Tompkins Financial

Press Release:

Tompkins Financial Corporation ("Tompkins" or the "Company") reported diluted earnings per share of $1.30 for the third quarter of 2024, up 18.2% from the immediate prior quarter, and up 155.3% from the diluted earnings (loss) per share of $(2.35) reported in the third quarter of 2023. Net income for the third quarter of 2024 was $18.6 million, up $3.0 million or 18.9% compared to the second quarter of 2024, and up $52.0 million, or 155.9%, when compared to the net loss of $(33.4) million reported for the third quarter of 2023.  The increase in diluted earnings per share and net income compared to the results for the third quarter of 2023 largely reflects the Company's sale of $429.6 million of available-for-sale securities, which resulted in a pre-tax loss of $62.9 million (or $3.34 per share) in the third quarter of 2023.

For the nine months ended September 30, 2024, diluted earnings (loss) per share were $3.59, up from $(0.39) for the nine months ended September 30, 2023.  Year-to-date net income (loss) was $51.2 million for the nine months ended September 30, 2024, up $56.7 million when compared to $(5.5) million for the prior year period.  The growth in year-to-date diluted earnings per share and net income was mainly due the Company's sale of $510.5 million of available-for-sale securities which resulted in a pre-tax loss of $70.0 million (or $3.69 per share) for the nine months ended September 30, 2023.

Tompkins President and CEO, Stephen Romaine, commented, "Our third quarter net income was up over 18% as compared to the second quarter, driven by a strengthening net interest margin and growth across our business.  For the third quarter our net interest margin expanded 6 basis points, loan balances grew over 8% annualized and our fee-based services continue to provide diversified growing revenue as total noninterest income represented 31% of total revenue.  Year-to-date, our operating results were further supported by lower expenses, as noninterest expenses were down 1.5% as compared to prior year.  As we are seeing improving profitability we believe that we remain well positioned to continue to drive growth through quality customer relationships supported by our strong capital and liquidity."

SELECTED HIGHLIGHTS FOR THE PERIOD:

Net interest margin for the third quarter of 2024 was 2.79%, improved from the immediate prior quarter of 2.73%, and the 2.75% reported for the same period of 2023.

Total average cost of funds for the third quarter of 2024 was up 5 basis points compared to the second quarter of 2024, down from a 10 basis point increase from the first quarter of 2024 to the second quarter of 2024. 

Total fee-based services (insurance, wealth management, service charges on deposit accounts and cards) revenues for the third quarter of 2024 were up $648,000 or 3.2% compared to the third quarter of 2023.

Total noninterest expenses for the third quarter of 2024 were in line with the second quarter of 2024 and the third quarter of 2023.

Total loans at September 30, 2024 were up $119.4 million, or 2.1% (8.2% on an annualized basis) compared to June 30, 2024, and up $446.4 million, or 8.2%, from September 30, 2023.

Total deposits at September 30, 2024 were $6.6 billion, up $292.0 million, or 4.7%, from June 30, 2024, and down $45.5 million, or 0.7%, from September 30, 2023. 

Loan to deposit ratio at September 30, 2024 was 89.4%, compared to 91.7% at June 30, 2024, and 82.1% at September 30, 2023.

Regulatory Tier 1 capital to average assets was 9.19% at September 30, 2024, up compared to 9.15% at June 30, 2024, and 9.01% at September 30, 2023.

NET INTEREST INCOME

Net interest income was $53.2 million for the third quarter of 2024, up $2.2 million or 4.4% compared to the second quarter of 2024, and $2.2 million or 4.3% compared to the third quarter of 2023. The increase in net interest income compared to both the second quarter of 2024, and third quarter of 2023, resulted primarily from the increase in average loan balances and the average yield on those loan balances, partially offset by the increase in cost of deposits.

For the nine months ended September 30, 2024, net interest income was $154.8 million, down $2.3 million or 1.5% when compared to the same period in 2023.

Net interest margin was 2.79% for the third quarter of 2024, up 6 basis points when compared to the immediate prior quarter, and up 4 basis points from the 2.75% reported for the third quarter of 2023. The increase in net interest margin, when compared to the prior periods, was mainly driven by higher yields on interest earning assets and higher average loan balances, and was partially offset by higher funding costs.

Average loans for the quarter ended September 30, 2024 were up $143.4 million, or 2.5%, from the second quarter of 2024, and were up $445.7 million, or 8.3%, compared to the same period prior year. The increase in average loans over both prior periods was mainly in the commercial real estate and commercial and industrial portfolios. The average yield on interest-earning assets for the quarter ended September 30, 2024 was 4.66%, which was up from 4.56% for the quarter ended June 30, 2024, and up from 4.06% for the quarter ended September 30, 2023.

Average total deposits of $6.4 billion for the third quarter of 2024 were up $41.4 million, or 0.7%, compared to the second quarter of 2024, and down $67.0 million or 1.0% compared to the same period in 2023.  The cost of interest-bearing deposits of 2.35% for the third quarter of 2024 was up 8 basis points from 2.27% for the second quarter of 2024, and up 61 basis points from 1.74% for the third quarter of 2023.  The ratio of average noninterest bearing deposits to average total deposits for the third quarter of 2024 was 28.9% compared to 29.1% for the second quarter of 2024, and 31.0% for the third quarter of 2023.  The average cost of interest-bearing liabilities for the third quarter of 2024 of 2.71% represents an increase of 7 basis points over the second quarter of 2024, and an increase of 73 basis points over the same period in 2023.

NONINTEREST INCOME

Noninterest income of $23.4 million for the third quarter of 2024 was up $65.0 million or 156.2% compared to the same period in 2023.  Year-to-date noninterest income of $67.3 million was up $75.9 million or 881.7% compared to the same period in 2023.  The increase in quarterly and year-to-date noninterest income compared to the same periods in 2023 was mainly due to the $62.9 million and $70.0 million, respectively, pre-tax loss on the sale of available-for-sale securities in 2023 as discussed above.  Other income was up $1.3 million for the quarter ended September 30, 2024 compared to the same period in 2023, and included increases in gains on loan sales, derivative swap fee income, and BOLI income.

Also included in the increase for the third quarter of 2024 over the same period prior year were fee-based revenues which included wealth management fees, up $583,000, service charges on deposit accounts, up $118,000, card services income, up $61,000.

NONINTEREST EXPENSE

Noninterest expense was $49.9 million for the third quarter of 2024, which was in line with the third quarter of 2023.

Year-to-date noninterest expense for the period ended September 30, 2024 was $149.7 million, a decrease of $2.3 million or 1.5% compared to the $152.0 million reported for the same period in 2023.  The year-over-year decrease was mainly driven by lower other expenses (legal fees, marketing, professional fees,   retirement plan expense, and travel and meeting expense), partially offset by higher FDIC insurance expense.

INCOME TAX EXPENSE

The provision for income tax expense was $5.9 million for an effective rate of 23.9% for the third quarter of 2024, compared to tax benefit of $8.3 million and an effective rate of 20.0% for the same quarter in 2023. For the nine months ended September 30, 2024, the provision for income tax expense was $16.0 million and the effective tax rate was 23.7% compared to a tax benefit of $619,000 and an effective tax rate of 10.3% for the same period in 2023.  Lower tax expense for both the quarter and year-to-date periods in 2023 was mainly a result of lower income associated with the loss on the sale of securities described above.

ASSET QUALITY

The allowance for credit losses represented 0.94% of total loans and leases at September 30, 2024, up from 0.92% reported at both June 30, 2024 and December 31, 2023. The increase in the allowance for credit losses coverage ratio was driven primarily by updated economic forecasts for unemployment and gross domestic product for the quarter, as well as model assumption updates for prepayment speeds, curtailment rates, and recovery lag.  The increase in allowance for credit losses was partially offset by lower off-balance sheet reserves due to model changes related to utilization rates and a decrease in loan pipeline.  The ratio of the allowance to total nonperforming loans and leases was 88.51% at September 30, 2024, compared to 84.94% at June 30, 2024, and 156.96% at September 30, 2023.  The decrease in the ratio compared to the same prior year period was due to the increase in nonperforming loans and leases discussed in more detail below.

Provision for credit losses for the third quarter of 2024 was $2.2 million compared to $1.2 million for the same period in 2023. Provision for credit losses for the nine months ended September 30, 2024 was $5.2 million compared to $2.6 million for the nine months ended September 30, 2023.  The increase in provision expense for the quarter and year-to-date periods compared to the same periods in 2023 was mainly driven by loan growth which was up $119.4 million or 2.1%, and $446.4 million or 8.2%, respectively, and the increase in net charge-offs in 2024 over 2023. Net charge-offs for three and nine months ended September 30, 2024 were $912,000 and $1.6 million, respectively, compared to net charge-offs of $177,000 and net recoveries of $1.1 million for the same periods in 2023.

Nonperforming assets represented 0.78% of total assets at September 30, 2024, down slightly from 0.79% reported at June 30, 2024, and up compared to 0.41% at September 30, 2023. At September 30, 2024, nonperforming loans and leases totaled $62.6 million, compared to $62.5 million at June 30, 2024 and $31.4 million at September 30, 2023. The increase in nonperforming loans and leases at September 30, 2024 compared to September 30, 2023 was mainly due to the addition in the fourth quarter of 2023 of one relationship totaling approximately $33.3 million with two commercial real estate properties included in the office space and mixed use properties portion of the commercial real estate portfolio. The Company believes that the existing collateral securing the loans was sufficient to cover the exposure as of September 30, 2024.

Special Mention and Substandard loans and leases totaled $126.0 million at September 30, 2024, compared to $116.2 million reported at June 30, 2024, and $122.9 million reported at September 30, 2023.

CAPITAL POSITION

Capital ratios at September 30, 2024 remained well above the regulatory minimums for well-capitalized institutions. The ratio of total capital to risk-weighted assets was 13.21% at September 30, 2024, compared to 13.26% at June 30, 2024, and 13.46% at September 30, 2023. The ratio of Tier 1 capital to average assets was 9.19% at September 30, 2024, compared to 9.15% at June 30, 2024, and 9.01% at September 30, 2023.

LIQUIDITY POSITION

The Company's liquidity position at September 30, 2024 was stable and consistent with the immediate prior quarter end. Liquidity is enhanced by ready access to national and regional wholesale funding sources including Federal funds purchased, repurchase agreements, brokered deposits, Federal Reserve Bank's Discount Window advances and Federal Home Loan Banks (FHLB) advances. The Company maintained ready access to liquidity of $1.4 billion, or 18.0% of total assets at September 30, 2024.  As a member of the FHLB, the Company can use certain unencumbered mortgage-related assets and securities to secure borrowings from the FHLB. At September 30, 2024 the Company had an available borrowing capacity at the FHLB of $769.5 million. Through various programs at the Federal Reserve Bank, the Company has the ability to use certain loans and securities to secure borrowings from the Federal Reserve Bank's Discount Window.  At September 30, 2024 the available borrowing capacity with the Federal Reserve Bank was $142.0 million, secured by loans. In addition to the available borrowing lines at the FHLB and Federal Reserve Bank, at September 30, 2024, the Company maintained $508.7 million of unencumbered securities which could be pledged to further enhance secured borrowing capacity. 

Press Release:

Demonstrating its commitment to fostering internal growth and professional development, Tompkins Financial Corporation (Tompkins) has promoted Erin Freije to director of marketing. Freije will oversee day-to-day operations across Tompkins’ marketing communications, internal communications, product management, and customer experience.   

“Erin has been an integral member of our team since 2018,” Charles Guarino, SVP and chief banking operations officer at Tompkins. “She has streamlined countless processes for us and, more importantly, spearheaded numerous initiatives to enhance our offerings to customers.”

Previously, Freije was the retail loan product manager and associate vice president at Tompkins, where she spearheaded the launch of new products, system implementations and digitally focused initiatives. With nearly a decade of experience in product management, Freije has ample expertise in traditional and digital marketing, in addition to marketing communications as it relates to banking and financial institutions.

A graduate of SUNY Geneseo and Messiah University’s MBA program with a focus in strategic leadership, Freije currently serves on United Way of Broome County’s Board. She lives in Central New York with her husband and two daughters.

Press Release:

Demonstrating its commitment to upholding high standards of service, Tompkins Financial Advisors (Tompkins) in Western New York has appointed Douglas Kallet to wealth advisor. With years of extensive financial expertise, Kallet will help grow the business and generate more personalized financial solutions for his clients. Additionally, he will work closely with Tompkins’ loyal clients, building on and maintaining customer relationships, while sharing and implementing Tompkins’ extensive services to assist individuals in continuously growing their finances and meeting their financial goals for years to come.

“Doug’s commitment to providing exceptional financial solutions and services matches all of Tompkins’ values,” said James Sperry, senior vice president and managing director for Tompkins’ Financial Advisors Western New York region. “He considers both financial and personal goals of clients, while also embracing a friendly atmosphere, valuable assistance, and excellent financial guidance and direction. He will provide immense value to our team and the company as a whole.”

Kallet joins Tompkins with over 15 years of service in the financial industry with proficiencies in investment management, capital markets, financial services, consulting and commercial finance. He has succeeded in many roles with Western New York-based financial institutions, serving in the enterprise risk management sector of Five Star Bank, as a senior consultant with Actel Advisory Group, and in financial planning, analysis and overseeing treasury management for QED Technologies LLC. Kallet holds a bachelor’s degree in business administration from Le Moyne College and an MBA from the University of Rochester. He currently lives in Pittsford, New York with his wife, Christina, and two daughters.

Press Release:

Industry publication Insurance Journal has recognized Tompkins Insurance Agencies as one of the Top 100 largest insurance brokers in the United States. In the magazine’s August issue, Tompkins Insurance ranks at 75th largest in the nation, up from 79th place last year. Additionally, the firm’s parent company, Tompkins Financial Corporation, earned a spot as one of the Top 20 bank-held insurance brokerages by fee income, securing the 14th spot in this prestigious ranking.

“We have ranked on Insurance Journal’s top agencies list for many years, and it’s a distinction we don’t take for granted, “ said David S. Boyce, president and CEO of Tompkins Insurance. “The recognition signals another notable year among the largest insurance brokers in the country, and also underscores our commitment to maintaining the strong relationships with the clients we serve throughout Western New York, Central New York and Southeastern Pennsylvania.”

Insurance Journal’s 2023 rankings categorize brokers by size in revenue for the calendar year. This list allows clients to assess their broker partners, offers individual brokers a way to measure their performance against competitors and market leaders, and reveals trends for customers’ risk management and employee benefits challenges and service needs.

In addition to providing commercial insurance programs for businesses throughout New York and Pennsylvania, the agency also serves more than 36,000 personal insurance and employee benefits clients. Tompkins Insurance Agencies operates 12 offices in Western New York, five offices in Central New York and five offices in Southeast Pennsylvania. 

It is an independent insurance agency offering personal and business insurance and employee benefits services through more than 50 different companies. A part of Tompkins Financial Corporation, (trading as TMP on the NYSE - MKT), the agency is affiliated with Tompkins Community Bank and Tompkins Financial Advisors, both operating in Western New York, Central New York, Southeast Pennsylvania and New York’s Hudson Valley.

For more information, head to www.tompkinsins.com or follow Tompkins Insurance Agencies on Facebook, LinkedIn and Instagram.

Press Release:

Tompkins Financial Corp. (Tompkins) announced that Eric Taylor has joined the company as Executive Vice President and President of Tompkins Financial Advisors. Taylor has spent his career in wealth management and brings extensive experience in investment and advisory services. 

His background includes strategic oversight and management of client-facing investment advisors, portfolio managers and financial planners. In addition, he brings in-depth knowledge of investment planning and portfolio implementation, as well as investment oversight and compliance.

In his new role, Taylor will lead Tompkins Financial Advisors, a holistic financial services firm with over 130 years of experience, bringing customized wealth management, financial planning and trust solutions to individuals and businesses. He will report to Steve Romaine, president and CEO of Tompkins Financial.  

Romaine commented, “It is my pleasure to welcome Eric to the Tompkins team. In addition to his experience in the wealth arena, he brings a vision consistent with the Tompkins model of always placing the client at the center of everything we do. Most importantly, we share a common set of values and culture. Eric started his early career with us as a trust officer and I have enjoyed watching his growth and progression over the years. I’m pleased to welcome him back in this senior role, and as a member of my senior leadership team, contributing to strategic issues across the company.”

A long-time resident of Ithaca, New York, Taylor is a graduate of the Johnson Graduate School of Management at Cornell University and holds a Master of Business Administration. He also spent his undergraduate years at Cornell earning a Bachelor of Arts in Policy Analysis and Management.

Press Release:

Tompkins Financial Corporation ("Tompkins" or the "Company") reported diluted earnings per share of $1.10 for the second quarter of 2024, down 6.8% from the immediate prior quarter, and up 86.4% from diluted earnings per share of $0.59 reported in the second quarter of 2023. Net income for the second quarter of 2024 was $15.7 million, down $1.2 million or 7.1% compared to the most recent prior quarter, and up $7.2 million, or 85.0%, when compared to the $8.5 million reported for the same period in 2023.  The increase in diluted earnings per share and net income compared to the results for the second quarter of 2023 largely reflects the Company's sale of $80.9 million of available-for-sale securities which resulted in a $7.1 million (or $0.37 per share) loss on securities transactions in the second quarter of 2023.

For the six months ended June 30, 2024, diluted earnings per share were $2.29, up 18.0% from $1.94 for the six months ended June 30, 2023.  Year-to-date net income was $32.6 million for the six month period ended June 30, 2024, up $4.7 million, or 16.9%, when compared to $27.9 million for the same six month period in 2023.  The growth in year-to-date diluted earnings per share and net income relative to the year-to-date results for the same six month period in 2023 is similarly attributable to the impact caused by the loss on securities transactions described above.

Tompkins President and CEO, Stephen Romaine, commented, "Our year to date and second quarter results have been positively impacted by a stabilizing net interest margin and growth throughout our business. Year over year loans are up 7.7% and year to date noninterest income was up 33%, or 10% excluding the impact from the loss on the sale of securities in the second quarter of 2023.  We have remained focused on expenses with noninterest expenses year to date lower by 2.3%.  As we continue to leverage our balance sheet we are seeing strengthening operating results with stabilizing and growing revenue and lower expenses.  We look forward to driving growth through quality customer relationships supported by our strong capital and liquidity."

SELECTED HIGHLIGHTS FOR THE PERIOD:

• Net interest margin for the second quarter of 2024 was 2.73%, unchanged from the first quarter of 2024, and down from 2.83% for the second quarter of 2023.
• Total cost of funds was up 10 basis points compared to the first quarter 2024, down from a 24 basis point increase from the fourth quarter of 2023 to the first quarter of 2024. 
• Fee-based services (insurance, wealth management, service charges on deposit accounts and cards) revenues for the second quarter of 2024 were up $903,000 or 5.0% compared to the second quarter of 2023.
• Total operating expenses of $49.9 million for the second quarter of 2024 were in line with the most recent prior quarter, and down $2.0 million or 3.9% compared to the second quarter of 2023.
• Total loans at June 30, 2024 were up $121.3 million, or 2.2% (8.7% on an annualized basis) compared to the immediate prior quarter, and up $409.5 million, or 7.7%, from June 30, 2023.
• Total deposits at June 30, 2024 were $6.3 billion, down $163.7 million, or 2.5% from March 31, 2024, and $168.8 million, or 2.6%, from June 30, 2023. 
• Loan to deposit ratio at June 30, 2024 was 91.7%, compared to 87.5% for the immediate prior quarter.
• Regulatory Tier 1 capital to average assets was 9.15% at June 30, 2024, up compared to 9.08% reported at March 31, 2024, and down compared to 9.57% at June 30, 2023.

NET INTEREST INCOME

Net interest income was $51.0 million for the second quarter of 2024, up from $50.7 million for the first quarter of 2024, and down from $51.9 million for the second quarter of 2023. Net interest income for the quarter ended June 30, 2024 was impacted by increases in interest expense, which totaled $34.3 million for the second quarter of 2024 compared to $20.0 million for the same period in 2023, partially offset by increased interest and dividend income, which increased by $13.4 million when compared to the second quarter of 2023. 

For the six months ended June 30, 2024, net interest income was $101.6 million, down $4.5 million or 4.3% when compared to the same period in 2023.  

Net interest margin was 2.73% for the second quarter of 2024, unchanged from the first quarter of 2024, and down from the 2.83% reported for the second quarter of 2023. The decrease in net interest margin, when compared to the prior year, was mainly driven by higher funding costs, driven by market rates and higher borrowings due to lower deposit balances, and was partially offset by higher yields on interest earnings assets. 

Average loans for the quarter ended June 30, 2024 were up $65.9 million, or 1.2%, from the first quarter of 2024, and were up $382.8 million, or 7.2%, compared to the prior year second quarter. The increase in average loans over both prior periods was mainly in the commercial real estate and commercial and industrial portfolios. The average yield on interest-earning assets for the quarter ended June 30, 2024 was 4.56%, which was up from 4.47% for the prior quarter ended March 31, 2024, and up from 3.91% for the quarter ended June 30, 2023. 

Average total deposits for the second quarter of 2024 were down $42.9 million, or 0.7%, compared to the first quarter of 2024, and down $128.3 million or 2.0% compared to the same period in 2023.  The decrease compared to the prior quarter was mainly driven by seasonal deposit trends, while the decrease compared to the prior year was largely driven by inflation and persistent rate competition for deposits due to the current interest rate environment and tightening monetary policy.  The cost of interest-bearing deposits of 2.27% for the second quarter of 2024 was up 10 basis points from 2.17% for the first quarter of 2024, and up 86 basis points from 1.41% for the second quarter of 2023.  The ratio of average noninterest bearing deposits to average total deposits for the second quarter of 2024 was 29.1% compared to 28.8% for the first quarter of 2024, and 31.1% for the quarter ended June 30, 2023.  The average cost of interest-bearing liabilities for the second quarter of 2024 of 2.64% represents an increase of 13 basis points over the first quarter of 2024, and an increase of 100 basis points over the same period in 2023.

NONINTEREST INCOME

Noninterest income represented 29.9% of total revenue for the second quarter of 2024 compared to 30.4% for the first quarter of 2024, and 19.6% for the second quarter of 2023.  Noninterest income of $21.8 million for the second quarter of 2024 was up $9.2 million or 72.6% compared to the same period in 2023.  Year-to-date noninterest income of $43.9 million was up $10.9 million or 33.0% compared to the same period in 2023.  The increase in quarterly and year-to-date noninterest income compared to the same periods in 2023 was mainly due to a $7.1 million loss on the sale of available-for-sale securities discussed above.  Also included in the increase in the second quarter of 2024 over the same period prior year are fee-based revenues which included insurance commissions and fees, up $415,000, wealth management fees, up $171,000, service charges on deposit accounts, up $126,000, and card services income, up $191,000.

NONINTEREST EXPENSE

Noninterest expense was $49.9 million for the second quarter of 2024, which was down $2.0 million or 3.9% compared to the second quarter of 2023.  Year-to-date noninterest expense for the period ended June 30, 2024 was $99.8 million, a decrease of $2.3 million or 2.3% compared to the $102.1 million reported for the same period in 2023.  The decrease was mainly driven by lower other expenses (legal fees, marketing expense, professional fees, and travel and meeting expense) and lower salaries, wages and other employee benefits in the second quarter of 2024 compared to the same period in 2023. 

INCOME TAX EXPENSE
The provision for income tax expense was $4.9 million for an effective rate of 23.8% for the second quarter of 2024, compared to tax expense of $1.8 million and an effective rate of 17.3% for the same quarter in 2023. For the first six months of 2024, the provision for income tax expense was $10.1 million and the effective tax rate was 23.6% compared to provision expense of $7.7 million and an effective tax rate of 21.6% for the same period in 2023.  Lower tax expense for both the quarter and year-to-date periods in 2023 was mainly a result of lower income associated with the loss on the sale of securities described above.

ASSET QUALITY

The allowance for credit losses represented 0.92% of total loans and leases at June 30, 2024, unchanged from the most recent prior quarter and December 31, 2023. The ratio of the allowance to total nonperforming loans and leases was 84.94% at June 30, 2024, compared to 82.47% at March 31, 2024, and 154.76% at June 30, 2023.  The decrease in the ratio compared to the same prior year period was due to the increase in nonperforming loans and leases discussed in more detail below.

Provision for credit losses for the second quarter of 2024 was $2.2 million compared to provision expense of $2.3 million for the same period in 2023. Provision for credit losses for the six months ended June 30, 2024 was $3.0 million compared to $1.4 million for the six months ended June 30, 2023.  The increase in provision expense for the year-to-date period compared to the same period in 2023 was mainly driven by loan growth and changes in off balance sheet reserves driven by an increase in loan pipeline.  Net charge-offs for the second quarter of 2024 were $509,000 compared to net recoveries of $27,000 reported for the same period in 2023.

Nonperforming assets represented 0.79% of total assets at June 30, 2024, down from 0.81% reported at March 31, 2024, and up compared to 0.41% at June 30, 2023. At June 30, 2024, nonperforming loans and leases totaled $62.5 million, compared to $62.7 million at March 31, 2024 and $31.4 million at June 30, 2023. The increase in nonperforming loans and leases at June 30, 2024 compared to results at June 30, 2023 was mainly due to the addition in the fourth quarter of 2023 of one relationship totaling approximately $33.3 million with two commercial real estate properties included in the office space and mixed use properties portion of the commercial real estate portfolio. The Company believes that the existing collateral securing the loans is sufficient to cover the exposure as of June 30, 2024.

Special Mention and Substandard loans and leases totaled $116.2 million at June 30, 2024, compared to $118.7 million reported at March 31, 2024, and $118.1 million reported at June 30, 2023.

CAPITAL POSITION

Capital ratios at June 30, 2024 remained well above the regulatory minimums for well-capitalized institutions. The ratio of total capital to risk-weighted assets was 13.26% at June 30, 2024, compared to 13.43% at March 31, 2024, and 14.48% at June 30, 2023. The ratio of Tier 1 capital to average assets was 9.15% at June 30, 2024, compared to 9.08% at March 31, 2024, and 9.57% at June 30, 2023.

LIQUIDITY POSITION

The Company's liquidity position at June 30, 2024 was stable and consistent with the immediately prior quarter. Liquidity is enhanced by ready access to national and regional wholesale funding sources including Federal funds purchased, repurchase agreements, brokered deposits, Federal Reserve Bank's Discount Window advances and Federal Home Loan Banks (FHLB) advances. The Company maintains ready access to liquidity of $1.4 billion, or 17.3% of total assets at June 30, 2024.  As a member of the FHLB, the Company can use certain unencumbered mortgage-related assets and securities to secure borrowings from the FHLB. At June 30, 2024 the Company had an available borrowing capacity at the FHLB of $661.8 million. Through various programs at the Federal Reserve Bank, the Company has the ability to use certain loans and securities to secure borrowings from the Federal Reserve Bank's Discount Window.  At June 30, 2024 the available borrowing capacity with the Federal Reserve Bank was $137.7 million, secured by loans. In addition to the available borrowing lines at the FHLB and Federal Reserve Bank, at June 30, 2024, the Company maintained $553.3 million of unencumbered securities which could be pledged to further enhance secured borrowing capacity.

Press Release:

Tompkins Financial Corporation ("Tompkins" or the "Company") reported diluted earnings per share of $1.18 for the first quarter of 2024, up 12.4% compared to the immediate prior quarter, and down 12.6% from diluted earnings per share of $1.35 reported in the first quarter of 2023.

Net income for the first quarter of 2024 was $16.9 million, up 12.5% compared to the immediate prior quarter, and down 13.0% from the $19.4 million reported for the same period in 2023.  The decrease in net income from the first quarter of 2023 was mainly a result of lower net interest income, driven by increased funding costs and increased provision for credit loss expense.  Decreases in net income were partially offset by growth in fee-based revenues and lower operating expenses year-over-year.  

Tompkins President and CEO, Stephen Romaine, commented, "In the first quarter we saw positive earnings momentum and continue to be well positioned with strong capital and liquidity.  For the quarter we saw continued loan growth with a year-over-year increase of 7.0%, moderation in deposit cost increases, and 8.5% growth in noninterest income.  We remain focused on noninterest expenses, which were lower in the first quarter compared to prior year.  As the industry challenges continue in light of the current economic environment, we plan to leverage the strength of our balance sheet and drive growth through quality customer relationships."

SELECTED HIGHLIGHTS FOR THE PERIOD:

• Net interest margin for the first quarter of 2024 was 2.73%, compared to 2.82% for the fourth quarter of 2023, and 2.99% for the first quarter of 2023.
• Average cost of deposits were up 11 basis points compared to the fourth quarter 2023, down from a 23 basis point increase from the third quarter to the fourth quarter 2023. 
• Fee-based services (insurance, wealth management, service charges on deposit accounts and cards) revenues for the first quarter of 2024 were up $3.1 million or 18.4% compared to the fourth quarter of 2023, and $1.5 million or 8.1% over the first quarter of 2023.
• Total operating expenses of $49.9 million for the first quarter of 2024 were down $1.4 million or 2.8% compared to the compared to the fourth quarter of 2023, and $301,000 or 0.6% from the first quarter of 2023.
• Total loans at March 31 were up $34.6 million, or 0.6% (2.5% on an annualized basis), compared to the immediate prior quarter, and up $366.9 million, or 7.0%, from March 31, 2023.
• Total deposits at March 31 were $6.4 billion, up $49.8 million, or 0.8% (3.1% on an annualized basis), from December 31, 2023, and down $59.4 million, or 0.9%, from March 31, 2023. 
• Loan to deposit ratio was 87.5%, compared to 87.6% for the immediate prior quarter.
• Regulatory Tier 1 capital to average assets was 9.08% at March 31 unchanged from December 31, 2023, and down compared to 9.63% at March 31, 2023.

NET INTEREST INCOME

Net interest income was $50.7 million for the first quarter of 2024, down from $52.4 million for the fourth quarter of 2023, and $54.2 million for the first quarter of 2023. Net interest income for the quarter ended March 31 was impacted by increases in interest expense, which totaled $32.5 million for the first quarter of 2024 compared to $15.0 million for the same period in 2023, partially offset by increased interest and dividend income, which increased by $13.9 million when compared to the first quarter of 2023.  

Net interest margin was 2.73% for the first quarter of 2024, compared to 2.82% reported for the fourth quarter of 2023, and 2.99% for the first quarter of 2023. The decrease in margin from the fourth quarter of 2023 was due to higher funding costs, driven by market rates and higher borrowings due to seasonal deposit changes outpacing increases on interest earning asset yields and growth in average loan balances.

Average loans for the quarter ended March 31 were up $134.9 million, or 2.5%, from the fourth quarter of 2023, and were up $370.3 million, or 7.1%, compared to the quarter ended March 31, 2023. The increase in average loans over both prior periods was mainly in the commercial real estate portfolio. The average yield on interest-earning assets for the quarter ended March 31 was 4.47%, which was up from 4.34% for the quarter ended December 31, 2023, and up from 3.81% for the quarter ended March 31, 2023.

Average total deposits for the first quarter of 2024 were down $123.9 million, or 1.9%, compared to the fourth quarter of 2023, while period end balances were up $49.8 million or 0.8% compared to the fourth quarter of 2023 driven by seasonal deposit trends.  Average deposits for the quarter were down $206.8 million, or 3.1%, compared to the same period in 2023. The decrease compared to the prior year was largely driven by inflation and persistent rate competition for deposits due to the current interest rate environment and tightening monetary policy.  The cost of interest-bearing deposits of 2.17% for the first quarter of 2024, was up 13 basis points from 2.04% for the fourth quarter of 2023, and up 107 basis points from 1.10% for the first quarter of 2023.  The ratio of average noninterest bearing deposits to average total deposits for the first quarter of 2024 was 28.8% compared to 29.6% for the fourth quarter of 2023, and 31.4% for the quarter ended March 31, 2023.  The average cost of interest-bearing liabilities for the first quarter of 2024 of 2.51% represents an increase of 26 basis points over the fourth quarter of 2023, and an increase of 125 basis points over the same period in 2023.

NONINTEREST INCOME

Noninterest income of $22.1 million for the first quarter of 2024 was up $1.7 million or 8.5% compared to the same period in 2023.  The increase was mainly due to increases in fee-based revenues which included insurance commissions and fees, up $750,000, wealth management fees, up $428,000 and card services income, up $257,000.  Noninterest income represented 30.4% of total revenue at March 31, compared to 26.5% at December 31, 2023, and 27.3% at March 31, 2023.

NONINTEREST EXPENSE

Noninterest expense was $49.9 million for the first quarter of 2024, which was down $301,000 or 0.6% compared to the first quarter of 2023.  The decrease was mainly driven by lower other expenses (legal fees, marketing expense, and travel and meeting expense) and lower salaries, wages and other employee benefits in the first quarter of 2024 compared to the same period in 2023.

INCOME TAX EXPENSE

The provision for income tax expense of $5.2 million for an effective rate of 23.5% for the first quarter of 2024, compared to tax expense of $3.1 million and an effective rate of 17.2% for the fourth quarter of 2023, and $5.9 million and an effective rate of 23.3% for the same quarter in 2023.

ASSET QUALITY

The allowance for credit losses represented 0.92% of total loans and leases at March 31, in line with December 31, 2023, and up from 0.87% at March 31, 2023. The ratio of the allowance to total nonperforming loans and leases was 82.47% at March 31, compared to 82.84% at December 31, 2023 and 162.11% at March 31, 2023.  The decrease in the ratio compared to the same prior year period was due to the increase in nonperforming loans and leases discussed in more detail below.

Provision for credit losses for the first quarter of 2024 was $854,000 compared to a credit of $825,000 for the same period in 2023. The increase in provision expense for the first quarter of 2024 was mainly driven by increased off-balance sheet exposures related to growth in commercial loan pipeline, loan growth, and changes in asset quality.  The provision credit in the first quarter of 2023 was largely driven by significant net recoveries.  Net charge-offs for the first quarter of 2024 were $228,000 compared to net recoveries of $1.3 million reported for the same period in 2023.

Nonperforming assets represented 0.81% of total assets at March 31, up from 0.80% reported at December 31, 2023 and 0.37% at March 31, 2023. At March 31 nonperforming loans and leases totaled $62.7 million, compared to $62.3 million at December 31, 2023 and $28.4 million at March 31, 2023. The increase in nonperforming loans at March 31 compared to the same period in 2023, was mainly due to the addition of one relationship with two commercial real estate properties totaling approximately $33.8 million included in the office space and mixed use properties portion of the commercial real estate portfolio during the fourth quarter of 2023. The Company believes that the existing collateral securing the loans is sufficient to cover the exposure as of March 31.

Special Mention and Substandard loans and leases totaled $118.7 million at March 31, compared to $123.1 million reported at December 31, 2023, and $85.6 million reported at March 31, 2023.

CAPITAL POSITION

Capital ratios at March 31 remained well above the regulatory minimums for well-capitalized institutions. The ratio of total capital to risk-weighted assets was 13.43% at March 31, compared to 13.36% at December 31, 2023, and 14.62% at March 31, 2023. The ratio of Tier 1 capital to average assets was 9.08% at March 31, unchanged from the most recent prior quarter, and down compared to 9.63% at March 31, 2023.

LIQUIDITY POSITION

The Company's liquidity position at March 31 was stable and consistent with the immediately prior quarter. Liquidity is enhanced by ready access to national and regional wholesale funding sources including Federal funds purchased, repurchase agreements, brokered deposits, Federal Reserve Bank Discount Window advances and Federal Home Loan Banks (FHLB) advances. The Company maintains ready access liquidity of $1.5 billion, or 19.3% of total assets at March 31. As a member of the FHLB, the Company can use certain unencumbered mortgage-related assets and securities to secure borrowings from the FHLB. At March 31 the Company had an available borrowing capacity at the FHLB of $773.4 million. Through various programs at the Federal Reserve Bank, the Company has the ability to use certain loans and securities to secure borrowings from the Federal Reserve Bank's Discount Window.  At March 31 the available borrowing capacity with the Federal Reserve Bank was $138 million, secured by loans. In addition to the available borrowing lines at the FHLB and Federal Reserve Bank, at March 31, the Company maintained $579.6 million of unencumbered securities which could be pledged to further enhance secured borrowing capacity. 

Press Release:

Expanding its advisory team, Tompkins Financial Advisors (Tompkins) in Western New York, announces the hire of Conner Simonetti as a wealth advisor. In his new role, Simonetti will be responsible for identifying and developing target segments while collaborating directly with clients, as well as sharing and implementing Tompkins’ comprehensive services to help clients build wealth and enjoy peace of mind.

“Conner has a proven track record of helping clients achieve their financial goals,” said James Sperry, senior vice president and managing director for Tompkins’ Western New York region. “Whether it be through personalized strategies or comprehensive wealth management solutions, he is committed to providing exceptional service and building long-lasting relationships with clients – things we deeply value at Tompkins. He will be an invaluable asset to our team.”

Simonetti comes to Tompkins with over 5 years of financial management experience. His experience is highlighted throughout his time as an operations and advisor for Worth Considering, Inc., and later, a portfolio manager with Brighton Securities Capital Management. In addition to his bachelor's degree in finance from Kent State University, Simonetti holds a Registered Investment Advisor license (Series 65) and is currently working toward his designation as a Certified Investment Management Analyst.

Before entering the financial industry in 2019, Simonetti played professional baseball with the Washington Nationals organization. Bringing that background full circle, he currently coaches baseball and softball students in the Monroe County, New York area.

Press Release:

Tompkins Financial Corporation ("Tompkins" or the "Company") reported diluted earnings per share of $1.05 for the fourth quarter of 2023, down 22.8% compared to the fourth quarter of 2022. Net income for the fourth quarter of 2023 was $15.0 million, down $4.5 million or 23.3% compared to the $19.5 million reported for the fourth quarter of 2022.  Contributing to the lower quarterly results were increased funding costs and increased operating expenses, which included costs related to three branch closures during the fourth quarter of 2023 as well as personnel-related charges.

For the year ended December 31, 2023, diluted earnings per share of $0.66 were down 88.8% compared to the year ended December 31, 2022.   Net income for 2023 was $9.5 million, a decrease of $75.5 million compared to the year ended December 31, 2022.  Significant contributors to the year-over-year decrease in net income included a previously announced after-tax loss of $52.9 million, or $3.69 loss per diluted share, related to the sale of $510.5 million of available-for-sale debt securities, increased funding costs and an increase in operating expenses. The sale of securities and subsequent reinvestment in the second and third quarters of 2023 is favorably impacting securities revenue as the securities sold had an average yield of 0.86%, while the proceeds of the sale were largely reinvested into securities with an estimated yield of approximately 5.09%.  Average yields on securities for the fourth quarter of 2023 were 2.33%, compared to 1.59% for the third quarter of 2023, and 1.44% for the fourth quarter of 2022.    

Tompkins President and CEO, Stephen Romaine, commented, "In the fourth quarter we continued to execute on strategic initiatives and are pleased to announce our expanded presence in Syracuse with the grand opening of our City Center office.  For the quarter we saw positive momentum with our net interest margin expanding, strong quarterly loan growth driving full-year loan growth of 6.4%, signs of stabilization in our deposit base, and growth in our noninterest-related revenue. During the quarter we also recognized non-recurring expenses relating to three branch closures and other personnel-related expenses intended to help offset future expense growth.  While the economic environment remains challenging for the industry we look forward to 2024 with our strong capital and liquidity position to continue to drive growth of quality customer relationships."

SELECTED HIGHLIGHTS FOR THE PERIOD:

Net interest margin for the fourth quarter of 2023 expanded to 2.82%, compared to 2.75% for the third quarter of 2023. 

Total loans at December 31, 2023, were up $171.1 million, or 3.2% (12.6% on an annualized basis), compared to the immediate prior quarter, and up $337.0 million, or 6.4%, from December 31, 2022.

Total deposits at December 31, 2023 were $6.4 billion, down $223.6 million, or 3.4% (13.5% on an annualized basis), from September 30, 2023, and down $202.5 million, or 3.1%, from December 31, 2022.

Loan to deposit ratio was 87.6%, compared to 82.1% for the immediate prior quarter.

Regulatory Tier 1 capital to average assets was 9.08% at December 31, 2023, compared to 9.01% at September 30, 2023 and 9.34% at December 31, 2022.

NET INTEREST INCOME

Net interest income was $52.4 million for the fourth quarter of 2023, up from $51.0 million for the third quarter of 2023 and down from $57.3 million for the fourth quarter of 2022. Net interest margin was 2.82% for the fourth quarter of 2023, compared to 2.75% reported for the third quarter of 2023 and 3.02% reported for the fourth quarter of 2022. The increase in net interest income and net interest margin during the fourth quarter of this year compared to the third quarter of 2023 was primarily due to securities purchased in the second and third quarters of 2023 yielding higher interest rates compared to securities sold during the same periods. The increase in securities yields was partially offset by the reversal of $1.0 million of accrued interest during the fourth quarter related to loans that moved to nonaccrual status during the quarter, as described further below under the heading Asset Quality.  The decreases in net interest income and net interest margin compared to the fourth quarter of last year were primarily attributable to increased interest costs on interest-bearing liabilities outpacing increased interest income on interest-earning assets due to the higher interest rate environment. 

For the year ended December 31, 2023, net interest income was $209.5 million, down $20.8 million, or 9.0%, when compared to the same period in 2022.  

Average loans for the quarter ended December 31, 2023, were up $101.5 million, or 1.9%, from the third quarter of 2023, and were up $277.0 million, or 5.3%, compared to the quarter ended December 31, 2022. The increase in average loans over both prior periods was mainly in the commercial real estate portfolio. The average yield on interest-earning assets for the quarter ended December 31, 2023, was 4.3%, which was up from 4.1% for the quarter ended September 30, 2023, and up from 3.6% for the quarter ended December 31, 2022.

Average total deposits for the fourth quarter of 2023 were up $58.4 million, or 0.9%, compared to the third quarter of 2023, while period-end balances were down $223.6 million compared to the third quarter of 2023 driven by seasonal deposit trends.  Average deposits for the quarter were down $227.8 million, or 3.4%, compared to the same period in 2022. The decrease compared to the prior year was largely driven by inflation and persistent rate competition for deposits due to the current interest rate environment and tightening monetary policy. The cost of interest-bearing deposits increased to 2.04% for the fourth quarter of 2023, compared to 1.74% for the third quarter of 2023, and 0.69% for the fourth quarter of 2022. The cost of interest-bearing deposits for the fourth quarter of 2023 increased 135 basis points compared to the fourth quarter of 2022, and 123 basis points for the year ended December 31, 2023 compared to the same period in 2022. The ratio of average noninterest bearing deposits to average total deposits for the fourth quarter of 2023 was 29.6% compared to 31.0% for the third quarter of 2023, and 30.8% for the year ended December 31, 2023.  The average cost of interest-bearing liabilities for the fourth quarter of 2023 of 2.25% represents an increase of 27 basis points over the third quarter of 2023, and an increase of 141 basis points over the same period in 2022.  

NONINTEREST INCOME

Noninterest income of $18.9 million for the fourth quarter of 2023 was up 2.7% compared to the same period in 2022.  The increase was mainly due to gains on securities transactions of $46,000 compared to losses on securities transactions of $455,000, and increases in fee-based revenues which include insurance commissions and fees, up $143,000, wealth management fees, up $181,000 and card services income, up $68,000.  

Noninterest income for the year ended December 31, 2023, was $10.2 million, which represents a decrease in noninterest income of $67.7 million compared to the same period in 2022.  The decrease in noninterest income was largely due to the previously noted sales of available-for-sale debt securities, mainly in the third quarter of 2023, which resulted in the recognition of a pre-tax loss of $70.0 million for the year ended December 31, 2023. Fee-based revenues, including insurance commissions and fees, wealth management fees, service charges on deposit accounts, and card services income, for the year ended December 31, 2023, were collectively up $1.0 million, or 1.4%, over the same period in 2022.  

NONINTEREST EXPENSE

Noninterest expense was $51.3 million for the fourth quarter of 2023, which was up $1.1 million, or 2.2%, over the fourth quarter of 2022.  The increases were mainly in premises and furniture and fixtures, up $799,000, and other operating expenses, up $1.7 million; partially offset by lower salaries and wages. The increase in premises and furniture and fixtures was mainly due to $720,000 of expenses related to branch closures. Contributing to the increase in other operating expenses were: FDIC expenses, up $723,000; technology, up $434,000; expenses related to the Company's retirement plans, up $428,000; charitable contributions and donations, up $315,000; and accrual for New York State minimum tax, up $207,000.  Salaries and wages included $638,000 of personnel-related charges, which were more than offset by lower incentive-related accruals.

For the year-to-date period, noninterest expense of $203.3 million was up $7.5 million, or 3.9%, from the same period in 2022. The increase in noninterest expense for the year ended December 31, 2023, over the same period in 2022 was mainly in employee benefits and other noninterest expenses. The increase in employee benefits was mainly in health insurance, which was up $1.8 million. Salaries and wages were down as annual merit increases were offset by lower incentive-related accruals. Contributing to the increases in other expenses were the following:  FDIC insurance, up $1.5 million; New York State minimum tax expense, up $830,000; professional fees, up $604,000; and charitable donations, up $317,000.  Premises and furniture and fixtures expenses were up over the prior year mainly as a result of expenses related to branch closures of $879,000.

INCOME TAX EXPENSE

The provision for income tax expense of $3.1 million for an effective rate of 17.2% for the fourth quarter of 2023, compared to tax expense of $4.5 million and an effective rate of 18.6% for the same quarter in 2022. The fourth quarter of 2023 included the impact of surrendering certain separate account BOLI policies, which added $1.8 million to tax expense for the quarter.  For the year-ended 2023, the provision for income tax expense of $2.5 million for an effective rate of 20.6% compared to tax expense of $24.6 million and an effective rate of 22.4% for the same period in 2022. The decrease in income tax expense between comparable periods reflects the decrease in pre-tax income, due primarily to the realized losses on the sale of certain available-for-sale securities.    

ASSET QUALITY

The allowance for credit losses represented 0.92% of total loans and leases at December 31, 2023, up from 0.91% at September 30, 2023, and up from 0.87% at December 31, 2022. The ratio of the allowance to total nonperforming loans and leases was 82.84% at December 31, 2023, compared to 156.96% at September 30, 2023, and 139.86% at December 31, 2022.  The decrease in the ratio compared to prior periods was due to the increase in nonperforming loans and leases discussed in more detail below.  

Provision for credit losses for the fourth quarter of 2023 was $1.8 million compared to $1.4 million for the same period in 2022. Provision for credit losses for the year ended December 31, 2023, was $4.3 million, compared to $2.8 million for the year ended December 31, 2022. The increase in provision expense for both the quarter and year-to-date periods was mainly driven by loan growth, economic forecasts, and changes in asset quality. Net charge-offs for the fourth quarter of 2023 were $410,000 compared to net charge-offs of $190,000 reported for the same period in 2022.

Nonperforming assets represented 0.80% of total assets at December 31, 2023, up from 0.41% reported at September 30, 2023, and 0.43% at December 31, 2022. At December 31, 2023, nonperforming loans and leases totaled $62.3 million, compared to $31.4 million at September 30, 2023, and $32.8 million at December 31, 2022. The increase in nonperforming loans at quarter-end December 31, 2023, was mainly due to the addition of one relationship with two commercial real estate properties in the hospitality portfolio totaling approximately $33.8 million. The Company believes that the existing collateral securing the loans is sufficient to cover the exposure as of December 31, 2023.  These loans were included in loans past due 30-89 days and accruing at the end of the third quarter of 2023.  Loans past due 30-89 days and accruing as a percentage of total loans decreased from 0.75% at the end of the third quarter of 2023 to 0.08% at the end of the fourth quarter of 2023.

Special Mention and Substandard loans and leases totaled $123.1 million at December 31, 2023, reflecting an increase from the $122.9 million reported at September 30, 2023, and $98.3 million reported at December 31, 2022.  

CAPITAL POSITION

Capital ratios at December 31, 2023, remained well above the regulatory minimums for well-capitalized institutions. The ratio of total capital to risk-weighted assets was 13.36% at December 31, 2023, compared to 13.46% at September 30, 2023, and 14.42% at December 31, 2022. The ratio of Tier 1 capital to average assets was 9.08% at December 31, 2023, compared to 9.01% at September 30, 2023, and 9.34% at December 31, 2022.

LIQUIDITY POSITION

The Company's liquidity position at December 31, 2023, was stable and consistent with the immediately prior quarter. Liquidity is enhanced by ready access to national and regional wholesale funding sources including Federal funds purchased, repurchase agreements, brokered deposits, Federal Reserve Bank Discount Window advances and Federal Home Loan Banks (FHLB) advances. The Company maintains ready access liquidity of $1.4 billion, or 18.3% of total assets as of December 31, 2023.  As a member of the FHLB, the Company can use certain unencumbered mortgage-related assets and securities to secure borrowings from the FHLB. At December 31, 2023, the Company had an available borrowing capacity at the FHLB of $642 million. Through various programs at the Federal Reserve Bank, the Company has the ability to use certain unencumbered mortgage-related assets and securities to secure borrowings from the Federal Reserve Bank's Discount Window. At December 31, 2023, the available borrowing capacity with the Federal Reserve Bank was $92.6 million, secured by investment securities. In addition to the available borrowing lines at the FHLB and Federal Reserve Bank, at December 31, 2023, the Company maintained $687.0 million of unencumbered securities which could be pledged to further enhance secured borrowing capacity.

Press Release:

Tompkins Financial Corporation (Tompkins) announced that Charles “Chuck” Guarino has been promoted to chief banking operations officer, a newly created position for the organization. Over the past five years with Tompkins, Guarino has effectively led mortgage sales and operations and small business lending, including a successful implementation of the Paycheck Protection Program (PPP) lending initiative, which generated over 3,000 loans.

Prior to joining Tompkins, Guarino spent more than two decades in banking and financial management, overseeing all aspects of consumer, home equity, residential, and small business lending, as well as analyzing risk in retail loan portfolios, recommending policy, procedure, and guideline adjustments.  

Guarino comes to this position as a final step in realigning the responsibilities of chief financial officer and chief operations officer of Tompkins Financial, Francis Fetsko, who will be retiring at the end of 2024. In his new role, Guarino will be responsible for overseeing Tompkins Financial Corp.'s technology and banking operations throughout the four markets it serves. He will report to Steve Romaine, president and CEO of Tompkins Financial.

“Chuck has led the retail and small business lending team at Tompkins Financial exceptionally well over the past five years and is ready for this expanded role,” said Romaine. “His strategic vision and ability to align resources and effectively execute are critical to his new role. I have had the pleasure of engaging with him on the Central New York leadership team and have watched him execute strategic plans to help our clients succeed. It is rewarding to know the Tompkins organization empowers our team and allows us to fill this position from within our current ranks. I look forward to Chuck’s contribution and collaboration as he joins our senior leadership team.”

Guarino is active in his community, previously holding positions as first vice chairperson on the board of directors of the Urban League of Rochester, past vice president of Resolve of Greater Rochester, and as a past campaign cabinet member of United Way of Wyoming County. He currently serves as a committee member for the marketing and fundraising committee of Hub585. Guarino is a member of the 1997 graduating class of SUNY Geneseo’s Jones School of Business, holding a bachelor of science in management. He also holds a master's degree in business administration from the University of Rochester Simon Business School and was inducted into the Beta Gamma Sigma Honor Society.  

Press Release:

Tompkins Financial Corporation ("Tompkins" or the "Company") reported a net loss of $33.4 million for the third quarter of 2023.  The quarterly results were negatively impacted by the sale of $429.6 million of available-for-sale debt securities, which resulted in an after-tax loss on the sale of securities of $47.5 million. Though this sale resulted in an operating loss in the third quarter of 2023, the transaction is expected to favorably impact securities revenue in future periods as the securities sold had an average yield of 0.93%, while the proceeds of the sale were largely reinvested into securities with an estimated yield of approximately 5.12%. The weighted average life of the securities purchased and sold was approximately 4.3 years.

Tompkins President and CEO, Stephen Romaine, commented, "During the quarter we elected to proactively reposition the balance sheet which will improve securities revenue and we expect that the improved revenue will exceed the value of the loss recognized in the third quarter through time.  We estimate securities revenue to improve by approximately $15.4 million over the next twelve months.

While the economic environment remains challenging for the banking industry, our capital and liquidity levels remain healthy and well positioned to meet the needs of our customers.  We continued to see favorable growth trends, with annualized loan growth of 6.0% from the second to third quarter of this year and increased deposit balances over the same periods. We are also pleased to announce our cash dividend, which is reflective of our healthy capital position."

Diluted earnings per share for the third quarter of 2023 were a loss of $2.35, which reflects the impact of the after-tax losses of $3.34 per diluted share related to the sale of available-for-sale debt securities as noted above.  Diluted earnings per share for the third quarter of 2022 were $1.48.

For the year-to-date period ended September 30, 2023, net income was a loss of $5.5 million, or a loss of $0.39 per diluted share. Year-to-date results were also negatively impacted by after-tax losses on the sale of securities totaling $52.9 million, or $3.69 loss per diluted share. For the same year-to-date period in 2022, net income was $65.5 million, or $4.53 per diluted share.

SELECTED HIGHLIGHTS FOR THE PERIOD:

Total loans at September 30, 2023 were up $82.5 million, or 1.5% (6.1% on an annualized basis) compared to the immediate prior quarter, and up $226.4 million, or 4.3%, from September 30, 2022.
Total deposits at September 30, 2023 were $6.6 billion, up $168.8 million, or 2.5% (10.4% on an annualized basis) from June 30, 2023, and down $313.3 million, or 4.5%, from September 30, 2022. 
Loan to deposit ratio was stable at 82.1%, compared to 82.9% for the immediate prior quarter.
Regulatory Tier 1 capital to average assets was 9.01% at September 30, 2023, compared to 9.57% at June 30, 2023 and 9.14% at September 30, 2022.
Total nonperforming assets at September 30, 2023 represented 0.41% of total assets, which was flat compared to the immediate prior quarter and down from 0.45% at September 30, 2022.

NET INTEREST INCOME

Net interest income was $51.0 million for the third quarter of 2023, down from $51.9 million for the second quarter of 2023 and $58.1 million for the third quarter of 2022. Net interest margin was 2.75% for the third quarter of 2023, compared to 2.83% reported for the second quarter of 2023 and 3.04% reported for the third quarter of 2022. The decrease in net interest income and net interest margin during the third quarter, when compared to the second quarter of this year and the same quarter last year, was due primarily to the increase in interest rates on interest-bearing liabilities outpacing increases on interest earning asset yields due to the higher interest rate environment.  

For the year-to-date period ended September 30, 2023, net interest income was $157.2 million, down $15.8 million, or 9.2%, when compared to the same period in 2022.

Average loans for the quarter ended September 30, 2023 were up $80.5 million, or 1.5%, from the second quarter of 2023, and were up $200.0 million, or 3.9%, compared to the quarter ended September 30, 2022. The increase in average loans over both prior periods was mainly in the commercial real estate portfolio. The average yield on interest-earning assets for the quarter ended September 30, 2023 was 4.06%, which was up from 3.91% for the quarter ended June 30, 2023, and up from 3.32% for the quarter ended September 30, 2022.  

Average total deposits for the third quarter of 2023 were down $20.0 million, or 0.3%, compared to the second quarter of 2023, and down $394.4 million, or 5.8%, compared to the same period in 2022. The decrease as compared to the prior year was largely driven by a decline in stimulus funding and a tightening monetary policy that has led to a declining trend in bank deposits on a national level, as reported by the Federal Reserve. The cost of interest-bearing deposits increased to 1.74% for the third quarter of 2023, compared to 1.41% for the second quarter of 2023, and 0.36% for the third quarter of 2022. The cost of interest-bearing deposits for the third quarter of 2023 increased 33 basis points from June 30, 2023. The ratio of average noninterest bearing deposits to average total deposits for the third quarter of 2023 was 31.0% compared to 31.1% for the second quarter of 2023.  The average cost of interest-bearing liabilities for the third quarter of 2023 of 1.98%, represents an increase of 34 basis points over the second quarter of 2023, and an increase of 153 basis points over the same period in 2022.

NONINTEREST INCOME

Noninterest income was a loss of $41.6 million for the third quarter of 2023, which represents a decrease in noninterest income of $62.3 million compared to the third quarter of 2022. Year-to-date noninterest income was a loss of $8.6 million, which represents a decrease in noninterest income of $68.2 million compared to the same nine month period in 2022.   The decrease in noninterest income in the third quarter of 2023 was largely due to the above noted sale of available-for-sale debt securities, which resulted in the recognition of a pre-tax loss of $62.9 million. Fee-based revenues, including insurance commissions and fees, wealth management fees, service charges on deposit accounts and card services income, for the third quarter of 2023 were collectively up $543,000, or 2.7%, over the same period in 2022.

NONINTEREST EXPENSE

Noninterest expense was $49.9 million for the third quarter of 2023, which was up $264,000, or 0.5%, over the third quarter of 2022.  For the year-to-date period, noninterest expense of $152.0 million was up $6.4 million, or 4.4%, from the same period in 2022. The increase in noninterest expense in the nine months ended September 30, 2023 over the same period in 2022 was mainly in other operating expenses which were up $4.1 million and higher personnel-related expenses, which were up $2.7 million.  Contributing to the growth in other expenses for the nine months ended September 30, 2023, compared to the same period in 2022 were the following: expenses related to the Company’s retirement plans, up $1.3 million; professional fees, up $699,000, New York State minimum tax, up $623,000; and FDIC insurance, up $777,000. The increase in personnel-related expenses was mainly in health insurance, which is up $1.5 million.  

INCOME TAX EXPENSE

The provision for income taxes was a credit of $8.3 million for an effective rate of 20.0% for the third quarter of 2023, compared to tax expense of $6.8 million and an effective rate of 24.1% for the same quarter in 2022. For the first nine months of 2023, the provision for income taxes was a credit of $619,000 for an effective rate of 10.3% compared to tax expense of $20.1 million and an effective rate of 23.4% for the same period in 2022.  The decrease in income tax expense between comparable periods reflects the decrease in pre-tax income, due primarily to the realized losses on the sale of certain available-for-sale securities and the anticipated retention of certain New York State tax benefits.  

ASSET QUALITY

The allowance for credit losses represented 0.91% of total loans and leases at September 30, 2023, flat as compared to June 30, 2023, and up from 0.86% at September 30, 2022. The ratio of the allowance to total nonperforming loans and leases was 156.96% at September 30, 2023, compared to 154.76% at June 30, 2023 and 128.27% at September 30, 2022.

Provision for credit losses for the third quarter of 2023 was $1.2 million compared to $1.1 million for the same period in 2022. Provision for credit losses for the nine months ended September 30, 2023 was $2.6 million, compared to $1.4 million for the nine months ended September 30, 2022. The increase in provision expense for both the quarter and year-to-date periods was mainly driven by economic forecasts, loan growth, and changes in asset quality. Net charge-offs for the quarter ended September 30, 2023 were $177,000 compared to net charge-offs of $122,000 reported for the same period in 2022.

Nonperforming assets represented 0.41% of total assets at September 30, 2023, down from 0.43% at December 31, 2022 and 0.45% reported at September 30, 2022. At September 30, 2023, nonperforming loans and leases totaled $31.4 million, compared to $32.8 million at December 31, 2022 and $34.9 million at September 30, 2022. The increase in loans past due 30-89 days at quarter-end September 30, 2023, was mainly due to the inclusion of two commercial real estate loans to one relationship totaling $18.6 million. The Company believes that the existing collateral securing the loans is sufficient to cover the exposure as of September 30, 2023.

Special Mention and Substandard loans and leases totaled $122.9 million at September 30, 2023, reflecting an increase from the $98.3 million reported at December 31, 2022, and $106.7 million at September 30, 2022. The increase as compared to year-end in Special Mention and Substandard was mainly a result of the downgrade of one commercial real estate loan added to Special Mention during the second quarter of 2023 and the downgrade of one commercial real estate loan previously reported as Special Mention in the second quarter of 2023.

CAPITAL POSITION

Capital ratios at September 30, 2023 remained well above the regulatory minimums for well-capitalized institutions. The ratio of total capital to risk-weighted assets was 13.46% at September 30, 2023, compared to 14.42% at December 31, 2022 and 14.26% at September 30, 2022. The ratio of Tier 1 capital to average assets was 9.01% at September 30, 2023, compared to 9.34% at December 31, 2022 and 9.14% at September 30, 2022.

During the third quarter of 2023, the Company repurchased 41,781 common shares at an aggregate cost of $2.3 million. These shares were purchased under the Company's Stock Repurchase Program announced in the third quarter of 2021.

LIQUIDITY POSITION

The Company's liquidity position at September 30, 2023 was stable and consistent with the immediately prior quarter. Liquidity is enhanced by ready access to national and regional wholesale funding sources including Federal funds purchased, repurchase agreements, brokered deposits, Federal Reserve Bank Discount Window advances and Federal Home Loan Banks (FHLB) advances. The Company maintains ready access liquidity of $1.2 billion, or 15.1% of total assets at September 30, 2023.  As members of the FHLB, the Company can use certain unencumbered mortgage-related assets and securities to secure borrowings from the FHLB. At September 30, 2023 the Company had an available borrowing capacity at the FHLB of $969.4 million. Through various programs at the Federal Reserve Bank, the Company has the ability to use certain unencumbered mortgage-related assets and securities to secure borrowings from the Federal Reserve Bank's Discount Window.  At September 30, 2023 the available borrowing capacity with the Federal Reserve Bank was $91.8 million, secured by investment securities. In addition to the available borrowing lines at the FHLB and Federal Reserve Bank, at September 30, 2023, the Company maintained $411.7 million of unencumbered securities which could be pledged to further enhance secured borrowing capacity. 

“Tompkins is proud to grow alongside our clients as we see vast developments to their portfolios so that we can better assist them in every aspect,” said James Sperry, senior vice president and managing director for Tompkins’ Western New York region. 

“We could not have asked for a better appointment to this position and for someone to work so closely with our clients, than Cesar.” 

Vazquez comes to Tompkins Financial Advisors with 35 years of work experience, including 22 in the retirement plan industry (with extensive knowledge in retirement plan designs, compliance, and industry knowledge), 13 years in the financial and banking industry, having previously served as the retirement plan service manager and consultant for Wealth Enhancement Group’s QCI Team, EPIC Retirement Plan Services, Lifetime Benefits Solutions, and more. 

He holds an associate degree in Business administration from Monroe Community College, a bachelor's degree in Accounting from St. John Fisher College, and certification from Accredited Investments Fiduciary (AIF), Vazquez currently resides in Webster, with his wife Ivette, and daughters Marissa and Alicia.  

Press Release:

Furthering its expertise in the Western New York market, Tompkins Financial Advisors has promoted Serena Compitello and Aaron Rowe to assistant vice president, trust counsel. In this role, Compitello and Rowe are responsible for assisting clients in their estate planning by collaborating with clients' attorneys and other professionals, who need professional advisement in trusts, estate planning, and asset protection.  

“As we see the clientele of Tompkins continue to grow, it is necessary to expand our leadership team to help support our clients in the best way possible,” said James Sperry, Tompkins Financial Advisors senior vice president and managing director for the Western New York market. “Serena and Aaron both bring years of legal experience and we are confident they are the perfect people to help in assisting our clients.”

Compitello has held the position of trust counsel at Tompkins Financial Advisors for the past eight months. She holds a Bachelor of Arts in Political Science from St. Bonaventure University and a Juris Doctorate from Albany Law School and is licensed to practice law in New York. Compitello is a PathStone Housing Action Corporation and PathStone Development Corporation board member and serves on the Membership Committee of the Monroe County Bar Association. Serena has received several past awards: The Daily Record and Rochester Business Journal’s Legal Excellence Award – Up and Coming Attorney, 2022; Super Lawyers Rising Star, 2022 and Super Lawyers Rising Star, 2021.

Rowe joined Tompkins Financial Advisors six months ago from Piede Law, LLP, where he served as an associate attorney. He holds a Bachelor of Science in Mechanical Engineering from Brigham Young University and a Juris Doctorate from Penn State Dickinson Law School of the Pennsylvania State University. Rowe is licensed to practice law in New York and is a member of the Monroe County Bar Association. He currently resides in Fairport New York, where he lives with his wife and three young children. Outside of his professional work, Rowe enjoys training and organizing youth leaders in the community, even taking a two-year leave from his university studies to volunteer full-time. Rowe is bilingual and has earned the privileged Eagle Scout achievement from the Boy Scouts of America. 

Photos submitted by Michelle Obligado of Tompkins 

 Press Release:

Tompkins Financial Corporation ("Tompkins" or the "Company") reported diluted earnings per share of $1.35 for the first quarter of 2023, in line with the immediate prior quarter, and down 15.6% from diluted earnings per share of $1.60 reported in the first quarter of 2022. The first quarter results in the prior year included $2.0 million, pre-tax, ($0.10 per diluted share) in net fees related to the SBA's Paycheck Protection Program loans ("PPP"), compared to net fees of $2,000 in the current period.  

Net income for the first quarter of 2023 was $19.4 million, a decrease of 16.7% from the $23.3 million reported for the same period in 2022.  Increased funding costs coupled with increases in operating expense were the main drivers for the year-over-year decreases in net income.  

Tompkins President and CEO, Stephen Romaine, commented, "The first quarter of 2023 was a tumultuous quarter for the banking industry.  In times like these, our business model - built on strong customer relationships and sustainable financial performance - has helped differentiate Tompkins from companies with less tenable business models. Though we are not immune to certain headwinds facing our industry - as evident from reduced earnings in the first quarter - we are pleased to report an increase in our common equity for the second consecutive quarter, a strong liquidity position, while at the same time delivering an annualized return on equity of 12.45% in the first quarter of 2023." 

       

SELECTED HIGHLIGHTS FOR THE PERIOD: 

• Key profitability measures remained healthy in the first quarter, with a return on average assets of 1.03% (up from 1.00% last quarter); net interest margin of 2.99% (down from 3.02% last quarter); and return on equity of 12.45% (down from 13.36% last quarter). 
• Regulatory Tier 1 capital to average assets improved for the sixth consecutive quarter, ending the first quarter of 2023 at 9.63%. 
• Total loans at March 31 were $5.3 billion, in line with the immediate prior quarter, and up $210.2 million, or 4.2% from March 31, 2022.  Excluding PPP loans, total loans at March 31 were up 4.6% over the first quarter of 2022. 
• Total nonperforming assets at March 31 represented 0.37% of total assets and declined 13.7% from the most recent prior quarter.    

Total deposits at March 31 were $6.5 billion, reflecting a 1.4% decrease compared to year-end 2022 and a decline of 7.2% when compared to same period last year.   
  

NET INTEREST INCOME 

Net interest margin was 2.99% for the first quarter of 2023, compared to 3.02% reported for the fourth quarter of 2022, and 3.04% at March 31, 2022. The decrease in margin from the fourth quarter of 2022 was due primarily to the increase in interest rates on interest-bearing liabilities outpacing increases on interest earning asset yields due to the higher interest rate environment.   

Net interest income was $54.2 million for the first quarter of 2023, down from $57.3 million for the fourth quarter of 2022, and $56.6 million for the first quarter of 2022. Net interest income for the quarter ended  March 31 was impacted by increases in interest expense, which totaled $15.0 million for the first quarter of 2023 compared to $2.6 million for the same period in 2022, partially offset by increased interest and dividend income, which increased by $10.1 million when compared to March 31, 2022.    

Average loans for the quarter ended March 31, 2023 were up $41.6 million or 0.8% from the fourth quarter of 2022, and $195.3 million or 3.9% compared to the same period in 2022. The increase in average loans was mainly in the residential and commercial real estate portfolios compared to the quarter ended March 31, 2022.  Asset yields for the quarter ended March 31, 2023 were up 25 basis points compared to the quarter ended December 31, 2022, and up 63 basis points compared to the same period in 2022.    

Average total deposits for the first quarter of 2023 were down $144.9 million, or 2.2% compared to the fourth quarter of 2022, and down $328.2 million, or 4.8% compared to the same period in 2022.  The decrease was largely driven by a decline in stimulus funding and a tightening monetary policy that has led to a declining trend in bank deposits on a national level, as reported by the Federal Reserve. Average deposit balances at March 31 are $1.3 billion or 23.9% higher than pre-pandemic levels reported at December 31, 2019.  The cost of interest-bearing deposits increased to 1.10% for the first quarter of 2023, compared to 0.69% for the fourth quarter of 2022, and 0.17% for the first quarter last year. The increase was mainly driven by higher market interest rates as a result of the target federal funds rate increasing 450 basis points over the prior twelve months.   

The total cost of interest-bearing liabilities of 1.26% for the first quarter of 2023 represented an increase of 42 basis points over the fourth quarter of 2022, and an increase of 105 basis points over the same period in 2022. At March 31, the Company estimates total uninsured deposits of $2.6 billion, which is unchanged from December 31, 2022.  The uninsured deposit balance of $2.6 billion at March 31 is made up of $1.1 billion of collateralized government deposits and $1.5 billion of uninsured customer deposits without liquid collateral pledged.  Total insured deposits and collateralized government deposits represent 76.9% of the Company's total deposits of $6.5 billion at March 31.   

NONINTEREST INCOME 

Noninterest income of $20.4 million for the first quarter of 2023 was up $2.0 million, or 11.2% compared to the most recent prior quarter, and up $415,000, or 2.1% compared to the prior year quarter in 2022. Noninterest income represented 27.3% of total revenue at March 31, compared to 24.3% at December 31, 2022, and 26.1% at March 31, 2022. Increases in insurance and card service fees in the first quarter of 2023 compared to the prior year quarter were partially offset by lower wealth management fees, primarily due to market conditions.  

NONINTEREST EXPENSE 

Noninterest expense was $50.2 million for the first quarter of 2023, which was in line with the fourth quarter of 2022, and up $3.3 million, or 7.1% over the first quarter of 2022, with the increase largely driven by higher personnel-related costs. Increases in FDIC insurance rates, as well as increased spending on marketing and technology also contributed to expense growth in the first quarter of 2023 compared to the first quarter of 2022.   

INCOME TAX EXPENSE 

The Company's effective tax rate was 23.3% for the first quarter of 2023, compared to 23.0% for the same period in 2022.   

ASSET QUALITY 

The allowance for credit losses represented 0.87% of total loans and leases at March 31, 2023, unchanged from the prior quarter, and up from 0.83% at March 31, 2022. The ratio of the allowance to total nonperforming loans and leases improved to 162.11% for the first quarter of 2023, compared to 139.86% at December 31, 2022 and 139.20% at March 31, 2022.  

Provision for credit losses for the first quarter of 2023 was a credit of $825,000 compared to a credit of $520,000 for the same period in 2022. Net recoveries for the quarter ended March 31 were $1.3 million compared to net recoveries of $17,000 reported for the same period in 2022.         

Nonperforming assets represented 0.37% of total assets at March 31, down from 0.43% at December 31, 2022 and 0.38% at March 31, 2022.  At March 31, nonperforming loans and leases totaled $28.4 million, compared to $32.8 million at December 31, 2022 and $30.3 million at March 31, 2022.   

Special Mention and substandard loans and leases totaled $85.6 million at March 31, reflecting improvement from the $98.3 million reported for December 31, 2022 and the $135.1 million at March 31, 2022.  The improvement over prior quarter was mainly a result of upgrades on two large commercial real estate loans previously reported as Special Mention. 

CAPITAL POSITION 

Capital ratios at March 31, remained well above the regulatory minimums for well-capitalized institutions. The ratio of total capital to risk-weighted assets was 14.62% at March 31, compared to 14.42% at December 31, 2022 and 14.23% at March 31, 2022. The ratio of Tier 1 capital to average assets was 9.63% at March 31, compared to 9.34% at December 31, 2022 and 8.89% at March 31, 2022.  

LIQUIDITY POSITION 

The Company's liquidity is well positioned and remains stable from the fourth quarter of 2022.  Liquidity is enhanced by ready access to national and regional wholesale funding sources including Federal funds purchased, repurchase agreements, brokered deposits, Federal Reserve Bank Discount Window advances and FHLB advances.  The Company maintains ready access liquidity of $1.7 billion or 22.5% of assets.  As members of the FHLB, the Company can use certain unencumbered mortgage-related assets and securities to secure borrowings from the FHLB. At March 31 the Company had an available borrowing capacity at the FHLB of $1.3 billion as compared to $1.3 billion in the fourth quarter of 2022.  Through various programs at the Federal Reserve Bank, the Company has the ability to use certain unencumbered mortgage-related assets and securities to secure borrowings from the Federal Reserve Bank's Discount Window.  At March 31 the available borrowing capacity with the Federal Reserve Bank was $157.0 million, secured by investment securities.  In addition to the available borrowing lines at the FHLB and Federal Reserve Bank, at March 31, the Company maintained $265.3 million of unencumbered securities which could be pledged to further enhance secured borrowing capacity.   

 

Press release:

Tompkins Financial Corporation ("Tompkins" or the "Company") reported diluted earnings per share of $1.36 for the fourth quarter of 2022, up 2.3% compared to $1.33 reported in the fourth quarter of 2021.  Net income for the fourth quarter of 2022 was $19.5 million, which was unchanged when compared to the same period in 2021.   

For the year ended December 31, 2022, diluted earnings per share of $5.89 were down 2.6% compared to the year ended December 31, 2021.  Net income for 2022 was $85.0 million, a decrease of $4.2 million compared to the year ended December 31, 2021.  Significant contributors to the negative variance in annual net income included a reduction in net deferred loan fees associated with PPP loans from $11.2 million in 2021 to $3.0 million in 2022, as well as an increase in provision for credit loss expense, which was a credit of $2.2 million in 2021 versus an expense of $2.8 million in 2022.       

During the fourth quarter of 2022, the Company sold its VISA Class B common shares, recognizing a pre-tax gain of $11.4 million.  Also in the fourth quarter of 2022, the Company sold $147.9 million of available-for-sale securities, recognizing a pre-tax loss on the sale of $11.9 million. The available-for-sale securities sold during the quarter had an average yield of 0.41% and remaining life of 2.1 years.  Proceeds from the sale of the VISA Class B shares and the available-for-sale securities were used to pay down overnight borrowings with the FHLB. 

Tompkins President and CEO, Stephen Romaine, commented, "We are pleased to report earnings growth in the fourth quarter of 2022, when compared to the same quarter last year. The quality of our balance sheet remains a strength, as we had net credit recoveries for the year and nonperforming loans remain near historic lows.  Our performance metrics remain strong as we begin a new year facing economic uncertainty and a challenging interest rate environment. We remain focused on growth that is built on quality customer relationships and on improving the overall efficiency of our Company."       

SELECTED HIGHLIGHTS FOR THE PERIOD: 

• Total loans at December 31, 2022 were $5.3 billion, up $60.5 million over the immediate prior quarter, reflecting an annualized increase of 4.7% from September 30, 2022, and up $193.4 million or 3.8% from December 31, 2021.  Excluding PPP loans, total loans at December 31, 2022 were up 5.3% over year-end 2021. 
• Total deposits at December 31, 2022 were $6.6 billion, down $189.1 million or 2.8% from December 31, 2021, while noninterest bearing deposits of $2.2 billion were up $14.4 million or 0.7% over the same time period. 
• Net interest margin of 3.02% for the quarter ended December 31, 2022 was down from 3.04% for the quarter ended September 30, 2022, and up from 3.01% for the quarter ended December 31, 2021. 
• Return on average equity for the year ended December 31, 2022 of 13.25% was higher than any of the previous three years.  

NET INTEREST INCOME 
Net interest margin was 3.02% for the fourth quarter of 2022, down compared to the 3.04% reported for the third quarter of 2022, and up compared to the 3.01% reported for the fourth quarter of 2021.  The decrease in margin from the third quarter of 2022 was due primarily to the increase in interest expense on interest-bearing deposits and short-term borrowings, partially offset by higher yields on loan, securities and cash, reflective of the higher interest rate environment. 

Net interest income was $57.3 million for the fourth quarter of 2022, down from $58.1 million for the third quarter of 2022 and $57.8 million for the fourth quarter of 2021. Full year net interest income was $230.3 million for the year ended December 31, 2022, up from $223.8 million reported for the year ended December 31, 2021.  

Comparisons to prior periods are impacted by net fees on PPP loans, which have largely paid down during 2022.  Net interest income in the current quarter included $5,000 of net deferred loan fees associated with PPP loans, down from $88,000 of net deferred PPP loan fees for the third quarter of 2022, and $3.2 million of net deferred PPP loan fees for the fourth quarter of 2021.  Full year net interest income for 2021 included net deferred loan fees associated with PPP loans of $11.2 million and a $1.9 million purchase accounting charge related to the redemption of $15.2 million in trust preferred securities; full year net deferred loan fees on PPP loans in 2022 were $3.0 million. 

Average loans for the quarter ended December 31, 2022 increased $145.7 million, or 2.9%, compared to the same period in 2021, and were in line with average loans for the third quarter of 2022.  The increase in average loans as compared to the same period in the prior year was mainly in commercial and residential real estate loans, which were up 7.9% and 4.9%, respectively.  Commercial and industrial loans were down 14.6%, mainly driven by lower PPP loan balances.  Average loan yields for the quarter ended December 31, 2022 were up 27 basis points from the third quarter of 2022 and up 32 basis points compared to the same period in 2021.   

Average loans for the year ended December 31, 2022 were in line with average loans for the year ended December 31, 2021.  Average loan yields for the year ended December 31, 2022, were up 9 basis points compared to 2021, which reflects the impact of rising market interest rates in 2022.   

Average total deposits for the fourth quarter of 2022 were down $261.8 million, or 3.8%, compared to the same period in 2021 and were down $108.1 million, or 1.6%, compared to average deposits for the third quarter of 2022.  The decrease was largely driven by inflation and higher rate alternatives due to current interest rate environment and tighter monetary policy.  The total cost of interest-bearing liabilities of 0.84% for the fourth quarter of 2022 represented an increase of 39 basis points over the third quarter of 2022, and an increase of 62 basis points over the same period in 2021.

Average total deposits for 2022 were flat compared to 2021.  Average noninterest bearing deposits for 2022 were up $90.2 million, or 4.3%, compared to 2021.  The total cost of interest-bearing liabilities for full year ended December 31, 2022 increased by 8 basis points to 0.43% from the same period in 2021. 

NONINTEREST INCOME 
Noninterest income of $18.4 million for the fourth quarter of 2022 was down 4.2% compared to the same period in 2021.  Negatively impacting noninterest income during the quarter were lower wealth management fees, primarily due to market conditions, as well as a net loss on sale of securities of $455,000. 

For the full year 2022, noninterest income of $78.0 million was down 1.1% from 2021.  Year to date 2022 noninterest income reflected higher revenue from insurance commissions, deposit fees and card services fees, which were offset by lower wealth management fees and net losses of $634,000 on securities transactions.   

NONINTEREST EXPENSE 
Noninterest expense was $50.2 million for the fourth quarter of 2022, up $2.0 million, or 4.2%, over the fourth quarter of 2021, with the increase largely driven by higher personnel related costs. Increased spending on marketing and technology also contributed to expense growth in the fourth quarter of 2022 compared to the same period in 2021.   

For the full year 2022, noninterest expense was $195.8 million, up $5.5 million, or 2.9%, over 2021.  The growth in noninterest expense for the year-to-date period was primarily driven by increases in salaries, wages and benefits and other noninterest expense. Contributing to the growth in these expense items were nonrecurring expenses of $1.2 million, related to the consolidation and rebranding of the Company's four banking charters   The year-to-date period in 2021 included $2.9 million in penalties related to the prepayment of $135.0 million in FHLB fixed rate advances.   

INCOME TAX EXPENSE 
The Company's effective tax rate was 18.6% for the fourth quarter of 2022, compared to 21.7% for the same period in 2021.  The effective tax rate for the year ended December 31, 2022 was 22.4%, compared to 22.0% reported for 2021.   

The Company's banking subsidiary has an investment in a real estate investment trust that provides certain benefits on its New York State tax return for qualifying entities.  A condition to claim these benefits is that the consolidated company has qualified assets of no more than $8.0 billion for the taxable year.   Prior to the fourth quarter of 2022, the Company expected to exceed the asset threshold and its effective tax rate reflected the anticipated loss of these tax benefits.  With the decrease in total assets between September 30, 2022 and December 31, 2022, the Company retained the tax benefits, and as a result, adjusted its tax rate in the fourth quarter of 2022 to reflect the retention of the benefits.  The Company will continue to monitor consolidated average assets to determine future eligibility.   

ASSET QUALITY 
The allowance for credit losses represented 0.87% of total loans and leases at December 31, 2022, up from 0.86% at September 30, 2022 and 0.84% at December 31, 2021. The ratio of the allowance to total nonperforming loans and leases improved to 139.85% at December 31, 2022, up compared to 128.27% at September 30, 2022 and 137.51% at December 31, 2021.  

The provision for credit loss expense for the fourth quarter of 2022 was $1.4 million compared to $3.9 million for the same period in 2021.  Provision expense for the year ended December 31, 2022 was an expense of $2.8 million, compared to a credit of $2.2 million for 2021.  The increase in the provision for credit losses for the year-ended December 31, 2022 is mainly driven by current economic forecasts coupled with loan growth.        

Nonperforming assets represented 0.43% of total assets at December 31, 2022, down from 0.45% at September 30, 2022, and up from 0.40% at December 31, 2021.  At December 31, 2022, nonperforming loans and leases totaled $32.8 million, compared to $34.9 million at September 30, 2022 and $31.2 million at December 31, 2021.   

Special Mention and Substandard loans and leases totaled $98.3 million at December 31, 2022, reflecting improvement from $106.7 million at September 30, 2022, and $137.6 million at December 31, 2021. 

CAPITAL POSITION
Capital ratios at December 31, 2022 remained well above the regulatory minimums for well-capitalized institutions. The ratio of Total Capital to Risk-Weighted Assets was 14.42% at December 31, 2022, compared to 14.26% at September 30, 2022 and 14.23% at December 31, 2021. The ratio of Tier 1 capital to average assets was 9.34% at December 31, 2022, compared to 9.14% at September 30, 2022 and 8.72% at December 31, 2021.