Tompkins Financial Corporation (“Tompkins” or the “Company”) announced diluted earnings per share (EPS) of $1.10 for the second quarter of 2024. This represents a 6.8% decline from the previous quarter but an 86.4% increase compared to $0.59 EPS in the same period of 2023. Net income for Q2 2024 was $15.7 million, a decrease of $1.2 million or 7.1% from the prior quarter, yet an increase of $7.2 million or 85.0% from $8.5 million reported in Q2 2023. This improvement is largely attributed to the prior year’s $80.9 million sale of available-for-sale securities, which led to a $7.1 million loss on securities transactions in Q2 2023.
For the six months ending June 30, 2024, diluted EPS was $2.29, reflecting an 18.0% increase from $1.94 for the same period in 2023. Net income for the year-to-date period reached $32.6 million, up $4.7 million or 16.9% compared to $27.9 million in the first half of 2023. This growth is similarly attributed to the aforementioned securities loss.
Stephen Romaine, President and CEO of Tompkins, stated, “Our year-to-date and second quarter results have benefited from a stabilizing net interest margin and broad-based growth. Loans are up 7.7% year over year, and noninterest income increased 33% year-to-date, or 10% excluding the 2023 securities loss. We have managed expenses effectively, with noninterest expenses down 2.3% year-to-date. We remain committed to driving growth through strong customer relationships, supported by our solid capital and liquidity position.”
Key Highlights for the Period:
- The net interest margin for Q2 2024 was 2.73%, consistent with Q1 2024 but down from 2.83% in Q2 2023.
- The total cost of funds increased by 10 basis points compared to Q1 2024, showing a decrease from a 24 basis point increase from Q4 2023 to Q1 2024.
- Fee-based services revenues (insurance, wealth management, service charges, and card services) for Q2 2024 rose by $903,000 or 5.0% year-over-year.
- Total operating expenses were $49.9 million in Q2 2024, unchanged from the prior quarter and down $2.0 million or 3.9% compared to Q2 2023.
- Total loans grew by $121.3 million or 2.2% (8.7% annualized) from the previous quarter and $409.5 million or 7.7% from the same date in 2023.
- Total deposits were $6.3 billion at June 30, 2024, down $163.7 million or 2.5% from March 31, 2024, and $168.8 million or 2.6% from June 30, 2023.
- The loan-to-deposit ratio was 91.7% at June 30, 2024, compared to 87.5% in the previous quarter.
- The Regulatory Tier 1 capital to average assets ratio was 9.15% at June 30, 2024, up from 9.08% at March 31, 2024, but down from 9.57% at June 30, 2023.
Net Interest Income
Net interest income for Q2 2024 was $51.0 million, up from $50.7 million in Q1 2024 but down from $51.9 million in Q2 2023. This was influenced by an increase in interest expense, totaling $34.3 million in Q2 2024 compared to $20.0 million in Q2 2023, partially offset by higher interest and dividend income, which rose by $13.4 million from the previous year.
For the first half of 2024, net interest income was $101.6 million, down $4.5 million or 4.3% from the same period in 2023. The net interest margin of 2.73% in Q2 2024 remained the same as Q1 2024 but decreased from 2.83% in Q2 2023, primarily due to higher funding costs and reduced deposit balances, partially mitigated by higher yields on interest-earning assets.
Noninterest Income
Noninterest income for Q2 2024 was $21.8 million, up $9.2 million or 72.6% compared to Q2 2023. Year-to-date noninterest income was $43.9 million, an increase of $10.9 million or 33.0% from the same period in 2023. This growth is largely attributed to the absence of the $7.1 million loss on securities from 2023. Additionally, fee-based revenues increased, including insurance commissions and fees, wealth management fees, service charges on deposit accounts, and card services income.
Noninterest Expense
Noninterest expense for Q2 2024 was $49.9 million, a decrease of $2.0 million or 3.9% from Q2 2023. Year-to-date noninterest expenses were $99.8 million, down $2.3 million or 2.3% compared to the same period in 2023, driven by reductions in other expenses and lower salaries and benefits.
Income Tax Expense
The provision for income tax expense was $4.9 million for Q2 2024, with an effective tax rate of 23.8%, compared to $1.8 million and an effective rate of 17.3% in Q2 2023. For the first six months of 2024, the provision was $10.1 million with a 23.6% effective tax rate, up from $7.7 million and 21.6% in 2023. The increase in tax expense is primarily due to lower income from the securities loss in the previous year.
Asset Quality
The allowance for credit losses was 0.92% of total loans and leases at June 30, 2024, unchanged from the prior quarter and the end of 2023. The allowance to total nonperforming loans and leases ratio was 84.94% at June 30, 2024, up from 82.47% in Q1 2024 but down from 154.76% in Q2 2023, due to increased nonperforming loans and leases.
The provision for credit losses for Q2 2024 was $2.2 million, compared to $2.3 million in Q2 2023. Year-to-date provision was $3.0 million, up from $1.4 million in 2023. The increase was driven by loan growth and off-balance-sheet reserve changes. Net charge-offs for Q2 2024 were $509,000, compared to net recoveries of $27,000 in the same period of 2023.
Nonperforming assets were 0.79% of total assets at June 30, 2024, down from 0.81% in Q1 2024 but up from 0.41% a year earlier. Nonperforming loans and leases totaled $62.5 million at June 30, 2024, compared to $62.7 million at March 31, 2024 and $31.4 million at June 30, 2023. The increase is due to a significant commercial real estate relationship added in Q4 2023. The Company believes existing collateral is sufficient to cover this exposure.
Capital Position
At June 30, 2024, capital ratios remained strong, with the total capital to risk-weighted assets ratio at 13.26%, compared to 13.43% at March 31, 2024 and 14.48% a year ago. The Tier 1 capital to average assets ratio was 9.15%, up from 9.08% in Q1 2024 but down from 9.57% in Q2 2023.
Liquidity Position
The Company’s liquidity position at June 30, 2024 was stable, with access to $1.4 billion in liquidity, or 17.3% of total assets. This includes available borrowing capacity from the Federal Home Loan Bank of $661.8 million and from the Federal Reserve Bank of $137.7 million. Additionally, the Company held $553.3 million in unencumbered securities that could be pledged to further enhance borrowing capacity.
About Tompkins Financial Corporation
Tompkins Financial Corporation is a banking and financial services provider serving Central, Western, and Hudson Valley regions of New York and Southeastern Pennsylvania. Headquartered in Ithaca, NY, Tompkins Financial is the parent company of Tompkins Community Bank and Tompkins Insurance Agencies, Inc., offering comprehensive wealth management services through Tompkins Financial Advisors. For more information, visit www.tompkinsfinancial.com.
