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Investors Bancorp Inc (ISBC) Q2 2019 Earnings Call Transcript

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Investors Bancorp Inc (NASDAQ: ISBC)
Q2 2019 Earnings Call
Jul 25, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Investors Bancorp Second Quarter Earnings Conference Call. [Operator Instructions]

We'll begin this morning's call with the company's standard forward-looking statement disclosure. On this call, representatives of Investors Bancorp, Inc. may make some forward-looking statements with respect to its financial position, results of operations and business. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond Investors Bancorp's control, are difficult to predict and which can cause actual results to materially differ from those expressed or forecast in these forward-looking statements.

In last night's press release, the company included its safe harbor disclosure and refers you to that statement. That document is incorporated into this presentation. For a more complete discussion of the certain risks and uncertainties affecting Investors Bancorp, please see the sections entitled Risk Factors, Management Discussion and Analysis of Financial Conditions and Results of Operations set forth in Investors Bancorp's filings with the SEC.

And now I would like to turn the call over to Kevin Cummings, Chairman and CEO of Investors Bancorp.

Kevin Cummings -- Chairman and Chief Executive Officer

Thank you, Lisa, and good morning. Welcome to the Investors Bancorp second quarter 2019 earnings conference call. The company issued two press releases last night at the close of business, one being the normal quarterly earnings for the second quarter, and the other being the announcement of the signing of a merger agreement to acquire Gold Coast Bancorp in a stock and cash deal valued at $63.6 million.

Gold Coast, with approximately $563 million in assets, is a Long Island based institution with six branches in Nassau and Suffolk counties and one in Brooklyn. This transaction is a 50-50 stock cash deal, and we anticipate buying the stock back post transaction closing. The transaction has minimal dilution to tangible book value and has an earn-back of approximately three years on the crossover method and four years on the static method. We like the franchise as it roughly doubles our presence in the suburban Long Island market. It is our first transaction post second step and post BSA, and the math works well for us as it is a good use of capital with an estimated IRR of 17%.

It creates a stronger presence in Long Island, where we recently expanded our Melville lending team and we believe we can leverage our balance sheet and expand opportunities to the Gold Coast customer base. It is good message to our employees and customers that Investors is on the move again and the math works well for our shareholders as it is a low-risk in-market transaction with significant upside potential in a market with strong demographics.

The company also reported last night its earnings release, net income of $46.6 million or $0.18 per diluted share, for the three months ended June 30 2019 versus $0.18 per diluted share for the three months ended March 31 of this year and $0.20 per diluted share for the quarter ended June 30 2018. For the six months ended June 30 this year, net income totaled $94.8 million or $0.36 per diluted share compared to $115 million or $0.40 per diluted share last year.

In June of this year, as previously reported in our 10-K, we early adopted a new accounting pronouncement which allowed us to reclassify certain securities in the held-to-maturity portfolio to available-for-sale. These securities of approximately $400 million was then sold at an after-tax loss of $4.1 million or $0.01 per share. The proceeds of the sale were reinvested in other debt securities yielding approximately 79 basis points higher than the securities sold.

Simultaneously, the bank modified $350 million of FHLB borrowings, which resulted in an interest expense savings of approximately 45 basis points, net of modification costs. We expect this transaction will yield a tangible book value earn-back of approximately one year. In a difficult interest rate environment, we continue to pull levers to improve our operating results.

Over the last 18 months, we have close 10 branches, and we'll continue to evaluate our operating cost structure. During the quarter, we managed our capital base with buybacks of approximately 3.8 million shares for $44 million at an average cost of $11.49 per share. In addition, at our Board meeting this week, our Board approved our quarterly dividend of $0.11 per share.

Loans grew $253 million for the quarter with business lending growing $154 million. We continue to emphasize this lending at the bank as we evolve into a full-service commercial bank. We recently hired a new banker to head up our cash management services, and have improved our product offerings in this area with enhanced escrow products and improvements to the digital platform at both the consumer and business lines.

With respect to the recent changes relating to rent regulation in New York City, we believe that we have a good understanding of our exposure at this time. While the rent regulation changes will bring some disruption to the industry, we do not see them having a significant impact on our business. Of our $8 billion in multi-family portfolio, approximately half is in New York City. At the back end of our co-ops, free market units and properties subject to the city's tax exemption programs, we estimate approximately $1 billion to $1.5 billion of rent stabilization exposure in this market.

It is important to note that our multi-family portfolio has always been underwritten based on in-place rents without anticipating increases and the LTVs with a weighted -- and the LTVs have a weighted average of less than 50%. In addition, our customers in this space are generally larger substantial owners that are committed to the New York City market for the longer term. As far -- with respect to loan growth, we were not particularly reliant on the New York City market, as we've been successful diversifying the portfolio in terms of geographic locale and property type becoming stronger throughout our overall footprint.

We do not anticipate growth in this loan group and in our residential -- or in our residential portfolio as the yields on these assets are not strong enough based on the incremental cost of deposits to fund these loan types. Our focus continues to be on diversifying our loan portfolio into the business sector, and the acquisition of Gold Coast will help this diversification in the Long Island market.

With respect to credit quality, we continue to have strong metrics with a reserve coverage of 1 % -- 1.05% to loans and a 280% coverage -- 208% coverage to non-accrual loans. I'm happy to report that our largest relationship in the multi-family non-accrual category was paid off yesterday, and will result in a $30 million reduction in our non-accrual totals.

Adjusting for that payoff, commercial non-accrual loans totaled $30 million or 19 basis points of total commercial loans, and a total adjusted non-accrual loan ratio of 37 basis points to total loans. This reduction in non-accrual loans resulted in an allowance coverage ratio to non-accrual loans of approximately 284%.

During the quarter, we had net recoveries of $221,000 for the quarter ended June 30, 2019. With the improvement in our credit quality and modest loan growth, we recorded a reduction to our allowance of $3 million in this quarter. With respect to our credit quality, we believe we are well positioned at this point in the credit quality of credit cycle as a significant portion of our non-performing loans are in the residential portfolio, where we have $51 million, representing 275 loans in non-accrual status for an average loan of $185,000. We take a conservative approach to these credits as evidenced by the historical gains recorded by the bank on the sale of ORE over the past five years.

We believe we are well positioned with our capital position should the economy slow down in the second half of next year. With respect to deposits, we had marginal growth in the quarter and continue to see fierce competition for deposits. Deposit costs increased 8 basis points in the quarter, which impacted our net interest margin by a similar 8 basis points. We are busy adjusting our retail teams and have hired 16 new business development officers to drive deposits into the bank by calling on centers of influences, such as CPAs and attorneys and working with our branch managers to put more feet on the street.

We're also looking at revamping our processes and workflows in the branch system to free up time for more sales and business development activities. Our teams are working hard and our calling efforts are up over the previous year.

With the implementation of the Salesforce CRM system, we are actively monitoring our team's activities and adding resources to improve results. It is a significant focus of the management team and comes up almost daily in almost every meeting at the bank. We are not satisfied with the results, but we will continue to focus on these activities and adding the proper resources to the fight. It is the top priority of the bank at this time, and we will continue to focus on it.

Now I'd like to turn the call over to Sean Burke, our CFO, who will give some additional comments on our operating results.

Sean Burke -- Executive Vice President and Chief Financial Officer

Thank you, Kevin. Our net interest margin was 2.47%, a decline of 8 basis points from prior quarter. Lower prepayment fees and inverted yield curve and increasing deposit costs drove the decline. Our provision for loan losses was negative $3 million for the quarter compared to a provision of $3 million in Q1. The provision was positively impacted by improved credit quality metrics, including the level of non-accrual loans and net recoveries coupled with modest loan growth, which was partially offset by an increase of multi-family reserves related to changes to New York City's rent regulation laws.

Our allowance remains among the strongest in our peer group. At June 30, our allowance in non-accrual loan ratio stood at 208% and our allowance as a percent of loans was 1.05%. Non-interest income excluding the loss related to our securities repositioning totaled $12.7 million for the quarter, an increase of $1.5 million from the first quarter. The increase was attributable primarily to a gain on a branch sales leaseback transaction and increased mortgage banking activity and deposit related fees.

Non-interest expenses totaled $103.8 million, which was relatively flat compared with the prior quarter. Our effective tax rate was 28.6%, which was also consistent with the prior quarter. Our asset quality and capital ratios remained strong. At June 30, our non-performing asset ratio stood at 48 basis points, an improvement from 52 basis points in the previous quarter.

Now, I'd like to turn it back over to Kevin for some concluding remarks.

Kevin Cummings -- Chairman and Chief Executive Officer

Okay. Thanks, Sean. The operating environment continues to be a challenge for banks like Investors with a liability sensitive balance sheet. The potential for a rate reduction next week by the Fed will help, but we need to accelerate our transition to a full service commercial bank and improve our lower cost funding of non-interest bearing deposits on both the consumer and commercial front. The acquisition of Gold Coast improves our presence in Long Island and gives the team a shot in the arm creating momentum for the bank.

We've been on the defensive in the last few years with our BSA issue, and this acquisition is a great first step moving forward. We're on a mission at the bank to create a special bank that makes a difference, first and foremost, with its employees and customers and the communities that we serve. We are leaders in the communities. We serve our communities and strive to make an impact. The changes we are implementing will take some time, but this time -- but this team is committed to our strategic plan in creating a stronger commercial bank serving the New York, New Jersey metropolitan area. We have a plan, we have a mission, and it's time to execute on that plan.

We thank you for your support. And now I'd like to turn the call or open to -- for some questions. Thank you.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Mark Fitzgibbon with Sandler O'Neill & Partners. Please go ahead. Mark, your line is open.

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

Hello. Hey, guys. Good morning.

Kevin Cummings -- Chairman and Chief Executive Officer

Good morning, Mark.

Sean Burke -- Executive Vice President and Chief Financial Officer

Good morning.

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

First, a question related to the deal. Is it likely that we'll see you guys doing more of these kinds of deals in an effort to bolster deposits? And could you give us a sense for how -- in terms of deployment of capital, how deals and buybacks rank in terms of priorities?

Domenick A. Cama -- President and Chief Operating Officer

Hey, Mark. Good morning. This is Domenick. The -- as we reported over the years since we've taken the second step, capital deployment has been important to us and share repurchases has been a major component of that strategy. We continue to believe that share repurchases, especially at this valuation play an important part in our capital strategy.

In terms of, looking at this particular deal, I think we've been vocal about our inability to do anything that was highly priced. We're very cognizant of tangible book value dilution. And so this was a transaction that was priced right that strategically fit within the realm about where we want it to be. Loan to deposit ratio metrics were good, credit quality was good. As I said, geography was good.

And we just thought this was another use of capital in addition to buying back strategy. So as we look out to the future, obviously it's hard to say what we may do, but we are going to preserve tangible book value. We're going to make sure the metrics are correct on anything we do, and buybacks will always be a part of that strategy going forward.

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

Okay.

Kevin Cummings -- Chairman and Chief Executive Officer

And then Mark, this is Kevin. I think it fits in well with our strategy. It's not an either/or. We're going to continue to use both and do everything prudently.

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

Okay.

Sean Burke -- Executive Vice President and Chief Financial Officer

And I'm going to chime in. It's Sean. The only -- the last comment I'd make here, Mark, is our bar is quite high on the M&A side. We see many opportunities and have passed on most of them. So we are cognizant of where we trade and ultimately what we look at has to fit our profile, but also has to add something strategically, and as Kevin pointed out, they are not mutually exclusive.

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

Okay. And then, Sean, can you help us think about expenses for the back half of the year? Is that $103.8 million a good run rate?

Sean Burke -- Executive Vice President and Chief Financial Officer

Our guidance remains $420 million, Mark, for 2019. But we are hoping to come inside of that, but we're going to stick with the $420 million for now, but we like the run rate and it bodes well for the second half of the year.

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

And I know head count has been trending down for a little while, but it looked like it bounced up about 40 FTEs this quarter. And I know, Kevin, you had mentioned, I think 16 new business development people. Where is the rest of the growth coming from?

Domenick A. Cama -- President and Chief Operating Officer

We have some summer interns, Mark, that we hire, and they will be out of here, I guess, by the end of August, when they all go back to school. So the number, the real number is the one Kevin mentioned and that's those 16 new business development officers.

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

Okay. And could you share any updated guidance with us with respect to the margin assuming and what your assumptions are in rate?

Sean Burke -- Executive Vice President and Chief Financial Officer

We expect margin to remain relatively stable throughout the rest of 2019, Mark, that's based on the assumption that we will get a July rate-cut.

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

Thank you.

Kevin Cummings -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Austin Nicholas with Stephens Inc. Please go ahead.

Austin Nicholas -- Stephens Inc -- Analyst

Hey, guys, good morning.

Sean Burke -- Executive Vice President and Chief Financial Officer

Good morning, Nicholas.

Austin Nicholas -- Stephens Inc -- Analyst

So I appreciate the comment on the stable margin, which seems to assume just one rate cut in July. If we were to get a rate cut in September and then another one in December, can you maybe talk about -- could we see that the margin inflect kind of it in the fourth quarter under that scenario.

Kevin Cummings -- Chairman and Chief Executive Officer

Yes, you would see that Austin and that would be -- those particular cuts, the one in September and December if we do in fact get them. They will be even more impactful for the following year when we get the full year impact of the cuts.

Austin Nicholas -- Stephens Inc -- Analyst

Understood. And then, can you maybe just talk a little bit about -- I know we've talked about this before, but the fixed to floating swap that you have on and it remind us when that runs off and what the kind of impact would be when that runs off assuming we have a couple of rate hikes -- a couple of rate cuts here?

Sean Burke -- Executive Vice President and Chief Financial Officer

So, we have approximately $1 billion that we have swapped to floating rates, but that swap comes off or end in February of 2020. And so then we go back to having $1 billion that turns back to fixed. So that would be a benefit when that swap ends in February of 2020.

Austin Nicholas -- Stephens Inc -- Analyst

Understood. That's helpful. And then just maybe just on M&A, can you -- on the acquisition announced today, congrats on that. Can you maybe just talk about what assumptions you guys have on in terms of growth for that kind of -- that part of the bank? I know, it's small, but is there any assumptions you have on the growth in terms of loan growth?

Sean Burke -- Executive Vice President and Chief Financial Officer

Yes. We're hopeful that the acquisition in Gold Coast can deliver more growth than we modeled in, but our expectation was approximately about an 8% growth rate.

Austin Nicholas -- Stephens Inc -- Analyst

Okay. That's helpful. And then maybe just on the multi-family portfolio, can you maybe -- and I know you've talked about well protected on credit, low LTVs, that all makes sense to me. And while I understand that, is there -- can you maybe speak to, if there is any risk that from a risk weighting perspective, is there any risk that the risk weightings could move up in any of those certain types of those loans where valuations may have gotten or may get hit. Is there any risk to that, and have you modeled anything, I mean that you could share with us?

Sean Burke -- Executive Vice President and Chief Financial Officer

Our risk weighting with respect to multi-family assets is pretty conservative relative to what others with large portfolios, how they risk weighted. So there's less impact to us, but Austin, we don't see a major impact there, and the rationale for that is the LTVs which would likely be impacted here or could be impacted, they are measured for regulatory purposes. The rule -- the LTV is measured at origination.

Austin Nicholas -- Stephens Inc -- Analyst

Sure. Okay, that's helpful. And then I guess --

Sean Burke -- Executive Vice President and Chief Financial Officer

And just to add to that a little bit, Austin. During our underwriting the last couple of years, we had adjusted and stressed in the underwriting process to 4.5% and 5% cap rate. So it's not like we were -- when the rates, especially in the Brooklyn market were coming in, in that 4 and sub-4. Our underwriting -- we adjusted the underwriting for a 4.5% and 5% cap rate over that period of time. So that bodes us well going into this type of situation should cap rates change, we feel -- we've been conservative in the underwriting.

Austin Nicholas -- Stephens Inc -- Analyst

Okay. That's helpful. And then some of your peers have broken down their portfolio in the similar way, as you have, but they've also made a kind of they've ring-fenced a small portion of loans that they considered or could be considered value add or rather where the borrower has a strategy or had a strategy to meaningfully increase stabilized rents to market rents. Have you done any analysis on that $1 billion to $1.5 billion portfolio of what maybe is a little bit more exposed on that -- from that perspective?

Sean Burke -- Executive Vice President and Chief Financial Officer

We haven't, Austin, and certainly we look at the strategies as the loans come in. But as Kevin mentioned, one of the ways that we moderate that risk is by using a low -- a higher cap rate which essentially gives less dollars to the borrower and which also then translates into more equity. And then the second item in our underwriting that helps to protect us is we qualify the loans to a 10-year borrowing rate. So in the event -- so even if a borrower is going to borrow for a five-year term. We have him -- PNI has to qualify at a 10-year rate.

So those are the two ways that we tried to protect that, and we try to protect the credit, but we haven't really dug down deep into. At this point, understanding who is buying it just simply to decimate the building and raise all the rents. We haven't done that.

Austin Nicholas -- Stephens Inc -- Analyst

Okay. That makes sense. And then maybe just one last one on loan growth. I know original guide was kind of in that 6% to 7% range, but maybe just as we look out here, can you give us some thoughts on how you think that number could look over the next couple of quarters. And then when you layer in this new acquisition, what maybe -- what that, what opportunities that could give you? I know, you kind of mentioned that your assumptions on that.

Sean Burke -- Executive Vice President and Chief Financial Officer

Yes. Austin, the pipeline for CRE is actually down at this point. It's down by about 50%, and so we've seen our overall CRE pipeline come down to about $450 million, which we believe is going to have an impact on growth going forward. We still have a healthy pipeline in our C&I portfolio. That's the area that we remain focused on, and I'm not sure how will bode for growth, but my feeling is that and we haven't put pencil to paper at this point, but just going through these numbers over the last week or so, gives me pause for hitting our $1.4 billion in growth for 2019.

That's notwithstanding the addition of the portfolio that will come from Gold Coast, which is primarily CRE. So that may add to it. That will help us get to our number, but I don't really look at it that way, I look at what current production is right now. And it looks like on the CRE front, we're down and that's truthfully is by design, just given the shape of the yield curve and just the risk in the market. We just believe it's a prudent thing to do at this point to limit growth in those areas.

Austin Nicholas -- Stephens Inc -- Analyst

Okay, great. And then maybe just one last one. I know you have the online bank that you started a few quarters ago. I think the goal was to maybe grow at 4250 million in deposits. Any comments on how that's going, if you've been able to lower rates there a bit recently? And then maybe just any goals to grow beyond that?

Sean Burke -- Executive Vice President and Chief Financial Officer

Yes. As of second quarter, we had about $300 million in the online accounts. And it's been doing well. If we look at it as an alternative to raising rates here in our market. At this point, we've been monitoring the rates pretty closely and we feel this is not the right time to lower the rates. Although, we have seen some competitors lower rates, but there are a number of competitors who are at the same level that we are at.

We are looking at the impending Fed rate cut as perhaps an opportunity to lower our rates and hopefully some of our competitors will do the same thing. We continue to like the vehicle. We continue to work on it. We have a team that specifically dedicated to monitoring the website and the online bank. And at this point, we've grown it above $300 million, and we're going to continue to watch that. But as I said, we're going to use it as an alternative to increasing all of our rates throughout the rest of the bank and use this as a alternative funding tool.

Austin Nicholas -- Stephens Inc -- Analyst

Understood. Thanks for taking my questions this morning.

Sean Burke -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Our next question comes from Jared Shaw with Wells Fargo Securities. Please go ahead.

Jared Shaw -- Wells Fargo Securities -- Analyst

Hi. Good morning.

Sean Burke -- Executive Vice President and Chief Financial Officer

Hi, Jared.

Kevin Cummings -- Chairman and Chief Executive Officer

Good morning.

Jared Shaw -- Wells Fargo Securities -- Analyst

I guess maybe on the credit, Kevin, you said that there was a recovery post the end of the quarter. Had any of that already been charged off and should we expect to see any type of additional provision release as a result of that?

Kevin Cummings -- Chairman and Chief Executive Officer

We haven't looked really that far ahead yet. It's still early, but there is a small recovery there, nothing that would really impact our allowance. But I would say that our asset quality ratios continue to be strong and they are improving and to the extent that they do, we wouldn't anticipate if it stays where it is. We wouldn't anticipate large provisions for the remainder of the year.

Jared Shaw -- Wells Fargo Securities -- Analyst

Okay. That's helpful. Thanks. And then on the C&I growth, it was a good quarter for growth. Can you give a little detail on where you're seeing that? And when we're looking at that sort of line items, specifically, is that sustainable with the hires that you've been doing there?

Domenick A. Cama -- President and Chief Operating Officer

Yes, we think it is. We just -- I just met with the C&I folks this morning as a matter of fact, and we are just slightly below our budgeted number for the year, but we feel pretty good that we'll be able to hit our number. Most of the business that we did was in our general market area. We did some lending in New York City, and in some of the boroughs. And so it's starting to reap the benefit of the additional hires and the focus on the business. It's too early to tell as to how this will pan out for the rest of the year, but so far, so good.

Kevin Cummings -- Chairman and Chief Executive Officer

And a good part of their business comes in the second half of the year, it's a seasonal business. First quarter is usually the slowest and they gain momentum in the second. We expect to have a stronger third and fourth quarter.

Jared Shaw -- Wells Fargo Securities -- Analyst

Okay, that's helpful. Thanks. And then on M&A with this deal, I'm assuming that that you were discussing with the regulators along the way, and that you're not anticipating any issues there. Is that probably a good way to look at it?

Domenick A. Cama -- President and Chief Operating Officer

Yes, that's fair. Our BSA order was lifted in December of 2018, and yes, in fact, we have been discussing this deal with all of our regulators since it came to the table.

Jared Shaw -- Wells Fargo Securities -- Analyst

And then once this is closed, or I guess, I understand that you're looking at M&A, it is very opportunistic and it has to meet specific criteria. But could we see another deal before this is closed or before this is integrated, or I guess, when would you start to reevaluate opportunities out there?

Domenick A. Cama -- President and Chief Operating Officer

You know, Jared, I think Sean said it earlier that there are deals that we are looking at all the time. And at this point, it's difficult to say whether we are going to do -- make another announcement before. I would say it's highly unlikely. We haven't done a transaction in quite some time. We have a lot of new members of the management, the operations and technology team. And so this deal works from a number of perspective, it is not only all of the strategic perspectives that I cited earlier, but also one in which our teams can convert and handle within a reasonable amount of time. So I'm hesitant to want to do something that's going to put some undue burden on the team. I want to get through this one first, since this is the first one we've done in quite some time.

Jared Shaw -- Wells Fargo Securities -- Analyst

Great. Thanks for the color.

Operator

Our next question comes from Brody Preston with Piper Jaffray. Please go ahead.

Brody Preston -- Piper Jaffray -- Analyst

Good morning, everyone. How are you?

Kevin Cummings -- Chairman and Chief Executive Officer

Great. Thank you.

Brody Preston -- Piper Jaffray -- Analyst

Yes, I just have a couple of questions on the deal. I just want to know what the expected cost saves and intangibles were as a result?

Domenick A. Cama -- President and Chief Operating Officer

The cost saves were 45%. I think that's what we modeled. On the intangibles, what -- $16 million or I think its $14 million of goodwill and approximately $6 million of core deposit intangibles.

Brody Preston -- Piper Jaffray -- Analyst

Okay, great. Thank you. And I'm assuming that the cost save number does not include any branch cuts, just given the lack of overlap between the footprints.

Domenick A. Cama -- President and Chief Operating Officer

That's correct.

Brody Preston -- Piper Jaffray -- Analyst

Okay, great. And then with regard to their underwriting specifically surrounding multi-family, do they have a -- do they have a, I guess a relatively larger rent regulated book and the underwriting standards that they have similar to yours?

Domenick A. Cama -- President and Chief Operating Officer

Yes, they are pretty clean bank, but Brody, multifamily makes up a very small component of their loan book. I think it's probably 13% or 14%, if I'm not mistaken. So it's very small.

Brody Preston -- Piper Jaffray -- Analyst

Okay, great. And then in terms of the accretion from the deal, will there be any material impact to the margin, as a result of accretion moving forward once the deal is closed?

Domenick A. Cama -- President and Chief Operating Officer

Probably flat, right.

Sean Burke -- Executive Vice President and Chief Financial Officer

Yeah, it's a little too small Brody really to move the margin needle for us.

Brody Preston -- Piper Jaffray -- Analyst

All right. And then one last one, not on the deal, but just in terms of the pricing competition that you're seeing, specifically in C&I, excuse me, with LIBOR down as much as it is at the end of the first quarter, how -- I guess, how competitive conditions trended? Are there any industries or segments where you're seeing more or less competition?

Domenick A. Cama -- President and Chief Operating Officer

We -- I would say first let me just say that the market is competitive and everyone is out there chasing C&I deals. Many of our deals get priced to treasuries actually, you know a large portion of them get priced treasuries, and to the extent that LIBOR has fallen and we have a deal that we prices to LIBOR or spreads to LIBOR, we do have RAROC hurdles that we have to hit. So when a lender brings a deal in, we run it to a model that tells us what the return on risk-adjusted capital will be. So even with the reduction in LIBOR, we will adjust the spread to ensure that we are hitting our RAROC levels.

Brody Preston -- Piper Jaffray -- Analyst

Okay, great. Are there any lending segments that are more or less competitive than any others?

Domenick A. Cama -- President and Chief Operating Officer

I would say not -- I would say that most segments are competitive. We are active in the healthcare segment and that remains competitive. Within the New York City market, we've done some high quality hospitality. That also remains competitive. We were bidding against a number of other banks in those particular deals, but I can't put my finger on any one segment of the market that is less competitive than the others.

Brody Preston -- Piper Jaffray -- Analyst

Okay, great. I guess one last one for me. Just a follow-up, is there any segment of the healthcare industry in particular that you're focused on with regard to C&I lending ?

Kevin Cummings -- Chairman and Chief Executive Officer

No, you know, we run the gamut between hospitals, doctor practices, dentist office -- nursing home facilities. So there is not one in particular that we're focused on, we really run the gamut there.

Brody Preston -- Piper Jaffray -- Analyst

All right. Great. Thank you very much everyone.

Laurie Hunsicker -- Compass Point -- Analyst

Okay, thank you.

Operator

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

Laurie Hunsicker -- Compass Point -- Analyst

Yeah, hi, good morning. Just wondered if, Kevin, you could share with us as you all look out on the acquisition front, and I appreciate that you're going slow, how do you think about a bank that has a very concentrated multi-family book or potential concentration and rent regulation. Is that a bank that you would just step away from interested or how are you approaching that?

Kevin Cummings -- Chairman and Chief Executive Officer

Well, certainly in our strategic plan, we want to diversify our portfolio and move more into the business lending. The multi-family asset class has served us well in our transition from a thrift to a more bank like, and it served us very well, but too much of a good thing. It is not a good thing. So certainly we love the asset class. It's a very profitable credit metrics. There is some uncertainty with the change in rent regulation. So we're being very mindful of that.

When we look at whether growing the portfolio or looking at potential acquisition targets. There is a low cost of entry into the business. All you have to do is get to get to know some brokers and you know you could lever it up pretty quickly, but in today's market with our funding costs, it's an area where we just want to maintain it or maybe shrinking a little bit to fund the business lending opportunities in the marketplace. And also there is a greater opportunity for deposit gathering when we deal with the C&I customers.

Laurie Hunsicker -- Compass Point -- Analyst

Okay. That makes sense. Can you remind us where you all would go geographically? How far outside of your footprint, you would look ?

Kevin Cummings -- Chairman and Chief Executive Officer

Yes, we, when you say outside our footprint, I mean we've been vocal, Laurie, about where we would go Nassau and Suffolk County has been one of the areas that we've targeted. And we've also targeted Center City, Philadelphia. I think we've mentioned in a number of occasions that the Philadelphia market we believe is attractive. We have a number of branches in the suburban areas of Philadelphia on the New Jersey side, and we think by looking at potential transactions in that Center City, Philadelphia market could work to enhance the franchise. So at this point, it's -- Long Island and Philadelphia is on the extreme of where we would go right now as we speak.

Laurie Hunsicker -- Compass Point -- Analyst

Great, thanks. And then certainly Gold Coast was small. How much smaller would you go, and then you remind us potentially how much larger you would also consider? What's the band there?

Domenick A. Cama -- President and Chief Operating Officer

Well, I don't think we would go much smaller than $500 million in assets. It's just, you know, especially, just given the work that's required to get a transaction like this one done. In terms of a big transaction, Laurie, it's also a difficult question to answer. And all I would say to that is anything that we would look at would have to fit within the confines of the deal of the metrics that we believe are suitable for us in terms of tangible book value dilution and earn back.

Laurie Hunsicker -- Compass Point -- Analyst

Okay, great. And so, I mean, theoretically, you know, if there was a $5 billion, $6 billion, $7 billion, $8 billion, 10 billion deal, would that be something you would look at if it fit within your tangible book and earn back parameters, or is that too big to digest? How do you think about that?

Sean Burke -- Executive Vice President and Chief Financial Officer

I mean, realistically, Laurie, this is Sean, just based on where we trade, we're very mindful of that. And so anything that size is likely to trade at a premium to where we are and would create a situation where may not be ideal or meet our return profile and our expectations for tangible book value dilution and earn back.

Laurie Hunsicker -- Compass Point -- Analyst

Right. Okay. Thank you for that. Just last quick question, muni deposits, can you remind us how much they are and where you guys currently are with cost of those? Thanks.

Sean Burke -- Executive Vice President and Chief Financial Officer

We have about $3.6 billion in muni deposits here in New Jersey.

Laurie Hunsicker -- Compass Point -- Analyst

And what are those costing?

Sean Burke -- Executive Vice President and Chief Financial Officer

Weighted average cost is just a touch above 2%.

Laurie Hunsicker -- Compass Point -- Analyst

Okay, great. Thanks. I'll leave it there. Thank you.

Operator

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

Collyn Gilbert -- KBW -- Analyst

Thanks. Good morning, guys.

Kevin Cummings -- Chairman and Chief Executive Officer

Good morning, Gilbert.

Collyn Gilbert -- KBW -- Analyst

I hopped on way late, I apologize if you guys covered this already, but just a couple questions. Did you -- can you just confirm what the outstanding balances for your New York City rent regulated multi-family loans?

Sean Burke -- Executive Vice President and Chief Financial Officer

Yes. Kevin, mentioned it earlier, somewhere between $1 billion and $1.5 billion.

Collyn Gilbert -- KBW -- Analyst

Okay. And again if you covered it, I can just read the transcript, but did you cover what your growth outlook was within that portfolio, and within multi-family in general?

Domenick A. Cama -- President and Chief Operating Officer

Yes, we've been vocal about the fact that we don't see growth potential coming from multi-family as matter of fact. If I break down the $1.4 billion that we projected for the year 2019 in our original strategic plan, only about $100 million was being attributed to multi-family. Truthfully, as I look at the shape of the yield curve and where we are in terms of pipeline, I'm not even sure that we'll be able to achieve that in 2019.

Collyn Gilbert -- KBW -- Analyst

Okay. That's helpful. And then just on the NIM, I'm sure you covered it, a lot of what I would ask, but you're -- can you just offer a little bit of guidance or thoughts on where you think your NIM would go in 2020 if we saw three rate -- rate cuts?

Sean Burke -- Executive Vice President and Chief Financial Officer

That's really counting -- that's counting the chickens before they hatch.

Collyn Gilbert -- KBW -- Analyst

I don't know, yes.

Sean Burke -- Executive Vice President and Chief Financial Officer

We're just focused on July, but obviously it would help --

Kevin Cummings -- Chairman and Chief Executive Officer

50 basis points next week.

Collyn Gilbert -- KBW -- Analyst

I don't know

Sean Burke -- Executive Vice President and Chief Financial Officer

We're liability sensitive, Collyn, and in every rate cut is beneficial to us. We did -- we did cover some of the guidance with respect to the remainder of the year earlier in the call, when we said, based on our July cut. We're expecting a stable margin for 2019.

Collyn Gilbert -- KBW -- Analyst

Okay. So did you quantify with every 25 basis point cut maybe what would happen with the margin. I know you just said staying with the first one, but I just didn't know about that.

Sean Burke -- Executive Vice President and Chief Financial Officer

We did not, and it will change because there is different dynamics at play here because we talked about, we had an asset swap on that rolls off in February of 2020. So obviously that will have an impact. So when you look at it in totality, the balance sheet, every 25 basis point cut helps, but it helps to different degrees and it probably get better the further up that we go.

Collyn Gilbert -- KBW -- Analyst

Okay. All right. Thank you for that. And then just finally, and again, sorry if you covered it, you can just say you did and I'll go back to the transcript on the buyback and what were your appetite is, maybe what caused you guys to buy back less spend. I guess I would have thought probably maybe less than maybe what the majority of the market would have thought, but just did you already cover that?

Sean Burke -- Executive Vice President and Chief Financial Officer

No, again, Collyn, as far as the buyback is concerned, I mean we believe in the buyback is an efficient use of capital. We have bought back over $1 billion, almost $1,200 million in stock over the last five years since we took the second step. So as we look out, we continue to use a strategy of buying more stock back when the price falls and less stock when the price rises.

In terms of just buying less and direct to your question, buying less for the quarter. That was really more in line with just trying to balance our tangible common equity ratios, our CRE concentration levels and ensuring that we do maintain enough capital for continued growth over the next 12 to 18 months. So I'm not saying that we're not buying back our stock. As a matter of fact, I'm saying the opposite, we will continue to buy it back. The degree obviously will vary based on the price changes that occur in the stock over the future.

Collyn Gilbert -- KBW -- Analyst

Okay. Okay, very good. I'll leave it there. Thanks guys.

Sean Burke -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

This concludes our question-and-answer session. I would now like to turn the conference back over to management for any closing remarks.

Sean Burke -- Executive Vice President and Chief Financial Officer

Okay. Thank you, Lisa. I'd like to thank you for participating on the call today. We're very excited about the Gold Coast potential and in the acquisition in the market that they operate in. That's Suffolk-Nasser market is very exciting to us. I'd also like to say that buybacks is still an integral part of our capital management plan along with dividends, along with organic growth and along with smart acquisitions that meet the requirements of tangible book value dilution, and those metrics. We are on the game plan to move this company forward. We're excited and I wish everyone a good remainder of the summer, and I look forward to seeing you out on the road, and have a good day. Okay. So thank you very much. And appreciate your participation on the call.

Operator

[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

Kevin Cummings -- Chairman and Chief Executive Officer

Sean Burke -- Executive Vice President and Chief Financial Officer

Domenick A. Cama -- President and Chief Operating Officer

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

Austin Nicholas -- Stephens Inc -- Analyst

Jared Shaw -- Wells Fargo Securities -- Analyst

Brody Preston -- Piper Jaffray -- Analyst

Laurie Hunsicker -- Compass Point -- Analyst

Collyn Gilbert -- KBW -- Analyst

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