Business Overview and History
Tompkins Financial Corporation traces its roots back to 1836 when it was founded as the Ithaca Savings Bank in Ithaca, New York. The company has a rich history of growth and expansion, evolving from a local savings bank into a diversified financial services organization. In the 1950s, Tompkins began expanding beyond Ithaca, opening additional banking offices in the Finger Lakes region of New York. This regional expansion continued throughout the 1960s and 1970s, with the company establishing a presence in the Hudson Valley and Western New York areas.
A significant milestone in the company's history occurred in 1995 when it reorganized and became Tompkins Financial Corporation, a bank holding company. This restructuring set the stage for further growth and diversification. In 2001, Tompkins made its first expansion into Pennsylvania, acquiring a bank in the southeastern region of the state. This move allowed the company to diversify its geographic footprint and customer base beyond New York.
The company's growth strategy has included both organic expansion and strategic acquisitions. In addition to its banking operations, Tompkins has built up its wealth management and insurance segments over time. The 1990s saw the establishment of the Tompkins Financial Advisors brand, offering trust, investment management, and financial planning services. In 2005, the company further diversified its offerings by acquiring Tompkins Insurance Agencies, Inc., enabling it to provide property, casualty, and employee benefits products to its customers.
Today, Tompkins Financial Corporation operates through three primary business segments: Banking, Insurance, and Wealth Management. The Banking segment is the largest, comprising 55 branch locations across New York and Pennsylvania and offering a full suite of commercial and consumer banking products and services. The Insurance segment, operating under the Tompkins Insurance Agencies brand, provides property and casualty insurance, as well as employee benefits consulting, to customers in the company's regional markets. The Wealth Management segment, branded as Tompkins Financial Advisors, offers investment management, trust and estate planning, and financial planning services.
Over its long history, Tompkins has grown both organically and through strategic acquisitions, expanding its geographic footprint and diversifying its revenue streams. In 2022, the company acquired a smaller regional bank, strengthening its presence in the Hudson Valley region of New York. Tompkins has also made several smaller insurance agency acquisitions in recent years, consolidating its position as a leading provider of insurance services in its markets.
Tompkins Financial Corporation primarily serves the Central, Western, and Hudson Valley regions of New York and the Southeastern region of Pennsylvania. The company has a community-based business model and maintains a strong reputation in its local markets. This focused geographic approach allows Tompkins to leverage its deep understanding of local market dynamics and build strong relationships with customers and communities.
Financial Performance and Ratios
Tompkins has demonstrated solid financial performance in recent years, with a focus on maintaining a strong balance sheet and prudent risk management. As of September 30, 2024, the company reported total assets of $8.01 billion, up 2.4% from the end of 2023. Total loans and leases, net of unearned income and deferred costs and fees, stood at $5.88 billion, an increase of 4.9% compared to year-end 2023.
The company's capital ratios remain well above regulatory minimums, with a total risk-based capital ratio of 13.21% and a Tier 1 capital ratio of 12.22% as of September 30, 2024. Tompkins' tangible common equity ratio, a key measure of financial strength, was 7.84% at the end of the third quarter, reflecting the company's prudent approach to managing its balance sheet.
In terms of profitability, Tompkins reported net income of $51.19 million for the first nine months of 2024, up from $5.50 million in the same period of 2023. The company's return on average assets (ROA) and return on average equity (ROE) for the year-to-date period were 0.87% and 10.12%, respectively, reflecting improved operating performance.
For the fiscal year 2023, Tompkins reported total revenue of $215.52 million and net income of $9.51 million. The company generated operating cash flow (OCF) of $89.00 million and free cash flow (FCF) of $82.24 million in 2023.
Quarterly Financial Highlights
For the third quarter of 2024, Tompkins reported diluted earnings per share of $1.30, up 18.2% from the previous quarter and a significant improvement over the $(2.35) loss per share reported in the third quarter of 2023. Net income for the quarter was $18.6 million, an increase of 18.9% compared to the second quarter of 2024 and a marked turnaround from the $33.4 million net loss in the prior-year period.
The company's net interest income for the third quarter of 2024 was $53.2 million, up 4.3% from the same period in 2023, driven by higher average loan balances and yields. Tompkins' net interest margin for the quarter was 2.79%, an improvement of 6 basis points sequentially and 4 basis points compared to the third quarter of 2023.
Noninterest income for the third quarter of 2024 was $23.4 million, a substantial increase from the $41.6 million reported in the prior-year period. This was primarily due to the absence of the $62.9 million pre-tax loss on the sale of available-for-sale debt securities that was recorded in the third quarter of 2023.
In the most recent quarter (Q3 2024), Tompkins reported revenue of $75.57 million, up 3.2% year-over-year, and net income of $18.64 million, a significant increase of 155.9% compared to the same quarter in the previous year. The company generated operating cash flow of $20.96 million and free cash flow of $29.07 million during this quarter. The increase in revenue, net income, and cash flows was primarily driven by higher interest income on loans and securities, as well as lower losses on the sale of investment securities.
Financials
Tompkins Financial Corporation has maintained a strong financial position, as evidenced by its solid balance sheet and improving profitability metrics. The company's total assets of $8.01 billion and loan portfolio of $5.88 billion as of September 30, 2024, demonstrate its continued growth trajectory. The improvement in net income from $5.50 million in the first nine months of 2023 to $51.19 million in the same period of 2024 showcases the company's ability to enhance its financial performance in a challenging economic environment.
The Banking segment, which is the largest contributor to Tompkins' business, reported net interest income of $154.82 million for the first nine months of 2024, down 1.5% from the same period in 2023. The provision for credit losses in this segment increased to $5.20 million for the first nine months of 2024, up from $2.58 million in the same period of 2023. Noninterest income for the banking segment showed a significant improvement, reaching $22.40 million for the first nine months of 2024, compared to a loss of $50.70 million in the same period of 2023, largely due to lower losses on the sale of investment securities.
The Insurance segment has demonstrated solid growth, with noninterest revenue of $31.16 million for the first nine months of 2024, up 4.0% from the same period in 2023. Net income for this segment reached $7.01 million for the first nine months of 2024, representing a 14.7% increase from the previous year.
The Wealth Management segment has also shown strong performance, with revenue of $15.32 million for the first nine months of 2024, up 11.2% from the same period in 2023. Net income for this segment increased by 48.9% to $2.84 million for the first nine months of 2024 compared to the same period in 2023.
Liquidity
Tompkins has maintained a robust liquidity position, which is crucial for navigating potential economic uncertainties and capitalizing on growth opportunities. The company's strong capital ratios and prudent balance sheet management suggest a focus on maintaining adequate liquidity. The total risk-based capital ratio of 13.21% and Tier 1 capital ratio of 12.22% indicate that Tompkins has a solid capital buffer, which contributes to its overall liquidity position.
As of September 30, 2024, Tompkins reported cash and cash equivalents of $132.32 million. The company's debt-to-equity ratio stood at 0.75, reflecting a balanced approach to leverage. The current ratio of 1.21 and quick ratio of 0.92 further underscore the company's ability to meet its short-term obligations.
Tompkins has established borrowing relationships with the Federal Home Loan Bank (FHLB) and correspondent banks, providing both secured and unsecured borrowing capacity. As of September 30, 2024, the established borrowing capacity with the FHLB was $1.40 billion, or 18.0% of total assets, with available unencumbered mortgage-related assets of $769.50 million. This additional borrowing capacity enhances the company's liquidity position and provides flexibility in managing its funding needs.
Operational Highlights and Initiatives
During the third quarter of 2024, Tompkins continued to focus on enhancing its digital capabilities and improving the customer experience. The company launched a new mobile banking app, which has been well-received by its customer base, and also expanded its commercial lending team to better serve the needs of its business clients.
In the Insurance segment, Tompkins has been actively diversifying its product offerings and expanding its geographic reach. The company recently acquired a smaller insurance agency in the Southeastern Pennsylvania market, strengthening its presence in that region. Additionally, the Insurance segment has seen strong growth in its commercial lines and employee benefits consulting businesses, driven by increased demand and improved market conditions.
The Wealth Management segment has also been a consistent performer for Tompkins, benefiting from favorable market conditions and the company's focus on providing comprehensive financial planning and investment services to its clients. Assets under management stood at $3.2 billion as of September 30, 2024, up 9.6% from the prior-year period.
Risks and Challenges
Like all financial institutions, Tompkins faces a variety of risks, including credit risk, interest rate risk, and operational risk. The company's geographic concentration in New York and Pennsylvania exposes it to economic conditions in those regions, which could impact loan demand and asset quality. Additionally, the ongoing competitive landscape in the banking and financial services industry, as well as the potential for increased regulatory scrutiny, pose challenges that Tompkins must navigate.
Tompkins has demonstrated a track record of prudent risk management, as evidenced by its solid asset quality metrics and strong capital position. However, the company must continue to adapt to the evolving market environment, investing in technology and talent to maintain its competitive edge and serve the evolving needs of its customers.
Outlook and Conclusion
Tompkins Financial Corporation has proven to be a resilient and adaptable regional banking and financial services provider, navigating the challenges of the past few years with a focus on responsible growth and a commitment to serving its local communities. The company's diversified business model, strong balance sheet, and experienced management team position it well to capitalize on opportunities in its core markets.
As Tompkins looks to the future, the company will need to continue investing in its digital capabilities, talent, and product offerings to stay ahead of the curve in an increasingly competitive industry. The solid performance across its Banking, Insurance, and Wealth Management segments demonstrates the strength of its diversified business model. With its long history of success, a proven track record of prudent risk management, and a strong presence in its regional markets, Tompkins appears well-positioned to continue delivering value for its shareholders in the years to come.