Cass Information Systems Reports First Quarter 2024 Results

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

• Net income of $7.2 million, or $0.52 per diluted common share.
• Return on average equity and assets of 12.66% and 1.20%, respectively.
• Increase in facility expense transaction volumes of 23.0%.
• Processing fee growth of 8.9%.
• Limited operating expense growth to 0.7% despite facility expense transaction volume increase.
• Maintained exceptional credit quality, with no non-performing loans or charge-offs.

Cass Information Systems, Inc. (Nasdaq: CASS), (the Company or Cass) reported first quarter 2024 earnings of $0.52 per diluted share, as compared to $0.51 in the first quarter of 2023 and $0.61 in the fourth quarter of 2023. Net income for the period was $7.2 million, an increase of 0.5% from $7.1 million in the same period in 2023 and a decrease of $1.3 million, or 15.0%, as compared to the fourth quarter of 2023.

Martin Resch, the Company’s President and Chief Executive Officer, noted, “We successfully onboarded a significant number of new facility clients during the first quarter which we could not have accomplished as effectively without the technology platform upgrades we have completed over the last several quarters. Facility transaction volumes increasing 23.0% and operating expenses increasing only 0.7% show that we are becoming more scalable.” Resch added, “While current revenue and profitability levels are certainly not where we would like them to be due to the ongoing freight recession and other external events, we have robust new business pipelines throughout our lines of business which should place us in a good position to grow clients and transactions.”

First Quarter 2024 Highlights

Transportation Dollar Volumes – Transportation dollar volumes were $8.9 billion during the first quarter of 2024, decreases of 12.9% as compared to the first quarter of 2023 and 1.2% as compared to the fourth quarter of 2023. The average dollars per transaction declined to $1,019 during the first quarter of 2024 as compared to $1,036 in the fourth quarter of 2023 and $1,129 in the first quarter of 2023 as a result of lower fuel costs and overall freight rates. 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 $5.3 billion during the first quarter of 2024, increases of 0.3% as compared to the first quarter of 2023 and 9.9% as compared to the fourth quarter of 2023. The slight increase as compared to the first quarter of 2023 is largely reflective of new client volume, partially offset by lower energy prices. The increase as compared to the fourth quarter of 2023 is reflective of new client onboarding and related transaction growth.

Processing Fees – Processing fees increased $1.7 million, or 8.9%, over the same period in the prior year. The increase in processing fees was largely driven by an increase in facility transaction volumes of 23.0%. The Company has experienced recent success in winning facility clients with high transaction volumes. Transportation invoice volumes decreased 3.6% over the same period. The decline in transportation volumes is largely due to the on-going freight recession.

Financial Fees – Financial fees, earned on a transactional level basis for invoice payment services when making customer payments, decreased $482,000, or 4.3%. The decrease in financial fee income was primarily due to a decline in transportation dollar volumes of 12.9% in addition to changes in the manner certain vendors receive payments, partially offset by the increase in short-term interest rates between the periods.

Net Interest Income – Net interest income decreased $422,000, or 2.5%. The decrease in net interest income was attributable to a decline in average interest-earning assets of $99.5 million, or 4.6%. The Company’s net interest margin improved to 3.26% as compared to 3.23% in the same period last year.

The Company’s net interest margin declined 4 basis points as compared to 3.30% in the fourth quarter of 2023 primarily driven by a $91.6 million decrease in average non-interest bearing funding, consisting of $17.0 million in average non-interest bearing deposits and $74.6 million in average accounts and drafts payable. A cyber event at a CassPay client reduced payment volumes and related accounts and drafts payable during the first quarter of 2024.

Provision for Credit Losses - The Company recorded a provision of credit losses of $95,000 during the first quarter of 2024 as compared to a release of credit losses of $340,000 in the first quarter of 2023. The provision for credit losses for the first quarter of 2024 was largely driven by the increase in total loans of $22.7 million, or 2.2%, as compared to December 31, 2023.

Personnel Expenses - Personnel expenses increased $581,000, or 1.9%. Salaries and commissions increased $1.4 million, or 6.1%, as a result of merit increases and an increase in average full-time equivalent employees (“FTEs”) of 5.2% due to strategic investments in various technology initiatives. Share-based compensation decreased $724,000 reflecting the Company’s financial performance and the impact on performance-based restricted stock between the periods.

Non-Personnel Expenses - Non-personnel expenses declined $282,000, or 2.7%. Certain expense categories related to technology declined as the Company transitioned to new technology platforms for data entry.

Loans - When compared to December 31, 2023, ending loans increased $22.7 million, or 2.2%. The Company experienced growth in its commercial and industrial loan portfolio during the first quarter of 2024.

Payments in Advance of Funding – Average payments in advance of funding decreased $46.6 million, or 19.3%, primarily due to a 12.9% decrease in transportation dollar volumes, which led to fewer dollars advanced to freight carriers.

Deposits – Average deposits decreased $65.2 million, or 5.7%, when compared to the first quarter of 2023 and increased $22.5 million, or 2.1%, as compared to the fourth quarter of 2023. Total deposits at March 31, 2024 decreased $61.7 million, or 5.4% as compared to December 31, 2023. The Company experienced deposit attrition subsequent to the first quarter of 2023 as larger commercial depository clients moved their funds to higher interest rate alternatives outside of the banking system. However, the Company has experienced recent growth in its average deposit balances as a result of higher deposit rates and increased depositor confidence across the banking industry.

Accounts and Drafts Payable - Average accounts and drafts payable decreased $59.3 million, or 5.4%. The decrease in these balances, which are non-interest bearing, are primarily reflective of the decrease in transportation dollar volumes of 12.9%. In addition, a cyber event at a CassPay client reduced payment volumes and related average accounts and drafts payable. Accounts and drafts payable are a significant source of funding generated by payment float from transportation, facility and CassPay clients.

Shareholders’ Equity - Total shareholders’ equity has decreased $322,000 since December 31, 2023 as a result of an increase in accumulated other comprehensive loss of $1.7 million primarily related to the fair value of available-for-sale investment securities, dividends of $4.0 million and the repurchase of Company stock of $1.0 million, partially offset by net income of $7.2 million.

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 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 March 31, 2024

 

Quarter Ended December 31, 2023

 

Quarter Ended March 31, 2023

Processing fees

$

21,253

 

 

$

20,728

 

 

$

19,513

Financial fees

 

10,777

 

 

 

11,467

 

 

 

11,259

Total fee revenue

$

32,030

 

 

$

32,195

 

 

$

30,772

 

 

 

 

 

 

Interest and fees on loans

 

12,776

 

 

 

12,796

 

 

 

12,235

Interest and dividends on securities

 

4,437

 

 

 

4,352

 

 

 

4,794

Interest on federal funds sold and other short-term investments

 

4,441

 

 

 

4,573

 

 

 

3,113

Total interest income

$

21,654

 

 

$

21,721

 

 

$

20,142

Interest expense

 

5,178

 

 

 

4,687

 

 

 

3,244

Net interest income

$

16,476

 

 

$

17,034

 

 

$

16,898

(Provision for) release of credit losses

 

(95

)

 

 

215

 

 

 

340

(Loss) gain on sale of investment securities

 

—

 

 

 

(13

)

 

 

39

Other

 

1,267

 

 

 

1,305

 

 

 

1,296

Total revenues

$

49,678

 

 

$

50,736

 

 

$

49,345

Salaries and commissions

 

23,976

 

 

 

23,861

 

 

 

22,605

Share-based compensation

 

1,226

 

 

 

342

 

 

 

1,950

Net periodic pension cost

 

195

 

 

 

434

 

 

 

100

Other benefits

 

5,210

 

 

 

4,963

 

 

 

5,371

Total personnel expenses

$

30,607

 

 

$

29,600

 

 

$

30,026

Occupancy

 

861

 

 

 

890

 

 

 

855

Equipment

 

1,881

 

 

 

1,950

 

 

 

1,650

Other

 

7,322

 

 

 

7,941

 

 

 

7,841

Total operating expenses

$

40,671

 

 

$

40,381

 

 

$

40,372

Income from operations before income taxes

$

9,007

 

 

$

10,355

 

 

$

8,973

Income tax expense

 

1,855

 

 

 

1,945

 

 

 

1,856

Net income

$

7,152

 

 

$

8,410

 

 

$

7,117

Basic earnings per share

$

.53

 

 

$

.62

 

 

$

.52

Diluted earnings per share

$

.52

 

 

$

.61

 

 

$

.51

 

 

 

 

 

 

Share data:

 

 

 

 

 

Weighted-average common shares outstanding

 

13,530

 

 

 

13,467

 

 

 

13,599

Weighted-average common shares outstanding assuming dilution

 

13,785

 

 

 

13,755

 

 

 

13,863

Consolidated Balance Sheets

($ in thousands)

 

(unaudited) March 31, 2024

 

December 31, 2023

 

(unaudited) March 31, 2023

Assets:

 

 

 

 

 

Cash and cash equivalents

$

192,803

 

 

$

372,468

 

 

$

210,478

 

Securities available-for-sale, at fair value

 

621,929

 

 

 

627,117

 

 

 

703,037

 

Loans

 

1,036,997

 

 

 

1,014,318

 

 

 

1,070,373

 

Less: Allowance for credit losses

 

(13,299

)

 

 

(13,089

)

 

 

(13,254

)

Loans, net

$

1,023,698

 

 

$

1,001,229

 

 

$

1,057,119

 

Payments in advance of funding

 

221,552

 

 

 

198,861

 

 

 

259,819

 

Premises and equipment, net

 

32,613

 

 

 

30,093

 

 

 

20,967

 

Investments in bank-owned life insurance

 

49,496

 

 

 

49,159

 

 

 

48,278

 

Goodwill and other intangible assets

 

20,463

 

 

 

20,654

 

 

 

21,240

 

Accounts and drafts receivable from customers

 

32,856

 

 

 

110,651

 

 

 

37,288

 

Other assets

 

98,169

 

 

 

68,390

 

 

 

69,163

 

Total assets

$

2,293,579

 

 

$

2,478,622

 

 

$

2,427,389

 

 

 

 

 

 

 

Liabilities and shareholders’ equity:

 

 

 

 

 

Deposits

 

 

 

 

 

Non-interest bearing

$

412,879

 

 

$

524,359

 

 

$

585,323

 

Interest-bearing

 

666,213

 

 

 

616,455

 

 

 

530,827

 

Total deposits

$

1,079,092

 

 

$

1,140,814

 

 

$

1,116,150

 

Accounts and drafts payable

 

944,793

 

 

 

1,071,369

 

 

 

1,051,435

 

Other liabilities

 

40,207

 

 

 

36,630

 

 

 

42,304

 

Total liabilities

$

2,064,092

 

 

$

2,248,813

 

 

$

2,209,889

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common stock

$

7,753

 

 

$

7,753

 

 

$

7,753

 

Additional paid-in capital

 

204,361

 

 

 

208,007

 

 

 

206,614

 

Retained earnings

 

148,845

 

 

 

145,782

 

 

 

134,822

 

Common shares in treasury, at cost

 

(82,316

)

 

 

(84,264

)

 

 

(79,419

)

Accumulated other comprehensive loss

 

(49,156

)

 

 

(47,469

)

 

 

(52,270

)

Total shareholders’ equity

$

229,487

 

 

$

229,809

 

 

$

217,500

 

Total liabilities and shareholders’ equity

$

2,293,579

 

 

$

2,478,622

 

 

$

2,427,389

 

Average Balances (unaudited)

($ in thousands)

 

Quarter Ended March 31, 2024

 

Quarter Ended December 31, 2023

 

Quarter Ended March 31, 2023

Average interest-earning assets

$

2,063,239

 

$

2,075,651

 

$

2,162,734

Average loans

 

1,016,246

 

 

1,025,259

 

 

1,076,221

Average securities available-for-sale

 

635,422

 

 

615,666

 

 

724,839

Average short-term investments

 

352,163

 

 

356,887

 

 

295,150

Average payments in advance of funding

 

194,338

 

 

209,364

 

 

240,890

Average assets

 

2,381,582

 

 

2,414,665

 

 

2,499,341

Average non-interest bearing deposits

 

447,900

 

 

464,924

 

 

553,644

Average interest-bearing deposits

 

631,622

 

 

592,055

 

 

591,102

Average borrowings

 

11

 

 

11

 

 

5,834

Average interest-bearing liabilities

 

631,633

 

 

592,066

 

 

596,936

Average accounts and drafts payable

 

1,035,833

 

 

1,110,415

 

 

1,095,182

Average shareholders’ equity

$

226,669

 

$

207,834

 

$

209,791

Consolidated Financial Highlights (unaudited)

($ and numbers in thousands, except ratios)

 

Quarter Ended March 31, 2024

 

Quarter Ended December 31, 2023

 

Quarter Ended March 31, 2023

Return on average equity

12.66 %

 

16.06 %

 

13.76 %

Return on average assets

1.20 %

 

1.38 %

 

1.15 %

Net interest margin (1)

3.26 %

 

3.30 %

 

3.23 %

Average interest-earning assets yield (1)

4.27 %

 

4.20 %

 

3.84 %

Average loan yield

5.06 %

 

4.95 %

 

4.61 %

Average investment securities yield (1)

2.71 %

 

2.63 %

 

2.62 %

Average short-term investment yield

5.07 %

 

5.08 %

 

4.28 %

Average cost of total deposits

1.93 %

 

1.76 %

 

1.15 %

Average cost of interest-bearing deposits

3.30 %

 

3.14 %

 

2.18 %

Average cost of interest-bearing liabilities

3.30 %

 

3.14 %

 

2.20 %

Allowance for credit losses to loans

1.28 %

 

1.29 %

 

1.24 %

Non-performing loans to total loans

-- %

 

-- %

 

-- %

Net loan charge-offs (recoveries) to loans

-- %

 

-- %

 

-- %

Common equity tier 1 ratio

14.84 %

 

14.73 %

 

13.76 %

Total risk-based capital ratio

15.60 %

 

15.49 %

 

14.49 %

Leverage ratio

11.34 %

 

10.71 %

 

10.01 %

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

 

 

 

 

 

 

Transportation invoice volume

8,771

 

8,733

 

9,098

Transportation dollar volume

$ 8,939,646

 

$ 9,044,772

 

$ 10,268,451

Facility expense transaction volume

4,264

 

3,505

 

3,468

Facility expense dollar volume

$ 5,329,566

 

$ 4,848,064

 

$ 5,313,385

 

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