And we don’t see that condition changing in the immediate term. So just like, we do in every any business prudent business decision, we evaluate all of our products and our lines of business in terms of their return and profitability and we came to the conclusion that since that business model is probably gonna be under stress for a while, that we would look to, transition that business model out. But keep in mind, though, that we still have an origination business in a – in an affordable housing unit that we do for on balance sheet lending. So to your point, it’s a combination of things. It’s a combination of the rate environment as well as the lack of liquidity in the secondary market for where we sold multifamily loans.
Tim Coffey: Okay great. Great color, thank you. And Jill, as you’re doing appraisals or receiving appraisals on your commercial real estate portfolio, are you seeing any meaningful change in cap rates across the products?
Jill Rice: They’re kicking up, Tim, but I would not say meaningfully yet. We expect them to continue to migrate up, but it’s – it’s not having a huge impact at this point.
Tim Coffey: Right okay. And then the outlook for the construction book, is it reasonable to expect that multifamily is gonna lose the growth in that book. I heard you said about the, Will Hill Developers trying to clear out the lots, but I just want to get some clarification on that.
Jill Rice: Could you say that again about the multifamily? I missed that.
Tim Coffey: Oh, yeah. So look at the construction book. We’ve seen most of the strength come out – come out of the multifamily construction. Do you expect that trend to continue?
Jill Rice: Yeah. For the short term, I mean, that’s where we’re gonna see those dollars continue to fund up and our builders are being conservative in their take down. So I would continue to see that outstrip in the immediate term in – in the affordable housing construction bucket primarily. We have – we do do limited middle income market rate multifamily, but the real growth there is in the affordable housing and we have lots of construction in that to fund up.
Tim Coffey: Okay, great. Those are my questions. Thank you for your time.
Mark Grescovich: Thanks, Tim.
Operator: Thank you. Our final question comes from the line of Jeff Rulis of D.A. Davidson. Your line is now open, please go ahead.
Jeff Rulis: Thanks. Good morning.
Mark Grescovich: Good morning, Jeff
Jeff Rulis: This question maybe for Rob. Yeah, I appreciate the expectation for – for margin and – and despite maybe some compression. I guess, we’re – we’re getting closer to a NII bottom, and I guess if you want to frame up your expectations for the possibility of NII growth, even if margin pulls in a bit here.
Rob Butterfield: Yeah. So – so yeah I – I think if we’re thinking about margin growth, I think we’re probably thinking about second half of 2024 and – and of course it’s gonna be influenced by what the Fed does and – and their timing on – on when they might start to decrease rates there but even under a flat rate cycles and you’ll hire for longer, I would expect that we’re gonna get to this point probably in the second half of 2024 where loan yields are increasing faster than the – than the cost of funding.
Jeff Rulis: Okay. So if I that’s on the – the margin side, like, is it, given the balance sheet, could you – could you scratch out NII growth from here I guess, linked quarter that’s diminishing that that decline and – and just wanted to see if that turn in NII is possible.
