Cass Information Systems reports Second Quarter 2024 Results
Cass Information Systems (Nasdaq: CASS) reported Q2 2024 earnings of $0.32 per diluted share, down from $0.52 in Q2 2023. Net income was $4.5 million, compared to $7.1 million in Q2 2023. Key highlights:
- Facility expense transaction volumes increased 25.1%
- Processing fee growth of 8.9%
- Transportation dollar volumes decreased 6.5% to $9.1 billion
- Net interest income decreased 0.5%
- Provision for credit losses of $400,000
The company faced challenges including the loss of over $100 million in non-interest bearing funding due to a client's cyber event and $3.4 million in one-time expenses. However, Cass successfully onboarded new facility clients and launched new initiatives in transportation and waste management.
- Facility expense transaction volumes increased by 25.1% year-over-year
- Processing fees grew by 8.9% compared to Q2 2023
- Net interest margin improved to 3.32% from 3.25% in Q2 2023
- Loans increased by $25.0 million (2.4%) compared to March 31, 2024
- Maintained exceptional credit quality with no non-performing loans or charge-offs
- Earnings per diluted share decreased to $0.32 from $0.52 in Q2 2023
- Net income declined to $4.5 million from $7.1 million in Q2 2023
- Transportation dollar volumes decreased by 6.5% year-over-year
- Financial fees decreased by $1.0 million (8.9%) due to decline in transportation dollar volumes
- Loss of over $100 million in non-interest bearing funding due to a client's cyber event
- Incurred $3.4 million in one-time expenses
Net income for Cass Information Systems significantly dropped to
The return on average equity (ROE) at
Processing fee growth of
Overall, while there are some bright spots in the performance figures, the significant drop in net income and EPS, combined with increased expenses and operational challenges, indicate that the company is struggling to maintain its previous levels of profitability. Investors should keep a close eye on how the company manages these issues moving forward.
The transportation and facility expense volumes provide important insights into Cass's core operations. While facility expense dollar volumes increased by
However, the decrease in transportation volumes is indicative of macroeconomic challenges, such as the freight recession. This downturn also negatively impacts financial fees, highlighting the interconnected nature of Cass's revenue streams. The launch of new solutions like their working capital solution for shippers and carriers may help mitigate these declines, but the impact will need to be closely monitored.
The company's strategy to focus on signed client implementations and convert pipeline opportunities into signed deals is a positive move. It shows a proactive approach to drive revenue growth despite current challenges. The partnership with FreightWaves SONAR for supply chain intelligence further enhances Cass's service offerings, potentially bolstering their market position.
In essence, while the company faces certain operational challenges, its strategic initiatives and new partnerships could provide avenues for recovery and growth. Investors should watch how effectively these strategies are executed in the coming quarters.
Cass's performance in the financial fees and net interest income segments provides a deep dive into the company's revenue generation mechanisms. The decrease in financial fees by
The loss of $100 million due to a cyber event is a significant blow and highlights the vulnerabilities in digital financial operations. Cybersecurity remains a growing concern in the financial sector and this event underscores the importance of robust security measures.
Additionally, the provision for credit losses of
Cass's net interest margin improvement to
The termination of the noncontributory defined-benefit pension plan is a strategic move to reduce long-term liabilities, though it incurs a one-time expense. This decision will lower operating expenses annually, aligning with the company's goal to reduce costs and improve efficiency.
Overall, while Cass is facing immediate challenges, its efforts to streamline operations and enhance financial stability through strategic adjustments are steps in the right direction. Investors should remain cognizant of the potential for short-term volatility but consider the long-term benefits of these strategies.
Second Quarter Results
(All comparisons refer to the second quarter of 2023, except as noted)
-
Net income of
, or$4.5 million per diluted common share.$0.32 -
Return on average equity and assets of
8.01% and0.78% , respectively. -
Increase in facility expense transaction volumes of
25.1% . -
Processing fee growth of
8.9% . - Maintained exceptional credit quality, with no non-performing loans or charge-offs.
Martin Resch, the Company’s President and Chief Executive Officer, noted, “The first half of 2024 has been both exciting and disappointing. We successfully onboarded several large facility clients, increasing year over year facilities transactions by
Second 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 improved to
Provision for Credit Losses - The Company recorded a provision of credit losses of
Personnel Expenses - Personnel expenses increased
Also, on July 16, 2024, the Company approved an Amendment providing for the termination of its noncontributory defined-benefit pension plan. The Company expects to record one-time termination expenses of approximately
Non-Personnel Expenses - Non-personnel expenses increased
Loans - When compared to March 31, 2024, 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 increased
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
|
|
Six-Months
|
|
Six-Months
|
||||||||||
Processing fees |
$ |
21,103 |
|
|
$ |
21,253 |
|
|
$ |
19,386 |
|
|
$ |
42,356 |
|
|
$ |
38,899 |
|
Financial fees |
|
10,628 |
|
|
|
10,777 |
|
|
|
11,662 |
|
|
|
21,405 |
|
|
|
22,921 |
|
Total fee revenue |
$ |
31,731 |
|
|
$ |
32,030 |
|
|
$ |
31,048 |
|
|
$ |
63,761 |
|
|
$ |
61,820 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest and fees on loans |
|
13,592 |
|
|
|
12,776 |
|
|
|
12,931 |
|
|
|
26,368 |
|
|
|
25,166 |
|
Interest and dividends on securities |
|
4,383 |
|
|
|
4,437 |
|
|
|
4,677 |
|
|
|
8,820 |
|
|
|
9,471 |
|
Interest on federal funds sold and other short-term investments |
|
3,267 |
|
|
|
4,441 |
|
|
|
2,100 |
|
|
|
7,708 |
|
|
|
5,213 |
|
Total interest income |
$ |
21,242 |
|
|
$ |
21,654 |
|
|
$ |
19,708 |
|
|
$ |
42,896 |
|
|
$ |
39,850 |
|
Interest expense |
|
5,312 |
|
|
|
5,178 |
|
|
|
3,694 |
|
|
|
10,490 |
|
|
|
6,938 |
|
Net interest income |
$ |
15,930 |
|
|
$ |
16,476 |
|
|
$ |
16,014 |
|
|
$ |
32,406 |
|
|
$ |
32,912 |
|
(Provision for) release of credit losses |
|
(400 |
) |
|
|
(95 |
) |
|
|
120 |
|
|
|
(495 |
) |
|
|
460 |
|
Loss on sale of investment securities |
|
(13 |
) |
|
|
— |
|
|
|
(199 |
) |
|
|
(13 |
) |
|
|
(160 |
) |
Other |
|
1,342 |
|
|
|
1,267 |
|
|
|
1,224 |
|
|
|
2,609 |
|
|
|
2,520 |
|
Total revenues |
$ |
48,590 |
|
|
$ |
49,678 |
|
|
$ |
48,207 |
|
|
$ |
98,268 |
|
|
$ |
97,552 |
|
Salaries and commissions |
|
24,259 |
|
|
|
23,976 |
|
|
|
23,617 |
|
|
|
48,235 |
|
|
|
46,222 |
|
Share-based compensation |
|
474 |
|
|
|
1,226 |
|
|
|
909 |
|
|
|
1,700 |
|
|
|
2,858 |
|
Other benefits |
|
5,124 |
|
|
|
5,405 |
|
|
|
4,906 |
|
|
|
10,529 |
|
|
|
10,378 |
|
Total personnel expenses |
$ |
29,857 |
|
|
$ |
30,607 |
|
|
$ |
29,432 |
|
|
$ |
60,464 |
|
|
$ |
59,458 |
|
Occupancy |
|
826 |
|
|
|
861 |
|
|
|
907 |
|
|
|
1,687 |
|
|
|
1,762 |
|
Equipment |
|
1,988 |
|
|
|
1,881 |
|
|
|
1,749 |
|
|
|
3,869 |
|
|
|
3,399 |
|
Other |
|
10,122 |
|
|
|
7,322 |
|
|
|
7,251 |
|
|
|
17,444 |
|
|
|
15,092 |
|
Total operating expenses |
$ |
42,793 |
|
|
$ |
40,671 |
|
|
$ |
39,339 |
|
|
$ |
83,464 |
|
|
$ |
79,711 |
|
Income from operations before income taxes |
$ |
5,797 |
|
|
$ |
9,007 |
|
|
$ |
8,868 |
|
|
$ |
14,804 |
|
|
$ |
17,841 |
|
Income tax expense |
|
1,313 |
|
|
|
1,855 |
|
|
|
1,730 |
|
|
|
3,168 |
|
|
|
3,586 |
|
Net income |
$ |
4,484 |
|
|
$ |
7,152 |
|
|
$ |
7,138 |
|
|
$ |
11,636 |
|
|
$ |
14,255 |
|
Basic earnings per share |
$ |
.33 |
|
|
$ |
.53 |
|
|
$ |
.53 |
|
|
$ |
.86 |
|
|
$ |
1.05 |
|
Diluted earnings per share |
$ |
.32 |
|
|
$ |
.52 |
|
|
$ |
.52 |
|
|
$ |
.84 |
|
|
$ |
1.03 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Share data: |
|
|
|
|
|
|
|
|
|
||||||||||
Weighted-average common shares outstanding |
|
13,538 |
|
|
|
13,530 |
|
|
|
13,553 |
|
|
|
13,534 |
|
|
|
13,576 |
|
Weighted-average common shares outstanding assuming dilution |
|
13,822 |
|
|
|
13,785 |
|
|
|
13,854 |
|
|
|
13,804 |
|
|
|
13,859 |
|
Consolidated Balance Sheets |
|||||||||||
|
|||||||||||
($ in thousands) |
|||||||||||
|
(unaudited)
|
|
(unaudited)
|
|
December 31,
|
||||||
Assets: |
|
|
|
|
|
||||||
Cash and cash equivalents |
$ |
223,727 |
|
|
$ |
192,803 |
|
|
$ |
372,468 |
|
Securities available-for-sale, at fair value |
|
540,802 |
|
|
|
621,929 |
|
|
|
627,117 |
|
Loans |
|
1,061,991 |
|
|
|
1,036,997 |
|
|
|
1,014,318 |
|
Less: Allowance for credit losses |
|
(13,633 |
) |
|
|
(13,299 |
) |
|
|
(13,089 |
) |
Loans, net |
$ |
1,048,358 |
|
|
$ |
1,023,698 |
|
|
$ |
1,001,229 |
|
Payments in advance of funding |
|
214,581 |
|
|
|
221,552 |
|
|
|
198,861 |
|
Premises and equipment, net |
|
33,469 |
|
|
|
32,613 |
|
|
|
30,093 |
|
Investments in bank-owned life insurance |
|
49,840 |
|
|
|
49,496 |
|
|
|
49,159 |
|
Goodwill and other intangible assets |
|
20,281 |
|
|
|
20,463 |
|
|
|
20,654 |
|
Accounts and drafts receivable from customers |
|
78,407 |
|
|
|
32,856 |
|
|
|
110,651 |
|
Other assets |
|
73,131 |
|
|
|
98,169 |
|
|
|
68,390 |
|
Total assets |
$ |
2,282,596 |
|
|
$ |
2,293,579 |
|
|
$ |
2,478,622 |
|
|
|
|
|
|
|
||||||
Liabilities and shareholders’ equity: |
|
|
|
|
|
||||||
Deposits |
|
|
|
|
|
||||||
Non-interest bearing |
$ |
372,031 |
|
|
$ |
412,879 |
|
|
$ |
524,359 |
|
Interest-bearing |
|
640,315 |
|
|
|
666,213 |
|
|
|
616,455 |
|
Total deposits |
$ |
1,012,346 |
|
|
$ |
1,079,092 |
|
|
$ |
1,140,814 |
|
Accounts and drafts payable |
|
996,832 |
|
|
|
944,793 |
|
|
|
1,071,369 |
|
Other liabilities |
|
43,493 |
|
|
|
40,207 |
|
|
|
36,630 |
|
Total liabilities |
$ |
2,052,671 |
|
|
$ |
2,064,092 |
|
|
$ |
2,248,813 |
|
|
|
|
|
|
|
||||||
Shareholders’ equity: |
|
|
|
|
|
||||||
Common stock |
$ |
7,753 |
|
|
$ |
7,753 |
|
|
$ |
7,753 |
|
Additional paid-in capital |
|
204,128 |
|
|
|
204,361 |
|
|
|
208,007 |
|
Retained earnings |
|
149,236 |
|
|
|
148,845 |
|
|
|
145,782 |
|
Common shares in treasury, at cost |
|
(81,554 |
) |
|
|
(82,316 |
) |
|
|
(84,264 |
) |
Accumulated other comprehensive loss |
|
(49,638 |
) |
|
|
(49,156 |
) |
|
|
(47,469 |
) |
Total shareholders’ equity |
$ |
229,925 |
|
|
$ |
229,487 |
|
|
$ |
229,809 |
|
Total liabilities and shareholders’ equity |
$ |
2,282,596 |
|
|
$ |
2,293,579 |
|
|
$ |
2,478,622 |
|
Average Balances (unaudited) |
||||||||||||||
|
||||||||||||||
($ in thousands) |
||||||||||||||
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Six-Months
|
|
Six-Months
|
|||||
Average interest-earning assets |
$ |
1,958,427 |
|
$ |
2,063,239 |
|
$ |
2,010,771 |
|
$ |
2,010,833 |
|
$ |
2,086,333 |
Average loans |
|
1,039,461 |
|
|
1,016,246 |
|
|
1,075,891 |
|
|
1,027,854 |
|
|
1,076,055 |
Average securities available-for-sale |
|
589,480 |
|
|
635,422 |
|
|
686,777 |
|
|
612,451 |
|
|
705,703 |
Average short-term investments |
|
265,291 |
|
|
352,163 |
|
|
185,230 |
|
|
308,727 |
|
|
239,886 |
Average payments in advance of funding |
|
213,185 |
|
|
194,338 |
|
|
254,869 |
|
|
203,761 |
|
|
247,918 |
Average assets |
|
2,308,045 |
|
|
2,381,582 |
|
|
2,370,359 |
|
|
2,344,813 |
|
|
2,434,494 |
Average non-interest bearing deposits |
|
407,079 |
|
|
447,900 |
|
|
552,718 |
|
|
427,489 |
|
|
553,178 |
Average interest-bearing deposits |
|
638,328 |
|
|
631,622 |
|
|
509,319 |
|
|
634,975 |
|
|
549,985 |
Average borrowings |
|
11 |
|
|
11 |
|
|
3,199 |
|
|
11 |
|
|
4,509 |
Average interest-bearing liabilities |
|
638,339 |
|
|
631,633 |
|
|
512,518 |
|
|
634,986 |
|
|
554,494 |
Average accounts and drafts payable |
|
996,944 |
|
|
1,035,833 |
|
|
1,049,281 |
|
|
1,016,388 |
|
|
1,072,105 |
Average shareholders’ equity |
$ |
225,265 |
|
$ |
226,669 |
|
$ |
214,066 |
|
$ |
225,967 |
|
$ |
211,940 |
Consolidated Financial Highlights (unaudited) |
|||||||||||||||||||
|
|||||||||||||||||||
($ and numbers in thousands, except ratios) |
|||||||||||||||||||
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Six-Months
|
|
Six-Months
|
||||||||||
Return on average equity |
|
8.01 |
% |
|
|
12.66 |
% |
|
|
13.37 |
% |
|
|
10.36 |
% |
|
|
13.56 |
% |
Return on average assets |
|
0.78 |
% |
|
|
1.20 |
% |
|
|
1.21 |
% |
|
|
1.00 |
% |
|
|
1.18 |
% |
Net interest margin (1) |
|
3.32 |
% |
|
|
3.26 |
% |
|
|
3.25 |
% |
|
|
3.29 |
% |
|
|
3.24 |
% |
Average interest-earning assets yield (1) |
|
4.41 |
% |
|
|
4.27 |
% |
|
|
3.98 |
% |
|
|
4.34 |
% |
|
|
3.91 |
% |
Average loan yield |
|
5.26 |
% |
|
|
5.06 |
% |
|
|
4.82 |
% |
|
|
5.16 |
% |
|
|
4.72 |
% |
Average investment securities yield (1) |
|
2.84 |
% |
|
|
2.71 |
% |
|
|
2.64 |
% |
|
|
2.77 |
% |
|
|
2.63 |
% |
Average short-term investment yield |
|
4.95 |
% |
|
|
5.07 |
% |
|
|
4.55 |
% |
|
|
5.02 |
% |
|
|
4.38 |
% |
Average cost of total deposits |
|
2.04 |
% |
|
|
1.93 |
% |
|
|
1.38 |
% |
|
|
1.99 |
% |
|
|
1.25 |
% |
Average cost of interest-bearing deposits |
|
3.35 |
% |
|
|
3.30 |
% |
|
|
2.88 |
% |
|
|
3.32 |
% |
|
|
2.50 |
% |
Average cost of interest-bearing liabilities |
|
3.35 |
% |
|
|
3.30 |
% |
|
|
2.89 |
% |
|
|
3.32 |
% |
|
|
2.52 |
% |
Allowance for credit losses to loans |
|
1.28 |
% |
|
|
1.28 |
% |
|
|
1.25 |
% |
|
|
1.28 |
% |
|
|
1.25 |
% |
Non-performing loans to total loans |
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
Net loan charge-offs (recoveries) to loans |
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
Common equity tier 1 ratio |
|
14.32 |
% |
|
|
14.84 |
% |
|
|
13.66 |
% |
|
|
14.32 |
% |
|
|
13.66 |
% |
Total risk-based capital ratio |
|
15.08 |
% |
|
|
15.60 |
% |
|
|
14.39 |
% |
|
|
15.08 |
% |
|
|
14.39 |
% |
Leverage ratio |
|
11.32 |
% |
|
|
10.92 |
% |
|
|
10.65 |
% |
|
|
11.32 |
% |
|
|
10.65 |
% |
(1) Yields are presented on tax-equivalent basis assuming a tax rate of |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Transportation invoice volume |
|
8,879 |
|
|
|
8,771 |
|
|
|
9,193 |
|
|
|
17,649 |
|
|
|
18,291 |
|
Transportation dollar volume |
$ |
9,081,343 |
|
|
$ |
8,939,646 |
|
|
$ |
9,711,801 |
|
|
$ |
18,020,989 |
|
|
$ |
19,980,252 |
|
Facility expense transaction volume |
|
4,337 |
|
|
|
4,264 |
|
|
|
3,467 |
|
|
|
8,601 |
|
|
|
6,935 |
|
Facility expense dollar volume |
$ |
5,039,283 |
|
|
$ |
5,329,566 |
|
|
$ |
4,578,490 |
|
|
$ |
10,368,848 |
|
|
$ |
9,891,875 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240718609271/en/
Cass Investor Relations
ir@cassinfo.com
Source: Cass Information Systems, Inc.
FAQ
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