TMP Tompkins Financial Corporation

Tompkins Financial Corporation (NYSE American: TMP)

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

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

Selected highlights for first quarter:

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

NET INTEREST INCOME

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

NONINTEREST INCOME

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

NONINTEREST EXPENSE

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

INCOME TAX EXPENSE

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

ASSET QUALITY

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

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

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

CAPITAL POSITION

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

ABOUT TOMPKINS FINANCIAL CORPORATION

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

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

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

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

            TOMPKINS FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CONDITION   (In thousands, except share and per share data) (Unaudited) As of As of ASSETS 03/31/2018 12/31/2017   Cash and noninterest bearing balances due from banks $ 66,396 $ 77,688 Interest bearing balances due from banks         1,706       6,615   Cash and Cash Equivalents 68,102 84,303   Available-for-sale securities, at fair value (amortized cost of $1,408,360 at March 31, 2018 and $1,409,996 at December 31, 2017) 1,371,664 1,392,775 Held-to-maturity securities, at amortized cost (fair value of $137,843 at March 31, 2018 and $140,315 at December 31, 2017) 139,131 139,216 Originated loans and leases, net of unearned income and deferred costs and fees (2) 4,408,081 4,358,543 Acquired loans (3) 296,765 310,577 Less: Allowance for loan and lease losses         40,211       39,771   Net Loans and Leases 4,664,635 4,629,349   Federal Home Loan Bank and other stock 47,019 50,498 Bank premises and equipment, net 92,139 86,995 Corporate owned life insurance 80,623 80,106 Goodwill 92,291 92,291 Other intangible assets, net 8,791 9,263 Accrued interest and other assets         83,732       83,494     Total Assets       $ 6,648,128     $ 6,648,290     LIABILITIES Deposits: Interest bearing: Checking, savings and money market 2,893,619 2,651,632 Time 685,600 748,250   Noninterest bearing         1,350,684       1,437,925   Total Deposits 4,929,903 4,837,807   Federal funds purchased and securities sold under agreements to repurchase 69,131 75,177 Other borrowings 995,074 1,071,742 Trust preferred debentures 16,734 16,691 Other liabilities         57,875       70,671     Total Liabilities       $ 6,068,717     $ 6,072,088     EQUITY Tompkins Financial Corporation shareholders' equity: Common Stock - par value $.10 per share: Authorized 25,000,000 shares; Issued: 15,321,245 at March 31, 2018; and 15,301,524 at December 31, 2017 1,532 1,530 Additional paid-in capital 366,666 364,031 Retained earnings 279,895 265,007 Accumulated other comprehensive loss (65,682 ) (51,296 )

Treasury stock, at cost – 116,587 shares at March 31,2018, and 120,805 shares

at December 31, 2017 (4,444 ) (4,492 )   Total Tompkins Financial Corporation Shareholders’ Equity 577,967 574,780 Noncontrolling interests         1,444       1,422     Total Equity       $ 579,411     $ 576,202     Total Liabilities and Equity       $ 6,648,128     $ 6,648,290       TOMPKINS FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME       Three Months Ended (In thousands, except per share data) (Unaudited) 03/31/2018     03/31/2017 INTEREST AND DIVIDEND INCOME Loans $ 50,894 $ 44,951 Due from banks 7 2 Available-for-sale securities 7,644 7,322 Held-to-maturity securities 858 878 Federal Home Loan Bank and other stock         737         468 Total Interest and Dividend Income         60,140         53,621 INTEREST EXPENSE Time certificates of deposits of $250,000 or more (14 ) 441 Other deposits 2,783 2,347 Federal funds purchased and securities sold under agreements to repurchase 46 108 Trust preferred debentures 279 367 Other borrowings         4,359         2,324 Total Interest Expense         7,453         5,587 Net Interest Income         52,687         48,034 Less: Provision for loan and lease losses         567         769 Net Interest Income After Provision for Loan and Lease Losses         52,120         47,265 NONINTEREST INCOME Insurance commissions and fees 7,394 7,118 Investment services income 4,246 3,791 Service charges on deposit accounts 2,132 2,167 Card services income 2,146 2,009 Other income 1,788 2,155 (Loss)/gain on sale of available-for-sale securities         124         0 Total Noninterest Income         17,830         17,240 NONINTEREST EXPENSE Salaries and wages 20,998 19,635 Other employee benefits 5,376 5,634 Net occupancy expense of premises 3,646 3,511 Furniture and fixture expense 1,975 1,597 FDIC insurance 667 538 Amortization of intangible assets 451 493 Other operating expense         10,608         9,960 Total Noninterest Expenses         43,721         41,368 Income Before Income Tax Expense         26,229         23,137 Income Tax Expense         5,761         7,388 Net Income attributable to Noncontrolling Interests and Tompkins Financial Corporation         20,468         15,749 Less: Net income attributable to noncontrolling interests         32         32 Net Income Attributable to Tompkins Financial Corporation       $ 20,436       $ 15,717 Basic Earnings Per Share $ 1.34 $ 1.04 Diluted Earnings Per Share       $ 1.33       $ 1.03     Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)                               Quarter Ended Quarter Ended               March 31, 2018       March 31, 2017 Average Average Balance Average Balance Average (Dollar amounts in thousands)         (QTD)     Interest     Yield/Rate       (YTD)     Interest     Yield/Rate ASSETS Interest-earning assets Interest-bearing balances due from banks $ 2,565 $ 7 1.11% $ 5,214 $ 2 0.16% Securities (4) U.S. Government securities 1,454,229 7,954 2.22% 1,479,516 7,659 2.10% State and municipal (5) 99,766 643 2.61% 100,698 840 3.38% Other securities (5)   3,571     35     3.97%       3,613     31     3.48% Total securities 1,557,566 8,632 2.25% 1,583,827 8,530 2.18% FHLBNY and FRB stock 49,509 737 6.04% 38,105 468 4.98%   Total loans and leases, net of unearned income (5)(6)   4,688,087     51,229     4.43%       4,263,799     45,675     4.34% Total interest-earning assets   6,297,727     60,605     3.90%       5,890,945     54,674     3.76%   Other assets 355,036 350,443   Total assets $

6,652,763

$ 6,241,388                                                 LIABILITIES & EQUITY Deposits Interest-bearing deposits Interest bearing checking, savings, & money market $ 2,796,197 1,646 0.24% $ 2,664,848 1,061 0.16% Time deposits   717,617     1,123     0.63%       869,949       1,727     0.81% Total interest-bearing deposits 3,513,814 2,769 0.32% 3,534,797 2,788 0.32%   Federal funds purchased & securities sold under agreements to repurchase 75,167 46 0.25% 77,980 108 0.56% Other borrowings 1,053,311 4,359 1.68% 791,136 2,324 1.19% Trust preferred debentures   16,706     279     6.77%       23,588     367     6.31% Total interest-bearing liabilities 4,658,998 7,453 0.65% 4,427,501 5,587 0.51%   Noninterest bearing deposits 1,351,307 1,188,567 Accrued expenses and other liabilities 67,495 69,423 Total liabilities 6,077,800 5,685,491   Tompkins Financial Corporation Shareholders’ equity 573,536 554,428 Noncontrolling interest 1,427 1,469 Total equity 574,963 555,897   Total liabilities and equity $ 6,652,763 $ 6,241,388 Interest rate spread       3.25%       3.25% Net interest income/margin on earning assets 53,152 3.42% 49,088 3.38%   Tax Equivalent Adjustment (465) (1,054)     Net interest income per consolidated financial statements               $ 52,687                   $ 48,034             Tompkins Financial Corporation - Summary Financial Data (Unaudited) (In thousands, except per share data)                                                   Quarter-Ended     Year-Ended Period End Balance Sheet      

Mar-18

   

Dec-17

   

Sep-17

   

Jun-17

   

Mar-17

   

Dec-17

Securities       $ 1,510,795     $ 1,531,991     $ 1,546,199     $ 1,564,865     $ 1,569,068     $ 1,531,991

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

        4,408,081       4,358,543       4,167,254       4,070,755       3,922,413       4,358,543 Acquired loans and leases (3)         296,765       310,577       323,259       347,841       375,380       310,577 Allowance for loan and lease losses         40,211       39,771       38,038       37,157       36,166       39,771 Total assets         6,648,128       6,648,290       6,524,060       6,415,012       6,280,047       6,648,290 Total deposits         4,929,903       4,837,807       4,943,944       4,750,722       4,850,585       4,837,807

Federal funds purchased and securities sold underagreements to repurchase

        69,131       75,177       73,874       50,360       70,716       75,177 Other borrowings         995,074       1,071,742       834,574       952,035       717,285       1,071,742 Trust preferred debentures         16,734       16,691       16,648       16,605       16,562       16,691 Total common equity         577,967       574,780       588,349       575,428       562,064       574,780 Total equity         579,411       576,202       589,868       576,915       563,518       576,202                     Average Balance Sheet                                                 Average earning assets       $ 6,297,727     $ 6,159,396     $ 6,072,269     $ 5,970,653     $ 5,890,945     $ 6,024,186 Average assets         6,652,763       6,552,414       6,430,497       6,329,847       6,241,388       6,389,504 Average interest-bearing liabilities         4,658,998       4,500,649       4,463,606       4,474,860       4,427,501       4,466,846 Average equity         574,963       593,956       586,671       572,741       555,893       577,446   Share data                                                   Weighted average shares outstanding (basic)       15,013,478     14,988,542     14,966,231     14,944,934     14,900,938     14,950,432 Weighted average shares outstanding (diluted)       15,112,518     15,103,906     15,078,555     15,066,861     15,042,614     15,073,255 Period-end shares outstanding       15,285,335     15,265,614     15,202.44     15,189.45     15,181.20     15,265,614 Common equity book value per share       $ 37.81     $ 37.65     $

38.70

    $ 37.88     $ 37.02     $ 37.65 Tangible book value per share (Non-GAAP)       $ 31.24     $ 31.04     $ 32.03     $ 31.18     $ 30.28     $ 31.04   Income Statement                                                   Net interest income       $ 52,687     $ 51,969     $ 51,000     $ 50,301     $ 48,034     $ 201,304 Provision for loan/lease losses         567       2,014       402       976       769       4,161 Noninterest income         17,830       17,312       17,202       17,450       17,240       69,204 Noninterest expense         43,721       46,286       41,883       41,568       41,368       171,105 Income tax expense         5,761       18,493       8,491       8,248       7,388       42,620 Net income attributable to Tompkins Financial Corporation         20,436       2,457       17,394       16,926       15,717       52,494 Noncontrolling interests         32       31       32       33       32       128 Basic earnings per share (8)       $ 1.34     $ 0.16     $ 1.14     $ 1.11     $ 1.04     $ 3.46 Diluted earnings per share (8)       $ 1.33     $ 0.16     $ 1.14     $ 1.11     $ 1.03     $ 3.43   Nonperforming Assets                                                 Originated nonaccrual loans and leases       $ 18,429     $ 16,253     $ 15,667     $ 14,284     $ 13,786     $ 16,253 Acquired nonaccrual loans and leases         3,352       3,264       3,152       2,903       3,356       3,264 Originated loans and leases 90 days past due and accruing         0       44       0       639       0       44 Troubled debt restructurings not included above         3,455       3,449       3,541       2,980       2,948       3,449 Total nonperforming loans and leases         25,236       23,010       22,360       20,806       20,090       23,010 OREO         2,047       2,047       2,030       2,331       2,520       2,047 Total nonperforming assets       $ 27,283     $ 25,057     $ 24,390     $ 23,137     $ 22,610     $ 25,057                           Tompkins Financial Corporation - Summary Financial Data (Unaudited) - continued                                                            

 

Quarter-Ended

    Year-Ended

Delinquency - Originated loan and lease portfolio

Mar-18

   

Dec-17

   

Sep-17

   

Jun-17

   

Mar-17

   

Dec-17

Loans and leases 30-89 days past due and       accruing (2)       $ 6,513     $ 6,791     $ 5,567     $ 6,188     $ 5,462     $ 6,791 Loans and leases 90 days past due and accruing (2)     0       44       0       639       0       44 Total originated loans and leases past due and accruing (2)     6,513       6,835       5,567       6,827       5,462       6,835   Delinquency - Acquired loan and lease portfolio                                               Loans 30-89 days past due and accruing (3)(7)       $ 823     $ 1,256     $ 2,857     $ 751     $ 907     $ 1,256 Loans 90 days or more past due     1,077       1,146       1,306       2,581       2,701       1,146 Total acquired loans and leases past due and accruing     1,900       2,402       4,163       3,332       3,608       2,402 Total loans and leases past due and accruing       $ 8,413     $ 9,237     $ 9,730     $ 10,159     $ 9,070     $ 9,237   Allowance for Loan Losses - Originated loan and lease portfolio                                           Balance at beginning of period       $ 39,686     $ 37,903     $ 36,960     $ 35,915     $ 35,598     $ 35,598 Provision for loan and lease losses     609       1,849       931       846       602       4,428 Net loan and lease (recoveries) charge-offs     187       66       (12)       (199)       285       140 Allowance for loan and lease losses (originated loan portfolio) - balance at end of period       $ 40,107     $ 39,686     $ 37,903     $ 36,960     $ 35,915     $ 39,686   Allowance for Loan Losses - Acquired loan and lease portfolio                                             Balance at beginning of period       $ 85     $ 135     $ 197     $ 251     $ 157     $ 157 Provision (credit) for loan and lease losses     (41)       165       (529)       130       167       (67) Net loan and lease (recoveries) charge-offs     (60)       215       (467)       184       73       5 Allowance for loan and lease losses (acquired loan portfolio) - balance at end of period     104       85       135       197       251       85                                                                 Total allowance for loan and lease losses       $ 40,211     $ 39,771     $ 38,038     $ 37,157     $ 36,166     $ 39,771   Loan Classification - Originated Portfolio                                                     Special Mention       $ 34,546     $ 46,074     $ 50,423     $ 38,488     $ 18,861     $ 46,074 Substandard     35,746       20,584       20,532       19,532       20,909       20,584 Loan Classification - Acquired Portfolio                                                     Special Mention     476       525       539       547       519       525 Substandard     3,468       5,355       8,193       8,796       9,628       5,355 Loan Classifications - Total Portfolio                                                     Special Mention     35,022       46,599       50,962       39,035       19,380       46,599 Substandard     39,214       25,939       28,725       28,328       30,537       25,939   Ratio Analysis Credit Quality                                                          

Nonperforming loans and leases/total loans andleases (7)

    0.54%       0.49%      

0.50%

      0.47%       0.47%       0.49% Nonperforming assets/total assets     0.41%       0.38%       0.37%       0.36%       0.36%       0.38%

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

    0.91%       0.91%       0.91%       0.91%       0.92%       0.91% Allowance/nonperforming loans and leases     159.34%       172.84%       170.12%       178.59%       180.02%       172.84%

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

    0.01%       0.02%       (0.04)%      

0.00%

      0.03%      

0.00%

                                        Tompkins Financial Corporation - Summary Financial Data (Unaudited) - continued Quarter-Ended     Year-Ended Capital Adequacy (period-end)      

Mar-18

   

Dec-17

   

Sep-17

   

Jun-17

   

Mar-17

   

Dec-17

Tangible common equity/tangible assets         7.29%       7.24%       7.58%      

7.50%

      7.44%       7.24%               Profitability                                                               Return on average assets *         1.25%       0.15%       1.07%       1.07%       1.02%       0.82% Return on average equity *         14.41%       1.64%       11.77%       11.85%       11.47%       9.09% Net interest margin (TE) *         3.42%       3.42%      

3.40%

      3.45%       3.38%       3.41%

* Quarterly ratios have been annualized

 

Non-GAAP Measures

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

                              Non-GAAP Disclosure - Adjusted Diluted Earnings Per Share Quarter-Ended     Year-Ended          

Mar-18

     

Dec-17

     

Sep-17

     

Jun-17

     

Mar-17

     

Dec-17

Net income available to common shareholders      

$

20,436     $ 2,457     $ 17,394     $ 16,926     $ 15,717     $ 52,494

Less: Income attributable to unvested stock-based compensation awards

        351       26       266       266       260       818 Tangible common equity         20,085       2,431       17,128       16,660       15,457       51,676 Remeasurement of net deferred taxes         0       14,944       0       0       0       14,994 Net income (Non-GAAP)         20,085       17,375       17,128       16,660       15,457       66,620 Weighted average shares outstanding (diluted)      

 

15,112,518

   

 

15,103,906

   

 

15,078,555

   

 

15,066,861

   

 

15,042,614

   

 

15,073,255

Adjusted diluted earnings per share (Non-GAAP)       $ 1.33     $ 1.15     $ 1.14     $ 1.11     $ 1.03     $ 4.42       Non-GAAP Disclosure - Tangible Book Value Per Share                                                 Total common equity       $ 577,967     $ 574,780     $ 588,349     $ 575,428     $ 562,064     $ 574,780 Less: Goodwill and intangibles (9)         100,436       100,887       101,360       101,840       102,326       100,887 Tangible common equity         477,531       473,893       486,989       473,588       459,738       473,893 Ending shares outstanding      

 

15,285,335

   

 

15,265,614

   

 

15,202,444

   

 

15,189,453

   

 

15,181,198

   

 

15,265,614

Tangible book value per share (Non-GAAP)       $ 31.24     $ 31.04     $ 32.03     $ 31.18     $ 30.28     $ 31.04  

(1) Federal Reserve peer ratio as of December 31, 2017, includes banks and bank holding companies with consolidated assets between $3 billion and $10 billion.(2) “Originated” equals loans and leases not included by definition in “acquired loans".(3) “Acquired Loans and Leases” equals loans and leases acquired at fair value, accounted for in accordance with FASB ASC Topic 805.(4) Average balances and yields on available-for-sale securities are based on historical amortized cost.(5) Interest income includes the tax effects of taxable-equivalent basis.(6) Nonaccrual loans are included in the average asset totals presented above. Payments received on nonaccrual loans have been recognized as disclosed in Note 1 of the Company's consolidated financial statements included in Part I of the Company's annual report on Form 10-K for the fiscal year ended December 31, 2017.(7) Certain acquired loans and leases that are past due are not on nonaccrual and are not included in nonperforming loans. The risk of credit loss on these loans has been considered by virtue of the Corporation's estimate of acquisition-date fair value and these loans are considered accruing as the Corporation primarily recognizes interest income through accretion of the difference between the carrying value of these loans and their expected cash flows.(8)Earnings per share year-to-date may not equal the sum of the quarterly earnings per share as a result of rounding of average shares(9) “Goodwill and intangibles” equal Total Intangible Assets less Mortgage Servicing Rights in the above tables.

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Tompkins Financial CorporationStephen S. Romaine, 888-503-5753President & CEOorFrancis M. Fetsko, 888-503-5753Executive VP, CFO & COO