Rob Reilly
EVP, CFO at The PNC Financial Services Group
Thanks, Bill, and good morning, everyone. Our balance sheet is on Slide 3 and is presented on an average basis. During the quarter, loan balances were $313 billion, an increase of $8 billion or 3%. Investment securities grew approximately $2 billion or 2%. Cash balances at the Federal Reserve decreased $8 billion, and our deposit balances averaged $439 billion, a decline of $7 billion or 2%. However, spot deposits were down $2.6 billion or less than 1% as lower consumer deposits were partially offset by growth in commercial deposits.
At the end of the third quarter, our loan-to-deposit ratio was 72% and remains well below our pre-pandemic levels. Average borrowed funds increased $8.6 billion as we bolstered our liquidity through Federal Home Loan Bank borrowings. During the quarter, we increased our borrowings with the home loan bank by $20 billion on a spot basis.
We continue to be well-positioned with significant capital flexibility. During the quarter, we returned $1.7 billion of capital to shareholders through approximately $600 million of common dividends and $1.1 billion of share repurchases or 6.7 million shares. And as of September 30, 2022, our CET1 ratio was estimated to be 9.3%.
Slide 4 shows our loans in more detail. During the third quarter, we delivered solid loan growth across our expanded franchise. Loan balances averaged $313 billion, an increase of $8 billion or 3% compared to the second quarter, reflecting growth in both commercial and consumer loans. On a spot basis, loans grew $4.6 billion or 1%.
Commercial loans grew $3.1 billion as strong new production more than offset the syndication of the $5 billion of high-quality short-term loans that were expected to mature in the second half of the year. Consumer loans increased $1.5 billion driven by higher residential mortgage and home equity balances, partially offset by lower auto loans. And loan yields increased 69 basis points compared to the second quarter, driven by higher interest rates.
Slide 5 covers our deposits in more detail. Although average deposits declined $7 billion or 2% compared to the second quarter, spot deposits were $438 billion and declined less than 1% compared to June 30. Commercial deposits grew $1.7 billion or 1% on a spot basis, and consumer deposits declined $4.3 billion or 2%, reflecting inflationary pressures and seasonally higher spending.
Given the rising interest rate environment, we've begun to see a mix shift from non-interest-bearing into interest-bearing, particularly within our commercial deposits, and expect this to continue over time. However, to date, our consolidated deposit portfolio mix has remained relatively stable with 2/3 interest-bearing and 1/3 non-interest-bearing.
Overall, our rate paid on interest-bearing deposits increased 33 basis points linked quarter to 45 basis points. As of September 30, our cumulative beta was 22%, and we estimate it will increase to approximately 30% by year-end.
Slide 6 details our securities portfolio. On an average basis, our securities grew $2 billion or 2% during the quarter, as we replaced maturities with higher-yielding securities. The yield on our securities portfolio increased 21 basis points to 2.1%, driven by higher reinvestment yields as well as lower premium amortization. And during the quarter, new purchase yields exceeded 4%. Throughout the course of the year, we've repositioned our securities portfolio. And as of September 30, we had 66% of our securities classified as held to maturity. While interest rates have continued to increase, this repositioning has reduced the rate of change in our AOCI.
At the end of the third quarter, our accumulated other comprehensive loss was $10.5 billion, and as you know, is not included in our regulatory capital. And importantly, we expect this amount to fully accrete back over the remaining lives of the securities and swaps. As of September 30, we estimate that approximately 5% of AOCI will accrete back per quarter going forward.
Turning to the income statement on Slide 7. As you can see, third quarter 2022 reported net income was $1.6 billion or $3.78 per share. Revenue was up $433 million or 8% compared with the second quarter. Expenses increased $36 million or 1%, resulting in 7% positive operating leverage linked quarter. Provision was $241 million in the third quarter, reflecting a slightly weaker economic outlook, which impacted our macroeconomic scenarios and weightings. Our effective tax rate was 19.1%.
Turning to Slide 8. We highlight our revenue trends. As you can see, total revenue for the third quarter was $5.5 billion, an increase of 8% or $433 million linked quarter. Net interest income of $3.5 billion was up $424 million or 14%. 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 32 basis points to 2.82%.
Third quarter non-interest income of $2.1 billion increased $9 million as lower fee income was offset by an increase in other non-interest income. The decline in fee revenue was driven by lower activity in our capital markets, mortgage and asset management businesses, which was somewhat offset by continued strong performance in our lending and deposit services as well as our card and cash management fees.
Growth in other non-interest income reflected higher private equity revenue as well as a $13 million positive Visa derivative fair value adjustment in the third quarter compared to a negative adjustment of $16 million in the second quarter.
Turning to Slide 9. Our third quarter expenses continue to be well managed and were up 1% linked quarter. The growth reflected increased personnel expense to support business growth as well as one additional day in the quarter. As we previously stated, we have a goal to reduce costs by $300 million in 2022 through our continuous improvement program.
We're now nine months into the year, and we've completed actions related to capturing more than 80% of our annual goal. And as a result, we remain confident we will achieve our full-year objectives. As you know, this program funds a significant portion of our ongoing business and technology investments.
Our credit metrics are presented on Slide 10. And non-performing loans of $2.1 billion increased $22 million or 1% compared to June 30 and continue to represent less than 1% of total loans. Total delinquencies were $1.6 billion on September 30 at $115 million or 8% increase linked quarter. The increase was driven by elevated levels of administrative delinquencies, the majority of which have already been or are in the process of being resolved.
Net charge-offs for loans and leases were $119 million, an increase of $36 million linked quarter, primarily driven by higher commercial loan net charge-offs. Our annualized net charge-offs to average loans continues to be historically low at 15 basis points.
Provision for the third quarter was $241 million compared to $36 million in the second quarter. The increase reflected slightly weaker economic expectations, which impacted our macroeconomic scenarios and weightings. And during the third quarter, our allowance for credit losses remained essentially stable. Our reserves now totals $5.3 billion and continued to be 1.7% of total loans.
In summary, PNC reported a strong third quarter. In regard to our view of the overall economy, we expect moderate growth in the fourth quarter, resulting in 1.8% GDP growth for the full year 2022. We also expect the Fed to raise rates by an additional 125 basis points in the fourth quarter with a 75 basis point increase in November and a 50 basis point increase in December.
Looking at the fourth quarter of 2022 compared to the third quarter of 2022, we expect average loan balances to increase approximately 1%. Net interest income to be up 6% to 8%, fee income to be stable to down 1%; other non-interest income to be between $200 million and $250 million, excluding net securities and Visa activity.
Taking our guidance for all components of revenue into consideration, we expect total revenue to increase approximately 2%. We expect total non-interest expense to be stable to up 1%. Fourth quarter net charge-offs to be between $125 million and $175 million, and we expect our effective tax rate to be approximately 18.5%.
And with that, Bill and I are ready to take your questions.
