Nathan Race: Okay, great. I’ll step back, thanks for the color.
Mariner Kemper: Thanks Nate.
Operator: Our next question comes from Chris McGratty with KBW. Your line is open.
Chris McGratty: Oh, great. Good morning.
Mariner Kemper: Morning Chris.
Chris McGratty: Good morning, everybody. Mariner maybe a question for you. You’ve talked and done a really good job historically on operating leverage, expenses were really well controlled this quarter. How should we be thinking about operating leverage in this increasingly tough environment for revenue?
Mariner Kemper: Well, I think you kind of hit the nail on the head there. The environment with really pretty much what’s happened with interest costs, right. It’s a storyline there. It’s more challenging in this environment to accomplish really, I would guess what any of us want to accomplish. We are still laser focused on it and obviously we don’t give guidance, but it would be hard for us to point you in any one direction. It’s kind of early in the year, to think about the budget for next year, to really be able to talk intelligently about where that might head. But we are operating leverage and as opposed to efficiency ratio is definitely where we put our emphasis and we’ll continue to be focused on it.
Chris McGratty: Okay. And then I think – I want to make sure, I heard you the fourth quarter loan growth was the expectation moderation from this quarter, or I may have missed that.
Mariner Kemper: Similar in strength.
Chris McGratty: Okay, got it. And then finally, in terms of the balance sheet, some of your peers are thinking about retooling some of the investment portfolio. Given the move in rates. I mean any appetite to move things around in the bond portfolio, obviously you’re not reinvesting but any kind of restructuring that might be contemplated.
Ram Shankar: Hi, Chris. As you know, we routinely evaluate these kinds of opportunities. But at this time, very little appetite desire or need really to do any of that.
Chris McGratty: Okay. Thanks for taking the questions.
Mariner Kemper: Thanks, Chris.
Operator: [Operator Instructions] We now turn to Timur Braziler with Wells Fargo Securities. Your line is open.
Timur Braziler: Hi, good morning.
Ram Shankar: Hi, Timur.
Timur Braziler: Hi, just following up on that last line of questioning. With the seasonal inflow expected on the public funds, I guess what’s the expectation for the bond book inside next quarter? Are you going to be reinvesting some of those proceeds that are rolling off, or is the bond book going to remain a source of funds for the loan growth you’re seeing?
Ram Shankar: It will remain a source of funds through the end of the year and maybe early into next year. And then we’ll have to evaluate based on loan production and deposit goals and whatnot. But at this point we’re still going to let it fund our balance sheet growth, or loan growth, I should say.
Timur Braziler: Okay. And then looking at the loan growth, the CRE construction growth remains pretty impressive. I’m just wondering how much of that is contractual some of these loans start to fund up on schedule and what that pipeline looks like over the next couple of quarters?
Mariner Kemper: It’s a mix. A lot of the funding we’ve seen certainly are deals that we approved over the last 6 and 12 months that are now hitting the construction phase. There’s still activity, we’re still seeing loan demand for multifamily and for industrial, albeit it’s probably slowed a little bit, but there’s still demand, still seeing activity. So it’s a couple – to answer your question specifically in terms of funding though it’s a mix of what we’ve approved over the last 6 to 12 months.
Ram Shankar: And new stuff coming in.
Mariner Kemper: And then new stuff coming in.
Timur Braziler: Okay and then just on the construction component and specifically any ill effects from the broader environment. Are you hearing that borrowers are taking more of a wait and see approach, whether it’s rates or just economic uncertainty. I guess any kind of color you can provide on some of the early stage building conversations you’re having?
Ram Shankar: I think I would echo the comments, as Mariner – that Tom said, which is that, there’s plenty of opportunity. The mix is changing, right. So multifamily and industrial remain very strong, while obviously office and other categories are winning significantly. So with a higher interest rate environment and a low supply – housing supply in the marketplace, there’s still very strong interest and demand for multifamily. There are pockets in the country where that isn’t the case. there are places where there is over-investment, there are places where people are building Class A, when they need is Class B you know et cetera. So we pay attention to those kinds of issues, to stay away from problems, but there is strong demand that we understand for multifamily.
And industrial continues to be strong because there’s a real need for last mile distribution and tilt up buildings to support the Amazonification of America and delivery and then all the businesses that either support Amazon or compete with Amazon. So there’s a pretty significant build out underway that we believe and understand still to support the way consumers receive delivery of goods in America. So we think those two things continue to present strong, high quality opportunities for us. The real shift in our book going forward in the environment we’re in, with excess liquidity gone from the system, is we’re more focused on making sure we reserve our capital for customers and people who do business with us and are willing to put their deposits and broaden their relationship with us.
