UPDATE 1-NBT Bancorp to buy Alliance Financial for $233 mln

* Deal valued at about $233.4 mln

* Alliance shareholders to get 2.1779 NBT share for eachAlliance share

* NBT will get additional $1.4 billion in assets

(Adds background, details, updates share movement)

Oct 8 (Reuters) - NBT Bancorp Inc will buy AllianceFinancial Corporation in a deal valued at about $233.4million to expand its footprint in New York.

The deal is the latest in a spate of community bankacquisitions. Industry experts are expecting more mergers amongsmall banks, which are looking to build scale and cut costs asthey contend with historically low interest rates.

The NBT-Alliance deal is valued at $48.24 per share -- a 22percent premium to the stock's Friday close.

Alliance shareholders will receive 2.1779 common shares ofNBT for each Alliance share they own.

NBT, which had assets of $6 billion as of June 30, will getan additional $1.4 billion in assets through the deal. Thisincludes $890 million in net loans held for investment, and $1.1billion in deposits.

The deal is expected to close in the second quarter of 2013.

Ambassador Financial Group served as financial advisor toNBT, while Keefe, Bruyette & Woods Inc advised Alliance on thedeal.

Alliance shares rose as much as 16 percent to $45.86, whilethose of NBT were down 3 percent to $21.39 on Monday on theNasdaq.

(Reporting by Ashutosh Pandey in Bangalore; Editing by RoshniMenon)

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