NORWICH – NBT Bancorp Inc. (NBT) (NASDAQ: NBTB) reported today that net income per diluted share for the three months ended June 30, 2008 was $0.45 per share, up $0.09, or 25.0%, from $0.36 per share for the three months ended June 30, 2007. Return on average assets and return on average equity were 1.12% and 14.49%, respectively, for the three months ended June 30, 2008, compared with 0.95% and 11.90%, respectively, for the three months ended June 30, 2007. Net income for the three months ended June 30, 2008 was $14.7 million, up $2.6 million, or 21.5%, from the three months ended June 30, 2007. The increase in net income for the three months ended June 30, 2008 compared with the three months ended June 30, 2007 was primarily the result of an increase in net interest income, an increase in noninterest income, and a decrease in the provision for loan and lease losses, partially offset by an increase in noninterest expense.

Net income per diluted share for the six months ended June 30, 2008 was $0.88 per share, up $0.11, or 14.3%, from $0.77 per share for the six months ended June 30, 2007. Return on average assets and return on average equity were 1.10% and 14.09%, respectively, for the six months ended June 30, 2008, compared with 1.04% and 12.98%, respectively, for the six months ended June 30, 2007. Net income for the six months ended June 30, 2008 was $28.4 million, up $2.2 million, or 8.3%, from the six months ended June 30, 2007. The increase in net income for the six months ended June 30, 2008 compared with the six months ended June 30, 2007 was primarily the result of increases in net interest income and noninterest income, partially offset by an increase in noninterest expense.

 NBT President and CEO Martin A. Dietrich said: “We are very pleased with our earnings through the first six months of 2008. Even though the economy is creating unique challenges for the banking industry, we were able to post record earnings per share through the first half of this year. We continue to see growth in noninterest income, which was up 17.3% for the second quarter of 2008, compared with the second quarter of 2007, primarily due to our continued focus on fee initiatives and other areas of noninterest income. Our net interest margin continues to climb despite the difficult rate environment. Our net interest margin was 3.94% for the second quarter of 2008, up from 3.84% for the first quarter of 2008 and up from 3.63% for the second quarter of 2007. This increase, coupled with the continued growth in our earning assets, has resulted in a 4.4% increase in net interest income over the first quarter of 2008 and in an 11.2% increase over the second quarter of 2007. In addition, we maintain capital levels in excess of regulatory standards for “well-capitalized” institutions. As of June 30, 2008, NBT’s ratio of core capital to tangible assets stands at 7.23%, while the applicable regulatory standard to be determined as “well-capitalized” is 5%. We have also seen improvement in our asset quality. Our delinquency ratio improved to 0.68% for the period ending June 30, 2008, compared with 0.85% for the period ending June 30, 2007. Solid operating results from all areas of the bank have contributed to our strong first half performance.”

Loan and Lease Quality and Provision for Loan and Lease Losses

Nonperforming loans at June 30, 2008 were $22.8 million or 0.63% of total loans and leases compared with $30.4 million or 0.87% at March 31, 2008, and $34.4 million or 1.00% at June 30, 2007. The decrease in nonperforming loans at June 30, 2008 was primarily the result of $7.8 million in net charge-offs during the second quarter related primarily to one large commercial loan, which had been previously identified and reserved for in 2007. The allowance for loan and lease losses totaled $54.5 million at June 30, 2008, as compared with $56.5 million at March 31, 2008, and $57.1 million at June 30, 2007.

The Company recorded a provision for loan and lease losses of $5.8 million during the second quarter of 2008 compared with $6.5 million and $9.8 million for the three months ending March 31, 2008 and June 30, 2007, respectively. Net charge-offs totaled $7.8 million for the three month period ending June 30, 2008, up from $4.2 million for the three months ending March 31, 2008, and up from $3.3 million for the three months ended June 30, 2007. The decrease in the provision for loan and lease losses for the three months ended June 30, 2008 was due primarily to improvement in nonperforming and classified loans. The increase in net charge-offs for the three months ended June 30, 2008 was due primarily to a charge-off related to one large commercial loan, which had been previously identified and reserved for in 2007. Net charge-offs to average loans and leases for the three months ended June 30, 2008 were 0.88%, compared with 0.48% for the three months ended March 31, 2008 and 0.38% for the three months ended June 30, 2007. The Company’s allowance for loan and lease losses was 1.51% of loans and leases at June 30, 2008, compared with 1.61% at March 31, 2008 and 1.66% at June 30, 2007.

The Company recorded a provision for loan and lease losses of $12.3 million during the six months ended June 30, 2008 as compared with $11.9 million for the six months ended June 30, 2007. Net charge-offs totaled $12.0 million for the six months ended June 30, 2008, up from $5.4 million for the same period a year ago. The increase in net charge-offs for the six months ended June 30, 2008 was due primarily to additional charge-offs in the first and second quarters of 2008 related to one large commercial loan, which had been previously identified and reserved for in 2007. Net charge-offs to average loans and leases for the six months ended June 30, 2008 were 0.68%, compared with 0.32% for the six months ended June 30, 2007.

Net Interest Income

Net interest income was up 11.2% to $46.0 million for the three months ended June 30, 2008 compared with $41.4 million for the three months ended June 30, 2007. The Company’s fully taxable equivalent (FTE) net interest margin increased from 3.63% for the three months ended June 30, 2007 to 3.94% for the three months ended June 30, 2008. In addition, the Company experienced a 2.7% growth in average earning assets for the three months ending June 30, 2008 as compared to the three months ending June 30, 2007, due primarily to an increase in average loans and leases. Although the yield on interest earning assets decreased 44 basis points, the yield on interest bearing liabilities declined 88 basis points, which contributed to the increase in the net interest margin for the three months ended June 30, 2008 compared to the same period for 2007. The yield on money market deposit accounts declined from 3.44% for the three months ended June 30, 2007 to 1.65% for the three months ended June 30, 2008, while the yield on time deposits decreased 85 basis points for the same period. The yield on short term borrowings declined 255 basis points for the three months ended June 30, 2008 as compared to the three months ended June 30, 2007 as a result of the 325 basis points drop in the Fed Funds Target Rate from 5.25% at June 30, 2007 to 2.00% at June 30, 2008.

Net interest income was up 9.9% to $90.1 million for the six months ended June 30, 2008 compared with $82.0 million for the six months ended June 30, 2007. The Company’s FTE net interest margin increased from 3.63% for the six months ended June 30, 2007 to 3.89% for the six months ended June 30, 2008. In addition, the Company experienced a 2.2% growth in average earning assets for the six months ending June 30, 2008 as compared to the six months ending June 30, 2007 due primarily to an increase in average loans and leases. Although the yield on interest earning assets decreased 34 basis points, the yield on interest bearing liabilities declined 69 basis points, which contributed to the increase in the net interest margin from the six months ended June 30, 2007. The yield on money market deposit accounts declined from 3.44% for the six months ended June 30, 2007 to 2.01% for the six months ended June 30, 2008, while the yield on time deposits decreased 58 basis points for the same period. The yield on short term borrowings declined 205 basis points for the six months ended June 30, 2008 as compared to the six months ended June 30, 2007 as a result of the 325 basis points drop in the Fed Funds Target Rate from 5.25% at June 30, 2007 to 2.00% at June 30, 2008.

Noninterest Income

Noninterest income for the three months ended June 30, 2008 was $16.4 million, up $2.4 million or 17.3% from $14.0 million for the same period in 2007. The increase in noninterest income was due primarily to an increase in fees from service charges on deposit accounts and ATM and debit cards, which collectively increased $2.2 million as the Company continued to focus on enhancing fee income through various initiatives. In addition, trust administration income increased $0.3 million for the three month period ended June 30, 2008, compared with the same period in 2007. This increase stems primarily from an increase in customer accounts resulting from successful business development. Broker/dealer and insurance revenue increased approximately $0.3 million for the three month period ended June 30, 2008 as we expanded our sales force and increased the number of accounts being serviced. Other noninterest income decreased $0.4 million for the three month period ended June 30, 2008, compared with the same period in 2007. Net securities gains for the three month periods ended June 30, 2008 and 2007 were nominal and had no significant effect on noninterest income.

Noninterest income for the six months ended June 30, 2008 was $32.5 million, up $5.8 million or 21.9% from $26.7 million for the same period in 2007. The increase in noninterest income was due primarily to an increase in fees from service charges on deposit accounts and ATM and debit cards, which collectively increased $4.4 million as the Company focused on enhancing fee income through various initiatives. In addition, trust administration income increased $0.6 million for the six month period ended June 30, 2008, compared with the same period in 2007. This increase stems primarily from an increase in customer accounts resulting from successful business development. Broker/dealer and insurance revenue increased approximately $0.3 million for the six month period ended June 30, 2008 as we expanded our sales force and increased the number of accounts being serviced. Net securities gains for the six month periods ended June 30, 2008 and 2007 were nominal and had no significant effect on noninterest income.