Robert Reilly
Chief Financial Officer at The PNC Financial Services Group
Thanks, Bill, and good morning, everyone. Our balance sheet is on Slide 4 and is presented on an average linked quarter basis. Loans of $320 billion were stable. Investment securities increased slightly by $1 billion or 1%. And our cash balances at the Federal Reserve were $45 billion, an increase of $4 billion or 10%. Deposit balances grew $5 billion or 1% and averaged $422 billion.
Borrowed funds decreased $1 billion or 2%, primarily due to the maturity of FHLB advances, partially offset by parent company debt issuances. At quarter end, AOCI was negative $5.1 billion, an improvement of $2.4 billion or 32% compared with June 30th. Our tangible book value increased to approximately $97 per common share, which was a 9% increase linked quarter and a 24% increase compared to the same period a year ago. We remain well capitalized and our estimated CET1 ratio increased to 10.3% as of September 30th.
Regarding the Basel III Endgame, while certain aspects of the proposed rules are likely to change, we estimate our revised standardized ratio, which includes AOCI to be 9.2% at quarter end. We continue to be well positioned with capital flexibility and we returned roughly $800 million of capital to shareholders during the quarter through common dividends and share repurchases.
Slide 5 shows our loans in more detail. Average loan balances of $320 billion were flat compared to the second quarter as well as the same period a year-ago. And the yield on total loans increased 8 basis points to 6.13% in the third quarter. Commercial loans were stable at $219 billion linked quarter, as utilization rates remained low and well below the historical average of roughly 55%.
We continue to have confidence that commercial loan demand will return in the coming quarters as our loan commitments continue to increase, and we expect business investment to return to historical levels. Consumer loans averaged $101 billion and were stable with the second quarter as growth in auto loans was mostly offset by a decline in residential real estate balances.
Slide 6 details our investment security and swap portfolios. Average investment securities of $142 billion increased $1 billion or 1%. The securities portfolio yield increased 24 basis points to 3.08%, driven by higher rates on new purchases and the full quarter impact of the securities repositioning. As of September 30th, our securities portfolio duration was approximately 3.3 years.
Our active received fixed rate swaps points to the commercial loan book totaled $33 billion on September 30th, and the weighted average rate increased 58 basis points to 3.08%. Our forward starting swaps were $15 billion with a weighted average received rate of 4.26%. Importantly, with our forward starting swaps, we've locked-in the replacement yield on the majority of our 2025 swap maturities at levels higher than existing swaps in current market rates.
Turning to Slide 7, we expect considerable runoff of lower yielding securities and swaps, which will allow us to continue to reinvest into higher yielding assets over the next couple of years. Accumulated other comprehensive income improved by approximately $2.4 billion or 32% to negative $5.1 billion on September 30th, compared to negative $7.4 billion on June 30th.
The linked quarter improvement in AOCI was primarily due to lower rates, which benefited our swap and available-for-sale portfolio valuations. Going forward, AOCI related to these securities and swaps as well as our held-to-maturity portfolio will accrete back as they mature and prepay, resulting in further growth to tangible book value.
Slide 8 covers our deposit balances in more detail. Average deposits increased $5 billion or 1%, reflecting an increase in interest-bearing commercial balances as well as higher time deposits. Regarding mix, noninterest-bearing deposits were stable at $96 billion and remained at 23% of total average deposits. Our rate paid on interest-bearing deposits increased 11 basis points during the third quarter to 2.72%, reflecting growth in commercial interest-bearing deposits.
We believe our total rate paid on deposits has reached its peak level, and with the 50 basis point cut in September, we've already begun to reduce deposit pricing. Looking forward, we expect the Federal Reserve to cut the benchmark rate by 25 basis points at both the November and December meetings, which will accelerate deposit repricing, particularly within our high beta commercial interest-bearing deposits.
Turning to Slide 9. We highlight our income statement trends. Third quarter net income was $1.5 billion or $3.49 per share. Comparing the third quarter to the second quarter, total revenue of $5.4 billion increased $21 million. Net interest income grew by $108 million or 3%. And our net interest margin was 2.64%, an increase of 4 basis points.
Fee income increased $176 million or 10%. Other non-interest income was $69 million and included negative $128 million of Visa-related activity. Non-interest expense of $3.3 billion decreased $30 million or 1%. As a result, PPNR grew 2% linked quarter and we generated positive operating leverage for the third consecutive quarter. Provision was $243 million, reflecting portfolio activity and our effective tax rate was 19.2%.
Turning to Slide 10. We highlight our revenue trends. Third quarter revenue increased $21 million, driven by higher fee and net interest income, partially offset by lower other non-interest income. Other non-interest income included negative $128 million of Visa-related activity. Net interest income of $3.4 billion increased $108 million or 3%, driven by higher yields on interest-earning assets.
Fee income was $2 billion and increased $176 million or 10% linked quarter. Looking at the detail, asset management and brokerage income grew $19 million or 5%, reflecting favorable equity and fixed income market performance. Capital markets and advisory fees increased approximately $100 million or 36%, driven by higher M&A advisory activity as well as broad growth across most categories.
Card and cash management decreased $8 million or 1% as higher treasury management revenue was more than offset by credit card origination incentives. Lending and deposit revenue grew $16 million or 5% due to increased customer activity. Mortgage revenue was up $50 million linked quarter, driven by a $59 million increase in the valuation of net mortgage servicing rights.
Other non-interest income of $69 million included Visa derivative fair value adjustments of negative $128 million, primarily related to Visa's September announcement of a $1.5 billion litigation escrow funding. Notably, we continue to see strong momentum across our lines of business and throughout our markets, and year-to-date non-interest income of $6 billion grew approximately $400 million or 7% compared to the same period last year.
Turning to Slide 11. Our non-interest expense of $3.3 billion declined $30 million or 1%. Excluding the second quarter, $120 million contribution expense to the PNC Foundation, non-interest expense increased $90 million or 3% linked quarter. Personnel expense increased $87 million or 5%, reflecting higher incentive compensation-related to increased business activity.
Importantly, all other categories declined or remained stable. Year-to-date non-interest expense has increased by $80 million or 1%. Excluding the $130 million FDIC special assessment and the $120 million foundation contribution expense in 2024, non-interest expense is down 2% compared to the same period a year ago. We remain diligent in our continuous improvement efforts. We increased our CIP goal last quarter from $425 million to $450 million, and we're on-track to achieve that goal in 2024. As you know, this program funds a significant portion of our ongoing business and technology investments.
Our credit metrics are presented on Slide 12. Non-performing loans increased $75 million or 3% linked quarter, primarily driven by an increase in CRE office loans. Total delinquencies of $1.3 billion were stable with June 30th. Net loan charge-offs were $286 million, the $24 million linked quarter increase was driven primarily by lower commercial recoveries and our annualized net charge-offs to average loans ratio was 36 basis points. Our allowance for credit losses totaled $5.3 billion or 1.7% of total loans on September 30th, stable with June 30th.
Slide 13 provides more detail on our CRE office credit metrics. We continue to see stress in the office portfolio given the challenges inherent in this book and the lack of demand for office properties. CRE office criticized loans were essentially stable linked quarter, but NPLs increased due to the migration of criticized loans to non-performing status.
Net loan charge-offs within the CRE office portfolio were down slightly. However, going forward, we expect additional charge-offs on this book, the size of which will vary quarter-to-quarter given the nature of the loans. As of September 30th, our reserves on the overall office portfolio were 11.3% and inside of that 16% on the multi-tenant portfolio, both up slightly from prior quarter.
The modest increase in reserves reflects the continued valuation adjustments across the portfolio and specific reserves for certain credits. Furthermore, CRE office balances declined 4% or approximately $270 million linked quarter as we continue to manage our exposure down. Accordingly, we believe we're adequately reserved.
In summary, PNC reported a solid third quarter. Regarding our view of the overall economy, we're expecting continued economic growth in the fourth quarter, resulting in real GDP growth of approximately 2% in 2024 and unemployment to remain slightly above 4% through year end. We expect the Fed to cut rates two additional times in 2024 with a 25 basis point decrease in November and another in December.
Looking at the fourth quarter of 2024 compared to the third quarter of 2024, we expect average loans to be stable, net interest income to be up approximately 1%. Fee income to be down 5% to 7% due to the elevated third quarter capital markets and MSR levels. Other non-interest income to be in the range of $150 million and $200 million, excluding Visa activity.
Taking the component pieces of revenue together, we expect total revenue to be stable. We expect total non-interest expense to be up 2% to 3%, and we expect fourth quarter net charge-offs to be approximately $300 million. Importantly, considering our year-to-date results and fourth quarter expectations, we're on-track to generate full year positive operating leverage.
And with that, Bill and I are ready to take your questions.
