Crispin Love: Thanks. I appreciate you taking my questions. Just following up on the question on the market and SVB. Scott, you made some comments earlier in the call about the potential for market share gains, just given SVB’s exit. To what level do you think you’ve already begun to benefit from SVB’s absence by increasing share in the last four or five months? And do you think the runway here will actually accelerate over the next few quarters and be available for kind of years ahead. Just curious if there’s just any way for you to size the opportunities in front of you just given the changes in the competitive landscape?
Scott Bluestein: Yes. Thanks, Crispin. It’s actually a great question. We do think that over the last three or four months, we have begun to benefit from what happened with Silicon Valley Bank in March of this year. But it is our strong view that the opportunity is going to continue to get better over the coming quarters and over the coming years. Silicon Valley Bank was the largest player in the space over the last 40 years. Obviously, they were acquired, but that team – that business will not be the same as it once was. They’re still in their new current sort of inclination a very formidable player, and we’re certainly rooting for them to continue to do very well in the market. But we believe that over the next several quarters, we’re going to continue to see a positive impact on the Hercules business tied to what happened in March of this year.
These conversations that our deal teams have with these companies don’t turn into transactions in a week or two weeks or three weeks. Those conversations start in April and in May, and they’ll turn into deals, some in Q2, more in Q3, more in Q4. And so we’re very optimistic that, that opportunity set continues to rise over the next several quarters.
Crispin Love: Thanks, Scott. Very helpful color there. And then just one on credit quality. I’m just curious if you can give any update on your credit outlook just your results. Non-accruals actually decreased in the quarter where others in the market are seeing credit issues. Do you expect any normalization in credit over the near to intermediate term? And are you just – are you seeing any stress in your portfolio companies as we sit here today, just because the results that you put up so far just say otherwise.
Scott Bluestein: Yes. So look, I think our team has always led the industry in terms of credit performance, and that’s something that we pride ourselves on. This business was started in 2004 with an emphasis and a focus on both relationships and credit underwriting. And that fundamental focus on credit underwriting is something that we’ve continued to expand upon and enhance over the course of the last 18, 19 years. When you have a $3-plus billion portfolio and 120 debt positions, of course, there’s going to be a handful of credits on a quarterly basis that are in some type of – I don’t even want to call it distressed, but some type of performance issues. Right now, we have zero Grade 5 credits and we have $67 million of Grade 4 credits.
And I think that really speaks to the health and quality of the overall portfolio. Things can change on a quarterly basis. We’re not seeing anything Q3 quarter-to-date that tells us that there’s going to be a material change either way. You mentioned that our non-accruals actually improved on a quarterly basis. Right now, we have one legacy loan on non-accrual. That represents 0% of our portfolio from a fair value perspective. We did have the one loan, which was to Codiak Biosciences that filed for bankruptcy at the very end of Q1 and was marked down in – sorry, and was marked down at the end of Q1. We are close to the finish line in terms of that workout. And what I can tell you is, to date, we have already received 100% of our fair value mark in Q1 and we’ve recovered approximately 97% of that original principal amount in cash.
And I think that’s an example of the great work that not only our investment team, but that our credit team does in managing our portfolio.
Crispin Love: All right. Well I appreciate you taking my questions, Scott. Thanks.
Scott Bluestein: Sure. Thanks, Crispin.
Operator: [Operator Instructions] Our next question comes from Casey Alexander with Compass Point Research & Trading. Casey, go ahead with your question.
Casey Alexander: Yes. Good afternoon. I’m going to try not to ask the same question or the same question in a different way, but there seems to be a lot of interest around it. If I understand your comments, a lot of your deal activity during the quarter came from your unfunded commitments, but you’re characterizing the deal quality as high and likely to get better. So what’s the catalyst that will get new deal activity going as opposed to just drawing out of the unfunded commitments?
