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Also, before we start, I would like to mention that comments made during this call contain forward-looking statements concerning M&I's future operations and financial results. Such statements are subject to important factors, which could cause M&I's actual results to differ materially from those anticipated by the forward-looking statements. These factors are described in M&I's most recent Form 10-K and M&I's other SEC filings. Such factors are incorporated herein by reference.For reconciliation of any non-GAAP financial measures mentioned in this presentation to the most comparable financial measures calculated in accordance with GAAP, please refer to M&I's Web site at www.micorp.com. And now, I will turn the call over to Greg. Greg Smith Thank you, Dave. And thank you everyone for joining us today. By now, you had an opportunity to see our press release and supplemental financial information. We have included the detailed slides on our Web site, which you might want to have available for later in our discussion. Our second quarter results provided us with continued confidence that a recovery underway at M&I. Our credit quality trends continued to benefit from our aggressive approach to non-performing loan identification and resolution as is shown by continued improvement in loans going into non-performing status, which reached our lowest levels since the first quarter of 2008; continued improvement in early stage delinquencies, which decreased for the fifth consecutive quarter; continued improvement in total non-performing loans, which decreased for the fourth consecutive quarter. The important items to focus on to better understand our second quarter performance include the following, our core loss this quarter is in line with the prior quarter and substantially less than the second quarter last year. Recall that our reported results last quarter included a $48 million pretax gain from our merchant [ph] processing sale. Our loan loss provision and net charge offs this quarter are consistent with the first quarter. They continue to reflect the progress we've made in addressing asset quality challenges to our early identification of problem credits. Our second quarter loan loss provision is 25% [ph] lower than our 2009 quarterly average, and is at its lowest level in nearly two years. We expect our provision to continue declining over time.
Non-performing loans were down $153 million this quarter. From our high in June 2009, non-performing loans are down 25%. For the quarter, early stage loan delinquencies, those performing loans past due 30 to 89 days declined again to the lowest level since 2007.Our non-performing construction and development loans were down $120 million or 18% from March 31st. Approximately half of this decrease is attributable to the Arizona market where our non-performing construction and development loans now total only $113 million. We continue to make progress, reducing our concentration of construction development loans to be less than 10% of the total portfolio. Today, our construction and development exposure is less than 10.7% of total loans, compared to nearly 23% at its high in the third quarter of 2007. For the quarter, our provision essentially matched charge offs. Our reserve now stands of 3.67% of total loans or more than $1.5 billion. We continue to make progress in improving our funding profile. Our loan to deposit ratio stands at 104% highlighting the substantial progress we've made since our high of 132% in 2007. We continue to maintain a strong capital base with a tangible common equity ratio of 8.3% and an estimated Tier 1 risk-based capital ratio at 10.9%. Now, for some additional insights into the quarter, first, the net interest margin, our net interest margin increased by four basis points on a linked-quarter basis to 3.17%. During the second quarter, our net interest margin benefited from changes in our deposit mix and deployment of our excess liquidity. Despite recent asset quality improvements, our marking continues to be negatively impacted by non-performing assets. The negative impact is 26 basis points in total. We expect net interest margin will stabilize for the near term. Many variables continue to impact margin, including competitive pricing and the influence of deposit loan force. It is difficult to project this one data point with a high degree of accuracy given the current yield curve and competitive environment. Read the rest of this transcript for free on seekingalpha.com