Welcome to Nashville. We appreciate you coming and being a part of it. We hope some of you that have been here a couple of days and will be here for a couple more, will get a better insight into why they call it It City. I guess I'm required to let you know you can't rely on anything we're about to tell you because things don't always turn out like we hope, and we have some non-GAAP measures that you'll find reconcilements in the appendix of Harold's presentation, among other places. We had lots of questions here. "Terry, what are you trying to do? What's the purpose of Investor Day? What do you want to get done?" These are really the objectives here. Number 1 is to showcase the quality and depth of management. We're excited for you to see.
We feel like everybody knows Harold and me, perhaps overexposed, we want to make sure you have an opportunity to understand the depth of our management team. Today, from an organizational standpoint, you'll have a chance to hear from Rob McCabe. Rob's not here right this minute, but he had another engagement this morning. He will be here, and he'll talk about what's going on in Tennessee. For those of you who don't understand our relationship, welcome to everybody else's world. Nobody gets it. He and I are best friends. We're longtime running mates. We're partners. We founded the company together. In this company, he is the Chairman of the Board of Directors, and in this company, he works for me and is responsible for the Tennessee operation and the wealth management business. In our careers, I've worked for him, he's worked for me.
We could do it either way. There's a tremendous depth of personal relationship that makes the management of this thing easy. I've tried to make sure people understand, that ask about succession in case of emergency, my wife's instructions are to bet on Rob, that'd be my instructions to you, too. I'll just say quickly, for those of you who don't know Rob, he is a journeyman banker. He and I worked together in a small bank in Knoxville, ended up with First American, which was a $20 billion company. When we left, Rob was Vice Chairman of the company, having, at some point in his career, run the retail line of business, the corporate line of business, the trust and investment lines of business, and the non-banking businesses. He's a well-skilled banker.
I'll just make this one comment because I do hope we do some things that maybe help you with your model, that's not the main thing we're trying to talk about here. We're trying to help you get how this thing works and why it works and all those kinds of things. I'll just say, so you can understand the connectedness to this market, Rob is extraordinarily well connected here. His brother's the governor of the state of Tennessee. His fraternity brother is Senator Corker. Senator Lamar Alexander is his father-in-law's best friend. There's a great connectedness that's powerful and helpful in terms of how we do business. You'll have a chance to hear again from Rick Callicutt. Most of you know Rick. Rick and I have had a fabulous relationship.
I think what sort of the common thread for us is that we're generally energetic communicators that love building things. Rick has done a fabulous job to sort of adopt our models and culture and run full force in the Carolinas and Virginia. He knows every banker over there. He's just finishing up as the Chairman of the North Carolina Bankers Association. Again, you've got this power base and connectedness that's important to us. You won't hear from Hugh Queener, although he's here today. Where is Hugh? Hugh's in the back. Hugh's the Chief Administrative Officer. He is a founder in this company with Rob and I. The three of us worked for a small bank together in Knoxville. He worked for me as a systems analyst back in the late '70s.
We've been traveling together for whatever it is, 35 years or so, except Hugh had an eight-year break in service where he left to go work for a software vendor. He worked for two different software vendors in Florida, one of whom was Kirchman Corporation. Some of you may know them. They were a large builder and provider of bank software. Hugh's literally installed bank software all over the Western Hemisphere, that's not an exaggeration. He's well-skilled in that. He's also the most creative person, I think, among our management team. He really formed the relationship with BHG. He negotiated that transaction. He formed a partnership with another small investment we made for a company called CorServ.
That is a front-end processor for credit cards. It put us in a position to build a $120 million credit card portfolio and a scale business that otherwise just wouldn't be possible. I won't go on with all those things, Hugh's our principal creative thinker. I won't introduce Harold. Everybody knows Harold. Many of you know Harvey White. Where's Harvey? Harvey's the Chief Credit Officer of the firm. We've worked together a long time. His background prior to coming here was that he was the Chief Credit Officer for a multi-state region at Regions Bank. He and I are longtime friends. I tell people Harvey was with First American Corporation when they acquired the bank that Rob and Hugh and I were with in Knoxville.
The first guy they sent over was Harvey to come over there and sit on me and Rob and make sure we didn't give the bank away. He's a great credit guy, in his career, he's been back and forth. I think that'll be an important theme when you hear from some of our credit guys. They've been back and forth between the line and credit, which is a powerful thing. Harvey's been a city executive in the Regions organization, as well as serving as the Chief Credit Officer. Rob builds the wealth management businesses. Kim Janni you won't hear from today, Kim will be in and out, I think, who's our enterprise-wide risk manager. Again, you'll get to hear from that group. Underneath that, you'll be exposed to regional presidents. We've got several of them in the room.
Mark Carlton, who's our Market President in Raleigh. Rob Ellenburg. Where's Rob? Rob's back here, the Market President in Charlotte. Kirk Bailey. Kirk Bailey's up here. He's a Market President in Memphis. Craig Holley, who's our Market President in Chattanooga. Again, I think one of the themes that you'll see, all these guys either started their own bank or started a de novo operation for another bank. Again, you get this theme of people that are real, live bankers that know how to build and move organizations forward. Beyond just the exposure to the management team, we want to try to get behind a little bit why Pinnacle has been such a rapid and reliable grower. We've done that over 18 years. I guess I want to try to help people get behind why does it work that way.
There are four themes that I think you might pick up on as we go through the day. One is we've got, I think, a proven competence in our ability to take the best bankers in the market away from large regional competitors. I'm always apologetic that I don't have some grand strategy. Really, we don't. We just try to get in urban markets dominated by large regional banks, get up underneath them, take their best people and their best clients. That's basically what we do in a nutshell. We're able to attract market best bankers. A lot of people say, "How does that work? Tell me about comp." We can talk about comp. There are some important aspects of it.
The truth is, if you think about the folks that I just mentioned in the Southeastern markets, it's Wells Fargo, it's SunTrust, it's Bank of America, those kinds of players, Regions, those kinds of companies. If in the markets that we serve, if you're working at those companies, you're in a very disengaging work environment. You're micromanaged. You're generally reporting to somebody in some other city. You get your credits approved somewhere else, and it's hard. Service levels keep you from taking care of your clients. It just gets hard. That's really the vulnerability that we seize on. We don't hire people that have less than 10 years experience. The average experience of the people we hire is 27 years. I know a lot of people are thinking, "Yeah, yeah, whatever." Look, that's an important theme.
It's really important because, from a management theory standpoint, you have to build your control infrastructure down to the lowest common denominator. If you're in a company hiring a bunch of trainees and so forth, you got to build a control infrastructure down there, which drives great bankers nuts. If your average experience level is 27 years, again, you build a different kind of control infrastructure. The second thing that happens with that hiring model is you get rapid growth. People move their books of business quickly. It's much different than handing them a Dun & Brad list and have them get out calling, meeting people to loan money to, if you will. You get rapid growth. You also get great asset quality.
Again, these folks, on average 27 years, if they've been handling a book of business for two and a half decades, they know the clients well, and oh, by the way, they leave the bad credits behind. It is a way to produce rapid asset growth and get it done on a sound basis. For companies in our zone, we're generally spread businesses. Maybe it's 75% of revenues or 80% of revenues, but the trick for companies like ours to grow earnings is to grow the balance sheet, and we do that rapidly and soundly through that hiring mechanism, which has put us in a position since 2013 to compound our fully diluted EPS at 23%, compound the tangible book value at 15%. Hey, Abbott.
Hey, Terry. Something going on outside. I wanted you to know.
Yeah. Thanks for letting us know. Harold will spend some time on the goal-setting mechanisms here. I think they're an important aspect of what propels this company to do what it does, why it's consistently a top quartile performer. We'll talk about the goal-setting mechanism, which is intended to drive us into top quartile performance. Talk about the incentive mechanisms where everybody's incented to produce that outcome, and it is unique and it is different and it is distinctive in terms of how we match up against our competitors. The last thing, we do have an extraordinarily engaged workforce. Anybody that's heard me present and talk has heard me talk about the Great Place to Work awards that we get. Again, I know some people are thinking, "Well, blah, blah." Let me tell you, that is the single most important reason why our performance is good.
Gallup led the research data two decades ago that really built the correlations between an engaged workforce and producing outsized outcomes on productivity, on sales results, and on asset quality. Those things link to share price performance. Again, if you believe what FTSE Russell says about it, go back to 1998, take all the companies listed on the top 100 Best Companies to Work For, build a balanced portfolio, sell the companies that fall off the list, buy the companies that come on the list. Through 2015, you produced three times the market return, 300%. Again, when we get in difficult situations, which we've been in like 2009, 2010, and 2011, my belief is our company. You can't hide from trouble, but we can get through it in a hurry. We'll do better in those situations because of our engaged workforce.
I want to demonstrate the power of the Tennessee model. I think over the last 18 months, I would say at least 50% of my conversation with investors has to do with BNC and the integration of BNC, how you doing in hiring, and so forth, which is an important topic. I think what happens is many people lose sight of the power of the model in Tennessee, the trajectory of that model, how fast it's running today. We're going to talk about hiring success in the Carolinas and Virginia, but I would say we're having even more success still in the Tennessee footprint. Rob will tell you that story. You'll hear from Rick. We do want to talk about the BNC integration. Harold will have some slides.
There are a number of things where we'll try to help you get sort of the distinction in our integration and others. We think it's different and better. Just a quick reminder for you, what we said in the deal rationale from the beginning was, in the case of BNC, they were largely a CRE bank. That's an oversimplification, but I think you understand the model I'm talking about there. It was a double-digit asset grower. We said we don't want to mess that up. We want to make sure we don't diminish that we keep that running that pace and doing that. What we want to do is bolt on a C&I business, which is what we do for a living, and we believe the marketplace is absolutely right in terms of the competitive landscape.
If you go back to the comment I made earlier about we want to be in large urban markets dominated by these large regional players, get up underneath them, take their players and their clients, that's a fabulous market for us to be in. This is the slide we used in the earnings call. As a quick reminder, we've said we want to hire 65 C&I bankers over a five-year period of time. If Rick tries to cut a corner on you, he'd probably say 64 because that's what he committed to. To make the math easy, I went to 65 there. It's 13 a year. You can see through the first nine months, we're at that level. He'll give you an update on where we are, and there's tremendous momentum, I think, in the hiring.
Again, I just try to make this point for you, not only are we hiring these C&I/private bankers, but we're hiring a good number of other revenue producers that support those C&I businesses, particularly the wealth management businesses and so forth. Rick will get you up to speed on that. A lot of people ask, "Well, how's it going?" My sense is it's going extraordinarily well. In the first quarter, the Carolinas and Virginia footprint grew their CRE business at about 15.5% and grew the C&I business at about 26%, and so that's sort of the play we called and what we've set out to do. I can't make that happen quarter in, quarter out, but I can make it happen over a long haul. Anyway, Lord willing, that's what we'll do. We'll talk about wealth management businesses.
Rob will cover that in some of his Tennessee comments. It's an important topic, I think, because as you think about fee income lift here, leading up to the BNCN transaction, our fee-to-asset ratio ran in the 1.08% range. Today it's at 81 basis points. The path, a critical part of the path, of course, BHG is a meaningful impact on that. The next biggest piece of that is the wealth management businesses. As we drive that fee income, it is critical that we build the C&I business, all the other revenue streams and fee businesses that go with that. I think Rob can paint you a picture of how we're doing that. I want to hit a little bit at the law of large numbers.
Every time we make an acquisition, people will hit the panic button and say, "Wait a second, you can't continue to grow at the pace you've grown at before." I guess I just want to try to make this illustration or this distinction between what we do here and what we've done at other companies. When I was at First American, I was the retail line of business head for a long period of time. The way I grew my balance sheet and the way I grew my P&L statement was really managing aggregates. I built product introductions. I built sales campaigns, direct mail campaigns, ad campaigns, sales contests, all that sort of stuff, and that's how we moved our balance sheet and moved our P&L. I think that's how virtually all my competitors view their path to growing the balance sheet.
For whatever it's worth, we do the opposite of that here. We do virtually none of that. We, I guess, went probably seven or eight years before we ever ran an ad of any sort, never in a newspaper, a high school annual, a television, a radio, or any of that sort of stuff. You say, "Well, how does it work?" What we do, think about it, is hire great bankers and have them move their relationship. You can underline that word relationship. We're managing at a micro level. When we hire somebody, he knows who his clients are. He's got an opinion about how fast he can move them. He's got a plan to move them, and when he moves them, he harvests the whole client relationship, the loan, the deposits, and the fees.
That's how we generate our balance sheet growth, which is the principal driver of what our EPS growth is. We're not managing aggregates here. People have a list, and they know who it is they're trying to move and at what pace they think they can move them, and that's where that growth comes from. I think the idea of a geographic focus is also critical to us. I had a little conversation here earlier about one of the large regionals and just talking about the frustration due to the line of business organization. It creates fragmentation in the marketplace. People don't know who they report to, or if they do know who they report to, they're in some other market and the guy sitting next to them reports to somebody else. Creates a really fragmented approach.
In our company, what we do is have somebody who's responsible for Nashville, Tennessee, Memphis, Tennessee, Chattanooga, Raleigh, whatever, and they run a bank. It's a community bank approach that's distinctive versus the large regional bank competitors with whom we compete. I believe that closeness to the client that we create there is why Greenwich Associates would say, again, Greenwich Associates is doing research for 620 banks on this topic. They're trying to discover what banks in the U.S. have a brand, have a distinguishable brand. 11. They say 11 out of 620 banks have any distinguishable brand. It's all the same. We're one of the 11, and our brand is for two things, trustworthiness and ease of doing business. Again, I think this idea of hiring people, concentrating on relationship management, managing on a geographic basis, is a really important part of how that brand gets built.
Give you a chance to think about how it works. The two most recent market extensions were by way of acquisition, both acquisitions in 2015. Our idea is we take a great company, we try to overlay our culture and hiring mechanisms. We start recruiting. We fill the company up with vibrant bankers, which will be distinctive versus our regional competitors, and that has the impact of accelerating growth. That's the idea. Here you're looking at Chattanooga and Memphis in the period following the 2015 acquisitions. In the case of Chattanooga, they had 23 revenue producers when we started. Over a two-year period, moved it out to 34 and then 39. In the case of Memphis, had 40 revenue producers, 2016, 2017, we moved it out to 47 and 68.
Again, you get this idea of getting up underneath these banks, taking their people, and you get great loan and deposit growth that goes with that. That's the way we move the business. When you start looking at these compound growth rates over a two-year period, in Chattanooga, you increase the revenue producers 30% per annum, grow the loans and deposits basically 20% or north. In the case of Memphis, same idea on the revenue producers and grow the loans and deposits at really extraordinary growth rates. Again, when you think about the law of large numbers, that's why that's not what keeps me up at night. Again, it's a way to grow at a rapid pace. We'll talk about deposit funding.
My belief is that the principal challenge for the industry, particularly underneath the money center banks, that'll be the principal challenge for all of us for some period of time. I want to talk about that and how it works in our company. Basically, our models require that we run 75%-85% core funding. When I say 75%-85%, what I'm saying is, basically we build our sales goals around 85% self-funding. A commercial industrial unit ought to produce 85% of its own funding. That's the way we build the sales goals. From an asset liability standpoint, we can operate at 75% core funding, in other words, 25% non-core funding. Again, I've tried to make this point. We gather that money through this relationship management strategy. We're not hiring lenders and trying to hire some depositors or deposit gatherers.
We are trying to hire people that control clients and have them move loans and deposits and fees. That's a really critical concept here. I think what we call our client advisory group in Nashville is instructive about how that works. It is a C&I group. It's got 29 bankers in there, some combination of C&I and private banking bankers in there, 29. 20 of those people have been with us more than five years, and so that's sort of a proxy for a mature portfolio. Five years, generally in that time or shorter, they should have consolidated their books. In that group, among those people that have a mature book, the average is $99 million in loans and $84 million in deposits. Again, you get this idea that sort of 85% self-funding in a mature book is how that works.
As you know, it doesn't always work just like that. Sometimes credit will be a lead. That's more a catalyst for somebody to move a relationship than the deposit side if you're just looking at the law of averages. We have to do other things to create emphasis and intentionality about gathering deposits. I think an advantage for our company is starting as a de novo bank with, we had one branch here in Nashville, north of Broadway, when we started. We've had to be intentional about how are we going to gather this funding, how do we move these relationships, and so forth. I think our muscles in that regard are good. Basically, the way we do it is we hire RMs.
We hire RMs of all varieties, but we do put an intentional effort to find those RMs that are net deposit providers. Private bankers typically fall in that category. We take our existing RMs and we focus them on pockets or pools of money, like bankruptcy trustees, title companies, HSA providers, all those kinds of large pools of deposits. If we can develop some value add or figure out how to get connected in those associations, we can tap into large pools of money. In our case, we have limited branch distribution everywhere. We wouldn't be branch advantaged anywhere, we have the opportunity to continue to add branches. I think in the last two years we added five branches, that's incremental deposit distribution. We augment deposit branch distribution with a courier deposit pickup system. We've got several markets that use that well.
Craig Holley in Chattanooga is the poster child for that, he can talk about how that works in his market. We obviously leverage a full suite of electronic banking tools. We have everything that our competitors do in terms of remote deposit capture for commercial clients and mobile banking deposits for consumers and so forth. We are beginning to utilize some mass market techniques. That's not really been a tool that we've used. In the Carolinas, where we have better branch distribution and lower share, there's opportunity to do advertising. We're doing a money market campaign in that market with some success. That's a rate-based deal, a 1.69 money market account. That's a relatively high rate, but it's not 2.03, and we're having good success. I think Rick will give you an update on how that's working.
The last thing I would say is we do focus on non-bank investments as opportunities. The thing when we talk about non-bank investments, BHG is the classic example. We got associated with them looking for some higher-yielding assets. We turned it into a fee opportunity based on our percentage ownership. I mentioned this company CorServ, have a small investment there. The goal was they built a front-end processor for credit cards that let us build a $120 million, 12% yield in credit card portfolio in a business that we otherwise wouldn't have been able to get to. Excuse me. We have some opportunities.
You're going to hear from Andy Moats, who is a superstar in our company, came from Avenue and is building out a music business and we're making an investment in a company called Artist Growth that we think will be a value-added provider that will let us corner music tours and the like to gather deposits through that mechanism. Those are all things that we do to focus on deposits. I'm going to try one more time on M&A, see if I can create clarity on that. You won't hear about it much as we go through the day, but at the conclusion, I'm going to walk down through A, then B, then C, and give you a chance to ask any questions that you want to ask about that. Over the course of the day, you'll also have a chance to hear from BHG.
Our goal there is simply to demystify. A lot of people have questions. Let's just bring Al in and let him talk about his business, what he's doing, how it works, and all those kinds of things. That is what we're going to do. That's it for my introduction. I'll be glad to take any questions. Jenny.
If I was a person that you want to hire from another bank and I've decided I'm willing to make a change to answer and lifestyle-wise, what would somebody say as to why they shouldn't? Why should someone not come to Pinnacle?
I think the thing that people most frequently use is, "Hey, man, you're going to get over there. You're just going to be a small fish over there. They got too many superstars. You're not going to stand out. You're not going to do any good. You could do better to stay here because you're a superstar in our program." That would be the number one competitive challenge, I think. Anybody else? Yeah.
You getting closer to sort of the 20-year anniversary of Pinnacle, you stock your relationship management team with 25-year veterans in round numbers. What's the risk of running out of 25-year veterans in a market like Nashville or Memphis or Chattanooga?
Yeah. Let me do this if I can, because I think Rob and Rick are both going to talk about that, Rob in particular. Let me just hold that one so we can stay close. If you don't feel like you got it answered, I've got an answer for you. Anybody else? All right. Harold, you the man.
All right. Can you all hear me? All right. I'm going to talk about several topics. It's kind of like marching all over the field. I'd like to think it's cohesive, but it's not. At the end of the day, I'm going to get to the one that I would really like to talk about, and that's how we set targets and why we come that way and all that kind of stuff. I'm going to try to get through deposits and approvals because that seems to be the questions that I get from friends, thank you, on the sales side. Okay. Change. Over the last three years, there's been a lot of change around here. CapitalMark, Magna, Bank of North Carolina, Avenue, all that has brought significant assets, and that's what you guys see and understand and try to grapple with in your model building.
Don't lose sight that a 177% increase in people, and that's what we try to manage around here is our people. Along with that, you can see these metrics on revenue per person, expense per person, assets per person. We're pretty proud of that. Those would be, we think, top decile, top quartile kind of numbers. As we've added all of this infrastructure and added all these assets, we've added these people, but these people have come to us and produced revenues for us. One of my favorite old CFOs said, "Cost cutters get paid 10 times earnings. Revenue growers get paid 20 times earnings." We want to be a revenue grower. You've seen these charts before, or derivations of these charts on earnings growth, revenue growth, tangible book value growth. We're pretty proud of these charts. We're focused on these measurements.
These are the ones that we spend all day long worrying about. That's all historical information, right? What we're worried about now is what the future holds. Tangible book value creation, north of $24 a share. Targets for this year should see a meaningful increase in that tangible book value per share for the rest of the year and then going into next year. We're excited about what could happen to that particular measurement here over the next, call it 3 to 7 quarters. Along those lines, you've seen these charts before. The correlation between return on average tangible equity and price to tangible book. I'm not teaching you any new information here. At the same time, we've got to ride the green line. There's still multiple expansion available to us if we can increase that ROTCE.
Moving on into PE, to be honest with you, we're confused about these charts. We get a lot of questions about our PE. We don't understand it. It's almost like we like these names, we don't like these names. It's kind of the way it's kind of shaping up. I guess the burden that Terry has, the rest of this management team has, is how do you create enough tailwind in these shares so that you move from the middle part of these charts to the right side of the charts. Because apparently, the market is not differentiating the earnings part of this equation. What we've got to do is figure out a way, somehow, some way, to move it to the right. If y'all got questions, please interrupt me and I'll try to respond to them best I can.
This is the most perplexing charts I've got. All right. A lot of change at Pinnacle, a lot of change in North Carolina. The four big bank mergers in North Carolina, I think if you look at the numbers, we're pretty proud about what we've been able to accomplish, what Rick and his team have been able to do. I mentioned earlier, we've got Ron and his team. We got Craig Holley and Kirk Bailey here. All those guys led their franchises for many years, and they're still with us, and they're still productive. That's really important to kind of what our brand is during these acquisitions. All right. Get a lot of questions about deposits. How are you going to be able to compete on deposits in this growing digital framework? What are you going to do? All right.
Our belief is with the large caps, they're spending a ton of money on digital, they're getting a ton of consumer accounts on digital. All right? They're getting small business accounts. They're building something, as a result, those accounts are coming. We're going to practice the relationship bank game, we're going to keep on practicing that relationship bank game. We think we win at it. The consumer banking game for us is a slog. First of all, we don't think we can beat Wells Fargo, Bank of America, or JP Morgan at it. We're not going to try to compete with them on it. In the consumer business, there's branches, there's high-priced executives that listen to marketing pitches all day long. There's trying to keep up with how you incent people.
All of those kind of things go into building that. If you're going to do consumer deposits, you got to do consumer lending. That is also fraught with a lot of process and peril. We're not ceding the consumer business to the big banks, we're also not pretending we're going to be able to compete with them there either. What we're going to do is go after middle-market commercial, small business, and affluent. That's kind of what we've been doing for the last 15, 18 years. That's what we're going to keep on doing. All right. The blue bars represent our annualized loan growth for every quarter. The gray bars are the median of the peer group. We've beat the median. I think there are 11 quarters up there, all 11 quarters. The blue line represents our cost of funds.
The gray line represents the median cost of funds. They're related. Loan growth and deposit pricing are absolutely related. If we were only growing loans at 5%, I'll bet you my bottom dollar that that blue line wouldn't be nearly as steep. My deposit beta wouldn't be 38%. As we look into the second quarter, that blue bar is likely to be just as tall as the first quarter, if not taller. We're having a great first six months on loan growth. We anticipate this year being a bigger year for loan growth. As a result of that, we think that blue line is also going to increase. All right, now, I know none of you are skeptics. Nobody's a skeptic.
Some of you might think with all that loan growth that you're layering in heavy big ticket kind of numbers that create this tailwind on loan growth, that there's a little small chart there. I bet if I asked you before this chart showed up, what was our average construction ticket, you likely would have said something north of $900,000. If our average commercial real estate ticket is $1.3 million. My bet is most of you would have said something a lot higher than that. We've got a very granular portfolio and thank Harvey, the credit guys, the line guys for producing this portfolio that touches a lot of clients. Credit. You can't have loan growth without good credit. We think our credit stacks up with anybody. This goes back pre-recession. I'll just go ahead and throw another Harvey plug at you.
He came to us right about the top of the bars on that chart, ever since then, he's been riding them down. We're glad to have Harvey and Tim and Mike here with us. They're going to share some thoughts with you here later on. On deposit growth. In the first quarter, our deposit growth was not good. It was less than anticipated. This quarter is going to be better. I think what I want to make sure you understand is over the last 11 quarters, we've beat our peer median seven of those 11 quarters. The way things run around here, just like that, Rob's in and out.
The way things run around here is those quarters where you see less deposit growth, you can bet Rob and Rick are beating on people saying, "Let's go get some deposits." Sure enough, they show up. We talk about deposits all the time. We lead with that with the sales force. Rarely do we have to beat on anybody to bring loan growth. That just kind of happens. Right now, this firm's turned its attention to deposit growth, I think that blue bar will elevate nicely. Loan-to-deposit ratio, that's the blue line and the gray line. We are now above that 96% threshold. To be honest with you, we can manage that blue line. We can manage it with wholesale funds, we can keep that blue line below 100 with using alternative funding sources. I wouldn't get too wrapped up about loan-to-deposit ratios.
Again, you can see average ticket size is there in the bottom of the chart. That's there for your information. This when we talk about our bank internally, we talk about the client bank and the wholesale bank. All right? The client bank, all the customers, all that. The blue line represents the cost of funds for the client bank. That's what Rick and Rob and all those guys are running. The beta on our client bank is about 19%. The wholesale bank is where the funding charges are coming. My wholesale bankers are here, Brian, Jeremy, and David. That's the wholesale bank. That's their responsibility is that gold line. We count on them to manage what that line does, what the liquidity risk of the firm is, what the interest rate sensitivity risk, all that stuff, but they're on it.
That gold line is going up, over time, those core deposits will come in, that gold line may go up, it'll be less impactful. Does that make sense? All right. Here's a serious chart. This is our non-core funding dependency ratio, wholesale funding, whatever. Over time. The blue bars are us, the gray bars are median. We operated this model before Bank of North Carolina with a non-core funding dependency ratio of 10%-15%. Bank of North Carolina acquisition occurred. We knew it was going to happen. It elevated up into the 20% range. 25% is when we start having to think about adjustments. Does that make sense? I don't think we'll get to 25%. We may go over 25%. If we do, we won't live there. We'll have to figure something out.
That's why we pay all these guys all that money, is to go out there and get those deposits to reduce that non-core funding dependency ratio. That's kind of our stake in the ground. Any questions? Okay. We're going to talk about core margin here in a minute. All right. Accretion income. Try to eliminate some confusion around accretion income. We booked about $52 million in purchase accounting in 2017. It's probably going to be $55 million this year. That's about $5 million less than what we originally thought based on how the pay-downs are coming in on the non-purchase impaired loans. All right. Next year, we think it's going to be about $40 million. That's about a $50 million reduction. That's not inconsistent with what we thought originally, based on what the consultants told us we should expect on the runoff.
The blue line down at the bottom, that's kind of what's happening to the unaccretable balance. That thing will run out over the next, call it three to five years. Now, that's a $50 million reduction in accretable discount, which will hit the GAAP EPS. Low double-digit, mid double-digit loan growth should provide ample net interest income to overcome that number and still hit our growth targets for 2019. Any questions so far? All right. Let's talk about our planning and our target setting and how we go about that process. Brock?
Can you just go back to the core funding slide just to clarify that. You said it could get as high as, like, 25?
It could get as high as 25.
Okay.
We don't think that's going to happen this quarter. We think for the rest of this year, it's going to peak out here in the second quarter. Where's Dan Stubblefield? He's there. We think it's going to peak out this quarter. Our typical yearly deposit flow is that in the last half of the year is when our clients build their deposit balances as they go into the fourth and first quarters. We're anticipating increases in deposit flows because of that. Steven.
What's the driver for why that would continue to increase? I get that it's a spike that we've been seeing, why wouldn't that kind of naturally come down as you layer on that business model and those.
Because right now our loan growth is more than we thought. All right? As Rob tells me constantly, "Harold, lenders, we've hired a bunch of lenders, and guess what? They lend, Harold." We're going to support them. We're not engaging clutches just yet, if we get into that 25% range, we might engage a clutch. That's still double-digit loan growth with a clutch. Anything else?
Did I hear you say mid double-digit loan growth?
Mid.
Okay.
Low to mid. Low. We did 18% in the first quarter. Okay. All right. This is important stuff if you want to understand how we operate around here. I've got a picture of-- You all see the red slide on the bottom? Who is that? Darth Vader. That's who that is. All right. He talks about his process. We have a process. It starts now. Well, it started about a month or two ago, where we start talking about strategic planning. We gather data from all the markets.
People like Craig and Kirk, Mark and Rob present information on their markets to us. We try to assess what's going on in Charlotte, what's going on in Raleigh, how many branches do they need, all that kind of stuff to try to build out a plan over the next three and a half years that meets our growth goals. What's the old saying, "Begin with the end in mind"? That's what we do. We're going through a budget process where we look at what we think we can get done next year. That's kicking off now that we can kind of understand what the Street expects of us in 2019. How we're going to achieve our growth goals for 2019. Every week, we go through a forecasting process.
As you hear about us in conferences. We start thinking, "Oh, well, something might change," it's because these forecasts are coming out every week that say, "Okay, this is what we think we're going to do this quarter. This is what we're going to do this year." The budget will give us a plan for the year, but it won't happen that way. We're going to have to make some changes along the way to create opportunities to hit the plan. All right. The linkage between this planning process and compensation. Back in the early 2000s, Mercer did a study. They said, "Okay, what drives total shareholder return?" They came up with three metrics: revenue growth, earnings growth, and soundness. All right? It wasn't about ROA, it wasn't about efficiency, it wasn't any of that.
It was about earnings growth, revenue growth, and soundness. If you could kind of put in the recipe the right mix of those three measurements, the share price ought to respond. With that, we said, what if you focus on those three metrics or three measurements. You set targets that consistently put your firm in the top quartile of an appropriate peer group. You incent everybody in the firm with the same plan. What would be the result? That's the kind of plan we set up. The consultants go give us a peer group. We try to figure out, okay, what's that peer group going to do over the planning horizon. How do we get into the 25th percentile or the top quartile of that peer group?
What plan do we need to have in place that puts us in that position over the course of many years? Now, some of this is religion. You just believe it, and you don't change it. We think that this process has served us well over time. This was the math in 2017, this is live data. We reported EPS of $2.70, revenues of $690 million, ROA of $1.11. When you adjust out merger costs, deferred taxes, Bank of North Carolina, we ended up at $3.53, $5.15, and $1.47. Why'd I drag you through all that algebra? What we believe is that our plan is much more objective and shareholder-friendly than, I won't say all of our peers' plans, but substantially all of our peers' plans. Last year, get through a classified asset ratio. We get into the metrics on EPS and revenues.
We ended up at $3.53 with an 80% payout, earnings of a 15% payout. If target's 100, we got 95%. The board was kind enough to award us an additional 10 because we could afford it. We thought we could afford it because the plan has to be funded if it's going to get paid. So far so good? What I'm trying to pitch to you is that this plan is only in play if we can hit our numbers. Here's a history of it over time, going back to 2000 we started the firm. That's the payout. The blue bar represents the named executive officers. That's Terry, Rob, Hugh, me, and Harvey. Well, Harvey since 2009. What we got paid and what everybody else got paid.
You can see we got goose eggs during the recession, and during several years, the named executive officers got goose eggs, again, because of what the earnings results were and what we needed to hit as a target. Down at this bottom right is what the impact of our plan is to EPS. Like last year, it was about $0.36 pre-tax, about 7% of our fully diluted shares on actual payouts. This year, it works out to be about $0.45, $0.46 pre-tax. That's assuming 100% payout. On the equity side, you can see on the bottom left, if you read through that, about $6 million of the equity incentives are performance-based.
We'll talk about that here in just a second, but what I'm trying to say is that a lot of our incentives only get paid if we hit numbers, and those numbers are set at the top quartile of a peer group. Any questions, comments? Kevin.
How would that work? I understand that you have the high-level targets. How would that work at a more granular level? If there's been a lot of focus on what the NIM was quarter versus the reported NIM, if that number came down a little bit, then suddenly there was a little bit of an EPS hit. What would happen to the incentive plan if there was some headwinds that materialized over the course of the year?
If we couldn't fix the headwinds with some other part of the P&L, the incentive plan comes down. It doesn't get paid.
Does that mean that if you hit the numbers, even if there was some, say, little bit unexpected cost?
It provides us a cushion.
Okay.
It does. That's why we accrued 75% in the first quarter. As we look out for the year, 75% seemed to be a fair number. There's $38 million in that green bar, thereabout, in the incentive pool at 100%.
Terry, let me hit on that, Kevin, just to make it good. The board's got discretion. They can do what they want to do. Where they make a judgment would be if we can get into a transaction, we can do a share issuance. Obviously, the numbers get moving. They'll take that into account and isolate that out.
That'd be an example of something they would do. Something they wouldn't do is say, "Dang, the funds ran faster than you thought. We're going to give you a pass on that." That doesn't happen. If we're missing on the funding assumption, you got to hit it on the yield assumption or fee assumption or cut the expenses. The idea is you got to deliver the earnings. There is some discretion in there, as I say, if there are bona fide items that can be isolated.
Just economic conditions, failing to hit numbers, any of those kinds of things, all that's off the table. You got to figure out some way to make the algebra work.
Okay. On equity incentives, everybody gets one. Everybody gets incentives. We do restricted shares, no options. The leadership of the firm is on a performance plan. There's about 100 of us now that are on a performance plan. We have to hit ROATA targets. 100 people, that means there's about 2,300 people who aren't on a performance plan that still get equity incentives. They're on a time-vested plan. It's five years out, it's kind of a glue in your chair kind of thing. We always want to keep equity incentives out in front of this workforce so that there's an investment there. They only get it if they're here and if they work. All right. I'm not going to go through this. There's a lot of catch-up making here, but on performance unit awards, if I earn them in 2017, I don't get them till 2022.
All right. If I earn them in 2018, 2022. Whatever awards I got in 2017, if I earn them all, I don't get them till 2022. That's provided we hit a soundness threshold in 2022. We think all that's fair, and we think it's shareholder aligned. We're not going to go through this chart, but I talked to several of my colleagues who have recently come to us from SunTrust and Regions. What this chart does is it takes a corporate incentive plan like what we run, compares it to a commercial incentive plan, which a large firm might run for their commercial bankers, and then a retail incentive plan that a large firm might run for their retail bankers. Now, a lot of smaller banks have adopted these similar kind of incentive systems because that's what the big guys do.
What I've tried to do here is align that with what shareholder alignment looks like, what associate buy-in looks like, what kind of associates thrive in these different incentive plans, and what the administrative burden is. If you go through all this, and granted, I'm biased, the tone and tenor of the slide might be a little biased. We line up with this corporate incentive plan. We think it wins. We think it's the best way to manage a bank, especially a relationship bank where you're hiring 25-year veterans. You got to work in our market for 10 years to come to work for us. We average at about 25, 27. It's a cheat sheet for you. All right. Here's the slide you're probably most interested in. These are our sustainable business model and where we think we're going.
We don't have updated numbers for you, we are leaning or biased one way or the other here. We'll go to strategic planning with our board here in a couple of weeks. We'll present this to them, and then probably second quarter conference call, third quarter conference call, we'll update with real live data. Right now, we're not adjusting our ROA targets. At least for 2018, 2019, we think they're still good targets. On margin, there's funding pressure. We talked about the chart where we're above median on funding. If I showed you the same chart on loan yields, it'd be the same kind of situation. Loan growth and loan yields are better. Funding costs will be higher. Whether or not that we modify that 360 to 380, I'm not sure. If we modify it won't be much. On net charge-offs, we may tweak it.
We won't tweak it up. We may tweak it down. Fees, we're likely to tweak it down. We were thinking three to five quarters. I think now, Terry, more like five to eight quarters, something like that, maybe on the fee goals. Expenses, we'll consider a reduction in that range for expenses because we think the expense burden is coming in better than we thought. We're now in a target environment, all the, I don't want to say, guesswork in what we think on expenses with we're now in North Carolina. We like the way we're set up in North Carolina, South Carolina, Virginia. We've got the people where they need to be, the right people in the right seats, all that stuff. The target environment is good. Now we can get a lot more predictive on our expense burden going forward. Forward estimates.
Normally, people don't like to talk about this, but we're at a 32%. This chart, what it does, let me back up. It takes what, like, 2015 right here. On 1/1/2014, our estimates were $2.12 a share. A year later, they were $2.29, and then the 2015, right after year-end close was $2.59. We reported $2.59. See how that chart works? All right. Right now, we were at $3.98 back at the first of 2017. That was pre-tax reform, pre-Bank of North Carolina. Avenue was in those numbers, $4.78. We're at $4.71. That's a 32% growth. The way we've been talking about that, and several of you know this, a third related to tax reform, a third related to Bank of North Carolina, a third related to core growth. We think that's fair. We still think we're in the ballgame on that. We like that number.
5.18, next year's 10% growth. To be candid with you, that's probably not going to get it. We need to be probably bigger. Dan's going to have to work harder. We need a better number there. That's what this whole strategic planning exercise is about, is to try to check that number. Do we have the capital? Do we have the liquidity? Do we have the growth, the funding growth necessary to support a bigger balance sheet to grow that number? All right. That's all I got. If you've got any more questions, I'll try to respond to them. Do y'all want to take a break? I'll wait. Jonathan. Can you just clarify what you mentioned for saying about 2019? Yeah. What the Street's got us at right now is a 10% growth rate off 2018. That's likely not going to be good enough.
As we look at the peer banks, try to figure out what it takes to be in the top quartile, we'll have to build plans to achieve that growth rate or whatever that might be. Does that make sense? No. All right. It might, but okay.
When you said not good enough, you mean for your expectations or for ROA?
For example, do you expect you would need to do better than 10%? Exactly. Okay. Exactly. I thought you were saying 10%, we're not going to get there. No, I'm not saying that at all. Dan hadn't showed me his cards yet. My bet is that
It's 10% now, isn't it?
Yeah. My bet is that when we line up the peer group, 10% won't put us in that top quartile. We'll have to ratchet up to figure out how to get in that top quartile.
I understand that you earlier said that that PE chart, the earnings equation was reflecting our highest view. Best guess, why do you think that consensus for 2019 went from 537 to 518 from January till now?
I think there's so much emphasis on core margins and GAAP margins, accretion income in or out, and all that stuff.
What's The Street missing?
On the 59, I think there's still a caution flag out. I think if we can throw up that's not a good term, throw up. I think if we hit this 471 number, I think it'll respond, because just the runway to 471 is pretty strong. Any other questions? Brock.
Can you just go back for a minute to the margin range in consistency to 380?
Yep.
You said you may modify that. Can you expand on that?
If we modify it's likely not to go higher. It may go lower, but it won't go low a lot. I'm thinking maybe five basis points or something like that. That's just me.
You'd likely do that after 2Q, or?
Probably after 2Q, we'll go to the board here in the middle of June with the strategic planning retreat. We'll talk about the next three to four years of what we think we can do with this firm. It'll either be in the second quarter conference call or the third quarter conference call. Terry gets to trump me on all that, so he gets to decide.
Harold, your message there was, you're aimed at a 150 to a 170 ROA, and you may rejigger.
Yeah
some of those components modestly.
Exactly
even with the current situation and still deliver the ROA.
Can I just shout out for the accountants in the room? You all don't ever beat me up about taxes. We're doing really good on taxes, and we spend all day long trying to get 10 basis points out of my ETR. Can we get some love for that, please? I guess I could reduce postage and you guys will be all fired up, but if I reduce taxes, nobody says anything. Right, Dana? Catherine.
One more margin question. On the last quarter conference call, you had talked about seeing an upward bias to the core margin. It sounds like that probably is unlikely if you're thinking the range is going to be on the lower end of that 360-380.
I think it'll be on the lower end. I think what we're going to try to do is defend the core margin this quarter. I don't know if we're going to be able to do it or not. That blue bar on that loan growth number is more than we thought. With that comes funding costs, with that.
Got it.
Like Terry said, I'm not backing away from $1.50, $1.70 on the ROA targets.
The core margin feels lower, but growth is better. Expenses you feel are better. Net charge-offs you think are better. Fees.
Don't forget taxes. Taxes are better.
Taxes are better.
Share count, all that.
Net is still at the 150-170 ROA.
Yep.
Got it. Thanks.
Okay. A couple of things. A break. Do y'all want to take a quick break? Yes. Sally owns a lot of shares of Pinnacle. She wants to take a quick break. We're going to take a quick break. Does anybody not have a book? Everybody's got a book. Let's take about a five-minute break. Let's hustle because you're going to want all the Rob McCabe you can get. Thank you.
Is this mic working? Sounds like it, doesn't it? Okay. I'll go ahead and get started. I'm Rob McCabe. My responsibilities are the state of Tennessee and the business lines and wealth management, which are trust, investment management, insurance, and also I run capital markets. Those latter two operations we run more as a line of business because of the obvious specialization. I've got a number of my colleagues today here in specialty businesses and geographic managers, which you'll get to interact with. I hope you will. I was just thinking about what our collective mindset is, and I think it is that we expect to deliver the results that we're accountable for. We always have. I think it's been mentioned several times, we feel like we have the best bankers available in the market.
We know there are plenty of other experienced bankers, primarily in their late 30s and early 40s, that can come to Pinnacle and reach their full personal, professional, and financial potential. Our job is to identify them and recruit them, that's where we're focused right now, there are plenty of them. Harvey's here, I would say underwriting is not an especially difficult pressure for us now competitively. What is difficult now is pricing, especially on fixed-rate lending, irrespective of duration. That's the big pressure right now on the margin, in addition to cost of funds. It's been mentioned our loan volume, our production is greater than expected. I think that's correct. We've got plenty of loan volume. I think deposit acquisition is much more difficult. Everybody knows that. We're highly focused on deposit acquisition and mining the fee business opportunities of the core bank.
There are many legitimate reasons that deposit gathering is difficult. One, monetary policy, two, just rising interest rates. I think our belief is it's a legitimate observation, at this point it's a conjecture which we intend to overcome. That's our mindset. I'd ask any of my colleagues, Craig, see anything different? Let's give you a brief overview of Tennessee. Here is our current franchise. You can see on the left, Memphis, one county, Shelby County, Middle Tennessee, eight counties, in Chattanooga in the lower right, two counties, Knoxville, three counties. We're in 46 office locations statewide in four urban areas. We are an urban bank. Terry talked about that. We get out-community banked. When we get outside of that footprint, we just don't intend to do so.
We have recently gone into southern and southwestern Kentucky, principally because we have seasoned bankers that have relationships in that area, we're very comfortable with that approach. I'll give you four slides just on these markets that are a little high level. Middle Tennessee is by far our best market. No question about it. We've avoided Amazon. Our goal was to come in second with Amazon, not let them sort of pollute the diversified industry structure that we have. You can see we have HCA, BMI, we've got all the professional sports. We talked last night about AllianceBernstein, which will bring 1,000 jobs here at an average salary, we're told, of $200,000, which is really a bullseye for Nashville the biggest trophy the state has ever earned. Healthcare is the number 1 driver. Music, entertainment, and tourism, Terry touched on it.
Andy's our expert, along with Ron Samuels. Publishing, light manufacturing, et cetera. State capital should not be underestimated. They employ 20,000 people. The key thing here is the population growth. The statistics show that there are 80-100 people today, per day, moving here. The unemployment rate is 2.2%. The MSA is close to zero here in Nashville. We used to say full employment was 5%. Anything below that was frictional. I think that number's moved down, we are very fully employed here in Middle Tennessee. We get our business from SunTrust. They're probably the top 1, 2, or 3 opportunity that we have. Some mining at Regions. The recent weakness in Wells helps us. Renasant is weak, First Tennessee and some of the wealth management businesses have some disruption, that's where we focus. Knoxville is an easy-to-underestimate market. It is stable.
There's a lot of intellectual capital there due to Oak Ridge and the University of Tennessee. The Department of Energy employs 20,000 people. It is a healthcare center, not nearly what Nashville is, but it does have diversified employment, and it's beginning to get recognitions. Most of these have to do with quality of life. Quality of life in Knoxville is excellent. It also has low unemployment rates. SunTrust is our principal well of opportunity once again, and increasingly, Regions. Both of these companies run more lines of business structure, so local leadership and continuity is a disadvantage to them compared to our geographic orientation. Memphis. I don't know quite how to say it, Kirk. It's an attractive market, but relative to the other three, it's probably the least attractive primarily because of its growth metrics.
The unemployment rate's a little higher, 3.5%, a lot of that has to do with the ability of the workers to fill quality jobs that are available. Kirk, where's Kirk? I think the population's really flat, correct? It's not growing. Still, it is the most geographically advantaged city possibly in the country for distribution. You can see it has FedEx, has 15,000 employees, AutoZone, 5, ServiceMaster, 2,200, International Paper, 2,100. Were great stable employers and also great corporate citizens that support the core of the city. You can see, relative to distribution, we've got major rail line hubs, 93,000 logistic jobs. There is plenty of business there. We try to work on First Tennessee there, but they kind of are the kings. We're doing a little better against them, but once again, SunTrust and Renasant, primarily as a result of the Metropolitan acquisition. Right, Kirk?
There's plenty of talent there, especially on the commercial side, that thinks Renasant might be less commercial and more real estate and small business. Chattanooga would be easy to underestimate. It's historically been an industrial town oriented towards manufacturing. Volkswagen calls it its home, and there are any number of supply chain participants in the area. It also has a legacy of light to heavy industry, which has been great to us. It's also near a heavy tourism area up on the Ocoee and up in the mountains. $1 billion of revenue comes to the city because of that. There's also great wealth in Chattanooga. There are four or five families down there that are billionaires that do a great job of taking care of the health and welfare of the city. A low unemployment rate. First Tennessee really does the best job in that market.
I did not realize that until a couple of years ago. They've been a little bit unassailable, SunTrust used to own that market when it was American National. Now they don't. They're weak. We're hiring their people, and Regions is also vulnerable. Craig, you good with that? All right. Here's our success equation. People state it in different ways. Here's how I look at it. I think in every market, we have well-known, experienced leaders with stature in the business. They've been there. They are go-to people. They're socially active, civically active, and viewed to be advisors and steady hands in any business or local or civic or growth potential activity that would occur. I think we have highly credible people in each market. As we have grown organically, we've only hired people with 10 years of experience in the market. Harold has said that, and that's true.
We have a very disciplined approach to hiring in that regard. When you buy banks, they haven't adhered to that model. We have to work through the development of younger people. Some people don't quite make it, but then when we hire additional people in those markets or to fill out programs that we acquired, we adhere to this model. That's been a huge benefit to us in terms of making quality geographic decisions. We have people that know what to do. They know when to raise their hand, when they don't know what to do, and that makes us much more competitive against the line of business people that are control-oriented. In the product and service lines, we compete well with super regionals. We have every product and service line. We have a FINRA broker-dealer in capital markets.
We do mergers and acquisition consulting, valuations, strategic reviews, and we're able to do non-public debt and equity raises for our clients. We believe that on any over a five-year period, 40% of our small business owners or middle-market company owners are going to have some type of transaction: buying, selling, wanting a valuation, or some succession plan, and we need to be in the middle of that conversation to get a fee. Not only that, but to capture the wealth management result that occurs. We have little or no turnover. Big advantage. One big advantage of that is that with all the professionals that we have, there are usually two, three, or four of us in the bank that know any one customer. The customer doesn't have one single point of contact. It's a much more enriching and collaborative and overwhelming experience for the client.
Terry talked about the attractive work environment. I wouldn't underestimate that. I will tell you, there's not a lot of disenchantment. There's not a lot of politics, not a lot of conversation about somebody's being mean to me. The conversation, the tension's largely about delivering something that we promised to the client. 95% of our time is productive. Flat organization, I feel like I can go to Knoxville or Chattanooga, and I know the bankers, I know the brokers. We're a phone call away. We don't have a hierarchy. We don't pull rank unless somebody's really screwing up. It's just that simple. It feeds our geographic effectiveness. Local decision-making has to occur to take advantage of your geographic focus. Our leaders, Mike DiStefano, Missy Wallen, Ed White, Kirk, Craig, Andy Moats, we're all involved in recruiting, sales, and service and civic involvement.
We have a number of meetings on Monday. We have a sales meeting on Monday morning, and we'll talk about what's important now. It's projected throughout the state of Tennessee. It'll have anything to do from a financial literacy topic or a capability we have that's underutilized on the fee side, or a focus on something like deposits that we need everybody's total attention now in terms of how it affects the profit plan, the EPS we're expected to deliver, and the incentive they expect to put in their pocket. All of that linkage is connected Monday. We have 75 people in a room in Nashville and broadcast throughout the state. There's no difficulty in understanding what's important now in our footprint. We have a track record of success.
When we go out and recruit, people know that we've been there a while, that we have some stature, and we've delivered a result. That helps us in recruiting people who may be looking, as I said, to reach their full personal, professional and financial potential. All that fits together. Questions on that? All right. These are difficult to read. Here's any number, 15 or so of experienced market leadership whose reputations and actions are in sync with the previous slide. Ed White, I don't think Ed is here today. Ed would be the Pied Piper of bankers in Nashville. He probably has a $2.5 billion, $3 billion book. People want to work for Ed White. He is the principal commercial force in this city, and he can handle 23 people on a span of control because they all know what to do.
Go down the list, we got about eight people here in the mid-state. John Cannon, commercial real estate. You can go on down the list. Ron and Kent, who came from Avenue. We've got Clay Hart here, who was the president of Renasant here until about two months ago when we hired him. He's come over to our bank. He's a 40-ish person that's looking for that promise of professional development and financial literacy that we've made to him. Missy Wallen and Mike DiStefano in Knoxville. Craig and Kenny Dyer, a great combination in Chattanooga, along with Ryan Murphy. Kirk and Lisa Foley, who's not here in Memphis. There are many other people. We have 200 people that I think could carry on a reasonable conversation with any of you. These are the leaders. You can see where they got their training. You have these slides, right?
Copies of the slides. You can see where they got their training, all known names. You can see their age. We have some people a little older. We say they don't have any expiration dates. We'll just see how far we can go. We're intensely interested in developing younger people, not only to migrate books of business, but take people who had specialized experiences, which people tend to do now, and give them a more generalist view. Okay. This chart, which is the Greenwich research for the full year 2017, to me, feels like the most evidence of the validation of the model that Terry and Harold have been educating us all on. In Nashville, we started in the year 2000. You look at lead market share, you're the lead bank in net promoter score, which I understand means willingness to recommend generally. Right, Terry?
What you want to be is in the upper right-hand box. We've come from zero to 23% or 24% of lead share and at almost a 90% net promoter score. You go over to Knoxville, we started de novo in 2007, correct? Applying the same model, the same disciplines, we've moved up to a 10% share and way over on net promoter score. Chattanooga and Memphis, those acquisitions occurred in 2015. You can see the type of share and the type of client advocacy we have in both of those markets. We're working hard to build share in Memphis. We pretty well doubled the size of our bank last year. That's where our most aggressive hiring is going on.
We're very proud of this and view this as a validation of the model, and gives us great confidence that the work Rick is doing, and his team, will yield the same result. A busy slide, this has to do with deposit share. Here are the regions. We have 46 branches. The banking business has a little over 1,400 in the state of Tennessee, we have 3.3% of the branch share. We have almost $10 billion of deposits. This was last year, 2017, June of 2017, so it's stale, but it's the FDIC-validated number. We have 8.3% of the deposits. That doesn't mean we're a great picker of locations. It means that we're able to leverage these locations because of the relationship, credibility, and productivity of our bankers. Our branches produce two and a half times in deposits, that ratio.
We believe that significant deposits remain available in every market. That's because we've got $10, the rest of them have $95 billion. That means there's a lot out there. If we attract the bankers and focus our bankers on gathering deposits, we will be successful in funding. At one point, this bank had a close to a 50% non-core funding ratio, Terry. Right? We woke up and thought that wasn't a great idea. We spent a lot of time working on deposits, and we worked that down in the core bank to 15% over time. We have an acquisition, we have aggressive loan growth goals, we have to redouble our efforts. Plenty of money available. You see who the lead banks are in the respective markets. You can see how dominant Memphis, for example, is, how it's dominated by First Tennessee.
Just a general slide about who we compete against. In Middle Tennessee, blue, we don't compete against First Tennessee too much. They kind of have their group of clients. They have a Maginot Line between us and them. We're friends, they're very competitive. We don't generally go after their clients, we go after Regions and SunTrust, and we generally cooperate with FirstBank. We do participations with FirstBank. They're sort of our partners, and that works out pretty well. In Knoxville, again, it's Regions and SunTrust. First Tennessee, we compete against some, they have been such an aggressive pricer in there, long-term fixed rates, that kind of thing, you just can't get the clients because of the pricing. I think we have better relationships and far more influential commercial bankers in there, we'll pick off them where we can.
Chattanooga, First Tennessee's done the best job there. I underestimated it. I did not realize they'd done such a good job. They're clearly the leader. We're at 10% share. We work on Regions and SunTrust and some of the other banks that have smaller footprints. In Memphis, we kind of go after everybody, that's paid off. We can compete against First Tennessee in Memphis. They're so large with that 32.7% share, there's somebody somewhere that's vulnerable, as long as we have the right people. You guys good with that? All right. All right. Here are some revenue hires year-over-year. I think this is May to May. We've hired 22 revenue producers in the banking side. You can see in Nashville, we've hired nine, Knoxville, net three, Memphis, net 10. In Chattanooga, that's not really fair. We had a huge hiring year the year before.
We've also got four people that have shown up here in the last week, one from First Citizens, their market leader, two that will populate our Ooltewah branch, which is being constructed, and a strong producer from Synovus, which will be in Hixson, right? We've got four to add there. In wealth management, we've added, I don't know, 15. Not in insurance. We've added them in trust and brokerage in fairly significant amounts, and we're getting great traction with seasoned brokers in particular. We've done a great job with trust administrators in all of our Tennessee markets. We're having a little more difficult time in trust in the Carolinas, but we're doing very well on brokerage. In the Carolinas, we've added five. One of these is trust, four of them are brokerage.
We have, I think, acceptance letters today from a key broker in Charlotte and one in Raleigh that we've been recruiting for some time that aren't in these numbers. Our job is to deliver to Rick these product specialists that will mine the fee-based business of the core bank to move this number from 0.81 to 0.9. Right, Terry? As Rick hires bankers that bring clients, we have to be in a position with seasoned advisors to capture that business. It's in tandem. All right. Let's see. Here are selective revenue hires. Andy hired Tom Fox. Andy, I would say Tom is a sports specialist. Is Andy in here? Right. With a national practice in basketball, football, you name it. He's been at Wells. He's a well-known commodity in the business. Andy will have entertainment, music, and sports and entertainment.
I think Tom's hit the ground running, Andy. All right. Bob Edwards, I've mentioned him here. We hired a number of people from SunTrust. This guy is a pure deposit producer. He will produce $60 million or $80 million of deposits over a reasonable period of time. Rick Seder was the market president for Commerce Bank of St. Louis. Kent Cleaver and I recruited him for two or three years. He's come here. He's already brought us $40 million or $50 million of business in six months, and is helping us primarily in Kentucky. Doing a great job in Kentucky. Just closed a big $30 million deal in Paducah, right? He's adult Clay Hart, I mentioned, was the president also of Renasant. His dad founded the bank, Capital Bank, and he sold it to Renasant.
We've been in conversations with his dad over a period of time, Clay felt like he could reach his full potential here. We're a headquartered bank here. Otherwise, he might have to move to Tupelo, and he is extremely well regarded and mature force in this market. We're going to build a team around him. Two market presidents. Knoxville, Michael Cole, SunTrust, capital markets and banking background. Jeff Dobbs, a pure deposit producer on the commercial side in Knoxville. Joelle Rogan, probably the principal commercial banker at Metropolitan before they were acquired by Renasant. She came to us. Here are others. Jeff Carter's the market leader for First Citizens. All right, Harold's telling me to speed up here. Okay. All right. Wealth management. I have to say this. This Oakley Group we hired in brokerage had $650 million of assets and $3.6 million of recurring revenue.
They've already migrated $450 million in assets and $2.1 million of recurring revenue moving from SunTrust. All right, our loan volumes, this is I guess a 15-month period, December 16th to March 18th. By product line, we grew 21.7%. Last year, we grew about 19.9%. By region, Middle Tennessee grew 15%, Knoxville 10%, and you can see Memphis and Chattanooga, as the model begins to kick in with this hiring, had tremendous increases in lending. On the deposit side, similar period, we grew 21.3%. We funded our loan growth with deposits, core deposits, 97.3%. All right, one wealth management slide. Wealth management for us is about a $50 million business. These units, brokerage will probably earn 25% pre-tax, somewhere along that range because they've got a lot of amortization bonuses. The other two will earn over 30% pre-tax.
We make a lot of money in these businesses and get a lot of operating leverage. First quarter of last year, if you looked at this business, it was $9.9 million. BNC had about $2.7 million of that, about $550 in brokerage, $1 million in trust, $1 million in brokerage. We've grown 23%. They are about the same. They're up about $100,000. Most of the growth currently has come in Tennessee. That's because we've been populating their markets with these specialists that have to get started. You can see the type of distribution we have, which is fairly diversified, which we're proud of. In terms of assets under management, Bank of North Carolina's numbers in here, they had $550 in brokerage and about $1 million in trust. Very strong trust operation over in High Point.
We've grown that business 52% in terms of assets under management. Big numbers changes in Pinnacle Asset Management. We've hired seven brokers from SunTrust that are all in between $600,000 and $3.5 million producers. We've got, I think, an unlimited runway here. The idea is to bind the business of the core bank and make money. That's what we're trying to do. Okay. That's all I have. I'd be happy to answer any questions along with my colleagues.
If I may, Rob, real quick.
Yes.
You might not realize we are capturing this entire meeting on a webcast. There will be a transcript produced, so it is vital we capture everyone's questions and comments on a microphone. To do that, we're going to put mics at the center tables. We'll try to capture everyone on the edges with their own handhelds. If you do want to speak or ask a question, look for a mic first. Thank you.
We good? Well, thank you for permitting me to present. Who wants to? Rick?
All right. Are we on? Is that just me talking loud? That's what it felt like. I want to make sure some of you guys in the back can hear me as I'm talking about second quarter here. It's been nice for me to see some of the familiar faces and old friends back when David and I were doing all of our one-on-one meetings and presentations and things like that. It's good to reacquaint ourselves. I've got really three things I want to accomplish this morning.
One is to give you an update on each of the markets in which we participate, give you my opinion on where we are relative to recruiting in each of those markets and where I think we are relative to the conversion systems, conversion and things like that. Then we'll talk a little bit about hiring and our strategy relative to hiring, where we are today relative to what's now become. You know what I always find out with Terry is we start with one number. Then all of a sudden, I go to a meeting, and it's a different number. He went from 64 to 65 on me there, but we've been able to get ahead of it a little bit. In the U.S. of A, there are 51 MSAs.
In the last five years, there have been 25 of those MSAs that have grown in the last five years. 16 of those MSAs have grown more than 5,000 people. Raleigh and Charlotte are in the top six in the country in growth.
If you ask people that are trying to travel down 17 and Highway 26 in Charleston, they'd say half the U.S.A. has moved to Charleston in the last 12 months. I mean, it's tough. Things are happening in those markets, and we're seeing a tremendous amount of inflows. Rob mentioned earlier, Nashville, 80 to 100 people a day moving to Nashville. As of, what, Rob, 60 days ago, they're estimating 100 people a day are moving into Metro Charlotte. It's very concentrated in where they're moving in those markets, but moving in those markets. Raleigh, we went to Raleigh in mid-2011, old BNC. We moved into Raleigh in 2011. That now today is about a billion-dollar asset market for us. We believe, and Mark Carlton would tell you, that I've hung it on him to grow that to a $2.5 billion market.
My mission, if you ask all of my regional execs, would say to you, at least I would believe that they would say to you, that my mission to them is to build a community bank in your market. I want Mark Carlton to build a $2.5 billion community bank in that market. We provide all the resources necessary for him to do that, which would include branch support, which would include CA support, financial advisor support, credit support, all those kind of things that would help make Mark successful. Now, that's a billion-dollar franchise now with what, Mark, seven offices? Those seven are only three in Raleigh, two in Chapel Hill, one in Durham, and one in Cary, North Carolina.
We believe in the Raleigh market, we're just out of the first inning and maybe getting ready to swing in the second inning relative to where our opportunity to grow is. If you think about Eastern North Carolina, does this have a pointer? There we go. If you think about Eastern North Carolina and Interstate 40, the other major areas of growth in North Carolina, or as you sort of move down the line, would be Wilmington. We do business in Wilmington, both out of Raleigh and out of Charlotte, with some preferred clients, but we have no presence in that market. Greenville, North Carolina, is sort of the next hub of business, more agricultural business, but some more manufacturing business that's moved into that market over the last several years. Big hospital, medical facilities in that market.
Those are markets where we do some business, but we have no real presence in those markets. We are concentrated really around growing Raleigh in the perimeter of Raleigh, within 25 miles of that core of Raleigh. Triad is our legacy market. We're about $2.5 billion in that market. I'll tell you that we are not where we ought to be in Winston-Salem. That's where BB&T is headquartered. BB&T's headquarters is about 20 minutes or so from where I sit. We have deployed two additional bankers in that market, I guess, in the last nine months, and we believe that we've got an excellent opportunity to continue to mine those bankers there and grow our Triad footprint. That would be the one that would be the most difficult thing to do for us would be in that core Triad market.
We're seeing growth in that market for the first time since 2006. In the last 11 years, we've seen no relative growth in that market today. The plans were just submitted for an Amazon distribution center in Kernersville, North Carolina. We have an office there in Kernersville in Forsyth County. Caterpillar just built a new plant. Highway 73, which is this big corridor that comes through here that really now travels all the way down to 95 and down to Myrtle Beach, is getting more and more use. That's been highly successful in recruiting new business for us. We're seeing furniture manufacturing come back. My office there in High Point, they have the International Home Furnishings Market twice a year. 100,000 people show up twice a year for that, and it continues to grow.
We've done our first real financing, Tim Huestis is here, on showroom space. There's been a big expansion of showroom space from folks moving from California into the High Point area. Charlotte, again, as I mentioned, one of the fastest-growing cities in the country. Our footing is there, about $1.7 billion in assets. Rob Ellenburg, who's here. Rob, he's throwing his number up. He's telling me now it's higher than that. He must have done something overnight to move that number. I won't cut him short. We've got limited distribution in that market. In the core city of Charlotte, we have, what, Rob, four offices in the core? One of those offices, really, we're expected to relocate that.
We believe that there's probably an opportunity over the next three to four years to build two to three additional offices to give us a wider brand of distribution. When you think about Charlotte, you really ought to think about it in terms of Rock Hill and Fort Mill. Former Governor Nikki Haley did a great job in recruiting business and positioning the state of South Carolina to recruit significant business with their tax structure. We've had a lot of people from Charlotte jump over the line into South Carolina and moving their entire companies down there. Good news is we just opened a new office in the area in South Charlotte called Ballantyne. We're five miles from Fort Mill, and we're eight miles from Rock Hill. We're in position to service those markets and call on those markets right now.
Again, Charlotte's seeing a significant amount of growth. Probably one of the more understated areas I would say to you is the Greenville, South Carolina market. BMW makes all their X cars there, soon to be their X8s, which I think are to be delivered later this year. Michelin is headquartered there. What a lot of people don't really understand is the inland port that's now located there. This has become a huge logistics area. As you can see, Highway 26, it will take you all the way over to 40, of course, 85, that takes you all the way through Atlanta, all the way down into Florida. The traffic coming from the Port of Charleston has been tremendous up Highway 26.
I was just over there the other day, and we're getting ready to see an expansion of that move up 26 and across 20 there to improve that logistical outlook. In Greenville, we're only about $350 million. We only been there about, I guess, four and a half years. Many of you remember Certus. I hope none of you are invested in Certus, many of you remember Certus. We bought some branches, bought some loans, that really expanded our presence in Greenville from what was really only a one office, very small presence. I'm happy to tell you, as we sit here today, we've had some great recruiting success there. They're not on board yet, we have two of the top business bankers who'll be joining us shortly from Wells Fargo in that market, both of which have been there north of 25 years.
We really believe that's going to be a great opportunity for us, and I think we're going to see some other teammates over the next several months potentially join us as well. Charleston is what I call an emerging market. Everybody loves Charleston. Everybody likes to go. The food's great and all that kind of thing. Real commerce takes place inland. Real commerce takes place and really begins now. If you're traveling down Highway 26 toward Charleston, you'll see a new interchange on 26. If you look to your left, you're going to see Nexton, a real residential sort of retail community is popping up. If you look to your right, you're going to see Volvo. The new Volvo plant is under construction there and soon to be in production. As you move on down 26 into North Charleston, you're going to see Boeing landing planes there.
My daughter, who just graduated from South Carolina, is going to work for Boeing in Charleston. From what she's telling me, their expansion plans over the next 10 years are to double that facility and that presence in that market. They're going to be moving some West Coast operations down into Charleston. This region is the only region where we had any disruption relative to our market presence through the transaction. Charlie Rivers, who was a former CEO of Harbor National Bank, some of you may have known Charlie, retired. We had an excellent opportunity to hire a guy named Mickey Renner. Mickey Renner was running business banking for Wells Fargo in all the state of South Carolina. Mickey was a 27-year blue Wachovia guy in Columbia. All the business bankers in all these markets reported to him.
Mickey came on board, just joined us about three weeks ago, and was really instrumental in helping us recruit that upstate team, and will continue to help us in both South Carolina and in North Carolina. Mickey spent a lot of his time in North Carolina, I think he's going to be a great help to us there. This just gives you sort of some more detail, and you have that in your book. I want to focus on sort of where we came from. The 16th of this month will be one year since we closed that transaction. We closed the transaction on the 16th, you'll see the trend line. The trend line was just up a little bit, then we retrenched. Think about this.
Some of you who are previous shareholders of BNC, we had just closed on the purchase of High Point Bank that was in our core market. It was a 105-year-old bank, we closed on that deal, what, David, November 1st of 2016. $600 million trust insurance, all that kind of thing. June of 2016, we had just made the acquisition of South Coast, and we had converted South Coast to the BNC platform. We convert South Coast in June, we convert High Point Bank, and those two together accounted for what, about $1.2 billion in footings? I lived in High Point all my entire life, practically. So buying the hometown bank, 105-year-old bank, then selling it less than 90 days later, I'm not sure I was going to be able to live in High Point anymore.
The short story is, that's $1.2 billion of clients who got flipped twice in less than 15 months, right? Who got flipped twice in less than 15 months. Those are employees who really, to a great extent, more South Coast than High Point, that weren't fully in the fold relative to the culture of our company. They hadn't been there long enough to do that, to be there to do that. The disruptors in this transaction were, and the risk in this transaction were, are we going to be able to keep our people, and are we going to be able to keep our clients? When the deal closed, you can see we went up a little bit and we came down. This run from June until December was full of, "Man, I didn't expect this." We just made an acquisition.
Nobody expected us to sell the bank. Nobody thought we had any idea. We had set out to build a $10 billion company. We had all the plans to build a $10 billion company. We still have the plans to build a $10 billion footprint. That's where we're headed. In the middle of that, we did this deal. We had a very bumpy conversion. We were playing defense from a deposit standpoint. We closed 10 offices. We closed 10 offices in December. Despite that, I was very proud of the fact we grew $75 million in deposits first quarter. We grew $200 million in loans first quarter of 2018. This sort of tells you, hey, here's where we came from. We saw the momentum and the refocus. When I say refocus, that's true. We had a lot of people playing a lot of defense with our clients.
Things weren't exactly working. We didn't have all the plugs in the right place exactly during that period of time, even into first quarter. You had the issues here in Tennessee. Had issues here in Tennessee as well. Now we've been able to get people's heads up, keep them focused, motivated, and give them some goals and expectations that will allow us to achieve the earnings expectations we have for this year. The highest, I mentioned changing the numbers, when we modeled this transaction for 2018, I think we modeled somewhere between $600 million and $625 million in loan growth. Is that right, David? Lower. He's pointing lower. He says five, I think it was six. Anyway, we'll be up. We did almost $200 million first quarter. Second quarter, we're on track to be just south of $250 million in loans.
The good news is we're also on track to fund our loans at about $1.15. Every dollar of loans we make, we think we're going to grow deposits $1.15. We've grown deposits here to date about $240 million, and loans are about $170 million as we sit here today. We feel like that we have been able to sort of right the ship, get people engaged, and we're able to move the ball forward. Terry has been understanding about the fact that this brand, people in North Carolina didn't know who Pinnacle was. They had real no reason to know who Pinnacle was. The branding really first started with, and Terry hadn't talked about the orientation process. Many of you probably know about that.
We've put, what, Terry, 600, 700 people to a two-and-a-half-day orientation process that goes all the way back to the culture of this company, how we achieve the goals that we achieve, what the expectations are, and it's culminated with everyone climbing over a 12-foot wall. People pushing from the bottom and people pulling from the top to demonstrate how the teamwork in this company goes. That was really one of the very first things that really got people's attention. It gave me an opportunity to talk to our people and say, "Hey, this is how we got here." I had many people at those orientations come up to me and say, "You know what? I was mad at you. We had a good thing going. Why'd you do this? Now I get it.
Now I understand." That's been the momentum builder for this company, for our section of this company, for our area of this company, has been able to get those people's heads up and move the ball forward. C&I growth, we've hired only C&I bankers, either C&I bankers or small business bankers, since we did the transaction. Terry mentioned earlier our plan to hire 65. As we sit here today, with the commitments that we have that are anticipated to join us by the end of the quarter, we'll have hired 20. We'll have hired 20 of those 65. That does not include, as Rob mentioned, that doesn't include any wealth. That doesn't include any mortgage. I'm also responsible for the SBA division. It doesn't include SBA, and I'll talk about that a little bit in a minute. That doesn't include other revenue producers.
These are purely commercial bankers. This is showing you a little bit about the loan growth numbers. This number, for the very first time in the history of this company, has exceeded that number. This number today, this slide's a little bit old, that number today is about $360 million, terms of growth. Just to give you a little bit of perspective, the largest loan growth, year-over-year growth we ever had in the previous company was just under $600 million. About $565 million. This gives you a little bit about market growth. In each of the areas, you can see Charlotte has really, really accelerated. Raleigh's having an outstanding year this year. We've got a lot of new hires over there. I said to you we've hired 20, or at least we got three or four coming in here shortly, by the end of the month.
17 of those have been hired since October. 15 or 16 of the 17 came with non-solicits. We haven't hired, I can only remember one that didn't have a non-solicit agreement. These are bankers that we sort of have to maneuver around and do things to try to put them in a position to make contact with their client and not violate their non-solicits, but also help us move the ball forward. Again, if you can think about it, 17 bankers in less than six and a half months, all came with non-solicits. This, again, gives you some information, and you can see the integration, the systems here. December was when we closed those offices. We know we lost $40 million in deposits, but what we don't know is what other business we lost.
We don't know people that might have been banking at that branch that had their account somewhere. We don't know exactly what that is, but we can put our finger on somewhere between $40 million and $45 million for sure. This gives you, again, total deposits growth since March on just the core funding side. We are doing a money market campaign. I'll tell you, we're competing against higher rates in the market, beyond the 169. We're competing with some folks from Charleston. We got 2% out there. We've done about $80 million in new money in that money market. What's the risk when you run a money market campaign? You cannibalize your existing portfolio, reprice a bunch of money markets, and you go, "Ah, well, my effective rate is X." As we sit here today, we've repriced about $70 million, and we got $80 million of new money.
It's been well worth the investment. Those are accounts we're going to lose anyway. Those are accounts that, I think, Dave, the effective rate on those accounts was 109 or 110 already because they were high affluent clients that we had specialized rates on. All right. I want to talk just a second about SBA. Again, I'm responsible for the SBA business. It sits in Greenville, South Carolina. A guy named David Hoppenworth, who's a 40-year veteran of that business, sits in Greenville. They're about 20% ahead on fee income year to date. We do intend to continue to grow that platform. In fact, we're in the midst of recruiting 3 additional FAs, one in Knoxville, one in Charlotte, and one in Atlanta as we speak.
We would like to expand that footprint and expand that business, and do believe, with the sort of the disruption that's happened with all the consolidation, a disrupter that would lead to some opportunity for us. One of the people asked me how I recruit these people. It's a 3-pronged approach. These guys in the room work their existing employees or existing associates, their existing bankers. Who are the best bankers you know? That sort of thing. I do a lot of work myself in using my contacts, my knowledge of the market, and some resources to go do that. Then, my wife, who runs her own financial recruiting firm, was responsible for north of 150 people, including these 2 guys here in this room, to help us recruit those people.
She continues to work with us and actually worked with these guys on recruiting and locating bankers both on the SBA side and on the client services or the client advisory side. All right. I'm happy to answer any questions. Yes, ma'am.
It seems like a lot of the deposit growth that you've had so far has been on the money market campaign. As you think about moving forward, do you think the deposit growth strategy changes meaningfully as your C&I bankers continue to ramp up their books of business?
Yeah. The money market's been about 20% of that deposit growth year to date. We do believe that with the ramping of the bankers. The other thing that we started doing, and Mark Carlton was the first beneficiary of this, is we started hiring some financial advisors, and we're going to strategically place those in each market. They're not treasury people. They are financial advisors who are responsible for building a deposit portfolio. Mickey Renner and I spent an hour or so the other day talking about deposit target opportunities in the state of South Carolina. Through his contacts, he sits on several boards down there. Through his contacts and contacts of others down there, we quickly developed a pipeline of north of $1 billion in suspects that currently bank at Wells Fargo that deposits are sitting there.
That's going to be a big focus of the new guys we bring on board. That's a big focus of his. We've got to do probably a better job in some of the other markets of developing that sort of suspect list. His experience in South Carolina, in particular, is going to be critical to us. Our markets today that fund themselves, Charleston funds themselves. The upstate funds themselves. I guess, David, who else? Roanoke. Excuse me. Roanoke. Roanoke. Roanoke funds them. I didn't talk about Roanoke. We had bought a bank up in Roanoke in 2015. Essentially ended up losing the entire team up there. What we thought at the time was going to be tough has turned into a blessing.
David Allen, who had worked for BNC, legacy BNC guy, went up there, and some of our biggest hires Terry mentioned this last night. Some of our biggest hires on the C&I side have actually been in Virginia. We got NCNB, or I say NCNB, old Bank of America. I go that far back because he does. Their only C&I banker left who covered Eastern Virginia and West Virginia is in our office. Wells Fargo, we just got their top guy less than 45 days ago, and we think they're going to get their number 2 guy there. We just got the lead private banker in the market from BB&T, who will be joining us here shortly. David's built a fantastic, very formidable team in that market, and they virtually just haven't even moved the needle yet on what the potential is up there. Yes, sir.
There's been a lot of acquisition activity in your markets with some of the other smaller banks being acquired. How has that changed the competitive dynamic? As you are competing against what had been smaller banks that are now similar size to you, are you competing for talent with them, customers, and how are they competing versus the bigger banks?
Yeah. If you think about Charlotte today, there are no real community banks you compete with in Charlotte anymore. They don't exist. You got a little bank called Aquesta who has one office. They're really up Highway 77, up into Cornelius, Huntersville, up in that market. But there are no community banks that we compete against in that market. In the Triad, you still have First Bank, who made an acquisition there and have been in that market for probably a long time. For us, prior to the transaction, for the last three or four years, we'd really been competing more in the metro markets with BB&T, Wells, B of A, PNC, Regions, Yadkin, who now is FNB. We've hired some FNB people, former Yadkin people. They've had a lot of disruption at that company. We've hired some SBA people from Yadkin.
Capital Bank, First Tennessee, we've hired three from First Tennessee since that deal was announced. They're trying to protect their turf, I'm going to tell you that. The South State, Park Sterling transaction, I think things are a little tough over there. The price of admission to hiring these people also has gone up. Last four people I've hired have had a 2 handle on their base, and we lost two that we really would have loved to have hired. You're talking about a base for a C&I lender at $280,000 with a 50% opportunity on their incentive. SunTrust guys that are now moved over to a competitor. We just didn't feel like we need to go there. We just didn't feel like we needed to go there. This other competitor is pretty desperate to show progress. Yes, sir.
What's the typical non-solicit term for these 15 hires since October, and what's been the success rate in targeting some of their existing clients even during that period, or is much of that really going to come once that non-solicit rolls off?
Yeah, the non-solicits are one year, typically. We've had a few non-competes, but primarily it's a non-solicit. You may have seen where FNB went after some SBA guys down in Raleigh. First Citizens is very active and very concerned about people with non-solicits. Our strategy around that is to say, "Hey, man, you have a non-solicit, and we don't want you to violate that." What we do is, we promote that banker in that market to make sure as many people as possible indirectly know where they are. If a client calls in and wants to speak to them, there's nothing anybody can do about that. If we're sending, if we're calling, if we're sending emails, if we're doing things we ought not to be doing, then they can get in trouble, and we don't want that to happen. We tread lightly. We vet that.
We have other FAs call them if we think there's an opportunity. Mark's got several of those. Rob's got several of those that had non-solicits. We have other FAs try to make introductions to the company. What else? All right, guys. Thank you.
I started trying to pull an agenda together. One thing we felt like was important for us to communicate to you was kind of what the thoughts are from boots on the ground. Really, to me, the stars of our show really are the guys that run these markets for us. They're the ones that kind of hire the people, motivate the people, all those things. We've got four of our all-stars here, two from Tennessee and then two from North Carolina. What I'd like to do is I'll kind of lob some softballs towards them and then let you guys kind of ask the more difficult, probing, intense questions. Okay? That sound reasonable? We'll try to keep this kind of moving at a fast clip for the next, call it, 30 minutes, and then after that, we'll let the credit guys come up here and really entertain you.
All right. Okay. Craig in Chattanooga, Kurk in Memphis, Mark's in Raleigh, and Rob's in Charlotte. They're all kings of their own little kingdom over there, and I'm glad they're here for sure. All right. Briefly, in like 30 seconds, tell us how you got to be the president. Where were you before? Where'd you cut your teeth, all that kind of stuff. Let's start with Craig.
Okay. I was a career AmSouth guy. Got in 25, almost 26 years there, and left in 2005 to start CapitalMark in Chattanooga. We grew the bank to about $1 billion, and then we partnered with Pinnacle in July of 2015.
I started with a company called Leader Federal in Memphis. Spent about 20 years with them. We sold that bank to Union Planters, which is now Regions, obviously, in 1996. We started Magna Bank in Memphis about 1999, and sold to Pinnacle in 2015 also.
Okay. Kind of my story. I've been doing this 31 years, I'll just give you the CliffsNotes. In 2005, I had the opportunity to join First Charter, which was a Charlotte, Concord, North Carolina based company, and help First Charter expand into the Triangle market. They were later acquired by Fifth Third Bank out of Cincinnati, and I stayed on for another year or so, running the middle market banking department in the Triangle for Fifth Third. Opportunity came up to meet with Mr. Callicutt, Mr. Spencer, and some others from Bank of North Carolina about helping BNC, Bank of North Carolina then, enter the Triangle market. I got to do a replay in 2010. It was April 2010. We started a three-man loan production office, de novo, in Raleigh, been a great move, been a lot of fun.
It's fun playing offense every day when you're building something. We've been at it now for eight years.
My story. I got a call from Rick Callicutt in August of 2007 and he said they wanted to talk to me about starting their presence in and around Charlotte. I was happy where I was at with First Charter Bank. Mark followed me there. I was happy. Two weeks later, I get called in from vacation. They tell me the bank sold to Fifth Third Bank. I knew I wasn't working there. I called Rick back as I'm walking out of that meeting. He said, "I saw that news. Did you change your mind?" I said, "I'll see you in an hour in High Point." He was kind enough to meet me halfway and, literally two weeks later, I started my orientation. Now it's two and a half days with Mr. Turner. My orientation was about 14 minutes.
They handed me a laptop and said, "Go get some business." 2010, kind of the same story. Rick did the same thing. We've grown from there. It's been a great ride, and we hope to keep that going.
All right. All four of you guys are in markets that we've kind of highlighted as growth markets, and we want to win in those markets. Tell us, just in your own words, how are you going to win in your market? What's going to be the key things you need to win? Then a little bit later, we'll talk about how big you need to be.
You just want us to start?
Yeah, just go down the row.
Okay. I was talking with Sally. I told her earlier my title really ought to be chief recruiter because I spend a good part of my time, along with the other leadership team members in Chattanooga, Kenny Dyer and Ryan Murphy, strategizing over our competition in the market and who the good bankers are. We really feel like that's the key to growing our bank. You've heard Terry talk about it frequently, and it really does work. As we look back, when we sold to Pinnacle in 2012, we had 15 revenue producers. Today, we have 40. Within the next 90 days, we'll have 43. We've got three people that have committed to coming that aren't here yet, and that's what drives our results. I think Rob put the names of Dan Goldberg and Jeff Carter up on the screen earlier.
We hired Dan Goldberg from Synovus a year ago, and today he has a $50 million loan book and a $15 million deposit book. Jeff Carter, the First Citizens market leader, has been there four weeks and has already booked $15 million in loans and $7 and a half million in deposits. The key really is bringing in that talent to the bank.
All right. Just briefly, Craig, what motivated Dan Goldberg to even talk to you? I mean, what was it?
Dan Goldberg.
Dan Goldberg.
You're going to remember those guys.
I remember Dan Goldfarb. All right. Dan Goldberg, he's going to be on my list.
Again, Sally and I were talking about this earlier. At the end of the day, your experienced, talented bankers, they want to be able to do one thing, and that's take care of their clients. They want to work in an environment that allows them to serve their clients, and that's what we provide them at Pinnacle. Terry's talked about the geographic management. We make the decisions there. In most cases, that banker makes the decision, and that's what good bankers want. They just want to be able to serve their clients.
Kirk?
We were, at Magna, primarily a real estate lending bank, large residential and commercial real estate lending group. The first thing that we had to do was to understand the Pinnacle culture, and I would say that took six or eight months to get everybody on the same page together because we need to recruit people into a healthy culture. Since then, we've been active recruiting people, you're going to hear this theme repetitively, recruiting people in the C&I space and the private client space. It's the first thing we talk about on Monday mornings, what's our recruiting pipeline look like? Who do I need to meet with that week that we're trying to recruit? It's how we build the company. We're winning on a lot of fronts in the Memphis market from the same people that Harold and Terry and others have told you about.
The big, larger banks, somewhat impersonal. We're offering local decision-making, everything you've heard, flexibility. We're actively winning. We recruited, I think in the last year, about 20 people. We have 10 to recruit this year. These are producers. We've hired six so far this year. To answer your question, Harold, we're building the bank around recruiting.
Mark?
Yes, sir. I think with us, a lot of it is reputation. A good reputation in the marketplace, it makes the recruiting a lot easier. I was sharing with Rick or Terry this morning that we've got one C&I middle market new hire. He's been with us since October. We tried to recruit him five years ago unsuccessfully because BNC was just simply not a C&I bank, and we didn't have the treasury capabilities to be such anyway. We just got him in October of last year as a result of Pinnacle's reputation as a middle market bank. This guy's a 40-year banker, 39-year banker, and it was important to him that he aligned himself with a C&I bank. I think reputation in the marketplace, just like you all, our industry is very small when it comes to people knowing people.
Everybody here seems to know everybody, and our industry is the same way in each of the markets. You know in the market who you want to hire, who the best bankers are. By keeping a good reputation, once you start winning some business, word gets around, "Man, Pinnacle Bank won that deal, they won that deal." It just creates a lot of momentum in hiring. Also, in addition to reputation and winning business and doing it the right way, you get momentum by the people you hire. Okay? Because in addition to saying, "Wow, they won that deal," the other buzz on the street is, "Wow, Pinnacle hired Larry Davis. Can you guys believe that?" It just opens it up.
It makes the story a little more credible when there's people that are mutually known throughout the market, and they say, "You know, Pinnacle's a special place, the way they do business." That helps. I think recruiting the right people, the right team, spirited individuals is a big key to it, that have a proven book, a proven following in the marketplace.
Rob?
Yeah, along the same lines as these guys. We've won because we've hired the right people. What I've always seen and what I believe is that A players want to work with A players. We've targeted those A players who then have those A clients. It's unique, and I even had somebody the other day say, "You guys had it figured out at BNC, and Pinnacle has it figured out. Why doesn't everybody else?" I said, "I don't know, but don't tell them." Other factors, I think, are those good bankers, those good clients, speed to market. We've got our geographic footprints, and we're able to operate really quick with Tim Huestis and his credit group in getting things back to the client really, really quickly and being a lot faster to market than some of our competitors.
We've had some recent success with some C&I folks in Charlotte out of South State Bank. We've taken advantage of some of the turmoil going on over there with their merger. Those folks have really hit the ground running. Between the two of them, I think in April, they did $20 million in deposits. Two really good wins. Looking to build on that momentum.
All right. What about you guys? Any questions? Jennifer. I'll repeat it.
Okay. Thank you. For Craig, are you in the Dalton market right now?
Craig, are you in the Dalton market right now?
Good question. Yes, we are. Let me tell you how we cover that market. Terry mentioned earlier our courier operation. We started CapitalMark with just one location in Chattanooga and grew to be the fourth largest bank in that market in just a few years. A lot of that success was driven by a very robust courier service. We have clients in Dalton that we bank both loans and deposits today, but we handle that through a courier service. We probably have 500-plus clients on our courier service, and we probably do 3,600, 4,000 pickups a month, and a number of those clients are in Dalton.
Can I ask a follow-up?
Yes, ma'am.
Two or three years ago, First Security sold to Atlantic Capital, has it gone well from service? Has Pinnacle been able to pick up business from?
The question is whether or not Pinnacle has been able to take business away from the old First Security franchise that's now ACBI in Chattanooga.
We have benefited from that combination. Actually, one of the leaders in our market, Kenny Dyer, was involved in the startup predecessor to FSG, had a lot of those relationships that followed him over once that transaction occurred. Then I believe we've hired one or two FSG associates since that time.
Kevin.
This question is, I guess, probably primarily for Kirk, but I guess maybe it's applicable to everyone else here. With recent inflation and expectations of M&A compared to how it's going to pick up if a First Horizon were acquired, how would that change your recruiting strategy with disruption? Because it's such a large bank and such a main position in two very big markets.
Just to give some frame of reference, First Tennessee has got about 35% market share in Memphis on deposits and about 40% on C&I small business lending. The first thing it would do, just because of disruption, would present a lot of opportunities for clients that we would immediately call on. There's some talent at First Tennessee that we would be interested in, clearly. I think because of disruption, they would certainly be open to talking to us. They don't have the talent pool that they used to have. It's been diluted some. They have stickiness to their clients because of their longevity and their branch network and their legacy of service to the city.
I'd say we would recruit some of their folks, I think we would have greater opportunity to get to some of their long-term clients because of the disruption of whomever that happens to be that comes into the marketplace.
We have. We've hired two bankers from First Tennessee this year. One is more private banking focused, and the other is, I'd say large business banking, not quite middle market level. With the acquisition of Capital Bank in Raleigh, well, they're in Raleigh, but Capital Bank, that created some opportunities for us to talk to some key people at First Tennessee. They were mostly a private bank in Raleigh anyway, First Tennessee was, or large corporate. It seemed like it was one or the other. We were able to sort of handpick a couple folks that we really like out of there. I think the disruption created some of that opportunity for us.
In our market, First Tennessee's got the lead share. We've hired a couple of their guys, if an event occurred, it'd create some opportunities both with bankers and specifically with clients.
Along those same lines, from a different perspective, when the BNC Pinnacle thing was announced obviously folks were calling on our folks. To this day, we still haven't lost any bankers. Client impact has been minimal. We've done a good job of keeping that thing in place and at the same time benefiting from a lot of the turmoil and a lot of the M&A activity in Charlotte. With South State and Park Sterling and a couple others. I'd like to say the same for Raleigh, too. We haven't lost any bankers through this merger. Candidly, I think we've hired 22 bankers since July. Now that can be mortgage, insurance, investments, financial advisors, support staff. 22 new hires since July. It's a good message, it's a good story, and it's one that the market really likes in the Triangle.
That's a pretty common theme as I think about it says something about how well we do these consolidations. We have not lost a single banker financial advisor that was with us at Capital Mark since the conversion. Same thing goes for the clients. That's pretty much unheard of in the business.
All right, Rob, a question for you. You're in Charlotte.
Yes, sir.
There's a couple of big banks there.
How does little Pinnacle, or how do you get your lenders, your relationship managers, how do you amp them up to go take on Wells Fargo, Bank of America? How do you position them so they feel like they've got an advantage, or how do you position Pinnacle with potential clients?
Most of our folks have been at those big banks, so they know how those operations go. They're going to get meeting to death. From a client perspective, our folks know that we're going to be significantly quicker to market than B of A, than Wells. It's really rare that we run into B of A on many of the deals that we're chasing and the clients that we're chasing. Wells is a little bit different. They do a good job in that smaller business banking segment. Again, my folks, they're competing with every bank in Charlotte for the good client base, and there's five banks looking at every deal. Our folks win more than their fair share. I think the numbers suggest that.
Kirk, you've mentioned you compete with First Tennessee. They're kind of the 900-pound gorilla in the room. You've mentioned that their talent pool has been diluted. How do you feel like you're advantaged in Memphis when you go against a First Tennessee client?
Well, we don't have the advantage we have other regionals, which is the local decision-making because they're there. They make the quick decisions. We're more aggressive than they are. We're more responsive to the customer. Again, they rely very heavily on their legacy position in the marketplace to retain their business, not really win new business. We're out competing more aggressively for the new business that exists. We're a little bit more nimble than they are, even though they're in the market in terms of responsiveness. We were up against them on a fairly large C&I deal in the last couple of weeks. We had a term sheet out, term sheet returned, the deal approved before First Tennessee got their term sheet to them. I would say we're a little bit quicker than they are in the marketplace.
We're also much more aggressive in the real estate sector than they are. First Tennessee exited residential real estate fairly directly about four or five years ago. They don't compete in that space at all in the marketplace. We've got a fairly robust CRE mortgage banking group that's housed in Memphis that services the Pinnacle footprint. They've recently acquired that capacity in North Carolina, we've been boxing their ears pretty good in Memphis on that business also. I guess the answer is we're just a little bit more aggressive in asking for the business. I don't want to say that they're complacent. They're very good bankers, they're comfortable with their position and we're uncomfortable with our position. We're trying to grow and compete and win, they're a little bit more accepting of where they are.
Any questions? Jonathan.
Excuse me, the positioning and the action by the super regional banks have been well received by the market over the past year. The stock has been relatively strong performers, beneficiaries of regulatory relief, higher interest rates, and they've also done a really good job at expense management. Investors are happy, stocks have outperformed, I guess. The people on the field, the bankers that run throughout the region, do they feel any better today than a year or two ago?
Well, I can speak for what I know in Raleigh. I think our peers that are with the larger banks are very frustrated because they're having to go to Cincinnati for approval, Pittsburgh for approval, basically out of market, out of state in some cases, to get the support they may need for a large credit opportunity. That's one of the things that we compete on every day. We had Tim Huestis on an airplane Monday a week ago, last Monday or Tuesday, flying to Asheville to meet with a large-scale nursing operator, along with a team of bankers from Raleigh, okay? The regionals aren't going to do that. The large regionals aren't going to do that. We already have received so much praise just from that one opportunity. This is a former BB&T banker that's joined our company with skilled nursing specialty lending, okay?
He's kind of an industry expert, and he captures the audience when he's making a call into that industry because he's kind of got the reputation as the guy that knows what he's doing. We've got a large opportunity, and it would be a wholesale banking change out of BB&T into Pinnacle. The point in sharing that with you is we've got the decision-makers local. In this case, the decision-makers were in front of the client in Asheville, North Carolina, which is what? Three, four hours away from Raleigh, and candidly, probably a couple hours away from Greensboro. We made it happen. It impressed them, and we're going through our due diligence phase right now, but it is a wonderful opportunity. I'll just mention one other thing and I'll be quiet. We uncovered an opportunity in Greenville, North Carolina.
It was a large deposit opportunity with a utility company there. Bank of America client for a number of years. B of A was giving them zero attention. Matter of fact, they were using a courier to bring all of their deposits from Greenville to Raleigh and using the Raleigh Bank of America office. We got one of the senior guys from Mike Hammontree's department in Nashville, in treasury, to hop on a plane, come to Raleigh, and three or four of us from Raleigh, along with him, went to Greenville and made our presentation to them. They're like, "Man, we haven't seen this many people from Bank of America in years. I can't believe you came all the way from Nashville to help with this proposal." That's how we win.
We win because we're playing offense every day, candidly, we're playing because we're having a lot of fun doing it.
Okay.
We're with a company that truly recognizes and celebrates success as a team.
All right, I got-
The question's really about morale level for the larger banks. Is that right? The bankers that you're trying to recruit, yes.
Without exception, every single one I talk to that works for our friends at the regionals, they have some sort of frustration.
Yeah.
I see it day in and day out.
I would say it runs in cycles. Clearly, right now, for example, there was a bank in Memphis, Metropolitan Bank, that was acquired by Renasant. They're going through the adjustment to the Renasant culture. There's a lot of uncertainty and questions. You take advantage of that as a recruiter. SunTrust is particularly vulnerable right now. They've just gone through an analysis that they're redistributing work from out of the local areas into some regional and hub-type operations. Their people are, upset's too strong a word, but they're worried about their connectivity to local decision-making, local support even. You just keep your ear to the ground about where the disruption is, and then you go where that disruption is to try to attract the best people. It is an issue.
I would just add, in Charlotte, I think if the folks at those super regionals, if their employees are happy about the stock price, that's probably the only thing they're excited about. That's an honest assessment. I've talked to multiple folks from those institutions on a weekly basis, lots of local leadership turnover over the last couple of years, I think, has affected that.
All right, one more question, we'll go to credit. If the credit guys start making their way up here, we'll transition as quickly as possible. This morning, I think Mark mentioned he wanted you to be a $2.5 billion bank, something like that.
Which means three.
Yeah. That's what we're going to talk about now is, Rob, you're like a $1.8 billion loan bank, $1 billion in funding. How big can you be? What's it going to take, quickly?
We'll be at two by the end of the year. My goal is to double that within the next three. The only way we'll get there.
How are you going to get the funding?
Sir?
How are you going to get the funding?
Hire more C&I bankers. Just like the most recent hires we've had have been five. Not one of those folks has made a CRE loan. We've hired five since October. Again, I looked at the numbers this morning, and we're at $60 million in loan growth quarter to date and $50 million in deposit growth quarter to date.
Mark, you're about $1 billion in loans and call it $500 or so in deposits, about big?
Yes, sir. Interesting, we've had double-digit loan growth this year, and our deposit growth has exceeded our loan growth. We've got folks focused on the deposit piece like I've never seen it before. It's going to take just continuing to hire the right people that want to come over and have fun and see that we're doing something special here. Like I mentioned with this one particular guy, he's probably got five or six more years left in his working career, if you will. He said, "Man, I just want to help you all build what you're doing. It's something that's special and want to be part of it." If we can find more people like him, he's got 40 years of banking in our market. Gosh, he could probably take the next five years moving all his business over from the other bank.
I think that's the key, along with additional branches will be helpful.
Craig, $1.15 billion in loans, $800 million in deposits. When we first met, you were a $750 loan kind of company, something like that, $700?
Right, in that mark. Yes. We've probably moved into a strong number three share on the loan side, probably number two. It's harder to get those numbers. On the deposit side, we're a solid number four. The next step will be Regions. As we build out our branch channel, we're committed to doing one a year over the next several years. That'll be a big part of it. Just really executing on our recruiting strategy will allow us to continue to take share. As a reminder, First Tennessee, SunTrust, and Regions still own 55% of that Chattanooga market. There's a tremendous opportunity, even if the market doesn't grow, for us to continue to grow our Chattanooga bank there.
How big do you think you can be in Chattanooga?
I think given enough time, we'll be the largest bank, both loans and deposits.
It's going to take a few years to catch First Tennessee at $2.2 billion, I think. We're closing the gap.
My money's on you. All right. Kirk, Magna was a $600 million bank.
Yep.
Something like that. $350 million in loans, 2015, right? Something like that.
Right.
You're now at $1.25 billion in loans and $1 billion in deposits. Remarkable. Well, how big do you think you can be? What's it going to take, and how long?
We've got a target of being $2.5 billion. It's a little fuzzy, 2020, 2021. Depends on the conversation we're having with Terry or Rob, we can realistically get there. We're on track to be close to $1.5 billion by the end of this year. Year to date, we're slightly ahead of deposits than loans. That will flip in the second half of the year. Loans will really pick up the second half of the year. If we grow 20% a year after that, we're not going to grow at the pace we grew last year. That was unusual. If we grow 20% a year, which I think we can comfortably do going forward, we'll be at that $2.5 billion mark by about 2021. We'll set another goal. We're not going to catch First Tennessee in our marketplace, we know that.
We'll aggressively grow the company, taking share from the big three in the market being SunTrust, Regions, and First Tennessee.
All right. Thanks, guys. I really appreciate it.
Thank you.
All right. We'll do a similar format here with credit officers. While they get mic'd up, just in terms of ground rules here, I'm going to kick it off with some questions. They're the same questions you guys asked me. We'll let these guys give you the answer. Please, I urge you, if you got questions about underwriting or what's in the portfolio, what's the personality, what are the concentration, just whatever you want to know about our credit book and credit metrics and all those things, these are the guys who know the answers. Don't leave here without getting your questions asked. We'll spend a similar amount of time trying to walk through this. Quickly by way of introduction, many of you have had lots of opportunity to interface with Harvey White. Harvey White is our Chief Credit Officer, and I introduced him earlier.
On his staff, immediately to his left, you have Mike Hendren. Mike Hendren is our senior credit officer for commercial real estate. We get thousands of questions about the commercial real estate book and all those kinds of things. Mike is the guy with the answers. He's the shepherd over that for our company and is an experienced real estate banker, not just as a credit officer, but as a real estate lender in this market over two decades, three decades, I guess really. On the far left is Tim Huestis. Tim was here in Nashville immediately prior to the BNC transaction. Rick, I think, it really Rick's idea, said, "Hey, we're going to build this C&I business. I need a senior credit officer over here who's an experienced C&I guy," which Tim is.
That was a happy marriage, and I think it's been good for everybody. They've got a great partnership. Tim is serving as the senior credit officer for the Carolinas and Virginia. There are the roles that we have. Harvey, take a minute or so and just get everybody on a level set here on how we approve credit, how does credit approval work in our company.
All right, Terry, just by way of background as I walk through how we do it, just keep in your mind that we're all in the same incentive program. We were all hired partly because of our experience, but partly because of the culture and the way we are team players, that kind of things. Almost all of us have been on the line side, almost all of us on the credit, really came up through the regionals or super regionals, and therefore were indoctrinated in much the same way of underwriting credit. There's not a whole lot of difference of opinion there. We do not have any committees. We do on a signature system alone. I don't believe in committees. I think you get into grandstanding and second-guessing and hiding behind a group decision as opposed to an individual decision. We've always believed in a signature system.
FAs or line management, most would have a million and a half of lending authority. Most credits that we do under $1 million gets centrally underwritten anyway. If you think about it, all they have is a million and a half. Not much really gets done without the second set of eyes. Really, on anything over about a million and a half, you get a credit officer involved. What we try to do is have a decision maker, as several of the guys earlier mentioned, on site in the major markets. Really, all markets except, I guess Roanoke and Greenville, we have an on-the-ground credit officer who typically has $10 million of authority, and is again, very close, joined at the hip, goes on calls with the local FAs, local area execs, that type of thing.
We were generally adamant that nobody ever in North Carolina, South Carolina, Virginia, you have to say, "Hey, your decision is being made in Tennessee." Tim Huestis has the same authority I have. He can go to the house limit of the banks. They have in state, in market, the ability to do anything we can do here. I will mention the addition to the senior credit officers, credit analysts are a strong part of the decision-making team. We like them to go on calls like we like our credit officers to. We like them to not just push numbers, but express an opinion. Again, they're still on the same incentive program, so they know that deals need to be made, but they know that good deals need to be made.
Finally, I'll just say, keep in mind, because of our business model of hiring people and they get to bring their business, we know most of these folks. It isn't as though we're doing a whole line of prospects that we haven't even heard of. In most markets, we have leadership from the major banks. In Knoxville, I was from Regions. We have a SunTrust person, a BB&T person. We have plenty of First Tennessee people. Most of the clients, or most of the people we're going after and making decisions on, somebody on the team has known. It's an unusually team approach.
Yep. All right. Here's the most famous question everybody gets. What inning are we in?
I don't know. Seven used to be a good number everybody liked. I look at it and say, well, you're having a lot of people start pushing out. Several things I hear from people I talk to and the financial press, a lot more people are saying, "Hey, maybe it is more years out, three or four years out." I do think that a lot of people believe it's going to be a little bit of a softer landing this time, so maybe we're not in a sudden death playoff type of game. There may be extra innings, however you want to look at that. I do think that it's probably out there a ways and would be a softer landing. I just don't see the excesses in certainly the C&I side that we saw earlier.
Mike, as the real estate guy, can speak to the real estate world and what he's seeing there. Generally, I'm seeing pretty good discipline in terms of requiring equity, those kind of things. I really kind of believe, Terry, that whenever the game's over, it's not going to be a sudden death. It's going to be a softer landing, and it's not in the next year or two.
Yep. All right. I'm going to switch gears with you here real quickly. You led the credit due diligence as a part of the BNC transaction. We're now 12 months into it. How'd we do? What are your thoughts on credit performance?
Well, I'll just step back and say, yeah, for the due diligence, we took a team of eight or nine people, spent a week in their shop in High Point. Had good cooperation from their data people, so we were able to look at files. We looked at every credit above $2.6 million, I think it was. We got up to about a 60% coverage. We were amazed as a team how similar they were to the way they looked at credit to the way we did. Several ways of looking at that. Their risk rating system was very much like ours. When you looked at the distribution of their portfolio by risk rating it mirrored ours almost unbelievably. That has tended to be borne out. We've had very few ones that we've gone in, even after the merger, and had more chance to look at.
We said, "Oh, no, this wasn't graded right." They had real good discipline in grading credits. Again, all of their guys, for the most part, came from the super regionals or the regionals, as we did. There's a lot of similarity in just the way we approached underwriting.
All right. I don't want to put words in your mouth, but let me give you something to respond to. I believe it's true that we've not really had any surprises as it relates to loan losses, all those sorts of things.
That's correct. They had better numbers than we did going in. I think, Rick, you had net recoveries for several years there just prior to the merger. Yes, you're right, our internal loan review people have not found things that we missed, any of that. No, it's been a clean transition, clean portfolio.
All right. I'm going to switch gears here a little bit and go to Hendren on commercial real estate. Let me ask you the same question because sometimes you get a different answer based on perspective. What inning are we in?
I've said frequently that I don't know what inning we're in, but we're going to behave as though we're in the seventh inning. I think as a commercial real estate lender, you always behave as though you're in innings five through seven. From that standpoint, I think there's still good runway.
All right. Let's talk about Nashville. Here's the question that I bet I've been asked 12 times here in the last two days. What about Nashville? Is this thing going to blow up? What are you worried about here in Nashville?
In terms of the economy and space market fundamentals here in Nashville, I'm not really concerned about anything in the short run, Terry. The key would be how you define the short run. I do think we're generating jobs, as everyone has said. If nothing else, commercial real estate is a set of boxes that house the economy. If the economy's expanding, you need more boxes. It's really just that simple. What we're seeing is we're generating jobs, we're generating good jobs. I saw a statistic yesterday while I was doing a little research that said we were the number 3 destination for college graduates. That's up from number 12 last year. That's significant I think demographic. We're also the number 1 bachelorette destination in America, which cannot-
We've got something going for us
cannot be overlooked at all. I do think we're blessed to benefit both from business and leisure travel, and as long as we can continue to generate jobs, I think that bodes well for space market fundamentals.
All right. What areas do you have cautions out on? What are you concerned about? Those kinds of things.
From our perspective in looking at the book, we're slightly over-weighted in hospitality, we've dialed that back a pretty good bit. We're going to limit our hotel lending going forward. As most of you, I'm sure know, not all of you, that is an industry and a business and a property that has a lot of operating leverage. Its expenses as a percentage of its income run extremely high, maybe 60% for a limited service hotel, whereas you may be paying $8 of expenses for $32 rents in the office market. That's a market that gets to market every single day because no one leases hotel rooms for seven, 10 years. That's a sector, I think, that concerns me a little bit, but it always concerns me because it's more vulnerable than the other product types.
That, and you throw in the fact that we've got about 5,000 rooms coming online here over the next couple of years, would suggest caution. I suspect you were surprised by the rate you had to pay for the hotel where you're staying. From that standpoint, we do a little relief, quite frankly, on ADR. We think that will settle down over time. Just so you know, we only have one hotel construction loan in the central business district here in Nashville. It's at an LTV that's less than 50%. We have a guarantor that we've required to pledge $4 million to shore up that guarantee. It's someone we've done business with as a firm for 15 years, and we took the extra precaution of selling about one-third of that as a participation.
We have a total of, I think, three deals in Nashville, four deals total, including three in the burbs. We've been very intentional, at least when speaking about Nashville, to limit our exposure to that particular industry.
Somewhat similar in our apartments. I know that Mike has been an advocate of not doing the high-rise downtown multifamily in Nashville ever since I've known you. It's a space we really never got in. This is not a recent getting out of doing something.
No, I think that's right. One of the things that we're keen on is properties that have too long of a gestation period. We've evolved into an interim construction lender, for the most part. If you look at the business we've closed over the last six months, it's a little over $500 million. 73% of that is construction. My mantra is, let's get it built, let's get it leased, let's get it gone, when we're talking about dealing in the large space. From that standpoint, we feel good about the approach we're taking to that business. CoStar lists 47 apartment properties under construction in Nashville. We're financing four of those, which seems about right to me.
All right. Mike, I'll just put it out here in a general way, but I'm asking you, give some personality of what's in our book. Who are we loaning to? Give some sense of the personality of what we do, and then when we get done with that, we'll contrast that with other stuff that's going on in the marketplace.
I think our lending enterprise, when it comes to commercial real estate, is almost a bifurcated model. We have a lot of community commercial real estate, Terry, I would call it, either from the firm's founding, when we couldn't do big deals, and also through some of the community bank acquisitions made in the Carolinas and Virginia. From that standpoint, we're like a brick wall that has some big bricks and some small bricks, which happens to work very well. In terms of exposure, we're still under-weighted in multifamily because we always have been. From that standpoint, we've still got runway there. I was looking at, along those lines, if that alarms you a little bit, our weighted average loan-to-value among our top 25 apartment construction loans is 58.4%. That's pretty good, I think. From that standpoint, we're under-weighted.
We're perhaps a little over-weighted in hotel, but that will take care of itself over time. If you look at our numbers, we might be considered a little over-weighted in retail, but that's a little bit misleading because it's a very granular book. It's evenly distributed between anchored, unanchored, and single tenant. From that standpoint, I'm not too concerned about that, although fundamentally, I'm very alarmed at what's going to happen in the retail space over the next two, five, 10 years. Although I'll be long gone in 10 years. Just looking at, for example, in our unanchored strip retail, which might alarm you, we've got 248 loans. The average is only about $1.4 million outstanding, so it's street corner kind of stuff. In strip anchored, the average loan size is $4 million, and we've only got one loan anchored over $20 million.
Again, we're not in that top-end space. We're not in the mall business. I like the granularity and the profile of that business. Industrial is what everybody's doing right now. We've really significantly increased our industrial exposure. I think from that standpoint, we're not a big lender on assisted living. We have a handful of transactions, but most of our business is going to continue to be sponsor-driven, Terry. That's always been the hallmark of this firm, and that's evident throughout our real estate book as well. We like people I hate to say this, but if there are no borrowers here, the devil you know is better than the devil you don't know.
Right.
We're doing business with people I've done business with in this market for 25 years, or everyone knows and we see them outside of work in multiple functions. It's pretty much the same profile as we get on the C&I side.
Right.
We spend a lot of time selecting people, making sure that people don't select us.
Yeah.
We don't do one-off transactions.
All right. Ours is really small and granular. Who's doing all this stuff?
Well, that's interesting. If you think about 47 apartments, we're doing four. That means 43 are being done by someone else. I think it's pretty evenly distributed. I think the high profile, large transactions are being done by some of the national banks, certainly by Bank of the Ozarks, which fits their profile, and their profile, to some extent, makes sense. They're a low leverage, high yield lender, and they generally pick pretty good products from my perspective. It's all across the board. It's funny, I mentioned we had closed on a little over $500 million over the last six months. We've also lost $328.5 million that we had approved over the last six months. That's 23 loans. We're losing business, which as a credit officer, I kind of like to see, as long as we're getting our share.
Yeah.
Most of it is due to pricing, some due to structure.
All right. I'll give you guys a chance. I might bring Tim in just get some perception. Tim, if you don't mind, on sort of where you think we are in the BNCN integration, what's it been like? What are the issues that you face there?
Yeah, the integration thus far, Terry, has gone well. We've really been focused on matching the talent acquisition. As we've hired new FAs, Terry, we've made sure to hire very good credit advisors or credit analysts. By credit analysts, I'm not talking a 26-year-old with an MBA. Typically, they're my age, or a little bit younger. The credit delivery channel, our process is, unlike most regional banks, we get credit involved on day two or three. The thought there is, if you've got experienced bankers and experienced credit advisor and credit officer, if the deal looks really good, we're very fast to delivery with a term sheet and offering. If it doesn't look good, we're catching it on day two or three and helping that banker put it down. I'd contrast that with the regional banks.
If you work at SunTrust or Regions and you're doing corporate lending, typically you might have to prepare a package to get your manager to bless it, then there might be another package to go to the first credit approver, and then there might be a second or third package to go to the final credit approver in Atlanta. That's exactly what we're not doing. We've got part of the regional approach, a credit officer in each market. It's really been, Terry, about building the trust with the line so that they let their guard down. They invite us in early. We match the talent on the credit side to fit the FA, and then just speed to delivery. It's going well.
All right. Jen, I see you got the mic there. You got a question?
I have several questions.
Yeah, good.
Going back to the granularity of the portfolio across the entire company, what is the largest loan size, or I guess, largest relationship you have in terms of total loans?
Yeah. What you have, we have house limits depending upon risk grade, either at 20, 40, or 60. We do have right at 20 relationships that are above 60. I think 95 or 100, 105 would be our very largest. What that is, Jen, is where it's probably a developer who has four different projects at 25 each, usually different geographies, that type of thing. The one that I'm thinking about that is pushing 100 is somebody that develops for O'Reilly's and Dollar General, those type of locations, will develop for them. They have multiple projects over multiple states going into that $100 million number. You get below that, we have a couple in the 75 range that would fit that same profile.
In terms of what you would really think about as pure concentration to an individual company, for example, 60 is about as big as we have, and we don't have many of those.
You said it takes, I think two people to approve a sub $10 million credit. Is that right?
In theory, yeah. Most of our credit officers have $10 million authority, but it's concurring authority. We credit guys can't do anything on our own, so.
Right
A line leader or an FA has to have recommended it and we're concurring.
What about this $100 million credit? How many people have to look at that?
I do, but what we do is any time that we have a house limit exception, and that would be, I take it to the Executive Committee, usually via email and just let them know, "Hey, here are the kind of deals that we're going above our" Tim or I, either one can go to the house limits. Either one of us can go to 60, but above that, I'm at the Executive Committee now.
That's the Executive Committee of the Board of Directors.
Okay. You said you were a little overexposed on hospitality total across the company, I assume you meant. What is the size of the portfolio?
I think when we talk about overexposed, I'm talking about weight more than an exposure. Perhaps that's something of a misnomer, but about 85% of our book is going to be national chain franchise properties, 15's going to be independent. We're talking about totally outstanding term debt of about $644 million there on hospitality. From that standpoint, we try to look at all property types and set a guideline as a percentage of our risk-based capital, and that has a pretty tight limit and it's just a little bit over right now.
How about healthcare exposure?
What's the total healthcare exposure for Pinnacle?
If you look at exposure, it'd be a hair over $1 billion. If you look at actual outstandings, it's a little under $900 million.
Okay.
Anybody else?
That would include everything from an HCA to a doctor. In fact, if you look at the concentration within that.
It's sort of indirect?
Most of what we have is individual physicians, practices, that type of thing.
Okay, that would mean a doctor all the way up to HCA?
Yes.
Yes.
That includes all of that.
What's your syndicated exposure?
Oh, it's fairly small, actually. I'll put it this way, in terms of participations purchased is the way we look at it, whether it's a national syndicated credit or not, we only do them really for the HCA, somebody that's in market, that's the only way you could get at them. We have established a limit of 6% of the portfolio that we feel should go there, we're below that. We're down around 5% right now. Again, it's all to in-market folks that we know. HCA would be an example.
Others? We've got just a few more minutes here. This is your chance. Jen, you're going to star the show here.
Mike said an interesting thing Mike, I thought you said something interesting, that you always pretend you're kind of in the seventh. You always pretend you're in the seventh, anyway, you're not. What happens if you guys start seeing some really crazy stuff in the market? You've got sort of a double-digit loan growth goal for yourself. Even with hiring, will you pump the brakes if you see things that just do not make sense, and you think will expose yourself down the road?
No, we're just going full-fledged ahead.
I know it's such a stupid question, kind of give us the idea of how you would position that-
Yeah
to the investment community, which I would hope at some point that is going to happen, right?
Yeah. I guess two or three things. One is, I've had some discussions with some of you. We run concentrations where you're looking at the C&I business generally in industry classifications and CRE business generally in asset classifications. To Mike's point, we've got separate targets for each one of those things that's a function of risk-based capital, and those targets have been set based on what we believe the overall risk parameters of that particular business are and all those kinds of things. They're variable. We publish with great frequency, more frequently than monthly, to all our lenders in the company, where are we on this stuff, and there's a green light, a yellow light, or a red light on stuff.
We change those lights from time to time, and it gets communicated every Monday morning in the communication protocols that Rick and Rob and so forth have talked about. We're tapping the brakes all the time on stuff and going back to things saying, "Okay, hey, that looks like that's worked out," and we move it forward. There's a communication infrastructure. There's a measurement process, number one, and then a communication infrastructure that pushes that information out, generally on a weekly basis, so people know what's in, what's out. First part of the answer is, yeah, we tap the brakes all the time. We've tapped it any number of times. I think Mike's had caution flags on multifamily for a period of time.
My guess is, Mike, if you said you probably feel better about multifamily today than you might have 12 months ago, and our perceptions, those things change, and that gets communicated in a pretty direct and robust way.
Yeah, Terry, among other things, we use a lot of debt service coverage covenants, what we've begun to do on particularly apartment construction and hotel construction, which are inherently speculative, we're taking a look at how those deals are performing right out of the gate so that we can see if there are any trends. Just so you'll know, the only deal we've got in East Nashville, they opened the doors in December of 2016. They're 57% leased. At East Nashville, 7/2017 opening, they're 90% leased. A Belmont Music Row property opened 12/2016. It's 92% leased. We've got a deal in Southeast Nashville that opened its doors on 2/2017 that's 97% leased. We're going to do the same thing for our hotel properties to make sure those deals are coming out of the gate and doing well.
If we start seeing some covenant defaults on that, we'll sit down and we'll all talk this thing through.
Yeah, Terry.
Jen, let me just say, because I think part of your question is how intense is the pressure to do deals. Again, I get back to, hey, we're all, both sides of the equation, want to do good business. I had one earlier this week, it happened to be an acquisition deal. It would have been in the HLT bucket. The FA and I just sat down, we talked through it, he and I both agreed, no, that's a little too rich for our blood. Hey, he wanted to turn it down as much as I did, once we sort of together got to that conclusion. No, we're on an individual credit, it's not afraid of letting them go. We're big believers that we gave them a no that very afternoon. We said, "Hey, here are the issues we see.
Here's the way we could do it if you put this much equity in," those kind of things. Getting back to them with either a no or a, "Hey, here's what it would take," we think keeps from burning bridges but helps us maintain discipline.
Maybe on a broader part of the question, Jen, I guess, is, Terry, are you willing to come to the market and say you can't produce this loan growth because asset quality won't support it? The answer to that is definitely yes. You look around at these guys here, they've been at it. They've been through 2009. I think everybody in here's got the courage to say, "Hey, whoa, this isn't working here. We're not going to be able to do this." Anyway, maybe that's helpful.
Okay.
Yeah.
This question is a little bit of a setup here in terms of getting to the question. You've got the most experienced bankers in your market, 25-year vets on average, that know all of the best customers. You know who the A customers are, the B customers, C customers, in your portfolio and then inside the market. Because Nashville, and probably the other markets as well, are so attractive for population growth, job growth, corporate relocations, obviously that means that other banks that are out of market want to come here and participate in some of that growth with LPOs. How do you view your portfolio from a vulnerability perspective as others come in and seek to move business from you and others?
How do you use that, if you do, as a kind of credit defense mechanism by Do you allow these new entrants into the market to believe that they're taking an A credit, when in fact it might be a C credit? Does that?
Yeah
make sense?
I think. Real quickly, I guess relative to the competitive pressures that exist when you've got an oversupply of banks chasing too few deals, I would say this: we are extraordinarily aggressive about retaining our clients, particularly our good clients. We're less aggressive about retaining bad clients. Good clients, we're aggressive about retaining, and so we don't generally let people take our business away from us based on price. If it's underwriting and there are those things, I didn't get to this because we ran out of time, but I let these guys talk about declinations. We decline stuff all the time where, hey, that's just a place we're not going to and we're not going to do, and occasionally we lose business on those kinds of things. I would say that we're fierce competitors.
If you came in and tried to take a high-grade client from us, we're not going to let you beat us on price for the most part. We'll let you beat us on underwriting, if you want to do that.
Have you seen much of that in the last couple of years as Nashville's really sort of accelerated the local GDP?
No, I don't think so. Rob's not in the room, but I think Rob's comment earlier in his presentation was, what we find is immense price-based competition, particularly on fixed rate credit, extended duration, particularly owner-occupied real estate. Man, it's astounding to me how some of that stuff gets done, the pricing there. You guys ought to comment instead of me, but I don't find Again, I promise you, I can take you over here today and pull out a deal and show it to you and say, "Look at this. This is stupid. They didn't get the guarantees," or whatever it is. I don't find that broadly going on in the marketplace. I can't say, "Hey, man, that group's screwing up the credit." The underwriting seems reasonable. It's more about price and duration, you guys ought to comment.
I would agree with that, I also would say, it's back to Greenwich will tell you, once we get a client, we just cover them up with service. We cross-sell, I don't mean hard sell, but we take care of all their needs, man, we make it hard for them to move. The Greenwich Associates stuff would tell you that yeah, it's got to be a price shopper or a huge price differential for us to lose it on that.
I think on the real estate side, one, most developers and real estate borrowers really value surety of closing. They've got a deadline. They've got to be at the closing table, I think our reputation is such as we've never left anybody standing. The other thing, too, I think we tend to be nimble. It's an interesting dynamic in the current environment that you approve a deal then they come back and want to change. I think that's an industry issue. Historically, it was kind of take the money, here's the term, take it or leave it. We're extremely nimble. Usually, it's just come down the hall, five-minute conversation. Yes, we'll prorate the guarantees, or yes, we'll live with something that wasn't part of the original approval. Those things, decisions can be made in 15 minutes.
You get back with the client, I think people place a strong value on that, too. The other thing, too, is if necessary, we're going to get Rob and Terry in front of clients, there aren't many places where you can get, at a bank our size, that level of senior exposure with our better clients. They're good at it. While Terry enjoys it, Rob lives for it.
Well said. Harold's about to judge me here. We're way over our time limit.
I thought we were just getting going.
We were, we can't. If you got more questions, feel free to grab these guys and they'll talk to you about whatever you want to talk about. Harold. Andy. Andy Moats. Andy Moats, many of you know, was the main executive at Avenue Bank. Andy had a lot of roles there, one of which was to be the credit officer. I would say in some senses, he was the senior banker, senior marketer, and was in some measures, the top banker there in terms of hiring people and so forth. Andy is a superstar in our company. He focused primarily on the music, entertainment and sports business. He can answer a lot of questions about that. We hit you with a lot of stuff about using our model, recruiting people, growing things at an extraordinary rate.
We've tried to put a geography, it has largely worked the same, I think, including the national footprint and extraordinary growth rates in the music business, both Pinnacle and working on some exciting things I mentioned earlier today, an investment in a company called Artist Growth. We'll hit on that. Andy.
Thanks, Terry. Everybody hear me okay?
Okay.
You can't come to Nashville and not talk about music, especially during CMA Fest. For those
Attending tonight. Enjoy that. Apologize in advance for some of the fashion choices made by the folks of Nashville tonight. This is kind of our Mardi Gras, and it gets pretty interesting. We'll get back to normal next week. It's a busy week for us, as you can imagine. A lot of late nights. All of our artists are in town at once, so we'll be out late with you tonight. Music, huge influence, relatively small industry, but the good news is not a lot of competitors either. Key thing here, we compete on knowledge, not risk. We do not bet on bands. That's what record labels do. They're the equity investors. We look backwards. They look forwards. You have to understand a couple unique things. You have to have a few unique products. We'll talk about some of those.
Non-traditional cash cycles, as an example, an artist can go on the road, make $1 million. They can come back the next year, be in the studio, not make $1 million. How do you get them approved for a secondary market mortgage? The answer is you can't. You have to have a good portfolio mortgage product. Intellectual property lending. Our collateral is songs. Our collateral may be records. We'll talk more about that. Very stable, very high-quality collateral, but not a lot of people understand it. We do. Specialty products, royalty advances to songwriters, tour lending. We'll get into more detail on that. Unique service expectations. My phone's always on. Our team's phone is always on. We get calls at 2:00 A.M. We get calls every weekend. You have to love this business to be in this business.
Some of those calls get pretty entertaining, as you could imagine. Largely centered in Nashville, New York, and L.A. We only have a physical presence in Nashville. We are on a lot of airplanes. The last two weeks alone for me has been New York, Los Angeles, a ranch in Oklahoma, meeting with a professional athlete, South Beach, meeting with a professional football player, Pocono at a racetrack. That's probably a good segue into our sports business. With the hire of Tom Fox from U.S. Bank and Wells, we have officially launched and gotten into the sports business. Pinnacle already had some pretty good exposure to athletes and a private banking business built around professional athletes, but we're going to take that to the next level.
That's a very fragmented, decentralized business, and we think with Tom at the helm there that there's going to be a great opportunity, particularly deposit and wealth management opportunity. We don't do a lot in film and TV at this time. I don't know if anybody's familiar with the term FAANG, Facebook, Amazon, Netflix, Google, Apple. Insatiable appetite for content right now, that has created some opportunity for us. TV studios as an example, which is largely a private banking sort of a game, but it is a landlord's market there. That would be really the only real estate we do, and that's really more owner-occupied real estate. Getting into the market as a whole and some of the opportunities. These are our clients. This is what they look like. We bank artists. Artists make a lot of their money from writing songs and from touring.
Thanks to streaming, there's a new income stream for artists that they historically did not participate in. We often work with ancillary businesses for artists as well. Think Dr. Dre Beats, think Kenny Chesney's rum company, that sort of thing. Artists are now leveraging their influence, not just their music. On the songwriting side, it's increasingly a singles-driven business. There are less songwriters than there might've been 10 years ago. You could make a living getting a cut on a record, say, a decade ago. Today, you have to have the single. There are less writers, but the ones that are successful are very successful. A lot of catalogs being sold were involved in the sale and finance of many of those. On the record label side. Historically, record labels sold things. The first 18 months was critically important.
It was a cash business, and after that, what they call the master right had limited value. Today, thanks to streaming, which is about 70% of a record label's revenue, they now have an annuity. It is a consumption model, not a sales model. The other thing that happened is that 70% of streaming is coming from back catalog. All of a sudden, these master rights that had limited value to record labels for all these years is now 70% of their revenue. That really just doubled our opportunity as a bank. We are very active in publishing or music copyright M&A, and labels have really doubled that. Now we can be active in master right M&A as well. Publishing, very stable. New trend over the last two years, a lot of institutional money has come into this market.
We are working with over $2 billion in institutional funds right now. Think BlackRock, Blackstone, think pension funds, international money, that sort of thing is all in the space. They are searching for non-correlated annuity yield, and they have determined that the music copyright, a well-diversified, well-seasoned catalog can provide that for them. There is a lot of new fund structures. Our relationships are both with the music publishers, which are really the operators, and directly with the institutional investors. Those have been very good opportunities for us, and we think that is going to continue. Touring, main source of income from artists. There is some ancillary business there we work with, think lighting, sound, merch, talent agents, all those parties. We are involved with all of those. Tour lending is a big new opportunity for us I will talk about shortly. Music tech, it is active. We are not very active in that space.
Pretty high risk I will note the Spotify IPO was very positive for our business however. Again, we have talked about geographies. Nashville seems to be winning as a music community. We are in New York a lot, we are in L.A. a lot, but it is nice to have our own backyard be doing so well. Sports, again, pretty decentralized. This is the team. Pinnacle has over 2,000 employees. We have 11. We are kind of a special ops group here. This is mostly the Avenue Bank team. If you want to connect the dots to what does Avenue look like two years later, this is part of that story. Our competitors, I would say the two primary ones, SunTrust and City National. SunTrust, less and less on a local level, but we do see them out of Atlanta on kind of a capital markets and commercial level.
City National, they have physical presence in L.A., in New York, in Nashville. They are very heavy on the film and TV side, and they do a nice job in music as well. First Tennessee has one or two employees. Regions has one or two employees. They are in the game, but not to the extent that City National and SunTrust are. Again, a lot of West Coast entertainment banks, more focused on film and TV than we would be at this point in time. We compete with credit agility. We were fast at Avenue. We might be faster here. I have been very impressed with how quickly we turn around quality credit opportunities. Again, knowledge and service. We are not betting on bands. A few highlights on our book of business, and when I say our, this is my team.
There are lots of other sports, film, TV, music opportunities spread out throughout the footprint of Pinnacle. When I say we are $500 million in loans and deposits, I would say there is another $250 million-$500 million of industry-related business spread out throughout the footprint. It is likely approaching a billion-dollar impact as an industry, but my group alone is what we will talk about here. That does not include wealth management, assets under management. That does not include secondary market mortgage activity, both big parts of what we do. Good thing, it is a self-funded book of business. Sometimes, some years deposits grow a little faster, some years loans grow a little faster, but largely self-funded. The private banking side of the business, a little more deposit heavy. The commercial side, a little more loan heavy. 2017 loan growth, 43%. 2016 exceeded that number.
2018 will exceed that number. We went from a jog to a sprint. We could not have done that at Avenue. Pinnacle has given us resources, given us legal lending limit. We've hired. We really stepped on the gas pedal since the Avenue merger. Loan yield, 4.93%. That is heavily floating rate. Very little fixed-rate exposure there. About one-third of our deposits are checking, zero interest-bearing checking accounts. You can see as we grow, we get the benefit of the lift in our floating rate yield, and create nice net interest margin there. Fee heavy, credit cards critically important. I can't remember the last charge-off, so credit has been very pristine as well. A little snapshot on the loans side. The pipeline deposit side I feel really good about right now as well.
On the top there, that's new loan commitments, that's not outstandings, that's just commitments, again, not including secondary market mortgage. For every $2 in loan commitment, we'll probably fund $1. If you look back that, what's that? Six, seven, maybe eight quarters, that's well north of $200 million. That's really back to the time a little bit after the Avenue merger. We've done over $200 million worth of business. The loan pipeline is as big as I've ever seen it. North of $100 million there. That's actually grown since this presentation. If you look at the loan mix, 56% publishing label, 15% commercial. That might be something like a talent agent, owner-occupied. This is almost 80% commercial by dollar. If you looked at it by number of loans, it would probably be 80% private banking. A few examples on the right side of the page.
Won't go into those other than to say we're getting paid for what we do. We get roughly 100-basis point premium to typical risk in non-music industry-related C&I business. These are spreads in the LIBOR 300 plus. These are 50-basis point to 100-basis point loan fees. Loan devalues generally under 50%, often under 30%. This is a very good business for us. A lot of significant capital investment as well. Really good capital partners. What does our collateral look like? This is what it looks like. We have thousands of songs as collateral. You wonder, are they new releases? What genre are they? They are songs that you have heard. These are the annuities. There's Elvis, Beatles, Twist and Shout, I Want Candy, Rumor Has It by Adele, AC/DC, Back in Black. This is iconic stuff.
Every time you hear these songs on the radio, it's servicing our interest in some way. We had one client have eight cuts on last year's Ed Sheeran record, which was the biggest record of 2017. A lot going on in this space. Music publishing is now monetizing what we call ROW, or rest of world. We're seeing monies come out of China, India, Russia, thanks to streaming for the first time ever. The industry's growing in that way. Technology is helping with the industry quite a bit, both on the cost of administering these catalogs, and also think of Alexa or in-home entertainment, or Peloton as an example. If anybody has a Peloton streaming workouts live to your home with that music. We're starting to see all these new revenue line items find their way onto the income statements of our clients. Then sports.
Again, talked about just adding sports. We're really excited about this. We've been involved to some degree. We are the official bank of the Titans, the official bank of the Grizzlies. We have had some exposure in racing, as you can see there. All the leagues you see on that page, we have existing clients, professional athletes that are involved in these leagues. These are pro athletes, generally five, 10, 15 years retired into their career. An average client for us is $2 million-$10 million in assets under management, maybe half a million, $1 million in deposits, needs a mortgage. You get about 15 of these pro athletes, and it's a $100 million book of business. Since Tom joined us five weeks ago, our pipeline is well north of $100 million in this space already.
If you think about it, Tom had one client who's a coach. He's moved 14 times. That's 14 mortgages that Tom has done for this individual over a period of 15 years. We are often the only thing consistent in an athlete's life. We'll hop on a plane and go where we need to. You may say, why Nashville for sports? Believe it or not, there's a lot of top-tier sports agents in our market with CAA located here, another group called Rep 1, the agents are often the referral sources for us. This is not a commercial business for us at this time, but it certainly could be at some point in the future. I will note all of our marketing partnerships with things like the Titans, Grizzlies are really self-funded with direct business that comes from those opportunities.
Won't get into those details, those are real win-wins for us. Saving a little time for Artist Growth. What is Artist Growth? We had a kind of a cryptic press release, purposely cryptic, a few weeks ago, we've made a small investment in this company. I spent a couple of years on the road in 1999, early 2000 with a couple of '80s hair metal bands. I'm happy to tell stories later. Stay off of Slaughter's bus is give you. What happened in 1999 is that they would hand you a sheet of paper, a book at the beginning of the tour, it would say, "Here's your hotel rooms, here's your dates, here's your venues." Every morning you'd get a day sheet. It would say, rehearsal, go live, buses load, all those sorts of things.
It's herding cats to get all the parties involved and all the logistics involved using paper, right? There's a handful of companies out there that have created tour logistics applications. They've done okay. Artist Growth is better. Artist Growth has open API technology and can integrate with multiple parties. What I mean by integrate, if you have an agent, let's say it's William Morris, and they're integrated with Artist Growth, the core system for William Morris will integrate into Artist Growth and automatically, not manually, automatically, all of your dates, the venues, your guaranteed minimums, all your notes will be there. It can integrate with your travel agent. Anything changes, it's there. It's permission-based, so everyone on your team, your manager, your agent, your travel agent, your wife, your girlfriend, sometimes they have both. All there, all permission-based. You can see some things, you can see all things.
It's a one-stop shop for merch counts, for guest lists. It also has a financial component to it. Show by show, you can see how much money you've made and how much you've spent. To this point, the financial component of Artist Growth is manual. We will begin to automate it. This data is invaluable to us. Here are the opportunities with Artist Growth and what we're working on and currently in a beta test program on. I'm going to start with tour loans. I'll explain the others in a second, tour loans will give you a sense for what we can do. First of all, artists have agents. If you have a major agent, they book your shows for you. They book those shows with a promoter or a buyer.
I had a hunch that most shows booked by major agents get performed and get paid. We worked with the two largest agencies in the world and found out that 98.5% of the time, a show that gets booked by a major agent gets performed by the artist and gets paid, 98.5% of the time. 1.5% of the time, there may be a cancellation, it's rarely an entire tour that gets canceled. It's one show, two shows, three shows. On top of that, there's something called tour cancellation insurance. 98.5% of the time, our artists are going to get paid. That 1.5% of the time, a handful of shows, not typically the entire tour, and we have tour cancellation insurance. On top of it, you need to understand that an artist generally gets a guaranteed minimum. They do not take the risk of tickets being sold.
$10,000 a night, $100,000 a night, $1 million a night. The promoter takes the risk whether anybody shows up, not the artist. The promoter puts a 10%-50% deposit down that's held in escrow with the agent. Here's the problem. Before an artist goes on the road, they need to fund that tour. They have to put deposits down on light, sound, LED screens, staging, per diem, rehearsal, et cetera. What can happen, it can be $10,000, it can be $2 million, that they may have to come out of pocket or sell equity in a tour in order to get on the road. We talked to everybody.
We talked to Rod Stewart, to Megadeth, to Dolly Parton, to Jason Aldean, to Kenny Chesney, you name it, everybody said, "If I don't have to write that check, I don't want to write that check." Maybe they're a mid-size artist that can't write that check yet. Labels provide some tour support. It's very expensive. Long story short, guaranteed minimums, low cancellation risk. We have all the data built into Artist Growth. It's already there. Effectively, you load 10 minutes worth of information, give us a driver's license, your touring entity documents. An algorithm runs where we can advance against future guaranteed minimums. Within 48 hours, you can have all the money that you need for your tour. As each show is performed, the revenue is redirected back to us. We are paid back from revenue, not from net income.
That's the kind of thing that the data and Artist Growth can do for us. We'll also leverage it for credit cards. Artists don't always have the best credit scores. Debt-to-income isn't exactly a metric that works for them, but we have data here, we can approve credit cards with non-traditional metrics. On top of that, do things like linking the travel notes on a credit card to someone's tour schedule. We're constantly answering our phones because an artist can be in three states in a day, and they are constantly perturbed by the fraud notices that they receive because of their heavy travel schedule. We can solve that. We can build rewards programs around the type of activities and things that an artist may need.
Lastly, again, going to this debits and credits component of Artist Growth, we can link tour accounts into this program, effectively becoming a music touring specific online banking that the world's never seen. This is first of its kind, really proud of Pinnacle for being entrepreneurial here. It's received great praise so far, it's in beta test. We expect next year to be a pretty big year for Artist Growth. With that, I think I'm out of time, but really happy. A lot of horses in the race, sports publishing, from baby acts to iconic acts, the private banking side, the commercial side, and turning music tech into fintech with Artist Growth.
City National, I'm guessing, is your primary competition. Have they been vulnerable since selling to RBC?
City National is very good at what they do. So far, we haven't seen a lot of vulnerability.
Okay, one other question. What would cause you to open an office in L.A., N.Y., wherever?
The commercial side of the business does not require bricks and mortar. We're very well known in that space already. To the extent that we found the right people and felt like there was a private banking opportunity in those markets, we could do that.
Okay. Any other segments of the market you're looking at in entertainment?
Our hands are full right now with music, with this Artist Growth, layering on sports. I don't think you'll see us get too active in film and TV yet.
Okay.
Eventually, we'll add some expertise there.
I guess what I'm thinking of, I used to cover City National Bank, and years ago, they decided they were going to open a New York office, and they basically took the Broadway community in a manner of a month, right?
Yep.
There was a lot of deposit opportunity. I'm not thinking of that particular opportunity, but they were able to capture it fast.
Yeah
Dominate it fast.
We have a heavy growth rate right now, and I think there's lots more opportunity out there.
Yeah. Not sure if you can fully answer this question, there was a recent acquisition in the Chicago area, Fifth Third bought MB Financial, and if I'm not mistaken, Fifth Third is the official bank of the Nashville Predators, and I think MB Financial is the official bank of the Chicago Blackhawks, and that's kind of like oil and water. Do you think there's going to be an opportunity at some point for maybe the Predators to come under the Pinnacle umbrella?
That'd be more of a question for marketing. We're certainly Predators fans, and I'm sure if the opportunity presented itself, we would look at it.
Yeah, I think that's really the way to look at it. For the deals we've done, I think you know enough about our company, we're not interested in just having a logo on a jersey or something like that. We're not looking for exposure. What we're looking for is economics, all the deals that we've done have been tied to what are we paying and what do we get in terms of the exact revenue streams, how many can we sell, how many per, so forth. Does that pay for what we're doing? In the case of the Titans, it's extraordinarily lucrative. In the case of the Grizzlies, we're not through where we need to get through, it's on a trajectory that makes sense. If we can line up the same thing with the Predators, we'd love to do that. It'd be a great brand.
I'll add that a lot of the athletes we talk to have had fraud and mismanagement in their past when it comes to wealth management. When we can say we're the official bank of the Titans and of the Grizzlies, it's instant credibility. It's really, really helped kind of close the loop on that conversation.
Andy, I'm just curious. Sorry if I missed this, you said it's $500 million or so in balance sheet impact today. What do you think the potential of that can be in the next two, three years? Do you think this business mix of being 56% publishing, does that hold with what you're seeing moving forward? Maybe the last component of that is just average loan size within that $500 million.
Yeah, sure. I think there's still a lot of growth left. We're at our 2022 number right now. I've been really, really pleased with the market. I do think the music publishing business will hold and continue to grow. A lot of the facilities we've closed might be $30 million, $40 million in size, probably $20 million-$40 million. Some of those have $2 million, $3 million, $4 million funded right now. As they begin to acquire content, honestly, we could stop today and grow 20% a year for the next two years with the deals that are on the books. The growth is certainly there, and as I mentioned, really the market doubled with streaming. Now record labels are fair game to lend into as well.
Add sports to it, add whatever Artist Growth and a tour lending program could do, you can start to see that we hit $1 billion and keep going. Other thoughts? Thanks, everybody. That one? This one.
Let me flip it to you. There we go. All right. Thanks, Andy. Andy mentioned something about Pinnacle was good enough to be entrepreneurial or something with Artist Growth. The reason we were entrepreneurial is that Andy Moats said we need to do this. Brag on Andy a little bit. As far as somebody that's well respected, well known, in that industry, you'd have to go a ways to beat Andy Moats. He's been around it for a long time now. You saw a bunch of pictures. We're not going to say they were our clients, but I'm not going to say they're not our clients. If you ever want to go have a beer with him, he can tell you some stories too, because he's in an incredible spot. All right. Last kind of formal session of the day, Bankers Healthcare Group.
We've got Al Crawford, the CEO there. Here. Not there, here. I've known Al now for, call it three or four years. I've not known a guy like Al ever before. He's got a passion for what he does that is, I think, remarkable. He's a great partner for Pinnacle. We've enjoyed this relationship immensely. He's come down here from Syracuse, New York. He said, "Well, what do you want us to say? What do you want me to say?" Terry and I were meaning what to go with. Well, our intention here is to kind of demystify Bankers Healthcare Group. With that, Mr. Crawford.
Thank you, Harold. Thank you, Terry. Again, as Harold said, I'm Al Crawford. I'm Chairman, CEO of Bankers Healthcare Group. I'm one of the original founders. We founded the company back in 2001. Two of my partners, Bobby and Eric Castro, were brothers. They were very big in the lease franchise equipment financing origination. They had worked for many different finance companies. I considered them, they were in their 30s at that time, two of the better originators in the country when it came to small-ticket lease finance . My background was a little bit more of a poor man's securitization, where I worked with community banks around the country and matched banks that had a need for assets with banks that had maybe a concentration problem or had a FDIC regulatory problem.
I would move portfolios from one bank to another bank and charge a fee to do that. Bobby, Eric, and I met in Martha's Vineyard, and literally within two weeks, we were talking about going into business together. We were both brokers. Bobby and Eric were brokers. I was a broker. We had never really owned a business ourselves. The idea of maybe building something using their ability to originate and my community bank network was appealing to both sides. Our strategy was I had placed a lot of different medical paper over the years before meeting Bobby and Eric, and they had done a lot of medical originations. The idea was to stay away from the bigger institutions, stay away from BofA, stay away from Capital One, Wells Fargo, SunTrust, who were some of the bigger players in the medical space.
We went with an idea and a concept that we'd really go small ticket. We'd work in the $100,000 and under ticket size, and we would bring a working capital loan just specifically to the medical community. We would stay on the commercial side of the equation, and we pushed the term out aggressively. We pushed the term from what back in 2001 was custom, was about 36 months for a short-term, small ticket loan. We pushed it all the way out to 84 months. We offered an affordable payment to the doctor. We thought, in the medical space, because again, practices should improve, their performances should increase.
Anybody who goes to a dentist in the room, anybody who goes to a doctor, nurse practitioner, I would make a pretty aggressive bet that you go to the same individual year in and year out until either you move or they move. If you stay in the same area, chances are you visit that same healthcare practitioner year after year and their practices grow. We didn't have any fear of going out to 84 months. In fact, we thought it would help the medical professional if we gave them an affordable payment that would coincide with the growth of their business. Surprisingly enough, we did not like startups. BofA, they're a behemoth in the startup business, especially on the dental side. We didn't want to run into their rejects. The average age of our doctor, our healthcare professional is approximately 15 years.
Ours was a kind of concierge service to a doctor who was established, who needed some type of capital, working capital for any reason, really, on the commercial side, and needed it and wanted it in a hassle-free environment. We concentrated heavily on going to those individuals, and those individuals, if you look back over the last 17 years, tended to be in business for about 15 years. They were experienced, their practices were well established, they were established as doctors, and there really wasn't, in our opinion, a big credit risk for $100,000 with a practice that on average was making about $1 million a year. The value of making the decisions faster than the competition. This was a big pet peeve of mine. I knew the banks well. I had worked with the banks over the years moving portfolios.
One of the things I learned pretty quickly about the banks was that they really took their time to make a credit decision on portfolios that I would bring them. One of the things that I said is I changed my opinion in terms of how credit can be analyzed. I said to Bobby and Eric, "If we can make a system, if we can have the technology to be able to really review the information at light speed, we should be able to give a decision to the medical professional the same day." I was a little bit of a contrarian where I said, "I don't think taking time increases credit value.
I don't think moving slowly increases credit value." I think the credit is what the credit is when it walks in the door, and if you take two to three to four to five weeks to review the credit, that doesn't make it any stronger than if you had reviewed it and gotten an answer to the borrower day one. We leveraged my knowledge of traditional banking, and we wanted to be fast. We wanted to get the information in the door. We wanted to create a platform that would score the credits on the individuals that were coming to us, on the corporations that were coming to us, and we wanted to get back to the medical professional immediately. The second thing that was key in the model was we did not want to rely on the medical professional getting us the information.
We use third-party providers to get us the information at light speed. I have, or my credit officers, we have about a 15-person credit department, have the doctor's tax returns within four hours. Straight from a provider, straight from the IRS. We have their W-2s, we have their 1099s. We get it all within a 12-hour period, and we pay to get it. The applicant comes in, they sign a very quick release for a Form 4506 or another form that allows us to get their W-2s. They sign that. It comes online on our system, our vision system, which is proprietary. The system prompts it to go and request the tax returns from the IRS and all the other financial information. We use iLien to check lien searches to see if there's any other debt out there. We do license searches.
The system is prompting it all on the way. It does not hit a credit officer until it is scored, and it is either accepted or it's declined with the initial screen. I know I'm kind of getting into the weeds here a little bit on the credit side, but it's important to understand that we can go through the whole process, have a very presentable package to our FDIC banks, and we usually accomplish that within 12 hours. It's full tax returns for three years, W-2s, cash flow analysis, DTIs, everything that you're looking at at a traditional bank, but we do it for the borrower. At the end of the day, we've actively gone after the borrower. We bring the borrower in.
We go to the borrower's practice, and then we make a decision within, generally speaking, 12 hours, and we're back to the borrower with either an acceptance and approval or a decline within that same amount of time. For that, we wanted to get paid. If I could give you an example of what we're probably similar to in today's environment, it would be Uber Black. I tell a story. We have about 875 banks that we work with, and I meet with them. I give seminars about every two months around the country and update the banks on where we are, what our financial position is, what the future looks like. It's usually about an eight-hour session. I usually tell them the easiest way. Why does a doctor come to us? Why would a borrower come?
You'll see later on in the slide, our gross rate is 14.25% in the first quarter of 2018. Our sell rate, without disclosing our gross rate, to the 875 banks that bid on our auction every day is, I think, a 5.15% right now. I tell the banks, you underwrite it, you take a look at it. You look at this loan as if it walked in your lobby, because it is walking in your lobby. We're bringing it in your lobby. We've already funded it, and we're selling it to you. We're in the low 5s with the auction. Where are we as a company? We're in the low 14s with the service that we're giving.
A lot of people say, "Why would a doctor come to you at 14% that a bank would lend to at 5%?" I say, for the same reason when I'm in New York City at our New York City office and I go out to LGA, I can take the subway for $5.50. I would never do that today. I might have done that 30 years ago, but I would never do that today. I could take a taxi for probably, I don't know, probably like $45. Uber Black costs me $125. I usually take Uber Black because I know they're going to be right there at the door when I walk out.
I know they're going to drive me in a clean car, air conditioning, no smoke, and they're going to get me to LGA right on time, and it's going to be a very pleasant experience. For that, I pay the premium. I can get there for $5.50, but I pay $125 to get there. That's the exact same reason medical professionals come to BHG. They're going to come in today, and I can fund them in 72 hours. I can deliver a package to the banks that has as much information as they will get over a four to five-week period from the doctor if they rely on the doctor to go get that information for them. It doesn't appeal to every single doctor out there, but it appeals to approximately, right now, about $70 million a month of $100,000 loans.
It's the model that we've built the business on. We use, if you look down through, marketing platform is key. We're approximately a $225 million asset company. If you matched us up against a bank and I put my budget for marketing, digital, outbound, mail, trade shows up against their budget, I would probably guess that I'm probably somewhere as in $15 million a year more than theirs. We'll spend $16 million, $17 million this year going after the client, driving the client into our lenders, which is a sales force of about 68 people. We will constantly be knocking on their door. Our marketing platform is key to producing the lead flow. They're the group. It's a 25-person marketing department in Syracuse, New York. We're probably one of the third biggest agencies in Upstate New York if we were an independent agency. Trade association involvement.
We compete with B of A's medical division aggressively, not necessarily for their big $1 million loan. We do compete for the same doctors for the $100,000 working capital loan. We see them at trade associations. I'll tell you the biggest difference to give you a little flavor of BHG. They're going to own the show. You go up to Yankee, down to [own Boston], they own the show. They have just huge presence from the walls to the path that you walk along. BHG's going to have a booth about the size of this. I'm going to have three guys in that booth that if I catch one of them inside the booth for the entire show, they're gone. They're going to be out in the aisle. They're going to meet and greet every single dentist that walks through that path.
We're very, I use the word aggressive in terms of if we're going to be at a show, we're going to be at a trade show. We're not going to be in Milwaukee, Wisconsin, consequently, you've got maybe a five-second chance to meet that doctor, that dentist, and make a relationship. Get out in the floor, meet them, talk to them, and let them know who BHG is. We brand, and we're aggressive with our branding. We're at all the shows. We don't have the budget that B of A has, nor SunTrust, nor Wells, but we have guys and gals who like to talk to people and who like to sell, and we have very much a sales culture. Underwrite loans pursued to strict standards using automation to the fullest extent possible. We have over 100 credit models. Loss rate last five years, approximately 2.54%.
Again, it follows heavily the national average. I think we'll be under 2% this year. In 2018, the portfolios are performing better than they've ever performed. Again, we're running off a growth rate of 14% plus. If we can run at 2% or honestly, 2.54%, we'll run at that for the rest of our lives and be very happy. Fair Isaac Professional insight and staff. We have over 15 analysts. I think our special sauce today, and it wasn't in 2001, our special sauce is that we've underwritten over $15 billion of individual working capital loans with doctors, dentists, and vets, and healthcare professionals. We have all that data. I've got 15 very much more intelligent than me, analysts who pore over that data. We funded, I think, about $3.7 billion of that.
The balance has either been declined or didn't accept our loan, we've got a lot of information on it. We have a lot of behavioral information as to who responded, what they looked like when they responded. We use Fair Isaac, TransUnion. We buy a tremendous amount of data from them before we even outbound. We can look at funding behavior. We can look at response behavior. If you look at the one slide later on, it shows that our lead flow is down in 2018, our margins are way up. That's by design. We're bringing in better quality lead flow that we know from a behavioral standpoint will close. They will fund. We don't want to bring in a lot of lead flow that's not going to fund and jack up our expenses.
In 2018, the quality of our lead flow by design is up, and our pull-through ratios are higher than they've ever been. Again, I attribute that to the 15 analysts who pore and pore over the data that we've accumulated over the years. Vision Phoenix, the bottom, that's the proprietary system we run on. FDIC has been in. OCC was in in 2003, 2004. FDIC, OCC was in 2010, 2012, 2014, 2016, 2017, and they're coming in in July with 15 examiners. We're not a bank, but we open our doors wide open to examination, and we've been examined heavily for the last 17 years. FDIC said if the banks in the U.S. ran their credit on our Vision Phoenix system, they would need 50% less FDIC officers because it is so user-friendly.
It stores every single piece of information that we get from the borrower in a cloud online. We have no paper. It is all stored. It is all prompted. It collects the data itself. It runs along a river, and by the time it gets to a credit officer, everything is in a compartment and everything is stored. It's very secure. At that point, our credit officers do manually handle it. People have asked me historically, "Are you guys a fintech?" I said, "I don't know if we're a fintech. I know we use technology to an extreme degree to move very quickly, but I also know we talk with every single borrower that we work with." We just set it up for the credit officer, then the credit officer has a discussion with the borrower, and every single applicant has a live voice when they come in.
They work with a sales representative. 72%, I think it is, of our leads come in through the internet. We're looking at, I think, 4,200 leads approximately a month. Again, 70%, 72% of those are coming in via the web. We sell loans to financial institutions seeking improved loan yields and commercial loan growth. It's been a super growth for us. Banks like Pinnacle. It's been a super relationship to have the growth that we've had. As we move along here, we've had. There's another slide in here that I can jump to quickly and give you a little bit more detail about the banks, and I'll do that in a minute. Over $3.25 billion in commercial medical loans originated. As I said just a couple of minutes ago, $1.71 billion outstanding as of 12/31. $711 million originated in 2017.
The default rate, we talked about hoping to move more towards the 2%. Diverse financing network, having sold loans to over 875 U.S. banks. In 2017, we sold loans to 422 different banks. In 2017, 118 banks bought their first BHG loan. Yes. Okay. Over 358 employees in three major locations. As we're moving along, loan fundings have grown. We went through 2008, 2009, 2010, 2011, 2012, and we actually picked up major market share during the mortgage meltdown. We really weren't affected at all. I think during that period, we had probably 125 banks that were buying from us. We probably had about 30 or 40 that went on the sideline. Quick story. Out of The Bank of Tampa, a very good friend called me up and said, "Al, I'm shocked. We're getting a run on our deposits." Bid a $5 million order in with us.
We were direct placing it was before the auction. He said, "I'm going to have to pull back." We had 75 other banks that said, "We're not having a run on deposits," and continued to want product aggressively. In the earlier days, OCC would ask me, "Al, why haven't you gone with a big money center bank or a bigger line?" I said, "Well, I grew up working with community banks." It's a very diversified platform that we use, and today we've got 875 banks. Like I said, we went through the mortgage crisis, and we actually took market share down as some of our competitors were on the sidelines. Loan distribution, as you guys can imagine, the medical community follows population. California, number 1, New York, number 2, Texas, number 3, Florida, number 4.
You get into Pennsylvania, Ohio, Illinois, and then it starts to get a little bit smaller after you go through those big 5, 6 states for us. We market, we look at everything. I mean, we're looking at physicians, dentists. Those are your average FICO scores that we get. As you see the bands there for our borrowers. The other ones, you guys, I'm sure can guess. The higher the FICO, the lower the profitability, the tougher the risk-based pricing becomes. That's one of the other big differences, I'd say, between us and a bank. We risk price. Period. I do not put a rate sheet out on Monday morning and say everybody fits into this box. We have 12 different groupings. Within each grouping, we have 5 different levels. We analyze performance aggressively, and our top rate is 23.99. Our best rate is 4.99.
Our most profitable rate is probably in the group 5, 6, and 7, where we're probably living in that 12%-14% area. They tend to close well, they tend to perform well, we tend to be able to get a little bit of rate on a risk-based prices. I mentioned this earlier, I won't bore you guys with this again, we use analysts. We use them in marketing for behavioral studies, response. You'll have a group of doctors that maybe it doesn't pay to go more than once every three months. You'll have another group of doctors that you should be mailing every week because when they want to borrow, they want to borrow that minute. If our piece is in front of them, either digitally or by mail, if they want to borrow that week, they're going to get the money from somebody.
If you're not in front of them, they're going to borrow from somebody else. With that group, we will mail them. We will digitally contact them. We'll use Facebook, we'll use Instagram. We'll use any social media that we have access to. We will hit them weekly. There may be another doctor, group of doctors, your top guys, they don't borrow. We don't waste money sending it to them on a weekly basis. We'll send it to them on an annual basis and see if we can catch them there. The rate of return on those specific mailers or those specific contact points is very small, so we're not going to waste a lot of money on those specific ones. If you move over to the participant analyst, we have a marketing acquisition model. We have a credit scoring model.
We tune that credit scoring model up daily, just following what works, what doesn't work. We might see some interruption in loss and say, "Hey, we've got to put that risk rate." We'll continue to do it, but maybe we put 150 basis points more to the sales force when we're working with that group if we're seeing a little bit of interruption there. We have a closing scoring model. We have a risk model, data management, external data, demographics. We have a data warehouse, which obviously is extremely valuable. We rank our sales guys. They got a board as big as that area right there. My number one guy converts 72%. He's a beast. You can't beat the guy. He gets a doctor on the phone. The doctors love him. He converts to an application of 72%. Our worst individual probably right now is maybe converting at 58%.
They won't get a lot of lead flow. He won't get a lot of lead flow. We will continue to push, very much like an NFL team. I tell the staff this, "If you're a ridiculous back, you're going to get the ball." If you're good at conversion, if you're good at selling, if you're good at talking with a OBGYN in California, you're going to get the ball, you're going to get the calls. If you're not, you're not getting the calls. We have an aggressive culture. We have a very communal culture. We believe heavily in organizational health. I meet with them once a week. I read a book with them. I'm reading "The Culture Code" with them right now. We bring in about 50 of the managers. We read "The Culture Code." We believe in backing each other.
We don't permit a lot of backwater channel stuff. I don't want to hear people talk about other people or talking negatively about the company. We're very communal in that sense, where we're really looking to build a team and a team idea to be successful. You guys can see this. This is a stat. Lead flow performance. Your average lead, 4,241. You're looking at revenue per lead. This is what I was talking about, which fascinates me. Our first quarter 2018, lead flow is down, actually. You're at 4,002 versus 4,241, but average revenue is $7.5 million versus $5.6 million. We're doing more with the leads that we have. We're targeting better people from a behavioral and a credit standpoint, they're going to fund, and our margin's up. Credit statistics. Walk you really quickly here.
Our average CMS, that's our internal credit matrix system that's constantly being updated, is a 752. Our average FICO is a 728. Our average borrower makes $252,000 a year. Our average approval size is $71,000. Average debt-to-income is 39%, and our average years licensed is 17. Funding, that's our 875 banks. We have nine bank representatives that cover the country. On a regional basis, I think there's four states where we don't have a bank that's purchased from us. Maine, whatever the one in the middle there is, Alaska, and Hawaii. The auction came about four years ago. We were at 7% on a sale rate direct to the banks. We screwed around with this really makeshift auction.
Our tech guys, I said, "Let's try making them bid a little bit." Within two weeks, they dropped the rate under six, and within a week after that, they dropped the rate under five. Needless to say, we took every single person that was available in the technology division and said, "Build this auction out," because it dropped rate crazily. We've had what now? We're going to have four prime raises, or we've had four prime raises. We've actually had a drop of 0.19. We're down 19 basis points on the auction in 2018. I think the average yield that we're looking at is, like I said, I think it's around 519, which is actually down. It might even be less than that from where we were last year, which is crazy given the increase in the short-term rates. Again, I think it's competition.
You have a bank that's maybe regional that says, "Hey, I'm in Nashville. I like this doctor. I want to buy him." Then you got a big bank that's coming in over the top, maybe out of San Francisco. They both want to buy that loan. They'll compete with it until 3:00 P.M. The auction runs for 24 hours. Let's say it comes out today at 3:00 P.M., and it runs till tomorrow at 3:00 P.M., and it's a cold stop at 3:00 P.M. Then we close the same day, send docs out, and we'll fund tomorrow on all the auction deals that went today. Number of banks, we've talked about this. Origination, origination credit, funding placements, institutions. Probably there's an interest in substitution collections. Substitution collections, I came from the broker world, as I told you guys. I came from the asset brokerage side.
I saw a lot of great deals, I saw bad deals. I saw companies that leveraged up and got in trouble because of the leverage, then did stupid things because of that leverage. I said, in our company, we are not going to legally stand behind it. I said, matter of fact, given the mortgage crisis, we are also not going to do handshake deals. We're going to put a piece of paper out there that says, we may opt to sub a deal at 90 days. We may opt not to sub a deal at 90 days. We do not sell to pension funds. We do not sell to individuals that don't understand finance. We only sell to institutional banks. Banks understand what it means to lend.
When I stand up there every two months, I tell them, "Sorry, you'll blow through sale on us if you count on our sub." The sub's there as an option if we are financially aware at all to go ahead and say yes. We vote on it every month at the board. We bring them up. As you guys have seen the growth of the company, we've been very fortunate. Our financials have been strong every year, we've always opted to sub. We build a lot of margin in. We have a recourse liability on balance sheet, we have a liability, and we have reserves for our off-balance sheet propensity to sub. If we stop subbing, that recourse obligation would flip over to the asset side. I think it's $72 million today.
It's something that is, as the slide says, to keep liquidity in the bank network. They appreciate it. FDIC appreciates it. We are very aggressive to say you cannot count on it. Every single lawyer, every single attorney that comes in and reviews the documents before their bank buys one, takes a look at this and says, "Guys, this isn't worth the paper it's written on," and tells their board that they cannot count on BHG to substitute a deal if it goes bad. We say, "You're correct, but you're a sophisticated institution. These are good loans with great doctors. Don't look at the substitution to buy this. Look at the credit underneath the loan," and that should suffice as a bank for you to participate on the auction.
If we're there and we're in the right mood and everything's working out, we will sub the deal. We do not have a legal obligation to sub it. Knowing that we're probably going to want to try to sub the deal, I think we have the best collectors in the country. Again, they are low salaried, high commission, get the payment back from the doctor. They are extremely compliant. They've been to CFPB courses and everything else. They're very compliant, but they're also very aggressive. For them to pay their mortgage, take care of their family, they've got to collect the money. Just about every single bank out there, I don't know of any that don't elect us to collect it. All funds are transferred ACH from the borrower to the bank.
Again, I saw too many debacles that I didn't like, we don't have the money going through us. The only time we handle the money is if we're in a collection mode. Otherwise, it's a present value discount formula where we're getting ours upfront and reinvesting, or if there's an interest differential where there's not a present value discount involved, we sweep on a quarterly basis from the bank, on an account we have at the bank back to us. Products in the future. FundX, we're going to be one of the 14 companies that has a non-bank SBA license. We went into the process. We bought it for $2.3 million a year ago, I think we are days away from getting the federal government approval.
We can start moving towards some of our bigger competitors that, I don't want them moving into our space, We get opportunities for half a million, $2 million, $3 million dollar loans every single day. I'd say we probably get 10 opportunities a day. We will start to fund those. We will probably sell them out through our bank group, at very healthy premiums. Keep the non-guaranteed portion and look to generate some real nice fee income from the SBA license and the ability to go into a bigger ticket size. I didn't mention it earlier, We get a little bit of weak in the knees, about $300,000. I really like the 50 to 200 level. Average term, as I've said, 84 months. Average ticket, $100, $125. We'll move up higher if it's a multiple guarantee practice.
Every deal we have gets personal guarantee from the doctor also. That's honestly what we chase, not the equipment. Patient lending, I think it's one of the biggest markets out there. It's $450 billion. It's crazy. We backed into this. Our banks, these 875 banks in 50 states, have relationships with every single hospital and surgery center out there. We've brought our patient financing program, our platform, in conjunction with Epic River, and we connect the bank with the local provider. The bank is introducing us to the provider. We're going in and selling the provider, the surgery center or the hospital, a program for them to finance their patients. We're flipping right back around and taking the local community bank, let's say in Mount Vernon, Illinois. They've got a 55-bed hospital. The bank in Mount Vernon brings us in, introduces us to the hospital.
We set up the technology to link the hospital to the bank. The bank funds the deals at 5.550%. We don't fund. The patient pays about 10.99%. Our fee is 300 basis points. We're not funding. The bank is funding. We're not involved in any risk. The provider is providing a 60-day buyback, full recourse for any loans that go bad. My first question to the provider, I've spent a lot of time in the last year in the field, is do you charge before or you charge after? If it's a hospital, they charge after. I said, "You already own the loans.
You're already under full recourse." For us to go in there and technologically finance and give them an electronic platform where the patient can pick their own payment and make it an affordable payment, instead of getting stuck with that high deductible as a bullet, it's very appealing to the patient. The patients tend to pay at a much higher rate, and the hospital can practice doing what they do well, which is healing people, and we can come in with our bank partner, and we can collect, and we can do the financing for them. We've talked to probably 100 providers in the last six months, and I'd say right now we're at about a 90% success rate for those providers coming forward. I think we can be the number one patient lending company in the country. I think we can knock LendingClub out.
I think we can knock CareCredit. Everything I've heard from the providers I've talked to around the country, they don't like the other options. Right now we're dealing with a number of-- AmSurg right here is 177 surgery centers. We're in the final negotiations with them. Surgery Partners, we're talking with them. We've got five different hospitals that we're working with locally, as well as, we're hopefully on the final strides with Ballad. It's out of Johnson City, Tennessee. Again, we're looking, hopefully, I'm thinking over the next three to five years, if we have $1 billion outstanding in receivables, our fee on that is three points, so we'd be looking at $30 million, and that $1 billion doubles the next year, doubles the next year, because the amortizations are 60 months.
You'd probably peak out on an AM probably around $3.5 billion and earn that same three points from those same providers over and over. It's an industry I really love. Again, we are not the lender. We're more of the facilitator and the aggregator in this marketplace. The exciting thing is we have the banks Close to 900 providing access to the surgery centers and the hospitals in their communities because generally they're on the boards there. We're bringing in the ability of the bank to lend, and they want to lend in their community and putting the two together, and it's really a nice marriage for the two of them. We're providing the platform with Epic River and the introduction, and we're charging a fee for that. We've talked a lot about the value proposition. Let me see about speed.
There's supplemental financial information also that's included in the back. Any questions? Yes.
How has the coupon for the docs changed, how do you expect that to change as rates continue to move up? Do you think there's a point in the rate backdrop where the demand for this product from the docs drops off?
That's a great question because that's something I'm always concerned about. Does the demand stay there? We've been on a minimal of 10%-15% growth a year. I think rates moving up is actually helping us because as you saw in 2017, I think we were around 14%. It gives our closers and our sales guys a chance to say, "Doc, have you watched the news? Have you put on CNBC? Have you watched Rates are going up." In the past, we just sat there with rates just on the ground. It was honestly a little bit more difficult a year and a half ago to get a doctor to lock in to 14% than it is today.
Our top side has actually inched up a little bit, we've been able to hold the downside, the auction side, because I think of the competition of the banks with their experience for the loans. Today, at least, in this upward-moving rate environment, we've been able to get a little bit more out of the top side. Hope to continue. Yes.
Maybe talk a little bit about the evolution of the business. When it first started, what was the turnaround time to get back to these doctors? What was the monthly closings? Over the last 17 years, how has the credit cycle emerged within the business? Did you see any kind of uptick when you first started out? As the technology kind of backfilled it, has that come down or has that been pretty stable at that 2.5%?
Great question. As an owner and with my other two partners, it was just the three of us and two other people. The credit was basically what the banks really wanted at that point. We had $25,000 in capital. That's it. Bobby had a deal that he wanted to take away from B of A for $1 million. I said, "Bobby, our average ticket size is like $75,000. I don't want to go on $1 million." He said, "It's the best deal." We didn't do the deal. The reoccurring theme is Bobby's type A. He's a sales guy. He's never met a doctor he doesn't love. He's never met a doctor he doesn't want to get funding for. He lost his vote in credit after about six months.
Having said that, I would say that we are much, much better today than we were when it was just Bobby, Eric, and me, and the banks. We ran loss ratios in 2008 and 2009. December 2008 was a scary day. We actually had about 153 ACH failures that came in that month. We were running at probably 70. I went home the end of that and just said, "When does this stop? I mean, these guys are starting to get hit." It was also a little bit of a perfect storm for the doctors. They loved us back on real estate, and they loved to day trade. At the end of the day, when the market crashed and the real estate market crashed, they were a bunch.
The thing I loved about them is you had your dentist that was maybe playing golf three times a week and practicing maybe two times a week. During the crisis, these guys went back to work. These guys, these gals, they stopped playing golf five times a week or three times a week, and they got in that office five days a week and went and pulled teeth for the government on Saturday morning and made cash. We saw an interruption in delinquency, we also saw them come back probably at a much faster pace than the overall market did. We followed the market. We definitely bellwethered off. I think 2009 was our high mark for default. Much higher than today. We've come straight down every single year since then. I will say this, in 2012, we looked at outside analytics.
The company wanted to charge us a half a million dollars. I said, "Forget it. Let's develop our own team." We went out and hired four or five, number one, Stanford, MIT, put them in charge of going through the data, put them in charge of building a better credit matrix system for us. That team's grown to 15, 16 individuals today, they're constantly using the data from the portfolio to make changes to the credit matrix and the credit officers and the whole vision system going forward. I think today we're much better than we were before, I think every day we improve because we do have a lot of intelligence. In defense of Bobby, Eric, and me, we didn't have $15 billion worth of data to see who was going to be successful. We didn't have soft pull technology.
We can go into soft pull. We can get information from TransUnion. They're on their game. They're providing a tremendous amount of intelligence for lenders if they're willing to pay for it. We can take a lot of our historical data, pump it into TransUnion, say, "How would this have performed?" They're going to charge us for that, it gives us tremendous insight as to what we could expect on a behavioral basis going forward with similar type of profiles. I think technology Intelligence, AI, these other companies, putting those people in place, us buying those services from those companies has made it a safer playground for us and the economy strong, which helps.
Catherine, one last question. Al, maybe you could hang around a little bit and let people ask you some questions offline, we'll take one more and then move on.
Just a supplement question on the credit side. All right. You said, you have the option to purchase these loans back. You want to because you have a better credit collectors. Can you just talk about the past, I don't know, maybe four or five years. Credit's been really good over the past four or five years. Can you talk about, is there an example recently where you have opted not to buy the credit back? Why has that been? Recently, have you been buying back all delinquent loans just because you can, because you have the liquidity to do so? At what point do you think that changes? What will make that change?
Hopefully one, the last five, six, seven years, we've never opted not to buy the loan back. When Crowe came in in 2012, we had 14% reserves because I was very conservative. I was paranoid about the substitution. I wanted to be able to opt. I was worried about bad markets. In 2010, at the exact wrong time, I jumped the reserves up to 14%. We held that at the banks. We held a big part of that present value right at the bank and with some big investment houses. We held it with Merrill Lynch, Stifel, where we could get a better return because we could buy block investments and not be beholden to the banks just giving us a very small depository rate.
Crowe came in in 2012 and made the biggest, according to them, made the biggest one-time adjustment up to an audited financial statement they've ever made. We literally had to have the CEO of Crowe sign off on it. I think the adjustment was a $26 million reversal, which they took out of the liability, the reserve side, and slapped it over on the asset side. I don't love. I argue with Crowe all the time. They tell me that it's not a question, it's not an argument, it's GAAP. I'll say, "Hey, I'd like to be a little bit more aggressive with reserves for a rainy day." The economy, as you said, the economy's good. Doctors are paying. Everything's going well. I wouldn't mind taking a little bit of the revenue and putting it more aggressively away.
We use a 50/40/10 methodology, bank methodology for the reserves based on real loss over the last three years. When I talk to our senior partner at Crowe, he says, "Al, I'm happy for you, but we're going to stick to the methodology. That's what's GAAP compliant, and that's what you've got to use for reserve." In the business, of course, I worry about it. I'm always thinking about it. It's something I want to be able to do. We do have risk plans that we've talked about. You could isolate 50 of your best banks in a really bad time and say, "Hey, we're going to continue to sub there, but we're not going to sub anywhere else." Again, those are just worst case scenario plans that we've had.
I do think, as I said earlier, I'll share this quickly and give the mic back to Terry. When Crowe audits our bank, any new bank, they send out an audit statement per loan, and they say, "Do you rely on BHG or do you rely on the credit?" When they came in in 2012, they audited every single one of the banks that owned our portfolio. Crowe came back to me and said, "We did not have one bank that came back in audit that said they rely on you guys." They're relying on the BHG sub. Every single one said they were relying on the underlying credit. Each year now, they audit just the new banks that buy from us. They don't audit the existing banks in terms of with that question. They audit cash flows aggressively with the banks.
I think we do have a customer. I kind of equate it's probably a stupid analogy, but you buy a car, you have the car, it's a three-year lease, and they say, "We'll give you free oil change and tune-up for the next three years." If they went out of business, you could probably find a place to get your oil changed somewhere else, and you could probably get whatever you need to fix someplace else. It's a nice add-on to have as long as they're in business. With us, I think the banks are kind of forced by their auditors, by us, by their in-house accountants and their in-house attorneys to say, "You can't rely on that BHG sub." They are banks, and they do know how to lend. I've talked to FDIC many times. I've been in Washington to talk to FDIC.
I said, "Listen, guys, you got approximately 1,000 banks with 1 billion secs. You have a million secs at each bank. If something ever happened to us, which we don't foresee, but if it did, your exposure to us is a million secs, which is 16 loans spread out across the country, ACH into your banks." I don't see a lot of risk with 3% cash put up at every single bank, which is more than the losses that we've run over the last five years. We do, and that's something I didn't mention, we do have that cash deposit at the bank for a loss. If we decided not to sub, they do have access to that too.
Ever since you've had the partnership with Pinnacle, what's been the biggest benefit to you since that partnership has happened?
No doubt about it, hands down, structure. I'll tell a quick story. Terry probably doesn't know this, but Hugh Queener and Harold called me after they first bought it, and they said, "Hey, Al, what's your next 5 years look like?" I said, "I have no clue what my next 5 years look like. I know what tomorrow looks like, and I know we had a good day in funding today, but we don't spend a lot of time on pro formas." That was pre 3 years ago. They have made us much, much more, I'd say, market savvy in terms of, we hired Wall Street analysts. We brought them in. We hired a P&L guy and a P&L guy. We didn't have those on staff. We have structured board meetings.
It was kind of like Bob, Eric, and I just got together and said, "Hey, what's good with the business? What are the dangers of the business?" When they came on board, Hugh and Harold are both board members. We meet like religion for a full board day, talk about the good parts of the business, the bad parts of the business. They've been a phenomenal partner for us, and they've brought us a tremendous amount of structure. We are very entrepreneurial, and that's helped. The guidance numbers that we give them, we're working until 12:00 on Christmas Eve if it's a number we've given them, and it's a number they expect. That's brought expectations, and I think that's brought performance too with the relationship. They've been a great partner for us.
All right. Thanks, Al. Thanks, Harry. Thank you. Appreciate it. We really did not have an objective to demystify BHG. We just wanted to spare you the Southern drawl for one presentation. That was Al's principal objective. We're sort of at the end. I'll try to put a bow on what we've done. Maybe. Need another presentation here. Do you have a clicker? I do have a clicker. Click through. Use that click through. You can move on. I assume click through means move it forward? Yeah. There we go. All right. When we started here today, we said we wanted to showcase the depth of management team. I hope you have gotten the feel that we've got a lot of smart people here.
I hope you've seen that there's a cohesiveness here in this team, that folks work together well, have good understandings, are really pros at what they do, and we got lots of flexibility that extends throughout the geography of the company. I hope that you've had a chance to sort of get behind what explains why Pinnacle has been such a high performer. What explains how year-after-year and quarter-after-quarter, they show up as a top quartile bank, and again, we talked about those reasons for that. One of it is because that's the way we set the goals. The goals are specifically designed to produce revenue and earnings growth that would cause us to be a top quartile company. Beyond that, the incentives are built so that nobody makes any money unless we're able to do that.
That drives a performance culture that's really important in how everybody thinks, how everybody performs, and so forth. I think the confidence that we have for attracting bankers is really important. I know you hear people talk about things, but I can tell you what we do here is systematic. These guys didn't say it, but I promise you, they would tell you when they're talking to me, they're talking as much about the recruiting pipeline as they're talking about the business development pipeline. There aren't many banks that approach their business that way. This idea of attracting talent is different than most companies I'm familiar with. Again, I think when you try to get down to the why does that work that way, it primarily works that way because these big regional companies are difficult environments to work in.
Again, the goal is not to disparage them, I'm just telling you it's a hard environment to work in. When somebody can come across and have the freedom to take care of their clients the way they want to take care of them, respond to their clients on a quick basis and so forth, work with pros in the market, that's a really attractive thing. My belief is that'll hold up over an extended period of time. Those are some of the reasons why it always shows up, and my belief is that that in conjunction with having a highly engaged workforce, which I do have a sincere belief that I think is data-driven, that if you can create an engaged workforce, you will produce better sales outcomes, better service outcomes, higher productivity, and less turnover.
Again, that's not my data, that's Gallup's data, but it's pretty compelling. Our company's built on that. It's a real thing. It's not a hype. In good times and bad, our people have jumped in and engaged and done what we needed to do. I hope you caught some excitement here about the power of the franchise in Tennessee. The trajectory has not slowed in this state. It's not slowed in Nashville. We tend to want to talk about which clients are moving because that's what turns us on. That's what the exciting thing is. I can tell you, we're moving marquee clients in Nashville that a decade ago, I said, "There's no way you're going to move those out of that bank." We're adding them at a pretty rapid pace, even here.
You saw the success and the momentum in Chattanooga and Memphis. We didn't spend a tremendous amount of time on Knoxville, but again, that's a $1.6 billion de novo bank that we built over there that's running at a rapid pace, and so forth. I know you got to feel better about our ability to integrate after looking at what's going on in the BNC transaction. I think you had a chance to hear from Rick and some market presidents. David Spencer could talk to you about what goes on in the company and how well the integration's going and so forth. It's always hard work.
None of them are perfect. I don't want to pitch it that way, but I would say when I go do listening sessions in Raleigh, North Carolina, to say, "Tell me what's going on here." Man, people go around, "Hey, this is messed up, this messed up, this messed up, this messed up." Say, "Okay, man, look, we're going to work on this. We're going to do that," and so forth. The guy comes up after the thing says, "Hey, I hope I gave you what you wanted. I gave you a list of things that are wrong, but this is easily the best thing I've been through, and I've been through four of them. This is the best one I've ever been through." I think that's sort of the characterization. None of them are flawless.
It was strong in terms of the cultural integration, in terms of systems integrations, all those kinds of things. I love working with Rick Callicutt. I've told people I like that BNCN transaction better today than the day I made it. That's a hard thing to say. I like it because the markets are better than I thought. I like it because the competitive landscape is better than I thought. Again, I just love my partnership with Rick and these guys in the Carolinas. It's been fabulous. It's been easy. The cultural alignment's not been difficult. I would say even smaller institutions would be more difficult than the cultural integration we've had to go through. The wealth management businesses, you can see we've got pros in those businesses. I think we understand what we're doing in them. We're able to grow the revenue.
We're able to produce the pre-tax in them, which is a big part of how we drive up our fee businesses. Again, build a commercial platform in the Carolinas and Virginia, harvest the wealth management that goes with that, as well as produce double-digit growth in the Tennessee footprint is really what our outlook is. We've hit a lot on this law of large numbers. Again, I think the idea here is that our approach is not managing aggregates. If you hadn't heard anything else, I hope you get that because I talk to a lot of people. All the questions have to do with, "Hey, I know." I'm thinking like Regions or KeyBank or some of these banks. We just don't do that. We're not dependent upon them.
In fact, we wouldn't be any good at all if we were up here trying to innovate some idea, push something out, run it through some macro deal, build ad campaigns, sales contests, and stuff like that. We don't know how to do that. We're not good at that. That's not the game we're going to play. What we're going to do is hire relationship managers that move relationships, harvest the entire relationship, which is the loan, the deposit, and the fee. Again, as long as we're able to work in the markets that we're in, my belief is, for an extended period of time, we'll produce double-digit growth if we go nowhere else, do nothing else, just do what we do right now in those markets. That's a luxurious position to be in my judgment.
We've tried to hit at deposit funding a little bit. I would, again, just reiterate my own belief is the number one challenge for this industry, the number one challenge for community banks, the number one challenge for Pinnacle will be deposit acquisition. I just think that's sort of the timeframe that we're in. I go back to this approach of can we hire people and can we get them to move their clients and can we harvest the whole relationship, which is generally over the minimum funding requirement in terms of core funding? My belief and confidence would be high on that. Again, don't hold me to that every quarter. I'll have some quarters we'll grow loans faster than deposits, and some quarters we'll grow deposits faster than loans. Again, that's what our approach to it is.
There's an intentionality in our company about gathering funding that began opening day. Some of us have been in big companies and sat on ALCO committees that never really felt, "Hey, I made $1.2 million in loans opening day, and I gathered $400,000 in deposits opening day, and I better get somebody on because I need the rest of that funding here." It's just a different mindset that exists in this company than us working, again, in a large ALCO environment, moving invisible armies around and so forth. I've tried to hit at a number of these tactics that we use. I'm not going to walk you back through them, but we've used them for a long time. My belief is they're highly successful. They're exportable. They're working in the Carolinas and Virginia.
We've hit on some of the more creative things that we're working on, like Artist Growth, but I think you ought to expect we'll find some other opportunities that resemble that that'll put us in front of large deposit pools and so forth. It'll take all that stuff for us to fund our bank, but that's our approach to it. On M&A, Bill, here you go, man. I'm going to try it. Let me start here. Everybody said, "Hey, man, are you too busy bogged down in BNCing to do an acquisition?" There was a day the answer to that was yes. That's not today. I don't think we're so busy doing it that if one of our targets that we love and believe meets all our criteria, if that were available, we would be in a position to do that, in my judgment.
Whatever holdup you might find in our M&A, it's not because we're too busy trying to figure out BNC, and I think we're far enough through that that we'd be comfortable moving forward. You heard me say just a minute ago that I expect us to produce double-digit growth doing what we do right now in the markets that we're in right now for several years. What that says to me is, well, why am I going to do anything but that? The reason I would do something but that is because I had some grand opportunity that could accelerate my EPS growth rate or those kinds of things. That's the reason that we would do it. We're not doing it because I'd rather be $28 billion than $23 billion, and I promise you, it doesn't make any difference to me.
We're not trying to grow the asset base of the company. We're trying to grow clients and EPS, but we're not trying to grow the asset base of the company. We're in a really, I think, luxurious, Harold laughs at me for using that word, but it is a luxurious position where we don't need to make any plays, and that's an important part of what our thinking is. We've outlined markets that we think are strategically attractive. Why are they attractive? Because they're large, most of them are high growth, and all of them are dominated by the same group of large regional national franchises that we love to compete with.
You've heard me say, though some of you have been hearing me say this since 2002, but some of you have already heard me say this today, that real simply what we do is try to get up underneath those banks, take their best people, and therefore take their clients. That's really what we do for a living. We've outlined some markets. You can go to Memphis and draw a line up to Richmond and down to Charleston through Atlanta, and there are 14 urban markets there. We'd like to be in those markets because they're large, most are high growth, and all are dominated by those banks. We'd like to be there. We don't have to go there, and I just want to be as clear as I can be. I don't care if we go to Atlanta. I don't care if we go to Richmond.
It's not going to hurt my feelings. It's not going to cause me to go out as a failure because we didn't make it to those markets because honestly, I don't care. It is about Doing what we do, growing this business in a responsible way, hitting the EPS growth rates that we think we can hit. That's what the game is for us, and it's not getting to those other markets. We go to those other markets when and if there's some opportunity that we think fits the strategic outline that we've made, drives our EPS, all those kinds of things. When you take those markets, we've said we'd be willing to go on a de novo basis, or we'd be willing to go by M&A. The same thing applies. It's all about when the opportunity is there. We're not going to Atlanta.
I think Nick asked a question about, well, is the idea that you build it and they'll come? Would you go down to Atlanta and build something and try to hire people? That'd never be our game. The only reason we'd go somewhere is because we got a group of people that we believe know and understand that market and control other bankers in there, and we wouldn't go anywhere without that. That's the opening criteria for us, that we just wouldn't go anywhere unless we had those opportunities. Some of you might say, "Well, I don't think you're going to get any of those opportunities." You can relax. We're not going to do anything else. We'll just keep running what we're doing, producing our double-digit growth and all that kind of thing. I want to kind of walk down through this.
Again, I've said this any number of times. If we were going to do an M&A transaction, it would need to be urban and not rural. People ask all the time, "How about why don't you buy these rural banks and deposits that, get the low-cost deposits, all that stuff? You ought to have an expectation." That's not what we're going to do. The reason is, and again, other people do it and it's a good thing. People figure out how to do it. I can tell you reasons why it might make sense for Cadence to buy a state bank, all those kinds of things. That's a good idea for them, not for us.
The reason is because we're a high-growth franchise, and yes, I could pick up some low-cost funding that I get a benefit out of for a few quarters, but I can't grow at 12% and 14% in Hinesville, Georgia. We're not going to Hinesville, Georgia. I think your buddy [Sally Hugh] said he didn't want to go up and down every pig path in Georgia. We don't want to go up and down every pig path in Georgia. Again, we're just not going to go to small markets. We want large, high-growth markets because that's where you have a large, high-growth bank. Urban, not rural. It has to be commercial and not retail. You listen to this group. We're commercial bankers. That's what we do. That's what we know. We understand the sales cycle. We understand relationship management, all that kind of stuff.
We're not going to buy a retail bank. That's another criteria. If it's a small deal, it needs to be 3%-5% earnings accretive. If it's a large deal like a BNC transaction, it needs to be 8%-10%. This group of people right here is the smartest group of people on this planet as it relates to community banks. You know there are not 25 banks that just meet what I just talked about there. There are probably not 15, probably not 10. Again, I'm just trying to get down to the brass tacks with you how this thing works. Look man, I'm going to seize every opportunity I can that's a good opportunity, but I want you to get it. We're not up here trying to figure out how to make acquisition.
Those of you who've been around know there have been five banks for sale in Atlanta for three years. We could have bought any one of them if they matched all those criteria. They didn't match those criteria, we didn't buy them. I want you to get the idea. Hey, I'm delighted. You can see, I don't mind to do an M&A transaction, but we're not just sitting up here trying to figure out how to do one. We're not plotting, trying to figure it out. I was laughing with Bill earlier. There's so much speculation. "Well, what are they going to buy next?" Man, if I were you, I wouldn't spend much time thinking about that, really. I don't want to tell you, "Hey, trust us, we're not going to buy anything," because we might.
I've told you there's some targets that we have. As far as I know, those people don't want to sell me their bank. If they decide they do, then we're probably going to work on it and try to put it together, if it meets these criteria, we're going to do it. If it doesn't, we'll just pass. Again, I don't know if I'm helping you here, but I'm trying to be as clear as I know how to be on what the M&A strategy is. I think that's all the stuff I've said before. Again, I'm just trying to get it where people can understand if we get a strategically attractive opportunity that meets all those criteria, I hope you want me to make that transaction. If we don't get something that meets that criteria, I hope you don't want me to make that transaction.
If you do, then we're aligned on what the M&A strategy of the company is. That's sort of it on M&A. That's my last attempt. I'm going to quit talking about it, but just try to get it out there where everybody can feel it a little bit. If somebody said, I think, Jennifer, you've asked before, "What about Atlanta then? You missed all the M&A. How are you going to get there?" Well, my guess is if we get to Atlanta, which I've already told you I don't care whether we do or don't, if we get there, it'd most likely be on a de novo basis. What would be the catalyst for that?
The catalyst for that would be because we got some big team down there that we think knows how to run a commercial banking franchise and can lift out people and build us a $3 billion, $4 billion, $5 billion bank down there. That'd be the catalyst. If we don't find that group, we're not interested in hiring a high-profile lender, two or three or four, and having some LPO. That's not what we do. Those are all kind of guidelines to help you think about M&A. I hope you enjoyed hearing from Al Crawford. Al's a fabulous partner. I love the partnership that we've had with BHG. I hope, if nothing else, you can figure out these guys have a passion for what they do. They're good at it. I love business. I love watching people be successful.
I don't know if you picked up on it, Al told you that he and his three partners started that business with $25,000, and we can argue about what it's worth, but maybe $1 billion. That's a cool thing. These guys have hustled. They've cared about it, they're passionate about it, they're good at it. When I think about that business, I would say the way I characterize it is they are pros at lead generation. They have developed systems and methodologies that let them be effective and efficient at generating doctors that will fund $100,000 tickets. They're good at that. They're great at underwriting. They've got proven mechanisms. Most of the guys are Fair Isaac guys who are the best at building those things, they built great underwriting system.
They built an auction platform that lets them sell stuff that they get for $14.5, that they sell for $4.5 through an auction platform that they built. Some of these people want to compare BHG to some of these other things where they're running securitized models and so forth. Man, I love the fact that they sell that stuff to 875 banks in the hinterlands that can't generate good assets. That's really who's buying that stuff, as you can see, based on the bids that occurs on that, and that's a really cool and valuable business. I think you ought to expect that we'll do things like that around the edge. I'm not telling you we got any. We don't have any.
If I find those opportunities, those are things that we love to do, and I hope we'll have Andy back talking about what's happened at Artist Growth and those kinds of things. We have other things that might help us on a deposit acquisition standpoint. That's really what we invited you here to tell you. I hope you feel like you got your money's worth. I think Harold whispered in my ear that Jennifer suggested we talk about succession planning. Let me say this. I'll tell you a little about succession planning. I don't want to comment on it too much, just primarily because it's an intensely personal thing that a lot of people in this room care about, and I'm not interested in walking through all the details in front of a big crowd.
I'm not sure that would ever be appropriate, but it's just not something I particularly want to do today. I would say to you, though, that we're not cavalier about succession in the company. I'll just give you two or three parameters to think about on that front. One is, I know that I look tired and bad, but I don't have any desire to retire. I don't have any hobbies. This is it for me. This is what I do with my life. I do this and my family, and that's sort of it. I got friends that play golf and I don't. I wasn't any good at it, so I'm stuck with banking. Again, I just say to you, Rob and I used to laugh.
He always said, "I got a plan to live forever, so far I'm on schedule." I'm just trying to say to you, I think, Chris, one time you made a comment about, "Hey, Terry, you're getting out there, 63. You don't want to be buying something from management changes and all those kinds of things." It wouldn't be my anticipation. You might want to check with our board. They might have a different anticipation, but it wouldn't be my anticipation. I'm looking for a way to exit and those kinds of things. I just maybe start with that as a construct. I think, succession planning, you plan on two axes. One's emergency succession and one's long-term development. Emergency succession, this company, in my judgment, I hope one of the things you can see is we're broken out with emergency succession. I mean, we got people.
Rob could run this company as well as I could run this company. We could have done it differently from the start. We could change it today. I mean, this emergency succession's never even been a concern of mine, sincerely. So the emergency succession is easy. I think long-term, that is a more difficult challenge. Our hiring formula makes a difference. I think the way the business has developed makes a difference. When I say that, I'm just saying a lot of us that grew up in the banking business years ago had fabulous opportunities to be generalists. Most of what happens today in the banking business is folks that are working in specific alleys and so forth. So we're conscientious about that.
We identify high-potential candidates in our company at all levels, those things are reviewed by our board of directors, we have development plans for all the folks in that list and all those kinds of things. We look for opportunities to develop people and put us in a position to have even stronger management as we go forward. Again, without getting into real specifics, I'd just say it's a thing that we care about, we do have both emergency and long-term succession planning that goes on in the company. It's reviewed by the board, generally at least on a biannual or every two-year basis. What else can I tell you guys? You know everything I know. Let me say one more time, thank you for coming and investing your time to learn about our company.
We got guys that are still gathered around and be glad to take questions or carry on other conversations as you would like. Thanks for being here.