**CRA Decision #130**

December 15, 2005 **January 2006**

Michael J. Chewens

Senior Vice President, Chief Financial Officer

and Secretary

NBT Bancorp Inc.

52 South Broad Street

Norwich, New York 13815

Re: Application to merge City National Bank and Trust, Gloversville, New
York, with and into

NBT Bank, National Association, Norwich, New York

Control No.: 2005-NE-02-0023 Charter No.: 1354

Dear Mr. Chewens:

On December 15, 2005 the Office of the Comptroller of the Currency
("OCC") approved your proposal to merge City National Bank and Trust,
Gloversville, New York, ("CNBT"), with and into NBT Bank, National
Association, Norwich, New York, ("NBTNA"), under the title and charter
number of the latter.

This approval was granted based on a thorough review of all information
available, including commitments and representations made in the
application, the merger agreement, and those of your representatives.

The OCC considered the potential anticompetitive effects of this
proposal in light of the reduction in the number of depository and/or
lending institutions in the relevant geographic market(*s*). The OCC
also considered the report of the Department of Justice, ("DOJ"), which
found the proposed transaction, would not have a significant adverse
effect on competition subject to its letter of agreement with NBT
Bancorp; Inc., ("NBT"), holding company of NBTNA.[^1] In light of NBT's
agreement with the DOJ, consummation of this proposal will not have a
significantly adverse effect on competition in the relevant geographic
market(*s*).

The OCC reviewed the proposed transaction under the criteria of the Bank
Merger Act, 12 U.S.C. § 1828(c), and applicable OCC regulations and
policies. The OCC considered the financial and managerial resources of
the banks, their future prospects, and the convenience and needs of the
communities to be served. In addition, the Bank Merger Act requires the
OCC to consider ". . . the effectiveness of any insured depository
institution involved in the proposed merger transaction in combating
money laundering activities, including in overseas branches," 12 U.S.C.
§ 1828(c)(11). We considered these factors and found them consistent
with approval under the statutory provisions.[^2]

The Community Reinvestment Act ("CRA") requires the OCC to take into
account the applicants' record of helping to meet the credit needs of
the community, including low- and moderate-income ("LMI") neighborhoods,
when evaluating certain applications, including merger transactions that
are subject to the Bank Merger Act, 12 U.S.C. § 2903 and

12 C.F.R. § 25.29. The OCC considers the CRA performance evaluation of
each institution involved in the transaction. A review of the record of
these applicants and other information available to the OCC as a result
of its regulatory responsibilities revealed no evidence that the
applicant's record of helping to meet the credit needs of their
communities, including LMI neighborhoods, is less than satisfactory.

NBTNA's latest CRA Performance Evaluation ("PE"), dated July 6, 2004,
and issued by the OCC, assigned an "Outstanding" rating. The PE noted
NBTNA's excellent responsiveness to the credit needs of its assessment
areas and excellent distribution of loans among borrowers of different
income levels. The PE also indicated NBTNA had an overall excellent
level of qualified investments. The OCC found no evidence of illegal
discrimination or other illegal credit practices.

CNBT's latest CRA PE dated January 27, 2003, and issued by the OCC,
assigned a "Satisfactory" rating. The PE disclosed that CNBT's had a
good level of lending and a good distribution of loans among borrowers
of different income levels. No fair lending deficiencies were
identified.

While the OCC did not receive any public comments on this application,
the Federal Reserve Bank of Cleveland received comments from the same
community organization, as noted in footnote number 2, on the holding
company application related to the proposed bank merger. Using 2003 and
2004 Home Mortgage Disclosure Act ("HMDA") data, the commenter expressed
concern with CNBT's low level of home purchase mortgage lending to
minorities in the Albany Metropolitan Statistical Area ("MSA").[^3] NBT
responded that CNBT's presence in the Albany MSA is limited to one
branch located in Saratoga County, a county with very few African
Americans (only 1.36% of the county's population) and Hispanics (only
1.41% of the county's population). NBT observed that given CNBT's low
application volume in this MSA, as well as the small minority population
in this area, a statistical analysis of the data is not meaningful.

Based on 2004 HMDA data, the commenter also expressed concern with
NBTNA's overall denial rates for minorities when compared to the denial
rate for whites. NBT responded that while its denial rates for African
Americans and Hispanics were higher than the denial rate for whites,
NBTNA's denial rates compare favorably to those of all mortgage lenders
operating in the areas in which NBTNA has an office. NBT pointed out
that it has adopted a fair lending policy and provides on-going training
and education for all employees who are involved in lending operations
or who have customer contact. NBTNA has also instituted a "second look"
program for residential mortgage products that requires a manager to
review applications slated for denial to ensure that they are properly
evaluated. Additionally, NBT also noted that it conducted its own review
of 2004 HMDA data earlier this year, and made staffing changes in the
Albany MSA in order to improve the bank's performance.

The commenter also expressed concern with NBTNA's loans with rate
spreads triggering the reporting of pricing information under HMDA.[^4]
Specifically, the commenter questioned the pricing of first-lien,
closed-end home equity loans and manufactured housing loans.[^5] NBT
responded that these loans are priced based on factors such as credit
terms and other cost and risk factors. The commenter did not suggest
that rate spread loans were originated disproportionately to any
particular group.

In sum, the OCC determined that the applicant's record of performance
under the CRA was consistent with approval.

The district office must be advised in writing in advance of the desired
effective date for the merger so that the OCC may issue the necessary
certification. The effective date must follow the applicable DOJ
injunction period and any other regulatory approval.

The OCC will issue a letter certifying consummation of the transaction
when we have received:

1)  A Secretary's Certificate for each institution, certifying that a
    majority of the board of directors approved the transaction, if not
    previously provided.

2)  An executed merger agreement with Articles of Association for the
    resulting bank attached, if not previously provided.

3)  A Secretary's Certificate for each institution, certifying that the
    shareholder approvals have been obtained, if not previously
    provided.

If the merger is not consummated within one year from the approval date,
the approval shall automatically terminate, unless the OCC grants an
extension of the time period.

Please be advised that the OCC is also authorizing the resulting bank,
should the combination occur between Call Report dates, to recalculate
its legal lending limit. The new lending limit should be calculated by
using data from the last Call Report of the individual banks filed prior
to consummating the merger, as adjusted for the combination. The
resulting bank will then file a new Call Report and begin calculating
its legal lending limit according to 12 C.F.R. §32.4(a) at the end of
the quarter following consummation of the combination.

This approval and the activities and communications by OCC employees in
connection with the filing do not constitute a contract, express or
implied, or any other obligation binding upon the OCC, the United States
("U.S."), any agency or entity of the U.S, or any officer or employee of
the U. S., and do not affect the ability of the OCC to exercise its
supervisory, regulatory and examination authorities under applicable law
and regulations. The foregoing may not be waived or modified by any
employee or agent of the OCC or the U. S.

All correspondence regarding this application should reference the
control number. If you have any questions, please contact Gabriel
Butler, Licensing Analyst, at 212-790-4055.

Sincerely,

/s/ Beverly L. Evans

Beverly L. Evans

Director for District Licensing

[^1]: In reaching this conclusion, the DOJ relied on commitments made by
    NBT in a letter of agreement dated December 1, 2005. NBT agrees that
    if it closes a branch located in Fulton County or Montgomery County,
    New York, it will sell or lease such branch; to the extent NBT has
    the legal authority to do so. For a period of three months prior to
    selecting a buyer or lessor for such branch, it will issue a notice
    on a weekly or bi-weekly basis in a relevant industry
    publication(s), or any other publication as may be approved by the
    DOJ. During this notice period, NBT will accept an offer from a
    commercial bank that is equivalent to, or better than, an offer from
    a non-bank bidder. In addition, NBT will not impose any conditions
    in deeds or lease agreements that would preclude the future use of
    any closed branch by a commercial bank. These commitments will
    remain in effect for a period of three years following the
    consummation of the subject transaction.

    NBT also agrees that it will suspend the operation of any existing
    non-compete agreements with any current NBT or CNBT loan officer or
    branch manager located in either Fulton County or Montgomery County,
    New York, effective from the signing of the Letter of Agreement and
    for a period of 180 days following the consummation of the subject
    transaction. In addition, NBT agrees that it will not enter into any
    new non-compete agreements with any current NBT or CNBT loan officer
    or branch manager located in either Fulton County or Montgomery
    County effective from the signing of the Letter of Agreement and for
    a period of 180 days following the consummation of the subject
    transaction.

    The DOJ agrees that it will advise the Board of Governors of the
    Federal Reserve System and the OCC, that if the commitments
    specified above are met, it believes that these transactions will
    not have a significantly adverse effect on competition. Pursuant to
    12 U.S.C. § 1849(b), as amended, and 12 U.S.C. § 1828(c), DOJ will
    concur in authorizing the consummation of this transaction, subject
    to the preceding commitments, 15 days on or after the date of
    approval.

[^2]: The Federal Reserve Bank of Cleveland received comments from one
    community organization on a related application expressing concern
    that NBTNA plans to close or consolidate branches, but has not yet
    disclosed specific information on these closings. NBT Bancorp Inc.
    ("NBT") has represented that the process of identifying branch
    closings is underway. NBT has stated it will adhere to its
    obligations under the Federal Deposit Insurance Act and the
    agencies' Joint Policy Statement Regarding Branch Closings.
    [See]{.underline} 12 U.S.C. § 1831r-1; 64 Fed. Reg. 34,844 (1999).

    Additionally, NBTNA's branch distribution system and record of
    branch openings and closings were reviewed as part of the OCC's most
    recent Community Reinvestment Act ("CRA") Performance Evaluation.
    The OCC concluded that service delivery systems were reasonably
    accessible to geographies and individuals of different income levels
    in the bank's assessment areas. In addition, any branch closings
    resulting from this merger will be considered in the bank's next CRA
    examination.

[^3]: It is important to note that HMDA data alone are not adequate to
    provide a basis for concluding that a bank is engaged in lending
    discrimination or in indicating whether its level of lending is
    sufficient. HMDA data do not take into consideration borrower
    creditworthiness, housing prices, and other factors relevant in each
    of the individual markets, nor do they fully reflect the range of a
    bank's lending activities or efforts. Nevertheless, denial and
    pricing disparities are of concern to the OCC and are evaluated in
    fair lending examinations.

[^4]: NBTNA had reported 164 such loans in 2004.

[^5]: The commenter also expressed concerns with possible errors
    regarding specific loans. We note that the application comment
    process is a poor forum for resolving concerns with respect to
    specific loans reported by an institution under HMDA. In any event,
    NBT provided detailed information to the commenter on these loans.