Cass Information Systems Reports First Quarter 2024 Results
- 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%
- Maintained exceptional credit quality, with no non-performing loans or charge-offs
- Transportation dollar volumes decreased by 12.9%
- Processing fees increased by 8.9%
- Financial fees decreased by 4.3%
- Net interest income decreased by 2.5%
- Personnel expenses increased by 1.9%
- Non-personnel expenses declined by 2.7%
- Ending loans increased by $22.7 million, or 2.2%
- Average deposits decreased by $65.2 million, or 5.7%
- Average accounts and drafts payable decreased by $59.3 million, or 5.4%
- Total shareholders’ equity decreased by $322,000
- Transportation dollar volumes decreased by 12.9%
- Financial fees decreased by 4.3%
- Net interest income decreased by 2.5%
- Average deposits decreased by $65.2 million, or 5.7%
- Average accounts and drafts payable decreased by $59.3 million, or 5.4%
- Total shareholders’ equity decreased by $322,000
Insights
The reported net income for Cass Information Systems demonstrates a marginal year-over-year increase, which suggests the company is maintaining profitability despite economic challenges, including a freight recession. The notable increase in facility expense transaction volumes against the backdrop of limited operating expense growth indicates operational leverage and efficient scalability in their business model. This cost-control is commendable in the current economic climate and suggests management effectiveness in handling expenses.
However, the decline in transportation dollar volumes is concerning as it reflects the direct impact of the broader economic downturn on the company's core business. With transportation volumes being a key revenue driver, any sustained downturn in this sector could adversely impact future earnings. Investors should monitor this metric closely, as it could signal trends that might affect the company's performance.
From the details provided, the company's shift to higher deposit rates to counter deposit attrition signals a response to competitive pressures in the banking industry. While this may help in retaining and attracting clients, it could also compress net interest margin over time if interest rates continue to rise. Strategic decisions like these reflect a proactive management stance but come with potential trade-offs that could impact the bottom line.
The provision for credit losses, albeit modestly increased, should be a focal point for investors as it provides insights into management's expectations for credit quality and potential defaults. It's positive to note there were no non-performing loans or charge-offs, which indicates strong credit quality amidst economic uncertainty. Strategic growth in the commercial and industrial loan portfolio warrants attention to ensure that credit quality does not deteriorate as the loan book expands.
In light of the cyber event impacting CassPay, investors should seek clarity on the company's cyber risk mitigation strategies and the potential financial implications of such events. Cybersecurity is increasingly becoming a critical factor in evaluating a company's risk profile, especially for firms handling significant transaction volumes and financial data.
The increase in the number of facility clients indicates successful market penetration and possibly an effective sales strategy. However, the company's performance is not isolated from external market forces, as evidenced by the impact of lower energy prices and the freight recession on revenues. Investors could benefit from deeper insights into the company's business diversification strategies to assess how well-positioned Cass Information Systems is to navigate sector-specific downturns.
Furthermore, the mention of robust new business pipelines suggests potential future growth, an aspect that could be underpinned by the aforementioned technology platform upgrades. This hints at an investment in infrastructure that could facilitate efficiency and support expansion, aligning with long-term growth objectives. Nonetheless, the actual conversion of these pipelines into revenue-generating clients will be key to realizing the benefits of such strategic investments.
First Quarter Results
(All comparisons refer to the first quarter of 2023, except as noted)
-
Net income of
$7.2 million $0.52 -
Return on average equity and assets of
12.66% and1.20% , 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.
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
First Quarter 2024 Highlights
Transportation Dollar Volumes – Transportation dollar volumes were
Facility Expense Dollar Volumes – Facility expense dollar volumes totaled
Processing Fees – Processing fees increased
Financial Fees – Financial fees, earned on a transactional level basis for invoice payment services when making customer payments, decreased
Net Interest Income – Net interest income decreased
The Company’s net interest margin declined 4 basis points as compared to
Provision for Credit Losses - The Company recorded a provision of credit losses of
Personnel Expenses - Personnel expenses increased
Non-Personnel Expenses - Non-personnel expenses declined
Loans - When compared to December 31, 2023, ending loans increased
Payments in Advance of Funding – Average payments in advance of funding decreased
Deposits – Average deposits decreased
Accounts and Drafts Payable - Average accounts and drafts payable decreased
Shareholders’ Equity - Total shareholders’ equity has decreased
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
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
|
|
Quarter
|
|
Quarter
|
|||||
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)
|
|
December 31, 2023 |
|
(unaudited)
|
||||||
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
|
|
Quarter
|
|
Quarter
|
|||
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
|
|
Quarter
|
|
Quarter
|
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 |
|||||
|
|
|
|
|
|
Transportation invoice volume |
8,771 |
|
8,733 |
|
9,098 |
Transportation dollar volume |
|
|
|
|
|
Facility expense transaction volume |
4,264 |
|
3,505 |
|
3,468 |
Facility expense dollar volume |
|
|
|
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240418079671/en/
Cass Investor Relations
ir@cassinfo.com
Source: Cass Information Systems, Inc.
FAQ
What was Cass Information Systems' net income for the first quarter of 2024?
How did Cass Information Systems' transportation dollar volumes change in the first quarter of 2024?
What was the percentage increase in facility expense transaction volumes for Cass Information Systems in the first quarter of 2024?
Did Cass Information Systems maintain exceptional credit quality in the first quarter of 2024?
How did Cass Information Systems' processing fees change in the first quarter of 2024?
