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Prior to coming to the legislative assembly, the CM is scheduled to offer pooja at the Subramanya and Ganesha temples in Sanjaynagar, close to his residence in Bangalore.
Income from bank owned life insurance ("BOLI") declined by $145 thousandin 2009 versus 2008 due to a lower rate of return on BOLI assets. Theincreased provision for loan and lease losses in 2009 versus the comparable 2008period was due to several factors, including an increase in non-accrual loansand leases, internal risk rating downgrades of several commercial loanrelationships and the growth in total loans outstanding.The decline in noninterest income in 2009 resulted principally from an increasein net security losses of $3.3 million due to a previously disclosed $4.0million first quarter 2009 non-cash other-than-temporary impairment ("OTTI")charge. Partiallyoffsetting the foregoing negative factors was a $653 thousand decline in totaloperating expenses, which occurred despite the $730 thousand special FDICinsurance fund assessment fee recorded in 2009.The decrease in net interest income was due to a 19 basis point narrowing of theCompany's net interest margin to 3.96% in 2009 from 4.15% a year ago. The increases in FDIC and NYS assessment and marketing expenseswere offset by a $1.3 million reduction in legal expenses in 2009 primarilyrelated to outside counsel fees incurred during the previously disclosedshareholder derivative suit settled during the third quarter of 2008.Earnings Summary for the Six Months Ended June 30, 2009The decrease in net income in the first six months of 2009 compared with 2008resulted from several factors, most notably an increase in the provision forloan and lease losses of $7.0 million and reductions in net interest income andnoninterest income of $1.3 million and $4.1 million, respectively. Marketing expenses increased by $456 thousand as the result ofcorporate branding efforts undertaken in 2009 coupled with significantreductions in print, broadcast and other media advertising during the secondquarter of 2008. This increase wasprimarily due to growth of $1.1 million in FDIC and NYS assessment fees, whichincludes a special FDIC insurance fund assessment fee of $730 thousand recordedin 2009.
The reduction in the Company's second quarter 2009 provision for loanand lease losses was primarily due to a $1.2 million provision recorded in thesecond quarter of 2008 upon the sale of the assets of the Company's formerequipment leasing subsidiary.Second quarter 2009 total operating expenses increased by $314 thousand or 2.8%to $11.5 million compared to the second quarter of 2008. Federalfunds purchased and other temporary borrowings declined by $158 million versusJune 30, 2008.The provision for loan and lease losses was $3.5 million in the second quarterof 2009, representing a decrease of $1.4 million versus the comparable 2008period. The Company experienced a$181 million increase in total deposits at June 30, 2009 versus June 30, 2008.This increase, which was recorded in all deposit categories, together with theMarch 2009 issuance of $29 million in senior unsecured debt due 2012 guaranteedby the Federal Deposit Insurance Corporation ("FDIC") under the FDIC's TemporaryLiquidity Guarantee Program ("TLGP"), allowed the Company to reduce its use ofother temporary borrowings in 2009 and improve its liquidity position. The lowercost of funds resulted from a 7% increase in core deposits (average cost of 50basis points) coupled with the lower prevailing rate environment in the secondquarter of 2009 versus the comparable 2008 period. The average yield on the Company's securities portfolio decreased by 41basis points to 4.49% in the second quarter of 2009 versus 2008.Partially offsetting the decreased average earning-asset yield was a 77 basispoint reduction in the Company's average cost of interest-bearing liabilities inthe second quarter of 2009 to 1.45% versus 2.22% at this time in 2008.
In June 2008, the Company sold approximately $64million in leases of its former equipment leasing subsidiary. The securitiesportfolio increased by $6 million at June 30, 2009 versus the comparable 2008period. Total loansincreased by $55 million or 5% to $1.1 billion at June 30, 2009 versus thecomparable 2008 period largely due to growth of $76 million in the Company'scommercial mortgage portfolio. The reducedmargin in 2009 resulted from lower asset yields in all categories, principallyloans and securities. The Company's second quarter 2009 average earning-assetyield declined by 106 basis points to a weighted average yield of 4.95% from6.01% in 2008.
The lower earning-asset yield resulted principally from a 121basis point reduction in the average yield on loans and leases to 5.30% due inpart to the increase in non-accrual loans recorded in 2009. This decline was due to a 41 basis pointcontraction of the Company's net interest margin to 3.88% in 2009. Until such time, we subscribe to a cautious and proactiveposture."Earnings Summary for the Quarter Ended June 30, 2009The Company recorded net income of $1.1 million during the second quarter of2009 versus earnings of $961 thousand in the comparable 2008 period. Netinterest income decreased by $1.0 million or 6.5% to $15.0 million in the secondquarter of 2009 versus 2008.
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