Our fourth quarter earnings were strong, as we successfully completed our systems integration of SB One and met both our expense savings estimate of over 30% and came in under our projected one-time merger-related charges.
Fourth quarter earnings were strong at $40.6 million or $0.53 per share, including $3.2 million in merger-related charges.
Net interest income was up 22% quarter-over-quarter.
Total assets at December 31st, 2020 stood at $12.9 billion, which resulted in an annualized return on average assets of 1.25% for the quarter and an annualized return on average tangible equity of 14.1%.
Included in total assets were $473 million in PPP loans, which will continue to be submitted to the SBA for forgiveness throughout Q2 of this year.
Credit line usage is down to 41.6% at December 31st, 2020 versus 55.7% in 2019.
Competition for loan growth remains extreme and our loan pipeline is $1.2 billion, with $295 million approved awaiting closing, and a 47% pull-through rate expected on the remainder.
Deposits for the year increased $2.7 billion, including $1.76 billion acquired from SB One.
Core deposit growth continued throughout the year and represented 88.9% of total deposits at December 31st.
We ended the year with a loan-to-deposit ratio of 99.8%, and we continue to interact with our customers to further solidify deposit relationships.
Non-interest income was up $2.7 million versus same quarter last year, which is primarily the result of $1.8 million contributed by our new fee revenue source from SB One Insurance, accompanied by an increase in the net gain on sale of residential mortgage loans of $757,000 and wealth management income increasing $561,000.
These increases were partially offset by decreases in prepayment fees of $882,000.
Non-operating expenses increased $4.8 million for the quarter, which included $3.2 million of non-recurring costs related to the acquisition of SB One.
Our operating expenses to average assets was 1.82% for the quarter and our efficiency ratio was 54.12%.
As an example, we have seen an increase in daily usage of 945% versus our previous person-to-person platform.
We repurchased 1.3 million shares in 2020 at an average cost of $16.59 per share, which leaves PFS with only 262,000 shares remaining in our existing program.
Yesterday, our Board authorized the adoption of a new 5% repurchase program, which will commence upon the completion of the existing one.
As Chris noted, our net income was $40.6 million or $0.53 per diluted share, compared to $27.1 million or $0.37 per diluted share for the trailing quarter.
Earnings for the current quarter included $6.2 million of negative provisions for credit losses on loans and off-balance sheet credit exposures, while the trailing quarter reflected provisions of $5.8 million.
The remaining non-recurring merger integration costs of $3.2 million were recorded in the fourth quarter, outperforming our expectations as disclosed at the transaction's inception by about $800,000, and helping tangible book value per share to recover and surpass pre-acquisition levels.
Core pre-tax pre-provision earnings, excluding provisions for credit losses on loans and commitments to extend credit, merger-related charges and COVID response costs were $50.1 million for pre-tax pre-provision ROA of 1.54%.
This compares favorably with $44.4 million or 1.48% in the trailing quarter.
Our net interest margin expanded 3 basis points versus the trailing quarter, as we reduced funding costs and grew non-interest bearing deposits, while earning asset yields held steady.
Including non-interest bearing deposits, our total cost of deposits fell to 31 basis points this quarter from 33 basis points in the trailing quarter.
Non-interest bearing deposits averaged $2.38 billion or 24% of total average deposits for the quarter.
This was an increase from $2.21 billion in the trailing quarter, reflecting a full quarter contribution from SB One.
Average borrowing levels decreased $82 million and the average cost of borrowed funds decreased 3 basis points versus the trailing quarter to 1.16%.
Quarter end loan totals increased $66 million versus the trailing quarter or an annualized 2.7%, reflecting growth in C&I, construction and consumer loans, partially offset by net reductions in CRE, multi-family and residential mortgage loans.
Loan originations, excluding line of credit advances totaled $868 million for the quarter.
The pipeline at December 31st decreased $138 million from the trailing quarter to $1.2 billion.
However, the pipeline rate increased 2 basis points since last quarter to 3.57% at December 31st.
Our provision for credit losses on loans was a benefit of $2.3 million for the current quarter, compared with an expense of $6.4 million in the trailing quarter.
We had annualized net charge-offs as a percentage of average loans of 10 basis points this quarter, compared with net recoveries of less than 1 basis point for the trailing quarter.
Non-performing assets increased to 71 basis points of total assets from 42 basis points at September 30th.
Excluding PPP loans, the allowance represented 1.09% of loans, compared with 1.16% in the trailing quarter.
Loans that have been or expected to be granted short-term COVID-19-related payment deferrals declined from their peak of $1.31 billion or 16.8% of loans to $207 million or 2.1% of loans.
This compares with $311 million or 3.2% of loans at September 30th.
This $207 million of loans consists of $9 million that are still in their initial deferral period; $51 million in the second 90-day deferral period; $121 million required additional deferrals and $26 million that have completed their initial deferral periods, but are expected to require ongoing assistance.
Included in this total are $49 million of loans secured by hotels with a pre-COVID weighted average LTV of 43%; $36 million of loans secured by retail properties with a pre-COVID weighted average LTV of 58%; $30 million of loans secured by multi-family properties, including $21 million that are student housing related with a pre-COVID weighted average LTV of 61%; $5 million of loans secured by restaurants with a pre-COVID weighted average LTV of 50%; and $30 million secured by residential mortgages with the balance comprised of diverse commercial loans.
Non-interest income decreased $268,000 versus the trailing quarter to $20 million as growth in loan and deposit fee income, bank-owned life insurance income and gains on loan sales was more than offset by a decline in net profit on loan level swaps, gains on sale of REO and a small reduction in wealth management income.
Excluding provisions for credit losses on commitments to extend credit, merger-related charges and COVID-related costs, non-interest expenses were an annualized 1.82% of average assets for the quarter, compared with 1.92% in the trailing quarter, as the benefits of greater scale and planned acquisition cost saves were achieved.
Our effective tax rate decreased to 23.3% from 25.5% for the trailing quarter as a result of an increased proportion of income coming from tax exempt sources in the current quarter.
We are currently projecting an effective tax rate of approximately 24% for 2021.

Summary:
Fourth quarter earnings were strong at $40.6 million or $0.53 per share, including $3.2 million in merger-related charges.
As Chris noted, our net income was $40.6 million or $0.53 per diluted share, compared to $27.1 million or $0.37 per diluted share for the trailing quarter.