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Spirit of Texas Bancshares (NASDAQ:STXB)
Q1 2021 Earnings Call
Apr 22, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greetings, and welcome to the Spirit of Texas Bancshares first-quarter 2021 earnings conference call. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Jerry Golemon, chief operating officer.

Thank you, sir. You may begin.

Jerry Golemon -- Chief Operating Officer

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Spirit of Texas Bancshares conference call and webcast to review 2021 first-quarter results. With me today is Mr. Dean Bass, chairman and chief executive officer; Mr.

David McGuire, president and chief lending officer; and Ms. Allison Johnson, chief financial officer. Following my opening remarks, we will provide a high-level review and commentary on the financial details of the first quarter before opening the call for Q&A. I'd now like to cover a few housekeeping items.

There will be a replay of today's call, and it will be available by webcast on our website at www.sotb.com. There will also be a telephonic replay available until April 29, 2021, and more information on how to access these replay features was included in yesterday's release. Please note that the information reported on this call speaks only as of today, April 22, 2021, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. In addition, the comments made by management during the conference call may contain certain forward-looking statements within the meaning of the United States federal securities laws.

These forward-looking statements reflect the current views of the management. However, various risks, uncertainties, and contingencies could cause actual results, performance, or achievements to differ materially from those expressed in the statements made by management. The listener or reader is encouraged to read the company's annual report Form 10-K filed with the SEC for the year ended December 31, 2020, to understand certain of those risks, uncertainties, and contingencies. The comments today will also include certain non-GAAP financial measures.

Additional details and reconciliations to the most directly comparable GAAP financial measures are included in yesterday's earnings release, which can be found on the Spirit of Texas website. Now I'd like to turn the call over to our chairman and CEO, Mr. Dean Bass. Dean?

Dean Bass -- Chairman and Chief Executive Officer

Thank you, Jerry, and good morning, everyone. Welcome. We are pleased to announce another solid quarter performance. Texas is open for business, and the economy is picking up steam.

During the quarter, we have seen a significant number of Texans receive the vaccine, an end to the mandatory mask requirement, and businesses across the state allowed to operate at full capacity. As a result, we have seen an increase in economic activity across the state, and we anticipate a quicker recovery in many parts of the country. During the quarter, we reported a strong net income of over $10 million with fully diluted EPS of $0.58 and a return on average assets of 1.32% annualized. Our provision expense has returned to pre-pandemic levels, consistent with the improvement in all economic indicators within Texas.

The current allowance balance appears adequate based on our insight, experience, and assessment model. Credit quality has improved, and loans and active deferral periods are not significant in either number or balance. The net interest margin has been adjusted in response to the global pandemic and has stabilized with our measures taken to deploy excess liquidity and remove inefficient leverage. We are pleased to now turn our gaze to future growth, both organically and through strategic partnerships.

The first quarter has always been a slower quarter with respect to loan growth. And as we review our pipeline and funding projections for the remainder of the year, we are confident in our quarterly and annual loan growth projections. We will never chase loan growth at the expense of our underwriting guidelines, but we are excited about the opportunities that are currently expected to materialize in the next few quarters. As always, we are diligently looking for strategic partners who can assist us with growing the bank with meaningful impact.

Now I'll turn the call over to David to discuss the loan portfolio and asset quality. David?

David McGuire -- President and Chief Lending Officer

Thank you, Dean. I would like to add some more detail around our results that I know the entire Spirit team is proud to have achieved. The unpaid principal balance of loans in active deferment periods has declined from $91.3 million at December 31, 2020, to $11.6 million at March 31, 2021. 97% of loans requesting a deferment during 2020 have resumed scheduled payments.

And when the last loan exits deferment in the middle of May, we expect that more than 99% of loans requesting deferment will resume scheduled payments. These statistics would not be possible without our lending team and credit administration team who have worked tirelessly the past year understanding borrower needs and providing guidance as well as assistance. While we did experience some loan growth during the quarter when excluding PPP loans, we sold approximately $45.2 million of participation from the commercial real estate portfolio in an effort to improve concentrations and assist our loan mix with respect to policy limits. As Dean mentioned, the first quarter has historically been a period of -- for slower loan growth and demand typically increasing late in the second quarter through the end of the year.

As we look at our current pipeline, we are still projecting year-over-year loan growth, excluding PPP loans, in the high single digits. The yield on loans in the fourth quarter of 2020 was 5.09%, which decreased 33 basis points from Q4 2020. The decrease in yield was expected given newly originated PPP loans, which yield 1% and a slower pace of PPP forgiveness than we experienced in the fourth quarter of 2020. Excluding the impact of PPP loans, the loan yield was 5.29%, compared to 5.3% at December 31, 2020.

The yield on loans, excluding PPP, has stabilized. Asset quality remained strong during the first quarter. We have seen improvement in past-due loans and overall risk ratings. Nonperforming loans increased to $9.9 million at March 31, 2021, from $8.6 million at December 31, 2020.

Nonperforming loans to outstanding loans increased to 41 basis points from 36 basis points during the quarter, primarily related to working through remaining pandemic-related credit accounts. We did not expect overall nonperforming assets to increase meaningfully during 2021. The provision for loan losses for the first quarter was $1.1 million, which was consistent with the first quarter of 2020. At quarter end, the coverage ratio on the organic portfolio was 92 basis points, excluding PPP loans.

Annualized net charge-offs were 14 basis points for the first quarter of 2021. With that, I'll turn the call back over to Jerry to provide a review of the funding side of the company. Jerry?

Jerry Golemon -- Chief Operating Officer

Thank you, David. Total deposits at the end of Q1 were $2.6 billion, an increase of $138 million or 5.6% from Q4 2020 and an increase of $520 million or 25% over Q1 2020. Of the $138 million sequential increase from Q4 2020, $59 million was related to newly originated PPP loans and $45 million was due to the seasonality of public funds. Noninterest-bearing deposits increased $72.7 million or 10% from Q4, again, with deposits related to PPP loans representing the bulk of the increase.

Noninterest-bearing deposits now make up 30.8% of total deposits, up from 23.4% at the end of Q1 2020. This improved shift in deposit mix, along with aggressive repricing on deposits, resulted in a 0.38% cost of deposits, a decrease of eight basis points from Q4 2020. The bank has no broker deposits. The reported loan-to-deposit ratio at the end of Q1 was 93.6%.

Excluding PPP activities, the loan-to-deposit ratio drops to 79.7%, down from 85.9% at the end of Q4, due to the previously mentioned loan participation sold during the quarter. Borrowings decreased by $61 million during the first quarter to $191.7 million due to the payoff of PPP LF borrowing after obtaining PPP forgiveness on the loans pledged against it, as well as the maturity of FHLB short-term borrowings. Borrowings totaled 6% of assets at the end of Q1. The company has significant sources of available liquidity, including $50 million in a holding company line of credit, Fed funds lines totaling $118 million, and the Federal Home Loan Bank availability of $668.8 million.

I would now like to turn the call over to Allison to provide a financial overview of the first quarter. Allison?

Allison Johnson -- Chief Financial Officer

Thanks, Jerry, and good morning, everyone. We provided detailed financial tables in yesterday's earnings release. Consolidated net income for the three months ended March 31, 2021, was $10.1 million, with fully diluted EPS of $0.58, compared to earnings of $4.1 million and fully diluted EPS of $0.22 in the first quarter of 2020. Net income and earnings per share were primarily driven by the recognition of $1.8 million of net PPP origination fees and $2.2 million of deferred costs associated with the origination of the latest round of PPP.

We anticipate the remaining $1.9 million of net origination fees on PPP loans generated during 2020 to be recognized during Q2 2021. In the latest round of PPP, we funded $144.3 million in loans with net PPP origination fees of $4.7 million, which we should recognize over the life of the loan. Noninterest income was $2.6 million for the first quarter of 2021, compared to $8.8 million in the fourth quarter of 2020, a decrease of $6.2 million linked quarter. The decline from Q4 2020 was primarily driven by the onetime fee recognition from the gain on the sale of Main Street Lending Program loans of $3.7 million and a reduction in swap product income of $1.9 million.

We expect noninterest income to increase in the coming quarters as treasury management offerings and swap products remain a strategic initiative for 2021. Noninterest expense, which totaled $16.6 million for the first quarter of 2021, compared to $18.4 million in the fourth quarter of 2020, decreased due to the deferral of $2.2 million in costs associated with the origination of the latest round of PPP loans. Given our ongoing efforts to diligently reduce expenses, branch optimization will continue to be a focus in 2021. The tax-equivalent margin in the first quarter of 2021 was 3.98% compared to fourth-quarter 2020 tax-equivalent margin of 4.44%, representing a 46 basis point decrease sequentially.

Excluding the impact of PPP loans, our tax-equivalent net interest margin for the first quarter of 2021 was 4.02% compared to 4.21% for the fourth quarter of 2020. During the quarter, we moved approximately $200 million of cash into higher-yielding securities, which should help to improve the margin in the second quarter and ensure that our tax-equivalent net interest margin remains above our target of 4%. The provision for loan losses for the fourth quarter was $1.1 million, which increased the allowance to $16.3 million or 67 basis points of our total loans outstanding, or 79 basis points, excluding the 100% government-guaranteed PPP loans. The provision expense for the quarter related primarily to the increase in specific reserves on impaired loans.

The coverage ratio on the organic portfolio was 92 basis points on the $1.51 billion in organic loans outstanding, excluding PPP loans at quarter end. Additionally, we have $4.1 million unamortized discounts on the acquired loan portfolio at March 31, 2021. We would not expect elevated provision expense for the remainder of 2021 beyond those amounts needed to fund net charge-offs and loan growth. As of March 31, 2021, we continue to enjoy strong capital ratios with a tier-one leverage ratio at the bank of 10.38% and 9.98% at the company on a consolidated basis.

Maintaining a strong capital position is the current priority so that we can focus on organic growth and strategic partnerships that may arise in the coming quarters. I'd now like to turn the call back over to Dean for closing remarks. Dean?

Dean Bass -- Chairman and Chief Executive Officer

Thank you, Allison. I'm very pleased with the first-quarter results and truly excited for what is in store for Spirit of Texas Bank. We can now return our focus to the growth trajectory we were on at the beginning of 2020. With some level of visibility returning to the capital markets, we are seeing merger activity increase as banks seek to combine strengths and mitigate weaknesses exiting the pandemic.

Spirit of Texas has a strong capital position and an experienced management team with expertise in finding the right strategic partners. Without a doubt, the future of our bank will be a story of growth, stability, and quality as it has since its inception. This concludes our prepared remarks. I'd like to ask the operator to open up the line for any questions.

Operator?

Questions & Answers:


Operator

Thank you. [Operator instructions] Our first question comes from the line of Matt Olney with Stephens. You may proceed with your question.

Matt Olney -- Stephens Inc. -- Analyst

Good morning. Thank you.

Dean Bass -- Chairman and Chief Executive Officer

Good morning, Matt.

David McGuire -- President and Chief Lending Officer

Morning, Matt.

Matt Olney -- Stephens Inc. -- Analyst

I want to start on the PPP side. And it sounds like the forgiveness process was slower than expected in 1Q, and that's definitely been the sentiment from some of your peers as well. But you are expecting, I think, the remaining fees from the first round of PPP to be recognized in 2Q, I believe. So does that mean you're already seeing the process of forgiveness start to improve in recent weeks?

David McGuire -- President and Chief Lending Officer

We have actually --

Allison Johnson -- Chief Financial Officer

Sorry, David. I'll take this one first and you can intervene. We did. In the second half of March, that actually picked up in forgiveness, and we actually ended up recognizing another $1 million of additional fee income.

Remaining off of the first two rounds of PPP loan fees, we have $1.9 million yet to be recognized, which we expect to recognize in the second quarter of this year.

David McGuire -- President and Chief Lending Officer

And, Matt, just a little color there, too, to add, is that we saw an acceleration right before the end of the quarter in the SBA forgiving loans, and that's continued on for -- up through today. As a matter of fact. So we're plowing through those first two rounds and think that those will be satisfied here pretty quickly this quarter, as Allison said. And then we'll wait out to round three and start processing those loans for forgiveness later in the year, late third quarter, early fourth.

Matt Olney -- Stephens Inc. -- Analyst

Got it. OK. Perfect. And just on fees in the first quarter, a little bit slower, I think, than you expected with respect to both swaps and SBA gains.

I'd love to hear more about what you saw in the first quarter and your expectations on fees overall, but those two in particular from here.

Allison Johnson -- Chief Financial Officer

Sure. So last quarter, we implemented this new swap product. So we scrubbed the existing loan portfolio, and any eligible loans that we thought should take advantage of that product, we went ahead and implemented that swap product for those customers. So that increased fee income kind of about $1.9 million, which was kind of an anomaly for Q4.

The seasonality of that, though, I would think, with Q1 typically being a slower loan growth quarter, we expect that swap fee income to pick up in future quarters. So we're estimating about -- probably about $1 million a quarter here going forward. And additionally, I'll let David talk about the seasonality associated with the SBA portfolio and the gain on sales generated from those.

David McGuire -- President and Chief Lending Officer

The SBA is -- last year was a very difficult year for generating new SBA loans due to the pandemic. But if you look at it today, we're starting to see activity that we had pre-pandemic in the SBA department. So the expectation is, is that we'll probably -- because of the time line on closing and fully funding SBA loans, we expect to see a much better second half of the year in the SBA world. And we'll probably be more reliant upon swap and other product income, fee income during the second and third quarters on through the end of the year.

Matt Olney -- Stephens Inc. -- Analyst

OK. Got it. That's helpful. And then on the loan side, loan growth side.

I think you mentioned -- sold some participations around $45 million. Would just love to hear more about strategy behind this. I think you mentioned reducing concentrations. I'm curious, were there any fees associated with selling these to other institutions? And would you look to continue to do this in the future?

David McGuire -- President and Chief Lending Officer

Well, if you remember, Matt, we did this last year at this exact same time as we're going into the acquisition of the Simmons branches, trying to balance out where our internal policies were versus regulatory targets. Again, this year, we did the same. As we build up our CRE portfolios, we are able to -- they're high-quality loans. We're able to find partners that want to take on a piece of the loan so we can rebalance.

And we now have the capacity to refill those buckets going into the rest of the year. And there's a -- we are -- when we do sell those loans, we take a 25-basis-point servicing fee on those loans. No other fees associated with that. And our expectation is that as we move along in looking at our growth projections for the rest of the year, we may bring some of those back like we did last year.

Dean Bass -- Chairman and Chief Executive Officer

And, Matt, just remember, like last year, we did the same thing to lessen the -- to bring about more liquidity and lessen some pressure points. And then this year, it's for a different reason, but we have the same capacity to bring those back in.

Matt Olney -- Stephens Inc. -- Analyst

OK. That's helpful. Thank you. I'll hop back in the queue.

Operator

[Operator instructions] Our next question comes from the line of Brad Milsaps with Piper Sandler. You may proceed with your question.

Brad Milsaps -- Piper Sandler -- Analyst

Hey. Good morning.

Dean Bass -- Chairman and Chief Executive Officer

Good morning.

David McGuire -- President and Chief Lending Officer

Good morning, Brad.

Brad Milsaps -- Piper Sandler -- Analyst

Wanted to maybe follow-up on the margin and kind of loan yield discussion. I was impressed that you're able to hold the kind of the core loan yield flat on a linked-quarter basis essentially. Just kind of curious, do you expect any additional pressure there? Do any of those servicing fees from the commercial real estate participation, does that run through interest income as opposed to fee income that might be supporting that? Just kind of want to get a sense of how much more stability you think is there, kind of given -- kind of where that rate is versus maybe what we're seeing from other of your peers in the market.

Allison Johnson -- Chief Financial Officer

Yes. So, Brad, again, I think loan yields have stabilized for us going forward. The way those participation works is that would run through the yield there. But I really don't think that that had a material impact on the loan yield.

On the cost of fund side, we're continuing to see -- we are continuing to see cost of funds decrease. We expect that trend to continue in the following quarters. We've got 22% of our CD portfolio is going to reprice next quarter and 78% is going to reprice over the next 12 months. So we'll see some relief there.

We did move some money around from cash and deployed that into our securities portfolio during the quarter. So we expect to see some pickup there in Q2 as well. But I think like most banks, we are just -- we have an influx of deposits right now. And that's mainly driven by the quantitative easing that's going on.

And we don't necessarily see that faucet turning off anytime in the short term. So with that, we're constantly monitoring our liquidity position and our asset mix -- our earning asset mix, and seeing how we can deploy that cash versus what we can keep in cash to use for future loan growth.

Brad Milsaps -- Piper Sandler -- Analyst

And just on the funding side of things, Allison, I think you had about $190 million of borrowings and long-term debt at the end of the quarter. I think roughly, $37 million of that. Is the remainder essentially the funding for PPP loans and that should come down as those loans pay off?

Allison Johnson -- Chief Financial Officer

That's correct.

Brad Milsaps -- Piper Sandler -- Analyst

OK. Great. And then on the expense side of things, you mentioned kind of ongoing branch rationalization. Just kind of wanted to get a sense of run-rate expenses.

I assume that you'll see the $2.2 million of FAS 91 related deferred costs come back in the run rate. But any other offsets there on kind of the branch rationalization side that could push the run rate lower?

Allison Johnson -- Chief Financial Officer

Yes. And, again, we expect to see maybe some branch rationalization occur in the second half of the year. One of the things we did last year was we turned off -- again, given COVID, there wasn't a lot of loan growth. So we shut off the incentive compensation for our lenders.

Given that we're expecting growth this year, we turned that initiative back on, so that's being factored in. So from a run rate perspective, we expect to maintain at about $18.5 million per quarter going forward, with the potential of getting some branch closures in there in the second half of the year.

Brad Milsaps -- Piper Sandler -- Analyst

Great. And just final question from me. For Dean, I think you guys, at the end of the year, were pushing about 365% CRE to total capital. Obviously, you had the loan participation this quarter.

How much is that going to impact your ability to grow? I mean, is it -- is kind of 400% the number that you sort of view as an upper bound? Or are you trying to push over time, back below the 300% threshold? Just kind of curious -- kind of how to think about that number, and what kind of governor that might represent toward growth going forward?

Dean Bass -- Chairman and Chief Executive Officer

We think we're in a very good position. If you remember back last year, some of your questions last year was, what are you going to do with the CRE and from the Simmons? It's a large dollar amount. It puts a little pressure there. Are those going to pay off? What's the quality of those? And now this year, we're in an excellent position.

I'll let David explain what transpired and what positioned us in a great spot right now. Good question.

David McGuire -- President and Chief Lending Officer

Yes, Brad. Internally, we've adopted policies probably about a decade ago now to exceed regulatory targets going up to 150% of our tier two capital for construction loans. And then we went to 350% on total CRE. So when we bumped across that number, that immediately gets our attention, and we want to manage back down to below that.

We've done that. We're in the low 320s right now. And given that with earnings and other measures, we're going to -- we're building capacity right now so that we have the availability to service the needs of our existing customer base and new customers going forward.

Dean Bass -- Chairman and Chief Executive Officer

Also consider when we did the sub debt last year was for M&A and/or organic growth. And so keep in mind, we still have additional funds to drop down if we thought it was needed and it could stimulate our progress in the income.

Brad Milsaps -- Piper Sandler -- Analyst

Great. Thank you, guys. I'll hop back in the queue.

Dean Bass -- Chairman and Chief Executive Officer

Thank you, Brad.

Operator

Our next question comes from the line of Woody Lay with KBW. You may proceed with your question.

Woody Lay -- KBW -- Analyst

Hey. Good morning, guys.

Dean Bass -- Chairman and Chief Executive Officer

Good morning.

David McGuire -- President and Chief Lending Officer

Good morning, Woody.

Woody Lay -- KBW -- Analyst

Yes. So I was hoping to get a quick update on the hotel portfolio. It was nice to see deferrals fall to such a low level. But I was just curious how occupancy rates are trending to this point.

Dean Bass -- Chairman and Chief Executive Officer

Yes, Woody. We predicted by the summer that all of our hotel portfolio would be back on its feet. And what we're seeing is actually, they're approaching that faster. And so -- than just the beginning of the summer.

Right now, we're -- we have -- the loans that are continuing to be deferred, we have three hotels. Things are -- revenues are improving, RevPARs are improving, occupancies are improving. And so we think that those, by the middle to end of the summer, will be back in where they need to be. And the rest of the hotel portfolio is performing as expected and all payments being made as agreed.

All contractual payments and amortizations are back in place. So overall, we feel very good about that. We're not quite ready to entertain doing new hotel loans at this point. But as things become better for the industry, particularly here in the state of Texas, that's where we focus on, we think that that portfolio will remain healthy and look to grow it probably later in the year or into 2022.

Woody Lay -- KBW -- Analyst

That's great to hear. My next question is with the industry flush with excess liquidity at the moment, I would imagine that pricing competition on the loan side is pretty intense. But you sound pretty optimistic with your forward loan yields from here. I was just curious how you're seeing the pricing competition unfold and where you're onboarding new average loan yields at this point?

Dean Bass -- Chairman and Chief Executive Officer

We have a target of maintaining a margin above 4%. And so depending on the deal, we're going to get -- particularly if it's a loan that's going to be a three- to five-year maturity and they're looking for a fixed rate right now, we're being really careful with that. We're pricing that in. We want to be north of 5% on a three- to five-year fixed-rate deal.

If it's a floating rate deal, then you're going to see pricing in the low to mid-fours. And as far as competition, I can't really speak to what everybody else is doing, other than looking at what their margins are. But based on our local peers, they're doing the same things we are. So the expectation is if we're running into competition that the pricing will be pretty much the same.

It's just going to be down to our underwriting guidelines versus theirs.

David McGuire -- President and Chief Lending Officer

Also, you might add, our pipeline going into the pandemic last year was around $1 billion, and that's what we had on ready to come through the bank in the following quarters. And so now we're seeing that pipeline back to those ranges -- close to those ranges where they were pre-pandemic, which is very encouraging.

Woody Lay -- KBW -- Analyst

Got it. And then last from me, the pipeline does sound strong at this point in time. Are there any segments in particular that will be driving the growth, or will it sort of be broad-based as we go forward?

David McGuire -- President and Chief Lending Officer

Yes. One of the benefits of being a -- basically having a statewide footprint is, is that we see a lot of different opportunities that our lenders are able to take advantage of. So if you look at the pipeline, and when we do, we actually segmented it out. We're not seeing any one segment growing any faster than the others.

So we expect that the granularity that we're trying to go after as a company, for safety reasons, is going to remain there and not looking to add huge loans on to move the needle. We'll do it one by one, like we've always done it. And it will be in many different segments that you might expect that -- in a company like ours as a community bank. We're going to be probably more real estate-related as collateral, but could be for lots of different purposes.

Dean Bass -- Chairman and Chief Executive Officer

And David makes a good point. We have a varied geography in our team. We have some strong professionals that have been doing their job for many, many years in different markets. And so that gives us a little bit of an advantage in -- just territory and where they're looking for loans.

So that's a strength, we feel like.

Woody Lay -- KBW -- Analyst

Got it. That's all for me. Thanks, guys.

Dean Bass -- Chairman and Chief Executive Officer

Thanks, Woody.

Operator

Our next question comes from the line of Matt Olney with Stephens. You may proceed with your question.

Matt Olney -- Stephens Inc. -- Analyst

Thanks. Just a follow-up on the investment securities purchase in the quarter. I think you mentioned about $200 million. I'd love to hear more details behind that in terms of products and yields and duration.

Thanks.

Allison Johnson -- Chief Financial Officer

Sure. Yes. So we have a really low-risk profile in general. The majority of that was put into cash flowing, agency mortgage backs.

The average yield on that portfolio is 1.45%, and the duration is a little over five years.

Matt Olney -- Stephens Inc. -- Analyst

Perfect. And then I guess, more for Dean around M&A. Would love to hear your thoughts about the M&A chatter in Texas more broadly, and love to hear kind of what types of transactions make the most sense for the bank this year?

Dean Bass -- Chairman and Chief Executive Officer

I'd be disappointed if you didn't ask me that question. So we have always been in that three to $500 million range. That's been a target. But as we've talked about before, there are different bank groups, outstanding bank groups at different levels, be it five to a billion to a billion to two.

And are there any other merger potentials that are out there that make sense for the company? We've been open to try to figure out what's in the best interest of our company. And I agree with you. I think it's that there is a strong interest now in a lot of different sectors. We had a good run in the first two years in M&A, and we had a pretty active board that was going to continue pre-COVID.

And now that has picked back up where there's more strong company, good companies on the board right now, whether it's on the fringes or in the metros. But it's a little harder wading into the metro market. So our fringe and edges has been successful to us, and we think that's a good way to continue.

Matt Olney -- Stephens Inc. -- Analyst

OK. Thanks for the commentary.

Dean Bass -- Chairman and Chief Executive Officer

Thank you.

Operator

There are no further questions at this time. I would like to turn the floor back over to you, Mr. Dean Bass for closing comments.

Dean Bass -- Chairman and Chief Executive Officer

Thank you, everyone, for being on the call. We appreciate your interest. And listen up, we think there are a lot of exciting things in the quarters, and we have certainly enjoyed being on this call and look forward to talking to you in the future. Thank you.

Operator

[Operator signoff]

Duration: 37 minutes

Call participants:

Jerry Golemon -- Chief Operating Officer

Dean Bass -- Chairman and Chief Executive Officer

David McGuire -- President and Chief Lending Officer

Allison Johnson -- Chief Financial Officer

Matt Olney -- Stephens Inc. -- Analyst

Brad Milsaps -- Piper Sandler -- Analyst

Woody Lay -- KBW -- Analyst

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