It is now my pleasure to turn the conference over to Mr. George L. Engelke, Jr. Chairman and Chief Executive Officer of Astoria. Sir, you may begin.George L. Engelke, Jr. Thank you very much and good morning and welcome to a review of Astoria Financial Corporation’s 2010 second quarter results. Joining me this morning are Monte Redman, President and Chief Operating Officer; Frank Fusco, CFO and Peter Cunningham, our Investor Relations Officer. Following my brief remarks we will entertain any questions you may have. Last evening, we reported operating income of $17.6 million or $0.19 per share, which excludes three non-core items totaling $2.1 million after tax or $0.02 per share. These items are detailed in yesterday’s press release on page 13. For the second quarter we recorded a $35 million provision through loan losses, $10 million lower than the previous quarter and $15 million lower than last year’s second quarter. The lower provision recognizes the stabilization in our asset quality and the improvement in the economy in general. We remain cautiously optimistic that these trends will continue. We also reported a net interest margin of 2.37% for the second quarter, 2 basis points lower than the linked quarter, which was due to the effect of one extra day of interest expense and the extension of borrowings. During the second quarter, $325 million of borrowings were extended with an average maturity of 3.3 years and a weighted average rate of 1.93%, which resulted in excess liquidity at quarter end. With respect to credit quality, non-performing loans decreased $4 million from the previous quarter to $415 million. While non-performing loan levels may remain elevated for some time as we work through the foreclosure process, it is important to note that the loss potential remaining has been greatly reduced. We have already marked down and charged off as necessary over 70% of current residential non-performing loans to their adjusted fair value less selling costs. During the second quarter the balance sheet contracted $391 million as loan prepayments remained elevated and we continue to limit multifamily loan production. With respect to deposits, total deposits decreased $436 million primarily in CD accounts as we continued to let the high costs of CDs run off.
Low cost passbook, money market and checking accounts on the other hand increased a $112 million for the quarter or 11% annualized and $385 million over the last 12 months or 10%. With respect to the outlook for 2010, with the national economic recovery underway and despite what the track of the pace appears to be moderating and the housing market remains soft, the long-term outlook for our credit quality is improving.This should translate in lower credit cost and further improvement in our financial performance. With that as an overview, I would like to open the phone lines for your questions. [Paula] you can begin. Question-and- Answer Session Operator The floor is now open for questions. (Operator Instructions) Your first question comes from Mathew Clark of KBW. Mathew Clark - Keefe, Bruyette & Woods, Inc. Can you just first touch on the limited reserve bill; I know in the past you guys have talked about the early stage bucket is being part of the reason why you might go to bring down credit costs and fees. So bottomed down despite those delinquencies being up this quarter, just curious about your thought process on the reserve here? George L. Engelke, Jr. Sure Matt. With respect to the increase in 30 day delinquents, $33 million represents two groups of multifamily loans, $25 million and $8 million that have the operational issues in June. Replacement checks for the June payment were received on July 1. These groups of loans have never been 30 days delinquent before and the relationship goes back in some cases to 2005. That’s why we felt comfortable with the overall allowance. As a footnote, current multifamily commercial real estate delinquents through July 20 compared to similar dates in private months are at a very low level. Read the rest of this transcript for free on seekingalpha.com