CASH 2018 Annual Report

90 Non-Interest Expense. Non-interest expense increased by $28.6 million, or 14%, to $228.2 million for fiscal 2018 from $199.7 million for fiscal 2017. This increase in non-interest expense was largely driven by an increase in compensation expense of $20.3 million when compared to the prior year. Also contributing to the increase were legal and consulting, other expense, occupancy and equipment expense and card processing expense, which increased $6.7 million, $4.9 million, $3.3 million and $2.2 million, respectively, from fiscal 2017 to fiscal 2018. The increase in compensation and benefits was due in part to employees joining the Company as part of the Crestmark Acquisition along with increased staffing to support the Company's other growing business line initiatives. The Company also incurred certain costs associated with the Crestmark Acquisition throughout the fiscal year that drove the increases in legal and consulting and other expense. The increase in occupancy and equipment expense was also largely attributable to the Crestmark Acquisition. Partially offsetting the above mentioned increases was a reduction in intangible impairment of $10.2 million which was down relative to fiscal 2017, which included an intangible impairment charge related to the non-renewal of the H&R Block relationship. Income Tax Expense Income tax expense for fiscal 2018 was $5.1 million, resulting in an effective tax rate of 9.0% in fiscal 2018 compared to a tax expense of $10.2 million and an effective tax rate of 18.6%, in fiscal 2017. Despite the increase in earnings, the Company recorded less income tax expense than the prior year due to multiple factors. One factor that contributed to the reduction in both the income tax expense and effective tax rate were the provisions of the Tax Act, which lowered Meta's statutory rate from 35% in fiscal 2017 to 24.53% in fiscal 2018. The Company also recognized an investment tax credit in fiscal 2018, which reduced the Company's income tax expense by $4.0 million from fiscal 2017, reflecting the generation of investment tax credits under the Company's initiatives in the renewable energy sector. In addition, fiscal 2018 included a $4.6 million benefit recognized by the Company as a result of amending a historical tax return of Crestmark. Comparison of Operating Results for the Years Ended September 30, 2017, and September 30, 2016 General The Company recorded net income of $44.9 million, or $1.61 per diluted share, for the year ended September 30, 2017, compared to $33.2 million, or $1.30 per diluted share, for the year ended September 30, 2016, an increase of $11.7 million. The increase in net income was primarily caused by an increase in tax advance fee income of $30.3 million, a $24.2 million increase in card fee income, a $15.9 million increase in net interest income, and a $15.6 million increase in refund advance fee income. The net income increase was offset in part by an increase in compensation and benefits expense of $27.1 million, a $10.2 million intangible impairment expense, a $7.5 million increase in amortization expense, and an increase in other expense of $5.5 million. Net Interest Income Net interest income for fiscal 2017 increased by $15.9 million, or 21%, to $93.2 million from $77.3 million for the prior year. Net interest margin decreased to 3.05% in fiscal 2017 as compared to 3.19% in 2016. The increase in net interest income was primarily due to an increase in interest income of $26.7 million to $108.1 million from $81.4 million for the prior year. The increase in interest income was primarily due to an increase in the Company’s average earning assets of $796.8 million, or 28%, to $3.62 billion during fiscal 2017 from $2.82 billion during 2016. The Company’s average earning assets increased $796.8 million, or 28%, to $3.62 billion during fiscal 2017 from $2.82 billion during 2016. This was due to a significant increase in volume in commercial real estate loans and specialty finance loans, which includes premium finance loans and the December 2016 purchased student loan portfolio.Growth in investment security balances and yields attained on those investment securities also contributed to the increase in net interest income. The increase in interest income was partially offset by an increase in interest expense of $10.8 million, to $14.9 million from $4.1 million for the prior year.