NBT Bancorp Inc. Announces Record Annual Earnings of $1.80 per Diluted Share, Up 19.2% From 2007; Declares Cash Dividend

NBT Bancorp Inc. (NBT) (NASDAQ: NBTB) reported today that net income for the year ended December 31, 2008 was $58.4 million, up $8.1 million, or 15.9%, from net income of $50.3 million reported in 2007. Net income per diluted share for the year ended December 31, 2008 was $1.80 per share, compared with $1.51 per share for 2007. Return on average assets and return on average equity were 1.11% and 14.16%, respectively, for the year ended December 31, 2008, compared with 0.98% and 12.60%, respectively, for 2007.

Net income for the three months ended December 31, 2008 was $14.9 million, up $5.9 million, or 65.8%, from net income of $9.0 million reported for the same period in 2007. Net income per diluted share for the three months ended December 31, 2008 was $0.45 per share, compared with $0.28 per share for the same period in 2007. Return on average assets and return on average equity were 1.11% and 13.88%, respectively, for the three months ended December 31, 2008, compared with 0.69% and 9.06%, respectively, for the same period in 2007.

NBT President and CEO Martin Dietrich said: "Although 2008 presented many challenges for the financial services industry and the economy in general, I am extremely pleased with the record earnings we achieved in this difficult environment. While the current financial crisis has caused many banks to struggle, we were able to post record diluted earnings per share of $1.80 and record net income of $58.4 million. In addition, the return on our stock, including reinvested dividends, was up over 26% as of December 31, 2008, compared with December 31, 2007. Our strong 2008 performance can be attributed to many factors, including growth in net interest income resulting from strategic management of our earning assets and interest bearing liabilities. Our net interest margin was 3.95% in 2008, compared with 3.61% for 2007. In addition, our efforts to grow our noninterest income resulted in a 20.1% increase over 2007. We have also seen several asset quality indicators improve from 2007. Our nonperforming assets were down approximately 12.8% from 2007, and net charge-offs were down approximately 14.0% from last year. During 2008, we continued our controlled growth initiative by opening three new branches within our footprint. While 2009 may be a very challenging year given the economic environment, I am confident in our ability to successfully navigate through the challenges ahead and deliver long-term value to our shareholders and customers."

Loan and Lease Quality and Provision for Loan and Lease Losses

Nonperforming loans at December 31, 2008 were $26.5 million or 0.73% of total loans and leases compared with $30.6 million or 0.88% at December 31, 2007. The decrease in nonperforming loans at December 31, 2008 from December 31, 2007 was primarily the result of net charge-offs during the 12 month period ending December 31, 2008 related to two large commercial loans, both of which had been previously identified and reserved for in 2007. The allowance for loan and lease losses totaled $58.6 million at December 31, 2008, compared with $54.2 million at December 31, 2007.

The Company recorded a provision for loan and lease losses of $27.2 million for the year ended December 31, 2008, compared with $30.1 million for the 12 months ended December 31, 2007. Net charge-offs totaled $22.8 million for the 12 months ended December 31, 2008, down from $26.5 million for the same period a year ago. The decrease in net charge-offs for the 12 months ended December 31, 2008 was due primarily to charge-offs in 2007 related to one large commercial real estate loan. Net charge-offs to average loans and leases for the 12 months ended December 31, 2008 were 0.64%, compared with 0.77% for the 12 months ended December 31, 2007.

The Company recorded a provision for loan and lease losses of $7.7 million during the fourth quarter of 2008 compared with $13.4 million for the three months ending December 31, 2007. The decrease in the provision for loan and lease losses for the three months ended December 31, 2008, compared with the three months ended December 31, 2007, was due primarily to the provision in the fourth quarter of 2007 related to one large commercial non-real estate loan. Net charge-offs totaled $5.0 million for the three month period ending December 31, 2008, down from $14.1 million for the three months ended December 31, 2007. The decrease in net charge-offs for the three months ended December 31, 2008, compared with the three months ended December 31, 2007, was due primarily to charge-offs in the fourth quarter of 2007 related to the aforementioned commercial real estate loan. Annualized net charge-offs to average loans and leases for the three months ended December 31, 2008 were 0.54%, compared with 1.62% for the three months ended December 31, 2007. The Company's allowance for loan and lease losses was 1.60% of loans and leases at December 31, 2008, compared with 1.57% at December 31, 2007.