Zachary Wasserman
Senior Executive Vice President, Chief Financial Officer at Huntington Bancshares
Thanks, Steve, and good morning, everyone. Slide 7 provides highlights of our first quarter results. We reported earnings per common share of $0.29. Adjusted for notable items, earnings per common share were $0.32. Return on tangible common equity, or ROTCE, came at 15.8% for the quarter. Adjusted for notable items, ROTCE was 17.1%. We were pleased to see accelerated momentum in our loan balances, with total loans increasing by $1.7 billion and excluding PPP, loans increased by $2.6 billion. Total average and ending deposits also increased, driven by strong trends in both consumer and commercial balances.
Pre-provision net revenue grew 4.2% from last quarter, reflecting our continued focus on self-funding revenue-producing strategic initiatives, as well as net interest income expansion. Consistent with our plan, we reduced core expenses by $27 million from last quarter, driven by the realization of cost synergies. Credit quality was exceptional, with record low net charge-offs of seven basis points and nonperforming assets reduced to 63 basis points.
Turning to slide 8; accelerated loan growth momentum continued, with average loan balances increasing 1.5% quarter-over-quarter, totaling $111.1 billion. Excluding PPP, total loan balances increased $2.6 billion or 2.4%, largely driven by commercial loans. Within commercial, excluding PPP, average loans increased by $2.2 billion or 3.8% from the prior quarter. We continue to see broad-based demand across lending categories that is supporting strong new production. We are also benefiting from slowing prepayments and modest increases in line utilization.
Middle market, asset finance, corporate and specialty banking, all contributed to higher net balances within commercial and have all expanded for two quarters in a row. Commercial real estate balances also increased during the quarter by $485 million. Inventory Finance contributed to growth this quarter with balances increasing by $666 million, driven by the expansion of client relationships and the expected seasonal increase in utilization levels. Auto dealer floor plan increased with balances by $251 million as new client relationships and a modest uptick in utilization, both supported growth.
In Consumer, we had a record first quarter performance in indirect auto and RV marine originations. This drove balances higher in auto and RV/Marine by $108 million and $63 million, respectively. Additionally, on-sheet residential mortgage increased by $550 million. These were offset by lower home equity balances. Across the enterprise, our bankers are executing disciplined calling strategies, driving sustained growth in both early-stage and late-stage loan pipelines, both of which are higher from the prior quarter and the prior year. We are seeing strong demand from our customers and the realization of pipelines supports our high degree of confidence in our 2022 outlook.
Turning to slide 9; we delivered solid deposit growth, with balances higher by $614 million. On a spot basis, total deposit balances increased $3.7 billion or 2.6% from prior quarter. Ending commercial balances increased by $2.5 billion and consumer balances increased by $1.5 billion from the prior quarter. This growth reflects continued consumer deposit gathering and our focused relationship deepening within commercial customers.
On slide 10, we reported net interest income and NIM expansion. Core net interest income, excluding PPP and purchase accounting accretion, increased by 3% to $1.119 billion. Consistent with prior guidance, net interest margin increased versus prior quarter, and we are on track for further NIM expansion throughout 2022. Turning to slide 11, we are dynamically managing the balance sheet to remain asset sensitive and capture the benefit of expected higher rates while incrementally providing downside protection opportunities present themselves. We have a peer-leading NIM, and we're positioned to expand margin as rates increase.
During the quarter, we modestly increased our downside protection by executing a net $2.7 billion of received fixed swaps. As noted on the slide, these explicit hedging actions reduced asset sensitivity in the quarter by 0.3%. The overall estimated asset sensitivity and an up 100 basis point ramp scenario ended the quarter at 3.1%, down from 4.6% at year-end. The remaining change in this metric beyond our hedging actions was driven by other ancillary modeling impacts such as the denominator impact of higher projected base net interest income, slower prepayments and other balance sheet mix shifts.
On the bottom of the slide is our loan portfolio composition. As you can see, we are well-positioned for the expected higher interest rates throughout the year with an attractive mix of floating and fixed rate loans. Furthermore, our indirect auto portfolio has a weighted average life of approximately 25 months with roughly half of that portfolio re-pricing each year.
Moving to slide 12; non-interest income was $499 million, up $104 million year-over-year and down $16 million from last quarter. Fee revenues were impacted by a decline in mortgage banking, primarily due to lower saleable originations as well as typical seasonality resulting in lower cards and payments activities compared to the fourth quarter. Given our robust SBA pipelines and attractive market opportunity, we reinitiated our SBA loan sales in the quarter, driving a $27 million increase.
In addition, our record first quarter performance in wealth management sales contributed to an increase in investment-related revenues. Overall, we continue to be pleased with the traction and growth outlooks for our key fee-generating businesses within payments, capital markets and wealth and advisory. Moving on to slide 13; non-interest expense declined $168 million from the prior quarter and excluding notable items, core expenses declined by $27 million to $1.07 billion as we delivered cost savings from the acquisition. As we shared previously, we expect core expenses to be approximately $1 billion by the second quarter. Even as we're driving down expenses, we're also investing in initiatives that are driving sustainable revenue growth throughout the company.
Slide 14 highlights our capital position. Common equity Tier 1 was 9.2% at quarter end. Our dividend yield remains at the top of our peer group at 4.6%. We did not repurchase any shares during the quarter due to our announced signing of a definitive agreement to acquire Capstone. As you can see on slide 15, credit quality continues to perform very well. As mentioned, net charge-offs were record low of seven basis points, benefiting from a net recovery position in commercial portfolios and continued strong consumer credit quality. Non-performing assets and criticized loans both declined from the previous quarter.
Our ending allowance for credit losses represented 1.87% of total loans, down from 1.89% at prior quarter end. Slide 16 covers our medium-term financial targets, which remain unchanged. As Steve mentioned, we're fully committed to achieving these by the second half of 2022. As our loan growth momentum continues, our first capital priority remains funding this organic growth, and we are encouraged by these trends. To the extent that our loan growth remains as robust as we expect, I would anticipate share buybacks will be de minimis for the remainder of the year. We are comfortable operating at or around these current capital levels as we balance our expected 2022 growth plans and the possible longer-term scenarios for the global macroeconomic outlook as we had in 2023.
Finally, turning to Slide 17, let me share our updated outlook. The guidance we provided in January assumed continued economic expansion aligned to market consensus as well as the interest rate yield curve expectations as of early January. Our updated guidance continues to assume further economic growth and the rate curve as of the end of March. As a result of the rate curve outlook, we are revising upward our guidance in net interest income. We now expect core net interest income on a dollar basis, excluding PPP and purchase accounting accretion, to grow in the mid to high teens. This is higher than our previous guidance of high single-digit to low double-digit growth.
In fee income, while we are seeing encouraging trends in our payments, capital markets and wealth and advisory businesses, we are also impacted by the industry-wide mortgage banking pressure. Based on this, we have revised lower our fee guidance to flat to down low single digits, excluding the impact of Capstone. On the topic of Capstone, we are anticipating closing the acquisition at the end of this quarter. Based on estimates created during due diligence, we believe the business could add approximately $20 million to $30 million of fee income on a quarterly basis. This would be incremental to the stand-alone Q4 Huntington guidance. We will provide further information on the impact of Capstone, as we complete the acquisition and finalize our financial forecast.
On expenses, excluding notable items, we are still tracking to our $1 billion run rate for this quarter. And again, this guidance is excluding Capstone. Finally, given our continued exceptional credit performance across our portfolios, we are revising our full year net charge-offs down to approximately 20 basis points from less than 30 basis points previously.
Now let me pass it back to Steve for a couple of closing comments before we open for Q&A.