F. Morgan Gasior: We are comfortable with the expense. If you look at where we are at now, we would say, expenses generally will run between just under $40 million, say, $39.5 million to just over, so framed right around $40 million. To the extent we see savings from the branch operations. We want to plow that back into marketing, especially for the commercial finance and some commercial deposit assets and liabilities. The branches are now closed. The two branches had issue. We had a contract on the sale of one of the branches. It fell through just a couple of weeks ago. There is still some interest in it. So we have reopened up the process and we are actually starting to negotiate an acquisition of the second branch, the larger facility and we are told that, that buyer has a 90-day to 120-day process that they are working through.
So it’s conceivable that we could have both buildings sold and closed by the end of second quarter. The estimated cost saves from both those branches are roughly $800,000. So we would see an improvement in expenses of about $400,000 for the second half. We do think there’s going to be some disposition costs on that based on where the contract is settling in. I don’t think it will be material to the financial statements, but it could cost us a couple of cents a share at whatever period we report this, most likely here in the first quarter since that’s when we have closed the facilities. So we could see a little bit of impact on first quarter, and then once the facilities are actually sold and closed is the bulk of the benefit after that. One of the facilities, for example, has an annual tax bill of approaching $300,000.
So the sooner it’s gone, the better we are. But that’s the key to achieving the cost saves as to disposition of the facilities.
Manuel Navas: Is that increased marketing spend kind of depending on where the economy is, any — is that an area where it could shift if the second half of the year is a little bit weaker? Like how are you thinking about the back half of the year and possible places you can shift if the environment changes?
F. Morgan Gasior: Well, I would say that, the commercial finance side is something that we need to allocate marketing expenses to and that needs to be a relatively consistent presence. So I would say, once we commit to a plan in that, we are going to see it through and see how effective the marketing is. The product capabilities we have in commercial finance and government finance, even a lessor finance are very strong within the market, in some ways, unique. So we need to make sure the word gets out and so that is a fundamental level of expense that we are not likely to change very much. On the deposit side, to your point, if we are well funded for our objectives and especially if our commercial marketing deposit marketing is effective.
That does two things. One, it might bring down the overall marginal cost of funds a bit. And two, we can meter the expenditures a little bit based on how the marketing is effective. So right now, I would say, the marketing is a fluid number. We know we are going to spend more on it. But it’s hard to predict it and so we measure the effectiveness of what we are going to try to do and some of what we are going to try to do is relatively new to us. Focusing on commercial deposit marketing has been something that’s done within the loan — the credit areas. Now we are going to make that a central focus within the organization, branch level, treasury services, are both going to contribute to those business plans and see if we can improve our total percentage of commercial to total deposits as best we can.
So it’s hard to predict those numbers. But once we get into it, we will have a better sense of what works and doesn’t work.
