FNB Corp (FNB) 2015 Q4 法說會逐字稿

Good morning and welcome to the F.N.B. Corporation fourth-quarter 2015 earnings conference call. All participants will be in listen-only mode. (Operator Instructions). After today's presentation, there will be an opportunity to ask questions. (Operator Instructions). Please note this call is being recorded.

I would now like to turn the conference over to Matthew Lazzaro, Manager of Investor Relations. Mr. Lazzaro, please go ahead.

Thank you. Good morning everyone and welcome to our earnings call. This conference call of F.N.B. Corporation and the reports it files with the Securities and Exchange Commission often contain forward-looking statements. Please refer to the forward-looking statement disclosure contained in our earnings release, related presentation materials and our reports and registration statements filed with the Securities and Exchange Commission and are available on our corporate website.

A replay of this call will be available until January 29 and the transcript and the webcast link will be posted to the About Us Investor Relations and Shareholder Services section of our corporate website.

I will now turn the call over to Vince Delie, President and Chief Executive Officer.

Good morning and welcome to our quarterly earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer, and Gary Guerrieri, our Chief Credit Officer. I will provide highlights for the fourth quarter and full year of 2015 and discuss some key strategic initiatives. Gary will review asset quality and Vince will provide further detail on our financial results, provide guidance for 2016, and then open the call up for any questions.

We are very pleased with both the quarter's results and our performance for the full year of 2015. Full-year operating EPS of $0.88 increased 9% year-over-year when adjusting for merger costs and the cost of capital raised proactively for upcoming acquisitions. For the fourth quarter, operating net income available to common shareholders was $0.22 per diluted share.

The outstanding performance in 2015 was defined by record revenue as we continue to gain scale and generate positive operating leverage. On a full-year basis, total operating revenue increased $50 million or 8%. And operating expenses were well-controlled, increasing $20 million or 6%.

The fourth-quarter efficiency ratio of 56.3% marked the 15th consecutive quarter under 60%, a period of nearly four years. On a full-year basis, our efficiency ratio improved 109 basis points to 56.1%. The significant drivers for the improvement included our ability to generate continued organic revenue growth, diligently manage expenses, and successfully execute our acquisition strategy by gaining scale and achieving the model EPS accretion.

We continue to generate positive operating leverage and our larger organization has enabled us to remain flexible and quickly adapt to changes in a challenging regulatory landscape. We strive to maintain our low risk profile and have consistently invested in overall enterprise-wide risk management infrastructure commensurate with our growth by investing in risk management, technology, operations and supports.

Fourth-quarter results reflected solid organic loan and deposit growth, a stable net interest margin and excellent performance from our fee-based businesses. The quarter's record high total revenue of $172 million marked the 12th consecutive quarter of total revenue growth.

Our ability to grow fee income has been driven by adding new customers and enhancing our cross-selling efforts. Full-year wealth management revenues totaled $35 million, an impressive year-over-year increase of $4 million or 13%. As discussed on prior calls, our strategic decision to expand the mortgage business and the capabilities of our capital markets group have produced very strong returns in a short period. 2015 mortgage banking revenues more than doubled and capital markets revenue, which includes syndications, international banking and derivatives, ended the year up over 50%. These areas continue to be a focus for F.N.B. as we benefit from expanded cross-selling efforts, lessen our dependence on spread income, and strengthen our overall revenue mix.

Noninterest income made up 24% of total revenue in 2015, up 90 basis points from 2014.

Looking at the quarter's results on a linked-quarter basis, annualized average loan growth was a solid 8% and consistent with our guidance. Commercial loan growth of 11% annualized reflects strong origination volumes with the metro markets making up a majority of the quarter's production.

At the end of December, our commercial pipelines were healthy and slightly higher than year-end 2014 with about two-thirds of the pipeline coming from the metro markets. We are fully staffed in Maryland and Cleveland, and have seen increasingly greater contributions from these markets.

The consumer loan portfolio organic growth was a combined 6% with nearly equal contributions from residential, indirect and home equity related portfolios. Total average deposit and repo growth was 9% annualized, led by average noninterest DDA growth of 14% annualized largely attributable to growth from commercial relationships.

We also continue to invest in our people across multiple revenue-generating and support areas of the organization. Regarding talent retention and acquisition, we have earned a reputation as an employer of choice and strengthened our ability to attract premium talent from larger financial institutions.

Additionally, we have invested in technology as customer preferences evolve. We are constantly looking to enhance our products and services in order to provide the best solutions for our clients and continue to drive market share gains.

Next I'd like to focus on several key strategic initiatives. We have now received all shareholder and regulatory approvals for the acquisitions of Metro Bancorp Inc. and 17 Pittsburgh branches from Fifth Third Bank. We are pleased with the receipt of these approvals and expect the Metro transaction to close February 12. The conversion process is going well for both transactions, and we are targeting an April conversion for the Fifth Third branches.

As part of the Metro merger, we will be deploying some leading-edge technology in the central Pennsylvania market to augment the consumer delivery channel. This is part of our Clicks to Bricks strategy, a strategy rooted in providing the customer with an experience that integrates the e-delivery and traditional physical delivery channels. As noted in our recent press release, these initiatives will include an upgraded consumer mobile banking app, a commercial banking app, innovative branch merchandising which includes scannable product packaging and integration into the Company website, as well as the installation of intelligent teller machines. We are deploying our strategy in Metro's footprint and will use video chat to assist customers with almost any transaction they can conduct in a branch outside of traditional branch hours.

In December, F.N.B. was recognized by Greenwich Associates as a Best Brand in Small Business Banking award winner. F.N.B. also received recognition for trust and ease of doing business in small business banking. Of more than 750 banks evaluated nationally, F.N.B. was one of only 11 to be recognized for trust and one of only 10 to be recognized for ease of doing business.

Also during the quarter, F.N.B. was recognized by Consumer Reports and received a top five score among all traditional banks included in the national survey. The recognition by Consumer Reports and Greenwich Associates provides evidence of how successfully and seamlessly we have integrated our culture of service across business lines and regions. This is a testament to our commitment to doing what's right for our customers.

Before turning the call over to Gary, I would like to congratulate and thank our team for another great quarter and a tremendous year. During 2015, we successfully completed the acquisition of five Bank of America branches and announced the Metro Bancorp Inc. and Fifth Third branch acquisitions. These integrations are all tracking to plan, momentum is strong, and F.N.B.'s enhanced market position will serve us well in the future.

In summary, we completed a number of initiatives that serve to better position the Company and enable us to deliver record annual results in 2015. We have achieved a number of outstanding accomplishments, including record total revenue, record net income, 9% operating EPS growth, continued growth in loans, deposits and our fee-based businesses, and an improved efficiency ratio. Our success would not have been possible without the extraordinary effort an exceptional teamwork put forth by our employees.

With that, I will turn the call over to Gary so he can share asset quality results.

Thank you, Vince, and good morning everyone. We closed out another successful year with our loan portfolio favorably positioned as we look ahead to 2016. Our fourth-quarter credit quality performance was highlighted by better-than-expected results in our acquired portfolio, an overall favorable delinquency and NPL plus OREO position, and that charge-off results that remained in line with historically good performance, totaling 23 basis points annualized on a GAAP basis for the quarter and 21 basis points on a GAAP basis for the full year.

I will now walk you through our originated portfolio results, followed by some acquired portfolio performance highlights. And finally, I will close out my commentary with an update on our energy and metals exposure.

Looking first at the originated portfolio, delinquency was up 4 basis points on a linked-quarter basis and continues to remain at exceptionally good levels, ending December at 93 basis points. The level of NPLs and OREO was up a few million during the quarter, remaining flat at 99 BPS.

Net charge-offs for the fourth quarter totaled $6.7 million or 25 basis points annualized. The originated provision was up from the prior quarter at $12.4 million, which covered net charge-offs, some limited credit migration, and supported heavier organic loan growth during the quarter. The provision to support the loan growth was approximately $3 million. The ending originated reserve position ticked up 1 basis point to end December at 1.23%.

As it relates to the acquired portfolio, we ended the quarter with $1.2 billion of loans outstanding purchased at fair value. Contractual delinquency improved $6.1 million quarter-over-quarter to end the period at just under $46 million. And we continue to benefit from our strategy of exiting less desirable credits. The ending acquired reserve remained fairly flat at $6.7 million. Including the credit mark for the acquired book as well as the reserve on the originated portfolio, we were adequately covered at 1.6% of the total loan portfolio at quarter end.

Now, shifting gears, I would like to provide you some color on our exposure to the energy and metals industries. As you are aware, these two sectors continued to be a topic of discussion during earnings season due to the pressure they are facing from lower commodities pricing. Some of the credit migration we experienced during the quarter was related to borrowers that operate in these industries.

Our energy sector portfolio, which has been focused on the indirect supply chain, is small at only $184 million, or 1.5% of the total loan book. Delinquency in the energy portfolio remains solid at 79 basis points, with a total reserve of 3.3% at year-end. A smaller subsegment of the portfolio more directly tied to the oil and gas markets totals only $50 million and carries a 6% reserve.

As it relates to metals, this portfolio totals $330 million or 2.6% of the overall loan book and is comprised of metal manufacturers, wholesalers and fabricators, the latter of which cover nearly 75% of our metals exposure. The level of delinquency in metals at 2.19% is driven by a single credit, and absent it, would only be 53 basis points. Our reserve position across this portfolio is 2.4%.

As we work through this softer phase of the cycle, we continue to diligently monitor all borrowers across the footprint to quickly identify and closely manage credits impacted by these declining commodity prices. This proactive and strategic approach will benefit us during these cyclical periods.

In closing, we finished out 2015 with another successful year. We continue to be pleased with the performance of our loan book and our ability to manage risk throughout the cycle. The significant investments we have made over the years to assemble an experienced banking team, build out comprehensive risk systems and models, and further refine our underwriting platform will allow us to further enhance our ability to manage our growing loan book.

I will now turn the call over to Vince calibrates, our Chief Financial Officer, for his remarks.

Thanks Gary. Good morning everyone. Today, I will discuss the fourth quarter's operating performance and provide high-level guidance for 2016.

Looking at the balance sheet, organic average loan growth momentum continued with average loans growing 8.4% annualized, driven by strong growth in commercial and consumer loans. Commercial growth totaled $174 million or 10.5% annualized, and as Vince mentioned, our commercial pipelines at quarter end remained healthy.

As noted in today's release, the fourth quarter's commercial origination volume was driven by strong performance in the Metro markets of Pittsburgh, Baltimore and Cleveland. The organic growth in the consumer portfolio was due to footprint-wide positive contributions across residential, indirect and home equity related products.

Average total deposits and customer repos increased $284 million, or 9% annualized, with organic growth in non-interest-bearing deposits of $105 million, or 14% annualized. Average transaction deposits and customer repos increased $360 million, or 14% annualized, mainly due to organic growth in business demand and money market balances. This growth in low-cost deposits further strengthened our funding base as 81% of total deposits and customer repos were transaction-based at the end of the fourth quarter.

From a total funding perspective, our relationship of loans to deposits and customer repos was 95% at the end of December.

On a pro forma basis, with the addition of Metro and the Fifth Third branch deposits, the loan to deposit ratio improves to 91%.

Net interest income grew $2.3 million, or 1.8%, due to the quarter's organic growth in loans and our ability to fund that growth with low cost deposits. Our net interest margin on both a reported and core basis equaled 3.38% as the net cost of sub-debt raised proactively on October 2 to support capital ratios post-Metro was offset by the benefit from accretable yield adjustments during the quarter.

Core net interest margin was equal to third-quarter core margin and in line with our guidance issued on the October call. Overall, we are very pleased with the full-year core net interest margin of 3.39%, given the extended low interest rate environment experienced throughout 2015.

Let's look now at noninterest income and expense. Noninterest income in the fourth quarter was a record high for F.N.B., increasing $1.8 million or 4.3% as we saw continued success in wealth management, mortgage banking and capital markets.

2015 saw improved contributions from our mortgage banking business unit as our increased scale led to record originations and gain on sale revenue. Full-year results for wealth management showed a 13% increase in revenue with continued success in new account acquisition and organic sales growth, as well as greater contributions from Cleveland and Maryland.

As Vince discussed earlier, the investments made to enhance the credit derivatives, syndications and international banking platforms resulted in full-year capital markets revenue increasing over 50%.

Noninterest expense, excluding merger and severance costs, increased $3.1 million, or 3.2%, due mostly to seasonally higher marketing costs and increased professional services. Since 2011, our efficiency ratio has trended positively as we have been able to gain scale through acquisitions and maintain a disciplined expense management approach.

Regarding income taxes, our overall effective tax rate for the quarter was 30.8%, in line with previous guidance.

Turning now to our expectations for 2016, I will first touch on our full-year organic growth assumptions and then discuss our guidance on an all-in basis, including pending mergers. We are bringing on Metro in a few weeks and expect to close the Fifth Third branch transaction in April, and I believe it's important to look at this all in view for the full year of 2016.

Let's begin with the organic growth assumptions, which exclude any impact from the mergers. We are expecting to achieve strong year-over-year organic total loan growth in the high single digits, and organic total deposit and customer repos growth in the mid-single digits. On an organic basis, we expect to generate full-year positive operating leverage with total revenue projected to increase in the high single digits and noninterest expense projected to increase in the mid-single digits.

Let's look now at the all in-view, which includes the impact of Metro and the Fifth Third branches, as well as the full-year impact of the Bank of America branches. Average diluted shares outstanding is expected to be approximately 210 million shares for the full year, and end the year at approximately 215 million shares outstanding. This reflects the full-year impact of the shares issued in the middle of February for the Metro transaction.

Given the size of Metro, I think it is helpful to discuss the day one balances we expect to add in February for Metro and in April for Fifth Third. Since they have not yet posted earnings growth for the fourth quarter, the following figures are based on Metro's September 30 balance sheet and the day one Fifth Third balances are based on the balances at the time of the transaction announcement. We expect to bring on approximately $2.2 billion in loans, $3.2 billion in earning assets, and $2.8 billion in total deposits.

Switching over to the income statement, the following assumptions are compared to the full year of 2015, including the impact of the mergers. We expect core noninterest income, which excludes securities gains, to increase $30 million to $40 million year-over-year. Total core noninterest expense, which excludes one-time merger costs, is expected to increase $80 million to $90 million year-over-year. Provision expense for 2016 is expected to be $12 million to $13 million per quarter in support of the strong loan growth projected for the year. We expect the full-year net interest margin to be relatively stable from the full-year core net interest margin of 3.39%.

I'll note that our forecast is build in line with consensus expectations and includes four rate increases throughout 2016. To the extent that does not occur, there is potential for modest pressure to expected net interest income.

The overall effective tax rate for 2016 is expected to be in the 31% to 32% range.

In summary, 2015 was a strong year of financial performance for F.N.B. as we continue to pursue the strategy of building our franchise through strong organic growth and acquisitions that create additional scale for F.N.B. The ability to execute this strategy is dependent on the quality of the people throughout the organization, and I am very proud of what our team accomplished in 2015 in the face of another challenging year for the banking industry as a whole.

Looking ahead to 2016, we feel very good about how the Company is positioned to deliver sustained value for customers, shareholders and employees.

Now I would like to turn the call over to the operator for your questions.

(Operator Instructions). Preeti Dixit, JPMorgan.

Good morning everyone. Just to clarify, did you say that organic high single-digit revenue growth guidance contemplates four rate increases? And could you give us a sense of the sensitivity assuming we see fewer rate hikes and what your fee revenue expectations are embedded in there?

Sure. The margin, just to comment on the margin overall, we felt very good about the stability we had in the quarter. The core margin being unchanged from the third quarter at $3.38 was even a little better than we projected last quarter, so that was a good outcome.

The guidance for 2016, when we put our plan together, was based on five moves, including a move in December, which as we all know we have at this point. And depending on who you ask, the responses range from we're not going to have any fed moves next year to we're still going to have four. So our guidance is predicated on four. And if you look at the impact of that, it's not as significant of an impact as it would have been last year. If we have flat rates from here, if we don't get any of the four moves, it's around $0.02 to $0.03 to earnings just unmanaged. So obviously our job is to manage through that if that happens. The sensitivity last year was larger than that and part of what's helping that is the gap between loans that are rolling off and new loans that are coming on as well as the investment securities are actually contributing, our investment yields portfolio has gone up 1 basis point the last couple of quarters. So that helps to mitigate the impact of that. But that's what's baked into the guidance.

And the fee revenue is, as I said, the guidance there that we gave was mid single digits on the fee income, high single-digit revenue growth overall. So that encompasses the high single-digit loan growth as well as the growth in the fee side.

Okay. That's helpful. And just to clarify on the fees, I know this is a very strong quarter for capital markets. As we look at that other income line, what's a good run rate to think about there?

It's all baked in. If you look at what's in other income for the quarter, there's a variety of items that happen in the fourth quarter. Definitely, as you mentioned, the strong capital markets is a key part of that. We had very nice swap fee income during the quarter. We had higher BOLI income during 2015. We renegotiated our policies to get some additional income for the Company going forward, which is run rate. We had higher recoveries on acquired loans, and there's a variety of other items. So really it's all -- what I would focus you on is the guidance that we gave. So that's all baked into the guidance.

Okay. That's helpful. And then Gary, what were the dollars of provision expense this quarter tied to the energy and metals portfolios? And could you break out for us what percentage of these loans are now sort of in criticized and classified?

In terms of the provision expense, just high-level, of the $12.4 million charge-offs covered, about $6.8 million of it, and loan growth required about $3 million of that. So, the difference, a couple, $2.5 million, relatively small, which would have supported any credit migration.

And around the credit migration, we didn't have much at all during the quarter. From a criticized asset standpoint, only $13 million in migration. So it was very nominal during the quarter.

And what was the second part of your question again?

I had asked about the criticized and classified. So is this really more of a general reserve built on that portfolio as opposed to specific reserves?

It was just general.

Okay, that's helpful. And then if we could shift quickly to the loan yields, I know they were up about 3 basis points in the quarter. I just want to get a sense if there's any fees impacting that, and how we should think about the direction of loan yields here given where you're putting on new originations.

I would say that the loan yields overall -- hang on a second. There's nothing unusual in there. If you look at our margin slide where we call out the accretable yield, the accretable yield benefit that we had this quarter, which is on Slide 16, was 3 basis points of benefit from accretable yield adjustments. In the past, that number -- it varies quite a bit from quarter to quarter. As we've said in the past, it's kind of lumpy. So in total, we had about $1.2 million worth of benefit during the quarter, and that's ranged from anywhere as low as $300,000 to almost $4 million over the last two years per quarter. So the figure this quarter was higher than last quarter but lower than the first two quarters. So in dollar terms, it's $1.2 million worth of additional accretable yield benefits that we had during the quarter, so the 3 basis points.

And then we had the cost of the sub-debt that we raised proactively, which I think turned out to be a smart decision instead of trying to raise that this quarter with everything going on in the market. And that affected margin by 3 basis points. So those two really offset to leave the core margin unchanged from where we were in the third quarter. But nothing unusual fee-wise other than just normal stuff rolling through there, but accretable yield adjustment did go up this quarter, which was good because we were able to resolve some additional credits at higher than where they were marked.

Got it. Okay. Thank you. I'll step out for now. Thanks.

(Operator Instructions). Rob Ramsey, FBR.

Good morning. I'm just curious if you could kind of comment on what all you are seeing in your core of western PA markets given the pullback in natural gas prices, just what you're hearing from customers, what you are seeing in terms of activity, what the sentiment is like.

Yes, I think the sector is a portion of the overall economy here today because of the expansion that occurred over the last eight years or so. But in truth, I think the companies that are directly in the supply line are being impacted, but most other businesses here are not being impacted by natural gas prices. To be quite frank, it's actually a positive for many manufacturers here, because the cost of production has gone down with lower energy costs. So, it's a mixed bag. But as Gary indicated, that supply chain portfolio for us is very small. So we have not noticed an impact, to be truthful.

Okay. Outside of energy broadly, are there any areas where you have any cause for concern or sensing any softness, or are maybe giving greater attention today than a year ago?

I think Gary called out the metals portfolio. I think many of the banks across the region, particularly in the Rust Belt, have exposure to companies that utilize metal, either in the production process or outright wholesalers of the material. So with situation in China and pressure on commodity prices, there's migration in those portfolios which we've seen many, many times over many cycles here. And the other banks have witnessed that as well. So I would say that's a weak spot, and that's why he called it out. I think it's an area we are watching. We are not under particular stress there, but it's an area of that clearly could be impacted by sustained lower commodity prices. And as you move through the cycle, once that inventory clears, things go back to normal. But you do have volatility in commodity prices today and given the global situation. So that's an area that we stay focused on. I don't know if you want to add anything, Gary.

That portfolio, as mentioned, has continued to perform very nicely. Our wholesale segment is very, very small, in the mid-$30 million range. And some of those wholesalers are seeing some pressure there due to inventory pricing. But other than that, we are very pleased with how our portfolio has performed at this point.

And our strategy has been, as has been repeated call after call, is to grow through a very granular strategy. So Gary is methodical about managing exposures in a variety of segments in the commercial portfolio so we are not reliant on one particular asset class in an industry to drive growth for the Company.

Our geographic expansion and the expansion into Baltimore and Cleveland provides us with the ability, as I've said in the past, to be more selective in a more competitive environment, particularly as we move into this portion of the cycle. So having that for us is a huge advantage over other regional banks that are embedded in a tranche of lending that might be experiencing adverse economic conditions. So, our strategy from the very start was to enable us to continue to sustain growth as we -- and maintain credit quality throughout cycles without variation as we move through a variety of economic cycles.

Okay, great. Shifting gears, one other question. Just in terms of M&A, you guys have obviously been an active acquirer over time. Are you sensing any shift in sentiment on the part of potential sellers, either given the lower for longer sort of rate outlook or some of the other macro uncertainty? Just kind of curious what the appetite is from sellers.

Yes, I think sellers are confused at this point given where things are going. So I'm not sure anybody's really focused at this stage in the game on long-term thinking. I think they are trying to survive a variety of forces in the economy.

So, to me it seems kind of quiet because of the volatility in the market. I think there's kind of a wait and see attitude. Having said that, we just announced a huge investment in technology. We have been investing in technology all along, so the impact to us in rolling out these initiatives, essentially it's a rebranding exercise and trying to engage customers in utilization of our website in our branches and get them to our branches through the website. So, we've spent money, but it's less than $0.005 in investment for us, and if we generate modest increases in the number of accounts sold, it's a 30% return, cash return, on that investment. So we've already laid the groundwork, so it's already embedded in the run rate for us.

I think others that have to catch up in the technology space, and being smaller than F.N.B. is going to be a challenge. So you have that coupled with the regulatory environment. You have the interest rate environment with uncertainty about where rates are going to go. I think all of those pressures eventually will mount and result in more consolidation. Having said that, we are very selective, we've been selective, and we are feeling very good about the acquisitions that we have on the table. And we're going to continue to be very, very selective moving forward.

Great. Thank you Vince.

(Operator Instructions). Brian Martin, FIG Partners.

Could you just comment on the organic -- you talked about the strength in fee income this quarter, maybe just in particular as you look to 2016. I guess do you expect that momentum to continue both on the capital market and the mortgage side, that you'd actually see organic growth? Is that kind of baked into that number you talked about on the organic growth outlook? I guess given the strength in these last couple of quarters, maybe it's more of a slower growth for those segments in 2016.

I think the guidance that Vince Calabrese gave includes our thoughts on how we're going to perform in those areas in 2016. So it's all-inclusive. And I think we factored into our forecast the competitive environment, a variety of factors, the global economy at the time that we were forecasting. So I think it captures what we believe we can do and is reflected in that guidance.

But I would add too that those areas that we called out are areas we have invested quite a bit in over the last few years to strengthen our team, strengthen the infrastructure and on the wealth side the insurance area. We mentioned that we did a lift-out from First Niagara, brought a team in. We think that's going to be a positive for us going forward. The wealth, both trust and the brokerage side, we are encouraged by the results we've been generating there, and similarly mortgage banking has been taken to a new level in the Company and the contribution overall. So I think those, the momentum that we have there should continue to serve us well based on the investments we've made in the coming years.

I should mention, when you look back, this Company has had six years of organic loan growth, particularly in the commercial segment. So, we've not missed a quarter. And when you look back over that time period, we've added hundreds of clients.

And what happens over time, if you are an effective cross-seller and you have a deep product set, you are able to enhance your share of wallet over time, and that has clearly been the strategy here. And it's working. So we are seeing double-digit growth in wealth management while others are flat. I know the market is a factor there but that's built into the guidance. We have good, solid growth in the insurance business.

Capital markets too.

Capital markets is ballooning because of a larger balance sheet --

Than the international.

Our international business is taking off. So we've got a lot of opportunity within our own customer base. So we are very excited about those areas and I think we chose the right areas to move into strategically to help offset downward pressure in the consumer bank on a number of fronts from a fee income standpoint. The strategy is worked -- and to offset a reliance on spread. So it's worked very, very well for us, and I'm very enthusiastic and optimistic about the future.

Several of those investments are really in the infancy, they're very early on, a year old to new. So I think those will continue to pay off for us going forward.

And I will remind you, on the mortgage business, historically the level of production (technical difficulty) anemic. So we can only go up from where we were.

Got you. Okay. That's helpful. Thanks. And then just two other things here. Just on the margins, you said if you didn't get the four rate increases as kind of laid out, did you say it was $0.02 to $0.03 for the year, or was it 2 to 3 basis points? I just want to make sure I correctly heard that.

It's $0.02 to $0.03 if we didn't get any additional fed moves from here. So that's the total impact, which our -- I think we're going to get more than zero. How many we get, I guess we'll see. But it's $0.02 to $0.03 (multiple speakers).

Got you. Okay. And then just one other item. The earning asset add you are expecting as a result of the M&A, was that -- can you just repeat that number I guess?

Sure. This is a combination of Metro and Fifth Third (technical difficulty) so total loans, $2.2 billion, earning assets is $3.2 billion, and then deposits and repos is $2.8 billion.

Okay. Got you.

(multiple speakers) for Metro because that's most current publicly available, so (multiple speakers).

Got you. Okay. Just maybe the last thing, you didn't comment on it but kind of your -- you said on the organic I think the operating leverage should continue to improve. Just wondering with all-in if you made that same comment or maybe I missed it, but just kind of your outlook all-in as far as operating leverage goes kind of year-over-year from 2015 to 2016 how you're thinking about that.

There is still positive operating leverage. That's a key focus for us every year when we put together our plans and our goals for the coming year. So, we expect to continue to generate positive operating leverage, which translates into some improvement in the efficiency ratio too.

Got you. Okay, thanks very much.

Thank you. As there are no more questions at the present time, I would like to turn the call back over to management for any closing comments.

First of all, I'd like to congratulate our team on another very, very successful year in a challenging environment. So, I think everybody did an outstanding job carrying out our plan.

We are very excited about 2016. I know there are some economic headwinds here with the market volatility, but we are excited. The team is charged up about the investments in technology and how we are positioning the branches with the merchandising strategy that we are rolling out with our Clicks to Bricks strategy is very exciting.

The Metro acquisition is moving as planned. We have been tracking one-time expenses, the expense take-out and the credit mark, and we are right on top of our forecast, so our model that we discussed with you when we did the acquisition, so we are excited about that. We've got our team in place, and we are ready to capitalize on the market disruption in the central part of the state. And we feel very good about that.

The other piece I will mention and then we can close out the call, when we looked at the Metro model, they did have extended hours. One of the benefits of the rollout of our technology plan is actually the addition of 10 service hours per week per branch because of the deployment of technology at 14 of those locations. So, we are actually extending the hours while cutting back the actual hours of the branch and adding the technology, we are actually extending the hours that a client can do face-to-face transactions by 10 hours. So we are excited about that move as well.

With that, again, thank you for participating in our call and we look forward to discussing the first-quarter results shortly. Thank you.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.