I will then provide an update on our digital platforms and physical operation and, finally, discuss our organization's $250 million commitment and continuing initiative to address economic and social inequity in our community.
Operating earnings per share increased 53% to $0.26, which included an additional $17 million or $0.04 per share of COVID-19 reserve bill in the quarter.
PPNR increased to $130 million.
Core revenue trends remained solid throughout a challenging interest rate environment with total revenues increasing 6% annualized to $306 million.
And total assets growing nearly $3 billion to end June at $38 billion.
Compared to the first quarter, loans and deposits increased $2.3 billion and $3.6 billion or 10% and 15% respectively.
On a linked quarter basis, double-digit second quarter loan and deposit growth were supported by organic commercial production and originating nearly 20,000 PPP loans totaling $2.6 billion.
Our fee-based businesses performed exceptionally well with capital markets and mortgage banking establishing revenue records of $13 million and $17 million respectively.
Our efficiency ratio was 53.7% and operating expenses were well controlled, down 3% from the first quarter.
On a linked quarter basis, total average loans increased 9%, largely driven by growth in commercial loans of 14%.
Commercial line balances when compared to historical levels contracted as we saw much lower line utilization of 36%.
Average deposits increased 11% as we had solid organic growth in customer relationships.
Non-interest bearing deposits were up $2.1 billion or 33% from the prior quarter-end.
Looking at June 30 spot balances, our loan to deposit ratio was 92%, including the funded PPP loans.
In fact, transaction deposits have increased $4 billion or 20% from March 31 and now represent 85% of total deposits, which compares very favorably to 79% five years ago.
This quarter's record mortgage banking income of $17 million better reflects the fundamentals in the results without MSR impairment as the mortgage banking business set a new production record for the quarter of $869 million.
We grew from 26 monthly appointments in January to 2,700 appointments in April.
Customers have been more active in F.N.B.'s mobile and online channels with monthly average users up by 50,000 in both categories compared to the average for 2019.
The level of delinquency ended the second quarter at 92 basis points on a GAAP basis, down 21 bps over the prior quarter as early stage delinquencies returns to more normalized levels.
On excluding PPP loan volume, level of delinquency would have ended the quarter at 1.02%, down 11 bps from the prior quarter.
Level of NPLs and OREO totaled 72 basis points at June, an 8 basis point increase linked quarter, while the non-GAAP level was 80 bps, excluding PPP.
Of our total NPLs at June, 48% of these borrowers continue to pay as agreed and are current.
Net charge-offs remained at a good level at $8.5 million for the quarter or 13 basis points annualized, resulting in a year-to-date level of 12 basis points.
Provision expense totaled $30 million in the quarter, which includes additional build for macroeconomic conditions tied to COVID-19.
Inclusive of the Q1 economic-driven build, our COVID-related provision for the first half of the year totaled $55 million.
Our ending reserve stands at 1.4% and, excluding PPP volume, the non-GAAP ending ACO totals 1.54%, representing a 10 basis point increase over the prior quarter, resulting in NPL coverage of 215%.
When including the acquired unamortized loan discounts, our coverage, excluding PPP volume, is 1.87%.
Under the preliminary severely adverse DFAST scenario, the current reserve position, inclusive of unamortized loan discounts, would cover 78% of stressed loss.
As it relates to our borrowers requesting payment deferral, 10% of our loan portfolio, excluding PPP loans, were approved during the initial deferment request window.
Of these deferments, 98.4% were current and in good standing prior to the pandemic.
Of the remaining 39 million, 12 million is already on non-accrual.
As shown on Slide 10, our exposure at the highly sensitive industries remains low at 3.8% of the total portfolio, which includes all borrowers operating in the travel and leisure, food services and energy space.
And the level of payment deferrals granted to these borrowers remains at 38%.
Our weighted average LTV position in this book remains strong at 65%.
Looking at Slide 5, GAAP earnings per share for the second quarter is $0.25, excluding $0.05 related to significant or outsized items.
This included $17.1 million of COVID-19 reserve build and $2 million of COVID-19-related expenses.
The TCE ratio ended June at 6.97%, reflecting these items as well as a 52-basis-point temporary impact for the $2.5 billion in net PPP loan balances at June 30th.
Without the PPP balances, the TCE ratio would have been 7.49%.
Additionally, our CET1 estimate ended the quarter at 9.4% compared to 9.1% at March 31st and 9.4% at the end of 2019, as PPP loans carry a 0% risk weighting for risk-based capital purposes.
Pretax pre-provision earnings increased to $130 million, providing more than adequate earnings power as we declared our third quarter dividend of $0.12 earlier this week.
With a dividend payout ratio of 48% in the second quarter, they're well below historical levels of previous payout ratios.
Turning to the balance sheet on Slide 14, the key theme is the impact of $2.5 billion in net PPP loan, as high as [Phonetic] 9.5% of total loans and leases at June 30th.
PPP was the primary driver in the linked-quarter average increase of $2.1 billion or 9% as well as strong organic activity across most of the commercial footprint.
Our commercial line utilization ended June at 36%, below historical levels, and down from the mid-40%s spot utilization rate at the end of the first quarter as we clearly saw some customer borrowing activity shift over to the PPP and our large corporate borrowers access to capital markets to reduce their bank debt.
Average consumer loans were essentially flat with direct installment loans increased $65 million from 14% annualized and residential mortgage increased 6% annualized, two bright spots to continue to perform well.
Continuing down to Slide 14, average deposit increased to $2.7 billion or 11% on a linked quarter basis, led by $2.9 billion or 15% of transaction deposit growth.
Transaction deposits equaled 85% of total deposits.
Non-interest-bearing, interest-bearing demand, and savings account balances each increased significantly, up $1.8 billion, $854 million, $226 million respectively.
Compared to the first quarter, net interest income totaled $228 million, a decrease of $4.7 million or 2% as loan and deposit growth mostly offset the impact from lower rates.
The net interest margin narrowed 26 basis points to 2.88%, primarily driven by a full quarter impact from March action, the lower the target Fed fund range to zero to 25 basis points.
Additionally, average one-month LIBOR fell to 36 basis points from 141 in the prior quarter.
Total yield on average earning assets declined 58 basis points to 3.54%, reflecting lower yield on variable and adjustable rate loans due to the lower interest rate environment and the impact of the PPP balances.
Total cost of funds decreased to 67 basis points from 101 basis points as cost on interest-bearing deposits were reduced 37 basis points.
Slide 16 and 17 provide details for non-interest income and expense compared to the first quarter.
Non-interest income totaled $77.6 million, increasing $9.1 million or 13.3% as mortgage banking operations increased $17.6 million on a reported basis or $10.2 million excluding MSR impairments of $300,000 and $7.7 million respectively.
Mortgage production established a new quarterly record at $869 million, increasing $306 million or 55% from the prior quarter with large contributions from North Carolina and the Mid-Atlantic region.
Capital markets also set a new record of $12.5 million, increasing $1.4 million or 12.6% with strong contributions from interest rate derivative activity across the footprint.
As expected, service charges decreased $6.2 million or 20.5% due to noticeably lower transaction volumes in the COVID-19 environment.
Turning to Slide 17, non-interest expense totaled $175.9 million, a decrease of $19 million or 9.7%, including $2 million of expenses associated with COVID-19 in second quarter 2020, $15.9 million of outsized, unusual or significant expenses occurring in the first quarter.
On an operating basis, expenses declined $5.1 million or 2.9% compared to the first quarter of 2020 as we have realized lower variable expenses such as travel and business development and increased FAS 91 benefits, given the amount of loans originated in the second quarter.
Additionally, we recognized an impairment of $4.1 million from a second quarter renewable energy investment tax credit transaction.
The efficiency ratio improved significantly 53.7% compared to 59%.
Lastly, we expect the effective tax rate to be around 17% for the full-year 2020.
For example, for the total risk-based capital ratio fall below 11%, total capital would have to drop by $258 million, 7.9% of total capital of $3.3 billion.
Our risk-weighted assets will have to increase by $2.3 billion, which is 8.5% of total risk-weighted assets of $27.5 billion.
I could comment also that $258 million is in after-tax dollars.
With CET1 of $2.6 billion and an allowance for credit losses of $365 million and a remaining PCD discount of $77 million, we have a substantial base available to absorb credit losses.
To put that in context, our reserves plus remaining discount on previously acquired loans would cover 62 quarters of net charge-offs that averaged $7.1 million per quarter in the first half 2020.
This is before considering the $2.6 billion in CET1.
Again, using $442 million in reserves plus remaining discount, we covered 75% of $586 million in charge-offs projected under the severely adverse scenario for a nine-quarter period.
If we put the $586 million in context, that compares to $64 million over nine quarters using the first half of 2020 net charge-offs or 9.2 times the current levels.
From a Fed perspective, we currently pay out $39 million in common dividends and $2 million in deferred dividend for a total of $41 million per quarter.
The Fed fourth quarter test currently shows in excess of $153 million after paying out the third quarter dividend just declared.
From an OCC perspective, there are significant cushions to support the $46 million the bank is projected to pay up to the holding company.
Three-part [Phonetic] test shows a cushion of $913 million relative to net divided [Phonetic] profits, $517 million relative to net profits for the current year combined with retained net profits for the prior two years, cushions are both well-capitalized levels ranging from 228 basis points to 384 basis points.
Year-to-date PPNR of $236 million more than supports the incremental reserve build through the first six months of the year.
We generated ample capital to cover the preferred and common dividend, and our CET1 ratio was consistent with where we ended 2019 at 9.4%.
Earlier this week, we announced our third quarter dividend of $0.12.
As an organization, we continue to place a strong emphasis on being inclusive and demonstrated by our recent $250 million commitment to address economic and social inequity and low and moderate income and predominantly minority communities.
During the quarter, F.N.B. originated nearly $500 million in Paycheck Protection Program loan in low to moderate income in rural neighborhoods, assisting thousands of small businesses and employees.
Our success is a direct result of our banker's proactive outreach to over 100 organizations and non-profit entities that work directly with these communities.
This recognition, which is based solely on employee feedback, joined the list of nearly 30 such awards received over the past decade.

Summary:
Operating earnings per share increased 53% to $0.26, which included an additional $17 million or $0.04 per share of COVID-19 reserve bill in the quarter.
In fact, transaction deposits have increased $4 billion or 20% from March 31 and now represent 85% of total deposits, which compares very favorably to 79% five years ago.
Looking at Slide 5, GAAP earnings per share for the second quarter is $0.25, excluding $0.05 related to significant or outsized items.