Image source: The Motley Fool.
Luther Burbank Corporation (LBC)
Q1Â 2020 Earnings Call
May 5, 2020, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, and welcome to the Luther Burbank Corporation First Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]
Before we begin, I would like to remind everyone that some of the comments made during this call may be considered forward-looking statements. The Company's Form 10-K for the 2019 fiscal year, its quarterly reports on Form 10-Q and reports on Form 8-K identify certain factors that could cause the Company's actual results for differ materially from those projected in any forward-looking statements made this morning. The Company does not undertake to update any forward-looking statements as a result of new information or future events or developments. The Company's periodic reports are available for the Company or online Company's website or the SEC's website.
I would like to remind you that while the Company's management thinks the Company's prospects for performance are good, it is the Company's policy not to establish with the markets any earnings, margin or balance sheet guidance.
I would now like to turn the conference over to your speaker today, Simone Lagomarsino, President and CEO. Please go ahead.
Simone Lagomarsino -- President & Chief Executive Officer
Thank you very much. Good morning, and welcome to the Luther Burbank Corporation 2020 first quarter conference call. This is Simone Lagomarsino, President and CEO, and with me today are Laura Tarantino, our Chief Financial Officer; and John Cardamone, our Chief Credit Officer.
We are in the midst of an unprecedented and challenging economic environment, which is the result of the COVID-19 pandemic. Our primary focus over the past two months has been the health and wellbeing of our employees, our customers and our communities, while also ensuring that we maintain the safety and soundness of our operations. We believe that our strong liquidity and capital levels as well as our historical approach to credit quality leading into this crisis position the Company well to navigate our path forward during these uncertain times.
I will focus first today on our risk profile. Over the past 36 years, we've been profitable every quarter, except the very first quarter of operations. This consistent profitability throughout all economic cycles was achieved because we have adhered to maintaining a strong risk profile and credit standards. These standards are reflected in the overall quality of our asset base.
At the end of the first quarter, cash, investments and real estate loans represented over 98% of our assets. Our securities portfolio is almost entirely comprised of high-quality liquid investments with little to no risk for impairment. Our loan portfolio is 100% real estate secured with an overall weighted average loan-to-value ratio of 59%. Multifamily and single-family residential real estate loans represent over 96% of our total loan portfolio. Less than 4% of our loan portfolio is secured by non-residential commercial real estate, and we have minimal exposure to the market segments most acutely impacted by the pandemic, including hospitality and retail, and no exposure to energy or travel. Additionally, and most significantly, we have no exposure to C&I loans.
The granular breakdown of our non-residential commercial real estate portfolio is available on Page 6 of our presentation deck. We believe that the residential real estate concentration in our loan portfolio and the lack of exposure to C&I lending, credit cards and auto loans provides a strong risk profile for the current circumstances and sets us apart from many of our peers in the industry.
The full economic impact of the COVID-19 pandemic is currently unknown. However, we think it is important to recognize that regardless of what lies ahead, people will still need a place to live. Additionally, the supply of housing in our primary markets was not sufficient to support the demand leading into this pandemic. And we do not anticipate that this dynamic will change as a result of the pandemic. In early March, in response to the COVID-19 pandemic, our incident response plan was implemented. We immediately began taking precautionary steps to protect our workforce and preserve our ability to serve our customers, including prohibiting employee travel, enhancing routine sanitization of our branches and our corporate offices, and enforcing social distancing and other safety protocols. We're pleased to report as a result of these actions that none of our employees has tested positive for the virus to date.
Our existing technology infrastructure with a few minor enhancements effectively accommodated and continues to accommodate approximately two-thirds of our staff who are working remotely. We implemented flexible employee schedules and reduced branch hours to ensure that our employees could be responsive to our customers, work safely and balance their family needs and responsibilities. We elevated and enhanced customer communications via mailings and website postings to remind our customers about telephonics, online and mobile options for transacting business.
We also encouraged our clients to exercise heightened awareness around cyber fraud and particularly in relation to COVID-19 schemes. Throughout this process, we have witnessed a significant change in branch foot traffic. Historically, before the pandemic, customers primarily conducted their transactions in person. Now, a significant number of our transactions are handled over the phone.
I'm proud to report that all of our branches remain open, and as always, when any deposit or loan customer calls our bank during business hours, they do not reach an automated system, but instead a Company representative answers the phone and is ready to serve their needs. To assist our borrowers who have been directly impacted by this health crisis, we've established a prudent customer-friendly loan payment deferral program. Our program allows certain borrowers to defer their monthly C&I obligations for three months or six months for borrowers in our first-time homebuyer program where the scheduled maturity of the loan is equally extended and the deferred interest payments are capitalized principal and repaid over the revised term of the loan.
As of April 30, we received completed loan payment deferral applications of 166 loans with principal balances totaling $253 million, representing approximately 4% of our total loan portfolio balance. Through April 30, we completed modifications for 64 loans with a total principal balance of $85 million representing 1.4% of our loan portfolio. Please refer to Page 8 of the presentation deck for more information regarding our COVID-19 payment deferral hardship program.
The foregone cash flows associated with the 166 loans that have provided completed applications is approximately $1.4 million per month and can be readily supplemented with our available liquidity resources totaling more than $1.9 billion at March 31 as shown on Page 5 of our presentation deck. Based on the flexibility afforded by Section 4013 of the recently enacted CARES Act, the vast majority of loan customers who receive a COVID-19 modification will have their payment status reflected as current and will be -- will continue to accrue interest monthly in our financial records. As would be expected, each loan that is approved for a COVID-19 modification will be added to our internal watch list and will be subject to increased monitoring.
It is not clear whether applications for credit relief will increase or subside over the coming months. The only anecdotal evidence gathered to date is that call volume inquiring about our payment deferral programs has decreased over the past two weeks. We believe that our desire and willingness to support our borrowers during this difficult time will reinforce our culture of providing superior customer service, both in good times and in bad without materially impacting the credit support of these loans, considering the generally well-secured nature of the portfolio as evidenced by our relatively low loan-to-value ratios.
We elected not to participate in the Paycheck Protection Program given the nature of our customer base, which includes only a minimal number of small business customers. However, our Company remains committed to providing essential residential real estate lending services, although we have taken steps to temporarily tighten our credit underwriting standards due to the potentially protractive period of the pandemic and the related unknown risks. First, we are no longer entertaining applications for investor-owned single-family homes, single-family second homes, non-residential commercial real estate loans or construction loans. We have reduced loan-to-value ratios for owner-occupied single-family and multifamily loans, the only two loan categories for which we are currently continuing to accept applications.
Additionally, debt coverage ratios have been revised and bank control payment reserves of six to 12 months are now required on all new multifamily loans, while higher credit scores are mandatory for single-family borrowers. We believe these actions will further support the strong credit quality of our loan portfolio. Nonetheless, we will continue to monitor employment statistics and real estate markets and implement additional protections and changes as necessary.
As an emerging growth company, we are not required to adopt CECL until January 2023 and as a result, we did not adopt CECL this quarter. We continue to develop our new model and had we adopted as of the end of the year prior to the COVID-19 pandemic, indicative loan loss reserve levels were not materially different when compared to our then current allowance, which was based on our existing incurred loss model. While there is -- it is too early to understand the potential impact of the pandemic on our CECL modeling, we will continue to analyze this as we learn more about the full economic impact of the virus.
Now, turning to our first quarter's results. Our net income for the first quarter of 2020 was $7.6 million or $0.14 per diluted common share compared to $12.5 million or $0.22 per diluted common share in the linked quarter. The notable decrease in earnings was predominantly due to a $5.3 million provision for loan losses, which was recorded entirely to address the uncertain economic consequences of the COVID-19 pandemic. Other contributing factors to the decline in net earnings for the quarter included a $1 million decrease in net interest income and $1.5 million increase in non-interest expense with the foregoing expenses somewhat offset by a corresponding $2 million reduction in income taxes.
And now, I'll speak in greater detail to those components. First, our asset quality, as defined by traditional measures, remains very strong and actually improved over the prior quarter. Our criticized loan balances decreased by $10.5 million or 23% and our non-performing loans to total loans dropped by 9 basis points from already low level of 10 basis points as compared to the linked quarter. As a result, absent the onset of the pandemic, the Company would have recorded a recapture of loan loss provisions. Instead, we added more than $6.1 million as a qualitative adjustment to our loan loss reserve to specifically account for the uncertain economic impact of the COVID-19 pandemic. We increased our allowance coverage ratio by 12% from 58 basis points at the end of the prior quarter to a current coverage ratio of 65 basis points.
In determining the appropriateness of our total reserve level, consideration was given to three key factors: number one, the fully secured real estate loan portfolio more than 96% of which is comprised of residential properties located in housing constrained West Coast markets; number two, the granularity of the loan portfolio, with an average loan balance of $1.3 million; and number three, the strong credit metrics, including considerable collateral support as indicated by our overall portfolio loan-to-value ratio of 59%, multifamily and non-residential commercial average debt coverage ratios of 1.5 times and 1.57 times respectively and a single-family portfolio average or original refreshed credit score of 750.
Had the Company not added the additional $6.1 million to its allowance for loan losses in connection with the COVID-19 pandemic during the first quarter, our net income for the quarter would have been $11.9 million or $0.21 per diluted share. While we feel comfortable with our level of reserves at March 31, additional provisions may become necessary in future quarters and we believe that the passage of time will add some incremental clarity to the scope of the economic impact of the COVID-19 pandemic.
Next, our quarter's net earnings declined due to lower net interest income. We recorded net interest income of $32.1 million for the first quarter or a decline of $1 million from the linked quarter. After two previously consecutive quarterly improvements in our net interest margin during the second half of 2019, our net interest margin declined 5 basis points from 1.89% in the fourth quarter of 2019 to 1.84% in the first quarter of 2020. This reduction was chiefly caused by precipitous cuts in the federal funds rate as a result of the COVID-19 pandemic totaling 150 basis points during March.
Given our liability-sensitive balance sheet, declines in short-term market rates are generally beneficial to our net interest margin. However, with our 70% composition of term deposits to total deposits, additional improvements in our funding cost will lag the significant rate reductions made by the Federal Reserve. The reduction in federal funds rate immediately, however, impacted the $1 billion of interest rate swaps placed in our books in June and August of 2019, which reduced swap income by $922,000 as compared to the previous quarter.
Our total cost of funding has declined by 17 basis points since we initiated the swaps from a level of 2.2% for the quarter ending September 2019 to a total cost of 2.03% for the current quarter. Looking forward, and assuming no change to the level or shape of the current yield curve, we would expect our net interest margin to improve for the balance of this year by approximately 3 basis points to 5 basis points per quarter.
Finally, net income for the first quarter was negatively impacted by a higher-than-anticipated level of non-interest expense. We recorded $16.9 million in non-interest expense as compared to $15.3 million in the prior quarter. The $1.5 million or 9.9% increase in expense was principally related to a $1.8 million increase in compensation costs due to the front-loaded nature of payroll taxes and an increase in post-retirement costs as well as $916,000 increase in FDIC insurance premiums owing to the final utilization of the remaining Small Bank Assessment Credit during the prior quarter. These increases were partially offset by a $736,000 decline in marketing costs related to business deposits and a $306,000 decrease in rent expense associated with the relocation of Company facilities in the fourth quarter of 2019.
The increase in post-retirement benefit costs approximating $500,000 was unexpected and occurred in direct relationship to the large decline in longer-term interest rates during the first quarter. Despite the increase in some costs this period, our non-interest expense to average assets ratio and efficiency ratio continue to compare favorably to the industry and measured 96 basis points and 51% respectively for the first quarter. We expect that our non-interest expense will range between $16 million and $16.5 million per quarter for the remainder of the year.
Now, we'll turn to the balance sheet. Our assets at the end of March 2020 totaled $7.1 billion, representing an increase of $28 million or 1.6% annualized growth rate. The increase was primarily due to growth in cash in our securities portfolio. Although we recorded new loans of $333.1 million, including a small $20.4 million multifamily loan purchase, loan curtailments and payoffs exceeded origination volume and our loan portfolio declined by $12.7 million. Similar to patterns experienced in the past few quarters, loan prepayments remained relatively high with a CPR of 20% for the entire portfolio for the first quarter of 2020. Prepayment speeds were particularly faster in the single-family residential loan segment with the first quarter CPR measured 36% primarily as a result of declining long-term interest rates and borrowers financing into longer-term fixed-rate loans.
In January of this year, we expected annual asset growth during 2020 to be in a range of 3% to 5%. The COVID-19 pandemic has created a significant amount of uncertainty. At March 31, 2020, our loan pipeline was $527 million or almost double the $279 million balance at the end of the prior quarter. The strong pipeline was the result of a significant dislocation of the market as a result of the COVID-19 pandemic. Our pipeline is stronger than it has ever been over the last year. However, prepayment speeds may remain high due to the further decline of approximately 130 basis points in longer-term interest rates during the first quarter. In addition, our growth may be negatively impacted by our tightened credit criteria recently put in place as a result of the pandemic. Therefore, we believe that a realistic growth rate for the year may be in the 2% to 3% range.
During the first quarter, total deposits grew $50.7 million or 1% to $5.3 billion. Consumer retail deposits increased by $13.8 million and wholesale deposits increased by $129 million, while retail business balances declined by $92.1 million. The reduction in business deposit balances was wholly attributed to a decrease in the 1031 exchange vertical, which typically experiences seasonal outflows in the first quarter of each year. However, with the current market turmoil and its impact on the real estate purchase market, we would expect this line of business to refill more slowly than it has in the past.
The health of capital is at the forefront in the minds of our Board of Directors and Executive Management. The Company's capital ratios remained strong and as shown on Page 9 of the presentation deck, we maintain significant capital cushions above the regulatory required minimum levels. We routinely manage our capital ratios to our Board's risk appetite, and we periodically stress test our resilience to those levels under adverse economic scenarios to assist us in making prudent capital management decisions.
During the first quarter of 2020 in light of our strong capital position, stock market volatility and slower-than-anticipated asset growth, we strategically invested in our own Company by increasing the authorized level of repurchases under our stock repurchase plan. Since inception of the plan in August 2018 through April 30, 2020, we have repurchased 4.3 million shares at an average price of $9.12 per share. These share repurchases have resulted in a total cost through April 30 of $39.3 million, and we have $5.7 million available for additional share repurchases pursuant to our currently approved share repurchase plan. We currently have no plans to freeze our share repurchase plans. Therefore, we anticipate we will complete the repurchases authorized under this existing current plan. We do not intend to replenish the plan unless or until we have a much better understanding of the full economic impact of the COVID-19 pandemic.
Additionally, on May 4, 2020. The Board of Directors declared a quarterly cash dividend of $5.75 per common share payable on May 26 to shareholders of record as of May 14. Based on what we currently know, we intend to continue our currently dividend at the current level. We will, however, continue to monitor the business economic and housing environment and impacts that the COVID-19 pandemic may have on our capital levels, and we will make changes accordingly if appropriate.
Before I turn it over to Laura to make a few comments, I would just like to publicly recognize and express my sincere appreciation to our awesome team of employees. They have been working tirelessly and their hard work and dedication is much appreciated. It is truly -- it's honor and privilege to be working with such a remarkable team and they truly come together to support each other, so that we can provide outstanding service to our customers throughout this crisis.
And now, I'd like to turn it over to Laura for a few additional remarks.
Laura Tarantino -- Executive Vice President & Chief Financial Officer
Thank you, Simone. Because we provided a good amount of detail in our earnings release and presentation deck, I'll spend just a few minutes providing an update on recent trends in our portfolio since the end of the first quarter. As Simone discussed, we have strong loan pipelines. And although we increased loan offer rates at the end of March, the majority of our pipeline loans are at rate lost [Phonetic] levels, reflecting interest rate declines experienced during the first quarter of 2020. As a result, second quarter loan originations will likely carry coupon at approximately 25 basis points less than the first quarter level of 3.98%.
Also, the interest rate on loan payoffs continues to exceed loan origination rates. These forces as well as the negative carry on our interest rate swaps currently out of the money by 139 basis points will continue to pressure our overall loan yield.
On a positive note, however, we should continue to experience additional cost savings in our deposit portfolio. At March 31, the cost of our retail and wholesale deposits measured 1.71% and 1.19% respectively as compared to rates of 1.95% and 1.8% respectively at the end of the prior quarter. As of the same date, $1.2 billion of retail CDs or 38% of our retail time deposit portfolio with a weighted average rate of 2.31% are subject to renewal during the second quarter of 2020. Based on current pricing, we would expect to retain funds or attract new time deposits at a rate approximating 1.25%. Additionally, 91% of our wholesale deposits or $495 million with a weighted average rate of 1.22% at March 31 is also subject to rollover during the second quarter where market pricing is currently sub-1%.
That concludes our prepared remarks. And at this time, we will ask the operator to open the line for questions.
Questions and Answers:
Operator
And thank you. [Operator Instructions] And our first question is going to come from Gary Tenner from D.A. Davidson. Your line is now open.
Gary Tenner -- D.A. Davidson -- Analyst
Thanks, good morning. I wanted to make sure that I understand kind of how the headwinds from the swap program will kind of show themselves during the second quarter, assuming that there's no change in rates, which nobody [Phonetic] expects. You said out of the money by 1.39% I think Laura. So relative to the first quarter headwind, it seems like the headwind would be less than it was in the first quarter. Is that correct or should it increase because of the full quarter impact of the lower rates on the variable side?
Laura Tarantino -- Executive Vice President & Chief Financial Officer
I think...
Simone Lagomarsino -- President & Chief Executive Officer
Laura, you want to -- yeah, go ahead.
Laura Tarantino -- Executive Vice President & Chief Financial Officer
I think it will increase because of the full quarter impact, nonetheless will have offsetting benefits from the deposit portfolio that continues to reprice.
Gary Tenner -- D.A. Davidson -- Analyst
Okay. And then, just more broadly speaking, what is the impact do you think of the eviction moratorium on your multifamily portfolio? How -- obviously, you're extending some although the request for modifications was more weighted toward your single-family portfolio. Where are you seeing from the multifamily borrowers in terms of kind of rents coming in or is it a bit too early tell?
Simone Lagomarsino -- President & Chief Executive Officer
So we have been asking our loan officers to touch base with their clients and in doing that, we have anecdotal information from them. It still appears that a significant number of tenants in many of the properties we're paying. And I think -- and John and Laura, correct me if I miss focus, but I think we understood in the 70% to 80% -- some as high as 90% of the tenants are continuing to make payments. Now, whether that continues into May, how that continues to play out, it's unknown at this point, but we put the similar program in place to assist those multifamily borrowers who really are impacted negatively because their tenants have been impacted, but because of the way we underwrite our loans, because of the reserves that we booked to when we make the loans initially and the strong cash flows that we look to, we expect that many of our borrowers on multifamily even if they have some tenant impacts, we will still be able to make their payments. And John or Laura, if you want to add to that, please do.
John A. Cardamone -- Executive Vice President & Chief Credit Officer
This is John. I thought that was very comprehensive. And yes, the numbers that Simone quoted what our loan officers are telling us, and we're pleased with that feedback so far.
Gary Tenner -- D.A. Davidson -- Analyst
Okay. Thanks. And that 70% to 90%, Simone, that was the April range that you're referring to?
Simone Lagomarsino -- President & Chief Executive Officer
Correct.
Gary Tenner -- D.A. Davidson -- Analyst
Okay. All right. Thanks very much.
Simone Lagomarsino -- President & Chief Executive Officer
Again, I want to be careful to say that's anecdotal. I mean, we haven't gotten rent rolls to confirm any of that. It's really important that I just underscore that.
Operator
Thank you. And our next question comes from Matthew Clark from Piper Sandler. Your line is now open.
Matthew Clark -- Piper Sandler -- Analyst
Hey, good morning. On the non-interest expense run rate of $16 million to $16.5 million a quarter, can you maybe talk through where you expect to see savings? It sounds like it's in the comp line and maybe on the marketing side of things or advertising. I just want to double check.
Simone Lagomarsino -- President & Chief Executive Officer
Laura, you want to start on that one and I'll follow up...
Laura Tarantino -- Executive Vice President & Chief Financial Officer
Sure. I do think with the change in interest rates, with the liquidity that's been brought into the bigger banks and particularly, we're seeing a little less competition. Therefore, I think our advertising dollars will be comparatively less than originally planned. Also, we shouldn't have the payroll taxes headwind that we had in the first quarter or the change in our post-retirement benefits from the significant drop in interest rates. Those would be the three largest areas I would not expect to repeat in the second quarter.
Matthew Clark -- Piper Sandler -- Analyst
Okay. And I think you gave us a couple of deposit rates at the end of March. Can you give us just the overall spot rate on deposits whether it's interest-bearing or total?
Laura Tarantino -- Executive Vice President & Chief Financial Officer
Yeah, I had been -- separately for retail was a spot rate of 1.71% at March 31 and wholesale, a spot rate of 1.19%.
Matthew Clark -- Piper Sandler -- Analyst
Okay. We can look at that. And then on the prepay activity in single-family resi book, I think in your release you mentioned that the pre-pay speeds are down slightly linked quarter to 36.1% versus 36.7%. But in that chart on Page 22 of the graph, it looks like that single-family resi prepay speed increased more significantly. I just wanted to square the two.
Laura Tarantino -- Executive Vice President & Chief Financial Officer
Yeah. I'm looking at graph, January, February, March.
Simone Lagomarsino -- President & Chief Executive Officer
I think it covers the 12-month rolling average.
Matthew Clark -- Piper Sandler -- Analyst
Yes. That could be it.
Laura Tarantino -- Executive Vice President & Chief Financial Officer
Simone, Thank you.
Matthew Clark -- Piper Sandler -- Analyst
Okay. Thank you. I see the footnote now. And then, just on the FHLB advances that you have two in a quarter, can you just remind us of the kind of schedule, how soon those might reprice going forward, let's say over the next three or four quarters?
Simone Lagomarsino -- President & Chief Executive Officer
I would say there is very little to reprice in the next three or four quarters. Most of those were hedged term borrowing, so very little to reprice.
Matthew Clark -- Piper Sandler -- Analyst
Okay. Okay, great. Thank you.
Operator
And thank you. And our next question comes from Jackie Bohlen from KBW. Your line is now open.
Jackie Bohlen -- KBW -- Analyst
Hi, good morning. I just wanted to touch base on the loan purchase and see if that's something you might look to going forward or if it was a one-time item.
Laura Tarantino -- Executive Vice President & Chief Financial Officer
I would say it's a one-time item at this point. We had started prior to the pandemic, started the process and entered into the agreements. And I think at this point with our very strong pipeline and with so much unknown based on the pandemic itself that we probably won't be doing another purchase in the near term.
Jackie Bohlen -- KBW -- Analyst
Okay. And then, in terms of the 2% to 3% growth -- excuse me, growth rate that you spoke of understanding the push and pull that's taking place there, the -- what's offsetting the strong pipeline volume that you have, is that more a function of your assumptions on prepayments or is it more a function of what you anticipate the changes in underwriting will have on your ability to generate from the pipeline?
Simone Lagomarsino -- President & Chief Executive Officer
So, there's a couple of factors. Again, very strong pipeline today. Some -- there will be some impact from the change in our credit underwriting criteria, the tightening of our credit box, so to speak, but also with long-term rates dropping by 130 basis points, we expect that we will see continued high levels of prepayments, what kind of unknown also is the level of real estate transactions that are going to be completed both on the single family and multifamily in the current environment that we're operating in with people staying at home. So that's the other piece of it that were still unknown. Fewer transactions are being done, so that will impact the growth as well.
Jackie Bohlen -- KBW -- Analyst
Okay. So it sounds like it's more a factor of prepayment expectations understanding that those to be volatile, and there's a lot of factors there, then it is a function of changes that you've made to underwriting?
Simone Lagomarsino -- President & Chief Executive Officer
Well, in the lack of -- the reduced levels of just people purchasing real estate right now, both single family and multifamily, it's definitely more prepayments potentially, but also the cash that we don't expect a lot of new purchases of real estate until we're further into and coming out of this economic downturn.
Jackie Bohlen -- KBW -- Analyst
Yeah, yeah. Definitely understood the environment that we're in. And then, I just have one more, related to deposit pricing, I understand the schedule that you have in terms of CDs and everything. The rates that you're currently offering right now on CDs, assuming a stagnant rate environment, have those all been fully repriced to where you want them, or is there a possibility that you could look to lower those from where they are right now without any further rate movement? Does that make sense what I'm asking?
Simone Lagomarsino -- President & Chief Executive Officer
Yes. Laura, you want to...
Laura Tarantino -- Executive Vice President & Chief Financial Officer
Yeah, it does make sense. And I would say, Jackie, where our CD levels are, are probably appropriate at this time and we probably engage at every week depending on the inflows and outflows, but there definitely are some competitors out there in the market with rates as high as 150 [Phonetic] for 12 months, not a lot. And we've definitely seen the pressure come down. So at this point, I don't see it turn of downward movement, although I think again it will depend on how long the pandemic goes, if we continue to see people bringing liquidity into that.
Jackie Bohlen -- KBW -- Analyst
Okay. Thank you. That's helpful.
Operator
Thank you. And I'm showing no further questions. I would now like to turn the conference over the Simone Lagomarsino, President and CEO for further remarks.
Simone Lagomarsino -- President & Chief Executive Officer
Thank you very much. So, this does conclude our first quarter earnings call, and we hope that all of you who are joining us today. We'll stay safe and healthy. And we look forward to the eventual recovery of our economy and our country. Thank you very much for joining us today.
Operator
[Operator Closing Remarks]
Duration: 36 minutes
Call participants:
Simone Lagomarsino -- President & Chief Executive Officer
Laura Tarantino -- Executive Vice President & Chief Financial Officer
John A. Cardamone -- Executive Vice President & Chief Credit Officer
Gary Tenner -- D.A. Davidson -- Analyst
Matthew Clark -- Piper Sandler -- Analyst
Jackie Bohlen -- KBW -- Analyst
