Third quarter core earnings per share of $0.24 was consistent with last quarter, even as we further increased loan loss reserves.
The core efficiency ratio improved to a record low of 54.45% and the core pre-tax pre-provision ROAA strengthened to 1.74%.
Core pre-tax pre-provision net income was $41.1 million, up some 14% over the second quarter.
The Company achieved record quarterly fee income of $26.7 million, an increase of $4.9 million from the previous quarter.
This more than offset a $4.4 million increase in provision expense to $11.2 million.
Excluding PPP balances, the allowance for loan losses as a percentage of total loans increased 10 basis points to 1.38%.
Including previously disclosed day one CECL adjustment, the coverage ratio excluding PPP loans would increase to 1.59%, as seen on Page 10 of the earnings supplement.
Our non-performing loans fell from $56 million at the end of the second quarter to $49.7 million at the end of the third quarter.
On Page 13 of the earnings supplement, COVID-19 deferrals totaled 2.68%, as of July 24th.
Those deferrals fell to 17 basis points as of October 23rd or last Friday.
Similarly, on Page 12 of the earnings supplement, deferrals on the commercial portfolios most impacted by COVID declined again from 3.4% on July 24th to 14 basis points as of last Friday.
Next, third quarter fee income as a percentage of revenue was 28.8%.
First, interchange income was $6.4 million, up roughly $500,000 over the second quarter.
Mortgage gain on sale income was $6.4 million with a record quarter of $240 million in production.
As an aside, 40% of these loans were not sold and remain on our balance sheet.
Despite a lackluster industrywide small business demand, SBA gain on sale income was $1.4 million, which also contributed to fee income.
Also on the fee income front, trust revenue totaled a record $2.6 million as well.
Loans grew $33 million or 2% on a linked-quarter basis, as the consumer lending business led the way.
In commercial lending, however, utilization of lines credit fell some $55 million from 38% at the end of June to 34% at the end of September, as business' investment and working capital utilization has stalled.
Fourth, the net interest margin contracted about 18 basis points to 3.11% in the third quarter, despite respectable loan growth and resilient loan spreads, particularly on the consumer side.
Net interest income, however, was virtually unchanged, falling only $300,000 to $66.7 million.
Fifth, core non-interest expenses were down $63,000 for the quarter to $52.3 million even -- $52.3 million, even as we continue to invest in our digital platform and tools for our client.
These launches impacted well over 200,000 consumers and small businesses and by all accounts went smoothly.
Core earnings per share matched last quarter's results even with $6.9 million of reserve build.
While our provision expense of $11.2 million came remarkably close to the consensus expectation of $11.1 million, our spread income came in roughly $3.5 million lower than consensus expectations and yet we still hit consensus.
Our core earnings figures excluded two non-recurring expense items from our results; $3.3 million of expense associated with a voluntary early retirement program and $2.5 million of expense associated with the branch consolidation effort, both of which have been previously disclosed.
First, our stated NIM was 3.11%, but was affected by negative replacement yields; a shift in mix toward consumer loans; and most importantly, an average excess cash position during the quarter of approximately $343.3 million or about 4% of average earning assets.
Consistent with prior disclosure, we calculate a core NIM, excluding the impact of PPP loans and excess liquidity of 3.28% in Q3.
Over the course of next year, however, we currently expect the core NIM, ex-PPP to continue a path of modest contraction in the 3.20% to 3.30% range.
Second, Mike mentioned that our fee income of $26.9 million was very strong in Q3, up by nearly $5 million from last quarter.
Because much of this was driven by mortgage, fee income is expected to seasonally adjust to approximately $24 million to $25 million in the fourth quarter.
And finally, I know Mike already mentioned this, but if you look at Page 10 of the supplement, you will see graphically what we have verbally explained in prior quarters, that even though we delayed the adoption of CECL, the addition of our day one CECL number to our current incurred ALLL results in a reserve of $101.2 million and a reserve coverage ratio of 1.59%.
Net charge-offs for Q3 were $4.3 million, which includes approximately $1.2 million in consumer charge-offs.
Net charge-offs annualized were 0.27%.
Our NPLs improved approximately $6.3 million to $49.7 million, improving to 0.78% from 0.88% of total loans excluding PPP loans.
Reserve coverage of NPLs rose to 177% from 145%, again excluding PPP loans.
Similarly, our NPAs improved $6.7 million to 0.80% of total loan assets from 0.91%.
Our proactive approach to risk ratings resulted in criticized loans increasing approximately $60 million, while classified loans increased modestly.
As shown in the slide deck, the provision for the quarter totaled $11.2 million, which resulted in a reserve build of $6.9 million under our incurred loss model.
The allowance for loan loss as of September 30th totaled $88.3 million as compared to $81.4 million at June 30th.
The reserve balance grew to 1.38% excluding PPP loans from 1.28%.
Net charge-offs were $4.3 million.
We have a slight increase in specific reserves of approximately $500,000.
Our standard qualitative reserves increased approximately $900,000 quarter-over-quarter, reflecting a mix of economic conditions.
Our COVID qualitative overlying reserve increased by $4.7 million for Q3 to $14.6 million.
We released approximately $1.9 million in consumer reserves due to improving deferral experience as well as improved economic conditions.
We increased our high-risk portfolio reserves by approximately $6.6 million, largely due to increases in the overlay reserves for our hospitality and retail portfolios.

Summary:
Core pre-tax pre-provision net income was $41.1 million, up some 14% over the second quarter.