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Tompkins Financial Corporation Reports Third Quarter Earnings

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ITHACA, NY - Tompkins Financial Corporation (NYSE American: TMP)

Tompkins Financial Corporation ("Tompkins" or the "Company") reported diluted earnings per share of $1.48 for the third quarter of 2022, up 2.1% from $1.45 per share in the third quarter of 2021. Net income for the third quarter of 2022 of $21.3 million was essentially unchanged when compared to the third quarter of 2021.

For the year-to-date period ended September 30, 2022, diluted earnings per share was $4.53, down 4.0% from $4.72 for the same year-to-date period in 2021. Year-to-date net income was $65.5 million for the period ended September 30, 2022, down $4.3 million, or 6.2%, from the same period in 2021. The year-to-date net income variance was primarily attributable to the provision for credit losses, which was an expense of $1.4 million in 2022, versus a credit of $6.1 million in 2021, resulting in a pretax variance of $7.5 million.

Tompkins President and CEO Stephen Romaine commented, "We noted several favorable trends during the third quarter of 2022. Revenue increased for the second consecutive quarter and grew at an annualized rate of 8.3% over the second quarter of this year. Our total loans grew at an annualized rate of 3.8% during the quarter, although that growth rate is somewhat slower than the 7.8% growth we experienced in the second quarter of this year. Our team did an excellent job supporting business in our communities with PPP loans and we are pleased that our loans outstanding under that program totaled less than $1 million as of September 30, 2022."

SELECTED HIGHLIGHTS FOR THE PERIOD:

Total loans at September 30, 2022 were $5.2 billion, up $45.9 million over the immediate prior quarter, reflecting an annualized increase of 3.6% from June 30, 2022.

Net interest margin of 3.04% for the quarter ended September 30, 2022 was down as compared to the 3.09% for the quarter ended June 30, 2022, but increased from 2.89% for the same period in 2021.

Total deposits at September 30, 2022 were $6.9 billion and were up 2.5% compared to the second quarter of 2022, and down 2.2% from the same period of 2021.

NET INTEREST INCOME

Net interest income was $58.1 million for the third quarter of 2022, which was in line with the most recent prior quarter. The third quarter of 2022 showed increased interest income in both the loan and security portfolios, but was slightly offset by higher funding cost on both deposits and other borrowings. Net interest income for the third quarter of 2022 was up $2.0 million, or 3.6% from the same period in 2021. Net interest income for the current quarter included $88,000 of net deferred loan fees associated with PPP loans, down from net deferred loan fees of $873,000 for the quarter ended June 30, 2022, and $3.3 million of net deferred loan fees in the third quarter of 2021.

For the year-to-date period ended September 30, 2022, net interest income was $173.0 million, up $7.0 million or 4.2% compared to the year-to-date period ended September 30, 2021. For the year-to-date period in 2022, net deferred loan fees associated with PPP loans were approximately $3.0 million, down from $8.0 million in the same period of 2021.

Average loans for the quarter ended September 30, 2022 increased $70.0 million or 1.4%, compared to the same period in 2021. The increase in average loans as compared to the same period prior year was mainly in commercial and residential real estate loans, which were up 7.6%, and 5.9%, respectively. Commercial and industrial loans were down 21.1%, mainly driven by lower PPP loan balances. Interest earning asset yields for the quarter ended September 30, 2022 were up 9 basis points from the second quarter of 2022 and up 17 basis points compared to the same period in 2021.

Average total deposits for the third quarter of 2022 were down $137.4 million, or 2.0% compared to the same period in 2021. Average noninterest bearing deposits for the quarter ended September 30, 2022 were up $84.7 million or 3.9% compared to the quarter ended September 30, 2021. For the third quarter of 2022, the average rate paid on interest-bearing deposits of 0.36% was up 18 basis points from the second quarter of 2022, and 14 basis points from the same period in 2021. The total cost of interest-bearing liabilities of 0.45% for the third quarter of 2022 represented an increase of 23 basis points over the second quarter of 2022, and an increase of 6 basis points versus the same period in 2021.

NONINTEREST INCOME

Noninterest income of $20.7 million for the third quarter of 2022 and $59.6 million for the year-to-date period were both in-line with the same periods in 2021. For the third quarter of 2022, total service-related fee categories were up $665,000 or 3.5% over the same quarter prior year, mainly driven by growth in insurance commissions and fees, and service charges on deposit accounts, which were partially offset by lower wealth management fees. The decline in wealth management fees is mainly a result of market conditions. Other income was down from the same quarter last year, mainly due to lower earnings on bank-owned life insurance, which was down $603,000 compared to the same quarter in 2021, as certain separate account policies were unfavorably impacted by decreases in the market value of the underlying assets.

NONINTEREST EXPENSE

Noninterest expense was $49.6 million for the third quarter of 2022, down $578,000 or 1.2% from the third quarter of 2021. For the year-to-date period, noninterest expense of $145.6 million was up $3.4 million or 2.4% from the same period in 2021. Growth in noninterest expense for the year-to-date period was primarily driven by increases in salary and wage expense and other noninterest expense. Other noninterest expense for the three months ended and year-to-date period ended September 30, 2022, included nonrecurring expenses of $196,000 and $1.2 million, respectively, related to the consolidation and rebranding of the Company's four banking charters.

INCOME TAX EXPENSE

The Company's effective tax rate was 24.1% for the third quarter of 2022, compared to 23.7% for the same period in 2021. The effective tax rate for the nine months ended September 30, 2022 was 23.4%, compared to 22.1% reported for the same period in 2021.

The increase in the effective tax rate for the three and nine months ended September 30, 2022, over the same periods in 2021, is largely due to the anticipated loss of certain New York State tax benefits. The Company's banking subsidiary has an investment in a real estate investment trust that provides certain benefits on its New York State tax return for qualifying entities. A condition to claim the benefit is that the consolidated company has qualified average assets of no more than $8.0 billion for the taxable year. The Company expects average assets to exceed the $8.0 billion threshold for the 2022 tax year. As of September 30, 2022, the Company's consolidated average assets were slightly over the $8.0 billion threshold, as defined by New York State law. The Company will continue to monitor the consolidated average assets during 2022 to determine future eligibility.

ASSET QUALITY

The allowance for credit losses represented 0.86% of total loans and leases at September 30, 2022, up from 0.85% at June 30, 2022 and down from 0.91% at September 30, 2021. The allowance coverage as a percentage of nonperforming loans and leases was 128.27% at September 30, 2022, down compared to 147.95% at June 30, 2022 and improved from the 76.15% reported at September 30, 2021.

The provision for credit losses for the third quarter of 2022 was an expense of $1.1 million, compared to a credit of $1.2 million for the same period in 2021. Provision for credit losses for the nine months ended September 30, 2022 was an expense of $1.4 million, compared to a credit of $6.1 million for the same period in 2021. The increase in provision for credit losses for both the three and nine month periods is mainly driven by current economic forecasts coupled with loan growth.

Nonperforming assets represented 0.45% as of September 30, 2022, up from 0.40% at December 31, 2021, and down compared to 0.75% at September 30, 2021. At September 30, 2022, nonperforming loans and leases totaled $34.9 million, compared to $31.2 million at December 31, 2021, and $60.7 million at September 30, 2021.

Special Mention and Substandard loans and leases totaled $106.7 million at September 30, 2022, reflecting improvement from $137.6 million at December 31, 2021, and $115.0 million at June 30, 2022. The decrease in Special Mention and Substandard loans, compared to the most recent prior quarter, was mainly due to improved asset quality in the hospitality industry as occupancy rates continue to increase.

The Company funded a total of 5,140 applications for PPP loans totaling $694.1 million in 2020 and 2021. As of September 30, 2022, there were fourteen outstanding PPP loans totaling approximately $875,000. Total net deferred fees on the remaining balance of PPP loans amounted to $18,000 at September 30, 2022.
CAPITAL POSITIONCapital ratios at September 30, 2022 remained well above the regulatory minimums for well-capitalized institutions. The ratio of Total Capital to Risk-Weighted Assets was 14.26% at September 30, 2022, compared to 14.23% at December 31, 2021, and 14.21% at September 30, 2021. The ratio of Tier 1 capital to average assets was 9.14% at September 30, 2022, compared to 8.72% at December 31, 2021, and 8.54% at September 30, 2021.

During the third quarter of 2022, the Company repurchased 18,182 common shares at an aggregate cost of $1.3 million. These shares were purchased under the Company's Stock Repurchase Program announced in the third quarter of 2021. For the nine month period ended September 30, 2022, the Company repurchased 197,979 common shares at an aggregate cost of $15.4 million.

ABOUT TOMPKINS FINANCIAL CORPORATION

Tompkins Financial Corporation is a banking and 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 Community Bank and 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 Act of 1995:

This press release contains “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. 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 Reports on Form 10-K and our Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission, are among those that could cause actual results to differ materially from the forward-looking statements; changes in general economic, market and regulatory conditions; estimated GDP growth and inflation trends; the ongoing dynamic nature of the COVID-19 pandemic and its impact; the impact of the interest rate and inflationary environment on the Company's business, financial condition and results of operations; 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 SEC rule making, The Dodd-Frank Act, Basel III, 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; uncertainties arising from national and global events such as the war in the Ukraine, including the potential impact of widespread protests, civil unrest, and political uncertainty on the economy and the financial services industry; 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.

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