The following is Management's Discussion of Consolidated Financial Condition as of March 31, 2012, compared to year-end 2011, and the Results of Operations for the three months ended March 2012, compared to the same period in 2011.

This discussion should be read in conjunction with the financial tables, statistics, and the audited financial statements and notes thereto included in Mid Penn's Annual Report on Form 10-K for the year ended December 31, 2011. The results of operations for interim periods are not necessarily indicative of operating results expected for the full year.

Certain of the matters discussed in this document and in documents incorporated by reference herein, including matters discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Mid Penn to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. The words "expect", "anticipates", "intend", "plan", "believe", "estimate", and similar expressions are intended to identify such forward-looking statements.

Mid Penn's actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation:

• The effects of economic deterioration on current customers, specifically the effect of the economy on loan customers' ability to repay loans;

• Governmental monetary and fiscal policies, as well as legislative and regulatory changes, including the effects of the Dodd-Frank Wall Street Reform and Consumer Protection Act;

• The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Financial Accounting Standards Board and other accounting standard setters;

• The risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, securities and interest rate protection agreements, as well as interest rate risks;

• The effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in Mid Penn's market area and elsewhere, including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the internet;

• The costs and effects of litigation and of unexpected or adverse outcomes in such litigation;

• Technological changes;

• Acquisitions and integration of acquired businesses;

• The failure of assumptions underlying the establishment of reserves for loan and lease losses and estimations of values of collateral and various financial assets and liabilities;

• Acts of war or terrorism;

• Volatilities in the securities markets; and

• Deteriorating economic conditions.

Mid Penn undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this report. Readers should carefully review the risk factors described in the documents that we periodically file with the SEC, including Mid Penn's Annual Report on Form 10-K for the year ended December 31, 2011.

Critical Accounting Estimates

Mid Penn's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and conform to general practices within the banking industry. Application of these principles involves significant judgments and estimates by management that have a material impact on the carrying value of certain assets and liabilities. The judgments and estimates that we used are based on historical experiences and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and estimates that we have made, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of assets and liabilities and the results of our operations.

Management of Mid Penn considers the accounting judgments relating to the allowance for loan and lease losses, the evaluation of Mid Penn's investment securities for other-than-temporary impairment, and the assessment of goodwill for impairment to be the accounting areas that require the most subjective and complex judgments.

The allowance for loan and lease losses represents management's estimate of probable incurred credit losses inherent in the loan and lease portfolio. Determining the amount of the allowance for loan and lease losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. The loan and lease portfolio also represents the largest asset type on the consolidated balance sheet. Throughout the remainder of this report, the terms "loan" or "loans" refers to both loans and leases.

Valuations for the investment portfolio are determined using quoted market prices, where available. If quoted market prices are not available, investment valuation is based on pricing models, quotes for similar investment securities, and observable yield curves and spreads. In addition to valuation, management must assess whether there are any declines in value below the carrying value of the investments that should be considered other than temporary or otherwise require an adjustment in carrying value and recognition of the loss in the consolidated statement of operations.

Accounting Standards Codification (ASC) Topic 350, Intangibles-Goodwill and Other, requires that goodwill is not amortized to expense, but rather that it be tested for impairment at least annually. Impairment write-downs are charged to results of operations in the period in which the impairment is determined. Mid Penn did not identify any impairment on its outstanding goodwill from its most recent testing, which was performed as of December 31, 2011. If certain events occur which might indicate goodwill has been impaired, the goodwill is tested when such events occur.

Results of Operations

Overview

Net income available to common shareholders was $1,006,000, $0.29 per common share, for the quarter ended March 31, 2012, as compared to net income available to common shareholders of $872,000, or $0.25 per common share, for the quarter ended March 31, 2011; an increase of 15.4% on a quarter-to-quarter basis.

Net interest income increased $694,000, or 13.9%, to $5,677,000 for the quarter ended March 31, 2012 from $4,983,000 during the quarter ended March 31, 2011. This increase has been spurred by a moderating cost of funds and increasing levels of average earning assets.

The provision for loan and lease losses in the first quarter of 2012 was $300,000, compared to $200,000 in the first quarter of 2011.

Net income as a percent of average assets (return on average assets or "ROA") and shareholders' equity (return on average equity or "ROE") were as follows on an annualized basis:

                                         Three Months Ended March 31,
                                         2012                    2011
          Return on average assets            0.64 %                  0.62 %
          Return on average equity            8.42 %                  8.34 %

Total assets increased $2,242,000 to $717,625,000 at March 31, 2012, from $715,383,000 at December 31, 2011. This increase is moderate compared to the growth in recent quarters, and was mainly driven by growth in loans, increasing $5,953,000 from $482,717,000 at December 31, 2011 to $488,670,000 at March 31, 2012. Total deposits also increased during the first quarter of 2012, increasing by $2,516,000 from $634,055,000 at December 31, 2011 to $636,571,000 at March 31, 2012; this growth was mainly in core deposits. In order to continue improving net interest margin within the current environment, we have chosen to manage the balance sheet in such a way that loan and deposit growth in 2012 remain closely matched, and because of this strategy, our asset growth rate has moderated in the first quarter.

Deposit growth has slowed, as noted above, during the first three months of 2012. This has allowed us to maintain a closer match between funding sources and funding uses and reduce the balance of overnight funding, which has been advantageous from a net interest margin perspective. Numerous deposit repricing opportunities remain throughout 2012, which will continue to help improve our cost of funds as well as overall net interest margin despite continued downward pressure on asset yields.

Net Interest Income/Funding Sources

Net interest income, Mid Penn's primary source of revenue, is the amount by which interest income on loans and investments exceeds interest incurred on deposits and borrowings. The amount of net interest income is affected by changes in interest rates and changes in the volume and mix of interest-sensitive assets and liabilities. Net interest income and corresponding yields are presented in the analysis below on a taxable-equivalent basis. Income from tax-exempt assets, primarily loans to or securities issued by state and local governments, is adjusted by an amount equivalent to the federal income taxes which would have been paid if the income received on these assets was taxable at the statutory rate of 34%. The following table includes average balances, rates, interest income and expense, interest rate spread, and net interest margin:

Average Balances, Effective Interest Differential and Interest Yields

Interest rates and interest differential - taxable equivalent basis



(Dollars in thousands)                        For the Three Months Ended                      For the Three Months Ended
                                                    March 31, 2012                                  March 31, 2011
                                        Average         Interest       Rate (%)         Average         Interest       Rate (%)
ASSETS:
Interest Earning Balances             $    27,786      $       65           0.94 %    $    59,622      $      162           1.10 %
Investment Securities:
Taxable                                   109,366             441           1.62 %         49,814             225           1.83 %
Tax-Exempt                                 48,634             619           5.12 %         28,777             488           6.88 %

Total Investment Securities               158,000                                          78,591

Federal Funds Sold                          6,125               4           0.26 %         15,587               8           0.21 %
Loans and Leases, Net                     484,415           6,883           5.71 %        467,858           6,830           5.92 %
Restricted Investment in Bank
Stocks                                      3,055               1           0.13 %          3,750              -            0.00 %

Total Earning Assets                      679,381           8,013           4.74 %        625,408           7,713           5.00 %
Cash and Due from Banks                     8,096                                           6,957
Other Assets                               24,716                                          25,672

Total Assets                          $   712,193                                     $   658,037