| (Mark One) | ||||||||
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES | ||||||||
EXCHANGE ACT OF 1934 | ||||||||
For the fiscal year ended December 31, | ||||||||
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | |||||||
SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the transition period from _______ to _______ | ||||||||
| CASS INFORMATION SYSTEMS, INC. | ||||||||||||||
| (Exact name of registrant as specified in its charter) | ||||||||||||||
| Missouri | 43-1265338 | |||||||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| 12444 Powerscourt Drive, Suite 550, St. Louis, Missouri 63131 | (314) 506-5500 | |||||||||||||
| (Address of principal executive offices) (Zip Code) | (Telephone Number, incl. area code) | |||||||||||||
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||
| Title of each | Trading Symbol | Name of each exchange on which registered | ||||||||||||
| Common Stock, par value | CASS | The Nasdaq Global Select Market | ||||||||||||
| Securities registered pursuant to Section 12(g) of the Act: | ||||||||||||||
| Title of each Class | ||||||||||||||
| None | ||||||||||||||
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer: ☒☐ Accelerated filer: ☐x Non-accelerated filer: ☐ Smaller reporting company: ☐ Emerging growth company: ☐
The aggregate market value of the common stock held by non-affiliates of the Registrant was approximately $708,000,000$515.5 million based on the closing price of the common stock of $59.67$38.78 on June 30, 2017,2023, as reported by The Nasdaq Global Select Market. As of February 19, 2018,15, 2024, the Registrant had 12,286,62813,649,223 shares outstanding of common stock.
faith-based ministries within the United States. the largest providers of waste invoice management solutions and competes against small expense management companies along with large national account programs of major haulers. The Company's TouchPoint division offers a church management software solution and an on-line platform to provide generosity services for faith-based and non-profit organizations, which is a complementary service offering to the Bank’s faith-based customers. Also, the Company, through its CassPay operation, competes with providers of corporate payment solutions. customers for a significant portion of its business. and Human Capital Resources In order for a financial holding company to commence any new activity permitted by the BHC Act or to acquire a company engaged in any new activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent examination under the Community Reinvestment Act. See “Community Reinvestment Act” below. liquidity requirements and other enhanced prudential standards. The final rules assign all domestic bank holding companies with $100 billion or more in total consolidated assets to one of four categories of tailored regulatory requirements. The Company and the Bank are generally not impacted by these rules. The enhanced prudential standards rules, as amended in 2019, require publicly traded bank holding companies with $50 billion or more in total consolidated assets to establish risk committees. Prior to the amendment, the requirement to establish a risk committee was applicable to publicly traded companies with $10 billion or more in consolidated assets. above the minimum but below the conservation buffer will face limitations on the payment of dividends, common stock repurchases and discretionary cash payments to executive officers based on the amount of the shortfall. deductions from and adjustments to common equity Tier 1 capital. These include, for example, the requirement that certain deferred tax assets and significant investments in non-consolidated financial entities be deducted from Tier 1 capital to the extent that any one such category exceeds 25% of common equity Tier 1 capital. Prompt Corrective Action– The Basel III Capital Rules incorporate new requirements into the prompt correction action framework, described above. The Federal Deposit Insurance Act (“FDIA”) requires that federal banking agencies take “prompt corrective action” against depository institutions that do not meet minimum capital requirements and includes the following five capital tiers: “well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare with various relevant capital measures and certain other factors, as established by regulation. Community Reinvestment Act– The Community Reinvestment Act of 1977 (“CRA”) requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities. Depository institutions are periodically examined for compliance with the CRA and are assigned ratings that must be publicly disclosed. In order for a financial holding The reference to the Company’s website address does not constitute incorporation by reference of the information contained on the website and should not be considered part of this report. our goodwill and other intangible assets may decline in the future control, may require an increase in the allowances for credit losses on loans, securities and off-balance sheet credit exposures. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. The substance and impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although any change could impact the regulatory structure under which the Company or its competitors operate and may significantly increase costs, impede the efficiency of internal business processes, require an increase in regulatory capital, require modifications to the Company’s business strategy, and/or limit its ability to pursue business opportunities in an efficient manner. A change in statutes, regulations or regulatory policies applicable to the Company or any of its subsidiaries could have a material, adverse effect on the Company’s business, financial condition and results of operations. From time to time, the regulatory agencies, the Financial Accounting Standards Board (“FASB”), and other authoritative bodies change the financial accounting and reporting standards that govern the preparation of the Company’s financial statements. These changes can be hard to predict and can materially impact how management records and reports the Company’s financial condition and results of operations. this document. its multi-national customer base. 13.8% from the prior year, respectively. financial fees. The the banking system. The Company also incurred a shift from non-interest bearing to interest-bearing deposits driven by the customer base. The average rate paid on interest-bearing deposits increased 225 basis points to 2.83% in 2023 due to the increase in short-term interest rates. Loans by Maturity on Loans and Allowance for Unfunded Commitments full during January 2023. volume, and individual loans. For loans that are individually 2022. 2022. There were no foreclosed assets at December 31, 2022. The single nonperforming loan at December 31, 2022 paid off in full during January 2023. accounting impact of the decline in plan assets during 2022 and corresponding decline in expected return on plan assets for 2023. totaling $15.3 million. Total investments Total investments current customers. Average accounts and drafts payable decreased $60.1 million, or 5.3%, to $1.08 billion during 2023. The decrease in average accounts and drafts payable was primarily driven by the decrease in transportation dollar volumes due to the ongoing freight recession. 2023 As of December 31, credit. 2022, respectively. $5.8 million. Credit Losses and Unfunded Commitments.” Total For rates, like the Company experienced in 2023. Loans: Taxable Tax-exempt Securities(1): Tax-exempt U.S. government agencies Certificates of deposit Investments in the FHLB and FRB Federal funds sold and other short-term investments Money market accounts Now accounts Savings deposits Time deposits: $250K and more Less than $250K Federal funds purchased and other short-term borrowing Periodic Cumulative Ratio of interest-bearing assets to interest-bearing liabilities: Periodic Cumulative Cash and cash equivalents Less allowance for loan losses Loans, net Total assets Noninterest-bearing Interest-bearing Total deposits Total liabilities Preferred stock, par value $.50 per share; 2,000,000 shares authorized and no shares issued Common stock, par value $.50 per share; 40,000,000 shares authorized, 13,047,858 and 11,931,147 shares issued at December 31, 2017 and 2016, respectively Common shares in treasury, at cost (760,962 and 742,681 shares at December 31, 2017 and 2016, respectively) Total shareholders’ equity Total liabilities and shareholders’ equity Total fee revenue and other income Taxable Exempt from federal income taxes Interest on federal funds sold and other short-term investments Total interest income Total interest expense Net interest income Net interest income after provision for loan losses Total net revenue Total operating expense Income before income tax expense Net income Net unrealized gain (loss) on securities available-for-sale Tax effect Reclassification adjustments for gains included in net income Tax effect FASB ASC 715 adjustment Tax effect Foreign currency translation adjustments Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Net gains on sales of securities Stock-based compensation expense Provisions for loan losses Deferred income tax expense (benefit) (Decrease) increase in current income tax liability Increase in pension liability Increase in accounts receivable Other operating activities, net Net cash provided by operating activities Net cash used in investing activities Net (decrease) increase in interest-bearing demand and savings deposits Net cash provided by (used in) financing activities Cash paid for interest Cash paid for income taxes LoansInterest on loans is recognized based upon the principal amounts outstanding. It is the Company’s policy to discontinue the accrual of interest when there is reasonable doubt as to the collectability of principal or interest. Subsequent payments received on such loans are applied to principal if there is any doubt as to the collectability of such principal; otherwise, these receipts are recorded as interest income. The accrual of interest on a loan is resumed when the loan is current as to payment of both principal and interest and/or the borrower demonstrates the ability to pay and remain current. Loan origination and commitment fees on originated loans, net of certain direct loan origination costs, are deferred and amortized to interest income using the level-yield method over the estimated lives of the related loans. The Company and its subsidiaries file U.S. federal and certain state income tax returns on a consolidated basis. In addition, certain state jurisdictions are filed on a separate company basis by the Company or its subsidiaries. statements. In statements. Company's financial statements. Directors. 2022. cost basis, which may be the maturity dates of the securities. Therefore, the unrealized losses are recorded in accumulated other comprehensive loss. Of these securities, 210, or 75.5%, were in an unrealized loss position for greater than 12 months at December 31, 2023. At December 31, 2023 and December 31, 2022, the Company had not recorded an allowance for credit losses on securities. 2023. 2023, 2022, and 2021 were $360,000, $0 and $4,000, respectively. A summary of loan categories is as follows: 2023: Loans subject to special monitoring possess some credit deficiency or potential weakness which requires a (2) Loans subject to special monitoring possess some credit deficiency or potential weakness which requires a A summary of the activity in the Plan’s projected benefit obligation, assets, funded status and amounts recognized in the Company’s consolidated balance sheets is as follows: first seven years of service. service. 2021. Expected future benefits payable by the Company over the next ten years are as follows: is $0. Restricted Stock 2023 achieved weighted average financial goals of 86.7% of target, resulting in the issuance of 26,499 shares of common stock. The PBRS that vested during the year ended December 31, 2022 achieved weighted average financial goals of 52.9% of target, resulting in the issuance of 18,021 $192,000. Contents asset is realizable. 2022. information related to CECL. revenue from contracts with clients. the Information Services segment. Other. 2023. 2023. *Management contract or compensatory plan arrangement20182024 Annual Meeting of Shareholders.is a leading provider ofprovides payment and information processing services to large manufacturing, distribution and retail enterprises across the United States. The Company provides transportationCompany’s services include freight invoice rating, payment processing, auditing, and the generation of accounting and transportation information to many of the nation’s largest companies. It isinformation. Cass also a processorprocesses and payer of energypays facility-related invoices, includingwhich include electricity and gas as well as waste and other facility related expenses. Additionally, Cass competes in the telecommunications expenses, and is a provider of telecom expense management market which includes bill processing, auditsolutions. Cass solutions include integrated payments, a B2B payment platform for clients that require an agile fintech partner. Additionally, the Company offers a church management software solution and paymentan on-line platform to provide generosity services for telephone, data line, wirelessfaith-based and communication equipment expense.non-profit organizations. The Company, through its wholly ownedCompany’s bank subsidiary, Cass Commercial Bank (the “Bank”), also provides commercial banking services. The Bank’s primary focus is to supportsupports the Company’s payment operations and provideoperations. The Bank also provides banking services to its target markets, which include privately-ownedprivately held businesses in the St. Louis metropolitan area and churchesrestaurant franchises and church-related ministries. Services include commercial and commercial real estate loans, checking, savings and time deposit accounts and other cash management services.Internetinternet or directly into customer internal systems. Cass’ proprietary Internetinternet management delivery system is the foundation for driving these critical functions. Transaction, operational, control, status and processing exception information are all delivered through this system creating an efficient, accessible and highly reliable asset for Cass customers.energy and wasteutility bills and provide management reporting. Available data indicates that the Company is one of the largest providers ofenergy utility information processing and payment services. Cass is unique among these competitors in that it is not exclusively affiliated with any one energy service provider (“ESP”). TheVarious ESPs market the Company’s services, adding value with their unique auditing, consulting and technological capabilities. Many of Cass’ services are customized for the ESPs, providing a full-featured solution without any development costs to the ESP. Also theThe Company, through its Telecom Information Services business unit, is a leader in the growing telecom expense management market and competes with other companies located throughout the United States in this market.Table The Company, through its Waste Expense Management business, is one of Contentsiswas originally classified as a bank holding corporation due to its ownership of a federally-insured commercial bank and was originally organized in 1982 as Cass Commercial Corporation under the laws of Missouri. Approval by the Board of Governors of the Federal Reserve System was received in February 1983. The Company changed its name to Cass Information Systems, Inc. in January 2001. In December 2011, the Federal Reserve Bank (“FRB”) of St. Louis approved the election of Cass Information Systems, Inc. to become a financial holding company. As a financial holding company, Cass may engage in activities that are financial in nature or incidental to a financial activity. The Bank encounters competition from numerous banks and financial institutions located throughout the St. Louis, Missouri metropolitan area and other areas in which the Bank competes. The Bank’s principal competitors, however, are large bank holding companies that are able to offer a wide range of banking and related services through extensive branch networks. The Bank targets its services to privately held businesses, located in the St. Louis, Missouri arearestaurant franchises, and church and church-related institutionsfaith-based ministries located in St. Louis, Missouri Orange County, California, Colorado Springs, Colorado, and other selected cities located throughout the United States.its subsidiaries are not dependent on any one customersystems for a significant portion of their businesses. managing employee-liable expenses and methods and systems for communicating expense management information.with no individual client exceeding 10%and are not dependent on any one customer or group of total revenue.8401,061 full-time and 276255 part-time employees as of February 19, 2018.15, 2024. Of these employees, the Bank had 5066 full-time and oneno part-time employees.scope and impact of many of the Dodd-Frank Act’s provisions will be determined over time as regulations are issued and become effective. As a result, the Company cannot predict the ultimate impact of the Dodd-Frank Act on the Company orand the Bank at this time, includinghas been substantial.extent to which it could increase costs or restrict the ability to pursue business opportunities, or otherwise adversely affect the Company’s business, financial condition and results of operations. However, at a minimum, the Company expects that the regulations enacted under theFinancial Stability Oversight Council. The Dodd-Frank Act will increase operatingmandates that certain regulatory requirements applicable to these systemically important financial institutions be more stringent than those applicable to other financial institutions. In 2019, the FRB adopted new rules impacting certain capital and compliance costs. (“FDICIA”), a depository institution, such as the Bank, may not pay dividends if payment would cause it to become undercapitalized or if it is already undercapitalized. The payment of dividends by the Company and the Bank may also be affected or limited by other factors, such as the requirement to maintain adequate capital and, under certain circumstances, the ability of federal regulators to prohibit dividend payments as an unsound or unsafe practice.Effective July 2, 2013, the FRB approved final rules known as the “Basel III Capital Rules” that substantially revised the risk-based capital and leverage capital requirements applicable to bank holding companies and depository institutions, including the Company and the Bank. The Basel III Capital Rules implement aspects of the Basel III capital framework agreed upon by the Basel Committee and incorporate changes required by the Dodd-Frank Act. The Basel III Capital Rules came into effect for the Company and the Bank on January 1, 2015 (subject to a phase-in period).FDIC insured depository institutionsthe Company and the Bank to meet and maintain severalthe following:capital standards: aratio of common equity Tier 1 capital to risk-basedrisk-weighted assets of at least 4.5%, plus a 2.5% capital conservation buffer (resulting in a minimum common equity Tier 1 capital ratio of 4.5%, 7.0%);risk-basedrisk-weighted assets of at least 6.0%, plus a 2.5% capital conservation buffer (resulting in a minimum Tier 1 capital ratio of 6.0%, 8.5%);risk-basedrisk-weighted assets of at least 8.0%, andplus the 2.5% capital conservation buffer (resulting in a minimum total capital ratio of 10.5%); andtotaladjusted average consolidated assets.leverage ratio.loancredit losses limited to a maximum of 1.25% of risk-weighted assets and, for non-advanced approaches institutions like Cass that have exercised a one-time opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.In addition to establishing the minimum regulatory capital requirements, the Basel III Capital Rules limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement is being phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increasing by that amount each subsequent January 1 until fully implemented at 2.5% on January 1, 2019.2017,2023, the Company and the Bank met all capital adequacy requirements under the Basel III Capital Rules.In September 2017, the federal bank regulators proposed to revise and simplify the capital treatment for certain deferred tax assets, mortgage servicing assets, investments in non-consolidated financial entities and minority interests for banking organizations, such as Cass, that are not subject to the advanced approaches capital framework that applies to large, internationally active banking organizations with at least $250 billion in total consolidated assets or at least $10 billion in total on-balance sheet foreign exposure. In November 2017, the federal banking regulators revised the Basel III Capital Rules to extend the current transitional treatment of these items for non-advanced approaches banking organizations until the September 2017 proposal is finalized. The September 2017 proposal would also change the capital treatment of certain commercial real estate loans under the standardized approach, which the Company uses to calculate its capital ratios.will generally be effectivewent into effect on January 1, 2022,2023, with an aggregate output floor phasing in through January 1, 2027. Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to advanced approaches institutions, and not to the Company or the Bank. The impact of Basel IV on the Company will depend on the manner in which it is implemented by the federal bank regulators.2010,2022, the FDIC adopted a new DIF restoration planfinal rule to ensureincrease the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning with the first quarterly assessment period of 2023. The increased assessment is expected to improve the likelihood that the DIF reserve ratio reacheswould reach the statutory minimum of 1.35% by September 30, 2020, as required by the Dodd-Frank Act. At least semi-annually,statutory deadline prescribed under the FDIC's amended restoration plan.update itsbe assessed at a quarterly rate of 3.36 basis points, over eight quarterly assessment periods, beginning in the first quarter of 2024. As a result of this final rule, the Company did not accrue expense related to this assessment based on the amount of uninsured deposits at December 31, 2022 of less than $5.0 billion. Under the final rule, the estimated loss pursuant to the systemic risk determination will be periodically adjusted, and income projections for the fundFDIC has retained the ability to cease collection early, extend the special assessment collection period, and if needed,impose a final shortfall special assessment on a one-time basis. The extent to which any such additional future assessments will increase or decrease assessment rates, following notice-and-comment rulemaking if required. impact the Company's future deposit insurance expense is currently uncertain.approximately $220,100, $309,700$603,000, $415,700 and $349,200$300,200 for the years ended December 31, 2017, 20162023, 2022 and 2015,2021, respectively.2017,2023, the most recent notification from the regulatory agencies categorized the Company and the Bank as well-capitalized. For further information regarding the capital ratios and leverage ratio of the Company and the Bank, see Item 8, Note 2 of this report.2017,2023, the Bank was in compliance with the loans-to-one-borrower limitations.Reserve System– FRB regulations require depository institutionsregulators regularly issue new and updated guidance and standards regarding cybersecurity intended to maintain cash reserves against their transaction accounts (primarily NOW and demand deposit accounts). A reserve of 3% is to be maintained against aggregate transaction accounts between $15.2 million and $110.2 million (subject to adjustment by the FRB) plus a reserve of 10% (subject to adjustment by the FRB between 8% and 14%) against that portion of total transaction accounts in excess of $110.2 million. The first $15.2 million of otherwise reservable balances (subject to adjustment by the FRB) is exempt from the reserve requirements. The Bank is in compliance with the foregoing requirements.Cybersecurity– In March 2015, federal regulators issued two related statements regarding cybersecurity. One statement indicates thatenhance cyber risk management among financial institutions should design multiple layers of security controlsand public companies generally. Financial institutions are expected to establish lines of defensecomply with such guidance and to ensure that theirstandards and develop appropriate risk management processes address the risk posed by compromised customer credentials, includingand security measures to reliably authenticate customers accessing internet-based services of the financial institution. The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack involving destructive malware. A financial institution is expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack.controls. If the Company fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.
Recently, the federal banking agencies adopted a final rule requiring banking organizations to notify their primary banking regulator within 36 hours of determining that a “computer-security incident” has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver banking products and services to a material portion of its customer base, its businesses and operations that would result in material loss, or its operations that would impact the stability of the United States. Banking organizations are also required to notify each affected customer as soon as possible in the event of an incident that results in actual or potential harm to the integrity or availability of information and systems or that violates or threatens to violate the organization’s security for four or more hours.In the ordinary course of business, the Company relies on electronic communications and information systems to conduct operations and store sensitive data. The Company employs an in-depth, layered, defensive approach that leverages people, processes and technology to manage and maintain cybersecurity controls. The Company also employs a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats. Notwithstanding the strength of the Company’s defensive measures, the threat from cyber attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures. While the Company has not experienced a significant compromise to date, significant data loss or any material financial losses related to cybersecurity attacks, the Company’s systems and those of its customers and third-party service providers are under constant threat and it is possible that the Company could experience a significant event in the future. ●Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;●Fair Credit Reporting Act, governing the provision of consumer information to credit reporting agencies and the use of consumer information;●Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;●Electronic Funds Transfer Act, governing automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.●Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;●Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;●Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;●The USA PATRIOT Act, which requires banks and savings institutions to establish broadened anti-money laundering compliance programs and due diligence policies and controls to ensure the detection and reporting of money laundering; and●The Bank Secrecy Act, which requires U.S. financial institutions to collaborate with the U.S. government in cases of suspected money laundering and fraud. All reports filed with the SEC are available for reading and copying at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549-2736 or for more information call the Public Reference Room at 1-800-SEC-0330. The SEC also makes all filed reports, proxy statements and information statements available on its website at www.sec.gov.Financial Information about SegmentsThe services provided by the Company are classified in two reportable segments: Information Services and Banking Services. The revenues from external customers, net income and total assets by segment as of and for each of the years in the three-year period ended December 31, 2017, are set forth in Item 8, Note 16 of this report.The Company has lending concentrations, including, but not limited to, churches and church-related entities located in selected cities and privately-held businesses located in or near St. Louis, Missouri, that could suffer a significant decline which could adversely affect the Company.Cass’ customer base consists, in part,continuation of the current low level ofdecline in market interest rates would be expected to have a negative impact on the Company’s net interest income.cyber-securitycybersecurity problems could damage Cass’ reputation and business.Additionally, anyThe Company also relies on electronic communications and information systems to store sensitive customer data. Any failure, interruption, breach inthird partythird-party vendors, including as a result of cyber-attacks, could 1)i) disrupt the proper functioning of Cass’ networks and systems and therefore operations and/or those of certain customers; 2)ii) result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise valuable information of the Company or its customers; 3)iii) result in a violation of applicable privacy, data breach and other laws, subjecting the Company to additional regulatory scrutiny and expose Cass to civil litigation, governmental fines and possible financial liability; 4)iv) require significant management attention and resources to remedy the damages that result; or 5)v) harm Cass’ reputation or cause a decrease in the number of customers that choose to do business with the Company. The occurrence of any of the foregoing could have a material adverse effect on Cass’ business, financial condition and results of operations.Operations of the Company’s customer base are impacted by macro-economic factors such as a strong dollar and/or volatility in commodity prices. A reduction in its customers’ operations could have a material adverse effect on Cass’ results of operations.A decline in the cost of oil worldwide can have a negative effect on both the number of freight transactions processed and the dollar amount of invoices processed. For example, lower oil prices can cause a significant drop in drilling supplies being transported to fracking operations by domestic railroads and trucks. Lower oil prices can also result in lower gas and fuel prices, negatively affecting the dollar amounts of the invoices that Cass processes for its freight and shipping customers. A decline in oil prices could have an adverse effect on the Company’s revenues and could significantly impact its results of operations.Cass’ stock price can become volatile and fluctuate widely in response to a variety of factors.stock price can fluctuateallowance for credit losses (“ACL”) is subject to continuing evaluation and may be insufficient.factors that can include actual or anticipated variations in Cass’ quarterly results; new technology or services by competitors; unanticipated losses or gains due to unexpected events, including losses or gains on securities held for investment purposes; significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involvingeconomic sources, such as Gross Domestic Product (“GDP”). Historical credit loss experience, of both the Company or its competitors; changesand similar peer banks, provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for asset quality trends, borrower’s ability to pay, collateral, and other environmental factors. The ACL is measured on a collective pool basis when similar risk characteristics exist. The determination of the appropriate level of the allowance for credit losses inherently involves a high degree of subjectivity and requires management to make estimates based on risks and trends that are subject to material change. Continuing deterioration in accounting policies or practices; failureeconomic conditions, including the possibility of a recession, affecting borrowers and securities issuers; inflation; rising interest rates; new information regarding existing loans, credit commitments and securities holdings; global pandemics; natural disasters and risks related to integrate acquisitions or realize anticipated benefits from acquisitions; or changes in government regulations.General market fluctuations, industryclimate change; and identification of additional problem loans, ratings down-grades and other factors, both within and general economic and political conditions, such as economic slowdowns or recessions, governmental intervention, interest rate changes, credit loss trends, low trading volume or currency fluctuations also could cause Cass’ stock price to decrease regardlessoutside of the Company’s operating results.Newgenerally require insured depository institutions and their holding companies to hold more capital.The Dodd-Frank Act required the federal banking agencies to establishimplemented stricter risk-based capital requirements and leverage limits to apply to banks and bank and savings and loan holding companies. In July 2013, the federal banking agencies published the final Basel III Capital Rules that revised their risk-based and leverage capital requirements and their methodmethods for calculating risk-weighted assets. The Basel III Capital Rules apply to banking organizations, includingassets, meaning the Company and the Bank, and are to be phased in through 2019.Among other things, the rules will require that the Company maintain a common equity Tier 1 capital ratio of 4.5%, a Tier 1 capital ratio of 6%, a total capital ratio of 8%, and a leverage ratio of 4%. Beginning in 2016, a capital conservation buffer is being phased in over three years, ultimately resulting in a requirement of 2.5% on top of the common equity Tier 1, Tier 1 and total capital requirements, resulting in a required common equity Tier 1 capital ratio of 7%, a Tier 1 capital ratio of 8.5%, and a total capital ratio of 10.5%. Failure to satisfy any of these capital requirements will result in limits on paying dividends, engaging in share repurchases and paying discretionary bonuses. These limitations will establish a maximum percentage of eligible retained income that could be utilized for such actions.In addition to the higher required capital ratios and the new deductions and adjustments relevant to the capital calculations, the final rules increase the risk weights for certain assets, meaning that the Company will have to hold more capital against thesesuch assets. Implementation ofComplying with these more stringent capital requirements could result in management modifying its business strategy and could limit the Company’s ability to make distributions, including paying dividends, or buying back shares.threeone accounting policiespolicy as being “critical” to the presentation of its financial condition and results of operations because they requireit requires management to make particularly subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. More information on Cass’ critical accounting policies is contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”In September 2012, theentered into a 10-year lease forleases office space in St. Louis County, Missouri, to house the headquarters of the Company and the Bank. The Company’s headquarters occupy 13,9917,549 square feet in an office center at 12444 Powerscourt Drive along with 3,563Drive. The Bank’s headquarters occupy 16,572 square feet in the same center at 12412 Powerscourt Drive. The Bank’s headquarters occupy 10,564 square feet in the same center at 12412 Powerscourt Drive.45,50048,300 square feet located at 2675 Corporate Exchange Drive, Columbus, Ohio. Additional facilities are located in Lowell, Massachusetts, Greenville, South Carolina, Wellington, Kansas, Jacksonville, Florida, and Columbus, Ohio.Brighton, Michigan. The Company has offices in Breda, Netherlands, Basingstoke, United Kingdom, and Singapore to service its multinational customers.facilitiesfacility in Fenton, Missouri, Santa Ana, California and Colorado Springs, Colorado.3.3. LEGAL PROCEEDINGS4.4. MINE SAFETY DISCLOSURES16, 2018,15, 2024, there were approximately 3,7475,717 holders of record of the Company’s common stock. High and low sale prices, as reported by The Nasdaq Global Select Market for each quarter of 2017 and 2016, restated for the stock dividend that occurred on December 15, 2017, were as follows:2017 2016 High Low High Low 1stQuarter $ 67.88 $ 56.12 $ 48.78 $ 43.31 2ndQuarter 62.15 54.39 47.96 40.95 3rdQuarter 62.65 53.23 53.31 45.04 4thQuarter 65.00 56.50 68.03 47.90 Cash dividends paid per shareHowever, future dividend payments will depend on the Company’s earnings, capital requirements, financial condition, applicable banking regulatory requirements and other factors considered relevant by the Company’s Board of Directors.during the two most recent fiscal years, restated for themaintains a treasury stock dividend that occurred on December 15, 2017, were as follows: 2017 2016 March $ .209 $ .200 June .209 .200 September .209 .200 December .240 .209 Subsidiary dividends can be a significant source of funds for payment of dividendsbuyback program approved by the CompanyBoard of Directors in October 2023 pursuant to its shareholders. Bothwhich, the Company andBoard of Directors has authorized the Bank are subjectrepurchase of up to various regulations that restrict their ability to pay dividends and the amount of dividends that they may pay. Under the FDICIA, a depository institution, such as the Bank, may not pay dividends if payment would cause it to become undercapitalized or if it is already undercapitalized. The payment of dividends by the Company and the Bank may also be affected or limited by other factors, such as the requirement to maintain adequate capital and, under certain circumstances, the ability of federal regulators to prohibit dividend payments as an unsound or unsafe practice. For further information regarding capital ratios and leverage ratio requirements500,000 shares of the Company’s common stock and has no expiration date. The Company has repurchased 13,964 shares under this treasury stock buyback program and the Bank and the effect on payment of dividends, see Item 8, Note 2 of this report.Adjustedtherefore has 486,036 shares remaining for the stock dividend that occurred on December 15, 2017, therepurchase.41,846150,541 shares at an aggregate cost of $2,270,000$5.8 million during the year ended December 31, 20172023 and 205,835130,374 shares at an aggregate cost of $9,215,000$5.3 million during the year ended December 31, 2016.2022. A portion of the repurchased shares may be used for the Company’s employee benefit plans and the balance will be available for other general corporate purposes. The stock repurchase authorization does not have an expiration date and the pace of repurchase activity will depend on factors such as levels of regulatory capital, cash generation from operations, cash requirements for investments, repayment of debt, current stock price, business and market conditions, and other factors. The Company may repurchase shares from time to time on the open market or in private transactions, including structured transactions. The stock repurchase program may be modified or discontinued at any time.
During the three months ended December 31, 2023, the Company repurchased shares of its common stock as follows:Period Average Price Paid per Share Maximum Number of Shares that May Yet
Be Purchased Under the Plans or ProgramsOctober 1, 2023 –
October 31, 20231,650 $ 37.68 1,650 498,350 November 1, 2023 –
November 30, 202313,295 40.28 11,714 486,636 December 1, 2023 –
December 31, 2023600 41.83 600 486,036 Total 15,545 $ 40.06 13,964 486,036 and in, the index of Nasdaq computer and data processing stocks, and the index of Nasdaq bank stocks. The graph assumes $100 was invested on December 31, 2012,2018, with dividends reinvested. Returns are based on period end prices.
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SELECTED FINANCIAL DATAThe following table presents selected financial information for each of the five years ended December 31. The selected financial data should be read in conjunction with the Company’s consolidated financial statements and accompanying notes included in Item 8 of this report.(Dollars in thousands except per share data) 2017 2016 2015 2014 2013 Fee revenue and other income $ 95,512 $ 86,136 $ 83,368 $ 79,907 $ 76,572 Interest income on loans 28,641 29,063 28,669 29,726 32,110 Interest income on debt and equity securities 10,993 9,801 9,498 9,441 8,915 Other interest income 2,343 1,066 543 592 552 Total interest income 41,977 39,930 38,710 39,759 41,577 Interest expense on deposits 2,187 2,029 2,111 2,460 2,832 Provision for loan losses — (1,500 ) (850 ) — 500 Net interest income after provision 39,790 39,401 37,449 37,299 38,245 Operating expense 100,403 93,473 89,783 85,414 84,086 Income before income tax expense 34,899 32,064 31,034 31,792 30,731 Income tax expense 9,885 (1) 7,716 7,978 7,759 7,234 Net income $ 25,014 $ 24,348 $ 23,056 $ 24,033 $ 23,497 Diluted earnings per share(2) $ 2.01 $ 1.96 $ 1.82 $ 1.88 $ 1.84 Dividends per share(2) .87 .81 .77 .74 .67 Dividend payout ratio 42.68 % 40.98 % 42.06 % 38.85 % 36.21 % Average total assets $ 1,568,112 $ 1,504,474 $ 1,439,511 $ 1,424,967 $ 1,351,782 Average net loans 653,459 667,158 659,109 651,984 647,827 Average investment securities 426,657 352,129 330,095 321,836 294,846 Average total deposits 602,490 614,975 579,752 571,039 550,110 Average total shareholders’ equity 216,548 207,060 197,853 200,149 175,441 Return on average total assets 1.60 % 1.62 % 1.60 % 1.69 % 1.74 % Return on average equity 11.55 11.76 11.65 12.01 13.39 Average equity to assets ratio 13.81 13.76 13.74 14.05 12.98 Equity to assets ratio at year-end 14.04 13.82 14.25 13.36 14.36 Tangible common equity to tangible assets 13.25 13.04 13.42 12.52 13.39 Tangible common equity to risk-weighted assets 20.23 20.13 21.19 19.65 20.37 Net interest margin 3.34 3.32 3.38 3.43 3.63 Allowance for loan losses to loans at year-end 1.49 1.53 1.77 1.78 1.79 Nonperforming assets to loans and foreclosed assets — .04 .48 (3) .07 .27 Net loan (recoveries) charge-offs to average loans outstanding — (.01 ) (.09 ) (.03 ) .18 (1)Includes one-time, non-cash Tax Cuts and Jobs Act (TCJA) charge of $1,824,000(2)Diluted earnings per share and dividends per share were adjusted for the stock dividend that occurred on December 15, 2017(3)In February 2016, one nonaccrual loan with a balance of $2,727,000 was paid in full. The percentage, as adjusted, would have been .06%.
RESERVEDITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSdiscussionManagement's Discussion and analysis provides information aboutAnalysis of Financial Condition and Results of Operations ("MD&A") is intended to promote understanding of the financial condition and results of operations of the Company for the years ended December 31, 2017, 2016 and 2015. All sharefinancial condition. MD&A is provided as a supplement to, and per share data have been restated to give effect to the 10% stock dividend issued on December 15, 2017. This discussion and analysis should be read in conjunction with, the Company’s consolidated financial statements and the accompanying notesNotes to Financial Statements (Part II, Item 8 of this Form 10-K). This section generally discusses the results of operations for 2023 compared to 2022. For discussion related to the results of operations and other selectedchanges in financial data presented elsewherecondition for 2022 compared to 2021 refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report.the Company's 2022 Annual Report on Form 10-K filed with the SEC on February 28, 2023.TableThe Company intends for the discussion of ContentsExecutive OverviewCass provides paymentfinancial condition and results of operations that follows to provide information processing servicesthat will assist the reader in understanding the Consolidated Financial Statements, the changes in certain key items in those financial statements from year to large manufacturing, distribution and retail enterprises from its offices/locations in St. Louis, Missouri, Columbus, Ohio, Boston, Massachusetts, Greenville, South Carolina, Wellington, Kansas, Jacksonville, Florida, Breda, Netherlands, Basingstoke, United Kingdom, and Singapore. The Company’s services include freight invoice rating, payment processing, auditing,year, and the generation of accounting and transportation information. Cass also processes and pays energy invoices, which include electricity and gasprimary factors that accounted for those changes, as well as wastehow certain accounting principles, policies, and telecommunications expenses,estimates affect the Consolidated Financial Statements. This discussion should be read in conjunction the Consolidated Financial Statements and is a providerthe related notes that appear in Part II, Item 8 of telecom expense management solutions. The Company also, through Cass Commercial Bank, its St. Louis, Missouri-based bank subsidiary, provides banking services in the St. Louis metropolitan area, Orange County, California, Colorado Springs, Colorado, and other selected cities in the United States. In addition to supporting the Company’s payment operations, the Bank provides banking services to its target markets, which include privately-owned businesses and faith-based ministries.InterestTransactional level payment services and interest income from the balances generated during the payment processing cycle isare affected by the amount of time Cass holds the funds prior to payment and the dollar volume processed. Both the number of transactions processed and the dollar volume processed are therefore key metrics followed by management. Other factors will also influence revenue and profitability, such as changes in the general level of interest rates, which have a significant effect on net interest income. The funds generated by these processing activities are invested in overnight investments, investment grade securities, advances to payees, and loans generated by the Bank. The Bank earns most of its revenue from net interest income, or the difference between the interest earned on its loans and investments and the interest paid on its deposits and other borrowings. The Bank also assesses fees on other services such as cash management services. Another negative impactlow fuel prices could be$197.5 million in 2023, up 8.2% from the prior year. Net income was $30.1 million and diluted EPS was $2.18 per share, decreases of 13.9% and 13.8% from the prior year, respectively.drop1.24% return on average assets and 14.24% return on average equity. The Company’s common equity Tier 1 capital ratio was 14.73% at December 31, 2023, significantly exceeding regulatory requirements. In addition, the Company has maintained exceptional credit quality with no non-performing loans at December 31, 2023, and no loan charge-offs during the year ended December 31, 2023.number of invoices related to drilling supplies carried by domestic railroadstechnology, processes, and trucks that move pipes, sand and water for fracking operations.In 2017, total fee revenue and other income increased $9,376,000, or 11%, net interest income after provision for loan losses increased $389,000, or 1%, total operating expenses increased $6,930,000, or 7%, and net income increased $666,000, or 3%. This positive performance in 2017 was attributable to continued growth in the customer base, expanded new revenue-generating services, and an improving rate environment. The increase in total operating expense was due mainly to on-going strategic investment in technology and staffpeople required to win and support new business. The asset quality of the Company’s loans and investments as of December 31, 2017 remained strong.On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted. As more fully described in this Item 7 and Note 13, the Company’s 2017 results of operations are skewed by a one-time, non-cash charge to income tax expense of $1,824,000, triggered by the passage of the TCJA. Excluding this charge, net income increased $2,490,000, or 10%. While the reduction in the federal corporate tax rate negatively impacted 2017 earnings, the rate reduction is projected to significantly boost after-tax earnings in the future.Impact of New and Not Yet Adopted Accounting PronouncementsIn May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09 –Revenue from Contracts with Customers. The ASU supersedes revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance in the FASB Accounting Standards Codification (“ASC”). The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance identifies specific steps that entities should apply in order to achieve this principle. Under the ASU, the amendments are effective for interim and annual periods beginning January 1, 2018 and must be applied retrospectively. The Company’s revenue is comprised of net interest income on financial assets and liabilities, which is explicitly excluded from the scope, and non-interest income. The Company will use the modified retrospective transition approach and there will not be a significant impact on the Company’s consolidated financial statements or results of operations.In January 2016, the FASB issued ASU No. 2016-01 –Financial Instruments – Overall (ASC Subtopic 825-10). The ASU requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in OCI the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of AFS debt securities in combination with other deferred tax assets. The standard is effective for fiscal periods beginning January 1, 2018 and will not have a significant impact on the Company’s consolidated financial statements or results of operations.In February 2016, the FASB issued ASU No. 2016-02 –Leases (ASC Topic 842). The ASU improves financial reporting about leasing transactions. The ASU affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. Consistent with current generally accepted accounting principles (GAAP), the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP—which requires only capital leases to be recognized on the balance sheet—the new ASU will require both types of leases to be recognized on the balance sheet. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The ASU on leases will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. A third-party vendor solution has been selected to assist in the application of ASU 2016-02. The impact of the adoption of this ASU is currently being evaluated but is not expected to have a material impact on the Company’s consolidated financial statements or results of operations.In June 2016, the FASB issued ASU No. 2016-13 - Financial Instruments –Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU requires measurement and recognition of expected credit losses for financial assets held. Under this standard, it will be required to hold an allowance equal to the expected life-of-loan losses on the loan portfolio. The standard is effective for fiscal periods beginning after December 15, 2019. The impact of the adoption of this ASU is currently being evaluated.In February 2018, the FASB issued ASU No. 2018-02 –Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.The ASU provides for the reclassification of the effect of remeasuring deferred tax balances related to items within AOCI to retained earnings resulting from the TCJA. The Company early adopted, and as a result, reclassified $2,286,000 from AOCI to retained earnings.ASC.Accounting Standards Codification (“ASC”). In preparing the consolidated financial statements, management makes estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. These estimates have been generally accurate in the past, have been consistent and have not required any material changes. There can be no assurances that actual results will not differ from those estimates. CertainA summary of significant accounting policies and a summary of recent accounting pronouncements applicable to the Company's Consolidated Financial Statements are included in Item 8, "Financial Statements and Supplementary Data—Note 1.”requirerequires significant management estimates and areis deemed critical to the Company’s results of operations or financial position havehas been discussed with the Audit and Risk Committee of the Board of Directors and areis described below.Loan Losses.Credit Losses. The Company performs periodic and systematic detailed reviews of its loan portfolio to assess overall collectability. The level of the allowance for loan losses reflectsdetermine management’s estimate of the collectabilitylifetime expected credit losses. The process combines many factors: economic factors, historical credit loss experience, of both the Company and similar peer banks, loan portfolio growth and concentrations, asset quality, risk tolerance, and other qualitative and quantitative factors which could affect future credit loss. Given the Company's recent historical loss experience, the impact of the qualitative risk factors related to the collective ACL is a substantial percentage of the overall ACL. Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses, and therefore the appropriateness of the ACL, could change significantly. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors and inputs are considered in estimating the ACL and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all loan portfolio. Although these estimates aretypes. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. Various regulatory agencies, as an integral part of the examination process, periodically review the ACL. Such agencies may require the Company to recognize additions to the ACL or reserve increases to adversely graded classified loans based on established methodologies for determining allowance requirements, actual results can differ significantly from estimated results.information available to them at the time of their examinations. The Company believes the level of ACL is appropriate. These policies affect both segments of the Company. The impact and associated risks related to these policies on the Company’s business operations are discussed in the Note 1 "Summary of Significant Accounting Policies" and Note 4 "Loans," as well as the “Provision and Allowance for Loan Losses”Credit Losses and Allowance for Unfunded Commitments” section of this report.(In thousands except per share data) For the Years Ended December 31, % Change 2023 2022 2021 2023 v. 2022 2022 v. 2021 Processing fees $ 79,566 $ 76,470 $ 74,589 4.0 % 2.5 % Financial fees 45,985 43,757 32,733 5.1 % 33.7 % Net interest income 66,494 58,844 44,326 13.0 % 32.8 % (Release of) provision for credit losses (550) 1,350 (130) (140.7) % (1138.5) % Other 4,916 4,755 2,369 3.4 % 100.7 % Total revenues 197,511 182,476 154,147 8.2 % 18.4 % Operating expense 160,155 139,576 120,326 14.7 % 16.0 % Income before income tax expense 37,356 42,900 33,821 (12.9) % 26.8 % Income tax expense 7,297 7,996 5,217 (8.7) % 53.3 % Net income $ 30,059 $ 34,904 $ 28,604 (13.9) % 22.0 % Diluted earnings per share $ 2.18 $ 2.53 $ 2.00 (13.8) % 26.5 % Return on average assets 1.24 % 1.35 % 1.23 % — — Return on average equity 14.24 % 16.53 % 11.29 % — — Company’s estimates have been materially accurateCompany recorded revenue of $197.5 million in 2023, up 8.2% from the prior year, due to increases in processing fees, financial fees, net interest income and a positive variance in the past, and accordingly, the Company expects to continue to utilize the present processes.Summary of ResultsFor the Years Ended December 31, % Change (In thousands except per share data) 2017 2016 2015 2017 v. 2016 2016 v. 2015 Total processing volume 63,207 57,897 54,521 9.2 % 6.2 % Total processing dollars $ 37,597,035 $ 34,689,268 $ 36,264,188 8.4 (4.3 ) Payment and processing fees $ 93,322 $ 83,713 $ 78,622 11.5 6.5 Net interest income after provision for loan losses $ 39,790 $ 39,401 $ 37,449 1.0 5.2 Total net revenue $ 135,302 $ 125,537 $ 120,817 7.8 3.9 Average earning assets $ 1,362,660 $ 1,308,914 $ 1,244,797 4.1 5.2 Net interest margin(1) 3.34 % 3.32 % 3.38 % — — Net income $ 25,014 $ 24,348 $ 23,056 2.7 5.6 Diluted earnings per share(2) $ 2.01 $ 1.96 $ 1.82 2.6 7.7 Return on average assets 1.60 % 1.62 % 1.60 % — — Return on average equity 11.55 % 11.76 % 11.65 % — — (1)Presented on a tax-equivalent basis(2)Diluted earnings per share was restated for the stock dividend that occurred on December 15, 2017The results of 2017 compared to 2016 include the following significant items:Overall, the Company’s performance improved(release of) provision for credit losses. Operating expenses increased 14.7% as a result of continued growthincreases in the customer base and new revenue-generating services. Payment and processing fees and total processing volume increased 12% and 9%, respectively. Against the backdrop of a strengthening global economy, increased carrier and fuel prices combined with higher volume from current accounts to produce an increase in processing dollars of 8%. Net income in 2017 increased 3% despite a onetime, non-cash charge to income tax expense of $1,824,000 triggered by the passage of the TCJA on December 22, 2017.Average earning assets increased 4% and net interest income after provision for loan losses increased 1% year over year.The increase in net interest income after provision for loan losses was primarily due to higher average earning assets but was largely offset by a negative provision for loan losses of $1,500,000 in 2016 compared to none in 2017.There were no gains from the sale of securities in 2017 and $387,000 in 2016. Bank service fees increased $73,000, or 6%,personnel and other income increased $81,000. Operating expenses increased $6,930,000, or 7%, as the Company continuedinvests in, and transitions to, invest in staffimproved technology. Net income was $30.1 million and technology to windiluted EPS was $2.18 per share, decreases of 13.9% and support new business.results of 2016 compared to 2015 include the following significant items:Overall, the Company’s performance was boosted asCompany posted a result of adding new accounts and expanding service lines as payment and processing fees and total processing volume increased 7% and 6%, respectively. Lingering adverse economic factors including low interest rates and low energy prices continued to impact total processing dollars, which decreased 4%, and net interest margin. The decrease in processing dollars generated smaller investable balances that lowered investment income and fees from carrier services.Average earning1.24% return on average assets and net interest income after provision for loan losses both increased 5% year over year. The increase in net interest income after provision for loan losses was primarily due to higher14.24% return on average earning assetsequity.a negative provision for loan losses of $1,500,000 in 2016 compared to $850,000 in 2015.Gains from the sale of securities were $387,000 in 2016 and $2,910,000 in 2015. Bank service fees increased $53,000, or 4%, and other income increased $147,000. Operating expenses increased $3,690,000, or 4%, as the Company invested in staff and technology to win and support new business and the Company received a one-time litigation settlement of $1.4 million ($800,000 reduction in other operating expenses and $600,000 loan loss recovery)are explained in the prior year.December 31, % Change (In thousands) 2017 2016 2015 2017 v. 2016 2016 v. 2015 Transportation invoice transaction volume 35,546 34,352 33,958 3.5 % 1.2 % Transportation invoice dollar volume $ 24,801,733 $ 22,774,909 $ 24,534,285 8.9 (7.2 ) Expense management transaction volume(1) 27,661 23,545 20,563 17.5 14.5 Expense management dollar volume(1) $ 12,795,302 $ 11,914,359 $ 11,729,903 7.4 1.6 Payment and processing revenue $ 93,322 $ 83,713 $ 78,622 11.5 6.5 Bank service fees $ 1,349 $ 1,276 $ 1,223 5.7 4.3 Gains on sales of investment securities — $ 387 $ 2,910 — (86.7 ) Other $ 841 $ 760 $ 613 10.7 24.0 (1)Includes energy,(In thousands) December 31, % Change 2023 2022 2021 2023 v. 2022 2022 v. 2021 Transportation invoice transaction volume 35,949 36,807 36,783 (2.3) % 0.1 % Transportation invoice dollar volume $ 38,288,478 $ 44,749,359 $ 36,829,841 (14.4) % 21.5 % 13,857 12,990 12,499 6.7 % 3.9 % $ 19,836,821 $ 19,514,049 $ 15,867,556 1.7 % 23.0 % Average payments in advance of funding $ 234,865 $ 278,185 $ 211,809 (15.6) % 31.3 % Processing fees $ 79,566 $ 76,470 $ 74,589 4.0 % 2.5 % Financial fees $ 45,985 $ 43,757 $ 32,733 5.1 % 33.7 % Other income $ 4,916 $ 4,755 $ 2,369 3.4 % 100.7 % and environmentalFee revenue and other income in 2017 compared to 2016 include the following significant pre-tax components:In the transportation sector, new business andwastegrowing customer base increased invoice volume 4%. The strong global economy combined with increased carrier and fuel prices produced a 9%6.7% increase in dollar volume. The increase in dollar volume generated larger investable balances that improved investment income and raised fees from carrier services. Expense managementfacility transaction volume increased 18% and dollar volume increased 7% as a result of new customer wins and increased volumes from current accounts. There were no gains on sales of investment securities.Fee revenue and other income in 2016 compared to 2015 include the following significant pre-tax components:In the transportation sector, new business and a growing customer base boosted invoice volume, though lingering negative factors continued to hinder dollar volume growth. Reduced average invoice amounts caused by low fuel and carrier prices as well as shiftsan increase in modal activity impactedfees received for ancillary processing services. Transportation invoice volumes decreased 2.3% over the same period. The decline in transportation volumes is primarily due to the on-going freight recession.volume.volumes of 14.4%. The decline in transportation dollar volumes had a direct effect on the 15.6% decrease in dollar volume also generated smaller investable balances that reduced investment income and more significantly lowered fees from carrier services. Expense management transaction volume increased 15% and dollar volume increased 2% as new customer wins, including several large accounts that migrated from competitors, fueledaverage payments in advance of funding, which is the increase. Gains on salesprimary generator of investment securities decreased as market conditions were not as favorable in the current year.December 31, % Change (In thousands) 2017 2016 2015 2017 v. 2016 2016 v. 2015 Average earning assets $ 1,362,660 $ 1,308,914 $ 1,244,797 4.1 % 5.2 % Net interest income(1) $ 45,480 $ 43,402 $ 42,025 4.8 % 3.3 % Net interest margin(1) 3.34 % 3.32 % 3.38 % Yield on earning assets(1) 3.50 % 3.47 % 3.55 % Rate on interest bearing liabilities .56 % .48 % .51 % (1)Presented on a tax-equivalent basis using a tax rate of 35% in all years.Net interest income in 2017 compared to 2016:(In thousands) December 31, % Change 2023 2022 2021 2023 v. 2022 2022 v. 2021 Average earning assets $ 2,076,951 $ 2,205,792 $ 1,999,609 (5.8) % 10.3 % Average interest-bearing liabilities $ 573,308 $ 603,262 $ 592,069 (5.0) % 1.9 % $ 67,583 $ 60,533 $ 46,199 11.6 % 31.0 % 3.25 % 2.74 % 2.31 % — — 4.04 % 2.90 % 2.37 % — — Rate on interest bearing liabilities 2.84 % 0.58 % 0.20 % — — wasin 2023 compared to 2022 is primarily due to an increase in the Federal Funds rate throughout 2022 and into 2023, positively affecting the net interest rate margin which increased to 3.25% as compared to 2.74% in the prior year. This was partially offset by a decrease in average earning assets combined with a slight improvementof $128.8 million, or 5.8%. The yield on interest-earning assets increased 114 basis points from 2.90% in 2022 to 4.04% in 2023 while the cost of interest-bearing liabilities increased 226 basis points from 0.58% in 2022 to 2.84% in 2023.net interest margin as a resultCompany's franchise restaurants, faith-based and lease financing receivables portfolios. The average yield on loans increased 83 basis points to 4.81% in 2023.an improving interest rate environment. More information is contained in the tables below and in Item 7A of this report.Total average investment in securities and certificates of deposit increased $73,697,000, or 20%.throughout 2023. The investment portfolio will expand and contract over time as the Company manages its liquidity and interest rate position. All purchases were madeThe average tax-equivalent yield on investment securities increased 33 basis point to 2.63% in accordance with2023 as a result of the Company’sincrease in short and long-term interest rates. The average yield on tax-exempt investment policy. Total average federal funds soldsecurities declined 19 basis points to 2.69% driven by maturities of higher rate securities. These securities have longer term fixed rates and otherthe Company has not purchased any such securities since interest rates began increasing.increased $19,047,000, or 13%. Interest bearingconsisting of interest-bearing deposits in other financial institutions decreased $24,590,000, or 20%.Total average loans decreased $14,408,000, or 2%, to $663,653,000. Loans have a positive effect on interest income and the net interest margin due to the fact that loans are one of the Company’s highest yielding earning assets for any given maturity.The Bank’s total average interest-bearing deposits decreased $29,184,000, or 7%, compared to the prior year. Average rates paid on interest-bearing liabilities increased from .48% to .56%.Net interest income in 2016 compared to 2015:The increase in net interest income was primarily due to an increase in average earning assets. This was partially offset by a decrease in the net interest margin due to the difficulty finding acceptable investment alternatives in the current low interest rate environment. More information is contained in the tables below and in Item 7A of this report.Total average investment in securities and certificates of deposit increased $25,537,000, or 8%. The investment portfolio will expand and contract over time as the Company manages its liquidity and interest rate position. All purchases were made in accordance with the Company’s investment policy. Total average federal funds sold, and other short-term investments increased $34,621,000,decreased $137.8 million, or 31%32.4%. Interest bearing deposits in other financial institutions decreased $3,083,000, or 2%.Total average loans increased $7,042,000, or 1%, to $678,061,000. Loans have a positive effect on interest income and the net interest margin due to the fact that loans are one of the Company’s highest yielding earning assets for any given maturity.Bank’s total average interest-bearing deposits increased $7,255,000, or 2%, compared to the prior year. Average rates paid on interest-bearing liabilities decreased from .51% to .48% asdecrease is primarily a result of the continued lowincrease in the average balance of loans, coupled with the decrease in average funding sources, partially offset by the decrease in average investment securities. The average yield on short-term investments increased 327 basis points to 4.78% in 2023 primarily due to the increase in short-term market interest rates that began in March 2022. The majority of these short-term investments are held at the Federal Reserve Bank.environment.Tablealternatives outside of Contents2017 2016 2015 Interest Interest Interest Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ (In thousands) Balance Expense Rate Balance Expense Rate Balance Expense Rate Assets(1) Earning assets Loans(2), (3): Taxable $ 658,791 $ 28,511 4.33 % $ 660,341 $ 28,506 4.32 % $ 649,472 $ 28,049 4.32 % Tax-exempt(4) 4,862 199 4.09 17,720 857 4.84 21,547 954 4.43 Securities(5): Taxable 23,172 472 2.04 5,030 93 1.85 1,168 21 1.8 Tax-exempt(4) 403,485 16,060 3.98 347,099 14,858 4.28 328,927 14,553 4.42 Certificates of deposit 6,970 82 1.18 7,801 51 .65 4,298 17 0.4 Interest-bearing deposits in other financial institutions 100,401 1,036 1.03 124,991 638 .51 128,074 393 0.31 Federal funds sold and other short-term investments 164,979 1,307 .79 145,932 428 .29 111,311 150 0.13 Total earning assets 1,362,660 47,667 3.50 1,308,914 45,431 3.47 1,244,797 44,137 3.55 Non-earning assets Cash and due from banks 12,904 11,822 13,050 Premises and equipment, net 21,299 20,503 18,544 Bank owned life insurance 16,676 16,174 15,665 Goodwill and other intangibles 14,464 13,799 14,187 Other assets 150,303 144,165 145,178 Allowance for loan losses (10,194 ) (10,903 ) (11,910 ) Total assets $ 1,568,112 $ 1,504,474 $ 1,439,511 Liabilities and Shareholders’ Equity(1) Interest-bearing liabilities Interest-bearing demand deposits $ 323,635 $ 1,610 .50 % $ 343,205 $ 1,388 .40 % $ 330,742 $ 1,392 .42 % Savings deposits 15,540 79 .51 20,524 100 .49 14,656 65 .44 Time deposits >=$250 16,022 150 .94 14,463 172 1.19 15,236 189 1.24 Other time deposits 38,279 348 .91 44,468 369 .83 54,771 465 .85 Total interest-bearing deposits 393,476 2,187 .56 422,660 2,029 .48 415,405 2,111 .51 Short-term borrowings 13 — — — — — 63 1 1.59 Total interest-bearing liabilities 393,489 2,187 .56 422,660 2,029 .48 415,468 2,112 .51 Non-interest bearing liabilities Demand deposits 209,014 192,315 164,347 Accounts and drafts payable 713,052 654,845 632,604 Other liabilities 36,009 27,594 29,239 Total liabilities 1,351,564 1,297,414 1,241,658 Shareholders’ equity 216,548 207,060 197,853 Total liabilities and shareholders’ equity $ 1,568,112 $ 1,504,474 $ 1,439,511 Net interest income $ 45,480 $ 43,402 $ 42,025 Net interest margin 3.34 % 3.32 % 3.38 % Interest spread 2.94 % 2.99 % 3.04 % (1)Balances shown are daily averages.(2)For purposes of these computations, nonaccrual loans are included in the average loan amounts outstanding. Interest on nonaccrual loans is recorded when received as discussed further in Item 8, Note 1 of this report.(3)Interest income on loans includes net loan fees of $415,000, $586,000, and $469,000 for 2017, 2016 and 2015, respectively.(4)Interest income is presented on a tax-equivalent basis assuming a tax rate 35% in all years. The tax-equivalent adjustment was approximately $5,691,000, $5,500,000 and $5,427,000 for 2017, 2016 and 2015, respectively.(5)For purposes of these computations, yields on investment securities are computed as interest income divided by the average amortized cost of the investments.(In thousands) 2023 2022 2021 Average
BalanceInterest
Income/
ExpenseYield/ Rate Average Balance Interest Income/
ExpenseYield/ Rate Average Balance Interest Income/
ExpenseYield/ Rate Interest-earning assets $ 1,055,668 $ 50,825 4.81 % $ 992,004 $ 39,460 3.98 % $ 887,662 $ 35,178 3.96 % Taxable 541,159 14,118 2.61 509,537 10,083 1.98 192,885 2,547 1.32 192,881 5,186 2.69 279,247 8,043 2.88 304,672 8,919 2.93 Short-term investments 287,243 13,720 4.78 425,004 6,429 1.51 614,390 726 0.12 Total interest-earning assets 2,076,951 83,849 4.04 % 2,205,792 64,015 2.90 % 1,999,609 47,370 2.37 % Non-interest-earning assets Cash and due from banks 24,914 20,772 21,220 Premises and equipment, net 24,445 19,291 17,846 Payments in advance of funding 234,865 278,185 211,809 Bank-owned life insurance 48,540 46,468 26,766 Goodwill and other intangibles 21,060 19,558 17,273 Unrealized (loss) gain on investment securities (68,893) (43,147) 15,833 Other assets 71,050 51,686 35,231 Allowance for credit losses (13,324) (12,527) (11,595) Total assets $ 2,419,608 $ 2,586,078 $ 2,333,992 Interest-bearing liabilities Interest-bearing demand deposits $ 496,154 $ 14,056 2.83 % $ 549,054 $ 3,118 0.57 % $ 521,409 $ 582 0.11 % Savings deposits 7,162 113 1.58 13,288 38 0.29 18,398 9 0.05 Time deposits >=$250 23,912 705 2.95 18,272 181 0.99 14,576 139 0.95 Other time deposits 43,839 1,276 2.91 22,637 145 0.64 37,676 441 1.17 Total interest-bearing deposits 571,067 16,150 2.83 603,251 3,482 0.58 592,059 1,171 0.20 Short-term borrowings 2,241 116 5.18 11 — — 10 — — Total interest-bearing liabilities 573,308 16,266 2.84 % 603,262 3,482 0.58 % 592,069 1,171 0.20 % Noninterest-bearing liabilities Demand deposits 512,608 588,121 447,880 Accounts and drafts payable 1,081,245 1,141,329 986,572 Other liabilities 41,378 42,224 54,035 Total liabilities 2,208,539 2,374,936 2,080,556 Shareholders’ equity 211,069 211,142 253,436 Total liabilities and shareholders’ equity $ 2,419,608 $ 2,586,078 $ 2,333,992 $ 67,583 $ 60,533 $ 46,199 3.25 % 2.74 % 2.31 % Interest spread 1.20 % 2.32 % 2.17 % 2017 Over 2016 2016 Over 2015 (In thousands) Volume(1) Rate(1) Total Volume(1) Rate(1) Total Increase (decrease) in interest income: Loans(2), (3): Taxable $ (67 ) $ 72 $ 5 $ 469 $ (12 ) $ 457 Tax-exempt(4) (543 ) (115 ) (658 ) (180 ) 83 (97 ) Securities: Taxable 369 10 379 71 1 72 Tax-exempt4 2,291 (1,089 ) 1,202 789 (484 ) 305 Certificates of deposit (6 ) 37 31 19 15 34 Interest-bearing deposits in other financial institutions (146 ) 544 398 (10 ) 255 245 Federal funds sold and other short-term investments 63 816 879 58 220 278 Total interest income $ 1,961 $ 275 $ 2,236 $ 1,216 $ 78 $ 1,294 Interest expense on: Interest-bearing demand deposits $ (82 ) $ 304 $ 222 $ 52 $ (56 ) $ (4 ) Savings deposits (25 ) 4 (21 ) 28 7 35 Time deposits >=$250 17 (39 ) (22 ) (9 ) (8 ) (17 ) Other time deposits (54 ) 33 (21 ) (86 ) (10 ) (96 ) Short-term borrowings — — — (1 ) — (1 ) Total interest expense (144 ) 302 158 (16 ) (67 ) (83 ) Net interest income $ 2,105 $ (27 ) $ 2,078 $ 1,232 $ 145 $ 1,377 (1)The change in interest due to the combined rate/volume variance has been allocated in proportion to the absolute dollar amounts of the change in each.(2)Average balances include nonaccrual loans.(3)Interest income includes net loan fees.(4)Interest income is presented on a tax-equivalent basis assuming a tax rate of 35% in all years.(In thousands) 2023 Over 2022 2022 Over 2021 Total Total Increase (decrease) in interest income: $ 2,657 $ 8,708 $ 11,365 $ 4,150 $ 132 $ 4,282 Securities: Taxable 658 3,377 4,035 5,780 1,756 7,536 (2,351) (506) (2,857) (734) (142) (876) Short-term investments (2,671) 9,962 7,291 (291) 5,994 5,703 Total interest income $ (1,707) $ 21,541 $ 19,834 $ 8,905 $ 7,740 $ 16,645 Interest expense on: Interest-bearing demand deposits $ (329) $ 11,267 $ 10,938 $ 32 $ 2,504 $ 2,536 Savings deposits (25) 100 75 (3) 32 29 Time deposits >=$250 71 453 524 36 6 42 Other time deposits 236 895 1,131 (139) (157) (296) Short-term borrowings — 116 116 — — — Total interest expense (47) 12,831 12,784 (74) 2,385 2,311 Net interest income $ (1,660) $ 8,710 $ 7,050 $ 8,979 $ 5,355 $ 14,334 $686,231,000 and represented 43%$1.01 billion, representing 40.9% of the Company's total assets as of December 31, 20172023 and generated $28,641,000$50.8 million in revenueinterest income during the year then ended. The Company had no sub-prime mortgage loans or residential development loans in its portfolio for any of the years presented. The following tables show the composition of the loan portfolio at the end of the periods indicated and remaining maturities for loans as of December 31, 2017.Loans by Type December 31, (In thousands) 2017 2016 2015 2014 2013 Commercial and industrial $ 236,394 $ 214,767 $ 193,430 $ 203,350 $ 171,304 Real estate (commercial and church): Mortgage 410,748 425,947 415,564 423,641 455,190 Construction 35,307 17,477 30,139 18,612 16,449 Industrial Revenue Bond 3,374 6,639 19,831 23,348 9,167 Other 408 36 91 395 67 Total loans $ 686,231 $ 664,866 $ 659,055 $ 669,346 $ 652,177 Loans by Type December 31, (In thousands) 2023 2022 2021 Commercial and industrial $ 498,502 $ 561,616 $ 450,336 Real estate (commercial and faith-based): Mortgage 499,739 495,280 464,341 Construction 16,023 25,968 39,461 PPP — — 6,299 Other 54 42 130 Total loans $ 1,014,318 $ 1,082,906 $ 960,567 (At December 31, 2017) One Year Over 1 Year Over Or Less Through 5 Years 5 Years Fixed Floating Fixed Floating Fixed Floating (In thousands) Rate Rate(1) Rate Rate(1) Rate Rate(1) Total Commercial and industrial $ 7,524 $ 66,574 $ 66,735 $ 42,466 $ 31,655 $ 21,440 $ 236,394 Real Estate: Mortgage 45,089 4,542 267,081 9,147 77,954 6,935 410,748 Construction 15,230 1,202 8,768 — 1,180 8,927 35,307 Industrial Revenue Bonds 3,168 — 206 — — — 3,374 Other — 408 — — — — 408 Total loans $ 71,011 $ 72,726 $ 342,790 $ 51,613 $ 110,789 $ 37,302 $ 686,231 (1)Loans have been classified as having "floating" interest rates if the rate specified in the loan varies with the prime commercial rate of interest.(In thousands) One Year
Or LessOver 1 Year
Through 5 YearsTotal Fixed
RateFloating
RateFixed
RateFloating
RateFixed
RateFloating
RateCommercial and industrial $ 19,711 $ 54,318 $ 200,726 $ 29,778 $ 179,335 $ 14,634 $ 498,502 Real Estate: Mortgage 68,144 13,175 311,474 1,741 93,587 11,618 499,739 Construction 7,784 5 838 7,396 — — 16,023 Other — 54 — — — — 54 Total loans $ 95,639 $ 67,552 $ 513,038 $ 38,915 $ 272,922 $ 26,252 $ 1,014,318 As can be seen in the loan composition table above and as discussed in Item 8, Note 4, theThe Company's primary market niche for banking services is privately held businesses, franchise restaurants, and churches and church-relatedfaith-based ministries.$250,000$500,000 secured by real estate. Company management monitors the local economy in an attempt to determine whether it has had a significant deteriorating effect on such real estate loans. When problems are identified, appraised values are updated on a continual basis, either internally or through an updated external appraisal.Loan portfolio changes from20162023. Lease finance receivables and franchise restaurant loans, which are both included in commercial and industrial loans, decreased $39.4 million, or 24.5%, and $8.6 million, or 3.9%, respectively, during 2023. Commercial and industrial loans decreased $14.5 million, or 8.0%, during 2023. These decreases were due to December 31, 2017:Totalbeing more selective in booking new loans increased $21,365,000, or 3%, to $686,231,000.as a result of the decline in deposits during the year. Additional details regarding the types and maturities of loans in the loan portfolio are contained in the tables above and in Item 8, Note 4.Loan portfolio changes from December 31, 2015 to December 31, 2016:Total loans increased $5,811,000, or 1%, to $664,866,000. Additional details regarding the types and maturities of loans in the loan portfolio are contained in the tables above and in Item 8, Note 4.LoanCredit Losses (ALLL)noa release of credit losses and off-balance sheet credit exposures of $550,000 in 2023 and a provision for loancredit losses of $1.4 million in 2017, ($1,500,000) in 2016 and ($850,000) in 2015.2022. The amount of the provisions(release of) provision for loancredit losses was derived from the Company’s quarterly analysis of the ALLL.CECL model. The amount of the provision will fluctuate as determined by these quarterly analyses. The Company had net loan recoveries of $30,000, $40,000,$0 and $591,000$13,000 in 2017, 2016,2023 and 2015,2022, respectively. The ALLLACL was $10,205,000$13.1 million at December 31, 20172023 compared to $10,175,000$13.5 million at December 31, 20162022. The ACL represented 1.29% and $11,635,000 at December 31, 2015. The year-end 2017 and 2016 allowance represented 1.5% of outstanding loans, while the allowance represented 1.8%1.25% of outstanding loans at year-end 2015. From December 31, 2016 to2023 and December 31, 2017, the level of2022, respectively. The allowance for unfunded commitments was $132,000 at December 31, 2023 and $232,000 at December 31, 2022. There were no nonperforming loans decreased from $245,000 to $0. Nonperformingoutstanding at December 31, 2023 and one nonperforming loan outstanding with an outstanding balance of $1.2 million, or 0.11% of total loans are more fully explainedat December 31, 2022. The single nonperforming loan at December 31, 2022 paid off in the section entitled “Nonperforming Assets.”ALLLACL has been established and is maintained to absorb reasonably estimated and probableestimate the lifetime credit losses expected in the loan portfolio. An ongoing assessment is performed to determine if the balance is adequate. Charges or credits are made to expense to cover any deficiency or reduce any excess, as required. The current methodology consists of two components: 1) estimated credit lossesbased on individually evaluated loans that are determined to be impaired in accordance with FASB ASC 310 -Allowance for Credit Lossesand 2) estimated credit losses inherentchanges in the remainder of theeconomic forecast, qualitative risk factors, loan portfolio in accordance with FASB ASC 450 -Contingencies. Estimated credit losses is an estimate of the current amount of loans that is probable the Company will be unable to collect according to the original terms.value. For the remainder of the portfolio, the Company groups loans with similar risk characteristics into eight segments and applies historical loss rates to each segment based on a five fiscal-year look-back period. In addition, qualitative factors including credit concentration risk, national and local economic conditions, nature and volume of loan portfolio, legal and regulatory factors, downturns in specific industries including losses in collateral values, trends in credit quality at the Company and in the banking industry and trends in risk-rating agencies are also considered.The Company also utilizes ratio analysis to evaluate the overall reasonableness of the ALLL compared to its peers and required levels of regulatory capital. values.ALLL.ACL. These agencies may require the Company to adjust the ALLLACL based on their judgments and interpretations about information available to them at the time of their examinations.ALLLACL and the allocation of the allowance to the Company’s loan categories.LoanCredit Loss ExperienceDecember 31, (In thousands) 2017 2016 2015 2014 2013 Allowance at beginning of year $ 10,175 $ 11,635 $ 11,894 $ 11,679 $ 12,357 Loans charged-off: Commercial and industrial — — 30 — 1,307 Real estate (commercial and church): Mortgage — — — 76 233 Construction — — — — — Other — — — 3 — Total loans charged-off — — 30 79 1,540 Recoveries of loans previously charged-off: Commercial and industrial 30 39 610 41 47 Real estate (commercial and church): Mortgage — 1 10 252 315 Construction — — — — — Other — — 1 1 — Total recoveries of loans previously charged-off 30 40 621 294 362 Net loans (recovered) charged-off (30 ) (40 ) (591 ) (215 ) 1,178 Provision (credited) charged to expense — (1,500 ) (850 ) — 500 Allowance at end of year $ 10,205 $ 10,175 $ 11,635 $ 11,894 $ 11,679 Loans outstanding: Average $ 663,653 $ 678,061 $ 671,019 $ 663,824 $ 659,422 December 31 686,231 664,866 659,055 669,346 652,177 Ratio of allowance for loan losses to loans outstanding: Average 1.54 % 1.50 % 1.76 % 1.79 % 1.77 % December 31 1.49 % 1.53 % 1.77 % 1.78 % 1.79 % Ratio of net (recoveries) charge-offs to average loans outstanding — (.01 )% (.09 )% (.03 )% .18 % Allocation of allowance for loan losses(1): Commercial and industrial $ 3,652 $ 3,261 $ 3,083 $ 3,515 $ 3,139 Real estate (commercial and church): Mortgage 5,356 5,689 6,885 7,076 7,439 Construction 266 132 226 140 124 Industrial Revenue Bond 52 101 320 394 155 Other(2) 879 992 1,121 769 822 Total $ 10,205 $ 10,175 $ 11,635 $ 11,894 $ 11,679 Percentage of categories to total loans: Commercial and industrial 34.4 % 32.3 % 29.3 % 30.4 % 26.3 % Real estate (commercial and church): Mortgage 59.9 % 64.1 % 63.1 % 63.3 % 69.8 % Construction 5.1 % 2.6 % 4.6 % 2.8 % 2.5 % Industrial Revenue Bond .59 % 1.0 % 3.0 % 3.5 % 1.4 % Other .01 % — % — % — % — % Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % (1)Although specific allocations exist, the entire allowance is available to absorb losses in any particular loan category.(2)Includes unallocated allowance of $877,000 and $992,000 in 2017 and 2016, respectively.(In thousands) December 31, 2023 2022 2021 2020 2019 Allowance at beginning of year $ 13,539 $ 12,041 $ 11,944 $ 11,279 $ 10,225 Loans charged-off: Commercial and industrial — — — — — Real estate (commercial and faith-based): Mortgage — — — — — Construction — — — — — Other — — — — — Total loans charged-off — — — — — Recoveries of loans previously charged-off: Commercial and industrial — 13 12 19 81 Real estate (commercial and faith-based): Mortgage — — 15 1 — Construction — — — — — Other — — — — — Total recoveries of loans previously charged-off — 13 27 20 81 Net loans recovered — (13) (27) (20) (81) (Release of) provision for credit losses (450) 1,485 70 645 250 Allowance at end of year $ 13,089 $ 13,539 $ 12,041 $ 11,944 $ 10,556 Cumulative effect of accounting change (ASU 2016-13) — — — — 723 Allowance at beginning of next year $ 13,089 $ 13,539 $ 12,041 $ 11,944 $ 11,279 Allowance for unfunded commitments at beginning of year $ 232 $ 367 $ 567 $ 402 $ — (Release of) provision for credit losses (100) (135) (200) 165 — Allowance for unfunded commitments at end of year 132 232 367 567 — Cumulative effect of accounting change (ASU 2016-13) — — — — 402 Allowance for unfunded commitments at beginning of next year $ 132 $ 232 $ 367 $ 567 $ 402 Loans outstanding: Average $ 1,055,668 $ 992,004 $ 887,662 $ 906,631 $ 760,153 December 31 1,014,318 1,082,906 960,567 891,676 772,638 Ratio of allowance for credit losses to loans outstanding at December 31 1.29 % 1.25 % 1.25 % 1.34 % 1.37 % Ratio of net recoveries to average loans outstanding — % — % — % — % (0.01) % Commercial and industrial $ 5,412 $ 5,977 $ 5,035 $ 4,635 $ 4,874 Real estate (commercial and faith-based): Mortgage 7,569 7,378 6,714 6,892 5,370 Construction 108 184 292 417 312 Other — — — — — Total $ 13,089 $ 13,539 $ 12,041 $ 11,944 $ 10,556 Percentage of categories to total loans: Commercial and industrial 49.1 % 51.9 % 46.9 % 33.5 % 41.9 % Real estate (commercial and faith-based): Mortgage 49.3 45.7 48.3 48.7 52.8 Construction 1.6 2.4 4.1 5.5 5.3 PPP — — 0.7 12.3 — Other — — — — — Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Troubled debt restructuringsLoans with modifications to borrowers experiencing financial difficulty are not included in nonperforming loans unless they are on non-accrual status or past due 90 days or more.InterestThere was no interest income recognized on nonaccrual loans which would have been recorded under the original terms of the loans, was approximately $24,000 and $66,000 for the years ended December 31, 20172023 and 2016, respectively. Of this amount, approximately $17,000 and $47,000 was actually recorded as interest income on such loans during the years ended December 31, 2017 and 2016, respectively.2017. Total2023 and one nonaccrual loansloan of $1.2 million at December 31, 2016 consisted of one loan totaling $245,000, which was paid off in October 2017.2017 and2023 or December 31, 2016.does not include a significant amountincludes $157,000 of single family real estate mortgages, as the Company does not market its services to retail customers. Also, the Company had no sub-prime mortgage loans or residential development loans in its portfolio in any of the years presented.December 31, (In thousands) 2017 2016 2015 2014 2013 Commercial and industrial: Nonaccrual $ — $ — $ — $ — $ 11 Contractually past due 90 days or more and still accruing — — — — — Real estate – mortgage: Nonaccrual — (1) 245 3,135 (1) 488 1,786 Contractually past due 90 days or more and still accruing — — — — — Total nonperforming loans $ — $ 245 $ 3,135 $ 488 $ 1,797 Total foreclosed assets — — — — — Total nonperforming assets $ — $ 245 $ 3,135 $ 488 $ 1,797 (1)In October 2017, one nonaccrual loan with a balance of $215,000 was paid in full. In February 2016, one nonaccrual loan with a balance of $2,727,000 was paid in full.(In thousands) December 31, 2023 2022 2021 2020 2019 Commercial and industrial: Nonaccrual $ — $ 1,150 $ — $ — $ — Contractually past due 90 days or more and still accruing — — — — — Real estate – mortgage: Nonaccrual — — — — — Contractually past due 90 days or more and still accruing — — — — — Total nonperforming loans $ — $ 1,150 $ — $ — $ — Total foreclosed assets — — — — — Total nonperforming assets $ — $ 1,150 $ — $ — $ — 20172023 compared to 20162022 and 2021 include the following significant pre-tax components:(In thousands) December 31, 2023 2022 2021 Salaries and commissions $ 93,474 $ 85,489 $ 75,641 Share-based compensation 4,139 6,732 2,859 Net periodic pension cost (benefit) 733 (2,564) (1,839) Other benefits 20,348 16,817 15,494 Total personnel expense $ 118,694 $ 106,474 $ 92,155 Occupancy 3,560 3,676 3,824 Equipment 7,138 6,668 6,745 Amortization of intangible assets 780 680 859 Other operating 29,983 22,078 16,743 Total operating expense $ 160,155 $ 139,576 $ 120,326 employee benefitscommissions increased $8.0 million, or 9.3%, as a result of merit increases and an increase in average full-time equivalent employees ("FTEs") of 10.8% due to strategic investments in various technology initiatives.$4,758,000, or 7%, to $77,339,000 as$3.3 million. Despite the Company invested in staff and technology to win and support new business. Outside service expense increased $1,355,000, or 24%, for continual technology advancements to support customers. Equipment expense increased $620,000 to $5,071,000 primarily due to depreciation of internally developed software.Operating expenses in 2016 compared to 2015 include the following significant pre-tax components:Salaries and employee benefits expense increased $2,267,000, or 3%, to $72,581,000 as the Company invested in staff and technology to win and support new business. Equipment expense increased $160,000 to $4,451,000 primarily due to depreciation of internally developed software. Other operating expense increased $1,273,000, or 11%, to $12,643,000 primarily due to a one-time litigation settlement that occurred in 2015 ($800,000 reduction in other operating expenses).Income Tax ExpenseOn December 22, 2017, the TCJA was enacted. Among other things, the new law (i) establishes a new, flat corporate federal statutory income tax rate of 21%; (ii) eliminates the corporate alternative minimum tax and allows the use of any such carryforwards to offset regular tax liability for any taxable year; (iii) limits the deduction for net interest expense incurred by U.S. corporations; (iv) allows businesses to immediately expense, for tax purposes, the cost of new investments in certain qualified depreciable assets; (v) eliminates or reduces certain deductions related to meals and entertainment expenses; (vi) modifies the limitation on excessive employee remuneration to eliminate the exception for performance-based compensation and clarifies the definition of a covered employee; and (vii) limits the deductibility of deposit insurance premiums. The TCJA also significantly changes U.S. tax law related to foreign operations, though, such changes do not currently impact the Company on a significant level.Also on December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance on accounting for tax effects of the TCJA. SAB 118 provides a measurement period of up to one year from the enactment date to complete the accounting. Based on the information available and current interpretation of the rules, the Company has made provisional estimates of the impact of the reductionCompany's defined benefit pension plan being frozen in the corporate tax rate and remeasurementfirst quarter of certain deferred tax assets and liabilities based on the rate at which they are expected to reverse2021 resulting in the future. The final analysis and measurement will be completed during 2018 when the Company files the 2017 U.S. federal income tax return.As more fully describedno service cost in this Item 7 and Note 13, the Company’s 2017 results of operations are skewed by a one-time, non-cash charge to income taxsubsequent periods, expense of $1,824,000, triggered by the passage of the TCJA. While the reduction in the federal corporate tax rate negatively impacted 2017 earnings, the rate reduction is projected to significantly boost after-tax earnings in the future.Taxable-equivalent adjustments noted throughout this report are the result of increasing income from tax-free loans and investments by an amount equal to the taxes that would be paid if the income were fully taxable based on a 35% federal tax rate, thus making tax-exempt yields comparable to taxable asset yields. Beginning January 1, 2018, taxable-equivalent adjustments will be based upon the new tax rate of 21%increased as a result of the TCJA.20172023 totaled $9,885,000$7.3 million, compared to $7,716,000 and $7,978,000$8.0 million in 2016 and 2015, respectively.2022. When measured as a percent of pre-tax income, the Company’s effective tax rate was 28%19.5% and 18.6% in 2017, 24% in 2016,2023 and 26% in 2015.2022, respectively. The increase in 2017 tax expense was primarily the result of a one-time, non-cash charge of $1,824,000 triggered by the passage of the TCJA on December 22, 2017. The charge consists of the following:●The deferred tax inventory was revalued at the new rate of 21% and resulted in a net credit of $462,000.●AOCI related to pension and unrealized gains/losses on securities available for sale was revalued at the new rate of 21% and resulted in a net charge of $2,286,000.The Company’s effective tax rate for 2017 includingin 2023 compared to 2022 was primarily due to a lower level of tax-free interest income on municipal securities in the current year.excluding the one-time TCJA charge was 28% and 25%political securities decreased $76.1 million, or 25.8%, respectively.As a result of the lower TCJA rates, the effective rate for 2018 is anticipated to decrease by approximately 25% vs. the 2017 rate excluding the TCJA charge. The Company’s effective tax rate has traditionally been lower than the statutory rate because of investments and loans that are tax exempt.Also$219.0 million at December 31, 2023 as a result of the TCJA, the FASB issued ASU 2018-02 allowing a one-time reclassification from AOCI to retained earnings for any amounts “stranded” in AOCI as a result of entries required by TCJA. Accordingly, the Company early adoptedmaturities and recorded a $2,286,000 reclassification from AOCI to retained earnings at December 31, 2017.Investment PortfolioInvestment portfolio changes from December 31, 2016 to December 31, 2017:State and political subdivision securities increased $46,898,000, or 12.7%, to $417,032,000. U.S. government agency securities increased $32,828,000 to $45,500,000.sales. The investment portfolio provides the Company with a significant source of earnings, secondary source of liquidity, and mechanisms to manage the effects of changes in loan demand and interest rates. Therefore, the size, asset allocation and maturity distribution of the investment portfolio will vary over time depending on management’s assessment of current and future interest rates, changes in loan demand, changes in the Company’s sources of funds and the economic outlook. During this period,2023, the Company purchased state and political subdivision along with U.S. government agency securities. Theseinvestment securities all had A or better credit ratings and maturities approaching 15 years. With the additional liquidity provided by the increase in deposits and accounts and drafts payable, the Company made these purchases to continue to reduce the level of short-term rate sensitive assets. All purchases were made in accordance with the Company’s investment policy.20172023 for which the aggregate amortized cost exceeded 10% of total shareholders' equity.Investments by TypeDecember 31, (In thousands) 2017 2016 2015 State and political subdivisions $ 417,032 $ 370,134 $ 369,070 U.S. government agencies 45,500 12,672 — Certificates of deposit 7,991 7,746 6,626 $ 470,523 $ 390,552 $ 375,696 Investments by Type (In thousands) December 31, 2023 2022 2021 State and political subdivisions $ 219,035 $ 295,126 $ 371,128 Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored enterprises 157,799 173,939 168,646 Corporate bonds 102,340 85,097 84,338 Asset-backed securities issued or guaranteed by U.S. Government agencies or sponsored enterprises 39,222 45,023 49,341 Treasury securities 108,721 155,283 — Total investments $ 627,117 $ 754,468 $ 673,453 Investment Securities by Maturity (At December 31, 2023) (In thousands) Within 1
YearOver 1 to 5
YearsOver 5 to
10 YearsOver
10 YearsYield State and political subdivisions $ 20,492 $ 78,179 $ 91,789 $ 28,575 2.49 % (1) Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored enterprises — 713 40,396 116,690 1.69 % Corporate bonds — 55,771 46,569 — 3.69 % Asset-backed securities issued or guaranteed by U.S. Government agencies or sponsored enterprises — — — 39,222 5.44 % Treasury securities 108,721 — — — 2.47 % Total investments $ 129,213 $ 134,663 $ 178,754 $ 184,487 2.64 % 2.55 % 4.08 % 1.98 % 2.48 % 2.64 % Investment Securities by Maturity(At December 31, 2017)Within 1 Over 1 to 5 Over 5 to Over (In thousands) Year Years 10 Years 10 Years Yield State and political subdivisions $ 16,143 $ 56,929 $ 246,512 $ 97,448 4.01 %(1) U.S. government agencies — — 17,449 28,051 2.11 % Certificates of deposit 6,495 1,496 — — 1.38 % $ 22,638 $ 58,425 $ 263,961 $ 125,499 3.78 % Weighted average yield(1) 4.58 % 3.52 % 4.00 % 3.33 % 3.78 % (1)Yields are presented on a tax-equivalent basis assuming a tax rate of 35%.(In thousands) December 31, 2023 2022 2021 Noninterest-bearing demand deposits $ 524,359 $ 642,757 $ 582,642 Interest-bearing demand deposits 616,455 614,460 638,861 Total deposits $ 1,140,814 $ 1,257,217 $ 1,221,503 Accounts and drafts payable $ 1,071,369 $ 1,067,600 $ 1,050,396 increased 31% from December 31, 2016decreased $118.4 million, or 18.4%, to $281,541,000$524.4 million at December 31, 2017. The average balances of these2023 and interest-bearing deposits increased 9% in 2017 to $209,014,000. These balances are primarily maintained by commercial customers, faith-based ministries, and new payment and information processing relationships and can fluctuate on a daily basis.Interest-bearing deposits decreased $10,758,000,$2.0 million, or 3%0.3%, to $396,547,000$616.5 million at December 31, 2017.2023. The average balancesCompany experienced deposit attrition during the first six months of these2023 as larger commercial depository clients moved their funds to higher interest rate alternatives outside of the banking system. The Company also incurred a shift from non-interest bearing to interest-bearing deposits decreased to $393,476,000 in 2017 from $422,660,000 in 2016.$19,601,000,$3.8 million, or 3%0.4%, to $661,888,000$1.07 billion, at December 31, 2017. The average balance of these funds increased $58,207,000, or 9%, to $713,052,000 in 2017. This increase was the result of continued growth in the customer base and a strengthening global economy.2023. Due to the Company’s payment processing cycle, average balances are much more indicative of the underlying activity than period-end balances since point-in-time comparisons can be misleading if the comparison dates fall on different days of the week.2017$100 to Less $250or (In thousands) $100 or Less Than $250 More Total Three months or less $ 1,201 $ 17,442 $ 3,539 $ 22,182 Three to six months 537 14,399 4,192 19,128 Six to twelve months 536 757 5,511 6,804 Over twelve months 384 787 3,213 4,384 Total $ 2,658 $ 33,385 $ 16,455 $ 52,498 (In thousands) $100 or Less $100 to Less
Than $250$250 or
MoreTotal Three months or less $ 3,466 $ 34,607 $ 7,576 $ 45,649 Three to six months 349 2,233 4,276 6,858 Six to twelve months 923 9,175 10,011 20,109 Over twelve months 528 2,525 1,053 4,106 Total $ 5,266 $ 48,540 $ 22,916 $ 76,722 $228,110,000$372.5 million at December 31, 2017, a decrease2023, an increase of $38,633,000,$171.5 million, or 14%85.4%, from December 31, 2016.2022. The increase during 2023 is primarily attributed to decreases in investment securities, loans and payments in advance of funding, partially offset by a decrease in deposits. At December 31, 2017, these assets2023, cash and cash equivalents represented 14%15.0% of total assets. Cashassets and cash equivalents are the Company’s and its subsidiaries’ primary source of liquidity to meet future expected and unexpected loan demand, depositor withdrawals or reductions in accounts and drafts payable.in debt securities available-for-sale at fair value was $470,523,000were $627.1 million at December 31, 2017, an increase2023, a decrease of $79,971,000,$127.4 million, or 20%16.9%, from December 31, 2016. These assets2022. Investment securities represented 29%25.3% of total assets at December 31, 2017 and were primarily state and political subdivision securities.2023. Of the total portfolio, 5%20.6% mature in one year or less, 12%21.5% mature after one year through five years and 83%57.9% mature after five years.2017,2023, the Bank had unsecured lines of credit at six correspondent banks to purchase federal funds up to a maximum of $68,000,000 at the following banks: US Bank, $20,000,000; Wells Fargo Bank, $15,000,000; PNC Bank, $12,000,000; Frost National Bank, $10,000,000; JPM Chase Bank, $6,000,000; and UMB Bank $5,000,000.$83.0 million in aggregate. As of December 31, 2017,2023, the Bank had secured lines of credit with the Federal Home Loan Bank (“FHLB”) of $204,789,000$228.3 million collateralized by commercial mortgage loans. At December 31, 2017,2023, the Company had a linelines of credit from UMB Bankthree banks up to a maximum of $50,000,000 and First Tennessee Bank of $50,000,000$250.0 million in aggregate collateralized by state and political subdivision securities. There were nonot any amounts outstanding at December 31, 2023 and 2022 under any of the lines of credit discussed above at December 31, 2017 or 2016.2017, 20162023, 2022 and 20152021 were $38,890,000, $35,189,000$36.9 million, $51.6 million, and $33,493,000,$34.5 million, respectively. Net income plus depreciation and amortization accounts for most of the operating cash provided. Net cash flows from investing and financing activities fluctuate greatly as the Company actively manages its investment and loan portfolios and customer activity influences changes in deposit and accounts and drafts payable balances. Further analysis of the changes in these account balances is discussed earlier in this report. Due to the daily fluctuations in these account balances, management believes that the analysis of changes in average balances, also discussed earlier in this report, can be more indicative of underlying activity than the period-end balances used in the statements of cash flows. Management anticipates that cash and cash equivalents, maturing investments, cash from operations, and borrowing lines will continue to be sufficient to fund the Company’s operations and capital expenditures in 2018.2024. The Company anticipates the annual capital expenditures for 20182024 should range from $4$10 million to $6$12 million. Capital expenditures in 20182024 are expected to primarily consist of purchases of equipment and software related to the payment and information processing services business.non-interest bearingnoninterest-bearing accounts and drafts payable generated from its payment and information processing services. Accordingly, higher levels of interest rates will generally allow the Company to earn more net interest income. Conversely, a lower interest rate environment will generally tend to depress net interest income. The Company actively manages its balance sheet in an effort to maximize net interest income as the interest rate environment changes. This balance sheet management impacts the mix of earning assets maintained by the Company at any point in time. For example, in a low interest rate environment, short-term relatively lower rate liquid investments may be reduced in favor of longer term relatively higher yielding investments and loans. If the primary source of liquidity is reduced in a low interest rate environment, a greater reliance would be placed on secondary sources of liquidity including borrowing lines, the ability of the Bank to generate deposits, and the investment portfolio to ensure overall liquidity remains at acceptable levels.2017,2023, new business was added in both the transportation and facility expense management operations, driven by both successful marketing efforts and the solid market leadership position held by Cass.20172023 as shown in Item 8, Note 2 of this report. All share and per share data have been restated to give effect to the 10% stock dividend issued on December 15, 2017.In 2017, cashCash dividends paid were $.87 per share for a total of $10,675,000, an increase of $696,000, or 7%, compared to $.81 per share for a total of $9,979,000$16.0 million and $15.4 million in 2016. The increase is attributable to the per-share amount paid2023 and the increase in outstanding shares as a result of the stock dividend.$225,088,000,$229.8 million, or 14%9.3% of total assets, at December 31, 2017,2023, an increase of $17,053,000 over the balance at$23.5 million as compared to December 31, 2016. This2022. The increase resultedwas primarily froma result of net income of $25,014,000, an increase$30.1 million and the decrease in accumulated other comprehensive incomeloss of $3,509,000, and an increase$11.9 million due to the change in additional paid in capital related to equity compensation of $2,340,000. These increases weremarket values on investment securities, partially offset by the payment of cash dividends of $10,675,000$16.0 million, and the repurchase of treasury shares of $2,270,000.2017,2023, unappropriated retained earnings of $30,137,000$30.8 million were available at the Bank for the declaration of dividends to the Company without prior approval from regulatory authorities.stock. stock and has no expiration date. A total of 486,036 shares remain under the buyback program at December 31, 2023.41,846a total of 150,541 shares at an aggregate cost of $2,270,000$5.8 million during the year ended December 31, 20172023 and 205,835130,374 shares at an aggregate cost of $9,215,000$5.3 million during the year ended December 31, 2016. As of December 31, 2017, 500,000 shares remained available for repurchase under the program.2022. A portion of the repurchased shares may be used for the Company'sCompany’s employee benefit plans and the balance will be available for other general corporate purposes. The stock repurchase authorization does not have an expiration date and the pace of future repurchase activity will depend on factors such as levels of regulatory capital, cash generation from operations, cash requirements for investments, repayment of debt, current stock price, business and market conditions, and other factors. The Company may repurchase shares from time to time on theinstruments and commitments under operating and capital leases.instruments. These financial instruments include commitments to extend credit, commercial letters of credit and standby letters of credit. The Company’s maximum potential exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, commercial letters of credit and standby letters of credit is represented by the contractual amounts of those instruments. At December 31, 2017, no amounts have2023, an allowance for unfunded commitments of $132,000 had been accruedrecorded. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Provision and Allowance for any estimated losses for these instruments. conditional commitments issued by the Company or its subsidiaries to guarantee the performance of a customer to a third party. These off-balance sheet financial instruments generally have fixed expiration dates or other termination clauses and may require payment of a fee. At December 31, 2017,2023, the balance of loan commitments, standby and commercial letters of credit were $87,013,000, $14,347,000$196.1 million, $13.6 million and $3,246,000,$353,000, respectively. Since some of the financial instruments may expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. Commitments to extend credit and letters of credit are subject to the same underwriting standards as those financial instruments included on the consolidated balance sheets. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of the credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but is generally accounts receivable, inventory, residential or income-producing commercial property or equipment. In the event of nonperformance, the Company or its subsidiaries may obtain and liquidate the collateral to recover amounts paid under its guarantees on these financial instruments.The following table summarizes contractual cash obligations See Note 14 "Disclosures about Fair Value of Financial Instruments" for more information.related to operating lease commitments and time deposits at December 31, 2017:Amount of Commitment Expiration per Period Less than 1 1-3 3-5 Over (In thousands) Total Year Years Years 5 Years Operating lease commitments $ 6,463 $ 1,518 $ 2,515 $ 2,204 $ 226 Time deposits 52,498 48,115 2,919 1,464 — $ 58,961 $ 49,633 $ 5,434 $ 3,668 $ 226 During 2017, the Company made nodid not make a contribution to its noncontributory defined benefit pension plan. In determining pension expense, the Company makes several assumptions, including the discount rate and long-term rate of return on assets. These assumptions are determined at the beginning of the plan year based on interest rate levels and financial market performance.2017,2023, these assumptions were as follows:Assumption Rate Weighted average discount rate 5.25 4.25% Rate of increase in compensation levels(a)Expected long-term rate of return on assets 6.00 6.50% (a)6.00% graded down to 3.25% over the first seven years of service.and its fair market value of equity areis affected by changes in market interest rates. The asset/liability management discipline as applied by the Company seeks to limit the volatility, to the extent possible, of both net interest income and the fair market value of equity that can result from changes in market interest rates. This is accomplished by limiting the concentration of maturities of fixed rate investments, loans, and deposits; matching fixed rate assets and liabilities to the extent possible; and optimizing the mix of fees and net interest income. However, as discussed below, the Company's asset/liability position often differs significantly from most other financial holding companies with significant positive cumulative "gaps" shown for each time horizon presented."gaps." This asset sensitive position is caused primarily by the operations of the Company, which generate large balances of accounts and drafts payable. These balances, which are noninterest bearing, contribute to the Company’s historical high net interest margin butcan cause the Company to become susceptible to changes in interest rates, with a decreasing net interest margin and fair market value of equity in periods of declining interest rates and an increasing net interest margin and fair market value of equity in periods of rising interest rates. and fair market value of equity in various interest rate environments. The ALCO evaluates the Company's risk position to determine whether the level of exposure is significant enough to hedge a potential decline in earnings and value or whether the Company can safely increase risk to enhance returns. The ALCO uses gap reports, 12-month net interest income simulations, and fair market value of equity analyses as its main analytical tools to provide management with insight into the Company's exposure to changing interest rates.scenarios in order to quantify potential changes in short-term accounting income.scenarios. Management has set policy limits specifying acceptable levels of interest rate risk given multiple simulated rate movements. These simulations are more informative than gap reports because they are able to capture more of the dynamics within the balance sheet, such as basis risk and embedded options risk. A table containing simulation results as of December 31, 2017,2023, from an immediate and sustained parallel change in interest rates in three varying scenarios is shown below.contains the analysis, which illustrates the effectsprojected impact of an immediate and sustained parallel change in interest ratesrate shocks on net interest income as of December 31, 2017:Change in Interest Rates % Change in Net Interest Income % Change in Fair Market Value of Equity +200 basis points 3 % 6 % +100 basis points 2 % 3 % Stable rates — — -100 basis points (5 %) (4 %) -200 basis points (8 %) (6 %) Change in Interest Rates % Change in Net Interest Income +200 basis points 14.7% +100 basis points 6.5 Flat rates — -100 basis points (3.2) -200 basis points (6.0)% Interest Rate Sensitivity PositionfollowingCompany is generally asset sensitive as average interest-earning assets of $2.08 billion for 2023 greatly exceeded average interest-bearing liabilities of $573.3 million. The table presentsabove on the Company’sprojected impact of interest rate risk positionshocks results from a static balance sheet at December 31, 20172023. On an average balance basis, the percent change in net interest income generally is higher to the positive for a rising interest rate environment and more negative for a declining interest rate environment. Since the various time periods indicated:Variable 0-90 91-180 181-364 1-5 Over (In thousands) Rate Days Days Days Years 5 Years Total Earning assets: $ 160,196 $ 5,165 $ 17,377 $ 46,747 $ 342,583 $ 110,789 $ 682,857 — — — 3,168 206 — 3,374 — 5,221 2,529 7,028 57,726 344,528 417,032 — — — — — 45,500 45,500 — 1,500 — 4,995 1,496 — 7,991 1,190 — — — — — 1,190 210,688 — — — — — 210,688 Total earning assets $ 372,074 $ 11,886 $ 19,906 $ 61,938 $ 402,011 $ 500,817 $ 1,368,632 Interest-sensitive liabilities: $ 260,418 $ — $ — $ — $ — $ — $ 260,418 72,463 — — — — — 72,463 11,168 — — — — — 11,168 — 3,540 4,192 5,511 3,212 — 16,455 — 18,643 14,936 1,293 1,171 — 36,043 — — — — — — — Total interest-bearing liabilities $ 344,049 $ 22,183 $ 19,128 $ 6,804 $ 4,383 $ — $ 396,547 Interest sensitivity gap: $ 28,025 $ (10,297 ) $ 778 $ 55,134 $ 397,628 $ 500,817 $ 972,085 28,025 17,728 18,506 73,640 471,268 972,085 972,085 1.08 0.52 1.04 9.10 91.72 — 3.45 1.08 1.05 1.05 1.19 2.19 3.45 3.45
Company held more short-term investments ($351.6 million) on its ending balance sheet at December 31, 2023 than its average balance for full year 2023 of $287.2 million, the percent changes in net interest income are not necessarily representative of what would occur in a changing interest rate environment as these short-term investments are floating rate assets. The Company's cash position can vary significantly on a day to day basis.(1)Balances shown reflect earliest re-pricing date.December 31, (In thousands except share and per share data) 2017 2016 Assets Cash and due from banks $ 17,422 $ 11,814 Interest-bearing deposits in other financial institutions 152,056 136,852 Federal funds sold and other short-term investments 58,632 118,077 228,110 266,743 Securities available-for-sale, at fair value 470,523 390,552 Loans 686,231 664,866 10,205 10,175 676,026 654,691 Premises and equipment, net 21,586 21,086 Investments in bank-owned life insurance 16,927 16,445 Payments in excess of funding 139,103 105,347 Goodwill 12,569 11,590 Other intangible assets, net 1,996 1,997 Other assets 36,369 36,388 $ 1,603,209 $ 1,504,839 Liabilities and Shareholders’ Equity Liabilities: Deposits $ 281,541 $ 214,656 396,547 407,305 678,088 621,961 Accounts and drafts payable 661,888 642,287 Other liabilities 38,145 32,556 1,378,121 1,296,804 Shareholders’ Equity: — — 6,524 5,966 Additional paid-in capital 204,631 128,455 Retained earnings 59,314 118,363 (32,061 ) (30,206 ) Accumulated other comprehensive loss (13,320 ) (14,543 ) 225,088 208,035 $ 1,603,209 $ 1,504,839 December 31, (In thousands except share and per share data) 2023 2022 Assets Cash and due from banks $ 20,908 $ 20,995 Short-term investments 351,560 179,947 Cash and cash equivalents 372,468 200,942 Securities available-for-sale, at fair value 627,117 754,468 Loans 1,014,318 1,082,906 Less allowance for credit losses 13,089 13,539 Loans, net 1,001,229 1,069,367 Payments in advance of funding 198,861 293,775 Premises and equipment, net 30,093 19,958 Investments in bank-owned life insurance 49,159 47,998 Goodwill 17,309 17,309 Other intangible assets, net 3,345 4,126 Accounts and drafts receivable from customers 110,651 95,779 Other assets 68,390 69,301 Total assets $ 2,478,622 $ 2,573,023 Liabilities and Shareholders’ Equity Liabilities: Deposits Noninterest-bearing $ 524,359 $ 642,757 Interest-bearing 616,455 614,460 Total deposits 1,140,814 1,257,217 Accounts and drafts payable 1,071,369 1,067,600 Other liabilities 36,630 41,881 Total liabilities 2,248,813 2,366,698 Shareholders’ Equity: Preferred stock, par value $0.50 per share; 2,000,000 shares authorized and no shares issued — — Common stock, par value $0.50 per share; 40,000,000 shares authorized; 15,505,772 shares issued at December 31, 2023 and 2022; 13,582,375 and 13,669,656 shares outstanding at December 31, 2023 and 2022, respectively. 7,753 7,753 Additional paid-in capital 208,007 207,422 Retained earnings 145,782 131,682 Common shares in treasury, at cost (1,923,397 shares at December 31, 2023 and 1,836,116 shares at December 31, 2022, respectively) (84,264) (81,211) Accumulated other comprehensive loss (47,469) (59,321) Total shareholders’ equity 229,809 206,325 Total liabilities and shareholders’ equity $ 2,478,622 $ 2,573,023 For the Years Ended December 31, (In thousands except per share data) 2017 2016 2015 Fee Revenue and Other Income: Information services payment and processing revenue $ 93,322 $ 83,713 $ 78,622 Bank service fees 1,349 1,276 1,223 Gains on sales of securities — 387 2,910 Other 841 760 613 95,512 86,136 83,368 Interest Income: Interest and fees on loans 28,641 29,063 28,669 Interest and dividends on securities: 554 143 38 10,439 9,658 9,460 2,343 1,066 543 41,977 39,930 38,710 Interest Expense: Interest on deposits 2,187 2,029 2,111 2,187 2,029 2,111 39,790 37,901 36,599 Provision for loan losses — (1,500 ) (850 ) 39,790 39,401 37,449 135,302 125,537 120,817 Operating Expense: Personnel 77,339 72,581 70,314 Occupancy 3,480 3,390 3,400 Equipment 5,071 4,451 4,291 Amortization of intangible assets 427 408 408 Other operating 14,086 12,643 11,370 100,403 93,473 89,783 34,899 32,064 31,034 Income tax expense 9,885 7,716 7,978 $ 25,014 $ 24,348 $ 23,056 Basic Earnings Per Share $ 2.04 $ 1.99 $ 1.85 Diluted Earnings Per Share 2.01 1.96 1.82 For the Years Ended December 31, (In thousands except per share data) 2023 2022 2021 Fee Revenue and Other Income: Processing fees $ 79,566 $ 76,470 $ 74,589 Financial fees 45,985 43,757 32,733 Other 4,916 4,755 2,369 Total fee revenue and other income 130,467 124,982 109,691 Interest Income: Interest and fees on loans 50,825 39,460 35,178 Interest and dividends on securities: Taxable 14,118 10,083 2,547 Exempt from federal income taxes 4,097 6,354 7,046 Interest on federal funds sold and other short-term investments 13,720 6,429 726 Total interest income 82,760 62,326 45,497 Interest Expense: Interest on deposits 16,150 3,482 1,171 Interest on short-term borrowings 116 — — Total interest expense 16,266 3,482 1,171 Net interest income 66,494 58,844 44,326 (Release of) provision for credit losses (550) 1,350 (130) Net interest income after (release of) provision for credit losses 67,044 57,494 44,456 Total net revenue 197,511 182,476 154,147 Operating Expense: Personnel 118,694 106,474 92,155 Occupancy 3,560 3,676 3,824 Equipment 7,138 6,668 6,745 Amortization of intangible assets 780 680 859 Other operating 29,983 22,078 16,743 Total operating expense 160,155 139,576 120,326 Income before income tax expense 37,356 42,900 33,821 Income tax expense 7,297 7,996 5,217 Net income $ 30,059 $ 34,904 $ 28,604 Basic Earnings Per Share $ 2.22 $ 2.58 $ 2.03 Diluted Earnings Per Share 2.18 2.53 2.00 For the Years Ended December 31, (In thousands) 2017 2016 2015 Comprehensive income: Net income $ 25,014 $ 24,348 $ 23,056 Other comprehensive income: 6,637 (10,644 ) 1,527 (2,465 ) 3,954 (567 ) — (387 ) (2,910 ) — 144 1,081 (1,311 ) (1,435 ) 6,256 487 531 (2,324 ) 161 (42 ) (96 ) Total comprehensive income $ 28,523 $ 16,469 $ 26,023 For the Years Ended December 31, (In thousands) 2023 2022 2021 Comprehensive Income: Net income $ 30,059 $ 34,904 $ 28,604 Other comprehensive income (loss): Net unrealized gain (loss) on securities available-for-sale 12,605 (79,746) (10,447) Tax effect (3,000) 18,981 2,487 Reclassification adjustments for losses (gains) included in net income 173 (15) (51) Tax effect (41) 3 12 FASB ASC 715 pension adjustment 2,550 1,504 11,363 Tax effect (607) (358) (2,705) Foreign currency translation adjustments, net of tax 172 (143) (191) Other comprehensive income (loss) 11,852 (59,774) 468 Total comprehensive income (loss) $ 41,911 $ (24,870) $ 29,072 For the Years Ended December 31, (In thousands) 2017 2016 2015 Cash Flows From Operating Activities: Net income $ 25,014 $ 24,348 $ 23,056 11,341 9,429 8,859 — (387 ) (2,910 ) 2,339 1,959 2,059 — (1,500 ) (850 ) 3,997 319 (137 ) (3,026 ) 357 47 8,008 4,137 4,550 (4,656 ) (4,070 ) (839 ) (4,127 ) 597 (342 ) 38,890 35,189 33,493 Cash Flows From Investing Activities: Proceeds from sales of securities available-for-sale — 21,491 99,347 Proceeds from maturities of securities available-for-sale 44,156 43,524 38,460 Purchase of securities available-for-sale (124,777 ) (96,290 ) (161,279 ) Net (increase) decrease in loans (21,335 ) (5,771 ) 10,882 (Increase) decrease in payments in excess of funding (33,756 ) 179 14,701 Purchases of premises and equipment, net (4,127 ) (4,684 ) (5,747 ) (139,839 ) (41,551 ) (3,636 ) Cash Flows From Financing Activities: Net increase in noninterest-bearing demand deposits 66,885 32,833 22,824 (7,472 ) (51,440 ) 23,536 Net decrease in time deposits (3,286 ) (5,916 ) (18,075 ) Net increase (decrease) in accounts and drafts payable 19,601 65,028 (78,169 ) Cash dividends paid (10,675 ) (9,979 ) (9,697 ) Purchase of common shares for treasury (2,270 ) (9,215 ) (10,951 ) Other financing activities, net (467 ) (1,378 ) (488 ) 62,316 19,933 (71,020 ) Net (decrease) increase in cash and cash equivalents (38,633 ) 13,571 (41,163 ) Cash and cash equivalents at beginning of year 266,743 253,172 294,335 Cash and cash equivalents at end of year $ 228,110 $ 266,743 $ 253,172 Supplemental information: $ 2,178 $ 2,017 $ 2,133 7,677 7,061 8,190 For the Years Ended December 31, (In thousands) 2023 2022 2021 Cash Flows From Operating Activities: Net income $ 30,059 $ 34,904 $ 28,604 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of intangible assets 780 680 859 Net amortization of premium/discount on investment securities 4,473 6,275 7,328 Depreciation 4,189 4,021 4,313 Losses (gains) on sales of securities 173 (15) (51) Stock-based compensation expense 4,139 6,732 2,859 (Release of) provision for credit losses (550) 1,350 (130) Deferred income tax benefit (284) (1,163) (698) (Decrease) increase in current income tax liability (1,481) 724 206 Increase (decrease) in pension liability 806 (2,484) (1,811) Increase in accounts receivable (3,841) (2,520) (602) Other operating activities, net (1,527) 3,104 (6,330) Net cash provided by operating activities 36,936 51,608 34,547 Cash Flows From Investing Activities: Proceeds from sales of securities available-for-sale 111,583 3,838 63,774 Proceeds from maturities of securities available-for-sale 39,233 61,209 96,951 Purchases of securities available-for-sale (15,332) (232,083) (494,226) Net decrease (increase) in loans 68,588 (122,326) (68,664) Purchase of bank-owned life insurance — (4,000) (25,119) Decrease (increase) in payments in advance of funding 94,914 (2,348) (96,864) Purchases of premises and equipment, net (14,324) (5,866) (4,369) Asset acquisition of TouchPoint — (4,814) — Net cash provided by (used in) investing activities 284,662 (306,390) (528,517) Cash Flows From Financing Activities: Net (decrease) increase in noninterest-bearing demand deposits (118,398) 60,115 89,138 Net (decrease) increase in interest-bearing demand and savings deposits (34,106) (17,838) 90,310 Net increase (decrease) in time deposits 36,101 (6,563) (8,801) Net (increase) decrease in accounts and drafts receivable from customers (14,872) (90,787) 6 Net increase in accounts and drafts payable 3,769 17,204 215,010 Cash dividends paid (15,959) (15,442) (15,446) Purchase of common shares for treasury (5,773) (5,299) (30,997) Other financing activities, net (834) (594) (850) Net cash (used in) provided by financing activities (150,072) (59,204) 338,370 Net increase (decrease) in cash and cash equivalents 171,526 (313,986) (155,600) Cash and cash equivalents at beginning of year 200,942 514,928 670,528 Cash and cash equivalents at end of year $ 372,468 $ 200,942 $ 514,928 Supplemental information: Cash paid for interest $ 15,697 $ 3,431 $ 1,194 Cash paid for income taxes 9,300 8,396 5,637 Accumulated Additional Other Common Paid-in Retained Treasury Comprehensive (In thousands except per share data) Stock Capital Earnings Stock Income (Loss) Total Balance, December 31, 2014 $ 5,966 $ 126,169 $ 90,635 $ (12,707 ) $ (9,631 ) $ 200,432 Net income 23,056 23,056 Cash dividends ($.77 per share) (9,697 ) (9,697 ) Issuance of 47,065 common shares pursuant to stock-based compensation plan, net(1) (1,250 ) 797 (453 ) Exercise of SARs (687 ) 293 (394 ) Stock-based compensation expense 2,058 2,058 Purchase of 238,053 common shares(1) (10,591 ) (10,591 ) Other comprehensive income 2,967 2,967 Balance, December 31, 2015 $ 5,966 $ 126,290 $ 103,994 $ (22,208 ) $ (6,664 ) $ 207,378 Net income 24,348 24,348 Cash dividends ($.81 per share) (9,979 ) (9,979 ) Issuance of 39,816 common shares pursuant to stock-based compensation plan, net(1) (1,231 ) 566 (665 ) Exercise of SARs (1,364 ) 651 (713 ) Stock-based compensation expense 1,959 1,959 Purchase of 205,835 common shares(1) (9,215 ) (9,215 ) Excess tax benefits associated with stock based compensation 2,801 2,801 Other comprehensive loss (7,879 ) (7,879 ) Balance, December 31, 2016 $ 5,966 $ 128,455 $ 118,363 $ (30,206 ) $ (14,543 ) $ 208,035 Net income 25,014 25,014 Cash dividends ($.87 per share) (10,675 ) (10,675 ) Stock dividend 558 75,108 (75,674 ) (8 ) Issuance of 24,482 common shares pursuant to stock-based compensation plan, net(1) (821 ) 273 (548 ) Exercise of SARs (451 ) 142 (309 ) Stock-based compensation expense 2,340 2,340 Purchase of 41,846 common shares(1) (2,270 ) (2,270 ) Other comprehensive income 3,509 3,509 Other comprehensive income reclassification for ASU 2018-02 2,286 (2,286 ) — Balance, December 31, 2017 $ 6,524 $ 204,631 $ 59,314 $ (32,061 ) $ (13,320 ) $ 225,088 (1)Share and per share figures adjusted for the 10% stock dividend that occurred on December 15, 2017(In thousands except per share data) Common
StockAdditional
Paid-in
CapitalRetained
EarningsTreasury
StockAccumulated
Other
Comprehensive
Income (Loss)Total Balance, December 31, 2020 $ 7,753 $ 204,875 $ 99,062 $ (50,515) $ (15) $ 261,160 Net income 28,604 28,604 Cash dividends ($1.09 per share) (15,446) (15,446) Issuance of 85,056 common shares pursuant to stock-based compensation plan, net (2,939) 2,249 (690) Exercise of SARs (519) 359 (160) Stock-based compensation expense 2,859 2,859 Purchase of 713,857 common shares (30,997) (30,997) Other comprehensive income 468 468 Balance, December 31, 2021 $ 7,753 $ 204,276 $ 112,220 $ (78,904) $ 453 $ 245,798 Net income 34,904 34,904 Cash dividends ($1.13 per share) (15,442) (15,442) Issuance of 82,172 common shares pursuant to stock-based compensation plan, net (2,727) 2,414 (313) Exercise of SARs (859) 578 (281) Stock-based compensation expense 6,732 6,732 Purchase of 130,374 common shares (5,299) (5,299) Other comprehensive income (59,774) (59,774) Balance, December 31, 2022 $ 7,753 $ 207,422 $ 131,682 $ (81,211) $ (59,321) $ 206,325 Net income 30,059 30,059 Cash dividends ($1.17 per share) (15,959) (15,959) Issuance of 84,366 common shares pursuant to stock-based compensation plan, net (3,334) 2,616 (718) Exercise of SARs (238) 122 (116) Stock-based compensation expense 4,157 (18) 4,139 Purchase of 150,541 common shares (5,773) (5,773) Other comprehensive loss 11,852 11,852 Balance, December 31, 2023 $ 7,753 $ 208,007 $ 145,782 $ (84,264) $ (47,469) $ 229,809 Cass Information Systems, Inc.(the “Company”) The Company provides payment and information services, which include processing and payment of transportation, energy, telecommunications and environmental invoices. These services include the acquisition and management of data, information delivery and financial exchange. The consolidated balance sheet captions, “Accounts and drafts payable” and “Payments in excessadvance of funding,” represent the Company’s resulting financial position related to the payment services that are performed for customers. The Company also provides a full range of banking services to individual, corporate and institutional customers through Cass Commercialthe Bank, (the “Bank”), its wholly owned bank subsidiary.generally accepted accounting principles (“GAAP”).GAAP. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries after elimination of intercompany transactions. Certain amounts in the 20162022 and 20152021 consolidated financial statements have been reclassified to conform to the 20172023 presentation. Such reclassifications have no effect on previously reported net income or shareholders’ equity. The Company issued a 10% stock dividend on December 15, 2017. The share and per share information have been restated unless indicated otherwise for all periods presented in the accompanying consolidated financial statements.as segregated in the accompanying consolidated balance sheets to be cash and cash equivalents.debt marketableinvestment securities as available-for-sale. Securities classified as available-for-sale are carried at fair value. Unrealized gains and losses, net of the related tax effect, are excluded from earnings and reported in accumulated other comprehensive income, a component of shareholders’ equity. A declineSecurities are periodically evaluated for credit losses in accordance with the fair value of any available-for-sale security below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. To determine whether impairment is other than temporary, the Company considers guidance provided in FASB ASC Topic 326, Financial Instruments – Credit Losses ("ASC 326").Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 320 -Investments – Debt and Equity Securities. When determining whether a debt securityentire loss in fair value is other-than-temporarily impaired,required to be recognized in current earnings if the Company assesses whether it has the intentintends to sell the security and whethersecurities or believes it is more likely than not that the Companyit will be required to sell priorthe security before the anticipated recovery. If neither condition is met, and the Company does not expect to recoveryrecover the amortized cost basis, the Company determines whether the decline in fair value resulted from credit losses or other factors. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss has occurred, and an allowance for credit losses is recorded. The allowance for credit losses is limited by the amount that the fair value is less than the amortized cost basis. Evidence consideredAny impairment not recorded through the provision for credit losses would be recognized in this assessment includesother comprehensive income.reasonsallowance for impairment,credit losses would be recorded as a provision for credit losses on the severity and durationconsolidated statements of income. Losses would be charged against the allowance for credit losses on securities when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the impairment, changes in value subsequentconditions regarding intent or requirement to year-end and forecasted performance of the investee. sell is met.estimatedexpected lives of the respective securities using the level-yield method. Interest income is recognized when earned. Gains and losses are calculated using the specific identification method.Allowance for Loan Losses (“ALLL”)The ALLL is increased by provisions charged to expense and is available to absorb charge-offs, net of recoveries. Management utilizes a systematic, documented approach in determining the appropriate level of the ALLL. Management’s approach provides for estimated credit losses on individually evaluated loans in accordance with FASB ASC 310 -Allowance for Credit Losses(“ASC 310”). These estimates are based upon a number of factors, such as payment history, financial condition of the borrower, expected future cash flows and discounted collateral exposure.Estimated credit losses inherent in the remainder of the portfolio are estimated in accordance with FASB ASC 450 -Contingencies. These loans are segmented into groups based on similar risk characteristics. Historical loss rates for each risk group, which are updated quarterly, are generally quantified using all recorded loan charge-offs and recoveries over a prescribed look-back period. These historical loss rates for each risk group are used as the starting point to determine the level of the allowance. The Company’s methodology incorporates an estimated loss emergence period for each risk group. The loss emergence period is the period of time from when a borrower experiences a loss event and when the actual loss is recognized in the financial statements, generally at the time of initial charge-off of the loan balance. The Company’s methodology also includes qualitative risk factors that allow management to adjust its estimates of losses based on the most recent information available and to address other limitations in the quantitative component that is based on historical loss rates. Such risk factors are generally reviewed and updated quarterly, as appropriate, and are adjusted to reflect changes in national and local economic conditions and developments, the volume and severity of delinquent and internally classified loans, loan concentrations, assessment of trends in collateral values, assessment of changes in borrowers’ financial stability, and changes in lending policies and procedures, including underwriting standards and collections, charge-off and recovery practices.Management believes the ALLL is adequate to absorb probable losses in the loan portfolio. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s ALLL. Such agencies may require the Company to increase the ALLL based on their judgments and interpretations about information available to them at the time of their examinations.Premises and EquipmentPremises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed over the estimated useful lives of the assets, or the respective lease terms for leasehold improvements, using straight-line and accelerated methods. Estimated useful lives do not exceed 40 years for buildings, the lesser of 10 years or the life of the lease for leasehold improvements and range from 3 to 7 years for software, equipment, furniture and fixtures. Maintenance and repairs are charged to expense as incurred.Intangible AssetsCost in excess of fair value of net assets acquired has resulted from business acquisitions. Goodwill and intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment at least annually. Intangible assets with definite useful lives are amortized on a straight-line basis over their respective estimated useful lives.Periodically, the Company reviews intangible assets for events or changes in circumstances that may indicate that the carrying amount of the assets may not be recoverable. Based on those reviews, adjustments of recorded amounts have not been required.Non-marketable Equity InvestmentsThe Company accounts for non-marketable equity investments, in which it holds less than a 20% ownership, under the cost method. Under the cost method of accounting, investments are carried at cost and are adjusted only for other than temporary declines in fair value, distributions of earnings and additional investments. The Company periodically evaluates whether any declines in fair value of its investments are other than temporary. In performing this evaluation, the Company considers various factors including any decline in market price, where available, the investee's financial condition, results of operations, operating trends and other financial ratios. Non-marketable equity investments are included in other assets on the consolidated balance sheets.Foreclosed AssetsReal estate acquired as a result of foreclosure is initially recorded at fair value less estimated selling costs. Fair value is generally determined through the receipt of appraisals. Any write down to fair value at the time the property is acquired is recorded as a charge-off to the allowance for loan losses. Any decline in the fair value of the property subsequent to acquisition is recorded as a charge to non-interest expense.Treasury StockPurchases of the Company’s common stock are recorded at cost. Upon reissuance, treasury stock is reduced based upon the average cost basis of shares held.Comprehensive IncomeComprehensive income consists of net income, changes in net unrealized gains (losses) on available-for-sale securities and pension liability adjustments and is presented in the accompanying consolidated statements of shareholders' equity and consolidated statements of comprehensive income.Impairmentimpairedindividually evaluated when it is probable that a creditor will be unable to collect all amounts due, both principal and interest, according to the contractual terms of the loan agreement. When measuring impairment,Individually evaluated loans are generally measured based on the expected future cash flows of an impaired loan areand discounted at the loan's effective interest rate. Alternatively, impairment could be measured by reference to an observable market price could be used to individually evaluate loans, if one exists, or the fair value of the collateral for a collateral-dependent loan. Regardless of the historical measurement method used, the Company measures impairmentindividually evaluated loans based on the fair value of the collateral when the Company determines foreclosure is probable. Additionally, impairment of a restructured loan is measured by discounting the total expected future cash flows at the loan's effective rate of interest as stated in the original loan agreement. The Company uses its nonaccrual methods as discussed above for recognizing interest on impairedindividually evaluated loans.Information Services Revenuerevenues arefee revenue is attributable to fees for providing services.services related to processing and payment of invoices. These services include invoice processing, transportation invoice rating, payment processing and services, auditing, and the generation of accounting and transportation information. The Company also processes, pays and generates management information from electric, gas, telecommunications, environmental, and other invoices. The specific payment and information processing services provided to each customer are developed individually to meet each customer’s specific requirements. The Company enters into service agreements with customers typically for fixed fees per transaction that are invoiced monthly. Revenues are recognized in the period services are rendered and earned under the service agreements, as long as collection is reasonably assured.
Financial fees The Company earns fees on a transaction level basis for invoice payment services when making customer payments. Fees are recognized at the point in time when the payment transactions are made, which is when the performance obligation is satisfied.bases.basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced if necessary, by a deferred tax asset valuation allowance. In the event that management determines it is more likely than not that it will not be able to realize all or part of net deferred tax assets in the future, the Company adjusts the recorded value of deferred tax assets, which would result in a direct charge to income tax expense in the period that such determination is made. Likewise, the Company will reverse the valuation allowance when realization of the deferred tax asset is expected. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.-Accounting for Stock Options and Other Stock-based Compensation(“ (“ASC 718”), which requires that all stock-based compensation be recognized as an expense in the financial statements and that such cost be measured at the fair value of the award. FASB ASC 718 also requires that excess tax benefits related to stock option exercises and restricted stock awards be reflected as financing cash inflows instead of operating cash inflows.2017,2023, rate of increase in future compensation levels and mortality rates.Theserates. These assumptions are updated annually and are disclosed in Note 10. The Company follows FASB ASC 715, -Compensation – Retirement Benefits(“ (“ASC 715”), which requires companies to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its consolidated balance sheet and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. The funded status is measured as the difference between the fair value of the plan assets and the projected benefit obligation as of the date of its fiscal year-end.-Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in GAAP, and outlines disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level hierarchy for valuation techniques is used to measure financial assets and financial liabilities at fair value. This hierarchy is based on whether the valuation inputs are observable or unobservable. Financial instrument valuations are considered Level 1 when they are based on quoted prices in active markets for identical assets or liabilities. Level 2 financial instrument valuations use quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Financial instrument valuations are considered Level 3 when they are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable, and when determination of the fair value requires significant management judgment or estimation. The Company records securities available for sale at their fair values on a recurring basis using Level 2 valuations. Additionally, the Company records impaired loansindividually evaluated credits and other real estate owned at their fair value on a nonrecurring basis. The nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or impairment write-downs of individual assets.May 2014,March 2022, the FASB issued Accounting Standards Update (“ASU”2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02") No. 2014-09 –Revenue from Contracts. This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL methodology for estimating allowances for credit losses and enhances the disclosure requirements for loan restructurings made with Customers. The ASU supersedes revenue recognition requirementsborrowers experiencing financial difficulty. Instead, entities are required to evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or continuation of an existing loan. In addition, the amendments require a public business entity to disclose current period gross charge-offs for financing receivables and net investment in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidanceleases by year of origination in the FASB Accounting Standards Codification (“ASC”). The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance identifies specific steps that entities should apply in order to achieve this principle. Under thevintage disclosures. ASU the amendments are2022-02 was effective for fiscal years beginning after December 15, 2022, including interim and annual periods beginningwithin those fiscal years. The implementation of this ASU effective January 1, 2018 and must be applied retrospectively. The Company’s revenue is comprised of net interest income on financial assets and liabilities, which is explicitly excluded from the scope, and non-interest income. The Company will use the modified retrospective transition approach and there will2023 did not behave a significantmaterial impact on the Company’s consolidated financial statements or results of operations.January 2016,October 2023, the FASB issued 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative ("ASU 2023-06"). This ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No. 2016-01 –Financial Instruments – Overall (ASC Subtopic 825-10). 33-10532 - Disclosure Update and Simplification that was issued in 2018.requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in OCI the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related2023-06 is not expected to unrealized losses of AFS debt securities in combination with other deferred tax assets. The standard is effective for fiscal periods beginning January 1, 2018 and will not have a significant impact on the Company’s consolidatedCompany's financial statements or results of operations.statements.February 2016,November 2023, the FASB issued 2023-07, Segment Reporting (Topic 820): Improvements to Reportable Segment Disclosures ("ASU No. 2016-02 –Leases (ASC Topic 842)2023-07"). TheThis ASU improves financial reporting about leasing transactions. The ASU affects all companiesexpands segment disclosure requirements for public entities to require disclosure of significant segment expenses and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. Consistent with current generally accepted accounting principles (GAAP), the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will dependsegment items on its classification as a finance or operating lease. However, unlike current GAAP—which requires only capital leases to be recognized on the balance sheet—the new ASU will require both types of leases to be recognized on the balance sheet. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The ASU on leases will take effect for public companies for fiscal years,an annual and interim basis and to provide in interim periods within thoseall disclosures about a reportable segment's profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after December 15, 2018. A third-party vendor solution has been selected to assist in the application of2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2016-02. The impact of the adoption of this ASU is currently being evaluated but2023-07 is not expected to have a materialsignificant impact on the Company’s consolidatedCompany's financial statements or results of operations.June 2016,December 2023, the FASB issued 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU No. 2016-13 - Financial Instruments –Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments2023-09"). TheThis ASU requires measurementpublic business entities to disclose in their rate reconciliation table additional categories of information about federal, state, and recognitionforeign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. It also requires all entities to disclose income taxes paid, net of expected credit lossesrefunds, disaggregated by federal, state, and foreign taxes for financial assets held. Under this standard, it will be requiredannual periods and to hold an allowance equal todisaggregate the expected life-of-loan lossesinformation by jurisdiction based on the loan portfolio. The standarda quantitative threshold, among other things. ASU 2023-09 is effective for fiscalannual periods beginning after December 15, 2019. The2024, though early adoption is permitted. ASU 2023-09 is not expected to have a significant impact ofon the adoption of this ASU is currently being evaluated.In February 2018, the FASB issued ASU No. 2018-02 –Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.The ASU provides for the reclassification of the effect of remeasuring deferred tax balances related to items within AOCI to retained earnings resulting from the TCJA. The Company early adopted, and as a result, reclassified $2,286,000 from AOCI to retained earnings.20172023 and 2016,2022, the Company and the Bank met all capital adequacy requirements to which they are subject.Effective July 2, 2013, the Federal Reserve Board approved final rules known as the “Basel III Capital Rules” that substantially revised the risk-based capital and leverage capital requirements applicable to bank holding companies and depository institutions, including the Company and the Bank. The Basel III Capital Rules implement aspects of the Basel III capital framework agreed upon by the Basel Committee and incorporate changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Among other things, the Basel III Capital Rules establish stricter capital requirements and calculation standards, as well as more restrictive risk weightings for certain loans and facilities. The Basel III Capital Rules were effective for the Company and the Bank on January 1, 2015 (subject to a phase-in period).2017,2023, the most recent notification from the regulatory agencies categorized the Bank as well-capitalized. To be categorized as well-capitalized, the Bank must maintain minimum total risk-based, common equity Tier I risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank’s category.AtBanking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits for that year combined with the retained net profits for the preceding two years. Under the foregoing dividend restrictions and while maintaining its “well capitalized” status, at December 31, 2017,2023, unappropriated retained earnings of $30,137,000$30.8 million were available at the Bank for the declaration of dividends to the Company without prior approval from regulatory authorities. However,In addition to regulatory requirements and considerations, any payment of dividends paidin the future will depend on the Company’s earnings, financial condition and other factors considered relevant by the Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements.TableCompany’s Board of Contents20172023 and 2016.Capital Requirement to be Actual Requirements Well-Capitalized (In thousands) Amount Ratio Amount Ratio Amount Ratio At December 31, 2017 Total capital (to risk-weighted assets) Cass Information Systems, Inc. $ 234,389 22.53 % $ 83,233 8.00 % $ N/A N/A % Cass Commercial Bank 122,440 17.01 57,568 8.00 71,960 10.00 Common Equity Tier I Capital (to risk-weighted assets) Cass Information Systems, Inc. 224,184 21.55 46,819 4.50 N/A N/A Cass Commercial Bank 114,603 15.93 32,382 4.50 46,774 6.50 Tier I capital (to risk-weighted assets) Cass Information Systems, Inc. 224,184 21.55 62,425 6.00 N/A N/A Cass Commercial Bank 114,603 15.93 43,176 6.00 57,568 8.00 Tier I capital (to average assets) Cass Information Systems, Inc. 224,184 13.87 64,649 4.00 N/A N/A Cass Commercial Bank 114,603 14.99 30,581 4.00 38,227 5.00 At December 31, 2016 Total capital (to risk-weighted assets) Cass Information Systems, Inc. $ 219,747 22.75 % $ 77,272 8.00 % $ N/A N/A % Cass Commercial Bank 110,576 16.72 52,898 8.00 66,123 10.00 Common Equity Tier I Capital (to risk-weighted assets) Cass Information Systems, Inc. 209,572 21.70 43,466 4.50 N/A N/A Cass Commercial Bank 102,769 15.54 29,755 4.50 42,980 6.50 Tier I capital (to risk-weighted assets) Cass Information Systems, Inc. 209,572 21.70 57,954 6.00 N/A N/A Cass Commercial Bank 102,769 15.54 39,674 6.00 52,898 8.00 Tier I capital (to average assets) Cass Information Systems, Inc. 209,572 13.83 60,620 4.00 N/A N/A Cass Commercial Bank 102,769 13.98 29,409 4.00 36,761 5.00 Actual Capital
RequirementsRequirement to be
Well-Capitalized(In thousands) Amount Ratio Amount Ratio Amount Ratio At December 31, 2023 Total capital (to risk-weighted assets) Cass Information Systems, Inc. $ 269,580 15.49 % $ 139,266 8.00 % $ N/A N/A % Cass Commercial Bank 204,584 19.04 85,964 8.00 107,455 10.00 Common Equity Tier I Capital (to risk-weighted assets) Cass Information Systems, Inc. 256,359 14.73 78,337 4.50 N/A N/A Cass Commercial Bank 192,104 17.88 48,355 4.50 69,846 6.50 Tier I capital (to risk-weighted assets) Cass Information Systems, Inc. 256,359 14.73 104,449 6.00 N/A N/A Cass Commercial Bank 192,104 17.88 64,473 6.00 85,964 8.00 Tier I capital (to average assets) Cass Information Systems, Inc. 256,359 10.71 95,760 4.00 N/A N/A Cass Commercial Bank 192,104 12.49 61,526 4.00 76,908 5.00 At December 31, 2022 Total capital (to risk-weighted assets) Cass Information Systems, Inc. $ 257,313 13.52 % $ 152,306 8.00 % $ N/A N/A % Cass Commercial Bank 186,075 16.00 93,044 8.00 116,305 10.00 Common Equity Tier I Capital (to risk-weighted assets) Cass Information Systems, Inc. 243,774 12.80 85,672 4.50 N/A N/A Cass Commercial Bank 172,848 14.86 52,337 4.50 75,598 6.50 Tier I capital (to risk-weighted assets) Cass Information Systems, Inc. 243,774 12.80 114,229 6.00 N/A N/A Cass Commercial Bank 172,848 14.86 69,783 6.00 93,044 8.00 Tier I capital (to average assets) Cass Information Systems, Inc. 243,774 9.52 102,386 4.00 N/A N/A Cass Commercial Bank 172,848 10.77 64,196 4.00 80,245 5.00 in Securities20172023 and 20162022 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-saleDecember 31, 2017 Gross Gross Amortized Unrealized Unrealized (In thousands) Cost Gains Losses Fair Value State and political subdivisions $ 408,165 $ 9,528 $ 661 $ 417,032 U.S. government agencies 46,222 — 722 45,500 Certificates of deposit 7,991 — — 7,991 Total $ 462,378 $ 9,528 $ 1,383 $ 470,523 December 31, 2016 Gross Gross Amortized Unrealized Unrealized (In thousands) Cost Gains Losses Fair Value State and political subdivisions $ 368,223 $ 5,239 $ 3,328 $ 370,134 U.S. government agencies 13,075 — 403 12,672 Certificates of deposit 7,746 — — 7,746 Total $ 389,044 $ 5,239 $ 3,731 $ 390,552 December 31, 2023 (In thousands) Amortized
CostGross
Unrealized
GainsGross
Unrealized
LossesFair Value State and political subdivisions $ 235,297 $ 4 $ (16,266) $ 219,035 Mortgage-backed securities issued or guaranteed by U.S. government agencies or sponsored enterprises 188,307 — (30,508) 157,799 Corporate bonds 111,109 — (8,769) 102,340 Treasury securities 109,836 — (1,115) 108,721 Asset backed securities issued or guaranteed by U.S. Government agencies or sponsored enterprises 40,368 — (1,146) 39,222 Total $ 684,917 $ 4 $ (57,804) $ 627,117 December 31, 2022 (In thousands) Amortized
CostGross
Unrealized
GainsGross
Unrealized
LossesFair Value State and political subdivisions $ 317,376 $ 54 $ (22,304) $ 295,126 Mortgage-backed securities issued or guaranteed by U.S. government agencies or sponsored enterprises 205,175 — (31,236) 173,939 Corporate bonds 96,348 — (11,251) 85,097 Treasury Securities 158,935 — (3,652) 155,283 Asset backed securities issued or guaranteed by U.S. government agencies or sponsored enterprises 47,213 — (2,190) 45,023 Total $ 825,047 $ 54 $ (70,633) $ 754,468 December 31, 2017 Less than 12 months 12 months or more Total Estimated Unrealized Estimated Unrealized Estimated Unrealized (In thousands) Fair Value Losses Fair Value Losses Fair value Losses State and political subdivisions $ 34,755 $ 123 $ 31,251 $ 538 $ 66,006 $ 661 U.S. government agencies 34,183 376 11,317 346 45,500 722 Certificates of deposit — — — — — — Total $ 68,938 $ 499 $ 42,568 $ 884 $ 111,506 $ 1,383 December 31, 2016 Less than 12 months 12 months or more Total Estimated Unrealized Estimated Unrealized Estimated Unrealized (In thousands) Fair Value Losses Fair Value Losses Fair value Losses State and political subdivisions $ 140,384 $ 3,328 $ — $ — $ 140,384 $ 3,328 U.S. government agencies 12,672 403 — — 12,672 403 Certificates of deposit — — — — — — Total $ 153,056 $ 3,731 $ — $ — $ 153,056 $ 3,731 December 31, 2023 Less than 12 months 12 months or more Total (In thousands) Estimated
Fair Value Unrealized
Losses Estimated
Fair ValueUnrealized
Losses Estimated
Fair Value Unrealized
LossesState and political subdivisions $ 63,198 $ 220 $ 152,854 $ 16,046 $ 216,052 $ 16,266 Mortgage-backed securities issued or guaranteed by U.S. government agencies or sponsored enterprises — — 157,799 30,508 157,799 30,508 Corporate bonds 19,545 455 82,795 8,314 102,340 8,769 Treasury securities — — 108,721 1,115 108,721 1,115 Asset backed securities issued or guaranteed by U.S. Government agencies or sponsored enterprises — — 39,222 1,146 39,222 1,146 Total $ 82,743 $ 675 $ 541,391 $ 57,129 $ 624,134 $ 57,804 December 31, 2022 Less than 12 months 12 months or more Total (In thousands) Estimated
Fair Value Unrealized
Losses Estimated
Fair ValueUnrealized
Losses Estimated
Fair Value Unrealized
LossesState and political subdivisions $ 214,919 $ 8,958 $ 47,474 $ 13,346 $ 262,393 $ 22,304 Mortgage-backed securities issued or guaranteed by U.S. government agencies or sponsored enterprises 53,732 6,135 118,017 25,101 171,749 31,236 Corporate bonds 32,517 3,629 47,580 7,622 80,097 11,251 Treasury securities 155,283 3,652 — — 155,283 3,652 Asset backed securities issued or guaranteed by U.S. Government agencies or sponsored enterprises — — 47,213 2,190 47,213 2,190 Total $ 456,451 $ 22,374 $ 260,284 $ 48,259 $ 716,735 $ 70,633 64275 securities, or 17% of the total (24 greater than 12 months)98.9%, in an unrealized loss position as of December 31, 20172023 compared to 108311 securities, (none greater than 12 months)or 91.7%, in an unrealized loss position as of December 31, 2016. All2022. The unrealized losses are reviewedat December 31, 2023 were primarily attributable to determine whetherchanges in market interest rates after the losses are other than temporary. Management believes that all unrealized losses are temporary since they are market driven,securities were purchased. The Company does not currently intend to sell, and based on current conditions, the Company does not have the intent to sell the security, andbelieve it is more likely than not that the Company will not be required to sell prior tothese available-for-sale securities before the recovery of the amortized basis. December 31, 2017 (In thousands) Amortized Cost Fair Value Due in 1 year or less $ 22,492 $ 22,638 Due after 1 year through 5 years 57,922 58,425 Due after 5 years through 10 years 256,396 263,961 Due after 10 years 125,568 125,499 No stated maturity — — Total $ 462,378 $ 470,523 The premium related to the purchase of state and political subdivisions was $7,147,000 and $5,749,000 in 2017 and 2016, respectively.The amortized cost of debtDecember 31, 2023 (In thousands) Amortized Cost Fair Value Due in 1 year or less $ 130,388 $ 129,213 Due after 1 year through 5 years 136,710 134,663 Due after 5 years through 10 years 202,069 178,754 Due after 10 years 215,750 184,487 Total $ 684,917 $ 627,117 securities sold under agreements to repurchase andor for other purposes at December 31, 2017 and 2016 was $3,750,000.debtinvestment securities classified as available-for-sale were $0$111.6 million in 2017, $21,491,0002023, $3.8 million in 2016,2022, and $99,347,000$63.8 million in 2015.2021. Gross realized gains on the sales in 2017, 20162023, 2022, and 20152021 were $0, $387,000,$187,000, $15,000, and $2,910,000,$55,000, respectively. There were no grossGross realized losses on the sales in 2017, 2016 or 2015.Orange County, CaliforniaColorado Springs, Colorado and other selected cities in the United States. The Company does not have any particular concentration of credit in any one economic sector; however, a substantial portion of the commercial and industrial loans is extended to privately-held commercial companies and franchises in these market areas and are generally secured by the assets of the business. The Company also has a substantial portion of real estate December 31, (In thousands) 2017 2016 Commercial and industrial $ 236,394 $ 214,767 Real estate Commercial: Mortgage 94,675 104,779 Construction 9,359 6,325 Church, church-related: Mortgage 316,073 321,168 Construction 25,948 11,152 Industrial Revenue Bonds 3,374 6,639 Other 408 36 Total loans $ 686,231 $ 664,866 December 31, (In thousands) 2023 2022 Commercial and industrial $ 498,502 $ 561,616 Real estate: Commercial: Mortgage 118,371 108,166 Construction 8,233 17,874 Faith-based: Mortgage 381,368 387,114 Construction 7,790 8,094 Other 54 42 Total loans $ 1,014,318 $ 1,082,906 2017:Performing Nonperforming 90 Days 30-59 60-89 and Non- Total (In thousands) Current Days Days Over accrual Loans Commercial and industrial $ 236,394 $ — $ — $ — $ — $ 236,394 Real estate Commercial: Mortgage 94,675 — — — — 94,675 Construction 9,359 — — — — 9,359 Church, church-related: Mortgage 316,073 — — — — 316,073 Construction 25,948 — — — — 25,948 Industrial Revenue Bonds 3,374 — — — — 3,374 Other 408 — — — — 408 Total $ 686,231 $ — $ — $ — $ — $ 686,231 Performing Nonperforming (In thousands) Current 30-59
Days60-89
Days90 Days
and
OverNon-
accrualTotal
LoansCommercial and industrial $ 498,502 $ — $ — $ — $ — $ 498,502 Real estate Commercial: Mortgage 118,371 — — — — 118,371 Construction 8,233 — — — — 8,233 Faith-based: Mortgage 381,368 — — — — 381,368 Construction 7,790 — — — — 7,790 PPP — — — — — — Other 54 — — — — 54 Total $ 1,014,318 $ — $ — $ — $ — $ 1,014,318 2016:Performing Nonperforming 90 Days 30-59 60-89 and Non- Total (In thousands) Current Days Days Over accrual Loans Commercial and industrial $ 214,767 $ — $ — $ — $ — $ 214,767 Real estate Commercial: Mortgage 104,534 — — — 245 104,779 Construction 6,325 — — — — 6,325 Church, church-related: Mortgage 321,168 — — — — 321,168 Construction 11,152 — — — — 11,152 Industrial Revenue Bonds 6,639 — — — — 6,639 Other 24 12 — — — 36 Total $ 664,609 $ 12 $ — $ — $ 245 $ 664,866 Performing Nonperforming (In thousands) Current 30-59
Days60-89
Days90 Days
and
OverNon-
accrualTotal
LoansCommercial and industrial $ 560,466 $ — $ — $ — $ 1,150 $ 561,616 Real estate Commercial: Mortgage 108,166 — — — — 108,166 Construction 17,874 — — — — 17,874 Faith-based: Mortgage 387,114 — — — — 387,114 Construction 8,094 — — — — 8,094 PPP — — — — — — Other 42 — — — — 42 Total $ 1,081,756 $ — $ — $ — $ 1,150 $ 1,082,906 2017:Loans Performing Nonperforming Subject to Loans Subject to Loans Subject Normal Special to Special (In thousands) Monitoring(1) Monitoring(2) Monitoring(2) Total Loans Commercial and industrial $ 234,271 $ 2,123 $ — $ 236,394 Real estate Commercial: Mortgage 93,788 887 — 94,675 Construction 9,359 — — 9,359 Church, church-related: Mortgage 316,042 31 — 316,073 Construction 25,948 — — 25,948 Industrial Revenue Bonds 3,374 — — 3,374 Other 408 — — 408 Total $ 683,190 $ 3,041 $ — $ 686,231
2023:(In thousands) Total Loans Commercial and industrial $ 498,502 $ — $ — $ 498,502 Real estate Commercial: Mortgage 118,371 — — 118,371 Construction 8,233 — — 8,233 Faith-based: Mortgage 375,865 5,503 — 381,368 Construction 7,790 — — 7,790 PPP — — — — Other 54 — — 54 Total $ 1,008,815 $ 5,503 $ — $ 1,014,318 (1) Loans subject to normal monitoring involve borrowers of acceptable-to-strong credit quality and risk whoand have the apparent ability to satisfy their loan obligation.(2) highhigher level of management attention.2016:Loans Performing Nonperforming Subject to Loans Subject to Loans Subject to Normal Special Special (In thousands) Monitoring(1) Monitoring(2) Monitoring(2) Total Loans Commercial and industrial $ 213,024 $ 1,743 $ — $ 214,767 Real estate Commercial: Mortgage 103,778 756 245 104,779 Construction 6,325 — — 6,325 Church, church-related: Mortgage 318,030 3,138 — 321,168 Construction 11,152 — — 11,152 Industrial Revenue Bonds 6,639 — — 6,639 Other 36 — — 36 Total $ 658,984 $ 5,637 $ 245 $ 664,866
2022:(In thousands) Total Loans Commercial and industrial $ 549,241 $ 11,225 $ 1,150 $ 561,616 Real estate Commercial: Mortgage 108,166 — — 108,166 Construction 17,874 — — 17,874 Faith-based: Mortgage 386,169 945 — 387,114 Construction 8,094 — — 8,094 PPP — — — — Other 42 — — 42 Total $ 1,069,586 $ 12,170 $ 1,150 $ 1,082,906 (1) Loans subject to normal monitoring involve borrowers of acceptable-to-strong credit quality and risk whoand have the apparent ability to satisfy their loan obligation.highhigher level of management attention.Impaired loans consist primarilystill accruing interest andmeasure of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty. In some cases, these modifications may result in new loans. Loan modifications to borrowers experiencing financial difficulty may be in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or a combination thereof, among other things.performingexperiencing financial difficulty and non-performing. Troubled debt restructuring involvesmodified during the grantingyear ended December 31, 2023, segregated by category and type of modification.(In thousands) Payment Delay Term Extension Interest Rate Reduction Combination Term Extension and Interest Rate Reduction Percentage of Total Loans Held for Investment Commercial and industrial $ — $ 22,354 $ — $ — 4.48 % Total $ — $ 22,354 $ — $ — 2.20 % (In thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Commercial and industrial $ 22,354 $ — $ — $ — $ — Total $ 22,354 $ — $ — $ — $ — concessionpayment default during the year ended December 31, 2023 and that had been modified due to athe borrower experiencing financial difficulty resulting inwithin the modification of terms of12 previous months preceding the default.such as changes in payment schedule or interest rate. There was no ALLL related to impaired loans at both December 31, 2017 and 2016. Nonaccrual loans were $0 and $245,000 at December 31, 2017 and 2016, respectively.is written off. There were no loans delinquent 90 days or more and still accruing interest at bothwritten off during the year ended December 31, 2017 and 2016. At December 31, 2017 and 2016,2023.classified asconsidered troubled debt restructuring. restructurings as of December 31, 2022.average balancesCompany had no loans evaluated for expected credit losses on an individual basis as of impaired loans during 2017, 2016 and 2015 were $166,000, $333,000, and $3,188,000, respectively. Income that would have been recognized on non-accrual loans under the original terms of the contract was $24,000, $66,000 and $390,000 for 2017, 2016 and 2015, respectively. IncomeDecember 31, 2023. The Company had one loan that was recognized on nonaccrual loansconsidered an individually evaluated credit at December 31, 2022, with no specific allowance. This loan was $17,000, $47,000 and $34,000 for 2017, 2016 and 2015 respectively.paid off in full in January 2023. There were no foreclosed assetsloans recorded as other real estate owned as of December 31, 20172023 or December 31, 2016.2022.There was no recorded investment or unpaid principal balance for impaired loans at December 31, 2017.The following table presents the recorded investment and unpaid principal balance for impaired loans at December 31, 2016: Related Unpaid Allowance Recorded Principal for Loan (In thousands) Investment Balance Losses Commercial and industrial: Nonaccrual $ — $ — $ — Real estate Commercial – Mortgage: Nonaccrual 245 245 — Church – Mortgage: Nonaccrual — — — Total impaired loans $ 245 $ 245 $ — The Company does not record loans at fair value on a recurring basis. Once a loan is identified as impaired, management measures impairment in accordance with FASB ASC 310. At December 31, 2017, there were no impaired loans. At December 31, 2016, all impaired loans were evaluated based on the fair value of the collateral. The fair value of the collateral is based upon an observable market price or current appraised value and therefore, the Company classifies these assets as nonrecurring Level 3.activity inACL by category for the allowance for loan lossesperiod ended December 31, 2023 is as follows: December 31, Charge- December 31, (In thousands) 2016 Offs Recoveries Provision 2017 Commercial and industrial $ 3,261 $ — $ 30 $ 361 $ 3,652 Real estate Commercial: Mortgage 1,662 — — (268 ) 1,394 Construction 47 — — 23 70 Church, church-related: Mortgage 4,027 — — (65 ) 3,962 Construction 85 — — 111 196 Industrial Revenue Bond 101 — — (49 ) 52 Other 992 — — (113 ) 879 Total $ 10,175 $ — $ 30 $ — $ 10,205 (In thousands) C&I CRE Faith-based CRE Construction Total Allowance for credit losses on loans: Balance at December 31, 2022 $ 5,978 $ 940 $ 6,437 $ 184 $ 13,539 (566) 153 39 (76) (450) Balance at December 31, 2023 $ 5,412 $ 1,093 $ 6,476 $ 108 $ 13,089 (1) For the period ended December 31, 2023, there was a release of credit losses of $100,000 for unfunded commitments. (In thousands) C&I CRE Faith-based CRE Construction Total Allowance for credit losses on loans: Balance at January 1, 2021 $ 5,034 $ 1,031 $ 5,684 $ 292 $ 12,041 931 (91) 753 (108) 1,485 Recoveries 13 — — — 13 Balance at December 31, 2022 $ 5,978 $ 940 $ 6,437 $ 184 $ 13,539 (1) For the period ended December 31, 2022, there was a release of credit losses of $135,000 for unfunded commitments. 2017,2023 and 2022, there were no loans to affiliates of executive officers or directors.directors, or their affiliates.December 31, December 31, December 31, (In thousands) 2017 2016 (In thousands) 2023 2022 Land $ 873 $ 873 Buildings 13,386 13,087 Leasehold improvements 2,120 2,098 Furniture, fixtures and equipment 14,801 13,248 Purchased software 4,819 4,704 Internally developed software 16,485 14,377 Software 52,484 48,387 Total Total Total Less accumulated depreciation 30,898 27,301 Total $ 21,586 $ 21,086 Total premises and equipment, net 2017, 20162023, 2022 and 20152021 amounted to $3,627,000, $3,245,000$4.2 million, $4.0 million, and $3,008,000,$4.3 million, respectively.The Company and its subsidiaries lease various premises and equipment under operating lease agreements which expire at various dates through 2023. Rental expense for 2017, 2016 and 2015 was $1,499,000, $1,397,000 and $1,387,000, respectively. The following is a schedule, by year, of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2017:(In thousands) Amount 2018 $ 1,518 2019 1,270 2020 1,245 2021 1,118 2022 1,086 2023 226 Total $ 6,463 -Goodwill and Other Intangible Assets(“ASC 350”), which requires that intangibles with indefinite useful lives be tested annually for impairment, or when management deems there is a triggering event, and those with finite useful lives be amortized over their useful lives.In March 2017, the Company completed an acquisition and recorded intangible assets of $1,405,000. Those intangibles were valued as $979,000 for goodwill, $355,000 for the customer list and $71,000 for non-compete agreements.December 31, 2017 December 31, 2016 Gross Carrying Accumulated Gross Carrying Accumulated (In thousands) Amount Amortization Amount Amortization Assets eligible for amortization: Customer lists $ 4,288 $ (2,702 ) $ 3,933 $ (2,342 ) Patent 72 (12 ) 72 (8 ) Non-compete agreements 332 (291 ) 261 (261 ) Software 234 (234 ) 234 (234 ) Other 500 (191 ) 500 (158 ) Unamortized intangible assets: Goodwill (1) 12,796 (227 ) 11,817 (227 ) Total intangible assets $ 18,222 $ (3,657 ) $ 16,817 $ (3,230 ) (1)Amortization through December 31, 2001 prior to adoption of FASB ASC 350.The customerDecember 31, 2023 December 31, 2022 (In thousands) Gross Carrying
AmountAccumulated
AmortizationGross Carrying
AmountAccumulated
AmortizationAssets eligible for amortization: Customer lists $ 6,470 $ (4,851) $ 6,470 $ (4,561) Patent 72 (36) 72 (32) Software 3,212 (1,933) 3,212 (1,508) Trade Name 373 (70) 373 (42) Other 500 (392) 500 (358) Unamortized intangible assets: Goodwill 17,309 — 17,309 — Total intangible assets $ 27,936 $ (7,282) $ 27,936 $ (6,501) seven and ten7 to 10 years; the patents over 18 years, the non-compete agreements over two and five years, software over three3 years to 7 years, trade name over 10 years to 20 years and other intangible assets over 15 years. Amortization of intangible assets amounted to $427,000, $408,000$780,000 and $408,000$680,000 for the years ended December 31, 2017, 20162023, and 2015,2022, respectively. Estimated future amortization of intangibles is $442,000$738,000 in 2018, $412,000 2019, $406,0002024, $730,000 in both 20202025, $582,000 in 2026, $262,000 in 2027, and 2021 and $88,000$253,000 in 2022.2028.December 31, (In thousands) 2017 2016 Interest-bearing demand deposits $ 332,881 $ 322,091 Savings deposits 11,168 29,430 Time deposits: Less than $100 2,658 3,523 $100 to less than $250 33,385 37,179 $250 or more 16,455 15,082 Total $ 396,547 $ 407,305 Weighted average interest rate .56 % .48 % December 31, (In thousands) 2023 2022 Interest-bearing demand deposits $ 532,507 $ 567,426 Savings deposits 7,226 6,413 Time deposits: Less than $100 5,266 2,526 $100 to less than $250 48,540 20,137 22,916 17,958 Total $ 616,455 $ 614,460 Weighted average interest rate 3.16 % 1.74 % on depositsexpense consists of the following:December 31, (In thousands) 2017 2016 2015 Interest-bearing demand deposits $ 1,611 $ 1,387 $ 1,392 Savings deposits 79 100 65 Time deposits: Less than $100 234 274 346 $100 to less than $250 114 191 119 $250 or more 149 77 189 Total $ 2,187 $ 2,029 $ 2,111 December 31, (In thousands) 2023 2022 2021 Interest-bearing demand deposits $ 14,056 $ 3,118 $ 582 Savings deposits 113 38 9 Time deposits: Less than $100 1,276 145 332 $100 to less than $250 288 79 109 $250 or more 417 102 139 Total $ 16,150 $ 3,482 $ 1,171 December 31, 2017 2016 Percent Percent (In thousands) Amount of Total Amount of Total Due within: One year $ 48,370 92.1 % $ 48,740 87.4 % Two years 281 0.5 4,752 8.5 Three years 2,383 4.5 155 0.3 Four years 25 0.1 2,072 3.7 Five years 1,439 2.8 65 0.1 Total $ 52,498 100.0 % $ 55,784 100.0 % December 31, 2023 2022 (In thousands) Amount Percent
of TotalAmount Percent
of TotalDue within: One year $ 72,616 94.6 % $ 37,925 93.3 % Two years 2,941 3.8 % 1,773 4.4 % Three years 1,098 1.4 % 797 2.0 % Four years 39 0.1 % 88 0.2 % Five years 28 0.1 % 38 0.1 % Total $ 76,722 100.0 % $ 40,621 100.0 % 2017,2023, the Bank had unsecured lines of credit at six correspondent banks to purchase federal funds up to a maximum of $68,000,000 at the following banks: US Bank, $20,000,000; Wells Fargo Bank, $15,000,000; PNC Bank, $12,000,000; Frost National Bank, $10,000,000; JPM Chase Bank, $6,000,000; and UMB Bank $5,000,000.$83.0 million in aggregate. As of December 31, 2017,2023, the Bank had secured lines of credit with the Federal Home Loan Bank (“FHLB”) of $204,789,000$228.3 million collateralized by commercial mortgage loans. AtAs of December 31, 2017,2023, the Company had a linelines of credit from UMB Bankthree banks up to a maximum of $50,000,000 and First Tennessee Bank of $50,000,000$250.0 million in aggregate collateralized by state and political subdivision securities. There were no amounts outstanding as of December 31, 2023 and 2022 under any of the lines of credit discussed above at December 31, 2017 or 2016.credit.2017.2023.20172023 Shares outstanding at January 1 11,188,46613,669,656 10% stock dividend issued December 15, 20171,116,711Issuance of common stock: Employee restricted stock grants 3,82512,780 Employee restricted stock units vested 9,843 Performance-based stock vested 15,646 Employee SARs exercised 7,5472,974 Directors’ compensationstock grants8,38922,415 Shares repurchased (38,042(150,541))Shares forfeited (398) Shares outstanding at December 31 12,286,89613,582,375 Anti-dilutive shares are those SARs with prices in excess of the current market value.December 31, (In thousands except share and per share data) 2017 2016 2015 Basic: Net income $ 25,014 $ 24,348 $ 23,056 Weighted average common shares outstanding 12,250,465 12,265,434 12,494,466 Basic earnings per share $ 2.04 $ 1.99 $ 1.85 Diluted: Net income $ 25,014 $ 24,348 $ 23,056 Weighted average common shares outstanding 12,250,465 12,265,434 12,494,466 Effect of dilutive restricted stock, PBRS and SARs 179,445 172,386 175,784 Weighted average common shares outstanding assuming dilution 12,429,910 12,437,820 12,670,250 Diluted earnings per share $ 2.01 $ 1.96 $ 1.82 All share and per share data have been restated to give effect to the 10% stock dividend issued on December 15, 2017.December 31, (In thousands except share and per share data) 2023 2022 2021 Basic: Net income $ 30,059 $ 34,904 $ 28,604 Weighted average common shares outstanding 13,530,005 13,552,503 14,091,773 Basic earnings per share $ 2.22 $ 2.58 $ 2.03 Diluted: Net income $ 30,059 $ 34,904 $ 28,604 Weighted average common shares outstanding 13,530,005 13,552,503 14,091,773 Effect of dilutive restricted stock, performance based restricted stock 286,011 255,526 238,103 Weighted average common shares outstanding assuming dilution 13,816,016 13,808,029 14,329,876 Diluted earnings per share $ 2.18 $ 2.53 $ 2.00 most of itseligible employees. Effective December 31, 2016, the Plan was closed to all new participants. TheAdditionally, the Company accrues and makes contributions designed to fund normal service costs on a current basis usingfroze the projected unit credit with service proration method to amortize prior service costs arising from improvements in pension benefits and qualifying service prior to the establishment of the Plan over a periodas of approximately 30 years.February 28, 2021. As such, subsequent to February 28, 2021, there is no service cost associated with the Plan.(In thousands) 2017 2016 Projected benefit obligation: Balance, January 1 $ 85,551 $ 78,369 Service cost 3,733 3,559 Interest cost 3,621 3,505 Actuarial (gain) loss 7,916 2,003 Benefits paid (2,031 ) (1,885 ) Balance, December 31 $ 98,790 $ 85,551 Plan assets: Fair value, January 1 $ 73,168 $ 71,174 Actual return 10,290 3,879 Employer contribution — — Benefits paid (2,031 ) (1,885 ) Fair value, December 31 $ 81,427 $ 73,168 Funded status: Accrued pension liability $ (17,363 ) $ (12,383 ) (In thousands) 2023 2022 Projected benefit obligation: Balance, January 1 $ 85,433 $ 117,323 Interest cost 4,314 3,293 Actuarial gain 865 (31,982) Benefits paid (3,485) (3,201) Balance, December 31 $ 87,127 $ 85,433 Plan assets: Fair value, January 1 $ 83,394 $ 114,136 Actual investment return 8,097 (26,820) Expenses paid from plan assets (1,252) (721) Benefits paid (3,485) (3,201) Fair value, December 31 $ 86,754 $ 83,394 Funded status: Accrued pension liability $ (373) $ (2,039) 2017, 20162023, 2022 and 2015,2021, the Plan’s expected benefit cash flows were discounted using the CitibankFTSE Above Median Double-A Curve. For 2017,2023 and 2022, the RP-2014Pri-2012 Mortality Table and the MP-2017MP-2021 Mortality Improvement TableScale were used. For 2016,2021, the RP-2014Pri-2012 Mortality Table and MP-2016MP-2021 Mortality Improvement TableScale were used. For 2015,2023 2022 2021 Weighted average discount rate 5.05 % 5.25 % 2.85 % Rate of increase in compensation levels N/A N/A (a) RP-2014 Mortality Table and MP-2015 Mortality Improvement Table were used. 2017 2016 2015 Weighted average discount rate 3.75 % 4.25 % 4.50 % Rate of increase in compensation levels (a) (a) (a) (a)6.0% graded down to 3.25% over the first seven years of service$85,236,000$87.1 million and $74,425,000$85.4 million as of December 31, 20172023 and 2016,2022, respectively. The Company doesmade no contributions during 2023 or 2022 to the Plan. The Company has not expect todetermined if it will make a contribution to the Plan in 2018.2024. The following pension benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the Plan:Amount 2018 $ 2,679,000 2019 2,823,000 2020 3,045,000 2021 3,300,000 2022 3,693,000 2023-2027 23,682,000 Amount 2024 $ 4,328,000 2025 4,532,000 2026 4,758,000 2027 4,968,000 2028 5,161,000 2029-2033 28,280,000 For the Year Ended December 31, (In thousands) 2017 2016 2015 Service cost – benefits earned during the year $ 3,733 $ 3,559 $ 3,796 Interest cost on projected benefit obligations 3,621 3,505 3,178 Expected return on plan assets (4,681 ) (4,734 ) (4,864 ) Net amortization and deferral 1,382 1,259 1,542 Net periodic pension cost $ 4,055 $ 3,589 $ 3,652 (In thousands) 2023 2022 2021 Service cost – benefits earned during the year $ — $ — $ 1,002 Interest cost on projected benefit obligations 4,314 3,293 3,076 Expected return on plan assets (3,735) (5,857) (6,310) Net amortization and deferral 154 — 393 Net periodic pension cost (benefit) $ 733 $ (2,564) $ (1,839) 2017 2016 2015 Weighted average discount rate 4.25 % 4.50 % 4.00 % Rate of increase in compensation levels (a) (a) (a) Expected long-term rate of return on assets 6.50 % 6.75 % 6.75 % (a)2023 2022 2021 Weighted average discount rate 5.25 % 2.85 % 2.55 % Rate of increase in compensation levels N/A N/A (a ) Expected long-term rate of return on assets 6.00 % 6.00 % 6.00 % of service2017,2023 and 2022, the RP-2014Pri-2012 Mortality Table and the MP-2016MP-2021 Mortality Improvement Table were used. For 2016,2021, the RP-2014Pri-2012 Mortality Table and the MP-2015MP-2020 Mortality Improvement Table were used. For 2015, the RP-2014 Mortality Tables and the MP-2014 Mortality Improvement scale were used.45%86% fixed income, 25% U.S. equity and 30% non-U.S.14% equity. Due to volatility in the market, this target allocation is not always desirable and asset allocations can fluctuate between acceptable ranges. The fixed income component is invested in pooled investment grade securities. The equityOne-Year Nominal Annual Standard Asset Class % of Total Portfolio Return Deviation Core Fixed Income 51 % 4.55 % 4.55 % Large Cap U.S. Equities 14 % 7.00 % 15.85 % Small Cap U.S. Equities 5 % 8.10 % 19.70 % International (Developed) 25 % 7.99 % 17.93 % International (Emerging) 5 % 10.56 % 27.35 % Asset Class % of Total Portfolio One-Year Nominal
ReturnAnnual Standard
DeviationCore Fixed Income 86.0 % 4.52 % 4.30 % Global Equity 14.0 % 8.54 % 18.12 % 6.50%5.00%.Fair Value Measurements as of December 31, 2017 2016 Quoted Prices Quoted Prices in Active in Active Markets for Significant Markets for Significant Identical Observable Identical Observable Assets Inputs Assets Inputs (In thousands) Total (Level 1) (Level 2) Total (Level 1) (Level 2) Cash $ 374 $ 374 $ — $ 340 $ 340 $ — Equity securities U.S. Large Cap Growth — — — 13,306 — 13,306 U.S. Small/Mid Cap Growth 4,111 — 4,111 5,655 — 5,655 Non-U. S. Core 21,065 — 21,065 10,588 — 10,588 U.S. Large Cap Passive 11,717 — 11,717 7,364 — 7,364 Emerging Markets 4,052 — 4,052 652 — 652 Fixed Income U.S. Core 11,284 — 11,284 24,438 — 24,438 U.S. Passive 24,345 — 24,345 9,571 — 9,571 Opportunistic 4,479 4,479 1,254 1,254 Total $ 81,427 $ 374 $ 81,053 $ 73,168 $ 340 $ 72,828 Fair Value Measurements as of December 31, 2023 2022 (In thousands) Total Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)Observable
Inputs
(Level 2)Total Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)Observable
Inputs
(Level 2)Cash $ 614 $ 614 $ — $ 566 $ 566 $ — Real estate investment trusts 2,849 — 2,849 7,120 — 7,120 Equity securities U.S. Small/Mid Cap Growth 987 — 987 2,055 — 2,055 Non-U. S. Core 3,811 — 3,811 7,822 — 7,822 U.S. Large Cap Passive 3,333 — 3,333 8,319 — 8,319 Emerging Markets 1,391 — 1,391 3,000 — 3,000 Fixed Income U.S. Core 69,710 — 69,710 51,756 — 51,756 Opportunistic 4,059 — 4,059 2,756 — 2,756 Total $ 86,754 $ 614 $ 86,140 $ 83,394 $ 566 $ 82,828 funded status and amounts recognized in the Company’s consolidated balance sheets is as follows:December 31, (In thousands) 2017 2016 Benefit obligation: Balance, January 1 $ 9,132 $ 8,748 Service cost 143 133 Interest cost 360 367 Benefits paid (247 ) (247 ) Actuarial (gain) loss 706 131 Balance, December 31 $ 10,094 $ 9,132 December 31, (In thousands) 2023 2022 Benefit obligation: Balance, January 1 $ 9,579 $ 12,420 Interest cost 472 318 Benefits paid (400) (348) Actuarial gain (150) (2,811) Balance, December 31 $ 9,501 $ 9,579 2017, 20162023, 2022 and 2015,2021, the SERP’s expected benefit cash flows were discounted using the CitigroupFTSE Above Median Double-A Curve. 2017 2016 2015 Weighted average discount rate 3.50 % 4.00 % 4.25 % Rate of increase in compensation levels (a) (a) (a) (a)6.00% graded down to 3.25% over the first seven years of service.2023 2022 2021 Weighted average discount rate 4.95 % 5.15 % 2.65 % Rate of increase in compensation levels N/A N/A (a) $8,734,000$9.5 million and $7,904,000$9.6 million as of December 31, 20172023 and 2016,2022, respectively. Since this is an unfunded plan, there are no plan assets. Benefits paid were $247,000$400,000 in both 20172023, $348,000 in 2022, and 2016 and $243,000$282,000 in 2015.Amount 2018 $ 314,000 2019 313,000 2020 311,000 2021 367,000 2022 711,000 2023-2027 3,813,000 The SERP’sAmount 2024 $ 792,000 2025 790,000 2026 787,000 2027 783,000 2028 778,000 2029-2033 $ 3,754,000 For the Year Ended December 31, (In thousands) 2017 2016 2015 Service cost – benefits earned during the year $ 143 $ 133 $ 140 Interest cost on projected benefit obligations 360 367 348 Net amortization and deferral 324 295 654 Net periodic pension cost $ 827 $ 795 $ 1,142 For the Year Ended December 31, (In thousands) 2023 2022 2021 Service cost – benefits earned during the year $ — $ — $ 147 Interest cost on projected benefit obligations 472 318 291 Net amortization and deferral — 108 203 Net periodic pension cost $ 472 $ 426 $ 641 The Plan SERP (In thousands) 2017 2016 2017 2016 Prior service cost $ — $ — $ — $ — Net actuarial loss 23,160 22,237 2,388 2,005 Total $ 23,160 $ 22,237 $ 2,388 $ 2,005 The Plan SERP (In thousands) 2023 2022 2023 2022 Prior service cost $ — $ — $ — $ — Net actuarial loss (gain) 4,434 6,833 (287) (136) Total $ 4,434 $ 6,833 $ (287) $ (136) 20172023 expected to be recognized as components of net periodic benefit cost in 20182024 for both the Plan are $0 and $1,409,000, respectively. The estimated pretax prior service cost and net actuarial loss in accumulated other comprehensive loss at December 31, 2017 expected to be recognized as components of net periodic benefit cost in 2018 for the SERP are $0 and $582,000, respectively.2017, 20162023, 2022, and 20152021 was $5,799,000, $5,367,000,$6.8 million, $7.9 million, and $5,211,000,$6.4 million, respectively.2017, 20162023, 2022 and 20152021 were $925,000, $658,000,$5.1 million, $4.6 million, and $623,000,$3.5 million, respectively.The“Omnibus Plan”"Prior Plan"). On April 18, 2023, shareholders approved the 2023 Omnibus Stock and Performance Compensation Plan (the "2023 Omnibus Plan") provides incentive opportunities for key employees and non-employee directors and to alignreplace the personal financial interests of such individuals with those of the Company’s shareholders.Prior Plan. The 2023 Omnibus Plan permits the issuance of up to 1,500,0001.0 million shares of the Company’s common stock in the form of stock options, SARs, restricted stock, restricted stock units, phantom stock, and performance awards.All share and per share data have been restated to give effect to the 10% stock dividend issued on December 15, 2017. shares granted prior to April 16, 2013 are amortized to expense over the three-year vesting period. Beginning on April 16, 2013, restricted shares granted to Company employees are amortized to expense over the three-year annualcliff vesting period whereas restrictedperiod. Restricted shares granted to members of the Board of Directors are amortized to expense over a one-year service period, with the exception of those shares granted in lieu of cash paymentpayments for retainer fees which are expensed in the period earned. Beginning on February 2, 2017, restricted shares granted to Company employees are amortized to expense over the three-year cliff vesting period.20172023 were as follows:Weighted Average Grant Date Shares Fair Value Balance at December 31, 2016 81,269 $ 46.39 Granted 26,064 $ 59.46 Vested (29,167 ) $ 47.58 Forfeited — — Balance at December 31, 2017 78,166 $ 50.30 Shares Weighted Average
Grant Date
Fair ValueBalance at December 31, 2022 205,565 $ 42.64 Granted 57,837 44.61 Vested (25,224) 51.66 Forfeited (398) 40.15 Balance at December 31, 2023 237,780 $ 42.17 20162022 and 2015, 39,8162021, 64,151 and 47,06553,906 shares, respectively, were granted with weighted average per share market values at date of grant of $45.75$39.30 in 20162022 and $46.40$41.55 in 2015.2021. The fair value of such shares are based on the market price on the date of grant. Amortization of the restricted stock bonus awards totaled $1,743,000$2.2 million for 2017, $1,712,0002023, $2.4 million for 20162022 and $1,514,000$1.8 million for 2015.2021. As of December 31, 2017,2023, the total unrecognized compensation expense related to non-vested restricted stock awards was $1,345,000$1.5 million, and the related weighted average period over which it is expected to be recognized is approximately 0.630.99 years. The total fair value of shares vested during the years ended December 2017, 2016,2023, 2022, and 20152021 was $1,550,000, $1,500,000,$1.3 million, $1.1 million, and $1,089,000,$1.2 million, respectively.In February 2017, theperformance-based restricted stock (“PBRS”)PBRS awards which are contingent upon the Company’s achievement of pre-established financial goals over the period from January 1, 2017 through December 31, 2019. The PBRS awardsa three-year cliff vest on the three-year anniversaryperiod. The number of their grant date at levels rangingshares issued ranges from 0% to 150% of the target opportunity based on the actual achievement of financial goals for the three-year performance period. The target numberPBRS shares granted was 25,342 with a grant date fair valuethe activity of $59.20 per share. The 2017 expense related to this grant totaled $579,000 and isthe PBRS, based on 100% of target value, for the grant date fair value and the anticipated achievement of approximately 124% of the target financial goals. year ended December 31, 2023: Shares Weighted Average
Grant Date
Fair ValueBalance at December 31, 2022 138,785 $ 43.19 Granted 51,453 48.19 Vested (30,567) 54.02 Forfeited (598) 40.15 Balance at December 31, 2023 159,073 $ 42.74 estimated expense for 2018 and each future period through the vesting date is subject to prospective adjustment based upon changes in the expected achievement of the financial goals.SARsThere were no SARs grantedPBRS that vested during the year ended December 31, 2017.2017, the Company recognized2023, there were no SARs granted and no expense of $18,000.recognized. As of December 31, 2017,2023, there was no unrecognized compensation expense related to SARs.20172023 were as follows:SARs Weighted Average Exercise Price Balance at December 31, 2016 261,206 $ 34.75 Exercised (26,970 ) 33.09 Forfeited — — Balance at December 31, 2017 234,236 34.97 Exercisable at December 31, 2017 234,236 $ 34.97 SARs Weighted Average Exercise Price Balance at December 31, 2022 46,325 $ 41.62 Exercised (15,916) 31.92 Balance at December 31, 2023 30,409 46.70 Exercisable at December 31, 2023 30,409 $ 46.70 20172023 and 20162022 was $892,000$508,000 and $2,162,000,$2.2 million, respectively. The average remaining contractual term for SARs outstanding as of December 31, 20172023 was 5.030.08 years, and the aggregate intrinsic value was $7,291,000.$0. The average remaining contractual term for SARs exercisableoutstanding as of December 31, 20162022 was 5.220.73 years, and the aggregate intrinsic value was $8,395,000.$2,340,000, $1,959,000,$4.1 million, $6.7 million, and $2,059,000$2.9 million in 2017, 2016,2023, 2022, and 2015,2021, respectively.For the Years Ended December 31, (In thousands) 2017 2016 2015 Postage and supplies $ 2,087 $ 1,925 $ 1,954 Promotional expense 2,557 2,187 2,268 Professional fees 1,650 1,930 1,690 Outside service fees 4,424 3,316 2,848 Data processing services 897 372 357 Telecommunications 749 1,000 1,068 Other 1,722 1,913 1,185 Total other operating expense $ 14,086 $ 12,643 $ 11,370 For the Years Ended December 31, (In thousands) 2023 2022 2021 Promotional expense $ 3,252 $ 2,889 $ 2,627 Outside service fees 9,627 7,874 7,413 Data processing services 6,553 3,365 2,650 Other 10,551 7,950 4,053 Total other operating expense $ 29,983 $ 22,078 $ 16,743 For the Years Ended December 31, (In thousands) 2017 2016 2015 Current: Federal $ 4,250 $ 6,456 $ 6,825 State 1,638 941 1,290 Deferred: Federal 4,256 301 (84 ) State (259 ) 18 (53 ) Total income tax expense $ 9,885 $ 7,716 $ 7,978 For the Years Ended December 31, (In thousands) 2023 2022 2021 Current: Federal $ 6,378 $ 7,794 $ 5,018 State 1,203 1,365 897 Deferred: Federal (242) (990) (608) State (42) (173) (90) Total income tax expense $ 7,297 $ 7,996 $ 5,217 35%21% for each of 2017, 2016 and 2015year to income before income tax expense is as follows:For the Years Ended December 31, (In thousands) 2017 2016 2015 Expected income tax expense $ 12,214 $ 11,223 $ 10,862 (Reductions) increases resulting from: Tax-exempt income (3,868 ) (3,754 ) (3,704 ) State taxes, net of federal benefit 896 623 804 Share-based compensation adjustment (376 ) — — Adjustment of deferred tax asset or liability for TCJA 1,824 — — Other, net (805 ) (376 ) 16 Total income tax expense $ 9,885 $ 7,716 $ 7,978 On December 22, 2017, the TCJA was enacted. Among other things, the new law (i) establishes a new, flat corporate federal statutory income tax rate of 21%; (ii) eliminates the corporate alternative minimum tax and allows the use of any such carryforwards to offset regular tax liability for any taxable year; (iii) limits the deduction for net interest expense incurred by U.S. corporations; (iv) allows businesses to immediately expense, for tax purposes, the cost of new investments in certain qualified depreciable assets; (v) eliminates or reduces certain deductions related to meals and entertainment expenses; (vi) modifies the limitation on excessive employee remuneration to eliminate the exception for performance-based compensation and clarifies the definition of a covered employee; and (vii) limits the deductibility of deposit insurance premiums. The TCJA also significantly changes U.S. tax law related to foreign operations, though, such changes do not currently impact the Company on a significant level.Also on December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance on accounting for tax effects of the TCJA. SAB 118 provides a measurement period of up to one year from the enactment date to complete the accounting. Based on the information available and current interpretation of the rules, the Company has made provisional estimates of the impact of the reduction in the corporate tax rate and remeasurement of certain deferred tax assets and liabilities based on the rate at which they are expected to reverse in the future. The final analysis and measurement will be completed during 2018 when the Company files the 2017 U.S. federal income tax return.For the Years Ended December 31, (In thousands) 2023 2022 2021 Expected income tax expense $ 7,885 $ 9,035 $ 7,103 (Reductions) increases resulting from: Tax-exempt income (1,104) (1,571) (1,673) State taxes, net of federal benefit 917 942 638 Share-based compensation adjustment 298 258 92 Federal tax credits (643) (473) (357) Other, net (56) (195) (586) Total income tax expense $ 7,297 $ 7,996 $ 5,217 20172023 totaled $9,885,000$7.3 million compared to $7,716,000$8.0 million in 2022 and $7,978,000$5.2 million in 2016 and 2015, respectively.2021. When measured as a percent of pre-tax income, the Company’s effective tax rate was 28%19.5% in 2017, 24%2023, 18.6% in 2016,2022, and 26%15.4% in 2015. The increase in 2017 tax expense was primarily the result2021.a one-time, non-cash charge of $1,824,000 triggered by the passage of the TCJA on December 22, 2017. The charge consists of the following:●The deferred tax inventory was revalued at the new rate of 21% and resulted in a net credit of $462,000.●AOCI related to pension and unrealized gains/losses on securities available for sale was revalued at the new rate of 21% and resulted in a net charge of $2,286,000.The Company’s effective tax rate for 2017 including and excluding the one-time TCJA charge was 28% and 25%, respectively. As a result of the lower TCJA rates, the effective rate for 2018 is anticipated to decrease by approximately 25% vs. the 2017 rate excluding the TCJA charge. The Company’s effective tax rate has traditionally been lower than the statutory rate because of investments and loans that are tax exempt.December 31, (In thousands) 2017 2016 Deferred tax assets: Allowance for loan losses $ 2,413 $ 3,718 ASC 715 pension funding liability 6,080 8,969 Net operating loss carryforward (1) 76 169 Supplemental executive retirement plan accrual 1,833 2,604 Stock compensation 1,307 1,695 Other 118 177 Total deferred tax assets $ 11,827 $ 17,332 Deferred tax liabilities: Premises and equipment (2,248 ) (2,731 ) Pension (1,379 ) (3,601 ) Intangible/assets (1,091 ) (1,402 ) Unrealized gain on investment in securities available-for-sale (1,938 ) (560 ) Deferred income (2,121 ) — Total deferred tax liabilities $ (8,777 ) $ (8,294 ) Net deferred tax assets $ 3,050 $ 9,038 (1)As of December 31, 2017, the Company had approximately $361,000 of net operating loss carry forwards as a result of the acquisition of Franklin Bancorp. The utilization of the net operating loss carry forward is subject to Section 382 of the Internal Revenue Code and limits the Company’s use to approximately $122,000 per year during the carry forward period, which expires in 2020.December 31, (In thousands) 2023 2022 Deferred tax assets: Allowance for credit losses $ 3,115 $ 3,222 ASC 715 pension funding liability 987 1,594 Supplemental executive retirement plan accrual 2,328 2,311 Stock compensation 2,988 2,745 13,756 16,798 Research and development expenses 604 772 Lease liability 2,020 2,261 Other 330 640 Total deferred tax assets $ 26,128 $ 30,343 Deferred tax liabilities: Premises and equipment $ (1,144) $ (1,710) Pension (967) (1,141) Intangible assets (1,828) (1,744) Right of use asset (1,927) (2,178) Prepaid expenses (765) (847) Other (283) (144) Total deferred tax liabilities $ (6,914) $ (7,764) Net deferred tax assets $ 19,214 $ 22,579 20172023 or 2016,2022, due to management’s belief that all criteria for recognition have been met, includingit is more likely than not that the expectation of projected future taxable income sufficient to support the realization of deferred tax assets.(In thousands) 2017 2016 2015 Balance at January 1 $ 1,623 $ 1,194 $ 1,117 Changes in unrecognized tax benefits as a result of tax positions taken during a prior year (15 ) 407 10 Changes in unrecognized tax benefits as a result of tax position taken during the current year 263 311 277 Decreases in unrecognized tax benefits relating to settlements with taxing authorities — — — Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations (239 ) (289 ) (210 ) Balance at December 31 $ 1,632 $ 1,623 $ 1,194 (In thousands) 2023 2022 2021 Balance at January 1 $ 1,252 $ 1,405 $ 1,231 Changes in unrecognized tax benefits as a result of tax positions taken during a prior year 99 (176) 165 Changes in unrecognized tax benefits as a result of tax position taken during the current year 300 222 239 Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations (254) (199) (230) Balance at December 31 $ 1,397 $ 1,252 $ 1,405 2017, 20162023, 2022 and 2015,2021, the balancebalances of the Company’s unrecognized tax benefits which would, if recognized, affect the Company’s effective tax rate was $1,464,000, $1,225,000were $1,285,000, $1,129,000 and $861,000,$1,134,000, respectively. These amounts are net of the offsetting benefitsexpense from other taxing jurisdictions.2017, 20162023, 2022 and 2015,2021, the Company had $139,000, $108,000$117,000, $84,000 and $54,000,$85,000, respectively, in accrued interest related to unrecognized tax benefits. During 2017 and 2016, the Company recorded a net increase in accrued interest of $31,000 and $54,000, respectively.$299,000$285,000 over the next 12 months. The reduction primarily relates to the anticipated lapse in the statute of limitations. The unrecognized tax benefits relate primarily to apportionment of taxable income among various state tax jurisdictions.2014 through 20162020, 2021 and 2022 remain subject to examination by the Internal Revenue Service. In addition, the Company is subject to state tax examinations for the tax years 20132019 through 2016.ContingenciesThe Company and its subsidiaries are not involved in any pending proceedings other than ordinary routine litigation incidental to their businesses. Management believes none of these proceedings, if determined adversely, would have a material effect on the business or financial condition of the Company or its subsidiaries.Note 15December 31, 2023 2022 (In thousands) Carrying
AmountFair Value Carrying
AmountFair Value Balance sheet assets: Cash and cash equivalents $ 372,468 $ 372,468 $ 200,942 $ 200,942 Investment securities 627,117 627,117 754,468 754,468 Loans, net 1,001,229 962,223 1,069,367 1,004,682 Accrued interest receivable 8,450 8,450 8,297 8,297 Total $ 2,009,264 $ 1,970,258 $ 2,033,074 $ 1,968,389 Balance sheet liabilities: Deposits $ 1,140,814 $ 1,140,814 $ 1,257,217 $ 1,257,217 Accounts and drafts payable 1,071,369 1,071,369 1,067,600 1,067,600 Accrued interest payable 635 635 66 66 Total $ 2,212,818 $ 2,212,818 $ 2,324,883 $ 2,324,883 2017 and 2016, no amounts have2023, an allowance for unfunded commitments of $132,000 had been accruedrecorded, as compared to $232,000 at December 31, 2022. See Note 1 "Summary of Significant Accounting Policies" for any estimated losses for these instruments. conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These off-balance sheet financial instruments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The approximate remaining terms of commercial and standby letters of credit range from less than one to five years. Since these financial instruments may expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. Commitments to extend credit and letters of credit are subject to the same underwriting standards as those financial instruments included on the consolidated balance sheets. The Company evaluates each customer’s credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of the credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but is generally accounts receivable, inventory, residential or income-producing commercial property or equipment. In the event of nonperformance, the Company may obtain and liquidate the collateral to recover amounts paid under its guarantees on these financial instruments. conditional commitments to extend credit, standby letters of credit and commercial letters:December 31, (In thousands) 2017 2016 Conditional commitments to extend credit $ 87,013 $ 45,497 Standby letters of credit 14,347 14,381 Commercial letters of credit 3,246 1,962 December 31, (In thousands) 2023 2022 Commitments to extend credit $ 196,064 $ 237,006 Standby letters of credit 13,614 14,494 Commercial letters of credit 353 354
The Company and its subsidiaries are not involved in any pending proceedings other than ordinary routine litigation incidental to their businesses. Management believes none of these proceedings, if determined adversely, would have a material effect on the business or financial condition of the Company or its subsidiaries.Followinga summary ofrecognized as the carrying amounts and fair valuesobligation to the customer is satisfied. The following is detail of the Company’s financial instruments:December 31, 2017 2016 Carrying Carrying (In thousands) Amount Fair Value Amount Fair Value Balance sheet assets: Cash and cash equivalents $ 228,110 $ 228,110 $ 266,743 $ 266,743 Investment in securities 470,523 470,523 390,552 390,552 Loans, net 676,026 675,020 654,691 652,028 Accrued interest receivable 7,413 7,413 6,543 6,543 Total $ 1,382,072 $ 1,381,066 $ 1,318,529 $ 1,315,866 Balance sheet liabilities: Deposits $ 678,088 $ 678,346 $ 621,961 $ 622,173 Accounts and drafts payable 661,888 661,888 642,287 642,287 Accrued interest payable 55 55 46 46 Total $ 1,340,031 $ 1,340,289 $ 1,264,294 $ 1,264,506 methodstable presents non-interest income, segregated by revenue streams in-scope and assumptions were used to estimateout-of-scope for the fair value of each class of financial instruments for which it is practicable to estimate that value:Cashyears ended December 31, 2023, 2022 and Cash EquivalentsThe carrying amount approximates fair value.Investment in SecuritiesThe fair value is measured on a recurring basis using Level 2 valuations. Refer to 2021.For the Years Ended December 31, (In thousands) 2023 2022 2021 Fee revenue and other income In-scope of ASC 606 Processing fees $ 79,566 $ 76,470 $ 74,589 Financial fees 45,985 43,757 32,733 Information services payment and processing revenue 125,551 120,227 107,322 Bank service fees 1,063 1,430 1,369 126,614 121,657 108,691 3,853 3,325 1,000 Total fee revenue and other income $ 130,467 $ 124,982 $ 109,691 3, “Investment in Securities,” for fair value and unrealized gains and losses by investment type.LoansThe fair value is estimated using present values of future cash flows discounted at risk-adjusted interest rates for each loan category designated by management and is therefore a Level 3 valuation. Management believes that the risk factor embedded in the interest rates along with the allowance for loan losses results in a fair valuation.Impaired loans are valued using the fair value of the collateral which is based upon an observable market price or current appraised value and therefore, the fair value is a nonrecurring Level 3 valuation.Accrued Interest ReceivableThe carrying amount approximates fair value.DepositsThe fair value of demand deposits, savings deposits and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities and therefore, is a Level 2 valuation. The fair value estimates above do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market or the benefit derived from the customer relationship inherent in existing deposits.Accounts and Drafts PayableThe carrying amount approximates fair value.Accrued InterestThe carrying amount approximates fair value.LimitationsFair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets or liabilities that are not considered financial assets or liabilities include premises and equipment and the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market (core deposit intangible). In addition, tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.Note 16
17Services.EachServices. Each of these segments provides distinct services that are marketed through different channels. They are managed separately due to their unique service and processing and capital requirements.ministries.Tableministries, as well as supporting the banking needs of Contentsnetpre-tax income after allocations for corporate expenses and income taxes.expenses. Transactions between segments are accounted for at what management believes to be fair value. Assetsactual assets ownedaverage balances and deposits generated by Information Services and Banking Services and there is no allocation methodology used. Loans are sold by Banking Services tointerest income is determined by actual interest income on loans minus actual interest expense paid on deposits plus/minus an allocation for interest income or expense dependent on the remaining available liquidity of the segment. Information Services to createinterest income is determined by multiplying available liquidity to keep the Bank’s loan to deposit ratio within policy limits. Segmentby actual yields on short-term investments and investment securities.from customersincome and overall total Company interest income is the actual interest earned on the loans owned by Information Servicesincluded in Corporate, Eliminations, and Banking Services, respectively.2017, 20162023, 2022 and 2015,2021 is as follows: Corporate, Information Banking Eliminations (In thousands) Services Services and Other Total 2017 Fee revenue and other income: Income from customers $ 93,804 $ 1,708 $ — $ 95,512 Intersegment income (expense) 13,317 1,545 (14,862 ) — Net interest income (expense) after provision for loan losses: Income from customers 13,400 26,390 — 39,790 Intersegment income (expense) — — — — Depreciation and amortization 3,784 150 118 4,052 Income taxes 4,326 5,559 — 9,885 Net income 13,597 11,417 — 25,014 Goodwill 12,433 136 — 12,569 Other intangible assets, net 1,996 — — 1,996 Total assets $ 800,214 $ 830,672 $ (27,677 ) $ 1,603,209 2016 Fee revenue and other income: Income from customers $ 84,612 $ 1,524 $ — $ 86,136 Intersegment income (expense) 12,164 1,575 (13,739 ) — Net interest income (expense) after provision for loan losses: Income from customers 13,820 25,581 — 39,401 Intersegment income (expense) 2 (2 ) — — Depreciation and amortization 3,368 165 120 3,653 Income taxes 1,478 6,238 — 7,716 Net income 14,049 10,299 — 24,348 Goodwill 11,454 136 — 11,590 Other intangible assets, net 1,997 — — 1,997 Total assets $ 763,999 $ 756,164 $ (15,324 ) $ 1,504,839 2015 Fee revenue and other income: Income from customers $ 82,144 $ 1,224 $ — $ 83,368 Intersegment income (expense) 10,078 1,648 (11,726 ) — Net interest income (expense) after provision for loan losses: Income from customers 14,598 22,851 — 37,449 Intersegment income (expense) 12 (12 ) — — Depreciation and amortization 3,164 151 101 3,416 Income taxes 2,818 5,160 — 7,978 Net income 14,635 8,421 — 23,056 Goodwill 11,454 136 — 11,590 Other intangible assets, net 2,405 — — 2,405 Total assets $ 702,491 $ 761,739 $ (8,724 ) $ 1,455,506 (In thousands) Information
ServicesBanking
ServicesCorporate,
Eliminations
and OtherTotal 2023 Fee income $ 126,766 $ 2,713 $ 988 $ 130,467 Interest income 39,899 54,696 (11,835) 82,760 Interest expense 1,191 28,029 (12,954) 16,266 Intersegment income (expense) (4,270) 4,270 — — Pre-tax income 23,662 11,587 2,107 37,356 Goodwill 17,173 136 — 17,309 Other intangible assets, net 3,345 — — 3,345 Total assets 1,586,388 1,103,173 (210,939) 2,478,622 Average funding sources $ 1,353,499 $ 810,903 $ — $ 2,164,402 2022 Fee income $ 120,234 $ 3,606 $ 1,142 $ 124,982 Interest income 28,528 40,913 (7,115) 62,326 Interest expense 166 4,143 (827) 3,482 Intersegment income (expense) (3,350) 3,350 — — Pre-tax income 26,478 21,566 (5,144) 42,900 Goodwill 17,173 136 — 17,309 Other intangible assets, net 4,126 — — 4,126 Total assets 1,595,939 1,182,439 (205,355) 2,573,023 Average funding sources $ 1,379,355 $ 953,346 $ — $ 2,332,701 2021 Fee income $ 106,678 $ 1,405 $ 1,608 $ 109,691 Interest income 24,332 24,732 (3,567) 45,497 Interest expense — 1,171 — 1,171 Intersegment income (expense) (3,222) 3,222 — — Pre-tax income 25,446 11,004 (2,629) 33,821 Goodwill 14,126 136 — 14,262 Other intangible assets, net 2,564 — — 2,564 Total assets 1,450,594 1,090,626 13,681 2,554,901 Average funding sources $ 1,150,493 $ 876,018 $ — $ 2,026,511 17
18(In thousands) December 31,
2023Lease payments due Less than 1 year $ 1,327 1-2 years 1,345 2-3 years 1,351 3-4 years 1,357 4-5 years 1,315 Over 5 years 2,904 Total undiscounted cash flows 9,599 Discount on cash flows 1,122 Total lease liability $ 8,477 -Subsequent Events, the Company has evaluated subsequent events after the consolidated balance sheet date of December 31, 2017,2023, and there were no events identified that would require additional disclosures to prevent the Company’s consolidated financial statements from being misleading.18
20 Condensed Balance Sheets December 31, (In thousands) 2017 2016 Assets Cash and due from banks $ 56,462 $ 45,464 Short-term investments 48,324 107,898 Securities available-for-sale, at fair value 470,523 390,552 Loans, net 12,239 47,184 Investments in subsidiaries 113,681 101,824 Premises and equipment, net 20,927 20,375 Other assets 199,865 161,317 Total assets $ 922,021 $ 874,614 Liabilities and Shareholders’ Equity Liabilities: Accounts and drafts payable $ 661,342 $ 640,945 Other liabilities 35,533 25,415 Total liabilities 696,875 666,360 Total shareholders’ equity 225,146 208,254 Total liabilities and shareholders’ equity $ 922,021 $ 874,614 Condensed Statements of Income For the Years Ended December 31, (In thousands) 2017 2016 2015 Income from subsidiaries: Interest $ — $ 2 $ 12 Management fees 2,172 2,105 2,201 Income from subsidiaries 2,172 2,107 2,213 Information services revenue 93,133 83,543 78,488 Net interest income after provision 13,217 13,389 13,948 Gain on sales of investment securities — 387 2,910 Other income 483 504 613 Total income 109,005 99,930 98,172 Expenses: Salaries and employee benefits 70,409 65,968 63,475 Other expenses 20,333 18,133 16,580 Total expenses 90,742 84,101 80,055 Income before income tax and equity in undistributed income of subsidiaries 18,263 15,829 18,117 Income tax expense 4,394 1,540 2,950 Income before undistributed income of subsidiaries 13,869 14,289 15,167 Equity in undistributed income of subsidiaries 11,145 10,059 7,889 Net income $ 25,014 $ 24,348 $ 23,056 (In thousands) 2023 2022 Assets Cash and due from banks $ 17,003 $ 5,081 Short-term investments 186,169 26,834 Securities available-for-sale, at fair value 399,339 490,829 Loans, net 70,833 74,810 Payments in advance of funding 198,861 293,775 Investments in subsidiaries 188,304 164,907 Premises and equipment, net 29,765 19,525 Investments in bank-owned life insurance 49,159 47,998 Goodwill 17,172 17,172 Other intangible assets, net 3,346 4,126 Accounts and drafts receivable from customers 110,651 95,779 Other assets 51,180 50,331 Total assets $ 1,321,782 $ 1,291,167 Liabilities and Shareholders’ Equity Liabilities: Accounts and drafts payable $ 1,069,338 $ 1,057,463 Other liabilities 22,635 27,379 Total liabilities 1,091,973 1,084,842 Total shareholders’ equity 229,809 206,325 Total liabilities and shareholders’ equity $ 1,321,782 $ 1,291,167 Condensed Statements of Cash Flows For the Years Ended December 31, (In thousands) 2017 2016 2015 Cash flows from operating activities: Net income $ 25,014 $ 24,348 $ 23,056 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Equity in undistributed income of subsidiaries (11,145 ) (10,059 ) (7,889 ) Net change in other assets (41,013 ) (7,085 ) 16,100 Net change in other liabilities 10,118 6,683 (2,779 ) Amortization of stock-based awards 1,743 1,677 1,504 Other, net 9,219 7,558 10,389 Net cash (used in) provided by operating activities (6,064 ) 23,122 40,381 Cash flows from investing activities: Net increase in securities (80,621 ) (33,025 ) (23,472 ) Net decrease in loans 34,944 40,431 28,343 Purchases of premises and equipment, net (4,020 ) (4,557 ) (5,708 ) Net cash (used in) provided by investing activities (49,697 ) 2,849 (837 ) Cash flows from financing activities: Net increase (decrease) in accounts and drafts payable 20,397 64,026 (78,439 ) Cash dividends paid (10,675 ) (9,979 ) (9,697 ) Purchase of common shares for treasury (2,270 ) (9,215 ) (10,951 ) Other financing activities (267 ) 1,705 66 Net cash provided by (used in) financing activities 7,185 46,537 (99,021 ) Net increase (decrease) in cash and cash equivalents (48,576 ) 72,508 (59,477 ) Cash and cash equivalents at beginning of year 153,362 80,854 140,331 Cash and cash equivalents at end of year $ 104,786 $ 153,362 $ 80,854 Note 19SUPPLEMENTARY FINANCIAL INFORMATION(Unaudited) First Second Third Fourth (In thousands except per share data) Quarter Quarter Quarter Quarter YTD 2017 Fee revenue and other income $ 22,771 $ 23,800 $ 24,207 $ 24,734 $ 95,512 Interest income 9,999 10,332 10,665 10,981 41,977 Interest expense 480 470 571 666 2,187 Net interest income 9,519 9,862 10,094 10,315 39,790 Provision for loan losses — — — — — Operating expense 24,318 24,901 25,042 26,142 100,403 Income tax expense 1,665 2,248 2,396 3,576 (1) 9,885 (1) Net income $ 6,307 $ 6,513 $ 6,863 $ 5,331 $ 25,014 Net income per share: Basic earnings per share $ .51 $ .53 $ .56 $ .44 $ 2.04 Diluted earnings per share .51 .52 .55 .43 2.01 2016 Fee revenue and other income $ 20,505 $ 21,457 $ 22,149 $ 22,025 $ 86,136 Interest income 9,777 10,010 9,985 10,158 39,930 Interest expense 513 504 505 507 2,029 Net interest income 9,264 9,506 9,480 9,651 37,901 Provision for loan losses (1,000 ) — — (500 ) (1,500 ) Operating expense 22,916 23,059 23,552 23,946 93,473 Income tax expense 2,020 2,035 1,855 1,806 7,716 Net income $ 5,833 $ 5,869 $ 6,222 $ 6,424 $ 24,348 Net income per share: Basic earnings per share $ .47 $ .48 $ .51 $ .53 $ 1.99 Diluted earnings per share .47 .47 .50 .52 1.96 (1) Includes one-time, non-cash TCJA charge of $1,824,000(In thousands) 2023 2022 2021 Equity in undistributed income of subsidiaries $ 19,281 $ 10,618 $ 2,252 Dividends received from subsidiaries 7,500 15,000 15,000 Income from subsidiaries – management fees 4,230 4,315 3,115 Processing fees 77,219 74,382 72,579 Financial fees 44,436 42,243 31,847 Other fees 3,804 2,606 970 Net interest income after provision for (release of) credit losses 19,287 13,435 11,316 Total revenue 175,757 162,599 137,079 Expenses: Salaries and employee benefits 105,114 94,047 80,434 Other expenses 40,440 32,406 27,406 Total expenses 145,554 126,453 107,840 Income before income tax expense 30,203 36,146 29,239 Income tax expense 144 1,242 635 Net income $ 30,059 $ 34,904 $ 28,604 (In thousands) 2023 2022 2021 Cash flows from operating activities: Net income $ 30,059 $ 34,904 $ 28,604 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed income of subsidiaries (19,281) (10,618) (2,252) Net change in other assets (4,427) (4,640) (212) Net change in other liabilities (2,870) 6,462 (9,307) Stock-based compensation expense 4,139 6,732 2,859 Other, net 10,149 10,412 5,921 Net cash provided by operating activities 17,769 43,252 25,613 Cash flows from investing activities: Proceeds from sales of securities available-for-sale 86,722 3,838 63,774 Proceeds from maturities of securities available-for-sale 23,032 44,566 95,787 Purchases of securities available-for-sale (15,332) (45,340) (385,651) Net decrease (increase) in loans 3,977 (34,295) 8,799 Net decrease (increase) in payments in advance of funding 94,914 (2,347) (96,864) Purchase of bank-owned life insurance — (4,000) (25,119) Purchases of premises and equipment, net (14,262) (5,851) (2,233) Asset acquisition of TouchPoint — (4,814) — Net cash provided by (used in) investing activities 179,051 (48,243) (341,507) Cash flows from financing activities: Net (increase) decrease in accounts and drafts receivable from customers (14,872) (90,787) 6 Net increase in accounts and drafts payable 11,875 16,393 208,650 Cash dividends paid (15,959) (15,442) (15,446) Purchase of common shares for treasury (5,773) (5,299) (30,997) Other financing activities, net (834) (594) (850) Net cash (used in) provided by financing activities (25,563) (95,729) 161,363 Net increase (decrease) in cash and cash equivalents 171,257 (100,720) (154,531) Cash and cash equivalents at beginning of year 31,915 132,635 287,166 Cash and cash equivalents at end of year $ 203,172 $ 31,915 $ 132,635 20172023 and 2016,2022, the related consolidated statements of income, comprehensive income, cash flows, and shareholders’ equity and cash flows for each of the years in the three three‑year period ended December 31, 2017,2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172023 and 2016,2022, and the results of its operations and its cash flows for each of the years in the three three‑year period ended December 31, 2017,2023, in conformity with U.S. generally accepted accounting principles.2017,2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 20182024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.20182024ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE2017.2023. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2017.2017.20172023 has been audited by KPMG LLP, our independent registered public accounting firm. KPMG LLP’s report, which expresses an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2017,2023, is included below.2017,2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.20172023 and 2016,2022, the related consolidated statements of income, comprehensive income, cash flows, and shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2017,2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 28, 2018,2024 expressed an unqualified opinion on those consolidated financial statements.overOver Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.2018202420182024 Annual Meeting of Shareholders (“2018(the “2024 Proxy Statement”), a copy of which will be filed with the SEC no later than 120 days after the close of the fiscal year: “Election of Directors – Proposal 1,” “Executive Compensation and Related Information,Information.” and “Beneficial Ownership of Securities.”2017.2023.20182024 Proxy Statement, a copy of which will be filed with the SEC no later than 120 days after the close of the fiscal year.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS20182024 Proxy Statement, a copy of which will be filed with the SEC no later than 120 days after the close of the fiscal year.2017: Number of securities remaining available for Weighted-average future issuance under Number of securities to exercise price of equity compensation be issued upon exercise outstanding plans (excluding of outstanding options, options, warrants securities reflected in warrants and rights and rights column (a)) Plan Category (a) (b) (c) Equity compensation plans approved by security holders(1) 312,402 $ 38.81 579,126 Equity compensation plans not approved by security holders — — — Total 312,402 $ 38.81 579,126
2023:Note: All sharePlan Category Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)Weighted-average
exercise price of
outstanding
options, warrants
and rights
(b)Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)21,207 $ 38.41 978,793 Equity compensation plans not approved by security holders — — — Total 21,207 $ 38.41 978,793 per share data have been restatedoutstanding under the Amended and Restated Omnibus Stock and Performance Compensation Plan (the “Prior Plan”) and the 2023 Omnibus Stock and Performance Compensation Plan (the "2023 Omnibus Plan"). The 2023 Omnibus Plan was approved by the Board of Directors in February 2023 and adopted by the Company's stockholders at the 2023 Annual Meeting of Shareholders.give effectbe10% stock dividend issuedshares available for issuance under the 2023 Omnibus Plan. The Prior Plan terminated in accordance with its terms on December 15, 2017.April 17, 2023, and no shares reserved for issuance under the Prior Plan will be made available for future awards under the 2023 Omnibus Plan.(1)Amount disclosed relates to the Amended and Restated Omnibus Stock and Performance Compensation Plan (the “Omnibus Plan”).ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE20182024 Proxy Statement, a copy of which will be filed with the SEC no later than 120 days after the close of the fiscal year.4”3” of the Company’s 20182024 Proxy Statement, a copy of which will be filed with the SEC no later than 120 days after the close of the fiscal year.IV.IV.(a) (a)The following documents are incorporated by reference in or filed as an exhibit to this report: (1) and (2)(2) Financial Statements and Financial Statement Schedules Included in Item 8 of this report. (3) (3)Exhibits listed under (b) of this Item 15. (b) (b)ExhibitsExhibits3.1 3.13.2 3.23.3 3.33.4 3.44.1 10.1 10.110.2 10.210.3 10.310.4 10.410.5 10.510.6 10.610.7 10.710.8 10.9 10.10 21 2123 2331.1 31.131.2 31.232.1 32.132.2 32.297 101.INS 101.INSXBRL Instance Document. 101.SCH 101.SCHXBRL Taxonomy Extension Schema Document. 101.CAL 101.CALXBRL Taxonomy Extension Calculation Linkbase Document. 101.LAB 101.LABXBRL Taxonomy Extension Label Linkbase Document. 101.PRE 101.PREXBRL Taxonomy Extension Presentation Linkbase Document. 101.DEF 101.DEFXBRL Taxonomy Extension Definition Linkbase Document. 104 Cover Page Interactive Data File ________________CASS INFORMATION SYSTEMS, INC. Date: February 28, 2024 By /s/ Martin H. Resch Martin H. Resch President and CEO
(Principal Executive Officer)Date: February 28, 20182024By /s/ Eric H. BrunngraberMichael J. Normile Eric H. BrunngraberMichael J. Normile Chairman, President and Chief Executive Officer(Principal Executive Officer)Date: February 28, 2018By/s/ P. Stephen Appelbaum P. Stephen AppelbaumDate: February 28, 20182024By /s/ Eric H. Brunngraber Eric H. Brunngraber Date: February 28, 2024 By /s/ Ralph W. Clermont Ralph W. Clermont Date: February 28, 2024 By /s/ Robert A. Ebel Robert A. Ebel Date: February 28, 20182024By /s/ Ralph W. ClermontBenjamin F. Edwards, IV Ralph W. ClermontBenjamin F. Edwards, IV Date: February 28, 20182024By /s/ Lawrence A. CollettWendy J. Henry Lawrence A. CollettWendy J. Henry Date: February 28, 2024 By /s/ James J. Lindemann James J. Lindemann Date: February 28, 20182024By /s/ Robert A. EbelAnn W. Marr Robert A. EbelAnn W. Marr Date: February 28, 2024 By /s/ Martin H. Resch Martin H. Resch Date: February 28, 2024 By /s/ Sally H. Roth Sally H. Roth Date: February 28, 20182024By /s/ Benjamin F. Edwards, IV Joseph D. Rupp Benjamin F. Edwards, IVJoseph D. Rupp Date: February 28, 20182024By /s/ James J. LindemannRandall L. Schilling James J. LindemannRandall L. Schilling Date: February 28, 20182024By /s/ Joseph D. RuppJoseph D. RuppDate: February 28, 2018By/s/ Randall L. SchillingRandall L. SchillingDate: February 28, 2018By/s/ Franklin D. Wicks, Jr. Franklin D. Wicks, Jr. 67