1
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 fiscal year ended December 31, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal period from to
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Commission file number 2-80070
CASS COMMERCIAL CORPORATION
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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.A. Employer
incorporation or organization) identification No.)
3636 South Geyer Road, Sunset Hills, Missouri 63127
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 821-1500
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
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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
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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. X
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As of March 15, 1997, 3,858,548 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
$59,424,552 based upon the NASDAQ Stock Market closing price of $21.50 for
March 15, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of registrant's Annual Report to Stockholders for the fiscal
year ended December 31, 1996 are incorporated by reference in Part I
and II hereof.
2. Registrant's Proxy Statement for the Annual Meeting of Stockholders to
be held on April 21, 1997 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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Cass Commercial Corporation
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Registrant, Cass Commercial Corporation (the "Company"), is a bank
holding corporation organized in 1982 under the laws of Missouri and approved
by the Board of Governors of the Federal Reserve system in February 1983 and
is governed by regulations of the Board of Governors of the Federal Reserve
system applying to bank holding companies. As of December 31, 1996, the
Company owned 100% of the outstanding shares of common stock of Cass Bank &
Trust Company ("Cass Bank") and Cass Information Systems, Inc. ("CIS"), a
nonbanking subsidiary, formerly named Cass Logistics, Inc. The business of
the Company is providing supervisory assistance to its subsidiaries in the
form of centralized accounting, human resources and internal auditing
services.
The Company and its subsidiaries had 558 full-time and 14 part-time
employees as of March 15, 1997.
Total net revenue, income before income tax, identifiable assets,
depreciation and amortization expense and capital expenditures attributable
to each business segment, for the three years ended December 31, 1996 are set
forth in Note Thirteen of the Notes to Consolidated Financial Statements on
page 22 of the Cass Commercial Corporation 1996 Annual Report, which note is
hereby incorporated by reference.
Recent Development
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Cass Commercial Corporation announced a two-for-one stock split in the
form of a 100% stock dividend payable March 15, 1997 to stockholders of
record as of March 5, 1997. All per share data in this report has been
adjusted to reflect such stock dividend.
Cass Bank & Trust Company
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Cass Bank was organized as a Missouri Trust Company with banking powers
in 1906. Its principal banking office is located at 3636 South Geyer Road,
Sunset Hills, Missouri.
Cass Bank provides banking services to the commercial, industrial and
residential areas it serves. However, its primary focus is small, privately
owned businesses. Services include commercial, real estate and personal
loans; checking, savings and time deposit accounts; lockbox operations and
other financial management services. Although Cass Bank has trust powers, it
does not operate a trust department. At December 31, 1996, Cass Bank had
total assets of $212,776,000, deposits of $187,340,000 and aggregate capital
accounts of $21,612,000 and for the year ended December 31, 1996, had net
income of $2,503,000.
Cass Bank encounters substantial competition in its banking business,
both from other banks in St. Louis, Missouri and from banks throughout the
St. Louis metropolitan area. Savings and loan associations, credit unions
and other financial institutions also provide competition. However, the
principal competition is represented by bank holding company affiliates, many
of which are larger and have greater resources than Cass Bank, and are able
to offer a wide range of banking and related services.
Cass Information Systems, Inc.
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CIS, formerly operated as a division of Cass Bank, conducts information
and payment operations. In 1956, Cass Bank began the operation of a freight
payment service to meet the needs of shippers and receivers of freight and
transportation companies in the St. Louis metropolitan area. This service
was well received and, in 1967, its marketing was expanded to cover the
entire United States. The range and scope of the services have been expanded
significantly over the years, and today many Fortune 500 companies in the
United States utilize the broad array of services provided by CIS.
In June 1994, CIS acquired substantially all the assets and assumed
substantially all the liabilities of the Freight Management Division of the
Bank of Boston, which increased CIS's freight payment dollar volume by
approximately 25%.
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The headquarters and operations of CIS are at 13001 Hollenberg Drive,
Bridgeton, Missouri where 41,000 square feet of space is utilized. Other
operating locations are in Columbus, Ohio; Chicago, Illinois and Boston,
Massachusetts.
CIS's competition comes from both within and outside the banking
industry. Many banks, which had provided freight payment services in the
past, have ceased providing such services or have sold those operations
during the last several years. CIS also competes with several nonbanking
companies throughout the United States. The Company believes CIS to be the
largest firm in the freight bill payment industry in terms of the total
dollars of freight bills paid; the total number of employees on staff; total
revenues and total assets employed. Nonbank competition consists of five
primary competitors and numerous small freight bill audit firms located in
cities throughout the United States. While offering freight payment
services, few of these audit firms compete on a national basis.
CIS 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 services provided by CIS
Ratemaker- The rate maintenance software product which is
provided to customers on a service basis as well
First Rate- The carrier selection software product which is also
available in a service environment
In addition, CIS either owns or has applied for nine other service
marks.
CIS continues to expand its Electronic Data Interchange ("EDI")
capabilities. CIS currently processes over 40% of its freight payment
transactions via EDI and anticipates a continuing increase in this method of
processing.
CIS 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 5%
of total revenue.
For the year 1996, CIS had net income of $4,130,000. Total assets at
December 31, 1996 were $237,963,000.
REGULATION AND SUPERVISION
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General
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The Company and Cass Bank are extensively regulated under federal and
state law. These laws and regulations are intended to protect depositors,
not stockholders. To the extent that the following information describes
statutory or regulatory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. Any change
in applicable laws or regulations may have a material effect on the business
and prospects of the Company. The operations of the Company may be affected
by legislative changes and by the policies of various regulatory authorities.
The Company is unable to predict the nature or the extent of the effects on
its business and earnings that fiscal or monetary policies, economic control
or new federal or state legislation may have in the future.
Federal Bank Holding Company Regulation
---------------------------------------
The Company is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "BHC Act"), and as such, it is
subject to regulation, supervision and examination by the Federal Reserve
Bank (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.
The BHC Act requires every bank holding company to obtain the prior
approval of the FRB before (1) acquiring, directly or indirectly, ownership
or control of any voting shares of another bank or bank holding company if,
after such acquisition, it would own or control more than 5% of such shares
(unless it
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already owns or controls the majority of such shares); (2) acquiring all or
substantially all of the assets of another bank or bank holding company; or
(3) merging or consolidating with another bank holding company. The FRB will
not approve any acquisition, merger or consolidation that would have a
substantially anticompetitive result, unless the anticompetitive effects of
the proposed transaction are clearly outweighed by a greater public interest
in meeting the convenience and needs of the community to be served. The FRB
also considers capital adequacy and other financial and managerial factors in
reviewing acquisitions or mergers.
With certain exceptions, the BHC Act also prohibits a bank holding
company from acquiring or retaining direct or indirect ownership or control
of more than 5% of the voting shares of any company which is not a bank or
bank holding company, or from engaging directly or indirectly in activities
other than those of banking, managing or controlling banks or providing
services for its subsidiaries. The principal exceptions to these
prohibitions involve certain non-bank activities which, by statute or by FRB
regulation or order, have been identified as activities closely related to
the business of banking or of managing or controlling banks. In making this
determination, the FRB considers whether the performance of such activities
by a bank holding company can be expected to produce benefits to the public
such as greater convenience, increased competition or gains in efficiency in
resources, which can be expected to outweigh the risks of possible adverse
effects such as decreased or unfair competition, conflicts of interest or
unsound banking practices.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on extensions of credit to
the bank holding company or its subsidiaries, on investments in their
securities and on the use of their securities as collateral for loans to any
borrower. These regulations and restrictions may limit the Company's ability
to obtain funds from Cass Bank for its cash needs, including funds for
payment of dividends, interest and operating expenses. Further, under the
BHC Act and certain regulations of the FRB, a bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property or
furnishing of services. For example, Cass Bank may not generally require a
customer to obtain other services from Cass Bank or the Company, and may not
require that customer to promise not to obtain other services from a
competitor, as a condition to an extension of credit to the customer.
State Bank Holding Company Regulation
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The Company, as a Missouri bank holding company, is also subject to
regulation by the Division of Finance of the State of Missouri (the "Division
of Finance"). Under the Missouri banking laws, prior approval of the
Division of Finance is required before a bank holding company may acquire
control of a Missouri chartered bank or a bank holding company incorporated
in Missouri. In addition, under the Missouri banking laws, it is unlawful
for any bank holding company to obtain control of any bank if the total
deposits in the bank together with the total deposits in all banks in
Missouri controlled by such bank holding company exceed 13% of the total
deposits held by all depository financial institutions in Missouri. In
computing deposits for purposes of this calculation, certificates of deposit
in the face amount of $100,000 or more, deposits from outside the United
States and deposits from banks not controlled by the bank holding company are
excluded. Depository financial institution is defined as any financial
institution which accepts deposits and which can insure such deposits through
an agency of the Federal government. As of December 31, 1996, the Company's
consolidated Missouri deposits represented less than 1% of the total deposits
held by all Missouri depository financial institutions.
Federal and State Bank Regulation
---------------------------------
Cass Bank is a Federally-insured Missouri bank and became a member of
the Federal Reserve System in November 1994. Cass Bank is subject to the
supervision and regulation of the Division of Finance, and to the supervision
and regulation of the FRB. These agencies may prohibit Cass Bank from
engaging in what they believe constitutes unsafe or unsound banking
practices.
The maximum legal rate of interest which Cass Bank may charge on a
particular loan depends on a variety of factors such as the type of borrower,
the purpose of the loan, the amount of the loan and the date the loan is
made. There are several state and federal statutes which set maximum legal
rates of interest for various kinds of loans.
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The Community Reinvestment Act requires that, in connection with
examinations of financial institutions within their jurisdiction, the FRB
shall evaluate the record of the financial institutions in meeting the credit
needs of their local communities, including low and moderate income
neighborhoods, consistent with the safe and sound operation of those banks.
These factors are also considered in evaluating mergers, acquisitions and
applications to open a branch or facility.
On September 23, 1994, the Riegle Community Development and Regulatory
Improvement Act of 1994 (the "CDB Act") was enacted. The CDB Act includes
more than 50 regulatory relief provisions designed to streamline the
regulatory process for banks and thrifts and to eliminate certain duplicative
regulations and paperwork requirements established after, and largely as a
result of, the savings and loan debacle. Well run community banks with less
than $250 million in assets will be examined every 18 months rather than
annually. The application process for forming a bank holding company has
been greatly reduced. Also, the requirement that call report data be
published in local newspapers has been eliminated. The CDB Act establishes
dual programs and provides funding in the amount of $382 million to provide
for development services, lending and investment in distressed urban and
rural areas by community development financial institutions and banks. In
addition, the CDB Act also includes provisions relating to flood insurance
reform, money laundering, regulation of high-cost mortgages, and small
business and commercial real estate securitization.
Cass Bank is also subject to certain restrictions imposed by the
Federal Reserve Act on extensions of credit to executive officers, directors,
principal shareholders or any related interest of such persons. Extensions
of credit (i) must be made on substantially the same terms, including
interest rates and collateral as, and follow credit underwriting procedures
that are not less stringent than, those prevailing at the time for comparable
transactions with persons not covered above and who are not employees, and
(ii) must not involve more than the normal risk of repayment or present other
unfavorable features. Cass Bank is also subject to certain lending limits
and restrictions on overdrafts to such persons. A violation of these
restrictions may result in the assessment of substantial civil monetary
penalties on Cass Bank or any officer, director, employee, agent or other
person participating in the conduct of the affairs of Cass Bank, the
imposition of a cease and desist order and other regulatory sanctions.
Under the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), each federal banking agency is required to prescribe, by
regulation, non-capital safety and soundness standards for institutions under
its authority. These standards are to cover internal controls, information
systems and internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth, compensation, fees and benefits, such
other operational and managerial standards as the agency determines to be
appropriate and standards for asset quality, earnings and stock valuation.
An institution which fails to meet these standards must develop a plan
acceptable to the agency, specifying the steps that the institution will take
to meet the standards. Failure to submit or implement such a plan may
subject the institution to regulatory sanctions. The Company believes that
Cass Bank meets all the standards of FDICIA. FDICIA also imposed new capital
standards on insured depository institutions, all of which are met by Cass
Bank.
Deposit Insurance and Assessments
---------------------------------
As a Federal Depository Insurance Corporation ("FDIC") member
institution, the deposits of Cass Bank are currently insured to a maximum of
$100,000 per depositor through the Bank Insurance Fund ("BIF"), administered
by the FDIC, and Cass Bank is required to pay semiannual deposit insurance
premium assessments to the FDIC.
The FDIC has adopted a risk-based assessment system. Under the
risk-based assessment system, BIF members pay varying assessment rates depending
upon the level of the institution's capital and the degree of supervisory
concern over the institution. The assessment rates are set by the FDIC
semiannually. The FDIC reduced the assessment rates for 1996 to a range of
zero (0) cents to 31 cents per $100 of insured deposits. The Bank qualified
for the $0 assessment rate for 1996, and was required to pay the statutory
minimum deposit premium of $2,000 for the year. The FDIC has authority to
increase the annual assessment rate if it determines that a higher assessment
rate is necessary to increase BIF's reserve ratio. There is no cap on the
annual assessment rate which the FDIC may impose.
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Under the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA"), a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by,
the FDIC in connection with (i) the default of a commonly controlled
FDIC-insured depository institution or (ii) any assistance provided by the
FDIC to a commonly controlled FDIC-insured depository institution in danger of
default (the "Cross Guarantee"). "Default" is defined generally as the
appointment of a conservator or receiver and "in danger of default" is
defined generally as the existence of certain conditions indicating either
that there is no reasonable prospect that the institution will be able to
meet the demands of its depositors or pay its obligations in the absence of
regulatory assistance, or that its capital has been depleted and there is no
reasonable prospect that it will be replenished in the absence of regulatory
assistance. The Cross Guarantee thus enables the FDIC to assess a holding
company's healthy BIF members for the losses of any of such holding company's
failed BIF members. Cross Guarantee liabilities are generally superior in
priority to obligations of the depository institution to its shareholders,
due solely to their status as shareholders, and obligations to other
affiliates. Under FIRREA, failure to meet applicable capital guidelines
could subject a banking institution to a variety of enforcement remedies
available to federal regulatory authorities, including the termination of
deposit insurance by the FDIC and a prohibition on the taking of "brokered
deposits."
Dividends
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The principal source of the Company's cash revenues is dividends
received from Cass Bank and CIS. The Missouri banking laws impose certain
limitations on the payment of dividends by Missouri state chartered banks
such as Cass Bank, as follows: (1) no dividends may be paid which would
impair capital; (2) until the surplus fund of a bank is equal to 40% of its
capital, no dividends may be declared unless there has been carried to the
surplus account no less than one-tenth of its net profits for the dividend
period; and (3) dividends are payable only out of a bank's undivided profits.
In addition, the appropriate regulatory authorities are authorized to
prohibit banks and bank holding companies from paying dividends which would
constitute an unsafe and unsound banking practice.
Capital Adequacy
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The federal 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
bank holding company or bank may be denied approval to acquire or establish
additional banks or non-bank businesses or to open facilities.
The FRB and FDIC have adopted risk-based capital guidelines for banks
and bank holding companies. The risk-based capital guidelines are designed
to make regulatory capital requirements more sensitive to differences in risk
profile among banks and bank holding companies, to account for off-balance
sheet exposure and to minimize disincentives for holding liquid assets.
Assets and off-balance sheet items are assigned to broad risk categories,
each with appropriate weights. The resulting capital ratios represent
capital as a percentage of total risk-weighted assets and off-balance sheet
items. The guidelines are minimums, and the FRB has noted that bank holding
companies contemplating significant expansion programs should not allow
expansion to diminish their capital ratios and should maintain ratios well in
excess of the minimum. The current guidelines require all bank holding
companies and federally-regulated banks to maintain a minimum risk-based
total capital ratio equal to 8%, of which at least 4% must be Tier 1 capital
(see description of Tier 1 capital and Tier 2 capital below). Bank holding
companies are required under such guidelines to deduct all intangibles except
purchased mortgage servicing rights from capital.
Tier 1 capital for bank holding companies includes common shareholders'
equity, qualifying perpetual preferred stock (up to 25% of total Tier 1
capital, if cumulative; under a FRB rule, redeemable perpetual preferred
stock may not be counted as Tier 1 capital unless the redemption is subject
to the prior approval of the FRB) and minority interests in equity accounts
of consolidated subsidiaries, less intangibles except as described above.
Tier 2 capital includes: (i) the allowance for loan losses up to 1.25% of
risk-weighted assets; (ii) any qualifying perpetual preferred stock which
exceeds the amount which may be included in Tier 1 capital; (iii) hybrid
capital instruments; (iv) perpetual debt; (v) mandatory convertible
securities and (vi) subordinated debt and intermediate term preferred stock
of up to 50% of Tier 1 capital. Total capital is the sum of Tier 1 and Tier
2 capital less reciprocal holdings of other banking organizations, capital
instruments and investments in unconsolidated subsidiaries.
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Banks' and bank holding companies' assets are given risk-weights of 0%,
20%, 50% or 100%, depending on the type of asset. In addition, certain
off-balance sheet items are given credit conversion factors to convert them
to asset equivalent amounts to which an appropriate risk-weight will apply.
These computations result in the total risk-weighted assets. Most loans are
assigned to the 100% risk-weight category, except for first mortgage loans
fully secured by residential property, which carry a 50% rating. Most
investment securities are assigned to the 20% category, except for municipal
or state revenue bonds, which have a 50% risk-weight, and direct obligations
of or obligations guaranteed by the United States Treasury or United States
Government agencies, which have a 0% risk-weight. In converting off-balance
sheet items, direct credit substitutes, including general guarantees and
standby letters of credit backing financial obligations, are given a 100%
conversion factor. Transaction related contingencies such as bid bonds,
other standby letters of credit and undrawn commitments, including commercial
credit lines with an initial maturity of more than one year, have a 50%
conversion factor. Short-term, self-liquidating trade contingencies are
converted at 20%, and short-term commitments have a 0% factor.
The FRB also has implemented a leverage ratio, which is Tier 1 capital
as a percentage of total average assets less intangibles, to be used as a
supplement to the risk-based guidelines. The principal objective of the
leverage ratio is to place a constraint on the maximum degree to which a bank
holding company may leverage its equity capital base. The FRB requires a
minimum leverage ratio of 3%. However, for all but the most highly rated
bank holding companies and for bank holding companies seeking to expand, the
FRB expects an additional cushion of at least 100 to 200 basis points.
As of December 31, 1996, the Company and the Bank's risk-based Tier 1
Capital and Total Capital ratios, and Leverage ratio, were as follows:
Company Cass
Consolidated Bank
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Tier 1 Capital to Risk-Weighted Assets 19.92% 13.46%
Total Capital to Risk-Weighted Assets 21.17% 14.71%
Leverage Ratio 10.05% 11.06%
FDICIA
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The Federal Deposit Insurance Corporation Improvement Act of 1992
("FDICIA") made extensive changes to the federal banking laws. FDICIA
instituted certain changes to the supervisory process, including provisions
that mandate certain regulatory agency actions against undercapitalized
institutions within specified time limits. FDICIA contains various other
provisions that may affect the operations of banks and savings institutions.
The prompt corrective action provision of FDICIA requires the federal
banking regulators to assign each insured institution to one of five capital
categories ("well capitalized", "adequately capitalized" or one of three
"undercapitalized" categories) and to take progressively more restrictive
actions based on the capital categorization, as specified below. Under
FDICIA, capital requirements would include a leverage limit, a risk-based
capital requirement and any other measure of capital deemed appropriate by
the federal banking regulators for measuring the capital adequacy of an
insured depository institution. All institutions, regardless of their
capital levels, are restricted from making any capital distribution or paying
any management fees that would cause the institution to fail to satisfy the
minimum levels for any relevant capital measure.
The FDIC and the Federal Reserve Board adopted capital-related
regulations under FDICIA. Under those regulations, a bank will be well
capitalized if it: (i) had a risk-based capital ratio of 10% or greater;
(ii) had a ratio of Tier I capital to risk-adjusted assets of 6% or greater;
(iii) had a ratio of Tier I capital to average assets of 5% or
greater; and (iv) was not subject to an order, written agreement, capital
directive, or prompt corrective action directive to meet and maintain a
specific capital for any capital measure. A bank will be adequately
capitalized if it was not "well capitalized" and; (i) had a risk-based
capital ratio of 8% or greater; (ii) had a ratio of Tier I capital to
risk-adjusted assets of 4% or greater; and (iii) had a ratio of Tier I
capital to average assets of 4% or greater (except that certain
associations rated "Composite 1" under the federal banking agencies' CAMEL
rating system may be adequately capitalized if their ratios of core capital
to average assets were 3% or greater). At December 31, 1996 Cass Bank is
categorized as "well capitalized".
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FDICIA makes extensive changes in existing rules regarding audits,
examinations and accounting. It generally requires annual on-site, full
scope examinations by each bank's primary federal regulator. It also imposes
new responsibilities on managment, the independent audit committee and
outside accountants to develop or approve reports regarding the effectiveness
of internal controls, legal compliance and off-balance-sheet liabilities and
assets.
Monetary Policy
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The earnings of a bank holding company are affected by the policies of
regulatory authorities, including the FRB, in connection with the FRB's
regulation of the money supply. Various methods employed by the FRB are open
market operations in United States Government securities, changes in the
discount rate on member bank borrowings and changes in reserve requirements
against member bank deposits. These methods are used in varying combinations
to influence overall growth and distribution of bank loans, investments and
deposits, and their use may also affect interest rates charged on loans or
paid on deposits. The monetary policies of the FRB have had a significant
effect on the operating results of commercial banks in the past and are
expected to continue to do so in the future.
Branching Act
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On September 29, 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Branching Act") was enacted. Under the
Branching Act, beginning September 29, 1995, adequately capitalized and
adequately managed bank holding companies are allowed to acquire banks
accross state lines, without regard to whether the transaction is prohibited
by state law; however, they are required to maintain the acquired
institutions as separately chartered institutions. Any state law relating to
the minimum age of target banks (not to exceed five years) has been
preserved. Under the Branching Act, the Federal Reserve Board is not
permitted to approve any acquisition if, after the acquisition, the bank
holding company would control more than 10% of the deposits of insured
depository institutions nationwide or 30% or more of the deposits in the
state where the target bank is located. The Federal Reserve Board could
approve an acquisition, notwithstanding the 30% limit, if the state waives
the limit either by statute, regulation or order of the appropriate state
official.
In addition, under the Branching Act beginning on June 1, 1997, banks
will be permitted to merge with one another across state lines and thereby
create a main bank with branches in separate states. After establishing
branches in a state through an interstate merger transaction, the bank could
establish and acquire additional branches at any location in the state where
any bank involved in the merger could have established or acquired branches
under applicable federal or state law.
The responsible federal agency will not be permitted to approve any
merger if, after the merger, the resulting entity would control more than 10%
of the deposits of insured depository institutions nationwide or 30% or more
of the deposits in any state affected by the merger. The responsible agency
could approve a merger, notwithstanding the 30% limit, if home state waives
the limit either by statute, regulation or order of the appropriate state
official.
Under the Branching Act, states may adopt legislation permitting
interstate mergers before June 1, 1997. In contrast, states may adopt
legislation before June 1, 1997, subject to certain conditions, opting-out of
interstate branching. If a state opts-out of interstate branching, no
out-of-state bank may establish a branch in that state through an acquisition
or de novo, and a bank whose home state opts-out may not participate in an
interstate merger.
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I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY: INTEREST
RATES AND INTEREST DIFFERENTIAL
The following table shows the condensed average balance sheets for each of
the periods reported, the 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.
For the year ended December 31
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1996 1995 1994
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Interest Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
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(Dollars expressed in thousands)
ASSETS<F1>
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Earning assets:
Loans<F2><F3>:
Taxable $190,634 $16,096 8.44% $157,638 $13,949 8.85% $140,828 $11,412 8.10%
Tax-exempt<F4> 1,462 147 10.05 1,299 141 10.85 1,868 191 10.22
Debt and equity securities<F5>:
Taxable 158,884 9,729 6.12 160,193 9,741 6.08 153,317 8,701 5.68
Tax-exempt<F4> 1,407 110 7.82 854 70 8.20 947 106 11.19
Federal funds sold and other
short-term investments 40,639 2,132 5.25 51,602 2,972 5.76 47,128 1,963 4.17
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Total earning assets 393,026 28,214 7.18 371,586 26,873 7.23 344,088 22,373 6.50
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Nonearning assets:
Cash and due from banks 17,945 15,645 14,639
Premises and equipment 8,091 7,731 7,428
Other assets 10,196 12,459 9,340
Allowance for loan losses (6,305) (6,504) (6,369)
-------- -------- --------
Total assets $422,953 $400,917 $369,126
======== ======== ========
(continued)
-8-
10
AVERAGE BALANCES, INTEREST AND RATES, Continued
For the year ended December 31
-----------------------------------------------------------------
1996 1995 1994
------------------------- ------------------------ ----------------------------
Interest Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- ------- ------ ------- ------- ------ ------- ------- ------
(Dollars expressed in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY<F1>
- ----------------------------------------
Interest-bearing liabilities:
Interest-bearing demand
deposits $ 24,895 $ 826 3.32% $ 20,791 $ 639 3.07% $ 23,856 $ 610 2.56%
Savings deposits 68,565 3,139 4.58 57,832 2,858 4.94 49,834 1,685 3.38
Time deposits of
$100,000 or more 4,512 242 5.36 4,715 267 5.66 3,352 127 3.79
Other time deposits 5,790 296 5.11 5,584 272 4.87 6,286 219 3.48
-------- ------- -------- ------- -------- -------
Total interest-
bearing deposits 103,762 4,503 4.34 88,922 4,036 4.54 83,328 2,641 3.17
Short-term borrowings 3,090 139 4.50 2,121 92 4.34 1,147 42 3.66
-------- ------- -------- ------- -------- -------
Total interest-bearing
liabilities 106,852 4,642 4.34 91,043 4,128 4.53 84,475 2,683 3.18
-------- ------- ===== -------- ------- ==== -------- ------- ====
Noninterest-bearing
liabilities:
Demand deposits 57,833 54,079 57,642
Accounts and drafts payable 206,269 207,424 183,113
Other liabilities 6,749 7,447 6,835
-------- -------- --------
Total liabilities 377,703 359,993 332,065
Stockholders' equity 45,250 40,924 37,061
-------- -------- --------
Total liabilities and
stockholders' equity $422,953 $400,917 $369,126
======== ======== ========
Net interest income $23,572 $22,745 $19,690
======= ======= =======
Net interest margin 6.00% 6.12% 5.72%
==== ==== ====
(continued)
-9-
11
AVERAGE BALANCES, INTEREST AND RATES, Continued
<FN>
NOTES:
<F1> Balances shown are daily averages.
<F2> 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 Note One to the
Company's 1996 Consolidated Financial Statements, incorporated by
reference herein.
<F3> Interest income on loans includes net loan fees of $8,000, $26,000 and
$67,000 for 1996, 1995 and 1994, respectively.
<F4> Income is presented on a tax-equivalent basis assuming a tax rate of 34%
for 1996, 1995 and 1994. The tax-equivalent adjustment was
approximately $88,000, $72,000 and $100,000 for 1996, 1995 and 1994,
respectively.
<F5> For purposes of these computations, yields on investment securities are
computed as interest income divided by the average amortized cost of
the investments.
-10-
12
INTEREST VOLUME AND RATE VARIANCE
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.
For the year ended December 31
----------------------------------
1996 Compared to 1995 1995 Compared to 1994
Increase (Decrease) Due Increase (Decrease) Due
to Change in: to Change in:
----------------------- -----------------------
Net Net
Volume Rate Change Volume Rate Change
------ ---- ------ ------ ---- ------
(Dollars expressed in thousands)
Interest earned on:
Loans <F1><F2>:
Taxable $2,810 $ (663) $2,147 $1,433 $1,104 $2,537
Tax-exempt <F3> 17 (11) 6 (61) 11 (50)
Debt and equity securities:
Taxable (80) 68 (12) 401 639 1,040
Tax-exempt <F3> 43 (3) 40 (10) (26) (36)
Federal funds sold and other
short-term investments (591) (249) (840) 201 808 1,009
------ ------ ------ ------ ------ ------
Total interest income 2,199 (858) 1,341 1,964 2,536 4,500
------ ------ ------ ------ ------ ------
Interest expense on:
Interest-bearing demand deposits 133 54 187 (85) 114 29
Savings deposits 502 (221) 281 304 869 1,173
Time deposits of $100,000 or more (11) (14) (25) 63 77 140
Other time deposits 10 14 24 (27) 80 53
Short-term borrowings 44 3 47 41 9 50
------ ------ ------ ------ ------ ------
Total interest expense 678 (164) 514 296 1,149 1,445
------ ------ ------ ------ ------ ------
Net interest income $1,521 $ (694) $ 827 $1,668 $1,387 $3,055
====== ====== ====== ====== ====== ======
<FN>
<F1> Average balances include nonaccrual loans.
<F2> Interest income includes net loan fees.
<F3> Information is presented on a tax-equivalent basis assuming a tax rate
of 34% for 1996, 1995 and 1994.
-11-
13
II. INVESTMENT PORTFOLIO
The carrying value of investments in debt and equity securities by category
of securities for each year, is as follows:
December 31
----------------------------
1996 1995 1994
---- ---- ----
(Dollars expressed in thousands)
U.S. Government Treasury securities $121,461 $102,992 $120,199
Obligations of U.S. Government
corporations and agencies 36,513 43,751 49,794
States and political
subdivisions 1,492 916 566
Stock of the Federal Reserve Bank 201 201 201
======== ======== ========
Total investments $159,667 $147,860 $170,760
At December 31, 1996, the maturity of investments in debt securities is as
follows:
After After
One Year Five Years
One Through Through After Weighted
Year or Five Ten Ten Average
Less Years Years Years Yield
---- ----- ----- ----- -----
(Dollars expressed in thousands)
U.S. Government Treasury
securities $24,094 $ 97,367 $ -- $ -- 6.26%
Obligations of U.S. Govern-
ment corporations and
agencies -- 19,414 2,408 14,691 5.92
States and political
subdivisions<F1> -- 448 533 511 5.13
------- -------- ------ -------
Total investments $24,094 $117,229 $2,941 $15,202 6.17%
======= ======== ====== ======= ====
Weighted average yield 6.33% 6.18% 6.19% 5.93%
======= ======== ====== =======
<FN>
<F1> Rates on obligations of states and political subdivisions have been
adjusted to pretax equivalent rates using the incremental statutory
federal income tax rate of 34%. While yields by range of maturity
are routinely provided by the Company's accounting system on a tax
equivalent basis, the individual amounts of adjustments are not so
provided. In total, at an assumed federal income tax rate of 34%,
the adjustment amounted to approximately $38,000.
There was no single issuer of securities in the investment portfolio at
December 31, 1996 other than the U.S. Government and U.S. Government
corporations and agencies, for which the aggregate amortized cost exceeded
ten percent of total stockholders' equity.
-12-
14
III. LOAN PORTFOLIO
The composition of the loan portfolio is as follows:
December 31
--------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Dollars expressed in thousands)
Commercial and industrial $ 94,962 $ 98,641 $ 91,500 $ 88,726 $110,276
Real estate:
Mortgage 85,360 58,746 48,997 51,225 50,352
Construction 9,164 11,057 4,253 6,478 10,426
Industrial revenue bonds 2,851 1,117 1,561 2,208 2,772
Installment, net 3,794 3,954 5,226 4,738 4,996
Other 1,644 678 929 552 913
-------- -------- -------- -------- --------
Total loans $197,775 $174,193 $152,466 $153,927 $179,735
======== ======== ======== ======== ========
Loans at December 31, 1996 mature as follows:
Over One Year Over
Through Five Years Five Years
------------------- ------------------
One Year Fixed Floating Fixed Floating
or Less Rate Rate Rate Rate Total
------- ---- ---- ---- ---- -----
(Dollars expressed in thousands)
Commercial and industrial $76,049 $16,580 $ 1,960 $373 $ -- $ 94,962
Real estate:
Mortgage 11,293 64,136 9,881 50 -- 85,360
Construction 8,131 1,033 -- -- -- 9,164
Industrial revenue bonds 678 2,173 -- -- -- 2,851
Installment, net 1,702 2,092 -- -- -- 3,794
Other 1,644 -- -- -- -- 1,644
------- ------- ------- ---- ------ --------
Total loans $99,497 $86,014 $11,841 $423 $ -- $197,775
======= ======= ======= ==== ====== ========
Loans have been classified as having "floating" interest rates if the rate
specified in the loan varies with the prime commercial rate of interest.
-13-
15
RISK ELEMENTS INCLUDED IN LENDING ACTIVITIES
The following are nonperforming assets:
December 31
----------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Dollars expressed in thousands)
Commercial, industrial and industrial
revenue bonds:
Nonaccrual $480 $151 $247 $ 810 $3,269
Contractually past due 90 days
or more -- 186 -- -- --
Renegotiated loans -- 278 213 975 472
Real estate-construction contractually
past due 90 days or more -- 15 -- -- --
Real estate-mortgage:
Nonaccrual -- -- -- 43 177
Contractually past due 90 days
or more 306 -- -- -- --
Installment:
Nonaccrual -- -- -- 104 369
Contractually past due 90 days
or more -- -- -- -- 44
---- ---- ---- ------ ------
Total nonperforming loans 786 630 460 1,932 4,331
Other real estate -- -- -- -- 608
---- ---- ---- ------ ------
Total nonperforming assets $786 $630 $460 $1,932 $4,939
==== ==== ==== ====== ======
(1) Nonaccrual Loans
----------------
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 $299,000 for the year ended December 31, 1996. Of
this amount, approximately $221,000 was actually recorded as
interest income on such loans.
(2) Potential Problem Loans
-----------------------
At December 31, 1996, 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, 1996, approximately $2,829,000 of loans not
included in the table above 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 problem loans, $2,440,000 are deemed to be
impaired as defined by Statement of Financial Accounting Standards
No. 114, Accounting by Creditors for Impairment of a Loan. While
these borrowers are currently meeting all of the terms of the
applicable loan agreements, 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.
(3) Foreign Loans
-------------
The Company does not have any foreign loans.
-14-
16
(4) Loan Concentrations
-------------------
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 Note Four to the Company's 1996 Consolidated
Financial Statements (included in the Company's 1996 Annual Report to
Stockholders incorporated herein by reference), the Company's primary
market niche is the small, privately held commercial company. Loans
to these 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 entity's building(s)/
plant(s) and are generally loaned with a maximum 80% loan to value ratio.
Loans secured exclusively by commercial real estate 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 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
commercial 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's loan portfolio does not include a significant amount of
single family real estate mortgage or installment credits, as the
Company has not concentrated on the consumer side of the business.
(5) Other Interest-Earning Assets
-----------------------------
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.
-15-
17
IV. SUMMARY OF LOAN LOSS EXPERIENCE
The following is a summary of loan loss experience:
For the year ended December 31
--------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Dollars expressed in thousands)
Allowance at beginning of year $ 6,358 $ 6,334 $ 6,446 $ 6,953 $ 3,387
Loans charged-off:
Commercial, industrial and IRB's 2,120 183 436 1,179 7,031
Real estate:
Mortgage -- -- -- -- --
Construction -- -- -- -- --
Installment 1 3 24 8 1
-------- -------- -------- -------- --------
Total 2,121 186 460 1,187 7,032
-------- -------- -------- -------- --------
Recoveries of loans previously charged-off:
Commercial, industrial and IRB's 152 708 348 559 341
Real estate:
Mortgage -- -- -- -- --
Construction -- -- -- -- --
Installment 7 2 -- -- --
-------- -------- -------- -------- --------
Total 159 710 348 559 341
-------- -------- -------- -------- --------
Net loans charged-off (recovered) 1,962 (524) 112 628 6,691
-------- -------- -------- -------- --------
Provision charged to expense<F1> -- (500) -- 121 10,257
-------- -------- -------- -------- --------
Allowance at end of year $ 4,396 $ 6,358 $ 6,334 $ 6,446 $ 6,953
======== ======== ======== ======== ========
Loans outstanding:
Average $192,096 $158,937 $142,696 $158,164 $203,166
December 31 197,775 174,193 152,466 153,927 179,735
Ratio of allowance for loan losses to
loans outstanding:
Average 2.29% 4.00% 4.44% 4.08% 3.42%
December 31 2.22% 3.65% 4.15% 4.19% 3.87%
Ratio of net charge-offs to average loans
outstanding 1.02% (.33)% .08% .40% 3.29%
======== ======== ======== ======== ========
Allocation of allowance for loan losses<F2>:
Commercial, industrial and IRB's $ 3,825 $ 5,582 $ 5,485 $ 5,956 $ 6,006
Real estate:
Mortgage 119 502 492 143 284
Construction 173 7 101 -- --
Installment 279 267 256 347 663
-------- -------- -------- -------- --------
Total $ 4,396 $ 6,358 $ 6,334 $ 6,446 $ 6,953
======== ======== ======== ======== ========
Percent of categories to total loans:
Commercial and industrial and IRB's 49.5% 57.3% 61.0% 59.1% 62.9%
Real estate:
Mortgage 43.2 33.7 32.2 33.3 28.0
Construction 4.6 6.3 2.8 4.2 5.8
Installment 1.9 2.3 3.4 3.1 2.8
Other .8 .4 .6 .3 .5
-------- -------- -------- -------- --------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ======== ========
See notes <F1> and <F2> on the following page.
-16-
18
IV. SUMMARY OF LOAN LOSS EXPERIENCE, Continued
<FN>
<F1> 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 possible loss
exposure based upon existing circumstances known to management; an
analysis of the loan portfolio with regard to potential future loss
exposure on loans to specific customers and/or industries; current
economic conditions and an overall review of the remainder of the
portfolio in light of past loan loss experience.
<F2> The Company allocated its allowance for loan losses to the
various loan categories at December 31, 1996 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 which 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 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.
-17-
19
V. DEPOSITS
Certificates of deposit and other time deposits of $100,000 and more at
December 31, 1996 mature as follows:
Amount
------
(Dollars expressed
in thousands)
Three months or less $1,421
Three to six months 506
Six to twelve months 1,638
Over twelve months 229
------
Total $3,794
======
The composition of average deposits and the average rates paid on those
deposits is represented in Table I included earlier in this discussion. The
Company does not have any significant deposits from foreign depositors.
VI. RETURN ON EQUITY AND ASSETS
The percent of net income to average assets and average stockholders' equity
and other data is presented below.
For the year ended December 31
------------------------------
1996 1995 1994
---- ---- ----
Return on average total assets 1.54% 1.55% 1.51%
Return on average total stockholders' equity 14.41 15.18 15.06
Ratio of average total stockholders' equity
to average total assets 10.70 10.21 10.04
Ratio of total dividends declared
to net income 35.22 33.18 34.65
-18-
20
ITEM 2. PROPERTIES
----------
Cass Commercial Corporation
- ---------------------------
The Company is currently headquartered at 3636 South Geyer, Sunset
Hills, Missouri where it shares space leased by Cass Bank. The Company will
move its headquarters in April, 1997 to a new facility being added on to the
CIS headquarters located in Bridgeton, Missouri.
Cass Bank & Trust Company
- -------------------------
Cass Bank currently leases its main banking offices at Geyer & Watson
Roads, Sunset Hills, Missouri consisting of approximately 25,000 square feet,
under an operating lease which expires in 2000. This lease will be taken
over by an unaffiliated major corporation in April, 1997. Cass Bank's
obligation under the lease will be terminated at that time. Cass Bank will
move its headquarters in April, 1997 to a new facility being constructed on
land owned by CIS in Bridgeton, Missouri. The new premises will consist of
approximately 20,500 square feet.
Cass Bank also leases approximately 1,500 square feet of office space
on the first floor of the 1015 Locust Building, St. Louis, Missouri. Cass
Bank owns its facility at 1420 Thirteenth Street, St. Louis, which consists
of approximately 1,600 square feet with adjoining drive-up facilities. Cass
Bank has an additional facility in Maryland Heights, Missouri consisting of
approximately 2,500 square feet of leased space with adjoining drive-up
facilities. Cass Bank will open a new facility in April, 1997 in Fenton,
Missouri under an operating lease expiring in 2002 with two five-year renewal
options. Cass Bank will open a new facility in May, 1997 in Chesterfield,
Missouri under an operating lease expiring in 2007.
Cass Information Systems, Inc.
- ------------------------------
CIS moved its headquarters and operations to 13001 Hollenberg Drive,
Bridgeton, Missouri in April 1993. This property is owned by CIS, and
includes a building with approximately 41,000 square feet of office space.
CIS also operates at an additional production facility located in
Columbus, Ohio where approximately 20,000 square feet are leased through the
year 2000. The space is located at 2545 Farmers Drive, Columbus, Ohio. CIS
also leases approximately 25,800 square feet of space for its Boston facility
located at 900 Chelmsford Street in Lowell, Massachusetts. This lease
expires October 31, 2005. CIS also leases approximately 15,000 square feet
for its rating and software division in Chicago, Illinois. This lease
expires in 1998.
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company and its subsidiaries are not involved in any pending
proceedings other than ordinary routine litigation incidental to their
business. 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 1996.
-19-
21
PART II.
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------------------
As of March 15, 1997, there were 314 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. The high and low sales prices of the Company's
common stock for the third and fourth quarters of 1996 were as follows:
1996
----
High Low
---- ---
3rd Quarter $18 7/8 $18
4th Quarter 19 3/4 18 3/4
Prior to July 1, 1996, shares of the Company's common stock were not
listed or publicly traded on any securities exchange, or actively traded in
the over-the-counter market. However, there were occasional sales of the
Company's stock. High and low bid prices as reported by the National
Association of Securities Dealers' automated system for reporting non-NASDAQ
quotes for each quarterly period during 1995 and the first two quarters of
1996 were as listed below. However, there may have been transactions at
higher or lower prices of which the Company is not aware.
1996 1995
---- ----
High Low High Low
---- --- ---- ---
1st Quarter $16 1/2 $13 3/4 $10 7/8 $ 9 3/4
2nd Quarter 17 1/2 12 1/2 11 3/16 10 1/2
3rd Quarter -- -- 12 1/2 10 5/8
4th Quarter -- -- 13 3/4 10 5/8
Dividends paid by the Company during the two most recent fiscal years
were as follows:
Dividends Per Share
-------------------
1996 1995
---- ----
March 15 $.115 $.105
June 15 .115 .105
September 15 .115 .105
December 15 .250 .220
-20-
22
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
------------------------------------
The following table sets forth certain selected consolidated financial
information of the Company.
For the year ended December 31
-------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Dollars expressed in thousands)
Interest income:
Loans <F1> $16,193 $14,042 $11,538 $12,315 $15,939
Investments in debt securities 9,801 9,787 8,772 6,896 4,802
Other 2,132 2,972 1,963 1,462 1,533
------- ------- ------- ------- -------
Total interest
income 28,126 26,801 22,273 20,673 22,274
------- ------- ------- ------- -------
Interest expense:
Deposits 4,503 4,036 2,641 2,392 3,596
Short-term borrowings 139 92 42 48 78
------- ------- ------- ------- -------
Total interest
expense 4,642 4,128 2,683 2,440 3,674
------- ------- ------- ------- -------
Net interest
income 23,484 22,673 19,590 18,233 18,600
Provision for loan losses -- (500) -- 121 10,257
------- ------- ------- ------- -------
Net interest income
after provision
for loan losses 23,484 23,173 19,590 18,112 8,343
Noninterest income 22,091 23,794 21,826 16,892 14,761
Noninterest expense 35,964 37,693 33,325 29,240 27,764
------- ------- ------- ------- -------
Income (loss) before income
tax expense (benefit) 9,611 9,274 8,091 5,764 (4,660)
Income tax expense (benefit) 3,092 3,060 2,509 1,554 (1,943)
------- ------- ------- ------- -------
Income (loss) before
cumulative effect of change
in accounting principle 6,519 6,214 5,582 4,210 (2,717)
Cumulative effect of change
in accounting principle -- -- -- 74 --
------- ------- ------- ------- -------
Net income (loss) $ 6,519 $ 6,214 $ 5,582 $ 4,284 $(2,717)
======= ======= ======= ======= =======
(Continued)
<FN>
<F1> Interest income on loans includes net loan fees.
-21-
23
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA, Continued
-----------------------------------------------
For the year ended December 31
-------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Dollars expressed in thousands,
except per share data)
Per share of common stock:
Income (loss) <F2> $ 1.670 $ 1.615 $ 1.460 $ 1.120 $ (.710)
Dividends .595 .535 .505 .475 .390
Average balances:
Total assets 422,953 400,917 369,126 342,039 338,547
Net loans 185,791 152,433 136,327 151,313 195,401
Investments in debt and
equity securities 160,291 161,047 154,264 110,127 66,528
Total deposits 161,595 143,001 140,970 144,819 158,775
Total stockholders'
equity 45,250 40,924 37,061 34,714 34,358
======== ======== ======== ======== ========
Selected ratios:
Return on average
total assets 1.54% 1.55% 1.51% 1.25% (.80)%
Return on average
total stockholders' equity 14.41 15.18 15.06 12.34 (7.91)
Total stockholders' equity
to total assets at year-end 10.90 10.12 9.52 9.73 9.23
Allowance for loan losses
to loans at year-end 2.22 3.65 4.15 4.19 3.87
Nonperforming assets
to loans and other
real estate at year-end .40 .36 .30 1.26 2.74
Net loan charge-offs to
average loans 1.02 (.33) .08 .40 3.29
<FN>
<F2> 1993 income per share includes $.02 per share relating to the
cumulative effect of a change in accounting principle.
-22-
24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
HIGHLIGHTS
- ----------
Net income for the year ended December 31, 1996 was $6,519,000 or
$1.670 per share. These results compare to net income of $6,214,000 or
$1.615 per share for 1995, and $5,582,000 or $1.460 per share for 1994. At
December 31, 1996 total assets were $438,322,000 compared to $428,058,000 at
December 31, 1995; loans were $197,775,000 compared to $174,193,000 and
deposits were $177,505,000 compared to $161,726,000. The following
paragraphs more fully discuss these highlights and other significant changes
and trends as they relate to the Company's financial condition, results of
operations, capital resources and liquidity during the three-year period
ended December 31, 1996. This discussion should be read in conjunction with
the Company's Consolidated Financial Statements and Notes which are hereby
incorporated by reference from the Company's 1996 Annual Report to
Stockholders.
RESULTS OF OPERATIONS
- ---------------------
Net Income
- ----------
Net income of $6,519,000 in 1996 increased from net income of
$6,214,000 in 1995 and $5,582,000 in 1994. Net income of $1.670 per share in
1996 increased from net income of $1.615 per share for 1995 and $1.460 per
share in 1994. The Company's return on average assets was 1.54% in 1996
compared to 1.55% in 1995 and 1.51% in 1994. Return on average equity was
14.41% in 1996 compared to 15.18% in 1995 and 15.06% in 1994.
The main factor contributing to the increase in net income in 1996 over
1995 was the increase in average earning assets net of interest-bearing
liabilities from $280,543,000 in 1995 to $286,174,000 in 1996. The main
factors contributing to the increase in net income in 1995 over 1994 were the
increase in net average earning assets from $259,613,000 in 1994 to
$280,543,000 in 1995; an improvement in the net interest margin from 5.72% in
1994 to 6.12% in 1995 and a negative provision for loan losses of $500,000 in
1995. See Table I beginning on page 8.
Net Interest Income
- -------------------
The Company's tax-equivalent net interest margin on earning assets
decreased in 1996 to 6.00% from 6.12% in 1995 and was 5.72% in 1994. The
prime rate increased from 6.00% at the beginning of 1994 to 8.75% by the end
of 1994 before climbing to a high of 9.00% in February, 1995, and declined to
8.25% by February 1, 1996 where it remained throughout 1996. The average
yield on earning assets decreased to 7.18% in 1996 from 7.23% in 1995 and was
6.50% in 1994 (See Table I on pages 8 and 9). 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 CIS in the form of accounts and drafts payable (See interest
sensitivity gap measurement under the section entitled "Asset/Liability
Management Program"), as well as a significant portion of the Company's loan
portfolio bearing a floating rate of interest.
The increase of $5,631,000 in average net earning assets was the
primary contributor to the increase in net tax-equivalent interest income of
$827,000 in 1996 over 1995. The increase of nearly $21,000,000 in average
net earning assets coupled with an increase in the net interest margin
resulted in the increase in net tax-equivalent interest income of $3,055,000
in 1995 over 1994. The mix of earning assets changed somewhat in 1996 with
an increase of over $33,000,000 in the average balance of loans and a
decrease of approximately $750,000 in investment securities. The increase in
average total earning assets of over $21,400,000 from $371,586,000 in 1995 to
$393,026,000 in 1996 was funded mainly by an increase of over $15,800,000 in
average interest-bearing liabilities. The interest volume and rate variance
analysis presented on page 11 provides a detailed explanation of the changes
in net interest income for 1996 compared to 1995 and 1995 compared to 1994,
respectively.
-23-
25
Provision for Loan Losses
- -------------------------
There was no provision for loan loss in 1996. The Company recorded a
negative provision for loan loss of $500,000 in 1995. There was no provision
for loan loss in 1994. Loan charge-offs, net of recoveries, experienced by
the Company were $1,962,000 in 1996, $(524,000) in 1995 and $112,000 in 1994.
Loan charge-offs in 1996 included $2,000,000 in loans to two borrowers, one
in the printing industry and one in the wholesale supply business, which
discontinued operations abruptly in late 1996. Net recoveries of $524,000
recorded in 1995 included $500,000 recovered on one loan which was charged
off in 1992. Based on the existing level of the allowance for loan losses
and the level of nonperforming loans, the Company deemed it appropriate to
make no provision for loan loss in 1996.
The allowance for loan losses was $4,396,000 at December 31, 1996,
compared to $6,358,000 at December 31, 1995 and $6,334,000 at December 31,
1994. The year-end 1996 allowance represents 2.22% of net outstanding loans.
At December 31, 1996, the level of nonperforming assets has increased
slightly from $630,000 at December 31, 1995 to $786,000. The total past due
over 90 days and nonaccrual loans of $786,000 at December 31, 1996 represents
.40% of outstanding loans which is well below industry standards.
Noninterest Income
- ------------------
Noninterest income is derived mainly from service fees generated by
CIS's Payment Systems and Software Systems Groups.
Total noninterest income decreased $1,703,000 (7.2%) in 1996 from 1995.
CIS's Payment Systems Group experienced a decrease in processing revenue of
$1,188,000 (6.3%) in 1996 from 1995. CIS acquired the Freight Management
Division of The First National Bank of Boston effective June 1, 1994. The
accounts of this division were converted to CIS's processing systems in two
phases. The first phase of conversion was completed in May, 1995 and the
second phase was completed in December, 1995. These conversions resulted in
a number of lost accounts which were generally expected and generally
represented accounts which were previously processed on an unprofitable
basis. The Boston operation accounted for a decrease in processing revenues
of $1,350,000 in 1996 compared to 1995. Once again, the Payment Systems
Group had a record processing year in paying over 20 million freight invoices
with a value of over $6.1 billion. CIS has continued to show strong earnings
in this line of business as more companies, particularly large Fortune 500
companies, seek to outsource this process. The volume of accepted new
business proposals remains strong and should result in increasing revenues in
CIS's Payment Systems Group as new accounts are placed in service throughout
1997.
CIS's Software Systems Group experienced a decrease in revenue of
$429,000 (11.5%) in 1996 compared to 1995. This decrease resulted primarily
from a decline in software sales. The client server version of the rating
system software was not brought to market until later than anticipated in
1996 which dampened sales revenue.
Total noninterest income increased $1,968,000 (9.0%) in 1995 over 1994.
CIS's Payment Systems Group experienced an increase in processing revenue of
$1,826,000 (10.7%) in 1995 over 1994 which resulted from a combination of new
business added and fee revenue generated by the Boston operation which was
acquired June 1, 1994.
Noninterest Expense
- -------------------
Noninterest expense decreased $1,729,000 (4.6%) in 1996 from 1995.
This decrease resulted primarily from decreased operating expenses at CIS's
operation in Boston upon completion of account conversions as described
above. Total noninterest operating expense excluding intercompany charges of
the Boston facility decreased $2,019,000 in 1996 compared to 1995.
-24-
26
Salaries and benefits expense decreased $814,000 (3.3%) in 1996
compared to 1995. CIS's Boston operation accounted for a decrease of
$979,000 resulting from staff attrition and adjustments as account
conversions were completed throughout 1995. The Company experienced an
increase of $165,000 (.8%) in the remainder of its operations in 1996.
Equipment expense decreased $101,000 (3.7%) in 1996 compared to 1995.
CIS's Boston operation accounted for this decrease entirely.
Other noninterest expense decreased $807,000 (9.9%) in 1996 compared to
1995. CIS's Boston operation accounted for a decrease of $832,000 which
included a write-off of approximately $300,000 of systems and equipment in
1995 resulting from the completion of systems conversions.
Noninterest expense increased $4,368,000 (13.1%) in 1995 over 1994.
This increase resulted primarily from CIS's addition of its Boston facility.
Noninterest expense of the Boston facility for 1994 included only 7 months of
expense compared to 12 months in 1995.
Salaries and benefits expense increased $2,944,000 (13.5%) in 1995 over
1994. This increase is largely attributable to the Boston operation. Cass
Bank's salary and benefit expense remained relatively stable increasing less
than 3% over 1994.
Occupancy expense increased $196,000 (10.2%) in 1995 over 1994. This
increase was also due to CIS's Boston facility which had occupancy expense of
$392,000 in 1995 compared to $241,000 in 1994.
Equipment expense increased $151,000 (5.9%) in 1995 over 1994. The
Boston operation's equipment expense increased $199,000 (64.6%) in 1995.
Once again this increase is due primarily to 1994 expense including only 7
months of expense and 1995 including 12 months of expense.
Other noninterest expense increased $1,077,000 (15.2%) in 1995 over
1994. CIS's Boston operation accounted for an increase of approximately
$700,000 which included a write-off of approximately $300,000 of systems and
equipment resulting from systems conversions. CIS's operations, other than
Boston, accounted for an increase of approximately $600,000 which was
consistent with the increase in processing volume. Cass Bank's other
noninterest expenses decreased approximately $220,000 from 1994 which
resulted primarily from reduced FDIC assessment rates.
-25-
27
Balance Sheet Analysis
- ----------------------
Federal funds sold and other short-term investments decreased from
$81,813,000 at December 31, 1995 to $56,900,000 at December 31, 1996. The
average balance of these accounts decreased $10,963,000 (21.2%) from
$51,602,000 in 1995 to $40,639,000 in 1996. The decrease in the average
balance of these accounts resulted from a deployment of funds to increased
loan balances. See Table I, page 8 for a presentation of average balances.
Total loans increased $23,582,000 (13.5%) from $174,193,000 at December
31, 1995 to $197,775,000 at December 31,1996. The average balances of loans
increased $33,159,000 (20.9%) in 1996 over 1995. Loan demand and new
business volume increased throughout 1996 and should continue into 1997.
Investments in debt and equity securities increased $11,807,000 (8.0%)
from $147,860,000 at December 31, 1995 to $159,667,000 at December 31, 1996.
The average balance of investments in securities decreased $756,000 (.5%)
from $161,047,000 in 1995 to $160,291,000 in 1996.
Total earning assets increased $10,476,000 (2.6%) from $403,866,000 at
December 31, 1995 to $414,342,000 at December 31, 1996. The average balance
of earning assets increased $21,440,000 (5.8%) from $371,586,000 in 1995 to
$393,026,000 in 1996. This increase was largely funded by an increase of
$15,809,000 in the average balance of interest-bearing liabilities.
Noninterest-bearing demand deposits decreased $1,862,000 (2.9%) from
$64,106,000 at December 31, 1995 to $62,244,000 at December 31, 1996. The
average balance of these accounts increased $3,754,000 (6.9%) from
$54,079,000 in 1995 to $57,833,000 in 1996.
Interest-bearing deposits increased from $97,620,000 at December 31,
1995 to $115,261,000 at December 31, 1996. The average balances of these
deposits increased $14,840,000 (16.7%) from $88,922,000 in 1995 to
$103,762,000 in 1996. The most significant increase in these deposits
occurred in interest-bearing commercial savings accounts.
Accounts and drafts payable generated by CIS in its freight payment
operations decreased $6,686,000 (3.2%) from $211,376,000 at December 31, 1995
to $204,690,000 at December 31, 1996. The average balances of these funds
decreased $1,155,000 (.6%) from $207,424,000 in 1995 to $206,269,000 in 1996.
This decrease has resulted from a change in the mix of accounts with a
greater number of accounts being priced with a higher component of fee
revenue relative to revenue generated from balances in accounts and drafts
payable.
INFLATION
- ---------
Inflation can impact the financial position and results of the
operations of banks because banks 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, as is typical
of financial institutions, 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 bank.
A substantial part of the funds of the Company supporting loans and
investments do not require the payment of interest. Therefore, when market
interest rates decline, the decrease in interest income significantly exceeds
the reduction in interest expense. When interest rates increase, the reverse
effect will be experienced.
It is the policy of the Company to limit fixed rate loans to a maximum
term of five years to limit its exposure to interest rate risk.
-26-
28
LIQUIDITY
- ---------
At December 31, 1996 approximately 49% of the Company's loan portfolio
was composed of commercial and industrial loans, of which approximately 78%
represented loans maturing within one year. As of the same date, real estate
loans represented approximately 48% of the total and of these, approximately
21% represented balances maturing within one year. Approximately 3% of the
loan portfolio is represented by installment loans.
The liquidity of the Company is further exemplified by cash and due
from banks of $10,256,000 and federal funds sold and other short-term
investments of $56,900,000 at December 31, 1996.
Total investments in debt and equity securities represented
approximately 36% of total assets at year-end. Average total securities as a
percent of average total assets has decreased slightly in 1996 compared to
1995. This occurred as a result of an increase in loan demand. Of the U.S.
Government securities in the Company's investment portfolio, which
represented approximately 76% of the total, approximately 20% have maturities
of less than one year. Obligations of U.S. Government corporations and
agencies comprise approximately 23% of the portfolio. Obligations of states
and political subdivisions and other security investments made up
approximately 1% of the investment portfolio at December 31, 1996. Of the
total portfolio, approximately 89% of the securities had maturities of five
years or less.
The deposits of the Company's banking subsidiary have also been stable,
consisting of a sizable volume of core deposits. Historically, the Company
has been a net provider of federal funds. Net federal funds sold averaged
$10,166,000 in 1996 and $8,252,000 in 1995. Additionally, the Company
averaged $30,473,000 in other short-term investments in 1996 and $43,350,000
in 1995. These investments were in money market funds backed by U.S.
Government and agency issues.
Cass Bank has unsecured lines at correspondent banks to purchase
federal funds up to a maximum of $14,200,000. Additionally, Cass Bank and
CIS have separate lines of credit at an unaffiliated financial institution in
the maximum amounts of $20,000,000 and $30,000,000, respectively.
-27-
29
Asset/Liability Management Program
- ----------------------------------
The primary goal of the Company's asset/liability management program is
to maintain an appropriate balance between rate-sensitive assets and
liabilities. The Company's Investment Committee monitors the sensitivity of
its subsidiaries' assets and liabilities with respect to changes in interest
rates and repricing opportunities, and directs the overall acquisition and
allocation of funds.
The following table presents the Company's rate sensitive position at
December 31, 1996 for the various time frames indicated.
Over Over
Three Six Over One
Three Through Through Through Over
Variable Months Six Twelve Five Five
Rate or Less Months Months Years Years Total
---- ------- ------ ------ ----- ----- -----
(Dollars expressed in thousands)
Earning assets:
Loans:
Taxable $ 91,119 $ 5,699 $ 2,633 $ 11,209 $ 83,841 $ 423 $ 194,924
Tax-exempt -- 233 248 197 2,173 -- 2,851
Debt and equity securities:
Taxable -- 5,999 6,018 12,077 116,781 17,099 157,974
Tax-exempt -- -- -- -- 448 1,044 1,492
Other 201 -- -- -- -- -- 201
Federal funds sold and
other short term investments 56,900 -- -- -- -- -- 56,900
--------- -------- -------- -------- --------- --------- ---------
Total earning
assets 148,220 11,931 8,899 23,483 203,243 18,566 414,342
========= ======== ======== ======== ========= ========= =========
Interest-sensitive
liabilities:
Money market deposit
accounts 21,463 -- -- -- -- -- 21,463
Interest-bearing
demand accounts 11,816 -- -- -- -- -- 11,816
Savings deposits 72,589 -- -- -- -- -- 72,589
Time deposits:
$100,000 and more -- 1,421 506 1,638 229 -- 3,794
Less than $100,000 -- 1,604 1,296 1,438 1,261 -- 5,599
Short-term borrowings 2,476 -- -- -- -- -- 2,476
--------- -------- -------- -------- --------- --------- ---------
Total interest-bearing
liabilities $ 108,344 $ 3,025 $ 1,802 $ 3,076 $ 1,490 $ -- $ 117,737
========= ======== ======== ======== ========= ========= =========
Interest sensitivity gap:
Periodic $ 39,876 $ 8,906 $ 7,097 $ 20,407 $ 201,753 $ 18,566 $ 296,605
Cumulative 39,876 48,782 55,879 76,286 278,039 296,605 296,605
Ratio of interest-bearing
assets to interest-bearing
liabilities:
Periodic 1.37x 3.94x 4.94x 7.63x 136.40x -- 3.52x
Cumulative 1.37x 1.44x 1.49x 1.66x 3.36x 3.52x 3.52x
As can be seen from the above table, the Company's asset/liability mix is
substantially different than most bank holding companies, with positive
"gaps" shown for every time horizon. This phenomenon demonstrates the
dramatic effect CIS, with its growing business and increasing levels of
accounts and drafts payable has on the net interest income of the Company. As
such, the Company is susceptible to changes in interest rates, with a
decreasing net interest margin experienced in periods of declining interest
rates, and correspondingly, an increase in the net interest margin in periods
of rising interest rates. While this situation is largely out of the control
of Company management, it is important to note that the overall net interest
margin of 6.00% for 1996 is still substantially higher than the average
margin experienced by most bank holding companies, due to the higher
percentage of interest earning assets to interest bearing liabilities
maintained by the Company than its bank holding company competitors.
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30
CAPITAL RESOURCES
- -----------------
Stockholders' equity was $47,781,000 at December 31, 1996, an increase
of $4,468,000 (10.3%) from the amount at the end of 1995. This increase
resulted from net income of $6,519,000, the payment of $2,296,000 in
dividends, the recognition of a net unrealized holding gain on debt and
equity securities available-for-sale of $135,000 and the amortization of
stock bonus plan awards of $110,000.
Total dividends paid to shareholders increased to $.595 per share in
1996 from $.535 per share in 1995.
Subsidiary dividends are the principal source of funds for payment of
dividends by the Company to its stockholders. The Missouri banking laws
impose certain limitations on the payment of dividends by Missouri state
chartered banks such as Cass Bank, as follows: (1) no dividends may be paid
which would impair capital; (2) until the surplus fund of a bank is equal to
40% of its capital, no dividends may be declared unless there has been
carried to the surplus account no less than one-tenth of its net profits for
the dividend period; and (3) dividends are payable only out of a bank's
undivided profits. In addition, the appropriate regulatory authorities are
authorized to prohibit banks and bank holding companies from paying dividends
which would constitute an unsafe and unsound banking practice.
The Company and its banking subsidiary continue to exceed all
regulatory capital requirements, as evidenced by the following capital ratios
at December 31, 1996:
Company Cass
Consolidated Bank
------------ ----
Leverage Ratio 10.05% 11.06%
Tangible Capital Ratio 11.78 11.11
Primary Capital 11.89 12.06
Risk Based Capital:
Tier I 19.92 13.46
Tier II 21.17 14.71
EFFECT OF PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
- -----------------------------------------------
During June 1996, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities (SFAS 125). SFAS 125 provides accounting and reporting standards
for transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial components
approach that focuses on control. It distinguishes transfers of financial
assets that are sales from transfers that are secured borrowings. Under the
financial components approach, after a transfer of financial assets, an
entity recognizes all financial and servicing assets it controls and
liabilities it has incurred and derecognizes financial assets it no longer
controls and liabilities that have been extinguished. The financial
components approach focuses on the assets and liabilities that exist after
the transfer. Many of these assets and liabilities are components of
financial assets that existed prior to the transfer. If a transfer does not
meet the criteria for a sale, the transfer is accounted as a secured
borrowing with pledge of collateral.
SFAS 125 extends the "available-for-sale" or "trading" approach in
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities (SFAS 115) to nonsecurity financial
assets that can contractually be prepaid or otherwise settled in such a way
that the holder of the asset would not recover substantially all of its
recorded investment. Thus, nonsecurity financial assets (no matter how
acquired) such as loans, other receivables, interest-only strips or residual
interests in securitization trusts that are subject to prepayment risk that
could prevent recovery of substantially all of the recorded amount are to be
reported at fair value with the change in fair value accounted for depending
on the asset's classification as "available-for-sale" or "trading". SFAS 125
also amends SFAS 115 to prevent a security from being classified as held-to-
maturity if the security can be prepaid or otherwise settled in such a way
that the holder of the security would not recover substantially all of its
recorded investment.
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31
SFAS 125 is effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996, and is
to be applied prospectively. Earlier or retroactive application is not
permitted. Also, the extension of the SFAS 115 approach to certain
nonsecurity financial assets and the amendment to SFAS 115 is effective for
financial assets held on or acquired after January 1, 1997.
Reclassifications that are necessary because of the amendment do not call
into question an entity's intent to hold other debt securities to maturity in
the future. The adoption of SFAS 125 is not expected to have a material
impact on the Company's financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The consolidated financial statements and related footnotes of the
Company and its subsidiaries on pages 8 through 23 of its Annual Report to
Stockholders and the report thereon of KPMG Peat Marwick LLP on page 23 of
the Annual Report to Stockholders are hereby incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
NONE
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32
PART III.
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
---------------------------------------
REGISTRANT
----------
Information concerning directors of the Registrant is incorporated
herein by reference from the Company's definitive Proxy Statement for its
1997 Annual Meeting of Stockholders, a copy of which will be filed 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 1997 Annual
Meeting of Stockholders, a copy of which will be filed 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 1997 Annual Meeting of Stockholders, a
copy of which will be filed 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 1997 Annual Meeting of Stockholders, a copy of which will
be filed not later than 120 days after the close of the fiscal year.
-31-
33
PART IV.
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
--------------------------------------------
REPORTS ON FORM 8-K
-------------------
(a) The following documents are filed as part of this Report:
(1) Financial Statements:
---------------------
Annual Report
Page Number
-----------
CASS COMMERCIAL CORPORATION AND SUBSIDIARIES
--------------------------------------------
Consolidated Balance Sheets, December 31,
1996 and 1995 8
Consolidated Statements of Income for the
years ended December 31, 1996, 1995 and
1994 9
Consolidated Statements of Cash Flows for the
years ended December 31, 1996, 1995 and 1994 10
Consolidated Statements of Stockholders'
Equity for the years ended December 31, 1996,
1995 and 1994 11
Notes to Consolidated Financial Statements 12-23
Independent Auditors' Report 23
(2) Financial Statement Schedules:
-----------------------------
None other than those included as Notes to
Consolidated Financial Statements.
(3) Exhibits
--------
3.1 Articles of Incorporation of Registrant filed as
Exhibit 3 to Registration Statement No. 2-80070
and incorporated herein by reference
3.2 By Laws of Registrant filed as Exhibit 3.2 to the
Company's 1995 Annual Report on Form 10-K and
incorporated herein by reference
10.1 1995 Restricted Stock Bonus Plan filed as Exhibit
10.1 to the Company's 1995 Annual Report on Form 10-K
and incorporated herein by reference
10.2 1995 Performance-Based Stock Option Plan filed as
Exhibit 10.2 to the Company's 1995 Annual Report on
Form 10-K and incorporated herein by reference
13 1996 Annual Report to Stockholders (only those
portions of such Annual Report as are incorporated
by reference in parts I and II hereof shall be
deemed a part of this Report)
21 Subsidiaries of registrant, incorporated
by reference to Item 1, Business
23 Consent of KPMG Peat Marwick LLP
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the
quarter ended December 31, 1996.
-32-
34
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 COMMERCIAL CORPORATION
Date: March 18, 1997 By /s/ Lawrence A. Collett
-----------------------------------------
Lawrence A. Collett
Chairman and Chief Executive Officer
Date: March 18, 1997 By /s/ Lawrence L. Frieben
-----------------------------------------
Lawrence L. Frieben
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 18, 1997 By /s/ Lawrence A. Collett
-----------------------------------------
Lawrence A. Collett
Date: March 18, 1997 By /s/ Robert J. Bodine
-----------------------------------------
Bobert J. Bodine
Date: March 18, 1997 By /s/ Thomas J. Fucoloro
-----------------------------------------
Thomas J. Fucoloro
Date: March 18, 1997 By /s/ Harry J. Krieg
-----------------------------------------
Harry J. Krieg
Date: March 18, 1997 By /s/ Jake Nania
-----------------------------------------
Jake Nania
Date: March 18, 1997 By /s/ Irving A. Shepard
-----------------------------------------
Irving A. Shepard
Date: March 18, 1997 By /s/ John J. Vallina
-----------------------------------------
John J. Vallina
-33-
35
CASS COMMERCIAL CORPORATION
Exhibit Index
Form 10-K
1996
Exhibit
Number Description of Exhibit
- ------- ----------------------
3.1 Articles of Incorporation of Registrant filed as Exhibit 3 to
Registration Statement No. 2-80070 and incorporated herein by
reference
3.2 By Laws of Registrant filed as Exhibit 3.2 to the Company's 1995
Annual Report on Form 10-K
10.1 1995 Restricted Stock Bonus Plan filed as Exhibit 10.1 to the
Company's 1995 Annual Report on Form 10-K
10.2 1995 Performance-Based Stock Option Plan filed as Exhibit 10.2 to
the Company's 1995 Annual Report on Form 10-K
13 1996 Annual Report to Stockholders (only those portions of such
Annual Report as are incorporated by reference in parts I and II
hereof shall be deemed a part of this Report)
21 Subsidiaries of registrant, incorporated by reference to Item 1,
Business
23 Consent of KPMG Peat Marwick LLP
-34-