So more likely to defend, but there’s capital being raised out there for that distress. I think the — George brought up the residence of equity to pull the trigger. That’s the case on new deals, and I think in office even on distressed deals. You’re starting to see some transactions that will, I think ultimately gain momentum as there’s price discovery and more of that capital start to enter the marketplace in a rescue situation, if you want to call it that. It still hasn’t materially developed, but there are transactions coming off. So I think you’ll see a lot of capital flow that way. There’s the most opportunity, the lowest hanging fruit from the standpoint of uncertainty creates great buy opportunities that result in great long-term investments.
So I think we’ll see more of that develop over the next 12 to 24 months. But again, I think a lot of it will be in that newer vintage product.
Stephen Scouten: Fantastic. Great color. Appreciate the time guys and great to see the continued NII growth. Well done.
George Gleason: Thank you.
Operator: One moment for our next question. Our next question comes from Catherine Mealor with KBW. Please proceed with your question.
Catherine Mealor: Thanks. Good morning. I want to just — if we could get a little bit of color on extensions? I know we talked a little bit about that last quarter and that you’re continuing to see clients ask for short-term extensions just as we kind of wait for rates to be cut. In a higher for longer scenario, what’s your — what’s your gut on how that trend continues and kind of what that could do to the size of your balance sheet? And is there any way to quantify maybe the size of your portfolio that you’ve seen take some kind of extension or modification over the past few quarters? Thanks.
George Gleason: Catherine, we have all that data. I don’t have it in my fingertips, and we haven’t disclosed it. But I would tell you, it’s a business as usual sort of situation. I think we probably commented last quarter that our extensions, we are typically maintaining or improving the economics on the transactions for us. Our fees are what they would normally be for as a bright extension or higher, we’re typically trying to reset floors and getting that done in the vast majority of those extensions and getting other appropriate contributions to improved cap stack, replenish reserves and so forth in most cases. So we have not done any extension yet that in the old world would have been a TDR. These have all been flat to improved economics for us as these have extended.
So we think there’s a very constructive by and large, as we’ve said in our management comments for quite some time, we expect the vast majority of our sponsors, certainly not all of them, but the vast majority of them to step up and support their projects until interest rates get to a better place or economic conditions and uncertainties resolve, and that continues to be the case, and we’re seeing that in the value growth of these sponsors and the extensions.
Catherine Mealor: Great, and then maybe a question on the margin, if I could. Can you — is there any way to quantify or think about what the incremental cost of new deposits that were added this quarter? And how close we might be to kind of a peak in deposit rate? It feels like you’ve still got a lot of growth coming in CDs. And so there’s a thought that your deposit cost might peak a few quarters later than maybe some of your peers. But just curious how close we are to that gap closing as we get to peak deposit rates?
George Gleason: Yes. Well, what I would tell you is our incremental cost of deposits in Q1 were less than our incremental cost of deposits in Q4. And that’s reflected on the fact that there was a high expectation at the beginning of the year that rates were going to get cut, and that led to a cut in deposit pricing. That has recoiled about halfway from where we saw it in January to probably where it was in Q4. So you’re still — the run rate on that repricing is lower than the run rate on new issuance CDs in Q4 but not as low as it was in January. It seems to have stabilized in here. And we’ve said, gosh, for seven quarters now, I think that we would have some continued escalation in pricing for several quarters after the last Fed increase.
And just because of the rollout, we’re in our CD portfolio, the longest maturities in that portfolio, predominantly 13 months at a rich duration. So we’re getting down where we’ve got couple of more quarters where those CDs are going to be rolling over from lower rates to higher rates. But that rate of change, as we said in our management comments at a decreasing rate of increase.
Catherine Mealor: Great. That makes sense. Thank you.
Operator: One moment for our next question. Our next question comes from Matt Olney with Stephens. Please proceed with your question.
Matt Olney: Hey, great. Thanks guys. The management commentary references that 2025 and 2026, we could see higher levels of RESG repayments, and that obviously makes sense. We’re seeing higher rates now and expectations for lower rates eventually. I’m just trying to appreciate the level of RESG loans that are currently eligible to be repaid, but for various reasons have not yet been paid down. Is the best way to think about that, just looking at that Figure 12 and just looking at the RESG loans to have a vintage in 2020 or earlier and just assuming those are currently eligible and probably awaiting lower rates?
George Gleason: I think, obviously, age is probably the key indicator there. So that’s probably a pretty reasonable way to look at it, Matt.
