The following discussion and analysis provides information about the financial condition and results of operations of the Company for the years ended December 31, 2008, 2007 and 2006. All share and per share data have been restated to give effect to the 50% and 10% stock dividends issued on September 15, 2006 and December 17, 2007, respectively. This discussion and analysis should be read in conjunction with the Company's consolidated financial statements and accompanying notes and other selected financial data presented elsewhere in this report.

Executive Overview

Cass provides payment and information processing services to large manufacturing, distribution and retail enterprises from its processing centers in St. Louis, Missouri, Columbus, Ohio, Boston, Massachusetts, Greenville, South Carolina and Wellington, Kansas. The Company's services include freight invoice rating, payment processing, auditing, and the generation of accounting and transportation information. Cass also processes and pays utility invoices, which include electricity, gas and telecommunications expenses, and is a provider of telecom expense management solutions. Cass extracts, stores and presents information from freight, utility and telecommunication invoices, assisting its customers' transportation, energy and information technology managers in making decisions that will enable them to improve operating performance. The Company receives data from multiple sources, electronic and otherwise, and processes the data to accomplish the specific operating requirements of its customers. It then provides the data in a central repository for access and archiving. The data is finally transformed into information through the Company's databases that allow client interaction as required and provide Internet-based tools for analytical processing. The Company also, through Cass Commercial Bank, its St. Louis, Missouri based bank subsidiary, provides banking services in the St. Louis metropolitan area, Orange County, California and other selected cities in the United States. In addition to supporting the Company's payment operations, the Bank provides banking services to its target markets, which include privately owned businesses and churches and church-related ministries.

The specific payment and information processing services provided to each customer are developed individually to meet each customer's requirements, which can vary greatly. In addition, the degree of automation such as electronic data interchange, imaging, and web-based solutions varies greatly among customers and industries. These factors combine so that pricing varies greatly among the customer base. In general, however, Cass is compensated for its processing services through service fees and account balances that are generated during the payment process. The amount, type and calculation of service fees vary greatly by service offering, but generally follow the volume of transactions processed. Interest income from the balances generated during the payment processing cycle is affected by the amount of time Cass holds the funds prior to payment and the dollar volume processed. Both the number of transactions processed and the dollar volume processed are therefore key metrics followed by management. Other factors will also influence revenue and profitability, such as changes in the general level of interest rates, which have a significant effect on net interest income. The funds generated by these processing activities are invested in overnight investments, investment grade securities and loans generated by the Bank. The Bank earns most of its revenue from net interest income, or the difference between the interest earned on its loans and investments and the interest paid on its deposits. The Bank also assesses fees on other services such as cash management services.

Industry-wide factors that impact the Company include the willingness of large corporations to outsource key business functions such as freight, utility and telecommunication payment and audit. The benefits that can be achieved by outsourcing transaction processing and the management information generated by Cass' systems can be influenced by factors such as the competitive pressures within industries to improve profitability, the general level of transportation costs, deregulation of energy costs and consolidation of telecommunication providers. Economic factors that impact the Company include the general level of economic activity that can affect the volume and size of invoices processed, the ability to hire and retain qualified staff and the growth and quality of the loan portfolio. As lower levels of economic activity are encountered, such as those experienced in the second half of 2008, the number and total dollar amount of transactions processed by the Company may decline thereby reducing fee revenue, interest income, and possibly liquidity. The general level of interest rates also has a significant effect on the revenue of the Company. As discussed in greater detail in Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," a decline in the general level of interest rates, as has been experienced during 2008, can have a negative impact on net interest income.

On July 7, 2006, the Company acquired 100% of the stock of NTransit, Inc. ("NTransit"), a company that provides auditing and expense management of parcel shipments. While this acquisition did not meet the Regulation S-X criteria of a significant business combination, it positioned the Company to expand its offerings in the specialized service and expertise in parcel shipping, which is a unique segment of the transportation industry that has experienced significant growth in recent years.

Total fee revenue and other income in 2008 increased $4,970,000, or 10%, and net interest income after provision for loan losses (also referred to as net investment income) decreased $1,922,000, or 5%, while total operating expenses increased $2,825,000, or 5%. These results were driven by a 1,950,000, or 11%, increase in items processed and $4,715,346,000, or 21%, increase in dollars processed, which were somewhat offset by the impact of a higher provision for loan losses and the decline in the general level of interest rates. The asset quality of the Company's loans and investments appears strong.

Currently, management views Cass' major opportunity and challenge as the continued expansion of its payment and information processing service offerings and customer base. Management intends to accomplish this by maintaining

the Company's lead in applied technology, which we believe, when combined with the security and processing controls of the Bank, makes Cass unique in the industry.

Recent Developments

The U.S. and global economies have experienced and are experiencing significant stress and disruptions in the financial sector. In response to the financial crisis, in October 2008, the Emergency Economic Stabilization Act of 2008 (the "EESA") was signed into law. In addition, the U.S. Treasury Department announced that it has been authorized to purchase equity stakes in participating U.S. financial institutions. Under this program, known as the Troubled Asset Relief Program - Capital Purchase Program (the "TARP Capital Purchase Program"), the U.S. Treasury Department will make capital available to participating U.S. financial institutions in exchange for, generally, preferred stock.

Further, after receiving a recommendation from the boards of the FDIC and the FRB, the U.S. Treasury signed the systemic risk exception to the FDIC Act, enabling the FDIC to temporarily provide a 100% guarantee of the senior debt of all FDIC-insured institutions and their holding companies, as well as non-interest bearing transaction deposit accounts under a Temporary Liquidity Guarantee Program.

After careful assessment, and due to its strong capital base, the Company chose not to participate in the TARP Capital Purchase Program.

The Company elected to participate in the Temporary Liquidity Guarantee Program, as not participating could have put the Company at a competitive disadvantage without the 100% FDIC guarantee of its non-interest bearing transaction deposit accounts. The FDIC guarantee of senior debt was not a factor in the Company's decision process, as it has no senior debt outstanding.

Critical Accounting Policies

The Company has prepared the consolidated financial information in this report in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). In preparing the consolidated financial statements in accordance with U.S. GAAP, management makes estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. These estimates have been generally accurate in the past, have been consistent and have not required any material changes. There can be no assurances that actual results will not differ from those estimates. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position have been discussed with the Audit Committee of the Board of Directors and are described below.

Impairment of Assets. The Company periodically evaluates certain long-term assets such as intangible assets including goodwill, foreclosed assets, internally developed software and investments in private equity securities for impairment. Generally, these assets are initially recorded at cost, and recognition of impairment is required when events and circumstances indicate that the carrying amounts of these assets will not be recoverable in the future. If impairment occurs, various methods of measuring impairment may be called for depending on the circumstances and type of asset, including quoted market prices, estimates based on similar assets, and estimates based on valuation techniques such as discounted projected cash flows. Assets held for sale are carried at the lower of cost or fair value less costs to sell. These policies affect both segments of the Company and require significant management assumptions and estimates that could result in materially different results if conditions or underlying circumstances change.

Pension Plans. The amounts recognized in the consolidated financial statements related to pensions are determined from actuarial valuations. Inherent in these valuations are assumptions including expected return on plan assets, discount rates at which the liabilities could be settled at December 31, 2008, rate of increase in future compensation levels and mortality rates. These assumptions are updated annually and are disclosed in Note 12 to the consolidated financial statements. The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" ("SFAS No. 158") on December 31, 2006. SFAS No. 158 requires companies to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. The funded status is measured as the difference between the fair value of the plan assets and the projected benefit obligation as of the date of its fiscal year-end.

Income Taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity's financial statements or tax returns. Judgment is required in addressing the future tax consequences of events that have been recognized in the Company's financial statements or tax returns such as the realization of deferred tax assets, changes in tax laws or interpretations thereof. In addition, the Company is subject to the continuous examination of its income tax returns by the Internal Revenue Service and other taxing authorities. Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for the recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. See Note 15 to the consolidated financial statements.

Allowance for Loan Losses. The Company performs periodic and systematic detailed reviews of its loan portfolio to assess overall collectability. The level of the allowance for loan losses reflects management's estimate of the collectability of the loan portfolio. Although these estimates are based on established methodologies for determining allowance requirements, actual results can differ significantly from estimated results. These policies affect both segments of the Company. The impact and associated risks related to these policies on the Company's business operations are discussed in the "Provision and Allowance for Loan Losses" section of this report.

Summary of Results

                                                        December 31,                                % Change
                                        ---------------------------------------------     ----------------------------
(In thousands, except per share data)         2008          2007               2006       2008 v. 2007    2007 v. 2006
----------------------------------------------------------------------------------------------------------------------
Total processing volume                      36,416        32,740             29,266          11.2%          11.9%
Total processing dollars                $26,900,535   $22,185,189        $19,871,281          21.3%          11.6%
Payment and processing fees                 $50,721       $45,642            $40,343          11.1%          13.1%
Net investment income                       $38,560       $40,482            $39,284          (4.7)%          3.1%
Total net revenue                           $91,730       $88,682            $82,105           3.4%           8.0%
Average earning assets                     $841,367      $809,739           $762,397           3.9%           6.2%
Net interest margin*                           5.34%         5.45%              5.50%         (2.0)%          (.9)%
Net income from continuing operations       $19,006       $17,795            $15,461           6.8%          15.1%
Diluted EPS from continuing operations        $2.03         $1.90              $1.65           6.8%          15.2%
Net income                                  $19,006       $17,795            $15,066           6.8%          18.1%
Diluted earnings per share                    $2.03         $1.90              $1.61           6.8%          18.0%
Return on average assets                       2.06%         2.00%              1.80%
Return on average equity                      18.24%        19.90%             18.89%
----------------------------------------------------------------------------------------------------------------------

The results of 2008 compared to 2007 include the following significant items:

Payment and processing fee revenue from continuing operations increased as the number of transactions processed increased. This increase was driven mainly by Utility Information Services processing activity which added a significant amount of new business during 2008. Transportation Information Services also achieved record levels of processing during 2008 and record levels of new customers added.

Net investment income decreased $1,922,000 primarily due to both a decline in the general level of interest rates and an increase in the provision for loan losses. The net interest margin on a tax equivalent basis was 5.34% in 2008 compared to 5.45% in 2007. The growth in average earning assets was funded mainly by increases in accounts and drafts payable due to the increase in dollars processed.

There were $552,000 gains from the sale of securities in 2008 and no gains in 2007. Bank service fees decreased $352,000, or 21%, to $1,330,000. Other income from continuing operations decreased $309,000 in 2008 or 35%. Operating expenses from continuing operations increased $2,825,000, or 5%, due mainly to expenses relating to the increase in processing activity.

The results of 2007 compared to 2006 include the following significant items:

Payment and processing fee revenue from continuing operations increased as the number of transactions processed increased. This increase was driven mainly by Utility Information Services processing activity which added a significant amount of new business during 2007. Transportation Information Services also achieved record levels of processing during 2007 and record levels of new customers added.

Net investment income increased $1,198,000 due to an increase in average earning assets. The net interest margin on a tax equivalent basis was 5.45% in 2007 compared to 5.50% in 2006. The growth in average earning assets was funded mainly by increases in accounts and drafts payable due to the increase in dollars processed.

There were no gains from the sale of securities in 2007 and 2006. Bank service fees increased $57,000, or 4%, to $1,682,000. Other income from continuing operations remained fairly constant at $876,000 in 2007 and $853,000 in 2006. Operating expenses from continuing operations increased $4,462,000, or 8%, due mainly to expenses relating to the increase in processing activity.

Fee Revenue and Other Income from Continuing Operations

The Company's fee revenue is derived mainly from freight and utility payment and
processing fees. As the Company provides its processing and payment services, it
is compensated by service fees which are typically calculated on a per-item
basis and by the accounts and drafts payable balances generated in the payment
process which can be used to generate interest income. Processing volumes, fee
revenue and other income for the years ended December 31, 2008, 2007 and 2006
were as follows:

                                                         December 31,                          % Change
                                       -------------------------------------------   ------------------------------
(In thousands)                                2008           2007            2006     2008 v. 2007    2007 v. 2006
-------------------------------------------------------------------------------------------------------------------
Freight invoice transaction volume           25,854         23,480          22,601        10.1%           3.9%
Freight invoice dollar volume           $17,482,520    $14,519,906     $14,199,389        20.4%           2.3%
Utility transaction volume                   10,562          9,260           6,665        14.1%          38.9%
Utility transaction dollar volume        $9,418,015     $7,665,283      $5,671,892        22.9%          35.1%
Payment and processing revenue              $50,721        $45,642         $40,343        11.1%          13.1%
Bank service fees                            $1,330         $1,682          $1,625       (20.9)%          3.5%
Gains on sales of investment securities        $552             --              --         N/A            N/A
Other                                          $567           $876            $853       (35.3)%          2.7%
-------------------------------------------------------------------------------------------------------------------

Fee revenue and other income in 2008 compared to 2007 include the following significant pre-tax components:

Freight volume increased by 2,374,000 transactions during the past year. This increase was due mainly to new business in 2008 somewhat offset by the impact of the general economic slow down on existing customer processing activity, particularly in the second half of the year. Utility volume experienced solid growth, adding more than 1,302,000 transactions in 2008. This growth was due mainly to new business. These transaction volume increases drove most of the $5,079,000 increase in payment and processing revenue.

Fee revenue and other income in 2007 compared to 2006 include the following significant pre-tax components:

Freight volume increased by 879,000 transactions during 2007. This increase was due mainly to new business in 2007. Utility volume experienced significant growth, adding more than 2,595,000 transactions in 2007. This growth was due mainly to new business. These transaction volume increases drove most of the $5,299,000 increase in payment and processing revenue.

Net Interest Income

Net interest income is the difference between interest earned on loans,
investments, and other earning assets and interest expense on deposits and other
interest-bearing liabilities. Net interest income is a significant source of the
Company's revenues. The following table summarizes the changes in tax-equivalent
net interest income and related factors for the three periods ended December 31,
2008, 2007 and 2006:

                                                                                 % Change          % Change
(In Thousands)                             2008          2007         2006      2008 v. 2007      2007 v. 2006
---------------------------------------------------------------------------------------------------------------
Average earning assets                   $841,366     $809,739     $762,397          3.9%             6.2%
Net interest income*                       44,966       44,115       41,950          1.9%             5.2%
Net interest margin*                        5.34%        5.45%        5.50%        (2.0)%            (.9)%
Yield on earning assets                     5.75%        6.43%        6.37%       (10.6)%              .9%
Rate on interest bearing liabilities        2.16%        4.20%        3.62%       (48.6)%            16.0%
---------------------------------------------------------------------------------------------------------------

Net interest income in 2008 compared to 2007:

The increase in net interest income was caused by the increase in earning assets partially offset by a decrease in net interest margin. The increase in earning assets was funded mainly by the increase in accounts and drafts payable due to the increased dollars processed. The decrease in net interest margin was due mainly to

the reduction in the general level of interest rates. The Company is negatively affected by decreases in the level of interest rates. Conversely, the Company is positively affected by increases in the level of interest rates due to the fact that its rate sensitive assets significantly exceed its rate sensitive liabilities. This is primarily due to the non-interest-bearing liabilities generated by the Company in the form of accounts and drafts payable. More information is contained in the tables below and in Item 7A of this report.

Total average loans increased $37,210,000, or 7%, to $552,333,000. Loans have a positive effect on interest income and the net interest margin due to the fact that loans are one of the Company's highest yielding earning assets for any given maturity.

Total average investment in securities increased $55,910,000, or 40%, to $197,273,000. The investment portfolio will expand and contract over time as the interest rate environment changes and the Company manages its liquidity and interest rate position. The increase in 2008 was due to the purchase of state and political subdivision securities with AA or better credit ratings and maturities approaching ten years. With the declining interest rate environment, the Company made these purchases to reduce the level of short-term rate sensitive assets. All purchases were made in accordance with the Company's investment policy. Total average federal funds sold and other short-term investments decreased $61,493,000, or 40%, to $91,760,000. This decrease was the primary offset to the previously mentioned increases in loans and investment securities.

The Bank's average interest-bearing deposits decreased $33,634,000, or 18%, compared to the prior year. This decrease was primarily the result of the reduction of higher-cost time deposits. Average rates paid on interest-bearing liabilities decreased from 4.20% to 2.16% as a result of an overall decline in the interest rate environment during 2008 combined with the previously mentioned reduction in higher-cost time deposits.

Net interest income in 2007 compared to 2006:

The increase in net interest income was caused by the increase in earning assets partially offset by a slight decrease in net interest margin. The increase in earning assets was funded mainly by the increase in accounts and drafts payable due to the increased dollars processed. The decrease in net interest margin was due mainly to the reduction in the general level of interest rates. The Company is negatively affected by decreases in the level of interest rates. Conversely, the Company is positively affected by increases in the level of interest rates due to the fact that its rate sensitive assets significantly exceed its rate sensitive liabilities. This is primarily due to the non-interest-bearing liabilities generated by the Company in the form of accounts and drafts payable. More information is contained in the tables below and in Item 7A of this report.

Total average loans decreased $7,244,000, or 1%, to $515,123,000. Loans have a positive effect on interest income and the net interest margin due to the fact that loans are one of the Company's highest yielding earning assets for any given maturity.

Total average investment in securities increased $49,808,000, or 54%, to $141,363,000. The investment portfolio will expand and contract over time as the interest rate environment changes and the Company manages its liquidity and interest rate position. The increase in 2007 was due to the purchase of state and political subdivision securities with AA or better credit ratings and maturities approaching ten years. With the expectations of a declining interest rate environment, the Company made these purchases to reduce the level of short-term rate sensitive assets. All purchases were made in accordance with the Company's investment policy. Total average federal funds sold and other short-term investments increased $4,778,000, or 3%, to $153,253,000. This increase was funded by the increase in accounts and drafts payable.

The Bank's average interest-bearing deposits remained relatively flat with a $6,450,000, or 4%, increase compared to the prior year. Average demand deposits decreased $5,165,000, or 5%, as customers moved their deposited funds into higher yielding off-balance sheet investment products. Average rates paid on interest-bearing liabilities increased from 3.62% to 4.20% as a result of increased rate competition for savings deposits and certificates of deposit in the markets served by the Bank.

Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rate and
Interest Differential

The following table contains condensed average balance sheets for each of the
periods reported, the tax-equivalent interest income and expense on each
category of interest-earning assets and interest-bearing liabilities, and the
average yield on such categories of interest-earning assets and the average
rates paid on such categories of interest-bearing liabilities for each of the
periods reported:

                                             2008                              2007                              2006
                                  --------------------------       --------------------------        ----------------------------
                                   Interest                        Interest                          Interest
                                   Average   Income/  Yield/       Average    Income/  Yield/        Average     Income/  Yield/
(Dollars in thousands)             Balance   Expense    Rate       Balance    Expense    Rate        Balance     Expense    Rate
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Assets(1)
Earning assets:
. . .