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Cass Information Systems Announces Quarterly Net Income and Revenue Growth of 21.9% and 15.1%, Respectively

Second Quarter Results

(All comparisons refer to the second quarter of 2021, except as noted)

  • Earned record quarterly net income and diluted earnings per share.

  • Increase in diluted earnings per share of 29.2%, to $.62 from $.48.

  • Increase in net income of 21.9%, to $8.6 million from $7.0 million.

  • Increase in return on average equity to 16.53% from 10.83%.

  • Processed record quarterly transportation dollar volumes of $11.4 billion, a 27.7% increase.

  • Increase in financial fees of $3.1 million, or 41.6%.

  • Increase in average payments in advance of funding of $95.3 million, or 48.2%.

  • Increase in average loans, excluding PPP loans, of $174.4 million, or 21.8%.

  • Maintained exceptional credit quality.

ST. LOUIS, July 14, 2022--(BUSINESS WIRE)--Cass Information Systems, Inc. (Nasdaq: CASS), (the Company or Cass) reported second quarter 2022 earnings of $.62 per diluted share, an increase of 29.2% from the $.48 per diluted share it earned in the second quarter of 2021. Net income for the period was $8.6 million, an increase of 21.9% from the $7.0 million earned in the same period in 2021. Diluted earnings per share and net income also increased 3.3% and 3.7%, respectively as compared to the first quarter of 2022.

Eric Brunngraber, the Company’s chairman and chief executive officer, noted, "It is exciting to see such strong financial results from the strategic initiatives undertaken during the past few years. Further initiatives are well underway, which will expand our service portfolio as well as increase our operational efficiency. The recent and anticipated future increase in short-term interest rates should also enhance revenue going forward."

Second Quarter 2022 Highlights

Financial Fees – Financial fee income, earned on a transactional level basis for invoice payment services when making customer payments, increased $3.1 million, or 41.6%, over the same period in the prior year. The increase in financial fee income was largely driven by the 48.2% increase in average payments in advance of funding.

Net Interest Income – Net interest income increased $2.8 million, or 26.2%. The Company’s net interest margin increased to 2.54% as compared to 2.30% in the same period last year. The increase in net interest income was largely driven by a 12.9% increase in average interest-earning assets, specifically an increase in average loans, excluding PPP loans, of 21.8%. The increase in the net interest margin was driven by an improved mix of interest-earning assets with an increase in average loans, combined with a rise in market interest rates which are favorable for the Company over the long-term as average interest-earning assets for the second quarter of 2022 of $2.22 billion greatly exceeded average interest-bearing liabilities of $605.8 million.

Provision for Credit Losses - The provision for credit losses was $70,000 during the second quarter of 2022 as compared to a release of credit losses of $610,000 in the second quarter of 2021. The provision for the second quarter of 2022 was primarily driven by external economic factors, including the reduction in the forecast of Gross Domestic Product (GDP). Credit quality remains strong with no charge-offs or non-performing loans.

Operating Expenses - Consolidated operating expenses rose $3.8 million, or 12.9%. Personnel expense increased $3.2 million, or 13.8%, due to an increase in base salaries, an increase in stock compensation and profit sharing of $1.0 million and $346,000, respectively, due to improved Company earnings, and strategic investment in various technology initiatives, including improved rating engine capabilities and investment in optical character recognition, artificial intelligence, machine learning and other processes to consume images and produce data.

Loans - Average loans increased $72.3 million, or 8.0%. Excluding the reduction in average PPP loans of $102.2 million, average loans increased $174.4 million, or 21.8%. The Company has been successful in achieving organic growth in its franchise, faith-based and other commercial and industrial loans. When compared to December 31, 2021, ending loans, excluding PPP loans, increased $4.2 million, or 0.4%, during the first six months of 2022.

Payments in Advance of Funding – Average payments in advance of funding increased $95.3 million, or 48.2%, primarily due to an increase in transportation dollar volumes.

Deposits – Average deposits increased $212.9 million, or 20.9%. The Company continues to experience robust deposit growth.

Accounts and Drafts Payable - Average accounts and drafts payable increased $187.5 million, or 19.8%. The increase in these balances, which are non-interest bearing, are primarily reflective of the increase in transportation and facility expense dollar volumes.

Transportation Dollar Volumes – Transportation dollar volumes hit a record level of $11.4 billion during the second quarter of 2022. The 27.7% increase in dollar volumes was largely due to inflationary pressures, supply chain disruptions and fuel surcharges, among other factors. The increase in dollar volumes is positively impacting the balance of our interest-earning assets which is helping generate interest income. In addition, higher dollar volumes are having a positive impact on financial fees.

Facility Expense Dollar Volumes – Facility dollar volumes totaled $4.6 billion during the second quarter of 2022. The 24.9% increase in dollar volumes was largely due to an increase in energy prices.

Liquidity - The Company continues to maintain significant liquidity, with average short-term investments of $450.9 million during the second quarter of 2022.

Capital - The Company’s common equity tier 1, total risk-based capital and leverage ratios were 13.47%, 14.21% and 8.85% at June 30, 2022, respectively. Total shareholders’ equity has declined $40.2 million since December 31, 2021 primarily as a result of an increase in accumulated other comprehensive loss due to the rise in market interest rates and resulting negative impact on the fair value of available-for-sale investment securities.

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 $80 billion annually on behalf of clients, and with total assets in excess of $2.4 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.

Note to Investors

Certain matters set forth in this news release may contain forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. However, such performance involves risks and uncertainties that may cause actual results to differ materially from those in such statements. These risks and uncertainties include the impact of the COVID-19 pandemic as well as 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. 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
June 30, 2022

Quarter
Ended
March 31, 2022

Quarter
Ended
June 30, 2021

Six-Months
Ended
June 30, 2022

Six-Months
Ended
June 30, 2021

Processing fees

$

19,326

$

19,036

$

19,048

$

38,362

$

37,423

Financial fees

10,623

10,532

7,500

21,155

14,497

Net interest income

13,641

11,903

10,811

25,544

21,156

(Provision for) release of credit losses

(70

)

(230

)

610

(300

)

1,210

Other

702

862

439

1,564

1,242

Total revenues

$

44,222

$

42,103

$

38,408

$

86,325

$

75,528

Personnel

$

26,033

$

24,718

$

22,880

$

50,751

$

45,406

Occupancy

916

915

959

1,831

1,906

Equipment

1,660

1,711

1,653

3,371

3,328

Other

5,030

4,484

4,311

9,514

7,688

Total operating expenses

$

33,639

$

31,828

$

29,803

$

65,467

$

58,328

Income from operations before income taxes

$

10,583

$

10,275

$

8,605

$

20,858

$

17,200

Income tax expense

2,021

2,017

1,579

4,038

3,103

Net income

$

8,562

$

8,258

$

7,026

$

16,820

$

14,097

Basic earnings per share

$

.63

$

.61

$

.49

$

1.24

$

.99

Diluted earnings per share

$

.62

$

.60

$

.48

$

1.22

$

.97

Share data:

Weighted-average common shares outstanding

13,543

13,578

14,267

13,560

14,286

Weighted-average common shares outstanding assuming dilution

13,802

13,814

14,510

13,808

14,526

Consolidated Balance Sheets

($ in thousands)

(unaudited)
June 30, 2022

(unaudited)
March 31, 2022

December 31,
2021

Assets:

Cash and cash equivalents

$

261,234

$

191,449

$

514,928

Investment securities

740,074

774,610

673,453

Loans, excluding PPP loans

958,491

975,829

954,268

PPP loans

996

1,373

6,299

Allowance for credit losses

(12,573

)

(12,406

)

(12,041

)

Payments in advance of funding

313,172

329,622

291,427

Premises and equipment, net

19,470

19,086

18,113

Investments in bank-owned life insurance

47,435

47,163

43,176

Goodwill and other intangible assets

21,825

16,691

16,826

Other assets

93,864

78,626

48,452

Total assets

$

2,443,988

$

2,422,043

$

2,554,901

Liabilities and shareholders’ equity:

Deposits

Non-interest bearing

$

604,492

$

621,819

$

582,642

Interest bearing

585,083

555,116

638,861

Total deposits

1,189,575

1,176,935

1,221,503

Accounts and drafts payable

998,870

989,733

1,050,396

Other liabilities

49,929

38,297

37,204

Total liabilities

$

2,238,374

$

2,204,965

$

2,309,103

Shareholders’ equity:

Common stock

$

7,753

$

7,753

$

7,753

Additional paid-in capital

204,482

203,149

204,276

Retained earnings

121,386

116,646

112,220

Common shares in treasury, at cost

(81,742

)

(82,348

)

(78,904

)

Accumulated other comprehensive (loss) income

(46,265

)

(28,122

)

453

Total shareholders’ equity

$

205,614

$

217,078

$

245,798

Total liabilities and shareholders’ equity

$

2,443,988

$

2,422,043

$

2,554,901

Average Balances (unaudited)

($ in thousands)

Quarter
Ended
June 30, 2022

Quarter
Ended
March 31, 2022

Quarter
Ended
June 30, 2021

Six-Months
Ended
June 30, 2022

Six-Months
Ended
June 30, 2021

Average interest-earning assets

$

2,222,655

$

2,122,915

$

1,968,646

$

2,173,060

$

1,930,235

Average loans, excluding PPP loans

972,756

956,913

798,329

964,879

783,181

Average PPP loans

1,115

2,938

103,290

2,021

108,296

Average payments in advance of funding

293,150

279,479

197,855

286,352

187,632

Average assets

2,616,220

2,528,263

2,278,402

2,572,485

2,231,744

Average deposits

1,229,744

1,167,121

1,016,806

1,198,606

993,950

Average accounts and drafts payable

1,135,504

1,088,105

947,987

1,111,935

923,320

Average shareholders’ equity

$

207,828

$

235,720

$

260,117

$

221,697

$

259,410

Consolidated Financial Highlights (unaudited)

($ and numbers in thousands, except ratios)

Quarter
Ended
June 30, 2022

Quarter
Ended
March 31, 2022

Quarter
Ended
June 30, 2021

Six-Months
Ended
June 30, 2022

Six-Months
Ended
June 30, 2021

Return on average equity

16.53

%

14.21

%

10.83

%

15.30

%

10.96

%

Net interest margin

2.54

%

2.36

%

2.30

%

2.45

%

2.31

%

Allowance for credit losses to loans

1.31

%

1.27

%

1.28

%

1.31

%

1.28

%

Non-performing loans to total loans

%

%

%

%

%

Net loan charge-offs (recoveries) to loans

%

%

%

%

%

Transportation invoice volume

9,289

8,958

9,461

18,247

18,248

Transportation dollar volume

$

11,413,414

$

10,855,180

$

8,940,889

$

22,268,594

$

16,845,528

Facility expense transaction volume

6,557

6,641

6,827

13,198

13,823

Facility expense dollar volume

$

4,570,178

$

4,643,942

$

3,657,965

$

9,214,120

$

7,375,393

View source version on businesswire.com: https://www.businesswire.com/news/home/20220714005138/en/

Contacts

Kenn Entringer
Casey Communications, Inc.
(314) 721-2828
kentringer@caseycomm.com