John Ciulla: And, Casey, to put a finer point, on expenses, right, it looks like a high headline number. But to Glenn’s point, half of the increase in the guided expenses really are related to Ametros acquisition. Those expenses as Glenn said, part of it is OpEx, and part of it is the amortization of intangibles. And then you have performance-based compensation year-over-year, an increase in expectation, which most of the industry is seeing. If you then look down, the remaining increase in core expenses is about 4%, slightly under, and that has some investment in teams and people and projects and technology. Even if we execute all of those things with our range of expectations, we’re still going to be in the low to mid 40% from an efficiency perspective, which I think is unique for us, giving us the opportunity to be on offense and to continue to invest into the kind of revenue tailwinds and the rate decline.
So — and obviously, we have opportunities should the tailwinds with respect to NII or fees get higher than we expect to curtail on the timing on some of those investments and lower expenses if we need to. So I feel pretty good about where we are, ending up at those financial metrics we’ve promised over time, given the guidance we’ve given. And I think the headline number on the expenses really needs to kind of peel it back and realize that half of it is not organic, it’s the acquisition and the rest of it is kind of performance-based and investment in new revenue opportunities.
Casey Haire: Yeah. Thanks for breaking it out.
Operator: Your next question comes from the line of Manan Gosalia from Morgan Stanley. Please go ahead, your line is open.
Manan Gosalia: Hi, good morning.
John Ciulla: Good morning.
Manan Gosalia: Can you talk about the guidance for the 5% to 7% loan growth in 2024? Where do you see that growth coming from? And I guess, what do you view as a catalyst, right? Like, how much help do you need from the environment to get to that higher end of that range?
Manan Gosalia: Yeah, I think that’s a great question. And obviously we realize that the 5% to 7% guide is kind of on the top end of what you’re seeing in the market. And the good news from our vantage point is we hope that we’ve got a good finger on the pulse of our pipeline and our clients and the markets and the sectors we serve. So what I would say is we’re not projecting that with a hope and pray attitude that the market conditions improve. We’re understanding and our original assumptions going in were that we would have higher loan growth than that. And so I really do think we’ve got a lot of opportunity. We’ve gone through our pipelines in commercial. The majority of the originations in the loan growth will come in those commercial categories, which will be non-office CRE, commercial, public sector finance, sponsor and specialty, general C&I in market and fund banking.
Those are the areas we obviously have good equipment, finance, and ABL capabilities, too. But I would say those core commercial categories where the growth is. And the other finer point in talking to our head of commercial banking and looking at our pipeline going forward and the momentum we had at the end of the quarter in terms of booking is that you’re seeing — while you may not see overall loan demand starting to flourish, obviously it’s still a bit muted, in some of the transactional areas, we’re starting to see more trading of assets and more transactional activity. And for us, for Webster, in our unique businesses, that means real estate investors, private equity sponsors, who are starting to see more activity in terms of buying and selling assets or buying and selling companies.
And that’s why we’ve seen our pipeline grow significantly as we head into the first quarter. We’ll obviously keep people updated as we go quarter to quarter. But right now we’ve got a good level of confidence that that 5% bogey on the low end of the range is something that’s attainable without taking too much risk and continuing to execute kind of within our underwriting boxes and with our existing strategies around segments and geography.
Manan Gosalia: Very helpful. And then if you can speak a little bit about the credit side, especially on commercial credit, I know there was a smaller increase this quarter on the commercial classified loan bucket. But if you can expand on what you’re seeing there, and if you could dig in a little bit on what you’re seeing in non-office CRE?
John Ciulla: Sure. We’re not really seeing any degradation in non — I’ll start with your last question, in non-office CRE, and we seem to be managing maturities well, and sponsors and owners seem to be connected to their loans. So I wouldn’t note any significant deterioration there at all. I think the way I characterize the quarter from a credit perspective as being relatively unchanged from prior quarter is pretty accurate. We had a few loans in C&I go into classifieds. We also reduced our non-performers modestly. So we kind of had some offsets there. And the overall credit profile remained stable. We’re not seeing any — and again, I haven’t dealt with you a lot, but many know that I was the Chief Credit Risk Officer during the Great Recession and thereafter.
I have been surprised, like many of us, that there’s been no capitulation in certain areas, right, and we’re still seeing significant resiliency in the consumer. We have no issues at all in our home equity and mortgage loans with respect to delinquencies or issues. And in C&I, people have been pretty resilient, and we’re seeing some level of investment. The areas that we still focus on, I would say, in sponsor and specialty, healthcare services, those are sort of secular pressures, contracting, which generally is cyclical. But we’ve done a good job proactively, either avoiding certain sectors and certain opportunities or being able to remediate things quickly. And then obviously, you’ve seen us reduce our office exposure, jeez, by almost $700 million over the course of the last five or six quarters without material loss.
