We originated $1.9 billion in loans, generated strong loan-related fees, continue to grow deposits and HSA total footings approached $10 billion.
Our adjusted earnings per share in Q4 were $0.99, up from $0.96 a year ago.
Our fourth quarter performance includes $42 million of pre-tax charges related to the strategic initiatives we announced last quarter.
An improved economic outlook with continued uncertainty, along with a flat quarter-over-quarter loan portfolio, supported a $1 million CECL allowance release in the quarter.
Our fourth quarter adjusted return on common equity was 11.5% and the adjusted return on tangible common equity in the quarter was 14.2%.
On Slide 3, loans grew 8% from a year ago or 2% when excluding $1.3 billion in PPP loans.
Commercial loans grew 6% from a year ago or more than $800 million.
Deposits grew 17% year-over-year, driven across all business lines.
Loan yield increased 4 basis points linked quarter, while deposit costs continue to decline.
Slides 4 through 6 set forth key performance statistics for our three lines of business.
This is a very strong quarter for Commercial Banking with more than $1.2 billion of loan originations, up solidly from Q3 and down only slightly from a strong 4Q 2019.
Loan fundings of $825 million were also up solidly from Q3.
Commercial bank deposits are at record levels, up more than 35% from the prior year's fourth quarter.
The Commercial Banking loan portfolio yield increased 9 basis points in the quarter, driven by better spreads and enhanced by a higher level of acceleration of deferred fees as we saw payoff activity return to more normalized levels.
HSA Bank total footings increased 17% from a year ago and now total nearly $10 billion.
Core deposits were up 15% and 13%, excluding the State Farm acquisition, which closed in 2020.
We added 668,000 accounts in 2020, 10% fewer than we added in 2019, consistent with industry trends and due primarily to lower enrollments with existing employers as COVID-19 impacted the overall employment environment.
HSA deposit costs continue to decline as we remain disciplined in this low interest rate environment and totaled 9% in the quarter -- 9 basis points, excuse me, in the quarter.
Community Banking loans grew 5% year-over-year and declined 5% excluding PPP.
As indicated on the slide, PPP loans decreased $63 million as we saw repayment and forgiveness activity begin in the quarter.
Community Banking deposits grew 14% year-over-year with consumer and business deposits growing 9% and 31% respectively.
Deposit costs continue to decline and totaled 16 basis points in the quarter.
Net interest income grew $8.3 million from a year ago, driven by overall loan and deposit growth.
On Slide 7, we show our commercial loan sectors most directly impacted by COVID, overall loan outstandings to these sectors have declined 10% from September 30th and payment deferrals have declined $64 million or 31%.
On Slide 8, we provide more detail across our $20 billion commercial and consumer loan portfolio.
The key takeaway here is the payment deferrals declined by 35% to $315 million at December 31st and now represent 1.6% of total loans compared to 2.4% of total loans at September 30th.
At year-end, $100 million or 32% of the $315 million in payment deferrals are first time deferrals.
And CARES Act and Interagency Statement defined payment deferrals, which are included in the $315 million of total payment deferrals at December 31st, decreased 29% from September 30th and now stand at $201 million.
Average securities grew $160 million or 1.8% linked-quarter.
Securities represented 27% of total assets at December 31st.
Average loans declined $142 million or 0.6% linked-quarter, primarily driven by a $176 million decline in consumer loans, reflecting higher pay down rates in mortgage and home equity portfolios.
Prepayment and forgiveness on PPP loans during the quarter totaled $98 million.
In Q4, we recognized $7.3 million of PPP deferred fee accretion and the remaining deferred fee balance totaled $27 million at December 31st.
Deposits increased $276 million linked-quarter, primarily driven by growth in Community Banking and HSA.
The strong growth in deposits allowed us to pay down borrowings, which were lower by $289 million from Q3.
At $1.9 billion, borrowings represent 5.2% of total assets compared to 7% at September 30th and 11.6% in prior year.
The tangible common equity ratio increased to 7.9% and will be 32 basis points higher, excluding the $1.3 billion and zero percent risk-weighted PDP loans.
Tangible book value per share at quarter end was $28.04, an increase of about 1% from September 30th and 3% from prior year.
Aggregate adjustments totaled $42 million pre-tax or $31.2 million after tax, representing $0.35 per share.
Of the $42 million in adjustments, $38 million is related to our strategic initiatives, which John will discuss further.
The remaining $4.1 million is associated with the debt prepayment.
The prepayment expense adversely impacted current quarter net interest income and impacted net interest margin by 5 basis points.
However, we will benefit by approximately $1.3 million in net interest income per quarter and NIM will benefit by 2 basis points.
As highlighted on the previous page, the adjustments total $42 million pre-tax.
On an adjusted basis, net interest income increased by $1.3 million from prior quarter.
This was a result of a $4.5 million reduction in deposit and borrowing costs, along with $1 million in additional loan income, which was partially offset by a $4 million decline in securities income primarily as a result of elevated prepayments.
Taken together, our adjusted net interest margin of 2.8% was flat to third quarter.
As compared to prior year, net interest income declined by $11 million.
$47 million of the decline was the net result of lower market rates and was partially offset by interest income of $29 million from earning asset growth and $8 million from a reduction in borrowings.
Non-interest income increased $1.7 million linked-quarter and $5.9 million from prior year.
Loan fees increased $2.5 million from prior quarter as a result of higher syndication, pre-payment and line usage fees.
Other income increased $4.4 million reflecting higher direct investment income and swap fees.
HSA fee income decreased $3.1 million linked-quarter as Q3 included $3.2 million of exit fees on TPA accounts.
Mortgage banking revenues decreased $3 million linked quarter as a result of lower volume on loans originated for sale.
The $5.9 million increase in non-interest income from prior year reflects additional loan fees, higher mortgage banking revenue and HSA fee income, partially offset by lower deposit service fees.
Non-interest expense of $181 million reflects an increase of $2 million primarily due to technology and seasonal increases in temporary staffing to support the HSA annual enrollment.
Non-interest expense decreased $1.5 million or 1% from prior year and our efficiency ratio was 60% in the quarter.
Pre-provision net revenue was $116 million in Q4.
This compares to $115 million in Q3 and $122 million in prior year.
Our CECL provision in the quarter reflects the credit of $1 million, which I'll discuss in more detail on the next slide.
And our adjusted tax rate was 22.1%.
The allowance coverage ratio, excluding PPP loans, declined from 1.8% to 1.76%, with total reserves of $359 million.
Non-performing loans in the upper left increased $3 million from Q3.
Net charge-offs in the upper right decreased from the third quarter and totaled $9.4 million after $1.9 million in recoveries.
The net charge-off rate was 17 basis points in the quarter.
Commercial classified loans in the lower left increased $30 million from Q3 and represented 352 basis points of total commercial loans.
Deposit growth of $414 million exceeded total asset growth and lowered the loan-to-deposit ratio to 79%.
Our sources of secured borrowing capacity increased further and totaled $12 billion at December 31st.
Our common equity Tier 1 ratio of 11.35% exceeds well capitalized by $1.1 billion.
Likewise, Tier 1 risk-based capital of 11.99% exceeds well-capitalized levels by $895 million.
That being said, we anticipate modest loan growth, excluding the timing of PPP forgiveness and Round 2 originations.
We remain on track to deliver an 8% to 10% reduction in core non-interest expense.
We announced in December the consolidation of 27 banking centers and we have targeted actions aimed at reducing corporate office square footage over time.

Summary:
Our adjusted earnings per share in Q4 were $0.99, up from $0.96 a year ago.