CASH 2017 Annual Report

76 Overall, the cost of funds at MetaBank averaged 0.43% during fiscal 2017, compared to 0.15% for 2016. This increase was primarily due to a combination of the issuance of the Company's subordinated debt in the fourth quarter of fiscal year 2016, the addition of wholesale deposits, and an increase in short-term borrowing rates. Tangible book value per common share decreased by $2.10, or 7%, to $29.47 per share at September 30, 2017, from $31.57 per share at September 30, 2016. This decrease was driven by an increase in common shares outstanding along with increases in goodwill and intangible assets, which for this calculation, are excluded from total stockholders' equity. The increases in common shares outstanding, goodwill and intangible assetswere primarily attributable to theEPS andSCS acquisitions completed during fiscal 2017. Book value per common share outstanding increased by $5.85, or 15%, to $45.15 per share at September 30, 2017, from $39.30 per share at September 30, 2016. The Company’s non-performing assets (“NPAs”) were 0.72% of total assets at September 30, 2017, compared to 0.03% at September 30, 2016. The increase in NPAs was primarily related to two large agricultural relationships becoming more than 90 days past due. These loan relationships were both still accruing in the fourth fiscal quarter. One of these relationships was paid in full on November 1, 2017, and it is possible the collateral related to the other relationship could go through a deed in lieu of foreclosure process in the near future. Financial Condition As of September 30, 2017, the Company’s assets grew by $1.22 billion, or 30%, to $5.23 billion, compared to $4.01 billion at September 30, 2016. The growth in assets resulted from a variety of factors, including increases in the Company’s cash and cash equivalents, loan balances, and investment securities portfolio. Total cash and cash equivalents was $1.27 billion at September 30, 2017, an increase of $493.8 million from $773.8 million at September 30, 2016. The majority of this increase was related to a temporary repositioning of the balance sheet in September 2017, similar to what was done in fiscal year 2016, to prepare the Company for the upcoming 2018 seasonal tax lending activity. The Company anticipated utilizing excess cash it held at its fiscal year end to repay overnight borrowings in October 2017. In general, the Company maintains its cash investments in interest-bearing overnight deposits with the FHLB and the FRB. At September 30, 2017, the Company had no federal funds sold. The total of MBS and investment securities increased $167.9 million, or 8%, to $2.26 billion at September 30, 2017, compared to September 30, 2016, as investment purchases exceeded related maturities, sales and principal pay downs. The Company’s portfolio of securities customarily consists primarily of MBS, which have expected lives much shorter than the stated final maturity, non-bank qualified obligations of states and political subdivisions (“NBQ”) which mature in approximately 15 years or less, and other tax exempt municipal mortgage related pass through securities which have average lives much shorter than their stated final maturities. All MBS held by the Company at September 30, 2017 were issued by a U.S. Government agency or instrumentality. Of the total $700.1 million of MBS at September 30, 2017, $586.5 million were classified as available for sale (“AFS”), and $113.7 million were classified as held to maturity (“HTM”). Of the total $1.56 billion of investment securities, $1.11 billionwere classified asAFS and $449.8millionwere classified as HTM. During fiscal 2017, the Company purchased an aggregate of $292.2 million of MBS securities, of which $131.4 million have an average life estimated at approximately five years or less or stated final maturities of approximately 30 years or less, and sold MBS in the amount of $90.0 million. In addition, the Company purchased $557.4million of investment securities which are principally comprised of tax exempt municipal bonds primarily backed by, and/or convertible into, Ginnie Mae, Fannie Mae, or Freddie Mac MBS securities, government related and guaranteed floating rate securities, and smaller portions of other security types. See Note 6 to the “Notes to Consolidated Financial Statements,” which is included in Part II, Item 8 “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. The Company’s portfolio of net loans receivable increased by $398.4 million, or 43%, to $1.32 billion at September 30, 2017, from $919.5 million at September 30, 2016. This growth was driven by increases in commercial real estate loans of $162.6 million, consumer loans of $125.9 million, residential mortgage loans of $34.4 million and commercial operating loans of $4.5 million, along with growth in premium finance loans of $78.9 million. The growth in consumer loans was primarily related to the student loan portfolio purchase in December 2016. The increase in net loans receivable was partially offset by a decrease in agricultural loans of $5.3 million. See Note 3 to the “Notes to Consolidated Financial Statements,” which is included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Through the Bank, the Company owns stock in the FHLB due to the Bank’s membership and participation in this banking system. The FHLB requires a level of stock investment based on a pre-determined formula. The Company’s investment in such stock increased $13.6 million, or 29%, to $61.1 million at September 30, 2017, from $47.5 million at September 30, 2016. The increase directly correlates with the higher short-term borrowings balances.