NB&T Financial Group Reports Earnings

Business Wire, Jan 16, 2007

WILMINGTON, Ohio -- NB&T Financial Group, Inc. (Nasdaq:NBTF), parent company of The National Bank and Trust Company, Wilmington, Ohio, announced net income for 2006 of $1.86 million, or $.58 per diluted share, compared to net income of $4.10 million, or $1.30 per diluted share, for 2005. In 2006, the Company undertook several initiatives to restructure its balance sheet, which reduced earnings for 2006. The Company incurred approximately $1.4 million in prepayment penalties from the early payoff of approximately $47.2 million in Federal Home Loan Bank debt. In addition, the Bank sold securities to reduce borrowings and fund a branch sale. The security losses were approximately $1.3 million, which was partially offset by a $1.1 million pre-tax gain on the branch sale in the fourth quarter of 2006. The Company also experienced a decline in its net interest income in 2006 and an increase in its provision for loan losses in 2006 from the previous year.

Net interest income was $18.30 million for 2006, a decrease of $817,000 compared to 2005. Net interest margin, however, increased to 3.26% for 2006 from 3.16% for 2005. Interest income increased to $34.1 million for 2006 from $32.9 million last year. Average interest-earning assets decreased approximately 7.5% to $561.5 million; however, the average yield increased from 5.44% for 2005 to 6.07% for 2006. Total interest expense increased $2.03 million to $15.80 million during 2006 from $13.77 million last year. Although average interest-bearing liabilities decreased 7.2% from last year to $554.5 million, their cost increased to 3.21% during 2006 from 2.57% last year. This is largely the result of increased rates on money market accounts, certificates of deposit and borrowings.

The provision for loan losses was $1.33 million in 2006 and $775,000 in 2005. The higher provision for loan losses in 2006 is a result of increased bankruptcy filings by bank customers associated with recent bankruptcy law changes and additional specific reserves on commercial loans. Net charge-offs were $626,000, or 0.15% of total average loans, in 2006, compared to $929,000, or 0.23% of total average loans, in 2005. Non-performing loans totaled $8.4 million at December 31, 2006, compared to $8.5 million at December 31, 2005. The allowance for loan losses to total loans was 1.16% at December 31, 2006.

Total non-interest income was $7.85 million for 2006 and $8.37 million for 2005. Non-interest income for 2006 includes $1.10 million from a branch sale and net security losses of $1.34 million, compared to a $101,000 security gain in 2005. Other non-interest income was $8.1 million in 2006, compared to $8.3 million in 2005.

Total non-interest expense was $23.31 for 2006, compared to $21.87 million for 2005. Most of the increase is due to Federal Home Loan Bank prepayment penalties of $1.36 million and additional marketing and printing expenses in 2006 related to the Company's new brand launch.

On December 19, 2006 the Board of Directors declared a dividend of $0.27 per share, payable January 26, 2007 to shareholders of record on December 31, 2006. This amount of dividend represents a 3.8% increase from the fourth quarter of 2005.

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