John Stern
Senior Executive Vice President and Chief Financial Officer at U.S. Bancorp
Thanks, Andy. Please turn to Slide 7. I'll start with a balance sheet summary, followed by a discussion of third quarter earnings trends. This quarter, total average deposits decreased 1.0% on a linked quarter basis to $509 billion as we continued to prioritize relationship-based deposits and maintained our pricing discipline. Average loans totaled $374 billion, a modest decrease of 0.2% on a linked quarter basis. Industry loan growth remains muted and the decline we saw this quarter was driven by slightly lower commercial balances given continued headwinds from capital markets related paydowns and continued relatively low utilization rates.
Within retail, higher credit card loan balances and improved revolver rates drove more favorable loan mix and margins. As Andy mentioned, this quarter we opportunistically restructured a portion of our investment portfolio to enhance our net interest income growth trajectory and to further strengthen our capital and liquidity profiles. At September 30th, the ending balance on our investment portfolio declined slightly to $167 billion with an average yield for the quarter of 3.20%.
Slide 8 highlights our credit quality performance. Asset quality metrics continued to develop in-line with our expectations and reflected ongoing macroeconomic stability. This quarter, we saw a slight reduction in our exposure to commercial real estate office portfolio, which remained appropriately reserved at 10.8%. Late stage delinquencies and non-performing asset metrics were relatively flat on a linked quarter basis and the ratio of non-performing assets to loans and other real estate was unchanged at 0.49% linked quarter versus 0.35% year-over-year.
Our net charge-off ratio of 0.60% increased 2 basis points from a second quarter level of 0.58%, in-line with our expectations. At September 30th, our allowance for credit losses totaled $7.9 billion, or 2.1% of period end loans. We expect our fourth quarter net charge-off ratio to remain relatively stable compared with the third quarter level. In the near-term, we expect changes to the loan loss reserve to be driven primarily by loan balance growth and mix.
Slide 9 provides a more detailed earnings summary. In the third quarter, we reported $1.03 per diluted share, which included $119 million of net losses or $189 million after tax on sales and securities rebalancing actions within our investment portfolio. These actions were largely offset by tax favorability in the quarter, primarily due to settlements in various tax jurisdictions.
Turning to Slide 10. Net interest income on a taxable equivalent basis totaled approximately $4.17 billion, an increase of 2.8% linked quarter. Our net interest margin increased 7 basis points to 2.74%. Both net interest income and net interest margin growth this quarter benefited from a combination of earning asset repricing and mix further supported by higher card revolve rates, investment portfolio actions and disciplined deposit pricing.
Slide 11 highlights trends in non-interest income. Non-interest income totaled $2.7 billion, and as mentioned included $119 million of net security losses related to rebalancing activity within our investment portfolio. Importantly, year-over-year, we saw good growth across our core business offerings, including trust and investment management, commercial products, mortgage banking and investment products. As a reminder, last quarter's mortgage banking fees included an approximately $30 million gain on sale of mortgage servicing rights. Service charges decreased 6.2% linked quarter, partly reflecting the impact of exiting our ATM cash provisioning business. The exit is now fully reflected in our run rate for the third quarter of 2024.
Turning to Slide 12, non-interest expense for the quarter totaled $4.2 billion, which was relatively flat to the prior quarter and 1.0% lower than a year ago, as adjusted. The linked quarter increase of $16 million, or 0.4% was driven by higher compensation and employee benefit expense, primarily due to higher performance-based incentives. On a year-over-year basis, the $42 million decrease as adjusted, was driven by prudent expense management initiatives and the identification of operational efficiencies across the company.
Turning to Slide 13, our common equity tier 1 ratio of 10.5% as of September 30th increased 20 basis points from the second quarter. Looking ahead, we intend to balance our continued capital accretion of 20 basis points to 25 basis points per quarter with capital distributions starting with a modest share repurchase in the near term.
I will now provide forward-looking guidance on Slide 14. We expect net interest income for the fourth quarter on an FTE basis to be relatively stable to this quarter's $4.17 billion. This guidance is reflective of our current expectation for more modest loan growth and continued QT impacts on deposits.
Full-year 2024 net interest income on an FTE basis is expected to come in at the higher-end of our $16.1 billion to $16.4 billion range. For the full-year, we still expect mid-single-digit growth in total non-interest income as adjusted, but likely at the lower end of the range. We expect full-year non-interest expense as adjusted to be $16.8 billion.
I'll now hand it back to Andy for closing remarks.
