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Pacific Premier Bancorp, Inc. Announces First Quarter 2024 Financial Results and a Quarterly Cash Dividend of $0.33 Per Share
For the first quarter of 2024, the Company's return on average assets ("ROAA") was 0.99%, return on average equity ("ROAE") was 6.50%, and return on average tangible common equity ("ROATCE")(1) was 10.05%, compared to (2.76)%, (19.01)%, and (28.01)%, respectively, for the fourth quarter of 2023, and 1.15%, 8.87%, and 13.89%, respectively, for the first quarter of 2023. Total assets were $18.81 billion at March 31, 2024, compared to $19.03 billion at December 31, 2023, and $21.36 billion at March 31, 2023.
Steven R. Gardner, Chairman, Chief Executive Officer, and President of the Company, commented, "Our team delivered solid first quarter financial performance with net income of $47.0 million, or $0.49 per share, reflecting a full quarter's benefit from the securities portfolio repositioning as our net interest margin expanded 11 basis points to 3.39%. Our commitment to prudent and proactive risk, liquidity, and capital management in the current dynamic environment continues to drive strong capital levels that rank amongst the top of our peers, with our TCE(1) ratio increasing 25 basis points to 10.97%.
"On the business development front, our dedicated relationship managers, retail branch bankers, and treasury management teams continue to successfully collaborate to expand our client base and deepen existing client relationships. During the first quarter, total deposits increased by $192 million, driven by a $120 million increase in non-maturity deposits, enabling us to further reduce FHLB borrowings by $400 million. Some of the quarterly deposit inflows were seasonal in nature, which we expect to reverse as we move through the year.
"First quarter asset quality trends remained strong, although nonperforming loans increased to $63.8 million, primarily the result of a single, diversified, Pacific Northwest commercial banking relationship, wherein the borrower remains current on all payments. Our team is actively engaged with the client and continues to approach the relationship consistent with our longstanding proactive approach to credit risk management.
"With our strong capital levels combined with our significant loss absorbing capacity, we have strategically positioned the company to perform in a variety of economic and credit scenarios. There are a number of factors contributing to an uncertain outlook, including ongoing inflationary pressures, interest rate volatility, and domestic and international geopolitical risks. Our franchise has been built on a culture of risk management and a proactive approach to building sustainable franchise value. We will continue to manage the business proactively and prudently while leveraging the strength of our relationship banking teams to capitalize on compelling opportunities as they may arise. I would like to thank all Pacific Premier employees for their outstanding efforts during the quarter, as well as all of our stakeholders for continuing to support our organization."
______________________________
FINANCIAL HIGHLIGHTS
Three Months Ended
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
March 31, December 31, March 31,
(Dollars in thousands, except per share data) 2024 2023 2023
--------------------------------------------------------------- -------------------------------------------------- -------------------------------------------------- --------------------------------------------------
Financial highlights (unaudited)
$ 47,025 $ (135,376 ) $ 62,562
Net income (loss)
145,127 146,789 168,610
Net interest income
0.49 (1.44 ) 0.66
Diluted earnings (loss) per share
0.33 0.33 0.33
Common equity dividend per share paid
0.99 % (2.76 )% 1.15 %
ROAA
6.50 (19.01 ) 8.87
ROAE
10.05 (28.01 ) 13.89
ROATCE (1)
1.43 (3.88 ) 1.63
Pre-provision net revenue (loss) to average assets (1)
3.39 3.28 3.44
Net interest margin
1.59 1.56 0.94
Cost of deposits
1.06 1.02 0.54
Cost of non-maturity deposits (1)
60.2 60.1 51.7
Efficiency ratio (1)
2.16 2.09 1.87
Noninterest expense as a percent of average assets
$ 18,813,181 $ 19,026,645 $ 21,361,564
Total assets
15,187,828 14,995,626 17,207,810
Total deposits
84.4 % 84.7 % 82.6 %
Non-maturity deposits (1) as a percent of total deposits
32.9 32.9 36.1
Noninterest-bearing deposits as a percent of total deposits
85.7 88.6 82.4
Loan-to-deposit ratio
0.34 0.13 0.14
Nonperforming assets as a percent of total assets
0.09 0.08 0.15
Delinquency as a percentage of loans held for investment
1.48 1.45 1.38
Allowance for credit losses to loans held for investment (2)
$ 30.09 $ 30.07 $ 29.58
Book value per share
20.33 20.22 19.61
Tangible book value per share (1)
10.97 % 10.72 % 9.20 %
Tangible common equity ratio (1)
15.02 14.32 13.54
Common equity tier 1 capital ratio
______________________________ (1) Reconciliations of the non-GAAP measures are set forth at the end of this press release. Reconciliations of the non-GAAP measures are set forth at the end of this press release.
INCOME STATEMENT HIGHLIGHTS
Net Interest Income and Net Interest Margin
Net interest income totaled $145.1 million in the first quarter of 2024, a decrease of $1.7 million, or 1.1%, from the fourth quarter of 2023. The decrease in net interest income was primarily attributable to lower average interest-earning asset balances, a higher cost of funds, and one less day of interest, partially offset by higher yields on interest-earning assets, as well as lower average borrowings.
The net interest margin for the first quarter of 2024 increased 11 basis points to 3.39%, from 3.28% in the prior quarter. The increase was primarily due to higher yields on investment securities as a result of a full quarter's benefit from the securities repositioning to higher-yielding available-for-sale ("AFS") Treasury securities, partially offset by a higher cost of funds.
Net interest income for the first quarter of 2024 decreased $23.5 million, or 13.9%, compared to the first quarter of 2023. The decrease was attributable to a higher cost of funds and lower average interest-earning asset balances, partially offset by lower average interest-bearing liabilities and higher yields on average interest-earning assets, all the result of the higher interest rate environment and the Company's balance sheet management strategies to prioritize capital accumulation.
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
(Unaudited)
Three Months Ended
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
March 31, 2024 December 31, 2023 March 31, 2023
----------------------------------------------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) Average Interest Average Average Interest Average Average Interest Average
Balance Income/ Yield/ Balance Income/ Yield/ Balance Income/ Yield/
Expense Cost Expense Cost Expense Cost
---------------------------------------- -------------------------------------------------- ----------------------------------------------- ------------------------------ -------------------------------------------------- ----------------------------------------------- ------------------------------ -------------------------------------------------- ----------------------------------------------- ------------------------------
Assets
$ 1,140,909 $ 13,638 4.81 % $ 1,281,793 $ 15,744 4.87 % $ 1,335,611 $ 13,594 4.13 %
Cash and cash equivalents
2,948,170 26,818 3.64 3,203,608 24,675 3.08 4,165,681 26,791 2.57
Investment securities
13,149,038 172,975 5.29 13,257,767 176,773 5.29 14,394,775 180,958 5.10
Loans receivable, net (1) (2)
-------------------- ---------- -------------------- -------------------- ------- -------------------- -------------------- ---------- -------------------- -------------------- ------- -------------------- -------------------- ---------- -------------------- -------------------- ------- --------------------
$ 17,238,117 $ 213,431 4.98 $ 17,743,168 $ 217,192 4.86 $ 19,896,067 $ 221,343 4.51
Total interest-earning assets
==================== ========== ==================== ==================== ======= ==================== ==================== ========== ==================== ==================== ======= ==================== ==================== ========== ==================== ==================== ======= ====================
Liabilities
$ 10,058,808 $ 59,506 2.38 % $ 10,395,116 $ 60,915 2.32 % $ 11,104,624 $ 40,234 1.47 %
Interest-bearing deposits
850,811 8,798 4.15 942,689 9,488 4.01 1,319,114 12,499 3.83
Borrowings
-------------------- ---------- -------------------- -------------------- ------- -------------------- -------------------- ---------- -------------------- -------------------- ------- -------------------- -------------------- ---------- -------------------- -------------------- ------- --------------------
$ 10,909,619 $ 68,304 2.52 $ 11,337,805 $ 70,403 2.46 $ 12,423,738 $ 52,733 1.72
Total interest-bearing liabilities
==================== ========== ==================== ==================== ======= ==================== ==================== ========== ==================== ==================== ======= ==================== ==================== ========== ==================== ==================== ======= ====================
$ 4,996,939 $ 5,141,585 $ 6,219,818
Noninterest-bearing deposits
Net interest income $ 145,127 $ 146,789 $ 168,610
==================== ======= ==================== ==================== ======= ==================== ==================== ======= ====================
Net interest margin (3) 3.39 % 3.28 % 3.44 %
Cost of deposits (4) 1.59 1.56 0.94
Cost of funds (5) 1.73 1.69 1.15
Cost of non-maturity deposits (6) 1.06 1.02 0.54
______________________________ (1) Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs, discounts/premiums, and the basis adjustment of certain loans included in fair value hedging relationships. Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs, discounts/premiums, and the basis adjustment of certain loans included in fair value hedging relationships. (2) Interest income includes net discount accretion of $2.1 million, $2.6 million, and $2.5 million for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, respectively. Interest income includes net discount accretion of $2.1 million, $2.6 million, and $2.5 million for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, respectively. (3) Represents annualized net interest income divided by average interest-earning assets. Represents annualized net interest income divided by average interest-earning assets. (4) Represents annualized interest expense on deposits divided by the sum of average interest-bearing deposits and noninterest-bearing deposits. Represents annualized interest expense on deposits divided by the sum of average interest-bearing deposits and noninterest-bearing deposits. (5) Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits. Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.
Provision for Credit Losses
For the first quarter of 2024, the Company recorded a $3.9 million provision expense, compared to $1.7 million for the fourth quarter of 2023, and $3.0 million for the first quarter of 2023. The provision for credit losses was largely attributable to increases associated with economic forecasts, partially offset by changes to the overall size and composition of the loan portfolio.
Three Months Ended
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
March 31, December 31, March 31,
(Dollars in thousands) 2024 2023 2023
-------------------------------------------- ---------------------------------------------- ---------------------------------------------- ----------------------------------------------
Provision for credit losses
$ 6,288 $ 8,275 $ 3,021
Provision for loan losses
(2,425 ) (6,577 ) (189 )
Provision for unfunded commitments
(11 ) (2 ) 184
Provision for held-to-maturity securities
-------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Noninterest Income
Noninterest income for the first quarter of 2024 was $25.8 million, an increase of $260.0 million from the fourth quarter of 2023. The increase was related to the investment securities portfolio repositioning which resulted in a loss of $254.1 million during the fourth quarter of 2023. Excluding the prior quarter's loss, noninterest income increased $5.9 million, primarily due to a $5.1 million gain on debt extinguishment resulting from an early redemption of a $200.0 million Federal Home Loan Bank of San Francisco ("FHLB") term advance as well as a $1.3 million increase in trust custodial account fees driven by annual tax fees earned during the current quarter.
Noninterest income for the first quarter of 2024 increased $4.6 million compared to the first quarter of 2023. The increase was primarily due to a $5.1 million gain on debt extinguishment resulting from an early redemption of a $200.0 million FHLB term advance during the current quarter.
Three Months Ended
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
March 31, December 31, March 31,
(Dollars in thousands) 2024 2023 2023
------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------ ----------------------------------------------
Noninterest income
$ 529 $ 359 $ 573
Loan servicing income
2,688 2,648 2,629
Service charges on deposit accounts
336 322 296
Other service fee income
765 844 803
Debit card interchange fee income
4,159 3,678 3,374
Earnings on bank owned life insurance
-- (4 ) 29
Net (loss) gain from sales of loans
-- (254,065 ) 138
Net (loss) gain from sales of investment securities
10,642 9,388 11,025
Trust custodial account fees
696 1,074 1,058
Escrow and exchange fees
5,959 1,562 1,261
Other income
-------------------- -------------- -------------------- -------------------- -------- -------------------- -------------------- ------ --------------------
Noninterest Expense
Noninterest expense totaled $102.6 million for the first quarter of 2024, a decrease of $137,000 compared to the fourth quarter of 2023. The results were impacted by a $523,000 FDIC special assessment in the first quarter of 2024 and a $2.1 million FDIC special assessment during the fourth quarter of 2023. Excluding the special assessments, noninterest expense increased $1.4 million, primarily due to a $2.2 million increase in compensation and benefits related to higher payroll taxes and the annual equity-based compensation awards, as well as a $1.5 million increase in deposit expense due to higher deposit earnings credit rates, partially offset by a $1.1 million decrease in other expense.
Noninterest expense for the first quarter of 2024 increased by $1.3 million compared to the first quarter of 2023. The increase was primarily due to a $4.2 million increase in deposit expense, partially offset by a $1.4 million decrease in legal and professional services and a $935,000 decrease in premises and occupancy.
Three Months Ended
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
March 31, December 31, March 31,
(Dollars in thousands) 2024 2023 2023
------------------------------------------ ---------------------------------------------- ---------------------------------------------- ----------------------------------------------
Noninterest expense
$ 54,130 $ 51,907 $ 54,293
Compensation and benefits
10,807 11,183 11,742
Premises and occupancy
7,511 7,409 7,265
Data processing
46 103 108
Other real estate owned operations, net
2,629 4,267 2,425
FDIC insurance premiums
4,143 4,663 5,501
Legal and professional services
1,558 1,728 1,838
Marketing expense
1,093 1,367 1,232
Office expense
770 437 646
Loan expense
12,665 11,152 8,436
Deposit expense
2,836 3,022 3,171
Amortization of intangible assets
4,445 5,532 4,695
Other expense
-------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Income Tax
For the first quarter of 2024, income tax expense totaled $17.4 million, resulting in an effective tax rate of 27.0%, compared with income tax benefit of $56.5 million and an effective tax rate of 29.4% for the fourth quarter of 2023, and income tax expense of $22.9 million and an effective tax rate of 26.8% for the first quarter of 2023. The income tax benefit in the prior quarter was primarily attributable to the pretax loss from sales of AFS securities recorded for the fourth quarter of 2023, driven by the Company's balance sheet repositioning.
BALANCE SHEET HIGHLIGHTS
Loans
Loans held for investment totaled $13.01 billion at March 31, 2024, a decrease of $276.9 million, or 2.1%, from December 31, 2023, and a decrease of $1.16 billion, or 8.2%, from March 31, 2023. The decrease from December 31, 2023 was primarily due to lower loan production and fundings, as well as a decrease in credit line draws, partially offset by slower loan prepayments and maturities.
During the first quarter of 2024, new loan commitments totaled $45.6 million, and new loan fundings totaled $14.0 million, compared with $128.1 million in loan commitments and $103.7 million in new loan fundings for the fourth quarter of 2023, and $116.8 million in loan commitments and $66.9 million in new loan fundings for the first quarter of 2023. During the first quarter of 2024, new origination activity remained muted given the uncertain economic and interest rate outlook as well as softer borrower demand.
At March 31, 2024, the total loan-to-deposit ratio was 85.7%, compared to 88.6% and 82.4% at December 31, 2023 and March 31, 2023, respectively.
The following table presents the primary loan roll-forward activities for total gross loans, including both loans held for investment and loans held for sale, during the quarters indicated:
Three Months Ended
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
March 31, December 31, March 31,
(Dollars in thousands) 2024 2023 2023
-------------------------------------------------------- ------------------------------------------------------ -------------------------------------------------- --------------------------------------------------
Beginning gross loan balance before basis adjustment $ 13,318,571 $ 13,319,591 $ 14,740,867
45,563 128,102 116,835
New commitments
(31,531 ) (24,429 ) (49,891 )
Unfunded new commitments
-------------------- -------------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
14,032 103,673 66,944
Net new fundings
(358,863 ) (422,607 ) (519,986 )
Amortization/maturities/payoffs
109,860 354,711 (53,436 )
Net draws on existing lines of credit
(32,676 ) (32,464 ) (803 )
Loan sales
(6,529 ) (4,138 ) (3,664 )
Charge-offs
-- (195 ) (6,886 )
Transferred to other real estate owned
-------------------- -------------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
(274,176 ) (1,020 ) (517,831 )
Net decrease
-------------------- -------------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
Ending gross loan balance before basis adjustment $ 13,044,395 $ 13,318,571 $ 14,223,036
(32,324 ) (29,551 ) (50,005 )
Basis adjustment associated with fair value hedge (1)
-------------------- -------------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
______________________________
The following table presents the composition of the loans held for investment as of the dates indicated:
March 31, December 31, March 31,
(Dollars in thousands) 2024 2023 2023
--------------------------------------------------------------------------------------------------------- -------------------------------------------------- -------------------------------------------------- --------------------------------------------------
Investor loans secured by real estate
$ 2,309,252 $ 2,421,772 $ 2,590,824
Commercial real estate ("CRE") non-owner-occupied
5,558,966 5,645,310 5,955,239
Multifamily
486,734 472,544 420,079
Construction and land
35,206 36,400 40,669
SBA secured by real estate (1)
-------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
8,390,158 8,576,026 9,006,811
Total investor loans secured by real estate
Business loans secured by real estate (2)
2,149,362 2,191,334 2,342,175
CRE owner-occupied
294,938 304,514 371,902
Franchise real estate secured
48,426 50,741 60,527
SBA secured by real estate (3)
-------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
2,492,726 2,546,589 2,774,604
Total business loans secured by real estate
Commercial loans (4)
1,774,487 1,790,608 1,967,128
Commercial and industrial ("C&I")
301,895 319,721 388,722
Franchise non-real estate secured
10,946 10,926 10,437
SBA non-real estate secured
-------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
2,087,328 2,121,255 2,366,287
Total commercial loans
Retail loans
72,353 72,752 70,913
Single family residential (5)
1,830 1,949 3,174
Consumer
-------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
74,183 74,701 74,087
Total retail loans
-------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
13,044,395 13,318,571 14,221,789
Loans held for investment before basis adjustment (6)
Basis adjustment associated with fair value hedge (7) (32,324 ) (29,551 ) (50,005 )
-------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
13,012,071 13,289,020 14,171,784
Loans held for investment
Allowance for credit losses for loans held for investment (192,340 ) (192,471 ) (195,388 )
-------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
$ 12,819,731 $ 13,096,549 $ 13,976,396
Loans held for investment, net
==================== ========== ==================== ==================== ========== ==================== ==================== ========== ====================
Total unfunded loan commitments $ 1,459,515 $ 1,703,470 $ 2,413,169
______________________________ (1) SBA loans that are collateralized by hotel/motel real property. SBA loans that are collateralized by hotel/motel real property. (2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment. Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment. (3) SBA loans that are collateralized by real property other than hotel/motel real property. SBA loans that are collateralized by real property other than hotel/motel real property. (4) Loans to businesses where the operating cash flow of the business is the primary source of repayment. Loans to businesses where the operating cash flow of the business is the primary source of repayment. (5) Single family residential includes home equity lines of credit, as well as second trust deeds. Single family residential includes home equity lines of credit, as well as second trust deeds. (6) Includes net deferred origination costs (fees) of $797,000, $(74,000), and $(745,000), and unaccreted fair value net purchase discounts of $41.2 million, $43.3 million, and $52.2 million as of March 31, 2024, December 31, 2023, and March 31, 2023, respectively. Includes net deferred origination costs (fees) of $797,000, $(74,000), and $(745,000), and unaccreted fair value net purchase discounts of $41.2 million, $43.3 million, and $52.2 million as of March 31, 2024, December 31, 2023, and March 31, 2023, respectively.
The total end-of-period weighted average interest rate on loans, excluding fees and discounts, at March 31, 2024 was 4.91%, compared to 4.87% at December 31, 2023, and 4.68% at March 31, 2023. The quarter-over-quarter and year-over-year increases reflect higher rates on new originations and the repricing of loans as a result of the increases in benchmark interest rates.
The following table presents the composition of loan commitments originated during the quarters indicated:
Three Months Ended
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
March 31, December 31, March 31,
(Dollars in thousands) 2024 2023 2023
------------------------------------------------- ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------
Investor loans secured by real estate
$ 850 $ 1,450 $ 1,200
CRE non-owner-occupied
480 94,462 4,464
Multifamily
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
1,330 95,912 5,664
Total investor loans secured by real estate
Business loans secured by real estate (1)
6,745 3,870 6,562
CRE owner-occupied
-- -- 3,217
Franchise real estate secured
-- -- 497
SBA secured by real estate (2)
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
6,745 3,870 10,276
Total business loans secured by real estate
Commercial loans (3)
32,477 24,766 93,150
Commercial and industrial
-- -- 1,666
Franchise non-real estate secured
-- -- 720
SBA non-real estate secured
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
32,477 24,766 95,536
Total commercial loans
Retail loans
4,936 3,554 5,359
Single family residential (4)
75 -- --
Consumer
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
5,011 3,554 5,359
Total retail loans
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
______________________________ (1) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment. Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment. (2) SBA loans that are collateralized by real property other than hotel/motel real property. SBA loans that are collateralized by real property other than hotel/motel real property. (3) Loans to businesses where the operating cash flow of the business is the primary source of repayment. Loans to businesses where the operating cash flow of the business is the primary source of repayment.
The weighted average interest rate on new loan commitments increased to 8.62% in the first quarter of 2024, compared to 6.34% in the fourth quarter of 2023, and 7.43% in the first quarter of 2023.
Asset Quality and Allowance for Credit Losses
At March 31, 2024, our allowance for credit losses ("ACL") on loans held for investment was $192.3 million, a decrease of $131,000 from December 31, 2023, and a decrease of $3.0 million from March 31, 2023. The decrease in the ACL from December 31, 2023 and March 31, 2023 reflects the relative changes in size and composition in our loans held for investment, partially offset by changes in economic forecasts.
During the first quarter of 2024, the Company incurred $6.4 million of net charge-offs, primarily related to the sale of special mention and substandard CRE and franchise loans during the quarter, compared to $3.9 million during the fourth quarter of 2023, and $3.3 million during the first quarter of 2023.
The following table provides the allocation of the ACL for loans held for investment as well as the activity in the ACL attributed to various segments in the loan portfolio as of and for the period indicated:
Three Months Ended March 31, 2024
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) Beginning Charge-offs Recoveries Provision for Ending
ACL Balance Credit ACL Balance
Losses
----------------------------------------- ---------------------------------------------- ------------------------------------------------------ ------------------------------------------------------ ---------------------------------------------- ----------------------------------------------
Investor loans secured by real estate
$ 31,030 $ (927 ) $ -- $ 678 $ 30,781
CRE non-owner-occupied
56,312 -- 5 2,094 58,411
Multifamily
9,314 -- -- (1,143 ) 8,171
Construction and land
2,182 (253 ) -- 255 2,184
SBA secured by real estate (1)
Business loans secured by real estate (2)
28,787 (4,452 ) 63 4,362 28,760
CRE owner-occupied
7,499 (212 ) -- (29 ) 7,258
Franchise real estate secured
4,427 -- 1 (140 ) 4,288
SBA secured by real estate (3)
Commercial loans (4)
36,692 (585 ) 39 961 37,107
Commercial and industrial
15,131 (100 ) -- (711 ) 14,320
Franchise non-real estate secured
458 -- 2 35 495
SBA non-real estate secured
Retail loans
505 -- -- (63 ) 442
Single family residential (5)
134 -- -- (11 ) 123
Consumer loans
-------------------- ------ -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
______________________________ (1) SBA loans that are collateralized by hotel/motel real property. SBA loans that are collateralized by hotel/motel real property. (2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment. Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment. (3) SBA loans that are collateralized by real property other than hotel/motel real property. SBA loans that are collateralized by real property other than hotel/motel real property. (4) Loans to bus