Manan Gosalia: All right. Fair enough. And then just on credit, it feels like a good quarter on credit. As we compare the properties that were reappraised this quarter versus last quarter, you had much less LTV migration into some of the high LTVs. Was there something fundamentally different about the properties reappraised this quarter versus last?
George Gleason: No. It’s just the normal cycle of what was due for maturity extension, renewal, reappraisal and there was nothing unique about that. Brannon and his teams at RESG continue to do an excellent job of getting paydowns on a lot of these loans where we would have had an upward migration in the loan-to-value based on a reappraisal as part of an extension process. We continue to get quite a few paydowns from sponsors on those that bring the loan to values back out of closer to the loan-to-value at the time of underwriting. That just reflects the strength of the sponsors and the quality of the assets.
Manan Gosalia: Got it. And anything different you’re seeing on the credit side? Some of your peers have been increasing their NPLs on commercial real estate and also the criticized assets. I know your business is different, but I was just wondering if you’re seeing anything different in the areas where you’re operating?
George Gleason: No, I’m not, and I’ll let Brannon address that. But the reality is that the quality of our sponsorship, the quality of our new construction projects, combined with the low leverage loan-to-value, loan-to-cost metrics on these projects has contributed to the excellent performance of our portfolio so far during this cycle. We continue to think that those are fundamental ingredients, great sponsorship, great state-of-the-art new assets, low loan-to-value, low loan to cost, that will continue to help our portfolio perform very well on a relative basis to the industry going forward.
Manan Gosalia: Great. Thank you.
Operator: And, thank you. And one moment for our next question. And our next question comes from Timur Braziler from Wells Fargo Securities. Your line is now open.
Timur Braziler: Hi, good morning. I have a three-part question following up on Stephen’s question. Just on loans staying on longer within the RESG. I guess, can you, a, put a number around just how much longer these loans are sticking on balance sheet versus a “normal time”? B, is there a contractual limit for how long these loans could stay in construction status? And then, c, how much of a cliff or a headwind to growth should we expect as the refi market reengages and paydowns normalize, whether that’s in ’25 or ’26, whenever that might be?
George Gleason: The length of duration that alone will stay in construction status because they’re waiting for a better exit or trying to time the markets for an exit, it’s hard to predict, and it varies quite a lot from loan to loan and Brannon shared some statistics with me earlier, which I’m going to — I can’t recall them, but on exactly where loans have paid off recently and how many of them have refied? How many of them have sold and so forth sold the properties and so forth. So I’ll let him share that, and that may answer that part of your question and give you a little color on it. Won’t answer it, but it will kind of explain that situation. And you’re accurate in that payoffs that extend today, the things that would have been a normal cycle don’t get paid off this quarter because the sponsor is going to wait to what they hope will be a better exit execution to a permanent loan.
A quarter or a year from now or 18 months from now, when a market sentiment develops that’s broad-based, that is time to exit, yes, we will have a lot of payoffs at that point in time. And our RESG teams, our asset-based lending teams, our equipment and structured finance teams, our commercial banking teams are all keenly aware that we’ve got to build our business and diversify our business and be in a position to originate volumes that will replace those assets when we get that wave of payoffs. So we’re building our infrastructure, and that goes back to one of the comments I made in our last conference call that we’re working really hard to add quality team members from banks that are cutting back on origination staff and other sorts of staff.
We’re building the quality of our team, and we’ve got some really good things that we’re very positive about in the works on that, that I think will help us continue to grow our balance sheet and grow our loan balances even when we get some pretty chunky waves of payoffs in the future. So we’re looking a year, two years, three years into the future on what those volumes are in planning accordingly. We always do look into the future and plan and that’s why our portfolio and our performance metrics right now are doing so well. Two years ago, we were — and three years ago and four years ago, we were planning for an environment where rates escalated and economic conditions change. We’re doing that with our variable rate loans with our floors on our loans with our low loan-to-value type structuring on credit.
And all that is paying off now. And as we’re going through this part of the cycle, we’re looking forward in a one, two, three, four years to future iterations and changes in the balance sheet and preparing now to continue to have a nice steady trajectory in those periods of time.
Timur Braziler: Great. Thank you for that color.
Brannon Hamblen: Filling those stats for you, George. I sort of alluded to it earlier before. But we’ve had year-to-date 53 loan repayments, if I got my count right, of that 53, we’ve had, I believe, 32 that were paid off with a third-party refinance. We had one that we actually had a land loan out and the borrower is ready to move forward with the vertical construction loans. So we essentially paid off our landlord and moved into a new construction loan there. And then we had 15 that sold — that were either condo sellout, so they sell out as the condos contracts are closed over time, but we had a number of those that completed their loan repayment and then a few industrial properties that sold complete building sale. And then as I said, we have had just a pure cash repayment by a sponsor that had a lot of cash on hand.
