Tompkins Financial Corporation Reports Record First Quarter Financial Results
SELECTED HIGHLIGHTS FOR THE PERIOD:
Net interest margin improved to 3.57% in the first quarter of 2026, up 15 basis points from the immediate prior quarter, and up 59 basis points from the first quarter of 2025.
Total loans at March 31, 2026 were up $31.7 million, or 0.5% compared to December 31, 2025 (1.97% on an annualized basis), and up $411.3 million, or 6.8%, from March 31, 2025.
Total deposits at March 31, 2026 were $7.1 billion, up $116.4 million, or 1.7% compared to the most recent prior quarter end, and up $300.7 million, or 4.5%, from March 31, 2025.
Total average cost of funds of 1.67% for the first quarter of 2026 was down 4 basis points compared to the most recent prior quarter, and down 17 basis points compared to the same period of the prior year.
Loan to deposit ratio at March 31, 2026 was 91.8%, compared to 92.9% at December 31, 2025, and 89.8% at March 31, 2025.
Net interest income was $71.9 million for the first quarter of 2026, up $2.8 million or 4.1% compared to the fourth quarter of 2025, and up $15.2 million or 26.8% compared to the first quarter of 2025. The increase in net interest income compared to both periods was due to improvement in net interest margin, which is discussed below, and growth in average loans.
Net interest margin was 3.57% for the first quarter of 2026, compared to 3.42% reported for the fourth quarter of 2025, and 2.98% reported for the first quarter of 2025. The increase in net interest margin reflects growth in average loan balances, improved yields on average earning assets, and lower funding costs. Average yield on securities for the first quarter of 2026 was up 51 basis points over the fourth quarter of 2025 and up 113 basis points over the first quarter of 2025, mainly a result of the previously reported reinvestment within the portfolio at higher yields during the fourth quarter of 2025.
Average loans for the quarter ended March 31, 2026 were up $98.3 million, or 1.6% (2.0% annualized), over the most recent prior quarter, and were up $409.5 million, or 6.8%, compared to the same prior year period. The increase in average loans over both prior periods was mainly in the commercial real estate and commercial and industrial portfolios. The average yield on interest-earning assets for the quarter ended March 31, 2026 was 5.09%, an increase of 11 basis points from 4.98% for the quarter ended December 31, 2025, and up 40 basis points from 4.69% for the quarter ended March 31, 2025.
Average total deposits of $7.0 billion for the first quarter of 2026, were in line with the most recent prior quarter, and up $344.4 million, or 5.2%, compared to the first quarter of 2025. The cost of interest-bearing deposits of 2.06% for the first quarter of 2026 was down 12 basis points compared to the most recent prior quarter, and down 17 basis points from the first quarter of 2025. The ratio of average noninterest bearing deposits to average total deposits for the first quarter of 2026 was 26.6% compared to 27.4% for the fourth quarter of 2025, and 26.9% for the first quarter of 2025. The average cost of interest-bearing liabilities for the first quarter of 2026 was 2.21%, down 9 basis points when compared to the most recent prior quarter, and down 23 basis points from the same period in 2025.
NONINTEREST INCOME
Noninterest income of $11.8 million for the first quarter of 2026 was down $13.2 million or 52.7% compared to the first quarter of 2025. The decrease in noninterest income is mainly a result of a decrease of $11.6 million in insurance revenue when compared to the first quarter of 2025, due to the sale of TIA in the fourth quarter of 2025. The first quarter of 2025 also included a $1.9 million gain on the sale of other real estate owned.
For the first quarter of 2026, investment services income was up $146,000 or 2.9% over the same period in 2025, while service charges on deposit accounts and card services income were in line with prior year.
NONINTEREST EXPENSE
Noninterest expense was $47.7 million for the first quarter of 2026, down $2.9 million or 5.7% compared to the first quarter of 2025. The decrease in noninterest expense included a decrease in salaries and wages and other employee benefits of $3.3 million or 10.4%, mainly due to the departure of employees in connection with the sale of TIA in the fourth quarter of 2025. Partially offsetting the decrease in salaries and wages and other employee benefits were annual merit increases and increased other employee benefit costs. Also contributing to the year-over-year decrease in noninterest expense were net occupancy expenses, down $115,000 or 3.2%, and amortization expense, down $84,000 or 100.0%. The decrease in noninterest expense for the first quarter of 2026 compared to the same period in 2025 was mainly due to the sale of TIA. Expenses related to TIA in the first quarter of 2025 included salaries and wages and other employee benefits of $6.0 million, net occupancy expense of premises of $279,000, furniture and fixture expense of $305,000, and amortization of intangible assets of $81,000.
INCOME TAX EXPENSE
Provision for income tax expense was $8.4 million for an effective rate of 24.4% for the first quarter of 2026, compared to $43.5 million for an effective rate of 31.1% for the most recent prior quarter, and $6.1 million for an effective rate of 23.7% for the first quarter of 2025. The effective tax rate in the fourth quarter of 2025 was impacted by the sale of TIA which resulted in a significant increase to pre-tax income and an adjustment for goodwill with no tax-basis.
ASSET QUALITY
The allowance for credit losses was 0.90% of total loans and leases at March 31, 2026, up from 0.89% at December 31, 2025, and down from 1.01% at March 31, 2025. The increase in the allowance for credit losses coverage ratio compared to year-end 2025 was mainly due to updated economic forecasts for unemployment for the quarter, as well as higher reserves for individually analyzed loans; while the decrease from March 31, 2025 was mainly due to lower reserves on individually analyzed loans. The ratio of the allowance to total nonperforming loans and leases was 113.06% at March 31, 2026, compared to 120.30% at December 31, 2025, and 85.85% at March 31, 2025.
Provision for credit losses for the first quarter of 2025 was $1.5 million compared to $977,000 for the fourth quarter of 2025, and $5.3 million for the first quarter of 2025. The provision expense in the first quarter of 2025 included $4.2 million for a specific reserve on an individually analyzed nonaccrual commercial real estate relationship. Net charge-offs for the three months ended March 31, 2026 were $775,000, compared to $3.3 million for the fourth quarter of 2025, and $733,000 for the first quarter of 2025. The fourth quarter of 2025 included a $2.4 million charge-off on one commercial real estate relationship totaling $7.4 million.
Nonperforming assets of $51.7 million represented 0.59% of total assets at March 31, 2026, up from $48.2 million or 0.56% of total assets at December 31, 2025, and down from $71.2 million or 0.87% of total assets at March 31, 2025. Loans past due 30-89 days totaled $5.9 million at March 31, 2026, $8.8 million at December 31, 2025, and $12.3 million at March 31, 2025.
Special Mention and Substandard loans and leases totaled $120.4 million at March 31, 2026, compared to $134.5 million reported at December 31, 2025, and $110.8 million reported at March 31, 2025.
CAPITAL POSITION
Capital ratios at March 31, 2026 remained well above the regulatory minimums for well-capitalized institutions. The ratio of total capital to risk-weighted assets was 14.78% at March 31, 2026, compared to 14.56% at December 31, 2025, and 13.28% at March 31, 2025. The ratio of Tier 1 capital to average assets was 10.58% at March 31, 2026, compared to 10.62% at December 31, 2025, and 9.31% at March 31, 2025.
During the first quarter of 2026, the Company repurchased 23,731 shares of common stock at an aggregate cost of $1.8 million. These shares were purchased under the Company's 2025 Stock Repurchase Plan.
LIQUIDITY POSITION
The Company's liquidity position at March 31, 2026 was consistent with its position at December 31, 2025. Liquidity is enhanced by ready access to national and regional wholesale funding sources including Federal funds purchased, repurchase agreements, brokered deposits, Federal Reserve Bank's Discount Window advances and Federal Home Loan Bank (FHLB) advances. The Company maintained ready access to liquidity of $1.6 billion, or 18.9% of total assets, at March 31, 2026.
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, which offers a full array of financial products and services, including commercial and consumer banking. Tompkins Community Bank provides wealth management services, including investment management, trust and estate, financial and tax planning services, under the Tompkins Financial Advisors brand. 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. The statements contained in this press release that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements may be identified by use of such words as "may", "could", "should", "will", "would", "estimate", "intend", "continue", "believe", "expect", "plan", "commit", or "anticipate", as well as the negative and other variations of these terms and other similar words. Examples of forward-looking statements may include statements regarding capital expectations, growth, and the sufficiency of collateral to cover exposure related to special mention and substandard loans. Forward-looking statements are made based on management’s expectations and beliefs concerning future events impacting the Company and are subject to 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 and historical performance. The following factors, in addition to those listed as Risk Factors in Item 1A in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission, are among those that could cause actual results to differ materially from the forward-looking statements and historical performance: changes in general economic, market and regulatory conditions; our ability to attract and retain deposits and other sources of liquidity; gross domestic product growth and inflation trends; 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 public companies, banks, bank holding companies and/or financial holding companies, including the Dodd-Frank Act, and other federal, state and local government mandates; the impact of any change in the FDIC insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount; changing supervisory and regulatory scrutiny of financial institutions; technological developments and changes; cybersecurity incidents and threats; 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; the geographic concentration of our business; the ability to access financial resources in the amounts, at the times, and on the terms required to support the Company's future businesses; and the economic impact, including market volatility, of national and global events, including the response to bank failures, war and geopolitical matters (including continuing or increasing hostilities in the Middle East and the war in Ukraine), tariffs and trade wars, widespread protests, civil unrest, political uncertainty, and pandemics or other public health crises, and the related financial stress on borrowers and changes to customer behavior and credit risk resulting from any of the foregoing. The Company does not undertake any obligation to update its forward-looking statements.