Zachary Wasserman
Chief Financial Officer & Senior Executive Vice President at Huntington Bancshares
Thanks, Steve, and good morning, everyone. Turning to slide six. We reported GAAP earnings per common share of $0.22 for the third quarter, which included acquisition expenses of $234 million. Earnings per common share adjusted for these notable items were $0.35. Return on tangible common equity, or ROTCE, came in at 11.5% for the quarter. Adjusted for the acquisition-related notable items, ROTCE was 17.9%. As we expected and consistent with guidance we provided in September, we were pleased to see loan balances ex-PPP grow in the third quarter, driven by robust new production. With continued strong liquidity, we are actively managing the balance sheet and have grown the securities portfolio by $3.7 billion from the end of the second quarter. Deposit balances were reduced by $847 million as a result of the branch divestiture.
Excluding the divestiture, deposit balances remained relatively stable on a period-end basis. Loans associated with the divestiture totaled $209 million. Fee income was another bright spot, where we continue -- where we saw continued momentum in our capital markets, cards and payments, treasury management and wealth and investment businesses. As Steve noted, we've been actively managing our capital, and we're pleased to complete $500 million of share repurchases in the third quarter. We also announced a $0.05 increase in the common stock dividend in the fourth quarter, which takes us to an annualized dividend rate of $0.62 per share. Finally, credit quality continued to improve with net charge-offs of 20 basis points, while nonperforming assets decreased 12% from the prior quarter.
Turning to slide seven. Period-end loan balances totaled $110.6 million. Excluding PPP, loan balances increased by $367 million during the quarter, with underlying growth in C&I, mortgage, auto and RV/Marine portfolios. On the commercial side, while PPP and auto dealer floor plan balances were lower, all other C&I loans increased by a net $466 million during the quarter, driven by growth in asset finance and core C&I. We're seeing very encouraging trends from new commercial loan production and pipelines that continue to grow both year-over-year and sequentially. Consumer growth was somewhat offset by marginal pressure from the continued runoff of the home equity portfolio. Additionally, we continue to observe solid activity levels in our consumer portfolios with residential mortgage, RV/Marine and automobile, all continuing to post sequential quarter balance growth.
Auto saw its strongest third quarter for production activity to date with -- while mortgage continued to see robust origination activity in the quarter. Excluding PPP, we believe the trough for underlying loan balances is behind us, and we expect continued modest growth from these levels in the fourth quarter. With respect to commercial portfolio specifically, we expect to see momentum accelerate as we move through the fourth quarter and throughout 2022. Moving on to slide eight. As noted previously, total deposit balances, excluding the divestiture, were relatively stable. We continue to optimize funding given our strong liquidity levels and reduced higher cost CDs by $395 million. Overall, we continue to see much of the excess liquidity remain fairly sticky as core commercial deposit balances increased during the quarter.
Turning to slide nine. FTE net interest income increased primarily driven by the full quarter benefit of TCF. Net interest income increased by $323 million, while net interest margin was 2.9%, both driven by the acquired TCF assets. Excess liquidity moderated slightly during the quarter with $8.1 billion of cash at the Fed at quarter end. On an average basis for the quarter, excess liquidity represented a drag on margin of approximately 23 basis points. Core net interest income, excluding PPP and accretion, was $1.085 billion. We expect core net interest income to grow from these levels on an absolute dollar basis in the fourth quarter and throughout 2022. We're positioned to be asset sensitive today, and we are dynamically managing the balance sheet to become increasingly asset-sensitive to capture the benefit from expected future higher interest rates.
This includes the hedge roll-offs as well as the addition of pay-fixed swaps. On June 30, our modeled net interest income asset sensitivity and an up 100 basis point scenario was 2.9%. Based on the deliberate actions we took during the quarter, we increased our asset sensitivity to 4.0%, and we continue to dynamically manage the balance sheet going forward. Over the course of the quarter, we terminated select downside rate protection hedges and added $6 billion of forward pay fixed swaps. Turning to slide 10. Noninterest income increased, primarily driven by the addition of TCF fee income. Several of our businesses performed quite well within the quarter. Cards and payments benefited from higher customer transaction volumes, mortgage banking performed well due to higher production and relatively higher saleable spreads and wealth and investment continued to be driven by positive net asset flows.
Capital markets income also grew, driven by solid performance in interest rate derivatives, foreign exchange and syndications. Turning to slide 11. Total noninterest expense came in at approximately $1.3 billion for the quarter, including the $234 million of notable items. Excluding these items, noninterest expense totaled $1.05 billion, primarily driven by the full quarter of TCF expenses. Our overall outlook for the magnitude of expense reductions is unchanged from prior guidance. The timing to realize these benefits, however, has accelerated due to our actions to drive realization of cost savings. As a result, we continue to expect that while Q3 was the high watermark for core expenses, they should benefit earlier than we previously thought as they step down into the fourth and first quarters.
Core expenses on an absolute dollar basis should trail down throughout 2022, as we recognize the benefits of the TCF cost synergies while continuing to invest in the initiatives to drive top line revenue growth. slide 12 highlights our well-capitalized balance sheet as well as a few highlights from the recent capital return actions. Common equity Tier one ended the quarter at 9.6%, well within our medium-term 9% to 10% operating guideline. Over the past quarter, we focused on returning capital to our shareholders in alignment with our capital priorities. We executed over half of the $800 million share repurchase program following the authorization as they moved in, and we are pleased to have recently announced an increase to the common stock dividend. As you can see on slide 13, our quarter ending allowance for credit losses represented 1.99% of total loans, down from 2.08% at prior quarter end.
The improved economic outlook and our stable credit quality resulted in a reserve release of $117 million for the third quarter. Additional key credit quality metrics are shown on slide 14, further reflecting our improving credit profile. Net charge-offs represented an annualized 20 basis points of average loans and leases, amongst the lowest levels in recent history, well below our target range of 35 to 55 basis points on average through the cycle. Consumer charge-offs remained low in this quarter of seven basis points with net recoveries in auto, home equity, RV and Marine. Our NPA ratio declined 12% as portfolios continue to perform as expected, and the ACL coverage of NPAs increased to 247%. Finally, turning to our outlook on slide 15. As we operate in a dynamic macro environment, we're focused on managing what we can control.
We remain committed to investing in our people-first digitally powered strategy, driving sustained revenue growth while managing expenses within our long-term commitment to positive operating leverage and achieving a 17% return on tangible common equity. We expect a peer group leading efficiency ratio and a normalized effective tax rate of 18% to 19%. We believe these key metrics: revenue growth, return on capital and annual positive operating leverage are a compelling set of financial performance indicators and closely aligned with value creation for our shareholders. Now let me turn it back over to Tim, so we can get to your questions.