Tompkins Financial Corporation : Reports Increased Second Quarter Earnings

Tompkins Financial Corporation (NYSE American:TMP):

Tompkins Financial Corporation reported diluted earnings per share of $1.44 for the second quarter of 2020, up 13.4% compared to $1.27 reported in the second quarter of 2019. Net income for the second quarter of 2020 was $21.4 million, compared to $19.4 million reported for the same period in 2019.

For the year-to-date period ended June 30, 2020, diluted earnings per share were $1.97, down 25.1% from the same period in 2019. Year-to-date net income was $29.4 million, down from $40.4 million, for the same period in 2019. Results for the 2020 year-to-date period were negatively impacted by economic stress resulting from the COVID-19 pandemic, which contributed to the $16.3 million provision for credit losses recognized during the first quarter of 2020.

Mr. Romaine commented, "We are pleased to report strong financial results for the quarter despite a very challenging business climate. Although the longer term impact of the pandemic and related economic conditions are still unknown, there have been several recent positive trends noted with certain national economic indicators, such as reduced levels of unemployment, improving retail sales and improving consumer confidence. At Tompkins, we have seen several positive trends as well, with very strong mortgage application volumes in the second quarter, higher levels of debit card spending, and favorable credit quality measures when compared to last quarter. We are encouraged by some of these recent favorable trends, though the recent rise in COVID-19 cases nationally makes it clear that much uncertainty remains. We will remain vigilant in monitoring risk trends as we navigate these challenging times.”

SELECTED HIGHLIGHTS FOR THE SECOND QUARTER:

• Total loans of $5.4 billion were up $568 million, or 11.7% over June 30, 2019. The increase over the prior year included $465.6 million of PPP loans funded during the second quarter of 2020.
• Total deposits of $6.4 billion increased by $1.4 billion, or 27.8% over June 30, 2019.
• Net interest margin was 3.45% for the second quarter of 2020, up from 3.44% for the first quarter of 2020, and 3.43% for the fourth quarter of 2019.
• The ratio of Total Capital to risk-weighted assets improved to 13.95%, up from 13.62% at March 31, 2020, and 13.53% at December 31, 2019.

NET INTEREST INCOME
Net interest income was $56.4 million for the second quarter of 2020, compared to $52.3 million reported for the second quarter of 2019. For the year-to-date period, net interest income was $109.3 million, an increase of $5.1 million or 4.9% from the same six-month period in 2019.

Net interest income benefited from growth in average loans. Average loans were up $297.7 million, or 6.2% in the first six months of 2020, compared to the same six month period in 2019. The increase in average loans includes the benefit of $465.6 million of loans originated under the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP") in the second quarter of 2020. Asset yields were down 20 basis points compared to the first six months of 2019, which reflects the impact of reductions in market interest rates during the first six months of 2020, and the addition of the lower yielding PPP loans originated in the second quarter.

Average total deposits were up $778.1 million, or 15.7% in the first six months of 2020, versus the same period in 2019. Average noninterest deposits were up $251.3 billion or 18.7% in the first six months of 2020, compared to the same period in 2019. Average deposit balances benefited from $465.6 million of PPP loan originations during the second quarter of 2020, the majority of which were deposited in Tompkins checking accounts. The average rate paid on interest-bearing deposit products in the first six months of 2020 decreased by 21 basis points over the same period in 2019.

Net interest margin was 3.45% for the second quarter of 2020, up compared to the 3.34% reported for the second quarter of 2019, and 3.44% for the first quarter of 2020. The improved net interest margin year-over-year was largely driven by lower funding costs, reflecting lower deposit rates and growth in deposit balances, which were used to reduce higher cost other borrowing balances.

As a result of its participation in the SBA's PPP, in the second quarter the Company recorded net deferred loan fees of $2.3 million, which are included in interest income.

NONINTEREST INCOME
Noninterest income represented 24.8% of total revenues in the first six months of 2020, as compared to 26.7% in the same period in 2019. Noninterest income of $17.2 million for the second quarter of 2020 was down 7.3% compared to the same period in 2019. For the year-to-date period, noninterest income of $36.1 million was down 4.7% from the same period in 2019. Total fee based services in the second quarter of 2020 were $14.7 million, down 10.5% compared to the same period in 2019. The reduction in fee based income in 2020 is largely related to the pandemic-related travel and business restrictions, which reduced card services and service charge income. Other noninterest income for the second quarter of 2020 included $691,000 related to gains on sales of residential mortgage loans.

NONINTEREST EXPENSE
Noninterest expense was $46.9 million for the second quarter of 2020, up $818,000, or 1.8%, over the second quarter of 2019. For the year-to-date period, noninterest expense was $92.6 million, up $2.3 million, or 2.6%, from the same period in 2019. The increase in noninterest expense for both the second quarter and year-to-date periods was primarily attributable to normal annual increases in salaries and wages. Other expense for the second quarter and year-to-date period of 2020 included $1.2 million and $1.7 million, respectively, related to allowance for credit losses for off-balance sheet exposures. Other expense during the quarter also included a loss of $675,000 related to the pending sale of real estate.

INCOME TAX EXPENSE
The Company's effective tax rate was 20.5% for the second quarter of 2020, compared to 19.6% for the same period in 2019. The effective tax rate for the six months ended June 30, 2020 was 20.2%, compared to 20.3% reported for the same period in 2019.

ASSET QUALITY
Asset quality trends remained strong in the second quarter of 2020. Nonperforming assets represented 0.40% of total assets at June 30, 2020, down from 0.47% at December 31, 2019. Nonperforming asset levels continue to be below the most recent Federal Reserve Board Peer Group Average¹ of 0.49%.

Provision for credit losses in the second quarter of 2020 was a negative provision of $348,000 compared to an expense of $601,000 for the same period in 2019. Provision expense for the six months ended June 30, 2020 was $15.9 million, compared to $1.0 million for the same period in 2019. The first quarter of 2020 included provision expense of $16.3 million related to the impact of the economic shutdown related to COVID-19 on economic forecasts and other model assumptions relied upon by management in determining the allowance. Net recoveries for the second quarter of 2020 were $26,000 compared to net charge-offs of $139,000 reported in the second quarter of 2019.

The allowance for credit losses represented 0.96% of total loans and leases at June 30, 2020, compared to 1.06% at March 31, 2020, 0.81% at December 31, 2019, and 0.84% at June 30, 2019. The decline in the ratio during the second quarter this year is largely due to the increase in loan balances being largely driven by $465.6 million of PPP loans for which no reserves have been allocated. The ratio of the allowance to total nonperforming loans and leases was 172.62% at June 30, 2020, improved from 126.90% at December 31, 2019, and 171.42% at June 30, 2019.

Overall credit quality has been supported by several initiatives initiated by the Company in response to the pandemic. As previously announced, Tompkins has initiated and participated in a number of credit initiatives to support employees and customers who have been impacted by the economic conditions associated with the COVID-19 pandemic. For non-executive employees affected by COVID-19, the Company implemented a low interest loan program. The Company also implemented a payment deferral program to assist both consumer and business borrowers that may be experiencing financial hardship due to COVID-19. Weekly deferral requests for the last week of June were down 98% from peak levels the Company experienced in late March. As of June 30, 2020, the Company had granted payment deferral requests for approximately 3,900 loans totaling $2.3 billion to individuals and businesses. As of July 20, 2020, nearly 50% of loans that had received deferrals had begun making regular payments.

As previously noted, the Company participated in the U.S. Small Business Administration (SBA) Paycheck Protection Program (“PPP”). This program provides borrower guarantees for lenders, as well as loan forgiveness incentives for borrowers that utilize the loan proceeds to cover employee compensation-related expenses and certain other eligible business operating costs, all in accordance with the rules and regulations established by the SBA. The Company began accepting applications for PPP loans on April 3, 2020, and had funded approximately 2,997 loans totaling about $465.6 million as of June 30, 2020.

CAPITAL POSITION
Capital ratios remained well above the regulatory minimums for well capitalized institutions. The ratio of Total capital to risk-weighted assets improved to 13.95% at June 30, 2020, up from 13.62% at March 31, 2020, and 13.53% at December 31, 2019. The ratio of Tier 1 capital to average assets was 8.79% at June 30, 2020, down from 9.61% at December 31, 2019, and 9.25% at June 30, 2019. The current period Tier 1 capital to average assets was negatively impacted by $465.6 million of PPP loans originated in the second quarter of 2020.

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 contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Examples of forward-looking statements in this press release include, without limitation, those regarding the novel coronavirus (COVID-19) and our plans in response to the coronavirus. Forward-looking statements may be identified by use of such words as "may", "will", "estimate", "intend", "continue", "believe", "expect", "plan", or "anticipate", and other similar words. 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, that could cause actual results of the Company to differ materially from those expressed and/or implied by forward-looking statements. The following factors, in addition to those listed as Risk Factors in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, 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 severity and duration of the coronavirus outbreak and the impact of the outbreak (including the government’s response to the outbreak) on economic and financial markets, potential regulatory actions, and modifications to our operations, products, and services relating thereto; disruptions in our and our customers’ operations and loss of revenue due to pandemics, epidemics, widespread health emergencies, government-imposed travel/business restrictions, or outbreaks of infectious diseases such as the coronavirus, and the associated adverse impact on our financial position, liquidity, and our customers’ abilities to repay their obligations to us or willingness to obtain financial services products from the Company; 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, bank holding companies and/or financial holding companies, such as the Dodd-Frank Act, Basel III and the Economic Growth, Regulatory Relief, and Consumer Protection Act; legislative and regulatory changes in response to COVID-19 with which we and our subsidiaries must comply, including the CARES Act and the rules and regulations promulgated thereunder, and state and local government mandates; 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; reliance on large customers; and financial resources in the amounts, at the times and on the terms required to support the Company’s future businesses. The Company does not undertake any obligation to update its 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		06/30/2020				12/31/2019
Cash and noninterest bearing balances due from banks		$	472,108			$	136,010
Interest bearing balances due from banks		7,018				1,972
Cash and Cash Equivalents		479,126				137,982
Available-for-sale debt securities, at fair value (amortized cost of $1,301,271 at June 30, 2020 and $1,293,239 at December 31, 2019)		1,335,153				1,298,587
Equity securities, at fair value (amortized cost $934 at June 30, 2020 and $915 at December 31, 2019)		934				915
Total loans and leases, net of unearned income and deferred costs and fees		5,424,285				4,917,550
Less: Allowance for credit losses		52,082				39,892
Net Loans and Leases		5,372,203				4,877,658
Federal Home Loan Bank and other stock		19,044				33,695
Bank premises and equipment, net		89,934				94,355
Corporate owned life insurance		83,606				82,961
Goodwill		92,447				92,447
Other intangible assets, net		5,500				6,223
Accrued interest and other assets		104,109				100,800
Total Assets		$	7,582,056			$	6,725,623
LIABILITIES
Deposits:
Interest bearing:
Checking, savings and money market		3,759,478				3,080,686
Time		699,166				675,014
Noninterest bearing		1,918,877				1,457,221
Total Deposits		6,377,521				5,212,921
Federal funds purchased and securities sold under agreements to repurchase		50,889				60,346
Other borrowings		325,000				658,100
Trust preferred debentures		17,120				17,035
Other liabilities		113,497				114,167
Total Liabilities		$	6,884,027			$	6,062,569
EQUITY
Tompkins Financial Corporation shareholders' equity:
Common Stock - par value $.10 per share: Authorized 25,000,000 shares; Issued: 14,950,368 at June 30, 2020; and 15,014,499 at December 31, 2019		1,495				1,501
Additional paid-in capital		335,268				338,507
Retained earnings		386,025				370,477
Accumulated other comprehensive loss		(21,048		)		(43,564		)
Treasury stock, at cost – 119,092 shares at June 30, 2020, and 123,956 shares at December 31, 2019		(5,187		)		(5,279		)
Total Tompkins Financial Corporation Shareholders’ Equity		696,553				661,642
Noncontrolling interests		1,476				1,412
Total Equity		$	698,029			$	663,054
Total Liabilities and Equity		$	7,582,056			$	6,725,623

TOMPKINS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data) (Unaudited)		Three Months Ended							Six Months Ended
		06/30/2020				06/30/2019			06/30/2020			06/30/2019
INTEREST AND DIVIDEND INCOME
Loans		$	56,133			$	56,740		$	111,747		$	112,064
Due from banks		1				$	10		7			$	20
Available-for-sale debt securities		6,922				$	7,686		14,066			$	15,544
Held-to-maturity securities		0				$	863		0			$	1,721
Federal Home Loan Bank and other stock		389				$	794		824			$	1,672
Total Interest and Dividend Income		63,445				$	66,093		126,644			$	131,021
INTEREST EXPENSE
Time certificates of deposits of $250,000 or more		860				774			1,703			$	1,360
Other deposits		3,917				6,816			10,272			$	12,827
Federal funds purchased and securities sold under agreements to repurchase		21				33			57			$	77
Trust preferred debentures		253				327			542			$	656
Other borrowings		2,028				5,825			4,735			$	11,869
Total Interest Expense		7,079				13,775			17,309			$	26,789
Net Interest Income		56,366				52,318			109,335			$	104,232
Less: Provision for credit loss expense		(348		)		601			15,946			$	1,046
Net Interest Income After Provision for Credit Loss Expense		56,714				51,717			93,389			$	103,186
NONINTEREST INCOME
Insurance commissions and fees		7,255				7,752			15,300			$	15,797
Investment services income		3,920				3,907			8,122			$	7,991
Service charges on deposit accounts		1,248				2,021			3,231			$	4,019
Card services income		2,283				2,750			4,466			$	5,540
Other income		2,466				1,806			4,570			$	4,284
Net gain on securities transactions		5				284			448			$	296
Total Noninterest Income		17,177				18,520			36,137			$	37,927
NONINTEREST EXPENSE
Salaries and wages		23,037				22,088			45,531			$	43,189
Other employee benefits		5,886				5,662			11,570			$	11,273
Net occupancy expense of premises		3,040				3,258			6,368			$	6,859
Furniture and fixture expense		1,888				1,996			3,873			$	3,975
Amortization of intangible assets		375				418			749			$	830
Other operating expense		12,662				12,648			24,537			$	24,153
Total Noninterest Expenses		46,888				46,070			92,628			$	90,279
Income Before Income Tax Expense		27,003				24,167			36,898			$	50,834
Income Tax Expense		5,540				4,743			7,449			$	10,338
Net Income Attributable to Noncontrolling Interests and Tompkins Financial Corporation		21,463				19,424			29,449			$	40,496
Less: Net Income Attributable to Noncontrolling Interests		32				32			69			$	64
Net Income Attributable to Tompkins Financial Corporation		$	21,431			19,392			$	29,380		$	40,432
Basic Earnings Per Share		$	1.44			$	1.27		$	1.97		$	2.64
Diluted Earnings Per Share		$	1.44			$	1.27		$	1.97		$	2.63

Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)
	Quarter Ended								Year to Date Period Ended								Year to Date Period Ended
	June 30, 2020								June 30, 2020								June 30, 2019
		Average								Average								Average
		Balance					Average			Balance					Average			Balance					Average
(Dollar amounts in thousands)		Quarter Ended		Interest			Yield/ Rate			Year Ended		Interest			Yield/ Rate			Year Ended		Interest			Yield/ Rate
ASSETS
Interest-earning assets
Interest-bearing balances due from banks	$	4,541		$	1		0.09	%	$	3,033		$	7		0.46	%	$	2,232		$	20		1.81	%
Securities (2)
U.S. Government securities		1,199,999		6,298			2.11	%		1,197,376		12,874			2.16	%		1,399,542		16,168			2.33	%
State and municipal (3)		109,621		743			2.73	%		103,550		1,409			2.74	%		93,872		1,264			2.72	%
Other securities (3)		3,433		32			3.75	%		3,428		68			3.99	%		3,416		81			4.78	%
Total securities		1,313,053		7,073			2.17	%		1,304,354		14,351			2.21	%		1,496,830		17,513			2.36	%
FHLBNY and other stock		21,691		389			7.21	%		24,124		824			6.87	%		47,349		1,672			7.12	%
Total loans and leases, net of unearned income (3)(4)		5,276,794		56,441			4.30	%		5,095,414		112,348			4.43	%		4,797,709		112,636			4.73	%
Total interest-earning assets		6,616,079		63,904			3.89	%		6,426,925		127,530			3.99	%		6,344,120		131,841			4.19	%
Other assets		797,866								616,521								398,762
Total assets	$	7,413,945							$	7,043,446							$	6,742,882
LIABILITIES & EQUITY
Deposits
Interest-bearing deposits
Interest bearing checking, savings & money market	$	3,660,190		1,935			0.21	%	$	3,436,366		6,301			0.37	%	$	2,943,765		9,441			0.65	%
Time deposits		704,460		2,842			1.62	%		692,354		5,674			1.65	%		658,242		4,746			1.45	%
Total interest-bearing deposits		4,364,650		4,777			0.44	%		4,128,720		11,975			0.58	%		3,602,007		14,187			0.79	%
Federal funds purchased & securities sold under
agreements to repurchase		52,464		21			0.16	%		57,996		57			0.20	%		63,451		77			0.24	%
Other borrowings		391,547		2,028			2.08	%		444,988		4,735			2.14	%		971,119		11,869			2.46	%
Trust preferred debentures		17,092		253			5.95	%		17,071		542			6.38	%		16,900		656			7.83	%
Total interest-bearing liabilities		4,825,753		7,079			0.59	%		4,648,775		17,309			0.75	%		4,653,477		26,789			1.16	%
Non-interest bearing deposits		1,788,108								1,598,884								1,347,538
Accrued expenses and other liabilities		109,609								111,141								101,409
Total liabilities		6,723,470								6,358,800								6,102,424
Tompkins Financial Corporation Shareholders’ equity		689,018								683,206								639,015
Noncontrolling interest		1,457								1,440								1,443
Total equity		690,475								684,646								640,458
Total liabilities and equity	$	7,413,945							$	7,043,446							$	6,742,882
Interest rate spread							3.30	%							3.24	%							3.03	%
Net interest income/margin on earning assets				56,825			3.45	%				110,221			3.45	%				105,052			3.34	%
Tax equivalent adjustments				(459		)						(886		)						(820		)
Net interest income per consolidated financial statements				$	56,366							$	109,335							$	104,232

Tompkins Financial Corporation - Summary Financial Data (Unaudited)

(In thousands, except per share data)
	Quarter-Ended															Year-Ended
Period End Balance Sheet		Jun-20			Mar-20			Dec-19			Sep-19			Jun-19			Dec-19
Securities	$	1,336,087		$	1,353,567		$	1,299,502		$	1,282,026		$	1,330,719		$	1,299,502
Total Loans		5,424,285			4,937,822			4,917,550			4,857,073			4,855,802			4,917,550
Allowance for credit losses		52,082			52,404			39,892			41,371			40,790			39,892
Total assets		7,582,056			6,743,114			6,725,623			6,627,982			6,654,390			6,725,623
Total deposits		6,377,521			5,409,363			5,212,921			5,369,990			4,988,897			5,212,921
Federal funds purchased and securities sold under agreements to repurchase		50,889			68,993			60,346			50,541			63,978			60,346
Other borrowings		325,000			457,983			658,100			429,000			824,562			658,100
Trust preferred debentures		17,120			17,078			17,035			16,992			16,949			17,035
Total common equity		696,553			681,153			661,642			658,358			656,201			661,642
Total equity		698,029			682,597			663,054			659,865			657,677			663,054
Average Balance Sheet
Average earning assets	$	6,616,079		$	6,237,773		$	6,188,442		$	6,203,078		$	6,337,983		$	6,268,440
Average assets		7,413,945			6,672,948			6,613,202			6,621,412			6,742,409			6,679,578
Average interest-bearing liabilities		4,825,753			4,471,797			4,374,572			4,415,079			4,638,249			4,523,088
Average equity		690,475			678,817			664,441			659,650			650,079			651,341
Share data
Weighted average shares outstanding (basic)	14,681,956			14,718,948			14,726,023			14,827,114			15,019,710			14,907,057
Weighted average shares outstanding (diluted)	14,714,848			14,774,269			14,790,503			14,887,626			15,085,945			14,973,951
Period-end shares outstanding	14,914,458			14,907,947			14,978,589			14,975,750			15,160,719			14,978,589
Common equity book value per share	$	46.70		$	45.69		$	44.17		$	43.96		$	43.28		$	44.17
Tangible book value per share (Non-GAAP)**	$	40.19		$	39.15		$	37.64		$	37.40		$	36.77		$	37.64
** See "Non-GAAP measures" below for a discussion of non-GAAP financial measures and a reconciliation of non-GAAP financial measures to the most directly comparable financial measures presented in accordance with GAAP.
Income Statement
Net interest income	$	56,366		$	52,969		$	53,240		$	53,156		$	52,318		$	210,628
Provision (credit) for credit loss expense		(348)			16,294			(1,000)			1,320			601			1,366
Noninterest income		17,177			18,960			17,972			19,534			18,520			75,433
Noninterest expense		46,888			45,740			45,900			45,655			46,070			181,834
Income tax expense		5,540			1,909			5,200			5,478			4,743			21,016
Net income attributable to Tompkins Financial Corporation		21,431			7,949			21,080			20,206			19,392			81,718
Noncontrolling interests		32			37			32			31			32			127
Basic earnings per share (5)	$	1.44		$	0.53		$	1.41		$	1.34		$	1.27		$	5.39
Diluted earnings per share (5)	$	1.44		$	0.53		$	1.40		$	1.34		$	1.27		$	5.37
Nonperforming Assets
Nonaccrual loans and leases	$	23,183		$	23,556		$	24,281		$	23,568		$	18,906		$	24,281
Loans and leases 90 days past due and accruing		0			0			0			0			0			0
Troubled debt restructuring not included above		6,988			7,137			7,154			6,528			4,889			7,154
Total nonperforming loans and leases		30,171			30,693			31,435			30,096			23,795			31,435
OREO		274			466			428			888			2,229			428
Total nonperforming assets	$	30,445		$	31,159		$	31,863		$	30,984		$	26,024		$	31,863

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

	Quarter-Ended															Year-Ended
Delinquency - Total loan and lease portfolio		Jun-20			Mar-20			Dec-19			Sep-19			Jun-19			Dec-19
Loans and leases 30-89 days past due and accruing	$	8,352		$	9,328		$	3,724		$	3,519		$	4,376		$	3,724
Loans and leases 90 days past due and accruing		0			0			794			1,219			1,229			794
Total loans and leases past due and accruing		8,352			9,328			4,518			4,738			5,605			4,518

Allowance for Credit Losses*
Balance at beginning of period	$	52,404		$	39,892		$	41,371		$	40,790		$	40,328		$	43,410
Impact of adopting ASC 326		0			(2,534	)		0			0			0			0
Provision (credit) for credit losses		(348	)		16,294			(1,000	)		1,320			601			1,366
Net loan and lease (recoveries) charge-offs		(26	)		1,248			479			739			139			4,884
Allowance for credit losses at end of period	$	52,082		$	52,404		$	39,892		$	41,371		$	40,790		$	39,892
*CECL was adopted January 1, 2020. Prior periods reflect the allowance for credit losses for loans under the incurred loss methodology.
Loan Classification - Total Portfolio
Special Mention	$	44,741		$	37,121			29,800		$	41,575		$	36,884		$	29,800
Substandard		48,046			52,894			60,499			61,682			47,627			60,499

Ratio Analysis

Credit Quality
Nonperforming loans and leases/total loans and leases (6)		0.56	%		0.62	%		0.64	%		0.62	%		60.49	%		0.64	%
Nonperforming assets/total assets		0.40	%		0.46	%		0.47	%		0.47	%		0.39	%		0.47	%
Allowance for credit losses/total loans and leases		0.96	%		1.06	%		0.81	%		0.85	%		0.84	%		0.81	%
Allowance/nonperforming loans and leases		172.62	%		170.74	%		126.90	%		137.46	%		171.42	%		126.90	%
Net loan and lease losses annualized/total average loans and leases		0.00	%		0.10	%		0.04	%		0.06	%		0.01	%		0.10	%
Capital Adequacy
Tier 1 Capital (to average assets)		8.79	%		9.53	%		9.61	%		9.43	%		9.25	%		9.61	%
Total Capital (to risk-weighted assets)		13.95	%		13.62	%		13.53	%		13.36	%		13.34	%		13.53	%
Profitability (period-end)
Return on average assets *		1.16	%		0.48	%		1.26	%		1.21	%		1.15	%		1.22	%
Return on average equity *		12.48	%		4.71	%		12.59	%		12.15	%		11.96	%		12.55	%
Net interest margin (TE) *		3.45	%		3.44	%		3.44	%		3.43	%		3.34	%		3.39	%
** Quarterly ratios have been annualized

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

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 below tables. The Company believes the non-GAAP measures provide meaningful comparisons of our underlying operational performance and facilitate management's and investors' assessments of business and performance trends. These non-GAAP financial measures should not be considered in isolation or as a measure of the Company's profitability or liquidity; they are in addition to, and are not a substitute for, financial measures under GAAP. The non-GAAP financial measures 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.

Reconciliation of Net Income Attributable to Tompkins Financial Corporation (GAAP) to Net Operating Income Available to Common Shareholders (Non-GAAP) and Reconciliation of Diluted Earnings Per Share (GAAP) to Adjusted Diluted Earnings Per Share (Non-GAAP)

	Quarter-Ended															Year-Ended
		Jun-20			Mar-20			Dec-19			Sep-19			Jun-19			Dec-19
Net income available to common shareholders	$	21,431		$	7,949		$	21,081		$	20,206		$	19,392		$	81,718
Less: income attributable to unvested stock-based compensations awards		251			99			334			317			306			1,306
Net earnings allocated to common shareholders (GAAP)		21,180			7,850			20,747			19,889			19,086			80,412
Diluted earnings per share (GAAP)	$	1.44		$	0.53		$	1.40		$	1.34		$	1.27		$	5.37
Adjustments for non-operating income and expense:
Write-down of real estate pending sale		673			0			0			0			0			0
Total Adjustments		673			0			0			0			0			0
Tax (benefit) expense		(165	)		0			0			0			0			0
Total adjustments, net of tax		508			0			0			0			0			0
Net operating income available to common shareholders (Non-GAAP)		21,688			7,850			20,747			19,889			19,086			80,412
Weighted average shares outstanding (diluted)	14,714,848			14,774,269			14,790,503			14,887,626			15,085,945			14,973,951
Adjusted diluted earnings per share (Non-GAAP)	$	1.47		$	0.53		$	1.40		$	1.34		$	1.27		$	5.37

	Year-to-Date
	Jun-20			Jun-19
Net income available to common shareholders	$	29,380		$	40,432
Less: income attributable to unvested stock-based compensation awards	350			655
Net earnings allocated to common shareholders (GAAP)	29,030			39,777
Diluted earnings per share (GAAP)	$	1.97		$	2.64
Adjustments for non-operating income and expense:
Write-down of real estate pending sale	673			0
Tax (benefit) expense	(165		)	0
Total adjustments, net of tax	508			0
Net operating income available to common shareholders (Non-GAAP)	29,538			39,777
Weighted average shares outstanding (diluted)	14,714,848			15,085,945
Adjusted diluted earnings per share (Non-GAAP)	$	2.01		$	2.64

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

Reconciliation of Common Equity Book Value Per Share (GAAP) to Tangible Book Value Per Share (non-GAAP)
Total common equity	$	696,553		$	681,153		$	661,642		$	658,358		$	656,201		$	661,642
Less: Goodwill and intangibles (7)		97,107			97,481			97,855			98,277			98,698			97,855
Tangible common equity (Non-GAAP)		599,446			583,672			563,787			560,081			557,503			563,787
Ending shares outstanding	14,914,458			14,907,947			14,978,589			14,975,750			15,160,719			14,978,589
Tangible book value per share (Non-GAAP)	$	40.19		$	39.15		$	37.64		$	37.40		$	36.77		$	37.64

(1) Federal Reserve peer ratio as of March 31, 2020 the most recent data available, includes banks and bank holding companies with consolidated assets between $3 billion and $10 billion.

(2) Average balances and yields on available-for-sale securities are based on historical amortized cost.

(3) Interest income includes the tax effects of taxable-equivalent basis.

(4) 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, 2019.

(5) 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

(6) 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 Company's estimate of acquisition-date fair value and these loans are considered accruing as the Company primarily recognizes interest income through accretion of the difference between the carrying value of these loans and their expected cash flows.

(7) "Goodwill and intangibles" as shown in the above tables, equal total intangible assets less mortgage servicing rights.

 

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