Cass Information Systems Inc 10-Q for FY2020 Q1

Cass Information Systems Inc (CASS)

10-Q 2020-05-07 For: 2020-03-31

Added on April 06, 2026

About this 10-Q

Cass Information Systems Inc filed this 10-Q on May 7, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $38.14M; down 0.6% from $38.37M a year earlier
Net income: $7.55M; down 7.6% from net income of $8.16M a year earlier
Diluted EPS: $0.52; down 5.5% from $0.55 a year earlier

	Amount of Commitment Expiration per Period
Time deposits	$	71,542		$	43,879		$	27,637		$	26		$	—
Total	$	71,542		$	43,879		$	27,637		$	26		$	—

	Shares	Weighted- Average Exercise Price
Balance at December 31, 2019	155,292	$	32.58	2.92	$	3,908
Exercised	(10,293)		26.72	—		—
Exercisable at March 31, 2020	144,999	$	32.99	2.71	$	665

(In thousands)	Estimated 2020
Service cost – benefits earned during the year	$	4,312	$	3,555
Interest cost on projected benefit obligations		3,903		4,103
Expected return on plan assets		(6,051)		(4,753)
Net amortization		1,890		1,559
Net periodic pension cost	$	4,054	$	4,464

(In thousands)	Estimated 2020
Service cost – benefits earned during the year	$	121	$	97
Interest cost on projected benefit obligation		347		408
Net amortization		112		276
Net periodic pension cost	$	580	$	781

	March 31, 2020
State and political subdivisions	$	288,631	$	12,010	$	—	$	300,641
U.S. government agencies		85,289		1,564		—		86,853
Certificates of deposit		500		—		—		500
Total	$	374,420	$	13,574	$	—	$	387,994

	December 31, 2019
State and political subdivisions	$	310,720	$	13,727	$	—	$	324,447
U.S. government agencies		97,380		507		169		97,718
Certificates of deposit		500		—		—		500
Total	$	408,600	$	14,234	$	169	$	422,665

	March 31, 2020
State and political subdivisions	$	—	$	—	$	—	$	—	$	—	$	—
U.S. government agencies		—		—		—		—		—		—
Certificates of deposit		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	—

	December 31, 2019
State and political subdivisions	$	—	$	—	$	—	$	—	$	—	$	—
U.S. government agencies		3,801		12		17,593		157		21,394		169
Certificates of deposit		—		—		—		—		—		—
Total	$	3,801	$	12	$	17,593	$	157	$	21,394	$	169

	March 31, 2020
Due in 1 year or less	$	61,709	$	62,498
Due after 1 year through 5 years		80,027		82,183
Due after 5 years through 10 years		199,491		209,364
Due after 10 years		33,193		33,949
Total	$	374,420	$	387,994

(In thousands)	March 31, 2020
Lease payments due
Less than 1 year	$	1,841
1-2 years		1,658
2-3 years		1,505
3-4 years		578
4-5 years		507
Over 5 years		2,407
Total undiscounted cash flows		8,496
Discount on cash flows		1,350
Total lease liability	$	7,146

	First Quarter of
Net income	$	7,545		$	8,163		(7.6)%
Diluted earnings per share	$	.52		$	.55		(5.5)%
Return on average assets		1.70	%		1.96	%	—
Return on average equity		12.50	%		14.67	%	—

	First Quarter of
Transportation invoice volume		8,280		8,948	(7.5)%
Transportation invoice dollar volume	$	6,467,051	$	6,985,773	(7.4)%
Facility expense transaction volume*		6,509		6,994	(6.9)%
Facility expense dollar volume	$	3,458,646	$	3,617,428	(4.4)%
Payment and processing revenue	$	25,503	$	26,457	(3.6)%

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →

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

	For the quarterly period ended March 31, 2020

OR

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

	For the transition period from __________ to __________

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

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

Large Accelerated Filer ☒	Accelerated Filer ☐

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

PART I – Financial Information
Item 1.FINANCIAL STATEMENTS
Consolidated Balance Sheets March 31, 2020 (unaudited) and December 31, 2019	3
Consolidated Statements of Income Three months ended March 31, 2020 and 2019 (unaudited)	4
Consolidated Statements of Comprehensive Income Three months ended March 31, 2020 and 2019 (unaudited)	5
Consolidated Statements of Cash Flows Three months ended March 31, 2020 and 2019 (unaudited)	6
Consolidated Statements of Shareholders’ Equity Three months ended March 31, 2020 and 2019 (unaudited)	7
Notes to Consolidated Financial Statements (unaudited)	8
Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	29
Item 4.CONTROLS AND PROCEDURES	29
PART II – Other Information – Items 1. – 6.	29
SIGNATURES	32

	March 31, 2020 (Unaudited)		December 31, 2019
Assets
Cash and due from banks	$	18,878	$	18,076
Interest-bearing deposits in other financial institutions		137,617		172,422
Federal funds sold and other short-term investments		6,699		13,456
Cash and cash equivalents		163,194		203,954
Securities available-for-sale, at fair value		387,994		422,665

Loans		854,780		772,638
Less: Allowance for loan losses		10,889		10,556
Loans, net		843,891		762,082
Payments in excess of funding		208,845		206,158
Premises and equipment, net		19,755		20,527
Investment in bank-owned life insurance		17,712		17,599
Goodwill		14,262		14,262
Other intangible assets, net		4,066		4,281
Other assets		72,263		112,715
Total assets	$	1,731,982	$	1,764,243

Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	288,226	$	351,091
Interest-bearing		438,381		406,045
Total deposits		726,607		757,136
Accounts and drafts payable		702,069		684,295
Short-term borrowings		—		18,000
Other liabilities		62,023		60,622
Total liabilities		1,490,699		1,520,053

Shareholders’ Equity:
Preferred stock, par value $.50 per share; 2,000,000 shares authorized and no shares issued		—		—
Common stock, par value $.50 per share; 40,000,000 shares authorized and 15,505,772 shares issued at March 31, 2020 and December 31, 2019		7,753		7,753
Additional paid-in capital		203,801		205,397
Retained earnings		93,968		90,341
Common shares in treasury, at cost (1,092,200 shares at March 31, 2020 and 991,406 shares at December 31, 2019)		(49,800)		(45,381)
Accumulated other comprehensive loss		(14,439)		(13,920)
Total shareholders’ equity		241,283		244,190
Total liabilities and shareholders’ equity	$	1,731,982	$	1,764,243

	Three Months Ended March 31,
	2020		2019
Fee Revenue and Other Income:
Information services payment and processing revenue	$	25,503	$	26,457
Bank service fees		410		376
Gains on sales of securities		1,069		11
Other		113		169
Total fee revenue and other income		27,095		27,013

Interest Income:
Interest and fees on loans		9,001		8,629
Interest and dividends on securities:
Taxable		560		642
Exempt from federal income taxes		1,819		2,037
Interest on federal funds sold and other short-term investments		958		1,589
Total interest income		12,338		12,897

Interest Expense:
Interest on deposits		963		1,290
Interest on short-term borrowings		2		—
Net interest income		11,373		11,607
Provision for loan losses		325		250
Net interest income after provision for loan losses		11,048		11,357
Total net revenue		38,143		38,370

Operating Expense:
Salaries and employee benefits		22,427		22,277
Occupancy		941		959
Equipment		1,635		1,469
Amortization of intangible assets		215		107
Other operating expense		3,711		3,650
Total operating expense		28,929		28,462
Income before income tax expense		9,214		9,908
Income tax expense		1,669		1,745
Net income	$	7,545	$	8,163

Basic earnings per share	$	.52	$	.56
Diluted earnings per share		.52		.55

(In thousands except per share data)	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance, December 31, 2018	$	7,753	$	205,770	$	75,171	$	(39,974)	$	(18,872)	$	229,848

Net income						8,163						8,163
Cash dividends ($.26 per share)						(3,776)						(3,776)
Issuance of 25,124 common shares pursuant to stock-based compensation plan, net				(1,014)				826				(188)
Exercise of SARs				(303)				164				(139)
Stock-based compensation expense				857								857
Purchase of 107,815 common shares								(5,701)				(5,701)
Other comprehensive income										5,416		5,416
Balance, March 31, 2019	$	7,753	$	205,310	$	79,558	$	(44,685)	$	(13,456)	$	234,480


Balance, December 31, 2019	$	7,753	$	205,397	$	90,341	$	(45,381)	$	(13,920)	$	244,190

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

	Three Months Ended March 31,
(In thousands except share and per share data)	2020		2019
Basic
Net income	$	7,545	$	8,163
Weighted-average common shares outstanding		14,422,813		14,455,527
Basic earnings per share	$	.52	$	.56

Diluted
Net income	$	7,545	$	8,163
Weighted-average common shares outstanding		14,422,813		14,455,527
Effect of dilutive restricted stock and stock appreciation rights		207,700		253,168
Weighted-average common shares outstanding assuming dilution		14,630,513		14,708,695
Diluted earnings per share	$	.52	$	.55

(In thousands)	Information Services		Banking Services		Corporate, Eliminations and Other		Total
Three Months Ended March 31, 2020
Fee income	$	25,440	$	615	$	1,040	$	27,095
Interest income*		5,791		7,284		(253)		12,822
Interest expense		—		965		—		965
Intersegment income (expense)		—		525		(525)		—
Tax-equivalized pre-tax income*		6,207		2,703		788		9,698
Goodwill		12,433		1,829		—		14,262
Other intangible assets, net		1,040		3,026		—		4,066
Total Assets		833,774		926,445		(28,237)		1,731,982
Funding Sources		677,829		611,135		—		1,288,964
Three Months Ended March 31, 2019
Fee income	$	26,796	$	391	$	(174)	$	27,013
Interest income*		6,177		7,486		(225)		13,438
Interest expense		—		1,290		—		1,290
Intersegment income (expense)		—		519		(519)		—
Tax-equivalized pre-tax income*		7,588		3,260		(398)		10,450
Goodwill		12,433		136		—		12,569
Other intangible assets, net		1,446		—		—		1,446
Total Assets		874,971		832,326		(22,416)		1,684,881
Funding Sources		647,590		591,199		—		1,238,789

	Performing						Nonperforming
(In thousands)	Current		30-59 Days		60-89 Days		90 Days and Over		Non- accrual		Total Loans
March 31, 2020
Commercial and industrial	$	399,217	$	—	$	—	$	—	$	—	$	399,217
Real estate
Commercial:
Mortgage		100,717		—		—		—		—		100,717
Construction		19,528		—		—		—		—		19,528
Faith-based:
Mortgage		311,520		—		—		—		—		311,520
Construction		23,792		—		—		—		—		23,792
Other		6		—		—		—		—		6
Total	$	854,780	$	—	$	—	$	—	$	—	$	854,780
December 31, 2019
Commercial and industrial	$	323,857	$	—	$	—	$	—	$	—	$	323,857
Real estate
Commercial:
Mortgage		101,654		—		—		—		—		101,654
Construction		25,299		—		—		—		—		25,299
Faith-based:
Mortgage		305,826		—		—		—		—		305,826
Construction		15,945		—		—		—		—		15,945
Other		57		—		—		—		—		57
Total	$	772,638	$	—	$	—	$	—	$	—	$	772,638

(In thousands)	Loans Subject to Normal Monitoring¹		Performing Loans Subject to Special Monitoring²		Nonperforming Loans Subject to Special Monitoring²		Total Loans
March 31, 2020
Commercial and industrial	$	387,444	$	11,773	$	—	$	399,217
Real estate
Commercial:
Mortgage		99,464		1,253		—		100,717
Construction		19,528		—		—		19,528
Faith-based:
Mortgage		310,236		1,284		—		311,520
Construction		23,792		—		—		23,792
Other		6		—		—		6
Total	$	840,470	$	14,310	$	—	$	854,780
December 31, 2019
Commercial and industrial	$	321,554	$	2,303	$	—	$	323,857
Real estate
Commercial:
Mortgage		100,346		1,308		—		101,654
Construction		25,299		—		—		25,299
Faith-based:
Mortgage		304,513		1,313		—		305,826
Construction		15,945		—		—		15,945
Other		57		—		—		57
Total	$	767,714	$	4,924	$	—	$	772,638

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

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

(In thousands)	December 31, 2018		Charge- Offs		Recoveries		Provision		March 31, 2019
Commercial and industrial	$	4,179	$	—	$	11	$	529	$	4,719
Real estate
Commercial:
Mortgage		1,417		—		—		(33)		1,384
Construction		89		—		—		26		115
Faith-based:
Mortgage		3,961		—		—		(51)		3,910
Construction		155		—		—		(27)		128
Other		424	$	—	$	—	$	(194)	$	230
Total	$	10,225	$	—	$	11	$	250	$	10,486

	Three Months Ended March 31,
	2020		2019
Comprehensive Income:
Net income	$	7,545	$	8,163
Other comprehensive (loss) income:
Net unrealized gain on securities available-for-sale		578		7,137
Tax effect		(138)		(1,699)
Reclassification adjustments for gains included in net income		(1,069)		(11)
Tax effect		254		3
Foreign currency translation adjustments		(144)		(14)
Total comprehensive income	$	7,026	$	13,579

	March 31, 2020				December 31, 2019
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Assets eligible for amortization:
Customer lists	$	4,778	$	(3,573)	$	4,778	$	(3,463)
Patents		72		(21)		72		(20)
Non-compete agreements		332		(332)		332		(332)
Software		2,844		(452)		2,844		(358)
Trade Name		190		(6)		190		(3)
Other		500		(266)		500		(259)
Unamortized intangible assets:
Goodwill¹		14,489		(227)		14,489		(227)
Total intangible assets	$	23,205	$	(4,877)	$	23,205	$	(4,662)

	Three Months Ended March 31, 2020
	Shares		Fair Value
Balance at December 31, 2019		123,272	$	47.24
Granted		23,111		53.16
Vested		(19,248)		49.33
Forfeited		(3,177)		49.83
Balance at March 31, 2020		123,958	$	47.95

	March 31, 2020
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State and political subdivisions	$	288,631	$	12,010	$	—	$	300,641
U.S. government agencies		85,289		1,564		—		86,853
Certificates of deposit		500		—		—		500
Total	$	374,420	$	13,574	$	—	$	387,994

	March 31, 2020
	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	$	—	$	—	$	—	$	—	$	—	$	—
U.S. government agencies		—		—		—		—		—		—
Certificates of deposit		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	—

	March 31, 2020
(In thousands)	Amortized Cost		Fair Value
Due in 1 year or less	$	61,709	$	62,498
Due after 1 year through 5 years		80,027		82,183
Due after 5 years through 10 years		199,491		209,364
Due after 10 years		33,193		33,949
Total	$	374,420	$	387,994

	For the Three Months Ended March 31,
(In thousands)	2020		2019
Fee revenue and other income
In-scope of FASB ASC 606
Invoice processing fees	$	19,124	$	20,542
Invoice payment fees		6,379		5,915
Information services payment and processing revenue		25,503		26,457
Bank service fees		410		376
Fee revenue (in-scope of FASB ASC 606)		25,913		26,833
Other income (out-of-scope of FASB ASC 606)		1,182		180
Total fee revenue and other income		27,095		27,013

Net interest income after provision for loan losses (out-of-scope of FASB ASC 606)¹		11,048		11,357
Total net revenue	$	38,143	$	38,370

	First Quarter of
(Dollars in thousands except per share data)	2020			2019			% Change
Net income	$	7,545		$	8,163		(7.6)%
Diluted earnings per share	$	.52		$	.55		(5.5)%
Return on average assets		1.70	%		1.96	%	—
Return on average equity		12.50	%		14.67	%	—

	First Quarter of 2020						First Quarter of 2019
(In thousands)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Assets¹
Earning assets
Loans²:
Taxable	$	799,502	$	9,001	4.53	%	$	721,526	$	8,629	4.85	%
Investment securities⁴:
Taxable		95,691		557	2.34			106,641		632	2.40
Tax-exempt³		297,044		2,303	3.12			330,624		2,578	3.16
Certificates of deposit		500		3	2.41			1,995		10	2.03
Interest-bearing deposits in other financial institutions		130,611		382	1.18			141,038		810	2.33
Federal funds sold and other short-term investments		164,525		576	1.41			136,789		779	2.31
Total earning assets		1,487,873		12,822	3.47			1,438,613		13,438	3.79
Non-earning assets
Cash and due from banks		17,351						13,816
Premises and equipment, net		20,295						22,015
Bank-owned life insurance		17,646						17,429
Goodwill and other intangibles		18,456						14,080
Other assets		226,568						191,474
Allowance for loan losses		(10,562)						(10,232)
Total assets	$	1,777,627					$	1,687,195
Liabilities and Shareholders’ Equity¹
Interest-bearing liabilities
Interest-bearing demand Deposits	$	326,852	$	633	0.78	%	$	304,890	$	922	1.23	%
Savings deposits		8,403		13	0.62			12,009		33	1.11
Time deposits >= $100		29,820		142	1.92			23,221		111	1.94
Other time deposits		44,092		175	1.60			49,729		224	1.83
Total interest-bearing deposits		409,167		963	0.95			389,849		1,290	1.34
Short-term borrowings		209		2	3.85			—		—	—
Total interest-bearing liabilities		409,376		965	0.95			389,849		1,290	1.34
Non-interest bearing liabilities
Demand deposits		295,165						270,169
Accounts and drafts payable		767,998						750,074
Other liabilities		62,228						51,427
Total liabilities		1,534,767						1,461,519
Shareholders’ equity		242,860						225,676
Total liabilities and shareholders’ equity	$	1,777,627					$	1,687,195
Net interest income			$	11,857					$	12,148
Net interest margin					3.21	%					3.42	%
Interest spread					2.52						2.45

1.	Balances shown are daily averages.
2.	Interest income on loans includes net loan fees of $156,000 and $165,000 for the First Quarter of 2020 and 2019, respectively.
3.	Interest income is presented on a tax-equivalent basis assuming a tax rate of 21%. The tax-equivalent adjustment was approximately $484,000 and $541,000 for the First Quarter of 2020 and 2019, respectively.
4.	For purposes of these computations, yields on investment securities are computed as interest income divided by the average amortized cost of the investments.

	First Quarter of 2020 Over First Quarter of 2019
(In thousands)	Volume			Rate			Total
Increase (decrease) in interest income:
Loans¹:
Taxable	$	948		$	(576	)	$	372
Investment securities:
Taxable		(60	)		(15	)		(75	)
Tax-exempt²		(242	)		(33	)		(275	)
Certificates of deposit		(9	)		2			(7	)
Interest-bearing deposits in other financial institutions		(56	)		(372	)		(428	)
Federal funds sold and other short-term investments		141			(344	)		(203	)
Total interest income		722			(1,338	)		(616	)
Interest expense on:
Interest-bearing demand deposits		65			(354	)		(289	)
Savings deposits		(8	)		(12	)		(20	)
Time deposits of >=$100		32			(1	)		31
Other time deposits		(23	)		(26	)		(49	)
Short-term borrowings		2			—			2
Total interest expense		68			(393	)		(325	)
Net interest income	$	654		$	(945	)	$	(291	)

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

	March 31, 2020				December 31, 2019
(Dollars in thousands)	Amount		Ratio		Amount		Ratio
Total capital (to risk-weighted assets)
Cass Information Systems, Inc.	$	247,970		19.16%	$	249,954		19.70%
Cass Commercial Bank		158,044		18.73%		154,011		19.32%
Common equity tier I capital (to risk-weighted assets)
Cass Information Systems, Inc.	$	237,081		18.32%	$	239,398		18.86%
Cass Commercial Bank		149,373		17.70%		145,673		18.27%
Tier I capital (to risk-weighted assets)
Cass Information Systems, Inc.	$	237,081		18.32%	$	239,398		18.86%
Cass Commercial Bank		149,373		17.70%		145,673		18.27%
Tier I capital (to leverage assets)
Cass Information Systems, Inc.	$	237,081		13.48%	$	239,398		13.24%
Cass Commercial Bank		149,373		17.02%		145,673		16.64%

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs¹	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2020 –	—		—	—	500,000
January 31, 2020
February 1, 2020 –
February 29, 2020	17,400	$	50.19	17,400	482,600
March 1, 2020 –
March 31, 2020	111,379	$	41.62	111,379	371,221
Total	128,779	$	42.77	128,779	371,221

	CASS INFORMATION SYSTEMS, INC.


DATE: May 7, 2020	By	/s/ Eric H. Brunngraber
		Eric H. Brunngraber
		Chairman, President, and Chief Executive Officer
		(Principal Executive Officer)


DATE: May 7, 2020	By	/s/ P. Stephen Appelbaum
		P. Stephen Appelbaum
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)