Tompkins Financial Corporation Reports Second Quarter Earnings

Tompkins Financial Corporation (TMP–NYSE MKT LLC)

Tompkins Financial Corporation reported net income of $8.8 million for the second quarter of 2012, a decrease of 6.1% from the $9.4 million reported for the same period in 2011. Diluted earnings per share were $0.72 for the second quarter of 2012, a 15.3% decrease from $0.85 reported for the second quarter of 2011. Quarterly earnings did show improvement from the first quarter, with second quarter net income up 13.0% and diluted earnings per share up 2.9% over the first quarter of 2012.

Results for the current quarter were impacted by $703,000 in after tax expenses related to the pending merger with VIST Financial Corporation as well as $243,000 in after tax income related to the reversal of an accrued liability related to the recently announced settlement of litigation between VISA Inc. and certain merchants. As more fully disclosed in the non-GAAP disclosure section of this press release, net income and diluted earnings per share would have been $9.3 million and $0.76, respectively if the merger expenses and reversal of the accrued liability were excluded from year-to-date results.

For the 2012 year to date period, net income of $16.6 million and diluted earnings per share of $1.42, represent declines of 8.4% and 13.9%, respectively over the same six month period in 2011. The current year to date net income and diluted earnings per share would have been $17.2 million and $1.47, respectively if the merger expenses and reversal of the accrued liability were excluded from year-to-date results, as disclosed in the non-GAAP disclosure section of this press release.

President and Chief Executive Officer Stephen S. Romaine, commented “Although second quarter earnings were down from the same period last year, we are encouraged by several positive trends noted during the quarter. These trends included loan growth during the quarter at an annualized rate of more than 8%, continued improving trends in asset quality, and a stabilization of the net interest margin. We have been working hard to prepare for the integration of VIST Financial into the Tompkins organization and are pleased that we remain on track to close this transaction on August 1st. We remain very excited by this opportunity and feel we are well positioned to make this a successful transaction both in the short term, and for years to come.”

Selected highlights for the 2012 second quarter and year to date periods are included below:

  • During the second quarter, the Company completed a successful capital raise, which helps position the Company for future growth, including the pending acquisition of VIST Financial. After transaction costs, net proceed from the capital raise were approximately $38.0 million, and resulted in 1,006,250 new shares being issued on April 3, 2012.
  • Credit quality continued to show improvement as nonperforming assets declined for the third consecutive quarter and net loan and lease losses were at their lowest level in the past four quarters. The ratio of nonperforming assets to total assets of 1.17% at June 30, 2012, has improved for seven consecutive quarters and remains well below the most recent peer averages of 2.62% published as of March 31, 2012, by the Federal Reserve 1. The Company continues to receive regular payments on over 65% of loan balances that we categorize as nonperforming.
  • The net interest margin for the second quarter of 2012 was 3.52%, which is relatively unchanged from the 3.51% margin in the first quarter of 2012. The margin is down from 3.77% in the second quarter of 2011. Despite the decline in net interest margin over the past 12 months, net interest income of $28.1 million for the second quarter of 2012 was at a record level, as growth in earning assets and core deposits have helped mitigate the earnings impact from the decline in margin.
  • Total loans were $2.0 billion at June 30, 2012, up $37.8 million or 1.9% from December 31, 2011, and up $99.0 million or 5.2% from June 30, 2011.
  • Total deposits were $2.8 billion at June 30, 2012, up 3.9% from December 31, 2011, and up 7.5% from June 30, 2011.
  • Noninterest income was up 6.3% for the quarter, when compared to the same period in 2011. Net gain on securities transactions and insurance commissions and fees were up from prior year by $933,000 and $301,000, respectively. The increase was partially offset by lower service charges on deposit accounts, which were impacted by regulatory changes implemented in the first quarter of 2012 and are expected to impact earnings for the remainder of 2012. Investment services income was down compared to the same period in 2011, mainly a result of a planned decrease in the number of external broker dealer relationships. Other income includes $405,000 of income related to the reversal of a liability that was previously accrued to cover the Company’s potential obligation to share in losses stemming from certain litigation of VISA Inc.
  • Noninterest expense for the second quarter of 2012 was $26.9 million, up 6.7% from the same period last year. Pension and employee benefits were up 12.7%; lower interest rates have impacted plan discount rates and contributed to the increase. The increase in other operating expense over the same period prior year was impacted by merger related expenses of $879,000 related to the planned merger with VIST Financial, and a $329,000 increase in marketing and business development expenses.
  • Provision for loan and lease losses was $1.0 million for the second quarter of 2012, down from $1.1 million and $1.2 million in the first quarter of 2012 and December 31, 2011, respectively, and in line with the second quarter of 2011.
  • Nonperforming assets were $40.7 million at June 30, 2012, down 4.8% when compared to June 30, 2011 and December 31, 2011.
  • The Company’s allowance for loan and lease losses totaled $26.9 million at June 30, 2012, which represented 1.33% of total loans, compared to $27.6 million and 1.39% at December 31, 2011. The allowance for loan and lease losses covered 69.75% of nonperforming loans as of June 30, 2012, up from the 66.65% at December 31, 2011.
  • Capital ratios remain well above the regulatory well capitalized minimums. Tier 1 capital as a percentage of average assets at June 30, 2012, was 9.53%; and the ratio of total capital to risk-weighted assets was 16.22%. The improvement in the capital ratios during the quarter is primarily attributable to the $38 million net capital raise completed in April 2012.

Mr. Romaine added, “As we begin the third quarter with the anticipation of closing on the transaction with VIST Financial, I would like to thank the employees of both companies for their dedication in working toward this shared goal of integrating the two organizations. The experience in working with teams from both companies makes me more confident than ever in the potential for the combined organization.”

Tompkins Financial Corporation operates 46 banking offices in the New York State markets served by the Company's three community banks - Tompkins Trust Company, The Bank of Castile, and Mahopac National Bank, and provides insurance through Tompkins Insurance Agencies, Inc. and wealth management through Tompkins Financial Advisors.

"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.

1 Federal Reserve peer ratio as of March 31, 2012, includes banks and bank holding companies with consolidated assets between $3 billion and $10 billion.
               
TOMPKINS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
 
(In thousands, except share and per share data) (Unaudited) As of As of
ASSETS 06/30/2012 12/31/2011
 
Cash and noninterest bearing balances due from banks $ 57,974 $ 47,297
Interest bearing balances due from banks 1,805 2,170
Money market funds           0         100  
Cash and Cash Equivalents 59,779 49,567
 
Trading securities, at fair value 17,935 19,598
Available-for-sale securities, at fair value 1,183,088 1,143,546
Held-to-maturity securities, fair value of $27,613 at June 30, 2012, and $27,255
at December 31, 2011 27,120 26,673
Loans and leases, net of unearned income and deferred costs and fees 2,019,681 1,981,849
Less: Allowance for loan and lease losses           26,865         27,593  
Net Loans and Leases 1,992,816 1,954,256
 
Federal Home Loan Bank stock and Federal Reserve Bank stock 16,692 19,070
Bank premises and equipment, net 45,167 44,712
Corporate owned life insurance 43,864 43,044
Goodwill 44,891 43,898
Other intangible assets, net 3,761 4,096
Accrued interest and other assets           47,555         51,788  
  Total Assets         $ 3,482,668       $ 3,400,248  
 
LIABILITIES
Deposits:
Interest bearing:
Checking, savings and money market 1,439,875 1,356,870
Time 678,550 687,321
Noninterest bearing           646,668         616,373  
Total Deposits 2,765,093 2,660,564
 
Federal funds purchased and securities sold under agreements to repurchase 161,662 169,090
Other borrowings, including certain amounts at fair value of $11,927 at June 30, 2012
and $12,093 at December 31, 2011 121,934 186,075
Trust preferred debentures 25,067 25,065
Other liabilities           55,213         60,311  
  Total Liabilities         $ 3,128,969       $ 3,101,105  
 
EQUITY
Tompkins Financial Corporation shareholders' equity:
Common Stock - par value $.10 per share: Authorized 25,000,000 shares; Issued:
12,259,700 at June 30, 2012; and 11,159,466 at December 31, 2011 1,226 1,116
Additional paid-in capital 248,403 206,395
Retained earnings 104,680 96,445
Accumulated other comprehensive income (loss) 484 (3,677 )
Treasury stock, at cost – 95,588 shares at June 30, 2012, and 95,105 shares
at December 31, 2011 (2,610 ) (2,588 )
 
Total Tompkins Financial Corporation Shareholders’ Equity 352,183 297,691
Noncontrolling interests           1,517         1,452  
  Total Equity         $ 353,700       $ 299,143  
  Total Liabilities and Equity         $ 3,482,669       $ 3,400,248  
 
 
TOMPKINS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
        Three Months Ended     Six Months Ended
(In thousands, except per share data) (Unaudited) 06/30/2012     06/30/2011 06/30/2012     06/30/2011
INTEREST AND DIVIDEND INCOME
Loans $ 25,403 $ 25,883 $ 50,706 $ 51,584
Due from banks 5 4 8 9
Federal funds sold 0 1 2 5
Trading securities 189 220 387 455
Available-for-sale securities 7,523 7,896 14,699 15,583
Held-to-maturity securities 225 331 450 696
Federal Home Loan Bank stock and Federal Reserve Bank stock           196         219         417         509  
Total Interest and Dividend Income           33,541         34,554         66,669         68,841  
INTEREST EXPENSE
Time certificates of deposits of $100,000 or more 720 868 1,454 1,717
Other deposits 1,798 2,565 3,825 5,190
Federal funds purchased and securities sold under agreements to repurchase 1,074 1,248 2,166 2,540
Trust preferred debentures 402 388 807 792
Other borrowings           1,437         1,533         2,866         3,108  
Total Interest Expense           5,431         6,602         11,118         13,347  
Net Interest Income           28,110         27,952         55,551         55,494  
Less: Provision for loan and lease losses           1,011         1,005         2,136         2,915  
Net Interest Income After Provision for Loan and Lease Losses           27,099         26,947         53,415         52,579  
NONINTEREST INCOME
Investment services income 3,493 3,825 6,890 7,665
Insurance commissions and fees 3,760 3,459 7,398 6,833
Service charges on deposit accounts 1,593 2,107 3,378 4,091
Card services income 1,280 1,269 2,849 2,514
Mark-to-market (loss) gain on trading securities (75 ) 165 (157 ) 115
Mark-to-market loss on liabilities held at fair value 77 (202 ) 166 (27 )
Net other-than-temporary impairment losses 1 (65 ) 0 (65 ) 0
Other income 1,770 1,390 3,034 3,219
Net gain on securities transactions           933         0         935         95  
Total Noninterest Income           12,766         12,013         24,428         24,505  
NONINTEREST EXPENSES
Salaries and wages 11,081 11,211 22,381 22,036
Pension and other employee benefits 4,123 3,657 8,422 7,688
Net occupancy expense of premises 1,793 1,706 3,598 3,601
Furniture and fixture expense 1,116 1,199 2,216 2,237
FDIC insurance 554 531 1,082 1,582
Amortization of intangible assets 124 146 257 316
Merger related expenses 879 0 972 0
Other operating expense           7,185         6,713         14,298         12,920  
Total Noninterest Expenses           26,855         25,163         53,226         50,380  
Income Before Income Tax Expense           13,010         13,797         24,617         26,704  
Income Tax Expense           4,151         4,364         7,912         8,466  
Net Income attributable to Noncontrolling Interests and Tompkins Financial Corporation           8,859         9,433         16,705         18,238  
Less: Net income attributable to noncontrolling interests           33         33         65         65  
Net Income Attributable to Tompkins Financial Corporation         $ 8,826       $ 9,400       $ 16,640       $ 18,173  
Basic Earnings Per Share $ 0.72 $ 0.86 $ 1.43 $ 1.66
Diluted Earnings Per Share         $ 0.72       $ 0.85       $ 1.42       $ 1.65  
 

1 In 2012, other-than-temporary impairment ("OTTI") on securities available-for-sale totaling $148,000 in losses were recognized which included $83,000 recognized in AOCI, and $65,000 of OTTI losses recognized in noninterest income. In 2011, OTTI on securities available for sale totaled $0 through June 30, 2011.
Average Consolidated Statements of Condition and Net Interest Analysis
        Quarter Ended     Year to Date Period Ended     Year to Date Period Ended
            June 30, 2012       June 30, 2012       June 30, 2011
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 $ 1,887 $ 5 1.07 % $ 20,269 $ 8 0.08 % $ 13,235 $ 9 0.14 %
Money market funds - - 0.00 % 36 - 0.00 % 100 - 0.00 %
Securities (1)
U.S. Government securities 1,153,660 6,927 2.42 % 1,107,730 13,504 2.45 % 945,956 14,215 3.03 %
Trading securities 18,483 189 4.11 % 18,917 387 4.11 % 22,053 455 4.16 %
State and municipal (2) 86,456 1,141 5.31 % 84,785 2,270 5.38 % 107,672 2,811 5.26 %
Other securities 11,523       129       4.50 %       11,787       268       4.57 %       14,790       348       4.74 %
Total securities 1,270,122 8,386 2.66 % 1,223,219 16,429 2.70 % 1,090,471 17,829 3.30 %
Federal Funds Sold 11 - 0.00 % 3,693 2 0.11 % 6,426 5 0.16 %
FHLBNY and FRB stock 17,546 196 4.49 % 17,134 415 4.87 % 18,505 509 5.55 %
Loans, net of unearned income (3)
Real estate 1,452,800 18,229 5.05 % 1,445,064 36,461 5.07 % 1,376,735 36,978 5.42 %
Commercial loans (2) 470,083 6,221 5.32 % 468,418 12,311 5.29 % 454,155 12,176 5.41 %
Consumer loans 61,057 1,020 6.72 % 61,804 2,054 6.68 % 70,446 2,443 6.99 %
Direct lease financing 5,013       71       5.70 %       5,387       154       5.75 %       8,318       246       5.96 %
Total loans, net of unearned income 1,988,953       25,541       5.17 %       1,980,673       50,980       5.18 %       1,909,654       51,843       5.47 %
Total interest-earning assets 3,278,519       34,128       4.19 %       3,245,024       67,834       4.20 %       3,038,391       70,195       4.66 %
 
Other assets 260,651 257,020 223,893
 
Total assets 3,539,170 3,502,044 3,262,284
                                                                       
LIABILITIES & EQUITY
Deposits
Interest-bearing deposits
Interest bearing checking, savings, & money market 1,474,516 867 0.24 % 1,466,424 1,872 0.26 % 1,332,585 2,455 0.37 %
Time deposits > $100,000 334,148 720 0.87 % 333,605 1,454 0.88 % 316,628 1,717 1.09 %
Time deposits < $100,000 369,864 931 1.01 % 375,981 1,953 1.04 % 413,119 2,714 1.32 %
Brokered time deposits < $100,000 -       -       0.00 %       -       -       0.00 %       3,372       21       1.26 %
Total interest-bearing deposits 2,178,528 2,518 0.46 % 2,176,010 5,279 0.49 % 2,065,704 6,907 0.67 %
Federal funds purchased & securities sold under agreements
to repurchase 168,303 1,074 2.57 % 169,103 2,166 2.58 % 178,359 2,540 2.87 %
Other borrowings 149,388 1,437 3.87 % 144,037 2,866 4.00 % 162,731 3,108 3.85 %
Trust preferred debentures 25,066       402       6.45 %       25,066       807       6.47 %       25,061       792       6.37 %
Total interest-bearing liabilities 2,521,285 5,431 0.87 % 2,514,216 11,118 0.89 % 2,431,855 13,347 1.11 %
 
Noninterest bearing deposits 613,315 604,866 511,345
Accrued expenses and other liabilities 55,549 56,679 36,242
Total liabilities 3,190,149 3,175,761 2,979,442
 
Tompkins Financial Corporation Shareholders’ equity 347,519 324,798 281,357
Noncontrolling interest 1,502 1,485 1,485
Total equity 349,021 326,283 282,842
 
Total liabilities and equity $ 3,539,170 $ 3,502,044 $ 3,262,284
Interest rate spread       3.32 %       3.31 %       3.55 %
Net interest income/margin on earning assets 28,697 3.52 % 56,716 3.51 % 56,848 3.77 %
 
Tax Equivalent Adjustment (587 ) (1,165 ) (1,354 )
 
Net interest income per consolidated financial statements                 $ 28,110                     $ 55,551                     $ 55,494        

 
(1)   Average balances and yields on available-for-sale securities are based on historical amortized cost.
(2) Interest income includes the tax effects of taxable-equivalent adjustments using a combined New York State and Federal effective income tax rate of 40% to increase tax exempt interest income to taxable-equivalent basis.
(3) Nonaccrual loans are included in the average asset totals presented above. 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, 2011.
 
 
Tompkins Financial Corporation - Summary Financial Data (Unaudited)
                                                   
(In thousands, except per share data)   Quarter-Ended     Year-Ended
  Jun-12       Mar-12       Dec-11       Sep-11       Jun-11       Dec-11
                   
Period End Balance Sheet                                                    
Securities         $ 1,228,143       $ 1,285,685       $ 1,189,817       $ 1,130,769       $ 1,138,563       $ 1,189,817  
Loans and leases, net of unearned income and deferred costs and fees           2,019,681         1,977,569         1,981,849         1,951,598         1,920,716         1,981,849  
Allowance for loan and lease losses           26,865         26,948         27,593         27,878         28,361         27,593  
Total assets           3,482,668         3,546,694         3,400,248         3,359,017         3,287,598         3,400,248  
                                                     
Total deposits           2,765,093         2,859,436         2,660,564         2,675,674         2,572,008         2,660,564  
Federal funds purchased and securities sold under agreements to repurchase           161,662         169,456         169,090         171,943         178,545         169,090  
Other borrowings           121,934         132,884         186,075         138,001         172,643         186,075  
Trust preferred debentures           25,067         25,066         25,065         25,063         25,062         25,065  
Total equity           353,700         305,967         299,143         309,335         300,060         299,143  
 
Average Balance Sheet                                                    
Average earning assets         $ 3,278,519       $ 3,211,533       $ 3,131,051       $ 3,050,346       $ 3,047,494       $ 3,064,761  
Average assets           3,539,170         3,464,917         3,368,135         3,286,159         3,271,895         3,294,982  
Average interest-bearing liabilities           2,521,285         2,507,146         2,435,326         2,391,576         2,432,556         2,422,577  
Average equity           349,021         303,546         307,539         303,861         288,341         294,620  
 
Share data                                                    
Weighted average shares outstanding (basic)           12,146,622         11,103,192         11,074,330         11,049,831         10,974,615         11,002,106  
Weighted average shares outstanding (diluted)           12,166,417         11,147,489         11,104,623         11,124,331         11,016,515         11,035,384  
Period-end shares outstanding           12,223,790         11,197,370         11,123,556         11,122,886         11,051,894         11,123,556  
Book value per share           28.94         27.32         26.89         27.81         27.15         26.89  
 
Income Statement                                                    
Net interest income         $ 28,110       $ 27,441       $ 27,999       $ 27,913       $ 27,952       $ 111,406  
Provision for loan/lease losses           1,011         1,125         1,160         4,870         1,005         8,945  
Noninterest income           12,766         11,661         11,197         12,312         12,013         48,014  
Noninterest expense           26,855         26,371         24,200         23,973         25,163         98,552  
Income tax expense           4,151         3,762         4,417         3,490         4,364         16,373  
Net income attributable to Tompkins Financial Corporation           8,826         7,811         9,387         7,859         9,400         35,419  
Noncontrolling interests           33         33         32         33         33         131  
Basic earnings per share         $ 0.72       $ 0.70       $ 0.84       $ 0.71       $ 0.86       $ 3.21  
Diluted earnings per share         $ 0.72       $ 0.70       $ 0.84       $ 0.71       $ 0.85       $ 3.20  
 
Asset Quality                                                    
Net charge-offs           1,094         1,770         1,445         5,353         679         9,184  
Nonaccrual loans and leases           36,749         38,455         39,588         40,419         38,457         39,588  
Loans and leases 90 days past due and accruing           321         1,552         1,380         379         2,512         1,380  
Troubled debt restructurings not included above           1,445         423         428         441         0         428  
Total nonperforming loans and leases           38,515         40,430         41,396         41,239         40,969         41,396  
OREO           2,161         1,906         1,334         1,632         1,742         1,334  
Nonperforming assets           40,676         42,336         42,730         42,871         42,711         42,730  
Loan Classifications                                                    
Special Mention           63,653         62,649         52,156         66,697         80,470         52,156  
Substandard           58,185         58,272         72,920         73,313         80,003         72,920  
Doubtful           588         1,344         1,494         509         2,450         1,494  
 
 
 
 
 
 
                                           
RATIO ANALYSIS   Quarter-Ended     Year-Ended
Credit Quality           Jun-12       Mar-12       Dec-11       Sep-11       Jun-11       Dec-11
Net loan and lease losses/ average loans
and leases *           0.22 %       0.36 %       0.29 %       1.10 %       0.14 %       0.48 %
Nonperforming loans and leases/loans and leases           1.91 %       2.04 %       2.09 %       2.11 %       2.13 %       2.09 %
Nonperforming assets/assets           1.17 %       1.19 %       1.26 %       1.28 %       1.30 %       1.26 %
Allowance/nonperforming loans and leases           69.75 %       66.65 %       66.65 %       67.60 %       69.23 %       66.65 %
Allowance/loans and leases           1.33 %       1.36 %       1.39 %       1.43 %       1.48 %       1.39 %
 
Capital Adequacy (period-end)                                                    
Tier I capital / average assets           9.53 %       8.46 %       8.51 %       8.55 %       8.39 %       8.51 %
Total capital / risk-weighted assets           16.22 %       14.37 %       14.17 %       14.11 %       13.98 %       14.17 %
 
Profitability                                                    
Return on average assets *           1.00 %       0.91 %       1.11 %       0.95 %       1.15 %       1.07 %
Return on average equity *           10.17 %       10.35 %       12.07 %       10.29 %       13.08 %       12.02 %
Net interest margin (TE) *           3.52 %       3.51 %       3.62 %       3.71 %       3.77 %       3.72 %
* Quarterly ratios have been annualized
                                           
            Quarter-Ended     Year-Ended
Non-GAAP Disclosure           Jun-12       Mar-12       Dec-11       Sep-11       Jun-11       Dec-11
Reported net income         $ 8,826       $ 7,811       $ 9,387       $ 7,859       $ 9,400       $ 35,419  
Adjustments (after tax):                                                    
Accrual adjustment VISA IPO           (243 )       0         0                          
Merger related expenses           703         75         0         0         0         0  
Subtotal adjustments           460         75         0         0         0         0  
Adjusted net income           9,286         7,886         9,387         7,859         9,400         35,419  
Weighted average shares outstanding (diluted)           12,166,417         11,147,489         11,104,623         11,124,331         11,016,515         11,035,384  
Adjusted diluted earnings per share         $ 0.76       $ 0.71       $ 0.84       $ 0.71       $ 0.85       $ 3.21  
 
                     
Non-GAAP Disclosure        

Year-to-date period

ended
          Jun-12     Jun-11
Reported net income         $ 16,640       $ 18,173  
Adjustments (after tax):                    
Accrual adjustment VISA IPO           (243 )       0  
Merger related expenses           778         0  
Subtotal adjustments           535         0  
Adjusted net income           17,175         18,173  
Weighted average shares outstanding (diluted)           11,656,771         10,986,287  
Adjusted diluted earnings per share         $ 1.47       $ 1.65  
 

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