Fitch Affirms Partners Trust at 'BBB-/F3'; Outlook Stable.

NEW YORK -- Fitch Ratings has affirmed the ratings for Partners Trust Financial Group, Inc. (PRTR) and its banking subsidiary, Partners Trust Bank (PRTRB). A complete list of ratings is provided below. The Rating Outlook is Stable.

Fitch's ratings reflect PRTR's strong capital position and solid asset quality metrics. Conversely, its comparatively low profitability metrics, geographic concentration in slow growth markets with limited earnings and revenue diversity are rating constraints.

Fitch views positively PRTR's successful integration of BSB Bancorp, Inc. (BSBN). The acquisition presented increased integration risk as PRTR acquired a bank almost twice its size that had been plagued by weak credit quality. PRTR has successfully managed down the problem credits and exhibits solid asset quality metrics with low levels of problem assets. Further, PRTR's solid loan loss reserve provides it with some flexibility to resolve current non-performing assets (NPAs) and some cushion against potential asset quality deterioration.

Constraining rating factors include PRTR's limited geographic and earnings diversity. PRTR's relatively small franchise is concentrated in slow growth markets in Central and Southeastern New York. Earnings trends rely mainly on spread income. Profitability metrics are comparatively weaker than similarly rated peers. The adverse interest rate environment, and intense competition for higher yielding commercial loans coupled with rising deposits costs have pressured operating performance. Positively, loan loss recoveries have benefited results.

The parent company relies mainly on dividends from the bank to support its obligations. More recently, the bank's capacity to upstream dividends to the parent has been limited by weak earnings. Further, unrestricted dividend capacity has been depleted and the bank requires special regulatory approval to upstream dividends. Fitch believes that PRTR presently maintains sufficient liquid assets to support its obligations, including the trust preferred interest and common dividend payments over a 12-month period. However, Fitch notes that the holding company's financial flexibility is somewhat constrained due to the bank's limited dividend capacity. Ratings at the holding company would be pressured if liquidity position should weaken and/or the bank's dividend was restricted by regulators. Nonetheless, PRTR's maintains solid capital levels given its risk profile and growth prospects.

Fitch affirm the following ratings:

Partners Trust Financial Group, Inc.

--Long-term Issuer Default Rating (IDR) at 'BBB-';

--Short-term rating at 'F3';

--Individual at 'C';

--Support at '5'.

Partners Trust Bank

--Long-term IDR at 'BBB-';

--Long-term deposits at 'BBB';

--Short-term at 'F3';

--Short-term deposits at 'F3';

--Individual at 'C';

--Support at '5'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.