Cass Information Systems (CASS) Q4 2005 earnings summary

Executive summary

• 2005 results exceeded management expectations: continuing-operations net income rose 13.8% YoY to $11.244 million; total net income was $10.946 million, including a discontinued-operations loss.

• Total net revenues increased 16.9% to $71.442 million as processing activity expanded and higher interest rates lifted net interest income.

• Q4 net income was $2.502 million, including $2.418 million from continuing operations and $84,000 from discontinued operations.

Financial highlights

• Fee revenue and other income rose 14% YoY to $38.653 million; net interest income after loan-loss provision increased 21% to $32.789 million.

• Processing volume grew 12.4% to 32.281 million items, while processed dollars increased 21.7% to $16.372 billion.

• Diluted EPS from continuing operations was $1.99, up from $1.76; total diluted EPS was $1.94, versus $1.43.

• Operating expenses increased 11% to $55.216 million, including a $3.1 million impairment charge on a private imaging investment.

• Q4 fee revenue and other income reached $9.969 million; net interest income was $9.481 million and diluted EPS was $0.44.

Outlook and guidance

• Management expected continued expansion of payment and information-processing services and the customer base in 2006.

• If interest rates continued rising, management expected a positive effect on net interest income and earnings; cash, maturing investments and operating cash were expected to fund 2006 operations and capital expenditures.

• Priorities included refining risk management, monitoring loan quality and maintaining strong financial and liquidity positions.