What changed in this filing

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Item 1. Business

2024-02-28 compared with 2023-02-28 · 81 added, 35 removed, 234 unchanged (33% of the section changed)

36 unchanged sentences

These competitors compete mainly on price, functionality and service levels.

The Company, through its Expense Management business unit, also competes with other companies located throughout the United States that pay energy and waste bills and provide management reporting.

Available data indicates that the Company is one of the largest providers of energy information processing and payment services.

The Company, through its Utility Expense Management business unit, also competes with other companies located throughout the United States that pay utility bills and provide management reporting.

Available data indicates that the Company is one of the largest providers of utility information processing and payment services.

Cass is unique among these competitors in that it is not exclusively affiliated with any one energy service provider (“ESP”).

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The Company, through its Telecom Information Services business unit, is a leader in the growing telecom expense management market and competes with other companies located throughout the United States in this market.

The Company, through its Waste Expense Management business competes against small expense management companies along with large national account programs of major haulers.

The Company division known as TouchPoint offers a church management software solution and an on-line platform to provide generosity services for faith-based and non-profit organizations, which is a complementary service offering to the Bank’s faith-based customers.

The Company, through its Waste Expense Management business, is one of the largest providers of waste invoice management solutions and competes against small expense management companies along with large national account programs of major haulers.

The Company's TouchPoint division offers a church management software solution and an on-line platform to provide generosity services for faith-based and non-profit organizations, which is a complementary service offering to the Bank’s faith-based customers.

Also, the Company, through its CassPay operation, competes with providers of corporate payment solutions.

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Cass also provides comprehensive health, dental, and vision plans to most employees, as well as free employee assistance programs to all employees and members of their families.

The Company invests in employees’ future by assisting with tuition reimbursement for continued education throughout the Company’s employee ranks.

The Company invests in its employees’ futures by assisting with tuition reimbursement for continued education.

Employees are also able to participate in educational seminars run by outside parties to maintain and expand professional knowledge.

In order to develop a workforce that aligns with the Company’s corporate values, regularly sponsored campaigns and events occur, such as charitable workplace campaigns, food drives to assist local food banks, and toy drives to support charities during the holidays.

The Company offers paid time off for charitable endeavors.

Additionally, the Company supports a number of organizations with annual financial contributions.

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and c) ensuring leadership commitment in facilitating the Company's DEI efforts.

In January 2022, the Company created a DEI Committee.

The DEI Committee was formed after a thorough process of determining a charter and is actively in the process of expanding the Company's DEI vision.

The Company's DEI Committee was formed after a thorough process of determining a charter and actively looks to expand the Company's DEI vision.

The committee members are passionate about DEI efforts and represent the Company's various business divisions and corporate departments.

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Within the management group, 52% were female, and 13% were ethnically diverse.

Over the past year, the Company has continued to support and provide diversity training to all employees.

The Company continues its commitment to providing a workplace that is free of harassment and discrimination by taking proactive measures and providing all employees with non-discrimination and sexual harassment prevention training on an annual basis.

The DEI initiatives will continue to be supported and promoted to provide all employees a place where they feel welcomed, appreciated and valued.

Equal opportunities, anti-harassment, non-discrimination, the health and safety of employees and work-life balance are actively promoted as more fully described in the Company's Environmental, Social, and Governance report.

The Company continues to support and provide diversity training to all employees.

The Company also continues its commitment to providing a workplace that is free of harassment and discrimination by taking proactive measures and providing all employees with non-discrimination and sexual harassment prevention training on an annual basis.

The DEI initiatives are supported and promoted to provide all employees a place where they feel welcomed, appreciated and valued.

Supervision and Regulation

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A financial holding company’s status will also depend upon it maintaining its status as “well capitalized” and “well managed’ under applicable FRB regulations.

If a financial holding company ceases to meet these capital and management requirements, the FRB may impose limitations or conditions on the conduct of its

activities during the non-compliance period, and the company may not commence any of the broader financial activities permissible for financial holding companies or acquire a company engaged in such financial activities without prior approval of the FRB.

If a financial holding company ceases to meet these capital and management requirements, the FRB may impose limitations or conditions on the conduct of its activities during the non-compliance period, and the company may not commence any of the broader financial activities

permissible for financial holding companies or acquire a company engaged in such financial activities without prior approval of the FRB.

If the company does not return to compliance within 180 days, the FRB may require divestiture of the holding company’s depository institutions.

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The impact of the Dodd-Frank Act on the Company and the Bank has been substantial.

Enhanced Prudential Standards – The FRB is required to monitor emerging risks to financial stability and enact enhanced supervision and prudential standards applicable to large bank holding companies and certain non-bank covered companies designated as systemically important by the Financial Stability Oversight Council.

The Dodd-Frank Act mandates that certain regulatory requirements applicable to these systemically important financial institutions be more stringent than those applicable to other financial institutions.

In 2019, the FRB adopted new rules impacting certain capital and liquidity requirements and other enhanced prudential standards.

The final rules assign all domestic bank holding companies with $100 billion or more in total consolidated assets to one of four categories of tailored regulatory requirements.

The Company and the Bank are generally not impacted by these rules.

The enhanced prudential standards rules, as amended in 2019, require publicly traded bank holding companies with $50 billion or more in total consolidated assets to establish risk committees.

Prior to the amendment, the requirement to establish a risk committee was applicable to publicly traded companies with $10 billion or more in consolidated assets.

Dividends and Stock Repurchases – Both the Company and the Bank are subject to various regulations that restrict their ability to pay dividends and the amount of dividends that they may pay.

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In August 2022, the Inflation Reduction Act of 2022 (the “Inflation Reduction Act") was enacted.

Among other things, the Inflation Reduction Act imposes a new 1% excise tax on the fair market value of stock repurchased after December 31, 2022 by publicly traded U.S.

Among other things, the Inflation Reduction Act imposes a new 1% excise tax on the fair market value of stock repurchased after December 31,

2022 by publicly traded U.S.

corporations.

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The calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

For instance, the Basel III Capital Rules and the Capital Simplification Rules provide for a number of deductions from and adjustments to common equity Tier 1 capital.

For instance, the Basel III Capital Rules and the capital simplification rules enacted in 2019 provide for a number of deductions from and adjustments to common equity Tier 1 capital.

These include, for example, the requirement that certain deferred tax assets and significant investments in non-consolidated financial entities be deducted from Tier 1 capital to the extent that any one such category exceeds 25% of common equity Tier 1 capital.

6 unchanged sentences

In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms (commonly referred to as “Basel IV”).

Among other things, these standards revise the Basel Committee's standardized approach for credit risk (including by recalibrating risk weights and introducing new capital requirements for certain “unconditionally cancellable commitments,” such as unused credit card lines of credit) and provides a new standardized approach for operational risk capital.

provides a new standardized approach for operational risk capital.

Under the Basel framework, these standards went into effect on January 1, 2023, with an aggregate output floor phasing in through January 1, 2027.

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An institution’s assessment rate depends upon the category to which it is assigned and certain other factors.

FDIC insurance expense totaled $415,700, $300,200 and $152,500 for the years ended December 31, 2022, 2021 and 2020, respectively.

In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning with the first quarterly assessment period of 2023.

The increased assessment is expected to improve the likelihood that the DIF reserve ratio would reach the statutory minimum of 1.35% by the statutory deadline prescribed under the FDIC's amended restoration plan.

In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the DIF incurred as a result of bank failures in early 2023 and the FDIC's use of the systemic risk exception to cover certain deposits that were otherwise uninsured.

The special assessment was based on estimated uninsured deposits as of December 31, 2022 (excluding the first $5.0 billion) and will be assessed at a quarterly rate of 3.36 basis points, over eight quarterly assessment periods, beginning in the first quarter of 2024.

As a result of this final rule, the Company did not accrue expense related to this assessment based on the amount of uninsured deposits at December 31, 2022 of less than $5.0 billion.

Under the final rule, the estimated loss pursuant to the systemic risk determination will be periodically adjusted, and the FDIC has retained the ability to cease collection early, extend the special assessment collection period, and impose a final shortfall special assessment on a one-time basis.

The extent to which any such additional future assessments will impact the Company's future deposit insurance expense is currently uncertain.

FDIC insurance expense totaled $603,000, $415,700 and $300,200 for the years ended December 31, 2023, 2022 and 2021, respectively.

The FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

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(ii) “adequately capitalized” if the institution has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a leverage ratio of 4% or greater, a common equity Tier 1 ratio of 4.5% or greater and does not meet the definition of “well capitalized”;

(iii) “undercapitalized” if the institution has a total risk-based capital ratio that is less than 8%, a Tier 1 risk-based capital ratio of less than 6%, a leverage ratio of less than 4% or a common equity Tier 1 ratio of less than 4.5%;

(iii) “undercapitalized” if the institution has a total risk-based capital ratio that is less than 8%, a Tier 1 risk-based capital ratio of less than 6%, a leverage ratio of less

than 4% or a common equity Tier 1 ratio of less than 4.5%;

(iv) “significantly undercapitalized” if the institution has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 4%, a leverage ratio of less than 3% or a common equity Tier 1 ratio of less than 3%;

23 unchanged sentences

Depository institutions are periodically examined for compliance with the CRA and are assigned ratings that must be publicly disclosed.

In order for a financial holding company to commence any new activity permitted by the BHC Act, or to acquire any company engaged in any new activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent examination under the CRA.

In order for a financial holding

company to commence any new activity permitted by the BHC Act, or to acquire any company engaged in any new activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent examination under the CRA.

The Bank received a rating of “satisfactory” in its most recent CRA exam.

On May 5, 2022, federal banking regulators requested comment on a joint notice of proposed rulemaking intended to strengthen and modernize the CRA regulations and framework.

Until the proposed rulemaking is final and effective, the Company and the Bank will continue to operate under the CRA regulations currently in effect.

At this time, it is uncertain what effect the impending CRA regulations will have on the Company and the Bank with respect to their CRA activities.

In October 2023, the OCC, together with the Federal Reserve and FDIC, issued a joint final rule to modernize the CRA regulatory framework.

The final rule is intended, among other things, to adapt to changes in the banking industry, including the expanded role of mobile and online banking, and to tailor performance standards to account for differences in bank size and business models.

The final rule introduces new tests under which the performance of banks with over $2 billion in assets will be assessed.

The new rule also includes data collection and reporting requirements, some of which are applicable only to banks larger than the Bank and updates the definitions of community development and process by which banks can seek approval of qualifying projects.

Most provisions of the final rule will become effective on January 1, 2026, and the data reporting requirements will become effective on January 1, 2027.

Financial Privacy – Banks and other financial institutions are subject to regulations that limit their ability to disclose non-public information about consumers to nonaffiliated third parties.

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The term “affiliate” is defined to mean any company that controls or is under common control with the Bank and includes the Company and its non-bank subsidiaries.

“Covered transactions” include a loan or extension of credit, as

well as a purchase of securities issued by an affiliate, certain purchases of assets from the affiliate, certain derivative transactions that create a credit exposure to an affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.

“Covered transactions” include a loan or extension of credit, as well as a purchase of securities issued by an affiliate, certain purchases of assets from the affiliate, certain derivative transactions that create a credit exposure to an affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.

In general, these regulations require that any such transaction by the Bank (or its subsidiaries) with an affiliate must be secured by designated amounts of specified collateral and must be limited to certain thresholds on an individual and aggregate basis.

9 unchanged sentences

See Item 1A, “Risk Factors” for a further discussion of risks related to cybersecurity.

Bank Secrecy Act/Anti Money Laundering Regulation, USA PATRIOT Act and National Defense Authorization Act - The Bank Secrecy Act ("BSA"), the USA PATRIOT Act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective Anti Money Laundering ("AML") program and to file timely reports such as suspicious activity reports and currency transaction reports.

The Company is required to comply with these and other AML requirements.

Anti-Money Laundering Regulation and the USA PATRIOT Act - A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing.

The Bank Secrecy Act (“BSA”), the USA PATRIOT Act of 2021 (the “USA PATRIOT Act”) and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective Anti-Money Laundering (“AML”) program and to file timely reports such as suspicious activity reports and currency transaction reports that assist government agencies in detecting and preventing money laundering.

The USA PATRIOT Act prohibits financial institutions from entering into specified financial transactions and account relationships and requires that the institutions implement customer identification programs, and enhance due diligence procedures for certain high-risk customers.

Regulatory authorities routinely examine financial institutions for compliance with these obligations.

The federal banking agencies and the Financial Crimes Enforcement Network (“FinCEN”) are authorized to impose significant civil money penalties for violations of those requirements and have recently engaged in coordinated enforcement efforts against banks and other financial services providers with the Department of Justice, Drug Enforcement Administration and Internal Revenue Service.

The Company is also subject to increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control.

The USA PATRIOT Act gives federal agencies additional powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened AML requirements.

The USA PATRIOT Act mandates that financial service companies implement additional policies and procedures and take heightened measures designed to address any or all of the following matters:

customer identification programs, money laundering, terrorist financing, identifying and reporting suspicious activities and currency transactions, currency crimes, and cooperation between financial institutions and law enforcement authorities.

On January 1, 2021, Congress enacted the National Defense Authorization Act, which enacted the most significant overhaul of the BSA and related AML laws since the USA PATRIOT Act.

The Anti-Money Laundering Act of 2020 (“AMLA”) amended the BSA and was intended to be a comprehensive reform and modernization to U.S.

bank secrecy and anti-money laundering laws.

Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions;

requires the U.S.

Department of the Treasury to promulgate priorities for anti-money laundering and countering the financing of terrorism policy;

requires the development of standards for testing technology and internal processes for BSA compliance;

expands enforcement- and investigation-related authority, including increasing available sanctions for certain BSA violations;

and expands BSA whistleblower incentives and protections.

Many of the statutory provisions in the AMLA will require additional rulemakings, reports and other measures, and the impact of the AMLA will depend on, among other things, rulemaking and implementation guidance.

In 2021, Congress passed the Corporate Transparency Act as part of the National Defense Authorization Act, which enacted the most significant overhaul of the BSA and related AML laws since the USA PATRIOT Act.

Notable amendments include (i) significant changes to the collection of beneficial ownership information and the establishment of a beneficial ownership registry, which requires corporate entities (generally, any corporation, limited liability company or other similar entity with 20 or fewer employees and annual gross income of $5 million or less) to report beneficial ownership information to FinCEN (which information will be maintained by FinCEN and made available upon request to financial institutions);

(ii) enhanced whistleblower provisions, which provide that one or more whistleblowers who voluntarily provide original information

leading to the successful enforcement of violations of the AML laws in any judicial or administrative action brought by the Secretary of the Treasury or the Attorney General resulting in monetary sanctions exceeding $1 million (including disgorgement and interest but excluding forfeiture, restitution, or compensation to victims) will receive not more than 30 percent of the monetary sanctions collected and will receive increased protections;

(ii) enhanced whistleblower provisions, which provide that one or more whistleblowers who voluntarily provide original information leading to the successful enforcement of violations of the AML laws in any judicial or administrative action brought by the Secretary of the Treasury or the Attorney General resulting in monetary sanctions exceeding $1 million (including disgorgement and interest but excluding forfeiture, restitution, or compensation to victims) will receive not more than 30 percent of the monetary sanctions collected and will receive increased protections;

(iii) increased penalties for violations of the BSA;

2 unchanged sentences

Many of the requirements included in the AML amendments will require additional rulemakings, reports and other measures, and the impact of these rules will depend on, among other things, rulemaking and implementation guidance.

On December 8, 2021, FinCEN issued proposed regulations that would implement the amendments regarding beneficial ownership if adopted as proposed.

FinCEN proposed three rules to implement changes to the beneficial ownership requirements and related amendments set forth in the Corporate Transparency Act.

As of the date of this Form 10-K, two of the three have been finalized.

The Beneficial Ownership Reporting Rule took effect on January 1, 2024 and requires certain domestic and foreign companies created, or registered to conduct business, in the United States to report beneficial ownership information to FinCEN.

The Access Rule, effective as of February 20, 2024, sets forth the circumstances under which FinCEN can disclose beneficial ownership information to authorized recipients and how FinCEN and recipients of the data will protect that information.

It is expected that FinCEN will issue a third rule, by January 1, 2025, to revise existing customer due diligence requirements and bring them into conformance with the Corporate Transparency Act and the Access Rule.

Climate-Related Regulation and Guidance - In recent years the federal banking agencies have increased their focus on climate-related risks impacting the operations of banks, the communities they serve and the broader financial system.

Accordingly, the agencies have begun to enhance their supervisory expectations regarding the climate risk management practices of larger banking organizations, including by encouraging such banks to:

ensure that management of climate-related risk exposures has been incorporated into existing governance structures;

evaluate the potential impact of climate-related risks on the bank’s financial condition, operations and business objectives as part of its strategic planning process;

account for the effects of climate change in stress testing scenarios and systemic risk assessments;

revise expectations for credit portfolio concentrations based on climate-related factors;

consider investments in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change;

evaluate the impact of climate change on the bank’s borrowers and consider possible changes to underwriting criteria to account for climate-related risks to mortgaged properties;

incorporate climate-related financial risk into the bank’s internal reporting, monitoring and escalation processes;

and prepare for the transition risks to the bank associated with the adjustment to a low-carbon economy and related changes in laws, regulations, governmental policies, technology, and consumer behavior and expectations.

In 2021, the OCC issued proposed principles for climate-related financial risk management for national banks with more than $100 billion in total assets.

In 2022, the FDIC and FRB issued their own proposed principles for climate risk management by larger banking organizations.

Although these risk management principles, if adopted as proposed, would not apply to the Bank directly based upon its current size, the regulators have indicated that all banks, regardless of their size, may have material exposures to climate-related financial and other risks that require prudent management.

The federal banking agencies are expected to adopt a more formal climate risk management framework for larger banking organizations in the coming months.

As climate-related supervisory guidance is considered and formalized for all banks and financial institutions, the Company may be required to expend significant capital and incur compliance, operating, maintenance and remediation costs in order to conform to such requirements.

Other Regulations – The operations of the Company and the Bank are also subject to:

3 unchanged sentences

• Electronic Funds Transfer Act, governing automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

• Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;

• Fair Housing Act, Home Mortgage Disclosure Act, and Real Estate Settlement Procedures Act, prohibiting discrimination against borrowers seeking housing and mortgages;

requiring transparency and public reporting on mortgage and lending activities;

and requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;

• Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

6 unchanged sentences

Cass files annual, quarterly and current reports with the Securities and Exchange Commission (the “SEC”).

Cass will, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC, make available free of charge on its website each of its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, and its definitive proxy statements.

Cass will, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC, make available free of charge

on its website each of its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, and its definitive proxy statements.

The address of Cass’ website is:

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business