Robert Q. Reilly
Chief Financial Officer at The PNC Financial Services Group
Well, thanks, Bill, and good morning, everyone. Our balance sheet is on slide 4, and is presented on an average basis. During the quarter, loan balances averaged $305 billion, an increase of $14 billion or 5%. Investment securities grew approximately $1 billion or 1%. And our average cash balances at the Federal Reserve declined $23 billion. Deposit balances averaged $447 billion, a decline of $7 billion or 2%. Our tangible book value was $74.39 per common share as of June 30, a 7% decline linked quarter, entirely AOCI driven as a function of higher rates.
And as of June 30, 2022, our CET1 ratio was estimated to be 9.6%. Given our strong capital ratios, we continue to be well positioned with significant capital flexibility. During the quarter, we returned $1.4 billion of capital to shareholders through $627 million of common dividends and $737 million of share repurchases for 4.3 million shares. Our recent CCAR results underscore the strength of our balance sheet and support our commitment to returning capital to our shareholders. As you know, our stress capital buffer for the fourth quarter period beginning in October 2022, is now 2.9%, and our applicable ratios are comfortably in excess of the regulatory minimums.
Earlier this year, our Board of Directors authorized a new repurchase framework, which allows for up to 100 million common shares, of which approximately 59% were still available for repurchase as of June 30. This allows for the continuation of our recent average share repurchase levels in dollars as well as the flexibility to increase those levels should conditions warrant. Slide 5 shows our loans in more detail. During the second quarter, we delivered solid loan growth across our expanded franchise, particularly when compared to 2021 growth rates.
2021, as you know, was characterized by low utilization levels, PPP loan forgiveness, and in PNC's case, a repositioning of certain acquisition-related portfolios. Loan balances averaged $305 billion, an increase of $14 billion or 5% compared to the first quarter, reflecting growth in both commercial and consumer loans. Commercial loans, excluding PPP, grew $13 billion, driven by higher new production as well as utilization. Included in this growth was approximately $5 billion related to high-quality short-term loans that are expected to mature during the second half of the year.
Notably, in our C&IB segment, the utilization rate increased more than 120 basis points, and our overall commitments were 5% higher compared to the first quarter. PPP loan balances declined $1.2 billion, and at the end of the quarter were less than $1 billion. Consumer loans increased $2 billion as higher mortgage and home equity balances were partially offset by lower auto loans. And loan yields increased 10 basis points compared to the first quarter, driven by higher interest rates. Slide 6 highlights the composition of our deposit portfolio as well as the average balance changes linked quarter.
We have a strong core deposit base, which is two-third interest-bearing and one-third noninterest-bearing. Within interest-bearing, 70% are consumer, and within noninterest-bearing, 50% are commercial compensating balances and represent stable operating deposits. At the end of the second quarter, our loan-to-deposit ratio was 71%, which remains well below our pre-pandemic historic average. On the right, you can see linked quarter change in deposits in more detail. Deposits averaged $447 billion in the second quarter, a decline of nearly $7 billion or 2% linked quarter.
Commercial deposits declined $8 billion or 4%, primarily in noninterest-bearing deposits due to movement to higher yielding investments and seasonality. Average consumer deposits increased seasonally by $2 billion or 1%. Overall, our rate paid on interest-bearing deposits increased 8 basis points linked quarter to 12 basis points. Deposit betas have lagged early in the rate rising cycle, but we expect our deposit betas to accelerate in the third quarter and throughout the remainder of the year given our increased rate forecast.
And as a result, we now expect our betas to approach 30% by year-end, compared to our previous expectation of 22%. Slide 7 details our securities portfolio. On an average basis, our securities grew $800 million or 1% during the quarter, representing a slower pace of reinvestment in light of the rapidly rising interest rate environment. The yield on our securities portfolio increased 25 basis points to 1.89%, driven by higher reinvestment yields as well as lower premium amortization. On a spot basis, our securities remained relatively stable during the second quarter as net purchases were largely offset by net unrealized losses on the portfolio.
As Bill mentioned, in total, we now have 60% of our securities and held to maturity as of June 30, which will help mitigate future AOCI impacts from rising interest rates. Net pretax unrealized losses on the securities portfolio totaled $8.3 billion at the end of the second quarter. This includes $5.4 billion related to securities transferred to held to maturity, which will accrete back over the remaining lives of those securities. Turning to the income statement on slide 8; as you can see, second quarter 2022 reported net income was $1.5 billion, or $3.39 per share, which included pretax integration costs of $14 million.
Excluding integration costs, adjusted EPS was $3.42. Revenue was up $424 million or 9% compared with the first quarter. Expenses increased $72 million or 2%, resulting in 7% positive operating leverage linked quarter. Provision was $36 million and our effective tax rate was 18.5%. Now let's discuss the key drivers of this performance in more detail. Slide 9 details our revenue trends. Total revenue for the second quarter of $5.1 billion increased 9% or $424 million linked quarter. Net interest income of $3.1 billion was up $247 million or 9%.
The benefit of higher yields on interest-earning assets and increased loan balances was partially offset by higher funding costs. And as a result, net interest margin increased 22 basis points to 2.5%. Second quarter fee income was $1.9 billion, an increase of $211 million or 13% linked quarter. Looking at the detail of each category; asset management and brokerage fees decreased $12 million or 3%, reflecting lower average equity markets. Capital market-related fees rebounded as expected and increased $157 million or 62%, driven by higher M&A advisory seats.
Card and cash management revenue grew $51 million or 8%, driven by higher consumer spending activity and increased treasury management product revenue. Lending and deposit services increased $13 million or 5%, reflecting seasonally higher activity and included lower integration-related fee waivers. Residential and commercial mortgage noninterest income was essentially stable linked quarter with higher revenue from commercial mortgage banking activities offset lower residential mortgage loan sales revenue. Finally, other noninterest income declined $34 million and included a $16 million Visa negative fair value adjustment related to litigation escrow funding and derivative valuation changes.
Turning to slide 10; our second quarter expenses were up by $72 million or 2% linked quarter, driven by increased business activity, merit increases and higher marketing spend. These increases were partially offset by seasonally lower occupancy expense and lower other expense. We remain deliberate around our expense management. And as we've previously stated, we have a goal to reduce costs by $300 million in 2022 through our continuous improvement program, and we're confident we'll achieve our full year target.
As you know, this program funds a significant portion of our ongoing business and technology investments. Our credit metrics are presented on slide 11. Overall, we saw broad improvements across all categories. Nonperforming loans of $2 billion decreased $252 million or 11% compared to March 31, and continue to represent less than 1% of total loans. Total delinquencies were $1.5 billion on June 30, a $188 million decline linked quarter, reflecting lower consumer and commercial loan delinquencies, which included the resolution of acquisition-related administrative and operational delays.
Net charge-offs for loans and leases were $83 million, a decrease of $54 million linked quarter, driven by lower consumer net charge-offs, primarily within the auto portfolio. Our annualized net charge-offs to average loans continues to be historically low at 11 basis points. And during the second quarter, our allowance for credit losses remained essentially stable, and our reserves now total $5.1 billion or 1.7% of total loans. In summary, PNC reported a solid second quarter, and we're well positioned for the second half of 2022 as we continue to realize the potential of our coast-to-coast franchise.
In regard to our view of the overall economy, we expect the pace of economic growth to slow over the remainder of 2022, resulting in 2% average annual real GDP growth. We also expect the Fed to raise rates by an additional cumulative 175 basis points through the remainder of this year to a range of 3.25% to 3.5% by year-end. Looking at the third quarter of 2022, compared to the second quarter of 2022, we expect average loan balances to be up 1% to 2%.
We expect net interest income to be up 10% to 12%. We expect noninterest income to be down 3% to 5%, which results in total revenue increasing 4% to 6%. We expect total noninterest expense to be stable to up 1%. And we expect third quarter net charge-offs to be between $125 million and $175 million. Considering our reported operating results for the first half of 2022, third quarter expectations, and current economic forecast for the full year 2022 compared to the full year 2021, we expect average loan growth of approximately 13% by an 8% loan growth on a spot basis.
We expect total revenue growth to be 9% to 11%. Our revenue outlook for the full year is unchanged from the guidance we provided in April. However, relative to our expectations at that time, we now expect more net interest income from higher rates, offset by somewhat lower fees. We expect expenses, excluding integration expense to be up 4% to 6%. And we now expect our effective tax rate to be approximately 19%.
And with that, Bill and I are ready to take your questions.
