TMP Tompkins Financial Corporation

Tompkins Financial Corporation (NYSEMKT:TMP) reported net income of $15.7 million for the first quarter of 2017, an increase of 10.8% from the $14.3 million reported for the same period in 2016. Diluted earnings per share were $1.03 for the first quarter of 2017, a 9.6% increase from $0.94 reported for the first quarter of 2016.

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

SELECTED HIGHLIGHTS FOR FOURTH QUARTER:

• Diluted earnings per share of $1.03 represent the best first quarter in Company history
• Net interest income was up 9.1% compared to the same period last year, and up 3.6% compared to the fourth quarter of 2016
• Net interest margin improved over the most recent prior quarter and over the same period last year
• Total loans of $4.3 billion were up 12.5% over the same period in 2016; and are up 1.0% over December 31, 2016
• Total deposits of $4.9 billion reflect an increase of 6.5% over the same period last year, and are up 4.9% from December 31, 2016.

NET INTEREST INCOME

Net interest income of $48.0 million for the first quarter of 2017 increased by $4.0 million, or 9.1% compared to the same period in 2016, and was up 3.6% compared to the fourth quarter of 2016. The increase in net interest income over prior year was largely driven by growth in average loans of $472.6 million or 12.5% as well as an improved net interest margin. The net interest margin was 3.38% for the first quarter of 2017, up from 3.30% for the fourth quarter of 2016, and 3.36% for the first quarter of 2016. The margin improvement benefited from improved yields on investment securities as well as maturities of some higher cost borrowings.

NONINTEREST INCOME

Noninterest income represented 26.4% of total revenues in the first quarter of 2017, compared to 28.4% in the same period in 2016, and 26.0% for the most recent prior quarter. Noninterest income of $17.2 million was down slightly from the same period last year, and up 5.7% over the fourth quarter of 2016. Revenue from Insurance and Investment services are the two largest components of noninterest income, representing 41.3% and 22.0% of noninterest income, respectively at March 31, 2017.

NONINTEREST EXPENSE

Noninterest expense was $41.4 million for the first quarter of 2017, which was up 4.7% compared to the same period in 2016, and up 5.0% compared to the fourth quarter of 2016. The increase in noninterest expense was mainly related to higher salaries and benefits in the first quarter of 2017. The first quarter of 2017 also included $262,000 of deconversion expenses related to a core system conversion planned for this year.

ASSET QUALITY

Asset quality trends remained strong in the first quarter of 2017. Nonperforming loans and leases were down 3.1% compared to first quarter of 2016, and down 7.3% compared to the most recent quarter end. Nonperforming assets represented 0.36% of total assets at March 31, 2017, unchanged from December 31, 2016, and improved slightly from 0.39% at March 31, 2016. Nonperforming asset levels continue to be well below the most recent Federal Reserve Board Peer Group Average1 of 0.57%.

Provision for loan and lease losses was $769,000 for the first quarter of 2017, down from $855,000 for the first quarter of 2016. Net charge-offs for the first quarter of 2017 were $358,000 compared to $329,000 reported in the first quarter of 2016.

The Company’s allowance for originated loan and lease losses totaled $35.9 million at March 31, 2017, and represented 0.92% of total originated loans and leases at March 31, 2017. The ratio is unchanged from the most recent prior quarter and is down from 0.95% one year ago. The total allowance represented 180.02% of total nonperforming loans and leases at March 31, 2017, improved from 164.98% at December 31, 2016, and 156.88% at March 31, 2016.

CAPITAL POSITION

Capital ratios remain well above the regulatory well capitalized minimums. The ratio of Tier 1 capital to average assets of 8.36% at March 31, 2017, compared to 8.41% reported for December 31, 2016. Total capital to risk-weighted assets at March 31, 2017 was 12.41%, compared to 12.22% reported at December 31, 2016. Both ratios are down from the same period last year, in large part due to the redemption of $20.5 million of 7% fixed rate Trust Preferred securities.

ABOUT TOMPKINS FINANCIAL CORPORATION

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

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

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

            TOMPKINS FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CONDITION   (In thousands, except share and per share data) (Unaudited) As of As of ASSETS 03/31/2017 12/31/2016   Cash and noninterest bearing balances due from banks $ 76,513 $ 62,074 Interest bearing balances due from banks       1,959       1,880 Cash and Cash Equivalents 78,472 63,954   Available-for-sale securities, at fair value (amortized cost of $1,438,716 at March 31, 2017 and $1,442,724 at December 31, 2016) 1,427,523 1,429,538 Held-to-maturity securities, at amortized cost (fair value of $142,445 at March 31, 2017 and $142,832 at December 31, 2016) 141,545 142,119 Originated loans and leases, net of unearned income and deferred costs and fees (2) 3,922,413 3,863,922 Acquired loans (3) 375,380 394,111 Less: Allowance for loan and lease losses       36,166       35,755 Net Loans and Leases 4,261,627 4,222,278   Federal Home Loan Bank and other stock 35,013 43,133 Bank premises and equipment, net 75,720 70,016 Corporate owned life insurance 78,535 77,905 Goodwill 92,291 92,623 Other intangible assets, net 10,767 11,349 Accrued interest and other assets       78,554       83,841   Total Assets     $ 6,280,047     $ 6,236,756   LIABILITIES Deposits: Interest bearing: Checking, savings and money market 2,755,752 2,518,318 Time 875,596 870,788   Noninterest bearing       1,219,237       1,236,033 Total Deposits 4,850,585 4,625,139   Federal funds purchased and securities sold under agreements to repurchase 70,716 69,062 Other borrowings 717,285 884,815 Trust preferred debentures 16,562 37,681 Other liabilities       61,381       70,654   Total Liabilities     $ 5,716,529     $ 5,687,351   EQUITY Tompkins Financial Corporation shareholders' equity: Common Stock - par value $.10 per share: Authorized 25,000,000 shares; Issued: 15,216,916 at March 31, 2017; and 15,171,816 at December 31, 2016 1,522 1,517 Additional paid-in capital 361,199 357,414 Retained earnings 239,084 230,182 Accumulated other comprehensive loss (35,684) (37,109) Treasury stock, at cost – 115,445 shares at March 31, 2017, and 117,997 shares at December 31, 2016 (4,057) (4,051)   Total Tompkins Financial Corporation Shareholders’ Equity 562,064 547,953 Noncontrolling interests       1,454       1,452   Total Equity     $ 563,518     $ 549,405   Total Liabilities and Equity     $ 6,280,047     $ 6,236,756     TOMPKINS FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME     Three Months Ended (In thousands, except per share data) (Unaudited) 03/31/2017     03/31/2016 INTEREST AND DIVIDEND INCOME Loans $ 44,951 $ 40,487 Due from banks 2 2 Trading securities 0 81 Available-for-sale securities 7,322 7,531 Held-to-maturity securities 878 911 Federal Home Loan Bank and other stock       468       297 Total Interest and Dividend Income       53,621       49,309 INTEREST EXPENSE Time certificates of deposits of $250,000 or more 441 390 Other deposits 2,347 2,209 Federal funds purchased and securities sold under agreements to repurchase 108 666 Trust preferred debentures 367 589 Other borrowings       2,324       1,417 Total Interest Expense       5,587       5,271 Net Interest Income       48,034       44,038 Less: Provision for loan and lease losses       769       855 Net Interest Income After Provision for Loan and Lease Losses       47,265       43,183 NONINTEREST INCOME Insurance commissions and fees 7,118 7,562 Investment services income 3,791 3,786 Service charges on deposit accounts 2,167 2,264 Card services income 2,009 1,941 Mark-to-market loss on trading securities 0 (46) Mark-to-market gain on liabilities held at fair value 0 57 Other income 2,155 1,707 Gain on sale of available-for-sale securities       0       232 Total Noninterest Income       17,240       17,503 NONINTEREST EXPENSE Salaries and wages 19,513 18,989 Pension and other employee benefits 5,759 5,283 Net occupancy expense of premises 3,511 3,148 Furniture and fixture expense 1,597 1,689 FDIC insurance 538 822 Amortization of intangible assets 493 527 Other operating expense       9,957       9,048 Total Noninterest Expenses       41,368       39,506 Income Before Income Tax Expense       23,137       21,180 Income Tax Expense       7,388       6,896 Net Income attributable to Noncontrolling Interests and Tompkins Financial Corporation       15,749       14,284 Less: Net income attributable to noncontrolling interests       32       33 Net Income Attributable to Tompkins Financial Corporation     $ 15,717     $ 14,251 Basic Earnings Per Share $ 1.04 $ 0.95 Diluted Earnings Per Share     $ 1.03     $ 0.94     Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)                             Year to Date Period Ended Year to Date Period Ended             March 31, 2017       March 31, 2016 Average Average Balance Average Balance Average (Dollar amounts in thousands)       (YTD)       Interest     Yield/Rate       (YTD)       Interest     Yield/Rate ASSETS Interest-earning assets Interest-bearing balances due from banks $ 5,214 $ 2 0.16% $ 2,094 $ 2 0.38% Securities (4) U.S. Government securities 1,479,516 7,659 2.10% 1,458,755 7,903 2.18% Trading securities - - 0.00% 7,248 81 4.49% State and municipal (5) 100,698 840 3.38% 97,631 838 3.45% Other securities (5)   3,613       31     3.48%       3,686       31     3.38% Total securities 1,583,827 8,530 2.18% 1,567,320 8,853 2.27% FHLBNY and FRB stock 38,105 468 4.98% 27,799 298 4.31%   Total loans and leases, net of unearned income (5)(6)   4,263,799       45,675     4.34%       3,791,207       41,185     4.37% Total interest-earning assets   5,890,945       54,675     3.76%       5,388,420       50,338     3.76%   Other assets 350,443 341,851   Total assets 6,241,388 5,730,271                                                   LIABILITIES & EQUITY Deposits Interest-bearing deposits Interest bearing checking, savings, & money market 2,664,848 1,061 0.16% 2,533,185 956 0.15% Time deposits   869,949       1,727     0.81%       868,095       1,643     0.76% Total interest-bearing deposits 3,534,797 2,788 0.32% 3,401,280 2,599 0.31%   Federal funds purchased & securities sold under agreements to repurchase 77,980 108 0.56% 126,262 666 2.12% Other borrowings 791,136 2,324 1.19% 502,319 1,417 1.13% Trust preferred debentures   23,588       367     6.31%       37,524       589     6.31% Total interest-bearing liabilities 4,427,501 5,587 0.51% 4,067,385 5,271 0.52%   Noninterest bearing deposits 1,188,568 1,067,638 Accrued expenses and other liabilities 69,426 66,934 Total liabilities 5,685,495 5,201,957   Tompkins Financial Corporation Shareholders’ equity 554,424 526,846 Noncontrolling interest 1,469 1,468 Total equity 555,893 528,314   Total liabilities and equity $ 6,241,388 $ 5,730,271 Interest rate spread       3.25%       3.24% Net interest income/margin on earning assets 49,088 3.38% 45,067 3.36%   Tax Equivalent Adjustment (1,054) (1,029)     Net interest income per consolidated financial statements             $ 48,034                   $ 44,038           Tompkins Financial Corporation - Summary Financial Data (Unaudited)                                                 (In thousands, except per share data)   Quarter-Ended     Year-Ended   Mar-17       Dec-16       Sep-16       Jun-16       Mar-16       Dec-16                     Period End Balance Sheet                                                 Securities     $ 1,569,068     $ 1,571,657     $ 1,515,761     $ 1,564,080     $ 1,583,742     $ 1,571,657

Originated loans and leases, net of unearned incomeand deferred costs and fees (2)

      3,922,413       3,863,922       3,672,539       3,551,628       3,370,791       3,863,922 Acquired loans and leases (3)       375,380       394,111       417,008       426,485       450,122       394,111 Allowance for loan and lease losses       36,166       35,755       34,112       33,125       32,530       35,755 Total assets       6,280,047       6,236,756       6,102,215       5,924,906       5,764,971       6,236,756 Total deposits       4,850,585       4,625,139       4,690,300       4,469,721       4,555,228       4,625,139

Federal funds purchased and securities sold underagreements to repurchase

      70,716       69,062       77,218       97,180       116,551       69,062 Other borrowings       717,285       884,815       671,000       700,026       455,341       884,815 Trust preferred debentures       16,562       37,681       37,638       37,595       37,552       37,681 Total common equity       562,064       547,953       559,640       552,918       538,408       547,953 Total equity       563,518       549,405       561,190       554,435       539,893       549,405   Average Balance Sheet                                                 Average earning assets     $ 5,890,945     $ 5,707,121     $ 5,577,885     $ 5,492,913     $ 5,388,420     $ 5,542,137 Average assets       6,241,388       6,074,973       5,942,260       5,842,387       5,730,271       5,898,080 Average interest-bearing liabilities       4,427,501       4,237,126       4,168,879       4,143,031       4,067,385       4,154,374 Average equity       555,893       559,106       557,281       543,283       528,314       547,057   Share data                                                 Weighted average shares outstanding (basic)       14,900,938       14,862,189       14,829,222       14,798,515       14,760,276       14,812,712 Weighted average shares outstanding (diluted) (10)       15,042,614       15,014,221       14,965,233       14,917,206       14,847,616       14,936,231 Period-end shares outstanding       15,181,198       15,135,906       15,055,954       15,035,369       15,023,776       15,135,906 Common equity book value per share     $ 37.02     $ 36.20     $ 37.17     $ 36.77     $ 35.84     $ 36.20 Tangible book value per share (Non-GAAP)     $ 30.28     $ 29.38     $ 30.28     $ 29.82     $ 28.85     $ 29.38   Income Statement                                                 Net interest income     $ 48,034     $ 46,374     $ 45,317     $ 44,907     $ 44,038     $ 180,636 Provision for loan/lease losses       769       1,706       782       978       855       4,321 Noninterest income       17,240       16,316       17,905       17,084       17,503       68,808 Noninterest expense       41,368       39,389       40,324       39,388       39,506       158,607 Income tax expense (10)       7,388       6,444       6,945       6,760       6,896       27,045

Net income attributable to Tompkins FinancialCorporation (10)

      15,717       15,118       15,138       14,833       14,251       59,340 Noncontrolling interests       32       33       33       32       33       131 Basic earnings per share (8)     $ 1.04     $ 1.00     $ 1.01     $ 0.99     $ 0.95     $ 3.94 Diluted earnings per share (8) (10)     $ 1.03     $ 0.99     $ 1.00     $ 0.98     $ 0.94     $ 3.91   Nonperforming Assets                                                 Originated nonaccrual loans and leases     $ 13,786     $ 14,300     $ 11,554     $ 11,008     $ 12,671     $ 14,300 Acquired nonaccrual loans and leases       3,356       4,741       4,559       4,831       4,145       4,741

Originated loans and leases 90 days past due andaccruing

      0       0       35       89       57       0 Troubled debt restructurings not included above       2,948       2,631       2,148       2,172       3,862       2,631 Total nonperforming loans and leases       20,090       21,672       18,296       18,100       20,735       21,672 OREO       2,520       908       1,008       1,001       1,865       908 Total nonperforming assets     $ 22,610     $ 22,580     $ 19,304     $ 19,101     $ 22,600     $ 22,580  

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

      Quarter-Ended     Year-Ended Delinquency - Originated loan and lease portfolio       Mar-17       Dec-16       Sep-16       Jun-16       Mar-16       Dec-16 Loans and leases 30-89 days past due and                     accruing (2)     $ 5,462     $ 6,694     $ 4,551     $ 4,464     $ 2,519     $ 6,694 Loans and leases 90 days past due and accruing (2)       0       0       35       89       57       0 Total originated loans and leases past due and accruing (2)       5,462       6,694       4,586       4,553       2,576       6,694   Delinquency - Acquired loan and lease portfolio Loans 30-89 days past due and accruing (3)(7)     $ 907     $ 2,553     $ 1,069     $ 1,750     $ 1,039     $ 2,553 Loans 90 days or more past due       2,701       2,557       2,555       1,861       1,915       2,557 Total acquired loans and leases past due and accruing       3,608       5,110       3,624       3,611       2,954       5,110 Total loans and leases past due and accruing     $ 9,070     $ 11,804     $ 8,210     $ 8,164     $ 5,530     $ 11,804   Allowance for Loan Losses - Originated loan and lease portfolio Balance at beginning of period     $ 35,598     $ 33,956     $ 32,968     $ 31,981     $ 31,312     $ 31,312 Provision for loan and lease losses       602       1,419       868       978       872       4,137 Net loan and lease (recoveries) charge-offs       285       (223)       (120)       (9)       203       (149) Allowance for loan and lease losses (originated 35,915 35,598 33,956 32,968 31,981 35,598 loan portfolio) - balance at end of period     $     $     $     $     $     $   Allowance for Loan Losses - Acquired loan and lease portfolio Balance at beginning of period     $ 157     $ 156     $ 157     $ 549     $ 692     $ 692 Provision (credit) for loan and lease losses       167       287       (86)       0       (17)       184 Net loan and lease (recoveries) charge-offs       73       286       (85)       392       126       719 Allowance for loan and lease losses (acquired loan portfolio) - balance at end of period       251       157       156       157       549       157                                                   Total allowance for loan and lease losses     $ 36,166     $ 35,755     $ 34,112     $ 33,125     $ 32,530     $ 35,755   Loan Classification - Originated Portfolio                                                 Special Mention     $ 18,861     $ 20,485     $ 27,215     $ 20,639     $ 20,388     $ 20,485 Substandard       20,909       20,316       18,121       16,462       18,026       20,316 Loan Classification - Acquired Portfolio                                                 Special Mention       519       526       540       550       534       526 Substandard       9,628       13,141       14,000       13,975       17,445       13,141 Loan Classifications - Total Portfolio                                                 Special Mention       19,380       21,011       27,755       21,189       20,922       21,011 Substandard       30,537       33,457       32,121       30,437       35,471       33,457   RATIO ANALYSIS                                             Credit Quality       Mar-17       Dec-16       Sep-16       Jun-16       Mar-16       Dec-16 Nonperforming loans and leases/total loans and leases (7)       0.47%       0.51%       0.45%       0.45%       0.54%       0.51% Nonperforming assets/total assets       0.36%       0.36%       0.32%       0.32%       0.39%       0.36%

Allowance for originated loan and lease losses/totaloriginated loans and leases

      0.92%       0.92%       0.92%       0.93%       0.95%       0.92% Allowance/nonperforming loans and leases       180.02%       164.98%       186.45%       183.01%       156.88%       164.98%

Net loan and lease losses (recoveries) annualized/totalaverage loans and leases

      0.03%       0.01%       (0.02%)       0.04%       0.03%       0.01%  

 

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

                                                Capital Adequacy (period-end)       Quarter-Ended     Year-Ended Tier 1 capital / average assets *       8.36%       8.41%       8.83%       8.79%       8.79%       8.41% Total capital / risk-weighted assets *       12.41%       12.22%       12.97%       12.95%       13.18%       12.22%   Profitability                                                 Return on average assets * (10)       1.02%       0.99%       1.01%       1.02%       1.00%       1.01% Return on average equity * (10)       11.47%       10.76%       10.81%       10.98%       10.85%       10.85% Net interest margin (TE) *       3.38%       3.30%       3.31%       3.36%       3.36%       3.33% * Quarterly ratios have been annualized                                   NON-GAAP MEASURES   This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). Where non-GAAP disclosures are used in this press release, the comparable GAAP measure, as well as reconciliation to the comparable GAAP measure, is provided in the accompanying tables. Management believes that these non-GAAP measures provide useful information. Non-GAAP measures should not be considered a substitute for financial measures determined in accordance with GAAP and investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. See "Tompkins Financial Corporation - Summary Financial Data (Unaudited)" tables for Non-GAAP related calculations.     Non-GAAP Disclosure - Tangible Book Value Per Share         Quarter-Ended     Year-Ended         Mar-17       Dec-16       Sep-16       Jun-16       Mar-16       Dec-16 Total common equity     $ 562,064     $ 547,953     $ 559,640     $ 552,918     $ 538,408     $ 547,953 Less: Goodwill and intangibles (9)       102,326       103,214       103,732       104,636       104,987       103,214 Tangible common equity       459,738       444,739       455,908       448,282       433,421       444,739 Ending shares outstanding       15,181,198       15,135,906       15,055,954       15,035,369       15,023,776       15,135,906 Tangible book value per share (Non-GAAP)     $ 30.28     $ 29.38     $ 30.28     $ 29.82     $ 28.85     $ 29.38                           (1) Federal Reserve peer ratio as of December 31, 2016, includes banks and bank holding companies with consolidated assets between $3 billion and $10 billion. (2) "Originated" equals loans and leases not included by definition in "acquired loans". (3)"Acquired Loans and Leases" equals loans and leases acquired at fair value, accounted for in accordance with FASB ASC Topic 805. (4) Average balances and yields on available-for-sale securities are based on historical amortized cost. (5) Interest income includes the tax effects of taxable-equivalent basis. (6) Nonaccrual loans are included in the average asset totals presented above. Payments received on nonaccrual loans have been recognized as disclosed in Note 1 of the Company's consolidated financial statements included in Part I of the Company's annual report on Form 10-K for the fiscal year ended December 31, 2016. (7) Certain acquired loans and leases that are past due are not on nonaccrual and are not included in nonperforming loans. The risk of credit loss on these loans has been considered by virtue of the Corporation's estimate of acquisition-date fair value and these loans are considered accruing as the Corporation primarily recognizes interest income through accretion of the difference between the carrying value of these loans and their expected cash flows. (8)Earnings per share year-to-date may not equal the sum of the quarterly earnings per share as a result of rounding of average shares. (9) "Goodwill and intangibles" equal Total Intangible Assets less Mortgage Servicing Rights in the above tables. (10) The third quarter, second quarter, and first quarter of 2016 information is revised to reflect the impact of the early adoption of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting". The early adoption resulted in $847,000, $274,000, $262,000, and $71,000 of excess benefits recognized within "income tax expense" during the three months ended December 31, September 30, June 30, and March 31, 2016, respectively.

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Tompkins Financial CorporationStephen S. Romaine, President & CEOFrancis M. Fetsko, Executive VP, CFO & COO888-503-5753