President's Letter

Detective Joe Friday used to say on the show Dragnet, “All we want are the facts.” Here are the NB&T Financial facts: Our 2012 earnings of $3.9 million were slightly more than 2011’s $3.8 million. We addressed identified loan problems, as evidenced by a $1.3 million increase in loan loss provision, a $1.5 million (12.7%) decrease in non-performing loans, and a $2.2 million (62.3%) reduction in real estate owned properties. We operated the company on $1.6 million less in non-interest expense than in 2011, which offset the $1.3 million reduction in net interest income. We did not make our budget and, as a result, paid no incentive compensation. We continue to operate in markets with high unemployment, which makes our results, in my opinion, reflective of the high caliber of personnel your company enjoys. I am proud of all our employees and their efforts.

Our primary challenges in 2013 are the same ones we have faced the last two years. First, this low rate environment continues to compress our interest margin, and the Federal Reserve has stated that it sees no rate increases through 2014. Rates on earning assets continue to decline while there is little room to decrease deposit rates. Second, maintaining credit quality requires increased efforts by our loan personnel. As I said in last year’s letter to you, we intended to remain focused on reducing the level of troubled assets on our books. We did lower those troubled assets but we must remain diligent. Lastly, governmental regulation continues to escalate, which increases the costs necessary to identify, track, measure and report activities, without any apparent benefit to your company.

In spite of these challenges, our focus in 2013 is to continue earnings growth. We operate in 2013 with fewer employees, fewer branches and shorter hours at other branches. We seek new ways to operate more efficiently while simultaneously working smarter and harder to attract new customers and business.

I would be remiss if I did not recognize the years of dedication and service provided by Darlene Myers, Sandy Waits, Steve Klumb and Robert Raizk. Darlene passed away last year. She had served as a director from 1995 until her retirement in 2008. She was previously a county commissioner, and was active in farm education throughout her active life. Sandy retired in January, after 35 years of service as an employee, with her last and most significant role being Vice President and Head of Human Resources. Steve was our Senior Vice President and our Chief Lending Officer, and retired in September. Robert served as a director of the company since 1995 and resigned from the board in July.

I speak for all of our associates when I say we look forward to the challenges of 2013. We have talented individuals throughout the company who provide great service and attention. That’s what makes us a strong community bank. As shareholders you can assist us in our efforts by recommending National Bank & Trust to your family, friends and acquaintances. We promise to represent you well!

Sincerely,

John J. Limbert
President & Chief Executive Officer
NB&T Financial Group, Inc.
The National Bank and Trust Company