Cass Information Systems Inc 10-Q for FY2021 Q1

Cass Information Systems Inc (CASS)

10-Q 2021-05-06 For: 2021-03-31

Added on April 06, 2026

About this 10-Q

Cass Information Systems Inc filed this 10-Q on May 6, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $37.12M; down 2.7% from $38.14M a year earlier
Net income: $7.07M; down 6.3% from net income of $7.55M a year earlier
Diluted EPS: $0.49; down 5.8% from $0.52 a year earlier

(In thousands)	Number of Loans	Pre-Modification Outstanding Balance
Commercial and industrial	1	$	8,773	$	8,773
Faith-based real estate	1		1,029		1,029
Total	2	$	9,802	$	9,802

	Amount of Commitment Expiration per Period
Time deposits	$	55,536		$	41,390		$	14,098		$	48		$	—


Balance at December 31, 2020	136,167	$	46.78
Granted	39,686		40.63
Vested	(21,364)		48.62
Balance at March 31, 2021	154,489	$	44.91


Balance at December 31, 2020	98,410	$	50.64
Granted	52,240		40.74
Vested	(31,451)		48.63
Balance at March 31, 2021	119,199	$	46.79

	Shares	Weighted- Average Exercise Price
Balance at December 31, 2020	144,999	$	32.99	1.95	$	1,095
Exercised	(20,560)		24.12	─		─
Exercisable at March 31, 2021	124,439	$	34.46	1.92	$	1,483

(In thousands)	Estimated 2021		Actual 2020
Service cost – benefits earned during the year	$	963		$	4,329
Interest cost on projected benefit obligations		3,069			3,908
Expected return on plan assets		(6,299)			(6,049)
Net amortization		360			1,946
Net periodic pension (benefit) cost	$	(1,907	)	$	4,134

(In thousands)	Estimated 2021
Service cost – benefits earned during the year	$	147	$	121
Interest cost on projected benefit obligation		291		347
Net amortization		203		112
Net periodic pension cost	$	641	$	580

	March 31, 2021
State and political subdivisions	$	312,479	$	15,678	$	174	$	327,983
U.S. government agencies		99,349		623		711		99,261
Total	$	411,828	$	16,301	$	885	$	427,244

	December 31, 2020
State and political subdivisions	$	287,059	$	18,915	$	─	$	305,974
U.S. government agencies		50,988		764		─		51,752
Total	$	338,047	$	19,679	$	─	$	357,726

	March 31, 2021
State and political subdivisions	$	36,423	$	174	$	─	$	─	$	36,423	$	174
U.S. government agencies		60,491		711		─		─		60,491		711
Total	$	96,914	$	885	$	─	$	─	$	96,914	$	885

	March 31, 2021
Due in 1 year or less	$	70,415	$	70,697
Due after 1 year through 5 years		89,351		93,669
Due after 5 years through 10 years		161,771		173,009
Due after 10 years		90,291		89,869
Total	$	411,828	$	427,244

(In thousands)	March 31, 2021
Lease payments due
Less than 1 year	$	1,711
1-2 years		1,558
2-3 years		628
3-4 years		507
4-5 years		517
Over 5 years		1,891
Total undiscounted cash flows		6,812
Discount on cash flows		1,013
Total lease liability	$	5,799

	First Quarter of
Net income	$	7,071		$	7,545		(6.3)%
Diluted earnings per share	$	.49		$	.52		(5.8)%
Return on average assets		1.31	%		1.70	%	—
Return on average equity		11.09	%		12.50	%	—

	First Quarter of
Transportation invoice volume		8,787		8,280	6.1%
Transportation invoice dollar volume	$	7,904,639	$	6,467,051	22.2%
Facility expense transaction volume*		6,996		6,509	7.5%
Facility expense dollar volume	$	3,717,428	$	3,458,646	7.5%
Payment and processing revenue	$	25,216	$	25,503	(1.1)%

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☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2021

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from __________ to __________

Missouri	43-1265338
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
12444 Powerscourt Drive, Suite 550 St. Louis, Missouri	63131
(Address of principal executive offices)	(Zip Code)

Title of each class		Trading symbols		Name of each exchange on which registered
Common stock, par value $.50		CASS		The Nasdaq Global Select Market

Large Accelerated Filer ☐	Accelerated Filer ☒

Non-Accelerated Filer ☐	Smaller Reporting Company ☐	Emerging Growth Company ☐

PART I – Financial Information
Item 1.FINANCIAL STATEMENTS
Consolidated Balance Sheets March 31, 2021 (unaudited) and December 31, 2020	3
Consolidated Statements of Income Three months ended March 31, 2021 and 2020 (unaudited)	4
Consolidated Statements of Comprehensive Income Three months ended March 31, 2021 and 2020 (unaudited)	5
Consolidated Statements of Cash Flows Three months ended March 31, 2021 and 2020 (unaudited)	6
Consolidated Statements of Shareholders’ Equity Three months ended March 31, 2021 and 2020 (unaudited)	7
Notes to Consolidated Financial Statements (unaudited)	8
Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	31
Item 4.CONTROLS AND PROCEDURES	31
PART II – Other Information – Items 1. – 6.	31
SIGNATURES	34

	March 31, 2021 (Unaudited)		December 31, 2020
Assets
Cash and due from banks	$	25,291	$	30,985
Interest-bearing deposits in other financial institutions		444,624		393,810
Federal funds sold and other short-term investments		129,744		245,733
Cash and cash equivalents		599,659		670,528
Securities available-for-sale, at fair value		427,244		357,726

Loans		888,575		891,676
Less: Allowance for credit losses		11,721		11,944
Loans, net		876,854		879,732
Payments in excess of funding		216,475		194,563
Premises and equipment, net		17,825		18,057
Investment in bank-owned life insurance		17,646		18,058
Goodwill		14,262		14,262
Other intangible assets, net		3,208		3,423
Other assets		43,400		46,886
Total assets	$	2,216,573	$	2,203,235

Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	424,859	$	493,504
Interest-bearing		578,276		557,352
Total deposits		1,003,135		1,050,856
Accounts and drafts payable		897,508		835,386
Other liabilities		56,443		55,833
Total liabilities		1,957,086		1,942,075

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; 40,000,000 shares authorized and 15,505,772 shares issued at March 31, 2021 and December 31, 2020		7,753		7,753
Additional paid-in capital		202,828		204,875
Retained earnings		102,247		99,062
Common shares in treasury, at cost (1,106,941 shares at March 31, 2021 and 1,113,103 shares at December 31, 2020)		(49,949)		(50,515)
Accumulated other comprehensive loss		(3,392)		(15)
Total shareholders’ equity		259,487		261,160
Total liabilities and shareholders’ equity	$	2,216,573	$	2,203,235

	Three Months Ended March 31,
	2021			2020
Fee Revenue and Other Income:
Information services payment and processing revenue	$	25,216		$	25,503
Bank service fees		494			410
Gains on sales of securities		48			1,069
Other		417			113
Total fee revenue and other income		26,175			27,095

Interest Income:
Interest and fees on loans		8,587			9,001
Interest and dividends on securities:
Taxable		198			560
Exempt from federal income taxes		1,739			1,819
Interest on federal funds sold and other short-term investments		152			958
Total interest income		10,676			12,338

Interest Expense:
Interest on deposits		331			963
Interest on short-term borrowings		─			2
Total interest expense		331			965
Net interest income		10,345			11,373
(Release of) provision for credit losses		(600	)		325
Net interest income after provision for credit losses		10,945			11,048
Total net revenue		37,120			38,143

Operating Expense:
Personnel		22,526			22,427
Occupancy		947			941
Equipment		1,675			1,635
Amortization of intangible assets		215			215
Other operating expense		3,162			3,711
Total operating expense		28,525			28,929
Income before income tax expense		8,595			9,214
Income tax expense		1,524			1,669
Net income	$	7,071		$	7,545

Basic earnings per share	$	.49		$	.52
Diluted earnings per share		.49			.52

(In thousands except per share data)	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance, December 31, 2019	$	7,753	$	205,397	$	90,341	$	(45,381)	$	(13,920)	$	244,190

Net income						7,545						7,545
Cash dividends ($.27 per share)						(3,918)						(3,918)
Issuance of 57,333 common shares pursuant to stock-based compensation plan, net				(2,075)				948				(1,127)
Exercise of SARs				(243)				141				(102)
Stock-based compensation expense				722								722
Purchase of 128,779 common shares								(5,508)				(5,508)
Other comprehensive loss										(519)		(519)
Balance, March 31, 2020	$	7,753	$	203,801	$	93,968	$	(49,800)	$	(14,439)	$	241,283


Balance, December 31, 2020	$	7,753	$	204,875	$	99,062	$	(50,515)	$	(15)	$	261,160

Net income						7,071						7,071
Cash dividends ($.27 per share)						(3,886)						(3,886)
Issuance of 69,374 common shares pursuant to stock-based compensation plan, net				(2,426)				1,596				(830)
Exercise of SARs				(314)				198				(116)
Stock-based compensation expense				693								693
Purchase of 31,256 common shares								(1,228)				(1,228)
Other comprehensive loss										(3,377)		(3,377)
Balance, March 31, 2021	$	7,753	$	202,828	$	102,247	$	(49,949)	$	(3,392)	$	259,487

	Three Months Ended March 31,
(In thousands except share and per share data)	2021		2020
Basic
Net income	$	7,071	$	7,545
Weighted-average common shares outstanding		14,312,260		14,422,813
Basic earnings per share	$	.49	$	.52

Diluted
Net income	$	7,071	$	7,545
Weighted-average common shares outstanding		14,312,260		14,422,813
Effect of dilutive restricted stock and stock appreciation rights		220,809		207,700
Weighted-average common shares outstanding assuming dilution		14,533,069		14,630,513
Diluted earnings per share	$	.49	$	.52

(In thousands)	Information Services		Banking Services		Corporate, Eliminations and Other		Total
Three Months Ended March 31, 2021
Fee income	$	24,977	$	638	$	560	$	26,175
Interest income*		5,509		5,751		(122)		11,138
Interest expense		—		331		—		331
Intersegment income (expense)		—		623		(623)		—
Tax-equivalized pre-tax income*		6,013		2,762		282		9,057
Goodwill		12,433		1,829		—		14,262
Other intangible assets, net		634		2,574		—		3,208
Total Assets		1,023,196		1,263,669		(70,292)		2,216,573
Funding Sources		837,852		849,177		—		1,687,029
Three Months Ended March 31, 2020
Fee income	$	25,440	$	615	$	1,040	$	27,095
Interest income*		4,707		7,284		831		12,822
Interest expense		—		965		—		965
Intersegment income (expense)		—		525		(525)		—
Tax-equivalized pre-tax income*		5,123		2,703		1,872		9,698
Goodwill		12,433		1,829		—		14,262
Other intangible assets, net		1,040		3,026		—		4,066
Total Assets		833,774		926,445		(28,237)		1,731,982
Funding Sources		677,829		611,135		—		1,288,964

	Performing						Nonperforming
(In thousands)	Current		30-59 Days		60-89 Days		90 Days and Over		Non- accrual		Total Loans
March 31, 2021
Commercial and industrial	$	302,747	$	—	$	—	$	—	$	—	$	302,747
Real estate
Commercial:
Mortgage		96,630		—		—		—		—		96,630
Construction		23,766		—		—		—		—		23,766
Faith-based:
Mortgage		331,153		—		—		—		—		331,153
Construction		20,800		—		—		—		—		20,800
PPP		113,474		—		—		—		—		113,474
Other		5		—		—		—		—		5
Total	$	888,575	$	—	$	—	$	—	$	—	$	888,575
December 31, 2020
Commercial and industrial	$	298,984	$	—	$	—	$	—	$	—	$	298,984
Real estate
Commercial:
Mortgage		100,419		—		—		—		—		100,419
Construction		25,090		—		—		—		—		25,090
Faith-based:
Mortgage		333,661		—		—		—		—		333,661
Construction		23,818		—		—		—		—		23,818
PPP		109,704		—		—		—		—		109,704
Total	$	891,676	$	—	$	—	$	—	$	—	$	891,676

(In thousands)	Loans Subject to Normal Monitoring¹		Performing Loans Subject to Special Monitoring²		Nonperforming Loans Subject to Special Monitoring²		Total Loans
March 31, 2021
Commercial and industrial	$	289,698	$	13,049	$	—	$	302,747
Real estate
Commercial:
Mortgage		95,305		1,325		—		96,630
Construction		23,766		—		—		23,766
Faith-based:
Mortgage		328,105		3,048		—		331,153
Construction		20,800		—		—		20,800
PPP		113,474		—		—		113,474
Other		5		—		—		5
Total	$	871,153	$	17,422	$	—	$	888,575
December 31, 2020
Commercial and industrial	$	284,882	$	14,102	$	—	$	298,984
Real estate
Commercial:
Mortgage		99,044		1,375		—		100,419
Construction		25,090		—		—		25,090
Faith-based:
Mortgage		330,554		3,107		—		333,661
Construction		23,818		—		—		23,818
PPP		109,704		—		—		109,704
Total	$	873,092	$	18,584	$	—	$	891,676

¹	Loans subject to normal monitoring involve borrowers of acceptable-to-strong credit quality and risk, who have the apparent ability to satisfy their loan obligations.
²	Loans subject to special monitoring possess some credit deficiency or potential weakness which requires a high level of management attention.

(In thousands)	C&I		CRE		Faith-based CRE		Construction		Total
Allowance for credit losses on loans:
Balance at December 31, 2020	$	4,635	$	1,175	$	5,717	$	417	$	11,944
Charge Offs		—		—		—		—		—
(Release of) provision for credit losses		54		(65)		(200)		(29)		(240)
Recoveries		2		—		15		—		17
Balance at March 31, 2021	$	4,691	$	1,110	$	5,532	$	388	$	11,721

(In thousands)	December 31, 2019		Charge- Offs		Recoveries		Provision		March 31, 2020
Commercial and industrial	$	4,874	$	—	$	7	$	213	$	5,094
Real estate
Commercial:
Mortgage		1,528		—		—		24		1,552
Construction		191		—		—		(41)		150
Faith-based:
Mortgage		3,842		—		1		106		3,949
Construction		121		—		—		23		144
Total	$	10,556	$	—	$	8	$	325	$	10,889

	Three Months Ended March 31,
	2021		2020
Comprehensive Income:
Net income	$	7,071	$	7,545
Other comprehensive (loss) income:
Net unrealized (loss) gain on securities available-for-sale		(4,214)		578
Tax effect		1,003		(138)
Reclassification adjustments for gains included in net income		(48)		(1,069)
Tax effect		11		254
Foreign currency translation adjustments		(129)		(144)
Total comprehensive income	$	3,694	$	7,026

	March 31, 2021				December 31, 2020
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Assets eligible for amortization:
Customer lists	$	4,778	$	(4,012)	$	4,778	$	(3,902)
Patents		72		(25)		72		(24)
Non-compete agreements		332		(332)		332		(332)
Software		2,844		(824)		2,844		(731)
Trade Name		190		(15)		190		(13)
Other		500		(300)		500		(291)
Unamortized intangible assets:
Goodwill¹		14,489		(227)		14,489		(227)
Total intangible assets	$	23,205	$	(5,735)	$	23,205	$	(5,520)

	Three Months Ended March 31, 2021
	Shares		Fair Value
Balance at December 31, 2020		136,167	$	46.78
Granted		39,686		40.63
Vested		(21,364)		48.62
Balance at March 31, 2021		154,489	$	44.91

	March 31, 2021
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State and political subdivisions	$	312,479	$	15,678	$	174	$	327,983
U.S. government agencies		99,349		623		711		99,261
Total	$	411,828	$	16,301	$	885	$	427,244

	March 31, 2021
	Less than 12 months				12 months or more				Total
(In thousands)	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
State and political subdivisions	$	36,423	$	174	$	─	$	─	$	36,423	$	174
U.S. government agencies		60,491		711		─		─		60,491		711
Total	$	96,914	$	885	$	─	$	─	$	96,914	$	885

	March 31, 2021
(In thousands)	Amortized Cost		Fair Value
Due in 1 year or less	$	70,415	$	70,697
Due after 1 year through 5 years		89,351		93,669
Due after 5 years through 10 years		161,771		173,009
Due after 10 years		90,291		89,869
Total	$	411,828	$	427,244

	For the Three Months Ended March 31,
(In thousands)	2021		2020
Fee revenue and other income
In-scope of FASB ASC 606
Invoice processing fees	$	19,064	$	19,124
Invoice payment fees		6,152		6,379
Information services payment and processing revenue		25,216		25,503
Bank service fees		494		410
Fee revenue (in-scope of FASB ASC 606)		25,710		25,913
Other income (out-of-scope of FASB ASC 606)		465		1,182
Total fee revenue and other income		26,175		27,095

	First Quarter of
(Dollars in thousands except per share data)	2021			2020			% Change
Net income	$	7,071		$	7,545		(6.3)%
Diluted earnings per share	$	.49		$	.52		(5.8)%
Return on average assets		1.31	%		1.70	%	—
Return on average equity		11.09	%		12.50	%	—

	First Quarter of 2021							First Quarter of 2020
(In thousands)	Average Balance			Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Assets¹
Earning assets
Loans²:
Taxable	$	881,222		$	8,587	3.95	%	$	799,502	$	9,001	4.53	%
Investment securities⁴:
Taxable		82,746			198	0.97			95,691		557	2.34
Tax-exempt³		288,386			2,201	3.10			297,044		2,303	3.12
Certificates of deposit		—			—	—			500		3	2.41
Interest-bearing deposits in other financial institutions		582,104			139	0.10			130,611		382	1.18
Federal funds sold and other short-term investments		56,937			13	0.09			164,525		576	1.41
Total earning assets		1,891,395			11,138	2.39			1,487,873		12,822	3.47
Non-earning assets
Cash and due from banks		20,344							17,351
Premises and equipment, net		18,070							20,295
Bank-owned life insurance		17,920							17,646
Goodwill and other intangibles		17,598							18,456
Other assets		231,196							226,568
Allowance for credit losses		(11,956	)						(10,562)
Total assets	$	2,184,567						$	1,777,627
Liabilities and Shareholders’ Equity¹
Interest-bearing liabilities
Interest-bearing demand Deposits	$	475,212		$	151	0.13	%	$	326,852	$	633	0.78	%
Savings deposits		21,800			3	0.06			8,403		13	0.62
Time deposits >= $100		24,505			83	1.37			29,820		142	1.92
Other time deposits		31,379			94	1.21			44,092		175	1.60
Total interest-bearing deposits		552,896			331	0.24			409,167		963	0.95
Short-term borrowings		10			—	—			209		2	3.85
Total interest-bearing liabilities		552,906			331	0.24			409,376		965	0.95
Non-interest bearing liabilities
Demand deposits		417,942							295,165
Accounts and drafts payable		898,378							767,998
Other liabilities		56,646							62,228
Total liabilities		1,925,872							1,534,767
Shareholders’ equity		258,695							242,860
Total liabilities and shareholders’ equity	$	2,184,567						$	1,777,627
Net interest income				$	10,807					$	11,857
Net interest margin						2.32	%					3.21	%
Interest spread						2.15						2.52

1.	Balances shown are daily averages.
2.	Interest income on loans includes net loan fees of $901,000 and $156,000 for the First Quarter of 2021 and 2020, respectively due to higher PPP fees.
3.	Interest income is presented on a tax-equivalent basis assuming a tax rate of 21%. The tax-equivalent adjustment was approximately $462,000 and $484,000 for the First Quarter of 2021 and 2020, respectively.
4.	For purposes of these computations, yields on investment securities are computed as interest income divided by the average amortized cost of the investments.

	First Quarter of 2021 Over First Quarter of 2020
(In thousands)	Volume			Rate			Total
Increase (decrease) in interest income:
Loans¹:
Taxable	$	825		$	(1,239	)	$	(414	)
Investment securities:
Taxable		(67	)		(292	)		(359	)
Tax-exempt²		(81	)		(21	)		(102	)
Certificates of deposit		(3	)		—			(3	)
Interest-bearing deposits in other financial institutions		356			(599	)		(243	)
Federal funds sold and other short-term investments		(232	)		(331	)		(563	)
Total interest income		798			(2,482	)		(1,684	)
Interest expense on:
Interest-bearing demand deposits		198			(680	)		(482	)
Savings deposits		9			(19	)		(10	)
Time deposits of >=$100		(23	)		(36	)		(59	)
Other time deposits		(44	)		(37	)		(81	)
Short-term borrowings		(1	)		(1	)		(2	)
Total interest expense		139			(773	)		(634	)
Net interest income	$	659		$	(1,709	)	$	(1,050	)

1.	Interest income includes net loan fees.
2.	Interest income is presented on a tax-equivalent basis assuming a tax rate of 21%.

	March 31, 2021				December 31, 2020
(Dollars in thousands)	Amount		Ratio		Amount		Ratio
Total capital (to risk-weighted assets)
Cass Information Systems, Inc.	$	256,899		21.13%	$	255,332		21.41%
Cass Commercial Bank		175,574		22.48%		171,298		21.46%
Common equity tier I capital (to risk-weighted assets)
Cass Information Systems, Inc.	$	245,178		20.17%	$	243,388		20.41%
Cass Commercial Bank		165,791		21.22%		161,300		20.21%
Tier I capital (to risk-weighted assets)
Cass Information Systems, Inc.	$	245,178		20.17%	$	243,388		20.41%
Cass Commercial Bank		165,791		21.22%		161,300		20.21%
Tier I capital (to leverage assets)
Cass Information Systems, Inc.	$	245,178		11.31%	$	243,388		11.52%
Cass Commercial Bank		165,791		11.81%		161,300		14.48%

(In thousands)	December 31, 2019		Impact of ASU 2016-13 Adoption			As Reported Under ASU 2016-13
Assets:
Allowance for credit/loan losses on loans	$	10,556	$	723		$	11,279
Deferred tax asset		2,298		269			2,567
Liabilities:
Reserve for unfunded commitments		—		402			402
Shareholders’ equity:
Retained earnings		90,341		(856	)		89,485

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs¹	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2021 – January 31, 2021	31,256		39.29	31,256	434,622
February 1, 2021 – February 29, 2021	—		—	—	434,622
March 1, 2021 – March 31, 2021	—		—	—	434,622
Total	31,256		39.29	31,256	434,622

	CASS INFORMATION SYSTEMS, INC.


DATE: May 6, 2021	By	/s/ Eric H. Brunngraber
		Eric H. Brunngraber
		Chairman, President, and Chief Executive Officer
		(Principal Executive Officer)


DATE: May 6, 2021	By	/s/ Michael J. Normile
		Michael J. Normile
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)