Pre-provision net revenue of $110.4 million increased 2% from Q2 as revenue grew in excess of expenses.
Earnings per share in the quarter were $0.75 compared to $0.57 in Q2 and $1 in the prior year's third quarter.
Our $23 million provision resulted in a reserve build of $11 million.
Our third quarter return on common equity was 9% and the return on tangible common equity was 11%.
Loans grew 12% from a year ago on Slide 3 or 5% when excluding $1.4 billion in PPP loans.
Commercial loans grew more than 10% from a year ago or by almost $1.2 billion, led by growth of more than $900 million in high-quality commercial real estate loans.
The decline in floating and periodic rate loans to total loans compared to a year ago reflects the $1.3 billion of fixed rate PPP loans added in the second quarter.
Deposits grew 16% year-over-year driven across all business lines.
Core deposits exceeded $4.3 billion and represent 90% of total deposits compared to 86% a year ago, while CDs declined $685 million from a year ago.
Slide 4 through 6 set forth key performance statistics for our three lines of business.
Loan balances increased to almost 10% from a year ago, excluding PPP loans.
Deposits, up 32% from a year ago, are nearly $6 billion at September 30th as our commercial clients maintain liquidity on their balance sheets.
Commercial deposits were up 11% linked quarter on seasonal strength in our treasury and payments solutions business, which includes government banking.
Core deposit growth was 15% year-over-year or 12.6%, excluding the impact of the State Farm transaction, which closed in the third quarter and added 22,000 accounts and $132 million in deposit balances.
COVID-19 has impacted the HSA business with new account openings 28% lower from prior year when adjusting for the State Farm acquisition.
TPA accounts and balances declined 41,000 and 64,000,000, respectively linked quarter, continuing the outmigration of accounts that we disclosed a year ago.
In the quarter, we recognized approximately $3 million of account closure fees related to the outmigration.
Community banking loans grew almost 10% year-over-year and declined slightly excluding PPP.
Business banking loans grew 5% from a year ago when excluding PPP.
Personal banking loans decreased 3% from a year ago as an increase in residential mortgages was offset by declines in home equity and other consumer loans.
Community banking deposits grew 12% year-over-year with consumer and business deposits growing 6% and 32% respectively.
The total cost of community banking deposits was 24 basis points in the quarter, that's down 48 basis points from a year ago.
Net interest and non-interest income both improved 3% from prior year driven by increased loan and deposit balances and by mortgage banking and swap fees, respectively.
The key points on this slide are that overall loan outstandings to these sectors have declined 5% from June 30th and the payment deferrals have declined $282 million or 57%.
On Slide 8, we provide more detail across our entire $20 billion commercial and consumer loan portfolio.
The key takeaway here is that payment deferrals declined by 65% to $482 million at September 30th and now represent 2% of total loans compared to 7% at June 30th.
Of the $482 million of payment deferrals at September 30th, $251 million or 52% are first time deferrals.
CARES Act and Interagency Statement payment deferrals, which are included in the $482 million of total payment deferrals at September 30th, decreased to 62% from June 30th and now total just $283 million.
Average securities grew $184 million or 2.1% linked quarter and represented 27% of total assets at September 30th, largely in line with levels over the past year.
Average loans grew $262 million or 1.2% linked quarter.
PPP loans average $1.3 billion in Q3 and grew $403 million from Q2, reflecting the full quarter impact of loans funded last quarter.
During the quarter, we had $5.5 million of PPP fee accretion and the remaining deferred fees totaled $35 million.
Apart from PPP loans, commercial real estate loans increased $124 million or 2%, while asset-based and other commercial loans decreased $108 million and $38 million, respectively.
The $119 million decline in consumer loans include $62 million in home equity and $32 million of residential mortgages.
Deposits increased $1 billion linked quarter, well in excess of the combined growth of $446 million in loans and securities.
We saw increases across all deposit categories except CDs, which declined $280 million or nearly 10%.
The cost of CDs declined 36 basis points and was a significant driver of our reduction in deposit cost.
Public funds increased $599 million in a seasonally strong third quarter, while the cost of these deposits declined from 35 basis points to 18 basis points.
Borrowings declined $744 million from Q2 and now represent 7% of total assets compared to 8.5% at June 30th and 10.5% in prior year.
The tangible common equity ratio increased to 7.75% and would be 34 basis points higher, excluding the $1.4 billion in 0% risk-weighted PPP loans.
Tangible book value per share at quarter end was $27.86, an increase of 1.7% from June 30th and 4.8% from prior year.
Net interest income declined $5.1 million from prior quarter.
Lower rates resulted in a quarter-over-quarter decline of $16.7 million in interest income from earning asset.
This was partially offset by $7.9 million due to lower deposit and borrowing costs and $3.7 million as a result of loan and security balanced growth.
As a result, our net interest margin was 11 basis points lower linked quarter.
Core loan yields and balances contributed 14 basis points to the decline with PPP loans contributing another 2 basis points to the NIM decline.
Lower reinvestment rates on our securities portfolio resulted in 3 basis points of NIM compression, while higher premium amortization resulted in an additional 4 basis points of NIM compression.
This was partially offset by a 10 basis point reduction in deposit cost, reflective of reduced rates across all categories, which benefited NIM by 10 basis points and fewer borrowings contributed another 2 basis points of NIM benefit.
As compared to prior year, net interest income declined $21 million, $65 million of the decline was the net result of lower market rates, which were partially offset by $44 million in earning asset growth.
Non-interest income increased $15 million linked quarter and $5.2 million from prior year.
HSA fee income increased $4.1 million linked quarter.
Interchange revenue increased $1 million, driven by a 12% linked quarter increase in debit transaction volume.
We also recognized $3.2 million of exit fees on TPA accounts during the quarter.
The mortgage banking revenue increase of $2.9 million linked quarter was split between increased origination activity and higher spread.
Deposit service fees increased $1.5 million quarter-over-quarter driven by overdraft and interchange fees.
Consumer and business debit transactions increased 16% linked quarter.
Other income increased $5.7 million, primarily due to a discrete fair value adjustment on our customer hedging book recorded last quarter.
Reported non-interest expense of $184 million included $4.8 million of professional fees driven by our strategic initiatives, which John will review in more detail.
We also saw a linked quarter increase of $4.3 million from higher medical costs due to an increase in utilization.
Non-interest expense increased $4.1 million or 2.3% from prior year.
The efficiency ratio remained at 60%.
Pre-provision net revenue was $110 million in Q3, this compares to $108 million in Q2 and $131 million in prior year.
The provision for credit loss for the quarter was $22.8 million, which I will discuss in more detail on the next slide.
And our effective tax rate was 20.9% compared to 21.8% in Q2.
As highlighted, the allowance for credit losses to loans increased to 1.69% or 1.8%, excluding PPP loans.
The forecast improved slightly from prior quarter, but was offset by commercial risk rating migration resulting in a provision of $23 million.
The $370 million allowance reflects our estimate of life of loan losses as of September 30th.
Nonperforming loans in the upper left, decreased $10 million from Q2.
Commercial real estate, residential mortgage and consumer each saw linked quarter decline, while commercial increased $3 million.
Net charge-offs in the upper right decreased from second quarter and totaled $11.5 million after $4.3 million in recoveries.
C&I gross charge-offs declined slightly and totaled $12 million, primarily reflecting credits that were already experiencing difficulty prior to the onset of the pandemic.
Commercial classified in the lower left represented 332 basis points of total commercial loans, this compares to a 20-quarter average of 315 basis points and the allowance for credit losses increased to $370 million as discussed on the prior slide.
Deposit growth of $565 million exceeded total asset growth and lowered the loan-to-deposit ratio to 81%.
Our sources of secured borrowing capacity increased further and totaled $11.7 billion at September 30th.
Our common equity Tier 1 ratio of 11.23% exceeds well capitalized by more than $1 billion.
Likewise, Tier 1 risk-based capital exceeds well capitalized levels by $870 million.
Assuming a flat rate environment with an average one-month LIBOR in the range of 15 basis points and an average 10-year treasury swap rate around 70 basis points, we believe we are near the bottom of core NIM compression.
Core non-interest expense will remain in the range of Q3 and our tax rate will be around 21%.
I'm now on Slide 15 and 16.
What I will say is that with respect to efficiency opportunities, we anticipate reducing our current expense base by 8% to 10% fully realized on a run rate basis by the fourth quarter of next year.
As we stated last quarter, we remain confident that even if the current operating environment persists with low interest rates and economic uncertainty that execution on our identified revenue enhancements and efficiency opportunities will allow us to sustainably generate returns in excess of our estimated 10% cost of capital by the end of 2021.

Summary:
Earnings per share in the quarter were $0.75 compared to $0.57 in Q2 and $1 in the prior year's third quarter.
The provision for credit loss for the quarter was $22.8 million, which I will discuss in more detail on the next slide.