CASS Cass Information Systems Inc

Third Quarter Results (All comparisons refer to the third quarter of 2023, except as noted)

• Net income of $2.9 million, or $0.21 per diluted common share (includes $6.6 million of bad debt expense on a funding receivable related to a facility client).
• Increase in net interest margin to 3.55%.
• Increase in facility expense transaction volumes of 26.3%.
• Increased quarterly dividend to $0.31 per share.
• Repurchased 64,471 shares of Company stock.

Cass Information Systems, Inc. (Nasdaq: CASS), (the Company or Cass) reported third quarter 2024 earnings of $0.21 per diluted share, as compared to $0.54 in the third quarter of 2023 and $0.32 in the second quarter of 2024. Net income for the period was $2.9 million, as compared to $7.4 million in the third quarter of 2023 and $4.5 million in the second quarter of 2024. Net income and earnings per diluted share were negatively impacted by $6.6 million of bad debt expense taken on a funding receivable related to a facility client.

Martin Resch, the Company’s President and Chief Executive Officer, noted, “Despite having to take bad debt expense on a funding receivable, I am pleased with our third quarter results. Our net interest margin increased to 3.55% compared to 3.32% in the second quarter and 3.24% in the same quarter last year reflecting loan growth and asset re-pricing to current market interest rates. Facility and Transportation transaction volumes are up year over year by 26.3% and 2.6%, respectively, demonstrating our ability to attract new clients in our core business lines. Importantly, we are able to process this additional volume with the same full-time equivalent employee count as we had in September 2023, reflecting our ability to leverage the new technology platforms to gain operating efficiencies. Lastly, we have opened ourselves to additional opportunities in Transportation by receiving a Multiple Award Schedule contract for Freight Audit and Payment with the General Services Administration.”

Third Quarter 2024 Highlights

Transportation Dollar Volumes – Transportation dollar volumes were $9.1 billion during the third quarter of 2024, a decrease of 1.8% as compared to the third quarter of 2023 and an increase of 0.2% as compared to the second quarter of 2024. The average dollars per transaction declined to $993 during the third quarter of 2024 as compared to $1,023 in the second quarter of 2024 and $1,038 in the third quarter of 2023. Transportation dollar volumes are key to the Company’s revenue as higher volumes generally lead to an increase in payment float, which generates interest income, as well as an increase in payments in advance of funding, which generates financial fees.

Facility Expense Dollar Volumes – Facility expense dollar volumes totaled $5.8 billion during the third quarter of 2024, an increase of 13.4% as compared to the third quarter of 2023 and an increase of 14.7% as compared to the second quarter of 2024. The increase as compared to the third quarter of 2023 is largely reflective of new client volume.

Processing Fees – Processing fees increased $114,000, or 0.6%, as compared to the third quarter of 2023. The increase in processing fees was largely driven by an increase in facility transaction volumes of 26.3%, partially offset by a decrease in ancillary processing fees unrelated to transaction volumes, such as implementation fees. The Company has experienced recent success in winning facility clients with high transaction volumes.

Financial Fees – Financial fees, earned on a transactional level basis for invoice payment services when making customer payments, decreased $420,000, or 3.6%. The decrease in financial fee income was primarily due to a decline in transportation dollar volumes of 1.8%, in addition to changes in the manner certain vendors receive payments.

Net Interest Income – Net interest income increased $1.1 million, or 6.5%. The increase in net interest income was attributable to an increase in the net interest margin to 3.55% in the third quarter of 2024 from 3.24% in the third quarter of 2023, partially offset by a decline in average interest-earning assets of $58.1 million, or 2.8%. The expansion in the net interest margin is largely due to an increase in the weighted-average yield on loans to 5.40% from 4.88% in the same quarter last year due to loan growth and re-pricing of loans in a higher interest rate environment. The recent decline in the Federal Funds rate of 50 basis points and expected continued cuts in the Federal Funds rate could hinder continued net interest margin expansion in the short-term.

Provision for Credit Losses on Loans - The Company recorded a release of credit losses on loans of $140,000 during the third quarter of 2024 as compared to a provision for credit losses on loans of $125,000 in the third quarter of 2023.

Personnel Expenses - Personnel expenses increased $231,000, or 0.8%. Salaries and commissions increased $459,000, or 2.0%, primarily as a result of merit increases and $280,000 of severance recorded during the third quarter of 2024, partially offset by a decrease in employee profit sharing due to the decline in net income.

During the fourth quarter of 2024, the Company expects to record one-time termination expenses of between approximately $4-6 million through operating expense related to the termination of its noncontributory defined-benefit pension plan. The successful termination of the plan is expected to reduce run rate operating expense by approximately $1.0 million on an annual basis.

Non-Personnel Expenses - Non-personnel expenses increased $6.6 million. Included in non-personnel expenses for the third quarter of 2024 is $6.6 million of bad debt expense on a funding receivable related to a facility client. While the Company is in the process of litigation to collect the receivable, a full write-off to bad debt expense was recorded as a result of a credit analysis.

Loans - When compared to June 30, 2024, ending loans increased $16.4 million, or 1.5%. The Company experienced growth in its franchise restaurant and faith-based portfolios during the third quarter of 2024.

Payments in Advance of Funding – Average payments in advance of funding decreased $31.7 million, or 13.5%, primarily due to a 1.8% decrease in transportation dollar volumes, which led to fewer dollars advanced to freight carriers, as well as the continued consolidation of freight carriers.

Deposits – Average deposits decreased $37.5 million, or 3.5%, when compared to the third quarter of 2023. The Company has experienced a migration of client funds from non-interest bearing to interest-bearing driven by the higher interest rate environment prior to the recent 50 basis point decline in the Federal Funds rate.

Accounts and Drafts Payable - Average accounts and drafts payable decreased $37.0 million, or 3.5%. The decrease in these balances, which are non-interest bearing, are primarily reflective of a cyber event at a CassPay client during the first quarter of 2024, which decreased average balances by approximately $100.0 million, and a decrease in transportation dollar volumes of 1.8%, partially offset by an increase in facility dollar volumes of 13.4%. Accounts and drafts payable are a significant source of funding generated by payment float from transportation and facility clients.

Shareholders’ Equity - Total shareholders’ equity has increased $7.8 million since December 31, 2023 as a result of net income of $14.6 million and a decrease in accumulated other comprehensive loss of $8.4 million, partially offset by dividends of $12.3 million and the repurchase of Company stock of $3.7 million.

Dividend - The Board of Directors approved an increase in the quarterly dividend from $0.30 to $0.31 per share.

About Cass Information Systems

Cass Information Systems, Inc. is a leading provider of integrated information and payment management solutions. Cass enables enterprises to achieve visibility, control and efficiency in their supply chains, communications networks, facilities and other operations. Disbursing over $90 billion annually on behalf of clients, and with total assets of $2.3 billion, Cass is uniquely supported by Cass Commercial Bank. Founded in 1906 and a wholly owned subsidiary, Cass Commercial Bank provides sophisticated financial exchange services to the parent organization and its clients. Cass was recently named as one of America’s best midsize companies by a leading publication and is part of the Russell 2000®. More information is available at www.cassinfo.com.

Forward Looking Information

This information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include future financial and operating results, expectations, intentions, and other statements that are not historical facts. Such statements are based on current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. These risks and uncertainties include the impact of economic and market conditions, inflationary pressures, risks of credit deterioration, interest rate changes, governmental actions, market volatility, security breaches and technology interruptions, energy prices and competitive factors, among others, as set forth in the Company’s most recent Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange Commission. Actual results may differ materially from those set forth in the forward-looking statements.

Note to Investors

The Company has used, and intends to continue using, the Investors portion of its website to disclose material non-public information and to comply with its disclosure obligations under Regulation FD. Accordingly, investors are encouraged to monitor Cass’s website in addition to following press releases, SEC filings, and public conference calls and webcasts.

Consolidated Statements of Income (unaudited)

 

($ and numbers in thousands, except per share data)

 

Quarter Ended September 30, 2024

 

Quarter Ended June 30, 2024

 

Quarter Ended September 30, 2023

 

Nine-Months Ended September 30, 2024

 

Nine-Months Ended September 30, 2023

Processing fees

$

20,053

 

$

21,103

 

 

$

19,939

 

 

$

62,409

 

 

$

58,838

 

Financial fees

 

11,177

 

 

 

10,628

 

 

 

11,597

 

 

 

32,582

 

 

 

34,518

 

Total fee revenue

$

31,230

 

 

$

31,731

 

 

$

31,536

 

 

$

94,991

 

 

$

93,356

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

14,567

 

 

 

13,592

 

 

 

12,863

 

 

 

40,935

 

 

 

38,029

 

Interest and dividends on securities

 

4,007

 

 

 

4,383

 

 

 

4,392

 

 

 

12,827

 

 

 

13,863

 

Interest on federal funds sold and

other short-term investments

 

4,200

 

 

 

3,267

 

 

 

3,934

 

 

 

11,908

 

 

 

9,147

 

Total interest income

$

22,774

 

 

$

21,242

 

 

$

21,189

 

 

$

65,670

 

 

$

61,039

 

Interest expense

 

5,156

 

 

 

5,312

 

 

 

4,641

 

 

 

15,646

 

 

 

11,579

 

Net interest income

$

17,618

 

 

$

15,930

 

 

$

16,548

 

 

$

50,024

 

 

$

49,460

 

Release of (provision for) credit

losses on loans

 

140

 

 

 

(400

)

 

 

(125

)

 

 

(355

)

 

 

335

 

Loss on sale of investment

securities

 

--

 

 

 

(13

)

 

 

--

 

 

 

(13

)

 

 

(160

)

Other

 

1,562

 

 

 

1,342

 

 

 

1,264

 

 

 

4,171

 

 

 

3,784

 

Total revenues

$

50,550

 

 

$

48,590

 

 

$

49,223

 

 

$

148,818

 

 

$

146,775

 

Salaries and commissions

 

23,850

 

 

 

24,259

 

 

 

23,391

 

 

 

72,085

 

 

 

69,613

 

Share-based compensation

 

898

 

 

 

474

 

 

 

938

 

 

 

2,598

 

 

 

3,796

 

Other benefits

 

5,119

 

 

 

5,124

 

 

 

5,307

 

 

 

15,648

 

 

 

15,685

 

Total personnel expenses

$

29,867

 

 

$

29,857

 

 

$

29,636

 

 

$

90,331

 

 

$

89,094

 

Occupancy

 

890

 

 

 

826

 

 

 

908

 

 

 

2,577

 

 

 

2,670

 

Equipment

 

2,107

 

 

 

1,988

 

 

 

1,789

 

 

 

5,976

 

 

 

5,188

 

Bad debt expense

 

6,559

 

 

 

1,288

 

 

 

--

 

 

 

7,847

 

 

 

--

 

Other

 

7,475

 

 

 

8,834

 

 

 

7,730

 

 

 

23,631

 

 

 

22,822

 

Total operating expenses

$

46,898

 

 

$

42,793

 

 

$

40,063

 

 

$

130,362

 

 

$

119,774

 

Income from operations before

income taxes

$

3,652

 

 

$

5,797

 

 

$

9,160

 

 

$

18,456

 

 

$

27,001

 

Income tax expense

 

714

 

 

 

1,313

 

 

 

1,766

 

 

 

3,882

 

 

 

5,352

 

Net income

$

2,938

 

 

$

4,484

 

 

$

7,394

 

 

$

14,574

 

 

$

21,649

 

Basic earnings per share

$

.22

 

 

$

.33

 

 

$

.55

 

 

$

1.08

 

 

$

1.60

 

Diluted earnings per share

$

.21

 

 

$

.32

 

 

$

.54

 

 

$

1.06

 

 

$

1.56

 

 

 

 

 

 

 

 

 

 

 

Share data:

 

 

 

 

 

 

 

 

 

Weighted-average common

shares outstanding

 

13,504

 

 

 

13,538

 

 

 

13,501

 

 

 

13,524

 

 

 

13,551

 

Weighted-average common

shares outstanding assuming

dilution

 

13,786

 

 

 

13,822

 

 

 

13,793

 

 

 

13,798

 

 

 

13,836

 

Consolidated Balance Sheets

 

($ in thousands)

 

(unaudited) September 30, 2024

 

(unaudited) June 30, 2024

 

December 31, 2023

Assets:

 

 

 

 

 

Cash and cash equivalents

$

230,556

 

 

$

223,727

 

 

$

372,468

 

Securities available-for-sale, at fair value

 

550,756

 

 

 

540,802

 

 

 

627,117

 

Loans

 

1,078,387

 

 

 

1,061,991

 

 

 

1,014,318

 

Less: Allowance for credit losses

 

(13,447

)

 

 

(13,633

)

 

 

(13,089

)

Loans, net

$

1,064,940

 

 

$

1,048,358

 

 

$

1,001,229

 

Payments in advance of funding

 

207,202

 

 

 

214,581

 

 

 

198,861

 

Premises and equipment, net

 

34,295

 

 

 

33,469

 

 

 

30,093

 

Investments in bank-owned life insurance

 

49,885

 

 

 

49,840

 

 

 

49,159

 

Goodwill and other intangible assets

 

20,098

 

 

 

20,281

 

 

 

20,654

 

Accounts and drafts receivable from customers

 

30,892

 

 

 

78,407

 

 

 

110,651

 

Other assets

 

72,136

 

 

 

73,131

 

 

 

68,390

 

Total assets

$

2,260,760

 

 

$

2,282,596

 

 

$

2,478,622

 

 

 

 

 

 

 

Liabilities and shareholders’ equity:

 

 

 

 

 

Deposits

 

 

 

 

 

Non-interest bearing

$

392,573

 

 

$

372,031

 

 

$

524,359

 

Interest-bearing

 

654,750

 

 

 

640,315

 

 

 

616,455

 

Total deposits

$

1,047,323

 

 

$

1,012,346

 

 

$

1,140,814

 

Accounts and drafts payable

 

936,463

 

 

 

996,832

 

 

 

1,071,369

 

Other liabilities

 

39,327

 

 

 

43,493

 

 

 

36,630

 

Total liabilities

$

2,023,113

 

 

$

2,052,671

 

 

$

2,248,813

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common stock

$

7,753

 

 

$

7,753

 

 

$

7,753

 

Additional paid-in capital

 

205,026

 

 

 

204,128

 

 

 

208,007

 

Retained earnings

 

148,092

 

 

 

149,236

 

 

 

145,782

 

Common shares in treasury, at cost

 

(84,139

)

 

 

(81,554

)

 

 

(84,264

)

Accumulated other comprehensive loss

 

(39,085

)

 

 

(49,638

)

 

 

(47,469

)

Total shareholders’ equity

$

237,647

 

 

$

229,925

 

 

$

229,809

 

Total liabilities and shareholders’ equity

$

2,260,760

 

 

$

2,282,596

 

 

$

2,478,622

 

Average Balances (unaudited)

 

($ in thousands)

 

Quarter Ended September 30, 2024

 

Quarter Ended June 30, 2024

 

Quarter Ended September 30, 2023

 

Nine-Months Ended September 30, 2024

 

Nine-Months Ended September 30, 2023

Average interest-earning assets

$

2,001,740

 

$

1,958,427

 

$

2,059,801

 

$

2,007,781

 

$

2,077,392

Average loans

 

1,072,824

 

 

 

1,039,461

 

 

 

1,045,967

 

 

 

1,042,953

 

 

 

1,065,915

 

Average securities available-for-sale

 

535,423

 

 

 

589,480

 

 

 

634,835

 

 

 

586,588

 

 

 

681,820

 

Average short-term investments

 

338,464

 

 

 

265,291

 

 

 

310,770

 

 

 

318,712

 

 

 

263,774

 

Average payments in advance of funding

 

202,976

 

 

 

213,185

 

 

 

234,684

 

 

 

203,498

 

 

 

243,458

 

Average assets

 

2,340,870

 

 

 

2,308,045

 

 

 

2,395,264

 

 

 

2,343,489

 

 

 

2,421,274

 

Average non-interest bearing deposits

 

404,364

 

 

 

407,079

 

 

 

480,472

 

 

 

419,724

 

 

 

528,677

 

Average interest-bearing deposits

 

630,204

 

 

 

638,328

 

 

 

591,556

 

 

 

633,373

 

 

 

563,994

 

Average borrowings

 

11

 

 

 

11

 

 

 

11

 

 

 

11

 

 

 

2,993

 

Average interest-bearing liabilities

 

630,215

 

 

 

638,339

 

 

 

591,567

 

 

 

633,384

 

 

 

566,987

 

Average accounts and drafts payable

 

1,033,070

 

 

 

996,944

 

 

 

1,070,057

 

 

 

1,021,988

 

 

 

1,071,414

 

Average shareholders’ equity

$

231,785

 

 

$

225,265

 

 

$

212,591

 

 

$

227,920

 

 

$

212,159

 

Consolidated Financial Highlights (unaudited)

 

($ and numbers in thousands, except ratios)

 

Quarter Ended September 30, 2024

 

Quarter Ended June 30, 2024

 

Quarter Ended September 30, 2023

 

Nine-Months Ended September 30, 2024

 

Nine-Months Ended September 30, 2023

Return on average equity

 

5.04

%

 

 

8.01

%

 

 

13.80

%

 

 

8.54

%

 

 

13.64

%

Return on average assets

 

0.50

%

 

 

0.78

%

 

 

1.22

%

 

 

0.83

%

 

 

1.20

%

Net interest margin (1)

 

3.55

%

 

 

3.32

%

 

 

3.24

%

 

 

3.38

%

 

 

3.24

%

Average interest-earning assets yield (1)

 

4.57

%

 

 

4.41

%

 

 

4.13

%

 

 

4.42

%

 

 

3.98

%

Average loan yield

 

5.40

%

 

 

5.26

%

 

 

4.88

%

 

 

5.24

%

 

 

4.77

%

Average investment securities yield (1)

 

2.86

%

 

 

2.84

%

 

 

2.62

%

 

2.80

%

 

 

2.63

%

Average short-term investment yield

 

4.94

%

 

 

4.95

%

 

 

5.02

%

 

 

4.99

%

 

 

4.64

%

Average cost of total deposits

 

1.98

%

 

 

2.04

%

 

 

1.72

%

 

 

1.98

%

 

 

1.42

%

Average cost of interest-bearing deposits

 

3.25

%

 

 

3.35

%

 

 

3.11

%

 

 

3.30

%

 

 

2.72

%

Average cost of interest-bearing liabilities

 

3.25

%

 

 

3.35

%

 

 

3.11

%

 

 

3.30

%

 

 

2.73

%

Allowance for credit losses to loans

 

1.25

%

 

 

1.28

%

 

 

1.28

%

 

 

1.25

%

 

 

1.28

%

Non-performing loans to total loans

 

--

%

 

 

--

%

 

 

--

%

 

 

--

%

 

 

--

%

Net loan charge-offs (recoveries) to loans

 

--

%

 

 

--

%

 

 

--

%

 

 

--

%

 

 

--

%

Common equity tier 1 ratio

 

14.54

%

 

 

14.32

%

 

 

14.53

%

 

 

14.54

%

 

 

14.53

%

Total risk-based capital ratio

 

15.31

%

 

 

15.08

%

 

 

15.30

%

 

 

15.31

%

 

 

15.30

%

Leverage ratio

 

11.05

%

 

 

11.32

%

 

 

10.61

%

 

 

11.05

%

 

 

10.61

%

(1) Yields are presented on tax-equivalent basis assuming a tax rate of 21%.

 

 

 

 

 

 

 

 

 

 

Transportation invoice volume

 

9,160

 

 

 

8,879

 

 

 

8,925

 

 

 

26,810

 

 

 

27,216

 

Transportation dollar volume

$

9,097,739

 

 

$

9,081,343

 

 

$

9,263,453

 

 

$

27,118,728

 

 

$

29,243,706

 

Facility expense transaction volume

 

4,316

 

 

 

4,337

 

 

 

3,417

 

 

 

12,917

 

 

 

10,352

 

Facility expense dollar volume

$

5,778,291

 

 

$

5,039,283

 

 

$

5,096,882

 

 

$

16,147,139

 

 

$

14,988,757

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241017462927/en/

Cass Investor Relations ir@cassinfo.com