Cass Information Systems (CASS) came out with quarterly earnings of $0.69 per share, beating the Zacks Consensus Estimate of $0.63 per share. This compares to earnings of $0.21 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of +9.52%. A quarter ago, it was expected that this invoice and payment management company would post earnings of $0.72 per share when it actually produced earnings of $0.38, delivering a surprise of -47.22%. ...

Investor Presentation OCTOBER 2025 www.cassinfo.com | ©2025 Cass Information Systems | Forward-Looking Information All statements other than statements of historical fact included in this release, including without limitation the Company's future prospects and performance, the business strategy and the plans and objectives of the Company's management for future operations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this release, wo ...

Financial Performance - Net income for Q3 2025 was $9.1 million, with diluted earnings per share of $0.68, representing an increase from $2.9 million and $0.21 in Q3 2024[1][11] - Net income from continuing operations for the three months ended September 30, 2025, was $9,212,000, up from $5,160,000 in the previous quarter, representing a 78.9% increase[25] - The company reported a net income of $9,106,000 for the three months ended September 30, 2025, compared to $8,855,000 in the prior quarter, reflecting a growth of 2.8%[25] - Net income from continuing operations (GAAP) for the three months ended September 30, 2025, was $9,212, compared to $3,028 in Q3 2024, representing a significant increase[39] Revenue and Income Sources - Total revenues for the nine months ended September 30, 2025, reached $140,860,000, compared to $135,603,000 for the same period in the previous year, indicating a growth of 3.3%[25] - Total fee revenue for the three months ended September 30, 2025, was $27,071,000, a slight decrease from $27,243,000 in the previous quarter[25] - Net interest income increased by $3.4 million, or 19.3%, driven by an improved net interest margin of 3.87%, up from 3.55% in the prior year quarter[6][11] - Net interest income increased to $21,020,000 for the three months ended September 30, 2025, compared to $19,475,000 in the prior quarter, reflecting a growth of 7.9%[25] Expenses and Costs - Total operating expenses for the three months ended September 30, 2025, were $38,441,000, slightly higher than $38,119,000 in the previous quarter[25] - Total personnel expenses for the three months ended September 30, 2025, were $27,606,000, compared to $27,752,000 in the prior quarter, showing a decrease of 0.5%[25] - Interest expense for the three months ended September 30, 2025, was $4,151,000, a slight decrease from $4,164,000 in the previous quarter[25] Asset and Equity Management - Total assets increased to $2,453,622 thousand as of September 30, 2025, up from $2,316,018 thousand as of June 30, 2025, representing a growth of 5.93%[27] - Total deposits rose to $1,034,660 thousand, an increase of 3.66% from $1,003,795 thousand in the previous quarter[27] - Shareholders' equity increased to $243,449 thousand, up from $240,822 thousand, reflecting a growth of 0.68%[27] - The company maintained a strong capital position with total liabilities of $2,210,173 thousand, up from $2,075,196 thousand, indicating a growth of 6.51%[27] Loan and Credit Quality - Non-performing loans totaled $7.1 million, an increase of $3.7 million from June 30, 2025, with the company actively working to reduce these balances[17][11] - Non-performing loans increased to $7,074 thousand, representing 0.65% of total loans, compared to 0.30% in the previous quarter[29] - The allowance for credit losses to loans ratio remained stable at 1.29% as of September 30, 2025, compared to 1.28% in the previous quarter[29] Shareholder Actions - The company repurchased 159,587 shares at a weighted average price of $41.96, and increased the quarterly dividend by $0.01 to $0.32 per share[11][16] Operational Metrics - Transportation invoice volumes decreased by 3.0% to 8.9 million, while transportation dollar volumes increased by 2.0% to $9.3 billion compared to Q3 2024[2][11] - Average payments in advance of funding decreased by $27.3 million, or 13.4%, compared to Q3 2024, reflecting ongoing consolidation in freight carriers[12][11] - Average full-time equivalent employees decreased to 958 in Q3 2025 from 1,029 in Q3 2024[31] Capital Ratios - As of September 30, 2025, the common equity tier 1 ratio improved to 15.04%, up from 14.54% a year ago[31] - Total risk-based capital ratio as of September 30, 2025, was 15.90%, an increase from 15.31% a year ago[31] - The leverage ratio as of September 30, 2025, was 10.17%, down from 11.05% a year ago[31]

Core Insights - Cass Information Systems specializes in payment and information processing services, primarily serving manufacturing, distribution, and retail sectors in the U.S. The company operates through two segments: Information Services and Banking Services, offering services like freight invoice rating, payment processing, and telecom expense management [1] Price Target Analysis - The consensus price target for Cass Information Systems has shown stability over the past year, with an average price target of $47 last month and last quarter, compared to $46 the previous year. This indicates a consistent outlook from analysts regarding the company's performance and growth potential. However, analyst Frank Schiraldi from Piper Sandler has set a lower price target of $45, reflecting a more cautious perspective [2] Earnings Performance - Cass Information Systems is expected to report third-quarter results, with Wall Street anticipating earnings growth. However, the company may lack the optimal factors for an earnings beat, as noted by Zacks. In Q2 2025, Cass reported GAAP earnings per share of $0.66, below the expected $0.72, and GAAP revenue was also below the anticipated $51 million. Net income for the quarter was $9 million, a 25.4% increase from $7.2 million in the same period last year, indicating improved financial performance over time [3] Investor Considerations - Investors should consider the financial results and analyst expectations when evaluating Cass Information Systems. The stable price target and recent earnings performance provide insights into future prospects, but it is crucial to stay informed about any recent developments that could impact these targets, such as earnings reports or strategic initiatives [4][5]

Core Viewpoint - Cass Information Systems (CASS) is anticipated to report a year-over-year increase in earnings despite a decline in revenues for the quarter ended September 2025, with the consensus outlook indicating a significant earnings picture that could influence its stock price in the near term [1][3]. Earnings Expectations - The upcoming earnings report is expected to show quarterly earnings of $0.63 per share, reflecting a year-over-year increase of +200%, while revenues are projected to be $49.4 million, down 2.3% from the previous year [3]. - The consensus EPS estimate has been revised 1.54% lower in the last 30 days, indicating a reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that the Most Accurate Estimate aligns with the Zacks Consensus Estimate, resulting in an Earnings ESP of 0%, indicating no recent differing analyst views [12]. - The stock currently holds a Zacks Rank of 5, which complicates the prediction of an earnings beat [12]. Historical Performance - In the last reported quarter, Cass was expected to post earnings of $0.72 per share but only achieved $0.38, resulting in a surprise of -47.22% [13]. - Over the past four quarters, the company has only beaten consensus EPS estimates once [14]. Investment Considerations - An earnings beat or miss may not solely dictate stock movement, as other factors can influence investor sentiment [15]. - While Cass does not appear to be a strong candidate for an earnings beat, investors should consider additional factors before making investment decisions [17].

Core Insights - Cass Information Systems operates in the US financial services market with a focus on payments servicing and banking services, particularly in transport, logistics, and energy invoice processing [1] Group 1: Company Overview - Cass Information Systems is a unique player in the financial services sector, specializing in two main activity directions: payments servicing and banking services [1] - The company primarily provides effective invoice processing solutions for industries such as transport, logistics, and energy [1] Group 2: Investment Strategy - The investment strategy discussed emphasizes uncovering high-upside opportunities in overlooked sectors, particularly small-caps, energy, commodities, and special situations [1] - The approach is rooted in the CAN SLIM framework, focusing on fundamental momentum indicators like EPS, ROE, and revenue, along with price-volume confirmation and macro filters [1] - Econometric tools such as GARCH and Granger causality are utilized to assess risk, volatility, and the influence of macro data on market cycles [1]

Core Insights - Freight shipments experienced a significant decline in August, with a 9.3% year-over-year drop, marking the largest decrease since October 2023 [1] - The freight expenditures index fell by 2.8% from July to August, with a year-over-year decline of 0.4%, the first such decline in five months [2] - Actual freight rates increased by 9.8% year-over-year, driven by a shift from less-than-truckload (LTL) to truckload (TL) shipments [3] Freight Shipment Trends - The North American domestic freight dataset indicated that LTL shipments were the main contributor to the decline, while truckload and intermodal volumes increased [1] - A forecast suggests that freight shipments will likely decline by 7% year-over-year in September [2] Expenditure and Rate Analysis - The TL linehaul index, which excludes fuel and accessorial surcharges, decreased by 1.8% sequentially but increased by 1.2% year-over-year, marking the eighth consecutive year-over-year increase [6] - Freight expenditures, which include fuel costs, showed a notable decline, with a two-year stacked comparison revealing a 9.4% decrease [2] Capacity and Market Dynamics - The Outbound Tender Reject Index indicates that while current tender rejections are better than the previous year, they do not signal a recovery in truck capacity [4] - A reduction in day cab orders may indicate that private fleets are contracting, potentially leading to a return of lost freight to the for-hire market [6] Economic Outlook - The report expresses a cautious outlook for freight demand, attributing it to the ongoing effects of tariffs and weak demand since the trade war began [7] - The processing of $36 billion in freight payables annually by Cass highlights the scale of the freight market and its sensitivity to economic changes [7]

PART I – Financial Information [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements and comprehensive notes for Cass Information Systems, Inc. and its subsidiaries [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific dates Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :-------------------------- | :------------------ | | **Assets** | | | | Cash and cash equivalents | $218,165 | $349,728 | | Investment securities available-for-sale, at fair value | $599,541 | $528,021 | | Loans, net | $1,102,708 | $1,068,594 | | Total assets | $2,316,018 | $2,395,081 | | **Liabilities** | | | | Total deposits | $1,003,795 | $967,916 | | Accounts and drafts payable | $1,036,795 | $1,129,610 | | Total liabilities | $2,075,196 | $2,166,051 | | **Shareholders' Equity** | | | | Total shareholders' equity | $240,822 | $229,030 | | Total liabilities and shareholders' equity | $2,316,018 | $2,395,081 | - Total assets decreased by **$79.1 million (3.3%)** from December 31, 2024, to June 30, 2025, primarily due to a decrease in cash and cash equivalents and accounts and drafts payable, partially offset by increases in investment securities and loans[14](index=14&type=chunk)[146](index=146&type=chunk)[152](index=152&type=chunk) [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) This section details the company's revenues, expenses, and net income over specific reporting periods Consolidated Statements of Income (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total fee revenue and other income | $24,948 | $28,448 | $52,986 | $57,172 | | Total interest income | $23,639 | $21,241 | $47,028 | $42,895 | | Total interest expense | $4,164 | $5,312 | $8,280 | $10,490 | | Net interest income | $19,475 | $15,929 | $38,748 | $32,405 | | Total net revenue | $44,398 | $43,977 | $90,804 | $89,082 | | Total operating expense | $38,119 | $38,409 | $73,649 | $74,617 | | Net income from continuing operations | $5,160 | $4,308 | $13,710 | $11,372 | | Income from discontinued operations, net of tax | $3,695 | $176 | $4,111 | $264 | | Net income | $8,855 | $4,484 | $17,821 | $11,636 | | Basic earnings per share | $0.67 | $0.33 | $1.34 | $0.86 | | Diluted earnings per share | $0.66 | $0.32 | $1.31 | $0.84 | - Net income for Q2 2025 increased by **97.5% to $8.9 million**, and diluted EPS increased by **106.3% to $0.66**, primarily driven by a gain on the sale of the TEM business and increased net interest income[16](index=16&type=chunk)[97](index=97&type=chunk) - For the first half of 2025, net income rose by **53.2% to $17.8 million**, and diluted EPS increased by **56.0% to $1.31**, also benefiting from the TEM business sale and improved net interest income[16](index=16&type=chunk)[99](index=99&type=chunk) [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents net income and other comprehensive income items, reflecting total non-owner changes in equity Consolidated Statements of Comprehensive Income (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $8,855 | $4,484 | $17,821 | $11,636 | | Net unrealized gain (loss) on securities available-for-sale (net of tax) | $3,825 | ($450) | $9,344 | ($2,047) | | Reclassification adjustments for losses included in net income (net of tax) | $2,711 | $10 | $2,725 | $10 | | Foreign currency translation adjustments | $303 | ($42) | $444 | ($132) | | Total comprehensive income | $15,694 | $4,002 | $30,334 | $9,467 | - Total comprehensive income significantly increased to **$15.7 million** for Q2 2025 (from $4.0 million in Q2 2024) and **$30.3 million** for H1 2025 (from $9.5 million in H1 2024), primarily due to net income growth and a substantial net unrealized gain on available-for-sale securities[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $20,274 | $20,517 | | Net cash (used in) provided by investing activities | ($50,137) | $12,553 | | Net cash used in financing activities | ($101,700) | ($181,811) | | Net decrease in cash and cash equivalents | ($131,563) | ($148,741) | | Cash and cash equivalents at end of period | $218,165 | $223,727 | - Net cash provided by operating activities remained stable at **$20.3 million** for H1 2025. Investing activities shifted from a net inflow of $12.6 million in H1 2024 to a net outflow of **$50.1 million** in H1 2025, largely due to increased purchases of investment securities and net increase in loans[20](index=20&type=chunk)[159](index=159&type=chunk) - Net cash used in financing activities decreased from **$181.8 million** in H1 2024 to **$101.7 million** in H1 2025, primarily due to a net increase in noninterest-bearing demand deposits and a smaller decrease in accounts and drafts payable[20](index=20&type=chunk) [Consolidated Statements of Shareholders' Equity](index=11&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) This section details changes in the company's equity accounts, including net income, dividends, and share repurchases Consolidated Statements of Shareholders' Equity (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total Shareholders' Equity | $240,822 | $229,030 | | Net income | $17,821 | N/A | | Cash dividends | ($8,303) | N/A | | Purchase of common shares for treasury | ($10,996) | N/A | | Other comprehensive gain | $12,513 | N/A | - Total shareholders' equity increased by **$11.8 million to $240.8 million** at June 30, 2025, driven by net income of $17.8 million and a $12.5 million decrease in accumulated other comprehensive loss, partially offset by $11.0 million in share repurchases and $8.3 million in dividends[25](index=25&type=chunk)[153](index=153&type=chunk) [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the consolidated financial statements [Note 1 - Basis of Presentation](index=13&type=section&id=Note%201%20-%20Basis%20of%20Presentation) This note describes the accounting principles and conventions used in preparing the financial statements - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, including normal recurring accruals. Certain prior-period amounts have been reclassified without affecting net income or shareholders' equity[28](index=28&type=chunk) [Note 2 - Discontinued Operations and Assets and Liabilities Held for Sale](index=13&type=section&id=Note%202%20-%20Discontinued%20Operations%20and%20Assets%20and%20Liabilities%20Held%20for%20Sale) This note details the financial impact and classification of business units sold or held for sale - On April 7, 2025, the Company signed an Asset Purchase Agreement to sell its telecom expense management and managed mobility solutions business unit (TEM Business Unit) to Asignet USA Inc for **$18.0 million**, with the sale closing on June 30, 2025[29](index=29&type=chunk) - The sale of the TEM Business Unit, which is part of the Information Services segment, is treated as a discontinued operation, representing a strategic shift for the Company[30](index=30&type=chunk) Assets and Liabilities of Discontinued Operations (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Assets of discontinued operations | $0 | $14,413 | | Liabilities of discontinued operations | $0 | $22,314 | Net Income from Discontinued Operations (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income from discontinued operations | $3,695 | $176 | $4,111 | $264 | | Gain on sale of TEM business | $3,550 | $0 | $3,550 | $0 | [Note 3 – Intangible Assets](index=14&type=section&id=Note%203%20%E2%80%93%20Intangible%20Assets) This note provides information on the company's goodwill and other intangible assets, including amortization policies - Intangible assets with finite useful lives are amortized over **3 to 20 years**, while goodwill is tested annually for impairment[33](index=33&type=chunk) Intangible Assets (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Goodwill | $16,164 | $16,333 | | Other intangible assets, net | $4,329 | $4,914 | | Total intangible assets (gross carrying amount) | $28,264 | $28,432 | | Amortization of intangible assets (3 months) | $293 | $173 | | Amortization of intangible assets (6 months) | $586 | $346 | - Estimated annual amortization of intangibles is projected to be **$1.2 million** in 2025, **$1.1 million** in 2026, **$738,000** in 2027, **$730,000** in 2028, and **$699,000** in 2029[34](index=34&type=chunk) [Note 4 – Earnings Per Share](index=15&type=section&id=Note%204%20%E2%80%93%20Earnings%20Per%20Share) This note presents the basic and diluted earnings per share calculations for continuing and discontinued operations Earnings Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS from continuing operations | $0.39 | $0.32 | $1.03 | $0.84 | | Basic EPS from discontinued operations | $0.28 | $0.01 | $0.31 | $0.02 | | Basic EPS | $0.67 | $0.33 | $1.34 | $0.86 | | Diluted EPS from continuing operations | $0.38 | $0.31 | $1.01 | $0.82 | | Diluted EPS from discontinued operations | $0.28 | $0.01 | $0.30 | $0.02 | | Diluted EPS | $0.66 | $0.32 | $1.31 | $0.84 | | Weighted-average common shares outstanding (basic) | 13,269,415 | 13,538,283 | 13,333,443 | 13,534,256 | | Weighted-average common shares outstanding (diluted) | 13,517,579 | 13,822,076 | 13,580,081 | 13,803,677 | [Note 5 – Stock Repurchases](index=15&type=section&id=Note%205%20%E2%80%93%20Stock%20Repurchases) This note details the company's common stock repurchase activities and new authorization programs - The Company repurchased **140,269 shares** during Q2 2025 and **256,378 shares** during H1 2025 under its treasury stock buyback program[36](index=36&type=chunk) - On July 15, 2025, the Board of Directors authorized a new repurchase program for up to **500,000 shares**, replacing the October 2023 authorization[36](index=36&type=chunk) [Note 6 – Industry Segment Information](index=16&type=section&id=Note%206%20%E2%80%93%20Industry%20Segment%20Information) This note provides financial data broken down by the company's operating segments: Information Services and Banking Services - The Company operates in two reportable segments: Information Services (transportation, energy, telecom, environmental invoice processing, church management software) and Banking Services (banking services to businesses, restaurants, faith-based ministries, and support for Information Services)[37](index=37&type=chunk)[38](index=38&type=chunk) Pre-tax income from continuing operations (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Information Services | $3,764 | $2,950 | $10,254 | $8,446 | | Banking Services | $5,433 | $1,902 | $8,914 | $4,077 | | Total | $6,279 | $5,568 | $17,155 | $14,465 | Average funding sources (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Information Services | $1,339,550 | $1,235,016 | $1,338,846 | $1,264,432 | | Banking Services | $766,622 | $785,893 | $766,947 | $792,816 | | Total | $2,106,172 | $2,020,909 | $2,105,793 | $2,057,248 | [Note 7 – Loans by Type](index=20&type=section&id=Note%207%20%E2%80%93%20Loans%20by%20Type) This note categorizes the company's loan portfolio and details the allowance for credit losses Loans by Type (in thousands) | Loan Type (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Commercial and industrial | $583,582 | $559,262 | | Real estate: Commercial Mortgage | $113,385 | $119,194 | | Real estate: Commercial Construction | $9,132 | $9,134 | | Real estate: Faith-based Mortgage | $388,268 | $368,881 | | Real estate: Faith-based Construction | $22,637 | $25,518 | | Total loans | $1,117,004 | $1,081,989 | - Total loans increased by **$35.0 million (3.2%)** from December 31, 2024, to June 30, 2025, primarily driven by growth in commercial and industrial and faith-based mortgage portfolios[47](index=47&type=chunk)[148](index=148&type=chunk) - At June 30, 2025, there were **two non-accrual loans totaling $3.4 million**, with a specific allowance for credit losses of **$160,000**. There were no non-accrual loans at December 31, 2024[48](index=48&type=chunk)[54](index=54&type=chunk) Allowance for Credit Losses (ACL) Activity (in thousands) | Category | Balance at Jan 1, 2024 | Provision for credit losses (2024) | Balance at Dec 31, 2024 | Provision for credit losses (H1 2025) | Balance at June 30, 2025 | | :-------------------- | :--------------------- | :--------------------------------- | :---------------------- | :------------------------------------ | :----------------------- | | C&I | $5,412 | $485 | $5,897 | $539 | $6,436 | | CRE | $1,093 | ($70) | $1,023 | $126 | $1,149 | | Faith-based CRE | $6,476 | ($218) | $6,258 | $231 | $6,489 | | Construction | $108 | $109 | $217 | $5 | $222 | | Total | $13,089 | $306 | $13,395 | $901 | $14,296 | [Note 8 – Commitments and Contingencies](index=24&type=section&id=Note%208%20%E2%80%93%20Commitments%20and%20Contingencies) This note outlines the company's unfunded commitments, letters of credit, and potential legal liabilities - At June 30, 2025, unfunded commitments were **$172.5 million**, standby letters of credit were **$12.4 million**, and commercial letters of credit were **$1.4 million**[57](index=57&type=chunk) - The Company recorded a bad debt recovery of **$2.0 million** in H1 2025 from a settlement with Rubicon Technologies, Inc., which also included a **$5.0 million** promissory note maturing July 1, 2029[59](index=59&type=chunk) [Note 9 – Share-Based Compensation](index=24&type=section&id=Note%209%20%E2%80%93%20Share-Based%20Compensation) This note details the expense recognized for share-based awards and unrecognized compensation costs - Share-based compensation expense was **$918,000** for Q2 2025 and **$2.2 million** for H1 2025, compared to $450,000 and $1.6 million for the respective periods in 2024[60](index=60&type=chunk) - As of June 30, 2025, total unrecognized compensation expense for non-vested restricted shares was **$2.8 million**, expected to be recognized over approximately **0.71 years**[62](index=62&type=chunk) - Performance-based restricted stock (PBRS) vesting for the 2022-2024 period was based on **99.1% achievement** of target financial goals, resulting in the issuance of **55,348 common shares**[65](index=65&type=chunk) [Note 10 – Defined Pension Plans](index=25&type=section&id=Note%2010%20%E2%80%93%20Defined%20Pension%20Plans) This note provides information on the costs associated with the company's defined-benefit pension and supplemental executive retirement plans - The Company recorded **no net periodic pension cost** for Q2 and H1 2025 related to its terminated defined-benefit pension plan, compared to $191,000 and $386,000 for the same periods in 2024[66](index=66&type=chunk) - SERP cost recorded to expense was **$112,000** for Q2 2025 and **$225,000** for H1 2025, consistent with the prior year[67](index=67&type=chunk) [Note 11 – Income Taxes](index=26&type=section&id=Note%2011%20%E2%80%93%20Income%20Taxes) This note presents the effective tax rates and factors causing differences from the statutory federal income tax rate Effective Tax Rate for Continuing Operations | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Effective tax rate for continuing operations | 17.8% | 22.6% | 20.1% | 21.4% | - The effective tax rate differs from the statutory rate of **21%** primarily due to state income taxes, tax-exempt interest from municipal bonds and bank-owned life insurance, and other factors[68](index=68&type=chunk) [Note 12 – Investment Securities](index=26&type=section&id=Note%2012%20%E2%80%93%20Investment%20Securities) This note details the company's investment securities portfolio, including amortized cost, fair value, and unrealized gains/losses Investment Securities (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total amortized cost | $643,388 | $587,708 | | Total fair value | $599,541 | $528,021 | | Gross unrealized gains | $1,585 | $18 | | Gross unrealized losses | ($45,432) | ($59,705) | - At June 30, 2025, **219 investment securities (81.4%)** were in an unrealized loss position, primarily due to changes in market interest rates. The Company does not intend to sell these securities before recovery of amortized cost[70](index=70&type=chunk) - Proceeds from sales of available-for-sale investment securities were **$30.1 million** for Q2 2025 and **$53.1 million** for H1 2025, resulting in gross realized losses of **$3.6 million** for both periods[72](index=72&type=chunk) [Note 13 – Fair Value of Financial Instruments](index=28&type=section&id=Note%2013%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) This note provides fair value measurements for various financial instruments, categorized by valuation input levels Fair Value of Financial Instruments (in thousands) | Metric (in thousands) | June 30, 2025 Carrying Amount | June 30, 2025 Fair Value | December 31, 2024 Carrying Amount | December 31, 2024 Fair Value | | :------------------------------------ | :------------------------------ | :----------------------- | :-------------------------------- | :--------------------------- | | Cash and cash equivalents | $218,165 | $218,165 | $349,728 | $349,728 | | Investment securities | $599,541 | $599,541 | $528,021 | $528,021 | | Loans, net | $1,102,708 | $1,086,635 | $1,068,594 | $1,046,406 | | Deposits | $1,003,795 | $1,003,795 | $967,916 | $967,916 | | Accounts and drafts payable | $1,036,795 | $1,036,795 | $1,129,610 | $1,129,610 | - Fair values for investment securities are measured using **Level 2 inputs**, while loans are estimated using **Level 3 valuations** based on discounted future cash flows at risk-adjusted interest rates[74](index=74&type=chunk)[75](index=75&type=chunk) [Note 14 – Revenue from Contracts with Customers](index=29&type=section&id=Note%2014%20%E2%80%93%20Revenue%20from%20Contracts%20with%20Customers) This note explains the company's revenue recognition policies and disaggregates revenue by stream - Revenue is recognized when performance obligations are satisfied, including processing fees (per-item or monthly), financial fees (transaction-level for payments), and bank service fees (transaction-based on deposit accounts)[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) Revenue Stream (in thousands) | Revenue Stream (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Processing fees | $17,082 | $16,816 | $33,551 | $33,675 | | Financial fees | $10,161 | $10,460 | $20,122 | $21,058 | | Bank service fees | $350 | $320 | $686 | $601 | | Total fee revenue (in-scope of FASB ASC 606) | $27,593 | $27,596 | $54,359 | $55,334 | [Note 15 – Leases](index=29&type=section&id=Note%2015%20%E2%80%93%20Leases) This note provides information on the company's operating lease liabilities, right-of-use assets, and associated costs - As of June 30, 2025, the Company had lease liabilities of **$4.9 million** and right-of-use assets of **$4.7 million** for operating leases[82](index=82&type=chunk) - Operating lease cost was **$214,000** for Q2 2025 and **$428,000** for H1 2025. The weighted-average remaining lease term was **6.6 years**, and the weighted-average discount rate was **2.75%**[82](index=82&type=chunk) [Note 16 – Subsequent Events](index=30&type=section&id=Note%2016%20%E2%80%93%20Subsequent%20Events) This note discloses any significant events occurring after the balance sheet date that require reporting - No other events requiring additional disclosures were identified after the consolidated balance sheet date of June 30, 2025[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial condition and operational results, covering revenue, expenses, liquidity, and critical accounting policies [Overview](index=31&type=section&id=Overview) This section provides a general description of the company's business model and primary service offerings - Cass Information Systems provides payment and information processing services to large enterprises, including freight, facility invoice processing, and B2B payment platforms. Its bank subsidiary, Cass Commercial Bank, supports payment operations and offers banking services to privately held businesses, franchise restaurants, and faith-based ministries[86](index=86&type=chunk) - Revenue is primarily generated from service fees, transactional payment services, and investment of account balances, with net interest income being a significant source for the Bank[87](index=87&type=chunk) [Recent Industry Developments](index=31&type=section&id=Recent%20Industry%20Developments) This section highlights current trends and changes within the company's operating industries - Freight rates are gradually increasing after declines since 2023, but volumes continue to decrease year-over-year, impacting transportation-related processing fees[89](index=89&type=chunk) - Carrier consolidation, with smaller trucking companies exiting or selling, is putting downward pressure on financial fees, as these smaller companies were significant users of quick pay solutions[89](index=89&type=chunk) [Recent Items of Note](index=31&type=section&id=Recent%20Items%20of%20Note) This section outlines significant financial events and strategic actions undertaken by the company - Net interest income increased by **$3.5 million (22.3%)** due to an improved net interest margin (**3.78% vs. 3.32%**) and a **6.7%** increase in average interest-earning assets[90](index=90&type=chunk) - The Company sold its telecom expense management (TEM) business unit for **$18.0 million**, resulting in a **$3.6 million** gain on sale[91](index=91&type=chunk) - The Company sold **$34.0 million** of corporate investment securities at a pre-tax loss of **$3.6 million** to reposition the portfolio for higher yields and improved net interest margin[92](index=92&type=chunk) - The recently signed One Big Beautiful Bill Act, making changes to tax law regarding interest expense deductibility, R&E expenses, and accelerated depreciation, is being analyzed for its potential impact on future income tax expense[93](index=93&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) This section summarizes the company's financial performance, including revenue, expenses, and net income Summary of Operating Results (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | % Change (QoQ) | H1 2025 | H1 2024 | % Change (YoY) | | :------------------------------------ | :------ | :------ | :------------- | :------ | :------ | :------------- | | Total net revenue | $44,398 | $43,977 | 1.0% | $90,804 | $89,082 | 1.9% | | Operating expense | $38,119 | $38,409 | (0.8)% | $73,649 | $74,617 | (1.3)% | | Net income from continuing operations | $5,160 | $4,308 | 19.8% | $13,710 | $11,372 | 20.6% | | Net income from discontinued operations | $3,695 | $176 | 1,999.4% | $4,111 | $264 | 1,457.2% | | Net income | $8,855 | $4,484 | 97.5% | $17,821 | $11,636 | 53.2% | | Diluted earnings per share | $0.66 | $0.32 | 106.3% | $1.31 | $0.84 | 56.0% | | Return on average assets | 1.48% | 0.78% | 89.7% | 1.49% | 1.00% | 49.0% | | Return on average equity | 15.35% | 8.01% | 91.6% | 15.62% | 10.36% | 50.8% | - Q2 2025 net revenue increased **1.0% to $44.4 million**, driven by net interest income, partially offset by investment securities losses. Operating expense decreased **0.8%** due to lower bad debt expense and late fees[96](index=96&type=chunk) - H1 2025 net revenue increased **1.9% to $90.8 million**, also driven by net interest income. Operating expense decreased **1.3%** due to a bad debt recovery from a litigation settlement[99](index=99&type=chunk) [Fee Revenue and Other Income](index=34&type=section&id=Fee%20Revenue%20and%20Other%20Income) This section analyzes the components of non-interest revenue, including processing and financial fees Fee Revenue and Other Income (in thousands) | Metric | Q2 2025 | Q2 2024 | % Change (QoQ) | H1 2025 | H1 2024 | % Change (YoY) | | :------------------------------------ | :------ | :------ | :------------- | :------ | :------ | :------------- | | Processing fees | $17,082 | $16,816 | 1.6% | $33,551 | $33,675 | (0.4)% | | Financial fees | $10,161 | $10,460 | (2.9)% | $20,122 | $21,058 | (4.4)% | | Other fees | $1,263 | $1,185 | 6.6% | $2,889 | $2,452 | 17.8% | | Loss on sale of investment securities | ($3,558) | ($13) | N/M | ($3,576) | ($13) | N/M | | Transportation invoice volume (000s) | 8,837 | 8,879 | (0.5)% | 17,192 | 17,649 | (2.6)% | | Facility-related transaction volume (000s) | 4,141 | 4,197 | (1.3)% | 8,366 | 8,311 | 0.7% | | Average payments in advance of funding (000s) | $176,191 | $213,185 | (17.4)% | $174,898 | $203,761 | (14.2)% | - Processing fees increased **1.6%** in Q2 2025 due to flat transportation and facility transaction volumes. Financial fees decreased **2.9%** in Q2 2025, primarily due to a **17.4%** decline in average payments in advance of funding[103](index=103&type=chunk) - The Company incurred a **$3.6 million** loss on the sale of **$34.0 million** of corporate investment securities in Q2 2025, aiming to redeploy proceeds into higher-yielding assets[104](index=104&type=chunk) [Net Interest Income](index=35&type=section&id=Net%20Interest%20Income) This section examines the difference between interest earned on assets and interest paid on liabilities Net Interest Income and Related Factors (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Average earning assets | $2,090,366 | $1,958,427 | $2,097,445 | $2,010,833 | | Average interest-bearing liabilities | $615,932 | $638,339 | $622,045 | $634,986 | | Net interest income (tax-equivalent) | $19,690 | $16,168 | $39,132 | $32,888 | | Net interest margin (tax-equivalent) | 3.78% | 3.32% | 3.76% | 3.29% | | Yield on earning assets (tax-equivalent) | 4.58% | 4.41% | 4.56% | 4.34% | | Cost of interest-bearing liabilities | 2.71% | 3.35% | 2.68% | 3.32% | - Net interest income increased by **$3.5 million** (QoQ) and **$6.2 million** (YoY) due to an improved net interest margin and growth in average earning assets. The net interest margin improved to **3.78%** in Q2 2025 and **3.76%** in H1 2025[107](index=107&type=chunk)[114](index=114&type=chunk)[128](index=128&type=chunk)[130](index=130&type=chunk) - Average loans increased by **8.3%** in Q2 2025 and **8.7%** in H1 2025, primarily in commercial and industrial and faith-based portfolios, with average loan yields increasing due to current market rates and re-pricing[108](index=108&type=chunk)[115](index=115&type=chunk) - The cost of interest-bearing liabilities decreased by **64 basis points** in both Q2 and H1 2025, primarily due to reductions in short-term interest rates in late 2024[107](index=107&type=chunk)[112](index=112&type=chunk)[114](index=114&type=chunk)[118](index=118&type=chunk) [Provision and Allowance for Credit Losses and Allowance for Unfunded Commitments](index=40&type=section&id=Provision%20and%20Allowance%20for%20Credit%20Losses%20and%20Allowance%20for%20Unfunded%20Commitments) This section discusses the company's reserves for potential loan losses and off-balance sheet credit exposures Provision for Credit Losses (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Provision for credit losses | $10 | $335 | $901 | $545 | | Provision for (release of) unfunded commitments | $15 | $65 | $29 | ($50) | | Total provision for credit losses and off-balance sheet credit exposures | $25 | $400 | $930 | $495 | - The allowance for credit losses (ACL) was **$14.3 million** at June 30, 2025, representing **1.28%** of outstanding loans, up from $13.4 million (**1.24%**) at December 31, 2024[133](index=133&type=chunk)[136](index=136&type=chunk) - The provision for credit losses in Q2 2025 was driven by an increase in nonaccrual loans of **$3.4 million**, partially offset by a decrease in total loans[132](index=132&type=chunk) [Operating Expenses](index=40&type=section&id=Operating%20Expenses) This section details the various costs incurred in the company's day-to-day operations Operating Expenses (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Personnel | $27,752 | $26,244 | $55,031 | $53,151 | | Occupancy | $669 | $641 | $1,390 | $1,317 | | Equipment | $2,562 | $1,936 | $4,856 | $3,767 | | Bad debt expense (recovery) | $0 | $1,288 | ($2,000) | $1,288 | | Amortization of intangible assets | $293 | $173 | $586 | $346 | | Other operating expense | $6,843 | $8,127 | $13,786 | $14,748 | | Total operating expense | $38,119 | $38,409 | $73,649 | $74,617 | - Total operating expenses decreased by **0.8%** in Q2 2025 and **1.3%** in H1 2025. Personnel expenses increased due to merit raises, the AcuAudit acquisition, and higher share-based compensation and profit sharing, partially offset by a decrease in FTEs[137](index=137&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk) - Equipment expense increased due to depreciation on new software. A **$2.0 million** bad debt recovery in H1 2025 (vs. $1.3 million expense in H1 2024) significantly impacted operating expenses[140](index=140&type=chunk)[142](index=142&type=chunk) [Net Income from Discontinued Operations](index=42&type=section&id=Net%20Income%20from%20Discontinued%20Operations) This section reports the financial results from business segments that have been sold or are held for sale Net Income from Discontinued Operations (in thousands) | Metric | Q2 2025 | Q2 2024 | % Change (QoQ) | H1 2025 | H1 2024 | % Change (YoY) | | :------------------------------------ | :------ | :------ | :------------- | :------ | :------ | :------------- | | Total revenues | $9,286 | $4,613 | 101.3% | $13,904 | $9,186 | 51.4% | | Operating expense | $4,359 | $4,385 | (0.6)% | $8,448 | $8,847 | (4.5)% | | Net income from discontinued operations | $3,695 | $176 | 1,999.4% | $4,111 | $265 | 1,451.3% | | Gain on sale of TEM business | $3,550 | $0 | 100.0% | $3,550 | $0 | 100.0% | - Net income from discontinued operations surged to **$3.7 million** in Q2 2025 and **$4.1 million** in H1 2025, primarily due to the **$3.6 million** gain on the sale of the TEM Business Unit and increased non-recurring fee income[144](index=144&type=chunk)[145](index=145&type=chunk) [Financial Condition](index=42&type=section&id=Financial%20Condition) This section assesses the company's overall financial health, including assets, liabilities, and equity - Total assets decreased by **$79.1 million (3.3%)** to **$2.32 billion** at June 30, 2025, from December 31, 2024[146](index=146&type=chunk) - Cash and cash equivalents decreased by **$131.6 million (37.6%)** to **$218.2 million**, while the investment securities portfolio increased by **$71.5 million (13.5%)** to **$599.5 million**[147](index=147&type=chunk)[148](index=148&type=chunk) - Loans increased by **$35.0 million (3.2%)**, and total deposits increased by **$35.9 million (3.7%)**, primarily due to noninterest-bearing deposits. Accounts and drafts payable decreased by **$92.8 million (8.2%)**[148](index=148&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - Total shareholders' equity increased by **$11.8 million to $240.8 million**, driven by net income and a decrease in accumulated other comprehensive loss, partially offset by share repurchases and dividends[153](index=153&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) This section evaluates the company's ability to meet short-term obligations and fund long-term growth - Cash and cash equivalents, the primary source of liquidity, totaled **$218.2 million** at June 30, 2025, representing **9.4%** of total assets[155](index=155&type=chunk) - Secondary liquidity sources include an investment portfolio of **$599.5 million** and unsecured lines of credit at correspondent banks (**$83.0 million**), secured lines with the Federal Home Loan Bank (**$228.5 million**), and secured lines from three banks (**$225.0 million**). No amounts were outstanding on these lines[156](index=156&type=chunk)[157](index=157&type=chunk) - The Company and its Bank subsidiary continue to exceed all regulatory capital requirements, with strong capital ratios across Total Capital, Common Equity Tier I, and Tier I Capital[165](index=165&type=chunk) [Impact of New or Not Yet Adopted Accounting Pronouncements](index=45&type=section&id=Impact%20of%20New%20or%20Not%20Yet%20Adopted%20Accounting%20Pronouncements) This section discusses the potential effects of recently issued or upcoming accounting standards - ASU 2023-06 (Disclosure Improvements) and ASU 2023-09 (Income Tax Disclosures) are not expected to have a significant impact on the Company's financial statements[166](index=166&type=chunk)[169](index=169&type=chunk) - ASU 2023-07 (Segment Reporting), effective for fiscal years beginning after December 15, 2023, did not have a significant impact on the Company's financial statements[167](index=167&type=chunk)[168](index=168&type=chunk) [Critical Accounting Policies](index=46&type=section&id=Critical%20Accounting%20Policies) This section identifies accounting policies requiring significant judgment and estimation by management - The Allowance for Credit Losses (ACL) is identified as a critical accounting policy, requiring significant management estimates based on established methodologies, economic forecasts, qualitative risk factors, and loan volume[171](index=171&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the Company's exposure to market risk, primarily interest rate risk, and how it is managed through gap analysis and a simulation model - The Company manages interest rate risk through gap analysis and a simulation model, with asset/liability management policies established and monitored by management[172](index=172&type=chunk) Simulated Changes in Net Interest Income (next 12 months) | Interest Rate Change | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | +200 basis points | 7.0% | 9.0% | | +100 basis points | 3.2% | 4.4% | | Flat rates | —% | —% | | -100 basis points | (0.2)% | 0.2% | | -200 basis points | (1.2)% | (1.3)% | - The Company is generally asset sensitive, meaning its net interest income is positively impacted by rising interest rates, as average interest-earning assets significantly exceed average interest-bearing liabilities[174](index=174&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports on the status of internal control over financial reporting - Management, under the supervision of the principal executive and financial officers, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[175](index=175&type=chunk) - There were no changes in the second quarter of 2025 that materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting[176](index=176&type=chunk) PART II – Other Information [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) This section states that the Company is involved in various legal actions and proceedings in the ordinary course of business, but management believes their outcome will not materially affect the Company's financial condition - Management believes that the outcome of all pending or threatened legal actions and proceedings will not have a material effect on the Company's businesses or financial conditions[177](index=177&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20RISK%20FACTORS) This section refers to the Company's 2024 Form 10-K for a description of risks and uncertainties and confirms no material changes to these risk factors - There are no material changes to the Risk Factors as disclosed in the Company's 2024 Annual Report on Form 10-K[178](index=178&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the Company's common stock repurchases during the second quarter of 2025 under its publicly announced buyback program Common Stock Repurchases (Q2 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------------------- | :------------------------------- | :--------------------------- | | April 1, 2025–April 30, 2025 | 41,666 | $41.04 | | May 1, 2025–May 31, 2025 | 64,344 | $42.61 | | June 1, 2025–June 30, 2025 | 35,172 | $42.85 | | Total | 141,182 | $42.20 | - Of the total shares purchased, **140,269** were under the publicly announced treasury stock buyback program, and **913 shares** were transferred from employees for tax withholding[179](index=179&type=chunk) - A new authorization for up to **500,000 shares** was approved on July 15, 2025, replacing the previous program[179](index=179&type=chunk) [Item 3. Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[180](index=180&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES) This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable[181](index=181&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20OTHER%20INFORMATION) This section confirms no material changes to procedures for recommending Board nominees and no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements adopted or terminated by officers or directors - No material changes to procedures for security holders to recommend nominees to the Board of Directors were implemented in Q2 2025[182](index=182&type=chunk) - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by officers or directors during Q2 2025[182](index=182&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including descriptions of the profit sharing program, certifications under Sarbanes-Oxley Act, and XBRL-related documents - Exhibits include the Description of Cass Information Systems, Inc. Profit Sharing Program, Certifications Pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002, and various Inline XBRL Taxonomy Extension Documents[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) SIGNATURES This section contains the official attestations by the company's principal executive and financial officers - The report was signed on August 5, 2025, by Martin H. Resch, President and Chief Executive Officer, and Michael J. Normile, Executive Vice President and Chief Financial Officer[189](index=189&type=chunk)

[Financial Highlights & CEO Commentary](index=1&type=section&id=Second%20Quarter%20Financial%20Highlights) Cass Information Systems reported a significant increase in Q2 2025 net income to $8.9 million, driven by expanded net interest income and strategic TEM business divestiture Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income ($) | $8.9 million | $4.5 million | +97.6% | | Diluted EPS ($) | $0.66 | $0.32 | +106.3% | | Return on Average Equity (%) | 15.35% | 8.01% | +7.34 p.p. | | Net Interest Margin (%) | 3.78% | 3.32% | +0.46 p.p. | - The CEO attributed the **strong quarterly performance** to **growth in interest-earning assets**, **improved net interest margin**, and ongoing **efficiency initiatives**; the **successful sale of the TEM business** is expected to provide capital for other purposes and allow for greater focus on core operations[1](index=1&type=chunk) - Key strategic actions in the quarter included: **closing the sale of the TEM business**, resulting in a **$3.6 million gain**; **selling $34.0 million of low-yield corporate investment securities** at a loss to **reposition the portfolio for better future returns**; and **repurchasing 140,269 shares of company stock**[3](index=3&type=chunk) [Operational and Financial Performance Analysis](index=2&type=section&id=Second%20Quarter%202025%20Financial%20Commentary) Profitability was primarily driven by a 22.3% YoY increase in net interest income, despite mixed transaction volumes and higher personnel expenses [Business Volume Analysis](index=2&type=section&id=Transportation%20Invoice%20and%20Dollar%20Volumes) Transportation invoice volume was flat YoY, with dollar volumes up 3.2%, while facility expense dollar volumes surged 16.1% YoY Q2 2025 Transportation Volume | Metric | Q2 2025 | Q2 2024 | YoY Change | Q1 2025 | QoQ Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Invoice Volume (millions) | 8.84 | 8.88 | -0.5% | 8.36 | +5.7% | | Dollar Volume (billions) | $9.4 | $9.1 | +3.2% | $8.6 | +8.4% | Q2 2025 Facility Expense Volume | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | | Invoice Volume (millions) | 4.1 | 4.2 | -1.4% | | Dollar Volume (billions) | $5.5 | $4.8 | +16.1% | [Revenue Analysis](index=2&type=section&id=Processing%20Fees) Net interest income significantly increased by $3.5 million (22.3%) due to margin expansion and asset growth, while fee-based revenues were mixed - **Processing fees increased by $266,000 (1.6%)** over Q2 2024, reflecting **flat transaction volumes**[7](index=7&type=chunk) - **Financial fees decreased by $299,000 (2.9%)** compared to Q2 2024, primarily due to a **17.4% decline in average payments in advance of funding**[7](index=7&type=chunk) - **Net interest income grew by $3.5 million (22.3%) YoY**, attributed to the **net interest margin improving to 3.78% from 3.32%** and a **$131.9 million increase in average interest-earning assets**[8](index=8&type=chunk) [Expense and Other Items Analysis](index=2&type=section&id=Provision%20for%20Credit%20Losses) The company recorded a minimal provision for credit losses, realized a strategic loss on securities sale, and saw personnel expenses rise despite reduced headcount - The **provision for credit losses was only $25,000** in Q2 2025, **compared to $400,000** in Q2 2024[10](index=10&type=chunk) - A **loss of $3.6 million** was taken on the **sale of $34.0 million of corporate investment securities** yielding 2.29%; proceeds will be **redeployed into higher-yielding assets**[11](index=11&type=chunk) - **Personnel expenses increased by $1.5 million (5.7%) YoY**, driven by merit increases, acquisition-related costs, and higher profit-sharing due to improved earnings, despite a **5.9% decrease in average full-time employees**[12](index=12&type=chunk) [Balance Sheet and Capital Management](index=2&type=section&id=Loans) Ending loans decreased sequentially but increased YoY, average deposits declined, and the company actively managed capital through repurchases and dividend approvals - **Ending loans decreased by $24.9 million (2.2%)** compared to March 31, 2025, but **increased by $35.0 million (3.2%)** since December 31, 2024[14](index=14&type=chunk) - **Average deposits decreased by $36.4 million (3.5%)** compared to Q2 2024, partly due to larger commercial clients using funds for acquisitions[16](index=16&type=chunk) - The Board of Directors **approved a quarterly dividend of $0.31 per share** and **authorized a new repurchase program for up to 500,000 shares** of common stock[19](index=19&type=chunk) [Discontinued Operations (TEM Business Sale)](index=1&type=section&id=Income%20from%20Discontinued%20Operations) The company finalized the sale of its TEM business, resulting in a $3.6 million gain and $3.7 million income from discontinued operations, with future earnings expected to be neutral - The **sale of the TEM business closed on June 30, 2025**, and has been **accounted for as a discontinued operation**[2](index=2&type=chunk) - The sale **generated a gain of $3.6 million** and was part of a **total income from discontinued operations of $3.7 million (net of tax)** for Q2 2025[14](index=14&type=chunk)[24](index=24&type=chunk) - Management expects **future consolidated earnings to be neutral from the sale**, as the projected net income of the TEM business will be **offset by increased interest income from deploying the $18.0 million purchase price**[14](index=14&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20%28unaudited%29) This section presents the unaudited consolidated financial statements, including the Statement of Income, Balance Sheet, Average Balances, and discontinued operations financials [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Total revenues from continuing operations were $44.4 million, with total net income reaching $8.9 million, or $0.66 per diluted share, significantly up from Q2 2024 Q2 Income Statement Summary ($ in thousands) | Line Item | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Fee Revenue | $27,243 | $27,276 | -0.1% | | Net Interest Income | $19,475 | $15,929 | +22.3% | | Net Income from Continuing Ops | $5,160 | $4,308 | +19.8% | | Income from Discontinued Ops | $3,695 | $176 | +2000% | | **Net Income** | **$8,855** | **$4,484** | **+97.5%** | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets were $2.32 billion, reflecting TEM divestiture, with loans at $1.10 billion, deposits at $1.00 billion, and shareholders' equity growing to $240.8 million Balance Sheet Highlights ($ in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,316,018 | $2,395,081 | | Loans, net | $1,102,708 | $1,068,594 | | Total Deposits | $1,003,795 | $967,916 | | Total Shareholders' Equity | $240,822 | $229,030 | [Average Balances and Key Ratios](index=6&type=section&id=Average%20Balances%20%28unaudited%29) Average interest-earning assets increased to $2.09 billion, with ROE rising to 15.35% and NIM expanding to 3.78%, reflecting improved efficiency and reduced headcount Key Performance Ratios (Q2 2025 vs. Q2 2024) | Ratio | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Return on average equity | 15.35% | 8.01% | | Return on average assets | 1.48% | 0.78% | | Net interest margin | 3.78% | 3.32% | - **Average interest-earning assets grew to $2.09 billion** in Q2 2025, an **increase from $1.96 billion** in Q2 2024[28](index=28&type=chunk) - **Average full-time equivalent employees decreased to 989** in Q2 2025 **from 1,051** in Q2 2024, reflecting **efficiency gains**[30](index=30&type=chunk) [Discontinued Operations Financials](index=7&type=section&id=Assets%20and%20Liabilities%20of%20Discontinued%20Operations%20%28unaudited%29) The sold TEM business generated $9.3 million in Q2 2025 total revenue, including a $3.6 million gain on sale, resulting in $3.7 million net income, with all related assets and liabilities removed - **Total revenue from discontinued operations in Q2 2025 was $9.3 million**, which **includes a $3.6 million gain** on the sale of the TEM business[34](index=34&type=chunk) - **Net income from discontinued operations for Q2 2025 was $3.7 million, net of tax**[34](index=34&type=chunk) - As of June 30, 2025, **all assets and liabilities of the discontinued operations have been removed from the balance sheet**, showing a **zero balance**[32](index=32&type=chunk)

Core Viewpoint - Investors in Cass Information Systems, Inc. (CASS) should closely monitor the stock due to significant implied volatility in the options market, particularly the Jun 20, 2025 $45.00 Put option [1] Group 1: Implied Volatility - Implied volatility indicates the market's expectation of future price movement, with high levels suggesting a potential significant move or an upcoming event that could lead to a rally or sell-off [2] - The current high implied volatility for Cass Information Systems may signal a developing trading opportunity, as options traders often seek to sell premium on such options to capture decay [4] Group 2: Analyst Insights - Cass Information Systems holds a Zacks Rank 3 (Hold) in the Computer-Services Industry, which is in the top 22% of the Zacks Industry Rank [3] - Over the past 60 days, one analyst has raised their earnings estimate for the current quarter, resulting in a consensus estimate increase from 64 cents per share to 65 cents [3]