Joseph Sutaris : Yes. So, Steve, probably could have spoken, I guess, more directly about first quarter results on the last quarter’s conference call. But our typical pattern is to see a significant increase in expenses in Q1 and part of that is we provide our merit increases across the board in Q1. Other companies might feather them out throughout the year. We typically do it in the first quarter. Along with that comes higher bank expenses, we had some severance expenses in the quarter around salaries. We did have wage pressures, particularly on the lower end, which — there’s a compression component to that, which pushes up the lower end of our pay scale. So, some of that effectively is, I’ll call it, embedded in the future run rate on salaries, but there’s also components that effectively are higher in the first quarter.
So, our expectation is that all-in on operating expenses that we would expect the next three quarters to be line with first quarter, most of our increase is absorbed in the first quarter. We also have some other expenses around just facilities costs, given our climate like in the first quarter that typically we don’t see in the following quarters. So, there’s a couple of items that contribute to just a higher OpEx line in Q1, but we do expect that basically off for the balance of the year. If you look at a full year-over-year basis on operating expenses, our expectations are somewhere between, call it, 5% and 9%, full year ’23 basis versus a full year ’22 basis.
Operator: The next question comes from Daniel Novas of DA Davidson. Please go ahead.
Unidentified Analyst : Hey, good morning, gentlemen. Filling in for Manuel today. I have a few questions on loan growth outlook and pipeline. So first up, just loan growth outlook of mid-single digit still hold from last quarter, especially after the balance sheet repositioning, has there been a change of mindset. Just want some color on that, please?
Joseph Sutaris : Yes. I believe that our expectations are the same, which is mid-single digits for loan growth what I think is a favorable change for us is just a competitive dynamic, which driven by the environment, a number of our peers are tougher spot, strong balance sheet perspective and their ability to service customers. So, we’re seeing higher quality opportunities at substantially better rates than maybe what we expected at the beginning of the year. I don’t think that we expect to do a lot more than will be communicated before, but I think better quality of better rates is what we’re striving for right now. So that guidance is still intact.
Unidentified Analyst : Great. Thanks. Could you also talk about your pipeline? And also, some color on your auto portfolio, any credit issues or anything like that, that we need to be aware of?
Dimitar Karaivanov : Sure. So, on the pipeline, if you look at our commercial pipeline, still very strong, a little bit lower than they were kind of at the end of the fourth quarter, as we would expect, given the market environment but still very strong compared to our historical. And again, that is a reflection on competitive dynamics and our retooling of the company over the past 18 months in terms of capabilities and people. On the mortgage side, similarly, I think we’ve communicated that we spent a lot of time and efforts, and money in retooling our go-to-market strategy. That’s paying off dividends. In fact, last week’s mortgage applications were higher than a year ago’s week, which is a nice change in trend, given everything that’s happening in the mortgage market.
So, our, kind of efforts there paying us as we expected that portfolio will grow as well. Auto is a little bit more of a wildcard from quarter-to-quarter. We probably didn’t expect the stronger growth in the first quarter as we got in that portfolio. But again, writing the same type of credit, 750 average FICO very appealing loan to values and better rates virtually every month. So, like I said, we’re roughly at 7%. So that risk reward and that paper right now is pretty good. As it relates to asset quality, maybe kind of starting backwards from auto our charge-offs this quarter were about 30 basis points, which is right in the historical range of our loss experience in auto. Again, this is 755 Fico super prime paper basically. We expect that it’s going to be somewhere in that range for the rest of the year.
Mortgage, virtually no charge-offs, very little below historical averages. We expect that to maybe normalize. Again, we’ve been talking about normalization for a while. We’re planning for that. You’re seeing us provision a little bit more ahead of that. But so far, no stresses on the consumer side. And commercial, I mean, we’re basically at 0 in terms of losses right now. We had a recovery in the prior quarter, I believe. So, the going is pretty good. We’re very vigilant around it. We ask ourselves multiple times a week what’s happening with credit, we’re proactively staying in front of our borrowers. But right now, credit quality is as good as we would want it to be.
Unidentified Analyst: Great. Thanks for taking my questions.
Operator: The next question comes from Matthew Breese of Stephens Inc. Please go ahead.
Matthew Breese : Good morning, everybody. I was hoping to start on deposit costs, get a sense for where we exited the quarter in terms of overall deposit costs. And Joe, I know you’d mentioned that expectations are not for a full cycle, 5% deposit beta, but would love some thoughts or color around where you think you might end up?
Joseph Sutaris : Sure, Matt. So, we did exit the quarter with deposit funding costs 38 basis points. So, we have seen some acceleration in terms of deposit costs increasing. With respect to margin in NII, I think expectations is that we’ll see — we have a couple tailwinds for Q2. So, I would expect that we’re going to see a better outcome in Q2, albeit maybe a marginally better outcome, and then in Q4, we’ll see. But in terms of a full cycle beta, it’s not unreasonable to expect that if we have a 500-basis point increase on the short end of the curve, that ultimately, our deposit beta is 23% of that or more when we’re through the full cycle full cycle beta, which I think would significantly outperform the industry. But I think those expectations are not unreasonable.
Dimitar Karaivanov : Yes. Okay. To add to that, if you look at — I mean, we look at all of our peers reporting and kind of across the country, I think if you had a list of betas and deposit costs right now, we would back up on a very short list. So, we expect that we’ll continue to be on that short list going forward. If you look at the underlying dynamics, the — a lot of the personnel deposits are basically remixing into cities. They’re not necessarily leaving the bank. They’re just remixing into cities the commercial deposits, you’ve seen some drawdowns there for people using cash projects, pay taxes, which happens kind of in the first part of the year. So that’s been a little bit more of the negative drawdown that doesn’t stay with us.
But as businesses money over the year. Hopefully, those balances are going to grow. And then on the public side, we’ve talked about the seasonality. So, it’s a little bit hard to figure out what the ultimate through the cycle cost is, but there’s a lot of moving pieces to it. And as Joe said, it’s not going to be 5%. We hope it’s less than 20%. But we’re trying to be as proactive as we can and continue to be on the very short list of banks with extraordinary deposit bases in the United States.
Matthew Breese : Understood. There’s 200,000 shares repurchased for the quarter. Obviously, like so many other banks in the industry, the stocks down a bit, but your capital levels are improving, and it seems like fingers crossed with the repositioning some of the worst of the AOCI stuff is behind us. Share repurchases on the radar in a more aggressive fashion than we’ve seen you do historically.
Joseph Sutaris : Yes, Matt, I wouldn’t say terribly more aggressive than we’ve done historically. We typically try to at least repurchase the shares that are issued in our equity plans. So, I would — for the balance of the year, maybe $0.5 million or less in terms of total shares, that would be repurchased over a 200,000 ounce, potentially another $300,000 throughout the year. I mean that could change later in the year, but right now, that’s — I think would be on the high end of our expectations.
