CASS INFORMATION SYSTEMS INC
For the period ended Jun 30, 2024. Filed Aug 6, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 6, 2024
CASS$54.18-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0000708781-24-000058
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0000708781-24-000074
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 89 previous paragraphs and 115 current paragraphs.
42 unchanged; 40 reworded; 21 added; 5 removed; 2 previous and 12 current paragraphs rearranged.
Tables are not compared: 8 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
2024 Items of Note
Current report
Net interest income for the second quarter of 2024 decreased $84,000, or 0.5%, as compared to the same period in 2023. The decrease in net interest income was attributable to a decline in average interest-earning assets of $52.3 million, or 2.6%. The Company had fewer funds to invest due to the loss of approximately $100.0 million of balances in February 2024 as a result of a cyber attack experienced by large client in the Company's CassPay division. CassPay offers solutions such as integrated payments, a B2B payment platform for clients. The Company does not expect these payment volumes and related balances from this client to return.
Current report
Included in other operating expenses for the second quarter of 2024 are $2.1 million of reserves and other losses on outstanding receivables in addition to $1.3 million related to estimated late fees to be incurred on facility transactions. See Note 7, "Commitments and Contingencies" for further information on the reserves and other losses. The late fees were
Current report
-22- mostly driven by a check processing delay with our third-party vendor, the same client that incurred a cyber attack, as described above.
Current report
Also, on July 16, 2024, the Company approved an Amendment providing for the termination of its noncontributory defined-benefit pension plan. The Company expects to record one-time termination expenses of approximately $5.0 million through operating expense related to the plan termination. The expense related to the termination is expected to be incurred during the fourth quarter of 2024 and first quarter of 2025 as the plan liabilities are settled. The successful termination of the plan is expected to reduce run rate operating expense by approximately $1.0 million on an annual basis.
Current report
-23- as described above comparing the second quarter of 2024 to the same period in 2023. Net income was $11.6 million and diluted EPS was $0.84 per share, decreases of 18.4% and 18.4% from the first half of June 30, 2023, respectively.
Current report
Average investment securities decreased $96.0 million, or 12.8%, to $653.7 million. The Company has not offset maturities and sales of investment securities with new purchase volume primarily due to the decline in average funding sources. The average yield on taxable investment securities increased 25 basis points to 2.88% and the average yield on tax-exempt investment securities increased 7 basis points to 2.75% driven by purchases of investment securities at current market interest rates and maturities and sales of securities at below market interest rates.
Current report
Average accounts and drafts payable decreased $52.3 million, or 5.0%, to $996.9 million. The decrease in average accounts and drafts payable was primarily reflective of a cyber event at a client, as described above, which decreased average balances approximately $100.0 million as well as the decrease in transportation dollar volumes of 6.5%, partially offset by an increase in facility dollar volume of 10.1%.
Current report
Average investment securities decreased $96.1 million, or 12.5%, to $674.3 million. The average yield on taxable investment securities increased 20 basis points to 2.79% and the average yield on tax-exempt investment securities declined 3 basis points to 2.72%. The Company has not offset maturities and sales of investment securities with new purchase volume primarily due to the decline in average funding sources. The increase in the average yield on taxable investment securities was driven by purchases of investment securities at current market interest rates and maturities and sales of securities at below market interest rates.
Current report
The average balance of interest-bearing deposits increased $85.0 million, or 15.5%, to $635.0 million. Average non-interest-bearing demand deposits decreased $125.7 million, or 22.7%, to $427.5 million. The Company has experienced a migration of client funds from non-interest bearing to interest-bearing driven by the higher interest rate environment. The average rate paid on interest-bearing deposits increased 82 basis points to 3.32% due to higher average short-term interest rates when comparing the periods.
Current report
Average accounts and drafts payable decreased $55.7 million, or 5.2%, to $1.02 billion. The decrease in average accounts and drafts payable was primarily reflective of a cyber event experienced by a client, as described above, which decreased average balances approximately $100.0 million as well as the decrease in transportation dollar volumes of 9.8%, partially offset by an increase in facility dollar volumes of 4.8%.
Current report
Balances shown are daily averages.
Current report
Interest income on loans includes net loan fees of $229,000 and $511,000 for the six-month periods ended June 30, 2024 and 2023, respectively.
Current report
Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for both the six-month periods ended June 30, 2024 and 2023. The tax-equivalent adjustment was approximately $483,000 and $584,000 for the six-month periods ended June 30, 2024 and 2023, respectively.
Current report
Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for the six-month periods ended June 30, 2024 and 2023.
Current report
Equipment expense increased $239,000, or 13.7%, partially due to an increase in depreciation expense related to technology initiatives throughout our lines of business.
Current report
Other operating expenses increased $2.9 million, or 40.9%. Included in other operating expenses for the second quarter of 2024 are $2.1 million of reserves and other losses on outstanding receivables in addition to $1.3 million related to estimated late fees to be incurred on facility transactions. The late fees were mostly driven by a check processing delay with our third-party vendor, the same client that experienced a cyber attack, as described above.
Current report
Equipment expense increased $470,000, or 13.8%, partially due to an increase in depreciation expense related to technology initiatives throughout our lines of business.
Current report
Other operating expenses increased $2.4 million, or 16.1% for the same reasons as described for the quarterly variance above, partially offset by lower levels of outside service expense as technology initiatives are completed.
Current report
Payments in advance of funding increased $15.7 million, or 7.9%. from December 31, 2023 due to timing of funding.
Current report
•A change in the increase (decrease) of the current income tax liability of $1.6 million and
Removed paragraphs (5)
Previous report
Average investment securities decreased $96.5 million, or 12.2%, to $694.8 million due to the maturity of investment securities throughout 2023 and the first three months of 2024. The average yield on taxable investment securities increased
Previous report
18 basis points to 2.72% as a result of the increase in short and long-term interest rates. The average yield on tax-exempt investment securities declined 13 basis points to 2.69% driven by maturities of higher rate securities.
Previous report
Average accounts and drafts payable decreased $59.3 million, or 5.4%, to $1.04 billion. The decrease in average accounts and drafts payable was primarily driven by the decrease in transportation dollar volumes of 12.9%. In addition, a cyber attack at a CassPay client during the first quarter of 2024 reduced payment volumes and related average accounts and drafts payable to that client.
Previous report
Non-Personnel expenses decreased $282,000, or 1.9%. Certain expense categories related to technology initiatives declined as the Company transitioned to new technology platforms for data entry.
Previous report
Payments in advance of funding increased $22.7 million, or 11.4%. The Company has experienced a recent increase in these balances dues to sales activities and other external factors.
Reworded paragraphs (40)
Previous wording
The transportation industry continues to experience a decline in overall freight rates caused by an ongoing freight recession. The freight recession adversely affects the number of freight transactions and dollar amount of invoices processed. Partially as a result, the Company's average accounts and drafts payable has declined $59.3 million, or 5.4%, from the first quarter of 2023 to the first quarter of 2024. Transportation dollar volumes are key to the Company’s revenue as higher volumes generally lead to an increase in payment float, which generates interest income, as well as an increase in payments in advance of funding, which generates financial fees.
Current wording
The transportation industry continues to experience a decline in overall freight rates caused by an ongoing freight recession. The freight recession adversely affects the number of freight transactions and dollar amount of invoices processed. Partially as a result, the Company's transportation invoice and dollar volumes declined 3.5% and 9.8%, respectively during the first six months of 2024 as compared to the same period in 2023. Transportation dollar volumes are key to the Company’s revenue as higher volumes generally lead to an increase in payment float, which generates interest income, as well as an increase in payments in advance of funding, which generates financial fees.
Previous wording
As a result of rising inflation, the Federal Reserve has increased the Federal Funds rate. The increase in the Federal Funds rate has contributed to a slight increase in the Company's net interest margin, therefore positively impacting net interest income. Inflation has also had the impact of increasing operating expenses, such as compensation expense.
Current wording
As a result of rising inflation, the Federal Reserve has increased the Federal Funds rate. The increase in the Federal Funds rate has contributed to a slight increase in the Company's net interest margin. Inflation has also had the impact of increasing operating expenses, such as compensation expense.
Previous wording
Despite the decline in average accounts and drafts payable as well as a decline in average deposits partially stemming from the disruption in the banking industry in the first quarter of 2023, the Company’s liquidity position and balance sheet remains strong. The Company maintained average short-term investments of $352.2 million during the first quarter of 2024. In addition, all of the Company's investment securities are classified as available-for-sale and there were no outstanding borrowings at March 31, 2024.
Current wording
Despite the decline in average accounts and drafts payable during the quarter, the Company’s liquidity position and balance sheet remains strong. The Company maintained average short-term investments of $265.3 million during the second quarter of 2024. In addition, all of the Company's investment securities are classified as available-for-sale and there were no outstanding borrowings at June 30, 2024.
Previous wording
The following paragraphs more fully discuss the results of operations and changes in financial condition for the three-month period ended March 31, 2024 (“first quarter of 2024”) compared to the three-month period ended March 31, 2023 (“first quarter of 2023”). 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 2023 Form 10-K. Results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be attained for any other period.
Current wording
The following paragraphs more fully discuss the results of operations and changes in financial condition for the three-month period ended June 30, 2024 (“second quarter of 2024”) compared to the three-month period ended June 30, 2023 (“second quarter of 2023”) and the six-month period ended June 30, 2024 ("first half of 2024") compared to the six-month period ended June 30, 2023 ("first half of 2023"). 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 2023 Form 10-K. Results of operations for the three months ended June 30, 2024 are not necessarily indicative of the results to be attained for any other period.
Previous wording
The Company recorded net revenue of $49.7 million during the three months ended March 31, 2024, up 0.7% from the three months ended March 31, 2023, primarily driven by higher processing fees. Operating expense increased 0.7% primarily driven by an increase in full-time equivalent employees. Net income was $7.2 million and diluted EPS was $0.52 per share, increases of 0.5% and 2.0% from the three months ended March 31, 2023, respectively.
Current wording
The Company recorded net revenue of $48.6 million during the three-month period ended June 30, 2024, up 0.8% from the three-month period ended June 30, 2023, primarily driven by higher processing fees. Operating expense increased 8.8% primarily driven by $2.1 million of reserves and other losses on outstanding receivables in addition to $1.3 million related to estimated late fees to be incurred on facility transactions. Net income was $4.5 million and diluted EPS was $0.32 per share, decreases of 37.2% and 38.5% from the three-month period ended June 30, 2023, respectively.
Previous wording
The Company posted a 1.20% return on average assets and 12.66% return on average equity.
Current wording
The Company posted a 0.78% return on average assets and 8.01% return on average equity.
Previous wording
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
Current wording
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:
Previous wording
Processing fee revenue increased $1.7 million, or 8.9%, primarily attributable to an increase in facility-related invoice volumes of 23.0%. The Company has experienced recent success in adding facility clients with high transaction volumes. Transportation invoice volumes decreased 3.6% over the same period. The decline in transportation volumes is due to the ongoing freight recession.
Current wording
Processing fee revenue increased $1.7 million, or 8.9%, primarily attributable to an increase in facility-related invoice volumes of 25.1%. The Company has experienced recent success in adding facility clients with high transaction volumes. Transportation invoice volumes decreased 3.4% over the same period. The decline in transportation volumes is largely due to the ongoing freight recession.
Previous wording
Financial fee revenue decreased $482,000, or 4.3%, primarily attributable to a decline in transportation dollar volumes of 12.9% in addition to changes in the manner certain vendors receive payments, partially offset by the increase in short-term interest rates in between periods.
Current wording
Financial fee revenue decreased $1.0 million, or 8.9%, primarily attributable to a decline in transportation dollar volumes of 6.5% in addition to changes in the manner certain vendors receive payments.
Previous wording
The decrease in net interest income is primarily due to the decrease in average earning assets of $99.5 million, or 4.6%, partially offset by the increase in the Federal Funds rate throughout 2022 and 2023, positively impacting the net interest margin which increased to 3.26%, as compared to 3.23% in the prior year. The yield on interest-earning assets increased 43 basis points from 3.84% to 4.27% while the cost of interest-bearing liabilities increased 110 basis points from 2.20% to 3.30%.
Current wording
The decrease in net interest income is primarily due to the decrease in average earning assets of $52.3 million, or 2.6%, partially offset by an increase in the net interest margin to 3.32%, as compared to 3.25% in the same quarter last year. The yield on interest-earning assets increased 43 basis points from 3.98% to 4.41% while the cost of interest-bearing liabilities increased 46 basis points from 2.89% to 3.35%.
Previous wording
Average loans decreased $60.0 million, or 5.6%, to $1.02 billion. The decrease in average loans was primarily due to the Company opting to be more selective in booking new loans as a result of a decline in average deposits during the first half of 2023. The average yield on loans increased 45 basis points to 5.06%, primarily due to the increase in short-term interest rates.
Current wording
Average loans decreased $36.4 million, or 3.4%, to $1.04 billion. The decrease in average loans was primarily due to the Company opting to be more selective in booking new loans as a result of a decline in average deposits. The average yield on loans increased 44 basis points to 5.26%.
Previous wording
The average balance of interest-bearing deposits increased $40.5 million, or 6.9%, to $631.6 million. Average non-interest-bearing demand deposits decreased $105.7 million, or 19.1%, to $447.9 million. The Company experienced deposit attrition during the first half of 2023 as larger commercial depository clients moved their funds to higher interest rate alternatives outside the Company. The Company also incurred a shift from non-interest bearing to interest-bearing deposits from current customers. However, the Company has experienced recent growth in its average deposit balances as a result of higher deposit rates and increased depositor confidence across the banking industry. The average rate paid on interest-bearing deposits increased 112 basis points to 3.30% due to the increase in short-term interest rates.
Current wording
The average balance of interest-bearing deposits increased $129.0 million, or 25.3%, to $638.3 million. Average non-interest-bearing demand deposits decreased $145.6 million, or 26.3%, to $407.1 million. The Company has experienced a migration of client funds from non-interest bearing to interest-bearing driven by the higher interest rate environment. The average rate paid on interest-bearing deposits increased 47 basis points to 3.35% due to higher average short-term interest rates when comparing the periods.
Previous wording
Average short-term investments, consisting of interest-bearing deposits in other financial institutions and federal funds sold, increased $57.0 million, or 19.3%, to $352.2 million. The increase is primarily a result of maturities of investment securities and the decline in average loans, partially offset by a decrease in average funding sources. The average yield on short-term investments increased 79 basis points to 5.07%, primarily due to the increase in short-term interest rates that began in March 2022. The majority of these short-term investments are held at the Federal Reserve Bank.
Current wording
Average short-term investments, consisting of interest-bearing deposits in other financial institutions and federal funds sold, increased $68.8 million, or 28.7%, to $308.7 million. The increase is primarily a result of the decline in average investment securities and loans, partially offset by a decrease in average funding sources. The average yield on short-term investments increased 64 basis points to 5.02%, primarily due to higher average short-term interest rates when comparing the periods. The majority of these short-term investments are held at the Federal Reserve Bank.
Previous wording
Interest income on loans includes net loan fees of $83,000 and $220,000 for the first quarter of 2024 and 2023, respectively.
Current wording
Interest income on loans includes net loan fees of $146,000 and $291,000 for the second quarter of 2024 and 2023, respectively.
Previous wording
Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for both 2024 and 2023. The tax-equivalent adjustment was approximately $244,000 and $321,000 for the first quarter of 2024 and 2023, respectively.
Current wording
Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for both 2024 and 2023. The tax-equivalent adjustment was approximately $239,000 and $263,000 for the second quarter of 2024 and 2023, respectively.
Previous wording
Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for the three months ended March 31, 2024 and 2023.
Current wording
Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for the three-month periods ended June 30, 2024 and 2023.
Previous wording
The Company recorded a provision for credit losses and off-balance sheet credit exposures of $95,000 for the first quarter of 2024 and release of credit losses of $340,000 in first quarter of 2023. The amount of the provision for (release of) credit losses is derived from the Company’s quarterly Current Expected Credit Loss (“CECL”) model. The amount of the provision for (release of) credit losses will fluctuate as determined by these quarterly analyses. The provision for credit losses in the first quarter of 2024 was driven by an increase in total loans of $22.7 million, or 2.2%, as compared to December 31, 2023.
Current wording
The Company recorded a provision for credit losses and off-balance sheet credit exposures of $400,000 for the second quarter of 2024 and release of credit losses of $120,000 in second quarter of 2023. The Company recorded a provision for credit losses and off-balance sheet credit exposures of $495,000 for the first half of 2024 and release of credit losses of $460,000 in first half of 2023.The amount of the provision for (release of) credit losses is derived from the Company’s quarterly Current Expected Credit Loss (“CECL”) model. The amount of the provision for (release of) credit losses will fluctuate as determined by these quarterly analyses. The provision for credit losses in the second quarter and first half of 2024 was driven by an increase in total loans of $47.7 million, or 4.7%, as compared to December 31, 2023.
Previous wording
The Company experienced no loan charge-offs in the first quarter of 2024 and 2023. The ACL was $13.3 million at March 31, 2024 and $13.1 million at December 31, 2023. The ACL represented 1.28% of outstanding loans at March 31, 2024 and 1.29% of outstanding loans at December 31, 2023. The allowance for unfunded commitments was $17,000 at March 31, 2024 and $132,000 at December 31, 2023. There were no nonperforming loans outstanding at March 31, 2024 and December 31, 2023.
Current wording
The Company experienced no loan charge-offs in the second quarter of 2024 and 2023. The ACL was $13.6 million at June 30, 2024 and $13.1 million at December 31, 2023. The ACL represented 1.28% of outstanding loans at June 30, 2024 and 1.29% of outstanding loans at December 31, 2023. The allowance for unfunded commitments was $82,000 at June 30, 2024 and $132,000 at December 31, 2023. There were no nonperforming loans outstanding at June 30, 2024 and December 31, 2023.
Previous wording
Total operating expenses for the first quarter of 2024 increased $299,000, or 0.7%, compared to the first quarter of 2023. The following table details the components of operating expenses:
Current wording
Total operating expenses for the second quarter of 2024 increased $3.5 million, or 8.8%, compared to the second quarter of 2023. Total operating expenses for the first half of 2024 increased $3.8 million, or 4.7%, compared to the first half of 2023.The following table details the components of operating expenses:
Previous wording
Personnel expenses increased $581,000, or 1.9%. Salaries and commissions increased $1.4 million, or 6.1%, as a result of merit increases and an increase in average full-time equivalent employees of 5.2% due to strategic investments in various technology initiatives. Share-based compensation decreased $724,000, reflecting the Company's financial performance and the impact on performance-based restricted stock between the periods.
Current wording
Personnel expenses increased $425,000, or 1.4%. Salaries and commissions increased $642,000, or 2.7%, primarily as a result of merit increases. Share-based compensation decreased $435,000, reflecting the Company's financial performance and the impact on performance-based restricted stock between the periods.
Previous wording
Total assets at March 31, 2024 were $2.29 billion, a decrease of $185.0 million, or 7.5%, from December 31, 2023.
Current wording
Total assets at June 30, 2024 were $2.28 billion, a decrease of $196.0 million, or 7.9%, from December 31, 2023.
Previous wording
The Company experienced a decrease in cash and cash equivalents of $179.7 million, or 48.2%, during the first three months of 2024. The change in cash and cash equivalents reflects the Company’s daily liquidity position and is primarily
Current wording
The Company experienced a decrease in cash and cash equivalents of $148.7 million, or 39.9%, during the first half of 2024. 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, investments securities and payments in advance of funding.
Previous wording
The investment securities portfolio decreased $5.2 million, or 0.8%, during the first three months of 2024. The decrease is due to maturities of $39.6 million and an increase in unrealized losses of $1.7 million driven by the increase in long-term interest rates, partially offset by purchases of $37.5 million.
Current wording
The investment securities portfolio decreased $86.3 million, or 13.8%, during the first half of 2024. The decrease is due to sales of $25.0 million and maturities of $103.6 million, partially offset by purchases of $47.0 million.
Previous wording
Loans increased $22.7 million, or 2.2%, from December 31, 2023. The Company experienced growth in its commercial and industrial loan portfolio during the first quarter of 2024.
Current wording
Loans increased $47.7 million, or 4.7%, from December 31, 2023. The Company experienced growth in its franchise restaurant and equipment finance loan portfolios during the first half of 2024.
Previous wording
Accounts and drafts receivable from customers decreased $77.8 million, or 70.3%, from December 31, 2023. The decrease is solely due to timing of customer funding.
Current wording
Accounts and drafts receivable from customers decreased $32.2 million, or 29.1%, from December 31, 2023. The decrease is solely due to timing of customer funding.
Previous wording
Total deposits at March 31, 2024 were $1.08 billion, a decrease of $61.7 million, or 5.4%, from December 31, 2023. The decrease is primarily due to timing as well as client tax payments occurring towards the end of the first quarter.
Current wording
Total deposits at June 30, 2024 were $1.01 billion, a decrease of $128.5 million, or 11.3%, from December 31, 2023. The decrease is primarily due to timing as well as seasonal tax and compensation payments of Bank clients.
Previous wording
Accounts and drafts payable at March 31, 2024 were $944.8 million, a decrease of $126.6 million, or 11.8%, from December 31, 2023. 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.
Current wording
Accounts and drafts payable at June 30, 2024 were $996.8 million, a decrease of $74.5 million, or 7.0%, from December 31, 2023. The decrease in accounts and drafts payable was primarily reflective of a cyber event at a client which decreased average balances approximately $100.0 million. 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.
Previous wording
Total liabilities at March 31, 2024 were $2.06 billion, a decrease of $184.7 million, or 8.2%, from December 31, 2023, reflective of the decrease in deposits and accounts and drafts payable.
Current wording
Total liabilities at June 30, 2024 were $2.05 billion, a decrease of $196.1 million, or 8.7%, from December 31, 2023, reflective of the decrease in deposits and accounts and drafts payable.
Previous wording
Total shareholders’ equity at March 31, 2024 was $229.5 million, a $322,000 decrease from December 31, 2023. The decrease in shareholders’ equity is a result of dividends paid of $4.1 million, the repurchase of Company stock of $1.1 million, and an increase in accumulated other comprehensive loss of $1.7 million primarily related to the fair value of available-for-sale investment securities, partially offset by first quarter of 2024 earnings of $7.2 million.
Current wording
Total shareholders’ equity at June 30, 2024 was $229.9 million, a $116,000 increase from December 31, 2023. The increase in shareholders’ equity is a result of the first half of 2024 net income of $11.6 million, partially offset by dividends paid of $8.2 million, the repurchase of Company stock of $1.1 million, and an increase in accumulated other comprehensive loss of $2.2 million primarily related to the fair value of available-for-sale investment securities.
Previous wording
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 $192.8 million at March 31, 2024, a decrease of $179.7 million, or 48.2%, from December 31, 2023. At March 31, 2024, these assets represented 8.4% 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.
Current wording
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 $223.7 million at June 30, 2024, a decrease of $148.7 million, or 39.9%, from December 31, 2023. At June 30, 2024, these assets represented 9.8% 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.
Previous wording
Secondary sources of liquidity include the investment portfolio and borrowing lines. Total investment securities were $621.9 million at March 31, 2024, a decrease of $5.2 million from December 31, 2023. These assets represented 27.1% of total assets at March 31, 2024. Of the total portfolio, 19.3% mature in one year, 20.6% mature in one to five years, and 60.1% mature in five or more years.
Current wording
Secondary sources of liquidity include the investment portfolio and borrowing lines. Total investment securities were $540.8 million at June 30, 2024, a decrease of $86.3 million from December 31, 2023. These assets represented 23.7% of total assets at June 30, 2024. Of the total portfolio, 8.2% mature in one year, 24.1% mature in one to five years, and 67.7% mature in five or more years.
Previous wording
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 March 31, 2024, the Bank also has secured lines of credit with the Federal Home Loan Bank of $238.5 million collateralized by mortgage loans. The Company also has secured lines of credit from three banks up to a maximum of $250.0 million in aggregate collateralized by investment securities. There were no amounts outstanding under any line of credit as of March 31, 2024 or December 31, 2023.
Current wording
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, 2024, the Bank also has secured lines of credit with the Federal Home Loan Bank of $193.1 million collateralized by mortgage loans. The Company also has secured lines of credit from three banks up to a maximum of $250.0 million in aggregate collateralized by investment securities. There were no amounts outstanding under any line of credit as of June 30, 2024 or December 31, 2023.
Previous wording
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 $47.5 million of CDARS deposits and interest-bearing demand deposits include $164.6 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.
Current wording
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 $49.0 million of CDARS deposits and interest-bearing demand deposits include $154.9 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.
Previous wording
Net cash flows provided by operating activities were $9.8 million for the three months ended March 31, 2024, compared to $9.3 million for the three months ended March 31, 2023, an increase of $534,000. 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 investments and cash from operations will continue to be sufficient to fund the Company’s operations and capital expenditures in 2024, which are estimated to range from $10 million to $12 million.
Current wording
-32- 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 investments and cash from operations will continue to be sufficient to fund the Company’s operations and capital expenditures in 2024, which are estimated to range from $10 million to $12 million.
Previous wording
Net income plus amortization of intangible assets, net amortization of premium/discount on investment securities and depreciation of premises and equipment was $9.5 million for both the three months ended March 31, 2024 and 2023. The first quarter of 2024 reflected higher net income of $35,000 and higher depreciation of $196,000, which was partially offset by a decrease in net amortization of premium/discount on investment securities of $182,000. 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.
Current wording
Net income plus amortization of intangible assets, net amortization of premium/discount on investment securities and depreciation of premises and equipment was $16.3 million and $19.0 million for the six-month periods ended June 30, 2024 and 2023, respectively, a decrease of $2.6 million. The first half of 2024 reflected lower net income of $2.6 million and higher depreciation of $296,000, which was partially offset by a decrease in net amortization of premium/discount on investment securities of $305,000. 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.
Previous wording
Other factors impacting the $534,000 increase in net cash provided by operating activities include:
Current wording
Other factors impacting the $3.5 million increase in net cash provided by operating activities include:
Previous wording
•An increase in other operating activities, net of $269,000, primarily due to changes in various other assets and liabilities;
Current wording
•An increase in other operating activities, net of $2.5 million, primarily due to changes in various other assets and liabilities;
Previous wording
•A smaller increase in accounts receivable of $277,000; and
Current wording
•A smaller increase in accounts receivable of $2.2 million; and
Previous wording
•A change in the provision for (release of) credit losses of $435,000 primarily due to changes in loans outstanding during the respective periods.
Current wording
•A change in the provision for (release of) credit losses of $1.0 million primarily due to changes in loans outstanding during the respective periods.
Previous wording
These factors were partially offset by a decrease in the stock compensation expense of $724,000.
Current wording
These factors were partially offset by a decrease in stock compensation expense of $1.2 million.
Rearranged current paragraphs (12)
Current report — wording carried from elsewhere
The Company recorded net revenue of $98.3 million during the first half of 2024, up 0.7% from the first half of June 30, 2023, primarily driven by higher processing fees. Operating expense increased 4.7% primarily driven by the same factors
Current report — wording carried from elsewhere
The Company posted a 1.00% return on average assets and 10.36% return on average equity.
Current report — wording carried from elsewhere
Processing fee revenue increased $3.5 million, or 8.9%, primarily attributable to an increase in facility-related invoice volumes of 24.0%. Transportation invoice volumes decreased 3.5% over the same period.
Current report — wording carried from elsewhere
Financial fee revenue decreased $1.5 million, or 6.6%, primarily attributable to a decline in transportation dollar volumes of 9.8% in addition to changes in the manner certain vendors receive payments.
Current report — wording carried from elsewhere
Average short-term investments, consisting of interest-bearing deposits in other financial institutions and federal funds sold, increased $80.1 million, or 43.2%, to $265.3 million. The increase is primarily a result of the sale and maturities of investment securities and the decline in average loans, partially offset by a decrease in average funding sources. The average yield on short-term investments increased 40 basis points to 4.95%, primarily due to higher average short-term interest rates when comparing the periods. The majority of these short-term investments are held at the Federal Reserve Bank.
Current report — wording carried from elsewhere
The decrease in net interest income is primarily due to the decrease in average earning assets of $75.5 million, or 3.6%, partially offset by the increase in the net interest margin to 3.29%, as compared to 3.24% in the prior year. The yield on
Current report — wording carried from elsewhere
-25- interest-earning assets increased 43 basis points from 3.91% to 4.34% while the cost of interest-bearing liabilities increased 80 basis points from 2.52% to 3.32%.
Current report — wording carried from elsewhere
Average loans decreased $48.2 million, or 4.5%, to $1.03 billion. The decrease in average loans was primarily due to the Company opting to be more selective in booking new loans as a result of a decline in average deposits. The average yield on loans increased 44 basis points to 5.16%.
Current report — wording carried from elsewhere
For purposes of these computations, yields on investment securities are computed as interest income divided by the average amortized cost of the investments.
Current report — wording carried from elsewhere
Interest income includes net loan fees.
Current report — wording carried from elsewhere
Personnel expenses increased $1.0 million, or 1.7%. Salaries and commissions increased $2.0 million, or 4.4%, primarily as a result of merit increases. Share-based compensation decreased $1.2 million, reflecting the Company's financial performance and the impact on performance-based restricted stock between the periods.
Current report — wording carried from elsewhere
Net cash flows provided by operating activities were $20.5 million for the six-month period ended June 30, 2024, compared to $17.0 million for the six-month period ended June 30, 2023, an increase of $3.5 million. Net cash flows from investing and financing activities fluctuate greatly as the Company actively manages its investment and loan portfolios and
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
-22- 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:
Previous report — wording carried elsewhere
-27- affected by changes in funding sources, mainly accounts and drafts payable and deposits, cash flows in and out of loans, investments securities and payments in advance of funding.