First Financial Bancorp (FFBC) 2014 Q1 法說會逐字稿

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  • Operator

  • Good morning. And welcome to the First Financial Bancorp First Quarter 2014 Earnings Conference Call and Webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the * key followed by zero.

  • After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press *, then 1, on your telephone keypad. To withdraw your question, please press *, then 2.

  • Please note this event is being recorded. I would now like to turn the conference over to Ken Lovik, Senior Vice President Investor Relations and Corporate Development. Please go ahead.

  • Ken Lovik - SVP, IR and Corporate Development

  • Thank you, Nikki. Good morning, everyone. And thank you for joining us on today's conference call to discuss First Financial Bancorp's First Quarter 2014 financial results.

  • Discussing our operating and financial results today will be Claude Davis, President and Chief Executive Officer; and Tony Stollings, Executive Vice President and Chief Financial Officer.

  • Before we get started, I would like to mention that both the press release we issued yesterday announcing our financial results for the quarter, and the accompanying supplemental presentation are available on our website, at www.BankAtFirst.com, under the Investor Relations section.

  • Please refer to the forward-looking statement disclosure contained in the First Quarter 2014 Earnings Release, as well as our SEC filings, for a full discussion of the Company's risk factors.

  • The information we will provide today is accurate as of March 31st, 2014. And we will not be updating any forward-looking statements to reflect facts or circumstances after this call.

  • I will now turn it over to Claude Davis.

  • Claude Davis - CEO

  • Thanks, Ken. And thanks everyone for joining the call, today.

  • For the quarter, we reported net income of $15.1 million, or $0.26 per diluted share.

  • Our results for the quarter were impacted by non-operating items, related to the execution of our efficiency initiatives, acquisition-related expenses, and legal-settlement expenses, which reduced reported earnings per share by $0.02.

  • On an adjusted basis, return on assets is 1.02%, and return on tangible common equity was 11.13%.

  • Additionally, as Tony will touch on in his comments, our results were impacted by seasonal and weather-related events affecting certain non-interest income and expense items.

  • As many of you have probably seen, we announced our third transaction in the Columbus Ohio market last night, with the signing of a definitive agreement to acquire Guernsey Bancorp, the parent company of the Guernsey Bank.

  • Guernsey's a $123 million asset institution, with $74.5 million in loans and $100.5 million in deposits. It has three locations in the market, including its headquarters in Worthington, and banking centers in Upper Arlington and Westerville. All extremely attractive communities in the metropolitan Columbus area.

  • Bob Patrella, the CEO, is the sole shareholder. And his team has built a successful franchise based on providing an exceptional level of client service, which we hope to enhance with our expanded product set and resources.

  • With its strong consumer-banking business, Guernsey is a perfect strategic complement to the commercial lending and asset-generation capabilities of the First Bexley Bank and Insight Bank. Taken together, these acquisitions positioned First Financial as one of the larger community banks serving the dynamic Columbus and Central Ohio area, and provides a strong platform to capitalize on the potential of one of the Midwest's higher-growth markets.

  • We are also very pleased with our recent expansion into Fort Wayne. Our new commercial and mortgage teams, which came onboard at the beginning of the year, are making excellent progress -- establishing the First Financial brand in this important Indiana market.

  • The commercial team, leveraging a wider product set and larger balance sheet, has been active as originations and commitments have exceeded our forecasts thus far.

  • The mortgage team, after dealing with the effects of a long winter -- on top of industry-wide volume decline -- is beginning to build a strong solid pipeline. It's on-track with our expectations heading into the second quarter.

  • From an organic-growth perspective, the momentum built up in the fourth quarter continued, as production remind strong and uncovered loan growth outpaced the decline in covered loan balances by over $60 million during the quarter.

  • Periods of uncovered loan balances increased for the eighth consecutive quarter. We were up almost $109 million; or 13%, on an annualized basis -- compared to year-end.

  • Leading the way with strong performance in CNI and owner-occupied CRU lending, franchised finance -- as well as increased originations from our investments CRU team.

  • While the pace of growth in our local economies remains moderate, business confidence among our middle-market and small-business clients continues to rise. With a comprehensive suite of credit products, our relationship managers are actively calling on clients and new prospects to produce increased-lending opportunities.

  • At the end of March, our commercial pipeline was up over 17%, compared to year-end. We remain optimistic regarding our ability to generate solid organic growth.

  • Asset-quality continued to improve as well, during the quarter. Net charge-offs continued to trend lower, falling to 23 bps of average loan-balance for the quarter. Contributing to the decline to the provision for loan losses.

  • Total non-performing assets decreased $11 million, or 15%, during the quarter. Driven primarily by a decline in OREO balances. The balance of non-performing assets declined to its lowest level since the second quarter of 2009; equaling 95 bps of total assets.

  • Excluding accruing TDRs from total NPAs, the ratio dropped to 74 bps.

  • Additionally, our allowance-coverage ratio in non-accrual loans improved approximately 122%, from 117% for the prior quarter.

  • In conjunction with the earnings release, we also announced our quarterly dividend at $0.15 per share, to be paid July 01. This translates into a 3.7% yield, based on yesterday's closing price. It remains on the upper end, compared to peer institutions.

  • During the quarter, we repurchased 40,000 shares of common stock, at an average price of $17.32. As we mentioned on last quarter's call, we've suspended additional repurchases during the first quarter, in connection with the pending regulatory applications related to the acquisitions.

  • In light of our announced acquisition of Guernsey, which includes cash consideration of $13.5 million and no stock to be issued, and a more-active M&A environment overall, we will be out of the market again in the second quarter.

  • As we have mentioned in the past, capital-return decisions are determined quarterly by the board of directors in the context of our overall capital-management strategies. Including considerations related to organic and acquisition-related growth initiatives.

  • Capital levels continue to remain strong. Tangible book value per share increased $0.14 to $10.24 per share. And we ended the quarter with a tangible common-equity ratio of 9.23. A Tier-1 ratio of 14.42. And a total capital ratio of 15.67%.

  • Adjusting for the pending transactions, and the estimated impact of Basel III, we still have sufficient capital to support further organic growth and acquisitions.

  • We are through the bulk of the integration work related to First Bexley and Insight. With the closing for both still on track for the second quarter, and anticipate that our activities related to Guernsey will be manageable from a time and resource perspective.

  • We remain interested in exploring further strategic opportunities and have the capacity and appetite to manage additional acquisitions that meet our strategic, operational and financial criteria.

  • To wrap up my comments. Excluding the impact of seasonal and weather-related items, we felt good about our operating performance for the quarter, and believe we are well-positioned to carry our growth-momentum into the second quarter and beyond.

  • We capitalized on another opportunity to strength our entry into the high-growth Columbus market, further-enhancing our ability to produce sustainable loan-deposit and earnings growth once the acquisitions are closed and part of First Financial.

  • Finally, our strong capital levels still allow sufficient room to pursue additional strategic opportunities. Those economic and regulatory factors continue to place increasing burdens on smaller institutions.

  • We believe that our community banking model, emphasizing client-service and local decision-making -- combined with the resources, product-set and capital-base of a larger bank -- offer an excellent alternative for smaller institutions looking to explore a partnership that benefits their communities, clients, employees and shareholders.

  • I'll now turn the call over to Tony for further discussion on our financial performance.

  • Anthony Stollings - EVP, CFO

  • Thank you, Claude.

  • Our first-quarter adjusted pretax, pre-provision earnings of $23.6 million -- which excludes certain items related to covered-loan activity, as well as other significant items -- decreased $3.8 million or 14%, from the fourth quarter. Primarily due to the impact from typical first-quarter seasonality, lower mortgage gains and the unusually harsh weather conditions experienced during the first quarter.

  • As shown on Slides 3 and 4 of the supplement, pre-tax, pre-provision earnings declined to 1.50% of average assets on an annualized basis, from 1.75% in the fourth quarter.

  • Excluding the seasonal- and weather-related items, our operating performance remained strong and was consistent with the prior quarter.

  • Total interest income decreased $900,000 -- or 1.4% -- compared to the linked quarter, as lower-interest income on loans was partially offset by higher-interest income from investment securities, and the lower amortization of the FDIC indemnification asset related to covered loans.

  • The first quarter decline in interest-income on loans is primarily the result of a $56 million or 11% decline in the average balance of covered loans. As well as the decline in loan-prepayments.

  • The impact of these declines was partially offset by another strong quarter of loan production, as we saw an $85 million or 2.5% increase in the average balance of uncovered loans during the period.

  • Despite the strong loan growth in recent periods, interest income continues to be impacted by the prolonged low-interest-rate environment. As the yield earned on the uncovered loan portfolio declined 11 bps during the first quarter -- excluding the fourth-quarter 2013 impact related to loans that returned to accrual status.

  • Further evidence in this challenging environment -- the average yield earned on new-loan originations was approximately 100 bps lower than the average yield on loans that paid off during the first quarter; which is a little lighter than we've seen in recent quarters.

  • Interest-income from investment-securities, however, increased $1.3 million or 13% during the quarter. Helping to offset the decline in interest-income on loans.

  • Higher-income from invested-securities was the result of $153 million of increase in average balances -- compared to the linked quarter, and a 14 bps increase in the portfolio yield. Driven by higher investment rates and continued stabilization in premium-amortization during the period.

  • We remain sensitive to the duration of the overall portfolio, and continue to manage it to approximately 4 years in length.

  • Total interest expense increased approximately $100,000, compared to the linked quarter. As the cost of funds related to interest-bearing deposits -- primarily time deposits -- increased 1 bps during the period.

  • The Company remains focused on growing core deposit relationships and managing our funding base.

  • Net-interest margins declined 8 bps to 3.82%, from 3.90% in the linked quarter. However, excluding approximately $600,000 of interest income related to loans that returned to accrual status during the fourth quarter of 2013, net-interest margin declined approximately 4 bps during the first quarter.

  • The margins will continue to be influenced by the quarterly reestimation of estimated expected cash flows on covenant loans in the indemnification assets. As well as the resolution of the prepayment activity in that portfolio.

  • As was previously mentioned, the negative impacts from the prolonged low-interest-rate environment on the uncovered portfolio continues, since higher-yielding loans pay off and are replaced by lower-yielding new-originations. Even though the margins were a little stronger than we anticipated this quarter, it remains difficult to predict what the balance of 2014 will look like.

  • We continue to believe, however, that the adjusted mid-single-digit declines observed this quarter remains a reasonable expectation for the second quarter of 2014.

  • Moving now to non-interest income. Excluding reimbursements due from the FDIC, other covered-loan activity and other items as noted in Table 1 of the earnings release --

  • Non-interest-income declined $1.2 million from the linked quarter, to $13.6 million for the first quarter of 2014. The decrease was driven by seasonal declines and service charges on deposit accountants and bankcard income. As well as lower net gains on sales of residential mortgages, rental income from ORA properties and valuation-related adjustments to the client-derivatives portfolio. These declines were partially offset by higher trust and wealth-management fees.

  • The seasonal decline we typically see in certain fee-income items was even more evident in the first quarter, as our transaction volumes were down more than usual due to the harsh weather experienced across our footprint.

  • While bankcard volumes dipped mid-quarter, we did see some lift in both volume and transaction-size in March, which should bode well for the second quarter.

  • Non-interest-expenses for the first year, excluding certain FDIC and covered-asset expenses -- expenses associated with the implementation of our efficiency plans and other items as noted in Table 2 of the earnings release -- totaled $44.8 million, compared to $43.2 million in the fourth quarter.

  • The increase in non-interest expenses compared to the linked quarter, were due primarily to increases in salaries and employee-benefit costs, typically experienced early in the year in higher weather-related occupancy costs.

  • Partially offset by lower-state and tangible-tax marketing and other non-interest expenses during the period.

  • Despite the seasonal and weather-related expense fluctuation, we continue to be pleased with our expense-management efforts, and remain focused on an efficient scalable operating platform.

  • The Company recognized income-tax expense of $7.1 million in the first quarter, as compared to a $1.2 million income-tax benefit in the fourth quarter of 2013. The income-tax benefit in the fourth quarter was the result of lower net-income, primarily related to the valuation-adjustment on the indemnification assets. As well as favorable tax-adjustments related to the completion of the 2012 state tax returns during the period.

  • The Company also recognized a $0.4 million tax benefit during the first quarter, associated with a favorable state tax change enacted during the period.

  • While the potential for unanticipated changes remain, we expect the overall effective tax rate for 2014 to be approximately 32% to 34%.

  • Turning briefly to covered assets. I'll highlight two areas.

  • First, the company again recognized income from net credit costs on covered assets in the first quarter, as highlighted on Page 8 of the supplement.

  • Second, the Company realized a 23% decline in the balance of classified covered loans during the quarter, and the balance stands at approximately $87 million at March 31st.

  • These areas reflect the Company's continued efforts to manage problem covered assets, deposit-resolutions, as we approach the third-quarter expiration of commercial loss-share coverage. And the midpoint of single-family loss-coverage.

  • Finally, with respect to interest-rate sensitivity, we expect to maintain a relatively neutral sensitivity position as of March 31st -- virtually unchanged from the end of the year. And continue to evaluate strategies to proactively manage our balance sheet with a bias toward asset-sensitivity.

  • With that, I'll turn the call back over to Claude.

  • Claude Davis - CEO

  • Great. Thanks, Tony.

  • Nikki, I think we're ready to open the call up for questions.

  • Operator

  • Thank you very much.

  • We will now begin the question-and-answer session.

  • To ask a question, you may press *, then 1, on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

  • To withdraw your question, please press *, then 2. At this time, we will pause momentarily to assemble our roster.

  • Our first question comes from Jon Arfstrom with RBC. Please go ahead.

  • Jon Arfstrom - Analyst

  • Yes. Thanks. Good morning, guys!

  • Ken Lovik - SVP, IR and Corporate Development

  • Hi, Jon!

  • Jon Arfstrom - Analyst

  • Hey -- couple of questions, here. Just Claude, bigger-picture on the business-confidence. And also on the commercial growth. It seems like it's strong and getting stronger.

  • Anything driving that or anything of note?

  • Claude Davis - CEO

  • I don't know that there's anything of note in terms of one or two things, Jon. It just seems like I think a couple of things.

  • One -- I think the activity's a bit better than we've seen just in broader-market perspective. I think clients are more confident to make investments where to take it back a year or so ago, that was one of our concerns. Just the level of conservatism.

  • So I think that's one issue.

  • I think the second is some of the investments we've made over the last two to three years in lending resources, credit-product, expansion of product. Whether that'd be in an AVL from the finance, the franchise-finance. All those are beginning to pay off for us.

  • So I think it's a combination of market, client confidence and our investments.

  • Jon Arfstrom - Analyst

  • Sure.

  • How about the construction activity? Anything of note there?

  • Claude Davis - CEO

  • You know, we are seeing some renewed construction. Not so much -- we're not doing too much in the residential construction area, other than in our first-mortgage group, where we have a nice construction product for our individual clients, if they're wanting to build a new home.

  • And we're seeing a bit of a pickup, there. I'd say it's early and small.

  • We're seeing some nice construction in the multi-family space, which is I think pretty consistent across the country. We have several big clients across our footprint and in that area.

  • I would say that then we have also some medical. There is some medical-facility construction going on. Mainly in smaller clinic-type facilities. That, we've also been able to participate in.

  • Then the final one that I think has really helped drive some growth are what I'd say are some specific retailer build-to-suit models that we've been financing, which have been a nice add, as well.

  • So yes, there is some construction pickup, but it's in specific categories.

  • Jon Arfstrom - Analyst

  • And then maybe Tony, you or Claude.

  • But you talked a little bit about the margin erosion and the pricing pressure. I think we all understand that.

  • But we're getting to the point where you have some good organic loan growth, and the covered assets in the runoff portfolio just keep getting smaller and smaller.

  • They're getting closer on net-interest income growth, but just curious how you think about your ability to grow net-interest income potentially, later in the year?

  • Claude Davis - CEO

  • Yes. Jon, I'll start. It's Claude. Then I'll let Tony pick up on that.

  • We do feel like with the organic growth that we're seeing, and as I mentioned, the pipeline is up 17% from year-end.

  • With Bexley, Insight and now Guernsey coming onboard this year, and they continue to experience very solid loan-growth in their markets. We feel good about that ability to grow the balance sheet. Grow the earnings-asset base. Even though at different rates than what's running off.

  • I think if you looked at this quarter and factored in day count, compared to fourth quarter, we might've actually seen some net-interest income. Relatively marginal growth in that category.

  • So we feel good about the trend there. Obviously, the interest-rate environment is going to play a big impact.

  • Anthony Stollings - EVP, CFO

  • Yes. There are a couple of things, as Claude said. The interest-rate environment, even though we have very solid loan volume -- in the prolonged interest-rate environment, there's just no way you can overcome that in terms of replacing eroding assets with new assets.

  • As far as the covered loans, you're right. It is becoming a much smaller piece of our story. And it is very much a volume-driven issue, there.

  • Overall, when you take the indemnification assets into consideration, the overall return on those assets doesn't change that much. It's the volume piece that really drives it.

  • So when we look at the quarter overall, net-interest income is only down about $900,000. Still solid loan growth. Covered-loan portfolio performing well.

  • So we like the position we're in. We're much more focused on net-interest income than we are the actual net-interest margin percentage.

  • Jon Arfstrom - Analyst

  • Okay. That's helpful; thank you.

  • Anthony Stollings - EVP, CFO

  • You bet.

  • Operator

  • Thank you.

  • The next question comes from Scott Siefers with Sandler O'Neill. Please go ahead.

  • Scott Siefers - Analyst

  • Thank you. Good morning, guys.

  • Claude Davis - CEO

  • Hey, Scott!

  • Scott Siefers - Analyst

  • Let's see.

  • Tony, I guess I want to ask I think -- Jon's question -- in a little different way. So you mentioned the slightly-widening gap between loans coming on versus those that are rolling off.

  • What makes you guys a little unique is of course the covered-loan portfolio running off. So do you have a sense for where new-loan yields are or were in the first quarter? Versus say the fourth quarter?

  • Just trying to get a perspective for how intense the pricing pressure is, and how much is simply due to the runoff of the covered portfolio.

  • I think my sense is that it's more that latter, but I'd be curious to hear your thoughts, there.

  • Anthony Stollings - EVP, CFO

  • Yes. It's a little bit of both.

  • We have talked in recent quarters about that spread. I'd say some quarters, we're a little better at managing it than we are others.

  • This particular quarter, we saw a little bit of a widening there. A little on the origination side, but mostly on the payoff side.

  • Claude Davis - CEO

  • Yes. What comes into play there, Scott -- this is Claude -- is in any one quarter, if you have certain loans that pay off, you could be getting a fixed-rate loan paying off in one quarter, a variable-rate loan paying off the next quarter. And those rate differentials and the significance.

  • The same is true on the origination side. Jon asked a question about construction. We're seeing some construction pick up. Those are typically variable rates.

  • So it also depends on the nets of shorter-term versus long-term.

  • I will tell you I think just in general, in terms of what's being originated in terms of rate -- I'm not sure we've seen a substantial tightening of spread. Which is the way we think about it.

  • So it really is, in any one quarter, a mix-determined spread.

  • Scott Siefers - Analyst

  • Okay. That's helpful color, and I appreciate it.

  • Then either Claude or Tony -- I was just hoping you could chat about what you're seeing on the mortgage side, for a second. I guess you guys are a little unique in that you've got that newer team out of Fort Wayne.

  • But just curious. There've been some pretty mixed messages on the strength of the spring selling season.

  • I know in you guys' geography, in particular, you've got the inclement-weather issue, which was relatively more of a factor. But I just would be curious what you're seeing on actual activity, inventory levels, et cetera.

  • Claude Davis - CEO

  • Sure. The first 2.5 months were pretty brutal. To put it kindly.

  • What we've been doing, Scott, to your point -- it's not just the Fort Wayne team. We've really been growing in the last year and a half or two years, our MLO base in multiple markets.

  • We've got a very nice team coming onboard in Columbus, Ohio. Both with Insight and First Bexley, as well.

  • So that's really a growing business for us, from a sales-staff perspective.

  • We did see the pipeline increase a fair amount late in March and into April. So we feel good about that, in terms of the increase. But it was off of a very low base in January and February.

  • So my own opinion is, I'd say it's still a little bit early to say whether we're going to see a substantial pickup in 2Q, although it will be a pickup -- just because of how bad the first 2.5 months were.

  • Anthony Stollings - EVP, CFO

  • Yes. Our overall volume, Scott, didn't decline too much. Maybe 10%. We put a little more on the balance sheet this quarter than we did originate for sale.

  • So that impacted some of the gain numbers. [inaudible] It's been in steady decline since the second or third quarter of last year.

  • But our drop-off from the fourth quarter through the first quarter was really not that significant.

  • Scott Siefers - Analyst

  • Okay. All right, that's great. I appreciate it.

  • Then just the final question is on the M&A side. Obviously, the last few months have been a little more active.

  • But in the aggregate, even though you've got three sort of open items now -- still very small --

  • Claude, I just would be curious to hear your thoughts on if there is any governor for a sort of number of things going on at the same time? Even if the size is small?

  • Or I guess just judging by what you guys have done in the past few years, you certainly seem to have a capacity to handle a few things at a time without a lot of problems.

  • So it would be just curious to hear your thoughts about a lot of little things. And then maybe a bigger-picture question. How much extra capital do you guys feel like you have at this point, given the regulatory items? What you might see on the horizon? Et cetera.

  • And how big would you be willing to look, if the right opportunity came along?

  • Claude Davis - CEO

  • Sure. Yes. A few questions there, Scott. If I don't get them all, remind me.

  • The first one, I think -- on our capacity -- you're right. I think in total, when all three deals close, and with their current growth, I guess we'll be around $700 million in the Columbus market.

  • So, taken together, that's a very manageable size and deal for us. Both from a resource-and-capital perspective; its five locations.

  • So we feel very good about our ability to integrate all three of the Columbus, Ohio deals. Yet, I will tell you and I think what our operations staff would tell you, is that it's still more difficult to integrate three deals than one deal.

  • There's a lot of work that has to get done. It doesn't matter whether the bank's $100 million or $1 billion. It's the same amount of work.

  • So we're very sensitive to our resource-constraint issue.

  • One of the reasons why we feel good -- and I commented in my script, about our ability to look at additional deals now -- is that a lot of the heavy-lifting on the Insight and First Bexley deals is substantially complete.

  • It's not complete. Obviously, it's not closed; not integrated, yet. But a lot of the planning and product-mapping and data-mapping has been done, and it's ready to go.

  • With those two, we feel like we're substantially further along. And with Guernsey being on the smaller end of the three, we feel good about our capability there, as well.

  • So to the extent another opportunity comes along tomorrow, just because of the way the calendar and the timing would work, and our ability to execute that deal and then plan the integration in the context of the other three -- I feel very good about it.

  • And as you've said, even if you go back to 2009 when we did the Peoples and Erwin deals within a 45-day window, we have the capacity with our teams to integrate multiple things at one time.

  • In terms of financial capacity, we've articulated our capital targets under Basel III. We have, we think, substantial room above those.

  • Because there are lots of moving parts related to the three deals, certainly we view our excess-capital as somewhere between $50 million and $100 million. We haven't calculated or disclosed the specifics.

  • It depends on their growth between now and close, and our growth-in-earnings between now and close. All that said, we feel very good about our capacity. And if the right strategic deal came along, we think we'd have the capacity to look at it.

  • As it relates to size-of-deal, we'd not really put an upper limit on that. Certainly, if you're going to spend some of the resources, it's always easier to do that on a bigger target, because you're spreading it across a larger asset base.

  • But we've tried not to focus on that. We've just tried to focus on the market and strategic opportunity. Does it give us a platform for growth?

  • That's really the other part where we're focused. We feel like the Columbus, Ohio entry -- it's important as it relates to the $700 million of assets. But it's more important as the platform that it gives us to grow the Columbus, Ohio market.

  • So, did that cover your question, Scott?

  • Scott Siefers - Analyst

  • Yes. It does. Thank you. You got all half-dozen of them. So that was great.

  • I appreciate all the color, so that does it for me. Thanks, again.

  • Operator

  • Thank you.

  • The next question comes from Chris McGratty with KBW. Please go ahead.

  • Christopher McGratty - Analyst

  • Hey; good morning, guys.

  • Claude Davis - CEO

  • Good morning.

  • Christopher McGratty - Analyst

  • Claude or Tony -- I want to ask on the margin one more way.

  • Given the color about near-term, I looked back on your margin pre-Erwin; it was call it 370 -- 375. Obviously a lot's changed since then. But is that kind of where you guys feel you may be going, until we ultimately trough? Is that reasonable?

  • Claude Davis - CEO

  • It's really difficult to say. I think that we try to look out over the next 9, 12, 15 months. I guess I can say that kind of "feels" right. But it's really difficult to say. It depends on where rates go, and how long we're kind of caught in this funk.

  • But I think that we've probably seen the biggest declines that we're going to see.

  • Christopher McGratty - Analyst

  • On the new markets, maybe an update on Fort Wayne. Any new wins there, in terms of market share? And maybe any incremental investments you guys may need to make?

  • Anthony Stollings - EVP, CFO

  • Certainly. Yes. I know we're really excited about Fort Wayne as a market, which we have been for some time. Now with the teams we have there, we're even more excited.

  • I would say the initial investment we're going to be making there, Chris -- in addition to what we've already done -- is we're in the process of searching for a new kind of hub for the Fort Wayne market. A permanent downturn home.

  • We will certainly look at additional retail locations in that market over the next probably couple of years. And there'll be staff to go along with that.

  • Then we'd like to certainly build out some of the asset or wealth-management product lines in the market, as we get the opportunity to do so.

  • So we'll continue to invest in Fort Wayne. In terms of wins in market share, I would just reiterate what I mentioned in the script. That is that thus far -- and it's very early, but -- the growth thus far, especially on the commercial side, has been in-excess of our original forecasts.

  • Now we don't disclose the forecast and we don't disclose by market growth. But I would just tell you that in terms of how we thought about that market and our expectations, thus far, they're exceeding them.

  • Christopher McGratty - Analyst

  • That's fair. Great. Thank you.

  • This last one, Tony -- maybe I missed it on the small transaction. Did you disclose the intangibles in the CDI and the merger charges? If so, could you provide them?

  • Anthony Stollings - EVP, CFO

  • Yes. We didn't give that kind of granularity on this. We did provide tangible book value dilution is about $0.12 in the earn-back period. But the rest is -- we really don't get into the model assumptions and pricing decisions and those things.

  • Christopher McGratty - Analyst

  • All right. Thanks a lot.

  • Anthony Stollings - EVP, CFO

  • You bet.

  • Claude Davis - CEO

  • Thanks, Chris.

  • Operator

  • Thank you.

  • Once again, if you would like to ask a question, please press *, then 1, on your telephone.

  • The next question comes from David Long with Raymond James. Please go ahead.

  • David Long - Analyst

  • Good morning, guys!

  • Claude Davis - CEO

  • Hi, David!

  • David Long - Analyst

  • Thanks for giving the update on the pipeline. It sounds like the commercial pipeline's growing pretty nicely. But if you look back over the last year or so, looking at that pipeline, have you noticed any changes in the closure rate? Those loans that were in the pipeline that have been closed, say, within three months?

  • Claude Davis - CEO

  • Honestly, I don't believe so, David. And our commercial team did not mention anything to me, related to kind of fallout rates increasing or declining. I don't know -- Ken -- have either one of you?

  • Ken Lovik - SVP, IR and Corporate Development

  • No. I've not heard that as being any kind of an impediment to our growth.

  • Claude Davis - CEO

  • Certainly, we've seen a correlation between the build of the pipeline and our growth rates, which leads me to believe in a "no." But to be honest, I have not looked specifically at fallout rates to that question.

  • David Long - Analyst

  • Okay.

  • And then the second question I had. You mentioned a couple of times the Columbus market being particularly strong, and the Midwest. I just wanted to see if you could maybe provide a little bit more color. Why do you think the Columbus market is particularly strong?

  • And are there any specific metrics that you're directly thinking about?

  • Claude Davis - CEO

  • Well, one is the size. The growth rates that are projected for that market, compared to other Midwest growth markets. I don't have the deck in front of me that we talked about it on the first-quarter call.

  • We had some of the comparative-growth statistics, David. But that was one. And Tony -- you can look at see if they can find that, real quickly.

  • The second, though, is just the quality of the market, in terms of our target client-base. That target client-base obviously both being consumers -- which is nearly a 2-million-person MSA.

  • A diverse economy, in terms of not only the large number of Fortune 1,000 companies -- of which there are about 15 in that market. But a substantial number of what we call our small- and middle-market business-target client-base. We think it's particularly strong in the Columbus market.

  • Then third is the stability of that market. With the existence of the State Capitol and Ohio State University. The regional health center that's in Columbus.

  • All of those just give us a strong confidence in the quality of that economy, and the growth rate for us.

  • What we've been trying to position ourselves to be, David -- we've done it in Cincinnati, we believe. We're trying to do this in Indianapolis, Fort Wayne, Columbus -- it's to be the largest community-bank alternative to the super-regional banks.

  • That we can offer a very similar product set -- especially to that commercial-client base. Where we can offer everything from capital-markets alternatives to ABL equipment finance, traditional senior debt. Treasury-management capability.

  • If we can get enough scale in those markets to be that community-bank alternative, we think it provides us a better-than-market growth rate in a good economy such as Columbus.

  • Ken Lovik - SVP, IR and Corporate Development

  • I just added that I was certainly initially attracted to the market through something that we didn't fully appreciate until we got up there. It was the opportunity to build that scalable platform with some of the smaller banks that were there that were feeling constrained. That really were looking to accomplish a rollup type of strategy.

  • That was something that as we spent more time in that market, we began to realize and see it as an opportunity.

  • So for all the points that Claude made on the economic strengths of the area, once we were there and saw the opportunity to achieve the scale that we like, it made it even more attractive.

  • David Long - Analyst

  • Gotcha. Great. Thanks for the color, guys.

  • Ken Lovik - SVP, IR and Corporate Development

  • You bet. Thanks, David.

  • Operator

  • Thank you. The next question comes from Emlen Harmon with Jefferies. Please go ahead.

  • Emlen Harmon - Analyst

  • Hi; good morning!

  • Claude Davis - CEO

  • Good morning!

  • Emlen Harmon - Analyst

  • On Columbus and the acquisitions, outside of the geography and kind of personality you added through the three different deals, did you add anything unique in terms of kind of businesses or expertise from those three organizations? How do they complement one another in that regard?

  • Claude Davis - CEO

  • Sure. They are all three slightly different. We feel very good about -- take as an example -- the commercial teams that First Bexley and Insight bring to us once those deals are closed. They bring a group of commercial talent to us that is not typical of what I'd call a smaller community bank.

  • Many of these individuals have worked in larger banks in their careers. They can do both small business as well as small- and middle-market clients. Which is why we've always talked about that ability to have a platform for growth.

  • To Tony's point, just a second ago, we were pleased with our ability to create that platform for growth with two or three smaller institutions. The Bexley bank also had a very strong private-banking type model. They have a lot of very good, solid individual clients that we think would be wonderful for us. Not only as clients, but as influence-makers for us in the Columbus market.

  • Then the addition of Guernsey Bank, which is -- I'd say -- a bit more of a retail-oriented institution. It's been around much longer. A much more core-deposit base.

  • Each of them bring a complement to each other that we think we can meld together and make a very strong First Financial brand.

  • Emlen Harmon - Analyst

  • Got it. Okay. Thanks.

  • There is one other quick one on Guernsey. So you [don't read] like you won't get the kind of full accretion until 2016. But is a little bit on the longer side. Maybe we are just getting later in the year.

  • Is there anything unique there that's going to take you longer to get the full effect from the deal? Or is that really just timing?

  • Claude Davis - CEO

  • No. It's just a transaction that we're projecting will happen later in the year. Between field costs and our ability to achieve all the costs saved, it's just going to stretch over 2015. So 2016 will be the first really full clean year.

  • Emlen Harmon - Analyst

  • Got it. Right. Perfect. Thanks.

  • Ken Lovik - SVP, IR and Corporate Development

  • Thanks, Emlen.

  • Operator

  • Thank you.

  • The next question is a follow-up from Jon Arfstrom with RBC. Please go ahead.

  • Jon Arfstrom - Analyst

  • Great. Thanks.

  • Tony, I don't know. I'm assuming you've done the math on weather. But any estimate for the cost maybe of revenue and expense together?

  • Anthony Stollings - EVP, CFO

  • From weather, did you say?

  • Jon Arfstrom - Analyst

  • Yes.

  • Anthony Stollings - EVP, CFO

  • Yes, we've done what we think is some conservative math around that. On the income side, it's maybe a $500,000 to $750,000. On the expense side, probably closer to $1 million.

  • So I mean we look at our performance for the quarter, and that's kind of the way we've talked about it internally.

  • Jon Arfstrom - Analyst

  • Okay. So it's meaningful.

  • Anthony Stollings - EVP, CFO

  • Yes.

  • Jon Arfstrom - Analyst

  • Okay. Then I guess the other question. You mentioned this -- the seasonal bounce that you expect in fees. That March seems to be back on track. Anything else going on there?

  • We should just expect the typical Q2?

  • Ken Lovik - SVP, IR and Corporate Development

  • I think that as I said, we did see some bounceback. Not just in longer transactions, but the size of the transactions. That's a good sign.

  • I think we're continuing to monitor customer behavior around service charges and fees, and those types of things. The volumes there. The consumers are much more cautious around how they handle their checking accounts and overdrafts and things like that. So that's something that we're watching. But nothing we're alarmed about.

  • Jon Arfstrom - Analyst

  • Okay. This is the last one.

  • Anything that we need to -- as analysts or investors -- think about on the expiration of the commercial piece of the loss share?

  • Ken Lovik - SVP, IR and Corporate Development

  • No. I don't think there's anything you need to think about beyond what we've been talking about for a number of quarters, now. And been very transparent about.

  • We're aggressively managing those assets under that loss share agreement out. We're very, very happy with where we're headed.

  • We had another strong quarter of resolution in the first quarter. Feel good about what we see thus far in the second quarter.

  • So we think we're going to be probably in as good a spot as we can be in mid-third-quarter, when those things expire.

  • Jon Arfstrom - Analyst

  • Okay.

  • Okay, thanks.

  • Claude Davis - CEO

  • Thanks, Jon.

  • Operator

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

  • Claude Davis - CEO

  • Great.

  • Thanks, Nikki. And I would just say thanks to all of you who joined the call today, and for your interest in First Financial. Thank you.

  • Operator

  • That does conclude our conference. Thank you for attending today's presentation. You may now disconnect your lines.