The infection rate in the State of Hawaii continues to remain very low with roughly 1,800 cases as of July 28.
During the second quarter we ran a Mahalo Meals initiative that provided 1,500 meals to local first responders and frontline heroes.
We originated over 7,200 PPP loans totaling over $550 million to both existing and new customers.
Given the low business rate environment, residential mortgage demand was strong, which enabled the company to grow our residential mortgage portfolio by $25 million and generate $3.6 million of mortgage banking income during the second quarter.
Overall for the second quarter, the company grew total loans by $491 million or 10.9% sequential quarter.
This included $526 million in PPP loans and $25 million in residential mortgage as I mentioned earlier, partially offset by declines in other loan categories.
We're also able to grow core deposits by $719 million or 16.7% sequential quarter augmented by the PPP loan funds that were deposited with the bank.
Given the volatility in the markets and the current operating environment we were successful in reducing the average cost of total deposits by 16 basis points to 20 basis points.
We experienced increased customer usage of digital channels over the last several months due to COVID-19 pandemic with mobile deposit transactions up over 90% and mobile banking enrollments up nearly 15% on a year ago.
The volume of loan payment deferrals printed peaked in May at $605 million in total loan balances and have since declined to $568 million or 12.7% of our total loan portfolio excluding PPP balances at June 30.
Our consumer loan payment deferrals totaled $66 million and residential loan payments forbearances totaled $177 million.
The majority of the residential mortgage forbearances were still in their initial 90-day forbearance period at June 30, but we are starting to see some borrowers resume payments and come off of forbearance with the total accounts dropping from a peak of 467 at May 31 down to 350 at June 30.
In our commercial and commercial real estate loan portfolio we provided loan payment deferrals of $318 million in total loan balances.
The highest amount was in the real estate and rental and leasing category of $167 million or 3.7% of the total loan portfolio, excluding PPP balances and comprised of 129 loans.
Additional details on our loan payment deferrals can be found on slides 13 and 14.
During the quarter special mention loans increased by $6.8 million sequential quarter to $116 million or 2.6% of the total loan portfolio excluding PPP balances.
The largest exposure is in the real estate and rental and leasing category, which totaled $59 million or 1.3% of the total loan portfolio excluding PPP balances.
Approximately 24% of special mentioned balances also received PPP loans.
Classified loans increased approximately $21 million sequential quarter to $47 million or 1% of the total loan portfolio excluding PPP balances.
Approximately 10% of classified balances also received PPP loans.
The weighted average origination loan to values in these portfolios are 61%, 63% and 60% respectively.
These loans comprise of approximately $3.4 billion or 76% of our total loan portfolio excluding PPP balances.
Net income for the second quarter of 2020 was $9.9 million or $0.35 per diluted share.
Return on average assets in the second quarter was 0.61% and return on average equity was 7.34%.
Our pre-tax pre-provision earnings for the second quarter was $23.5 million, which increased by $3 million or 15% sequential quarter.
Net interest income for the second quarter was $49.3 million, which increased by $1.4 million on a sequential quarter basis.
The increase includes $2.5 million in PPP net interest income and net loan fees.
The net interest margin decreased to 3.26% in the second quarter compared to 3.43% in the prior quarter.
The second quarter NIM normalized for PPP was 3.31%.
Second quarter other operating income totaled $10.7 million compared to $8.9 million in the prior quarter.
The increase was primarily due to higher mortgage banking income of $3.2 million and higher BOLI income of $1.4 million.
Other operating expense for the second quarter was $36.4 million, which was relatively flat to the prior quarter.
In the current quarter PPP loan origination cost of $2.2 million was capitalized and deferred, which reduced salaries and benefits.
Net charge-offs in the first quarter totaled -- in the second quarter totaled $2.9 million compared to net charge-offs of $1.2 million in the prior quarter.
At June 30, our allowance for credit losses was $67.3 million or 1.35% of outstanding loans.
Excluding the PPP loan portfolio, which is guaranteed by the SBA, our allowance for credit losses was 1.50% of total loans.
The efficiency ratio improved to 60.8% in the second quarter compared to 63.9% in the previous quarter.
The effective tax rate decreased to 23% in the second quarter due to higher tax exempt bank-owned life insurance income.
Going forward, we expect the effective tax rate to be in the 24% to 26% range.
Our Board declared a quarterly cash dividend of $0.23 per share, which will be payable on September 15 to shareholders of record at the close of business on August 31.
As a result of these consolidations we expect annual expense savings of approximately $1.8 million.
We also expect to incur one-time charges associated with the consolidations of approximately $0.3 million in the third quarter and $1.4 million in the fourth quarter.

Summary:
Net income for the second quarter of 2020 was $9.9 million or $0.35 per diluted share.
Net interest income for the second quarter was $49.3 million, which increased by $1.4 million on a sequential quarter basis.