Cass information systems announces quarterly earnings per share and revenue growth of 33.3% and 22.1%, respectively
St. louis--(business wire)--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.
