What changed in this filing

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Item 1. Business

2022-02-28 compared with 2021-02-26 · 119 added, 178 removed, 144 unchanged (67% of the section changed)

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Cass Information Systems, Inc.

(“Cass”

or the “Company”) provides payment and information processing services to large manufacturing, distribution and retail enterprises across the United States.

The Company’s services include freight invoice rating, payment processing, auditing, and the generation of accounting and transportation information.

(“Cass” or the “Company”) provides payment and information processing services to large manufacturing, distribution and retail enterprises across the United States.

The Company’s services include freight invoice rating, payment processing, auditing, and the generation of accounting and transportation information.

Cass also processes and pays facility-related invoices, which include electricity and gas as well as waste and telecommunications expenses, and is a provider of telecom expense management solutions.

Cass solutions include a B2B payment platform for clients that require an agile fintech partner.

Cass solutions include integrated payments, a B2B payment platform for clients that require an agile fintech partner.

Additionally, the Company offers an on-line platform to provide generosity services for faith-based and non-profit organizations.

The Company’s bank subsidiary, Cass Commercial Bank (the “Bank”), supports the Company’s payment operations.

The Bank also provides banking services to its target markets, which include privately-owned businesses and faith-based ministries in the St.

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Cass possesses four core competencies that encompass most of its processing services.

Data acquisition –

This refers to the gathering of data elements from diverse, heterogeneous sources and the building of complete databases for our customers.

Data acquisition – This refers to the gathering of data elements from diverse, heterogeneous sources and the building of complete databases for our customers.

Data is the raw material of the information economy.

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Through its numerous methods of obtaining streams and pieces of raw data, Cass is able to assemble vital data into centralized data management systems and warehouses, thus producing an engine to create the power of information for managing critical corporate functions and processing systems.

Data management –

Once data is assembled, Cass is able to utilize the power from derived information to produce significant savings and benefits for its clients.

This information is integrated into customers’

unique financial and accounting systems, eliminating the need for internal accounting processing and providing internal and external support for these critical systems.

Data management – Once data is assembled, Cass is able to utilize the power from derived information to produce significant savings and benefits for its clients.

This information is integrated into customers’ unique financial and accounting systems, eliminating the need for internal accounting processing and providing internal and external support for these critical systems.

Information is also used to produce management and exception reporting for operational control, feedback, planning assistance and performance measurement.

Business Intelligence –

Receiving information in the right place at the right time and in the required format is paramount for business survival.

information delivery solutions provide reports, digital images, data files and retrieval capabilities through the internet or directly into customer internal systems.

proprietary internet management delivery system is the foundation for driving these critical functions.

Business Intelligence – Receiving information in the right place at the right time and in the required format is paramount for business survival.

Cass’ information delivery solutions provide reports, digital images, data files and retrieval capabilities through the internet or directly into customer internal systems.

Cass’ proprietary internet management delivery system is the foundation for driving these critical functions.

Transaction, operational, control, status and processing exception information are all delivered through this system creating an efficient, accessible and highly reliable asset for Cass customers.

Financial exchange –

Since Cass is unique among its competition in that it owns a commercial bank, it is also able to manage the movement of funds from its customers to their suppliers.

Financial exchange – Since Cass is unique among its competition in that it owns a commercial bank, it is also able to manage the movement of funds from its customers to their suppliers.

This is a distinguishing factor, which clearly requires the processing capability, operating systems and financial integrity of a banking organization.

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Old and costly check processing and delivery mechanisms are replaced with more efficient electronic cash management and funds transfer systems.

core competencies allow it to perform the highest volumes of transaction processing in an integrated, efficient and systematic approach.

Cass’ core competencies allow it to perform the highest volumes of transaction processing in an integrated, efficient and systematic approach.

Not only is Cass able to process the transaction, it is also able to collect the data defining the transaction and effect the financial payment governing its terms.

These core competencies, enhanced through shared business processes, drive Cass’

strategic business units.

These core competencies, enhanced through shared business processes, drive Cass’ strategic business units.

Building upon these foundations, Cass continues to explore new business opportunities that leverage these competencies and processes.

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Available data indicates that the Company is one of the largest providers of energy 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”).

Various ESPs market the Company’s services, adding value with their unique auditing, consulting and technological capabilities.

Many of Cass’

services are customized for the ESPs, providing a full-featured solution without any development costs to the ESP.

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

Various ESPs market the Company’s services, adding value with their unique auditing, consulting and technological capabilities.

Many of Cass’ services are customized for the ESPs, providing a full-featured solution without any development costs to the ESP.

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 Gyve Generosity Services uses 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 Integrated Financial Services business competes with providers of corporate payment solutions.

Also, the Company through its Integrated Payments business competes with providers of corporate payment solutions.

The Bank is organized as a Missouri trust company with banking powers and was founded in 1906.

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in January 2001.

In December 2011, the Federal Reserve Bank (“FRB”) of St.

Louis approved the election of Cass Information Systems, Inc.

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Louis, Missouri metropolitan area and other areas in which the Bank competes.

The Bank’s principal competitors, however, are large bank holding companies that are able to offer a wide range of banking and related services through extensive branch networks.

The Bank targets its services to privately held businesses located in the St.

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These include:

FreightPay®, Transdata®, Ratemaker®, Best Rate®, Rate Exchange®, CassPort®, Cass Freight Index®, Cass Truckload Linehaul Index®, Cass Intermodal Price Index®

Expense$mart®, ExpenseSmart®, WasteVision™

and Direct2Carrier Payments™.

FreightPay®, Transdata®, Ratemaker®, Best Rate®, Rate Exchange®, CassPort®, Cass Freight Index®, Cass Truckload Linehaul Index®, Cass Intermodal Price Index® Expense$mart®, ExpenseSmart®, WasteVision™ and Direct2Carrier Payments™.

The Company holds patents for methods and systems for managing employee-liable expenses and methods and systems for communicating expense management information.

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The Company and its subsidiaries had 884 full-time and 232 part-time employees as of February 15, 2022.

Of these employees, the Bank had 63 full-time and one part-time employee.

Of these employees, the Bank had 65 full-time and no part-time employees.

Cass has long been committed to comprehensive and competitive compensation and benefits programs to attract and retain talent in a competitive environment.

Retention of skilled and highly trained employees is critical as the Company’s future operating results depend substantially upon the continued service of executive officers and key personnel.

Furthering the philosophy to attract and retain a pool of talented and motivated employees who will continue to advance the Company’s purpose and contribute to overall success, compensation and benefits programs include:

Retention of skilled and highly trained employees is critical as the Company’s future operating results depend substantially upon the continued service of executive officers and key personnel.

a noncontributory profit sharing program for most employees;

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

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.

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

Cass strives to place the health and well-being of employees above all else.

Never has this been more necessary than during the novel coronavirus (“COVID-19”) pandemic.

In response to the COVID-19 pandemic, the Company has taken significant steps to protect the health and well-being of employees and clients.

These steps include implementing a work-from-home policy for the majority of employees, establishing safety guidelines in facilities based on guidance from the U.S.

Centers for Disease Control and Prevention (“CDC”), and pausing travel that was routine in the Company’s operations.

These steps include implementing a work-from-home policy for the majority of employees and establishing safety guidelines in facilities based on guidance from the U.S.

Centers for Disease Control and Prevention ("CDC").

The Company recognizes the benefits of building a corporate culture that promotes diversity, equity and inclusion ("DEI") to foster unique ideas and ways of thinking.

In pursuit of the Company's overall DEI mission, Cass focuses on:

a) cultivating an environment that encourages collaboration, flexibility and fairness to enable all employees to contribute to their full potential;

b) promoting diversity in our talent management and succession planning processes and employee development programs;

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

Supervision and Regulation

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These laws and regulations are intended to primarily protect depositors, not shareholders.

The Bank is subject to regulation and supervision by the Missouri Division of Finance, the FRB and the Federal Deposit Insurance Corporation (the “FDIC”).

The Company is a financial 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 FRB.

The Bank is subject to regulation and supervision by the Missouri Division of Finance, the FRB and the Federal Deposit Insurance Corporation (the “FDIC”).

Significant elements of the laws and regulations applicable to the Company and the Bank are described below.

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A change in statutes, regulations or regulatory policies applicable to the Company and its subsidiaries could have a material effect on the business, financial condition and results of operations of the Company.

Bank Holding Company Activities –

In general, the BHC Act limits the business of bank holding companies to banking, managing or controlling banks and other related activities.

Bank Holding Company Activities – In general, the BHC Act limits the business of bank holding companies to banking, managing or controlling banks and other related activities.

In addition, bank holding companies that qualify and elect to be financial holding companies, such as the Company, may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is either (i) financial in nature or incidental to such financial activity or (ii) complementary to a financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.

Such permitted activities include securities underwriting and dealing, insurance underwriting and making merchant banking investments.

To maintain financial holding company status, a financial holding company and all of its depository institution subsidiaries must be “well capitalized”

and “well managed.”

A depository institution subsidiary is considered to be “well capitalized”

if it satisfies the requirements for this status discussed in the section “Prompt Corrective Action”

A depository institution subsidiary is considered “well managed”

if it received a composite rating and management rating of at least “satisfactory”

in its most recent examination.

A financial holding company’s status will also depend upon it maintaining its status as “well capitalized”

and “well managed’

under applicable FRB regulations.

To maintain financial holding company status, a financial holding company and all of its depository institution subsidiaries must be “well capitalized” and “well managed.” A depository institution subsidiary is considered to be “well capitalized” if it satisfies the requirements for this status discussed in the section “Prompt Corrective Action” below.

A depository institution subsidiary is considered “well managed” if it received a composite rating and management rating of at least “satisfactory” in its most recent examination.

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

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

in its most recent examination under the Community Reinvestment Act.

See “Community Reinvestment Act”

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

See “Community Reinvestment Act” below.

The FRB has the power to order any bank holding company or its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when the FRB has reasonable grounds to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial soundness, safety or stability of any bank subsidiary of the bank holding company.

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In reviewing acquisition applications, the bank regulatory authorities will consider, among other things, the competitive effect and public benefits of the transactions, the capital position of the combined organization, the risks to the stability of the U.S.

banking or financial system, the applicant’s performance record under the Community Reinvestment Act and its compliance with fair housing laws.

The Dodd-Frank Act –

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted in July 2010, significantly restructured the financial regulatory environment in the United States, affecting all bank holding companies and banks, including the Company and the Bank, some of which are described in more detail below.

banking or financial system, the applicant’s performance record under the Community Reinvestment Act and its compliance with fair housing laws.

The Dodd-Frank Act – The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted in July 2010, significantly restructured the financial regulatory environment in the United States, affecting all bank holding companies and banks, including the Company and the Bank, some of which are described in more detail below.

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

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.

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.

Under the Federal Deposit Insurance Corporation Improvement Act of 1991, a depository institution, such as the Bank, may not pay dividends if payment would cause it to become undercapitalized or if it is already undercapitalized.

The payment of dividends by the Company and the Bank may also be affected or limited by other factors, such as the requirement to maintain adequate capital and, under certain circumstances, the ability of federal regulators to prohibit dividend payments as an unsound or unsafe practice.

In July 2019, the federal bank regulators adopted final rules (the “Capital Simplifications Rules”) applicable to banks, like Cass, that are not subject to the advanced approaches capital framework that applies to large, internationally active banking organizations with at least $250 billion in total consolidated assets or at least $10 billion in total on-balance sheet foreign exposure.

Among other things, the Capital Simplifications Rules eliminated the standalone Federal Reserve prior approval requirement in the Basel III Capital Rules for any repurchase of common stock.

In certain circumstances, the Company’s repurchases of its common stock may be subject to a prior approval or notice requirement under other regulations, policies or supervisory expectations of the Federal Reserve Board.

Capital Requirements –

As a bank holding company, the Company and the Bank are subject to capital requirements pursuant to the FRB’s capital guidelines which include (i) risk-based capital guidelines, which are designed to make capital requirements more sensitive to various risk profiles and account for off-balance sheet exposure;

Capital Requirements – As a bank holding company, the Company and the Bank are subject to capital requirements pursuant to the FRB’s capital guidelines which include (i) risk-based capital guidelines, which are designed to make capital requirements more sensitive to various risk profiles and account for off-balance sheet exposure;

(ii) guidelines that consider market risk, which is the risk of loss due to change in value of assets and liabilities due to changes in interest rates;

and (iii) guidelines that use a leverage ratio which places a constraint on the maximum degree of risk to which a financial holding company may leverage its equity capital base.

Effective July 2, 2013, the FRB approved final rules known as the “Basel III Capital Rules”

that substantially revised the risk-based capital and leverage capital requirements applicable to bank holding companies and depository institutions, including the Company and the Bank.

The Basel III Capital Rules implement aspects of the Basel III capital framework agreed upon by the Basel Committee and incorporate changes required by the Dodd-Frank Act.

The Basel III Capital Rules implemented common equity Tier 1 capital as a new capital measure, which is generally defined as common stockholders’

equity and retained earnings.

The Basel III Capital Rules require the Company and the Bank to maintain the following:

• a minimum ratio of common equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% capital conservation buffer (resulting in a minimum common equity Tier 1 capital ration of 7.0%);

• a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus a 2.5% capital conservation buffer (resulting in a minimum Tier 1 capital ratio of 8.5%);

• a minimum ratio of total capital (that is, Tier 1 plus Tier 2 capital) to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (resulting in a minimum total capital ratio of 10.5%);

• a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to adjusted average consolidated assets.

The capital conservation buffer is designed to absorb losses during periods of economic stress.

Banking institutions with a ratio of common equity Tier 1 capital to risk-weighted assets above the minimum but below the conservation buffer will face limitations on the payment of dividends, common stock repurchases and discretionary cash payments to executive officers based on the amount of the shortfall.

Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings.

Tier 1 capital is generally defined as common equity Tier 1 and Additional Tier 1 capital.

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Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements.

Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for non-advanced approaches institutions like Cass that have exercised a one-time opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.

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

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

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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.

Prior to the adoption of the Capital Simplification Rules, amounts were deducted from common equity Tier 1 capital to the extent that any one such category exceeded 10% of common equity Tier 1 capital or all such items, in the aggregate, exceeded 15% of common equity Tier 1 capital.

The Capital Simplification Rules took effect for the Company and the Bank as of January 1, 2020.

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets, are multiplied by a risk weight factor assigned by the regulations based on the risks believed inherent in the type of asset.

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government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans, and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.

Fully phased-in as of January 1, 2019, the Basel III Capital Rules require banking organizations, like Cass, to maintain:

a minimum ratio of common equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% capital conservation buffer;

a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus a 2.5% capital conservation buffer;

a minimum ratio of total capital (that is, Tier 1 plus Tier 2 capital) to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer;

a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to adjusted average consolidated assets.

The capital conservation buffer is designed to absorb losses during periods of economic stress.

The FRB has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s capital level is or may become inadequate in light of the particular risks or circumstances.

In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that revised certain capital regulations to account for changes to credit loss accounting under U.S.

The 2019 CECL Rule included a transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of adopting a new accounting standard related to the measurement of current expected credit losses (“CECL”) on their regulatory capital ratios (three-year transition option).

In March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year transition option of the 2019 CECL Rule and also provides banking organizations that were required under U.S.

GAAP (as of January 2020) to implement CECL before the end of 2020 the option to delay for two years an estimate of the effect of CECL on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option).

The Company elected to not use either the three-year or five-year transition period.

As of December 31, 2021, the Company and the Bank met all capital adequacy requirements under the Basel III Capital Rules.

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”).

such as unused credit card lines of credit) and provides a new standardized approach for operational risk capital.

Under the Basel framework, these standards will generally be effective on January 1, 2022, with an aggregate output floor phasing in through January 1, 2027.

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.

Under the Basel framework, these standards are currently set to go into effect on January 1, 2023, pushed back 12 months from the original implementation date of January 1, 2022 as a result of the Covid-19 pandemic, with an aggregate output floor phasing in through January 1, 2027.

Under the current U.S.

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The impact of Basel IV on the Company will depend on the manner in which it is implemented by the federal bank regulators.

Source of Strength Doctrine –

FRB and other regulations require bank holding companies to act as a source of financial and managerial strength to their subsidiary banks.

Source of Strength Doctrine – FRB and other regulations require bank holding companies to act as a source of financial and managerial strength to their subsidiary banks.

Under this requirement, the Company is expected to commit resources to support the Bank.

Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other indebtedness of such subsidiary banks.

In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.

Deposit Insurance –

Substantially all of the deposits of the Bank are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) of the FDIC, and the Bank is subject to deposit insurance assessments to maintain the DIF.

Deposit Insurance – Substantially all of the deposits of the Bank are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) of the FDIC, and the Bank is subject to deposit insurance assessments to maintain the DIF.

Deposit insurance assessments are based on average consolidated total assets minus average tangible equity.

Under the FDIC’s risk-based assessment system, insured institutions with less than $10 billion in assets, such as the Bank, are assigned to one of four risk categories based on supervisory evaluations, regulatory capital level, and certain other factors, with less risky institutions paying lower assessments.

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

FDIC insurance expense totaled approximately $152,500, $108,700 and $222,200 for the years ended December 31, 2020, 2019 and 2018, respectively.

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

FDIC insurance expense totaled $300,200, $152,500 and $108,700 for the years ended December 31, 2021, 2020 and 2019, 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.

Prompt Corrective Action –

The Basel III Capital Rules incorporate new requirements into the prompt correction action framework, described above.

The Federal Deposit Insurance Act (“FDIA”) requires that federal banking agencies take “prompt corrective action”

against depository institutions that do not meet minimum capital requirements and includes the following five capital tiers:

“well-capitalized,”

“adequately capitalized,”

“undercapitalized,”

“significantly undercapitalized”

and “critically undercapitalized.”

A depository institution’s capital tier will depend upon how its capital levels compare with various relevant capital measures and certain other factors, as established by regulation.

A depository institution is deemed to be (i) “well-capitalized”

if the institution has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a leverage ratio of 5% or greater, a common equity Tier 1 ratio of 6.5% or greater and is not subject to any regulatory order agreement or written directive to meet and maintain a specific capital level for any capital measure;

(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%;

(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%;

and (v) “critically undercapitalized”

if the institution has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2%.

Prompt Corrective Action – The Basel III Capital Rules incorporate new requirements into the prompt correction action framework, described above.

The Federal Deposit Insurance Act (“FDIA”) requires that federal banking agencies take “prompt corrective action” against depository institutions that do not meet minimum capital requirements and includes the following five capital tiers:

“well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare with various relevant capital measures and certain other factors, as established by regulation.

A depository institution is deemed to be (i) “well-capitalized” if the institution has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a leverage ratio of 5% or greater, a common equity Tier 1 ratio of 6.5% or greater and is not subject to any regulatory order agreement or written directive to meet and maintain a specific capital level for any capital measure;

(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%;

(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%;

and (v) “critically undercapitalized” if the institution has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2%.

An institution may be deemed to be in a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters.

A bank’s capital category is determined solely for the purpose of applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of the bank’s overall financial condition or prospects for other purposes.

Subject to a narrow exception, a receiver or conservator is required to be appointed for an institution that is “critically undercapitalized”

within specified time frames.

The regulations also provide that a capital restoration plan must be filed with the FRB within 45 days of the date an institution is deemed to have received notice that it is “undercapitalized,”

“significantly undercapitalized”

or “critically undercapitalized.”

Compliance with the plan must be guaranteed by any parent holding company up to the lesser of 5% of the institution’s total assets when it was deemed to be undercapitalized or the amount

necessary to achieve compliance with applicable capital requirements.

Subject to a narrow exception, a receiver or conservator is required to be appointed for an institution that is “critically undercapitalized” within specified time frames.

The regulations also provide that a capital restoration plan must be filed with the FRB within 45 days of the date an institution is deemed to have received notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Compliance with the plan must be guaranteed by any parent holding company up to the lesser of 5% of the institution’s total assets when it was deemed to be undercapitalized or the amount necessary to achieve compliance with applicable capital requirements.

In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion.

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For further information regarding the capital ratios and leverage ratio of the Company and the Bank, see Item 8, Note 2 of this report.

Safety and Soundness Regulations –

In accordance with the FDIA, the federal banking agencies adopted guidelines establishing general standards relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings, compensation, fees and benefits.

Safety and Soundness Regulations – In accordance with the FDIA, the federal banking agencies adopted guidelines establishing general standards relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings, compensation, fees and benefits.

In general, the guidelines require that institutions maintain appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines.

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In addition, regulations adopted by the federal banking agencies authorize the agencies to require that an institution that has been given notice that it is not satisfying any of such safety and soundness standards to submit a compliance plan.

If the institution fails to submit an acceptable compliance plan or fails in any material respect to implement an accepted compliance plan, the agency must issue an order directing corrective actions and may issue an order directing other actions of the types to which an undercapitalized institution is subject under the “prompt corrective action”

provisions of FDIA.

If the institution fails to comply with such an order, the agency may seek to enforce such order in judicial proceedings and to impose civil money penalties.

Loans-to-One-Borrower –

The Bank generally may not make loans or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus.

Loans-to-One-Borrower – The Bank generally may not make loans or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus.

An additional amount may be loaned, up to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate.

As of December 31, 2021, the Bank was in compliance with the loans-to-one-borrower limitations.

Depositor Preference –

The FDIA provides that, in the event of the “liquidation or other resolution”

of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution.

Depositor Preference – The FDIA provides that, in the event of the “liquidation or other resolution” of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution.

If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors, including depositors whose deposits are payable only outside of the United States and the parent bank holding company, with respect to any extensions of credit they have made to such insured depository institution.

Community Reinvestment Act –

The Community Reinvestment Act of 1977 (“CRA”) requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice.

Community Reinvestment Act – The Community Reinvestment Act of 1977 (“CRA”) requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice.

Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities.

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

In order for a financial holding 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.

In December 2019, the FDIC joined the Office of the Comptroller of the Currency (the “OCC”) in proposing rules that would significantly change existing CRA regulations.

The Federal Reserve did not join in the proposed rulemaking.

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

In December 2019, the FDIC joined the Office of the Comptroller of the Currency in proposing rules that would significantly change existing CRA regulations.

The proposed rules are intended to increase bank activity in low and moderate income communities where there is significant need for credit, more responsible lending, greater access to banking services, and improvements to critical infrastructure.

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and (iv) improving the timeliness and transparency of record keeping and reporting.

The OCC has adopted these rules as final, but the FDIC and Federal Reserve have yet to take action that would finalize and implement new CRA regulations.

As the Company is not subject to OCC regulation, it will continue to monitor CRA regulatory changes and evaluate any resulting impact on the Company’s financial condition and results of operations.

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.

The Federal Reserve did not join in the proposed rulemaking but is seeking public comment on an approach to modernize the CRA and evaluate how banks address inequities in credit access.

The agencies are working together to put forward a joint rule.

The Company will continue to monitor CRA regulatory changes and evaluate any resulting impact on the Company’s financial condition and results of operations.

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.

These limitations require disclosure of privacy policies to consumers and affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.

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The standards set forth in the guidelines are intended to ensure the security and confidentiality of customer records and information, protect against any anticipated threats or hazards to the security or integrity of such records and protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer.

Transactions with Affiliates –

Transactions between the Bank and its affiliates are subject to regulations that limit the types and amounts of covered transactions engaged in by the Bank and generally require those transactions to be on an arm’s-length basis.

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.

Transactions with Affiliates – Transactions between the Bank and its affiliates are subject to regulations that limit the types and amounts of covered transactions engaged in by the Bank and generally require those transactions to be on an arm’s-length basis.

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.

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.

Federal law also limits the Bank’s authority to extend credit to its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons.

Among other things, extensions of credit to insiders are required to be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than those prevailing for comparable transactions with unaffiliated persons.

Also, the terms of such extensions of credit may not involve more than the normal risk of repayment or present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the Bank’s capital.

Federal Reserve System –

FRB regulations require depository institutions to maintain cash reserves against their transaction accounts (primarily negotiable order of withdrawal and demand deposit accounts).

A reserve of 3% is to be maintained against aggregate transaction accounts between $15.2 million and $110.2 million (subject to adjustment by the FRB) plus a reserve of 10% (subject to adjustment by the FRB between 8% and 14%) against that portion of total transaction accounts in excess of $110.2 million.

The first $15.2 million of otherwise reservable balances (subject to adjustment by the FRB) is exempt from the reserve requirements.

The Bank is in compliance with the foregoing requirements.

Cybersecurity –

In March 2015, federal regulators issued two related statements regarding cybersecurity.

Cybersecurity – In March 2015, federal regulators issued two related statements regarding cybersecurity.

One statement indicates that financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution.

The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack involving destructive malware.

A financial institution is expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack.

If the Company fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.

In November 2021, the federal banking agencies adopted a final rule requiring banking organizations to notify their primary banking regulator within 36 hours of determining that a “computer-security incident” has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver banking products and services to a material portion of its customer base, its businesses and operations that would result in material loss, or its operations that would impact the stability of the United States.

Banking organizations are also required to notify each affected customer as soon as possible in the event of an incident that results in actual or potential harm to the integrity or availability of information and systems or that violates or threatens to violate the organization’s security for four or more hours.

In the ordinary course of business, the Company relies on electronic communications and information systems to conduct operations and store sensitive data.

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The Company also employs a variety of preventative and detective tools to identify, protect, detect, respond, and recover against suspicious activity, as well as to report on any suspected advanced persistent threats.

Notwithstanding the strength of the Company’s defensive measures, the threat from cyber attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures.

While the Company has not experienced a significant compromise to date, significant data loss or any material financial losses related to cybersecurity attacks, the Company’s systems and those of its customers and third-party service providers are under constant threat and it is possible that the Company could experience a significant event in the future.

Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of internet banking, mobile banking and other technology-based products and services by the Company and its customers.

See Item 1A, “Risk Factors”

for a further discussion of risks related to cybersecurity.

Other Regulations –

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

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

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

• Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

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• Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

Electronic Funds Transfer Act, governing automatic deposits to and withdrawals from deposit accounts and customers’

rights and liabilities arising from the use of automated teller machines and other electronic banking services.

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

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

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

Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,”

such as digital check images and copies made from that image, the same legal standing as the original paper check;

• Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

• The USA PATRIOT Act, which requires banks and savings institutions to establish broadened anti-money laundering compliance programs and due diligence policies and controls to ensure the detection and reporting of money laundering;

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government in cases of suspected money laundering and fraud.

Certain of these laws are consumer protection laws that extensively govern the Company’s relationship with its customers.

Violations of applicable consumer protection laws can result in significant potential liability from litigation brought by customers, including actual damages, restitution and attorneys’

Certain of these laws are consumer protection laws that extensively govern the Company’s relationship with its customers.

Violations of applicable consumer protection laws can result in significant potential liability from litigation brought by customers, including actual damages, restitution and attorneys’ fees.

Federal bank regulators, state attorneys general and state and local consumer protection agencies may also seek to enforce consumer protection requirements and obtain these and other remedies, including regulatory sanctions, customer rescission rights, action by the state and local attorneys general in each jurisdiction in which the Company operates and civil money penalties.

Failure to comply with consumer protection requirements may also result in the Company’s inability to pursue merger or acquisition transactions.

Website Availability of SEC Reports

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.

The address of Cass’

The address of Cass’ website is:

www.cassinfo.com.

The reference to the Company’s website address does not constitute incorporation by reference of the information contained on the website and should not be considered part of this report.

Statistical Disclosure by Bank Holding Companies

For the statistical disclosure by bank holding companies, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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