NB&T Financial Reports Earnings for 2013

FOR IMMEDIATE RELEASE

Contact:

Craig Fortin
NB&T Financial Group, Inc.
937-283-3002

Dated: January 21, 2014

NB&T Financial Group, Inc. (Nasdaq: NBTF), parent company of The National Bank and Trust Company ("NB&T"), Wilmington, Ohio, announced net income for 2013 of $4.24 million, or $1.24 per share, an increase of 9% compared to net income of $3.88 million for 2012, or $1.13 per share. A net interest income decrease of approximately $1.5 million in 2013 was more than offset by decreases in the loan loss provision of $1.7 million and non-interest expenses of $1.1 million in 2013 compared to 2012. Total non-interest income in 2013 was down $899,000 from 2012 primarily due to two items in 2012: 1) termination of NB&T’s single-family FDIC loss share guarantee for approximately $405,000 and 2) realization of non-taxable income of approximately $359,000 on a bank-owned life insurance death benefit in excess of surrender value.

Net income for the fourth quarter of 2013 was $1.0 million, or $.30 per share, compared to $1.1 million, or $.32 per share, for the same period in 2012.

President & CEO, John Limbert, commented, “Like most banks in this current rate environment, we were challenged in 2013 with lower yields on our loans and investments. We were able to offset the lost revenue by reducing expenses and our loan loss provision. The lower loan loss provision is a result of lower charge-offs in 2013 compared to 2012, lower other real estate owned balances, and an almost 50% drop in total nonperforming loans.”

Net interest income was $20.6 million for 2013, compared to $22.1 million for 2012. Net interest margin decreased to 3.37% for 2013, compared to 3.48% for the previous year. Net interest margin is down primarily as a result of loan and investment yields continuing to decrease more in this low interest rate environment than our cost of funds. Interest income on loans and investments of $22.5 million in 2013 was down $2.8 million from $25.3 million in 2012. Interest expense, however, only fell $1.3 million in 2013 to $1.8 million from $3.1 million in 2012. Net interest income for the fourth quarter of 2013 was $5.1 million, compared to $5.7 million for 2012.

The provision for loan losses for 2013 was $2.6 million, compared to $4.3 million the previous year. Net charge-offs were $3.3 million for 2013, compared to $4.2 million in 2012. Net charge-offs for the fourth quarter of 2013 were $2.6 million, compared to $2.1 million in the same quarter last year. During the fourth quarter, NB&T charged off $2.4 million on one commercial loan that previously had a specific reserve of $2.0 million. The fourth quarter liquidation of the collateral securing that loan yielded lower proceeds than previously projected. Primarily as a result of this charge-off and resolution of other problem loans in 2013, non-performing loans declined to $5.8 million at December 31, 2013, compared to $10.6 million at December 31, 2012.

Total non-interest income was $9.6 million for 2013, compared to $10.5 million for 2012. The decrease is primarily due to the non-recurring income of $764,000 in 2012 related to the termination of the single-family FDIC loss share guarantee and the bank-owned life insurance death benefit. Non-interest income for the fourth quarter of 2013 was $2.3 million, compared to $2.1 million for the same period last year. In the fourth quarter of 2013, NB&T realized gains on sales of securities of $227,000.

Total non-interest expense was $22.4 million for 2013, compared to $23.5 million in 2012. The decline in expense is due to continued focus on expense reduction, primarily in the areas of personnel and processing efficiency. In addition, net costs associated with the maintenance of other real estate have declined in the past year as the number of properties declined. For the fourth quarter of 2013, total non-interest expense was $5.4 million, compared to $5.7 million for the same period in 2012.

On December 17, 2013, the Board of Directors declared a dividend of $0.30 per share, payable January 27, 2014 to shareholders of record on December 31, 2013.

Also, at their January 21, 2014 meeting, the Board of Directors increased the number of directors to nine. At the same meeting, the Board appointed James Reynolds, President of Wilmington College, as a director effective at the February 2014 Board of Directors’ meeting.

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