Jason J. Tyler
Executive Vice President and Chief Financial Officer at Northern Trust
Thank you, Mike. And let me join Jennifer and Mike in welcoming you to our second quarter 2022 earnings call. Let's dive into the financial results of the quarter starting on Page 2. This morning, we reported second quarter net income of $396.2 million. Earnings per share were $1.86, and our return on average common equity was 15.7%.
Results for the quarter included a $20.3 million pension settlement charge within the employee benefits expense category. Also recall from last year, we implemented accounting reclassifications to certain fees at the beginning of the year, which will continue to impact the year-over-year comparisons as noted on this page. Our effective tax rate was 26.7%, which compared to 24.3% in the prior year and 23.8% in the prior quarter. The increase is largely related to our international earnings mix, including reserves for uncertain tax positions. We now expect our effective tax rate to be approximately 24% to 25% on a go-forward basis.
Let's move to Page 3, and review the financial highlights of the quarter. Year-over-year, revenue was up 12% and expenses increased 9%. Net income was up 8%. In the sequential comparison, revenue was up 3% and expenses were up 1%, while net income increased 2%. The strengthening of the U.S. dollar resulted in a reduction in our year-over-year revenue and expense growth rates of approximately 2%, and a reduction in the sequential growth rates were approximately 1%. The provision for credit losses was $4.5 million in the quarter. Return on average common equity was 15.7% for the quarter, up from 13.7% a year ago and up from 14.2% in the prior quarter.
Let's look at the results in greater detail starting with revenue on Page 4. Trust, Investment and Other Servicing fees representing the largest component of our revenue totaled $1.1 billion and were up 6% from last year and down 2% sequentially. All other remaining non-interest income declined 2% from both the prior year and the prior quarter. Net interest income, which I'll discuss in more detail later, was $470 million and was up 37% from one year ago and up 21% sequentially.
Let's look at the components of our Trust and Investment fees on Page 5. For our Asset Servicing business, fees totaled $643 million and were up 5% year-over-year and down 3% sequentially. Custody and Fund Administration fees were $434 million, down 5% year-over-year and down 4% sequentially. The year-over-year decline was primarily driven by unfavorable currency translation, partially offset by new business. The sequential decline was driven by unfavorable currency translation, as well as unfavorable markets. Assets Under Custody and Administration for Asset Servicing clients were $12.8 trillion at quarter end, down 13% year-over-year and down 12% sequentially. Both the year-over-year and sequential declines were primarily driven by unfavorable markets and unfavorable currency translation.
Investment Management fees and Asset Servicing of $148 million were up 47% year-over-year and up 1% sequentially. The year-over-year performance was driven primarily by lower money market mutual fund fee waivers and the previously mentioned accounting reclassification, partially offset by client outflows. Sequentially, the increase was primarily due to lower fee waivers, partially offset by client outflows and unfavorable markets. There were no fee waivers relating to low interest rates in the second quarter results compared to $28 million in the prior quarter and $50 million in the prior year quarter. Assets Under Management for Asset Servicing clients were $950 billion, down 19% year-over-year and down 13% sequentially. Both declines were driven by unfavorable markets, client outflows and unfavorable currency translation.
Securities Lending fees were $22 million, up 11% year-over-year and up 14% sequentially as wider spreads offset the impact of lower volumes. Average Securities Lending Collateral levels were down 7% year-over-year and down 5% sequentially. Other trust fees, fees were $39 million, up 7% compared to the prior year and down 11% sequentially. The sequential decline was primarily driven by higher seasonal benefit payment services fees in the prior quarter.
Moving to our Wealth Management business. Trust, Investment and Other Servicing fees were $501 million and were up 8% compared to the prior year and down 1% from the prior quarter. There were no fee waivers in relation to low interest rates in the current quarter compared to $23 million in the prior quarter and $29 million in the prior year quarter. Within the regions, the year-over-year growth was driven by lower money market mutual fund fee waivers and new business.
For the sequential performance, the decline within the regions was primarily driven by unfavorable markets, partially offset by lower fee waivers. Within Global Family Office, the year-over-year growth was driven by lower fee waivers, new business and favorable markets. The sequential increase was mainly related to lower fee waivers, partially offset by unfavorable markets. Assets Under Management for our Wealth Management clients were $353 billion at quarter end, down 5% year-over-year and down 11% on a sequential basis. The year-over-year decline was driven by unfavorable markets, partially offset by client flows. The sequential decline was driven by unfavorable markets and client outflows.
Moving to Page 6. Net interest income was $470 million in the quarter and was up 37% from the prior year. Earning assets averaged $140 billion in the quarter, down 1% versus the prior year. Average deposits were $129 billion and were up 1% versus the prior year, while loan balances averaged $41 billion and were up 12% compared to the prior year. On a sequential quarter basis, net interest income grew 21%. Average earning assets and average deposits both declined 7%, while average loan balances were up 3%. The net interest margin was 1.35% in the quarter, up 38 basis points from a year ago and up 30 basis points from the prior quarter. The increases from the prior year and prior quarter were both driven primarily by higher average interest rates, a favorable balance sheet mix and $7 million in non-recurring interest received from certain non-accrual loans.
Turning to Page 7. Expenses were $1.2 billion in the second quarter and were 9% higher than the prior year and 1% higher than the prior quarter. The current quarter's expenses included a $20.3 million pension settlement charge within the employee benefits category, while the prior year quarter included a pension settlement charge of $17.6 million. Also included in the quarter is the impact of the previously mentioned accounting reclassification, which increased other operating expense by $10.4 million compared to the prior year. Excluding these impacts, expenses were up 8% versus the prior year and flat sequentially. Compensation expense was up 12% compared to the prior year and was down 3% sequentially. The year-over-year growth was primarily driven by higher salaries, as well as higher cash-based incentives.
The sequential decrease was primarily due to the quarters -- to the prior quarter's equity incentives, including $49 million in expense associated with retirement eligible staff, partially offset by higher salaries. Both the year-over-year and sequential comparisons benefited by favorable currency translation. Excluding the previously mentioned settlement charges, employee benefits expense was down 1% compared to the prior year and down 5% from the prior quarter. Outside Services expense was $213 million and was down 2% from a year ago and flat sequentially. The year-over-year decline was primarily driven by lower third-party advisor and technical services costs, partially offset by higher consulting expenses.
Equipment and Software expense of $204 million was up 14% from one year ago and 5% sequentially. The year-over-year and sequential growth were both primarily driven by higher software costs due to continued investments in technology, as well as higher amortization Occupancy expense of $51 million was down 2% from a year ago and flat sequentially. Other operating expense of $90 million was up 33% from a year ago and up 13% sequentially. The year-over-year increase was driven by the previously mentioned accounting reclassification and higher business promotion and other miscellaneous expense, partially offset by lower supplemental compensation plan expense. The sequential performance was primarily due to higher business promotion and staff-related expense.
Turning to Page 8. Our capital ratios remained strong, with our common equity Tier 1 ratio of 10.5% under the standardized approach, down from the prior quarter's 11.4%, our Tier 1 leverage ratio was 6.7%, up from 6.5% in the prior quarter. An increase in net unrealized losses on the available for sale securities portfolio was a primary factor in this quarter's decline in capital ratios. Accumulated other comprehensive income at the end of the current quarter was a loss of $1.5 billion with the loss in the second quarter totaling approximately $600 million. During the quarter, we declared cash dividends of $0.70 per share, totaling $148 million to common stockholders. As announced yesterday, our Board of Directors approved an increase in our third quarter dividend to $0.75 per share.
The current environment continues to demonstrate the importance of a strong capital base and liquid balance sheet to both weather the uncertain economic conditions and to support our clients' needs. We remain laser-focused on providing exceptional client service, while executing on our strategic priorities to grow the franchise and create long-term value to our shareholders. Before we open it up to questions, I'd like to take a moment to thank Mark Bette, who is transitioning from heading Investor Relations to his new role as CFO for our Shared Services Group. Mark, thank you for your leadership, your partnership and your unwavering commitment to serving our analyst and investor community over the past six years. I know I speak for all of us when I say we've learned so much from your insights and perspective. So thank you.
And with that, please open the line for questions.