Cass Information Systems Inc.

11/04/2025 | Press release | Distributed by Public on 11/04/2025 09:02

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Cass Information Systems, Inc. ("Cass" or the "Company") provides payment and information processing services to large manufacturing, distribution, and retail enterprises across the United States. The Company's services include freight invoice rating, payment processing, auditing, and the generation of accounting and transportation information. Cass also processes and pays facility-related invoices, which include electricity and gas as well as waste and telecommunications expenses. Cass solutions include integrated payments, a B2B payment platform for clients that require an agile fintech partner. Additionally, the Company offers a church management software solution and an on-line platform to provide generosity services for faith-based and non-profit organizations. The Company's bank subsidiary, Cass Commercial Bank (the "Bank"), supports the Company's payment operations. The Bank also provides banking services to its target markets, which include privately held businesses in the St. Louis metropolitan area and restaurant franchises and faith-based ministries within the United States.
In general, Cass is compensated for its information processing services through service fees, transactional level payment services, and investment of account balances generated during the payment process. Both the number of transactions processed and the dollar volume processed are therefore key metrics followed by management. The Bank earns most of its revenue from net interest income.
Various factors will influence the Company's revenue and profitability, such as changes in the general level of interest rates, which has a significant effect on net interest income; industry-wide factors, such as the willingness of large corporations to outsource key business functions, and the general level of transportation and energy costs; and economic factors that include the general level of economic activity, the ability to hire and retain qualified staff, the growth and quality of the Bank's loan portfolio, and the effects of tariffs or other domestic or international governmental policies. For a more detailed discussion of the Company's revenue drivers and factors that impact the Company's results of operation and financial condition generally, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2024 Form 10-K.
Recent Industry Developments
While freight rates have recently begun gradually increasing after several quarters of decline since 2023, volumes continue to decline on a year over year basis which continues to put pressure on transportation related processing fees. In addition, carrier consolidation with small and medium-sized trucking companies exiting the market or selling to larger carriers continues to put downward pressure on financial fees as the smaller trucking companies were larger users of our quick pay solutions.
The Company has experienced an increase in facility dollar volumes in recent quarters due to higher energy usage and prices, in addition to onboarding new clients with high dollar volumes as compared to the related transaction count. Energy prices are rising due to a number of factors, including an aging power grid, and rising demand for electricity as a result of data center construction to power artificial intelligence and electric vehicles.
Recent Items of Note
Net interest income increased $3.5 million, or 19.3%, as compared to the same period last year. The increase in net interest income was attributable to the net interest margin improving to 3.87% as compared to 3.55% in the same period last year, in addition to an increase in average interest-earning assets of $187.6 million, or 9.4%. The Company generally benefits from a higher interest rate environment due to a large percentage of its funding sources being non-interest bearing.
On July 4, 2025 the president signed into law the One Big Beautiful Bill Act which makes various changes to the tax law. The most significant impacts relate to the deductibility of interest expense, research and experimentation expenses and accelerated deprecation deductions, among others. The full impact of the bill is being analyzed by the Company and could have an impact on income tax expense in future periods.
Results of Operations
The following paragraphs more fully discuss the results of operations and changes in financial condition for the three months ended September 30, 2025 ("third quarter of 2025") compared to the three months ended September 30, 2024 ("third quarter of 2024") and the nine months ended September 30, 2025 compared to the nine months ended
-27-
September 30, 2024. The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and related notes and with the statistical information and financial data appearing in this report, as well as in the Company's 2024 Form 10-K. Results of operations for the three months ended September 30, 2025 are not necessarily indicative of the results to be attained for any other period.
Discontinued Operations
The Company has applied discontinued operations accounting in accordance with Accounting Standards Codification, or ASC, Topic 205-20, "Presentation of Financial Statements - Discontinued Operations," to the assets and liabilities being sold related to the Company's TEM Business Unit as of September 30, 2025 and December 31, 2024, and for the three and nine months ended September 30, 2025, and 2024, as applicable. All financial information in this Quarterly Report on Form 10-Q is reported on a continuing operations basis, unless otherwise noted. See Note 2 to our consolidated financial statements for further discussion regarding discontinued operations and subsequent events associated with discontinued operations.
Summary of Results
The following table summarizes the Company's operating results:
(In thousands except per share data)
Third Quarter of
Nine Months Ended September 30,
2025 2024 %
Change 		2025
2024
%
Change
Processing fees $ 16,655 $ 16,686 (0.2) % $ 50,206 $ 50,361 (0.3) %
Financial fees 10,416 11,017 (5.5) % 30,538 32,075 (4.8) %
Net interest income 21,020 17,618 19.3 % 59,768 50,023 19.5 %
(Release of) provision for credit loss (193) (140) 37.9 % 737 355 107.6 %
Gain (loss) on sale of investment securities 4 - N/M (3,572) (13) N/M
Other 1,768 1,060 66.8 % 4,657 3,512 32.6 %
Total net revenue 50,056 46,521 7.6 % 140,860 135,603 3.9 %
Operating expense 38,441 42,757 (10.1) % 112,090 117,374 (4.5) %
Income before income tax expense 11,615 3,764 208.6 % 28,770 18,229 57.8 %
Income tax expense 2,403 736 226.5 % 5,848 3,829 52.7 %
Net income from continuing operations $ 9,212 $ 3,028 204.2 % $ 22,922 $ 14,400 59.2 %
Income from discontinued operations, net of tax $ (106) $ (90) (17.8) % $ 4,005 $ 174 N/M
Net income $ 9,106 $ 2,938 209.9 % $ 26,927 $ 14,574 84.8 %
Diluted earnings per share from continuing operations $ 0.69 $ 0.22 213.6 % $ 1.69 $ 1.05 61.0 %
Diluted earnings per share from discontinued operations $ (0.01) $ (0.01) - % $ 0.30 $ 0.01 N/M
Diluted earnings per share $ 0.68 $ 0.21 223.8 % $ 1.99 $ 1.06 87.7 %
Return on average assets 1.44 % 0.50 % 188.0 % 1.48 % 0.83 % 78.3 %
Return on average equity 15.29 % 5.04 % 203.4 % 15.51 % 8.54 % 81.6 %
Third quarter of 2025 compared to third quarter of 2024:
The Company recorded net revenue of $50.1 million during the third quarter of 2025, an increase of 7.6% from the third quarter of 2024, primarily driven by an increase in net interest income, partially offset by lower financial fees. Operating expense decreased 10.1% primarily driven by $6.6 million of bad debt expense in the third quarter of 2024, partially offset
-28-
by an increase in personnel expenses of $1.1 million. Net income was $9.1 million and diluted EPS was $0.68 per share, increases of 209.9% and 223.8% from the three months period ended September 30, 2024, respectively.
The Company posted a 1.44% return on average assets and 15.29% return on average equity.
Nine months ended September 30, 2025 compared to nine months ended September 30, 2024:
The Company recorded net revenue of $140.9 million during the nine months ended September 30, 2025, an increase of 3.9% from the nine months ended September 30, 2024, primarily driven by an increase in net interest income, partially offset by a loss on the sale of investment securities and lower financial fees. Operating expense decreased 4.5% primarily driven by a $9.8 million change in bad debt expense (recovery), partially offset by an increase in personnel expenses of $3.0 million. Net income was $26.9 million and diluted EPS was $1.99 per share, increases of 84.8% and 87.7% from the nine months ended September 30, 2024, respectively.
The Company posted a 1.48% return on average assets and 15.51% return on average equity.
Fee Revenue and Other Income
The Company's fee revenue is derived mainly from transportation and facility processing and financial fees. As the Company provides its processing and payment services, it is compensated by service fees which are typically calculated on a per-item basis, discounts received for services provided to carriers and by the accounts and drafts payable balances generated in the payment process which can be used to generate interest income. Processing volumes, average payments in advance of funding, and fee revenue were as follows:
(In thousands) Third Quarter of Nine Months Ended September 30,
2025 2024 %
Change 		2025 2024 %
Change
Transportation invoice volume 8,884 9,160 (3.0) % 26,075 26,810 (2.7) %
Transportation invoice dollar volume $ 9,277,722 $ 9,097,739 2.0 % $ 27,291,394 $ 27,118,728 0.6 %
Facility-related transaction volume 1
4,084 4,176 (2.2) % 12,450 12,487 (0.3) %
Facility-related dollar volume 1
$ 6,233,369 $ 5,473,113 13.9 % $ 17,569,447 $ 15,239,831 15.3 %
Average payments in advance of funding $ 175,705 $ 202,976 (13.4) % $ 175,170 $ 203,498 (13.9) %
Processing fees $ 16,655 $ 16,686 (0.2) % $ 50,206 $ 50,361 (0.3) %
Financial fees $ 10,416 $ 11,017 (5.5) % $ 30,538 $ 32,075 (4.8) %
Other fees $ 1,768 $ 1,060 66.8 % $ 4,657 $ 3,512 32.6 %
Gain (loss) on sale of investment securities $ 4 $ - N/M $ (3,572) $ (13) N/M
1.Includes utility and waste.
-29-
Third quarter of 2025 compared to third quarter of 2024:
Processing fees decreased $31,000, or 0.2% over the same period in the prior year reflecting lower transportation and facility transaction volumes.
Financial fees decreased $601,000, or 5.5%, primarily attributable to a decline in average payments in advance of funding of 13.4%, in addition to changes in the manner whereby facility vendors receive payments.
Nine months ended September 30, 2025 compared to nine months ended September 30, 2024:
Processing fees decreased $155,000, or 0.3% over the same period in the prior year reflecting lower transportation and facility transaction volumes.
Financial fees decreased $1.5 million, or 4.8%, primarily attributable to a decline in average payments in advance of funding of 13.9%, in addition to changes in the manner whereby facility vendors receive payments.
The Company sold $34.0 million of corporate investment securities with a weighted-average yield of 2.29% at a loss of $3.6 million during June 2025. The proceeds from these sales were redeployed into higher yielding interest-earning assets during the third quarter of 2025.
Net Interest Income
Net interest income is the difference between interest earned on loans, investments, and other earning assets and interest expense on deposits and other interest-bearing liabilities. Net interest income is a significant source of the Company's revenues. The following table summarizes the changes in tax-equivalent net interest income and related factors:
(In thousands) Third Quarter of Nine Months Ended September 30,
2025 2024 2025 2024
Average earning assets $ 2,189,384 $ 2,001,741 $ 2,128,428 $ 2,007,780
Average interest-bearing liabilities 610,414 630,215 618,125 633,384
Net interest income* 21,336 17,856 60,467 50,744
Net interest margin* 3.87 % 3.55 % 3.80 % 3.38 %
Yield on earning assets* 4.62 % 4.57 % 4.58 % 4.42 %
Cost of interest-bearing liabilities 2.70 % 3.25 % 2.69 % 3.30 %
*Presented on a tax-equivalent basis assuming a tax rate of 21% for both 2025 and 2024.
Third quarter of 2025 compared to third quarter of 2024:
The increase in net interest income is primarily attributable to the net interest margin improving to 3.87% as compared to 3.55% in the same period last year, in addition to an increase in average earning assets of $187.6 million, or 9.4%. The yield on interest-earning assets increased 5 basis points from 4.57% to 4.62% while the cost of interest-bearing liabilities decreased 55 basis points from 3.25% to 2.70%.
Average loans increased $22.6 million, or 2.1%, to $1.10 billion. The average yield on loans increased 26 basis points to 5.66%, primarily due to loan growth at current market interest rates and continued maturing and re-pricing of existing fixed rate loans to current market interest rates.
Average investment securities increased $121.3 million, or 20.5%, to $711.7 million. The increase was driven by the utilization of available liquidity arising from an increase in average accounts and drafts payable to purchase investment securities. The average yield on taxable investment securities increased 44 basis points to 3.32% and the average yield on tax-exempt investment securities increased 59 basis points to 3.40%.
Average short-term investments, consisting of interest-bearing deposits in other financial institutions and federal funds sold, increased $43.8 million, or 12.9%, to $382.3 million. The increase is primarily a result of the increase in average funding sources, partially offset by the increase in average loans and average investment securities. The average yield on short-term investments decreased 93 basis points to 4.01%, primarily due to the decrease in the Federal Funds rate that
-30-
occurred in the last four months of 2024 and then again in September 2025. The majority of these short-term investments are held at the Federal Reserve Bank.
The average balance of interest-bearing deposits decreased $19.8 million, or 3.1%, to $610.4 million. Average non-interest-bearing demand deposits increased $1.9 million, or 0.5%, to $406.2 million. The Company has experienced deposit attrition due to a decrease in the overall level of some larger commercial deposits due to client funding needs for acquisitions and other purposes. The average rate paid on interest-bearing deposits decreased 55 basis points to 2.70% due to the reduction in short-term interest rates in the last four months of 2024 and then again in September 2025.
Average accounts and drafts payable increased $196.5 million, or 19.4%, to $1.21 billion. The increase in average accounts and drafts payable was primarily driven by the increase in facility dollar volumes of 13.9% as well as the increase in transportation dollar volumes of 2.0%.
Nine months ended September 30, 2025 compared to nine months ended September 30, 2024:
The increase in net interest income is primarily attributable to the net interest margin improving to 3.80% as compared to 3.38% in the same period last year, in addition to an increase in average earning assets of $120.6 million, or 6.0%. The yield on interest-earning assets increased 16 basis points from 4.42% to 4.58% while the cost of interest-bearing liabilities decreased 61 basis points from 3.30% to 2.69%.
Average loans increased $67.3 million, or 6.5%, to $1.11 billion. The average yield on loans increased 40 basis points to 5.64%, primarily due to loan growth at current market interest rates and continued maturing and re-pricing of existing fixed rate loans to current market interest rates.
Average investment securities increased $17.1 million, or 2.6%, to $663.2 million. The increase was driven by the utilization of available liquidity arising from an increase in average accounts and drafts payable to purchase investment securities. The average yield on taxable investment securities increased 29 basis points to 3.11% and the average yield on tax-exempt investment securities increased 25 basis points to 3.00%.
Average short-term investments, consisting of interest-bearing deposits in other financial institutions and federal funds sold, increased $36.3 million, or 11.4%, to $355.0 million. The increase is primarily a result of the increase in average funding sources, partially offset by the increase in average loans and average investment securities. The average yield on short-term investments decreased 94 basis points to 4.05%, primarily due to the decrease in the Federal Funds rate that occurred in the last four months of 2024 and again in September 2025. The majority of these short-term investments are held at the Federal Reserve Bank.
The average balance of interest-bearing deposits decreased $15.3 million, or 2.4%, to $618.1 million. Average non-interest-bearing demand deposits decreased $18.2 million, or 4.3%, to $401.5 million. The Company has experienced deposit attrition due to a decrease in the overall level of some larger commercial deposits due to client funding needs for acquisitions and other purposes. The average rate paid on interest-bearing deposits decreased 61 basis points to 2.69% due to the reduction in short-term interest rates in the last four months of 2024 and again in September 2025.
Average accounts and drafts payable increased $140.7 million, or 14.1%, to $1.14 billion. The increase in average accounts and drafts payable was primarily driven by the increase in facility dollar volumes of 15.3%.
Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rate and Interest Differential
The following tables show the condensed average balance sheets for each of the periods reported, the tax-equivalent interest income and expense for each category of interest-earning assets and interest-bearing liabilities, and the average yield on such categories of interest-earning assets and the average rates paid on such categories of interest-bearing liabilities for each of the periods reported.
-31-
(In thousands)
Third Quarter of 2025
Third Quarter of 2024
Average
Balance 		Interest
Income/
Expense 		Yield/
Rate 		Average
Balance 		Interest
Income/
Expense 		Yield/
Rate
Assets1
Interest-earning assets
Loans2:
$ 1,095,412 $ 15,632 5.66 % $ 1,072,824 $ 14,567 5.40 %
Investment securities3:
Taxable 536,394 4,491 3.32 % 430,242 3,114 2.88 %
Tax-exempt4
175,328 1,504 3.40 % 160,211 1,131 2.81 %
Short-term investments 382,250 3,860 4.01 % 338,464 4,200 4.94 %
Total interest-earning assets 2,189,384 25,487 4.62 % 2,001,741 23,012 4.57 %
Non-interest-earning assets
Cash and due from banks 24,106 22,468
Premises and equipment, net 30,648 31,766
Bank-owned life insurance 51,415 49,899
Goodwill and other intangibles 20,343 15,079
Payments in advance of funding 175,705 202,976
Unrealized loss on investment securities (44,451) (55,029)
Other assets 67,057 71,768
Allowance for credit losses (14,293) (13,632)
Assets of discontinued operations - 13,834
Total assets $ 2,499,914 $ 2,340,870
Liabilities and Shareholders' Equity1
Interest-bearing liabilities
Interest-bearing demand deposits $ 514,138 $ 3,345 2.58 % $ 543,845 $ 4,314 3.16 %
Savings deposits 7,104 24 1.34 % 6,921 29 1.67 %
Time deposits >= $100 27,868 236 3.36 % 27,884 270 3.85 %
Other time deposits 61,293 546 3.53 % 51,554 543 4.19 %
Total interest-bearing deposits 610,403 4,151 2.70 % 630,204 5,156 3.25 %
Short-term borrowings 11 - - % 11 - - %
Total interest-bearing liabilities 610,414 4,151 2.70 % 630,215 5,156 3.25 %
Non-interest bearing liabilities
Demand deposits 406,241 404,364
Accounts and drafts payable 1,209,416 1,012,922
Other liabilities 37,635 38,598
Liabilities of discontinued operations - 22,986
Total liabilities 2,263,706 2,109,085
Shareholders' equity 236,208 231,785
Total liabilities and shareholders' equity $ 2,499,914 $ 2,340,870
Net interest income $ 21,336 $ 17,856
Net interest margin 3.87 % 3.55 %
Interest spread 1.92 % 1.32 %
1.Balances shown are daily averages.
2.Interest income on loans includes net loan fees of $114,000 and $154,000 for the third quarter of 2025 and 2024, respectively.
3.For purposes of these computations, yields on investment securities are computed as interest income divided by the average amortized cost of the investments.
4.Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for both 2025 and 2024. The tax-equivalent adjustment was approximately $316,000 and $237,000 for the third quarter of 2025 and 2024, respectively.
-32-
(In thousands)
Nine Months Ended September 30, 2025
Nine Months Ended September 30, 2024
Average
Balance 		Interest
Income/
Expense 		Yield/
Rate 		Average
Balance 		Interest
Income/
Expense 		Yield/
Rate
Assets1
Interest-earning assets
Loans2:
$ 1,110,227 $ 46,819 5.64 % $ 1,042,953 $ 40,935 5.24 %
Investment securities3:
Taxable 515,059 11,996 3.11 % 479,337 10,118 2.82 %
Tax-exempt4
148,161 3,328 3.00 % 166,778 3,429 2.75 %
Short-term investments 354,981 10,755 4.05 % 318,712 11,908 4.99 %
Total interest-earning assets 2,128,428 72,898 4.58 % 2,007,780 66,390 4.42 %
Non-interest-earning assets
Cash and due from banks 21,497 22,630
Premises and equipment, net 31,143 30,858
Bank-owned life insurance 50,949 49,603
Goodwill and other intangibles 20,676 15,251
Payments in advance of funding 175,170 203,498
Unrealized loss on investment securities (50,822) (59,528)
Other assets 64,470 72,413
Allowance for credit losses (13,998) (13,343)
Assets of discontinued operations 9,765 14,327
Total assets $ 2,437,278 $ 2,343,489
Liabilities and Shareholders' Equity1
Interest-bearing liabilities:
Interest-bearing demand deposits $ 525,139 $ 10,112 2.57 % $ 548,891 $ 13,244 3.22 %
Savings deposits 7,249 72 1.33 % 7,134 92 1.72 %
Time deposits >= $100 26,359 657 3.33 % 27,492 773 3.76 %
Other time deposits 59,367 1,590 3.58 % 49,856 1,536 4.12 %
Total interest-bearing deposits 618,114 12,431 2.69 % 633,373 15,645 3.30 %
Short-term borrowings 11 - - % 11 1 12.14 %
Total interest-bearing liabilities 618,125 12,431 2.69 % 633,384 15,646 3.30 %
Non-interest bearing liabilities:
Demand deposits 401,497 419,724
Accounts and drafts payable 1,141,535 1,000,874
Other liabilities 42,287 37,627
Liabilities of discontinued operations 1,727 23,960
Total liabilities 2,205,171 2,115,569
Shareholders' equity 232,107 227,920
Total liabilities and shareholders' equity $ 2,437,278 $ 2,343,489
Net interest income $ 60,467 $ 50,744
Net interest margin 3.80 % 3.38 %
Interest spread 1.12 % 1.12 %
1.Balances shown are daily averages.
2.Interest income on loans includes net loan fees of $599,000 and $383,000 for the nine months ended September 30, 2025 and 2024, respectively.
3.For purposes of these computations, yields on investment securities are computed as interest income divided by the average amortized cost of the investments.
4.Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for both the nine months ended September 30, 2025 and 2024. The tax-equivalent adjustment was approximately $699,000 and $720,000 for the nine months ended September 30, 2025 and 2024, respectively.
-33-
Analysis of Net Interest Income Changes
The following tables present the changes in interest income and expense between periods due to changes in volume and interest rates. That portion of the change in interest attributable to the combined rate/volume variance has been allocated to rate and volume changes in proportion to the absolute dollar amounts of the change in each.
(In thousands)
Third Quarter of 2025 Compared to Third Quarter of 2024
Volume Rate Total
Increase (decrease) in interest income:
Loans1:
$ 311 $ 754 $ 1,065
Investment securities:
Taxable 842 535 1,377
Tax-exempt2
114 259 373
Short-term investments 502 (842) (340)
Total interest income 1,769 706 2,475
Increase (decrease) in interest expense:
Interest-bearing demand deposits (226) (743) (969)
Savings deposits 1 (6) (5)
Time deposits >=$100 - (34) (34)
Other time deposits 94 (91) 3
Short-term borrowings - - -
Total interest expense (131) (874) (1,005)
Net interest income $ 1,900 $ 1,580 $ 3,480
1.Interest income includes net loan fees.
2.Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for the three months ended September 30, 2025 and 2024.
(In thousands)
Nine Months Ended September 30, 2025 Compared to
Nine Months Ended September 30, 2024
Volume Rate Total
Increase (decrease) in interest income:
Loans1:
$ 2,732 $ 3,151 $ 5,883
Investment securities:
Taxable 787 1,092 1,879
Tax-exempt2
(402) 301 (101)
Short-term investments 1,259 (2,412) (1,153)
Total interest income 4,376 2,132 6,508
Interest expense on:
Interest-bearing demand deposits (553) (2,579) (3,132)
Savings deposits 1 (21) (20)
Time deposits >=$100 (31) (85) (116)
Other time deposits 270 (216) 54
Short-term borrowings - (1) (1)
Total interest expense (313) (2,902) (3,215)
Net interest income $ 4,689 $ 5,034 $ 9,723
1.Interest income includes net loan fees.
2.Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for the nine months ended September 30, 2025 and 2024.
-34-
Provision and Allowance for Credit Losses and Allowance for Unfunded Commitments
The Company recorded a release of credit losses and off-balance sheet credit exposures of $193,000 and $140,000 for the third quarter of 2025 and 2024, respectively. The Company recorded a provision for credit losses and off-balance sheet credit exposures of $737,000 and $355,000 for the nine months ended September 30, 2025 and 2024, respectively. The amount of the provision for (release of) credit losses is derived from the Company's quarterly Current Expected Credit Loss ("CECL") model. The amount of the provision for (release of) credit losses will fluctuate as determined by these quarterly analyses. The release of credit losses in the third quarter of 2025 was driven by the decrease in total loans of $28.7 million, or 2.6%, partially offset by the increase in nonaccrual loans of $3.7 million as compared to June 30, 2025.
The Company experienced no loan charge-offs in the third quarter of 2025 and 2024. The ACL was $14.1 million at September 30, 2025 and $13.4 million at December 31, 2024. The ACL represented 1.29% of outstanding loans at September 30, 2025 and 1.24% of outstanding loans at December 31, 2024. The allowance for unfunded commitments was $339,000 at September 30, 2025 and $273,000 at December 31, 2024. There were $7.1 million of nonperforming loans outstanding at September 30, 2025 and $0 at December 31, 2024. The Company has a specific allowance for credit losses of $141,000 allocated to its nonaccrual loans at September 30, 2025.
The ACL has been established and is maintained to estimate the lifetime expected credit losses in the loan portfolio. An ongoing assessment is performed to determine if the balance is adequate. Charges or credits are made to expense based on changes in the economic forecast, qualitative risk factors, loan volume, and individual loans. For loans that are individually evaluated, the Company uses two impairment measurement methods: 1) the present value of expected future cash flows and 2) collateral value.
The Company also utilizes ratio analyses to evaluate the overall reasonableness of the ACL compared to its peers and required levels of regulatory capital. Federal and state regulatory agencies review the Company's methodology for maintaining the ACL. These agencies may require the Company to adjust the ACL based on their judgments and interpretations about information available to them at the time of their examinations.
Summary of Credit Loss Experience
The following table presents information on the Company's provision for (release of) credit losses and analysis of the ACL:
Third Quarter of
Nine Months Ended September 30,
(In thousands)
2025
2024
2025
2024
Allowance for credit losses at beginning of period $ 14,296 $ 13,634 $ 13,395 $ 13,089
(Release of) provision for credit losses (230) (187) 671 358
Net recoveries - - - -
Allowance for credit losses at end of period $ 14,066 $ 13,447 $ 14,066 $ 13,447
Allowance for unfunded commitments at beginning of period $ 302 $ 82 $ 273 $ 132
Provision for (release of) credit losses 37 47 66 (3)
Allowance for unfunded commitments at end of period $ 339 $ 129 $ 339 $ 129
Loans outstanding:
Average $ 1,095,412 $ 1,072,824 $ 1,110,227 $ 1,042,953
September 30
$ 1,088,347 $ 1,078,387 $ 1,088,347 $ 1,078,387
Ratio of allowance for credit losses to loans outstanding at September 30
1.29 % 1.25 % 1.29 % 1.25 %
Operating Expenses
Total operating expenses for the third quarter of 2025 decreased $4.3 million, or 10.1%, as compared to the third quarter of 2024. Total operating expenses for the nine months ended 2025 decreased $5.3 million, or 4.5%, as compared to the nine months ended 2024. The following table details the components of operating expenses:
-35-
(In thousands)
Third Quarter of
Nine Months Ended September 30,
2025 2024 2025 2024
Salaries and commissions $ 20,105 $ 20,530 $ 60,406 $ 60,445
Share-based compensation 1,018 863 3,177 2,508
Employee profit sharing 1,685 627 4,770 2,978
Net periodic pension cost - 195 - 581
Other benefits 4,798 4,307 14,284 13,161
Personnel $ 27,606 $ 26,522 $ 82,637 $ 79,673
Occupancy 734 699 2,124 2,016
Equipment 2,513 2,058 7,369 5,825
Bad debt expense (recovery) - 6,559 (2,000) 7,847
Amortization of intangible assets 293 173 879 519
Other operating expense 7,295 6,746 21,081 21,494
Total operating expense $ 38,441 $ 42,757 $ 112,090 $ 117,374
Third quarter of 2025 compared to third quarter of 2024:
Personnel expenses increased $1.1 million, or 4.1%. Salaries and commissions decreased $425,000, or 2.1%, as a result of a decrease in average full-time equivalent employees ("FTEs") of 6.9% due to strategic investments in various technology initiatives. Share-based compensation and employee profit sharing increased $155,000 and $1.1 million, respectively, due to the improvement in earnings. Other benefits increased $491,000, or 11.4%, due to higher health insurance costs, partially offset by the decline in average FTEs.
Equipment expense increased $455,000, primarily due to an increase in depreciation expense on software related to recently completed technology initiatives.
The Company incurred bad debt expense of $6.6 million during the third quarter of 2024 and $0 in the third quarter of 2025.
Nine months ended September 30, 2025 compared to nine months ended September 30, 2024:
Personnel expenses increased $3.0 million, or 3.7%. Salaries and commissions decreased $39,000, or 0.1%, as a result of a decrease in average full-time equivalent employees ("FTEs") of 5.1% due to strategic investments in various technology initiatives Share-based compensation and employee profit sharing increased $669,000 and $1.8 million, respectively, due to the improvement in earnings. Other benefits increased $1.1 million, or 8.5%, due to higher health insurance costs, partially offset by the decline in average FTEs.
Equipment expense increased $1.5 million primarily due to an increase in depreciation expense on software related to recently completed technology initiatives.
The Company recorded a bad debt recovery during the nine months ended 2025 of $2.0 million related to partial consideration received in a litigation settlement as more fully described in Note 8 to the consolidated financial statements. The Company incurred $7.8 million of bad debt expense in the nine months ended 2024 related to the same matter.
-36-
Net Income from Discontinued Operations
(In thousands except per share data)
Third Quarter of
Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
Processing fees $ - $ 3,849 (100.0) % $ 8,367 $ 12,027 (30.4) %
Financial fees - 161 (100.0) % 888 508 74.8 %
Other fees 772 20 3760.0 % 1,871 680 175.1 %
Gain on sale of TEM business - - 100.0 % 3,550 - 100.0 %
Total revenues 772 4,030 (80.8) % 14,676 13,215 11.1 %
Operating expense 913 4,142 (78.0) % 9,362 12,989 (27.9) %
(Loss) income before income tax (benefit) expense (141) (112) 25.9 % 5,314 226 2251.3 %
Income tax (benefit) expense (35) (22) 59.1 % 1,309 52 2417.3 %
Net (loss) income from discontinued operations $ (106) $ (90) 17.8 % $ 4,005 $ 174 2201.7 %
Facility transaction volume - 141 (100.0) % 259 430 (39.8) %
Facility dollar volume $ - $ 305,178 (100.0) % $ 501,626 $ 907,308 (44.7) %
Average full-time equivalent employees 27 157 (82.8) % 94 159 (40.9) %
Third quarter of 2025 compared to third quarter of 2024:
Net loss from discontinued operations was $106,000, as compared to $90,000 during the same period in the prior year.
Nine months ended September 30, 2025 compared to nine months ended September 30, 2024:
Net income from discontinued operations was $4.0 million, an increase of $3.8 million over the same period in the prior year. The increase is primarily due to the gain on sale of the TEM Business Unit of $3.6 million in the second quarter of 2025.
Financial Condition
Total assets at September 30, 2025 were $2.45 billion, an increase of $58.5 million, or 2.4%, from December 31, 2024.
The Company experienced a decrease in cash and cash equivalents of $91.1 million, or 26.0%, during the nine months ended 2025. The change in cash and cash equivalents reflects the Company's daily liquidity position and is primarily affected by changes in funding sources, mainly accounts and drafts payable and deposits, cash flows in and out of loans, investment securities and payments in advance of funding.
The investment securities portfolio increased $189.3 million, or 35.9%, during the nine months ended 2025. The increase is due to purchases of $354.8 million and a decrease in unrealized losses of $20.7 million, partially offset by sales of $125.8 million and maturities of $55.8 million.
Loans increased $6.4 million, or 0.6%, from December 31, 2024. The Company experienced growth in its commercial and industrial and faith-based loan portfolios during the nine months ended 2025.
Payments in advance of funding decreased $20.5 million, or 9.8%, primarily due to the continued consolidation of freight carriers, partially offset by the 2.0% increase in transportation dollar volumes.
Accounts and drafts receivable from customers decreased $6.1 million, or 10.9%, from December 31, 2024. The decrease is solely due to timing of customer funding.
Assets of discontinued operations declined $14.4 million due to the sale of the TEM business on June 30, 2025.
Total deposits at September 30, 2025 were $1.03 billion, an increase of $66.7 million, or 6.9%, from December 31, 2024. Given the nature of the Company's deposit base being larger commercial clients, the ending balance of deposits will fluctuate from period end to period end due to liquidity needs of these clients. Average balances are generally a more meaningful measure of deposits.
-37-
Accounts and drafts payable at September 30, 2025 were $1.13 billion, an increase of $761,000, or 0.1%, from December 31, 2024. Accounts and drafts payable are a stable source of funding generated by payment float from transportation and facility clients. The ending balance of accounts and drafts payable will fluctuate from period to period due to the payment processing cycle, which results in lower balances on days when payments clear and higher balances on days when payments are issued. For this reason, average balances are generally a more meaningful measure of accounts and drafts payable.
Liabilities of discontinued operations declined $22.3 million due to the sale of the TEM business on June 30, 2025.
Total liabilities at September 30, 2025 were $2.21 billion, an increase of $44.1 million, or 2.0%, from December 31, 2024, reflective of the increase in accounts and drafts payable and in total deposits.
Total shareholders' equity at September 30, 2025 was $243.4 million, a $14.4 million increase from December 31, 2024. The increase in shareholders' equity is a result of net income of $26.9 million, and a decrease in accumulated other comprehensive loss of $15.8 million primarily related to the fair value of available-for-sale investment securities, partially offset by the repurchase of Company stock of $17.7 million, and dividends paid of $12.4 million.
Liquidity and Capital Resources
The discipline of liquidity management as practiced by the Company seeks to ensure that funds are available to fulfill all payment obligations relating to invoices processed as they become due and meet depositor withdrawal requests and borrower credit demands while at the same time maximizing profitability. This is accomplished by balancing changes in demand for funds with changes in supply of funds. Primary liquidity to meet demand is provided by short-term liquid assets that can be converted to cash, maturing investment securities and the ability to obtain funds from external sources. The Company's Asset/Liability Committee has direct oversight responsibility for the Company's liquidity position and profile. Management considers both on-balance sheet and off-balance sheet items in its evaluation of liquidity.
The balance of liquid assets consists 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. Cash and cash equivalents totaled $258.6 million at September 30, 2025, a decrease of $91.1 million, or 26.0%, from December 31, 2024. At September 30, 2025, these assets represented 10.5% 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.
Secondary sources of liquidity include the investment portfolio and borrowing lines. Total investment securities were $717.4 million at September 30, 2025, an increase of $189.3 million from December 31, 2024. These assets represented 29.2% of total assets at September 30, 2025. Of the total portfolio, 1.6% mature in one year, 10.1% mature in one to five years, and 88.3% mature in five or more years.
The Bank has unsecured lines of credit at six correspondent banks to purchase federal funds up to a maximum of $83.0 million in aggregate. As of September 30, 2025, the Bank also has secured lines of credit with the Federal Home Loan Bank of $220.7 million collateralized by mortgage loans. The Company also has secured lines of credit from three banks up to a maximum of $225.0 million in aggregate collateralized by investment securities. There were no amounts outstanding under any line of credit as of September 30, 2025 or December 31, 2024.
The deposits of the Company's banking subsidiary have historically been stable, consisting of a sizable volume of core deposits related to customers that utilize other commercial products of the Bank, including CassPay and faith-based customers. The accounts and drafts payable generated by the Company has also historically been a stable source of funds. The Company is part of the Certificate of Deposit Account Registry Service ("CDARS") and Insured Cash Sweep ("ICS") deposit placement programs. Time deposits include $62.4 million of CDARS deposits and interest-bearing demand deposits include $135.3 million of ICS deposits. These programs offer the Bank's customers the ability to maximize Federal Deposit Insurance Corporation ("FDIC") insurance coverage. The Company uses these programs to retain or attract deposits from existing customers.
Net cash flows provided by operating activities were $32.6 million for the nine months ended September 30, 2025, compared to $20.3 million for the nine months ended September 30, 2024, an increase of $12.3 million. 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. Other causes for the changes in these account balances are discussed earlier in this report. Due to the daily fluctuations in these account balances, 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
-38-
and cash equivalents, maturing investments and cash from operations will continue to be sufficient to fund the Company's operations and capital expenditures in 2025, which are estimated to range from $6 million to $8 million.
Net income plus amortization of intangible assets, net amortization of premium/discount on investment securities and depreciation of premises and equipment was $33.3 million and $21.5 million for the nine months ended 2025 and 2024, respectively. The nine months ended September 30, 2025 reflected higher net income of $12.4 million and higher depreciation of $988,000, partially offset by a decrease in net amortization of premium/discount on investment securities of $1.9 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.
Other factors impacting the $12.3 million increase in net cash provided by operating activities include:
•A loss on sale of investment securities of $3.6 million;
•A change in accounts receivable of $3.7 million; and
•A change in income tax liabilities of $2.1 million.
These were partially offset by a decrease in net cash (used in) provided by discontinued operations of $3.1 million and a change in other operating activities, net of $3.0 million, primarily due to changes in various other assets and liabilities related to client funding and reimbursements.
The Company faces market risk to the extent that its net interest income and fair market value of equity are affected by changes in market interest rates. For information regarding the market risk of the Company's financial instruments, see Item 3, "Quantitative and Qualitative Disclosures about Market Risk."
There are several trends and uncertainties that may impact the Company's ability to generate revenues and income at the levels that it has in the past. Those that could significantly impact the Company include the general levels of interest rates, business activity, inflation, and energy costs as well as new business opportunities available to the Company. For more detailed information on these trends and uncertainties and how they can generally affect the Company's available liquidity, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity" in the Company's 2024 Form 10-K.
As a bank holding company, the Company and the Bank are subject to capital requirements administered by state and federal banking agencies. Capital adequacy guidelines, and, for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are subject to qualitative judgments by regulators about components, risk weighting, and other factors. In addition, the calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. For example, as allowed under the Basel III Capital Rules, the Company has elected to opt-out of the requirement to include most components of accumulated other comprehensive income in common equity Tier 1 capital. For more information on these regulatory requirements, including the Basel III Capital Rules and capital classifications, see Item 1, "Business-Supervision and Regulation" and Item 8, Note 2, "Financial Statements and Supplementary Data" of the Company's 2024 Form 10-K.
-39-
The Company and the Bank continue to exceed all regulatory capital requirements, as evidenced by the following capital amounts and ratios:
Actual Capital
Requirements 		Requirement to be
Well-Capitalized
(In thousands) Amount Ratio Amount Ratio Amount Ratio
At September 30, 2025
Total capital (to risk-weighted assets)
Cass Information Systems, Inc. $ 266,552 15.90 % $ 134,115 8.00 % $ N/A N/A %
Cass Commercial Bank 220,318 19.63 89,780 8.00 112,225 10.00
Common Equity Tier I Capital (to risk-weighted assets)
Cass Information Systems, Inc. 252,147 15.04 75,440 4.50 N/A N/A
Cass Commercial Bank 206,584 18.41 50,501 4.50 72,946 6.50
Tier I capital (to risk-weighted assets)
Cass Information Systems, Inc. 252,147 15.04 100,587 6.00 N/A N/A
Cass Commercial Bank 206,584 18.41 67,335 6.00 89,780 8.00
Tier I capital (to average assets)
Cass Information Systems, Inc. 252,147 10.17 99,189 4.00 N/A N/A
Cass Commercial Bank 206,584 14.16 58,351 4.00 72,938 5.00
At December 31, 2024
Total capital (to risk-weighted assets)
Cass Information Systems, Inc. $ 261,021 14.61 % $ 142,969 8.00 % $ N/A N/A %
Cass Commercial Bank 207,519 17.68 93,911 8.00 117,389 10.00
Common Equity Tier I Capital (to risk-weighted assets)
Cass Information Systems, Inc. 247,354 13.84 80,420 4.50 N/A N/A
Cass Commercial Bank 194,446 16.56 52,825 4.50 76,303 6.50
Tier I capital (to risk-weighted assets)
Cass Information Systems, Inc. 247,354 13.84 107,226 6.00 N/A N/A
Cass Commercial Bank 194,446 16.56 70,433 6.00 93,911 8.00
Tier I capital (to average assets)
Cass Information Systems, Inc. 247,354 10.57 93,625 4.00 N/A N/A
Cass Commercial Bank 194,446 13.50 57,620 4.00 72,026 5.00
Impact of New or Not Yet Adopted Accounting Pronouncements
In December 2023, the FASB issued 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures("ASU 2023-09"). This ASU requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. It also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. ASU 2023-09 is not expected to have a significant impact on the Company's financial statements.
In July 2025, the FASB issued Accounting Standards Update 2025-05,Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets ("ASU 2025-05"). ASU 2025-05 provides the option to elect a practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating
-40-
expected credit losses on these assets. ASU 2025-05 is effective for the Company for fiscal years beginning after December 15, 2025 and interim periods within those fiscal years. The Company does not expect adoption of ASU 2025-05 to have a material impact on its consolidated financial statements.
In September 2025, the FASB issued Accounting Standards Update 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Targeted Improvements to the Accounting for Internal-Use Software("ASU 2025-06"). ASU 2025-06 clarified and modernizes the accounting for costs related to internal-use software. The amendments in ASU 2025-06 remove all references to project stages throughout Subtopic 350-40 and clarify the threshold entities apply to begin capitalizing costs. ASU 2025-06 is effective for the Company for fiscal years beginning after December 15, 2027 and interim periods within those fiscal years. The Company is currently evaluating the impact of adoption of ASU 2025-06 on its consolidated financial statements.
Critical Accounting Policies
The Company has prepared the consolidated financial statements in this report in accordance with the Financial Accounting Standards Board Accounting Standards Codification. In preparing the consolidated financial statements, management makes estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. These estimates have been generally accurate in the past, have been consistent and have not required any material changes. There can be no assurances that actual results will not differ from those estimates. The accounting policy that requires significant management estimates and is deemed critical to the Company's results of operations or financial position has been discussed with the Audit and Risk Committee of the Board of Directors and is described below.
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. Although these estimates are based on established methodologies for determining allowance requirements, actual results can differ significantly from estimated results. 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 "Provision and Allowance for Credit Losses and Allowance for Unfunded Commitments" section of this report.
Cass Information Systems Inc. published this content on November 04, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 04, 2025 at 15:03 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]