Third Quarter Results
(All comparisons refer to the third quarter of 2021, except as
noted)
- Earned record quarterly net income and diluted earnings per
share.
- Increase in diluted earnings per share of 33.3%, to $.64 from
$.48.
- Increase in net income of 29.3%, to $8.8 million from $6.8
million.
- Increase in return on average equity to 16.84% from
10.83%.
- Processed record quarterly transportation dollar volumes of
$11.5 billion, a 21.1% increase.
- Increase in financial fees of $2.6 million, or 30.5%.
- Increase in average payments in advance of funding of $63.8
million, or 29.8%.
- Increase in average loans, excluding PPP loans, of $147.3
million, or 17.6%.
- Increase in net interest margin to 2.90% from 2.32%
- Maintained exceptional credit quality.
Cass Information Systems, Inc. (Nasdaq:
CASS), (the Company or Cass) reported third quarter 2022
earnings of $.64 per diluted share, an increase of 33.3% from the
$.48 per diluted share it earned in the third quarter of 2021. Net
income for the period was $8.8 million, an increase of 29.3% from
the $6.8 million earned in the same period in 2021. Diluted
earnings per share and net income also increased 3.2% and 2.8%,
respectively as compared to the second quarter of 2022.
Eric Brunngraber, the Company’s chairman and chief executive
officer, noted, “Experiencing another quarter of record net income
and EPS is exciting to see. We are utilizing a large portion of our
revenue growth to fund ongoing and new technology initiatives which
should allow us to both more efficiently consume data through
automation and onboard new customers faster. We believe these
technology initiatives will assist our operating leverage beginning
in late 2023.”
Third Quarter 2022 Highlights
Processing Fees – Processing fees increased $503,000, or
2.7%, over the same period in the prior year. The increase in
processing fee income was largely driven by the increase in
facility transaction volumes of 6.8%. Transportation invoice
volumes increased 0.6% over the same period.
Financial Fees – Financial fees, earned on a
transactional level basis for invoice payment services when making
customer payments, increased $2.6 million, or 30.5%, over the same
period in the prior year. The increase in financial fee income was
largely driven by the increases in transportation and facility
dollar volumes in addition to the 29.8% increase in average
payments in advance of funding.
Net Interest Income – Net interest income increased $4.5
million, or 39.7%. The Company’s net interest margin increased to
2.90% as compared to 2.32% in the same period last year. The
increase in net interest income and margin was largely driven by
the rise in market interest rates which are favorable for the
Company over the long-term. Our net interest margin has increased
from a low of 2.30% during the fourth quarter of 2021 to 2.90%
during the third quarter of 2022. Further improvement is expected
in future quarters if short-term interest rates continue to
increase. The Company was also assisted by the 10.2% increase in
average interest-earning assets, specifically an increase in
average loans, excluding PPP loans, of 17.6%.
Provision for Credit Losses - The provision for credit
losses was $550,000 during the third quarter of 2022 as compared to
$340,000 in the third quarter of 2021. The provision for the third
quarter of 2022 was primarily driven by the increase in total loans
of $77.6 million, or 8.1%, as compared to June 30, 2022.
Operating Expenses - Consolidated operating expenses rose
$5.6 million, or 18.3%. Personnel expense increased $3.7 million,
or 16.0%. Base salaries increased as a result of merit increases,
wage pressures, an increase in average full-time equivalent
employees of 7.5% due to the Touchpoint acquisition and strategic
investment in various technology initiatives, including improved
rating engine capabilities and investment in optical character
recognition, artificial intelligence, machine learning and other
processes to consume images and produce data. Also driving the
increase in personnel expense were increases in stock compensation
and profit sharing due to improved Company earnings. Certain other
expense categories are also elevated as we invest in, and
transition to, improved technology. The Company anticipates this
elevated spending will result in improved operating leverage
beginning in late 2023.
Loans - Average loans increased $111.0 million, or 12.7%.
Excluding the reduction in average PPP loans of $36.3 million,
average loans increased $147.3 million, or 17.6%. The Company has
been successful in achieving organic growth in its franchise,
faith-based and other commercial and industrial loans. When
compared to December 31, 2021, ending loans, excluding PPP loans,
increased $82.8 million, or 8.7%, during the first nine months of
2022.
Payments in Advance of Funding – Average payments in
advance of funding increased $63.8 million, or 29.8%, primarily due
to an increase in transportation dollar volumes, which led to
higher dollars advanced to freight carriers.
Deposits – Average deposits increased $131.0 million, or
12.4%, when compared to the third quarter of 2021. However, average
deposits declined $45.4 million or 3.7%, as compared to the second
quarter of 2022, partially due to tightening monetary policy.
Accounts and Drafts Payable - Average accounts and drafts
payable increased $171.7 million, or 17.0%. The increase in these
balances, which are non-interest bearing, are primarily reflective
of the increase in transportation and facility expense dollar
volumes.
Transportation Dollar Volumes – Transportation dollar
volumes hit a record level of $11.5 billion during the third
quarter of 2022. The 21.1% increase in dollar volumes was largely
due to inflationary pressures, supply chain disruptions and fuel
surcharges, among other factors. The increase in dollar volumes is
positively impacting the balance of our interest-earning assets
which is helping generate interest income. In addition, higher
dollar volumes are having a positive impact on financial fees.
Facility Expense Dollar Volumes – Facility dollar volumes
totaled $5.5 billion during the third quarter of 2022. The 30.1%
increase in dollar volumes was largely due to an increase in energy
prices.
Capital - The Company’s common equity tier 1, total
risk-based capital and leverage ratios were 13.33%, 14.07% and
9.08% at September 30, 2022, respectively. Total shareholders’
equity has declined $54.1 million since December 31, 2021 primarily
as a result of an increase in accumulated other comprehensive loss
due to the rise in market interest rates and resulting negative
impact on the fair value of available-for-sale investment
securities.
About Cass Information Systems
Cass Information Systems, Inc. is a leading provider of
integrated information and payment management solutions. Cass
enables enterprises to achieve visibility, control and efficiency
in their supply chains, communications networks, facilities and
other operations. Disbursing over $80 billion annually on behalf of
clients, and with total assets in excess of $2.6 billion, Cass is
uniquely supported by Cass Commercial Bank. Founded in 1906 and a
wholly owned subsidiary, Cass Commercial Bank provides
sophisticated financial exchange services to the parent
organization and its clients. Cass is part of the Russell 2000®. More information is available
at www.cassinfo.com.
Note to Investors
Certain matters set forth in this news release may contain
forward-looking statements that are provided to assist in the
understanding of anticipated future financial performance. However,
such performance involves risks and uncertainties that may cause
actual results to differ materially from those in such statements.
These risks and uncertainties include the impact of the COVID-19
pandemic as well as economic and market conditions, inflationary
pressures, risks of credit deterioration, interest rate changes,
governmental actions, market volatility, security breaches and
technology interruptions, energy prices and competitive factors,
among others, as set forth in the Company’s most recent Annual
Report on Form 10-K and subsequent reports filed with the
Securities and Exchange Commission. The Company has used, and
intends to continue using, the Investors portion of its website to
disclose material non-public information and to comply with its
disclosure obligations under Regulation FD. Accordingly, investors
are encouraged to monitor Cass’s website in addition to following
press releases, SEC filings, and public conference calls and
webcasts.
Consolidated Statements of
Income (unaudited)
($ and numbers in thousands, except per
share data)
Quarter Ended
September 30, 2022
Quarter Ended
June 30, 2022
Quarter Ended
September 30, 2021
Nine-Months Ended
September 30, 2022
Nine-Months Ended
September 30, 2021
Processing fees
$
18,964
$
19,186
$
18,461
$
57,184
$
55,882
Financial fees
11,252
10,623
8,624
32,406
23,122
Net interest income
15,971
13,641
11,432
41,515
32,588
(Provision for) release of credit
losses
(550
)
(70
)
(340
)
(850
)
870
Other
1,568
842
492
3,275
1,735
Total revenues
$
47,205
$
44,222
$
38,669
$
133,530
$
114,197
Personnel
$
26,999
$
26,033
$
23,283
$
77,750
$
68,689
Occupancy
970
916
953
2,801
2,859
Equipment
1,633
1,660
1,700
5,004
5,028
Other
6,719
5,030
4,754
16,233
12,442
Total operating expenses
$
36,321
$
33,639
$
30,690
$
101,788
$
89,018
Income from operations before income
taxes
$
10,884
$
10,583
$
7,979
$
31,742
$
25,179
Income tax expense
2,085
2,021
1,174
6,123
4,277
Net income
$
8,799
$
8,562
$
6,805
$
25,619
$
20,902
Basic earnings per share
$
.65
$
.63
$
.48
$
1.89
$
1.47
Diluted earnings per share
$
.64
$
.62
$
.48
$
1.86
$
1.45
Share data:
Weighted-average common shares
outstanding
13,542
13,543
14,040
13,554
14,203
Weighted-average common shares
outstanding assuming dilution
13,804
13,802
14,277
13,807
14,442
Consolidated Balance
Sheets
($ in thousands)
(unaudited) September 30,
2022
(unaudited) June 30,
2022
December 31, 2021
Assets:
Cash and cash equivalents
$
346,994
$
261,234
$
514,928
Investment securities
763,789
740,074
673,453
Loans, excluding PPP loans
1,037,101
958,491
954,268
PPP loans
—
996
6,299
Allowance for credit losses
(13,049
)
(12,573
)
(12,041
)
Payments in advance of funding
269,221
313,172
291,427
Premises and equipment, net
19,375
19,470
18,113
Investments in bank-owned life
insurance
47,714
47,435
43,176
Goodwill and other intangible assets
21,630
21,825
16,826
Other assets
118,040
93,864
48,452
Total assets
$
2,610,815
$
2,443,988
$
2,554,901
Liabilities and shareholders’ equity:
Deposits
Non-interest bearing
$
581,731
$
604,492
$
582,642
Interest bearing
647,990
585,083
638,861
Total deposits
1,229,721
1,189,575
1,221,503
Accounts and drafts payable
1,146,334
998,870
1,050,396
Other liabilities
43,025
49,929
37,204
Total liabilities
$
2,419,080
$
2,238,374
$
2,309,103
Shareholders’ equity:
Common stock
$
7,753
$
7,753
$
7,753
Additional paid-in capital
205,624
204,482
204,276
Retained earnings
126,361
121,386
112,220
Common shares in treasury, at cost
(81,624
)
(81,742
)
(78,904
)
Accumulated other comprehensive (loss)
income
(66,379
)
(46,265
)
453
Total shareholders’ equity
$
191,735
$
205,614
$
245,798
Total liabilities and shareholders’
equity
$
2,610,815
$
2,443,988
$
2,554,901
Average Balances
(unaudited)
($ in thousands)
Quarter Ended
September 30, 2022
Quarter Ended
June 30, 2022
Quarter Ended
September 30, 2021
Nine-Months Ended
September 30, 2022
Nine-Months Ended
September 30, 2021
Average interest-earning assets
$
2,243,219
$
2,222,655
$
2,036,297
$
2,196,704
$
1,965,977
Average loans, excluding PPP loans
983,953
972,756
836,664
971,307
801,205
Average PPP loans
152
1,115
36,406
1,391
84,069
Average payments in advance of funding
277,683
293,150
213,922
283,431
196,492
Average assets
2,617,814
2,616,220
2,373,244
2,587,760
2,279,429
Average deposits
1,184,330
1,229,744
1,053,369
1,193,795
1,013,974
Average accounts and drafts payable
1,182,373
1,135,504
1,010,641
1,135,673
952,747
Average shareholders’ equity
$
207,247
$
207,828
$
254,521
$
216,827
$
257,763
Consolidated Financial
Highlights (unaudited)
($ and numbers in thousands, except
ratios)
Quarter Ended
September 30, 2022
Quarter Ended
June 30, 2022
Quarter Ended
September 30, 2021
Nine-Months Ended
September 30, 2022
Nine-Months Ended
September 30, 2021
Return on average equity
16.84
%
16.53
%
10.61
%
15.80
%
10.84
%
Net interest margin
2.90
%
2.54
%
2.32
%
2.61
%
2.31
%
Allowance for credit losses to loans
1.26
%
1.31
%
1.32
%
1.26
%
1.32
%
Non-performing loans to total loans
—
%
—
%
—
%
—
%
—
%
Net loan charge-offs (recoveries) to
loans
—
%
—
%
—
%
—
%
—
%
Transportation invoice volume
9,385
9,289
9,333
27,633
27,581
Transportation dollar volume
$
11,549,980
$
11,413,414
$
9,540,408
$
33,818,573
$
26,385,936
Facility expense transaction volume
(1)
3,315
3,186
3,104
9,794
9,351
Facility expense dollar volume
$
5,485,783
$
4,570,178
$
4,215,044
$
14,699,903
$
11,590,437
(1) Facility expense transaction
volumes have been restated for the current and prior periods to
reflect total invoices processed. In prior periods, we utilized
billing account numbers in our Telecom division as a proxy for
transactions.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221013005252/en/
Cass Investor Relations ir@cassinfo.com
Cass Information Systems (NASDAQ:CASS)
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