NBT Bancorp Inc. Announces Annual Earnings of $50.3 Million; Declares Cash Dividend; Authorizes Buyback of an Additional 1,000,000 Shares

Market Wire, January, 2008

NBT Bancorp Inc. (NBT) (NASDAQ: NBTB) reported today that net income for the year ended December 31, 2007 was $50.3 million, down $5.6 million, or 10.0%, from net income of $55.9 million reported in 2006. Net income per diluted share for the year ended December 31, 2007 was $1.51 per share, compared with $1.64 per share for 2006. Return on average assets and return on average equity were 0.98% and 12.60%, respectively, for the year ended December 31, 2007, compared with 1.14% and 14.47%, respectively, for 2006. The decrease in net income for the year ended December 31, 2007 was primarily the result of a $20.7 million increase in the provision for loan and lease losses from the prior year, due to increases in nonperforming loans and charge-offs. The increase in the provision for loan and lease losses was partially offset by an $11.1 million, or 22.8%, increase in noninterest income for the year ended December 31, 2007 as compared to December 31, 2006. In addition, net interest income for the year ended December 31, 2007 was $165.0 million, up $1.2 million or 0.7% from net interest income of $163.8 million reported for the same period in 2006.

Net income for the three months ended December 31, 2007 was $9.0 million, down $4.7 million, or 34.2%, from net income of $13.6 million reported for the same period in 2006. Net income per diluted share for the three months ended December 31, 2007 was $0.28 per share, compared with $0.40 per share for the same period in 2006. Return on average assets and return on average equity were 0.69% and 9.06%, respectively, for the three months ended December 31, 2007, compared with 1.07% and 13.31%, respectively, for the same period in 2006. The decrease in net income for the three months ended December 31, 2007 was primarily the result of a $10.0 million increase in the provision for loan and lease losses compared to the same period in 2006. The increase in the provision for loan and lease losses was partially offset by a $4.2 million, or 33.7%, increase in noninterest income for the three months ended December 31, 2007 as compared to the three months ended December 31, 2006.

The comparability of financial information is affected by the acquisition of CNB Bancorp, Inc. ("CNB"). Operating results include the operations of CNB from the date of acquisition, which was February 10, 2006.

NBT President and CEO Martin A. Dietrich said, "The financial services industry as a whole was faced with challenging market conditions and credit-quality issues in 2007. While the dollar amount of NBT's nonperforming loans in the fourth quarter was similar to that of the third quarter, the potential number of problem loans in our portfolio decreased 9% from the third quarter and is now consistent with levels from the first half of 2007. We remain confident that our conservative credit approach and disciplined underwriting practices are effective. With the exception of the increase in the provision for loan and lease losses already discussed, I am pleased with the results achieved in other core areas of our business. These results include a 16% increase in noninterest income, cost controls in the form of a reduction in noninterest expenses, stable net interest income due to an increase in earning assets and the expansion of our footprint through four new branches in key growth markets. While 2008 will be another challenging year for our industry, we will continue to position ourselves for future success and strive to deliver value to our shareholders and customers."

Loan and Lease Quality and Provision for Loan and Lease Losses

Nonperforming loans at December 31, 2007 were $30.6 million or 0.88% of total loans and leases compared with $30.7 million or 0.90% at September 30, 2007, and $15.3 million or 0.45% of total loans and leases at December 31, 2006. The increase in 2007 was primarily due to the addition of one owner-occupied commercial real estate relationship and several dairy credits during the second quarter. The Company recorded a provision for loan and lease losses of $13.4 million during the fourth quarter of 2007 compared with $3.5 million for the fourth quarter of 2006. As previously disclosed, within the $13.4 million of provision for loan and lease losses during the fourth quarter was approximately $8.6 million related to one large commercial loan. During the quarter, $6.0 million of the loan was charged off. As also previously disclosed, this loan was current as of September 30, 2007, but subsequently became past due 30 days for the first time, and was being closely monitored.

Net charge-offs totaled $14.1 million and $3.5 million during the fourth quarters of 2007 and 2006, and $26.5 million and $8.7 million for the years ended December 31, 2007 and 2006, respectively. Net charge-offs to average loans and leases for the year ended December 31, 2007, were 0.77%, compared with 0.26% for the year ended December 31, 2006. The Company's allowance for loan and lease losses was 1.57% of loans and leases at December 31, 2007, compared with 1.48% at December 31, 2006.