UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K
______________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): October 17, 2024
______________________
(Exact name of registrant as specified in its charter)
______________________
| (State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
| (Address of principal executive offices) | (Zip Code) | ||||
(314 ) 506-5500
(Registrant’s telephone number, including area code)
______________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act. | |||||
Soliciting material pursuant to Rule 14a-12 under the Exchange Act. | |||||
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act. | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act. | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On October 17, 2024, Cass Information Systems, Inc. (the “Company”) issued a press release announcing its financial results for the third quarter of fiscal 2024. A copy of this press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
Also on October 17, 2024, the Company made available on the Investors section of the Company’s website at www.cassinfo.com, an investor presentation that includes information about the Company’s business and developments and certain financial information relating to the third quarter of fiscal 2024. The information contained in the investor presentation is summary information that is intended to be considered in the context of the Company’s Securities and Exchange Commission filings and other public announcements that the Company may make, by press release or otherwise, from time to time. A copy of this investor presentation is attached hereto as Exhibit 99.2 and incorporated herein by reference.
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 the Company’s website in addition to following press releases, SEC filings, and public conference calls and webcasts.
The information reported under this Item 2.02 of Form 8-K, including Exhibit 99.1 and Exhibit 99.2, is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 8.01. Other Events.
On October 15, 2024, the Company’s Board of Directors declared a fourth quarter dividend of $0.31 per share payable on December 13, 2024 to shareholders of record on December 3, 2024.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: October 17, 2024
| CASS INFORMATION SYSTEMS, INC. | ||||||||
| By: | /s/ Martin H. Resch | |||||||
| Name: | Martin H. Resch | |||||||
| Title: | President and Chief Executive Officer | |||||||
| By: | /s/ Michael J. Normile | |||||||
| Name: | Michael J. Normile | |||||||
| Title: | Executive Vice President and Chief Financial Officer | |||||||
3
Exhibit 99.1
Contact: Cass Investor Relations
ir@cassinfo.com
October 17, 2024
Cass Information Systems reports Third Quarter 2024 Results
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.
ST. LOUIS – 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 | |||||||||||||||||||
The Power to Deliver Solutions Around the world, leading enterprises rely on Cass for our vertical expertise, processing power, and global payment network to execute critical financial transactions while driving greater control and efficiency across critical business expenses. Q3 2024 INVESTOR PRESENTATION
Forward-Looking Statements Cass at a Glance Financial Performance Revenue & Expenses Balance Sheet Capital Leadership and Shareholder Information TABLE OF CONTENTS 2 3 4 6 9 14 19 20 www.cassinfo.com / © 2024 Cass Information Systems
This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contain words such as “anticipate,” “believe,” “can,” “would,” “should,” “could,” “may,” “predict,” “seek,” “potential,” “will,” “estimate,” “target,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “intend” or similar expressions that relate to the Company’s strategy, plans or intentions. Forward-looking statements involve certain important risks, uncertainties, and other factors, any of which could cause actual results to differ materially from those in such statements. Such factors include, without limitation, the “Risk Factors” referenced in our most recent Form 10-K filed with the Securities and Exchange Commission (SEC), other risks and uncertainties listed from time to time in our reports and documents filed with the SEC, and the following factors: ability to execute our business strategy; business and economic conditions; effects of a prolonged government shutdown; economic, market, operational, liquidity, credit and interest rate risks associated with the Company’s business; effects of any changes in trade, monetary and fiscal policies and laws; changes imposed by regulatory agencies to increase capital standards; effects of inflation, as well as, interest rate, securities market and monetary supply fluctuations; changes in the economy or supply-demand imbalances affecting local real estate values; changes in consumer and business spending; the Company's ability to realize anticipated benefits from enhancements or updates to its core operating systems from time to time without significant change in client service or risk to the Company's control environment; the Company's dependence on information technology and telecommunications systems of third-party service providers and the risk of systems failures, interruptions or breaches of security; the Company’s ability to achieve organic fee income, loan and deposit growth and the composition of such growth; changes in sources and uses of funds; increased competition in the payments and banking industries; the effect of changes in accounting policies and practices; the share price of the Company’s stock; the Company's ability to realize deferred tax assets or the need for a valuation allowance; ability to maintain or increase market share and control expenses; costs and effects of changes in laws and regulations and of other legal and regulatory developments; technological changes; the timely development and acceptance of new products and services; the Company’s continued ability to attract, hire and maintain qualified personnel; ability to implement and/or improve operational management and other internal risk controls and processes and reporting system and procedures; regulatory limitations on dividends from the Company's bank subsidiary; changes in estimates of future loan reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; widespread natural and other disasters, pandemics, dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities; impact of reputational risk; and success at managing the risks involved in the foregoing items. The Company can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved, and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of original publication of this presentation, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law. This presentation is a high-level summary of our recent and historical financial results and current business developments. For more detailed information, please refer to our press releases and filings with the SEC. FORWARD LOOKING STATEMENTS 3www.cassinfo.com / © 2024 Cass Information Systems
4www.cassinfo.com / © 2024 Cass Information Systems CASS AT A GLANCE
+ Cass is an information services company that processes freight and facility payments for a number of the largest global companies + The information systems business has a 70-year legacy + As a result of its $90B of payments, Cass generates $1B+ of average non-interest bearing float + Cass continues to operate a strong and profitable commercial bank founded in 1906 Note: Balance sheet metrics as of September 30, 2024. Income statement metrics are through period ended September 30, 2024 as indicated. Market. Cap. $575M Assets $2.3B YTD ROE 8.54% TTM NI $23.0M YTD % Fees/ Rev. 63.8% % AVG NIB Funding 69.5% INFORMATION SYSTEMS / PAYMENTS + Transportation information systems provides freight invoice audit and payment services + Facilities expense management provides invoice management, payment and business intelligence for all types of utility and facility related expenses + CassPay provides complex treasury management and payment services for fintech and other payment companies COMMERCIAL BANK + Cass Commercial Bank operates in three primary niches ‒ St. Louis C&I market ‒ Faith based organizations across the U.S. ‒ McDonalds’ franchisees + Strong track record of asset quality $90B Annual payments volume 50M Annual invoice volume $128M TTM fee revenue $1.0B YTD average float $1.1B Loans $1.0B Deposits 1.98% YTD cost of deposits $0 Charge-offs OVERVIEW 5www.cassinfo.com / © 2024 Cass Information Systems
6www.cassinfo.com / © 2024 Cass Information Systems FINANCIAL PERFORMANCE
Q3 2024 FINANCIAL HIGHLIGHTS 7www.cassinfo.com / © 2024 Cass Information Systems $7.39M $2.94M Q3 '23 Q3 '24 $0.54 $0.21 Q3 '23 Q3 '24 13.80% 5.04% Q3 '23 Q3 '24 NET INCOME DILUTED EPS RETURN ON EQUITY + Net income of $2.9 million (includes $6.6 million of bad debt expense on a funding receivable to a facility client) + Increase in facility expense transaction volumes of 26.3% + Increase in net interest margin to 3.55% + Increased quarterly dividend to $0.31 per share + Repurchased 64,471 shares of Company stock $19.9M $20.1M Q3 '23 Q3 '24 FACILITY TRANSACTION VOLUME PROCESSING FEES 3.24% 3.55% Q3 '23 Q3 '24 NET INTEREST MARGIN 3.42M 4.32M Q3 '23 Q3 '24
QUARTERLY FINANCIAL PERFORMANCE 8www.cassinfo.com / © 2024 Cass Information Systems $40.1M $40.4M $40.7M $42.8M $46.9M Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 $7.39M $8.41M $7.15M $4.48M $2.94M Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 13.80% 16.05% 12.66% 8.01% 5.04% Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 1.22% 1.38% 1.20% 0.78% 0.50% Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 TOTAL OPERATING EXPENSE NET INCOME RETURN ON EQUITY ROAA $49.2M $50.7M $49.7M $48.6M $50.6M Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 TOTAL REVENUE $0.54 $0.61 $0.52 $0.32 $0.21 Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 DILUTED EPS
9www.cassinfo.com / © 2024 Cass Information Systems REVENUE & EXPENSES
FINANCIAL FEES 10www.cassinfo.com / © 2024 Cass Information Systems + Financial fees declined $420,000 from Q3 2023 due to a 1.8% decline in transportation dollar volumes, which led to a lower average balance of payments in advance of funding, in addition to changes in the manner certain vendors receive payments. + The Company expects its new working capital solution and other initiatives to increase financial fees in future quarters. $9.3B $9.0B $8.9B $9.1B $9.1B Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 $5.10B $4.85B $5.33B $5.04B $5.78B Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 $234.7M $209.4M $194.3M $213.2M $203.0M Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 TRANSPORTATION DOLLAR VOLUMES FACILITY DOLLAR VOLUMES AVERAGE PAYMENTS IN ADVANCE OF FUNDING $11.6M $11.5M $10.8M $10.6M $11.2M Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 FINANCIAL FEES
PROCESSING FEES 11www.cassinfo.com / © 2024 Cass Information Systems + The change quarter to quarter is generally correlated to transportation and facility invoice volumes. + Processing fees increased 0.6% as compared to 3Q 2023 primarily due to a 26.3% increase in facility invoice volumes, partially offset by a decrease in ancillary processing fees unrelated to transaction volumes, such as implementation fees. 8.93M 8.73M 8.77M 8.88M 9.16M Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 3.42M 3.51M 4.26M 4.34M 4.32M Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 $19.9M $20.7M $21.3M $21.1M $20.1M Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 TRANSPORTATION INVOICE VOLUMES FACILITY INVOICE VOLUMES PROCESSING FEES
NET INTEREST INCOME 12www.cassinfo.com / © 2024 Cass Information Systems + The net interest margin (NIM) improved 31 basis points from Q3 2023 largely driven by an increase in the weighted average yield on loans to 5.40% from 4.88%. The increase in NIM led to a 6.5% increase in net interest income. + The recent and expected continued decline in the Federal Funds rate could hinder continued net interest margin expansion in the short-term, but higher 3-10 year U.S. Treasury rates would be expected to benefit the Company over the longer-term as fixed rate loans and investments re-price to current market interest rates. $16.5M $17.0M $16.5M $15.9M $17.6M Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 $2.06B $2.08B $2.06B $1.96B $2.00B Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 3.24% 3.30% 3.26% 3.32% 3.55% Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 NET INTEREST INCOME AVERAGE INTEREST-EARNING ASSETS NET INTEREST MARGIN
PERSONNEL EXPENSE 13www.cassinfo.com / © 2024 Cass Information Systems + Salaries and commissions have stabilized and are expected to decline in future quarters as a result of a reduction in the full-time employee count. + Employee profit sharing declined commensurate with the decline in net income. + The Company announced its intent to terminate its noncontributory defined-benefit pension plan. The termination is expected to result in one-time expenses of approximately $4-6 million during Q4 2024 but decrease run-rate operating expense by approximately $1.0 million on an annual basis. + FTEs declined 2.6% from June 30, 2024 to September 30, 2024 and are expected to continue to decline in future quarters. Expense 3Q2023 4Q2023 1Q2024 2Q2024 3Q2024 Salaries and commissions $21.7 $22.0 $22.4 $23.2 $23.2 Employee profit sharing 1.7 1.9 1.6 1.0 0.7 Share-based compensation 0.9 0.3 1.2 0.5 0.9 Net periodic pension cost 0.1 0.5 0.2 0.2 0.2 Other benefits 5.2 4.9 5.2 5.0 4.9 Total personnel expense $29.6 $29.6 $30.6 $29.9 $29.9 Full-time equivalent employees (FTEs) 1,167 1,189 1,202 1,203 1,171 ($$ in millions)
NON-PERSONNEL EXPENSE 14www.cassinfo.com / © 2024 Cass Information Systems + Equipment expense has increased slightly as a result of an increase in depreciation expense related to technology projects now in production. + Bad debt expense relates to a full write-off of a funding receivable related to a facility client. The Company is in the process of litigation to collect the receivable. + Other expense during Q2 2024 included $1.3 million of estimated late fees to be incurred on facility transactions as described in the Q2 2024 earnings release. Expense 3Q2023 4Q2023 1Q2024 2Q2024 3Q2024 Occupancy expense $0.9 $0.9 $0.9 $0.8 $0.9 Equipment expense 1.8 2.0 1.9 2.0 2.1 Bad debt expense 0.0 0.0 0.0 1.3 6.6 Other expense 7.8 7.9 7.3 8.9 7.4 Total non-personnel expense $10.5 $10.8 $10.1 $13.0 $17.0 ($$ in millions)
15www.cassinfo.com / © 2024 Cass Information Systems BALANCE SHEET
LOANS 16www.cassinfo.com / © 2024 Cass Information Systems + Loans increased 1.5% as compared to June 20, 2024. The Company experienced growth in its franchise restaurant and faith-based portfolios. + The Company has not incurred a loan charge-off since 2015. Portfolio Composition 9/30/23 12/31/23 3/31/24 6/30/24 9/30/24 Franchise $221.8 $214.7 $213.9 $229.6 $237.1 Faith-Based 385.4 389.2 387.5 382.2 401.3 Leases 127.7 121.3 126.1 131.4 118.3 Other C&I 167.9 162.6 186.4 187.6 193.1 Other CRE 136.8 126.6 123.0 131.2 128.6 Ending Loans $1,039.6 $1,014.3 $1,037.0 $1,062.0 $1,078.4 Loan Yield 4.88% 4.95% 5.06% 5.26% 5.40% ACL/Loans 1.28% 1.29% 1.28% 1.28% 1.27% Net Charge-Offs — — — — — Non-Performing Loans/Loans — — — — — Franchise 22% Faith-Based 37% Leases 11% Commercial and Industrial 18% Commercial Real Estate 12% PORTFOLIO COMPOSITION 9/30/24 ($$ in millions)
INVESTMENT PORTFOLIO COMPOSITION 17www.cassinfo.com / © 2024 Cass Information Systems + All investment securities are classified as available-for-sale. The overall weighted-average repricing term is 3.5 years and the average yield for 3Q2024 was 2.86%. The portfolio had unrealized losses of $46.9 million at September 30, 2024 resulting in a total fair value for the portfolio of $550.8 million. + The asset-backed securities are backed by student loans in the FFELP program with a minimum 97% guaranty by the U.S. Department of Education. Theses securities have long maturities but are floating rate assets. + Of the total $119.0 million portfolio of high-quality corporate bonds, $57.0 million are floating rate. + The mortgage-backed securities portfolio has an estimated average life of 4.4 years. + 99% of the municipal securities are an investment grade of “A” or higher. PORTFOLIO COMPOSITION (BOOK VALUE) State and Political $216.4M MBS $225.7M Corporate Bonds $118.9M Asset-Backed $39.5M
FUNDING 18www.cassinfo.com / © 2024 Cass Information Systems + For 3Q2024, 69.5% of average funding was non-interest bearing, a strategic advantage in the current interest rate environment. + Average accounts and drafts payable declined during 3Q2024 as a result of a cyber event at a CassPay client during Q1 2024, resulting in the loss of approximately $100.0 million of balances, in addition to a decrease in transportation dollar volumes of 1.8%, partially offset by an increase in facility dollar volumes of 13.4%. AVERAGE DEPOSITS AND ACCOUNTS & DRAFTS PAYABLE FUNDING COMPOSITION $1.3B IN NON- INTEREST FUNDING $1.07B $1.11B $1.04B $1.00B $1.03B $1.07B $1.06B $1.08B $1.05B $1.03B Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 AVERAGE DEPOSITS AVERAGE ACCOUNTS & DRAFTS PAYABLE $2.14B $2.17B $2.12B $2.07B$2.05B Int-DDA, MM, Savings $573.4M Non-Interest $392.6M Accts & Drafts Payable $936.5M Time Deposits $81.4M
KEY FUNDING POINTS 19www.cassinfo.com / © 2024 Cass Information Systems + Accounts and drafts payable represents float generated by our payments businesses and have proven a very stable source of funding over a long period of time. + Deposits are generated from core Bank and CassPay clients. These deposits almost entirely consist of operating accounts from core faith-based and other C&I clients as well as CassPay clients where the Company generates float. + The cost of deposits for the third quarter of 2024 was 1.98%. + The Bank participates in the CDARS and ICS programs offered by Promontory Interfinancial Network, LLC, enabling FDIC insurance up to $100 million on money market accounts and $50 million on certificates of deposit. + There are no brokered deposits or wholesale borrowings. + The Bank has a $239 million secured line of credit with the FHLB collateralized by commercial mortgage loans. + The Company has $250.0 million of unused lines of credit collateralized by investment securities.
CAPITAL 20www.cassinfo.com / © 2024 Cass Information Systems + The Company maintains excess capital to support organic balance sheet growth and opportunistic acquisitions + Increase in quarterly dividend to 0.31 per share + Cass has continuously paid regularly scheduled cash dividends since 1934 + The Company repurchased 64,471 shares of Company stock during Q3 2024 Tier 1 leverage ratio at 9/30/24 11.05% Common equity tier 1 risk- based ratio at 9/30/24 14.54% Tier 1 risk-based ratio at 9/30/24 14.54% Total risk-based ratio at 9/30/24 15.31%
LEADERSHIP AND SHAREHOLDER INFORMATION 21www.cassinfo.com / © 2024 Cass Information Systems
BOARD OF DIRECTORS 22 Eric H. Brunngraber Executive Chairman Ralph W. Clermont Retired Managing Partner, KPMG LLP, Saint Louis, Missouri Robert A. Ebel Retired Chief Executive Officer, Universal Printing Company Wendy J. Henry Retired Managing Partner, BKD, LLP James J. Lindemann Retired Executive Vice President, Emerson Sally H. Roth Retired Area President — Upper Midwest, Regions Bank Joseph D. Rupp Lead Director and Retired Chairman, President, and Chief Executive Officer, Olin Corporation Randall L. Schilling Chief Executive Officer, OPO Startups, LLC Franklin D. Wicks, Jr., Ph.D. Retired Executive Vice President and President, Applied Markets, Sigma-Aldrich Benjamin F. (Tad) Edwards, IV Chairman, Chief Executive Officer, and President, Benjamin F. Edwards & Company www.cassinfo.com / © 2024 Cass Information Systems Ann W. Marr Retired Executive Vice President of Global Human Resources, World Wide Technology Martin H. Resch President and Chief Executive Officer
LEADERSHIP COUNCIL 23 Cory J. Bricker Senior Vice President and President - CassPay Carl N. Friedholm Senior Vice President and President - Telecom Expense Management Christi A. Reiter Senior Vice President - Human Resources Nicole M. Jennings Vice President - Internal Audit and Risk Management Martin H. Resch President and Chief Executive Officer Mark A. Campbell Senior Vice President and President – Government Payables Jeanne M. Scannell Chief Credit Officer - Cass Commercial Bank James M. Cavellier Executive Vice President and Chief Information Officer Teresa D. Meares Senior Vice President and President - Waste Expense Management Matthew S. Schuckman Executive Vice President, General Counsel, and Corporate Secretary Dwight D. Erdbruegger President and Chief Operating Officer, Cass Commercial Bank Michael J. Normile Executive Vice President and Chief Financial Officer Anthony G. Urban Executive Vice President - Transportation Information Services www.cassinfo.com / © 2024 Cass Information Systems Ross M. Miller Senior Vice President and President - TouchPoint Sean M. Mullins Vice President – Chief Information Security Officer Todd J. Wills Senior Vice President and President - Utility Expense Management
SHAREHOLDER INFORMATION 24www.cassinfo.com / © 2024 Cass Information Systems CORPORATE HEADQUARTERS Cass Information Systems, Inc. 12444 Powerscourt Drive, Suite 550 Saint Louis, Missouri 63131 314.506.5500 www.cassinfo.com INVESTOR RELATIONS ir@cassinfo.com COMMON STOCK The company’s common stock trades on the NASDAQ stock market under the symbol CASS. INDEPENDENT AUDITORS KPMG LLP 10 South Broadway, Suite 900 Saint Louis, Missouri 63102 TRANSFER AGENT Shareholder correspondence should be mailed to: Computershare P.O. Box 43006 Providence, RI 02940-3006 Overnight correspondence should be mailed to: Computershare 150 Royall St, Suite 101 Canton, MA 02021 SHAREHOLDER WEBSITE www.computershare.com/investor SHAREHOLDER ONLINE INQUIRIES www-us.computershare.com /investor/Contact TOLL-FREE PHONE 866.323.8170
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