Good morning, everyone. On behalf of the team at Community Financial System, it is my great pleasure to welcome you all to the 2024 Investor Day. I'll quickly cover a few logistical points, and then we'll get started with the presentations. We'll hold two Q&A sessions during the event, one midway through and another at the end, just before the remarks from the President and CEO. We encourage you to share your feedback throughout the day. Additionally, today's presentation is available under the News and Presentation section of the company website. For our virtual attendees, you can submit your questions by selecting the Question Input option on the top right corner of your screen. Finally, please take a moment to review the disclaimer regarding forward-looking statements, and kindly switch off your phones or keep them on silent, and enjoy the presentations.
It is now my pleasure to introduce Community Financial System Chairman, Ric Stickels, who will lead us into the next part of today's session.
Good morning, everyone. Good morning, everyone that is here today and those participating remotely. My name is Ric Stickels, and I am the Board Chair of Community Financial System, Inc., and Community Bank, N.A. I've served on the board of directors of our company since December 2015. Prior to joining CBU, I was the president and chief operating officer of Oneida Financial Corp. and Oneida Savings Bank, enjoying a 33-year career that culminated in the successful merger and partnership with this company. We thank you all for taking time out of your busy schedules to learn more about our company today. We haven't engaged this way with our investors in over a decade, and we are certainly a much different company today than we were 10 years ago.
In the words of our CEO, Dimitar Karaivanov, "We are much more than a bank with hobbies." CBU is a diversified financial services company, and over the past decade, we have significantly invested to grow our non-banking revenues to nearly 30% of total revenues. This was accomplished while at the same time we have doubled the size and footprint of our banking business. Today, we operate four distinct but complementary businesses. Again, these are distinct businesses that all contribute to the success and value of this company. As you know, we announced a corporate name change earlier this year. Although the name change was subtle, replacing Community Bank System with Community Financial System, this corporate name better reflects the diversified nature of our business and our strategic focus going forward. As you can see, we have a full agenda for this morning's presentation.
This includes a short break at 10:30 A.M. and two 15-minute question and answer sessions. We encourage and appreciate your questions, but we ask that you hold them until the Q&A session. For those joining us virtually via webcast, you can submit your questions by clicking the Questions Input button at the top right corner of the webcast player. After typing your question, hit Submit. Selected questions from the virtual attendees will be read aloud by our moderator. While we may not have time to address all questions during the Q&A session, we encourage you to schedule meetings with our management team in the coming weeks. Today, you will meet many of our company executives and the leadership in each of our businesses. There are no better voices to explain the unique business model than those that are running the businesses every day.
I am also pleased to formally introduce our CEO, Dimitar Karaivanov. Dimitar took over as CEO on January 1st of this year. The board of directors was focused and diligent last year in our duty to select a CEO that shared our strategic focus and would continue to build upon the notable success of our retired CEO, Mark Tryniski. Dimitar has hit the ground running. He contributed to our past successes and understands the value yet to be realized. So it is my pleasure to introduce the President and CEO of Community Financial System, Inc., Dimitar Karaivanov.
Thank you, Ric. Good morning, and welcome to our Investor Day. We're very excited to tell our story, and you will hear from key members of our team today. As a quick background on myself, I joined the company three years ago after spending the bulk of my career in investment banking, where I had the privilege of being an outside Advisor to the company since two thousand and eight. So I have had the benefit of knowing the company quite well for quite a while. A quick overview of our businesses. We're truly a diversified financial services company with four distinct lines of business. Aggregate revenues of over $700 million, with about $500 million of that coming from the banking business and over $200 million coming from our employee benefit services, insurance services, and wealth management services lines.
We function as four complementary units that are equally important. As Ric mentioned, I have a saying around here that we are not a bank with hobbies. We're organized in that fashion as well. For example, I have one direct report for each one of those four businesses, as they're equally important to our success going forward. You can see that each one of the businesses have attractive growth rates, and we will discuss our expectations for those in more detail later on. I'm often asked by clients, colleagues, and new hires, why should they do business with us or work for us? After all, everybody's money is green. And the reasons are very simple. It is because of who we are.
We have a clear mission, and we have four core values: integrity, which is our currency. Teamwork, which is how we work together. Excellence in what we do, and personally, to me, most importantly, humility. The last piece is what I deem to be truly special about our company, and we talk a lot about it. By the way, these are non-negotiable, and we expect these of ourselves at all times. There are a few important points that I hope you all take away from today, and this is a key one of them. This is what truly makes us different from our peers. The revenue diversification of our company is basically unmatched in the industry, and you can see that we have been on an opposite journey from our peers in the KRX.
The historical context is important here, and I don't need to tell you all about the reasons why banking institutions have become more and more spread dependent over time, while we have deliberately nurtured a truly diversified financial model. Over the past twenty years, KRX peers have gone from 28% of revenue being fee income to just over 18%, and we have gone from 21% to 40%. Not only that, but a fully 74% of those fees are outside of banking products, and this financial model is the core of the sustainability of our investment thesis. Our investment thesis is simple: It's above-average return with below-average risk. We do it by actively managing sources of volatility across the company, diversifying every one of our businesses, and staying focused on risk and return.
We talk about quantity and quality of earnings and improvement, not just asset growth. You can see the below-average risk results pretty clearly on this slide. On the top, you will see the revenue growth volatility for CBU versus the banking industry. Banking is a macro-driven business, and smoothing out the revenue goes a long way to avoiding the drawdowns. At the bottom, you see the pillars of our balance sheet, cost of funds, and credit risk management. For most of the past 10 years, everyone's liquidity and credit looked great. Now that we're out of the zero-rate environment, you're starting to see the gap between us and peers open up again on those metrics. The wonderful part about being diversified in this manner is that it also produces above-average returns.
By having low capital intensity and low balance sheet intensity businesses, we get an immediate benefit to returns, which over time allows us to drive the consistent earnings performance, dividend growth, and shareholder returns. In line with our evolution and how we run the company, we recently began providing more detailed segment information about the performance and returns of each of our businesses, and you can see how valuable those businesses are, and hopefully that helps frame our valuation premium. You will also see that as our revenue mix has evolved over time, so has our valuation compared to peers.
There will be more to come on this topic, but suffice to say, the last couple of years have been a moment in time when the gap between our revenue quality and the peers only increased while the valuation delta compressed, thus making it a great time to invest in our company, and most of us are doing so personally, and we also bought back a lot of shares at the corporate level. I would like to briefly spend a couple of minutes on the opportunity set in each one of our business lines. You can see here the secret sauce in our banking business. Basically, we're a leading market share participant in 2/3 of the towns we operate in, and we do an excellent job of client service, as evident by customer awards in virtually every market we operate. I equate market share with permanence in the banking business.
It is absolutely critical for success and longevity. We also have an amazing opportunity to quadruple or more our market share in the biggest markets we're present in. In those larger markets, we have been growing at a high single-digit rate, and if you just did the math on 5% market share, that would get you to the $10 billion plus of opportunities right there for us for the taking. I will also note that we're the largest non-super regional bank in those markets, thus making us a great alternative for clients and talent. Our employee benefit services business is a very unique asset for our company. We entered the business 28 years ago, and it was $1 million in revenue. It is now close to $130 million in revenue, and we service almost 900,000 participants across the country.
What is quite exciting is that even with the excellent growth we've had, the target market here is over 111 million participants, so a very, very long runway of opportunities. Our brand is becoming more and more recognized across the country now, and our win rates and the sizes of those wins are increasing at a robust pace. The margins in the business are also excellent, and we continue to supplement the organic growth with inorganic adds. Insurance services is another success story for us. We acquired OneGroup via the acquisition of Oneida Savings in 2015, and have since grown the business at essentially a double-digit rate, more than doubling it. We're now one of the 66 largest insurance agencies in the country and one of the top five owned by banks.
The opportunity set here is also basically limitless between organic growth and tuck-in acquisitions. Insurance is essentially a non-discretionary spend, and the revenue retention rates are excellent. Our wealth services business line is at a size and scale that is also beyond what you would typically find at our peers. We have very deep credentialed expertise and unique offerings that we're now pursuing on a national basis. We're currently making some meaningful organic investments in the business that will propel us even further. I spoke previously about having a capital-light, balance sheet-light business focus, and if you look at the S&P 500, you will see that the companies that have outperformed over time are exactly those types of businesses. The additional focus now with RPAs and GenAI is becoming labor-light.
We have been making progress in all of our businesses and have placed an emphasis on this point even more so in the past couple of years, and will continue to do so. I also want to make sure that everyone gets a closer look at how our system works. We're not just an amalgamation of businesses. There is a system here, pun intended, and all of the units complement and support each other in strengthening client relationships and stickiness. All of our businesses serve virtually the same small to mid-market type local business client. We established a formal initiative called Community Connect about two years ago, and that has led to significant momentum as well. Every leader in every market, in every business is part of this and understands the importance of cross-serving clients.
All of our businesses are local and focused on the same market segments, yet they have national-level expertise and talent, and you can see some of the statistics on how our system works. We're seeing excellent activity from all businesses cross-serving their clients with solutions from their sister companies and are very excited about the kind of client retention this creates. The internal referrals are growing at a solid double-digit rate, and we're still in the very early innings of this opportunity. Lastly, I want to touch on the exciting times in our local markets. It has been a very long while since our markets experienced above national growth and investments. Be it the restoring of basic manufacturing, or the investment in green energy, or the investment in advanced chips manufacturing, the numbers are truly staggering, so the timing of our evolution couldn't be better.
We get to benefit not just from our ability to take market share, but also from an expanding market. We're now laser-focused on helping support this growth in our communities, and you can see that our banking de novo expansion is also very much along those lines. With that, I will pass it on to Jeff Levy, our Chief Banking Officer, for more details on our banking business.
Thank you, Dimitar. Good morning, everyone. I'm Jeff Levy, Chief Banking Officer of Community Bank. Thank you for joining us today. To begin, I'd like to provide you with a brief overview of my 40-plus year in banking. I joined Community Bank in 2018 as Regional Executive to establish Community Bank's presence in the capital region of New York. I was promoted to President of Commercial Banking in December of 2021, and was appointed Chief Banking Officer in the beginning of this year, overseeing all banking operations. Prior to joining Community Bank, I served in regional and executive leadership roles with NBT Bank for 11 years, and prior to that, with M&T Bank for 20 years. My career has provided me the opportunity to be directly responsible for all significant banking lines of business, most notably in commercial banking, credit and sales capacities.
I have played a leadership role through the integration of several acquisitions with all of my employers. Community Bank is among the country's 100 largest banking institutions. Our roots date back to 1866, having been founded in the North Country of Upstate New York. We have grown over the years through a balanced approach of organic growth, whole bank, and branch acquisitions. Our more recent growth has expanded our footprint from its very rural beginnings into more densely populated markets. Today, we operate more than 200 customer facilities across Upstate New York, Northeastern Pennsylvania, Vermont, and Western Massachusetts, serving more than 500,000 households and businesses, and the bank employs over 2,000 individuals. We operate as a true community bank, promoting a philosophy of local authority, autonomy, entrepreneurial spirit, and volunteerism.
Given our size and scale, we have the capacity and capabilities to effectively compete with our large bank competitors and with a much more high-touch approach. We like to say, "Think big, but act small." The two pillars of our bank are our liquidity and credit metrics, both of which have held up extremely well through the past and more recent industry crises. Our balance sheet is one of the best in the industry and provides us the backbone to serve clients prudently, grow, and above peer rates. Joseph Sutaris will be providing commentary on these items, and I have more asset quality detail later on in my presentation. Although fee income from both banking and non-banking is a distinguishing feature of Community Financial System's revenue streams, NII remains the primary driver of the bank's income.
We have grown NII every year since 2016, which is no small feat, given all the macro volatility during that period. In fact, we are one of only three KRX members to achieve that consistent growth. Our NII growth is a function of several factors over our recent history, and again, a combination of our organic growth capabilities and M&A activities. The stable, low-cost deposit base of our legacy markets continues to serve us well. Recognizing that today's industry-wide focus is on the funding side, our long-tenured strategy of pursuing customer consumer checking accounts and business banking relationships continues to be a core strength, as we have historically maintained elevated attention on deposit gathering and retention. Further evidence of these efforts is reflected in our strong post-acquisition and branch consolidation retention statistics.
On the lending side, our consistent approach to loan growth, leveraging our vast branch network, and focusing on traditional relationship-based business lending, consumer mortgages, and automobile financing, has provided consistent annual growth in our interest income. We focus on three primary lines of business: retail and business banking, consumer lending, and commercial banking. Retail and business banking serves consumers and small businesses through our 200-plus banking facilities located in our four-state footprint. Our consumer lending unit supports our retail network on credit extensions for residential mortgages and traditional installment loans. Additionally, we employ a team of mortgage loan officers who originate loans through their various referral networks, including local real estate agents, primarily in the four-state market area. Finally, we have a significant automobile finance portfolio, which is comprised of loans sourced through new and used automobile dealerships, primarily within our four-state footprint.
Commercial banking represents a variety of loan and deposit products marketed to middle-market companies, owner-occupied property owners, and commercial real estate investors in our four-state footprint, plus our recent expansion into New Hampshire. Here, we present the performance statistics of our three primary loan portfolios: commercial, consumer real estate, and consumer installment, which is dominated by auto finance loans. We have a long history spanning numerous economic cycles and banking industry crises in all these sectors. As you can see, all portfolios have maintained consistent growth and, more importantly, consistent lower-than-peer net charge-offs. Tracking our performance from the pre-COVID period of 2019 to present, commercial loans have grown by $1.9 billion, or 79%, with average annual net charge-offs of three basis points.
Consumer real estate loans have grown by $1.2 billion, or 45%, with average annual net charge-offs of 3 basis points, and installment loans have grown by almost $650 million, or 51%, with average annual net charge-offs of 27 basis points. I would say our secret sauce is consistency. Consistency of people in leadership roles, underwriting practices, and credit policies. We have diverse portfolios with no material concentrations and a relatively low average commercial credit relationship of $794,000. As I mentioned, our roots go back to the very rural markets of northern New York State, and our M&A and commercial banking market expansion activities over the recent years have expanded our geographic reach into more vibrant markets.
M&A has been a great resource of talent across the bank, and the more densely populated markets are now a provider, a deep pool of highly educated, experienced candidates. Our ongoing investment in human capital has been complemented by our consistent technology investments to keep pace with our big bank competitors. Our post-COVID performance results are reflective of the talent and technology investments we have been making. Total loans have a 9% CAGR since 2022. We have grown our deposit balances, and our net charge-off and non-performing metrics continue to be quite strong. You can see that we have effectively doubled our growth capabilities while retaining our strong liquidity profile and credit performance. We have also done that while becoming more efficient in how we service clients.
As noted earlier, we operate as a true community bank with regionally based management teams led by a regional president. Our regional teams work cohesively to deliver both banking and non-banking products and services to their markets, keep us closer to our customers, and in touch with the various local economies in our footprint. Another key focus at the regional level is to support our commitment to community engagement programs and activities. In 2023, our employees served on over 500 not-for-profit boards and committees, supported over 2,100 organizations, volunteered over 16,000 hours, and we have given over $3.7 million through donations, grants, and sponsorships. We are now well-established in all of the largest Upstate New York markets, New England, and Northeastern Pennsylvania. We have solid footings, an expansive branch presence, and a favorable reputation.
As our current overall market share in most of these geographic areas is still in the single digits, the growth potential is vast, and our demonstrated ability to grow organically provides a long runway for significant market share expansion. We have an expansive, prominent branch network complemented by a growing digital platform. Our experienced, customer service-focused team of branch-based bankers and small business relationship managers provide personalized service to our long-term customer base, and our branch leaders are all actively involved in each of the communities we are present in. Our branches, products, and services continue to evolve to accommodate the changing needs of our customers and communities. We've added everything from mobile wallet to digital payments, to investment services, no closing cost mortgages, and home equity loans.
As our industry continues to evolve, our commitment to enriching our communities through personal service remains the same. We have an ongoing process of evaluating individual branch performance through various KPIs, and we monitor in-person transaction counts as we balance brick-and-mortar facilities against the continuing trend of customers' adaptation of our digital tools. Over the last five years, we have consolidated over 60 branches and have experienced excellent customer and balance retention through this period. In contrast to branch consolidations, we are also undertaking an initiative to open several new facilities across our footprint. As we expand into promising markets with strong potential for growth, we are reimagining the customer in-branch experience with clean, modern designs that encourage customer and banker collaboration, co-locating with our non-bank business partners, and staffing with personnel that can consult on a wide array of financial products and services.
We continue to see consistent increases in the utilization of our various digital platforms, and we are making significant technology investments as products are enhanced and new offerings are introduced. Regarding AI, we recently appointed a system-wide team dedicated to begin implementing the innovative capabilities of generative AI to automate routine tasks for both customer and internal processes. Our long-established consumer loan origination model consists of a three-pronged approach: branch-centric, online applications, and experienced loan officers generating residential mortgages and automobile loans across our footprint. Our model, policies, and underwriting standards have remained consistent over many years and has proven to be a core competency of our bank. Complementing our organic loan growth capabilities, our asset quality results are also a recognized strength.
Our conservative underwriting philosophy is validated by the 10-year history of below-peer net charge-offs of 4 basis points for residential mortgages and 46 basis points for our installment loan portfolio. Average FICO scores at origination are in the seven hundred and fifty range for both residential mortgages and automobiles. Given our size, scale, and technical expertise, we are becoming a more prominent commercial lending resource across all of our markets. Our underwriting policies are consistent, our team offers a wide range of in-industry expertise, and we have developed a reputation of responsiveness. Our treasury management platform offers a full array of products with competitive pricing, and we continue to leverage lending and treasury management technology resources to become a more efficient service provider. Another competitive advantage is our ability to recruit top talent.
We have added several new bankers across all markets with larger bank experience and formal credit training. We maintain a robust credit approval process with a deep bench of senior seasoned credit officers. As previously highlighted, our historical asset quality results have been solid, and the near-term outlook appears to be favorable. The regional economies of the footprint remain stable, with favorable employment statistics, strong multifamily occupancy rates, and a relatively stable suburban office market. Consistent with our lower risk philosophy, our commercial loan portfolio is very diverse and managed by a variety of concentration guardrails we employ to maintain a wide mix of industries, property types, and geographic concentrations within our $4 billion portfolio. Specific to non-owner-occupied commercial real estate, we maintain a below-peer ratio of loan outstandings to bank capital, and we are well within regulatory guidelines.
Our 10-year average net charge-offs at 7 basis points is reflective of a very disciplined underwriting model. As our lending capacity and capabilities have evolved, we've expanded our product offerings with a focus on enhancing our fee income. We recently began providing our more sophisticated borrowers with interest rate derivative offerings, enabling borrowers to obtain long-term fixed rate via swap agreements with an intermediary partner financial institution. This has opened a new revenue stream for us and has assisted in more effectively managing our on-balance sheet interest rate risk. We established commercial real estate capital market capabilities with the acquisition of a regional firm who specializes in structuring and arranging permanent financing through a variety of capital sources, including insurance companies, agencies, and banks. This acts as a great tool for us to serve clients, manage risk, and generate revenue.
Both of these initiatives will generate additional fee income to our 2024 results. Through our growing partnership with our non-banking business partners in insurance, wealth management, and employee benefits, we continue to source additional revenue opportunities through our internal cross-service program, whereby sales representatives across all lines of business work together to provide a comprehensive product set to our clients. This program has generated strong results and is a meaningful transformational success for our company. As I have previously mentioned, our bank was formed and built in rural Upstate New York, which still represents a very meaningful customer base for our bank. M&A and commercial banking market expansion initiatives such as our recent entry into Manchester, New Hampshire, and the Lehigh Valley in Pennsylvania has expanded our footprint into more densely populated markets.
These markets represent exponential growth opportunities and offer demographics which play well with our community banking style of delivering high-touch, personalized service. Our lending capacity and product offerings position us to be able to accommodate the vast majority of customers and prospects in these markets. If you look closely into the competitive dynamics across these markets, there is an excellent opportunity for us to evolve to be the leading large bank alternative, which is evident in our growth rates. A 5% market share increase across these markets implies about $10 billion of growth for us. Earlier this year, we announced a strategic plan to expand our branch presence in select markets throughout the remainder of 2024 and 2025.
This expansion currently includes plans for 18 new locations across Buffalo, Syracuse, Rochester, Albany, and Lehigh Valley in Pennsylvania, Springfield, Mass., and our first physical branch presence in New Hampshire. Over the last few years, we've made tremendous progress upgrading and enhancing our infrastructure and positioning our organization to be able to double our size with minimal disruption or a substantial increase in operating costs. We have made numerous human capital upgrades via new hires and M&A. We have redesigned and simplified our consumer checking products. In consumer lending, we have expanded our pool of residential mortgage loan officers and made technology investments to streamline the underwriting process and made organizational structural changes to be a much more efficient organization. The point is, as defined on this slide, we see the future as bright.
We will continue to leverage the opportunities our extensive customer base provides across all Community Financial System's business units and grow market share in the more robust markets we now have a presence in. I would now like to introduce Paul Neveu, the CEO and President of BPAS, our employee benefits and institutional trust business. Paul?
Good morning, everyone. My name is Paul Neveu, and I'm the Chief Executive Officer of BPAS. It's my pleasure to be with you all today, whether on-site or virtually. I've been here for 19 years and was honored to assume this role four years ago. BPAS is a national provider of retirement plan services and institutional trust services, partnering with a full range of intermediaries. That's advisors, banks and trust companies, asset managers and custodians. Now, 51 years in, we're proud to be among the nation's 25 largest record keepers, the 13 largest pension actuaries, and one of the three largest special purpose trust companies devoted to collective funds. We're proud of our business and our reputation, but we stay humble, focused on growth, listening, and building relationships. Let's say I'm an advisor, and servicing retirement plans is a core part of my business.
When I select a partner, I'd like to have full flexibility on investments. A firm who's not trying to force me into their own funds or tie my hands. I'd like to be able to handle any mix of plans I run into, working with a firm with great technical depth, who makes life easy for my clients, who's innovative with technology and respects my role in relationships. All of these comprise the value proposition and strategy of BPAS. At BPAS, we're an emerging player in a growing national landscape. By combining administration, technology, and investments for our partners, our mantra is one company, one call. A few key stats. Today, we're working with about 880,000 participants, as Dimitar said. We have about 5,800 corporate plans and about 2,500 relationships with intermediaries in total.
Our annual run rate revenues in the trailing 12 months shown here were $129.7 million, and we have 455 total employees nationally, 16 offices, and a remotely located team of experts. From 2013 to 2023, we saw a CAGR of around 12.1%. Now, acquisitions, they're an important and key part of our strategy, and since 1996, we've done so eight times. But we're not one of those sequential roll-up firms. When we acquire, it's very strategic, filling product gaps and expanding our footprint, but always making sure that the target firm buys into our culture and who we are as an organization. At the same time, our sales team is out there every day and every week, winning plans organically, which is the true mark of a successful firm.
You want clients who are with you because you're hopefully lighting up the scoreboard with service, not because you just bought someone. So we're engaged in this battle of hearts and minds every day throughout the country. Now here, our highway has four lanes: participants, employers, financial intermediaries, and even competitors, the largest firms who come to us with a niche need. So what two traits help us win? As shown here, breadth of service and speed to market. We're often called the Swiss Army knives of the industry because of the uniquely broad range of accounts we service.
And some of our partners have said, "Listen, if we built this internally, Paul, it would take us 36 months fighting through committees to get it live, but by working with BPAS, we are able to get this product live in six months." Or, "We're amazed you built your own HSA solution." So being nimble has many advantages. Based on the situation, BPAS might be offered as a back office with single sign-on technology. We could be side by side with our partner or presented out front, but always as a friendly extension of our partner's business. And we divide our business here into the retirement side, about 55% of revenues, and the institutional trust side, around 45%. So let's start with the retirement side.
So as Jeff kind of alluded to, we've always pursued business within the bank's footprint, but in the early 2000s, we decided to take our story national, taking it to the streets, Holiday Inns, Expresses, and airports through a national sales team. I've probably been in a few of those myself. There is nothing like a face-to-face meeting to create or sustain a partnership, and that's something we truly believe in here. We keep growing nationally, and much to the chagrin of the HR team, we now have employees in 32 states. But we're trying to focus on the 32, Maureen, so for new hires. We have clients in every state, and here, lighter to darker shading shows the preponderance of clients by state. Now, within our sales team, we have 22.
Within our organization, we have 22 sales team members, 95 plan consultants, 33 actuaries, and 25 members of our BA systems and programming teams, plus many others. What's the general mantra? Build it ourselves if possible, so we own the platform and the experience and keep costs low. Use outside vendors only where necessary, but always keeping BPAS in a position of control over clients and data. And above all, don't let any vendor get between us and our own clients. So on the retirement side, we're calling on approximately 2,500 firms today. Of these, around 700 have one or more pieces of business with BPAS. Now, note that in the U.S., there are over 15,000 advisory firms and over 5,000 trust companies.
So this means that between the firms that don't work with us yet and the ones we're working with that have other business elsewhere, the upside potential is enormous. This slide chronicles our history over thirteen events, from 1996 to today, and our growth has been enabled by a foundational principle. Namely, at BPAS, we seek employees with the Big Four, who are smart, friendly, motivated, and low drama. If you think about it, it's kind of a magical formula. This allows us to operate nationally with teams of people who communicate, have great friendships here, and take care of our clients and partners. It's us against the world at BPAS, but we like our chances, thanks to a great team vibe and constant efforts to keep turnover low. Now, the industry we're in, it's growing for two reasons, and the first has to do with coverage.
As of last year, there were still 65 million American workers not covered by a retirement plan, 44% of the workforce. Think of every restaurant, hotel, amusement park, or water park you've been to. Now, there has been both a federal and state response. Among the states, 16 have now imposed a mandatory state-run retirement plan, 25 more have one under development. So if employers don't have a plan by a certain date, they're forced to adopt the state program. Now, the good news for us is that when faced with this dilemma, 90% of employers are choosing a private sector solution. No offense to the Department of Motor Vehicles, okay? We appreciate the opportunities here. So this slide shows the effect.
There were 503,000 401(k) plans in 2017, rising to a projected 940,000 by the end of this decade. Again, thanks to these two factors. We expect this will create another 30-35 million more participants in 401(k) plans, which is a huge opportunity for us here at BPAS, along with our partners. The second reason driving this is legislation, and you've probably heard the SECURE 2.0 Act took effect this year with new plan tax credits and required automatic enrollment in new plans. This is creating many new plans in the first place and getting more participants into the plans that are here. Double-barrel good news. But so much for pension simplification, okay? The new law made retirement plans the most complicated they've ever been, which is why they don't let me do an ADP test anymore.
But for firms like BPAS, who thrive in the technical, compared with the national bundle providers, generally staffed with teams of generalists and loop lines, this moves the puck into our end of the ice. So we're all aware that DC plan balances fluctuate. My account will verify that very well. But with strong new plan formation and continued contributions every two weeks, we see this crescendo continuing for years. Our retirement plan system is a vital part of American free enterprise, generating capital that sustains jobs and livelihoods while driving innovation. Now, we're proud of the growth we've had, but you know what's humbling? In spite of everything we've done here and all the driving around, the Holiday Inn Expresses, and the Denny's, and you name it, to win plans, we still only service 0.5% of the retirement plans and participants in America. 0.5%.
So the upside is enormous, especially as some of the largest firms have been disaffected lately with turmoil following acquisitions. We recently had a meeting with 12 of our top partners, advisors, and trust companies called our Partner Advisory Board, and we said, "What do you like about us? What do we need to keep working on?" And what they said was kind of interesting. They said, "Paul and Liz and Victor and, and Brian, keep working on technology. We like what you've done. Keep working on it and the automation, but don't change. Keep calling us back in 30 minutes. Keep putting experts on the phone and the Zooms who have urgency around client relationships, and we'll keep sending you more plans." So I expected something really cerebral, and it was something as basic as calling us back in 30 minutes.
So, they basically said, "Listen, a beautiful mobile app and website might win a plan, but accountability and expertise are what truly matter to today's weary HR departments, often overworked, understaffed." So these are words we keep reflecting on at BPAS. So revenue, where does it come from? At BPAS, as you see here, about 39% from servicing defined contribution plans, 6% from our health and welfare business, 12% from defined benefit actuarial and administrative services, and a major growth area for us, we're super proud of it, is our institutional trust business, now 43% of our revenues. We strive to be a diversified business, like a hardware store, with a seasonality of products and solutions. And in terms of our revenue mix, we're currently 51% asset-based and 49% fixed dollar, so well diversified.
Now, note this, the fact that 90% of our revenues comes from partnering with other institutions to service engagements, it's pretty unique. Selling directly to employers, like Manhattan Engineering across the street, is a crowded space, and it requires getting in the door in the first place. So we like being a flexible and malleable player in the middle, getting introduced by our partner to their clients, and shining together as we win in service engagements. This chart here shows the growth of our revenues and pre-tax over time. We've grown revenues every year for 20 years straight, something we're proud of, and hit new high water marks this year. Our margins have been strong and consistent, with a three-year operating pre-tax of 42.9% and a 10-year CAGR of 12.1%.
And again, it's imperative for us to invest, automate, and hire as we grow, but we do keep an eye on margin discipline. So when I talk about defined contribution services, there are three key points. First, we like alphabet soup. As you see here, we support pretty much everything out there, DC and DB, health and welfare plans. Partners love that they can go out selling with conviction that BPAS as their partner, we can handle it, or if not, we'll probably figure it out, and I'm proud of that. Second is scale. You see here the growth in our plans, assets, participants on our Omni DC system by year. We're hovering at around $14 billion as of today, and 500,000 participants on the daily valuation system, with a goal of doubling these in the next five to seven.
We plan to move from the 25th largest record keeper out of 300 in total to the high teens during this time. Now, a third point, it's more nuanced, and this has to do with where your participants are by plan size. Because BPAS hasn't done much retail advertising, many times advisors might not know our name. We meet somebody in Montana, and they say, "You know, I've only heard your name once or twice, so I assume you're a small plan shop." But consider this, our industry is shaped like a wide and flat pyramid. There are far more 9 or 10 participant plans than there are 5,000 participant plans. So the data that matters is where, what is the clustering of your participants across plans of different sizes? You see here some great news for us.
BPAS has the largest segment of our participants in the mid and large end of the market. 27% of our total assets are in plans from 50 million to 1 billion in assets. 29% are in plans with over 1,000 participants. This means that that advisor's guess about us, precisely backwards. We're telling our story. The industry is waking up and getting the memo. When it's big and complicated, give BPAS a call, even if it has a few weird provisions and we have to figure that out. This is especially true for plans with company stock, ESOPs, KSOPs, complexes of plans with banks and hospitals. We're proud of the ability to figure it out and get to, hopefully, a good solution.
Now, next week, there's a presentation going on in Ohio for a $20 million plan, and BPAS is presenting with an advisor against three of the largest firms in the industry, people who advertise in March Madness or the Super Bowl, whose names would roll off your tongue. So you might ask, how does the committee end up picking BPAS? What's our secret sauce to winning that plan when they don't know us? So our sneaky advantage, probably shouldn't be saying this on a national webcast, kidding, is that we're vertically integrated. And what this means is, in your 401(k) or 403(b) plan, we handle administration, record keeping, trading, and custody under one roof, and we do it on one system.
There's only one system here, one set of records, not a separate plan and trust that need to be reconciled every day. So we collect data on every employee, every payroll. We scrub this data, and we find and fix errors before the contributions are traded on Friday night. By doing this, we can take about 50% or 55% of the work off the desk of the HR team. They thank us later when they see how much work has jumped from their desk to ours, with an extremely clean annual audit. So single point of contact, strong knowledge of technical, true open architecture on investments, BPAS on the hook for everything, nowhere to hide. In a world where competitors are moving to rotating service teams and loop lines with headsets on, accountability truly resonates.
Quick responses are music to the ears of weary HR departments and enable us to win and keep many more plans. So at BPAS, we do take pride in owning our technology and driving continuous innovation. Our E2 suite provides an elegant experience for all users in a device-agnostic format. There's no features gap between the mobile and the web. It's the same thing, fast, clean, warm, engaging, easy to use. We deliver a powerful experience for our financial planning, thanks to our Roadways Mile Marker, created with our own actuaries, with a lot of debates along the way. We're seriously happy with the outcome, and this helps participants project their future state and fill the gap over time, seeing it every day or every week.
BPAS University is our proprietary app to educate, motivate, and inspire participants and family members across a range of financial and life planning topics, with videos, interviews, quizzes, and gamification that's constantly changing. It's a free download in the app stores. I would encourage you all today to download BPAS U and check it out. Now, we have an ambitious plan for technology over the next five years: more fireworks, automation, use of AI, continuous account security enhancements, and making every aspect of what we do more efficient. You're probably familiar with traditional health and welfare services, flex plans, and the like. We administer all of these. But consider this, when the average American reaches age 67, they'll be facing over $250,000 of future medical expenses, a pretty daunting number.
For this reason, there's been a large national push on retiree health savings accounts, including corporate HSAs. For we built our own solution for these. But there's also been an interesting push among public sector and union employers towards VEBA HRA arrangements, a similar concept, but with employer contributions and usually unused sick or vacation time. Through our solution, the participant can go online and on the mobile app and invest funds until retirement, picking a whole range of funds. They use an access card when they have claims, with a triple tax advantage result, as long as they use it for an allowable expense. So BPAS has become a national platform in this space, and some of the largest firms are now using us as their partner. We are also large and substantial in the defined benefit business.
Through our APS group, Actuarial and Pension Services, which we acquired 20 years ago from PricewaterhouseCoopers. We're very proud of this team. Today, out of the 80 individuals in this team, 33 of them are actuaries. We handle the full range of engagements, plans of all sizes, sectors, from one to 20,000 participants. Our clients include many universities, banks, hospitals, major employers, and municipalities, plus a heck of a lot of radiology and anesthesiology firms. So this, this team is known for the highest level of white-glove service, with creative solutions like cash balance plan conversions, DB non-qualified plans, and custom discount rates, which deliver compelling new value. We're also in the post-retirement healthcare space, helping organizations manage their full range of programs, including the valuation of self-funded medical plans and their liabilities, using an expert team of actuaries.
Now, this February, we acquired an intriguing firm about 20 miles east of here called Creative Plan Designs on Long Island. We've now expanded our CPD practice into a unique value proposition, bringing unique chops to the under one hundred defined benefit marketplace, cash balance 401(k) combo plans to help owners achieve impressive tax deferrals. Our TPA team here is also being used by some of the largest record keepers nationally now, and we have a secret practice devoted to celebrity clients, including many stars, models, and entertainers. Now, they still won't give me the list of who they are because of NDAs, but I might just show up at an enrollment meeting and see what happens.
We're also proud in this business of a DB outsourcing team and DB 360, which provide ancillary services, pension payments, and a portal to round out the mix. By offering this DB 360, we can deliver all of it under one roof: actuarial, a pension portal to log on and model your benefits, a call center specific to the DB plans, payer services, asset management and trustee services, or a different mix in partnership with another firm. So integrating puzzle pieces here, it's part of our strategy. This growing business is driven by the national craving for accountability, so we're happy to respond. Let's talk about our IRA business. So I have a friend, his name is Larry, and last year he was working at Home Depot.
Finally, he took another job, and he had just under $7,000 in his 401(k), and rather than just getting a check, his account was moved to an automatic rollover solution when he made no other choice. Now, BPAS is one of the top five firms in this space nationally for our own clients and 133 other firms. You can find us here as AutoRollovers.com. We have a lot of street names here. And this 11-person team also handles voluntary IRAs, including an intriguing new solution called Express IRA, which gives advisors a technology-enabled answers to support IRAs from $10 to $500,000 in assets on a very cost-effective, high-touch basis. So our IRA team keeps growing with over 65,000 total IRAs as of today.
Next, we also have a thriving business in Puerto Rico, which I absolutely have to meet with every January and February for due diligence. But unlike Utica, this location very rarely experiences sleet or wintry mix. So this includes our BPAS Trust Company of Puerto Rico, with 13 current employees. Now, these plans are called 1081 . They're similar to 401(k)s but have some vital differences. Among our 200 Puerto Rico-based clients, we have many household name employers. We get to work with some amazing HR departments, and I'll tell you, it's a veritable who's who of American business. Now, we service these plans as record keeper, directed trustee. We partner with advisors locally, and we have a dedicated team that is fully bilingual in the meetings, the education meetings, the websites, all the literature.
We've also created a very innovative collective fund in Puerto Rico for the Commonwealth of Puerto Rico Plan, which now has $2.4 billion of assets, a stable value fund, and this is used by this jumbo plan with 115,000 participants, so we're very proud of that. Our Puerto Rico business line is exciting and growing. It's a way that many advisors first meet BPAS and do other business with our firm. Okay, so the second half of BPAS is very substantial. It's our trust business, and it operates from Greater Boston and Houston. Now, currently, this business line generates approximately $60 million in revenue and has approximately 110 professionals. This business partners with institutions, including major custodian banks, consulting firms, asset managers, and asset owners. We have two trust companies here.
Global Trust Company, based in Maine, is based in Boston, but is a Maine trust charter with the largest trust company registered in Maine. It's a subsidiary of Northeast Retirement Services, NRS, based in Woburn. We also have Hand Benefits and Trust, located in Houston. Now, we operate our trust business as a unified team in P&L, and what this means is, based upon the configuration and needs of a client, the engagement could be placed with either team or set of systems. We use the most efficient tool for the job at all times. So, what are collective funds? We're all familiar with mutual funds, which have been around since 1940, an efficient way to invest assets for thousands of lay investors. There are still over 25,000 mutual funds and share classes operating today.
However, because of SEC and FINRA regulatory requirements, it's fairly expensive to operate a mutual fund today. Annual costs can be $250,000-$350,000 per year to get a new mutual fund in the sky. In contrast, collective investment funds have been around for decades. They're a bank investment product, and they're regulated by state or federal trust examiners in lieu of SEC or FINRA. Now, they're only available to retirement plans. About 15 years ago, we started to daily value these funds, and it's created a new life to them. So to offer a collective fund, you need a trustee. The trustee takes responsibility for the fund and everything that happens in it. BPAS, we're one of the three largest trustees in the collective fund space, so we act as fiduciary.
We hire and oversee the investment managers, which is a little awkward because that's our client, but we have to monitor them. We get a nightly download from the custodians. We price the funds every evening. We do fact sheets, performance reporting, and we make the funds available so record keepers can trade them every night. Because of their more efficient environment, we can get a collective fund operating at a much lower cost, perhaps $50,000 per year. This gives managers also great flexibility. They can create new funds, different share classes for clients of different sizes or different revenue sharing levels, or they can create a CIT for a single jumbo client. So because of their flexibility, collective funds have exploded.
Morningstar notes that they now represent 49% of the total assets in the defined contribution industry, and this year they'll overtake mutual funds in the target date space for total assets. So through this business, we've become a trusted partner for a number of the largest institutions in the U.S. Now, we're very careful not to offend our partners due to the magnitude of these relationships, but I will assure you, it's a veritable who's who of the financial services industry, many of them with offices within a mile of us here. We also service a few mega employers here who have a goal of creating their own funds, not use anyone else's funds, and then negotiate with managers for their specific services and fees for each asset class.
On this slide, you see our total assets under administration within the trust business line, reaching just north of $104 billion in June. We also administer, getting to the end, by the way, guys, common funds, and these are taxable accounts, normally valued monthly, similar to collectives, but they're primarily used by an insurance company who have assets in their general account. What's also compelling is our endowment and foundation business. A major foundation or charity will hire us to perform all back office services, so reporting, accounting, statements, websites, asset reconciliation, while they work with donors on the front end in a program white labeled around their institution. I also find fascinating, we administer LLCs for foundations.
So we take the disparate assets at multiple custodians and give the entire pool a single nightly price, which allows for seamless daily in and outs of contributions and disbursements across the asset pool with trading tonight, with settling tomorrow. NRS also provides transfer agent services for many partners that we discuss. We deal with the end client in handling statements, websites, and reporting. This allows us to customize our deliverables with great flexibility, sets us apart. Our transfer agent business ranges from governmental plans to faith-based nonprofits to other collectives. Being able to handle non-registered products is another advantage over our competitors and something that our asset owners find compelling. To wrap this up, we also provide master trust accounting for complexes of plans, synthetic portfolios, which I love in particular for certain situations, aggregation services for trades, and donor-advised funds.
So by doing great work and having an honest, transparent relationship, we become a friendly extension of our partner's business, and we often just get notified, "Hey, here are six new collective funds converting," which is the best form of wholesaling. We're always focused on how we can get better, capitalizing on technology and evolving our business. To wrap up my summary of the Swiss Army knife that is BPAS. BPAS operates in a vibrant, growing market. We have an extremely diversified business, unique capabilities, and a deep partner focus. We've got a growing national reputation, and we've done... We're doing great things also across CFI, CFSI, with wealth management teams and other businesses to cross-pollinate activity.
Finally, the benefits of AI and technology will drive massive efficiencies in our business, allowing us to continue our white glove service approach, while routine transactions become more seamless for all clients. We're excited for the future and the great things we'll accomplish together through a low drama, accountable mindset, bringing refreshing solutions to the marketplace with a constant focus on growth and innovation while we remain humble. And now it's my pleasure to introduce my friend, Pierre Morrisseau, the CEO of OneGroup.
Good morning, everyone. I'd like to thank everyone for joining us today. I am Pierre Morrisseau and currently serve as CEO of OneGroup. I'm a little atypical for insurance, as my education actually was engineering. I found my way into insurance industry out of college as a Safety Engineer with Wausau Insurance. I thought I'd do it for a little while, you know, build a network, but really enjoyed the company, the industry, and in particular, risk management. I joined OneGroup in 2003. It was part of Oneida Savings Bank at the time. It was a smaller brokerage firm, but it had a great culture of innovation, entrepreneurship, and customer focus, and really a great financial partner and business partner in Oneida Savings Bank.
I learned the business from the ground up, starting in sales and sales management, expanding to product development and operations, and became President in 2010. By the end of 2015, we had grown the business to five times our revenue in 2003, and Oneida Savings merged with Community Financial System, adding insurance to the mix of their non-banking businesses. In the last eight years, we've doubled in size to over 10 times our revenue in 2003. We've also expanded our geography, diversified our offerings, and increased the number of specialty areas we serve. It's been a great run, and our Community Financial System subsidiary organizations are great partners in that journey. We're a full-service risk management insurance brokerage firm with offices down the East Coast in New York, Pennsylvania, Massachusetts, South Carolina, and Florida.
We have three major lines of business: commercial line insurance, employee benefits, and personal lines. Combined, we place over $390 million in premium, which generates about $48.3 million in trailing 12-month revenue. We ranked 66 on the 2024 top 100 U.S. independent insurance agencies list. A little tough to say. Our value proposition is, one, to provide practical, holistic solutions to our clients to manage and mitigate risk. It helps prevent and minimize loss, and it's an important tool in negotiating with our carriers. We provide claims risk management, risk management, and human resources consulting to our clients, and we sell them unbundled to our prospective clients, so we can build a relationship with them. Our ability to work with our clients to solve problems allows us to package and apply the solutions to others.
For example, many of our workers' compensation clients were not getting any results from pre-employment physicals. So we built the Employ Smart product, which creates customized physical, demand-based job descriptions, builds customized functional job tests, teaches local physical therapists, vendors how to complete the tests, and provides the ADA-compliant policies for the organization. We made it practical to implement effective pre-employment testing. We are, sorry, we are proficient at growing through new sales and acquisitions. This combination has allowed us to grow consistently over the past 20 years. Our history started in central New York. It was essentially the merger of Bailey & Haskell Associates, which was primarily a property and casualty broker, with Retirement Income Services, which specialized in employee benefits and financial services. This formed the basis of our product offerings.
We eventually spun the financial services unit off into its own entity and rebranded the P&C insurance and employee benefits practice as OneGroup in 2014. From our humble beginnings in Oneida, New York, we now have significant concentration of locations in central and eastern New York State, the greater New York City area. We've since expanded to New England and down the East Coast. Our geographic growth plan is focused on leveraging the footprint of our banking operations and expanding into growing economies that fit our niches. An example is our Florida operation, which we have a strong personal lines operation and wanted to care for our clients that moved into Florida market. In June of 2021, we acquired a great platform agency in Melbourne, Florida, with approximately $1.2 million in annual revenue.
Since then, we've expanded into Tampa, Boca Raton, Naples, and we have trailing 12-month revenue is $3.3 million, and it's on track to be $3.5 million by year-end. We believe in building through organic and acquisition growth. Our priorities for acquisitions are talent and expertise, additional specialties, and creating scale. We're not looking to be the largest. We want to be big enough to effectively compete in today's market and have enough scale to leverage resources, but still be focused on innovation and agility. We are a GDP business. As the economy grows, so does our basis for revenue. We have a track record of strong growth and have outpaced premiums and GDP growth in all but the initial two years of COVID. It's stable business with good client retention and recurring revenue. Our industry is still highly fragmented.
There are more than 10,000 small brokers, and it is getting harder and harder for those smaller agencies to compete. We have been very successful at bringing those smaller agencies into our organization. We offer them more resources and career paths for their employees. We have a culture that welcomes new ideas and provides a platform for collaboration and growth. This was a key element of growing Florida. 3/4 of our revenue is from business clients, and the other quarter is from individuals. Our knowledge of specific industries and our ability to create specialized solutions allows us to compete with very large brokerage firms, especially when we're in our niche. Our strength is being able to bring our expertise directly to our clients to work with them to create solutions. We continue to build scale in these specialties and acquire new ones as well.
Our Boston group has spent almost four decades specializing in food, agriculture, and life sciences. They create highly specialized solutions through carriers and Lloyd's that enable them to cover risks that most brokers cannot. As a result, we write business all over the country from our Boston office. We have similar deep expertise in our other specialties, which you can see on the slide. We have good scale in all lines of business. We have also built infrastructure to specifically support small business, middle-market business, and large and complex risks in each of our segments. We are very good at meeting the client where they are at and using our resources and knowledge to help them progress at their desired speed.
We are skilled in traditional insurance, but we also have strong expertise and experience with high-deductible programs, captives, and self-insurance for both our property and casualty clients and our employee benefits clients. Our partnership with our associates in the actuarial practice at BPAS enables us to provide deep analytics along with our employee benefits offerings. We still have significant internal growth opportunities as we increase our penetration of our other lines of business throughout our footprint. We've had strong revenue growth and reasonable margin. Our focus is on investing in growth and building a sustainable business. That means continuing to invest in people and technology. It also means looking for better efficiency and scale to improve the margin as we grow. We have strong direct relationships with three hundred plus carriers. Like most brokers, we also can access markets through major wholesale and Lloyd's brokers as well.
In Florida, we can grow the personal lines business because we have direct access to the Florida-specific carriers. Our specialties and risk management expertise enables us to get direct access to unique products and build successful group programs. In summary, we look forward to strong organic growth. This will further be enhanced by cross-sell opportunities through our insurance footprint. It is further enhanced by our ability to leverage the synergy with our banking operations. This will help us increase our organic growth in both our personal lines products and the products we sell to our commercial clients. Our specialties, especially in life science and food, enable us to write business throughout the U.S. We look to continue that trend and expand it with our other specialties. Technology creates opportunity to improve customer experience and improve overall operational efficiencies.
We are willing to learn and apply new technology constantly as it is a core competency for the future. We are already starting to pilot how AI can work for us. Mergers and acquisitions provides a great opportunity for us to attract talent and expertise. In areas where we've built a solid platform, we will continue to roll up revenue into these operations. We are a very attractive buyer to agencies that are looking to grow. And now I will hand it back to Zach for our first Q&A session. Thank you.
Thank you, Pierre. We've come to the end of the first half of this presentation. We will pause for a moment to consolidate our questions from the virtual guests, and give priority to those who are in the room for the questions. So for the team, Dimitar, Joe, Pierre, Paul, join me in the front.
Thank you. My question's for Pierre. A little while ago, you talked about the margins. Can you also speak to how your margins compare to comparably sized organizations? And then also, you talked about the M&A opportunities. Can you talk about what kind of pricing, how competitive it is to continue your external growth strategy?
Yeah, our margins are probably mid-level to peers. There's two groupings of peers, usually the very large brokers, and then us at our size. We tend to try to reinvest in both the acquisitions and our people so that we can sustain growth. Others can take a little bit higher level of margin if they can kind of continue, and they've already built out that platform. So we have a little more investment in building out scale in our geographies, as well as our specialties. But we're about average compared to our banks, our bank peers right now. We look to keep to grow that, but we're also we don't wanna starve the ability to kind of invest in the future, as we move forward. Mergers and acquisitions, we spent a lot of time in that area.
We are attractive to buyers who wanna come on board and grow themselves. We can roll in smaller agencies that are looking to exit, but we only do that with where we have an established platform, and the main selling point for them isn't always the number that we pay, it's a lot more about will we take care of their clients? 'Cause you gotta imagine, these are smaller brokers. They built personal relationships. So yeah, they want a good exit plan, but they also want the ability to make sure their clients are taken care of.
And then when you structure those deals, is there usually an earn-out as part of the deal structure to kind of incent the seller to align with your goals?
Absolutely. So there's. Think of it, we have two kinds of sellers, those that are staying on board. One of our most popular successes is with basically a parent-child relationship inside the agency. Parent wants to exit, child has learned the business from the ground up, and that generation doesn't kind of want to go it alone in today's environment. So we speak well to that because we offer them the resources and the ability to grow. And so yeah, those deals are structured with basically a growth earn-out to them. A roll-in, it's more of a one-time sale and some structure around retention. Where do we fit? We're not paying the most. So a lot of our deals are based upon their willingness and interest to come with us.
However, we are competitive in the marketplace, is the way I would define it. So, we have a lot of success where our cultures and our interests align, which is our main approach to acquisitions.
I think, Kevin, if I can just add, you've seen a lot of recent transactions in the space, even from some of our peers, and those have gone off at kind of four to five times revenue. We typically roll in these acquisitions at a turn or more below that.
Yes, sir.
Hi, I have two somewhat unrelated questions. First, on the core banking business, and I know you guys have done some branch consolidations, but if I think about how you're differentiating in these local markets, does that limit how much of that you can do? In other words, it's part of the offering as being sort of physically present nearby or not. I'm just kind of curious relative to the bigger competitors. And then my second question is, if you're gonna go into this later, no worries, but the CHIPS Act or other semiconductor investment in your broader region, just curious how that sort of manifests in your business.
Is it just sort of the whole, you know, better pitch to growth in the area shows up in all the books, or is that something that you sort of directly target or go after? Thanks.
... address the first part, Jeff?
Sure, I'll address the localness, if you would. You know, clearly, it's a combination of having good presence in the markets that we're in, and more importantly, it's about the people side. So, you know, we like to say we're not in the banking business, we're in the people business. So, physical presence is clearly important. It's gonna continue to be important. There's also the intangible value of the billboard effect of people know that you're in the market.
It's a lot of the non-banking activities that, as a community bank, we participate in boards, and we're at the Little League field, and we're at church or temple, and you know, that's our competitive advantage, and that works against the big guys and also against the small guys.
I think on the CHIPS Act, and just the investment, what we're seeing today is largely away from that, and we put some of the information on the slide as in terms of the local opportunities. But the pipeline, the economic pipeline in Central New York, as an example, is 20 times what it used to be in 2019 , and that does not include Micron. So there is just a lot of investment of the onshoring, reshoring back of manufacturing happening all the way from Northeastern PA through the 90 C orridor into the, you know, Rust Belt, essentially, of the U.S. So that's driving a lot of it. New York is a place where you can still find reasonable cost of living and housing.
We have a very high-skilled workforce because of the number of community colleges and colleges and institutions in Upstate, and now those people have jobs to stay. And also, it's not as cold as it used to be. So...
Great. I have a question here from Matt Breeze for Mr. Levy. Can you quantify for us, if at all possible, the potential fees from CRA capital markets and interest rate derivatives?
I can tell you this: We put a very aggressive budget in place for 2024, and our expectations are that we're going to exceed that budget. Joe, I don't know if we wanna expand on that at all.
Yeah, it's a relatively new product line for us. We've you know been able to kind of manage our balance sheet with kind of in the traditional way, and we've had more demand for interest rate swaps and derivatives and capital market products. And so we've expanded you know budget expectations kind of in a... I'll call it less than $4 million-$5 million in the first year, with expectations that we're gonna continue to grow that in 2025 and beyond. We've got pretty good traction early on with the customer base, and our expectation is that's gonna continue to grow as part of our core business.
I have a follow-up. While the loan to deposit ratio remains solid at 76%, over the last couple of years, deposit growth has lagged loan growth, and the loan to deposit ratio has increased from 60%-65% since 2022. Given the stronger loan growth dynamics and the continued push to the market share in those markets, is the loan deposit ratio expected to increase? And if so, where is the upper tolerance limit?
Take that. So this all ties back to our investment thesis, and I think this is a major takeaway for folks to really understand. Everything we do is through the investment thesis, which is below-average risk. A major component of that is liquidity. Really, in the banking business, there's two components where you really get in trouble, right? It's liquidity and credit. So we're gonna be below averages on both of those as part of our investment thesis. What does that mean for liquidity ratio, for loan to deposit ratio, and for also the coverage of uninsured deposits? It means that our internal target today is to stay below 85% on loans to deposits over time, and for our coverage of uninsured deposits to be well north of 150%. So those are the two things that we look at.
During COVID, we got $4 billion of deposits in two years, a disproportionate amount compared to peers because we have a disproportionate account of core checking accounts. So as people were getting stimulus checks, we were getting a lot more of those, which is great. What it essentially did is it accelerated, it pulled forward, if you will, the deposit growth of the next couple of years. So our loan to deposit ratio did trend down in the 60s, creating this amount of opportunity, allowing us to get into this cycle of growth with a much more favorable balance sheet than our peers. So today, we're at 76% , roughly, loan to deposit ratio. As we project the next five years, we're perfectly fine staying around that 85% and below threshold, with high single-digit growth on the asset side.
Beyond that is why we're investing in branches today. That's one of the reasons why we're opening 18 new locations in the largest markets, because that's where we're gonna get that additional amount of liquidity. It takes a long time. It's a long-term investment. It's an expensive one. There's very few banks in the country that are willing to do so, but we are. So that's really the... Again, everything circles back to planning ahead, looking forward into our investment thesis, and how do we continue to sustain it for all of you?
Okay, one more from the virtual team before we get back to the room. Is there a risk to your low-cost funding advantage if you have to fund incremental loan growth with market rate funding, as or if the loan-to-deposit ratio expands?
Well, given that we have one of the best cost of funds in the industry, it is arguably hard to get much better than where we are. So as we grow into the larger markets, and we add much more funding in those chunks that are gonna be a little bit more expensive, that clearly is probably going to have a higher impact on the cost of funds. However, I think it's really important to keep things in context. If, let's say, we're successful in our plan, and that's certainly our expectation, we open 18 branches over the next 10 years. Let's say you achieve $100 million per branch, right? On average. That's $1.8 billion of funding at what likely will be higher than 1.30% deposit costs today.
We still have $13 billion today of deposits at 1.30% that are gonna continue to grow at a normal pace of about 2%. So the relative amount of those deposits that... By the way, they're not gonna be at 5%, and they're not gonna be at 4% at today's rates, but the relative proportion of those to the aggregate number is still going to be relatively small. So my expectation is that our cost of funding advantage is going to remain. It may just not be quite as large as it is today. That is a good trade because we're still making pretty good money on that.
A couple more from the room. Manuel?
Hey, you talked about being in the early innings of doing some synergies and referrals. Can you talk about that opportunity, and why early innings? Is it part of the commercial lending maturation? And just kind of talk to that point a bit.
So we're in the early innings mostly because we grew these businesses as standalone businesses with their own right to win and be successful, which is why we've been more successful than most, I would argue. Which is why we've gotten those businesses to double and quadruple and quintuple in size since the time that we've owned them. So they developed on their own. They figured out how do they go and fish their own fish and how can we be successful on a national scale. And then we started kind of building around it, as we now have the scale and the opportunities and the expertise and the trust of the people between each other and the company, to be part of the same company, truly, and to feel like they're part of the whole.
So that process, I would say, kind of, it's always been there, but in earnest, with a dedicated focus from everyone at the CEO level in those businesses and down, really started a few years ago. So if you look at our businesses today, the amount of overlap in clients, we have some tremendous success stories where we have clients that use all products across the board, but that represents less than, typically less than 10% of the business of each one of those units, with the exception of probably wealth, where there is naturally more overlap between the branches and the consultants and the trust business. Is that ever going to be the predominant piece of the business?
No, nor do we actually want it to be, because we want these businesses to operate the same way and to win, you know, in the marketplace without being necessarily subsidized by anybody else, but being augmented by the rest of the company, so we see that percentage as growing over time, and just the opportunity is very large because we haven't been dedicated at it, but for the past couple of years.
In the revenue growth potential on the fee businesses, those all include acquisitions as part of that, those targets? Just wanted to confirm that.
Yes. We expect to continue to augment organic growth with inorganic growth through acquisition. That's been part of our business strategy and, you know, to the points of our presenters, you know, we do a pretty good job of integrating those as well. So it's part of our growth strategy and revenue target. But with respect to, you know, the ability of the businesses, the non-banking businesses, to grow organically, I think the setup is pretty good because, you know, you think about the benefit plans business, where about 50% of the revenue has a market component to it, right? And if the market, on average, between fixed income and equities, you know, goes up 6% a year, that's on average, obviously, it's not a linear path.
You know, there's a 3% tailwind built into the benefits business just through kind of average market appreciation. And as Paul alluded to, you know, we have a lot of business partners that we've been working with, and we're clearly, you know, moving up the pecking order in terms of our capabilities and scale, and so that provides a nice organic tailwind as well. So there is, you know, a possibility to grow in, you know, in that business, particularly at high single digits, just organically. And if we can augment it with acquisitions, that's even better. And the same, you know, same applies to the wealth business.
You know, it's basically, there's a market factor tailwind that benefits the business on a, you know, not a consistent basis, but over time, on a consistent basis, and so, you know, there's an ability to grow organically in that business as well.
All right. One more question from Steve.
My question's for Paul. Just curious, in terms of where you on BPAS, what are the product enhancements you still want to make, maybe areas of investment? You know, you talked about some unique acquisitions. Just curious on that front. And the other thing also, you know, curious about your white label partnerships.
... chatted with Dimitar earlier in the week about some of the growth you guys are experiencing there. Maybe just go into a little bit of that, too.
Absolutely, I'd be happy to. So we look at four types of technology or four or five enhancements that you do. One are fireworks, you know, that's an amazing new mobile app. The second has to do with making existing processes more efficient. Another one could be security, you know, cyber fraud prevention. Another one could be things you have to do because of government edict. So I would say that all four, and the final one is take my pain away. You know, like the Easy Button from a certain U.S. retailer, they love that one, all right? The fireworks are great, but what really wins praise is the Easy Button. So we're gonna continue with a rounded assessment of all four types.
I will say that the biggest challenge is you'll see a shiny object out there offered by, sorry, Pierre, by another firm, and the temptation is, "We have to have that now." And, my thing is that with the right people, with the right additional resources, including some CFSI teams, we can build a heck of a lot ourselves. So it's kind of accepting a solid B+ done on our terms is oftentimes better than the immediate A+, which changes the nature of your product or gets another vendor in the middle. So the answer I would say is we're gonna continue to push on all five types of enhancements. In terms of acquisitions, I would say that what is interesting, and this kinda gets on the previous question, we are now getting a lot of...
There's firms out there who wanna take chips to the window, right? "I wanna sell my business, and I either wanna," you know, most want the business to keep living and succeeding. A few people just want the maximum price tag, and whatever happens, happens, but firms are actually calling us now to say, "Would you consider buying us? Because you, you all are stable and low drama," and so the message is getting out about, you know, maybe we're not the flashiest firm, you know, but we're stable, and we're not going anywhere, and it, it meaning we're here, we're gonna be here, so we're getting people calling us now on acquisitions. In terms of the product gap, what's most attractive? I would say West Coast.
We did create a Spokane office, which now has ten very hardworking employees there, but that would be attractive to me, the West Coast. You know, the more profitable parts of the business clearly are the DC administration, when you bundle it all together in the institutional trust side, so I would say, looking at some of those, West Coast, and you know, you never know what else we'll get into. There are a few products that we only do some of, where we keep growing our ESOP, KSOP business, so I guess I'm giving you a rambling answer, but the point is that there's a lot we're gonna do that'll be both organic and acquired, but technology is at the heart of it.
And the last thing is, you know. Sometimes you win a lot of new engagements, and you spend time onboarding those, but maybe the best use of the next four quarters is automate the heck out of things that are not super automated now. So keep looking at rolling out of paperless distributions and having systems handshake, so there's less human intervention. AI is a big part of it with this. I won't get into it now. We have a seven-pronged plan for our call center to bring AI in, both to constant training of the agents and asking the bot questions, not the two managers, as well as actually having AI listen to calls and be able to respond in multiple languages eventually. So we have a plan.
It's always gonna be where people are integral to our mix, but technology helps us do our job better.
Paul, do you wanna touch on some of the white labeling we're doing with some of our competitors? And-
Yes, that's a great-- that's a great point. So as I mentioned, sometimes we're out front. We're, we're usually side by side. Jeff and I are bidding on a plan here, right? We're bidding, you know, we're going in with First National Bank of wherever to bid a plan. But the, the newest part of our s- our product set is being a solution to competitors, firms we compete with all day long on 401(k) and 403(b) plans, but will come to us and say, "Hey, you have a very enticing chassis for VEBAs or for DB outsourcing, and we would like to white label that." And so what'll happen is a major firm, I mean, all the firms that I would say would roll off your tongue, and you'll probably see, if anyone's watching the football game tonight, they'll probably be advertising.
They log in to that firm's website, they get authenticated, and then they get a five-plan pick list, and to go to the VEBA, they click that button, and then they single sign on into our website. So, and then when they're done, they go, they go back to the, the major firm. So that's, to Dimitar's point, that is a huge growth area for us because these firms like, we have. They're kind of like: "Where have you been? You have a lot of cool things you can do," and we can have it live in six months, not 36 months. So that's been a big growth area, and it's nice because, you know, they have a 100-person sales teams, and they'll say, "Hey, we just won this mega engagement. You know, we just had an, an 18,000-life plan come out of conversion a few, few months ago.
Seamless, by the way, everyone was happy, and we have more like that in the future. So we love partnering with those competitors. We know we're gonna compete on a lot of basic plans, and we accept that, but we can work together on things where we have a great solution immediately, and they want that.
Right. Thanks, Paul. So we've come to the end of the first session. We are taking a ten-minute break. There's some refreshments. You can take a bathroom break. We'll be back here in ten minutes. Thank you.
You need more room to walk than I do.
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Oh me, oh my, I can't explain. Oh. She might just be my everything. Oh me, oh my, I can't explain. She might just be my everything. So do you think I'm being foolish if I don't rush in? I'm scared to death that she might be it, that the love is real, that the shoe might fit. She might just be my everything and beyond, beyond. Space and time in the afterlife. Will she have my kids? Will she be my wife? She might just be my everything and beyond. Yeah, she might just be. Oh me, oh my, I can't explain. She might just be my everything. She might just be. Oh me, oh my, I can't explain. She might just be my everything. She might just be. Oh me, oh my, I can't explain. She might just be my everything. She might just be my, be my...
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All right, everybody, I hope you enjoyed your break. We'll take our seats now. We're about to get started for the next session, to start with, wealth management with Michael Cerminaro. Michael?
Good morning, ladies and gentlemen. My name is Michael Cerminaro, and I am the President and CEO of Community Financial's Wealth Management Division. I joined the company a little over a year ago after a long career in private bank wealth management with Bank of America, Citibank, and most recently, 16 years with HSBC. I'm delighted and look forward to sharing our wealth management story. I'd like to start by giving a high-level overview of our platform and services, our experienced teams, and key metrics about our wealth management division. We are unique in both the depth of our services and the scale of our businesses. We deliver through four brands or business units within wealth management. Business unit number one, Community Investment Services. This is where we deliver our investment services. We are registered and partner with the largest U.S. independent broker-dealer in LPL Financial.
Business unit number two, Nottingham Trust, where our trust services are carried out through our nationally chartered, full-service trust company. Business unit number three, Nottingham Advisors, our asset management capability through our institutional quality registered investment advisor. And our fourth and final business unit, OneGroup Retirement Advisors, an industry-leading retirement plan consulting business. It leverages our OneGroup brand, given its historical affiliation and insurance services. Now, each of these four brands are supported by a dedicated financial planning team embedded throughout the division and our newly launched outsourced partner solutions. Partner Solutions supports our national effort in a directed, delegated trust administration, outsourced chief investment officer, and outsourced retirement plan consulting services.... We deliver wealth management through our four-state branch footprint and nationally in all fifty states where we have clients residing across each of our business units.
Our investment services and retirement plan consulting businesses have clients spanning all 50 states, our trust business across 33 states, and our RIA has clients spanning 41 states. We are truly a national provider of wealth management services. Our trailing 12-month revenue growth and 10-year CAGR have high single-digit growth rates. We provide an excellent source of non-interest revenue. Our assets under management and administration have grown to over $12 billion. We provide comprehensive and custom advice through our growing team of financial consultants, trust officers, portfolio managers, and financial planners. Between the entire team of client-facing associates, we carry 14 different industry designations to support our clients. Our relationships with our clients are deep, supporting our clients' most important life ambitions at some of the most personal times of their lives.
It's not uncommon for one of our trust officers to be the first call upon the birth of a grandchild or the passing of a beloved grandparent. We are well-positioned to capture our share of these growing assets. With total investable assets almost doubling over the five-year timeframe from 2016 to 2021, from $36 trillion-$65 trillion, we have adopted these four industry tiers, including the mass and middle market, the mass affluent, the high net worth, and the ultra-high net worth. Now, our footprint at Community Financial primarily includes the three tiers up to and including the high net worth, which by the way, grew at a 10% double-digit CAGR over that same five-year period. To further explain our approach to these wealth tiers, our legacy markets are more typical of the mass and middle market and mass affluent.
Our right to win is significant in these markets, with Community Bank being the number one or number two market share in deposits across two-thirds of these markets. Our newer and expansion markets would include not only the mass and middle market and mass affluent, but also give us access to the high net worth and lower end of the ultra-high net worth in regions like the Capital District, Syracuse, Rochester, Buffalo, and Northeast Pennsylvania regions. Let me give you a sense of the opportunity. On the bank side alone, we have over 500,000 retail customers. Our penetration rate amongst our retail client base is 2.8%. That means that 2.8% of our retail clients have a wealth management account with us.
Now, our industry benchmarks tell us a median bank broker-dealer program is approximately 5% wealth share, and a top quartile program is a 7% wealth share. Given our significant deposit market share and company culture, leveraging our Community Connect program that Dimitar mentioned earlier, we believe doubling and tripling our penetration rates are retrievable. For every 1% increase in penetration rate, we increase by 5,000 new wealth management clients, a meaningful increase over our approximately 19,000 households. So now let me draw your attention to the right side of the chart here. I spoke a little bit earlier about the depths of our services and the scale of our wealth division.
Across our four businesses, remember, the broker-dealer, the trust company, the RIA, and the retirement plan consulting business, we have over 12 billion in assets under management and administration. If you take the latest second quarter SEC-registered RIA data, those above 12 billion are comfortably within that top 10%. Now, not a complete apple-to-apples comparison, but as you will see as we walk through this presentation, an extremely high percentage of our assets are recurring revenue, very typical of an RIA. The existing scale is an advantage when competing for both market share in our legacy and new expansion markets. Throughout this presentation, I have referenced we are unique for our size and our platform and services and scale. Here are some of the highlights across those four businesses that I mentioned earlier.
Our community investment services business has 26 financial consultants sitting in our bank branches, where we have the number one or number two market share in most of those markets. We are a top 10 program with LPL Financial, the largest independent broker-dealer in the U.S. They have over 1,000 financial institutions that they work with. We are ranked number 13 in revenue. 68% of our revenue is derived from advisory business, with 80% of our revenue coming from recurring sources, which are stable, repeatable, and increase with market appreciation. Nottingham Trust. The Nottingham Trust business is a nationally chartered, full-service, 100-year trust platform, including asset management, administration, and fiduciary services. In this business, we service our longest-standing client relationships, expanding over multiple generations with our highly credentialed 19 trust officers....
Now, embedded in our trust business is our employee benefits group, providing payer services to our pension plan clients that Paul mentioned earlier. It's the fastest-growing part of our trust business. It grew at over 25% for the first half of 2024. Beyond the traditional trust business and employee benefits business, we are pursuing a directed, delegated arrangement in a newly formed New Hampshire non-state tax trust situs. With both our employee benefits and directed delegated trust services, it gives Community Wealth Management the ability to expand nationally beyond our existing footprint. Business number three, Nottingham Advisors. It's a $4 billion registered investment advisor in total assets under management and administration. With extensive management experience with six CFAs providing both model and custom managed portfolios, we have institutional portfolio management experience to support our pensions, not-for-profits, endowments and foundations, and other institutional clients.
We have a 20-year-plus GIPS compliant, that's Global Investment Performance Standards track record, and a 30-year proven provider of outsourced chief investment officer services to also expand nationally beyond our branch-based footprint. Finally, our OneGroup Retirement Advisors, our retirement plan consulting business, is both New York State and nationally recognized for expertise in investment advisory, fiduciary work with plan sponsors and plan participants. We have $2 billion in assets under administration, with over 180 retirement plan clients and 29,000 plan participants. We're recognized by NAPA, the National Association of Plan Advisors, as an industry-leading defined contribution team, including top 10 in New York State by assets under administration and top advisors under 40. The business has over $500 million in private wealth assets under management, capitalizing on that convergence between retirement and wealth.
Finally, we are only one of 100 teams approved by LPL Financial to provide what's called 3(38) Fiduciary advisory services, allowing us to be a national provider of these services to other advisor practices. If I had to highlight our most impressive characteristic and achievement, let me draw your attention to the pie charts to the left of the slide. It would be the recurring revenue asset base of our overall wealth management business at 87%. Some of those revenue categories that drive those higher percentages include advisory consulting fees through the broker-dealer, portfolio management fees through the RIA and the trust company, and those fiduciary administration fees that we earn through the trust company. Approximately $31 million of the $35.6 million in trailing 12-month revenues are recurring asset base, providing a level of earning stability and leverages historic market appreciation.
The second pie chart demonstrates our balanced mix of both equity and fixed income, so not overexposed in either asset class and a good hedge for our wealth management division. As we move across the slide to the right, you'll see the 10-year history of both revenue and asset growth, reinforcing our history of achieving high single digit, low double-digit growth rates with an 8.3% 10-year CAGR for revenue and a 12.8% 10-year CAGR for assets under management and administration. Combined, our well-diversified mix of revenue and assets under management and administration across our four lines of businesses, and you have a stable and sturdy business leveraging historical uptrends in markets with additional growth opportunities through well-executed initiatives. We've talked a fair amount this morning about revenue and asset growth and those factors and strategies that will drive both.
The business has also demonstrated the ability to deliver strong margins to support profitability with a three-year average operating margin of 31%. In the short run, and Dimitar mentioned this earlier, we are using some of this margin to invest in our wealth management business. Investments in business development associates like financial consultants, trust officers, outsource wholesalers, a professional sales coaching program, security-based lending program, and the new New Hampshire-based direct delegated trust administration capability we talked about. These investments will allow us to scale and better connect both within our wealth management division and Community Financial, as well as expand our services beyond our branch footprint with a national outreach, including outsource partner solutions. Finally, I'd like to conclude with what you can expect from our wealth management division.
I want to be specific here because we have a very well-defined plan and priorities that we will deliver our growth. These priorities include, number one, amongst our high- amongst our highest priorities, achieving greater penetration across our family of community financial businesses. Our most significant opportunities are with our retail, commercial banking, and commercial insurance businesses, over 500,000 existing customers and their need for wealth management services. Our pursuit of greater penetration rates is critical. Number two, our national growth initiative, leveraging our 2,000 plus BPAS financial intermediaries, supporting their growth efforts with outsourced partner solutions, including outsourced chief investment officer, directed and delegated trust administration, and retirement plan fiduciary services. Finally, number three, depending, deepening existing client relationships across our wealth management division. These are opportunities we have within our own control.
Examples across each of our four businesses include greater wallet share within the investment services business. Right now, we're capturing about $1,100 per client in revenue. A top-tier program is around $1,800. Delivering trust administrative services to our 19,000 wealth households. Working closer with our registered investment advisor to provide custom portfolio management solutions across our entire population of 19,000 households. And staffing up, engaging our 29,000 plan participants to uncover further private wealth opportunities in the retirement plan consulting business. As you have heard me say throughout the presentation, while the results are strong, our opportunities for revenue expansion and growth are even stronger. Now, I'd like to introduce Dan Bailey, our Chief Risk Officer.
Thank you, and good morning, Mike. I am Dan Bailey, and I'm the Chief Risk Officer, and similar to Mike, I have been with CFSI for a little over a year. Previously, I spent a majority of my career with the Office of the Comptroller of the Currency, or OCC, the regulator of national banks. I also spent a portion of my career as portfolio manager responsible for credit functions at KeyCorp's commercial equipment leasing company. I'm going to provide an overview of CFSI's risk management framework, an overview of CBNA's credit and funding profiles, and the strength of its core markets. CFSI's primary risk exposures reside in the bank. With the exception of operational and compliance risks related to our financial services lines of business, CFSI's primary exposures to credit, interest rate, liquidity, price, and compliance risk are related to its banking business.
The first line of defense for each risk exposure is the responsibility of the business unit to understand the nature and risk, to design and implement a system of effective controls. The areas that report to me are responsible for ensuring that the first line controls are effective and adequately mitigating the risk exposure of the business activity. Those second line pillars are focused on enterprise risk management, which is designing and implementing a risk and control self-assessment program that documents, evaluates, and tests key controls for each line of business and activity. Compliance. The current consumer compliance environment is very challenging. The pace and complexity of new regulations and new interpretations of existing regulations are very challenging. Our compliance experts work with our business partners to ensure that our policies and practices proactively keep pace with regulatory changes. Credit risk review.
Credit risk review tests loan risk rating accuracy, and compliance with our credit policies. A third-party risk management encompasses reviewing the risk posed by vendors, such as our core processor, software vendors, et cetera, and works to mitigate our exposure to a vendor not being able to complete their contractual obligations. Security. Similar to consumer compliance, the fraud environment is very challenging. The breadth and scope of the types of scams being perpetrated by fraudsters is constantly evolving. Our investments in systems, personnel, and controls are considerable and constantly evolving to decrease our exposure to ever-changing fraud schemes. Information technology security. On a weekly basis, a new information security breach is in the news. A routine occurrence is receiving a notice in your home mailbox that your personal information has been exposed due to a security event.
Similar to our investments in systems and controls to prevent financial fraud, our investments in information security measures are constant and evolving in their complexity and focus on a wider range of risks. The last several years have been focused on making investments in our risk management capabilities. This trend will continue. We are focused on a progression of our risk management structure to meet the OCC's heightened standards that are required for banks with total assets greater than $50 billion. While this threshold is some distance from our current asset size, these standards are not something that can be contemplated just ahead of reaching this asset threshold. We are planning well ahead of that day to make our transition to these enhanced expectations seamless and uneventful.
After the events of last spring that highlighted funding and liquidity risk, and the current concerns about the potential impact of a recession on commercial and consumer credit losses, I will focus my remaining comments on credit and liquidity risk. Our first-line risk management capabilities and credit strength of the markets we operate in have been a hallmark of safety and soundness. Some of the factors that made that possible are a balanced loan mix between commercial and retail lending activities. Total portfolio is comprised of 41% commercial exposures and retail exposures of 59%. Retail lending has the strength of a lengthy track record and profitable risk selection, particularly in retail mortgage and auto lending. Retail lending also offers greater portfolio granularity than commercial lending and lower credit loss volatility through the credit cycle.
We also benefit from favorable geographic, retail, and commercial credit profile. CBNA's core markets have proven historically to exhibit low delinquencies, default, and loss volatility. Our core markets of Upstate New York, the Scranton/Wilkes-Barre, Pennsylvania, I-81 Corridor, Vermont, and Western Massachusetts, are characterized by a lower cost of living than the I-95 Corridor markets to our east, and have higher incomes and savings rates than national averages. This benefits our customers' ability to repay their loans and build wealth. The map reflects that these markets have an average lower household debt-to-income ratios than other Northeastern U.S. markets. The counties colored shades of teal have lower DTIs or better loan repayment capacities, and those shaded brown have higher DTIs or weaker loan repayment capacities. Our core markets have more teal-shaded counties, meaning households have greater financial flex, flexibility to repay their debts.
The chart reflects CBNA's credit loss experience and comparable peer group data for the past 20 years. The strength of our core markets, loan mix, and credit underwriting practices have translated into a low level and variability of lending credit losses over this protracted 20-year period. The period of the Great Recession was benign from a credit risk perspective on CBNA's financial performance. CBNA is over-represented in loan types that have historically exhibited lower credit loss volatility and underrepresented in loan types with historically higher credit loss volatility. So we're over-represented in residential mortgage and auto lending and underrepresented in loan types such as income-producing commercial real estate, including multifamily housing, C&I loans, and construction and development. In addition to our favorable loan mix from a credit perspective, our residential mortgage and auto portfolios are overwhelmingly to prime borrowers.
That further reduces credit exposure in periods of economic stress. Our stability of core funding sources is a fundamental strength of the organization. CBNA has an exceptional low-cost, low-churn retail and commercial core deposit base, with no reliance on brokered or listing service-sourced deposits. Our funding metrics are favorable compared to our peer banks. Joe will detail our substantial sources of primary and secondary sources of liquidity during his presentation. To put into perspective how different our deposit base is to those institutions that failed last spring, the chart illustrates our low depositor concentration compared to our peer banks and the different universe that the failed banks operated in. To summarize, we believe our loan portfolio composition, geographic strength, core deposit base, and credit risk selection are sustainable, sustaining pillars for our continued ability to generate above-average returns and below-average risk.
I will now turn over the presentation to Joe Sutaris, our Chief Financial Officer, to discuss the financial performance of the company.
Thank you, Dan. Good morning, everyone, and thank you again for joining us today. I am Joseph Sutaris, and currently serve as the company's Executive Vice President and Chief Financial Officer. I joined the company in 2011 in connection with the Wilber Corporation acquisition. During my 14-year tenure, I've seen the company grow and expand in both the banking front and within the broader financial services industry. The company, led by its board, has embraced a culture of growth and entrepreneurship with an unrelenting focus on creating long-term shareholder value. Over the years, the company has kept pace with the ever-changing banking and financial services landscape by keeping people at the forefront of its business plan through consistent investments in talent and a complete focus on its customers and communities.
The management team maintains a front-footed posture and has been willing to press the pace to create shareholder value. This includes supporting our core values, maintaining strong commitments to risk management and compliance, and leaning into technology. The company's investment thesis of creating above-average returns with below-average risk is supported by certain long-standing fundamental elements designed to endure regardless of the economic climate, competitive conditions, or regulatory environment. This includes conscious management of revenue quality, diversification and growth, as well as maintaining solid capital, robust liquidity reserves, and a best-in-class core deposit franchise and strong asset quality. The commitment to these fundamental elements is evidenced by the company's thirty-two-year streak of increasing its cash dividends to shareholders, placing us among a select group of dividend aristocrats. The company has a very solid track record of growing its total operating revenues over the prior ten years.
In addition, against the backdrop of the pandemic, significant changes in the economic climate and interest rate environment, continuous competitive pressures and regulatory pressure on banking-related non-interest revenues, the company's total revenue growth, supported by its diversified revenue model, has more than doubled the banking industry as a whole over the prior five years. On a trailing 12-month basis, net interest income represented 61% of the company's total revenues, while our top decile non-interest revenue profile represented the other 39%. Although the company's revenue performance relies to a certain extent on the interest rate environment and performance of the capital markets, the company's focus on recurring high-quality subscription-type revenue in the company's non-banking financial services businesses have supported consistent year-over-year performance. A significant contributor to the company's long-term and enduring performance has been its focus on asset quality and asset diversification, as Dan just touched on.
Over the years, many financial institutions have fallen victim to macroeconomic downturns, credit concentrations, and poor credit quality, or any combination of the three. Community Bank has consistently maintained strong underwriting standards and loan portfolio diversification objectives that have stood the test of time. The company's net charge-off ratios to average loans outstanding have consistently outperformed the industry. This was especially evident during the Great Financial Crisis, when the company's net charge-offs topped out at thirty basis points during two thousand and nine, as compared to the industry total of two hundred and fifty-three basis points. As highlighted in Jeff Levy's presentation, the bank remains largely an in-footprint lender with no particular risk-laden specialty lines or concentrations. The company's strong credit history has supported the maintenance of an allowance for credit losses below the industry average.
The company's allowance for credit losses at the end of the second quarter stood at $71.8 million, or 72 basis points of total loans outstanding, as compared to an industry aggregate of 151 basis points of total loans outstanding. Although this may appear optically low, the company's current allowance for credit losses as a multiple of trailing 12-month net charge-offs was 7, as compared to an industry average of 3.7, despite a significant increase in industry allowance levels following the adoption of CECL in the 2020 pandemic. Similarly, the company's current allowance for credit losses as a multiple of the prior 10-year average net charge-off ratio is 5.4, as compared to 4.4 for the industry as a whole. In my opening remarks, I referenced the company's best-in-class core deposit franchise.
Over the last 15 years, the company has been focused on building strong core deposit franchise through targeted acquisition strategy and a grassroots sales effort in the retail branch network and through its digital channels, with the primary focus on securing low-cost checking and savings accounts, which currently comprise approximately two-thirds of the company's total deposits. In the low interest rate environment that followed the great financial crisis of 2008 and 2009 , the value of the company's deposit franchise was less apparent, as most banks were able to maintain a total cost of funds well below a 100 ba sis points. As inflation levels and market interest rates spiked following the pandemic, industry funding betas increased markedly, leading to a cycle-to-date funding beta of 45% for the industry.
By comparison, the company's cycle-to-date funding beta is 24%, or approximately 1/2 of the industry funding beta. The strength of the company's core deposits have consistently provided a strong platform for effective interest rate risk management and liquidity. At the end of the second quarter, the company's total liquidity sources topped $4.4 billion. This represented over 200% of the company's uninsured deposits, net of collateralized and intercompany deposits, which were estimated at $2.1 billion. This level of liquidity not only provides significant capacity for future loan growth, but also provides a strong backstop for emergency funding if ever needed. Maintaining sufficient capital is paramount to the long-term success of the company. Capital is the key element for growth of the company.
Management's primary focus is on building capital through strong earnings, retention, and deploying it in support of the company's investment thesis of above-average returns with below-average risk across all lines of business. In addition, management is committed to maintaining strong regulatory capital reserves. At the end of the second quarter, the company's Tier 1 leverage ratio stood at 9.07%, which is close to two times the regulatory well-capitalized standards of 5%. The company's common equity Tier 1 risk-based capital ratio, commonly known as CET1, was 14% at the end of the second quarter, as compared to a median of 11.7% for the population of KRX member institutions. When coupled with operating discipline and accretive acquisitions, these fundamental elements have produced favorable industry performance.
More specifically, the company's 20-year average core return on average assets of 1.27% has outperformed the KRX members by an average of 20 basis points. Over this period, the company's average non-interest revenues to total revenues was 33%, as compared to an average for the members of the KRX over this period of 24%, which we believe is one of the primary factors supporting our long-standing premium valuation in the market. In more recent history, the company has weathered the storms of COVID, bank failures, inflation, and rising interest rates. Despite these conditions, second quarter results highlighted the company's strengths. Total operating revenues of $184.1 million were up 4.5% over the prior year's second quarter and set a new quarterly record for the company.
Non-interest operating revenues accounted for 40% of total operating revenues and included strong contributions from all four businesses, including record quarterly revenue contribution from the company's non-banking financial services businesses. Loan balances increased 9.3% over the prior year, including 1.4% during the second quarter, marking the 12th consecutive quarter of loan growth, while credit performance remained strong, with just 5 basis points of annualized net charge-offs. Net interest margin was also increased 6 basis points in the quarter, and operating pre-tax, pre-provision net revenue per share of $1.29 was up $0.11, or 9.3% over the linked first quarter, and $0.05, or 4% over the prior year's second quarter. As noted by the previous speakers, each of the company's business segments have contributed to the company's long-term success.
This includes both strong top-line revenue growth and solid margin performance, solidifying each business's permanence in the company's ecosystem. With this said, given the company's breadth of business lines, the opportunity set for capital deployment for us is wider than that of our bank-only peers, particularly for sellers seeking out strategic partners. In the banking business, capital is regularly set aside to support both organic and acquired growth. In our less capital-intensive non-banking businesses, earnings are used to provide holding company dividend support, and stock repurchase activity, and/or redeployed into the businesses for opportunistic M&A activity.
Since 2009, the company has generated over $1 billion of operating net income and paid out nearly $500 million in dividends to its shareholders, while continuing to support over $5 billion of earning asset growth and executing on both strategic and tactical M&A in the banking and non-banking businesses. As we look ahead, it is important to identify the catalyst for potential earnings growth and shareholder value creation. The conscious management of strong fundamentals, coupled with a highly valued stock currency, organic and M&A-related growth opportunities and critical scale in all four of our businesses are ingredients for future growth. In the banking business, over the next 12 months, we will have an opportunity to reprice or redeploy an estimated $2.8 billion in loan assets.
The bank's limited credit concentrations, organic growth capabilities, robust liquidity, low loan-to-deposit ratio, and strong core deposit base provide a solid foundation for continued lending without restrictive caps. Our strong retail presence provides opportunity on the consumer and small business fronts, while our dedicated middle market teams focus on more complex C&I lending and commercial real estate, which in combination leads to a well-diversified portfolio composition. The cumulative effect of the new loan originations in future quarters at interest rates potentially well above our book yield and cost of funds that appears to be stabilizing, portend higher levels of net interest income in 2025. Furthermore, over the next five years, the company estimates that it will receive investment securities principal payments totaling approximately $2.2 billion. The current weighted average yield on these securities is approximately 1.7%.
While the future is never certain, management anticipates these proceeds will be redeployed into higher-yielding assets or used to pay down borrowings. The slide on the screen illustrates the potential earnings power of these cash flows, assuming the proceeds are to be redeployed in assets at higher yields. Other factors aside, a hypothetical 100 basis point improvement in the yield on these assets would drive an increase in earnings per share of $0.28 by the year 2029, while a 400 basis point improvement in yield would drive an increase in earnings of well over $1 a share. The opportunity set in all of our businesses were outlined by the previous speakers in their remarks. This slide summarizes these opportunities and provides insight into management's long-term financial targets for each of these businesses.
From a broader perspective, each of these businesses has sufficient scale, depth, and talent to execute their growth strategies organically and through synergistic M&A. In the banking business, we have started down the path of transforming the earning asset mix on our balance sheet and expect to grow loans and net, excuse me, and net interest income in the mid-single-digit range while maintaining our historical strong credit profile. On the non-banking front, each of the businesses has the potential to grow its revenues at high single digit or potentially double dig- double-digit clip over time. The employee benefits services segment, broadening the relationships with our large insurance, custodial, and wealth advisory partners, provide opportunity to grow and expand revenues over time, including significant opportunity in the collective investment fund market, actuarial services arena, and health and welfare plan space.
The recent FBD and CPD acquisitions have also demonstrated BPAS's ability to expand its service offerings and unlock new verticals. In our OneGroup insurance services business, we expect to continue to be a consolidator in a very fragmented industry, continue to broaden our geographic footprint, and expand our specialty practices. In the wealth management services business, we expect to further leverage our trust services capabilities and further embed our wealth management services in the company's sister businesses. In summary, we remain very optimistic about our future opportunities for growth. Thank you for attending today's event. I'll turn it back now back to Dimitar for a few additional comments regarding the company's valuation.
Okay. Thank you, Joe. We added this section because, frankly, we often hear from investors that they love our story, but don't fully understand the valuation, and fair enough, we're very different than the typical peer that has a banking business, maybe a wealth business, rarely now an insurance business, let alone a benefits business, and certainly not to our scale, so I wanted to provide some color on how we think about the intrinsic value of our company. First, on this slide, you will see some important statistics for context.
When you own CBU, you own the company with the highest share of non-banking fees in the KRX, second highest overall fee income in the KRX, lowest cost of funds in the KRX, second longest streak of dividend increase in the KRX, all with above average return on assets and a balance sheet that carries quite a bit less risk content. And as Jeff pointed out earlier, only one of three companies in the KRX that has grown net interest income since two thousand and six. So I hope we can all agree that we should not trade at a pure multiple, otherwise, why buy anybody, anybody else?
You can see the premium valuation as well, which has on average increased over time, very much in line with us continuing to widen the gap versus peers on the revenue quality, while producing consistent returns and sustainable dividend growth now for 32 years. This slide gives you a framework for what should drive and support this valuation differential. The revenue quality and revenue stability of our non-banking businesses is just at a different level than that of a typical bank, let alone a consumer finance business. And the value that the market has applied to these is very different, and we believe rightfully so. If you look at the numbers, consumer finance companies trade at high single-digit multiples. Banks are someplace in the low teens. Wealth companies are typically mid-teens, while insurance and benefit peers are well into the twenties on price-to-earnings multiples.
We're very attuned to this, and as I say around here, not every dollar of revenue or earnings is created equal, and I think we have proven our ability to grow high quality, high valued revenue and earning streams in each one of our four businesses. Price to earnings is really the metric that we believe is the purest form of valuation over time. I believe there is a reason why every company has quarterly earnings releases, not quarterly EBITDA or book value releases. I think that this is a handy chart on value creation potential in each one of our businesses as we grow the revenues and earnings. On this slide, we provided some additional reference and information on the implied valuation of our non-banking businesses. Note that this is illustrative based on how we think about it internally.
As you know, none of our non-banking businesses have anything to do with things like price to book, which is why we always say that we cannot use that metric as a frame of reference for the economic value of CBU. After all, we believe that it basically doesn't account for over $1 billion of value. And if you wanted to somehow try to back into some sort of a book multiple, we believe that should be added back. Otherwise, you basically have the value in the P part, but not in the TBV part of that ratio. And this explains why our price to tangible book value has always seemed high, when in reality, in the very recent past, we believe we were trading at and below intrinsic tangible book value, if you will.
We have also had higher than usual AOCI noise as well due to the strength of our liquid balance sheet. Ironically, the more liquidity we have, the higher the securities book and the higher the AOCI mark in a rising rate environment, which we also believe is a real understatement for actual economic value. Again, we think that price to tangible book is a very flawed and surface-level metric for us, given the company we have and the balance sheet liquidity we have, but appreciate the need for context. I hope that this background on how we think about our valuation is helpful to all of you. With that, I will pause, and we will open it up for our next Q&A session.
Thanks. Thanks, Dimitar. We'll take some questions from here, and then we'll consolidate those from our virtual guests. So if you have a question, just put up your hand and we'll proceed.
Thank you. Thank you. Yeah, on the... In the slides, you guys had 19 basis points as the average net charge-off rate going back 20 years or so. And I think there's only been, you know, a couple of years, you know, prior to the pandemic, where net charge-offs were, you know, below 15 basis points. So I guess, you know, what gives you guys the confidence, or what's changed as far as, you know, the, through-the-cycle financial targets to be kind of consistently below fifteen basis points?
Chris, I appreciate the question. You know, I think the way we view, we don't control the economy. We don't control, you know, what the world does, but what we do control is our underwriting. And, you know, we've had a consistent underwriting platform for a long time. You know, you can see through that, through the twenty-year period, that's resulted in-
Is this mic on?
I'm sorry. Through that 20-year period, you know, it's resulted in pretty low levels of net charge-offs, and you saw, you know, in years prior, those were higher, and they've come down in, you know, the last 10 or 15 years, and that's been pretty consistently low, so you know, we believe in our underwriting standards and believe that will continue to keep our charge-off levels low. It's a very granular portfolio, continues to be a pretty granular portfolio, and so our expectations are that, you know, that those outcomes will continue.
I think, Chris, we like to keep ourselves to a high standard, and that is one of our metrics on our scorecard. For us to hit the credit quality metric is fifteen basis points, and we've been below that the last couple of years, and some of our board members asked if that's too easy of a metric, so I'm glad you asked that question.
Thank you.
Next question. Anybody?
You talk about--you talked about some of the M&A opportunities on the various business lines. Can you maybe give us a little bit of your thoughts in terms of on the bank business side?
Sure. It's a question we get a lot, Jake, as you can imagine. We have been an active acquirer on the bank side as well. We will continue to be an active acquirer on the bank side. I think today we're just a little bit of a different company than we were historically. So what matters to us today is a little bit different than what it did historically. Historically, we were not a very good organic grower because of the markets we were in and because of some of our own capabilities and structures. That's changed. So today, the franchises that appeal to us have less to do with asset growth and more to do with what I call the permanence in the banking business, which is their deposit base and market position.
The things that appeal to us today are franchises that have strong market position where they are in the counties that they're in, low cost of funds, hard to be lower than us, but certainly lower than the median for the industry, and some excess liquidity that we can deploy and really make above and beyond what they're making today. There's not a lot of those, so the list of those is a lot shorter than the list of franchises out there who are owned up, concentrated out, and have no market share in the present in the markets they're in. There are just less things that fit our box today. I would call it that way. With that said, there's still quite a few of those. We've historically averaged one acquisition every eighteen months or so.
I think we will continue to have a similar opportunity set, but it's just gonna be a little bit different in the complexity of the franchises that we partner with.
Thanks, Dimitar. Just a quick reminder for our virtual guests, to submit your question, you can go to the question input option on the top right corner of your screen. Next question.
My question's for Michael. Earlier, you talked about some of the penetration rates on the wealth management side. I think it was 2.8%.
Yeah.
Currently with the existing Community Bank retail customer base, and you mentioned that the average bank is at 5%, and then the higher performing bank is at 7%. Can you talk about if you've set any penetration rates internally for the bank, and how long will it take you to get there? And if you can talk about tactically, on a day-to-day basis, blocking and tackling, how that gets achieved.
Yeah. Our first goal is obviously to get to the median of 5%. So we're about 3% right now, and you know, it's a fairly new measure for us within the organization, and so we now have the entire organization aligned around what are called key performance indicators for both our retail business as well as our financial consultants that are aligned within those businesses. We've got sales coaching that we're doing right now, and every month we're measuring and monitoring literally every financial consultant, every branch at the regional, and then across our entire footprint. So it is absolutely a priority for us. We are getting a little sense right now because it's a fairly new mark for us. We're trying to get a better sense of what a reasonable goal looks like, right?
So a 1% increase, I mentioned, was 5,000 new clients. If you take, you know, roughly the, you know, the 200 branches that we've got, it's about 25 referrals, closed referrals from each one of our branches, okay? So we're in the middle right now of trying to figure out, is a 0.5% or a 1% increase each year reasonable? So we're working right now with our regional managers on the retail side, but it'll be somewhere between a 0.5% and 1% per year. So I would expect us to get there, the median, in the next 2 years- 3 years.
Thanks, Michael. We have a question from our virtual guests. This is for Mr. Karaivanov. Throughout today's presentation, artificial intelligence was referenced multiple times as a tool for driving efficiency. How soon might we see AI as a driver of change for the industry? And as we look out to five to ten years, to what extent will it impact efficiency ratios for yourselves and the industry, and what areas will be most impacted?
Right. So I don't think I'm qualified enough to opine on the industry, but I'll tell you what we're doing, and I would coach it as kind of, automation 1.0 and AI 2.0 , in the field of automation in the past couple of years, we've implemented a robotic process automation across our banking business, predominantly. Last year, that saved us 65,000 hours of labor, so that's basically thirty FTEs last year. Doesn't mean that we dispensed with 30 FTEs, but we basically could retreat 30 FTEs without replacing them in those areas. This year, we're probably gonna take out another similar amount of hours. That's kind of the 1.0 piece, and that's in the banking side. We have recently started looking at that on the insurance side as well.
The AI 2.0 , as I would call it, we have a couple of initiatives. The first one is as it relates to internal service capabilities between our own people and the resources that takes today. So, for example, questions coming from the teller line in a branch into a branch administration, which have to do with policy manuals. That stuff is going to basically go into an internal AI GenAI chat, as opposed to having to pick up the phone or send an email to a human person who then responds to it. That's gonna get launched here imminently. Paul mentioned that we have similar opportunities for that on his side of the house, in the 401(k) business. So that's coming there as well.
The call center is going to be another area where we're gonna start launching the external AI piece very early next year as well, and that's going to be both in the banking business and in the benefits business. There's things we're looking pretty actively, as Pierre mentioned, on the insurance side as well, as it relates to claims management and claims adjudication, so there is a lot of things in process, and I'm very optimistic about our ability to execute on that topic. It is a high priority for our organization. As we understand, we're quite a bit ahead from most of our peers. We actually have policies and procedures in place, and next month we have a strategic planning session, which is going to be all focused on the AI topic.
Thank you. We have our next question from Manuel.
I love looking at slide 96, where the payout ratio has been pretty strong over the last five years. You're going to have a tailwind in capital if rates come down. Can you talk about how this is going to look a little different over the next five years, perhaps of more capital return or more capital usage, more leverage of the balance sheet? Can you talk through that a little bit, please?
Yeah, Manuel, and I, I think you're referring to the dividend payout ratio, just to be clear here.
Ah, yes.
Yeah. So we've, we've historically tried to balance dividend growth and redeployment of capital, in a manner that we think is best for our shareholders. And, and, you know, that, that's been historically about a 50% payout ratio for us. And because of the capital generation on the non-banking side of the house, we've been able to maintain that dividend increase year over year over year, because we have that ability to, you know, to generate capital. Another way to think about, you know, capital redeployment too, is, you know, if, if we, you know, want to grow the bank a, you know, $1 billion a year in assets, I think that's where your question's going, you know, we need $70 million-$80 million of capital to retain to support that balance sheet growth from a capital perspective.
So, you know, on a run rate that's over $200 million and a 50% payout ratio, you know, that provides an extra $50 million or so of capital to redeploy into something else other than just supporting our asset growth. So, you know, our expectations are we're going to continue to probably maintain a payout ratio kind of in that corridor of about 50%, a little higher, a little lower, depending on the particular year. And, you know, the other thing I should mention is that we also like the pressure of having increased our dividend for 32 consecutive years. It keeps the management team focused on growing earnings year over year to support that level of payout.
And so, you know, my expectations with that, we continue to increase our dividend, you know, into the foreseeable future and effectively, you know, maintain a payout ratio that probably is close to 50%.
Can you just reiterate how you've evaluated securities, the securities book, and any restructuring possibilities? You've talked about it in the past, but just wanted to hear the latest thoughts on that.
Yeah. So just as a reminder to everyone, back in late January, February of 2023, we were one of the first movers on a restructuring trade. Fortunately, that was before Silicon Valley Bank, and the street liked our trade, you know, because we had basically a defined outcome for where the proceeds were going, and the expectation was that we were going to effectively recapture, you know, that loss within about two years. As it turned out, it actually was a little bit shorter because Fed funds had gone up about another 100 basis points. We were able to recapture it a little bit shorter.
With that said, you know, we're continually monitoring the securities portfolio for additional opportunities, if you will, if for nothing else, other than to accelerate, you know, I'll say, the redeployment of our asset base. You know, we don't have anything even impending of significance, but, you know, if rates continue to come down and that, you know, that recapture period shortens, there, you know, there potentially is that, that opportunity. I think I referenced - I did reference in our slides that we have $2.2 billion of securities cash flows coming up here, and there's a, there's, you know, a tranche in 2026 and 2027 and 2028.
And should we get a downstroke in rates that makes, you know, that more attractive to pull forward some of those cash flows and either, you know, pay down current borrowings or redeploy it into the loan portfolio, we'd consider it. You know, so it is something that's on our radar, and we're monitoring it on a regular basis. But we also know, you know, there's if we're patient, we'll get to those cash flows of $2.2 billion in just a couple of years out. And, you know, the earnings potential on those cash flows is very significant.
Next question. Stu?
Michael, you mentioned security investments in wealth management, including securities-based lending. Just kind of curious how that investment looks and how you guys are thinking about growing that line of business or maybe any other areas as well.
So that would be a new program for us. We've seen our clients over time, when they've got liquidity needs, sometimes they'll move it to another program that offers a lending program, or they'll liquidate their assets, and our assets under management go down. So we are looking at leveraging a security-based program technology provider. We're looking at some of the really good firms that you might imagine, that you've probably heard of, that do this in the marketplace. We think it's a wonderful additional source of revenue for us within the wealth business. We also think there are ways that we could leverage that program and work together with our commercial bankers.
For example, I was up in New Hampshire two weeks ago, and we were talking to our aircraft lending underwriter up there and talking about the 85% loan-to-value on an aircraft with 15%, you know, allocated for, you know, a cash investment. Well, in cases like that, we could take a high-net-worth individual, they could put securities with us, and then we can offer that remaining 15%, so truly be a kind of a full-service provider. We think it's a need that our clients want and are asking for, and we're gonna make the investment.
All right. Any additional questions from the audience? Yes.
Hey. M&A has been, you know, a part of the growth strategy for the non-interest businesses. Are there any deals of size out there that could really fast-track the proportion of, you know, those businesses to the total revenue? And what would be the considerations or your appetite for doing that?
Yeah. Great question, Adam. So we love to deploy capital across all of our businesses. We have been active in all of them. On the non-banking side, as you mentioned, most of the larger swings we have taken have been on the benefits side of the house. You're probably unlikely to see us be very meaningful M&A participant on the wealth side, simply because those businesses have a different complexity to them and a different risk-return in our mind. On the insurance side of the business, the smaller roll-ins, as Pierre said, we have a good story. We have a real right to win, especially in some of the market situations or in some of the specialty situations, and we'll continue to do those.
We probably wouldn't pay the prices that some of the private equity players are paying for larger assets such as ours. We kind of lose the risk-reward in that, in that equation as well. On the benefit side, going back to that, virtually in every year of the past three or four years, we've had an opportunity to do something of what I would call reasonable size, and a reasonable size for us is probably less than $200 million in capital deployment. We have been a bridesmaid in a number of those cases. At some point, we might get married, so we'll continue to keep trying, but in the meantime, we'll also continue to focus on the tremendous organic opportunity we have and the roll and tuck-in opportunities as well.
All right. Thank you. We have one more question from-
Can I just? I'd just add one more thing on the business.com. No, just kidding. We do have a lot of people coming to us to say, "Hey, I've run a great business. I'm looking forward to taking chips to the window, joining BPAS, joining your firm." Maybe it's $500,000, maybe it's $2 million of revenue. We have a lot of those happening that are lower on the radar, and maybe they're more an asset purchase or just paying for a client list. So, we're getting a lot of those, whether they kind of light up the scoreboard with a national press release or not, so there's a lot of interest in there.
Great. We have a question for Mr. Levy. How is Community Connect integrated to the different bank functions to circulate clients?
So we have literally a group that is represented by a leader from every one of the four main businesses, and each of us up here are personally engaged in regular interaction with the group. There's goals set across the lines of business. There's regular communication at the senior level, as well as throughout the organization.
Right. Thank you. Any follow-up questions on the floor? Great. Thanks, everyone. Now I'll turn it back to Dimitar.
Great. Thank you, Zach. So in closing, I would like to first express my sincere gratitude to all of you for taking the time to learn more about the story. We believe it's very differentiated and with very strong reasons to own. The standout business model, the growth catalysts across the businesses, the sustainable and high-quality earning stream, and the foundational balance sheet strength are very hard to replicate. I would also note again our ability to deploy capital across multiple attractive businesses, and as you saw, we've been active across the board in our capital investments. We're also fully aligned with you. We not only talk about our investment thesis to investors, but we live it. Our incentive compensation is designed exactly around those above-average return and below-average risk metrics we just talked about.
Lastly, I would like to sincerely thank our whole team and the 3,000 employees that work for CBU. I couldn't be more proud of our company, our impact on our clients and communities, and excited to go to work every day with each one of them. Thank you again. Really appreciate the ownership and partnership we have with all of you.
Thanks, Dimitar. This marks the end of our Investor Day. For those who have any questions, please refer to the most recent press release for contacts for how you can reach us. Thank you.