David J. Turner
Senior Executive Vice President & Chief Financial Officer at Regions Financial
Thank you, John. Let's start with the balance sheet. Including the impact of acquired loans from the EnerBank transaction, adjusted average and ending loans grew 6% and 7% respectively during the quarter. Although business loans continue to be impacted by excess liquidity, pipelines have surpassed pre-pandemic levels. And encouragingly we experienced a 240 basis point increase in line utilization rates during the fourth quarter.
In addition, production remained strong with a line of credit commitments increasing $4.7 billion year-over-year. Consumer loans reflected the addition of $3 billion of acquired EnerBank loans as well as another strong quarter of mortgage production, accompanied by modest growth in credit card. Looking forward, we expect full-year 2022 reported average loan balances to grow 4% to 5% compared to 2021.
Let's turn to deposits. Although, the pace of deposit growth has slowed, balances continue to increase this quarter to new record levels. The increase includes impact of EnerBank deposits acquired during the fourth quarter as well as continued growth in new accounts and account balances. We are continuing to analyze our deposit base and pandemic related deposit inflow characteristics in order to predict future deposit behavior. Based on this analysis, we currently believe approximately 35% or $12 billion to $14 billion of deposit increases can be used to support longer term asset growth through the rate cycle.
Additional portions of the deposit increases could persist on the balance sheet where it likely to be more rate sensitive especially later in the Fed cycle. While we expect a portion of the surge deposits to be rate sensitive, you will recall that the granular nature and generally rate insensitive construct of our overall deposit base represent significant upside for us when rates do begin to increase.
Let's shift to net interest income and margin. Net interest income increased 6% versus the prior quarter, driven primarily from our EnerBank acquisition, favorable PPP income and organic balance sheet growth. Net interest income from PPP loans increased $8 million from the prior quarter, but will be less of a contributor going forward. Approximately 80% of estimated PPP fees have been recognized. Cash averaged $26 billion during the quarter, and when combined with PPP, reduced fourth quarter's reported margin by 51 basis points.
Our adjusted margin was 3.34%, modestly higher versus the third quarter. Excluding the impact of a large third quarter loan interest recovery, core net interest income was mostly stable as loan growth offset impacts from the low interest rate environment. Similar to prior quarters, net interest income was reduced by lower reinvestment yields on the fixed rate loans and securities. These impacts are expected to be more neutral to positive going forward. The hedging program contributed meaningfully to net interest income in the fourth quarter. The cumulative value created from our hedging program is approximately $1.5 billion. Roughly 90% of that amount has either been recognized or is locked in the future earnings from hedge terminations.
Excluding PPP, net interest income is expected to grow modestly in the first quarter aided by strong fourth quarter ending loan growth as well as continued loan growth in the first quarter, partially offset by day count. Regions' balance sheet is positioned to benefit meaningfully from higher interest rates. Over the first 100 basis points of rate tightening, each 25 basis point increase in the federal funds rate is projected to add between $60 million and $80 million over a full 12-month period. This includes recent hedging changes and it's supported by a large proportion of stable deposit funding and a significant amount of earning assets held in cash when compared to the industry.
Importantly, we continue to shorten the maturity profile of our hedges in the fourth quarter. Hedging changes to date support increasing net interest income exposure to rising rates, positioning us well for higher rates in 2022 and beyond. In summary, interest income is poised for growth in 2022 through balance sheet growth and a higher yield curve in an expanding economy.
Now let's take a look at fee revenue and expense. Adjusted non-interest income decreased 5% from the prior quarter primarily due to elevated other non-interest income in the third quarter that did not repeat in the fourth quarter. Organic growth and the integration of Sabal Capital Partners and Clearsight Advisors will drive growth in capital markets revenue in 2022. Going forward, we expect capital markets to generate quarterly revenue of $90 million to $110 million excluding the impact of CVA and DVA. Mortgage income remained relatively stable during the quarter.
And while we don't anticipate replicating this year's performance in 2022, mortgage is expected to remain a key contributor to fee revenue, particularly as the purchase market in our footprint remains very strong. Wealth management income increased 5%, driven by stronger sales and market value impacts and is expected to grow incrementally in 2022. Seasonality drove an increase in service charges compared to the prior quarter. Looking ahead, as announced yesterday, we are making changes to our NSF and overdraft practices, which along with previously implemented changes will further reduce these fees.
NSF and overdraft fees make up approximately 50% of our service charge line item. These changes will be implemented throughout 2022 but once fully rolled out together with our previous changes implemented last year, we expect the annual impact to result in 20% to 30% lower service charges revenue versus 2019. Based on our expectations around the implementation timeline, we estimate $50 million to $70 million will be reflected in 2022 results. NSF and overdraft revenue has declined substantially over the last decade and once fully implemented, we expect the annual contribution from these fees will be approximately 50% lower than 2011 levels.
Since 2011, NSF and overdraft revenue has decreased approximately $175 million and debit interchange legislation reduced card and ATM fees, another $180 million. We have successfully offset these declines through expanded and diversified fee-based services and as a result, total non-interest income increased approximately $400 million over this same time period. Through our ongoing investments in capabilities and services, we will continue to grow and diversify revenue to overcome the impact of these new policy changes. We expect 2022 adjusted total revenue to be up 3.5% to 4.5% compared to the prior year, driven primarily by growth in net interest income. This growth includes the impact of lower PPP related revenue and the anticipated impact of NSF and overdraft changes.
Let's move on to non-interest expense. Adjusted non-interest expenses increased 5% in the quarter. Salaries and benefits increased 4% primarily due to higher incentive compensation. Base salaries also increased as we added approximately 660 new associates primarily as a result of acquisitions that closed this quarter. The increased head count also reflects key hires to support strategic initiatives within other revenue producing businesses. We have experienced some inflationary pressures already and expect certain of those to persist in 2022. If you exclude variable based and incentive compensation associated with better than expected fee income and credit performance as well as expenses related to our fourth quarter acquisitions, our 2021 adjusted core expenses remained relatively stable compared to the prior year.
We will continue to prudently manage expenses while investing in technology, products and people to grow our business. As a result, our core expense base will grow. We expect 2022 adjusted non-interest expenses to be up 3% to 4% compared to 2021. Importantly, this includes the full year impact of recent acquisitions as well as anticipated inflationary impacts. Despite these impacts, we remain committed to generating positive adjusted operating leverage in 2022. Overall, credit performance remained strong. Annualized net charge-offs increased 6 basis points from the third quarter's record low to 20 basis points, driven in part by the addition of EnerBank in the fourth quarter.
Full year net charge-offs totaled 24 basis points, the lowest level on record since 2006. Nonperforming loans continue to improve during the quarter and are now below pre-pandemic levels at just 51 basis points of total loans. Our allowance for credit losses remained relatively stable at 1.79% of total loans, while the allowance as a percentage of non-performing loans increased 66 percentage points to 349%. We expect credit losses to slowly begin to normalize in the back half of 2022 and currently expect full year net charge-offs to be in the 25 basis point to 35 basis point range.
With respect to capital, our common equity Tier 1 ratio decreased approximately 130 basis points to an estimated 9.5% this quarter. During the fourth quarter, we closed on three acquisitions, which combined, absorbed approximately $1.3 billion of capital. Additionally, we repurchased $300 million of common stock during the quarter. We expect to maintain our common equity Tier 1 ratio near the midpoint of our 9.25% to 9.75% operating range.
So wrapping up on the next slide are our 2022 expectations, which we've already addressed. In closing, the momentum we experienced in the fourth quarter positions us well for growth in 2022 as the economic recovery continues. Pre-tax pre-provision income remained strong. Expenses are well controlled, credit risk is relatively benign, capital and liquidity are solid and we're optimistic about the pace of the economic recovery in our markets.
With that, we're happy to take your questions.