United
States
Securities
and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2015
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to ______
Commission File Number 1-12709
Tompkins Financial
Corporation
(Exact name of registrant as specified in its
charter)
New York |
|
16-1482357 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
The Commons, P.O. Box 460, Ithaca, NY |
|
14851 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone
number, including area code: (888) 503-5753
Former name, former address, and former fiscal year, if changed
since last report: NA
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐.
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files). Yes ☒ No ☐.
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large Accelerated Filer ☐ |
|
Accelerated Filer ☒ |
Non-Accelerated Filer ☐ (Do not check if a smaller reporting
company) |
|
Smaller Reporting Company ☐ |
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒.
Indicate the number of shares of the Registrant’s Common Stock
outstanding as of the latest practicable date:
Class |
|
Outstanding as
of July 28, 2015 |
Common Stock, $0.10 par value |
|
14,942,138 shares |
TOMPKINS FINANCIAL
CORPORATION
FORM 10-Q
INDEX
TOMPKINS FINANCIAL CORPORATION |
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION |
(In thousands, except share and per share data) (Unaudited) | |
As of | |
As of |
ASSETS | |
06/30/2015 | |
12/31/2014 |
Cash and noninterest bearing balances due from banks | |
$ | 58,237 | | |
$ | 53,921 | |
Interest bearing balances due from banks | |
| 1,902 | | |
| 2,149 | |
Cash and Cash Equivalents | |
| 60,139 | | |
| 56,070 | |
| |
| | | |
| | |
Trading securities, at fair value | |
| 8,153 | | |
| 8,992 | |
Available-for-sale securities, at fair value (amortized cost
of $1,381,440 at June 30, 2015 and $1,397,458 at December 31, 2014) | |
| 1,382,484 | | |
| 1,402,236 | |
Held-to-maturity securities, at amortized cost (fair value
of $146,076 at June 30, 2015 and $89,036 at December 31, 2014) | |
| 145,737 | | |
| 88,168 | |
Originated loans and leases, net of unearned income and deferred costs and fees | |
| 3,013,968 | | |
| 2,839,974 | |
Acquired loans and leases, covered | |
| 15,771 | | |
| 19,319 | |
Acquired loans and leases, non-covered | |
| 492,192 | | |
| 533,995 | |
Less: Allowance for loan and lease losses | |
| 30,091 | | |
| 28,997 | |
Net Loans and Leases | |
| 3,491,840 | | |
| 3,364,291 | |
| |
| | | |
| | |
FDIC indemnification asset | |
| 634 | | |
| 1,903 | |
Federal Home Loan Bank stock | |
| 27,128 | | |
| 21,259 | |
Bank premises and equipment, net | |
| 59,451 | | |
| 59,800 | |
Corporate owned life insurance | |
| 74,894 | | |
| 73,725 | |
Goodwill | |
| 92,243 | | |
| 92,243 | |
Other intangible assets, net | |
| 13,569 | | |
| 14,649 | |
Accrued interest and other assets | |
| 79,864 | | |
| 86,225 | |
Total Assets | |
$ | 5,436,136 | | |
$ | 5,269,561 | |
LIABILITIES | |
| | | |
| | |
Deposits: | |
| | | |
| | |
Interest bearing: | |
| | | |
| | |
Checking, savings and money market | |
| 2,314,510 | | |
| 2,247,708 | |
Time | |
| 906,345 | | |
| 898,081 | |
Noninterest bearing | |
| 983,234 | | |
| 1,023,365 | |
Total Deposits | |
| 4,204,089 | | |
| 4,169,154 | |
| |
| | | |
| | |
Federal funds purchased and securities sold under agreements to repurchase | |
| 131,063 | | |
| 147,037 | |
Other borrowings, including certain amounts at fair value of
$10,817 at June 30, 2015 and $10,961 at December 31, 2014 | |
| 493,326 | | |
| 356,541 | |
Trust preferred debentures | |
| 37,423 | | |
| 37,337 | |
Other liabilities | |
| 64,841 | | |
| 69,909 | |
Total Liabilities | |
$ | 4,930,742 | | |
$ | 4,779,978 | |
EQUITY | |
| | | |
| | |
Tompkins Financial Corporation shareholders’ equity: | |
| | | |
| | |
Common Stock - par value $.10 per share: Authorized
25,000,000 shares; Issued: 14,978,017 at June 30, 2015; and 14,931,354 at December 31, 2014 | |
| 1,498 | | |
| 1,493 | |
Additional paid-in capital | |
| 351,549 | | |
| 348,889 | |
Retained earnings | |
| 181,955 | | |
| 165,160 | |
Accumulated other comprehensive loss | |
| (27,621 | ) | |
| (24,011 | ) |
Treasury stock, at cost – 111,467 shares at June
30, 2015, and 111,436 shares at December 31, 2014 | |
| (3,504 | ) | |
| (3,400 | ) |
| |
| | | |
| | |
Total Tompkins Financial Corporation Shareholders’ Equity | |
| 503,877 | | |
| 488,131 | |
Noncontrolling interests | |
| 1,517 | | |
| 1,452 | |
Total Equity | |
$ | 505,394 | | |
$ | 489,583 | |
Total Liabilities and Equity | |
$ | 5,436,136 | | |
$ | 5,269,561 | |
See notes to consolidated financial statements
TOMPKINS FINANCIAL CORPORATION |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
| |
Three Months Ended | |
Six Months Ended |
(In thousands, except per
share data) (Unaudited) | |
06/30/2015 | |
06/30/2014 | |
06/30/2015 | |
06/30/2014 |
INTEREST AND DIVIDEND INCOME | |
| |
| |
| |
|
Loans | |
$ | 38,059 | | |
$ | 37,348 | | |
$ | 75,435 | | |
$ | 74,302 | |
Due from banks | |
| 1 | | |
| 0 | | |
| 2 | | |
| 1 | |
Trading securities | |
| 90 | | |
| 107 | | |
| 184 | | |
| 219 | |
Available-for-sale securities | |
| 7,374 | | |
| 7,984 | | |
| 15,188 | | |
| 15,920 | |
Held-to-maturity securities | |
| 674 | | |
| 186 | | |
| 1,270 | | |
| 338 | |
Federal Home Loan Bank stock and Federal Reserve Bank stock | |
| 225 | | |
| 194 | | |
| 572 | | |
| 404 | |
Total
Interest and Dividend Income | |
| 46,423 | | |
| 45,819 | | |
| 92,651 | | |
| 91,184 | |
INTEREST EXPENSE | |
| | | |
| | | |
| | | |
| | |
Time certificates of deposits of $250,000 or more | |
| 354 | | |
| 328 | | |
| 689 | | |
| 635 | |
Other deposits | |
| 2,267 | | |
| 2,449 | | |
| 4,553 | | |
| 4,884 | |
Federal funds purchased and securities sold under
agreements to repurchase | |
| 665 | | |
| 763 | | |
| 1,335 | | |
| 1,580 | |
Trust preferred debentures | |
| 573 | | |
| 571 | | |
| 1,143 | | |
| 1,141 | |
Other borrowings | |
| 1,234 | | |
| 1,192 | | |
| 2,373 | | |
| 2,401 | |
Total Interest Expense | |
| 5,093 | | |
| 5,303 | | |
| 10,093 | | |
| 10,641 | |
Net Interest Income | |
| 41,330 | | |
| 40,516 | | |
| 82,558 | | |
| 80,543 | |
Less: Provision for loan and lease losses | |
| 922 | | |
| 67 | | |
| 1,131 | | |
| 810 | |
Net Interest Income After Provision for Loan and Lease Losses | |
| 40,408 | | |
| 40,449 | | |
| 81,427 | | |
| 79,733 | |
NONINTEREST INCOME | |
| | | |
| | | |
| | | |
| | |
Insurance commissions and fees | |
| 7,407 | | |
| 7,046 | | |
| 14,777 | | |
| 14,303 | |
Investment services income | |
| 3,838 | | |
| 3,902 | | |
| 7,844 | | |
| 7,912 | |
Service charges on deposit accounts | |
| 2,244 | | |
| 2,388 | | |
| 4,402 | | |
| 4,504 | |
Card services income | |
| 2,025 | | |
| 1,920 | | |
| 3,843 | | |
| 4,032 | |
Mark-to-market loss on trading securities | |
| (74 | ) | |
| (34 | ) | |
| (137 | ) | |
| (93 | ) |
Mark-to-market gain on liabilities held at fair value | |
| 104 | | |
| 63 | | |
| 145 | | |
| 128 | |
Other income | |
| 2,695 | | |
| 2,400 | | |
| 4,721 | | |
| 4,239 | |
Gain on sale of available-for-sale securities | |
| 723 | | |
| 35 | | |
| 1,013 | | |
| 129 | |
Total Noninterest Income | |
| 18,962 | | |
| 17,720 | | |
| 36,608 | | |
| 35,154 | |
NONINTEREST EXPENSES | |
| | | |
| | | |
| | | |
| | |
Salaries and wages | |
| 18,394 | | |
| 17,660 | | |
| 35,962 | | |
| 34,306 | |
Pension and other employee benefits | |
| (519 | ) | |
| 4,978 | | |
| 5,475 | | |
| 11,023 | |
Net occupancy expense of premises | |
| 3,073 | | |
| 3,066 | | |
| 6,412 | | |
| 6,326 | |
Furniture and fixture expense | |
| 1,483 | | |
| 1,459 | | |
| 2,933 | | |
| 2,796 | |
FDIC insurance | |
| 748 | | |
| 735 | | |
| 1,489 | | |
| 1,546 | |
Amortization of intangible assets | |
| 500 | | |
| 525 | | |
| 1,007 | | |
| 1,052 | |
Other operating expense | |
| 9,239 | | |
| 10,505 | | |
| 19,332 | | |
| 20,089 | |
Total Noninterest Expenses | |
| 32,918 | | |
| 38,928 | | |
| 72,610 | | |
| 77,138 | |
Income Before Income Tax Expense | |
| 26,452 | | |
| 19,241 | | |
| 45,425 | | |
| 37,749 | |
Income Tax Expense | |
| 9,030 | | |
| 6,148 | | |
| 15,290 | | |
| 12,054 | |
Net Income attributable to Noncontrolling Interests and Tompkins Financial Corporation | |
| 17,422 | | |
| 13,093 | | |
| 30,135 | | |
| 25,695 | |
Less: Net income attributable to noncontrolling interests | |
| 32 | | |
| 32 | | |
| 65 | | |
| 65 | |
Net Income Attributable to Tompkins Financial Corporation | |
$ | 17,390 | | |
$ | 13,061 | | |
$ | 30,070 | | |
$ | 25,630 | |
Basic Earnings Per Share | |
$ | 1.16 | | |
$ | 0.88 | | |
$ | 2.01 | | |
$ | 1.73 | |
Diluted
Earnings Per Share | |
$ | 1.15 | | |
$ | 0.87 | | |
$ | 2.00 | | |
$ | 1.72 | |
See notes to consolidated financial statements
Consolidated
Statements of Comprehensive Income | |
| |
|
| |
Three Months Ended |
(In
thousands) (Unaudited) | |
06/30/2015 | |
06/30/2014 |
Net income attributable to noncontrolling interests and Tompkins Financial Corporation | |
$ | 17,422 | | |
$ | 13,093 | |
Other comprehensive income, net of tax: | |
| | | |
| | |
| |
| | | |
| | |
Available-for-sale securities: | |
| | | |
| | |
Change in net unrealized gain/loss during the period | |
| (7,224 | ) | |
| 6,751 | |
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income | |
| (434 | ) | |
| (22 | ) |
| |
| | | |
| | |
Employee benefit plans:
| |
| | | |
| | |
Recognized actuarial gain due to curtailment | |
| (3,196 | ) | |
| 0 | |
Net retirement plan loss | |
| 1,170 | | |
| 0 | |
Amortization of net retirement plan actuarial gain | |
| 439 | | |
| 128 | |
Amortization of net retirement plan prior service (credit) cost | |
| (114 | ) | |
| (7 | ) |
| |
| | | |
| | |
Other comprehensive (loss) income | |
| (9,359 | ) | |
| 6,850 | |
| |
| | | |
| | |
Subtotal
comprehensive income attributable to noncontrolling interests and Tompkins Financial Corporation | |
| 8,063 | | |
| 19,943 | |
Less: Net income attributable to noncontrolling interests | |
| (32 | ) | |
| (32 | ) |
Total
comprehensive income attributable to Tompkins Financial Corporation | |
$ | 8,031 | | |
$ | 19,911 | |
See notes to unaudited
condensed consolidated financial statements.
Consolidated Statements
of Comprehensive Income | |
| |
|
| |
Six Months Ended |
(In
thousands) (Unaudited) | |
06/30/2015 | |
06/30/2014 |
Net income attributable to noncontrolling interests and Tompkins Financial Corporation | |
$ | 30,135 | | |
$ | 25,695 | |
Other comprehensive income, net of tax: | |
| | | |
| | |
| |
| | | |
| | |
Available-for-sale securities: | |
| | | |
| | |
Change in net unrealized (loss) gain during the period | |
| (1,632 | ) | |
| 12,041 | |
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income | |
| (608 | ) | |
| (78 | ) |
| |
| | | |
| | |
Employee benefit plans: | |
| | | |
| | |
Recognized actuarial gain due to curtailment | |
| (3,196 | ) | |
| 0 | |
Net retirement plan loss | |
| 1,170 | | |
| 0 | |
Amortization of net retirement plan actuarial gain | |
| 877 | | |
| 320 | |
Amortization
of net retirement plan prior service credit/cost | |
| (221 | ) | |
| 1 | |
| |
| | | |
| | |
Other comprehensive (loss) income | |
| (3,610 | ) | |
| 12,284 | |
| |
| | | |
| | |
Subtotal
comprehensive income attributable to noncontrolling interests and Tompkins Financial
Corporation | |
| 26,525 | | |
| 37,979 | |
Less: Net income attributable to noncontrolling interests | |
| (65 | ) | |
| (65 | ) |
Total comprehensive income attributable to Tompkins Financial Corporation | |
$ | 26,460 | | |
$ | 37,914 | |
See notes to unaudited condensed consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| |
| |
|
(In thousands) (Unaudited) | |
06/30/2015 | |
06/30/2014 |
OPERATING ACTIVITIES | |
| |
|
Net income attributable to Tompkins Financial Corporation | |
$ | 30,070 | | |
$ | 25,630 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
Provision for loan and lease losses | |
| 1,131 | | |
| 810 | |
Depreciation and amortization of premises, equipment, and software | |
| 3,209 | | |
| 2,772 | |
Amortization of intangible assets | |
| 1,007 | | |
| 1,052 | |
Earnings from corporate owned life insurance | |
| (1,169 | ) | |
| (975 | ) |
Net amortization on securities | |
| 5,835 | | |
| 5,180 | |
Amortization/accretion related to purchase accounting | |
| (3,034 | ) | |
| (3,736 | ) |
Mark-to-market loss on trading securities | |
| 137 | | |
| 93 | |
Mark-to-market gain on liabilities held at fair value | |
| (145 | ) | |
| (128 | ) |
Net gain on securities transactions | |
| (1,013 | ) | |
| (129 | ) |
Net gain on sale of loans originated for sale | |
| (10 | ) | |
| (221 | ) |
Proceeds from sale of loans originated for sale | |
| 669 | | |
| 8,415 | |
Loans originated for sale | |
| (1,050 | ) | |
| (9,102 | ) |
Gain on conversion of deposits | |
| 0 | | |
| (140 | ) |
Net (gain) loss on sale of bank premises and equipment | |
| (1 | ) | |
| 15 | |
Gain on pension curtailment | |
| (6,003 | ) | |
| 0 | |
Stock-based compensation expense | |
| 953 | | |
| 697 | |
Decrease in accrued interest receivable | |
| 495 | | |
| 375 | |
Increase (decrease) in accrued interest payable | |
| 115 | | |
| (243 | ) |
Proceeds from maturities and payments of trading securities | |
| 695 | | |
| 879 | |
Other, net | |
| 7,273 | | |
| 2,945 | |
Net Cash Provided by Operating Activities | |
| 39,164 | | |
| 34,189 | |
INVESTING ACTIVITIES | |
| | | |
| | |
Proceeds from maturities, calls and principal paydowns of available-for-sale securities | |
| 125,893 | | |
| 121,008 | |
Proceeds from sales of available-for-sale securities | |
| 94,524 | | |
| 38,688 | |
Proceeds from maturities, calls and principal paydowns of held-to-maturity securities | |
| 7,729 | | |
| 7,249 | |
Purchases of available-for-sale securities | |
| (209,545 | ) | |
| (169,245 | ) |
Purchases of held-to-maturity securities | |
| (65,444 | ) | |
| (19,231 | ) |
Net increase in loans | |
| (126,513 | ) | |
| (32,818 | ) |
Net (increase) decrease in Federal Home Loan Bank stock | |
| (5,869 | ) | |
| 4,013 | |
Proceeds from sale of bank premises and equipment | |
| 58 | | |
| 86 | |
Purchases of bank premises and equipment | |
| (2,524 | ) | |
| (5,387 | ) |
Purchase of corporate owned life insurance | |
| 0 | | |
| (2,500 | ) |
Net cash used in acquisition | |
| 0 | | |
| (210 | ) |
Other, net | |
| 330 | | |
| 386 | |
Net Cash Used in Investing Activities | |
| (181,361 | ) | |
| (57,961 | ) |
FINANCING ACTIVITIES | |
| | | |
| | |
Net increase in demand, money market, and savings deposits | |
| 26,671 | | |
| 61,225 | |
Net increase in time deposits | |
| 9,016 | | |
| 37,067 | |
Net decrease in Federal funds purchases and securities sold under agreements to repurchase | |
| (15,408 | ) | |
| (22,362 | ) |
Increase in other borrowings | |
| 277,350 | | |
| 140,445 | |
Repayment of other borrowings | |
| (140,421 | ) | |
| (184,690 | ) |
Cash dividends | |
| (12,550 | ) | |
| (11,839 | ) |
Repurchase of common stock | |
| (1,441 | ) | |
| 0 | |
Shares issued for dividend reinvestment plan | |
| 0 | | |
| 2,186 | |
Shares issued for employee stock ownership plan | |
| 1,595 | | |
| 1,528 | |
Net shares issued related to restricted stock awards | |
| (152 | ) | |
| 115 | |
Net proceeds from exercise of stock options | |
| 1,426 | | |
| 558 | |
Tax benefit from stock option exercises | |
| 180 | | |
| 74 | |
Net Cash Provided by Financing Activities | |
| 146,266 | | |
| 24,307 | |
Net Increase in Cash and Cash Equivalents | |
| 4,069 | | |
| 535 | |
Cash and cash equivalents at beginning of period | |
| 56,070 | | |
| 82,884 | |
Total Cash & Cash Equivalents at End of Period | |
| 60,139 | | |
| 83,419 | |
See notes to unaudited
condensed consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
(In thousands) (Unaudited) | |
06/30/2015 | |
06/30/2014 |
Supplemental Information: | |
| |
|
Cash paid during the year for - Interest | |
$ | 10,730 | | |
$ | 12,344 | |
Cash paid during the year for - Taxes | |
| 8,224 | | |
| 437 | |
Transfer of loans to other real estate owned | |
| 187 | | |
| 4,067 | |
See notes to unaudited condensed consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY |
(Unaudited) |
(In
thousands except share and per share data) | |
Common
Stock | |
Additional
Paid-in Capital | |
Retained
Earnings | |
Accumulated
Other Comprehensive (Loss) Income | |
Treasury
Stock | |
Non-
controlling Interests | |
Total |
Balances
at January 1, 2014 | |
$ | 1,479 | | |
$ | 346,096 | | |
$ | 137,102 | | |
$ | (25,119) | | |
$ | (3,071 | ) | |
$ | 1,452 | | |
$ | 457,939 | |
Net
income attributable to noncontrolling interests and Tompkins Financial Corporation | |
| | | |
| | | |
| 25,630 | | |
| | | |
| | | |
| 65 | | |
| 25,695 | |
Other
comprehensive income | |
| | | |
| | | |
| | | |
| 12,284 | | |
| | | |
| | | |
| 12,284 | |
Total
Comprehensive Income | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 37,979 | |
Cash dividends ($0.80
per share) | |
| | | |
| | | |
| (11,839 | ) | |
| | | |
| | | |
| | | |
| (11,839 | ) |
Net exercise of stock
options and related tax benefit (29,485 shares) | |
| 3 | | |
| 629 | | |
| | | |
| | | |
| | | |
| | | |
| 632 | |
Stock-based
compensation expense | |
| | | |
| 697 | | |
| | | |
| | | |
| | | |
| | | |
| 697 | |
Shares issued for dividend
reinvestment plan (46,081 shares) | |
| 4 | | |
| 2,182 | | |
| | | |
| | | |
| | | |
| | | |
| 2,186 | |
Shares issued for employee
stock ownership plan (31,192 shares) | |
| 3 | | |
| 1,525 | | |
| | | |
| | | |
| | | |
| | | |
| 1,528 | |
Directors deferred compensation
plan (680 shares) | |
| | | |
| 80 | | |
| | | |
| | | |
| (80 | ) | |
| | | |
| 0 | |
Restricted
stock activity ((2,416) shares) | |
| | | |
| 115 | | |
| | | |
| | | |
| | | |
| | | |
| 115 | |
Balances
at June 30, 2014 | |
$ | 1,489 | | |
$ | 351,324 | | |
$ | 150,893 | | |
$ | (12,835) | | |
$ | (3,151 | ) | |
$ | 1,517 | | |
$ | 489,237 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balances
at January 1, 2015 | |
$ | 1,493 | | |
$ | 348,889 | | |
$ | 165,160 | | |
$ | (24,011) | | |
$ | (3,400 | ) | |
$ | 1,452 | | |
$ | 489,583 | |
Net
income attributable to noncontrolling interests and Tompkins Financial Corporation | |
| | | |
| | | |
| 30,070 | | |
| | | |
| | | |
| 65 | | |
| 30,135 | |
Other
comprehensive loss | |
| | | |
| | | |
| | | |
| (3,610) | | |
| | | |
| | | |
| (3,610 | ) |
Total
Comprehensive Income | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 26,525 | |
Cash dividends ($0.84
per share) | |
| | | |
| | | |
| (12,550 | ) | |
| | | |
| | | |
| | | |
| (12,550 | ) |
Net exercise of stock
options and related tax benefit (56,756 shares) | |
| 6 | | |
| 1,600 | | |
| | | |
| | | |
| | | |
| | | |
| 1,606 | |
Common
stock repurchased and returned to unissued status (27,892 shares) | |
| (3 | ) | |
| (1,438 | ) | |
| | | |
| | | |
| | | |
| | | |
| (1,441 | ) |
Stock-based
compensation expense | |
| | | |
| 953 | | |
| | | |
| | | |
| | | |
| | | |
| 953 | |
Shares issued for employee
stock ownership plan (29,575 shares) | |
| 3 | | |
| 1,592 | | |
| | | |
| | | |
| | | |
| | | |
| 1,595 | |
Directors deferred compensation
plan (31 shares) | |
| | | |
| 104 | | |
| | | |
| | | |
| (104 | ) | |
| | | |
| 0 | |
Restricted
stock activity ((11,776) shares) | |
| (1 | ) | |
| (151 | ) | |
| | | |
| | | |
| | | |
| | | |
| (152 | ) |
Adoption
of ASU 2014-01 Investments | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accounting
for Investments in Qualified Affordable
Housing Projects | |
| | | |
| | | |
| (725 | ) | |
| | | |
| | | |
| | | |
| (725 | ) |
Balances
at June 30, 2015 | |
$ | 1,498 | | |
$ | 351,549 | | |
$ | 181,955 | | |
$ | (27,621) | | |
$ | (3,504 | ) | |
$ | 1,517 | | |
$ | 505,394 | |
See notes to unaudited condensed consolidated financial statements
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Business
Tompkins Financial Corporation (“Tompkins”
or the “Company”) is headquartered in Ithaca, New York and is registered as a Financial Holding Company with the Federal
Reserve Board under the Bank Holding Company Act of 1956, as amended. The Company is a locally oriented, community-based financial
services organization that offers a full array of products and services, including commercial and consumer banking, leasing, trust
and investment management, financial planning and wealth management, and insurance services. At June 30, 2015, the Company’s
subsidiaries included: four wholly-owned banking subsidiaries, Tompkins Trust Company (the “Trust Company”), The Bank
of Castile (DBA Tompkins Bank of Castile), Mahopac Bank (formerly known as Mahopac National Bank, DBA Tompkins Mahopac Bank), VIST
Bank (DBA Tompkins VIST Bank); and a wholly-owned insurance agency subsidiary, Tompkins Insurance Agencies, Inc. (“Tompkins
Insurance”). The trust division of the Trust Company provides a full array of investment services, including investment management,
trust and estate, financial and tax planning as well as life, disability and long-term care insurance services. The Company’s
principal offices are located at The Commons, Ithaca, New York, 14851, and its telephone number is (888) 503-5753. The Company’s
common stock is traded on the NYSE MKT LLC under the Symbol “TMP.”
As a registered financial holding company,
the Company is regulated under the Bank Holding Company Act of 1956 (“BHC Act”), as amended and is subject to examination
and comprehensive regulation by the Federal Reserve Board (“FRB”). The Company is also subject to the jurisdiction
of the Securities and Exchange Commission (“SEC”) and is subject to disclosure and regulatory requirements under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The Company is subject to the rules of
the NYSE MKT LLC for listed companies.
The Company’s banking subsidiaries are
subject to examination and comprehensive regulation by various regulatory authorities, including the Federal Deposit Insurance
Corporation (“FDIC”), the New York State Department of Financial Services (“NYSDFS”), and the Pennsylvania
Department of Banking and Securities (“PDBS”). Each of these agencies issues regulations and requires the filing of
reports describing the activities and financial condition of the entities under its jurisdiction. Likewise, such agencies conduct
examinations on a recurring basis to evaluate the safety and soundness of the institutions, and to test compliance with various
regulatory requirements, including: consumer protection, privacy, fair lending, the Community Reinvestment Act, the Bank Secrecy
Act, sales of non-deposit investments, electronic data processing, and trust department activities.
The trust division of Tompkins Trust Company
is subject to examination and comprehensive regulation by the FDIC and NYSDFS.
The Company’s
insurance subsidiary is subject to examination and regulation by the NYSDFS and the Pennsylvania Insurance Department.
2. Basis of Presentation
The unaudited consolidated financial statements
included in this quarterly report do not include all of the information and footnotes required by GAAP for a full year presentation
and certain disclosures have been condensed or omitted in accordance with rules and regulations of the SEC. In the application
of certain accounting policies, management is required to make assumptions regarding the effect of matters that are inherently
uncertain. These estimates and assumptions affect the reported amounts of certain assets, liabilities, revenues, and expenses in
the unaudited condensed consolidated financial statements. Different amounts could be reported under different conditions, or if
different assumptions were used in the application of these accounting policies. The accounting policies that management considers
critical in this respect are the determination of the allowance for loan and lease losses, the expenses and liabilities associated
with the Company’s pension and post-retirement benefits, and the review of its securities portfolio for other than temporary
impairment.
In management’s opinion, the unaudited
condensed consolidated financial statements reflect all adjustments of a normal recurring nature. The results of operations for
the interim periods are not necessarily indicative of the results of operations to be expected for the full year ended December
31, 2015. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated
financial statements and the notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
There have been no significant changes to the Company’s accounting policies from those presented in the 2014 Annual Report
on Form 10-K. Refer to Note 3- “Accounting Standards Updates” of this Report for a discussion of recently issued accounting
guidelines.
Cash and cash equivalents in the consolidated
statements of cash flow include cash and noninterest bearing balances due from banks, interest-bearing balances due from banks,
and money market funds. Management regularly evaluates the credit risk associated with the counterparties to these transactions
and believes that the Company is not exposed to any significant credit risk on cash and cash equivalents.
The Company has evaluated subsequent events
for potential recognition and/or disclosure, and determined that no further disclosures were required.
The consolidated financial information included
herein combines the results of operations, the assets, liabilities, and shareholders’ equity of the Company and its subsidiaries.
Amounts in the prior periods’ unaudited condensed consolidated financial statements are reclassified when necessary to conform
to the current periods’ presentation. All significant intercompany balances and transactions are eliminated in consolidation.
3. Accounting Standards
Updates
ASU 2014-01, “Investments (Topic 323),
Accounting for Investments in Qualified Affordable Housing Projects.” The amendments in this ASU provide guidance on
accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable
housing projects that qualify for the low-income housing tax credit. The amendments permit reporting entities to make an accounting
policy election to account for their investments in qualified affordable housing projects using the proportional amortization method
if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment
in proportion to the tax credits and other tax benefits received and recognize the net investment performance in the income statement
as a component of income tax expense (benefit). The amendments in this ASU became effective for the Company for annual periods
beginning January 1, 2015 and should be applied retrospectively to all periods presented. A reporting entity that uses the effective
yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to
apply the effective yield method for those preexisting investments.
The Company previously
accounted for its investments in qualified affordable housing projects under the cost method; however, the Company determined
that its investments in its qualified affordable housing projects meet the conditions set forth in ASU 2014-01 to account for
these investments under the proportional amortization method. The Company believes that amortizing its investments in qualified
affordable housing projects as a component of income tax expense rather than as a component of operating expenses better reflects
the nature and intent of these investments. As a result of adopting ASU 2014-01, the Company recognized additional income tax
expense attributable to the amortization of investments in qualified affordable housing projects of $0.1 million and $0.2 million
during the three and six months ended June 30, 2015, respectively. While the adoption of ASU 2014-01 requires retrospective application to all periods presented, the
Company did not restate the prior period financial statements as the amounts were not material. The net effect of adoption is
$725,000 and is reported in the Statement of Changes in Shareholder’s Equity for the six months ended June 30, 2015. The
Company’s remaining investment in qualified affordable housing projects, net of amortization totaled $2.9 million and $3.9
million at June 30, 2015 and December 31, 2014, respectively.
ASU 2014-12 “Compensation—Stock
Compensation” (Topic 718”): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance
Target Could Be Achieved after the Requisite Service Period, a consensus of the FASB Emerging Issues Task Force (ASU 2014-12).
ASU 2014-12 requires that a performance target that affects vesting of share-based payment awards and that could be achieved after
the requisite service period be treated as a performance condition. Compensation cost should be recognized in the period in which
it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the
periods for which the requisite service has already been rendered. If the performance target becomes probable of being achieved
before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively
over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service
period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately
vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award
if the performance target is achieved. ASU 2014-12 is effective for all entities for interim and annual periods beginning after
December 15, 2015, with early adoption permitted. An entity may apply the amendments in ASU 2014-12 either (i) prospectively to
all awards granted or modified after the effective date or (ii) retrospectively to all awards with performance targets that are
outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified
awards thereafter. The adoption of ASU 2014-12 is not expected to have a material impact on the Company’s consolidated financial
condition or results of operations because the Company has not historically granted performance-based stock compensation.
4. Securities
Available-for-Sale
Securities
The following table summarizes available-for-sale
securities held by the Company at June 30, 2015:
| |
Available-for-Sale Securities |
June
30, 2015 | |
Amortized Cost | |
Gross Unrealized Gains | |
Gross Unrealized Losses | |
Fair Value |
(in thousands) | |
| |
| |
| |
|
Obligations of U.S. Government sponsored entities | |
$ | 539,336 | | |
$ | 6,471 | | |
$ | 1,534 | | |
$ | 544,273 | |
Obligations of U.S. states and political subdivisions | |
| 71,948 | | |
| 828 | | |
| 466 | | |
| 72,310 | |
Mortgage-backed securities – residential, issued by | |
| | | |
| | | |
| | | |
| | |
U.S. Government agencies | |
| 96,785 | | |
| 1,991 | | |
| 1,191 | | |
| 97,585 | |
U.S. Government sponsored entities | |
| 669,663 | | |
| 5,337 | | |
| 10,000 | | |
| 665,000 | |
Non-U.S. Government agencies or sponsored entities | |
| 208 | | |
| 3 | | |
| 0 | | |
| 211 | |
U.S. corporate debt securities | |
| 2,500 | | |
| 0 | | |
| 338 | | |
| 2,162 | |
Total debt securities | |
| 1,380,440 | | |
| 14,630 | | |
| 13,529 | | |
| 1,381,541 | |
Equity securities | |
| 1,000 | | |
| 0 | | |
| 57 | | |
| 943 | |
Total
available-for-sale securities | |
$ | 1,381,440 | | |
$ | 14,630 | | |
$ | 13,586 | | |
$ | 1,382,484 | |
The following table summarizes available-for-sale securities held by the Company at December 31, 2014:
| |
Available-for-Sale Securities |
December
31, 2014 | |
Amortized Cost | |
Gross Unrealized Gains | |
Gross Unrealized Losses | |
Fair Value |
(in thousands) | |
| |
| |
| |
|
Obligations of U.S. Government sponsored entities | |
$ | 553,300 | | |
$ | 6,222 | | |
$ | 1,702 | | |
$ | 557,820 | |
Obligations of U.S. states and political subdivisions | |
| 70,790 | | |
| 999 | | |
| 279 | | |
| 71,510 | |
Mortgage-backed securities – residential, issued by | |
| | | |
| | | |
| | | |
| | |
U.S. Government agencies | |
| 108,931 | | |
| 2,339 | | |
| 1,344 | | |
| 109,926 | |
U.S. Government sponsored entities | |
| 660,195 | | |
| 7,309 | | |
| 8,384 | | |
| 659,120 | |
Non-U.S. Government agencies or sponsored entities | |
| 267 | | |
| 4 | | |
| 0 | | |
| 271 | |
U.S. corporate debt securities | |
| 2,500 | | |
| 0 | | |
| 338 | | |
| 2,162 | |
Total debt securities | |
| 1,395,983 | | |
| 16,873 | | |
| 12,047 | | |
| 1,400,809 | |
Equity securities | |
| 1,475 | | |
| 0 | | |
| 48 | | |
| 1,427 | |
Total
available-for-sale securities | |
$ | 1,397,458 | | |
$ | 16,873 | | |
$ | 12,095 | | |
$ | 1,402,236 | |
Held-to-Maturity
Securities
The following table summarizes
held-to-maturity securities held by the Company at June 30, 2015:
| |
Held-to-Maturity Securities |
June 30, 2015 | |
Amortized Cost | |
Gross Unrealized Gains | |
Gross Unrealized Losses | |
Fair Value |
(in thousands) | |
| |
| |
| |
|
Obligations of U.S. Government sponsored entities | |
$ | 132,671 | | |
$ | 536 | | |
$ | 651 | | |
$ | 132,556 | |
Obligations of U.S. states and political subdivisions | |
$ | 13,066 | | |
$ | 454 | | |
$ | 0 | | |
$ | 13,520 | |
Total held-to-maturity debt securities | |
$ | 145,737 | | |
$ | 990 | | |
$ | 651 | | |
$ | 146,076 | |
The following table summarizes held-to-maturity securities held by the Company at December 31, 2014:
| |
Held-to-Maturity Securities |
December 31, 2014 | |
Amortized Cost | |
Gross Unrealized Gains | |
Gross Unrealized Losses | |
Fair Value |
(in thousands) | |
| |
| |
| |
|
Obligations of U.S. Government sponsored entities | |
$ | 71,906 | | |
$ | 400 | | |
$ | 37 | | |
$ | 72,269 | |
Obligations of U.S. states and political subdivisions | |
| 16,262 | | |
| 505 | | |
| 0 | | |
| 16,767 | |
Total held-to-maturity debt securities | |
$ | 88,168 | | |
$ | 905 | | |
$ | 37 | | |
$ | 89,036 | |
The Company may from time to time sell investment
securities from its available-for-sale portfolio. Realized gains on available-for-sale securities were $725,000 and $1,015,000
for the three and six months ending June 30, 2015 and $35,000 and $166,000 in the same periods during 2014. Realized losses on
available-for-sale securities were $2,000 for the three and six months ending June 30, 2015 and $0 and $78,000 for the three and
six months ending June 30, 2014, respectively. The sales of available-for-sale investment securities were the result of general
investment portfolio and interest rate risk management.
The
following table summarizes available-for-sale securities that had unrealized losses at June 30, 2015:
| |
| |
| |
|
| |
Less than 12 Months | |
12 Months or Longer | |
Total |
(in thousands) | |
Fair Value | |
Unrealized Losses | |
Fair Value | |
Unrealized Losses | |
Fair Value | |
Unrealized Losses |
Obligations of U.S. Government sponsored
entities | |
$ | 114,924 | | |
$ | 1,259 | | |
$ | 17,270 | | |
$ | 275 | | |
$ | 132,194 | | |
$ | 1,534 | |
Obligations of U.S. states and political subdivisions | |
| 30,494 | | |
| 426 | | |
| 2,111 | | |
| 40 | | |
| 32,605 | | |
| 466 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Mortgage-backed securities – issued by | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
U.S. Government agencies | |
| 24,874 | | |
| 56 | | |
| 33,386 | | |
| 1,135 | | |
| 58,260 | | |
| 1,191 | |
U.S. Government sponsored entities | |
| 308,068 | | |
| 3,149 | | |
| 204,211 | | |
| 6,851 | | |
| 512,279 | | |
| 10,000 | |
U.S. corporate debt securities | |
| 0 | | |
| 0 | | |
| 2,162 | | |
| 338 | | |
| 2,162 | | |
| 338 | |
Equity securities | |
| 0 | | |
| 0 | | |
| 943 | | |
| 57 | | |
| 943 | | |
| 57 | |
Total available-for-sale securities | |
$ | 478,360 | | |
$ | 4,890 | | |
$ | 260,083 | | |
$ | 8,696 | | |
$ | 738,443 | | |
$ | 13,586 | |
The following table summarizes
held-to-maturity securities that had unrealized losses at June 30, 2015.
| |
| |
| |
|
| |
Less than 12 Months | |
12 Months or Longer | |
Total |
(in thousands) | |
Fair Value | |
Unrealized Losses | |
Fair Value | |
Unrealized Losses | |
Fair Value | |
Unrealized Losses |
| |
| |
| |
| |
| |
| |
|
Obligations of
U.S. Government sponsored entities | |
$ | 65,635 | | |
$ | 651 | | |
$ | 0 | | |
$ | 0 | | |
$ | 65,635 | | |
$ | 651 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total held-to-maturity securities | |
$ | 65,635 | | |
$ | 651 | | |
$ | 0 | | |
$ | 0 | | |
$ | 65,635 | | |
$ | 651 | |
The following table summarizes
available-for-sale securities that had unrealized losses at December 31, 2014:
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
12 Months or Longer |
|
Total |
(in thousands) |
|
Fair Value |
|
Unrealized Losses |
|
Fair Value |
|
Unrealized Losses |
|
Fair Value |
|
Unrealized Losses |
Obligations of U.S. Government sponsored entities |
|
$ |
71,363 |
|
|
$ |
385 |
|
|
$ |
65,497 |
|
|
$ |
1,317 |
|
|
$ |
136,860 |
|
|
$ |
1,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. states and political subdivisions |
|
|
15,451 |
|
|
|
124 |
|
|
|
8,102 |
|
|
|
155 |
|
|
|
23,553 |
|
|
|
279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities – residential, issued by |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies |
|
|
2,623 |
|
|
|
21 |
|
|
|
28,502 |
|
|
|
1,323 |
|
|
|
31,125 |
|
|
|
1,344 |
|
U.S. Government sponsored entities |
|
|
162,377 |
|
|
|
719 |
|
|
|
271,503 |
|
|
|
7,665 |
|
|
|
433,880 |
|
|
|
8,384 |
|
U.S. corporate debt securities |
|
|
0 |
|
|
|
0 |
|
|
|
2,163 |
|
|
|
338 |
|
|
|
2,163 |
|
|
|
338 |
|
Equity securities |
|
|
0 |
|
|
|
0 |
|
|
|
952 |
|
|
|
48 |
|
|
|
952 |
|
|
|
48 |
|
Total available-for-sale securities |
|
$ |
251,814 |
|
|
$ |
1,249 |
|
|
$ |
376,719 |
|
|
$ |
10,846 |
|
|
$ |
628,533 |
|
|
$ |
12,095 |
|
The following table summarizes
held-to-maturity securities that had unrealized losses at December 31, 2014.
| |
| |
| |
|
| |
Less than 12 Months | |
12 Months or Longer | |
Total |
(in thousands) | |
Fair Value | |
Unrealized Losses | |
Fair Value | |
Unrealized Losses | |
Fair Value | |
Unrealized Losses |
Obligations of U.S. Government
sponsored entities | |
$ | 15,095 | | |
$ | 37 | | |
$ | 0 | | |
$ | 0 | | |
$ | 15,095 | | |
$ | 37 | |
Total held-to-maturity securities | |
$ | 15,095 | | |
$ | 37 | | |
$ | 0 | | |
$ | 0 | | |
$ | 15,095 | | |
$ | 37 | |
The gross unrealized losses reported for residential
mortgage-backed securities relate to investment securities issued by U.S. government sponsored entities such as Federal National
Mortgage Association, Federal Home Loan Mortgage Corporation, and U.S. government agencies such as Government National Mortgage
Association. The total gross unrealized losses, shown in the tables above, were primarily attributable to changes in interest rates
and levels of market liquidity, relative to when the investment securities were purchased, and not due to the credit quality of
the investment securities.
The Company does not intend to sell other-than-temporarily
impaired investment securities that are in an unrealized loss position until recovery of unrealized losses (which may be until
maturity), and it is not more-likely-than not that the Company will be required to sell the investment securities, before recovery
of their amortized cost basis, which may be at maturity. Accordingly, as of June 30, 2015, and December 31, 2014, management
has determined that the unrealized losses detailed in the tables above are not other-than-temporary.
Ongoing Assessment of Other-Than-Temporary
Impairment
On a quarterly basis,
the Company performs an assessment to determine whether there have been any events or economic circumstances indicating that a
security with an unrealized loss has suffered other-than-temporary impairment (“OTTI”). A debt security is considered
impaired if the fair value is less than its amortized cost basis (including any previous OTTI charges) at the reporting date. If
impaired, the Company then assesses whether the unrealized loss is other-than-temporary. An unrealized loss on a debt security
is generally deemed to be other-than-temporary and a credit loss is deemed to exist if the present value, discounted at the security’s
effective rate, of the expected future cash flows is less than the amortized cost basis of the debt security. As a result, the
credit loss component of an other-than-temporary impairment write-down for debt securities is recorded in earnings while the remaining
portion of the impairment loss is recognized, net of tax, in other comprehensive income provided that the Company does not intend
to sell the underlying debt security and it is more-likely-than not that the Company would not have to sell the debt security prior
to recovery of the unrealized loss, which may be to maturity. If the Company intended to sell any securities with an unrealized
loss or it is more-likely-than not that the Company would be required to sell the investment securities, before recovery of their
amortized cost basis, then the entire unrealized loss would be recorded in earnings.
The Company considers the following factors
in determining whether a credit loss exists.
| - | The length of time and the extent to which the fair value has been less than the amortized cost
basis; |
| - | The level of credit enhancement provided by the structure which includes, but is not limited to,
credit subordination positions, excess spreads, overcollateralization, protective triggers; |
| - | Changes in the near term prospects of the issuer or underlying collateral of a security, such as
changes in default rates, loss severities given default and significant changes in prepayment assumptions; |
| - | The level of excess cash flow generated from the underlying collateral supporting the principal
and interest payments of the debt securities; and |
| - | Any adverse change to the credit conditions of the issuer or the security such as credit downgrades
by the rating agencies. |
As a result of the other-than-temporarily impairment
review process, the Company does not consider any investment security held at June 30, 2015 to be other-than-temporarily impaired.
The amortized cost and
estimated fair value of debt securities by contractual maturity are shown in the following table. Expected maturities may differ
from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment
penalties. Mortgage-backed securities are shown separately since they are not due at a single maturity date.
June 30, 2015 | |
| |
|
(in
thousands) | |
Amortized Cost | |
Fair Value |
Available-for-sale securities: | |
| |
|
Due in one year or less | |
$ | 64,183 | | |
$ | 65,131 | |
Due after one year through five years | |
| 373,581 | | |
| 379,080 | |
Due after five years through ten years | |
| 161,270 | | |
| 160,341 | |
Due after ten years | |
| 14,750 | | |
| 14,193 | |
Total | |
| 613,784 | | |
| 618,745 | |
Mortgage-backed securities | |
| 766,656 | | |
| 762,796 | |
Total available-for-sale debt securities | |
$ | 1,380,440 | | |
$ | 1,381,541 | |
December 31, 2014 | |
| |
|
(in thousands) | |
Amortized Cost | |
Fair Value |
Available-for-sale securities: | |
| |
|
Due in one year or less | |
$ | 67,281 | | |
$ | 68,350 | |
Due after one year through five years | |
| 342,548 | | |
| 347,230 | |
Due after five years through ten years | |
| 199,724 | | |
| 199,276 | |
Due after ten years | |
| 17,037 | | |
| 16,636 | |
Total | |
| 626,590 | | |
| 631,492 | |
Mortgage-backed securities | |
| 769,393 | | |
| 769,317 | |
Total available-for-sale debt securities | |
$ | 1,395,983 | | |
$ | 1,400,809 | |
June 30, 2015 | |
| |
|
(in thousands) | |
Amortized Cost | |
Fair Value |
Held-to-maturity securities: | |
| |
|
Due in one year or less | |
$ | 8,111 | | |
$ | 8,157 | |
Due after one year through five years | |
| 9,065 | | |
| 9,388 | |
Due after five years through ten years | |
| 128,383 | | |
| 128,324 | |
Due after ten years | |
| 178 | | |
| 207 | |
Total held-to-maturity debt securities | |
$ | 145,737 | | |
$ | 146,076 | |
December 31, 2014 | |
| |
|
(in
thousands) | |
Amortized Cost | |
Fair Value |
Held-to-maturity securities: | |
| |
|
Due in one year or less | |
$ | 11,400 | | |
$ | 11,471 | |
Due after one year through five years | |
| 3,440 | | |
| 3,694 | |
Due after five years through ten years | |
| 73,020 | | |
| 73,518 | |
Due after ten years | |
| 308 | | |
| 353 | |
Total
held-to-maturity debt securities | |
$ | 88,168 | | |
$ | 89,036 | |
The Company also holds
non-marketable Federal Home Loan Bank New York (“FHLBNY”) stock, non-marketable Federal Home Loan Bank Pittsburgh
(“FHLBPITT”) stock and non-marketable Atlantic Community Bankers Bank stock, all of which are required to be held
for regulatory purposes and for borrowing availability. The required investment in FHLB stock is tied to the Company’s borrowing
levels with the FHLB. Holdings of FHLBNY stock, FHLBPITT stock, and ACBB stock totaled $15.8 million, $11.3 million and $95,000
at June 30, 2015, respectively. These securities are carried at par, which is also cost. The FHLBNY and FHLBPITT continue to pay
dividends and repurchase stock. As such, the Company has not recognized any impairment on its holdings of FHLBNY and FHLBPITT
stock. Quarterly, we evaluate our investment in the FHLB for impairment. We evaluate recent and long-term operating performance,
liquidity, funding and capital positions, stock repurchase history, dividend history and impact of legislative and regulatory
changes. Based on our most recent evaluation, as of June 30, 2015, we have determined that no impairment write-downs are currently
required.
Trading Securities |
The following summarizes trading securities, at estimated fair value, as of: |
|
(in thousands) | |
06/30/2015 | |
12/31/2014 |
Obligations of U.S. Government sponsored entities | |
$ | 7,009 | | |
$ | 7,404 | |
Mortgage-backed securities – residential, issued by | |
| | | |
| | |
U.S. Government sponsored entities | |
| 1,144 | | |
| 1,588 | |
Total | |
$ | 8,153 | | |
$ | 8,992 | |
The decrease in the trading portfolio reflects
maturities or payments during the three and six months ended June 30, 2015. For the three and six months ended June 30, 2015, net
mark-to-market losses related to the securities trading portfolio were $74,000 and $137,000, respectively, compared to net mark-to-market
losses for the three and six months ended June 30, 2014 of $34,000 and $93,000, respectively.
The Company pledges securities as collateral
for public deposits and other borrowings, and sells securities under agreements to repurchase. Securities carried of $1.2 billion
and $1.1 billion at June 30, 2015, and December 31, 2014, respectively, were either pledged or sold under agreements to repurchase.
5. Loans and Leases |
Loans and Leases at June 30, 2015 and December 31, 2014 were as follows: |
| |
| 06/30/2015 | | |
| 12
/31/2014 |
(in thousands) | |
| Originated | | |
| Acquired | | |
| Total Loans and Leases | | |
| Originated | | |
| Acquired | | |
| Total Loans and Leases | |
Commercial and industrial | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Agriculture | |
$ | 61,744 | | |
$ | 0 | | |
$ | 61,744 | | |
$ | 78,507 | | |
$ | 0 | | |
$ | 78,507 | |
Commercial and industrial other | |
| 724,196 | | |
| 92,875 | | |
| 817,071 | | |
| 688,529 | | |
| 97,034 | | |
| 785,563 | |
Subtotal commercial and industrial | |
| 785,940 | | |
| 92,875 | | |
| 878,815 | | |
| 767,036 | | |
| 97,034 | | |
| 864,070 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 74,795 | | |
| 37,981 | | |
| 112,776 | | |
| 72,427 | | |
| 35,906 | | |
| 108,333 | |
Agriculture | |
| 74,586 | | |
| 2,214 | | |
| 76,800 | | |
| 58,994 | | |
| 3,182 | | |
| 62,176 | |
Commercial real estate other | |
| 1,055,007 | | |
| 278,825 | | |
| 1,333,832 | | |
| 979,621 | | |
| 308,488 | | |
| 1,288,109 | |
Subtotal commercial real estate | |
| 1,204,388 | | |
| 319,020 | | |
| 1,523,408 | | |
| 1,111,042 | | |
| 347,576 | | |
| 1,458,618 | |
Residential real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| 193,332 | | |
| 48,717 | | |
| 242,049 | | |
| 186,957 | | |
| 56,008 | | |
| 242,965 | |
Mortgages | |
| 760,858 | | |
| 30,607 | | |
| 791,465 | | |
| 710,904 | | |
| 32,282 | | |
| 743,186 | |
Subtotal residential real estate | |
| 954,190 | | |
| 79,324 | | |
| 1,033,514 | | |
| 897,861 | | |
| 88,290 | | |
| 986,151 | |
Consumer and other | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Indirect | |
| 17,866 | | |
| 0 | | |
| 17,866 | | |
| 18,298 | | |
| 0 | | |
| 18,298 | |
Consumer and other | |
| 39,842 | | |
| 973 | | |
| 40,815 | | |
| 35,874 | | |
| 1,095 | | |
| 36,969 | |
Subtotal consumer and other | |
| 57,708 | | |
| 973 | | |
| 58,681 | | |
| 54,172 | | |
| 1,095 | | |
| 55,267 | |
Leases | |
| 14,190 | | |
| 0 | | |
| 14,190 | | |
| 12,251 | | |
| 0 | | |
| 12,251 | |
Covered loans | |
| 0 | | |
| 15,771 | | |
| 15,771 | | |
| 0 | | |
| 19,319 | | |
| 19,319 | |
Total loans and leases | |
| 3,016,416 | | |
| 507,963 | | |
| 3,524,379 | | |
| 2,842,362 | | |
| 553,314 | | |
| 3,395,676 | |
Less: unearned income and deferred costs and fees | |
| (2,448 | ) | |
| 0 | | |
| (2,448 | ) | |
| (2,388 | ) | |
| 0 | | |
| (2,388 | ) |
Total loans and leases, net of unearned income and deferred costs and fees | |
$ | 3,013,968 | | |
$ | 507,963 | | |
$ | 3,521,931 | | |
$ | 2,839,974 | | |
$ | 553,314 | | |
$ | 3,393,288 | |
The outstanding principal balance and the related carrying amount of the Company’s loans acquired in the VIST Bank acquisition are as follows at June 30, 2015 and December 31, 2014: |
|
(in thousands) | |
06/30/2015 | |
12/31/2014 |
Acquired Credit Impaired Loans | |
| |
|
Outstanding principal balance | |
$ | 38,570 | | |
$ | 44,273 | |
Carrying amount | |
| 30,463 | | |
| 34,410 | |
| |
| | | |
| | |
Acquired Non-Credit Impaired Loans | |
| | | |
| | |
Outstanding principal balance | |
| 483,114 | | |
| 525,182 | |
Carrying amount | |
| 477,500 | | |
| 518,904 | |
| |
| | | |
| | |
Total Acquired Loans | |
| | | |
| | |
Outstanding principal balance | |
| 521,684 | | |
| 569,455 | |
Carrying amount | |
| 507,963 | | |
| 553,314 | |
The following tables present changes in accretable yield on loans acquired from VIST Bank that were considered credit impaired. |
|
(in
thousands) | |
|
Balance at January 1, 2014 | |
$ | 10,954 | |
Accretion | |
| (4,598 | ) |
Disposals (loans paid in full) | |
| (250 | ) |
Reclassifications to/from nonaccretable difference1 | |
| 2,498 | |
Balance
at December 31, 2014 | |
$ | 8,604 | |
| |
| | |
(in
thousands) | |
| | |
Balance at January 1, 2015 | |
$ | 8,604 | |
Accretion | |
| (1,644 | ) |
Disposals (loans paid in full) | |
| (53 | ) |
Reclassifications to/from nonaccretable difference1 | |
| 1,314 | |
Balance
at June 30, 2015 | |
$ | 8,221 | |
1 Results in increased interest income as a prospective
yield adjustment over the remaining life of the loans, as well as increased interest income from loan sales, modification and
prepayments.
At
June 30, 2015, acquired loans included $15.8 million of covered loans. VIST Bank had previously acquired these loans in an
FDIC assisted transaction in the fourth quarter of 2010. In accordance with a loss sharing agreement with the FDIC, certain losses
and expenses relating to covered loans may be reimbursed by the FDIC at 70% or, if net losses exceed certain levels specified
in the loss sharing agreements, 80%. See Note 7 – “FDIC Indemnification Asset Related to Covered Loans” for
further discussion of the loss sharing agreements and related FDIC indemnification assets.
The Company has adopted comprehensive lending
policies, underwriting standards and loan review procedures. Management reviews these policies and procedures on a regular basis.
The Company discussed its lending policies and underwriting guidelines for its various lending portfolios in Note 3 – “Loans
and Leases” in the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2014. There have been no significant changes in these policies and guidelines. As such, these policies
are reflective of new originations as well as those balances held at June 30, 2015. The Company’s Board of Directors approves
the lending policies at least annually. The Company recognizes that exceptions to policy guidelines may occasionally occur and
has established procedures for approving exceptions to these policy guidelines. Management has also implemented reporting systems
to monitor loan origination, loan quality, concentrations of credit, loan delinquencies and nonperforming loans and potential problem
loans.
Loans are considered past due if the required
principal and interest payments have not been received as of the date such payments are due. Generally loans are placed on nonaccrual
status if principal or interest payments become 90 days or more past due and/or management deems the collectability of the principal
and/or interest to be in question as well as when required by regulatory agencies. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Payments received on loans on nonaccrual are generally applied to reduce the principal balance of
the loan. Loans are generally returned to accrual status when all the principal and interest amounts contractually due are brought
current, the borrower has established a payment history, and future payments are reasonably assured. When management determines
that the collection of principal in full is not probable, management will charge-off a partial amount or full amount of the loan
balance. Management considers specific facts and circumstances relative to each individual credit in making such a determination.
For residential and consumer loans, management uses specific regulatory guidance and thresholds for determining charge-offs.
Acquired loans that met the criteria for nonaccrual
of interest prior to the acquisition may be considered performing after the date of acquisition, regardless of whether the customer
is contractually delinquent, if we can reasonably estimate the timing and amount of the expected cash flows on such loans and if
the Company expects to fully collect the new carrying value of the loans. As such, we may no longer consider the loan to be nonaccrual
or nonperforming and may accrue interest on these loans, including the impact of any accretable discount. To the extent we cannot
reasonably estimate cash flows, interest income recognition is discontinued. The Company has determined that it can reasonably
estimate future cash flows on our acquired loans that are past due 90 days or more and accruing interest and the Company expects
to fully collect the carrying value of the loans.
The below table is an
age analysis of past due loans, segregated by originated and acquired loan and lease portfolios, and by class of loans, as of
June 30, 2015 and December 31, 2014.
June 30, 2015 | |
| |
| |
| |
| |
| |
|
(in
thousands) | |
30-89 days | |
90 days or more | |
Current Loans | |
Total Loans | |
90 days and accruing1 | |
Nonaccrual |
Originated
Loans and Leases | |
| |
| |
| |
| |
| |
|
Commercial and industrial | |
| |
| |
| |
| |
| |
|
Agriculture | |
$ | 0 | | |
$ | 0 | | |
$ | 61,744 | | |
$ | 61,744 | | |
$ | 0 | | |
$ | 0 | |
Commercial and industrial other | |
| 707 | | |
| 1,117 | | |
| 722,372 | | |
| 724,196 | | |
| 0 | | |
| 1,351 | |
Subtotal commercial and industrial | |
| 707 | | |
| 1,117 | | |
| 784,116 | | |
| 785,940 | | |
| 0 | | |
| 1,351 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 0 | | |
| 0 | | |
| 74,795 | | |
| 74,795 | | |
| 0 | | |
| 0 | |
Agriculture | |
| 0 | | |
| 0 | | |
| 74,586 | | |
| 74,586 | | |
| 0 | | |
| 112 | |
Commercial real estate other | |
| 302 | | |
| 3,510 | | |
| 1,051,195 | | |
| 1,055,007 | | |
| 0 | | |
| 4,443 | |
Subtotal commercial real estate | |
| 302 | | |
| 3,510 | | |
| 1,200,576 | | |
| 1,204,388 | | |
| 0 | | |
| 4,555 | |
Residential real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| 812 | | |
| 1,497 | | |
| 191,023 | | |
| 193,332 | | |
| 58 | | |
| 1,522 | |
Mortgages | |
| 1,069 | | |
| 6,717 | | |
| 753,072 | | |
| 760,858 | | |
| 0 | | |
| 6,895 | |
Subtotal residential real estate | |
| 1,881 | | |
| 8,214 | | |
| 944,095 | | |
| 954,190 | | |
| 58 | | |
| 8,417 | |
Consumer and other | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Indirect | |
| 349 | | |
| 75 | | |
| 17,442 | | |
| 17,866 | | |
| 0 | | |
| 83 | |
Consumer and other | |
| 76 | | |
| 135 | | |
| 39,631 | | |
| 39,842 | | |
| 0 | | |
| 160 | |
Subtotal consumer and other | |
| 425 | | |
| 210 | | |
| 57,073 | | |
| 57,708 | | |
| 0 | | |
| 243 | |
Leases | |
| 0 | | |
| 0 | | |
| 14,190 | | |
| 14,190 | | |
| 0 | | |
| 0 | |
Total
loans and leases | |
| 3,315 | | |
| 13,051 | | |
| 3,000,050 | | |
| 3,016,416 | | |
| 58 | | |
| 14,566 | |
Less:
unearned income and deferred costs and fees | |
| 0 | | |
| 0 | | |
| (2,448 | ) | |
| (2,448 | ) | |
| 0 | | |
| 0 | |
Total
originated loans and leases, net of unearned income and deferred costs and fees | |
$ | 3,315 | | |
$ | 13,051 | | |
$ | 2,997,602 | | |
$ | 3,013,968 | | |
$ | 58 | | |
$ | 14,566 | |
Acquired
Loans and Leases | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial and industrial | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial and industrial other | |
| 3 | | |
| 562 | | |
| 92,310 | | |
| 92,875 | | |
| 353 | | |
| 661 | |
Subtotal commercial and industrial | |
| 3 | | |
| 562 | | |
| 92,310 | | |
| 92,875 | | |
| 353 | | |
| 661 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 0 | | |
| 1,695 | | |
| 36,286 | | |
| 37,981 | | |
| 1,326 | | |
| 369 | |
Agriculture | |
| 0 | | |
| 0 | | |
| 2,214 | | |
| 2,214 | | |
| 0 | | |
| 0 | |
Commercial real estate other | |
| 163 | | |
| 2,023 | | |
| 276,639 | | |
| 278,825 | | |
| 473 | | |
| 1,948 | |
Subtotal commercial real estate | |
| 163 | | |
| 3,718 | | |
| 315,139 | | |
| 319,020 | | |
| 1,799 | | |
| 2,317 | |
Residential real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| 596 | | |
| 594 | | |
| 47,527 | | |
| 48,717 | | |
| 202 | | |
| 593 | |
Mortgages | |
| 155 | | |
| 1,153 | | |
| 29,299 | | |
| 30,607 | | |
| 677 | | |
| 1,459 | |
Subtotal residential real estate | |
| 751 | | |
| 1,747 | | |
| 76,826 | | |
| 79,324 | | |
| 879 | | |
| 2,052 | |
Consumer and other | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Consumer and other | |
| 0 | | |
| 0 | | |
| 973 | | |
| 973 | | |
| 0 | | |
| 0 | |
Subtotal consumer and other | |
| 0 | | |
| 0 | | |
| 973 | | |
| 973 | | |
| 0 | | |
| 0 | |
Covered loans | |
| 455 | | |
| 674 | | |
| 14,642 | | |
| 15,771 | | |
| 674 | | |
| 0 | |
Total
acquired loans and leases, net of unearned income and deferred costs and fees | |
$ | 1,372 | | |
$ | 6,701 | | |
$ | 499,890 | | |
$ | 507,963 | | |
$ | 3,705 | | |
$ | 5,030 | |
December
31, 2014 | |
| |
| |
| |
| |
| |
|
(in
thousands) | |
30-89 days | |
90 days or more | |
Current Loans | |
Total Loans | |
90 days and accruing1 | |
Nonaccrual |
Originated
loans and leases | |
| |
| |
| |
| |
| |
|
Commercial and industrial | |
| |
| |
| |
| |
| |
|
Agriculture | |
$ | 0 | | |
$ | 0 | | |
$ | 78,507 | | |
$ | 78,507 | | |
$ | 0 | | |
$ | 0 | |
Commercial and industrial other | |
| 889 | | |
| 1,329 | | |
| 686,311 | | |
| 688,529 | | |
| 0 | | |
| 1,435 | |
Subtotal commercial and industrial | |
| 889 | | |
| 1,329 | | |
| 764,818 | | |
| 767,036 | | |
| 0 | | |
| 1,435 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 206 | | |
| 0 | | |
| 72,221 | | |
| 72,427 | | |
| 0 | | |
| 0 | |
Agriculture | |
| 0 | | |
| 105 | | |
| 58,889 | | |
| 58,994 | | |
| 0 | | |
| 131 | |
Commercial real estate other | |
| 760 | | |
| 3,247 | | |
| 975,614 | | |
| 979,621 | | |
| 0 | | |
| 4,911 | |
Subtotal commercial real estate | |
| 966 | | |
| 3,352 | | |
| 1,106,724 | | |
| 1,111,042 | | |
| 0 | | |
| 5,042 | |
Residential real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| 1,414 | | |
| 1,061 | | |
| 184,482 | | |
| 186,957 | | |
| 59 | | |
| 1,279 | |
Mortgages | |
| 2,963 | | |
| 5,308 | | |
| 702,633 | | |
| 710,904 | | |
| 47 | | |
| 6,194 | |
Subtotal residential real estate | |
| 4,377 | | |
| 6,369 | | |
| 887,115 | | |
| 897,861 | | |
| 106 | | |
| 7,473 | |
Consumer and other | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Indirect | |
| 542 | | |
| 75 | | |
| 17,681 | | |
| 18,298 | | |
| 0 | | |
| 101 | |
Consumer and other | |
| 75 | | |
| 4 | | |
| 35,795 | | |
| 35,874 | | |
| 0 | | |
| 248 | |
Subtotal consumer and other | |
| 617 | | |
| 79 | | |
| 53,476 | | |
| 54,172 | | |
| 0 | | |
| 349 | |
Leases | |
| 0 | | |
| 0 | | |
| 12,251 | | |
| 12,251 | | |
| 0 | | |
| 0 | |
Total loans and leases | |
| 6,849 | | |
| 11,129 | | |
| 2,824,384 | | |
| 2,842,362 | | |
| 106 | | |
| 14,299 | |
Less:
unearned income and deferred costs and fees | |
| 0 | | |
| 0 | | |
| (2,388 | ) | |
| (2,388 | ) | |
| 0 | | |
| 0 | |
Total
originated loans and leases, net of unearned income and deferred costs and fees | |
$ | 6,849 | | |
$ | 11,129 | | |
$ | 2,821,996 | | |
$ | 2,839,974 | | |
$ | 106 | | |
$ | 14,299 | |
Acquired
loans and leases | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial and industrial | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial and industrial other | |
| 5 | | |
| 1,156 | | |
| 95,873 | | |
| 97,034 | | |
| 475 | | |
| 681 | |
Subtotal commercial and industrial | |
| 5 | | |
| 1,156 | | |
| 95,873 | | |
| 97,034 | | |
| 475 | | |
| 681 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 0 | | |
| 1,759 | | |
| 34,147 | | |
| 35,906 | | |
| 1,385 | | |
| 436 | |
Agriculture | |
| 0 | | |
| 0 | | |
| 3,182 | | |
| 3,182 | | |
| 0 | | |
| 0 | |
Commercial real estate other | |
| 0 | | |
| 1,918 | | |
| 306,570 | | |
| 308,488 | | |
| 77 | | |
| 2,042 | |
Subtotal commercial real estate | |
| 0 | | |
| 3,677 | | |
| 343,899 | | |
| 347,576 | | |
| 1,462 | | |
| 2,478 | |
Residential real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| 135 | | |
| 704 | | |
| 55,169 | | |
| 56,008 | | |
| 177 | | |
| 592 | |
Mortgages | |
| 1,041 | | |
| 907 | | |
| 30,334 | | |
| 32,282 | | |
| 500 | | |
| 978 | |
Subtotal residential real estate | |
| 1,176 | | |
| 1,611 | | |
| 85,503 | | |
| 88,290 | | |
| 677 | | |
| 1,570 | |
Consumer and other | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Consumer and other | |
| 5 | | |
| 0 | | |
| 1,090 | | |
| 1,095 | | |
| 0 | | |
| 0 | |
Subtotal consumer and other | |
| 5 | | |
| 0 | | |
| 1,090 | | |
| 1,095 | | |
| 0 | | |
| 0 | |
Covered loans | |
| 533 | | |
| 914 | | |
| 17,872 | | |
| 19,319 | | |
| 914 | | |
| 0 | |
Total
acquired loans and leases, net of unearned income and deferred costs and fees | |
$ | 1,719 | | |
$ | 7,358 | | |
$ | 544,237 | | |
$ | 553,314 | | |
$ | 3,528 | | |
$ | 4,729 | |
1 Includes
acquired loans that were recorded at fair value at the acquisition date.
6. Allowance for Loan and Lease Losses
Originated Loans and Leases
Management reviews the appropriateness of the
allowance for loan and lease losses (“allowance”) on a regular basis. Management considers the accounting policy relating
to the allowance to be a critical accounting policy, given the inherent uncertainty in evaluating the levels of the allowance required
to cover credit losses in the portfolio and the material effect that assumptions could have on the Company’s results of operations.
The Company has developed a methodology to measure the amount of estimated loan loss exposure inherent in the loan portfolio to
assure that an appropriate allowance is maintained. The Company’s methodology is based upon guidance provided in SEC Staff
Accounting Bulletin No. 102, Selected Loan Loss Allowance Methodology and Documentation Issues and ASC Topic 310, Receivables
and ASC Topic 450, Contingencies.
The model is comprised of five major components
that management has deemed appropriate in evaluating the appropriateness of the allowance for loan and lease losses. While none
of these components, when used independently, is effective in arriving at a reserve level that appropriately measures the risk
inherent in the portfolio, management believes that using them collectively, provides reasonable measurement of the loss exposure
in the portfolio. The five components include: impaired loans; individually reviewed and graded loans; past due and nonaccrual
loans; historical loss experience; and qualitative or subjective analysis.
Since the methodology is based upon historical
experience and trends as well as management’s judgment, factors may arise that result in different estimates. Significant
factors that could give rise to changes in these estimates may include, but are not limited to, changes in economic conditions
in the local area, concentration of risk, changes in interest rates, and declines in local property values. While management’s
evaluation of the allowance as of June 30, 2015, considers the allowance to be appropriate, under adversely different conditions
or assumptions, the Company would need to increase or decrease the allowance.
Acquired Loans and Leases
Acquired loans accounted for under ASC 310-30
For our acquired loans, our allowance for loan
losses is estimated based upon our expected cash flows for these loans. To the extent that we experience a deterioration in borrower
credit quality resulting in a decrease in our expected cash flows subsequent to the acquisition of the loans, an allowance for
loan losses would be established based on our estimate of future credit losses over the remaining life of the loans.
Acquired loans accounted for under ASC 310-20
We establish our allowance for loan losses
through a provision for credit losses based upon an evaluation process that is similar to our evaluation process used for originated
loans. This evaluation, which includes a review of loans on which full collectability may not be reasonably assured, considers,
among other matters, the estimated fair value of the underlying collateral, economic conditions, historical net loan loss experience,
carrying value of the loans, which includes the remaining net purchase discount or premium, and other factors that warrant recognition
in determining our allowance for loan losses.
The
following tables detail activity in the allowance for loan and lease losses segregated by originated and acquired loan and
lease portfolios and by portfolio segment for the three and six months ended June 30, 2015 and 2014. Allocation of a portion
of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
Three months ended June 30, 2015 |
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Finance Leases | |
Total |
| |
| |
| |
| |
| |
|
Allowance for originated loans and leases | |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
|
Beginning balance | |
$ | 9,830 | | |
$ | 12,338 | | |
$ | 4,665 | | |
$ | 1,857 | | |
$ | 0 | | |
$ | 28,690 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Charge-offs | |
| (42 | ) | |
| 0 | | |
| (219 | ) | |
| (243 | ) | |
| 0 | | |
| (504 | ) |
Recoveries | |
| 88 | | |
| 269 | | |
| 2 | | |
| 114 | | |
| 0 | | |
| 473 | |
Provision (credit) | |
| (1,652 | ) | |
| 880 | | |
| 1,135 | | |
| 406 | | |
| | | |
| 769 | |
Ending Balance | |
$ | 8,224 | | |
$ | 13,487 | | |
$ | 5,583 | | |
$ | 2,134 | | |
$ | 0 | | |
$ | 29,428 | |
Three months ended June 30, 2015 |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Finance Leases | |
Total |
| |
| |
| |
| |
| |
|
Allowance for acquired loans | |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
|
Beginning balance | |
$ | 563 | | |
$ | 166 | | |
$ | 43 | | |
$ | 23 | | |
$ | 0 | | |
$ | 795 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Charge-offs | |
| (52 | ) | |
| (156 | ) | |
| (82 | ) | |
| 0 | | |
| 0 | | |
| (290 | ) |
Recoveries | |
| 0 | | |
| 5 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 5 | |
Provision (credit) | |
| (127 | ) | |
| 152 | | |
| 139 | | |
| (11 | ) | |
| 0 | | |
| 153 | |
Ending Balance | |
$ | 384 | | |
$ | 167 | | |
$ | 100 | | |
$ | 12 | | |
$ | 0 | | |
$ | 663 | |
Three months ended June 30, 2014 | |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Finance Leases | |
Total |
| |
| |
| |
| |
| |
|
Allowance for originated loans and leases | |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
|
Beginning balance | |
$ | 8,769 | | |
$ | 10,415 | | |
$ | 5,368 | | |
$ | 2,109 | | |
$ | 0 | | |
$ | 26,661 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Charge-offs | |
| (133 | ) | |
| (433 | ) | |
| (74 | ) | |
| (414 | ) | |
| 0 | | |
| (1,054 | ) |
Recoveries | |
| 424 | | |
| 560 | | |
| 74 | | |
| 143 | | |
| 0 | | |
| 1,201 | |
Provision (credit) | |
| (498 | ) | |
| (153 | ) | |
| 77 | | |
| 518 | | |
| 0 | | |
| (56 | ) |
Ending Balance | |
$ | 8,562 | | |
$ | 10,389 | | |
$ | 5,445 | | |
$ | 2,356 | | |
$ | 0 | | |
$ | 26,752 | |
Three months ended June 30, 2014 |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Covered Loans | |
Total |
| |
| |
| |
| |
| |
|
Allowance for acquired loans | |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
|
Beginning balance | |
$ | 298 | | |
$ | 819 | | |
$ | 70 | | |
$ | 166 | | |
$ | 0 | | |
$ | 1,353 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Charge-offs | |
| (6 | ) | |
| (526 | ) | |
| (178 | ) | |
| (1 | ) | |
| 0 | | |
| (711 | ) |
Recoveries | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Provision (credit) | |
| (133 | ) | |
| 167 | | |
| 157 | | |
| (68 | ) | |
| 0 | | |
| 123 | |
Ending Balance | |
$ | 159 | | |
$ | 460 | | |
$ | 49 | | |
$ | 97 | | |
$ | 0 | | |
$ | 765 | |
Six months ended June 30, 2015 |
| |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Finance Leases | |
Total |
| |
| |
| |
| |
| |
|
Allowance for originated loans and leases | |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
|
Beginning balance | |
$ | 9,157 | | |
$ | 12,069 | | |
$ | 5,030 | | |
$ | 1,900 | | |
$ | 0 | | |
$ | 28,156 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Charge-offs | |
| (44 | ) | |
| (14 | ) | |
| (312 | ) | |
| (510 | ) | |
| 0 | | |
| (880 | ) |
Recoveries | |
| 235 | | |
| 477 | | |
| 49 | | |
| 282 | | |
| 0 | | |
| 1,043 | |
Provision (credit) | |
| (1,124 | ) | |
| 955 | | |
| 816 | | |
| 462 | | |
| 0 | | |
| 1,109 | |
Ending Balance | |
$ | 8,224 | | |
$ | 13,487 | | |
$ | 5,583 | | |
$ | 2,134 | | |
$ | 0 | | |
$ | 29,428 | |
Six months ended June 30, 2015 | |
| |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Covered Loans | |
Total |
| |
| |
| |
| |
| |
|
Allowance for acquired loans | |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
|
Beginning balance | |
$ | 431 | | |
$ | 337 | | |
$ | 51 | | |
$ | 22 | | |
$ | 0 | | |
$ | 841 | |
Charge-offs | |
| (53 | ) | |
| (156 | ) | |
| (112 | ) | |
| 0 | | |
| 0 | | |
| (321 | ) |
Recoveries | |
| 7 | | |
| 112 | | |
| 2 | | |
| 0 | | |
| 0 | | |
| 121 | |
Provision (credit) | |
| (1 | ) | |
| (126 | ) | |
| 159 | | |
| (10 | ) | |
| 0 | | |
| 22 | |
Ending Balance | |
$ | 384 | | |
$ | 167 | | |
$ | 100 | | |
$ | 12 | | |
$ | 0 | | |
$ | 663 | |
Six months ended June 30, 2014 |
| |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Finance Leases | |
Total |
|
| |
| |
| |
| |
|
Allowance for originated loans and leases |
| |
| |
| |
| |
|
|
| |
| |
| |
| |
|
Beginning balance | |
$ | 8,406 | | |
$ | 10,459 | | |
$ | 5,771 | | |
$ | 2,059 | | |
$ | 5 | | |
$ | 26,700 | |
Charge-offs | |
| (254 | ) | |
| (613 | ) | |
| (267 | ) | |
| (666 | ) | |
| 0 | | |
| (1,800 | ) |
Recoveries | |
| 489 | | |
| 562 | | |
| 86 | | |
| 260 | | |
| 0 | | |
| 1,397 | |
Provision (credit) | |
| (79 | ) | |
| (19 | ) | |
| (145 | ) | |
| 703 | | |
| (5 | ) | |
| 455 | |
Ending Balance | |
$ | 8,562 | | |
$ | 10,389 | | |
$ | 5,445 | | |
$ | 2,356 | | |
$ | 0 | | |
$ | 26,752 | |
Six months ended June 30, 2014 |
| |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Covered Loans | |
Total |
| |
| |
| |
| |
| |
|
Allowance for acquired loans | |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
|
Beginning balance | |
$ | 168 | | |
$ | 770 | | |
$ | 274 | | |
$ | 58 | | |
$ | 0 | | |
$ | 1,270 | |
Charge-offs | |
| (25 | ) | |
| (551 | ) | |
| (277 | ) | |
| (7 | ) | |
| 0 | | |
| (860 | ) |
Recoveries | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Provision (credit) | |
| 16 | | |
| 241 | | |
| 52 | | |
| 46 | | |
| 0 | | |
| 355 | |
Ending Balance | |
$ | 159 | | |
$ | 460 | | |
$ | 49 | | |
$ | 97 | | |
$ | 0 | | |
$ | 765 | |
At June 30, 2015 and December
31, 2014, the allocation of the allowance for loan and lease losses summarized on the basis of the Company’s impairment
methodology was as follows:
| |
| |
| |
| |
| |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Finance Leases | |
Total |
| |
| |
| |
| |
|
Allowance for originated loans and leases | |
| |
| |
| |
|
June 30, 2015 | |
| |
| |
| |
| |
| |
|
Individually evaluated for impairment | |
$ | 0 | | |
$ | 735 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 735 | |
Collectively evaluated for
impairment | |
| 8,224 | | |
| 12,752 | | |
| 5,583 | | |
| 2,134 | | |
| 0 | | |
| 28,693 | |
Ending balance | |
$ | 8,224 | | |
$ | 13,487 | | |
$ | 5,583 | | |
$ | 2,134 | | |
$ | 0 | | |
$ | 29,428 | |
| |
| |
| |
| |
| |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Covered Loans | |
Total |
| |
| |
| |
| |
| |
|
Allowance for acquired loans | |
| |
| |
| |
| |
|
June 30, 2015 | |
| |
| |
| |
| |
| |
|
Individually evaluated for impairment | |
$ | 364 | | |
$ | 23 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 387 | |
Collectively evaluated for impairment | |
| 20 | | |
| 144 | | |
| 100 | | |
| 12 | | |
| 0 | | |
| 276 | |
Ending balance | |
$ | 384 | | |
$ | 167 | | |
$ | 100 | | |
$ | 12 | | |
$ | 0 | | |
$ | 663 | |
| |
| |
| |
| |
| |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Finance Leases | |
Total |
| |
| |
| |
| |
| |
|
Allowance for originated loans and leases | |
| |
| |
| |
| |
|
December 31, 2014 | |
| |
| |
| |
| |
| |
|
Individually evaluated for impairment | |
$ | 0 | | |
$ | 652 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 652 | |
Collectively evaluated
for impairment | |
| 9,157 | | |
| 11,417 | | |
| 5,030 | | |
| 1,900 | | |
| 0 | | |
| 27,504 | |
Ending balance | |
$ | 9,157 | | |
$ | 12,069 | | |
$ | 5,030 | | |
$ | 1,900 | | |
$ | 0 | | |
$ | 28,156 | |
| |
| |
| |
| |
| |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Covered Loans | |
Total |
| |
| |
| |
| |
| |
|
Allowance for acquired loans | |
| |
| |
| |
| |
|
December 31, 2014 | |
| |
| |
| |
| |
| |
|
Individually evaluated for impairment | |
$ | 414 | | |
$ | 100 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 514 | |
Collectively evaluated
for impairment | |
| 17 | | |
| 237 | | |
| 51 | | |
| 22 | | |
| 0 | | |
| 327 | |
Ending balance | |
$ | 431 | | |
$ | 337 | | |
$ | 51 | | |
$ | 22 | | |
$ | 0 | | |
$ | 841 | |
The recorded investment in loans and leases summarized on the basis of the Company’s impairment methodology as of June 30, 2015 and December 31, 2014 was as follows: |
| |
| |
| |
| |
| |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Finance Leases | |
Total |
| |
| |
| |
| |
| |
| |
|
Originated loans and leases | |
| |
| |
| |
| |
| |
|
June 30, 2015 | |
| |
| |
| |
| |
| |
|
Individually evaluated for impairment | |
$ | 555 | | |
$ | 9,027 | | |
$ | 944 | | |
$ | 0 | | |
$ | 0 | | |
$ | 10,526 | |
Collectively evaluated for
impairment | |
| 785,385 | | |
| 1,195,361 | | |
| 953,246 | | |
| 57,708 | | |
| 14,190 | | |
| 3,005,890 | |
Total | |
$ | 785,940 | | |
$ | 1,204,388 | | |
$ | 954,190 | | |
$ | 57,708 | | |
$ | 14,190 | | |
$ | 3,016,416 | |
| |
| |
| |
| |
| |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Covered Loans | |
Total |
| |
| |
| |
| |
| |
| |
|
Acquired loans | |
| |
| |
| |
| |
| |
|
June 30, 2015 | |
| |
| |
| |
| |
| |
|
Individually evaluated for impairment | |
$ | 1,184 | | |
$ | 3,757 | | |
$ | 1,241 | | |
$ | 0 | | |
$ | 0 | | |
$ | 6,182 | |
Loans acquired with deteriorated credit quality | |
$ | 689 | | |
$ | 11,613 | | |
$ | 3,616 | | |
$ | 0 | | |
$ | 14,545 | | |
$ | 30,463 | |
Collectively evaluated for
impairment | |
| 91,002 | | |
| 303,650 | | |
| 74,467 | | |
| 973 | | |
| 1,226 | | |
| 471,318 | |
Total | |
$ | 92,875 | | |
$ | 319,020 | | |
$ | 79,324 | | |
$ | 973 | | |
$ | 15,771 | | |
$ | 507,963 | |
| |
| |
| |
| |
| |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Finance Leases | |
Total |
| |
| |
| |
| |
| |
| |
|
Originated loans and leases | |
| |
| |
| |
| |
| |
|
December 31, 2014 | |
| |
| |
| |
| |
| |
|
Individually evaluated for impairment | |
$ | 1,283 | | |
| 7,675 | | |
$ | 1,408 | | |
$ | 0 | | |
$ | 0 | | |
$ | 10,366 | |
Collectively evaluated for
impairment | |
| 765,753 | | |
| 1,103,367 | | |
| 896,453 | | |
| 54,172 | | |
| 12,251 | | |
| 2,831,996 | |
Total | |
$ | 767,036 | | |
$ | 1,111,042 | | |
$ | 897,861 | | |
$ | 54,172 | | |
$ | 12,251 | | |
$ | 2,842,362 | |
| |
| |
| |
| |
| |
| |
|
(in thousands) | |
Commercial and Industrial | |
Commercial Real Estate | |
Residential Real Estate | |
Consumer and Other | |
Covered Loans | |
Total |
| |
| |
| |
| |
| |
| |
|
Acquired loans | |
| |
| |
| |
| |
| |
|
December 31, 2014 | |
| |
| |
| |
| |
| |
|
Individually evaluated for impairment | |
$ | 628 | | |
$ | 1,195 | | |
$ | 440 | | |
$ | 0 | | |
$ | 0 | | |
$ | 2,263 | |
Loans acquired with deteriorated credit quality | |
| 995 | | |
| 11,640 | | |
| 3,669 | | |
| 0 | | |
| 18,106 | | |
| 34,410 | |
Collectively evaluated for
impairment | |
| 95,411 | | |
| 334,741 | | |
| 84,181 | | |
| 1,095 | | |
| 1,213 | | |
| 516,641 | |
Total | |
$ | 97,034 | | |
$ | 347,576 | | |
$ | 88,290 | | |
$ | 1,095 | | |
$ | 19,319 | | |
$ | 553,314 | |
A loan is impaired when, based on current information
and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement.
Impaired loans consist of our non-homogenous nonaccrual loans, and all loans restructured in a troubled debt restructuring (TDR).
Specific reserves on individually identified impaired loans that are not collateral dependent are measured based on the present
value of expected future cash flows discounted at the original effective interest rate of each loan. For loans that are collateral
dependent, impairment is measured based on the fair value of the collateral less estimated selling costs, and such impaired amounts
are generally charged off. The majority of impaired loans are collateral dependent impaired loans that have limited exposure or
require limited specific reserves because of the amount of collateral support with respect to these loans, and previous charge-offs.
Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably
assured. In these cases, interest is recognized on a cash basis. Impaired loans are as follows:
| |
06/30/2015 |
12/31/2014 |
(in thousands) | |
Recorded Investment | |
Unpaid Principal Balance | |
Related Allowance | |
Recorded Investment | |
Unpaid Principal Balance | |
Related Allowance |
Originated loans and leases with no related allowance | |
| |
| |
| |
|
| |
| |
| |
| |
|
Commercial and industrial | |
| |
| |
| |
| |
| |
|
Commercial and industrial other | |
$ | 555 | | |
$ | 560 | | |
$ | 0 | | |
$ | 1,283 | | |
$ | 1,307 | | |
$ | 0 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial real estate other | |
| 7,349 | | |
| 7,948 | | |
| 0 | | |
| 6,021 | | |
| 6,628 | | |
| 0 | |
Residential real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| 944 | | |
| 944 | | |
| 0 | | |
| 1,408 | | |
| 1,499 | | |
| 0 | |
Subtotal | |
$ | 8,848 | | |
$ | 9,452 | | |
$ | 0 | | |
$ | 8,712 | | |
$ | 9,434 | | |
$ | 0 | |
| | |
| | | |
| | | |
| | | |
| | |
Originated loans and leases with related allowance | | |
| | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial real estate other | |
| 1,678 | | |
| 1,702 | | |
| 735 | | |
| 1,654 | | |
| 1,654 | | |
| 652 | |
Subtotal | |
$ | 1,678 | | |
$ | 1,702 | | |
$ | 735 | | |
$ | 1,654 | | |
$ | 1,654 | | |
$ | 652 | |
Total | |
$ | 10,526 | | |
$ | 11,154 | | |
$ | 735 | | |
$ | 10,366 | | |
$ | 11,088 | | |
$ | 652 | |
| |
| 06/30/2015 | | |
| 12/31/2014 |
(in thousands) | |
| Recorded Investment | | |
| Unpaid Principal Balance | | |
| Related Allowance | | |
| Recorded Investment | | |
| Unpaid Principal Balance | | |
| Related Allowance | |
| | |
| | | |
| | | |
| | | |
| | |
Acquired loans and leases with no related allowance | | |
| | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
Commercial and industrial | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial and industrial other | |
$ | 457 | | |
$ | 457 | | |
$ | 0 | | |
$ | 64 | | |
$ | 64 | | |
$ | 0 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 369 | | |
| 369 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Commercial real estate other | |
| 3,244 | | |
| 3,638 | | |
| 0 | | |
| 941 | | |
| 1,204 | | |
| 0 | |
Residential real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| 1,241 | | |
| 1,241 | | |
| 0 | | |
| 440 | | |
| 440 | | |
| 0 | |
Subtotal | |
$ | 5,311 | | |
$ | 5,705 | | |
$ | 0 | | |
$ | 1,445 | | |
$ | 1,708 | | |
$ | 0 | |
| | | |
| | | |
| | | |
| | | |
| | |
Acquired loans and leases with related allowance | | | |
| | | |
| | | |
| | | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial and industrial | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial and industrial other | |
| 727 | | |
| 727 | | |
| 364 | | |
| 564 | | |
| 564 | | |
| 414 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial real estate other | |
| 144 | | |
| 144 | | |
| 23 | | |
| 254 | | |
| 254 | | |
| 100 | |
Subtotal | |
$ | 871 | | |
$ | 871 | | |
$ | 387 | | |
$ | 818 | | |
$ | 818 | | |
$ | 514 | |
Total | |
$ | 6,182 | | |
$ | 6,576 | | |
$ | 387 | | |
$ | 2,263 | | |
$ | 2,526 | | |
$ | 514 | |
The average recorded investment and interest income recognized on impaired loans for the three months ended June 30, 2015 and 2014 was as follows:
| |
Three Months Ended | |
Three Months Ended |
| |
06/30/2015 | |
06/30/2014 |
(in thousands) | |
Average Recorded Investment | |
Interest Income Recognized | |
Average Recorded Investment | |
Interest Income Recognized |
Originated loans and leases with no related allowance | |
| |
| |
|
| |
| |
| |
| |
|
Commercial and industrial | |
| |
| |
| |
|
Commercial and industrial other | |
| 560 | | |
| 0 | | |
| 376 | | |
| 0 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | |
Commercial real estate other | |
| 7,739 | | |
| 0 | | |
| 10,465 | | |
| 0 | |
Residential real estate | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| 1,137 | | |
| 0 | | |
| 1,144 | | |
| 0 | |
Subtotal | |
$ | 9,436 | | |
$ | 0 | | |
$ | 11,985 | | |
$ | 0 | |
| |
| | | |
| | | |
| | | |
| | |
Originated loans and leases with related allowance | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | |
Commercial real estate other | |
| 1,678 | | |
| 0 | | |
| 0 | | |
| 0 | |
Subtotal | |
$ | 1,678 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
Total | |
$ | 11,114 | | |
$ | 0 | | |
$ | 11,985 | | |
$ | 0 | |
| |
Three Months Ended | |
Three Months Ended |
| |
06/30/2015 | |
06/30/2014 |
(in thousands) | |
Average Recorded Investment | |
Interest Income Recognized | |
Average Recorded Investment | |
Interest Income Recognized |
Acquired loans and leases with no related allowance | |
| |
| |
|
| |
| |
| |
| |
|
Commercial and industrial | |
| |
| |
| |
|
Commercial and industrial other | |
| 559 | | |
| 0 | | |
| 1,071 | | |
| 0 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 371 | | |
| 0 | | |
| 2,039 | | |
| 0 | |
Commercial real estate other | |
| 3,074 | | |
| 0 | | |
| 3,708 | | |
| 0 | |
Residential real estate | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| 1,109 | | |
| 0 | | |
| 0 | | |
| 0 | |
Subtotal | |
$ | 5,113 | | |
$ | 0 | | |
$ | 6,818 | | |
$ | 0 | |
| |
| | | |
| | | |
| | | |
| | |
Acquired loans and leases with related allowance | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Commercial and industrial | |
| | | |
| | | |
| | | |
| | |
Commercial and industrial other | |
| 778 | | |
| 0 | | |
| 0 | | |
| 0 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | |
Commercial real estate other | |
| 143 | | |
| 0 | | |
| 251 | | |
| 0 | |
Subtotal | |
$ | 921 | | |
$ | 0 | | |
$ | 251 | | |
$ | 0 | |
Total | |
$ | 6,034 | | |
$ | 0 | | |
$ | 7,069 | | |
$ | 0 | |
| |
Six Months Ended | |
Six Months Ended |
| |
06/30/2015 | |
06/30/2014 |
(in thousands) | |
Average Recorded Investment | |
Interest Income Recognized | |
Average Recorded Investment | |
Interest Income Recognized |
Originated loans and leases with no related allowance |
| |
| |
|
| |
| |
| |
| |
|
Commercial and industrial | |
| |
| |
| |
|
Commercial and industrial other | |
| 1,688 | | |
| 0 | | |
| 386 | | |
| 0 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | |
Commercial real estate other | |
| 9,045 | | |
| 0 | | |
| 10,618 | | |
| 0 | |
Residential real estate | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| 2,169 | | |
| 0 | | |
| 1,132 | | |
| 0 | |
Subtotal | |
$ | 12,902 | | |
$ | 0 | | |
$ | 12,136 | | |
$ | 0 | |
| |
| | | |
| | | |
| | | |
| | |
Originated loans and leases with related allowance | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | |
Commercial real estate other | |
| 1,669 | | |
| 0 | | |
| 0 | | |
| 0 | |
Subtotal | |
$ | 1,669 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
Total | |
$ | 14,571 | | |
$ | 0 | | |
$ | 12,136 | | |
$ | 0 | |
| |
Six Months Ended | |
Six Months Ended |
| |
06/30/2015 | |
06/30/2014 |
(in thousands) | |
Average Recorded Investment | |
Interest Income Recognized | |
Average Recorded Investment | |
Interest Income Recognized |
Acquired loans and leases with no related allowance |
| |
| |
|
| |
| |
| |
| |
|
Commercial and industrial | |
| |
| |
| |
|
Commercial and industrial other | |
| 600 | | |
| 0 | | |
| 1,093 | | |
| 0 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 375 | | |
| 0 | | |
| 2,298 | | |
| 0 | |
Commercial real estate other | |
| 3,176 | | |
| 0 | | |
| 3,460 | | |
| 0 | |
Residential real estate | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| 1,060 | | |
| 0 | | |
| 0 | | |
| 0 | |
Subtotal | |
$ | 5,211 | | |
$ | 0 | | |
$ | 6,851 | | |
$ | 0 | |
| |
| | | |
| | | |
| | | |
| | |
Acquired loans and leases with related allowance | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Commercial and industrial | |
| | | |
| | | |
| | | |
| | |
Commercial and industrial other | |
| 787 | | |
| 0 | | |
| 0 | | |
| 0 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | |
Commercial real estate other | |
| 144 | | |
| 0 | | |
| 248 | | |
| 0 | |
Subtotal | |
$ | 931 | | |
$ | 0 | | |
$ | 248 | | |
$ | 0 | |
Total | |
$ | 6,142 | | |
$ | 0 | | |
$ | 7,099 | | |
$ | 0 | |
Loans are considered modified in a TDR when,
due to a borrower’s financial difficulties, the Company makes a concession(s) to the borrower that it would not otherwise
consider. These modifications may include, among others, an extension for the term of the loan, and granting a period when interest-only
payments can be made with the principal payments made over the remaining term of the loan or at maturity.
The following tables present information on loans modified in troubled debt restructuring during the periods indicated.
June 30, 2015 | |
Three months ended |
| |
| |
| |
| |
Defaulted TDRs3 |
(in
thousands) | |
Number of Loans | |
Pre-Modification Outstanding Recorded Investment | |
Post-Modification Outstanding Recorded Investment | |
Number of Loans | |
Post-Modification Outstanding Recorded Investment |
Commercial and industrial
| |
| |
| |
| |
| |
|
Commercial and
industrial other1 | |
| 2 | | |
$ | 62 | | |
$ | 62 | | |
| 0 | | |
$ | 0 | |
Residential real estate
| |
| | | |
| | | |
| | | |
| | | |
| | |
Home
equity2 | |
| 3 | | |
| 450 | | |
| 450 | | |
| 2 | | |
| 143 | |
Total
| |
| 5 | | |
$ | 512 | | |
$ | 512 | | |
| 2 | | |
$ | 143 | |
1 Represents the following concessions:
reduction of rate |
2 Represents the following concessions:
extension of term and reduction of rate |
3 TDRs that defaulted during the three months ended June 30, 2015 that were restructured in the prior twelve months. |
June 30, 2014 | |
Three months ended |
| |
| |
| |
| |
Defaulted TDRs3 |
(in thousands) | |
Number of Loans | |
Pre-Modification Outstanding Recorded Investment | |
Post-Modification Outstanding Recorded Investment | |
Number of Loans | |
Post-Modification Outstanding Recorded Investment |
Commercial and industrial | |
| |
| |
| |
| |
|
Commercial and industrial other1 | |
| 1 | | |
$ | 88 | | |
$ | 88 | | |
| 0 | | |
$ | 0 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial real estate other2 | |
| 1 | | |
| 480 | | |
| 480 | | |
| 0 | | |
| 0 | |
Total | |
| 2 | | |
$ | 568 | | |
$ | 568 | | |
| 0 | | |
$ | 0 | |
1 Represents the following concessions:
extension of term and reduction of rate |
2 Represents the following concessions:
extension of term and reduction of rate |
3 TDRs that defaulted in the quarter ended June 30, 2014 that had been restructured in the prior twelve months. |
June 30, 2015 | |
Six months ended |
| |
| |
| |
| |
Defaulted TDRs4 |
(in thousands) | |
Number of Loans | |
Pre-Modification Outstanding Recorded Investment | |
Post-Modification Outstanding Recorded Investment | |
Number of Loans | |
Post-Modification Outstanding Recorded Investment |
Commercial and industrial | |
| |
| |
| |
| |
|
Commercial and industrial other1 | |
| 4 | | |
$ | 381 | | |
$ | 381 | | |
| 0 | | |
$ | 0 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial real estate other2 | |
| 2 | | |
$ | 614 | | |
| 614 | | |
| 0 | | |
$ | 0 | |
Residential real estate | |
| | | |
| | | |
| | | |
| | | |
| | |
Home equity3 | |
| 12 | | |
| 1,558 | | |
| 1,558 | | |
| 2 | | |
| 143 | |
Total | |
| 18 | | |
$ | 2,553 | | |
$ | 2,553 | | |
| 2 | | |
$ | 143 | |
1 Represents the following concessions: extension of term (2 loans $319,000) and reduction of rate (2 loans $62,000) |
2 Represents the following concessions: extension of term (1 loan $28,000) and extension of term (1 loan $585,000) |
3 Represents the following concessions: extension of term (9 loans $1.2 million) and reduction of rate (3 loans $376,000) |
4 TDRs that defaulted during the six months ended June 30, 2015 that had been restructured in the prior twelve months. |
June 30, 2014 | |
Six months ended |
| |
| |
| |
| |
Defaulted TDRs4 |
(in thousands) | |
Number of Loans | |
Pre-Modification Outstanding Recorded Investment | |
Post-Modification Outstanding Recorded Investment | |
Number of Loans | |
Post-Modification Outstanding Recorded Investment |
Commercial and industrial | |
| |
| |
| |
| |
|
Commercial and industrial other1 | |
| 1 | | |
$ | 88 | | |
| 88 | | |
| 0 | | |
$ | 0 | |
Commercial real estate | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial real estate other2 | |
| 1 | | |
| 480 | | |
| 480 | | |
| 1 | | |
| 63 | |
Residential real estate | |
| | | |
| | | |
| | | |
| | | |
| | |
Home equity3 | |
| 0 | | |
| 0 | | |
| 0 | | |
| 1 | | |
| 195 | |
Total | |
| 2 | | |
$ | 568 | | |
| 568 | | |
| 2 | | |
$ | 258 | |
1 Represents the following concessions: extension of term and reduction in rate |
2 Represents the following concessions: extension of term and reduction of rate |
3 TDRs that defaulted during the six months ended June 30, 2014 that were restructured in the prior twelve months. |
The following tables present credit quality indicators (internal risk grade) by class of commercial and industrial loans and commercial real estate loans as of June 30, 2015 and December 31, 2014. |
June 30, 2015 | |
| |
| |
| |
| |
| |
|
(in thousands) | |
Commercial and Industrial
Other | |
Commercial and Industrial
Agriculture | |
Commercial Real Estate
Other | |
Commercial Real Estate
Agriculture | |
Commercial Real Estate
Construction | |
Total |
Originated Loans and Leases | |
| |
| |
| |
| |
| |
|
Internal risk grade: | |
| |
| |
| |
| |
| |
|
Pass | |
$ | 716,926 | | |
$ | 60,775 | | |
$ | 1,020,443 | | |
$ | 73,714 | | |
$ | 71,164 | | |
$ | 1,943,022 | |
Special Mention | |
| 1,666 | | |
| 164 | | |
| 20,097 | | |
| 148 | | |
| 3,631 | | |
| 25,706 | |
Substandard | |
| 5,604 | | |
| 805 | | |
| 14,467 | | |
| 724 | | |
| 0 | | |
| 21,600 | |
Total | |
$ | 724,196 | | |
$ | 61,744 | | |
$ | 1,055,007 | | |
$ | 74,586 | | |
$ | 74,795 | | |
$ | 1,990,328 | |
June 30, 2015 | |
| |
| |
| |
| |
| |
|
(in thousands) | |
Commercial and Industrial
Other | |
Commercial and Industrial
Agriculture | |
Commercial Real Estate
Other | |
Commercial Real Estate
Agriculture | |
Commercial Real Estate
Construction | |
Total |
Acquired Loans and Leases | |
| |
| |
| |
| |
| |
|
Internal risk grade: | |
| |
| |
| |
| |
| |
|
Pass | |
$ | 90,053 | | |
$ | 0 | | |
$ | 260,047 | | |
$ | 2,214 | | |
$ | 36,060 | | |
$ | 388,374 | |
Special Mention | |
| 83 | | |
| 0 | | |
| 1,506 | | |
| 0 | | |
| 0 | | |
| 1,589 | |
Substandard | |
| 2,739 | | |
| 0 | | |
| 17,272 | | |
| 0 | | |
| 1,921 | | |
| 21,932 | |
Total | |
$ | 92,875 | | |
$ | 0 | | |
$ | 278,825 | | |
$ | 2,214 | | |
$ | 37,981 | | |
$ | 411,895 | |
December 31, 2014 | |
| |
| |
| |
| |
| |
|
(in thousands) | |
Commercial and Industrial
Other | |
Commercial and Industrial
Agriculture | |
Commercial Real Estate
Other | |
Commercial Real Estate
Agriculture | |
Commercial Real Estate
Construction | |
Total |
Originated Loans and Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal risk grade: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass | |
$ | 670,478 | | |
$ | 78,250 | | |
$ | 945,898 | | |
$ | 58,455 | | |
$ | 68,696 | | |
$ | 1,821,777 | |
Special Mention | |
| 12,602 | | |
| 151 | | |
| 19,692 | | |
| 155 | | |
| 3,731 | | |
| 36,331 | |
Substandard | |
| 5,449 | | |
| 106 | | |
| 14,031 | | |
| 384 | | |
| 0 | | |
| 19,970 | |
Total | |
$ | 688,529 | | |
$ | 78,507 | | |
$ | 979,621 | | |
$ | 58,994 | | |
$ | 72,427 | | |
$ | 1,878,078 | |
December 31, 2014 | |
| |
| |
| |
| |
| |
|
(in thousands) | |
Commercial and Industrial
Other | |
Commercial and Industrial
Agriculture | |
Commercial Real Estate
Other | |
Commercial Real Estate
Agriculture | |
Commercial Real Estate
Construction | |
Total |
Acquired Loans and Leases |
|
Internal risk grade: |
|
Pass | |
$ | 94,054 | | |
$ | 0 | | |
$ | 288,193 | | |
$ | 1,352 | | |
$ | 33,686 | | |
$ | 417,285 | |
Special Mention | |
| 83 | | |
| 0 | | |
| 5,675 | | |
| 0 | | |
| 0 | | |
| 5,758 | |
Substandard | |
| 2,897 | | |
| 0 | | |
| 14,620 | | |
| 1,830 | | |
| 2,220 | | |
| 21,567 | |
Total | |
$ | 97,034 | | |
$ | 0 | | |
$ | 308,488 | | |
$ | 3,182 | | |
$ | 35,906 | | |
$ | 444,610 | |
The following tables present credit quality indicators by class of residential real estate loans and by class of consumer loans. Nonperforming loans include nonaccrual, impaired, and loans 90 days past due and accruing interest. All other loans are considered performing as of June 30, 2015 and December 31, 2014. For purposes of this footnote, acquired loans that were recorded at fair value at the acquisition date and are 90 days or greater past due are considered performing. |
June 30, 2015 | |
| |
| |
| |
| |
|
(in thousands) | |
Residential Home Equity | |
Residential Mortgages | |
Consumer Indirect | |
Consumer Other | |
Total |
Originated Loans and Leases | |
| |
| |
| |
| |
|
Performing | |
$ | 191,752 | | |
$ | 753,963 | | |
$ | 17,783 | | |
$ | 39,682 | | |
$ | 1,003,180 | |
Nonperforming | |
| 1,580 | | |
| 6,895 | | |
| 83 | | |
| 160 | | |
| 8,718 | |
Total | |
$ | 193,332 | | |
$ | 760,858 | | |
$ | 17,866 | | |
$ | 39,842 | | |
$ | 1,011,898 | |
June 30, 2015 | |
| |
| |
| |
| |
|
(in thousands) | |
Residential Home Equity | |
Residential Mortgages | |
Consumer Indirect | |
Consumer Other | |
Total |
Acquired Loans and Leases | |
| |
| |
| |
| |
|
Performing | |
$ | 48,124 | | |
$ | 29,148 | | |
$ | 0 | | |
$ | 973 | | |
$ | 78,245 | |
Nonperforming | |
| 593 | | |
| 1,459 | | |
| 0 | | |
| 0 | | |
| 2,052 | |
Total | |
$ | 48,717 | | |
$ | 30,607 | | |
$ | 0 | | |
$ | 973 | | |
$ | 80,297 | |
December 31, 2014 |
|
|
(in thousands) | |
Residential Home Equity | |
Residential Mortgages | |
Consumer Indirect | |
Consumer Other | |
Total |
Originated Loans and Leases |
|
|
Performing | |
$ | 185,619 | | |
$ | 704,663 | | |
$ | 18,197 | | |
$ | 35,626 | | |
$ | 944,105 | |
Nonperforming | |
| 1,338 | | |
| 6,241 | | |
| 101 | | |
| 248 | | |
| 7,928 | |
Total | |
$ | 186,957 | | |
$ | 710,904 | | |
$ | 18,298 | | |
$ | 35,874 | | |
$ | 952,033 | |
December 31, 2014 |
|
(in thousands) | |
Residential Home Equity | |
Residential Mortgages | |
Consumer Indirect | |
Consumer Other | |
Total |
Acquired Loans and Leases |
|
Performing | |
$ | 55,416 | | |
$ | 31,304 | | |
$ | 0 | | |
$ | 1,095 | | |
$ | 87,815 | |
Nonperforming | |
| 592 | | |
| 978 | | |
| 0 | | |
| 0 | | |
| 1,570 | |
Total | |
$ | 56,008 | | |
$ | 32,282 | | |
$ | 0 | | |
$ | 1,095 | | |
$ | 89,385 | |
7. FDIC Indemnification Asset Related to
Covered Loans
Certain loans acquired in the VIST Financial
acquisition were covered loans with loss share agreements with the FDIC. Under the terms of loss sharing agreements, the FDIC will
reimburse the Company for 70 percent of net losses on covered single family assets up to $4.0 million, and 70 percent of net losses
incurred on covered commercial assets up to $12.0 million. The FDIC will increase its reimbursement of net losses to 80 percent
if net losses exceed the $4.0 million and $12 million thresholds, respectively. The term for loss sharing on residential real estate
loans is ten years, while the term for loss sharing on non-residential real estate loans is five years in respect to losses and
eight years in respect to loss recoveries. The loss share period for the residential real estate loans expires on December 31,
2020, while the loss share period for the nonresidential real estate loans expires December 31, 2015.
The receivable arising from the loss sharing
agreements (referred to as the “FDIC indemnification asset” on our consolidated statements of financial condition)
is measured separately from covered loans because the agreements are not contractually part of the covered loans and are not transferable
should the Company choose to dispose of the covered loans. As of the acquisition date with VIST Financial, the Company recorded
an aggregate FDIC indemnification asset of $4.4 million, consisting of the present value of the expected future cash flows the
Company expected to receive from the FDIC under loss sharing agreements. The FDIC indemnification asset is reduced as loss sharing
payments are received from the FDIC for losses realized on covered loans. Actual or expected losses in excess of the acquisition
date estimates and accretion of the acquisition date present value discount will result in an increase in the FDIC indemnification
asset and the immediate recognition of non-interest income in our financial statements.
A decrease in expected losses would generally
result in a corresponding decline in the FDIC indemnification asset and the non-accretable difference. Reductions in the FDIC indemnification
asset due to actual or expected losses that are less than the acquisition date estimates are recognized prospectively over the
shorter of (i) the estimated life of the applicable covered loans or (ii) the term of the loss sharing agreements with the FDIC.
Changes in the FDIC indemnification asset during
the six months ended June 30, 2015 are shown below.
Six months ended June 30, 2015 | |
|
(in thousands) | |
Six Months Ended |
Balance, beginning of the period | |
$ | 1,903 | |
Prospective adjustment for additional cash flows | |
| (619 | ) |
Increase due to impairment on covered loans | |
| 0 | |
Reimbursements from the FDIC | |
| (650 | ) |
Balance, end of period | |
$ | 634 | |
8. Earnings Per Share
Earnings per share in the table below, for
the three and six month periods ending June 30, 2015 and 2014 are calculated under the two-class method as required by ASC Topic
260, Earnings Per Share. ASC 260 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends
are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The
Company has issued restricted stock awards that contain such rights and are therefore considered participating securities. Basic
earnings per common share are calculated by dividing net income allocable to common stock by the weighted average number of common
shares, excluding participating securities, during the period. Diluted earnings per common share include the dilutive effect of
additional potential shares from stock compensations awards.
| |
Three Months Ended |
(in thousands, except share and per share data) | |
06/30/2015 | |
06/30/2014 |
Basic | |
| |
|
Net income available to common shareholders | |
$ | 17,390 | | |
$ | 13,061 | |
Less: dividends and undistributed earnings allocated to unvested restricted stock awards | |
| (234 | ) | |
| (118 | ) |
Net earnings allocated to common shareholders | |
| 17,156 | | |
| 12,943 | |
| |
| | | |
| | |
Weighted average shares outstanding, including participating securities | |
| 14,958,878 | | |
| 14,844,279 | |
| |
| | | |
| | |
Less: average participating securities | |
| (207,034 | ) | |
| (134,398 | ) |
Weighted average shares outstanding - Basic | |
| 14,751,844 | | |
| 14,709,881 | |
| |
| | | |
| | |
Diluted | |
| | | |
| | |
Net earnings allocated to common shareholders | |
| 17,156 | | |
| 12,943 | |
| |
| | | |
| | |
Weighted average shares outstanding - Basic | |
| 14,751,844 | | |
| 14,709,881 | |
| |
| | | |
| | |
Dilutive effect of common stock options or restricted stock awards | |
| 126,263 | | |
| 111,310 | |
Weighted average shares outstanding - Diluted | |
| 14,878,107 | | |
| 14,821,191 | |
| |
| | | |
| | |
Basic EPS | |
| 1.16 | | |
| 0.88 | |
Diluted EPS | |
| 1.15 | | |
| 0.87 | |
The dilutive effect of common stock options or restricted awards calculation for the three months ended June 30, 2015 and 2014 excludes stock options, stock appreciation rights and restricted stock awards covering an aggregate of 81,316 and 68,404 shares, respectively, because the exercise prices were greater than the average market price during these periods. |
| |
Six Months Ended |
(in thousands, except share and per share data) | |
06/30/2015 | |
06/30/2014 |
Basic | |
| |
|
Net income available to common shareholders | |
$ | 30,070 | | |
$ | 25,630 | |
Less: dividends and undistributed earnings allocated to unvested restricted stock awards | |
| (420 | ) | |
| (234 | ) |
Net earnings allocated to common shareholders | |
| 29,650 | | |
| 25,396 | |
| |
| | | |
| | |
Weighted average shares outstanding, including participating securities | |
| 14,939,869 | | |
| 14,813,010 | |
| |
| | | |
| | |
Less: average participating securities | |
| (213,143 | ) | |
| (135,622 | ) |
Weighted average shares outstanding - Basic | |
| 14,726,726 | | |
| 14,677,388 | |
| |
| | | |
| | |
Diluted | |
| | | |
| | |
Net earnings allocated to common shareholders | |
| 29,650 | | |
| 25,396 | |
| |
| | | |
| | |
Weighted average shares outstanding - Basic | |
| 14,726,726 | | |
| 14,677,388 | |
| |
| | | |
| | |
Dilutive effect of common stock options or restricted stock awards | |
| 131,401 | | |
| 121,074 | |
Weighted average shares outstanding - Diluted | |
| 14,858,127 | | |
| 14,798,462 | |
| |
| | | |
| | |
Basic EPS | |
| 2.01 | | |
| 1.73 | |
Diluted EPS | |
| 2.00 | | |
| 1.72 | |
The dilutive effect of common stock options or restricted awards calculation for the six months ended June 30, 2015 and 2014 excludes stock options, stock appreciation rights and restricted stock awards covering an aggregate of 162,811 and 69,868 shares, respectively, because the exercise prices were greater than the average market price during these periods.
9. Other Comprehensive Income (Loss) |
The following table presents reclassifications out of the accumulated other comprehensive income for the three month periods ended June 30, 2015 and 2014. |
| |
Three months ended June 30, 2015 |
(in thousands) | |
Before-Tax Amount | |
Tax (Expense) Benefit | |
Net of Tax |
Available-for-sale securities: | |
| | | |
| | | |
| | |
Change in net unrealized gain/loss during the period | |
$ | (12,041 | ) | |
$ | 4,817 | | |
$ | (7,224 | ) |
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income | |
| (723 | ) | |
| 289 | | |
| (434 | ) |
Net unrealized gains | |
| (12,764 | ) | |
| 5,106 | | |
| (7,658 | ) |
| |
| | | |
| | | |
| | |
Employee benefit plans: | |
| | | |
| | | |
| | |
Recognized actuarial gain due to curtailment | |
| (5,326 | ) | |
| 2,130 | | |
| (3,196 | ) |
Net retirement plan loss | |
| 1,950 | | |
| (780 | ) | |
| 1,170 | |
Amortization of net retirement plan actuarial loss | |
| 729 | | |
| (290 | ) | |
| 439 | |
Amortization of net retirement plan prior service credit | |
| (190 | ) | |
| 76 | | |
| (114 | ) |
Employee benefit plans | |
| (2,837 | ) | |
| 1,136 | | |
| (1,701 | ) |
Other comprehensive loss | |
$ | (15,601 | ) | |
$ | 6,242 | | |
$ | (9,359 | ) |
| |
Three months ended June 30, 2014 |
(in thousands) | |
Before-Tax Amount | |
Tax (Expense) Benefit | |
Net of Tax |
Available-for-sale securities: | |
| |
| |
|
Change in net unrealized gain/loss during the period | |
$ | 11,250 | | |
$ | (4,499 | ) | |
$ | 6,751 | |
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income | |
| (35 | ) | |
| 13 | | |
| (22 | ) |
Net unrealized gains | |
| 11,215 | | |
| (4,486 | ) | |
| 6,729 | |
| |
| | | |
| | | |
| | |
Employee benefit plans: | |
| | | |
| | | |
| | |
Amortization of net retirement plan actuarial gain | |
| 213 | | |
| (85 | ) | |
| 128 | |
Amortization of net retirement plan prior service cost | |
| (12 | ) | |
| 5 | | |
| (7 | ) |
Employee benefit plans | |
| 201 | | |
| (80 | ) | |
| 121 | |
Other comprehensive income | |
$ | 11,416 | | |
$ | (4,566 | ) | |
$ | 6,850 | |
| |
Six months ended June 30, 2015 |
(in thousands) | |
Before-Tax Amount | |
Tax (Expense) Benefit | |
Net of Tax |
Available-for-sale securities: | |
| |
| |
|
Change in net unrealized gain/loss during the period | |
$ | (2,721 | ) | |
$ | 1,089 | | |
$ | (1,632 | ) |
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income | |
| (1,013 | ) | |
| 405 | | |
| (608 | ) |
Net unrealized gains | |
| (3,734 | ) | |
| 1,494 | | |
| (2,240 | ) |
| |
| | | |
| | | |
| | |
Employee benefit plans: | |
| | | |
| | | |
| | |
Recognized actuarial gain due to curtailment | |
| (5,326 | ) | |
| 2,130 | | |
| (3,196 | ) |
Net retirement plan loss | |
| 1,950 | | |
| (780 | ) | |
| 1,170 | |
Amortization of net retirement plan actuarial gain | |
| 1,462 | | |
| (585 | ) | |
| 877 | |
Amortization of net retirement plan prior service credit | |
| (369 | ) | |
| 148 | | |
| (221 | ) |
Employee benefit plans | |
| (2,283 | ) | |
| 913 | | |
| (1,370 | ) |
Other
comprehensive (loss) income | |
$ | (6,017 | ) | |
$ | 2,407 | | |
$ | (3,610 | ) |
| |
Six months ended June 30, 2014 |
(in thousands) | |
Before-Tax Amount | |
Tax (Expense) Benefit | |
Net of Tax |
Available-for-sale securities: | |
| |
| |
|
Change in net unrealized gain/loss during the period | |
$ | 20,065 | | |
$ | (8,024 | ) | |
$ | 12,041 | |
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income | |
| (129 | ) | |
| 51 | | |
| (78 | ) |
Net unrealized losses | |
| 19,936 | | |
| (7,973 | ) | |
| 11,963 | |
| |
| | | |
| | | |
| | |
Employee benefit plans: | |
| | | |
| | | |
| | |
Amortization of net retirement plan actuarial gain | |
| 532 | | |
| (212 | ) | |
| 320 | |
Amortization of net retirement plan prior service cost | |
| 2 | | |
| (1 | ) | |
| 1 | |
Employee benefit plans | |
| 534 | | |
| (213 | ) | |
| 321 | |
| |
| | | |
| | | |
| | |
Other comprehensive income (loss) | |
$ | 20,470 | | |
$ | (8,186 | ) | |
$ | 12,284 | |
The following table presents the activity in our accumulated other comprehensive income (loss) for the periods indicated: |
(in thousands) |
|
Available-for-Sale Securities |
|
Employee Benefit Plans |
|
Accumulated Other Comprehensive Income |
Balance at March 31, 2015 |
|
$ |
8,285 |
|
|
$ |
(26,547 |
) |
|
$ |
(18,262 |
) |
Other comprehensive loss before reclassifications |
|
|
(7,224 |
) |
|
|
0 |
|
|
|
(7,224 |
) |
Amounts reclassified from accumulated other comprehensive loss |
|
|
(434 |
) |
|
|
(1,701 |
) |
|
|
(2,135 |
) |
Net current-period other comprehensive loss |
|
|
(7,658 |
) |
|
|
(1,701 |
) |
|
|
(9,359 |
) |
Balance at June 30, 2015 |
|
$ |
627 |
|
|
$ |
(28,248 |
) |
|
$ |
(27,621 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2015 |
|
$ |
2,867 |
|
|
$ |
(26,878 |
) |
|
$ |
(24,011 |
) |
Other comprehensive income before reclassifications |
|
|
(1,632 |
) |
|
|
0 |
|
|
|
(1,632 |
) |
Amounts reclassified from accumulated other comprehensive loss |
|
|
(608 |
) |
|
|
(1,370 |
) |
|
|
(1,978 |
) |
Net current-period other comprehensive loss |
|
|
(2,240 |
) |
|
|
(1,370 |
) |
|
|
(3,610 |
) |
Balance at June 30, 2015 |
|
$ |
627 |
|
|
$ |
(28,248 |
) |
|
$ |
(27,621 |
) |
(in thousands) |
|
Available-for-Sale Securities |
|
Employee Benefit Plans |
|
Accumulated Other Comprehensive Income |
Balance at March 31, 2014 |
|
$ |
(3,123 |
) |
|
$ |
(16,562 |
) |
|
$ |
(19,685 |
) |
Other comprehensive income before reclassifications |
|
|
6,751 |
|
|
|
0 |
|
|
|
6,751 |
|
Amounts reclassified from accumulated other comprehensive income |
|
|
(22 |
) |
|
|
121 |
|
|
|
99 |
|
Net current-period other comprehensive income |
|
|
6,729 |
|
|
|
121 |
|
|
|
6,850 |
|
Balance at June 30, 2014 |
|
$ |
3,606 |
|
|
$ |
(16,441 |
) |
|
$ |
(12,835 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2014 |
|
$ |
(8,357 |
) |
|
$ |
(16,762 |
) |
|
$ |
(25,119 |
) |
Other comprehensive income before reclassifications |
|
|
12,041 |
|
|
|
0 |
|
|
|
12,041 |
|
Amounts reclassified from accumulated other comprehensive loss (income) |
|
|
(78 |
) |
|
|
321 |
|
|
|
243 |
|
Net current-period other comprehensive income |
|
|
11,963 |
|
|
|
321 |
|
|
|
12,284 |
|
Balance at June 30, 2014 |
|
$ |
3,606 |
|
|
$ |
(16,441 |
) |
|
$ |
(12,835 |
) |
The following tables present the amounts reclassified out of each component of accumulated other comprehensive (loss) income for the three months ended June 30, 2015 and 2014. |
Three months ended June 30, 2015
Details about Accumulated other Comprehensive Income Components (in thousands) |
|
Amount Reclassified from Accumulated Other Comprehensive (Loss) Income1 |
|
Affected Line Item in the Statement Where Net Income is Presented |
Available-for-sale securities: |
|
|
|
|
Unrealized gains and losses on available-for-sale securities |
|
$ |
723 |
|
|
Net gain on securities transactions |
|
|
|
(289 |
) |
|
Tax expense |
|
|
|
434 |
|
|
Net of tax |
Employee benefit plans: |
|
|
|
|
|
|
Amortization of the following 2 |
|
|
|
|
|
|
Net retirement plan actuarial loss
|
|
|
(729 |
) |
|
|
Net
retirement plan prior service credit |
|
|
190 |
|
|
|
|
|
|
(539 |
) |
|
Total before tax |
|
|
|
214 |
|
|
Tax benefit |
|
|
|
(325 |
) |
|
Net of tax |
Six months ended June 30, 2015
Details about Accumulated other Comprehensive Income Components (in thousands) | |
Amount Reclassified from Accumulated Other Comprehensive (Loss) Income1 | |
Affected Line Item in the Statement Where Net Income is Presented |
Available-for-sale securities: | |
| |
|
Unrealized gains and losses on available-for-sale securities | |
$ | 1,013 | | |
Net gain on securities transactions |
| |
| (405 | ) | |
Tax expense |
| |
| 608 | | |
Net of tax |
Employee benefit plans: | |
| | | |
|
Amortization of the following 2 | |
| | | |
|
Net retirement plan actuarial loss | |
| (1,462 | ) | |
|
Net retirement plan prior service cost | |
| 369 | | |
|
| |
| (1,093 | ) | |
Total before tax |
| |
| 436 | | |
Tax benefit |
| |
| (657 | ) | |
Net of tax |
Three months ended June 30, 2014
Details about Accumulated other Comprehensive Income Components (in thousands) | |
Amount Reclassified from Accumulated Other Comprehensive Income1 | |
Affected Line Item in the Statement Where Net Income is Presented |
Available-for-sale securities: | |
| |
|
Unrealized gains and losses on available-for-sale securities | |
$ | 35 | | |
Net gain on securities transactions |
| |
| (13 | ) | |
Tax expense |
| |
| 22 | | |
Net of tax |
Employee benefit plans: | |
| | | |
|
Amortization of the following 2 | |
| | | |
|
Net retirement plan actuarial loss | |
| (213 | ) | |
|
Net retirement plan prior service cost | |
| 12 | | |
|
| |
| (201 | ) | |
Total before tax |
| |
| 80 | | |
Tax benefit |
| |
| (121 | ) | |
Net of tax |
Six months ended June 30, 2014
Details about Accumulated other
Comprehensive Income Components (in thousands) | |
Amount Reclassified from Accumulated Other Comprehensive (Loss) Income1 | |
Affected Line Item in the Statement Where Net Income is Presented |
Available-for-sale securities: | |
| |
|
Unrealized gains and losses on available-for-sale securities | |
$ | 129 | | |
Net gain on securities transactions |
| |
| (51 | ) | |
Tax expense |
| |
| 78 | | |
Net of tax |
Employee benefit plans: | |
| | | |
|
Amortization of the following 2 | |
| | | |
|
Net retirement plan actuarial loss | |
| (532 | ) | |
|
Net retirement plan prior service cost | |
| (2 | ) | |
|
| |
| (534 | ) | |
Total before tax |
| |
| 213 | | |
Tax benefit |
| |
| (321 | ) | |
Net of tax |
1 Amounts in parentheses indicated debits in income statement |
2 The accumulated other comprehensive (loss) income components are included in the computation of net periodic benefit cost (See Note 10 - “Employee Benefit Plan”) |
10. Employee Benefit Plan
The following table sets forth the amount of
the net periodic benefit cost recognized by the Company for the Company’s pension plan, post-retirement plan (Life and Health),
and supplemental employee retirement plans (“SERP”) including the following components: service cost, interest cost,
expected return on plan assets for the period, amortization of the unrecognized transitional obligation or transition asset, and
the amounts of recognized gains and losses, prior service cost recognized, and gain or loss recognized due to settlement or curtailment.
Components of Net Periodic Benefit Cost |
| |
Pension Benefits | |
Life and Health | |
SERP Benefits |
| |
Three Months Ended | |
Three Months Ended | |
Three Months Ended |
(in thousands) | |
06/30/2015 | |
06/30/2014 | |
06/30/2015 | |
06/30/2014 | |
06/30/2015 | |
06/30/2014 |
Service cost | |
$ | 688 | | |
$ | 592 | | |
$ | 57 | | |
$ | 45 | | |
$ | 35 | | |
$ | 18 | |
Interest cost | |
| 713 | | |
| 766 | | |
| 69 | | |
| 85 | | |
| 224 | | |
| 219 | |
Expected return on plan assets | |
| (1,267 | ) | |
| (1,254 | ) | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Amortization of net retirement plan actuarial loss | |
| 553 | | |
| 205 | | |
| (6 | ) | |
| (11 | ) | |
| 182 | | |
| 19 | |
Amortization of net retirement plan prior service (credit) cost | |
| (196 | ) | |
| (31 | ) | |
| 4 | | |
| 4 | | |
| 2 | | |
| 15 | |
Recognized actuarial gain due to curtailments | |
| (6,003 | ) | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Net periodic benefit cost | |
$ | (5,512 | ) | |
$ | 278 | | |
$ | 124 | | |
$ | 123 | | |
$ | 443 | | |
$ | 271 | |
Components of Net Period Benefit Cost |
| |
Pension Benefits | |
Life and Health | |
SERP Benefits |
| |
Six Months Ended | |
Six Months Ended | |
Six Months Ended |
(in thousands) | |
06/30/2015 | |
06/30/2014 | |
06/30/2015 | |
06/30/2014 | |
06/30/2015 | |
06/30/2014 |
Service cost | |
$ | 1,372 | | |
$ | 1,217 | | |
$ | 118 | | |
$ | 101 | | |
$ | 100 | | |
$ | 111 | |
Interest cost | |
| 1,465 | | |
| 1,534 | | |
| 161 | | |
| 183 | | |
| 464 | | |
| 433 | |
Expected return on plan assets | |
| (2,508 | ) | |
| (2,512 | ) | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Amortization of net retirement plan actuarial loss | |
| 1,139 | | |
| 429 | | |
| 10 | | |
| 0 | | |
| 313 | | |
| 103 | |
Amortization of net retirement plan prior service | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
cost (credit) | |
| (413 | ) | |
| (62 | ) | |
| 8 | | |
| 8 | | |
| 36 | | |
| 56 | |
Recognized actuarial gain due to curtailments | |
| (6,003 | ) | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Net periodic benefit cost | |
$ | (4,948 | ) | |
$ | 606 | | |
$ | 297 | | |
$ | 292 | | |
$ | 913 | | |
$ | 703 | |
The net periodic benefit cost for the Company’s
benefit plans are recorded as a component of salaries and benefits in the consolidated statements of income.
The Company realized approximately $657,000
and $321,000, net of tax, as amortization of amounts previously recognized in accumulated other comprehensive income, for the six
months ended June 30, 2015 and 2014, respectively.
The Company is not required to contribute to
the pension plan in 2015, but it may make voluntary contributions. The Company did not contribute to the pension plan in the six
months ended June 30, 2015 or 2014.
Effective July 31, 2015, the Retirement Plan
(Accruing Pension Plan) was frozen (participants will no longer accrue benefits after July 31, 2015). The Plan freeze was reflected
on June 30, 2015, and in accordance with ASC 715 Compensation – Retirement Benefits, a Curtailment is triggered. Under a
Curtailment due to a plan freeze, any unrecognized Prior Service Cost bases must be fully recognized in benefit cost at the time
of the Curtailment. The sum of unrecognized Prior Service Cost bases as of June 30, 2015 was $6.0 million.
11. Other Income and Operating Expense |
|
Other income and operating expense totals are presented in the table below. Components of these totals exceeding 1% of the aggregate of total noninterest income and total noninterest expenses for any of the years presented below are stated separately. |
| |
Three Months Ended | |
Six Months Ended |
(in thousands) | |
06/30/2015 | |
06/30/2014 | |
06/30/2015 | |
06/30/2014 |
Noninterest Income | |
| |
| |
| |
|
Other service charges | |
$ | 678 | | |
$ | 1,108 | | |
$ | 1,498 | | |
$ | 1,803 | |
Increase in cash surrender value of corporate owned life insurance | |
| 555 | | |
| 473 | | |
| 1,169 | | |
| 975 | |
Net gain on sale of loans | |
| 6 | | |
| 171 | | |
| 10 | | |
| 221 | |
Other income | |
| 1,456 | | |
| 648 | | |
| 2,044 | | |
| 1,240 | |
Total other income | |
$ | 2,695 | | |
$ | 2,400 | | |
$ | 4,721 | | |
$ | 4,239 | |
Noninterest Expenses | |
| | | |
| | | |
| | | |
| | |
Marketing expense | |
$ | 1,466 | | |
$ | 1,460 | | |
$ | 2,454 | | |
$ | 2,419 | |
Professional fees | |
| 1,576 | | |
| 1,511 | | |
| 2,914 | | |
| 2,899 | |
Legal fees | |
| 360 | | |
| 529 | | |
| 753 | | |
| 1,061 | |
Software licensing and maintenance | |
| 1,025 | | |
| 1,101 | | |
| 2,221 | | |
| 2,316 | |
Cardholder expense | |
| 641 | | |
| 729 | | |
| 1,267 | | |
| 1,398 | |
Other expenses | |
| 4,171 | | |
| 5,175 | | |
| 9,723 | | |
| 9,996 | |
Total other operating expense | |
$ | 9,239 | | |
$ | 10,505 | | |
$ | 19,332 | | |
$ | 20,089 | |
12. Financial Guarantees
The Company
currently does not
issue any
guarantees that would
require liability
recognition or disclosure,
other than standby
letters of credit.
The Company extends
standby letters of
credit to
its customers
in the
normal course of
business. The standby
letters of
credit are generally short-term.
As of June
30, 2015, the Company’s maximum potential
obligation under standby letters
of credit was $56.7 million compared
to $58.2 million at December
31, 2014. Management uses
the same
credit policies
to extend
standby letters
of credit that
it uses
for on-balance
sheet lending
decisions and
may require collateral to
support standby letters of
credit based upon its evaluation
of the counterparty.
Management does not anticipate
any significant losses as a result of
these transactions, and has
determined that the
fair value
of standby letters of credit is not significant.
13. Segment and Related Information
The Company manages its operations through
three reportable business segments in accordance with the standards set forth in FASB ASC 280, “Segment Reporting”:
(i) banking (“Banking”), (ii) insurance (“Tompkins Insurance Agencies, Inc.”) and (iii) wealth management
(“Tompkins Financial Advisors”). The Company’s insurance services and wealth management services, other than
trust services, are managed separately from the Banking segment.
Banking
The Banking segment is primarily comprised
of the four banking subsidiaries: Tompkins Trust Company, a commercial bank with thirteen banking offices located in Ithaca, NY
and surrounding communities; The Bank of Castile (DBA Tompkins Bank of Castile), a commercial bank with sixteen banking offices
located in the Genesee Valley region of New York State as well as Monroe County; Mahopac Bank (DBA Tompkins Mahopac Bank), a commercial
bank with fourteen full-service banking offices located in the counties north of New York City; and VIST Bank (DBA Tompkins VIST
Bank), a banking organization with nineteen banking offices headquartered and operating in the areas surrounding southeastern Pennsylvania.
Insurance
The Company provides property and casualty
insurance services and employee benefits consulting through Tompkins Insurance Agencies, Inc., a 100% wholly-owned subsidiary of
the Company, headquartered in Batavia, New York. Tompkins Insurance is an independent insurance agency, representing many major
insurance carriers and provides employee benefit consulting to employers in Western and Central New York and Southeastern Pennsylvania,
assisting them with their medical, group life insurance and group disability insurance. Through the 2012 acquisition of VIST Financial,
Tompkins Insurance expanded its operations with the addition of VIST Insurance, a full service insurance agency offering a similar
array of insurance products as Tompkins Insurance in southeastern Pennsylvania.
Wealth Management
The Wealth Management segment is generally
organized under the Tompkins Financial Advisors brand. Tompkins Financial Advisors offers a comprehensive suite of financial services
to customers, including trust and estate services, investment management and financial and insurance planning for individuals,
corporate executives, small business owners and high net worth individuals. Tompkins Financial Advisors has offices in each of
the Company’s four subsidiary banks.
Summarized financial information concerning
the Company’s reportable segments and the reconciliation to the Company’s consolidated results is shown in the following
table. Investment in subsidiaries is netted out of the presentations below. The “Intercompany” column identifies the
intercompany activities of revenues, expenses and other assets between the banking, insurance and wealth management services segments.
The Company accounts for intercompany fees and services at an estimated fair value according to regulatory requirements for the
services provided. Intercompany items relate primarily to the use of human resources, information systems, accounting and marketing
services provided by any of the banks and the holding company. All other accounting policies are the same as those described in
the summary of significant accounting policies in the 2014 Annual Report on Form 10-K.
As of and for the three months ended June 30, 2015 |
(in
thousands) | |
Banking | |
Insurance | |
Wealth Management | |
Intercompany | |
Consolidated |
Interest income | |
$ | 46,383 | | |
$ | 0 | | |
$ | 40 | | |
$ | 0 | | |
$ | 46,423 | |
Interest expense | |
| 5,093 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 5,093 | |
Net
interest income | |
| 41,290 | | |
| 0 | | |
| 40 | | |
| 0 | | |
| 41,330 | |
Provision for loan and lease losses | |
| 922 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 922 | |
Noninterest income | |
| 7,664 | | |
| 7,480 | | |
| 4,004 | | |
| (186 | ) | |
| 18,962 | |
Noninterest expense | |
| 24,895 | | |
| 5,568 | | |
| 2,641 | | |
| (186 | ) | |
| 32,918 | |
Income
before income tax expense | |
| 23,137 | | |
| 1,912 | | |
| 1,403 | | |
| 0 | | |
| 26,452 | |
Income tax expense | |
| 7,793 | | |
| 763 | | |
| 474 | | |
| 0 | | |
| 9,030 | |
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation | |
| 15,344 | | |
| 1,149 | | |
| 929 | | |
| 0 | | |
| 17,422 | |
Less: Net income attributable to noncontrolling interests | |
| 32 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 32 | |
Net Income attributable to Tompkins Financial Corporation | |
$ | 15,312 | | |
$ | 1,149 | | |
$ | 929 | | |
$ | 0 | | |
$ | 17,390 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Depreciation and amortization | |
$ | 1,518 | | |
$ | 92 | | |
$ | 32 | | |
$ | 0 | | |
$ | 1,642 | |
Assets | |
| 5,391,491 | | |
| 37,214 | | |
| 13,950 | | |
| (6,519 | ) | |
| 5,436,136 | |
Goodwill | |
| 64,500 | | |
| 19,662 | | |
| 8,081 | | |
| 0 | | |
| 92,243 | |
Other intangibles, net | |
| 8,554 | | |
| 4,534 | | |
| 481 | | |
| 0 | | |
| 13,569 | |
Net loans and leases | |
| 3,491,840 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 3,491,840 | |
Deposits | |
| 4,210,387 | | |
| 0 | | |
| 0 | | |
| (6,298 | ) | |
| 4,204,089 | |
Total Equity | |
| 466,508 | | |
| 27,408 | | |
| 11,478 | | |
| 0 | | |
| 505,394 | |
As of and for the three months ended June 30, 2014 |
(in thousands) | |
Banking | |
Insurance | |
Wealth Management | |
Intercompany | |
Consolidated |
Interest income | |
$ | 45,786 | | |
$ | 2 | | |
$ | 33 | | |
$ | (2 | ) | |
$ | 45,819 | |
Interest expense | |
| 5,303 | | |
| 2 | | |
| 0 | | |
| (2 | ) | |
| 5,303 | |
Net interest income | |
| 40,483 | | |
| 0 | | |
| 33 | | |
| 0 | | |
| 40,516 | |
Provision for loan and lease losses | |
| 67 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 67 | |
Noninterest income | |
| 6,915 | | |
| 7,116 | | |
| 4,014 | | |
| (325 | ) | |
| 17,720 | |
Noninterest expense | |
| 30,584 | | |
| 5,836 | | |
| 2,833 | | |
| (325 | ) | |
| 38,928 | |
Income before income tax expense
| |
| 16,747 | | |
| 1,280 | | |
| 1,214 | | |
| 0 | | |
| 19,241 | |
Income tax expense | |
| 5,229 | | |
| 498 | | |
| 421 | | |
| 0 | | |
| 6,148 | |
Net Income attributable to noncontrolling
interests and Tompkins Financial Corporation | |
| 11,518 | | |
| 782 | | |
| 793 | | |
| 0 | | |
| 13,093 | |
Less: Net income attributable to noncontrolling interests | |
| 32 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 32 | |
Net Income attributable to Tompkins
Financial Corporation | |
$ | 11,486 | | |
$ | 782 | | |
$ | 793 | | |
$ | 0 | | |
$ | 13,061 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Depreciation and amortization | |
$ | 1,279 | | |
$ | 59 | | |
$ | 36 | | |
$ | 0 | | |
$ | 1,374 | |
Assets | |
| 5,016,712 | | |
| 35,524 | | |
| 14,085 | | |
| (8,500 | ) | |
| 5,057,821 | |
Goodwill | |
| 64,500 | | |
| 19,662 | | |
| 8,081 | | |
| 0 | | |
| 92,243 | |
Other intangibles, net | |
| 9,995 | | |
| 4,932 | | |
| 558 | | |
| 0 | | |
| 15,485 | |
Net loans and leases | |
| 3,201,451 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 3,201,451 | |
Deposits | |
| 4,052,715 | | |
| 0 | | |
| 0 | | |
| (8,326 | ) | |
| 4,044,389 | |
Total Equity | |
| 451,596 | | |
| 27,126 | | |
| 10,515 | | |
| 0 | | |
| 489,237 | |
For the six months ended June 30, 2015 |
(in thousands) | |
Banking | |
Insurance | |
Wealth Management | |
Intercompany | |
Consolidated |
Interest income | |
$ | 92,576 | | |
$ | 1 | | |
$ | 75 | | |
$ | (1 | ) | |
$ | 92,651 | |
Interest expense | |
| 10,094 | | |
| 0 | | |
| 0 | | |
| (1 | ) | |
| 10,093 | |
Net
interest income | |
| 82,482 | | |
| 1 | | |
| 75 | | |
| 0 | | |
| 82,558 | |
Provision for loan and lease losses | |
| 1,131 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 1,131 | |
Noninterest income | |
| 14,054 | | |
| 14,887 | | |
| 8,131 | | |
| (464 | ) | |
| 36,608 | |
Noninterest expense | |
| 55,846 | | |
| 11,584 | | |
| 5,644 | | |
| (464 | ) | |
| 72,610 | |
Income
before income tax expense | |
| 39,559 | | |
| 3,304 | | |
| 2,562 | | |
| 0 | | |
| 45,425 | |
Income tax expense | |
| 13,105 | | |
| 1,317 | | |
| 868 | | |
| 0 | | |
| 15,290 | |
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation | |
| 26,454 | | |
| 1,987 | | |
| 1,694 | | |
| 0 | | |
| 30,135 | |
Less: Net income attributable to noncontrolling interests | |
| 65 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 65 | |
Net
Income attributable to Tompkins Financial Corporation | |
$ | 26,389 | | |
$ | 1,987 | | |
$ | 1,694 | | |
$ | 0 | | |
$ | 30,070 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Depreciation and amortization | |
$ | 2,962 | | |
$ | 184 | | |
$ | 63 | | |
$ | 0 | | |
$ | 3,209 | |
For the six months ended June 30, 2014 |
(in thousands) | |
Banking | |
Insurance | |
Wealth Management | |
Intercompany | |
Consolidated |
Interest income | |
$ | 91,119 | | |
$ | 4 | | |
$ | 65 | | |
$ | (4 | ) | |
$ | 91,184 | |
Interest expense | |
| 10,643 | | |
| 2 | | |
| 0 | | |
| (4 | ) | |
| 10,641 | |
Net interest income | |
| 80,476 | | |
| 2 | | |
| 65 | | |
| 0 | | |
| 80,543 | |
Provision for loan and lease losses | |
| 810 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 810 | |
Noninterest income | |
| 13,228 | | |
| 14,363 | | |
| 8,243 | | |
| (680 | ) | |
| 35,154 | |
Noninterest expense | |
| 60,429 | | |
| 11,564 | | |
| 5,825 | | |
| (680 | ) | |
| 77,138 | |
Income before income tax expense
| |
| 32,465 | | |
| 2,801 | | |
| 2,483 | | |
| 0 | | |
| 37,749 | |
Income tax expense | |
| 10,079 | | |
| 1,123 | | |
| 852 | | |
| 0 | | |
| 12,054 | |
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation | |
| 22,386 | | |
| 1,678 | | |
| 1,631 | | |
| 0 | | |
| 25,695 | |
Less: Net income attributable to noncontrolling interests | |
| 65 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 65 | |
Net Income attributable to Tompkins
Financial Corporation | |
$ | 22,321 | | |
$ | 1,678 | | |
$ | 1,631 | | |
$ | 0 | | |
$ | 25,630 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Depreciation and amortization | |
$ | 2,589 | | |
$ | 109 | | |
$ | 74 | | |
$ | 0 | | |
$ | 2,772 | |
14. Fair Value
FASB
ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles and expands disclosures about fair value measurements. FASB ASC Topic 820 also establishes
a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). Transfers between levels, when determined to be appropriate, are
recognized at the end of each reporting period.
The three levels of the fair value hierarchy
under FASB ASC Topic 820 are:
Level 1 – Unadjusted quoted prices in
active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices for similar assets
or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active,
or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
Level 3 – Prices or valuation techniques
that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market
activity).
The
following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of June 30,
2015 and December 31, 2014, segregated by the level of valuation inputs within the fair value hierarchy used to measure fair value.
Recurring Fair Value Measurements | |
|
June 30, 2015 | |
| |
| |
| |
|
(in thousands) | |
Total | |
(Level 1) | |
(Level 2) | |
(Level 3) |
Trading securities | |
| |
| |
| |
|
Obligations of U.S. Government sponsored entities | |
$ | 7,009 | | |
$ | 0 | | |
$ | 7,009 | | |
$ | 0 | |
Mortgage-backed securities – residential U.S. Government sponsored entities | |
| 1,144 | | |
| 0 | | |
| 1,144 | | |
| 0 | |
Available-for-sale securities | |
| | | |
| | | |
| | | |
| | |
Obligations of U.S. Government sponsored entities | |
| 544,273 | | |
| 0 | | |
| 544,273 | | |
| 0 | |
Obligations of U.S. states and political subdivisions | |
| 72,310 | | |
| 0 | | |
| 72,310 | | |
| 0 | |
Mortgage-backed securities – residential, issued by: | |
| | | |
| | | |
| | | |
| | |
U.S. Government agencies | |
| 97,585 | | |
| 0 | | |
| 97,585 | | |
| 0 | |
U.S. Government sponsored entities | |
| 665,000 | | |
| 0 | | |
| 665,000 | | |
| 0 | |
Non-U.S. Government agencies or sponsored entities | |
| 211 | | |
| 0 | | |
| 211 | | |
| 0 | |
U.S. corporate debt securities | |
| 2,162 | | |
| 0 | | |
| 2,162 | | |
| 0 | |
Equity securities | |
| 943 | | |
| 0 | | |
| 0 | | |
| 943 | |
| |
| | | |
| | | |
| | | |
| | |
Borrowings | |
| | | |
| | | |
| | | |
| | |
Other borrowings | |
| 10,817 | | |
| 0 | | |
| 10,817 | | |
| 0 | |
The change in the fair value of available-for-sale equity securities valued using significant unobservable inputs (level 3), between January 1, 2015 and June 30, 2015 was mainly due to the reclassification of $475,000 of securities from available-for-sale securities to other assets to reflect the nonmarketable nature of these securities.
Recurring Fair Value Measurements | |
|
December 31, 2014 | |
| |
| |
| |
|
(in thousands) | |
Total | |
(Level 1) | |
(Level 2) | |
(Level 3) |
Trading
securities | |
| |
| |
| |
|
Obligations of U.S. Government sponsored entities | |
$ | 7,404 | | |
$ | 0 | | |
$ | 7,404 | | |
$ | 0 | |
Mortgage-backed securities – residential U.S. Government sponsored entities | |
| 1,588 | | |
| 0 | | |
| 1,588 | | |
| 0 | |
Available-for-sale securities | |
| . | | |
| | | |
| | | |
| | |
Obligations of U.S. Government sponsored entities | |
| 557,820 | | |
| 0 | | |
| 557,820 | | |
| 0 | |
Obligations of U.S. states and political subdivisions | |
| 71,510 | | |
| 0 | | |
| 71,510 | | |
| 0 | |
Mortgage-backed securities – residential, issued by: | |
| | | |
| | | |
| | | |
| | |
U.S. Government agencies | |
| 109,926 | | |
| 0 | | |
| 109,926 | | |
| 0 | |
U.S. Government sponsored entities | |
| 659,120 | | |
| 0 | | |
| 659,120 | | |
| 0 | |
Non-U.S. Government agencies or sponsored entities | |
| 271 | | |
| 0 | | |
| 271 | | |
| 0 | |
U.S. corporate debt securities | |
| 2,162 | | |
| 0 | | |
| 2,162 | | |
| 0 | |
Equity securities | |
| 1,427 | | |
| 0 | | |
| 0 | | |
| 1,427 | |
| |
| | | |
| | | |
| | | |
| | |
Borrowings | |
| | | |
| | | |
| | | |
| | |
Other borrowings | |
| 10,961 | | |
| 0 | | |
| 10,961 | | |
| 0 | |
The change in the fair value of the $1.4 million of available-for-sale securities valued using significant
unobservable inputs (level 3), between January 1, 2014 and December 31, 2014 was immaterial.
There were no transfers between Levels 1, 2
and 3 for the three months ended June 30, 2015.
The Company determines fair value for its trading
securities using independently quoted market prices. The Company determines fair value for its available-for-sale securities using
an independent bond pricing service for identical assets or very similar securities. The Company has reviewed the pricing sources,
including methodologies used, and finds them to be fairly stated.
Fair values of borrowings are estimated using
Level 2 inputs based upon observable market data. The Company determines fair value for its borrowings using a discounted cash
flow technique based upon expected cash flows and current spreads on FHLB advances with the same structure and terms. The Company
also receives pricing information from third parties, including the FHLB. The pricing obtained is considered representative of
the transfer price if the liabilities were assumed by a third party. The Company’s potential credit risk did not have a material
impact on the quoted settlement prices used in measuring the fair value of the FHLB borrowings at June 30, 2015.
Certain assets are measured at fair value on
a nonrecurring basis. For the Company, these include loans held for sale, collateral dependent impaired loans, and other real estate
owned (“OREO”). During the second quarter of 2015, certain collateral dependent impaired loans were remeasured and
reported at fair value through a specific valuation allowance and/or partial charge-offs for loan and lease losses based upon the
fair value of the underlying collateral. Collateral values are estimated using Level 2 inputs based upon observable market data.
In addition to collateral dependent impaired loans, certain other real estate owned were remeasured and reported at fair value
based upon the fair value of the underlying collateral. The fair values of other real estate owned are estimated using Level 2
inputs based on observable market data or Level 3 inputs based on customized discounting criteria. In general, the fair values
of other real estate owned are based upon appraisals, with discounts made to reflect estimated costs to sell the real estate. Upon
initial recognition, fair value write-downs on other real estate owned are taken through a charge-off to the allowance for loan
and lease losses. Subsequent fair value write-downs on other real estate owned are reported in other noninterest expense.
Three months ended June 30, 2015
| |
| |
Fair value measurements at reporting date using: | |
Gain (losses) from
fair value changes |
| |
As of | |
Quoted prices in
active markets for
identical assets | |
Significant other observable inputs | |
Significant unobservable inputs | |
Three months ended |
Assets: | |
06/30/2015 | |
(Level 1) | |
(Level 2) | |
(Level 3) | |
06/30/2015 |
Impaired Loans | |
$ | 1,510 | | |
$ | 0 | | |
$ |
1,510 |
| |
$ | 0 | | |
$ |
0 |
|
Other real estate owned | |
| 12 | | |
| 0 | | |
|
12 |
| |
| 0 | | |
|
884 |
|
Three months ended June 30, 2014
| |
| |
Fair value measurements at reporting date using: | |
Gain (losses) from
fair value changes |
| |
As of | |
Quoted prices in
active markets for
identical assets | |
Significant other observable inputs | |
Significant unobservable inputs | |
Three months ended |
Assets: | |
06/30/2014 | |
(Level 1) | |
(Level 2) | |
(Level 3) | |
06/30/2014 |
Impaired Loans | |
$ | 3,261 | | |
$ | 0 | | |
$ |
3,261 |
| |
$ | 0 | | |
$ |
(270 |
) |
Other real estate owned | |
| 2,688 | | |
| 0 | | |
|
2,688 |
| |
| 0 | | |
|
(160 |
) |
Six months ended June 30, 2015
| |
| |
Fair value measurements at reporting date using: | |
Gain (losses) from
fair value changes |
| |
As of | |
Quoted prices in
active markets for
identical assets | |
Significant other observable inputs | |
Significant unobservable inputs | |
Six months ended |
Assets: | |
06/30/2015 | |
(Level 1) | |
(Level 2) | |
(Level 3) | |
06/30/2015 |
Impaired Loans | |
$ | 3,263 | | |
$ | 0 | | |
$ |
3,263 |
| |
$ | 0 | | |
$ |
(80 |
) |
Other real estate owned | |
| 2,341 | | |
| 0 | | |
|
2,341 |
| |
| 0 | | |
|
816 |
|
Six months ended June 30, 2014
| |
| |
Fair value measurements at reporting date using: | |
Gain (losses) from
fair value changes |
| |
As of | |
Quoted prices in
active markets for
identical assets | |
Significant other observable inputs | |
Significant unobservable inputs | |
Six months ended |
Assets: | |
06/30/2014 | |
(Level 1) | |
(Level 2) | |
(Level 3) | |
06/30/2014 |
Impaired Loans | |
$ | 4,086 | | |
$ | 0 | | |
$ |
4,086 |
| |
$ | 0 | | |
$ |
(185 |
) |
Other real estate owned | |
| 6,175 | | |
| 0 | | |
|
6,175 |
| |
| 0 | | |
|
(42 |
) |
The following table presents the carrying amounts
and estimated fair values of the Company’s financial instruments at June 30, 2015 and December 31, 2014. The carrying amounts
shown in the table are included in the Consolidated Statements of Condition under the indicated captions.
The fair value estimates, methods and assumptions
set forth below for the Company’s financial instruments, including those financial instruments carried at cost, are made
solely to comply with disclosures required by generally accepted accounting principles in the United States and do not always incorporate
the exit-price concept of fair value prescribed by ASC Topic 820-10 and should be read in conjunction with the financial statements
and notes included in this Report.
Estimated Fair Value of Financial Instruments
|
June 30, 2015 | |
| |
| |
| |
| |
|
(in thousands) | |
Carrying Amount | |
Fair Value | |
(Level 1) | |
(Level 2) | |
(Level 3) |
Financial Assets: | |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
|
Cash and cash equivalents | |
$ | 60,139 | | |
$ | 60,139 | | |
$ | 60,139 | | |
$ | 0 | | |
$ | 0 | |
Securities - held to maturity | |
| 145,737 | | |
| 146,076 | | |
| 0 | | |
| 146,076 | | |
| 0 | |
FHLB stock | |
| 27,128 | | |
| 27,128 | | |
| 0 | | |
| 27,128 | | |
| 0 | |
Accrued interest receivable | |
| 16,023 | | |
| 16,023 | | |
| 0 | | |
| 16,023 | | |
| 0 | |
Loans/leases, net1 | |
| 3,491,839 | | |
| 3,498,475 | | |
| 0 | | |
| 3,263 | | |
| 3,495,212 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Financial Liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Time deposits | |
$ | 906,345 | | |
$ | 907,857 | | |
$ | 0 | | |
$ | 907,857 | | |
$ | 0 | |
Other deposits | |
| 3,297,744 | | |
| 3,297,744 | | |
| 0 | | |
| 3,297,744 | | |
| 0 | |
Fed funds purchased and securities sold under agreements to repurchase | |
| 131,063 | | |
| 133,830 | | |
| 0 | | |
| 133,830 | | |
| 0 | |
Other borrowings | |
| 482,509 | | |
| 485,630 | | |
| 0 | | |
| 485,630 | | |
| 0 | |
Trust preferred debentures | |
| 37,423 | | |
| 40,782 | | |
| 0 | | |
| 40,782 | | |
| 0 | |
Accrued interest payable | |
| 1,983 | | |
| 1,983 | | |
| 0 | | |
| 1,983 | | |
| 0 | |
Estimated Fair Value of Financial Instruments |
December
31, 2014 | |
| |
| |
| |
| |
|
(in
thousands) | |
Carrying Amount | |
Fair Value | |
(Level 1) | |
(Level 2) | |
(Level 3) |
Financial Assets:
| |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
|
Cash and cash equivalents | |
$ | 56,070 | | |
$ | 56,070 | | |
$ | 56,070 | | |
$ | 0 | | |
$ | 0 | |
Securities - held to maturity | |
| 88,168 | | |
| 89,036 | | |
| 0 | | |
| 89,036 | | |
| 0 | |
FHLB and FRB stock | |
| 21,259 | | |
| 21,259 | | |
| 0 | | |
| 21,259 | | |
| 0 | |
Accrued interest receivable | |
| 16,518 | | |
| 16,518 | | |
| 0 | | |
| 16,518 | | |
| 0 | |
Loans/leases, net1 | |
| 3,364,291 | | |
| 3,383,742 | | |
| 0 | | |
| 2,891 | | |
| 3,380,851 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Financial Liabilities:
| |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Time deposits | |
$ | 898,081 | | |
$ | 899,871 | | |
$ | 0 | | |
$ | 899,871 | | |
$ | 0 | |
Other deposits | |
| 3,271,073 | | |
| 3,271,073 | | |
| 0 | | |
| 3,271,073 | | |
| 0 | |
Fed funds purchased and securities sold under agreements to repurchase | |
| 147,037 | | |
| 151,201 | | |
| 0 | | |
| 151,201 | | |
| 0 | |
Other borrowings | |
| 345,580 | | |
| 350,043 | | |
| 0 | | |
| 350,043 | | |
| 0 | |
Trust preferred debentures | |
| 37,337 | | |
| 39,453 | | |
| 0 | | |
| 39,453 | | |
| 0 | |
Accrued interest payable | |
| 1,868 | | |
| 1,868 | | |
| 0 | | |
| 1,868 | | |
| 0 | |
1 Lease receivables, although excluded from the scope of
ASC Topic 825, are included in the estimated fair value amounts at their carrying value.
The following methods and assumptions were
used in estimating fair value disclosures for financial instruments.
Cash
and Cash Equivalents: The carrying amounts reported in the Consolidated Statements of Condition for cash, noninterest-bearing
deposits, money market funds, and Federal funds sold approximate the fair value of those assets.
Securities:
Fair values for U.S. Treasury securities are based on quoted market prices. Fair values for obligations of U.S. government sponsored
entities, mortgage-backed securities-residential, obligations of U.S. states and political subdivisions, and U.S. corporate debt
securities are based on quoted market prices, where available, as provided by third party pricing vendors. If quoted market prices
were not available, fair values are based on quoted market prices of comparable instruments in active markets and/or based upon
matrix pricing methodology, which uses comprehensive interest rate tables to determine market price, movement and yield relationships.
These securities are reviewed periodically to determine if there are any events or changes in circumstances that would adversely
affect their value.
Loans
and Leases: The fair values of residential loans are estimated using discounted cash flow analyses, based upon available
market benchmarks for rates and prepayment assumptions. The fair values of commercial and consumer loans are estimated using discounted
cash flow analyses, based upon interest rates currently offered for loans and leases with similar terms and credit quality. The
fair value of loans held for sale are determined based upon contractual prices for loans with similar characteristics.
FHLB STOCK: The carrying amount of FHLB
stock approximates fair value. If the stock is redeemed, the Company will receive an amount equal to the par value of the stock.
For miscellaneous equity securities, carrying value is cost.
ACCRUED INTEREST RECEIVABLE AND ACCRUED
INTEREST PAYABLE: The carrying amount of these short term instruments approximate fair value.
Deposits:
The fair values disclosed for noninterest bearing accounts and accounts with no stated maturities are equal to the amount payable
on demand at the reporting date. The fair value of time deposits is based upon discounted cash flow analyses using rates offered
for FHLB advances, which is the Company’s primary alternative source of funds.
Securities
Sold Under Agreements to Repurchase: The carrying amounts of repurchase agreements and other short-term borrowings approximate
their fair values. Fair values of long-term borrowings are estimated using a discounted cash flow approach, based on current market
rates for similar borrowings. For securities sold under agreements to repurchase where the Company has elected the fair value option,
the Company also receives pricing information from third parties, including the FHLB.
Other
Borrowings: The fair values of other borrowings are estimated using discounted cash flow analysis, discounted at the
Company’s current incremental borrowing rate for similar borrowing arrangements. For other borrowings where the Company has
elected the fair value option, the Company also receives pricing information from third parties, including the FHLB.
TRUST PREFERRED DEBENTURES: The fair
value of the trust preferred debentures has been estimated using a discounted cash flow analysis which uses a discount factor of
a market spread over current interest rates for similar instruments.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
BUSINESS
Corporate Overview
and Strategic Initiatives
Tompkins Financial Corporation (“Tompkins”
or the “Company”) is headquartered in Ithaca, New York and is registered as a Financial Holding Company with the Federal
Reserve Board under the Bank Holding Company Act of 1956, as amended. The Company is a locally oriented, community-based financial
services organization that offers a full array of products and services, including commercial and consumer banking, leasing, trust
and investment management, financial planning and wealth management, and insurance services. At June 30, 2015, the Company’s
subsidiaries included: four wholly-owned banking subsidiaries, Tompkins Trust Company (the “Trust Company”), The Bank
of Castile (DBA Tompkins Bank of Castile), Mahopac Bank (formerly known as Mahopac National Bank, DBA Tompkins Mahopac Bank), VIST
Bank (DBA Tompkins VIST Bank); and a wholly-owned insurance agency subsidiary, Tompkins Insurance Agencies, Inc. (“Tompkins
Insurance”). The trust division of the Trust Company provides a full array of investment services, including investment management,
trust and estate, financial and tax planning as well as life, disability and long-term care insurance services. The Company’s
principal offices are located at The Commons, Ithaca, New York, 14851, and its telephone number is (888) 503-5753. The Company’s
common stock is traded on the NYSE MKT LLC under the Symbol “TMP.”
The Company’s strategic initiatives include
diversification within its markets, growth of its fee-based businesses, and growth internally and through acquisitions of financial
institutions, branches, and financial services businesses. As such, the Company from time to time considers acquiring banks, thrift
institutions, branch offices of banks or thrift institutions, or other businesses within markets currently served by the Company
or in other locations that would complement the Company’s business or its geographic reach. The Company generally targets
merger or acquisition partners that are culturally similar and have experienced management and possess either significant market
presence or have potential for improved profitability through financial management, economies of scale and expanded services. The
Company has pursued acquisition opportunities in the past, and continues to review new opportunities.
Business Segments
Banking services consist primarily of attracting
deposits from the areas served by the Company’s four banking subsidiaries’ 62 banking offices (43 offices in New York
and 19 offices in Pennsylvania) and using those deposits to originate a variety of commercial loans, consumer loans, real estate
loans (including commercial loans collateralized by real estate), and leases. The Company’s lending function is managed within
the guidelines of a comprehensive Board-approved lending policy. Reporting systems are in place to provide management with ongoing
information related to loan production, loan quality, concentrations of credit, loan delinquencies, and nonperforming and potential
problem loans. Banking services also include a full suite of products such as debit cards, credit cards, remote deposit, electronic
banking, mobile banking, cash management, and safe deposit services.
Wealth management services consist of investment
management, trust and estate, financial and tax planning as well as life, disability and long-term care insurance services. Wealth
management services are under the trade name Tompkins Financial Advisors. Tompkins Financial Advisors has office locations at all
four of the Company’s subsidiary banks.
Insurance services include property and casualty
insurance, employee benefit consulting, and life, long-term care and disability insurance. Tompkins Insurance is headquartered
in Batavia, New York. Over the past fourteen years, Tompkins Insurance has acquired smaller insurance agencies in the market areas
serviced by the Company’s banking subsidiaries and successfully consolidated them into Tompkins Insurance. The VIST Financial
acquisition in 2012, which included VIST Insurance, was the largest acquisition and nearly doubled the Company’s annual insurance
revenues. Tompkins Insurance offers services to customers of the Company’s banking subsidiaries by sharing offices with The
Bank of Castile, Trust Company, and VIST Bank. In addition to these shared offices, Tompkins Insurance has five stand-alone offices
in Western New York, two stand-alone offices in Tompkins County, New York and one stand-alone office in Montgomery County, Pennsylvania.
The Company’s principal expenses are
interest on deposits, interest on borrowings, and operating and general administrative expenses, as well as provisions for loan
and lease losses. Funding sources, other than deposits, include borrowings, securities sold under agreements to repurchase, and
cash flow from lending and investing activities.
Competition
Competition for commercial banking and other
financial services is strong in the Company’s market areas. In one or more aspects of its businesses, the Company’s
subsidiaries compete with other commercial banks, savings and loan associations, credit unions, finance companies, Internet-based
financial services companies, mutual funds, insurance companies, brokerage and investment banking companies, and other financial
intermediaries. Some of these competitors have substantially greater resources and lending capabilities and may offer service that
the Company does not currently provide. In addition, many of the Company’s non-bank competitors are not subject to the same
extensive Federal regulations that govern financial holding companies and Federally-insured banks.
Management believes that a community based
financial organization is better positioned to establish personalized financial relationships with both commercial customers and
individual households. The Company’s community commitment and involvement in its primary market areas, as well as its commitment
to quality and personalized financial services, are factors that contribute to the Company’s competitiveness. Management
believes that each of the Company’s subsidiary banks can compete successfully in its primary market areas by making prudent
lending decisions quickly and more efficiently than its competitors, without compromising asset quality or profitability, although
no assurances can be given that such factors will assure success.
Regulation
Banking, insurance services and wealth management
are highly regulated. As a financial holding company with four community banks, a registered investment advisor, and an insurance
agency subsidiary, the Company and its subsidiaries are subject to examination and regulation by the Federal Reserve Board (“FRB”),
Securities and Exchange Commission (“SEC”), the Federal Deposit Insurance Corporation (“FDIC”), the New
York State Department of Financial Services, Pennsylvania Department of Banking and Securities, Financial Industry Regulatory Authority,
and the Pennsylvania Insurance Department.
OTHER IMPORTANT INFORMATION
The following discussion is intended to provide
an understanding of the consolidated financial condition and results of operations of the Company for the three and six months
ended June 30, 2015. It should be read in conjunction with the Company’s Audited Consolidated Financial Statements and the
notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, and the Unaudited
Consolidated Financial Statements and notes thereto included in Part I of this Quarterly Report on Form 10-Q.
In this Report there are comparisons of the
Company’s performance to that of a peer group. Unless otherwise stated, this peer group is comprised of the group of 117
domestic bank holding companies with $3 billion to $10 billion in total assets as defined in the Federal Reserve’s “Bank
Holding Company Performance Report” for March 31, 2015 (the most recent report available).
Forward-Looking Statements
The Company is making this statement in order
to satisfy the “Safe Harbor” provision contained in the Private Securities Litigation Reform Act of 1995. The statements
contained in this Quarterly Report on Form 10-Q that are not statements of historical fact may include forward-looking statements
that involve a number of risks and uncertainties. Such forward-looking statements are made based on management’s expectations
and beliefs concerning future events impacting the Company and are subject to certain uncertainties and factors relating to the
Company’s operations and economic environment, all of which are difficult to predict and many of which are beyond the control
of the Company. These uncertainties and factors that could cause actual results of the Company to differ materially from those
matters expressed and/or implied by such forward-looking statements. The following factors are among those that could cause actual
results to differ materially from the forward-looking statements: changes in general economic, market and regulatory conditions;
the development of an interest rate environment that may adversely affect the Company’s interest rate spread, other income
or cash flow anticipated from the Company’s operations, investment and/or lending activities; changes in laws and regulations
affecting banks, insurance companies, bank holding companies and/or financial holding companies, such as the Dodd-Frank Wall Street
Reform and Consumer Protection Act and Basel III; technological developments and changes; the ability to continue to introduce
competitive new products and services on a timely, cost-effective basis; governmental and public policy changes, including environmental
regulation; protection and validity of intellectual property rights; reliance on large customers; the expenses and reputational
damage if there were ever a material cybersecurity breach; financial resources in the amounts, at the times and on the terms required
to support the Company’s future businesses; and other factors discussed elsewhere in this Quarterly Report on Form 10-Q and
in other reports we file with the SEC, in particular the “Risk Factors” discussed in Item 1A of the Company’s
Annual Report on Form 10-K for the year ended December 31, 2014. In addition, such forward-looking statements could be affected
by general industry and market conditions and growth rates, general economic and political conditions (including changes in economic
conditions in the Company’s primary market areas), including interest rate and currency exchange rate fluctuations, and other
factors.
Critical Accounting Policies
The accounting and reporting policies followed
by the Company conform, in all material respects, to accounting principles generally accepted in the United States and to general
practices within the financial services industry. In the course of normal business activity, management must select and apply many
accounting policies and methodologies and make estimates and assumptions that lead to the financial results presented in the Company’s
consolidated financial statements and accompanying notes. There are uncertainties inherent in making these estimates and assumptions,
which could materially affect the Company’s results of operations and financial position.
Management considers accounting estimates to
be critical to reported financial results if (i) the accounting estimates require management to make assumptions about matters
that are highly uncertain, and (ii) different estimates that management reasonably could have used for the accounting estimate
in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have
a material impact on the Company’s financial statements. Management considers the accounting policies relating to the allowance
for loan and lease losses (“allowance”), pension and postretirement benefits, the review of the securities portfolio
for other-than-temporary impairment, and acquired loans to be critical accounting policies because of the uncertainty and subjectivity
involved in these policies and the material effect that estimates related to these areas can have on the Company’s results
of operations.
For additional information on critical accounting
policies and to gain a greater understanding of how the Company’s financial performance is reported, refer to Note 1 –
“Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, and the section captioned
“Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of
Operations, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. There have been
no significant changes in the Company’s application of critical accounting policies since December 31, 2014. Refer to Note
3 – “Accounting Standards Updates” in the Notes to Unaudited Consolidated Financial Statements included in Part
I of this Quarterly Report on Form 10-Q for a discussion of recent accounting updates.
OVERVIEW
Net
income for the second quarter was $17.4 million or $1.15 diluted earnings per share, compared to $13.1 million or $0.87 diluted
earnings per share for the same period in 2014. Net income for the first six months of 2015 was $30.1 million or $2.00 diluted
earnings per share, compared to $25.6 million or $1.72 diluted earnings per share in the first six months of 2014. Results for
the current quarter and year to date were positively impacted by a one-time curtailment gain of $3.6 million, after-tax, related
to changes to the Company’s defined benefit pension plan. Exclusive of this one-time gain, net income and diluted earnings
per share for the current quarter would have been $13.8 million and $0.91, respectively, and for the first six months of 2015,
$26.0 million and $1.75, respectively.
Return
on average assets (“ROA”) for the quarter ended June 30, 2015 was 1.29%, compared to 1.04% for the quarter ended June
30, 2014. Return on average shareholders’ equity (“ROE”) for the second quarter of 2015 was 13.79%, compared
to 10.91%, for the same period in 2014. Tompkins’ second quarter ROA and ROE compare to the most recent peer average ratios
of 0.95% and 8.50%, respectively, ranking Tompkins’ ROA in the 52nd percentile and ROE in the 71st
percentile of the peer group.
In
addition to these performance measures, management also considers operating return on average tangible common equity an important
ratio in measuring financial performance. This ratio is considered a non-GAAP measure. The following table shows the calculation
of this non-GAAP ratio and reconciliation to the comparable GAAP measure. The Company believes this non-GAAP measure provides
a meaningful comparison of our underlying operational performance and facilitates managements’ and investors’ assessments
of business and performance trends in comparison to others in the financial services industry. This non-GAAP financial measure
should not be considered in isolation or as a measure of the Company’s profitability or liquidity; it is in addition to,
and is not a substitute for, financial measures under GAAP. Net operating income as presented herein may be different from non-GAAP
financial measures used by other companies, and may not be comparable to similarly titled measures reported by other companies.
Further, the Company may utilize other measures to illustrate performance in the future. Non-GAAP financial measures have limitations
since they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance
with GAAP.
Adjusted Diluted Earnings
Per Share | |
| |
| |
| |
|
| |
| |
| |
| |
|
| |
Three Months Ended | |
Six Months Ended |
(in
thousands, except per share data) | |
06/30/2015 | |
06/30/2014 | |
06/30/2015 | |
06/30/2014 |
Net income attributable
to Tompkins Financial Corporation | |
$ | 17,390 | | |
$ | 13,061 | | |
$ | 30,070 | | |
$ | 25,630 | |
Less:
dividends and undistributed earnings allocated to unvested stock awards | |
| (234 | ) | |
| (118 | ) | |
| (420 | ) | |
| (235 | ) |
Net income available to common
shareholders (GAAP) | |
| 17,156 | | |
| 12,943 | | |
| 29,650 | | |
| 25,395 | |
Diluted earnings per share
(GAAP) | |
| 1.15 | | |
| 0.87 | | |
| 2.00 | | |
| 1.72 | |
| |
| | | |
| | | |
| | | |
| | |
Adjustments for non-operating
income and expense, net of tax: | |
| | | |
| | | |
| | | |
| | |
Gain
on pension plan curtailment | |
| (3,602 | ) | |
| 0 | | |
| (3,602 | ) | |
| 0 | |
Total adjustments, net of tax | |
| (3,602 | ) | |
| 0 | | |
| (3,602 | ) | |
| 0 | |
| |
| | | |
| | | |
| | | |
| | |
Net operating income available
to common shareholders (Non-GAAP) | |
| 13,554 | | |
| 12,943 | | |
| 26,048 | | |
| 25,395 | |
Adjusted
diluted earnings per share (Non-GAAP) | |
| 0.91 | | |
| 0.87 | | |
| 1.75 | | |
| 1.72 | |
Operating Return on Average Tangible
Common Equity (Non-GAAP) |
|
| |
Three Months Ended | |
Six Months Ended |
(in thousands) | |
06/30/2015 | |
06/30/2014 | |
06/30/2015 | |
06/30/2014 |
Net operating income
available to common shareholders (Non-GAAP) | |
| 13,554 | | |
| 12,943 | | |
| 26,048 | | |
| 25,395 | |
Amortization
of intangibles, net of tax | |
| 300 | | |
| 315 | | |
| 604 | | |
| 631 | |
Adjusted
net operating income available to common shareholders (Non-GAAP) | |
| 13,854 | | |
| 13,258 | | |
| 26,652 | | |
| 26,026 | |
Average Tompkins Financial
Corporation shareholders’ common equity | |
| 504,166 | | |
| 478,561 | | |
| 499,896 | | |
| 472,836 | |
Average
goodwill and intangibles 1 | |
| 105,130 | | |
| 106,988 | | |
| 105,385 | | |
| 107,193 | |
Average Tompkins financial
Corporation shareholders’ tangible common equity (Non-GAAP) | |
| 399,036 | | |
| 371,573 | | |
| 394,511 | | |
| 365,643 | |
Adjusted
operating return on average shareholders’ tangible common equity (Non-GAAP) | |
| 13.93 | % | |
| 14.31 | % | |
| 13.62 | % | |
| 14.35 | % |
1 Average goodwill and intangibles
exclude mortgage servicing rights
Segment Reporting
The Company
operates in the following three business segments, banking, insurance, and wealth management. Insurance is comprised of property
and casualty insurance services and employee benefit consulting operated under the Tompkins Insurance Agencies, Inc. subsidiary.
Wealth management activities include the results of the Company’s trust, financial planning, and wealth management services,
organized under the Tompkins Financial Advisors brand. All other activities are considered banking.
Banking
Segment
The banking
segment reported net income of $15.3 million for the second quarter of 2015, up $3.8 million or 33.3% from net income of $11.5
million for the same period in 2014. For the six months ended June 30, 2015, the banking segment reported net income of $26.4
million, up $4.1 million or 18.2% over the same period in 2014.
Net interest
income of $41.3 million for the second quarter of 2015 was up $807,000 or 2.0% over the same period in 2014. For the six months
ended June 30, 2015, net interest income of $82.5 million was up $2.0 million or 2.5% compared to prior year. Growth in average
earning assets and lower funding costs offset the effect of lower asset yields and contributed to favorable year-over-year comparisons.
Net interest margin for the six months ended June 30, 2015 was 3.41% compared to 3.58% for the same period prior year.
The provision
for loan and lease losses was $922,000 for the three months ended June 30, 2015; up from $67,000 for the same period in 2014.
Provision expense also increased for the six months ended June 30, 2015 to $1.1 million from $810,000 in the previous year. The
increase in provision expense was largely attributable to growth in total loans.
Noninterest
income for the three months ended June 30, 2015 of $7.7 million was up $749,000 or 10.8% compared to the same period in 2014,
and for the six months ended June 30, 2015 was up $826,000 or 6.2% to $14.1 million compared to $13.2 million for the six months
ending June 30, 2014. The primary contributors to the three and six month increase include: gains on the sale of other real estate
owned (up $885,000), and net realized gains on securities transactions (up $884,000). Partially offsetting these items were decreases
in loan fees, including gains on sales of residential loans (down $482,000), card services income (down $189,000), and service
charges on deposit accounts (down $102,000).
Noninterest
expense of $24.9 million for the second quarter and $55.8 million for the six months ending June 30, 2015 were down $5.7 million
or 18.6% and down $4.6 million or 7.6%, respectively, from the same periods in 2014. The declines are primarily attributed to
the curtailment of the Company’s defined benefit pension plan, which resulted in a $6.0 million credit to pension and other
employee benefits expense in the second quarter of 2015 in accordance with accounting guidance. This decrease was partially offset
by an increase in salaries and wages due to normal annual merit and market increases, increases in incentive compensation, as
well as an increase in the number of employees.
Insurance
Segment
The insurance
segment reported net income of $1.1 million for the three months ended June 30, 2015; up $367,000 or 46.9% from the second quarter
of 2014. For the six month period ended June 30, 2015, net income rose $309,000 or 18.4% compared to 2014. Noninterest income
was up $364,000 or 5.1% in the second quarter of 2015, compared to the same period in 2014 and up $524,000 or 3.6% to $14.9 million
for the six months ending June 30, 2015. Noninterest expenses for the three months ended June 30, 2015 were down $268,000 or 4.6%
compared to the second quarter of 2014 and for the first six months of 2015 were flat compared to the same period in 2014. The
decline in noninterest expense for the second quarter is mainly the result of the aforementioned defined benefit pension plan
curtailment adjustment. Partially offsetting this adjustment were increases in salaries and wages reflecting normal annual merit
adjustments and sales commissions.
Wealth
Management Segment
The wealth management
segment reported net income of $929,000 for the three months ended June 30, 2015, up $136,000 or 17.2% compared to the second
quarter of 2014. Net income for the six months ended June 30, 2015 increased $63,000 or 3.9% to $1.7 million compared to the same
period in 2014. Noninterest income was flat for the second quarter of 2015 and down $112,000 for the first six months of 2015
compared to the prior year. Noninterest expenses for the three months ended June 30, 2015, were down $192,000 or 6.8% and for
the six months ended June 30, 2015 were down $181,000 or 3.1% compared to the same period of 2014 due primarily to the Company’s
curtailment of its defined benefit pension plan mentioned above.
Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited) |
| |
|
Quarter
Ended | |
Year
to Date Period Ended | |
Year
to Date Period Ended |
| |
|
June
30, 2015 | |
June
30, 2015 | |
June
30, 2014 |
(Dollar
amounts in thousands) | |
|
Average
Balance
(QTD) |
| |
Interest | |
Average
Yield/Rate | |
|
Average
Balance
(YTD) | |
Interest | |
Average
Yield/Rate | |
|
Average
Balance
(YTD) | |
Interest | |
Average
Yield/Rate |
ASSETS | |
|
|
| |
| |
| |
|
|
| |
| |
| |
|
| |
| |
|
| |
|
|
| |
| |
| |
|
|
| |
| |
| |
|
| |
| |
|
Interest-earning
assets | |
|
|
| |
| |
| |
|
|
| |
| |
| |
|
| |
| |
|
| |
|
|
| |
| |
| |
|
|
| |
| |
| |
|
| |
| |
|
Interest-bearing
balances due from banks | |
$ | 1,824 | | |
$ | 1 | | |
| 0.22 | % | |
$ | 1,607 | | |
$ | 2 | | |
| 0.25 | % | |
$ | 885 | | |
$ | 1 | | |
| 0.23 | % |
Securities (1) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
U.S.
Government securities | |
| 1,450,039 | | |
| 7,513 | | |
| 2.08 | % | |
| 1,442,846 | | |
| 15,366 | | |
| 2.15 | % | |
| 1,301,015 | | |
| 14,877 | | |
| 2.31 | % |
Trading
securities | |
| 8,453 | | |
| 90 | | |
| 4.27 | % | |
| 8,654 | | |
| 184 | | |
| 4.29 | % | |
| 10,584 | | |
| 219 | | |
| 4.17 | % |
State
and municipal (2) | |
| 86,710 | | |
| 832 | | |
| 3.85 | % | |
| 87,502 | | |
| 1,703 | | |
| 3.92 | % | |
| 89,964 | | |
| 2,127 | | |
| 4.77 | % |
Other
securities (2) | |
| 3,752 | | |
| 30 | | |
| 3.21 | % | |
| 3,758 | | |
| 60 | | |
| 3.22 | % | |
| 4,729 | | |
| 76 | | |
| 3.24 | % |
Total
securities | |
| 1,548,954 | | |
| 8,465 | | |
| 2.19 | % | |
| 1,542,760 | | |
| 17,313 | | |
| 2.26 | % | |
| 1,406,292 | | |
| 17,299 | | |
| 2.48 | % |
FHLBNY
and FRB stock | |
| 23,927 | | |
| 225 | | |
| 3.76 | % | |
| 22,355 | | |
| 572 | | |
| 5.15 | % | |
| 20,670 | | |
| 404 | | |
| 3.94 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total
loans and leases, net of unearned income (2)(3) | |
| 3,463,881 | | |
| 38,680 | | |
| 4.48 | % | |
| 3,431,282 | | |
| 76,635 | | |
| 4.50 | % | |
| 3,206,950 | | |
| 75,161 | | |
| 4.73 | % |
Total
interest-earning assets | |
| 5,038,586 | | |
| 47,371 | | |
| 3.77 | % | |
| 4,998,004 | | |
| 94,522 | | |
| 3.81 | % | |
| 4,634,797 | | |
| 92,865 | | |
| 4.04 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other
assets | |
| 352,528 | | |
| | | |
| | | |
| 355,264 | | |
| | | |
| | | |
| 371,552 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total
assets | |
| 5,391,114 | | |
| | | |
| | | |
| 5,353,268 | | |
| | | |
| | | |
| 5,006,349 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
LIABILITIES
& EQUITY | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Deposits | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest-bearing
deposits | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest
bearing checking, savings, & money market | |
| 2,326,361 | | |
| 924 | | |
| 0.16 | % | |
| 2,337,605 | | |
| 1,914 | | |
| 0.17 | % | |
| 2,272,478 | | |
| 2,211 | | |
| 0.20 | % |
Time
deposits | |
| 917,986 | | |
| 1,697 | | |
| 0.74 | % | |
| 912,016 | | |
| 3,328 | | |
| 0.74 | % | |
| 895,073 | | |
| 3,308 | | |
| 0.75 | % |
Total
interest-bearing deposits | |
| 3,244,347 | | |
| 2,621 | | |
| 0.32 | % | |
| 3,249,621 | | |
| 5,242 | | |
| 0.33 | % | |
| 3,167,551 | | |
| 5,519 | | |
| 0.35 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Federal
funds purchased & securities sold under agreements to repurchase | |
| 131,324 | | |
| 665 | | |
| 2.03 | % | |
| 136,811 | | |
| 1,335 | | |
| 1.97 | % | |
| 153,939 | | |
| 1,580 | | |
| 2.07 | % |
Other
borrowings | |
| 422,364 | | |
| 1,234 | | |
| 1.17 | % | |
| 385,233 | | |
| 2,373 | | |
| 1.24 | % | |
| 263,633 | | |
| 2,401 | | |
| 1.84 | % |
Trust
preferred debentures | |
| 37,395 | | |
| 573 | | |
| 6.15 | % | |
| 37,374 | | |
| 1,143 | | |
| 6.17 | % | |
| 37,205 | | |
| 1,141 | | |
| 6.18 | % |
Total
interest-bearing liabilities | |
| 3,835,430 | | |
| 5,093 | | |
| 0.53 | % | |
| 3,809,039 | | |
| 10,093 | | |
| 0.53 | % | |
| 3,622,328 | | |
| 10,641 | | |
| 0.59 | % |
Noninterest
bearing deposits | |
| 983,199 | | |
| | | |
| | | |
| 978,233 | | |
| | | |
| | | |
| 856,161 | | |
| | | |
| | |
Accrued
expenses and other liabilities | |
| 66,818 | | |
| | | |
| | | |
| 64,615 | | |
| | | |
| | | |
| 53,539 | | |
| | | |
| | |
Total
liabilities | |
| 4,885,447 | | |
| | | |
| | | |
| 4,851,887 | | |
| | | |
| | | |
| 4,532,028 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Tompkins
Financial Corporation Shareholders’ equity | |
| 504,166 | | |
| | | |
| | | |
| 499,896 | | |
| | | |
| | | |
| 472,836 | | |
| | | |
| | |
Noncontrolling
interest | |
| 1,501 | | |
| | | |
| | | |
| 1,485 | | |
| | | |
| | | |
| 1,485 | | |
| | | |
| | |
Total
equity | |
| 505,667 | | |
| | | |
| | | |
| 501,381 | | |
| | | |
| | | |
| 474,321 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total
liabilities and equity | |
$ | 5,391,114 | | |
| | | |
| | | |
$ | 5,353,268 | | |
| | | |
| | | |
$ | 5,006,349 | | |
| | | |
| | |
Interest
rate spread | |
| | | |
| | | |
| 3.24 | % | |
| | | |
| | | |
| 3.28 | % | |
| | | |
| | | |
| 3.45 | % |
Net
interest income/margin on earning assets | |
| | | |
| 42,278 | | |
| 3.37 | % | |
| | | |
| 84,429 | | |
| 3.41 | % | |
| | | |
| 82,224 | | |
| 3.58 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Tax
Equivalent Adjustment | |
| | | |
| (948 | ) | |
| | | |
| | | |
| (1,871 | ) | |
| | | |
| | | |
| (1,681 | ) | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
interest income per consolidated financial statements | |
| | | |
$ | 41,330 | | |
| | | |
| | | |
$ | 82,558 | | |
| | | |
| | | |
$ | 80,543 | | |
| | |
1 Average balances and yields on available-for-sale securities are based
on historical amortized cost |
2 Interest income includes the tax effects of taxable-equivalent adjustments
using a combined New York State and Federal effective income tax rate of 40% to increase tax exempt interest income to taxable-equivalent
basis. |
3 Nonaccrual loans are included in the average asset totals presented above.
Payment received on nonaccrual loans have been recognized as disclosed in Note 1 of the Company’s condensed consolidated
financial statements included in Part 1 of the Company’s annual report on Form 10-K for the fiscal year ended December
31, 2014. |
Net Interest
Income
Net interest
income is the Company’s largest source of revenue, representing 68.6% and 69.3%, respectively, of total revenues for the
three and six month periods ended June 30, 2015, compared to 69.6% for the same periods in 2014. Net interest income is dependent
on the volume and composition of interest earning assets and interest-bearing liabilities and the level of market interest rates.
The above table shows average interest-earning assets and interest-bearing liabilities, and the corresponding yield or cost associated
with each.
Taxable-equivalent
net interest income for the three and six months ended June 30, 2015 was up 2.0% and 2.5%, respectively, over the same periods
in 2014, as growth in average earning assets offset a decrease in net interest margin for the second quarter and year-to-date
in 2015 compared to the same periods in 2014. The decrease in net interest margin reflects lower yields on average earning assets
as a result of low interest rate environment as well as a slight shift in composition of average earning assets between loans
and securities. For the three and six months ended June 30, 2015, average loans and average securities represented 68.8% and 68.6%,
respectively, of average earning assets compared to 69.0% and 69.2%, respectively, for the same periods in 2014.
Taxable-equivalent
interest income for the three and six month periods ended June 30, 2015 was $47.4 million and $94.5 million, respectively, up
1.6% and 1.8% compared to the same periods of 2014. The increase in taxable-equivalent interest income was mainly the result of
an increase in average loans, which was partially offset by a decrease in the yield on average loans. Average loan balances for
the three months and six months ended June 30, 2015 were up $242.7 million or 7.5%, and $224.3 million or 7.0%, respectively,
while the average yield decreased 22 basis points and 23 basis points, respectively, from the same periods in 2014. Average securities
balances for the three and six months ended June 30, 2015 were up by $161.4 million or 11.3% and $136.5 million or 9.7%, respectively,
while the average yield for the three and six month periods were down 25 and 22 basis points, respectively, compared to the same
periods in 2014.
Interest expense
for the three and six months ended June 30, 2015 decreased by $210,000 or 4.0%, and $548,000 or 5.2%, respectively, compared to
the same periods in 2014. The average rate paid on interest bearing deposits during the three and six months ended June 30, 2015
was 0.32% and 0.33%, respectively, compared to 0.35% reported for the same periods of 2014. Average interest bearing deposits
for the second quarter of 2015 were up $85.5 million or 2.7% compared to the same period in 2014, while year-to-date average interest
bearing deposits were up $82.1 million or 2.6% compared to the same period in 2014. Average noninterest bearing deposits for the
three and six month periods ended June 30, 2015 were up $106.0 million or 12.1% and $122.1 million or 14.3%, respectively, compared
to the same periods in 2014. Average other borrowings for the three and six months ended June 30, 2015 were up $143.9 million
or 51.7% and $121.6 million or 46.1% compared to the same periods in 2014. The increase was mainly in overnight borrowings with
the FHLB, which contributed to the decrease in average funding cost in this category in 2015.
Provision
for Loan and Lease Losses
The provision
for loan and lease losses represents management’s estimate of the amount necessary to maintain the allowance for loan and
lease losses at an adequate level. The provision for loan and lease losses was $922,000 for the second quarter of 2015 and $1.1
million for the six months ended June 30, 2015. The increase in provision for loan and lease losses in 2015 over the three and
six month comparative periods in 2014 is mainly a result loan growth in 2015. The section captioned “Financial Condition
– Allowance for Loan and Lease Losses and Nonperforming Assets” below has further details on the allowance for loan
and lease losses and asset quality metrics.
Noninterest
Income
Noninterest
income was $19.0 million for the second quarter of 2015 and $36.6 million for the first six months of 2015. This represents an
increase of 7.0% for the quarter and 4.1% for the year-to-date period compared to the same periods in 2014. Noninterest income
represented 31.5% of total revenue for the second quarter of 2015 and 30.7% for the year-to-date period, compared to 30.4% for
the same periods in 2014.
Insurance commissions
and fees were $7.4 million for the second quarter of 2015, an increase of 5.1% over the same period prior year. For the first
six months of 2015, insurance commissions and fees were up $474,000 or 3.3% over the first six months of 2014. Commissions from
commercial lines, personal insurance lines and health and life insurance were up in 2015 over the same period in 2014.
Investment
services income was $3.8 million in the second quarter of 2015, a decrease of 1.6% from $3.9 million in the second quarter of
2014. For the first six months of 2015, investment services income was down $68,000 or 0.9% from the first six months of
2014. At the end of the first quarter, the Company concluded operations attributable to their internal broker dealer
and registered investment advisory group and engaged a new broker dealer of record. This contributed to a slight decline
in year-over-year income. Investment services income includes trust services, financial planning, wealth management services,
and brokerage related services. With fees largely based on the market value and the mix of assets managed, the general
direction of the stock market can have a considerable impact on fee income. The fair value of assets managed by, or in
custody of, Tompkins was $3.9 billion at June 30, 2015, up 9.7% from $3.6 billion at June 30, 2014. These figures include
$1.2 billion of Company-owned securities where Tompkins Trust Company is custodian.
Service charges
on deposit accounts were down $144,000 or 6.0% for the second quarter of 2015 compared to the second quarter of 2014, and down
$102,000 or 2.3% for the six months ended June 30, 2015 compared to the same period in 2014. Net overdraft fees, the largest component
of service charges on deposit accounts, were down 9.3% and 6.3% for the three and six months ended June 30, 2015 compared to the
same periods in 2014.
Card services
income for the three months and six months ended June 30, 2015 was up $105,000 or 5.5%, and down $189,000 or 4.7% over the same
periods in 2014. Income benefited from a first quarter accrual adjustment related to the termination of a debit card reward program
to reflect actual redemption rate on program incentives than management’s original estimates. The number of debit cards
issued and transaction volume during the second quarter and year-to-date periods in 2015 were favorable to 2014.
The Company
recognized gains on the sales/calls of available-for-sale securities of $723,000 and $1.0 million for the three and six months
ended June 30, 2015, compared to gains of $35,000 and $129,000 for the same periods in 2014. Sales of available-for-sale securities
are generally the result of general portfolio maintenance and interest rate risk management.
Other income
of $2.7 million in the second quarter of 2015 was up 12.3% over the second quarter of 2014. For the first six months of 2015,
other income of $4.7 million was up 11.4% over the same period in 2014. The significant components of other income are other service
charges, increases in cash surrender value of corporate owned life insurance (“COLI”), gains on the sales of residential
mortgage loans, and income from miscellaneous equity investments. A main contributor of the year over year increase was a significant
gain on the sale of an other real estate owned property in the second quarter 2015. Gains on sales of other real estate owned
totaled $924,000 for the three and six months ended June 30, 2015 compared to a net loss of $80,000 for the three months ended
June 30, 2014 and a net gain of $39,000 for the first six months of 2014. Partially offsetting the gains on sales of other real
estate owned were lower loan related fees, including gains on the sales of residential loans.
Noninterest
Expense
Noninterest
expense was $32.9 million for the second quarter of 2015, down 15.4% compared to the second quarter of 2014 and $72.6 million
for the six months ended June 30, 2015, down 5.9% from the same period in 2014. The decrease in noninterest expense in 2015 compared
to the same period prior year is mainly attributable to the curtailment of the Company’s defined benefit pension plan, which
resulted in a $6.0 million credit to pension and other employee benefits expense in the second quarter of 2015 in accordance with
accounting guidance.
Salaries and
wages expense for the three and six months ended June 30, 2015 increased by $734,000 or 4.2%, and $1.7 million or 4.8%, respectively,
over the same periods in 2014. The increase is mainly a result of normal merit and market adjustments, increases in incentive
compensation as well as an increase in the number of employees. Pension and other employee related benefits were down $5.5 million
over both the three and six month periods in 2014, mainly as a result of the pension curtailment discussed above.
Other operating
expense for the second quarter of 2015 and for the first six months of 2015 was down $1.3 million or 12.1% and $757,000 or 3.8%
compared to the same periods in 2014. The decrease is mainly related to lower legal fees, and other real estate owned related
expenses.
Overall, all
other expense categories remained relatively flat compared to the same period prior year.
Income Tax
Expense
The provision
for income taxes was $9.0 million for an effective rate of 34.1% for the second quarter of 2015, compared to tax expense of $6.1
million and an effective rate of 32.0% for the same quarter in 2014. For the first six months of 2015 the tax provision was $15.3
million for an effective rate of 33.7% compared to a tax provision of $12.1 million and an effective rate of 31.9% for the same
period in 2014. The effective rates differ from the U.S. statutory rate of 35.0% primarily due to the effect of tax-exempt income
from loans, securities and life insurance assets. The increase in the effective rate in the second quarter of 2015 was mainly
a result of the accounting for the $6.0 million curtailment gain related to the change to the Company’s defined benefit
pension plan.
FINANCIAL
CONDITION
Total assets
were $5.4 billion at June 30, 2015, up $166.6 million or 3.2% over December 31, 2014. The growth over year-end was primarily attributable
to growth in originated loans, which were up $174.0 million or 6.1%, and growth in held-to-maturity securities which were up $57.6
million or 65.3%. This growth was partially offset by a decrease in acquired loans, which were down $45.4 million or 8.2% and
a decrease in available-for-sale securities which were down $19.8 million or 1.4%. Total deposits increased $34.9 million or 0.8%
compared to December 31, 2014, mainly a result of an inflow of municipal deposits. Other borrowings increased $136.8 million or
38.4% from December 31, 2014, as a result of loan growth outpacing deposit growth.
Securities
As of June 30,
2015, the Company’s securities portfolio was $1.5 billion or 28.1% of total assets, compared to $1.4 billion or 28.5% of
total assets at year-end 2014. The following table details the composition of available-for-sale and held-to-maturity securities.
Available-for-Sale
Securities |
|
|
|
|
|
|
|
|
06/30/2015 |
|
12/31/2014 |
(in
thousands) |
|
Amortized
Cost |
|
Fair
Value |
|
Amortized
Cost |
|
Fair
Value |
|
|
|
|
|
|
|
|
|
Obligations of U.S.
Government sponsored entities |
|
$ |
539,336 |
|
|
$ |
544,273 |
|
|
$ |
553,300 |
|
|
$ |
557,820 |
|
Obligations of U.S. states and
political subdivisions |
|
|
71,948 |
|
|
|
72,310 |
|
|
|
70,790 |
|
|
|
71,510 |
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies |
|
|
96,785 |
|
|
|
97,585 |
|
|
|
108,931 |
|
|
|
109,926 |
|
U.S. Government sponsored entities |
|
|
669,663 |
|
|
|
665,000 |
|
|
|
660,195 |
|
|
|
659,120 |
|
Non-U.S. Government agencies
or sponsored entities |
|
|
208 |
|
|
|
211 |
|
|
|
267 |
|
|
|
271 |
|
U.S.
corporate debt securities |
|
|
2,500 |
|
|
|
2,162 |
|
|
|
2,500 |
|
|
|
2,162 |
|
Total debt securities |
|
|
1,380,440 |
|
|
|
1,381,541 |
|
|
|
1,395,983 |
|
|
|
1,400,809 |
|
Equity
securities |
|
|
1,000 |
|
|
|
943 |
|
|
|
1,475 |
|
|
|
1,427 |
|
Total
available-for-sale securities |
|
$ |
1,381,440 |
|
|
$ |
1,382,484 |
|
|
$ |
1,397,458 |
|
|
$ |
1,402,236 |
|
Held-to-Maturity
Securities |
|
|
06/30/2015 |
|
12/31/2014 |
(in
thousands) |
|
Amortized
Cost |
|
Fair
Value |
|
Amortized
Cost |
|
Fair
Value |
Obligations of U.S.
Government sponsored entities |
|
$ |
132,671 |
|
|
$ |
132,556 |
|
|
$ |
71,906 |
|
|
$ |
72,269 |
|
Obligations
of U.S. states and political subdivisions |
|
$ |
13,066 |
|
|
$ |
13,520 |
|
|
$ |
16,262 |
|
|
$ |
16,767 |
|
Total
held-to-maturity debt securities |
|
$ |
145,737 |
|
|
$ |
146,076 |
|
|
$ |
88,168 |
|
|
$ |
89,036 |
|
The decrease
in the fair value of the available-for-sale portfolio was due primarily to changes in interest rates during the first six months
of 2015. The increase in interest rates during 2015 resulted in a decrease in the unrealized gains in the available-for-sale portfolio.
Management’s policy is to purchase investment grade securities that on average have relatively short duration, which helps
mitigate interest rate risk and provides sources of liquidity without significant risk to capital. The increase in the held-to-maturity
portfolio was due to purchases of Obligations of U.S. Government sponsored entities during the six month period ended June 30,
2015.
The Company
has no investments in preferred stock of U.S. government sponsored entities and no investments in pools of Trust Preferred securities.
Quarterly, the Company evaluates all investment securities with a fair value less than amortized cost to identify any other-than-temporary
impairment as defined under generally accepted accounting principles.
As a result
of the other-than-temporarily impairment review process, the Company does not consider any investment security held at June 30,
2015 to be other-than-temporarily impaired. Future changes in interest rates or the credit quality and credit support of the underlying
issuers may reduce the market value of these and other securities. If such decline is determined to be other than temporary, the
Company will record the necessary charge to earnings and/or accumulated other comprehensive income to reduce the securities to
their then current fair value.
The Company
maintains a trading portfolio with a fair value of $8.2 million as of June 30, 2015, compared to $9.0 million at December 31,
2014. The decrease in the trading portfolio reflects maturities or payments during the three and six months ended June 30, 2015.
For the three and six months ended June 30, 2015, net mark-to-market losses related to the securities trading portfolio were $74,000
and $137,000, respectively, compared to net mark-to-market losses for the three and six months ended June 30, 2014 of $34,000
and $93,000, respectively.
Loans and Leases |
|
|
|
Loans and leases at June 30,
2015 and December 31, 2014 were as follows: |
|
|
|
|
|
|
06
/30/2015 |
|
|
|
12
/31/2014 |
|
(in
thousands) |
|
|
Originated
|
|
|
|
Acquired
|
|
|
|
Total
Loans and Leases |
|
|
|
Originated |
|
|
|
Acquired |
|
|
|
Total
Loans and Leases |
|
Commercial
and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture |
|
$ |
61,744 |
|
|
$ |
0 |
|
|
$ |
61,744 |
|
|
$ |
78,507 |
|
|
$ |
0 |
|
|
$ |
78,507 |
|
Commercial
and industrial other |
|
|
724,196 |
|
|
|
92,875 |
|
|
|
817,071 |
|
|
|
688,529 |
|
|
|
97,034 |
|
|
|
785,563 |
|
Subtotal
commercial and industrial |
|
|
785,940 |
|
|
|
92,875 |
|
|
|
878,815 |
|
|
|
767,036 |
|
|
|
97,034 |
|
|
|
864,070 |
|
Commercial
real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
74,795 |
|
|
|
37,981 |
|
|
|
112,776 |
|
|
|
72,427 |
|
|
|
35,906 |
|
|
|
108,333 |
|
Agriculture |
|
|
74,586 |
|
|
|
2,214 |
|
|
|
76,800 |
|
|
|
58,994 |
|
|
|
3,182 |
|
|
|
62,176 |
|
Commercial
real estate other |
|
|
1,055,007 |
|
|
|
278,825 |
|
|
|
1,333,832 |
|
|
|
979,621 |
|
|
|
308,488 |
|
|
|
1,288,109 |
|
Subtotal
commercial real estate |
|
|
1,204,388 |
|
|
|
319,020 |
|
|
|
1,523,408 |
|
|
|
1,111,042 |
|
|
|
347,576 |
|
|
|
1,458,618 |
|
Residential
real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
equity |
|
|
193,332 |
|
|
|
48,717 |
|
|
|
242,049 |
|
|
|
186,957 |
|
|
|
56,008 |
|
|
|
242,965 |
|
Mortgages |
|
|
760,858 |
|
|
|
30,607 |
|
|
|
791,465 |
|
|
|
710,904 |
|
|
|
32,282 |
|
|
|
743,186 |
|
Subtotal
residential real estate |
|
|
954,190 |
|
|
|
79,324 |
|
|
|
1,033,514 |
|
|
|
897,861 |
|
|
|
88,290 |
|
|
|
986,151 |
|
Consumer
and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect |
|
|
17,866 |
|
|
|
0 |
|
|
|
17,866 |
|
|
|
18,298 |
|
|
|
0 |
|
|
|
18,298 |
|
Consumer
and other |
|
|
39,842 |
|
|
|
973 |
|
|
|
40,815 |
|
|
|
35,874 |
|
|
|
1,095 |
|
|
|
36,969 |
|
Subtotal
consumer and other |
|
|
57,708 |
|
|
|
973 |
|
|
|
58,681 |
|
|
|
54,172 |
|
|
|
1,095 |
|
|
|
55,267 |
|
Leases |
|
|
14,190 |
|
|
|
0 |
|
|
|
14,190 |
|
|
|
12,251 |
|
|
|
0 |
|
|
|
12,251 |
|
Covered
loans |
|
|
0 |
|
|
|
15,771 |
|
|
|
15,771 |
|
|
|
0 |
|
|
|
19,319 |
|
|
|
19,319 |
|
Total
loans and leases |
|
|
3,016,416 |
|
|
|
507,963 |
|
|
|
3,524,379 |
|
|
|
2,842,362 |
|
|
|
553,314 |
|
|
|
3,395,676 |
|
Less:
unearned income and deferred costs and fees |
|
|
(2,448 |
) |
|
|
0 |
|
|
|
(2,448 |
) |
|
|
(2,388 |
) |
|
|
0 |
|
|
|
(2,388 |
|
Total
loans and leases, net of unearned income and deferred costs and fees |
|
$ |
3,013,968 |
|
|
$ |
507,963 |
|
|
$ |
3,521,931 |
|
|
$ |
2,839,974 |
|
|
$ |
553,314 |
|
|
$ |
3,393,288 |
|
Residential
real estate loans, including home equity loans at June 30, 2015 were $1.0 billion, $474 million or 4.8%
compared to December 31, 2014, and comprised 29.3% of total loans and leases. Growth in residential loan balance
is impacted by the Company’s decision to retain these loans or sell them in the secondary market due to interest rate
considerations. The Company’s Asset/Liability Committee meets regularly and establishes standards for selling and
retaining residential real estate mortgage originations.
The Company
may sell residential real estate loans in the secondary market based on interest rate considerations. These residential real estate
loans are generally sold to Federal Home Loan Mortgage Corporation (“FHLMC”) or State of New York Mortgage Agency
(“SONYMA”) without recourse in accordance with standard secondary market loan sale agreements. These residential real
estate loans also are subject to customary representations and warranties made by the Company, including representations and warranties
related to gross incompetence and fraud. The Company has not had to repurchase any loans as a result of these representations
and warranties. While in the past in rare circumstances the Company agreed to sell residential real estate loans with recourse,
the Company has not done so in the past several years and the amount of such loans included on the Company’s balance sheet
at June 30, 2015 was insignificant. The Company has never had to repurchase a loan sold with recourse.
During the first
six months of 2015 and 2014, the Company sold residential mortgage loans totaling $0.7 million and $8.2 million, respectively,
and realized gains on these sales of $10,000 and $221,000, respectively. These residential real estate loans were sold without
recourse in accordance with standard secondary market loan sale agreements. When residential mortgage loans are sold, the Company
typically retains all servicing rights, which provides the Company with a source of fee income. Mortgage servicing rights, at
amortized basis, totaled $1.0 million at June 30, 2015 and $1.0 million at December 31, 2014.
The Company
has not originated any hybrid loans, such as payment option ARMs. The Company underwrites residential real estate loans in accordance
with secondary market standards in effect at the time of origination, including loan-to-value (“LTV”) and documentation
requirements. The Company does not underwrite low or reduced documentation loans other than those that meet secondary market standards
for low or reduced documentation loans. In those instances, W-2’s and paystubs are used instead of sending Verification
of Employment forms to employers to verify income and bank deposit statements are used instead of Verification of Deposit forms
mailed to financial institutions to verify deposit balances.
Commercial and
industrial loans and commercial real estate loans totaled $878.8 million and $1.5 billion, and represented 25.0% and 43.3%, respectively
of total loans as of June 30, 2015. The commercial real estate portfolio was up 4.4% over year-end 2014, while commercial and
industrial loans were up 1.7%. As of June 30, 2015, agriculturally-related loans totaled $138.5 million or 3.9% of total loans
and leases, down from $140.7 million or 4.2% of total loans and leases at December 31, 2014. There is generally an increase in
agriculturally-related loans at year end related to tax planning and these loans are typically paid down over the first part of
the year. Agriculturally-related loans include loans to dairy farms and cash and vegetable crop farms. Agriculturally-related
loans are primarily made based on identified cash flows of the borrower with consideration given to underlying collateral, personal
guarantees, and government related guarantees. Agriculturally-related loans are generally secured by the assets or property being
financed or other business assets such as accounts receivable, livestock, equipment or commodities/crops.
The acquired
loans in the above table reflect loans acquired in the acquisition of VIST Financial Corp. during the third quarter of 2012. The
acquired loans were recorded at fair value pursuant to the purchase accounting guidelines in FASB ASC 805 – “Fair
Value Measurements and Disclosures” (as determined by the present value of expected future cash flows) with no valuation
allowance (i.e., the allowance for loan losses). Upon acquisition, the Company evaluated whether each acquired loan (regardless
of size) was within the scope of ASC 310-30, “Receivables – Loans and Debt Securities Acquired with Deteriorated Credit
Quality”. The carrying value of the acquired loans reflects management’s best estimate of the amount to be realized
from the acquired loan and lease portfolios. However, the amounts the Company actually realizes on these loans could differ materially
from the carrying value reflected in these financial statements, based upon the timing of collections on the acquired loans in
future periods, underlying collateral values and the ability of borrowers to continue to make payments.
The carrying
value of acquired loans acquired and accounted for in accordance with ASC Subtopic 310-30, “Receivables Loans and Debt Securities
Acquired with Deteriorated Credit Quality,” was $30.5 million at June 30, 2015 as compared to $34.4 million at December
31, 2014. Under ASC Subtopic 310-30, loans may be aggregated and accounted for as pools of loans if the loans being aggregated
have common risk characteristics. The Company elected to account for the loans with evidence of credit deterioration individually
rather than aggregate them into pools. The difference between the undiscounted cash flows expected at acquisition and the investment
in the acquired loans, or the “accretable yield,” is recognized as interest income utilizing the level-yield method
over the life of each loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows
expected at acquisition, or the “non-accretable difference,” are not recognized as a yield adjustment, as a loss accrual
or as a valuation allowance.
Increases in
expected cash flows subsequent to the acquisition are recognized prospectively through an adjustment of the yield on the loans
over the remaining life. Subsequent decreases to the expected cash flows require us to evaluate the need for an addition to the
allowance for loan losses. Valuation allowances (recognized in the allowance for loan losses) on these impaired loans reflect
only losses incurred after the acquisition (representing all cash flows that were expected at acquisition but currently are not
expected to be received).
The carrying
value of loans not exhibiting evidence of credit impairment at the time of the acquisition (i.e. loans outside of the scope of
ASC 310-30) was $477.5 million at June 30, 2015. At acquisition, these loans were recorded at fair value, including a credit discount.
Credit losses on acquired performing loans are estimated based on analysis of the performing portfolio. The purchased performing
portfolio also included a general interest rate mark (premium). Both the credit discount and interest rate mark are accreted/amortized
as a yield adjustment over the estimated lives of the loans. Interest is accrued daily on the outstanding principal balance of
purchased performing loans.
At June 30,
2015, acquired loans included $15.8 million of covered loans. VIST Financial Corp had acquired these loans in an FDIC assisted
transaction in the fourth quarter of 2010. In accordance with loss sharing agreements with the FDIC, certain losses and expenses
relating to covered loans may be reimbursed by the FDIC at 70% or, if certain levels of reimbursement are reached, 80%. See Note
7 – “FDIC Indemnification Asset Related to Covered Loans” in the Notes to Unaudited Condensed Consolidated Financial
Statements included in Part I of this Quarterly Report on Form 10-Q.
The Company
has adopted comprehensive lending policies, underwriting standards and loan review procedures. Management reviews these policies
and procedures on a regular basis. The Company discussed its lending policies and underwriting guidelines for its various lending
portfolios in Note 3 – “Loans and Leases” in the Notes to Consolidated Financial Statements contained in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2014. There have
been no significant changes in these policies and guidelines. As such, these policies are reflective of new originations as well
as those balances held at June 30, 2015. The Company’s Board of Directors approves
the lending policies at least annually. The Company recognizes that exceptions to policy guidelines may occasionally occur and
has established procedures for approving exceptions to these policy guidelines. Management has also implemented reporting
systems to monitor loan originations, loan quality, concentrations of credit, loan delinquencies and nonperforming loans and potential
problem loans.
The
Company’s loan and lease customers are located primarily in the New York and Pennsylvania communities served by its four
subsidiary banks. Although operating in numerous communities in New York State and Pennsylvania, the Company is still dependent
on the general economic conditions of these states and the local economic conditions of the communities within those states in
which the Company does business. Other than geographic and general economic risks, management is not aware of any material concentrations
of credit risk to any industry or individual borrower.
The Allowance for Loan and Lease
Losses
The tables below
provide, as of the dates indicated, an allocation of the allowance for probable and inherent loan losses by type. The allocation
is neither indicative of the specific amounts or the loan categories in which future charge-offs may occur, nor is it an indicator
of future loss trends. The allocation of the allowance to each category does not restrict the use of the allowance to absorb losses
in any category.
(in
thousands) | |
| 06/30/2015 | | |
| 12/31/2014 | | |
| 06/30/2014 | |
| |
| | | |
| | | |
| | |
Allowance for originated loans and leases | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Commercial and industrial | |
$ | 8,224 | | |
$ | 9,157 | | |
$ | 8,562 | |
Commercial real estate | |
| 13,487 | | |
| 12,069 | | |
| 10,389 | |
Residential real estate | |
| 5,583 | | |
| 5,030 | | |
| 5,445 | |
Consumer and
other | |
| 2,134 | | |
| 1,900 | | |
| 2,356 | |
Total | |
$ | 29,428 | | |
$ | 28,156 | | |
$ | 26,752 | |
(in
thousands) | |
| 06/30/2015 | | |
| 12/31/2014 | | |
| 06/30/2014 | |
| |
| | | |
| | | |
| | |
Allowance for acquired loans | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Commercial and industrial | |
$ | 384 | | |
$ | 431 | | |
$ | 159 | |
Commercial real estate | |
| 167 | | |
| 337 | | |
| 460 | |
Residential real estate | |
| 100 | | |
| 51 | | |
| 49 | |
Consumer and
other | |
| 12 | | |
| 22 | | |
| 97 | |
Total | |
$ | 663 | | |
$ | 841 | | |
$ | 765 | |
As
of June 30, 2015, the total allowance for loan and lease losses was $30.1 million, which was $1.1 million or 3.8% over year-end
2014. The increase in the allowance compared to year-end was mainly due growth in the originated loan portfolio. Loans internally-classified
Special Mention, Substandard and Doubtful were down from prior year as were the level of nonperforming loans and leases. The allowance
for loan and lease losses covered 139.36% of nonperforming loans and leases as of June 30, 2015, compared to 128.43% at December
31, 2014, and 103.08% at June 30, 2014.
The
Company’s allowance for originated loan and lease losses totaled $29.4 million at June 30, 2015, which represented 0.98%
of total originated loans, compared to 0.99% at prior quarter end, and 1.02% at June 30, 2014. Originated loans internally-classified
as Special Mention, Substandard and Doubtful totaled $47.3 million at June 30, 2015, which were in down $6.8 million or 12.6%
compared to prior quarter, and down $9.4 million or 16.6% compared to June 30, 2014. The decrease is mainly due to paydowns of
classified assets and upgrades of risk ratings in our commercial loan portfolio and commercial real estate construction portfolios
as a result of improving financial conditions of our commercial customers.
The
allowance for acquired loans at June 30, 2015 was $663,000, down $178,000 or 21.2% from year-end 2014 and down $102,000 or 13.3%
compared to June 30, 2014. The amount of acquired loans internally-classified as Special Mention, Substandard and Doubtful totaled
$23.5 million at June 30, 2015, down from $27.3 million at year-end 2014 and $42.4 million at June 30, 2014. Loan pay downs coupled
with charge offs contributed to the decrease from the same quarter prior year and year-end 2014. Nonaccrual acquired loans were
$5.0 million as of June 30, 2015 compared to $4.7 million at year-end 2014, and $5.9 million at June 30, 2014.
Activity in the Company’s allowance
for loan and lease losses during the first six months of 2015 and 2014 is illustrated in the table below.
Analysis of the Allowance for Originated
Loan and Lease Losses |
|
|
|
(in
thousands) |
|
06/30/2015 |
|
06/30/2014 |
Average originated
loans outstanding during period |
|
$ |
2,900,786 |
|
|
$ |
2,559,332 |
|
Balance of originated allowance
at beginning of year |
|
$ |
28,156 |
|
|
$ |
26,700 |
|
|
|
|
|
|
|
|
|
|
ORIGINATED LOANS
CHARGED-OFF: |
|
|
|
|
|
|
|
|
Commercial and industrial |
|
|
44 |
|
|
|
254 |
|
Commercial real estate |
|
|
14 |
|
|
|
613 |
|
Residential real estate |
|
|
312 |
|
|
|
267 |
|
Consumer
and other |
|
|
510 |
|
|
|
666 |
|
Total
loans charged-off |
|
$ |
880 |
|
|
$ |
1,800 |
|
|
|
|
|
|
|
|
|
|
RECOVERIES OF
ORIGINATED LOANS PREVIOUSLY CHARGED-OFF: |
|
|
|
|
|
|
|
|
Commercial and industrial |
|
|
235 |
|
|
|
489 |
|
Commercial real estate |
|
|
477 |
|
|
|
562 |
|
Residential real estate |
|
|
49 |
|
|
|
86 |
|
Consumer
and other |
|
|
282 |
|
|
|
260 |
|
Total
loans recoveries |
|
$ |
1,043 |
|
|
$ |
1,397 |
|
Net loans (recovered) charged-off |
|
|
(163 |
) |
|
|
403 |
|
Additions
to originated allowance charged to operations |
|
|
1,109 |
|
|
|
455 |
|
Balance
of originated allowance at end of period |
|
$ |
29,428 |
|
|
$ |
26,752 |
|
Allowance
for originated loans and leases as a percentage of originated loans and leases |
|
|
0.98 |
% |
|
|
1.02 |
% |
Annualized
net (recoveries) charge-offs on originated loans to average total originated loans and leases during the period |
|
|
(0.01 |
%) |
|
|
0.03 |
% |
Analysis of the Allowance for Acquired
Loan Losses |
| |
|
(in
thousands) | |
06/30/2015 | |
06/30/2014 |
Average acquired
loans outstanding during period | |
$ | 530,496 | | |
$ | 647,618 | |
Balance of acquired allowance
at beginning of year | |
| 841 | | |
| 1,270 | |
| |
| | | |
| | |
ACQUIRED
LOANS CHARGED-OFF: | |
| | | |
| | |
Commercial and industrial | |
| 53 | | |
| 25 | |
Commercial real estate | |
| 156 | | |
| 551 | |
Residential real estate | |
| 112 | | |
| 277 | |
Consumer
and other | |
| 0 | | |
| 7 | |
Total
loans charged-off | |
$ | 321 | | |
$ | 860 | |
| |
| | | |
| | |
Commercial and industrial | |
| 7 | | |
| 0 | |
Commercial real estate | |
| 112 | | |
| 0 | |
Residential
real estate | |
| 2 | | |
| 0 | |
Total
loans recovered | |
$ | 121 | | |
$ | 0 | |
Net loans charged-off | |
| 200 | | |
| 860 | |
Additions
to acquired allowance charged to operations | |
| 22 | | |
| 355 | |
Balance
of acquired allowance at end of period | |
$ | 663 | | |
$ | 765 | |
Allowance
for acquired loans as a percentage of acquired loans outstanding acquired loans and leases | |
| 0.12 | % | |
| 0.12 | % |
Annualized
net charge-offs on acquired loans as a percentage of average acquired loans and leases outstanding during the period | |
| 0.08 | % | |
| 0.25 | % |
Annualized
total net charge-offs as a percentage of average loans and leases outstanding during the period | |
| 0.00 | % | |
| 0.08 | % |
Analysis of Past Due and Nonperforming
Loans |
|
(in
thousands) |
|
|
06/30/20151 |
|
12/31/20141 |
|
06/30/20141 |
|
|
Loans
90 days past due and accruing |
|
|
|
|
|
|
|
|
|
Commercial
and industrial |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Commercial
real estate |
|
|
0 |
|
|
|
0 |
|
|
|
1 |
|
Residential
real estate |
|
|
58 |
|
|
|
106 |
|
|
|
542 |
|
Total
loans 90 days past due and accruing |
|
|
58 |
|
|
|
106 |
|
|
|
543 |
|
Nonaccrual
loans |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
and industrial |
|
|
2,012 |
|
|
|
2,116 |
|
|
|
1,758 |
|
Commercial
real estate |
|
|
6,872 |
|
|
|
7,520 |
|
|
|
10,008 |
|
Residential
real estate |
|
|
10,469 |
|
|
|
9,043 |
|
|
|
10,490 |
|
Consumer
and other |
|
|
243 |
|
|
|
349 |
|
|
|
569 |
|
Total
nonaccrual loans |
|
|
19,596 |
|
|
|
19,028 |
|
|
|
22,825 |
|
Troubled
debt restructurings not included above |
|
|
1,939 |
|
|
|
3,444 |
|
|
|
3,327 |
|
Total
nonperforming loans and leases |
|
|
21,593 |
|
|
|
22,578 |
|
|
|
26,695 |
|
Other
real estate owned |
|
|
2,570 |
|
|
|
5,683 |
|
|
|
6,795 |
|
Total
nonperforming assets |
|
$ |
24,163 |
|
|
$ |
28,261 |
|
|
$ |
33,490 |
|
Allowance
as a percentage of nonperforming loans and leases |
|
|
139.36 |
% |
|
|
128.43 |
% |
|
|
103.08 |
% |
Total
nonperforming loans and leases as percentage of total loans and leases |
|
|
0.61 |
% |
|
|
0.67 |
% |
|
|
0.83 |
% |
Total
nonperforming assets as percentage of total assets |
|
|
0.44 |
% |
|
|
0.54 |
% |
|
|
0.66 |
% |
1 The June 30, 2015, December
31, 2014, and June 30, 2014 columns in the above table exclude $3.7 million, $3.5 million, and $4.0 million, respectively,
of acquired loans that are 90 days past due and accruing interest. These loans were originally recorded at fair value on the
acquisition date of August 1, 2012. These loans are considered to be accruing as we can reasonably estimate future cash flows
on these acquired loans and we expect to fully collect the carrying value of these loans. Therefore, we are accreting the
difference between the carrying value of these loans and their expected cash flows into interest income. |
Net loan and
lease charge-offs totaled $316,000 for the three months ended June 30, 2015, compared to $564,000 for the same period in 2014.
Annualized net charge offs for the six month period ended June 30, 2015 as a percentage of average total loans and leases was
0.04% compared to 0.07% for the six months ended June 30, 2014, compared to the most recent peer percentage is 0.09%.
The provision
for loan and lease losses was $922,000 and $1.1 million for the three and six months ended June 30, 2015, compared to $67,000
and $810,000 for the same periods in 2014. The increase in provision for loan and lease losses in 2015 compared to 2014 was mainly
a result of growth in total loans, which was partially offset by generally favorable asset quality trends, including reductions
in classified loans and nonperforming loans, and lower net charge-offs.
Nonperforming
assets include nonaccrual loans, troubled debt restructurings (“TDR”), and foreclosed real estate/other real estate
owned. Nonperforming assets represented 0.44% of total assets at June 30, 2015, compared to 0.54% at December 31, 2014, and 0.66%
at June 30, 2014. The Company’s ratio of nonperforming assets to total assets
continues to compare favorably to our peer group’s most recent ratio of 0.88% at March 31, 2015.
Total nonperforming
loans and leases were down $985,000 or 4.4% from year end 2014, and down $5.1 million or 19.1% from June 30, 2014. A breakdown
of nonperforming loans by portfolio segment is shown above. The decrease in nonperforming commercial real estate loans since June
30, 2014 is mainly due to significant payments received on two large commercial relationships in 2014. The decrease in the line
captioned, ‘Troubled debt restructurings not included above’, from year-end 2014 was a result of several loans performing
in accordance with their modified terms for an extended period and therefore no longer required to be reported on this line item.
Total nonperforming assets were down $4.1 million compared to December 31, 2014. The decrease is mainly due to the sale of one
property that was acquired through foreclosure in the second quarter of 2014.
Loans are considered
modified in a TDR when, due to a borrower’s financial difficulties, the Company makes a concession(s) to the borrower that
it would not otherwise consider and the borrower could not obtain elsewhere. These modifications may include, among others, an
extension of the term of the loan, and granting a period when interest-only payments can be made, with the principal payments
made over the remaining term of the loan or at maturity. TDRs are included in the above table within the following categories:
“loans 90 days past due and accruing”, “nonaccrual loans”, or “troubled debt restructurings not
included above”. Loans in the latter category include loans that meet the definition of a TDR but are performing in accordance
with the modified terms and therefore classified as accruing loans. At June 30, 2015 the Company had $6.1 million in TDRs, and
of that total $4.2 million were reported as nonaccrual and $1.9 million were considered performing and included in the table above.
In general,
the Company places a loan on nonaccrual status if principal or interest payments become 90 days or more past due and/or management
deems the collectability of the principal and/or interest to be in question, as well as when required by applicable regulations.
Although in nonaccrual status, the Company may continue to receive payments on these loans. These payments are generally recorded
as a reduction to principal, and interest income is recorded only after principal recovery is reasonably assured.
The Company’s
recorded investment in loans and leases that are considered impaired totaled $16.7 million at June 30, 2015, compared to $12.6
million at December 31, 2014 and $17.5 million at June 30, 2014. A loan is impaired when, based on current information and events,
it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired
loans consist of our non-homogenous nonaccrual loans, and all TDRs. Specific reserves on individually identified impaired loans
that are not collateral dependent are measured based on the present value of expected future cash flows discounted at the original
effective interest rate of each loan. For loans that are collateral dependent, impairment is measured based on the fair value
of the collateral less estimated selling costs, and such impaired amounts are generally charged off.
The year-to-date
average recorded investment in impaired loans and leases was $20.7 million at June 30, 2015, compared to $19.2 million at June
30, 2014. At June 30, 2015 there was a specific reserve of $1.1 million on impaired loans compared to $1.2 million of specific
reserves at December 31, 2014. The specific reserve of $1.1 million reported at June 30, 2015 includes a specific reserve of $735,000
for one commercial real estate loan in the originated portfolio and specific reserves of $387,000 on 5 loans within the acquired
portfolio. The majority of impaired loans are collateral dependent impaired loans that have limited exposure or require limited
specific reserve because of the amount of collateral support with respect to these loans and previous charge-offs. Interest payments
on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured. In these
cases, interest is recognized on a cash basis.
The ratio
of the allowance to nonperforming loans (loans past due 90 days and accruing, nonaccrual loans and restructured troubled
debt) was 139.36% at June 30, 2015, improved from 128.43% in December 31, 2014, and 103.08% at June 30, 2014. The improvement
in the ratio reflects the decrease in nonperforming loans over the year as well as an increase in the total allowance. The
Company’s nonperforming loans are mostly made up of collateral dependent impaired loans with limited exposure or
requiring limited specific reserve due to the level of collateral available with respect to these loans and/or previous
charge-offs. The Company’s peer group ratio as provided by the Federal Reserve Bank was 162.44% as of March 31,
2015.
Management reviews
the loan portfolio continuously for evidence of potential problem loans and leases. Potential problem loans and leases are loans
and leases that are currently performing in accordance with contractual terms, but where known information about possible credit
problems of the related borrowers causes management to have doubt as to the ability of such borrowers to comply with the present
loan payment terms and may result in such loans and leases becoming nonperforming at some time in the future. Management considers
loans and leases classified as Substandard, which continue to accrue interest, to be potential problem loans and leases. The Company,
through its internal loan review function, identified 32 commercial relationships from the originated portfolio and 22 commercial
relationships from the acquired portfolio totaling $15.7 million and $11.4 million, respectively at June 30, 2015 that were potential
problem loans. At December 31, 2014, the Company had identified 34 relationships totaling $14.8 million in the originated portfolio
and 21 relationships totaling $8.8 million in the acquired portfolio that were potential problem loans. Of the 32 commercial relationships
in the originated portfolio at June 30, 2015, that were Substandard, there were 5 relationships that equaled or exceeded $1.0
million, which in aggregate totaled $9.2 million, the largest of which was $3.5 million. Of the 22 commercial relationships from
the acquired loan portfolio at June 30, 2015, that were Substandard, there were 3 relationships that equaled or exceeded $1.0
million, which in aggregate totaled $5.4 million, the largest of which is $2.0 million. The Company continues to monitor these
potential problem relationships; however, management cannot predict the extent to which continued weak economic conditions or
other factors may further impact borrowers. These loans remain in a performing status due to a variety of factors, including payment
history, the value of collateral supporting the credits, and personal or government guarantees. These factors, when considered
in the aggregate, give management reason to believe that the current risk exposure on these loans does not warrant accounting
for these loans as nonperforming. However, these loans do exhibit certain risk factors, which have the potential to cause them
to become nonperforming. Accordingly, management’s attention is focused on these credits, which are reviewed on at least
a quarterly basis.
Capital
Total equity
was $505.4 million at June 30, 2015, an increase of $15.8 million or 3.2% from December 31, 2014. The increase reflects growth
in retained earnings and additional paid-in capital.
Additional paid-in
capital increased by $2.7 million, from $348.9 million at December 31, 2014, to $351.5 million at June 30, 2015. The increase
is primarily attributable to the following: $1.6 million related to shares issued under the employee stock ownership plan, $1.6
million related to shares issued for the exercise of stock options, and $953,000 related to stock-based compensation. Retained
earnings increased by $16.8 million from $165.2 million at December 31, 2014, to $182.0 million at June 30, 2015, reflecting net
income of $30.1 million less dividends paid of $12.6 million. Retained earnings were also impacted by the adoption of accounting
guidance related to accounting for investments in qualified affordable housing projects in the first quarter of 2015. The adoption
resulted in a $725,000 reduction of retained earnings. Accumulated other comprehensive loss increased from a net loss of $24.0
million at December 31, 2014 to a net loss of $27.6 million at June 30, 2015, reflecting a $2.2 million decrease in unrealized
gains on available-for-sale securities due to an increase in market rates, and a $1.4 million increase related to postretirement
benefit plans. During the second quarter of 2015, the Company recorded a one-time; $3.2 million loss to accumulated other comprehensive
income due to the curtailment of its defined benefit pension plan in accordance with FASB ASC 715. Under regulatory requirements,
amounts reported as accumulated other comprehensive income/loss related to net unrealized gain or loss on available-for-sale securities
and the funded status of the Company’s defined benefit post-retirement benefit plans do not increase or reduce regulatory
capital and are not included in the calculation of risk-based capital and leverage ratios.
Cash dividends
paid in the first six months of 2015 totaled approximately $12.6 million, representing 41.7% of year to date 2015 earnings. Cash
dividends of $0.84 per common share paid in the first six months of 2015 were up 5.0% over cash dividends of $0.80 per common
share paid in the first six months of 2014.
On July 24,
2014, the Company’s Board of Directors authorized, at the discretion of senior management, the repurchase of up to 400,000
shares of the Company’s outstanding common stock. Purchases may be made on the open market or in privately negotiated transactions
over the 24 months following adoption of the repurchase program. The Company did not repurchase any shares during the first quarter
and repurchased 27,892 shares in the second quarter of 2015 at an average price of $51.66. As of June 30, 2015 the Company has
repurchased an aggregate of 129,358 shares under the plan at an average price of $46.75.
The Company
and its banking subsidiaries are subject to various regulatory capital requirements administered by Federal banking agencies.
In July 2013, the FRB approved and published the final Basel III Capital Rules establishing a new comprehensive capital framework
for U.S. banking organizations. The rules implement the Basel Committee’s December 2010 framework known as “Basel
III” for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act. The Basel III
Capital Rules substantially revise the risk-based capital requirements applicable to bank holding companies and depository institutions,
including Tompkins Financial, compared to the current U.S. risk-based capital rules. The Basel III Capital Rules define the components
of capital, and address risk weights and other issues affecting the denominator in banking institutions’ regulatory capital
ratios. It also replaces the existing risk-weighting approach, with a more risk-sensitive approach based, in part, on the standardized
approach in the Basel Committee’s 2004 “Basel II” capital accords and implements the requirements of Section 939A
of the Dodd-Frank Act to remove references to credit ratings utilized in the federal banking agencies’ rules. The Basel
III Capital Rules were effective for Tompkins on January 1, 2015 (subject to a phase-in period).
As required
under Dodd-Frank, a new capital ratio, “common equity tier 1 capital ratio” (CET1) was established. This ratio allows
only common equity to qualify as tier 1 capital. The new CET1 ratio also will include most elements of accumulated other comprehensive
income, including unrealized securities gains and losses, as part of both total regulatory capital (numerator) and total assets
(denominator). Community banks however were given the opportunity to make a one-time irrevocable election to include or not to
include certain elements of other comprehensive income, most notably unrealized securities gains or losses. Tompkins elected to
not include the certain items of other comprehensive income in its capital calculation.
In addition
to setting higher minimum capital ratios, the new rules, introduce a capital conservation buffer, which must be added to each
of the minimum capital ratios and is designed to absorb losses during periods of economic stress. The capital conservation buffer
will be phased-in over five years beginning on January 1, 2016 and will be set at 2.5% when fully phased-in. If a banking organization
fails to hold capital above minimum capital ratios, including the capital conservation buffer, it will be subject to certain restrictions
on capital distributions and discretionary bonus payments.
The final rules
eliminated the proposed phase-out over 10 years of Trust Preferred Services, or “TRUPs” as tier 1 capital for banks,
such as Tompkins Financial, that have less than $15 billion in total assets. Under the final rule, grandfathered TRUPs, such as
Tompkins Financial’s outstanding TRUPs, would continue to qualify as tier 1 capital until they mature or are redeemed, up
to a limit of 25% of tier 1 capital (for grandfathered TRUPs and other grandfathered tier 1 capital components).
The following
table provides a summary of the Company’s capital ratios as of June 30, 2015.
REGULATORY
CAPITAL ANALYSIS |
June
30, 2015 |
|
Actual |
|
Well
Capitalized Requirement |
(dollar
amounts in thousands) |
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
Total Capital (to risk
weighted assets) |
|
$ |
503,602 |
|
|
|
13.46 |
% |
|
$ |
374,020 |
|
|
|
10.00 |
% |
Tier 1 Capital (to risk weighted
assets) |
|
$ |
471,580 |
|
|
|
12.61 |
% |
|
$ |
299,216 |
|
|
|
8.00 |
% |
Tier 1 Common Equity (to risk weighted
assets) |
|
$ |
434,157 |
|
|
|
11.61 |
% |
|
$ |
243,113 |
|
|
|
6.50 |
% |
Tier
1 Capital (to average assets) |
|
$ |
471,580 |
|
|
|
8.92 |
% |
|
$ |
264,342 |
|
|
|
5.00 |
% |
As illustrated
above, the Company’s capital ratios on June 30, 2015 remained above the minimum requirements for well capitalized institutions.
Total capital as a percent of risk weighted assets decreased from 13.6% as of December 31, 2014 to 13.5% at June 30, 2015. Tier
1 capital as a percent of risk weighted assets decreased from 12.8% at the end of 2014 to 12.6% as of June 30, 2015. Tier 1 capital
as a percent of average assets was 8.9% at June 30, 2015 up from 8.7% at year end December 31, 2014. Common equity tier 1 capital
was 11.6% at the end of the second quarter of 2015, up from 11.5% at the end of the first quarter. All ratios were negatively
impacted by the new Basel III requirements the Company was subject to in the reporting period.
As of June 30,
2015, the capital ratios for the Company’s subsidiary banks also exceeded the minimum levels required to be considered well
capitalized.
Deposits
and Other Liabilities
Total deposits
of $4.2 billion at June 30, 2015 were flat compared to December 31, 2014 as a $66.8 million increase in money market savings and
interest bearing checking deposits were offset by a $40.1 million decline in noninterest bearing deposits. The improvement in
money market savings and interest checking deposits can be attributed primarily to municipal customers and reflects an inflow
of tax receipts. The decrease in noninterest bearing balances was partially due to the seasonality experienced by the Company’s
agricultural related businesses, as deposit balances generally accumulate at year end and are subsequently put to use during the
first half of the year.
The most significant
source of funding for the Company is core deposits. The Company defines core deposits as total deposits less time deposits of
$250,000 or more, brokered deposits and municipal money market deposits. Core deposits of $3.4 billion were relatively flat at
June 30, 2015 compared to year-end 2014. Core deposits represented 80.7% of total deposits at June 30, 2015, compared to 81.1%
of total deposits at December 31, 2014.
Municipal money
market savings and interest checking accounts of $706.8 million at June 30, 2015 increased $48.6 million or 7.4% from $658.2 million
at year-end 2014. In general, there is a seasonal pattern to municipal deposits starting with a low point during July and August.
Account balances tend to increase throughout the fall and into the winter months from tax deposits and the Company receive an
additional inflow at the end of March from the electronic deposit of state funds.
The Company
uses both retail and wholesale repurchase agreements. Retail repurchase agreements are arrangements with local customers of the
Company, in which the Company agrees to sell securities to the customer with an agreement to repurchase those securities at a
specified later date. Retail repurchase agreements totaled $45.3 million at June 30, 2015, and $60.7 million at December 31, 2014.
Management generally views local repurchase agreements as an alternative to large time deposits. The Company’s wholesale
repurchase agreements totaled $85.7 million at June 30, 2015 and included $55.0 million with the FHLB and $30.7 million with a
large financial institution. Wholesale repurchase agreements totaled $86.3 million at December 31, 2014.
The Company’s
other borrowings totaled $493.3 million at June 30, 2015, up $136.8 million or 38.4% from $356.5 million at December 31, 2014.
Borrowings at June 30, 2015 included $249.0 million in FHLB overnight advances, $230.8 million of FHLB term advances, and a $13.5
million advance from a bank. Borrowings at year-end 2014 included $232.1 million in overnight advances from FHLB, $111.0 million
of FHLB term advances, and a $13.5 million advance from a bank. The increase in term borrowings reflects growth in earning assets
as deposit balances remained flat during the period. Of the $230.8 million in FHLB term advance at June 30, 2015, $160.1 million
is due over one year. In 2007, the Company elected the fair value option under FASB ASC Topic 825 for a $10.0 million advance
with the FHLB. The fair value of this advance decreased by $145,000 (net mark-to-market gain of $145,000) over the six months
ended June 30, 2015.
Liquidity
The objective
of liquidity management is to ensure the availability of adequate funding sources to satisfy the demand for credit, deposit withdrawals,
and business investment opportunities. The Company’s large, stable core deposit base and strong capital position are the
foundation for the Company’s liquidity position. The Company uses a variety of resources to meet its liquidity needs, which
include deposits, cash and cash equivalents, short-term investments, cash flow from lending and investing activities, repurchase
agreements, and borrowings. The Company’s Asset/Liability Management Committee monitors asset and liability positions of
the Company’s subsidiary banks individually and on a combined basis. The Committee reviews periodic reports on liquidity
and interest rate sensitivity positions. Comparisons with industry and peer groups are also monitored. The Company’s strong
reputation in the communities it serves, along with its strong financial condition, provides access to numerous sources of liquidity
as described below. Management believes these diverse liquidity sources provide sufficient means to meet all demands on the Company’s
liquidity that are reasonably likely to occur.
Core deposits,
discussed above under “Deposits and Other Liabilities”, are a primary and low cost funding source obtained primarily
through the Company’s branch network. In addition to core deposits, the Company uses non-core funding sources to support
asset growth. These non-core funding sources include time deposits of $250,000 or more, brokered time deposits, national deposit
listing services, municipal money market deposits, bank borrowings, securities sold under agreements to repurchase and overnight
and term advances from the FHLB. Rates and terms are the primary determinants of the mix of these funding sources. Non-core funding
sources of $1.4 billion at June 30, 2015 increased $144.0 million or 11.1% as compared to year end 2014. Non-core funding sources,
as a percentage of total liabilities, were 29.1% at June 30, 2015, compared to 27.0% at December 31, 2014. The increase in non-core
funding sources reflects an increase in mainly in term borrowings from the FHLB.
Non-core funding
sources may require securities to be pledged against the underlying liability. Securities carried at $1.2 billion and $1.1 billion
at June 30, 2015 and December 31, 2014, respectively, were either pledged or sold under agreements to repurchase. Pledged securities
represented 75.3% of total securities at June 30, 2015, compared to 72.3% of total securities at December 31, 2014.
Cash and cash
equivalents totaled $60.1 million as of June 30, 2015 which increased from $56.1 million at December 31, 2014. Short-term investments,
consisting of securities due in one year or less, decreased from $79.8 million at December 31, 2014, to $73.3 million on June
30, 2015. The Company also had $8.2 million of securities designated as trading securities at June 30, 2015.
Cash flow from
the loan and investment portfolios provides a significant source of liquidity. These assets may have stated maturities in excess
of one year, but have monthly principal reductions. Total mortgage-backed securities, at fair value, were $762.8 million at June
30, 2015 compared with $769.3 million at December 31, 2014. Outstanding principal balances of residential mortgage loans, consumer
loans, and leases totaled approximately $1.1 billion at June 30, 2015 as compared to $1.1 billion at December 31, 2014. Aggregate
amortization from monthly payments on these assets provides significant additional cash flow to the Company.
Liquidity is
enhanced by ready access to national and regional wholesale funding sources including Federal funds purchased, repurchase agreements,
brokered certificates of deposit, and FHLB advances. Through its subsidiary banks, the Company has borrowing relationships with
the FHLB and correspondent banks, which provide secured and unsecured borrowing capacity. At June 30, 2015, the unused borrowing
capacity on established lines with the FHLB was $1.2 billion. As members of the FHLB, the Company’s subsidiary banks can
use certain unencumbered mortgage-related assets and securities to secure additional borrowings from the FHLB. At June 30, 2015,
total unencumbered residential mortgage loans and securities of the Company were $491.2 million. Additional assets may also qualify
as collateral for FHLB advances upon approval of the FHLB.
The Company
has not identified any trends or circumstances that are reasonably likely to result in material increases or decreases in liquidity
in the near term.
Item
3. Quantitative and Qualitative Disclosure About Market Risk
Interest rate
risk is the primary market risk category associated with the Company’s operations. Interest rate risk refers to the volatility
of earnings caused by changes in interest rates. The Company manages interest rate risk using income simulation to measure interest
rate risk inherent in its on-balance sheet and off-balance sheet financial instruments at a given point in time. The simulation
models are used to estimate the potential effect of interest rate shifts on net interest income for future periods. Each quarter,
the Company’s Asset/Liability Management Committee reviews the simulation results to determine whether the exposure of net
interest income to changes in interest rates remains within levels approved by the Company’s Board of Directors. The Committee
also considers strategies to manage this exposure and incorporates these strategies into the investment and funding decisions
of the Company. The Company does not currently use derivatives, such as interest rate swaps, to manage its interest rate risk
exposure, but may consider such instruments in the future.
The Company’s
Board of Directors has set a policy that interest rate risk exposure will remain within a range whereby net interest income will
not decline by more than 10% in one year as a result of a 100 basis point parallel change in rates. Based upon the simulation
analysis performed as of May 31, 2015 a 200 basis point parallel upward change in interest rates over a one-year time frame would
result in a one-year decrease in net interest income from the base case of approximately 1.6%, while a 100 basis point parallel
decline in interest rates over a one-year period would result in an decrease in one-year net interest income from the base case
of 1.3%. The simulation assumes no balance sheet growth and no management action to address balance sheet mismatches.
If rates rise
in a parallel fashion (+200 basis points over 12 months, or +400 basis points over 24 months), net interest income is expected
to trend slightly below the base assumption, as upward adjustments to rate sensitive deposits and short-term funding outpace increases
to asset yields which are concentrated in intermediate to longer-term products. Once market rates stabilize, increases to funding
costs dissipate while asset yields continue to cycle higher. As a result, net interest income improves for the remainder of the
projection period.
Although the
simulation model is useful in identifying potential exposure to interest rate movements, actual results may differ from those
modeled as the repricing, maturity, and prepayment characteristics of financial instruments may change to a different degree than
modeled. In addition, the model does not reflect actions that management may employ to manage the Company’s interest rate
risk exposure. The Company’s current liquidity profile, capital position, and growth
prospects, offer a level of flexibility for management to take actions that could offset some of the negative effects of
unfavorable movements in interest rates. Management believes the current exposure
to changes in interest rates is not significant in relation to the earnings and capital strength of the Company.
In addition
to the simulation analysis, management uses an interest rate gap measure. The table below is a Condensed Static Gap Report, which
illustrates the anticipated repricing intervals of assets and liabilities as of June 30, 2015. The Company’s one-year net
interest rate gap was a negative $368.7 million or 6.78% of total assets at June 30, 2015, compared with a negative $225.8 million
or 4.28% of total assets at December 31, 2014. A negative gap position exists when the amount of interest-bearing liabilities
maturing or repricing exceeds the amount of interest-earning assets maturing or repricing within a particular time period. This
analysis suggests that the Company’s net interest income is moderately more vulnerable to an increasing rate environment
than it is to a prolonged declining interest rate environment. An interest rate gap measure could be significantly affected by
external factors such as a rise or decline in interest rates, loan or securities prepayments, and deposit withdrawals.
Condensed Static Gap –
June 30, 2015 | |
Repricing Interval |
| |
| |
| |
| |
| |
|
(in
thousands) | |
Total | |
0-3 months | |
3-6 months | |
6-12 months | |
Cumulative 12 months |
| |
| |
| |
| |
| |
|
Interest-earning
assets1 | |
$ | 5,086,290 | | |
$ | 1,009,984 | | |
$ | 219,555 | | |
$ | 483,779 | | |
$ | 1,713,318 | |
Interest-bearing
liabilities | |
| 3,882,665 | | |
| 1,653,991 | | |
| 157,777 | | |
| 270,212 | | |
| 2,081,980 | |
Net
gap position | |
| | | |
| (644,007 | ) | |
| 61,778 | | |
| 213,567 | | |
| (368,662 | ) |
Net
gap position as a percentage of total assets | |
| | | |
| (11.85 | %) | |
| 1.14 | % | |
| 3.93 | % | |
| (6.78 | %) |
1 Balances of available securities are shown at amortized
cost |
Item
4. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
The Company’s
management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended) as of June 30, 2015. Based upon that evaluation, the Company’s Chief Executive
Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Report on Form 10-Q, the Company’s
disclosure controls and procedures were effective.
Changes
in Internal Control Over Financial Reporting
There were no
changes in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2015,
that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II -
OTHER INFORMATION
Item
1. |
Legal Proceedings |
Due to the nature
of the Company’s business, the Company is party to a certain amount of litigation arising out of the ordinary course of
the Company’s business. In the opinion of management, there are no pending claims which, if determined adversely, would
have a material effect on the Company’s results of operations or financial condition.
There have been
no material changes in the risk factors previously disclosed under Item 1A. of the Company’s Annual Report on Form 10-K,
as amended, for the fiscal year ended December 31, 2014.
Item
2. |
Unregistered
Sales of Equity Securities and the Use of Proceeds |
Issuer Purchases of Equity Securities |
| |
Total Number of
Shares Purchased (a) | |
Average Price Paid
Per Share (b) | |
Total Number of
Shares Purchased as Part of Publicly Announced Plans or Programs (c) | |
Maximum Number
of Shares that May Yet Be Purchased Under the Plans or Programs (d) |
| |
| | | |
| | | |
| | | |
| | |
April 1, 2015 through April 30, 2015 | |
| 3,180 | | |
$ | 53.95 | | |
| 0 | | |
| 298,534 | |
| |
| | | |
| | | |
| | | |
| | |
May 1, 2015 through May 31, 2015 | |
| 13,310 | | |
| 51.49 | | |
| 8,685 | | |
| 289,849 | |
| |
| | | |
| | | |
| | | |
| | |
June 1, 2015 through June 30, 2015 | |
| 19,207 | | |
| 51.74 | | |
| 19,207 | | |
| 270,642 | |
| |
| | | |
| | | |
| | | |
| | |
Total | |
| 35,697 | | |
$ | 51.85 | | |
| 27,892 | | |
| 270,642 | |
Included
in the table above are 1,752 shares purchased in April 2015, at an average cost of $54.26, and 617 shares purchased in May
2015, at an average cost of $51.05 by the trustee of the rabbi trust established by the Company under the Company’s
Stock Retainer Plan For Eligible Directors of Tompkins Financial Corporation and Participating Subsidiaries and were part of
the director deferred compensation under that plan. In addition, (i) 1,428 shares tendered by employees, with an average
value of $53.57, in April 2015, in order to cover option exercise prices, and (ii) 4,008 shares, with an average value of
$51.57, which were withheld in May 2015 from vested restricted stock grants in order to fund the employee’s tax
liabilities in connection therewith.
On July 24,
2014, the Company’s Board of Directors authorized a new stock repurchase plan for the Company to repurchase up to 400,000
shares of the Company’s common stock. Purchases may be made over the 24 months following adoption of the plan. The repurchase
program may be suspended, modified or terminated at any time for any reason. As of the date of this report, the Company has repurchased
129,358 shares under this program, at an average price of $46.75.
Recent
Sales of Unregistered Securities
None
Item 3. |
Defaults Upon Senior Securities |
Item 4. |
Mine Safety Disclosure |
Item 5. |
Other Information |
The information called for by this
item is incorporated by reference to the Exhibit Index included in this Quarterly Report on Form 10-Q, immediately following the
signature page.
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: August
10, 2015
TOMPKINS FINANCIAL CORPORATION
By: |
/S/ Stephen S. Romaine |
|
|
Stephen S. Romaine |
|
|
President and Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
|
By: |
/S/ Francis M. Fetsko |
|
|
Francis M. Fetsko |
|
|
Executive Vice President, Chief Financial Officer, and Chief Operating Officer |
|
|
(Principal Financial Officer) |
|
|
(Principal Accounting Officer) |
|
EXHIBIT
INDEX
Exhibit
Number |
Description |
31.1 |
Certification of Principal Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. |
|
|
31.2 |
Certification of Principal Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. |
|
|
32.1 |
Certification of Principal Executive Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, 18 U.S.C. Section 1350. |
|
|
32.2 |
Certification of Principal Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, 18 U.S.C. Section 1350. |
|
|
101 |
The
following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, formatted in XBRL
(eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Condition as of June 30, 2015 and December
31, 2014; (ii) Condensed Consolidated Statements of Income for the three and six months ended June 30, 2015 and 2014; (iii) Condensed
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2015 and 2014; (iv) Condensed Consolidated
Statements of Cash Flows for the six months ended June 30, 2015 and 2014; (v) Condensed Consolidated Statements of Changes in
Shareholders’ Equity for the six months ended June 30, 2015 and 2014; and (vi) Notes to Unaudited Condensed Consolidated
Financial Statements. |
70
Tompkins Financial Corporation 10-Q
Exhibit 31.1
CERTIFICATION
I, Stephen S. Romaine, certify that:
1. I have reviewed this quarterly report on
Form 10-Q of Tompkins Financial Corporation;
2. Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Designed such internal control over financial
reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in
the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying
officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material
weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 10, 2015
/S/Stephen S. Romaine |
|
|
Stephen S. Romaine |
|
|
|
|
|
President and Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
Tompkins Financial Corporation 10-Q
Exhibit 31.2
CERTIFICATION
I, Francis M. Fetsko, certify that:
1. I have reviewed this quarterly report on
Form 10-Q of Tompkins Financial Corporation;
2. Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Designed such internal control over financial
reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in
the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying
officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material
weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 10, 2015
/S/ Francis M. Fetsko |
|
|
Francis M. Fetsko |
|
|
Executive Vice President, Chief Financial Officer, and Chief Operating Officer |
|
(Principal Financial Officer) |
|
|
(Principal Accounting Officer) |
|
|
Tompkins Financial Corporation 10-Q
Exhibit 32.1
CERTIFICATION
In connection with the filing of the Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2015 (the “Report”) by Tompkins Financial Corporation (the
“Company”), the undersigned, as the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C.
§1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
The Report fully complies with the requirements
of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; and
The information contained in the Report fairly
presents, in all material respects, the financial condition and results of operations of the Company.
Assigned original of this written statement
required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.
August 10, 2015 |
/S/ Stephen S. Romaine |
|
Stephen S. Romaine |
|
President and |
|
Chief Executive Officer |
|
(Principal Executive Officer) |
|
|
|
Tompkins Financial Corporation 10-Q
Exhibit 32.2
CERTIFICATION
In connection with the filing of the Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2015 (the “Report”) by Tompkins Financial Corporation (the
“Company”), the undersigned, as the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C.
§1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
The Report fully complies with the requirements
of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; and
The information contained in the Report fairly
presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement
required by Section 906 has ben provided to the Company and will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.
August 10, 2015 |
/S/ Francis M. Fetsko |
|
Francis M. Fetsko |
|
Executive Vice President, Chief Financial Officer,
and Chief Operating Officer |
|
(Principal Financial Officer) |
|
(Principal Accounting Officer) |
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