The following is Management's Discussion of Consolidated Financial Condition as of September 30, 2009, compared to year-end 2008 and the Results of Operations for the three and nine months ended September 30, 2009, compared to the same periods in 2008.

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, 2008, Mid Penn's Quarterly Reports on Form 10-Q filed during 2009, and with Mid Penn's Forms 8-K, that were filed during 2009 with the SEC. 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 the Corporation 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.

The Corporation'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 future economic conditions on Mid Penn and its customers;

• Governmental monetary and fiscal policies, as well as legislative and regulatory changes;

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

• 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;

• 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 Annual Report and other documents that we periodically file with the SEC, including Mid Penn's Annual Report on Form 10-K for the year ended December 31, 2008.

Critical Accounting Estimates

Mid Penn's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America 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 the Corporation considers the accounting judgments relating to the allowance for loan and lease losses and the evaluation of the Corporation's investment securities for other-than-temporary 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 potentially 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 income.

Results of Operations

Overview

Net income available to common stockholders was $206,000 or $0.06 per common share for the quarter ended September 30, 2009, as compared to net income available to common stockholders of $1,122,000 or $0.32 per common share for the quarter ended September 30, 2008. During the nine months ended September 30, 2009, net income available to common stockholders was $875,000 or $0.25 per common share versus $3,355,000 or $0.96 per common share during the same period in 2008. Net income available to common stockholders was adversely impacted by increased FDIC assessments, higher levels of provision for loan and lease losses, and other increased noninterest expenses as more fully explained below.

The net interest margin compression experienced throughout 2008 has begun to abate somewhat in 2009 with net interest income increasing to $4,670,000 in the three months ended September 30, 2009 from $4,292,000 during the same period in 2008. The nine months ended September 30, 2009 reflect an increasing level of net interest income as well, growing to $13,357,000 versus $12,639,000 during the same period in 2008. These increases have been spurred by a moderating cost of funds and increasing levels of average earning assets.

The provision for loan and lease losses in the third quarter of 2009 was $1,108,000, as compared to $275,000 in the third quarter of 2008. During the nine months ended September 30, 2009, the provision for loan and lease losses was $2,520,000 compared to $530,000 for the nine months ended September 30, 2008. The increased provision reflects strong loan volume growth, weak economic conditions, and additional legacy loan issues.

Increasing noninterest expenses in the three and nine months ended September 30, 2009, versus the same periods in 2008, also negatively affected earnings. The three primary areas of increased expenses during these periods were Salaries and Benefits, FDIC Assessment, and Marketing and Advertising expense.

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

                                   Three Months Ended September 30,                  Nine Months Ended September 30,
                                    2009                      2008                    2009                      2008
Return on average assets                 0.23 %                    0.82 %                  0.29 %                    0.84 %
Return on average equity                 2.64 %                   11.10 %                  3.23 %                   11.09 %

Total assets increased to $598,192,000 at September 30, 2009, from $572,300,000 on December 31, 2008. This asset increase was the result of strong loan demand to this point of 2009 with gross loans of $484,709,000 at September 30, 2009 compared to $434,643,000 at year-end, an increase of approximately $50 million. This growth in loans and leases was funded by maturities or calls of interest-bearing time deposits with other financial institutions and investment securities as well as an aggressive push on the generation of core deposit accounts within MPB's market area.

The funding side of Mid Penn has undergone a dramatic transformation since December 31, 2008. Deposit growth was strong during the first nine months of 2009. Total deposits were $471,416,000 at September 30, 2009, compared to $436,824,000 at December 31, 2008, an increase of approximately $35 million. This increase in deposits was primarily caused by a flight to safety as investors retreat from the stock market and invest funds in insured accounts. Not clearly evident from these numbers is the transformation in deposit composition Mid Penn has experienced. During the first nine months of 2009, $10,000,000 of brokered deposits have matured and been replaced with local, core deposits. In addition, $10,000,000 of long-term FHLB debt has matured and been shifted into overnight borrowings at very advantageous rates. These strategies have improved cost of funds and energized the net interest margin despite increasing levels of nonaccrual loans. Mid Penn continued, during the third quarter of 2009, an aggressive campaign of soliciting traditional, relationship-based, core deposit accounts from new and existing customers to replace wholesale funding sources and reduce the bank's reliance on higher costing time deposits.

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:

          MID PENN BANCORP, INC.   Management's Discussion and Analysis




                                                For the Nine Months Ended             For the Nine Months Ended
                                                    September 30, 2009                    September 30, 2008
(Dollars in thousands)                        Balance    Interest    Rate (%)       Balance    Interest    Rate (%)
ASSETS:
Interest Earning Assets
Interest Earning Balances                    $  42,554   $   1,177       3.70 %    $  56,211   $   1,961       4.66 %
Investment Securities:
Taxable                                         19,273         495       3.43 %       21,582         640       3.96 %
Tax-Exempt                                      25,122       1,303       6.93 %       27,990       1,454       6.94 %

Total Investment Securities                     44,395                                49,572

Federal Funds Sold                                 343           1       0.39 %           -           -
Loans and Leases, Net:
Taxable                                        443,506      20,433       6.16 %      387,194      19,877       6.86 %
Tax-Exempt                                      13,551         723       7.13 %        8,487         453       7.13 %

Total Loans and Leases, Net                    457,057                               395,681
Restricted Investment in Bank Stocks             3,895           1       0.03 %        1,908         112       7.84 %

Total Earning Assets                           548,244      24,133       5.89 %      503,372      24,497       6.50 %
Cash and Due from Banks                          6,596                                 7,826
Other Assets                                    22,370                                21,717

Total Assets                                 $ 577,210                             $ 532,915