Trustmark Corp
NASDAQ:TRMK
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Trustmark Corp
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Good morning, ladies and gentlemen, and welcome to Trustmark Corporation Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation this morning, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded.
It is now my pleasure to introduce Mr. Joey Rein, Director of Investor Relations at Trustmark. Mr. Rein, the floor is yours sir.
Good morning. I would like to remind everyone that a copy of our second quarter earnings release as well as the slide presentation that will be discussed on our call this morning is available on the Investor Relations section of our website at trustmark.com.
During the course of our call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We would like to caution you that these forward-looking statements may differ materially from actual results due to a number of risks and uncertainties, which are outlined in our earnings release and our other filings with the Securities and Exchange Commission.
At this time, I'd like to introduce Duane Dewey, President and CEO of Trustmark.
Thank you, Joey. Good morning, everyone, and thank you for joining us. With me this morning are Tom Owens, our Chief Financial Officer; Barry Harvey, our Chief Credit and Operations Officer; and Tom Chambers, our Chief Accounting Officer.
Trustmark had a strong second quarter as reflected by significant loan growth, strong credit quality and expansion in the net interest margin. For the second quarter, Trustmark reported net income of $34.3 million or $0.56 per diluted share.
Let's look at our financial highlights in a little more detail by turning to Slide 3. At June 30th, loans held for investments totaled $10.9 billion, an increase of $547.7 million from the prior quarter and $792 million from the previous year. Deposits totaled $14.8 billion, a decrease of $343.1 million linked-quarter and a $138.1 million increase from this time last year.
Revenue in the second quarter totaled $165.9 million, a $12.5 million or 8.1% increase from the previous quarter. Net interest income totaled $115.6 million in the second quarter, an increase of $13.2 million or 12.9% linked-quarter. Non-interest income totaled $53.3 million and represented 32.1% of total revenue in the second quarter. Non-interest expense in the second quarter totaled $123.8 million, a 1.8% increase from the prior quarter.
Credit quality remained solid this quarter as non-performing assets declined 3.7% from the prior quarter and recoveries exceeded charge-offs by $1.7 million. We continue to maintain strong capital levels with a Tier 1 ratio of 11.01% and a total risk-based capital ratio of 13.26%. The Board declared a quarterly cash dividend of $0.23 per share payable September 15 to shareholders of record September 1.
During the second quarter, Trustmark repurchased $7.5 million or approximately 263,000 shares of common stock. As of June 30th, Trustmark had $83.4 million remaining under its authority in its existing repurchase program, which expires 12/31/2022.
At this time, I'd like to ask Barry to provide color on loan growth and credit quality.
I'd be glad to, Duane. Thank you.
Turning to Slide 4. Loans held for investment, excluding PPP loans, totaled $10.9 billion as of June 30th, an increase as Duane mentioned, $548 million linked-quarter, or 5.3% and $792 million or 7.8% from the prior year. We are extremely excited about the Q2 loan growth that occurred in almost every category with the exception of public finance. We are now anticipating high single-digit loan growth for 2022. Our loan portfolio continues to be well diversified based on both product type as well as geography.
Looking at Slide 5. Trustmark's CRE portfolio is 62% existing, 37% construction, land development, which is 92% vertical. Our construction, land development portfolio is 78% construction. The bank's owner-occupied portfolio has a nice mix between real estate types as well as industries.
Turning to Slide 6. The bank's commercial portfolio is well diversified as you can see across numerous industry segments with no single category exceeding 13%.
Moving now to Slide 7. Our allowance for credit losses for loans held for investment was $2.7 million. The provisioning was primarily due to reserves related to loan growth and the nature and volume of the portfolio offset by improvements in the macroeconomic forecast. At June 30th, 2022, the allowance for credit losses on loans held for investment totaled $103.1 million.
Looking at Slide 8. We continue to post solid credit quality metrics. The allowance for credit losses represents 0.94% of loans held for investment and 475% of non-performing loans, excluding those that are individually analyzed. In the second quarter, recoveries exceeded charge-offs by $1.7 million. Non-accruals declined by 3.6% in the second quarter, and non-performing assets declined by 3.7% from the prior quarter. Duane?
Thank you, Barry. Now turning to the liability side of the balance sheet, I'd like to ask Tom Owens to discuss our deposit base and net interest margin.
Thanks, Duane, and good morning, everyone. Looking at deposits on Slide 9. Deposits totaled $14.8 billion at June 30th, a $343 million decrease linked-quarter and a $138 million increase year-over-year. The linked-quarter decrease was driven primarily by a decline of $200 million in public fund balances with the remainder split somewhat proportionally between personal and non-personal balances. The year-over-year growth has been driven primarily by personal account activity which accounts for about $421 million of growth, while public fund balances are off about $252 million. So the granularity of our deposit growth remains strong.
Our cost of interest-bearing deposits was unchanged from the prior quarter at 11 basis points. And we continue to maintain a favorable deposit mix with 31% of balances in non-interest-bearing accounts and 64% of deposits in checking accounts.
Turning to revenue on Slide 10. Net interest income FTE increased $13.2 million linked-quarter, totaling $115.6 million, which resulted in a net interest margin of 2.90% that represented a linked-quarter increase of 32 basis points. Higher loan yields contributed about $7.3 million of lift linked-quarter, while higher average loan balances contributed about $2.2 million of increase. The security portfolio contributed about $2.2 million of lift linked-quarter with about $1.3 million due to higher yields and about $900,000 due to higher average balances.
Interest on excess Fed reserves contributed about $1.2 million of lift linked-quarter. Net interest margin, excluding PPP loans and Fed reserves was 3.06%, an increase of 18 basis points linked-quarter.
Turning to Slide 11. The balance sheet remains well positioned for higher interest rates with substantial asset sensitivity driven by loan portfolio mix with 47% variable rate coupon, the securities portfolio duration of 4.3 years and cash and due balance of about $700 million.
During the quarter, we deployed nearly $800 million of excess liquidity via loans held for investment growth of $548 million and securities portfolio growth of about $235 million. As we sought to take advantage of substantial increase in market interest rates during the quarter, the deployment did not alter the mix of floating versus fixed rate loans, nor did it materially extend the duration of the securities portfolio. So the year one increase in net interest income to immediate interest rate shocks remains substantially asset sensitive at about 6% for a 100 basis point shock, about 11% for a 200 basis point shock and about 17% for a 300 basis point shock, with the benefit in years two and beyond increasing as the balance sheet continues to reprice.
Turning to Slide 12. Non-interest income for the second quarter totaled $53.3 million, an $862,000 linked-quarter decrease, and a $3.2 million decrease year-over-year. The linked-quarter and year-over-year changes are principally due to lower mortgage banking revenue, which was partially offset by increase in other line items. Service charges on deposit accounts increased $775,000 linked-quarter and $2.6 million year-over-year.
Insurance revenue totaled $13.7 million in the second quarter, a linked-quarter decrease of $387,000 and a $1.5 million increase year-over-year. Wealth management revenue totaled $9.1 million in the second quarter unchanged from the prior quarter and a $200,000 increase year-over-year. For the quarter, non-interest income represented 32% of total revenue continuing to demonstrate our well-diversified revenue stream.
Now looking at Slide 13. Mortgage banking revenue totaled $8.1 million in the second quarter, a $1.7 million decrease linked-quarter and a $9.2 million decrease year-over-year. Mortgage loan production totaled $681 million in the second quarter, an increase of 25% linked-quarter and 8% year-over-year. Retail production remained strong in the second quarter, representing 82% of volume or about $560 million.
Loans sold in the secondary market represented 51% of production, while loans held on balance sheet represented 49% with the majority of loans going into the portfolio consisting of 15-year and Hybrid ARMs, while we've continued to sell rather than retain our conforming 30-year loan originations. Gain on sale margin declined by about 12% linked-quarter from 223 basis points in the first quarter to 197 basis points in the second quarter.
And now, I'll ask Tom Chambers to cover non-interest expense and capital management.
Thank you, Tom. Turning to Slide 14, you will see a detail of our non-interest expenses broken out between adjusted, other and total. Adjusted non-interest expense was $122.4 million in the second quarter, a linked-quarter increase of $1.8 million or 1.5%. Salary and employee benefits expense in the second quarter totaled $71.7 million, a $2.1 million increase from the prior quarter, mainly due to increased commissions and annual merit increases. Services and fees remain relatively flat linked-quarter and increased $2.8 million year-over-year mainly from higher professional fees.
As noted on Slide 15, Trustmark remains well positioned from a capital perspective. During the second quarter, Trustmark repurchased $7.5 million or approximately 263,000 shares of Trustmark stock. Our share repurchase program may take place through open market or private transactions, depending on market conditions and at management's discretion.
Our capital ratios remained solid with a common Tier 1 ratio of 11.01% and a total risk-based capital ratio of 13.26% at June 30. As Duane mentioned earlier, the Board declared a quarterly cash dividend of $0.23 per share payable at September 15 to shareholders of record on September 1. Duane?
Thank you, Tom. Turning to Slide 16, let's review our outlook. From a balance sheet perspective, we are expecting loans held for investments to grow high-single digits for the year. Our security balances are still targeted at 20% to 25% of earning assets subject to changes in market conditions. Personal and non-personal deposit balances are expected to remain stable for the year with a decline in public fund balances full-year.
We are expecting the net interest income, excluding PPP loan interest and fees to grow in high-teens for the year based on current market implied forward interest rates. Based on the current economic outlook, the total provision for credit losses, including unfunded commitments is expected to be modest. Net charge-offs required additional reserving are expected to be nominal based upon the current outlook.
From a non-interest income perspective, we expect service charges and bank card fees to continue rebounding from depressed levels. Mortgage banking revenue is expected to continue trending lower, driven by reduced volume and a lower gain on sale margin. Insurance revenue is expected to increase high-single digits full-year with wealth management expected to increase mid-single digits.
Adjusted non-interest expense as previously defined is expected to increase mid-single digits for the year. This reflects general inflationary pressures as well as pressure on wages, additions of new production associates and the impact of commissions on our fee businesses. Additionally, we continue to invest in technology across our company to meet the needs of our customers. As these pressures persist, we remain intensely focused on expenses.
As announced last quarter, we continue to optimize our branch network. Since 2016, we've had a net reduction of 31 offices across our system, including three to date in 2022 with an addition of 18 scheduled to close – excuse me, eight to close this year. In April, we announced FIT2GROW, which is a comprehensive program of focus, innovation and growth designed to enhance growth and efficiency while providing best-in-class customer service.
Along with the branch consolidation noted above, we've implemented new state-of-the-art technology across the organization, as well as updated our digital capabilities and ATM and ITM networks. In the third and fourth quarters of 2022, we will be completing Phase I of a core system conversion, and we will also be transitioning to loan processing system. Along with our efficiency initiatives, we are also adding growth strategies, such as streamlining our community bank system to create better growth in the core banking businesses.
We have also opened an Atlanta loan production office, focusing on commercial real estate, residential real estate, corporate banking and specialty banking. We have added seasoned professionals to our team to execute our strategy throughout the Southeast. Atlanta will also house a new equipment finance team focused on middle to large ticket equipment finance opportunities, which we believe is complimentary to our customer base. This unit will commence operation in coming weeks.
Finally, we also continue a disciplined approach to capital deployment with a preference for organic loan growth, potential M&A and opportunistic share repurchases. We will continue to maintain a strong capital base to implement corporate priorities and initiatives. I trust this discussion of our second quarter financial results and outlook commentary has been helpful and insightful.
At this time, we'd like to open the floor for questions.
Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Graham Dick of Piper Sandler. Please go ahead.
Hey, good morning.
Good morning.
Just starting with the loan growth. I wanted to get some color on why you think you, in particular, had such a good quarter. And then also why you think things might slow down as implied by the full-year guidance in the back half of the year? Is that like payoffs? Or are you guys tightening underwriting standards or just something else I'm missing?
Hey, Graham. This is Barry. I'll walk you through that process in our minds anyway, and we don't have a crystal ball, obviously, what's going to happen in the second half of the year from the economy standpoint as well as what we may see in terms of a speed up and early payoffs on the CRE book. But the way we view it is the mortgage growth that we saw in Q2, it's not going to be sustainable for the second half of the year. So we would expect that to have to slow down from what we experienced in Q2.
From a CRE perspective, we had a great growth this quarter, about $205 million from that perspective. That production engine is on track and doing well. We possibly – because Q2 is a strong quarter for CRE so as Q3, so we expect that trend to continue. In Q4, sometimes you do experience a higher level of unexpected payoffs just because of tax planning and other things that goes on, but here again, we don't necessarily anticipate that, but we don't know that it won't occur.
Commercial owner-occupied financing, we're very pleased with the growth this quarter of $118 million. We expect that trend to continue throughout the year. Consumer loans grew $38 million, extremely pleased to see that. That's been a struggle for all banks. And we've seen shrinkage in the past. Now we're actually holding our own and growing a little bit. We expect to see that trend continue as well.
But our view of the second half of the year is predominantly generated based upon the fact that we know the mortgage book is going to slow in terms of production that we hold on balance sheet. And then we're uncertain about what may occur in Q4 regarding some tax planning and things that occur as it relates to potential early payoffs on CRE. From a production standpoint, from an earnings perspective, we fully expect that things continue to grow in a meaningful way. It's going to be the slowdown on the mortgage side and the potential early payoffs that we may begin to experience again in Q4 that leads us to believe that it might be a little slower in the second half of the year. We'll be very pleased if that does not occur.
Okay. Thanks for that. And then also, I guess, just on mortgage while we're talking about it, do you expect that – I guess, that proportion of what's held on balance sheet and then what's sold in the secondary is to kind of shift back toward the, I guess, the 70% sold in the secondary and 30% held on balance sheet. And then also how might that affect fee revenues based on mortgage fee revenues that line item of $8.8 million before the hedge ineffectiveness?
And this is Barry. I'll start on the first part, and then Tom can speak to the second part. As it relates to what we expect to hold on balance sheet in the second half of the year, what we're portfolioing is going to be – is Hybrid ARMs and 15-year paper predominantly. And we do expect that we've had a pull forward of – as it relates to Hybrid ARMs in terms of a lot of people moving quickly to try to get loans closed prior to rates continuing to rise and choosing the Hybrid ARM process as opposed to the fixed rate option.
Just because of there's some potential belief of either they're going to be in the property for a shorter period of time or just believe that there will be a cycle here and rates will go back down eventually. And they don't want the longer-term fixed rate exposure for that reason. So we do expect to see that – we do expect a slowdown in the amount of Hybrid ARM production that we hold on balance sheet in the second half of the year. And then on the second part of your question, I'll let Tom address the fee income impact.
Thank you, Barry, and good morning, Graham. So as Barry said, I do think it's reasonable to assume that the percentage sold does rebound for the reasons that Barry articulated. As we said in our prepared comments, it was really a mix in the Hybrid ARMs that caused the increase in retention in the second quarter. And so if you look at some normalized percentage sold, if you look at extrapolating forward the compression that we've seen in the gain on sale margin.
So 197 basis points in the second quarter down from 223 in the first quarter. If you extrapolated that forward to, say, 170 basis points or so in the third quarter and you do the math on that. You wind up with quarter-over-quarter gain on sale, if you look at Slide 13, the gain on sale of loans net of about $6 million, I would anticipate that over the next couple of quarters, that will probably be about the level that we'll see.
And this is Duane. I'll just note real quick. The mortgage business is moving back to a more normalized environment, whereby for a couple of years, we haven't seen as much seasonality as well, I think, begin to see again moving into a more normal operating environment. And so we do expect seasonal declines in the fourth quarter and possibly into the first quarter of next year as well.
Okay. Great. I appreciate it. And then I guess if I could just get one more in here. On service charges, I know these are going to decline somewhat later this year due to our changes in NSF and overdraft structure, but they're still up pretty handily this quarter. Do you think – where do you think we need to think about this number going to on a net basis after you implement those changes later this year and then account for any additional activity? Mean, is this $10.2 million number a good run rate? Or where do you think we see this had directionally, I guess?
The changes that we announced earlier in the year will really take effect moving into 2023. We don't really expect much in the way of change as far as 2022 goes. And once we move into the 2023 environment, we'll look at kind of where our volumes are and that sort of thing. But in terms of overall percentages, Graham, I don't see a very real significant decline, maybe in the range of 5% to 10% at the most.
Okay. Thanks, Duane. And then last one. Sorry guys, just on card fees. Was there anything non-recurring in there? Or is that where we should see government here differ from that mid 8 million level run rate?
Nothing unusual in that category, Graham.
All right. Great. Thank you.
Next we have Catherine Mealor of KBW.
Thanks. Good morning.
Good morning, Catherine.
I just wanted you talk about the expenses and you increased expenses a little bit or the guide for this year, which makes sense just given the inflationary pressures. But just kind of curious if you can talk about some of the savings that you might see in FIT2GROW. And is there a chance as you kind of work through some of those strategies, we actually might see some that are savings are some lower expense growth as we move into 2023?
Well, I'll start. Tom and Tom can add to the – to any of my comments. We haven't quantified from a FIT2GROW standpoint and particularly the technology expenses and some of the things we're doing. Because we've got to get the system implemented and then really start to focus on the efficiencies gained via the new technology investments, the core conversion, the loan processing system conversion, et cetera, those things and we'll kind of start to quantify that moving into 2023.
In terms of the branch consolidation, we did quantify that in the first quarter. Tom, that number is in the $3.5 million range, I think, from the overall branch consolidation – $2 million to $3 million, $3.5 million. So that's in our numbers and our forecast as we move forward. The offset to some of that is truly general inflationary pressures across – that we're seeing in virtually all categories, which is travel and expenses, we're under, I think wage pressures are impacting us. The new associates added in our Atlanta office will be additive here at the remainder of 2022 will start to generate revenue, really more in the latter part of the fourth quarter into 2023. So that's kind of the rationale. We went to increase our guidance. Tom or –
I guess the only thing I'd add, Catherine, again, with respect to branch network optimization. I think it's reasonable to expect that that's going to continue. The 11 branches that we announced that will be consolidated this year. I think it's likely you're going to see in terms of order of magnitude, continued consolidation at that pace over the next couple of years. I think the guidance we gave was net realized savings of about $2 million from those consolidations. That's a run rate annual realized expense save, which I think has a bit of conservatism built into it. But you think about it, that your run rate on that will kick in, in 2023. You realized some of that in 2022, your run rate on that will kick-in in 2023.
And then if you sort of extrapolate that forward, so that's at least $2 million of benefit in 2023, probably turns into $4 million of benefit in 2024 and $6 million of benefit in 2025, if you start to extrapolate out over a longer period of time.
Great. And then up to the margin, any updated thoughts on how you're thinking about deposit beta over the cycle just given that be more aggressive? And then just more near term, was there any move in deposit costs maybe later in the quarter, maybe the month of June or as you're seeing in July so far?
So, Catherine, this is Tom. With respect to – let's talk about the guidance in general for net interest income. As you know, that's based on market implied forward interest rates at the time that we do the forecast. And so what that reflects, Catherine, is the Fed hiking to a 3.5% Fed funds target rate by year-end this year, and maintaining that at least through the first two quarters of 2023 before beginning to ease a bit in the second half of 2023.
With respect to the beta question. So with our interest-bearing deposit cost was unchanged linked-quarter to 11 basis points. What we have modeled is a cumulative beta to that peak, Fed funds rate of 3.5% in the mid-40s, call it, 45%. Now it's got a bit of a lag to it.
So interest-bearing deposit costs for the fourth quarter, we have modeled at about 60 basis points. That would represent a cumulative beta of about 20% through year-end this year. And then we have – as the Fed sits there with the target rate of 3.5% in the first and second quarters of next year, we have deposits continuing to reprice up. So that by the time you get to that peak, we're in the neighborhood of 40% or so on our deposit beta, which means if you look at, say, the second quarter of next year, as deposits continue to reprice probably in the neighborhood of 140 basis points or so for a second quarter 2023 interest-bearing deposit cost.
On the loan side, we're modeling about a 50% beta in terms of loan yield. So for the fourth quarter of this year, that probably puts you in the neighborhood of $490 million or so on loan yield. And then that reprices up just a little bit more through, say, the second quarter of next year to about 5% or so.
Awesome. Very, very helpful. Thanks.
Thank you, Catherine.
The next question we have will come from Joe Yanchunis of Raymond James.
Good morning.
Good morning, Joe.
So how should we think about some near or long-term targets for your Atlanta LPO or your new line of business there? And then additionally, in relation to these new initiatives, I was hoping you could discuss your decision to build [indiscernible].
Okay. You kind of broke off there at the end of that question. Could you say that again, please?
Yes. So I was hoping to get better understanding of your decision to build versus buy and then some near long-term targets for Atlanta and your new line of business?
Well, I'll start. Barry can jump in and add some commentary. Our Atlanta forecast is included in our guidance to date for loan growth. So we haven't really factored into, and we haven't extended out to 2023. And given the businesses that are represented in that office being commercial real estate, residential, corporate, and so on, the standard businesses that we've operated in, those are incorporated and will be incorporated in our loan growth forecast as we move forward. But we're very optimistic. We have a very strong team. We've added great personnel in that market. We're very excited about what they bring to the table in terms of new customers et cetera.
In terms of the equipment finance business, again, we've not really started to forecast specific growth in that business unit where we do have the team hired and again, are very excited. That's a complementary business, we think, to our customer base. It's very complementary to significant growth that's occurring. And so that team will be up and running over the next few weeks and will also then as we move into 2023, begin to forecast specific growth in that line.
And then the last part of the question, build versus grow organically build organically versus acquire. We became – last year became very active in evaluating and looking at opportunities out in the marketplace and of what like available companies for sale, et cetera, became very educated and just felt like we could not get comfortable or did not find the right fit for our organization in the equipment finance space.
And quite honestly, I became aware of folks that could help us build it organically and therefore, felt like that was a better option for us. It's a little bit slower in terms of growth. But at the end of the day, we can better control and get accustomed to the business. Barry, anything to add there?
I would. Well, in regards to the Atlanta LPO, the people being hired, Joe, are working in lines of businesses that we do every day. Commercial, commercial lending, CRE lending, and homebuilder lending. And so therefore, it's just an extension of what we're already doing in other markets. We would expect these associates that we're bringing on board who we're very pleased with the type of the quality and the talent that we're being able to attract I think that's a function of, one, Trustmark's reputation as well as some changes in the industry, allowing some associates to free up that we're very excited about getting on board.
And the Monica Day is heading up that group for us for institutional bank and doing a great job of recruiting good talent. These associates are going to also operate throughout the Southeast. So while they will have relationships in the Atlanta market, just like we do today, we're very active in that market. They'll also be pursuing opportunities throughout the Southeast.
Great. Thank you. And I have another question. So your asset sensitivity declined pretty meaningfully on a sequential basis. How happy are you with your current level there? And where should we expect that trend in the back half of the year?
Joe, that's a great question. This is Tom Owens. So it did increase meaningfully or decrease meaningfully. I'm sorry. I think our – as I said in my prepared comments, the growth in the loan portfolio and the growth in the securities portfolio, neither of those changed essentially the effective duration of either portfolio. So when you think about it, it's really the deployment of the excess liquidity.
So in other words, I think we ended the first quarter with excess reserves at the Fed of about $1.8 billion. We took those down about $1.2 billion between the loan growth, securities growth, and some decline in deposits. So I think we ended the second quarter closer to $600 million. And so really, when you do the numbers, what you find is that the decrease in the asset sensitivity is really attributable to that.
With respect to your question regarding how happy are we about that? And how should we think about that going forward? We made a conscious decision to maintain what we call a competitive level of asset sensitivity versus the peer group. And as best we could tell, we were top quartile relative to the peer group in anticipation of interest rates rising which they have, obviously, substantially this year, and that's what presented the opportunity for us to put that liquidity to work.
We were meaningfully above peer asset sensitivity coming into the year. It will be interesting to see how that shakes out for the second quarter as we compare ourselves to peers. But obviously, I think we in the broader industry, we're going to be taking steps to manage our asset sensitivity closer to neutral to continue to reduce our asset sensitivity over time. You'd like to think that you could time it so that you catch the top in interest rates, and you've basically gotten yourself back to neutral.
There's a lot of work, obviously, that it takes to get there. But we've been deliberate. I think we took advantage of that very significant increase in rates in the second quarter that followed the significant increase in rates in the first quarter. I think we'll be deliberate here going forward.
For example, I don't think given the deployment of liquidity in the second quarter, I don't think that we will continue increasing the securities portfolio meaningfully from here. We have worked down a lot of that excess liquidity, and we'll have to evaluate how loan growth versus deposit growth, how that dynamic shakes out over the remainder of the year. It's possible even likely perhaps that you'll see us begin to engage in hedging activities in the way of derivatives, interest rate swaps and/or floors to begin to protect ourselves against the eventual easing onset of an easing cycle by the Fed, although that the timing on that remains obviously highly uncertain.
Very thorough answer. I appreciate it. And then I just had one last question for me. How should we think about the cadence of share repurchases for the balance of the year?
So, Joe, this is Tom. As we came into the year, the guidance that we gave was that we'd probably be in a range of $20 million to $30 million for the year, which is a reduction really of about half from the pace that we deployed capital in 2021 and in 2020. And that really reflected the reduced earnings power that we had we were meaningfully asset sensitive.
And as the mortgage refi boom sort of worked its way down and we were facing lower earnings power that's really what was the driver of reducing the pace of deployment via share repurchase I think it's fair to assume here for the third quarter and probably for the remainder of the year that we will stick to that range to $20 million to $30 million. And I think it's probably fair to assume that we'll probably end up toward the higher end of that range. And I think we'll be reevaluating capital deployment opportunities as we go into 2023. We have a strong preference for deploying capital via loan growth.
And obviously, acquisition opportunities are always a possibility as well. But to the extent that we continue to have the strong capital ratios that we do and our earnings power increases, depending on what those opportunities are to deploy capital the loan growth or acquisition. We may well end up increasing the pace of deployment via repurchase as we go into 2023.
Understood. Thanks very much.
I'm showing no further questions at this time. We'll then conclude our question-and-answer session. I would now like to turn the conference call back over to Mr. Duane Dewey for any closing remarks. Sir?
Yes. Thank you for joining us for our second quarter call. We're very pleased and happy with the second quarter. We look forward to catching up and visiting with you again at the end of the third quarter. Have a great rest of the week.
Right. And we thank you, sir and to the rest of the management team for your time also today. Again, we thank you all for attending today's presentation. At this time, you may disconnect your lines. Thank you. Take care and have a blessed day, everyone.