Q3 2020 First Bancorp Earnings Call
[music] good morning, and welcome to the first Bancorp third quarter earnings conference call and webcast.
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I would now like to turn the conference over to John Pelling IR.
Please go ahead.
Thank you Debbie good morning, everyone and thank you for joining first Bancorp's conference call and webcast to discuss the Companys actual results for the third quarter 2020, joining.
Joining you today first bancorp are really all <unk>, President and Chief Executive Officer, and lender Bird Executive Vice President and Chief Financial Officer.
Before we begin todays call. It is my responsibility to inform you that this call may involve certain forward looking statements such as projections of revenue earnings and capital structure as well as statements on the plans objectives of the Companys business.
The company's actual results could differ materially from the forward looking statements made due to important factors described in the company's SEC filings.
He assumes no obligation to update any forward looking statements made during the call. If anyone does that already have a copy of what cause presentation or press release, you can access them at our website, one first bank dot com.
This time I'd like to turn the call over to our CEO.
[music].
Good morning, everyone and thanks for joining our call today.
Please let's move to slide four of the presentation.
He was a very important waterborne Olin Corporation and.
And I would like to overcome key highlights and then expanding certain matters.
First of all you know we're extremely pleased with how we complete all we're starting up with solutions like.
By closing the Santander drops I feel September 1st.
This transaction not only solidifies our position in the island bullets rent since our competitiveness in commercial or retail that's what our residential.
I'm very pleased to welcome our 250000 new customers.
We look forward to <unk> board.
Who board them to support their plans with an expanded branch that were expanded service John L. King County, they can already cooperating [laughter].
On the economic front, they definitely there really fallen from the pandemic combined with 27 being you're making fun being deployed.
Bolstered liquidity being aware market and we continue to drive the economy got BBP will touch on that.
Nobody likes seats I even.
Even following the completion of the acquisition.
We do already sustain at fortress balance sheet, our liquidity reserve copy the level or I'm on the I guess in the banking sector.
Corporate form almost <unk> water.
We generated 28.6 meal net income.
Dr. Pepper lesion was 77, Emilio we have only one month of earnings from the acquired operations.
Hi, Laurie nature worst draw that 971 million for the quarter.
We basically are in.
Increased 49, you'll see not got they look through the quarter.
But on the policies that live broker and government agreed to.
To 12.5 million and finally, our capital ratio remain among the highest in the banking sector.
And Gabi Dulac films remain a priority the us we see economic environments start relaxing.
Now, let's go over in more globally afield beside them on slide six dart would like six.
Let's talk about the beat down Soc shown definitely was a long time in the making and then as you see we really brought over my people see showing oki area.
As you recall that was actually was announced back in October 20 like the.
In closing I'd completing.
Well see but they buy by the call the pandemic definitely.
Well it seems than some of the metrics I'll be broke from announcement, we would still expect.
35, or 70 bps that ratio to consensus estimates the revised BBB at closing is estimated at 4% lower than I worried on estimate.
And we expect less than two years old well burn but now.
The this improvement is driven by you know slightly smaller loan portfolio.
This is a lotta research the LIBOR at closing and the rate March due to the rate environment.
Well I call savings are estimated at 48, mainly on we would definitely work harder to see either area, though we're going to see more books, but we're also focused on growing the franchise. So you say, it's a balancing that as we move forward and a few of our gold all have to be more efficient.
Increased market share.
I think together, we have an excellent team and then we're working diligently to bleep degrade and to turn on the girls endings, I see opportunities Comed, Andy Let me.
I want to touch on the Rachel you know we made a lot of profit that's when the first 45 days they they choice on their way.
Those 45 days, we completed the conversion and integration of the mortgage business the insurance agency and several him and he said the functions.
The plan is to complete the integration process by the end of the second quarter 2021.
And they do comps either remembered that we continue to operate on their call the limitation and they start seeing and obviously a process of this magnitude you know takes types.
We also want to own this month as part of the they brought with them as part of the synergies and I think the ratio, we announced a voluntary separation program.
That provides an opportunity for early retirement to approximately 160 employees well they combined institution.
This program will be executed over the next three quarters.
Starting in the fourth quarter.
Well there are potential synergies identified include you know the opportunity of consolidating eight to 10 branches.
I definitely think that I meant that you did he say show of the Dove Channel School drive well there are efficiencies, but again, we don't want to hamper our potential to grow our market share with with that would then I'll expand it might get a distribution that we have so so we will continue to move on to report on this on this effort.
Let's move to slide seven.
The new combined balance sheet is solid on Wednesday, where to fight it.
You know that the 2.6 billion acquired loan portfolio that really complements all worse nicely.
They they and their deposit books improves our funding.
The nowaday lumpy deposit ratio stands at 78%.
And then obviously, we have an expanded customer base to grow all said and done.
So I moved on to other products.
Let's move to slide eight to talk about the economy.
I think the water, we clearly saw the co relation of the reopening you know what it might get on.
The trends of economic recovery.
He was clearly reflected in the water and remember that in the case of Puerto Rico. We have some you know severe tightening in the second quarter. He and some of those rules were relaxed later, we're still operating under certain loved now.
He bought but the I think the market has reacted very well to the situation.
And getting used to operate on their ducks in ideal.
The.
Importantly, you know before aboard this economy. There are still over you don't 60 Bailey of wells have been damaged got here get relief. So so those are numbers that are a big four days four days gone on me and there's a lot of going on regarding the construction on the phones are being deployed there there definitely showing delek.
Would it be an activity.
Employment figures computer and Basit beef recent numbers off of all girls you are 92% both of almost 2019.
So definitely there is a recovery on the blame insight.
From the perspective of our client base, you know 100% of our corporate clients are our operating and go from 99% of the business banking clients rough reopened well.
And there are sectors are more sensitive the hospitality industry continued to reflect laurel coupon seaboard, but.
But improving trends.
Our you know how the portfolio a.
It will be because of the bus 11 Airlines I want airport traffic is slow.
The closer to 50% and that we are all aware.
This is these are the segments that are more sensitive and would require longer recall that he btwob. So we continue to closely monitor.
On the other hand, probably be said that they'd be perspective lending activity for the quarter was knee or you know pretty pandemic level.
And do you need to like DB piece off significantly.
Retail lending for the orders were very strong for both auto and mortgage lending.
And actually it came about re pandemic level. So so.
So we are optimistic with a recovery on the possibilities of additional stimulus.
But we also began to to do the five that you know what they sell economic hurdles could come if there's a need to implement HR restrictions of cold call, but in the future. So we have to be we hope to be watchful.
Please now lets move to slide nine it.
[noise], we wanted to give you an update on the relief road humps trends. The relief brands are actually Basit. If the graph show you know the peaks and low over over the last six months I totally since March of the different regions have brought oaks.
A I think you know.
We see a positive trend during the water well actually after the quarter closes.
Our active multiple deals were reduced to only 0.8% of the portfolio less than 1% of his EPS of October 23rd.
I think so far they both mother in payments perform unexplored sit there with you know 98% of commercial lines core and a 94% every day. That's all door 21st it's important to note that this does not reflect only the due date prior to dollar 21st regarding the payment patterns. So we.
Have to wait until the end of the month to see the final trend.
We do have a segment of the commercial portfolio that belongs to the industries that I mentioned the more sensitive ones.
So just you know hospitality retail and entertainment.
That's good need additional support through a longer stabilization period, those are being evaluated on their deportation modification will therms provided by the sexual for things like air side.
So so please lets move to slide eight.
You know here, we have all the trend of the balance sheet, you know, where we how we compare to be irrs and and and definitely you know both of these acquisitions you know our liquidity level every circle restaurant company that Brazil.
They really they really give us opportunity. We're there we're positioned well to take advantage of any growth opportunities.
Oh definitely would be good stewards of our capital position and again capital deployment opportunities remain a priority ones, our economic environment Stobie life [laughter], let's let's move to slide nine for a moment.
I wanted to talk about you and show you the trends of core metrics. Obviously, you know this graph shows.
Hey, you know the trends on that on the positive impact of the acquired operation.
We generate think I meant that being our net income with only one month of earnings contribution for the quarter abrasions.
Yeah, and again, they they enhanced funding profile should should help both driving you know additional revenue.
Lori in Asia, when I say major were solid for the quarter Utica the level and indeed, the lateral adoption rates continued to improve during this pandemic.
We will continue to work hard and now with more clients and more distribution points to improve our level of service to all our customers.
I have to say that I'm really proud of my team and will have been able to accomplish so far money the pandemic challenges.
And we're definitely excited for the future growth prospects of our institutional.
And we're also excited to show over Beijing Best stores, while we are able to accomplish.
With that I will turn the call door landlord to go over the details of some of the financial metric thanks to all.
Good morning, everyone.
Hello, My reference to net income for the quarter was 28.6 million up 13 cents, a chair compared to 21 million last quarter.
We break down the components you can see that corporations are legacy core basis.
Cheap that had income of 44.3 million, which mostly it's a result of reductions in the required provision for credit losses or last quarter, we had up a regional 39 million as compared to 8 million this quarter.
During the quarter the improve.
Improvements on macroeconomic projected variable to most of our portfolios except for their commercial real estate as well. So some changes in portfolio balances are led to this reduction.
The acquired us and on their operation contributed three and a half million after tax net income that excludes the one c., so adjustments, which I'll touch upon these these results, including buckled the amortization of the fair value Mark on all the assets and liabilities.
And on the amortization of the resulting in tangible.
Oh for example, a one of the other things that are hot impact we look at the moment portfolio something they're hot U.S. treasuries or like your spectrum portfolio.
That after Mark's resulted in a portfolio yields are only 15 basis points.
Since since then we decided not to improve margin or to sell this portfolio and reinvesting in other securities ER. According to our policy is.
Which you all know around 94 basis points, which will improve one former Soviet yield.
On the other hand amortization of some of the other discounts on intangibles, resulting in our 1 million improvement in a in a net interest income from the combination of loan and deposit Oh preliminary fair value adjustments that have been booked.
If we look at all there are the other components of transaction. Some large ones that were in the quarter or the first one would be to see so I made reference to a female.
He sold requires that indicates of a business combination combination we set up an allowance for credit losses.
On top on on non purchase credit deteriorates loans on top all orientation to any any kind of fair value measurement.
This resulted in a recognition of an allowance of almost 39 million for the quarter. In addition to those fair value marks the the the non purchase credit deteriorated portfolio. Its about a 1.7 billion after after marks.
During the quarter, we also decided to sell our under 160 million of MBS that we're experiencing significant prepayments on.
And that resulted in a gain of our <unk> 5.1 million from from different section of them being reinvested again, you know there are other instruments.
Merger and restructuring costs out and you all mentioned some a bit during the quarter, we had 10.4 million, which compares to 2.9 million in the last quarter, which was mostly legal financial a a financial consulting as well as some conversion related costs as we prepare for the conversion so.
So far we have incurred our 25 million in expenses related to the transaction over the last few quarters.
And during the fourth quarter, we expect to have some amount associated with the voluntary separation program that you mentioned as well as costs associated with the branch and other consolidations as we finalize the sessions on data those processes.
Finally, the law the other large items that we need to know about analyses completed on a lot I saw the DTA now, including the times on their operation and that we told that in that reversal of approximately $8 million of deferred tax asset valuation allowance we had on on the on the books.
Net interest income for the quarter was 148.7 million.
Which is a 13.5 million higher than last quarter 40 million of that with Ah lisanti on their operation.
The on the other hand, the legacy Bio Firstbank Corporation.
Had a reduction of $500000.
In interest income as compared to last quarter.
In here a reduction in rates, obviously accelerated prepayments on the investment portfolio has been large.
Higher proportion of all Scotch on investment Securities totaled earning assets are up resulted in a reduction in the NIM on first bank last quarter. We had a 422 a mean that your room you saw in our release, it's gotten but that number is down to about 394 this quarter.
Break it down some of the components of the commercial loan repricing with our four basis points of the reduction.
Hi, hi, much higher proportion about gosh on investment securities as well as some of the large repayments repayments on.
Andy the alternative for reimbursement affected by 18 basis points more by barging.
Sometime there on a stand alone was about the margin with our Threeeighty nine considering the purchase accounting adjustments.
That combined with first bank ended up with a threeninety three margin data that you see on the under release.
Noninterest income improved to 29.9 million.
The 9 million. This 9 million increase includes a 5 million in the gains on sales that I made reference to before of securities that I referenced.
We had 3.4 million increase in revenue from mortgage banking activities.
Mostly or all of it it's related to two sales of residential mortgage this quarter.
We had a much active more active quarter on originations than what we had in the second quarter and ended up selling 98 million more in conforming paper that we did last quarter, we told him that revenue increase.
Also the the rig the reopening of businesses as we have seen on the quarter.
I've seen a much higher level of credit and debit card activity, which improved Oh God.
That includes 80, m. merchant fees and some of the other component not improve up being combined with 2.8 million.
In the quarter and then the improvement we had in deposit service fees associated with the way. It's under construction that are brought in 1.1 million of additional deposit piece.
To to the operation.
On the expense side expenses were $107 million that includes 10.7 million expenses for the ascendant upwards on that operation and a 96.8 million for the first time legacy operation.
This 96 million 7 million higher than the 89, almost 80 million we had the last water.
As I mentioned, the merger and restructuring costs for the quarter were 10.4 million.
Which is 7.5 million higher than EPS quarter than last quarter basically created most of the increase but.
During the quarter we.
If we exclude this first bank was 86.4 million up expenses.
Corporate related expenses were down about a million that are this quarter, which is down about 2 million up from last quarter boarded what other expenses.
Obviously as we saw improvements in volume of transactions on improvement in fee. We also have become higher expenses associated with the with that volume of business.
In in those the debit and credit card transactions.
The allowance for credit losses increased significantly as of September 30, the allowance for loans at least it's only was up.
Up 65 million to 385 million as compared to June.
Mostly due to the initial along with the credit losses require.
So to the Sunday on their operation even.
If we look at total the allowance for credit losses, including unfunded commitments under securities that's up to 403 million.
This quarter as I mentioned before we recorded 38 1 million in allowance for credit losses totaled 37.5 million not that it's related to loans.
That build up the data allowance associated with the portfolio and you know this on a four four bcf.
PCB loans or pressure, it's ready deteriorated specifically.
We start Lisa 20, almost 29 million allowance, which represents the fair value marks on this loan.
Which diesel requires that what is commonly referred to as it ramps up that the loans represented gross R&D alone and this can be presented in the la once those two combined were about 65 million.
Oh, the ratio be Ob allowance for credit losses on loans to total loans was three 3.15% at September slightly down from 340, we had a june but.
But but a very significant coverage if we consider that we added a large amount of portfolios.
A large part of it it's also a mark to market on fair value Mark to market on has been discounted.
On a non-GAAP basis, if we exclude the ppb loans, which don't carry much reserve the ratio of the allowance.
To total loans was 338.
As compared to 355 last quarter.
[noise] asset quality remain remain.
Good enough water nonperformance or a downturn I have million.
Oh, two dot 293 million most of the reduction or hopping on the on the Oreo portfolio, which decreased seven and 7.3 million, mostly sales whether were completed in the quarter.
Migrations to nonperforming were higher this quarter I'll talk more about our EMS expire we start getting taken getting back to levels of more to the normal levels that we were seen before.
And we are in a position to continue to pursue some of the foreclosure processes that were put on hold for a couple of quarters.
You know us we provide to those moratoriums to two customers.
The inflows were 18.4 million this quarter.
Which is 10 million higher than than last quarter.
Our capital ratios remain.
Really strong.
As you can see weve, even with the impact of the of the acquisition we feel hub.
Tier one ratios up seven have 17%.
The the leverage ratio I think that's important to mention that you see to about 13%.
For the quarter, but.
You know, we only had some sound on their operation for one month in the quarter. So average assets were less if we were to to normalize and assume a full quarter of Irish assets that ratio would be closer to 11% yields over that.
And and that was.
We expect that is still very significant with the acquisition of.
Five losses in assets in the quarter.
With that I will I will open the call for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if you weren't using a speakerphone. Please pick up your handset before pressing the keys to.
To withdraw your question. Please press Star then too.
This time, we will pause momentarily to assemble our roster.
The first question comes from Iran.
Walla with Bank of America. Please go ahead.
Good morning, guys.
Hi, good morning, everyone. So in your prepared remarks for you I know you mentioned a bunch of things that all the focus on capital in the tone and opt and optimism about things getting better or body.
Barring any sort of negative.
Developments and Colgate.
Like by my math like when you look at your largest competitor that tier one leverage ratio is about 8% you're at 11.
200 basis points of excess capital very conservatively.
As a shareholder you would want the bank to act now given that the stock is just talk to US I don't love enough or didn't see the deals being done do you think the regulators are on board to the I know you can talk about your regulatory discussions, but there should be a sense of urgency I would imagine in executing this given where the stock.
So just if you could talk about that.
Yeah, I think I think Brian and thank you for the question the yeah.
We have a sense of urgency to understand the importance of.
On the other hand, you know, it's really about the environment.
You have to see what's happening around the world and we have to see how what's happening in the U.S. and we have the elections.
Well you know commenting on that I think you know what but it was also position with Congress you know to benefit either case. So things we continue independently over wins, we believe but but but that coupled with the call with you know.
A risk, but still not is still out there.
You know of hopefully we don't have to go back to two more love down for closing we have seen the impact.
Yes, there's another stable those that you know that I, probably deal with comp, but I think I think we have a lot more visibility first quarter on this day.
There. There's also some regulatory guideline it regarding these matters that are to be issued through the end of the year. So so did its a priority for the management team, yes, we recognize the excess capital.
Yeah, we I think we need to get through.
The end of the year close to your see you know where the economic trends are in the next round you know we have a couple of quarters that.
We increase you know bromate, we provision you know incrementally in a material amount we are world covered.
But all that depends on economic forecast. So I think that the you know we know these animals that.
Of of time in this matter to be brought in and make sure that that you know that that yes. The economy is stabilizing and you don't watch it as we are learning to work on a call it environment.
We know that you can upgrade you know that you can be you didn't achieve your business. You know you know you have you have to spend some money for that to happen.
But in some environments you know, we're watchful of both ore bodies only restriction sold out that that is a caveat here okay.
No understood well, thanks for that and I guess I'll just moving on Orlando on Slide 11, our looking at pre provision earnings if you put the.
The quick what impact the Santander implies about $87 million.
In what he he collision awnings.
Outside of the $48 million in cost savings that you expect.
Talk to us in terms of your outlook on p. or not or revenue or delta between quarter levels as it pertains to fee income and the margin outlook.
Yeah, I think there is what are they learned what are the levers here.
Obviously loan growth.
We will look to achieve some loan growth, but you know again.
And by the economy and opportunities.
You know we have we have seen good numbers in the mortgage business.
[noise] commercially solid auto it's continues to to sustain it.
On the other hand a.
You have you know central margin compression risk.
That is still out there with the repricing, we have excess liquidity liquidity continues to grow it and and we have you know all the other component at this moment the investment portfolio I think Orlando over you know some levers that we're pulling there but on the other hand you go deal. We continue to have higher prepayments. So that you know there's always.
It expands their synergies and dispense with both to a positive but all those are both levers regarding PPNR without getting into the provision.
There's also we have a lot more levers that we had before closing the deal.
And we're very focused on how we pull these levers someone some of them we can draw some of them we don't control.
I like the rate environment, but that's really the it's not always about execution.
You know what and achieving what we have in the plot on integration. The estimates that we provided to you on how how long it takes and how much it will cost to get those synergies. It is sustained so that is our plan. We continue to execute recognizing that the yes, you know the rate environment still a challenge.
Yes keep in mind that you know.
The the savings its impart related also to the integration process.
So they don't happen immediately we kept going up you know two or three quarters before we achieve full benefit of old savings that we could we could get a you know we still.
Running systems independently, we're still covering cost related to running that's under systems.
So there's a number of things that will happen.
As we go through the integration over the next three quarters has already mentioned and.
And that's going to go don't push it the margin the margin. It's a it's a challenge and you know.
I made this point the expectation, it's it's not necessarily as.
Interest rate reduction, but it's more of a mix.
And they.
[music].
You know, we we don't mind, having a lot of deposit sudden we don't have a having a lot of liquidity, but it does have an impact then and ER and the prepayment that we are seeing the portfolios. It's a pretty large so much higher than than we would have anticipated.
A couple of quarters.
[laughter] <unk> I.
I appreciate the challenge with the margin Orlando do you think and I was just about 177, Oh, the full quarter basis for the combined bank can at least hang in flat to higher from your dog do field, especially <unk> and <unk>.
We're hoping that it's going to stay.
Oh flat to higher a little.
A little bit based on also on that what I would tell you said that you know that now as we integrate we can pursue additional business.
You know, we we do see some things that have to be taken into account like mortgage originations are good what we are doing a lot of conforming paper. So that's been sold we generate impeding comp, but it's resulting in some reductions on the portfolio side.
On one on one hand.
So so the mix is going to be it's going to be the the pressure component here more than the rates going forward.
We still you know.
How about a little bit on the on the repricing inside of the liabilities.
Deposits come due or the read where rates are lower from that some of these.
Cds that where he should have you know a couple of years ago.
So there was a little bit in there, but but it's going to be more of a mix kind of thing.
Got it thanks for taking all my questions.
Thank you.
Again, if you have a question. Please press Star then one our next question comes from Alex Twerdahl with Piper Sandler. Please go ahead.
Hey, good morning, guys.
Got it.
First off just wanted to circle back to so what you're talking about capital return and obviously I understand that there is a lot of moving parts in the economy and we're not out of the woods, yet Colgate et cetera, but when we are out of the woods. There a formal process that you guys need to go through and are an order to turn on a buyback at some point in time and that you can sort of elaborate.
What what that might look like.
You know all companies I like to have a formal process.
Studies delineate that you know either by by regulation lowered by our capital plans.
So so after you after you complete your analysis and your and your recommendation you have to go to process them and you know when engaging in different flavors of you guys executed if we say buyback yeah.
You know obviously you know I think it's a common profit up people know.
Obviously I think the you know where I don't think its a process what is what is holding off today.
I think you know we have to we have to make sure that we live in a right time.
The things move forward you know we have priorities that are you know the integration we have priorities that are a sustaining our asset quality.
Okay and has there those are challenged by the current common situation I think we have to take that in mind. A you. So so that's really that's really we need to see we need to see more evidence of stabilization before concluding on that decision Alex.
Okay understood and then just as I look at the pro forma balance sheet. It seems like you know you guys do have a lot of liquidity and then you have some higher costing brokered Cds and you guys I bet, you'll be advances that are a little bit higher costing today I mean are there some opportunities to do some de leveraging to get rid of some inefficient leverage out there.
Clearly when and you can see that the level of broker deposits have been has been coming down.
I don't think we have not been renewed when any of the broker deposits.
We do have some they're not off expenses, but we do have some brokered money market accounts in here, but move a little bit up and down every quarter, but what on the broker CD side, we're not running.
We know when it I'll, let it go it's a you know it's much cheaper using the cash that you have on hand data that even with the lower cost brokered deposits out there but.
But obviously you have to love.
Well part of the maturity of those.
But we have not been renewing any any broker deposits or FHLB advances that mature.
So those are some of the opportunities is a as well as what I mentioned on the repricing of the of the time deposits that come due that were priced at a much higher rates a couple of one or two years ago when when they were issued.
Okay are there big tranches of either brokered Cds or advances that will be coming out are maturing in the near term.
In that.
The way we structure the brokered Cds that we were ensuring with fairly spread to try to.
Not have precisely that a big chunk come in and then on pacing a point in time in the market that was up.
You know at some point market become too complex for some of these each month.
So it's it's not a bunch, it's a bit every quarter. That's whatever we have what we have bid every quarter.
Okay, and then can you help us I'm sort of figure out the loan Mark inclusive of the credit adjustment you know that.
That would be coming back to and I over the life's alone and sort of how to project.
That purchase accounting accretion over the next couple of quarters.
Oh theme.
Obviously the marks on the PCB portfolio are part of the reserves.
And and those markets are the dawn don't accrete back it's a matter of just ER or down depends on the Cecil analysis, you do going forward.
On and the case will be all the or not you see the portfolios.
There is about a 30 35 36 million of marks.
That would be both great I'm on rates that would come back through the life of the loans.
I know, obviously, you know the mortgage ones will take longer because it would be the commercial ones, but typically you know operating profit or because of their maturity terms.
So more or less that's the those are those are the big components.
It's you know, we'll see I tried a chunk between three months on a on a two years, which is related to two commercial on or not.
On the on.
On their consumer portfolios and then the mortgage once will be more than that five to seven year term.
Great and then just a final question for me is I'm, just as I think about expenses and sort of the phase and on cost saves can you kind of get to help us get a sense for sort of the cadence of the cost saves coming in over 2021, I know you got the guidance in the in the slide deck and then also the voluntary.
Any retirement program is that part of the $48 million of cost saves or is that additional to that.
That's far.
The cost saves will come from our rationalizing operations technology side, you know the the Santander cost births compared to adding that type of operation to our knowledge structure.
It's it's higher so we the voluntary separation has our immediate cost, but then you start saving from that point on those our position on that in general or if not all basically all will not be will not be replaced so those are immediate savings and that was part of the assumptions we do.
From the start.
But that we would do something like this.
So you know.
Tom will start.
Those are bottomed out its operation in January technology. Once we close on another large one will will start happening.
The other here, but most of it in a in the first half about 2021.
And ER and then.
The other one would be potentially be that that's going to take a little bit of time, because we again I mentioned there is related to branch consolidations. When we decide to do that we went up a customer.
Well you know that's why I mentioned that a b, we will we'll see the full benefit starting.
Really on the second half of 2021, yeah, yeah, some of their hobby not you've already.
When I see you know some of that in to this quarter as we integrate operations and systems. We completed two significant businesses. This this border early in October so some of them even if it comes into the quarter. So obviously, that's our focus our priority.
But it's a lot of you know little things also when you add you know marketing costs League God you know on the different you know consultants and professional services and that's why we come up with the with the potential safe.
Perfect. Thank you for taking my questions. Thank you Alex.
If you have a question. Please press Star then one.
At this time there are no further questions. So this concludes our question and answer session.
I would like to turn the conference back over to John Pelling for any closing remarks.
Thank you Debbie on the IR front, we have a couple of virtual conferences coming up here in November November 9th or the Piper Sandler conference and on the 10th.
Family. So we look forward to chatting with you again, we appreciate your.
This will conclude the conference call. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.