Glenn MacInnes: Yes. From a funding gap, the answer is yes. I mean depending on your loan growth. Probably you get some additional mix. And you’d probably see a move — as we’ve seen in the past, like money market deposits. So it definitely increases your cost. The other thing I’ll point out, John, is that with Ametros and HSA, Ametros is at 7 basis points or 8 basis points. And we’ve come out of the box — they’ve come out of the box pretty strong on that. We closed at $800 million. We’re already at $871 million and it’s just basically two months. And so we expect — we think that’s going to grow pretty good as well. And likewise, with HSA. So I think, there is a lot of — as John pointed out in the opening comments, when you look at our diverse funding profile, there’s a lot of levers we can pull.
Short answer is if we saw some more pressure on DDA, we probably use wholesale funding. The last thing I’d put on Ametros, by the way, and it is in this slide is that in that business, we have about $3.5 billion of committed funds in the future. So those are contractual settlements. So if you think of that business, there is $3.5 billion in a pipeline that’s over years and years, but it’s — that’s the committed funds to that business. And I think that represents a pretty significant opportunity for us.
John Ciulla: Yes. And I would just — again, I think I’m probably saying the same thing Glenn said. But what we saw in the first quarter was less DDAs out creating funding holes, but DDAs to higher-yielding accounts internally. So we didn’t really — it didn’t create a funding [hole] (ph), it was just unfortunately higher cost deposits.
Daniel Tamayo: Okay, great. Thanks for all the color. Appreciate again.
Operator: Your next question comes from the line of Bernie von-Gizycki with Deutsche Bank. Please go ahead.
Bernard von-Gizycki: Hi guys good morning. John in the beginning of the call, you noted you expect an ROA of 1.3% and a ROATCE of 18% in 2024 and beyond. It’s similar to the adjusted results this quarter — is that how we should also think about this as a through-the-cycle return target? And if you can elaborate on any underlying macro assumptions behind that?
John Ciulla: Yes. I mean I think if you just take kind of where our guidance is right now, kind of that’s the output, right? And the reason we talk about those return metrics is that when we announced the merger with Sterling three years ago, we thought that structurally, this is what this company can generate with respect to returns. And interestingly, nothing in our original assumptions about the macro environment when we did the deal has come true. We’ve seen a precipitous change in Fed funds unprecedented. We’ve seen banking crises, we have seen pressures on liquidity. We’ve seen outflows of deposits. And through that all, we have continued to post those kind of high teens, ROATCE and kind of a 1.2% to 1.4% ROA. Obviously, this quarter, it was down a little But if we look at our modeling and we sensitize to credit performance, given our efficient operating model and our funding sources like those are our targets.
And we’ve been able to post those targets for the last nine quarters since the merger closed. And those remain our targets. And what could hurt that would be things like a more significant credit crisis, something unexpected in deposit prices and other inflows and outflows. But if you look at our modeling and you look at our history, we think that kind of we’re geared up to be able to deliver those returns through cycles.
Bernard von-Gizycki: Okay. Great. Thank you for that. And just separately, I appreciate the additional CRE slides in the deck this quarter in your latest 10-Q, I believe you disclosed the CRE office reserves of nearly $36 million. Just wondering how is that tracking as of 3/31?
John Ciulla: We disclosed it — those reserves have moved up their 5% of the traditional office portfolio now. I think last quarter, they were 3.5%. Anybody there?
Operator: Your next question comes from the line of Laurie Hunsicker with Seaport. Please go ahead.
Laurie Hunsicker: Yeah, hi thanks. Good morning, and Glenn, I just wanted to say congrats. Just if we could jump back to C&I, that’s where you had a big jump in non-performers, can you help us think about going from $135 million to $204 million in non-performers in the quarter. Where we are seeing that jump where any details? Is it Sponsor & Specialty finance? Is it ABL? How much is [next] (ph)? Any color you can share with us there? Thanks.
John Ciulla: Yes. Laurie, I will try. We — at a company our size, we certainly don’t talk about specific credits, but there were, say, four credits in the C&I. We had a contractor, health care services, food and restaurant company, one retail CRE. That’s sort of the representation across it. Again, I think I try and look at the macro picture. Obviously, Jason is looking at the micro picture to see whether there is any correlated risk So if I told you they were five sponsor deals in a particular segment, I would be transparent and tell you that and say we are concerned about it and give you more portfolio detail but these were really idiosyncratic across five different categories across our C&I and one CRE deal. And again, I think, the critical element is that our non-accrual loans, if you look at peers that have reported so far or you look at Webster’s nonaccrual levels pre-pandemic, we still have an approach the benign credit environment level there.
And I’m not pretending that we won’t because I said we’ll continue to have pressure. But nothing we’ve seen has suggested that there’s a pocket of weakness for underwriting, asset class business-line or geography that has us particularly concerned, we’re really reviewing the whole portfolio. So I would say, it’s idiosyncratic across industries, across sectors and business lines in the quarter and a move back to a more normal level of non-performers.
Laurie Hunsicker: Got it. And then just especially the Sponsor & Specialty book, how much is that non-performing?
John Ciulla: Can you repeat the question?
Laurie Hunsicker: Yes, the Sponsor & Specialty book, what is the nonperforming rate there or dollar amount there, the $6.7 billion book?
John Ciulla: About 2% — about 2%.
Laurie Hunsicker: Okay. Okay. Great. And then just going back to margin here. Do you have the spot margin? And then can you just comment a little bit in terms of FHLB borrowings. I was thinking that the Ametros acquisition, you would probably be paying that down, that’s costing 5.5%. Can you just share with us, I guess what you’re thinking there? Thank you very much.
Glenn MacInnes: So the spot NIM at the end of the quarter was exactly where we were for the full quarter, so say, [3.35%] (ph) spot deposit costs I said on the call, [2.24%] (ph), so up 1 basis point from where we were for the quarter and loans down 2 basis points, so [$622 million] (ph). And then with respect to FHLB, I mean part of the dynamic there, Laurie, is that we’ve paid down or we’ve let expire brokered CDs. And so the FHLB borrowings allow us to be a little more flexible than winding up brokered CDs, the terms and stuff like that. And so we can tap that resource in order to fund any shortfalls and things like that. So I think that’s the way I would think about it.
Operator: At this time, there are no further questions. I would like to turn the call back over to John Ciulla for closing remarks. Please go ahead.
John Ciulla: Thank you very much, Eric. I appreciate everyone joining us this morning. Have a great day.
Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining, and you may now disconnect your lines.
