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Tompkins Financial Corporation Reports Record Full Year and Fourth Quarter Earnings

January 25, 2019 9:00 AM

ITHACA, N.Y.--(BUSINESS WIRE)-- Tompkins Financial Corporation (NYSE American: TMP)

Tompkins Financial Corporation reported record 2018 full year diluted earnings per share of $5.35, an increase of 56.0% compared to the $3.43 per share reported for the period ending December 31, 2017. For the fourth quarter of 2018, diluted earnings per share of $1.23 were up from the $0.16 per share reported in the same quarter last year.

As more fully disclosed in the Non-GAAP disclosure tables included in this press release, it is helpful to view comparisons to prior periods on an adjusted basis to exclude the impact of certain significant non-recurring items. Most notably, earnings per share and net income in the fourth quarter and year-to-date periods of 2017 were impacted by a one-time non-cash write-down of net deferred tax assets in the amount of $14.9 million as a result of the Tax Cuts and Jobs Act of 2017. On an adjusted basis, year-to-date diluted earnings per share for 2018 would have been $5.33, an increase of 20.6% over the adjusted diluted earnings per share of $4.42 reported for the year ending December 31, 2017. For the fourth quarter of 2018, adjusted diluted earnings per share of $1.23 reflected an increase of 7.0% over the $1.15 adjusted diluted earnings per share reported in same quarter last year. Refer to Non-GAAP Disclosure tables for additional details.

Due to changes in the Federal tax rates between periods, it is also helpful to view current period and prior period earnings performance on a pre-tax basis. Income before tax expense was $104.2 million for the year ended December 31, 2018, and $23.8 million in the fourth quarter of 2018, reflecting an increase of 9.4% and 13.5%, respectively, over the same periods in 2017.

President and CEO, Stephen S. Romaine said “We are pleased to once again report record earnings for both the full year and quarterly periods. The results are especially rewarding in today’s environment of uncertain economic conditions. During the quarter, our net interest margin remained relatively stable as growth in average noninterest bearing deposits helped soften the impact of rising market interest rates. Our diversified revenue sources have served us well in volatile markets, as fees from insurance, wealth management, and banking related services provide a revenue mix that is less dependent on interest rates. During 2018, each of these fee based business lines reflected growth over the prior year."

SELECTED HIGHLIGHTS FOR YEAR AND FOURTH QUARTER:

NET INTEREST INCOME

Net interest income of $53.2 million for the fourth quarter of 2018 was up 2.4% over the same period in 2017. For the full year, net interest income was $211.8 million, up $10.5 million, or 5.2% from the same period in 2017.

Growth in net interest income for the year ended December 31, 2018, was largely driven by $356.4 million of growth in average loans during the year, an increase of 8.1% over the prior period. Average deposits for the year ended December 31, 2018, increased $89.7 million, or 1.9% compared to the same period in 2017. Included in the growth of average deposits during 2018 was a $103.5 million increase in average noninterest bearing deposits, up 8.1% from the prior year average.

Net interest margin for 2018 was 3.37%, down slightly from the 3.41% reported for 2017. The decline in margin during the year was largely due to increases in market interest rates, which has resulted in funding costs rising at a faster pace than asset yields.

NONINTEREST INCOME

Noninterest income represented 26.8% of total revenues in 2018, compared to 25.6% in 2017. For the full year, noninterest income of $77.4 million was up $8.2 million, or 11.9%, when compared to 2017. Noninterest income was $19.9 million for the fourth quarter of 2018, and was up $2.5 million or 14.7% compared to the same period in 2017. Fee income business related to investment services, service charges on deposit accounts, and card services income all contributed to the increase over the fourth quarter of 2017. Declines in the stock market during the fourth quarter of 2018 resulted in lower investment services fees tied to assets under management, though the impact was offset by higher than normal fees associated with trust and estate activities.

Other income in the fourth quarter of 2018 included $2.5 million related to the collection of fees and nonaccrual interest for a credit that was charged off in 2010. Other income for the full year included a $2.9 million gain on the sale of two properties. The sale of these properties was related to the move of the Company’s headquarters in the second quarter of 2018.

NONINTEREST EXPENSE

Noninterest expense was $47.2 million for the fourth quarter of 2018, up $0.9 million, or 2.0%, over the fourth quarter of 2017. For the full year of 2018, noninterest expense was $181.1 million, up $10.0 million, or 5.8%, from the same period in 2017. Noninterest expense increases for both the full year and fourth quarter of 2018 included normal annual increases in salaries and wages. The higher noninterest expense in 2018 included lease write-downs of $2.0 million in the second quarter and $514,000 in the third quarter related to leases on recently vacated space. Results for the quarter and full year periods also include an increase of $1.5 million and $2.8 million, respectively, in professional fees, primarily related to investments in strengthening the Company’s compliance and information security infrastructure.

INCOME TAX EXPENSE

The Company's effective tax rate was 20.9% for the year ended December 31, 2018, compared to 44.8% for the same period in 2017. The decrease is a direct result of the $14.9 million non-cash write-down of net deferred tax assets recorded in the fourth quarter of 2017, which was caused by the decline in the Federal statutory tax rate from 35% in 2017, to 21% in 2018 as a result of the Tax Cuts and Jobs Act of 2017.

ASSET QUALITY

Asset quality trends remained strong in the fourth quarter of 2018. Nonperforming assets represented 0.42% of total assets at December 31, 2018, compared to 0.38% at December 31, 2017. Nonperforming asset levels continue to compare favorably to the most recent Federal Reserve Board Peer Group Average1 of 0.61%.

Provision for loan and lease losses was $2.1 million for the fourth quarter of 2018, compared to $2.0 million for the fourth quarter of 2017. Net charge-offs for the fourth quarter of 2018 were $6,000 compared to net charge-offs of $281,000 in the fourth quarter of 2017.

The Company’s allowance for originated loan and lease losses totaled $43.3 million at December 31, 2018, and represented 0.95% of total originated loans and leases at December 31, 2018. At December 31, 2017, the allowance was $39.7 million and represented 0.91% of total originated loans and leases. Contributing to the $2.1 million increase in the allowance over the level reported at September 30, 2018, was an impairment reserve related to a single credit that was downgraded during the fourth quarter of 2018. The total allowance represented 163.25% of total nonperforming loans and leases at December 31, 2018, compared to 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 7.81% at December 31, 2018, improved from the 7.49% reported at September 30, 2018, and the 7.24% reported at December 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 12/31/2018 � 12/31/2017
Cash and noninterest bearing balances due from banks $ 78,524 $ 77,688
Interest bearing balances due from banks � 1,865 � � 6,615 �
Cash and Cash Equivalents 80,389 84,303
�

Available-for-sale securities, at fair value (amortized cost of $1,363,902 at December 31, 2018
and $1,408,996 at December 31, 2017)

1,332,658 1,391,862

Held-to-maturity securities, at amortized cost (fair value of $139,377 at December 31, 2018 and
$140,315 at December 31, 2017)

140,579 139,216

Equity securities, at fair value (amortized cost $1,000 at December 31, 2018 and $1,000 at
December 31, 2017)

887 913
Originated loans and leases, net of unearned income and deferred costs and fees (2) 4,568,741 4,358,543
Acquired loans (3) 265,198 310,577
Less: Allowance for loan and lease losses � 43,410 � � 39,771 �
Net Loans and Leases 4,790,529 4,629,349
�
Federal Home Loan Bank and other stock 52,262 50,498
Bank premises and equipment, net 97,202 86,995
Corporate owned life insurance 81,928 80,106
Goodwill 92,283 92,291
Other intangible assets, net 7,628 9,263
Accrued interest and other assets � 82,091 � � 83,494 �
Total Assets � $ 6,758,436 � � $ 6,648,290 �
LIABILITIES
Deposits:
Interest bearing:
Checking, savings and money market 2,853,190 2,651,632
Time 637,295 748,250
Noninterest bearing � 1,398,474 � � 1,437,925 �
Total Deposits 4,888,959 4,837,807
�
Federal funds purchased and securities sold under agreements to repurchase 81,842 75,177
Other borrowings 1,076,075 1,071,742
Trust preferred debentures 16,863 16,691
Other liabilities � 73,826 � � 70,671 �
Total Liabilities � $ 6,137,565 � � $ 6,072,088 �
EQUITY
Tompkins Financial Corporation shareholders' equity:

Common Stock - par value $.10 per share: Authorized 25,000,000 shares; Issued: 15,363,255 at
December 31, 2018; and 15,316,492 at December 31, 2017

1,535 1,530
Additional paid-in capital 366,595 364,031
Retained earnings 319,396 265,007
Accumulated other comprehensive loss (63,165 ) (51,296 )

Treasury stock, at cost – 137,195 shares at December 31,2018, and 135,773 shares at December
31, 2017

(4,902 ) (4,492 )
Total Tompkins Financial Corporation Shareholders’ Equity 619,459 574,780
�
Noncontrolling interests � 1,412 � � 1,422 �
Total Equity � $ 620,871 � � $ 576,202 �
Total Liabilities and Equity � $ 6,758,436 � � $ 6,648,290 �
�
�
TOMPKINS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except per share data) (Unaudited) � Three Months Ended � Twelve Months Ended
12/31/2018 � 12/31/2017 � 12/31/2018 � 12/31/2017
INTEREST AND DIVIDEND INCOME � �
Loans $ 55,951 $ 50,153 $ 214,370 $ 191,410
Due from banks 9 22 31 37
Available-for-sale securities 7,556 7,337 30,377 29,721
Held-to-maturity securities 865 862 3,437 3,475
Federal Home Loan Bank and other stock � 944 � � 655 � � 3,377 � � 2,121 �
Total Interest and Dividend Income � 65,325 � � 59,029 � � 251,592 � � 226,764 �
INTEREST EXPENSE
Time certificates of deposits of $250,000 or more 624 516 1,712 1,880
Other deposits 5,184 2,745 14,883 10,253
Federal funds purchased and securities sold under agreements to
repurchase 37 40 152 235
Trust preferred debentures 323 270 1,227 1,158
Other borrowings � 5,921 � � 3,489 � � 21,818 � � 11,934 �
Total Interest Expense � 12,089 � � 7,060 � � 39,792 � � 25,460 �
Net Interest Income � 53,236 � � 51,969 � � 211,800 � � 201,304 �
Less: Provision for loan and lease losses � 2,058 � � 2,014 � � 3,942 � � 4,161 �
Net Interest Income After Provision for Loan and Lease Losses � 51,178 � � 49,955 � � 207,858 � � 197,143 �
NONINTEREST INCOME
Insurance commissions and fees 6,685 6,886 29,369 28,778
Investment services income 4,923 4,121 17,288 15,665
Service charges on deposit accounts 2,135 2,100 8,435 8,437
Card services income 2,484 2,225 9,693 9,100
Other income 4,387 1,964 13,130 7,631
(Loss) gain on securities transactions � (756 ) � 16 � � (466 ) � (407 )
Total Noninterest Income � 19,858 � � 17,312 � � 77,449 � � 69,204 �
NONINTEREST EXPENSE
Salaries and wages 21,221 20,722 85,625 81,590
Other employee benefits 6,231 5,675 22,090 21,870
Net occupancy expense of premises 3,436 3,249 13,309 13,214
Furniture and fixture expense 1,890 2,209 7,351 7,028
FDIC insurance 535 752 2,618 2,527
Amortization of intangible assets 437 473 1,771 1,932
Other operating expense � 13,478 � � 13,206 � � 48,303 � � 42,944 �
Total Noninterest Expenses � 47,228 � � 46,286 � � 181,067 � � 171,105 �
Income Before Income Tax Expense � 23,808 � � 20,981 � � 104,240 � � 95,242 �
Income Tax Expense � 4,866 � � 18,493 � � 21,805 � � 42,620 �
Net Income Attributable to Noncontrolling Interests and Tompkins Financial Corporation � 18,942 � � 2,488 � � 82,435 � � 52,622 �
Less: Net Income Attributable to Noncontrolling Interests � 31 � � 31 � � 127 � � 128 �
Net Income Attributable to Tompkins Financial Corporation � $ 18,911 � � $ 2,457 � � $ 82,308 � � $ 52,494 �
Basic Earnings Per Share $ 1.24 $ 0.16 $ 5.39 $ 3.46
Diluted Earnings Per Share � $ 1.23 � � $ 0.16 � � $ 5.35 � � $ 3.43 �
�
�
Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)
� � � � � � � � �
Quarter Ended YTD Period Ended YTD Period Ended
� � � December 31, 2018 � � December 31, 2018 � � December 31, 2017
Average Average Average
Balance

Average

Balance Average Balance Average
(Dollar amounts in thousands) � � (QTD) � Interest �

Yield/
Rate

� � (YTD) � Interest �

Yield/
Rate

� � (YTD) � Interest �

Yield/
Rate

ASSETS
Interest-earning assets
Interest-bearing balances due from banks $ 2,193 $ 9 1.63 % $ 2,139 $ 31 1.45 % $ 4,599 $ 37 0.80 %
Securities (4)
U.S. Government securities 1,404,813 7,883 2.23 % 1,429,875 31,645 2.21 % 1,471,717 31,006 2.11 %
State and municipal (5) 95,809 622 2.58 % 97,116 2,520 2.59 % 100,595 3,393 3.37 %
Other securities (5) � 3,414 � � 40 � � 4.65 % � � 3,491 � 153 � � 4.38 % � � 3,597 � 129 � � 3.59 %
Total securities 1,504,036 8,545 2.25 % 1,530,482 34,318 2.24 % 1,575,909 34,528 2.19 %
FHLBNY and FRB stock 48,888 944 7.66 % 51,815 3,377 6.52 % 42,465 2,121 4.99 %
�
Total loans and leases, net of unearned income (5)(6) � 4,808,996 � � 56,253 � � 4.64 % � � 4,757,583 � 215,648 � � 4.53 % � � 4,401,205 � 194,433 � � 4.42 %
Total interest-earning assets � 6,364,113 � � 65,751 � � 4.10 % � � 6,342,019 � 253,374 � � 4.00 % � � 6,024,178 � 231,119 � � 3.84 %
�
Other assets 346,831 350,659 365,326
�
Total assets � $ 6,710,944 � � � � � � $ 6,692,678 � � � � � $ 6,389,504 � � � �
�
LIABILITIES & EQUITY
Deposits
Interest-bearing deposits
Interest bearing checking, savings & money market $ 2,872,090 3,728 0.51 % $ 2,822,747 9,847 0.35 % $ 2,674,204 5,141 0.19 %
Time deposits � 643,720 � � 2,080 � � 1.28 % � � 664,788 � � 6,748 � � 1.02 % � � 827,181 � � 6,992 � � 0.85 %
Total interest-bearing deposits 3,515,810 5,808 0.66 % 3,487,535 16,595 0.48 % 3,501,385 12,133 0.35 %
�
Federal funds purchased & securities sold under
agreements to repurchase 65,004 37 0.23 % 63,472 152 0.24 % 64,888 235 0.36 %
Other borrowings 1,008,887 5,921 2.33 % 1,086,847 21,818 2.01 % 882,235 11,934 1.35 %
Trust preferred debentures � 16,835 � � 323 � � 7.61 % � � 16,771 � 1,227 � � 7.32 % � � 18,338 � 1,158 � � 6.31 %
Total interest-bearing liabilities 4,606,536 12,089 1.04 % 4,654,625 39,792 0.85 % 4,466,846 25,460 0.57 %
�
Non-interest bearing deposits 1,431,009 1,382,550 1,279,027
Accrued expenses and other liabilities 67,161 � 64,559 66,185
Total liabilities 6,104,706 6,101,734 5,812,058
�
Tompkins Financial Corporation Shareholders’ equity 604,740 589,475 575,958
Noncontrolling interest 1,498 � 1,469 1,488
Total equity 606,238 590,944 577,446
�
Total liabilities and equity $ 6,710,944 � $ 6,692,678 $ 6,389,504
Interest rate spread � � 3.06 % � � 3.14 % � � 3.27 %
Net interest income/margin on earning assets 53,662 3.34 % 213,582 3.37 % 205,659 3.41 %
�
Tax equivalent adjustments (426 ) (1,782 ) (4,355 )
�
Net interest income per consolidated financial statements � � � � $ 53,236 � � � � � � � $ 211,800 � � � � � � � $ 201,304 � � �
�
�

Tompkins Financial Corporation - Summary Financial Data (Unaudited)

�
(In thousands, except per share data) �
Quarter-Ended � Year-Ended
Period End Balance Sheet � Dec-18 � Sep-18 � Jun-18 � Mar-18 � Dec-17 � Dec-18
Securities � $ 1,474,124 � $ 1,452,788 � $ 1,483,991 �

$

1,510,795

�

$

1,531,991

� $ 1,474,124

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

� � 4,568,741 � � 4,531,241 � � 4,507,006 � � 4,408,081 � � 4,358,543 � � 4,568,741
Acquired loans and leases (3) � � 265,198 � � 271,468 � � 284,187 � � 296,765 � � 310,577 � � 265,198
Allowance for loan and lease losses � � 43,410 � � 41,358 � � 41,225 � � 40,211 � � 39,771 � � 43,410
Total assets � � 6,758,436 � � 6,746,960 � � 6,745,800 � � 6,648,128 � � 6,648,290 � � 6,758,436
Total deposits � � 4,888,959 � � 5,025,082 � � 4,792,229 � � 4,929,903 � � 4,837,807 � � 4,888,959

Federal funds purchased and securities sold under
agreements to repurchase

� � 81,842 � � 52,875 � � 52,042 � � 69,131 � � 75,177 � � 81,842
Other borrowings � � 1,076,075 � � 988,515 � � 1,229,956 � � 995,074 � � 1,071,742 � � 1,076,075
Trust preferred debentures � � 16,863 � � 16,820 � � 16,777 � � 16,734 � � 16,691 � � 16,863
Total common equity � � 619,459 � � 597,636 � � 589,173 � � 577,967 � � 574,780 � � 619,459
Total equity � � 620,871 � � 599,144 � � 590,649 � � 579,411 � � 576,202 � � 620,871
� � � � �
Average Balance Sheet � � � � � � � � � � � �
Average earning assets � $ 6,364,113 � $ 6,356,781 �

$

6,348,562

�

$

6,297,727

�

$

6,159,396

�

$

6,342,019

Average assets � � 6,710,944 � � 6,716,452 � �

6,689,649

� �

6,652,763

� �

6,552,414

� �

6,692,678

Average interest-bearing liabilities � � 4,606,536 � � 4,644,533 � �

4,709,122

� �

4,658,998

� �

4,500,649

� �

4,654,625

Average equity � � 606,238 � � 597,211 � �

584,951

� �

574,963

� �

593,956

� �

590,944

�
Share data � � � � � � � � � � � �

Weighted average shares outstanding(basic)

� � 15,057,673 � 15,047,405 � � 15,038,061 � � 15,013,478 � � 14,988,542 � � 15,039,229

Weighted average shares outstanding(diluted)

� � 15,135,750 � � 15,144,491 � � 15,135,970 � � 15,112,518 � � 15,103,906 � � 15,132,257
Period-end shares outstanding � � 15,312,377 � 15,277,915 � � 15,278,430 � � 15,285,335 � � 15,265,614 � � 15,312,377
Common equity book value per share � $ 40.45 � $ 39.12 � $ 38.56 � $ 37.81 � $ 37.65 � $ 40.45

Tangible book value per share (Non-GAAP)

� $ 33.98 � $ 32.60 � $ 32.02 � $ 31.24 � $ 31.04 � $ 33.98
�
Income Statement � � � � � � � � � � � �
Net interest income � $ 53,236 � $ 53,163 �

$

52,714

�

$

52,687

�

$

51,969

�

$

211,800

Provision for loan/lease losses � � 2,058 � � 272 � � 1,045 � � 567 � � 2,014 � � 3,942
Noninterest income � � 19,858 � � 18,603 � � 21,158 � �

17,830

� �

17,312

� �

77,449

Noninterest expense � � 47,228 � � 45,133 � � 44,985 � �

43,721

� �

46,286

� �

181,067

Income tax expense � � 4,866 � � 5,427 � � 5,751 � �

5,761

� �

18,493

� �

21,805

Net income attributable to Tompkins Financial
Corporation

� � 18,911 � � 20,902 � � 22,059 � �

20,436

� �

2,457

� �

82,308

Noncontrolling interests � � 31 � � 32 � � 32 � �

32

� �

31

� �

127

Basic earnings per share (8) � $ 1.24 � $ 1.37 � $ 1.44 �

$

1.34

�

$

0.16

�

$

5.39

Diluted earnings per share (8) � $ 1.23 � $ 1.36 � $ 1.43 �

$

1.33

�

$

0.16

�

$

5.35

�
Nonperforming Assets � � � � � � � � � � � �
Originated nonaccrual loans and leases � $ 19,340 � $ 17,518 � $ 19,082 �

$

18,429

�

$

16,253

�

$

19,340

Acquired nonaccrual loans and leases � � 2,856 � � 2,659 � � 2,673 � �

3,352

� �

3,264

� �

2,856

Originated loans and leases 90 days past due and
accruing

� � 0 � � 0 � � 0 � �

0

� �

44

� �

0

Troubled debt restructurings not included above � � 4,395 � � 4,295 � � 4,324 � �

3,455

� �

3,449

� �

4,395

Total nonperforming loans and leases � � 26,591 � � 24,472 � � 26,079 � �

25,236

� �

23,010

� �

26,591

OREO � � 1,595 � � 1,870 � � 2,233 � �

2,047

� �

2,047

� �

1,595

Total nonperforming assets � $ 28,186 � $ 26,342 � $ 28,312 �

$

27,283

�

$

25,057

�

$

28,186

�
�

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

� Quarter-Ended � Year-Ended

Delinquency - Originated loan and lease
portfolio

� � Dec-18 � � Sep-18 � � � Jun-18 � � Mar-18 � � Dec-17 � Dec-18

Loans and leases 30-89 days past due and
accruing (2)

� � � �
� $ 7,796 � $ 6,454 � � $ 5,875 � $ 6,513 � $ 6,791 � $ 7,796
Loans and leases 90 days past due and accruing (2) � � 0 � � 0 � � � 0 � � 0 � � 44 � � 0

Total originated loans and leases past due and
accruing (2)

� � 7,796 � � 6,454 � � � 5,875 � � 6,513 � � 6,835 � � 7,796
�
Delinquency - Acquired loan and lease portfolio � � � � � � � � � � � � � � � � � � � �
Loans 30-89 days past due and accruing (3)(7) � $ 67 � $ 1,109 � � $ 1,108 � $ 823 � $ 1,256 � $ 67
Loans 90 days or more past due � � 1,316 � � 1,420 � � � 1,110 � � 1,077 � � 1,146 � � 1,316

Total acquired loans and leases past due and
accruing

� � 1,383 � � 2,529 � � � 2,218 � � 1,900 � � 2,402 � � 1,383
Total loans and leases past due and accruing � $ 9,179 � $ 8,983 � � $ 8,093 � $ 8,413 � $ 9,237 � $ 9,179
�
Allowance for Loan Losses - Originated loan and lease portfolio � � � � � � � � � � � � � � � � � � � �
Balance at beginning of period � $ 41,289 � $ 41,111 � � $ 40,107 � $ 39,686 � $ 37,903 � $ 39,686
Provision for loan and lease losses � � 2,046 � � 208 � � � 1,035 � � 608 � � 1,849 � � 3,897
Net loan and lease (recoveries) charge-offs � � 14 � � 30 � � � 31 � � 187 � � 66 � � 262

Allowance for loan and lease losses (originated
loan portfolio) - balance at end of period

� $ 43,321 � $ 41,289 � � $ 41,111 � $ 40,107 � $ 39,686 � $ 43,321
�
Allowance for Loan Losses - Acquired loan and lease portfolio � � � � � � � � � � � � � � � � � � � � �
Balance at beginning of period � $ 69 � $ 114 � � $ 104 � $ 85 � $ 135 � $ 85
Provision (credit) for loan and lease losses � � 12 � � 64 � � � 10 � � (41 ) � 165 � � 45
Net loan and lease (recoveries) charge-offs � � (8 ) � 109 � � � 0 � � (60 ) � 215 � � 41

Allowance for loan and lease losses (acquired
loan portfolio) - balance at end of period

� � 89 � � 69 � � � 114 � � 104 � � 85 � � 89
� � � � � � � � � � � � � � � � � � � � � �
Total allowance for loan and lease losses � $ 43,410 � $ 41,358 � � $ 41,225 � $ 40,211 � $ 39,771 � $ 43,410
�
Loan Classification - Originated Portfolio � � � � � � � � � � � � � � � � � � � �
Special Mention � $ 28,074 � $ 34,245 � � $ 44,068 � $ 34,546 � $ 44,334 � $ 28,074
Substandard � � 43,963 � � 49,597 � � � 41,572 � � 35,746 � � 20,584 � � 43,963
Loan Classification - Acquired Portfolio � � � � � � � � � � � � � � � � � � � � �
Special Mention � � 452 � � 465 � � � 469 � � 476 � � 525 � � 452
Substandard � � 2,914 � � 3,041 � � � 3,180 � � 3,468 � � 5,355 � � 2,914
Loan Classifications - Total Portfolio � � � � � � � � � � � � � � � � � � � � �
Special Mention � � 28,526 � � 34,710 � � � 44,537 � � 35,022 � � 46,599 � � 28,526
Substandard � � 46,877 � � 52,638 � � � 44,752 � � 39,214 � � 25,939 � � 46,877
�

Ratio Analysis

�

Credit Quality

� � � � � � � � � � � � � � � � � � � � �

Nonperforming loans and leases/total loans and
leases (7)

� � 0.55 % � � 0.51 % � � 0.54 % � � 0.54 % � � 0.49 % � � 0.55%
Nonperforming assets/total assets � � 0.42 % � � 0.39 % � � 0.42 % � � 0.41 % � � 0.38 % � � 0.42%

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

� � 0.95 % � � 0.91 % � � 0.91 % � � 0.91 % � � 0.91 % � � 0.95%
Allowance/nonperforming loans and leases � � 163.25 % � � 169.00 % � � 158.11 % � � 159.34 % � � 172.84 % � � 163.25%

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

� � 0.00 % � � 0.01 % � � 0.00 % � � 0.01 % � � 0.02 % � � 0.01%
�
�

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

� � Year-Ended
Capital Adequacy (period-end) � Dec-18 � Sep-18 � Jun-18 � Mar-18 � Dec-17 � Dec-18
Tangible common equity/tangible assets � 7.81 % � 7.49 % � 7.36 % � 7.29 % � 7.24 % � 7.81 %
� � � � �
Profitability � � � � � � � � � � � �
Return on average assets * � 1.12 % � 1.23 % � 1.32 % � 1.25 % � 0.15 % � 1.23 %
Return on average equity * � 12.38 % � 13.89 % � 15.13 % � 14.41 % � 1.64 % � 13.93 %
Net interest margin (TE) * � 3.34 % � 3.35 % � 3.36 % � 3.42 % � 3.42 % � 3.37 %
* 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
� � � Dec-18 � Sep-18 � Jun-18 � Mar-18 � Dec-17 � Dec-18
Net income available to common shareholders � $ 18,911 � $ 20,902 � $ 22,059 � $ 20,436 � $ 2,457 � $ 82,308

Income attributable to unvested stock-based
compensation awards

� � 291 � � 318 � � 359 � � 347 � � 26 � � 1,315
Net earnings allocated to common shareholders � � 18,620 � � 20,584 � � 21,700 � � 20,089 � � 2,431 � � 80,993
Remeasurement of net deferred taxes � � 0 � � 0 � � 0 � � 0 � � 14,944 � � 0
Gain on sale of real estate, net of tax � � 0 � � 0 � � 2,227 � � 0 � � 0 � � 2,227
Write-down of impaired leases, net of tax � � 0 � � (388) � � (1,527) � � 0 � � 0 � � (1,915)
Net income (Non-GAAP) � � 18,620 � � 20,972 � � 21,000 � � 20,089 � � 17,375 � � 80,681
Weighted average shares outstanding (diluted) �

�

15,135,750

� 15,144,491 � 15,135,970 � 15,112,518 � 15,103,906 � 15,132,257
Adjusted diluted earnings per share (Non-GAAP) � $ 1.23 � $ 1.38 � $ 1.39 � $ 1.33 � $ 1.15 � $ 5.33
� � � � � � � � � � �
Non-GAAP Disclosure - Tangible Book Value Per Share
Total common equity � $ 619,459 � $ 597,636 � $ 589,173 � $ 577,967 � $ 574,780 � $ 619,459
Less: Goodwill and intangibles (9) � � 99,106 � � 99,543 � � 99,983 � � 100,436 � � 100,887 � � 99,106
Tangible common equity � � 520,353 � � 498,093 � � 489,190 � � 477,531 � � 473,893 � � 520,353
Ending shares outstanding �

�

15,312,377

� 15,277,915 � 15,278,430 � 15,285,335 � 15,265,614 � 15,312,377
Tangible book value per share (Non-GAAP) � $ 33.98 � $ 32.60 � $ 32.02 � $ 31.24 � $ 31.04 � $ 33.98
�
�

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

�
Non-GAAP Disclosure - Year to date adjusted diluted earnings per share
� � � Dec-18 � � Dec-17
Net income available to common shareholders � $ 82,308 � � $ 52,494
Income attributable to unvested stock-based compensation awards � � 1,315 � � � 818
Net earnings allocated to common shareholders � � 80,993 � � � 51,676
Remeasurement of net deferred taxes � � 0 � � � 14,944
Gain on sale of real estate, net of tax � � 2,227 � � � 0
Write-down of impaired leases, net of tax � � (1,915 ) � � 0
Net income (Non-GAAP) � � 80,681 � � � 66,620
Weighted average shares outstanding (diluted) � � 15,132,257 � � � 15,073,255
Adjusted diluted earnings per share (Non-GAAP) � $ 5.33 � � $ 4.42
� �

(1) Federal Reserve peer ratio as of September 30, 2018, 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.

For more information:

Stephen S. Romaine, President & CEO

Francis M. Fetsko, Executive VP, CFO & COO

Tompkins Financial Corporation 888-503-5753

Source: Tompkins Financial Corporation

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