While People's possesses many attributes of an attractive acquisition target, including strong margin, attractive footprint, and strong asset quality, we think People's capital base is still too large to receive a premium in an acquisition. We think People's will need further utilize its capital base and earn a higher return before a suitor would be interested in paying a significant premium for the company.
We are decreasing our fair value estimate by $1 to $13 per share, as we incorporate tighter margin in the nearer term due to lower long term rates, and transfer coverage to a new analyst. Our fair value estimate is 16.4x our 2012 earnings estimate, and 1.4x tangible book value. We project long-term net interest margin will increase to 4.0% over the 2013-2018 period from 3.9% for 2012, further increasing to 4.2% by 2021, compared to the average of 4.0% over the 2006-2011 period.
In addition, we anticipate that tangible equity to tangible assets will decline from to 12% by 2021 from 18.5% in 2012. We project that the efficiency ratio will decline to 66% in 2012 from its 2011 72% level, as net interest income increases from acquisitions, and projected lower expenses from cost reductions initiatives which commenced in 2012. We project that the efficiency ratio will slowly decrease to 62% by 2021. We expect return on equity to rise to 9.5% by 2021, which is still below People's 10% cost of equity.