Berkshire Hills Bancorp (BHLB) Q2 2019 Earnings Call Transcript

Berkshire Hills Bancorp (BHLB -1.07%)
Q2 2019 Earnings Call
Jul 24, 2019, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Berkshire Hills Bancorp Q2 earnings release conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Erin Duggan, investor relations manager. Please go ahead.

Erin Duggan -- Investor Relations Manager

Good morning and thank you for joining this discussion of second quarter results. Our news release and a presentation outlining our ongoing 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 and 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 second-quarter earnings 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. I'll begin the call today with a high level overview of the quarter and then turn it over to Jamie, who will dive deeper into our results and provide an update on our ongoing strategic review.

We had a good quarter. Our earnings were in line with our expectations as we completed our acquisition of SI Financial and made good progress on our strategic initiatives. In the second quarter, we delivered $0.65 in core EPS and $0.52 in GAAP EPS. The difference being outlined in the earnings release table.

Our NIM came in at 3.19% and included 11 basis points of benefits from purchased loan and time deposit accretion. Integration of SI Financial operation has started smoothly for us and remains on plan. We've been impressed with the talent and customer focus manner at which they operator, as well as their enthusiasm to expand their businesses. We continue to deploy resources to work with their teams prior to our systems conversion, which is planned for October.

SI Financial added approximately $1.7 billion in assets to our balance sheet, with 18 branches in Eastern Connecticut and five in Rhode Island. We've experienced positive deposit growth in those markets thus far and we look forward to capitalizing on new opportunities markets and teams provide us and anticipate to achieve our projected cost savings on schedule. As Jamie will discuss shortly, we've continued to move forward with our strategic initiatives that begun to see results from our efforts. We plan to continue to build on this momentum and to meet the goals we set forth last quarter.

Overall, we're pleased with the progress we've made toward our financial and strategic goals for 2019. I talked a lot about our culture and core values over the past few quarters and we are beginning to see the untapped potential of diversity. Building trusting relationships with all of our communities will help us bank the growing number of millennials and people of color throughout our footprint. In the second quarter, we officially launched our Be FIRST internal values as well as our Be FIRST commitment to the communities we serve.

We are invested in not only our outward-facing products and work, but also in building our internal capacity and diversity. Through our Be FIRST programs, we have established our concept for community store fronts to be based on MyBankers success, develop new community deposit loan products, and established a bank level diversity and inclusion committee. I am proud to say that, during the second quarter, Berkshire Bank was named a 2019 recipient of the North American Employee Engagement Award for social responsibility and work. Berkshire beat out global companies across many industries in winning this honor, a true testament of the strong work environment dedicated to service and culture.

Now I'm going to turn the call over to Jamie. Jamie?

Jamie Moses -- Chief Financial Officer

Thanks, Richard, and good morning, everyone. I'm going to begin with a few comments around the second quarter and then give an update on our strategic initiatives, at which time I'll direct my comments to the presentation that was posted to our IR website. As Richard said, we delivered $0.65 in core EPS and $0.52 in GAAP EPS with a difference coming from our SI Financial acquisition and restructuring efforts. During the quarter, we saw improvement to our capital and liquidity metrics.

At this point, we are roughly 60% through our projected SI Financial merger costs with the remainder of those expected to come through in the back half of the year. This merger strengthens our balance sheet as we move forward with our plan. The economics of this deal remain strong. We had expansion in our core profitability metrics as core ROA was 101 basis points, up from 92 in the first quarter; and return on tangible common equity was 12.2%, up from 11.4% in the first quarter.

GAAP ROA was 79 basis points and GAAP ROE was 6.1%, due to the impact of merger related and other noncore charges as you would expect. Our efficiency ratio improved to 56% from 60% in the first quarter. Loans to deposits were 94% at the end of the quarter, as we move forward with our plan to deleveraging. SI Financial loans and deposits came on at roughly a 100% loan-to-deposit ratio.

On the loan side, we reclassified our aircraft portfolio to held-for-sale during the quarter. Prior to this reclass and excluding SI Financial, commercial loans were down 1% for the quarter as we exited some non-strategic commercial loans as planned. Turning to revenues, fee income was down from first quarter results primarily in our loan related income, tied to two items. First, recall that we had $1 million in additional SBA fee income in the first quarter related to the government shutdown delaying revenues from the fourth quarter of 2018.

Second, we took a $700,000 fair value mark on our back-to-back swap book due to the steep decline in rates quarter over quarter. Moving forward, we expect fee income returning to a more normalized run rate. On the expense side, overall, we are pleased with the disciplined quarter over quarter as we execute on the strategic plan. With that being said, professional services showed an increase quarter over quarter that we expect to move back in line going forward.

This was primarily tied to an indemnification claim on a prior acquisition. Overall, we're pleased with our progress and execution during the quarter as we continue to take steps toward repositioning and optimizing our balance sheet, developing high-quality sustainable earnings and driving efficiency through targeted cost reductions while maintaining and enhancing product and services. Turning to the slides and beginning with Slide 3, our balance sheet optimization is on track. The indirect auto portfolio continues to run off as planned and our securities portfolio continues to naturally run off.

And as I just mentioned, we have moved our aircraft portfolio balance of $178 million to held-for-sale. Turning to Slide 4. As you can see in our earnings release, the First Choice Loan Services operations had a good quarter, taking advantage of a boost in the refi market due to lower rates. As we said in the past, this is a team of good operators and we continued to receive interest in the operations from potential partners where the strategic fit makes sense.

Moving on to Slide 5, we've taken key steps in our expense management initiatives evidenced by our 56% efficiency ratio. We have enacted companywide policy changes, reduced our full-time organic FTE count by 6% year to date and have additional expense management initiatives that will be enacted in the back half of the year. We continue to see improvement as we remain on target and maintain an efficiency ratio in the mid-50s by the end of the year. Moving onto capital management on Slide 6.

We received regulatory approval for share repurchases in mid June. As of last night, we repurchased 310,000 shares and plan to remain active as a purchaser, again, subject to market conditions. We've modeled our average share count to be around 51.5 million in the back half of the year. Again, that's subject to market conditions.

And as a reminder, our Board approved share repurchase authorization includes 2.4 million shares and expires on March 31, 2020. Shifting gears and looking at the broader picture for a moment. Based on the forward curve, we expect further rate cuts and we've already begun to see the impact of lower, short- and long-term rates. In this updated environment, we anticipate our reported NIM to remain relatively stable subject of the timing of purchase loan accretion.

We remain on track to meet our full-year core EPS targets due to the overall benefits of the SI merger and our strategic initiatives. At this time, we cannot provide GAAP EPS guidance due to the impact of noncore items, which includes FCLS. I'll turn it back over to Richard now for closing remarks. Richard?

Richard Marotta -- Chief Executive Officer

Thank you, Jamie. Picking up the discussion on Slide 7 of the deck and to reiterate what Jamie said, we remain on track to meet our targeted performance goals. This includes a $2.60-plus core EPS, and a core ROA above 1% for 2019, with a focus on improving ROTC over time. During the quarter, we welcomed three new members to our board of directors, Baye Adofo-Wilson, Rheo Brouillard, and Bill Hughes.

These additions provide deeper insights into our newer markets and bring enhanced [Inaudible] and new perspectives into our boardroom, including expertise in cybersecurity and community development financing. In addition, during the quarter, we officially welcomed Malia Lazu to our management team as our newly appointed executive vice president, Chief experience and cultural officer. This position will be instrumental in building on the momentum of our diversity inclusion initiatives. We also appointed Jackie Courtwright to the position of senior vice president, chief human resource officer.

Jackie brings more than 25 years of human resource experience to the position as she leads all aspects of the human resource function. We're moving forward on all fronts. We expect to see strong results in the next several quarters as our initiatives come together to drive value. As we meet with the new networks within our communities, we are beginning to understand the value of inclusion.

We're excited to explore the growth potential of our new programs. Our teams are energized and fully engaged within our markets as they continue to focus on building relationship-oriented business. There's a lot of opportunity ahead with the SI Financial expansion, and our Be FIRST effort have been met with optimism from our communities and our employees. We're taking key steps in order to fortify our franchise and truly define what it means to be a 21st century community bank.

With that, I'll open it up to questions.

Questions & Answers:

Operator

[Operator instructions] The first question comes from Brody Preston from Piper Jaffray.

Brody Preston -- Piper Jaffray -- Analyst

Good morning, everyone. How are you?

Richard Marotta -- Chief Executive Officer

Hey, Brody.

Jamie Moses -- Chief Financial Officer

Hey, Brody.

Brody Preston -- Piper Jaffray -- Analyst

I had a quick question -- [Inaudible] I guess, are you guys hearing a bit of an echo, too?

Jamie Moses -- Chief Financial Officer

Not on our end.

Brody Preston -- Piper Jaffray -- Analyst

OK. All right. Well, that's fine then. I guess, I just want to get a sense on the core NIM.

Jamie, you said that it would likely be, I guess, sort of flat moving forward just given the outlook for the forward curve?

Jamie Moses -- Chief Financial Officer

Yes, so the reported NIM we except to be relatively flat for the back half of the year. And again, that's going to include the purchase loan accretion and CD marks, things like that in the back half of the year. Our core NIM, we expect with rates being cut, we expect that will decline a little bit in the back half of the year, maybe in total, 5, 6, 7 basis points, something like that. Again, depending on timing and when and if those rate cuts happen.

Brody Preston -- Piper Jaffray -- Analyst

OK. All right. All right. I appreciate that.

And then, I guess, as we look to -- as I look at the income -- excuse me, if I missed it, I hoped on a few minutes late. Jamie, you said you except fee income to normalize moving forward. What would that run rate look like?

Jamie Moses -- Chief Financial Officer

I think we look at that as probably 20-plus when you include SIFI in this deal. So we're pretty confident that that's going to go to $20 million number.

Brody Preston -- Piper Jaffray -- Analyst

OK. And is the impact from there been still anticipated to be about $5 million a year?

Jamie Moses -- Chief Financial Officer

Yes. Yes, we think it's right around there.

Brody Preston -- Piper Jaffray -- Analyst

OK. Great. And then, I guess moving to loan growth -- I understand that you moved the aircraft portfolio held-for-sale. I guess, even adjusting for that, loan balances came in a little bit lower than what I was looking for.

So could you help me sort of explain or help me understand what drove the delta and what you would expect for loan growth moving forward. Should we expect maybe a slower pace of growth to continue?

George Bacigalupo -- Commercial Leader

Brody, this is George Bacigalupo. So, for the second quarter, our core regional lending was flat. The reductions, as Richard had mentioned, were almost totally in our nonrelationship and syndicated lending assets. And so as we move into the third quarter, we're looking to -- despite some additional payoffs associated with those noncore transactions, we're looking at a range of probably 2-or-so-percent upward from second quarter.

And specifically, we have some good momentum in our business banking in New York and Eastern Mass, ABL as well as Eastern Mass commercial real estate. So we're fairly bullish on the next quarter.

Richard Marotta -- Chief Executive Officer

Yes. Brody, if I could -- this is Richard, if I can just add one thing, I guess the way I would look at it is, our pipeline is strong and robust as it has been. I think we're just being very selective when it comes to the relationship and also the rates on the loans.

Brody Preston -- Piper Jaffray -- Analyst

OK. OK. And then I have a question surrounding, I guess, maybe some of the recent hires that you've made. I think -- forgive me if I'm mispronouncing her name, but I think it's Malia Lazo.

Jamie Moses -- Chief Financial Officer

Malia, Malia Lazu.

Brody Preston -- Piper Jaffray -- Analyst

Malia. OK. I just want to understand -- I understand that she sort of has a separate business that is focused around sort of, I guess, diversity and inclusion. I wanted to better understand what some of the I guess maybe some of the key things she's bringing to the organization in terms of like key steps she's going to implement moving forward?

Richard Marotta -- Chief Executive Officer

Yes. I guess the -- as we kind of look at into the future into being a 21st century bank, part of that whole aspect is to deal with the communities that we service. And part of that, those communities or major part of those communities are people of color and just overall diversity, and Malia has built a strong business, and she's a 20-year vet in the Boston, not only Boston but nationally. So what she brings is just the ability to take our vision and then to tie it -- take it and tie it back to the communities that we serve.

Brody Preston -- Piper Jaffray -- Analyst

OK. Great. Thank you very much, guys.

Operator

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

Laurie Hunsicker -- Compass Point -- Analyst

Hi. Thanks. Good morning.

Richard Marotta -- Chief Executive Officer

Hey, Laurie.

Laurie Hunsicker -- Compass Point -- Analyst

I just wanted to go back to your comments on non-interest income, I guess, what Brody was asking, and I just wanted to make sure I heard this right. As you look forward, you're thinking that run rate is $20 million a quarter?

Jamie Moses -- Chief Financial Officer

Yes. Yes, that's right. We think we'll be north of that.

Laurie Hunsicker -- Compass Point -- Analyst

North of that? OK. So maybe can you help me think about it to some -- looking this quarter, it's $17.5 million, SIFI comes over, they were running at $2.9 million, I'm taking out $400,000 in change for Durbin to $2.3 million, half a quarter impact. SIFI should only be adding a little over $1 million for your fully baked run rate. I guess, what else -- so I look at it going from $17.5 million to round numbers $18.5 million, even $19 million.

I guess, what am I missing here?

Jamie Moses -- Chief Financial Officer

Well, I don't think -- you may not be necessarily missing anything. In that fee income line, though we had decline based on the fair market value of our swaps that we don't -- typically, you're not going to see much movement in that quarter over quarter. And so we had this dramatic decrease in rates from end of Q1 to end of Q2. So, we had to take a mark on that, so you would add -- you sort of just read that back in and --

Laurie Hunsicker -- Compass Point -- Analyst

$700,000 back? OK. Got it. That's showing up in that --

Jamie Moses -- Chief Financial Officer

Loan-related income line.

Laurie Hunsicker -- Compass Point -- Analyst

Loan-related income. Got it. OK. OK.

OK.

Jamie Moses -- Chief Financial Officer

We also expect to do better in SPA fees going forward in Q3 and Q4. We've made some investments in that business that we really like, and we expect to see the payoffs and that will start to happen in back half of the here.

Laurie Hunsicker -- Compass Point -- Analyst

OK. Great. Thanks. And then just to go back to your comments on margin, can you help us think about -- so if the core margin is contracting 4 or 5 basis points that's suggesting that your accretion income in your model is running higher than no more than the quarter at $3.2 million? What -- how you're thinking of our accretion income? Just the last 2 quarters of '19, and I realize that number can move around.

Jamie Moses -- Chief Financial Officer

Yes. The timing on that is a tough one. We don't know for sure. But in our model, we're sort of having the purchase loan accretion remain relatively flat, that's about $2.2 million or so.

But then we also had a mark on the acquired CD portfolio that's contributing to the reported NIM as well. So that added about 3 basis points or so this quarter, should add roughly double that in Q3 and Q4. And so the accumulation of those purchase loan accounting and deposit marks should keep us relatively stable back half of the year, while the sort of underlying balance sheet is contracting somewhat based on the forward curve.

Laurie Hunsicker -- Compass Point -- Analyst

OK. Great. And then tax rate, what should we using going forward?

Jamie Moses -- Chief Financial Officer

Yes. I think 20% for the back half of the year, plus 20% for the full year seems about like the -- a good number for us.

Laurie Hunsicker -- Compass Point -- Analyst

OK. All right. Great. And then can you just update us, I guess, where we are with the taxi book?

Jamie Moses -- Chief Financial Officer

Sure, yes. I'll kick that over to Georgia, she can help you with that.

Georgia Melas -- Chief Credit Officer

Hi. Good morning, Laurie, it's Georgia.

Laurie Hunsicker -- Compass Point -- Analyst

Hi, good morning.

Georgia Melas -- Chief Credit Officer

Balances are just under $26 million. There's really no material changes to the overall credit of the portfolio. I mean, it's continuing to perform along our expectations. Delinquency did pick up a little bit from last quarter.

However, when we adjust for matured loans that are current with the payments, it was actually flat. So it's continuing to perform.

Laurie Hunsicker -- Compass Point -- Analyst

I'm sorry. What is the delinquency number?

Georgia Melas -- Chief Credit Officer

Well, it is at 68%, but that includes loans that have matured, that are current. So if you were to back those out, it falls back to where we were last quarter, which is roughly around the 60% range.

Laurie Hunsicker -- Compass Point -- Analyst

OK. Great. And were there any charge-offs this quarter?

Georgia Melas -- Chief Credit Officer

No. Not in the full portfolio, no.

Laurie Hunsicker -- Compass Point -- Analyst

OK. Great. And then same question, can you just update me on the Firestone book, just the loan balance, origination, non-performers, and charge-offs?

Georgia Melas -- Chief Credit Officer

Yes. Balances are up slightly from last quarter at $270 million. I think it was up about 2% quarter over quarter. NPLs are just under $2 million, which were down from last quarter, and delinquency is at 1.3% or roughly 3 basis points of the total loan portfolio in minimal charge-offs.

Laurie Hunsicker -- Compass Point -- Analyst

In minimal charge-offs? OK. And what were the originations this quarter?

Georgia Melas -- Chief Credit Officer

I've got that somewhere.

Laurie Hunsicker -- Compass Point -- Analyst

Maybe when you're looking for that too, can you help what is substandard, as we've said, as of June 30, total substandard and then also what piece of that is CNI?

Georgia Melas -- Chief Credit Officer

OK. Well, $36 million in Firestone originations for the quarter. And I'm sorry, your question on credit size, was that specific to Firestone or --

Laurie Hunsicker -- Compass Point -- Analyst

No, I'm sorry, just overall what your substandard is currently running? I guess is that comparable? At March it was $152 million? And then also I'm looking for the fee slips that's substandard CNI only and comparable -- if margin was around $55 million?

Georgia Melas -- Chief Credit Officer

Well, substandard is flat. It was roughly $157 million at March 31st, and it's $158 million at June 30.

Laurie Hunsicker -- Compass Point -- Analyst

$158 million? OK. And do you have the piece of that that is CNI?

Georgia Melas -- Chief Credit Officer

I do not have the breakout.

Richard Marotta -- Chief Executive Officer

We can follow up with you on that, Laurie.

Laurie Hunsicker -- Compass Point -- Analyst

OK. OK. That sounds good. OK.

And then just two more questions. I guess when we're looking more broadly at your income statement, you guys are putting a lot into restructuring, and some of these are charges I think that other banks would just consider a part of operating course of business. Can you help us think about when that line goes to 0? And then how we should be thinking about restructuring expenses for the remainder of 2019?

Jamie Moses -- Chief Financial Officer

Yes, so that line should go to 0 after the fourth quarter of this year, right? So this is -- I would say that the restructuring charges that we're putting through this line are related to our strategic review, are moving forward with different lines of businesses and getting out of certain lines of businesses, that sort of thing. So we should have that completed by the end of the year. So I think -- First Q 2020, that line should be 0 along with the sort of merger and acquisition line as well. Our conversion happens in Q4, so we're sort of stuck with charges that will tail off into Q4 this year, but those both numbers should go to 0 in Q1.

And again, I just want to remind that we are likely to have some more branch closures that happen in Q4 as well that we will likely call that a restructuring charge.

Laurie Hunsicker -- Compass Point -- Analyst

OK. And how many branches are you closing?

Jamie Moses -- Chief Financial Officer

So probably somewhere between two and three.

Laurie Hunsicker -- Compass Point -- Analyst

Two to three. OK. OK.

Jamie Moses -- Chief Financial Officer

Still trying to identify which ones and where, but we're -- we think that's probably the right number.

Laurie Hunsicker -- Compass Point -- Analyst

OK. And then that goes into the number. OK. So then again, as we're looking forward, assuming you don't do another acquisition, 1Q '20 March, we're going to see your first clean quarter in terms of restructuring and merger charges in like a decade? Is that the right way to be thinking about this?

Jamie Moses -- Chief Financial Officer

I think that is the right way, Laurie, yes [Inaudible]

Laurie Hunsicker -- Compass Point -- Analyst

OK. That's great. That's great. One more question and then -- sorry, I've taken up a lot of time here.

The aircraft leasing sale that's expected, can you share with us if that's a gain or loss?

Jamie Moses -- Chief Financial Officer

I don't feel real comfortable talking too much about that right now in terms of whether it's a gain or loss, but you'll see the impact on the next call, hopefully, or over the release when the thing closes, we'll let you know what the impacts would be.

Laurie Hunsicker -- Compass Point -- Analyst

OK. And that's also probably going to run through your restructuring line as well?

Jamie Moses -- Chief Financial Officer

I don't think so. I don't think that will run through the restructuring line.

Laurie Hunsicker -- Compass Point -- Analyst

OK. OK. Great. And I'll follow up with you on substandard after.

Thank you very much.

Jamie Moses -- Chief Financial Officer

Yes. Perfect. Thanks, Laurie.

Richard Marotta -- Chief Executive Officer

Thanks, Laurie.

Operator

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

Collyn Gilbert -- KBW -- Analyst

Thanks. Good morning, everyone.

Richard Marotta -- Chief Executive Officer

How are you doing, Collyn.

Collyn Gilbert -- KBW -- Analyst

Good. Thanks. So maybe just starting, Jamie, with the NIM discussion, and I appreciate the colors through the back half of this year, but then as we look at 2020 and if we just assume no rate -- no change in the rate environment from 4Q '19 position, can you just confirm what percent of accretion income will go away in 2020? And then very broadly, how you think that core NIM can trend in 2020?

Jamie Moses -- Chief Financial Officer

So, almost all of the accretion income will go away in 2020. What's going to remain is an interest rate mark on acquired portfolios, which is a very small piece of the overall loan accretion. And in the first quarter, and in the small piece of the second quarter, you're also going to get mark income that comes through on that acquired CD portfolio that we have. And again, this quarter, that was worth about 3 basis points on the reported NIM.

And we expect that will roughly double as in the full run rate here in Q3, Q4. In Q1, that was a, not to get too technical around it, but we have that as like an 11-month straight-line runoff. And so at month 11, that income goes to 0 on that. So then you'll -- there will be almost, I will call it, no noise in the reported NIM versus what we would describe as our adjusted NIM.

The delta would only be what's in the interest rate mark, and we would expect that to be a minimal number and roughly stable and running off over time.

Collyn Gilbert -- KBW -- Analyst

OK. OK. That's helpful. And then, just generally kind of how you're seeing the core NIM or maybe more sort of the way the movement in the core NIM through 2020 and tying into just like strategies on SIFI and all that kind of stuff.

Jamie Moses -- Chief Financial Officer

Yes. So as we've talked about before, I mean, the part of the balance sheet restructuring that we're doing is to try to protect our NIM as best as we can. We are at the moment a slightly asset-sensitive bank, so the initial rate movements down are going to impact our assets quicker than they will our liabilities. We expect that to abate by Q1 next year.

And then we would expect that -- last time we talked about sort of grinding higher basis point by basis point, couple basis points here quarter on quarter based on balance sheet restructuring, and I think that's when we'll see starting in 2020. We would expect that -- that core NIM to sort of just rise slightly and slowly over time.

Collyn Gilbert -- KBW -- Analyst

OK. That's helpful. And then you had indicated 20% tax rate. Can you just give us color as to what that would assume in terms of future tax investments and just where you guys are positioning that for the remainder of this year and into next?

Jamie Moses -- Chief Financial Officer

Yes. So, you were breaking up a little bit there, Collyn, but I think your question is around the tax rate and where we're looking at going forward in those investments in general?

Collyn Gilbert -- KBW -- Analyst

Correct.

Jamie Moses -- Chief Financial Officer

OK. . So in the quarter, you'll note -- in F-9, in this statement, you can see the actual breakout of the charge related to the income -- the tax credit and the income associated with it. So this quarter, we had about $440,000 net benefit to the bottom line because of the tax benefits this quarter. We continue to look at these as relationship deals where we know the operators who are going to do it.

For example, commercial real estate deal that historic tax credits might be involved in, we think it's good business if it makes sense from an ROE perspective, we'll do both the loan and the tax credits. And so we think that's good business for us, and we'll continue to do those types of things. We do not do any solar tax credits. And I think, Richard, did you have something --

Richard Marotta -- Chief Executive Officer

The only thing I would add, Collyn, is just to highlight the point Jamie just made. I mean, these are relationship that we -- are in our footprint. We don't do anything national and we're not just out there chasing tax credits for the sake of tax credits. These are part of an overall relationship we have with the entity or the person.

Collyn Gilbert -- KBW -- Analyst

OK. OK. That's great. That's helpful.

And then, I'd understood you guys -- I'm sorry, hopped on the call late, if you answered this already, I apologize, but can you just update us on how you're thinking about buybacks and what your appetite is there?

Jamie Moses -- Chief Financial Officer

Yes. Sure, absolutely. So we got approval mid- to late June for -- Fed approval to do buybacks. We did about 110,000 in Q2 over those, say, 10 or so trading days.

We have done 310,000 in total as of yesterday. We will continue to be in the market as long as nothing crazy happens on -- in terms of stock price. We'll continue to be in the market. We have 2.4 million authorization from our board, number of shares that expires in Q -- at the end of Q1 next year, and e continue to believe that we will use that entire authorization.

And of course, the pace of those things will depend on market conditions. And then, the last thing I guess I would say about is that is that we really think that this is a sort of best use of the excess capital that we have and we will continue to do that over time.

Collyn Gilbert -- KBW -- Analyst

OK. That's really helpful. And then I thought that was going to be my last question, but I forgot. I think I have two more.

Just really quickly, the indirect auto, the $500 million that you're running down or, well, about $450 million left, is there any sort of seasonality to that's going to run off?

Jamie Moses -- Chief Financial Officer

The only -- I don't think seasonality is probably not the right way to think about it. But since they are amortizing loans, the runoff will accelerate over time. I think that's -- so, less seasonality and more just the structure of those loans.

Collyn Gilbert -- KBW -- Analyst

OK. That's helpful. And then just finally, how are you guys are thinking about some of the consolidation occurring in your market? Do you see that as an opportunity to take customers, to take lenders or anything that you're seeing kind of on an offensive strategic positioning as it relates to some of your market areas?

Richard Marotta -- Chief Executive Officer

Yes. Collyn, the answer to those question is yes and yes. So any time there is a merger or an acquisition or whatever, there's always disruption. And disruption, if you play it right, is opportunity.

So we are looking for the clients that aren't happy with the new regime and/or employees that are not happy. So yes, we are strategical in that regard.

Jamie Moses -- Chief Financial Officer

I'd also just add that when competitors are eliminated, that naturally reduces the sort of competition that you have, so that should help on both sort of the asset generation and the liability side of things in those markets.

Collyn Gilbert -- KBW -- Analyst

OK. OK. That's great. I will leave it there.

Thanks, guys.

Richard Marotta -- Chief Executive Officer

Thank you.

Jamie Moses -- Chief Financial Officer

Thanks, Collyn.

Operator

The next question comes from David Bishop with the D.A. Davidson. Please go ahead.

David Bishop -- D.A. Davidson -- Analyst

Hey. Good morning, guys. How are you?

Richard Marotta -- Chief Executive Officer

How are you going?

Jamie Moses -- Chief Financial Officer

Hey.

David Bishop -- D.A. Davidson -- Analyst

Hey, a question -- if anyone I haven't asked you this, but in terms of the First Choice Loan group, given what happening in the mortgage market, is there a potential for gain in terms of the divestiture of that segment?

Jamie Moses -- Chief Financial Officer

I'm not real comfortable talking too much with that. We're in discussions at the moment. So it probably would be that alone.

David Bishop -- D.A. Davidson -- Analyst

I got it. Saw an uptick in terms of commercial loan NPAs, just curious, some colors around that and maybe the outlook for the provision as you head into the back half of the year, maybe 2020?

Georgia Melas -- Chief Credit Officer

Hi. Good morning. It's Georgia. Yes, we did see -- it was about $5 million increase in NPLs.

That's primarily due to one single CNI relationship in our Vermont market. I mean overall, though, the nonperforming loans as a percentage of total loans is basically flat quarter-over-quarter, inclusive of SIFI, add about 36 basis points. We don't really see anything else going into nonaccrual, at least not in the near future. So I think it's, like I said, it's due primarily to that one loan.

And we continue to work off, obviously, a lot of the smaller loans.

Richard Marotta -- Chief Executive Officer

And David, this is Richard. The only thing I would add is that one transaction seems to be adequately collateralized at this point.

Jamie Moses -- Chief Financial Officer

And, Dave, I guess I will also add on the provision. I would expect you would see the provision go up, commensurate with the size of the balance sheet moving higher as well and into Q3 and Q4.

David Bishop -- D.A. Davidson -- Analyst

Got it. And then on the core deposit front, some decent growth in non-interest bearing, maybe just talk about some of the core deposit trends that you're seeing with the markets and maybe on pricing front as well.

Jamie Moses -- Chief Financial Officer

Dave, we're seeing good growth in our MyBanker and our private banking franchise. We closed six branches deployed of MyBankers and actually grew deposits post the closing of those branches. So we're seeing that is an incredible value proposition and an alternative to traditional banking. And we think it will give us flexibility going forward.

David Bishop -- D.A. Davidson -- Analyst

Got it. Then on the pricing front, just curious what you're seeing on from a competitive standpoint in terms of your markets?

Jamie Moses -- Chief Financial Officer

Yes. I mean, we continue to see that less pressure from competition rates as it would -- there's a rate cut started to be anticipated, we saw competition sort of produce their specials, we've reduced our specials ahead of that as well. We've come down probably 15 or 20 basis points or so over the past, say, 15 or 20 days. And with anticipated continued rate cuts, I imagine that what we'll see is less and less competition, better, and better rates over time.

David Bishop -- D.A. Davidson -- Analyst

Got it. Then one follow-up question in terms of the organic loan growth. Just curious, in some of the core markets in the newer markets of Boston, what's your -- what you're seeing on the commercial loan front there?

Jamie Moses -- Chief Financial Officer

We're seeing good activity and opportunity in eastern Mass, Boston in general. And we're -- we have a very robust pricing model that we adhere to, and we're being selective on our deals. But we certainly have good deals flow in, we feel optimistic about winning our share of transactions.

David Bishop -- D.A. Davidson -- Analyst

Yes. Thank you.

Operator

The next question comes from Mark Fitzgibbon with Sandler O'Neill. Please go ahead.

Mark Fitzgibbon -- Sandler O'Neill + Partners, L.P. -- Analyst

Hey, ghuys. Good morning.

Richard Marotta -- Chief Executive Officer

Hey, Mark.

Mark Fitzgibbon -- Sandler O'Neill + Partners, L.P. -- Analyst

Just one clarification question on non-interest expenses. I assume you're going to extract the SIFI -- begin to extract the SIFI [Inaudible] in this upcoming quarter. Should we look for non-interest expense sort of down a touch from what we saw in 2Q?

Jamie Moses -- Chief Financial Officer

So Mark, the right way to think about that is Q4 is where you'll see the full benefit of the expenses come in. That when conversion happens. So you'll see a rise in expense in Q3 relative to Q2. And then the decline would have been there in Q4.

Mark Fitzgibbon -- Sandler O'Neill + Partners, L.P. -- Analyst

OK. And then just to clarify, your guidance in the slide decks says you're projecting core EPS, $2.60 to $2.65, does that assume any additional restructuring or merger charges or any other nonrecurring items in the third and fourth quarters?

Jamie Moses -- Chief Financial Officer

No, it doesn't include any restructuring charges or anything in the third quarter or fourth quarter.

Mark Fitzgibbon -- Sandler O'Neill + Partners, L.P. -- Analyst

Thank you.

Operator

This concludes the conference for this morning. Thank you for attending today's -- it concludes the question-and-answer session. I would like to turn the conference back over to Berkshire for any closing remarks.

Jamie Moses -- Chief Financial Officer

Yes, thank you for joining us today. We look forward to speaking again in October for our third quarter call. Thank you.

Operator

[Operator signoff]

Duration: 40 minutes

Call participants:

Erin Duggan -- Investor Relations Manager

Richard Marotta -- Chief Executive Officer

Jamie Moses -- Chief Financial Officer

Brody Preston -- Piper Jaffray -- Analyst

George Bacigalupo -- Commercial Leader

Laurie Hunsicker -- Compass Point -- Analyst

Georgia Melas -- Chief Credit Officer

Collyn Gilbert -- KBW -- Analyst

David Bishop -- D.A. Davidson -- Analyst

Mark Fitzgibbon -- Sandler O'Neill + Partners, L.P. -- Analyst

More BHLB analysis

All earnings call transcripts