Berkshire Hills Bancorp (BHLB) Q1 2019 Earnings Call Transcript

Berkshire Hills Bancorp (BHLB)
Q1 2019 Earnings Call
April 30, 2019 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, everyone, and welcome to the Berkshire Hills Bancorp first-quarter earnings release conference call. [Operator instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the conference call over to Ms. Erin Duggan, investor relations manager.

Ma'am, please go ahead.

Erin Duggan -- Investor Relations Manager

Good morning, and thank you for joining this discussion of first-quarter results. Our news release and a presentation outlining our previously announced strategic review which we will discuss today is available on the investor relations section of our website, berkshirebank.com, and will be furnished to the SEC. Our remarks will include forward-looking statements and actual results could differ materially from those statements. For detail on related factors, please see our earnings release and most recent SEC reports on Forms 10-K and 10-Q.

In addition, certain non-GAAP financial measures will be discussed on this conference call. References to non-GAAP measures are only provided to assist you in understanding Berkshire's results and performance trends and should not be relied upon as financial measures of actual results or future projections. A comparison and reconciliation to GAAP measures is included in our news release. And with that, I'll turn the call over to CEO, Richard Marotta.

Richard Marotta -- Chief Executive Officer

Thank you, Erin. Good morning, everyone, and thank you for joining us today for our first-quarter call. With me this morning are Jamie Moses, our CFO; Sean Gray, our president; Georgia Melas, our chief credit officer; and George Bacigalupo, our commercial leader. We'll break the call into two parts.

Our first-quarter results and second, our strategic review and future outlook. Starting with the first quarter. We consolidated six branches in Q1. With early deployment of MyBankers, we've actually seen a slight increase in the deposit balances that were affected by the closing.

We move forward with our acquisition of Savings Institute, which is targeted for completion in the second quarter. We continue to work cohesively with their team as we make decisions for the integrated company. We are also exploring new delivery channels with storefront locations that are having non-traditional footprint and historically under bank communities that will be supported by MyBankers. In the first quarter, we've taken steps to affirm our commitment to corporate responsibly and culture.

We've heard me talk previously about my passion to ensure that diversity, inclusion and belonging our focal point for the company. In March, the board officially established a board level of corporate responsibility and culture committee led by Ms. Laurie Norton Moffatt. This committee will work closely with senior leadership as we expand and deepen our commitment to corporate social responsibility, diversity, inclusion and belonging across all aspects of our company.

We also published for -- our first annual corporate social responsibility report, which can be found at our investor relations website. In this report, we summarized the many ways Berkshire delivers on being a good corporate citizen by conducting business in a social responsible manner, being a caring neighbor and employer and being transparent in our governance practices. At the end of the quarter, we said goodbye to three of our esteemed colleagues and members of the leadership team. Linda Johnston, Mike Carroll as they begin their retirements and Ali O'Rourke, as she pursues new opportunities outside of the company.

Linda spent 41 years with the bank and lead our human resource function. Mike Carroll was pivotal in the buildout of our specialty lending operations and spent many years leading our commercial teams in the New York region. Many of you on this call have worked closely with Ali over the last six years as she lead our investor relations efforts and helped communicate our strategic vision. We wish all of them well in their future endeavors.

As far as the first-quarter results go, we delivered $0.60 in core EPS and $0.51 in GAAP EPS due to the impact of non-core charges that are detailed in the earnings release tables. Our NIM came in at 3.17% and included 5 basis points of purchase loan accretion. Measured before accretion, the NIM was up 1 basis point quarter over quarter to 3.12%. The provision was $41 million -- $4.1 million and exceeded net charge-offs.

Our allowance increased to 69 points of total loans, and our credit quality metrics remained strong and improved quarter over quarter. Now we'll turn to our strategic review. We will be referring to slides as we walk through that deck, which is posted at our website. Turning to Slide 3.

As I discussed on our last call, we initiated a full strategic review shortly after year-end. The review moved us toward profitability and the development of higher quality, sustainable earnings, while focusing on customer relationship strategies within our footprint. As you recall, the review was initiated to offset a reduction of approximately $50 million in purchase loan accretion and our acquired portfolios in addition to achieving our profitability, liquidity and efficiency goals. My focus as CEO is on the disciplined deployment of capital and liquidity and driving core deposit growth, while staying true to our core values of inclusion and belonging in our company and the communities that we serve.

The results of the review led us to the actions that: one, improve the size and composition of the balance sheet; two, focus on energies on strategically compelling profitable lines; three, rationalize our organizations' expenses; four, deploy capital to its highest and best use; and finally, allow us to deliver on our short and longer term performance goals. I'm going to turn the call over to Jamie at this time, so he can walk through the financial impacts of that review. Jamie?

Jamie Moses -- Chief Financial Officer

Thanks, Richard, and good morning, everyone. Let's begin with the balance sheet changes. Turning to Slide 4. We've identified just over $1 billion in asset reductions to take place over the next few years as we let lower-yielding assets run off and exit non-strategic and non-relationship businesses.

Specifically, we've chosen to run-off our indirect auto portfolio, exit our aircraft lending business, which was acquired in the Commerce acquisition and reduced the size of our securities portfolio. These assets in aggregate yield about 3.75%, and we intend to pay down borrowings that currently cost in the neighborhood of 2.5%. In the securities portfolio, we have identified roughly $450 million in mortgage-backed securities reduction, which would include opportunistic sales and natural run-off. These actions overtime will boost the NIM while giving us flexibility to improve our returns to shareholders.

Turning to Slide 5. In an effort to create higher quality sustainable earning stream, we have decided to exit business lines that are nonstrategic or nonrelationship. The exit from the FCLS, National Mortgage Banking Operation, is not expected to have a significant financial impact on Berkshire's net impact or financial condition in 2019. These national mortgage originations have historically been sold servicing release to the secondary markets.

We have begun a search process for the sale of FCLS, and we have engaged in discussions with several interested parties that are attracted to this best-in-class mortgage platform. In terms of our in-footprint operations, Berkshire Bank currently offers a competitive array of mortgage solutions through its Berkshire bank home lending division and will continue to serve Berkshire's northeast customers through our extensive regional offices in local markets. Our indirect auto and aircraft portfolios are both stand-alone products that have limited relationship potential, and we expect to save about $1.5 million in non-interest expense on a run-rate basis. Turning to our expense review on Slide 6.

At this point, we have set a range of $12 million to $15 million in annualized expense save opportunities to be fully implemented by the end of the year. This number excludes the expense impact of the FCLS mortgage banking operations. Our expense save goal is separate from the 30% cost goal related to the Savings Institute operations. With that said, we have undergone the strategic review within the context of the acquisition so that we will achieve the most sensible results across these two organizations, while maintaining and enhancing our customer service offerings.

We believe that we can achieve an efficiency ratio run rate in the mid-50s by the end of the year. Moving on to capital management on Slide 7. We project that our core return on tangible equity will be in the area of 13%, which will provide excess capital in the context of our balance sheet changes and organic growth plans. The board approved 2.4 million share repurchase authorization equates to approximately 5% of our projected outstanding shares, when including shares issued for the Savings Institute acquisition.

Even with repurchases, we expect that our capital ratios will improve modestly overtime. Repurchases will be subject to market conditions and dividends are an alternative path, if appropriate to completing our captain repositioning. We intend to carefully control tangible book value dilution from buybacks and restructuring charges and are targeting the payback to be inside of three years. We believe that these actions are a major step in optimizing our use of capital and liquidity.

As we discussed last quarter, we came into this year with an outlook that our purchase loan accretion would decrease significantly from 2018 and prior years. The actions we have outlined will increase our net interest margin before accretion and will support earnings despite the loss of that accretion income. Our expense initiatives and planned acquisition efficiencies are also significant elements of our strategy. We believe this plan can drive core ROTC hire, while strengthening our balance sheet, enhancing our core franchise and returning excess capital to our shareholders.

Slide 8 lays out our performance goals for 2019 and beyond, again despite the loss of $15 million in purchase loan accretion that translates to about $0.24 in EPS, this plan would deliver a 260plus core EPS and a core ROA above 1%. From a longer term perspective, we believe that we can drive positive operating leverage year over year along with ROAs north of 110 basis points in the short term and north of 115 in the medium term. In terms of return on tangible, our continued focus is on driving ROTCE north. Long term, we expect to maintain our efficiency ratio in the mid-50s.

I'll turn it back over to Richard now to take you through the rest of the deck. Richard?

Richard Marotta -- Chief Executive Officer

Thank you, Jamie. On Slide 9, we see attractive opportunities for our franchise in 2019 and beyond starting with pending acquisition of Savings Institute. We continue to expect the closing of this merger to be in Q2 and for this to be marginally accretive to earnings in 2019, due to the timing of their core system conversion. Our 30% cost save number's unchanged, and we expect to hit that number in Q4.

As we've discussed, this acquisition will give us low cost, sticky deposits in less competitive markets and ultimately helping our profitability and our liquidity. The plan that we've laid out describes a more focused business selection targeted to support our profitability metrics. We remain highly focused on relationships in loans that return solid double-digit ROEs. The higher-yielding commercial loans are targeted to replace the run-off of the indirect in aircraft portfolio.

So to summarize, on Slide 10, we view 2019 as a transition year that generally maintains the profitability levels of 2019 with a higher quality, sustainable earning stream, while setting the stage for improving profitability and controlled balance sheet growth in 2020 and beyond. We have already taken many key steps in our strategic evolution with further actions expected throughout the year. We are focused on repositioning and optimizing balance sheet and driving efficiency through rationalization of cost, while maintaining and enhancing our service and product offering. We anticipate that share repurchases will be a primary avenue to deploy excess, internally generate a capital, but that will depend on market and economic condition.

The strategic review of our organization has been undertaking through the lens of succeeding in the market as a 21st century community bank with an emphasis on our culture, a culture that is driven by inclusion. More importantly, we strive to be a company that makes everyone, regarding -- regardless of race, gender or sexual orientation feel that they belong. I believe that this allows us to deepen the talent pool that our employees come from and widen the group of potential customers for Berkshire Bank. Those effects will ultimately drive bottom-line results to our shareholders as we future proof the bank from the cultural shift as millennials become a greater and greater percentage of our employees and our customers.

With that, I'd like to open it up to any questions. 

Questions and Answers:

Operator

[Operator instructions] And our first question today comes from Sean Tobin from FIG Partners. Please go ahead with your question.

Sean Tobin -- FIG Partners -- Analyst

Good morning, guys.

Jamie Moses -- Chief Financial Officer

Good morning.

Richard Marotta -- Chief Executive Officer

Hey, Sean.

Sean Tobin -- FIG Partners -- Analyst

Hey. It was great to see the 2.4 million share repurchase approval. If we were to look at that for the remainder of the year or even until expiration, can you give us an idea of some of the thresholds that will determine how aggressive or not aggressive to be on that front?

Jamie Moses -- Chief Financial Officer

So yeah, it's a good question, Sean. Thanks for asking. I think that we don't want to get too far into those details around what we're looking at. I guess, I'll answer that this way is if we think that the best use of capital is to buy back shares, that's what we will do.

If we think that the best use of capital is to deploy it in the form of assets, that's what we will do. So I don't want to get into stock price targets or anything like that, but that's how we would think about that share repurchase program in total.

Sean Tobin -- FIG Partners -- Analyst

Got you. That's helpful. And then if we were to look at the linked-quarter change or decline and non-interest-bearing deposits, would you describe those as kind of the seasonal decline? Or is that more -- does that have anything to do with some of the lower-yielding relationships that you'll possibly be no longer prioritizing as you refocus your operations?

Jamie Moses -- Chief Financial Officer

Yes. No, I think generally speaking, we would see that as a bit of a seasonal decline, but I think, Sean, has some more --

Sean Gray -- President

You're right on. It's seasonal due to payroll and municipal deposits.

Sean Tobin -- FIG Partners -- Analyst

Got you. That make sense. And then I guess, just lastly, if you look at the cost of total deposits and just deposit pricing in market today, how strong is the competition? And then, I guess, just explaining on that, how do you kind of see that number playing out for the remainder of the year?

Sean Gray -- President

I'll start and take it over Jamie. Competition has been strong. It's pulled back some. We're seeing -- we're planning for low single-digit organic good core relationship deposit growth.

From a future outlook, Jamie, anything you would like to...

Jamie Moses -- Chief Financial Officer

Yeah. I think from a competition perspective, what we see is that people are pulling back on their specials in large measure, right? So from an overall perspective, that's what you would see. So we think that sort of gathering deposits is potentially slightly easier than it was going to be in say Q4 as expectations for rate increases have sort of gone away. With that being said, I think, future outlook for us probably in the neighborhood of 1 basis point or 2 in terms of deposit cost increase quarter over quarter to the rest of the year and again that kind of assumes a -- the flat sort of yield curve and flat expectations for fed rate hikes.

There is still some things that reprice overtime, and those will reprice to the higher levels that we're at now as compared to where they came on the books. But assuming rates stay where they are, we think it's generally benign in terms of deposit cost.

Sean Tobin -- FIG Partners -- Analyst

Gotcha. That's very helpful. Thanks for taking my questions.

Operator

Our next question comes from Laurie Hunsicker from Compass Point. Please go ahead with your question.

Laurie Hunsicker -- Compass Point -- Analyst

Yeah, hi. Good morning. Thanks for taking my question.

Richard Marotta -- Chief Executive Officer

Good morning, Laurie.

Laurie Hunsicker -- Compass Point -- Analyst

Just wondered if we could talk a little bit about the exit of your non-strategic non-relationship businesses? Maybe just starting with the aircraft and obviously give us the size. What is that portfolio looking like in terms of non-performers charge-offs size of loan?

Richard Marotta -- Chief Executive Officer

I think, the aircraft portfolio historically has done very well, has no charge-offs. And I think 99% pass rating on the portfolio. So it's performed very well.

Laurie Hunsicker -- Compass Point -- Analyst

OK. And what is the average size of those loans?

Richard Marotta -- Chief Executive Officer

It's about 1,000 loans. They average about $170,000, I believe. So we're talking about roughly $175 million portfolio.

Laurie Hunsicker -- Compass Point -- Analyst

OK. And if we were thinking about -- OK, that's helpful. And then just in terms of non-strategic lines, can you sort of more macro give us an update in terms of how you're thinking about Firestone? Maybe why that wasn't part of the earmarked non-strategic, non-relationship businesses? Or how you're thinking about it? And then also just an update there in terms of balance origination for the quarter nonperformers and charge-offs?

Jamie Moses -- Chief Financial Officer

Sure. Thanks, Laurie. So Firestone is actually integrated really well with our SBA team, our 44 business capital team. So there is a lot of relationship value that Firestone is delivering outside of just their loans that they're putting on the balance sheet.

So we actually view them as a strategic component of -- in terms of growing our fee revenue as well as they work with 44 BC. So we're actually very pleased with how they are performing. And so we would view them not as a stand alone line of business, we would view them as an integrated piece of the company. And in terms of credit quality and things, I'm going to kick it over to Georgia to help you with that.

Georgia Melas -- Chief Credit Officer

Hi. Good morning, Laurie.

Laurie Hunsicker -- Compass Point -- Analyst

Hi. Good morning.

Georgia Melas -- Chief Credit Officer

Portfolios of gross loans is about $267 million for the quarter, originations for the quarter was just under $30 million, delinquency is down slightly from last quarter, charge-offs continue to run as anticipated, roughly 4% of the portfolio and nonaccrual's basically flat year over year, 3 basis points overall -- the overall portfolio.

Laurie Hunsicker -- Compass Point -- Analyst

I'm sorry, charge-offs are 4%?

Georgia Melas -- Chief Credit Officer

Four basis points. I'm sorry, did I say percent? I apologize, 4 basis points.

Laurie Hunsicker -- Compass Point -- Analyst

OK. Four basis points. OK. That's helpful.

OK. And then Taxi, can you just give us an update there, same numbers?

Georgia Melas -- Chief Credit Officer

Yes. The Medallion portfolio is roughly $26.5 million, delinquencies are up slightly or up over last quarter, which is typical. This is the slowest time of the year for that portfolio. No charge-offs in the portfolio.

I think that was the same as of last quarter. And basically -- do you have any other questions about that one?

Laurie Hunsicker -- Compass Point -- Analyst

Sorry, what are the delinquencies now? Is it most of the...

Georgia Melas -- Chief Credit Officer

Delinquency is up a little bit, over 60% for the quarter.

Laurie Hunsicker -- Compass Point -- Analyst

60% of the buck. OK. OK, great. And then, Jamie, on the expense side, I mean, it looks like if I kind of put all the pieces together and you're thinking about a $12 million to $15 million-or-so number of savings, you're definitely ahead on your run rate.

And I'm just hoping you can step us through that a little bit. When you're guiding in terms of talking about the first quarter, you're talking about the 72 less the $7 million in restructure charges. So we're starting with the base of 65?

Jamie Moses -- Chief Financial Officer

Yes. So I guess, the way to think about this, Laurie, is generally speaking, we're looking at about a 5% reduction in expenses off of the '18 run rate, generally speaking, right, excluding FCLS. But I think maybe the better way to really think about think is in terms of a mid-50s efficiency ratio in how we're getting there because it's a run-rate basis that's going to get there sort of by the end of the year. We're targeting that sort of mid-50s efficiency ratio and how we get there.

Laurie Hunsicker -- Compass Point -- Analyst

OK. And then the branch closures, most of those are a fourth quarter, the four to six branches that you're closing?

Jamie Moses -- Chief Financial Officer

Yes. So there were branch closures here in Q1, that's part of their restructuring charges that you see in the earnings release and then we are looking at an additional four to six branches potential in Q4.

Laurie Hunsicker -- Compass Point -- Analyst

OK. And are those SIFI branches or are those Berkshire Hill branches?

Jamie Moses -- Chief Financial Officer

Yes. We don't have them identified yet, Laurie. We're still going through the process. It's -- we're not quite there yet in determining which of those branches we're going to do.

Laurie Hunsicker -- Compass Point -- Analyst

OK. And then on the restructure charges of $5.4 million, can you just take us through roughly how those breakout in terms of which components those are coming from?

Jamie Moses -- Chief Financial Officer

Yes. So $2.5 million is tied to the branch closings that we had in the quarter. The rest of that is related to restructuring charges that we took here, the bulk of which is severance that we had here in Q1. You don't see a huge decline in the salary line -- sorry, in compensation line because those actions are sort of, generally speaking, taken toward the end of the quarter.

Laurie Hunsicker -- Compass Point -- Analyst

OK. So the 2.9 -- the residual 2.9 is severance. So nothing related to First Choice, nothing related to SIFI in that restructuring line?

Jamie Moses -- Chief Financial Officer

Yes. So nothing related to FCLS, $1.5 million related to SIFI this quarter.

Laurie Hunsicker -- Compass Point -- Analyst

OK. And then in terms of the one-time charges you identified with SIFI, do you feel like you're on track?

Jamie Moses -- Chief Financial Officer

Yeah, we think we're on track to where we thought we would be so that's in the neighborhood of $15 million to $20 million-or-so for the rest of the year in terms of restructuring charges there -- merger charges not restructuring charges.

Laurie Hunsicker -- Compass Point -- Analyst

OK. Merger. OK. OK.

And then how are we thinking about just your one-time charges going forward, because this has been something that whether it's merger charges or restructuring charges, et cetera, that we continue to see bleed through. Can you help us think about when we're going to see a clean quarter?

Jamie Moses -- Chief Financial Officer

Yeah. I mean, I think our goal is to deliver a clean quarter as soon as we possibly can. Our core conversion happens early on in quarter four of this year. So there will be some restructuring charges or merger charges that bleed into Q4, but our anticipation at this point is that Q1 of next year, we're going to have clean quarters and we'll continue that.

We want to have clean quarters as a matter of course.

Richard Marotta -- Chief Executive Officer

Yeah. Laurie, I think -- it's Richard. I think that as I indicated or we indicated, our remarks, 2019 is a transition year. I think 2020, it becomes clean.

So that's kind of the game plan.

Laurie Hunsicker -- Compass Point -- Analyst

OK. Great. That's helpful. And then Richard, one last question for you.

So I'm looking at your capital allocation side of Page 7, and there is no mention of M&A. Am I right to assume that M&A is off the table? Or how are you thinking about that?

Richard Marotta -- Chief Executive Officer

Well, Laurie, I said in the conversion that I'll never ever, ever say never about anything, but it's not even in my mind or anyone's mind. We are 100% focused on driving the profitability through independent company that we are now.

Laurie Hunsicker -- Compass Point -- Analyst

Great. Thank you so much.

Operator

Our next question comes from Collyn Gilbert from KBW. Please go ahead with your question.

Collyn Gilbert -- KBW -- Analyst

Thanks. Good morning, everybody.

Jamie Moses -- Chief Financial Officer

Hello.

Collyn Gilbert -- KBW -- Analyst

So I'm asking an obvious question, which I apologize, if you've already covered it, all right, just missing it. But the accretion drop, can you just walk us through that, Jamie, as to why, just run through those numbers again, the accretion dropped this quarter and then I know in the slide deck, you said $15 million less, but just kind of the accounting behind that?

Jamie Moses -- Chief Financial Officer

Yes. Sure. So last quarter, quarter over quarter, the accretion's down about $7 million-or-so. Q4, we had $8.3 million in purchase loan accounting, things run through this quarter about $1.3 million.

And so how that -- generally speaking, how that works is, we spend a lot of time and effort with our workout teams that go and try to work out loans that we've acquired from other institutions overtime. And so when those loans that were credit impaired get worked out, they disappear from our balance sheet. And so in 2018, we've had $23 million in purchase loan accretion and when that accretion goes away, that is to say, when those loans get worked out, the ability to continue to earn on those goes away. And 2019, we expect our accretion to drop to something like $8 million.

Again, because we did a good job working those loans out in 2018, it's not available here for us in 2019. So that's the $15 million drop year over year that we have because of purchase loan accretion.

Collyn Gilbert -- KBW -- Analyst

OK. And what was the corresponding loan balances that you have subsequently worked out or moved off the balance sheet?

Jamie Moses -- Chief Financial Officer

I don't have that number in front of me, Collyn. We can -- yes, I can try to work that up later, and I can get that to you offline.

Collyn Gilbert -- KBW -- Analyst

OK. OK, that's helpful. And then just in terms of your sort of the strategic review, starting with the loan side, right. So obviously, you indicated some of the transactional credits are going to move off balance sheet.

Stripping that out and as you think about kind of the legacy strategic focus, what do you think the growth rate on loans will be within those buckets in say '19 or '20?

Jamie Moses -- Chief Financial Officer

I think one of the things that we're really focused on, Collyn, is we're driving deposit growth and driving liquidity in the company. So we are likely to -- not likely, we are going to keep our loan growth inside of what our core organic deposit growth is going to be. And so we're looking at from an organic deposit perspective, we think 2% to 3% a year with loan growth inside of that. But again that's going to transition from lower-yielding assets, those will transition off the books and it will put higher quality, higher-yielding assets back on.

Collyn Gilbert -- KBW -- Analyst

OK. OK. And then -- so then does the loan-to-deposit ratio is again pulling off these credits and the objective is to keep that loan-to-deposit ratio in its sort of relative range? Or do you have a target in mind for that?

Jamie Moses -- Chief Financial Officer

Yes. No, I think we want to continue to keep our loan deposit ratio sort of we're going to drive it south of 100%, but we are focused on other liquidity metrics that we take a look at as well that are more of a risk management in nature, but that is the general intent that we would drive the loan-to-deposit ratio down slightly.

Collyn Gilbert -- KBW -- Analyst

OK. OK. And then, Jamie, just want to clarify. So you said on the deposit cost, sort of outlook there, you said 1 to 2 basis points of deposit cost increases per quarter.

Is that right?

Jamie Moses -- Chief Financial Officer

Yes.

Collyn Gilbert -- KBW -- Analyst

OK. And then you're talking about the borrowing movement that you're going to do on the -- So the net effect should be, I mean, a pretty positive trajectory, I guess. Just trying to sort of think about the NIM at this...

Jamie Moses -- Chief Financial Officer

Yeah. Sure.

Collyn Gilbert -- KBW -- Analyst

-- the 3.17% NIM this quarter and then 3.20%, you guys are doing a lot to get 3-basis-point pickup in the NIM?

Jamie Moses -- Chief Financial Officer

So the 3.17% is our GAAP NIM, which includes the effect of accretion. So our GAAP NIM will rise at the end of this year, we expect, based on the SIFI acquisition as some of that accretion sort of pops back into the NIM number. Underlying all that though, when we think about sort of what's going on underneath the unknowable timing and amount of purchase loan accretion, if you measure the NIM before accretion, we think that we can drive that higher over the course of this year as well. And so we think that we are going to be -- you're right to point out that it's a lot that we're doing to drive 3, 4 basis points higher in NIM, but that is an expansion of NIM at a time when we expect rates to be flat.

And so we think that along with that expansion of NIM that we will get in a flat rate environment, that increases our profitability, that increases our ROA, that increases our return on tangible common, which is our sort of focus of driving all those metrics north as we sort of reposition the balance sheet.

Collyn Gilbert -- KBW -- Analyst

Got it. OK. OK. And do you yet have any estimates for what the SIFI accretion might be?

Jamie Moses -- Chief Financial Officer

So we think it's going to be marginally accretive here in 2019.

Collyn Gilbert -- KBW -- Analyst

Sorry, I meant the accretable -- well, I don't mean to interrupt you, go ahead, run with that.

Jamie Moses -- Chief Financial Officer

Yes. So you were talking about the accretable yield?

Collyn Gilbert -- KBW -- Analyst

Yes.

Jamie Moses -- Chief Financial Officer

OK. So we do not have those estimates yet. Those ones will get marked when we actually take over on those loans.

Collyn Gilbert -- KBW -- Analyst

OK. OK. But the 3.20% that you guys are offering as a target includes the impact of additional accretion rolling on with SIFI. Is that right or that's a core NIM number?

Jamie Moses -- Chief Financial Officer

Yes. You're correct. So one of the things that's -- one of the things that's complicating this is that it's a -- is that next year, you don't have accretion -- you won't have accretion in the numbers in 2020 because of CECL, right, the accounting rules all change on that. So our expectation is that by 2020, 2021 that the GAAP and the core NIM is the same and that we would be driving that to a 3.20% plus.

Collyn Gilbert -- KBW -- Analyst

Got it. Right. Thank you for clarifying. OK.

And then just final question on the efficiency target. I think you'd said in your comments that you were targeting a mid-50 efficiency ratio by the end of this year, but then I think in the slide deck, you guys included on the '20 to '21 outlook. So just trying to tighten up the expectation on that mid-efficiency -- I mean that mid-50s efficiency ratio target?

Jamie Moses -- Chief Financial Officer

Right. So we think that we're going to get our -- the cost savings that we outlined earlier on in the call sort of by the end of the year on a run-rate basis. And so we're saying we'll get to a mid-50s sort up by the end of the year and then we'd maintained that mid-50s efficiency ratio throughout that period that we're talking about.

Collyn Gilbert -- KBW -- Analyst

OK. Super. OK. All right.

That is -- That's all I had. Thanks guys.

Jamie Moses -- Chief Financial Officer

Thank you.

Operator

Our next question comes from Mark Fitzgibbon from Sandler O'Neill and Partners. Please go ahead with your question.

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

Hey, guys. I apologize I got on the call a little late, so I'll try not to be redundant. But if you can give a sense as to what the size of the potential restructuring charges in the remainder of this year would be from selling First Choice and those portfolios?

Jamie Moses -- Chief Financial Officer

We don't have a solid estimate on that at the moment, that's something that we -- will depend on, obviously, on market conditions. We don't expect it to be a sizable charge nor do we expect to get a sizable premium, I guess, this is how I would answer that, Mark.

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

OK. And then is there likely to be any incremental restructuring aside from what you've already disclosed? Do you -- are you still looking at lines of business to exit it and things of that nature?

Jamie Moses -- Chief Financial Officer

I mean we will always continue to try to optimize what we're doing here from a capital deployment perspective, but for the moment this is where we're at and we feel good about the review that we've undertaken and the strategic direction moving forward.

Richard Marotta -- Chief Executive Officer

Yes. Mark, I guess, the only thing I would add is that this is an ongoing process, but I think Jamie's correct, I think. Much of the heavy lifting has been done, but we're still in that process.

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

OK. And then if loan growth is going to slow presumably a fair bit and you're selling some of your high-risk loans, should we assume provisioning is going to come down a fair amount?

Jamie Moses -- Chief Financial Officer

Yes. I mean, I think provision's going to -- it might be slightly higher than where we are at this quarter. But yes, generally speaking, I think we're going to be in this $4 million to $4.5 million range in provision. That's clearly going to depend on net charge-offs in activity and the environment though in any given quarter.

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

OK. Great. And then can you help us think about the effective tax rate and may be any plans for additional tax credit investments?

Jamie Moses -- Chief Financial Officer

We're going to continue to do tax credit investments for our good customers that we have. We're not making significant investments in that. So my expectation is that our tax rate would stick around this 22% level throughout the year.

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

OK. And then I could be -- no, I'm sorry. I think you did answer that question. The money market deposits increased quite a bit this quarter, I think, about $0.5 billion, what drove that? Was there a promotional rate or something else?

Jamie Moses -- Chief Financial Officer

Yes. So the main thing here, Mark, is that our payroll business that can have point-to-point fluctuations. So the bulk of the increase that we saw from that payroll business flowed out the next day, just half of the quarter happened to end on a day in which there was sizable amounts of dollars in those accounts.

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

In the payroll business flows through money market?

Jamie Moses -- Chief Financial Officer

Yes. Some of them are classified as money market deposits.

Richard Marotta -- Chief Executive Officer

And demand.

Jamie Moses -- Chief Financial Officer

Yes. And to be clear, some of them are money markets, some of them are demand.

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

OK. Great. Thank you.

Jamie Moses -- Chief Financial Officer

You got it.

Operator

And ladies and gentlemen, with that, we'll end today's question-and-answer session. At this time, I'd like to turn the conference call back over to Berkshire for any closing remarks.

Jamie Moses -- Chief Financial Officer

All right. Great. Thanks, everybody, for being here with us. We'll talk to you in three months.

Operator

[Audio gap]

Duration: 37 minutes

Call Participants:

Erin Duggan -- Investor Relations Manager

Richard Marotta -- Chief Executive Officer

Jamie Moses -- Chief Financial Officer

Sean Tobin -- FIG Partners -- Analyst

Sean Gray -- President

Laurie Hunsicker -- Compass Point -- Analyst

Georgia Melas -- Chief Credit Officer

Collyn Gilbert -- KBW -- Analyst

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

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