Good morning. I'm Jim Mabry, Executive Vice President at SouthState, and I'd like to welcome you to our Investor Day here in N.Y. Thank you very much for your interest in SouthState. We greatly appreciate that. As you know, this event is being live webcast. We will have the opportunity to have questions at the end, and I would ask that you hold your questions until we get through all the presentations, and certainly welcome your questions at the end of our remarks. For those that are participating on the webcast, there's an instant messaging feature on the webcast. We welcome your questions as well. We don't make a commitment we can get to all of them, but we'll certainly endeavor to do that. Before we begin, I importantly want to point your attention to the forward-looking statements, because we'll be making some of those.
We really appreciate your interest, again, and your feedback, and we've really benefited from your suggestions and ideas as we approached Investor Day, and again, really appreciate that. We've been through a lot these past couple of years with a couple of mergers and $10 billion, and there's been a lot going on. Today, we have a couple of goals with you. One is to provide a little more clarity in terms of our current results, because it's been sort of a haze for us, and I'm sure for you, and hopefully today, we can give you a little more clarity on where we stand. Just as importantly, some visibility as to where we think we're going to go, and we'll be able to go the next couple of years. We've been so busy, plowed a lot of ground, in the use of sports analogy.
It's really sort of a new season for us, and hopefully you'll share in the excitement that we have for this new season. With that, I'd like to turn it over to Robert Hill. Actually, before I do that, Robert, I do want to make you aware, we do have Wi-Fi available in the room. If you go, it's under MarketSite Guest. The username is ssb, all lowercase. The password is ssb, all lowercase. With that, I'll turn it over to Robert.
Thank you, Jim. Y'all excuse my coffee. My voice kind of comes and goes, so just bear with me this morning, if you would. Welcome, and good morning. We're so glad that you're here. We've got people from right around the corner. We've got folks from Atlanta. We've got Nick, who came from California. We've got folks from all over parts to come and be with us today. Sally and I were talking maybe, I think it was at the last conference, and she said, "One of the most valuable things that happens is when I can get a management team in my conference room for 45 minutes." I never really thought about it from that perspective. Today, the shoe's on the other foot. I've began to realize how important your time is that we get to spend with you, and we value that very much.
Today, our goals are pretty simple, is to give you more clarity and visibility into our company. As Jim said, we're starting to enter a new season. It's just a different focus for our company, and to some degree, the culmination of an era where we've been building this franchise over the last couple of decades to where we begin to really more focus on how do we grow it and optimize the value of what we have built. Before we get really into it, though, I do want to recognize a few people who are with us today that I hope during our breaks or at lunch or after we wrap up today, that you'll take some time and any questions that you have, feel free to ask them. Their bios are in the back of the deck. First is Jean Davis.
Jean joined us from the Park Sterling merger as a board member. She has a very diverse background. She retired from Wachovia, where she was the head of operations, technology, and e-commerce, but she had pretty much done it all. She ran HR, retail, played senior roles in corporate banking and in the regional bank. Her depth of banking background has been very valuable to the company. Then Martin Davis, who is with us this morning from Atlanta. Martin has 30 years of running very complex IT organizations. He's currently the CIO at Southern Company. Before that, he was in charge of enterprise IT and the Chief Technology Officer at Wells Fargo. Then Bob Herger. Bob has been a practicing attorney for 42 years. He's been on our board since 1991 and has been the Chairman of our board since 1998.
Those are our board members who are with us today. They welcome your feedback and welcome your questions, and we value their time being with us as well. Let's get started. Back to Jim's initial comments of clarity and visibility. I know that you have had a tough job. I know it's been hard for you trying to understand our numbers. I get that. It's been hard for us to manage through. With $10 billion, the Durbin Amendment, accretable yield, M&A, a rising rate environment, all those dynamics make it equally hard internally as it is for you to have insight into how we stand. That fog, that haze, is beginning to lift internally for us.
Our goal from that, while we're early in this new season, is to begin to give you more insight into the company on where we are and where we feel like we can go. My topics for discussion today really are just twofold. Really, who are we today? What have we created? What have we built? How do we view creating shareholder value? Those are the two areas we'll start on, then other members of our management team will build on those things and go deeper with them as we go throughout the day. I speak about the turbulence in trying to figure out the core of what the earnings stream is in the company.
Obviously, the gap between where the Street has been and where we've been the last couple of quarters is something we don't like any more than you like, and whether it be on the low side or the high side. We're not always going to be in step with the Street, and we don't manage to the Street numbers. We do want to at least be able to provide enough clarity to where that gap is not too wide. Let me go to 50,000 feet for a moment and just kind of summarize how I see the major moving pieces and parts and why some of that gap, I believe, existed. Let me start with the mergers. Mergers always complicate the numbers, right? Park Sterling has been a major focus. We're a little year into Park Sterling acquisition now.
Simply, it just checked all the boxes. Everything that I think we committed to when we announced from a call save perspective, from a team revenue perspective, we feel really good about. John Pollok, during his presentation, will go deeper overall in the Park Sterling merger. Overall, I believe that it has been very additive, not just financially, but also hit all the strategic things that we felt like were important with that merger and feel really good with where it sits today. What some of the merger has kind of masked has really been some of the slower growth in our legacy bank. If you look at the loan growth by market, and I'll touch on this in another slide in a minute, we've just had more churn. We've had CRE churn.
We've had a period of time as rates have risen that customers who have sold their businesses or sold real estate investments, we've just seen some, which I consider healthy and natural, but it's muted our loan growth. I think some people kind of took that to believe that maybe that was Park-related. It's really more core bank-related. I don't see it going on forever. I do see it continuing still in the fourth quarter. I do think as we continue to move into 2019, overall, our loan growth will begin to normalize over time. I think that's one piece of the puzzle that has been harder for you to piece together. I think the other piece is the interest expense. Higher than what we budgeted for the year.
Loan growth, by the way, was lower than what we forecasted for the year, interest expense is higher. As we moved into this year, there wasn't some force from our customers to raise rates. We had really two dynamics. One, the market did become very competitive. We consider our deposit base and our customer base really the crown jewel of the company, and we wanted to protect that. We were also remixing the liability side of the balance sheet just as we were the asset side. As we brought on wholesale funding, we wanted some of that to move off the balance sheet, which you can see that we have, therefore, we wanted to make sure we didn't have any loss to the core funding side. Then the last piece is the tax reform.
I think there was certainly some consensus for us and others that most of that was all going to flow to the bottom line. For us, it was really never the intention for it all to go to the bottom line. There were investments we needed to make in our delivery channels, investments we needed to make in building out our $10 billion platform. We've made those investments. We took a lot of that to the bottom line, but not all of it. If you look at our internal expectations, overall, we're fairly close to being on track with where we thought we were going to be. What we hope now going forward is we can give you better guidance, with targets and ranges on kind of how we feel like the business will perform in the years ahead.
If there was two slides that I was going to show you today to help get the core of who we are, this would be one of the two. If you take leadership, which is really the foundation of our company, integrity, and accountability, that is how we live. We get up every day, living by those principles, by those fundamentals. I think to speak to the leadership, it's really three areas that I feel like it is a very much a differentiator for our company. First is how we recruit. Our recruiting strategy is quality over quantity. If they don't meet all the characteristics and don't fit with our culture and who we are, then we tend not to move in that direction. The second is M&A. We've been able to acquire companies but retain the talent. I think that's fairly unique.
If you look at our Savannah team, our Augusta team, our Park Sterling merger, all have been very accretive from a talent perspective and a leadership perspective. Then through the years, we've been very adept at growing talent internally. I think about bankers who, at one time were young bankers, who today are running major parts of our company. They came in right out of business school or right out of undergrad, and today have significant roles in our company. Also think about Charlotte. From a leadership perspective and technical skill perspective, we, in South Carolina, in the markets we were in, began to bleed some of that inventory. Charlotte and the presence we have now gives us really untapped potential for great talent and skill sets that we've really never had access to before.
I think Don Truslow is certainly one great example of that, there's certainly many others. From an integrity and accountability standpoint, I think integrity is pretty clear. We're in the trust business, and the reputation business, and we guard that with everything that we have. Then accountability. We just want to make sure you know, we feel very accountable to you. Very accountable to you for our performance, for how we communicate, and how we run our company. Also to make sure that we take a long-term view that we use your capital and your investment wisely and safely. As the haze lifts more internally, it's interesting because now it's more volatile externally, and that's normally a period where we tend to thrive. We feel like we're very well-positioned for kind of that new season.
If I go to soundness, profitability and growth, those are really the ways we think. Those are our priorities. I've been here almost 25 years. I can't think of a time where we've made a growth decision that sacrificed soundness. We may have made a mistake or two along the way. We've certainly done that. Those are in conflict often, and we always go towards the soundness principle first. Let me start there. A lot of questions over the last year, why did you shrink the Park Sterling loan book? It wasn't a terrible loan book. They certainly didn't make terrible decisions. We got out of the SNC business. We got out of the builder finance business. We've been shrinking those all year. Clearly, there's a revenue impact on the company when we made that decision.
The reason we did that is because it just violated some of our core philosophies on how we're going to build our credit culture and the soundness of our company. We're not in the transaction business. We're not in the financial intermediary business. We're in the relationship business. We peeled those things away. It would have helped us close the gap on earnings per share. It would have helped our loan growth look better for the year. We feel like it's in the long-term best interest to move away from those and use your capital in a better way. Let me move to profitability. Profitability is just table stakes, is we have to earn, and we have to grow our earnings per share at a reasonable rate. We also want to grow it in a safe and sound way.
Let me use deposit rates as our example there on how we think about our profitability metrics. We didn't plan to. As the year went on, we began to move our deposit rates up. As I mentioned, it was really to protect the core. We could have kept them lower. We could have kept our deposit betas lower, which I think they're around 30% from start to finish, Sean. Our cost of funds is still very low compared to our peers. We wanted to protect things that are most important to us, and we felt that we're very accountable to our customers as well, and we felt like passing some of that along now on the short term would help us and pay benefits down the road. Finally, growth.
If you look at our company today, over the last couple of years, at least, 60% asset growth. If you look at 2018, you would say it's kind of slowed down. It's really plateaued. What I would tell you, if there was a core strength of our company that is there, I think more than any, it's our desire to go get business and to go win business and to go win quality business. We're good at that. We have been for decades. That hadn't changed. We have more opportunities to do that than we have in the past. We have been very distracted. Going over $10 billion, the regulatory challenges, the integration of the banks, building out our business lines has taken a big focus from external forces. Now we're going to be able to shift to internal.
That's what we talk about when we're talking about a new season, is really going from kind of building what we needed from a scale perspective to getting the infrastructure and beginning to grow. I'll touch on that a little bit more in a minute. As you'll hear from Jonathan Kivett, Jonathan will be our new Chief Credit Officer in January. Even with this growth, we have never sacrificed our core credit fundamentals. We're very granular. We're very diverse. We lend in our backyard. We lend to people who we know and trust. If you think about us building the company, we've been kind of become a melting pot of these banks and a lot more. A lot of other initiatives to create who SouthState is today. There was only one goal. Over the last 20 years, there's really only been one goal.
We had certain markets that we knew we wanted to be in because they were high growth and the demographics were good, and we felt like they were a size where we could be a meaningful market share player, and we wanted to be dense and deep in those markets. That has been the driver of our whole philosophy now for 20 years. Today, we're there. It is a franchise that would be next to impossible to replicate in some of the best markets in the Southeast. Just as our markets have changed and our position has changed, our leadership has changed. We have really two roles for our executives. They're charged with growing their business and growing their leadership inside their team. Those are the two things that each of these folks focus on each and every day.
Just as I talked about the way our team and talent inside the company is built, it's reflective in our executive leadership team. Don and Jim came from mergers or from outside and brought very unique skill sets that we did not have in our company. Jack and Jonathan and Greg all came from a large bank background and brought that skill set from a long-term career there and brought that skill set to our company over the last 10 to 12 years. Renee has been with our company and done pretty much everything. Started as a branch manager, and I think has run every part of our company better than any of her predecessors, over the last 20-plus years with our company, and has just been named our COO. John and I have worked together now for 30 years.
The team overall now has worked together about 15 years, there are new faces on this, and I think it speaks to the depth of our team as Renee being able to move into the COO role, Greg into the President role, Jack Goettee running South Carolina and Georgia, and Jonathan as our Chief Credit Officer. I look forward to hearing from some of those people today. What I would say about this team more so than anything is there's no desire to be average. They've always been a high-performing group, and they wake up each and every day to make sure that we remain that way, even though with some of the headwinds we faced the last two years, that's been tougher to do.
The biggest thing that we as a team have been debating over the last year has really been, how do we run our company now that it's larger? As part of that debate, we're meeting with some of our regional people on what is the org structure? What is the delivery model going to need to look like? How is it different? How does it drive efficiency and growth? I was with one of our regional execs, and he said, "Robert, we got to figure out how we harness the power of a $15 billion bank in the markets where we are." I thought that was really well said. That's what we've tried to do with our organizational structure today. Let me walk you through it from the inside out. Our focus today, 100% on the customer. How do we grow relationships, expand relationships?
We have $700,000 in our company. How do we make those relationships deeper and denser, just like we have in our markets? There's certain part of our culture that we did not want to give up as we got larger. Mainly the local leadership and the team dynamics. They're engaged, it's more fun, and they win at a faster pace with that engagement. What we were really missing was the delivery channels, the focus, how we delivered for the customers in our lines of business. We built delivery channels for consumer, commercial, wealth, and mortgage. Some are at different phases than others in terms of their overall build-out, and we had to set priorities.
We started in the support area this year, and we said, what are the high-value things that we do that impact our customers and our markets, and what are the low-impact things that we do in the support area that are low impact on our customers and our markets? We basically got rid of the low things. We outsourced things like our mainframe. We had a conversion, we called it T2, or technology transformation, to really kind of retool our backroom so that now we can have the talent and the technology and their time focused on the things that directly impact the customer. Secondly was our commercial platform. The Park Sterling merger was a way to really accelerate that.
We had been a good commercial bank, but we were lacking in our platform to go toe-to-toe with Wells Fargo and Bank of America that control 30% of the market we're in. That has been a major focus to build out those two. Let me flip now to why we're able to implement and why would we implement this today, where it didn't really make sense to do maybe five, six, seven years ago. Most of it has to do with volumes of business and scale in these businesses. This is the market share in all the combined counties that we're in and the top 10 banks. You see we're 6.6% share, and we're number six in market share. We compete and differentiate ourselves the best against Wells and B of A. They control 30% of that market.
If you look below us, most of the others aren't as material players with just 1%-2%. It, to a large degree, is us versus the large guys, which is kind of really where we wanted. We knew where we wanted to be, but we didn't know how we would get there. 10 years ago, to put it in perspective, we would've been at 0.6% on this slide. We've gone from 0.6% to 6.6% over the last decade. The only way to make that happen was M&A, and the only way to make that happen was M&A in a very disciplined manner. Because I think we could have created possibly even higher EPS growth, but again, scattered out over a very large geographic area. We said, very concentrated, very dense and deep.
Taking Kivett and Pollok, we've been in more Hampton Inns and basements of banks all over the Southeast than I can think of in the last 10 years. Every time we leave, we end up going back to what is our core, what is our focus? Yeah, this might be EPS accretive, but does it create that footprint that we set out to achieve a while back? Now, we think we have, over time, the ability to take that 6.6% to a 10% market share. 10% share, where we have that, our returns are typically just better. We're more efficient. We're a more meaningful player, and that'll be our focus, and I think that can be done predominantly without M&A. Let me drill down one more slide. Back to our depth and density of our footprint.
You can see today, coastal Georgia, South Carolina, and North Carolina, our footprint is right at $3.8 billion in deposits. In the central Georgia and South Carolina market, $2.8 billion. The I-85 corridor, which is really the Greenville and area down towards Atlanta, $2.1 billion. Charlotte market, $1.6 billion. The I-85 corridor, which is the highest growth part of our market and most diverse from a business perspective, basically runs from Charlotte, which is here, to Atlanta, which is here, and we outline the whole thing and have $3.7 billion worth of deposits along that whole corridor. This has traditionally been the fastest-growing part of our bank. For years, the fastest-growing part. This year, the growth is maybe 2% in this market. These other markets have been pretty good.
High single-digit growth levels in Charleston and Savannah and Hilton Head and Columbia continue to hit on all cylinders. What's the difference? I think there are two. I think, one, the Park Sterling merger impacted these two markets more so than any other, so just more turbulence, more distraction, and we also had some CRE exposure in the Upstate that just turned out and that we did not replace. These will continue to be the strong catalyst for growth for us going forward. When you look at our growth numbers, I think it's not just the remixing, which gets a lot of attention. It is really the core bank and some of the things that have gone in to the overall muted loan growth this year.
Our volumes of business remain very healthy. John will help you reconcile some of that later today between our productivity and our loan growth. A lot of that gap in terms of loan growth is just getting these two areas back to a normalized growth rate. If we do that, we're going to be in a really good spot. The other dynamic is Raleigh and Richmond. When I first came to the bank, it was a small rural bank.
I had a board member who's a very successful businessperson, come up to me after a meeting and said, "Robert, do you know what the law of the farm is?" I said, "No, I don't know what the law of the farm is." He said, "We believe in planting some seeds and letting it grow." We have been planting a lot of seeds over the last 20 years. A lot of that growth is now very much at a mature stage where we can manage it and drive it differently than the past. We also like to have some seeds planted. I think Raleigh and Richmond are two that over the next two decades, we can really continue to build out and have good opportunity and continue to differentiate our bank.
When you look at this footprint, it's taken discipline, it's taken focus, it's taken a lot of M&A, but now we have a very dense, deep, unique franchise that would be very hard to rebuild. If you look at this slide, this is the market share where we stack up for banks less than $100 billion in assets. In all our markets, we've got almost 12 million people, 200,000 businesses, and we have about 700,000 of that today. If we can get to 10%, that number goes from 700 to almost 1.2 million customers. We can do that without major investment in those markets because we have made those investments. If you look at where we sit, most of those markets, and most of these we're number 1 in, but one or two in terms of being a really unique, differentiated size from our competitors.
It used to be five years ago, we would have been mostly here. We still have some that we can grow for the future. A lot of them where we're in a really good position. Let me switch gears now and go from talking about us a little bit to more talking about what's most important to you is creating shareholder value and what does all this mean to you. First, as I've told you, our board and our team have always been very shareholder-focused in making sure we do what's in the right best interest long-term for our company. I'm going to start with our view on how we achieve that. This is our asset growth since 1995 when we came to the bank. The purpose of showing you this is really not to talk about our growth.
This is what I would call the building stage. This is how we got that share in those markets. It was really a grow and then a plateau philosophy. We would take material steps forward, then we would slow the growth of the bank to integrate, to execute, and to retain what we purchased. Then once we got through that, we would begin to figure out the next growth path going forward. You see that when we hit about $1 billion, we did a small acquisition in 1999 and bought some branches. We grew and then we plateaued. You see it again, around $2 billion, where we grew and then plateaued. You see it again around $8 billion, grew and plateaued. Then you see it where we are today.
The cycle that we're in, I know some investors, and I think Chris was our first analyst to ever cover us. I think Sally and Wellington have been long, long-term investors. They've seen this. They've kind of known how we've managed through this. I think a lot of people don't. It's been our style of execution on these for years, and we're in a period where after we make a big move, that we typically tend to throttle back and to focus on execution. Now we're in a position where we can shift gears and we move from really kind of building to growing. The other is, I mentioned harnessing the power of the $15 billion bank for our customer. Clearly a better opportunity to do that.
I think as you think back to that footprint, there's also a great opportunity to harness the earnings power of the investments we've made over the last 20 years. I mentioned if there was a two slides that I would stay focused on, if I only had two, this would be the second. This is ultimately how we view shareholder value creation. Chris put out a note not too long ago and said 75% of the time over the last seven years, we've materially outperformed in terms of growing tangible book value at a faster pace than our peer banks, $10 billion-$30 billion. That is mainly because we focus on it. I think that is the result there. Why do we focus on it? There's a very high correlation between this and ultimate total shareholder return.
I think if you look at that over time, you would see our TSR and our CAGR on TB plus dividends to be somewhat closely aligned. The other dynamic of why we focus on this is it's not short-term. There are times you're not going to have a flat yield curve. There are not times that 4% of your earnings are going to be hit with Durbin. There can be times when you can grow earnings at a faster rate, times when you can grow at a slower rate. We've been investing in this company personally for 25 years, and financially for 25 years. Our view is longer term. I was at an investor conference not long ago, and an investor asked me my perception of longer term. Was it nine months or 12 months?
Jim looked at me, I said, we tend to think 10 to 20 years. Our perception on timetables and how value is created in some way, sometimes there's just a little disconnect there. This shows you how we gauge our success is building our tangible book value. The other dynamic this does is it reinforces soundness, profitability, and growth. You're not making short-term decisions for a short-term gain. You're being measured by a gauge that's much more long-term. Ultimately, what does that mean in terms of our shareholder return? Got several lines here. This is our TSR, including dividends, since 2006. This is just pure stock price for South State since 2006. This is the KRX since 2006, and this is the SNL Southeast U.S. Bank Index since 2006. Clearly over the long term, we've outperformed nicely.
I want to touch on this, obviously, part of the slide in just a minute. When John and I left Wachovia Bank in the early 1990s, we decided we wanted to do something more entrepreneurial, we went to about a $500 million bank that was troubled to try to turn it around. We were young, we didn't know what we didn't know. We got in, what we saw was a bank that had 90% of their assets were fantastic. They owned the market. They had huge market share. They had been in this market for a really long time. They had every customer that you could possibly want. They had entered commercial finance business. They'd gone out of market. They'd done partnerships or participations on CRE. That 10% that they added on really took down what was a quite valuable company.
We ultimately sold it to NationsBank after we kind of got things fixed, there was a lot of value that was destroyed. I think that's what we've seen in our 30 years in this industry, is periods of building value and destroying value. For some reason, our industry kind of consistently goes through that cycle. As John and I came here, one of our major goals was we want to build value, we also don't want to destroy value. I think that through the way we run our company, our longer-term view, the principles that we live by, we've been able to build a very granular, a very simple, a very unlevered balance sheet, and very simple business model that works and delivers steady returns over the long term.
I mentioned a lot of volatility internally over the last few years, a lot of fuzziness, a lot of haziness. Now that seems to be less so internally and more so externally. We believe banks will begin to be separated based on how they're going to perform through whatever this next cycle brings, and we feel really good about that. One thing I would want to talk about, though, is this move. It is not the first time it's happened. It's happened here, it happened here, it happened here, it happened here, and it happened here. We've seen it happen multiple times throughout the time that we've been with the company, where we've seen sharp reductions overall in the market price. We're heavily invested in the bank. We feel your pain. I promise you, we feel that drop.
We feel the reduction in the value of the company, just like you do. Don't confuse today our excitement, our enthusiasm, our belief in what we're doing, as somehow that we're happy with our performance, either the gap between earnings expectations and how we've performed the last 2 quarters, or how our stock has performed over the last few months. Those two things are, in our minds, separate. We feel good about where we are. Our internal expectations were pretty much right on track with, and we feel good about the path ahead. 2019 still has some headwinds. It just does. You got Durbin that's going to take 4% of our EPS growth right off the top.
Those things begin to become more and more distant as we get each quarter out and our earnings begin to be more pure and simple, and I think easier for you to follow. Let me wrap up. Jim mentioned a new season. I think we're in the early innings of the new season. It's clearly a different focus. All this building that we have been doing for decades has given us great position in great markets. Really depth and talented team. I think the opportunity set today is very different than it was 10 or 20 years ago. Fortunately, I think this comes down a lot to organic growth and execution. I think those are two things that we have a history of overall doing well.
Today, you'll hear from Greg, John, Jonathan, and John Pollok, who will give you more color around what that opportunity looks like and how we're going to measure our success going forward. We look forward to wrapping up with a Q&A session at the end of the day with any questions that you have. With that, I'll turn it over to Greg Lapointe. Greg was named president of our bank this year. He is an outstanding banker. He has done a tremendous job for our company for just about 10 years that he has been here, and he's going to give you more insight into the commercial banking space. Greg?
Thank you, Robert. Good morning. Thank you for being here. I was with some of you all this spring, and it's great to be back in New York. I'm Greg Lapointe, President of the bank. I've been in banking for 34 years, 10 with SouthState Bank and 24 years with Bank of America and Wells Fargo. I can almost see my apartment in this picture, but I'll move on. The four things I want to touch on today as I go through my presentation are really our high-growth footprint, the expansion in our commercial bank, the talent and recruitment success that we've had in 2018, as well as opportunity that we're seeing to leverage in full relationships within our commercial bank. Let me touch on the footprint for a second and give you some economic highlights. All four of our states are right-to-work states.
Two of the top 10 busiest ports in the country are Savannah and Charleston. The Jasper Ocean Terminal that's going to open in 2028 is on the border of Georgia and South Carolina. When that port opens, it will be the largest port in the country. But if you look at our four-state franchise, a very, very strong infrastructure to include the interstate systems and particularly I-85 corridor, which is one of the fastest corridors in the country, growing corridors in the country, along with I-95. The inland ports that you'll see in the upper part of Georgia, Greenville, South Carolina, 95, and South Carolina facilitate the movement of goods from the ports throughout the country, as well as the international airports in Atlanta, certainly Charlotte, Raleigh, and up into Virginia.
If you look at the yellow dots, certainly what you'll see is our franchise is well-positioned within the infrastructure network across this four-state network for the franchise. We've got very established presence in high-growth markets. If you look at the dark blue lines, six of our top markets are growing two times the national average. If you look in the bottom right-hand corner, between 2019 and 2024, the national growth projections are 3.5%. Those top six markets are growing well above 2%. If you look at our branch network, about 71% of our branches are in high-growth markets. Let me move now to the commercial bank. Significant depth and scale within the commercial bank, 63% of total loans, 43% of total deposits, $2.3 billion of those deposits are in treasury relationships. If I move over to depth, 135 bankers throughout the franchise, 15,000 lending relationships and 3,600 treasury customers.
Significant opportunity there for us. We've got a very strong treasury platform that we acquired through the Park Sterling acquisition. We've got a great opportunity to penetrate our existing lending relationships as well as layer in new client acquisition. From a solution perspective, we've got a fully built-out lending depository, cash management, interest rate advisory, foreign exchange, and 401(k) asset management. Where we've been spending our time, talent, and treasury over the past couple of years, if you look at 2016 to 2018 in treasury, we've gone from 11 employees in 2016 to over 30 in 2018, as well as I touched on earlier, a world-class treasury product. Capital markets. A couple of years ago, we really did the interest rate hedging through a third party.
Today, we have a fully built-out in-house team, and we make interest rate hedging a part of every large credit relationship that we do as an option. Process. In the past, we traditionally led with credit. Today, we have a fully built-out product set for our commercial clients. And candidly, we're a true alternative for larger banks. All this built out in investment, candidly, has brought us greater efficiency and greater customer satisfaction, and most importantly, it's enhanced our sales performance, particularly as we look at treasury services. Opportunity in our footprint is significant. We've got 200,000 businesses within our footprint, 6,000 are typically, you see up there, $10 million-$50 million in revenue. That's typically called the middle market. 54,000 in the $1 million-$10 million revenue phase. Core commercial and 140,000 small business and micro business opportunities within our franchise.
If you look at the pie chart, Charlotte, Raleigh, and Richmond represent 45% of that 200,000. The other 55% are spread throughout our franchise. This is one of my favorite slides, to be honest with you. Charlotte, North Carolina, $38 billion deposit market opportunity for us. I need to mention, I moved here right after the Park Sterling closing back in November of last year. Charlotte is really where we brought these two banks together. Leadership teams, sales teams, you name it. This is where they came together in our company. If I look back a year from where we did that, I feel very good about where we are. If you look at the map, both within the beltway and outside of the beltway, we compare very favorably to our three most prominent competitors, Bank of America, Wells Fargo, and BB&T.
This branch network gives us the ability to enhance our brand awareness, candidly, in Charlotte, as well as improve customer access. At the end of the day, this is a very difficult branch network to replicate. Also, too, we continue to listen to our customer base, and they always tell us that branches remain very important to what we do as a company. Talent. This is where I've spent a lot of my time over the past couple of years, and a significant part about what we're doing as a company. If you look, we've added two middle-market bankers in Virginia, one from SunTrust and one from M&T Bank. Two commercial bankers from Sona and FTN. I also need to note that in Richmond, we added two private bankers earlier in 2018. In Charlotte, we added two middle-market bankers from SunTrust.
Both are doing exceptionally well for us in the Charlotte market. We also added one middle-market banker in Columbia. Though I named those markets, there are other high-growth markets in Raleigh, Greenville, and Charleston, and we're going to continue to recruit in those high-growth markets. Results. My favorite slide, because this is what it's all about. It's all about results. It's all about having fun. It's all about bringing business into the company. If you look at these slides, these are relationships that candidly are dividends of our continued progress as a company as we continue to grow and build out. The first of which, a publicly traded manufacturer. I should note, these are all recent wins within the Charlotte franchise. A publicly traded manufacturer, $4 billion revenue company.
That $45 million loan you'll see in the center is our portion of a large multi-bank credit facility, and we've got a full deposit and treasury relationship, and we also have a significant relationship with the key managers and some owners within that company. The middle company, a regional service company, $30 million in revenue. We have a $42 million loan, of which SouthState Bank has 100% of that. We have full treasury, full deposit, and we also have very deep wealth in consumer business within that company as well. The last one, I'll be honest with you, I'm very proud of. This is a very recent win. This is a national insurance provider, $100 million revenue company. We did a $5 million loan, but that was candidly a very small piece of it.
We led with treasury, we led with deposits, and we had the opportunity to take that from a very large bank and also competed against two other very large banks to bring that into our company. We're very proud of that one. That integration is going on as we speak. What's the difference maker? If I was you all, I'd want to know that. How are we competing against these large banks? I've got to say, as I look at these three and I look at the relationships we layered in throughout the company, the difference maker is when you take the banker and you have the banker build the deal team. Is it me? Is it Kivett? Is it Robert? How we think about bringing that company into SouthState. The second piece I always call listen, offer, and provide. Do we listen to the need?
Do we offer advice? Do we provide the solution? You would think most banks do that, but we're finding now that that's a huge opportunity for us to layer in relationships. Lastly, it's execution. Do we do what we say we're going to do? Do we bring it home and do we execute? On all of those, we certainly did. There's great opportunity for us to do that as we look across the franchise in our commercial bank. Thank you. Renee?
Thank you, Greg. For those of you on the webcast, just for reference point, I'm going to start on slide 32. Good morning. My name is Renee Brooks, and I currently serve as our Chief Operating Officer. This morning, I want to spend a little bit of time giving you an overview in our consumer, mortgage, and wealth lines of business. I'm also going to try and give you a little color around the opportunities we see within each one of these lines of business. As you can see from this slide, these three lines of business, they generate a significant amount of our non-interest income. In fact, almost 90%. They make up a substantial amount of our balance sheet, and they represent 320,000 consumer households.
Over the past five years, we have really built out a solid platform within our wealth division, really competitive to any larger bank or brokerage house. At the same time, we've been able to attract some really talented advisors with books of business, not only through our platform, but also really through our brand recognition, particularly in South Carolina and Georgia, more of our established markets. In fact, to date, 87% of our advisors are located in the South Carolina/Georgia footprint, and they account for about 90% of our overall wealth revenue. We really, as we look out over the coming years, we feel like we're going to be able to replicate that both in North Carolina and Virginia.
We've talked a lot about those markets and the growth opportunities, but over time, we see building out that brand recognition in North Carolina and Virginia and beginning to continue to add talent really within the wealth areas. Mortgage has continued to be a strong contributor, even in the current rate environment. It's really always been an integral part of our bank. This past year, they've continued to contribute to our balance sheet growth, but also a great referral source to our other lines of business, particularly our consumer line of business. A lot of our checking accounts actually come through the mortgage line of business. We have a very robust product set within mortgage. We sell direct to the agencies.
We offer government loans, and we also leverage our balance sheet for competitive ARM and construction loans to select borrowers. With this product set, much like wealth, we've been able to really attract some talented originators, seasoned originators that have deep relationships with our local realtors and also some other referral sources. Because of this talent team, we consistently have strong purchase money business, above average purchase money business. This year, 85% of our originations are purchase money business. At the same time, we have the ability to service our loans. We have a captive audience of mortgage customers that we're sending a monthly bill to each month. 90% of the loans we originate, we also retain the servicing on. That's 30,000 customers that we have an opportunity to do future business through repeat business.
Much like wealth, 80% of our originators are located in the South Carolina, Georgia markets. That density has given us the ability to continue to maintain top five share in the major markets within the South Carolina-Georgia footprint. We see, much like wealth, continued opportunity in adding talent and seasoned originators in the North Carolina, Virginia markets. At the same time, we're actually taking advantage of the slower mortgage market. We're trying to work on our internal efficiencies so that we can get more efficient, and also, we're further building out our digital channel. We recognize our consumers. Many of them want to deal directly with an originator, but there's also some consumers that want to apply for a mortgage through a digital channel. About three years ago, we did roll out a digital channel to our mortgage customers.
Today, about 4% of our originations are coming through that particular channel. We'd like to double that over the next couple of years, but we also recognize the value of seasoned originators. Even with doubling that digital volume, still over 90%, we project probably over 90% of our mortgage volume is going to come really through the originators. Then our consumer bank. At our size, we are larger in the consumer bank compared to most peer banks our size. In fact, we have over 400,000 consumer checking accounts. Now, we've accumulated these checking accounts through some strong organic growth, but most of these have come through the various acquisitions we've done over the last 10 years. We've tended to buy older banks with more seasoned checking account portfolios, and they have really stuck with us through the various conversions over the year.
I'm also pleased to report, even with this large base and the fact that we've consolidated 16 of our offices this year, we are on track to grow checking accounts this year as we end the year. Not only are we seeing growth in our checking accounts, we also see great opportunity in deepening the relationships with the customers in our consumer bank. I mentioned on the first slide, these three lines of business represent 320,000 consumer households. 125,000 of those consumer households, or about 40%, only have a checking account relationship with us. Not only are they captive consumer customers, but we feel like just by growing those relationships, we can recognize some real revenue growth there. Lastly, Greg mentioned this, but 71% of our branches are located in high-growth markets.
We're seeing growth, and we feel like we're just naturally located where we'll continue really to see growth within this line of business. We see growth in the consumer bank, but I will tell you, we also see a lot of opportunity around efficiencies. Much like other banks, we're looking at the transactions that are coming through our offices and where our branches are located. I would say over the last year, we've taken an even more strategic look, not only at where our banks are located geographically, but also the types of transactions that are running through our offices. This year, through the end of last month, we actually processed 6.6 million of non-ACH deposits. Now, 16% of those transactions went through our digital channels, where the other 84% were actually handled within our branch locations.
Now we're still doing some initial estimates around the cost of these transactions, but just from our initial projections and industry stats, transactions that go through a digital channel typically cost less than $0.25 compared to transactions running through a branch, which can cost anywhere from $2 to $4. We really see just by simply shifting some of these transactions to more self-serve options, we really feel like we can recognize some real nice efficiencies in that area. We're going to be looking for ways to systematically shift the behavior of our customers. We're also going to be looking at ways that we can invest in technology solutions that will also support this behavior. This year, we rolled out online account opening. It's a channel that's open 24/7, and it shifts the data entry to the customer.
We rolled it out at the beginning of August. 10% of our new deposit accounts are now coming through this channel, and 80% of those customers are brand new to SouthState. Much like mortgage, we'd like to see this volume double over the next couple of years. In addition to reviewing the efficiencies in our branches, we're also looking at our back rooms and other infrastructure, and we're actually deploying the Lean methodology. We're looking for ways to improve our processes and also deliver better solutions to our customers, and we're leveraging technology solutions to do that. A great example is e-signature, which we began to roll out just this past month. It's a great example of how we can leverage technology not only to create efficiency, but also give our customers a better experience.
It eliminates waste, it improves our backroom efficiencies, also it just gives our customer a better experience. Within each one of the lines of business, I mentioned the opportunity of deepening our relationships. We see our customer data as one of our greatest assets today. Due to the fact that our lines of business have various operating systems, we don't have a great way to aggregate that data today. In addition to looking at technology for customer experience and efficiencies, we're also going to be looking at technology to help us better aggregate our data so that we can deepen our relationships. In closing, we really see growth and efficiency in all three lines of business. Probably greater growth opportunities in the wealth line of business, and even more efficiency opportunities within mortgage and the consumer bank. Jim, that completes my remarks.
I'm going to turn it over to you for maybe some instructions for lunch.
We've got lunch outside. We'll reconvene at 12:45. Thank you.
It's gonna be all right. It's just a change of mind. Don't forget about the good times. It's gonna be all right. It just takes some time. To forget about her one time. Darling, I know sometimes it's hard to take. Believe me, I know. You're gonna make it through the day. Darling, I know sometimes it's hard to take. Believe me, I know. You're gonna make it through the day. It's all right, sweetie pie. It's just a change of mind. I'm sure she'll never see the night. You've got to let her go, don't fight. It's just a change of mind. You'll feel better in your own time. Darling, I know sometimes it's hard to take. Believe me, I know. You're gonna make it through the day. Darling, I know sometimes it's hard to take. Believe me, I know. You're gonna make it through the day.
I know it hurts. I know it hurts moving on. I know it hurts. Hurts moving on. Hurts moving on. Moving on.
Moving on. Moving on. Moving on. Come out of your dreams. Wake up from your recipes. Time's hands don't do the clean. This victory ride is gonna break. They tell me we got nothing. A $1 for a life of sin. On the terminal wait, on the terminal wait. Oh, get a darkened pony for a judgment day. Here we go. Running circles around and round and round and round. When nothing's right, just close your eyes. Close your eyes, and you're gone. Dreams. Dreams. D-d-d-dreams. This sleep's making me high. This sleep's making me high. Dreams. Dreams. D-d-d-dreams. This sleep's making me high. I'm going in and out. Running through in my mind. Now can we both awake, baby? Better hurry from reality. If you wait for anything. You just wash away another day. Here we go. Running circles around and round and round and round.
When nothing's right, just close your eyes. Close your eyes, and you're gone. Dreams. Dreams. D-d-d-dreams. This sleep's making me high. This sleep's making me high. Dreams. Dreams. D-d-d-dreams. This sleep's making me high. I'm going in and out. Running through in my mind. Running through in my mind. Dreams. Oh, with the dreams. Yeah. Oh, with the dreams. Yeah. Oh. Here we go. Running circles around and round and round and round. When nothing's right, just close your eyes. Close your eyes, and you're gone. Dreams. Dreams. D-d-d-dreams. This sleep's making me high. This sleep's making me high. Dreams. Dreams. D-d-d-dreams. This sleep's making me high. I'm going in and out. Running through in my mind. Running through in my mind. Oh. Oh. Oh. I'm going in and out. Running through in my mind. Running through in my mind. Walking on a dream. Hopping on a plane.
Talking to myself. Will I see again? We are always running for the thrill of it, thrill of it. Always pushing up the hill, searching for the thrill of it. On and on and on we are calling out, not again. Never looking down, I'm just in awe of what's in front of me. Friends, two people on one. Friends, two people on one. Far I've never seen. What's this harmony? Now it's changing all the time. Living in a rhythm, working minutes, working overtime. We are always running for the thrill of it, thrill of it. Always pushing up the hill, searching for the thrill of it. On and on and on we are calling out, not again. Never looking down, I'm just in awe of what's in front of me. Friends, two people on one. Friends, two people on one. Friends, two people on one.
Friends, two people on one. Get me out before it ends. Get me out before it ends. Don't stop, just keep going on. Unplug, sure to leave none. Come on, just let the phone inside. All we got is tonight, light as righteous butterflies. Friends, two people on one. Friends, two people on one. Friends, two people on one. Friends, standing by the fucking sign, waiting for a welfare dime. They can't buy her job. The man is just a very fine to catch the poor old lady's eye. Just for funny fits. Get a job. That's just the way it is. Some things will never change. That's just the way it is. Don't you believe them. Said, 'Hey, little boy, you can't go in up in store. You don't look like they do.' Said, 'Hell, man, how can you stand a thing that rude?
Did you really think about it before you made this move?' Said, 'Sure.' That's just the way it is. Some things will never change. That's just the way it is. Don't you believe them. Yeah. It takes the law and the 64 to give those who ain't got a little more, but it only goes so far. Does the law do change an evil mind when all it sees is the hiring times? There's no line on the color blind, no. That's just the way it is. Some things'll never change. That's just the way it is. That's just the way it is. Business plan, or it don't work, you know. You gotta step up your game to make it to the top, so go. Show a little competition, or you're gonna find out how to cope with living on your own, oh-oh. Oh-oh.
Let's make it up and go. Gonna show the world something. Get to work and make it work for you, and you'll know the world. Let's get this party going. Everybody knows it's gonna want to change with you. You'll have what you want. It'll take a little time to make a little better. It's only going up, just one thing and another, you know. You know. It takes a little time to make a little better. It's only going up, just one thing and another, you know. You know. Let's make it up and go. Gonna show the world something. Get to work and make it work for you, and you'll know the world. Let's get this party going. Everybody knows it's gonna want to change with you. You'll have what you want. Let's make it up and go.
Gonna show the world something. Get to work and make it work for you, and you'll know the world. Let's get this party going. Everybody knows it's gonna want to change with you. You'll have what you want. Let's make it up and go. Gonna show the world something. Get to work and make it work for you, and you'll know the world. Let's get this party going. Everybody knows it's gonna want to change with you. You'll have what you want. Get out of your own way. Get out of your own way. Love hurts. Now you look out, it's left with no words. Your heart's a balloon, but then it bursts. It doesn't take a cannon just to pin your skin. No covering and resistance. Love has got to fight for its existence. The enemy is always the resistance.
The amorous, the glamorous, the kiss of spiffs. Listen to this. Get out of your own way. Get out of your own way.
Inside. I can help you but it's your fight, your fight. Fight back. Don't take it lying down, you got to fight back. Face whatever decided to crack. She had a plan until she got a smack in the mouth. It all went south like freedom. The slaves are looking for someone to lead them. The masses looking for someone to need them. The promised land is there for those who need it most. Lincoln's ghost says. Get out of your own way. Get out of your own way. I keep singing to you all night, all night. If I could, I'd make it alright. Nothing's stopping you except what's inside. I can help you but it's your fight, your fight. Get out of your own way. Get out of your own way.
Blessed are the arrogant, for theirs the kingdom of their own company. Blessed are the superstars, for the magnificence in their lives we understand better our own insignificance. Blessed are the filthy rich, for you can only truly own what you give away. Like your pain.
Orange twilight, blinding light. Fifth and seventh, summer night. You hear me miss me all the time. For now, it is goodbye. Sky full of shiny stars. We're partying through the night. I keep feeling sad somehow. 'Cause this feels just right. Unreality. Unreality. If you could make me feel the way it feels to sleep. If you could make me feel the way it feels to weep. If you could make me feel the way it feels to die. Pack my bags, drop off the key. Waiting on the front porch smoking weed. Let's take our last road out to the sea. My hair getting messed up by the August breeze. I have so many words to say. If I just ignore the pain. Maybe I got it right this time. 'Cause this feels just right.
If you could make me feel the way it feels to sleep. If you could make me feel the way it feels to weep. If you could make me feel the way it feels to die
I know the score, at the back of my hand. Remember the boy, I don't give a damn. They can toss the rings, I'll carry the crown. Nothing can break, nothing can break me down. Don't you know by now, I got a plan? I know the direction, the lay of the land. I look for life, at the back of my hand. Remember the boy, I don't give a damn. I'm the man come round. No, nothing can break, no, nothing can break me down. I'm the man come round, and no, nothing can break, you can't break me down. I got cash in the bank. I got money in the bank. I got love for you, baby, look into my eyes. I got skin in the game. I got heart for days. I got love for you, baby, look into my eyes.
When it comes to Friday, I always earn. If you try to test me, got nothing to learn. Baby, don't guess it. You see what I mean? Give it to you, sun to five lean. I'm the man come round. No, nothing can break, you can't break me down. I got cash in the bank. I got money in the bank. I got love for you, baby, look into my eyes. I got skin in the game. No pain or gain. I got love for you, baby, look into my eyes. Who's the man? I'm the man. Who's the man? I'm the man. Who's the man? I'm the man. Who's the man?
I could do it all.
Yeah. Thank you so much. Yes, sir. See you.
Well, good afternoon. I'm Jonathan Kivett. I'm the Commercial Chief Credit Officer of the bank. As Robert mentioned, effective January 1st, I'll be the Chief Credit Officer of the bank. Before I start in, I do want to make sure you guys know in terms of the agenda. This afternoon it'll be me. Then I'll be followed by John Pollok. We'll both be followed by a Q&A session. Since I'm new to most of you guys, a little background on me. I've been in banking over 20 years. I've been with SouthState Bank for over 12. In that time, I worked along with the Chief Credit Officer, working on the commercial credit strategy and implementing that. Prior to joining SouthState Bank, I started my career with Legacy Wachovia, where I was credit trained. Then spent time in both C&I and CRE credit and lending.
I'm going to focus on three points today. One, the bank's consistent credit culture, the soundness of the bank's loan portfolio. Finally, I'll talk about some of the steps that we're taking to support the bank's future growth. The first thing I want to mention is to be clear, there's a new Chief Credit Officer. There's not going to be any change in the bank's credit culture. As Robert mentioned in his slide, we're firmly rooted in soundness and the soundness profitability and growth. Slide 39 here shows the credit leadership. It demonstrates the amount of experience and how deeply tenured the credit leadership is with SouthState Bank. This team that you see before you has spent the last 10 years working together, really building the bank's credit culture.
Honestly, going forward, we're going to be caretakers of that credit culture, particularly as we expand. When we talk about SouthState Bank, we always mention soundness, profitability, and growth. Just as a reminder to everyone, the bank continues to enjoy strong asset quality. As you can see, our total past dues have trended down over the last three years, down to 67 basis points at the end of the third quarter. Our classified-to-capital ratio has been in the low 5% range. NPAs finished the third quarter at 27 basis points. Our originated net charge-offs increased slightly in the third quarter, but have been in that two to seven basis point range. The bank continues to grow, you've heard us talk before about the granularity of the loan portfolio.
In 2008, if you look at the chart on the left on page 41, the average loan size was $79,000, and at the same time, our largest lending relationship was $25 million, or 9.3% of our risk-based capital. If you fast-forward that at the end of the third quarter of 2018, our average loan size had grown to $127,000, and the largest lending relationship was $77.5 million, or 5.2% of our risk-based capital. In this 10-year period, despite the fact that we grew capital over five times, our average loan size only grew by 60% in those 10 years. Throughout history, it's these small average loan sizes that we've had that have helped insulate us in times of economic downturn.
As we look at the current economic cycle, I think it's valuable for us to take a moment and just look back through how the bank performed in the last recession. If you look in 2006, on the far left of the chart on page 42, you look in 2006, classifieds were at 30 basis points, NPAs were at 20 basis points, and past dues were at 30 basis points. During the recession, classifieds went up to 9%, NPAs were at 3.4%, and past dues were at 3.2% as a high. Today, that curve is normalized and classifieds are now at 60 basis points, NPAs at 20 basis points, and past dues are down at 20 basis points. Because of our credit culture during this downturn, our charge-offs were roughly half of those of our peers in Southeast. Currently, we're in a rising rate environment.
Corporate and consumer debt are near all-time highs. Assets are inflated by demand for returns and low interest rates. As we closely monitor these economic variables, one of the metrics that most correlates to kind of our historical asset quality is this Southeastern unemployment rate that you see here. It's currently at 3.7%. Increased unemployment, declining home values, and increases in interest rates could all contribute to a potential downturn. We feel like, though, despite the risk that may be building, that continued strength in the economy are going to help asset quality remain stable through 2019. After the last downturn, what did we learn? There's a lot of messages on this slide, but the one I want to draw your attention to is the construction land development.
From 2008 to 2010, 43% of our originated loan portfolio losses came from land and lot loans, which made 23% of our portfolio. Think about that. 43% of our losses came from 23% of our portfolio, and these land losses exceeded our CRE losses by three and a half times. Because of this, the bank began reducing our land exposure and dropped it, as you can see, from 15.1% in 2008 to 2.6% at the end of the third quarter. You'll also see that construction lending over that same period has remained steady at around 8% of the portfolio. One thing I will point out on this is that 41% of our construction lending is owner-occupied, either commercial or consumer. I think when I look at this, the biggest change I see is a significant reduction in real estate speculation.
As we manage our loan growth, we're paying close attention to loan concentrations. Currently, as you can see, the loan portfolio is fairly evenly split between commercial, consumer, and CRE. As part of our management process, we look at seven major categories, 24 subcategories, with a primary focus on our regulatory concentration limits for our CRE. If you'll note where we've exploded the CRE, note that none of our subcategories account for more than 5% of the loan portfolio. We're closely monitoring exposures in retail, hotel, multifamily, mini storage, and we're using this capital and saving it for our best customers. One thing I will point out that geographically, 99.5% of our CRE portfolio is located within our four-state area. Back to something Robert mentioned, this demonstrates that we lend money to people we trust in markets that we understand.
As we look ahead on page 45 to future growth, we're well positioned within our regulatory limits of 300% and 100% of risk-based capital. Based on these limits, at the end of the third quarter, the bank would have $1.3 billion in CRE capacity, and that doesn't include or account for any capital growth in 2019. Specifically, we're targeting office and industrial CRE markets, C&I lending, small business and consumer, as well as Greg mentioned, we're expanding into our new markets of Charlotte, Raleigh, and Richmond. In preparation for the next phase of the bank's loan growth, as we mentioned, we've got a firm foundation of strong asset quality to build upon. We've got an established credit culture that's held up during the economic downturns, which ties back into the notion of soundness. We've also invested in process improvements. I think that had been mentioned earlier.
We have a commercial loan origination system that's slated for a 2020 delivery, and this system is going to provide better management data, increased efficiency, and over time, it's going to provide cost savings. We've widened the lens on our small business channel. We've added a streamlined micro business delivery channel with the idea that we're going to direct these smaller commercial transactions to a lower cost approval channel. We've also added commercial portfolio management positions, which have improved the quality of our underwriting, and more importantly, they're allowing us to increase the portfolio size of our most productive lenders. Finally, we've added strategic hires and continue to add strategic hires to expand the bank's knowledge base, both functionally and geographically. Year-to-date, we've added 20 credit personnel. Most of them are in commercial, and we recently hired a head of middle market credit for Charlotte.
To wrap all of this up, given the strong balance sheet, these improvements in efficiency, and continued addition of talent, the bank's positioned to grow the loan portfolio in 2019.
Thank you, Jonathan. Great to be with you all today. I'm John Pollok, I'm the CFO of SouthState Bank. I love this slide. Of course, Richmond is my hometown, so great to see it up there as part of our company. It is a little further out on the map, but it's a market we're really excited to be in. Today, I want to spend some time going deeper in the company. I want to talk to you about some of the thought processes that we've had around how we've managed the company over the last year, we got a lot of new data for you today. I'm going to cover several areas. I'm going to give you an update on Park Sterling. I'm going to go deeper into our balance sheet strength and how we think about managing our balance sheet.
I want to talk to you about profitability, we're going to wrap it up with some targets. I thought I'd start off with a very easy subject, everybody's favorite subject. I figured we'd start off with accretable yield. I know there's a lot of discussion around accretable yield in the company. Let me level set you on this slide today. This is a new slide that we came up with, if you look over on the left-hand side, we're starting in the first quarter of 2015. What we're trying to do here is show you the percentage of accretion in terms of total interest income. If you go back to the beginning of 2015, you can see accretion really was a big percentage of our overall percentage of total interest income.
As typically happens with us, is it has less impact over time. As acquisitions age, has a tendency to go down, when we do new acquisitions, it has a tendency to go up. Our view has always been in M&A. I don't have a crystal ball. I didn't underwrite the credit, we always take a conservative mark on the credits that we do, and they have a tendency to perform better over time than we initially thought. As you get later in the slide, you look at the second quarter of 2017, that's when we had the Southeastern merger. It kind of popped up. We did the Park Sterling merger at the end of last year. We did the first Southeastern recast. We do a recast at the end of the first year to look at how the credit parameters have changed.
If they's improved, that's where we get our release, and we have more accretion in our numbers. In fact, the fourth quarter of this year will be the first time we've done the Park Sterling release. As you can see, as with all our transaction, the Park Sterling credit has performed better than we thought. I think there's a lot of views on accretion. Some people completely discount it. We don't. We think there's a lot of important things about accretion. First, we view it as a bridge in earnings. Gives us time to make the decisions that we need to. I think a great example in our history is when we bought the Bank of America branches a couple of years ago. We didn't shut down any of them. We had branches right next door to each other.
We really wanted to focus on the consumer habits, how were they going to enter the branch, which branches should we close, has really allowed us to take a more strategic look. It's kind of a bridge of earnings. The second thing it does is it's a real value to TBV build. It does build your tangible book value. You clearly can see that in our numbers. Lastly, what I would say, it's going to really continue to be there for three years. One of the things that we found on the accretion side is a lot of people are confused what number to use as they're looking at our earnings.
One of the things we did this year is we brought out a new disclosure, and as you can see at the top of this slide, we had $12.4 million in accretion, in the third quarter, and I see a lot of people using $18 million. $18 million includes the contractual interest on a lot of these acquired loans. I would really guide you to look at our earnings release. We tried to make it very simple so you can see what the accretion numbers are, but there still is a lot of confusion as folks have looked at that accretion number. Let's talk a little bit about Park Sterling. We laid out a lot of parameters when we announced the deal, and I want to go back and review a few of those.
First of all, as you've heard a lot of us talk about today, is deposit retention is very key to us. In the deposits that we wanted to retain, we had a 98% retention rate. As you remix loans and you force loans out of the bank, you do lose some deposits, but we've had excellent retention on the deposits that we've wanted to keep. We had a goal of $35 million in cost saves. We achieved that at the beginning of the third quarter. Those numbers are showing up in our run rate. Deal charges. Our deal charges came in below budget than what we originally forecasted. In fact, if you look at our deal charges and the adjustments we've made to the day one balance sheet, we came in about $10 million than we first thought. The EPS impact.
I think there was a lot of confusion at the beginning of the deal. There was a lot written that this deal was going to be double-digit accretive. We said it was going to be mid-single digit accretive. The big reason why that was because of the remixing of the loan portfolio. We finished up with our merger charges in the third quarter of this year. The fourth quarter will be the first quarter without the merger charges. As I mentioned, we're doing the recast this quarter. As we get through that process, and it does look good on the recast part, you'll begin to see the impact of that in the first quarter of 2019. Ultimately, as you all know from a standalone company, we had a very significant Durbin charge.
As you know, last quarter, it had about a $0.10 impact on our earnings. Finally, I go back on this slide and look at TBV. When we announced the deal, I've given you the third quarter of 2017, that's actually the quarter that we closed the deal. You can see today, we've had $1.71 in TBV growth over that time period. When we announced the deal, we said it was about 4% dilutive or $1.25. I think you can see from a TBV standpoint, we're clearly doing extremely well on earning that back. Of course, two other factors you have to throw in there. We had a very large DTA write-off in the first quarter, was $25 million, and obviously, as rates have increased, we've all been affected by OCI through our equity. Let's talk about net loan growth.
We've gotten a lot of feedback over the last few months: "I really don't understand your net loan growth, and I don't understand the Park remix, what that looks like." Joe, part of this slide's for you. What we've shown here is our loan book at the fourth quarter of 2017. We've shown you our runoff and amortization, and we've shown that on Park Sterling, we run off or amortized at about $350 million. I know, Jennifer, that was one of your questions last quarter: "Tell me how much the Park Sterling book has decreased." You can see our production numbers. That was $2.5 billion in production. $1.8 billion of that was funded, and a little over $650 million was unfunded.
The one number that does not show up in there is renewals on the acquired non-credit impaired book, and that was about $190 million. That is in the first bar and in the last bar. We did not bring that through the runoff and amortization and the production. That is a key number in there. I do think that answers a couple of questions. People heard about our production, couldn't really tie it all together, we tried to give you a simple slide on that and show you how much of the Park Sterling book we'd run off. If you go deeper into that Park Sterling book, what we announced, we had $70 million in Shared National Credits. We've gotten rid of that in that number. There was a builder finance portfolio that Robert talked about.
That's another $60 million of that number, and we have about $25 million to go in there. The rest of that, majority of that, is CRE, that has been run off. Let's shift focus and look at the balance sheet for a few minutes. I think this is really important as you try to analyze our company, as you try to think about where we're going, to really take a little bit of time and go in to look at our balance sheet. As Robert mentioned, we're in a new season. We feel like our balance sheet's been rebuilt, remixed, and is surely ready for growth. Let's look at a few components in there. Let's start on the right-hand side. I think as you all know, we're big believers in the deposit side.
If you look at the right-hand side of the slide and you look at the red box at the top, you can see we have almost $6 billion in checking account balances. That is the first thing on my sheet when I look at M&A, is how core funded are they? Does the company have a lot of checking accounts? We feel like over time, it is a key differentiator for us. You can see that is a very large number. As you kind of work your way down the page on that side, we are not big believers in wholesale funding or having lots of debt on our balance sheet. If you look at that fed funds purchase line and repurchase agreements, there is really two components in there. The fed funds purchased are really deposits from smaller banks within our footprint, that we have had in our correspondent area.
The repurchase agreements are typically to companies that we bank, a lot of those that Greg has in the treasury area. Finally, our other borrowings line, it is trust equity. It is Tier 1 capital, some that we had from the legacy bank, and some that we acquired. Clearly, that is a very precious piece of capital that we have, that you really cannot get today. If you shift over to the left-hand side, our investment portfolio is very vanilla. We do not really have any corporate debt in there. We do not have any private label mortgage-backed securities. We do not have any CLOs. Those are things that we have had a tendency to squeeze out of that portfolio. It is very vanilla.
Our acquired loan book, today, when you look at that $3.3 billion, roughly $2.7 billion is the acquired non-credit impaired, and a little over $500 million of that is acquired credit impaired. I do want to spend a minute on the acquired credit impaired and how it relates to accretion, is today, of that over $500 million, over 60% of it is past rated. We have done a lot of work to rehabilitate some of these credits, and what does that do? That creates accretion. We purchase assets that are performing better, but let me tell you, it just does not happen overnight. Kivett's team has done a tremendous amount of work with that, and we are very excited that now over 60% of that is past credits. Let us go a little bit deeper into the funding side.
If you look at this side, the left-hand side talks about wholesale funding reliance. I will just give you the simple definition of that. That is looking at total borrowings plus brokered CDs divided by total borrowings and total deposits. As you can see, compared to peer today, we have a significant less amount than they do, and I think it is really important. I believe that the next 300% to CRE kind of number that is out there is really on the funding side. I think you are going to see more and more focus on these wholesale numbers and the amount of money that people have borrowed. That does not mean that we will not borrow money in the future.
As Greg builds the middle market bank, we're not going to get fully funded with the deposit relationships out of that, but it's clearly something that we have a lot of concern about in the industry. On the cost of funds side, something we focus on a lot, Robert talked about we wanted to make sure we stayed ahead of the curve on the funding side. At the end of the day, we still have a 50 basis points cost of funds. One of the reasons we're so focused on that, if you want to compete for the A credits in the market, you're not going to get the highest interest rates on those A credits. You really better manage your cost of funds in a very disciplined manner.
Let's go a little bit deeper on our transaction accounts, and Renee touched on a few of these things today. We see this as a very big differentiator in our company. If you look at this slide, our non-interest bearing and our interest bearing, the dollar amounts, as I mentioned earlier, are almost $6 billion. I'm not sure there's another $14.5 billion bank in the country that has that. When you go deeper, let's look at how granular it is. That represents over 455,000 accounts. Very deep and dense. Look at the left-hand side of the slide. Average balance, $13,000. Very granular and very old. Average age, 10 years old. We have checking accounts that have been with us 20, 30, and 40 years, but we see that as a very big differentiator. Then you have to ask yourself, are these accounts used?
Well, if you go to the right-hand side of the screen, as you all know, we have probably one of the largest Durbin charges in the country when we took that haircut of $0.10 last quarter. We have over 100 million debit card swipes a year. These things are sticky, they're small, they're granular, and they're used a great deal. This middle piece of it, back to some of Renee's comments, is we think we can even manage these accounts more efficiently. We've done a great job on mobile adoption and mobile deposits. As Renee talked about earlier, we feel like we can do more. It's a great opportunity for us. It is the cornerstone of our funding, but we do see that we can manage these much more efficiently as we go forward.
Let's go to the real easy slide and talk about how simple it is to understand our margin today. Let's start at the bottom. Let's start on the left-hand side. I'm going to give you a few things to think about of how we've looked at this over the last year. One thing I want to point out, the dotted line in there is when we closed the Park Sterling transaction. As you all know, that was a very large transaction for us. It was over $3 billion. As you can see on the bottom on the left-hand side of the cost of funds, you can see how we've done compared to peer. When we bought the Park Sterling deal in, they had a cost of funds of 58 basis points.
As we got that, I think as we talked to you all earlier, we wanted to kind of re-deal how that looked. There was over $400 million in wholesale funding. As you all saw on one of those few slides before, we've been able to squeeze out that whole funding side and keep our deposit costs at a very low level. On the right-hand side, it's our yield on earning assets. As Robert mentioned earlier, there was a lot of assets that we could have kept in the Park Sterling transaction. They had excellent credit quality. We felt like it just didn't fit our business model. These were some high-yielding assets. There were some high-yielding assets on the balance sheet.
It didn't quite match our risk profile, so we pulled those out, and we're still able to drive our yield on our interest earning assets up to 450. Ultimately, you can see the margin at the top of the table, is our margin is better in peer. We have given you the accretion number. If you want to go and back that out, you can look at that. As I mentioned, that accretion is going to be with us for another three years, so it's something that's going to continue to be there. We're very focused on trying to drive our margin. Clearly, it'll be harder in the environment that we're in today. Who knows exactly where funding cost goes. Lot of discussion around when the next rate moves would be.
I will assure you, one thing that we will do is we will continue to really protect our deposit franchise. We want to kind of get ahead of the curve a little bit. I feel like over time, that will begin to normalize as rates begin to settle down. Let's look a little bit deeper on the loan side today. This top bar on this chart kind of breaks down our loan book by states. As you can see, in South Carolina, we have over $6 billion in loans. In North Carolina, we have $2 billion. In Georgia, we have over $2 billion, and we have about $600 million in Virginia. As Greg mentioned in his presentation, we really feel like in that North Carolina and Virginia, great growth potential to be able to drive those numbers up. Really excited about that.
If you go and you look at the bottom, we get a lot of people ask us about our loan growth. Of course, as you remix a portfolio, it's harder to have loan growth. You can see on the left-hand side of this chart, we've had non-acquired loan growth of 17%. If you take those acquired non-credit impaired renewals out and take that out of the number, it's still 14%. Our people are producing at a very, very high level. One thing I can assure you is, as we think about loan growth, we're not going to go change our risk profile just to drive that number. We're not selling widgets. We're selling for people to pay us back over a long period of time, we're not going to let that get ahead of how we view our risk profile of our company.
If you look, as Jonathan mentioned earlier, on the asset quality, it's a pristine book of credit. It's a granular book of credit, and our top 25 relationships make up about 7% of our loans. Our view on this is much like the deposit side. We don't want to take a lot of big bets. We like our granularity of our loan portfolio. It has really served us well over the last decades. Let's shift a little bit and go deeper into the loan book, and let's talk about how things reprice if it's fixed rate, or how it sits on our balance sheet. If you looked at the left-hand side of this balance sheet, and as Renee had mentioned, we've got a fair amount of consumer loans, which are granular. We have right under $6 billion in fixed rate.
We have right under $2.5 billion in floaters. My definition of floaters is anything that reprices in less than 30 days. We have some hybrid ARMs, so the ARM business that we've done on the mortgage side, and then we have some adjustable rate mortgages. That kind of gives you the base of how our loan book looks. If you go to the right-hand side, let's talk about how this book contractually matures or reprices. 30% of that is done in less than a year, 34% is 1-5, and then 36% is over five years. Then what we said, well, we were going to go deeper for you, here's another new disclosure today, is the weighted average life on this portfolio is in the 3-4-year range, and I would tell you today we're closer to three.
It's granular, it churns, it clearly helps with interest rate risk. One of our strategies in the mortgage piece of our company, and Renee and I have both worked in it a number of years ago, is when we do a consumer real estate loan on the books, it's not going to be there forever. Eventually, it is going to get to the secondary market. We do a lot of construction, it gets to permanent financing, and then ultimately that customer is going to want a fixed rate, and that's how we're able to drive the interest rate risk down as you look at our book. Let's shift and look a little bit more at our operating leverage and things that we can do. A couple things on this slide.
If you start over on the right-hand side, this is our efficiency ratio for the third quarter. I'm giving you an adjusted efficiency ratio and a GAAP efficiency ratio. The difference there is the last bit of merger expenses that we had from the Park Sterling deal, and then I've given you our peer median. We believe that we can drive our efficiency ratio back into that 56%-57%. In fact, before Durbin, before we got hit with that $0.10 a quarter, we were really there. The other thing I would point out there, as you all know, as much as we've done in merger, we've had a lot of merger charges come through our financial statement. Well, that's over now. What does that do?
Back to Chris Marinac's point on building tangible book value is our GAAP efficiency ratio and our adjusted efficiency ratio will become the same, that's clearly going to build more tangible book value without those merger charges. Capital. What a wild ride it's been the last month when you look at stock prices and repurchases of stock and what people are doing with their capital. I think today, when you look, this slide kind of takes us back through the quarter before the Park Sterling merger, is we've been building capital at a pretty rapid pace. As Robert mentioned, we thought loan growth would be higher than where we are now. We probably thought we'd be levered more in that 12.5% range on total risk-based capital. Clearly, on total risk-based and tangible, it's really begin to build, and it's built up to a fairly significant level.
We realize that we don't want to sit on excess capital. That's not what we want to do. We've always been able to leverage it, we sure have been able to produce it even with the M&A transactions that we've done. Let's talk a little bit more about capital and how we think about it. From an organic perspective, really without any earnings growth at all, we can absorb over $250 million growth a quarter and still accumulate capital. We are generating that much capital today to be able to support our growth. Clearly, from an M&A side, M&A today would be pretty difficult to do where prices are, our capital levels give us a lot of options there.
If we saw another company a little bit like Park that had a high level of CRE to risk-based capital, we can absorb that because of our capital levels. From a dividend perspective, our view has typically been in the past to pay out between 25% and 30% in cash dividends. Then finally, from a repurchase standpoint, is I think if I was sitting here six months ago, I'd tell you, this is completely off the table. It's not something that we really think about, I want to talk more about that in a minute. The last thing I would add here is we all have to deal with CECL as we get to 2020. Does it change? What does that mean? We're all kind of zeroed in on that to see what's going to happen from the CECL side.
One thing I would caution you is, some reserves might go up, some people's reserves might come down. Still a lot of unknowns, CECL could have a capital impact throughout our industry. From a repurchase standpoint, as I mentioned a minute ago, I didn't really think that this would be something that we would be focused on. At these prices, absolutely, we are. I think, as y'all know, we've always tried to be opportunistic. We've always had an authorization in place, so we didn't have to go out and announce an authorization at the last quarter. We started buying. We bought almost 770,000 shares in the fourth quarter, at a price a little over $67. We have a little over 130,000 remaining on the plan, we do anticipate putting in another authorization when this one's up.
We've always had one in place, and we feel like we're beginning to put another one in place. If growth doesn't pick up, it's clearly something we're going to continue to focus on in terms of buying back our shares. Ultimately, I think it gets down to your tangible equity and how you look at returns. I think my slide's a little bit different than Robert's. I didn't include the dividends on this one, but dividends over this time period were over $8 cumulatively. We've done three FDIC deals, we've done five whole bank deals. We did a branch purchase, and we did that with cash. We did that with tangible equity. I didn't issue any shares.
We've been able to put all that in and still deliver really good results on our tangible book value build, as you can see, since the fourth quarter of 2009 through the third quarter of this year. Finally, I hope some of y'all didn't fall down, that we were actually going to put some targets out there. I know y'all have been trying to get them out of me for a while. We thought, as Robert Hill said, we're entering into a new season, and so we thought we would lay out some things of how we think about targets. That doesn't mean these are going to happen tomorrow. That doesn't mean they'll necessarily happen in 2019, but I think it's goals that we can achieve. We believe we can get our loan growth back to 5%-10%.
I think, as y'all know, that's not been one of our issues over the years. We've been able to grow our loan portfolio. We do best when we can manage expenses less than 3% growth. Clearly, if you're not growing your asset side and you've had a hit from Durbin, you better be mighty precious on your expense growth. It's something we're very focused on. As I mentioned earlier, we feel like we can get our efficiency ratio back in that range. Some ask, "Well, why can't you go lower?" I think there's several reasons. One, if you look at our business model, we're high touch. We have a mortgage area, we have a wealth area, and we're a very granular company. And some of those do put some limits on how far you can drive that down.
From a capital standpoint, you can see that we feel like from a TCE standpoint, we can be in that 8%-9% range and operate very effectively. Clearly, today, we're above that. There's going to be times when we do operate above that number, but clearly, we think that's an area that we can do. Dividend payout ratio in that 25%-30% range. As we do every year, we'll update our capital plan. That could be a number that could end up moving as we see where the world sits as we do that in the first part of next year. I think ultimately it gets down to the returns, is we believe that we can have a return on tangible equity in that 16%-18% range. I do know there's a natural question around when. As I mentioned, I'm not sure.
It doesn't necessarily mean '19. We're going to continue to operate within our risk parameters. As Jonathan mentioned earlier, we are looking at a very stable credit environment. If the credit environment changes, obviously, we'll have to begin to look at these again. Ultimately, let's just look at return on tangible equity a little bit deeper. When you look at this slide, the box that's been shaded, that's our return on tangible equity. This slide's a little bit different than some of the ones in the past. We've given you 2015, '16, '17, and then we've given you the first three quarters of '18. This is our adjusted return on tangible equity, so we're adding back those merger expenses. Then we've kind of given you our peer median.
We feel like if we can operate in those ranges, that gives us a very, very acceptable returns on our tangible equity. There could be times it's a little bit lower. There could be times where we get to that upper range around 18. Really, at the end of the day, you have tangible book value build, you get some earnings growth, you manage your capital ratios properly, and as y'all know, we have a tendency to be a little bit higher on the capital side than the way some run. We feel like that we can produce those type of returns. With that, I'll turn it back over to Robert.
Just a couple of concluding remarks. Again, we thank you for your time today. Thank you for your travels and your interest in our company. I hope that we've accomplished our goals of giving you more clarity and visibility into our company. For the areas where we've not, we'll move into a Q&A session in a minute, and we're always at your disposal for questions that you may have to follow up with. We're still in the early innings of the season. We don't have all the answers yet. We clearly have more visibility into our company and more stability in our numbers than we've had in some time. I think that in about two hours today, you have heard everything about our company, because our company's pretty simple. Our culture's pretty simple, our business model's pretty simple, our balance sheet is pretty simple.
I think with complexity tends to come risk, and with the simpleness of our company, it just makes us a less risky alternative. I think as we've talked about our markets, you can say to a large degree, mission accomplished. In terms of our teams, we're building talent externally, we're building leadership internally, and we're retaining talent through M&A. I think the difference today is really the opportunity set that lies before us there. We look forward to updating you in the quarters ahead on how we stand in terms of how our performance accomplishes that mission. We'll go into a Q&A now, Jim, is that right?
Yes. We can start with our executive team.
Our executive team will be up front for you, and we'll have a microphone to go around the room, and we'll be glad to answer any questions that you may have. Jim. When we're done, will you wrap everything up and just thank them again and close us out?
She said it's okay to talk now, right?
Yeah. Who's got the microphone? It's not there.
I think it's Kelly.
It's Kelly. Just as a reminder, for the folks that are participating via webcast, you've got the ability to pose questions through the messaging on that. If we have time, be happy to take those. Initially, we'll start in the room with any questions you may have.
Thank you. Thanks for organizing this today, Jim. It's been very helpful. As you look at all the various items in the income statement, it feels like loan growth might present the biggest risk versus your internal budget over the next 12 months. Can you just comment on where you see the earnings risk kind of highest to lowest as you view it over the next 12 to 24 months?
Jennifer, this is John. I'll start. One of the things I meant to say in my comments, I think if you look at loan growth for this quarter, it feels a lot like the third quarter. We still haven't gotten kind of back to that higher single-digit range, so we still have some remixing. I think clearly, you're not seeing quite as much demand out there. I will say, when you look at our pipelines, if you look at some of the things that Greg talked about, we think we're really poised to really do a good job there. As we've said in the past, does that return in the first half of next year? I hope so. Feel like we're getting a lot of good opportunities there.
I think ultimately is, Jennifer, if we can't grow the loan portfolio, then we just got to find other ways to bring more returns to the bottom line.
Yes. Maybe on expenses real quick. Kind of appreciate the longer-term targets, so the 0%-3%. How should we kind of think about in the near term? It sounds like there's some investments on data aggregation, tech, delivery. I understand that some of those you kind of get a better efficiency or ROI past that. How should we think about kind of the investment phase that gets you there? Can you still operate within the 0%-3% kind of more near term?
I'll start. You want to start? Yeah. I think we can. I think what we've always said is, I think today where we are on the investment side, we've got to find the efficiencies to offset that. We'll just totally each quarter map out like that. You might see a bump up one quarter and down the next quarter. We don't see some big, huge bubble coming through the expense line. We've got to do a good job at managing expenses. I think if we invest today, we've got to be able to show we have a way to offset what we do on the expense side. Nick, I'd just add, I think that's the whole reason that we've been going down this path of building out these delivery channels, is because we know we've got to spend some money on technology.
The whole reason we outsourced some of the support areas of the company, to stay focused on the things that were critical because we got to operate more efficiently because we know there are investments that need to be made. What we want to try to do, as John said, the timing may not always be perfect, but try to offset as much of the investment that we need to make by gaining efficiencies in terms of how we deliver today.
I would just add, internally, you mentioned ROI, return on investment. We've really tried to instill some discipline throughout our company. As we've gotten larger, as the different lines of business, our support areas, as they bring forward a technology initiative, we're looking for some type of return on investment. There may be some, like Zelle, for example, you're not going to see a return on investment. That's basically table stakes. You need that to be able to play in the game. We'll have to find some other ways to pay for that investment. For the most part, we have really tried to put some discipline within our company so that we have a solid return on investment before we start an initiative.
As a follow-up on the efficiency target, as we think about the other side of that equation on the revenue side, how do you think about your net interest margin? What level of net interest margin, a range, but what level of net interest margin do you need to maintain in order to hit those efficiency targets?
I haven't really thought about it like that. I would say today, the core margin's fairly stable. I think the first thing will be is where does funding costs land. I think our view around funding costs, it is going to begin to level out. I think on the loan side, our loan yields are moving up. Feel good about that. As you know, Catherine, is the accretion will begin to wind down. It's going to put some pressure, but it's not going to be tomorrow. We're doing our first part recast. We feel very good about the credit. You'll begin to see some of that show up in the first quarter. I think when you look at that efficiency ratio, we were clearly there before we had the big impact of Durbin.
When you dig a little bit deeper into that is, so for a 1% improvement in our efficiency ratio, if you look at the revenue side, it's about $11 million a year. If you look at the expense side, a 1% improvement would be about $6.5 million a year. I think our view is we run the company, as Renee said, we analyze these different areas where we need to add. We need to find offsets. I think one of the things we have done a good job is when we do have an initiative out there, as we've been able to tell you what the initiative is, what the cost save aspect of it is, and what we need to spend, it's clearly something we're going to stay focused on.
Maybe a follow-up on the margin. I'm kind of putting together comments that you've made throughout the day, it feels like you've made comments that the cost of funds are still going up, that the rate of increase is stabilizing. Of course, that all depends on what the Fed does, but generally stabilizing. It feels like your yield on earning assets has been the weight of the runoff there from higher yielding runoff has weighed on your ability to reprice the asset side as quickly as you otherwise may have been able to. As I put those two together, do you feel like there's upside to the core margin over the next couple of years?
I think over a couple of years. I wouldn't say the funding cost is totally stable yet. I think we got to see what happens in December and kind of see where the Fed is. I do think that you're seeing slower growth overall, kind of throughout our industry. I do believe that piece has helped. I am concerned about the wholesale piece. I think a lot of people are just capped on the wholesale side of it. What does that do? Does that drive more competition on the deposit side? As growth slowed at the end of last quarter, it felt like the competition wasn't quite as hot as it was on the deposit side.
Helpful. Thank you.
Hey, guys. Thanks. Question on the other side from the revenue standpoint. Obviously to get that efficiency ratio target achieved, it feels like operating revenue growth in total would have to be pretty strong. Can you talk about fees? That's obviously declined a lot year-over-year as a percentage of overall revenues, is that a perpetual goal to grow that as a percentage of revenues, and especially maybe wealth and mortgage that you talked a bit about?
You want me to start?
Yeah.
I think the first thing is, when you look at 2019, fee revenue is not going to grow because we got a full year of Durbin, right? We had the first six months in 2018. Really in 2019, that's not going to be a growth part. I think as Renee mentioned, we feel like there's growth in wealth. I think the mortgage volume obviously is not where it was for secondary market loans, but it has given us the ability to get some loan growth. Then I think on the retail side, we've just got to be more efficient.
I think if you go back and look at those slides on the number of checking accounts that we have, the number that we still can adopt digital, I think that's where we're going to have to drive more efficiencies than necessarily having the fee income grow in that category.
Steven, the only thing, just adding a fee comment, but a lot of it just gets back to loan growth, too. Man, that's where the bulk of the revenue drivers are going to come for our company. Obviously, we've been through a period of slower growth, but we're in good markets. The pipeline looks good, and our team looks good.
It's just been an unusual time of remixing. We don't see the economy just falling off a cliff. It still looks pretty healthy. Is it 5% loan growth or is it 8% loan growth? We don't clearly know, but I think the biggest driver of getting to that efficiency ratio is our opportunity to drive loan growth and also leverage up our infrastructure.
On the loan side too, our average loan amount of $127,000. That's not going to be the average loan amount in the middle-market bank. Bigger loans are going to be more efficient, and that's going to help there a great deal.
If you look at the infrastructure that Robert mentioned, to get to 10% market share, to get to that 1.2 million in customers, we feel like all those pieces are in place. We feel like there's a lot that we can just leverage up in our footprint.
This question comes from John.
Pardon me.
You mentioned the longer-term targets. Can you provide any more clarity as to when you might expect to reach those long-term targets on a quarterly or annual basis?
I think, as we mentioned earlier, is we're in a new season. We're giving you a lot of data today. We've just rolled out those targets. I think it's going to take some time. Some of those we might not achieve in 2019. It's going to take some time on a few of those. I think as we kind of work our way throughout the year, I think it does become clearer. We thought it was important. We've gotten the feedback. At least give us some ranges around targets that you're thinking.
Yeah. Hi, thank you. I'm just curious. Your charge-offs are low. Everyone's charge-offs are low at this point. There's a lot of good loans put on after the crisis, good underwriting. What do you see today on the credit side, other banks' behavior, that's troubling you, maybe leads us to the next credit cycle? Thank you.
Yeah, I'll take that. I think there's risk building in the system. I think with the pursuit of loan growth, I think folks are stretching on terms. We're getting fierce competition from obviously the community banks, our peer banks, but we're also seeing increased competition from non-bank competitors, too. We're just getting hit from all different directions. Obviously, they're pressuring margins, but it's also pressuring the structure piece, too. I think ultimately, that's creating risk that's building up in the system. I don't think you'll see that fully until we have a downturn, and then you'll see how much risk was there. It's a good question.
Yeah, John, one thing I would add is when I start seeing what I call our C minus and D credits get paid off, it kind of begins to make me wonder sometimes. You're seeing some of those begin to move off our balance sheet and being refinanced at other places.
Give us a call.
Thank you. I had a quick question on capital. It seems like that's the biggest lever in my mind. The market's kind of concerned maybe we're in the back half of the economic cycle. How does that kind of balance with your decision maybe to run with a little bit lower capitals? A follow-up, how do you evaluate the buyback? Do you look at TBV earn back or an IRR, or how do you evaluate that decision?
I'll start. I'd say on the capital side, we clearly are later in the cycle. I'd say the first thing is we're big believers in tangible. We don't have a lot of hybrid capital on the books. I think that the tangible piece of that, as you get later in the cycle, that's really equity that you can spend. I haven't seen a whole lot of people use their hybrid capital as they got into credit losses. I think as we look at buybacks, we look at IRR, we look at earn back, clearly with where prices have come down, assuming you believe in your credit metrics, it's a pretty risk-free way or pretty risk-free earn back. We look at those two things.
I'd say, Joe, just to add is, we look at buybacks all the time, and the earn back period never met a hurdle rate for us. Now it does. I think just the TBV earn back period has materially come down and seem to be, especially with the low-risk nature of the buyback, a good use of capital when you're building excess capital.
Yes, we spent a lot of time talking about depth and density and the importance of that, or having scale in several of your markets. You also talked about Raleigh Richmond being seeds to farm from here. Can you touch on the M&A appetite and what you guys will be looking to do on that front?
Yeah, I'd say really M&A is really just not on the radar screen. You look at the volatility where the quality of the banks to acquire is clearly diminished. Look at the funding of a lot of those smaller banks, it's just not that good. I think the pool of banks that we would be interested in buying is smaller than it's been in quite some time. I'd say it's just further down the list. The big opportunity for us is to, John and I always said years ago, if we can just figure out a way to generate our own capital
To build the balance sheet. Well, today that's not an issue. We're generating a lot of capital. We just have to figure out how to leverage it and put it to work. I think that's the lowest risk, highest return opportunity for our investors.
All right, John, I'm going to give you an accretable yield and CECL question.
All right. That's what I need.
Your two favorite topics, I know. You mentioned that accretable yield is going to be here for another three years plus. How should we think about I know you're not going to have an exact CECL number for us, and I don't think anyone's expecting that. How should we think about how accretable yield will look in 2020 post-CECL, just given expectations there, and how we kind of think about the acquired credit book and then the acquired performing book and the different accretable yield pieces within those two portfolios?
I think on the CECL front, I still think there's a lot of unknowns. When you think about CECL from the acquired side, you got to think about M&A, and then you got to think about what's on your books. Let me just start with M&A. One of the things that will be different in M&A on the acquired non-credit impaired book, you're going to have to put up a legacy reserve. It is going to change the accounting. Today, we put up a discount, really don't put up a reserve. If you look at our financial statement, those charge-offs run through the income statement, and then we kind of put up the reserve to cover the charge-off. You're going to kind of front-end load, again, the charge-offs.
Today, anybody that has acquired non-credit impaired charge-offs, you're not going to see that come through the income statement in theory. You have that piece. I think on what we have today, the discounts are basically going to be grandfathered. Let's start with the acquired non-credit impaired piece. We have a discount in there. It's $37.1 million. It's in our footnotes in our financial statements. We're going to have to go put up a reserve against that. As I mentioned in my first comments, you won't really see any charge-offs on that book anymore, right? Acquired non-credit impaired is a book of credits that you don't add new loans to. It's just going to wind down. You're going to have to put that piece in. On the acquired credit-impaired book, there's really not a whole lot of change.
It's going to be grandfathered. You're going to have your reserve piece, which today on our acquired credit impaired is a little over $30 million. Then you're going to have this non-accretable that's turned to accretable. That's going to be grandfathered in. In the future, I think our hope, along with you all, is why would you run credit improvement through the margin, right? Doesn't make a whole lot of sense, is those will be more one-time hits. Let's take the Park book, what I'm getting ready to do with that. We're going to do this recast in the next quarter, and we're going to have some pieces of it that are impaired, and we're going to have a lot of pieces that are not impaired. What's ever impaired in that first piece, you have to take that hit right up front.
You have to go ahead and write it off. Whatever we release is going to come back through income over time. It's all going to be the same in the future. You're going to take your hit, and then you're just going to drive all that income through the bottom line. Today, let's just say you paid off our whole acquired book. All that accretion poured in, it's $80 million. That's what's coming back through our income statement over time from the accretion standpoint. I think our view on CECL and where we are, is we should start running parallel by the middle of next year, and then we'll be ready for 2020, in terms of being able to implement that. Clearly, a lot of discussion out there on how it should look.
I think our view is what a lot of people have brought up. I think what makes the most sense is let's pay for charge-offs in the first year. If you're trying to use your crystal ball and predict what's going to happen in the future, let's at least let that come back through the OCI calculation and not drive that through the income statement.
I see one more question in the back.
Just a quick follow-up to that. Are you assuming a CECL hit to capital when you're getting to that 8%-9% TCE target? Is that kind of the main driver for the timeline it will take to sustain the ROTCE goals?
No, not necessarily at all. I think as CECL becomes clearer, it could change what that looks like. Let's just think about how that's going to work. You're going to have your TCE calculation, and you're going to have your total risk-based capital calculation. If you have to add more to your reserve in the CECL calculation, but you don't go above 1.25% of risk-weighted assets, then whatever you put up in your reserve is going to be in tier 2 equity. In fact, you're going to have more equity. Your capital ratios are going to look better as long as you don't go above 1.25%. The reason that is because you're kind of taking the tax effect out of equity, right? Is you have to pull it out of tangible, and you put it back in the reserve.
the reality is that's going to go up. I think, Steven, once we get clarity around that, we would do that. I think our point around the 8%-9% range, if you look in the past
Is that's a very comfortable range for us to operate in. I think, as we mentioned earlier, we thought we would be bigger now. We thought growth in the legacy bank would be bigger now. That's why our capital ratios have kind of trended up from where they are.
Jonathan, just one for you. You showed the charts sort of before the recession to today, what's the average loan size and the granularity. Do you have a sense or do you know the numbers off the top of your head? How do LTVs compare today versus then? I'm just trying to appreciate, see you have more capital today. I just want to appreciate how risky the loan book is today versus then.
Well, I don't know right off the top of my head, but one thing I'll say is we've not changed the way we do business. The way we do business today is the same advanced rates, LTVs, et cetera, that we did five years ago, 10 years ago. We're not making any dramatic changes in how we do it. I would suspect it would be very similar to the way we've done it in the past.
I had a quick question on loan growth. I guess you guys kind of mentioned the I-85 corridor was a little weaker than you expected. Part of it was Park, part of it was some runoff, I think, in upstate. How much do you think competition factored into that, I guess, as far as maybe some rationality? Those felt like internal things. What are the external focus things that maybe you're pulling back from?
Greg.
I couldn't hear the question. I'm sorry.
Yeah. How much of the competitive environment kind of led you to pull back from loan growth in the I-85 that could have been a headwind to growth absent Park and potential runoff? I guess, are there competitors in the market that are somewhat irrational in pricing and you're pulling back? Did that factor into the softer growth?
As I look at our growth markets, the I-85 has probably been the most stable in terms of competitive pressure. We've seen, as far as rational and irrational competitors, I'd say that market's probably one of the most rational markets, relatively speaking. I don't think if there has been a pullback up there, it's not so much demand-driven, it's not so much irrational competition. I really don't.
I would say some of that has to do with just the asset values and customers taking money off the table. With high asset values, we've had a lot of loans pay off just from the sale. Even with the flat yield curve, moving some of these construction and land development deals, moving those to the permanent market. That's what we're seeing. It's all very positive from the customer's perspective. From the bank's perspective, they're payouts nonetheless.
Yeah, I agree with Jonathan. Don't think it's a competitive issue. I think it's been more of really long-term investors selling. Feeling like cap rates are at a peak or whatever reason, that's been because the productivity's still been pretty good, especially in the upstate. I think it's a lot of taking money off the table. Last week, the largest home builder in the state is a company called Mungo Homes. They build 1,800 homes a year in South Carolina, and they sold to a subsidiary of Berkshire Hathaway. We're seeing other money from outside the market move in and invest in assets. That has been a shift over the last 12 months.
Joe, I think to go a little granular. Let's look at the three loan categories that have shrunk in the last year. If you look at our balance sheet. Construction and land development, if you go back, really, let's just go back to year-end. It's down $120 million. Seeing some less construction costs are up. I think that's very natural. The second category is home equity lines. Prime's been moving out, right? Home equity lines are based on prime rates, that's down right at $30 million year to date for us. Then the last piece I think that really Robert and Greg alluded to is our income-producing real estate is down about $50 million. People are seeing these discount rates. They're selling these properties and taking their gains. What we found with those customers, they're waiting for their next opportunity.
Yeah.
They've accumulated a lot of cash, they're trying to figure out what their next move means. It really kind of goes down into those three categories.
Yeah.
If you go back to that I-85 corridor too, John touched on it in his presentation. Production's been very strong. If you look at production, let's call it year to date, we're almost at the end of the year. It's been very strong in North Carolina, Virginia, and very strong along the I-85 corridor. That has not waned at all.
I don't see any other questions. With that, excuse me, I'd like to bring our Investor Day to a close. Once again, want to thank you very much for your interest. We really appreciate it. Most importantly, your feedback. We value that feedback and listen to it and are anxious to get it. Thank you very much. We appreciate your participation today.