Regions Financial ( RF) says third-quarter profits rose 37% from a year ago because of a combination of cost cuts and bigger profits from its Morgan Keegan brokerage firm. In the quarter, the southeastern regional lender earned $352 million, or 77 cents a share, compared with $256.6 million, or 55 cents per share. The year-ago quarter included a 6-cents-a-share acquisition charge. Analysts, as surveyed by Thomson Financial, were looking for earnings of 77 cents a share. "We reduced operating expenses and achieved higher net interest income, solid fee revenues and lower credit-related costs, all of which contributed to our third quarter's bottom-line strength," says Jackson Moore, Regions chairman and chief executive. Fee revenue at the Birmingham, Ala., company, which has $87 billion in assets, inched higher by 3.5%, to $466 million. Expenses fell 3.5% from a year earlier and by 7% from the second quarter, to $715 million, Regions says. Regions says loans rose 2% from a year earlier, to $59 billion; deposits rose 5%, to $62 billion. Credit quality remained positive. Net charge-offs fell by $7 million from the second quarter and by $13 million from the year earlier quarter, to $24 million, the company says. Nonperforming assets fell by 29% from a year earlier to $312 million. But mortgage banking continued to be a drag on the company. Regions says mortgage servicing and origination fees fell by 5.6% from a year ago, to $33 million. The company expects to complete its acquisition of AmSouth Bancorp ( ASO), also of Birmingham, in November. Shareholders of both companies approved the deal earlier this month.