Chang Liu : They were commercial lines of credit that were drawn down during the second quarter, and we got some paydowns, not payoffs, but paydowns during the third quarter.
Heng Chen : Yes. And then vulnerable borrowers borrowed again here in October.
Operator: And our next question comes from Brandon King at Truist Securities.
Brandon King : So just wanted to get how you’re thinking about deposit growth near term in the fourth quarter? And also, could you give some context around the growth you saw in DDA? And how you expect DDA trends or non-interest bearing deposit trends to play out in the fourth quarter?
Heng Chen : Yes, we were pleasantly surprised at the amount of deposit growth in the third quarter. There may be — I mean, there’s a small amount that was temporary. We had a customer that deposited what’s going to money and pending a real estate purchase and that deposit. It’s a money market that will go out in October, late October. But I think the DDA, it’s — there’s nothing special there.
Chang Liu : It’s really a collective effort, I think, of our kind of network, retail network and they know that bringing in CDs and retaining them that’s part of the job. But really, the key is driving the DDA deposits and we’re getting hit enough as it is on the cost of funds on the CDs, even the money markets, but the DDA growth is really where we need to concentrate and in order to offset some of that cost increase just on our funds.
Brandon King : Got it. And for that outflow, how much of that are you expecting to outflow in the fourth quarter?
Heng Chen : Oh, that one, it was $65 million.
Brandon King : Okay. I see that was money market?
Heng Chen : Yes. It was a money market. Yes. It’s a long time deposit. Yes.
Brandon King : Okay. Okay. And then going back to the question on loan yields. How are you expecting that to trend near term? Are you expecting kind of a similar sort of increase in the fourth quarter? What are your expectations?
Heng Chen : We think so. I mean, one thing that we see is in residential mortgage, that’s very large. It’s — our residential mortgage, it’s almost $6 billion. And it’s been — for each of the three quarters in 2023, that loan set has gone up 20 basis points every quarter. So in the third quarter, residential mortgages was 4.96%. We’re banking a couple of hundred million of loans every quarter, $250 million or so in the almost 7% range. So that pulls it up, and we continue to see prepayments from our 3/1 and 5/1 ARMs. They tend to pay off when they get — when they finish the initial fixed rate period. And then — I mean, on CRE, we’re trying to get in the 7s.
Chang Liu : Right. CRE, we’re pricing them at about 250 plus if we can get them over the 5-year with a 3-year. So that’s kind of the rate range that we’re looking at. We’re still seeing some activity, some purchases, some refinance from floating rate, but — so we’re seeing some steady .
Brandon King : Got it. Got it. And then just to kind of sum up, you expect kind of a similar increase in the fourth quarter. Is that — did I hear that correctly?
Chang Liu : Probably pretty close to what we had in the third quarter. Yes. Yes.
Operator: And our next question today comes from Andrew Terrell with Stephens.
Andrew Terrell : Just maybe just square out the discussion on the loan yields, up 20 basis points this quarter, but that did include the impacts from the interest recovery or prepayment that was 2 basis points to the NIM last quarter, 6 basis points this quarter. I guess, are you assuming that prepay or interest recovery continues at 6 basis points to the margin whenever you talk about loan yields going up a similar amount in 4Q? Or should that normalize lower going forward?
