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Tompkins Financial Corporation Reports Increased Second Quarter Earnings

·20 min read

Tompkins Financial Corporation (NYSE American:TMP):

Tompkins Financial Corporation reported diluted earnings per share of $1.44 for the second quarter of 2020, up 13.4% compared to $1.27 reported in the second quarter of 2019. Net income for the second quarter of 2020 was $21.4 million, compared to $19.4 million reported for the same period in 2019.

For the year-to-date period ended June 30, 2020, diluted earnings per share were $1.97, down 25.1% from the same period in 2019. Year-to-date net income was $29.4 million, down from $40.4 million, for the same period in 2019. Results for the 2020 year-to-date period were negatively impacted by economic stress resulting from the COVID-19 pandemic, which contributed to the $16.3 million provision for credit losses recognized during the first quarter of 2020.

Mr. Romaine commented, "We are pleased to report strong financial results for the quarter despite a very challenging business climate. Although the longer term impact of the pandemic and related economic conditions are still unknown, there have been several recent positive trends noted with certain national economic indicators, such as reduced levels of unemployment, improving retail sales and improving consumer confidence. At Tompkins, we have seen several positive trends as well, with very strong mortgage application volumes in the second quarter, higher levels of debit card spending, and favorable credit quality measures when compared to last quarter. We are encouraged by some of these recent favorable trends, though the recent rise in COVID-19 cases nationally makes it clear that much uncertainty remains. We will remain vigilant in monitoring risk trends as we navigate these challenging times."

SELECTED HIGHLIGHTS FOR THE SECOND QUARTER:

  • Total loans of $5.4 billion were up $568 million, or 11.7% over June 30, 2019. The increase over the prior year included $465.6 million of PPP loans funded during the second quarter of 2020.

  • Total deposits of $6.4 billion increased by $1.4 billion, or 27.8% over June 30, 2019.

  • Net interest margin was 3.45% for the second quarter of 2020, up from 3.44% for the first quarter of 2020, and 3.43% for the fourth quarter of 2019.

  • The ratio of Total Capital to risk-weighted assets improved to 13.95%, up from 13.62% at March 31, 2020, and 13.53% at December 31, 2019.

NET INTEREST INCOME
Net interest income was $56.4 million for the second quarter of 2020, compared to $52.3 million reported for the second quarter of 2019. For the year-to-date period, net interest income was $109.3 million, an increase of $5.1 million or 4.9% from the same six-month period in 2019.

Net interest income benefited from growth in average loans. Average loans were up $297.7 million, or 6.2% in the first six months of 2020, compared to the same six month period in 2019. The increase in average loans includes the benefit of $465.6 million of loans originated under the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP") in the second quarter of 2020. Asset yields were down 20 basis points compared to the first six months of 2019, which reflects the impact of reductions in market interest rates during the first six months of 2020, and the addition of the lower yielding PPP loans originated in the second quarter.

Average total deposits were up $778.1 million, or 15.7% in the first six months of 2020, versus the same period in 2019. Average noninterest deposits were up $251.3 billion or 18.7% in the first six months of 2020, compared to the same period in 2019. Average deposit balances benefited from $465.6 million of PPP loan originations during the second quarter of 2020, the majority of which were deposited in Tompkins checking accounts. The average rate paid on interest-bearing deposit products in the first six months of 2020 decreased by 21 basis points over the same period in 2019.

Net interest margin was 3.45% for the second quarter of 2020, up compared to the 3.34% reported for the second quarter of 2019, and 3.44% for the first quarter of 2020. The improved net interest margin year-over-year was largely driven by lower funding costs, reflecting lower deposit rates and growth in deposit balances, which were used to reduce higher cost other borrowing balances.

As a result of its participation in the SBA's PPP, in the second quarter the Company recorded net deferred loan fees of $2.3 million, which are included in interest income.

NONINTEREST INCOME
Noninterest income represented 24.8% of total revenues in the first six months of 2020, as compared to 26.7% in the same period in 2019. Noninterest income of $17.2 million for the second quarter of 2020 was down 7.3% compared to the same period in 2019. For the year-to-date period, noninterest income of $36.1 million was down 4.7% from the same period in 2019. Total fee based services in the second quarter of 2020 were $14.7 million, down 10.5% compared to the same period in 2019. The reduction in fee based income in 2020 is largely related to the pandemic-related travel and business restrictions, which reduced card services and service charge income. Other noninterest income for the second quarter of 2020 included $691,000 related to gains on sales of residential mortgage loans.

NONINTEREST EXPENSE
Noninterest expense was $46.9 million for the second quarter of 2020, up $818,000, or 1.8%, over the second quarter of 2019. For the year-to-date period, noninterest expense was $92.6 million, up $2.3 million, or 2.6%, from the same period in 2019. The increase in noninterest expense for both the second quarter and year-to-date periods was primarily attributable to normal annual increases in salaries and wages. Other expense for the second quarter and year-to-date period of 2020 included $1.2 million and $1.7 million, respectively, related to allowance for credit losses for off-balance sheet exposures. Other expense during the quarter also included a loss of $675,000 related to the pending sale of real estate.

INCOME TAX EXPENSE
The Company's effective tax rate was 20.5% for the second quarter of 2020, compared to 19.6% for the same period in 2019. The effective tax rate for the six months ended June 30, 2020 was 20.2%, compared to 20.3% reported for the same period in 2019.

ASSET QUALITY
Asset quality trends remained strong in the second quarter of 2020. Nonperforming assets represented 0.40% of total assets at June 30, 2020, down from 0.47% at December 31, 2019. Nonperforming asset levels continue to be below the most recent Federal Reserve Board Peer Group Average1 of 0.49%.

Provision for credit losses in the second quarter of 2020 was a negative provision of $348,000 compared to an expense of $601,000 for the same period in 2019. Provision expense for the six months ended June 30, 2020 was $15.9 million, compared to $1.0 million for the same period in 2019. The first quarter of 2020 included provision expense of $16.3 million related to the impact of the economic shutdown related to COVID-19 on economic forecasts and other model assumptions relied upon by management in determining the allowance. Net recoveries for the second quarter of 2020 were $26,000 compared to net charge-offs of $139,000 reported in the second quarter of 2019.

The allowance for credit losses represented 0.96% of total loans and leases at June 30, 2020, compared to 1.06% at March 31, 2020, 0.81% at December 31, 2019, and 0.84% at June 30, 2019. The decline in the ratio during the second quarter this year is largely due to the increase in loan balances being largely driven by $465.6 million of PPP loans for which no reserves have been allocated. The ratio of the allowance to total nonperforming loans and leases was 172.62% at June 30, 2020, improved from 126.90% at December 31, 2019, and 171.42% at June 30, 2019.

Overall credit quality has been supported by several initiatives initiated by the Company in response to the pandemic. As previously announced, Tompkins has initiated and participated in a number of credit initiatives to support employees and customers who have been impacted by the economic conditions associated with the COVID-19 pandemic. For non-executive employees affected by COVID-19, the Company implemented a low interest loan program. The Company also implemented a payment deferral program to assist both consumer and business borrowers that may be experiencing financial hardship due to COVID-19. Weekly deferral requests for the last week of June were down 98% from peak levels the Company experienced in late March. As of June 30, 2020, the Company had granted payment deferral requests for approximately 3,900 loans totaling $2.3 billion to individuals and businesses. As of July 20, 2020, nearly 50% of loans that had received deferrals had begun making regular payments.

As previously noted, the Company participated in the U.S. Small Business Administration (SBA) Paycheck Protection Program ("PPP"). This program provides borrower guarantees for lenders, as well as loan forgiveness incentives for borrowers that utilize the loan proceeds to cover employee compensation-related expenses and certain other eligible business operating costs, all in accordance with the rules and regulations established by the SBA. The Company began accepting applications for PPP loans on April 3, 2020, and had funded approximately 2,997 loans totaling about $465.6 million as of June 30, 2020.

CAPITAL POSITION
Capital ratios remained well above the regulatory minimums for well capitalized institutions. The ratio of Total capital to risk-weighted assets improved to 13.95% at June 30, 2020, up from 13.62% at March 31, 2020, and 13.53% at December 31, 2019. The ratio of Tier 1 capital to average assets was 8.79% at June 30, 2020, down from 9.61% at December 31, 2019, and 9.25% at June 30, 2019. The current period Tier 1 capital to average assets was negatively impacted by $465.6 million of PPP loans originated in the second quarter of 2020.

ABOUT TOMPKINS FINANCIAL CORPORATION

Tompkins Financial Corporation is a financial services company serving the Central, Western, and Hudson Valley regions of New York and the Southeastern region of Pennsylvania. Headquartered in Ithaca, NY, Tompkins Financial is parent to Tompkins Trust Company, Tompkins Bank of Castile, Tompkins Mahopac Bank, Tompkins VIST Bank, Tompkins Insurance Agencies, Inc., and offers wealth management services through Tompkins Financial Advisors. For more information on Tompkins Financial, visit www.tompkinsfinancial.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform of 1995:

This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Examples of forward-looking statements in this press release include, without limitation, those regarding the novel coronavirus (COVID-19) and our plans in response to the coronavirus. Forward-looking statements may be identified by use of such words as "may", "will", "estimate", "intend", "continue", "believe", "expect", "plan", or "anticipate", and other similar words. Forward-looking statements are made based on management’s expectations and beliefs concerning future events impacting the Company and are subject to certain uncertainties and factors relating to the Company’s operations and economic environment, all of which are difficult to predict and many of which are beyond the control of the Company, that could cause actual results of the Company to differ materially from those expressed and/or implied by forward-looking statements. The following factors, in addition to those listed as Risk Factors in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, are among those that could cause actual results to differ materially from the forward-looking statements: changes in general economic, market and regulatory conditions; the severity and duration of the coronavirus outbreak and the impact of the outbreak (including the government’s response to the outbreak) on economic and financial markets, potential regulatory actions, and modifications to our operations, products, and services relating thereto; disruptions in our and our customers’ operations and loss of revenue due to pandemics, epidemics, widespread health emergencies, government-imposed travel/business restrictions, or outbreaks of infectious diseases such as the coronavirus, and the associated adverse impact on our financial position, liquidity, and our customers’ abilities to repay their obligations to us or willingness to obtain financial services products from the Company; the development of an interest rate environment that may adversely affect the Company’s interest rate spread, other income or cash flow anticipated from the Company’s operations, investment and/or lending activities; changes in laws and regulations affecting banks, bank holding companies and/or financial holding companies, such as the Dodd-Frank Act, Basel III and the Economic Growth, Regulatory Relief, and Consumer Protection Act; legislative and regulatory changes in response to COVID-19 with which we and our subsidiaries must comply, including the CARES Act and the rules and regulations promulgated thereunder, and state and local government mandates; technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; governmental and public policy changes, including environmental regulation; reliance on large customers; and financial resources in the amounts, at the times and on the terms required to support the Company’s future businesses. The Company does not undertake any obligation to update its forward-looking statements.

TOMPKINS FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CONDITION

(In thousands, except share and per share data) (Unaudited)

As of

As of

ASSETS

06/30/2020

12/31/2019

Cash and noninterest bearing balances due from banks

$

472,108

$

136,010

Interest bearing balances due from banks

7,018

1,972

Cash and Cash Equivalents

479,126

137,982

Available-for-sale debt securities, at fair value (amortized cost of $1,301,271 at June 30, 2020 and $1,293,239 at December 31, 2019)

1,335,153

1,298,587

Equity securities, at fair value (amortized cost $934 at June 30, 2020 and $915 at December 31, 2019)

934

915

Total loans and leases, net of unearned income and deferred costs and fees

5,424,285

4,917,550

Less: Allowance for credit losses

52,082

39,892

Net Loans and Leases

5,372,203

4,877,658

Federal Home Loan Bank and other stock

19,044

33,695

Bank premises and equipment, net

89,934

94,355

Corporate owned life insurance

83,606

82,961

Goodwill

92,447

92,447

Other intangible assets, net

5,500

6,223

Accrued interest and other assets

104,109

100,800

Total Assets

$

7,582,056

$

6,725,623

LIABILITIES

Deposits:

Interest bearing:

Checking, savings and money market

3,759,478

3,080,686

Time

699,166

675,014

Noninterest bearing

1,918,877

1,457,221

Total Deposits

6,377,521

5,212,921

Federal funds purchased and securities sold under agreements to repurchase

50,889

60,346

Other borrowings

325,000

658,100

Trust preferred debentures

17,120

17,035

Other liabilities

113,497

114,167

Total Liabilities

$

6,884,027

$

6,062,569

EQUITY

Tompkins Financial Corporation shareholders' equity:

Common Stock - par value $.10 per share: Authorized 25,000,000 shares; Issued: 14,950,368 at June 30, 2020; and 15,014,499 at December 31, 2019

1,495

1,501

Additional paid-in capital

335,268

338,507

Retained earnings

386,025

370,477

Accumulated other comprehensive loss

(21,048

)

(43,564

)

Treasury stock, at cost – 119,092 shares at June 30, 2020, and 123,956 shares at December 31, 2019

(5,187

)

(5,279

)

Total Tompkins Financial Corporation Shareholders’ Equity

696,553

661,642

Noncontrolling interests

1,476

1,412

Total Equity

$

698,029

$

663,054

Total Liabilities and Equity

$

7,582,056

$

6,725,623

TOMPKINS FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data) (Unaudited)

Three Months Ended

Six Months Ended

06/30/2020

06/30/2019

06/30/2020

06/30/2019

INTEREST AND DIVIDEND INCOME

Loans

$

56,133

$

56,740

$

111,747

$

112,064

Due from banks

1

$

10

7

$

20

Available-for-sale debt securities

6,922

$

7,686

14,066

$

15,544

Held-to-maturity securities

0

$

863

0

$

1,721

Federal Home Loan Bank and other stock

389

$

794

824

$

1,672

Total Interest and Dividend Income

63,445

$

66,093

126,644

$

131,021

INTEREST EXPENSE

Time certificates of deposits of $250,000 or more

860

774

1,703

$

1,360

Other deposits

3,917

6,816

10,272

$

12,827

Federal funds purchased and securities sold under agreements to repurchase

21

33

57

$

77

Trust preferred debentures

253

327

542

$

656

Other borrowings

2,028

5,825

4,735

$

11,869

Total Interest Expense

7,079

13,775

17,309

$

26,789

Net Interest Income

56,366

52,318

109,335

$

104,232

Less: Provision for credit loss expense

(348

)

601

15,946

$

1,046

Net Interest Income After Provision for Credit Loss Expense

56,714

51,717

93,389

$

103,186

NONINTEREST INCOME

Insurance commissions and fees

7,255

7,752

15,300

$

15,797

Investment services income

3,920

3,907

8,122

$

7,991

Service charges on deposit accounts

1,248

2,021

3,231

$

4,019

Card services income

2,283

2,750

4,466

$

5,540

Other income

2,466

1,806

4,570

$

4,284

Net gain on securities transactions

5

284

448

$

296

Total Noninterest Income

17,177

18,520

36,137

$

37,927

NONINTEREST EXPENSE

Salaries and wages

23,037

22,088

45,531

$

43,189

Other employee benefits

5,886

5,662

11,570

$

11,273

Net occupancy expense of premises

3,040

3,258

6,368

$

6,859

Furniture and fixture expense

1,888

1,996

3,873

$

3,975

Amortization of intangible assets

375

418

749

$

830

Other operating expense

12,662

12,648

24,537

$

24,153

Total Noninterest Expenses

46,888

46,070

92,628

$

90,279

Income Before Income Tax Expense

27,003

24,167

36,898

$

50,834

Income Tax Expense

5,540

4,743

7,449

$

10,338

Net Income Attributable to Noncontrolling Interests and Tompkins Financial Corporation

21,463

19,424

29,449

$

40,496

Less: Net Income Attributable to Noncontrolling Interests

32

32

69

$

64

Net Income Attributable to Tompkins Financial Corporation

$

21,431

19,392

$

29,380

$

40,432

Basic Earnings Per Share

$

1.44

$

1.27

$

1.97

$

2.64

Diluted Earnings Per Share

$

1.44

$

1.27

$

1.97

$

2.63

Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)

Quarter Ended

Year to Date Period Ended

Year to Date Period Ended

June 30, 2020

June 30, 2020

June 30, 2019

Average

Average

Average

Balance

Average

Balance

Average

Balance

Average

(Dollar amounts in thousands)

Quarter
Ended

Interest

Yield/
Rate

Year
Ended

Interest

Yield/
Rate

Year
Ended

Interest

Yield/
Rate

ASSETS

Interest-earning assets

Interest-bearing balances due from banks

$

4,541

$

1

0.09

%

$

3,033

$

7

0.46

%

$

2,232

$

20

1.81

%

Securities (2)

U.S. Government securities

1,199,999

6,298

2.11

%

1,197,376

12,874

2.16

%

1,399,542

16,168

2.33

%

State and municipal (3)

109,621

743

2.73

%

103,550

1,409

2.74

%

93,872

1,264

2.72

%

Other securities (3)

3,433

32

3.75

%

3,428

68

3.99

%

3,416

81

4.78

%

Total securities

1,313,053

7,073

2.17

%

1,304,354

14,351

2.21

%

1,496,830

17,513

2.36

%

FHLBNY and other stock

21,691

389

7.21

%

24,124

824

6.87

%

47,349

1,672

7.12

%

Total loans and leases, net of unearned income (3)(4)

5,276,794

56,441

4.30

%

5,095,414

112,348

4.43

%

4,797,709

112,636

4.73

%

Total interest-earning assets

6,616,079

63,904

3.89

%

6,426,925

127,530

3.99

%

6,344,120

131,841

4.19

%

Other assets

797,866

616,521

398,762

Total assets

$

7,413,945

$

7,043,446

$

6,742,882

LIABILITIES & EQUITY

Deposits

Interest-bearing deposits

Interest bearing checking, savings & money market

$

3,660,190

1,935

0.21

%

$

3,436,366

6,301

0.37

%

$

2,943,765

9,441

0.65

%

Time deposits

704,460

2,842

1.62

%

692,354

5,674

1.65

%

658,242

4,746

1.45

%

Total interest-bearing deposits

4,364,650

4,777

0.44

%

4,128,720

11,975

0.58

%

3,602,007

14,187

0.79

%

Federal funds purchased & securities sold under

agreements to repurchase

52,464

21

0.16

%

57,996

57

0.20

%

63,451

77

0.24

%

Other borrowings

391,547

2,028

2.08

%

444,988

4,735

2.14

%

971,119

11,869

2.46

%

Trust preferred debentures

17,092

253

5.95

%

17,071

542

6.38

%

16,900

656

7.83

%

Total interest-bearing liabilities

4,825,753

7,079

0.59

%

4,648,775

17,309

0.75

%

4,653,477

26,789

1.16

%

Non-interest bearing deposits

1,788,108

1,598,884

1,347,538

Accrued expenses and other liabilities

109,609

111,141

101,409

Total liabilities

6,723,470

6,358,800

6,102,424

Tompkins Financial Corporation Shareholders’ equity

689,018

683,206

639,015

Noncontrolling interest

1,457

1,440

1,443

Total equity

690,475

684,646

640,458

Total liabilities and equity

$

7,413,945

$

7,043,446

$

6,742,882

Interest rate spread

3.30

%

3.24

%

3.03

%

Net interest income/margin on earning assets

56,825

3.45

%

110,221

3.45

%

105,052

3.34

%

Tax equivalent adjustments

(459

)

(886

)

(820

)

Net interest income per consolidated financial statements

$

56,366

$

109,335

$

104,232

Tompkins Financial Corporation - Summary Financial Data (Unaudited)

(In thousands, except per share data)

Quarter-Ended

Year-Ended

Period End Balance Sheet

Jun-20

Mar-20

Dec-19

Sep-19

Jun-19

Dec-19

Securities

$

1,336,087

$

1,353,567

$

1,299,502

$

1,282,026

$

1,330,719

$

1,299,502

Total Loans

5,424,285

4,937,822

4,917,550

4,857,073

4,855,802

4,917,550

Allowance for credit losses

52,082

52,404

39,892

41,371

40,790

39,892

Total assets

7,582,056

6,743,114

6,725,623

6,627,982

6,654,390

6,725,623

Total deposits

6,377,521

5,409,363

5,212,921

5,369,990

4,988,897

5,212,921

Federal funds purchased and securities sold under agreements to repurchase

50,889

68,993

60,346

50,541

63,978

60,346

Other borrowings

325,000

457,983

658,100

429,000

824,562

658,100

Trust preferred debentures

17,120

17,078

17,035

16,992

16,949

17,035

Total common equity

696,553

681,153

661,642

658,358

656,201

661,642

Total equity

698,029

682,597

663,054

659,865

657,677

663,054

Average Balance Sheet

Average earning assets

$

6,616,079

$

6,237,773

$

6,188,442

$

6,203,078

$

6,337,983

$

6,268,440

Average assets

7,413,945

6,672,948

6,613,202

6,621,412

6,742,409

6,679,578

Average interest-bearing liabilities

4,825,753

4,471,797

4,374,572

4,415,079

4,638,249

4,523,088

Average equity

690,475

678,817

664,441

659,650

650,079

651,341

Share data

Weighted average shares outstanding (basic)

14,681,956

14,718,948

14,726,023

14,827,114

15,019,710

14,907,057

Weighted average shares outstanding (diluted)

14,714,848

14,774,269

14,790,503

14,887,626

15,085,945

14,973,951

Period-end shares outstanding

14,914,458

14,907,947

14,978,589

14,975,750

15,160,719

14,978,589

Common equity book value per share

$

46.70

$

45.69

$

44.17

$

43.96

$

43.28

$

44.17

Tangible book value per share (Non-GAAP)**

$

40.19

$

39.15

$

37.64

$

37.40

$

36.77

$

37.64

** See "Non-GAAP measures" below for a discussion of non-GAAP financial measures and a reconciliation of non-GAAP financial measures to the most directly comparable financial measures presented in accordance with GAAP.

Income Statement

Net interest income

$

56,366

$

52,969

$

53,240

$

53,156

$

52,318

$

210,628

Provision (credit) for credit loss expense

(348)

16,294

(1,000)

1,320

601

1,366

Noninterest income

17,177

18,960

17,972

19,534

18,520

75,433

Noninterest expense

46,888

45,740

45,900

45,655

46,070

181,834

Income tax expense

5,540

1,909

5,200

5,478

4,743

21,016

Net income attributable to Tompkins Financial Corporation

21,431

7,949

21,080

20,206

19,392

81,718

Noncontrolling interests

32

37

32

31

32

127

Basic earnings per share (5)

$

1.44

$

0.53

$

1.41

$

1.34

$

1.27

$

5.39

Diluted earnings per share (5)

$

1.44

$

0.53

$

1.40

$

1.34

$

1.27

$

5.37

Nonperforming Assets

Nonaccrual loans and leases

$

23,183

$

23,556

$

24,281

$

23,568

$

18,906

$

24,281

Loans and leases 90 days past due and accruing

0

0

0

0

0

0

Troubled debt restructuring not included above

6,988

7,137

7,154

6,528

4,889

7,154

Total nonperforming loans and leases

30,171

30,693

31,435

30,096

23,795

31,435

OREO

274

466

428

888

2,229

428

Total nonperforming assets

$

30,445

$

31,159

$

31,863

$

30,984

$

26,024

$

31,863

Tompkins Financial Corporation - Summary Financial Data (Unaudited) - continued

Quarter-Ended

Year-Ended

Delinquency - Total loan and lease portfolio

Jun-20

Mar-20

Dec-19

Sep-19

Jun-19

Dec-19

Loans and leases 30-89 days past due and accruing

$

8,352

$

9,328

$

3,724

$

3,519

$

4,376

$

3,724

Loans and leases 90 days past due and accruing

0

0

794

1,219

1,229

794

Total loans and leases past due and accruing

8,352

9,328

4,518

4,738

5,605

4,518

Allowance for Credit Losses*

Balance at beginning of period

$

52,404

$

39,892

$

41,371

$

40,790

$

40,328

$

43,410

Impact of adopting ASC 326

0

(2,534

)

0

0

0

0

Provision (credit) for credit losses

(348

)

16,294

(1,000

)

1,320

601

1,366

Net loan and lease (recoveries) charge-offs

(26

)

1,248

479

739

139

4,884

Allowance for credit losses at end of period

$

52,082

$

52,404

$

39,892

$

41,371

$

40,790

$

39,892

*CECL was adopted January 1, 2020. Prior periods reflect the allowance for credit losses for loans under the incurred loss methodology.

Loan Classification - Total Portfolio

Special Mention

$

44,741

$

37,121

29,800

$

41,575

$

36,884

$

29,800

Substandard

48,046

52,894

60,499

61,682

47,627

60,499

Ratio Analysis

Credit Quality

Nonperforming loans and leases/total loans and leases (6)

0.56

%

0.62

%

0.64

%

0.62

%

60.49

%

0.64

%

Nonperforming assets/total assets

0.40

%

0.46

%

0.47

%

0.47

%

0.39

%

0.47

%

Allowance for credit losses/total loans and leases

0.96

%

1.06

%

0.81

%

0.85

%

0.84

%

0.81

%

Allowance/nonperforming loans and leases

172.62

%

170.74

%

126.90

%

137.46

%

171.42

%

126.90

%

Net loan and lease losses annualized/total average loans and leases

0.00

%

0.10

%

0.04

%

0.06

%

0.01

%

0.10

%

Capital Adequacy

Tier 1 Capital (to average assets)

8.79

%

9.53

%

9.61

%

9.43

%

9.25

%

9.61

%

Total Capital (to risk-weighted assets)

13.95

%

13.62

%

13.53

%

13.36

%

13.34

%

13.53

%

Profitability (period-end)

Return on average assets *

1.16

%

0.48

%

1.26

%

1.21

%

1.15

%

1.22

%

Return on average equity *

12.48

%

4.71

%

12.59

%

12.15

%

11.96

%

12.55

%

Net interest margin (TE) *

3.45

%

3.44

%

3.44

%

3.43

%

3.34

%

3.39

%

** Quarterly ratios have been annualized

Tompkins Financial Corporation - Summary Financial Data (Unaudited) - continued

Non-GAAP Measures

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). Where non-GAAP disclosures are used in this press release, the comparable GAAP measure, as well as reconciliation to the comparable GAAP measure, is provided in the below tables. The Company believes the non-GAAP measures provide meaningful comparisons of our underlying operational performance and facilitate management's and investors' assessments of business and performance trends. These non-GAAP financial measures should not be considered in isolation or as a measure of the Company's profitability or liquidity; they are in addition to, and are not a substitute for, financial measures under GAAP. The non-GAAP financial measures presented herein may be different from non-GAAP financial measures used by other companies, and may not be comparable to similarly titled measures reported by other companies. Further, the Company may utilize other measures to illustrate performance in the future. Non-GAAP financial measures have limitations since they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP.

Reconciliation of Net Income Attributable to Tompkins Financial Corporation (GAAP) to Net Operating Income Available to Common Shareholders (Non-GAAP) and Reconciliation of Diluted Earnings Per Share (GAAP) to Adjusted Diluted Earnings Per Share (Non-GAAP)

Quarter-Ended

Year-Ended

Jun-20

Mar-20

Dec-19

Sep-19

Jun-19

Dec-19

Net income available to common shareholders

$

21,431

$

7,949

$

21,081

$

20,206

$

19,392

$

81,718

Less: income attributable to unvested stock-based compensations awards

251

99

334

317

306

1,306

Net earnings allocated to common shareholders (GAAP)

21,180

7,850

20,747

19,889

19,086

80,412

Diluted earnings per share (GAAP)

$

1.44

$

0.53

$

1.40

$

1.34

$

1.27

$

5.37

Adjustments for non-operating income and expense:

Write-down of real estate pending sale

673

0

0

0

0

0

Total Adjustments

673

0

0

0

0

0

Tax (benefit) expense

(165

)

0

0

0

0

0

Total adjustments, net of tax

508

0

0

0

0

0

Net operating income available to common shareholders (Non-GAAP)

21,688

7,850

20,747

19,889

19,086

80,412

Weighted average shares outstanding (diluted)

14,714,848

14,774,269

14,790,503

14,887,626

15,085,945

14,973,951

Adjusted diluted earnings per share (Non-GAAP)

$

1.47

$

0.53

$

1.40

$

1.34

$

1.27

$

5.37

Year-to-Date

Jun-20

Jun-19

Net income available to common shareholders

$

29,380

$

40,432

Less: income attributable to unvested stock-based compensation awards

350

655

Net earnings allocated to common shareholders (GAAP)

29,030

39,777

Diluted earnings per share (GAAP)

$

1.97

$

2.64

Adjustments for non-operating income and expense:

Write-down of real estate pending sale

673

0

Tax (benefit) expense

(165

)

0

Total adjustments, net of tax

508

0

Net operating income available to common shareholders (Non-GAAP)

29,538

39,777

Weighted average shares outstanding (diluted)

14,714,848

15,085,945

Adjusted diluted earnings per share (Non-GAAP)

$

2.01

$

2.64

Tompkins Financial Corporation - Summary Financial Data (Unaudited) - continued

Reconciliation of Common Equity Book Value Per Share (GAAP) to Tangible Book Value Per Share (non-GAAP)

Total common equity

$

696,553

$

681,153

$

661,642

$

658,358

$

656,201

$

661,642

Less: Goodwill and intangibles (7)

97,107

97,481

97,855

98,277

98,698

97,855

Tangible common equity (Non-GAAP)

599,446

583,672

563,787

560,081

557,503

563,787

Ending shares outstanding

14,914,458

14,907,947

14,978,589

14,975,750

15,160,719

14,978,589

Tangible book value per share (Non-GAAP)

$

40.19

$

39.15

$

37.64

$

37.40

$

36.77

$

37.64

(1) Federal Reserve peer ratio as of March 31, 2020 the most recent data available, includes banks and bank holding companies with consolidated assets between $3 billion and $10 billion.

(2) Average balances and yields on available-for-sale securities are based on historical amortized cost.

(3) Interest income includes the tax effects of taxable-equivalent basis.

(4) Nonaccrual loans are included in the average asset totals presented above. Payments received on nonaccrual loans have been recognized as disclosed in Note 1 of the Company's consolidated financial statements included in Part I of the Company's annual report on Form 10-K for the fiscal year ended December 31, 2019.

(5) Earnings per share year-to-date may not equal the sum of the quarterly earnings per share as a result of rounding of average shares

(6) Certain acquired loans and leases that are past due are not on nonaccrual and are not included in nonperforming loans. The risk of credit loss on these loans has been considered by virtue of the Company's estimate of acquisition-date fair value and these loans are considered accruing as the Company primarily recognizes interest income through accretion of the difference between the carrying value of these loans and their expected cash flows.

(7) "Goodwill and intangibles" as shown in the above tables, equal total intangible assets less mortgage servicing rights.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200724005035/en/

Contacts

Stephen S. Romaine, President & CEO
Francis M. Fetsko, Executive VP, CFO & COO
Tompkins Financial Corporation (888) 503-5753