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Cass Information Systems Reports Fourth Quarter 2024 Results

1. CASS reported Q4 2024 earnings of $0.33 per share, a 45.4% decline. 2. Bad debt and pension terminations negatively impacted 2024 net income. 3. Net interest margin improved to 3.55%, indicating financial resilience. 4. Transportation dollar volumes decreased 0.6%, affecting revenue generation. 5. CASS expects growth momentum in 2025 with improved efficiencies.

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$41.06501/24 02:52 PM EDTLatest Updated
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Why Neutral?

The earnings drop and bad debt suggest caution, yet improvements in margin support stability.

How important is it?

Earnings reports directly impact stock performance and investor sentiment, particularly amidst a mixed outlook.

Why Short Term?

Immediate effects are evident in current earnings, but new efficiencies could drive recovery quickly.

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CASS
ST. LOUIS--(BUSINESS WIRE)--Cass Information Systems, Inc. (Nasdaq: CASS), (the Company or Cass) reported fourth quarter 2024 earnings of $0.33 per diluted share, as compared to $0.61 in the fourth quarter of 2023 and $0.21 in the third quarter of 2024. Net income for the period was $4.6 million, a decrease of 45.4% from $8.4 million in the same period in 2023 and an increase of $2.9 million, or 56.4%, as compared to the third quarter of 2024. For the year ended December 31, 2024, the Company reported net income and earnings per diluted share of $19.2 million and $1.39, respectively, as compared to $30.1 million and $2.18, respectively, for the year ended December 31, 2023. Martin Resch, the Company’s President and Chief Executive Officer, noted, “We closed 2024 operationally on a strong note and have significant momentum for enhanced profitability as we enter 2025. We expect our net interest margin to continue to increase given the current interest rate environment. We see average earning assets returning to the level we had prior to the cyber event at our CassPay client, which resulted in a $100 million balance decrease early in 2024. We have leveraged our new AI enabled technology platforms to gain operating efficiencies in our payments business, and will continue to do so throughout 2025, resulting in lower headcount even as our transaction volumes continue to increase. The launch of Amplify, our partnership with Lupeon and our acquisition of AcuAudit provides us with a unique opportunity to market a best-in-class transportation payments solution, covering all geographies and transportation modes. The termination of the defined benefit pension plan will remove close to $1 million of annual operating costs. Finally, and most importantly, we continue to win new business reflecting our market leadership position and trust that our clients have in our ability to deliver value.” Resch continued, “Net income during 2024 was negatively impacted by a combination of $7.8 million of bad debt expense on a funding receivable related to a facility client, a pension termination loss of $3.5 million and the cyber event at a CassPay client. These events and their related financial impact are now behind us and we have significant tailwinds as described above. These tailwinds, combined with indications that freight indices are approaching positive territory for the first time since 2022 (Cass Transportation Index Report), set up for a positive revenue and profitability environment for Cass in coming quarters.” Fourth Quarter 2024 Highlights Transportation Dollar Volumes – Transportation dollar volumes were $9.0 billion during the fourth quarter of 2024, a decrease of 0.6% as compared to the fourth quarter of 2023 and a decrease of 1.1% as compared to the third quarter of 2024. The decrease in dollar volumes was due to a decrease in the average dollars per transaction to $1,008 during the fourth quarter of 2024 as compared to $1,036 in the fourth quarter of 2023 and $993 in the third 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. Facility Expense Dollar Volumes – Facility expense dollar volumes totaled $5.3 billion during the fourth quarter of 2024, an increase of 9.1% as compared to the fourth quarter of 2023 and a decrease of 8.4% as compared to the third quarter of 2024. The increase as compared to the fourth quarter of 2023 is largely reflective of new client volume. The decrease as compared to the third quarter of 2024 is largely due to seasonality in client energy usage. Processing Fees – Processing fees decreased $466,000, or 2.2%, over the same period in the prior year. The decrease in processing fees was largely driven by an decrease in fees in the Company’s Waste division and a decrease in ancillary fees, partially offset by increases in facility and transportation transaction volumes of 20.3% and 2.1%, respectively. Financial Fees – Financial fees, earned on a transactional level basis for invoice payment services when making customer payments, decreased $753,000, or 6.6%. The decrease in financial fee income was primarily due to the decline in transportation dollar volumes of 0.6% in addition to changes in the manner certain vendors receive payments. The Company has had recent success signing clients for the Amplify by Cass working capital solution which is expected to begin to have a positive impact on financial fees during the second half of 2025. Net Interest Income – Net interest income increased $730,000, or 4.3%. The increase in net interest income was attributable to an increase in the net interest margin to 3.55% in the fourth quarter of 2024 from 3.30% in the fourth quarter of 2023, partially offset by a decline in average interest-earning assets of $52.8 million, or 2.5%. The expansion in the net interest margin is largely due to an increase in the weighted-average yield on loans to 5.38% from 4.95% in the same quarter last year due to loan growth and fixed rate loans maturing and being re-priced in a higher interest rate environment. Provision for Credit Losses - The Company recorded a provision for credit losses of $93,000 during the fourth quarter of 2024 as compared to a release of credit losses of $215,000 in the fourth quarter of 2023. The provision for credit losses for the fourth quarter of 2024 was largely driven by an increase in total loans of $3.6 million, or 0.3%, as compared to September 30, 2024 as well as an increase in unfunded commitments on new faith-based construction loans. Personnel Expenses - Personnel expenses increased $3.5 million, or 11.7%. Salaries and commissions increased $410,000, or 1.7%, as compared to the fourth quarter of 2023 primarily as a result of merit increases. The Company has reduced its FTE count to 1,147 at December 31, 2024 as compared to 1,170 at September 30, 2024 and 1,202 at June 30, 2024. The December 31, 2024 FTE count includes 14 from AcuAudit. Salaries and commissions increased $421,000 as compared to the third quarter of 2024 due to an increase in employee profit sharing of $1.0 million, partially offset by the decline in FTEs. Net periodic pension cost increased $3.5 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. Excluding the impact of the one-time pension termination expense, personnel expenses were flat with the same quarter in the prior year. Non-Personnel Expenses - Non-personnel expenses increased $765,000, or 7.1%. Equipment expense increased $378,000 due to an increase in depreciation expense on software related to recently completed technology initiatives. Loans - When compared to December 31, 2023, ending loans increased $67.7 million, or 6.7%. Payments in Advance of Funding – Average payments in advance of funding decreased $8.4 million, or 4.0%, primarily due to a 0.6% decrease in transportation dollar volumes, which led to fewer dollars advanced to freight carriers, as well as the continued consolidation of freight carriers. Goodwill and Other Intangible Assets - When compared to September 30, 2024, goodwill and other intangible assets increased $6.3 million. In December 2024, the Company acquired AcuAudit, a premier 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. Deposits – Average deposits decreased $19.0 million, or 1.8%, when compared to the fourth quarter of 2023. 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 from September 2024 to December 2024. Accounts and Drafts Payable - Average accounts and drafts payable decreased $54.5 million, or 4.9%. 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 9.1%. Accounts and drafts payable are a significant source of funding generated by payment float from transportation and facility clients. Shareholders’ Equity - Total shareholders’ equity has decreased $779,000 since December 31, 2023 primarily as a result of dividends of $16.5 million and the repurchase of Company stock of $7.2 million, partially offset by net income of $19.2 million. 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 $90 billion annually on behalf of clients, and with total assets of $2.4 billion, Cass is uniquely supported by Cass Commercial Bank. Founded in 1906 and a wholly owned subsidiary, Cass Commercial Bank provides sophisticated financial exchange services to the parent organization and its clients. Cass is part of the Russell 2000®. More information is available at www.cassinfo.com. Forward Looking Information This information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include future financial and operating results, expectations, intentions, and other statements that are not historical facts. Such statements are based on current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. These risks and uncertainties include the impact of economic and market conditions, inflationary pressures, risks of credit deterioration, interest rate changes, governmental actions, market volatility, security breaches and technology interruptions, energy prices and competitive factors, among others, as set forth in the Company’s most recent Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange Commission. Actual results may differ materially from those set forth in the forward-looking statements. Note to Investors The Company has used, and intends to continue using, the Investors portion of its website to disclose material non-public information and to comply with its disclosure obligations under Regulation FD. Accordingly, investors are encouraged to monitor Cass’s website in addition to following press releases, SEC filings, and public conference calls and webcasts. Consolidated Statements of Income (unaudited) ($ and numbers in thousands, except per share data) Quarter Ended December 31, 2024 Quarter Ended September 30, 2024 Quarter Ended December 31, 2023 Year Ended December 31, 2024 Year Ended December 31, 2023 Processing fees $ 20,262 $ 20,053 $ 20,728 $ 82,671 $ 79,566 Financial fees 10,714 11,177 11,467 43,297 45,985 Total fee revenue $ 30,976 $ 31,230 $ 32,195 $ 125,968 $ 125,551 Interest and fees on loans 14,428 14,567 12,796 55,362 50,825 Interest and dividends on securities 4,104 4,007 4,352 16,931 18,215 Interest on federal funds sold and other short-term investments 3,844 4,200 4,573 15,752 13,720 Total interest income $ 22,376 $ 22,774 $ 21,721 $ 88,045 $ 82,760 Interest expense 4,612 5,156 4,687 20,258 16,266 Net interest income $ 17,764 $ 17,618 $ 17,034 $ 67,787 $ 66,494 (Provision for) release of credit losses (93 ) 140 215 (447 ) 550 Loss on sale of investment securities (33 ) -- (13 ) (46 ) (173 ) Other 1,757 1,562 1,305 5,927 5,089 Total revenues $ 50,371 $ 50,550 $ 50,736 $ 199,189 $ 197,511 Salaries and commissions 24,271 23,850 23,861 96,356 93,474 Share-based compensation 570 898 342 3,168 4,139 Net periodic pension cost 3,588 195 476 4,172 878 Other benefits 4,632 4,924 4,921 19,695 20,203 Total personnel expenses $ 33,061 $ 29,867 $ 29,600 $ 123,391 $ 118,694 Occupancy 868 890 890 3,446 3,560 Equipment 2,328 2,107 1,950 8,305 7,138 Bad debt expense -- 6,559 -- 7,847 -- Other 8,350 7,475 7,941 31,981 30,763 Total operating expenses $ 44,607 $ 46,898 $ 40,381 $ 174,970 $ 160,155 Income from operations before income taxes $ 5,764 $ 3,652 $ 10,355 $ 24,219 $ 37,356 Income tax expense 1,170 714 1,945 5,051 7,297 Net income $ 4,594 $ 2,938 $ 8,410 $ 19,168 $ 30,059 Basic earnings per share $ .34 $ .22 $ .62 $ 1.42 $ 2.22 Diluted earnings per share $ .33 $ .21 $ .61 $ 1.39 $ 2.18 Share data: Weighted-average common shares outstanding 13,436 13,504 13,467 13,502 13,530 Weighted-average common shares outstanding assuming dilution 13,718 13,786 13,755 13,778 13,816 Consolidated Balance Sheets ($ in thousands) (unaudited) December 31, 2024 (unaudited) September 30, 2024 December 31, 2023 Assets: Cash and cash equivalents $ 349,728 $ 230,556 $ 372,468 Securities available-for-sale, at fair value 528,021 550,756 627,117 Loans 1,081,989 1,078,387 1,014,318 Less: Allowance for credit losses (13,395 ) (13,447 ) (13,089 ) Loans, net $ 1,068,594 $ 1,064,940 $ 1,001,229 Payments in advance of funding 208,530 207,202 198,861 Premises and equipment, net 34,174 34,295 30,093 Investments in bank-owned life insurance 50,325 49,885 49,159 Goodwill and other intangible assets 26,359 20,098 20,654 Accounts and drafts receivable from customers 66,281 30,892 110,651 Other assets 63,069 72,136 68,390 Total assets $ 2,395,081 $ 2,260,760 $ 2,478,622 Liabilities and shareholders’ equity: Deposits Non-interest bearing $ 251,230 $ 392,573 $ 524,359 Interest-bearing 716,686 654,750 616,455 Total deposits $ 967,916 $ 1,047,323 $ 1,140,814 Accounts and drafts payable 1,149,276 936,463 1,071,369 Other liabilities 48,859 39,327 36,630 Total liabilities $ 2,166,051 $ 2,023,113 $ 2,248,813 Shareholders’ equity: Common stock $ 7,753 $ 7,753 $ 7,753 Additional paid-in capital 205,593 205,026 208,007 Retained earnings 148,487 148,092 145,782 Common shares in treasury, at cost (87,615 ) (84,139 ) (84,264 ) Accumulated other comprehensive loss (45,188 ) (39,085 ) (47,469 ) Total shareholders’ equity $ 229,030 $ 237,647 $ 229,809 Total liabilities and shareholders’ equity $ 2,395,081 $ 2,260,760 $ 2,478,622 Average Balances (unaudited) ($ in thousands)   Quarter Ended December 31, 2024 Quarter Ended September 30, 2024 Quarter Ended December 31, 2023 Year Ended December 31, 2024 Year Ended December 31, 2023 Average interest-earning assets $ 2,022,794 $ 2,001,740 $ 2,075,641 $ 2,011,554 $ 2,076,950 Average loans 1,065,944 1,072,824 1,025,259 1,048,732 1,055,668 Average securities available-for-sale 555,674 535,423 615,666 578,817 665,146 Average short-term investments 348,632 338,464 356,887 326,233 287,243 Average payments in advance of funding 200,963 202,976 209,364 202,860 234,865 Average assets 2,366,992 2,340,870 2,414,665 2,349,397 2,419,608 Average non-interest bearing deposits 399,778 404,364 464,924 414,711 512,608 Average interest-bearing deposits 638,180 630,204 592,055 634,581 571,067 Average interest-bearing liabilities 638,191 630,215 592,066 634,592 573,308 Average accounts and drafts payable 1,055,928 1,033,070 1,110,415 1,030,520 1,081,245 Average shareholders’ equity $ 231,993 $ 231,785 $ 207,834 $ 228,944 $ 211,069 Consolidated Financial Highlights (unaudited) ($ and numbers in thousands, except ratios) Quarter Ended December 31, 2024 Quarter Ended September 30, 2024 Quarter Ended December 31, 2023 Year Ended December 31, 2024 Year Ended December 31, 2023 Return on average equity 7.88 % 5.04 % 16.06 % 8.37 % 14.24 % Return on average assets 0.77 % 0.50 % 1.38 % 0.82 % 1.24 % Net interest margin (1) 3.55 % 3.55 % 3.30 % 3.42 % 3.25 % Average interest-earning assets yield (1) 4.46 % 4.57 % 4.20 % 4.43 % 4.04 % Average loan yield 5.38 % 5.40 % 4.95 % 5.28 % 4.81 % Average investment securities yield (1) 2.87 % 2.86 % 2.63 % 2.82 % 2.63 % Average short-term investment yield 4.39 % 4.94 % 5.08 % 4.83 % 4.78 % Average cost of total deposits 1.77 % 1.98 % 1.76 % 1.93 % 1.50 % Average cost of interest-bearing deposits 2.88 % 3.25 % 3.14 % 3.19 % 2.85 % Average cost of interest-bearing liabilities 2.87 % 3.25 % 3.14 % 3.19 % 2.84 % Allowance for credit losses to loans 1.24 % 1.25 % 1.29 % 1.24 % 1.29 % Non-performing loans to total loans -- % -- % -- % -- % -- % Net loan charge-offs (recoveries) to loans -- % -- % -- % -- % -- % Common equity tier 1 ratio 13.84 % 14.54 % 14.73 % 13.84 % 14.73 % Total risk-based capital ratio 14.61 % 15.31 % 15.49 % 14.61 % 15.49 % Leverage ratio 10.57 % 11.05 % 10.71 % 10.57 % 10.71 % Transportation invoice volume 8,919 9,160 8,733 35,729 35,949 Transportation dollar volume $ 8,994,440 $ 9,097,739 $ 9,044,772 $ 36,113,169 $ 38,288,478 Facility expense transaction volume 4,218 4,316 3,505 17,135 13,857 Facility expense dollar volume $ 5,291,143 $ 5,778,291 $ 4,848,064 $ 21,438,282 $ 19,836,821 (1) Yields are presented on tax-equivalent basis assuming a tax rate of 21%.

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