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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2008

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from/to





NB&T FINANCIAL GROUP,
INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Ohio                                                           |  | 31-1004998                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)

48 N. South Street, Wilmington, Ohio 45177

(Address of principal executive offices) (Zip Code)

Registrants telephone number: (937) 382-1441





Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the
definition of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                                              |  |                             
|--------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈                    |  | Accelerated Filer   ̈        
|Non-accelerated filer   ̈                      |  | Smaller Reporting Company  x
|(Do not check if a smaller reporting company) |  |                             

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the last practicable date: As of May 5, 2008, 3,170,301 common shares were issued and outstanding.









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NB&T FINANCIAL GROUP, INC.

March 31, 2008 Form 10-Q

Table of Contents



|                  |  |                                                                                       |  |     
|----------------- |  | ------------------------------------------------------------------------------------- |  | ----
|                  |  |                                                                                       |  | Page
|PART I           
|                  |  |                                                                                      
|Item 1:           |  | Financial Statements                                                                  |  |     
|                  |  | Condensed Consolidated Balance Sheets                                                 |  | 3   
|                  |  | Condensed Consolidated Statements of Income                                           |  | 4   
|                  |  | Condensed Consolidated Statements of Cash Flows                                       |  | 5   
|                  |  | Notes to Condensed Consolidated Financial Statements                                  |  | 6   
|                  |  | Report of Independent Registered Public Accounting Firm                               |  | 11  
|                  |  |                                                                                      
|Item 2:           |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 12  
|                  |  |                                                                                      
|Item 3:           |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 16  
|                  |  |                                                                                      
|Item 4:           |  | Controls and Procedures                                                               |  | 17  
|                 
|Part II          
|                  |  |                                                                                      
|Item 1:           |  | Legal Proceedings                                                                     |  | 19  
|                  |  |                                                                                      
|Item 1A:          |  | Risk Factors                                                                          |  | 19  
|                  |  |                                                                                      
|Item 2:           |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 19  
|                  |  |                                                                                      
|Item 3:           |  | Defaults Upon Senior Securities                                                       |  | 19  
|                  |  |                                                                                      
|Item 4:           |  | Submission of Matters to a Vote of Security Holders                                   |  | 19  
|                  |  |                                                                                      
|Item 5:           |  | Other Information                                                                     |  | 19  
|                  |  |                                                                                      
|Item 6:           |  | Exhibits and Reports on Form 8-K                                                      |  | 19  
|                  |  |                                                                                      
|Signatures        |  |                                                                                       |  | 21  
|                  | 
|Index to Exhibits |  | 22                                                                                   



2



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NB&T Financial Group, Inc.

Condensed Consolidated Balance Sheets



|                                                                                                                                                         |  |               |         |   |                  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|(Dollars in thousands)                                                                                                                                   |  | March 31,2008 |         |   | December 31,2007 |  
|                                                                                                                                                         |  | (Unaudited)   |         |   |                  |  
|Assets                                                                                                                                                   |  |               |         |   |                  |   |         |  
|Cash and due from banks                                                                                                                                  |  | $             | 10,810  |   |                  | $ | 12,707  |  
|Interest-bearing deposits                                                                                                                                |  |               | 15,522  |   |                  |   | 10,699  |  
|Federal funds sold                                                                                                                                       |  |               | 16,741  |   |                  |   | 2,749   |  
|                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                |  |               | 43,073  |   |                  |   | 26,155  |  
|                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Interest-bearing time deposits                                                                                                                           |  |               | 10,000  |   |                  |   |        |  
|Securities - available-for-sale                                                                                                                          |  |               | 89,311  |   |                  |   | 89,275  |  
|Loans held for sale                                                                                                                                      |  |               | 222     |   |                  |   | 1,503   |  
|Loans, net of allowance for loan losses of $3,534 and $3,594                                                                                             |  |               | 338,164 |   |                  |   | 354,169 |  
|                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total loans                                                                                                                                              |  |               | 338,336 |   |                  |   | 355,672 |  
|Premises and equipment                                                                                                                                   |  |               | 16,230  |   |                  |   | 15,453  |  
|Federal Reserve and Federal Home Loan Bank stock                                                                                                         |  |               | 9,131   |   |                  |   | 9,023   |  
|Earned income receivable                                                                                                                                 |  |               | 2,920   |   |                  |   | 3,288   |  
|Goodwill and other intangibles                                                                                                                           |  |               | 4,874   |   |                  |   | 4,930   |  
|Bank-owned life insurance                                                                                                                                |  |               | 13,689  |   |                  |   | 13,564  |  
|Other assets                                                                                                                                             |  |               | 2,049   |   |                  |   | 1,562   |  
|                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total assets                                                                                                                                             |  | $             | 529,663 |   |                  | $ | 518,922 |  
|                                                                                                                                                         |  |               |         |   |                  |   |         |  
|                                                                                                                                                         |  |              
|Liabilities and Stockholders Equity                                                                                                                     |  |               |         |   |                  |   |         |  
|                                                                                                                                                         |  |              
|Liabilities                                                                                                                                              |  |               |         |   |                  |   |         |  
|Deposits                                                                                                                                                 |  |               |         |   |                  |   |         |  
|Demand                                                                                                                                                   |  | $             | 59,711  |   |                  | $ | 59,804  |  
|Savings, NOW and Money Market                                                                                                                            |  |               | 191,283 |   |                  |   | 192,295 |  
|Time                                                                                                                                                     |  |               | 174,899 |   |                  |   | 168,155 |  
|                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total deposits                                                                                                                                           |  |               | 425,893 |   |                  |   | 420,254 |  
|                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Short-term borrowings                                                                                                                                    |  |               | 796     |   |                  |   | 722     |  
|Long-term debt                                                                                                                                           |  |               | 39,810  |   |                  |   | 34,810  |  
|Interest payable and other liabilities                                                                                                                   |  |               | 3,904   |   |                  |   | 4,253   |  
|                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total liabilities                                                                                                                                        |  |               | 470,403 |   |                  |   | 460,039 |  
|                                                                                                                                                         |  |               |         |   |                  |   |         |  
|                                                                                                                                                         |  |              
|Commitments and Contingencies                                                                                                                            |  |               |         |   |                  |   |         |  
|                                                                                                                                                         |  |              
|Stockholders Equity                                                                                                                                     |  |               |         |   |                  |   |         |  
|Preferred stock, no par value, authorized 100,000 shares; none issued Common stock, no par value; authorized 6,000,000 shares; issued 
3,818,950 shares |  |               | 1,000   |   |                  |   | 1,000   |  
|Additional paid-in capital                                                                                                                               |  |               | 10,335  |   |                  |   | 10,380  |  
|Retained earnings                                                                                                                                        |  |               | 54,919  |   |                  |   | 54,810  |  
|Unearned employee stock ownership plan (ESOP) shares                                                                                                     |  |               | (699    | ) |                  |   | (749    | )
|Accumulated other comprehensive income                                                                                                                   |  |               | 1,013   |   |                  |   | 658     |  
|Treasury stock; 648,649 shares - 2008 and 640,638 shares - 2007                                                                                          |  |               | (7,306  | ) |                  |   | (7,216  | )
|                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                               |  |               | 59,260  |   |                  |   | 58,883  |  
|                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                               |  | $             | 529,663 |   |                  | $ | 518,922 |  
|                                                                                                                                                         |  |               |         |   |                  |   |         |  

See Notes to Condensed Consolidated Financial Statements



3



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NB&T Financial Group, Inc.

Condensed Consolidated Statements of Income



|                                                              |  |                             |       |      |   |      
|------------------------------------------------------------- |  | --------------------------- | ----- | ---- | - | -----
|                                                              |  | Three Months EndedMarch 31,
|(Dollars in thousands, except per share amounts)              |  | 2008                        |       | 2007
|                                                              |  | (Unaudited)                 |       |     
|Interest and Dividend Income                                  |  |                             |       |      |   |      
|Loans                                                         |  | $                           | 5,950 |      | $ | 6,946
|Securities-taxable                                            |  |                             | 759   |      |   | 413  
|Securities-tax-exempt                                         |  |                             | 392   |      |   | 418  
|Federal funds sold and other                                  |  |                             | 270   |      |   | 97   
|Dividends on Federal Home Loan and Federal Reserve Bank stock |  |                             | 120   |      |   | 142  
|                                                              |  |                             |       |      |   |      
|Total interest and dividend income                            |  |                             | 7,491 |      |   | 8,016
|                                                              |  |                             |       |      |   |      
|Interest Expense                                              |  |                             |       |      |   |      
|Deposits                                                      |  |                             | 2,522 |      |   | 3,083
|Short-term borrowings                                         |  |                             | 4     |      |   | 18   
|Long-term debt                                                |  |                             | 510   |      |   | 532  
|                                                              |  |                             |       |      |   |      
|Total interest expense                                        |  |                             | 3,036 |      |   | 3,633
|                                                              |  |                             |       |      |   |      
|Net Interest Income                                           |  |                             | 4,455 |      |   | 4,383
|                                                              |  |                            
|Provision for Loan Losses                                     |  |                             | 95    |      |   | 5    
|                                                              |  |                             |       |      |   |      
|Net Interest Income After Provision for Loan Losses           |  |                             | 4,360 |      |   | 4,378
|                                                              |  |                             |       |      |   |      
|Non-interest Income                                           |  |                             |       |      |   |      
|Trust income                                                  |  |                             | 235   |      |   | 229  
|Service charges and fees                                      |  |                             | 811   |      |   | 747  
|Insurance agency commissions                                  |  |                             | 742   |      |   | 704  
|Other                                                         |  |                             | 489   |      |   | 351  
|                                                              |  |                             |       |      |   |      
|Total non-interest income                                     |  |                             | 2,277 |      |   | 2,031
|                                                              |  |                             |       |      |   |      
|Non-interest Expense                                          |  |                             |       |      |   |      
|Salaries and employee benefits                                |  |                             | 3,071 |      |   | 2,878
|Net occupancy expense                                         |  |                             | 511   |      |   | 427  
|Equipment and data processing expense                         |  |                             | 675   |      |   | 612  
|Professional fees                                             |  |                             | 345   |      |   | 359  
|Marketing expense                                             |  |                             | 73    |      |   | 109  
|State franchise tax                                           |  |                             | 193   |      |   | 185  
|Amortization of intangibles                                   |  |                             | 56    |      |   | 147  
|Other                                                         |  |                             | 466   |      |   | 490  
|                                                              |  |                             |       |      |   |      
|Total non-interest expense                                    |  |                             | 5,390 |      |   | 5,207
|                                                              |  |                             |       |      |   |      
|Income Before Income Tax                                      |  |                             | 1,247 |      |   | 1,202
|Provision for Income Taxes                                    |  |                             | 230   |      |   | 196  
|                                                              |  |                             |       |      |   |      
|Net Income                                                    |  | $                           | 1,017 |      | $ | 1,006
|                                                              |  |                             |       |      |   |      
|Basic Earnings Per Share                                      |  | $                           | .32   |      | $ | .32  
|                                                              |  |                             |       |      |   |      
|Diluted Earnings Per Share                                    |  | $                           | .32   |      | $ | .32  
|                                                              |  |                             |       |      |   |      
|Dividends Declared Per Share                                  |  | $                           | .29   |      | $ | .28  
|                                                              |  |                             |       |      |   |      

See Notes to Condensed Consolidated Financial Statements



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NB&T Financial Group, Inc.

Condensed Consolidated Statements of Cash Flows



|                                                          |  |                             |         |   |      |   |        |  
|--------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------ | -
|                                                          |  | Three Months Ended,March 31 |        
|(Dollars in thousands)                                    |  | 2008                        |         |   | 2007 |  
|                                                          |  | (Unaudited)                 |         |   |      |  
|Operating Activities                                      |  |                             |         |   |      |   |        |  
|Net income                                                |  | $                           | 1,017   |   |      | $ | 1,006  |  
|Items not requiring (providing) cash                      |  |                             |         |   |      |   |        |  
|Depreciation and amortization                             |  |                             | 428     |   |      |   | 476    |  
|Provision for loan losses                                 |  |                             | 95      |   |      |   | 5      |  
|Amortization of premiums and discounts on securities      |  |                             | (111    | ) |      |   | 97     |  
|FHLB stock dividends                                      |  |                             | (109    | ) |      |   |       |  
|Net change in:                                            |  |                             |         |   |      |   |        |  
|Loans held for sale                                       |  |                             | 1,281   |   |      |   | (384   | )
|Other assets and liabilities                              |  |                             | (698    | ) |      |   | (25    | )
|                                                          |  |                             |         |   |      |   |        |  
|Net cash provided by operating activities                 |  |                             | 1,903   |   |      |   | 1,175  |  
|                                                          |  |                             |         |   |      |   |        |  
|Investing Activities                                      |  |                             |         |   |      |   |        |  
|Purchases of available-for-sale securities                |  |                             | (10,016 | ) |      |   | (5,590 | )
|Proceeds from maturities of available-for-sale securities |  |                             | 10,628  |   |      |   | 9,435  |  
|Purchases of interest-bearing time deposits               |  |                             | (10,000 | ) |      |   |       |  
|Net change in loans                                       |  |                             | 15,910  |   |      |   | 8,315  |  
|Purchase of premises and equipment                        |  |                             | (1,149  | ) |      |   | (444   | )
|                                                          |  |                             |         |   |      |   |        |  
|Net cash provided by investing activities                 |  |                             | 5,373   |   |      |   | 11,716 |  
|                                                          |  |                             |         |   |      |   |        |  
|Financing Activities                                      |  |                             |         |   |      |   |        |  
|Net change in:                                            |  |                             |         |   |      |   |        |  
|Deposits                                                  |  |                             | 5,639   |   |      |   | (6,220 | )
|Short-term borrowings                                     |  |                             | 74      |   |      |   | (2,011 | )
|New FHLB advances                                         |  |                             | 5,000   |   |      |   |       |  
|Purchase of treasury shares                               |  |                             | (163    | ) |      |   |        |  
|Cash dividends                                            |  |                             | (908    | ) |      |   | (891   | )
|                                                          |  |                             |         |   |      |   |        |  
|Net cash provided by (used in) financing activities       |  |                             | 9,642   |   |      |   | (9,122 | )
|                                                          |  |                             |         |   |      |   |        |  
|Increase in Cash and Cash Equivalents                     |  |                             | 16,918  |   |      |   | 3,769  |  
|                                                          |  |                            
|Cash and Cash Equivalents, Beginning of Year              |  |                             | 26,155  |   |      |   | 18,973 |  
|                                                          |  |                             |         |   |      |   |        |  
|Cash and Cash Equivalents, End of Period                  |  | $                           | 43,073  |   |      | $ | 22,742 |  
|                                                          |  |                             |         |   |      |   |        |  

See Notes to Condensed Consolidated Financial Statements



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Note 1: Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q. The Form 10-Q does not include all the information and footnotes required by accounting
principles generally accepted in the United States of America for complete financial statements. Only material changes in financial condition and results of operations are discussed in Managements Discussion and Analysis of Financial Condition
and Results of Operations.

The condensed consolidated balance sheet as of December 31, 2007 has been derived from the audited consolidated balance
sheet of that date.

In the opinion of management, the condensed consolidated financial statements contain all adjustments necessary to present fairly the
financial condition of NB&T Financial Group, Inc. (the "Company") as of March 31, 2008, and December 31, 2007, and the results of its operations and cash flows for the three-month periods ended March 31, 2008 and 2007. Those
adjustments consist of only normal recurring adjustments. The results of operations for the interim periods reported herein are not necessarily indicative of results of operation to be expected for the entire year. The unaudited condensed
consolidated financial statements should be read in conjunction with the consolidated financial statements, accounting policies and financial notes thereto included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2007 filed with the Commission.

Note 2: Securities

The amortized cost and approximate fair values of securities are as follows (thousands):



|                                                |  |               |        |                      |   |                       |  |   |                       |   |  |   |       
|----------------------------------------------- |  | ------------- | ------ | -------------------- | - | --------------------- |  | - | --------------------- | - |  | - | ------
|Available-for-Sale Securities:                  |  | AmortizedCost |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | ApproximateFair Value
|March 31, 2008:                                 |  |               |        |                      |   |                       |  |   |                       |   |  |   |       
|U.S. government agencies and sponsored entities |  | $             | 8,574  |                      | $ | 109                   |  | $ |                      |   |  | $ | 8,683 
|Mortgage-backed securities                      |  |               | 48,795 |                      |   | 791                   |  |   | (203                  | ) |  |   | 49,383
|State and political subdivisions                |  |               | 30,407 |                      |   | 838                   |  |   |                      |   |  |   | 31,245
|                                                |  |               |        |                      |   |                       |  |   |                       |   |  |   |       
|                                                |  | $             | 87,776 |                      | $ | 1,738                 |  | $ | (203                  | ) |  | $ | 89,311
|                                                |  |               |        |                      |   |                       |  |   |                       |   |  |   |       
|December 31, 2007:                              |  |               |        |                      |   |                       |  |   |                       |   |  |   |       
|U.S. government agencies and sponsored entities |  | $             | 14,581 |                      | $ | 36                    |  | $ | (42                   | ) |  | $ | 14,575
|Mortgage-backed securities                      |  |               | 40,970 |                      |   | 401                   |  |   | (78                   | ) |  |   | 41,293
|State and political subdivisions                |  |               | 32,725 |                      |   | 691                   |  |   | (9                    | ) |  |   | 33,407
|                                                |  |               |        |                      |   |                       |  |   |                       |   |  |   |       
|                                                |  | $             | 88,276 |                      | $ | 1,128                 |  | $ | (129                  | ) |  | $ | 89,275
|                                                |  |               |        |                      |   |                       |  |   |                       |   |  |   |       



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Note 3: Loans



|                                                     |  |               |         |   |                  |   |         |  
|---------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|Categories of loans include (thousands):             |  | March 31,2008 |         |   | December 31,2007 |  
|Commercial and industrial                            |  | $             | 58,936  |   |                  | $ | 62,455  |  
|Agricultural                                         |  |               | 22,892  |   |                  |   | 24,910  |  
|Real estate construction                             |  |               | 5,014   |   |                  |   | 9,203   |  
|Commercial real estate                               |  |               | 93,205  |   |                  |   | 95,801  |  
|Residential real estate                              |  |               | 126,486 |   |                  |   | 124,849 |  
|Consumer                                             |  |               | 35,200  |   |                  |   | 40,552  |  
|                                                     |  |               |         |   |                  |   |         |  
|Total loans                                          |  |               | 341,733 |   |                  |   | 357,770 |  
|                                                     |  |              
|Less: Net deferred loan fees, premiums and discounts |  |               | (35     | ) |                  |   | (7      | )
|Allowance for loan losses                            |  |               | (3,534  | ) |                  |   | (3,594  | )
|                                                     |  |               |         |   |                  |   |         |  
|Net loans                                            |  | $             | 338,164 |   |                  | $ | 354,169 |  
|                                                     |  |               |         |   |                  |   |         |  

Activity in the allowance for loan losses was as follows (thousands):



|                           |  |                              |       |   |      |   |       |  
|-------------------------- |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                           |  | Three Months Ended March 31, |      
|                           |  | 2008                         |       |   | 2007 |  
|Balance, beginning of year |  | $                            | 3,594 |   |      | $ | 4,762 |  
|Provision for loan losses  |  |                              | 95    |   |      |   | 5     |  
|Recoveries                 |  |                              | 88    |   |      |   | 99    |  
|Charge-offs                |  |                              | (243  | ) |      |   | (252  | )
|                           |  |                              |       |   |      |   |       |  
|Balance, end of period     |  | $                            | 3,534 |   |      | $ | 4,614 |  
|                           |  |                              |       |   |      |   |       |  

Impaired loans totaled $2,359,000 at March 31, 2008 and $2,046,000 at December 31, 2007. An allowance
for loan losses of $535,000 and $65,000 relates to impaired loans of $1,476,000 and $389,000 at March 31, 2008 and December 31, 2007, respectively. At March 31, 2008 and December 31, 2007, impaired loans of $883,000 and
$1,657,000 had no related allowance for loan losses.

At March 31, 2008 and December 31, 2007, there were $5,000 and $253,000 accruing loans
delinquent 90 days or more. Non-accruing loans at March 31, 2008 and December 31, 2007 were $3,288,000 and $1,729,000, respectively.

Note 4: Long Term Debt

Long-term debt consisted of the following components (thousands):



|                                |  |               |        |                  |   |       
|------------------------------- |  | ------------- | ------ | ---------------- | - | ------
|                                |  | March 31,2008 |        | December 31,2007
|Federal Home Loan Bank Advances |  | $             | 29,500 |                  | $ | 24,500
|Junior subordinated debentures  |  |               | 10,310 |                  |   | 10,310
|                                |  |               |        |                  |   |       
|Total                           |  | $             | 39,810 |                  | $ | 34,810
|                                |  |               |        |                  |   |       

On June 25, 2007, NB&T Statutory Trust III (Trust III), a wholly owned subsidiary of the
Corporation, closed a pooled private offering of 10,000 Capital Securities with a liquidation amount of $1,000 per security. The proceeds of the offering were loaned to the Corporation in exchange for junior subordinated debentures with terms
similar to the Capital Securities. The sole assets of Trust III



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are the junior subordinated debentures of the Corporation and payments thereunder. The junior subordinated debentures and the back-up obligations, in the
aggregate, constitute a full and unconditional guarantee by the Corporation of the obligations of Trust III under the Capital Securities. Distributions on the Capital Securities are payable quarterly at a fixed interest rate of 7.071% through
September 6, 2012 and thereafter at the annual rate of 1.50% over the 3 month LIBOR. Distributions on the Capital Securities are included in interest expense in the consolidated financial statements. These securities are considered Tier I
capital (with certain limitations applicable) under current regulatory guidelines.

The junior subordinated debentures are subject to mandatory redemption,
in whole or in part, upon repayment of the Capital Securities at maturity or their earlier redemption at the liquidation amount. Subject to the Corporation having received prior approval of the Federal Reserve, if then required, the Capital
Securities are redeemable prior to the maturity date of September 6, 2037, at the option of the Corporation. On or after September 6, 2012, the Capital Securities are redeemable at par. Upon occurrence of specific events defined within the
trust indenture, the Capital Securities may also be redeemed prior to September 6, 2012 at a premium. The Corporation has the option to defer distributions on the Capital Securities from time to time for a period not to exceed 20 consecutive
semi-annual periods.

As of March 31, 2008 and December 31, 2007, the outstanding principal balance of the Capital Securities was $10,000,000. In
accordance with the provisions in FIN 46, the Company accounts for its investment in the trust as assets, its subordinated debentures as debt, and the interest paid thereon as interest expense.

Note 5: Commitments

Outstanding commitments to extend credit as of
March 31, 2008 totaled $49,258,000. Standby letters of credit as of March 31, 2008 totaled $2,701,000.

Note 6: Earnings Per Share

The factors used in the earnings (loss) per share computation were as follows (thousands, except share and per share amounts):



|                                                     |  |                             |           |      |   |          
|---------------------------------------------------- |  | --------------------------- | --------- | ---- | - | ---------
|                                                     |  | Three Months EndedMarch 31,
|                                                     |  | 2008                        |           | 2007
|Numerator:                                           |  |                             |           |      |   |          
|Net income                                           |  | $                           | 1,017     |      | $ | 1,006    
|                                                     |  |                             |           |      |   |          
|Denominator:                                         |  |                             |           |      |   |          
|Weighted-average common shares outstanding (basic)   |  |                             | 3,139,419 |      |   | 3,186,129
|Effect of stock options                              |  |                             | 809       |      |   | 184      
|                                                     |  |                             |           |      |   |          
|Weighted-average common shares outstanding (diluted) |  |                             | 3,140,229 |      |   | 3,186,313
|                                                     |  |                             |           |      |   |          
|Earnings per share:                                  |  |                             |           |      |   |          
|Basic                                                |  | $                           | .32       |      | $ | .32      
|                                                     |  |                             |           |      |   |          
|Diluted                                              |  | $                           | .32       |      | $ | .32      
|                                                     |  |                             |           |      |   |          

For the three months ended March 31, 2008 and March 31, 2007, stock options covering 181,000 and 106,000
shares of common stock, respectively, were not considered in computing earnings per share as their exercise prices exceeded the fair market value of the Companys common shares.



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##### Table of Contents

Note 7: Comprehensive Income

Total comprehensive income was as follows (thousands):



|                           |  |                             |       |      |   |      
|-------------------------- |  | --------------------------- | ----- | ---- | - | -----
|                           |  | Three Months EndedMarch 31,
|                           |  | 2008                        |       | 2007
|Net Income                 |  | $                           | 1,017 |      | $ | 1,006
|Other Comprehensive Income |  | $                           | 355   |      | $ | 99   
|                           |  |                             |       |      |   |      
|Total Comprehensive Income |  | $                           | 1,372 |      | $ | 1,105
|                           |  |                             |       |      |   |      

Note 8: Accounting for Uncertainty in Income Taxes

The Company or one of its subsidiaries files income tax returns in the U.S. federal and Ohio jurisdictions. With few exceptions, the Company is no longer subject to U.S.
federal, state and local examinations by tax authorities for years before 2005.

Financial Accounting Standards Board (FASB) Interpretation No. 48
(FIN 48), Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109, prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of March 31, 2008, the Company did not identify
any uncertain tax positions that it believes should be recognized in the financial statements.

Note 9: Fair Value of Assets and Liabilities

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157).
FAS 157 define fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 has been applied prospectively as of the beginning of the period.

FAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. FAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of
inputs that may be used to measure fair value:



|        |  |                                                                                                                                                                                                                                                                                                             
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1 |  | Quoted prices in active markets for identical assets or liabilities                                                                                                                                                                                                                                         
|        | 
|Level 2 |  | Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable
or can be corroborated by observable market data for substantially the full term of the assets or liabilities
|        | 
|Level 3 |  | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities                                                                                                                                                              

Available-for-Sale Securities

The fair value of available-for-sale securities are determined by various valuation methodologies. Level 2 securities include U.S. government agencies, mortgage-backed securities, and obligations of political and
state subdivisions. Level 2 inputs do not include quoted prices for individual securities in active markets; however, they do include inputs that are either directly or indirectly observable for the individual security being valued. Such observable
inputs include interest rates and yield curves at commonly quoted intervals, volatilities, prepayment speeds, credit risks and default rates. Also included are inputs derived principally from or corroborated by observable market data by correlation
or other means.



9



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##### Table of Contents

The following table presents the fair value measurements of assets and liabilities measured at fair value on a recurring
basis and the level within the FAS 157 fair value hierarchy in which the fair value measurements fall at March 31, 2008:



|                                                                                                                                                                                                                                                     |  |                                                 |        |                                                             |   |                                             |  |                                         |        |  |   |    
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | ------ | ----------------------------------------------------------- | - | ------------------------------------------- |  | --------------------------------------- | ------ |  | - | ---
|                                                                                                                                                                                                                                                     |  | Fair Value Measurements at Reporting Date Using
|Description                                                                                                                                                                                                                                          |  | FairValue                                       |        | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   | Significant OtherObservable Inputs(Level 2) |  | SignificantUnobservable Inputs(Level 3)
|Available-for-sale securities                                                                                                                                                                                                                        |  | $                                               | 89,311 |                                                             | $ |                                            |  | $                                       | 89,311 |  | $ |   
|The following table presents the fair value measurements of assets
and liabilities measured at fair value on a nonrecurring basis and the level within the FAS 157 fair value hierarchy in which the fair value measurements fall at March 31, 2008:
|                                                                                                                                                                                                                                                     |  | Fair Value Measurements at Reporting Date Using
|Description                                                                                                                                                                                                                                          |  | FairValue                                       |        | Quoted Prices inActive Markets forIdentical Assets(Level
1) |   | Significant OtherObservable Inputs(Level 2) |  | SignificantUnobservable Inputs(Level 3)
|Impaired loans                                                                                                                                                                                                                                       |  | $                                               | 941    |                                                             | $ |                                            |  | $                                       |       |  | $ | 941



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

NB&T Financial Group, Inc.

Wilmington, Ohio

We have reviewed the accompanying condensed consolidated balance sheet of NB&T Financial Group, Inc. as of March 31, 2008 and the related condensed consolidated
statements of income and cash flows for the three-month periods ended March 31, 2008 and 2007. These interim financial statements are the responsibility of the Companys management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information
consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of
the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to
be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2007 and the related consolidated statements of income, stockholders equity and cash flows for the year then
ended (not presented herein); and in our report dated February 15, 2008, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 2007 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.



/s/ BKD, LLP


Cincinnati, Ohio

April 30, 2008



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##### Table of Contents

Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations

Results of
Operations

Net income for the first quarter of 2008 was $1.0 million, or $.32 per diluted share, which is comparable to the level of earnings achieved
in the first quarter of 2007.

Net Interest Income

Net
interest income was $4.5 million for the first quarter of 2008, an increase of $72,000 compared to the first quarter of 2007. Net interest margin increased to 3.73% for the first quarter of 2008 from 3.55% for the first quarter of 2007. Interest
income declined to $7.5 million for the first quarter of 2008 from $8.0 million for the same quarter last year. Average interest-earning assets decreased approximately 4.0% to $480.4 million, and the average yield decreased from 6.50% for the first
quarter of 2007 to 6.27% for the first quarter of 2008 due to slower loan volume and reinvestment of funds into lower-yielding short-term investments. Total interest expense decreased $597,000 to $3.0 million during the first quarter of 2008 from
$3.6 million for the same quarter last year. Average interest-bearing liabilities decreased 4.9% from last year to $404.5 million, and their cost decreased to 3.02% during the first quarter of 2008 from 3.46% for the same quarter last year.

Provision for Loan Losses

The provision for loan
losses was $95,000 in the first quarter of 2008 and $5,000 in the first quarter of 2007. Net charge-offs were $155,000, or 0.18% of total average loans, in the first quarter of 2008, compared to $154,000, or 0.15% of total average loans, in the
first quarter of 2007. Non-performing loans totaled $3.3 million at March 31, 2008, compared to $9.5 million at March 31, 2007. The allowance for loan losses to total loans was 1.03% at March 31, 2008, compared to 1.15% at
March 31, 2007.

Non-interest Income

Total
non-interest income was $2.3 million for the first quarter of 2008, compared to $2.0 million for the same quarter last year. The increase is largely due to increased deposit service charges on business checking accounts and increased NSF fees. In
addition, the Companys insurance agency subsidiary had higher profit sharing with insurance carriers based on their performance and claims experience, and the National Bank and Trust Company (the Bank) recognized a gain of $116,000
from the mandatory redemption of shares by Visa in its initial public offering completed during the first quarter of 2008.

Non-interest Expense

Total non-interest expense was $5.4 million for the first quarter of 2008, compared to $5.2 million for the first quarter of 2007. The increase in
non-interest expense is largely due to the increased personnel and occupancy costs of approximately $137,000 associated with opening two new branches in the first quarter of 2008.

Income Taxes

The provision for income taxes for the first quarter of 2008 was $230,000, or 18.4%, compared to
$196,000, or 16.3%, for the first quarter of 2007. The increase in the effective tax rate is mainly due to lower municipal security balances and related tax-exempt income.



12



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##### Table of Contents

Financial Condition

The changes that have occurred in the Companys financial condition during 2008 are as follows (in thousands):



|                            |  |               |         |                  |   |             |  |   |         |   |  |       |  
|--------------------------- |  | ------------- | ------- | ---------------- | - | ----------- |  | - | ------- | - |  | ----- | -
|                            |  |               |         |                  |   | 2008 Change | 
|                            |  | March 31,2008 |         | December 31,2007 |   | Amount      |  |   | Percent |  
|Total assets                |  | $             | 529,663 |                  | $ | 518,922     |  | $ | 11,611  |   |  | 2.2   |  
|Interest-bearing deposits   |  |               | 25,522  |                  |   | 10,699      |  |   | 14,823  |   |  | 138.5 |  
|Federal funds sold          |  |               | 16,741  |                  |   | 2,749       |  |   | 13,992  |   |  | 509.0 |  
|Loans, net*                 |  |               | 338,386 |                  |   | 355,672     |  |   | (17,286 | ) |  | (4.9  | )
|Securities                  |  |               | 89,311  |                  |   | 89,275      |  |   | 36      |   |  | NM    |  
|Demand deposits             |  |               | 59,711  |                  |   | 59,804      |  |   | (93     | ) |  | (.2   | )
|Savings, NOW, MMDA deposits |  |               | 191,283 |                  |   | 192,295     |  |   | (1,012  | ) |  | (.5   | )
|CDs $100,000 and over      |  |               | 33,925  |                  |   | 30,191      |  |   | 3,734   |   |  | 12.4  |  
|Other time deposits         |  |               | 140,974 |                  |   | 137,964     |  |   | 3,010   |   |  | 2.2   |  
|Total deposits              |  |               | 425,893 |                  |   | 420,254     |  |   | 5,639   |   |  | 1.3   |  
|Short-term borrowing        |  |               | 796     |                  |   | 722         |  |   | 74      |   |  | 10.3  |  
|Long-term borrowing         |  |               | 39,810  |                  |   | 34,810      |  |   | 5,000   |   |  | 14.4  |  
|Stockholders Equity         |  |               | 59,260  |                  |   | 58,883      |  |   | 377     |   |  | .6    |  



|* | Includes loans held for sale
|- | ----------------------------

At March 31, 2008, total assets were
$529.7 million, an increase of $10.7 million from December 31, 2007. The increase is primarily attributable to an increase in federal funds sold of $14.0 million and an increase in interest-bearing deposits of $14.8 million, offset by a
decrease in the loan portfolio of $17.3 million. As loan volume slowed, excess funds have been invested in such short-term investments. Total deposit liabilities increased $5.6 million in 2008, with most of the increase in certificates of deposit.
Long-term borrowings increased $5.0 million due to a leverage transaction where the funds were borrowed at 2.82% for a year and reinvested in FDIC-insured certificates of deposit at 4.3% for the same term. Stockholders equity increased
$377,000 in the first quarter of 2008 to $59.3 million primarily due to increases in the market value of the securities portfolio.

Average total assets
decreased 3.6% to $526.3 million from the first quarter of 2007. Average total gross loans decreased to $348.5 million, a decline of 13.9% from the same quarter last year. Due to the decline in loan volume and the leveraged transaction, excess funds
have been invested in securities, which have increased $11.7 million on average, and interest-bearing deposits, which have increased $15.8 million on average, from the same quarter last year. In addition, other excess funds have been invested in
federal funds sold, which has increased $9.0 million on average from the first quarter of 2007.

Average total deposit liabilities declined $21.3 million
for the first quarter of 2008 to $424.3 million, compared to an average of $445.6 million for the same quarter last year. Average long-term borrowings increased $2.3 million, or 6.4%, due to the refinancing of the Companys trust preferred debt
in the second quarter of 2007 and the leverage transaction in the first quarter of 2007.



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##### Table of Contents

Allowance for Loan Losses

The following table is a summary of the Companys loan loss experience for the periods ended March 31, 2008 and 2007 (dollars in thousands):



|                                   |  |                            |       |   |      |   |       |  
|---------------------------------- |  | -------------------------- | ----- | - | ---- | - | ----- | -
|                                   |  | Three Months EndedMarch 31 |      
|                                   |  | 2008                       |       |   | 2007 |  
|Balance at beginning of period     |  | $                          | 3,594 |   |      | $ | 4,762 |  
|Charge-offs:                       |  |                            |       |   |      |   |       |  
|Commercial and industrial          |  |                            | (3    | ) |      |   | (40   | )
|Commercial real estate             |  |                            | (74   | ) |      |   |      |  
|Agricultural                       |  |                            |      |   |      |   |      |  
|Residential real estate            |  |                            | (41   | ) |      |   | (47   | )
|Consumer                           |  |                            | (125  | ) |      |   | (165  | )
|Other                              |  |                            |      |   |      |   |      |  
|                                   |  |                            |       |   |      |   |       |  
|Total charge-offs                  |  |                            | (243  | ) |      |   | (252  | )
|                                   |  |                            |       |   |      |   |       |  
|Recoveries:                        |  |                            |       |   |      |   |       |  
|Commercial and industrial          |  |                            | 6     |   |      |   | 2     |  
|Commercial real estate             |  |                            | 3     |   |      |   | 25    |  
|Agricultural                       |  |                            | 15    |   |      |   | 4     |  
|Residential real estate            |  |                            | 1     |   |      |   | 29    |  
|Consumer                           |  |                            | 63    |   |      |   | 39    |  
|Other                              |  |                            |      |   |      |   |      |  
|                                   |  |                            |       |   |      |   |       |  
|Total recoveries                   |  |                            | 88    |   |      |   | 99    |  
|                                   |  |                            |       |   |      |   |       |  
|Net charge-offs                    |  |                            | (155  | ) |      |   | (153  | )
|Provision for possible loan losses |  |                            | 95    |   |      |   | 5     |  
|                                   |  |                            |       |   |      |   |       |  
|Balance at end of period           |  | $                          | 3,534 |   |      | $ | 4,614 |  
|                                   |  |                            |       |   |      |   |       |  

The following table sets forth selected information regarding the Companys loan quality at the dates
indicated (in thousands):



|                                                                 |  |               |       |   |                  |   |       |               |  |   |        |  
|---------------------------------------------------------------- |  | ------------- | ----- | - | ---------------- | - | ----- | ------------- |  | - | ------ | -
|                                                                 |  | March 31,2008 |       |   | December 31,2007 |   |       | March 31,2007 | 
|Loans accounted for on non-accrual basis                         |  | $             | 3,288 |   |                  | $ | 1,729 |               |  | $ | 9,542  |  
|Accruing loans which are past due 90 days                        |  |               | 5     |   |                  |   | 253   |               |  |   |       |  
|Renegotiated loans                                               |  |               |      |   |                  |   |      |               |  |   |       |  
|Other real estate owned                                          |  |               | 354   |   |                  |   | 176   |               |  |   | 1,009  |  
|                                                                 |  |               |       |   |                  |   |       |               |  |   |        |  
|Total non-performing assets                                      |  | $             | 3,647 |   |                  | $ | 2,158 |               |  | $ | 10,551 |  
|                                                                 |  |               |       |   |                  |   |       |               |  |   |        |  
|Ratios:                                                          |  |               |       |   |                  |   |       |               |  |   |        |  
|Allowance to total loans                                         |  |               | 1.03  | % |                  |   | 1.00  | %             |  |   | 1.15   | %
|Net charge-offs to average loans (annualized)                    |  |               | .18   | % |                  |   | 0.34  | %             |  |   | .15    | %
|Non-performing assets to total loans and other real estate owned |  |               | 1.07  | % |                  |   | .60   | %             |  |   | 2.62   | %

The allowance is maintained to absorb losses in the portfolio. Managements determination of the adequacy of
the reserve is based on reviews of specific loans, loan loss experience, general economic conditions and other pertinent factors. If, as a result of charge-offs or increases in risk characteristics of the loan portfolio, the reserve is below the
level considered by management to be adequate to absorb possible loan losses, the provision for loan losses is increased. Loans deemed not collectible are charged off and deducted from the reserve. Recoveries on loans previously charged off are
added to the reserve.



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##### Table of Contents

The Company allocates the allowance for loan losses to specifically classified loans and non-classified loans generally
based on the one- and three-year net charge-off history. In assessing the adequacy of the allowance for loan losses, the Company considers three principal factors: (1) the one- and three-year rolling average charge-off percentage applied to the
current outstanding balance by portfolio type; (2) specific percentages applied to individual loans estimated by management to have a potential loss; and (3) estimated losses attributable to economic conditions. Economic conditions
considered include unemployment levels, the condition of the agricultural business, and other local economic factors.

As of March 31, 2008, there was
$2.4 million in 16 non-accrual small business relationships. The majority of this amount consisted of one $1.1 million relationship, secured by a convenience store.

Nonaccrual residential real estate loans totaled $741,000 and consisted of 11 loans with the largest balance being $182,000. Non-accrual consumer loans consisted of 15 loans that totaled $139,000, and home
equity credit loans consisted of five loans totaling $48,000.

Liquidity and Capital Resources

Effective liquidity management ensures that the cash flow requirements of depositors and borrowers, as well as Company cash needs, are met. The Company manages liquidity
on both the asset and liability sides of the balance sheet. The loan-to-deposit ratio at March 31, 2008 was 79.4%, compared to 90.0% at the same date in 2007. Loans to total assets were 63.9% at the end of the first quarter of 2008, compared to
73.6% at the same time last year. The Company has $89.3 million in available-for-sale securities that are readily marketable. Approximately 53.9% of the available-for-sale portfolio is pledged to secure public deposits, short-term and long-term
borrowings and for other purposes as required by law. The balance of the available-for-sale securities could be sold if necessary for liquidity purposes. Also, a stable deposit base, consisting of 92.0% core deposits, makes the Company less
susceptible to large fluctuations in funding needs. The Company has short-term borrowing lines of credit with several correspondent banks. The Company also has both short- and long-term borrowing available through the Federal Home Loan Bank (FHLB).
The Company has the ability to obtain deposits in the brokered certificate of deposit market to help provide liquidity to fund loan growth.

The Federal
Reserve Board has adopted risk-based capital guidelines that assign risk weightings to assets and off-balance sheet items and also define and set minimum capital requirements (risk-based capital ratios). Bank holding companies must maintain total
risk-based, Tier 1 risk-based and Tier 1 leverage ratios of 8%, 4% and 3%, respectively. At March 31, 2008, the Company had a total risk-based capital ratio of 18.30%, a Tier 1 risk-based capital ratio of 17.33%, and a Tier 1 leverage ratio of
12.07%.

CRITICAL ACCOUNTING POLICIES

The accounting
and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry. The Companys significant accounting policies are described
in detail in the notes to the Companys consolidated financial statements for the year ended December 31, 2007. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions. The financial position and results of operations can be affected by these estimates and assumptions and are integral to the understanding of reported results. Critical accounting policies are those policies that management
believes are the most important to the portrayal of the Companys financial condition and results, and they require management to make estimates that are difficult, subjective, or complex.

Allowance for Loan Losses-The allowance for loan losses provides coverage for probable losses inherent in the Companys loan portfolio. Management evaluates
the adequacy of the allowance for loan losses each quarter based on changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry or customer-specific concentrations), trends in loan
performance, regulatory guidance and economic factors. This evaluation is inherently subjective, as it requires the use of significant management estimates. Many factors can affect managements estimates of specific and expected losses,
including volatility of default probabilities, collateral values, rating migrations, loss severity and economic and political conditions. The allowance is increased through provisions charged to operating earnings and reduced by net charge-offs.

The Company determines the amount of the allowance based on relative risk characteristics of the loan portfolio. The allowance recorded for commercial
loans is based on reviews of individual credit relationships and historical loss experience. The allowance recorded for homogeneous consumer loans is based on an analysis of loan mix, risk characteristics of the portfolio, and historical losses,
adjusted for current trends, for each homogeneous category or group of loans. The allowance for loan losses relating to impaired loans is based on the loans observable market price, the collateral for certain collateral-dependent loans, or the
discounted cash flows using the loans effective interest rate.



15



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##### Table of Contents

Regardless of the extent of the Companys analysis of customer performance, portfolio trends or risk management
processes, certain inherent but undetected losses are probable within the loan portfolio. This is due to several factors, including inherent delays in obtaining information regarding a customers financial condition or changes in their unique
business conditions, the judgmental nature of individual loan evaluations, collateral assessments and the interpretation of economic trends. Volatility of economic or customer-specific conditions affecting the identification and estimation of losses
for larger non-homogeneous credits and the sensitivity of assumptions utilized to establish allowances for homogenous groups of loans are among other factors. The Company estimates a range of inherent losses related to the existence of these
exposures. The estimates are based upon the Companys evaluation of risk associated with the commercial and consumer allowance levels and the estimated impact of the current economic environment.

Goodwill and Other Intangibles-The Company records all assets and liabilities acquired in purchase acquisitions, including goodwill and other intangibles, at fair
value as required by SFAS 141. Goodwill is subject, at a minimum, to annual tests for impairment. Other intangible assets are amortized over their estimated useful lives using straight-line and accelerated methods, and are subject to impairment if
events or circumstances indicate a possible inability to realize the carrying amount. The initial goodwill and other intangibles recorded and subsequent impairment analysis requires management to make subjective judgments concerning estimates of how
the acquired asset will perform in the future. Events and factors that may significantly affect the estimates include, among others, customer attrition, changes in revenue growth trends, specific industry conditions and changes in competition.

EFFECT OF RECENT ACCOUNTING STANDARDS

In February
2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  including an amendment of FASB Statement No. 115
(SFAS No. 159). SFAS No. 159 permits us to choose to measure certain financial assets and liabilities at fair value that are not currently required to be measured at fair value (i.e. the Fair Value Option). Election of the Fair Value
Option is made on an instrument-by-instrument basis and is irrevocable. At the adoption date, unrealized gains and losses on financial assets and liabilities for which the Fair Value Option has been elected would be reported as a cumulative
adjustment to beginning retained earnings. If we elect the Fair Value Option for certain financial assets and liabilities, we will report unrealized gains and losses due to changes in their fair value in earnings at each subsequent reporting date.
SFAS No. 159 is effective as of January 1, 2008. The Company has not elected the fair value option for any financial assets or liabilities at March 31, 2008.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 enhances existing guidance for measuring assets and liabilities using fair value.
Prior to the issuance of FAS 157, guidance for applying fair value was incorporated in several accounting pronouncements. FAS 157 provides a single definition of fair value, together with a framework for measuring it, and requires additional
disclosure about the use of fair value to measure assets and liabilities. FAS 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being
quoted prices in active markets. Under FAS 157, fair value measurements are disclosed by level within that hierarchy. While FAS 157 does not add any new fair value measurements, it does change current practice. Changes to practice include:
(1) a requirement for an entity to include its own credit standing in the measurement of its liabilities; (2) a modification of the transaction price presumption; (3) a prohibition on the use of block discounts when valuing large
blocks of securities for broker-dealers and investment companies; and (4) a requirement to adjust the value of restricted stock for the effect of the restriction even if the restriction lapses within one year. FAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.

Item 3  Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss arising from
adverse changes in the fair value of financial instruments due to interest rate risk, exchange rate risk, equity price risk and commodity price risk. The Company does not maintain a trading account for any class of financial instrument, and is not
currently subject to foreign currency exchange rate risk, equity price risk or commodity price risk. The Companys market risk is composed primarily of interest rate risk.

The Bank manages its interest rate risk regularly through its Asset/Liability Committee. The Committee meets on a monthly basis and reviews various asset and liability management information, including but not limited
to, the Banks interest rate risk position, liquidity position, projected sources and uses of funds and economic conditions.



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The Bank uses simulation models to manage interest rate risk. In the Banks simulation models, each asset and
liability balance is projected over a one-year horizon. Net interest income is then projected based on expected cash flows and projected interest rates under a stable rate scenario and analyzed on a monthly basis. The results of this analysis are
used in decisions made concerning pricing strategies for loans and deposits, balance sheet mix, securities portfolio strategies, liquidity and capital adequacy. The Banks current one-year simulation model under stable rates indicates
increasing yields on interest-earning assets will exceed increasing costs of interest-bearing liabilities. This position could have a positive effect on projected net interest margin over the next twelve months.

Simulation models are also performed for ramped 100, 200 and 300 basis point increases or decreases in interest rates over one year. The results of these simulation
models are compared with the stable rate simulation. The model includes assumptions as to repricing and expected prepayments, anticipated calls, and expected decay rates of transaction accounts under the different rate scenarios. The results of
these simulations include changes in both net interest income and market value of equity. ALCO guidelines that measure interest rate risk by the percent of change from stable rates, and capital adequacy, have been established, and as the table below
indicates at March 31, 2008, the Bank is within the guidelines established by the Board for net interest income changes, but outside the guidelines for economic value of equity changes for down rate changes of 100 and 200 basis points. A
decreasing rate change of 300 basis points is not calculated because the rate would be less than zero for most of the Banks liabilities in todays current low interest rate environment. This current rate environment also reduces the
calculated economic value to the Bank the substantial portion of checking and money market account balances maintained by the Bank. In the decreasing 100 and 200 economic value calculations, the calculated value of these same deposits is the primary
reason for the Bank exceeding the ALCO guidelines. Both management and the Board believe these deposits have long-term intangible value and help maintain the Bank within the net interest income change guidelines. Therefore, the Board and management
will continue to monitor this risk guideline but are not taking any specific action at this time.

As with any method of measuring interest rate risk,
certain shortcomings are inherent in the simulation modeling. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market rates. In addition, the
interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market rates, while interest rates on other types may lag behind changes in market rates. Further, in the event of a change in interest rates, expected
rates of prepayment on loans and mortgage-backed securities and early withdrawals from certificates of deposit may deviate significantly from those assumed in making the risk calculations. The Banks rate ramp simulation models provide results
in extreme interest rate environments and results are used accordingly. Reacting to changes in economic conditions, interest rates and market forces, the Bank has been able to alter the mix of short-and long-term loans and investments, and increase
or decrease the emphasis on fixed- and variable-rate products in response to changing market conditions.



|          |  |                                    |   |  |                                |   |  |         |   |  |               |  
|--------- |  | ---------------------------------- | - |  | ------------------------------ | - |  | ------- | - |  | ------------- | -
|          |  | One Year Net InterestIncome Change |   |  | Economic Value of EquityChange |  
|Rate Ramp |  | 3/31/08                            |   |  | ALCOGuideline                  |   |  | 3/31/08 |   |  | ALCOGuideline |  
|+ 300     |  | -.7                                | % |  | ±15                            | % |  | 19.4    | % |  | ±20           | %
|+ 200     |  | -.1                                |   |  | ±10                            |   |  | 14.2    |   |  | ±15           |  
|+ 100     |  | NM                                 |   |  | ±5                             |   |  | 8.0     |   |  | ±10           |  
|- 100     |  | -1.5                               |   |  | ±5                             |   |  | -10.3   |   |  | ±10           |  
|- 200     |  | -3.5                               |   |  | ±10                            |   |  | -22.7   |   |  | ±15           |  
|- 300     |  | -4.9                               |   |  | ±15                            |   |  | NA      |   |  | ±20           |  

Item 4  Controls and Procedures

(a) The Companys principal executive officer and principal financial officer
have concluded, based upon their evaluation of the Companys disclosure controls and procedures as of March 31, 2008, that the Companys disclosure controls and procedures were effective to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and



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Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Companys management, including its principal executive and principal
financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b) During the quarter ended March 31, 2008, there were
no changes in the Companys internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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##### Table of Contents

PART II  OTHER INFORMATION

Item 1  Legal Proceedings

Not applicable

Item 1A  Risk Factors

There are no material changes from the risk factors disclosed in the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2007.

Item 2  Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable

(b) Not applicable

(c) Issuer Purchases
of Equity Securities



|                  |  |                                   |  |                                |       |                                                                                       |       |                                                                                                                  |        
|----------------- |  | --------------------------------- |  | ------------------------------ | ----- | ------------------------------------------------------------------------------------- | ----- | ---------------------------------------------------------------------------------------------------------------- | -------
|Period            |  | (a) TotalNumber ofSharesPurchased |  | (b) AveragePrice Paidper Share |       | (c) Total Number ofShares Purchased as Partof Publicly AnnouncedPlans or Programs
(1) |       | (d) Maximum Number (orApproximate Dollar Value) ofShares that May Yet
BePurchased Under the Plans orPrograms (1)
|1/1/08 to 1/31/08 |  |                                   |  |                                |       |                                                                                       |       |                                                                                                                  | 112,880
|2/1/08 to 2/29/08 |  | 3,261                             |  | $                              | 20.74 |                                                                                       | 3,261 |                                                                                                                  | 109,619
|3/1/08 to 3/31/08 |  | 4,750                             |  | $                              | 20.25 |                                                                                       | 4,750 |                                                                                                                  | 104,869
|Total             |  | 8,011                             |  | $                              | 20.45 |                                                                                       | 8,011 |                                                                                                                  | 104,869



|(1) | On April 22, 2008, the Board of Directors approved an extension until April 30, 2009, of the Companys repurchase of up to 170,000 shares of stock as originally
announced on April 24, 2007.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 3  Defaults Upon Senior Securities

Not applicable

Item 4  Submission of Matters to a Vote of Security Holders

None

Item 5  Other Information

Not applicable

Item 6  Exhibits



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##### Table of Contents

|              |  |                                                                                             
|------------- |  | --------------------------------------------------------------------------------------------
|ExhibitNumber |  | Index to Exhibits                                                                           
|3.1           |  | Third Amended and Restated Articles of Incorporation of NB&T Financial Group, Inc.          
|              | 
|3.2           |  | Amended and Restated Code of Regulations of NB&T Financial Group, Inc.                      
|              | 
|4             |  | Agreement to furnish instruments and agreements defining rights of holders of long-term debt
|              | 
|15            |  | Accountants acknowledgement                                                                
|              | 
|31.1          |  | Certification by CEO.                                                                       
|              | 
|31.2          |  | Certification by CFO.                                                                       
|              | 
|32.1          |  | Certification by CEO Pursuant to 18 U.S.C. Section 1350.                                    
|              | 
|32.2          |  | Certification by CFO Pursuant to 18 U.S.C. Section 1350.                                    



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.





|                   |  |                                                  
|------------------ |  | -------------------------------------------------
|                   |  | NB&T FINANCIAL GROUP, INC.                       
|                   | 
|Date: May 15, 2008 |  | /s/ Craig F. Fortin                              
|                   |  | Craig F. Fortin                                  
|                   |  | Senior Vice President and Chief Financial Officer
|                   |  | (Principal Financial Officer)                    



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Index to Exhibits



|              |  |                                                                                              |  |                                                                                                        
|------------- |  | -------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                  |  | Page Reference                                                                                         
|3.1           |  | Third Amended and Restated Articles of Incorporation of NB&T Financial Group, Inc.           |  | Incorporated by reference to registrants Definitive Proxy Statement filed on March 31, 2003, Exhibit A
|              |  |                                                                                             
|3.2           |  | Amended and Restated Code of Regulations of NB&T Financial Group, Inc.                       |  | Incorporated by reference to registrants Definitive Proxy Statement filed on March 31, 2003, Exhibit B
|              |  |                                                                                             
|4             |  | Agreement to furnish instruments and agreements defining rights of holders of long-term debt |  |                                                                                                        
|              |  |                                                                                             
|15            |  | Accountants acknowledgement.                                                                |  |                                                                                                        
|              |  |                                                                                             
|31.1          |  | Certification by CEO.                                                                        |  |                                                                                                        
|              |  |                                                                                             
|31.2          |  | Certification by CFO.                                                                        |  |                                                                                                        
|              |  |                                                                                             
|32.1          |  | Certification by CEO Pursuant to 18 U.S.C Section 1350.                                      |  |                                                                                                        
|              |  |                                                                                             
|32.2          |  | Certification by CFO Pursuant to 18 U.S.C. Section 1350.                                     |  |                                                                                                        



22