Mike Maguire
Chief Financial Officer at Truist Financial
Great. Thank you, Bill, and good morning everyone. For the quarter, we reported a GAAP net loss of $5.2 billion or $3.85 per share. As Bill noted, reported earnings per share were impacted by several items detailed at the top of Slide 8. Those include a non-cash goodwill impairment charge of $6.1 billion, a special FDIC assessment of $507 million and the discrete tax benefit of $204 million. Excluding these three items, adjusted net income was $1.1 billion or $0.81 per share. In addition, merger-related and restructuring charges primarily related to severance and branch consolidation associated with our cost saves initiatives negatively impacted EPS by another $0.10.
Before providing further details on this quarter's underlying financial performance, I do want to provide some additional background on the goodwill impairment charge that occurred during the quarter. We test our goodwill for impairment annually on October 1st. This year's test resulted in an impairment of $6.1 billion.
The impairment was primarily driven by the continued impact of higher interest rates and higher discount rates and a sustained decline in banking industry share prices, including Truists share price. Importantly, as Bill noted in his opening remarks, this is a non-cash charge and has no impact on our liquidity, no impact on our regulatory capital ratios, our ability to pay our common stock dividend or to serve the needs of our clients.
Moving on to the results for the quarter. Total revenue increased 50 basis points sequentially due to a more modest decline in net interest income than expected. Adjusted expenses declined 4.5% or 5.2% if excluding the impact of TIH Independence readiness costs. Our net interest margin improved 3 basis points to 2.98% during the quarter. We added 20 basis points of CET1 capital in the quarter and increased our ALLL ratio by 5 basis points in light of ongoing economic uncertainty. Finally, our tangible book value per share increased 13% on a linked-quarter basis, due primarily to the impact of lower interest rates on the value of our available for sale investment portfolio.
Next, we'll turn to Page 9 to cover loans and leases. Average loans decreased 1.7% sequentially, reflecting our ongoing balance sheet optimization efforts and overall weaker client demand. Average commercial loans decreased 1.8% primarily due to a 2.3% decrease in C&I balances primarily due to lower client demand. In our consumer portfolio, average loans decreased 1.8% primarily due to further reductions in indirect auto and mortgage. Overall, we expect average commercial and consumer balances decline modestly in the first quarter, driven by our ongoing mix shift towards deeper client relationships, deemphasizing lower return portfolios and the effects of continued economic uncertainty.
Moving now to deposit trends on Slide 10. Average deposits decreased 1.4% sequentially as growth in time deposits and interest checking was more than offset by declines in noninterest-bearing and money market balances. Noninterest-bearing deposits decreased 3.7% and represented 29% of total deposits compared to 30% in the third quarter and 34% in the fourth quarter of 2022.
During the quarter, consumers continued to seek higher rate alternatives, which drove an increase in deposit costs, albeit at a slower pace relative to recent periods. Typically, total deposit costs increased 9 basis points sequentially to 1.90%, down from a 30 basis point increase in the prior quarter, which resulted in just a 100 basis point increase to our cumulative total deposit beta to 36%.
Similarly, interest-bearing deposit costs increased 10 basis points sequentially to 2.67%, down from 38 basis point increase in the prior quarter, which also resulted in a 100 basis point increase to our cumulative total interest-bearing deposit beta to 50%. Going-forward, we will continue to maintain a balanced approach, focusing on core relationships, staying attentive to client needs and striving to maximize the value we can add to relationships outside of rate paid.
Moving to net interest income and net interest margin on Slide 11. For the quarter, taxable equivalent net interest income decreased by 0.6% linked-quarter, due to lower average earning assets and higher rate paid on deposits, partially offset by favorable hedge income. Reported net interest margin improved 3 basis points on a linked-basis quarter. While net interest margin expanded in each of the last two quarters, we expected to contract in the first quarter due to an increase in rate paid on deposits, partially offset by continued improvement in spreads on new and renewed loans.
Turning to noninterest income on Slide 12. Fee income increased $47 million or 2.2% relative to the third quarter. The linked-quarter increase was primarily attributable to higher service charges on deposits, which were up $76 million in the fourth quarter, due primarily to the third quarter being impacted by $87 million of client refunds.
Lending-related fees increased $51 million linked-quarter due to higher leasing-related gains. And other fees declined $66 million due to lower equity income. Fee income was down 3.2% on a like quarter basis as lower investment banking and trading, deposit service charges, mortgage banking and other income were partially offset with higher insurance income and higher lending-related fees.
Next, I'll cover noninterest expense on Slide 13. GAAP expenses of $10.3 billion increased $6.5 billion linked-quarter due primarily to the previously mentioned $6.1 billion goodwill impairment charge, the $507 million FDIC special assessment, and a $108 million increase in merger-related and restructuring expense, partially offset by $183 million decline in personnel costs.
Excluding these items and the impact of intangible amortization, adjusted noninterest expense declined 4.5% sequentially or 5.2% excluding the impact of $33 million of TIH Independence readiness costs. The decrease in adjusted expense was driven by lower personnel expense due to the execution of our cost savings program resulting in headcount reductions as well as lower incentive compensation to reflect our performance in 2023. These improvements were partially offset with higher professional and outside processing expenses. Adjusted noninterest expenses were essentially flat on a like quarter basis.
As Bill mentioned, we are pleased with the progress that we've made on the cost savings initiative that we announced in September. Our original goal was to eliminate or avoid expenses of approximately $750 million over a 12-month to 18-month period, which will help us manage our expense growth in 2024 to flat-to-up 1%. The largest category of savings targeted in our plan was a reduction enforced, driven by a company-wide assessment of spans and layers of management, the elimination of redundant functions and the restructuring of certain business lines. We've made significant progress here. FTEs are down 4% from June 30th to December 31st, with the final set of reductions underway in the first quarter.
The second category we highlighted include cost savings opportunities that would be driven by organizational simplification. Examples include reimagining our go-to-market strategy in CRE, simplifying our benefits programs and rightsizing our branch network and related staffing. As part of these efforts, we anticipate reducing the size of our branch footprint by nearly 4% during the first half of 2024.
In addition to lowering headcount in simplifying our organization, we also reexamined our technology investment spend. Through this process, we've rationalized, rescoped, or delayed the start of a number of projects primarily in non-core areas. We estimated restructuring costs related to this initiative to be approximately $225 million or 30% of our initial $750 million goal. So far, we have incurred around $200 million of charges related to the program, mostly driven by reductions enforced and the facilities related decisions. We would expect to recognize the bulk of the remaining costs in the first quarter. It's clear to state here that the work is never done and we continue to assertively manage costs, but we feel confident that we will achieve our flat-to-up 1% expense target for 2024.
Okay, moving on to asset quality on Slide 14. Asset quality metrics continued to normalize in the fourth quarter, but overall remain manageable. Nonperforming loans declined 6% linked-quarter, while early-stage delinquency increased 11 basis points sequentially due to an increase in 30-day to 89-day past due consumer and C&I loans.
Included in our appendix is an updated updated data on our office portfolio, which represents 1.7% of total loans. We are pleased that nonperforming and criticized and classified office loans decreased modestly linked-quarter, while we increased the reserve on this portfolio from 8.3% at September 30 to 8.5% at year end.
During the quarter, our net charge-off ratio increased 6 basis points to 57 basis points. The increase in net charge-offs for the quarter reflects increases in our other consumer, indirect auto and C&I lending portfolios, partially offset by lower CRE losses. We continue to build reserves as provision expense exceeded net charge-offs by $119 million. Our ALLL ratio increased to 1.54%, up 5 basis points sequentially and 20 basis points year-over-year due to ongoing credit normalization and greater economic uncertainty. Consistent with our commentary last quarter, we've tightened our risk appetite in select areas, though we remain -- maintain our through-the-cycle supportive approach for high quality long-term clients.
Turning now to capital on Slide 15, Truist added 20 basis points of CET1 capital in the fourth quarter through a combination of organic capital generation, disciplined RWA management and this quarter's tax benefit, partially offset by the FDIC special assessment. With a CET1 ratio of 10.1%, Truist remains well-capitalized relative to our minimum regulatory requirement of 7.4% that became effective on October 1st. We do not have plans to repurchase shares over the near-term.
We continue to be disciplined with our RWA management strategy as we allocate less capital to certain businesses, though we have been clear that our balance sheet remains open to core clients. Our primary capital priorities are supporting the financial needs of new and existing core clients as well as the payment of our $0.52 per share quarterly dividend. In addition, we continue to believe that Truist's capital flexibility with Truist Insurance Holdings is a distinctive advantage. We estimate that our residual 80% ownership stake provides greater than 200 basis points of additional capital flexibility, and we continue to evaluate our strategic options with respect to TIH.
The table in the center of the slide provides an updated analysis of our AOCI at year end. During the fourth quarter, the component of AOCI attributable to securities declined from $13.5 billion to $11.1 billion, or by $2.4 billion due to the decline in long-term interest rates during the quarter and finished 2023 essentially flat when compared to year end 2022. AOCI related to our pension plan improved from $1.5 billion to $1.1 billion, which is a level that will remain static throughout 2024.
Based on estimated cash flows in today's forward curve, we would expect the component of AOCI attributable to securities to decline from $11.1 billion at the end of the fourth quarter to $8 billion by the end of 2026, or by approximately 28%. We continue to feel confident in our ability to meet the requirements and build capital under the proposed phase-in periods based on our assessment of the proposed capital rules. We have refined our estimate for the impact to risk-weighted assets under Basel III and now expect a mid single-digit increase in risk-weighted assets compared to our previous estimate of a high single-digit increase.
Finally, as it relates to the proposed rules for a long-term debt requirement, we estimate that Truist's binding constrain is at the bank level and that the shortfall is approximately $12 billion. We remain confident that we will be able to meet the proposed requirement at both the bank and the holding company level through normal debt issuance during the phase-in period. As part of our regular way funding plan, we issued $1.75 billion of long-term debt during the fourth quarter of 2023.
All right, I'll now turn to Page 16 to review our updated guidance. Looking into the first quarter of 2024, we expect revenues to remain flat or decline by 1% from 4Q 2023 GAAP revenue of $5.8 billion. Net interest income is likely to be down 3% to 4% in the first quarter, which is more than we experienced in the fourth quarter, due primarily to one less day, a smaller balance sheet and some pressure on our net interest margin driven by rate paid. We expect linked-quarter improvement in noninterest income due to higher insurance and investment banking and trading income, partially offset by lower other and lending-related fee income.
Adjusted expenses of $3.4 billion are expected to increase by 4% due to normal seasonal increases related to payroll taxes and higher incentive accruals.
For the full-year 2024, we expect revenues to decrease by 1% to 3%. Our balance sheet and interest rate sensitivity continue to be positioned as relatively neutral, which is in-line with our long-term goal. Our forecast assumes that net interest income troughs in the first-half of 2024 and then remains relatively stable, assuming five reductions in the Fed funds rate with the first reduction coming in May 2024.
In addition, we assume that insurance continues to grow at high single-digit rate, while investment banking and trading should benefit from a recovery in capital markets. Although we anticipate adjusted expenses rising 4% in the first quarter due to seasonal factors, full-year 2024 adjusted expenses are still expected to remain flat or to increase 1% over 2023 adjusted expenses of $14 billion, which includes TIH Independence readiness costs. Our 2024 expense guidance of flat-to-up 1% also includes $85 million of TIH Independence readiness costs.
In terms of asset quality, we expect net charge-offs of about 65 basis points, reflecting a continued normalization of loss rates across our consumer and wholesale loan portfolios, a lower denominator from declining loan balances and our strategy to be proactive in resolving higher risk portfolios. Finally, we expect our effective tax rate to approximate 17% or 20% on a taxable equivalent basis.
I'll now turn it back to Bill for some final remarks.
