Tompkins Financial Corporation Reports Record First Quarter Earnings.

By: Tompkins Financial Corporation via Business Wire News Releases

April 27, 2018 at 09:00 AM EDT

Tompkins Financial Corporation (NYSE American: TMP)

Tompkins Financial Corporation reported net income of $20.4 million for the first quarter of 2018, an increase of 30.0% from the $15.7 million reported for the same period in 2017. Diluted earnings per share were $1.33 for the first quarter of 2018, a 29.1% increase from $1.03 reported for the first quarter of 2017.

President and CEO, Stephen S. Romaine said “We are excited to start 2018 with very strong earnings growth. Solid loan growth, an improved net interest margin, and higher fee income all contributed to earnings improvement over the prior year. Our first quarter earnings also benefited from a lower tax rate in 2018.”

Selected highlights for first quarter:

Diluted earnings per share of $1.33 represent the best quarterly earnings in Company history, and are up 29.1% over the same period in 2017
Net interest income of $52.7 million was up 9.7% compared to the first quarter of 2017
Total loans of $4.7 billion were up 9.5% over the same period in 2017, and are up 0.8% compared to December 31, 2017
Total deposits of $4.9 billion reflect an increase of 1.6% over the same period last year, and are up 1.9% from December 31, 2017

NET INTEREST INCOME

Net interest income of $52.7 million for the first quarter of 2018 increased by $4.7 million, or 9.7% compared to the same period in 2017, and was up 1.4% compared to the fourth quarter of 2017. The increase in net interest income over prior year benefited from a 10.0% increase in average loans and a 13.7% increase in average noninterest-bearing deposits when compared to the same period in 2017. Net interest income was also positively impacted by reduced interest expense on time deposits, which benefited from accelerated accretion of purchase accounting deposit discounts from certain VIST acquired deposits. The net interest margin was 3.42% for the first quarter of 2018, up from 3.38% for the first quarter of 2017, and in line with the fourth quarter of 2017.

NONINTEREST INCOME

Noninterest income represented 25.3% of total revenues in the first quarter of 2018, compared to 26.4% in the same period in 2017, and 25.0% for the most recent prior quarter. Noninterest income of $17.8 million was up 3.4% compared to the same period last year, and up 3.0% over the fourth quarter of 2017. Contributing to the increase was fee based income related to insurance and investment services, card services and deposit account fees which improved a combined 5.5% over the same period in 2017.

NONINTEREST EXPENSE

Noninterest expense was $43.7 million for the first quarter of 2018, which was up 5.7% from the same period in 2017, and down 5.5% compared to the fourth quarter of 2017. The increase in noninterest expense was mainly related to higher salaries and wages in the first quarter of 2018. Other operating expenses in the fourth quarter of 2017 included $2.7 million related to a write off of a historic tax credit investment.

INCOME TAX EXPENSE

The Company’s effective tax rate was 22.0% in the first quarter of 2018, compared to 31.9% for the same period in 2017. The decrease is a direct result of The Tax Cuts and Jobs Act of 2017, which reduced the Federal statutory tax rate from 35% in 2017, to 21% in 2018.

ASSET QUALITY

Asset quality trends remained strong in the first quarter of 2018. Nonperforming assets represented 0.41% of total assets at March 31, 2018, up slightly from 0.38% at December 31, 2017. Nonperforming asset levels continue to be below the most recent Federal Reserve Board Peer Group Average1 of 0.63%.

Provision for loan and lease losses was $567,000 for the first quarter of 2018, down from $769,000 reported for the first quarter of 2017. Net charge-offs for the first quarter of 2018 were $127,000 compared to $358,000 reported in the first quarter of 2017.

The Company’s allowance for originated loan and lease losses totaled $40.1 million at March 31, 2018, and represented 0.91% of total originated loans and leases at March 31, 2018, compared to 0.92% at March 31, 2017. The total allowance represented 159.34% of total nonperforming loans and leases at March 31, 2018, down from 180.02% at March 31, 2017, and 172.84% at December 31, 2017.

CAPITAL POSITION

Capital ratios remain well above the regulatory well capitalized minimums. The ratio of tangible common equity to tangible assets was 7.29% at March 31, 2018, improved from the 7.24% reported for the most recent prior quarter ended December 31, 2017, and down from 7.44% at March 31, 2017.

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.

The statements made herein shall not confer upon any person any rights or remedies of any nature, and shall not be construed to establish, amend, or modify any benefit plan, program, agreement, or arrangement, nor to alter any existing at-will employment relationship between the Company and its employees.


TOMPKINS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION

(In thousands, except share and per share data) (Unaudited)				As of			As of
ASSETS				03/31/2018			12/31/2017

Cash and noninterest bearing balances due from banks			$	66,396		$	77,688
Interest bearing balances due from banks				1,706			6,615
	Cash and Cash Equivalents			68,102			84,303

Available-for-sale securities, at fair value (amortized cost of $1,408,360 at March 31,
	2018 and $1,409,996 at December 31, 2017)			1,371,664			1,392,775
Held-to-maturity securities, at amortized cost (fair value of $137,843 at March 31, 2018
	and $140,315 at December 31, 2017)			139,131			139,216
Originated loans and leases, net of unearned income and deferred costs and fees (2)				4,408,081			4,358,543
Acquired loans (3)				296,765			310,577
Less: Allowance for loan and lease losses				40,211			39,771
	Net Loans and Leases			4,664,635			4,629,349

Federal Home Loan Bank and other stock				47,019			50,498
Bank premises and equipment, net				92,139			86,995
Corporate owned life insurance				80,623			80,106
Goodwill				92,291			92,291
Other intangible assets, net				8,791			9,263
Accrued interest and other assets				83,732			83,494
	Total Assets		$	6,648,128		$	6,648,290

LIABILITIES
Deposits:
	Interest bearing:
	Checking, savings and money market			2,893,619			2,651,632
	Time			685,600			748,250
	Noninterest bearing			1,350,684			1,437,925
	Total Deposits			4,929,903			4,837,807

Federal funds purchased and securities sold under agreements to repurchase				69,131			75,177
Other borrowings				995,074			1,071,742
Trust preferred debentures				16,734			16,691
Other liabilities				57,875			70,671
	Total Liabilities		$	6,068,717		$	6,072,088

EQUITY
Tompkins Financial Corporation shareholders' equity:
	Common Stock - par value $.10 per share: Authorized 25,000,000 shares; Issued:
		15,321,245 at March 31, 2018; and 15,301,524 at December 31, 2017		1,532			1,530
	Additional paid-in capital			366,666			364,031
	Retained earnings			279,895			265,007
	Accumulated other comprehensive loss			(65,682	)		(51,296	)
	Treasury stock, at cost – 116,587 shares at March 31,2018, and 120,805 shares
		at December 31, 2017		(4,444	)		(4,492	)

	Total Tompkins Financial Corporation Shareholders’ Equity			577,967			574,780
Noncontrolling interests				1,444			1,422
	Total Equity		$	579,411		$	576,202
	Total Liabilities and Equity		$	6,648,128		$	6,648,290


TOMPKINS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
		Three Months Ended
(In thousands, except per share data) (Unaudited)		03/31/2018			03/31/2017
INTEREST AND DIVIDEND INCOME
Loans	$	50,894		$	44,951
Due from banks		7			2
Available-for-sale securities		7,644			7,322
Held-to-maturity securities		858			878
Federal Home Loan Bank and other stock		737			468
Total Interest and Dividend Income		60,140			53,621
INTEREST EXPENSE
Time certificates of deposits of $250,000 or more		(14	)		441
Other deposits		2,783			2,347
Federal funds purchased and securities sold under agreements to
repurchase		46			108
Trust preferred debentures		279			367
Other borrowings		4,359			2,324
Total Interest Expense		7,453			5,587
Net Interest Income		52,687			48,034
Less: Provision for loan and lease losses		567			769
Net Interest Income After Provision for Loan and Lease Losses		52,120			47,265
NONINTEREST INCOME
Insurance commissions and fees		7,394			7,118
Investment services income		4,246			3,791
Service charges on deposit accounts		2,132			2,167
Card services income		2,146			2,009
Other income		1,788			2,155
(Loss)/gain on sale of available-for-sale securities		124			0
Total Noninterest Income		17,830			17,240
NONINTEREST EXPENSE
Salaries and wages		20,998			19,635
Other employee benefits		5,376			5,634
Net occupancy expense of premises		3,646			3,511
Furniture and fixture expense		1,975			1,597
FDIC insurance		667			538
Amortization of intangible assets		451			493
Other operating expense		10,608			9,960
Total Noninterest Expenses		43,721			41,368
Income Before Income Tax Expense		26,229			23,137
Income Tax Expense		5,761			7,388
Net Income attributable to Noncontrolling Interests and Tompkins Financial Corporation		20,468			15,749
Less: Net income attributable to noncontrolling interests		32			32
Net Income Attributable to Tompkins Financial Corporation	$	20,436		$	15,717
Basic Earnings Per Share	$	1.34		$	1.04
Diluted Earnings Per Share	$	1.33		$	1.03


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

			Quarter Ended					Quarter Ended
				March 31, 2018					March 31, 2017
				Average					Average
				Balance			Average		Balance			Average
(Dollar amounts in thousands)				(QTD)	Interest		Yield/Rate		(YTD)	Interest		Yield/Rate
ASSETS
Interest-earning assets
	Interest-bearing balances due from banks		$	2,565	$	7	1.11%	$	5,214	$	2	0.16%
	Securities (4)
		U.S. Government securities		1,454,229	7,954		2.22%		1,479,516	7,659		2.10%
		State and municipal (5)		99,766	643		2.61%		100,698	840		3.38%
		Other securities (5)		3,571	35		3.97%		3,613	31		3.48%
		Total securities		1,557,566	8,632		2.25%		1,583,827	8,530		2.18%
	FHLBNY and FRB stock			49,509	737		6.04%		38,105	468		4.98%

	Total loans and leases, net of unearned income (5)(6)			4,688,087	51,229		4.43%		4,263,799	45,675		4.34%
	Total interest-earning assets			6,297,727	60,605		3.90%		5,890,945	54,674		3.76%

Other assets				355,036					350,443

	Total assets		$	6,652,763				$	6,241,388

LIABILITIES & EQUITY
Deposits
	Interest-bearing deposits
		Interest bearing checking, savings, & money market	$	2,796,197	1,646		0.24%	$	2,664,848	1,061		0.16%
		Time deposits		717,617	1,123		0.63%		869,949	1,727		0.81%
		Total interest-bearing deposits		3,513,814	2,769		0.32%		3,534,797	2,788		0.32%

Federal funds purchased & securities sold under
		agreements to repurchase		75,167	46		0.25%		77,980	108		0.56%
Other borrowings				1,053,311	4,359		1.68%		791,136	2,324		1.19%
Trust preferred debentures				16,706	279		6.77%		23,588	367		6.31%
	Total interest-bearing liabilities			4,658,998	7,453		0.65%		4,427,501	5,587		0.51%

Noninterest bearing deposits				1,351,307					1,188,567
Accrued expenses and other liabilities				67,495					69,423
	Total liabilities			6,077,800					5,685,491

Tompkins Financial Corporation Shareholders’ equity				573,536					554,428
Noncontrolling interest				1,427					1,469
	Total equity			574,963					555,897

	Total liabilities and equity		$	6,652,763				$	6,241,388
Interest rate spread							3.25%					3.25%
	Net interest income/margin on earning assets				53,152		3.42%			49,088		3.38%

Tax Equivalent Adjustment					(465)					(1,054)

	Net interest income per consolidated financial statements				$	52,687				$	48,034


Tompkins Financial Corporation - Summary Financial Data (Unaudited)
(In thousands, except per share data)
	Quarter-Ended										Year-Ended
Period End Balance Sheet	Mar-18		Dec-17		Sep-17		Jun-17		Mar-17		Dec-17
Securities	$	1,510,795	$	1,531,991	$	1,546,199	$	1,564,865	$	1,569,068	$	1,531,991
Originated loans and leases, net of unearned income and deferred costs and fees (2)		4,408,081		4,358,543		4,167,254		4,070,755		3,922,413		4,358,543
Acquired loans and leases (3)		296,765		310,577		323,259		347,841		375,380		310,577
Allowance for loan and lease losses		40,211		39,771		38,038		37,157		36,166		39,771
Total assets		6,648,128		6,648,290		6,524,060		6,415,012		6,280,047		6,648,290
Total deposits		4,929,903		4,837,807		4,943,944		4,750,722		4,850,585		4,837,807
Federal funds purchased and securities sold under agreements to repurchase		69,131		75,177		73,874		50,360		70,716		75,177
Other borrowings		995,074		1,071,742		834,574		952,035		717,285		1,071,742
Trust preferred debentures		16,734		16,691		16,648		16,605		16,562		16,691
Total common equity		577,967		574,780		588,349		575,428		562,064		574,780
Total equity		579,411		576,202		589,868		576,915		563,518		576,202


Average Balance Sheet
Average earning assets	$	6,297,727	$	6,159,396	$	6,072,269	$	5,970,653	$	5,890,945	$	6,024,186
Average assets		6,652,763		6,552,414		6,430,497		6,329,847		6,241,388		6,389,504
Average interest-bearing liabilities		4,658,998		4,500,649		4,463,606		4,474,860		4,427,501		4,466,846
Average equity		574,963		593,956		586,671		572,741		555,893		577,446

Share data
Weighted average shares outstanding (basic)	15,013,478		14,988,542		14,966,231		14,944,934		14,900,938		14,950,432
Weighted average shares outstanding (diluted)	15,112,518		15,103,906		15,078,555		15,066,861		15,042,614		15,073,255
Period-end shares outstanding	15,285,335		15,265,614		15,202.44		15,189.45		15,181.20		15,265,614
Common equity book value per share	$	37.81	$	37.65	$	38.70	$	37.88	$	37.02	$	37.65
Tangible book value per share (Non-GAAP)	$	31.24	$	31.04	$	32.03	$	31.18	$	30.28	$	31.04

Income Statement
Net interest income	$	52,687	$	51,969	$	51,000	$	50,301	$	48,034	$	201,304
Provision for loan/lease losses		567		2,014		402		976		769		4,161
Noninterest income		17,830		17,312		17,202		17,450		17,240		69,204
Noninterest expense		43,721		46,286		41,883		41,568		41,368		171,105
Income tax expense		5,761		18,493		8,491		8,248		7,388		42,620
Net income attributable to Tompkins Financial Corporation		20,436		2,457		17,394		16,926		15,717		52,494
Noncontrolling interests		32		31		32		33		32		128
Basic earnings per share (8)	$	1.34	$	0.16	$	1.14	$	1.11	$	1.04	$	3.46
Diluted earnings per share (8)	$	1.33	$	0.16	$	1.14	$	1.11	$	1.03	$	3.43

Nonperforming Assets
Originated nonaccrual loans and leases	$	18,429	$	16,253	$	15,667	$	14,284	$	13,786	$	16,253
Acquired nonaccrual loans and leases		3,352		3,264		3,152		2,903		3,356		3,264
Originated loans and leases 90 days past due and accruing		0		44		0		639		0		44
Troubled debt restructurings not included above		3,455		3,449		3,541		2,980		2,948		3,449
Total nonperforming loans and leases		25,236		23,010		22,360		20,806		20,090		23,010
OREO		2,047		2,047		2,030		2,331		2,520		2,047
Total nonperforming assets	$	27,283	$	25,057	$	24,390	$	23,137	$	22,610	$	25,057


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

	Quarter-Ended										Year-Ended
Delinquency - Originated loan and lease portfolio	Mar-18		Dec-17		Sep-17		Jun-17		Mar-17		Dec-17
Loans and leases 30-89 days past due and
accruing (2)	$	6,513	$	6,791	$	5,567	$	6,188	$	5,462	$	6,791
Loans and leases 90 days past due and accruing (2)		0		44		0		639		0		44
Total originated loans and leases past due and accruing (2)		6,513		6,835		5,567		6,827		5,462		6,835

Delinquency - Acquired loan and lease portfolio
Loans 30-89 days past due and accruing (3)(7)	$	823	$	1,256	$	2,857	$	751	$	907	$	1,256
Loans 90 days or more past due		1,077		1,146		1,306		2,581		2,701		1,146
Total acquired loans and leases past due and accruing		1,900		2,402		4,163		3,332		3,608		2,402
Total loans and leases past due and accruing	$	8,413	$	9,237	$	9,730	$	10,159	$	9,070	$	9,237

Allowance for Loan Losses - Originated loan and lease portfolio
Balance at beginning of period	$	39,686	$	37,903	$	36,960	$	35,915	$	35,598	$	35,598
Provision for loan and lease losses		609		1,849		931		846		602		4,428
Net loan and lease (recoveries) charge-offs		187		66		(12)		(199)		285		140
Allowance for loan and lease losses (originated
loan portfolio) - balance at end of period	$	40,107	$	39,686	$	37,903	$	36,960	$	35,915	$	39,686

Allowance for Loan Losses - Acquired loan and lease portfolio
Balance at beginning of period	$	85	$	135	$	197	$	251	$	157	$	157
Provision (credit) for loan and lease losses		(41)		165		(529)		130		167		(67)
Net loan and lease (recoveries) charge-offs		(60)		215		(467)		184		73		5
Allowance for loan and lease losses (acquired
loan portfolio) - balance at end of period		104		85		135		197		251		85

Total allowance for loan and lease losses	$	40,211	$	39,771	$	38,038	$	37,157	$	36,166	$	39,771

Loan Classification - Originated Portfolio
Special Mention	$	34,546	$	46,074	$	50,423	$	38,488	$	18,861	$	46,074
Substandard		35,746		20,584		20,532		19,532		20,909		20,584
Loan Classification - Acquired Portfolio
Special Mention		476		525		539		547		519		525
Substandard		3,468		5,355		8,193		8,796		9,628		5,355
Loan Classifications - Total Portfolio
Special Mention		35,022		46,599		50,962		39,035		19,380		46,599
Substandard		39,214		25,939		28,725		28,328		30,537		25,939

Ratio Analysis
Credit Quality
Nonperforming loans and leases/total loans and leases (7)		0.54%		0.49%		0.50%		0.47%		0.47%		0.49%
Nonperforming assets/total assets		0.41%		0.38%		0.37%		0.36%		0.36%		0.38%
Allowance for originated loan and lease losses/total originated loans and leases		0.91%		0.91%		0.91%		0.91%		0.92%		0.91%
Allowance/nonperforming loans and leases		159.34%		172.84%		170.12%		178.59%		180.02%		172.84%
Net loan and lease losses (recoveries) annualized/total average loans and leases		0.01%		0.02%		(0.04)%		0.00%		0.03%		0.00%


Tompkins Financial Corporation - Summary Financial Data (Unaudited) - continued
	Quarter-Ended										Year-Ended
Capital Adequacy (period-end)	Mar-18		Dec-17		Sep-17		Jun-17		Mar-17		Dec-17
Tangible common equity/tangible assets		7.29%		7.24%		7.58%		7.50%		7.44%		7.24%


Profitability
Return on average assets *		1.25%		0.15%		1.07%		1.07%		1.02%		0.82%
Return on average equity *		14.41%		1.64%		11.77%		11.85%		11.47%		9.09%
Net interest margin (TE) *		3.42%		3.42%		3.40%		3.45%		3.38%		3.41%
* Quarterly ratios have been annualized

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 measures 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.


Non-GAAP Disclosure - Adjusted Diluted Earnings Per Share
	Quarter-Ended										Year-Ended
		Mar-18		Dec-17		Sep-17		Jun-17		Mar-17		Dec-17
Net income available to common shareholders	$	20,436	$	2,457	$	17,394	$	16,926	$	15,717	$	52,494
Less: Income attributable to unvested stock- based compensation awards		351		26		266		266		260		818
Tangible common equity		20,085		2,431		17,128		16,660		15,457		51,676
Remeasurement of net deferred taxes		0		14,944		0		0		0		14,994
Net income (Non-GAAP)		20,085		17,375		17,128		16,660		15,457		66,620
Weighted average shares outstanding (diluted)		15,112,518		15,103,906		15,078,555		15,066,861		15,042,614		15,073,255
Adjusted diluted earnings per share (Non-GAAP)	$	1.33	$	1.15	$	1.14	$	1.11	$	1.03	$	4.42

Non-GAAP Disclosure - Tangible Book Value Per Share
Total common equity	$	577,967	$	574,780	$	588,349	$	575,428	$	562,064	$	574,780
Less: Goodwill and intangibles (9)		100,436		100,887		101,360		101,840		102,326		100,887
Tangible common equity		477,531		473,893		486,989		473,588		459,738		473,893
Ending shares outstanding		15,285,335		15,265,614		15,202,444		15,189,453		15,181,198		15,265,614
Tangible book value per share (Non-GAAP)	$	31.24	$	31.04	$	32.03	$	31.18	$	30.28	$	31.04

(1) Federal Reserve peer ratio as of December 31, 2017, 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.
(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, 2017.
(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)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
(9) “Goodwill and intangibles” equal Total Intangible Assets less Mortgage Servicing Rights in the above tables.

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Contacts:

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