Mike Maguire
Chief Financial Officer at Truist Financial
Thank you, Bill, and good morning, everyone. As Bill mentioned, our financial statements for the first quarter and for previous periods have been restated due to the pending sale of Truist Insurance Holdings. This restatement has no impact on our net income or earnings per share for historical or current reporting periods. However, and as you can see in our financial tables, revenue and expense associated with TIH is no longer shown on our financial statements.
TIH's contribution to Truist net income and earnings per share is now captured in net income from discontinued operations. My comments today will focus on revenue and expense from continuing operations, although I will also provide some detail on revenue and expense for the quarter inclusive of TIH for comparative purposes.
We reported net income available from continuing operations of $1 billion or $0.76 per share, which includes a $75 million pre-tax or $0.04 per share after-tax expense related to the industry-wide FDIC special assessment. We reported net income available from discontinued operations, which represents earnings from TIH of $64 million or $0.05 per share, which includes an $89 million pre-tax or $0.05 per share negative impact from the acceleration of incentive compensation at TIH due to the pending sale. So on an adjusted basis, we reported net income available to common shareholders of $1.2 billion or $0.90 per share, which includes adjusted net income from continuing operations of $0.80 and adjusted net income from discontinued operations of $0.10.
In addition to the items I just noted, we also had pre-tax restructuring charges totaling $70 million in the quarter, which negatively impacted adjusted EPS to common shareholders by $0.04 per share. The bulk of these charges were related to severance and real-estate rationalization. Total revenue, which excludes revenue associated with TIH, decreased by 1.4% linked-quarter due to a decline in net interest income, partially offset by stronger non-interest income led by investment banking and trading. Revenue before the impact of discontinued operations accounting increased 0.2% on a linked quarter basis. Adjusted expenses, which excludes adjusted expense associated with TIH, increased by 0.7%. Adjusted expenses before the impact of discontinued operations accounting increased 1% on a linked quarter basis.
Next, I'll cover loans and leases on slide nine. Average loans decreased 1.3% sequentially, reflecting overall weaker client demand and our decision to deemphasize certain lending activities during 2023, which impacted growth during the first quarter. Average commercial loans decreased to 0.9%, primarily due to a 1.2% decrease in C&I balances due mostly to lower client demand. In our consumer portfolio, average loans decreased 2%, primarily due to further reductions in indirect auto and mortgage.
During the quarter, we did increase our appetite for high-quality indirect auto loans, which as Bill mentioned, resulted in consumer loan balances showing positive growth for the month of March. Overall, we expect average loan balances to decline modestly in the second quarter, albeit at a slower pace than the first quarter.
Moving to deposit trends on slide 10. Average deposits decreased 1.6% sequentially as growth in client time deposits and interest checking was more than offset by declines in non-interest-bearing brokered and money market balances. Approximately $1.9 billion of the $6.3 billion linked quarter decline in average deposits was due to lower brokered deposits. Adjusting for broker deposits, our average deposits declined approximately 1%. Non-interest bearing deposits decreased 4.9% and represented 28% of total deposits compared to 29% in the fourth quarter of 2023.
During the quarter, consumers continued to seek higher-rate alternatives, which drove an increase in deposit costs. Specifically, total deposit costs increased 11 basis points sequentially to 2.03%, which resulted in a 2% increase in our cumulative total deposit beta to 38%. Similarly, interest-bearing deposit costs increased 11 basis points sequentially to 2.82%, which also resulted in a 2% increase in our cumulative total interest-bearing deposit beta of 53%.
Moving to net interest income and net interest margin on slide 11. For the quarter, taxable equivalent net interest income decreased by 4.2% linked quarter, primarily due to higher rate paid on deposits, lower day count in the quarter, and lower average earning assets. Reported net interest margin declined 7 basis points on a linked quarter basis due primarily to higher rate paid on deposits.
Turning to non-interest income on slide 12. Non-interest income increased $83 million or 6.1% relative to the fourth quarter. The linked-quarter increase was primarily attributable to higher investment banking and trading income, which was up $158 million linked quarter due to strong results across much of our entire capital markets platform with specific strength in M&A and equity capital markets. Lending-related fees decreased $57 million linked-quarter due to lower leasing-related gains. Non-interest income increased 1.8% on a like-quarter basis, as higher investment banking and trading, wealth, and other income were partially offset by lower service charges on deposit and mortgage banking income.
Next, I'll cover non-interest expense on slide 13. GAAP expenses of $3 billion decreased $6.6 billion linked-quarter, as fourth quarter 2023 expenses were negatively impacted by a $6.1 billion goodwill impairment charge, a $507 million FDIC special assessment, and $155 million of restructuring charges primarily related to our cost-savings initiatives. Excluding these items and the impact of intangible amortization, adjusted non-interest expense increased 0.7% sequentially.
The increase in adjusted expense was driven by higher personnel expense of $156 million due to normal seasonal factors and higher variable incentive compensation, partially offsetting the increase in personnel expense were lower other expenses, which declined $82 million, reflecting lower operating charge-offs and lower pension expense. Adjusted non-interest expenses before the impact of discontinued operations, accounting -- discontinued operations accounting increased 1% on a linked quarter basis. On a like-quarter basis, adjusted expenses declined $120 million or 4.2%, reflecting lower headcount and continued expense discipline.
Moving to asset quality on slide 14. Asset quality metrics continue to normalize in the first quarter, but overall remained manageable. Non-performing loans remained relatively stable to linked-quarter, while total delinquencies were down 6 basis points sequentially, driven by a 7 basis point decline in loans 30 to 89 days past due. Included in our appendix is updated data on our office portfolio, which is virtually unchanged at 1.7% of total loans. However, we did increase our reserve on this portfolio from 8.5% to 9.3% during the quarter to reflect continued stress in this sector. We expect stress to remain in the office sector, but believe that the size of our office portfolio is manageable and well reserved. Approximately 5.5% of our office portfolio is currently classified as non-performing, but 89% of these loan balances are paying in accordance with the original terms of the loan.
During the quarter, our net charge-offs increased 7 basis points to 64 basis points. The increase in net charge-offs for the quarter reflects increases in our CRE and consumer portfolios, offset by lower C&I and CRE construction losses. Our ALLL ratio increased to 1.56%, up 2 basis points sequentially, and 19 basis points on a year-over-year basis due to ongoing credit normalization and stress in the office sector. Consistent with our commentary last quarter, we've tightened our risk appetite in select areas that we maintain our through-the-cycle supportive approach for high-quality long-term clients.
Turning now to capital on slide 15. Truist's CET1 ratio remained relatively stable on a linked-quarter basis at 10.1%, as organic capital generation and the impact of lower risk-weighted assets were mostly offset by the impact of the CECL phase-in that occurred during the quarter. We still anticipate the sale of TIH will generate approximately 230 basis points of CET1 under current rules and 255 basis points of CET1 capital under proposed Basel III endgame rules. It will also increase our tangible book value per share by 33% through a combination of a $4.8 billion after-tax gain and the deconsolidation of $4.7 billion of goodwill and intangibles from our balance sheet.
The divestiture of TIH has a 255 basis point positive impact under the fully proposed phase-in Basel III endgame rules. We will also increase our tangible book value per share by 33% through a combination of $4.8 billion after-tax gain and the deconsolidation of $4.7 billion of goodwill on intangibles from our balance sheet. The divestiture of TIH has a 255 basis point positive impact under fully proposed base-in Basel III endgame rules, which is 25 basis points higher than under current rules. The larger impact on our CET1 ratio under the proposed rules is due to the reduction in certain threshold deductions due to the overall higher level of capital from selling TIH.
The sale of TIH accelerates our ability to meet increasing standards for capital and liquidity in the industry. And importantly, creates capacity for Truist to evaluate a wide variety of capital deployment alternatives, including growing our core banking franchise during a time when much of the industry is conserving capital, repositioning our balance sheet, and resuming share repurchases. As it relates to a possible repositioning, recognizing securities losses under proposed Basel III rules would have no impact on our fully phased-in CET1 ratio since the current proposed rules include AOCI in the calculation. Moreover, any decision to sell market-value securities has no impact on our tangible book value per share.
I will now review our updated guidance on slide 16. First, all of my comments today related to second-quarter and full-year 2024 guidance exclude any benefit from interest income that Truist will earn on the $10.1 billion of after-tax cash proceeds that we expect to receive from the pending sale of TIH. Our guidance also excludes any impact from a potential balance sheet repositioning that we plan to evaluate post-closing. In addition, revenue and expense guidance for the second quarter and full year 2024 is based on revenue and expense from continuing operations and does not include any contribution from TIH in previous or in future periods.
Looking into the second quarter of 2024, we expect revenue to decline about 2% from 1Q '24 GAAP revenue of $4.9 billion. Net interest income is likely to be down 2% to 3% in the second quarter due to continued pressure on rate paid and a smaller balance sheet. We expect non-interest income to remain relatively stable on a linked-quarter basis. Adjusted expenses of $2.7 billion in the first quarter are expected to increase 4% in Q2 due to higher professional fees, some timing of projects delayed from Q1, higher marketing costs, and annual merit increases. For the full year 2024, we previously expected revenues to be down 1% to 3%, which would have included revenue from Truist Insurance Holdings. If we had excluded revenue from Truist Insurance Holdings from our outlook, our expectation would have been closer to down 3% to down 5% in 2024.
Today, we are tightening our previous revenue guidance adjusted for TIH of down approximately 3% to down 5% to now down approximately 4% to 5% to reflect the latest interest-rate outlook and continued pressure on the deposit mix, partially offset by our improved outlook for non-interest income. Our outlook assumes three reductions in the Fed funds rate with the first reduction coming in June 2024. Previously, we assumed five reductions in the Fed funds rate with the first reduction occurring in May 2024. We still assume that net interest income will trough in the second quarter of 2024 and modestly improve in the second half of the year. Fewer than three rate -- three rate reductions would add pressure to our NII outlook and result in our annual revenue coming in at the lower end of our range for revenue to be down 4% to 5%.
As a reminder, our second quarter and full-year revenue outlook excludes any benefit from interest income earned on the cash proceeds from the sale of TIH or the benefit of potential balance sheet repositioning. As Bill mentioned, we still expect the sale of TIH to be completed during the second quarter. We previously expected our expenses to remain flat or to increase by 1% in 2024, which included expenses associated with Truist Insurance Holdings. If we had excluded expected expenses from Truist Insurance Holdings from our outlook, our expectation would equate to expenses remaining approximately flat in 2024. Consistent with our previous expense outlook adjusted for TIH, we expect full-year '24 adjusted expenses to remain approximately flat over 2023 adjusted expenses of $11.4 billion.
In terms of asset quality, we continue to expect net charge-offs of about 65 basis points in 2024. Finally, we expect our effective tax rate to approximate 16% or 19% on a taxable equivalent basis. Our estimated tax rate excludes any impact from the gain on the sale of TIH or a potential balance sheet repositioning that we might consider following the sale.
So now I'll turn it back to Bill for some final remarks.
