CASH 2017 Annual Report

77 Total deposits increased by $793.3 million, or 33%, to $3.22 billion at September 30, 2017, from $2.43 billion at September 30, 2016. The increase in end-of-period deposits was primarily the result of an increase in wholesale deposits of $476.2 million, an increase in non-interest bearing checking deposits of $286.5 million, and a $29.2 million increase in interest-bearing checking deposits. Wholesale deposits were added during fiscal year 2017 at advantageous rates when compared to the overnight borrowing rates, thereby lowering funding costs, or to target strategic maturities which are expected to aid in tax season tax advance loan funding. Deposits attributable to the Payments divisions were up $305.9 million, or 14%, at September 30, 2017, as compared to September 30, 2016. The increase is due to continued growth in our core business relationships related to the Payments divisions. The Company’s total borrowings increased $302.5 million, or 25%, from $1.19 billion at September 30, 2016, to $1.49 billion at September 30, 2017, primarily due to the increases in short-term advances from the FHLB, which was done as part of a temporary repositioning of the balance sheet, as noted above. The Company’s short-term borrowings fluctuate on a daily basis due to the nature of a portion of its non-interest-bearing deposit base, primarily related to payroll processing timing with a higher volume of short-term borrowings on Monday and Tuesday, which are typically paid down throughout the week. This predictable fluctuation may be augmented near a month-end by a prefunding of certain programs. See Notes 8 and 9 to the “Notes to Consolidated Financial Statements,” which are included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. At September 30, 2017, the Company’s stockholders’ equity totaled $434.5 million, an increase of $99.5 million from $335.0 million at September 30, 2016. Stockholders’ equity increased primarily as a result of an increase in additional paid-in capital and retained earnings. At September 30, 2017, the Bank continued to meet regulatory requirements for classification as a well-capitalized institution. See Note 13 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. Results of Operations The Company’s results of operations are dependent on net interest income, provision for loan losses, non-interest income, non-interest expense and income tax expense. Net interest income is the difference, or spread, between the average yield on interest- earning assets and the average rate paid on interest-bearing liabilities. The interest rate spread is affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows. Notwithstanding that a significant amount of the Company’s deposits, primarily those attributable to the Payments divisions, pay relatively low rates of interest or none at all, the Company, like other financial institutions, is subject to interest rate risk to the extent that its interest-earning assets mature or reprice at different times, or on a different basis, than its interest-bearing liabilities. The provision for loan loss is the adjustment to the allowance for loan loss balance for the applicable period. The allowance for loan loss is management’s estimate of probable loan losses in the loan portfolio based upon loan losses that have been incurred as of the balance sheet date. The Company’s non-interest income is derived primarily from tax product fees, prepaid cards, credit products, ATM fees attributable to the MPS division and fees charged on bank loans and transaction accounts. Non-interest income is also derived from net gains on the sale of securities available for sale as well as the Company’s holdings of bank-owned life insurance. This income is offset by non-interest expenses, such as compensation and occupancy expenses associated with additional personnel and office locations as well as card processing expenses attributable to Payments. Non-interest expense is also impacted by acquisition-related expenses, occupancy and equipment expenses, regulatory expenses, and legal and consulting expenses.