Mike Maguire
Chief Financial Officer at Truist Financial
Thank you, Bill, and good morning, everyone. I'll begin with net interest income on Slide 12. For the quarter, taxable equivalent net interest income decreased to 2.8% sequentially as higher funding costs and two fewer days in the quarter more than offset the effects of solid loan growth. Reported net interest margin decreased 8 basis points, while core net interest margin decreased 7 basis points. When you breakdown the decrease in the core net interest margin, approximately 5 basis points was driven by a shift in the funding mix from DDA and other low-cost deposit products in the interest-bearing deposits. And about 2 basis points was due to our decision to conservatively carry more liquidity during the last few weeks of March.
Moving to fee income on Slide 13. Fee income was relatively stable compared to the fourth quarter and modestly exceeded our expectations in light of typical seasonal headwinds. Insurance income increased $47 million largely due to seasonality. Year-over-year organic revenue growth was 4.7%. Mortgage banking income rose $25 million, primarily due to a gain on-sale of a servicing portfolio, which was partially offset by MSR valuation adjustments. Income from core mortgage activity was relatively stable compared to the prior quarter.
Wealth management income improved $15 million benefiting from an increase in brokerage commissions, asset flows and higher fees due to rising asset prices during the quarter. Wealth continues to build momentum as net organic asset flows, which exclude the impact of market value changes were approximately $1 billion for the quarter, it had been positive for seven of the last eight quarters. In addition, we were pleased by the modest increase in investment banking and trading income led by strength in investment-grade and high-yield bond originations, fixed-income derivatives and loan syndications.
CIB's performance continues to be aided by two idiosyncratic factors; strategic hiring over the past two years, as well as increased integrated relationship management activity. With respect to IRM, capital markets fees from non-CIB clients increased 12% sequentially, and we're 20% up from first quarter 2022. Other income decreased $56 million, primarily due to lower-income from our non-qualified plan. While fee income remains below its potential, our investments in key areas such as insurance, investment banking and wealth will continue to be a source of momentum as markets normalize, and as our IRM execution continues to mature.
Turning now to Slide 14. Reported non-interest expense declined $31 million, driven by $107 million reduction in merger costs due to the completion of integration activities, and a $27 million decrease in amortization expense. The expense reductions I just described were largely offset by a $103 million, or 3% increase in adjusted non-interest expense. Expense drivers included a $39 million increase in pension expense and a $23 million increase in regulatory charges due to higher FDIC premiums. We also experienced a $33 million increase in operating losses, which are reflected in other expense due to industry check fraud issues and an operating loss within Truist Insurance recognized prior to completing our transaction with Stone Point.
As a company, we are committed to generating expense reductions and have undertaken a number of actions that help bend the expense arc at Truist. Last week, we announced a strategic realignment within our fixed-income sales and trading business in which we discontinued certain market making activities and services provided by our middle markets fixed-income platform. This platform was largely focused on MBS related sales and trading for depositories and had produced an unattractive ROE. This realignment will result in an approximate $50 million run-rate expense save with little PPNR impact and enable us to focus more on our core strategy of being a fulsome in premier investment bank for corporate sponsors and municipal issuers.
We're also in the process of realigning our LightStream platforms with our broader consumer business with the goal of bringing the innovation, digital capabilities, efficiencies and cloud-based infrastructure of LightStream to Truist's broader client base. This will reduce the cost of supporting a separate brand and strategy, enhance the experience and primacy with our existing and prospective clients. In addition, we continue to adjust our capacity and focus in mortgage to reflect current challenging market conditions and our own strategic focus on client primacy. These actions among others, or what drove the $63 million of restructuring charges during the quarter. Furthermore, we've also aligned executive compensation to Truist to shareholder expectations, which I shared with many of you about a month ago. Taken together, we believe these, as well as other actions we're taking, will increase our focus and our expense curve and improve returns for Truist.
Moving to Slide 15. Asset quality remained strong in the first quarter, reflecting our prudent risk culture and diverse loan portfolio. Leading indicators remain favorable. Loans 30 days to 89 days past due, decreased 15 basis points sequentially and were down 17 basis points versus the first quarter of 2022. Our NPL ratio was steady at a relatively benign, 36 basis points. Net charge-offs increased 3 basis points to 37 basis points, primarily due to C&I and continued normalization in consumer and are consistent with pre-pandemic levels. We became even more cautious in our outlook regarding CRE fundamentals. And in light of increased economic uncertainty, we prudently increased our allowance by $102 million and increased our ALLL ratio by 3 basis points to 1.37%. In anticipation of an increasing risk environment, we are also tightening credit and reducing our risk appetite in selected areas, while maintaining our through-the-cycle approach for high-quality long-term clients.
Next, given high investor interest, I will dive deeper into CRE, on Slide 16. As we began the integration process to become Truist, we were very intentional about retaining the diversification benefits of the merger. To achieve this outcome, we carefully evaluated our various portfolios, including CRE to ensure we fully understood their combined risk profile and to establish how we would manage them going forward. While we did not wholly pause CRE production during this process, we did de-emphasize it until we aligned on a single go-to-market strategy. As a result of this decision, Truist's CRE portfolio actually decreased by 2.2% from the end of 2019 to the end of 2022, whereas our median peer grew CRE, 21%.
Our disciplined focus on diversification has also resulted in less CRE concentration and risk relative to our peer group. At year-end, CRE represented 11% of our loan mix, compared to 12% at our median peer and the office segment comprised 1.6% of our loan book versus 1.9% at our median peer. We maintain a high-quality CRE portfolio through disciplined risk management and prudent client selection. We typically work with developers and sponsors we know well and have observed their performance through-the-cycle. Our exposure tends to be large CRE with strong institutional sponsorship and we have reduced our exposure to smaller CRE. The quality of our CRE portfolio is also reflected in the Federal Reserve's annual stress test results.
Our disciplined approach to CRE is reflected in our asset quality metrics, which remain solid. In the lower right, you can see a snapshot of our office portfolio, which had approximately $5 billion in outstanding balances as of March 31st, and another area where Truist has been risk-averse and highly selective over the past two years. Our office portfolio tends to be weighted towards Class A properties within our footprint, which we believe will perform better than large urban markets. We have a great CRE team that is very proactive in working with clients to get ahead of any problems. Criticized trends have increased over the past few months, but we believe overall problems will be manageable, given our conservative LTVs, our reserves and the laddered maturity profile of the portfolio.
Turning to capital and liquidity, on Slide 17. Our CET1 ratio increased from 9% to 9.1% as approximately 20 basis points of organic capital generation was partially offset by 12 basis points of CECL phase-in. While not included in our CET1 ratio AOCI improved by $1 billion from December 31st to March 31st. Of our $12.6 billion of after tax OCI as of March 31st, $8.5 billion is related to our AFS portfolio, $2.5 billion is related to the frozen portion of the HTM portfolio, and $1.5 billion is related to our pension plan. We would expect the securities portfolio related OCI to decrease by $2 billion to $2.5 billion by the end of 2024, or by approximately 20%, and that's in a static rate environment. In addition, this accretion will be a powerful driver of higher tangible book value per share over time, a small glimpse of which we saw this past quarter with tangible book value increasing 8%.
On April 3rd, we also closed on the sale of a 20% minority stake in Truist Insurance Holdings, which added approximately 30 basis points to our capital ratios and provides flexibility in the future. Additionally, we declared a strong common dividend of $0.52 per share, which was paid on March 1st. Finally, Truist continues to have significant access to liquidity and a very robust liquidity managed process that includes internal and external stress-testing as well as real-time monitoring of our liquidity position. Our average consolidated LCR improved 113% during the first quarter and remains well above the regulatory minimum of 100%. We have access to approximately $166 billion of liquidity, including cash, FHLB borrowing capacity, unpledged securities and discount window capacity.
As a reminder, government and agency obligations represent 97% of our securities portfolio, which produces about $2.5 billion to $3 billion of cash flow per quarter. During the quarter, we conservatively increased our cash position from $16 billion as of December 31st, the $33 billion at the end of March funded largely by callable FHLB advances. And we'd expect that to somewhat normalized going forward given that activity has stabilized. More broadly, we do expect regulatory requirements around capital and liquidity to heightened, but believe we're in a strong position to respond given the already high expectations for an institution of our size, the strategic and financial flexibility we have as a company, and the orderly phase-in period that would likely accompanying potential changes.
Now I will review our updated guidance on Slide 18. Looking into the second quarter of 2023, we expect revenues to be relatively stable compared to the first quarter as a modest decline in NII is offset by seasonally stronger insurance revenue. Adjusted expenses are anticipated to increase 1% to 2% linked-quarter, primarily as a result of higher incentive-based compensation from insurance revenue growth. For the full-year 2023, we now expect revenues to increase 5% to 7% compared to 2022. The decline from our previous outlook is driven almost entirely by a lower net interest income outlook given higher deposit and funding costs. Adjusted expenses are still expected to increase between 5% and 7%. As I indicated earlier, we remain focused on taking actions throughout the year to reduce costs.
Excluded from our adjusted expense outlook are two items. First, we are not including the impact of any potential incremental FDIC surcharge or assessment. After we received clarity, we'll provide an update on estimated impact. Secondly, there will be some onetime costs occurring in 2023 and 2024, tied to preparing Truist Insurance Holdings to transition its operating model to be more independent, which is consistent with its new capital structure. These expenses directly correlate to realizing significant value in the business overtime. We will not adjust for these expenses in our results, but we will provide transparency. Our goal is still to produce positive operating leverage and positive adjusted PPNR growth for the full year, excluding these two items. The degree of difficulty has increased relative to January given higher funding costs.
Our expectations for the net charge-off ratio to be between 35 basis points for the full-year is unchanged. Lastly, excluding discrete items, we now expect our effective tax rate will be approximately 20%, which translates to approximately 22% on a taxable equivalent basis, due to our adoption of recent accounting guidance regarding the amortization of new market tax credits. This change simply shift contra-revenue and other income to the tax expense line and has no impact on the bottom-line.
Now, I'll hand it back to Bill for some final remarks.
