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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2003

OR

For the transition period from/to

NB&T FINANCIAL GROUP, INC.

(Exact name of registrant as specified in its charter)

48 N. South Street, Wilmington, Ohio 45177

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number: (513) 382-1441

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the 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 August 1, 2003, 3,227,893 common shares were issued and outstanding.

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NB&T FINANCIAL GROUP, INC.

June 30, 2003 Form 10-Q

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NB&T Financial Group, Inc.

Condensed Consolidated Balance Sheets

See Notes to Condensed Consolidated Financial Statements

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NB&T Financial Group, Inc.

Consolidated Statements of Income

See Notes to Condensed Consolidated Financial Statements

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NB&T Financial Group, Inc.

Condensed Consolidated Statements of Cash Flows

See Notes to Condensed Consolidated Financial Statements

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NB&T Financial Group, Inc.

Notes to Condensed Consolidated Financial Statements

June 30, 2003

(Unaudited)

Note 1: Basis of Presentation

The accompanying unaudited 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 consolidated balance sheet as of December 31, 2002 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. as of June 30, 2003, and December 31, 2002, and the results of its operations for the three and six month periods and cash flows for the six months ended June 30, 2003 and 2002. 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 and Form 10-K for the year ended December 31, 2002 filed with the Commission.

Note 2: Securities

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

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NB&T Financial Group, Inc.

Notes to Condensed Consolidated Financial Statements

June 30, 2003

(Unaudited)

Note 3: Loans

Categories of loans include (thousands):

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

Impaired loans totaled $4,598,000 and $4,214,000 at June 30, 2003 and December 31, 2002, respectively. An allowance for loan losses of $1,391,000 and $1,542,000 relates to impaired loans of $3,779,000 and $4,196,000 at June 30, 2003 and December 31, 2002, respectively. At June 30, 2003 and December 31, 2002, impaired loans of $819,000 and $18,000 had no related allowance for loan losses.

At June 30, 2003 and December 31, 2002, accruing loans delinquent 90 days or more totaled $955,000 and $1,391,000, respectively. Non-accruing loans at June 30, 2003 and December 31, 2002 were $6,287,000 and $4,734,000, respectively.

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NB&T Financial Group, Inc.

Notes to Condensed Consolidated Financial Statements

June 30, 2003

(Unaudited)

Note 4: Commitments

Outstanding commitments to extend credit as of June 30, 2003 total $44,162,000. Standby letters of credit as of June 30, 2003 total $879,000.

Note 5: Earnings Per Share

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

For the three and six months ended June 30, 2003 and 2002, stock options covering 49,200 and 60,700 shares of common stock were not considered in computing earnings per share, as they were antidilutive.

Note 6: Stock Options

The Company accounts for its stock option plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the grant date. The following table illustrates the effect on net income and earnings per share if the company had applied the fair value provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation (thousands, except per share amounts):

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Independent Accountants’ Report

Board of Directors

NB&T Financial Group, Inc.

Wilmington, Ohio

We have reviewed the accompanying condensed consolidated balance sheet of NB&T Financial Group, Inc. as of June 30, 2003 and the related condensed consolidated statements of income for the three and six month periods and cash flows for the six-month periods ended June 30, 2003 and 2002. These financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. 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 auditing standards generally accepted in the United States of America, 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 auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2002 and the related consolidated statements of income, retained earnings and cash flows for the year then ended (not presented herein), and in our report dated February 5, 2003, 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, 2002 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

BKD, LLP

Cincinnati, Ohio

July 11, 2003

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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 second quarter of 2003 was $1.59 million, a decrease of $308,000, or 16.2%, from the second quarter of 2002 net income of $1.90 million. Net income per share-basic was $.51 for the second quarter of 2003, compared to $.62 per share for the second quarter of 2002, a decrease of 17.7%. Return on average equity and return on average assets for the second quarter of 2003 were 10.94% and 0.92%, respectively, compared to 14.83% and 1.13% for the same period in 2002. Net income for the first six months of 2003 was $3.23 million, a decrease of $210,000, or 6.1%, from the first six months of 2002 net income of $3.44 million. Net income per share-basic was $1.03 for the first six months of 2003, compared to $1.11 per share for the first six months of 2002, a decrease of 7.2%. Return on average equity and return on average assets for the first six months of 2003 were 11.21% and 0.94%, respectively, compared to 13.50% and 1.02% for the same period in 2002.

Net Interest Income

Net interest income was $5.39 million for the second quarter of 2003 and $11.0 million for the first six months of 2003, a decrease of $646,000 and $683,000 respectively, compared to the same periods last year. Interest income totaled $8.93 million for the second quarter of 2003, a decrease of 14% from $10.38 million during the same period last year. Interest income for the first six months of 2003 totaled $18.18 million, a decrease of 12.7% from $20.81 million during the same period last year. Although average loans and securities outstanding for the second quarter and the first six months increased 3.64% and 3.01%, compared to the prior year, the effect of the decline in their average yields exceeded the effect of those gains. The yield on average loans decreased from 7.63% in the second quarter of 2002 to 6.70% in the second quarter of 2003 while the yield on average loans decreased from 7.70% for the first six months of 2002 to 6.88% for the same period in 2003. The tax-equivalent yield on average securities decreased from 5.70% for the second quarter last year to 4.13% for the second quarter of this year, and the tax-equivalent yield on average securities decreased from 5.71% for the first six months of 2002 to 4.35% for the same period this year. A decrease in interest expense of 18.7% to $3.53 million during the second quarter of 2003 from $4.34 million during the same period last year offset most of the decrease in the second quarter’s interest income. Similarly, a decrease in interest expense of 21.4% to $7.18 million during the first six months of 2003 from $9.13 million during the same period last year offset most of the decrease in year-to-date interest income. Average interest-bearing liabilities for the second quarter increased 3.07% from last year to $584 million, and their cost decreased from 3.07% during the second quarter of last year to 2.43% in the second quarter of this year. Average interest-bearing liabilities for the first six months of 2003 decreased .22% from last year to $578.4 million, and their cost decreased from 3.18% to 2.50%. Tax-equivalent net interest margin decreased to 3.47% for the second quarter of this year from 4.06% for the second quarter of last year while the tax-equivalent net interest margin decreased to 3.60% for the first six months of 2003 from 3.92% for the same period last year.

Provision for Loan Losses

The provision for credit losses represents the charge to income necessary to adjust the allowance for loan losses to an amount that represents management’s assessment of the estimated probable credit losses inherent in the Bank’s loan portfolio at each balance sheet date. The provision for loan losses increased 2.6% to $487,000 during the second quarter of 2003 from $475,000 during the second quarter of last year. For the first six months of 2003, the provision increased 20.9% to $1.03 million from $850,000 for the same period last year. The higher provision for loan losses for 2003 was attributable to an increase in net charge-offs and management’s evaluation of the loan portfolio and potential weaknesses of specific loans. Net charge-offs for the first six months of 2003 were $979,000, or 0.50% (annualized), compared to $854,000, or 0.45% (annualized), for the same period in 2002.

Non-interest Income

Non-interest income, excluding gains on sales of securities, was $2.30 million for the second quarter of 2003, an increase of 1.1% over the $2.27 million earned in the second quarter of 2002. Non-interest income, excluding gains on sales of securities, was $4.36 million for the first six months of 2003, and increase of 3.1% over the $4.23 million in the same period in 2002. Service charges and fees increased 47.6% from the second quarter last year and 42.7% due to increases in overdraft fees and debit card revenue. In August 2002, the Company introduced the Overdraft Honor program that aids customers by paying more and returning fewer overdraft checks. Insurance agency commissions increased 18.2% in the second quarter of 2003 and 13.5% in the first six months of 2003, compared to the same periods last year, due to increased sales of annuity products. These revenue increases were partially offset by

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decreases in Trust and ATM network fees and income from bank-owned life insurance. Trust income decreased 4.7% from the second quarter of last year and 10.9% from the first six months of last year as a result of market value decreases in the accounts managed. ATM network fees decreased 24.5% from the second quarter of last year and 28.2% from the first six months of last year as a result of fewer units in operation during 2003 compared to the same periods in 2002. Other income decreased primarily due to a decrease in BOLI income of $258,000 from 2002 to 2003 as a result of a death benefit claim made in May 2002.

The Company had $361,000 in securities gains in the second quarter of 2003, resulting from the sale of $15.6 million in mortgage-backed securities and U.S. agency notes. Security gains for the first six months of 2003 totaled $907,000, resulting from the sale of $34.5 million in mortgage-backed securities and U.S. agency notes.

Non-interest Expense

Non-interest expense was $5.52 million for the second quarter of 2003, compared to $5.53 million for the second quarter of 2002. Other expense declined $239,000 in the second quarter from the same quarter last year due to write-off of assets primarily related to the Insurance Agency in 2002. For the first six months of 2003, non-interest expense was $11.2 million, compared to $10.8 million for the same period in 2002. The increase occurred primarily due to increases in salaries and benefits expense. The average number of full-time equivalent employees has increased to 272 for the six months ended June 30, 2003, from 264 for the same period in 2002. In addition, health care and retirement benefit expenses, including the 401k and employee stock ownership plans, were higher for the six months ended June 30, 2003, compared to the same period last year.

Income Taxes

The provision for income taxes for the second quarter of 2003 was $461,000, compared to $439,000 for the same period in 2002. The provision for income taxes for the first six months of 2003 was $810,000, compared to $857,000 for the same period last year. The effective tax rate for the three months ended and six months ended June 30, 2003 was 22.4% and 20.1%, respectively, compared to 18.8% and 20% for the same periods in 2002.

Financial Condition

The changes that have occurred in NB&T Financial Group, Inc.’s financial condition during 2003 are as follows (in thousands):

At June 30, 2003, total assets were $691.5 million, an increase of $26.7 million from December 31, 2002. The increase is primarily attributable to an increase in the loan portfolio of $18.5 million and the securities portfolio of $4.9 million. In addition, cash and cash equivalents increased $3.2 million. The asset growth was funded by a combination of an increase in deposits, repurchase agreements and Federal Home Loan Bank advances. Deposits increased $2.5 million primarily in the corporate money market accounts. Federal Home Loan Bank advances increased $18.3 million during the year to fund the increase in the securities portfolio. Stockholders’ equity increased $1.5 million during the year to $58.8 million due to an increase in retained earnings for the quarter

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partially offset by a decrease in other comprehensive income of $596,000 due to a change in market value of securities available for sale.

Average total assets increased 3.5% to $695.2 million from the second quarter of 2002. Average total loans increased to $398.0 million, an increase of 3.5% from the same quarter of last year. The commercial loan average grew $9.1 million, an increase of 5.2%, and the personal loan average grew $7.8 million, an increase of 10.7%. Commercial and industrial lending to small to mid-sized companies continues to be an area of growth for the Company, and the Bank has increased its efforts to originate automobile loans through its dealer network. Real estate loans declined $3.5 million, a decrease of 2.5%, due to increased customer refinancing. The securities portfolio average has increased $9.1 million from the second quarter of 2002 to $238.4 million. During the first six months of 2003, the Company has purchased $121.3 million in agency notes and mortgage-backed securities, $30.0 million of which was leveraged with $20 million in Federal Home Loan Bank advances. In that same time period, $34.5 million in securities were sold at a gain of $907,000, $49 million in bonds were called and approximately $26.7 million in payments on mortgage-backed securities were received.

Average total deposits remained relatively unchanged at $476.8 million for the second quarter of 2003, compared to an average of $476.5 million for the same quarter last year. Average small certificates of deposit decreased $11.9 million, or 6.9%, as the Company reduced its cost of funds and customers continued to seek out higher rates of return. Average short-term borrowings declined $3.3 million or 12.8% from the second quarter of 2002 due to decreased public fund balances in repurchase agreements. Average Federal Home Loan Bank borrowings increased $13.3 million, or 11.7%, due to the Company leveraging security purchases in the first quarter with an additional $20 million in fixed-rate advances. Average long-term debt increased $7.5 million from the second quarter of 2002, primarily due to the issuance of $8.0 million of trust preferred debt in the second quarter of 2002.

Allowance for Loan Losses

The following table is a summary of the Company’s loan loss experience for the periods ended June 30, 2003 and 2002: