David Turner: Gerard, usually, we’re seeing strength in consumers and businesses in general. There are pockets of stressed industries that John mentioned earlier. I think at the end of the day, they seem to be more idiosyncratic to the business model of that borrower, and these are valuation charges that are being taken. And so you don’t have any one — when you kind of cut to the chase, you think about credit risk actually being fairly good right now, but you’re going to have these pockets — these one-off pockets, as I just mentioned, just two credits for us. It’s a big deal in terms of the effect on the charge-off percentage. So — and we don’t see it as a contagion as much as we see it as an idiosyncratic business issue.
Gerard Cassidy: I see. So it wasn’t really like across the board, the higher rate environment for these downgrades really affected it, but it was more idiosyncratic for each one of the borrowers.
John Turner: I think the one exception to that, Gerard, would be transportation where we are seeing that industry, particularly the truckload industry and smaller borrowers is under some stress and valuations — equipment valuations are also under stress. I mean, obviously, if you think about real estate-related portfolios, office and senior housing, in particular, you can understand why those are also under stress, but transportation would be the one area where I would say it feels like across that industry for the truckload related. The less in truckload businesses are still doing okay, but truckload-related carriers are having challenges.
Operator: Our next question comes from the line of Christopher Spahr with Wells Fargo.
Christopher Spahr: So my question is just relating to the shift in loan mix over the last few years, particularly with EnerBank and comparing it to the average pre-pandemic charge-offs. And kind of your thoughts on where you think the mix would have — has shifted a little bit and might have impacted the comparisons. And then just thoughts about the EnerBank kind of portfolio itself, it seems to be holding up a little bit better than expected.
David Turner: Well, let me couch it in terms of just our overall portfolio from a CECL standpoint. So if you go back to pre-pandemic, so the fourth quarter 2019, when we all implemented CECL, our CECL reserve at that time was 1.71%. If you adjust that for the portfolio we have today, so there’s pluses and minuses, just a completely different mix, and apply those same loss rates to our current portfolio, that would imply a seasonal reserve of 162. I think that’s on one of our slides. And so I think at the end of the day, we have pretty robust reserves to cover expected losses. The stress portfolios that we’ve talked about are our driver. The lower FICO bands of consumer have more pressure on it than the rest of the consumer base.
And some of the portfolios that we’ve added, whether it be EnerBank or Ascentium, those are higher-yield portfolios, and they have higher loss content. In both cases, we had those two portfolios, EnerBank and Ascentium at, call it, 2%, 2.5% expectation, and they’re performing in line with that. So — and I think it gets back to the fact that businesses and consumers, generally speaking, are in pretty good shape. So we’ve been real careful making sure we don’t grow too fast in those portfolios. And so far, everything is worth according to plan.
Operator: Our final question comes from the line of Peter Winter with D.A. Davidson.
Peter Winter: Just one quick question. Last quarter, you mentioned an exit rate for the NIM around 360. I’m just wondering if you’re still comfortable with that? Just on the one hand, you’re building more liquidity, but then you did the securities restructuring.
David Turner: Yes. I think whether we get — we should get pretty close to that number still. Again, we’re not counting on rates being a huge driver. Incrementally, though, if we have the long end that stays higher than our reinvestment yields are a little bit better. And if short rates come down, then our negative carry on, our swap book will be helped and that could propel us. So I would say the upper 350s to 360, we are carrying a bit more cash. You probably saw that, just out an abundance of caution given the events of last quarter. And while that cash doesn’t really hurt us from an NII standpoint, it does hurt us from a margin standpoint. And so we still should have one of the leading margins regardless because we have a lot of confidence in our funding costs kind of settling down.
Peter Winter: Got it. And how much benefit do you get from the securities restructuring on the margin?
David Turner: Well, cost is, round number, $50 million, and it’s a payback of 2.1 years. So you can do quick math. You mean on margins? It’s a couple of basis points of positive.
Operator: Mr. Turner, I would now like to turn the floor back over to you for closing comments.
John Turner: Okay. Well, thank you all for your participation today. We appreciate your interest in our company. That concludes the call.
Operator: Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time.
