Net interest margin increased 14 basis points to 3.73% in the third quarter of 2010 from our margin of 3.59% in the prior year third quarter due primarily to lower cost of funds. The yield on earning assets declined 49 basis points from the 2009 third quarter while rates paid on interest-bearing liabilities declined 74 basis points. Net interest margin increased 2 basis points to 3.73% from our margin of 3.71% in the second quarter of 2010 due primarily to a lower average cost of funds. Both yield on earning assets and cost of interest-bearing liabilities decreased 12 basis points from the second quarter of 2010.

“Our net interest margin rose to its highest level since the first quarter of 2007, highlighting our focus on improving our core earnings,” continued Ms. Bouvette.

Average earning assets declined 2.3% to $1.56 billion for the three months ended September 30, 2010, compared with $1.60 billion for the three months ended September 30, 2009. The decline in average earning assets was due primarily to lower average loans resulting from a slowdown in new loan originations and loans moved to other real estate owned (OREO).

Average deposits increased 2.1% to $1.40 billion, up from $1.37 billion for the three months ended September 30, 2009.

Non-Interest Income

Non-interest income for the third quarter of 2010 increased 93.1%, or $1.9 million, to $3.9 million compared with $2.0 million in the third quarter of 2009. The increase in non-interest income was due primarily to $2.2 million in net gains on sales of securities.

Non-Interest Expense

Non-interest expense for the third quarter of 2010 increased from the prior year’s third quarter due primarily to increased OREO expense. FDIC insurance expense increased 36.6% to $855,000 in the third quarter of 2010 compared to $626,000 in the third quarter of 2009. State franchise tax expense increased 20.7% to $543,000 in the third quarter of 2010 compared with $450,000 in the third quarter of 2009. OREO expense increased to $2.2 million in the third quarter of 2010 compared with $353,000 in the third quarter of 2009, due primarily to increased losses on sales of OREO, OREO write-downs, and OREO maintenance costs.