Mark DeFazio: But, Nick, year-over-year, if you look at the difference between core funding and net new loan growth, it was minimal. We didn’t really rely at all, heavily at all, on wholesale funding to fund that growth.
Nick Cucharale: Right. Right. Okay. And then lastly, another solid rise in the healthcare portfolio this quarter. Where are you comfortable bringing that book as an overall percentage of total loans?
Mark DeFazio: We’re studying that right now. We’re having stress tests, as you know. As you know, we do stress testing of the entire portfolio twice a year. We’re having a targeted stress test done on the healthcare. I have a sense of where that’s going to come out, it would be very positive. We like the risk profile there. So we will announce some new numbers at some point, but we’re going through that analysis now in the first quarter. But we do like the risk profile and the economics around healthcare. Remember, it’s a very diversified portfolio. It’s just not skilled nursing homes and assisted living facilities.
Nick Cucharale: I appreciate the color, and thank you for taking my questions.
Dan Dougherty: Thanks, Nick.
Mark DeFazio: Thanks, Nick.
Operator: Thank you. Our next question comes from Chris O’Connell with KBW. Please go ahead.
Chris O’Connell: Hey, good morning.
Mark DeFazio: Good morning, Chris.
Chris O’Connell: So, just wanted to circle back to the NIM guide of the 20 basis points and just confirm that’s off of the 4Q23 to 4Q24 timeline numbers, not off of the annual MIM?
Dan Dougherty: It’s actually off the annual MIM.
Chris O’Connell: So that’s 20 basis points over 3.48%?
Dan Dougherty: That’s correct.
Chris O’Connell: Great. And how much does that change, I guess, if there’s no Fed cuts next year?
Dan Dougherty: I don’t have that handy. Happy to run the model and let you know.
Mark DeFazio: One other way of looking at that too, Nick, is we have some very big deposit initiatives that should drive low cost deposits throughout 2024. So we’re not just relying on the Fed to give us some expansion here. We’re driving it ourselves, as we have historically. And you saw in this year that just passed, we had only two quarters of compression with the kind of tightening that we face. So we’re not relying on the Fed. The Fed has many more cuts predicted. We only have two in our projections, but it is not the underpinning of that margin expansion. It’s our deposit initiatives.
Dan Dougherty: Yeah, so the NIM forecast that my team has produced has relatively conservative assumptions related to core deposit growth. So yeah — if anything, there should be upside there, assuming that the path of administer grades is generally aligned with what we’ve talked about.
Chris O’Connell: Great. And on the B2C exit, I appreciate all the color that you guys gave. As far as just the actual impact to the GPG fee line, do you have what that is, I guess, on an annual basis once the exit’s complete? And then any sense of just, even if it’s rough, the timing of how that would play out?
Dan Dougherty: Again, the exit is going to happen during the course of 2024. The reason I couched it in terms of forecast revenue for next year is to emphasize the fact that it’s a relatively small number. It’s 2% to 3% of consensus right now for 2024. So you can do the math, I can do the math. Let’s call it $5 million to $6 million is going to be the delta there.
Chris O’Connell: Got it. Great. And then…
Dan Dougherty: This is Chris.
Mark DeFazio: Chris, keep in mind just one thing that shouldn’t be not focused on. As I mentioned earlier, we didn’t bring in — we haven’t onboarded a B2C client, and GPG’s revenues not only absorb the material reduction in crypto-related transaction revenues, we not only replaced that seamlessly, we replaced the lack of revenue coming from B2C as well by adding new B2B clients. So the underpinning of that business is strong and it’s unfortunate that we’re replacing some opportunities there for a lot of different reasons but we are not coming out of a hole because we are replacing it as we speak. And we demonstrated it again in ‘23.
Chris O’Connell: Great. And just by the multifamily provision, how big was that credit? And can you give any color to surround the overall circumstances, what the total reserve to the loan size is? And just any other detail surrounding the credit?
Mark DeFazio: It’s multifamily outside of New York. I think it’s Ohio and Louisiana. What we understand is a dispute between partners and the lack of willingness to put capital into the projects to bring them to be stabilized. So it’s not something we haven’t seen in our careers before. Considering the sponsorship behind it, we’re a little bit surprised that considering how wealthy they are and how experienced they are in this asset class, that they would run the risk of litigation, but they are. But we are confident. We believe the risk of loss here is minimal. I actually believe the risk of loss here is zero.
Chris O’Connell: Great. And do you have what the LTV or debt service coverage ratio was on the credit going in most recent?
Mark DeFazio: Well, they were properties in transition, so they were not highly occupied. That was the value proposition of acquiring it at a very high cap rate, going in, renovate, stabilize. And the typical model of multifamily is you go in, you acquire, you stabilize, you renovate, you stabilize, rates come down, cap rates come down, you refinance or sell at a higher return. And they just — rates are likely to come down, but they’re not finishing the renovation. So the debt service coverage is almost irrelevant because of the guarantee and the global cash flow of the guarantors, which supported the projects on the way in. The LTVs were 70%, I’m sure, within policy guidelines of 70%, 75%, I’m sure.
