In second quarter, Cullen/Frost earned $93.1 million or $1.47 per share compared with earnings of $109.6 million, or $1.72 per share in the same quarter of last year and $47.2 million or $0.75 a share in the first quarter of this year.
To add our response to the COVID-19 pandemic, we've been continuing serving customers with appointments in our bank lobbies, to our motor banks, with our online and mobile banking service, to around the clock telephone customer service and at our network of more than 1200 ATMs. I'll talk in more detail about our Houston expansion and our Paycheck Protection Program loans.
In fact, during the second quarter, we learned that Frost had achieved its highest ever Net Promoter Score with a jump from 82 to 87.
As of June 30, when PPP loan applications were initially scheduled to end, we had helped nearly 18,300 of our customers get PPP loans, totaling more than 3.2 billion.
In the state of Texas, Frost was number three in PPP lending with 5% of the loans in San Antonio, Fort Worth and Corpus Christi, Frost was number one in terms of PPP loans approved and in San Antonio we had more PPP loans in Bank of America, Chase and Wells Fargo, combined.
We did well helping businesses of all sizes, but I'm particularly pleased that more than three quarters of our PPP loans were for $150,000 or less, and close to 90% were for 350,000 or less.
PPP applications have been extended into August and we're still taking anywhere from a few to 50 applications per day.
Through July, we've taken an additional 500 applications for over $22 million or an average size of about $45,000.
Average deposits in the second quarter were $31.3 billion, up by more than 20% from the $26 billion in the second quarter of last year, and the highest quarterly average deposits in our history.
Average loans in the second quarter were $17.5 billion, up by more than 20% from the $14.4 billion in the second quarter of last year.
That includes our strong showing in PPP loans, but our loan total would have been up approximately 5% even without PPP.
In the second quarter our return on average assets was 0.99%, compared to 1.4% in the second quarter of last year.
Our credit loss expense was $32 million in the second quarter, compared to $175.2 million in this first quarter of 2020 and $6.4 million in the second quarter of 2019.
That first quarter provision was significantly influenced by our energy portfolio stress scenario of oil at $9 per barrel for the remainder of 2020.
Oil prices have since stabilized at levels well above that assumption, and the energy borrowing base redeterminations are 95% complete.
Net charge-offs for the second quarter were $41 million, compared to $38.6 million in the first quarter and $7.8 million in the second quarter of last year.
Annualized net charge-offs for the second quarter were 0.94% of average loans.
Non-performing assets were $85.2 million at the end of the second quarter compared to $67.5 at the end of the first quarter, and $76.4 at the end of the second quarter last year.
At the current level, non-performing assets represent only 22 basis points of assets which is well within our tolerance level and our level lower than our average non-performing assets over the past nine quarters.
Overall delinquencies for accruing loans at the end of the second quarter were $91 million, or 51 basis points of period end loans.
To the end of the second quarter, we granted 90 day deferrals, totaling $2.2 billion.
Of loans whose deferral period has now ended, which is about $1.1 billion, only $72 million worth have requested a second deferral.
Total problem loans, which we define as risk grade 10 and higher were $674 million at the end of the second quarter, compared to $582 million at the end of the first quarter, which happened to be a multi year low.
A subset of total problem loans, those loans graded 11 and worse, which is synonymous with the regulatory definition of classified totaled $355 million or only 12% of Tier 1 capital.
Energy related problem loans were $176.8 million at the end of the second quarter, compared to $141.7 million for the previous quarter, and $93.6 million in the first quarter of last year.
To put that into perspective, the year in 2016 total problem energy loans totaled nearly $600 million.
Energy loans in general represented 9.6% of our non-PPP portfolio at the end of the second quarter, if you include PPP loans, energy loans were 7.9%.
As a reminder, the peak was 16% back in 2015, and we continued to diversify our loan portfolio and to moderate our company's exposure to the energy segment.
The total of these portfolio segments, excluding PPP loans, represented almost $1.6 billion at the end of the second quarter.
Combined with our risk assessments, these conversations influence our loan loss reserve to these segments, which is 2.52% at the end of the second quarter.
Overall, our focus for commercial loans continues to be on consistent balanced growth, including both core loan component, which we define is lending relationships under $10 million in size, as well as larger relationships, while maintaining our quality standards.
New relationships are up by about 28%, compared with this time last year, largely because of our strong efforts in helping small businesses get PPP loans.
When we ask these businesses why they came to Frost, 340 of them told us that PPP was a key factor.
The dollar amount of new loan commitments booked through June dropped by about 3%, compared to the prior year.
Regarding new loan commitments booked, the balance between these relationships went from 57% larger and 43% core at the end of the first quarter to 53% larger and 47% core so far in 2020.
For instance, the percentage of deals lost to structure increased from 61% this time last year to 75% this year.
Our weighted current active loan pipeline in the second quarter was up 24%, compared with the end of the first quarter.
Overall, net new consumer customer growth rate for the second quarter was 2.2%, compared to the second quarter of 2019.
Same-store sales, however, is measured by account openings were down by 30% through the end of the second quarter, as lobbies were opened only for -- by appointment only and through driving [Indecipherable].
In the second quarter 59% of our account openings came from our online channel, which includes our Frost Bank mobile app.
Online account openings in total were 72% higher, compared to the second quarter of 2019.
The consumer loan portfolio was $1.8 billion at the end of the second quarter, and it increased by 4.3%, compared to last year.
Our Houston expansion continues on pace, with four new financial centers opened in the second quarter and two more opened already in the third quarter for a total of 17 of the 25 planned new financial centers.
As Phil mentioned, we generated over $3.2 billion in PPP loans during the quarter.
Our average fee on that portfolio was about 3.2% and translates into about $104 million.
Our direct origination costs associated with these loans totaled about $7.4 million, resulting in net deferred fees of about $97 million, about 20% of the net fees were accreted into interest income during the second quarter.
Looking at our net interest margin, our net interest margin percentage for the second quarter was 3.13%, down 43 basis points from the 3.56% reported last quarter, excluding the impact of our PPP loans, the net interest margin would have been 3.05%.
The 43 basis point decrease in our reported net interest margin percentage, primarily resulted from lower yields on loans and balances at the Fed, as well as an increase in the proportion of balances at the Fed, as a percentage of earning assets, partially offset by lower funding cost.
The taxable equivalent loan yield for the second quarter was 3.95%, down 70 basis points from the previous quarter, impacted by the lower rate environment with the March Fed rate cuts and decreases in LIBOR during the quarter.
The yield on PPP loan portfolio during the quarter was 4.13% and had favorable 3 basis point impact on the overall loan yields for the quarter.
Looking at our investment portfolio, the total investment portfolio averaged $12.5 billion during the second quarter, down about $463 million from the first quarter average of $13 billion.
The taxable equivalent yield on the investment portfolio was 3.53% in the second quarter, up 7 basis points from the first quarter.
Our municipal portfolio averaged about $8.5 billion during the second quarter, flat with the first quarter with the taxable equivalent yield also flat with the first quarter at 4.07%.
At the end of the second quarter over 70% of the municipal portfolio was pre-refunded or PSF insured.
The duration of the investment portfolio at the end of the second quarter was 4.4 years, compared to 4.6 years last quarter.
Looking at our funding sources, the cost of total deposits for the second quarter was 8 basis points, down 16 basis points from the first quarter.
The cost of combined Fed funds purchased and repurchase agreements, which consists primarily customer repos decreased 80 basis points to 0.15% for the second quarter from 0.95% in the previous quarter.
Those balances averaged about $1.3 billion during the second quarter, up about $36 million from the previous quarter.
Looking to non-interest expense, total non-interest expense for the second quarter decreased approximately $3.5 million, or 1.7%, compared to the second quarter last year.
The expense decrease was impacted by the $7.4 million in PPP loan origination costs that were deferred and netted against the PPP processing fee, which were amortized into interest income as a yield adjustment over the life of those PPP loans.
Excluding the favorable impact of deferring those origination fees related to PPP loans, total non-interest expenses would have been up $3.8 million, or 1.9%, compared to the second quarter last year.
As we look out for the full-year, adding back to $7.4 million in deferred expenses related to the PPP loans I mentioned previously, we currently expect annual expense growth of something around 6%, which is down 2.5 percentage points from the 8.5% growth guidance we gave last quarter.
Regarding income tax expense, we did recognize a $2.6 million one-time discrete tax benefits during the quarter related to an asset contribution to a charitable trust during the second quarter.
Excluding the impact of that item, our effective tax rate on a year-to-date earnings would have been about 3.1%.

Summary:
In second quarter, Cullen/Frost earned $93.1 million or $1.47 per share compared with earnings of $109.6 million, or $1.72 per share in the same quarter of last year and $47.2 million or $0.75 a share in the first quarter of this year.