Our team delivered another solid quarter with growth in revenue and earning assets while maintaining an expense discipline that resulted in year over year quarterly expenses declining 5%.
Finally, we continue to successfully deliver on our Synovus Forward initiatives and investments with the $75 million in pre-tax run rate benefit achieved through the second quarter and an additional $100 million in pre-tax run rate benefits to come by year-end 2022.
We also have migrated approximately 25,000 business clients to Synovus Gateway, our new digital platform for business and commercial banking.
Total adjusted revenue of $489 million, adjusted expenses of $268 million and a $25 million reversal of provision for credit losses resulted in adjusted net income of $179 million or $1.20 diluted earnings per share.
Without adjustments, net income was $178 million or $1.19 diluted earnings per share.
Pretax run rate benefits from Synovus Forward of $75 million have increased by $25 million from the first-quarter results.
Our work on completed and future initiatives continues to give us confidence in our ability to achieve an aggregate pre-tax run rate benefit of $100 million by year-end 2021 and $175 million by the end of '22.
Total loans, excluding P3 loans, were up $194 million in the second quarter.
Core transaction deposits increased $702 million or 2%, led by core noninterest-bearing deposits growth of $601 million or 4%.
Key credit metrics were stable with the NPA ratio declining by 4 basis points to 46 basis points, and the ACL coverage remains strong.
A more favorable economic outlook and a 14% reduction in criticized and classified loans supported further allowance releases.
The ACL ratio, excluding P3 loans, declined 15 basis points to 1.54%.
We remain well capitalized with the CET1 ratio increasing to 9.8%, while completing nearly half of our $200 million share authorization in the quarter.
As shown on Slide 4, we ended the quarter with earning assets of $51 billion.
Total loans declined $569 million, led by P3 balance declines of $763 million.
The annualized growth rate and total commitments over the past two years is more than 3% compared to an annualized increase in funded loan balances of approximately 1%.
A material portion of that growth will translate into funded balances once C&I line utilization begins to normalize closer to the long-term average of 46 to 47%.
In June, total loans, excluding changes in P3 balances grew by approximately $200 million.
In the second quarter, further declines in consumer mortgage and HELOC portfolios of $98 million and $74 million, respectively, continued to be impacted by accelerated prepayment activity and excess liquidity.
CRE loan declines of $173 million this quarter largely resulted from accelerated payoffs as many owners are selling with the expectation that capital gains taxes will increase in 2022.
C&I balances, excluding changes in P3, increased $220 million with $469 million in commitment growth while C&I line utilization remained near historic lows.
As a reminder, a normalization in C&I line utilization would result in more than $700 million in funded balances.
We had approximately $150 million in fundings of round two P3 loans, net of unearned fees, which partially offset forgiveness of $927 million.
Total P3 balances ended the quarter at $1.6 billion.
Lastly, as a function of this liquidity environment, we increased the securities portfolio about $616 million and third-party consumer portfolio about $273 million.
Investment securities accounted for 17% of total assets at the end of the quarter and could increase further as we look for opportunistic deployments of liquidity in the second half of 2021.
As shown on Slide 5, we continue to grow core transaction deposits, which increased $702 million, or 2% from the prior quarter.
This was led by core noninterest-bearing deposit growth of $601 million or 4%, which offset strategic declines in higher cost deposits.
We continue to have success reducing our total deposit costs in the second quarter with a reduction of 6 basis points from 22 basis points to 16 basis points.
For the month of June, total deposit costs were 15 basis points, and we expect further reductions in total deposit costs this year.
Slide 6 shows net interest income of $382 million, an increase of $8 million from the prior quarter.
The net interest margin of 3.02%, a decline of 2 basis points was primarily impacted by P3 forgiveness as P3 fee accretion decreased $5 million from the prior quarter.
Deceleration of prepayment activity resulted in a $3 million reduction of premium amortization in the second quarter, down from $20 million in the first quarter.
As of June 30th, our loan portfolio is 54% variable and approximately 30% of those variable rate loans have floors at or above short-term index rates of 25 basis points.
Using the quarter-end forward curve and absent rate hikes, we expect a NIM of approximately 3%, excluding the impact of P3, with headwinds from the lapse of P3 fee accretion being offset by the continued deployment of excess liquidity and with notable upside coming from increases in either short-term or long-term interest rates.
As we've shared previously, we estimate NIM dilution of approximately 6 basis points per $1 billion of excess cash on deposit at the Federal Reserve.
Slide 7 shows a total adjusted noninterest revenue of $106 million, down $6 million from the previous quarter.
Core banking fees were $41 million, up $3 million.
Increases were broad-based, led by $1 million increases in account analysis fees that benefit from our treasury and payment solutions team and our recently in-sourced merchant business.
NSF, or overdraft fees, which have received a lot of attention throughout the industry, were flat at $6 million, accounting for less than 6% of noninterest revenue and 1.3% of total revenues.
Net mortgage revenue declined $8 million in the second quarter to $14 million due to reductions in secondary production and gain on sale.
Increases in fiduciary revenues of $3 million helped offset decreases in other areas, including capital markets income.
Assets under management grew 3% in the quarter and 28% from the previous year.
Total noninterest expense of $271 million is highlighted on Slide 8.
Adjusted noninterest expense was $268 million up $2 million from the prior quarter and down $6 million from the prior year.
Employment expense of $159 million was down $1 million from the prior quarter as seasonal decreases in payroll taxes was partially offset by an increase in pay days, as well as commissions and other variable compensation.
Expenses of $42 million associated with occupancy, equipment and software increased $1 million from the previous quarter, largely due to an increase in the repairs and maintenance.
Other expenses of $67 million were up $3 million primarily due to the $4 million increase in third-party processing fees associated with the expenses from additional P3 forgiveness and third-party consumer loans.
We have reduced our head count 6% year over year, approximately 85% of which was on the support side.
We continue to see improvement in the overall economic outlook, which is reflected in the reversal of provision for credit losses of $25 million and a 14% reduction in criticized and classified loans.
As shown in the appendix, cash inflows from March to May are each up more than 10% compared to the same period from 2019, which we use as a pre-pandemic baseline.
The annualized net charge-off ratio for the quarter was 0.28%.
During the second quarter, the NPA ratio declined 4 basis points to 46 basis points.
Criticized and classified loans fell 14%, and we expect further reductions as we progress through the rest of the year.
The ACL ratio of 1.54%, excluding P3 loans, was down 15 basis points from the prior quarter and 27 basis points from the end of the year.
We continue to use a multi-scenario framework in our CECL modeling and a sign of 40% weighting to adverse scenarios, 55% weighting to the base scenario and 5% weighting to an upside scenario.
As noted on Slide 10, the CET1 ratio increased 1 basis point to 9.75% as a result of strong performance.
In the second quarter, we repurchased $92 million of the $200 million share repurchase authorization in place for 2021, which resulted in a 1.3% reduction of average diluted outstanding shares.
We have completed approximately $15 million of additional repurchase activity in July.
We will continue to opportunistically deploy capital on our balance sheet and to our shareholders as we remain above our 9.5% operating target for CET1.
As I highlighted earlier, throughout the second quarter, we have continued to add to our Synovus Forward pre-tax run rate benefits, now totaling approximately $75 million.
Based upon our progress to date, as well as the ongoing plan and execution, we remain confident in achieving the 2021 and 2022 milestones of $100 million and $175 million, respectively.
Approximately $50 million of the $75 million pre-tax run rate benefit we have achieved by the end of the quarter relates to these specific efficiency initiatives.
We have plans to increase the savings in each of these categories, but also are adding new initiatives and areas of focus to achieve an incremental 30 to $40 million in pre-tax benefits by the end of 2022.
We have also had success to date on the revenue side of Synovus Forward with $25 million in pre-tax run rate benefits.
The Treasury and Payment Solutions pricing-for-value initiative has resulted in annualized pre-tax run rate benefits of approximately $12 million in the second quarter.
As we turn to future plans and initiatives, the 60 to $70 million in expected pre-tax revenue benefits will largely be accomplished through analytics, new products and solutions, balance sheet management strategies, as well as ongoing talent and specialty team expansion.
We still expect to be within our 2 to 4% loan growth guidance excluding P3 loans, and third-party consumer loans.
This asset class represents $1.5 billion in period-end balances, up $776 million in 2021.
Pre-pandemic, this portfolio was approximately $2 billion in held for investment outstandings.
Our capital management target now includes a CET1 ratio greater or equal to 9.5% target.
A continuation of strong operating performance and a stable economic outlook is likely to result in a CET1 ratio above 9.5%, even after completing the entire $200 million share repurchase authorization for the current year.
Additional focus and execution related to various tax strategies are expected to result in an effective tax rate of 22 to 24%.
Year-to-date, the ETR is 22% or 23% before discrete items.

Summary:
Total adjusted revenue of $489 million, adjusted expenses of $268 million and a $25 million reversal of provision for credit losses resulted in adjusted net income of $179 million or $1.20 diluted earnings per share.
Without adjustments, net income was $178 million or $1.19 diluted earnings per share.