1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the year ended December 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal period from ____________to ______________
Commission file number 2-80070
CASS INFORMATION SYSTEMS, INC.
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(Exact name of registrant specified in its charter)
Missouri 43-1265338
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13001 Hollenberg Drive, Bridgeton, Missouri 63044
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 506-5500
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock par value $.50
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. ___
As of March 5, 2000, 3,282,449 shares of common stock of the registrant
were outstanding; the aggregate market value of the shares of common stock of
the registrant held by non-affiliates was approximately $50,002,000 based
upon the Nasdaq Stock Market closing price of $20.00 for March 5, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on April 16, 2001 is incorporated by reference in
Part III hereof.
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PART I.
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ITEM 1. BUSINESS
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DESCRIPTION OF BUSINESS
Cass Information Systems, Inc. ("Cass" or "the Company") is a leading
provider of information processing services to large manufacturing, chemical,
food, personal products, and retail enterprises across the United States.
The Company is the nation's largest provider of freight invoice rating,
payment, audit, cost accounting and transportation information to many of the
nation's largest companies. It is also the largest processor and payer of
utility invoices, including electricity, gas, water, telephone and refuse
collection. Cass extracts, stores and presents information from freight and
utility invoices, assisting our customers' traffic and energy managers in
making decisions that will enable them to improve their operating
performance. Cass utilizes web, Internet and browser technology in all of
its systems. It heavily utilizes electronic commerce in moving over $8
billion of transactions annually. It is able to bring financial and
transaction processing components together in a single process. As an
information processing company, Cass focuses on these critical business
areas: Data Acquisition, Data Warehousing and Data Delivery. The Company
receives data from multiple sources, electronic and otherwise, and processes
the data to accomplish specific operating requirements of its customers. It
then makes the data available in a central repository for access and
archiving. Finally, the data is turned into information through the
Company's databases that communicate with clients as required and provide
internet-based methods and tools for analytical processing. Cass offers some
of its services as an Application Service Provider (ASP). In addition, the
Company, through its wholly owned bank subsidiary Cass Commercial Bank ("the
Bank"), provides banking services in the commercial, industrial and
residential areas it serves. Its primary focus is to support the Company's
payment operations, and it also provides banking services to its target
markets, which include privately owned businesses and churches and
church-related ministries. Services include commercial, real estate and
personal loans; checking, savings and time deposit accounts and other cash
management services.
An important component of the Company's services is the financial control and
stability for handling the billions of dollars of payments and the
infrastructure for electronic funds transfers (EFT). The Company's wholly
owned subsidiary, Cass Commercial Bank was organized as a Missouri trust
company with banking powers in 1906. Its principal banking office is located
at 13001 Hollenberg Drive, Bridgeton, Missouri, 63044 and it has five other
branches in the St. Louis, Missouri metropolitan area. Due to its ownership
of a federally insured commercial bank, the Registrant is a bank holding
corporation originally organized in 1982 as Cass Commercial Corporation,
under the laws of Missouri and approved by the Board of Governors of the
Federal Reserve System (the "FRB") in February 1983. On January 9, 2001 the
Company's subsidiary, Cass Information Systems, Inc. was merged into the
parent company, Cass Commercial Corporation, and the parent's name was
subsequently changed to Cass Information Systems, Inc. As of December 31,
2000, the Company owned 100% of the outstanding shares of common stock of
Cass Commercial Bank. The main operating location of the Company is at 13001
Hollenberg Drive, Bridgeton, Missouri. Other operating locations are in
Columbus, Ohio; Chicago, Illinois and Boston, Massachusetts.
MARKETING, CUSTOMERS AND COMPETITION
The Company believes it is the largest firm in the freight bill payment
industry based on the total dollars of freight bills paid. Competition
consists of five primary competitors and numerous small freight bill audit
firms located throughout the United States. While offering freight payment
services, few of these audit firms compete on a national basis. The Company
also competes with several companies, located throughout the United States,
that pay utility bills and provide extensive management reporting. Available
data indicates that the Company is also the largest provider of utility
information processing and payment services. Due to the fact that this is a
new market, the competitive environment for utility bill processing and
payment is difficult to assess and is changing rapidly. The Company appears
to have five or six firms that provide comparable services. Most of these
are regulated subsidiaries of Public Utility companies. There is
consolidation occurring among these companies and Cass now provides
processing services as an ASP for many Energy Service Providers (ESP). In
December 2000, the Company entered into an agreement to purchase the assets
of "The Utility Navigator(R)" a division of privately held Insite Services,
Inc. (see subsequent events, in Part II, Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations"). This will add
new ESP's for the Company's product as well as provide additional processing
growth.
The Company's bank subsidiary encounters substantial competition from other
banks located throughout the St. Louis metropolitan area. Savings banks,
credit unions, other financial institutions and non-bank providers of
financial services also provide competition. The principal competition
however, is represented by bank holding
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company affiliates, many of which are larger and have greater resources than
the Bank, and are able to offer a wide range of banking and related services
through extensive branch networks.
The Company owns several service marks for the freight payment services and
logistics information software it provides. Those marks deemed the most
valuable are "Freightpay", the basic freight payment service and
"Ratemaker", a rate maintenance service. In addition, the Company either
owns or has applied for other service marks.
The Company is not dependent on any one customer for a large portion of its
business. It has a varied client base with no individual client exceeding
10% of total revenue. The Bank is also not dependent on any one customer.
The Bank does however, target its services to privately-held businesses
located in the St. Louis, MO area and church and church related institutions
located in St. Louis, MO and other selected cities located throughout the
United States.
EMPLOYEES
The Company had 618 full-time and 84 part-time employees as of December 31,
2000. Of these employees, the bank subsidiary had 71 full-time and 7
part-time employees.
SUPERVISION AND REGULATION
The Company and its bank subsidiary are extensively regulated under federal
and state law. These laws and regulations are intended to protect
depositors, not shareholders. The Bank is subject to regulation and
supervision by the Missouri Division of Finance, the FRB and the Federal
Deposit Insurance Corporation (the "FDIC"). The Company is a bank holding
company within the meaning of the Bank Holding Company Act of 1956, as
amended, and as such, it is subject to regulation, supervision and
examination by the FRB. The Company is required to file quarterly and annual
reports with the FRB and to provide to the FRB such additional information as
the FRB may require, and it is subject to regular inspections by the FRB.
Bank regulatory agencies use Capital Adequacy Guidelines in their examination
and regulation of bank holding companies and banks. If the capital falls
below the minimum levels established by these guidelines, the agencies may
force certain remedial action to be taken. The Capital Adequacy Guidelines
are of several types and include risk-based capital guidelines, which are
designed to make capital requirements more sensitive to various risk profiles
and account for off-balance sheet exposure; guidelines which consider market
risk, which is the risk of loss due to change in value of assets and
liabilities due to changes in interest rates; and guidelines that use a
leverage ratio which places a constraint on the maximum degree of risk to
which a bank holding company may leverage its equity capital base. For
further discussion of the capital adequacy guidelines and ratio, please see
Part II, Item 7 "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
The FRB also has extensive enforcement authority over bank holding companies,
including, among other things, the ability to assess civil money penalties,
to issue cease and desist or removal orders and to require that a holding
company divest subsidiaries (including its bank subsidiaries). In general,
enforcement actions may be initiated for violations of law or regulations or
for unsafe or unsound practices. Both the FRB and Missouri Division of
Finance also have restrictions on the amount of dividends that banks and bank
holding companies may remit.
As a bank holding company, the Company must obtain prior approval from the
FRB before acquiring ownership or control of more than 5% of the voting
shares of another bank or bank holding company or acquiring all or
substantially all of the assets of such a company. In many cases, prior
approval is also required for the Company to engage in similar acquisitions
involving a non-bank company or to engage in new non-bank activities. Any
change in applicable laws or regulations may have a material effect on the
business and prospects of the Company.
As a bank holding company, the Company must obtain prior approval from the
FRB before acquiring ownership or control of more than 5% of the voting
shares of another bank or bank holding company or acquiring all or
substantially all of the assets of such a company. In many cases, prior
approval is also required for the Company to engage in similar acquisitions
involving a non-bank company or to engage in new non-bank activities. Any
change in applicable laws or regulations may have a material effect on the
business and prospects of the Company.
FINANCIAL INFORMATION ABOUT SEGMENTS
The components of net income (loss) along with depreciation and amortization
expense, identifiable assets and capital expenditures attributable to each
business segment, for the three years ended December 31, 2000 are set forth
in Part II, Item 8, Note 12 of this report.
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
For the statistical disclosure by bank holding companies see Part II, Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
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ITEM 2. PROPERTIES
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The Company's headquarters are located at 13001 Hollenberg Drive, Bridgeton,
Missouri. This location is owned by the Company, and includes a building
with approximately 61,500 square feet of office space, 20,500 of which is
occupied by the Bank. In November 2000 the Company purchased a production
facility of approximately 45,500 square feet in Columbus, Ohio, which the
Company expects to occupy in the early part of 2001. Currently the Company
operates a production facility in Columbus where approximately 26,000 square
feet are leased. This space is located at 2545 Farmers Drive, Columbus,
Ohio. The Company operates an additional production facility in Lowell,
Massachusetts where approximately 25,800 square feet of office space is
leased through October 31, 2005. The Company also leases a facility for its
rating and software group in Chicago, Illinois where approximately 1,285
square feet of office space is leased through the year 2001.
The Company's bank subsidiary's headquarters are located at 13001 Hollenberg
Drive, Bridgeton, Missouri, 63044. The Bank leases approximately 20,500
square feet of a 61,500 square foot building owned by the Company. In
addition, the Bank owns a banking facility near downtown St. Louis that
consists of approximately 1,600 square feet with adjoining drive-up
facilities. The Bank has additional leased facilities in Maryland Heights,
Missouri (2,500 square feet); Fenton, Missouri (1,250 square feet);
Chesterfield, Missouri (2,850 square feet) and downtown St. Louis, Missouri
(1,500 square feet).
ITEM 3. LEGAL PROCEEDINGS
-----------------
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of 2000.
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PART II.
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
-------------------------------------------------
STOCKHOLDER MATTERS
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As of March 5, 2001, there were 246 holders of record of the Company's common
stock. The Company's common stock was listed on the Nasdaq Stock Market
effective July 1, 1996. High and low bid prices for each quarter of 2000 and
1999 were as follows:
2000 1999
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High Low High Low
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1st Quarter $21.188 $18.625 $25.125 $24.500
2nd Quarter 21.500 19.000 25.000 24.250
3rd Quarter 22.188 17.500 25.500 23.500
4th Quarter 18.875 17.125 25.750 18.625
Dividends paid per share by the Company during the two most recent fiscal
years were as follows:
2000 1999
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March 15 $.20 $.19
June 15 .20 .19
September 15 .20 .19
December 15 20 .19
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
------------------------------------
(Dollars in thousands, except per share data) 2000 1999 1998 1997 1996
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Interest income on loans 1 $ 27,716 $ 20,371 $ 17,579 $ 16,951 $ 16,193
Interest income on debt and equity securities 5,264 4,722 6,607 9,151 9,801
Other interest income 4,085 5,782 5,858 3,181 2,132
Total interest income 37,065 30,875 30,044 29,283 28,126
Interest expense on deposits 5,165 4,357 4,271 4,181 4,503
Interest expense on short-term borrowings 20 9 10 67 139
Total interest expense 5,185 4,366 4,281 4,248 4,642
Net interest income 31,880 26,509 25,763 25,035 23,484
Provision for loan losses 750 -- -- 300 --
Net interest income after provision 31,130 26,509 25,763 24,735 23,484
Noninterest income 21,114 21,444 22,447 21,813 22,091
Noninterest expense 41,236 38,344 36,625 35,911 35,811
Income before income tax expense 11,008 9,609 11,585 10,637 9,764
Income tax expense 3,861 3,411 4,177 3,626 3,245
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Net income $ 7,147 $ 6,198 $ 7,408 $ 7,011 $ 6,519
==========================================================================================================
Basic earnings per share $ 2.05 $ 1.63 $ 1.92 $ 1.82 $ 1.69
Diluted earnings per share 2.02 1.61 1.89 1.79 1.66
Dividends per share .800 .760 .720 .650 .595
==========================================================================================================
Average total assets $515,308 $491,450 $469,606 $443,900 $422,953
Average net loans 323,515 254,353 208,603 197,761 185,791
Average debt and equity securities 84,276 78,903 109,275 148,027 160,291
Average total deposits 186,684 190,661 176,784 161,778 161,595
Average total shareholders' equity 54,308 57,118 55,246 49,965 45,250
==========================================================================================================
Return on average total assets 1.39% 1.26% 1.58% 1.58% 1.54%
Return on average total shareholders' equity 13.16 10.85 13.41 14.03 14.41
Total shareholders' equity to
total assets at year-end 9.33 11.29 11.39 12.01 10.90
Net interest margin 6.70 5.87 5.98 6.16 6.00
Allowance for loan losses to loans at year-end 1.32 1.54 1.97 2.28 2.22
Nonperforming assets to loans and other
real estate at year-end .30 .15 .35 .39 .40
Net loan charge-offs to average
loans outstanding .04 .06 .03 .10 1.02
==========================================================================================================
<FN>
1. Interest income on loans includes net loan fees.
</FN>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
RESULTS OF OPERATIONS
The following discussion and analysis provides information about the
financial condition and results of operations of the Company for the years
ended December 31, 2000, 1999 and 1998.
NET INCOME
The Company's consolidated net income, earnings per share and selected ratios
for 2000, 1999 and 1998 were as follows:
2000 1999 1998
==================================================================================================
Net income $7,147,000 $6,198,000 $7,408,000
Basic earnings per share $2.05 $1.63 $1.92
Diluted earnings per share $2.02 $1.61 $1.89
Return on average assets 1.39% 1.26% 1.58%
Return on average equity 13.16% 10.85% 13.41%
Ratio of average total shareholders' equity
to average total assets 10.54% 11.62% 11.77%
Ratio of total dividends declared
to net income 38.95% 46.61% 37.55%
==================================================================================================
The 2000 results compared to 1999 include the following significant pre-tax
components:
Net interest income after provision for loan losses increased
$4,621,000 or 17.4% due to a $22,935,000 increase in average earning
assets, a $69,220,000 increase in average loans outstanding and a rise
in the general level of interest rates, which more than offset a
$750,000 increase in the provision for loan losses.
Total noninterest income decreased $330,000 or 1.5% due to several
factors. Total freight and utility payment and processing fees
decreased $136,000 or .7% despite a $749,000 increase in revenue from
utility payment and processing services. The decrease in revenue from
freight payment and processing services was due to several factors.
First, there was a decrease in non-recurring other miscellaneous
freight fees. Second, there were continued anticipated decreases of
some freight payment services that were part of a prior acquisition.
Finally, a greater percentage of payment and processing revenue was
obtained from investible balances generated rather than from fees.
Bank service fees increased $238,000 or 20.7% due to a significant
increase in the Bank's customer base.
Total noninterest expense increased $2,892,000 or 7.5% due to several
factors. The most significant was the Company's investment in the
utility processing area and in new freight processing capabilities.
Due to the rapid growth in the utility processing area, the Company
was unable to leverage freight processing resources to the extent that
was initially envisioned. As a result, a much larger investment in
staff and processing support had to be made to accommodate the fast
rate of growth. It is estimated that the pre-tax loss on utility
payment processing services was approximately $500,000. In addition,
the Company invested heavily in Internet system capabilities and
internal system development in the freight processing area that will
allow greater growth in this area in the future. Finally, annual
salary increases and higher benefit expenses accounted for a
significant part of the increase.
The 1999 results compared to 1998 include the following significant pre-tax
components:
Net interest income after provision for loan losses increased $746,000
or 2.9% due to a $45,667,000 increase in average loans and a
$22,032,000 increase in average earning assets, which were partially
offset by a decline in the general level of interest rates.
Total noninterest income decreased $1,003,000 or 4.5% due to several
factors. Total freight and utility payment and processing revenue
decreased $583,000 or 3.1% despite a $726,000 increase in revenue from
utility payment and processing services. The decrease in revenue from
freight payment and processing services was due to several factors.
First, there was a decrease in the volume of freight transactions due
largely to the growth in competition for electronic data interchange
(EDI) processing of parcel and air shipments. Second, there were
continued anticipated decreases of some freight payment services that
were
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part of a prior acquisition. Finally, the implementation of new
prospects, which typically exceed lost business, appeared to be
delayed by our prospect's Y2K remediation programs. Freight rating
services revenue decreased $346,000 or 16.1% due to a change in
Company direction from selling rating software to Internet-based
systems. Bank service fees increased $283,000 or 32.8% due to an
increase in the Bank's customer base. Finally, the Company recognized
a $285,000 gain on the sale of securities in 1998.
Total noninterest expense increased $1,719,000 or 4.7% due to several
factors. The most significant was the Company's investment in the
utility processing area and in new freight processing capabilities.
Due to the rapid growth in the utility processing area, the Company
was unable to leverage freight processing resources to the extent that
was initially envisioned. As a result, a much larger investment in
staff and processing support had to be made to accommodate the fast
rate of growth. It is estimated that the pre-tax loss on utility
payment processing services exceeded $1,000,000. In addition, the
Company invested heavily in Internet system capabilities and internal
system development in the freight processing area that will allow
greater growth in this area in the future. Finally, annual salary
increases and higher benefit expenses accounted for a significant part
of the increase.
NET INTEREST INCOME
Net interest income is the difference between interest earned on loans,
investments, and other earning assets and interest paid on deposits and other
interest-bearing liabilities. Net interest income is a significant source of
the Company's revenues.
Net interest income in 2000 compared to 1999:
On a tax-equivalent basis, net interest income for 2000 totaled $32,111,000,
an increase of $5,390,000 or 20.2% over 1999. The net interest margin for
2000 was 6.70% compared to 5.87% in 1999. The following factors account for
this increase in net interest income and net interest margin:
Total average earning assets increased $22,935,000 or 5.0% to
$478,122,000. This increase was due mainly to an increase in accounts
and drafts payable resulting from an increase in dollars processed.
This increase, combined with a rise in the general level of interest
rates, contributed to the increase in net interest income.
Total average loans increased $69,220,000 or 26.8% to $327,962,000.
This increase was attributable to new business relationships and
funded by the increase in payables along with a decrease in federal
funds sold and other short-term investments. This increase in loans
increased interest income and had a positive effect on the net
interest margin due to the fact that loans are the Company's highest
yielding earning asset.
Total average federal funds sold and other short-term investments
decreased $51,658,000 or 43.9% to $65,884,000. Since these are the
lowest yielding earning assets, decreases in average balances
outstanding can decrease interest income, but the reinvestment of
these funds in higher yielding assets will increase the average yield
on earning assets and therefore interest income and net interest
margin.
The net interest margin increased primarily because of the increase in
the general level of interest rates and a shift of earning assets from
lower yielding federal funds sold and other short-term investments to
higher yielding loans and securities. The average yield on earning
assets increased to 7.78% in 2000 from 6.83% in 1999. The Company
is positively affected by increases in the level of interest rates due
to the fact that its rate sensitive assets significantly exceed its
rate sensitive liabilities. Conversely, the Company is adversely
affected by decreases in the level of interest rates. This is
primarily due to the noninterest-bearing liabilities generated by the
Company in the form of accounts and drafts payable. More information
is contained in the tables that follow.
Net interest income in 1999 compared to 1998:
On a tax-equivalent basis, net interest income for 1999 totaled $26,721,000,
an increase of $833,000 or 3.2% over 1998. The net interest margin for 1999
was 5.87% compared to 5.98% in 1998. The following factors account for this
increase in net interest income and decrease in net interest margin:
Total average earning assets increased $22,032,000 or 5.1% to
$455,187,000. This increase was due to an increase in non-interest
bearing demand and interest bearing deposits at the Bank resulting
from new business development efforts and an increase in accounts and
drafts payable at the Company from an
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increase in dollars processed. This increase in earning assets
contributed to the increase in net interest income.
Total average loans increased $45,667,000 or 21.4% to $258,742,000.
This increase was funded by the increase in deposits and payables
along with the maturity of debt securities. This increase in loans
increased interest income and had a positive effect on the net
interest margin due to the fact that loans are the Company's highest
earning asset.
Total average federal funds sold and other short-term investments
increased $6,737,000 or 6.1% to $117,542,000. This increase was also
funded by the increase in deposits and payables and maturities of debt
securities. Since these are the lowest yielding earning assets,
increases in average balances outstanding can increase interest
income, but reduce the average yield on earning assets and therefore
the net interest margin.
Although net interest income increased, the net interest margin
decreased primarily because of the decline in the general level of
interest rates. The average yield on earning assets decreased to
6.83% in 1999 from 6.96% in 1998. The Company is adversely affected
by decreases in the level of interest rates due to the fact that its
rate sensitive assets significantly exceed its rate sensitive
liabilities. Conversely, the Company is positively affected by
increases in the level of interest rates. This is primarily due to
the noninterest-bearing liabilities generated by the Company in the
form of accounts and drafts payable. More information is contained in
the tables that follow.
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATE
AND INTEREST DIFFERENTIAL
The following table shows the condensed average balance sheets for each of
the periods reported, the tax-equivalent interest income and expense on each
category of interest-earning assets and interest-bearing liabilities, and the
average yield on such categories of interest-earning assets and the average
rates paid on such categories of interest-bearing liabilities for each of the
periods reported.
2000 1999 1998
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INTEREST INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
(DOLLARS IN THOUSANDS) BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
==============================================================================================================================
ASSETS 1
Earning assets:
Loans 2,3:
Taxable $320,801 $27,322 8.49% $252,340 $20,022 7.93% $210,168 $17,404 8.28%
Tax-exempt 4 7,161 596 8.30 6,402 529 8.26 2,907 266 9.15
Debt and equity securities 5:
Taxable 83,083 5,205 6.25 77,646 4,659 6.00 107,924 6,538 6.06
Tax-exempt 4 1,193 88 7.36 1,257 95 7.56 1,351 103 7.62
Federal funds sold and other
short-term investments 65,884 4,085 6.18 117,542 5,782 4.92 110,805 5,858 5.29
- ------------------------------------------------------------------------------------------------------------------------------
Total earning assets 478,122 37,296 7.78 455,187 31,087 6.83 433,155 30,169 6.96
Nonearning assets:
Cash and due from banks 21,366 22,616 21,124
Premises and equipment, net 10,444 9,265 9,516
Other assets 9,823 8,771 10,283
Allowance for loan losses (4,447) (4,389) (4,472)
- ------------------------------------------------------------------------------------------------------------------------------
Total assets $515,308 $491,450 $469,606
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS'
EQUITY 1
Interest-bearing liabilities:
Interest-bearing demand
deposits $ 44,596 $ 1,961 4.39% $ 42,207 $ 1,431 3.39% $ 34,296 $ 1,198 3.49%
Savings deposits 55,979 2,885 5.14 63,164 2,539 4.02 62,246 2,624 4.22
Time deposits of
$100,000 or more 2,488 129 5.17 3,479 232 6.67 3,928 222 5.65
Other time deposits 3,872 190 4.89 4,641 155 3.34 4,665 227 4.87
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 106,935 5,165 4.82 113,491 4,357 3.84 105,135 4,271 4.06
Short-term borrowings 272 20 7.33 275 9 3.27 280 10 3.57
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 107,207 5,185 4.82 113,766 4,366 3.84 105,415 4,281 4.06
Noninterest-bearing liabilities:
Demand deposits 79,749 77,170 71,649
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Accounts and drafts payable 267,963 238,007 231,655
Other liabilities 6,081 5,389 5,641
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 461,000 434,332 414,360
Shareholders' equity 54,308 57,118 55,246
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $515,308 $491,450 $469,606
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income $32,111 $26,721 $25,888
Net interest margin 6.70% 5.87% 5.98%
Interest spread 2.96% 2.99% 2.90%
==============================================================================================================================
<FN>
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 $327,000, $91,000 and
$27,000 for 2000, 1999 and 1998, respectively.
4. Interest income is presented on a tax-equivalent basis assuming a tax rate
of 34% for 2000, 1999 and 1998. The tax-equivalent adjustment was
approximately $231,000, $212,000 and $125,000 for 2000, 1999 and 1998,
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.
</FN>
ANALYSIS OF NET INTEREST INCOME CHANGES
The following table presents the changes in interest income and expense
between years due to changes in volume and interest rates. That portion of
the change in interest attributable to the combined rate/volume variance has
been allocated to rate and volume changes in proportion to the absolute
dollar amounts of the change in each.
2000 Over 1999 1999 Over 1998
------------------------------- --------------------------------
(Dollars in thousands) Volume 1 Rate 1 Total Volume 1 Rate 1 Total
=================================================================================================================
Increase (decrease) in interest income:
Loans 2,3:
Taxable $ 5,795 $1,505 $ 7,300 $ 3,371 $ (753) $ 2,618
Tax-exempt 4 65 2 67 291 (28) 263
Debt and equity securities:
Taxable 344 202 546 (1,817) (62) (1,879)
Tax-exempt 4 (5) (2) (7) (7) (1) (8)
Federal funds sold and other
short-term investments (2,951) 1,254 (1,697) 345 (421) (76)
- -----------------------------------------------------------------------------------------------------------------
Total interest income 3,248 2,961 6,209 2,183 (1,265) 918
- -----------------------------------------------------------------------------------------------------------------
Interest expense on:
Interest-bearing demand deposits 86 444 530 269 (36) 233
Savings deposits (311) 657 346 38 (123) (85)
Time deposits of $100,000 or more (58) (45) (103) (27) 37 10
Other time deposits (29) 64 35 (1) (71) (72)
Short-term borrowings -- 11 11 -- (1) (1)
- -----------------------------------------------------------------------------------------------------------------
Total interest expense (312) 1,131 819 279 (194) 85
- -----------------------------------------------------------------------------------------------------------------
Net interest income $ 3,560 $1,830 $ 5,390 $ 1,904 $(1,071) $ 833
=================================================================================================================
<FN>
1. The change in interest due to both volume and rate has been allocated
proportionately.
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 34% for 2000, 1999 and 1998.
</FN>
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The Company recorded a provision for loan losses of $750,000 in 2000 and no
provision in 1999 or 1998. The Company increased the provision for loan
losses based on the increase in average loans outstanding and the increase in
nonperforming assets. Loan charge-offs, net of recoveries, experienced by
the Company were $135,000 in 2000, $146,000 in 1999 and $56,000 in 1998. The
allowance for loan losses was $4,897,000 at December 31, 2000, compared to
$4,282,000 at December 31, 1999 and $4,428,000 at December 31, 1998. The
year-end 2000 allowance represents 1.32% of outstanding loans, compared to
1.54% at year-end 1999. This decrease relates mainly to the increase in
total loans experienced during 2000. From December 31, 1999 to December 31,
2000 the level of nonperforming assets increased $724,000 from $407,000 to
$1,131,000, which represents .30% of outstanding loans. The majority of this
increase related to real estate construction loans of two borrowers.
9
10
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars expressed in thousands) 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
Allowance at beginning of year $ 4,282 $ 4,428 $ 4,484 $ 4,396 $ 6,358
- --------------------------------------------------------------------------------------------------------------
Loans charged-off:
Commercial, industrial and IRB's 183 255 365 412 2,120
Real estate:
Mortgage -- -- -- -- --
Construction -- -- -- -- --
Installment -- 1 -- -- 1
- --------------------------------------------------------------------------------------------------------------
Total loans charged-off 183 256 365 412 2,121
- --------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged-off:
Commercial, industrial and IRB's 48 109 309 200 152
Real estate:
Mortgage -- -- -- -- --
Construction -- -- -- -- --
Installment -- 1 -- -- 7
- --------------------------------------------------------------------------------------------------------------
Total recoveries of loans previously charged-off 48 110 309 200 159
==============================================================================================================
Net loans charged-off 135 146 56 212 1,962
Provision charged to expense 1 750 -- -- 300 --
- --------------------------------------------------------------------------------------------------------------
Allowance at end of year 4,897 4,282 4,428 4,484 4,396
==============================================================================================================
Loans outstanding:
Average $327,962 $258,742 $213,075 $202,280 $192,096
December 31 372,220 278,343 224,888 196,478 197,775
Ratio of allowance for loan losses to
loans outstanding:
Average 1.49% 1.65% 2.08% 2.22% 2.29%
December 31 1.32% 1.54% 1.97% 2.28% 2.22%
Ratio of net charge-offs to
average loans outstanding .04% .06% .03% .10% 1.02%
==============================================================================================================
Allocation of allowance for loan losses 2:
Commercial, industrial and IRB's $ 3,159 $ 3,844 $ 3,982 $ 4,001 $ 3,825
Real estate:
Mortgage 416 19 19 366 119
Construction 1,317 419 427 15 173
Installment 5 -- -- 102 279
- --------------------------------------------------------------------------------------------------------------
Total $ 4,897 $ 4,282 $ 4,428 $ 4,484 $ 4,396
==============================================================================================================
Percent of categories to total loans:
Commercial and industrial and IRB's 40.9% 40.9% 45.2% 48.9% 49.5%
Real estate:
Mortgage 49.0 46.5 45.1 44.6 43.2
Construction 7.9 10.6 7.4 4.0 4.6
Installment .7 .6 1.1 1.6 1.9
Other 1.5 1.4 1.2 .9 .8
- --------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
==============================================================================================================
<FN>
1. Factors which influence management's determination of the provision for
loan losses charged to expense for each of the years presented above,
among other things, include evaluation of each nonperforming and/or
classified loan to determine the estimated loss exposure under existing
circumstances known to management; evaluation of all potential problem
loans identified in light of probable loss exposure based upon existing
circumstances known to management, current economic conditions and an
overall review of the remainder of the portfolio in light of past loan
loss experience.
2. The Company allocated its allowance for loan losses to the various loan
categories at December 31, 2000 based on the ratio of total nonperforming
loans over the last 5 years. Management views the allowance for loan
losses as being available for all potential or presently unidentified loan
losses that may occur in the future. The risk of future losses that is
inherent in the loan portfolio is not precisely attributable to a
particular loan or category of loans. Allocations estimated for the
categories do not specifically represent that loan charge-offs of this
magnitude will be required. The allocation does not restrict future loan
losses attributable to a particular
10
11
category of loans from being absorbed by the portion of the allowance
attributable to other categories of loans. The risk factors considered
when determining the overall level of the allowance are the same when
estimating the allocation by major category, as specified in the above
summary.
</FN>
NONPERFORMING ASSETS
It is the policy of the Company to continually monitor its loan portfolio and
to discontinue the accrual of interest on any loan on which payment of
principal or interest in a timely manner in the normal course of business is
doubtful. Subsequent payments received on such loans are applied to
principal if there is any doubt as to the collectibility of such principal;
otherwise, these receipts are recorded as interest income. Interest on
nonaccrual loans, which would have been recorded under the original terms of
the loans, was approximately $123,000 for the year ended December 31, 2000.
Of this amount, approximately $19,000 was actually recorded as interest
income on such loans.
At December 31, 2000, after review of potential problem loans identified by
management including those noted above, management of the Company concluded
the allowance for loan losses was adequate. As of December 31, 2000,
approximately $4,691,000 of loans not included in the table below were
identified by management as having potential credit problems which raised
doubts as to the ability of the borrowers to comply with the present loan
repayment terms. Of this balance of potential credit problems, $4,263,000
were deemed to be impaired. On January 2, 2001, the Bank foreclosed on
certain operating assets relating to one borrower in order to protect the
Bank's financial interest in that borrower. A loan to this borrower
represented $4,205,000 of the balance of potential credit problems, not
included in the table below, at December 31, 2000. The Bank is currently in
the process of stabilizing this business and will continue to operate the
business until it can be sold or merged into another entity. As of January
2, 2001 the Bank's investment in this company amounted to $4,505,000. All
other borrowers identified in this process are currently meeting all of the
terms of the applicable loan agreements, however their financial condition
has caused management to believe that their loans may result in disclosure at
some future time as nonaccrual, past due or restructured.
The Company has no concentrations of loans exceeding 10% of total loans which
are not otherwise disclosed in the loan portfolio composition table. As can
be seen in the loan composition table above and discussed in Item 8, Note 4
of this report, the Company's primary market niche for banking services is
the privately held commercial company and churches and church-related
ministries. Loans to the commercial entities are generally secured by the
business assets of the company, including accounts receivable, inventory,
machinery and equipment, and the building(s)/plant(s) from which the company
operates. Operating lines of credit to these companies generally are secured
by accounts receivable and inventory, with specific percentages of each
determined on a customer by customer basis, based on the business in which
the customer operates. Intermediate term credit for machinery and equipment
is generally loaned at some percentage of the value of the equipment
purchased, again depending on the type of machinery or equipment purchased by
the entity (e.g., less funds would be loaned on restaurant equipment which
has a lower resale value than certain types of machinery which tend to hold
their value). Long term credits are secured by the entities'
building(s)/plant(s) and are generally loaned with a maximum 80% loan to
value ratio.
Loans secured exclusively by real estate to businesses and churches are
generally made with a maximum 80% loan to value ratio, again depending upon
the Company's estimate of the resale value and ability for the property to
generate cash flow. The Company's loan policy requires an independent
appraisal for all loans over $250,000 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 credits. When
problems are identified, appraised values are updated on a continual basis,
either internally or through ordering an updated external appraisal.
The Company does not have any foreign loans. The Company's loan portfolio
does not include a significant amount of single family real estate mortgage
or installment credits, as the Company does not market to the consumer side
of the banking business.
The Company does not have any other interest-earning assets which would have
been included in nonaccrual, past due or restructured loans if such assets
were loans.
11
12
SUMMARY OF NONPERFORMING ASSETS
(Dollars expressed in thousands) 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
Commercial, industrial and industrial
revenue bonds:
Nonaccrual $ 84 $170 $477 $285 $480
Contractually past due 90 days
or more and still accruing -- 167 179 3 --
Renegotiated loans -- 70 134 449 --
Real estate-construction on nonaccrual 1,043 -- -- -- --
Real estate-mortgage contractually
past due 90 days or more and still accruing -- -- -- 24 306
Installment loans contractually past due
90 days or more and still accruing 4 -- -- -- --
- --------------------------------------------------------------------------------------------------------------
Total nonperforming loans 1,131 407 790 761 786
- --------------------------------------------------------------------------------------------------------------
Other real estate -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------
Total nonperforming assets $1,131 $407 $790 $761 $786
==============================================================================================================
NONINTEREST INCOME
The Company's noninterest income is derived mainly from fee revenue relating
to the payment and processing of freight and utility invoices. As the
Company provides its freight and utility processing and payment services, it
is compensated by service fees which are typically calculated on a per-item
basis and by the accounts and drafts payable generated in the payment process
which can be used to generate interest income. In addition to payment
processing revenue, the Company also receives fees from the sale,
maintenance, and service bureau operations relating to freight rating
software. Other noninterest revenue is generated by the Bank in the form of
fees that relate to the credit, depository, and cash management products of
the Bank. Bank customers compensate the bank through these fees, the
maintenance of demand deposit balances, or both.
Noninterest income in 2000 compared to 1999 include the following significant
pre-tax components:
Freight and utility payment and processing revenue decreased $136,000
or .7% to $18,090,000. Of the total payment and processing revenue,
fees related to utility payment and processing increased $749,000 and
fees relating to freight payment and processing services decreased
$885,000. The increase in utility payment and processing fees relates
the rapid expansion of our customer base. At the end of 2000 the
Company was processing 1.8 million utility invoices representing over
a billion dollars of invoice value on an annualized basis. The
decrease in revenue from freight payment and processing services was
due to several factors. First, there was a decrease in non-recurring
other miscellaneous freight fees. Second, there were continued
anticipated decreases relating to some freight payment services that
were part of a prior acquisition. Finally, the balance of
compensation relating to the delivery of these services to the
existing customer base shifted from service fees to increases in
accounts and drafts payable.
Freight rating services revenue decreased $466,000 or 25.9% to
$1,334,000 due to a change in the strategic direction of the Company
from selling rating software to the development of a new
Internet-based delivery system of carrier rates. This system will
offer the shipping community an expanded level of features,
capabilities and ease of access.
Service charges generated by the Bank increased $238,000 or 20.7% to
$1,385,000. This increase was due primarily to the growth of the
Bank's customer base.
Other miscellaneous noninterest income increased $34,000 or 12.5% to
$305,000. This increase was due primarily to miscellaneous services
provided by the Company to its customers.
Noninterest income in 1999 compared to 1998 include the following significant
pre-tax components:
Freight and utility payment and processing revenue decreased $583,000
or 3.1% to $18,226,000. Of the total payment and processing revenue,
fees related to utility payment and processing increased $726,000 and
fees relating to freight payment and processing services decreased
$1,309,000. The increase in utility payment and processing fees
relates the rapid expansion of our customer base. At the end of 1999
the Company was processing 1.5 million utility invoices representing
almost a billion dollars of invoice value
12
13
on an annualized basis. The decrease in revenue from freight payment
and processing services was due to several factors. First, there was
a decrease in the volume of freight transactions due largely to the
growth in competition for electronic data interchange (EDI) processing
of parcel and air shipments. The entrance in the marketplace of niche
companies formed to process the increasing volume of overnight package
shipments was caused in part by the increase in e-commerce
transactions. Historically, this has not been a strategic market for
the Company. A number of customers, while retained by the Company,
moved this type of transaction to these new competitors. The Company
has since reengineered its processes to handle these transactions more
effectively and it is anticipated that these transactions will provide
significant growth in the future. Second, there were continued
anticipated decreases relating to some freight payment services that
were part of a prior acquisition. Finally, the implementation of new
prospects, which typically exceed lost business, appeared to be
delayed by our prospect's Y2K remediation programs.
Freight rating services revenue decreased $346,000 or 16.1% due to a
change in the strategic direction of the company from selling rating
software to the development of a new Internet-based delivery system of
carrier rates to the shipping community.
Service charges generated by the Bank increased $283,000 or 32.8% to
$1,147,000. This increase was due primarily to the growth of the
Bank's customer base.
Other variances in total noninterest revenue include the fact that
their was a $285,000 gain on the sale of securities in 1998 and that
other miscellaneous noninterest income decreased $72,000 or 21.0% to
$271,000.
NONINTEREST EXPENSE
Noninterest expense in 2000 compared to 1999 include the following
significant pre-tax components:
Salaries and employee benefits increased $2,526,000 or 9.7% to
$28,500,000. This increase was caused by several factors. First,
additional staff was hired in utility payment processing in order to
keep pace with the growth in this area. Second, health insurance
premiums increased and the Company changed health insurance carriers
to provide additional benefits to employees. Third, an increase in
profits resulted in an increase in bonus expenses. Finally, annual
salary increases accounted for the remainder.
Occupancy expense decreased $22,000 or 1.2% to $1,758,000. Equipment
expense increased $313,000 or 11.5% to $3,027,000. Other noninterest
expenses increased $75,000 or 1.0% to $7,951,000. The increases can
be attributed mainly to expansion of our utility payment processing
capabilities, increased investment in our freight payment processing
and Internet capabilities and other normal operating expense
fluctuations. More details on the components of other noninterest
operating expenses are contained in Item 8, Note 8 of this report.
Noninterest expense in 1999 compared to 1998 include the following
significant pre-tax components:
Salaries and employee benefits increased $979,000 or 3.9% to
$25,974,000. This increase was caused by several factors. First,
additional staff was hired in utility payment processing in order to
keep pace with the growth in this area. Second, employee benefits
expense increased 15.1% due to increased pension accruals and health
insurance costs. Finally, annual salary increases accounted for the
remainder.
Occupancy expense increased $82,000 or 4.8% to $1,780,000. Equipment
expense increased $65,000 or 2.5% to $2,714,000. Other noninterest
expenses increased $593,000 or 8.1% to $7,876,000. These increases
can be attributed mainly to expansion of our utility payment
processing capabilities, increased investment in our freight payment
processing and Internet capabilities and other normal operating
expense fluctuations. More details on the components of other
noninterest operating expenses are contained in Item 8, Note 8 of this
report.
INCOME TAX EXPENSE
Income taxes in 2000 totaled $3,861,000 compared to $3,411,000 in 1999 and
$4,177,000 in 1998. When measured as a percent of income before income
taxes, the Company's effective tax rate was 35.1% in 2000, 35.5% in 1999 and
36.1% in 1998.
13
14
FINANCIAL CONDITION
LIQUIDITY
Cash and cash equivalents, which consist of cash and due from banks, federal
funds sold, and money market funds, were $115,931,000 or 20.1% of total
assets at December 31, 2000. These funds represent the Company's and the
Bank's primary source of liquidity to meet future expected and unexpected
loan demand, depositor withdrawls or reductions in accounts and drafts
payable.
Secondary sources of liquidity include the investment portfolio and borrowing
lines. Total investment in debt and equity securities represented
approximately $69,325,000 or 12.0% of total assets at December 31, 2000. Of
this total, 44% were U.S. treasury securities, 54% were U.S. government
agencies, and 2% were other securities. Of the total portfolio, 27% matures
in one year, 62% matures in one to five years, and 11% matures in five or
more years. Of the total portfolio, 90% is designated available for sale and
10% is designated held to maturity. On January 2, 2001 the Company
transferred all remaining held-to-maturity securities to available-for-sale
with the adoption of FASB 133. The investment portfolio provides secondary
liquidity through regularly scheduled maturities, the ability to sell
securities out of the available-for-sale portfolio, and the ability to use
these securities in conjunction with its reverse repurchase lines of credit.
As of December 31, 2000 the Company had $19,820,000 in unsecured federal fund
lines of credit and $60,000,000 in reverse repurchase agreement lines with
unaffiliated financial institutions.
The deposits of the Company's banking subsidiary have historically been
stable, consisting of a sizable volume of core deposits related to customers
that utilize many other commercial products of the bank. The accounts and
drafts payable generated by the Company has also proven to be a stable source
of funds.
INTEREST RATE SENSITIVITY
The Company faces market risk to the extent that its net interest income and
its fair market value of equity are affected by changes in market interest
rates. The asset/liability management discipline as applied at 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 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 differs significantly from most other bank holding companies with
positive "gaps" shown for each time horizon presented. This asset sensitive
position is caused primarily by the operations of the Company, which
generates large balances of accounts and drafts payable. These balances,
which are noninterest bearing, contribute to the Company's high net interest
margin but causes 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.
The Company's Asset/Liability Management Committee (ALCO) measures the
Company's interest rate risk sensitivity on a quarterly basis to monitor and
manage the variability of earnings 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, twelve-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.
A gap report is used by management to review any significant mismatch between
the reproaching points of the Company's rate sensitive assets and liabilities
in certain time horizons. A negative gap indicates that more liabilities
reprice in that particular time frame and, if rates rise, these liabilities
will reprice faster than the assets. A positive gap would indicate the
opposite. Management has set policy limits specifying acceptable levels of
interest rate risk as measured by the gap report. Gap reports can be
misleading in that they capture only the repricing timing within the balance
sheet, and fail to capture other significant risks such as basis risk and
embedded options risk. Basis risk involves the potential for the spread
relationship between rates to change under different rate environments and
embedded options risk relates to the potential for the alteration of the
level and/or timing of cash flows given changes in rates.
Another measurement tool used by management is net interest income
simulation, which forecasts net interest income during the coming twelve
months under different interest rate scenarios in order to quantify potential
changes in short
14
15
term accounting income. 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. Simulation results illustrate that
the Company's net interest income over the next twelve months would decrease
4.3% from an immediate and sustained parallel decrease in interest rates of
100 basis points and increase 4.2% from a corresponding increase in interest
rates.
While net interest income simulations do a good job of capturing interest
rate risk to short term earnings, they do not capture risk within the current
balance sheet beyond twelve months. The Company uses fair market value of
equity analyses to help identify longer-term risk that may reside on the
current balance sheet. The fair market value of equity is represented by the
present value of all future income streams generated by the current balance
sheet. The Company measures the fair market value of equity as the net
present value of all asset and liability cash flows discounted at forward
rates suggested by the current Treasury curve plus appropriate credit
spreads. This representation of the change in the fair market value of
equity under different rate scenarios gives insight into the magnitude of
risk to future earnings due to rate changes. Management has set policy limits
relating to declines in the market value of equity. The results of these
analyses indicate that the Company's fair market value of equity would
decrease 4.3% from an immediate and sustained parallel decrease in interest
rates of 100 basis points and increase 3.7% from a corresponding increase in
interest rates.
INTEREST RATE SENSITIVE POSITION
The following table presents the Company's gap or interest rate risk position
at December 31, 2000 for the various time periods indicated.
Variable 0-90 91-180 181-364 1-5 Over 5
(Dollars in thousands) Rate days days days years Years Total
- --------------------------------------------------------------------------------------------------------------------------
Earning assets:
Loans:
Taxable $121,260 $ 10,107 $ 8,272 $ 27,041 $188,644 $ 1,091 $356,415
Tax-exempt -- 37 56 1,633 1,454 12,625 15,805
Debt and equity securities 1:
Taxable -- 7,903 4,017 10,028 42,334 3,228 67,510
Tax-exempt -- 141 -- -- 415 625 1,181
Other 634 -- -- -- -- -- 634
Federal funds sold and other
short term investments 94,251 -- -- -- -- -- 94,251
- --------------------------------------------------------------------------------------------------------------------------
Total earning assets 216,145 18,188 12,345 38,702 232,847 17,569 535,796
==========================================================================================================================
Interest-sensitive liabilities:
Money market accounts 39,515 -- -- -- -- -- 39,515
Now accounts 9,697 -- -- -- -- -- 9,697
Savings deposits 56,441 -- -- -- -- -- 56,441
Time deposits:
$100,000 and more -- 321 958 1,331 434 -- 3,044
Less than $100,000 -- 1,287 1,098 876 767 -- 4,028
- --------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $105,653 $ 1,608 $ 2,056 $ 2,207 $ 1,201 -- $112,725
==========================================================================================================================
Interest sensitivity gap:
Periodic $110,492 $ 16,580 $ 10,289 $ 36,495 $231,646 $ 17,569 $423,071
Cumulative 110,492 127,072 137,361 173,856 405,502 423,071 423,071
Ratio of interest-bearing
assets to interest-bearing
liabilities:
Periodic 2.05x 11.31x 6.00x 17.54x 193.88x -- 4.75x
Cumulative 2.05x 2.18x 2.26x 2.56x 4.60x 4.75x 4.75x
==========================================================================================================================
<FN>
1 Balances shown reflect earliest repricing date.
</FN>
INVESTMENT SECURITIES
Investment portfolio changes from December 31, 1999 to December 31, 2000:
U.S. Government Treasury securities decreased $12,026,000 or 28.4% to
$30,247,000. This decrease was caused by the decision to increase the
Company's liquidity given expected loan growth.
15
16
U.S. Government corporations and agencies decreased $2,006,000 or 5.1%
to $37,263,000. This decrease was also due to the Company's decision
to fund expected loan growth.
Investment portfolio changes from December 31, 1998 to December 31, 1999:
U.S. Government Treasury securities decreased $16,703,000 or 28.3% to
$42,273,000. This decrease was caused by the decision to allow
maturities to exceed reinvestment in this sector in order to improve
the yield of the portfolio.
U.S. Government corporations and agencies increased $15,750,000 or
67.0% to $39,269,000. This increase was funded by maturities of U.S.
Government Treasury securities.
There was no single issuer of securities in the investment portfolio at
December 31, 2000 other than the U.S. Government and U.S. Government
corporations and agencies, for which the aggregate amortized cost exceeded
ten percent of total shareholders' equity.
INVESTMENT BY TYPE (AT BOOK VALUE)
DECEMBER 31,
------------------------------------
(Dollars in Thousands) 2000 1999 1998
================================================================================================
U.S. Treasury securities $30,247 $42,273 $58,976
Obligations of U.S. Government corporations and agencies 37,263 39,269 23,519
States and political subdivisions 1,181 1,253 1,278
Stock of the Federal Home Loan Bank 433 -- --
Stock of the Federal Reserve Bank 201 201 201
- ------------------------------------------------------------------------------------------------
Total investments $69,325 $82,996 $83,974
================================================================================================
INVESTMENT BY MATURITY
WITHIN OVER 1 TO OVER 5 TO OVER
(Dollars in Thousands at December 31, 2000) 1 YEAR 5 YEARS 10 YEARS 10 YEARS YIELD
=================================================================================================================
U.S. Treasury securities $18,102 $12,145 $ -- $ -- 6.23%
U.S. Government corporations and
agencies 598 30,582 3,424 2,659 6.20%
States and political subdivisions 1 140 524 517 -- 7.38%
- -----------------------------------------------------------------------------------------------------------------
Total investments $18,840 $43,251 $3,941 $2,659 6.23%
- -----------------------------------------------------------------------------------------------------------------
Weighted average yield 6.10% 6.34% 6.95% 6.91%
=================================================================================================================
<FN>
1. Interest income is presented on a tax-equivalent basis assuming a tax rate
of 34%.
</FN>
LOAN PORTFOLIO
Loan portfolio changes from December 31, 1999 to December 31, 2000:
Total loans increased $93,877,000 or 33.7% to $372,220,000. This
increase was due mainly to the addition of new lending relationships
in the Bank's privately held business banking services group and the
expansion of church and church-related loans in the St. Louis
metropolitan area and selected areas across the United States. At
year-end church and church-related real estate and construction
credits totaled $84,955,000, which represented a 29% increase over
1999. Additional details regarding the types and maturities of the
loan portfolio are contained in the tables below.
Loan portfolio changes from December 31, 1998 to December 31, 1999:
Total loans increased $53,455,000 or 23.7% to $278,343,000. This
increase was due mainly to the addition of new lending relationships
in the Bank's privately held business banking services group and the
expansion of church and church-related loans in the St. Louis
metropolitan area and selected cities across the United States. At
year-end church and church-related credits totaled $65,956,000, which
represented a 90% increase over 1998. Additional details regarding
the types and maturities of the loan portfolio are contained in the
tables below.
16
17
LOANS BY TYPE
(Dollars in Thousands at December 31) 2000 1999 1998 1997 1996
=================================================================================================================
Commercial and industrial $136,482 $106,444 $ 95,663 $ 93,633 $ 94,962
Real estate:
Mortgage 182,538 129,482 101,468 87,573 85,360
Construction 29,464 29,633 16,547 7,893 9,164
Industrial revenue bonds 15,804 7,265 5,951 2,520 2,851
Installment 2,533 1,541 2,458 3,066 3,794
Other 5,399 3,978 2,801 1,793 1,644
- -----------------------------------------------------------------------------------------------------------------
Total loans $372,220 $278,343 $224,888 $196,478 $197,775
=================================================================================================================
LOANS BY MATURITY
OVER ONE YEAR OVER
THROUGH FIVE YEARS FIVE YEARS
------------------ ------------------
ONE YEAR FIXED FLOATING FIXED FLOATING
(Dollars in Thousands at December 31, 2000) OR LESS RATE RATE 1 RATE RATE 1 TOTAL
=============================================================================================================================
Commercial and industrial $20,744 $ 25,537 $4,019 $ 191 $85,991 $136,482
Real estate:
Mortgage 21,051 160,505 82 900 -- 182,538
Construction 27,245 1,032 4 -- 1,183 29,464
Industrial revenue bonds 1,725 1,454 -- 12,625 -- 15,804
Installment 963 1,570 -- -- -- 2,533
Other 5,399 -- -- -- -- 5,399
- -----------------------------------------------------------------------------------------------------------------------------
Total loans $77,127 $190,098 $4,105 $13,716 $87,174 $372,220
=============================================================================================================================
<FN>
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.
</FN>
DEPOSITS AND ACCOUNTS AND DRAFTS PAYABLE
Noninterest-bearing demand deposits increased $8,269,000 or 9.0% from
$91,672,000 at December 31, 1999 to $99,941,000 at December 31, 2000. The
average balance of these accounts increased $2,579,000 or 3.3% from
$77,170,000 in 1999 to $79,749,000 in 2000. New business volume increased
throughout 2000 and should continue to increase in 2001.
Interest-bearing deposits increased from $97,064,000 at December 31, 1999 to
$112,725,000 at December 31, 2000. The average balances of these deposits,
however, decreased $6,556,000 or 5.8% from $113,491,000 in 1999 to
$106,935,000 in 2000. The decrease in average balances related mainly to the
movement of funds from deposit accounts to non-deposit investment
alternatives.
Accounts and drafts payable generated by the Company in its payment
processing operations increased $52,946,000 or 21.2% from $249,894,000 at
December 31, 1999 to $302,840,000 at December 31, 2000. The average balances
of these funds increased $29,956,000 or 12.6% from $238,007,000 in 1999 to
$267,963,000 in 2000. 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. The increase in average balances
can be attributed to the fact that the dollar amount of invoices processed
increased.
The composition of average deposits and the average rates paid on those
deposits is represented in the table entitled "Distribution of Assets,
Liabilities and Stockholders' Equity; Interest Rate and Interest
Differential" which is included earlier in this discussion. The Company does
not have any significant deposits from foreign depositors.
17
18
MATURITIES OF CERTIFICATES OF DEPOSITS OF $100,000 OR MORE
(Dollars in thousands at December 31, 2000)
=========================================================================
Three months or less $ 321
Three to six months 958
Six to twelve months 1,331
Over twelve months 434
- -------------------------------------------------------------------------
Total $3,044
=========================================================================
CAPITAL RESOURCES
One of the Company's primary objectives is to maintain a strong capital base
to warrant the confidence of our customers, shareholders, and bank regulatory
agencies. A strong capital base is needed to take advantage of profitable
growth opportunities that arise and to provide assurance to depositors and
creditors. The Company and its banking subsidiary continue to significantly
exceed all regulatory capital requirements, as evidenced by the following
capital ratios at December 31, 2000:
Company Cass
Consolidated Bank
===============================================================================
Total capital (to risk-weighted assets) 13.55% 13.38%
Tier I capital (to risk-weighted assets) 12.40 12.13
Tier I capital (to average assets) 10.26 10.52
===============================================================================
In 2000, cash dividends declared totaled $2,784,000 or $.80 per share, a $.04
or 5.3% increase over the prior year. On December 21, 1999 the Board of
Directors authorized a stock repurchase program that allowed the repurchase
of up to 200,000 shares of common stock through December 31, 2000. On March
21, 2000 the Board of Directors authorized a 100,000 increase in the number
of shares that could be purchased under the program. Along with the 300,000
shares authorized under the plan, the Board of Directors approved the
repurchase of an additional 100,180 shares. During 2000 the Company
repurchased 394,510 shares. Repurchases were made in the open market or
through negotiated transactions from time to time depending on market
conditions.
Shareholders' equity was $53,821,000 or 9.3% of total assets at December 31,
2000, a decrease of $2,742,000 over the balance at December 31, 1999. This
decrease resulted from cash dividends paid of $2,784,000, repurchases of
stock of $7,828,000, which was partially offset by net income of $7,147,000,
a net unrealized gain on available for sale securities of $576,000 and other
items of $147,000.
Dividends from the bank subsidiary are a significant source of funds for
payment of dividends by the Company to its shareholders. The only
restrictions on dividends are those dictated by regulatory capital
requirements and prudent and sound banking principles. As of December 31,
2000, unappropriated retained earnings of $424,000 were available at the Bank
for the declaration of dividends to the Company without prior approval from
regulatory authorities.
SUBSEQUENT EVENTS
On January 18, 2001 the Company announced that it acquired the business and
substantially all the assets of "The Utility Navigator(R)" a division of
privately held Insite Services, Inc. These assets include all books and
records relating to the business, customer and vendor lists, customer
contracts, reporting history and databases, marketing and advertising
materials, trademarks and other intellectual property, and a license to the
software used to process and pay utility bills. This move should solidify
the market position of the Company in this emerging market.
EFFECT OF RECENT AND PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS 133) which establishes
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. In June 1999, the FASB issued Statement of
Financial Accounting Standards No. 137, Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB No. 133,
which defers the effective date of SFAS 133 from fiscal years beginning after
June 15, 1999 to fiscal years beginning after June 15, 2000. Earlier
application of SFAS 133, as amended, is encouraged but should not be applied
retroactively to financial statements of prior periods. In June 2000, the
FASB issued
18
19
Statement of Financial Accounting Financial Standards No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities, which
addresses certain issues causing implementation difficulties. The Company
has adopted SFAS 133, as amended, effective January 1, 2001, but since the
Company does not participate in any derivative or hedging activities, SFAS
133, as amended, had no impact on the Company's consolidated financial
position and results of operations, except for the transfer of all
held-to-maturity securities into available-for-sale as of January 1, 2001.
INFLATION
Inflation can impact the financial position and results of the operations of
banks and bank holding companies because these companies hold monetary assets
and monetary liabilities. Monetary assets and liabilities are those which
can be converted into a fixed number of dollars, and include cash,
investments, loans and deposits. The Company's consolidated balance sheets
reflects a net positive monetary position (monetary assets exceeding monetary
liabilities). During periods of inflation, the holding of a net positive
monetary position will result in an overall decline in the purchasing power
of a company.
FORWARD-LOOKING STATEMENTS - FACTORS THAT MAY AFFECT FUTURE RESULTS
Statements in Management's Discussion and Analysis of Financial Condition and
Results of Operations and the other sections of this Report that are not
statements of historical fact are forward-looking statements. Such
statements are subject to important risks and uncertainties which could cause
the Company's actual results to differ materially from those expressed in any
such forward-looking statements made herein. The aforesaid uncertainties
include, but are not limited to: burdens imposed by federal and state
regulators, credit risk related to borrowers' ability to repay loans,
concentration of loans in the St. Louis Metropolitan area which subjects the
Company to risks associated with changes in the local economy, risks
associated with fluctuations in interest rates, competition from other banks
and other financial institutions, some of which are not as heavily regulated
as the Company and risks associated with breakdowns in data processing
systems and competition from other providers of similar services.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
For information regarding the market risk of the Company's financial
instruments, see Part II, Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations". The Company's primary market
risk exposure is to interest rate risk.
19
20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
CASS INFORMATIONS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
---------------------------------
(In Thousands of Dollars, Except Share and per Share Data) 2000 1999
- -----------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 21,680 $ 18,497
Federal funds sold and other short-term investments 94,251 105,720
-------- --------
Cash and cash equivalents 115,931 124,217
-------- --------
Investment in debt and equity securities:
Held-to-maturity, fair value of $6,682 and $25,381
at December 31, 2000 and 1999, respectively 6,650 25,554
Available-for-sale, at fair value 62,675 57,442
-------- --------
Total investment in debt and equity securities 69,325 82,996
-------- --------
Loans 372,220 278,343
Less: Allowance for loan losses 4,897 4,282
-------- --------
Loans, net 367,323 274,061
-------- --------
Premises and equipment, net 13,914 9,181
Accrued interest receivable 3,528 2,764
Other assets 6,865 7,626
-------- --------
Total assets $576,886 $500,845
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
- ------------
Deposits:
Noninterest-bearing $ 99,941 $ 91,672
Interest-bearing 112,725 97,064
-------- --------
Total deposits 212,666 188,736
Accounts and drafts payable 302,840 249,894
Short-term borrowings -- 208
Other liabilities 7,559 5,444
-------- --------
Total liabilities 523,065 444,282
-------- --------
Shareholders' Equity:
- ---------------------
Preferred stock, par value $.50 per share; 2,000,000
shares authorized and no shares issued -- --
Common stock, par value $.50 per share;
20,000,000 shares authorized and
4,000,000 shares issued 2,000 2,000
Surplus 5,059 5,087
Retained earnings 59,177 54,814
Accumulated other comprehensive income (loss) 159 (417)
Common shares in treasury, at cost (665,089 and 277,149
shares at December 31, 2000 and 1999, respectively) (12,480) (4,770)
Unamortized stock bonus awards (94) (151)
-------- --------
Total shareholders' equity 53,821 56,563
-------- --------
Total liabilities and shareholders' equity $576,886 $500,845
======== ========
See accompanying notes to consolidated financial statements.
20
21
CASS INFORMATIONS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
DECEMBER 31
-------------------------------------------
(In Thousands of Dollars, Except Share and per Share Data) 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------
Interest Income:
- ----------------
Interest and fees on loans $ 27,716 $ 20,371 $ 17,579
Interest and dividends on debt and equity securities:
Taxable 5,205 4,659 6,538
Exempt from federal income taxes 59 63 69
Interest on federal funds sold and
other short-term investments 4,085 5,782 5,858
--------- --------- ---------
Total interest income 37,065 30,875 30,044
--------- --------- ---------
Interest Expense:
- -----------------
Interest on deposits 5,165 4,357 4,271
Interest on short-term borrowings 20 9 10
--------- --------- ---------
Total interest expense 5,185 4,366 4,281
--------- --------- ---------
Net interest income 31,880 26,509 25,763
Provision for loan losses 750 -- --
--------- --------- ---------
Net interest income after provision
for loan losses 31,130 26,509 25,763
--------- --------- ---------
Noninterest Income:
- -------------------
Information services revenue:
Freight and utility payment and processing fees 18,090 18,226 18,809
Freight rating services fees 1,334 1,800 2,146
Bank service fees 1,385 1,147 864
Gain on sale of debt securities -- -- 285
Other 305 271 343
--------- --------- ---------
Total noninterest income 21,114 21,444 22,447
--------- --------- ---------
Noninterest Expense:
- --------------------
Salaries and employee benefits 28,500 25,974 24,995
Occupancy expense 1,758 1,780 1,698
Equipment expense 3,027 2,714 2,649
Other 7,951 7,876 7,283
--------- --------- ---------
Total noninterest expense 41,236 38,344 36,625
--------- --------- ---------
Income before income tax expense 11,008 9,609 11,585
Income tax expense 3,861 3,411 4,177
--------- --------- ---------
Net income $ 7,147 $ 6,198 $ 7,408
========= ========= =========
Earnings per share:
Basic $2.05 $1.63 $1.92
Diluted $2.02 $1.61 $1.89
Weighted average shares outstanding:
Basic 3,485,789 3,791,250 3,862,393
Effect of stock options and awards 44,859 57,182 67,281
Diluted 3,530,648 3,848,432 3,929,674
See accompanying notes to consolidated financial statements.
21
22
CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31
--------------------------------------------
(Dollars in Thousands) 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities:
- -------------------------------------
Net income $ 7,147 $ 6,198 $ 7,408
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,571 2,433 2,359
Amortization of stock bonus awards 81 68 50
Provision for loan losses 750 -- --
Deferred income tax expense (benefit) (501) (492) 131
Decrease (increase) in accrued interest receivable (764) -- 373
Gain on sale of debt securities -- -- (285)
Increase (decrease) in pension liability 560 834 (203)
Change in other assets 1,444 372 (644)
Change in other liabilities 1,373 499 (769)
Other operating activities, net (350) 530 194
-------- -------- --------
Net cash provided by operating activities 12,311 10,442 8,614
-------- -------- --------
Cash Flows From Investing Activities:
- -------------------------------------
Proceeds from sales of debt securities available-for-sale -- -- 6,409
Proceeds from maturities of debt and equity securities:
Held-to-maturity 20,757 30,819 32,974
Available-for-sale 12,909 1,690 2,905
Purchase of debt and equity securities available-for-sale (19,322) (33,091) --
Net increase in loans (94,012) (53,601) (28,466)
Purchases of premises and equipment, net (7,041) (1,923) (1,250)
-------- -------- --------
Net cash provided by (used in) investing activitie (86,709) (56,106) 12,572
-------- -------- --------
Cash Flows From Financing Activities:
- -------------------------------------
Net increase (decrease) in noninterest-bearing demand,
interest-bearing demand and savings deposits 23,332 (918) 25,945
Net increase (decrease) in time deposits 598 (1,328) (820)
Net increase (decrease) in accounts and drafts payable 52,946 (624) 36,763
Net decrease in short-term borrowings (208) (115) (83)
Cash proceeds from exercise of stock options 56 81 52
Cash dividends paid (2,784) (2,889) (2,782)
Purchase of common shares for treasury (7,828) (3,711) --
-------- -------- --------
Net cash provided by (used in) financing activities 66,112 (9,504) 59,075
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (8,286) (55,168) 80,261
Cash and cash equivalents at beginning of period 124,217 179,385 99,124
-------- -------- --------
Cash and cash equivalents at end of period $115,931 $124,217 $179,385
======== ======== ========
Supplemental information:
Cash paid for interest $ 5,143 $ 4,375 $ 4,314
Cash paid for income taxes 4,382 3,536 3,712
See accompanying notes to consolidated financial statements.
22
23
CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Accumulated
Other Unamortized Comp-
(In Thousands of Dollars, Common Retained Comprehensive Treasury Stock Bonus rehensive
Except per Share Data) Stock Surplus Earnings Income (Loss) Stock Awards Total Income
- ---------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1997 $2,000 $4,740 $46,879 $ 364 $ (1,284) $ (46) $52,653
Net Income -- -- 7,408 -- -- -- 7,408 7,408
Cash dividends
($.72 per share) -- -- (2,782) -- -- -- (2,782)
Other comprehensive
income:
Net unrealized
gain on debt
securities available-
for-sale, net of tax 211
Adjustment for gain
on sale of debt
securities,
available-for-sale,
net of tax (188)
------
Total other
comprehensive income -- -- -- 23 -- -- 23 23
Issuance of 3,000
common shares
pursuant to Stock
Bonus Plan -- 48 -- -- 27 (75) --
Amortization of
Stock Bonus Plan awards -- -- -- -- -- 50 50
Exercise of Stock Options -- 8 -- -- 44 -- 52
------------------------------------------------------------------------------------------
Balance, December 31,
1998 2,000 4,796 51,505 387 (1,213) (71) 57,404
Comprehensive income
for 1998 7,431
======
Net income 6,198 6,198 6,198
Cash dividends
($.76 per share) (2,889) (2,889)
Purchase of 160,000
common shares for Treasury (3,711) (3,711)
Other comprehensive
income (loss):
Net unrealized loss
on debt securities
available-for-sale,
net of tax (804) (804) (804)
Issuance of 5,900
common shares
pursuant to Stock
Bonus Plan 87 61 (148)
Amortization of
Stock Bonus
Plan awards 68 68
Exercise of stock
options (12) 93 81
Tax benefit on
stock awards 216 216
------------------------------------------------------------------------------------------
Balance, December 31,
1999 2,000 5,087 54,814 (417) (4,770) (151) 56,563
Comprehensive income
for 1999 5,394
======
Net income 7,147 7,147 7,147
Cash dividends
($.80 per share) (2,784) (2,784)
Purchase of 394,510
common shares
for Treasury (7,828) (7,828)
Other comprehensive
income (loss):
Net unrealized gain
on debt securities
available-for-
sale, net of tax 576 576 576
Issuance of 1,200
common shares
pursuant to Stock
Bonus Plan 2 22 (24)
Amortization of
Stock Bonus
Plan awards 81 81
Exercise of stock
options (40) 96 56
Tax benefit on
stock awards 10 10
------------------------------------------------------------------------------------------
Balance, December
31, 2000 $2,000 $5,059 $59,177 $ 159 $(12,480) $ (94) $53,821
==============================================================================
Comprehensive income
for 2000 $7,723
======
See accompanying notes to consolidated financial statements.
23
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000 and 1999
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company provides information services which include processing and
payment of freight and utility charges, preparation of transportation
management reports, auditing of freight charges and rating of freight
shipments. The Company is subject to competition from other commercial
concerns providing similar services to companies throughout the United States
and Canada. The consolidated balance sheet caption "Accounts and Drafts
Payable," consists of obligations related to bill payment services which are
performed for customers.
The Company also provides a full range of banking services to individual,
corporate and institutional customers through its wholly owned subsidiary
bank. The Bank is subject to competition from other financial and
nonfinancial institutions throughout the metropolitan St. Louis, Missouri
area. Additionally, the Company and the Bank are subject to the regulations
of certain federal and state agencies and undergo periodic examinations by
those regulatory agencies.
On January 9, 2001 the Company's subsidiary, Cass Information Systems, Inc.
was merged into the parent company, Cass Commercial Corporation, and the
parent's name was subsequently changed to Cass Information Systems, Inc.
The accounting and reporting policies of the Company and its subsidiaries
conform to accounting policies generally accepted in the United States of
America. The following is a description of the more significant of those
policies.
BASIS OF PRESENTATION The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries after elimination
of intercompany transactions.
In preparing the consolidated financial statements, Company management is
required to make estimates and assumptions which significantly affect the
reported amounts in the consolidated financial statements. A significant
estimate which is particularly susceptible to change in a short period of
time is the determination of the allowance for loan losses.
INVESTMENT IN DEBT AND EQUITY SECURITIES At the time of purchase, debt
securities are classified into one of two categories: available-for-sale or
held-to-maturity. Held-to-maturity securities are those securities which the
Company has the ability and intent to hold until maturity. All equity
securities, and debt securities not classified as held-to-maturity, are
classified as available-for-sale.
Available-for-sale securities are recorded at fair value. Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization of
premiums or discounts. Unrealized gains and losses, net of the related tax
effect, on available-for-sale securities are excluded from earnings and
reported as accumulated other comprehensive income. Gains and losses on the
sale of available-for-sale securities are determined using the specific
identification method.
A decline in the fair value of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary is charged to
earnings and results in the establishment of a new cost basis for the
security.
The Bank is required to maintain an investment in the capital stock of the
Federal Reserve Bank. The stock is recorded at cost, which represents
redemption value. The Bank has elected to become a member of the Federal
Home Loan Bank and invested in its common stock which is recorded at cost,
which represents redemption value.
INTEREST ON LOANS Interest 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 collectibility of principal
or interest. Subsequent payments received on such loans are applied to
principal if there is any doubt as to the collectibility 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.
ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is increased by
provisions charged to expense and reduced by net charge-offs. The provisions
charged to expense are based on economic conditions, past losses, collection
experience, risk characteristics of the portfolio and such other factors
which, in management's judgment, deserve current recognition.
24
25
Management believes the allowance for loan losses is adequate to absorb
losses in the loan portfolio. While management uses all available information
to recognize losses on loans, future additions to the allowance may be
necessary based on changes in economic conditions. Additionally, various
regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses. Such agencies
may require the Company to increase the allowance for loan losses based on
their judgments and interpretations about information available to them at
the time of their examination.
INFORMATION SERVICES REVENUE Revenue from freight and utility related
services is recognized when fees are billed to customers, generally monthly.
PREMISES AND EQUIPMENT Premises 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 are 31-1/2 to 39 years for buildings, 8 to 10 years for
leasehold improvements and 3 to 10 years for furniture, fixtures, equipment
and software. Maintenance and repairs are charged to expense as incurred.
INTANGIBLE ASSETS Cost in excess of fair value of net assets acquired and
fair value in excess of cost of net assets acquired have resulted from
business acquisitions which were accounted for using the purchase method.
The premiums and discounts related to the fair value adjustments are
amortized using the level-yield method.
Cost in excess of fair value of net assets acquired and fair value in excess
of cost of net assets acquired are amortized on a straight-line basis over 3
to 15 years.
Periodically, the Company reviews its 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.
INCOME TAXES Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. 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. 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.
CASH FLOWS For purposes of the consolidated statements of cash flows, the
Company considers due from banks, federal funds sold and other short-term
investments to be cash equivalents.
RECLASSIFICATIONS Certain amounts in the 1999 and 1998 consolidated
financial statements have been reclassified to conform with the 2000
presentation. Such reclassifications have no effect on previously reported
net income.
NOTE 2
CAPITAL REQUIREMENTS AND REGULATORY RESTRICTIONS
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can result in certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could
have a direct material effect on the Company's consolidated financial
statements. Under capital adequacy guidelines, the Company and the Bank must
meet specific capital guidelines that involve quantitative measures of
assets, liabilities and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Company and the Bank's capital amounts
and classifications are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
Quantitative measures established by regulators to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of
total and Tier I capital to risk-weighted assets, and of Tier I capital to
average assets. Management believes as of December 31, 2000, the Company and
the Bank meet all capital adequacy requirements to which they are subject.
The Bank is also subject to the regulatory framework for prompt corrective
action. The most recent notification from the regulatory agencies, dated
December 15, 2000, categorized the Bank as well capitalized. To be
categorized as well capitalized, the Bank must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set
25
26
forth in the table below. There are no conditions or events since that
notification that management believes have changed the Bank's category.
Subsidiary dividends are a principal source of funds for payment of dividends
by the Company to its shareholders. The Bank is subject to regulations which
require the maintenance of minimum capital levels. At December 31, 2000,
unappropriated retained earnings of $424,000 were available at the Bank for
the declaration of dividends to the Company without prior approval from
regulatory authorities.
Restricted funds on deposit used to meet regulatory reserve requirements
amounted to approximately $2,053,000 and $4,522,000 at December 31, 2000 and
1999, respectively.
The Company and the Bank's actual and required capital amounts and ratios as
of December 31, 2000 and 1999 are as follows:
Requirement
to be well
capitalized under
Capital prompt corrective
Actual requirements action provisions
----------------------------------------------------------------------
(Dollars in Thousands) Amount Ratio Amount Ratio Amount Ratio
- ---------------------------------------------------------------------------------------------------------------------
At December 31, 2000
Total capital (to risk-weighted assets):
Cass Information Systems, Inc. $57,712 13.55% $34,076 8.00% $ N/A N/A%
Cass Commercial Bank 26,064 13.38 15,586 8.00 19,483 10.00
Tier I capital (to risk-weighted assets):
Cass Information Systems, Inc. $52,815 12.40% $17,038 4.00% $ N/A N/A%
Cass Commercial Bank 23,624 12.13 7,793 4.00 11,690 6.00
Tier I capital (to average assets):
Cass Information Systems, Inc. $52,815 10.26% $15,448 3.00% $ N/A N/A%
Cass Commercial Bank 23,624 10.52 6,737 3.00 11,228 5.00
At December 31, 1999
Total capital (to risk-weighted assets):
Cass Information Systems, Inc. $60,736 18.23% $26,654 8.00% $ N/A N/A%
Cass Commercial Bank 28,014 16.39 13,676 8.00 17,095 10.00
Tier I capital (to risk-weighted assets):
Cass Information Systems, Inc. $56,570 16.98% $13,327 4.00% $ N/A N/A%
Cass Commercial Bank 25,873 15.14 6,838 4.00 10,257 6.00
Tier I capital (to average assets):
Cass Information Systems, Inc. $56,570 11.53% $14,717 3.00% $ N/A N/A%
Cass Commercial Bank 25,873 11.54 6,725 3.00 11,208 5.00
NOTE 3
INVESTMENT IN DEBT AND EQUITY SECURITIES
Debt and equity securities have been classified in the consolidated balance
sheets according to management's intent.
The amortized cost and fair values of debt securities classified as held-to-
maturity at December 31, 2000 and 1999, are as follows:
2000
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(In Thousands) Cost Gains Losses Value
- -------------------------------------------------------------------------------------------------
U.S. Government Treasury securities $2,004 $-- $-- $2,004
Obligations of U.S. Government
corporations and agencies 3,465 13 (3) 3,475
States and political subdivisions 1,181 28 (6) 1,203
- -------------------------------------------------------------------------------------------------
Total $6,650 $41 $(9) $6,682
=================================================================================================
26
27
1999
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(In Thousands) Cost Gains Losses Value
- -------------------------------------------------------------------------------------------------
U.S. Government Treasury securities $14,146 $15 $ (7) $14,154
Obligations of U.S. Government
corporations and agencies 10,155 -- (186) 9,969
States and political subdivisions 1,253 19 (14) 1,258
- -------------------------------------------------------------------------------------------------
Total $25,554 $34 $(207) $25,381
=================================================================================================
The amortized cost and fair value of debt securities classified as
held-to-maturity at December 31, 2000, by contractual maturity, are as
follows. Expected maturities may differ from contractual maturities because
borrowers have the right to prepay obligations with or without prepayment
penalties.
2000
---------------------------------
Amortized Fair
(In Thousands) Cost Value
- -------------------------------------------------------------------------------------
Due in 1 year or less $2,697 $2,695
Due after 1 year through 5 years 524 527
Due after 5 years through 10 years 3,429 3,460
- -------------------------------------------------------------------------------------
Total $6,650 $6,682
=====================================================================================
The amortized cost and fair values of debt and equity securities classified
as available-for-sale at December 31, 2000 and 1999, are summarized as
follows:
2000
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(In Thousands) Cost Gains Losses Value
- -------------------------------------------------------------------------------------------------
U.S. Government Treasury securities $27,975 $268 $ -- $28,243
Obligations of U.S. Government
corporations and agencies 33,825 95 (122) 33,798
- -------------------------------------------------------------------------------------------------
Total debt securities 61,800 363 (122) 62,041
Stock in Federal Reserve Bank and
Federal Home Loan Bank 634 -- -- 634
- -------------------------------------------------------------------------------------------------
Total $62,434 $363 $(122) $62,675
=================================================================================================
1999
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(In Thousands) Cost Gains Losses Value
- -------------------------------------------------------------------------------------------------
U.S. Government Treasury securities $28,107 $37 $ (17) $28,127
Obligations of U.S. Government
corporations and agencies 29,765 11 (662) 29,114
- -------------------------------------------------------------------------------------------------
Total debt securities 57,872 48 (679) 57,241
Stock in Federal Reserve Bank and
Federal Home Loan Bank 201 -- -- 201
- -------------------------------------------------------------------------------------------------
Total $58,073 $48 $(679) $57,442
=================================================================================================
The amortized cost and fair value of debt and equity securities classified as
available-for-sale at December 31, 2000, by contractual maturity, are shown
in the following table. Expected maturities may differ from contractual
maturities because borrowers have the right to prepay obligations with or
without prepayment penalties.
27
28
2000
----------------------------------
Amortized Fair
(In Thousands) Cost Value
- --------------------------------------------------------------------------------------
Due in 1 year or less $16,098 $16,142
Due after 1 year through 5 years 42,503 42,727
Due after 5 years through 10 years 525 512
Due after 10 years 2,674 2,660
No stated maturity 634 634
- --------------------------------------------------------------------------------------
Total $62,434 $62,675
======================================================================================
The amortized cost of debt securities pledged to secure public deposits,
securities sold under agreements to repurchase and for other purposes was
approximately $5,596,000 and $55,899,000 at December 31, 2000 and 1999,
respectively.
There were no sales of debt and equity securities classified as
available-for-sale in 2000 or 1999. In 1998, proceeds from the sale of debt
securities classified as available-for-sale were $6,409,000 with a realized
gross gain on the sale of $285,000.
NOTE 4
LOANS
A summary of loan categories at December 31, 2000 and 1999, is as follows:
(In Thousands) 2000 1999
- -------------------------------------------------------------------------------------
Commercial and industrial $136,482 $106,444
Real estate:
Mortgage 117,170 86,171
Mortgage - Church & Related 65,368 43,311
Construction 9,877 6,987
Construction - Church & Related 19,587 22,646
Industrial revenue bonds 15,804 7,265
Installment 2,533 1,541
Other 5,399 3,978
- -------------------------------------------------------------------------------------
Total $372,220 $278,343
=====================================================================================
The Company originates commercial, industrial, real estate and installment
loans to businesses, churches and consumers throughout the metropolitan St.
Louis area. The Company also originates church and church-related loans
outside the metropolitan St. Louis area. 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 are extended to
privately held commercial companies in this market area, and are generally
secured by the assets of the business. The Company also has a substantial
portion of real estate loans that are extended to churches, in this market
area and selected cities throughout the United States, which are secured by
mortgages.
Loan transactions involving executive officers and directors of the Company
and its subsidiaries and loans to affiliates of executive officers and
directors for the year ended December 31, 2000, are summarized below. Such
loans were made in the normal course of business on substantially the same
terms, including interest rates and collateral, as those prevailing at the
same time for comparable transactions with other persons, and did not involve
more than the normal risk of collectibility.
(In Thousands)
- --------------------------------------------------------------
Aggregate balance, January 1, 2000 $1,230
New loans --
Payments 1,177
- --------------------------------------------------------------
Aggregate balance, December 31, 2000 $ 53
==============================================================
28
29
A summary of the activity in the allowance for loan losses for 2000, 1999 and
1998 is as follows:
(In Thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------------------
Balance, January 1 $4,282 $4,428 $4,484
Provision charged to expense 750 -- --
Loans charged off (183) (256) (365)
Recoveries of loans previously
charged off 48 110 309
- -------------------------------------------------------------------------------------------------
Net loan charge-offs (135) (146) (56)
- -------------------------------------------------------------------------------------------------
Balance, December 31 $4,897 $4,282 $4,428
=================================================================================================
A summary of impaired loans at December 31, 2000 and 1999, is as follows:
(In Thousands) 2000 1999
- ----------------------------------------------------------------------------------
Nonaccrual loans $1,127 $170
Impaired loans continuing to accrue interest 4,267 173
- ----------------------------------------------------------------------------------
Total impaired loans $5,394 $343
==================================================================================
The allowance for loan losses on impaired loans was $271,000 and $175,000 at
December 31, 2000 and 1999, respectively. Impaired loans with no related
allowance for loan losses totaled $5,123,000 and $168,000 at December 31,
2000 and 1999, respectively. The average balance of impaired loans during
2000 and 1999 was $1,476,000 and $517,000, respectively. Subsequent to
year-end the Bank foreclosed on certain operating assets of one borrower that
represented $4,205,000 of the impaired loan balance at December 31, 2000.
The Bank is currently in the process of stabilizing this business and will
continue to operate the business until it can be sold or merged into another
entity.
A summary of interest income on impaired loans for 2000, 1999 and 1998 is as
follows:
2000
-----------------------------------------
Impaired Loans
Nonaccrual Continuing to
(In Thousands) Loans Accrue interest Total
- -------------------------------------------------------------------------------------------------
Income recognized $ 19 $87 $106
Interest income if interest had accrued 123 87 210
- -------------------------------------------------------------------------------------------------
1999
-----------------------------------------
Impaired Loans
Nonaccrual Continuing to
(In Thousands) Loans Accrue interest Total
- -------------------------------------------------------------------------------------------------
Income recognized $ 1 $1 $ 2
Interest income if interest had accrued 44 1 45
- -------------------------------------------------------------------------------------------------
1998
-----------------------------------------
Impaired loans
Nonaccrual Continuing to
(In Thousands) Loans Accrue interest Total
- -------------------------------------------------------------------------------------------------
Income recognized $17 $26 $ 43
Interest income if interest had accrued 78 26 104
- -------------------------------------------------------------------------------------------------
29
30
NOTE 5
PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 2000 and 1999, is as
follows:
(In Thousands) 2000 1999
- ----------------------------------------------------------------------------------
Land $ 873 $ 367
Buildings 9,101 6,341
Leasehold improvements 1,264 1,264
Furniture, fixtures and equipment 22,963 19,392
- ----------------------------------------------------------------------------------
34,201 27,364
Less accumulated depreciation and amortization 20,287 18,183
- ----------------------------------------------------------------------------------
Total $13,914 $ 9,181
==================================================================================
Depreciation charged to expense in 2000, 1999 and 1998 amounted to
$2,275,000, $1,993,000 and $1,953,000, respectively.
The Company and its subsidiaries lease various premises and equipment under
operating lease agreements which expire at various dates through 2007. The
following is a schedule, by year, of future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease
terms in excess of one year as of December 31, 2000:
(In Thousands)
- --------------------------------------------------
2001 $ 318
2002 243
2003 242
2004 242
2005 209
2006 and thereafter 49
- --------------------------------------------------
Total $1,303
==================================================
Rental expense for 2000, 1999 and 1998 was $1,161,000, $1,271,000 and
$1,161,000, respectively.
NOTE 6
INTEREST-BEARING DEPOSITS
Interest-bearing deposits consist of the following at December 31, 2000 and
1999:
(In Thousands) 2000 1999
- ----------------------------------------------------------------------------
NOW and Money Market Demand Accounts $ 49,212 $43,092
Savings deposits 56,441 47,498
Time deposits:
Less than $100 4,028 3,863
$100 or more 3,044 2,611
- ----------------------------------------------------------------------------
Total $112,725 $97,064
============================================================================
Interest on deposits consists of the following for 2000, 1999 and 1998:
(In Thousands) 2000 1999 1998
- ----------------------------------------------------------------------------
NOW and Money Market Demand Accounts $1,961 $1,431 $1,198
Savings deposits 2,885 2,539 2,624
Time deposits:
Less than $100 190 207 227
$100 or more 129 180 222
- ----------------------------------------------------------------------------
Total $5,165 $4,357 $4,271
============================================================================
30
31
The scheduled maturities of certificates of deposit at December 31, 2000 and
1999, are summarized as follows:
2000 1999
--------------------------------------------------------
Percent Percent
(In Thousands) Amount of Total Amount of Total
- -------------------------------------------------------------------------------------
Due within:
One year $5,871 83.0% $5,014 77.4%
Two years 1,037 14.7 938 14.5
Three years 34 .5 382 5.9
Four years 91 1.3 -- --
Five years 39 .5 140 2.2
- -------------------------------------------------------------------------------------
Total $7,072 100.0% $6,474 100.0%
=====================================================================================
NOTE 7
EMPLOYEE BENEFITS
The Company has a noncontributory defined benefit pension plan which covers
substantially all of its employees. The Company's subsidiaries accrue and
make contributions designed to fund normal service costs on a current basis
using 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 period of
approximately 30 years.
The pension cost for 2000, 1999 and 1998 was $386,000, $784,000 and $517,000,
respectively, and included the following components:
(In Thousands) 2000 1999 1998
- ------------------------------------------------------------------------------------------------
Service cost - benefits earned during the year $ 747 $ 929 $ 763
Interest cost on projected benefit obligations 778 747 617
Expected return on plan assets (959) (899) (765)
Net amortization and deferral (180) 7 (98)
- ------------------------------------------------------------------------------------------------
Net periodic pension cost $ 386 $ 784 $ 517
================================================================================================
A summary of the activity in the defined benefit pension plan's benefit
obligation, assets, funded status and amounts recognized in the Company's
consolidated balance sheets at December 31, 2000 and 1999, is as follows:
(In Thousands) 2000 1999
- ------------------------------------------------------------------------------
Benefit obligation:
Balance, January 1 $10,562 $10,771
Service cost 747 929
Interest cost 778 747
Actuarial loss (gain) 41 (1,733)
Benefits paid (197) (152)
- ------------------------------------------------------------------------------
Balance, December 31 $11,931 $10,562
==============================================================================
Plan assets:
Fair value, January 1 $11,958 $10,886
Actual return 304 1,017
Employer contribution 24 207
Benefits paid (197) (152)
- ------------------------------------------------------------------------------
Fair value, December 31 $12,089 $11,958
==============================================================================
Funded status:
Unfunded projected benefits obligation $ 158 $ 1,396
Unrecognized prior service cost 19 134
Unrecognized net gains (2,251) (3,241)
- ------------------------------------------------------------------------------
Accrued pension cost $(2,074) $(1,711)
==============================================================================
31
32
The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.50% and 4.00% in 2000, 7.75% and 4.00% in
1999 and 6.75% and 4.00% in 1998. The expected long-term rate of return on
assets was 8.00% in 2000, 1999 and 1998.
In addition to the above funded benefit plan, in 1998 the Company developed
an unfunded supplemental executive retirement plan which covers key
executives of the Company. This is a noncontributory plan in which the
Company's subsidiaries make accruals designed to fund normal service costs on
a current basis using the same method and criteria as its defined benefit
plan.
The pension cost for 2000, 1999 and 1998 for the supplemental executive
retirement plan was $245,000, $257,000 and $143,000 respectively, and
included the following components:
(In Thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------------------
Service cost - benefits earned during the year $ 29 $ 38 $ 25
Interest cost on projected benefit obligations 131 113 59
Net amortization and deferral 85 106 59
- -------------------------------------------------------------------------------------------------
Net periodic pension cost $245 $257 $143
=================================================================================================
A summary of the activity in the supplemental executive retirement plan's
benefit obligation, funded status and amounts recognized in the Company's
consolidated balance sheets at December 31, 2000 and 1999, is as follows:
(In Thousands) 2000 1999
- ---------------------------------------------------------------------------------
Benefit obligation:
Balance, January 1 $ 1,566 $ 972
Service cost 30 38
Interest cost 131 113
Actuarial loss 71 443
- ---------------------------------------------------------------------------------
Balance, December 31 $ 1,798 $ 1,566
=================================================================================
Funded status:
Unfunded projected benefits obligation $(1,798) $(1,566)
Unrecognized prior service cost 645 704
Unrecognized actuarial loss 508 462
- ---------------------------------------------------------------------------------
Accrued pension cost (645) (400)
Minimum liability adjustment (533) (581)
- ---------------------------------------------------------------------------------
Accrued pension cost $(1,178) $ (981)
=================================================================================
The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.50% and 4.00% in 2000, 7.75% and 4.00% in
1999 and 6.75% and 5.00% in 1998.
The Company maintains a noncontributory profit sharing plan which covers
substantially all of its employees. Employer contributions are calculated
based upon formulas which relate to current operating results and other
factors. Profit sharing expense recognized in the consolidated statements of
income in 2000, 1999 and 1998 was $1,617,000, $1,413,000 and $1,679,000,
respectively.
The Company sponsors a defined contribution 401(k) plan to provide additional
retirement benefits to substantially all employees. Contributions under the
401(k) plan for 2000, 1999 and 1998 were $247,000, $234,000 and $199,000,
respectively.
The Company maintains a restricted stock bonus plan which provides for the
issuance of up to 100,000 shares of the Company's common stock. The fair
value of such shares, which is based on the market price on the date of
grant, has been recorded in the consolidated financial statements through the
establishment of a contra shareholders' equity account which is amortized
over the three-year vesting period. Amortization of the restricted stock
bonus awards totaled $81,000, $68,000 and $50,000 for 2000, 1999 and 1998,
respectively.
32
33
Changes in stock bonus shares outstanding were as follows:
Weighted Average
Fair Value
Shares Per Share
- -----------------------------------------------------------------------
Balance at December 31, 1997 -- $ --
Granted 3,000 25.00
- -----------------------------------------------------------------------
Balance at December 31, 1998 3,000 25.00
Granted 5,900 25.14
Vested (1,000) 25.00
- -----------------------------------------------------------------------
Balance at December 31, 1999 7,900 25.10
Granted 1,200 20.00
Vested (2,967) 25.09
- -----------------------------------------------------------------------
Balance at December 31, 2000 6,133 $24.11
=======================================================================
The Company also maintains a performance-based stock option plan which
provides for the granting of options to acquire up to 400,000 shares of
Company common stock. Options vest over a period not to exceed seven years,
but the vesting period can be less based on the Company's attainment of
certain financial operating performance criteria.
The following table summarizes stock options outstanding as of December 31,
2000:
Weighted Average
Exercise Options Remaining
Price Outstanding Contractual Life
-----------------------------------------------------------------
$10.32 80,070 3.02
20.36 6,000 3.76
23.00 3,500 5.00
24.63 2,000 5.00
25.25 61,350 5.00
25.45 8,500 3.70
Changes in options outstanding were as follows:
Weighted
Average
Shares Exercise Price
- -----------------------------------------------------------------------
Balance at December 31, 1997 118,500 $11.91
Exercised (7,200) 10.32
Forfeited (1,400) 10.32
- -----------------------------------------------------------------------
Balance at December 31, 1998 109,900 12.04
Granted 67,100 25.11
Exercised (9,960) 10.32
Forfeited (250) 10.32
- -----------------------------------------------------------------------
Balance at December 31, 1999 166,790 17.38
Exercised (5,370) 10.32
- -----------------------------------------------------------------------
Balance at December 31, 2000 161,420 17.61
=======================================================================
At December 31, 2000, 57,337 shares were exercisable with a weighted average
exercise price of $11.11.
The Company accounts for stock-based compensation under the stock option plan
in accordance with Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25), and accordingly, recognizes no
compensation expense as the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant.
The Company elected not to adopt the recognition provisions of the Financial
Accounting Standards Board Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS 123). An entity that
continues to apply APB 25 shall disclose certain pro forma information as if
the fair value-based accounting method in SFAS 123 had been used to account
for stock-based compensation costs. The required disclosure provisions of
SFAS 123 are provided in the table below. The Company uses the Black-Scholes
option pricing model to determine the fair value of the stock options at the
date of grant using the related assumptions as presented in the following
table:
33
34
(In Thousands of Dollars
Except Share and per Share Data) 2000 1999 1998
- ------------------------------------------------------------------------------------------------
Net earnings as reported $7,147 $6,198 $7,408
Pro forma net earnings 7,076 6,133 7,347
Diluted earnings per share as reported 2.02 1.61 1.89
Pro forma diluted earnings per share 2.00 1.59 1.87
- ------------------------------------------------------------------------------------------------
Weighted average assumptions:
Expected lives in years 7 7 7
Dividend yield 2.66% 2.64% 2.62%
Expected volatility 7.68% 7.63% 7.25%
Risk-free interest rate 6.30% 6.31% 6.38%
- ------------------------------------------------------------------------------------------------
NOTE 8
OTHER NONINTEREST EXPENSE
Details of other noninterest expense for 2000, 1999 and 1998 are as follows:
(In Thousands) 2000 1999 1998
- ------------------------------------------------------------------------------------------------
Postage, printing and supplies $2,375 $2,261 $2,161
Advertising and business development 1,407 1,509 1,392
Professional fees 1,223 1,064 1,056
Outside service fees 792 796 431
Data processing services 499 570 590
Telecommunications 635 612 531
Other 1,020 1,064 1,122
- ------------------------------------------------------------------------------------------------
Total other noninterest expense $7,951 $7,876 $7,283
================================================================================================
NOTE 9
INCOME TAXES
The components of income tax expense for 2000, 1999 and 1998 are as follows:
(In Thousands) 2000 1999 1998
- ------------------------------------------------------------------------------------------------
Current:
Federal $4,035 $3,560 $3,654
State 327 343 392
Deferred (501) (492) 131
- ------------------------------------------------------------------------------------------------
Total income tax expense $3,861 $3,411 $4,177
================================================================================================
A reconciliation of expected income tax expense, computed by applying the
effective federal statutory rate of 34% for 2000, 1999 and 1998 to income
before income tax expense, to reported income tax expense is as follows:
(In Thousands) 2000 1999 1998
- ------------------------------------------------------------------------------------------------
Expected income tax expense $3,743 $3,267 $3,939
(Reductions) increases resulting from:
Tax-exempt interest (150) (136) (79)
State taxes, net of federal benefit 216 226 259
Other, net 52 54 58
- ------------------------------------------------------------------------------------------------
Total income tax expense $3,861 $3,411 $4,177
================================================================================================
The tax effects of temporary differences which give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 2000 and 1999, are presented below:
34
35
(In Thousands) 2000 1999
- ---------------------------------------------------------------------------------
Deferred tax assets:
Unrealized loss on investment in debt
and equity securities available for sale $ -- $ 215
Allowance for loan losses 1,180 898
Accrued pension cost 716 590
Premises and equipment 59 39
Other 388 292
- ---------------------------------------------------------------------------------
Total deferred tax assets 2,343 2,034
- ---------------------------------------------------------------------------------
Deferred tax liabilities:
Unrealized gain on investment in debt
and equity securities available for sale (82) --
Discount accretion (48) (57)
Other (175) (143)
- ---------------------------------------------------------------------------------
Total deferred tax liabilities (305) (200)
- ---------------------------------------------------------------------------------
Net deferred tax assets $2,038 $1,834
=================================================================================
A valuation allowance would be provided on deferred tax assets when it is
more likely than not that some portion of the assets will not be realized.
The Company has not established a valuation allowance at December 31, 2000 or
1999, due to management's belief that all criteria for recognition have been
met, including the existence of a history of taxes paid sufficient to support
the realization of deferred tax assets.
NOTE 10
CONTINGENCIES
The Company and its subsidiaries are involved in various pending legal
actions and proceedings in which claims for damages are asserted. Management,
after discussion with legal counsel, believes the ultimate resolution of
these legal actions and proceedings will not have a material effect upon the
Company's consolidated financial position or results of operations.
NOTE 11
DISCLOSURES ABOUT FINANCIAL INSTRUMENTS
The Company is party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, commercial
letters of credit and standby letters of credit. The Company's 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.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commercial and standby letters of credit are 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. 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.
Conditional commitments to extend credit, commercial letters of credit and
standby letters of credit totaled approximately $16,958,000, $22,000 and
$3,542,000, respectively, at December 31, 2000 and approximately $24,438,000,
$99,000 and $4,756,000, respectively at December 31, 1999.
35
36
Following is a summary of the carrying amounts and fair values of the
Company's financial instruments at December 31, 2000 and 1999:
2000 1999
---------------------------------------------------------
Carrying Fair Carrying Fair
(In Thousands) Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------
Balance sheet assets:
Cash and cash equivalents $115,931 $115,931 $124,217 $124,217
Investment in debt and
equity securities 69,325 69,357 82,996 82,823
Loans, net 367,323 365,398 274,061 270,712
Accrued interest receivable 3,528 3,528 2,764 2,764
- ------------------------------------------------------------------------------------------------------
Total $556,107 $554,228 $484,038 $480,516
======================================================================================================
Balance sheet liabilities:
Deposits $212,666 $212,666 $188,736 $189,052
Accounts and drafts payable 302,840 302,840 249,894 249,894
Short-term borrowings -- -- 208 208
Accrued interest payable 93 93 51 51
- ------------------------------------------------------------------------------------------------------
Total $515,599 $515,599 $438,889 $439,205
======================================================================================================
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate
that value:
CASH AND OTHER SHORT-TERM INSTRUMENTS For cash and cash equivalents, accrued
interest receivable, accounts and drafts payable, short-term borrowings and
accrued interest payable, the carrying amount is a reasonable estimate of
fair value because of the demand nature or short maturities of these
instruments.
INVESTMENT IN DEBT AND EQUITY SECURITIES Fair values are based on quoted
market prices or dealer quotes.
LOANS The fair value of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
DEPOSITS The 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. 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 nor the benefit derived from the customer
relationship inherent in existing deposits.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT The fair value of
commitments to extend credit and standby letters of credit are estimated
using the fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements, the likelihood of the
counterparties drawing on such financial instruments and the present
credit-worthiness of such counterparties. The Company believes such
commitments have been made at terms which are competitive in the markets in
which it operates; however, no premium or discount is offered thereon and,
accordingly, the Company has not assigned a value to such instruments for
purposes of this disclosure.
LIMITATIONS Fair 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.
Because no market exists for a significant portion of the Company's financial
instruments, fair value estimates are based on management's judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
36
37
NOTE 12
INDUSTRY SEGMENT INFORMATION
The services provided by the Company are classified into two industry
segments: Information Services and Banking Services which are more fully
discussed in Note One. The Company maintains separate financial statements
for each of these segments which identify each segment's assets and net
income. Revenue from the Banking Services segment is derived primarily from
net interest income, which includes both interest income and interest
expense. Revenue from the Information Services segment is derived primarily
from interest income and fees from its freight and utility payment, rating
and processing services.
Summarized information about the Company's operations in each industry as of
and for the years ended December 31, 2000, 1999 and 1998, is as follows:
(In Thousands) 2000 1999 1998
- ------------------------------------------------------------------------------------------------
Total interest income:
Information services $19,906 $ 15,808 $ 15,306
Banking services 16,691 15,215 14,910
Eliminations 468 (148) (172)
- ------------------------------------------------------------------------------------------------
Total interest income 37,065 30,875 30,044
- ------------------------------------------------------------------------------------------------
Total interest expense:
Information services -- -- --
Banking services 5,549 4,514 4,453
Eliminations (364) (148) (172)
- ------------------------------------------------------------------------------------------------
Total interest expense 5,185 4,366 4,281
- ------------------------------------------------------------------------------------------------
Provision for loan losses:
Information services 300 -- --
Banking services 450 -- --
- ------------------------------------------------------------------------------------------------
Total provision for loan losses 750 -- --
- ------------------------------------------------------------------------------------------------
Net interest income 31,130 26,509 25,763
- ------------------------------------------------------------------------------------------------
Total noninterest income:
Information services 19,728 20,274 21,573
Banking services 2,517 1,338 1,149
Corporate 1,564 1,472 1,328
Eliminations (2,695) (1,640) (1,603)
- ------------------------------------------------------------------------------------------------
Total noninterest income 21,114 21,444 22,447
- ------------------------------------------------------------------------------------------------
Total noninterest expense:
Information services 33,315 31,497 30,185
Banking services 8,072 6,883 6,592
Corporate 1,712 1,604 1,451
Eliminations (1,863) (1,640) (1,603)
- ------------------------------------------------------------------------------------------------
Total noninterest expense 41,236 38,344 36,625
- ------------------------------------------------------------------------------------------------
Income (loss) before taxes:
Information services 6,019 4,585 6,694
Banking services 5,137 5,156 5,014
Corporate (148) (132) (123)
- ------------------------------------------------------------------------------------------------
Total income (loss) before taxes 11,008 9,609 11,585
- ------------------------------------------------------------------------------------------------
Income taxes:
Information services 2,019 1,570 2,403
Banking services 1,891 1,886 1,815
Corporate (49) (45) (41)
- ------------------------------------------------------------------------------------------------
Total income taxes 3,861 3,411 4,177
- ------------------------------------------------------------------------------------------------
37
38
Net income (loss):
Information services 4,000 3,015 4,291
Banking services 3,246 3,270 3,199
Corporate (99) (87) (82)
- ------------------------------------------------------------------------------------------------
Total net income (loss) $ 7,147 $ 6,198 $ 7,408
================================================================================================
Depreciation and amortization:
Information services $ 2,093 $ 2,102 $ 2,056
Banking services 445 301 283
Corporate 33 30 20
- ------------------------------------------------------------------------------------------------
Total depreciation and amortization $ 2,571 $ 2,433 $ 2,359
================================================================================================
Identifiable assets:
Information services $338,098 $284,412 $285,397
Banking services 238,782 214,971 228,032
Corporate 54,671 56,702 57,809
Eliminations (54,665) (55,240) (67,326)
- ------------------------------------------------------------------------------------------------
Total identifiable assets $576,886 $500,845 $503,912
================================================================================================
Capital expenditures:
Information services $ 6,763 $ 1,425 $ 907
Banking services 256 454 294
Corporate 22 60 49
- ------------------------------------------------------------------------------------------------
Total capital expenditures $ 7,041 $ 1,938 $ 1,250
================================================================================================
NOTE 13
CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
Following are the condensed balance sheets of the Company (parent company
only) as of December 31, 2000 and 1999, and the related condensed schedules
of income and cash flows for each of the years in the three-year period ended
December 31, 2000. The following information relates to Cass Commercial
Corporation prior to its merger with its subsidiary, Cass Information
Systems, Inc., and the adoption of its name as of January 9, 2001.
Condensed
Balance Sheets
December 31
------------------------
(In Thousands) 2000 1999
- ------------------------------------------------------------------------------------------------
Assets:
Cash $ 256 $ 280
Investment in Cass Information Systems, Inc. 29,586 30,027
Investment in Cass Commercial Bank 23,681 25,883
Other assets 1,149 512
- ------------------------------------------------------------------------------------------------
Total assets $54,672 $56,702
================================================================================================
Liabilities and Shareholders' Equity:
Total liabilities $ 851 $ 139
Total shareholders' equity 53,821 56,563
- ------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $54,672 $56,702
================================================================================================
Condensed Schedules
of Income
December 31
----------------------------------------
(In Thousands) 2000 1999 1998
- ------------------------------------------------------------------------------------------------
Income:
Dividends received from subsidiaries:
Cass Information Systems, Inc. $ 4,969 $ 3,500 $ 1,728
Cass Commercial Bank 5,497 2,642 1,152
Management fees from subsidiaries 1,564 1,473 1,328
- ------------------------------------------------------------------------------------------------
Total income 12,030 7,615 4,208
- ------------------------------------------------------------------------------------------------
38
39
Expenses:
Salaries and employee benefits 1,277 1,252 1,092
Other expenses 436 352 359
- ------------------------------------------------------------------------------------------------
Total expenses 1,713 1,604 1,451
- ------------------------------------------------------------------------------------------------
Income before income tax and equity in
undistributed income of subsidiaries 10,317 6,011 2,757
Income tax benefit (49) (45) (41)
- ------------------------------------------------------------------------------------------------
10,366 6,056 2,798
Equity in undistributed income (loss)
of subsidiaries (3,219) 142 4,610
- ------------------------------------------------------------------------------------------------
Net income $ 7,147 $ 6,198 $ 7,408
================================================================================================
Condensed Schedules
of Cash Flows
December 31
----------------------------------------
(In Thousands) 2000 1999 1998
- ------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 7,147 $ 6,198 $ 7,408
Adjustments to reconcile net income to
net cash provided by operating activities:
Net income of subsidiaries exclusive
of management fees (8,811) (7,758) (8,818)
Dividends from subsidiaries 10,466 6,142 2,880
Management fees from subsidiaries 1,564 1,473 1,328
Amortization of stock bonus plan 81 68 50
Other, net 133 63 157
- ------------------------------------------------------------------------------------------------
Net cash provided by
operating activities 10,580 6,186 3,005
- ------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Cash dividends paid (2,784) (2,889) (2,782)
Purchase of common shares for treasury (7,828) (3,711) --
- ------------------------------------------------------------------------------------------------
Net cash used in financing activities (10,612) (6,600) (2,782)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (24) (414) 223
Cash and cash equivalents at beginning of year 280 694 471
- ------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 256 $ 280 $ 694
================================================================================================
39
40
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders Cass Information Systems, Inc.:
We have audited the accompanying consolidated balance sheets of Cass
Information Systems, Inc. and subsidiaries (the Company) as of December 31,
2000 and 1999, and the related consolidated statements of income, cash flows
and shareholders' equity and comprehensive income for each of the years in
the three-year period ended December 31, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cass
Information Systems, Inc. and subsidiaries as of December 31, 2000 and 1999,
and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
St. Louis, Missouri
January 23, 2001
40
41
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
NONE
PART III.
---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Information concerning directors and executive officers of the Registrant is
incorporated herein by reference from the Company's definitive Proxy
Statement for its 2001 Annual Meeting of Shareholders, a copy of which will
be filed with the Securities and Exchange Commission, no later than 120 days
after the close of the fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Information concerning executive compensation is incorporated herein by
reference from the Company's definitive Proxy Statement for its 2001 Annual
Meeting of Shareholders, a copy of which will be filed with the Securities
and Exchange Commission, not later than 120 days after the close of the
fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
-----------------------------------------------
AND MANAGEMENT
--------------
Information concerning security ownership of certain beneficial owners and
management is incorporated herein by reference from the Company's definitive
Proxy Statement for its 2001 Annual Meeting of Shareholders, a copy of which
will be filed with the Securities and Exchange Commission, not later than 120
days after the close of the fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Information concerning certain relationships and transactions is incorporated
herein by reference from the Company's definitive Proxy Statement for its
2001 Annual Meeting of Shareholders, a copy of which will be filed with the
Securities and Exchange Commission, not later than 120 days after the close
of the fiscal year.
41
42
PART IV.
--------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
--------------------------------------------
REPORTS ON FORM 8-K
-------------------
(a) The following documents are incorporated by reference in or
filed as an exhibit to this Report:
(1) and (2) Financial Statements and Financial Statement
--------------------------------------------
Schedules Submitted as a separate section of
---------
this report.
(3) Exhibits
--------
3.1 Restated Articles of Incorporation of Registrant,
incorporated by reference to Exhibit 4.1 to Form
S-8 Registration Statement No. 333-44499, filed
with the SEC on January 20, 1998
3.2 By Laws of Registrant, incorporated by reference
to Exhibit 4.2 to Form S-8 Registration
Statement No. 333-44499, filed with the SEC on
January 20, 1998
10.1 1995 Restricted Stock Bonus Plan, as amended to
January 19, 1999, including form of Restriction
Agreement, incorporated by reference to Exhibit
4.3 to Post-Effective Amendment No. 2 to Form S-8
Registration Statement No. 33-91456, filed with
the SEC on February 16, 1999
10.2 1995 Performance-Based Stock Option Plan, as
amended to January 19, 1999, including forms of
Option Agreements, incorporated by reference to
Exhibit 4.3 to Post-Effective Amendment No. 2 to
Form S-8 Registration Statement No. 33-91568,
filed with the SEC on February 16, 1999
21 Subsidiaries of registrant
23 Consent of KPMG LLP
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended December 31, 2000.
42
43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CASS INFORMATION SYSTEMS, INC.
Date: March 13, 2001 By /s/ Lawrence A. Collett
-------------------------------------
Lawrence A. Collett
Chairman and Chief Executive Officer
Date: March 13, 2001 By /s/ Eric H. Brunngraber
-------------------------------------
Eric H. Brunngraber
Vice President-Secretary
(Chief Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below on the dates indicated by the following persons
on behalf of the Company and in their capacity as a member of the Board of
Directors of the Company.
Date: March 13, 2001 By /s/ Bryan S. Chapell
-------------------------------------
Bryan S. Chapell
Date: March 13, 2001 By /s/ Lawrence A. Collett
-------------------------------------
Lawrence A. Collett
Date: March 13, 2001 By /s/ Thomas J. Fucoloro
-------------------------------------
Thomas J. Fucoloro
Date: March 13, 2001 By /s/ Harry J. Krieg
-------------------------------------
Harry J. Krieg
Date: March 13, 2001 By /s/ A.J. Signorelli
-------------------------------------
A.J. Signorelli
Date: March 13, 2001 By /s/ John J. Vallina
-------------------------------------
John J. Vallina
43