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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 September 30, 2009

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 has submitted electronically and posted on its
corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).    Yes   ̈    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   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller Reporting Company |  | x

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 November 4,
2009, 3,173,082 common shares were issued and outstanding.









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NB&T FINANCIAL GROUP, INC.

September 30, 2009 Form 10-Q

Table of Contents



|                  |  |                                                                                       |  |     
|----------------- |  | ------------------------------------------------------------------------------------- |  | ----
|                  |  | PART I                                                                                |  |     
|                  |  |                                                                                       |  | Page
|Item 1:           |  | Financial Statements                                                                  |  | 3   
|                  |  | Condensed Consolidated Balance Sheets                                                 |  |     
|                  |  | Condensed Consolidated Statements of Income                                           |  |     
|                  |  | Condensed Consolidated Statements of Cash Flows                                       |  |     
|                  |  | Notes to Condensed Consolidated Financial Statements                                  |  |     
|                  |  | Report of Independent Registered Public Accounting Firm                               |  |     
|                  |  |                                                                                      
|Item 2:           |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 15  
|Item 3:           |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 22  
|Item 4T:          |  | Controls and Procedures                                                               |  | 23  
|                  |  |                                                                                      
|                  |  | Part II                                                                               |  |     
|Item 1:           |  | Legal Proceedings                                                                     |  | 24  
|Item 1A:          |  | Risk Factors                                                                          |  | 24  
|Item 2:           |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 24  
|Item 3:           |  | Defaults Upon Senior Securities                                                       |  | 24  
|Item 4:           |  | Submission of Matters to a Vote of Security Holders                                   |  | 24  
|Item 5:           |  | Other Information                                                                     |  | 24  
|Item 6:           |  | Exhibits and Reports on Form 8-K                                                      |  | 24  
|                  | 
|Signatures        |  | 25                                                                                   
|                  | 
|Index to Exhibits |  | 26                                                                                   



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NB&T Financial Group, Inc.

Condensed Consolidated Balance Sheets



|                                                                                   |  |                   |         |   |                  |   |         |  
|---------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|(Dollars in thousands)                                                             |  | September 30,2009 |         |   | December 31,2008 |  
|                                                                                   |  |                  
|Assets                                                                             |  | (Unaudited)       |         |   |                  |  
|                                                                                   |  |                  
|Cash and due from banks                                                            |  | $                 | 6,893   |   |                  | $ | 10,705  |  
|Interest-bearing deposits                                                          |  |                   | 38,007  |   |                  |   | 43,393  |  
|Federal funds sold                                                                 |  |                   | 349     |   |                  |   | 541     |  
|                                                                                   |  |                   |         |   |                  |   |         |  
|Cash and cash equivalents                                                          |  |                   | 45,249  |   |                  |   | 54,639  |  
|                                                                                   |  |                   |         |   |                  |   |         |  
|Securities - available-for-sale                                                    |  |                   | 125,573 |   |                  |   | 87,908  |  
|Loans held for sale                                                                |  |                   | 208     |   |                  |   | 169     |  
|Loans, net of allowance for loan losses of $3,009 and $3,411                       |  |                   | 333,091 |   |                  |   | 332,605 |  
|                                                                                   |  |                   |         |   |                  |   |         |  
|Total loans                                                                        |  |                   | 333,299 |   |                  |   | 332,774 |  
|Premises and equipment                                                             |  |                   | 16,030  |   |                  |   | 16,452  |  
|Federal Reserve and Federal Home Loan Bank stock                                   |  |                   | 9,367   |   |                  |   | 9,362   |  
|Earned income receivable                                                           |  |                   | 2,884   |   |                  |   | 3,042   |  
|Goodwill and other intangibles                                                     |  |                   | 4,655   |   |                  |   | 4,705   |  
|Bank-owned life insurance                                                          |  |                   | 14,402  |   |                  |   | 14,056  |  
|Other assets                                                                       |  |                   | 3,295   |   |                  |   | 1,903   |  
|                                                                                   |  |                   |         |   |                  |   |         |  
|                                                                                   |  |                  
|Total assets                                                                       |  | $                 | 554,754 |   |                  | $ | 524,841 |  
|                                                                                   |  |                   |         |   |                  |   |         |  
|                                                                                   |  |                  
|Liabilities and Stockholders Equity                                               |  |                   |         |   |                  |   |         |  
|                                                                                   |  |                  
|Liabilities                                                                        |  |                   |         |   |                  |   |         |  
|Deposits                                                                           |  |                   |         |   |                  |   |         |  
|Demand                                                                             |  | $                 | 63,362  |   |                  | $ | 65,969  |  
|Savings, NOW and Money Market                                                      |  |                   | 228,796 |   |                  |   | 180,089 |  
|Time                                                                               |  |                   | 156,439 |   |                  |   | 174,670 |  
|                                                                                   |  |                   |         |   |                  |   |         |  
|Total deposits                                                                     |  |                   | 448,597 |   |                  |   | 420,728 |  
|                                                                                   |  |                   |         |   |                  |   |         |  
|Short-term borrowings                                                              |  |                   | 254     |   |                  |   | 1,693   |  
|Long-term debt                                                                     |  |                   | 39,810  |   |                  |   | 39,810  |  
|Interest payable and other liabilities                                             |  |                   | 5,955   |   |                  |   | 3,819   |  
|                                                                                   |  |                   |         |   |                  |   |         |  
|                                                                                   |  |                  
|Total liabilities                                                                  |  |                   | 494,616 |   |                  |   | 466,050 |  
|                                                                                   |  |                   |         |   |                  |   |         |  
|                                                                                   |  |                  
|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                                                         |  |                   | 10,578  |   |                  |   | 10,513  |  
|Retained earnings                                                                  |  |                   | 54,728  |   |                  |   | 55,004  |  
|Unearned employee stock ownership plan (ESOP) shares                               |  |                   | (407    | ) |                  |   | (551    | )
|Accumulated other comprehensive income                                             |  |                   | 1,599   |   |                  |   | 162     |  
|Treasury stock; 645,868 shares - 2009 and 644,203 shares - 2008                    |  |                   | (7,360  | ) |                  |   | (7,337  | )
|                                                                                   |  |                   |         |   |                  |   |         |  
|                                                                                   |  |                  
|Total stockholders equity                                                         |  |                   | 60,138  |   |                  |   | 58,791  |  
|                                                                                   |  |                   |         |   |                  |   |         |  
|                                                                                   |  |                  
|Total liabilities and stockholders equity                                         |  | $                 | 554,754 |   |                  | $ | 524,841 |  
|                                                                                   |  |                   |         |   |                  |   |         |  



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NB&T Financial Group, Inc.

Condensed Consolidated Statements of Income



|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|------------------------------------------------------------- |  | -------------------------------- | ----- | ------------------------------- | - | ----- |  | ---- | ------ |  | - | ------
|                                                              |  | Three Months Ended September 30, |       | Nine Months Ended September 30,
|(Dollars in thousands, except per share amounts)              |  | 2009                             |       | 2008                            |   | 2009  |  | 2008
|                                                              |  | (Unaudited)                      |       | (Unaudited)                    
|Interest and Dividend Income                                  |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|Loans                                                         |  | $                                | 5,053 |                                 | $ | 5,656 |  | $    | 15,053 |  | $ | 17,260
|Securities-taxable                                            |  |                                  | 1,183 |                                 |   | 760   |  |      | 3,235  |  |   | 2,319 
|Securities-tax-exempt                                         |  |                                  | 223   |                                 |   | 348   |  |      | 746    |  |   | 1,107 
|Federal funds sold and other                                  |  |                                  | 28    |                                 |   | 223   |  |      | 131    |  |   | 762   
|Dividends on Federal Home Loan and Federal Reserve Bank stock |  |                                  | 119   |                                 |   | 126   |  |      | 334    |  |   | 370   
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|Total interest and dividend income                            |  |                                  | 6,606 |                                 |   | 7,113 |  |      | 19,499 |  |   | 21,818
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|Interest Expense                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|Deposits                                                      |  |                                  | 1,330 |                                 |   | 1,889 |  |      | 4,124  |  |   | 6,551 
|Short-term borrowings                                         |  |                                  |      |                                 |   | 2     |  |      |       |  |   | 9     
|Long-term debt                                                |  |                                  | 521   |                                 |   | 520   |  |      | 1,550  |  |   | 1,546 
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|Total interest expense                                        |  |                                  | 1,851 |                                 |   | 2,411 |  |      | 5,674  |  |   | 8,106 
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|                                                              |  |                                  |       |                                
|Net Interest Income                                           |  |                                  | 4,755 |                                 |   | 4,702 |  |      | 13,825 |  |   | 13,712
|                                                              |  |                                  |       |                                
|Provision for Loan Losses                                     |  |                                  | 175   |                                 |   | 105   |  |      | 650    |  |   | 295   
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|Net Interest Income After Provision for Loan Losses           |  |                                  | 4,580 |                                 |   | 4,597 |  |      | 13,175 |  |   | 13,417
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|Non-interest Income                                           |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|Trust income                                                  |  |                                  | 221   |                                 |   | 223   |  |      | 654    |  |   | 708   
|Service charges and fees                                      |  |                                  | 1,027 |                                 |   | 905   |  |      | 2,733  |  |   | 2,570 
|Insurance agency commissions                                  |  |                                  | 590   |                                 |   | 433   |  |      | 1,751  |  |   | 1,773 
|Net gains on sales of securities                              |  |                                  | 5     |                                 |   | 4     |  |      | 43     |  |   | 15    
|Other                                                         |  |                                  | 373   |                                 |   | 482   |  |      | 1,089  |  |   | 1,305 
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|Total non-interest income                                     |  |                                  | 2,216 |                                 |   | 2,047 |  |      | 6,270  |  |   | 6,371 
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|Non-interest Expense                                          |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|Salaries and employee benefits                                |  |                                  | 2,807 |                                 |   | 2,977 |  |      | 8,464  |  |   | 9,042 
|Net occupancy expense                                         |  |                                  | 479   |                                 |   | 488   |  |      | 1,467  |  |   | 1,496 
|Equipment and data processing expense                         |  |                                  | 703   |                                 |   | 713   |  |      | 2,128  |  |   | 2,105 
|FDIC Insurance                                                |  |                                  | 162   |                                 |   | 18    |  |      | 722    |  |   | 43    
|Professional fees                                             |  |                                  | 461   |                                 |   | 286   |  |      | 1,212  |  |   | 959   
|Marketing expense                                             |  |                                  | 168   |                                 |   | 138   |  |      | 410    |  |   | 366   
|State franchise tax                                           |  |                                  | 192   |                                 |   | 198   |  |      | 578    |  |   | 588   
|Amortization of intangibles                                   |  |                                  | 41    |                                 |   | 56    |  |      | 126    |  |   | 169   
|Other                                                         |  |                                  | 522   |                                 |   | 522   |  |      | 1,371  |  |   | 1,505 
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|                                                              |  |                                  |       |                                
|Total non-interest expense                                    |  |                                  | 5,535 |                                 |   | 5,396 |  |      | 16,478 |  |   | 16,273
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|Income Before Income Tax                                      |  |                                  | 1,261 |                                 |   | 1,248 |  |      | 2,967  |  |   | 3,515 
|Provision for Income Taxes                                    |  |                                  | 269   |                                 |   | 226   |  |      | 507    |  |   | 612   
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|                                                              |  |                                  |       |                                
|Net Income                                                    |  | $                                | 992   |                                 | $ | 1,022 |  | $    | 2,460  |  | $ | 2,903 
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|                                                              |  |                                  |       |                                
|Basic Earnings Per Share                                      |  | $                                | .32   |                                 | $ | .33   |  | $    | .79    |  | $ | .93   
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|                                                              |  |                                  |       |                                
|Diluted Earnings Per Share                                    |  | $                                | .32   |                                 | $ | .33   |  | $    | .79    |  | $ | .93   
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       
|                                                              |  |                                  |       |                                
|Dividends Declared Per Share                                  |  | $                                | .29   |                                 | $ | .29   |  | $    | .87    |  | $ | .87   
|                                                              |  |                                  |       |                                 |   |       |  |      |        |  |   |       



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NB&T Financial Group, Inc.

Condensed Consolidated Statements of Cash Flows



|                                                          |  |                                |         |   |      |   |         |  
|--------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                          |  | Nine Months Ended,September 30 |        
|(Dollars in thousands)                                    |  | 2009                           |         |   | 2008 |  
|Operating Activities                                      |  | (Unaudited)                    |        
|Net income                                                |  | $                              | 2,460   |   |      | $ | 2,903   |  
|Items not requiring (providing) cash                      |  |                                |         |   |      |   |         |  
|Depreciation and amortization                             |  |                                | 1,210   |   |      |   | 1,310   |  
|Provision for loan losses                                 |  |                                | 650     |   |      |   | 295     |  
|Amortization of premiums and discounts on securities      |  |                                | (68     | ) |      |   | (234    | )
|Gain on sale of securities                                |  |                                | (43     | ) |      |   | (15     | )
|FHLB stock dividends                                      |  |                                |        |   |      |   | (337    | )
|Net change in:                                            |  |                                |         |   |      |   |         |  
|Loans held for sale                                       |  |                                | (39     | ) |      |   | 1,258   |  
|Other assets and liabilities                              |  |                                | (58     | ) |      |   | (852    | )
|                                                          |  |                                |         |   |      |   |         |  
|Net cash provided by operating activities                 |  |                                | 4,112   |   |      |   | 4,328   |  
|                                                          |  |                                |         |   |      |   |         |  
|                                                          |  |                               
|Investing Activities                                      |  |                                |         |   |      |   |         |  
|Purchases of available-for-sale securities                |  |                                | (82,660 | ) |      |   | (22,967 | )
|Proceeds from maturities of available-for-sale securities |  |                                | 47,277  |   |      |   | 23,403  |  
|Net change in interest-bearing time deposits              |  |                                |        |   |      |   | (5,000  | )
|Net change in loans                                       |  |                                | (1,136  | ) |      |   | 6,133   |  
|Purchase of premises and equipment                        |  |                                | (654    | ) |      |   | (2,293  | )
|                                                          |  |                                |         |   |      |   |         |  
|Net cash used in investing activities                     |  |                                | (37,173 | ) |      |   | (724    | )
|                                                          |  |                                |         |   |      |   |         |  
|                                                          |  |                               
|Financing Activities                                      |  |                                |         |   |      |   |         |  
|Net change in:                                            |  |                                |         |   |      |   |         |  
|Deposits                                                  |  |                                | 27,869  |   |      |   | 1,446   |  
|Short-term borrowings                                     |  |                                | (1,439  | ) |      |   | 504     |  
|New FHLB advances                                         |  |                                |        |   |      |   | 5,000   |  
|Purchase of treasury shares                               |  |                                | (23     | ) |      |   | (188    | )
|Cash dividends                                            |  |                                | (2,736  | ) |      |   | (2,724  | )
|                                                          |  |                                |         |   |      |   |         |  
|Net cash provided by financing activities                 |  |                                | 23,671  |   |      |   | 4,038   |  
|                                                          |  |                                |         |   |      |   |         |  
|                                                          |  |                               
|Increase (Decrease) in Cash and Cash Equivalents          |  |                                | (9,390  | ) |      |   | 7,642   |  
|                                                          |  |                               
|Cash and Cash Equivalents, Beginning of Year              |  |                                | 54,639  |   |      |   | 26,155  |  
|                                                          |  |                                |         |   |      |   |         |  
|                                                          |  |                               
|Cash and Cash Equivalents, End of Period                  |  | $                              | 45,249  |   |      | $ | 33,797  |  
|                                                          |  |                                |         |   |      |   |         |  



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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, 2008 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 September 30, 2009, and December 31, 2008, and the results of its operations and cash flows for the nine-month periods ended September 30, 2009 and 2008. 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, 2008 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
|September 30, 2009:                             |  |               |         |                      |   |                       |  |   |                       |   |  |   |        
|                                                |  |               |         |                     
|U.S. government agencies and sponsored entities |  | $             | 12,516  |                      | $ | 15                    |  | $ | (8                    | ) |  | $ | 12,523 
|Mortgage-backed securities                      |  |               | 91,505  |                      |   | 2,652                 |  |   | (801                  | ) |  |   | 93,356 
|State and political subdivisions                |  |               | 19,129  |                      |   | 565                   |  |   |                       |   |  |   | 19,694 
|                                                |  |               |         |                      |   |                       |  |   |                       |   |  |   |        
|                                                |  |               |         |                     
|                                                |  | $             | 123,150 |                      | $ | 3,232                 |  | $ | (809                  | ) |  | $ | 125,573
|                                                |  |               |         |                      |   |                       |  |   |                       |   |  |   |        
|December 31, 2008:                              |  |               |         |                      |   |                       |  |   |                       |   |  |   |        
|                                                |  |               |         |                     
|U.S. government agencies and sponsored entities |  | $             | 10,576  |                      | $ | 137                   |  | $ |                      |   |  | $ | 10,713 
|Mortgage-backed securities                      |  |               | 52,930  |                      |   | 717                   |  |   | (1,050                | ) |  |   | 52,597 
|State and political subdivisions                |  |               | 24,156  |                      |   | 476                   |  |   | (34                   | ) |  |   | 24,598 
|                                                |  |               |         |                      |   |                       |  |   |                       |   |  |   |        
|                                                |  |               |         |                     
|                                                |  | $             | 87,662  |                      | $ | 1,330                 |  | $ | (1,084                | ) |  | $ | 87,908 
|                                                |  |               |         |                      |   |                       |  |   |                       |   |  |   |        



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The amortized cost and fair value of securities available for sale at September 30, 2009, by
contractual maturity, are shown below (thousands). Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.



|                                   |  |               |         |            |   |        
|---------------------------------- |  | ------------- | ------- | ---------- | - | -------
|                                   |  | AmortizedCost |         | Fair Value
|One year or less                   |  | $             | 10,177  |            | $ | 10,189 
|After one year through five years  |  |               | 5,959   |            |   | 6,161  
|After five years through ten years |  |               | 6,141   |            |   | 6,348  
|After ten years                    |  |               | 9,368   |            |   | 9,519  
|                                   |  |               |         |            |   |        
|                                   |  |               | 31,645  |            |   | 32,217 
|Mortgage-backed securities         |  |               | 91,505  |            |   | 93,356 
|                                   |  |               |         |            |   |        
|                                   |  |              
|Totals                             |  | $             | 123,150 |            | $ | 125,573
|                                   |  |               |         |            |   |        

The carrying value of securities pledged as collateral, to secure public deposits and for other
purposes, was $47,442,000 at September 30, 2009.

Gross gains of $43,000 were realized on premium calls of municipal bonds during the
first nine months of 2009. The tax expense for net gains on securities transactions for the first nine months of 2009 was $15,000.

The table
below indicates the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2009. (Thousands)



|                                       |           |                     |                |  |                   |           |   |                |   |       |           |   |                |   |  |   |        |  |   |      |  
|-------------------------------------- | --------- | ------------------- | -------------- |  | ----------------- | --------- | - | -------------- | - | ----- | --------- | - | -------------- | - |  | - | ------ |  | - | ---- | -
|                                       |           | Less than 12 months |                |  | 12 months or more |           |   | Total          |  
|                                       | FairValue |                     | UnrealizedLoss |  |                   | FairValue |   | UnrealizedLoss |   |       | FairValue |   | UnrealizedLoss |  
|September 30, 2009                     |           |                     |                |  |                   |           |   |                |   |       |           |   |                |   |  |   |        |  |   |      |  
|                                       |           |                     |                |  |                   |          
|U.S. Government sponsored entity notes |           | $                   | 4,414          |  | $                 | (8        | ) |                | $ |      |           | $ |               |   |  | $ | 4,414  |  | $ | (8   | )
|                                       |           |                     |                |  |                   |          
|Mortgage-backed securities             |           |                     | 5,279          |  |                   | (134      | ) |                |   | 2,468 |           |   | (667           | ) |  |   | 7,747  |  |   | (801 | )
|Municipals                             |           |                     |               |  |                   |          |   |                |   |      |           |   |               |   |  |   |       |  |   |     |  
|Other securities                       |           |                     |               |  |                   |          |   |                |   |      |           |   |               |   |  |   |       |  |   |     |  
|                                       |           |                     |                |  |                   |           |   |                |   |       |           |   |                |   |  |   |        |  |   |      |  
|Total Securities                       |           | $                   | 9,693          |  | $                 | (142      | ) |                | $ | 2,468 |           | $ | (667           | ) |  | $ | 12,161 |  | $ | (809 | )
|                                       |           |                     |                |  |                   |           |   |                |   |       |           |   |                |   |  |   |        |  |   |      |  

Management evaluates securities for other-than-temporary impairment on a periodic basis.
Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost; (2) the financial condition of the issuer; and (3) the intent and ability of the company to retain its investment in the
issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The unrealized losses of $809,000 includes an unrealized loss of $603,000 on one private-label collateralized mortgage obligation, which has been downgraded
by three of the major bond rating agencies as of September 30, 2009. The security continues to pay as expected, and the unrealized loss is not deemed by management to be other-than-temporary.



7



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##### Table of Contents

Note 3: Loans



|                                                     |  |                   |         |   |                  |   |         |  
|---------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|Categories of loans include (thousands):             |  | September 30,2009 |         |   | December 31,2008 |  
|                                                     |  |                  
|Commercial and industrial                            |  | $                 | 53,947  |   |                  | $ | 52,490  |  
|Agricultural                                         |  |                   | 28,452  |   |                  |   | 26,265  |  
|Real estate construction                             |  |                   | 3,183   |   |                  |   | 6,064   |  
|Commercial real estate                               |  |                   | 111,786 |   |                  |   | 96,755  |  
|Residential real estate                              |  |                   | 121,173 |   |                  |   | 130,091 |  
|Consumer                                             |  |                   | 17,661  |   |                  |   | 24,440  |  
|                                                     |  |                   |         |   |                  |   |         |  
|Total loans                                          |  |                   | 336,202 |   |                  |   | 336,105 |  
|                                                     |  |                  
|Less: Net deferred loan fees, premiums and discounts |  |                   | (102    | ) |                  |   | (89     | )
|Allowance for loan losses                            |  |                   | (3,009  | ) |                  |   | (3,411  | )
|                                                     |  |                   |         |   |                  |   |         |  
|                                                     |  |                  
|Net loans                                            |  | $                 | 333,091 |   |                  | $ | 332,605 |  
|                                                     |  |                   |         |   |                  |   |         |  

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



|                           |  |                                 |        |   |      |   |       |  
|-------------------------- |  | ------------------------------- | ------ | - | ---- | - | ----- | -
|                           |  | Nine Months Ended September 30, |       
|                           |  | 2009                            |        |   | 2008 |  
|Balance, beginning of year |  | $                               | 3,411  |   |      | $ | 3,594 |  
|Provision for loan losses  |  |                                 | 650    |   |      |   | 295   |  
|Recoveries                 |  |                                 | 209    |   |      |   | 253   |  
|Charge-offs                |  |                                 | (1,261 | ) |      |   | (579  | )
|                           |  |                                 |        |   |      |   |       |  
|                           |  |                                
|Balance, end of period     |  | $                               | 3,009  |   |      | $ | 3,563 |  
|                           |  |                                 |        |   |      |   |       |  

Impaired loans totaled $2,386,000 at September 30, 2009 and $2,190,000 at December 31,
2008. An allowance for loan losses of $395,000 and $472,000 relates to impaired loans of $1,890,000 and $1,688,000 at September 30, 2009 and December 31, 2008, respectively. At September 30, 2009 and December 31, 2008, impaired
loans of $496,000 and $502,000 had no related allowance for loan losses.

At September 30, 2009 and December 31, 2008, there were
$521,000 and $200,000 accruing loans delinquent 90 days or more. Non-accruing loans at September 30, 2009 and December 31, 2008 were $2,907,000 and $2,982,000, respectively.

Note 4: Long-Term Debt

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



|                                |  |                   |        |                  |   |       
|------------------------------- |  | ----------------- | ------ | ---------------- | - | ------
|                                |  | September 30,2009 |        | December 31,2008
|                                |  |                  
|Federal Home Loan Bank Advances |  | $                 | 29,500 |                  | $ | 29,500
|Junior subordinated debentures  |  |                   | 10,310 |                  |   | 10,310
|                                |  |                   |        |                  |   |       
|                                |  |                  
|Total                           |  | $                 | 39,810 |                  | $ | 39,810
|                                |  |                   |        |                  |   |       

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.



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##### Table of Contents

The sole assets of Trust III 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 September 30, 2009 and December 31, 2008, the outstanding principal balance of the Capital Securities was $10,000,000. As required by the Consolidation Topic of the FASB Accounting Standards Codification ("Codification"),
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 September 30, 2009
totaled $64,009,000. Standby letters of credit as of September 30, 2009 totaled $2,298,000.

On June 30, 2009, the Company entered
into a definitive agreement for the merger of Community National Corporation (Community) into the Company in a cash and stock transaction. The transaction is expected to close in the fourth quarter of 2009, subject to regulatory
approval, the approval of Communitys shareholders and other conditions to closing. The proposed transaction is valued at approximately $6.8 million.

Note 6: Earnings Per Share

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



|                                                     |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|---------------------------------------------------- |  | -------------------------------- | --------- | ------------------------------- | - | --------- |  | ---- | --------- |  | - | ---------
|                                                     |  | Three Months Ended September 30, |           | Nine Months Ended September 30,
|                                                     |  | 2009                             |           | 2008                            |   | 2009      |  | 2008
|Numerator:                                           |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|Net income                                           |  | $                                | 992       |                                 | $ | 1,022     |  | $    | 2,460     |  | $ | 2,903    
|                                                     |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|                                                     |  |                                  |           |                                
|Denominator:                                         |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|Weighted-average common shares outstanding (basic)   |  |                                  | 3,151,546 |                                 |   | 3,138,270 |  |      | 3,151,751 |  |   | 3,140,577
|Effect of stock options                              |  |                                  |          |                                 |   |          |  |      |          |  |   | 413      
|                                                     |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|                                                     |  |                                  |           |                                
|Weighted-average common shares outstanding (diluted) |  |                                  | 3,151,546 |                                 |   | 3,138,270 |  |      | 3,151,751 |  |   | 3,140,990
|                                                     |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|                                                     |  |                                  |           |                                
|Earnings per share:                                  |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|Basic                                                |  | $                                | .32       |                                 | $ | .33       |  | $    | .79       |  | $ | .93      
|                                                     |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|Diluted                                              |  | $                                | .32       |                                 | $ | .33       |  | $    | .79       |  | $ | .93      
|                                                     |  |                                  |           |                                 |   |           |  |      |           |  |   |          

Options to purchase 225,000 and 224,500 shares of common stock were outstanding at September 30,
2009 and September 30, 2008, respectively, but not included in the computation of diluted EPS because the options exercise price was greater than the average market price of the common shares.



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Note 7: Comprehensive Income

Total comprehensive income was as follows (thousands):



|                                                           |  |                                  |       |      |                                 |       |      |  |      |       |  |   |        |  
|---------------------------------------------------------- |  | -------------------------------- | ----- | ---- | ------------------------------- | ----- | ---- |  | ---- | ----- |  | - | ------ | -
|                                                           |  | Three Months Ended September 30, |       |      | Nine Months Ended September 30, |      
|                                                           |  | 2009                             |       | 2008 |                                 |       | 2009 |  | 2008 |      
|Net Income                                                 |  | $                                | 992   |      | $                               | 1,022 |      |  | $    | 2,460 |  | $ | 2,903  |  
|Other Comprehensive Income (Loss):                         |  |                                  |       |      |                                 |       |      |  |      |       |  |   |        |  
|Unrealized gains (losses) on securities available for sale |  | $                                | 1,148 |      | $                               | (740  | )    |  | $    | 2,134 |  | $ | (1,298 | )
|Reclassification for realized amount included in income    |  |                                  | 5     |      |                                 | 4     |      |  |      | 43    |  |   | 15     |  
|                                                           |  |                                  |       |      |                                 |       |      |  |      |       |  |   |        |  
|Other comprehensive income (loss, before tax effect        |  |                                  | 1,153 |      |                                 | (736  | )    |  |      | 2,177 |  |   | (1,283 | )
|                                                           |  |                                  |       |     
|Tax expense (benefit)                                      |  |                                  | 392   |      |                                 | (250  | )    |  |      | 740   |  |   | (436   | )
|                                                           |  |                                  |       |      |                                 |       |      |  |      |       |  |   |        |  
|                                                           |  |                                  |       |     
|Other comprehensive income (loss)                          |  |                                  | 761   |      |                                 | (486  | )    |  |      | 1,437 |  |   | (847   | )
|                                                           |  |                                  |       |      |                                 |       |      |  |      |       |  |   |        |  
|                                                           |  |                                  |       |     
|Total Comprehensive Income                                 |  | $                                | 1,753 |      | $                               | 536   |      |  | $    | 3,897 |  | $ | 2,056  |  
|                                                           |  |                                  |       |      |                                 |       |      |  |      |       |  |   |        |  

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 2006.

The Income Taxes Topic of the Codification
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. This topic also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure and transition. As of September 30, 2009, 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 Fair Value Measurements as prescribed under the Financial Instruments Topic of the Codification. The codification defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements, and the updated standard has been applied prospectively as of the beginning of the period.

The Financial Instruments Topic of the Codification 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. The accounting standard 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
accounting 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 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



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|        |  |                                                                                                                                               
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|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 values 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.

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 fair value hierarchy as prescribed under the Financial Instruments Topic of the Codification, in which the fair value measurements fall at September 30, 2009, December 31, 2008 and
September 30, 2008 (thousands):



|                                                |  |            |         |                                                              |   |                                             |  |                                         |         |  |   |  
|----------------------------------------------- |  | ---------- | ------- | ------------------------------------------------------------ | - | ------------------------------------------- |  | --------------------------------------- | ------- |  | - | -
|                                                |  |            |         | Fair Value Measurements at Report Date Using                
|Description                                     |  | Fair Value |         | Quoted Pricesin Active Markets forIdentical Assets (Level 1) |   | Significant OtherObservable Inputs(Level 2) |  | SignificantUnobservable Inputs(Level 3)
|U.S. government agencies and sponsored entities |  | $          | 12,523  |                                                              | $ |                                            |  | $                                       | 12,523  |  | $ | 
|Mortgage-backed securities                      |  |            | 93,356  |                                                              |   |                                            |  |                                         | 93,356  |  |   | 
|State and political subdivisions                |  |            | 19,694  |                                                              |   |                                            |  |                                         | 19,694  |  |   | 
|                                                |  |            |         |                                                              |   |                                             |  |                                         |         |  |   |  
|Total available-for-sale securities             |  | $          | 125,573 |                                                              |   |                                             |  | $                                       | 125,573 |  |   |  
|                                                |  |            |         |                                                              |   |                                             |  |                                         |         |  |   |  
|                                                |  |            |         |                                                             
|December 31, 2008:                              |  | $          | 87,908  |                                                              | $ |                                            |  | $                                       | 87,908  |  | $ | 
|Available-for-sale securities                   |  |            |         |                                                              |   |                                             |  |                                         |         |  |   |  
|                                                |  |            |         |                                                             
|September 30, 2008:                             |  |            |         |                                                              |   |                                             |  |                                         |         |  |   |  
|Available-for-sale securities                   |  | $          | 87,803  |                                                              | $ |                                            |  | $                                       | 87,803  |  | $ | 

The following is a description of the valuation methodologies used for instruments measured at fair
value on a non-recurring basis and recognized in the accompanying balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Impaired Loans

At September 30, 2009, December 31, 2008 and
September 30, 2008, impaired loans consisted primarily of loans secured by commercial real estate. Management has determined fair value measurements on impaired loans primarily through evaluations of appraisals performed. As of
September 30, 2009, one impaired loan of approximately $342,000 is secured by accounts receivable and equipment. Management has determined fair value measurements based on managements assessment of the collectability of current
receivables and research of current equipment values.

Foreclosed assets

Real estate acquired through, or in lieu of, loan foreclosure is held for sale and initially recorded at fair value (based on current appraised value) at the date of foreclosure, establishing a new cost
basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less estimated costs to sell. Management has determined fair value measurements on real
estate owned primarily through evaluations of appraisals performed.



11



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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 nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2009, December 31, 2008 and September 30, 2008:



|                       |  |           |       |                                                             |   |                                             |  |                                         |   |  |   |      
|---------------------- |  | --------- | ----- | ----------------------------------------------------------- | - | ------------------------------------------- |  | --------------------------------------- | - |  | - | -----
|                       |  |           |       | Fair Value Measurements at Report Date Using               
|Description            |  | FairValue |       | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   | Significant OtherObservable Inputs(Level 2) |  | SignificantUnobservable Inputs(Level 3)
|September 30, 2009:    |  |           |       |                                                             |   |                                             |  |                                         |   |  |   |      
|Impaired loans         |  | $         | 1,418 |                                                             | $ |                                            |  | $                                       |  |  | $ | 1,418
|Foreclosed assets, net |  |           | 1,755 |                                                             |   |                                            |  |                                         |  |  |   | 1,755
|                       |  |           |       |                                                            
|December 31, 2008:     |  |           |       |                                                             |   |                                             |  |                                         |   |  |   |      
|Impaired loans         |  | $         | 1,214 |                                                             | $ |                                            |  | $                                       |  |  | $ | 1,214
|Foreclosed assets, net |  |           |      |                                                             |   |                                            |  |                                         |  |  |   |     
|                       |  |           |       |                                                            
|September 30, 2008:    |  |           |       |                                                             |   |                                             |  |                                         |   |  |   |      
|Impaired loans         |  | $         | 941   |                                                             | $ |                                            |  | $                                       |  |  | $ | 941  
|Foreclosed assets, net |  |           |      |                                                             |   |                                            |  |                                         |  |  |   |     

Note 10: Disclosures about Fair Value of Financial Instruments

The following table presents estimated fair values of the Companys financial instruments. The fair values of certain of these instruments were
calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair
values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate (thousands):



|                                         |  |                    |         |                   |   |                |  |           |         |  |   |        
|---------------------------------------- |  | ------------------ | ------- | ----------------- | - | -------------- |  | --------- | ------- |  | - | -------
|                                         |  | September 30, 2009 |         | December 31, 2008
|                                         |  | CarryingAmount     |         | FairValue         |   | CarryingAmount |  | FairValue
|Financial assets                         |  |                    |         |                   |   |                |  |           |         |  |   |        
|Cash and cash equivalents                |  | $                  | 45,249  |                   | $ | 45,249         |  | $         | 54,639  |  | $ | 54,639 
|Available-for-sale securities            |  |                    | 125,573 |                   |   | 125,573        |  |           | 87,908  |  |   | 87,908 
|Loans including loans held for sale, net |  |                    | 333,299 |                   |   | 336,548        |  |           | 332,774 |  |   | 339,502
|Stock in FRB and FHLB                    |  |                    | 9,367   |                   |   | 9,367          |  |           | 9,362   |  |   | 9,362  
|Interest receivable                      |  |                    | 2,884   |                   |   | 2,884          |  |           | 3,042   |  |   | 3,042  
|Financial liabilities                    |  |                    |         |                   |   |                |  |           |         |  |   |        
|Deposits                                 |  |                    | 448,597 |                   |   | 450,494        |  |           | 420,728 |  |   | 423,452
|Short-term borrowings                    |  |                    | 254     |                   |   | 254            |  |           | 1,693   |  |   | 1,693  
|Long-term debt                           |  |                    | 39,810  |                   |   | 41,418         |  |           | 39,810  |  |   | 41,381 
|Interest payable                         |  |                    | 335     |                   |   | 335            |  |           | 469     |  |   | 469    

For purposes of the above disclosures of estimated fair value, the following assumptions were used as
of September 30, 2009 and December 31, 2008. The estimated fair value for cash and cash equivalents, interest-bearing deposits, FRB and FHLB stock, accrued interest receivable, demand deposits, savings accounts, NOW accounts, certain money
market deposits, short-term borrowings, and interest payable is considered to approximate cost. The estimated fair value for securities is based on quoted market values for the individual securities or for equivalent securities. The estimated fair
value for loans receivable, including loans held for sale, net, is based on estimates of the rate the Bank would charge for similar loans at September 30, 2009 and December 31, 2008 applied for the time period until the loans are assumed
to reprice or be paid. The estimated fair



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##### Table of Contents

value for fixed-maturity time deposits as well as borrowings is based on estimates of the rate the Bank would pay on such liabilities at September 30, 2009 and December 31, 2008,
applied for the time period until maturity. The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of
the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit and lines of credit is based on fees currently
charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

Note 11: Subsequent Events

Subsequent events have been evaluated through November 12,
2009, which is the date the financial statements were issued.



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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 September 30, 2009 and the related
condensed consolidated statements of income for the three-month and nine-month periods ended September 30, 2009 and 2008 and cash flows for the nine-month periods ended September 30, 2009 and 2008. 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, 2008 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 23, 2009, 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, 2008 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

November 12, 2009



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

Results of Operations

Net income for the third quarter of 2009 was $992,000, or $.32 per diluted share, compared to net income of $1.0 million, or $.33 per diluted share, for the same quarter last year. Net income for the
first nine months of 2009 was $2.5 million, or $.79 per diluted share, compared to $2.9 million, or $.93 per diluted share, for the first nine months of 2008. The decrease in earnings from the first nine months of last year is primarily due to an
additional Federal Deposit Insurance Corporation (FDIC) assessment for insurance of deposits, an increase in the provision for loan losses and lower non-interest income.

Net Interest Income

Net interest income was $4.8 million for the third quarter of 2009,
compared to $4.7 million earned in the third quarter of 2008. Net interest margin decreased to 3.72% for the third quarter of 2009, compared to 3.91% for the third quarter of 2008. Interest income declined to $6.6 million for the third quarter of
2009 from $7.1 million for the same quarter last year. Average interest-earning assets increased approximately 8% to $506.8 million; however, the average yield decreased from 6.02% for the third quarter of 2008 to 5.17% for the third quarter of 2009
due to declining rates, slower loan volume, and reinvestment of funds into lower-yielding short-term investments as overall market rates remained at historical lows for the quarter. Total interest expense decreased a similar amount to $1.9 million
during the third quarter of 2009 from $2.4 million for the same quarter last year. Average interest-bearing liabilities increased approximately 5% from last year to $424.9 million, and their cost decreased to 1.73% during the third quarter of 2009
from 2.37% for the same quarter last year. For the first nine months of 2009, net interest income was $13.8 million compared to $13.7 million for the same period last year.

Provision for Loan Losses

The provision for loan losses was $175,000 in the third quarter
of 2009 and $105,000 in the third quarter of 2008. Year-to-date provision for loan losses was $1,052,000 for 2010, compared to $326,000 for 2009. Net charge-offs were $78,000 in the third quarter of 2009, compared to $76,000 in the third quarter of
2008. Net charge-offs were $1,052,000 for the first nine months of 2009, compared to $326,000 for the same period in 2008. Charge-offs in 2009 included one loan charged-off for $511,000 for which $300,000 in specific reserves had been previously
allocated. These increases in the provision were required as a result of managements evaluation of the loan portfolio and reflect the increase in net charge-off experience and non-performing loans. Non-performing loans totaled $4.4 million at
September 30, 2009, compared to $3.0 million at September 30, 2008. The increase in non-performing loans is primarily due to two commercial real estate loan relationships. The allowance for loan losses to total loans was 0.89% at
September 30, 2009, compared to 1.01% at September 30, 2008.

Non-interest Income

Total non-interest income was $2.2 million for the third quarter of 2009, compared to $2.0 million for the same quarter last year. For the first nine months
of 2009, non-interest income was $6.3 million, compared to $6.4 million for the same period last year. Non-interest income for 2008 was primarily higher due to a gain of approximately $116,000 on the mandatory redemption of Visa shares as a result
of the Visa initial public offering. Service charges and fees increased in 2009 but were partially offset by lower trust fee income and lower insurance agency revenues.

Non-interest Expense

Total non-interest expense was $5.5 million for the third quarter of 2009
and $5.4 million for the same quarter in 2008. FDIC insurance premiums increased $143,000 in the third quarter of 2009 from the third quarter of 2008. This increased expense has been offset by reductions in compensation expense in 2009. In addition,
approximately $125,000 in professional fees related to the pending acquisition of Community National Corporation were expensed in the third quarter of 2009. Total non-interest expense for the first nine months of 2009 was $16.5 million, compared to
$16.3 million in 2008. In total, our 2009 FDIC insurance premiums increased $680,000 over the first nine months of 2008.



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Income Taxes

The provision for income taxes for the third quarter of 2009 was $269,000, or 21.3%, compared to $226,000, or 18.1%, for the third quarter of 2008. For the first nine months of 2009, the provision for
income taxes was $507,000, or 17.1%, compared to $612,000, or 17.4%, for the same period last year. The increase in the effective tax rate for the third quarter of 2009 is primarily due to a decrease in tax-exempt income.

Financial Condition

The changes that have
occurred in the Companys financial condition during 2009 are as follows (in thousands):



|                            |  |                   |         |                  |   |             |  |   |         |   |  |       |  
|--------------------------- |  | ----------------- | ------- | ---------------- | - | ----------- |  | - | ------- | - |  | ----- | -
|                            |  |                   |         |                  |   | 2009 Change | 
|                            |  | September 30,2009 |         | December 31,2008 |   | Amount      |  |   | Percent |  
|Total assets                |  | $                 | 554,754 |                  | $ | 524,841     |  | $ | 29,913  |   |  | 5.7   |  
|Interest-bearing deposits   |  |                   | 38,007  |                  |   | 43,393      |  |   | (5,386  | ) |  | (12.4 | )
|Federal funds sold          |  |                   | 349     |                  |   | 541         |  |   | (192    | ) |  | (35.5 | )
|Loans, net*                 |  |                   | 333,299 |                  |   | 332,774     |  |   | 525     |   |  | .16   |  
|Securities                  |  |                   | 125,573 |                  |   | 87,908      |  |   | 37,665  |   |  | 42.9  |  
|Demand deposits             |  |                   | 63,362  |                  |   | 65,969      |  |   | (2,607  | ) |  | (4.0  | )
|Savings, NOW, MMDA deposits |  |                   | 228,796 |                  |   | 180,089     |  |   | 48,707  |   |  | 27.1  |  
|CDs $100,000 and over      |  |                   | 29,813  |                  |   | 31,940      |  |   | (2,127  | ) |  | (6.7  | )
|Other time deposits         |  |                   | 126,626 |                  |   | 142,730     |  |   | (16,104 | ) |  | (11.3 | )
|Total deposits              |  |                   | 448,597 |                  |   | 420,728     |  |   | 27,869  |   |  | 6.6   |  
|Short-term borrowings       |  |                   | 254     |                  |   | 1,693       |  |   | (1,439  | ) |  | (85.0 | )
|Long-term borrowings        |  |                   | 39,810  |                  |   | 39,810      |  |   |        |   |  |      |  
|Stockholders Equity         |  |                   | 60,138  |                  |   | 58,791      |  |   | 1,347   |   |  | 2.3   |  



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

At
September 30, 2009, total assets were $554.8 million, an increase of $29.9 million from December 31, 2008. The increase is primarily attributable to an increase in savings, NOW and money market accounts of $48.9 million, partially offset
by a decrease in time deposits of $18.2 million. These excess funds have been invested in investment securities, which increased $37.7 million since December 31, 2008. Stockholders equity increased $1.3 million in the first nine months of
2009 to $60.1 million primarily due to increases in the market value of the securities portfolio.

Average total assets increased $30.4
million, or 5.8%, to $553.9 million from the third quarter of 2008. Average total gross loans decreased to $332.7 million, a decline of $13.3 million from the same quarter last year. The decline is the result of increased refinancing of residential
real estate loans to fixed-rate loans sold in the secondary market and the continuing decline in indirect loans since the Company exited that market in the third quarter of 2006. The decline in these two loan portfolios was partially offset by an
increase in commercial real estate loans, which is the primary type of commercial loans being sought by customers in the Companys market. In addition, one large commercial loan of approximately $4.5 million was paid off in the fourth quarter
of 2008. Both the local and national decline in the economy appear to have impacted new loan volume. Based on discussions with both current and prospective loan customers, borrowers are reducing debt when possible and being more cautious when
seeking additional bank funding. Also, many borrowers are quoted higher rates than anticipated due to additional uncertainty regarding the timing of their cash flows and fewer banks bidding for the business. Due to the decline in loan volume, excess
funds have been invested in interest-bearing deposits and securities, which have increased $50.4 million on average, from the same quarter last year.

Average total deposit liabilities increased $30.0 million for the third quarter of 2009 to $451.0 million, compared to an average of $421.0 million for the same quarter last year. Non-interest bearing deposits and NOW accounts increased on
average $22.8 million and savings and money market accounts increased $18.8 million on average from the third quarter of 2008, offset by declines in average certificate of deposit balances.



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Allowance for Loan Losses

The following table is a summary of the Companys loan loss experience for the periods ended September 30, 2009 and 2008 (dollars in thousands):



|                               |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |       |  
|------------------------------ |  | ------------------------------ | ----- | - | ----------------------------- | - | ----- | ---- |  | - | ------ | - |  | - | ----- | -
|                               |  | Three Months EndedSeptember 30 |       |   | Nine Months EndedSeptember 30 |  
|                               |  | 2009                           |       |   | 2008                          |   |       | 2009 |  |   | 2008   |  
|Balance at beginning of period |  | $                              | 2,912 |   |                               | $ | 3,534 |      |  | $ | 3,411  |   |  | $ | 3,594 |  
|                               |  |                                |       |  
|Charge-offs:                   |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |       |  
|Commercial and industrial      |  |                                | (20   | ) |                               |   | (33   | )    |  |   | (206   | ) |  |   | (54   | )
|Commercial real estate         |  |                                | (9    | ) |                               |   |      |      |  |   | (574   | ) |  |   | (74   | )
|Real estate construction       |  |                                |      |   |                               |   |      |      |  |   |       |   |  |   |      |  
|Agricultural                   |  |                                |      |   |                               |   |      |      |  |   | (4     | ) |  |   |      |  
|Residential real estate        |  |                                | (20   | ) |                               |   | (17   | )    |  |   | (130   | ) |  |   | (85   | )
|Consumer                       |  |                                | (96   | ) |                               |   | (107  | )    |  |   | (347   | ) |  |   | (366  | )
|                               |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |       |  
|                               |  |                                |       |  
|Total charge-offs              |  |                                | (145  | ) |                               |   | (158  | )    |  |   | (1,261 | ) |  |   | (579  | )
|                               |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |       |  
|                               |  |                                |       |  
|Recoveries:                    |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |       |  
|Commercial and industrial      |  |                                |      |   |                               |   | 3     |      |  |   | 16     |   |  |   | 17    |  
|Commercial real estate         |  |                                | 1     |   |                               |   | 41    |      |  |   | 8      |   |  |   | 49    |  
|Real estate construction       |  |                                | 4     |   |                               |   |      |      |  |   | 7      |   |  |   |      |  
|Agricultural                   |  |                                | 2     |   |                               |   | 6     |      |  |   | 22     |   |  |   | 30    |  
|Residential real estate        |  |                                | 17    |   |                               |   |      |      |  |   | 32     |   |  |   | 31    |  
|Consumer                       |  |                                | 43    |   |                               |   | 31    |      |  |   | 124    |   |  |   | 126   |  
|                               |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |       |  
|Total recoveries               |  |                                | 67    |   |                               |   | 81    |      |  |   | 209    |   |  |   | 253   |  
|                               |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |       |  
|                               |  |                                |       |  
|Net charge-offs                |  |                                | (78   | ) |                               |   | (76   | )    |  |   | (1,052 | ) |  |   | (326  | )
|Provision for loan losses      |  |                                | 175   |   |                               |   | 105   |      |  |   | 650    |   |  |   | 295   |  
|                               |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |       |  
|                               |  |                                |       |  
|Balance at end of period       |  | $                              | 3,009 |   |                               | $ | 3,563 |      |  | $ | 3,009  |   |  | $ | 3,563 |  
|                               |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |       |  

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



|                                                                 |  |                   |       |   |                  |   |       |                   |  |   |       |  
|---------------------------------------------------------------- |  | ----------------- | ----- | - | ---------------- | - | ----- | ----------------- |  | - | ----- | -
|                                                                 |  | September 30,2009 |       |   | December 31,2008 |   |       | September 30,2008 | 
|Loans accounted for on non-accrual basis                         |  | $                 | 2,907 |   |                  | $ | 2,982 |                   |  | $ | 2,990 |  
|Accruing loans which are past due 90 days                        |  |                   | 521   |   |                  |   | 200   |                   |  |   | 45    |  
|Renegotiated loans                                               |  |                   | 945   |   |                  |   |      |                   |  |   |      |  
|Other real estate owned                                          |  |                   | 1,855 |   |                  |   | 321   |                   |  |   | 289   |  
|                                                                 |  |                   |       |   |                  |   |       |                   |  |   |       |  
|Total non-performing assets                                      |  | $                 | 6,228 |   |                  | $ | 3,503 |                   |  | $ | 3,324 |  
|                                                                 |  |                   |       |   |                  |   |       |                   |  |   |       |  
|                                                                 |  |                   |      
|Ratios:                                                          |  |                   |       |   |                  |   |       |                   |  |   |       |  
|Allowance to total loans                                         |  |                   | 0.89  | % |                  |   | 0.95  | %                 |  |   | 1.01  | %
|Net charge-offs to average loans (annualized)                    |  |                   | 0.43  | % |                  |   | 0.30  | %                 |  |   | .13   | %
|Non-performing assets to total loans and other real estate owned |  |                   | 1.84  | % |                  |   | 1.04  | %                 |  |   | .95   | %

The allowance is maintained to absorb losses in the portfolio. Managements determination of the
adequacy of the reserve is



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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.

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 estimated changes in real estate values, unemployment levels, the condition of the agricultural business, and other local economic factors. Specifically, the Company also continues to consider the
impact of DHL Express (USA), Inc. and DHL Network Operations (USA), Inc. (collectively, DHL) and ABX Air significantly reducing their operations in Wilmington and Clinton County, Ohio. DHL and ABX Air combined employed more people than
any other employer in Clinton County. DHL has decided to outsource its United States transportation and sorting services to another company. Thousands of local jobs have been eliminated. Not all the individuals with these jobs live in Clinton
County. We do, however, expect this job reduction to have a negative short-term and potentially negative long-term impact on the local economy. While the Company has no direct relationship with either DHL or ABX Air, the Company did estimate its
direct exposure, both loans and deposits, from employees of DHL and ABX Air and considered this in evaluating the allowance. The Bank estimated this exposure at less than 1% of total assets. To date, this part of the overall portfolio continues to
perform as expected. What is uncertain and not estimated is the potential impact of the spending habits of the DHL and ABX employees on other Bank customers in the area.

During the first quarter of 2009, the Company foreclosed on a $1.2 million commercial loan for which specific reserves of $300,000 had been previously allocated. Approximately $511,000 was charged off
with the balance of $685,000 transferred to other real estate owned. In addition, one loan secured by residential lots for approximately $689,000 was transferred to other real estate owned during the second quarter. Another $340,000 loan secured by
a convenience store for which specific reserves of $35,000 had been previously allocated was also transferred to other real estate owned in the second quarter with $50,000 charged off. As of September 30, 2009, there was $1.3 million in 21
non-accrual small business relationships. The majority of this amount consisted of two relationships, one secured by accounts receivable and equipment and the other secured by a commercial office building. In addition, the Company had one
renegotiated loan of approximately $945,000 secured by commercial real estate where the loan payments were lowered temporarily to assist the borrower with short-term cash flow issues.

Non-accrual residential real estate loans totaled $1,411,000 and consisted of 20 loans with the largest balance being $249,000. Non-accrual consumer loans consisted of four loans that totaled $23,000, and
home equity credit loans consisted of seven loans totaling $140,000.

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 September 30, 2009 was 75.0%, compared to 83.4% at the same date in 2008. Loans to total assets were 60.6% at the end of the third
quarter of 2009, compared to 66.3% at the same time last year. At September 30, 2009, the Company had $38.0 million in interest-bearing deposits, of which $19.0 million was held in fully-insured certificates of deposit with maturities laddered
over 90 days to meet short-term funding needs. The Company has $125.6 million in available-for-sale securities that are readily marketable. Approximately 37.8% 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 93.4% 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.



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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). At September 30, 2009 and December 31, 2008, the Company had the following risk-based capital ratios, which are well above the
regulatory minimum requirements:



|                                                   |  |        |        |       |                              |   |        |                                                               |        |  |     |        |  |       |        |  |      |  
|-------------------------------------------------- |  | ------ | ------ | ----- | ---------------------------- | - | ------ | ------------------------------------------------------------- | ------ |  | --- | ------ |  | ----- | ------ |  | ---- | -
|                                                   |  | Actual |        |       | For Capital AdequacyPurposes |   |        | To Be Well CapitalizedUnder PromptCorrective ActionProvisions |       
|                                                   |  | Amount |        | Ratio |                              |   | Amount |                                                               | Ratio  |  |     | Amount |  | Ratio |       
|As of September 30, 2009                           |  |        |        |       |                              |   |        |                                                               |        |  |     |        |  |       |        |  |      |  
|Total Risk-Based Capital (to Risk-Weighted Assets) |  |        |        |       |                              |   |        |                                                               |        |  |     |        |  |       |        |  |      |  
|Consolidated                                       |  | $      | 67,461 |       | 18.53                        | % |        | $                                                             | 29,124 |  | 8.0 | %      |  |       | N/A    |  | N/A  |  
|Bank                                               |  |        | 62,058 |       | 17.07                        |   |        |                                                               | 29,086 |  | 8.0 |        |  | $     | 36,358 |  | 10.0 | %
|                                                   |  |        |        |       |                              |  
|Tier I Capital (to Risk-Weighted Assets)           |  |        |        |       |                              |   |        |                                                               |        |  |     |        |  |       |        |  |      |  
|Consolidated                                       |  |        | 64,452 |       | 17.70                        |   |        |                                                               | 14,562 |  | 4.0 |        |  |       | N/A    |  | N/A  |  
|Bank                                               |  |        | 59,049 |       | 16.24                        |   |        |                                                               | 14,543 |  | 4.0 |        |  |       | 21,815 |  | 6.0  |  
|                                                   |  |        |        |       |                              |  
|Tier I Capital (to Average Assets)                 |  |        |        |       |                              |   |        |                                                               |        |  |     |        |  |       |        |  |      |  
|Consolidated                                       |  |        | 64,452 |       | 11.72                        |   |        |                                                               | 21,992 |  | 4.0 |        |  |       | N/A    |  | N/A  |  
|Bank                                               |  |        | 59,049 |       | 10.78                        |   |        |                                                               | 21,920 |  | 4.0 |        |  |       | 27,400 |  | 5.0  |  
|                                                   |  |        |        |       |                              |  
|As of December 31, 2008                            |  |        |        |       |                              |   |        |                                                               |        |  |     |        |  |       |        |  |      |  
|Total Risk-Based Capital (to Risk-Weighted Assets) |  |        |        |       |                              |   |        |                                                               |        |  |     |        |  |       |        |  |      |  
|Consolidated                                       |  | $      | 67,338 |       | 18.80                        | % |        | $                                                             | 28,649 |  | 8.0 | %      |  |       | N/A    |  | N/A  |  
|Bank                                               |  |        | 59,489 |       | 16.66                        |   |        |                                                               | 28,568 |  | 8.0 |        |  | $     | 35,710 |  | 10.0 | %
|                                                   |  |        |        |       |                              |  
|Tier I Capital (to Risk-Weighted Assets)           |  |        |        |       |                              |   |        |                                                               |        |  |     |        |  |       |        |  |      |  
|Consolidated                                       |  |        | 63,927 |       | 17.85                        |   |        |                                                               | 14,324 |  | 4.0 |        |  |       | N/A    |  | N/A  |  
|Bank                                               |  |        | 56,078 |       | 15.70                        |   |        |                                                               | 14,284 |  | 4.0 |        |  |       | 21,426 |  | 6.0  |  
|                                                   |  |        |        |       |                              |  
|Tier I Capital (to Average Assets)                 |  |        |        |       |                              |   |        |                                                               |        |  |     |        |  |       |        |  |      |  
|Consolidated                                       |  |        | 63,927 |       | 12.21                        |   |        |                                                               | 20,935 |  | 4.0 |        |  |       | N/A    |  | N/A  |  
|Bank                                               |  |        | 56,078 |       | 10.72                        |   |        |                                                               | 20,931 |  | 4.0 |        |  |       | 26,164 |  | 5.0  |  

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, 2008. 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



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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.

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 the Intangibles  Goodwill & Other topic of the FASB Accounting Standards Codification. Goodwill of $3.8 million is subject, at a minimum, to annual
tests for impairment. Testing includes evaluating the current market price of the stock versus book value, the current economic value of equity versus current book value, and recent market sales of financial institutions. Based on the review of all
three factors, management has concluded goodwill is not impaired. Other intangible assets of $830,000 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 an update to the Financial Instruments Topic of the FASB Accounting Standards Codification, The Fair Value Option for
Financial Assets and Financial Liabilities, which 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. The updated standard is effective as of January 1, 2008. The Company has not elected the fair value option for any financial assets or liabilities at September 30, 2009.

In September 2006, the FASB issued an update to the Fair Value Measurement and Disclosures Topic of the Codification, which enhances existing guidance for
measuring assets and liabilities using fair value. Prior to this updated standard, guidance for applying fair value was incorporated in several accounting pronouncements. The updated standard 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. The standard 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 this topic, fair value measurements are disclosed by level within that hierarchy. While the standard 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. The updated standard is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.



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Effective October 10, 2008, and for prior periods, the FASB modified the Fair Value Measurements and
Disclosures Topic of the FASB Accounting Standards Codification, Determining the Fair Value of a Financial Asset When the Market for that Asset Is Not Active. The updated standard clarifies the application of fair value measurements, in
a market that is not active. As of September 30, 2009, the Company was able to obtain all market values using the Level II hierarchy measurements adopted under this accounting standard.

In December 2007, the FASB issued an update to the Business Combinations Topic of the Codification, which changes accounting and reporting requirements for
business acquisitions in fiscal years beginning on or after Dec. 15, 2008. In general, the updated topic will require measuring and recognizing the business acquired at full acquisition-date fair value. This replaces the prior cost-allocation
process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. The updated standard also requires the direct costs of a business combination be
recognized as expenses of the period in which they are incurred and no longer included in the measurement of the business acquired. In addition, under the prior standard, restructuring costs that the acquirer expected but was not obligated to incur
were recognized as if they were a liability assumed at the acquisition date. The updated standard requires the acquirer to recognize those costs separately from the business combination.

In June 2009 the FASB adopted the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, which establishes the FASB Accounting Standards
Codification (Codification) as the single source of authoritative U.S. generally accepted accounting principles (U.S. GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority
of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Codification
supersedes all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements,
FASB Staff Positions, or Emerging Issues Task Force Abstracts. Instead, the FASB will issue Accounting Standards Updates, which will serve only to: (a) update the Codification; (b) provide background information about the guidance; and
(c) provide the bases for conclusions on the change(s) in the Codification. Adoption of this Statement did not have a material effect on the Companys financial position or results of operations.

In May 2009 the FASB issued the Subsequent Events Topic of the Codification, which establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, the accounting standard provides:

The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial
statements;

The circumstances under which an entity should recognize events or transactions occurring after the balance sheet
date in its financial statements; and

The disclosure that an entity should make about events or transactions that occurred
after the balance sheet date.

The new standard is effective for interim or annual financial periods ending after June 15, 2009 and did
not have a material effect on the Companys financial position or results of operations.

On April 9, 2009, the FASB updated the
Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification regarding the accounting treatment for investments including mortgage-backed securities. These updated standard changed the method for determining if an
Other-Than-Temporary Impairment (OTTI) exists and the amount of OTTI to be recorded through an entitys income statement. The changes provide greater clarity and reflect a more accurate representation of the credit and noncredit
components of an OTTI event. The three areas updated within the standard are as follows:



| |  |  | Determining Fair Value When the Volume and Level of Activity for the Assets or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly addresses the criteria to be used in the determination of an active market in determining whether observable transactions are Level 1 or Level 2 under the framework. The standard reiterates that fair value is
based on the notion of exit price in an orderly transaction between willing market participants at the valuation date.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Recognition and Presentation of Other-than-Temporary Impairments provides additional guidance designed to create greater clarity and
consistency in accounting for and presenting impairment losses on debt securities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Interim Disclosures about Fair Value of Financial Instruments enhances consistency in financial reporting by increasing the frequency of
fair value disclosures.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

The updated standard is effective for financial statements issued for periods ending
after June 15, 2009. Adoption of the updated standard did not have a material effect on the Companys financial position or results of operations.

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.

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. Historically, simulation models are also performed for ramped 100, 200 and 300 basis point decreases. However, these
decreasing rate changes are not calculated because the rates would be less than zero for most of the Banks liabilities in todays current low interest rate environment. 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 September 30,
2009, the Bank is within the guidelines established by the Board for net interest income changes and economic value of equity changes for increasing rate changes of 100, 200 and 300 basis points.

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 |  | 9/30/09                            |   |  | ALCOGuideline                  |   |  | 9/30/09 |   |  | ALCOGuideline |  
|+300      |  | -1.19                              | % |  | ±15                            | % |  | 9.6     | % |  | ±20           | %
|+200      |  | -0.97                              |   |  | ±10                            |   |  | 8.0     |   |  | ±15           |  
|+100      |  | -0.36                              |   |  | ±5                             |   |  | 5.2     |   |  | ±10           |  



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Item 4T  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 September 30, 2009, 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 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 September 30, 2009, 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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PART II  OTHER INFORMATION

Item 1  Legal Proceedings

Not applicable

Item 1A  Risk Factors

Not applicable

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



| | (a) | Not applicable
| | --- | --------------



| | (b) | Not applicable
| | --- | --------------



| | (c) | Not applicable
| | --- | --------------

Item 3  Defaults Upon Senior Securities

Not applicable

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

Not applicable

Item 5  Other Information

Not applicable

Item 6  Exhibits



|               |  |                                                                                             
|-------------- |  | --------------------------------------------------------------------------------------------
|Exhibit Number |  | 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
|10.1           |  | Amendment to Agreement and Plan of Merger                                                   
|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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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: November 12, 2009 |  |  |  | /S/    CRAIG F.
FORTIN                                                         
|                        |  |  |  | Craig F. Fortin                                                                
|                        |  |  |  | Senior Vice President and Chief Financial Officer (Principal Financial Officer)



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Index to Exhibits



|               |  |                                                                                              |  |                                                                                                                                                                                 
|-------------- |  | -------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | 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 21, 2003, Exhibit A (SEC File No. 000-23134)                                                
|               |  |                                                                                             
|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 21, 2003, Exhibit B                                                                         
|               |  |                                                                                             
|4              |  | Agreement to furnish instruments and agreements defining rights of holders of long-term debt |  | (SEC File No. 000-23134)                                                                                                                                                        
|               |  |                                                                                             
|10.1           |  | Amendment to Agreement and Plan of Merger                                                    |  | Incorporated by reference to registrants Registration Statement on Form S-4, Part I, Annex A to prospectus proxy statement, filed on October 19, 2009 (SEC File No. 333-162570)
|               |  |                                                                                             
|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.                                     |  |                                                                                                                                                                                 



26