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We will limit the length of this call to one hour, which will include the time for you to ask questions. During the Q&A section we will ask you to limit your questions to one primary and one follow-up question to enable other participants to ask questions.I will now turn the time over to Harris Simmons, Chairman and Chief Executive Officer. Harris? Harris Simmons Thanks very much, James, and welcome all of you. This quarter is one in which we have continued to see some progress generally in credit quality trends, but it remains somewhat choppy in terms of the economy and the outlook for the economy in the near term. We're seeing decidedly improved trends in some of our markets, Utah, Texas, perhaps most notably, but contain challenges in some of the southwestern markets, Nevada most especially, and California, Arizona as well. We view the quarter as one in which we made reasonably good progress on credit quality and we believe our visibility continues to improve in that area. We were able to reduce non-accrual loans for the first time since the financial crisis began, and we believe that the improvement will continue into the third quarter, as other measures of problem credits also declined at encouraging rates during the quarter. This quarter wasn't without its challenges, as loan balances continued to decline at a strong rate. Though the largest portion of that decrease came in construction and land development elements of the portfolio where we are actually encouraged to see them coming down and reducing our exposure in those areas. We are encouraged with a significant increase in gross loan originations and renewables compared to the first quarter, but it wasn't enough to offset paydowns, and to a smaller extent charge-offs, and we expect that net loan growth is going to remain a challenge in the near term, and particularly as a result as we've indicated before, the continued shrinkage in the construction and development portfolio.
Turning to our results, there were several noisy items that obscure some positive trends which we'll review on this call. We reported a loss of $0.84 per share to common shareholders in the second quarter. Net income before taxes fell to a loss of a $136 million, which was down $44 million from the first quarter. This decline can be primarily attributed to the conversion of subordinated debt into preferred stock, which was a $49 million increase in expense from the second quarter compared to the prior quarter.As we said in the prior quarter's call, we didn't expect to add significantly to the allowance for credit losses and during the quarter we note that the ratio, the allowance for credit losses to total loans only increased 6 basis points compared to a 24 basis point increase last quarter, an increase of more than 200 basis points in 2009. As you are aware, we raised about $600 million of capital during the quarter, which is responsible for a significant improvement in our GAAP and regulatory capital ratios. Looking back at what has been accomplished during the past several quarters, the tangible common equity ratio increased 160 basis points from March 31, 2009 through the end of the second quarter of this year despite absorbing $1.5 billion of that charge-offs, $339 million of securities impairments, including both OCI and OTTI, $168 million of other real estate owned expense and enhancing the allowance for credit losses ratio by 200 basis points or the equivalent of $850 million. With these actions, our capital ratios have moved above the peer median. We remain pleased with the performance of our core deposit franchise, which we continue to believe is among the best in the industry. Average noninterest bearing demand deposit balance growth remained very strong, rising an annualized 25% from the prior quarter. It is up 25% compared to the year-ago level. Read the rest of this transcript for free on seekingalpha.com