1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1999
COMMISSION FILE NO. 2-80070
-----------------
CASS COMMERCIAL CORPORATION
INCORPORATED UNDER THE LAWS OF MISSOURI
I.R.S. EMPLOYER IDENTIFICATION NO. 43-1265338
13001 HOLLENBERG DRIVE, BRIDGETON, MISSOURI 63044
TELEPHONE: (314) 506-5500
-----------------
Indicate by check mark whether the registrant has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of registrant's only class of stock as
of June 30, 1999: Common stock, par value $.50 per share - 3,762,851 shares
outstanding.
- -------------------------------------------------------------------------------
This document constitutes part of a prospectus covering securities that
have been registered under the Securities Act of 1933.
- -------------------------------------------------------------------------------
2
PART I, ITEM 1
- --------------
CASS COMMERCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT
PER SHARE DATA)
--------------------------------
JUNE 30 DECEMBER 31
1999 1998
------------ ------------
ASSETS
- ------
Cash and due from banks $ 19,316 $ 22,558
Federal funds sold and other short-term investments 55,860 156,827
-------- --------
Cash and cash equivalents 75,176 179,385
-------- --------
Investment in debt and equity securities:
Held-to-maturity, fair value of $41,340
and $57,191 at June 30, 1999 and
December 31, 1998, respectively 41,294 56,605
Available-for-sale, at fair value 43,481 27,369
-------- --------
Total investment in debt and equity securities 84,775 83,974
-------- --------
Loans 277,470 224,888
Less: Allowance for loan losses 4,471 4,428
-------- --------
Loans, net 272,999 220,460
-------- --------
Premises and equipment, net 9,263 9,249
Accrued interest receivable 2,548 2,764
Other assets 6,826 8,080
-------- --------
Total assets $451,587 $503,912
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities:
- -----------
Deposits:
Noninterest-bearing $ 82,940 $ 82,911
Interest-bearing 112,224 108,071
-------- --------
Total deposits 195,164 190,982
Accounts and drafts payable 195,226 250,518
Short-term borrowings 227 323
Other liabilities 5,268 4,685
-------- --------
Total liabilities 395,885 446,508
-------- --------
Shareholders' Equity:
- --------------------
Preferred stock, par value $.50 per share; 2,000,000
shares authorized and no shares issued -- --
Common stock, par value $.50 per share;
20,000,000 shares authorized and
4,000,000 shares issued 2,000 2,000
Surplus 4,918 4,796
Retained earnings 53,055 51,505
Accumulated other comprehensive income (loss) (83) 387
Common shares in treasury, at cost (237,149 shares at
June 30, 1999 and 132,123 shares at December 31, 1998) (4,011) (1,213)
Unamortized stock bonus awards (177) (71)
-------- --------
Total shareholders' equity 55,702 57,404
-------- --------
Total liabilities and shareholders' equity $451,587 $503,912
======== ========
See accompanying notes to consolidated financial statements.
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CASS COMMERCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
----------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------- -----------------------
1999 1998 1999 1998
-------- -------- -------- --------
INTEREST INCOME:
- ---------------
Interest and fees on loans $4,940 $4,526 $ 9,272 $ 8,735
Interest and dividends on debt and equity securities:
Taxable 1,163 1,753 2,340 3,551
Exempt from federal income taxes 16 18 32 37
Interest on federal funds sold and
other short-term investments 1,379 1,260 3,034 2,565
------ ------ ------- --------
Total interest income 7,498 7,557 14,678 14,888
------ ------ ------- --------
INTEREST EXPENSE:
- ----------------
Interest on deposits 1,076 1,072 2,115 2,125
Interest on short-term borrowings 2 3 4 6
------ ------ ------- --------
Total interest expense 1,078 1,075 2,119 2,131
------ ------ ------- --------
Net interest income 6,420 6,482 12,559 12,757
Provision for loan losses -- -- -- --
------ ------ ------- --------
Net interest income after provision
for loan losses 6,420 6,482 12,559 12,757
------ ------ ------- --------
NONINTEREST INCOME:
- ------------------
Freight and utility payment and processing revenue 5,079 5,286 10,256 10,795
Service charges on deposit accounts 168 152 333 314
Other 65 124 232 305
------ ------ ------- --------
Total noninterest income 5,312 5,562 10,821 11,414
------ ------ ------- --------
NONINTEREST EXPENSE:
- -------------------
Salaries and employee benefits 6,355 6,267 12,623 12,861
Occupancy expense 434 418 858 853
Equipment expense 660 645 1,307 1,289
Other 1,961 1,659 3,914 3,522
------ ------ ------- --------
Total noninterest expense 9,410 8,989 18,702 18,525
------ ------ ------- --------
Income before income tax expense 2,322 3,055 4,678 5,646
Income tax expense 835 1,085 1,672 2,003
------ ------ ------- --------
Net income $1,487 $1,970 $ 3,006 $ 3,643
====== ====== ======= ========
Earnings per share:
Basic $ .39 $ .51 $ .78 $ .94
------ ------ ------- --------
Diluted $ .39 $ .50 $ .77 $ .93
------ ------ ------- --------
See accompanying notes to consolidated financial statements.
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CASS COMMERCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
SIX MONTHS ENDED
JUNE 30,
---------------------------------
1999 1998
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
- ------------------------------------
Net income $ 3,006 $ 3,643
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,157 1,144
Amortization of stock bonus awards 42 46
Decrease in accrued interest receivable 216 172
Other operating activities, net 2,075 586
--------- --------
Net cash provided by operating activities 6,496 5,591
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
- ------------------------------------
Proceeds from maturities of debt and equity securities:
Held-to-maturity 15,198 16,133
Available-for-sale 1,096 1,566
Purchase of debt and equity securities available-for-sale (17,986) --
Net increase in loans (52,539) (22,416)
Purchases of premises and equipment, net (941) (331)
--------- --------
Net cash used in investing activities (55,172) (5,048)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Net increase in noninterest-bearing demand,
interest-bearing demand and savings deposits 4,179 9,740
Net increase in time deposits 3 136
Net decrease in accounts and drafts payable (55,292) (11,248)
Net decrease in short-term borrowings (96) (32)
Cash proceeds from exercise of stock options 81 38
Cash dividends paid (1,456) (1,390)
Purchase of common shares for treasury (2,952) --
--------- --------
Net cash used in financing activities (55,533) (2,756)
--------- --------
Net decrease in cash and cash equivalents (104,209) (2,213)
Cash and cash equivalents at beginning of period 179,385 99,124
--------- --------
Cash and cash equivalents at end of period $ 75,176 $ 96,911
========= ========
Supplemental information:
Cash paid for interest $ 2,129 $ 2,141
========= ========
Cash paid for income taxes $ 1,865 $ 2,035
========= ========
See accompanying notes to consolidated financial statements.
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CASS COMMERCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
Note 1 - Basis of Presentation
Cass Commercial Corporation (the Company) provides a full range of
banking services to individual, corporate and institutional customers, with a
primary focus on privately held companies and church-related ministries,
through its wholly owned subsidiary bank, Cass Commercial Bank (the Bank).
The Bank is subject to competition from other financial and nonfinancial
institutions throughout the metropolitan St. Louis, Missouri area.
Additionally, the Company and the Bank are subject to the regulations of
certain federal and state agencies and undergo periodic examinations by those
regulatory agencies.
The Company also provides payment processing and information
services through its wholly owned subsidiary, Cass Information Systems, Inc.
(CIS). These services include processing and payment of freight and utility
charges, preparation of management reports, auditing of freight charges,
rating of freight shipments and other payment related activities. CIS is
subject to competition from other commercial concerns providing similar
services to companies throughout the United States and Canada. The
consolidated balance sheet caption, "Accounts and Drafts Payable", consists
of obligations related to payment services which are performed for customers.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation, have been included. Operating results for
the period ended June 30, 1999 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1999. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
Note 2 - Impact Of New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS 133) which establishes
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. In June 1999, the FASB issued Statement of
Financial Accounting Standards No. 137, Accounting for Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of FASB No. 133, an
amendment of FASB Statement No. 133, which defers the effective date of
SFAS from fiscal years beginning after June 15, 1999 to fiscal years beginning
after June 15, 2000. Earlier application of SFAS 133, as amended, is encouraged
but should not be applied retroactively to financial statements of prior
periods. The Company is currently evaluating the requirements and impact of
SFAS 133, as amended.
In October 1998, the FASB issued Statement of Financial Accounting
Standards No. 134, Accounting for Mortgage-Backed Securities Retained after
the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise (SFAS 134) which conforms the subsequent accounting for securities
retained after the securitization of mortgage loans by a mortgage banking
enterprise with the subsequent accounting for securities retained after the
securitization of other types of assets by a nonmortgage banking enterprise.
SFAS 134 is effective for the first fiscal quarter beginning after December
15, 1998. Since the Company does not securitize any mortgage loans, SFAS 134
had no impact on the Company's consolidated financial position and results of
operations.
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Note 3 - Comprehensive Income
For the three- and six-month periods ended June 30, 1999 and 1998,
unrealized holding loss on debt and equity securities available-for-sale is the
Company's only other comprehensive income component. Comprehensive income
for the periods ended June 1999 and 1998 is summarized as follows:
(In Thousands) (In Thousands)
Three Months Ended Six Months Ended
June 30 June 30
------- -------
1999 1998 1999 1998
---- ---- ---- ----
Net Income $1,487 $1,970 $3,006 $3,643
Other comprehensive income:
Net unrealized loss on debt and equity
securities available-for-sale, net
of tax (315) (58) (470) --
------ ------ ------ ------
$1,172 $1,912 $2,536 $3,643
====== ====== ====== ======
Note 4 - Earnings Per Share
Average common shares outstanding for the six-month periods ended
June 30, 1999 and 1998 were 3,831,868 and 3,861,441, respectively. Average
common shares outstanding for the three-month periods ended June 30, 1999 and
1998 were 3,794,706 and 3,861,951, respectively. The only dilutive
instruments are stock options and unvested stock awards with an aggregate
dilutive effect of 57,657 and 71,770 shares for the six-month periods ended
June 30, 1999 and 1998, respectively and 59,461 and 70,321 shares for the
three-month periods ended June 30, 1999 and 1998, respectively.
Note 5 - Industry Segment Information
The services provided by the Company are classified into two
industry segments: Banking Services and Information Services which are more
fully discussed in Note 1. Total net revenue is comprised of total interest
income and total noninterest income, less provision for loan losses. There
have been no material changes in assets, changes in the basis of segmentation
or changes in the basis of measurement of segment profits from the amounts
disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
Summarized information about the Company's operations in each
industry segment for the periods ended June 30, 1999 and 1998, is as follows:
(In Thousands) (In Thousands)
Three Months Ended Six Months Ended
June 30 June 30
------- -------
1999 1998 1999 1998
---- ---- ---- ----
Total Net Revenue:
Banking Services $ 4,058 $ 4,043 $ 7,914 $ 8,029
Information Services 8,819 9,192 17,726 18,541
Eliminations (67) (116) (141) (268)
------- ------- ------- -------
Total $12,810 $13,119 $25,499 $26,302
------- ------- ------- -------
Income (Loss) Before Income Tax:
Banking Services $ 1,220 $ 1,337 $ 2,320 $ 2,531
Information Services 1,154 1,758 2,431 3,199
Corporate Items (52) (40) (73) (84)
------- ------- ------- -------
Total $ 2,322 $ 3,055 $ 4,678 $ 5,646
------- ------- ------- -------
Income Tax Expense (Benefit):
Banking Services $ 448 $ 474 $ 854 $ 891
Information Services 405 625 843 1,141
Corporate Items (18) (14) (25) (29)
------- ------- ------- -------
Total $ 835 $ 1,085 $ 1,672 $ 2,003
------- ------- ------- -------
Net Income (Loss):
Banking Services $ 772 $ 863 $ 1,466 $ 1,640
Information Services 749 1,133 1,588 2,058
Corporate Items (34) (26) (48) (55)
------- ------- ------- -------
Total $ 1,487 $ 1,970 $ 3,006 $ 3,643
======= ======= ======= =======
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Note 6 - Reclassifications
Certain amounts in the 1998 consolidated financial statements have
been reclassified to conform with the 1999 presentation. Such
reclassifications have no effect on previously reported net income.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Cass Commercial Corporation (the Company) operates in two primary
business segments through two wholly owned subsidiaries, Cass Commercial Bank
(the Bank), a commercial bank, and Cass Information Systems, Inc. (CIS), a
payment processing company. The Bank provides specialized banking services
to privately held businesses and church and church-related entities located
primarily in the St. Louis, Missouri metropolitan area. CIS is a payment
processing and information services company, whose operations include the
processing and payment of freight and utility charges, preparation of
transportation management reports, auditing of freight charges, rating of
freight shipments and other payment related activities for customers located
throughout the United States.
The following paragraphs more fully discuss the results of
operations and changes in financial condition for the three-month period
ended June 30, 1999 (the Second Quarter of 1999) compared to the three-month
period ended June 30, 1998 (the Second Quarter of 1998) and the six-month
period ended June 30, 1999 (the First Half of 1999) compared to the six-month
period ended June 30, 1998 (the First Half of 1998). Most information is
provided on a consolidated basis for the Company, the Bank and CIS, with
expanded disclosures for the specific effects CIS's operations have on
particular account captions.
The following discussion and analysis should be read in conjunction
with the consolidated financial statements and related notes and with the
statistical information and financial data appearing in this report as well
as the Company's 1998 Annual Report on Form 10-K. Results of operations for
the three and six month periods ended June 30, 1999 are not necessarily
indicative of results to be attained for any other period.
RESULTS OF OPERATIONS
The Company had net income of $1,487,000 for the Second Quarter of
1999, a $483,000 or 24.5% decrease compared to net income of $1,970,000 for
the Second Quarter of 1998. The Company had net income of $3,006,000, a
$637,000 or 17.5% decrease for the First Half of 1999 compared to net income
of $3,643,000 for the First Half of 1998. Diluted earnings per share was $.39
for the Second Quarter of 1999, a 22.0% decrease compared to $.50 for the
Second Quarter of 1998. Diluted earnings per share was $.77 for the First
Half of 1999, a 17.2% decrease compared to $.93 for the First Half of 1998.
Net Interest Income
- -------------------
The Company's tax-equivalent net interest income decreased .65% or
$42,000 from $6,511,000 in the Second Quarter of 1998 to $6,469,000 in the
Second Quarter of 1999. The tax-equivalent net interest margin decreased
from 6.12% in the Second Quarter of 1998 to 5.80% in the Second Quarter of
1999. The average tax-equivalent yield on earning assets decreased from
7.13% in the Second Quarter of 1998 to 6.77% in the Second Quarter of 1999.
The average rate paid on interest-bearing liabilities decreased from 4.13% in
the Second Quarter of 1998 to 3.81% in the Second Quarter of 1999.
The average balance of loans increased $34,864,000 from $216,023,000
to $250,887,000, investment in debt and equity securities decreased
$38,270,000 from $117,404,000 to $79,134,000, and federal funds sold and
other short-term investments increased $23,956,000 from $93,274,000 to
$117,230,000 from the Second Quarter of 1998 to the Second Quarter of 1999.
The average balance of noninterest-bearing demand deposit accounts increased
$3,135,000 from $70,564,000 to $73,699,000, accounts and drafts payable
increased $7,660,000 from $227,046,000 to $234,706,000, and interest-bearing
liabilities increased $9,129,000 from $104,420,000 to $113,549,000 from the
Second Quarter of 1998 to the Second Quarter of 1999.
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The decreases experienced during the Second Quarter in net interest
margin and net interest income were caused primarily by decreases in the
general level of interest rates, specifically, the federal fund, short-term
government, and prime rates. The Company is adversely affected by decreases
in the level of interest rates due to the fact that its rate sensitive assets
significantly exceed its rate sensitive liabilities. Conversely, the Company
is positively affected by increases in the level of interest rates. This is
primarily due to the noninterest-bearing liabilities generated by CIS in the
form of accounts and drafts payable. Most of the impact from this decrease
in rates was offset by increases in interest-earning assets.
The increases experienced during the Second Quarter in noninterest-
bearing demand deposits and interest-bearing deposits were attributable to
the addition of new business at the Bank. The increase in accounts and
drafts payable was attributable mainly to an increase in the dollar value of
items processed at CIS. These increases were used to fund the increased
investment in loans and federal funds and other short-term investments. The
decrease in investment in debt and equity securities was also used to fund
the increase in federal funds and other short-term investments and was caused
by management's desire to increase liquidity to meet expected future loan
demand. Please refer to Table 1 on Page 8.
The Company's tax-equivalent net interest income decreased 1.2% or
$158,000 from $12,815,000 in the First Half of 1998 to $12,657,000 in the
First Half of 1999. The tax-equivalent net interest margin decreased from
6.09% in the First Half of 1998 to 5.72% in the First Half of 1999. The
average tax-equivalent yield on earning assets decreased from 7.10% in the
First Half of 1998 to 6.68% in the First Half of 1999. The average rate paid
on interest-bearing liabilities decreased from 4.13% in the First Half of
1998 to 3.83% in the First Half of 1999.
The average balance of loans increased $27,371,000 from $210,177,000
to $237,548,000, investment in debt and equity securities decreased
$39,714,000 from $119,172,000 to $79,458,000, and federal funds sold and
other short-term investments increased $33,606,000 from $95,321,000 to
$128,927,000 from the First Half of 1998 to the First Half of 1999. The
average balance of noninterest-bearing demand deposit accounts increased
$4,566,000 from $68,201,000 to $72,767,000, accounts and drafts payable
increased $5,943,000 from $228,545,000 to $234,488,000, and interest-bearing
liabilities increased $7,609,000 from $104,026,000 to $111,635,000 from the
First Half of 1998 to the First Half of 1999.
The decreases experienced during the First Half of 1999 in net
interest margin and net interest income were caused primarily by decreases in
the general level of interest rates, specifically, the federal fund, short-
term government, and prime rates. The Company is adversely affected by
decreases in the level of interest rates due to the fact that its rate
sensitive assets significantly exceed its rate sensitive liabilities.
Conversely, the Company is positively affected by increases in the level of
interest rates. This is primarily due to the noninterest-bearing liabilities
generated by CIS in the form of accounts and drafts payable. Most of the
impact from this decrease in rates was offset by increases in
interest-earning assets.
The increases experienced during the First Half of 1999 in
noninterest-bearing demand deposits and interest bearing deposits were
attributable to the addition of new business at the Bank. The increase in
accounts and drafts payable was attributable mainly to an increase in the
dollar value of items processed at CIS. These increases were used to fund
the increase investment in loans and federal funds and other short-term
investments. The decrease in investment in debt and equity securities was
also used to fund the increase in federal funds and other short-term
investments and was caused by management's desire to increase liquidity to
meet expected future loan demand. Please refer to Table 2 on Page 10.
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TABLE 1: CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST
INCOME ANALYSIS
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
(TAX-EQUIVALENT BASIS, IN THOUSANDS)
AVERAGE INTEREST INCREASE (DECREASE)
AVERAGE BALANCE YIELD/RATE INCOME/EXPENSE DUE TO CHANGE IN
--------------- ------------ -------------- NET ------------------
1999 1998 1999 1998 1999 1998 CHANGE VOLUME RATE
---- ---- ---- ---- ---- ---- ------ ------ ----
ASSETS
- ------
Interest-earning assets:
Loans $250,887 $216,023 7.96% 8.44% $4,981 $4,546 $ 435 $ 703 $(268)
Investment in debt and equity
securities 79,134 117,404 6.02 6.08 1,187 1,780 (593) (574) (19)
Federal funds sold and other
short-term investments 117,230 93,274 4.72 5.41 1,379 1,260 119 296 (177)
-------- -------- ------ ------ ----- ----- -----
Total interest-earning assets 447,251 426,701 6.77 7.13 7,547 7,586 (39) 425 (464)
-------- -------- ------ ------ ----- ----- -----
Nonearning assets:
Cash and due from banks 22,765 20,024
Premises and equipment, net 9,175 9,570
Other assets 9,529 10,206
Allowance for loan losses (4,463) (4,548)
-------- --------
Total assets 484,257 461,953
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Interest-bearing liabilities:
Interest-bearing demand deposits 41,925 33,671 3.31 3.53 346 296 50 69 (19)
Savings deposits 63,460 61,555 4.01 4.28 635 657 (22) 20 (42)
Time deposits of $100,000
or more 4,319 4,131 4.27 5.83 46 60 (14) 3 (17)
Other time deposits 3,574 4,726 5.50 5.01 49 59 (10) (15) 5
-------- -------- ------ ------ ----- ----- -----
Total interest-bearing deposits 113,278 104,083 3.81 4.13 1,076 1,072 4 77 (73)
Short-term borrowings 271 337 2.96 3.57 2 3 (1) (1) --
-------- -------- ------ ------ ----- ----- -----
Total interest-bearing
liabilities 113,549 104,420 3.81 4.13 1,078 1,075 3 76 (73)
-------- -------- ------ ------ ----- ----- -----
Noninterest-bearing liabilities:
Demand deposits 73,699 70,564
Accounts and drafts payable 234,706 227,046
Other liabilities 5,502 5,448
-------- --------
Total liabilities 427,456 407,478
Shareholders' equity 56,801 54,475
-------- --------
Total liabilities and
shareholders' equity $484,257 $461,953
======== ========
Net interest income $6,469 $6,511 $ (42) $ 349 $(391)
====== ====== ===== ===== =====
Net interest margin 5.80% 6.12%
==== ====
Interest spread 2.96% 3.00%
==== ====
-8-
10
AVERAGE BALANCES, INTEREST AND RATES, Continued
NOTES:
(1) For purposes of these computations, nonaccrual loans are included in the
average loan amounts outstanding.
(2) Interest income on loans includes net fees of $80,000 and $11,000 for
the Second Quarter of 1999 and 1998, respectively.
(3) Income is presented on a tax-equivalent basis assuming a tax rate of 34%.
The tax-equivalent adjustment was approximately $49,000 and $29,000 for
the Second Quarter of 1999 and 1998, respectively.
-9-
11
TABLE 2: CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST
INCOME ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(TAX-EQUIVALENT BASIS, IN THOUSANDS)
AVERAGE INTEREST INCREASE (DECREASE)
AVERAGE BALANCE YIELD/RATE INCOME/EXPENSE DUE TO CHANGE IN
--------------- ------------ -------------- NET ------------------
1999 1998 1999 1998 1999 1998 CHANGE VOLUME RATE
---- ---- ---- ---- ---- ---- ------ ------ ----
ASSETS
- ------
Interest-earning assets:
Loans $237,548 $210,177 7.94% 8.42% $ 9,354 $ 8,775 $ 579 $ 1,098 $(519)
Investment in debt and equity
securities 79,458 119,172 6.06 6.10 2,388 3,606 (1,218) (1,194) (24)
Federal funds sold and other
short-term investments 128,927 95,321 4.75 5.42 3,034 2,565 469 821 (352)
-------- -------- ------- ------- ------- ------- -----
Total interest-earning assets 445,933 424,670 6.68 7.10 14,776 14,946 (170) 725 (895)
-------- -------- ------- ------- ------- ------- -----
Nonearning assets:
Cash and due from banks 21,795 18,995
Premises and equipment 9,196 9,703
Other assets 9,653 11,468
Allowance for loan losses (4,448) (4,523)
-------- --------
Total assets 482,129 460,313
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Interest-bearing liabilities:
Interest-bearing demand deposits 39,687 34,081 3.32 3.55 654 600 54 94 (40)
Savings deposits 63,720 60,821 4.01 4.28 1,268 1,290 (22) 60 (82)
Time deposits of $100,000
or more 3,609 3,974 5.20 5.78 93 114 (21) (10) (11)
Other time deposits 4,341 4,848 4.65 5.03 100 121 (21) (12) (9)
-------- -------- ------- ------- ------- ------- -----
Total interest-bearing deposits 111,357 103,724 3.83 4.13 2,115 2,125 (10) 132 (142)
Short-term borrowings 278 302 2.90 4.01 4 6 (2) -- (2)
-------- -------- ------- ------- ------- ------- -----
Total interest-bearing
liabilities 111,635 104,026 3.83 4.13 2,119 2,131 (12) 132 (144)
-------- -------- ------- ------- ------- ------- -----
Noninterest-bearing liabilities:
Demand deposits 72,767 68,201
Accounts and drafts payable 234,488 228,545
Other liabilities 5,637 5,871
-------- --------
Total liabilities 424,527 406,643
Stockholders' equity 57,602 53,670
-------- --------
Total liabilities and
stockholders' equity $482,129 $460,313
======== ========
Net interest income $12,657 $12,815 $ (158) $ 593 $(751)
======= ======= ======= ======= =====
Net yield on interest-earning assets 5.72% 6.09%
==== ====
Interest spread 2.85% 2.97%
==== ====
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12
AVERAGE BALANCES, INTEREST AND RATES, Continued
NOTES:
(1) For purposes of these computations, nonaccrual loans are included in the
average loan amounts outstanding.
(2) Interest income on loans includes net fees of $87,000 and $13,000 for
the First Half of 1999 and 1998, respectively.
(3) Income is presented on a tax-equivalent basis assuming a tax rate of
34%. The tax-equivalent adjustment was approximately $98,000 and
$58,000 for the First Half of 1999 and 1998, respectively.
-11-
13
Provision for Loan Losses
- -------------------------
A significant determinant of the Company's operating results is the
provision for loan losses and the level of loans charged off. There was no
provision made for loan losses during the Second Quarter of 1999 or 1998 and
no provision made during the First Half of 1999 or 1998. Net loan recoveries
for the Second Quarter of 1999 was $33,000 compared to net loan recoveries of
$66,000 for the Second Quarter of 1998. Net loan recoveries for the First
Half of 1999 was $43,000 compared to $85,000 for the First Half of 1998.
The ratio of allowance for loan losses as of June 30 to average
loans outstanding during the Second Quarter was 1.78% in 1999 compared to
2.12% in 1998. The ratio of nonperforming loans as of June 30 to average
loans during the Second Quarter was .21% in 1999 compared to .79% in 1998.
At June 30, 1999, impaired loans totalled $561,000 which includes
$378,000 of nonaccrual loans. The allowance for loan losses on impaired
loans was $404,000 at June 30, 1999. The average balance of impaired loans
during the First Half of 1999 and the First Half of 1998 was $634,000 and
$1,253,000, respectively.
The allowance for loan losses at June 30, 1999 was $4,471,000 and at
December 31, 1998 was $4,428,000. The allowance for loan losses at June 30,
1999 represented 1.61% of total loans outstanding compared to 1.97% at
December 31, 1998.
Factors which influence management's determination of the adequacy of
the allowance for loan losses, among other things, include: evaluation of each
nonperforming and/or classified loan to determine the estimated loss exposure
under existing circumstances known to management; evaluation of all potential
problem loans identified in light of possible loss exposure based upon
existing circumstances known to management; analysis of the loan portfolio
with regard to potential future loss exposure on loans to specific customers
and/or industries; current economic conditions; and, an overall review of
the loan portfolio in light of past loan loss experience. In management's
judgment, the allowance for loan losses is considered adequate to absorb
potential losses in the loan portfolio.
The following table presents information as of and for the three- and
six-month periods ended June 30, 1999 and 1998 pertaining to the Company's
provision for loan losses and analysis of the allowance for loan losses.
Three Months Ended Six Months Ended
June 30 June 30
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
(Dollars in Thousands)
Allowance at beginning of period $ 4,438 $ 4,503 $ 4,428 $ 4,484
Loans charged off (58) -- (58) --
Recoveries on loans previously charged off 91 66 101 85
-------- -------- -------- --------
Net loan recoveries 33 66 43 85
-------- -------- -------- --------
Allowance at end of period $ 4,471 $ 4,569 $ 4,471 $ 4,569
======== ======== ======== ========
Loans outstanding:
Average $250,887 $216,023 $237,548 $210,177
June 30 277,470 218,979 277,470 218,979
Ratio of allowance for loan losses to
loans outstanding:
Average 1.78 % 2.12 % 1.88 % 2.17 %
June 30 1.61 % 2.09 % 1.61 % 2.09 %
Nonperforming loans:
Nonaccrual loans $ 378 $ 657 $ 378 $ 657
Loans past due 90 days or more 143 1,059 143 1,059
-------- -------- -------- --------
Total $ 521 $ 1,716 $ 521 $ 1,716
-------- -------- -------- --------
Nonperforming loans as a percent of
average loans .21 % .79 % .22 % .82 %
-12-
14
Noninterest Income
- ------------------
Noninterest income is principally derived from service fees
generated by CIS. Total noninterest income for the Second Quarter of 1999 was
$5,312,000, a $250,000 or 4.5% decrease compared to the Second Quarter of
1998. Total noninterest income for the First Half of 1999 was $10,821,000, a
$593,000 or 5.2% decrease compared to the First Half of 1998.
CIS experienced a decrease in payment and processing revenues of
$207,000 or 3.9% in the Second Quarter of 1999 compared to the Second Quarter
of 1998 and a decrease of $539,000 or 5.0% in the First Half of 1999 compared
to the First Half of 1998. These decreases were due primarily to a decrease
in the number of freight invoices processed. Some of these decreases were
offset by an increase in the number of utility invoices processed.
Noninterest Expense
- -------------------
Total noninterest expense for the Second Quarter of 1999 was
$9,410,000, a $421,000 or 4.7% increase compared to the Second Quarter of
1998. Total noninterest expense for the First Half of 1999 was $18,702,000,
a $177,000 or 1.0% increase compared to the First Half of 1998.
Salaries and benefits expense for the Second Quarter of 1999 was
$6,355,000, a $88,000 or 1.4% increase compared to the Second Quarter of
1998. Salary and benefits expense for the First Half of 1999 was
$12,623,000, a $238,000 or 1.9% decrease compared to the First Half of 1998.
The increase in expense for the Second Quarter relates primarily to annual
pay increases and increased expenses related to an increased investment at
CIS to support expanded utility operations. The decrease in expense for the
First Half relates primarily to separation costs associated with the
streamlining and integration of operations in the freight rating services
group which were expensed in the First Three Months of 1998.
Other noninterest expense for the Second Quarter of 1999 was
$1,961,000, an increase of $302,000 or 18.2% increase compared to the Second
Quarter of 1998. Other noninterest expense for the First Half of 1999 was
$3,914,000, a $392,000 or 11.1% increase compared to the First Half of 1998.
These increases were attributable to several items including
telecommunications, travel & entertainment, and postage expenses.
FINANCIAL CONDITION
Total assets at June 30, 1999 were $451,587,000, a decrease of
$52,325,000 or 10.4% from December 31, 1998. Total assets increased
$12,943,000 or 3.0% from June 30, 1998. Loans, net of the allowance for
loan losses, at June 30, 1999 were $272,999,000, an increase of $52,539,000
or 23.8% from December 31, 1998. Total investments in debt and equity
securities at June 30, 1999 were $84,775,000, a $801,000 or .95% increase from
December 31, 1998. Federal Funds sold and other short-term investments at
June 30, 1999 were $55,860,000, a $100,967,000 or 64.4% decrease from December
31, 1998.
Total deposits at June 31, 1999 were $195,164,000, a $4,182,000 or
2.2% increase from December 31, 1998. Accounts and drafts payable were
$195,226,000, a $55,292,000 or 22.1% decrease from December 31, 1998. Total
shareholders' equity at June 30, 1998 was $55,702,000, a $1,702,000 or 3.0%
decrease from December 31, 1998.
The increase in loans is related to the Bank's ongoing marketing
efforts. The decrease in federal funds sold and other short-term investments
relates primarily to the corresponding decrease in accounts and drafts
payable. The ending balances of accounts and drafts payable will fluctuate
from month to month due to the payment processing cycle, which results in
lower balances on days when checks are issued. As noted above, the average
balances of accounts and drafts payable have increased from the Second
Quarter of 1998 to the Second Quarter of 1999 and the First Half of 1998 to
the First Half of 1999. The decrease in total shareholders equity resulted
from the repurchase of common stock for $2,952,000 (120,000 shares); dividends
paid of $1,456,000 ($.38 per share); a decrease in other comprehensive income
of $470,000 and offset by net income of $3,006,000; cash received from the
exercise of stock options of $81,000 and a tax benefit of $47,000 on stock
options exercised.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity of the Company is primarily represented federal funds
sold and other short-term investments of $55,860,000 and cash and due from
banks of $19,316,000 at June 30, 1999. Included in this total is $30,000,000
invested in money market funds consisting of short-term U.S. Government and
agency issues.
-13-
15
Investment in debt and equity securities represented approximately
19% of total assets at June 30, 1999. Of the U.S. Government securities in
the Company's investment portfolio, which represented 55% of the total, 52%
have maturities of less than one year. Mortgage-backed securities represented
approximately 23% of the total. U.S. Government Agencies represented 21% of
the total. Obligations of state and political subdivisions constituted 1% of
the investment portfolio at June 30, 1999. There were no sales of debt
securities in the First Half of 1999. Of the total portfolio, approximately
99% of the securities have maturities of five years or less. These securities
provide the Company with longer term liquidity than its primary sources.
The funds provided by the Bank consist of a sizable volume of core
deposits. Historically, the Bank has been a net provider of federal funds.
During the First Half of 1999, the Bank was a net provider of federal funds,
averaging over $26,388,000 in net funds sold. Additionally, the Company
averaged approximately $102,539,000 in short-term money market funds during the
First Half of 1999. The Company was able to meet its liquidity requirements in
the First Half of 1999 through the growth of deposit accounts, accounts and
drafts payable and the liquid nature of federal funds sold and other short-term
investments.
The Company faces market risk to the extent that its net interest
income and fair market value of equity are affected by changes in market
interest rates. For information regarding the market risk of the Company's
financial instruments, see Item 3. "QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK".
Risk-based capital guidelines for financial institutions were
adopted by regulatory authorities effective January 1, 1991. These guidelines
were designed to relate regulatory capital requirements to the risk profile
of the specific institution and to provide for uniform requirements among the
various regulators. Currently, the risk-based capital guidelines require the
Company to meet a minimum total capital ratio of 8.0% of which at least 4.0%
must consist of Tier I capital. Tier I capital generally consists of (a)
common shareholders' equity (excluding the unrealized market value
adjustments on the available-for-sale securities), (b) qualifying perpetual
preferred stock and related surplus subject to certain limitations specified
by the FDIC, (c) minority interests in the equity accounts of consolidated
subsidiaries less (d) goodwill, (e) mortgage servicing rights within certain
limits, and (f) any other intangible assets and investments in subsidiaries
that the FDIC determines should be deducted from Tier I capital. The FDIC
also requires a minimum leverage ratio of 3.0%, defined as the ratio of Tier
I capital less purchased mortgage servicing rights to total assets, for
banking organizations deemed the strongest and most highly rated by banking
regulators. A higher minimum leverage ratio is required of less highly rated
banking organizations. Total capital, a measure of capital adequacy,
includes Tier I capital, allowance for possible loan losses, and debt
considered equity for regulatory capital purposes.
The Company and the Bank continue to significantly exceed all
regulatory capital requirements, as evidenced by the following capital
amounts and ratios at June 30, 1999 and December 31, 1998:
June 30, 1999 Amount Ratio
------------- ------ -----
Total capital (to risk-weighted assets)
Cass Commercial Corporation $58,656,000 22.11%
Cass Commercial Bank 27,376,000 14.71
Tier I capital (to risk-weighted assets)
Cass Commercial Corporation $55,326,000 20.86%
Cass Commercial Bank 25,046,000 13.46
Tier I capital (to average assets)
Cass Commercial Corporation $55,326,000 11.49%
Cass Commercial Bank 25,046,000 11.15
December 31, 1998 Amount Ratio
----------------- ------ -----
Total capital (to risk-weighted assets)
Cass Commercial Corporation $60,073,000 21.14%
Cass Commercial Bank 27,526,000 15.12
Tier I capital (to risk-weighted assets)
Cass Commercial Corporation $56,510,000 19.89%
Cass Commercial Bank 25,246,000 13.86
Tier I capital (to average assets)
Cass Commercial Corporation $56,510,000 12.05%
Cass Commercial Bank 25,246,000 12.04
-14-
16
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Year 2000 Issue
- -------------------
The Year 2000 issue centers around the inability of some
computer systems to properly read and interpret dates because many existing
computers and computer programs have been developed to use two digits rather
than four to refer to a year. The risk of system failure and data processing
errors may be the result of this issue.
The Company's operations are heavily dependent on the use of computer
systems. For this reason, the Company implemented a Year 2000 project in 1997.
The project was segmented into five phases: Awareness, Assessment, Renovation,
Testing and Implementation. The Company has focused its efforts on addressing
those systems it deems to be critical to ongoing operations. The Company has
completed all phases of the plan for its internal, mission critical systems
during the first quarter of 1999.
The Company continues to assess the readiness of its major vendors,
suppliers, customers and business partners. This process has been
accomplished through such avenues as user acceptance testing, interface
testing, risk analysis and periodic correspondence. Although our efforts
have been diligent and assessment results have been positive, there can be no
guarantee that the systems of these outside parties will be fully functional
in the Year 2000. Such failures could have a material adverse effect on the
Company.
The Company has developed business resumption contingency plans for
the purpose of assuring that core business processes will continue to operate
into the Year 2000. The plans will address failures such as payment system
failures, data processing system failures, increased cash withdrawals,
telecommunication failures, disruption in services provided by outside
parties and customer failures. The contingency plans provide for reasonable
alternatives to potential failures and the establishment of an implementation
strategy, including timelines and responsibility assignments.
The Company estimates it will incur costs of approximately $2.5
million to prepare for the century date change. This includes internal and
external costs that will be expensed as well as capital expenditures that
will be capitalized. Costs include, but are not limited to salary expenses,
outside service fees (i.e., legal, audit, consulting), hardware and software
expenditures, and equipment costs. As of June 30, 1999 direct and indirect
expenditures have been approximately $2.2 million. Funding for Year 2000
costs have been, and will continue to be, derived from normal operating cash
flow and deployment of internal resources. Year 2000 expenses are not expected
to have a material impact on the Company's income.
The foregoing discussion of Year 2000 issues is based on
management's most current assessment and estimates. The information
utilizes multiple assumptions of future events, including, but not limited
to, the continued availability of certain resources, third party efforts, and
other factors. There can be no guarantee that the estimates included herein
will be achieved, and actual costs and results could differ materially from
the estimates currently anticipated by the Company.
Inflation
- ---------
Inflation can impact the financial position and results of the
operations of financial institutions because financial institutions hold
monetary assets and monetary liabilities. Monetary assets and liabilities
are those which can be converted into a fixed number of dollars, and include
cash, investments, loans and deposits. The Company's consolidated balance
sheets, as is typical of financial institutions, reflect a net positive
monetary position (monetary assets exceeding monetary liabilities). During
periods of inflation, the holding of a net positive monetary position will
result in an overall decline in the purchasing power of a financial
institution.
-15-
17
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
- ----------------------------------------------------------------------
Securities Litigation Reform Act of 1995
- ----------------------------------------
Statements in Management's Discussion and Analysis of Financial
Condition and Results of Operations and the other sections of this Report
that are not statements of historical fact are "forward-looking statements".
Such statements are subject to important risks and uncertainties which could
cause the Company's actual results to differ materially from those expressed
in any such forward-looking statements made herein. The aforesaid
uncertainties include, but are not limited to: burdens imposed by federal
and state regulators, credit risk related to borrowers' ability to repay
loans, concentration of loans in the St. Louis Metropolitan area which
subjects the Company to risks associated with changes in the local economy,
risks associated with fluctuations in interest rates, competition from other
banks and other financial institutions, some of which are not as heavily
regulated as the Company and, particularly in the case of CIS, risks
associated with breakdowns in data processing systems and competition from
other providers of similar services.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The Company faces market risk to the extent that its net interest
income and its fair market value of equity are affected by changes in market
interest rates. The asset/liability management discipline as applied at the
Company seeks to limit the volatility, to the extent possible, of both net
interest income and the fair market value of equity that can result from
changes in market interest rates. This is accomplished by limiting the
maturities of fixed rate investments, loans, and deposits; matching fixed
rate assets and liabilities to the extent possible; and optimizing the mix of
non-interest fee and net interest income. However, as discussed below, the
Company's asset/liability position differs significantly from most other bank
holding companies with positive "gaps" shown for each time horizon presented.
This asset sensitive position is caused primarily by the operations of CIS,
which generates large balances of accounts and drafts payable. These
balances, which are noninterest-bearing, contributes to the Company's high
net interest margin but causes the Company to become susceptible to changes
in interest rates, with a decreasing net interest margin and fair market
value of equity in periods of declining interest rates and an increasing net
interest margin and fair market value of equity in periods of rising interest
rates.
The Company's Asset/Liability Management Committee (ALCO) measures
the Company's interest rate risk sensitivity on a Quarterly basis to monitor
and manage the variability of earnings and fair market value of equity in
various interest rate environments. The ALCO evaluates the Company's risk
position to determine whether the level of exposure is significant enough to
hedge a potential decline in earnings and value or whether the Company can
safely increase risk to enhance returns. The ALCO uses gap reports,
twelve-month net interest income simulations, and fair market value of equity
analyses as its main analytical tools to provide management with insight into
the Company's exposure to changing interest rates.
A gap report is used by management to review any significant
mismatch between the repricing points of the Company's rate sensitive assets
and liabilities in certain time horizons. A negative gap indicates that more
liabilities reprice in that particular time frame and, if rates rise, these
liabilities will reprice faster than the assets. A positive gap would
indicate the opposite. Management has set policy limits specifying acceptable
levels of interest rate risk as measured by the gap report. Gap reports can
be misleading in that they capture only the repricing timing within the
balance sheet, and fail to capture other significant risks such as basis risk
and embedded options risk. Basis risk involves the potential for the spread
relationship between rates to change under different rate environments and
embedded options risk relates to the potential for the alteration of the
level and/or timing of cash flows given changes in rates.
Another measurement tool used by management is net interest income
simulation, which forecasts net interest income during the coming twelve
months under different interest rate scenarios in order to quantify potential
changes in short-term accounting income. Management has set policy limits
specifying acceptable levels of interest rate risk given multiple simulated
rate movements. These simulations are more informative than gap reports
because they are able to capture more of the dynamics within the balance
sheet, such as basis risk and embedded options risk. Simulation results
illustrate that the Company's net interest income over the next twelve months
is more vulnerable to declining rates than rising rates.
-16-
18
While net interest income simulations do a good job of capturing
interest rate risk to short-term earnings, they do not capture risk within
the current balance sheet beyond twelve months. The Company uses fair market
value of equity analyses to help identify longer-term risk that may reside on
the current balance sheet. The fair market value of equity is represented by
the present value of all future income streams generated by the current
balance sheet. The Company measures the fair market value of equity as the
net present value of all asset and liability cash flows discounted at forward
rates suggested by the current Treasury curve plus appropriate credit
spreads. This representation of the change in the fair market value of
equity under different rate scenarios gives insight into the magnitude of
risk to future earnings due to rate changes. Management has set policy limits
relating to declines in the market value of equity. The results of these
analyses indicate that the Company's fair market value of equity declines as
rates decline and increases as rates increase.
-17-
19
Interest Rate Sensitivity Gap Table
- -----------------------------------
The following table presents the Company's gap or interest rate
position at June 30, 1999 for the various time frames indicated.
OVER OVER
THREE SIX OVER ONE
THREE THROUGH THROUGH THROUGH OVER
VARIABLE MONTHS SIX TWELVE FIVE FIVE
RATE OR LESS MONTHS MONTHS YEARS YEARS TOTAL
---- ------- ------ ------ ----- ----- -----
(Dollars in Thousands)
Interest-earning assets:
Loans $115,208 $ 5,671 $ 9,320 $13,815 $122,463 $10,993 $277,470
Investment in debt and
equity securities -- 11,515 9,513 24,057 38,446 1,244 84,775
Federal funds sold and other
short-term investments 55,860 -- -- -- -- -- 55,860
-------- ------- ------- ------- -------- ------- --------
Total interest-earning assets $171,068 $17,186 $18,833 $37,872 $160,909 $12,237 $418,105
======== ======= ======= ======= ======== ======= ========
Interest-bearing liabilities:
Interest-bearing transaction
accounts $104,419 $ -- $ -- $ -- $ -- $ -- $104,419
Time deposits-$100,000 or more -- 1,392 1,050 936 126 -- 3,504
Other time deposits -- 1,467 791 1,137 906 -- 4,301
Short-term borrowings 227 -- -- -- -- -- 227
-------- ------- ------- ------- -------- ------- --------
Total interest-bearing
liabilities $104,646 $ 2,859 $ 1,841 $ 2,073 $ 1,032 $ -- $112,451
======== ======= ======= ======= ======== ======= ========
Interest sensitivity gap:
Periodic $ 66,422 $14,327 $16,992 $35,799 $159,877 $12,237 $305,654
Cumulative 66,422 80,749 97,741 133,540 293,417 305,654 305,654
Ratio of interest-sensitive
assets to interest-sensitive
liabilities:
Periodic 1.63x 6.01x 10.23x 18.27x 155.92x -- 3.72x
Cumulative 1.63x 1.75x 1.89x 2.20x 3.61x 3.72x 3.72x
Balances shown reflect earliest repricing date.
-18-
20
PART II
- -------
Item 1. LEGAL PROCEEDINGS
-----------------
None
Item 2. CHANGES IN SECURITIES
---------------------
None
Item 3. DEFAULTS IN SENIOR SECURITIES
-----------------------------
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
At the annual meeting of the shareholders of Cass Commercial
Corporation held on April 19, 1999, the following proposals were
voted on and approved:
The following is a summary of votes cast. No broker non-votes
were received.
Withheld
Authority/
For Against Abstentions
--------- ----------- ---------------
1. Proposal to elect four Directors for a term
of three years ending 2002;
Bryan C. Chapell 2,952,680 3,628 917,403
Jake Nania 2,907,912 48,396 917,403
John J. Vallina 2,952,933 3,375 917,403
Bruce E. Woodruff 2,952,680 3,628 917,403
2. Proposal to approve certain amendments to the
1995 Performance-Based Stock Option Plan to
permit the granting of incentive stock option
under the Option Plan. 2,864,731 50,369 958,611
3. Proposal to ratify the selection of KPMG LLP
as independent accountants for 1999. 2,949,992 2,868 920,851
Item 5. OTHER INFORMATION
-----------------
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) None
(b) Cass Commercial Corporation did not file any reports on
Form 8-K during the three-months ended June 30, 1999.
-19-
21
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 thereunto duly authorized.
CASS COMMERCIAL CORPORATION
DATE: August 5, 1999 By /s/ Lawrence A. Collett
-------------------------------------
Lawrence A. Collett
Chairman and Chief Executive Officer
DATE: August 5, 1999 By /s/ Eric H. Brunngraber
-------------------------------------
Eric H. Brunngraber
Vice President-Secretary
(Chief Financial and Accounting Officer)
-20-
9
1,000
3-MOS
DEC-31-1999
APR-01-1999
JUN-30-1999
19,316
30,000
25,860
0
43,481
41,294
41,340
277,470
4,471
451,587
195,164
227
200,494
0
0
0
2,000
53,702
451,587
4,940
1,179
1,379
7,498
1,076
1,078
6,420
0
0
9,410
2,322
2,322
0
0
1,487
.39
.39
5.80
378
143
106
561
4,438
58
91
4,471
0
0
0
TO BE DOCUMENTED IN THE DEC-31-1999 STATEMENTS.
9
1,000
6-MOS
DEC-31-1999
JAN-01-1999
JUN-30-1999
19,316
30,000
25,860
0
43,481
41,294
41,340
277,470
4,471
451,587
195,164
227
200,494
0
0
0
2,000
53,702
451,587
9,272
2,372
3,034
14,678
2,115
2,119
12,559
0
0
18,702
4,678
4,678
0
0
3,006
.78
.77
5.72
378
143
106
561
4,428
58
101
4,471
0
0
0
TO BE DOCUMENTED IN THE DEC-31-1999 STATEMENTS.
