While "the trend is your friend" when it comes to short-term investing or trading, timing entries into the trend is a key determinant of success. And increasing the odds of success by making sure the sustainability of a trend isn't easy.The trend often reverses before exiting the trade, leading to a short-term capital loss for investors. So, for a profitable trade, one should confirm factors such as sound fundamentals, positive earnings estimate revisions, etc. that could keep the momentum in the stock aliv ...

Cass' core competencies allow it to perform the highest volumes of transaction processing in an integrated, efficient and systematic approach. Not only is Cass able to process the transaction, it is also able to collect the data defining the transaction and effect the financial payment governing its terms. Marketing, Customers and Competition Employees and Human Capital Resources Table of Contents The Company's DEI Committee was formed after a thorough process of determining a charter and actively looks to ...

Most of us have heard the dictum "the trend is your friend." And this is undeniably the key to success when it comes to short-term investing or trading. But it isn't easy to ensure the sustainability of a trend and profit from it.Often, the direction of a stock's price movement reverses quickly after taking a position in it, making investors incur a short-term capital loss. So, it's important to ensure that there are enough factors -- such as sound fundamentals, positive earnings estimate revisions, etc. -- ...

Cass Information Systems (CASS) came out with quarterly earnings of $0.61 per share, beating the Zacks Consensus Estimate of $0.48 per share. This compares to earnings of $0.67 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 27.08%. A quarter ago, it was expected that this invoice and payment management company would post earnings of $0.55 per share when it actually produced earnings of $0.54, delivering a surprise of -1.82%.O ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements and management's analysis of financial condition [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited consolidated financial statements including balance sheets, income, comprehensive income, cash flows, and equity [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets slightly decreased to $2.50 billion, driven by reduced loans and securities, offset by increased cash Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 (Unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $408,435 | $200,942 | | Securities available-for-sale | $615,855 | $754,468 | | Loans, net | $1,026,300 | $1,069,367 | | **Total Assets** | **$2,504,878** | **$2,573,023** | | **Liabilities & Equity** | | | | Total deposits | $1,177,342 | $1,257,217 | | Accounts and drafts payable | $1,082,224 | $1,067,600 | | **Total Liabilities** | **$2,298,642** | **$2,366,698** | | **Total Shareholders' Equity** | **$206,236** | **$206,325** | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Net income declined in Q3 and nine-month periods due to increased operating expenses outpacing revenue growth Income Statement Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total net revenue | $49,223 | $47,205 | $146,775 | $133,530 | | Total operating expense | $40,063 | $36,321 | $119,774 | $101,788 | | **Net income** | **$7,394** | **$8,799** | **$21,649** | **$25,619** | | **Diluted earnings per share** | **$0.54** | **$0.64** | **$1.56** | **$1.86** | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income significantly improved for the nine-month period due to smaller unrealized losses on securities Comprehensive Income (Loss) Summary (in thousands) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income | $7,394 | $8,799 | $21,649 | $25,619 | | Other comprehensive (loss) income | $(10,526) | $(20,114) | $(7,599) | $(66,832) | | **Total comprehensive (loss) income** | **$(3,132)** | **$(11,315)** | **$14,050** | **$(41,213)** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash increased by $207.5 million for the nine months, primarily from investing activities and operations Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $29,366 | $40,799 | | Net cash provided by (used in) investing activities | $194,245 | $(249,861) | | Net cash (used in) provided by financing activities | $(16,118) | $41,128 | | **Net increase (decrease) in cash** | **$207,493** | **$(167,934)** | [Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shareholders' equity remained stable, influenced by dividends, repurchases, and comprehensive loss, offset by net income - For the nine months ended September 30, 2023, the company paid cash dividends of **$0.87 per share**, totaling **$11.9 million**[35](index=35&type=chunk) - The company repurchased **136,577 common shares** for **$5.2 million** during the first nine months of 2023[35](index=35&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, segment information, loan portfolio, stock repurchase program, and recent accounting standard adoption - The company operates in **two reportable segments**: Information Services (invoice processing for transportation, energy, etc.) and Banking Services (commercial banking)[45](index=45&type=chunk)[76](index=76&type=chunk) - Total loans decreased to **$1.04 billion** at September 30, 2023, from **$1.08 billion** at December 31, 2022. The portfolio consists primarily of commercial & industrial and real estate loans, with **no loans past due** as of September 30, 2023[82](index=82&type=chunk) - The company repurchased **136,577 shares** in the first nine months of 2023. A new repurchase authorization for up to **500,000 shares** was approved by the Board on October 17, 2023, replacing the prior program[75](index=75&type=chunk) - Effective **January 1, 2023**, the company adopted **ASU 2022-02**, which eliminated the accounting guidance for troubled debt restructurings and enhanced disclosure requirements for loan modifications to borrowers experiencing financial difficulty[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses revenue growth, net income decline due to expenses, freight recession impact, and strong liquidity [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Net income decreased due to higher operating expenses, despite growth in fee revenue and net interest income Key Performance Metrics | Metric | Q3 2023 vs Q3 2022 | 9M 2023 vs 9M 2022 | | :--- | :--- | :--- | | Net Revenue | +4.3% | +9.9% | | Operating Expense | +10.3% | +17.7% | | Net Income | -16.0% | -15.5% | | Diluted EPS | -15.6% | -16.1% | - Processing fee revenue increased **5.1%** in Q3 2023 vs Q3 2022, driven by a **3.1% increase** in facility-related invoice volumes and ancillary fees, which offset a **4.9% decline** in transportation invoice volumes[235](index=235&type=chunk) - Net interest income for the nine months ended Sep 30, 2023, increased **19.1%** year-over-year, primarily due to the increase in the Federal Funds rate, which expanded the net interest margin to **3.24%** from **2.61%**[114](index=114&type=chunk)[186](index=186&type=chunk) - Personnel expenses, the largest component of operating costs, increased **14.6%** for the nine-month period due to merit increases, an increase in full-time employees for technology initiatives, and higher benefit costs[225](index=225&type=chunk) [Financial Condition](index=35&type=section&id=Financial%20Condition) Total assets decreased, marked by increased cash, decreased investments and loans, and a decline in total deposits - Cash and cash equivalents increased by **$207.5 million (103.3%)** during the first nine months of 2023[228](index=228&type=chunk) - The investment securities portfolio decreased by **$138.6 million (18.4%)**, primarily due to sales and maturities[259](index=259&type=chunk) - Loans decreased by **$43.3 million (4.0%)** as the company became more selective in booking new loans amid declining deposits[248](index=248&type=chunk) - Total deposits decreased by **$79.9 million (6.4%)** from year-end 2022, as commercial clients moved funds to higher-rate alternatives, but balances have shown recent stabilization[249](index=249&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with substantial cash and borrowing capacity, exceeding all regulatory capital requirements - Primary liquidity is strong, with cash and cash equivalents at **$408.4 million**, representing **16.3% of total assets**[263](index=263&type=chunk) - The company has substantial secondary liquidity, including unsecured lines of credit up to **$83.0 million** and secured lines of credit up to **$457.8 million**, with **no amounts outstanding**[251](index=251&type=chunk) Regulatory Capital Ratios (Consolidated) as of Sep 30, 2023 | Ratio | Actual | Requirement for Well-Capitalized | | :--- | :--- | :--- | | Total capital (to risk-weighted assets) | 15.30% | N/A | | Common Equity Tier I Capital | 14.53% | N/A | | Tier I capital (to risk-weighted assets) | 14.53% | N/A | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company manages interest rate risk, with simulations indicating asset sensitivity to rate changes Simulated Change in Net Interest Income (Next 12 Months) | Rate Shock | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | +200 basis points | +13.7% | +10.6% | | +100 basis points | +8.2% | +4.2% | | -100 basis points | -3.2% | —% | | -200 basis points | -6.0% | -1.5% | - The company is generally **asset sensitive**, as average interest-earning assets of **$2.06 billion** for Q3 2023 significantly exceeded average interest-bearing liabilities of **$591.6 million**[282](index=282&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were **effective** as of September 30, 2023[283](index=283&type=chunk) - **No material changes** in internal control over financial reporting were identified during the third quarter of 2023[270](index=270&type=chunk) [PART II. OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, updated risk factors, equity sales, and other miscellaneous information [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to ordinary course legal actions, not expected to materially affect financial condition - Management does not expect any pending or threatened legal actions to have a **material effect** on the company's business or financial condition[284](index=284&type=chunk) [Item 1A. Risk Factors](index=40&type=page&id=Item%201A.%20Risk%20Factors) Updated risks include liquidity issues from eroded confidence, potential realized losses on securities, and increased regulatory scrutiny - The company identifies a risk of an unexpected inability to obtain liquidity due to **eroded customer confidence** in regional banks following recent high-profile bank failures[274](index=274&type=chunk)[276](index=276&type=chunk) - Rising interest rates have created **significant unrealized losses** in the available-for-sale securities portfolio, which could become realized losses if the company were required to sell them to meet liquidity needs[277](index=277&type=chunk)[287](index=287&type=chunk) - The company anticipates **increased regulatory scrutiny** and new regulations in response to recent banking industry events, which could increase costs and reduce profitability[88](index=88&type=chunk)[296](index=296&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details on common stock repurchases during Q3 2023 and a new share repurchase authorization are provided Share Repurchases for Q3 2023 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jul 2023 | 1,122 | $38.68 | | Aug 2023 | 60,900 | $38.79 | | Sep 2023 | 11,250 | $38.16 | | **Total** | **73,272** | **$38.69** | - On **October 17, 2023**, the Board of Directors authorized a new repurchase program for up to **500,000 shares**, replacing the previous authorization from October 2021[75](index=75&type=chunk)[298](index=298&type=chunk) [Item 3. Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company - **Not applicable**[91](index=91&type=chunk) [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) No other significant information reported, specifically no Rule 10b5-1 trading arrangements by officers or directors - During Q3 2023, **none** of the company's officers or directors adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements[92](index=92&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including Sarbanes-Oxley certifications and Interactive Data Files (XBRL) - The exhibits filed with this report include **CEO and CFO certifications** (Exhibits 31.1, 31.2, 32.1, 32.2) and **Inline XBRL documents** (Exhibit 101)[93](index=93&type=chunk)[293](index=293&type=chunk) [Signatures](index=43&type=section&id=SIGNATURES) The report was duly signed by the President and CEO, and Executive Vice President and CFO - The report was duly signed on **November 7, 2023**, by Martin H. Resch, President and Chief Executive Officer, and Michael J. Normile, Executive Vice President and Chief Financial Officer[96](index=96&type=chunk)[302](index=302&type=chunk)

PART I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements for the quarterly period ended June 30, 2023, revealing a decrease in net income primarily due to higher operating expenses despite increased net interest income [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2023, total assets decreased to $2.47 billion from $2.57 billion, primarily due to reduced securities and loans, while total liabilities also fell to $2.26 billion from $2.37 billion, and shareholders' equity increased to $215.1 million from $206.3 million | Account | June 30, 2023 ($ in thousands) | Dec 31, 2022 ($ in thousands) | | :--- | :--- | :--- | | **Total Assets** | **2,470,796** | **2,573,023** | | Cash and cash equivalents | 270,473 | 200,942 | | Loans, net | 1,042,654 | 1,069,367 | | Securities available-for-sale | 637,513 | 754,468 | | **Total Liabilities** | **2,255,650** | **2,366,698** | | Total deposits | 1,191,434 | 1,257,217 | | Accounts and drafts payable | 1,021,524 | 1,067,600 | | **Total Shareholders' Equity** | **215,146** | **206,325** | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Net income for Q2 2023 decreased to $7.1 million from $8.6 million, and for the first half of 2023, it fell to $14.3 million from $16.8 million, primarily due to a significant increase in operating expenses outpacing revenue growth | Metric | Q2 2023 ($ in thousands) | Q2 2022 ($ in thousands) | H1 2023 ($ in thousands) | H1 2022 ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total net revenue | 48,207 | 44,222 | 97,552 | 86,325 | | Total operating expense | 39,339 | 33,639 | 79,711 | 65,467 | | **Net income** | **7,138** | **8,562** | **14,255** | **16,820** | | **Diluted earnings per share** | **$0.52** | **$0.62** | **$1.03** | **$1.22** | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income for Q2 2023 significantly improved to $3.0 million from a $9.6 million loss in Q2 2022, driven by a smaller net unrealized loss on available-for-sale securities | Metric | Q2 2023 ($ in thousands) | Q2 2022 ($ in thousands) | H1 2023 ($ in thousands) | H1 2022 ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net income | 7,138 | 8,562 | 14,255 | 16,820 | | Other comprehensive income (loss) | (4,124) | (18,147) | 2,927 | (46,722) | | **Total comprehensive income (loss)** | **3,014** | **(9,585)** | **17,182** | **(29,902)** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first half of 2023, net cash from operations decreased to $17.0 million, while investing activities provided $163.5 million, and financing activities used $110.9 million, resulting in a $69.5 million increase in cash and cash equivalents | Cash Flow Activity (Six Months Ended June 30) | 2023 ($ in thousands) | 2022 ($ in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 16,973 | 31,062 | | Net cash provided by (used in) investing activities | 163,485 | (163,705) | | Net cash used in financing activities | (110,927) | (121,051) | | **Net increase (decrease) in cash and cash equivalents** | **69,531** | **(253,694)** | [Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shareholders' equity increased from $206.3 million at year-end 2022 to $215.1 million by June 30, 2023, driven by net income and positive other comprehensive income, partially offset by dividends and share repurchases - Balance at Dec 31, 2022: **$206,325 thousand**[91](index=91&type=chunk) - Key changes in H1 2023 include: Net income of **$14,255 thousand**, cash dividends of **($7,941) thousand**, share repurchases of **($2,377) thousand**, and other comprehensive gain of **$2,927 thousand**[26](index=26&type=chunk)[91](index=91&type=chunk) - Balance at June 30, 2023: **$215,146 thousand**[26](index=26&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed information supporting the financial statements, covering operating segments, loan portfolio quality, stock-based compensation, investment securities fair value, and revenue recognition policies - The Company operates in two reportable segments: Information Services (invoice processing and payment) and Banking Services (commercial banking)[30](index=30&type=chunk)[57](index=57&type=chunk) - Total loans stood at **$1.06 billion** as of June 30, 2023, with the vast majority classified as 'Normal' credit grade and no loans past due[35](index=35&type=chunk)[36](index=36&type=chunk) - The company adopted ASU 2022-02, which eliminated the accounting for troubled debt restructurings and enhanced disclosures for loan modifications for borrowers in financial difficulty[37](index=37&type=chunk) - Stock-based compensation expense was **$2.9 million** for the first six months of 2023, down from **$3.2 million** in the same period of 2022[70](index=70&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's Q2 2023 performance, noting revenue growth driven by net interest income, but a 16.6% net income decline due to a 16.9% increase in operating expenses from technology investments and personnel costs, alongside impacts of banking industry volatility on deposits and the company's strong liquidity and capital position [Results of Operations](index=26&type=section&id=Results%20of%20Operations) In Q2 2023, net interest income grew 17.4% to $16.0 million and financial fees increased 9.8% to $11.7 million, but a 16.9% rise in operating expenses to $39.3 million, driven by personnel and technology costs, led to a 16.6% decrease in net income to $7.1 million | Metric (Q2 2023 vs Q2 2022) | 2023 ($ in thousands) | 2022 ($ in thousands) | % Change | | :--- | :--- | :--- | :--- | | Net interest income | 16,014 | 13,641 | 17.4% | | Total revenues | 48,207 | 44,222 | 9.0% | | Operating expense | 39,339 | 33,639 | 16.9% | | Net income | 7,138 | 8,562 | (16.6)% | | Diluted EPS | $0.52 | $0.62 | (16.1)% | - The increase in net interest income was primarily due to the rise in the Federal Funds rate, which expanded the net interest margin to **3.25%** from **2.54%** in the prior year[169](index=169&type=chunk) - Operating expenses increased due to merit increases, wage pressures, a **10.9%** increase in average full-time employees for technology initiatives, and higher costs for outside services during a technology platform transition[172](index=172&type=chunk)[196](index=196&type=chunk) [Financial Condition](index=34&type=section&id=Financial%20Condition) Total assets decreased by $102.2 million (4.0%) to $2.5 billion from year-end 2022, primarily due to reduced investment securities and loans, while total liabilities fell by $111.0 million (4.7%) due to lower deposits, and shareholders' equity grew by $8.8 million (4.3%) to $215.1 million - Total assets decreased by **4.0%** to **$2.5 billion** at June 30, 2023[174](index=174&type=chunk) - The investment securities portfolio decreased by **$117.0 million** (**15.5%**) due to sales and maturities[175](index=175&type=chunk) - Total deposits decreased by **$65.8 million** (**5.2%**) as larger clients moved funds to higher-interest alternatives[177](index=177&type=chunk) - Shareholders' equity increased by **4.3%** to **$215.1 million**, driven by earnings and a decrease in accumulated other comprehensive loss[203](index=203&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with cash and cash equivalents increasing to $270.5 million and access to substantial undrawn credit lines, while both the holding company and Cass Commercial Bank exceed all regulatory capital requirements, demonstrating robust capital ratios - Cash and cash equivalents totaled **$270.5 million** at June 30, 2023, representing **10.9%** of total assets[180](index=180&type=chunk) - The company has access to **$83.0 million** in unsecured federal funds lines and **$464.3 million** in secured lines of credit, with no outstanding balances as of June 30, 2023[181](index=181&type=chunk) | Capital Ratios (Cass Commercial Bank) | June 30, 2023 | Well-Capitalized Requirement | | :--- | :--- | :--- | | Total capital (to risk-weighted assets) | 17.06% | 10.00% | | Tier I capital (to risk-weighted assets) | 15.94% | 8.00% | | Common Equity Tier I Capital | 15.94% | 6.50% | | Tier I capital (to average assets) | 12.37% | 5.00% | [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is asset-sensitive, with simulations indicating that a 100 basis point increase in interest rates would boost projected net interest income by 7.4% over 12 months, and a 200 basis point increase by 12.7% - The company is asset sensitive, as average interest-earning assets of **$2.0 billion** greatly exceeded average interest-bearing liabilities of **$512.5 million** in Q2 2023[189](index=189&type=chunk) | Interest Rate Shock | % Change in Projected Net Interest Income (June 30, 2023) | | :--- | :--- | | +200 basis points | 12.7% | | +100 basis points | 7.4% | | -100 basis points | (3.3)% | | -200 basis points | (5.7)% | [Controls and Procedures](index=38&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting identified during Q2 2023 - Management concluded that disclosure controls and procedures were effective as of June 30, 2023[213](index=213&type=chunk) - No changes in internal control over financial reporting were identified in Q2 2023 that materially affected, or are reasonably likely to materially affect, the company's internal controls[190](index=190&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=39&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is subject to various ordinary course legal actions, which management believes will not materially affect its business or financial condition - Management does not expect pending legal actions to have a material effect on the company's businesses or financial conditions[214](index=214&type=chunk) [Risk Factors](index=39&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section outlines material risks, including liquidity concerns from potential deposit outflows due to eroded customer confidence, the negative impact of rising interest rates on the securities portfolio, and increased regulatory scrutiny and costs - A key risk is the potential inability to obtain needed liquidity to satisfy deposit withdrawal requests, which could be accelerated if uninsured depositors lose confidence[216](index=216&type=chunk)[233](index=233&type=chunk) - Recent bank failures have eroded customer confidence, potentially causing customers to move deposits to larger institutions or higher-yielding investments, which could adversely impact liquidity and results[217](index=217&type=chunk)[234](index=234&type=chunk) - Rising interest rates have caused significant unrealized losses in the available-for-sale securities portfolio. A forced sale to meet liquidity needs could result in realized losses, impairing capital[218](index=218&type=chunk)[235](index=235&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECU RITIES%20AND%20USE%20OF%20PROCEEDS) During Q2 2023, the company repurchased 63,305 shares of common stock at an average price of $37.55 per share under its treasury stock buyback program, with 277,402 shares remaining for repurchase | Period (2023) | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April | 13,678 | $37.10 | | May | 45,921 | $37.56 | | June | 3,706 | $39.13 | | **Total Q2** | **63,305** | **$37.55** | - As of June 30, 2023, a maximum of **277,402 shares** may yet be purchased under the authorized plan[220](index=220&type=chunk)[239](index=239&type=chunk) [Exhibits](index=41&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including the 2023 Omnibus Stock and Performance Compensation Plan, related award agreements, and CEO and CFO certifications - Filed exhibits include the 2023 Omnibus Stock and Performance Compensation Plan and various award agreements[222](index=222&type=chunk) - Certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included as exhibits[222](index=222&type=chunk)

____________________ x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 CASS INFORMATION SYSTEMS, INC. (Exact name of registrant as specified in its charter) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the ...

Investment securities available-for-sale are recorded at fair value on a recurring basis. The Company's investment securities availablefor-sale at December 31, 2022 and 2021 are measured at fair value using Level 2 valuations. The market evaluation utilizes several sources which include "observable inputs" rather than "significant unobservable inputs" and therefore falls into the Level 2 category. The table below presents the balances of securities available-for-sale | --- | --- | --- | --- | --- | --- | -- ...

[FORM 10-Q General Information](index=1&type=section&id=FORM%2010-Q%20General%20Information) This section provides administrative details of the Form 10-Q filing for Cass Information Systems, Inc., for the quarter ended September 30, 2022 [Filing Details](index=1&type=section&id=Filing%20Details) This section details the Form 10-Q filing for Cass Information Systems, Inc., including the period, filer status, and common shares outstanding - The registrant is **CASS INFORMATION SYSTEMS, INC.**, incorporated in Missouri, with Commission File No. 000-20827[4](index=4&type=chunk) - The report covers the quarterly period ended **September 30, 2022**[4](index=4&type=chunk) - The registrant is an **Accelerated Filer** and not a shell company[7](index=7&type=chunk)[9](index=9&type=chunk) Common Stock Outstanding | As of Date | Shares Outstanding | | :--------------- | :----------------- | | October 22, 2022 | 13,661,353 | [Forward-looking Statements](index=3&type=section&id=Forward-looking%20Statements) This section outlines the nature of forward-looking statements, emphasizing they are not guarantees and involve risks discussed in the 2021 Form 10-K - Forward-looking statements are not guarantees of future performance and involve risks, uncertainties, and other factors beyond the Company's control[13](index=13&type=chunk) - These risks are discussed in Part I, Item 1A, 'Risk Factors' of the Company's 2021 Annual Report on Form 10-K[13](index=13&type=chunk) - The Company undertakes no obligation to publicly update or revise any forward-looking statements[13](index=13&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the unaudited consolidated financial statements and management's discussion and analysis of the Company's financial condition [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section presents the unaudited consolidated balance sheets, highlighting total assets, liabilities, and shareholders' equity Consolidated Balance Sheet Highlights (Dollars in Thousands) | Metric | Sep 30, 2022 (Unaudited) | Dec 31, 2021 | | :------------------------- | :----------------------- | :----------- | | Total Assets | $2,610,815 | $2,554,901 | | Total Liabilities | $2,419,080 | $2,309,103 | | Total Shareholders' Equity | $191,735 | $245,798 | - Total assets increased by **$55.9 million (2.2%)** from December 31, 2021, to September 30, 2022, primarily driven by increases in loans and investment securities[18](index=18&type=chunk)[162](index=162&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - Total shareholders' equity decreased by **$54.1 million (22.0%)** due to unrealized losses on investment securities, share repurchases, and dividends paid, partially offset by net income and stock-based compensation[18](index=18&type=chunk)[170](index=170&type=chunk) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) This section presents the unaudited consolidated statements of income, detailing revenue, expenses, net income, and diluted earnings per share Consolidated Statements of Income Highlights (Dollars in Thousands, except Per Share Data) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total fee revenue and other income | $31,784 | $27,577 | $92,865 | $80,739 | | Total interest income | $16,753 | $11,719 | $42,859 | $33,503 | | Total interest expense | $782 | $287 | $1,344 | $915 | | Net interest income | $15,971 | $11,432 | $41,515 | $32,588 | | Total net revenue | $47,205 | $38,669 | $133,530 | $114,197 | | Total operating expense | $36,321 | $30,690 | $101,788 | $89,018 | | Net income | $8,799 | $6,805 | $25,619 | $20,902 | | Diluted earnings per share | $0.64 | $0.48 | $1.86 | $1.45 | - Net income increased by **29.3%** for the three months ended September 30, 2022, and by **22.6%** for the nine months ended September 30, 2022, compared to the prior year periods[21](index=21&type=chunk)[113](index=113&type=chunk) - Diluted EPS increased by **33.3%** for the three months and **28.3%** for the nine months ended September 30, 2022, driven by significant revenue growth in financial fees and net interest income[21](index=21&type=chunk)[113](index=113&type=chunk) [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the unaudited consolidated statements of comprehensive income, focusing on net income and other comprehensive income components Consolidated Statements of Comprehensive Income Highlights (Dollars in Thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $8,799 | $6,805 | $25,619 | $20,902 | | Net unrealized loss on securities available-for-sale | $(26,127) | $(4,438) | $(87,159) | $(7,086) | | Foreign currency translation adjustments | $(195) | $(168) | $(405) | $(145) | | Total comprehensive (loss) income | $(11,315) | $3,257 | $(41,213) | $15,324 | - Total comprehensive income shifted from a gain in 2021 to a significant loss in 2022, primarily due to a substantial increase in net unrealized losses on available-for-sale securities[24](index=24&type=chunk) - Net unrealized loss on securities available-for-sale increased significantly to **$(87,159) thousand** for the nine months ended September 30, 2022, compared to $(7,086) thousand in the prior year, reflecting rising interest rates[24](index=24&type=chunk)[170](index=170&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the unaudited consolidated statements of cash flows, detailing cash from operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (Dollars in Thousands) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $40,799 | $30,680 | | Net cash used in investing activities | $(249,861) | $(276,033) | | Net cash provided by financing activities | $41,128 | $75,134 | | Net decrease in cash and cash equivalents | $(167,934) | $(170,219) | | Cash and cash equivalents at end of period | $346,994 | $500,309 | - Net cash provided by operating activities increased by **$10.1 million** for the nine months ended September 30, 2022, compared to the prior year[29](index=29&type=chunk)[177](index=177&type=chunk) - The decrease in cash and cash equivalents was primarily due to growth in loans and investment securities, which utilized cash to fund such growth[29](index=29&type=chunk)[163](index=163&type=chunk) [Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) This section presents the unaudited consolidated statements of shareholders' equity, detailing changes from net income, dividends, and other comprehensive loss Shareholders' Equity Changes (Nine Months Ended September 30, 2022, Dollars in Thousands) | Item | Amount | | :------------------------------------ | :--------- | | Balance, December 31, 2021 | $245,798 | | Net income | $25,619 | | Cash dividends ($.84 per share) | $(11,478) | | Stock-based compensation expense | $4,479 | | Purchase of common shares for treasury | $(5,299) | | Other comprehensive loss | $(66,832) | | Balance, September 30, 2022 | $191,735 | - Total shareholders' equity decreased by **$54.1 million (22.0%)** from December 31, 2021, to September 30, 2022[36](index=36&type=chunk)[170](index=170&type=chunk) - The decrease was primarily driven by a **$66.8 million** accumulated other comprehensive loss due to rising interest rates impacting the fair value of investment securities[36](index=36&type=chunk)[170](index=170&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the basis of presentation, significant accounting policies, and specific financial instrument details [Note 1 - Basis of Presentation](index=10&type=section&id=Note%201%20-%20Basis%20of%20Presentation) These unaudited financial statements adhere to U.S. GAAP for interim reporting, with management confirming all necessary adjustments for fair presentation - Financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q/Rule 10-01 of Regulation S-X[39](index=39&type=chunk) - Prior-period financial statements were reclassified to conform to current presentation, with no effect on previously reported net income or shareholders' equity[39](index=39&type=chunk) [Note 2 – Intangible Assets](index=10&type=section&id=Note%202%20%E2%80%93%20Intangible%20Assets) This note details the Company's intangible assets, including the June 2022 Touchpoint acquisition, which added $5.3 million in goodwill, customer lists, and software - In June 2022, the Company acquired Touchpoint assets for **$4.9 million cash** plus potential contingent consideration up to $2.5 million, adding **$5.289 million** in intangible assets[41](index=41&type=chunk)[42](index=42&type=chunk) Intangible Assets (In thousands) | Asset Type | Sep 30, 2022 Gross Carrying Amount | Dec 31, 2021 Gross Carrying Amount | | :--------------- | :--------------------------------- | :--------------------------------- | | Customer lists | $6,470 | $4,778 | | Software | $3,212 | $2,844 | | Trade name | $373 | $190 | | Goodwill | $17,309 | $14,262 | | Total | $27,936 | $22,646 | - Estimated annual amortization of intangibles is projected to be **$680,000** in 2022, **$780,000** in 2023, **$738,000** in 2024, **$730,000** in 2025, and **$582,000** in 2026[46](index=46&type=chunk) [Note 3 – Earnings Per Share](index=11&type=section&id=Note%203%20%E2%80%93%20Earnings%20Per%20Share) This note details the calculation of basic and diluted earnings per share, showing increases for the three and nine months ended September 30, 2022 Earnings Per Share (EPS) (Per Share Data) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic EPS | $0.65 | $0.48 | $1.89 | $1.47 | | Diluted EPS | $0.64 | $0.48 | $1.86 | $1.45 | - Diluted EPS increased by **33.3%** (from $0.48 to $0.64) for the three months and **28.3%** (from $1.45 to $1.86) for the nine months ended September 30, 2022[48](index=48&type=chunk)[113](index=113&type=chunk) [Note 4 – Stock Repurchases](index=11&type=section&id=Note%204%20%E2%80%93%20Stock%20Repurchases) This note details the Company's treasury stock buyback program, authorized for 750,000 shares, with 340,707 shares remaining available as of September 30, 2022 - Board of Directors authorized repurchase of up to **750,000 shares** in October 2021[48](index=48&type=chunk) - As of September 30, 2022, **340,707 shares** remained available for repurchase[48](index=48&type=chunk) Stock Repurchases | Period | Shares Repurchased | | :------------------------------------ | :----------------- | | Three months ended Sep 30, 2022 | 0 | | Three months ended Sep 30, 2021 | 314,672 | | Nine months ended Sep 30, 2022 | 130,374 | | Nine months ended Sep 30, 2021 | 434,938 | [Note 5 – Industry Segment Information](index=11&type=section&id=Note%205%20%E2%80%93%20Industry%20Segment%20Information) The Company operates in two segments: Information Services (invoice processing, church management) and Banking Services (banking for businesses and ministries) - The Company has two reportable segments: **Information Services** and **Banking Services**, managed separately due to distinct service and processing requirements[49](index=49&type=chunk) - Information Services provides transportation, energy, telecom, and environmental invoice processing, plus church management services[50](index=50&type=chunk) - Banking Services provides banking services primarily to privately held businesses, restaurant franchises, and faith-based ministries, and supports the Information Services segment[50](index=50&type=chunk) Segment Performance (Tax-equivalized pre-tax income, In thousands) | Segment | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Information Services | $5,605 | $6,509 | $20,259 | $18,477 | | Banking Services | $4,126 | $2,130 | $10,418 | $8,773 | | Corporate, Eliminations and Other | $1,565 | $(193) | $2,359 | $(654) | | Total | $11,296 | $8,446 | $33,036 | $26,596 | [Note 6 – Loans by Type](index=14&type=section&id=Note%206%20%E2%80%93%20Loans%20by%20Type) This note summarizes the Company's loan portfolio, which increased to $1.037 billion, with commercial and industrial loans showing significant growth Loans by Type (In thousands) | Loan Type | Sep 30, 2022 | Dec 31, 2021 | | :------------------------ | :----------- | :----------- | | Commercial and industrial | $539,272 | $450,336 | | Real estate: Commercial | $124,372 | $133,556 | | Real estate: Faith-based | $373,437 | $370,246 | | PPP | $0 | $6,299 | | Total loans | $1,037,101 | $960,567 | - Total loans increased by **$76.5 million (8.0%)** from December 31, 2021, to September 30, 2022, with significant growth in commercial and industrial loans[59](index=59&type=chunk)[165](index=165&type=chunk) - The Allowance for Credit Losses (ACL) increased to **$13.049 million** at September 30, 2022, from $12.041 million at December 31, 2021, primarily due to loan growth and external economic factors[64](index=64&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - No nonperforming loans were outstanding at September 30, 2022, or December 31, 2021[152](index=152&type=chunk) [Note 7 – Commitments and Contingencies](index=16&type=section&id=Note%207%20%E2%80%93%20Commitments%20and%20Contingencies) This note details off-balance sheet credit instruments and commitments, with an allowance for unfunded commitments recorded at $222,000 as of September 30, 2022 - Off-balance sheet activities include commitments to extend credit, commercial letters of credit, and standby letters of credit[65](index=65&type=chunk)[66](index=66&type=chunk) Unfunded Commitments and Letters of Credit (In thousands) | Instrument Type | Sep 30, 2022 | | :------------------------------ | :----------- | | Unfunded commitments | $207,883 | | Standby letters of credit | $13,450 | | Commercial letters of credit | $1,633 | | Allowance for unfunded commitments | $222 | [Note 8 – Stock-Based Compensation](index=16&type=section&id=Note%208%20%E2%80%93%20Stock-Based%20Compensation) This note details the Omnibus Plan for stock awards, with stock-based compensation expense increasing due to grants of restricted and performance-based shares - The Omnibus Plan permits issuance of up to **1,500,000 shares** for various stock-based awards[67](index=67&type=chunk) Stock-Based Compensation Expense (In thousands) | Period | Amount | | :------------------------------------ | :----------- | | Three months ended Sep 30, 2022 | $1,307 | | Three months ended Sep 30, 2021 | $1,066 | | Nine months ended Sep 30, 2022 | $4,479 | | Nine months ended Sep 30, 2021 | $2,585 | - During the nine months ended September 30, 2022, **62,375 restricted shares** and **57,542 performance-based restricted shares** were granted[67](index=67&type=chunk) - As of September 30, 2022, total unrecognized compensation expense for non-vested restricted shares was **$2.239 million**, expected to be recognized over approximately **0.74 years**[70](index=70&type=chunk) [Note 9 – Defined Pension Plans](index=18&type=section&id=Note%209%20%E2%80%93%20Defined%20Pension%20Plans) This note details the Company's noncontributory defined-benefit pension plan, frozen in February 2021, and an unfunded supplemental executive retirement plan - The defined-benefit pension plan was closed to new participants in 2016 and benefits were frozen as of **February 28, 2021**[75](index=75&type=chunk) Net Periodic Pension Benefit (In thousands) | Period | Amount | | :------------------------------------ | :----------- | | Three months ended Sep 30, 2022 | $616 | | Nine months ended Sep 30, 2022 | $1,847 | | Three months ended Sep 30, 2021 | $678 | | Nine months ended Sep 30, 2021 | $1,096 | - The net periodic pension benefit increased during the nine-month period ended September 30, 2022, primarily due to the Plan being frozen[75](index=75&type=chunk) [Note 10 – Income Taxes](index=18&type=section&id=Note%2010%20%E2%80%93%20Income%20Taxes) This note details the effective tax rates for the three and nine months ended September 30, 2022, which increased due to higher taxable income Effective Tax Rates | Period | Effective Tax Rate | | :------------------------------------ | :----------------- | | Three months ended Sep 30, 2022 | 19.2% | | Nine months ended Sep 30, 2022 | 19.3% | | Three months ended Sep 30, 2021 | 14.7% | | Nine months ended Sep 30, 2021 | 17.0% | - The effective tax rate differs from the statutory rate of **21%** primarily due to tax-exempt interest from municipal bonds and bank-owned life insurance[77](index=77&type=chunk) - The increase in the effective tax rate for the nine-month period ended September 30, 2022, is primarily a result of higher taxable income[77](index=77&type=chunk) [Note 11 – Investment in Securities](index=18&type=section&id=Note%2011%20%E2%80%93%20Investment%20in%20Securities) This note details the Company's investment securities, with a fair value of $763.8 million and significant unrealized losses due to rising interest rates Investment Securities Available-for-Sale (In thousands) | Security Type | Sep 30, 2022 Fair Value | Dec 31, 2021 Fair Value | | :-------------------------------------------------------------------------- | :---------------------- | :---------------------- | | State and political subdivisions | $298,446 | $371,128 | | Mortgage-backed securities issued or guaranteed by U.S. government agencies | $178,133 | $168,646 | | Corporate bonds | $83,791 | $84,338 | | U.S. treasury bonds | $155,119 | $0 | | Asset backed securities issued or guaranteed by U.S. government agencies | $48,300 | $49,341 | | Total | $763,789 | $673,453 | - Total investment securities increased by **$90.3 million (13.4%)** during the first nine months of 2022[79](index=79&type=chunk)[164](index=164&type=chunk) - As of September 30, 2022, there were **$78.0 million** in gross unrealized losses, primarily due to changes in market interest rates, affecting 326 securities (**93%** of the portfolio)[79](index=79&type=chunk)[81](index=81&type=chunk) - The Company purchased **$155.1 million** in U.S. treasury bonds with maturities between one and two years during the first nine months of 2022[164](index=164&type=chunk) [Note 12 – Fair Value of Financial Instruments](index=21&type=section&id=Note%2012%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) This note summarizes the carrying amounts and fair values of financial instruments, with most approximating fair value or measured using Level 2 valuations Fair Value of Financial Instruments (In thousands) | Instrument Type | Sep 30, 2022 Carrying Amount | Sep 30, 2022 Fair Value | Dec 31, 2021 Carrying Amount | Dec 31, 2021 Fair Value | | :------------------------ | :--------------------------- | :---------------------- | :--------------------------- | :---------------------- | | Cash and cash equivalents | $346,994 | $346,994 | $514,928 | $514,928 | | Investment securities | $763,789 | $763,789 | $673,453 | $673,453 | | Loans, net | $1,024,052 | $972,338 | $948,526 | $948,701 | | Deposits | $1,229,721 | $1,229,721 | $1,221,503 | $1,221,503 | | Accounts and drafts payable | $1,146,334 | $1,146,334 | $1,050,396 | $1,050,396 | - Fair value of investment securities is measured using **Level 2 valuations**[86](index=86&type=chunk) - Fair value of loans is estimated using **Level 3 valuations**, based on present values of future cash flows discounted at risk-adjusted interest rates[87](index=87&type=chunk) [Note 13 – Revenue from Contracts with Customers](index=21&type=section&id=Note%2013%20%E2%80%93%20Revenue%20from%20Contracts%20with%20Customers) This note details revenue recognition from processing, financial, and bank service fees, all recognized when performance obligations are satisfied - Revenue is recognized as the obligation to the customer is satisfied[92](index=92&type=chunk) - Processing fees are recognized at the point in time or over the course of a month[93](index=93&type=chunk) - Financial fees are recognized at the point in time when payment transactions are made[94](index=94&type=chunk) Fee Revenue and Other Income (In thousands) | Revenue Type | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Processing fees | $18,964 | $18,461 | $57,184 | $55,882 | | Financial fees | $11,252 | $8,624 | $32,406 | $23,122 | | Information services payment and processing revenue | $30,216 | $27,085 | $89,590 | $79,004 | | Bank service fees | $289 | $323 | $1,142 | $991 | | Total fee revenue and other income | $31,784 | $27,577 | $92,865 | $80,739 | [Note 14 – Leases](index=22&type=section&id=Note%2014%20%E2%80%93%20Leases) This note details the Company's operating leases, with liabilities of $9.759 million and right-of-use assets of $9.435 million as of September 30, 2022 Lease Liabilities and Right-of-Use Assets (In thousands) | Metric | Sep 30, 2022 | | :--------------------- | :----------- | | Lease liabilities | $9,759 | | Right-of-use assets | $9,435 | - The weighted-average remaining lease term for operating leases is **8.4 years**, with a weighted-average discount rate of **3.59%**[98](index=98&type=chunk) Operating Lease Costs (In thousands) | Period | Operating Lease Cost | Short-Term Lease Cost | | :------------------------------------ | :------------------- | :-------------------- | | Three months ended Sep 30, 2022 | $386 | $51 | | Nine months ended Sep 30, 2022 | $1,184 | $156 | [Note 15 – Subsequent Events](index=23&type=section&id=Note%2015%20%E2%80%93%20Subsequent%20Events) No subsequent events requiring additional disclosures were identified after September 30, 2022, to prevent misleading financial statements - No subsequent events requiring additional disclosures were identified after September 30, 2022[101](index=101&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=24&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the Company's financial performance, condition, key drivers, and critical accounting policies, highlighting revenue and expense trends [Overview](index=24&type=section&id=Overview) Cass Information Systems provides payment and information processing services, generating revenue from service fees and interest income - Cass provides payment and information processing services for freight, energy, telecom, and environmental invoices, and offers church management and online generosity services[103](index=103&type=chunk) - Compensation is primarily through service fees (per-item or monthly) and interest income from account balances generated during the payment process[104](index=104&type=chunk) - Key metrics followed by management include the number of transactions processed and the dollar volume processed, as well as the general level of interest rates[104](index=104&type=chunk) - Management's major opportunity is the continued expansion of payment and information processing service offerings and customer base, leveraging applied technology and banking controls[106](index=106&type=chunk) [Critical Accounting Policies](index=24&type=section&id=Critical%20Accounting%20Policies) The Company's critical accounting policies involve significant management estimates, particularly for the Allowance for Credit Losses (ACL) - The **Allowance for Credit Losses (ACL)** is a critical accounting policy requiring significant management estimates[110](index=110&type=chunk) - Estimates for ACL are based on established methodologies for determining allowance requirements, but actual results can differ significantly[110](index=110&type=chunk) - These policies affect both the Information Services and Banking Services segments[110](index=110&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) This section details the Company's operating results, highlighting growth in net income, fee revenue, and net interest income, alongside rising expenses [Net Income](index=25&type=section&id=Net%20Income) Net income and diluted EPS significantly increased for the three and nine months ended September 30, 2022, driven by strong revenue growth Key Profitability Metrics | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | % Change | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | % Change | | :--------------------------- | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Net income (in thousands) | $8,799 | $6,805 | 29.3% | $25,619 | $20,902 | 22.6% | | Diluted earnings per share | $0.64 | $0.48 | 33.3% | $1.86 | $1.45 | 28.3% | | Return on average assets | 1.33% | 1.14% | - | 1.32% | 1.23% | - | | Return on average equity | 16.84% | 10.61% | - | 15.80% | 10.84% | - | - Profitability metrics were up, driven by significant revenue growth in financial fees and net interest income, partially offset by increased operating expenses[113](index=113&type=chunk) [Fee Revenue and Other Income](index=25&type=section&id=Fee%20Revenue%20and%20Other%20Income) Fee revenue, especially financial fees, increased significantly due to higher transaction volumes and dollar volumes influenced by inflation and energy costs Fee Revenue and Volume Metrics (In thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | % Change | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | % Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Transportation invoice volume | 9,385 | 9,333 | 0.6% | 27,633 | 27,581 | 0.2% | | Transportation invoice dollar volume | $11,549,980 | $9,540,408 | 21.1% | $33,818,573 | $26,385,936 | 28.2% | | Facility-related transaction volume | 3,315 | 3,104 | 6.8% | 9,794 | 9,351 | 4.7% | | Facility-related dollar volume | $5,485,783 | $4,215,044 | 30.1% | $14,699,903 | $11,590,437 | 26.8% | | Average payments in advance of funding | $277,683 | $213,922 | 29.8% | $283,431 | $196,492 | 44.2% | | Processing fees | $18,964 | $18,461 | 2.7% | $57,184 | $55,882 | 2.3% | | Financial fees | $11,252 | $8,624 | 30.5% | $32,406 | $23,122 | 40.2% | - Financial fee revenue increased by **30.5%** for the three months and **40.2%** for the nine months ended September 30, 2022, driven by increases in transportation and facility-related dollar volumes[117](index=117&type=chunk)[119](index=119&type=chunk) - Increased dollar volumes contributed to a **29.8%** (three months) and **44.2%** (nine months) increase in average payments in advance of funding, a key driver of financial fee revenue[117](index=117&type=chunk)[119](index=119&type=chunk) [Net Interest Income](index=27&type=section&id=Net%20Interest%20Income) Net interest income increased substantially due to higher average interest-earning assets and an improved net interest margin from rising short-term interest rates Net Interest Income and Related Factors (Tax-equivalent, In thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | % Change | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | % Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Average earnings assets | $2,243,219 | $2,036,296 | 10.2% | $2,196,704 | $1,965,976 | 11.7% | | Average interest-bearing liabilities | $597,469 | $600,263 | (0.5)% | $598,812 | $583,478 | 2.6% | | Net interest income* | $16,383 | $11,900 | 37.7% | $42,809 | $34,005 | 25.9% | | Net interest margin* | 2.90% | 2.32% | - | 2.61% | 2.31% | - | | Yield on earning assets* | 3.04% | 2.37% | - | 2.69% | 2.37% | - | | Rate on interest-bearing liabilities | 0.52% | 0.19% | - | 0.30% | 0.21% | - | - Tax-equivalent net interest income increased by **37.7%** for the three months and **25.9%** for the nine months ended September 30, 2022, driven by increased average interest-earning assets and a higher net interest margin[130](index=130&type=chunk)[138](index=138&type=chunk) - The net interest margin increased due to rising short-term interest rates, which positively impact the Company given its larger interest-earning assets compared to interest-bearing liabilities[130](index=130&type=chunk)[138](index=138&type=chunk) - Average investment securities increased by **59.9%** (three months) and **70.0%** (nine months), while average loans increased by **12.7%** (three months) and **9.9%** (nine months)[125](index=125&type=chunk)[126](index=126&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) [Provision and Allowance for Credit Losses and Allowance for Unfunded Commitments](index=32&type=section&id=Provision%20and%20Allowance%20for%20Credit%20Losses%20and%20Allowance%20for%20Unfunded%20Commitments) The Company recorded a provision for credit losses of $550,000 for Q3 2022, driven by loan growth and economic factors, increasing ACL to $13.049 million Provision for Credit Losses (In thousands) | Period | Provision for Credit Losses | | :------------------------------------ | :-------------------------- | | Three months ended Sep 30, 2022 | $550 | | Three months ended Sep 30, 2021 | $340 | | Nine months ended Sep 30, 2022 | $850 | | Nine months ended Sep 30, 2021 | $(870) (release) | - The provision for credit losses in 2022 was driven by loan growth and external economic factors, including a reduction in the forecast of Gross Domestic Product[151](index=151&type=chunk) Allowance for Credit Losses (ACL) (In thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :------------------------------------ | :----------- | :----------- | | ACL at end of period | $13,049 | $12,041 | | ACL as % of outstanding loans | 1.26% | 1.25% | | Allowance for unfunded commitments | $222 | $367 | - No nonperforming loans were outstanding at September 30, 2022, or December 31, 2021[152](index=152&type=chunk) [Operating Expenses](index=33&type=section&id=Operating%20Expenses) Total operating expenses increased due to higher personnel costs from merit increases, wage pressures, increased FTEs, and strategic technology investments Operating Expenses (In thousands) | Expense Category | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Personnel | $26,999 | $23,283 | $77,750 | $68,689 | | Other operating expense | $6,524 | $4,539 | $15,748 | $11,798 | | Total operating expense | $36,321 | $30,690 | $101,788 | $89,018 | - Personnel costs increased by **16.0%** (three months) and **13.2%** (nine months) due to merit increases, wage pressures, increased FTEs (**7.5%** for three months, **3.8%** for nine months), and strategic technology investments[158](index=158&type=chunk)[160](index=160&type=chunk) - Other operating expenses increased by **43.7%** (three months) and **33.5%** (nine months) due to higher travel, employee procurement, data processing, and professional fees, including investments in technology platforms[159](index=159&type=chunk)[161](index=161&type=chunk) [Financial Condition](index=33&type=section&id=Financial%20Condition) Total assets increased to $2.611 billion, liabilities rose to $2.419 billion, and shareholders' equity decreased to $191.7 million due to unrealized losses - Total assets increased by **$55.9 million (2.2%)** to **$2.611 billion** at September 30, 2022, from December 31, 2021[162](index=162&type=chunk) - Cash and cash equivalents decreased by **$167.9 million (32.6%)**, primarily due to funding growth in loans and investment securities[163](index=163&type=chunk) - The investment securities portfolio increased by **$90.3 million (13.4%)**, including **$155.1 million** in U.S. treasury bonds[164](index=164&type=chunk) - Loans increased by **$76.5 million (8.0%)**, driven by growth in commercial and industrial loans[165](index=165&type=chunk) - Total liabilities increased by **$109.9 million (4.8%)** to **$2.419 billion**, with accounts and drafts payable increasing by **$95.9 million (9.1%)**[168](index=168&type=chunk)[169](index=169&type=chunk) - Total shareholders' equity decreased by **$54.1 million (22.0%)**, mainly due to a **$66.8 million** accumulated other comprehensive loss from unrealized losses on investment securities[170](index=170&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) The Company manages liquidity through liquid assets and borrowing lines, exceeding regulatory capital requirements despite decreasing capital ratios - Primary liquidity is provided by short-term liquid assets (cash and cash equivalents), maturing securities, and external funding sources[171](index=171&type=chunk)[172](index=172&type=chunk) - Cash and cash equivalents totaled **$346.994 million** at September 30, 2022, a decrease of **32.6%** from December 31, 2021[172](index=172&type=chunk) - Secondary liquidity sources include the investment portfolio (**$763.789 million** at Sep 30, 2022) and borrowing lines (unsecured lines of **$83 million**, secured lines of **$228.858 million** with FHLB, and **$150 million** from two banks)[173](index=173&type=chunk)[174](index=174&type=chunk) - Net cash flows from operating activities increased by **$10.1 million** to **$40.799 million** for the nine months ended September 30, 2022[177](index=177&type=chunk) - The Company and the Bank continue to exceed all regulatory capital requirements under **Basel III Capital Rules**[183](index=183&type=chunk)[191](index=191&type=chunk) Regulatory Capital Ratios | Metric | Sep 30, 2022 Ratio | Dec 31, 2021 Ratio | | :------------------------------------ | :----------------- | :----------------- | | Cass Information Systems, Inc. Total Capital | 14.07% | 14.86% | | Cass Commercial Bank Total Capital | 16.08% | 17.21% | | Cass Information Systems, Inc. Common Equity Tier I Capital | 13.33% | 14.11% | | Cass Commercial Bank Common Equity Tier I Capital | 14.96% | 16.07% | | Cass Information Systems, Inc. Tier I Capital (to leverage assets) | 9.08% | 9.21% | | Cass Commercial Bank Tier I Capital (to leverage assets) | 10.44% | 11.05% | [Inflation](index=36&type=section&id=Inflation) The Company's monetary position is net positive; inflation impacts expenses like compensation and influences fee income and accounts payable - The Company holds a **net positive monetary position** (monetary assets exceed monetary liabilities)[192](index=192&type=chunk) - Inflation affects expenses like employee compensation, which may not be readily recoverable in service prices[193](index=193&type=chunk) - Higher levels of interest rates generally allow the Company to earn more net interest income due to its funding structure[179](index=179&type=chunk) - Overall economic activity and energy costs significantly impact fee income and accounts and drafts payable balances[180](index=180&type=chunk)[181](index=181&type=chunk) [Impact of New and Not Yet Adopted Accounting Pronouncements](index=37&type=section&id=Impact%20of%20New%20and%20Not%20Yet%20Adopted%20Accounting%20Pronouncements) No new accounting pronouncements are applicable or materially impact the Company's financial statements - No new accounting pronouncements are applicable or materially impact the Company[194](index=194&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=37&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The Company manages interest rate risk using gap analysis and a simulation model, showing decreased projected net interest income in rising rate scenarios - The Company manages interest rate risk using **gap analysis** and a **simulation model**[195](index=195&type=chunk) Simulated Changes in Net Interest Income (Next 12 Months) | Interest Rate Change | Sep 30, 2022 | Dec 31, 2021 | | :------------------- | :----------- | :----------- | | +200 basis points | 13.1% | 20.6% | | +100 basis points | 5.5% | 10.2% | | Flat rates | —% | —% | | -100 basis points | (2.5)% | (2.5)% | | -200 basis points | (11.9)% | N/M | - The decrease in projected net interest income in a rising interest rate environment from 2021 to 2022 is primarily due to the purchase of **$155.119 million** in U.S. treasury bonds[197](index=197&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=37&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded the Company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal control - Disclosure controls and procedures were evaluated and concluded to be **effective** as of September 30, 2022[198](index=198&type=chunk) - No material changes in internal control over financial reporting were identified during the Third Quarter of 2022[199](index=199&type=chunk) [PART II. OTHER INFORMATION](index=38&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers other information including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=38&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The Company is involved in various legal actions, but management believes their outcome will not materially affect business or financial conditions - The Company is involved in various pending or threatened legal actions and proceedings[202](index=202&type=chunk) - Management believes the outcome of these proceedings will not materially affect the Company's businesses or financial conditions[202](index=202&type=chunk) [ITEM 1A. RISK FACTORS](index=38&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to the risk factors previously disclosed in the Company's 2021 Annual Report on Form 10-K were identified - No material changes to the Risk Factors as disclosed in the Company's 2021 Annual Report on Form 10-K[203](index=203&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=38&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) There were no unregistered sales of equity securities or use of proceeds to report for the period - None[204](index=204&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=38&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) There were no defaults upon senior securities to report for the period - None[205](index=205&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=38&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Mine safety disclosures are not applicable to the Company - Not applicable[206](index=206&type=chunk) [ITEM 5. OTHER INFORMATION](index=38&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No other material information or changes to procedures for recommending Board of Directors nominees were reported in Q3 2022 - No material changes to procedures for security holders to recommend nominees to the Board of Directors in Q3 2022[207](index=207&type=chunk) [ITEM 6. EXHIBITS](index=38&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including Sarbanes-Oxley Act certifications and XBRL documents - Includes Certifications Pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002[208](index=208&type=chunk)[209](index=209&type=chunk) - Includes various Inline XBRL Taxonomy Extension documents (Schema, Calculation, Label, Presentation, Definition Linkbase Documents) and the Cover Page Interactive Data File[209](index=209&type=chunk) [SIGNATURES](index=39&type=section&id=SIGNATURES) This section confirms the report's due signing on November 7, 2022, by the Chairman/CEO and EVP/CFO [Signatures](index=39&type=section&id=Signatures) The report was duly signed on November 7, 2022, by the Chairman and CEO, and the Executive Vice President and CFO - The report was signed on **November 7, 2022**[214](index=214&type=chunk) - Signed by **Eric H. Brunngraber**, Chairman and Chief Executive Officer (Principal Executive Officer)[214](index=214&type=chunk) - Signed by **Michael J. Normile**, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)[214](index=214&type=chunk)

Table of Contents ____________________ ____________________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ___________________________ FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File No. 000-20827 CASS INFORMATION SYSTEMS, INC ...