Great Western Bancorp (GWB) Q2 2019 Earnings Call Transcript
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Great Western Bancorp (NYSE: GWB)
Q2 2019 Earnings Call
April 25, 2019 8:30 a.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Good day and welcome to the Great Western Bancorp second-quarter fiscal-year 2019 earnings conference call. [Operator instructions] Please note this event is being recorded. I would like to turn the conference over to Ann Nachtigal, director of corporate communications. Please go ahead ma'am.
Ann Nachtigal -- Director of Corporate Communications
Thank you, Karl and good morning, everyone. Joining us this morning on Great Western Bancorp's second-quarter fiscal-year 2019 conference call are Ken Karels, chairman and chief executive officer; Doug Bass, president and chief operating officer; Peter Chapman, chief financial officer; Karlyn Knieriem, chief risk officer; and Michael Gough, chief credit officer. Before we get started, I would like to remind you that today's presentation may contain forward-looking statements that are subject to certain risks and uncertainties that could cause the company's actual future results to materially differ from those discussed. Please refer to the forward-looking statement disclosures contained in the presentation we have made available on our website, as well as our periodic SEC filings for a full discussion of the company's risk factors.
Additionally, today, we will be discussing certain non-GAAP financial measures on this conference call. References to non-GAAP measures are only provided to assist you in understanding Great Western's results and performance trends and should not be relied upon as the financial measure of actual results. Reconciliations for such non-GAAP measures are appropriately referenced and included within the presentation. With that said, let me turn it over now to Great Western Bancorp's chairman and chief executive officer, Ken Karels.
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Ken?
Ken Karels -- Chairman and Chief Executive Officer
OK. Good morning and thank you for joining the call. We're very pleased with the results for the second quarter of our fiscal year. Net income of $44.5 million or $0.78 a share is up 10% and earnings per share of $0.78 is up 13% over the March 2018 quarter.
Return on average tangible common equity of 16.9% continues to be industry leading. Expense control remains strong with our efficiency ratio at 45.6%. Asset quality metrics were stable with no real impact from the flooding that occurred through parts of the Midwest. We raised our dividend by 20% to $0.30 per share and we continue to generate excess capital with total capital increasing 30 basis points to 12.4% during the quarter.
Now for more insight on this quarter's financial results, I'd like to turn the call over to our chief financial o`fficer, Peter Chapman. Pete?
Peter Chapman -- Chief Financial Officer
Thank you, Ken and good morning, everybody. Looking to revenue, interest income was $13.1 million for the quarter which reflected an increase of $6.9 million or 5.5%. Net interest margin and adjusted net interest margin was 3.75% and 3.76% respectively for the quarter. With the adjusted net interest margin down 5 basis points quarter over quarter.
Of the decrease in margin, 1 basis point was due to nonaccrual interest write-offs in the quarter and 1 basis point due to carrying higher balances in the investment portfolio. This increase in the investment portfolio of $250 million will reduce NIM by approximately 8 basis points in future quarters but generate incremental post-tax earnings of $200,000 per quarter. This step up in liquidity was in an area we're running a little below peers. And while we've also seen good deposit inflows, we thought it was worthwhile to increase on balance sheet liquidity and also to pick up some additional income, we're taking on limited increased investment interest rate risk.
As some of these item in the absence of further Fed funds increases, we would expect NIM to drop by 2 basis points to 3 basis points per quarter, should deposit competition remain as is in our markets, although we have started to reduce deposit prices on some products. Non-interest income increased by $1.5 million for the quarters just $18.2 million. Drivers of the growth were up $0.4 million benefit on credit risk on fair value loans compared to $1.2 million charge in the prior quarter. $0.3 million lower derivative expense, $0.5 million in contract volume benefits and $0.5 million of ALLL and other benefits in the current quarter.
These increases were offset by $1.5 million decline in service charges and other fees driven by $1.8 million decline in OD/NSF fees and $0.5 million decline in crop insurance of which is seasonal with annual revenue largely being recognized in the prior quarter. Non-interest expenses were $56.6 million for the quarter, a decline of $0.5 million. Salaries and benefits remained relatively stable. Data processing increased by $0.4 million after slower spend in the December 2018 quarter.
Occupancy costs increased by $0.4 million due to seasonal storm-related costs and professional fees increased by $0.6 million through increased consulting spent. OREO expense also declined by $0.4 million due to assets performing, declined $2.4 million due to assets performing above expectations. But expense control for the following quarter to be slightly below previous guidance at around $57.5 million ahead of the $58 million previously discussed. For more now on loan and deposit growth, I'll turn over to our president and chief operating officer, Doug Bass.
Doug?
Doug Bass -- President and Chief Operating Officer
Thanks, Pete and good morning, everyone. At the end of the March quarter, loans were $9.7 billion which is flat to prior quarter. As we flagged in prior quarterly calls, the March quarter is typically our softest growth period due to seasonal Ag pay downs and also construction slower in many of our markets due to weather. With current pipelines, which are comprised of about 45% C&I and owner occupied real estate and 55% commercial real estate.
We would expect growth to still be in the mid-single-digit range for the full fiscal year. Growth came across the footprint during the quarter with strong growth in Iowa followed by Colorado, South Dakota and Nebraska. Growth for the quarter was comprised of $139 million increase in the commercial real estate segment with no real concentration in any specific industry. Construction and development balances increased by $28 million during the quarter as we would expect this growth to accelerate for the remainder of the fiscal year as weather conditions improve and owner equity is fully invested and funded draws commence on existing construction projects.
Agricultural balances decreased $113 million during the quarter with approximately $30 million due to repayment of seasonal tax planning advances made in December also $16 million in one exposure previously on nonaccrual and rated substandard move to OREO. We see this event as positive as we can better control a more orderly sale of our collateral. The balance of $63 million was due to seasonal Ag pay downs. We also continue to work with higher risk, higher leveraged agricultural operations to refinance the relationships to other institutions and non-traditional crop input lenders.
We were also pleased with our new branch in North Scottsdale which opened in December 2018. Our team is comprised of four seasoned bankers that specialize in C&I lending that in aggregate have an excess of 50 years experience in the Phoenix market. Additionally, we've hired four experienced bankers in the quarter in other metro markets across the company that focus on C&I lending. Deposit growth during the quarter was $355 million or 3.5%.
We did see continued strong consumer inflow with consumer balances growing $145 million during the quarter. Business account balances were largely flat. Deposit competition during the quarter continues to remain strong. However, we see fewer high rate promotions post the Federal Reserve's decision to not raise interest rates in March.
Consistent with prior quarters due to seasonality of our customer base, the upcoming quarter will show modest deposit movements. To manage net interest margin, the regional leadership teams meet weekly to review loan and deposit rates to ensure that we have consistent views on acceptable returns across the footprint. We will continue to do this and proactively manage pricing on both sides of the balance sheet. Let's turn the call over now to our chief credit officer, Michael Gough, who will take us through asset quality developments.
Michael?
Michael Gough -- Chief Credit Officer
Thank you, Doug. Overall, we are satisfied with asset quality during the quarter with asset quality remaining stable to improving slightly across some metrics. Before we run through the performance of the portfolio for the quarter, it is important to note that we have had minimal impact so far from flooding in the Midwest. In Northeastern Nebraska and Southwestern Iowa, the most impacted area, we have only $25 million of loan commitments and one branch that has been impacted by closure.
Compared to the December 2018 quarter, we saw a $20 million decline in watch credits to $301 million largely due to upgrades in the Ag portfolio. Substandard credits and OREO balances increased to $259 million and $32 million respectively with the increase in OREO balances consistent with our discussion on the December 18 earnings call, where we did expect to take land on one large relationship into OREO. Also if you refer to Slide 7 in our earnings release presentation, the levels of watch and substandard loans and charge offs across the portion of the loan portfolio that is non-ag are at very low levels. With non-Ag watch loans at $92 million, substandard loans $72 million and non-Ag charge off 6 basis points for the quarter.
Net charge offs for the quarter were $5.9 million or 25 basis points of average loans on an annualized basis with a slightly elevated level of charge offs on a small number of accounts where we have realized losses previously reserved. Our allowance for loan and lease losses as a percentage of total loans increased 2 basis points to 70 basis points and our comprehensive credit coverage which includes credit-related fair value adjustments on our long term loan portfolio and purchase accounting marks remained sound at 93 basis points of total loans. We have completed significant credit reviews of the Ag portfolio during the quarter with over 97% of the portfolio reviewed for all exposures with credits due prior to March 31 which represents the majority of the grain portfolio. For the dairy portfolio, milk prices have increased during the quarter and also there is more positive sentiment for future price trends.
Within the grain portfolio, borrowers performed overall better than expected during 2018. The grain portfolio also remains very lowly leveraged with the overall loan to value ratio of the portfolio being in the low 40% range with this increasing only modestly from the prior year which we feel is a very good sign of the strength of the portfolio in this stressed environment. With that, let's turn the call back to Ken for some closing remarks.
Ken Karels -- Chairman and Chief Executive Officer
OK. Thank you, Michael. We are very pleased with our continued positive momentum and strong returns in the second quarter. As Doug highlighted, we would expect loan growth in the mid-single-digit range for the full fiscal year as pipelines remain solid.
We were very successful in raising deposits this past six months, raising $495 million in business and consumer deposits which will allow us to be less aggressive with deposit rate pricing in the future. Thank you for your continued interest in Great Western Bank. And we'll now open up this call for questions.
Questions and Answers:
Operator
[Operator instructions] And our first question today comes from Dave Rochester with Deutsche Bank.
Dave Rochester -- Deutsche Bank -- Analyst
Just wanted to start on the expense side. It looked like you had great expense control this quarter, that came in decently below guidance. How should we be thinking about that trend from here? Will this lower level stick through the end of this year?
Peter Chapman -- Chief Financial Officer
Look we, as I just said, Dave, I'd expect it to creep up a bit next quarter. So sort of around that $57.5 million so little light below where we thought previously and then sort of just a little gradual increase from there. So sort of that -- sort of 3% to 4% increase annually out from that one there, Dave. But yeah, you're right.
Expenses do come in a little, little lower continually with some IT and consulting projects we've got. They're just running a little slower, still going well but the invoices have been coming in a little slower. So just a slower start to the year on the expenses.
Dave Rochester -- Deutsche Bank -- Analyst
OK. Great. Just a quick one on credit quality. Was the $25 million in commitments you mentioned the only exposure that you have in the markets that experienced flooding? Are you seeing that to extend your exposure to the flooding?
Michael Gough -- Chief Credit Officer
That's the extent of our loan book in our most affected branch that has been closed and we've had to operate from another location $25 million in commitments about $20 million in outstanding.
Dave Rochester -- Deutsche Bank -- Analyst
I guess that is bigger picture it maybe not in just that market where you had a branch closure but overall have you sort of isolated or nailed down the total amount of your loan book that could be located within markets that experienced flooding?
Doug Bass -- President and Chief Operating Officer
Dave, this is Doug Bass. We have you know pulled a lot of the markets and precedents as to totals and honestly no significant impacts other than the total in the one branch that Michael noted. Flooding is so widespread and not in areas that we have credit concentrations.
Dave Rochester -- Deutsche Bank -- Analyst
That's great. OK. And then just one last one. You mentioned 2 bps to 3 bps of NIM pressure going forward.
Are you expecting that per quarter through the end of fiscal '19. Just wanted to understand the parameters around that guidance?
Peter Chapman -- Chief Financial Officer
Yeah, Dave. Look at this stage, I'd say so just until we -- just until we see how deposit competition plays out now over the next quarter. As Doug mentioned in his comments, we are saying that to wind back deposit costs. So look, hoping that will help but that's just based on best information at this stage.
We'll update you more next quarter.
Dave Rochester -- Deutsche Bank -- Analyst
On the latter point with the unwind at some of the deposit cost increases. You said, you're actually reducing some deposit cost at this point?
Peter Chapman -- Chief Financial Officer
Looking to project. Certainly looking -- we've identified our higher cost deposits, Dave. And just starting to try to wind those back a little bit.
Operator
And our next question comes from Jon Arfstrom with RBC.
Jon Arfstrom -- RBC Capital Markets -- Analyst
Hey just a follow up on the margin, Pete. The curious portfolio increase. Are you seeing that 8 basis points is already in the run rate?
Peter Chapman -- Chief Financial Officer
No, it was only 1 basis point this quarter Jon. So the average effect, we did it later on in the quarter. So it was only about the number this quarter and the average balances was only about $35 million and ought to be $250 million on an average basis next quarter.
Jon Arfstrom -- RBC Capital Markets -- Analyst
OK. And so it's -- are you saying -- when you deconstruct this a bit are you saying that the core lending and core deposit piece of the bank that you're seeing maybe a little bit of improvement or relative stability, or how do you want us to think about that?
Peter Chapman -- Chief Financial Officer
That's the sort of the couple of basis point decline in margin, Jon. We would expect just with no Fed fund increases, you don't get that bump on the loan portfolio. And while we are trying to manage deposit costs down, there is still some deposit competition pressure there. So that's where I'd expect that sort of couple of point drift outside of the investment portfolio.
That change we've made this quarter.
Jon Arfstrom -- RBC Capital Markets -- Analyst
OK. OK. That makes sense. Michael, question for you, you talked about some upgrades, watch list upgrades in the Ag portfolio.
Curious on that and I'm just curious if you feel like there's anything new that you're seeing, anything deteriorating or is it just essentially stable from here?
Michael Gough -- Chief Credit Officer
Really, different answer depending on the sector you're talking about, the grain book, overall. I think really did do better. We have had more upgrades than downgrades, always. There's always a mix, some going both ways.
But the good news is as we got through the round of reviewing '18 results more upgrades than downgrades in the grain book. Now the other thing, I would tell you in the grain book if you look at our top 10 classified exposures, I think our seventh biggest one was grain, with a planned pay down over the next 45 days or so on that one. You won't have any problem grain exposures over $10 million based on information we have at the present time. Dairy, we know has been at a low point in its cycle but we are hearing -- seeing some pricing improvement.
And also from some -- from at least one major trade group some expectations for better performance later in the year.
Jon Arfstrom -- RBC Capital Markets -- Analyst
OK. All right. And then in terms of competition in Ag. It's kind of an oddball question because I know you have a big competitor there.
But are you seeing better pricing or less competition in the sector?
Doug Bass -- President and Chief Operating Officer
Yeah. Jon, this is Doug. Yes we see returns that are probably depending on the exact request 50 basis points to 75 basis points higher in the Ag sector. The competition remains pretty consistent because honestly a lot of the smaller community banks, farm credit and institutional lenders of insurance companies have really not changed and are still very active in over the last few years.
Jon Arfstrom -- RBC Capital Markets -- Analyst
OK. Thanks for the help.
Doug Bass -- President and Chief Operating Officer
And the couple large regionals as well are still very active in a number of the different segments.
Operator
And our next question comes from Ebrahim Poonawala with Bank of America Merrill Lynch.
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
I just wanted to go back to the margin again, Pete, just wanted to clarify. So you said, you expect 8 basis points in incremental pressure because of the securities book to the margin.
Peter Chapman -- Chief Financial Officer
Correct.
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
And then another 2 basis points to 3 basis points.
Peter Chapman -- Chief Financial Officer
Correct, Ebrahim.
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
So 376 -- 368 and then 2 basis points to 3 basis points, OK. Yeah, I just want to make sure we didn't overdo that. Understood. And in terms of the loan to deposit ratio, so that went down to 93% because of the growth this quarter.
Is that at a point where you start seeing it drift higher. I know you mentioned about wanting to maintain a bit more liquidity, so how should we think about deposit growth in terms of your loan growth guidance?
Peter Chapman -- Chief Financial Officer
You'll see that loan to deposit ratio drift up over the next couple of quarters, Ebrahim. We typically see some outflows this quarter and next on the deposit side of things. So you'll see that drift up over these next couple of quarters.
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
Drift up over the next -- makes sense. And in terms of I guess capital return or buybacks. We didn't do any this quarter. Just wanted to understand the appetite to buy back stock and what's the constraining ratio from a capital ratio standpoint that you're looking at when you think about capital return?
Ken Karels -- Chairman and Chief Executive Officer
Yeah. Just -- Ken, here. Yeah definitely, we will continue to look at buying back stock here. Obviously, Pete will -- probably know what the ratio we're at, but we generated again what 3 basis points or 4 basis points higher.
Yeah capital on it too. So even with raising the dividend, unless we do an acquisition, we need to return capital to our investors. So we'll be very conscious of doing that. And probably the easiest way is to do stock buybacks.
Peter Chapman -- Chief Financial Officer
Look, we're not -- from a capital ratio perspective, Ebrahim, we're pretty healthy at the moment. So certainly not constrained by any one ratio. As Ken said, up the dividend this quarter, we will still have a little bit of a look at M&A certainly and if there's nothing on the horizon then we may be active again in the future.
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
Understood. And anything on the M&A like are discussions progressing? We've heard from other banks about a higher level of conservation. But just wondering, if you think the market is getting to a point where we actually start seeing some transactions?
Ken Karels -- Chairman and Chief Executive Officer
We're seeing a little bit of signs of pricing coming down from sellers. Our pipeline has got a few more than it had here last quarter in it. So it just depends. I mean, we are -- we are very cautious in doing acquisitions and doing it at the right price.
That's accretive to our shareholders. And so -- we continue to look. But they're hard to predict here because we can't determine seller prices, so.
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
Understood, thanks for taking my questions.
Operator
And our next question comes from Jeff Rulis with D.A. Davidson. Please go ahead.
Ken Karels -- Chairman and Chief Executive Officer
Good morning, Jeff.
Jeff Rulis -- D.A. Davidson -- Analyst
On the mortgage banking side, I guess year to date you are down, I guess fiscal year to date down close to 20% year over year. Any thoughts on kind of the balance of the year outlook and what may be kind of -- what you're seeing in that line item?
Ken Karels -- Chairman and Chief Executive Officer
And again mortgage banking is a very very small segment for us and non-interest income. But I think, it's seasonally, we will see pickup with the sign in a lot of our markets and construction and home purchasing activity. I think interest rates continue to still be very favorable on 15 year and 30 year options and we'll see some pickups in this quarter and next which should be seasonally comparable to prior years. But again, it's not a material focus or a material swing for us in the company.
Jeff Rulis -- D.A. Davidson -- Analyst
OK. And then Pete maybe just on the expense side again just obviously the -- if you look at the kind of the loss on repossessed property, a big drop, is that in part to your expense guidance that maybe that comes back up on sort of a more normalized level?
Peter Chapman -- Chief Financial Officer
Yeah. So I think previously, Jeff, we've spoken sort of around about $800,000 a quarter in sort of hold costs. We've got one large property in there that's actually performing a little better than we expected and forecast so that -- that's why that came in a little bit better this quarter. So yes, I'd probably say that, expect to come back up a little bit and then just on the consulting side and maybe the salary side expect those to drift up a little bit over the next two quarters as well.
Jeff Rulis -- D.A. Davidson -- Analyst
And Pete on the other deposit products that you are attempting to lower like CDs or what is the typical -- comp that you are trying to lower? OK.
Peter Chapman -- Chief Financial Officer
Very much that CDs very much so Jeff, we've pulled a couple of those last quarter, I think actually now. And also on the public fund deposits as well just working those down as well were the two main ones.
Jeff Rulis -- D.A. Davidson -- Analyst
And just one last one, I guess for Michael. Just to clarify, you had -- you said 97% of your Ag review is complete at this point?
Michael Gough -- Chief Credit Officer
That is absolutely correct. What we did is we measured forward lines that came due most of which this time of year in the grain sector from December of '18 through March of '19. We are through 97% of those and a couple of that have not been completed, there is small percentage left. Those may have been extended but we did take a look at debt service and other metrics to make sure we didn't have any problems.
But what you said is exactly correct.
Operator
And our next question comes from Nathan Race with Piper Jaffray. Please go ahead.
Nathan Race -- Piper Jaffray -- Analyst
Going back to the credit quality discussion, just curious. It looks like Ag accounted for the majority of the charge offs this quarter and it sounds like grain improved in the quarter from a credit quality perspective. So just curious, what the specific drivers of the Ag charge offs were this quarter?
Michael Gough -- Chief Credit Officer
This quarter, the largest driver would have been in the cattle sector which we think was somewhat of an isolated instance but that was largely due to one large cattle operation.
Ken Karels -- Chairman and Chief Executive Officer
And also that the item that went into OREO that --
Michael Gough -- Chief Credit Officer
And we did take when we moved that big parcel into OREO, we took some of what had been reserved as charge-off there as well. Absolutely correct.
Peter Chapman -- Chief Financial Officer
Nathan, it's kind of interesting when you take a look at our Ag portfolio and even the return after charge off, it's outperforming our C&I portfolio greatly. So that's something that the niche we have in Ag is serving us well even in tough times.
Nathan Race -- Piper Jaffray -- Analyst
That's great. Very helpful color. And just going back to the securities portfolio discussion. Pete, just curious, if you can kind of put some parameters in terms of the absolute size or kind of relative size of the securities portfolio as you intend to grow it and is that growth going to be largely funded on a -- in terms by wholesale borrowings or deposits or just kind of how you're kind of thinking about the growth in that portfolio going forward?
Peter Chapman -- Chief Financial Officer
Yeah. We did the step up as I said this quarter, where it was only about $35 million to the average but it was $250 million on a spot basis where we increased that, Nath. I'd expect the most sort of organic growth at the moment for the -- for this coming quarter, so probably flattish to slightly up this quarter Nathan and then it would be funded by sort of deposits or FHLB.
Nathan Race -- Piper Jaffray -- Analyst
OK. Understood. And if I could just ask one more on swap fees, they tick lower in the quarter by about half of what we saw in -- in fiscal 1Q. So just curious if you have any line of sight into how swap fees could trend over the balance of this year.
Peter Chapman -- Chief Financial Officer
Probably more consistent with this quarter than last. Last, we had a couple of big deals that are great but you can't forecast those every quarter. So probably, say more in line with this quarter, Nath.
Operator
And our next question comes from Damon DelMonte with KBW.
Damon DelMonte -- KBW -- Analyst
Good morning, guys. So most of my questions have been answered. But just -- if we could circle back to the provision outlook for the upcoming quarters. Obviously this quarter was a little bit higher than what we've seen in previous quarters.
Do you think we kind of revert back to that mid $5 million per quarter level?
Michael Gough -- Chief Credit Officer
This is Michael. I would say that would be the expectation.
Damon DelMonte -- KBW -- Analyst
OK. Great. And then I guess, pretty much everything else was asked and answered already. So that's all that I had.
Thank you.
Michael Gough -- Chief Credit Officer
Thank you very much.
Operator
And our next question comes from Tim O'Brien with Sandler O'Neill & Partners.
Tim O'Brien -- Sandler O'Neill -- Analyst
Thanks. Just one more clean up. The other income line increase to $1.9 million. What was -- what's the story behind that?
Peter Chapman -- Chief Financial Officer
Other? Yeah, there's a couple of things in there. I called out about $0.5 million for a -- an incentive -- a volume incentive we got through the quarter. Tim, there's a couple of hundred thousand incremental from ALLL. Unfortunately, that was a debt that we got and that -- those two items made up the bulk of that NIM, just to a few other reps in Mass.
Tim O'Brien -- Sandler O'Neill -- Analyst
Those are non-recurring hopefully.
Peter Chapman -- Chief Financial Officer
Yes exactly, Tim.
Operator
[Operator instructions] And our next question comes from Terry McEvoy with Stephens.
Terry McEvoy -- Stephens Inc. -- Analyst
Thanks. Good morning.
Ken Karels -- Chairman and Chief Executive Officer
Good morning.
Terry McEvoy -- Stephens Inc. -- Analyst
Just a question on the service charges, I know in the release the step down you mentioned was just overdraft fees, nonsufficient fees coming down in the first quarter but it was down a fair amount year over year and I was wondering if you could just talk about the outlook for that line throughout 2019?
Peter Chapman -- Chief Financial Officer
Yeah. It is down year over year. I expect it to tick up over the next couple of quarters, Terry. But we are seeing a decline in the consumer in NSF/ODTs, very true.
We've been able to offset some of that with increase on the business side, business credit cards and cash management have been performing well for us. But I would expect a slight tick down year on year, but an increase from this quarter on.
Terry McEvoy -- Stephens Inc. -- Analyst
Thank you. And then just follow up, the C&I pipeline. Any specific markets or industries that stand out today?
Ken Karels -- Chairman and Chief Executive Officer
No, not really. Nothing, Terry. It's really spread evenly. Manufacturing, distribution and nothing geographically concentrated either.
I think, a lot of it's been because of the focus on the hiring of the C&I bankers for the last 12 to 15 months that are -- takes about six months, eight months of time and we start seeing pipelines build and that's what we're experiencing.
Terry McEvoy -- Stephens Inc. -- Analyst
OK. Thanks, guys.
Ken Karels -- Chairman and Chief Executive Officer
Thank you.
Operator
[Operator signoff]
Duration: 34 minutes
Call Participants:
Ann Nachtigal -- Director of Corporate Communications
Ken Karels -- Chairman and Chief Executive Officer
Peter Chapman -- Chief Financial Officer
Doug Bass -- President and Chief Operating Officer
Michael Gough -- Chief Credit Officer
Dave Rochester -- Deutsche Bank -- Analyst
Jon Arfstrom -- RBC Capital Markets -- Analyst
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
Jeff Rulis -- D.A. Davidson -- Analyst
Nathan Race -- Piper Jaffray -- Analyst
Damon DelMonte -- KBW -- Analyst
Tim O'Brien -- Sandler O'Neill -- Analyst
Terry McEvoy -- Stephens Inc. -- Analyst
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