First Commonwealth Financial Corporation (FCF) Q2 2025 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. And welcome to the First Commonwealth Financial Corporation Second Quarter 2025 Earnings Release Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. I will now hand today's call over to Ryan Thomas, Vice President of Finance and Investor Relations. Please go ahead, sir.

Thank you, Tamica, and good afternoon, everyone. Thank you for joining us today to discuss First Commonwealth Financial Corporation's second quarter financial results. Participating on today's call will be Mike Price, President and CEO; Jim Reske, Chief Financial Officer; Jane Grebenc, Bank President and Chief Revenue Officer; Brian Sohocki, Chief Credit Officer; and Mike McCuen, Chief Lending Officer. As a reminder, a copy of yesterday's earnings release can be accessed by logging on to fcbanking.com and clicking the Investor Relations link at the top of the page. We've also included a slide presentation on our Investor Relations website with supplemental information that will be referenced during today's call. Before we begin, I need to caution listeners that this call will contain forward-looking statements. Please refer to our forward-looking statements disclaimer on Page 3 of the slide presentation for a description of risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Today's call will also include non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to and not as an alternative for our reported results prepared in accordance with GAAP. A reconciliation of these measures can be found in the appendix of today's slide presentation. And with that, I will turn the call over to Mike.

Thank you, Ryan. We are generally pleased with our performance this quarter. Our core earnings per share of $0.38 surpasses consensus estimates by $0.03 and was an improvement from the $0.32 reported in the first quarter. Our headline financial metrics were robust with core return on assets of 1.31%, a core pretax pre-provision ROA of 1.95% and a core efficiency ratio of 54.1%. We've consistently worked towards building a high-performing franchise. This quarter's results reflect those efforts and occurred just 1 year after absorbing a $13 million downdraft in annualized debit card interchange income due to the Durbin amendment as we crossed $10 billion in assets. Let me highlight a few key drivers this quarter, many of which build on the trends we've discussed in past calls. First, our net interest margin expanded significantly from 3.62% in the first quarter to 3.83% in the second quarter, a 21 basis point increase. This was driven primarily by improved loan yields and lower deposit costs and aided by the CenterBank acquisition and the roll-off of the macro hedges. This margin expansion, coupled with strong loan growth of 8.1% annualized, fueled a $10.7 million increase in net interest income over last quarter to $106.2 million. We've said before that our focus on optimizing our balance sheet and driving high-quality loan growth would position us well in a dynamic rate environment, and we're seeing those efforts bear fruit. Loan growth was broad-based with standout performance in Equipment Finance alongside meaningful contributions from small business, commercial, indirect and branch lending. Perhaps even more importantly, we grew both deposits and loans in 4 of our 6 geographic markets. On the fee income side, we saw a $2.1 million increase in noninterest income to $24.7 million, with strong contributions from mortgage, SBA, interchange, wealth and other service charges. The growth reflects our ongoing efforts to deepen customer relationships and expand our noninterest income streams. Our deposit franchise remains a cornerstone of our bank. Total deposits grew 9% year-to-date, reaching $10.1 billion. Notably, our Community Pennsylvania region which accounts for 37% of our deposit funding continues to perform exceptionally well. And we're pleased with our continual progress in Ohio, where organic growth and small but strategic acquisitions have built a $4 billion bank. Ohio also accounts for the bulk of our new loan growth. The integration of CenterBank, which closed on May 1 and converted in early June, is progressing smoothly. Center added $295 million in loans and $278 million in deposits bolstering our presence in Cincinnati. We're confident that the long-term value of this acquisition will enhance our Ohio franchise as we've seen with prior integrations. On the credit front, we experienced a continuation of positive trends in charge-offs and delinquency. Our second quarter provision expense was $12.6 million with $3.8 million tied to day 1 CECL provision for CenterBank, which we've excluded from our core income metrics. Of the remaining $8.8 million in provision expense, $2.6 million can be attributed to a net increase in specific reserves, which was driven by a $4.2 million specific reserve for a single commercial floorplan loan that was moved to nonaccrual and reserve for in the quarter. With respect to the floorplan credit, we are operating under a forbearance agreement. And as it remains an active workout, we appreciate your understanding that we'll not be able to provide a lot of further detail on today's call. The impact of this single credit and the inclusion of Center caused nonperforming loans to increase by $40 million -- $40.1 million from the prior quarter. Absent these 2 events, our core credit metrics for criticized, classified and nonperforming loans were all neutral quarter-over-quarter. Looking ahead, we remain optimistic about our trajectory. The momentum we've built through disciplined execution, strategic acquisitions, a regional business model and a customer-centric approach positions us well for the second half of 2025 and beyond. As we've said before, our goal is to be the leading community bank in our markets, delivering value to our stakeholders, while staying true to our mission of improving the financial lives of our customers and communities. I'll now turn it over to Jim Reske for a more detailed review of our financials, Jim?

Thanks, Mike. As Mike mentioned, the second quarter of 2025 was a strong quarter for us. Our earnings performance was driven by an expanding margin and strong fee income, so I'll focus on those 2 areas and wrap up with some brief thoughts on expenses and capital. The net interest margin or NIM, expanded 21 basis points to 3.83%. We closed our acquisition of CenterBank during the quarter, so the natural question is how much of that NIM improvement comes from the acquisition? Center's impact prior to marks was actually fairly neutral, which is not that surprising, considering that its first quarter NIM was almost the same as ours, just 3 basis points less and it was a relatively small acquisition for us. The marks on their loan portfolio, however, added 4 basis points to our NIM in the second quarter. Of that 4 basis points, 2 were related to the acceleration of marks related to loan prepayments, but the other 2 should continue. All of that means that most of our NIM expansion was due to our organic banking business. We did have the benefit of a maturity of $150 million in macro swaps for 2/3 of the quarter which added about 3 basis points to NIM in the second quarter and should add another 2 basis points next quarter. The rest of the NIM expansion was split between assets and liabilities with 9 basis points of the increase coming from assets and 5 from liabilities. New organic loan growth was strong at 8% annualized, and those loans came on to the book at rates that were 42 basis points higher than the ones that ran off. The cost of deposits fell by 8 basis points but we had increased borrowings by the end of the quarter, so the total drop in the cost of funds was only 5 basis points. Our forward NIM guidance this quarter is based on a revised baseline forecast that now contemplates 2 Fed cuts by year-end, down from 3 in last quarter's forecast. And in that case, we'd expect our NIM to expand for the low to mid 3.90s by the end of the year, give or take a few basis points as always. If there are no cuts at all, the NIM would expand another 5 basis points on top of that by the end of 2025. That guidance includes an additional 2 basis points in the third quarter of '25 from the macro swaps that matured last quarter, plus macro swap maturities of $25 million on August 25, $25 million on October 10, and $50 million on November 5. It also reflects expected pressure on loan spreads and the need to price deposits to fund our loan growth. All told, with the loan growth, the acquired Center portfolio and the improved margin, we believe that our net interest income should be between $110 million to $115 million per quarter for the remainder of 2025. Turning now to fee income. Our noninterest income increased by $2.2 million over the last quarter. There are about $600,000 of items here woth mentioning. First, we had about $375,000 in gains on the sale of OREO properties in the quarter. There's only about $1 million of OREO left in our books, so I wouldn't count on outsized OREO gains again anytime soon. Second, the $436,000 increase in BOLI income included $166,000 from a debt claim, while the rest of the increase comes from higher crediting rates on the BOLI portfolio. Other than that, our fee income improvements in the quarter were broad-based, and as Mike mentioned, included improved performance in fee income businesses like mortgage, SBA and wealth. Turning now to expenses. Operating expense, which excludes merger expense, was up by about $1.1 million from last quarter. Increased salary expense associated with the newly acquired Center employees was offset by lower incentive expense compared to last quarter, leaving the salary and benefits line item relatively unchanged. Some of the increased expense that shows up in other this quarter was associated with increased loan volume in areas like SBA. Finally, with regard to capital, capital ratio has improved due to retained earnings, along with a reduction in AOCI. Our tangible book value per share grew by 7.3% annualized from the previous quarter. There's very little buyback activity in the second quarter, but we ended the quarter with $6.2 million of share repurchase authority and just obtained an additional $25 million in share repurchase authority from our board yesterday. With that, we'll take any questions you may have.

[Operator Instructions] Your first question is from the line of Daniel Tamayo with Raymond James.

I apologize, Jim, did you give a guidance range for expenses in the third quarter or the back half of the year?

I didn't, Danny. I looked at the expenses -- the expenses and the consensus seem like they're pretty much on track. I think the consensus for the third quarter, I'm looking at it now is $72.8 million, fourth quarter $73.1. Since you asked the question, I will take the opportunity just to mention something. When we look at our internal budgeting and forecast, we see a little trail-off in expenses and noninterest income together. They kind of offset each other, but we see a little trail off in the fourth quarter just due to seasonality, just the way we budget. There's some business lines that have some seasonality where customers are shopping for cars and mortgages and buying homes more in the summer months, and it trails off a little bit, along with some expenses towards the end of the year, like hospitalization that trails off because of our -- the way we operate our self-insurance or hospitalization expense. And the consensus forecast has both of those pretty consistent in noninterest income expense from third to fourth quarter, and both of those should trail off a little bit in the third and fourth quarter. It doesn't matter that much because I kind of offset each other, but I appreciate you asking.

And -- but then they would both bounce back in the first quarter of next year?

Yes, probably.

Seasonal items, yes.

That's right. That's right. And we had a pretty fairly off the top of the head, like 4-ish percentage growth in expenses year-over-year pretty consistently.

Okay. Helpful. I guess, secondly, you talked about it at the end there on the repurchases, the stock price is higher now. You didn't buy back much or any in the second quarter, but yet the deal happening. I'm just curious kind of what the appetite is. Obviously, you've got the new authorization. You've got plenty of dry powder, if you will. So how are you guys thinking about repurchases now?

Yes, we'll go back into the market after a round a blackout and probably set a price and we buy back our shares according to a pricing grid that we set with a maximum cap. So for example, in previous -- last quarter, I think towards the end after we got out of the CenterBank acquisition, that was closed for a few days. We set the cap at $15.50 a share, but the price is going higher than that we will be buying back. We're not like some companies that might say, come hell or high water, no matter what price, we're going to retire 3% of our shares this year. And we don't care what the price is. We're just going to spend the money to buy it. We really haven't done that. We try to keep some dry powder for dips in the price. And when it gets to expensive, we just come out of the market. So we haven't set that price yet for the fourth quarter. If I had a gun on my head right now, I get it somewhere in the $17 range and we'd say, okay, that below those prices $17 or $17.50 buy back stock. When it gets to be above that weight, keep the powder dry and then go back in and buy on the dips. That's kind of how we do it.

Okay. That's helpful. And then lastly, I appreciate you can't give more color on the loan that drove the increase in NPLs. But maybe you can give color on where you think charge-offs trend from here they've been low for the first half of the year, I think probably lower than expectations. So you guys thinking that -- is there a reason that they would be moving back up to a more normalized range in the back half or pretty clear in terms of the outlook for charge-offs.

Yes. I'll let Brian Sohocki, our Chief Credit Officer, answer that right.

Yes. Thanks, Mike. I mean, we're obviously pleased with the quarter. I'd highlight that after experiencing the Centric charge-offs in 2023 and 2024, it was really diminished in the second quarter. We're down at 34,000 in that category. Across the portfolio, charge-offs have been at acceptable levels. Equipment Finance, indirect have outperformed industry peers. As you mentioned, we've reserved for this problem credit as well as others and work through those resolutions. But absent that one large relationship and with less headwind from Centric, I feel we've normalized. We've always referenced kind of a mid-20 basis point charge-off range, 25 to 30. And we could see return into those levels with the problem assets, but nothing else to note.

Your next question is from the line of Karl Shepard with RBC Capital Markets.

Jim, I guess I wanted to start on the margin. You mentioned loan yields, I think, replacing 42 bps higher this quarter. Any guidepost to maybe how that's gone in July and any way you want to frame up, I guess, the quarter, the best you can?

Yes. So all those forecasts we give on the NIM really are predicated on continuing trends of the previous quarters and continue that kind of loan growth trajectory, and that's the best we can do. So we assume if we continue if the past repeats itself and we can go forward, we'll be able to keep that replacement made up. It's been pretty consistent. It's a little -- few basis points higher in the first quarter. I think it was 46 off the top of my head and the 43, second quarter. So as long as the Fed doesn't cut rates, that should persist for a while. And obviously, even as the Fed does cut once, it will still probably be positive. But there is somewhat -- there are some -- definitely some estimates of loan production that go into that whole model that predicts the -- that doesn't NIM forecast.

Karl, I would just add that the 42 basis points increase, commercial fixed is really dragging that number up at like 111 and indirect installment loan is probably 73 basis points. So that's pulling it up and just -- and they had big volume. The mortgage and some of the other categories have nice replacement yields, but there's not a lot of volume, honestly. So we expect the dynamics to stay in place.

If I could just pile on to that as well, just what Mike is saying, if you look at the whole -- all the loan categories, about 40% of the new originations coming on were fixed and 60% were variable. The variable rate ones are just a matter of spread. So the replacement yields on those are -- they were 9 basis points positive, not that much this quarter. But the fixed ones were 115 basis points positive. That's how you get to the overall 42 basis points. So the fixed replacement yields at 115 positive last quarter, that will persist even through a few Fed cuts.

Okay. That's helpful. And then shifting topics, I guess, M&A has picked up for the industry. You guys have a pretty good track record of looking at lots of stuff and doing a few things that make sense on the smaller side. Just kind of curious what discussions you guys are having and what makes sense and what your priorities are?

Just a discussion or 2, not a lot. I mean, I think Jim and I always say we've looked at, I think 70 loans or 70 opportunities over 10 years, so about 7 a year. I don't think that's really picked up and a big item, but we just -- we tend to bow out on price on the larger deals and the smaller deals remain interesting to us. We also have to see a pretty good path of low-risk execution before we get super excited as well. So maybe our box is a little tighter than others. We do like smaller deals. We think we can really leverage them into something a little bit more as we bring our different verticals in. And I think Jane Grebenc over the years and Mike McCuen now, they're really good at indirect auto, mortgage, small business and just bringing them into the mix, maybe a little higher in investment real estate and then just really creating some magic. The key is to make sure the deposits keep up with the loan growth and the focus is on funding the loans. And that's -- we'll be doing that even in quarters where the loans aren't growing. Mike or Jane, do you want to add anything to that?

I don't think so, Mike. I think you did a good job of sort of explaining our psyche.

Yes, I agree.

Your next question is from the line of Kelly Motta with KBW.

This is Charlie on for Kelly. Thanks for the question. You guys saw some strong organic loan growth this quarter. Just wondering if you could expand on kind of what you're seeing in the pipeline, this level of growth and general momentum is continuing.

I think the pipeline is pretty good. I do think that we're going to have a little -- a few more payoffs in the third quarter. Mike, do you want to expand upon that?

Yes, I think a little bit of a summer wall and some payoffs from the permanent market, but I expect activity to stay at this pace in the -- once we get into the fourth quarter, a strong finish to the year.

Okay. Great. And then specifically, if you could touch on the equipment finance portfolio. You guys had some good momentum there. I know you brought on some new teams recently. Just like the growth there and if what you're seeing is sustainable and maybe what it could get up to in terms of a percentage of the portfolio?

Yes, I'll start there and let Mike finish. But we're about 3, 3.5 years in. Those loans are typically 5-year loans. So we're going to hit a wall here in about 1.5 years, even if we continue to put on loans at the pace we are where the portfolio will probably flatten out a bit. And so I'd start there. And we just like the business. We like -- we have a professional that's been doing this for about 3 decades and a good team. And we just like the credit quality we're seeing and the types of assets he's putting on. Michael, would you add...

Mathematically, the growth was huge because it's obviously a start-up operation. And I would just say that, so far, we're pleased with the type of assets we're financing and the credit quality of those assets. And furthermore, it's augmenting our bank relationships where historically, we did not have equipment finance options for clients, especially tax leases. We now have that. So we expect incremental value from that relationship.

Yes. We also -- we're very focused on growing C&I through our regional model from the smallest small business out of branches in $50 million and $100 million loan hunks up through commercial. And then most importantly, getting operating accounts and core deposit relationships from businesses to fund our growth.

Your next question is from the line of Manuel Navas with D.A. Davidson.

Growth was really strong this quarter. Are you going to stay at the mid-single digit core ex the acquisition level of growth? Or is there any upside to it? And maybe comment on the mix as well.

Yes. I think the guidance will continue to be mid-single digits because funding for us is an imperative and keeping pace with the funding. The mix -- we would love to see that continuing to rotate towards C&I, commercial real estate, owner-occupied commercial real estate, and those loans that right now have a 7 handle on them. And that being said, we're a larger community bank than most banks of our size with about 40% of the action. And we know that credit leads to cornerstone deposit relationships, particularly with younger households. So we want to have credit access for the good consumers, some 200,000-plus customers in our 6 markets. So we will remain open there, and we feel that even though the rates are a little lower, the replacement rates on those loans is very positive. Jane, anything you would add on consumer or Mike on commercial?

Well, we've had a good run in the consumer businesses and that's all in market existing bank customers. So we have no interest in pinching that. Those are good relationships. As you said, small business, every one of those loans is really important to us. And the other consumer businesses indirect replacement yields have been good and mortgage is generally upward sale business for us. It's a fee business right now. We're not running it generally as a balance sheet business. So we like them all.

And I would just say for the benefit of all the employees listening and Jane insists upon core deposit relationships with everyone lending loan.

I appreciate the commentary. Shifted over to deposits, the NIM guide, I understand it. Can you just dive into some of the dynamics? And you point out that there might be some expected loan yield pressure in the model and then some deposit cost increases to fund that future loan growth. Can you kind of flesh that out a little bit?

Yes, Manuel, it's Jim. I'll tell you exactly what I was thinking. I mean the model is giving you numbers that are a little higher than the guidance I'm giving to you. But I happen to know of some things that we're doing that we're doing that. We're not in the model when the model was last update. So I know that, for example, we looked at the deposit growth and loan growth in the second quarter and put the pedal down on the gas -- put the gas pedal down a little firmer on the deposit growth. So -- and deposit rates we're paying to get that growth, we want to make sure that we fund our loan growth with deposits as we go along. And so that's probably going to put a little bit of pressure on the margin going forward. And then anectodatlly, we hear about tightening loan spreads. We could say that you might hear those anecdotes in a lot of quarters, but you hear that more and more. And so if the model -- I'll just tell you, the model is saying that the mid would be 3.97% and 4.00% in the third and fourth quarters, respectively. But knowing what we know, we haircut that a little bit to give the guidance that we do give, which is low to mid-3.9... Now the loan repricing yields, they have 9 basis points of that. So if that just continues, that's nice, that just keeps going. If the Fed starts cutting rates, then that might be a little lower, but you do have those macro swaps coming off, which will be positive towards the end of the year. So all that goes into that guidance and that's kind of gives you maybe a little background of our thinking.

That's great. And that's the natural push against kind of the high end of the NIM is at some point competition can step in, like how high could this get into next year? Is that just -- it just really depends on rates? Any thoughts on that type of discussion?

Yes. Yes, thanks for asking. It's early to talk about next year. I mean, the math -- if that doesn't cut rates at all, the math just keeps clicking away and the margin just keeps going up, up, up. But as someone actually pointed out on last quarter's earnings call, the industry generally doesn't sustain NIMs over 4% for very long as it gets competed away on both the asset and liability side. And it's like they are saying, and we've already seen some of that pressures on spreads on the commercial loan side and the need to price up deposits to get that growth. So the model say the Fed doesn't cut rates, just -- it's tremendous. But realistically speaking, as I say, the trees don't grow to the sky.

Yes. I would just add just a little counterintuitively, if rates settle a bit, I think it primes the pump for demand and we have a broad business model for consumers business. And I think we have more business, more cross-selling opportunities and consumers are in better shape as our small businesses, the SBA business, there's more fee income. So I just think Jim and I and the team, Jane and Mike, we just have tried to make it 50-50 variable fix. So we do well irrespective of where interest rates go, and I think our fee income -- our fee businesses would benefit from that. So I think either way, we can do quite well.

And that's actually gives me an opportunity, Manuel, if you don't mind, for me to mention. Mike, since you're talking about that kind of view of the next year. We do have more macro swaps maturing next year. There's $150 million in May of 2026 and another $25 million in October '26. So that will help the margin. So even in a world where the Fed in our forecast, there are 4 more cuts in 2026. The model is predicting a NIM that stays above -- slightly above 4% for next year. So, but we'll know more as we really work on sharpening our pencils on budgets and get a little more accurate forecast on the earnings calls for the third and fourth quarter of this year.

Okay. That's great. Anything you want to add, I'm all ears. Thanks for the commentary.

Your next question is from the line of Matt Breese with Stephens Inc.

Maybe to start just a modeling question. Securities were down a bit this quarter. We now sit at 13.5% of total assets, that feels a little low versus where we've been recently. Maybe not, but it just feels a little low versus where we've been. Is that right? Do you like to be kind of in the 14% range or is 13.5% adequate?

No, we're okay with that, 13.5% is adequate. We want to make sure we have securities on hand to pledge against borrowings and other things we need to use those for. It's down a little bit this quarter because our purchase activity was slow this quarter. We had prepurchased some and previous quarters to get ahead of it a little bit, and so I didn't feel the need to buy much this quarter. But we don't think from a liquidity standpoint that we need a higher percentage. We have so much available liquidity and real good -- there's a slide in our webcast presentation that talks about this. So we have source of liquidity backed by assets that we can pledge. I think it's over $5 billion. So we don't feel like we need to keep 15%, 20% of our assets and securities just for the stake of on-balance sheet liquidity. Our liquidity is very strong without that. So it's -- we're very comfortable with where it's at.

A couple of bigger picture ones. Strategically, just thinking about your markets, where from a market share position standpoint, do you feel like there's the most room for opportunity? We hear you talk a lot about Ohio as being an engine for growth. Can that will continue for a lot longer? And if not, where on the map might you see you go that could be the next kind of vehicle for growth the next Ohio for you?

I honestly believe and perhaps I'm delusional that I think between Cincinnati, Cleveland, Columbus, Pittsburgh and our community markets in Western PA, we could build out a bank that's 2x the size because we're just not a market maker. We're kind of on the fringes of market share. And we just see a lot of crumbs coming off the table from bigger banks. And I just feel like we can fill in and love to add some rural depositories, fill in those metro markets, maybe do a little bit of de novo. We have some cities between in Ohio, like Dayton. We also have opportunities in Western PA. And then we really haven't penetrated all of our lines of business in each of our markets. I just think within these markets, we can grow the company substantially. That doesn't mean we wouldn't go to Northern Kentucky or we wouldn't do something contiguous. We just feel like we have to be able to extend the brand thoughtfully and be able to cover just not outkick our coverage as they say, in football. And so I don't know that we're super interested in just getting to the next market. I think we can grow where we're at, honestly. Jane or Mike, anything you would add there?

The recent acquisition is a good example of that. It's in market. It gives us more a higher profile. But even with that, we're still maybe 10th in market share in that market. So we have a lot of upside. Those are the kind of things that we absorb quickly, we can move on to the next one and grow that market further.

And we haven't really penetrated our fee income businesses. We've -- we're really good in Community PA and in Pittsburgh. But we're just getting there with our regional model with businesses like wealth and insurance and other things that we do pretty well at in SBA. And so I'm pretty enthused just about Western PA and Ohio, honestly.

Yes. Mike, to put a finer point on it, 2 things. One, our product penetration from the existing households we have still leaves a lot of room for growth. So as our execution gets better, there's a lot of embedded upside there. And there's a lot of terrific small businesses and middle market -- lower middle market companies as we drive from Pittsburgh to Cleveland, and we're interested in all of those. So -- and we've spent some money on our treasury management offerings. So we can bank those companies in addition to just lending to them.

I appreciate all that. Maybe just as a follow-up, Senator McCormick a couple of weeks ago, a few weeks ago, held a conference in Pittsburgh around AI and data centers and power investments in Pennsylvania, I think, to the tune of maybe like $90 billion, just a huge number. Curious if you attended what you heard, how beneficial could this be to the area? And if any of these forms of real estate or investments are directly or indirectly helpful to you all? That's all I had.

Yes. We see it all over. We'll see it right in our backyard in Indiana County. There's a $10 billion investment for a power plant just for a data center, and it's a conversion of coal and natural -- and it will be a natural gas power plant. And they're really firing up really the Marcellus Shale to help fuel that. And we're seeing it all over. We're seeing it in the infrastructure with the gas pipelines, the trucking, everything and not to mention the plastics that complement the natural gas. So I don't know. I just think this area, particularly Pennsylvania has been harder hit over the last 25 years. I just think the future could be brighter and we're seeing a significant investment everywhere.

[Operator Instructions] Your next question is from the line of Daniel Cardenas with Janney.

Good afternoon, guys. Just quickly returning to credit quality. Of this floor plan nonaccrual, what percentage of your total nonaccrual portfolio, does this represent? And then second, what's the overall health of the remainder of the portfolio?

Sure, I can take that. And I may have you repeat the second part, I couldn't hear it entirely. But it's approximately just over 30%. Our nonaccruals as you saw that I mean I referenced the nonperforming bucket increased $40 million to just shy of $100 and $31.8 of that was the floor plan. So pretty straightforward on that 100 basis to be just over 30%.

Brian, because you mentioned that the remainder of the increase in NPLs is from the acquisition, right?

Sure. Yes. So and that's a good point, Jim. So the remainder, if you look at the $40 million increase, $31.9 from the dealer floorplan, 8.4 from CenterBank acquisition. So absent those 2 events, we had a $300,000 or minimal, but $300,000 decrease in the quarter, we would have went from 65 basis points to 63 basis points.

And so is this large loan, floorplan loan, is that a legacy, an FCF legacy loan? Or was that acquired?

No. Yes, I'll tell you a little bit about the dealer floorplan portfolio. It is legacy and none of our floorplan has been acquired. At the 630, our floorplan segment was $154 million of outstandings. So a rather manageable small portfolio, 23 costumers, and this was the only one over $20 million of exposure. We just have 2 others over $15 million with the rest really being granular inside $10 million of exposure. And the other portfolio is performing well, strong weighted average risk rating in compliance. So here, we really had an isolated event with the one dealer happen to be the largest.

Okay. Excellent. And then in terms of just your larger relationships, is this like in the top 20 or 25 overall?

It was. We manage our borrowers over -- really, we've monitored internally over $15 million. Yes, there's really about 10 relationships over '25. So this is one of the larger.

And how are those relationships performing?

Very well. That portfolio is very strongly risk rated. All but one, I would comment or two would be better than past watch. So it's a strong portfolio, no early signs of or any early indications of weakness in that portfolio.

Okay. And did this credit have any impact on the margin this quarter?

There was a move to nonaccruals late in May. That's $300,000...

It did. Yes. So it's probably took away a basis point or two.

Reversal of interest in May or April. That's right. Yes.

Yes, I don't know if you heard that. We went to nonaccruals reversal of interest about $300,000. So that would have hit them NIM to maybe rounded to 1 basis point.

At this time, there are no further questions. I will now hand the call back over to Mike Price, President and CEO.

Very good. Thanks for the questions. It's always good to engage. Excited about the future of our company to grow organically, remain disciplined with M&A, to make sure that our low-cost deposits keep pace with our commercial loan growth and just do a better job of cross-selling our clients and bringing them fee income opportunities. But just thank you, and just have a good day.

This concludes today's call. Thank you for joining. You may now disconnect your lines.