Tompkins Financial Corporation Reports Record First Quarter Earnings

Tompkins Financial Corporation (NYSEMKT:TMP)

Tompkins Financial Corporation reported net income of $14.2 million for the first quarter of 2016, an increase of 11.8% from the $12.7 million reported for the same period in 2015. Diluted earnings per share were $0.94 for the first quarter of 2016, an 11.9% increase from $0.84 reported for the first quarter of 2015.

President and CEO, Stephen S. Romaine said, "We are excited to start off the new year with the best first quarter earnings results in our history. Solid loan growth, coupled with a stabilizing net interest margin, have been key drivers of growth over the prior year. At the same time, we have seen continued improvement in credit quality trends, with nonperforming assets improved from already low levels.”

SELECTED HIGHLIGHTS FOR FIRST QUARTER:

  • Net interest income of $44.0 million was up 6.8% from the same period last year.
  • Net interest margin has remained relatively stable over the past four quarters.
  • Total loans of $3.8 billion were up 11.5% over the same period in 2015.
  • Tangible book value per share was up 8.6% compared to the same period last year (refer to Non-GAAP measures).
  • Credit quality continues to improve with nonperforming assets down 13.5% compared to the first quarter of 2015.

NET INTEREST INCOME

Net interest income of $44.0 million for the first quarter of 2016 increased 6.8% compared to the same period in 2015, and was up 1.4% compared to the fourth quarter of 2015. Growth in net interest income was largely driven by growth in average loans of $392.9 million (11.6%) since the first quarter of 2015; and $103.7 million (2.8%) since the fourth quarter of 2015. The net interest margin was 3.36% for the first quarter of 2016, down from 3.45% for the same period last year, but has remained relatively stable over the past four quarters.

NONINTEREST INCOME

Noninterest income represented 28.4% of total revenues in the first quarter of 2016, compared to 30.0% in 2015. Noninterest income of $17.5 million was consistent with the same period prior year, and was down 2.3% compared to the most recent prior quarter.

NONINTEREST EXPENSE

Noninterest expense was $39.5 million for the first quarter of 2016, which was consistent with the same period last year and the fourth quarter of 2015. Salaries and wages were up 8.1% compared to same quarter last year, which was partially offset by lower pension and employee benefits costs.

ASSET QUALITY

Asset quality trends continued to improve in the first quarter of 2016. Nonperforming assets were down 13.5% compared to the first quarter in 2015, and down 7.8% compared to the prior quarter end. Nonperforming assets represented 0.39% of total assets at March 31, 2016, down from 0.43% at December 31, 2015. Nonperforming asset levels continue to be well below the most recent Federal Reserve Board Peer Group Average1 of 0.90%.

Provision for loan and lease losses was $855,000 for the first quarter of 2016, up from $209,000 one year ago. Net charge-offs for the first quarter of 2016 were $329,000 compared to net recoveries of $279,000 reported in the first quarter 2015.

The Company’s allowance for originated loan and lease losses totaled $32.0 million at March 31, 2016, and represented 0.95% of total originated loans at March 31, 2016. The ratio is unchanged from the most recent prior quarter and is down from 0.99% one year ago. The total allowance represented 156.88% of total nonperforming loans and leases at March 31, 2016, up from 146.7% at December 31, 2015, and 145.11% at March 31, 2015.

CAPITAL POSITION

Capital ratios remain well above the regulatory well capitalized minimums. Tier 1 capital to average assets of 8.79%, compared to 8.82% reported for December 31, 2015, and 8.85% at March 31, 2015. Total Capital to risk-weighted assets improved from 13.03% at December 31, 2015 to 13.18% at March 31, 2016.

ABOUT TOMPKINS FINANCIAL CORPORATION

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

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

This press release may include forward-looking statements with respect to revenue sources, growth, market risk, and corporate objectives. The Company assumes no duty, and specifically disclaims any obligation, to update forward-looking statements, and cautions that these statements are subject to numerous assumptions, risks, and uncertainties, all of which could change over time. Actual results could differ materially from forward-looking statements.

TOMPKINS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except share and per share data) (Unaudited)As ofAs of
ASSETS03/31/201612/31/2015
Cash and noninterest bearing balances due from banks $ 53,637

$

56,261
Interest bearing balances due from banks 1,877 1,996
Cash and Cash Equivalents55,51458,257
Trading securities, at fair value 7,023 7,368

Available-for-sale securities, at fair value (amortized cost of $1,415,577 at March 31, 2016 and $1,390,255 at December 31, 2015)

1,431,709 1,385,684

Held-to-maturity securities, at amortized cost (fair value of $150,139 at March 31, 2016 and $146,686 at December 31, 2015)

145,010 146,071
Originated loans and leases, net of unearned income and deferred costs and fees (2) 3,370,791 3,310,768
Acquired loans and leases, covered (3) 12,737 14,031
Acquired loans and leases, non-covered (3) 437,385 447,243
Less: Allowance for loan and lease losses 32,530 32,004
Net Loans and Leases3,788,3833,740,038
FDIC indemnification asset 147 158
Federal Home Loan Bank stock 25,727 29,969
Bank premises and equipment, net 60,237 60,331
Corporate owned life insurance 76,410 75,792
Goodwill 92,617 91,792
Other intangible assets, net 13,233 12,448
Accrued interest and other assets 68,961 82,087
Total Assets$5,764,971

$

5,689,995
LIABILITIES
Deposits:
Interest bearing:
Checking, savings and money market 2,574,523 2,401,519
Time 887,142 855,133
Noninterest bearing 1,093,563 1,138,654
Total Deposits4,555,2284,395,306

Federal funds purchased and securities sold under agreements to repurchase

116,551 136,513

Other borrowings, including certain amounts at fair value of $10,518 at March 31, 2016 and $10,576 at December 31, 2015

455,341 536,285
Trust preferred debentures 37,552 37,509
Other liabilities 60,406 67,916
Total Liabilities$5,225,078

$

5,173,529
EQUITY
Tompkins Financial Corporation shareholders' equity:

Common Stock - par value $.10 per share: Authorized 25,000,000 shares; Issued: 15,059,686 at March 31, 2016; and 15,015,594 at December 31, 2015

1,506 1,502
Additional paid-in capital 353,846 350,823
Retained earnings 205,031 197,445
Accumulated other comprehensive loss (18,341 ) (31,001 )

Treasury stock, at cost – 111,924 shares at March 31, 2016, and 116,126 shares at December 31, 2015

(3,634 ) (3,755 )
Total Tompkins Financial Corporation Shareholders’ Equity538,408515,014
Noncontrolling interests 1,485 1,452
Total Equity$539,893

$

516,466
Total Liabilities and Equity$5,764,971

$

5,689,995
TOMPKINS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(In thousands, except per share data) (Unaudited)03/31/201603/31/2015
INTEREST AND DIVIDEND INCOME
Loans $ 40,487 $ 37,376
Due from banks 2 1
Trading securities 81 94
Available-for-sale securities 7,531 7,814
Held-to-maturity securities 911 596
Federal Home Loan Bank stock and Federal Reserve Bank stock 297 347
Total Interest and Dividend Income49,30946,228
INTEREST EXPENSE
Time certificates of deposits of $250,000 or more 390 335
Other deposits 2,209 2,286
Federal funds purchased and securities sold under agreements to
repurchase 666 670
Trust preferred debentures 589 570
Other borrowings 1,417 1,139
Total Interest Expense5,2715,000
Net Interest Income44,03841,228
Less: Provision for loan and lease losses 855 209
Net Interest Income After Provision for Loan and Lease Losses43,18341,019
NONINTEREST INCOME
Insurance commissions and fees 7,562 7,370
Investment services income 3,786 4,007
Service charges on deposit accounts 2,264 2,157
Card services income 1,941 1,818
Mark-to-market loss on trading securities (46 ) (63 )
Mark-to-market gain on liabilities held at fair value 57 41
Other income 1,707 2,026
Gain on sale of available-for-sale securities 232 290
Total Noninterest Income17,50317,646
NONINTEREST EXPENSES
Salaries and wages 18,989 17,568
Pension and other employee benefits 5,283 5,994
Net occupancy expense of premises 3,148 3,339
Furniture and fixture expense 1,689 1,450
FDIC insurance 822 741
Amortization of intangible assets 527 507
Other operating expense 9,048 10,093
Total Noninterest Expenses39,50639,692
Income Before Income Tax Expense21,18018,973
Income Tax Expense 6,967 6,260
Net Income attributable to Noncontrolling Interests and Tompkins Financial Corporation14,21312,713
Less: Net income attributable to noncontrolling interests 33 33
Net Income Attributable to Tompkins Financial Corporation$14,180$12,680
Basic Earnings Per Share$0.95$0.85
Diluted Earnings Per Share$0.94$0.84
Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)
Year to Date Period EndedYear to Date Period Ended
March 31, 2016March 31, 2015
Average Average
Balance Average Balance Average
(Dollar amounts in thousands) (YTD) Interest Yield/Rate (YTD) Interest Yield/Rate
ASSETS
Interest-earning assets
Interest-bearing balances due from banks $ 2,094 $ 2 0.38 % $ 1,388 $ 1 0.29 %
Securities (4)
U.S. Government securities 1,458,755 7,903 2.18 % 1,435,574 7,853 2.22 %
Trading securities 7,248 81 4.49 % 8,858 94 4.30 %
State and municipal (5) 97,631 838 3.45 % 88,304 870 4.00 %
Other securities (5) 3,686 31 3.38 % 3,764 30 3.23 %
Total securities 1,567,320 8,853 2.27 % 1,536,500 8,847 2.34 %
FHLBNY and FRB stock 27,799 298 4.31 % 20,765 347 6.78 %
Total loans and leases, net of unearned income (5)(6) 3,791,207 41,185 4.37 % 3,398,319 37,954 4.53 %
Total interest-earning assets5,388,42050,3383.76%4,956,97247,1493.86%
Other assets 341,851 358,030
Total assets5,730,2715,315,002
LIABILITIES & EQUITY
Deposits
Interest-bearing deposits
Interest bearing checking, savings, & money market 2,533,185 956 0.15 % 2,348,973 990 0.17 %
Time deposits 868,095 1,643 0.76 % 905,981 1,631 0.73 %
Total interest-bearing deposits 3,401,280 2,599 0.31 % 3,254,954 2,621 0.33 %
Federal funds purchased & securities sold under
agreements to repurchase 126,262 666 2.12 % 142,359 670 1.91 %
Other borrowings 502,319 1,417 1.13 % 347,690 1,139 1.33 %
Trust preferred debentures 37,524 589 6.31 % 37,352 570 6.19 %
Total interest-bearing liabilities4,067,3855,2710.52%3,782,3555,0000.54%
Noninterest bearing deposits 1,067,638 973,212
Accrued expenses and other liabilities 66,934 62,388
Total liabilities 5,201,957 4,817,955
Tompkins Financial Corporation Shareholders’ equity 526,846 495,579
Noncontrolling interest 1,468 1,468
Total equity528,314497,047
Total liabilities and equity$5,730,271$5,315,002
Interest rate spread 3.24%3.32%
Net interest income/margin on earning assets 45,0673.36%42,1493.45%
Tax Equivalent Adjustment (1,029)(921)
Net interest income per consolidated financial statements $44,038$41,228
Tompkins Financial Corporation - Summary Financial Data (Unaudited)
(In thousands, except per share data)

Quarter-Ended

Year-Ended

Mar-16 Dec-15 Sep-15 Jun-15 Mar-15 Dec-15
Period End Balance Sheet
Securities $ 1,583,742 $ 1,539,123 $ 1,542,332 $ 1,536,374 $ 1,555,597 $ 1,539,123
Originated loans and leases, net of unearned income and deferred costs and fees (2) 3,370,791 3,310,768 3,149,386 3,013,968 2,898,533 3,310,768
Acquired loans and leases (3) 450,122 461,274 484,927 507,963 529,024 461,274
Allowance for loan and lease losses 32,530 32,004 30,965 30,091 29,485 32,004
Total assets 5,764,971 5,689,995 5,594,718 5,436,136 5,357,533 5,689,995
Total deposits 4,555,228 4,395,306 4,437,073 4,204,089 4,282,766 4,395,306
Federal funds purchased and securities sold under agreements to repurchase 116,551 136,513 134,941 131,063 135,769 136,513
Other borrowings 455,341 536,285 398,946 493,326 330,850 536,285
Trust preferred debentures 37,552 37,509 37,466 37,423 37,380 37,509
Total common equity 538,408 515,014 516,409 503,877 502,811 515,014
Total equity 539,893 516,466 517,959 505,394 504,296 516,466
Average Balance Sheet
Average earning assets $ 5,388,420 $ 5,260,979 $ 5,138,665 $ 5,038,586 $ 4,956,972 $ 5,099,743
Average assets 5,730,271 5,624,351 5,486,645 5,391,114 5,315,002 5,455,214
Average interest-bearing liabilities 4,067,385 3,930,707 3,856,025 3,835,430 3,782,355 3,851,549
Average equity 528,314 518,529 509,518 505,667 497,047 507,754
Share data
Weighted average shares outstanding (basic) 14,760,276 14,719,394 14,739,915 14,751,844 14,701,397 14,728,193
Weighted average shares outstanding (diluted) 14,905,919 14,869,103 14,866,735 14,878,107 14,837,935 14,863,026
Period-end shares outstanding 15,023,776 14,979,684 14,905,576 14,942,107 14,962,079 14,979,684
Common equity book value per share $ 35.84 $ 34.38 $ 34.65 $ 33.72 $ 33.61 $ 34.38
Tangible book value per share (Non-GAAP) $ 28.85 $ 27.48 $ 27.64 $ 26.71 $ 26.56 $ 27.48
Income Statement
Net interest income $ 44,038 $ 43,437 $ 42,386 $ 41,330 $ 41,228 $ 168,381
Provision (Credit) for loan/lease losses 855 1,533 281 922 209 2,945
Noninterest income 17,503 17,910 17,422 18,962 17,646 71,940
Noninterest expense 39,506 39,370 37,882 32,918 39,692 149,862
Income tax expense 6,967 6,557 7,115 9,030 6,260 28,962
Net income attributable to Tompkins Financial Corporation 14,180 13,854 14,497 17,390 12,680 58,421
Noncontrolling interests 33 33 33 32 33 131
Basic earnings per share (9) $ 0.95 $ 0.93 $ 0.97 $ 1.16 $ 0.85 $ 3.91
Diluted earnings per share (9) $ 0.94 $ 0.92 $ 0.96 $ 1.15 $ 0.84 $ 3.87
Nonperforming Assets
Originated nonaccrual loans and leases $ 12,671 $ 13,506 $ 14,821 $ 14,566 $ 13,811 $ 13,506
Acquired nonaccrual loans and leases 4,145 4,331 4,908 5,030 4,683 4,331
Originated loans and leases 90 days past due and accruing 57 58 57 58 236 58
Troubled debt restructurings not included above 3,862 3,915 3,465 1,939 1,589 3,915
Total nonperforming loans and leases 20,735 21,810 23,251 21,593 20,319 21,810
OREO (8) 1,865 2,692 3,188 2,570 5,816 2,692
Total nonperforming assets $ 22,600 $ 24,502 $ 26,439 $ 24,163 $ 26,135 $ 24,502

Quarter-EndedYear-Ended
Delinquency - Originated loan and lease portfolio Mar-16 Dec-15 Sep-15 Jun-15 Mar-15 Dec-15
Loans and leases 30-89 days past due and
accruing (2) $ 2,519 $ 3,280 $ 3,550 $ 3,315 $ 2,438 $ 3,280
Loans and leases 90 days past due and accruing (2) 57 58 57 58 236 58
Total originated loans and leases past due and accruing (2) 2,576 3,338 3,607 3,373 2,674 3,338
Delinquency - Acquired loan and lease portfolio
Covered loans and leases 30-89 days past due and accruing (3)(7) $ 1 $ 276 $ 309 $ 455 $ 547 $ 276
Covered loans and leases 90 days or more past
due and accruing (3)(7) 469 524 508 674 682 524
Non-covered loans and leases 30-89 days past
due and accruing (3)(7) 1,038 933 1,028 917 2,546 933
Non-covered loans and leases 90 days past
due and accruing (3)(7) 1,446 1,991 2,069 3,031 2,811 1,991
Total acquired loans and leases past due and accruing 2,954 3,724 3,914 5,077 6,586 3,724
Total loans and leases past due and accruing $ 5,530 $ 7,062 $ 7,521 $ 8,450 $ 9,260 $ 7,062
Allowance for Loan Losses - Originated loan and lease portfolio
Balance at beginning of period $ 31,312 $ 30,450 $ 29,428 $ 28,690 $ 28,156 $ 28,156
Provision for loan and lease losses 872 1,185 173 769 340 2,467
Net loan and lease charge-offs (recoveries) 203 323 (849 ) 31 (194 ) (689 )
Allowance for loan and lease losses (originated 31,981 31,312 30,450 29,428 28,690 31,312
loan portfolio) - balance at end of period $ $ $ $ $ $
Allowance for Loan Losses - Acquired loan and lease portfolio
Balance at beginning of period $ 692 $ 515 $ 663 $ 795 $ 841 $ 841
Provision (Credit) for loan and lease losses (17 ) 348 108 153 (131 ) 478
Net loan and lease charge-offs (recoveries) 126 171 256 285 (85 ) 627
Allowance for loan and lease losses (acquired
loan portfolio) - balance at end of period 549 692 515 663 795 692
Total allowance for loan and lease losses $ 32,530 $ 32,004 $ 30,965 $ 30,091 $ 29,485 $ 32,004
Loan Classification - Originated Portfolio
Special Mention $ 20,388 $ 19,657 $ 25,133 $ 25,706 $ 34,965 $ 19,657
Substandard 18,026 18,186 19,937 21,600 19,150 18,186
Loan Classification - Acquired Portfolio
Special Mention 534 540 1,446 1,589 5,053 540
Substandard 17,445 17,007 23,683 21,932 21,752 18,238
Loan Classifications - Total Portfolio
Special Mention 20,922 20,197 26,579 27,295 40,018 20,197
Substandard 35,471 35,193 43,620 43,532 40,902 36,424
RATIO ANALYSISQuarter-EndedYear-Ended
Credit Quality Mar-16 Dec-15 Sep-15 Jun-15 Mar-15 Dec-15
Nonperforming loans and leases/total loans and leases (7) 0.54 % 0.58 % 0.64 % 0.61 % 0.59 % 0.58 %
Nonperforming assets/total assets 0.39 % 0.43 % 0.47 % 0.44 % 0.49 % 0.43 %
Allowance for originated loan and lease losses/total originated loans and leases 0.95 % 0.95 % 0.97 % 0.98 % 0.99 % 0.95 %
Allowance/nonperforming loans and leases 156.88 % 146.74 % 133.18 % 139.36 % 145.11 % 146.74 %
Net loan and lease losses (recoveries) annualized/total average loans and leases 0.03 % 0.05 % (0.07 %) 0.04 % (0.03 %) (0.00 %)
Capital Adequacy (period-end)
Tier 1 capital / average assets * 8.79 % 8.82 % 8.89 % 8.92 % 8.85 % 8.82 %
Total capital / risk-weighted assets * 13.18 % 13.03 % 13.29 % 13.46 % 13.37 % 13.03 %
*Beginning with March 31, 2015, ratios are calculated utilizing Basel III regulatory capital framework
Profitability
Return on average assets * 0.99 % 0.98 % 1.05 % 1.29 % 0.97 % 1.07 %
Return on average equity * 10.77 % 10.63 % 11.29 % 13.79 % 10.35 % 11.51 %
Net interest margin (TE) * 3.36 % 3.35 % 3.35 % 3.37 % 3.45 % 3.38 %
* Quarterly ratios have been annualized

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

NON-GAAP MEASURES
This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). Where non-GAAP disclosures are used in this press release, the comparable GAAP measure, as well as reconciliation to the comparable GAAP measure, is provided in the accompanying tables. Management believes that these non-GAAP measure provide useful information. Non-GAAP measures should not be considered a substitute for financial measures determined in accordance with GAAP and investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. See "Tompkins Financial Corporation - Summary Financial Data (Unaudited)" tables for Non-GAAP related calculations.

Quarter-Ended

Year-Ended

Non-GAAP Disclosure - Adjusted Diluted Earnings Per Share

Mar-16

Dec-15

Sep-15

Jun-15

Mar-15

Dec-15

Net income available to common shareholders $ 14,180 $ 13,854 $ 14,497 $ 17,390 $ 12,680 $ 58,421
Less: Dividends and undistributed earnings allocated to unvested restricted stock awards 224 229 189 234 182 834
Adjusted net income available to common shareholders 13,956 13,625 14,308 17,156 12,498 57,587
Gain on pension plan curtailment (net of tax) 0 0 0 (3,602 ) 0 (3,602 )
Net operating income (Non-GAAP) 13,956 13,625 14,308 13,554 12,498 54,349
Weighted average shares outstanding (diluted) 14,905,919 14,869,103 14,866,735 14,878,107 14,837,935 14,863,026
Adjusted diluted earnings per share (Non-GAAP) (9) $ 0.94 $ 0.92 $ 0.96 $ 0.91 $ 0.84 $ 3.66
Non-GAAP Disclosure - Tangible Book Value Per Share
Total common equity $ 538,408 $ 515,014 $ 516,409 $ 503,877 $ 502,811 $ 515,014
Less: Goodwill and intangibles (10) 104,987 103,347 104,349 104,845 105,344 103,347
Tangible common equity 433,421 411,667 412,060 399,032 397,467 411,667
Ending shares outstanding 15,023,776 14,979,684 14,905,576 14,942,107 14,962,079 14,979,684
Tangible book value per share (Non-GAAP) $ 28.85 $ 27.48 $ 27.64 $ 26.71 $ 26.56 $ 27.48
(1) Federal Reserve peer ratio as of December 31, 2015, includes banks and bank holding companies with consolidated assets between $3 billion and $10 billion.
(2) "Originated" equals loans and leases not included by definition in "acquired loans".
(3)"Acquired Loans and Leases" equals loans and leases acquired at fair value, accounted for in accordance with FASB ASC Topic 805. "Covered Loans" are loans for which the Company will share losses with the FDIC and consist of loans VIST Bank acquired as part of an FDIC-assisted transaction during the fourth quarter of 2010.
(4) Average balances and yields on available-for-sale securities are based on historical amortized cost.
(5) Interest income includes the tax effects of taxable-equivalent basis.
(6) Nonaccrual loans are included in the average asset totals presented above. Payments received on nonaccrual loans have been recognized as disclosed in Note 1 of the Company's consolidated financial statements included in Part I of the Company's annual report on Form 10-K for the fiscal year ended December 31, 2015.
(7) Certain acquired loans and leases that are past due are not on nonaccrual and are not included in nonperforming loans. The risk of credit loss on these loans has been considered by virtue of the Corporation's estimate of acquisition-date fair value and these loans are considered accruing as the Corporation primarily recognizes interest income through accretion of the difference between the carrying value of these loans and their expected cash flows.
(8) Includes all other real estate owned, including those balances acquired through business combinations.
(9)Earnings per share year-to-date may not equal the sum of the quarterly earnings per share as a result of rounding of average shares.
(10) "Goodwill and intangibles" equal Total Intangible Assets less Mortgage Servicing Rights in the above tables.

Contacts:

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

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