Tompkins Community Bank

Tompkins Insurance Agencies announces Kevin Robertson has been promoted to assistant vice president, personal lines supervisor. Robertson is responsible for overseeing personal lines account managers throughout the entire Western New York region. He has been with Tompkins Insurance for six years. Robertson holds his New York State Insurance Brokers License for property and casualty, in addition to a master’s degree from SUNY Brockport. Robertson currently resides in the Village of LeRoy.

Press release:

As reported by many financial institutions, Tompkins Financial Corporation’s earnings for the quarter and year- to-date periods ended December 31, 2017, were impacted by the Tax Cut and Jobs Act of 2017, which reduced the Federal statutory tax rate from 35% in 2017, to 21% in 2018. The change in the tax law created a one-time, fourth quarter, non-cash write-down of net deferred tax assets in the amount of $14.9 million due to the required remeasurement of the net deferred tax assets using the new lower tax rate.

President and CEO Stephen Romaine commented, “I am extremely proud of our Company’s results in 2017. Though our reported earnings are down for the year, had it not been for the non-cash write-down related to the tax law change, our earnings would have been at a record level. Coupled with the general positive trends we have seen in business growth, the lower marginal tax rate will have a meaningful positive impact on future earnings.”

A summary of the impact of the tax law changes on 2017 full year earnings per share is as follows:

§ Diluted earnings per share for year ended December 31, 2017, (including the one-time charge related to tax reform) were $3.43, down 12.3% over full year 2016

§ Adjusted diluted earnings per share for year ended December 31, 2017 (excluding the one-time charge related to tax reform) were $4.42, up 13.0% over full year 2016 (refer to table of “Non GAAP Measures” included in this press release)

GAAP net income for the year ended December 31, 2017, was $52.5 million, down from $59.3 million reported in 2016. Diluted earnings per share were $3.43 for the year ended December 31, 2017, down from the $3.91 per share reported in 2016. Excluding the impact of the one-time charge related to changes in the tax law,

For more information contact:

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

diluted earnings per share for 2017 would have been $4.42, reflecting an increase of 13.0% over diluted earnings per share for 2016. Refer to the table of “Non-GAAP Measures” included in this press release for additional details.

GAAP net income for the fourth quarter of 2017 was $2.5 million, down from the $15.1 million reported for the same period in 2016. Diluted earnings per share of $0.16 for the fourth quarter of 2017 were down 83.8% from the $0.99 reported in the fourth quarter of 2016. Removing the impact of the one-time charge related to tax reform from fourth quarter earnings would have resulted in diluted earnings per share of $1.15 for the fourth quarter of 2017, representing a 16.2% increase over the same period in 2016. Refer to the table of “Non- GAAP Measures” included in this press release for additional details.

Mr. Romaine further commented, “Tompkins has a history of being a high performing Company with a long- term focus. In keeping with this approach, we plan to leverage the benefits of reduced taxes from the Tax Cut and Jobs Act of 2017 in a way that is consistent with our strategy of creating long-term value for our clients, shareholders, communities and employees. This includes planned investments to modernize our facilities, improve customer-facing technology and expand staff in support of these initiatives. We have always given generously to the communities we serve and expect to continue to increase that level going forward. We have a long history of paying profit sharing to our employees and we have raised the profit sharing payout that will be paid in 2018 to 9.0% of employee annual pay. We also plan to raise the minimum wage paid by our Company to $14.00 - $15.00 per hour based on geography and we are committed to increasing compensation for all employees earning less than $18.00 per hour. We are investing just in excess of $1.0 million to increase our wages to these levels.”

SELECTED HIGHLIGHTS FOR YEAR AND FOURTH QUARTER:

• §  Net interest income for the full year of $201.3 million, is up 11.4% over 2016; while net interest income for the fourth quarter of $52.0 million is up 12.1% over the same quarter last year.

• §  Total loans of $4.7 billion at year end 2017 were up 9.7% over year end 2016

• §  Noninterest bearing deposit balances of $1.4 billion at year end 2017 are up 16.3% over year end 2016

• §  Nonperforming assets remain at historically low levels and compare favorably to our industry peers, with nonperforming assets representing 0.38% of total assets at year end 2017, compared to 0.36% at year end 2016.

NET INTEREST INCOME

For the full year ended December 31, 2017, net interest income was $201.3 million, up $20.7 million, or 11.4% from the same period in 2016. Net interest income of $52.0 million for the fourth quarter of 2017 increased by $5.6 million, or 12.1% compared to the same period in 2016.

Growth in net interest income was largely driven by an 11.2% increase in average total loans during 2017, up $444.0 million over average loans in 2016. The loan growth was supported, in part, by a $249.4 million increase in average total deposits over the same period. The net interest margin was 3.42% in the fourth quarter of 2017, up from 3.40% for the most recent prior quarter, and 3.30% for the same quarter last year.

NONINTEREST INCOME

For the full year, noninterest income of $69.2 million is up slightly from $68.8 million reported for 2016. Noninterest income was $17.3 million for the fourth quarter of 2017, and was up $996,000 compared to the same period in 2016. Fee income business related to cards services and investment and management services contributed to the improvement. Insurance revenue and services charges on deposit accounts were down, partially offsetting those improvements. Results for 2017 included realized losses on available-for-sale securities in the amount of $407,000, compared to realized gains of $926,000 in 2016.

NONINTEREST EXPENSE

For the full year, noninterest expenses were $171.1 million in 2017, up 7.9% over 2016. Noninterest expense was $46.3 million for the fourth quarter of 2017, up 17.5% when compared to that same quarter in 2016. During 2017, the Company invested $2.7 million in a historic preservation tax credit which yielded Federal and NYS tax credits. The project was placed in service in the fourth quarter, and accordingly, the fourth quarter results include the required write-off of this investment as operating expense and recognition of the related $3.3 million of tax credits generated from the investment as a reduction of income tax expense. 2017 expenses also included $731,000 of deconversion expenses related to system conversions (including a core system conversion completed in the second quarter of 2017); compared to deconversion expenses of $546,000 recognized in 2016.

INCOME TAX EXPENSE

During 2017, the Company’s effective tax rate was 44.8%, compared to 31.3% in 2016. The increase is mainly due to the $14.9 million one-time write-down of net deferred tax assets discussed above. Tax expense for 2017 benefited from the $3.3 million historic tax credit described above, which was recognized in the fourth quarter of 2017. As previously mentioned, the Tax Cut and Jobs Act of 2017 will reduce the federal statutory tax rate from 35% in 2017, to 21% in 2018.

ASSET QUALITY

Asset quality trends remained strong in the fourth quarter of 2017. Nonperforming assets represented 0.38% of total assets at December 31, 2017, up slightly from 0.36% at December 31, 2016. Nonperforming asset levels continue to be below the most recent Federal Reserve Board Peer Group Average1 of 0.64%.

Full year provision for loan and lease losses was $4.2 million in 2017, down from $4.3 million in 2016. Net loan and lease charge-offs for 2017 were $145,000 compared to net charge-offs of $570,000 reported in 2016. The provision for loan and lease losses was $2.0 million for the fourth quarter of 2017, up from $1.7 million in the fourth quarter of 2016.

The Company’s allowance for originated loan and lease losses totaled $39.7 million at December 31, 2017, and represented 0.91% of total originated loans and leases at December 31, 2017, compared to 0.92% at December 31, 2016. The total allowance represented 172.84% of total nonperforming loans and leases at December 31, 2017, up from 164.98% at December 31, 2016.

CAPITAL POSITION

Capital ratios remain well above the regulatory well capitalized minimums. The ratio of tangible common equity to tangible assets was 7.24% at December 31, 2017, a decline from the 7.58% reported for the most recent prior quarter, and 7.25% at December 31, 2016. Contributing to the decline in capital levels in the fourth quarter of 2017 was the impact of Tax Cut and Jobs Act of 2017. The change in the tax law created a one-time non-cash write-down of net deferred tax assets in the amount of $14.9 million due to the remeasurement of the assets using the new lower tax rate. 

Tompkins Financial Advisors has expanded its capabilities for specialized portfolio management and investment strategies in Western New York with the hiring of Matt Kelley as the company’s Portfolio Manager.

Kelley will be a key member of the Tompkins Financial Advisors Investment Committee and is the first Portfolio Manager to join the company. He will be responsible for developing and implementing investment strategies for individuals and institutional investors. Kelley will also serve as an investment specialist supporting the Tompkins Financial Advisors business development team.

“Our clients will benefit from Matt’s experience as a research analyst, and his ability to develop customized investment strategies,” said Jim Sperry, Tompkins Financial Advisors Managing Director for Western New York. “Like every member of our team, Matt will be focused on understanding our clients’ complete financial picture so we can provide the wealth management strategies that make a meaningful difference in their lives.”

Kelley has more than nine years of client management and portfolio management experience. He holds the Chartered Financial Analyst (CFA) designation, and FINRA Series 7 and 66 registrations. Kelley most recently served as Assistant Vice President of Graystone Consulting, a unit of Morgan Stanley. Within that role, he directed research and managed a globally diversified portfolio of more than $1 billion for high net worth families and institutions.

Kelley earned his Bachelor’s degree in Economics from the University of Rochester, and his Master’s degree in Finance from the Simon Graduate School of Business at the University of Rochester, where he graduated with Beta Gamma Sigma honors. Beta Gamma Sigma is the international honor society serving business programs accredited by the Association to Advance Collegiate Schools of Business. Membership in Beta Gamma Sigma is the highest recognition a business student anywhere in the world can receive in a business program accredited by AACSB International.

Kelley and his family live in Victor, N.Y.

Press release:

Tompkins Financial Corporation reported diluted earnings per share of $1.14 for the third quarter of 2017, which represents an increase of 14.0% compared to the $1.00 reported in the third quarter of 2016. Net income for the third quarter of 2017 was $17.4 million, up 14.9% compared to the $15.1 million reported in the third quarter of 2016.

Year-to-date diluted earnings per share of $3.27 for the first nine months of 2017 represents an increase of 12.0% over the same period in 2016. Year-to-date net income was $50.0 million through the first nine months of 2017, an increase of 13.2% over the same period in 2016.

President and CEO, Stephen S. Romaine said “We are extremely pleased with our earnings performance as the reported results reflect the best third quarter and best year-to-date performance through the first nine months of any year in our Company’s history. A key growth driver for the quarter and year-to-date periods has been the improvement in net interest income, which has benefited from solid growth trends in loans and deposits.”

SELECTED HIGHLIGHTS FOR THIRD QUARTER AND YEAR TO DATE:

• §  Best earnings performance for the first nine months of any year in our Company’s history. Also, the best third quarter earnings performance in our Company’s history.

• §  Net interest income for the quarter was up 12.5% compared to the third quarter of 2016, and up year-to-date 11.2% compared to the same period in 2016.

• §  Net interest margin of 3.40% for the quarter and 3.41% for the year-to-date, are both improved from the same periods in 2016.

For more information contact:

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

• §  Total loans of $4.5 billion were up 9.8% over the same period in 2016; and are up 5.5% over December 31, 2016.

• §  Total deposits of $4.9 billion reflect an increase of 5.4% over the same period last year, and are up 6.9% from December 31, 2016.

• §  Third quarter return on average equity was 11.77% compared to 10.81% for the same quarter last year.

  NET INTEREST INCOME

  Net interest income of $51.0 million for the third quarter of 2017 increased by $5.7 million, or 12.5% compared to the same period in 2016. For the year-to-date period, net interest income was $149.3 million, up $15.1 million, or 11.2% from the same nine-month period in 2016.

  Growth in net interest income for the third quarter of 2017 over the third quarter of 2016 was largely driven by $430.1 million of growth in average loans over the third quarter of 2016, an increase of 10.7%. Average deposits increased $249.1 million, or 5.5% compared to the same period in 2016. Included in the increase in average deposits was a $165.7 million or 14.4% increase in noninterest bearing deposits. For the third quarter of 2017, net interest margin measured 3.40%, compared to 3.45% for the quarter ended June 30, 2017, and 3.31% in the third quarter of 2016.

  NONINTEREST INCOME

  Noninterest income represented 25.2% of total revenues in the third quarter of 2017, compared to 28.3% in the same period in 2016, and 25.8% for the most recent prior quarter. Noninterest income of $17.2 million was down $703,000, or 3.9% compared to the same period last year. The third quarter of 2017 included a loss on sales of available for sale securities of approximately $423,000 compared to a gain of $455,000 reported in the third quarter of 2016. Sales of available-for-sale securities are generally the result of general investment security portfolio maintenance and interest rate risk management.

  Year-to-date noninterest income of $51.9 million was in line with the previous year noninterest income of $52.5 million.

  NONINTEREST EXPENSE

  Noninterest expense was $41.9 million for the third quarter of 2017, up $1.6 million, or 3.9%, over the third quarter of 2016. For the year-to-date period, noninterest expense was $124.8 million, up $5.6 million, or 4.7%, from the same period in 2016. The increase in noninterest expense for both the third quarter and year-to-date periods was mainly due to higher salaries and benefits. Expenses for the quarter also included $345,000 of expense related to OREO properties held by the bank.

ASSET QUALITY

Asset quality trends remained strong in the third quarter of 2017. Nonperforming assets represented 0.37% of total assets at September 30, 2017, compared to 0.36% at December 31, 2016, and 0.32% at September 30, 2016. Though credit quality metrics showed some modest deterioration during the quarter, overall credit quality remains strong and compares favorably to our peers. Nonperforming asset levels as a percentage of total assets of 0.37% compares favorably to the most recent Federal Reserve Board Peer Group Average1 of 0.51%.

Provision for loan and lease losses was $402,000 for the third quarter of 2017, down $380,000 compared to the third quarter of 2016. Net recoveries for the third quarter of 2017 were $479,000 compared to net recoveries of $205,000 reported in the third quarter of 2016.

The Company’s allowance for originated loan and lease losses totaled $37.9 million at September 30, 2017, and represented 0.91% of total originated loans and leases at September 30, 2017, relatively unchanged from the most recent prior quarter and the third quarter of 2016. The total allowance represented 170.12% of total nonperforming loans and leases at September 30, 2017, compared to 164.98% at December 31, 2016, and 186.45% at September 30, 2016.

The level of Special Mention originated loans increased during the quarter to $50.4 million, up from $27.2 million a year ago, and up from $38.5 million at June 30, 2017. The increase is largely related to the Company’s agricultural portfolio that has been negatively impacted by lower average milk prices in 2016, which had an unfavorable impact on operations of our agricultural customers. Milk prices have rebounded in 2017. As of September 30, 2017, payments on all loans in our agricultural portfolio were current. Of the $50.4 million of loans currently listed as Special Mention, 94.3% of the dollar amount outstanding was current on their payments as of September 30, 2017.

CAPITAL POSITION

Capital ratios remain well above the regulatory well capitalized minimums. The ratio of Tier 1 capital to average assets was 8.50% at September 30, 2017, compared to 8.41% reported at December 31, 2016. Total capital to risk-weighted assets at September 30, 2017 was 12.52%, compared to 12.22% at December 31, 2016. Both ratios are down from the same period last year, in large part due to the redemption of $20.5 million of 7% fixed rate Trust Preferred securities in January 2017. 

Press release:

Tompkins Financial Corporation announced today that its Board of Directors approved payment of a regular quarterly cash dividend of $0.47 per share, payable on November 15, 2017, to common shareholders of record on November 7, 2017. The current dividend represents a 4.4% increase over the $0.45 cash dividend paid in the third quarter of 2017.

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.