CASS INFORMATION SYSTEMS INC
For the period ended Dec 31, 2024. Filed Mar 5, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 5, 2025
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-K
Period ended 2023-12-31; filed 2024-02-28.
0000708781-24-000023
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-05.
0000708781-25-000018
Item 7. 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 118 previous paragraphs and 130 current paragraphs.
65 unchanged; 41 reworded; 23 added; 12 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 15 previous and 14 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 (23)
Current report
Recent Industry Developments
Current report
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 0.6% and 5.7%, respectively during the year ended December 31, 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.
Current report
Recent Items of Note
Current report
Average interest-earning assets for December 31, 2024 declined $65.4 million, or 3.1%, as compared to 2023. 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 a CassPay client. CassPay offers solutions such as integrated payments, a B2B payment platform for clients. The loss of CassPay balances was partially offset by an increase in facility dollar volumes of 8.1%, leading to higher average accounts and drafts payable.
Current report
Despite the decline in average interest-earning assets during the year, the Company’s liquidity position and balance sheet remains strong. The Company maintained average short-term investments of $326.2 million during 2024. In addition, all of the Company's investment securities are classified as available-for-sale and there were no outstanding borrowings at December 31, 2024.
Current report
The Company recorded bad debt expense of $7.8 million for the year ended December 31, 2024 on a funding receivable related to a facility client. See Note 15, "Commitments and Contingencies" for further information.
Current report
During July 2024, the Company approved an Amendment providing for the termination of its noncontributory defined-benefit pension plan. The Company recorded a one-time termination expense of approximately $3.5 million through operating expense related to the plan termination during the fourth quarter of 2024 as the plan liabilities were 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
In December 2024, the Company acquired AcuAudit, a freight audit platform for ocean and international air freight, from Acuitive Solutions LLC. The Asset Purchase Agreement reflects a base purchase price of $3.0 million and an earnout based on annualized recurring revenue at the end of 24 months. Current annualized recurring revenue is approximately $2.5 million. The Company expects the impact of the acquisition to be EBITDA neutral in 2025 and a minimal negative impact to diluted earnings per share driven by intangible amortization.
Current report
Various indicators are used by management in evaluating the Company's financial condition and operating performance. Among these indicators are net income and earnings per share, total revenue, operating expense, asset quality indicators such as nonperforming assets to assets and net charge-offs to average loans, and return on average assets and equity.
Current report
The Company posted a 0.82% return on average assets and 8.37% return on average equity. The Company did not have any nonperforming assets at December 31, 2024 and did not have any loan charge-offs during 2024.
Current report
Other income increased $965,000, or 19.6%, in 2024 largely due to higher bank-owned life insurance revenue and TouchPoint fees.
Current report
Average loans decreased $6.9 million, or 0.7%, to $1.05 billion. This decrease was 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 47 basis points to 5.28% in 2024.
Current report
Average accounts and drafts payable decreased $50.7 million, or 4.7%. The decrease in these balances, which are non-interest bearing, are primarily reflective of a cyber event at a CassPay client during the first quarter of 2024, which decreased average balances by approximately $100.0 million, and a decrease in transportation dollar volumes of 0.6%, partially offset by an increase in facility dollar volumes of 8.1%. Accounts and drafts payable are a significant source of funding generated by payment float from transportation and facility clients.
Current report
Performing loans subject to special monitoring increased from $5.5 million at December 31, 2023 to $51.2 million at December 31, 2024. These loans possess some credit deficiency or potential weakness which requires a higher level of management attention. The increase during 2024 is primarily due to a large franchise restaurant relationship that has experienced some level of financial weakness. However, the Company does not believe there is any concern of credit loss at December 31, 2024.
Current report
Net periodic pension cost increased $3.3 million. The Company recorded a one-time non-cash expense of $3.5 million in the fourth quarter of 2024 related to the termination of its noncontributory defined-benefit pension plan. The termination of the plan is expected to reduce run rate operating expense by approximately $1.0 million on an annual basis.
Current report
Equipment expense increased $1.2 million, or 16.3%, primarily due to an increase in depreciation expense on software related to recently completed technology initiatives.
Current report
The Company recorded bad debt expense during 2024 of $7.8 million on a funding receivable related to a facility client. While the Company is in the process of litigation to collect the receivable, a full write-off to bad debt expense was recorded as a result of a credit analysis.
Current report
Other operating expense increased $1.3 million, or 4.2%, to $31.2 million. The Company incurred $1.3 million of late fees on facility transactions during 2024 driven by a check processing delay with a third-party vendor, the same CassPay client which incurred the cyber attack.
Current report
Investment securities decreased $99.1 million, or 15.8%, during 2024 to $528.0 million at December 31, 2024. U.S. Treasury securities decreased $108.7 million to $0 at December 31, 2024 compared to $108.7 million at December 31,
Current report
Total deposits decreased $172.9 million, or 15.2% during 2024. Noninterest-bearing demand deposits decreased $273.1 million, or 52.1%, to $251.2 million at December 31, 2024 and interest-bearing deposits increased $100.2 million, or 16.3%, to $716.7 million at December 31, 2024. The Company has experienced a migration of client funds from non-interest bearing to interest-bearing driven by the higher interest rate environment prior to the recent 100 basis point cumulative decline in the Federal Funds rate in the fourth quarter of 2024. The decrease in total deposits between the periods was also driven by timing of customer funds. The average balance of deposits is more indicative of trends period to period.
Current report
•A decrease in share-based compensation expense of $1.0 million;
Current report
•A change in the FASB ASC 715 pension adjustment of $2.6 million; and
Current report
On an overall basis, the Company's $2.0 million increase in net cash provided by operating activities was primarily due to changes in cash flows from fluctuations in tax and other accounts offset by the decline in net income.
Removed paragraphs (12)
Previous report
The Company recorded revenue of $197.5 million in 2023, up 8.2% from the prior year. Net income was $30.1 million and diluted EPS was $2.18 per share, decreases of 13.9% and 13.8% from the prior year, respectively.
Previous report
The Company posted a 1.24% return on average assets and 14.24% return on average equity.
Previous report
Average loans increased $63.7 million, or 6.4%, to $1.06 billion. This increase was due to loan growth during the second half of 2022, specifically in the Company's franchise restaurants, faith-based and lease financing receivables portfolios. The average yield on loans increased 83 basis points to 4.81% in 2023.
Previous report
Average accounts and drafts payable decreased $60.1 million, or 5.3%. The decrease in average accounts and drafts payable was primarily driven by the decrease in transportation dollar volumes of 14.4% due to the ongoing freight recession.
Previous report
Pension expense increased $3.3 million. Despite the Company's defined benefit pension plan being frozen in the first quarter of 2021 resulting in no service cost in subsequent periods, expense increased as a result of the accounting impact of the decline in plan assets during 2022 and corresponding decline in expected return on plan assets for 2023.
Previous report
Other operating expense increased $7.9 million, or 35.8%, to $30.0 million. Certain expense categories such as outside service fees and data processing have increased as the Company invests in, and transitions to, improved technology.
Previous report
Total deposits decreased $116.4 million, or 9.3% during 2023. Noninterest-bearing demand deposits decreased $118.4 million, or 18.4%, to $524.4 million at December 31, 2023 and interest-bearing deposits increased $2.0 million, or 0.3%, to $616.5 million at December 31, 2023. The Company experienced deposit attrition during the first six months of 2023 as larger commercial depository clients moved their funds to higher interest rate alternatives outside of the banking system. The Company also incurred a shift from non-interest bearing to interest-bearing deposits from current customers.
Previous report
•A decrease in stock-based compensation expense of $2.6 million due to lower Company earnings and the impact on performance based stock;
Previous report
These factors were partially offset by an increase in the pension liability of $3.3 million.
Previous report
On an overall basis, the Company's $14.7 million decrease in net cash provided by operating activities was due to higher operating expenses driven by strategic investments in technology initiatives. Higher expense levels were partially offset by improved revenue driven by higher levels of net interest income, processing fees and financial fees. The increase in net interest income in 2023 compared to 2022 is primarily due to the Federal Reserve’s actions to increase the Federal Funds rate throughout 2022 and into 2023, positively affecting the net interest rate margin which increased to 3.25% as compared to 2.74% in the prior year.
Previous report
During 2023, the Company did not make a contribution to its noncontributory defined benefit pension plan. In determining pension expense, the Company makes several assumptions, including the discount rate and long-term rate of return on assets. These assumptions are determined at the beginning of the plan year based on interest rate levels and financial market performance.
Previous report
For 2023, these assumptions were as follows:
Reworded paragraphs (41)
Previous wording
The Company continues to operate profitably, posting a 1.24% return on average assets and 14.24% return on average equity. The Company’s common equity Tier 1 capital ratio was 14.73% at December 31, 2023, significantly exceeding regulatory requirements. In addition, the Company has maintained exceptional credit quality with no non-performing loans at December 31, 2023, and no loan charge-offs during the year ended December 31, 2023.
Current wording
The Company continues to operate profitably, posting a 0.82% return on average assets and 8.37% return on average equity. The Company’s common equity Tier 1 capital ratio was 13.84% at December 31, 2024, significantly exceeding regulatory requirements. In addition, the Company has maintained exceptional credit quality with no non-performing loans at December 31, 2024, and no loan charge-offs during the year ended December 31, 2024.
Previous wording
The Company’s solid capital and liquidity positions, combined with ongoing earnings, are expected to continue to allow for investment in strategic opportunities when they become available, in addition to return of capital to shareholders. The Company delivered $21.7 million in dividend payments and share repurchases during 2023. The Company continues to invest in the technology, processes, and people required to support its multi-national customer base.
Current wording
The Company’s solid capital and liquidity positions, combined with ongoing earnings, are expected to continue to allow for investment in strategic opportunities when they become available, in addition to return of capital to shareholders. The Company delivered $16.5 million in dividend payments and $7.2 million in share repurchases during 2024. The Company continues to invest in the technology, processes, and people required to support its multi-national customer base.
Previous wording
The Company recorded revenue of $197.5 million in 2023, up 8.2% from the prior year, due to increases in processing fees, financial fees, net interest income and a positive variance in the (release of) provision for credit losses. Operating expenses increased 14.7% as a result of increases in personnel and other expenses as the Company invests in, and transitions to, improved technology. Net income was $30.1 million and diluted EPS was $2.18 per share, decreases of 13.9% and 13.8% from the prior year, respectively.
Current wording
The Company recorded revenue of $199.2 million in December 31, 2024, up 0.8% from the prior year, due to increases in processing fees and net interest income, partially offset by a decrease in financial fees and the negative variance in the provision for (release of) credit losses. Operating expenses increased 9.3% largely driven by $7.8 million of bad debt expense experienced on a funding receivable related to a facility client as well as a one-time non-cash expense of $3.5 million in the fourth quarter of 2024 related to the termination of its noncontributory defined-benefit pension plan. Net income was $19.2 million and diluted EPS was $1.39 per share, decreases of 36.2% for both from the prior year.
Previous wording
Processing fees increased $3.1 million, or 4.0%, during 2023 largely driven by a 6.7% increase in facility transaction volumes as well as an increase in fees received for ancillary processing services. Transportation invoice volumes decreased 2.3% over the same period. The decline in transportation volumes is primarily due to the on-going freight recession.
Current wording
Processing fees increased $3.1 million, or 3.9%, during 2024 largely driven by a 23.7% increase in facility transaction volumes. Transportation invoice volumes decreased 0.6% over the same period. The decline in transportation volumes is primarily due to the on-going freight recession.
Previous wording
Financial fees increased $2.2 million, or 5.1%, in 2023 primarily attributable to the increase in short-term interest rates throughout 2023, partially offset by a decline in transportation dollar volumes of 14.4%. The decline in transportation dollar volumes had a direct effect on the 15.6% decrease in average payments in advance of funding, which is the primary generator of financial fees.
Current wording
Financial fees decreased $2.7 million, or 5.8%, in 2024 primarily attributable to the decline in transportation invoice dollar volumes of 5.7%. The decline in transportation invoice dollar volumes had a direct effect on the 13.6% decrease in average payments in advance of funding, which is the primary generator of financial fees.
Previous wording
The increase in net interest income in 2023 compared to 2022 is primarily due to an increase in the Federal Funds rate throughout 2022 and into 2023, positively affecting the net interest rate margin which increased to 3.25% as compared to 2.74% in the prior year. This was partially offset by a decrease in average earning assets of $128.8 million, or 5.8%. The yield on interest-earning assets increased 114 basis points from 2.90% in 2022 to 4.04% in 2023 while the cost of interest-bearing liabilities increased 226 basis points from 0.58% in 2022 to 2.84% in 2023.
Current wording
The increase in net interest income in 2024 as compared to 2023 is primarily due to an increase in the net interest margin to 3.42% as compared to 3.25% in the prior year. The increase in the net interest margin was partially offset by a decrease in average earning assets of $65.4 million, or 3.1%. The yield on interest-earning assets increased 39 basis points from 4.04% in 2023 to 4.43% in 2024 while the cost of interest-bearing liabilities increased 35 basis points from 2.84% in 2023 to 3.19% in 2024.
Previous wording
Average investment securities decreased $54.7 million, or 6.9%, due to the sale and maturity of investment securities throughout 2023. The investment portfolio will expand and contract over time as the Company manages its liquidity and interest rate position. The average tax-equivalent yield on investment securities increased 33 basis point to 2.63% in 2023 as a result of the increase in short and long-term interest rates. The average yield on tax-exempt investment securities declined 19 basis points to 2.69% driven by maturities of higher rate securities. These securities have longer term fixed rates and the Company has not purchased any such securities since interest rates began increasing.
Current wording
Average investment securities decreased $97.5 million, or 13.3%, due to the sale and maturity of investment securities throughout 2024. The investment portfolio will expand and contract over time as the Company manages its liquidity and interest rate position. The average tax-equivalent yield on investment securities increased 19 basis points to 2.82% in 2024 as a result of purchases of new investment securities at current market interest rates, which are higher than the average interest rate in the current investment portfolio.
Previous wording
Average short-term investments, consisting of interest-bearing deposits in other financial institutions and federal funds sold, decreased $137.8 million, or 32.4%. The decrease is primarily a result of the increase in the average balance of loans, coupled with the decrease in average funding sources, partially offset by the decrease in average investment securities. The average yield on short-term investments increased 327 basis points to 4.78% in 2023 primarily due to the increase in short-term market 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 $39.0 million, or 13.6%. 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 5 basis points to 4.83% in 2024 primarily due to the higher short-term market interest rates when comparing the periods. The majority of these short-term investments are held at the Federal Reserve Bank.
Previous wording
The average balance of interest-bearing deposits decreased $32.2 million, or 5.3%. Average non-interest-bearing demand deposits decreased $75.5 million, or 12.8%. The Company experienced deposit attrition during the first six months of 2023 as larger commercial depository clients moved their funds to higher interest rate alternatives outside of the banking system. The Company also incurred a shift from non-interest bearing to interest-bearing deposits driven by the customer base. The average rate paid on interest-bearing deposits increased 225 basis points to 2.83% in 2023 due to the increase in short-term interest rates.
Current wording
The average balance of interest-bearing deposits increased $63.5 million, or 11.1%. Average non-interest-bearing demand deposits decreased $97.9 million, or 19.1%. The Company has experienced a migration of client funds from non-interest bearing to interest-bearing driven by the higher interest rate environment prior to the recent 100 basis point decline in the Federal Funds rate. The average rate paid on interest-bearing deposits increased 36 basis points to 3.19% in 2024 due to higher average short-term interest rates.
Previous wording
(2)Interest income on loans includes net loan fees of $686,000, $684,000, and $3.4 million for 2023, 2022 and 2021, respectively. Loan fees include $0, $167,000, and $2.6 million of PPP loan fees for 2023, 2022 and 2021, respectively.
Current wording
(2)Interest income on loans includes net loan fees of $477,000, $686,000, and $684,000 for 2024, 2023 and 2022, respectively. Loan fees include $0, $0, and $167,000 of Paycheck Protection Program ("PPP") loan fees for 2024, 2023 and 2022, respectively.
Previous wording
(3)Interest income is presented on a tax-equivalent basis assuming a tax rate of 21%. The tax-equivalent adjustment was approximately $1.1 million, $1.7 million and $1.9 million for 2023, 2022, and 2021, respectively.
Current wording
(3)Interest income is presented on a tax-equivalent basis assuming a tax rate of 21%. The tax-equivalent adjustment was approximately $1.0 million, $1.1 million, and $1.7 million for 2024, 2023, and 2022, respectively.
Previous wording
Interest earned on the loan portfolio is a primary source of income for the Company. The loan portfolio was $1.01 billion, representing 40.9% of the Company's total assets as of December 31, 2023 and generated $50.8 million in interest income during the year then ended. The following tables show the composition of the loan portfolio at the end of the periods indicated and remaining maturities for loans as of December 31, 2023.
Current wording
Interest earned on the loan portfolio is a primary source of income for the Company. The loan portfolio was $1.08 billion, representing 45.2% of the Company's total assets as of December 31, 2024 and generated $55.4 million in interest income during the year ended December 31, 2024. The following tables show the composition of the loan portfolio at the end of the periods indicated and remaining maturities for loans as of December 31, 2024.
Previous wording
The Company does not have any foreign loans. The Company's loan portfolio includes $157,000 of single family real estate mortgages, as the Company does not market its services to retail customers. Also, the Company had no sub-prime mortgage loans or residential development loans in its portfolio in any of the years presented.
Current wording
The Company does not have any foreign loans. The Company's loan portfolio includes $110,000 of single family real estate mortgages, as the Company does not market its services to retail customers. Also, the Company had no sub-prime mortgage loans or residential development loans in its portfolio in any of the years presented.
Previous wording
Loans decreased $68.6 million, or 6.3%, to $1.01 billion at December 31, 2023. Lease finance receivables and franchise restaurant loans, which are both included in commercial and industrial loans, decreased $39.4 million, or 24.5%, and $8.6 million, or 3.9%, respectively, during 2023. Commercial and industrial loans decreased $14.5 million, or 8.0%, during 2023. These decreases were due to being more selective in booking new loans as a result of the decline in deposits during the year. Additional details regarding the types and maturities of loans in the loan portfolio are contained in the tables above and in Item 8, Note 4.
Current wording
Loans increased $67.7 million, or 6.7%, to $1.08 billion at December 31, 2024. Franchise restaurant loans, which are included in commercial and industrial loans, increased $43.1 million during 2024. Faith-based loans increased $5.2 million, during 2024. Additional details regarding the types and maturities of loans in the loan portfolio are contained in the tables above and in Item 8, Note 4.
Previous wording
The Company recorded a release of credit losses and off-balance sheet credit exposures of $550,000 in 2023 and a provision for credit losses of $1.4 million in 2022. The amount of the (release of) provision for credit losses was derived from the Company’s CECL model. The amount of the provision will fluctuate as determined by these analyses. The Company had net loan recoveries of $0 and $13,000 in 2023 and 2022, respectively. The ACL was $13.1 million at December 31, 2023 compared to $13.5 million at December 31, 2022. The ACL represented 1.29% and 1.25% of outstanding loans at December 31, 2023 and December 31, 2022, respectively. The allowance for unfunded commitments was $132,000 at December 31, 2023 and $232,000 at December 31, 2022. There were no nonperforming loans outstanding at December 31, 2023 and one nonperforming loan outstanding with an outstanding balance of $1.2 million, or 0.11% of total loans at December 31, 2022. The single nonperforming loan at December 31, 2022 paid off in full during January 2023.
Current wording
The Company recorded a provision for credit losses and off-balance sheet credit exposures of $447,000 in 2024 and a release of credit losses of $550,000 in 2023. The amount of the provision for (release of) credit losses was derived from the Company’s CECL model. The amount of the provision will fluctuate as determined by these analyses. The Company had no loan charge-offs or recoveries in 2024 and 2023. The ACL was $13.4 million at December 31, 2024 compared to $13.1 million at December 31, 2023. The ACL represented 1.24% and 1.29% of outstanding loans at December 31, 2024 and December 31, 2023, respectively. The allowance for unfunded commitments was $273,000 at December 31, 2024 and $132,000 at December 31, 2023. There were no nonperforming loans outstanding at December 31, 2024 or December 31, 2023.
Previous wording
There were no nonaccrual loans at December 31, 2023 and one nonaccrual loan of $1.2 million at December 31, 2022. There were no foreclosed assets at December 31, 2023 or December 31, 2022. The single nonperforming loan at December 31, 2022 paid off in full during January 2023.
Current wording
There were no nonaccrual loans at December 31, 2024 and December 31, 2023. There were no foreclosed assets at December 31, 2024 or December 31, 2023.
Previous wording
Total operating expenses increased 14.7% in 2023 compared to 2022.
Current wording
Total operating expenses increased 9.3% in 2024 compared to 2023.
Previous wording
Salaries and commissions increased $8.0 million, or 9.3%, as a result of merit increases and an increase in average full-time equivalent employees ("FTEs") of 10.8% due to strategic investments in various technology initiatives.
Current wording
Salaries and commissions increased $2.9 million, or 3.1%, as a result of merit increases and an increase in average full-time equivalent employees ("FTEs") of 1.6%.
Previous wording
Share-based compensation decreased $2.6 million, reflecting the Company's financial performance and the impact on performance-based restricted stock between the periods.
Current wording
Share-based compensation decreased $1.0 million, reflecting the Company's financial performance and the impact on performance-based restricted stock between the periods.
Previous wording
Other benefits, such as 401(k) match, health insurance and payroll taxes, increased $3.5 million, or 21.0%, primarily due to the 10.8% increase in average FTEs as well as a significant increase in employer health insurance costs over prior year levels.
Current wording
Other benefits, such as 401(k) match, health insurance and payroll taxes decreased $507,000, or 2.5%.
Previous wording
Income tax expense in 2023 totaled $7.3 million, compared to $8.0 million in 2022. When measured as a percent of pre-tax income, the Company’s effective tax rate was 19.5% and 18.6% in 2023 and 2022, respectively. The increase in the effective tax rate in 2023 compared to 2022 was primarily due to a lower level of tax-free interest income on municipal securities in the current year.
Current wording
Income tax expense in 2024 totaled $5.1 million, compared to $7.3 million in 2023. When measured as a percent of pre-tax income, the Company’s effective tax rate was 20.9% and 19.5% in 2024 and 2023, respectively. The increase in the effective tax rate in 2024 compared to 2023 was primarily due to a lower level of tax-free interest income on municipal securities in the current year, in addition to $304,000 of tax penalties incurred in 2024 on the surrender and redeployment of bank-owned life insurance policies to increase future noninterest income.
Previous wording
Investment securities decreased $127.4 million, or 16.9%, during 2023 to $627.1 million at December 31, 2023. U.S. Treasury securities decreased $46.6 million to $108.7 million at December 31, 2023 compared to $155.3 million at December 31, 2022. State and political securities decreased $76.1 million, or 25.8%, to $219.0 million at December 31, 2023 as a result of maturities and sales. The investment portfolio provides the Company with a significant source of earnings, secondary source of liquidity, and mechanisms to manage the effects of changes in loan demand and interest rates. Therefore, the size, asset allocation and maturity distribution of the investment portfolio will vary over time depending on management’s assessment of current and future interest rates, changes in loan demand, changes in the Company’s sources of funds and the economic outlook. During 2023, the Company purchased investment securities totaling $15.3 million.
Current wording
State and political securities decreased $47.1 million, or 21.5%, to $172.0 million at December 31, 2024. Mortgage-backed securities increased $75.5 million, or 47.8%, to $233.3 million at December 31, 2024. The investment portfolio provides the Company with a significant source of earnings, secondary source of liquidity, and mechanisms to manage the effects of changes in loan demand and interest rates. Therefore, the size, asset allocation and maturity distribution of the investment portfolio will vary over time depending on management’s assessment of current and future interest rates, changes in loan demand, changes in the Company’s sources of funds and the economic outlook. During 2024, the Company purchased investment securities totaling $119.7 million and sold investment securities totaling $60.1 million. The Company generally utilized funds from maturities and sales of U.S. Treasury securities and state and political securities to increase short-term investments and fund purchases of mortgage-backed securities.
Previous wording
Accounts and drafts payable generated by the Company in its payment processing operations increased $3.8 million, or 0.4%, to $1.07 billion, at December 31, 2023. Due to the Company’s payment processing cycle, average balances are much more indicative of the underlying activity than period-end balances since point-in-time comparisons can be misleading if the comparison dates fall on different days of the week. Average accounts and drafts payable decreased $60.1 million, or 5.3%, to $1.08 billion during 2023. The decrease in average accounts and drafts payable was primarily driven by the decrease in transportation dollar volumes due to the ongoing freight recession.
Current wording
Accounts and drafts payable generated by the Company in its payment processing operations increased $77.9 million, or 7.3%, to $1.15 billion, at December 31, 2024. Due to the Company’s payment processing cycle, average balances are much more indicative of the underlying activity than period-end balances since point-in-time comparisons can be misleading if the comparison dates fall on different days of the week. Average accounts and drafts payable decreased $50.7 million, or 4.7%, to $1.03 billion during 2024. The decrease in these balances, which are non-interest bearing, are primarily reflective of a cyber event at a CassPay client during the first quarter of 2024, which decreased average balances by approximately $100.0 million, and a decrease in transportation dollar volumes of 0.6%, partially offset by an increase in facility dollar volumes of 8.1%.
Previous wording
The balances of liquid assets consist 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, totaled $372.5 million at December 31, 2023, an increase of $171.5 million, or 85.4%, from December 31, 2022. The increase during 2023 is primarily attributed to decreases in investment securities, loans and payments in advance of funding, partially offset by a decrease in deposits. At December 31, 2023, cash and cash equivalents represented 15.0% 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
2024 is primarily attributed to a decrease in deposits and an increase in loans, partially offset by decreases in securities available-for-sale and accounts and drafts receivable from customers and an increase in accounts and drafts payable. At December 31, 2024, cash and cash equivalents represented 14.6% 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 available-for-sale at fair value were $627.1 million at December 31, 2023, a decrease of $127.4 million, or 16.9%, from December 31, 2022. Investment securities represented 25.3% of total assets at December 31, 2023. Of the total portfolio, 20.6% mature in one year or less, 21.5% mature after one year through five years and 57.9% mature after five years.
Current wording
Secondary sources of liquidity include the investment portfolio and borrowing lines. Total investment securities available-for-sale at fair value were $528.0 million at December 31, 2024, a decrease of $99.1 million, or 15.8%, from December 31, 2023. Investment securities represented 22.0% of total assets at December 31, 2024. Of the total portfolio, 1.7% mature in one year or less, 19.4% mature after one year through five years and 78.9% mature after five years.
Previous wording
As of December 31, 2023, the Bank had unsecured lines of credit at six correspondent banks to purchase federal funds up to a maximum of $83.0 million in aggregate. As of December 31, 2023, the Bank had secured lines of credit with the Federal Home Loan Bank of $228.3 million collateralized by commercial mortgage loans. At December 31, 2023, the Company had lines of credit from three banks up to a maximum of $250.0 million in aggregate collateralized by state and political subdivision securities. There were not any amounts outstanding at December 31, 2023 and 2022 under any of the lines of credit.
Current wording
As of December 31, 2024, the Bank had unsecured lines of credit at six correspondent banks to purchase federal funds up to a maximum of $83.0 million in aggregate. As of December 31, 2024, the Bank had secured lines of credit with the Federal Home Loan Bank of $183.6 million collateralized by commercial mortgage loans. At December 31, 2024, the Company had lines of credit from three banks up to a maximum of $250.0 million in aggregate collateralized by state and political subdivision securities. There were no amounts outstanding at December 31, 2024 and 2023 under any of the lines of credit.
Previous wording
Net cash flows provided by operating activities for the years 2023, 2022 and 2021 were $36.9 million, $51.6 million, and $34.5 million, respectively. Net income plus depreciation and amortization accounts for most of the operating cash provided. 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. Further analysis of the changes in these account balances is discussed earlier in this report. Due to the daily fluctuations in these account balances, management believes that 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, cash from operations, and borrowing lines will continue to be sufficient to fund the Company’s operations and capital expenditures in 2024. The Company anticipates the annual capital expenditures for 2024 should range from $10 million to $12 million. Capital expenditures in 2024 are expected to primarily consist of purchases of equipment and software related to the payment and information processing services business.
Current wording
Net cash flows provided by operating activities for the years 2024, 2023 and 2022 were $38.9 million, $36.9 million, and $51.6 million, respectively. Net income plus depreciation and amortization accounts for most of the operating cash provided. 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. Further analysis of the changes in these account balances is discussed earlier in this report. Due to the daily fluctuations in these account balances, management believes that 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, cash from operations, and borrowing lines will continue to be sufficient to fund the Company’s operations and capital expenditures in 2025. The Company estimates that capital expenditures for 2025 should range from $6 million to $8 million. Capital expenditures in 2025 are expected to primarily consist of purchases of equipment and software related to the payment and information processing services business.
Previous wording
Net income plus amortization of intangible assets, net amortization of premium/discount on investment securities and depreciation of premises and equipment was $39.5 million and $45.9 million for the years ended December 31, 2023 and December 31, 2022, respectively, a decrease of $6.4 million year over year. The decrease was due to the decrease in net income of $4.8 million and lower net amortization of premium/discount on investment securities of $1.8 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.
Current wording
Net income plus amortization of intangible assets, net amortization of premium/discount on investment securities and depreciation of premises and equipment was $28.7 million and $39.5 million for the years ended December 31, 2024 and December 31, 2023, respectively, a decrease of $10.8 million year over year. The decrease was due to the decrease in net income of $10.9 million and lower net amortization of premium/discount on investment securities of $882,000, partially offset by an increase in depreciation of $1.1 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.
Previous wording
Other factors impacting the $14.7 million decrease in net cash provided by operating activities include:
Current wording
Other factors impacting the $2.0 million increase in net cash provided by operating activities include:
Previous wording
•A decrease in other operating activities, net of $4.6 million, primarily due to changes in various accounts receivable and payable;
Current wording
•An increase in other operating activities, net of $8.2 million, primarily due to changes in various accounts receivable and payable;
Previous wording
•A decrease in current income tax liability of $2.2 million; and
Current wording
•An increase in current income tax liability of $2.3 million;
Previous wording
•A change in the (release of) provision for credit losses of $1.9 million 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
Cash dividends paid were $16.0 million and $15.4 million in 2023 and 2022, respectively.
Current wording
Cash dividends paid were $16.5 million and $16.0 million in 2024 and 2023, respectively.
Previous wording
Shareholders’ equity was $229.8 million, or 9.3% of total assets, at December 31, 2023, an increase of $23.5 million as compared to December 31, 2022. The increase was primarily a result of net income of $30.1 million and the decrease in accumulated other comprehensive loss of $11.9 million due to the change in market values on investment securities, partially offset by the payment of cash dividends of $16.0 million, and the repurchase of treasury shares of $5.8 million.
Current wording
Shareholders’ equity was $229.0 million, or 9.6% of total assets, at December 31, 2024, a decrease of $779,000 as compared to December 31, 2023. The decrease was primarily a result of the payment of cash dividends of $16.5 million, and the repurchase of treasury shares of $7.2 million, partially offset by net income of $19.2 million and the decrease in accumulated other comprehensive loss of $2.3 million.
Previous wording
Dividends from the Bank are a source of funds for payment of dividends by the Company to its shareholders. The only restrictions on dividends are those dictated by regulatory capital requirements, state corporate laws and prudent and sound banking principles. During 2023, the Bank paid dividends of $7.5 million to the Company. As of December 31, 2023, unappropriated retained earnings of $30.8 million were available at the Bank for the declaration of dividends to the Company without prior approval from regulatory authorities.
Current wording
Dividends from the Bank are a source of funds for payment of dividends by the Company to its shareholders. The only restrictions on dividends are those dictated by regulatory capital requirements, state corporate laws and prudent and sound banking principles. During 2024, the Bank paid dividends of $20.0 million to the Company. As of December 31, 2024, unappropriated retained earnings of $31.4 million were available at the Bank for the declaration of dividends to the Company without prior approval from regulatory authorities.
Previous wording
The Company maintains a treasury stock buyback program approved by the Board of Directors in October 2023 pursuant to which the Board of Directors has authorized the repurchase of up to 500,000 shares of the Company’s common stock and has no expiration date. A total of 486,036 shares remain under the buyback program at December 31, 2023.
Current wording
The Company maintains a treasury stock buyback program approved by the Board of Directors in October 2023 pursuant to which the Board of Directors has authorized the repurchase of up to 500,000 shares of the Company’s common stock and has no expiration date. A total of 318,581 shares remain under the buyback program at December 31, 2024.
Previous wording
The Company repurchased a total of 150,541 shares at an aggregate cost of $5.8 million during the year ended December 31, 2023 and 130,374 shares at an aggregate cost of $5.3 million during the year ended December 31, 2022. A portion of the repurchased shares may be used for the Company’s employee benefit plans and the balance will be available for other general corporate purposes. The pace of future repurchase activity will depend on factors such as levels of regulatory capital, cash generation from operations, cash requirements for investments, repayment of debt, current stock price, business and market conditions, and other factors. The Company may repurchase shares from time to time on the open market or in private transactions, including structured transactions. The stock repurchase program may be modified or discontinued at any time.
Current wording
The Company repurchased a total of 167,455 shares at an aggregate cost of $7.2 million during the year ended December 31, 2024 and 150,541 shares at an aggregate cost of $5.8 million during the year ended December 31, 2023. A portion of the repurchased shares may be used for the Company’s employee benefit plans and the balance will be available for other general corporate purposes. The pace of future repurchase activity will depend on factors such as levels of regulatory capital, cash generation from operations, cash requirements for investments, repayment of debt, current stock price, business and market conditions, and other factors. The Company may repurchase shares from time to time on the open market or in private transactions, including structured transactions. The stock repurchase program may be modified or discontinued at any time.
Previous wording
As a result of rising inflation, the Federal Reserve increased the Federal Funds rate throughout 2022 and 2023. The increase in the Federal Funds rate has contributed to the increase in the Company's net interest margin to 3.25% in 2023 from 2.74% in 2022, therefore positively impacting net interest income. Partially as a result of declining inflation, the market is forecasting a decline in the Federal Funds rate beginning in 2024. A decrease in the Federal Funds rate could negatively impact the Company's net interest margin and income.
Current wording
As a result of rising inflation, the Federal Reserve increased the Federal Funds rate throughout 2022 and 2023. The increase in the Federal Funds rate has contributed to the increase in the Company's net interest margin to 3.42% in 2024 from 3.25% in 2023 and 2.74% in 2022, therefore positively impacting net interest income. The Federal Reserve began to decrease the Federal Funds rate during the last four months of 2024 by a cumulative 100 basis points. Further decreases in the Federal Funds rate resulting from softening inflation or other reasons could negatively impact the Company's net interest margin and income in 2025.
Previous wording
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. The process combines many factors: economic factors, historical credit loss experience, of both the Company and similar peer banks, loan portfolio growth and concentrations, asset quality, risk tolerance, and other qualitative and quantitative factors which could affect future credit loss. Given the Company's recent historical loss experience, the impact of the qualitative risk factors related to the collective ACL is a substantial percentage of the overall ACL. Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses, and therefore the appropriateness of the ACL, could change significantly. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors and inputs are considered in estimating the ACL and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all loan types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. Various regulatory agencies, as an integral part of the examination process, periodically review the ACL. Such agencies may require the Company to recognize additions to the ACL or reserve increases to adversely graded classified loans based on information available to them at the time of their examinations. The Company believes the level of ACL is appropriate. 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 Note 1 "Summary of Significant Accounting Policies" and Note 4 "Loans," as well as the “Provision and Allowance for Credit Losses and Allowance for Unfunded Commitments” section of this report.
Current wording
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. The process combines many factors: economic factors, historical credit loss experience, of both the Company and similar peer banks, loan portfolio growth and concentrations, asset quality, and other qualitative and quantitative factors which could affect future credit loss. Given the Company's recent historical loss experience, the impact of the qualitative risk factors related to the collective ACL is a substantial percentage of the overall ACL. Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses, and therefore the appropriateness of the ACL, could change significantly. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors and inputs are considered in estimating the ACL and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all loan types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. Various regulatory agencies, as an integral part of the examination process, periodically review the ACL. Such agencies may require the Company to recognize additions to the ACL or reserve increases to adversely graded classified loans based on information available to them at the time of their examinations. The Company believes the level of ACL is appropriate. 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 Note 1 "Summary of Significant Accounting Policies" and Note 4 "Loans," as well as the “Provision and Allowance for Credit Losses and Allowance for Unfunded Commitments” section of this report.
Previous wording
In the normal course of business, the Company is party to activities that involve credit, market and operational risk that are not reflected in whole or in part in the Company’s consolidated financial statements. 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. At December 31, 2023, an allowance for unfunded commitments of $132,000 had been recorded. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Provision and Allowance for Credit Losses and Unfunded Commitments.”
Current wording
In the normal course of business, the Company is party to activities that involve credit, market and operational risk that are not reflected in whole or in part in the Company’s consolidated financial statements. 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. At December 31, 2024, an allowance for unfunded commitments of $273,000 had been recorded. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Provision and Allowance for Credit Losses and Unfunded Commitments.”
Showing the first 40 of 41 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The balance of liquid assets consists of cash and cash equivalents, which includes cash and due from banks, interest-bearing deposits in other financial institutions, federal funds sold, and money market funds. These balances totaled $349.7 million at December 31, 2024, a decrease of $22.7 million, or 6.1%, from December 31, 2023. The decrease during