NB&T Financial Reports Third Quarter Earnings

NB&T Financial Group, Inc. (Nasdaq: NBTF), parent company of The National Bank and Trust Company, Wilmington, Ohio, announced net income for the third quarter of 2009 of $992,000, or $.32 per diluted share, compared to net income of $1.0 million, or $.33 per diluted share, for the same quarter last year. Net income for the first nine months of 2009 was $2.5 million, or $.79 per diluted share, compared to $2.9 million, or $.93 per diluted share, for the first nine months of 2008. The decrease in earnings from the first nine months of last year is primarily due to an additional Federal Deposit Insurance Corporation ("FDIC") assessment for insurance of deposits, an increase in the provision for loan losses and lower non-interest income.

Commenting on these results, President & C.E.O. John J. Limbert said, "We are glad to get our earnings back up this quarter by increasing net interest income and non-interest income, while controlling our expenses. Total assets have increased since year-end almost $30 million as we continue to grow the deposit relationships within the communities we serve."

Net interest income was $4.8 million for the third quarter of 2009, compared to $4.7 million earned in the third quarter of 2008. Net interest margin decreased to 3.72% for the third quarter of 2009, compared to 3.91% for the third quarter of 2008. Interest income declined to $6.6 million for the third quarter of 2009 from $7.1 million for the same quarter last year. Average interest-earning assets increased approximately 8% to $506.8 million; however, the average yield decreased from 6.02% for the third quarter of 2008 to 5.17% for the third quarter of 2009 due to declining rates, slower loan volume, and reinvestment of funds into lower-yielding short-term investments. Total interest expense decreased a similar amount to $1.9 million during the third quarter of 2009 from $2.4 million for the same quarter last year. Average interest-bearing liabilities increased approximately 5% from last year to $424.9 million, and their cost decreased to 1.73% during the third quarter of 2009 from 2.37% for the same quarter last year. For the first nine months of 2009, net interest income was $13.8 million compared to $13.7 million for the same period last year.

The provision for loan losses was $175,000 in the third quarter of 2009 and $105,000 in the third quarter of 2008. Net charge-offs were $78,000 in the third quarter of 2009, compared to $76,000 in the third quarter of 2008. Net charge-offs were $1,052,000 for the first nine months of 2009, compared to $326,000 for the same period in 2008. Charge-offs in 2009 included one loan charged-off for $511,000 for which $300,000 in specific reserves had been previously allocated. Non-performing loans totaled $4.4 million at September 30, 2009, compared to $3.0 million at September 30, 2008. The increase in non-performing loans is primarily due to two commercial real estate loan relationships. The allowance for loan losses to total loans was 0.89% at September 30, 2009, compared to 1.01% at September 30, 2008.

Total non-interest income was $2.2 million for the third quarter of 2009, compared to $2.0 million for the same quarter last year. For the first nine months of 2009, non-interest income was $6.3 million, compared to $6.4 million for the same period last year. This decrease for the year is primarily due to a combination of lower trust fee income and lower insurance agency revenues. In addition, 2008 non-interest income included a gain of approximately $116,000 on the mandatory redemption of Visa shares as a result of the Visa initial public offering.

Total non-interest expense was $5.5 million for the third quarter of 2009 and $5.4 million for the same quarter in 2008. FDIC insurance premiums increased $143,000 in the third quarter of 2009 from the third quarter of 2008. This increased expense has been offset by reductions in compensation expense in 2009. Total non-interest expense for the first nine months of 2009 was $16.5 million, compared to $16.3 million in 2008. In total, our 2009 FDIC insurance premiums increased $680,000 over the first nine months of 2008.

On September 15, 2009 the Board of Directors declared a dividend of $0.29 per share, payable October 26, 2009 to shareholders of record on September 30, 2009. This dividend is unchanged from the dividend declared for the third quarter of 2008.

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