David Turner
Chief Financial Officer at Regions Financial
Thank you, John. Let's start with the balance sheet, average in ending loans remained relatively stable quarter over quarter. Within the business portfolio average loans were stable while ending loans decreased 1%. As John mentioned, we are being judicious in reserving our capital for business where we can have a full relationship. Client sentiment varies across industries with some continuing to expect growth, while others have a more muted outlook. Commercial commitments are down 1% compared to the second quarter. Average and ending consumer loans increased 1% as growth in mortgage and EnerBank was partially offset by declines in home equity and run-off exit portfolios.
Subsequent to quarter-end, we executed the sale of our remaining GreenSky portfolio of approximately $300 million, which represents one of our consumer exit portfolios. The economics of the transaction are relatively neutral and will create approximately 14 basis-points of incremental charge-offs in the fourth-quarter, offset by the related reserve release. Looking forward, we expect 2023 ending loan growth to be in the low-single digits. From a deposit standpoint the modest deposit declines were in line with expectations, largely driven by late-cycle rates seeking behavior. We continued to experience remixing out of noninterest-bearing or NIB products and ended the quarter with NIB, representing 35% of total deposits.
Given the current rate environment. We expect the percentage to ultimately level off in the low 30% range. While some customers find alternatives and other investment channels outside of Regions many are moving to our CDs and money market accounts. We also continued to provide off-balance sheet opportunities through our wealth management platform and then in the corporate banking segment, the money market mutual fund solutions. In the case of corporate clients overall liquidity under management has remained stable quarter over quarter. Acquisition and the retention of high primacy and operating relationships are strong, reflecting our focus to sustain and extend our deposit advantage through cycles.
Looking-forward, the higher-rate environment, a tightening Federal Reserve, and heightened competition will likely continue to constrain deposit growth and pressure cost for the industry through year end and into early 2024. Accordingly, we expect deposits to be stable to modestly lower in the fourth-quarter and we expect continued remixing into interest-bearing categories. So, let's shift to net interest income. Net interest income declined by 6.5% in the third quarter, reflecting the anticipated normalization from elevated net interest income and margin levels back towards a sustainable longer-term range.
The decline is driven by deposit cost normalization, the start of the active period on $6 billion of incremental hedging as well as a one-time leverage lease residual value adjustment. As the Federal Reserve nears the end of its tightening cycle net interest income was supported by elevated floating-rate loan and cash yields at higher market interest rates and fixed-rate asset turnover from the maturity of lower-yielding loans and securities. Deposit costs continued to increase through a combination of repricing and remixing, increasing the cycle to date. Interest-bearing deposit beta to 34%.
Historically, this behavior persist for a few quarters after the Fed stops moving interest rates. While we expect the pace of repricing to moderate a higher federal funds rate over an extended period will cause remixing from low-cost deposits to persist ultimately pushing deposit betas, higher than previously anticipated. We now project the cycle to date beta to increase to near 40% by year end. Regardless, we remain confident that our deposit composition will provide a meaningful competitive advantage to Regions when compared to the broader industry. If the Fed remains on hold fourth-quarter net interest income is expected to decline approximately 5% driven by continued deposit and funding cost normalization and the beginning of the active hedging period on another $3 billion of previously transacted forward-starting swaps.
Net interest income is projected to grow approximately 11% in 2023, when compared to 2022. As we look to 2024, higher rates for longer likely extends the period of deposit cost and mix normalization. We expect net interest income trends to stabilize over the first-half of the year and grow over the back half of the year. The balance sheet hedging program is an important source of earnings stability in today's uncertain environment. Hedges added to date, create a net interest income profile that is well-protected and mostly neutral to changes in interest rates through 2025, while we do not anticipate adding meaningfully to the hedging position over the coming quarters we continue to look for opportunities to add protection at attractive rate levels in our outer years through the use of derivatives or securities.
During the third quarter, we added $1.5 billion of forward-starting swaps and $500 million of forward-starting rate collars. Let's take a look at fee revenue and expense. Adjusted non-interest income decreased 2% from the prior quarter as modest increases in mortgage and wealth management income were offset by declines primarily in service charges and capital markets. The increase in mortgage income was driven by higher servicing income associated with a bulk purchase of the rights to service $6.2 billion of residential mortgage loans closed early in the quarter. Service charges declined 7% reflecting the run-rate impact of the company's overdraft, grace feature implemented late in the second quarter.
Based on our experience today as well as our expectation for another record year in treasury management we now expect full-year service charges of approximately $590 million. Total capital markets income decreased $4 million, excluding the impact of CVA and DVA. Capital markets income decreased 13% sequentially as increases in M&A fees were offset by declines in other categories. We had a negative $3 million CVA and DVA adjustments during the quarter versus the $9 million negative adjustment in the prior quarters. With respect to the outlook, we now expect full-year 2023 adjusted total revenue to be up 5% to 6% compared to 2022.
Let's move on to noninterest expense. Adjusted non-interest expense decreased 2% compared to the prior quarter and includes the previously noted elevated operational losses. Excluding the incremental fraud experienced in both the second and third quarters adjusted non-interest expenses increased 1% sequentially. Salaries and benefits decreased 2% driven primarily by lower incentives and payroll taxes while other noninterest expense increased 12%, driven primarily by a $7 million pension settlement charge.
We remain committed to prudently managing expenses in order to fund investments in our business. We will continue to refine our expense base, focusing on our largest categories, which include salaries and benefits, occupancy, and vendor spend. We expect full-year 2023 adjusted non-interest expenses to be up 9.5%. Excluding the $135 million of incremental operational losses experienced in the past two quarters, we expect adjusted non-interest expenses to be up approximately 6% in 2023 when compared to 2022. From an asset quality standpoint, overall credit performance continues to normalize as expected.
Net charge-offs increased seven basis points to 40 basis points due to elevated charge offs related to a solar program we've since discontinued at EnerBank, as well as lower commercial recoveries versus the second quarter. Nonperforming loans, business services criticized loans, and total delinquencies also increased. Nonperforming loans as a percentage of total loans increased 15 basis points in the quarter due primarily to a large collateralized information credit. Provision expense was $145 million or $44 million in excess of net charge-offs. The allowance for credit-loss ratio increased five basis points to 1.70%[phonetic] while the allowance as a percentage of nonperforming loans declined to 261%.
The increase to our allowances is due primarily to adverse risk migration and continued credit quality normalization as well as the building qualitative adjustments for incremental risk in certain portfolios, including office, multifamily and select markets, and EnerBank. It's also worth noting the outcome of the most recent shared national credit exam is reflected in our results. The allowance on the office portfolio increased from 2.7% to 3.1%. Importantly, the vast majority of our office exposure is in Class-A properties located primarily within the Sunbelt and non-gateway markets.
Overall, we continue to feel good about the composition of our office book and do not expect any meaningful loss in this portfolio. We expect net charge-offs will continue to normalize including this quarter's charge-offs but excluding the 14 basis-point impact on our fourth-quarter GreenSky loan sale we expect full year 2023 adjusted net charge-off ratio to be slightly above 35 basis-points. In the third-quarter two anticipated notices of proposed rulemaking were issued. While we plan to provide feedback through the common[phonetic] process on both we are well-positioned to absorb the ultimate impacts without major changes to our business.
With respect to Basel III endgame as proposed, we estimate a low-to mid-single-digit increase in risk-weighted assets under the expanded risk-based approach in addition to the phase in AOCI and regulatory capital. Regarding minimum long-term debt we estimate a need to issue approximately $6 billion of long-term debt over the course of several years. We view this amount to be manageable, resulting in a modest drag on earnings. Importantly, the proposal will provide clarity on the evolution of the regulatory environment and support our decision to maintain our common equity Tier-one ratio around 10% over the near-term as this level should provide sufficient flexibility to meet the proposed changes along the implementation timeline while supporting strategic growth objectives.
Despite the current macroeconomic and geopolitical uncertainty as well as the continued evolution of the regulatory framework we expect that share repurchases will resume in the near-term. And finally, we have a slide, summarizing our expectations, which we have addressed throughout the prepared comments. With that, we'll move to the Q&A portion of the call.
