CASS 10-Q
Cass Information Systems Inc (CASS)
10-Q
2025-08-05
For: 2025-06-30
View Original
Added on
April 06, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________________
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended | |||||
| OR | |||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
| For the transition period from __________ to __________ | |||||
Commission File No. 000-20827
____________________
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of principal executive offices) | (Zip Code) | ||||
(314 ) 506-5500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbols | Name of each exchange on which registered | ||||||||||||
____________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer," “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | o | x | |||||||||||||||
| Non-Accelerated Filer | o | Smaller Reporting Company | Emerging Growth Company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No x
The number of shares outstanding of the registrant's only class of common stock as of August 4, 2025: Common stock, par value $.50 per share – 13,216,006 shares outstanding.
-1-
TABLE OF CONTENTS
Forward-looking Statements - Factors That May Affect Future Results
This report may contain or incorporate by reference forward-looking statements made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Although we believe that, in making any such statements, our expectations are based on reasonable assumptions, forward-looking statements are not guarantees of future performance and involve risks, uncertainties, and other factors beyond our control, which may cause future performance to be materially different from expected performance summarized in the forward-looking statements. These risks, uncertainties and other factors are discussed in Part I, Item 1A, “Risk Factors” of the Company’s 2024 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”), which may be updated from time to time in our future filings with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, or changes to future results over time.
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands except Share and Per Share Data)
See accompanying notes to unaudited consolidated financial statements.
June 30, 2025 (Unaudited) | December 31, 2024 | ||||||||||
| Assets | |||||||||||
| Cash and due from banks | $ | $ | |||||||||
| Short-term investments | |||||||||||
| Cash and cash equivalents | |||||||||||
| Investment securities available-for-sale, at fair value | |||||||||||
| Loans | |||||||||||
| Less: Allowance for credit losses | |||||||||||
| Loans, net | |||||||||||
| Payments in advance of funding | |||||||||||
| Premises and equipment, net | |||||||||||
| Investment in bank-owned life insurance | |||||||||||
| Goodwill | |||||||||||
| Other intangible assets, net | |||||||||||
| Accounts and drafts receivable from customers | |||||||||||
| Other assets | |||||||||||
| Assets of discontinued operations | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Shareholders’ Equity | |||||||||||
| Liabilities: | |||||||||||
| Deposits: | |||||||||||
| Noninterest-bearing | $ | $ | |||||||||
| Interest-bearing | |||||||||||
| Total deposits | |||||||||||
| Accounts and drafts payable | |||||||||||
| Other liabilities | |||||||||||
| Liabilities of discontinued operations | |||||||||||
| Total liabilities | |||||||||||
| Shareholders’ Equity: | |||||||||||
Preferred stock, par value $ | |||||||||||
Common stock, par value $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
Common shares in treasury, at cost ( | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total shareholders’ equity | |||||||||||
| Total liabilities and shareholders’ equity | $ | $ | |||||||||
-3-
CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands except Per Share Data)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Fee Revenue and Other Income: | |||||||||||||||||||||||
| Processing fees | $ | $ | $ | $ | |||||||||||||||||||
| Financial fees | |||||||||||||||||||||||
| Loss on sale of investment securities | ( | ( | ( | ( | |||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total fee revenue and other income | |||||||||||||||||||||||
| Interest Income: | |||||||||||||||||||||||
| Interest and fees on loans | |||||||||||||||||||||||
| Interest and dividends on investment securities: | |||||||||||||||||||||||
| Taxable | |||||||||||||||||||||||
| Exempt from federal income taxes | |||||||||||||||||||||||
| Interest on federal funds sold and other short-term investments | |||||||||||||||||||||||
| Total interest income | |||||||||||||||||||||||
| Interest Expense: | |||||||||||||||||||||||
| Interest on deposits | |||||||||||||||||||||||
| Total interest expense | |||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||
| Provision for credit losses | |||||||||||||||||||||||
| Net interest income after provision for credit losses | |||||||||||||||||||||||
| Total net revenue | |||||||||||||||||||||||
| Operating Expense: | |||||||||||||||||||||||
| Salaries and commissions | |||||||||||||||||||||||
| Share-based compensation | |||||||||||||||||||||||
| Employee profit sharing | |||||||||||||||||||||||
| Net periodic pension cost | |||||||||||||||||||||||
| Other benefits | |||||||||||||||||||||||
| Total personnel expenses | |||||||||||||||||||||||
| Occupancy | |||||||||||||||||||||||
| Equipment | |||||||||||||||||||||||
| Amortization of intangible assets | |||||||||||||||||||||||
| Bad debt expense (recovery) | ( | ||||||||||||||||||||||
| Other operating expense | |||||||||||||||||||||||
| Total operating expense | |||||||||||||||||||||||
| Income from continuing operations, before income tax expense | |||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Net income from continuing operations | |||||||||||||||||||||||
| Income from discontinued operations, net of tax | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Basic earnings per share from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Basic earnings per share from discontinued operations | |||||||||||||||||||||||
| Basic earnings per share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per share from discontinued operations | |||||||||||||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | |||||||||||||||||||
-4-
CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in Thousands)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
Comprehensive Income: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income: | |||||||||||||||||||||||
| Net unrealized gain (loss) on securities available-for-sale | ( | ( | |||||||||||||||||||||
| Tax effect | ( | ( | |||||||||||||||||||||
| Reclassification adjustments for losses included in net income | |||||||||||||||||||||||
| Tax effect | ( | ( | ( | ( | |||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | |||||||||||||||||||||
| Total comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
-5-
CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
| Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash Flows From Operating Activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Less: net income from discontinued operations | |||||||||||
| Net income from continuing operations | |||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Amortization of intangible assets | |||||||||||
| Net amortization of premium/discount on investment securities | |||||||||||
| Depreciation | |||||||||||
| Loss on sale of investment securities | |||||||||||
| Share-based compensation expense | |||||||||||
| Provision for credit losses | |||||||||||
| Increase in current income tax liability | |||||||||||
| (Increase) decrease in accounts receivable | ( | ||||||||||
| Other operating activities, net | ( | ( | |||||||||
| Net cash provided by operating activities - continuing operations | |||||||||||
| Net cash (used in) provided by operating activities - discontinued operations | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash Flows From Investing Activities: | |||||||||||
| Proceeds from sales of investment securities available-for-sale | |||||||||||
| Proceeds from maturities of investment securities available-for-sale | |||||||||||
| Purchase of investment securities available-for-sale | ( | ( | |||||||||
| Net increase in loans | ( | ( | |||||||||
| Proceeds from sale of TEM business | |||||||||||
| Decrease (increase) in payments in advance of funding | ( | ||||||||||
| Purchases of premises and equipment, net | ( | ( | |||||||||
| Net cash (used in) provided by investing activities - continuing operations | ( | ||||||||||
| Net cash (used in) provided by investing activities - discontinued operations | ( | ||||||||||
| Net cash (used in) provided by investing activities | ( | ||||||||||
| Cash Flows From Financing Activities: | |||||||||||
| Net increase (decrease) in noninterest-bearing demand deposits | ( | ||||||||||
| Net (decrease) increase in interest-bearing demand and savings deposits | ( | ||||||||||
| Net increase in time deposits | |||||||||||
| Net (increase) decrease in accounts and drafts receivable from customers | ( | ||||||||||
| Net decrease in accounts and drafts payable | ( | ( | |||||||||
| Cash dividends paid | ( | ( | |||||||||
| Purchase of common shares for treasury | ( | ( | |||||||||
| Other financing activities, net | ( | ( | |||||||||
| Net cash used in financing activities - continuing operations | ( | ( | |||||||||
| Net cash (used in) provided by financing activities - discontinued operations | ( | ||||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Net decrease in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
| Supplemental information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes | |||||||||||
-6-
CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
THREE MONTHS ENDED JUNE 30, 2025 AND 2024
(Unaudited)
(Dollars in Thousands except per share data)
| Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||
Cash dividends ($ | ( | ( | |||||||||||||||||||||||||||||||||
Issuance of | ( | ||||||||||||||||||||||||||||||||||
| Share-based compensation expense | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ( | |||||||||||||||||||||||||||||||||
Balance, June 30, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||
Cash dividends ($ | ( | ( | |||||||||||||||||||||||||||||||||
Issuance of | ( | ||||||||||||||||||||||||||||||||||
| Share-based compensation expense | ( | ||||||||||||||||||||||||||||||||||
Purchase of | ( | ( | |||||||||||||||||||||||||||||||||
| Other comprehensive gain | |||||||||||||||||||||||||||||||||||
Balance, June 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
-7-
CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
SIX MONTHS ENDED JUNE 30, 2025 AND 2024
(Unaudited)
(Dollars in Thousands except per share data)
| Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||
Balance, December 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||
Cash dividends ($ | ( | ( | |||||||||||||||||||||||||||||||||
Issuance of | ( | ( | |||||||||||||||||||||||||||||||||
| Share-based compensation expense | ( | ||||||||||||||||||||||||||||||||||
Purchase of | ( | ( | |||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ( | |||||||||||||||||||||||||||||||||
Balance, June 30, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
Balance, December 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||
Cash dividends ($ | ( | ( | |||||||||||||||||||||||||||||||||
Issuance of | ( | ( | |||||||||||||||||||||||||||||||||
| Share-based compensation expense | ( | ||||||||||||||||||||||||||||||||||
Purchase of | ( | ( | |||||||||||||||||||||||||||||||||
| Other comprehensive gain | |||||||||||||||||||||||||||||||||||
Balance, June 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
-8-
CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
Note 2 - Discontinued Operations and Assets and Liabilities Held for Sale
On April 7, 2025, the Company signed an Asset Purchase Agreement providing for the sale of its telecom expense management and managed mobility solutions business unit ("TEM Business Unit") to Asignet USA Inc ("Asignet"). The Asset Purchase Agreement with Asignet reflects a purchase price of $18.0 million, which closed on June 30, 2025. The Company also signed a Transition Services Agreement with Asignet to provide certain information technology, data ingestion, and payment processing services for a period of time not to exceed 18 months after closing.
The Company has applied discontinued operations accounting in accordance with Accounting Standards Codification, or ASC, Topic 205-20, “Presentation of Financial Statements – Discontinued Operations,” to the assets and liabilities being sold related to the Company's TEM Business Unit as of June 30, 2025 and December 31, 2024, and for the three and six months ended June 30, 2025, and 2024, as applicable. The sale of the TEM Business Unit represents a strategic shift due to the Company completely exiting both the telecom expense management and managed mobility solutions businesses. The Company did not allocate any consolidated interest that is not directly attributable to or related to discontinued operations. All financial information in the consolidated financial statements and notes to the consolidated financial statements is reported on a continuing operations basis, unless otherwise noted. The TEM Business Unit is included in the Information Services operating segment.
The carrying amount of major classes of assets and liabilities included as part of discontinued operations at June 30, 2025, and December 31, 2024 were as follows:
June 30, 2025 | December 31, 2024 | ||||||||||
| (In thousands except share and per share data) | |||||||||||
| Assets | |||||||||||
| Premises and equipment, net | $ | $ | |||||||||
| Goodwill | |||||||||||
| Other intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Assets of discontinued operations | $ | $ | |||||||||
| Liabilities | |||||||||||
| Accounts and drafts payable | $ | $ | |||||||||
| Other liabilities | |||||||||||
| Liabilities of discontinued operations | $ | $ | |||||||||
-9-
Income from discontinued operations, net of tax, for the three and six months ended June 30, 2025, and 2024 are as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| (In thousands except per share data) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Fee Revenue and Other Income: | |||||||||||||||||||||||
| Processing fees | $ | $ | $ | $ | |||||||||||||||||||
| Financial fees | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Gain on sale of TEM business | |||||||||||||||||||||||
| Total fee revenue and other income | |||||||||||||||||||||||
| Operating Expense: | |||||||||||||||||||||||
| Salaries and commissions | |||||||||||||||||||||||
| Share-based compensation | ( | ||||||||||||||||||||||
| Other benefits | |||||||||||||||||||||||
| Total personnel expenses | |||||||||||||||||||||||
| Occupancy | |||||||||||||||||||||||
| Equipment | |||||||||||||||||||||||
| Amortization of intangible assets | |||||||||||||||||||||||
| Other operating expense | |||||||||||||||||||||||
| Total operating expense | |||||||||||||||||||||||
| Income from discontinued operations, before income tax expense | |||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Net income from discontinued operations | $ | $ | $ | $ | |||||||||||||||||||
Note 3 – Intangible Assets
The Company accounts for intangible assets in accordance with ASC 350, Goodwill and Other Intangible Assets, which requires that intangibles with indefinite useful lives be tested annually for impairment, or when management deems there is a triggering event, and those with finite useful lives be amortized over their useful lives.
Details of the Company’s intangible assets are as follows:
| June 30, 2025 | December 31, 2024 | ||||||||||||||||||||||
| (In thousands) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | |||||||||||||||||||
| Assets eligible for amortization: | |||||||||||||||||||||||
| Customer lists | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Software | ( | ( | |||||||||||||||||||||
| Trade name | ( | ( | |||||||||||||||||||||
| Unamortized intangible assets: | |||||||||||||||||||||||
| Goodwill | — | — | |||||||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | $ | ( | |||||||||||||||||
The customer lists are amortized over 5 to 10 years; software over 3 to 7 years; the trade names over 10 to 20 years; and other intangible assets over 15 years. Amortization of intangible assets amounted to $293,000 and $586,000 for the three and six months ended June 30, 2025, respectively. Amortization of intangible assets amounted to $173,000 and $346,000
-10-
Note 4 – Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per share is computed by dividing net income by the sum of the weighted-average number of common shares outstanding and the weighted-average number of potential common shares outstanding.
The calculations of basic and diluted earnings per share are as follows:
| (In thousands except share and per share data) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Basic: | |||||||||||||||||||||||
| Earnings from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Earnings from discontinued operations | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average common shares outstanding | |||||||||||||||||||||||
| Basic earnings per share from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Basic earnings per share from discontinued operations | $ | $ | $ | $ | |||||||||||||||||||
| Basic earnings per share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted: | |||||||||||||||||||||||
| Earnings from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Earnings from discontinued operations | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average common shares outstanding | |||||||||||||||||||||||
| Effect of dilutive restricted stock and stock appreciation rights | |||||||||||||||||||||||
| Weighted-average common shares outstanding assuming dilution | |||||||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per share from discontinued operations | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | |||||||||||||||||||
Note 5 – Stock Repurchases
-11-
Note 6 – Industry Segment Information
The services provided by the Company are classified into two reportable segments: Information Services and Banking Services. Each of these segments provides distinct services that are marketed through different channels and are consistent with the presentation of financial information to the chief operating decision maker to evaluate segment performance, develop strategy, and allocate resources. They are managed separately due to their unique service and processing requirements. The Company's chief operating decision maker is the President and Chief Executive Officer of Cass Information Systems' Inc.
The Information Services segment provides transportation, energy, telecommunication, and environmental invoice processing and payment services to large corporations. In addition, this segment provides church management software and on-line generosity services primarily for faith-based ministries. As discussed in Note 2 to the consolidated financial statements, the Company applied discontinued operations accounting to the assets and liabilities being sold related to the TEM Business Unit as of and for the three and six months ended June 30, 2025 and 2024, as applicable. The TEM Business Unit is included in the Information Services operating segment. The Banking Services segment provides banking services primarily to privately held businesses, franchise restaurants and faith-based ministries, as well as supporting the banking needs of the Information Services segment.
The Company’s accounting policies for segments are the same as those described in the summary of significant accounting policies in the Company’s 2024 Form 10-K. Management and the chief operating decision maker evaluates segment performance based on pre-tax income after allocations for corporate expenses. Transactions between segments are accounted for at what management believes to be fair value.
Substantially all revenue originates from, and all long-lived assets are located within, the United States and no revenue from any customer of any segment exceeds 10% of the Company’s consolidated revenue.
Funding sources represent average balances and deposits generated by Information Services and Banking Services and there is no allocation methodology used. Banking Services interest income is determined by actual interest income on loans minus actual interest expense paid on deposits plus/minus an allocation for interest income or expense dependent on the remaining available liquidity of the segment. Information Services interest income is determined by multiplying available liquidity by actual yields on short-term investments and investment securities.
Any difference between total segment interest income and overall total Company interest income is included in Corporate, Eliminations, and Other.
-12-
Summarized information about the Company’s operations in each industry segment is as follows:
| (In thousands) | Information Services | Banking Services | Corporate, Eliminations and Other | Total | |||||||||||||||||||
Three Months Ended June 30, 2025: | |||||||||||||||||||||||
| Fee revenue and other income | $ | $ | $ | $ | 28,506 | ||||||||||||||||||
| Loss on sale of investment securities | ( | ( | |||||||||||||||||||||
| Interest income | ( | ||||||||||||||||||||||
| Interest expense | ( | ||||||||||||||||||||||
| Provision for credit losses | |||||||||||||||||||||||
| Total net revenue | ( | ||||||||||||||||||||||
| Personnel expenses | |||||||||||||||||||||||
| Occupancy | |||||||||||||||||||||||
| Equipment | |||||||||||||||||||||||
| Intersegment expense (income) | ( | — | |||||||||||||||||||||
| Other operating expense | |||||||||||||||||||||||
| Total operating expense | |||||||||||||||||||||||
| Pre-tax income from continuing operations | ( | ||||||||||||||||||||||
| Pre-tax income from discontinued operations | |||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||
| Other intangible assets, net | |||||||||||||||||||||||
| Total assets | ( | ||||||||||||||||||||||
| Average funding sources | $ | $ | $ | $ | |||||||||||||||||||
-13-
| (In thousands) | Information Services | Banking Services | Corporate, Eliminations and Other | Total | |||||||||||||||||||
Three Months Ended June 30, 2024: | |||||||||||||||||||||||
| Fee revenue and other income | $ | $ | $ | $ | 28,461 | ||||||||||||||||||
| Loss on sale of investment securities | ( | ( | |||||||||||||||||||||
| Interest income | ( | ||||||||||||||||||||||
| Interest expense | ( | ||||||||||||||||||||||
| Provision for credit losses | |||||||||||||||||||||||
| Total net revenue | |||||||||||||||||||||||
| Personnel expenses | |||||||||||||||||||||||
| Occupancy | |||||||||||||||||||||||
| Equipment | |||||||||||||||||||||||
| Bad debt expense | |||||||||||||||||||||||
| Intersegment expense (income) | ( | — | |||||||||||||||||||||
| Other operating expense | |||||||||||||||||||||||
| Total operating expense | |||||||||||||||||||||||
| Pre-tax income from continuing operations | |||||||||||||||||||||||
| Pre-tax income from discontinued operations | |||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||
| Other intangible assets, net | |||||||||||||||||||||||
| Total assets | ( | ||||||||||||||||||||||
| Average funding sources | $ | $ | $ | $ | |||||||||||||||||||
-14-
| (In thousands) | Information Services | Banking Services | Corporate, Eliminations and Other | Total | |||||||||||||||||||
Six Months Ended June 30, 2025: | |||||||||||||||||||||||
| Fee revenue and other income | $ | $ | $ | $ | 56,562 | ||||||||||||||||||
| Loss on sale of investment securities | ( | ( | |||||||||||||||||||||
| Interest income | ( | ||||||||||||||||||||||
| Interest expense | ( | ||||||||||||||||||||||
| Provision for credit losses | |||||||||||||||||||||||
| Total net revenue | ( | ||||||||||||||||||||||
| Personnel expenses | |||||||||||||||||||||||
| Occupancy | |||||||||||||||||||||||
| Equipment | |||||||||||||||||||||||
| Bad debt recovery | ( | ( | |||||||||||||||||||||
| Intersegment income (expense) | ( | — | |||||||||||||||||||||
| Other operating expense | |||||||||||||||||||||||
| Total operating expense | |||||||||||||||||||||||
| Pre-tax income from continuing operations | ( | ||||||||||||||||||||||
| Pre-tax income from discontinued operations | |||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||
| Other intangible assets, net | |||||||||||||||||||||||
| Total assets | ( | ||||||||||||||||||||||
| Average funding sources | $ | $ | $ | $ | |||||||||||||||||||
-15-
| (In thousands) | Information Services | Banking Services | Corporate, Eliminations and Other | Total | |||||||||||||||||||
Six Months Ended June 30, 2024: | |||||||||||||||||||||||
| Fee revenue and other income | 57,185 | ||||||||||||||||||||||
| Loss on sale of investment securities | ( | ( | |||||||||||||||||||||
| Interest income | ( | ||||||||||||||||||||||
| Interest expense | ( | ||||||||||||||||||||||
| Provision for credit losses | |||||||||||||||||||||||
| Total net revenue | |||||||||||||||||||||||
| Personnel expenses | |||||||||||||||||||||||
| Occupancy | |||||||||||||||||||||||
| Equipment | |||||||||||||||||||||||
| Bad debt expense | |||||||||||||||||||||||
| Intersegment income (expense) | ( | — | |||||||||||||||||||||
| Other operating expense | |||||||||||||||||||||||
| Total operating expense | |||||||||||||||||||||||
| Pre-tax income from continuing operations | |||||||||||||||||||||||
| Pre-tax income from discontinued operations | |||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||
| Other intangible assets, net | |||||||||||||||||||||||
| Total assets | ( | ||||||||||||||||||||||
| Average funding sources | |||||||||||||||||||||||
Intersegment income (expense) primarily relates to payment processing fees paid by the Information Services segment to the Banking services segment. The Corporate elimination for total assets and interest income and interest expense primarily relates to allocated funds and related interest depending on funding needs of the operating segments.
Note 7 – Loans by Type
A summary of loans is as follows:
| (In thousands) | June 30, 2025 | December 31, 2024 | |||||||||
| Commercial and industrial | $ | $ | |||||||||
| Real estate: | |||||||||||
| Commercial: | |||||||||||
| Mortgage | |||||||||||
| Construction | |||||||||||
| Faith-based: | |||||||||||
| Mortgage | |||||||||||
| Construction | |||||||||||
| Total loans | $ | $ | |||||||||
-16-
The following table presents the aging of loans past due by category at June 30, 2025 and December 31, 2024:
| Performing | Nonperforming | ||||||||||||||||||||||||||||||||||
| (In thousands) | Current | 30-59 Days | 60-89 Days | 90 Days and Over | Non- accrual | Total Loans | |||||||||||||||||||||||||||||
| June 30, 2025 | |||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Real estate | |||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||
| Mortgage | |||||||||||||||||||||||||||||||||||
| Construction | |||||||||||||||||||||||||||||||||||
| Faith-based: | |||||||||||||||||||||||||||||||||||
| Mortgage | |||||||||||||||||||||||||||||||||||
| Construction | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Real estate | |||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||
| Mortgage | |||||||||||||||||||||||||||||||||||
| Construction | |||||||||||||||||||||||||||||||||||
| Faith-based: | |||||||||||||||||||||||||||||||||||
| Mortgage | |||||||||||||||||||||||||||||||||||
| Construction | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
-17-
The following table presents the credit exposure of the loan portfolio by internally assigned credit grade as of June 30, 2025 and December 31, 2024:
| (In thousands) | Loans Subject to Normal Monitoring1 | Performing Loans Subject to Special Monitoring2 | Nonperforming Loans Subject to Special Monitoring2 | Total Loans | |||||||||||||||||||
| June 30, 2025 | |||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | |||||||||||||||||||
| Real estate | |||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Mortgage | |||||||||||||||||||||||
| Construction | |||||||||||||||||||||||
| Faith-based: | |||||||||||||||||||||||
| Mortgage | |||||||||||||||||||||||
| Construction | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | |||||||||||||||||||
| Real estate | |||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Mortgage | |||||||||||||||||||||||
| Construction | |||||||||||||||||||||||
| Faith-based: | |||||||||||||||||||||||
| Mortgage | |||||||||||||||||||||||
| Construction | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
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. | ||
-18-
Loan modifications to borrowers experiencing financial difficulty may be in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or a combination thereof, among other things.
The following table shows the amortized cost of loans that were both experiencing financial difficulty and modified during the six months ended June 30, 2025, segregated by category and type of modification.
| (In thousands) | Payment Delay | Term Extension | Interest Rate Reduction | Combination Term Extension and Interest Rate Reduction | Percentage of Total Loans Held for Investment | ||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | % | ||||||||||||||||||||||||
There were two loans modified during the six months ended June 30, 2025. There were no loans modified during the six months ended June 30, 2024. Both loans modified during the six months ended June 30, 2025 were due to term extensions coupled with an interest rate increase.
The following table shows the payment status of loans that have been modified to borrowers experiencing financial difficulty in the last twelve months:
| (In thousands) | Current | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or More Past Due | Total Past Due | ||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
At June 30, 2025, the Company had no commitments to lend additional funds to borrowers experiencing financial difficulty for which the Company modified the terms of the loans in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension during the current period.
There were no modified loans that had a payment default during the six months ended June 30, 2025 that had been modified due to the borrower experiencing financial difficulty within the 12 previous months preceding the default.
Upon the Company's determination that a modified loan has subsequently been deemed uncollectible, the loan is written off. There were no loans written off during the six months ended June 30, 2025.
At June 30, 2025, the Company had two non-accrual loans totaling $3.4 million that had an allowance for credit losses specifically allocated to them of $160,000 based on an evaluation of expected credit losses. There were no non-accrual loans at December 31, 2024. The Company did not record any interest income on non-accrual loans during the three and six months ended June 30, 2025 or June 30, 2024.
There were no foreclosed loans recorded as other real estate owned as of June 30, 2025 or December 31, 2024.
A summary of the activity in the allowance for credit losses (“ACL”) by category for the six months ended June 30, 2025 and year-ended December 31, 2024 is as follows:
| (In thousands) | C&I | CRE | Faith-based CRE | Construction | Total | ||||||||||||||||||||||||
Balance at January 1, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Provision for (release of) credit losses | ( | ( | |||||||||||||||||||||||||||
Balance at December 31, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Provision for credit losses (1) | |||||||||||||||||||||||||||||
Balance at June 30, 2025 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| (1) | For the six months ended June 30, 2025, there was a provision for credit losses of $29,000 for unfunded commitments. | ||||
-19-
Note 8 – Commitments and Contingencies
In the normal course of business, the Company is party to activities that contain credit, market and operational risks that are not reflected in whole or in part in the Company’s consolidated financial statements. As more fully described in the Form 10-K, such activities include traditional off-balance sheet credit-related financial instruments. These financial instruments include commitments to extend credit, commercial letters of credit and standby letters of credit. The Company’s maximum potential exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, commercial letters of credit and standby letters of credit is represented by the contractual amounts of those instruments. Commitments to extend credit and letters of credit are subject to the same underwriting standards as those financial instruments included on the consolidated balance sheets. An allowance for unfunded commitments of $302,000 and $273,000 had been recorded at June 30, 2025 and December 31, 2024, respectively.
At June 30, 2025, the balances of unfunded commitments, standby and commercial letters of credit were $172.5 million, $12.4 million, and $1.4 million, respectively. Since some of the financial instruments may expire without being drawn upon, the total amounts do not necessarily represent future cash requirements.
On March 28, 2025, the Company and Rubicon, in order to fully resolve the above matters, signed a Settlement Agreement and Mutual Release whereby Rubicon made an initial payment to the Company of $2.0 million. The Company recorded a bad debt recovery of $2.0 million in the consolidated statement of income for the six months ended June 30, 2025 upon receipt of the initial payment of $2.0 million. Rubicon also agreed to a fully amortizing, interest-bearing Promissory Note of $5.0 million, with annual payments, maturing July 1, 2029.
Note 9 – Share-Based Compensation
On February 16, 2023, the Board of Directors adopted the 2023 Omnibus Stock and Performance Compensation Plan (the "2023 Omnibus Plan"), which was approved by the Company's shareholders on April 18, 2023. The 2023 Omnibus Plan permits the issuance of up to 1.0 million shares of the Company’s common stock in the form of stock options, SARs, restricted stock, restricted stock units, phantom stock, and performance awards. During the six months ended June 30, 2025, 63,804 time-based restricted shares and 56,339 performance-based restricted shares were granted under the 2023 Omnibus Plan. Share-based compensation expense was $918,000 and $2.2 million for the three and six months ended June 30, 2025, respectively, and $450,000 and $1.6 million for the three and six months ended June 30, 2024, respectively.
Restricted Stock
Restricted shares granted to Company employees are amortized to expense over a three-year cliff vesting period, or until vesting occurs upon retirement. Restricted shares granted to members of the Board of Directors are amortized to expense over a one-year service period, with the exception of those shares granted in lieu of cash payments for retainer fees which are expensed in the period earned.
As of June 30, 2025, the total unrecognized compensation expense related to non-vested restricted shares was $2.8 million, and the related weighted-average period over which it is expected to be recognized is approximately 0.71 years.
Following is a summary of the activity of the Company's restricted stock for the six months ended June 30, 2025, with total shares and weighted-average fair value:
-20-
| Six Months Ended June 30, 2025 | |||||||||||
| Shares | Fair Value | ||||||||||
Balance at December 31, 2024 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeitures | ( | ||||||||||
Balance at June 30, 2025 | $ | ||||||||||
Performance-Based Restricted Stock
The Company has granted three-year performance-based restricted stock (“PBRS”) awards which are contingent upon the Company’s achievement of pre-established financial goals over a three-year cliff vesting period. The number of shares issued ranges from 0 % to 150 % of the target opportunity based on the actual achievement of financial goals for the three-year performance period.
Following is a summary of the activity of the PBRS for the six months ended June 30, 2025, based on 100% of target value:
| Six Months Ended June 30, 2025 | |||||||||||
| Shares | Fair Value | ||||||||||
Balance at December 31, 2024 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeitures | ( | ||||||||||
Balance at June 30, 2025 | $ | ||||||||||
The PBRS that vested during the six months ended June 30, 2025 were based on the Company's achievement of 99.1 % of target financial goals for the 2022-2024 performance period, resulting in the issuance of 55,348 shares of common stock. The outstanding PBRS at June 30, 2025 will vest at scheduled vesting dates and the actual number of shares of common stock issued will range from 0 % to 150 % of the target opportunity based on the actual achievement of financial goals for the respective three-year performance period.
Note 10 – Defined Pension Plans
The Company had a noncontributory defined-benefit pension plan (the “Plan”), which covered eligible employees that was terminated in 2024. The Company recorded no 191,000 and $386,000 for the three and six months ended June 30, 2024, respectively related to the Plan.
In addition to the Plan, the Company has an unfunded supplemental executive retirement plan (the "SERP"). There are no current employees earning benefits and therefore, there is no service cost associated with the SERP. The following table represents the components of the net periodic cost for the SERP:
| (In thousands) | Estimated 2025 | Actual 2024 | |||||||||
| Interest cost on projected benefit obligation | $ | $ | |||||||||
| Net amortization | ( | ||||||||||
| Net periodic pension cost | $ | $ | |||||||||
SERP cost recorded to expense was $112,000 225,000
-21-
Note 11 – Income Taxes
Note 12 – Investment Securities
Investment securities available-for-sale are recorded at fair value on a recurring basis. The Company’s investment securities available-for-sale are measured at fair value using Level 2 inputs including observable trade data, market data, etc. The market evaluation utilizes several sources which include “observable inputs” rather than “significant unobservable inputs” and therefore fall into the Level 2 category. The amortized cost, gross unrealized gains, gross unrealized losses and fair value of investment securities are summarized as follows:
| June 30, 2025 | |||||||||||||||||||||||
| (In thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| State and political subdivisions | $ | $ | $ | ( | $ | ||||||||||||||||||
| Mortgage-backed securities issued or guaranteed by U.S. government agencies or sponsored enterprises | ( | ||||||||||||||||||||||
| Corporate bonds | ( | ||||||||||||||||||||||
| Asset backed securities issued or guaranteed by U.S. government agencies or sponsored enterprises | ( | ||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| (In thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| State and political subdivisions | $ | $ | $ | ( | $ | ||||||||||||||||||
| Mortgage-backed securities issued or guaranteed by U.S. government agencies or sponsored enterprises | ( | ||||||||||||||||||||||
| Corporate bonds | ( | ||||||||||||||||||||||
| Asset backed securities issued or guaranteed by U.S. government agencies or sponsored enterprises | ( | ||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ||||||||||||||||||
-22-
The fair values of investment securities with unrealized losses are as follows:
| June 30, 2025 | |||||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Mortgage-backed securities issued or guaranteed by U.S. government agencies or sponsored enterprises | |||||||||||||||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||||||||||||||
| Asset backed securities issued or guaranteed by U.S. government agencies or sponsored enterprises | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Mortgage-backed securities issued or guaranteed by U.S. government agencies or sponsored enterprises | |||||||||||||||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||||||||||||||
| Asset backed securities issued or guaranteed by U.S. government agencies or sponsored enterprises | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
There were 219 investment securities, or 81.4 % (187 of which for greater than 12 months), in an unrealized loss position as of June 30, 2025. The unrealized losses at June 30, 2025 were primarily attributable to changes in market interest rates after the investment securities were purchased. The Company does not currently intend to sell, and based on current conditions, the Company does not believe it will be required to sell these available-for-sale investment securities before the recovery of the amortized cost basis, which may be the maturity dates of the investment securities. Therefore, the unrealized losses are recorded in accumulated other comprehensive loss. There were 241 investment securities, or 96.0 % (215 of which for greater than 12 months), in an unrealized loss position as of December 31, 2024. At June 30, 2025 and December 31, 2024, the Company had not recorded an allowance for credit losses on investment securities.
The amortized cost and fair value of investment securities by contractual maturity are shown in the following table. Expected maturities may differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.
-23-
| June 30, 2025 | |||||||||||
| (In thousands) | Amortized Cost | Fair Value | |||||||||
Due in 1 year or less | $ | $ | |||||||||
Due after 1 year through 5 years | |||||||||||
Due after 5 years through 10 years | |||||||||||
Due after 10 years | |||||||||||
| Total | $ | $ | |||||||||
Proceeds from sales of investment securities classified as available-for-sale were $30.1 million and $53.1 million for the three and six months ended June 30, 2025, and were $25.0 3.6 13,000 no
Note 13 – Fair Value of Financial Instruments
Following is a summary of the carrying amounts and fair values of the Company’s financial instruments:
| June 30, 2025 | December 31, 2024 | ||||||||||||||||||||||
| (In thousands) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||
| Balance sheet assets: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
| Investment securities | |||||||||||||||||||||||
| Loans, net | |||||||||||||||||||||||
| Accrued interest receivable | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| Balance sheet liabilities: | |||||||||||||||||||||||
| Deposits | $ | $ | $ | $ | |||||||||||||||||||
| Accounts and drafts payable | |||||||||||||||||||||||
| Accrued interest payable | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and Cash Equivalents - The carrying amount approximates fair value.
Investment Securities - The fair value is measured on a recurring basis using Level 2 inputs including observable trade data, market data, etc. Refer to Note 12, “Investment Securities,” for fair value and unrealized gains and losses by investment type.
Loans - The fair value is estimated using present values of future cash flows discounted at risk-adjusted interest rates for each loan category designated by management and is therefore a Level 3 valuation. Management believes that the risk factor embedded in the interest rates along with the allowance for credit losses result in a fair valuation.
Accrued Interest Receivable - The carrying amount approximates fair value.
Deposits - The fair value of demand deposits, savings deposits and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities and therefore, is a Level 2 valuation. The fair value estimates above do
-24-
not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market or the benefit derived from the customer relationship inherent in existing deposits.
Accounts and Drafts Payable - The carrying amount approximates fair value.
Accrued Interest Payable - The carrying amount approximates fair value.
Note 14 – Revenue from Contracts with Customers
Revenue is recognized as the obligation to the customer is satisfied. The Company’s revenue from contracts with clients is as follows:
Processing fees – The Company earns fees on a per-item or monthly basis for the invoice processing services rendered on behalf of customers. Per-item fees are recognized at the point in time when the performance obligation is satisfied. Monthly fees are earned over the course of a month, representing the period over which the performance obligation is satisfied. The contracts have no significant variable consideration or financing components.
Financial fees – The Company earns fees on a transaction level basis for invoice payment services when making customer payments. Fees are recognized at the point in time when the payment transactions are made, which is when the performance obligation is satisfied. The contracts have no significant impact of variable consideration and no significant financing components.
Bank service fees – Revenue from service fees consists of service charges and fees on deposit accounts under depository agreements with customers to provide access to deposited funds. Service charges on deposit accounts are transaction-based fees that are recognized at the point in time when the performance obligation is satisfied. The contracts have no significant impact of variable consideration and no significant financing components.
The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope for the periods ended June 30, 2025 and 2024.
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Fee revenue and other income | |||||||||||||||||||||||
| In-scope of FASB ASC 606 | |||||||||||||||||||||||
| Processing fees | $ | $ | $ | $ | |||||||||||||||||||
| Financial fees | |||||||||||||||||||||||
| Information services payment and processing revenue | |||||||||||||||||||||||
| Bank service fees | |||||||||||||||||||||||
| Fee revenue (in-scope of FASB ASC 606) | |||||||||||||||||||||||
| Other income (out-of-scope of FASB ASC 606) | |||||||||||||||||||||||
| Loss on sale of investment securities | ( | ( | ( | ( | |||||||||||||||||||
| Total fee revenue and other income | $ | $ | $ | $ | |||||||||||||||||||
Note 15 – Leases
The Company leases certain premises under operating leases. As of June 30, 2025, the Company had lease liabilities of $4.9 million and right-of-use assets of $4.7 million. Lease liabilities and right-of-use assets are reflected in and , respectively. Presented within occupancy expense on the Consolidated Statements of Income for the three and six months ended June 30, 2025, operating lease cost was $214,000 and $428,000 , short-term lease cost was $52,000 and $106,000 , and there was no 6.6 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 2.75 %. Certain of the Company’s leases contain options to renew the lease; however, these renewal options are not included in the calculation of the lease liabilities as they are not reasonably certain to be exercised. See the Company’s 2024 Form 10-K for information regarding these commitments.
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| (In thousands) | June 30, 2025 | ||||
| Lease payments due | |||||
Less than 1 year | $ | ||||
1-2 years | |||||
2-3 years | |||||
3-4 years | |||||
4-5 years | |||||
Over 5 years | |||||
| Total undiscounted cash flows | |||||
| Discount on cash flows | |||||
| Total lease liability | $ | ||||
There were no sale and leaseback transactions, leveraged leases, or lease transactions with related parties during the six months ended June 30, 2025.
Note 16 – Subsequent Events
In accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events after the consolidated balance sheet date of June 30, 2025. There were no other events identified that would require additional disclosures to prevent the Company’s unaudited consolidated financial statements from being misleading.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Cass Information Systems, Inc. ("Cass" or the "Company") provides payment and information processing services to large manufacturing, distribution, and retail enterprises across the United States. The Company’s services include freight invoice rating, payment processing, auditing, and the generation of accounting and transportation information. Cass also processes and pays facility-related invoices, which include electricity and gas as well as waste and telecommunications expenses. Cass solutions include integrated payments, a B2B payment platform for clients that require an agile fintech partner. Additionally, the Company offers a church management software solution and an on-line platform to provide generosity services for faith-based and non-profit organizations. The Company’s bank subsidiary, Cass Commercial Bank (the “Bank”), supports the Company’s payment operations. The Bank also provides banking services to its target markets, which include privately held businesses in the St. Louis metropolitan area and restaurant franchises and faith-based ministries within the United States.
In general, Cass is compensated for its information processing services through service fees, transactional level payment services, and investment of account balances generated during the payment process. Both the number of transactions processed and the dollar volume processed are therefore key metrics followed by management. The Bank earns most of its revenue from net interest income.
Various factors will influence the Company’s revenue and profitability, such as changes in the general level of interest rates, which has a significant effect on net interest income; industry-wide factors, such as the willingness of large corporations to outsource key business functions, and the general level of transportation and energy costs; and economic factors that include the general level of economic activity, the ability to hire and retain qualified staff, the growth and quality of the Bank’s loan portfolio, and the effects of tariffs or other domestic or international governmental policies. For a more detailed discussion of the Company’s revenue drivers and factors that impact the Company’s results of operation and financial condition generally, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2024 Form 10-K.
Recent Industry Developments
While freight rates have recently begun gradually increasing after several quarters of decline since 2023, volumes continue to decline on a year over year basis which continues to put pressure on transportation related processing fees. In addition, carrier consolidation with small and medium-sized trucking companies exiting the market or selling to larger carriers continues to put downward pressure on financial fees as the smaller trucking companies were larger users of our quick pay solutions.
Recent Items of Note
Net interest income increased $3.5 million, or 22.3%. The increase in net interest income was attributable to the net interest margin improving to 3.78% as compared to 3.32% in the same period last year, in addition to an increase in average interest-earning assets of $131.9 million, or 6.7%. The Company generally benefits from a higher interest rate environment due to a large percentage of its funding sources being non-interest bearing.
On April 7, 2025, the Company signed an Asset Purchase Agreement providing for the sale of its telecom expense management and managed mobility solutions business unit (TEM Business Unit) to Asignet USA Inc for $18.0 million in cash. The sale closed on June 30, 2025 and resulted in a gain on sale of $3.6 million.
The Company sold $34.0 million of corporate investment securities with a weighted-average yield of 2.29% at a pretax loss of $3.6 million in an effort to reposition the investment portfolio and improve the net interest margin in future periods.
On July 4, 2025 the president signed into law the One Big Beautiful Bill Act which makes various changes to the tax law. The most significant impacts relate to the deductibility of interest expense, research and experimentation expenses and accelerated deprecation deductions, among others. The full impact of the bill is being analyzed by the Company and could have an impact on income tax expense in future periods.
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Results of Operations
The following paragraphs more fully discuss the results of operations and changes in financial condition for the three months ended June 30, 2025 (“second quarter of 2025”) compared to the three months ended June 30, 2024 (“second quarter of 2024”) and the six months ended June 30, 2025 ("first half of 2025") compared to the six months ended June 30, 2024 ("first half of 2024"). The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and related notes and with the statistical information and financial data appearing in this report, as well as in the Company’s 2024 Form 10-K. Results of operations for the three months ended June 30, 2025 are not necessarily indicative of the results to be attained for any other period.
Discontinued Operations
The Company has applied discontinued operations accounting in accordance with Accounting Standards Codification, or ASC, Topic 205-20, “Presentation of Financial Statements – Discontinued Operations,” to the assets and liabilities being sold related to the Company's TEM Business Unit as of June 30, 2025 and December 31, 2024, and for the three and six months ended June 30, 2025, and 2024, as applicable. All financial information in this Quarterly Report on Form 10-Q is reported on a continuing operations basis, unless otherwise noted. See Note 2 to our consolidated financial statements for further discussion regarding discontinued operations and subsequent events associated with discontinued operations.
Summary of Results
The following table summarizes the Company’s operating results:
| (In thousands except per share data) | Second Quarter of | First Half of | |||||||||||||||||||||||||||||||||
| 2025 | 2024 | % Change | 2025 | 2024 | % Change | ||||||||||||||||||||||||||||||
| Processing fees | $ | 17,082 | $ | 16,816 | 1.6 | % | $ | 33,551 | $ | 33,675 | (0.4) | % | |||||||||||||||||||||||
| Financial fees | 10,161 | 10,460 | (2.9) | % | 20,122 | 21,058 | (4.4) | % | |||||||||||||||||||||||||||
| Net interest income | 19,475 | 15,929 | 22.3 | % | 38,748 | 32,405 | 19.6 | % | |||||||||||||||||||||||||||
| Provision for credit loss | 25 | 400 | (93.8) | % | 930 | 495 | 87.9 | % | |||||||||||||||||||||||||||
| Loss on sale of investment securities | (3,558) | (13) | 27,269.2 | % | (3,576) | (13) | 27,407.7 | % | |||||||||||||||||||||||||||
| Other | 1,263 | 1,185 | 6.6 | % | 2,889 | 2,452 | 17.8 | % | |||||||||||||||||||||||||||
| Total net revenue | 44,398 | 43,977 | 1.0 | % | 90,804 | 89,082 | 1.9 | % | |||||||||||||||||||||||||||
| Operating expense | 38,119 | 38,409 | (0.8) | % | 73,649 | 74,617 | (1.3) | % | |||||||||||||||||||||||||||
| Income before income tax expense | 6,279 | 5,568 | 12.8 | % | 17,155 | 14,465 | 18.6 | % | |||||||||||||||||||||||||||
| Income tax expense | 1,119 | 1,260 | (11.2) | % | 3,445 | 3,093 | 11.4 | % | |||||||||||||||||||||||||||
| Net income from continuing operations | $ | 5,160 | $ | 4,308 | 19.8 | % | $ | 13,710 | $ | 11,372 | 20.6 | % | |||||||||||||||||||||||
| Income from discontinued operations, net of tax | $ | 3,695 | $ | 176 | 1,999.4 | % | $ | 4,111 | $ | 264 | 1,457.2 | % | |||||||||||||||||||||||
| Net income | $ | 8,855 | $ | 4,484 | 97.5 | % | $ | 17,821 | $ | 11,636 | 53.2 | % | |||||||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 0.38 | $ | 0.31 | 22.6 | % | $ | 1.01 | $ | 0.82 | 23.2 | % | |||||||||||||||||||||||
| Diluted earnings per share from discontinued operations | $ | 0.28 | $ | 0.01 | 2,700.0 | % | $ | 0.30 | $ | 0.02 | 1,400.0 | % | |||||||||||||||||||||||
| Diluted earnings per share | $ | 0.66 | $ | 0.32 | 106.3 | % | $ | 1.31 | $ | 0.84 | 56.0 | % | |||||||||||||||||||||||
| Return on average assets | 1.48 | % | 0.78 | % | 89.7 | % | 1.49 | % | 1.00 | % | 49.0 | % | |||||||||||||||||||||||
| Return on average equity | 15.35 | % | 8.01 | % | 91.6 | % | 15.62 | % | 10.36 | % | 50.8 | % | |||||||||||||||||||||||
Second quarter of 2025 compared to second quarter of 2024:
The Company recorded net revenue of $44.4 million during the second quarter of 2025, up 1.0% from the second quarter of 2024, primarily driven by an increase in net interest income, partially offset by a loss on the sale of investment securities. Operating expense decreased 0.8% primarily driven by $1.3 million of bad debt expense and an additional $1.3 million of
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expense related to late fees incurred on facility transactions in the second quarter of 2024, partially offset by an increase in personnel expenses of $1.5 million and an increase in other expenses related to technology initiatives. Income from discontinued operations was up due to the $3.6 million gain on sale of the TEM business and $1.5 million of other non-recurring fee income. Net income was $8.9 million and diluted EPS was $0.66 per share, increases of 97.5% and 106.3% from the three months period ended June 30, 2024, respectively.
The Company posted a 1.48% return on average assets and 15.35% return on average equity.
First half of 2025 compared to first half of 2024:
The Company recorded net revenue of $90.8 million during the first half of 2025, up 1.9% from the first half of 2024, primarily driven by net interest income, partially offset by a loss on the sale of investment securities. Operating expense decreased 1.3% primarily driven by a bad debt recovery of $2.0 million related to partial consideration received in a litigation settlement. Net income was $17.8 million and diluted EPS was $1.31 per share, increases of 53.2% and 56.0% from the first half of June 30, 2024, respectively.
The Company posted a 1.49% return on average assets and 15.62% return on average equity.
Fee Revenue and Other Income
The Company’s fee revenue is derived mainly from transportation and facility processing and financial fees. As the Company provides its processing and payment services, it is compensated by service fees which are typically calculated on a per-item basis, discounts received for services provided to carriers and by the accounts and drafts payable balances generated in the payment process which can be used to generate interest income. Processing volumes, average payments in advance of funding, and fee revenue were as follows:
| (In thousands) | Second Quarter of | First Half of | |||||||||||||||||||||||||||||||||
| 2025 | 2024 | % Change | 2025 | 2024 | % Change | ||||||||||||||||||||||||||||||
| Transportation invoice volume | 8,837 | 8,879 | (0.5) | % | 17,192 | 17,649 | (2.6) | % | |||||||||||||||||||||||||||
| Transportation invoice dollar volume | $ | 9,370,535 | $ | 9,081,343 | 3.2 | % | $ | 18,013,673 | $ | 18,020,989 | — | % | |||||||||||||||||||||||
Facility-related transaction volume 1 | 4,141 | 4,197 | (1.3) | % | 8,366 | 8,311 | 0.7 | % | |||||||||||||||||||||||||||
Facility-related dollar volume 1 | $ | 5,513,143 | $ | 4,750,511 | 16.1 | % | $ | 11,336,078 | $ | 9,766,719 | 16.1 | % | |||||||||||||||||||||||
| Average payments in advance of funding | $ | 176,191 | $ | 213,185 | (17.4) | % | $ | 174,898 | $ | 203,761 | (14.2) | % | |||||||||||||||||||||||
| Processing fees | $ | 17,082 | $ | 16,816 | 1.6 | % | $ | 33,551 | $ | 33,675 | (0.4) | % | |||||||||||||||||||||||
| Financial fees | $ | 10,161 | $ | 10,460 | (2.9) | % | $ | 20,122 | $ | 21,058 | (4.4) | % | |||||||||||||||||||||||
| Other fees | $ | 1,263 | $ | 1,185 | 6.6 | % | $ | 2,889 | $ | 2,452 | 17.8 | % | |||||||||||||||||||||||
| Loss on sale of investment securities | $ | (3,558) | $ | (13) | N/M | $ | (3,576) | $ | (13) | N/M | |||||||||||||||||||||||||
1.Includes utility and waste.
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Second quarter of 2025 compared to second quarter of 2024:
Processing fees increased $266,000, or 1.6% over the same period in the prior year reflecting flat transportation and facility transaction volumes when comparing the periods.
Financial fees decreased $299,000, or 2.9%, primarily attributable to a decline in average payments in advance of funding of 17.4%.
The Company sold $34.0 million of corporate investment securities with a weighted-average yield of 2.29% at a loss of $3.6 million. These sales occurred at the end of June 2025. The proceeds from these sales will be redeployed into higher yielding interest-earning assets.
First half of 2025 compared to first half of 2024:
Processing fees decreased $124,000, or 0.4% over the same period in the prior year reflecting flat transportation and facility transaction volumes when comparing the periods.
Financial fees decreased $936,000, or 4.4%, primarily attributable to a decline in average payments in advance of funding of 14.2%.
Net Interest Income
Net interest income is the difference between interest earned on loans, investments, and other earning assets and interest expense on deposits and other interest-bearing liabilities. Net interest income is a significant source of the Company’s revenues. The following table summarizes the changes in tax-equivalent net interest income and related factors:
| (In thousands) | Second Quarter of | First Half of | |||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Average earning assets | $ | 2,090,366 | $ | 1,958,427 | $ | 2,097,445 | $ | 2,010,833 | |||||||||||||||
| Average interest-bearing liabilities | 615,932 | 638,339 | 622,045 | 634,986 | |||||||||||||||||||
| Net interest income* | 19,690 | 16,168 | 39,132 | 32,888 | |||||||||||||||||||
| Net interest margin* | 3.78 | % | 3.32 | % | 3.76 | % | 3.29 | % | |||||||||||||||
| Yield on earning assets* | 4.58 | % | 4.41 | % | 4.56 | % | 4.34 | % | |||||||||||||||
| Cost of interest-bearing liabilities | 2.71 | % | 3.35 | % | 2.68 | % | 3.32 | % | |||||||||||||||
*Presented on a tax-equivalent basis assuming a tax rate of 21% for both 2025 and 2024.
Second quarter of 2025 compared to second quarter of 2024:
The increase in net interest income is primarily attributable to the net interest margin improving to 3.78% as compared to 3.32% in the same period last year, in addition to an increase in average earning assets of $131.9 million, or 6.7%. The yield on interest-earning assets increased 17 basis points from 4.41% to 4.58% while the cost of interest-bearing liabilities decreased 64 basis points from 3.35% to 2.71%.
Average loans increased $86.4 million, or 8.3%, to $1.13 billion. The increase in average loans was primarily due to growth in the Company's commercial and industrial and faith-based loan portfolios. The average yield on loans increased 38 basis points to 5.64%, primarily due to loan growth at current market interest rates and continued maturing and re-pricing of existing fixed rate loans to current market interest rates.
Average investment securities increased $11.9 million, or 1.8%, to $665.6 million. The average yield on taxable investment securities increased 33 basis points to 3.05% as a result of purchases of new investment securities at current market interest rates, which were higher than the average interest rate in the current investment portfolio. The average yield on tax-exempt investment securities declined 45 basis points to 2.91% driven by maturities of higher rate investment securities.
Average short-term investments, consisting of interest-bearing deposits in other financial institutions and federal funds sold, increased $33.6 million, or 12.7%, to $298.9 million. The increase is primarily a result of the increase in average funding sources, partially offset by the increase in average loans and average investment securities. The average yield on short-term investments decreased 92 basis points to 4.03%, primarily due to the decrease in the Federal Funds rate that
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occurred in the last four months of 2024. The majority of these short-term investments are held at the Federal Reserve Bank.
The average balance of interest-bearing deposits decreased $22.4 million, or 3.5%, to $615.9 million. Average non-interest-bearing demand deposits decreased $14.0 million, or 3.4%, to $393.1 million. The Company has experienced deposit attrition due to a decrease in the overall level of some larger commercial deposits due to client funding needs for acquisitions and other purposes. The average rate paid on interest-bearing deposits decreased 64 basis points to 2.71% due to the reduction in short-term interest rates in the last four months of 2024.
Average accounts and drafts payable increased $129.7 million, or 13.3%, to $1.11 billion. The increase in average accounts and drafts payable was primarily driven by the increase in facility dollar volumes of 16.1%.
First half of 2025 compared to first half of 2024:
The increase in net interest income is primarily attributable to the net interest margin improving to 3.76% as compared to 3.29% in the same period last year, in addition to an increase in average earning assets of $86.6 million, or 4.3%. The yield on interest-earning assets increased 22 basis points from 4.34% to 4.56% while the cost of interest-bearing liabilities decreased 64 basis points from 3.32% to 2.68%.
Average loans increased $89.9 million, or 8.7%, to $1.12 billion. The increase in average loans was primarily due to growth in the Company's commercial and industrial and faith-based loan portfolios. The average yield on loans increased 47 basis points to 5.63%, primarily due to loan growth at current market interest rates and continued maturing and re-pricing of existing fixed rate loans to current market interest rates.
Average investment securities decreased $35.7 million, or 5.3%, to $638.6 million due to the sale and maturity of investment securities throughout 2024 and the first half of 2025 exceeding new purchases. The average yield on taxable investment securities increased 36 basis points to 3.00% as a result of purchases of new investment securities at current market interest rates, which were higher than the average interest rate in the current investment portfolio. The average yield on tax-exempt investment securities declined 56 basis points to 2.74% driven by maturities of higher rate investment securities.
Average short-term investments, consisting of interest-bearing deposits in other financial institutions and federal funds sold, increased $32.4 million, or 10.5%, to $341.1 million. The increase is primarily a result of the decrease in average investment securities and the increase in average funding sources, partially offset by the increase in average loans. The average yield on short-term investments decreased 94 basis points to 4.08%, primarily due to the decrease in the Federal Funds rate that occurred in the last four months of 2024. The majority of these short-term investments are held at the Federal Reserve Bank.
The average balance of interest-bearing deposits decreased $12.9 million, or 2.0%, to $622.0 million. Average non-interest-bearing demand deposits decreased $28.4 million, or 6.6%, to $399.1 million. The Company has experienced deposit attrition due to a decrease in the overall level of some larger commercial deposits due to client funding needs for acquisitions and other purposes. The average rate paid on interest-bearing deposits decreased 64 basis points to 2.68% due to the reduction in short-term interest rates in the last four months of 2024.
Average accounts and drafts payable increased $94.0 million, or 9.4%, to $1.09 billion. The increase in average accounts and drafts payable was primarily driven by the increase in facility dollar volumes of 16.1%.
Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rate and Interest Differential
The following tables show the condensed average balance sheets for each of the periods reported, the tax-equivalent interest income and expense for each category of interest-earning assets and interest-bearing liabilities, and the average yield on such categories of interest-earning assets and the average rates paid on such categories of interest-bearing liabilities for each of the periods reported.
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| (In thousands) | Second Quarter of 2025 | Second Quarter of 2024 | |||||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Yield/ Rate | Average Balance | Interest Income/ Expense | Yield/ Rate | ||||||||||||||||||||||||||||||
Assets1 | |||||||||||||||||||||||||||||||||||
| Interest-earning assets | |||||||||||||||||||||||||||||||||||
Loans2: | $ | 1,125,899 | $ | 15,837 | 5.64 | % | $ | 1,039,461 | $ | 13,592 | 5.26 | % | |||||||||||||||||||||||
Investment securities3: | |||||||||||||||||||||||||||||||||||
| Taxable | 524,666 | 3,991 | 3.05 | % | 487,164 | 3,484 | 2.88 | % | |||||||||||||||||||||||||||
Tax-exempt4 | 140,926 | 1,023 | 2.91 | % | 166,511 | 1,137 | 2.75 | % | |||||||||||||||||||||||||||
| Short-term investments | 298,875 | 3,002 | 4.03 | % | 265,291 | 3,267 | 4.95 | % | |||||||||||||||||||||||||||
| Total interest-earning assets | 2,090,366 | 23,853 | 4.58 | % | 1,958,427 | 21,480 | 4.41 | % | |||||||||||||||||||||||||||
| Non-interest-earning assets | |||||||||||||||||||||||||||||||||||
| Cash and due from banks | 19,735 | 22,196 | |||||||||||||||||||||||||||||||||
| Premises and equipment, net | 31,891 | 31,123 | |||||||||||||||||||||||||||||||||
| Bank-owned life insurance | 50,924 | 49,622 | |||||||||||||||||||||||||||||||||
| Goodwill and other intangibles | 20,634 | 15,252 | |||||||||||||||||||||||||||||||||
| Payments in advance of funding | 176,191 | 213,185 | |||||||||||||||||||||||||||||||||
| Unrealized loss on investment securities | (51,810) | (64,196) | |||||||||||||||||||||||||||||||||
| Other assets | 64,833 | 80,956 | |||||||||||||||||||||||||||||||||
| Allowance for credit losses | (14,287) | (13,302) | |||||||||||||||||||||||||||||||||
| Assets of discontinued operations | 14,031 | 14,782 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 2,402,508 | $ | 2,308,045 | |||||||||||||||||||||||||||||||
Liabilities and Shareholders’ Equity1 | |||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 523,604 | $ | 3,394 | 2.60 | % | $ | 554,813 | $ | 4,526 | 3.28 | % | |||||||||||||||||||||||
| Savings deposits | 6,816 | 23 | 1.35 | % | 7,040 | 31 | 1.77 | % | |||||||||||||||||||||||||||
| Time deposits >= $100 | 25,446 | 208 | 3.28 | % | 26,959 | 246 | 3.67 | % | |||||||||||||||||||||||||||
| Other time deposits | 60,055 | 538 | 3.59 | % | 49,516 | 509 | 4.13 | % | |||||||||||||||||||||||||||
| Total interest-bearing deposits | 615,921 | 4,163 | 2.71 | % | 638,328 | 5,312 | 3.35 | % | |||||||||||||||||||||||||||
| Short-term borrowings | 11 | — | — | % | 11 | — | — | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 615,932 | 4,163 | 2.71 | % | 638,339 | 5,312 | 3.35 | % | |||||||||||||||||||||||||||
| Non-interest bearing liabilities | |||||||||||||||||||||||||||||||||||
| Demand deposits | 393,054 | 407,079 | |||||||||||||||||||||||||||||||||
| Accounts and drafts payable | 1,105,201 | 975,468 | |||||||||||||||||||||||||||||||||
| Other liabilities | 36,940 | 37,550 | |||||||||||||||||||||||||||||||||
| Liabilities of discontinued operations | 19,967 | 24,344 | |||||||||||||||||||||||||||||||||
| Total liabilities | 2,171,094 | 2,082,780 | |||||||||||||||||||||||||||||||||
| Shareholders’ equity | 231,414 | 225,265 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 2,402,508 | $ | 2,308,045 | |||||||||||||||||||||||||||||||
| Net interest income | $ | 19,690 | $ | 16,168 | |||||||||||||||||||||||||||||||
| Net interest margin | 3.78 | % | 3.32 | % | |||||||||||||||||||||||||||||||
| Interest spread | 1.87 | % | 1.06 | % | |||||||||||||||||||||||||||||||
1.Balances shown are daily averages.
2.Interest income on loans includes net loan fees of $118,000 and $146,000 for the second quarter of 2025 and 2024, respectively.
3.For purposes of these computations, yields on investment securities are computed as interest income divided by the average amortized cost of the investments.
4.Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for both 2025 and 2024. The tax-equivalent adjustment was approximately $215,000 and $239,000 for the second quarter of 2025 and 2024, respectively.
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| (In thousands) | First Half of 2025 | First Half of 2024 | |||||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Yield/ Rate | Average Balance | Interest Income/ Expense | Yield/ Rate | ||||||||||||||||||||||||||||||
Assets1 | |||||||||||||||||||||||||||||||||||
| Interest-earning assets | |||||||||||||||||||||||||||||||||||
Loans2: | $ | 1,117,758 | $ | 31,187 | 5.63 | % | $ | 1,027,854 | $ | 26,368 | 5.16 | % | |||||||||||||||||||||||
Investment securities3: | |||||||||||||||||||||||||||||||||||
| Taxable | 504,215 | 7,505 | 3.00 | % | 504,154 | 7,004 | 2.79 | % | |||||||||||||||||||||||||||
Tax-exempt4 | 134,352 | 1,824 | 2.74 | % | 170,098 | 2,298 | 2.72 | % | |||||||||||||||||||||||||||
| Short-term investments | 341,120 | 6,895 | 4.08 | % | 308,727 | 7,708 | 5.02 | % | |||||||||||||||||||||||||||
| Total interest-earning assets | 2,097,445 | 47,411 | 4.56 | % | 2,010,833 | 43,378 | 4.34 | % | |||||||||||||||||||||||||||
| Non-interest-earning assets | |||||||||||||||||||||||||||||||||||
| Cash and due from banks | 20,170 | 22,711 | |||||||||||||||||||||||||||||||||
| Premises and equipment, net | 31,395 | 30,399 | |||||||||||||||||||||||||||||||||
| Bank-owned life insurance | 50,712 | 49,453 | |||||||||||||||||||||||||||||||||
| Goodwill and other intangibles | 20,846 | 15,339 | |||||||||||||||||||||||||||||||||
| Payments in advance of funding | 174,898 | 203,761 | |||||||||||||||||||||||||||||||||
| Unrealized loss on investment securities | (54,061) | (61,801) | |||||||||||||||||||||||||||||||||
| Other assets | 63,673 | 72,739 | |||||||||||||||||||||||||||||||||
| Allowance for credit losses | (13,848) | (13,197) | |||||||||||||||||||||||||||||||||
| Assets of discontinued operations | 14,211 | 14,576 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 2,405,441 | $ | 2,344,813 | |||||||||||||||||||||||||||||||
Liabilities and Shareholders’ Equity1 | |||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 530,731 | $ | 6,767 | 2.57 | % | $ | 551,442 | $ | 8,930 | 3.26 | % | |||||||||||||||||||||||
| Savings deposits | 7,323 | 47 | 1.29 | % | 7,242 | 63 | 1.75 | % | |||||||||||||||||||||||||||
| Time deposits >= $100 | 25,592 | 420 | 3.31 | % | 27,293 | 503 | 3.71 | % | |||||||||||||||||||||||||||
| Other time deposits | 58,388 | 1,045 | 3.61 | % | 48,998 | 994 | 4.08 | % | |||||||||||||||||||||||||||
| Total interest-bearing deposits | 622,034 | 8,279 | 2.68 | % | 634,975 | 10,490 | 3.32 | % | |||||||||||||||||||||||||||
| Short-term borrowings | 11 | — | — | % | 11 | — | — | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 622,045 | 8,279 | 2.68 | % | 634,986 | 10,490 | 3.32 | % | |||||||||||||||||||||||||||
| Non-interest bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Demand deposits | 399,085 | 427,489 | |||||||||||||||||||||||||||||||||
| Accounts and drafts payable | 1,088,699 | 994,709 | |||||||||||||||||||||||||||||||||
| Other liabilities | 44,784 | 37,111 | |||||||||||||||||||||||||||||||||
| Liabilities of discontinued operations | 20,806 | 24,551 | |||||||||||||||||||||||||||||||||
| Total liabilities | 2,175,419 | 2,118,846 | |||||||||||||||||||||||||||||||||
| Shareholders’ equity | 230,022 | 225,967 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 2,405,441 | $ | 2,344,813 | |||||||||||||||||||||||||||||||
| Net interest income | $ | 39,132 | $ | 32,888 | |||||||||||||||||||||||||||||||
| Net interest margin | 3.76 | % | 3.29 | % | |||||||||||||||||||||||||||||||
| Interest spread | 1.88 | % | 1.02 | % | |||||||||||||||||||||||||||||||
1.Balances shown are daily averages.
2.Interest income on loans includes net loan fees of $485,000 and $229,000 for the six months ended June 30, 2025 and 2024, respectively.
3.For purposes of these computations, yields on investment securities are computed as interest income divided by the average amortized cost of the investments.
4.Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for both the six months ended June 30, 2025 and 2024. The tax-equivalent adjustment was approximately $383,000 and $483,000 for the six months ended June 30, 2025 and 2024, respectively.
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Analysis of Net Interest Income Changes
The following tables present the changes in interest income and expense between periods due to changes in volume and interest rates. That portion of the change in interest attributable to the combined rate/volume variance has been allocated to rate and volume changes in proportion to the absolute dollar amounts of the change in each.
| (In thousands) | Second Quarter of 2025 Compared to Second Quarter of 2024 | ||||||||||||||||
| Volume | Rate | Total | |||||||||||||||
| Increase (decrease) in interest income: | |||||||||||||||||
Loans1: | $ | 1,201 | $ | 1,044 | $ | 2,245 | |||||||||||
| Investment securities: | |||||||||||||||||
| Taxable | 287 | 220 | 507 | ||||||||||||||
Tax-exempt2 | (179) | 65 | (114) | ||||||||||||||
| Short-term investments | 384 | (649) | (265) | ||||||||||||||
| Total interest income | 1,693 | 680 | 2,373 | ||||||||||||||
| Increase (decrease) in interest expense: | |||||||||||||||||
| Interest-bearing demand deposits | (242) | (890) | (1,132) | ||||||||||||||
| Savings deposits | (1) | (7) | (8) | ||||||||||||||
| Time deposits >=$100 | (13) | (25) | (38) | ||||||||||||||
| Other time deposits | 100 | (71) | 29 | ||||||||||||||
| Short-term borrowings | — | — | — | ||||||||||||||
| Total interest expense | (156) | (993) | (1,149) | ||||||||||||||
| Net interest income | $ | 1,849 | $ | 1,673 | $ | 3,522 | |||||||||||
1.Interest income includes net loan fees.
2.Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for the three months ended June 30, 2025 and 2024.
| (In thousands) | First Half of 2025 Compared to First Half of 2024 | ||||||||||||||||
| Volume | Rate | Total | |||||||||||||||
| Increase (decrease) in interest income: | |||||||||||||||||
Loans1: | $ | 2,361 | $ | 2,458 | $ | 4,819 | |||||||||||
| Investment securities: | |||||||||||||||||
| Taxable | 1 | 500 | 501 | ||||||||||||||
Tax-exempt2 | (490) | 16 | (474) | ||||||||||||||
| Short-term investments | 739 | (1,552) | (813) | ||||||||||||||
| Total interest income | 2,611 | 1,422 | 4,033 | ||||||||||||||
| Interest expense on: | |||||||||||||||||
| Interest-bearing demand deposits | (326) | (1,837) | (2,163) | ||||||||||||||
| Savings deposits | 1 | (17) | (16) | ||||||||||||||
| Time deposits >=$100 | (30) | (53) | (83) | ||||||||||||||
| Other time deposits | 174 | (123) | 51 | ||||||||||||||
| Short-term borrowings | — | — | — | ||||||||||||||
| Total interest expense | (181) | (2,030) | (2,211) | ||||||||||||||
| Net interest income | $ | 2,792 | $ | 3,452 | $ | 6,244 | |||||||||||
1.Interest income includes net loan fees.
2.Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for the six months ended June 30, 2025 and 2024.
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Provision and Allowance for Credit Losses and Allowance for Unfunded Commitments
The Company recorded a provision for credit losses and off-balance sheet credit exposures of $25,000 and $400,000 for the second quarter of 2025 and 2024, respectively. The Company recorded a provision for credit losses and off-balance sheet credit exposures of $930,000 and $495,000 for the first half of 2025 and 2024, respectively. The amount of the provision for credit losses is derived from the Company’s quarterly Current Expected Credit Loss (“CECL”) model. The amount of the provision for credit losses will fluctuate as determined by these quarterly analyses. The provision for credit losses in the second quarter of 2025 was driven by an increase in nonaccrual loans of $3.4 million, partially offset by the decrease in total loans of $24.9 million, or 2.2%, as compared to March, 31, 2025.
The Company experienced no loan charge-offs in the second quarter of 2025 and 2024. The ACL was $14.3 million at June 30, 2025 and $13.4 million at December 31, 2024. The ACL represented 1.28% of outstanding loans at June 30, 2025 and 1.24% of outstanding loans at December 31, 2024. The allowance for unfunded commitments was $302,000 at June 30, 2025 and $273,000 at December 31, 2024. There were $3.4 million of nonperforming loans outstanding at June 30, 2025 and $0 at December 31, 2024. The Company has a specific allowance for credit losses of $160,000 allocated to its nonaccrual loans at June 30, 2025.
The ACL has been established and is maintained to estimate the lifetime expected credit losses in the loan portfolio. An ongoing assessment is performed to determine if the balance is adequate. Charges or credits are made to expense based on changes in the economic forecast, qualitative risk factors, loan volume, and individual loans. For loans that are individually evaluated, the Company uses two impairment measurement methods: 1) the present value of expected future cash flows and 2) collateral value.
The Company also utilizes ratio analyses to evaluate the overall reasonableness of the ACL compared to its peers and required levels of regulatory capital. Federal and state regulatory agencies review the Company’s methodology for maintaining the ACL. These agencies may require the Company to adjust the ACL based on their judgments and interpretations about information available to them at the time of their examinations.
Summary of Credit Loss Experience
The following table presents information on the Company's provision for (release of) credit losses and analysis of the ACL:
Second Quarter of | First Half of | ||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Allowance for credit losses at beginning of period | $ | 14,286 | $ | 13,299 | $ | 13,395 | $ | 13,089 | |||||||||||||||
| Provision for credit losses | 10 | 335 | 901 | 545 | |||||||||||||||||||
| Allowance for credit losses at end of period | $ | 14,296 | $ | 13,634 | $ | 14,296 | $ | 13,634 | |||||||||||||||
| Allowance for unfunded commitments at beginning of period | $ | 287 | $ | 17 | $ | 273 | $ | 132 | |||||||||||||||
| Provision for (release of) credit losses | 15 | 65 | 29 | (50) | |||||||||||||||||||
| Allowance for unfunded commitments at end of period | $ | 302 | $ | 82 | $ | 302 | $ | 82 | |||||||||||||||
| Loans outstanding: | |||||||||||||||||||||||
| Average | $ | 1,125,899 | $ | 1,039,461 | $ | 1,117,758 | $ | 1,027,854 | |||||||||||||||
June 30 | $ | 1,117,004 | $ | 1,061,991 | $ | 1,117,004 | $ | 1,061,991 | |||||||||||||||
Ratio of allowance for credit losses to loans outstanding at June 30 | 1.28 | % | 1.28 | % | 1.28 | % | 1.28 | % | |||||||||||||||
Operating Expenses
Total operating expenses for the second quarter of 2025 decreased $290,000, or 0.8%, as compared to the second quarter of 2024. Total operating expenses for the first half of 2025 decreased $968,000, or 1.3%, as compared to the first half of 2024. The following table details the components of operating expenses:
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| (In thousands) | Second Quarter of | First Half of | |||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Salaries and commissions | $ | 20,638 | $ | 20,393 | $ | 40,301 | $ | 39,915 | |||||||||||||||
| Share-based compensation | 918 | 450 | 2,159 | 1,645 | |||||||||||||||||||
| Employee profit sharing | 1,583 | 901 | 3,085 | 2,351 | |||||||||||||||||||
| Net periodic pension cost | — | 191 | — | 386 | |||||||||||||||||||
| Other benefits | 4,613 | 4,309 | 9,486 | 8,854 | |||||||||||||||||||
| Personnel | $ | 27,752 | $ | 26,244 | $ | 55,031 | $ | 53,151 | |||||||||||||||
| Occupancy | 669 | 641 | 1,390 | 1,317 | |||||||||||||||||||
| Equipment | 2,562 | 1,936 | 4,856 | 3,767 | |||||||||||||||||||
| Bad debt expense (recovery) | — | 1,288 | (2,000) | 1,288 | |||||||||||||||||||
| Amortization of intangible assets | 293 | 173 | 586 | 346 | |||||||||||||||||||
| Other operating expense | 6,843 | 8,127 | 13,786 | 14,748 | |||||||||||||||||||
| Total operating expense | $ | 38,119 | $ | 38,409 | $ | 73,649 | $ | 74,617 | |||||||||||||||
Second quarter of 2025 compared to second quarter of 2024:
Personnel expenses increased $1.5 million, or 5.7%. Salaries and commissions increased $245,000, or 1.2%, as a result of merit increases and the December 2024 acquisition of AcuAudit, partially offset by a decrease in average full-time equivalent employees of 5.9% due to strategic investments in various technology initiatives. Share-based compensation and employee profit sharing increased $468,000 and $682,000, respectively, due to the improvement in earnings. Other benefits increased $304,000, or 7.1%, due to higher health insurance costs, partially offset by the decline in average FTEs.
Equipment expense increased $626,000, primarily due to an increase in depreciation expense on software related to recently completed technology initiatives.
The Company incurred bad debt expense of $1.3 million during the second quarter of 2024 and $0 in the second quarter of 2025.
Other operating expense declined $1.3 million as a result of $1.3 million of expense related to late fees incurred on facility transactions during the second quarter of 2024.
First half of 2025 compared to first half of 2024:
Personnel expenses increased $1.9 million, or 3.5%. Salaries and commissions increased $386,000, or 1.0%, as a result of merit increases and the December 2024 acquisition of AcuAudit, partially offset by a decrease in average full-time equivalent employees of 4.7% due to strategic investments in various technology initiatives. Share-based compensation and employee profit sharing increased $514,000 and $734,000, respectively, due to the improvement in earnings. Other benefits increased $632,000, or 7.1%, due to higher health insurance costs, partially offset by the decline in average FTEs.
Equipment expense increased $1.1 million primarily due to an increase in depreciation expense on software related to recently completed technology initiatives.
The Company recorded a bad debt recovery during the first half of 2025 of $2.0 million related to partial consideration received in a litigation settlement as more fully described in Note 8 to the consolidated financial statements. The Company incurred $1.3 million of bad debt expense in the first half of 2024 related to the same matter.
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Net Income from Discontinued Operations
| (In thousands except per share data) | Second Quarter of | First Half of | |||||||||||||||||||||||||||||||||
| 2025 | 2024 | % Change | 2025 | 2024 | % Change | ||||||||||||||||||||||||||||||
| Processing fees | $ | 3,807 | $ | 3,941 | (3.4) | % | $ | 7,630 | $ | 8,178 | (6.7) | % | |||||||||||||||||||||||
| Financial fees | 475 | 169 | 181.1 | % | 888 | 348 | 155.2 | % | |||||||||||||||||||||||||||
| Other fees | 1,454 | 503 | 189.1 | % | 1,836 | 660 | 178.2 | % | |||||||||||||||||||||||||||
| Gain on sale of TEM business | 3,550 | — | 100.0 | % | 3,550 | — | 100.0 | % | |||||||||||||||||||||||||||
| Total revenues | 9,286 | 4,613 | 101.3 | % | 13,904 | 9,186 | 51.4 | % | |||||||||||||||||||||||||||
| Operating expense | 4,359 | 4,385 | (0.6) | % | 8,448 | 8,847 | (4.5) | % | |||||||||||||||||||||||||||
| Income before income tax expense | 4,927 | 228 | 2061.0 | % | 5,456 | 339 | 1509.4 | % | |||||||||||||||||||||||||||
| Income tax expense | 1,232 | 52 | 2269.2 | % | 1,345 | 74 | 1717.6 | % | |||||||||||||||||||||||||||
| Net income from discontinued operations | $ | 3,695 | $ | 176 | 1999.4 | % | $ | 4,111 | $ | 265 | 1451.3 | % | |||||||||||||||||||||||
| Facility transaction volume | 126 | 139 | (9.4) | % | 259 | 289 | (10.4) | % | |||||||||||||||||||||||||||
| Facility dollar volume | $ | 244,782 | $ | 288,772 | (15.2) | % | $ | 501,626 | $ | 602,130 | (16.7) | % | |||||||||||||||||||||||
| Average full-time equivalent employees | 116 | 151 | (23.2) | % | 123 | 149 | (17.4) | % | |||||||||||||||||||||||||||
Second quarter of 2025 compared to second quarter of 2024:
Net income from discontinued operations was $3.7 million, an increase of $3.5 million over the same period in the prior year. The increase is primarily due to the gain on sale of the TEM Business Unit of $3.6 million in the second quarter of 2025 in addition to $1.5 million of other non-recurring fee income during the second quarter of 2025 as compared to $503,000 in the same quarter in 2024.
First half of 2025 compared to first half of 2024:
Net income from discontinued operations was $4.1 million, an increase of $3.8 million over the same period in the prior year. The increase is primarily due to the gain on sale of the TEM Business Unit of $3.6 million in the second quarter of 2025 in addition to $1.8 million of other non-recurring fee income during the first half of 2025 as compared to $660,000 in the same period in 2024.
Financial Condition
Total assets at June 30, 2025 were $2.32 billion, a decrease of $79.1 million, or 3.3%, from December 31, 2024.
The Company experienced a decrease in cash and cash equivalents of $131.6 million, or 37.6%, during the first half of 2025. The change in cash and cash equivalents reflects the Company’s daily liquidity position and is primarily affected by changes in funding sources, mainly accounts and drafts payable and deposits, cash flows in and out of loans, investment securities and payments in advance of funding.
The investment securities portfolio increased $71.5 million, or 13.5%, during the first half of 2025. The increase is due to purchases of $153.2 million and a decrease in unrealized losses of $15.8 million, partially offset by sales of $53.1 million and maturities of $40.0 million.
Loans increased $35.0 million, or 3.2%, from December 31, 2024. The Company experienced growth in its commercial and industrial and faith-based loan portfolios during the first half of 2025.
Payments in advance of funding decreased $30.9 million, or 14.8%, primarily due to the continued consolidation of freight carriers, partially offset by the 3.2% increase in transportation dollar volumes.
Accounts and drafts receivable from customers increased $4.4 million, or 7.8%, from December 31, 2024. The increase is solely due to timing of customer funding.
Assets of discontinued operations declined $14.4 million due to the sale of the TEM business on June 30, 2025.
Total deposits at June 30, 2025 were $1.00 billion, an increase of $35.9 million, or 3.7%, from December 31, 2024. The increase is primarily due to the increase in noninterest-bearing deposits of $119.4 million.
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Accounts and drafts payable at June 30, 2025 were $1.04 billion, a decrease of $92.8 million, or 8.2%, from December 31, 2024. Accounts and drafts payable are a stable source of funding generated by payment float from transportation and facility clients. Accounts and drafts payable will fluctuate from period-end to period-end due to the payment processing cycle, which results in lower balances on days when payments clear and higher balances on days when payments are issued. For this reason, average balances are generally a more meaningful measure of accounts and drafts payable.
Liabilities of discontinued operations declined $22.3 million due to the sale of the TEM business on June 30, 2025.
Total liabilities at June 30, 2025 were $2.08 billion, a decrease of $90.9 million, or 4.2%, from December 31, 2024, reflective of the decrease in accounts and drafts payable, partially offset by the increase in deposits.
Total shareholders’ equity at June 30, 2025 was $240.8 million, an $11.8 million increase from December 31, 2024. The increase in shareholders’ equity is a result of first half of 2025 earnings of $17.8 million, and a decrease in accumulated other comprehensive loss of $12.5 million primarily related to the fair value of available-for-sale investment securities, partially offset by the repurchase of Company stock of $11.0 million, and dividends paid of $8.3 million.
Liquidity and Capital Resources
The discipline of liquidity management as practiced by the Company seeks to ensure that funds are available to fulfill all payment obligations relating to invoices processed as they become due and meet depositor withdrawal requests and borrower credit demands while at the same time maximizing profitability. This is accomplished by balancing changes in demand for funds with changes in supply of funds. Primary liquidity to meet demand is provided by short-term liquid assets that can be converted to cash, maturing investment securities and the ability to obtain funds from external sources. The Company's Asset/Liability Committee has direct oversight responsibility for the Company's liquidity position and profile. Management considers both on-balance sheet and off-balance sheet items in its evaluation of liquidity.
The balance of liquid assets consists of cash and cash equivalents, which include cash and due from banks, interest-bearing deposits in other financial institutions, federal funds sold and money market funds. Cash and cash equivalents totaled $218.2 million at June 30, 2025, a decrease of $131.6 million, or 37.6%, from December 31, 2024. At June 30, 2025, these assets represented 9.4% of total assets and are the Company’s and its subsidiaries’ primary source of liquidity to meet future expected and unexpected loan demand, depositor withdrawals or reductions in accounts and drafts payable.
Secondary sources of liquidity include the investment portfolio and borrowing lines. Total investment securities were $599.5 million at June 30, 2025, an increase of $71.5 million from December 31, 2024. These assets represented 25.9% of total assets at June 30, 2025. Of the total portfolio, 1.2% mature in one year, 13.8% mature in one to five years, and 85.0% mature in five or more years.
The Bank has unsecured lines of credit at six correspondent banks to purchase federal funds up to a maximum of $83.0 million in aggregate. As of June 30, 2025, the Bank also has secured lines of credit with the Federal Home Loan Bank of $228.5 million collateralized by mortgage loans. The Company also has secured lines of credit from three banks up to a maximum of $225.0 million in aggregate collateralized by investment securities. There were no amounts outstanding under any line of credit as of June 30, 2025 or December 31, 2024.
The deposits of the Company's banking subsidiary have historically been stable, consisting of a sizable volume of core deposits related to customers that utilize other commercial products of the Bank, including CassPay and faith-based customers. The accounts and drafts payable generated by the Company has also historically been a stable source of funds. The Company is part of the Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweep (“ICS”) deposit placement programs. Time deposits include $58.3 million of CDARS deposits and interest-bearing demand deposits include $161.8 million of ICS deposits. These programs offer the Bank’s customers the ability to maximize Federal Deposit Insurance Corporation (“FDIC”) insurance coverage. The Company uses these programs to retain or attract deposits from existing customers.
Net cash flows provided by operating activities were $20.3 million for the first half of June 30, 2025, compared to $20.5 million for the first half of June 30, 2024, a decrease of $243,000. Net cash flows from investing and financing activities fluctuate greatly as the Company actively manages its investment and loan portfolios and customer activity influences changes in deposit and accounts and drafts payable balances. Other causes for the changes in these account balances are discussed earlier in this report. Due to the daily fluctuations in these account balances, the analysis of changes in average balances, also discussed earlier in this report, can be more indicative of underlying activity than the period-end balances used in the statements of cash flows. Management anticipates that cash and cash equivalents, maturing
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investments and cash from operations will continue to be sufficient to fund the Company’s operations and capital expenditures in 2025, which are estimated to range from $6 million to $8 million.
Net income plus amortization of intangible assets, net amortization of premium/discount on investment securities and depreciation of premises and equipment was $22.2 million and $16.2 million for the first half of 2025 and 2024, respectively. The first half of 2025 reflected higher net income of $6.2 million and higher depreciation of $811,000, partially offset by a decrease in net amortization of premium/discount on investment securities of $1.2 million. The net amortization of premium/discount on investment securities is dependent on the type of securities purchased and changes in the prevailing market interest rate environment.
The loss on sale of investment securities of $3.6 million also had a positive impact on net cash provided by operating activities. These factors positively impacting net cash provided by operating activities were partially offset by:
•A change in other operating activities, net of $2.9 million, primarily due to changes in various other assets and liabilities related to client funding and reimbursements;
•An change in accounts receivable of $1.5 million; and
•A decrease in net cash (used in) provided by discontinued operations of $2.0 million.
The Company faces market risk to the extent that its net interest income and fair market value of equity are affected by changes in market interest rates. For information regarding the market risk of the Company’s financial instruments, see Item 3, “Quantitative and Qualitative Disclosures about Market Risk.”
There are several trends and uncertainties that may impact the Company’s ability to generate revenues and income at the levels that it has in the past. Those that could significantly impact the Company include the general levels of interest rates, business activity, inflation, and energy costs as well as new business opportunities available to the Company. For more detailed information on these trends and uncertainties and how they can generally affect the Company’s available liquidity, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity” in the Company’s 2024 Form 10-K.
As a bank holding company, the Company and the Bank are subject to capital requirements administered by state and federal banking agencies. Capital adequacy guidelines, and, for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are subject to qualitative judgments by regulators about components, risk weighting, and other factors. In addition, the calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. For example, as allowed under the Basel III Capital Rules, the Company has elected to opt-out of the requirement to include most components of accumulated other comprehensive income in common equity Tier 1 capital. For more information on these regulatory requirements, including the Basel III Capital Rules and capital classifications, see Item 1, "Business-Supervision and Regulation" and Item 8, Note 2, "Financial Statements and Supplementary Data" of the Company's 2024 Form 10-K.
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The Company and the Bank continue to exceed all regulatory capital requirements, as evidenced by the following capital amounts and ratios:
| Actual | Capital Requirements | Requirement to be Well-Capitalized | |||||||||||||||||||||||||||||||||
| (In thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||||||||
At June 30, 2025 | |||||||||||||||||||||||||||||||||||
| Total capital (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||
| Cass Information Systems, Inc. | $ | 267,542 | 15.67 | % | $ | 136,574 | 8.00 | % | $ N/A | N/A % | |||||||||||||||||||||||||
| Cass Commercial Bank | 217,919 | 19.05 | 91,503 | 8.00 | 114,379 | 10.00 | |||||||||||||||||||||||||||||
| Common Equity Tier I Capital (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||
| Cass Information Systems, Inc. | 252,944 | 14.82 | 76,823 | 4.50 | N/A | N/A | |||||||||||||||||||||||||||||
| Cass Commercial Bank | 204,109 | 17.95 | 51,470 | 4.50 | 74,346 | 6.50 | |||||||||||||||||||||||||||||
| Tier I capital (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||
| Cass Information Systems, Inc. | 252,944 | 14.82 | 102,431 | 6.00 | N/A | N/A | |||||||||||||||||||||||||||||
| Cass Commercial Bank | 204,109 | 17.85 | 68,627 | 6.00 | 91,503 | 8.00 | |||||||||||||||||||||||||||||
| Tier I capital (to average assets) | |||||||||||||||||||||||||||||||||||
| Cass Information Systems, Inc. | 252,944 | 10.62 | 95,281 | 4.00 | N/A | N/A | |||||||||||||||||||||||||||||
| Cass Commercial Bank | 204,109 | 14.45 | 56,483 | 4.00 | 70,604 | 5.00 | |||||||||||||||||||||||||||||
At December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Total capital (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||
| Cass Information Systems, Inc. | $ | 261,021 | 14.61 | % | $ | 142,969 | 8.00 | % | $ N/A | N/A % | |||||||||||||||||||||||||
| Cass Commercial Bank | 207,519 | 17.68 | 93,911 | 8.00 | 117,389 | 10.00 | |||||||||||||||||||||||||||||
| Common Equity Tier I Capital (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||
| Cass Information Systems, Inc. | 247,354 | 13.84 | 80,420 | 4.50 | N/A | N/A | |||||||||||||||||||||||||||||
| Cass Commercial Bank | 194,446 | 16.56 | 52,825 | 4.50 | 76,303 | 6.50 | |||||||||||||||||||||||||||||
| Tier I capital (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||
| Cass Information Systems, Inc. | 247,354 | 13.84 | 107,226 | 6.00 | N/A | N/A | |||||||||||||||||||||||||||||
| Cass Commercial Bank | 194,446 | 16.56 | 70,433 | 6.00 | 93,911 | 8.00 | |||||||||||||||||||||||||||||
| Tier I capital (to average assets) | |||||||||||||||||||||||||||||||||||
| Cass Information Systems, Inc. | 247,354 | 10.57 | 93,625 | 4.00 | N/A | N/A | |||||||||||||||||||||||||||||
| Cass Commercial Bank | 194,446 | 13.50 | 57,620 | 4.00 | 72,026 | 5.00 | |||||||||||||||||||||||||||||
Impact of New or Not Yet Adopted Accounting Pronouncements
In October 2023, the FASB issued 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative ("ASU 2023-06"). This ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. ASU 2023-06 is not expected to have a significant impact on the Company's financial statements.
In November 2023, the FASB issued 2023-07, Segment Reporting (Topic 820): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). This ASU expands segment disclosure requirements for public entities to require disclosure of significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after
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December 15, 2024. The adoption of ASU 2023-07 did not have a significant impact on the Company's financial statements. See Note 6 to our financial statements.
In December 2023, the FASB issued 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). This ASU requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. It also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. ASU 2023-09 is not expected to have a significant impact on the Company's financial statements.
Critical Accounting Policies
The Company has prepared the consolidated financial statements in this report in accordance with the Financial Accounting Standards Board Accounting Standards Codification. In preparing the consolidated financial statements, management makes estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. These estimates have been generally accurate in the past, have been consistent and have not required any material changes. There can be no assurances that actual results will not differ from those estimates. The accounting policy that requires significant management estimates and is deemed critical to the Company’s results of operations or financial position has been discussed with the Audit and Risk Committee of the Board of Directors and is described below.
Allowance for Credit Losses. The Company performs periodic and systematic detailed reviews of its loan portfolio to determine management’s estimate of the lifetime expected credit losses. Although these estimates are based on established methodologies for determining allowance requirements, actual results can differ significantly from estimated results. These policies affect both segments of the Company. The impact and associated risks related to these policies on the Company’s business operations are discussed in the “Provision and Allowance for Credit Losses and Allowance for Unfunded Commitments” section of this report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As described in the Company’s 2024 Form 10-K for the year ended December 31, 2024, the Company manages its interest rate risk through measurement techniques that include gap analysis and a simulation model. As part of the risk management process, asset/liability management policies are established and monitored by management.
The following table summarizes simulated changes in net interest income versus unchanged rates over the next 12 months as of June 30, 2025 and December 31, 2024.
| % change in projected net interest income | ||||||||||||||
| June 30, 2025 | December 31, 2024 | |||||||||||||
| +200 basis points | 7.0 | % | 9.0 | % | ||||||||||
| +100 basis points | 3.2 | % | 4.4 | % | ||||||||||
| Flat rates | — | % | — | % | ||||||||||
| -100 basis points | (0.2) | % | 0.2 | % | ||||||||||
| -200 basis points | (1.2) | % | (1.3) | % | ||||||||||
The Company is generally asset sensitive as average interest-earning assets of $2.09 billion for the second quarter of 2025 greatly exceeded average interest-bearing liabilities of $615.9 million. The table above on the projected impact of interest rate shocks results from a static balance sheet at June 30, 2025.
ITEM 4. CONTROLS AND PROCEDURES
The Company’s management, under the supervision and with the participation of the principal executive officer and the principal financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report and concluded that, as of such date, these controls and procedures were effective.
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There were no changes in the second quarter of 2025 in the Company's internal control over financial reporting identified by the Company’s principal executive officer and principal financial officer in connection with their evaluation that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended).
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is the subject of various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of business. Management believes the outcome of all such proceedings will not have a material effect on the businesses or financial conditions of the Company or its subsidiaries.
ITEM 1A. RISK FACTORS
The Company has included in Part I, Item 1A of its 2024 Form 10-K, a description of certain risks and uncertainties that could affect the Company’s business, future performance or financial condition (the “Risk Factors”). There are no material changes to the Risk Factors as disclosed in the Company’s 2024 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended June 30, 2025, the Company repurchased shares of its common stock as follows:
| Period | Total Number of Shares Purchased(1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | |||||||||||||||||||
| April 1, 2025–April 30, 2025 | 41,666 | $ | 41.04 | 41,445 | 161,027 | ||||||||||||||||||
| May 1, 2025–May 31, 2025 | 64,344 | 42.61 | 64,344 | 96,683 | |||||||||||||||||||
| June 1, 2025–June 30, 2025 | 35,172 | 42.85 | 34,480 | 62,203 | |||||||||||||||||||
| Total | 141,182 | $ | 42.20 | 140,269 | 62,203 | ||||||||||||||||||
(1)During the quarter ended June 30, 2025, there were 140,269 shares repurchased pursuant to the Company's publicly announced treasury stock buyback program and 913 shares transferred from employees in satisfaction of tax withholding obligations upon the vesting of restricted stock.
(2)The Board of Directors authorized the treasury stock buyback program on October 17, 2023, announced by the Company on October 19, 2023. The program provides that the Company may repurchase up to an aggregate of 500,000 shares of common stock and has no expiration date. On July 15, 2025, the Board of Directors authorized the repurchase of up to 500,000 shares of the Company's common stock with no expiration date. This authorization replaces the October 2023 authorization, and as such, the Company has 500,000 shares available for repurchase effective with the July 15, 2025 authorization.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
(a)None.
(b)There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors implemented in the second quarter of 2025.
(c)During the three months ended June 30, 2025, none of the Company's officers or directors adopted or terminated any "Rule 10b5-1 trading arrangement" or any “non-Rule 10b5-1 trading arrangement,” as such terms are defined under Item 408 of Regulation S-K.
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ITEM 6. EXHIBITS
| Exhibit 101.INS XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||
| Exhibit 101.SCH Inline XBRL Taxonomy Extension Schema Document. | ||
| Exhibit 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||
| Exhibit 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. | ||
| Exhibit 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||
| Exhibit 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. | ||
| Exhibit 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | ||
* Management contract or compensatory plan arrangement. | ||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CASS INFORMATION SYSTEMS, INC. | ||||||||
DATE: August 5, 2025 | By | /s/ Martin H. Resch | ||||||
| Martin H. Resch | ||||||||
| President and Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
DATE: August 5, 2025 | By | /s/ Michael J. Normile | ||||||
| Michael J. Normile | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
| (Principal Financial and Accounting Officer) | ||||||||
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