As filed with the Securities and Exchange Commission on June 8, 2007

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM SB-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

New North Penn Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Pennsylvania	6036	26-0261305
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(IRS Employer Identification No.)

216 Adams Avenue Scranton, Pennsylvania 18503 (570) 344-6113	216 Adams Avenue Scranton, Pennsylvania 18503 (570) 344-6113
(Address and telephone number, of principal executive offices)	(Address and telephone number of principal place of business or intended principal place of business)

Frederick L. Hickman

President and Chief Executive Officer

New North Penn Bancorp, Inc.

216 Adams Avenue

Scranton, Pennsylvania 18503

(570) 344-6113

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Copies to:

Aaron M. Kaslow, Esq. Corey D. O’Brien, Esq. Muldoon Murphy & Aguggia LLP 5101 Wisconsin Avenue, NW Washington, DC 20016 (202) 362-0840 Raymond A. Tiernan, Esq. Eric M. Marion, Esq. Elias, Matz, Tiernan & Herrick L.L.P. 734 15^th Street, NW 12^th Floor Washington, DC 20005

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  ¨

Calculation of Registration Fee

Title of each class of securities to be registered	Amount to be registered	Proposed maximum offering price per unit	Proposed maximum aggregate offering price (1)	Amount of registration fee
Common Stock $.10 par value	1,454,750	$10.00	$14,547,500	$447

(1) Estimated solely for the purpose of calculating the registration fee.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

PROSPECTUS

New North Penn Bancorp, Inc.

(Proposed holding company for North Penn Bank)

Up to 1,265,000 Shares of Common Stock

New North Penn Bancorp, Inc., a Pennsylvania corporation, is offering common stock for sale in connection with the conversion of North Penn Bank from the mutual holding company form of organization to the stock form. We are offering our shares of common stock for sale on a priority basis to depositors of North Penn Bank in a subscription offering and, if necessary, to other persons in a direct community offering and/or syndicated community offering. The shares we are offering represent the 53.7% ownership interest in North Penn Bancorp, Inc. now owned by North Penn Mutual Holding Company. The remaining 46.3% interest in North Penn Bancorp owned by the public will be exchanged for shares of common stock of New North Penn Bancorp so that North Penn Bancorp’s existing public shareholders will own approximately the same percentage of New North Penn Bancorp common stock as they owned of North Penn Bancorp’s common stock immediately prior to the conversion. The present North Penn Bancorp and North Penn Mutual Holding Company will cease to exist upon completion of the conversion and offering. New North Penn Bancorp, Inc. will be renamed “North Penn Bancorp, Inc.” once the conversion and offering have been completed. North Penn Bancorp’s common stock is currently quoted on the OTC Bulletin Board under the symbol “NPEN.” After the offering, we intend to have the common stock of New North Penn Bancorp quoted on the OTC Bulletin Board.

We are offering up to 1,265,000 shares of common stock for sale on a best efforts basis, subject to certain conditions. We must sell a minimum of 935,000 shares to complete the offering. All shares are offered at a price of $10.00 per share. The amount of capital being raised is based on an appraisal of New North Penn Bancorp, Inc. Most of the terms of this offering are required by regulations of the Office of Thrift Supervision. If, as a result of regulatory considerations, demand for the shares or changes in financial market conditions, the independent appraiser determines our market value has increased, we may sell up to 1,454,750 shares without giving you further notice or the opportunity to change or cancel your order.

The offering is scheduled to terminate at 12:00 Noon, Eastern time, on [DATE1], 2007. We may extend this termination date without notice to you until [DATE 2], 2007. Funds received before completion of the offering will be maintained in a segregated account at North Penn Bank or, at our discretion, in an escrow account at an independent insured depository institution. All subscriptions received will earn interest calculated at North Penn Bank’s passbook savings rate, which is currently         % per annum.

The minimum purchase is 25 shares. Once submitted, orders are irrevocable unless the offering is terminated or extended beyond [DATE 2], 2007. If we extend the offering beyond [DATE 2], 2007, we will promptly return the funds of all subscribers who do not confirm or change their subscriptions. If we terminate the offering because we fail to sell the minimum number of shares or for any other reason, we will promptly return your funds with interest calculated at North Penn Bank’s passbook savings rate.

Ryan Beck & Co., Inc. will use its best efforts to assist us in our selling efforts, but is not required to purchase any of the common stock that is offered for sale. Purchasers will not pay a commission to purchase shares of common stock in the offering.

This investment involves a degree of risk, including the possible loss of principal.

Please read “Risk Factors” beginning on page     .

OFFERING SUMMARY

Price Per Share: $10.00

	Minimum		Maximum		Maximum As Adjusted
Number of shares		935,000		1,265,000		1,454,750
Gross offering proceeds	$	9,350,000	$	12,650,000	$	14,547,500
Estimated offering expenses, excluding selling agent fees and expenses	$	650,000	$	650,000	$	650,000
Estimated selling agent fees and expenses	$	160,000	$	160,000	$	160,000
Estimated net proceeds	$	8,540,000	$	11,840,000	$	13,737,500
Estimated net proceeds per share	$	9.13	$	9.36	$	9.44

These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Neither the Securities and Exchange Commission, the Office of Thrift Supervision nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

For assistance, please contact our Stock Information Center toll-free at (        )                 .

The date of this prospectus is [                    ], 2007

[Map of Pennsylvania showing office locations of North Penn Bank appears here]

Table of Contents

	Page
Summary	1
Risk Factors	15
A Warning About Forward-Looking Statements	19
Selected Financial and Other Data	20
Recent Developments
Use of Proceeds	22
Our Dividend Policy	24
Market for the Common Stock	24
Capitalization	26
Regulatory Capital Compliance	27
Pro Forma Data	28
Our Business	34
Management’s Discussion and Analysis of Results of Operations and Financial Condition	40
Our Management	60
Stock Ownership	68
Subscriptions by Executive Officers and Directors	69
Regulation and Supervision	70
Federal and State Taxation	75
The Conversion and Offering	77
Restrictions on Acquisition of New North Penn Bancorp	97
Description of New North Penn Bancorp Capital Stock	101
Transfer Agent and Registrar	102
Registration Requirements	102
Legal and Tax Opinions	102
Experts	102
Where You Can Find More Information	102
Index to Financial Statements of North Penn Bancorp, Inc.	104

Summary

This summary highlights material information from this document and may not contain all the information that is important to you. To understand the conversion and offering fully, you should read this entire document carefully. For assistance, please call our Stock Information Center toll-free at (__) _______.

The Companies

New North Penn Bancorp, Inc. New North Penn Bancorp, Inc. is a newly formed Pennsylvania corporation. New North Penn Bancorp is conducting this offering in connection with the conversion of North Penn Bank from the mutual holding company form of organization to the stock form. The shares of common stock of New North Penn Bancorp, Inc. to be sold represent the 53.7% ownership interest in North Penn Bancorp, Inc., the mid-tier stock holding company, that is currently owned by North Penn Mutual Holding Company. The remaining 46.3% ownership interest in North Penn Bancorp, Inc. is currently owned by other shareholders (who are sometimes referred to as the “public shareholders”) and will be exchanged for shares of New North Penn Bancorp’s common stock based on an exchange ratio of 1.2012 to 1.6251. The exchange ratio may be increased to up to 1.8689 in the event the maximum of the offering range is increased by 15%. The actual exchange ratio will be determined at the closing of the offering and will depend on the number of shares of New North Penn Bancorp’s common stock sold in the offering. The executive offices of New North Penn Bancorp, Inc. are located at 216 Adams Avenue, Scranton, Pennsylvania 18503, and its telephone number is (570) 344-6113.

North Penn Bancorp, Inc. North Penn Bancorp is a Pennsylvania corporation that was formed by North Penn Bank to be its holding company in connection with the mutual holding company reorganization completed in 2005. North Penn Bancorp owns all of North Penn Bank’s capital stock and directs, plans and coordinates North Penn Bank’s business activities. At March 31, 2007, North Penn Bancorp had total assets of $121.2 million, deposits of $86.8 million and total stockholders’ equity of $13.1 million on a consolidated basis. The present North Penn Bancorp will cease to exist upon completion of the conversion and offering.

North Penn Bank. North Penn Bank is a Pennsylvania chartered stock savings bank headquartered in Scranton, Pennsylvania. Located in the heart of Northeast Pennsylvania, the major metropolitan areas of Philadelphia, New York City, Northern New Jersey, Harrisburg, Pennsylvania and Syracuse, New York are within a two hour drive of Scranton. North Penn Bank operates five full-service locations in Northeast Pennsylvania. Three of our offices are located in the Scranton-Wilkes-Barre metropolitan area and two of our offices are located in Monroe County, which is on the outskirts of the New York City metropolitan area. We conduct a community banking business, offering a variety of deposit and loan products to individuals and small businesses in our market area. Since 2003, we have emphasized commercial real estate lending and have grown our commercial loan portfolio (including multi-family real estate and commercial business loans) to $41.4 million, or 42.9% of total loans as of March 31, 2007.

Our Web site address is www.northpennbank.com. Information on our Web site should not be considered a part of this prospectus.

North Penn Mutual Holding Company. North Penn Mutual Holding Company is the majority shareholder of North Penn Bancorp. As a mutual holding company, North Penn Mutual Holding Company is a non-stock company and does not engage in any significant business activity. North Penn Mutual Holding Company currently owns 53.7% of the outstanding shares of North Penn Bancorp common stock. North Penn Mutual Holding Company will cease to exist upon completion of the conversion and offering.

Our Operating Strategy (page ___)

Our mission is to operate and grow a profitable community-oriented financial institution. We plan to achieve this by executing our strategy of:

• Growing and diversifying our loan portfolio by emphasizing commercial loans;

• Emphasizing the growth and retention of core deposits to support our asset growth;

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• Providing superior service to attract and retain customers; and

• Continuing to use conservative underwriting practices to maintain the high quality of our loan portfolio.

Regulation and Supervision (page ___)

New North Penn Bancorp will be subject to regulation, supervision and examination by the Office of Thrift Supervision. North Penn Bank is subject to regulation, supervision and examination by the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation.

Description of the Conversion (page ___)

In 2005, we reorganized North Penn Bank into a stock savings bank with a mutual holding company structure. As a part of that reorganization, we formed North Penn Bancorp as the mid-tier holding company for North Penn Bank and sold a minority of North Penn Bancorp common stock to our depositors and others in a subscription offering, direct community offering and syndicated community offering. The majority of North Penn Bancorp’s shares were issued to North Penn Mutual Holding Company, a mutual holding company organized under Pennsylvania law. Our current ownership structure is as follows:

The “second-step” conversion process that we are now undertaking involves a series of transactions by which we will convert our organization from the partially public mutual holding company form to the fully public stock holding company structure. In the stock holding company structure, all of North Penn Bank’s stock will be owned by New North Penn Bancorp, and all of New North Penn Bancorp’s stock will be owned by the public. Upon completion of the conversion and offering, the present North Penn Bancorp and North Penn Mutual Holding Company will cease to exist.

After the conversion and offering, our ownership structure will be as follows:

As part of the conversion, we are offering for sale common stock representing the majority ownership interest of North Penn Bancorp that is currently held by North Penn Mutual Holding Company. At the conclusion of

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the conversion and offering, existing public shareholders of North Penn Bancorp will receive shares of common stock in New North Penn Bancorp in exchange for their existing shares of common stock of North Penn Bancorp. New North Penn Bancorp, Inc. will be renamed North Penn Bancorp, Inc. once the conversion and offering are completed.

We may cancel the conversion and offering at any time prior to the special meeting of depositors of North Penn Bank to vote on the plan of conversion and the special meeting of shareholders of North Penn Bancorp to vote on the plan of conversion. We may also cancel the conversion and offering after the special meetings with the concurrence of the Office of Thrift Supervision. If we cancel the conversion and offering, orders for common stock already submitted will be canceled, subscribers’ funds will be returned with interest calculated at North Penn Bank’s passbook savings rate and all deposit account withdrawal holds will be cancelled.

The normal business operations of North Penn Bank will continue without interruption during the conversion and offering, and the same officers and directors who currently serve North Penn Bank in the mutual holding company structure will serve the new holding company and North Penn Bank in the fully converted stock form.

Reasons for the Conversion and Offering (page ___)

Our primary reasons for the conversion and offering are the following:

• The proceeds from the sale of common stock will increase our capital, which will support the growth of our interest-earning assets.

• The larger number of shares that will be outstanding after completion of the conversion and offering is expected to result in a more liquid and active market than currently exists for North Penn Bancorp common stock, although following the conversion and offering we will continue to have a relatively small number of shares outstanding. A more liquid and active market would make it easier for our shareholders to buy and sell our common stock.

• The stock holding company structure will make it easier to access the capital markets through possible future equity and debt offerings. Our current mutual holding structure limits our ability to raise capital because North Penn Mutual Holding Company must own at least 50.1% of the shares of North Penn Bancorp.

• The stock holding company structure will give us greater flexibility in connection with merger and acquisition transactions. Following the conversion and offering, we will be able to use stock as a form of payment for acquisitions and merge with any other stock institution. Our current mutual holding company structure limits our opportunities to acquire other institutions because we cannot now issue stock in an amount that would cause North Penn Mutual Holding Company to own less than a majority of the outstanding shares of North Penn Bancorp. Currently, however, we have no plans, agreements or understandings regarding any acquisition.

Conditions to Completing the Conversion and Offering

We are conducting the conversion and offering under the terms of our plan of conversion and reorganization (which is referred to as the “plan of conversion”). We cannot complete the conversion and offering unless:

• the plan of conversion is approved by at least a majority of votes eligible to be cast by depositors of North Penn Bank;

• the plan of conversion is approved by at least two-thirds of the outstanding shares of North Penn Bancorp, including shares held by North Penn Mutual Holding Company;

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• the plan of conversion is approved by at least a majority of the votes eligible to be cast by shareholders of North Penn Bancorp, excluding shares held by North Penn Mutual Holding Company;

• we sell at least the minimum number of shares offered; and

• we receive the final approval of the Office of Thrift Supervision, the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation to complete the conversion and offering.

North Penn Mutual Holding Company, which owns 53.7% of the outstanding shares of North Penn Bancorp, intends to vote these shares in favor of the plan of conversion. In addition, as of June 1, 2007, directors and executive officers of North Penn Bancorp and their associates beneficially owned 93,129 shares of North Penn Bancorp or 6.4% of the outstanding shares. They intend to vote those shares in favor of the plan of conversion.

Purchase Price and Number of Shares to be Sold

The purchase price is $10.00 per share. You will not pay a commission to buy any shares in the offering. We are offering for sale between 935,000 and 1,265,000 shares of New North Penn Bancorp common stock in this offering. Most of the terms of this offering are required by regulations of the Office of Thrift Supervision. With regulatory approval, we may increase the number of shares to be sold up to 1,454,750 shares without giving you further notice or the opportunity to change or cancel your order. In considering whether to increase the offering size, the Office of Thrift Supervision will consider the level of subscriptions, the views of our independent appraiser, our financial condition and results of operations and changes in financial market conditions.

How We Intend to Use the Proceeds of this Offering (page ___)

The following table summarizes how we will use the proceeds of this offering, based on the sale of shares at the minimum and maximum of the offering range.

(In thousands)	935,000 Shares at $10.00 Per Share		1,265,000 Shares at $10.00 Per Share
Offering proceeds	$	9,350	$	12,650
Less: offering expenses		810		810
Net offering proceeds		8,540		11,840
Less:
Proceeds contributed to North Penn Bank		4,270		5,920
Proceeds used for loan to employee stock ownership plan		748		1,012
Proceeds remaining for New North Penn Bancorp	$	3,522	$	4,908

Initially, we intend to invest the proceeds of the offering in short-term liquid investments. In the future, New North Penn Bancorp may use the funds it retains to, among other things, invest in securities, pay cash dividends or repurchase shares of common stock, subject to regulatory restrictions. Over time, North Penn Bank intends to use the portion of the proceeds that it receives to fund new loans or to repay outstanding Federal Home Loan Bank advances. North Penn Bank may also use the proceeds to open new branches and expand its business activities, although there are no specific plans for these activities. We expect that much of the loan growth will occur in our commercial real estate portfolio, but we have not allocated specific dollar amounts to any particular area of our loan portfolio. The amount of time that it will take to deploy the proceeds of the offering into loans will depend primarily on the level of loan demand. New North Penn Bancorp and North Penn Bank may also use the proceeds of the offering to diversify their businesses and acquire other companies, although we have no specific plans to do so at this time.

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How We Determined the Offering Range and Exchange Ratio (page ___)

Federal regulations require that the aggregate purchase price of the securities sold in the offering be based upon our estimated pro forma value as converted (i.e., taking into account the expected receipt of proceeds from the sale of securities in the offering), as determined by an appraisal by an independent person experienced and expert in corporate appraisal. We have retained RP Financial, LC., which is experienced in the evaluation and appraisal of business entities, to prepare the appraisal. RP Financial has indicated that in its opinion as of May 18, 2007, our common stock’s estimated full market value was $20.5 million at the midpoint. In the offering, we are selling the number of shares representing the 53.7% of North Penn Bancorp currently owned by North Penn Mutual Holding Company. This results in an offering range of $9,350,000 to $12,650,000, with a midpoint of $11,000,000. The appraisal was based in part upon North Penn Bancorp’s financial condition and operations and the effect of the additional capital we will raise from the sale of common stock in this offering. RP Financial will receive fees totaling $27,000 for its appraisal report, plus $3,000 for any appraisal updates (of which there will be at least one) and reimbursement of out-of-pocket expenses.

In preparing its appraisal, RP Financial considered the information in this prospectus, including our financial statements. RP Financial also considered the following factors, among others:

• our historical, present and projected operating results and financial condition, including, but not limited to, net interest income, the amount and volatility of interest income and interest expense relative to changes in market area conditions and interest rates, asset quality, levels of loan loss provisions, the amount and sources of non-interest income, and the amount of non-interest expenses;

• the economic, demographic and competitive characteristics of our market area, including, but not limited to, employment by industry type, unemployment trends, size and growth of the population, trends in household and per capita income, and deposit market share;

• a comparative evaluation of the operating and financial statistics of North Penn Bank with those of other similarly-situated, publicly-traded savings associations and savings association holding companies, which included a comparative analysis of balance sheet composition, income statement and balance sheet ratios, credit and interest rate risk exposure;

• the effect of the capital raised in this offering on our net worth and earnings potential, including, but not limited to, the increase in consolidated equity resulting from the offering, the estimated increase in earnings resulting from the investment of the net proceeds of the offering, and the estimated impact on consolidated equity and earnings resulting from adoption of the employee benefit plans; and

• the trading market for securities of comparable institutions and general conditions in the market for such securities.

Two measures that some investors use to analyze whether a stock might be a good investment are the ratio of the offering price to the issuer’s “book value” and the ratio of the offering price to the issuer’s annual and core earnings. RP Financial considered these ratios in preparing its appraisal, among other factors. Book value is the same as total equity and represents the difference between the issuer’s assets and liabilities. Tangible book value is equal to total equity minus intangible assets. Core earnings, for purposes of the appraisal, was defined as net earnings after taxes, excluding the after-tax portion of income from nonrecurring items. RP Financial’s appraisal also incorporates an analysis of a peer group of publicly traded companies that RP Financial considered to be comparable to us. In applying each of the valuation methods, RP Financial considered adjustments to our pro forma market value based on a comparison of North Penn Bank with the peer group. RP Financial made slight upward adjustments for financial condition and asset growth, a moderate downward adjustment for liquidity of the shares, and slight downward adjustments for profitability, growth and viability of earnings and primary market area. No adjustments were made for dividends, marketing of the issue, management and effect of government regulations and regulatory reform.

The following table presents a summary of selected pricing ratios for the peer group companies utilized by RP Financial in its appraisal and the pro forma pricing ratios for us as calculated under “Pro Forma Data.”

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	Price to Earnings Multiple (1)	Price to Book Value Ratio		Price to Tangible Book Value Ratio
New North Penn Bancorp (pro forma) (2):
Minimum	35.71x	83.75	%	83.75	%
Midpoint	35.71x	92.17	%	92.17	%
Maximum	41.67x	99.40	%	99.40	%
15% above Maximum	41.67x	106.84	%	106.84	%
Peer group companies as of May 18, 2007 (3):
Average	18.46x	124.63	%	126.85	%
Median	16.04x	127.12	%	127.72	%

(1) Multiples calculated by RP Financial in its appraisal report are based on an estimate of core, or recurring, earnings for the twelve months ended March 31, 2007, total pro forma outstanding shares of common stock, including all shares owned by our employee stock ownership plan, whether or not allocated to participants, and equal 53.34x, 59.12x, 64.25x and 69.53x, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range. Because this is a different method than used in calculating the numbers included in the table and in the pro forma information included under “Pro Forma Data,” the pro forma price-to-earnings multiples in the table do not correspond to the multiples in the appraisal. See note 1 to the pro forma information under “Pro Forma Data” for more information on our treatment of shares owned by our employee stock ownership plan for purposes of this calculation.

(2) Based on North Penn Bancorp financial data as for and the three months ended March 31, 2007. Price-to-earnings multiples for New North Penn Bancorp are shown on an annualized basis.

(3) Based on earnings for the twelve months ended March 31, 2007 and book value and tangible book value as of March 31, 2007.

Compared to the average pricing ratios of the peer group at the maximum of the offering range, our stock would be priced at a premium of 126% to the peer group on a price-to-earnings basis, a discount of 20% to the peer group on a price-to-book basis and a discount of 22% to the peer group on a price-to- tangible book basis. This means that, at the maximum of the offering range, a share of our common stock would be more expensive than the peer group based on an earnings basis and less expensive than the peer group based on a book value and tangible book value basis.

Because of differences in important factors such as operating characteristics, location, financial performance, asset size, capital structure, and business prospects between us and other fully converted institutions, you should not rely on these comparative valuation ratios as an indication as to whether or not our common stock is an appropriate investment for you. The appraisal is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing the common stock. The appraisal does not indicate market value. You should not assume or expect that the appraisal described above means that our common stock will trade at or above the $10.00 purchase price after the offering.

Possible Change in Offering Range

RP Financial will update its appraisal before we complete the conversion and offering. If, as a result of regulatory considerations, demand for the shares or changes in financial market conditions, RP Financial determines that our pro forma market value has increased, we may sell up to 1,454,750 shares without further notice to you. If our pro forma market value at that time is either below $17.4 million or above $27.1 million, then, after consulting with the Office of Thrift Supervision, we may: terminate the offering and promptly return all funds; promptly return all funds, set a new offering range and give all subscribers the opportunity to place a new order; or take such other actions as may be permitted by the Office of Thrift Supervision and the Securities and Exchange Commission.

Possible Termination of the Offering

We must sell a minimum of 935,000 shares to complete the conversion and offering. If we terminate the offering because we fail to sell the minimum number of shares or for any other reason, we will promptly return your funds with interest calculated at North Penn Bank’s passbook savings rate.

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After-Market Performance of “Second-Step” Conversion Offerings

The following table provides information regarding the after-market performance of the “second-step” conversion offerings completed from January 1, 2005 through May 18, 2007. “Second-step” conversion offerings are public offerings by companies that are converting from the mutual holding company form of organization to the stock holding company form. Data in this table reflects a small number of transactions and is not necessarily indicative of general stock market performance trends or of price performance trends of companies that undergo “second-step” conversions.

				Price Performance From Initial Offering Price
Issuer (Market/Symbol)	Closing Date	Gross Proceeds		After 1 Day		After 1 Week		After 4 Weeks		Through 5/18/07
		(In millions)
People’s United Financial, Inc. (Nasdaq: PBCT)	04/16/07	$	3,444.5	3.8	%	2.0	%	0.9	%	(0.1	)%
Osage Bancshares, Inc. (Nasdaq: OSBK)	01/18/07		25.1	(0.5	)	(0.5	)	(2.5	)	(7.7	)
Westfield Financial, Inc. (Amex: WFD)	01/04/07		184.0	7.0		7.5		9.9		1.1
Citizens Community Bancorp, Inc. (Nasdaq: CZWI)	11/01/06		52.9	(2.5	)	(1.0	)	(2.5	)	(8.5	)
Liberty Bancorp, Inc. (Nasdaq: LBCP)	07/24/06		28.1	2.5		1.0		(0.8	)	8.5
First Clover Leaf Financial Corp. (Nasdaq: FCLF)*	07/11/06		41.7	3.9		6.0		9.8		6.5
Monadnock Bancorp, Inc. (OTCBB: MNKB)	06/29/06		5.7	0.0		(5.0	)	(15.6	)	(20.5	)
New England Bancshares, Inc. (Nasdaq: NEBS)	12/29/05		30.8	6.6		7.0		7.0		29.0
American Bancorp of New Jersey, Inc. (Nasdaq: ABNJ)	10/06/05		99.2	1.6		(2.0	)	0.1		11.5
Hudson City Bancorp, Inc. (Nasdaq: HCBK)	06/07/05		3,929.8	9.6		10.7		15.5		33.2
First Federal of Northern Michigan (Nasdaq: FFNM)	04/04/05		17.0	(5.1	)	(7.0	)	(16.0	)	(8.5	)
Rome Bancorp, Inc. (Nasdaq: ROME)	03/31/05		59.0	0.5		(2.0	)	(5.6	)	21.7
Average - all transactions				2.3		1.4		0.4

* Transaction involved simultaneous acquisition.

This table is not intended to be indicative of how our stock may perform. Furthermore, this table presents only short-term price performance with respect to several companies that only recently completed their second-step conversion and may not be indicative of the longer-term stock price performance of these companies. Stock price appreciation is affected by many factors, including, but not limited to: general market and economic conditions; the interest rate environment; the amount of proceeds a company raises in its offering; and numerous factors relating to the specific company, including the experience and ability of management, historical and anticipated operating results, the nature and quality of the company’s assets, and the company’s market area. The companies listed in the table above may not be similar to New North Penn Bancorp, the pricing ratios for their offerings were in some cases different from the pricing ratios for New North Penn Bancorp’s common stock and the market conditions in which these offerings were completed were, in some cases, different from current market conditions. Any or all of these differences may cause our common stock to perform differently from these other offerings. Before you make an investment decision, we urge you to carefully read this prospectus, including, but not limited to, the “Risk Factors” section beginning on page ___.

You should be aware that, in certain market conditions, stock prices of second-step conversion offerings have decreased. For example, as the above table illustrates, the stock of six companies traded at or below their initial offering price at the various dates shown. We can give you no assurance that our common stock will not trade below the $10.00 purchase price or that our common stock will perform similarly to other recent second-step conversions.

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The Exchange of Existing Shares of North Penn Bancorp Common Stock (page ___)

If you are a shareholder of North Penn Bancorp on the date we complete the conversion and offering, your existing shares will be cancelled and exchanged for shares of New North Penn Bancorp, which will be renamed North Penn Bancorp upon completion of the conversion and offering. The number of shares you will receive will be based on an exchange ratio determined as of the closing of the conversion and offering that is intended to result in North Penn Bancorp’s existing public shareholders owning approximately 46.3% of New North Penn Bancorp’s common stock, which is the same percentage of North Penn Bancorp common stock currently owned by existing public shareholders. Under Pennsylvania law, current shareholders of North Penn Bancorp have dissenters’ rights in connection with the conversion and offering. The following table shows how the exchange ratio will adjust, based on the number of shares sold in our offering. The table also shows how many shares a hypothetical owner of 100 shares of North Penn Bancorp common stock would receive in the exchange, based on the number of shares sold in the offering.

	Shares to be Sold in the Offering			Shares to be Exchanged for Existing Shares of North Penn Bancorp			Total Shares of Common Stock to be	Exchange	Shares to be Received for 100 Existing
	Amount	Percent		Amount	Percent		Outstanding	Ratio	Shares (1)
Minimum	935,000	53.7	%	804,794	46.3	%	1,739,794	1.2012	120
Midpoint	1,100,000	53.7		946,817	46.3		2,046,817	1.4131	141
Maximum	1,265,000	53.7		1,088,839	46.3		2,353,839	1.6251	162
15% above Maximum	1,454,750	53.7		1,252,165	46.3		2,706,915	1.8689	186

(1) Cash will be paid instead of issuing any fractional shares.

No fractional shares of New North Penn Bancorp common stock will be issued in the conversion and offering. For each fractional share that would otherwise be issued, we will pay in cash an amount equal to the product obtained by multiplying the fractional share interest to which the holder would otherwise be entitled by the $10.00 per share subscription price.

We also will convert options previously awarded under the 2006 Omnibus Stock Option Plan into options to purchase New North Penn Bancorp common stock. At March 31, 2007, there were outstanding options to purchase 27,000 shares of North Penn Bancorp common stock. The number of outstanding options and related per share exercise prices will be adjusted based on the exchange ratio. The aggregate exercise price, term and vesting period of the outstanding options will remain unchanged. If any options are exercised before we complete the offering, the number of shares of North Penn Bancorp common stock outstanding will increase and the exchange ratio could be adjusted.

Benefits of the Conversion to Management (page __)

We intend to adopt the benefit plans described below. We will recognize additional compensation expense related to the expanded employee stock ownership plan and the new equity incentive plan. The actual expense will depend on the market value of New North Penn Bancorp’s common stock and, with respect to the employee stock ownership plan, will increase as the value of New North Penn Bancorp’s common stock increases. As reflected under “Pro Forma Data,” based upon assumptions set forth therein, the annual expense related to the employee stock ownership plan and the new equity incentive plan would have been $30,000 and $139,000, respectively, for the year ended December 31, 2006, assuming shares are sold at the maximum of the offering range. If awards under the new equity incentive plan are funded from authorized but unissued stock, your ownership interest would be diluted by up to approximately 7.0%. See “Pro Forma Data” for an illustration of the effects of each of these plans.

Employee Stock Ownership Plan. Our employee stock ownership plan intends to purchase an amount of shares equal to 8.0% of the shares sold in the offering. The plan will use the proceeds from a 20-year loan from New North Penn Bancorp to purchase these shares. As the loan is repaid and shares are released from collateral, the shares will be allocated to the accounts of employee participants. Allocations will be based on a participant’s individual compensation as a percentage of total plan compensation. Non-employee directors are not eligible to participate in the employee stock ownership plan. We will incur additional compensation expense as a result of this plan. See “Pro Forma Data” for an illustration of the effects of this plan.

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New Equity Incentive Plan. We intend to implement a new equity incentive plan no earlier than six months after completion of the offering. We will submit this plan to our shareholders for their approval. Under this plan, we may grant stock options in an amount up to 10.0% of the number of shares sold in the offering and restricted stock awards in an amount equal to 4.0% of the shares sold in the offering. Stock options will be granted at an exercise price equal to 100% of the fair market value of our common stock on the option grant date. Shares of restricted stock will be awarded at no cost to the recipient. We will incur additional compensation expense as a result of this plan. See “Pro Forma Data” for an illustration of the effects of this plan. The new equity incentive plan will comply with all applicable Office of Thrift Supervision regulations. The new equity incentive plan will supplement our existing 2006 Omnibus Stock Option Plan, which will continue as a plan of New North Penn Bancorp.

The following table summarizes, at the maximum of the offering range, the total number and value of the shares of common stock that the employee stock ownership plan expects to acquire and the total value of all restricted stock awards and stock options that are expected to be available under the new equity incentive plan. At the maximum of the offering range, we will sell 1,265,000 shares and have 2,353,839 shares outstanding. The number of shares reflected for the benefit plans in the table below assumes that North Penn Bank’s tangible capital will be 10% or more following the completion of the offering and the application of the net proceeds as described under “Use of Proceeds.”

	Number of Shares to be Granted or Purchased
(Dollars in thousands)	At Maximum of Offering Range	As a % of Common Stock Sold		As a % of Common Stock Outstanding		Dilution Resulting from Issuance of Additional Shares		Total Estimated Value of Grants
Employee stock ownership plan (1)	101,200	8.0	%	4.3	%	—		$	1,012,000
Restricted stock awards (1)	50,600	4.0		2.2		2.1	%		506,000
Stock options (2)	126,500	10.0		5.4		5.1			437,690
Total	278,300	22.0	%	11.9	%	7.0		$	1,955,690

(1) Assumes the value of New North Penn Bancorp common stock is $10.00 per share for purposes of determining the total estimated value of the grants.

(2) Assumes the value of a stock option is $3.46. See “Pro Forma Data.”

In addition to shares of common stock that could be issued under the future equity incentive plan, additional shares can be issued under the 2006 Omnibus Stock Option Plan currently maintained by North Penn Bancorp. At March 31, 2007, a total of 64,214 options and 35,313 restricted shares could be issued under our existing stock benefit plan after applying the exchange ratio at the maximum of the offering range. These totals represent shares that would be issued because of future grants under the existing stock benefit plan.

The following table presents information regarding our existing employee stock ownership plan, options and restricted stock previously awarded or available for future awards under our 2006 Omnibus Stock Option Plan, additional shares purchased by our employee stock ownership plan and our proposed new equity incentive plan. The table below assumes that 2,353,839 shares are outstanding after the offering, which includes the sale of 1,265,000 shares in the offering at the maximum of the offering range and the issuance of 1,088,839 shares in exchange for shares of North Penn Bancorp using an exchange ratio of 1.6251. It is also assumed that the value of the stock is $10.00 per share and that the exchange of existing shares is in accordance with the exchange ratio at the maximum of the offering range.

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Existing and New Stock Benefit Plans	Eligible Participants	Number of Shares at Maximum of Offering Range(1)		Estimated Value of Shares			Percentage of Shares Outstanding After the Conversion and Offering
Employee Stock Ownership Plan:	Employees
Shares purchased in 2005 mutual holding company reorganization		86,473	(2)	$	864,730		3.7	%
Shares to be purchased in the offering		101,200			1,012,000		4.3
Total employee stock ownership plan		187,673			1,876,730		8.0
Restricted Stock Awards:	Directors and officers
2006 Omnibus Stock Option Plan		43,235	(3)		432,350	(4)	1.8
New shares of restricted stock		50,600			506,000	(4)	2.2
Total shares of restricted stock		93,835			938,350		4.0
Stock Options:	Directors and officers
2006 Omnibus Stock Option Plan		108,091	(5)		373,995	(6)	4.6
New stock options		126,500			437,690	(6)	5.4
Total stock options		234,591			811,685		10.0
Total stock benefit plans		516,099		$	3,626,765		22.0	%

(1) Amounts have been adjusted for the 1.6251 exchange ratio at the maximum of the offering range.

(2) Of these shares, 13,355, have been allocated to the accounts of participants.

(3) Of these shares, 7,922 shares have been awarded and 35,313 shares remain available for future awards. None of the outstanding awards of restricted stock have vested.

(4) The actual value of restricted stock grants will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value is assumed to be the same as the offering price of $10.00 per share.

(5) Of these shares, options for 43,877 shares have been awarded and options for 64,214 shares remain available for future grants. No options have been exercised to date, and all previously granted options remain outstanding. It is our intention to fund these options through open market purchases. However, if any options previously granted under the 2006 Omnibus Stock Option Plan are exercised during the first year following the completion of the conversion and offering, they will be funded with newly issued shares, as Office of Thrift Supervision regulations do not permit us to repurchase our shares during the first year following completion of the conversion and offering except to fund restricted stock grants or under extraordinary circumstances.

(6) The weighted-average fair value of stock options granted and outstanding under the 2006 Omnibus Stock Option Plan has been estimated using the Black-Scholes option pricing model. Prior to the adjustment for the exchange ratio, there were 27,000 outstanding options valued at $3.86 per option. Using this value and adjusting for an exercise price to $10.00, the fair value of stock options to be granted under the new equity incentive plan has been estimated at $3.46 per option. See “Pro Forma Data.”

Persons Who Can Order Stock in the Offering (page ___)

We have granted rights to subscribe for shares of New North Penn Bancorp common stock in a “subscription offering” to the following persons in the following order of priority:

1. Persons with $50 or more on deposit at North Penn Bank as of the close of business on December 31, 2005.

2. Our employee stock ownership plan.

3. Persons with $50 or more on deposit at North Penn Bank as of the close of business on June 30, 2007.

4. North Penn Bank’s depositors as of the close of business on _______, 2007, who were not eligible to subscribe for shares under categories 1 and 3 above.

If we receive subscriptions for more shares than are to be sold in this offering, we may be unable to fill or may only partially fill your order. Shares will be allocated in order of the priorities described above under a formula outlined in the plan of conversion. If we increase the number of shares to be sold above 1,265,000, North Penn

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Bank’s employee stock ownership plan will have the first priority right to purchase any shares exceeding that amount to the extent that its subscription has not previously been filled. Any shares remaining will be allocated in the order of priorities described above. See “The Conversion and Offering—Subscription Offering and Subscription Rights” for a description of the allocation procedure.

We may offer shares not sold in the subscription offering to the general public in a “direct community offering” that can begin concurrently with, during or immediately following the subscription offering. Orders received in the direct community offering will be subordinate to subscription offering orders. Natural persons and trusts of natural persons who are residents of Lackawanna and Monroe Counties, Pennsylvania will have first preference to purchase shares in the direct community offering and shareholders of North Penn Bancorp will have second preference in the direct community offering. Shares of common stock not purchased in the subscription offering or the direct community offering may be offered for sale through a “syndicated community offering” managed by Ryan Beck & Co., Inc. We have the right to accept or reject, in our sole discretion, orders we receive in the direct community offering and syndicated community offering.

Subscription Rights are Not Transferable

You are not allowed to transfer your subscription rights and we will act to ensure that you do not do so. You will be required to certify that you are purchasing shares solely for your own account and that you have no agreement or understanding with another person to sell or transfer subscription rights or the shares that you purchase. We will not accept any stock orders that we believe involve the transfer of subscription rights. Eligible depositors who enter into agreements to allow ineligible investors to participate in the subscription offering may be violating federal and state law and may be subject to civil enforcement actions or criminal prosecution.

How to Purchase Common Stock (page ___)

In the subscription offering and the direct community offering, you may pay for your shares by:

1. personal check, bank check or money order made payable directly to “New North Penn Bancorp, Inc.” (third-party checks of any type will not be accepted); or

2. authorizing us to withdraw money from your North Penn Bank deposit account(s) other than accounts with check writing privileges and individual retirement accounts (“IRAs”). To use funds from accounts with check writing privileges, please submit a check. To use IRA funds, please see the next section.

North Penn Bank is not permitted to lend funds (including funds drawn on a North Penn Bank line of credit) to anyone for the purpose of purchasing shares of common stock in the offering. Also, payment may not be made by wire transfer.

Checks and money orders will be immediately cashed, so the funds must be available within the account when your stock order form is received by us. Subscription funds will be held in a segregated account at North Penn Bank or, at our discretion, in an escrow account at an independent insured depository institution. We will pay interest calculated at North Penn Bank’s passbook savings rate from the date those funds are processed until completion or termination of the offering. Withdrawals from certificate of deposit accounts at North Penn Bank for the purpose of purchasing common stock in the offering may be made without incurring an early withdrawal penalty. All funds authorized for withdrawal from deposit accounts with North Penn Bank must be available within the deposit accounts at the time the stock order form is received. A hold will be placed on the amount of funds designated on your stock order form. Those funds will be unavailable to you during the offering; however, the funds will not be withdrawn from the accounts until the offering is completed and will continue to earn interest at the applicable contractual deposit account rate until the completion of the offering.

You may submit your order form in one of three ways: by mail, using the order reply envelope provided; by overnight courier to the address indicated on the order form; or by taking the stock order form and payment to our Stock Information Center, located at our main office in Scranton. Stock order forms may not be delivered to our other offices. These locations will not have offering materials on hand. Once submitted, your order is irrevocable. We are not required to accept copies or facsimiles of order forms.

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Using IRA Funds to Purchase Shares in the Offering (page ___)

You may be able to subscribe for shares of common stock using funds in your individual retirement account(s), or IRA. If you wish to use some or all of the funds in your North Penn Bank IRA, the applicable funds must first be transferred to a self-directed IRA account maintained by an unaffiliated institutional trustee or custodian, such as a brokerage firm. An annual fee may be payable to the new trustee. If you do not have such an account, you will need to establish one and transfer your funds before placing your stock order. Our Stock Information Center can give you guidance in this regard. Because processing this type of order takes additional time, we recommend that you contact our Stock Information Center promptly, preferably at least two weeks before the [DATE1], 2007 offering deadline. Whether you may use retirement funds for the purchase of shares in the offering will depend on timing constraints and, possibly, limitations imposed by the institution where the funds are held.

Purchase Limitations (page ___)

Our plan of conversion establishes limitations on the purchase of common stock in the offering. These limitations include the following:

• The minimum purchase is 25 shares.

• No individual (or individuals exercising subscription rights through a single qualifying deposit account held jointly) may purchase more than $150,000 of common stock (which equals 15,000 shares) in the offering.

• No individual together with any associates and no group of persons acting in concert may purchase more than $300,000 of common stock (which equals 30,000 shares) in the offering. For purposes of applying this limitation, your associates include:

• Any person who is related by blood or marriage to you and who either lives in your home or who is a director or officer of North Penn Bank;

• Companies or other entities in which you are an officer or partner or have a 10% or greater beneficial ownership interest; and

• Trusts or other estates in which you have a substantial beneficial interest or as to which you serve as a trustee or in another fiduciary capacity.

Unless we determine otherwise, persons having the same address and persons exercising subscription rights through qualifying deposit accounts registered to the same address will be subject to this overall purchase limitation. We have the right to determine, in our sole discretion, whether prospective purchasers are associates or acting in concert.

Subject to the Office of Thrift Supervision’s approval, we may increase or decrease the purchase limitations at any time. Our tax-qualified employee benefit plans, including our employee stock ownership plan, are authorized to purchase up to 8.0% of the shares sold in the offering, without regard to these purchase limitations.

Deadline for Ordering Stock (page ___)

The subscription offering will end at 12:00 Noon, Eastern time, on [DATE1], 2007. If you wish to purchase shares, a properly completed and signed original stock order form, together with full payment for the shares of common stock, must be received by us (not postmarked) no later than this time. We expect that the direct community offering will terminate at the same time, although it may continue for up to 45 days after the end of the subscription offering, or longer if regulators approve a later date. No single extension may be for more than 90 days. If we extend the offering beyond [DATE 2], 2007, all subscribers will be notified and given the opportunity to confirm, change or cancel their orders. If you do not respond to this notice, we will promptly return your funds with

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interest calculated at North Penn Bank’s passbook savings rate or cancel your deposit account withdrawal authorization. If we intend to sell fewer than 935,000 shares or more than 1,454,750 shares, we will promptly return all funds and set a new offering range. All subscribers will be notified and given the opportunity to place a new order.

Purchases by Directors and Executive Officers (page ___)

We expect that our directors and executive officers, together with their associates, will subscribe for 46,700 shares, which equals 4.3% of the shares that would be sold at the midpoint of the offering range. Our directors and executive officers will pay the same $10.00 per share price as everyone else who purchases shares in the offering. Like all of our depositors, our directors and executive officers have subscription rights based on their deposits and, in the event of an oversubscription, their orders will be subject to the allocation provisions set forth in our plan of conversion. Purchases by our directors and executive officers will count towards the minimum number of shares we must sell to close the offering. Following the conversion and offering, and including shares received in exchange for shares of North Penn Bancorp, our directors and executive officers, together with their associates, are expected to own 178,296 shares of New North Penn Bancorp common stock, which would equal 7.6% of our outstanding shares if shares are sold at the midpoint of the offering range.

Market for New North Penn Bancorp’s Common Stock (page ___)

North Penn Bancorp common stock is quoted on the OTC Bulletin Board under the symbol “NPEN.” We intend to have New North Penn Bancorp common stock quoted on the OTC Bulletin Board following completion of the conversion. However, we do not expect an active and liquid trading market due to the small size of the offering. Ryan Beck & Co., Inc. is currently a market maker in North Penn Bancorp’s common stock and intends to be a market maker in New North Penn Bancorp’s common stock, but it is under no obligation to do so. We cannot assure you that other market makers will be obtained or that an active and liquid trading market for our common stock will develop or, if developed, will be maintained. After shares of the common stock begin trading, you may contact a stock broker to buy or sell shares. There can be no assurance that persons purchasing the common stock in the offering will be able to sell their shares at or above the $10.00 offering price, and brokerage firms typically charge commissions related to the purchase or sale of securities.

North Penn Bancorp’s Dividend Policy (page ___)

North Penn Bancorp currently pays a cash dividend of $0.03 per share per quarter, which equals $0.12 on an annualized basis. After the conversion and offering, we intend to continue to pay cash dividends on a quarterly basis. We currently expect that the level of cash dividends per share after the conversion and offering will be substantially consistent with the current amount of dividends per share paid by North Penn Bancorp, as adjusted for the exchange ratio. For example, based on the current cash dividend of $0.03 per share and an assumed exchange ratio of 1.6251 at the maximum of the offering range, the cash dividend would be approximately $0.02 per share. However, the dividend rate and the continued payment of dividends will depend on a number of factors, including our capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations and general economic conditions. No assurance can be given that we will continue to pay dividends or that they will not be reduced in the future. Additionally, we cannot guarantee that the amount of dividends that we pay after the conversion and offering will be equal to the per share dividend amount that North Penn Bancorp shareholders currently receive, as adjusted to reflect the exchange ratio.

Tax Consequences (page ___)

As a general matter, the conversion will not be a taxable transaction for purposes of federal or state income taxes to us or persons who receive or exercise subscription rights. Existing shareholders of North Penn Bancorp who receive cash in lieu of fractional share interests in shares of New North Penn Bancorp will recognize gain or loss equal to the difference between the cash received and the tax basis of the fractional share. Our special counsel, Muldoon Murphy & Aguggia LLP, and our independent certified public accountant, McGrail Merkel Quinn & Associates, have issued us opinions to this effect, which are summarized on pages __ through __ of this prospectus.

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Delivery of Prospectus

To ensure that each person receives a prospectus at least 48 hours before the offering deadline, we may not mail prospectuses any later than five days prior to such date or hand-deliver prospectuses later than two days prior to that date. Stock order forms may only be delivered if accompanied or preceded by a prospectus. We are not obligated to deliver a prospectus or order form by means other than U.S. mail.

We will make reasonable attempts to provide a prospectus and offering materials to holders of subscription rights. The subscription offering and all subscription rights will expire at 12:00 Noon, Eastern time, on [DATE1], 2007 whether or not we have been able to locate each person entitled to subscription rights.

Delivery of Stock Certificates (page ___)

Certificates representing shares of common stock issued in the offering will be mailed to purchasers at the address provided by them on the order form as soon as practicable following completion of the offering and receipt of all necessary regulatory approvals. Until certificates for common stock are available and delivered to subscribers, subscribers may not be able to sell their shares, even though trading of the common stock will have commenced.

Stock Information Center

If you have any questions regarding the conversion and offering, please call or visit our Stock Information Center, located at our main office in Scranton. Only this location will accept stock order forms and proxy cards and have supplies of offering materials. The toll-free telephone number is (__) _______. The Stock Information Center is open Monday through Friday from 10:00 a.m. to 4:00 p.m., Eastern time, except for bank holidays.

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Risk Factors

You should consider carefully the following risk factors when deciding how to vote on the conversion and before purchasing shares of New North Penn Bancorp common stock.

Risks Related to Our Business

Our emphasis on commercial lending may expose us to increased lending risks.

At March 31, 2007, $41.4 million, or 42.9%, of our loan portfolio consisted of commercial and multi-family real estate loans and commercial business loans. These types of loans generally expose a lender to greater risk of non-payment and loss than one- to four-family residential mortgage loans because repayment of the loans often depends on the successful operation of the property and the income stream of the borrowers. Such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans. Commercial business loans expose us to additional risks since they typically are made on the basis of the borrower’s ability to make repayments from the cash flow of the borrower’s business and are secured by non-real estate collateral that may depreciate over time. In addition, some of our commercial borrowers have more than one loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship may expose us to a greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. Furthermore, as a result of the offering, we may make larger loans under our policy for loans-to-one borrower. Our ability to make larger loans may expose us to greater risk of loss.

Rising interest rates may further compress our interest rate spread, which would hurt our profits.

Short-term market rates of interest (which we use as a guide to price our deposits) have recently risen from historically low levels, while longer-term market rates of interest (which we use as a guide to price our longer-term loans) have not. As a result, many financial institutions, including North Penn Bank, have experienced a narrowing or “compression” of their net interest spread, which is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities. North Penn Bank’s net interest spread was 3.00% for the year ended December 31, 2006 compared to 3.21% and 3.08% for the years ended December 31, 2005 and 2004, respectively. If short-term interest rates continue to rise, and if rates on our deposits continue to reprice upwards faster than the rates on our long-term loans and investments, we would continue to experience compression of our interest rate spread, which would have a negative effect on our profitability. For further discussion of how changes in interest rates could impact us, see “Management’s Discussion and Analysis of Results of Operations and Financial Condition—Risk Management—Interest Rate Risk Management.”

Our efforts to increase core deposits may not be successful, which would limit our ability to grow.

Our goal is to fund growth of interest-earning assets by attracting core deposits, which we define as demand, savings and money market deposits. We face significant competition for core deposits from other financial institutions. If we are unable to attract core deposits, we will not be able to increase our interest-earning assets unless we use other funding sources, such as certificates of deposit or borrowed funds, which generally require us to pay higher interest rates compared to core deposits. In addition, competition may require us to pay higher rates on core deposits. Many institutions currently offer high yielding checking, savings and/or money market accounts. We may have to offer similar high yielding accounts in order to attract core deposits, which would contribute to the compression of our interest rate spread and net interest margin, which would have a negative effect on our profitability.

Because most of our borrowers are located in Northeast Pennsylvania, a downturn in the local economy or a decline in local real estate values could cause increases in nonperforming loans, which could hurt our profits.

Substantially all of our loans are secured by real estate or made to businesses in Northeast Pennsylvania. As a result of this concentration, a downturn in the local economy could cause significant increases in nonperforming loans, which would hurt our profits. A decline in real estate values could cause some of our mortgage loans to become inadequately collateralized, which would expose us to a greater risk of loss.

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Additionally, a decline in real estate values could adversely impact our portfolio of commercial real estate loans and could result in a decline in the origination of such loans. For a discussion of our market area, see “Our Business—Market Area.”

Strong competition within our market area could hurt our profits and inhibit growth.

We face intense competition in making loans, attracting deposits and hiring and retaining experienced employees. This competition has made it more difficult for us to make new loans and attract deposits. Price competition for loans and deposits sometimes results in us charging lower interest rates on our loans and paying higher interest rates on our deposits, which reduces our net interest income. Competition also makes it more difficult and costly to attract and retain qualified employees. At June 30, 2006, which is the most recent date for which data is available from the Federal Deposit Insurance Corporation, we held approximately 1.6% of the deposits in Lackawanna County, Pennsylvania and 1.0% of the deposits in Monroe County, Pennsylvania. Many of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer products and services that we do not provide. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Our profitability depends upon our continued ability to compete successfully in our market area. For more information about our market area and the competition we face, see “Our Business—Market Area” and “Our Business—Competition.”

We are dependent upon the services of our management team.

We rely heavily on our President and Chief Executive Officer, Frederick L. Hickman and our senior executives Thomas J. Dziak and Thomas A. Byrne. The loss of our chief executive officer or other senior executive officers could have a material adverse impact on our operations because, as a small community bank, we have fewer management-level personnel that have the experience and expertise to readily replace these individuals. Changes in key personnel and their responsibilities may be disruptive to our business and could have a material adverse effect on our business, financial condition and results of operations. We have employment agreements with Messrs. Hickman, Dziak and Byrne.

We operate in a highly regulated environment and we may be adversely affected by changes in laws and regulations.

We are subject to extensive regulation, supervision and examination by the Pennsylvania Department of Banking, our chartering authority, and by the Federal Deposit Insurance Corporation, as our primary federal regulator. Upon completion of the conversion and offering, New North Penn Bancorp will be subject to regulation and supervision by the Office of Thrift Supervision. Such regulation and supervision governs the activities in which an institution and its holding company may engage and are intended primarily for the protection of the insurance fund and the depositors and borrowers of North Penn Bank rather than for holders of New North Penn Bancorp common stock. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.

Risks Related to the Offering

Additional expenses following the offering from new equity benefit plans will adversely affect our profitability.

Following the offering, we will recognize additional annual employee compensation expenses stemming from options and shares granted to employees, directors and executives under new benefit plans. Stock options and restricted stock may be granted under a new equity incentive plan adopted following the offering, if approved by shareholders. These additional expenses will adversely affect our profitability. We cannot determine the actual amount of these new stock-related compensation expenses at this time because applicable accounting practices generally require that these expenses be based on the fair market value of the options or shares of common stock at the date of the grant; however, they may be material. We recognize expenses for our employee stock ownership plan when shares are committed to be released to participants’ accounts and will recognize expenses for restricted

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stock awards and stock options over the vesting period of awards made to recipients. Pro forma benefits expenses for the year ended December 31, 2006 were $169,000 at the maximum of the offering range, as set forth in the pro forma financial information under “Pro Forma Data” assuming the $10.00 per share purchase price as fair market value. Actual expenses, however, may be higher or lower, depending on the price of our common stock, the number of shares awarded under the plans and the timing of the implementation of the plans. For further discussion of these plans, see “Our Management—Benefit Plans.”

Our stock price may decline when trading commences.

If you purchase shares in the offering, you might not be able to sell them later at or above the $10.00 purchase price. After the shares of our common stock begin trading, the trading price of the common stock will be determined by the marketplace, and will be influenced by many factors outside of our control, including prevailing interest rates, investor perceptions, securities analyst research reports and general industry, geopolitical and economic conditions. Publicly traded stocks, including stocks of financial institutions, often experience substantial market price volatility. These market fluctuations might not be related to the operating performance of particular companies whose shares are traded.

There may be a limited market for our common stock, which may adversely affect our stock price.

Although we intend to have our shares of common stock quoted on the OTC Bulletin Board, the shares might not be actively traded. If an active trading market for our common stock does not develop, you may not be able to sell all of your shares of common stock on short notice, and the sale of a large number of shares at one time could temporarily depress the market price. There also may be a wide spread between the bid and ask price for our common stock. When there is a wide spread between the bid and ask price, the price at which you may be able to sell our common stock may be significantly lower than the price at which you could buy it at that time.

Our return on equity will initially be low compared to other publicly traded financial institutions. A low return on equity may negatively impact the trading price of our common stock.

Net income divided by average equity, known as “return on equity,” is a ratio used by many investors to compare the performance of a financial institution with its peers. For the year ended December 31, 2006, our return on equity was 2.88%. Although we expect that our net income will increase following the offering, we expect that our return on equity will remain low as a result of the additional capital that we will raise in the offering. For example, our pro forma return on equity for the year ended December 31, 2006 is 1.90%, assuming the sale of shares at the maximum of the offering range. In comparison, the peer group used by RP Financial in its appraisal had an average return on equity of 5.89% for the 12 months ended March 31, 2007. Over time, we intend to use the net proceeds from the offering to increase earnings per share and book value per share, without assuming undue risk, with the goal of achieving a return on equity that is competitive with other similarly situated publicly held companies. This goal could take a number of years to achieve, and we might not attain it. Consequently, you should not expect a competitive return on equity in the near future. Failure to achieve a competitive return on equity might make an investment in our common stock unattractive to some investors and might cause our common stock to trade at lower prices than comparable companies with higher returns on equity. See “Pro Forma Data” for an illustration of the financial impact of the offering.

We have broad discretion in allocating the proceeds of the offering. Our failure to effectively utilize such proceeds would reduce our profitability.

New North Penn Bancorp intends to contribute approximately 50% of the net proceeds of the offering to North Penn Bank and to use approximately 8.0% of the net proceeds to fund the loan to the employee stock ownership plan. New North Penn Bancorp may use the remaining proceeds that it retains to, among other things, invest in securities, pay cash dividends or repurchase shares of common stock, subject to regulatory restrictions. North Penn Bank may use the portion of the proceeds that it receives to fund new loans, repay outstanding borrowings, invest in securities and expand its business activities. New North Penn Bancorp and North Penn Bank may also use the proceeds of the offering to open new branches, diversify their businesses and acquire other companies, although we have no specific plans to do so at this time. We have not allocated specific amounts of proceeds for any of these purposes, and we will have significant flexibility in determining how much of the net proceeds we apply to different uses and the timing of such applications. Our failure to utilize these funds effectively would reduce our profitability.

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Issuance of shares for benefit programs may dilute your ownership interest.

We intend to adopt a new equity incentive plan following the offering, subject to shareholder approval. We may fund the equity incentive plan through the purchase of common stock in the open market (subject to regulatory restrictions) or by issuing new shares of New North Penn Bancorp common stock. If we fund the awards under the equity incentive plan with new shares of common stock, your ownership interest would be diluted by approximately 7.0%, assuming we award all of the shares and options available under the plan. We currently have outstanding options and shares available for future stock options and restricted stock awards under our 2006 Omnibus Stock Option Plan. If we fund the awards under our existing plan with new shares of stock, your ownership interest would be diluted by approximately 5.7%, assuming we award all of the shares and options available under the plan. See “Pro Forma Data” and “Our Management—Benefit Plans.”

The articles of incorporation and bylaws of New North Penn Bancorp and certain laws and regulations may prevent or make more difficult certain transactions, including a sale or merger of New North Penn Bancorp.

Provisions of the articles of incorporation and bylaws of New North Penn Bancorp, state corporate law and federal banking regulations may make it more difficult for companies or persons to acquire control of New North Penn Bancorp. As a result, our shareholders may not have the opportunity to participate in such a transaction and the trading price of our common stock may not rise to the level of other institutions that are more vulnerable to hostile takeovers. The factors that may discourage takeover attempts or make them more difficult include:

• Articles of incorporation and bylaws. Provisions of the articles of incorporation and bylaws of New North Penn Bancorp may make it more difficult and expensive to pursue a takeover attempt that the board of directors opposes. All of these provisions currently exist in the articles of incorporation and bylaws of North Penn Bancorp. These provisions also make more difficult the removal of current directors or management, or the election of new directors. These provisions include:

• supermajority voting requirements for certain business combinations and changes to some provisions of the articles of incorporation and bylaws;

• limitation on the right to vote shares;

• the election of directors to staggered terms of three years;

• provisions regarding the timing and content of shareholder proposals and nominations;

• provisions restricting the calling of special meetings of shareholders;

• the absence of cumulative voting by shareholders in the election of directors; and

• the removal of directors only for cause.

• Pennsylvania anti-takeover statutes. Pennsylvania law contains four anti-takeover sections that apply to public reporting companies relating to control share acquisitions, the disgorgement of profits by certain controlling persons, business combination transactions with interested shareholders and the ability of shareholders to put their stock following a control transaction.

• Office of Thrift Supervision regulations. Office of Thrift Supervision regulations prohibit, for three years following the completion of a mutual-to-stock conversion, including a second-step conversion, the offer to acquire or the acquisition of more than 10% of any class of equity security of a converted institution without the prior approval of the Office of Thrift Supervision. See “Restrictions on Acquisition of New North Penn Bancorp.”

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A Warning About Forward-Looking Statements

This prospectus contains forward-looking statements, which can be identified by the use of words such as “believes,” “expects,” “anticipates,” “estimates” or similar expressions. Forward-looking statements include, but are not limited to:

• statements of our goals, intentions and expectations;

• statements regarding our business plans, prospects, growth and operating strategies;

• statements regarding the quality of our loan and investment portfolios; and

• estimates of our risks and future costs and benefits.

These forward-looking statements are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors:

• general economic conditions, either nationally or in our market area, that are worse than expected;

• changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments;

• increased competitive pressures among financial services companies;

• changes in consumer spending, borrowing and savings habits;

• legislative or regulatory changes that adversely affect our business;

• adverse changes in the securities markets; and

• changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board or the Public Company Accounting Oversight Board.

Any of the forward-looking statements that we make in this prospectus and in other public statements we make may later prove incorrect because of inaccurate assumptions, the factors illustrated above or other factors that we cannot foresee. Consequently, no forward-looking statement can be guaranteed.

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Selected Financial and Other Data

The summary financial information presented below is derived in part from our consolidated financial statements. The following is only a summary and you should read it in conjunction with the consolidated financial statements and notes beginning on page F-1. The information at December 31, 2006 and 2005 and for the years ended December 31, 2006 and 2005 is derived in part from the audited consolidated financial statements that appear in this prospectus. The information at and for the year ended December 31, 2004 is for North Penn Bank. The information presented below does not include the financial condition, results of operations or other data of North Penn Mutual Holding Company. The information at March 31, 2007 and 2006 and for the three months ended March 31, 2007 and 2006 was not audited, but in the opinion of management, reflects all adjustments necessary for a fair presentation. All of these adjustments are normal and recurring. The results of operations for the three months ended March 31, 2007 are not necessarily indicative of the results of operations that may be expected for the entire year.

	Three Months Ended March 31,				Year Ended December 31,
(In thousands, except per share data)	2007		2006		2006		2005			2004
	(Unaudited)
Financial Condition Data:
Total assets	$	121,226	$	110,220	$	122,456	$	105,381		$	92,997
Investment securities		13,948		15,353		14,227		15,651			23,465
Loans receivable, net		95,525		84,274		95,154		79,560			60,829
Deposits		86,829		82,592		86,746		77,429			77,342
Borrowings		20,451		14,207		21,741		14,698			7,375
Total stockholders’ equity		13,139		12,788		13,126		12,795			7,753
Operating Data:
Interest income	$	1,859	$	1,597	$	7,032	$	5,344		$	4,807
Interest expense		992		729		3,532		2,187			1,977
Net interest income		867		868		3,500		3,157			2,830
Provision for loan losses		30		30		120		105			—
Net interest income after provision for loan losses		837		838		3,380		3,052			2,830
Other income		109		97		348		272			449
Other expenses		814		748		3,339		3,464			2,740
Income (loss) before taxes		132		187		389		(140	)		539
Income tax expense (benefit)		37		41		74		(16	)		155
Net income (loss)	$	95	$	146	$	315	$	(124	)	$	384
Per Share Data:
Earnings per share, basic	$	0.07	$	0.10	$	0.23	$	(0.09	)		N/A
Earnings per share, diluted		0.07		0.10		0.23		(0.09	)		N/A
Dividends per share		0.03		0.03		0.12		0.03			N/A

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	Three Months Ended March 31,				Year Ended December 31,
	2007		2006		2006		2005		2004
Performance Ratios (1):
Return on average assets	0.32	%	0.54	%	0.28	%	(0.13	)%	0.41	%
Return on average equity	3.38		5.39		2.88		(1.31	)	4.99
Interest rate spread (2)	2.79		3.24		3.00		3.21		3.08
Net interest margin (3)	3.23		3.61		3.41		3.52		3.24
Noninterest expense to average assets	2.73		2.78		2.94		3.58		2.95
Dividend payout ratio	45.26		29.45		54.92		N/M		—
Efficiency ratio (4)	80.36		74.65		83.56		98.55		80.87
Average interest-earning assets to average interest-bearing liabilities	112.23		112.53		112.60		113.25		106.94
Average equity to average assets	9.43		10.08		9.63		9.77		8.30
Capital Ratios (5):
Tier 1 capital	9.49		10.20		9.45		10.50		8.35
Tier 1 risk-based capital	12.00		12.58		11.97		13.76		12.07
Total risk-based capital	13.22		13.79		13.17		15.01		13.32
Asset Quality Ratios:
Allowance for loan losses as a percent of total loans	1.19		1.24		1.16		1.27		1.51
Allowance for loan losses as a percent of nonperforming loans	625.54		229.63		188.72		190.17		68.61
Net charge-offs (recoveries) to average outstanding loans during the period	0.00		0.00		0.03		0.02		0.10
Non-performing loans as a percent of total loans	0.19		0.54		0.62		0.67		2.20
Non-performing assets as a percent of total assets	0.23		0.42		0.57		0.61		1.46
Other Data:
Number of:
Real estate loans outstanding	859		845		887		873		837
Deposit accounts	6,390		6,318		6,371		6,107		6,122
Offices	5		4		5		4		4

(1) Performance ratios for the three months ended March 31, 2007 and 2006 are annualized.

(2) Represents the difference between the tax-equivalent weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.

(3) Represents tax-equivalent net interest income as a percent of average interest-earning assets.

(4) Represents noninterest expense divided by the sum of tax-equivalent net interest income and other income.

(5) Capital ratios are for North Penn Bank.

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Use of Proceeds

The following table shows how we intend to use the net proceeds of the offering. The actual net proceeds will depend on the number of shares of common stock sold in the offering and the expenses incurred in connection with the offering. Payments for shares made through withdrawals from deposit accounts at North Penn Bank will reduce North Penn Bank’s deposits and will not result in the receipt of new funds for investment. See “Pro Forma Data” for the assumptions used to arrive at these amounts.

	Minimum of Offering Range				Midpoint of Offering Range				Maximum of Offering Range				15% Above Maximum of Offering Range
(Dollars in thousands)	935,000 Shares at $10.00 Per Share		Percent of Net Proceeds		1,100,000 Shares at $10.00 Per Share		Percent of Net Proceeds		1,265,000 Shares at $10.00 Per Share		Percent of Net Proceeds		1,454,750 Shares at $10.00 Per Share		Percent of Net Proceeds
Offering proceeds	$	9,350			$	11,000			$	12,650			$	14,548
Less: offering expenses		810				810				810				810
Net offering proceeds		8,540	100.0	%		10,190	100.0	%		11,840	100.0	%		13,738	100.0	%
Less:
Proceeds contributed to North Penn Bank		4,270	50.0			5,095	50.0			5,920	50.0			6,869	50.0
Proceeds used for loan to employee stock ownership plan		748	8.8			880	8.6			1,012	8.5			1,164	8.5
Proceeds remaining for New North Penn Bancorp	$	3,522	41.2	%	$	4,215	41.4	%		4,908	41.5	%	$	5,705	41.5	%

We intend to invest the proceeds retained from the offering at New North Penn Bancorp in short-term, liquid investments, such as U.S. treasury and government agency securities, mortgage-backed securities and cash and cash equivalents, in order to supplement the interest income of North Penn Bank and increase consolidated interest income. The actual amounts to be invested in different instruments will depend on the interest rate environment and New North Penn Bancorp’s liquidity requirements. In the future, New North Penn Bancorp may liquidate its investments and use those funds:

• to pay dividends to shareholders;

• to repurchase shares of its common stock, subject to regulatory restrictions;

• to finance the possible acquisition of financial institutions or other businesses that are related to banking; and

• for general corporate purposes.

Under current Office of Thrift Supervision regulations, New North Penn Bancorp may not repurchase shares of its common stock during the first year following completion of the conversion and offering, except to fund equity benefit plans other than stock options or, with prior regulatory approval, when extraordinary circumstances exist. For a discussion of our dividend policy and regulatory matters relating to the payment of dividends, see “Our Dividend Policy.”

North Penn Bank initially intends to invest the proceeds it receives from the offering, which is shown in the table above as the amount contributed to North Penn Bank, in short-term, liquid investments. Over time, North Penn Bank may use the proceeds that it receives from the offering:

• to fund new loans;

• to repay outstanding Federal Home Loan Bank advances;

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• to invest in securities;

• to finance the possible expansion of its business activities, including developing new branch locations; and

• for general corporate purposes.

We may need regulatory approvals to engage in some of the activities listed above.

We currently do not have any specific plans for any expansion or diversification activities, including adding branch locations or acquiring other financial institutions. Consequently, we currently anticipate that the proceeds of the offering contributed to North Penn Bank initially will be used to fund new loans. We expect that much of the loan growth will occur in our commercial real estate portfolio, which we have emphasized in recent periods, but we have not allocated specific dollar amounts to any particular area of our portfolio. The amount of time that it will take to deploy the proceeds of the offering into loans will depend primarily on the level of loan demand. In the absence of loan demand, we anticipate that we will use a portion of the proceeds contributed to North Penn Bank to repay outstanding overnight advances from the Federal Home Loan Bank.

Except as described above, neither New North Penn Bancorp nor North Penn Bank has any specific plans for the investment of the proceeds of the offering and has not allocated a specific portion of the proceeds to any particular use. For a discussion of our business reasons for undertaking the offering, see “The Conversion and Offering—Reasons for the Conversion and Offering.”

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Our Dividend Policy

North Penn Bancorp currently pays a cash dividend of $0.03 per quarter, which equals $0.12 per share on an annualized basis. After the conversion and offering, we intend to continue to pay cash dividends on a quarterly basis. We currently expect that the level of cash dividends per share after the conversion and offering will be substantially consistent with the current amount of dividends per share paid by North Penn Bancorp on its common stock as adjusted for the exchange ratio. For example, based on the current cash dividend of $0.03 per share and an assumed exchange ratio of 1.6251 at the maximum of the offering range, the cash dividend, if paid, would be approximately $0.02 per share. However, in determining the amount of any dividends, the board of directors will take into account New North Penn Bancorp’s financial condition and results of operations, tax considerations, capital requirements and alternative uses for capital, industry standards and economic conditions. We cannot guarantee that we will pay dividends or that, if paid, we will not reduce or eliminate dividends in the future.

New North Penn Bancorp is subject to Pennsylvania law, which generally permits a corporation to pay dividends on its common stock unless, after giving effect to the dividend, the corporation would be unable to pay its debts as they become due in the usual course of its business or the total assets of the corporation would be less than the sum of its liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.

New North Penn Bancorp will not be subject to regulatory restrictions on the payment of dividends. However, New North Penn Bancorp’s ability to pay dividends may depend, in part, upon its receipt of dividends from North Penn Bank because New North Penn Bancorp initially will have no source of income other than earnings from the investment of the net proceeds from the offering that it retains.

Any payment of dividends by North Penn Bank to New North Penn Bancorp that would be deemed to be drawn out of North Penn Bank’s bad debt reserves would require the payment of federal income taxes by North Penn Bank at the then current income tax rate on the amount deemed distributed. See “Federal and State Taxation—Federal Income Taxation” and note 12 of the notes to consolidated financial statements included elsewhere in this prospectus. New North Penn Bancorp does not contemplate any distribution by North Penn Bank that would result in this type of tax liability.

Market for the Common Stock

The common stock of North Penn Bancorp is currently quoted on the OTC Bulletin Board under the symbol “NPEN.” Due to the small number of shareholders and shares outstanding, trading in shares of North Penn Bancorp common stock is limited. Following the completion of the conversion and offering, we intend to have the common stock of New North Penn Bancorp quoted on the OTC Bulletin Board. Ryan Beck & Co, Inc. is currently a market maker in North Penn Bancorp’s common stock and intends to be a market maker in New North Penn Bancorp’s common stock following the conversion and offering, but is under no obligation to do so. We cannot assure you that other market makers will be obtained or that an active and liquid trading market for our common stock will develop or, if developed, will be maintained. The increased number of shareholders and shares outstanding resulting from the conversion and offering is expected to increase the liquidity for New North Penn Bancorp common stock compared to the liquidity for North Penn Bancorp common stock.

The development of a public market having the desirable characteristics of depth, liquidity and orderliness depends on the existence of willing buyers and sellers, the presence of which is not within our control or that of any market maker. The number of active buyers and sellers of our common stock at any particular time may be limited, which may have an adverse effect on the price at which our common stock can be sold. There can be no assurance that persons purchasing the common stock will be able to sell their shares at or above the $10.00 price per share in the offering. Purchasers of our common stock should recognize that there are risks involved in their investment and that there may be a limited trading market in the common stock and that the common stock should not be considered a short-term investment.

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The following table sets forth high and low sales prices for North Penn Bancorp’s common stock and dividends paid per share for the periods indicated.

	High		Low		Dividend Paid Per Share
Year Ending December 31, 2007:
Third Quarter (through ______, 2007)	$		$		$
Second Quarter						0.03
First Quarter		15.50		11.05		0.03
Year Ended December 31, 2006:
Fourth Quarter		12.20		11.24		0.03
Third Quarter		11.75		10.90		0.03
Second Quarter		11.75		10.40		0.03
First Quarter		11.00		10.30		0.03
Year Ended December 31, 2005:
Fourth Quarter		11.50		10.10		0.03
Third Quarter		10.25		10.04		—
Second Quarter		11.00		10.00		—

At _______________, 2007, North Penn Bancorp had approximately _____ shareholders of record, not including those who hold shares in “street name.” On the effective date of the conversion, all publicly held shares of North Penn Bancorp common stock, including shares held by our officers and directors, will be converted automatically into and become the right to receive a number of shares of New North Penn Bancorp common stock determined pursuant to the exchange ratio. See “The Conversion and Offering—Share Exchange Ratio.” Options to purchase shares of North Penn Bancorp common stock will be converted into options to purchase a number of shares of New North Penn Bancorp common stock adjusted pursuant to the exchange ratio, for the same aggregate exercise price.

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Capitalization

The following table presents the historical capitalization of North Penn Bancorp at March 31, 2007 and the capitalization of New North Penn Bancorp reflecting the offering (referred to as “pro forma” information). The pro forma capitalization gives effect to the assumptions listed under “Pro Forma Data,” based on the sale of the number of shares of common stock indicated in the table. This table does not reflect the issuance of additional shares as a result of the exercise of options granted under the proposed equity incentive plan. A change in the number of shares to be issued in the offering may materially affect pro forma capitalization. We are offering our common stock on a best efforts basis. We must sell a minimum of 935,000 shares to complete the offering.

				Pro Forma Capitalization Based Upon the Sale of
(In thousands)	At March 31, 2007			Minimum of Offering Range 935,000 Shares at $10.00 Per Share			Midpoint of Offering Range 1,100,000 Shares at $10.00 Per Share			Maximum of Offering Range 1,265,000 Shares at $10.00 Per Share			15% Above Maximum of Offering Range 1,454,750 Shares at $10.00 Per Share
Deposits (1)	$	86,829		$	86,829		$	86,829		$	86,829		$	86,829
Borrowings		20,451			20,451			20,451			20,451			20,451
Total deposits and borrowed funds	$	107,280		$	107,280		$	107,280		$	107,280		$	107,280
Stockholders’ equity:
Preferred stock:
20,000,000 shares, no par value, authorized; none issued or outstanding	$	—		$	—		$	—		$	—		$	—
Common stock:
80,000,000 shares, $0.10 par value per share, authorized; specified number of shares assumed to be issued and outstanding (2)		144			174			205			235			271
Additional paid-in capital		5,878			14,388			16,007			17,627			19,489
Retained earnings (3)		7,675			7,675			7,675			7,675			7,675
Mutual holding company capital consolidation		—			209			209			209			209
Accumulated other comprehensive loss		(98	)		(98	)		(98	)		(98	)		(98	)
Less:
Common stock held by employee stock ownership plan (4)		(460	)		(1,208	)		(1,340	)		(1,472	)		(1,624	)
Common stock to be acquired by equity incentive plan (5)		—			(374	)		(440	)		(506	)		(582	)
Total stockholders’ equity	$	13,139		$	20,766		$	22,218		$	23,670		$	25,340
Total stockholders’ equity as a percentage of total assets		10.84	%		16.14	%		17.08	%		17.99	%		19.02	%

(1) Does not reflect withdrawals from deposit accounts for the purchase of common stock in the offering. Withdrawals to purchase common stock will reduce pro forma deposits by the amounts of the withdrawals.

(2) Reflects total issued and outstanding shares of 1,739,794, 2,046,817, 2,353,839 and 2,706,915 at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively.

(3) Retained earnings are restricted by applicable regulatory capital requirements.

(4) Assumes that 8.0% of the common stock sold in the offering will be acquired by the employee stock ownership plan in the offering with funds borrowed from New North Penn Bancorp. Under U.S. generally accepted accounting principles, the amount of common stock to be purchased by the employee stock ownership plan represents unearned compensation and, accordingly, is reflected as a reduction of capital. As shares are released to plan participants’ accounts, a compensation expense will be charged, along with related tax benefit, and a reduction in the charge against capital will occur in the amount of the compensation expense recognized. Since the funds are borrowed from New North Penn Bancorp, the borrowing will be eliminated in consolidation and no liability or interest expense will be reflected in the financial statements of New North Penn Bancorp. See “Our Management—Benefit Plans—Employee Stock Ownership Plan.”

(5) Assumes the purchase in the open market at $10.00 per share, for restricted stock awards under the proposed equity incentive plan, of a number of shares equal to 4.0% of the shares of common stock sold in the offering. The shares are reflected as a reduction of stockholders’ equity. The equity incentive plan will be submitted to shareholders for approval at a meeting following the offering. See “Risk Factors—Issuance of shares for benefit programs may dilute your ownership interest,” “Pro Forma Data” and “Our Management—Benefit Plans—Future Equity Incentive Plan.”

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Regulatory Capital Compliance

At March 31, 2007, North Penn Bank exceeded all regulatory capital requirements. The following table presents North Penn Bank’s capital position relative to its regulatory capital requirements at March 31, 2007, on a historical and a pro forma basis. The table reflects receipt by North Penn Bank of 50% of the net proceeds of the offering. For purposes of the table, the amount expected to be borrowed by the employee stock ownership plan has been deducted from pro forma regulatory capital. For a discussion of the assumptions underlying the pro forma capital calculations presented below, see “Use of Proceeds,” “Capitalization” and “Pro Forma Data.” The definitions of the terms used in the table are those provided in the capital regulations issued by the Federal Deposit Insurance Corporation. For a discussion of the capital standards applicable to North Penn Bank, see “Regulation and Supervision—Federal Banking Regulation—Capital Requirements.”

					Pro Forma at March 31, 2007
	Historical at March 31, 2007				Minimum of Offering Range 935,000 Shares at $10.00 Per Share					Midpoint of Offering Range 1,100,000 Shares at $10.00 Per Share					Maximum of Offering Range 1,265,000 Shares at $10.00 Per Share					15% Above Maximum of Offering Range 1,454,750 Shares At $10.00 Per Share
(Dollars in thousands)	Amount		Percent of Assets (1)		Amount			Percent of Assets		Amount			Percent of Assets		Amount			Percent of Assets		Amount			Percent of Assets
Total equity under generally accepted accounting principles	$	11,225	9.37	%	$	14,956		12.03	%	$	15,649		12.51	%	$	16,342		12.98	%	$	17,139		13.51	%
Tier 1 leverage capital:
Actual(2)	$	11,296	9.49	%	$	15,027		12.17	%	$	15,720		12.64	%	$	16,413		13.11	%	$	17,210		13.65	%
Requirement		4,762	4.00			4,941		4.00			4,974		4.00			5,007		4.00			5,045		4.00
Excess	$	6,534	5.49	%	$	10,086		8.17	%	$	10,746		8.64	%	$	11,406		9.11	%	$	12,165		9.65	%
Tier 1 risk-based capital:
Actual	$	11,296	12.00	%	$	15,027		15.81	%	$	15,720		16.51	%	$	16,413		17.21	%	$	17,210		18.01	%
Requirement		3,765	4.00			3,801		4.00			3,808		4.00			3,814		4.00			3,822		4.00
Excess	$	7,531	8.00	%	$	11,226		11.81	%	$	11,912		12.51	%	$	12,599		13.21	%	$	13,388		14.01	%
Total risk-based capital:
Actual (3)	$	12,447	13.22	%	$	16,178		17.02	%	$	16,871		17.72	%	$	17,564		18.42	%	$	18,361		19.22	%
Requirement		7,530	8.00			7,602		8.00			7,615		8.00			7,628		8.00			7,644		8.00
Excess	$	4,917	5.22	%	$	8,576		9.02	%	$	9,256		9.72	%	$	9,936		10.42	%	$	10,717		11.22	%
Reconciliation of capital contributed to North Penn Bank:
Net proceeds contributed to North Penn Bank					$	4,479				$	5,304				$	6,129				$	7,078
Less common stock acquired by ESOP						(748	)				(880	)				(1,012	)				(1,164	)
Pro forma increase in GAAP and regulatory capital					$	3,731				$	4,424				$	5,117				$	5,914

(1) Tier 1 leverage capital level is shown as a percentage of average assets of $119,045,000. Risk-based capital levels are shown as a percentage of risk-weighted assets of $94,130,000.

(2) Net unrealized losses on available-for-sale securities and disallowed servicing assets account for the difference between capital calculated under generally accepted accounting principles and Tier 1 leverage capital. See note 18 of the notes to the consolidated financial statements for additional information.

(3) Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 20% risk-weighting.

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Pro Forma Data

The following tables show information about our net income and stockholders’ equity reflecting the conversion and offering. The information provided illustrates our pro forma net income and stockholders’ equity based on the sale of common stock at the minimum, the midpoint, the maximum and 15% above the maximum of the offering range. The actual net proceeds from the sale of the common stock cannot be determined until the offering is completed. Net proceeds indicated in the following tables are based upon the following assumptions:

• All shares of common stock will be sold in the subscription and direct community offerings;

• Our employee stock ownership plan will purchase a number of shares equal to 8.0% of the shares sold in the offering with a loan from New North Penn Bancorp that will be repaid in equal installments over 20 years;

• Ryan Beck & Co., Inc. will receive a fee equal to the greater of $160,000 or 1.0% of the aggregate purchase price of the shares sold in the subscription and direct community offerings, except that no fee will be paid with respect to shares purchased by the employee stock ownership plan or by our officers, directors and employees or members of their immediate families; and

• Total expenses of the offering, excluding fees paid to Ryan Beck & Co., Inc., will be approximately $650,000.

Actual expenses may vary from this estimate, and the amount of fees paid will depend upon whether a syndicate of broker-dealers or other means is necessary to sell the shares (which would increase offering expenses), and other factors.

Pro forma net income for the three months ended March 31, 2007 and the year ended December 31, 2006 has been calculated as if the offering were completed at the beginning of each period, and the net proceeds had been invested at 4.90% which represent the one-year treasury rate. We believe that the one-year treasury rate represents a more realistic yield on the investment of the offering proceeds than the arithmetic average of the weighted average yield earned on our interest-earning assets and the weighted average rate paid on our deposits, which is the reinvestment rate required by Office of Thrift Supervision regulations.

A pro forma after-tax return of 2.89% is used for the three months ended March 31, 2007 and the year ended December 31, 2006, after giving effect to a combined federal and state income tax rate of 41.0%. The actual rate experienced by New North Penn Bancorp may vary. Historical and pro forma per share amounts have been calculated by dividing historical and pro forma amounts by the number of shares of common stock indicated in the tables.

When reviewing the following tables you should consider the following:

• The final column gives effect to a 15% increase in the offering range, which may occur without any further notice if RP Financial increases its appraisal to reflect the results of the offering, changes in our financial condition or results of operations, or changes in market conditions after the offering begins. See “The Conversion and Offering—How We Determined the Offering Range and the $10.00 Purchase Price.”

• Since funds on deposit at North Penn Bank may be withdrawn to purchase shares of common stock, the amount of funds available for investment will be reduced by the amount of withdrawals for stock purchases. The pro forma tables do not reflect withdrawals from deposit accounts.

• Historical per share amounts have been computed as if the shares of common stock expected to be issued in the offering had been outstanding at the beginning of the period covered by the table. However, neither historical nor pro forma stockholders’ equity has been adjusted to reflect the investment of the estimated net proceeds from the sale of the shares in the offering, the additional employee stock ownership plan expense or the proposed equity incentive plan.

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• Pro forma stockholders’ equity (“book value”) represents the difference between the stated amounts of our assets and liabilities. Book value amounts do not represent fair market values or amounts available for distribution to shareholders in the unlikely event of liquidation. The amounts shown do not reflect the federal income tax consequences of the restoration to income of North Penn Bank’s special bad debt reserves for income tax purposes, which would be required in the unlikely event of liquidation. See “Federal and State Taxation.”

• The amounts shown as pro forma stockholders’ equity per share do not represent possible future price appreciation of our common stock.

The following pro forma data, which are based on North Penn Bancorp’s equity at March 31, 2007 and December 31, 2006, and net income for the three months ended March 31, 2007 and the year ended December 31, 2006, may not represent the actual financial effects of the offering or our operating results after the offering. The pro forma data rely exclusively on the assumptions outlined above and in the notes to the pro forma tables. The pro forma data do not represent the fair market value of our common stock, the current fair market value of our assets or liabilities, or the amount of money that would be available for distribution to shareholders if we were to be liquidated after the conversion.

We are offering our common stock on a best efforts basis. We must sell a minimum of 935,000 shares to complete the offering.

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At or For the Three months Ended March 31, 2007

	Minimum of Offering Range			Midpoint of Offering Range			Maximum of Offering Range			15% Above Maximum of Offering Range
(Dollars in thousands, except per share amounts)	935,000 Shares at $10.00 Per Share			1,100,000 Shares at $10.00 Per Share			1,265,000 Shares at $10.00 Per Share			1,454,750 Shares at $10.00 Per Share
Gross proceeds	$	9,350		$	11,000		$	12,650		$	14,548
Plus: Shares issued in exchange for shares of North Penn Bancorp		8,048			9,468			10,888			12,521
Proforma market capitalization	$	17,398		$	20,468		$	23,538		$	27,069
Gross proceeds	$	9,350		$	11,000		$	12,650		$	14,548
Less: estimated expenses		810			810			810			810
Estimated net proceeds		8,540			10,190			11,840			13,738
Less: common stock acquired by employee stock ownership plan (1)		(748	)		(880	)		(1,012	)		(1,164	)
Less: common stock to be acquired by equity incentive plan (2)		(374	)		(440	)		(506	)		(582	)
Assets received from mutual holding company		209			209			209			209
Net investable proceeds	$	7,627		$	9,079		$	10,531		$	12,201
Pro Forma Net Income:
Pro forma net income (3):
Historical	$	95		$	95		$	95		$	95
Pro forma income on net investable proceeds		55			66			76			88
Less: pro forma employee stock ownership plan adjustments (1)		(6	)		(6	)		(7	)		(9	)
Less: pro forma restricted stock award expense (2)		(11	)		(13	)		(15	)		(17	)
Less: pro forma stock option expense (3)		(15	)		(17	)		(20	)		(23	)
Pro forma net income	$	118		$	125		$	129		$	134
Pro forma net income per share (3):
Historical	$	0.06		$	0.05		$	0.04		$	0.04
Pro forma income on net investable proceeds		0.03			0.04			0.04			0.04
Less: pro forma employee stock ownership plan adjustments (1)		(0.00	)		(0.00	)		(0.00	)		(0.00	)
Less: pro forma restricted stock award expense (2)		(0.01	)		(0.01	)		(0.01	)		(0.01	)
Less: pro forma stock option expense (3)		(0.01	)		(0.01	)		(0.01	)		(0.01	)
Pro forma net income per share	$	0.07		$	0.07		$	0.06		$	0.06
Offering price as a multiple of pro forma net income per share (annualized)		35.71x			35.71x			41.67x			41.67x
Number of shares used to calculate pro forma net income per share (4)		1,606,029			1,889,447			2,172,863			2,498,793
Pro Forma Stockholders’ equity:
Pro forma stockholders’ equity (book value):
Historical	$	13,139		$	13,139		$	13,139		$	13,139
Assets received from mutual holding company		209			209			209			209
Estimated net proceeds		8,540			10,190			11,840			13,738
Less: common stock acquired by employee stock ownership plan (1)		(748	)		(880	)		(1,012	)		(1,164	)
Less: common stock to be acquired by equity incentive plan (2)		(374	)		(440	)		(506	)		(582	)
Pro forma stockholders’ equity	$	20,766		$	22,218		$	23,670		$	25,340
Pro forma stockholders’ equity per share:
Historical	$	7.55		$	6.42		$	5.58		$	4.85
Assets received from mutual holding company		0.12			0.10			0.09			0.08
Estimated net proceeds		4.91			4.97			5.03			5.07
Less: common stock acquired by employee stock ownership plan (1)		(0.43	)		(0.43	)		(0.43	)		(0.43	)
Less: common stock to be acquired by equity incentive plan (2)		(0.21	)		(0.21	)		(0.21	)		(0.21	)
Pro forma stockholders’ equity per share	$	11.94		$	10.85		$	10.06		$	9.36
Offering price as a percentage of pro forma stockholders’ equity per share		83.75	%		92.17	%		99.40	%		106.84	%
Number of shares used to calculate pro forma stockholders’ equity per share (4)		1,739,794			2,046,817			2,353,839			2,706,915

(footnotes on page __)

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At or For the Year Ended December 31, 2006

	Minimum of Offering Range			Midpoint of Offering Range			Maximum of Offering Range			15% Above Maximum of Offering Range
(Dollars in thousands, except per share amounts)	935,000 Shares at $10.00 Per Share			1,100,000 Shares at $10.00 Per Share			1,265,000 Shares at $10.00 Per Share			1,454,750 Shares at $10.00 Per Share
Gross proceeds	$	9,350		$	11,000		$	12,650		$	14,548
Plus: Shares issued in exchange for shares of North Penn Bancorp		8,048			9,468			10,888			12,521
Proforma market capitalization	$	17,398		$	20,468		$	23,538		$	27,069
Gross proceeds	$	9,350		$	11,000		$	12,650		$	14,548
Less: estimated expenses		810			810			810			810
Estimated net proceeds		8,540			10,190			11,840			13,738
Less: common stock acquired by employee stock ownership plan (1)		(748	)		(880	)		(1,012	)		(1,164	)
Less: common stock to be acquired by equity incentive plan (2)		(374	)		(440	)		(506	)		(582	)
Assets received from mutual holding company		209			209			209			209
Net investable proceeds	$	7,627		$	9,079		$	10,531		$	12,201
Pro Forma Net Income:
Pro forma net income (3):
Historical	$	315		$	315		$	315		$	315
Pro forma income on net investable proceeds		220			262			304			353
Less: pro forma employee stock ownership plan adjustments (1)		(22	)		(26	)		(30	)		(34	)
Less: pro forma restricted stock award expense (2)		(44	)		(52	)		(60	)		(69	)
Less: pro forma stock option expense (3)		(58	)		(68	)		(79	)		(90	)
Pro forma net income	$	411		$	431		$	450		$	475
Pro forma net income per share (3):
Historical	$	0.20		$	0.17		$	0.14		$	0.13
Pro forma income on net investable proceeds		0.14			0.14			0.14			0.14
Less: pro forma employee stock ownership plan adjustments (1)		(0.01	)		(0.01	)		(0.01	)		(0.01	)
Less: pro forma restricted stock award expense (2)		(0.03	)		(0.03	)		(0.03	)		(0.03	)
Less: pro forma stock option expense (3)		(0.04	)		(0.04	)		(0.04	)		(0.04	)
Pro forma net income per share	$	0.26		$	0.23		$	0.20		$	0.19
Offering price as a multiple of pro forma net income per share		38.46x			43.48x			50.00x			52.63x
Number of shares used to calculate pro forma net income per share (4)		1,603,183			1,886,098			2,169,012			2,494,364
Pro Forma Stockholders’ equity:
Pro forma stockholders’ equity (book value):
Historical	$	13,126		$	13,126		$	13,126		$	13,126
Assets received from mutual holding company		209			209			209			209
Estimated net proceeds		8,540			10,190			11,840			13,738
Less: common stock acquired by employee stock ownership plan (1)		(748	)		(880	)		(1,012	)		(1,164	)
Less: common stock to be acquired by equity incentive plan (2)		(374	)		(440	)		(506	)		(582	)
Pro forma stockholders’ equity	$	20,753		$	22,205		$	23,657		$	25,327
Pro forma stockholders’ equity per share:
Historical	$	7.54		$	6.41		$	5.58		$	4.85
Assets received from mutual holding company		0.12			0.10			0.09			0.08
Estimated net proceeds		4.91			4.98			5.02			5.07
Less: common stock acquired by employee stock ownership plan (1)		(0.43	)		(0.43	)		(0.43	)		(0.43	)
Less: common stock to be acquired by equity incentive plan (2)		(0.21	)		(0.21	)		(0.21	)		(0.21	)
Pro forma stockholders’ equity per share	$	11.93		$	10.85		$	10.05		$	9.36
Offering price as a percentage of pro forma stockholders’ equity per share		83.82	%		92.17	%		99.50	%		106.84	%
Number of shares used to calculate pro forma stockholders’ equity per share (4)		1,739,794			2,046,817			2,353,839			2,706,915

(footnotes on following page)

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(1) Assumes that the employee stock ownership plan will acquire a number of shares of stock equal to 8.0% of the shares sold in the offering, (74,800, 88,000, 101,200 and 116,380 shares at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively). The employee stock ownership plan will borrow the funds to acquire these shares from the proceeds retained by New North Penn Bancorp. The amount of this borrowing has been reflected as a reduction from gross proceeds to determine estimated net investable proceeds. This borrowing will have an interest rate equal to the prime rate as published in The Wall Street Journal, which is currently         %, and a term of 20 years. North Penn Bank intends to make contributions to the employee stock ownership plan in amounts at least equal to the principal and interest requirement of the debt. Interest income that New North Penn Bancorp will earn on the loan will offset a portion of the compensation expense recorded by North Penn Bank as it contributes to the employee stock ownership plan. As the debt is paid down, shares will be released for allocation to participants’ accounts and stockholders’ equity will be increased.

The adjustment to pro forma net income for the employee stock ownership plan reflects the after-tax compensation expense associated with the plan. Applicable accounting principles require that compensation expense for the employee stock ownership plan be based upon shares committed to be released and that unallocated shares be excluded from earnings per share computations. An equal number of shares (1/20 of the total, based on a 20-year loan) will be released each year over the term of the loan. The valuation of shares committed to be released would be based upon the average market value of the shares during the year, which, for purposes of the pro forma tables, was assumed to be equal to the $10.00 per share purchase price. If the average market value per share is greater than $10.00 per share, total employee stock ownership plan expense would be greater. See “Our Management—Benefit Plans—Employee Stock Ownership Plan.”

(2) Assumes that New North Penn Bancorp will purchase in the open market a number of shares of common stock equal to 4.0% of the shares sold in the offering, (37,400, 44,000, 50,600 and 58,190 shares at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively), that will be reissued as restricted stock awards under a new equity incentive plan to be adopted following the offering. Purchases will be funded with cash on hand at New North Penn Bancorp or with dividends paid to New North Penn Bancorp by North Penn Bank. The cost of these shares has been reflected as a reduction from gross proceeds to determine estimated net investable proceeds. In calculating the pro forma effect of the restricted stock awards, it is assumed that the required shareholder approval has been received, that the shares used to fund the awards were acquired at the beginning of the respective period and that the shares were acquired at the $10.00 per share purchase price. The issuance of authorized but unissued shares of the common stock instead of shares repurchased in the open market would dilute the ownership interests of existing shareholders by approximately 2.1%.

The adjustment to pro forma net income for the restricted stock awards reflects the after-tax compensation expense associated with the awards. It is assumed that the fair market value of a share of New North Penn Bancorp common stock was $10.00 at the time the awards were made, that shares of restricted stock issued under the equity incentive plan vest 20% per year, that compensation expense is recognized on a straight-line basis over each vesting period so that 20% of the value of the shares awarded was an amortized expense during each year, and that the combined federal and state income tax rate was 41%. If the fair market value per share is greater than $10.00 per share on the date shares are awarded under the equity incentive plan, total equity incentive plan expense would be greater.

(3) The adjustment to pro forma net income for stock options reflects the after-tax compensation expense associated with the stock options that may be granted under the new equity incentive plan to be adopted following the offering. If the new equity incentive plan is approved by shareholders, a number of shares equal to 10.0% of the number of shares sold in the offering, (93,500, 110,000, 126,500 and 145,475) shares at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively), will be reserved for future issuance upon the exercise of stock options that may be granted under the plan. We will comply with Financial Accounting Standards Board Statement No. 123 (revised 2004), Share-Based Payment, to account for stock options issued. This standard requires compensation cost relating to share-based payment transactions be recognized in the financial statements over the period the employee is required to provide services for the award. The cost will be measured based on the fair value of the equity instruments issued. Applicable accounting standards do not prescribe a specific valuation technique to be used to estimate the fair value of employee stock options. The weighted-average fair value of stock options granted and outstanding under North Penn Bancorp’s 2006 Omnibus Stock Option Plan is $3.86 per option. Using this value and adjusting for an exercise price of $10.00, the fair value of stock options to be granted under the new equity incentive plan has been estimated at $3.46 per option for purposes of the pro forma tables. It is assumed that stock options granted under the equity incentive plan vest 20% per year, that compensation expense is recognized on a straight-line basis over each vesting period so that 20% of the value of the options awarded was an amortized expense during each year, that 25% of the options awarded are non-qualified options and that the combined federal and state income tax rate was 41%. We plan to use the Black-Scholes option-pricing formula; however, if the fair market value per share is different than $10.00 per share on the date options are awarded under the equity incentive plan, or if the assumptions used in the option-pricing formula are different from those used in preparing this pro forma data, the value of the stock options and the related expense would be different. The issuance of authorized but unissued shares of common stock to satisfy option exercises instead of shares repurchased in the open market would dilute the ownership interests of existing shareholders, by approximately 5.1%.

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(4) The number of shares used to calculate pro forma net income per share is equal to the weighted average shares outstanding for the respective period (1,398,562 for the three months ended March 31, 2007 and 1,393,857 for the year ended December 31, 2006) multiplied by the exchange ratio at the minimum, midpoint, maximum, and adjusted maximum of the offering range, less the number of shares purchased by the employee stock ownership plan not committed to be released within one year following the offering as adjusted to effect a weighted average over the period. The total number of shares to be outstanding upon completion of the conversion and offering includes the number of shares sold in the offering plus the number of shares issued in exchange for outstanding shares of North Penn Bancorp common stock held by persons other than North Penn Mutual Holding Company. The number of shares used to calculate pro forma stockholders’ equity per share is equal to the total number of shares to be outstanding upon completion of the offering.

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Our Business

General

North Penn Bancorp was incorporated on November 22, 2004 to become the holding company for North Penn Bank in connection with North Penn Bank’s mutual holding company reorganization and minority stock issuance, which was completed on June 1, 2005. North Penn Bancorp’s business activity is the ownership of the outstanding capital stock of North Penn Bank. New North Penn Bancorp was incorporated on May 23, 2007 to become the holding company for North Penn Bank upon completion of the conversion and offering. In the future, New North Penn Bancorp may acquire or organize other operating subsidiaries; however, there are no current plans, arrangements, agreements or understandings, written or oral, to do so.

North Penn Bank was organized on February 28, 1877 as The German Building Association of Scranton. The institution eventually became North Penn Savings and Loan Association. On October 1, 2003, North Penn converted from a Pennsylvania state-chartered savings association to a Pennsylvania state-chartered savings bank and changed its name to North Penn Bank. We operate as a community-oriented financial institution offering traditional financial services to consumers and businesses in our market area. We attract deposits from the general public and use those funds to originate a variety of consumer and business loans.

North Penn Bank has two subsidiaries: Norpenco, Inc. and North Penn Settlement Services, LLC. Norpenco maintains an investment portfolio of equity securities in other financial institutions. North Penn Settlement Services engages in joint ventures with local title insurance companies to provide title insurance and settlement services.

Our Web site address is www.northpennbank.com. Information on our Web site should not be considered a part of this prospectus.

Market Area

We are headquartered in Scranton, Pennsylvania. In addition to our main office, we operate full-service branch offices in Scranton, Stroudsburg, Clarks Summit and Effort, Pennsylvania. Scranton and Clarks Summit are in Lackawanna County, which is part of the Scranton – Wilkes-Barre, Pennsylvania metropolitan statistical area. Located in the heart of Northeast Pennsylvania, the major metropolitan areas of Philadelphia, New York City, Northern New Jersey, Harrisburg, Pennsylvania and Syracuse, New York are within a two hour drive of Scranton. Historically, the economy of Scranton was dominated by manufacturing enterprises, and the city continues to depend heavily on the nondurable goods sector for companies such as Proctor & Gamble. However, in the last decade, several major financial and professional services corporations opened large offices locally. Since that time, there has also been a marked increase in the number of people employed in the health, education, and social services industry. Defense contractors also play an important role in the region’s diversified economy, and construction, utilities, retail trade, and government make up a large part of the economic base. Tourism is also a growing industry. According to the U.S. Census Bureau, Lackawanna County had an estimated population of approximately 210,000 people in 2006, while Scranton had an estimated population of approximately 73,000 in 2005. The population of Scranton and Lackawanna County has been slowly declining for many years, though in recent years the population has held steady or declined only slightly as the local economy has improved.

Stroudsburg and Effort are in Monroe County. Monroe County, which is on the outskirts of the New York City metropolitan area, is located in eastern Pennsylvania, situated 90 miles north of Philadelphia, 75 miles west of New York and 116 miles northeast of Harrisburg. According to the U.S. Census Bureau, Monroe County had an estimated population of approximately 167,000 people in 2006. Between 2000 and 2006, the population of Monroe County grew 19.5% making it one of the fastest growing counties in Pennsylvania. Major industries include tourism, construction and educational facilities.

According to the U.S. Department of Labor, the unemployment rate as of February 2007 was 5.0% in Lackawanna County and 4.9% in Monroe County, compared to 4.0% for the entire state and 4.5% nationwide.

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Competition

We face significant competition for the attraction of deposits and origination of loans. Our most direct competition for deposits has historically come from the many financial institutions operating in our market area. We also face competition for investors’ funds from money market funds, mutual funds and other corporate and government securities. Our competition for loans comes primarily from financial institutions in our market area and, to a lesser extent, from other financial service providers, such as mortgage companies and mortgage brokers. Competition for loans also comes from the increasing number of non-depository financial service companies entering the mortgage market, such as insurance companies, securities companies and specialty finance companies.

Several large banks operate in our market area, including PNC Bank, which has the largest deposit market share in both Lackawanna and Monroe Counties, Wachovia, M&T Bank and Citizens Bank. These institutions are significantly larger than us and, therefore, have significantly greater resources. According to data provided by the Federal Deposit Insurance Corporation, as of June 30, 2006, we had a deposit market share of 1.6% in Lackawanna County, which represented the 11th largest deposit market share out of 16 banks with offices in the county. In Monroe County, at that same date we had a deposit market share of 1.0%, which represented the 14^th largest market share out of 15 banks with offices in the county.

We expect competition to remain intense in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Technological advances, for example, have lowered barriers to entry, allowed banks to expand their geographic reach by providing services over the Internet and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks. Changes in federal law permit affiliation among banks, securities firms and insurance companies, which promotes a competitive environment in the financial services industry. Competition for deposits and the origination of loans could limit our growth in the future.

Lending Activities

One- to Four-Family Residential Loans. We offer both fixed-rate and adjustable-rate mortgage loans. We offer fixed-rate mortgage loans with terms up to 40 years and adjustable-rate mortgage loans with terms up to 30 years and interest rates and payments that adjust annually after an initial fixed period of one or three years. Interest rates and payments on our adjustable-rate loans generally are adjusted to a rate equal to a percentage above the one year U.S. Treasury index. The maximum amount by which the interest rate may be increased or decreased is generally 2% per adjustment period and the lifetime interest rate cap is generally 6% over the initial interest rate of the loan. We do not offer loans with negative amortization or interest only loans and we do not engage in subprime lending. Substantially all of the residential mortgage loans that we originate conform to Fannie Mae and Freddie Mac underwriting standards and, therefore, are readily saleable in the secondary market.

We offer home equity loans with a maximum combined loan to value ratio of 75%. Home equity lines of credit have adjustable rates of interest that are indexed to the Prime Rate as published by The Wall Street Journal. Home equity loans have fixed interest rates and terms that typically range from five to 10 years.

Borrower demand for adjustable-rate loans compared to fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, and the difference between the interest rates and loan fees offered for fixed-rate mortgage loans as compared to the interest rates and loan fees for adjustable-rate loans. The relative amount of fixed-rate and adjustable-rate mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment. The loan fees, interest rates and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive market conditions. In recent periods, we have experienced a customer preference for fixed-rate mortgage loans.

While one- to four-family residential real estate loans are normally originated with up to 30-year terms, such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full either upon sale of the property pledged as security or upon refinancing the original loan. Therefore, average loan maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding loans.

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We will make mortgage loans with loan-to-value ratios up to 95%; however, we require private mortgage insurance for loans with a loan-to-value ratio over 80%. We require all properties securing mortgage loans to be appraised by a board-approved independent appraiser. We generally require title insurance on all first mortgage loans. Borrowers must obtain hazard insurance, and flood insurance is required for loans on properties located in a flood zone.

Commercial and Multi-Family Real Estate Loans. We originate loans secured by a variety of commercial and multi-family real estate, such as hotels, commercial and residential investment properties, and owner-occupied commercial buildings, located in our market area. Our commercial and multi-family real estate loans have adjustable rates based on the Prime Rate and adjust monthly or periodically after an initial fixed period of one, three or five years. Term loans and mortgage loans generally have terms up to 20 years. Payments may be based on an amortization schedule that exceeds the term of the loan, up to a maximum of 25 years, with a balloon payment due at the end of the loan term. We also provide revolving lines of credit secured by commercial real estate. Loan amounts generally do not exceed 80% of the property’s appraised value.

If a loan exceeds our legal lending limit, we will sell participation interests in the loan to other banks in our market area. This allows us to make larger loans, while reducing our exposure to a single borrower.

In reaching a decision on whether to make a commercial or multi-family real estate loan, we consider and review a global cash flow analysis of the borrower and consider the net operating income of the borrower’s business or the property, the borrower’s expertise, credit history and profitability, and the value of the underlying property. We generally require that the borrowers have debt service coverage ratios (the ratio of earnings before debt service to debt service) of at least 1.2. In some circumstances, loans are also collateralized by business assets, assignments of leases or the business owner’s primary residence. We may also require personal guarantees. An environmental survey or environmental risk insurance is obtained when the possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials. In order to monitor these loans, we generally require the borrower and, in some cases, the business owner to provide annual financial statements and/or income tax returns.

As of March 31, 2007, our largest commercial real estate loan was $1.5 million and was secured by a hotel. This loan was performing in accordance with its original terms at March 31, 2007.

Construction and Land Development Loans. We originate loans to individuals and builders to finance the construction of residential dwellings. We also make construction and land development loans for small development projects. Our construction loans generally provide for the payment of interest only during the construction phase, which is usually nine months for residential properties and 12 months for commercial properties. Loans generally can be made with a maximum loan to value ratio of 95% on residential construction and 80% on commercial construction, based on appraised value as if complete. Before making a commitment to fund a construction loan, we require an appraisal of the property by an independent licensed appraiser. We also will require an inspection of the property before disbursement of funds during the term of the construction loan.

Commercial Loans. We occasionally make commercial business loans. Most of our commercial loans are for the acquisition of equipment, which secure the loans. We do not offer unsecured commercial loans or lines of credit backed solely by inventory or accounts receivable.

When making commercial business loans, we consider the financial statements of the borrower, the borrower’s payment history of both corporate and personal debt, the debt service capabilities of the borrower, the projected cash flows of the business, the viability of the industry in which the customer operates and the value of the collateral. At March 31, 2007, our largest commercial loan relationship was one loan totaling $135,000 secured by construction vehicles. This loan was performing in accordance with its original terms at March 31, 2007.

Consumer Loans. Our consumer loans consist primarily of automobile loans. We occasionally make loans secured by passbook or certificate accounts.

Most of our automobile loans were originated on an indirect basis. We have established relationships with several automobile dealers in our market area through which we originate loans. The dealer acts in an agent capacity to take applications that are forwarded to us for action by assigned lending officers. Although we have

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incurred few losses on our indirect automobile lending, we reduced this activity subsequent to March 31, 2007 because we determined that it was not sufficiently profitable. While we intend to continue making automobile loans to our customers on a direct basis, we expect that the termination of our indirect lending activities will result in the reduction in the size of our consumer loan portfolio.

Loan Underwriting Risks.

Adjustable-Rate Loans. While we anticipate that adjustable-rate loans will better offset the adverse effects of an increase in interest rates as compared to fixed-rate mortgages, an increased monthly mortgage payment required of adjustable-rate loan borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of the underlying property also may be adversely affected in a high interest rate environment. In addition, although adjustable-rate mortgage loans make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits.

Construction Loans. Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction and the estimated cost (including interest) of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the building. If the estimate of value proves to be inaccurate, we may be confronted, at or before the maturity of the loan, with a building having a value which is insufficient to assure full repayment. If we are forced to foreclose on a building before or at completion due to a default, there can be no assurance that we will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs.

Commercial and Multi-Family Real Estate Loans. Loans secured by commercial and multi-family real estate generally have larger balances and involve a greater degree of risk than one- to four-family residential mortgage loans. Of primary concern in commercial and multi-family real estate lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the project. Payments on loans secured by investment properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject to adverse conditions in the real estate market or the economy.

Commercial Loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Consumer Loans. Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as motor vehicles. In the latter case, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower’s continuing financial stability, and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

Loan Originations, Purchases and Sales. Loan originations come from a number of sources. The primary source of residential loan originations are existing customers, walk-in traffic, referrals from customers and advertising. Commercial loans are generated primarily through the efforts of our loan officers.

From time to time, we purchase participations in commercial real estate loans from other financial institutions in our market area. Loan participations totaled $5.7 million at March 31, 2007. Loan participations are subject to the same credit analysis and loan approvals as loans we originate. We are permitted to review all of the

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documentation relating to any loan in which we participate. However, in a purchased participation loan, we do not service the loan and thus are subject to the policies and practices of the lead lender with regard to monitoring delinquencies, pursuing collections and instituting foreclosure proceedings.

In the past, we have sold some of the residential mortgage loans that we originated. In recent periods we have retained all of the residential mortgage loans that we have originated. Commencing in the second quarter of 2007, we began to sell fixed-rate residential mortgage loans to the Federal Home Loan Bank of Pittsburgh through its Mortgage Partnership Finance program on a servicing retained basis. We retain the credit risk for the loans that we sell. In the event of a default, losses are absorbed by a “first loss” account established by the Federal Home Loan Bank. If losses exceed the amount of the first loss account, North Penn Bank will be responsible for the amount of the loss above the first loss account. We receive a credit enhancement fee for managing the credit risk of the loans sold to the Federal Home Loan Bank.

Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures established by our board of directors and management. The board of directors has granted loan approval authority to certain officers up to prescribed limits, based on the officer’s experience and tenure. Loans over $250,000 up to $350,000 must be approved by the loan committee. All loans over $350,000 must be approved by the board of directors.

Loans to One Borrower. The maximum amount that we may lend to one borrower and the borrower’s related entities is limited, by internal policy, to generally 15% of our Tier 1 capital and reserves. At March 31, 2007, our regulatory limit on loans to one borrower was $1.9 million. At that date, our largest lending relationship was $1.7 million and was secured by various commercial and residential real estate. This loan was performing in accordance with its original terms at March 31, 2007.

Loan Commitments. We issue commitments for fixed- and adjustable-rate mortgage loans conditioned upon the occurrence of certain events. Commitments to originate mortgage loans are legally binding agreements to lend to our customers. Generally, our loan commitments expire after 60 days.

Investment Activities

We have legal authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies and of state and municipal governments, mortgage-backed securities and certificates of deposit of federally insured institutions. Within certain regulatory limits, we also may invest a portion of our assets in corporate securities and mutual funds. We also are required to maintain an investment in Federal Home Loan Bank of Pittsburgh stock.

Our investment objectives are to provide and maintain liquidity, to establish an acceptable level of interest rate and credit risk, to provide an alternate source of low-risk investments when demand for loans is weak and to generate a favorable return. Our board of directors has the overall responsibility for the investment portfolio, including approval of our investment policy. The Asset/Liability Committee is responsible for implementation of the investment policy and monitoring our investment performance. Our board of directors reviews the status of our investment portfolio on a monthly basis, or more frequently if warranted.

At March 31, 2007, our investment portfolio totaled $13.9 million, or 11.5% of total assets, and consisted primarily of mortgage-backed securities and municipal bonds. In July 2005, we purchased $7.0 million of municipal bonds using the proceeds of $7.0 million of term borrowings from the Federal Home Loan Bank of Pittsburgh. The purpose of the transaction was to increase earnings by leveraging the equity that we had raised through the stock offering completed in June 2005. Substantially all of the municipal bonds mature in 2019 through 2021. Through our subsidiary, Norpenco, Inc., we invest in equity securities of financial institutions. At March 31, 2007, we owned equity securities totaling $999,000. At that date we owned shares of 42 companies and the largest holding was $50,000.

Deposit Activities and Other Sources of Funds

General. Deposits, borrowings and loan repayments are the major sources of our funds for lending and other investment purposes. Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general interest rates and money market conditions.

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Deposit Accounts. Substantially all of our depositors are residents of Pennsylvania. Deposits are attracted from within our market area through the offering of a broad selection of deposit instruments, including non-interest-bearing demand deposits (such as checking accounts), interest-bearing demand accounts (such as NOW and money market accounts), savings accounts and certificates of deposit. In addition to accounts for individuals, we also offer commercial checking accounts and sweep accounts designed for the businesses operating in our market area. We do not have any brokered deposits. From time to time we promote various accounts in an effort to increase deposits. We also offer higher interest rates on certain NOW and money market accounts in exchange for maintaining larger balances.

Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors. In determining the terms of our deposit accounts, we consider the rates offered by our competition, our liquidity needs, profitability to us, and customer preferences and concerns. We generally review our deposit mix and pricing weekly. Our deposit pricing strategy has generally been to offer competitive rates and to be towards the top of the local market for rates on selected types of deposit products.

Borrowings. We utilize advances from the Federal Home Loan Bank of Pittsburgh to supplement our investable funds. The Federal Home Loan Bank functions as a central reserve bank providing credit for member financial institutions. As a member, we are required to own capital stock in the Federal Home Loan Bank and are authorized to apply for advances on the security of such stock and certain of our mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met. Advances are made under several different programs, each having its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s net worth or on the Federal Home Loan Bank’s assessment of the institution’s creditworthiness. At March 31, 2007, we had arrangements to borrow up to $15.0 million from the Federal Home Loan Bank of Pittsburgh. We currently do not have any other borrowing arrangements.

Properties

We currently conduct business through our five full-service banking offices in Scranton, Stroudsburg, Clarks Summit and Effort, Pennsylvania. We own all of our offices, except for Clarks Summit, which is subject to a renewable lease that expires in 2009. The net book value of the land, buildings, furniture, fixtures and equipment owned by us was $4.3 million as of March 31, 2007.

Personnel

As of March 31, 2007, we had 31 full-time employees and 17 part-time employees, none of whom is represented by a collective bargaining unit. We believe our relationship with our employees is good.

Legal Proceedings

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

Subsidiaries

The only subsidiary of North Penn Bancorp is North Penn Bank. North Penn Bank has two subsidiaries: Norpenco, Inc. and North Penn Settlement Services, LLC. Norpenco maintains an investment portfolio of equity securities in other financial institutions. North Penn Settlement Services engages in joint ventures with local title insurance companies to provide title insurance and settlement services.

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Management’s Discussion and Analysis of

Results of Operations and Financial Condition

The objective of this section is to help potential investors understand our views on our results of operations and financial condition. You should read this discussion in conjunction with the consolidated financial statements and notes to the consolidated financial statements that appear at the end of this prospectus.

Overview

We conduct community banking activities by accepting deposits and making loans in our market area. Our lending products include commercial loans and mortgages, consumer and home equity loans, and residential mortgages on single-family and multi-family dwellings. We also maintain an investment portfolio consisting primarily of municipal bonds and mortgage-backed securities to manage our liquidity and interest rate risk. Our loan and investment portfolios are funded with deposits as well as collateralized borrowings from the Federal Home Loan Bank of Pittsburgh.

Income. Our primary source of pre-tax income is net interest income. Net interest income is the difference between interest income, which is the income that we earn on our loans and investments, and interest expense, which is the interest that we pay on our deposits and borrowings. Changes in levels of interest rates affect our net interest income. In recent periods, short-term interest rates (which influence the rates we pay on deposits) have increased, while longer-term interest rates (which influence the rates we earn on loans) have not. The narrowing of the spread between the interest we earn on loans and investments and the interest we pay on deposits has negatively affected our net interest income.

A secondary source of income is non-interest income, which is revenue that we receive from providing products and services. The majority of our non-interest income generally comes from service charges (mostly from service charges on deposit accounts) and increases in the value of bank-owned life insurance. In some years, we recognize income from the sale of securities and real estate owned.

Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings.

Expenses. The noninterest expenses we incur in operating our business consist of salaries and employee benefits expenses, occupancy expenses, data processing expenses and other miscellaneous expenses, such as office supplies, telephone, postage, advertising and professional services.

Our largest noninterest expense is salaries and employee benefits, which consist primarily of salaries and wages paid to our employees, payroll taxes, and expenses for health insurance, retirement plans and other employee benefits. Following the conversion and offering, we will recognize additional annual employee compensation expenses stemming from the adoption of a new equity benefit plan and expansion of our employee stock ownership plan. We cannot determine the actual amount of these new stock-related compensation and benefit expenses at this time because applicable accounting practices require that they be based on the fair market value of the shares of common stock at specific points in the future. For an illustration of these expenses, see “Pro Forma Data.”

Occupancy expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of depreciation charges, furniture and equipment expenses, maintenance, real estate taxes and costs of utilities. Our occupancy expenses have increased in recent periods because of our new office in Effort, Pennsylvania.

Effective at the beginning of 2007, the Federal Deposit Insurance Corporation began assessing most insured depository institutions for deposit insurance at a rate between five cents and seven cents for every $100 of deposits. Assessment credits have been provided to institutions that paid high premiums in the past. According to information provided by the Federal Deposit Insurance Corporation, North Penn Bank will receive an assessment credit of approximately $112,000. We expect that this credit will offset all of our deposit insurance premiums in 2007.

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Operating Strategy

Our mission is to continue operating as an independent, community-oriented bank by meeting the credit needs of local businesses and individuals, providing relationship banking and customer service that is better than other banks and offering products and services desired by our customers. We plan to achieve this by executing our strategy of:

• Growing and diversifying our loan portfolio by emphasizing commercial loans;

• Emphasizing the growth and retention of core deposits to support our asset growth;

• Providing superior service to attract and retain customers; and

• Continuing to use conservative underwriting practices to maintain the high quality of our loan portfolio.

Grow and diversify our loan portfolio by emphasizing commercial loans

We have a team of experienced commercial lenders in place to attract commercial loans, which we are pursuing to balance our portfolio of residential mortgages. Commercial loans provide diversification to our loan portfolio and, because most of our commercial loans are tied to the prime rate, improve the interest sensitivity of our interest-earning assets. Another benefit of commercial lending is that it improves the yield on our loan portfolio because commercial loans generally have higher interest rates than residential mortgage loans. We are actively pursuing business relationships by capitalizing on the experience of our lending team to develop deposit and lending relationships based on service. With the additional capital raised in the offering, we intend to continue to pursue the larger lending relationships associated with commercial lending. Commercial lending generally exposes a lender to greater risk of non-payment than residential lending because repayment of the loans often depends on the successful operation of the property or business and the income stream of the borrowers. See “Risk Factors – Our emphasis on commercial lending may expose us to increased lending risks.”

Emphasize the growth and retention of core deposits to support our asset growth

Our goal is to support our asset growth with core deposits, which we consider to be demand accounts, money market accounts and savings accounts. Generally, core deposit accounts have lower rates of interest than time deposits and borrowings and are expected to remain with us for a relatively long period of time. We are emphasizing commercial deposit growth to complement our commercial lending activities and are developing a sweep account product for our commercial customers. We recently hired a director of retail banking who is responsible for coordinating our deposit generation activities.

Provide superior service to attract and retain customers

As a community-oriented financial institution, we emphasize providing superior customer service as a means to attract and retain customers. We offer a variety of commercial and consumer loans, including real estate loans, residential mortgage loans, home equity loans and lines of credit, auto loans and other credit products. Our deposit services include business and individual demand and time deposit accounts, NOW accounts, money market accounts, individual retirement accounts and holiday accounts. We provide a number of convenience-oriented products and services to our customers, including direct payroll and social security deposit services, bank-by-mail services, access to a national automated teller machine network, safe deposit boxes, night depository facilities, notary services and travelers checks. We also offer Internet banking and electronic bill payment.

Continue to use conservative underwriting practices to maintain the high quality of our loan portfolio

We believe that maintaining high asset quality is a key to long-term financial success. We have sought to grow and diversify our loan portfolio while keeping nonperforming assets to a minimum. We use underwriting standards that we believe are conservative and we diligently monitor collection efforts. At March 31, 2007, our nonperforming loans were 0.19% of our total loan portfolio. Although we intend to continue our efforts to originate

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commercial loans after the offering, we intend to maintain our philosophy of managing large loan exposures through our conservative approach to lending.

Critical Accounting Policies

In the preparation of our consolidated financial statements, we have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States. Our significant accounting policies are described in the notes to our consolidated financial statements.

Certain accounting policies involve significant judgments and assumptions by us that have a material impact on the carrying value of certain assets and liabilities. We consider these accounting policies to be critical accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations.

Allowance for Loan Losses. We consider the allowance for loan losses to be a critical accounting policy. The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are: loss exposure at default; the amount and timing of future cash flows on impacted loans; value of collateral; and determination of loss factors to be applied to the various elements of the portfolio. All of these estimates are susceptible to significant change. Management reviews the level of the allowance at least quarterly and establishes the provision for loan losses based upon an evaluation of the portfolio, delinquency levels, past loss experience, current economic conditions and other factors related to the collectibility of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future additions to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, regulatory authorities, as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require us to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examinations. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings. See note 1 of the notes to the consolidated financial statements included in this prospectus.

Deferred Income Taxes. We use the asset and liability method of accounting for income taxes as prescribed in Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. In particular, management evaluates the recoverability of deferred tax assets based on our ability to generate future profits to utilize such benefits. Management employs budgeting and periodic reporting processes to continually monitor progress. These factors lower the inherent risk in the assumption of future profits. Historically, we have had sufficient profits for tax recovery. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance would result in additional income tax expense in the period, which would negatively affect earnings.

Balance Sheet Analysis

General. Total assets declined $1.2 million, or 1.0%, to $121.2 million at March 31, 2007 from $122.5 million at December 31, 2006. Total loans, net, increased $371,000 during the quarter, while investment securities decreased $279,000. Cash and cash equivalents decreased $1.3 million during the quarter as excess liquidity was used to pay down overnight borrowings.

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Total assets increased $17.1 million, or 16.2%, to $122.5 million at December 31, 2006 from $105.4 million at December 31, 2005. Most of the growth occurred in the loan portfolio, which increased $15.5 million, or 19.5%, during 2006 to $95.1 million. The investment securities portfolio decreased $1.5 million during the year due to pay-downs and maturities. Asset growth was funded through an increase in both deposits and borrowings. Deposits increased $9.3 million, or 12.0%, during 2006 while borrowings increased $7.0 million, or 47.6%.

Loans. At March 31, 2007, total loans, net, were $95.5 million, or 78.8% of total assets. In the three months ended March 31, 2007, the net loan portfolio grew $371,000 or 0.4%. During the quarter, residential mortgage loans increased $1.5 million, while consumer loans decreased $959,000 and commercial real estate loans decreased $422,000. The minimal growth in the loan portfolio during the quarter reflected reduced loan demand as well as our decision to be less aggressive in loan pricing without the availability of less costly core deposits to fund loan growth.

The net loan portfolio increased $15.5 million, or 19.5%, from $79.6 million at December 31, 2005, to $95.1 million at December 31, 2006. The largest area of increase was commercial real estate loans. We remain committed to this type of lending in order to take advantage of interest rate flexibility due to shorter repricing terms and better yields in comparison to our fixed-rate residential mortgages.

Table 1: Loan Portfolio Analysis

	March 31, 2007				December 31,
					2006				2005				2004
(Dollars in thousands)	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
Real estate loans:
Construction and land development	$	1,537	1.6	%	$	1,186	1.2	%	$	1,126	1.4	%	$	2,030	3.3	%
Residential, 1 – 4 family		43,785	45.3			42,323	44.0			43,159	53.6			35,892	58.1
Residential, multi-family		2,435	2.5			2,449	2.5			1,997	2.5			256	0.4
Commercial		37,289	38.6			37,711	39.2			23,738	29.4			13,640	22.1
Total real estate loans		85,046	88.0			83,669	86.9			70,020	86.9			51,818	83.9
Commercial loans		1,725	1.8			1,742	1.8			1,069	1.3			347	0.6
Consumer loans		9,905	10.2			10,864	11.3			9,496	11.8			9,595	15.5
Total loans		96,676	100.0	%		96,275	100.0	%		80,585	100.0	%		61,760	100.0	%
Less: allowance for losses		1,151				1,121				1,025				931
Loans, net	$	95,525			$	95,154			$	79,560			$	60,829

The following table sets forth certain information at March 31, 2007 regarding the dollar amount of loan principal repayments becoming due during the periods indicated. The table does not include any estimate of prepayments, which significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below. Demand loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less. The amounts shown below exclude applicable loans in process, unearned interest in consumer loans and net deferred loan costs.

Table 2: Contractual Maturities and Interest Rate Sensitivity

March 31, 2007 (Dollars in thousands)	Real Estate Loans		Commercial Loans		Consumer Loans		Total Loans
Amounts due in:
One year or less	$	13,533	$	101	$	763	$	14,397
More than one to five years		28,714		981		7,686		37,381
More than five years		42,799		643		1,456		44,898
Total	$	85,046	$	1,725	$	9,905	$	96,676
Interest rate terms on amounts due after one year:
Fixed-rate loans	$	41,705	$	1,624	$	9,073	$	52,402
Adjustable-rate loans		29,808		—		69		29,877
Total	$	71,513	$	1,624	$	9,142	$	82,279

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Securities. The investment securities portfolio was $13.9 million, or 11.5% of total assets, at March 31, 2007. At that date, 50.4% of the investment portfolio was invested in municipal bonds and 36.1% was invested in mortgage-backed securities. In recent periods we have focused on growing our loan portfolio. Accordingly, during the three months ended March 31, 2007 and the year ended December 31, 2006, we did not purchase any debt securities and used the proceeds from paydowns and maturing securities to fund loans. During the first quarter of 2007, the investment portfolio decreased $279,000 primarily as a result of pay downs on mortgage-backed securities and declines in market values.

The investment portfolio decreased $1.5 million, or 9.6%, to $14.2 million at December 31, 2006, from $15.7 million at December 31, 2005. This decrease was caused by pay downs on mortgage-backed securities of $1.1 million and maturities of $750,000. Offsetting those items was a net increase of $254,000 in equity securities.

At March 31, 2007, we had no investments in a single company or entity that had an aggregate book value in excess of 10% of our stockholders’ equity.

Table 3: Investment Securities

	March 31, 2007				December 31,
					2006				2005				2004
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Securities available for sale:
U.S. Agency securities	$	385	$	380	$	385	$	378	$	385	$	377	$	2,385	$	2,350
Mortgage-backed securities		5,158		5,034		5,391		5,280		6,494		6,346		10,882		10,776
State and political subdivisions		7,026		7,038		7,026		7,077		7,026		6,952		875		873
Other debt securities		503		496		503		495		1,264		1,256		8,544		8,686
Total debt securities		13,072		12,948		13,305		13,320		15,169		14,931		22,686		22,685
Equity securities		1,025		1,000		999		997		745		720		273		282
Total available for sale		14,097		13,948		14,304		14,227		15,914		15,651		22,959		22,967
Securities held to maturity:
State and political subdivisions		—		—		—		—		—		—		498		504
Total	$	14,097	$	13,948	$	14,304	$	14,227	$	15,914	$	15,651	$	23,457	$	23,471

The following table sets forth the stated maturities and weighted average yields of our debt securities at March 31, 2007. Certain mortgage-backed securities have adjustable interest rates and will reprice annually within the various maturity ranges. These repricing schedules are not reflected in the table below. Approximately $712,000 of the mortgage-backed securities listed have adjustable interest rates.

Table 4: Investment Maturities Schedule

	One Year or Less				More than One Year to Five Years				More than Five Years to Ten Years				More than Ten Years				Total
March 31, 2007 (Dollars in thousands)	Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield
Securities held for sale:
U.S. Agency securities		—	—			—	—		$	380	5.73	%		—	—		$	380	5.73	%
Mortgage-backed securities		—	—		$	3,211	4.51	%		42	5.47		$	1,781	5.02	%		5,034	4.84
State and political subdivisions		—	—			—	—			368	5.47			6,670	5.48			7,038	5.43
Other debt securities	$	496	4.22	%		—	—			—	—			—	—			496	4.22
Total debt securities	$	496	4.22	%	$	3,211	4.51	%	$	790	4.64	%	$	8,451	5.38	%	$	12,948

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Deposits. Deposits increased $83,000, or 0.1%, in the three months ended March 31, 2007, as a decrease in NOW accounts of $2.5 million offset growth in all other types of accounts. The changes in deposit balances related primarily to a movement of funds out of NOW accounts and into time deposits and money market accounts following the expiration of a higher promotional rate on NOW accounts.

Total deposits increased $9.3 million, or 12.0%, to $86.7 million at December 31, 2006, from $77.4 million at December 31, 2005. Increases in time deposits of $7.2 million and NOW accounts of $3.8 million were offset by small decreases in regular checking, money market and savings accounts. The increases experienced in 2006 were primarily the results of opening a fifth branch in the area. The branch, located in Effort, Pennsylvania, accounted for new deposits of approximately $8.3 million. The branch was able to attract the majority of its customer base by offering CD specials along with a promotional rate on NOW accounts.

Table 5: Deposits

	March 31, 2007				December 31,
					2006				2005				2004
(Dollars in thousands)	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
Noninterest-bearing demand deposits	$	7,287	8.4	%	$	6,993	8.1	%	$	7,306	9.4	%	$	5,530	7.2	%
Interest-bearing demand deposits		7,188	8.3			9,654	11.1			5,930	7.7			4,423	5.7
Money market		9,538	11.0			8,760	10.1			9,711	12.5			15,975	20.7
Savings		7,990	9.2			7,612	8.8			7,963	10.3			8,389	10.8
Time deposits		54,826	63.1			53,727	61.9			46,519	60.1			43,025	55.6
Total	$	86,829	100.0	%	$	86,746	100.0	%	$	77,429	100.0	%	$	77,342	100.0	%

Table 6: Time Deposit Maturities of $100,000 or more

March 31, 2007 (In thousands)	Certificates of Deposit
Maturity Period
Three months or less	$	9,154
Over three through six months		1,545
Over six through twelve months		2,372
Over twelve months		1,282
Total	$	14,353

Borrowings. As of March 31, 2007 and December 31, 2006, we had two outstanding loans and a line of credit with the Federal Home Loan Bank of Pittsburgh. We have a long term note of $5.0 million which matures on July 19, 2010. The annual percentage rate on this note is 6.19% and carries a prepayment penalty equal to a percentage of the remaining interest payments. We also have a long term note of $7.0 million at a rate of 4.34%, maturing July 13, 2015. Our line of credit is available up to $15.0 million at an interest rate equal to the current overnight rate. This line is a source of liquidity which is used to fund our loan demand when deposit volume is inadequate. In the three months ended March 31, 2007, we used excess liquidity to reduce our overnight borrowings. During 2006, we increased our use of overnight borrowings to help fund loan growth.

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Table 7: Short-Term Borrowings

	Three Months Ended March 31,						Year Ended December 31,
(Dollars in thousands)	2007			2006			2006			2005			2004
Maximum amount outstanding at any month end during the period:
FHLB advances	$	8,451		$	7,726		$	9,741		$	4,363		$	3,525
Average amount outstanding during the period:
FHLB advances	$	7,557		$	6,285		$	4,651		$	1,070		$	793
Weighted average interest rate during the period:
FHLB advances		5.40	%		3.83	%		5.20	%		3.49	%		2.05	%
Balance outstanding at end of period:
FHLB advances	$	8,451		$	2,207		$	9,741		$	2,698		$	2,375
Weighted average interest rate at end of period:
FHLB advances		5.38	%		4.93	%		5.46	%		4.28	%		2.29	%

Results of Operations for the Three Months Ended March 31, 2007 and 2006

Financial Highlights. Net income for the three months ended March 31, 2007, declined $51,000, or 34.9% to $95,000 from $146,000 for the same period in 2006. Net interest income for the first quarter was essentially unchanged from the first quarter of the prior year. The decline in net income was the result of higher expenses in the current year, which were partially offset by higher other income.

Net Interest Income. Net interest income was essentially unchanged at $867,000 for the three months ended March 31, 2007. Our net interest spread and net interest margin contracted to 2.79% and 3.23%, respectively, for the three months ended March 31, 2007 from 3.24% and 3.61%, respectively, for the three months ended March 31, 2006. Higher market rates, combined with intense competition for deposits, resulted in a significant increase in the cost of funds in 2007.

Interest income increased $262,000, or 16.4%, to $1.9 million in 2007 compared to $1.6 million in 2006. Interest on loans increased $265,000, or 18.6%, to $1.7 million in 2007 from $1.4 million in 2006, due to slightly higher loan volume and higher interest rates resulting from increases in the prime rate. Interest and dividends on investments decreased $3,000 mainly due to a decrease in the investment portfolio in 2007 from the same period in 2006. The decrease was directly related to pay-downs on mortgage-backed securities.

Interest expense increased $263,000, or 36.1%, to $992,000 in 2007 from $729,000 in 2006. Interest on deposits increased $231,000 or 45.8%, to $735,000 in 2007 from $504,000 in 2006 due to growth in deposits and increases in rates paid on short-term time deposits. Our average cost of deposits was 3.66% in 2007 compared to 2.85% in 2006. Interest on borrowed funds increased $32,000, or 14.2%, to $257,000 in 2007 compared to $225,000 in 2006 as a result of increases in the average volume of overnight borrowings and the rate paid.

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Table 8: Net Interest Income – Changes Due to Rate and Volume

Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006 (In thousands)	Volume			Rate			Net
Interest income:
Loans	$	147		$	117		$	264
Investment securities		(8	)		(11	)		(19	)
Deposits in other banks		12			5			17
Total		151			111			262
Interest expense:
Interest-bearing demand deposits		10			11			21
Savings and money market deposits		1			2			3
Time deposits		104			103			207
Borrowings		16			16			32
Total		131			132			263
Increase (decrease) in net interest income	$	20		$	(21	)	$	(1	)

Provision for Loan Losses. We recorded a provision for loan loss in the amount of $30,000 for the three months ended March 31, 2007 and 2006. The allowance for loan losses as a percent of total loans was 1.19% at March 31, 2007 compared to 1.16% at December 31, 2006. We had no net charge-offs in the first quarter of 2007 compared to $1,000 in the same period in 2006. We used the same methodology and generally similar assumptions in assessing the allowance for both periods. The amount of the provision was based on management’s estimate of the losses inherent in our total loan portfolio.

An analysis of the changes in the allowance for loan losses is presented under “–Risk Management – Analysis and Determination of the Allowance for Loan Losses.”

Other Income. Other income for the three months ended March 31, 2007 totaled $109,000, which was an increase of $12,000 compared to the same period in 2006. During 2007, equity securities held by the bank’s subsidiary, Norpenco, Inc. were sold at a pre-tax gain of $17,000 with no comparable gains in 2006. This gain was offset by a decrease of $23,000 in gain on the sale of real estate owned. Other operating income increased as a result of rental income on real estate owned.

Table 9: Other Income Summary

Three months ended March 31, (Dollars in thousands)	2007		2006		$ Change			% Change
Service charges and fees	$	32	$	31	$	1		3.2	%
Gain on sale of other real estate owned		6		29		(23	)	(79.3	)
Increase in cash surrender value of life insurance		22		21		1		4.8
Other operating income		32		16		16		100.0
Gain on sale of securities		17		—		17		N/M
Total	$	109	$	97	$	12		12.4	%

Other Expenses. Other expenses increased $66,000, or 8.8%, to $814,000 in the three months ended March 31, 2007 from $748,000 in the same period in 2006. Salaries and employee benefits increased $19,000, or 4.3%, to $463,000 in 2007, while occupancy and equipment expense increased $7,000 or 4.9%, to $149,000. Professional expenses increased in part as a result of preparations for complying with the provisions of Section 404 of the Sarbanes-Oxley Act. During 2007, management, with the assistance of consultants, will be completing the documentation and testing needed for the assessment of our internal control over financial reporting.

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Table 10: Other Expense Summary

Three months ended March 31, (Dollars in thousands)	2007		2006		$ Change			% Change
Salaries and employee benefits	$	463	$	444	$	19		4.3	%
Occupancy and equipment		149		142		7		4.9
Directors’ fees		26		27		(1	)	(3.7	)
Data processing expense		13		15		(2	)	(13.3	)
Correspondent bank charges		14		12		2		16.7
Contributions		2		1		1		100.0
Advertising		8		13		(5	)	(38.5	)
Insurance		12		13		(1	)	(7.7	)
Professional services		27		7		20		285.7
Consulting fees		4		10		(6	)	(60.0	)
Postage and office supplies		23		17		6		35.3
ATM expense		13		14		(1	)	(7.1	)
FDIC expense		3		2		1		50.0
BOLI expense		18		16		2		12.5
Dues and subscriptions		4		3		1		33.3
Telephone		9		6		3		50.0
Other real estate owned expense		9		—		9		N/M
Other operating expense		17		6		11		183.3
Total	$	814	$	748	$	66		8.8	%

Income Tax Expense. Income tax expense was $37,000 for the three months ended March 31, 2007, reflecting an effective tax rate of 28.0%, compared with $41,000 for the three months ended March 31, 2006, reflecting an effective tax rate of 21.9%.

Results of Operations for the Years Ended December 31, 2006 and 2005

Financial Highlights. For the year ended December 31, 2006, we recorded net income of $315,000 compared to a net loss of $124,000 for December 31, 2005. The loss recorded in 2005 was due to the contribution expense incurred in connection with the establishment of a charitable foundation at the time of our initial public offering.

Net Interest Income. Net interest income increased $343,000, or 10.7%, to $3.5 million for 2006, compared to $3.2 million for 2005. Interest income benefited from a shift to a higher percentage of interest-earning assets being invested in loans and higher yields, but was partially offset by greater interest expense resulting from larger volumes of time deposits and borrowings and higher market rates. The 21 basis point decrease in the interest rate spread to 3.00% for 2006, compared to 3.21% for 2005, reflected the impact of changes in market interest rates.

Total interest income increased $1.7 million, or 32.1%, to $7.0 million for 2006 compared to $5.3 million for 2005. The increase was the result of greater average loan volumes, partially offset by a decrease in the investment portfolio. Total loan income for 2006 was $6.3 million, an increase of $1.8 million, or 40.0%, from 2005. The loan portfolio yield increased 53 basis points to 7.05% for 2006, while the average loan balance increased $20.6 million, or 29.7%, to $90.0 million. Most of the increase in the loan portfolio was in commercial real estate loans. Total investment securities and interest bearing deposit income decreased $129,000, or 15.8%, for 2006 to $686,000. The decrease was mainly due to the sale of investments at the end of 2005 to fund loan growth. Due to the sale, our average volume of investment securities decreased to $14.9 million in 2006 from $21.5 million in 2005.

Interest expense for 2006 increased $1.3 million, or 59.1%, to $3.5 million as a result of higher expense for both deposits and borrowings. Interest expense on time deposits accounted for most of the increase in deposit costs. Average time deposit volumes increased $7.6 million, or 17.2%, to $51.8 million for 2006, while the cost of time deposits increased 97 basis points to 4.09%. Savings and money market interest expense increased $146,000, or 56.8%, to $403,000 for 2006. For 2006, the average balance of customer deposits increased $6.9 million, or 9.7%, to $78.2 million. The overall increase in the amount of deposits was primarily related to the opening of our new

48

branch in Effort, Pennsylvania, where we used special promotional rates to increase customer interest. Higher market rates accounted for the higher cost of deposits in 2006.

The average balance of Federal Home Loan Bank advances increased $6.8 million, or 68.7%, to $16.7 million in 2006. The interest paid on these advances increased $346,000, or 66.7%, to $865,000 for 2006. The increase was the result of higher rates and volumes on overnight borrowings coupled with a full year of interest expense on our leveraged borrowing in 2006 compared to only five months of expense in 2005.

Table 11: Net Interest Income – Changes Due to Rate and Volume

2006 Compared to 2005 (In thousands)	Volume			Rate			Net
Interest income:
Loans	$	1,430		$	387		$	1,817
Investment securities		(384	)		212			(172	)
Deposits in other banks		16			27			43
Total		1,062			626			1,688
Interest expense:
Interest-bearing demand deposits		(1	)		116			115
Savings and money market deposits		(7	)		153			146
Time deposits		262			476			738
Borrowings		351			(5	)		346
Total		605			740			1,345
Increase (decrease) in net interest income	$	457		$	(114	)	$	343

Provision for Loan Losses. We recorded a provision for loan loss in the amount of $120,000 for the year ended December 31, 2006, compared to $105,000 for the year ended December 31, 2005. The allowance for loan losses as a percent of total loans was 1.16% at December 31, 2006, as compared to 1.27% at December 31, 2005. We had net charge-offs of $24,000 in 2006 compared to $11,000 in 2005. We used the same methodology and generally similar assumptions in assessing the allowance for both periods. The change in the provision was based solely on management’s estimate of the losses inherent in our total loan portfolio and the increases in the loan portfolio.

An analysis of the changes in the allowance for loan losses is presented under “–Risk Management – Analysis and Determination of the Allowance for Loan Losses.”

Other Income. Other income for 2006 totaled $348,000, which was an increase for the year of $76,000 compared to 2005. The increase was primarily the result of changes in gain on the sale of securities. Investments were sold at a pre-tax gain of $11,000 in 2006 compared to a pre-tax loss of $55,000 in 2005. The investments sold in 2006 were equity securities held by the bank’s subsidiary, Norpenco, Inc.

Table 12: Other Income Summary

Year Ended December 31, (Dollars in thousands)	2006		2005			$ Change			% Change
Service charges and fees	$	206	$	197		$	9		4.6	%
Gain on sale of other real estate owned		29		40			(11	)	(27.5	)
Increase in cash surrender value of life insurance		87		86			1		1.2
Other operating income		15		4			11		275.0
Gain (loss) on sale of securities		11		(55	)		66		N/M
Total	$	348	$	272		$	76		27.9	%

Other Expenses. Other expenses decreased approximately $125,000, or 3.6%, to $3.3 million for the year ended December 31, 2006, compared to $3.5 million for the year ended December 31, 2005. Salaries and employee benefits represented 54.4% and 49.2% of total other expense for 2006 and 2005, respectively. Salaries and employee benefits increased $112,000, or 6.6%, in 2006 from 2005 primarily as a result of additional personnel hired for our new branch and merit salary increases for our employees. Occupancy and equipment expense increased $51,000 or 8.5%, for 2006 as a result of the opening and operation of our Effort branch.

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Various expenses, such as telephone, postage and office supplies increased in 2006 due to supplying our new branch. ATM expense increased due to the addition of a machine at our new branch. Professional fees increased in 2006 as a result of being a public company for all of 2006, versus only a portion of 2005.

During 2005, our contribution expense was inflated due to one-time funding costs of $383,000 involved with the establishment of a charitable foundation in connection with our initial public offering that were not present in 2006.

Table 13: Other Expense Summary

Year Ended December 31, (Dollars in thousands)	2006		2005		$ Change			% Change
Salaries and employee benefits	$	1,816	$	1,704	$	112		6.6	%
Occupancy and equipment		653		602		51		8.5
Directors’ fees		101		95		6		6.3
Data processing expense		68		65		3		4.6
Correspondent bank charges		50		71		(21	)	(29.6	)
Contributions		7		390		(383	)	(98.2	)
Advertising		67		49		18		36.7
Insurance		46		45		1		2.2
Professional services		95		63		32		50.8
Consulting fees		33		34		(1	)	(2.9	)
Postage and office supplies		86		76		10		13.2
ATM expense		58		44		14		31.8
FDIC expense		10		10		—		—
BOLI expense		64		35		29		82.9
Dues and subscriptions		12		10		2		20.0
Telephone		39		26		13		50.0
Other real estate owned expense		12		31		(19	)	(61.3	)
Other operating expense		122		114		8		7.0
Total	$	3,339	$	3,464	$	(125	)	(3.6	)%

Income Tax Expense. We recorded income tax expense for the year ended December 31, 2006 of $74,000, compared to an income tax benefit of $16,000 for the year ended December 31, 2005.

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Average Balance Sheets and Related Yields and Rates

The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. Nonaccrual loans are included in average loan balances. Loan fees are included in interest income on loans and are insignificant. Tax-exempt income has been calculated on a tax equivalent basis.

Table 14: Average Balance Tables

	At		Three Months Ended March 31,
	March 31, 2007					2007							2006
(Dollars in thousands)	Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost
Assets:
Interest-earning assets:
Loans:
Mortgages	7.06	%	$	85,336		$	1,500	7.03	%	$	72,531		$	1,254	6.92	%
Consumer	6.46			9,948			160	6.43			9,747			155	6.36
Commercial	6.96			1,723			30	6.96			1,133			16	5.65
Total loans	6.99			97,007			1,690	6.97			83,411			1,425	6.83
Investment securities:
U.S. government securities	4.18			4,683			58	4.95			6,743			70	4.15
Municipal securities(1)	6.05			7,026			108	6.15			7,026			108	6.15
Other securities	3.98			503			5	3.98			1,262			15	4.75
Equities	3.52			1,010			9	3.56			796			6	3.02
Total securities	4.06			13,222			180	5.45			15,827			199	5.03
Deposits in banks	3.83			1,802			26	5.99			942			10	4.25
Total interest earning assets	6.55			112,031			1,896	6.77			100,180			1,634	6.52
Non-interest earning assets:
Cash and due from banks				1,823							3,041
Other assets				6,328							5,361
Less: allowance for loan losses				(1,131	)						(1,034	)
Total non-interest earning assets				7,020							7,368
Total assets			$	119,051						$	107,548
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Deposits:
Interest bearing demand deposits	1.56	%	$	8,175			28	1.37	%	$	5,194			7	0.54	%
Savings and money market accounts	1.87			16,717			82	1.96			18,383			79	1.72
Certificates of deposit	4.56			55,347			625	4.52			47,163			418	3.55
Total interest-bearing deposits	3.70			80,239			735	3.66			70,740			504	2.85
Borrowings	5.03			19,580			257	5.25			18,285			225	4.92
Total interest bearing liabilities	3.97			99,819			992	3.98			89,025			729	3.28
Non-interest bearing demand deposits				7,127							7,066
Other non-interest bearing liabilities				878							613
Total liabilities				107,824							96,704
Stockholders’ equity				11,227							10,844
Total liabilities and stockholders’ equity			$	119,051						$	107,548
Net interest income and rate spread(1)						$	904	2.79					$	905	3.24
Net interest margin(1)								3.23							3.61
Taxable equivalent adjustment						$	37						$	37
Average interest-earning assets as a percentage of interest-bearing liabilities				112.23	%						112.53	%

(1) The yield on municipal securities is computed on a taxable equivalent basis using a tax rate of 34% for all periods presented.

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	Year Ended December 31,
				2006							2005
(Dollars in thousands)	Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost
Assets:
Interest-earning assets:
Loans:
Mortgages	$	78,322		$	5,537	7.07	%	$	60,931		$	3,916	6.43	%
Consumer		9,974			670	6.72			8,128			587	7.22
Commercial		1,742			139	7.98			357			26	7.28
Total loans		90,038			6,346	7.05			69,416			4,529	6.52
Investment securities:
U.S. government securities		6,107			262	4.29			9,655			392	4.06
Municipal securities(1)		6,956			435	6.25			6,857			253	3.69
Other securities		952			44	4.62			4,209			218	5.18
Equities		907			33	3.64			747			21	2.81
Total securities		14,922			774	5.19			21,468			884	4.12
Deposits in banks		1,883			60	3.19			1,124			17	1.51
Total interest earning assets		106,843			7,180	6.72			92,008			5,430	5.90
Non-interest earning assets:
Cash and due from banks		1,313							1,698
Other assets		6,564							3,923
Less: allowance for loan losses		(1,061	)						(970	)
Total non-interest earning assets		6,816							4,651
Total assets	$	113,659						$	96,659
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Deposits:
Interest bearing demand deposits	$	7,481			146	1.95		$	7,765			31	0.40
Savings and money market accounts		18,968			403	2.12			19,403			257	1.32
Certificates of deposit		51,785			2,118	4.09			44,183			1,380	3.12
Total interest-bearing deposits		78,234			2,667	3.41			71,351			1,668	2.34
Borrowings		16,651			865	5.19			9,891			519	5.25
Total interest bearing liabilities		94,885			3,532	3.72			81,242			2,187	2.69
Non-interest bearing demand deposits		7,209							5,188
Other non-interest bearing liabilities		623							782
Total liabilities		102,717							87,212
Stockholders’ equity		10,942							9,447
Total liabilities and stockholders’ equity	$	113,659						$	96,659
Net interest income and rate spread(1)				$	3,648	3.00					$	3,243	3.21
Net interest margin(1)						3.41							3.52
Taxable equivalent adjustment				$	148						$	86
Average interest-earning assets as a percentage of interest-bearing liabilities		112.60	%						113.25	%

(1) The yield on municipal securities is computed on a taxable equivalent basis using a tax rate of 34% for all periods presented.

We believe that it is common practice in the banking industry to present interest income and related yield information on tax exempt securities on a tax-equivalent basis and that such information is useful to investors because it facilitates comparisons among financial institutions. However, the adjustment of interest income and yields on tax exempt securities to a tax equivalent amount may be considered to include non-GAAP financial information. A reconciliation to GAAP is provided below.

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Table 15: Tax Equivalent Reconciliation

	Three Months Ended March 31,								Year Ended December 31,
	2007				2006				2006				2005
(Dollars in thousands)	Interest		Average Yield		Interest		Average Yield		Interest		Average Yield		Interest		Average Yield
Municipal securities – nontaxable	$	71	4.04	%	$	71	4.04	%	$	287	4.13	%	$	167	2.44	%
Tax equivalent adjustment(1)		37				37				148				86
Municipal securities – tax equivalent	$	108	6.15	%	$	108	6.15	%	$	435	6.25	%		253	3.69	%
Net interest income – nontaxable	$	867			$	868			$	3,500			$	3,157
Tax equivalent adjustment(1)		37				37				148				86
Net interest income – tax equivalent	$	904			$	905			$	3,648			$	3,243
Interest rate spread – no tax adjustment			2.66	%			3.10	%			2.86	%			3.21	%
Net interest margin – no tax adjustment			3.10	%			3.47	%			3.28	%			3.43	%

(1) The tax equivalent adjustment is based on a tax rate of 34% for all periods presented.

Risk Management

Overview. Managing risk is an essential part of successfully managing a financial institution. Our most prominent risk exposures are credit risk, interest rate risk and market risk. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan or investment when it is due. Interest rate risk is the potential reduction of interest income as a result of changes in interest rates. Market risk arises from fluctuations in interest rates that may result in changes in the values of financial instruments, such as available-for-sale securities that are accounted for on a mark-to-market basis. Other risks that we face are operational risks, liquidity risks and reputation risk. Operational risks include risks related to fraud, regulatory compliance, processing errors, technology and disaster recovery. Liquidity risk is the possible inability to fund obligations to depositors, lenders or borrowers. Reputation risk is the risk that negative publicity or press, whether true or not, could cause a decline in our customer base or revenue.

Credit Risk Management. Our strategy for credit risk management focuses on having well-defined credit policies and uniform underwriting criteria and providing prompt attention to potential problem loans.

When a borrower fails to make a required loan payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current status, including contacting the borrower by letter and phone at regular intervals. When the borrower is in default, we may commence collection proceedings. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, the real property securing the loan generally is sold at foreclosure. Generally, when a consumer loan becomes 45 days past due, we institute collection proceedings and attempt to repossess any personal property that secures the loan. Management informs the board of directors monthly of the amount of loans delinquent more than 30 days, all loans in foreclosure and repossessed property that we own.

Analysis of Nonperforming and Classified Assets. We consider repossessed assets and loans that are 90 days or more past due to be nonperforming assets. Loans are generally placed on nonaccrual status when they become 90 days delinquent at which time the accrual of interest ceases and the allowance for any uncollectible accrued interest is established and charged against operations. Typically, payments received on a nonaccrual loan are applied to the outstanding principal and interest as determined at the time of collection of the loan.

Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until it is sold. When property is acquired it is recorded at the lower of its cost, which is the unpaid balance of the loan plus foreclosure costs, or fair market value at the date of foreclosure. Holding costs and declines in fair value after acquisition of the property result in charges against income. At March 31, 2007, real estate owned consisted of residential real estate.

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Table 16: Nonperforming Assets

	March 31,			December 31,
(Dollars in thousands)	2007			2006			2005			2004
Nonaccrual loans:
Real estate mortgage	$	158		$	577		$	506		$	1,338
Commercial		—			—			—			—
Consumer		26			17			33			19
Total nonaccrual loans		184			594			539			1,357
Accruing loans past due 90 days or more		—			—			—			—
Total of nonaccrual and 90 days or more past due loans		184			594			539			1,357
Real estate owned		100			100			105			—
Other nonperforming assets		—			—			—			—
Total nonperforming assets		284			694			644			1,357
Troubled debt restructurings		—			—			—			—
Troubled debt restructurings and total nonperforming assets	$	284		$	694		$	644		$	1,357
Total nonperforming loans to total gross loans		0.19	%		0.62	%		0.67	%		2.20	%
Total nonperforming assets to total assets		0.23			0.57			0.61			1.46

Interest income that would have been recorded for the year ended December 31, 2006, had nonaccruing loans been current according to their original terms amounted to $38,000. No interest related to nonaccrual loans was included in interest income for the year ended December 31, 2006.

Federal regulations require us to review and classify our assets on a regular basis. In addition, regulatory authorities have the authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss. “Substandard assets” must have one or more defined weaknesses and are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. “Doubtful assets” have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified “loss” is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. The regulations also provide for a “special mention” category, described as assets which do not currently expose us to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving our close attention. When we classify an asset as substandard or doubtful we establish a specific allowance for loan losses. If we classify an asset as loss, we charge off an amount equal to 100% of the portion of the asset classified loss.

Table 17: Classified Assets

	March 31,		December 31,
(Dollars in thousands)	2007		2006		2005
Special mention assets	$	545	$	727	$	764
Substandard assets		548		468		320
Doubtful assets		17		25		35
Loss assets		—		—		—
Total classified assets	$	1,110	$	1,220	$	1,119

Other than disclosed in the above tables, there are no other loans that management has serious doubts about the ability of the borrowers to comply with the present loan repayment terms.

Analysis and Determination of the Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings.

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Our methodology for assessing the appropriateness of the allowance for loan losses consists of three key elements: (1) specific allowances for impaired or collateral-dependent loans; (2) a general valuation allowance on identified problem loans; and (3) a general valuation allowance on the remainder of the loan portfolio. Although we determine the amount of each element of the allowance separately, the entire allowance for loan losses is available to absorb losses in the loan portfolio.

For loans that are classified as impaired, we establish an allowance when the discounted cash flows (or collateral value or observable market price) of the loan is lower than its carrying value. Under current accounting guidelines, a loan is defined as impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due under the contractual terms of the loan agreement.

We also establish a general allowance for classified loans that do not have an individual allowance. The evaluation is based on our asset review and classified loan list. We segregate these loans by loan category and assign allowance percentages to each category based on inherent losses associated with each type of lending and consideration that these loans, in the aggregate, represent an above-average credit risk and that more of these loans will prove to be uncollectible compared to loans in the general portfolio.

We establish another general allowance for loans that are not classified to recognize the inherent losses associated with lending activities. This general valuation allowance is determined by segregating the loans by loan category and assigning allowance percentages to each category. The allowance percentages have been derived using percentages commonly applied under the regulatory framework for North Penn Bank and other similarly-sized institutions. The percentages may be adjusted for significant factors that, in management’s judgment, affect the collectibility of the portfolio as of the evaluation date. These significant factors may include changes in lending policies and procedures, changes in existing general economic and business conditions affecting our primary lending areas, credit quality trends, collateral value, loan volumes and concentrations, seasoning of the loan portfolio, recent loss experience in particular segments of the portfolio, duration of the current business cycle and bank regulatory examination results. The applied loss factors are reevaluated periodically to ensure their relevance in the current economic environment.

We identify loans that may need to be charged off as a loss by reviewing all delinquent loans, classified loans and other loans that management may have concerns about collectibility. For individually reviewed loans, the borrower’s inability to make payments under the terms of the loan or a shortfall in collateral value would result in our charging off the loan or the portion of the loan that was impaired.

Regulatory authorities, as an integral part of their examination process, periodically review our allowance for loan losses. They may require us to make additional provisions for loan losses based on judgments different from ours.

At March 31, 2007, our allowance for loan losses represented 1.19% of total gross loans. The allowance for loan losses increased by 2.7% from December 31, 2006 to March 31, 2007, following the provision for loan losses of $30,000. At March 31, 2007, $9,000 of the allowance was allocated to loans for which impairment has been recognized and $103,000 of the allowance was allocated to classified loans. The decision to increase the allowance reflected evaluation of the composition of the loan portfolio and consideration of concentrations in the portfolio.

At December 31, 2006, our allowance for loan losses represented 1.16% of total gross loans, compared to 1.27% at December 31, 2005. The allowance for loan losses increased 9.4% from December 31, 2005 to December 31, 2006, following the provision for loan losses of $120,000 and net charge-offs of $24,000. The addition to the allowance reflected the increase in the loan portfolio by 19.5%, and a small increase in nonperforming assets. The growth of the portfolio contributed to an increase in the allowance for loan losses because the general valuation allowance is determined by multiplying each category of loans by an assigned allowance percentage. Accordingly, the general allowance increases as the portfolio increases. During 2006, we reduced the allowance percentage applied to unclassified consumer and commercial loans because of our low default rates on these loans. This contributed to the allowance representing a smaller percentage of total loans.

The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated.

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Table 18: Allocation of Allowance of Loan Losses

	March 31,				December 31,
	2007				2006				2005				2004
(Dollars in thousands)	Amount		% of Loans in Category to Total Loans		Amount		% of Loans in Category to Total Loans		Amount		% of Loans in Category to Total Loans		Amount		% of Loans in Category to Total Loans
Construction and land development	$	—	1.6	%	$	—	1.2	%	$	—	1.4	%	$	—	3.3	%
Residential, 1 – 4 family		307	45.3			285	44.0			261	53.6			380	58.1
Residential, multi-family		1	2.5			1	2.5			1	2.5			1	0.4
Commercial real estate		660	38.6			652	39.2			543	29.4			341	22.1
Commercial		—	1.8			—	1.8			—	1.3			—	0.6
Consumer		183	10.2			183	11.3			220	11.8			209	15.5
Total allowance for loan losses	$	1,151	100.0	%	$	1,121	100.0	%	$	1,025	100.0	%	$	931	100.0	%

Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and our results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while we believe we have established our allowance for loan losses in conformity with generally accepted accounting principles, there can be no assurance that regulators, in reviewing our loan portfolio, will not require us to increase our allowance for loan losses. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above. Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations.

Table 19: Analysis of Loan Loss Experience

	Three Months Ended March 31,						Year Ended December 31,
(Dollars in thousands)	2007			2006			2006			2005			2004
Allowance at beginning of period	$	1,121		$	1,025		$	1,025		$	931		$	985
Charge offs:
Real estate mortgage loans		—			1			1			—			35
Commercial loans		—			—			—			—			—
Consumer loans		—			—			31			14			20
Total		—			1			32			14			55
Recoveries:
Real estate mortgage loans		—			—			—			—			—
Commercial loans		—			—			—			—			—
Consumer loans		—			—			8			3			1
Total		—			—			8			3			1
Net charge-offs		—			1			24			11			54
Provision charged to operations		30			30			120			105			—
Allowance at end of period	$	1,151		$	1,054		$	1,121		$	1,025		$	931
Average loans outstanding	$	97,007		$	83,411		$	90,038		$	69,416		$	55,574
Loan reserve ratios:
Allowance as a percentage of nonperforming loans		625.54	%		229.63	%		188.72	%		190.17	%		68.61	%
Net loan charge-offs to average loans		0.00	%		0.00	%		0.03	%		0.02	%		0.10	%
Allowance as a percentage of total loans		1.19	%		1.24	%		1.16	%		1.27	%		1.51	%

Interest Rate Risk Management. Our earnings and the market value of our assets and liabilities are subject to fluctuations caused by changes in the level of interest rates. We manage the interest rate sensitivity of our interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment. Deposit accounts typically react more quickly to changes in market interest rates than

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mortgage loans because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect our earnings while decreases in interest rates may beneficially affect our earnings. To reduce the potential volatility of our earnings, we have sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread. Our strategy for managing interest rate risk emphasizes originating commercial loans with adjustable interest rates and promoting transaction accounts and short-term time deposits.

We have an Asset/Liability Committee to coordinate all aspects involving asset/liability management. The committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

Table 20: Gap Analysis

	Maturing Or Repricing In:
March 31, 2007 (In thousands)	Within 3 Months			4 – 12 Months			1 – 5 Years			Over 5 Years			Total
Interest earning assets:
Interest bearing deposits	$	87		$	—		$	—		$	—		$	87
Investment securities		—			496			3,211			9,241			12,948
Loans		7,689			8,801			29,684			50,502			96,676
Total interest earning assets		7,776			9,297			32,895			59,743			109,711
Interest bearing liabilities:
Interest bearing demand		7,188			—			—			—			7,188
Money market		9,538			—			—			—			9,538
Savings		—			—			—			7,990			7,990
Time deposits		30,802			15,233			8,791			—			54,826
Borrowed funds		8,451			—			5,000			7,000			20,451
Total interest bearing liabilities	$	55,979		$	15,233		$	13,791		$	14,990		$	99,993
Period gap	($	48,203	)	($	5,936	)	$	19,104		$	44,753
Cumulative gap	($	48,203	)	($	54,139	)	($	35,035	)	$	9,718
Ratio of cumulative gap to total assets		(39.76	%)		(44.66	%)		(28.90	%)		8.02	%

Assumptions:

• Adjustable rate loans have been distributed among the categories by repricing dates.

• Mortgage backed investments and loans do not take into account principal prepayments.

• All transaction deposit accounts have been placed into the within three months category as they have no stated maturity and rates will adjust as market rates adjust.

• All savings accounts have been placed in the beyond five years category based upon historical experience.

Earnings are dependent on maintaining adequate net interest yield or spread between rates earned on assets and the cost of interest bearing liabilities. We must manage our interest rate sensitivity to maintain adequate spread during rising and declining interest rate environments. Decisions about which bonds to purchase are based upon factors such as term, yield and asset quality. Short term bonds enhance rate sensitivity but typically have lower yields. The majority of our investments mature after the five year period illustrated above. All of our investments are held available for sale, which gives us the flexibility to sell in response to market changes. The money can then be used to fund loan growth or reinvested in bonds at the new interest rate.

Having a similar amount of assets repricing, or maturing, at or about the same time as our liabilities reprice or mature, reduces our interest rate risk. However, we recognize certain trends and historical experiences for some products. We know that while all our customers could withdraw their money on any given day, they do not do so, even with interest rate changes. Accounts such as savings, interest checking, and money market accounts are core deposits and do not have the same reaction to interest rate changes as time deposits do. These accounts tend to change according to cash flow and the transaction needs of our customers.

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According to the table, we have a negative gap position, which means our liabilities will reprice faster than our assets. When interest rates are rising, this will tend to reduce our interest spread and our net interest income, and when rates are falling, our interest spread and net income should increase.

Liquidity Management. Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities of and payments on investment securities and borrowings from the Federal Home Loan Bank of Pittsburgh. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

We regularly adjust our investments in liquid assets based upon our assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities and (4) the objectives of our asset/liability management policy.

Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At March 31, 2007, cash and cash equivalents totaled $2.8 million. In addition, at March 31, 2007, we had arrangements to borrow up to $15.0 million from the Federal Home Loan Bank of Pittsburgh. On March 31, 2007, we had $8.5 million of advances outstanding.

At March 31, 2007, all of our investment securities were classified as available for sale. We have classified our investments in this manner, rather than as held to maturity, because they were purchased primarily to provide a source of liquidity as well as income. Securities whose market value exceeds our cost totaled $13.9 million at March 31, 2007.

A significant use of our liquidity is the funding of loan originations. At March 31, 2007, we had $300,000 in loan commitments outstanding. In addition, we had $955,000 in undisbursed construction loans and $414,000 in unused home equity lines of credit. Historically, many of the lines of credit expire without being fully drawn; therefore, the total commitment amounts do not necessarily represent future cash requirements. Another significant use of our liquidity is the funding of deposit withdrawals. Certificates of deposit due within one year of March 31, 2007 totaled $46.0 million, or 83.9% of certificates of deposit. The large percentage of certificates of deposit that mature within one year reflects customers’ hesitancy to invest their funds for long periods in the recent low interest rate environment. If these maturing deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before March 31, 2008. We believe, however, based on past experience, that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Our primary investing activities are the origination and purchase of loans and the purchase of securities. Our primary financing activities consist of activity in deposit accounts and Federal Home Loan Bank advances. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive. Occasionally, we offer promotional rates on certain deposit products to attract deposits.

Capital Management. We are subject to various regulatory capital requirements administered by the Federal Deposit Insurance Corporation, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At March 31, 2007, we exceeded all of our regulatory capital requirements. We are considered “well capitalized” under regulatory guidelines. See “Regulation and Supervision—Federal Banking Regulation—Capital Requirements,” “Regulatory Capital Compliance” and note 18 of the notes to the consolidated financial statements.

The offering is expected to increase our equity by $8.5 million to $11.8 million. See “Capitalization.” The capital from the offering will significantly increase our liquidity and capital resources. Over time, the initial level of

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liquidity will be reduced as net proceeds from the offering are used for general corporate purposes, including the funding of lending activities. Our financial condition and results of operations will be enhanced by the capital from the offering, resulting in increased net interest-earning assets and net income. However, the large increase in equity resulting from the capital raised in the offering will, initially, have an adverse impact on our return on equity.

Following the offering, we may use capital management tools such as cash dividends and common share repurchases. However, under Office of Thrift Supervision regulations, we will not be allowed to repurchase any shares during the first year following the offering, except: (1) in extraordinary circumstances, we may make open market repurchases of up to 5% of our outstanding stock if we receive the prior non-objection of the Office of Thrift Supervision of such repurchases; (2) if we conduct an OTS-approved offer to repurchase made to all shareholders; (3) if we repurchase to fund a restricted stock award plan that has been approved by shareholders; or (4) if we repurchase stock to fund a tax-qualified employee stock benefit plan. All repurchases are prohibited, however, if the repurchase would reduce North Penn Bank’s regulatory capital below regulatory required levels. If any options previously granted under the 2006 Omnibus Stock Option Plan are exercised during the first year following the conversion and offering, they will be funded with newly issued shares, as the Office of Thrift Supervision does not view pre-existing stock options as an extraordinary circumstance or compelling business purpose for a stock repurchase in the first year after conversion.

Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. For information about our loan commitments and unused lines of credit, see note 14 of the notes to the consolidated financial statements.

For the three months ended March 31, 2007 and the year ended December 31, 2006, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Impact of Recent Accounting Pronouncements

For a discussion of the impact of recent accounting pronouncements, see note 1 of the notes to the consolidated financial statements included in this prospectus.

Effect of Inflation and Changing Prices

The financial statements and related financial data presented in this prospectus have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution’s performance than do general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

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Our Management

Board of Directors

The board of directors of New North Penn Bancorp is composed of eight persons who are elected for terms of three years, approximately one-third of whom will be elected annually. The directors of New North Penn Bancorp are the same individuals that comprise the boards of directors of North Penn Mutual Holding Company, North Penn Bancorp and North Penn Bank. All of our directors are independent under the current listing standards of the Nasdaq Stock Market, except for Mr. Hickman, whom we currently employ as President and Chief Executive Officer. Information regarding the directors is provided below. Unless otherwise stated, each person has held his or her current occupation for the last five years. Ages presented are as of March 31, 2007.

The following directors have terms ending in 2008:

Gordon S. Florey. Retired. Age 81. Director since 1979.

Virginia D. McGregor Member, Board of Directors of Community Medical Center, Scranton, PA since January 2006. Age 44. Director since 2007.

James W. Reid, Esq. is a partner in the law firm of Oliver Price & Rhodes. Age 55. Director since 2001.

The following directors have terms ending in 2009:

Herbert C. Kneller is a Project Engineer for Hanson Aggregates Pennsylvania, Inc. Age 62. Director since 1975.

Frank H. Mechler Retired. Prior to his retirement, Mr. Mechler served as the President and Secretary of North Penn Bank. Mr. Mechler serves as Secretary of North Penn Bank. Age 87. Director since 1979.

David Samuel. Retired. Prior to his retirement, Mr. Samuel owned Samuel Fuel Oil. Age 80. Director since 1975.

The following directors have terms ending in 2010:

Frederick L. Hickman is the President and Chief Executive Officer of North Penn Bancorp, Inc., North Penn Mutual Holding Company and North Penn Bank. Prior to joining North Penn Bank in 2000, Mr. Hickman served as President and Chief Executive Officer of Union National Bank of Mount Carmel. Age 51. Director since 2000.

Kevin M. Lamont is the President of Millennium Health Services, Inc. and President of Lamont Development Company, Inc. Age 48. Director since 2004.

Executive Officers

Our executive officers are elected by the board of directors and serve at the board’s discretion. The following individuals currently serve as executive officers of North Penn Bancorp and North Penn Bank and will serve in the same positions with New North Penn Bancorp following the conversion and offering. Each officer has held his current position for at least the last five years, unless otherwise stated. Ages presented are as of March 31, 2007.

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Name	Age	Principal Occupation for Past Five Years
Thomas J. Dziak	51	Executive Vice President – Senior Lending Officer of North Penn Mutual Holding Company and North Penn Bancorp. Prior to joining North Penn Bank in February of 2001, Mr. Dziak served as a vice president and loan officer at LA Bank, NA.
Thomas A. Byrne	46	Senior Vice President – Commercial Lending Officer of North Penn Mutual Holding Company and North Penn Bancorp. Prior to joining North Penn Bank in January of 2005, Mr. Byrne served as a vice president and commercial loan officer at Community Bank & Trust.
Glenn J. Clark	34	Assistant Vice President and Controller of North Penn Bancorp and North Penn Bank.

Meetings and Committees of the Board of Directors

North Penn Bancorp and North Penn Bank conduct business through meetings and activities of their boards of directors and their committees. During the year ended December 31, 2006, the boards of directors of North Penn Bancorp and North Penn Bank held two and 14 meetings, respectively. No director attended fewer than 75% of the aggregate of total meetings of North Penn Bancorp’s and North Penn Bank’s respective Board of Directors and the committees on which such director served.

In connection with the completion of the conversion and offering, New North Penn Bancorp will establish an audit committee, a compensation committee and a nominating and corporate governance committee. All of the members of these committees will be independent directors as defined in the listing standards of The Nasdaq Stock Market. Such committees will operate in accordance with written charters, which we expect to have available on our Web site at www.northpennbank.com.

North Penn Bancorp currently maintains an audit committee, a compensation committee and a nominating and corporate governance committee. The directors who serve on these committees will serve on the similar committees of New North Penn Bancorp.

Audit Committee. The Audit Committee, consisting of Messrs. Lamont (Chairman), Kneller and Mechler oversees North Penn Bancorp’s accounting and financial reporting processes. It meets periodically with the independent registered accounting firm, management and the internal auditors to review accounting, auditing, internal control structure and financial reporting matters. During 2006, the Audit Committee met six times. Each member of the Audit Committee is independent in accordance with the listing standards of The Nasdaq Stock Market. The Audit Committee does not have an “audit committee financial expert.” The Board of Directors believes that each Audit Committee member has sufficient knowledge in financial and auditing matters to serve on the committee. The committee has the authority to engage legal counsel or other experts or consultants as it deems appropriate to carry out its responsibilities. The Audit Committee acts under a written charter adopted by the Board of Directors, a copy of which is posted on North Penn Bancorp’s Web site at www.northpennbank.com.

Compensation Committee. The Compensation Committee, consisting of Messrs. Kneller, Reid and Lamont (Chairman) is responsible for human resource policies, salaries and benefits, incentive compensation, executive development and management succession planning. It also deals with policies relating to nondiscriminatory employment practices, including those related to hiring, compensation and promotion. The Compensation Committee reviews all compensation components for North Penn Bancorp’s Chief Executive Officer, including annual salary, bonus, stock options and other direct and indirect benefits, as well as reviews North Penn Bancorp’s executive and employee compensation programs, and director compensation. During 2006, the Compensation Committee met three times. Each member of the Compensation Committee is independent in accordance with the listing standards of The Nasdaq Stock Market. The Compensation Committee acts under a written charter, a copy of which is posted on North Penn Bancorp’s Web site at www.northpennbank.com.

Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee, consisting of Messrs. Reid (Chairman) and Lamont, and Ms. McGregor takes a leadership role in

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shaping governance policies and practices, including recommending to the board of directors the corporate governance policies and guidelines that should be adopted by North Penn Bancorp and monitoring compliance with these policies and guidelines. In addition, the Nominating and Corporate Governance Committee is responsible for identifying individuals qualified to become board members, considering the candidates recommended by shareholders for board membership, and recommending to the board the director nominees for election at the next annual meeting of shareholders. It manages the board’s annual review of its performance and recommends director candidates for each committee for appointment by the board. During 2006, the Nominating and Corporate Governance Committee met two times. Each member of the Nominating and Corporate Governance Committee is independent in accordance with the listing standards of The Nasdaq Stock Market. The Nominating and Corporate Committee acts under a written charter, a copy of which is posted on North Penn Bancorp’s Web site at www.northpennbank.com.

Directors’ Compensation

Cash Retainer and Meeting Fees For Non-Employee Directors. The following table sets forth the applicable retainers and fees that are paid to non-employee directors for their service on the boards of directors of North Penn Mutual Holding Company, North Penn Bancorp and North Penn Bank. All of the fees are paid by North Penn Bank. Directors do not receive any separate compensation for their service on the board of directors of North Penn Bancorp or North Penn Mutual Holding Company. Directors of New North Penn Bancorp will not receive any separate compensation for their service on the board of directors of New North Penn Bancorp. Directors do not receive committee meeting fees if they do not attend the committee meeting.

Board of Directors Fees
Monthly retainer	$	375
Fee per board meeting:
Chairman		650
Other directors		400
Fee per committee meeting		200

The following table sets forth the total cash paid to our non-employee directors for their service on our board of directors during the year ended December 31, 2006. No director received any equity or other compensation during 2006.

Name	Fees Earned or Paid in Cash
Gordon S. Florey	$	9,900
Herbert C. Kneller		12,100
Kevin M. Lamont		14,100
Frank H. Mechler		12,100
James W. Reid		10,100
Otto P. Robinson		9,700
David Samuel		11,900
John Schumacher		15,100

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Executive Compensation

Summary Compensation Table. The following information is provided for our President and Chief Executive Officer and two most highly compensated executive officers for the year ended December 31, 2006 (the “named executive officers”).

Name and Principal Position	Year	Salary		Bonus		Stock Awards (1)		Option Awards (2)		All Other Compensation (3)		Total
Frederick L. Hickman President & CEO	2006	$	160,176	$	24,000	$	836	$	2,123	$	15,280	$	202,415
Thomas J. Dziak Executive Vice President	2006		88,926		18,100		697		1,351		8,553		117,627
Thomas A. Byrne Senior Vice President	2006		91,400		20,500		697		965		8,675		122,237

(1) Reflects the amount recognized for financial statement reporting purposes in accordance with FAS 123(R). For further information on the assumptions used to value the awards, see note 10 to the notes to the consolidated financial statements contained in this prospectus.

(2) Reflects the amount recognized for financial statement reporting purposes in accordance with FAS 123(R) for 11,000, 7,000, and 5,000 options in 2006 for Messrs. Hickman, Dziak and Byrne, respectively, based upon a fair value of each option of $3.86, using the Black-Scholes option pricing model. The assumptions used in the valuation of the options were as follows: dividend yield, 0.29%; expected volatility, 3.76%; risk-free rate, 4.76%; and expected life in years of 10 years.

(3) Includes employer 401(k) plan contributions of $4,808, $2,218 and $2,090, ESOP allocations of $9,549, $5,549 and $5,802, and employer-paid life insurance premiums of $923, $786 and $783 for Messrs. Hickman, Dziak and Byrne, respectively.

With respect to the payment of bonus as set forth above, our board of directors meets annually to approve the incentive compensation for our executive officers. Incentive compensation for Messrs. Hickman and Dziak is based on a combination of factors, including individual executive officer performance and North Penn Bank’s earnings and financial condition. The board of directors has not established a particular formula or established specific criteria for the calculation of the bonus amount. Incentive compensation for Mr. Byrne is based primarily on loan originations. The objective of the incentive compensation program is to reward our executive officers for their contributions to North Penn Bancorp and North Penn Bank and to provide incentives to encourage continued improvement in financial performance.

Employment Agreements. On June 1, 2005, North Penn Bancorp and North Penn Bank entered into amended and restated employment agreements with Frederick L. Hickman and Thomas J. Dziak. North Penn Bancorp and North Penn Bank also entered into an employment agreement with Thomas A. Byrne on the same date. The employment agreements are intended to help North Penn Bancorp and North Penn Bank maintain a stable and competent management base. Messrs. Hickman, Dziak and Byrne are also referred to as the “executive” or the “executives” below.

The employment agreements with Messrs. Hickman and Dziak provide for a three-year term, while Mr. Byrne entered into an employment agreement for a two-year term. The Board of Directors annually reviews the employment agreements and may renew the terms of the agreements for an additional year and adjust the executives’ base salaries based upon the results of its review. The current base salaries for Messrs. Hickman, Dziak and Byrne are $160,680, $88,910 and $88,375, respectively. In addition to base salaries, the employment agreements provide for bonus payments, benefit plan participation, perquisites and business expense reimbursement.

The employment agreements enable North Penn Bancorp and North Penn Bank to terminate the executives’ employment for cause, as defined in the employment agreements, at any time. No severance payments or benefits are provided under the employment agreements upon termination for cause. If North Penn Bancorp or North Penn Bank terminates the executive’s employment for reasons other than for cause, or if the executive resigns from North

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Penn Bancorp or North Penn Bank under specified circumstances that constitute constructive termination, the executive or, if he dies, his beneficiary, receives an amount equal to his base salary for the remaining term of the agreement, plus his average bonus paid over the term of the employment agreement and the contributions that would have been made on his behalf to any employee benefit plans of North Penn Bancorp and North Penn Bank during the remaining term of the employment agreement. North Penn Bank also provides continued life, medical and dental coverage for the remaining term of the employment agreements.

Under the employment agreements, the executives also receive severance payments and benefits if they voluntarily (upon the occurrence of specific circumstances discussed in the agreements) or involuntarily terminate employment following a change in control of North Penn Bancorp or North Penn Bank. Upon such termination, Messrs. Hickman and Dziak, or their beneficiaries, if they die prior to receipt of payment, receive severance equal to 2.99 times their average annual compensation for the five (5) preceding years of employment (or their period of employment, if less than five (5) years). Mr. Byrne’s employment agreement provides for a change in control severance benefit equal to two (2) times his average annual compensation over the five (5) preceding years (or his period of employment, if less than five (5) years). North Penn Bank also continues the executives’ life, medical, and dental coverage for 36 months following termination of employment in connection with a change in control.

Section 280G of the Internal Revenue Code provides that payments related to a change in control that equal or exceed three (3) times the individual’s base amount (defined as average annual taxable compensation over the five (5) preceding calendar years) constitute “excess parachute payments.” Individuals who receive excess parachute payments are subject to a 20% excise tax on the amount that exceeds the base amount, and the employer may not deduct such amounts. The employment agreements limit payments made to the executives in connection with a change in control to amounts that will not exceed their Section 280G limits.

North Penn Bancorp and North Penn Bank have agreed to pay or reimburse the executives for their reasonable costs and legal fees associated with any dispute or question of interpretation relating to the employment agreements, provided the executives are successful on the merits in a legal judgment, arbitration or settlement. The employment agreements also require North Penn Bancorp and North Penn Bank to indemnify the executives to the fullest extent legally allowable. The executives have agreed not to compete with North Penn Bancorp or North Penn Bank for one year following their termination of employment, other than in connection with a change in control.

Amended and Restated Employment Agreements. We intend to amend and restate the existing employment agreements with Messrs. Hickman, Dziak and Byrne, effective as of the completion of the conversion and offering. Although the duration and terms of the agreements will remain essentially the same, the amended and restated agreements will contain updated language clarifying that both New North Penn Bancorp and North Penn Bank are parties to and will be jointly liable for payments due under the agreements. The agreements will also provide health and dental benefit continuation for the executive’s spouse and dependents for the remaining term of the agreement following the executive’s death and reduce the distance for an involuntary relocation to be considered constructive termination from fifty (50) to twenty-five (25) miles. The amended and restated agreements will continue to provide the same payments and benefits discussed above upon disability, involuntary termination, termination without cause, and termination in connection with a change in control. The amended and restated agreements also will continue to limit payments made to the executives in connection with a change in control to an amount that does not exceed the applicable limitations of Section 280G of the Internal Revenue Code.

Supplemental Executive Retirement Plan. North Penn Bank has entered into supplemental executive retirement agreements with Frederick L. Hickman, Thomas J. Dziak and Thomas A. Byrne. Under these agreements, upon their separation from service on or after the normal retirement age of 65, Messrs. Hickman, Dziak and Byrne each will receive benefits of $83,000, $46,000 and $43,000 per year, respectively, for 10 years. Upon early termination of employment or termination due to disability, the executive receives a reduced benefit equal to 100% of the accrued balance under the plan as of the date of termination, payable 90 days following termination, in the case of early termination, or within 90 days following the participant’s attainment of age 65, in the case of disability. If the executive dies while in service, his beneficiary will receive a lump sum actuarial equivalent pre-retirement benefit in lieu of the normal retirement benefit. Upon a change in control, the executive receives an annual benefit, payable within 90 days following termination, with the benefit amount determined by vesting the executive in the present value of the normal retirement benefit using a 4% discount rate. No benefits are payable under the supplemental executive retirement agreements following termination for cause. In addition, in

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consideration for the benefits provided under the agreements, the executives agree not to engage in competitive business activities while employed by North Penn Bank and for two years following termination of employment for any reason other than a change in control.

Outstanding Equity Awards at Fiscal Year-End. The following table sets forth information concerning unexercised stock options and stock that has not vested for each of the named executive officers as of December 31, 2006.

	Option Awards				Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Un-Exercisable (1)	Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#) (2)	Market Value of Shares or Units of Stock That Have Not Vested ($)(3)
Frederick L. Hickman	11,000	$	11.15	9/26/2016	1,500	$	17,400
Thomas J. Dziak	7,000		11.15	9/26/2016	1,250		14,500
Thomas A. Byrne	5,000		11.15	9/26/2016	1,250		14,500

(1) Stock options granted pursuant to the North Penn Bancorp, Inc. 2006 Omnibus Stock Option Plan vest 20% each year for five continuous years, commencing on September 26, 2007.

(2) Stock awards granted pursuant to the North Penn Bancorp, Inc. 2006 Omnibus Stock Option Plan vest 20% each year for five continuous years, commencing on September 26, 2007.

(3) Determined based on closing price of $11.60 per share as of December 29, 2006.

Benefit Plans

Defined Benefit Pension Plan. North Penn Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions, which provides retirement benefits for eligible employees. Employees are eligible to participate in the plan upon the completion of one year of service and attainment of age 21. The formula for the annual normal retirement benefit payable under the plan after age 65 is 2.0%, multiplied by years of benefit service (as defined under the plan), multiplied by the average of the participant’s highest five (5) years of salary. Participants may also receive a reduced early retirement benefit upon retirement after age 55 but prior to age 65. Participants generally vest in their pension plan benefits at the rate of 20% following completion of two years of service and 20% per year thereafter, becoming 100% vested upon completion of six years of service. Participants are 100% vested at age 65, however, regardless of completed years of service. Benefits paid under the plan are not reduced for social security benefits that become payable to participants. As of December 31, 2006, Messrs. Hickman, Dziak and Byrne had 6, 5.92 and 1 year of benefit service, respectively, under the plan.

401(k) Plan. Effective June 1, 2005, North Penn Bank established the North Penn Bank Employees’ Savings and Profit Sharing Plan and Trust, a tax-qualified defined contribution plan. Participants become eligible to participate in the plan on the first day of the month following their completion of one year of service. Eligible employees may contribute up to 20% of their compensation to the plan on a pre-tax basis, subject to certain compensation limitations imposed on tax-qualified plans under the Internal Revenue Code of 1986, as amended. Under the plan, North Penn Bank makes matching contributions to participants’ accounts equal to 50% of the amount deferred, up to a maximum of 6% of each participant’s compensation. North Penn Bank may also make discretionary profit-sharing contributions to the accounts of participants. Participants are always 100% vested in their salary deferrals; participants vest in North Penn Bank’s matching and profit-sharing contributions at the rate of 100% upon the completion of three years of service; participants are 0% vested prior to completing three years of service.

Employee Stock Ownership Plan. North Penn Bank sponsors an employee stock ownership plan for eligible employees of North Penn Bank. Eligible employees who were 21 years old and employed by North Penn Bank on June 1, 2005, the closing date of the reorganization and minority offering, began participating in the plan as

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of that date. New employees of North Penn Bank after that date who are 21 years old and complete at least twelve months of service with North Penn Bank are eligible to participate in the employee stock ownership plan as of the January 1^st or July 1^st following their completion of the plan’s eligibility requirements.

In connection with the minority offering, an independent trustee purchased 53,211 shares of common stock on behalf of the plan, using the proceeds of a $532,110 loan from North Penn Bancorp for this purpose. North Penn Bank repays the outstanding loan by making contributions to the employee stock ownership plan and through dividends paid on common stock held by the plan over the 15-year loan term. As North Penn Bank repays the loan, participants receive annual allocations of Company common stock based on their proportional compensation.

The employee stock ownership plan will subscribe for 8.0% of the shares sold in the offering using funds borrowed from New North Penn Bancorp. The term of the loan will be 20 years. The interest rate for the loan will equal the prime rate, as published in The Wall Street Journal, on the closing date of the conversion and offering. If the employee stock ownership plan is unable to acquire 8.0% of the common sold in the offering, the plan may acquire the shares through open market purchases, subject to approval by the Office of Thrift Supervision.

Participants currently vest in employee stock ownership plan benefits at the rate of 20% upon the completion of three years of service, and at the rate of 20% per year thereafter, becoming fully vested upon the completion of seven years of service. In connection with entering into the ESOP loan and effective upon completion of the conversion, the ESOP vesting schedule will be amended to provide for vesting at the rate of 20% after two years of service and 20% per year thereafter, with participants becoming fully vested upon the completion of six years of service. Participants also become fully vested automatically upon death or disability, a change in control or termination of the employee stock ownership plan. Participants generally receive their benefits upon separation from service. The plan reallocates any unvested shares forfeited upon a participant’s termination of employment among the remaining plan participants.

Participants may direct the plan trustee regarding how to vote common stock credited to their accounts. The trustee will vote all allocated shares held in the employee stock ownership plan as instructed by the plan participants and will vote unallocated shares and allocated shares for which it receives no instructions in the same ratio as those shares for which instructions are given, subject to its overall fiduciary responsibilities to plan participants. The employee stock ownership plan must meet certain requirements of the Internal Revenue Code and the Employee Retirement Income Security Act of 1974. North Penn Bank intends to request a favorable determination letter from the Internal Revenue Service regarding the tax-qualified status of the employee stock ownership plan. North Penn Bank expects to receive a favorable determination letter, but cannot guarantee that it will. Under applicable accounting requirements, North Penn Bank records a compensation expense for the employee stock ownership plan equal to the fair market value of the shares when committed for release to participants’ accounts.

2006 Omnibus Stock Option Plan. The North Penn Bancorp, Inc. 2006 Omnibus Stock Option Plan was adopted by our Board of Directors and approved by our shareholders in May 2006. The 2006 Omnibus Stock Option Plan authorizes the granting of up to 66,514 stock options and 26,605 shares of restricted stock. The purpose of the 2006 Omnibus Stock Option Plan was to attract and retain qualified personnel, to provide officers, employees and directors with a proprietary interest in us as an incentive to contribute to our continued success, to align employees’ interests with those of our shareholders and to reward outstanding performance. The 2006 Omnibus Stock Option Plan is administered by a committee of the Board of Directors, which has the authority to determine the eligible directors or employees to whom awards are to be granted, the number of awards to be granted, the vesting of the awards and the conditions and limitations of the awards.

As of June 1, 2007, options for 27,000 shares were outstanding and options for 39,514 shares remained available for future awards under the plan. None of the options granted under the have been exercised. As of June 1, 2007, 4,875 shares of restricted stock had been granted and 21,730 shares remained available for future awards.

The 2006 Omnibus Stock Option Plan provides that in the event any merger, consolidation, share exchange or other similar corporate transaction affects the shares of North Penn Bancorp in such a manner that an adjustment is required to preserve the benefits available under the plan, the committee administering the plan has the authority to adjust the number of shares which may be granted, the number of shares subject to restricted stock awards or outstanding stock options, and the exercise price of any stock option grant. As a result, upon completion of the conversion and offering, outstanding shares of restricted stock and options to purchase shares of North Penn

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Bancorp common stock will be converted into and become shares of restricted stock and options to purchase shares of New North Penn Bancorp common stock. The number of shares of restricted stock and common stock to be received upon exercise of these options and the related exercise price will be adjusted for the exchange ratio in the conversion. The aggregate exercise price, duration and vesting schedule of these awards will not be affected.

New North Penn Bancorp will assume the 2006 Omnibus Stock Option Plan after the conversion and offering.

Future Equity Incentive Plan. Following the offering, North Penn Bancorp plans to adopt an equity incentive plan that will provide for grants of stock options and restricted stock. In accordance with applicable regulations, North Penn Bancorp anticipates that the plan will authorize a number of stock options equal to 10.0% of the total shares sold in the offering, and a number of shares of restricted stock equal to 4.0% of the total shares sold in the offering. Therefore, the number of shares reserved under the plan will range from 130,900 shares, assuming 935,000 shares are issued in the offering, to 177,100 shares, assuming 1,265,000 shares are issued in the offering.

North Penn Bancorp may fund the equity incentive plan through the purchase of common stock in the open market by a trust established in connection with the plan or from authorized, but unissued, shares of North Penn Bancorp common stock. The issuance of additional shares after the offering would dilute the interests of existing shareholders. See “Pro Forma Data.”

North Penn Bancorp will grant all stock options at an exercise price equal to 100% of the fair market value of the stock on the date of grant. North Penn Bancorp will grant restricted stock awards at no cost to recipients. Restricted stock awards and stock options generally vest ratably over a five-year period (or as otherwise permitted by the Office of Thrift Supervision), but North Penn Bancorp may also make vesting contingent upon the satisfaction of performance goals established by the board of directors or the committee charged with administering the plan. All outstanding awards will accelerate and become fully vested upon a change in control of North Penn Bancorp.

The equity incentive plan will comply with all applicable Office of Thrift Supervision regulations. We will submit the equity incentive plan to shareholders for their approval not less than six months after completion of the conversion and offering, at which time we will provide shareholders with detailed information about the plan.

Transactions with Related Persons

The aggregate amount of loans by North Penn Bank to its executive officers and directors, and members of their immediate families, was $911,000 at March 31, 2007. As of that date, these loans were performing according to their original terms. Except as described below, the outstanding loans made to our directors and executive officers, and members of their immediate families, were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to North Penn Bank, and did not involve more than the normal risk of collectibility or present other unfavorable features.

For information about restrictions on our ability to make loans to insiders, see “Regulation and Supervision—Federal Banking Regulation—Transactions with Related Parties.”

North Penn Bank maintains a program that enables all employees to obtain residential mortgage loans and auto loans at a reduction of 2% from the rates available to the public. Frederick Hickman has a mortgage loan from North Penn Bank that was made under this program at a rate of 3.65%. The largest amount of principal outstanding during 2006 on this loan was $169,655 and the outstanding balance at May 31, 2007 was $145,362. The total principal and interest paid on this loan during 2006 was approximately $18,000 and $6,000, respectively.

Indemnification for Directors and Officers

New North Penn Bancorp’s articles of incorporation provide that New North Penn Bancorp must indemnify all directors and officers of New North Penn Bancorp against all expenses and liabilities reasonably incurred by them in connection with or arising out of any action, suit or proceeding in which they may be involved by reason of their having been a director or officer of New North Penn Bancorp. Such indemnification may include the advancement of funds to pay for or reimburse reasonable expenses incurred by an indemnified party. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of New North Penn Bancorp pursuant to its articles of incorporation or otherwise, New North Penn Bancorp has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

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Stock Ownership

The following table sets forth, as of June 1, 2007, the name and address of each person who owns of record or who is known by the board of directors to be the beneficial owner of more than 5% of North Penn Bancorp’s outstanding common stock, the number of shares beneficially owned by such person and the percentage of North Penn Bancorp’s outstanding common stock so owned.

Name and Address	Number of Shares Beneficially Owned	Percent of Outstanding Common Stock Beneficially Owned
North Penn Mutual Holding Company 216 Adams Avenue Scranton PA 18503-1692	778,415	53.7	%

The following table sets forth the information concerning the number of shares and percentage of Company common stock beneficially owned, as of June 1, 2007, by each present director and named executive officer and by all directors and executive officers as a group.

Name of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership		Percent of Class(2)
Thomas A. Byrne	3,318	(3)	*
Thomas J. Dziak	7,631	(4)	*
Gordon S. Florey	2,000	(5)	*
Frederick L. Hickman	12,480	(6)	*
Herbert C. Kneller	1,200		*
Kevin M. Lamont	53,000	(8)	3.7	%
Virginia D. McGregor	1,500		*
Frank H. Mechler	5,000	(7)	*
James W. Reid	2,000		*
David Samuel	5,000		*
Executive Officers and Directors as a Group (10 persons)	93,129		6.4	%

* Less than 1%.

(1) The securities “beneficially owned” by an individual are determined in accordance with the definitions of “beneficial ownership” set forth in the general rules and regulations of the Securities and Exchange Commission and may include securities owned by or for the individual’s spouse and minor children and any other relative who has the same home, as well as, securities to which the individual has or shares voting or investment power or has the right to acquire beneficial ownership within 60 days after March 26, 2007. Beneficial ownership may be disclaimed as to certain of the securities.

(2) Based on 1,448,430 shares of North Penn Bancorp’s common stock outstanding and entitled to vote as of June 1, 2007.

(3) Includes 1,709 shares owned by Mr. Byrne held in 401(k) Plan, 359 shares allocated under the ESOP and 1,250 shares of unvested restricted stock held in trust.

(4) Includes 4,000 shares owned by Mr. Dziak held in IRA, 2,011 shares held in 401(k) Plan, 370 shares allocated under the ESOP and 1,250 shares of unvested restricted stock held in trust.

(5) Shares owned by Mr. Florey held in IRA.

(6) Includes 4,856 shares owned by Mr. Hickman held in 401(k) Plan, 647 shares allocated under the ESOP, 100 shares owned by Mr. Hickman’s wife, 100 shares held by Mr. Hickman as custodian for his son, 100 shares held by Mr. Hickman as custodian for his daughter and 1,500 shares of unvested restricted stock held in trust.

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(7) Shares owned by Mr. Mechler as trustee for Judith Mechler Trust.

(8) Includes 10,000 shares held by Mr. Lamont in Lamont Development Company, Inc.

Subscriptions by Executive Officers and Directors

The table below sets forth, for each of our directors and named executive officers and for all of the directors and named executive officers as a group, the following information:

• the number of shares of New North Penn Bancorp common stock to be received in exchange for shares of North Penn Bancorp common stock upon consummation of the conversion and offering, based upon their beneficial ownership of North Penn Bancorp common stock as of June 1, 2007;

• the proposed purchases of New North Penn Bancorp common stock, assuming sufficient shares are available to satisfy their subscriptions; and

• the total amount of New North Penn Bancorp common stock to be held upon consummation of the conversion and offering.

In each case, it is assumed that shares are sold and the exchange ratio is calculated at the midpoint of the offering range. No individual has entered into a binding agreement to purchase these shares and, therefore, actual purchases could be more or less than indicated. Directors and executive officers and their associates may not purchase more than 33% of the shares sold in the offering. Like all of our depositors, our directors and officers have subscription rights based on their deposits. For purposes of the following table, sufficient shares are assumed to be available to satisfy subscriptions in all categories. See “The Conversion and Offering–Limitations on Purchases of Shares.”

	Number of Shares Received	Proposed Purchases of Stock in the Offering (1)			Total Common Stock to be Held
Name of Beneficial Owner	in Exchange for Shares of North Penn Bancorp (2)	Number of Shares	Dollar Amount		Number of Shares (2)	Percentage of Total Outstanding
Thomas A. Byrne	4,688	2,700	$	27,000	7,388	*
Thomas J. Dziak	10,783	1,000		10,000	11,783	*
Gordon S. Florey	2,826	—		—	2,826	*
Frederick L. Hickman	17,635	10,000		100,000	27,635	1.4	%
Herbert C. Kneller	1,695	500		5,000	2,195	*
Kevin M. Lamont	74,894	30,000		300,000	104,894	5.1
Virginia D. McGregor	2,119	2,500		25,000	4,619	*
Frank H. Mechler	7,065	—		—	7,065	*
James W. Reid	2,826	—		—	2,826	*
David Samuel	7,065	—		—	7,065	*
Total	131,596	46,700	$	467,000	178,296	7.6	%

* Less than 1%.

(1) Includes proposed subscriptions, if any, by associates.

(2) Based on information presented in “Stock Ownership.” Excludes shares that may be acquired upon the exercise of outstanding stock options.

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Regulation and Supervision

General

North Penn Bank is subject to extensive regulation, examination and supervision by the Federal Deposit Insurance Corporation, as its primary federal regulator, and by the Pennsylvania Department of Banking. North Penn Bank is a member of the Federal Home Loan Bank System and its deposit accounts are insured up to applicable limits by the Deposit Insurance Fund managed by the Federal Deposit Insurance Corporation. North Penn Bank must file reports with the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation concerning its activities and financial condition in addition to obtaining regulatory approvals before entering into certain transactions such as mergers with, or acquisitions of, other financial institutions. There are periodic examinations by the Federal Deposit Insurance Corporation and the Pennsylvania Department of Banking to evaluate North Penn Bank’s safety and soundness and compliance with various regulatory requirements. This regulatory structure is intended primarily for the protection of the insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such policies, whether by the Pennsylvania Department of Banking, the Federal Deposit Insurance Corporation or Congress, could have a material adverse impact on New North Penn Bancorp and North Penn Bank and their operations. New North Penn Bancorp, as a savings and loan holding company, will be required to file certain reports with, is subject to examination by, and otherwise must comply with the rules and regulations of the Office of Thrift Supervision.

Certain of the regulatory requirements that are or will be applicable to North Penn Bank and New North Penn Bancorp are described below. This description of statutes and regulations is not intended to be a complete explanation of such statutes and regulations and their effects on North Penn Bank and New North Penn Bancorp and is qualified in its entirety by reference to the actual statutes and regulations.

Federal Banking Regulation

Capital Requirements. The Federal Deposit Insurance Corporation’s capital regulations require federally insured, state-chartered banks that are not members of the Federal Reserve System (“state non-member banks”), such as North Penn Bank, to comply with minimum leverage capital requirements. For an institution determined by the Federal Deposit Insurance Corporation to not be anticipating or experiencing significant growth and to be, in general, a strong banking organization rated composite 1 under Uniform Financial Institutions Ranking System established by the Federal Financial Institutions Examination Council, the minimum capital leverage requirement is a ratio of Tier 1 capital to total assets of 3.0%. For all other institutions, the minimum leverage capital ratio is not less than 4.0%. Tier 1 capital is the sum of common shareholder’s equity, noncumulative perpetual preferred stock (including any related surplus) and minority investments in certain subsidiaries, less intangible assets (except for certain servicing rights and credit card relationships) and certain other specified items.

The Federal Deposit Insurance Corporation regulations require state non-member banks to maintain certain levels of regulatory capital in relation to regulatory risk-weighted assets. The ratio of regulatory capital to regulatory risk-weighted assets is referred to as a bank’s “risk-based capital ratio.” Risk-based capital ratios are determined by allocating assets and specified off-balance sheet items (including recourse obligations, direct credit substitutes and residual interests) to four risk-weighted categories ranging from 0.0% to 100.0%, with higher levels of capital being required for the categories perceived as representing greater risk. For example, under the Federal Deposit Insurance Corporation’s risk-weighting system, cash and securities backed by the full faith and credit of the U.S. government are given a 0.0% risk weight, loans secured by one- to four-family residential properties generally have a 50.0% risk weight, and commercial loans have a risk weighting of 100.0%.

State non-member banks must maintain a minimum ratio of total capital to risk-weighted assets of at least 8.0%, of which at least one-half must be Tier 1 capital. Total capital consists of Tier 1 capital plus Tier 2 or supplementary capital items, which include allowances for loan losses in an amount of up to 1.25% of risk-weighted assets, cumulative preferred stock and certain other capital instruments, and a portion of the net unrealized gain on equity securities. The includable amount of Tier 2 capital cannot exceed the amount of the institution’s Tier 1 capital. Banks that engage in specified levels of trading activities are subject to adjustments in their risk based capital calculation to ensure the maintenance of sufficient capital to support market risk.

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The Federal Deposit Insurance Corporation also has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s capital level is or may become inadequate in light of the particular circumstances. At March 31, 2007, North Penn Bank met each of these capital requirements. See note 18 of the notes to the consolidated financial statements for additional information regarding North Penn Bank’s regulatory capital compliance.

Prompt Corrective Regulatory Action. The Federal Deposit Insurance Corporation is required to take certain supervisory actions against undercapitalized institutions, the severity of which depends upon the institution’s degree of undercapitalization. Generally, an institution that has a ratio of total capital to risk weighted assets of less than 8%, a ratio of Tier 1 (core) capital to risk-weighted assets of less than 4% or a ratio of core capital to total assets of less than 4% (3% or less for institutions with the highest examination rating) is considered to be “undercapitalized.” An institution that has a total risk-based capital ratio less than 6%, a Tier 1 capital ratio of less than 3% or a leverage ratio that is less than 3% is considered to be “significantly undercapitalized” and an institution that has a tangible capital to assets ratio equal to or less than 2% is deemed to be “critically undercapitalized.” Subject to a narrow exception, the Federal Deposit Insurance Corporation is required to appoint a receiver or conservator within specified time frames for an institution that is “critically undercapitalized.” An institution must file a capital restoration plan with the Federal Deposit Insurance Corporation within 45 days of the date it receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Compliance with the plan must be guaranteed by any parent holding company. In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion. “Significantly undercapitalized” and “critically undercapitalized” institutions are subject to more extensive mandatory regulatory actions. The Federal Deposit Insurance Corporation could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors. See note 18 of the notes to the consolidated financial statements for additional information regarding North Penn Bank’s regulatory capital compliance.

Standards for Safety and Soundness. As required by statute, the federal banking agencies have adopted Interagency Guidelines prescribing Standards for Safety and Soundness. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the Federal Deposit Insurance Corporation determines that an institution fails to meet any standard prescribed by the guidelines, the Federal Deposit Insurance Corporation may require the institution to submit an acceptable plan to achieve compliance with the standard. North Penn Bank has not received any notice from the Federal Deposit Insurance Corporation that it has failed to meet any standard prescribed by the guidelines.

Investment Activities. All state-chartered insured banks, including savings banks, are generally limited in their investment activities to principal and equity investments of the type and in the amount authorized for national banks, notwithstanding state law, subject to certain exceptions. For example, state-chartered banks may, with Federal Deposit Insurance Corporation approval, continue to exercise state authority to invest in common or preferred stocks listed on a national securities exchange and in the shares of a registered investment company, up to certain limits. The Federal Deposit Insurance Corporation may terminate such authority if it determines that such investments pose a safety and soundness risk or upon the occurrence of certain events such as the savings bank’s conversion to a different charter. In addition, the Federal Deposit Insurance Corporation is authorized to permit such institutions to engage in state authorized activities or investments not permissible for national banks (other than non-subsidiary equity investments) if they meet all applicable capital requirements and it is determined that such activities or investments do not pose a significant risk to the Deposit Insurance Fund.

Interstate Banking and Branching. Adequately capitalized bank holding companies may acquire banks in any state subject to specified concentration limits and other conditions. Federal law also authorizes the interstate merger of banks. In addition, among other things, banks may establish new branches on an interstate basis provided that such action is specifically authorized by the law of the host state.

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Transactions with Related Parties. Federal law limits North Penn Bank’s authority to lend to, and engage in certain other transactions with (collectively, “covered transactions”), “affiliates” (e.g., any company that controls or is under common control with an institution, including North Penn Bancorp, Inc. and its non-bank subsidiaries). The aggregate amount of covered transactions with any individual affiliate is limited to 10% of the capital and surplus of the institution. The aggregate amount of covered transactions with all affiliates is limited to 20% of the institution’s capital and surplus. Loans and other specified transactions with affiliates are required to be secured by collateral in an amount and of a type described in federal law. The purchase of low quality assets from affiliates is generally prohibited. Transactions with affiliates must be on terms and under circumstances that are at least as favorable to the institution as those prevailing at the time for comparable transactions with non-affiliated companies.

The Sarbanes-Oxley Act generally prohibits loans by North Penn Bancorp to its executive officers and directors. However, the Sarbanes-Oxley Act contains a specific exemption from such prohibition for loans by North Penn Bank to its executive officers and directors in compliance with federal banking regulations. Federal regulations require that all loans or extensions of credit to executive officers and directors of insured institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and must not involve more than the normal risk of repayment or present other unfavorable features. North Penn Bank is therefore prohibited from making any new loans or extensions of credit to executive officers and directors at different rates or terms than those offered to the general public. Notwithstanding this rule, federal regulations permit North Penn Bank to make loans to executive officers and directors at reduced interest rates if the loan is made under a benefit program generally available to all other employees and does not give preference to any executive officer or director over any other employee.

Insurance of Deposit Accounts. Deposits of North Penn Bank are insured by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation. Insurance premiums are based on a number of factors, primarily the risk of loss that insured institutions pose to the Deposit Insurance Fund. The Federal Deposit Insurance Corporation has the ability to adjust the insurance fund’s reserve ratio between 1.15% and 1.5%, depending on projected losses, economic changes and assessment rates at the end of a calendar year. The FDIC has adopted regulations that set assessment rates that took effect at the beginning of 2007. The new assessment rates for most banks vary between five cents and seven cents for every $100 of deposits. A change in insurance premiums could have an adverse effect on the operating expenses and results of operations of North Penn Bank. We cannot predict what insurance assessment rates will be in the future. Assessment credits have been provided to institutions that paid high premiums in the past. As a result, North Penn Bank will have credits that offset all of its premiums in 2007.

Insurance of deposits may be terminated by the Federal Deposit Insurance Corporation upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the Federal Deposit Insurance Corporation. We do not know of any practice, condition or violation that might lead to termination of deposit insurance.

In addition to the assessment for deposit insurance, institutions are required to make payments on bonds issued in the late 1980s by the Financing Corporation to recapitalize a predecessor deposit insurance fund.

Federal Home Loan Bank System. North Penn Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank provides a central credit facility primarily for member institutions. North Penn Bank, as a member of the Federal Home Loan Bank of Pittsburgh, is required to acquire and hold shares of capital stock in that Federal Home Loan Bank. North Penn Bank was in compliance with this requirement with an investment in Federal Home Loan Bank stock at March 31, 2007 of $1.1 million.

Community Reinvestment Act. Under the Community Reinvestment Act, as implemented by Federal Deposit Insurance Corporation regulations, every financial institution has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The Community Reinvestment Act does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the Community

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Reinvestment Act. The Community Reinvestment Act requires the Federal Deposit Insurance Corporation, in connection with its examination of state-chartered banks, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution.

The Community Reinvestment Act requires public disclosure of an institution’s rating and requires the Federal Deposit Insurance Corporation to provide a written evaluation of an association’s Community Reinvestment Act performance utilizing a four-tiered descriptive rating system.

North Penn Bank received a “satisfactory” rating as a result of its most recent Community Reinvestment Act assessment.

Pennsylvania Savings Bank Law

The Pennsylvania Banking Code contains detailed provisions governing the organization, location of offices, rights and responsibilities of directors, officers, and employees, as well as corporate powers, savings and investment operations and other aspects of North Penn Bank and its affairs. The code delegates extensive rule-making power and administrative discretion to the Pennsylvania Department of Banking so that the supervision and regulation of state-chartered savings banks may be flexible and readily responsive to changes in economic conditions and in savings and lending practices.

The Pennsylvania Banking Code also provides that state-chartered savings banks may engage in any activity permissible for a federal savings association, subject to regulation by the Pennsylvania Department of Banking. The Federal Deposit Insurance Act, however, prohibits North Penn Bank from making new investments, loans, or becoming involved in activities as principal and equity investments which are not permitted for national banks unless:

• the Federal Deposit Insurance Corporation determines the activity or investment does not pose a significant risk of loss to the Deposit Insurance Fund; and

• North Penn Bank meets all applicable capital requirements.

Accordingly, the additional operating authority provided to North Penn Bank by the Pennsylvania Banking Code is significantly restricted by the Federal Deposit Insurance Act.

Other Regulations

Interest and other charges collected or contracted for by North Penn Bank are subject to state usury laws and federal laws concerning interest rates. North Penn Bank’s operations are also subject to federal laws applicable to credit transactions, such as the:

• Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

• Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

• Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

• Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;

• Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and

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• rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The operations of North Penn Bank also are subject to the:

• Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

• Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

• Check Clearing for the 21^st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

• Title III of The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (referred to as the “USA PATRIOT Act”), and the related regulations of the Federal Deposit Insurance Corporation, which require financial institutions operating in the United States to develop new anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting of money laundering; and

• The Gramm-Leach-Bliley Act, which placed limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties.

Holding Company Regulation

General. Federal law allows a state savings bank that qualifies as a “qualified thrift lender” to elect to be treated as a savings association for purposes of the savings and loan holding company provisions of federal law. Such election allows its holding company to be regulated as a savings and loan holding company by the Office of Thrift Supervision rather than as a bank holding company by the Federal Reserve Board. North Penn Bancorp is a bank holding company regulated by the Federal Reserve Board. However, North Penn Bank has elected to be treated as a savings association in connection with the conversion and offering so that New North Penn Bancorp will be regulated as a savings and loan holding company under federal law. As such, New North Penn Bancorp will register with the Office of Thrift Supervision and will be subject to Office of Thrift Supervision regulations, examinations, supervision, reporting requirements and regulations concerning corporate governance and activities. In addition, the Office of Thrift Supervision will have enforcement authority over New North Penn Bancorp and its non-savings institution subsidiaries. Among other things, this authority permits the Office of Thrift Supervision to restrict or prohibit activities that are determined to be a serious risk to North Penn Bank.

As a unitary savings and loan holding company, New North Penn Bancorp will be able to engage only in activities permitted to a financial holding company and those permitted for a multiple savings and loan holding company, which includes non-banking activities that the Federal Reserve Board has determined to be permissible for bank holding companies.

Limitation on Capital Distributions. Office of Thrift Supervision regulations impose limitations upon all capital distributions by a savings institution, including cash dividends, payments to repurchase its shares and payments to shareholders of another institution in a cash-out merger. Under the regulations, an application to and the prior approval of the Office of Thrift Supervision is required before any capital distribution if the institution does not meet the criteria for “expedited treatment” of applications under Office of Thrift Supervision regulations (i.e., generally, examination and Community Reinvestment Act ratings in the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement with the Office of Thrift Supervision. If an application is not required, the institution must still provide prior notice to the Office of Thrift Supervision of the capital

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distribution if, like North Penn Bank, it is a subsidiary of a holding company. If North Penn Bank’s capital were ever to fall below its regulatory requirements or regulators notified it that it was in need of increased supervision, its ability to make capital distributions could be restricted. In addition, the Office of Thrift Supervision could prohibit a proposed capital distribution that would otherwise be permitted by the regulation if the agency determines that such distribution would constitute an unsafe or unsound practice.

Qualified Thrift Lender Test. In order for New North Penn Bancorp to be regulated by the Office of Thrift Supervision as a savings and loan holding company (rather than by the Federal Reserve Board as a bank holding company) North Penn Bank must meet a qualified thrift lender test. Under the test, North Penn Bank is required to either qualify as a “domestic building and loan association” under the Internal Revenue Code or maintain at least 65% of its “portfolio assets” (total assets less: (i) specified liquid assets up to 20% of total assets; (ii) intangibles, including goodwill; and (iii) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential mortgages and related investments, including certain mortgage-backed securities) in at least 9 months out of each 12 month period. Education loans, credit card loans and small business loans may be considered “qualified thrift investments.” As of March 31, 2007, North Penn Bank maintained 89.1% of its portfolio assets in qualified thrift investments and, therefore, met the qualified thrift lender test.

Acquisition of Control. Under the federal Change in Bank Control Act, a notice must be submitted to the Office of Thrift Supervision if any person (including a company), or group acting in concert, seeks to acquire “control” of a savings and loan holding company or savings association. An acquisition of “control” can occur upon the acquisition of 10% or more of the voting stock of a savings and loan holding company or savings institution or as otherwise defined by the Office of Thrift Supervision. Under the Change in Bank Control Act, the Office of Thrift Supervision has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the anti-trust effects of the acquisition. Any company that so acquires control would then be subject to regulation as a savings and loan holding company.

Federal and State Taxation

Federal Income Taxation

General. We report our income on a fiscal year basis using the accrual method of accounting. The federal income tax laws apply to us in the same manner as to other corporations with some exceptions, including particularly our reserve for bad debts discussed below. The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to us. Our federal income tax returns have been either audited or closed under the statute of limitations through tax year 2003. For its 2006 fiscal year, North Penn Bancorp’s maximum federal income tax rate was 34%.

New North Penn Bancorp and North Penn Bank will enter into a tax allocation agreement. Because New North Penn Bancorp will own 100% of the issued and outstanding capital stock of North Penn Bank, New North Penn Bancorp and North Penn Bank will be members of an affiliated group within the meaning of Section 1504(a) of the Internal Revenue Code, of which group New North Penn Bancorp is the common parent corporation. As a result of this affiliation, North Penn Bank may be included in the filing of a consolidated federal income tax return with New North Penn Bancorp and, if a decision to file a consolidated tax return is made, the parties agree to compensate each other for their individual share of the consolidated tax liability and/or any tax benefits provided by them in the filing of the consolidated federal income tax return.

Bad Debt Reserves. For fiscal years beginning before 1996, thrift institutions that qualified under certain definitional tests and other conditions of the Internal Revenue Code were permitted to use certain favorable provisions to calculate their deductions from taxable income for annual additions to their bad debt reserve. A reserve could be established for bad debts on qualifying real property loans, generally secured by interests in real property improved or to be improved, under the percentage of taxable income method or the experience method. The reserve for nonqualifying loans was computed using the experience method. Federal legislation enacted in 1996 repealed the reserve method of accounting for bad debts and the percentage of taxable income method for tax years beginning after 1995 and require savings institutions to recapture or take into income certain portions of their accumulated bad debt reserves.

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Distributions. If North Penn Bank makes “non-dividend distributions” to New North Penn Bancorp, the distributions will be considered to have been made from North Penn Bank’s unrecaptured tax bad debt reserves, including the balance of its reserves as of December 31, 1987, to the extent of the “non-dividend distributions,” and then from North Penn Bank’s supplemental reserve for losses on loans, to the extent of those reserves, and an amount based on the amount distributed, but not more than the amount of those reserves, will be included in North Penn Bank’s taxable income. Non-dividend distributions include distributions in excess of North Penn Bank’s current and accumulated earnings and profits, as calculated for federal income tax purposes, distributions in redemption of stock, and distributions in partial or complete liquidation. Dividends paid out of North Penn Bank’s current or accumulated earnings and profits will not be so included in North Penn Bank’s taxable income.

The amount of additional taxable income triggered by a non-dividend is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Therefore, if North Penn Bank makes a non-dividend distribution to New North Penn Bancorp, approximately one and one-half times the amount of the distribution not in excess of the amount of the reserves would be includable in income for federal income tax purposes, assuming a 34% federal corporate income tax rate. North Penn Bank does not intend to pay dividends that would result in a recapture of any portion of its bad debt reserves.

State Taxation

Pennsylvania Taxation. North Penn Bancorp is, and New North Penn Bancorp will be, subject to the Pennsylvania Corporate Net Income Tax, Capital Stock and Franchise Tax. The Corporation Net Income Tax rate for 2006 was 9.99% and is imposed on unconsolidated taxable income for federal purposes with certain adjustments. In general, the Capital Stock and Franchise Tax is a property tax imposed on a corporation’s capital stock value at a statutorily defined rate, such value being determined in accordance with a fixed formula based upon average net income and net worth.

North Penn Bank is subject to tax under the Pennsylvania Mutual Thrift Institutions Tax Act, as amended to include thrift institutions having capital stock. Pursuant to the Mutual Thrift Institutions Tax, the tax rate is 11.5%. The Mutual Thrift Institutions Tax exempts North Penn Bank from other taxes imposed by the Commonwealth of Pennsylvania for state income tax purposes and from all local taxation imposed by political subdivisions, except taxes on real estate and real estate transfers. The Mutual Thrift Institutions Tax is a tax upon net earnings, determined in accordance with generally accepted accounting principles with certain adjustments. The Mutual Thrift Institutions Tax, in computing income according to generally accepted accounting principles, allows for the deduction of interest earned on state and federal obligations, while disallowing a percentage of a thrift’s interest expense deduction in the proportion of interest income on those securities to the overall interest income of North Penn Bank. Net operating losses, if any, thereafter can be carried forward three years for Mutual Thrift Institutions Tax purposes.

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The Conversion and Offering

This conversion is being conducted pursuant to a plan of conversion approved by the boards of directors of North Penn Mutual Holding Company, North Penn Bancorp and North Penn Bank. The Office of Thrift Supervision has conditionally approved the plan of conversion; however, such approval does not constitute a recommendation or endorsement of the plan of conversion by such agency. The plan of conversion also must be approved by the depositors of North Penn Bank and the shareholders of North Penn Bancorp. A special meeting of depositors and a special meeting of shareholders have been called for this purpose.

General

On April 24, 2007, the boards of directors of North Penn Mutual Holding Company, North Penn Bancorp and North Penn Bank unanimously adopted the plan of conversion. Under the plan of conversion, North Penn Bank will convert from the mutual holding company form of organization to the stock holding company form of organization and become a wholly owned subsidiary of New North Penn Bancorp, a newly formed Pennsylvania corporation. Current shareholders of North Penn Bancorp, other than North Penn Mutual Holding Company, will receive shares of New North Penn Bancorp common stock in exchange for their shares of North Penn Bancorp common stock. Following the conversion and offering, North Penn Bancorp and North Penn Mutual Holding Company will no longer exist.

The conversion to a stock holding company structure also includes the offering by New North Penn Bancorp of its common stock to qualifying depositors of North Penn Bank in a subscription offering and, if necessary, to members of the general public through a direct community offering and/or a syndicate of registered broker-dealers. The amount of capital being raised in the offering is based on an appraisal of New North Penn Bancorp. Most of the terms of the offering are required by the regulations of the Office of Thrift Supervision.

The Office of Thrift Supervision has approved our plan of conversion, subject to, among other things, approval of the plan of conversion by North Penn Bank’s depositors and North Penn Bancorp’s shareholders. The special meetings of North Penn Bank’s depositors and North Penn Bancorp’s shareholders have been called for this purpose on _______, 2007. Applications for approval of the mergers that are part of the conversion have been filed with the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation. Completion of the conversion and offering are conditioned upon receipt of these approvals.

The following is a brief summary of the pertinent aspects of the conversion and offering. A copy of the plan of conversion is available from North Penn Bancorp upon request and is available for inspection at the offices of North Penn Bank and at the Office of Thrift Supervision. The plan of conversion is also filed as an exhibit to the registration statement, of which this prospectus forms a part, that New North Penn Bancorp has filed with the Securities and Exchange Commission. See “Where You Can Find More Information.”

Reasons for the Conversion and Offering

After considering the advantages and disadvantages of the conversion and offering, the boards of directors of North Penn Mutual Holding Company, North Penn Bancorp and North Penn Bank unanimously approved the conversion and offering as being in the best interests of North Penn Bancorp and North Penn Bank and their respective shareholders and depositors. The board of directors concluded that the conversion and offering provides a number of advantages that will be important to our future growth and performance and that outweigh the disadvantages of the conversion and offering.

The conversion and offering will result in the raising of additional capital for New North Penn Bancorp and North Penn Bank, which will support North Penn Bank’s future lending and operational growth and may also support future branching activities or the acquisition of other financial institutions or financial service companies or their assets. As a fully converted stock holding company, we will have greater flexibility in structuring mergers and acquisitions, including the form of consideration paid in a transaction. Our current mutual holding company structure, by its nature, limits our ability to offer our common stock as consideration in a merger or acquisition. Our new stock holding company structure will enhance our ability to compete with other bidders when acquisition opportunities arise by better enabling us to offer stock or cash consideration, or a combination of the two.

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After completion of the conversion and offering, the unissued common and preferred stock authorized by New North Penn Bancorp’s articles of incorporation will permit us to raise additional capital through further sales of securities. Although North Penn Bancorp currently has the ability to raise additional capital through the sale of additional shares of North Penn Bancorp common stock, that ability is limited by the mutual holding company structure, which, among other things, requires that North Penn Mutual Holding Company hold a majority of the outstanding shares of North Penn Bancorp common stock.

We expect that the larger number of shares that will be outstanding after completion of the conversion and offering will result in a more liquid and active market than currently exists for North Penn Bancorp common stock, although following the conversion and offering we will continue to have a relatively small number of shares outstanding. A more liquid and active market would make it easier for our shareholders to buy and sell our common stock.

Due to the small number of shares of North Penn Bancorp that are outstanding, it is difficult to purchase shares. The conversion and offering will afford our officers and employees the opportunity to increase their stock ownership, which we believe to be an effective performance incentive and an effective means of attracting and retaining qualified personnel. The conversion and offering also will provide our customers and local community members with an opportunity to acquire our stock.

If North Penn Bancorp had undertaken a standard conversion in 2005, applicable regulations would have required a greater amount of North Penn Bancorp common stock to be sold than the amount that was sold in connection with the formation of North Penn Mutual Holding Company. If a standard conversion had been conducted in 2005, management of North Penn Bancorp believed that it would have been difficult to prudently invest the larger amount of capital that would have been raised, when compared to the net proceeds raised in connection with the formation of North Penn Mutual Holding Company. In addition, a standard conversion in 2005 would have immediately eliminated all aspects of the mutual form of organization.

The disadvantage of the conversion and offering considered by board of directors is the fact that operating in the stock holding company form of organization could subject North Penn Bank to contests for corporate control. The Board of Directors determined that the advantages of the conversion and offering outweighed the disadvantages.

Description of the Conversion

New North Penn Bancorp has been incorporated under Pennsylvania law as a first-tier wholly owned subsidiary of North Penn Bank. To effect the conversion, the following will occur:

• North Penn Bancorp will adopt a federal charter by merging with and into an interim federal mid-tier holding company, which will subsequently convert to an interim federal savings bank and simultaneously merge with and into North Penn Bank, with North Penn Bank as the surviving entity;

• North Penn Mutual Holding Company will adopt a federal charter by merging with an interim federal mutual holding company, which will subsequently convert to an interim federal savings bank and simultaneously merge with and into North Penn Bank, with North Penn Bank as the surviving entity; and

• An interim federal savings bank will be formed as a wholly owned subsidiary of New North Penn Bancorp, which will merge with and into North Penn Bank, with North Penn Bank as the surviving entity.

As a result of the series of mergers described above, North Penn Bank will become a wholly owned subsidiary of New North Penn Bancorp and the outstanding shares of North Penn Bancorp common stock held by persons other than North Penn Mutual Holding Company will be converted into a number of shares of New North

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Penn Bancorp common stock that will result in the holders of such shares owning in the aggregate approximately the same percentage of New North Penn Bancorp common stock to be outstanding upon the completion of the conversion and offering (i.e., the common stock issued in the offering plus the shares issued in exchange for shares of North Penn Bancorp common stock) as the percentage of North Penn Bancorp common stock owned by them in the aggregate immediately before consummation of the conversion and offering before giving effect to (1) the payment of cash in lieu of issuing fractional exchange shares and (2) any shares of common stock purchased by public shareholders in the offering.

Consummation of the conversion and offering requires the approval of the Office of Thrift Supervision, the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation. In addition, pursuant to Office of Thrift Supervision regulations, consummation of the conversion and offering (including the offering of common stock in the offering, as described below) is conditioned upon the approval of the plan of conversion by (1) at least a majority of the total number of votes eligible to be cast by depositors of North Penn Bank at a special meeting of depositors, (2) holders of at least two-thirds of the outstanding shares of North Penn Bancorp common stock at a special meeting of shareholders and (3) the holders of at least a majority of the outstanding shares of common stock of North Penn Bancorp, excluding shares held by North Penn Mutual Holding Company, at a special meeting of shareholders.

Share Exchange Ratio

Office of Thrift Supervision regulations provide that in a conversion from mutual holding company to stock holding company form, the public shareholders will be entitled to exchange their shares for common stock of the stock holding company, provided that the mutual holding company demonstrates to the satisfaction of the Office of Thrift Supervision that the basis for the exchange is fair and reasonable. Under the plan of conversion, each publicly held share of North Penn Bancorp common stock will, on the effective date of the conversion and offering, be converted automatically into and become the right to receive a number of new shares of New North Penn Bancorp common stock. The number of new shares of common stock will be determined pursuant to an exchange ratio that ensures that the public shareholders of North Penn Bancorp common stock will own approximately the same percentage of new common stock in New North Penn Bancorp after the conversion and offering as they held in North Penn Bancorp immediately before the conversion and offering, before giving effect to (1) the receipt of cash in lieu of fractional shares and (2) their purchase of additional shares in the offering. At June 1, 2007, there were 1,448,430 shares of North Penn Bancorp common stock outstanding, of which 670,015 were publicly held. The exchange ratio is not dependent on the market value of North Penn Bancorp common stock. It is calculated based on the percentage of North Penn Bancorp common stock held by the public, the appraisal of North Penn Bancorp prepared by RP Financial and the number of shares sold in the offering.

The following table shows how the exchange ratio will adjust, based on the number of shares sold in the offering. The table also shows how many shares an owner of 100 shares of North Penn Bancorp common stock would receive in the exchange, based on the number of shares sold in the offering.

	Shares to be Sold in the Offering			Shares to be Exchanged for Existing Shares of North Penn Bancorp			Total Shares of Common Stock to be	Exchange	Shares to be Received for 100 Existing
	Amount	Percent		Amount	Percent		Outstanding	Ratio	Shares (1)
Minimum	935,000	53.7	%	804,794	46.3	%	1,739,794	1.2012	120
Midpoint	1,100,000	53.7		946,817	46.3		2,046,817	1.4131	141
Maximum	1,265,000	53.7		1,088,839	46.3		2,353,839	1.6251	162
15% above Maximum	1,454,750	53.7		1,252,165	46.3		2,706,915	1.8689	186

(1) Cash will be paid instead of issuing any fractional shares.

Outstanding options to purchase shares of North Penn Bancorp common stock will be converted into and become options to purchase New North Penn Bancorp common stock. The number of shares of common stock to be received upon exercise of these options and the related exercise price will be adjusted for the exchange ratio. The aggregate exercise price, duration and vesting schedule of these options will not be affected. At June 1, 2007, there were 27,000 outstanding options to purchase North Penn Bancorp common stock, none of which was vested.

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Effects of Conversion on Deposits and Borrowers

General. Each depositor in North Penn Bank currently has both a deposit account in the institution and a pro rata ownership interest in the net worth of North Penn Mutual Holding Company based upon the balance in his or her account. However, this ownership interest is tied to the depositor’s account and has no value separate from such deposit account. Furthermore, this ownership interest may only be realized in the unlikely event that North Penn Mutual Holding Company is liquidated. In such event, the depositors of record at that time, as owners, would share pro rata in any residual surplus and reserves of North Penn Mutual Holding Company after other claims are paid. Any depositor who opens a deposit account at North Penn Bank obtains a pro rata ownership interest in the net worth of North Penn Mutual Holding Company without any additional payment beyond the amount of the deposit. A depositor who reduces or closes his or her account receives a portion or all of the balance in the account but nothing for his or her ownership interest in the net worth of North Penn Mutual Holding Company, which is lost to the extent that the balance in the account is reduced. When a mutual holding company converts to stock holding company form, depositors lose all rights to the net worth of the mutual holding company, except the right to claim a pro rata share of funds representing the liquidation account established in connection with the conversion.

Continuity. While the conversion and offering are being accomplished, the normal business of North Penn Bank will continue without interruption, including being regulated by the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation. After the conversion and offering, North Penn Bank will continue to provide services for depositors and borrowers under its current policies by its present management and staff.

The directors of North Penn Bank at the time of conversion will serve as directors of North Penn Bank after the conversion and offering. The board of directors of New North Penn Bancorp is composed of the individuals who serve on the board of directors of North Penn Bancorp. All officers of North Penn Bank at the time of conversion will retain their positions after the conversion and offering.

Deposit Accounts and Loans. The conversion and offering will not affect any deposit accounts or borrower relationships with North Penn Bank. All deposit accounts in North Penn Bank after the conversion and offering will continue to be insured up to the legal maximum by the Federal Deposit Insurance Corporation in the same manner as such deposit accounts were insured immediately before the conversion and offering. The conversion and offering will not change the interest rate or the maturity of deposits at North Penn Bank.

After the conversion and offering, all loans of North Penn Bank will retain the same status that they had before the conversion and offering. The amount, interest rate, maturity and security for each loan will remain as they were contractually fixed before the conversion and offering.

Effect on Liquidation Rights. If North Penn Mutual Holding Company were to liquidate, all claims of North Penn Mutual Holding Company’s creditors would be paid first. Thereafter, if there were any assets remaining, members of North Penn Mutual Holding Company would receive such remaining assets, pro rata, based upon the deposit balances in their deposit accounts at North Penn Bank immediately before liquidation. In the unlikely event that North Penn Bank were to liquidate after the conversion and offering, all claims of creditors (including those of depositors, to the extent of their deposit balances) also would be paid first, followed by distribution of the “liquidation account” to certain depositors (see “—Liquidation Rights” below), with any assets remaining thereafter distributed to New North Penn Bancorp as the holder of North Penn Bank’s capital stock.

Liquidation Rights

In the unlikely event of a complete liquidation of North Penn Mutual Holding Company before the conversion and offering, each depositor in North Penn Bank would receive a pro rata share of any assets of North Penn Mutual Holding Company remaining after payment of claims of all creditors. Each depositor’s pro rata share of the remaining assets would be in the same proportion as the value of his or her deposit account to the total value of all deposit accounts in North Penn Bank at the time of liquidation. In the event of a complete liquidation of North Penn Bank after the conversion and offering, each depositor would have a claim as a creditor of the same general priority as the claim of all other general creditors of North Penn Bank. However, except as described below, his or her claim would be solely in the amount of the balance in his or her deposit account plus accrued interest. He or she would not have an interest in the value of the assets or North Penn Bank or New North Penn Bancorp above that amount.

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The plan of conversion provides for the establishment, upon the completion of the conversion and offering, of a special “liquidation account” for the benefit of eligible account holders and supplemental eligible account holders in an amount equal to the greater of (1) North Penn Bank’s retained earnings of $7.7 million at September 30, 2004, the date of the latest statement of financial condition contained in the final prospectus used in the mutual holding company reorganization or (2) 53.7% of North Penn Bancorp’s total stockholders’ equity as reflected in its latest statement of financial condition contained in the final prospectus utilized in the offering. As of the date of this prospectus, the initial balance of the liquidation account would be approximately $____ million. Each eligible account holder and supplemental eligible account holder, if he or she were to continue to maintain his or her deposit account at North Penn Bank, would be entitled, upon a complete liquidation of North Penn Bank after the conversion and offering, to an interest in the liquidation account before any payment to New North Penn Bancorp as the sole shareholder of North Penn Bank. Each eligible account holder and supplemental eligible account holder would have an initial interest in such liquidation account for each deposit account, including passbook accounts, transaction accounts such as checking accounts, money market deposit accounts and certificates of deposit, held in North Penn Bank at the close of business on December 31, 2005 or June 30, 2007, as the case may be. Each eligible account holder and supplemental eligible account holder will have a pro rata interest in the total liquidation account for each of his or her deposit accounts based on the proportion that the balance of each such deposit account on the December 31, 2005 eligibility record date (or the June 30, 2007 supplemental eligibility record date, as the case may be) bore to the balance of all deposit accounts in North Penn Bank on such date.

If, however, on any December 31 annual closing date of North Penn Bank, commencing December 31, 2007, the amount in any deposit account is less than the amount in such deposit account on December 31, 2005 or June 30, 2007, as the case may be, or any other annual closing date, then the interest in the liquidation account relating to such deposit account would be reduced by the proportion of any such reduction, and such interest will cease to exist if such deposit account is closed. In addition, no interest in the liquidation account would ever be increased despite any subsequent increase in the related deposit account. Any assets remaining after the above liquidation rights of eligible account holders and supplemental eligible account holders are satisfied would be distributed to New North Penn Bancorp as the sole shareholder of North Penn Bank.

No merger, consolidation, bulk purchase of assets with assumptions of statement accounts and other liabilities or similar transactions with another federally insured institution in which North Penn Bank is not the surviving institution will be considered to be a complete liquidation. In any of these transactions, the liquidation account will be assumed by the surviving institution.

Subscription Offering and Subscription Rights

Under the plan of conversion, we have granted rights to subscribe for our common stock to the following persons in the following order of priority:

1. Persons with deposits in North Penn Bank with balances aggregating $50 or more (“qualifying deposits”) as of the close of business on December 31, 2005 (“eligible account holders”).

2. Our employee stock ownership plan.

3. Persons with qualifying deposits in North Penn Bank as of the close of business on June 30, 2007 (“supplemental eligible account holders”), other than our officers, directors and their associates.

4. Depositors of North Penn Bank as of the close of business on ____________, 2007, who are not eligible or supplemental eligible account holders (“other depositors”).

The amount of common stock that any person may purchase will depend on the availability of the common stock after satisfaction of all subscriptions having prior rights in the subscription offering and to the maximum and minimum purchase limitations set forth in the plan of conversion. See “—Limitations on Purchases of Shares.” All persons on a joint deposit account will be counted as a single subscriber for purposes of determining the maximum amount that may be subscribed for by owners of a joint deposit account.

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Priority 1: Eligible Account Holders. Subject to the purchase limitations as described below under “—Limitations on Purchases of Shares,” each eligible account holder has the right to subscribe for up to the greater of:

• $150,000 of common stock (which equals 15,000 shares);

• one-tenth of 1% of the total offering of common stock; or

• 15 times the product, rounded down to the next whole number, obtained by multiplying the total number of shares of common stock to be sold by a fraction of which the numerator is the amount of qualifying deposits of the eligible account holder and the denominator is the total amount of qualifying deposits of all eligible account holders. The balance of qualifying deposits of all eligible account holders was $_____ million.

If there are insufficient shares to satisfy all subscriptions by eligible account holders, shares first will be allocated so as to permit each subscribing eligible account holder, if possible, to purchase a number of shares sufficient to make the person’s total allocation equal 100 shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be allocated among the remaining subscribing eligible account holders whose subscriptions remain unfilled in the proportion that the amounts of their respective qualifying deposits bear to the total qualifying deposits of all remaining eligible account holders whose subscriptions remain unfilled. Subscription rights of eligible account holders who are also executive officers or directors of North Penn Bancorp or North Penn Bank or their associates will be subordinated to the subscription rights of other eligible account holders to the extent attributable to increased deposits in North Penn Bank in the one year period preceding December 31, 2005.

To ensure a proper allocation of stock, each eligible account holder must list on his or her stock order form all deposit accounts in which such eligible account holder had an ownership interest at December 31, 2005. Failure to list an account, or providing incorrect information, could result in the loss of all or part of a subscriber’s stock allocation.

Priority 2: Tax-Qualified Employee Benefit Plans. Subject to the purchase limitations as described below under “—Limitations on Purchases of Shares,” our tax-qualified employee benefit plans have the right to purchase up to 10% of the shares of common stock issued in the offering. As a tax-qualified employee benefit plan, our employee stock ownership plan intends to purchase 8.0% of the shares sold in the offering. Subscriptions by the employee stock ownership plan will not be aggregated with shares of common stock purchased by any other participants in the offering, including subscriptions by our officers and directors, for the purpose of applying the purchase limitations in the plan of conversion. If we increase the number of shares offered above the maximum of the offering range, the employee stock ownership plan will have a first priority right to purchase any shares exceeding that amount up to the amount of its subscription. If the plan’s subscription is not filled in its entirety due to oversubscription or by choice, the employee stock ownership plan may purchase shares after the offering in the open market or directly from us, with the approval of the Office of Thrift Supervision.

Priority 3: Supplemental Eligible Account Holders. Subject to the purchase limitations as described below under “—Limitations on Purchases of Shares,” each supplemental eligible account holder has the right to subscribe for up to the greater of:

• $150,000 of common stock (which equals 15,000 shares);

• one-tenth of 1% of the total offering of common stock; or

• 15 times the product, rounded down to the next whole number, obtained by multiplying the total number of shares of common stock to be sold by a fraction of which the numerator is the amount of qualifying deposits of the supplemental eligible account holder and the denominator is the total amount of qualifying deposits of all supplemental eligible account holders. The balance of qualifying deposits of all supplemental eligible account holders was $_____ million.

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If eligible account holders and the employee stock ownership plan subscribe for all of the shares being sold, no shares will be available for supplemental eligible account holders. If shares are available for supplemental eligible account holders but there are insufficient shares to satisfy all subscriptions by supplemental eligible account holders, shares first will be allocated so as to permit each subscribing supplemental eligible account holder, if possible, to purchase a number of shares sufficient to make the person’s total allocation equal 100 shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be allocated among the remaining subscribing supplemental eligible account holders whose subscriptions remain unfilled in the proportion that the amounts of their respective qualifying deposits bear to the total qualifying deposits of all remaining supplemental eligible account holders whose subscriptions remain unfilled.

To ensure a proper allocation of stock, each supplemental eligible account holder must list on his or her stock order form all deposit accounts in which such supplemental eligible account holder had an ownership interest at June 30, 2007. Failure to list an account, or providing incorrect information, could result in the loss of all or part of a subscriber’s stock allocation.

Priority 4: Other Depositors. Subject to the purchase limitations as described below under “—Limitations on Purchases of Shares,” each other depositor has the right to purchase up to the greater of $150,000 of common stock (which equals 15,000 shares) or one-tenth of 1% of the total offering of common stock. If eligible account holders, the employee stock ownership plan and supplemental eligible account holders subscribe for all of the shares being sold, no shares will be available for other depositors. If shares are available for other depositors but there are not sufficient shares to satisfy all subscriptions by other depositors, shares first will be allocated so as to permit each subscribing other depositor, if possible, to purchase a number of shares sufficient to make the person’s total allocation equal 100 shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be allocated among the remaining subscribing other depositors in the proportion that each other depositors’ subscription bears to the total subscriptions of all such subscribing other depositors whose subscriptions remain unfilled.

To ensure a proper allocation of stock, each other depositor must list on his or her stock order form all deposit accounts in which such other member had an ownership interest at __________, 2007. Failure to list an account or providing incorrect information could result in the loss of all or part of a subscriber’s stock allocation.

Expiration Date for the Subscription Offering. The subscription offering, and all subscription rights under the plan of conversion, will terminate at 12:00 Noon, Eastern time, on [DATE1], 2007. We will not accept orders for common stock in the subscription offering received after that time. We will make reasonable attempts to provide a prospectus and related offering materials to holders of subscription rights; however, all subscription rights will expire on the expiration date whether or not we have been able to locate each person entitled to subscription rights.

Office of Thrift Supervision regulations require that we complete the sale of common stock within 45 days after the close of the subscription offering. If the sale of the common stock is not completed by [DATE 2], 2007, all funds received will be returned promptly with interest calculated at North Penn Bank’s passbook savings rate and without deduction of any fees and all withdrawal authorizations will be canceled unless we receive approval of the Office of Thrift Supervision to extend the time for completing the offering. If regulatory approval of an extension of the time period has been granted, we will notify all subscribers of the duration of the extension, and subscribers will have the right to confirm, change or cancel their purchase orders. If we do not receive a response from a subscriber to any resolicitation, the subscriber’s order will be rescinded and all funds received will be returned promptly with interest, or withdrawal authorizations will be canceled. No single extension can exceed 90 days. The offering must be completed no later than 24 months after North Penn Bank’s depositors approve the plan of conversion.

Persons in Non-Qualified States. We will make reasonable efforts to comply with the securities laws of all states in the United States in which persons entitled to subscribe for stock under the plan of conversion reside. However, we are not required to offer stock in the subscription offering to any person who resides in a foreign country or who resides in a state of the United States in which (1) only a small number of persons otherwise eligible to subscribe for shares of common stock reside; (2) the granting of subscription rights or the offer or sale of shares to such person would require that we or our officers or directors register as a broker, dealer, salesman or selling agent under the securities laws of the state, or register or otherwise qualify the subscription rights or common stock for sale or qualify as a foreign corporation or file a consent to service of process; or (3) we determine that compliance with that state’s securities laws would be impracticable or unduly burdensome for reasons of cost or otherwise.

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Restrictions on Transfer of Subscription Rights and Shares. Subscription rights are nontransferable. You may not transfer, or enter into any agreement or understanding to transfer, the legal or beneficial ownership of your subscription rights issued under the plan of conversion or the shares of common stock to be issued upon exercise of your subscription rights. Your subscription rights may be exercised only by you and only for your own account. When registering your stock purchase on the order form, you should not add the name(s) of persons who have no subscription rights or who qualify in a lower purchase priority than you do. Doing so may jeopardize your subscription rights. If you exercise your subscription rights, you will be required to certify that you are purchasing shares solely for your own account and that you have no agreement or understanding regarding the sale or transfer of such shares. Federal regulations also prohibit any person from offering, or making an announcement of an offer or intent to make an offer, to purchase such subscription rights or a subscriber’s shares of common stock before the completion of the offering.

If you sell or otherwise transfer your rights to subscribe for common stock in the subscription offering or subscribe for common stock on behalf of another person, you may forfeit those rights and face possible further sanctions and penalties imposed by the Office of Thrift Supervision or another agency of the U.S. Government. Illegal transfers of subscription rights, including agreements made prior to completion of the offering to transfer shares after the offering, have been subject to enforcement actions by the Securities and Exchange Commission as violations of Rule 10b-5 of the Securities Exchange Act of 1934.

We intend to report to the Office of Thrift Supervision and the Securities and Exchange Commission anyone who we believe sells or gives away their subscription rights. We will pursue any and all legal and equitable remedies in the event we become aware of the transfer of subscription rights, and we will not honor orders that we believe involve the transfer of subscription rights.

Direct Community Offering

To the extent that shares remain available for purchase after satisfaction of all subscriptions received in the subscription offering, we may, in our discretion, offer shares to the general public in a direct community offering. In the direct community offering, preference will be given first to natural persons and trusts of natural persons who are residents of Lackawanna and Monroe Counties, Pennsylvania (“community residents”), second to shareholders of North Penn Bancorp as of                     , 2007 and finally to other members of the general public.

We will consider a person to be resident of a particular county if he or she occupies a dwelling in the county, has the intent to remain for a period of time, and manifests the genuineness of that intent by establishing an ongoing physical presence together with an indication that such presence is something other than merely transitory in nature. We may utilize depositor or loan records or other evidence provided to us to make a determination as to a person’s resident status. In all cases, the determination of residence status will be made by us in our sole discretion.

Purchasers in the direct community offering are eligible to purchase up to $150,000 of common stock (which equals 15,000 shares). If shares are available for community residents in the direct community offering but there are insufficient shares to satisfy all of their orders, the available shares will be allocated first to each community resident whose order we accept in an amount equal to the lesser of 100 shares or the number of shares ordered by each such subscriber, if possible. After that, unallocated shares will be allocated among the remaining community residents whose orders remain unsatisfied on an equal number of shares per order basis until all available shares have been allocated. If, after filling the orders of community residents in the direct community offering, shares are available for shareholders of North Penn Bancorp and/or the general public in the direct community offering but there are insufficient shares to satisfy all orders, shares will be allocated in the same manner as for community residents.

The direct community offering, if held, may commence concurrently with or subsequent to the subscription offering and will terminate no later than 45 days after the close of the subscription offering unless extended by us, with approval of the Office of Thrift Supervision. If we receive regulatory approval for an extension, all subscribers will be notified of the duration of the extension, and will have the right to confirm, change or cancel their orders. If we do not receive a response from a subscriber to any resolicitation, the subscriber’s order will be rescinded and all funds received will be promptly returned with interest.

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The opportunity to subscribe for shares of common stock in the direct community offering is subject to our right to reject orders, in whole or part, either at the time of receipt of an order or as soon as practicable following the expiration date of the offering. If your order is rejected in part, you will not have the right to cancel the remainder of your order.

Syndicated Community Offering or Underwritten Public Offering

The plan of conversion provides that, if necessary, all shares of common stock not purchased in the subscription offering and direct community offering may be offered for sale to the general public in a syndicated community offering to be managed by Ryan Beck & Co., Inc., acting as our agent. In such capacity, Ryan Beck & Co., Inc. may form a syndicate of other brokers-dealers who are NASD member firms. Alternatively, we may sell any remaining shares in an underwritten public offering. Neither Ryan Beck & Co., Inc. nor any registered broker-dealer will have any obligation to take or purchase any shares of the common stock in the syndicated community offering; however, Ryan Beck & Co., Inc. has agreed to use its best efforts in the sale of shares in any syndicated community offering. We have not selected any particular broker-dealers to participate in a syndicated community offering and will not do so until prior to the commencement of any syndicated community offering. The syndicated community offering would terminate no later than 45 days after the expiration of the subscription offering, unless extended by us, with approval of the Office of Thrift Supervision.

The opportunity to subscribe for shares of common stock in the syndicated community offering or underwritten public offering is subject to our right in our sole discretion to accept or reject orders, in whole or part, either at the time of receipt of an order or as soon as practicable following the expiration date of the offering. If your order is rejected in part, you will not have the right to cancel the remainder of your order.

Common stock sold in the syndicated community offering also will be sold at the $10.00 per share purchase price. Purchasers in the syndicated community offering are eligible to purchase up to $150,000 of common stock (which equals 15,000 shares). We may begin the syndicated community offering or underwritten public offering at any time following the commencement of the subscription offering.

Any syndicated community offering will be conducted in accordance with certain Securities and Exchange Commission rules applicable to best efforts offerings. Generally, under those rules, Ryan Beck & Co., Inc., as our broker-dealer, will deposit the funds it receives from interested investors prior to closing into a separate non-interest bearing account. If and when all the conditions for closing are met, funds for shares of common stock sold by the broker-dealer in the syndicated community offering, less the broker-dealer’s commissions, will be promptly delivered to us. If the offering closes, but some or all of an interested investor’s funds are not accepted by us, those funds will be returned to the interested investor promptly after the closing, without interest. If the offering does not close, funds in the account will be promptly returned, without interest, to the potential investor. Normal customer ticketing will be used for order placement. Order forms will not be used.

If we are unable to find purchasers from the general public to reach the minimum of the offering range, we will make other purchase arrangements, if feasible. Other purchase arrangements must be approved by the Office of Thrift Supervision and may provide for purchases for investment purposes by directors, officers, their associates and other persons in excess of the limitations provided in the plan of conversion and in excess of the proposed director and executive officer purchases discussed earlier, although no such purchases are currently intended. If other purchase arrangements cannot be made, we may either: terminate the offering and promptly return all funds; promptly return all funds, set a new offering range and give all subscribers the opportunity to place a new order for shares of New North Penn Bancorp common stock; or take such other actions as may be permitted by the Office of Thrift Supervision and the Securities and Exchange Commission.

Limitations on Purchases of Shares

In addition to the purchase limitations described above under “—Subscription Offering and Subscription Rights,” “—Direct Community Offering” and “—Syndicated Community Offering or Underwritten Public Offering,” the plan of conversion provides for the following purchase limitations:

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• No individual (or individuals exercising subscription rights through a single qualifying deposit account held jointly) may purchase more than $150,000 of common stock (which equals 15,000 shares), subject to increase as described below.

• Except for our tax-qualified employee benefit plans, no person together with associates of , or persons acting in concert with, such person may purchase in the aggregate more than $300,000 of common stock (which equals 30,000 shares), subject to increase as described below.

• Each subscriber must subscribe for a minimum of 25 shares.

• Our directors and executive officers, together with their associates, may purchase in the aggregate up to 33% of the common stock sold in the offering.

We may, in our sole discretion, increase the individual and/or aggregate purchase limitation to up to 5% of the shares of common stock sold in the offering. We do not intend to increase the maximum purchase limitation unless market conditions warrant. If we decide to increase the purchase limitations, persons who subscribed for the maximum number of shares of common stock will be given the opportunity to increase their subscriptions accordingly, subject to the rights and preferences of any person who has priority subscription rights. We, in our discretion, also may give other large subscribers the right to increase their subscriptions.

In the event that we increase the maximum purchase limitation to 5% of the shares of common stock sold in the offering, we may further increase the maximum purchase limitation to 9.99%, provided that orders for common stock exceeding 5% of the shares of common stock sold in the offering may not exceed in the aggregate 10% of the total shares of common stock sold in the offering.

The plan of conversion defines “acting in concert” to mean knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not by an express agreement or understanding; or a combination or pooling of voting or other interests in the securities of an issuer for a common purpose under any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. In general, a person who acts in concert with another party will also be deemed to be acting in concert with any person who is also acting in concert with that other party. We may presume that certain persons are acting in concert based upon, among other things, joint account relationships and the fact that persons reside at the same address or may have filed joint Schedules 13D or 13G with the Securities and Exchange Commission with respect to other companies. For purposes of the plan of conversion, our directors are not deemed to be acting in concert solely by reason of their board membership.

The plan of conversion defines “associate,” with respect to a particular person, to mean:

• a corporation or organization other than North Penn Mutual Holding Company, North Penn Bancorp or North Penn Bank or a majority-owned subsidiary of North Penn Mutual Holding Company, North Penn Bancorp or North Penn Bank of which a person is a senior officer or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities of such corporation or organization;

• a trust or other estate in which a person has a substantial beneficial interest or as to which a person serves as a trustee or a fiduciary; and

• any person who is related by blood or marriage to such person and who lives in the same home as such person or who is a director or senior officer of North Penn Mutual Holding Company, North Penn Bancorp or North Penn Bank or any of their subsidiaries.

For example, a corporation of which a person serves as an officer would be an associate of that person and, therefore, all shares purchased by the corporation would be included with the number of shares that the person could purchase individually under the purchase limitations described above. We have the right in our sole discretion to reject any order submitted by a person whose representations we believe to be false or who we otherwise believe, either alone or acting in concert with others, is violating or circumventing, or intends to violate or circumvent, the

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terms and conditions of the plan of conversion. Directors and officers are not treated as associates of each other solely by virtue of holding such positions. We have the sole discretion to determine whether prospective purchasers are “associates” or “acting in concert.”

Marketing Arrangements

Offering materials have been initially distributed through mailings to those eligible to subscribe in the subscription offering. To assist in the marketing of our common stock, we have retained Ryan Beck & Co., Inc., which is a broker-dealer registered with the National Association of Securities Dealers, Inc. Ryan Beck & Co., Inc. will assist us in the offering by:

• Acting as our financial advisor for the offering;

• Providing administrative services and managing the Stock Information Center;

• Educating our employees about the offering;

• Targeting our sales efforts, including assisting in the preparation of marketing materials; and

• Soliciting orders for common stock; and

• Soliciting proxy votes of North Penn Bank’s voting depositors.

For these services, Ryan Beck & Co., Inc. will receive a fee equal to the greater of $160,000 or 1.0% of the aggregate purchase price of the shares sold in the subscription and direct community offerings, except that no fee will be paid with respect to shares purchased by the employee stock ownership plan or by officers, directors and employees or members of their immediate families. In the event that Ryan Beck & Co., Inc. sells common stock through a group of broker-dealers in a syndicated community offering, it will be paid a fee equal to 1.0% of the dollar amount of total shares sold in the syndicated community offering, which fee along with the fee payable to selected dealers (which may include Ryan Beck & Co., Inc. for the shares it sells) for the shares they sell shall not exceed 6.0% of the aggregate dollar amount of shares sold in the syndicated offering. In the subscription and direct community offerings, Ryan Beck & Co., Inc. will also be reimbursed for its allocable expenses in an amount not to exceed $15,000 and for its legal fees in an amount not to exceed $35,000. In the event that there is a resolicitation of subscribers, Ryan Beck & Co., Inc. may be required to provide significant additional services for which they may charge an additional administrative fee.

We will indemnify Ryan Beck & Co., Inc. against liabilities and expenses, including legal fees, incurred in connection with certain claims or litigation arising out of or based upon untrue statements or omissions contained in the offering materials for the common stock, including liabilities under the Securities Act of 1933, as amended.

Description of Sales Activities

New North Penn Bancorp will offer the common stock in the subscription offering and direct community offering principally by the distribution of this prospectus and through activities conducted at our Stock Information Center. The Stock Information Center, which will be managed by employees of Ryan Beck & Co., Inc., is expected to operate throughout the offering period. Employees of Ryan Beck & Co., Inc. will be responsible for responding to questions regarding the offering and will manage the administrative functions of the Stock Information Center, such as mailing materials relating to the offering and processing stock orders.

Sales of common stock will be made by registered representatives affiliated with Ryan Beck & Co., Inc. or by the selected dealers managed by Ryan Beck & Co., Inc. North Penn Bank’s officers and employees may participate in the offering in clerical capacities, providing administrative support in effecting sales transactions or, when permitted by state securities laws, answering questions of a mechanical nature relating to the proper execution of the order form. North Penn Bank’s officers may answer questions regarding our business when permitted by state securities laws. Other questions of prospective purchasers, including questions as to the advisability or nature of the investment, will be directed to registered representatives. North Penn Bank’s officers and employees have been instructed not to solicit offers to purchase common stock or provide advice regarding the purchase of common stock.

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None of North Penn Bank’s officers, directors or employees will be compensated, directly or indirectly, for any activities in connection with the offer or sale of securities issued in the offering.

None of North Penn Bank’s personnel participating in the offering is registered or licensed as a broker or dealer or an agent of a broker or dealer. North Penn Bank’s personnel will assist in the above-described sales activities under an exemption from registration as a broker or dealer provided by Rule 3a4-1 promulgated under the Securities Exchange Act of 1934. Rule 3a4-1 generally provides that an “associated person of an issuer” of securities will not be deemed a broker solely by reason of participation in the sale of securities of the issuer if the associated person meets certain conditions. These conditions include, but are not limited to, that the associated person participating in the sale of an issuer’s securities not be compensated in connection with the offering at the time of participation, that the person not be associated with a broker or dealer and that the person observe certain limitations on his or her participation in the sale of securities. For purposes of this exemption, “associated person of an issuer” is defined to include any person who is a director, officer or employee of the issuer or a company that controls, is controlled by or is under common control with the issuer.

Procedure for Purchasing Shares in the Subscription and Direct Community Offerings

Prospectus Delivery. To ensure that each purchaser receives a prospectus at least 48 hours before the expiration date of the offering in accordance with Rule 15c2-8 of the Securities Exchange Act of 1934, we may not mail a prospectus any later than five days prior to the expiration date or hand deliver a prospectus any later than two days prior to that date. We are not obligated to deliver a prospectus or order form by means other than U.S. Mail. Execution of an order form will confirm receipt of delivery of a prospectus in accordance with Rule 15c2-8. Stock order forms will be distributed only if preceded or accompanied by a prospectus.

Termination of Offering; Rejection of Orders. We reserve the right in our sole discretion to terminate the offering at any time and for any reason, in which case we will cancel any deposit account withdrawal holds and promptly return all funds submitted, with interest calculated at North Penn Bank’s passbook savings rate from the date of receipt.

We have the right to reject any order submitted in the offering by a person who we believe is making false representations or who we otherwise believe, either alone or acting in concert with others, is violating, evading, circumventing, or intends to violate, evade or circumvent the terms and conditions of the plan of conversion.

Use of Order Forms. In order to purchase shares of common stock in the subscription offering and direct community offering, you must submit a properly completed and signed original stock order form. We will not be required to accept orders submitted on photocopied or facsimiled stock order forms. All order forms must be received by our Stock Information Center (not postmarked) prior to 12:00 Noon Eastern time on [DATE1], 2007. Your order form must be accompanied by full payment for all of the shares subscribed for or include appropriate authorization on the order form for withdrawal of payment from the types of North Penn Bank deposit accounts provided for. You may submit your order form and payment in one of three ways: by mail using the order reply envelope provided; by overnight delivery to the indicated address noted on the form; or by hand delivery to the Stock Information Center located at our main office in Scranton. Order forms may not be delivered to any other office of North Penn Bank. Our interpretation of the terms and conditions of the plan of conversion and of the acceptability of the order forms will be final.

We need not accept order forms that are received after the expiration of the subscription offering or direct community offering, as the case may be, or that are executed defectively or that are received without full payment or without appropriate withdrawal instructions. We have the right to waive or permit the correction of incomplete or improperly executed order forms, but do not represent that we will do so. Once received, an executed order form may not be modified, amended or rescinded without our consent unless the offering has not been completed within 45 days after the end of the subscription offering.

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To ensure that your stock purchase eligibility and priority are properly identified, you must list all qualifying deposit accounts on the order form, giving all names in each account and the account number. We will strive to identify your ownership in all accounts, but cannot guarantee we will identify all accounts in which you have an ownership interest. When entering the stock registration on your stock order form, you should not add the name(s) of persons without subscription rights, or who qualify in a lower purchase priority than you.

By executing the stock order form, you will be certifying that you received this prospectus and acknowledging that the common stock is not a deposit account and is not insured or guaranteed by the federal government. You also will be acknowledging that you received disclosure concerning the risks involved in the offering. The acknowledgment could be used as support to show that you understand the nature of this investment.

Payment for Shares. Payment for all shares of common stock will be required to accompany all completed order forms for the purchase to be valid. Payment for shares may be made only by:

• Personal check, bank check or money order made payable directly to “New North Penn Bancorp, Inc.” (you may not remit North Penn Bank line of credit checks, and we will not accept wire transfers or third party checks, including those payable to you and endorsed over to New North Penn Bancorp); or

• Authorization of withdrawal from the types of North Penn Bank deposit account(s) provided for on the stock order form.

Checks and money orders will be cashed immediately and the subscription funds will be held by North Penn Bank or, at our discretion, in an escrow account at an independent insured depository institution. Interest will be paid on payments made by check or money order at our passbook savings rate from the date payment is received at the Stock Information Center until the completion or termination of the offering.

If payment is made by authorization of withdrawal from deposit accounts, the funds authorized to be withdrawn from a deposit account will continue to accrue interest at the contractual rate until completion or termination of the offering, unless the certificate matures after the date of receipt of the order form but before closing or termination of the offering, in which case funds will earn interest at the passbook savings rate from the date of maturity until the offering is completed or terminated. For authorized withdrawals, a hold will be placed on the funds, making them unavailable to the depositor during the offering. When the offering is completed, the funds will be withdrawn and used to purchase the shares of common stock ordered.

The shares of common stock issued in the offering cannot and will not be insured by the Federal Deposit Insurance Corporation or any other government agency. If the offering is not consummated for any reason, all funds submitted will be promptly refunded with interest as described above.

If a subscriber authorizes us to withdraw the amount of the purchase price from his or her deposit account, we will do so as of the completion of the offering, though the account must contain the full amount necessary for payment at the time the subscription order is received. On your stock order form, please do not designate a withdrawal from accounts with check-writing privileges. Please submit a check instead. We will waive any applicable penalties for early withdrawal from certificate of deposit accounts. If the remaining balance in a certificate account is reduced below the applicable minimum balance requirement at the time funds are actually withdrawn, the certificate will be canceled at the time of the withdrawal, without penalty, and the remaining balance will earn interest at our passbook savings rate. You may not authorize direct withdrawal from a North Penn Bank IRA. If you wish to use funds in your North Penn Bank IRA to purchase shares of our common stock, please refer to the following section.

The employee stock ownership plan will not be required to pay for shares at the time it subscribes, but rather may pay for shares upon the completion of the offering; provided that there is in force, from the time of its subscription until the completion of the offering, a loan commitment from an unrelated financial institution or from us to lend to the employee stock ownership plan, at that time, the aggregate purchase price of the shares for which it subscribed.

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We may, in our sole discretion, permit institutional investors to submit irrevocable orders together with a legally binding commitment for payment and to thereafter pay for such shares of common stock for which they subscribe in the direct community offering at any time prior to the 48 hours before the completion of the offering. This payment may be made by wire transfer.

Using IRA Funds To Purchase Shares. A depositor interested in using funds in his or her individual retirement accounts (IRAs) at North Penn Bank to purchase common stock must do so through a self-directed IRA. Since we do not offer those accounts, we will allow a depositor to make a trustee-to-trustee transfer of funds in a North Penn Bank IRA to a trustee offering a self-directed IRA program. There will be no early withdrawal or Internal Revenue Service interest penalties for such transfers. The new trustee would hold the common stock in a self-directed account in the same manner as we now hold the depositor’s IRA funds. An annual administrative fee may be payable to the new trustee. Depositors interested in using funds in a North Penn Bank IRA or any other IRA to purchase common stock should contact the Stock Information Center for assistance at least two weeks before the [DATE1], 2007 offering expiration date because processing such transactions takes additional time. Whether or not you may use retirement funds for the purchase of shares in the offering depends on timing constraints and, possibly, limitations imposed by the institution where the funds are held.

How We Determined the Offering Range and the $10.00 Purchase Price

Federal regulations require that the aggregate purchase price of the securities sold in connection with the offering be based upon our estimated pro forma value as converted (i.e., taking into account the expected receipt of proceeds from the sale of securities in the offering), as determined by an appraisal by an independent person experienced and expert in corporate appraisal. We have retained RP Financial, LC., which is experienced in the evaluation and appraisal of business entities, to prepare the appraisal. RP Financial will receive fees totaling $27,000 for its appraisal report, plus $3,000 for each appraisal update (of which there will be at least one) and reasonable out-of-pocket expenses. We have agreed to indemnify RP Financial under certain circumstances against liabilities and expenses, including legal fees, arising out of, related to, or based upon the offering. RP Financial has not received any other compensation from us in the past two years.

RP Financial prepared the appraisal taking into account the pro forma impact of the offering. For its analysis, RP Financial undertook substantial investigations to learn about our business and operations. We supplied financial information, including annual financial statements, information on the composition of assets and liabilities, and other financial schedules. In addition to this information, RP Financial reviewed our conversion application as filed with the Office of Thrift Supervision and our registration statement as filed with the Securities and Exchange Commission. Furthermore, RP Financial visited our facilities and had discussions with our management. RP Financial did not perform a detailed individual analysis of the separate components of our assets and liabilities. We did not impose any limitations on RP Financial in connection with its appraisal.

In connection with its appraisal, RP Financial reviewed the following factors, among others:

• the economic make-up of our primary market area;

• our financial performance and condition in relation to publicly traded, fully converted financial institution holding companies that RP Financial deemed comparable to us;

• the specific terms of the offering of our common stock;

• the pro forma impact of the additional capital raised in the offering;

• our proposed dividend policy;

• conditions of securities markets in general; and

• the market for thrift institution common stock in particular.

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RP Financial’s independent valuation also utilized certain assumptions as to the pro forma earnings of New North Penn Bancorp after the offering. These assumptions included estimated expenses, an assumed after-tax rate of return on the net offering proceeds, and expenses related to the stock-based benefit plans of New North Penn Bancorp, including the employee stock ownership plan and the new equity incentive plan. The employee stock ownership plan and new equity incentive plan are assumed to purchase 8.0% and 4.0%, respectively, of the shares of New North Penn Bancorp common stock sold in the offering. The new equity incentive plan is assumed to grant options to purchase the equivalent of 10.0% of the shares of New North Penn Bancorp common stock sold in the offering. See “Pro Forma Data” for additional information concerning these assumptions. The use of different assumptions may yield different results.

Consistent with Office of Thrift Supervision appraisal guidelines, the RP Financial applied three primary methodologies to estimate the pro forma market value of our common stock: the pro forma price-to-book value approach applied to both reported book value and tangible book value; the pro forma price-to-earnings approach applied to reported and estimated core earnings; and the pro forma price-to-assets approach. The market value ratios applied in the three methodologies were based upon the current market valuations of a peer group of companies considered by RP Financial to be comparable to us, subject to valuation adjustments applied by RP Financial to account for differences between North Penn Bancorp and the peer group. The peer group is comprised of publicly-traded thrifts all selected based on asset size, market area and operating strategy. In preparing its appraisal, RP Financial placed emphasis on the price-to-earnings and the price-to-book approaches and placed lesser emphasis on the price-to-assets approaches in estimating pro forma market value. The peer group consisted of ten publicly traded, fully converted, financial institution holding companies based in the mid-Atlantic region of the United States. The peer group included companies with:

• average assets of $448 million;

• average non-performing assets of 0.30% of total assets;

• average loans of 61.2% of total assets;

• average equity of 12.5% of total assets; and

• average core income of 0.59% of average assets.

RP Financial prepared a valuation dated May 18, 2007. RP Financial has advised us that, as of May 18, 2007, the estimated pro forma market value, or valuation range, of our common stock, including shares sold in the offering and exchange shares, ranged from a minimum of $17.4 million to a maximum of $23.5 million, with a midpoint of $20.5 million. The aggregate offering price of the shares of common stock will be equal to the valuation range multiplied by the 53.7% ownership interest that North Penn Mutual Holding Company has in North Penn Bancorp. The number of shares offered will be equal to the aggregate offering price divided by the price per share. Based on the valuation range, the percentage of North Penn Bancorp common stock owned by North Penn Mutual Holding Company and the $10.00 price per share, the minimum of the offering range is 935,000 shares, the midpoint of the offering range is 1,100,000 shares, the maximum of the offering range is 1,265,000 shares and 15% above the maximum of the offering range is 1,454,750 shares. RP Financial will update its independent valuation before we complete our offering.

The following table presents a summary of selected pricing ratios for the peer group companies and for all publicly traded thrifts and the resulting pricing ratios for New North Penn Bancorp reflecting the pro forma impact of the offering, as calculated in the table in the section of this prospectus entitled “Pro Forma Data.” Compared to the average pricing ratios of the peer group, North Penn Bancorp’s pro forma pricing ratios at the maximum of the offering range indicated a premium of 126% on a price-to-earnings basis, a discount of 20% on a price-to-book value basis and a discount of 22% on a price-to-tangible book value basis.

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	Price to Earnings Multiple(1)	Price to Book Value Ratio		Price to Tangible Book Value Ratio
North Penn Bancorp (pro forma) (2):
Minimum	35.71x	83.75	%	83.75	%
Midpoint	35.71x	92.17	%	92.17	%
Maximum	41.67x	99.40	%	99.40	%
Maximum, as adjusted	41.67x	106.84	%	106.84	%
Peer Group (3):
Average	18.46x	124.63	%	126.85	%
Median	16.04x	127.12	%	127.72	%
All fully-converted, publicly-traded thrifts (3):
Average	20.54x	142.65	%	160.45	%
Median	18.40x	132.01	%	150.70	%

(1) Multiples calculated by RP Financial in its appraisal report are based on an estimate of core, or recurring, earnings for the twelve months ended March 31, 2007, total pro forma outstanding shares of common stock, including all shares owned by our employee stock ownership plan, whether or not allocated to participants, and equal 53.34x, 59.12x, 64.25x and 69.53x, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range. Because this is a different method than used in calculating the numbers included in the table and in the pro forma information included under “Pro Forma Data,” the pro forma price-to-earnings multiples in the table do not correspond to the multiples in the appraisal. See note 1 to the pro forma information under “Pro Forma Data” for more information on our treatment of shares owned by our employee stock ownership plan for purposes of this calculation.

(2) Based on North Penn Bancorp financial data as for and the three months ended March 31, 2007. Price-to-earnings multiples for New North Penn Bancorp are shown on an annualized basis.

(3) Based on earnings for the twelve months ended March 31, 2007 and book value and tangible book value as of March 31, 2007.

Our board of directors reviewed RP Financial’s appraisal report, including the methodology and the assumptions used by RP Financial, and determined that the offering range was reasonable and adequate. Our board of directors has decided to offer the shares for a price of $10.00 per share. The purchase price of $10.00 per share was determined by us, taking into account, among other factors, the requirement under Office of Thrift Supervision regulations that the common stock be offered in a manner that will achieve the widest distribution of the stock and desired liquidity in the common stock after the offering. Our board of directors also established the formula for determining the exchange ratio. Based upon such formula and the offering range, the exchange ratio ranged from a minimum of 1.2012 to a maximum of 1.6251 shares of New North Penn Bancorp common stock for each current share of North Penn Bancorp common stock, with a midpoint of 1.4131. Based upon this exchange ratio, we expect to issue between 804,794 and 1,088,839 shares of New North Penn Bancorp common stock to the holders of North Penn Bancorp common stock outstanding immediately prior to the completion of the conversion and offering.

Since the outcome of the offering relates in large measure to market conditions at the time of sale, it is not possible for us to determine the exact number of shares that we will issue at this time. The offering range may be amended, with the approval of the Office of Thrift Supervision, if necessitated by developments following the date of the appraisal in, among other things, market conditions, our financial condition or operating results, regulatory guidelines or national or local economic conditions.

If, upon completion of the subscription offering, at least the minimum number of shares are subscribed for, RP Financial, after taking into account factors similar to those involved in its prior appraisal, will determine its estimate of our pro forma market value as of the close of the subscription offering. If, as a result of regulatory considerations, demand for the shares or changes in market conditions, RP Financial determines that our pro forma market value has increased, we may sell up to 1,454,750 shares without any further notice to you.

No shares will be sold unless RP Financial confirms that, to the best of its knowledge and judgment, nothing of a material nature has occurred that would cause it to conclude that the actual total purchase price of the shares on an aggregate basis was materially incompatible with its appraisal. If, however, the facts do not justify that statement, a new offering range may be set, in which case all funds would be promptly returned and all subscribers would be given the opportunity to place a new order. If the offering is terminated, all subscriptions will be cancelled and subscription funds will be returned promptly with interest, and holds on funds

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authorized for withdrawal from deposit accounts will be released. If RP Financial establishes a new valuation range, it must be approved by the Office of Thrift Supervision.

In formulating its appraisal, RP Financial relied upon the truthfulness, accuracy and completeness of all documents we furnished to it. RP Financial also considered financial and other information from regulatory agencies, other financial institutions, and other public sources, as appropriate. While RP Financial believes this information to be reliable, RP Financial does not guarantee the accuracy or completeness of the information and did not independently verify the financial statements and other data provided by us or independently value our assets or liabilities. The appraisal is not intended to be, and must not be interpreted as, a recommendation of any kind as to the advisability of purchasing shares of common stock. Moreover, because the appraisal must be based on many factors that change periodically, there is no assurance that purchasers of shares in the offering will be able to sell shares after the offering at prices at or above the purchase price.

Copies of the appraisal report of RP Financial, including any amendments to the report, and the detailed memorandum of the appraiser setting forth the method and assumptions for such appraisal are available for inspection at our main office and the other locations specified under “Where You Can Find More Information.”

Delivery of Certificates

A certificate representing the common stock purchased in the offering will be mailed by our transfer agent to the address designated by the subscriber on the stock order form as soon as practicable following completion of the conversion and offering. Our transfer agent will hold certificates returned as undeliverable until claimed by the persons legally entitled to the certificates or otherwise disposed of in accordance with applicable law. Until certificates for common stock are available and delivered to subscribers, subscribers may not be able to sell their shares, even though trading of the common stock will have commenced.

Stock Information Center

If you have any questions regarding the conversion and offering, please call or visit our Stock Information Center, located at our main office in Scranton. Only this location will accept stock order forms and proxy cards and have supplies of offering materials. The toll-free telephone number is (__) _______. The Stock Information Center is open Monday through Friday from 10:00 a.m. to 4:00 p.m., Eastern time, except for bank holidays.

Restrictions on Repurchase of Stock

Under Office of Thrift Supervision regulations, for a period of one year from the date of the completion of the offering we may not repurchase any of our common stock from any person, except (1) in an offer made to all shareholders to repurchase the common stock on a pro rata basis, approved by the Office of Thrift Supervision, (2) the repurchase of qualifying shares of a director, or (3) repurchases to fund restricted stock plans or tax-qualified employee stock benefit plans. Where extraordinary circumstances exist, the Office of Thrift Supervision may approve the open market repurchase of up to 5% of our common stock during the first year following the conversion and offering. To receive such approval, we must establish compelling and valid business purposes for the repurchase to the satisfaction of the Office of Thrift Supervision. If any options previously granted under the 2006 Omnibus Stock Option Plan are exercised during the first year following the conversion and offering, they will be funded with newly issued shares, as the Office of Thrift Supervision does not view pre-existing stock options as an extraordinary circumstance or compelling business purpose for a stock repurchase in the first year after conversion.

Restrictions on Transfer of Shares Applicable to Officers and Directors

Common stock purchased in the offering will be freely transferable, except for shares purchased by our directors and executive officers.

Shares of common stock purchased by our directors and executive officers may not be sold for a period of one year following the offering, except upon the death of the shareholder or unless approved by the Office of Thrift Supervision. Shares purchased by these persons in the open market after the offering will be free of this restriction. Shares of common stock issued to directors and executive officers and their associates will bear a legend giving

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appropriate notice of the restriction and, in addition, we will give appropriate instructions to our transfer agent with respect to the restriction on transfers. Any shares issued to directors and executive officers as a stock dividend, stock split or otherwise with respect to restricted common stock will be similarly restricted.

Persons affiliated with us, including our directors and executive officers, received subscription rights based only on their accounts with North Penn Bank as account holders. While this aspect of the offering makes it difficult, if not impossible, for insiders to purchase stock for the explicit purpose of meeting the minimum of the offering, any purchases made by persons affiliated with us for the explicit purpose of meeting the minimum of the offering must be made for investment purposes only, and not with a view towards redistribution. Furthermore, as set forth above, Office of Thrift Supervision regulations restrict sales of common stock purchased in the offering by directors and executive officers for a period of one year following the offering.

Purchases of outstanding shares of our common stock by directors, officers, or any person who becomes an executive officer or director after adoption of the plan of conversion, and their associates, during the three-year period following the offering may be made only through a broker or dealer registered with the Securities and Exchange Commission, except with the prior written approval of the Office of Thrift Supervision. This restriction does not apply, however, to negotiated transactions involving more than 1% of our outstanding common stock or to the purchase of stock under stock benefit plans.

We have filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 for the registration of the common stock to be issued in the offering. This registration does not cover the resale of the shares. Shares of common stock purchased by persons who are not affiliates of us may be resold without registration. Shares purchased by an affiliate of us will have resale restrictions under Rule 144 of the Securities Act. If we meet the current public information requirements of Rule 144, each affiliate of ours who complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of certain other persons, would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of our outstanding shares or the average weekly volume of trading in the shares during the preceding four calendar weeks. We may make future provision to permit affiliates to have their shares registered for sale under the Securities Act under certain circumstances.

Material Income Tax Consequences

Although the conversion may be effected in any manner approved by the Office of Thrift Supervision that is consistent with the purposes of the plan of conversion and applicable law, regulations and policies, it is intended that the conversion will be effected through various mergers. Completion of the conversion and offering is conditioned upon prior receipt of either a ruling or an opinion of counsel with respect to federal tax laws, and either a ruling or an opinion with respect to Pennsylvania tax laws, that no gain or loss will be recognized by North Penn Bank, North Penn Bancorp or North Penn Mutual Holding Company as a result of the conversion or by account holders receiving subscription rights, except to the extent, if any, that subscription rights are deemed to have fair market value on the date such rights are issued. We believe that the tax opinions summarized below address all material federal income tax consequences that are generally applicable to North Penn Bank, North Penn Bancorp, North Penn Mutual Holding Company, New North Penn Bancorp, persons receiving subscription rights and shareholders of North Penn Bancorp.

Muldoon Murphy & Aguggia LLP has issued an opinion to North Penn Bancorp, North Penn Mutual Holding Company and New North Penn Bancorp that, for federal income tax purposes:

1. the adoption of a federal charter by North Penn Mutual Holding Company through the merger with and into a federal mutual holding company will qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code, and no gain or loss will be recognized by the North Penn Mutual Holding Company or the interim federal mutual holding company by reason of such merger;

2. adoption of a federal charter by North Penn Bancorp through the merger with and into a federal mid-tier holding company will qualify as a reorganization within the meaning of Section

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368(a)(1)(A) of the Internal Revenue Code, and no gain or loss will be recognized by the Mid-Tier Holding Company or the interim federal mid-tier holding company by reason of such merger;

3. the conversion of North Penn Mutual Holding Company from mutual form to a federal interim stock savings association (“interim association 1”) will qualify as a reorganization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code, and no gain or loss will be recognized by North Penn Mutual Holding Company by reason of such conversion;

4. the merger of interim association 1 with and into North Penn Bank will qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code, and no gain or loss will be recognized by North Penn Mutual Holding Company or North Penn Bank by reason of such merger;

5. the conversion of North Penn Bancorp to a federal interim stock savings association (“interim association 2”) will qualify as a reorganization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code, and no gain or loss will be recognized by North Penn Bancorp by reason of such conversion;

6. the merger of interim association 2 with and into North Penn Bank will qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code, and no gain or loss will be recognized by North Penn Bancorp or North Penn Bank by reason of such merger;

7. the merger of an interim federal stock savings association formed as a wholly owned subsidiary of New North Penn Bancorp (“interim association 3”) with and into North Penn Bank (the “bank merger”) will qualify either as a reorganization within the meaning of Section 368(a)(2)(E) of the Internal Revenue Code or as an exchange under Section 351 of the Internal Revenue Code, and no gain or loss will be recognized by interim association 3, North Penn Bank or New North Penn Bancorp by reason of the bank merger;

8. no gain or loss will be recognized by the current shareholders of North Penn Bancorp upon the receipt of shares of common stock of New North Penn Bancorp pursuant to the bank merger, except to the extent of any cash received in lieu of a fractional share interest in New North Penn Bancorp;

9. the aggregate tax basis of the shares of New North Penn Bancorp common stock to be received by the current shareholders of North Penn Bancorp will be the same as the aggregate tax basis of the North Penn Bancorp common stock surrendered in exchange therefore reduced by any amount allocable to a fractional share interest in North Penn Bancorp for which cash is received;

10. the holding period of the shares of New North Penn Bancorp common stock to be received by the current shareholders of North Penn Bancorp will include the holding period of the shares of North Penn Bancorp common stock, provided that North Penn Bancorp common stock was held as a capital asset on the date of the bank merger;

11. a holder of shares of North Penn Bancorp common stock who receives cash in lieu of a fractional share of New North Penn Bancorp common stock will recognize gain or loss equal to the difference between the amount of cash received and the portion of such holder’s tax basis of the shares of North Penn Bancorp allocable to the fractional share; such gain or loss will be capital gain or loss if such shares were held as a capital asset as of the date of the bank merger, and will be long-term capital gain or loss if such holder’s holding period in the shares of North Penn Bancorp common stock is more than one year on the date of the bank merger;

12. no gain or loss will be recognized by New North Penn Bancorp upon the sale of shares of common stock in the offering;

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13. no gain or loss will be recognized by depositors of North Penn Bank upon the issuance to them of interests in the liquidation account in North Penn Bank pursuant to the merger of interim association 3 into North Penn Bank;

14. it is more likely than not that the fair market value of the non-transferable subscription rights to purchase shares of common stock of New North Penn Bancorp to be issued to eligible account holders, supplemental eligible account holders and other depositors is zero and, accordingly, that no income will be recognized by eligible account holders, supplemental eligible account holders and other depositors upon the issuance to them of the subscription rights or upon the exercise of the subscription rights;

15. it is more likely than not that the tax basis to the holders of shares of common stock purchased in the offering pursuant to the exercise of the subscription rights will be the amount paid therefor, and that the holding period for such shares of common stock will begin on the date of completion of the offering.

The statements set forth in paragraphs (14) and (15) above are based on the position that the subscription rights do not have any market value at the time of distribution or at the time they are exercised. Whether subscription rights have a market value for federal income tax purposes is a question of fact, depending upon all relevant facts and circumstances. According to our counsel, the Internal Revenue Service will not issue rulings on whether subscription rights have a market value. Counsel has also advised us that they are unaware of any instance in which the Internal Revenue Service has taken the position that nontransferable subscription rights have a market value. Counsel also noted that the subscription rights will be granted at no cost to the recipients, will be nontransferable and of short duration, and will afford the recipients the right only to purchase our common stock at a price equal to its estimated fair market value, which will be the same price as the purchase price for the unsubscribed shares of common stock.

McGrail Merkel Quinn & Associates has issued an opinion to us to the effect that, more likely than not, the income tax consequences under Pennsylvania law of the conversion are not materially different than for federal tax purposes.

Unlike a private letter ruling issued by the Internal Revenue Service, an opinion of counsel is not binding on the Internal Revenue Service and the Internal Revenue Service could disagree with the conclusions reached in the opinion. If there is a disagreement, no assurance can be given that the conclusions reached in an opinion of counsel would be sustained by a court if contested by the Internal Revenue Service.

The opinions of Muldoon Murphy & Aguggia LLP and McGrail Merkel Quinn & Associates are filed as an exhibit to the registration statement that we have filed with the Securities and Exchange Commission. See “Where You Can Find More Information.”

Interpretation, Amendment and Termination

All interpretations of the plan of conversion by our board of directors will be final, subject to the authority of the Office of Thrift Supervision. The plan of conversion provides that, if deemed necessary or desirable by the board of directors, the plan of conversion may be substantively amended by a majority vote of the board of directors as a result of comments from regulatory authorities or otherwise, at any time prior to the submission of proxy materials to the depositors of North Penn Bank and shareholders of North Penn Bancorp. Amendment of the plan of conversion thereafter requires a majority vote of the board of directors, with the concurrence of the Office of Thrift Supervision. The plan of conversion may be terminated by a majority vote of the board of directors at any time prior to the earlier of the date of the special meeting of shareholders and the date of the special meeting of depositors of North Penn Bank, and may be terminated by the board of directors at any time thereafter with the concurrence of the Office of Thrift Supervision. The plan of conversion will terminate if the conversion and offering are not completed within 24 months from the date on which the depositors of North Penn Bank approve the plan of conversion, and may not be extended by us or the Office of Thrift Supervision.

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Restrictions on Acquisition of New North Penn Bancorp

General

Certain provisions in the articles of incorporation and bylaws of New North Penn Bancorp may have antitakeover effects. In addition, regulatory restrictions may make it more difficult for persons or companies to acquire control of us.

Articles of Incorporation and Bylaws of New North Penn Bancorp

Although our board of directors is not aware of any effort that might be made to obtain control of us after the offering, the board of directors believed it appropriate to adopt certain provisions permitted by federal and state regulations that may have the effect of deterring a future takeover attempt that is not approved by our board of directors. The following description of these provisions is only a summary and does not provide all of the information contained in our articles of incorporation and bylaws. See “Where You Can Find More Information” as to where to obtain a copy of these documents.

Limitation on Voting Rights. Our articles of incorporation provide that in no event will any record owner of any outstanding common stock which is beneficially owned, directly or indirectly, by a person who, as of any record date for the determination of shareholders entitled to vote on any matter, beneficially owns in excess of 10% of the then-outstanding shares of common stock, be entitled, or permitted to any vote in respect of the shares held in excess of the limit. Our articles of incorporation provide that, for a period of three years from the date of the completion of the conversion and offering, no person may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of any class of an equity security of ours. If shares are acquired in excess of 10%, those shares will be considered “excess shares” and will not be counted as shares entitled to vote.

Board of Directors.

Classified Board. Our board of directors is divided into three classes as nearly as equal in number as possible. The shareholders elect one class of directors each year for a term of three years. The classified board makes it more difficult and time consuming for a shareholder group to fully use its voting power to gain control of the board of directors without the consent of the incumbent board of directors of New North Penn Bancorp.

Filling of Vacancies; Removal. The articles of incorporation provide that any vacancy occurring in the Board of Directors, including a vacancy created by an increase in the number of directors, may be filled by a vote of a majority of the directors then in office. A person elected to fill a vacancy on the Board of Directors will serve until the term of the class to which such director was appointed shall expire. Our articles of incorporation provide that a director may be removed from the Board of Directors before the expiration of his or her term only for cause and only upon the vote of a majority of the outstanding shares of voting stock. These provisions make it more difficult for shareholders to remove directors and replace them with their own nominees.

Qualification. The bylaws provide that no person will be eligible to serve on the Board of Directors who has in the past 10 years been subject to a supervisory action by a financial regulatory agency that involved dishonesty or breach of trust, has been convicted of a crime involving dishonesty or breach of trust that is punishable by a year or more in prison, or is currently charged with such a crime, or has been found by a regulatory agent or a court to have breached a fiduciary duty involving personal profit or committed a willful violation of any law governing banking securities or insurance or has been nominated by a person who would be disqualified from serving by any of the above.

In addition, our bylaws require each director to reside in a county in Pennsylvania in which North Penn Bank maintains an office or in any adjacent county within Pennsylvania. Our bylaws also require each director to own at least 1,000 shares of our outstanding common stock. Furthermore, management officials of depository institutions other than North Penn Bank are not eligible to serve as a director of New North Penn Bancorp, unless such person was on the initial board of directors of New North Penn Bancorp and served as a director of North Penn

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Bank on September 30, 2004. Our bylaws also prohibit individuals who reach the age of 75 from being elected, reelected, appointed or reappointed to our board of directors, unless such person was on the initial board of directors of New North Penn Bancorp and served as a director of North Penn Bank on September 30, 2004. These provisions contained in our articles of incorporation and bylaws may prevent shareholders from nominating themselves or persons of their choosing for election to the board of directors.

Elimination of Cumulative Voting. Our articles of incorporation provide that no shares will be entitled to cumulative voting. The elimination of cumulative voting makes it more difficult for a shareholder group to elect a director nominee.

Shareholder Action by Written Consent; Special Meetings of Shareholders. Our shareholders must act only through an annual or special meeting. Special meetings of shareholders may only be called by the board of directors. Our articles of incorporation provide that no action may be taken by shareholders without a meeting. Our articles of incorporation also specifically deny shareholders the ability to consent in writing without a meeting to take any action. Additionally, our articles of incorporation also provide that amendments to our articles of incorporation relating to a change in control of us must be approved by the board of directors prior to shareholder action. The provisions of our articles of incorporation and bylaws limiting shareholder action by written consent and calling of special meetings of shareholders may have the effect of delaying consideration of a shareholder proposal until the next annual meeting, unless a special meeting is called at the request of a majority of the board of directors. These provisions also would prevent the holders of a majority of common stock from unilaterally using the written consent procedure to take shareholder action.

Advance Notice Provisions for Shareholder Nominations and Proposals. Our articles of incorporation establish an advance notice procedure for shareholders to nominate directors or bring other business before an annual meeting of shareholders. A person may not be nominated for election as a director unless that person is nominated by or at the direction of our board of directors or by a shareholder who has given appropriate notice to us before the meeting. Similarly, a shareholder may not bring business before an annual meeting unless the shareholder has given us appropriate notice of the shareholder’s intention to bring that business before the meeting. Our Secretary must receive notice of the nomination or proposal not less than 60 days before the anniversary date of the prior year’s annual meeting. A shareholder who desires to raise new business must provide us with certain information concerning the nature of the new business, the shareholder and the shareholder’s interest in the business matter. Similarly, a shareholder wishing to nominate any person for election as a director must provide us with certain information concerning the nominee and the proposing shareholder.

Advance notice of nominations or proposed business by shareholders gives our board of directors time to consider the qualifications of the proposed nominees, the merits of the proposals and, to the extent deemed necessary or desirable by our board of directors, to inform shareholders and make recommendations about those matters.

Authorized but Unissued Shares of Capital Stock. Following the offering, we will have authorized but unissued shares of common and preferred stock. Our articles of incorporation authorize the board of directors to establish one or more series of preferred stock and, for any series of preferred stock, to determine the terms and rights of the series, including voting rights, conversion rates, and liquidation preferences. Such shares of common and preferred stock could be issued by the board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise.

Business Combinations with Interested Shareholders. Our articles of incorporation also provide that any business combination put forth by an interested shareholder must be approved by not less than 80% of the outstanding shares of voting shares unless the combination has been approved by either a two-thirds vote of the board of directors, an affirmative vote of all shareholders entitled to cast votes in an election of directors or by a majority vote of the shareholders excluding the interested shareholder if the interested shareholder has owned at least 80% of out outstanding shares for at least three months, or by a majority vote of the shareholders excluding the interested shareholder at a meeting held no earlier than five years after the date the interested shareholder became an interested shareholder. Our articles of incorporation also require the affirmative vote of the holders of at least 80% of the outstanding shares entitled to vote in order to amend or repeal the 80% super-majority vote requirement for interest shareholder business combinations. The super-majority voting provisions in our articles of incorporation have been included to render it more difficult or to discourage an attempt to obtain control of us without approval by the Board of Directors.

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State Law Restrictions on Certain Business Combinations

Pennsylvania law contains four anti-takeover sections that apply to Pennsylvania corporations relating to:

• control share acquisitions;

• the disgorgement of profits by certain controlling persons;

• business combination transactions with interested shareholders; and

• the ability of shareholders to put their stock following a control transaction.

Control Share Acquisitions. Under Pennsylvania law, unless a corporation has opted out of certain statutory provisions, shares of a corporation whose shares are registered under the Securities Exchange Act of 1934 acquired in a “control share acquisition” do not have voting rights unless restored by a resolution approved by a majority vote of the disinterested shareholders and all voting shares of the corporation. Under Pennsylvania law, a “control share acquisition” means an acquisition by any person of voting power over voting shares of a corporation that would, when added to all other voting power of such person, entitle such person to cast for the first time, the amount of voting power in any of the following ranges:

• at least 20% but less than 33 1/3%;

• at least 33 1/3% but less than 50%; or

• more than 50%.

Disgorgement by Certain Controlling Shareholders. Pennsylvania corporate law includes provisions which generally provide that any “profit” realized by any person or group who is or was a “controlling person or group” with respect to a registered corporation from the disposition of any equity security of the corporation to any person shall belong to and be recoverable by the corporation where the profit is realized by such person or group: (1) from the disposition of the equity security within 18 months after the person or group attained the status of a controlling person or group; and (2) the equity security had been acquired by the controlling person or group within 24 months prior to or 18 months subsequent to the attaining by the person or group of the status of a controlling person or group.

A “controlling person or group” for purposes of these provisions of Pennsylvania law is defined to mean (1) a person or group who has acquired, offered to acquire or, directly or indirectly, publicly disclosed or caused to be disclosed the intention of acquiring voting power over voting shares of a registered corporation that would entitle the holder thereof to cast at least 20% of the votes that all shareholders would be entitled to cast in an election of directors of the corporation or (2) a person or group who has otherwise, directly or indirectly, publicly disclosed or caused to be disclosed that it may seek to acquire control of a corporation through any means. The definition of “controlling person or group” also includes terms which are designed to facilitate a corporation’s determination of the existence of a group and members of a controlling group.

Pennsylvania law excludes certain persons and holders from the definition of a controlling person or group, absent “significant other activities” indicating that a person or group should be deemed a controlling person or group. Pennsylvania law similarly provides that, absent a person or group’s direct or indirect disclosure or causing to be disclosed that it may seek to acquire control of the corporation through any means, a person or group will not be deemed to be a controlling person or group if such person or group holds voting power, among other ways, as a result of the solicitation of proxies or consents if such proxies or consents are (a) given without consideration in response to a solicitation pursuant to the Securities Exchange Act of 1934 and the regulations thereunder and (b) do not empower the holder thereof to vote such shares except on the specific matters described in such proxy or consent and in accordance with the instructions of the giver of such proxy or consent. The disgorgement provisions of Pennsylvania law applicable to registered corporations also do not apply to certain specified transfers of equity securities, including certain acquisitions and dispositions which are approved by a majority vote of both the board of directors and shareholders of the corporation in the prescribed manner.

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Actions to recover any profit due to a registered corporation under the disgorgement provisions of Pennsylvania law may be commenced by the corporation in any court of competent jurisdiction within two years from the date any recoverable profit was realized. Such an action also may be commenced by a shareholder on behalf of the corporation if the corporation refuses to bring the action within 60 days after written request by a shareholder or the corporation fails to prosecute the action diligently. Although any recovery of profits would be due the corporation, the shareholder would be entitled to reimbursement of all costs incurred in connection with the bringing of any such action in the event that such action results in a judgment recovering profits for the corporation.

Business Combinations with Interested Shareholders. Under Pennsylvania law, a registered corporation may not engage in a business combination with an interested shareholder except for certain types of business combinations as enumerated under Pennsylvania law. Pennsylvania law defines a “business combination” generally to include, with respect to a corporation, certain sales, purchases, exchanges, leases, mortgages, pledges, transfers or dispositions of assets, mergers or consolidations, certain issuances or reclassifications of securities, liquidations or dissolutions or certain loans, guarantees or financial assistance, pursuant to an agreement or understanding between such corporation or any subsidiaries, on the one hand, and an interested shareholder or an “affiliate” or “associate” thereof, on the other hand. An “interested shareholder” is defined generally to include any individual, partnership, association or corporation which is the beneficial owner, as defined, of at least 20% of the outstanding voting stock of the corporation or which is an affiliate or associate of such corporation and at any time within the five-year period prior to the date in question was the beneficial owner of at least 20% of the outstanding voting stock.

Control Transactions. Pennsylvania law includes provisions that allow holders of voting shares of a registered corporation that becomes the subject of a “control transaction” to object to such transaction and demand that they be paid a cash payment for the “fair value” of their shares from the “controlling person or group.” A “control transaction” for purposes of these provisions means the acquisition by a person or group of persons acting in concert of at least 20% of the outstanding voting stock of the registered corporation. “Fair value” for purposes of these provisions means an amount not less than the highest price per share paid by the controlling person or group at any time during the 90-day period ending on and including the date of the control transaction, plus an increment representing any value, including without limitation any proportion of any value payable for acquisition of control of the corporation, that may not be reflected in such price.

Regulatory Restrictions

Office of Thrift Supervision Regulations. Office of Thrift Supervision regulations provide that for a period of three years following the date of the completion of the offering, no person, acting singly or together with associates in a group of persons acting in concert, may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of a class of our equity securities without the prior written approval of the Office of Thrift Supervision. Where any person acquires beneficial ownership of more than 10% of a class of our equity securities without the prior written approval of the Office of Thrift Supervision, the securities beneficially owned by such person in excess of 10% may not be voted by any person or counted as voting shares in connection with any matter submitted to the shareholders for a vote, and will not be counted as outstanding for purposes of determining the affirmative vote necessary to approve any matter submitted to the shareholders for a vote.

Change in Bank Control Act. The acquisition of 10% or more of our outstanding common stock may trigger the provisions of the Change in Bank Control Act. The Office of Thrift Supervision has also adopted a regulation under the Change in Bank Control Act which generally requires persons who at any time intend to acquire control of a federally chartered savings association or its holding company to provide 60 days prior written notice and certain financial and other information to the Office of Thrift Supervision.

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The 60-day notice period does not commence until the information is deemed to be substantially complete. Control for these purposes exists in situations in which the acquiring party has voting control of at least 25% of any class of our voting stock or the power to direct our management or policies. However, under Office of Thrift Supervision regulations, control is presumed to exist where the acquiring party has voting control of at least 10% of any class of our voting securities if specified “control factors” are present. The statute and underlying regulations authorize the Office of Thrift Supervision to disapprove a proposed acquisition on certain specified grounds.

Description of New North Penn Bancorp Capital Stock

The common stock of New North Penn Bancorp represents nonwithdrawable capital, is not an account of any type, and is not insured by the Federal Deposit Insurance Corporation or any other government agency.

General

New North Penn Bancorp is authorized to issue 80,000,000 shares of common stock having a par value of $0.10 per share and 20,000,000 shares of preferred stock having a par value of $0.10 per share. Each share of New North Penn Bancorp’s common stock has the same relative rights as, and is identical in all respects with, each other share of common stock. Upon payment of the purchase price for the common stock, as required by the plan of conversion and reorganization, all stock will be duly authorized, fully paid and nonassessable. New North Penn Bancorp will not issue any shares of preferred stock in the conversion and offering.

Common Stock

Dividends. New North Penn Bancorp can pay dividends if, as and when declared by its board of directors. The payment of dividends by New North Penn Bancorp is limited by law and applicable regulation. See “Our Dividend Policy.” The holders of common stock of New North Penn Bancorp will be entitled to receive and share equally in dividends declared by the board of directors of New North Penn Bancorp. If New North Penn Bancorp issues preferred stock, the holders of the preferred stock may have a priority over the holders of the common stock with respect to dividends.

Voting Rights. The holders of common stock of New North Penn Bancorp will possess exclusive voting rights in New North Penn Bancorp. They will elect New North Penn Bancorp’s board of directors and act on other matters as are required to be presented to them under federal law or as are otherwise presented to them by the board of directors. Except as discussed in “Restrictions on Acquisition of New North Penn Bancorp,” each holder of common stock will be entitled to one vote per share and will not have any right to cumulate votes in the election of directors. If New North Penn Bancorp issues preferred stock, holders of New North Penn Bancorp preferred stock may also possess voting rights.

Liquidation. If there is any liquidation, dissolution or winding up of North Penn Bank, New North Penn Bancorp, as the sole holder of North Penn Bank’s capital stock, would be entitled to receive all of North Penn Bank’s assets available for distribution after payment or provision for payment of all debts and liabilities of North Penn Bank, including all deposit accounts and accrued interest. Upon liquidation, dissolution or winding up of New North Penn Bancorp, the holders of its common stock would be entitled to receive all of the assets of New North Penn Bancorp available for distribution after payment or provision for payment of all its debts and liabilities. If New North Penn Bancorp issues preferred stock, the preferred stock holders may have a priority over the holders of the common stock upon liquidation or dissolution.

Preemptive Rights; Redemption. Holders of the common stock of New North Penn Bancorp will not be entitled to preemptive rights with respect to any shares that may be issued. The common stock cannot be redeemed.

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Preferred Stock

New North Penn Bancorp will not issue any preferred stock in the conversion and offering and it has no current plans to issue any preferred stock after the conversion and offering. Preferred stock may be issued with designations, powers, preferences and rights as the board of directors may from time to time determine. The board of directors can, without shareholder approval, issue preferred stock with voting, dividend, liquidation and conversion rights that could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock of New North Penn Bancorp will be Registrar and Transfer Company, Cranford, New Jersey.

Registration Requirements

In connection with the conversion and offering, we will register our common stock with the Securities and Exchange Commission under Section 12(g) of the Securities Exchange Act of 1934, as amended, and will not deregister our common stock for a period of at least three years following the conversion and offering. As a result of registration, the proxy and tender offer rules, insider trading reporting and restrictions, annual and periodic reporting and other requirements of that statute will apply.

Legal and Tax Opinions

The legality of our common stock has been passed upon for us by Muldoon Murphy & Aguggia LLP, Washington, D.C. The federal income tax consequences of the conversion have been opined upon by Muldoon Murphy & Aguggia LLP. McGrail Merkel Quinn & Associates has provided an opinion to us regarding the Pennsylvania income tax consequences of the conversion. Muldoon Murphy & Aguggia LLP and McGrail Merkel Quinn & Associates have consented to the references to their opinions in this prospectus. Certain legal matters will be passed upon for Ryan Beck & Co., Inc. by Elias, Matz, Tiernan & Herrick L.L.P., Washington, DC.

Experts

The financial statements of North Penn Bancorp, Inc. as of December 31, 2006 and 2005, and for each of the years in the two year period ended December 31, 2006 included in this prospectus and in the registration statement have been audited by McGrail Merkel Quinn & Associates, an independent registered public accounting firm, as stated in their report appearing herein and elsewhere in the registration statement (which report expresses an unqualified opinion), and has been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

RP Financial has consented to the summary in this prospectus of its report to us setting forth its opinion as to our estimated pro forma market value and to the use of its name and statements with respect to it appearing in this prospectus.

Where You Can Find More Information

We have filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933, as amended, that registers the common stock offered in the offering. This prospectus forms a part of the registration statement. The registration statement, including the exhibits, contains additional relevant information about us and our common stock. The rules and regulations of the Securities and Exchange Commission allow us to omit certain information included in the registration statement from this prospectus. You may read and copy the registration statement at the Securities and Exchange Commission’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-

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0330 for further information on the Securities and Exchange Commission’s public reference rooms. The registration statement also is available to the public from commercial document retrieval services and at the Internet World Wide Web site maintained by the Securities and Exchange Commission at “http://www.sec.gov.”

North Penn Mutual Holding Company has filed an application for approval of the plan of conversion with the Office of Thrift Supervision. This prospectus omits certain information contained in the application. The application may be inspected, without charge, at the offices of the Office of Thrift Supervision, 1700 G Street, NW, Washington, D.C. 20552 and at the offices of the Regional Director of the Office of Thrift Supervision at the Northeast Regional Office of the Office of Thrift Supervision, Harborside Financial Center Plaza Five, Suite 1600, Jersey City, New Jersey 07311.

A copy of the plan of conversion is available without charge from North Penn Bank by contacting the Stock Information Center.

The appraisal report of RP Financial has been filed as an exhibit to our registration statement and to our application to the Office of Thrift Supervision. Portions of the appraisal report were filed electronically with the Securities and Exchange Commission and are available on its Web site as described above. The entire appraisal report is available at the public reference room of the Securities and Exchange Commission and the offices of the Office of Thrift Supervision as described above.

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Index to Financial Statements of

North Penn Bancorp, Inc.

	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheet as of March 31, 2007 (unaudited) and December 31, 2006 and 2005	F-2
Consolidated Statements of Operations for the Three Months Ended March 31, 2007 and 2006 (unaudited) and for the Years Ended December 31, 2006 and 2005	F-4
Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2007 (unaudited) and for the Years Ended December 31, 2006 and 2005	F-5
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006 (unaudited) and for the Years Ended December 31, 2006 and 2005	F-7
Notes to Consolidated Financial Statements	F-9

* * *

All schedules are omitted as the required information either is not applicable or is included in the financial statements or related notes.

Separate financial statements for New North Penn Bancorp, Inc. have not been included in this prospectus because New North Penn Bancorp, Inc., which has engaged only in organizational activities to date, has no significant assets, contingent or other liabilities, revenues or expenses.

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	Francis J. Merkel, CPA
McGrail Merkel Quinn & Associates	Joseph J. Quinn, CPA, CVA
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS	Daniel J. Gerrity, CPA
	Mary Ann E. Novak, CPA

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

North Penn Bancorp, Inc.

Scranton, Pennsylvania

We have audited the consolidated balance sheets of North Penn Bancorp, Inc. and subsidiary as of December 31, 2006 and 2005, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of North Penn Bancorp, Inc. and subsidiary as of December 31, 2006 and 2005, and the results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

/s/ McGrail Merkel Quinn & Associates

Scranton, Pennsylvania

March 23, 2007

RSM McGladreyNetwork

An Independently Owned Member

Clay Avenue Professional Plaza, 1173 Clay Avenue, Scranton, PA 18510 570961-0345 Fax: 570 961-8650

www.mmq.com

F-1

NORTH PENN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(In Thousands)

	MARCH 31, 2007			DECEMBER 31,
				2006			2005
	(UNAUDITED)			(AUDITED)
ASSETS
Cash and due from banks	$	2,732		$	4,029		$	2,333
Interest bearing deposits at other financial institutions		87			87			20
Total cash and cash equivalents		2,819			4,116			2,353
Investment securities, available for sale		13,948			14,227			15,651
Equity securities at cost, substantially restricted		1,165			1,236			991
Loans, net of allowance for loan losses of $1,151 in 2007 $1,121 in 2006 and $1,025 in 2005		95,525			95,154			79,560
Bank premises and equipment, net		4,304			4,342			3,592
Accrued interest receivable		637			638			480
Cash surrender value of life insurance		2,113			2,094			2,018
Deferred income taxes		442			417			448
Other real estate owned		100			100			105
Other assets		173			132			183
TOTAL ASSETS	$	121,226		$	122,456		$	105,381
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	7,287		$	6,993		$	7,306
Interest bearing		79,542			79,753			70,123
Total deposits		86,829			86,746			77,429
Other borrowed funds		20,451			21,741			14,698
Accrued interest and other liabilities		807			843			459
Total Liabilities		108,087			109,330			92,586
Commitments and Contingencies
Preferred stock, no par value; authorized 20,000,000 shares; none issued		—			—			—
Common stock, par value $0.10; 80,000,000 shares authorized; 1,443,555 shares issued and outstanding		144			144			144
Additional paid-in capital		5,878			5,870			5,853
Retained earnings		7,675			7,623			7,481
Unearned ESOP shares		(460	)		(460	)		(509	)
Accumulated other comprehensive loss		(98	)		(51	)		(174	)
Total Stockholders’ Equity		13,139			13,126			12,795
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	121,226		$	122,456		$	105,381

See notes to consolidated financial statements.

F-2

NORTH PENN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Amounts)

	THREE MONTHS ENDED MARCH 31,				YEARS ENDED DECEMBER 31,
	2007		2006		2006		2005
	(UNAUDITED)				(AUDITED)
INTEREST INCOME
Interest on loans	$	1,690	$	1,425	$	6,346	$	4,529
Interest and dividends on investments		169		172		686		815
Total interest income		1,859		1,597		7,032		5,344
INTEREST EXPENSE
Interest on deposits		735		504		2,667		1,668
Interest on borrowed funds		257		225		865		519
Total interest expense		992		729		3,532		2,187
NET INTEREST INCOME		867		868		3,500		3,157
PROVISION FOR LOAN LOSSES		30		30		120		105
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		837		838		3,380		3,052
OTHER INCOME
Gain (loss) on sale of securities		17		—		11		(55	)
Gain on sale of other real estate owned		6		29		29		40
Service charges and fees		32		31		206		197
Other operating income		54		37		102		90
TOTAL OTHER INCOME		109		97		348		272
OTHER EXPENSE
Salaries and employee benefits		463		444		1,816		1,704
Occupancy and equipment expense		149		142		653		602
Other operating expenses		202		162		870		1,158
TOTAL OTHER EXPENSE		814		748		3,339		3,464
INCOME (LOSS) BEFORE INCOME TAXES		132		187		389		(140	)
INCOME TAX EXPENSE (BENEFIT)		37		41		74		(16	)
NET INCOME (LOSS)	$	95	$	146	$	315	$	(124	)
Weighted average number of shares outstanding (converted to stock form on June 1, 2005)		1,398,562		1,393,844		1,393,857		1,393,844
Earnings per share, basic and diluted	$	0.07	$	0.10	$	0.23	$	(0.09	)
Dividends per share	$	0.03	$	0.03	$	0.12	$	0.03

See notes to consolidated financial statements.

F-3

NORTH PENN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2007 (Unaudited)

FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 (Audited)

(In Thousands, Except Per Share Amounts)

	COMMON STOCK		ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS			UNEARNED ESOP SHARES			ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)			TOTAL
Balance, December 31, 2004	$	—	$	—	$	7,748		$	—		$	5		$	7,753
Comprehensive loss:
Net loss		—		—		(124	)		—			—			(124	)
Unrealized losses on securities, net of income taxes		—		—		—			—			(179	)		(179	)
Comprehensive loss															(303	)
Initial capitalization of North Penn Mutual Holding Company		—		—		(100	)		—			—			(100	)
Initial public stock offering		144		5,833		—			—						5,977
Unearned ESOP shares		—		—		—			(545	)		—			(545	)
ESOP shares released		—		20		—			36			—			56
Cash dividend—$0.03 per share		—		—		(43	)		—			—			(43	)
Balance, December 31, 2005	$	144	$	5,853	$	7,481		$	(509	)	$	(174	)	$	12,795
Comprehensive income:
Net income		—		—		315			—			—			315
Unrealized gains on securities, net of income taxes		—		—		—			—			123			123
Comprehensive income															438
ESOP shares released		—		6		—			49			—			55
Restricted stock awards		—		11		—			—			—			11
Cash dividend—$0.03 per share		—		—		(173	)		—			—			(173	)
Balance, December 31, 2006	$	144	$	5,870	$	7,623		$	(460	)	$	(51	)	$	13,126
Comprehensive income:
Net income		—		—		95			—			—			95
Unrealized losses on securities, net of income taxes		—		—		—			—			(47	)		(47	)
Comprehensive income															48
ESOP shares released		—		—		—			—			—
Restricted stock awards		—		8		—			—			—			8
Cash dividend—$0.03 per share		—		—		(43	)		—			—			(43	)
Balance, March 31, 2007 (Unaudited)	$	144	$	5,878	$	7,675		$	(460	)	$	(98	)	$	13,139

See notes to consolidated financial statements.

F-4

NORTH PENN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	THREE MONTHS ENDED MARCH 31,						YEARS ENDED DECEMBER 31,
	2007			2006			2006			2005
	(UNAUDITED)						(AUDITED)
Operating Activities:
Net income (loss)	$	95		$	146		$	315		$	(124	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		67			63			312			294
Provision for loan losses		30			30			120			105
Amortization of securities (net of accretion)		4			7			24			66
Increase in cash surrender value of life insurance		(19	)		(19	)		(76	)		(76	)
Net realized (gain) loss on securities		(17	)		—			(11	)		55
Net realized gain on other real estate owned		(6	)		(29	)		(29	)		(40	)
Stock contribution to charitable foundation		—			—			—			283
Deferred income tax expense		—			—			(33	)		(65	)
ESOP expense		—			—			55			56
Changes in:
Accrued interest income and other assets		(40	)		5			(107	)		204
Accrued interest expense and other liabilities		(71	)		131			353			(197	)
Net Cash Provided by Operating Activities		43			334			923			561
Investing Activities:
Purchase bank premises and equipment		(29	)		(519	)		(1,062	)		(603	)
Proceeds from sale of other real estate owned		427			134			134			128
Proceeds from sale of securities “available for sale”		91			—			48			7,076
Purchase of securities “available for sale”		(100	)		(153	)		(291	)		(7,547	)
Redemptions of securities “available for sale”		—			—			750			5,553
Redemptions of securities “held to maturity”		—			—			—			500
Redemptions of mortgage-backed securities “available for sale”		229			269			1,090			1,840
Purchase of life insurance policies		—			—			—			(125	)
Redemption (purchase) of restricted stock		71			(253	)		(245	)		(205	)
Net increase in loans to customers		(822	)		(4,743	)		(15,814	)		(18,920	)
Net Cash Used in Investing Activities		(133	)		(5,265	)		(15,390	)		(12,303	)
Financing Activities:
Net increase in deposits		83			5,163			9,317			87
Short term borrowings, net		(1,290	)		(491	)		7,043			323
Proceeds from other borrowings		—			—			—			7,000
Net proceeds of initial public stock offering		—			—			—			5,714
Common Stock Acquired by ESOP		—			—			—			(545	)
Initial capitalization of North Penn Mutual Holding Company		—			—			—			(100	)
Cash dividends paid		—			—			(130	)		(43	)
Net Cash (Used In) Provided by Financing Activities		(1,207	)		4,672			16,230			12,436
Net (Decrease) Increase in Cash and Cash Equivalents		(1,297	)		(259	)		1,763			694
Cash and Cash Equivalents, January 1	$	4,116		$	2,353		$	2,353		$	1,659
Cash and Cash Equivalents, December 31	$	2,819		$	2,094		$	4,116		$	2,353
Supplementary Schedule of Cash Flow Information:
Cash paid during the period for:
Interest	$	911		$	729		$	3,179		$	2,353
Income taxes		57			9			143			56
Non-cash investing and financing activities:
Transfer from loans to other real estate owned		421			—			100			193

See notes to consolidated financial statements.

F-5

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

North Penn Bancorp, Inc. was organized on November 22, 2004 to be the bank holding company for North Penn Bank (Bank) in connection with the Bank’s mutual holding company reorganization and minority stock issuance. The common stock trades on the OTC Bulletin Board under the symbol “NPEN.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.

UNAUDITED INTERIM FINANCIAL DATA

The interim financial data is unaudited. However, in the opinion of management, interim financial data as of March 31, 2007 and for the three months ended March 31, 2007 and 2006 includes all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods. The results of operations for interim periods are not necessarily indicative of the results of operations to be expected for a full year.

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.

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 losses on loans and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowance for loses on loans and foreclosed real estate, management periodically obtains independent appraisals for significant properties.

EMERGING ACCOUNTING STANDARDS

In December 2004, FASB issued Statement No. 123 (Revised 2004), Share-Based Payment. Statement No. 123 (Revised 2004) is a revision of FASB Statement 123, Accounting for Stock-Based

F-6

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. The Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. Statement No. 123 (Revised 2004) requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, except in certain circumstances. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award. The Company adopted this statement on January 1, 2006. The effects of the adoption of this statement are included in Note 10 to the consolidated financial statements.

In December 2004, FASB issued Statement No. 153, Exchanges of Nonmonetary Assets, An Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions. Statement No. 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29 and replaces it with an exception for exchanges that do not have commercial substance. Statement No. 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The statement is effective for fiscal periods beginning after June 15, 2005. The Company has not been a party to any nonmonetary exchanges that would be impacted by application of Statement No. 153.

In May 2005, FASB issued Statement No. 154, Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements – An Amendment of APB Opinion No, 28. Statement No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or earliest date practicable, as the required method for reporting a change in accounting principle or correction of an error. The Statement is effective for accounting changes or corrections of errors made in fiscal periods beginning after December 15, 2005. The adoption of this statement had no effect the Company’s results of operations or financial position.

In November 2005, the FASB issued FASB Staff Position (FSP) FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. The FSP addresses the determination of when an investment is considered impaired and whether that impairment is other than temporary, and provides guidance on measuring impairment loss. The FSP requires certain disclosures about unrealized losses not recognized as other-than-temporary impairments. The guidance in the FSP amends FASB Statements No. 115, Accounting for Certain Investments in Debt and Equity Securities, and No. 124, Accounting for Certain Investments Held by Not-For-Profit Organizations, and APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. The Company has considered the requirement of this FSP in its assessment of the investment portfolio.

In February 2006, FASB issued Statement No. 155, Accounting for Certain Hybrid Financial Instruments – An Amendment of FASB Statements No. 133 and 140. Statement No. 155 eliminates the exception from applying Statement 133 to interests in securitized financial assets so that similar instruments are accounted for similarly regardless of the form of the instruments. The Statement is effective for all financial instruments acquired or issued after the beginning of the first fiscal year that begins after September 15, 2006. The Company believes that the adoption of this Statement will not have a significant impact on its results of operations or financial position.

In March 2006, FASB issued Statement No. 156, Accounting for Servicing of Financial Instruments – An Amendment of FASB Statement No. 140. Statement No. 156 requires the recognition of the fair

F-7

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

value of a servicing asset or servicing liability each time an obligation to service a financial asset by entering into a servicing contract is undertaken, if practicable. It also allows the entity to subsequently measure the asset or liability under an amortization or fair value method. The Statement is effective for all financial instruments acquired after the beginning of the first fiscal year that begins after September 15, 2006. The Company believes that the adoption of this Statement will not have a significant impact on its result of operations or financial position.

In July 2006, FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109. Interpretation No. 48 clarified the application of Statement No. 109 by establishing a threshold condition that a tax position must meet for any part of that position to be recognized in the financial statements. In addition to recognition, the Interpretation provides guidance on the measurement, derecognition, classification and disclosure of tax positions. The Interpretation is effective for fiscal years beginning after December 15, 2006. The Company believes that the adoption of this Statement will not have a significant impact on its result of operations or financial position.

In September 2006, FASB issued Statement No. 157, Fair Value Measurements. Statement No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company believes that the adoption of this Statement will not have a significant impact on its result of operations or financial position.

In September 2006, FASB issued Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – An Amendment of FASB Statements No. 87, 88, 106 and 132(R). Statement No. 158 requires an employer to recognize the overfunded or unfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. The Statement was effective for financial statements issued for fiscal years ending after December 31, 2006. The adoption of the Statement had no effect on the Company’s results of operations or financial position.

In the September 2006 EITF meeting, a consensus was reached on EITF 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. EITF 06-4 requires the recognition of a liability related to the postretirement benefits covered by an endorsement split-dollar life insurance arrangement based on the substantive agreement with the employee. The issue is effective for fiscal years beginning after December 15, 2007, with early adoption permitted. The Company is evaluating the potential impact of this Statement on its results of operations and financial position.

In the September 2006 EITF meeting, a consensus was reached on EITF 06-5, Accounting for Purchases of Life Insurance – Determining the Amount That Could be Realized in accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance. EITF 06-5 requires that the amount that could be realized under the insurance contract as of the date of the statement of financial position should be reported as an asset net of any potential surrender charges. The issue is effective for fiscal years beginning after December 15, 2006. The Company believes the adoption of this Statement will not have a significant impact on its results of operations and financial position.

In September 2006, the SEC staff issued SEC Staff Accounting Bulletin No. 108 (SAB No. 108) Topic 1N, Financial Statements – Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements. SAB No. 108 addresses how a registrant should quantify the effect of an error on the financial statements. The SEC staff concluded in that a dual

F-8

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

approach should be used to compute the amount of a misstatement. Specifically, the amount should be computed using both the “rollover” (current year income statement prospective) and “iron curtain” (year-end balance sheet perspective) methods. This SAB was effective for annual financial statements covering the first fiscal year ending after November 15, 2006. The adoption of this SAB had no effect on the Company’s results of operations or financial position.

INVESTMENT SECURITIES

The Company’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 Company 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. Bonds, notes, debentures and equity securities not classified as securities 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. The Company classifies all new purchases of securities as “available-for-sale”.

Purchase premiums and discounts are recognized in interest income on the straight-line basis over the term 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 Statements of Operations.

The Company has no derivative financial instruments required to be disclosed under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities.

FEDERAL HOME LOAN BANK STOCK

The FHLBank of Pittsburgh (FHLB) stock is a required investment for membership in FHLB with the level of investment determined annually. Its marketability is limited to resale to the FHLB or another member. The Company does not foresee any circumstances that would require the liquidation of this security. The balance of the investment was $1,128,000, $1,199,000 and $954,000 at March 31, 2007 and December 31, 2006 and 2005, respectively.

LOANS

Loans are stated at the principal amount outstanding, net of any unearned income, 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 Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral and current economic conditions.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according

F-9

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payments delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures.

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 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.

LOAN SERVICING

The Company generally retains the right to service mortgage loans sold to others. The cost allocated to the mortgage servicing rights retained has been recognized as a separate asset and is being amortized in proportion to and over the period of estimated net servicing income.

Mortgage servicing rights are periodically evaluated for impairment based on the fair value of those rights. Fair values are estimated using discounted cash flows based on current market rates of interest and current expected future prepayment rates. For purposes of measuring impairment, the rights must be stratified by one or more predominant risk characteristics of the underlying loans. The Company stratifies its capitalized mortgage servicing rights based on the term of the underlying loans. The amount of impairment recognized is the amount, if any, by which the amortized cost of the rights for each stratum exceed their fair value.

PREMISES AND EQUIPMENT

The Company operates from one leased and four owned facilities. Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Provision for depreciation, computed on the straight-line method and accelerated method, is charged to operating expenses over the estimated useful lives of the assets. Maintenance and repairs are charged to operating expense as incurred.

The estimated useful lives used to compute depreciation are as follows:

	YEARS
Buildings	19-39
Furniture and equipment	5-10

F-10

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FORECLOSED REAL ESTATE

Foreclosed real estate is carried at the lower of cost or fair value at the time of foreclosure. Management periodically performs valuations and a loss is recognized by a charge to operations if the carrying value of a property exceeds its net realizable value. Additional costs associated with holding the properties are expensed as incurred. The balance of foreclosed real estate was $100,000 at March 31, 2007 and December 31, 2006. The balance of foreclosed real estate was $105,000 at December 31, 2005. The property held at the end of 2005 was sold in January 2006.

LONG-LIVED ASSETS

The Company reviews the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate that carrying amounts of the assets might not be recoverable, as prescribed in Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

POSTRETIREMENT EMPLOYEE BENEFITS

The Company provides postretirement benefits in the form of term life insurance and health insurance coverage for a limited period of time. The costs are funded as incurred and are not significant to the accompanying financial statements.

ADVERTISING EXPENSES

Advertising costs are expensed as incurred. Advertising expense for the three months ended March 31, 2007 and 2006 was $8,000 and $13,000 respectively. Advertising expense for the year ended December 31, 2006 was $67,000 compared to $49,000 for the year ended December 31, 2005.

INCOME TAXES

Provisions for income taxes are based on the taxes payable or refundable for the current year (after exclusion of nontaxable income such as interest), as well as the deferred income taxes on temporary differences arising from differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements at currently enacted income tax rates applicable to the period in which deferred tax assets and liabilities are expected to be realized or settled as prescribed in Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision of income taxes.

CASH FLOWS

For purposes of the Statements of Cash Flows, cash and due from banks include cash on hand and demand deposits at other financial institutions (including cash items in process of clearing). Cash flows from loans and deposits are reported net.

The Company may, from time to time, maintain correspondent bank balances in excess of $100,000 each. Management is not aware of any evidence that would indicate that such deposits are at risk.

F-11

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 includes common shares issuable upon exercise of employee stock options (Note 10) as follows:

	MARCH 31, 2007 (UNAUDITED)
	INCOME (NUMERATOR)		SHARES (DENOMINATOR)	PER-SHARE AMOUNT
Basic EPS
Income available	$	95,000	1,398,562	$	0.07
Options includable		—	940		—
Diluted EPS	$	95,000	1,399,502	$	0.07

	MARCH 31, 2006 (UNAUDITED)
	INCOME (NUMERATOR)			SHARES (DENOMINATOR)	PER-SHARE AMOUNT
Basic EPS
Income available	$	146,000		1,393,844	$	0.10
Options includable		—		—		—
Diluted EPS	$	146,000		1,393,844	$	0.10
	DECEMBER 31, 2006 (AUDITED)
	INCOME (NUMERATOR)			SHARES (DENOMINATOR)	PER-SHARE AMOUNT
Basic EPS
Income available	$	315,000		1,393,857	$	0.23
Options includable		—		147		—
Diluted EPS	$	315,000		1,394,004	$	0.23
	DECEMBER 31, 2005 (AUDITED)
	INCOME (NUMERATOR)			SHARES (DENOMINATOR)	PER-SHARE AMOUNT
Basic EPS
(Loss) Income available	($	124,000	)	1,393,844	($	0.09	)
Options includable		—		—		—
Diluted EPS	($	124,000	)	1,393,844	($	0.09	)

F-12

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2—INVESTMENT SECURITIES

The amortized cost and fair value of investment securities at March 31, 2007, December 31, 2006 and 2005 are as follows (in thousands):

	MARCH 31, 2007 (UNAUDITED)
	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES		FAIR VALUE
Held-to-maturity		None
Available-for-sale
U.S. Agency securities	$	385	$	—	$	5	$	380
Mortgage-backed securities		5,158		1		125		5,034
State & political subdivisions		7,026		18		6		7,038
Other bonds		503		—		7		496
Total debt securities		13,072		19		143		12,948
Equity securities		1,025		46		71		1,000
Total available-for-sale	$	14,097	$	65	$	214	$	13,948

	DECEMBER 31, 2006 (AUDITED)
	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES		FAIR VALUE
Held-to-maturity		None
Available-for-sale
U.S. Agency securities	$	385	$	—	$	7	$	378
Mortgage-backed securities		5,391		2		113		5,280
State & political subdivisions		7,026		51		—		7,077
Other bonds		503		—		8		495
Total debt securities		13,305		53		128		13,230
Equity securities		999		51		53		997
Total available-for-sale	$	14,304	$	104	$	181	$	14,227
	DECEMBER 31, 2005 (AUDITED)
	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES		FAIR VALUE
Held-to-maturity		None
Available-for-sale
U.S. Agency securities	$	385	$	—	$	8	$	377
Mortgage-backed securities		6,494		1		149		6,346
State & political subdivisions		7,026		—		74		6,952
Other bonds		1,264		3		11		1,256
Total debt securities		15,169		4		242		14,931
Equity securities		745		15		40		720
Total available-for-sale	$	15,914	$	19	$	282	$	15,651

F-13

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost and fair value of debt securities at March 31, 2007, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	SECURITIES AVAILABLE FOR SALE
	AMORTIZED COST		FAIR VALUE
Due in one year or less	$	503	$	496
Due after one year through five years		3,300		3,211
Due after five years through ten years		792		790
Due after ten years		8,477		8,451
Total debt securities	$	13,072	$	12,948

During the three months ended March 31, 2007, proceeds from sales of securities available for sale totaled $91,000. Proceeds from sales of securities available-for-sale totaled $48,000 and $7,076,000 during 2006 and 2005, respectively. Gross gains realized from the sale of securities totaled $17,000 for the three months ended March 31, 2007 and $11,000 and $72,000 for the years ended December 31, 2006 and 2005, respectively. There were no realized gross losses for the three months ended March 31, 2007. Gross losses realized from the sale of securities totaled $0 and $127,000 for the years ended December 31, 2006 and 2005, respectively.

Securities available-for-sale with amortized costs and fair values of $1,173,000 and $1,170,000 at March 31, 2007 were pledged as collateral on public deposits and/or overnight borrowings with the FHLBank of Pittsburgh. Securities available-for-sale with amortized costs and fair values of $1,173,000 and $1,171,000 at December 31, 2006 and $1,934,000 and $1,920,000, at December 31, 2005, were pledged as collateral on public deposits and/or overnight borrowings with the FHLBank of Pittsburgh.

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 is as follows (in thousands):

	MARCH 31, 2007 (UNAUDITED)
	LESS THAN 12 MONTHS				12 MONTHS OR MORE				TOTALS
	FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES
U.S. Agency securities	$	—	$	—	$	380	$	5	$	380	$	5
Mortgage-backed securities		334		4		4,662		121		4,996		125
State & political subdivisions		1,020		6		—		—		1,020		6
Other bonds		—		—		496		7		496		7
Equity securities		247		20		376		51		623		71
Total	$	1,601	$	30	$	5,914	$	184	$	7,515	$	214
	DECEMBER 31, 2006 (AUDITED)
	LESS THAN 12 MONTHS				12 MONTHS OR MORE				TOTALS
	FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES
U.S. Agency securities	$	—	$	—	$	378	$	7	$	378	$	7
Mortgage-backed securities		403		3		4,473		110		4,876		113
State & political subdivisions		—		—		—		—		—		—
Other bonds		495		8		—		—		495		8
Equity securities		196		14		278		39		474		53
Total	$	1,094	$	25	$	5,129	$	156	$	6,223	$	181

F-14

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	DECEMBER 31, 2005 (AUDITED)
	LESS THAN 12 MONTHS				12 MONTHS OR MORE				TOTALS
	FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES
U.S. Agency securities	$	—	$	—	$	377	$	8	$	377	$	8
Mortgage-backed securities		65		1		6,223		148		6,288		149
State & political subdivisions		6,952		74		—		—		6,952		74
Other bonds		—		—		495		11		495		11
Equity securities		387		35		57		5		444		40
Total	$	7,404	$	110	$	7,152	$	172	$	14,556	$	282

The above table at March 31, 2007 includes 13 securities that have unrealized losses for less than 12 months and 29 securities that have been in an unrealized loss position for 12 or more months.

U.S. Agency Securities The Bank invests in debt securities of the U.S. government, U.S. agencies, U.S. sponsored agencies, obligations of states and political subdivisions and corporate obligations. Changes in market value of all debt securities can result from changes in interest rates. Changes in credit quality can affect securities of states and political subdivisions and corporate obligations. The changes in market value of the debt securities held by the Bank have been due to changes in interest rates, and because the Bank has the ability to hold these investments until maturity, the Bank does not consider these investments to be other-than-temporarily impaired at March 31, 2007.

Mortgage-Backed Securities The unrealized losses on the Company’s investments in federal agency mortgage-backed securities were caused by interest rate increases. The contractual cash flows of these investments are guaranteed by an agency of the U.S. government. Accordingly, it is expected that these securities would not be settled at a price less than the amortized cost of the Company’s investment. Because the decline in market value is attributable to changes in interest rates and not credit quality and because the Bank has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2007.

State & Political Subdivisions The unrealized losses on the Company’s investments in these obligations were caused by interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investment. Because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2007.

Equity Securities The Company’s investments in equity securities consists entirely of bank stocks. The unrealized losses are from twenty-three bank stocks. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the impairment. Based on that evaluation, and the Company’s ability to hold these stocks for a reasonable period of time sufficient for a forecasted recovery of fair value, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2007.

F-15

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3—LOANS RECEIVABLE

Loans receivable consist of the following at (in thousands):

	MARCH 31, 2007		DECEMBER 31,
			2006		2005
	(UNAUDITED)		(AUDITED)
Real estate mortgages
Construction and land development	$	1,537	$	1,186	$	1,126
Residential, 1 – 4 family		43,785		42,323		43,159
Residential, multi-family		2,435		2,449		1,997
Commercial		37,289		37,711		23,738
Total real estate mortgages		85,046		83,669		70,020
Commercial		1,725		1,742		1,069
Consumer		9,905		10,864		9,496
Total loans		96,676		96,275		80,585
Allowance for loan losses		1,151		1,121		1,025
Total loans, net	$	95,525	$	95,154	$	79,560

Nonaccrual loans represent loans which are ninety days or more in arrears or in the process of foreclosure. These loans totaled approximately $184,000, $594,000 and $539,000 at March 31, 2007 and December 31, 2006 and 2005, respectively. The allowance for loan losses allocated to impaired loans was $9,000, $45,000 and $51,000 at March 31, 2007 and December 31, 2006 and 2005, respectively. Additional interest income that would have been earned under the original terms of such loans would have amounted to $3,000, $38,000 and $26,000 for the period ended March 31, 2007 and the years ended December 31, 2006 and 2005, respectively.

The following is a summary of the activity of the allowance for loan losses (in thousands):

	MARCH 31,					DECEMBER 31,
	2007		2006			2006			2005
	(UNAUDITED)					(AUDITED)
Balance, beginning of period	$	1,121	$	1,025		$	1,025		$	931
Provision for loan losses		30		30			120			105
Recoveries		—		—			8			3
Loans charged-off		—		(1	)		(32	)		(14	)
Balance, end of period	$	1,151	$	1,054		$	1,121		$	1,025

NOTE 4—LOAN SERVICING

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others was $2,645,000 at March 31, 2007, $3,019,000 at December 31, 2006 and $3,510,000 at December 31, 2005.

F-16

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5—PREMISES AND EQUIPMENT, NET

Premises and equipment are summarized as follows (in thousands):

	MARCH 31, 2007		DECEMBER 31,
			2006		2005
	(UNAUDITED)		(AUDITED)
Land and improvements	$	1,200	$	1,200	$	1,200
Building and improvements		5,320		5,320		4,443
Leasehold improvements		158		158		158
Furniture and equipment		2,123		2,094		1,909
		8,801		8,772		7,710
Less: Accumulated depreciation and amortization		4,497		4,430		4,118
Premises and equipment, net	$	4,304	$	4,342	$	3,592

Depreciation expense was $67,000 and $63,000 for the three months ended March 31, 2007 and 2006 and $312,000 and $294,000 for the years ended December 31, 2006 and 2005, respectively.

NOTE 6—CASH SURRENDER VALUE OF LIFE INSURANCE

The Company has purchased bank owned life insurance (BOLI) policies on certain directors and officers. These policies are intended to fund benefits payable under current and future retirement plans.

NOTE 7—DEPOSITS

Deposits consist of the following major classifications at (dollars in thousands):

	MARCH 31, 2007				DECEMBER 31,
					2006				2005
	AMOUNT		% OF TOTAL DEPOSITS		AMOUNT		% OF TOTAL DEPOSITS		AMOUNT		% OF TOTAL DEPOSITS
	(UNAUDITED)				(AUDITED)
Non-interest checking	$	7,287	8.4	%	$	6,993	8.1	%	$	7,306	9.4	%
Interest checking		7,188	8.3			9,654	11.1			5,930	7.7
Money market		9,538	11			8,760	10.1			9,711	12.5
Savings		7,990	9.2			7,612	8.8			7,963	10.3
Certificates of deposit		54,826	63.1			53,727	61.9			46,519	60.1
Total	$	86,829	100	%	$	86,746	100	%	$	77,429	100	%

Certificates of deposit accounts of $100,000 and over totaled approximately $14,353,000 at March 31, 2007, $13,341,000 at December 31, 2006 and $9,167,000 at December 31, 2005. Deposit account balances over $100,000 generally are not insured by the Federal Deposit Insurance Corporation.

F-17

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At March 31, 2007 and December 31, 2006 and 2005, scheduled maturities of time deposits were as follows:

	MARCH 31, 2007		DECEMBER 31,
			2006		2005
	(UNAUDITED)		(AUDITED)
Maturing in:
One Year	$	46,035	$	45,058	$	29,918
Two Years		3,635		4,044		10,906
Three Years		3,456		2,075		2,950
Four Years		1,486		2,002		449
Five Years		214		548		2,296
Thereafter		—		—		—
Total	$	54,826	$	53,727	$	46,519

Interest expense on deposits consisted of the following for the three months ended March 31, 2007 and 2006 and the years ended December 31, 2006 and 2005:

	THREE MONTHS ENDED MARCH 31,				YEAR ENDED DECEMBER 31,
	2007		2006		2006		2005
	(UNAUDITED)				(AUDITED)
Interest checking	$	28	$	7	$	146	$	31
Money market		64		67		338		210
Savings		18		12		65		47
Certificates of deposit		625		418		2,118		1,380
	$	735	$	504	$	2,667	$	1,668

NOTE 8—OTHER BORROWINGS

SHORT-TERM BORROWINGS

The Company has a line of credit with the FHLB 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, 2007, the Company borrowed $8,451,000 in overnight funds with interest at 5.38%, which was also represents the Company’s maximum borrowing outstanding at any month-end during the quarter. The average amount outstanding for the quarter ended March 31, 2007 amounted to $7,557,000 and the average interest rate was 5.40%.

At December 31, 2006, the Company borrowed $9,741,000 in overnight funds with interest at 5.46%, which was also represents the Company’s maximum borrowing outstanding at any month-end during the year. The average amount outstanding for the year ended December 31, 2006 amounted to $4,651,000 and the average interest rate was 5.20%.

At December 31, 2005, the Company borrowed $2,698,000 in overnight funds with interest at 4.28%. During the year ended December 31, 2005, the Company’s maximum borrowing outstanding at any month-end was $4,363,000. The average amount outstanding for the year ended December 31, 2005 amounted to $1,070,000 and the average interest rate was 3.49%.

F-18

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TERM BORROWINGS

The Company also has two term loans from the FHLB. One is a $5 million term loan 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 other loan is $7 million issued in July 2005 and matures July 2015. The interest rate is fixed at 4.34%, for two years, at which time the FHLB has the option to convert it to an adjustable rate if the related index reaches the strike rate of 8.00% (5.35% as of March 31, 2007). Interest is due quarterly and the principal is due at maturity.

All of the above borrowings are secured by the Company’s mortgages and/or investment securities.

The Company’s collateralized maximum borrowing capacity with FHLBank of Pittsburgh was $56,000,000 as of March 31, 2007.

NOTE 9—RETIREMENT PLANS

DEFINED BENEFIT PLAN

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.

For the Plan year ending June 30, 2007 and 2006, the required contributions due were $138,000 and $133,000, respectively.

The Fund covers all employees who have met the stated age and service requirements. A benefit formula provides for retirement benefits that are calculated as a percentage of salary during their working career, as defined. More details can be found in the plan document.

THRIFT PLAN

The Bank also sponsors the Financial Institutions Thrift Plan (the Plan) with the Pentegra Group. The Plan covers all employees who meet age and service requirements. Participants in the Plan are permitted to make contributions up to 20% of their compensation. The Company will match 50% of the participants’ contributions, not to exceed 6% of compensation. Employer contributions to the Plan was $5,000 for each of the quarters ended March 31, 2007 and 2006, and $22,000 and $21,000 for the years ended December 31, 2006 and 2005 respectively.

EMPLOYEE STOCK OWNERSHIP PLAN

The Company adopted an employee stock ownership plan (ESOP) for eligible employees of North Penn Bank effective June 1, 2005. Eligible employees who are 21 years old and employed by the Bank as of the effective date begin participating in the plan as of that date. Thereafter, new employees of the Bank who are 21 years old and have been credited with at least on year of service with North Penn Bank will be eligible to participate in the employee stock ownership plan as of the first entry date following their completion of the plan’s eligibility requirements. The ESOP used $545,000 in proceeds from a term loan obtained from the Company to purchase 53,211 shares of the Company’s common stock. The term loan principal is payable in fifteen, equal, annual installments. Interest is at prime plus .5% and payable quarterly. Each year, the Bank intends to make discretionary contributions to the ESOP which will be equal to the required principal and interest payments on the term loan. The loan is further paid down by the amount of dividends paid, if any, on the common stock owned by the ESOP.

F-19

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Shares purchased with the loan proceeds are initially pledged as collateral for the term loan and are held in a suspense account for future allocation among participants. Contributions to the ESOP and shares released from the suspense account will be allocated among participants on the basis of compensation.

The ESOP is accounted for in accordance with Statement of Position 93-6, Employers’ Accounting for Employee Stock Ownership Plans. The shares pledged as collateral are deducted from stockholders’ equity as unearned ESOP shares in the accompanying consolidated balance sheets. As shares are released from collateral, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for EPS computations.

For the quarter ended March 31, 2007, compensation expense amounted to $9,000. For the year ended December 31, 2006, compensation expense amounted to $55,000. At December 31, 2006, total ESOP shares amounted to 53,211, with 8,218 shares committed to be released and 44,993 shares unearned. The fair value of unearned shares amounted to $521,919 at December 31, 2006.

For the year ended December 31, 2005, compensation expense amounted to $56,000. At December 31, 2005, total ESOP shares amounted to 53,211, with 3,500 shares committed to be released and 49,711 shares unearned. The fair value of unearned shares amounted to $512,000 at December 31, 2005.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Effective July 1, 2004, the Company established an unfunded supplemental executive retirement plan to provide certain officers with additional benefits upon termination or retirement. The Company expensed $18,000 for the three months ended March 31, 2007 and 2006, and $53,000 and $45,000 for the years ended December 31, 2006 and 2005, respectively, on the accompanying financial statements. No contributions were made to the plan in 2006 and 2005, and the Company does not plan to make any contributions in 2007.

NOTE 10—OMNIBUS STOCK OPTION PLAN

Stock Awards. In May 2006, the Company’s stockholders approved the 2006 Omnibus Stock Option Plan, under which the Company reserved 93,119 shares of common stock for future issuance. The Plan provides for grants of stock options and restricted stock awards. Only present and future employees and directors are eligible to receive incentive awards under the 2006 Omnibus Plan. The Company believes that such awards better align the interests of its employees with its stockholders.

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

Stock Grants. Restricted stock grants totaling 4,875 shares were awarded on September 26, 2006 having a fair value of $54,000. The grants vest over five years. The market value as of the grant date of the restricted stock grants is charged to expense as the grants vest. Compensation expense for stock grants was $3,000 for the first quarter of 2007 and $4,000 for the year ended 2006.

Stock Options. Stock options covering 27,000 shares of common stock were awarded on September 26, 2006. The option awards were granted with an exercise price equal to the average price of the last trade date. The stock options vest and therefore become exercisable on a pro rata basis annually over five years from the date awarded, commencing September 26, 2007. The options are available to be exercised for a period of ten years after the date awarded.

F-20

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

The Company recorded $8,000 during the first quarter of 2007, and $11,000 for the year ended December 31, 2006 in expense included in “Salaries and employee benefits” on the accompanying financial statements. As of March 31, 2007, there was approximately $143,000 of total unrecognized compensation cost related to unvested options and grants. That cost is expected to be recognized over a weighted-average period of 5 years. The Company plans on obtaining shares to be issued upon exercise of stock options through authorized common stock.

	NUMBER OF SHARES	WEIGHTED- AVERAGE EXERCISE PRICE		WEIGHTED- AVERAGE REMAINING CONTRACTUAL TERM
Outstanding, January 1, 2007	27,000	$	11.15	—
Granted	—		—	—
Exercised	—		—	—
Forfeited or expired	—		—	—
Outstanding, March 31, 2007	27,000	$	11.15	9.5

	STOCK OPTIONS			RESTRICTED STOCK
	NUMBER OF SHARES	WEIGHTED- AVERAGE GRANT-DATE FAIR VALUE		NUMBER OF SHARES	WEIGHTED- AVERAGE GRANT-DATE FAIR VALUE
Nonvested shares
Nonvested, January 1, 2007	27,000	$	3.86	4,875	$	11.15
Granted	—		—	—		—
Vested	—		—	—		—
Forfeited	—		—	—		—
Nonvested, March 31, 2007	27,000	$	3.86	4,875	$	11.15

F-21

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11—OTHER OPERATING INCOME AND OTHER OPERATING EXPENSE

Other income and expense amounts for the three months ended March 31, 2007 and 2006 and for the years ended December 31, 2006 and 2005 (in thousands):

	THREE MONTHS ENDED MARCH 31,				YEAR ENDED DECEMBER 31,
	2007		2006		2006		2005
	(UNAUDITED)				(AUDITED)
Other Operating Income
Cash surrender value of life insurance	$	22	$	21	$	87	$	86
Other income		32		16		15		4
Total other operating income	$	54	$	37	$	102	$	90
Other Operating Expense
Directors’ fees	$	26	$	27	$	101	$	95
Data processing expense		13		15		68		65
Correspondent bank charges		14		12		50		71
Contributions		2		1		7		390
Advertising		8		13		67		49
Insurance		12		13		46		45
Professional services		27		7		95		63
Consulting fees		4		10		33		34
Postage and office supplies		23		17		86		76
Other operating expense		73		47		317		270
Total other operating expense	$	202	$	162	$	870	$	1,158

NOTE 12—INCOME TAXES

The Company and its subsidiary file a consolidated Federal income tax return. North Penn Bancorp, Inc. and Norpenco, Inc. each file a Pennsylvania corporate tax report and North Penn Bank files a Pennsylvania Mutual Thrift Earnings Report.

Retained earnings at March 31, 2007 and December 31, 2006 and 2005, included approximately $1,243,000 representing accumulated bad debt reserves in excess of actual experience, for which no provision for Federal income taxes has been made, in accordance with Accounting Principles Board Statement No. 23. These amounts represent an allocation of income to bad debt deductions for tax purposes only. If anything other than tax bad debt losses are charged to this accumulated bad debt reserve, taxable income would be created at the then-current corporate tax rates. The unrecorded deferred income tax liability related to this at 34% was $423,000 at March 31, 2007 and December 31, 2006 and 2005. The Company’s liquidity and capital position causes management to believe that these tax restrictions will not be violated.

F-22

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total income tax expense (benefit) for the three months ended March 31, 2007 and 2006 and for the years ended December 31, 2006 and 2005, is as follows (in thousands):

	THREE MONTHS ENDED MARCH 31,				YEAR ENDED DECEMBER 31,
	2007		2006		2006			2005
	(UNAUDITED)				(AUDITED)
Federal:
Currently payable	$	23	$	25	$	66		$	37
Deferred tax (benefit)		—		—		(33	)		(65	)
Total Federal taxes		23		25		33			(28	)
State:
Currently payable		14		16		41			12
Deferred tax expense, net		—		—		—			—
Total State taxes		14		16		41			12
Total income tax expense (benefit)	$	37	$	41	$	74		$	(16	)

A reconciliation of income taxes at statutory rates to applicable income taxes reported in the Consolidated Statements of Operations is as follows (in thousands):

	THREE MONTHS ENDED MARCH 31,						YEAR ENDED DECEMBER 31,
	2007			2006			2006			2005
	(UNAUDITED)						(AUDITED)
Tax expense at statutory rate on pretax income	$	45		$	64		$	132		$	(48	)
Cash surrender value increase		(1	)		(2	)		(8	)		(10	)
State income taxes		14			16			41			8
Change in valuation allowance		—			—			—			64
Tax exempt interest income		(24	)		(24	)		(98	)		(45	)
Tax effect of other items, net		3			(13	)		7			15
Applicable income tax expense	$	37		$	41		$	74		$	(16	)

Significant deferred tax assets and liabilities at March 31, 2007 and December 31, 2006 are as follows (in thousands):

	MARCH 31, 2007			DECEMBER 31
				2006			2005
	(UNAUDITED)			(AUDITED)			(AUDITED)
Deferred tax assets:
Allowance for loan losses	$	326		$	326		$	324
Contribution carryover		129			129			129
Unrealized securities losses		51			26			59
		506			481			512
Less valuation allowance		(64	)		(64	)		(64	)
Total	$	442		$	417			448

During the year ended December 31, 2005, the Company recorded a valuation allowance of $64,000 on the deferred tax asset for the contribution carryforward to reduce the total amount that management believes

F-23

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

will ultimately be realized. Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carryforwards are expected to be available to reduce taxable income.

NOTE 13—ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income of ($98,000), ($51,000) and ($174,000) at March 31, 2007 and December 31, 2006 and 2005, respectively, consisted entirely of unrealized gains and losses on available-for-sale securities, net of tax.

A reconciliation of other comprehensive income is as follows (dollars in thousands):

	THREE MONTHS ENDED MARCH 31, 2007 (UNAUDITED)
	BEFORE-TAX AMOUNT			TAX BENEFIT (EXPENSE)			NET-OF-TAX AMOUNT
Unrealized losses on available-for-sale securities:
Unrealized holding losses arising during the period	$	(55	)	$	19		$	(36	)
Less: Reclassification adjustment for net Gains realized in income		17			(6	)		11
Net unrealized losses	$	(72	)	$	25		$	(47	)

	YEAR ENDED DECEMBER 31, 2006 (AUDITED)
	BEFORE-TAX AMOUNT			TAX BENEFIT (EXPENSE)			NET-OF-TAX AMOUNT
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during the year	$	197		$	(67	)	$	130
Less: Reclassification adjustment for net Gains realized in income		11			(4	)		7
Net unrealized gains	$	186		$	(63	)	$	123
	YEAR ENDED DECEMBER 31, 2005 (AUDITED)
	BEFORE-TAX AMOUNT			TAX BENEFIT (EXPENSE)			NET-OF-TAX AMOUNT
Unrealized losses on available-for-sale securities:
Unrealized holding losses arising during the year	$	(326	)	$	111		$	(215	)
Less: Reclassification adjustment for net Losses realized in income		(55	)		19			(36	)
Net unrealized losses	$	(271	)	$	92		$	(179	)

NOTE 14—COMMITMENTS AND CONTINGENCIES

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business. These financial instruments include commitments to extend credit to meet the financing needs of its customers. Such commitments have been made in the normal course of business and at current prevailing market terms. The commitments, once funded, are principally to originate commercial loans and other loans secured by real estate. The Company uses the same credit policies in

F-24

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

making commitments and conditional obligations as it does for on-balance-sheet instruments. The Company does not anticipate any losses as a result of these transactions. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Balance Sheets.

Commitments issued to potential borrowers of the Bank are as follows (dollars in thousands):

	MARCH 31, 2007		DECEMBER 31,
			2006		2005
	(UNAUDITED)		(AUDITED)
Fixed-rate commitments	$	1,367	$	2,897	$	861
Variable/adjustable-rate commitments		4,256		6,884		4,157
Total	$	5,623	$	9,781	$	5,018

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments include loans-in-process, available borrowings under commercial line of credit agreements and available borrowings under home equity agreements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

LEGAL PROCEEDINGS

At March 31, 2007 and December 31, 2006, the Company was neither engaged in any existing nor aware of any pending legal proceedings. From time to time, the Company is a party to legal proceedings within the normal course of business wherein it enforces its security interest in loans made by it, and other maters of a similar nature.

OPERATING LEASE

The Company has an operating lease for commercial space for its Abington Branch. The lease commenced upon occupancy in April 1999 for a ten year period with three options to renew for five years each. The annual lease cost is composed of minimum rent per square foot, plus a proportionate share of certain operating costs and a flat fee for the drive-up/ATM area. The Company has been granted a limited right of first refusal for purchase.

The future minimum rental commitments under this lease at March 31, 2007 are as follows (in thousands):

2007		32
2008		43
2009		15
Thereafter		—
Total	$	90

NOTE 15—FAIR VALUE OF FINANCIAL INSTRUMENTS

The following required disclosure of the estimated fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methodologies. However,

F-25

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

considerable judgment is necessarily required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect in the estimated fair value amounts.

The methods and assumptions used to estimate the fair values of each class of financial instrument are as follows:

Cash and cash equivalents: The carrying amount of cash and cash equivalents approximate their fair value.

Available-for-sale and held-to-maturity securities: Fair values for securities are based on bid prices received from securities dealers. Restricted equity securities are carried at cost, which approximates fair value.

Loans: The fair value of all loans is estimated by the net present value of the future expected cash flows.

Deposit liabilities: The fair value of demand deposits, NOW accounts, savings accounts, and money market deposits is estimated by the net present value of the future expected cash flows. For certificates of deposit, the discount rates used reflect the Bank’s current market pricing. The discount rates used for nonmaturity deposits are the current book rate of the deposits.

Other borrowings: The fair value of other borrowings is estimated using the rates currently offered for similar borrowings.

Accrued interest: The carrying amounts of accrued interest approximate their fair values.

Off-balance-sheet instruments: Commitments to extend credit are generally short-term and are priced to market at the time of funding. Therefore, the estimated fair value of these financial instruments is nominal prior to funding.

F-26

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair value of the Company’s financial instruments at March 31, 2007, December 31, 2006 and 2005 was as follows (in thousands):

	MARCH 31, 2007			DECEMBER 31,
				2006			2005
	CARRYING AMOUNT		ESTIMATED FAIR VALUE	CARRYING AMOUNT		ESTIMATED FAIR VALUE	CARRYING AMOUNT		ESTIMATED FAIR VALUE
	(UNAUDITED)			(AUDITED)
Financial assets:
Cash and cash equivalents	$	2,819	2,819	$	4,116	4,116	$	2,353	2,353
Investments available for sale		13,948	13,948		14,227	14,227		15,651	15,651
Restricted equity securities		1,165	1,165		1,236	1,236		991	991
Loans		95,525	94,876		95,154	94,599		79,560	79,025
Accrued interest receivable		637	637		638	638		480	480
Total financial assets	$	114,094	113,445	$	115,371	114,816		99,035	98,500
Financial liabilities:
Deposits	$	86,829	86,687	$	86,746	86,209		77,429	76,871
Other borrowings		20,451	19,859		21,741	21,621		14,698	14,531
Accrued interest payable		480	480		392	392		226	226
Total financial liabilities	$	107,760	107,026	$	108,879	108,222		92,353	91,628
Off-balance sheet liabilities:
Commitments to extend credit	$	—	—	$	—	—		—	—

NOTE 16—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 three months ended March 31, 2007 and the years ended December 31, 2006 and 2005 (in thousands):

	THREE MONTHS ENDED MARCH 31, 2007			DECEMBER 31,
				2006			2005
	(UNAUDITED)			(AUDITED)
Beginning balance	$	922		$	976		$	2,198
Additions		8			19			155
Collections		(19	)		(73	)		(1,377	)
Ending balance	$	911		$	922		$	976

F-27

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17—DIVIDEND POLICY

COMPANY

The Company paid a quarterly cash dividend of $0.03 in 2006 and the first quarter of 2007. Payments of cash dividends to our stockholders may be dependent on the payment of a cash dividend from the Bank to the Company. The payment of cash dividends by the Bank to the Company is limited by regulations of the FDIC and the Pennsylvania Department of Banking. The Company’s future dividend policy is subject to the discretion of the Board of Directors and will depend upon a number of factors including future earnings, financial conditions, cash needs, and general business conditions. Holders of common stock will be entitled to receive dividends as and when declared by the board of directors out of funds legally available for that purpose.

BANK

The amount of dividends that may be paid by the Bank depends upon the Bank’s earnings and capital position. The Bank may not make a distribution that would constitute a return of capital during the three-year term of the business plan submitted in connection with the stock offering. The Bank may not make a capital distribution if, after making the distribution, it would be under capitalized.

Any payment of dividends by the Bank that would be deemed to be drawn out of its bad debt reserves would require the Bank to pay federal income taxes at the then current tax rate on the amount deemed distributed. We do not contemplate any distribution by the Bank that would result in this type of tax liability.

As a state bank subject to the regulations of the FDIC, the Bank must obtain approval for any dividend if the total of all dividends declared in any calendar year would exceed the total of its net profits, as defined by applicable regulations, for that year, combined with its retained net profits for the preceding two years, less any required transfers to surplus. In addition, the Bank may not pay a dividend in an amount greater than its retained earnings then on hand after deducting its losses and bad debts. For this purpose, bad debts are generally defined to include the principal amount of loans which are in arrears with respect to interest by six months or more unless such loans are fully secured and in the process of collection. Moreover, for purposes of this limitation, the Bank is not permitted to add the balance in its allowance for loan loss account to its undivided profits then on hand; however, it may net the sum of its bad debts as so defined against the balance in its allowance for loan loss account and deduct from undivided profits only bad debts as so defined in excess of that amount.

In addition, the FDIC is authorized to determine under certain circumstances relating to the financial condition of a bank that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. The payment of dividends that deplete a bank’s capital base could be deemed to constitute such an unsafe or unsound practice.

NOTE 18—REGULATORY MATTERS

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by state and federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory – and possible additional discretionary – actions by regulators that, if undertaken, could have a direct material effect on the Company’s and Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.

F-28

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital to average assets (as defined). Management believes, as of March 31, 2007 and December 31, 2006, the Company and the Bank meet all capital adequacy requirements to which they are subject.

As of March 31, 2007, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Company’s and the Bank’s actual capital amounts and ratios at March 31, 2007, December 31, 2006 and 2005 are presented in the following table (dollars in thousands):

	ACTUAL				FOR CAPITAL ADEQUACY PURPOSES					TO BE WELL CAPITALIZED UNDER PROMPT CORRECTIVE ACTION PROVISIONS
	AMOUNT		RATIO		AMOUNT		RATIO			AMOUNT		RATIO
At March 31, 2007 (Unaudited):
Total Capital (to Risk-Weighted Assets):
Consolidated	$	14,361	15.07	%	³	$7,622	³	8.0	%	³	$9,528	³	10.0	%
North Penn Bank	$	12,447	13.22	%	³	$7,530	³	8.0	%	³	$9,413	³	10.0	%
Tier 1 Capital (to Risk-Weighted Assets):
Consolidated	$	13,210	13.86	%	³	$3,811	³	4.0	%	³	$5,717	³	6.0	%
North Penn Bank	$	11,296	12.00	%	³	$3,765	³	4.0	%	³	$5,648	³	6.0	%
Tier 1 Capital (to Average Assets):
Consolidated	$	13,210	10.99	%	³	$4,808	³	4.0	%	³	$6,010	³	5.0	%
North Penn Bank	$	11,296	9.49	%	³	$4,762	³	4.0	%	³	$5,952	³	5.0	%
Risk-Weighted Assets:
Consolidated	$	95,281
North Penn Bank	$	94,130
Average Assets:
Consolidated	$	120,196
North Penn Bank	$	119,045

F-29

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	ACTUAL				FOR CAPITAL ADEQUACY PURPOSES					TO BE WELL CAPITALIZED UNDER PROMPT CORRECTIVE ACTION PROVISIONS
	AMOUNT		RATIO		AMOUNT		RATIO			AMOUNT		RATIO
At December 31, 2006 (Audited):
Total Capital (to Risk-Weighted Assets):
Consolidated	$	14,295	15.13	%	³	$7,560	³	8.0	%	³	$9,450	³	10.0	%
North Penn Bank	$	12,326	13.17	%	³	$7,487	³	8.0	%	³	$9,359	³	10.0	%
Tier 1 Capital (to Risk-Weighted Assets):
Consolidated	$	13,175	13.94	%	³	$3,780	³	4.0	%	³	$5,670	³	6.0	%
North Penn Bank	$	11,206	11.97	%	³	$3,744	³	4.0	%	³	$5,615	³	6.0	%
Tier 1 Capital (to Average Assets):
Consolidated	$	13,175	11.02	%	³	$4,782	³	4.0	%	³	$5,977	³	5.0	%
North Penn Bank	$	11,206	9.45	%	³	$4,746	³	4.0	%	³	$5,932	³	5.0	%
Risk-Weighted Assets:
Consolidated	$	94,496
North Penn Bank	$	93,589
Average Assets:
Consolidated	$	119,548
North Penn Bank	$	118,641
At December 31, 2005 (Audited):
Total Capital (to Risk-Weighted Assets):
Consolidated	$	13,926	17.66	%	³	$6,307	³	8.0	%	³	$7,884	³	10.0	%
North Penn Bank	$	11,808	15.01	%	³	$6,293	³	8.0	%	³	$7,866	³	10.0	%
Tier 1 Capital (to Risk-Weighted Assets):
Consolidated	$	12,942	16.42	%	³	$3,154	³	4.0	%	³	$4,730	³	6.0	%
North Penn Bank	$	10,824	13.76	%	³	$3,146	³	4.0	%	³	$4,720	³	6.0	%
Tier 1 Capital (to Average Assets):
Consolidated	$	12,942	12.53	%	³	$4,130	³	4.0	%	³	$5,163	³	5.0	%
North Penn Bank	$	10,824	10.50	%	³	$4,123	³	4.0	%	³	$5,153	³	5.0	%
Risk-Weighted Assets:
Consolidated	$	78,841
North Penn Bank	$	78,659
Average Assets:
Consolidated	$	103,252
North Penn Bank	$	103,070

F-30

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19—PARENT COMPANY FINANCIAL INFORMATION

Information is presented as of March 31, 2007 and December 31, 2006 and 2005. Operations for 2005 are for the period June 1, 2005 to December 31, 2005.

A summary of the balance sheets (in thousands):

	MARCH 31, 2007		DECEMBER 31,
			2006		2005
	(UNAUDITED)		(AUDITED)
Assets
Cash on deposit with subsidiary	$	436	$	463	$	2,053
Investment in subsidiary		11,225		11,158		10,677
Bank premises, net		1,355		1,377		299
Deferred income taxes		65		65		65
Other Assets		135		131		—
Total assets	$	13,216	$	13,194	$	13,094
Liabilities and Stockholders’ Equity
Accrued Interest and Other Liabilities	$	77	$	68	$	299
Stockholders’ equity		13,139		13,126		12,795
Total Liabilities and Stockholders’ Equity	$	13,216	$	13,194	$	13,094

A summary of the statement of operations for the three months ended March 31, 2007 and 2006 and for the years ended December 31, 2006 and 2005 (in thousands):

	THREE MONTHS ENDED MARCH 31,					YEAR ENDED DECEMBER 31,
	2007			2006		2006			2005
	(UNAUDITED)					(AUDITED)
Income
Interest income	$	—		$	—	$	—		$	20
Rental income		8			10		22			—
Total Income		8			10		22			20
Expenses
Occupancy and equipment expense		22			—		55			—
Charitable contributions		—			—		—			383
Other expenses		9			—		15			—
Total Expenses		31			—		70			383
(Loss) income before income tax benefit and equity in undistributed earnings of subsidiary		(23	)		10		(48	)		(363	)
Income tax benefit		(3	)		—		(6	)		(65	)
(Loss) income before equity in undistributed earnings of subsidiary		(20	)		10		(42	)		(298	)
Equity in undistributed earnings of subsidiary		115			136		357			174
Net income (loss)	$	95		$	146	$	315		$	(124	)

F-31

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the statement of cash flows for the three months ended March 31, 2007 and 2006 and the year ended December 31, 2006 and 2005 (in thousands):

	THREE MONTHS ENDED						YEAR ENDED DECEMBER 31,
	2007			2006			2006			2005
	(UNAUDITED)						(AUDITED)
Cash flows from operating activities:
Net income (loss)	$	95		$	146		$	315		$	(124	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation expense		22			—			55			—
Undistributed income of subsidiary		(115	)		(136	)		(357	)		(174	)
Increase in deferred income taxes		—			—			—			(65	)
Increase in other assets		5			—			(186	)		—
Decrease in other liabilities		(34	)		(257	)		(274	)		—
Net cash used in operating activities		(27	)		(247	)		(447	)		(363	)
Cash flows from investing activities:
Purchase of bank premises and equipment		—			(495	)		(1,013	)		—
Net cash used in investing activities		—			(495	)		(1,013	)		—
Cash flows from financing activities:
Issuance of common stock, net		—			—			—			3,104
Common stock acquired by ESOP		—			—			—			(545	)
Initial capitalization of mutual holding company		—			—			—			(100	)
Cash dividends paid		—			(43	)		(130	)		(43	)
Net cash (used in) provided by financing activities		—			(43	)		(130	)		2,416
Net (decrease) increase in cash and cash equivalents		(27	)		(785	)		(1,590	)		2,053
Cash and cash equivalents at beginning of period		463			2,053			2,053			—
Cash and cash equivalents at end of period	$	436		$	1,268		$	463		$	2,053

NOTE 20—REORGANIZATION

On October 15, 2004, the Board of Trustees of North Penn Bank adopted both a Plan of Reorganization and Minority Stock Issuance (the “Plan of Reorganization”) and a Plan of Charter Conversion. On June 1, 2005, the mutual holding company reorganization and minority stock issuance was completed. Pursuant to the Plan of Charter Conversion, the Bank converted from a Pennsylvania state-chartered mutual savings bank to a Pennsylvania state-chartered stock savings bank. Pursuant to the Plan of Reorganization, the Bank: (i) converted to a stock savings bank as successor to the Bank in its current mutual form; (ii) organized a Stock Holding Company as a federally chartered corporation that owns 100% of the common stock of the Stock Bank; and (iii) organized a Mutual Holding Company as a federally chartered mutual holding company that owns 53.9% of the common stock of the Stock Holding Company. The Stock Bank succeeded to the business and operations of the Bank in its mutual form and the Stock Holding Company offered its common stock in a public stock offering.

Following the completion of the reorganization, all depositors who had membership or liquidation rights with respect to the Bank as of the effective date of the reorganization continued to have such rights solely with respect to the Mutual Holding Company so long as they continue to hold deposit accounts with the

F-32

NORTH PENN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bank. In addition, all persons who become depositors of the Bank subsequent to the reorganization will have such membership and liquidation rights with respect to the Mutual Holding Company.

The Stock Holding Company offered to the public shares of common stock representing a minority ownership of the estimated pro forma market value of the Bank as determined by an independent appraisal. The Mutual Holding Company maintained the majority ownership of the Stock Holding Company and was initially funded with $100,000. Net proceeds received from the offering amounted to $5,714,000, after expenses of $654,000.

NOTE 21—ADOPTION OF PLAN OF CONVERSION AND REORGANIZATION (UNAUDITED)

On April 24, 2007, the Company, the Bank and North Penn Mutual Holding Company adopted a Plan of Conversion and Reorganization (the “Plan of Conversion”) pursuant to which the Bank will reorganize from the two-tier mutual holding company structure to the stock holding company structure. Pursuant to the Plan of Conversion, (i) North Penn Mutual Holding Company and the Company will, pursuant to an election to be made by the Bank pursuant to Section 10(l) of the Home Owners’ Loan Act, become federally chartered savings and loan holding companies and immediately thereafter each will convert to a federal interim stock association and then merge with and into the Bank, with the Bank being the surviving entity, (ii) the Bank will merge with an interim subsidiary of a newly formed Pennsylvania corporation, New North Penn Bancorp, Inc., (iii) the shares of common stock of the Company held by persons other than North Penn Mutual Holding Company (whose shares will be canceled) will be converted into shares of common stock of New North Penn Bancorp pursuant to an exchange ratio designed to preserve the percentage ownership interests of such persons, (iv) the Bank will issue all of its capital stock to New North Penn Bancorp, and (v) New North Penn Bancorp will offer and sell shares of the common stock to depositors of the Bank and others in the manner and subject to the priorities set forth in the Plan of Conversion.

In connection with the conversion, shares of the Company’s common stock currently owned by North Penn Mutual Holding Company will be canceled and new shares of common stock, representing the approximate 53.7% ownership interest of North Penn Mutual Holding Company, will be offered for sale by the New North Penn Bancorp. Concurrent with the completion of the offering, the Company’s existing public shareholders will receive shares of the New North Penn Bancorp’s common stock for each share of the Company’s common stock they own at that date, based on an exchange ratio to ensure that they will own approximately the same percentage of the New North Penn Bancorp’s common stock as they owned of the Company’s common stock immediately prior to the conversion.

The transactions contemplated by the Plan of Conversion are subject to approval by the Company’s shareholders, depositors of the Bank and the Office of Thrift Supervision, the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation. Special meetings of the Company’s shareholders and the Bank’s depositors will be held to approve the plan in the third quarter of 2007. If the conversion is completed, conversion costs will be netted against the offering proceeds. If the conversion is terminated, such costs will be expensed. As of March 31, 2007, the Company had incurred approximately $35,000 of conversion costs.

F-33

You should rely only on the information contained in this prospectus. Neither North Penn Bank nor North Penn Bancorp, Inc. has authorized anyone to provide you with different information. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered by this prospectus to any person or in any jurisdiction in which an offer or solicitation is not authorized or in which the person making an offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make an offer or solicitation in those jurisdictions. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common stock.

(Proposed Holding Company for North Penn Bank)

1,265,000 Shares

(Anticipated Maximum, Subject to Increase)

COMMON STOCK

Prospectus

Ryan Beck & Co.

________________, 2007

Until _________, 2007, or 25 days after commencement of the syndicated community offering, if any, whichever is later, all dealers effecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a prospectus when acting as underwriters and with respect to their unsold allotments of subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

The Articles of Incorporation of New North Penn Bancorp provide as follows:

Article 10. Indemnification, etc. of Officers, Directors, Employees, and Agents.

A. Persons. The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, including actions by or in the right of the Company, whether civil, criminal, administrative, or investigative, by reason of the fact that such person is or was a director or officer of the Company, or is or was serving at the request of the Company as a director, officer, employee, fiduciary, or agent of another corporation, partnership, joint venture, trust, or other enterprise.

B. Extent — Derivative Actions. In the case of a threatened, pending, or completed action or suit by or in the right of the Company against a person named in paragraph A by reason of such person holding a position named in paragraph A, the Company shall indemnify such person if such person satisfies the standard in paragraph C, for expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of the action or suit.

C. Standard — Derivative Suits. In the case of a threatened, pending, or completed action or suit by or in the right of the Company, a person named in paragraph A shall be indemnified only if:

1. such person is successful on the merits or otherwise; or

2. such person acted in good faith in the transaction that is the subject of the suit or action, and in a manner reasonably believed to be in, or not opposed to, the best interests of the Company, including, but not limited to, the taking of any and all actions in connection with the Company’s response to any tender offer or any offer or proposal of another party to engage in a Business Combination (as defined in Article 13 of these Articles) not approved by the Board of Directors. However, such person shall not be indemnified in respect of any claim, issue, or matter as to which such person has been adjudged liable to the Company unless (and only to the extent that) the court of common pleas or the court in which the suit was brought shall determine, upon application, that despite the adjudication of liability but in view of all the circumstances, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper.

D. Extent — Nonderivative Suits. In case of a threatened, pending, or completed suit, action, or proceeding (whether civil, criminal, administrative, or investigative), other than a suit by or in the right of the Company, together hereafter referred to as a nonderivative suit, against a person named in paragraph A by reason of such person holding a position named in paragraph A, the Company shall indemnify such person if such person satisfies the standard in paragraph E, for amounts actually and reasonably incurred by such person in connection with the defense or settlement of the nonderivative suit, including, but not limited to (i) expenses (including attorneys’ fees), (ii) amounts paid in settlement, (iii) judgments, and (iv) fines.

E. Standard — Nonderivative Suits. In case of a nonderivative suit, a person named in paragraph A shall be indemnified only if:

1. such person is successful on the merits or otherwise; or

II-1

2. such person acted in good faith in the transaction that is the subject of the nonderivative suit and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the Company, including, but not limited to, the taking of any and all actions in connection with the Company’s response to any tender offer or any offer or proposal of another party to engage in a Business Combination (as defined in Article 13 of these Articles) not approved by the Board of Directors and, with respect to any criminal action or proceeding, such person had no reasonable cause to believe such person’s conduct was unlawful. The termination of a nonderivative suit by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, in itself, create a presumption that the person failed to satisfy the standard of this paragraph E.2.

F. Determination That Standard Has Been Met. A determination that the standard of paragraph C or E has been satisfied may be made by a court, or, except as stated in paragraph C.2 (second sentence), the determination may be made by:

1. the Board of Directors by a majority vote of a quorum consisting of directors of the Company who were not parties to the action, suit, or proceeding;

2. if such a quorum is not obtainable or if obtainable and a majority of a quorum of disinterested directors so directs, by independent legal counsel in a written opinion; or

3. the shareholders of the Company.

G. Proration. Anyone making a determination under paragraph F may determine that a person has met the standard as to some matters but not as to others, and may reasonably prorate amounts to be indemnified.

H. Advancement of Expenses. Reasonable expenses incurred by a director or officer of the Company in defending a civil or criminal action, suit, or proceeding described in Article 10.A may be paid by the Company in advance of the final disposition of such action, suit, or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by the Company.

I. Other Rights. The indemnification and advancement of expenses provided by or pursuant to this Article 10 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any insurance or other agreement, vote of shareholders or directors, or otherwise, both as to actions in their official capacity and as to actions in another capacity while holding an office, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors, and administrators of such person.

J. Insurance. The Company shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of this Article 10.

K. Security Fund; Indemnity Agreements. By action of the Board of Directors (notwithstanding their interest in the transaction), the Company may create and fund a trust fund or fund of any nature, and may enter into agreements with its officers, directors, employees, and agents for the purpose of securing or insuring in any manner its obligation to indemnify or advance expenses provided for in this Article 10.

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L. Modification. The duties of the Company to indemnify and to advance expenses to any person as provided in this Article 10 shall be in the nature of a contract between the Company and each such person, and no amendment or repeal of any provision of this Article 10, and no amendment or termination of any trust or other fund created pursuant to Article 10.K hereof, shall alter to the detriment of such person the right of such person to the advancement of expenses or indemnification related to a claim based on an act or failure to act which took place prior to such amendment, repeal, or termination.

M. Proceedings Initiated by Indemnified Persons. Notwithstanding any other provision in this Article 10, the Company shall not indemnify a director, officer, employee, or agent for any liability incurred in an action, suit, or proceeding initiated by (which shall not be deemed to include counter-claims or affirmative defenses) or participated in as an intervenor or amicus curiae by the person seeking indemnification unless such initiation of or participation in the action, suit, or proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors then in office.

N. Savings Clause. If this Article 10 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify each director, officer, employee, and agent of the Company as to costs, charges, and expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement with respect to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, including an action by or in the right of the Company to the fullest extent permitted by any applicable portion of this Article 10 that shall not have been invalidated and to the fullest extent permitted by applicable law.

If the laws of the Commonwealth of Pennsylvania are amended to permit further indemnification of the directors, officers, employees, and agents of the Company, then the Company shall indemnify such persons to the fullest extent permitted by law. Any repeal or modification of this Article by the shareholders of the Company shall not adversely affect any right or protection of a director, officer, employee, or agent existing at the time of such repeal or modification.

New North Penn Bancorp also maintains directors and officers insurance to insure its directors and officers and the directors and officers of its subsidiaries against certain liabilities.

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Item 25. Other Expenses of Issuance and Distribution.

SEC filing fee	$	750
OTS filing fee		12,000
NASD filing fee		1,955
Pennsylvania filing fee		6,450
EDGAR, printing, postage and mailing		100,000
Legal fees and expenses		300,000
Underwriter’s expenses including counsel fees		50,000
Accounting fees and expenses		65,000
Appraiser’s fees and expenses		30,500
Data processing fees and expenses		20,000
Transfer agent and registrar fees and expenses		11,000
Certificate printing		5,000
Business plan		43,000
Miscellaneous		4,345
Total	$	650,000

In addition to the fees set forth above, Ryan Beck & Co., Inc. will receive a fee equal to the greater of $160,000 or 1.00% of the total dollar amount of stock sold in the offering, excluding shares purchased by officers, directors, employees, their immediate household family members and ESOP purchases.

Item 26. Recent Sales of Unregistered Securities.

None.

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Item 27. Exhibits.

The exhibits filed as a part of this registration statement are as follows:

1.1	Engagement Letter between North Penn Bank, North Penn Mutual Holding Company, North Penn Bancorp, Inc. and Ryan Beck & Co., Inc.
1.2	Draft Agency Agreement*
2.1	Plan of Conversion and Reorganization (Incorporated herein by reference to Exhibit 2.1 to the Form 8-K filed by North Penn Bancorp, Inc. on April 27, 2007)
3.1	Articles of Incorporation of New North Penn Bancorp, Inc.
3.2	Bylaws of New North Penn Bancorp, Inc.
4	Specimen Stock Certificate
5.1	Form of Opinion of Muldoon Murphy & Aguggia LLP re: Legality
8.1	Form of Opinion of Muldoon Murphy & Aguggia LLP re: federal tax matters
8.2	Form of Opinion of McGrail Merkel Quinn & Associates re: state tax matters*
10.1	Amended and Restated Employment Agreement by and among North Penn Bank, North Penn Bancorp, Inc. and Frederick L. Hickman**(Incorporated herein by reference to Exhibit 10.1 to Form 10-QSB of North Penn Bancorp, Inc. for the quarterly period ended June 30, 2005.)
10.2	Amended and Restated Employment Agreement by and among North Penn Bank, North Penn Bancorp, Inc. and Thomas J. Dziak** (Incorporated herein by reference to Exhibit 10.2 to Form 10-QSB of North Penn Bancorp, Inc. for the quarterly period ended June 30, 2005.)
10.3	Employment Agreement by and among North Penn Bank, North Penn Bancorp, Inc. and Thomas A. Byrne** (Incorporated herein by reference to Exhibit 10.3 to Form 10-QSB of North Penn Bancorp, Inc. for the quarterly period ended June 30, 2005.)
10.4	North Penn Bancorp, Inc. 2006 Omnibus Stock Option Plan** (Incorporated herein by reference to Appendix A to Schedule 14A Definitive Proxy Statement of North Penn Bancorp, Inc. for 2006.)
10.5	Form of Stock Option Agreement for the North Penn Bancorp, Inc. 2006 Omnibus Stock Option Plan** (Incorporated herein by reference to Exhibit 10.5 to Form 10-KSB of North Penn Bancorp, Inc. for the year ended December 31, 2006.)
10.6	Form of Restricted Stock Agreement for the North Penn Bancorp, Inc. 2006 Omnibus Stock Option Plan**(Incorporated herein by reference to Exhibit 10.6 to Form 10-KSB of North Penn Bancorp, Inc. for the year ended December 31, 2006.)
10.7	Supplemental Executive Retirement Agreement dated December 14, 2004 between North Penn Bank and Frederick L. Hickman**(Incorporated herein by reference to Exhibit 10.7 to Form 10-KSB of North Penn Bancorp, Inc. for the year ended December 31, 2006.)
10.8	Supplemental Executive Retirement Agreement dated December 14, 2004 between North Penn Bank and Thomas J. Dziak***
10.9	Supplemental Executive Retirement Agreement dated April 1, 2005 between North Penn Bank and Thomas A. Byrne***
10.10	North Penn Bank Employee Stock Ownership Plan (Incorporated herein by reference to Exhibit 10.5 to Form 10-QSB of North Penn Bancorp, Inc. for the quarterly period ended June 30, 2005.)

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10.11	Form of Amendment No. 1 to North Penn Bank Employee Stock Ownership Plan
10.12	North Penn Bank Employee Stock Ownership Plan Trust Agreement*
10.13	Form of ESOP Loan Documents
21.1	List of Subsidiaries
23.1	Consent of McGrail Merkel Quinn & Associates
23.2	Consent of RP Financial, LC
23.3	Consent of Muldoon Murphy & Aguggia LLP (included in Exhibits 5.1 and 8.1 filed herewith)
24.1	Powers of Attorney
99.1	Appraisal Report of RP Financial, LC. (P)
99.2	Draft Marketing Materials*
99.3	Form of Subscription Order Form and Instructions*

(P) The supporting financial schedules are filed in paper pursuant to Rule 202 of Regulation S-T.

* To be filed by amendment.

** Management contract or compensatory plan contract or arrangement filed pursuant to Item 601(b)(10)(ii)(A) of Regulation S-B.

Item 28. Undertakings.

The small business issuer will:

(1) File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:

(i) Include any prospectus required by section 10(a)(3) of the Securities Act.

(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

(iii) Include any additional or changed material information on the plan of distribution.

(2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

(3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

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(4) For determining liability of the undersigned small business issuer under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned small business issuer undertakes that in a primary offering of securities of the undersigned small business issuer pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned small business issuer will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned small business issuer relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned small business issuer or used or referred to by the undersigned small business issuer;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned small business issuer or its securities provided by or on behalf of the undersigned small business issuer; and

(iv) Any other communication that is an offer in the offering made by the undersigned small business issuer to the purchaser.

The small business issuer will provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

The small business issuer hereby undertakes that:

(1) For determining any liability under the Securities Act, treat the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430(A) and contained in a form of prospectus filed by the small business issuer pursuant to Rule 424(b)(1), or (4) or 497(h) under the Securities Act as part of this registration statement as of the time the Commission declared it effective.

(2) For determining any liability under the Securities Act , treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that offering of the securities at that time as the initial bona fide offering of those securities.

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SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in the City of Scranton, Commonwealth of Pennsylvania, on June 8, 2007.

New North Penn Bancorp, Inc.
By:	/s/ Frederick L. Hickman
	Frederick L. Hickman
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Name	Title	Date
/s/ Frederick L. Hickman Frederick L. Hickman	President, Chief Executive Officer and Director (principal executive officer)	June 8, 2007
/s/ Glenn J. Clark Glenn J. Clark	Assistant Vice President and Controller (principal accounting and financial officer)	June 8, 2007
/s/ Gordon S. Florey Gordon S. Florey	Director	June 8, 2007
/s/ Herbert C. Kneller Herbert C. Kneller	Director	June 8, 2007
/s/ Kevin M. Lamont Kevin M. Lamont	Director	June 8, 2007
/s/ Virginia D. McGregor Virginia D. McGregor	Director	June 8, 2007
/s/ Frank H. Mechler Frank H. Mechler	Director	June 8, 2007
/s/ James W. Reid James W. Reid	Director	June 8, 2007
David Samuel	Director