Welcome to the Old National Bancorp First Quarter 2023 Earnings Conference Call. This call is being recorded and has been made accessible to the public in accordance with the SEC regulations FD. Corresponding presentation slides can be found on the investor relations page at oldnational.com and will be archived there for 12 months. Management would like to remind everyone that certain statements on today's call may be forward-looking in the nature and are subject to certain risks, uncertainties and other factors that could cause actual results or outcomes to differ from those discussed. The company refers to you to its forward-looking statement legend in the earnings release presentation slides. Certain slides contain non-GAAP measures which management believes provide more appropriate comparisons. These non-GAAP measures are intended to assist investors' understanding of performance trends.
Reconciliations for these numbers are contained within the appendix of the presentation. I would now like to turn the call over to Old National CEO, Jim Ryan for opening remarks. Mr. Ryan.
Good morning. On the morning of April 10th, our Old National family was blindsided by unthinkable tragedy. In the span of minutes, five of our team members were lost forever, while other team members and two Louisville Metro police officers suffered injuries. All Old National team members are out of the hospital and on the road to recovery. one Louisville officer remains in the hospital. In the aftermath of this tragedy, many heroes emerged, including members of law enforcement, city and state officials, the amazing Louisville medical community, and some of our own team members who were there on the scene. To all of you, thank you from the bottom of our hearts. On behalf of everyone at Old National, I also want to thank the entire community of Louisville for your unconditional love, prayers and support.
I also want to acknowledge the overwhelming outreach from individuals and organizations throughout the country. Your outpouring of love and care has helped strengthen us, and we are so grateful. Turning to the quarter, we reported strong first quarter earnings despite a rapid shift in the operating environment for all banks. For Old National, it was business as usual even throughout March, and the strength of our franchise remains evident in the results outlined on slide 4. Adjusted EPS was $0.54 per common share, with adjusted ROA and ROATCE of 1.4 and 23.4% respectively. Our adjusted efficiency ratio remained under 50%. Obviously, deposits, liquidity and credit are in focus today. As you can see, deposit balances were stable during the quarter despite the normal first quarter seasonal patterns in public fund balances.
Our total cost of deposits at 72 basis points is well below peers. We maintained our deposit pricing discipline with a low 15% total deposit beta cycle to date. Granularity is one of the keys to success here. Brendon will share some additional details on the competitive advantage our funding base provides later in the deck. With respect to liquidity, as you'd expect, we took steps to increase our cash on hand and our available liquidity over the course of March and April. Our liquidity coverage in excess of our uninsured deposits is 150%, including unencumbered assets. Likewise, our credit remains strong with 5 basis points of non-PCD related charge-offs and stable asset quality. We remain watchful like other banks and are focused on potential pockets of softness.
Like our deposit portfolio, our loan portfolio is granular, which should continue to serve us well. We remain confident in our client selection and underwriting, as you know, Old National has taken an active approach to credit management. This approach has served us well in various economic cycles. As evidenced this quarter, we worked aggressively to address some PCD credit from the merger. On the client side, engagement remained high in the quarter we continue to expect disciplined loan growth in 2023, albeit not at 2022's pace. In other areas, more of the same. Below peer deposit costs should drive a funding advantage, more organic growth of our wealth management client base, and a continued focus on disciplined expense management. Thank you. I will now turn the call over to Brendon to cover the quarter results in more detail.
Thanks, Jim. Turning to the quarter's results on slide 5, we reported GAAP net income applicable to common shares of $143 million or $0.49 per share. Reported earnings include $15 million in pre-tax merger-related charges, $1 million in pre-tax property optimization charges, as well as $5 million in debt securities losses. Excluding these items, our adjusted earnings per share was $0.54. Slide 6 provides our quarter-end balance sheet. Total asset growth of $1.1 billion in the quarter was driven by disciplined loan growth and higher cash balances funded through stable deposits and higher borrowings. Moving to slide 7, total deposits were stable quarter-over-quarter despite public fund outflows. Q1 is typically our seasonal low point for public funds, and we anticipate net inflows in Q2.
Our trend in average deposits reflects mix shifts away from non-interest-bearing accounts into money market and CDs, which is typical for this point in the rate cycle. Market conditions continue to put upward pressure on deposit rates. With total deposit costs of 38 basis points quarter-over-quarter to a still very low 72 basis points, which equates to a total deposit cost beta of 15%. Interest-bearing deposit costs increased 57 basis points to 1.09%, resulting in an interest-bearing deposit beta of 23%. Although the terminal beta is difficult to estimate, we have a strong track record of managing deposit costs and are confident we can maintain our funding advantage throughout the remainder of the rate cycle. We are actively defending deposit balances through competitive rack rates and limited pricing exceptions, in addition to playing offense through various deposit specials.
We are pleased with the execution of this strategy to date, as we have been able to generate new deposits sufficient to maintain stable overall balances. Slide 8 provides additional details and granularity of our deposit base. Our average core deposit account balances are meaningfully lower than peers. We have deep and long-standing relationships with our deposit customers. 75% of which have been with the bank for more than five years, and nearly a third have been with us for more than 25 years. The concentration of our largest customers is also exceptionally low. Our top 20 deposit clients represent less than 5% of our total deposits. If you exclude collateralized deposits, our top 20 represents only 2% of our total deposits. Slide 9 provides details of our funding and liquidity.
We have ample liquidity with approximately 100% coverage of our uninsured deposits, including $10.3 billion in immediately available funds from cash equivalents, Federal Home Loan Bank, Fed discount window, and the BTFP. We also have $5.4 billion in capacity from high-quality unencumbered collateral available for pledging. Beyond the 150% coverage, we have significant other sources of liquidity through broker deposits and unsecured credit lines, as well as insured cash sweep product capacity. Slide 10 shows trend in total loan growth and portfolio yields. Total loans grew 2% consistent with our expectations and Q4 pipeline. Consumer loans were stable quarter-over-quarter, and loan portfolio yields increased 34 basis points to 5.42%. The invest portfolio was stable quarter-over-quarter as portfolio cash flows were offset by an improvement in fair values.
Duration improved to 4.4, we expect approximately $1.2 billion in total investment cash flows over the next 12 months. Nearly 80% of our portfolio consists of high-quality treasury and agency investments, with an additional 18% held in highly rated municipals. The remaining portfolio consists of highly rated corporate securities and other investments. Slide 11 details our Q1 commercial production. The $1.8 billion of production was well-balanced across all product lines and major markets. We continue to maintain a disciplined approach to underwriting while taking advantage of market dislocation to grow attractive new relationships. That said, we have tightened our pricing standards, enhanced credit structure, and have reinforced with our relationship managers the importance of acquiring a full banking relationship for new loan requests.
Turning briefly to pricing, new money yields on commercial loans increased 64 basis points to 6.72% for the quarter, with March production yields of 6.87%. Moving to slide 12, you will see further details of our loan portfolio. We have a well-diversified commercial loan portfolio that represents approximately 70% of total loans and carries an average loan balance of approximately $1 million. Our non-owner occupied CRE is well-diversified by asset class and geography. As it relates specifically to non-owner occupied office, the bulk of the portfolio is made up of suburban or medical office with a meaningful amount of credit tenant leases. Less than 1% of total loans are located within central business districts, which are geographically diverse in 11 Midwestern cities, with only five deals totaling less than $50 million in Chicago and Minneapolis-Saint Paul.
Slide 13 shows our credit trends. Credit conditions are stable and our commercial and consumer portfolios continue to perform exceptionally well. Delinquencies and NPLs are showing positive trends, and net charge-offs were stable at a modest 5 basis points, excluding the 16 basis point impact from PCD loans. Our special asset team is continuing to work through the First Midwest acquired PCD loan book and expect charge-offs from this portfolio to be elevated in the near term. The provision expense impact from the workout effort should be minimal as we carry $54 million or approximately 5% reserve against this book. On slide 14, you will see details of our first quarter allowance, including reserve for unfunded commitments, which stands at $333 million, consistent with Q4. Reserves reflect loan growth with relatively small increases due to portfolio mix.
More than offset by improvement in economic forecasts and charge-offs of PCD loans that don't require reserve replenishment. While credit metrics are stable, we believe it is prudent to maintain elevated reserves given the uncertainty in our economic outlook. Our current reserves reflect a 100% weighted Moody's S3 scenario with negative GDP of 3.1% and unemployment of 7.1%. Unless the economic outlook deteriorates materially, 2023 provision expense should continue to be limited to portfolio performance and loan growth. In addition to the $333 million in reserves, we also carry $96 million in acquired loan discount marks. On slide 15, you will see details of our net interest income and margin. Both metrics were generally in line with our expectations.
Net interest margin contracted 16 basis points quarter-over-quarter to 3.69%, while core margin excluding accretion decreased 13 basis points to 3.62%. Core margin was just shy of the low end of our margin guidance due to holding more cash on hand following market disruption in March. We continue to proactively manage the balance sheet towards a neutral rate risk position while layering in protection for a sudden reversal in Fed rate policy. Slide 16 shows trends in adjusted non-interest income, which was $76 million for the quarter. This was generally in line with our expectations, with improvements in capital markets and wealth revenues offsetting macro-driven weakness in mortgage and a full quarter impact of our service charge enhancements put in place in December.
The linked quarter increase in our other category was driven by fair market value adjustments on equity securities and higher BOLI income. Slide 17 shows a trend in adjusted non-interest expenses. Adjusted non-interest expense was $235 million, and our adjusted efficiency ratio was a low 48.8%. Expenses were well controlled and consistent with the prior quarter. The increase in the other expense category was largely due to higher FDIC assessment and marketing expenses. Slide 18 provides details on our capital position at quarter end. Capital ratios were stable and reflect strong earnings offset by loan growth and share repurchases in the quarter. Our TCE ratio increased 19 basis points to 6.37%, largely due to a reduction in unrealized losses in other comprehensive income.
Total available for sale unrealized losses is impacting our TCE ratio by 145 basis points. Our after-tax HTM unrealized losses stood at approximately $300 million at quarter end. We continue to monitor our balance sheet for economic stress and feel very comfortable with our capital levels. While we did repurchase 1.8 million shares of common stock earlier in the quarter, we do not anticipate repurchasing additional shares in the near term. As I wrap up my comments, here are some key takeaways. We had a strong start to 2023, with results in line with our expectations. We posted strong return metrics with adjusted return on average assets of 1.39% and adjusted return on tangible common equity of 23%.
Our deposit franchise continues to perform exceptionally well in this environment, as we have maintained stability in our deposit balances while delivering a top quartile total deposit beta of 15%. We have ample liquidity with uninsured deposit coverage ratio of approximately 150%, including unencumbered eligible collateral. Credit remains strong. We continue to manage expenses in a disciplined manner, as evidenced by our efficiency ratio of 48.8% for the quarter. Slide 19 includes thoughts on our outlook for the remainder of 2023. We believe our current pipeline should continue to support near term loan growth in the mid-single digit range. While we expect to have meaningful year-over-year NII growth in 2023 in the range of 9%-12%, margin will continue to be under pressure from higher deposit costs.
More detailed NII and margin guidance is difficult to provide given the uncertainty of future Fed rate actions and the uncertainty of market dynamics that will ultimately determine terminal deposit betas. That said, we remain confident in our ability to manage deposit costs better than most. Contractual accretion is expected to be approximately $16 million for the remainder of full year 2023. We expect our fee businesses to continue to perform well despite headwinds, with mortgage following industry patterns. We should continue to see revenue momentum and wealth from the strategic hires we've made over the last 2 years. Capital markets revenues will largely follow loan demand and should perform consistent with Q1 levels. This quarter's bank fees fully reflect the HSA sale and service charge enhancements implemented in December and should represent a good baseline.
Our expense outlook is consistent with our prior guidance with full year 2023 total expense of approximately $939 million, excluding merger related charges and property optimization related expenses. Provision expense should continue to be limited to loan growth, portfolio changes, and non-PCD charge-offs, as we believe we have adequate reserve against the PCD book. We are already 100% weighted towards the Moody's S3 scenario. Turning to taxes, we expect approximately $11 million in tax credit amortization for the remainder of 2023, with a corresponding full year effective tax rate of 24% on a core FTE basis and 22% on a GAAP basis. With those comments, I'd like to open the call for your questions. We do have the full team available, including Mark Sander, Jim Sandgren, and John Moran.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question comes from the line of Scott Siefers with Piper Sandler. You may now proceed.
Morning, everyone. Thank you for taking the question. My condolences regarding the events of the last couple weeks.
Thank you, Scott.
I was hoping we could start, maybe on the sort of thoughts on deposit mix. What would be your best guess as to where non-interest-bearing levels go as a % of total deposits? Maybe a little historical perspective and why whatever number you think might might be the best one where you sort of think things will settle.
Scott, this is Brendon. We look back. I, you know, I think the 28% kind of pre-COVID level is probably a decent spot in terms of where it could settle. How long it takes to get there at this pace, I'm not sure, but that's probably a good place to think about where it might settle.
Okay, perfect. When you made some comments about having worked aggressively on some PCD stuff from the merger. It sounds like we'll continue to see some charge-offs there, albeit not ones that'll require provisioning since you already have the PCD reserve. You know, maybe just some thoughts on, you know, what kind of stuff you are working through, how long it might take to work through the remainder of where you'd see issues, et cetera.
Yeah. Hey, Scott, it's Mark. You know, we still have $54 million of PCD reserves on our books. I think that'll work through over the next 18-24 months, we would say. I don't think it'll be a linear type of thing, so there'll be some lumpiness in there. As you indicated, and as Brendon said, we think we're fully reserved on all those loans.
Okay. All right. Wonderful. Thank you very much. I appreciate it.
Thanks, Scott.
Thank you, Mr. Siefers. The next question comes from the line of Benjamin Gerlinger with Hovde Group. You may now proceed.
Hey, good morning.
Good morning, Ben.
I just want to take a moment. You guys did a fantastic job as both management team and as a franchise to support the community. The last thing you guys want to do is make it about yourself, but I think it's applauded tragedy. You guys did a great job stepping up being a community bank and supporting the community far beyond loans and deposits.
We appreciate the support.
Yeah, absolutely. In terms of just kind of growth going forward, I think it makes sense that it's a little bit softer. I mean, obviously, economic outlook isn't great. When you guys think of kind of new loans, any sort of subcategories within lending or within the loan portfolio that you guys are kind of targeting as like this is an area that we could still see some growth for positive risk-adjusted returns and any sort of geographies that might entail?
I wouldn't specify any geographies, Ben, but, you know, CNI remains relatively strong, I would say. You know, I've seen a lot of CNI clients over the last quarter and, you know, they remain positive. Slightly more muted than a few quarters ago, given rates and noise relative to recession, but still a positive outlook overall in CNI, generally speaking. Strong operating performance and they're still looking to invest. I think the CNI space still looks solid, albeit at a lower level than we saw in 2022. In CRE, certainly volumes are down, but you still have a couple of sectors, multifamily and industrial, which is where we do the vast majority of our new business these days, which are holding up well.
They're not seeing major rent increases, but they're still seeing modest rent increases off of really strong bases. You still have pockets of strength out there.
That's great to hear. I know you guys have done a pretty sizable rebranding and adjustment and frankly, highlighting wealth management. Do you still think that there's a lot of additional hires? Is that kind of embedded or are we finding somewhat of a run rate? I mean, obviously market dependent helps assets under management. I'm just trying to think from a fee income perspective. It seems like you guys are growing faster than peers, but you're clearly investing there too. Just trying to see the dynamics within that subcategory.
Maybe I can start, Ben, and Mark can chime in. First, the new hires are embedded in our outlook on the expense guide. A lot of that would include additional wealth hires. I know we're still seeing a lot of talent and having a lot of that continue to invest. I do think the momentum you've seen over the last couple of quarters in that space, we're hopeful that can continue absent, you know, market dynamics. That may be a bit of a headwind there.
I think the story here is similar to what we said relative to growth, right? I think we still see opportunities at a lower level of new hires in 2023 than we saw in 2022, but we'll still hire. We hired eight revenue producers across wealth and commercial in Q1. Again, I think you'll continue. There's still markets we'd like to build out further. We still, you know, we invest for the long haul. We're a franchise that people want to join, and we still are, you know, think there are nice. We think people who are high performers pay for themselves quickly. We never tire of saying that to our people.
I think you'll continue to see a steady stream, albeit at a lower level, of new hires in 2023.
Gotcha. Appreciate the color. Great quarter, guys.
Thanks, Ben.
Thank you, Mr. Gerlinger. The next question comes from the line of Terence McEvoy with Stephens. You may now proceed.
Hi. Good morning. First off, Jim, I also want to share my ongoing support for you and the Old National team.
Thanks. Thanks, Terry. It means an awful lot.
Just a couple of questions here. Brendon, I recognize and appreciate the predicting and forecasting deposit beta is tough to really estimate. When you look at your NII guide of 9%-12%, is there a deposit beta range or some underlying assumptions that you're willing to share within the outlook for full year NII?
Sure. Yeah, as you said, this is a tough environment, but we did want to at least put some guardrails out there. What we did is we, you know, we modeled both the forward curve, which implies kind of 2.5 cuts for the back half of the year, and then something more consistent with the Fed dot plot, which is 1 more and flat. Then we, you know, we looked at a range of betas from 30%-40% cumulative by the end of the year. That's kind of where the range of possibilities came out. As we look at that and try to probability weight it, we have a bias towards the higher end of that range, but it's just difficult to pinpoint with any more precision than that.
Thanks. Then maybe as a follow-up, any comments with regards to deposit trends in metro versus community markets and how they've differed over the last several quarters at all?
There really hasn't been a big difference. you know, we have one market in particular, one state that has typically had a higher beta than others. Generally fairly consistent across the footprint.
we have slightly different pricing parameters across markets, and so to reflect some of those, regional differences. Yeah, the performance has been, stable across the entire footprint.
one last quick one. The debt security loss, was that an investment in one of the banks that failed last quarter?
It was.
Okay. Thanks for taking my questions.
Thanks, Terence.
Thank you, Mr. McEvoy. The next question comes from the line of Christopher McGratty with KBW. You may now proceed.
Great morning, and, like everyone else, extend our condolences to the ONB family. Jim, or maybe a question for Brendon. The $1.2 billion that's gonna come off the bond book over the next year would effectively map to 1 for 1 on your loan growth. I guess, is that the way you're thinking, kind of flat earning assets from here?
Yeah.
Great. The second part would be, given the steps you've been doing to protect downside risk on margin, how do we think just bigger picture, the trajectory of the NIM, the core margin, if the futures curve does give us, you know, some cuts maybe into next year?
Yeah. I point you back to the, to the kind of year-over-year guide that we just, we talked about. Clearly there'll be pressure on the margin embedded in that, in the year-over-year increase. Just it's really difficult to, again, say where that thing's gonna land. But in terms of the, you know, the down rate protection, we continue to, you know, be really active on that, on that spot and continue to put additional protection there. Obviously as deposit costs continue to increase, we get closer and closer to a neutral risk rate position, which is what we're trying to, trying to move towards over the next couple quarters.
In terms of just broader balance sheet management, is there anything that might be on the table given the environment's gotten a little bit more challenging? Also can you remind us where you'd be comfortable letting the loan-to-deposit drift?
Obviously this is a dynamic environment. All tools are on the table, both off balance sheet and on balance sheet opportunities, to preserve margin and protect capital. We'll continue to look at all opportunities, but we don't see anything big or major restructurings in the future. We think we have room to grow in the loan deposit ratio. We have ample liquidity, and we still have levers to continue to let some of the non-core consumer books shrink to support higher and better quality commercial growth.
Okay, great. Jim, maybe one for you. You noted the buyback. I assume that happened before March ninth.
Correct.
I guess what would it take to either turn it back on, or perhaps consider something external with your capital? You know, typically you guys have been pretty disciplined and when you see things, but, you know, there's a lot of volatility and there likely could be some opportunities.
Yeah. You know, obviously, more stability for a longer period of time, I think is what's going to require for us to get more comfortable in looking at capital differently. You know, getting more clarity as the year plays out with respect to, you know, the economy, I think is also going to be critical. We're in no hurry to do much different with our capital. We're just going to continue to watch how the year plays out and if it plays out where it's a little bit better than everybody anticipates, I think we could be thinking about, you know, capital in the future. Until then, we just got to sit on the sidelines and watch things play.
Great. Great. Thank you.
Thank you, Chris, for your support. Really appreciate it.
Thank you, Mr. McGratty. The next question comes from the line of Broderick Preston with UBS. You may now proceed.
Hey, good morning, everyone. Again, like everybody else, just want to say I'm terribly sorry, about what happened. That's very tragic.
Thank you, Brody.
Yeah. As to some of the non-interest bearing deposits, just want to ask if there's any geographic concentration, as to where that runoff occurred within your footprint, and any thoughts you can offer on, you know, expectations from here. I think Scott asked something about it earlier, but I might have missed it.
Yeah, sure. I can help. No geographic concentrations. clearly it's mostly in the commercial side, with a higher percentage of non-interest-bearing deposits in total. we had talked about, you know, pre-COVID we were at a low point, about 28% non-interest-bearing deposits, and that might be a good way to think about a potential floor.
Okay. Understood. I did want to just, circle back on the, on the assumptions and the allowance that the 7.1% unemployment, is that like a 2024 number? Like just give me a time frame on that.
Yeah. I can't remember specifically the quarter that that peaks, but that is the peak unemployment in the Moody's S3 scenario.
Okay.
We can get-
Okay.
We can follow back up with you.
Yeah, that'd be great. I want to circle back on the beta commentary. I think you and I think you were responding to Terry's question maybe on NII. You said a 30% to 40% beta is what you ran through when you did the different scenarios. I'm assuming the 40 is maybe in the flat, you know, scenario using the dot plots, and the 30 is maybe closer to if we get Fed cuts. Is that a good way to think about it? Could you help us understand what the interest-bearing beta is or if that was the interest-bearing beta that you were talking about?
That is the interest-bearing beta. We ran all of those beta assumptions through both curves. To your point, obviously we'd expect probably a lower beta in the forward curve where there's cuts, higher beta if it's higher for longer. Which is why we're leaning towards probably the higher end or bias towards the higher end of that range, as we look through it. It's probably unlikely, we have the highest beta in a down or a rate cutting environment.
Got it. Could you remind us what percentage of the loan portfolio is floating rate? Then give us a sense for what the fixed rate loans that need to reprice over the rest of the year look like.
Yes. We are sitting at 56% floating today. The duration of our loan book is, you know, roughly 5 years. You'll see about 20% of our fixed rate loans reprice, you know, meaningfully higher.
Got it. Are we done with the hedging or is there additional hedging that's going to take place on the loan side?
No. We'll continue to look for opportunities, like I said, both on balance sheet and off balance sheet to continue to layer in downward protection and protect margin. We're not, you know, taking our eye off the ball with OCI and capital support. There are some opportunities to do there to protect that.
Got it. Then last one from me was just if you happen to have the assets under management at quarter end.
Yeah. $28 billion.
Okay. Relatively flattish quarter-over-quarter.
Yes.
Awesome. Thank you very much for taking my questions, everyone. I appreciate it.
Thanks, Brody.
Thank you, Mr. Preston. We have a follow-up question from the line of Scott Siefers with Piper Sandler. You may now proceed.
Hey, everyone. Thank you for just taking the question. Just a quick one. Within the 9%-12% NII growth NII guidance, does that assume the contractual accretion, or is there a different number baked into there?
Slightly higher than the contractual accretion number, kind of in that typical 20%-30% range.
Okay. Perfect. That was actually it. Thank you very much.
Thanks, Scott.
Thank you, Mr. Siefers. The next question comes from the line of Jon Arfstrom with RBC Capital Markets. You may now proceed.
Thanks. Good morning.
Morning, John.
You know, like the others, just, yeah, deepest condolences to everyone impacted. I wanted to get to a couple of follow-ups here. You use the term limited pricing exceptions in terms of your deposit management. How much more frequent is that today than, say, it was prior to mid-March?
I don't know that it's picked up materially. It's been pretty steady since December. you know, I think you look at the average interest bearing costs and sort of the spot rate differences, 12/31 to 3/31. That pace hasn't really increased. I think it's indicative. It's pretty steady state.
We have competitive rack rates, as Brendon alluded to earlier. You know, some of the larger deposit balances, we've, you know, got to them early. You know, but most of that has played its way out. I wouldn't say it's done, but I would say the vast majority of the pricing exceptions is largely behind us because, again, the large balances were on it quickly.
Okay.
We're also getting aggressive and on the offense, where we judiciously in our markets, right. Where we're opening more accounts than we're closing and raising balances across our footprint.
Okay. Do you guys This seems like a crazy question, but have things really changed that much in terms of deposit pricing since mid-March?
Interesting question. Not really. Yeah, it's a great question. You know, there's been a lot more conversations. The actual pricing, hasn't changed dramatically since mid-March.
Yeah. Okay. That was my sense, but I thought I should ask. A couple more things here. You're talking about your relationship managers and the focus on the full banking relationship. Is that something that's different that's now expected from, you know, your borrowers and your relationship managers, or does that change or restrict any opportunities for you? Just you're talking about a tightened pricing structure, enhanced credit structure and, you know, kind of chasing deposits as well.
I really appreciate that question because the answer is no. I mean, that's our model, right? It's a relationship-
Okay.
based model, and we lend to people that bank with us.
In times like this, you can be more adamant and forceful and disciplined and, but I'd like to think, Candid, that we always are. I think in general we are, but this is a place where you draw a line in the sand a little bit more and make sure that that's the case.
Okay. Just last one. This is a follow-up on Brody's question. The S3 Moody's waiting, it's obviously pretty severe. Are you guys more concerned today about credit than you were a quarter ago? If there's a, you know, degree of whether you're more concerned or not, you know, you haven't changed your views at all. What happens if that S3 is just way off and it doesn't come true and, you know, we end up in a much better spot than that?
Jon, let me take the top of that. I don't think we're meaningfully more concerned about credit today than we were, you know, heading into really all of last year and into this year. You know, obviously we're not immune from hearing about what's going on in the economy and, you know. As Mark said, you know, we spend an awful lot of time with clients, and when we're out with clients, we're just not hearing that same kind of feedback that seems to be, you know, discussed in today's news cycle. You know, having said that, we think it's prudent and have had that opinion for quite some time.
you know, I guess the question gets back to, you know, maybe more of an accounting question about, you know, when do we think about a different, you know, forecast to run through there? Brendon, I don't know what else you'd add to that.
No, obviously I think there'll be a time where, you know, whatever recession may or may not be coming hits, we'll have to think about a different waiting for the Moody's S3, and that would imply some opportunity for potential reserve release depending on, you know, what the environment looks like.
It, you know, Mark continues to lead us through, you know, portfolio reviews and making sure that we're going through and doing deep dives on, you know, the entire book and particularly those areas that are generally more vulnerable. We're gonna continue to do that, you know, look for, you know, kind of an active, proactive management that we've always been known for. If we identify weaknesses, we're gonna put them in the hospital quickly, with the hope that they come out, you know, healthy again. We're just gonna continue to do that, you know, that's, we're probably a little bit more sensitive to that today than we were maybe six months ago, but that's absolutely the approach that we've always taken in these kinds of times.
Yep. Okay. All right. Well, nice job. Nice quarter.
Thanks, John.
Thank you, Mr. Arfstrom. As a reminder, if you would like to ask a question, please press star one. There are no further questions registered at this time. I'd like to turn the call back over to Jim Ryan for closing remarks.
Well, thank you, for your participation. Thank you for your support. It's meant a lot to all of us. As usual, if you have any follow-up questions, please don't hesitate to reach out to the whole team. We'll be here to answer anything you have. Thank you.
This concludes Old National's call. Once again, a replay along with presentation slides will be available for 12 months on Investor Relations page of Old National's website, oldnational.com. A replay of the call will also be available by dialing 866-813-9403. Access code 569807. This replay will be available through May 9th. If anyone has additional questions, please contact Lynell Walton at 812-464-1366. Thank you for your participation in today's conference call.