So I think the overall net risk rating migration in the portfolio continues to be modestly to the downside. But with proactive risk management and working through things, we’re not seeing any material areas of stress in the portfolio. Even if you look at the charge-off numbers, I think for the year we ended up at about 22 basis points. Interestingly, that’s kind of the same as the five year average pre-pandemic. So really that gives you a perspective of where credit performance is now, even to pre-pandemic levels. And within that 22 basis points, 10 basis points of the 22 basis points is related to proactive balance sheet management and loan sales. So we really haven’t seen kind of the credit wave that I think people have been expecting for time.
But we continue to monitor pretty aggressively.
Manan Gosalia: Appreciate all the detail. Thank you.
Operator: Your next question comes from the line of Daniel Tamayo from Raymond James. Please go ahead, your line is open.
Daniel Tamayo: Hey, thanks, guys. Good morning, everybody.
John Ciulla: Hey, Daniel.
Daniel Tamayo: Just a quick one. Almost all my questions have been asked this point. But I guess to put a finer point on the intangible amortization discussion around the Ametros expenses in 2024, did you have a number that is baked into your forecast that we could just pull out the operating of Ametros from?
Glenn MacInnes: What I would say is we said expenses would be about $50 million, and I would say about half of that is going to be intangible amortization.
Daniel Tamayo: Okay, great. That’s all I had. Thanks, guys.
John Ciulla: Thanks, Dan.
Operator: Your next question comes from the line of Steven Alexopoulos from JP Morgan. Please go ahead, your line is open.
Steven Alexopoulos: Hey, good morning, everyone.
John Ciulla: Hey, Steve.
Steven Alexopoulos: I want us to go back to the margin for you, Glenn. So the NIM at 3.42% is fairly strong, right? Many of your peers are in the 2% club. As we think about the potential for Fed cuts, right, which is a short-term negative given an asset-sensitive balance sheet, but long-term positive given the potential for a steeper curve. Put this together for us, like, how do you think the NIM, does the NIM trend up in early part of ’24 and then down once we start getting those cuts? And then once we do get a normal curve, how do you think about a normal NIM versus where you are in 4Q?
Glenn MacInnes: Yeah. Thanks, Steve. So I think that 3.42% is sort of more of an anomaly for us given the originations that occurred. John, I think, highlighted in his remarks over $1 billion of loan originations, securities originations at the end of the quarter. So we’ll get the full benefit of that as we get into the first quarter. And then if you add things like Ametros, and you just think of it like, mathematically, $800 million is coming in, at a minimum we’re going to pay down FHLB borrowings that are 5.25% right. So you get the immediate benefit of that, and that’ll carry out through the whole year. So that’ll support our NIM. The other thing, and I know we’ve talked about this in the past, is we continue to have this dynamic, as I think all do, that fixed rate loans are repricing.
So for us, it’s like $1 billion, $1.2 billion in some quarters of fixed rate loans that are repricing. And to the extent they reprice into fixed rate loans, you’re picking up 200 basis points. So that’s added to NIM as well. The securities purchases, like we talked about, at the end of the quarter, you get the full year benefit of that. When you think about the restructuring we did on $400 million, we probably picked up about 400 basis points on that. These are all additive to NIM. And I think the dynamic here is that you’ll see NIM supported in the first couple of quarters and it will carry out through the year. You will see — we are asset-sensitive. So in the back half of the year, as the Fed starts to cut, you’ll see NIM — you’ll see deposit costs begin to, which will initially be a lag, will begin to reprice down as well.
So all that ins and outs, and there’s a lot of moving pieces, as I’m sure you can appreciate. I would expect that the NIM would be in the range of 3.45% with some potential upside, depending on how the balance sheet rolls out.
John Ciulla: Yeah. And Steve, I think you have the dynamic right. We get some opportunity in the near term, a little more pressure in the long term this year when they start cutting. But as Glenn said, we feel pretty confident, given the moves we’ve made, that we can keep that NIM relatively stable at a rate better than most of the industry.
Steven Alexopoulos: Got it. Okay. And then I had a question on HSA bank, which had a decent year overall for 2023. So, as you guys know, there was quite a bit of speculation since the last earnings call in terms of your appetite to retain the business. John, could you frame for us how you look at HSA bank today, right? I look at the Slide 4 and I say, well, maybe it’s not as important as it used to be to the franchise. And do you feel that the value of HSA bank is being held back by being inside of Webster, can you give me your update there?
John Ciulla: Sure. I don’t. So I’ll answer the question kind of short term, and it’s every bit as important to us as it’s been. Obviously, it’s from a pure financial contribution perspective, given the size of the organization now, it’s a slightly smaller contributor, but nonetheless hugely important to us from a revenue and fee and obviously low cost, long duration deposit perspective. I can clarify on this call because I knew there was a lot of activity and speculation after our last phone call, I answered that question the way I had answered it every single quarter when asked. What happened, Steve, was that no one asked the question for about six quarters. So people thought, because I gave an answer, that there was a new perspective.
No, we are not a seller of HSA. We are a true believer, particularly with the acquisition of Ametros, in our ability — unique ability as a bank to have diversified funding sources that grow fees at a good clip. And I think we’ll be able to, and not included in our forecast, as I mentioned, are opportunities for us to have cross synergies in some of these really unique businesses, even throw interLINK in there as well. But I also do say very carefully every time that we’re a steward of our shareholders’ capital. And so we continually have to evaluate all of our business lines, how we can maximize economic profit in those business lines, and whether or not that happens as a wholly owned activity or as a joint ventured activity or as a sold activity.
