Regions Financial Corporation (NYSE: RF) today announced earnings for the third quarter ended September 30, 2021. The company reported net income available to common shareholders of $624 million and earnings per diluted share of $0.65. Compared to the second quarter of 2021, total revenue grew 2 percent while pre-tax pre-provision income(1) decreased 1 percent. Adjusted revenue(1) increased 3 percent while adjusted pre-tax pre-provision income(1) increased 4 percent. The company also generated modest year-to-date positive operating leverage on a reported and adjusted basis.
“Our ability to deliver solid third quarter results comes from having both a strong foundation and a strategic plan that positions us to grow effectively and efficiently,” said John Turner, President and CEO of Regions Financial Corp. “Strong relationships with customers across all segments drive our performance, and our track record of exceptional service continues to deepen those relationships while also bringing in new customers. We’re operating in markets that are attractive and growing, and those are the places where we’ll continue to make investments while consistently strengthening the core of our business throughout our footprint.
“Our focus on sustainable growth continues with bolt-on acquisitions – EnerBank aligns with our strategy to be the premier lender to homeowners, and our agreement to acquire Sabal Capital Partners is designed to further expand our range of specialized services for business clients,” Turner added. “Regions' investments in digital and data are also positioning us for growth. Through a technology-enabled, seamless experience in branches and across all platforms, customers are responding to the personalized service, advice and guidance they're getting from Regions.
Total revenue of approximately $1.6 billion increased 2 percent on a reported basis and 3 percent on an adjusted basis(1) compared to the second quarter of 2021. Net interest income increased modestly in aggregate and 1 percent after adjusting for lower PPP income linked-quarter. The company offset pressure on asset yields from the low interest rate environment through its interest rate hedging program, a continued focus on lower funding costs, and active cash management strategies. This includes securities purchases in the second quarter, as well as a net reduction of holding company debt in the third quarter. Loan growth, one additional day in the quarter, and a large interest recovery drove net interest income higher. Strong deposit growth trends continued, and cash balances rose to new record levels, negatively impacting the reported net interest margin. Excluding the impact of PPP interest income and excess cash balances held at the Federal Reserve, the company's adjusted net interest margin(1) remained relatively stable at 3.30 percent.
Non-interest income increased 5 percent on a reported basis and 8 percent on an adjusted basis(1) compared to the second quarter of 2021. Capital markets income increased 43 percent, driven by record loan syndication revenue and strong M&A advisory fees. Other income increased 49 percent attributable primarily to an increase in the value of certain equity investments as well as increased gains associated with the sale of certain small dollar equipment loans and leases. Mortgage income decreased 6 percent primarily due to mortgage servicing rights valuation adjustments, partially offset by improved secondary market gains. Service charges and wealth management income experienced modest declines compared to the prior quarter. Additionally, bank-owned life insurance income decreased $15 million during the quarter compared to the second quarter, which included the benefit of a significant claim.
Non-interest expense increased 4 percent on a reported basis and 3 percent on an adjusted basis(1) compared to the second quarter of 2021. Salaries and benefits increased 4 percent, driven primarily by higher variable-based compensation associated with elevated fee income as well as one additional work day in the third quarter. Full-time equivalent associate headcount increased by 149 positions with the vast majority located in revenue-producing businesses. Further, strong financial performance contributed to higher incentive compensation. Professional fees increased 40 percent reflecting the benefit of a legal reserve release in the prior quarter that did not repeat. Most other expense categories increased slightly or remained relatively stable. Partially offsetting these increases was a 21 percent decrease in marketing expense due to the timing of campaigns. The company also incurred a $20 million charge associated with the early extinguishment of debt during the quarter.