CASH 2018 Annual Report

85 During the first quarter of fiscal 2018, the Company early adopted Accounting Standard Update ("ASU") 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ." Due to the early adoption of the ASU, the Company transferred $204.7 million of investment securities and $101.3 million of MBS from HTM to AFS during the first quarter of fiscal 2018. In connection with the Crestmark Acquisition, the Company transferred $40.9 million of investment securities from HTM to AFS during the fourth quarter of fiscal 2018, as allowed through ASC 320-10-25-6(c), which allows for the transfer of securities from HTM in the event of a major business combination. 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 and leases receivable increased by $1.61 billion, or 122%, to $2.93 billion at September 30, 2018, from $1.32 billion at September 30, 2017, primarily attributable to loans and leases acquired as part of the Crestmark Acquisition. Excluding loans and leases acquired as part of the Crestmark Acquisition, total net loans and leases receivable would have increased $454.0 million, or 34%, during fiscal year 2018. Crestmark loans and leases receivable were acquired at a fair value of $1.05 billion on August 1, 2018 and grew to $1.16 billion at September 30, 2018. National lending loans and leases increased $1.45 billion, or 367%, to $1.85 billion at September 30, 2018 compared to September 30, 2017. Excluding the Crestmark division, national lending loans and leases would have increased $291.4million, or 74%, at September 30, 2018 compared to September 30, 2017. Within the national lending portfolios, excluding the Crestmark division, commercial finance loans and leases increased $95.4 million from September 30, 2017 to September 30, 2018, primarily driven by an increase of $87.4 million, or 35%, in commercial insurance premium finance loans. The consumer finance portfolio increased $195.1 million, largely driven by consumer credit products, an asset-based consumer warehouse line of credit, and the Company's student loan portfolio. Community banking loans grew $167.6 million, or 18%, at September 30, 2018 compared to September 30, 2017, due to growth in commercial real estate loans of $163.1 million and residential mortgage loans of $26.8 million, offset in part by a decrease in agricultural loans of $34.9 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 decreased $37.7 million, or 62%, to $23.4 million at September 30, 2018, from $61.1 million at September 30, 2017. The decrease directly correlates with the lower short-term borrowings balances compared to the prior year. Total end-of-period deposits increased by $1.21 billion, or 37%, to $4.43 billion at September 30, 2018, from $3.22 billion at September 30, 2017. The increase in end-of-period deposits was primarily the result of an increase in wholesale deposits of $1.06 billion, an increase in certificate of deposits of $152.5 million, and an increase in interest bearing deposits of $44.3 million, partially offset by a decrease in non-interest bearing checking deposits of $48.8 million. The increase in wholesale deposits and certificate of deposits was primarily attributable to the fair value of deposits acquired on August 1, 2018 in the Crestmark Acquisition, which included $825.1 million in wholesale deposits and $295.6 million in certificates of deposits. End of period deposits attributable to the Payments divisions decreased $23.9 million, or 1%, at September 30, 2018, as compared to September 30, 2017. The Company’s total borrowings decreased $975.3 million, or 65%, from $1.49 billion at September 30, 2017, to $514.7 million at September 30, 2018, primarily due to the decrease in short-term advances from the FHLB. 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. The Company also has an available no fee line of credit with JP Morgan of $25.0 million with no funds advanced at September 30, 2018. See Note 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.