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Thank you and good morning everyone and welcome. Our strategic initiatives continue to provide steady improvement to our results. Asset quality and margin improvement led the way and we almost swung back to profitable status for the quarter. Bob Kaminski will detail the entire dynamic of our loan portfolio and the provision for loan losses during his comments. While we did suffer a small loss for the quarter, significant improvement in our pass-through loans and our nonperforming assets suggest that we may have finally turned a corner in our relentless efforts to counteract the effects of the steep economic downturn. Even if we have turned the corner, we know that upcoming quarters will still be difficult as commercial real estate values remain challenging and the cost of disposing of our remaining ORE portfolio will also be challenging. It is, however, very heartening to see some very tangible signs of improvement in so many areas.
Chuck Christmas and Bob will detail these actions in their comments as well. I want to thank our customers for their loyalty and support, our board for its wisdom and vision and our hardworking employees for their dedication and sacrifice. At this time I'm going to turn it over to Chuck Christmas.Chuck Christmas
Thank you Mike. Good morning everybody. This morning we announced that we recorded a net loss of $0.7 million during the second quarter of 2010 compared to a net loss of $6.4 million during the second quarter of 2009 and a net loss of $3.6 million during the first 6 months of 2010 compared to a net loss of $10.9 million during the first 6 months of 2009. On a pre-tax basis, which we believe provides a more accurate comparison of our operating results given the change in our tax position, our net loss during the second quarter of 2010 was $1.2 million compared to a net loss of $9.6 million during the second quarter of 2009. And our net loss during the first 6 months of 2010 was $4.3 million compared to a net loss of $16.9 million during the first 6 months of 2009. While we are of course disappointed any time we have to report a net loss, we are encouraged with the significant improvement in our operating results as well as the continued improvement in may key areas of our financial condition and performance. Our financial performance during 2010, like that throughout 2009 and 2008, has been impacted by a significant provision expense. Unfortunately, continued state, regional, and national economic struggles have negatively impacted some of our borrowers' cash flows and underlying collateral values, leading to increased nonperforming assets, higher loan charge offs, and increased overall credit risk within our loan portfolio when compared to historical norms.
From the time we sensed economic weakness over 2 years ago, we have been working with our borrowers to develop constructive dialog, which has strengthened our relationships and enhanced our ability to resolve complex issues. With the environment for the banking industry likely to remain stressed until economic conditions improve, credit quality will continue to be our major concern. We will remain relentlessly vigilant in the identification and administration of problem assets.Unfortunately, provision expense as well as nonperforming asset administration and resolution costs will likely remain higher than historical levels, dampening future earnings performance. But during the second quarter of 2010, we saw the continuation of very positive trends we reported for the first quarter of 2010, and throughout 2009 as well, and I'd like to touch on some of them. Despite a reduction in our total earning assets, an improvement in interest margin has provided for increased net interest income. Net interest income during the second quarter of 2010 was $2 million higher, an increase of 16% over the second quarter of 2009. Our net interest margins during the second quarter of 2010 was 3.31%, compared to 2.50% during the second quarter of 2009, an improvement of 81 basis points, or over 32%. The improvement is primarily due to a significant decline in our cost of funds. While we expect further reductions in our cost of funds during the remainder of 2010, it will likely be at a much slower pace than during the past several quarters. For the remainder of 2010, we have about $280 million in wholesale funds maturing at an average rate of 1.80%. For perspective, our average rate on new wholesale funds was about 1% during the second quarter. Also contributing to our improved net interest margin has been a very stable yield on assets. Read the rest of this transcript for free on seekingalpha.com