Hello and welcome to the First Financial Bancorp second quarter 2022 earnings conference call and webcast. My name is Brica, and I'll be coordinating the call today. During the presentation, you will have the opportunity to ask a question by pressing star followed by one on your telephone keypad. I now have the pleasure of handing the call over to our host, Scott. Scott, please go ahead.
Thanks, Brica. Good morning, everyone. Thank you for joining us on today's conference call to discuss First Financial Bancorp's second quarter and year-to-date 2022 financial results. Participating on today's call will be Archie Brown, President and Chief Executive Officer, Jamie Anderson, Chief Financial Officer, and Bill Harrod, Chief Credit Officer. Both the press release we issued yesterday and the accompanying slide presentation are available on our website at www.bankatfirst.com under the Investor Relations section. We'll make reference to the slides contained in the accompanying presentation during today's call. Additionally, please refer to the forward-looking statements disclosure contained in the second quarter 2022 earnings release, as well as our SEC filings for a full discussion of the company's risk factors.
The information we will provide today is accurate as of June 30th, 2022, and we will not be updating any forward-looking statements to reflect facts or circumstances after this call. I'll now turn it over to Archie Brown.
Thank you, Scott. Good morning, everyone, and thank you for joining us for today's call. Yesterday afternoon, we announced our financial results for the second quarter. Before I turn the call over to Jamie to discuss those results in greater detail, I'm going to say a few words regarding the quarter. I'm extremely pleased with our performance in the recent period, which was highlighted by a rapidly expanding margin, strong loan growth, and exceptional fee income. For the quarter, we achieved adjusted earnings per share of $0.56, a 1.31% return on average assets, and a 21.26% return on average tangible common equity. Earnings improved from the first quarter as our asset sensitive balance sheet was positively impacted by recent rate increases. In addition, credit quality was stable with lower net charge-offs and non-accrual loan balances.
This led to a small provision recapture for the quarter. We were encouraged by our fee income performance for the quarter, which reflects the strength of our diverse fee businesses. Total fee income surpassed our expectations due to record foreign exchange income, higher income from limited partnership investments, and our growing leasing business. While second quarter mortgage banking income increased 35% from the linked quarter, we continue to experience headwinds due to rapid rise in interest rates. In addition, recent overdraft program changes led to a modest reduction in deposit account service charges during the second quarter, and we expect some further decline in the third quarter as these changes are fully integrated. We're very pleased with loan growth in the second quarter. Loans excluding PPP increased by $191 million or 8.3% on an annualized basis.
Loan growth was broad-based with increases in C&I, retail mortgage, and consumer banking. This more than offset a decline in the ICRE portfolio, which was driven by elevated prepayments. In addition, we were also pleased with Summit's growth in the quarter, which included a total of $50 million in leases and loans. Loan origination activity remains strong as we head into the third quarter. With that, I'll now turn the call over to Jamie to discuss the second quarter results in more detail. After Jamie's discussion, I will wrap up with some additional forward-looking commentary. Jamie?
Thank you, Archie. Good morning, everyone. Slides four, five, and six provide a summary of our second quarter financial results. The second quarter was highlighted by an expanding net interest margin, strong loan growth, increased fee income, and stable credit quality. As a result of the Fed rate hikes, our net interest margin increased 30 basis points during the quarter. Given our asset-sensitive balance sheet, we believe this trend will accelerate into the third quarter as the Fed increases rates further. We were pleased with 8% annualized loan growth during the period, excluding PPP balances. The growth was widespread across the portfolio, with the biggest increases in C&I and residential mortgage. Fee income increased 21% during the quarter, surpassing our expectations. In particular, Bannockburn had a record quarter, while leasing business income increased 19%. Mortgage banking income increased compared to the first quarter.
However, we do not expect this trajectory to continue as originations will be negatively impacted from higher interest rates. Additionally, service charge income was relatively flat compared to the first quarter as we made several changes to our overdraft program that are expected to reduce fees in the coming periods. Non-interest expenses were slightly higher than our expectations due primarily to incentive compensation tied to elevated fee income. We were pleased on the credit front as net charge-offs declined to 8 basis points and non-performing assets declined to 31 basis points of total assets. These two factors drove $800,000 of provision recapture during the period. From a capital standpoint, our regulatory ratios remain in excess of both internal and regulatory targets. Similar to the first quarter, accumulated other comprehensive income declined significantly, negatively impacting both tangible book value and our tangible common equity ratio.
Slide 7 reconciles our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $53 million or $0.56 per share for the quarter. These adjusted earnings account for $1.1 million of losses on investment securities and $900 thousand of Summit related and other costs not expected to recur, such as severance and branch consolidation expenses. As depicted on slide 8, these adjusted earnings equate to a return on average assets of 1.31%, a return on average tangible common equity of 21%, and an efficiency ratio of 61%. Turning to slides 9 and 10, net interest margin increased 30 basis points from the linked quarter to 3.47%.
This increase was primarily driven by an increase in asset yields during the period, resulting from rising interest rates. The increase in asset yields was partially offset by a slight increase in funding costs and a decline in PPP forgiveness fees. As a result of rising rates, asset yields surged during the period, with loan yields increasing 34 basis points. In addition, investment yields increased due to higher reinvestment rates and slower prepayments on mortgage-backed securities. Our cost of deposits was relatively flat when compared to the first quarter, but we expect these costs to increase in future periods in reaction to competitive pressures from an increasing rate environment. Slide 11 details the asset sensitivity of our balance sheet. We remain well-positioned for expected rate increases as approximately two-thirds of our loan portfolio will reprice fairly quickly.
Slide 12 details the betas utilized in our net interest income modeling. While we didn't realize a drastic increase in costs from the initial rate hikes, as additional rate increases occur, we expect our deposit beta to be approximately 30% over the full cycle. Slide 13 illustrates our current loan mix and balance changes compared to the linked quarter. As I mentioned before, loan balances increased 8% on an annualized basis, excluding PPP. With the exception of ICRE, every portfolio grew compared to the linked quarter. The largest areas of growth were in the C&I, retail mortgage, and Oak Street portfolios. However, we were also pleased with the trajectory of the consumer, franchise, and Summit books. Slide 15 shows our deposit mix as well as the progression of average deposits from the first quarter.
In total, average deposit balances declined $246 million during the quarter, driven by a $136 million decline in brokered CDs and a $104 million decline in money market accounts. These were isolated to a handful of larger accounts. We were pleased with the growth in lower cost transaction deposits during the quarter, which included a $36 million increase in non-interest-bearing accounts and a $31 million increase in savings accounts. Slide 16 highlights our non-interest income for the quarter. As I mentioned previously, second quarter fee income surpassed our expectations, primarily due to record foreign exchange income, higher mortgage banking income, and an increase in other non-interest income. In addition, wealth management remained elevated and derivative fees increased 69% from the prior period.
While mortgage banking exceeded first quarter levels, increasing rates and record production in prior years has softened mortgage demand significantly, and we continue to expect industry-wide pressure on this business for the remainder of 2022. Deposit service charge income was steady in the second quarter. However, as I mentioned before, we expect reductions in this income going forward as program changes are fully realized. Non-interest expense for the quarter is outlined on slide 17. The second quarter was relatively quiet on the non-interest expense front. On an operating basis and excluding Summit, expenses increased $1 million compared to the linked quarter, due primarily to additional incentive compensation resulting from higher fee income at Bannockburn. Turning now to slide 18.
Our ACL model resulted in a total allowance, which includes both funded and unfunded reserves of $135 million and $800,000 in total provision recapture during the period. This resulted in an ACL that was 1.25% of total loans at June 30. The provision recapture was driven by stable credit quality and lower net charge-offs during the period. Net charge-offs as a percentage of loans decreased to 8 basis points on an annualized basis, while non-performing assets declined to 31 basis points of total assets. Classified assets increased slightly during the quarter due to the downgrade of two credits in the hotel and healthcare industry. However, these borrowers have good liquidity and are exhibiting improving trends. Our view on the ACL and provision expense remains unchanged.
We acted aggressively when building reserves in response to the pandemic and have been steadily releasing reserves as credit has stabilized. We expect increasing provision expense in the back half of 2022. Finally, as shown on slides 20 and 21, regulatory capital ratios remain in excess of regulatory minimums and internal targets. During the second quarter, tangible book value and the TCE ratio continued to decline. These declines were caused by a $101 million decline in accumulated comprehensive income as a result of unrealized losses on the investment portfolio from rising interest rates. Absent this decline, the TCE ratio would have been 7.1% at June 30 compared to 6.4% as reported. We returned over 40% of our earnings to our shareholders during the period and believe our dividend yield is attractive to potential shareholders.
We do not anticipate any near-term changes to the common dividend. However, we will continue to evaluate various capital actions as the year progresses. I'll now turn it back over to Archie for some comments on our outlook going forward. Archie.
Thank you, Jamie. Before we end our prepared remarks, I want to comment on our forward-looking guidance, which can be found on slide 22. Loan demand remains strong, and we expect balances to grow mid- to high-single digits over the third quarter, while deposit balances are expected to decline modestly over the near term. Our asset sensitive balance sheet continues to position us very well to benefit from further increases in interest rates. Significant portion of our loan portfolio is indexed to short-term rates, and although there are many variables that can impact magnitude and timing, we expect the margin to continue to expand to a range of 3.85%-4% in the third quarter. As we get later in the cycle, we're expecting to see some pressure on deposit rates, which will moderate the margin expansion.
Regarding credit, much uncertainty remains regarding inflation and the impact of rate hikes to the economy and our customers. Over the remainder of this year, we expect continued improvement in our credit quality trends, which are already strong, and an increase in provision expense. We expect fee income to be between $46 million and $48 million in the third quarter, with continued strength in our fee-producing businesses. Rate headwinds will continue to put pressure on overall mortgage banking income, and we expect a further decline in overdraft income of approximately $1.2 million due to the updates to our program. Specific to expenses, we expect to be between $102 million and $104 million. This could fluctuate with fee income performance. As our operating lease portfolio grows, we will also see corresponding depreciation expense growth.
Regarding Summit, our outlook is unchanged, and we expect the acquisition to have a minimal impact on overall 2022 earnings, with a modestly positive impact to the third quarter. We continue to expect Summit to provide $400 million in annual originations, which should provide a strong lift to overall loan growth. Lastly, our capital ratios remain strong, and we expect to maintain our dividend at current levels. Before I finish, I want to thank our associates for their excellent performance so far this year. As we head into the back half of 2022, we are optimistic that our balance sheet is positioned to further benefit from additional rate increases and loan activity remains strong. We remain diligent in our credit monitoring and are prepared to manage a downturn in the economy should it occur later in the interest rate cycle.
With that, we'll now open up the call for questions.
Thank you. If you would like to ask a question, please press Star followed by one on your telephone keypad. If you change your mind at any time, please press Star two to remove the question. We have the first question from the phone lines from Chris McGratty from KBW. Your line is open.
Hey, good morning.
Hey, Chris.
Jamie, maybe start with a net interest margin question. The margin upgrade was, I would say, significantly above expectations. I'm interested just kind of how you get there. Obviously, I think you've got the ability to shrink the bond portfolio. I'm interested kind of in a comment about the size of the balance sheet.
Yeah.
the funding of the growth. Then also just more broadly, you know, your net interest income went up, you know, $10 million-$11 million this quarter. If we think about it that way, like, it would presumably the sequential increase should accelerate in the back half of the year. I just wanted to confirm that with you.
Yeah, that's 100% true. I mean, we are, you know, at this point, not seeing any real significant increase in deposit costs. That'll change, obviously, and that'll start to ramp up here in the third and fourth quarter in the back half of the year. We are expecting the margin at this point, the increase from the second quarter to the third quarter to be greater than what we saw from the first quarter to the second quarter. And from a funding perspective, I mean, I think it's really a couple of things. I mean, obviously, we have capacity on the borrowing side, on the wholesale side from a short-term borrowing capacity.
Our plan is to kind of slowly bleed down the investment securities portfolio to also fund some of that either to fund either some of that growth on the loan side or fund some of the deposit runoff. We are forecasting, you know, some runoff here in the third quarter. On the deposit side, you know, I think we're putting in 2%-3% down in total deposits. That would be, again, funded from both short-term borrowings and, you know, bleeding down the securities portfolio. We're not going to. I think that'll just be kind of slowing down and/or stopping the reinvestment of cash flow off of the investment securities portfolio.
That's helpful. How much is thrown off the bond book every quarter?
At a minimum, I mean, it depends on some of the calls and whatnot, but at a minimum, it's about $50 million a month. Between $600,000 and $700,000. $600,000-$700 million a year.
Okay. Great. If I could you provide the spot rates at June 30th for deposits, loans, and also if you had, like, a June margin?
Help me out when you're saying the spot rates, when you're like-
Right.
For-
Where were loan yields for the month of June? Where were deposit costs for the month of June versus the average for the whole quarter?
Yeah, I got you. Okay. Yeah. Just so. Let me maybe start at the end because I need to find that, those actual yields. On the margin, our net interest margin for June was 3.64%, compared to the full quarter of 3.47%. Luke, can you get me those two numbers quickly? When you think about even that, even for the month of June, Chris, I mean, that was, you know, increasing as the month went on with the rate hike in the middle of the month.
You know, if you look at, you know, even maybe more significant the margin, if you wanna call it, like, heading into the third quarter or as of June 30 or July 1, would've been closer somewhere to, like, to around 3.75%.
Okay. That's awesome. Thank you.
Quickly on the loan yields. Our loan yields for the month of June were 4.34%, and deposit costs were 11 basis points.
Great. That deposit beta you, the 30%, is that a interest-bearing deposit or is that a total?
That's full. Yeah.
Okay.
When we say 30%, obviously that is for the entire cycle. You know, we have seen, you know, call it 2%-5% beta so far, but that obviously, you know, now starts to ramp up. For the full cycle we're forecasting a 30% beta.
That's on interest-bearing, Jamie? Or total deposits? Sorry.
That's on total.
Got it. Okay. Wonderful. Thank you.
Yeah. You're welcome.
Thanks, Chris.
Thank you, Chris. We now have a question from Scott Siefers of Piper Sandler. Please go ahead when you're ready, Scott.
Morning, guys. Thanks for taking the question.
Hey, Scott.
Jamie, I think I must have sort of misinterpreted in the guide how quickly the margin was gonna get up to that level as well. That is really just sort of a profound increase since it'll be in the third quarter. I guess number one, you know, I think we've been thinking about, you know, maybe 8 basis points benefit per rate hike previously. You know, it looks like it's really come in, you know, even significantly better than that cycle to date. Jamie, were there any? Like, what were the surprises to you as you watched the margin continue to drift higher?
By the time we get done with the third quarter, at least based on the forward curve, you know, we'll be mostly done with rate hikes, but not fully done. Will you guys still be asset sensitive? I mean, I'm guessing the answer is yes, you know, at the end of the third quarter. What's sort of the marginal benefit vis-à-vis what you've got now?
Yeah. Maybe I'll start at the end again. I mean, yes, we will still be asset sensitive, you know, at the end of the rate hikes. When it comes to the margin, we are showing, you know, based on, I guess, the Fed Funds futures and the projected rate hikes that are kind of built into the market right now, we are showing that our margin will peak somewhere in the fourth quarter and around in the beginning of the first quarter. To your question about, you know, what maybe surprised us. I mean, I guess.
I mean, the other thing when we were kind of talking the last time about the margin and rate hikes and, you know, we were talking about, you know, let's say 8 basis points of benefit to the margin per 25, per 25 basis point rate hike. You know, that was. It also kind of assumed a little more, I guess methodical type of rate hike where you're getting 25 basis points at a time. You know, when we get these large increases of 75 basis points, I mean, you really get, you know, really no movement at all on the funding side, on the deposit side. And you're getting, you know, two-thirds of the loan book repricing, you know, immediately.
We do have about 15%-20% of the securities portfolio and floaters that blew through their floors as well, that are starting to reprice. I think it's really kind of the culmination of that. It's the magnitude and the frequency of those rate hikes that, you know, the last time we talked, it just surprised everybody.
Yeah.
As we get further along, you know, that starts to mitigate. Those 25 basis point hikes, you know, we're getting, you know, five, six, you know, basis points of benefit.
Yeah.
They just came so fast and furious that it kind of, you know, the loan book kind of overwhelms things.
Yeah. Okay, great. All right. That's good color. I appreciate it. Separately, I was hoping you could maybe walk through sort of the puts and takes in fees as well. You know, there's sort of a lot of moving parts between, you know, Forex is, you know, clearly good for the call.
Yep.
I think presuming that's getting more toward like a steady state now, but would be curious to hear your thoughts. Maybe some of those that have been a little more volatile or I guess newer within the scheme of the business line.
Yeah. I mean, the foreign exchange business, Bannockburn, they did have a very good quarter at $13.5 million. We still think that business is. That's the record quarter, first of all. I mean, we're not expecting that every single quarter. They can have some choppiness to their business. We think they're in that $11 million-$12 million a quarter type of range. Obviously we're seeing, even though it did increase from the first quarter, we're seeing pressure on the mortgage side.
You know, we're expecting that to come down in the back half of the year, the third and fourth quarter. You know, we mentioned the changes we've made within service charges and our overdraft program. You know, we'll see some pressure there, about $1 million or so decline in the overdraft side, which flows through that service charge. Those flows through that service charge line. On the Summit side, you know, as they build the balance sheet and are retaining their leases as opposed to their old model of selling them, you know, they have a combination of finance leases and operating leases.
The operating leases that income flows through. Well, that income and the income on the leases that they continue to sell, you know, flows through fee income. That's increasing, call it, fifteen to twenty percent per quarter now as they're building those balances up. That also flows through the expense side as well, that the depreciation expense related to those operating leases flows through the expense side. That's why you're seeing a little bit of increase. I think it's about—it's a little around $1 million a quarter increase on the expense side as well. That will, that's kind of the offset to that.
You know, we have the fee income related to it increasing, call it $1.5 million-$2 million a quarter, but then you have the depreciation expense on the other side.
All right. That's perfect. Thank you for all that color there. I appreciate it.
Yep. All right. Thanks, Scott.
We now have a question from Daniel Tamayo of Raymond James. Please go ahead. I've opened your line, Daniel.
Hey, good morning, guys.
Morning.
Thanks for taking my question. Maybe we start on the deposits. You talked about just transaction deposits coming down here in the third quarter. You still got a lot of leeway on the loan deposit ratio, though.
Yep.
Interested in your thoughts, bigger picture, about how you know where you see that loan deposit ratio going over the next year or so and the plan to allow deposits to run off if they're not kind of core or maybe they're more rate sensitive. Thanks.
Daniel Tamayo, this is Archie Brown. I don't know. You know, there's a little bit of a variable here on these deposits and how they may move around. When it comes to core deposits, we really didn't see much movement. It was more brokerage CDs. I think we had about three larger business-oriented money market accounts. So that was sort of a temporary parked money that exited during the quarter. So we probably see a little more pressure on the rate sensitive side. Certainly, we'll start to see some rate movement. You know, loan to deposit ratio, we're high 70s now. That's going to move into the 80s. Don't know exactly how fast we'll get there, but we'll move into the 80s based on our current thinking next quarter.
We got room to go, though. I think certainly for us to get into 90% range or low 90s, we'd still be comfortable with that level. We're gonna watch pricing, make sure we're keeping all our core accounts. As Jamie said, we've some flexibility on how we make up deposits or funding if we need to on some of the maybe the more hot money kind of deposit accounts.
Got it. Okay. Thank you. Switching gears here to capital. You talked about being comfortable with capital here. On the regulatory side, certainly, you've got a cushion there. But with the TCE ratio now in the mid-six range, does that impact your ability or willingness to invest in the business or in loan growth? You know, is that just kind of put aside, given the reason for getting down there?
Yeah, Daniel, this is Archie again. We don't think it changes anything in terms of how we're currently operating the business here. We stopped buybacks at the end of the year more at the time because we had just acquired Summit, and we wanted to let some time settle. Then with the, of course, the major rate movements and impact of AOCI, you know, we've kept the buyback off the table for now, and we will continue to do that. As far as funding the business and growing the business, you know, our loan growth is solid, but it's not at a level that we think creates any sort of problems in terms of how we, you know, operate the business in the near term.
Okay. Not feeling any regulatory pressure with the TCE ratio in those levels? I'm assuming I know the answer here, but.
Oh. Yeah, none at all.
Okay. All right. Terrific. That's all I had. I appreciate it.
Thank you.
Thank you. We now have a question from Jon Arfstrom of RBC Capital Markets. Please go ahead, John.
Well, with a quarter like that, I wish I was at RBC Capital Markets. RBC Capital Markets is who I represent. Anyway, Jamie, the loan fees and accretion, is that included in that 3.85%-4% thinking for the Q3 margin?
It is. Yeah.
Okay.
That would be the all-in margin, John. Yeah.
Okay. Can you talk about, I don't know how to ask it, but, like, the residual benefit of the most recent 75 basis point hike, how long does that take to get fully reflected in your margin? I know it's kind of open-ended, but, you know, just kind of curious how long it takes for all those benefits to flow through.
Yeah. Yeah. It is. I mean to say it's immediate is you know, fairly close. It takes you know, maybe a month or so to flow through on some depending on when on some of the resets. You know, like we said, we have about, call it 65% of the loan book that reprices off of the short end, call it LIBOR or SOFR at this point on some of those. It just like I said, just depends on the resets, but it's not months, it's you know, weeks. It you know, might be two to four weeks, so it's not very long at all.
That's why, you know, when we're talking about that acceleration in the margin at the third quarter, when we're looking at it, the third quarter, we're expecting that to be more significant than that increase from the first to the second quarter.
Yeah. Okay. Yeah. I'm just trying to get a feel for if we get 75 next week, we're gonna get two months of it, and then there's gonna be some benefit that rolls into 4Q.
Yep.
Plus maybe some hikes after that. That's why you're saying probably a peak in 4Q or 1Q, right?
Correct. That's correct. Yep.
Yeah.
Yep.
Yep. Okay. Maybe for Bill or Archie, just curious on the provision magnitude, what you're thinking there, and maybe an overall assessment of what your clients are saying. Because obviously, you know, financial media and maybe the public has kind of a dour mood about the economy. When we look at the bank numbers, it's obviously very clean, and you're telling a pretty good story. Help us think through the provision and then kind of what you're hearing from clients.
Yeah. Jon, this is Archie. I'll start, and I'll continue the form that Jamie's been conducting and answering this morning. I'll start from the back and kind of go forward in that. Now, on the latter part of the question. Probably gonna have Jamie talk about provision. Look, credit is really strong right now. We're not seeing any, what I would call cracks in what's happening with regard to credit. Spending time with clients over the last few months, I think most of them would say things are very good. We've had the residual problems of wage pressure, labor shortages, supply chain issues. I think those continue to hamper some of our clients. Their business is strong, and I think as they look out over the near term, that's what they see.
In the back of their mind, they're reading the news just like you are and we are. They're worried about something coming down the pike, and I think they're starting to
A little bit on some of those concerns. Right now, when you ask them how their business is, their business is really strong.
Okay.
Yeah. Jon, so on the provision expense, I mean, when you look at where our coverage is now, our loan loss reserve to loans is at 1.25%. You know, if you look at where we started, day one, CECL was 1.29%, so we are just slightly below that. You know, not significantly below that. You know, at this point, we think that, you know, generally we are at the bottom of that coverage ratio for us. You know, if you think about that then going forward, kind of the drivers of what you know. Like, we think we've hit the inflection point in terms of, you know, the provision recapture is over, and we start to see that swing the other way.
If you think about then, you know, that where we are at that point and the drivers of what provision expense would be, you know, we're looking at either a, you know, changes, I guess, in the forecast. We use the Moody's forecast. You know, the other thing that's gonna drive that as well is what we're seeing in loan growth. You know, that'll fluctuate with that a little bit, but it's really those two things that will kind of dictate what the provision expense will be here going forward.
Okay. Bill, anything, I don't know, spidey sense that you're concerned about or worried about, or do you see things as very solid as well?
Yeah, I do at this point see things as very, very solid in our customer base and our loan portfolio. You know, not a lot of breadcrumbs showing their head at this point. You know, collections, you know, on some consumer stuff's a little bit tougher, but nothing systemic that's putting their head out here.
Yeah. Okay. All right. Thanks, guys. Appreciate it.
Thanks, Jon Arfstrom.
Thank you, Jon. As a reminder, if you would like to ask any further questions today, please press star followed by one on your telephone keypads now. We have the next question from Terry McEvoy of Stephens. Please go ahead when you're ready.
Thanks. Good morning, everyone.
Hey, Terry.
Hey, Terry.
Jamie, we've talked a lot about the margin expansion as rates go up over the next couple quarters. I'm just wondering how do you plan on managing kind of the rate sensitivity looking out into next year, assuming the Fed's done raising rates? Ultimately, how do you protect the margin? Why I ask that question, at the bottom of slide 12, you, we, you know, you show the loan betas and the deposit betas and there was some margin kind of compression during that period.
Yeah. Yeah. Good question. You know, it's something that we're looking at now because if you go back to pre-March or right when the pandemic was hitting March of 2020, you know, our margin went down fairly significantly when we saw the rate cut. We're looking at that and evaluating options that we have, you know, kind of across the board in terms of trying to look at the backside of this and trying to mitigate that asset sensitivity and potentially buying some protection on the downside. You know, extending out some on the investment portfolio to mitigate some of that risk and what we are reinvesting.
You know, everything is kind of, I think, on the table there. Yeah, we're kind of looking at all those options to try to manage that going forward and potentially, at this point, reduce some of that asset sensitivity for when things start to go the other way. It's nothing really I would say that we've executed yet or that's set in stone, but evaluating that and I'm sure you'll see something coming through here in the next quarter or two.
Great. That was the only question left on my list. Thanks, guys.
All right. Thank you.
Thank you. We have no further questions, so I'd like to hand it back to Archie Brown for some closing remarks.
Thank you. I want to thank everybody for joining today and, your interest in our company, and we wish you have a nice day and a great weekend, and we look forward to talking to you next quarter. Bye now.
Thank you all for joining. That does conclude today's call. You may now disconnect your line.