Cass information systems announces quarterly net income and revenue growth of 21.9% and 15.1%, respectively
St. louis--(business wire)--cass information systems, inc. (nasdaq: cass), (the company or cass) reported second quarter 2022 earnings of $.62 per diluted share, an increase of 29.2% from the $.48 per diluted share it earned in the second quarter of 2021. net income for the period was $8.6 million, an increase of 21.9% from the $7.0 million earned in the same period in 2021. diluted earnings per share and net income also increased 3.3% and 3.7%, respectively as compared to the first quarter of 2022. eric brunngraber, the company’s chairman and chief executive officer, noted, “it is exciting to see such strong financial results from the strategic initiatives undertaken during the past few years. further initiatives are well underway, which will expand our service portfolio as well as increase our operational efficiency. the recent and anticipated future increase in short-term interest rates should also enhance revenue going forward.” second quarter 2022 highlights financial fees – financial fee income, earned on a transactional level basis for invoice payment services when making customer payments, increased $3.1 million, or 41.6%, over the same period in the prior year. the increase in financial fee income was largely driven by the 48.2% increase in average payments in advance of funding. net interest income – net interest income increased $2.8 million, or 26.2%. the company’s net interest margin increased to 2.54% as compared to 2.30% in the same period last year. the increase in net interest income was largely driven by a 12.9% increase in average interest-earning assets, specifically an increase in average loans, excluding ppp loans, of 21.8%. the increase in the net interest margin was driven by an improved mix of interest-earning assets with an increase in average loans, combined with a rise in market interest rates which are favorable for the company over the long-term as average interest-earning assets for the second quarter of 2022 of $2.22 billion greatly exceeded average interest-bearing liabilities of $605.8 million. provision for credit losses - the provision for credit losses was $70,000 during the second quarter of 2022 as compared to a release of credit losses of $610,000 in the second quarter of 2021. the provision for the second quarter of 2022 was primarily driven by external economic factors, including the reduction in the forecast of gross domestic product (gdp). credit quality remains strong with no charge-offs or non-performing loans. operating expenses - consolidated operating expenses rose $3.8 million, or 12.9%. personnel expense increased $3.2 million, or 13.8%, due to an increase in base salaries, an increase in stock compensation and profit sharing of $1.0 million and $346,000, respectively, due to improved company earnings, 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. loans - average loans increased $72.3 million, or 8.0%. excluding the reduction in average ppp loans of $102.2 million, average loans increased $174.4 million, or 21.8%. 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 $4.2 million, or 0.4%, during the first six months of 2022. payments in advance of funding – average payments in advance of funding increased $95.3 million, or 48.2%, primarily due to an increase in transportation dollar volumes. deposits – average deposits increased $212.9 million, or 20.9%. the company continues to experience robust deposit growth. accounts and drafts payable - average accounts and drafts payable increased $187.5 million, or 19.8%. 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 $11.4 billion during the second quarter of 2022. the 27.7% 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 $4.6 billion during the second quarter of 2022. the 24.9% increase in dollar volumes was largely due to an increase in energy prices. liquidity - the company continues to maintain significant liquidity, with average short-term investments of $450.9 million during the second quarter of 2022. capital - the company’s common equity tier 1, total risk-based capital and leverage ratios were 13.47%, 14.21% and 8.85% at june 30, 2022, respectively. total shareholders’ equity has declined $40.2 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 $2.4 billion, cass is uniquely supported by cass commercial bank. founded in 1906 and a wholly owned subsidiary, cass commercial bank provides sophisticated financial exchange services to the parent organization and its clients. cass is part of the russell 2000®. more information is available at www.cassinfo.com. note to investors certain matters set forth in this news release may contain forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. however, such performance involves risks and uncertainties that may cause actual results to differ materially from those in such statements. these risks and uncertainties include the impact of the covid-19 pandemic as well as economic and market conditions, inflationary pressures, risks of credit deterioration, interest rate changes, governmental actions, market volatility, security breaches and technology interruptions, energy prices and competitive factors, among others, as set forth in the company’s most recent annual report on form 10-k and subsequent reports filed with the securities and exchange commission. the company has used, and intends to continue using, the investors portion of its website to disclose material non-public information and to comply with its disclosure obligations under regulation fd. accordingly, investors are encouraged to monitor cass’s website in addition to following press releases, sec filings, and public conference calls and webcasts. consolidated statements of income (unaudited) ($ and numbers in thousands, except per share data) quarter ended june 30, 2022 quarter ended march 31, 2022 quarter ended june 30, 2021 six-months ended june 30, 2022 six-months ended june 30, 2021 processing fees $ 19,326 $ 19,036 $ 19,048 $ 38,362 $ 37,423 financial fees 10,623 10,532 7,500 21,155 14,497 net interest income 13,641 11,903 10,811 25,544 21,156 (provision for) release of credit losses (70 ) (230 ) 610 (300 ) 1,210 other 702 862 439 1,564 1,242 total revenues $ 44,222 $ 42,103 $ 38,408 $ 86,325 $ 75,528 personnel $ 26,033 $ 24,718 $ 22,880 $ 50,751 $ 45,406 occupancy 916 915 959 1,831 1,906 equipment 1,660 1,711 1,653 3,371 3,328 other 5,030 4,484 4,311 9,514 7,688 total operating expenses $ 33,639 $ 31,828 $ 29,803 $ 65,467 $ 58,328 income from operations before income taxes $ 10,583 $ 10,275 $ 8,605 $ 20,858 $ 17,200 income tax expense 2,021 2,017 1,579 4,038 3,103 net income $ 8,562 $ 8,258 $ 7,026 $ 16,820 $ 14,097 basic earnings per share $ .63 $ .61 $ .49 $ 1.24 $ .99 diluted earnings per share $ .62 $ .60 $ .48 $ 1.22 $ .97 share data: weighted-average common shares outstanding 13,543 13,578 14,267 13,560 14,286 weighted-average common shares outstanding assuming dilution 13,802 13,814 14,510 13,808 14,526 consolidated balance sheets ($ in thousands) (unaudited) june 30, 2022 (unaudited) march 31, 2022 december 31, 2021 assets: cash and cash equivalents $ 261,234 $ 191,449 $ 514,928 investment securities 740,074 774,610 673,453 loans, excluding ppp loans 958,491 975,829 954,268 ppp loans 996 1,373 6,299 allowance for credit losses (12,573 ) (12,406 ) (12,041 ) payments in advance of funding 313,172 329,622 291,427 premises and equipment, net 19,470 19,086 18,113 investments in bank-owned life insurance 47,435 47,163 43,176 goodwill and other intangible assets 21,825 16,691 16,826 other assets 93,864 78,626 48,452 total assets $ 2,443,988 $ 2,422,043 $ 2,554,901 liabilities and shareholders’ equity: deposits non-interest bearing $ 604,492 $ 621,819 $ 582,642 interest bearing 585,083 555,116 638,861 total deposits 1,189,575 1,176,935 1,221,503 accounts and drafts payable 998,870 989,733 1,050,396 other liabilities 49,929 38,297 37,204 total liabilities $ 2,238,374 $ 2,204,965 $ 2,309,103 shareholders’ equity: common stock $ 7,753 $ 7,753 $ 7,753 additional paid-in capital 204,482 203,149 204,276 retained earnings 121,386 116,646 112,220 common shares in treasury, at cost (81,742 ) (82,348 ) (78,904 ) accumulated other comprehensive (loss) income (46,265 ) (28,122 ) 453 total shareholders’ equity $ 205,614 $ 217,078 $ 245,798 total liabilities and shareholders’ equity $ 2,443,988 $ 2,422,043 $ 2,554,901 average balances (unaudited) ($ in thousands) quarter ended june 30, 2022 quarter ended march 31, 2022 quarter ended june 30, 2021 six-months ended june 30, 2022 six-months ended june 30, 2021 average interest-earning assets $ 2,222,655 $ 2,122,915 $ 1,968,646 $ 2,173,060 $ 1,930,235 average loans, excluding ppp loans 972,756 956,913 798,329 964,879 783,181 average ppp loans 1,115 2,938 103,290 2,021 108,296 average payments in advance of funding 293,150 279,479 197,855 286,352 187,632 average assets 2,616,220 2,528,263 2,278,402 2,572,485 2,231,744 average deposits 1,229,744 1,167,121 1,016,806 1,198,606 993,950 average accounts and drafts payable 1,135,504 1,088,105 947,987 1,111,935 923,320 average shareholders’ equity $ 207,828 $ 235,720 $ 260,117 $ 221,697 $ 259,410 consolidated financial highlights (unaudited) ($ and numbers in thousands, except ratios) quarter ended june 30, 2022 quarter ended march 31, 2022 quarter ended june 30, 2021 six-months ended june 30, 2022 six-months ended june 30, 2021 return on average equity 16.53 % 14.21 % 10.83 % 15.30 % 10.96 % net interest margin 2.54 % 2.36 % 2.30 % 2.45 % 2.31 % allowance for credit losses to loans 1.31 % 1.27 % 1.28 % 1.31 % 1.28 % non-performing loans to total loans — % — % — % — % — % net loan charge-offs (recoveries) to loans — % — % — % — % — % transportation invoice volume 9,289 8,958 9,461 18,247 18,248 transportation dollar volume $ 11,413,414 $ 10,855,180 $ 8,940,889 $ 22,268,594 $ 16,845,528 facility expense transaction volume 6,557 6,641 6,827 13,198 13,823 facility expense dollar volume $ 4,570,178 $ 4,643,942 $ 3,657,965 $ 9,214,120 $ 7,375,393
