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Tompkins Financial Corporation announced Tuesday that its Board of Directors approved payment of a regular quarterly cash dividend of $0.50 per share, payable on August 15, 2019, to common shareholders of record on July 30, 2019.

The company also reported net income of $19.4 million for the second quarter of 2019, compared to the $22.1 million reported for the same period in 2018. Year-to-date net income was $40.4 million, a decrease of $2.1 million, or 4.9% from the same period in 2018.

Diluted earnings per share were $1.27 for the second quarter of 2019, compared to $1.43 reported in the second quarter of 2018. For the year-to-date period ended June 30, 2019, diluted earnings per share were $2.63, down 4.7% over the same period in 2018.

President and CEO, Stephen S. Romaine said "Though overall performance remains very good, we did see a decline in earnings for the quarter and year-to-date periods. The decline from recent prior periods was largely driven by the challenging interest rate environment that has resulted in funding costs increasing at a faster pace than asset yields. We are fortunate that our business model includes meaningful fee income contributions from business lines that are less impacted by the interest rate environment. Additionally, we have a number of continuous improvement initiatives underway that we expect will have a positive impact on performance later in 2019 and in future years."

SELECTED HIGHLIGHTS FOR THE SECOND QUARTER AND YEAR-TO-DATE PERIODS:

• Total loans of $4.9 billion were up 1.4% over the same period in 2018
• Total deposits of $5.0 billion reflect an increase of 4.1% over the same period last year
• Total nonperforming loans were down $2.3 million or 8.8% compared to the same period last year, and
• down $2.8 million or 10.5% from December 31, 2018
• Tangible book value per share is up $4.75 or 14.8% from the second quarter of 2018 and reflects the sixth consecutive quarterly increase

NET INTEREST INCOME

Net interest income was $52.3 million for the second quarter of 2019, compared to $52.7 million reported for the second quarter of 2018. For the year-to-date period, net interest income was $104.2 million, a decrease of $1.2 million or 1.1% from the same six-month period in 2018.

Net interest income benefited from growth in average loans and higher yielding earning assets. Average loans were up $78.4 million, or 1.7% in the first six months of 2019, compared to the same six month period in 2018, while asset yields were up 26 basis points compared to the first six months of 2018. Average total deposits were up $101.3 million, or 2.1% in the first six months of 2019, versus the same period in 2018. Average noninterest deposits for the first six months of 2019 were in line with the same period in 2018. The average rate paid on interest bearing deposit products in the first six months of 2019 increased 42 basis points over the same period in 2018. The net interest margin for the second quarter of 2019 was 3.34%, compared to 3.36% reported for the same period in 2018, and unchanged compared to the prior quarter end. The decline in margin is largely due to the recent increases in market interest rates that have resulted in increased funding costs.

During the quarter, the Company sold $152.1 million in lower yielding securities and used the proceeds to pay down short term borrowings. Because the transaction was executed in June, it had little impact on net interest income during the quarter, but is expected to have a positive impact on net interest income during the remainder of 2019.

NONINTEREST INCOME

Noninterest income represented 26.7% of total revenues in the first six months of 2019, compared to 27.0% in the same period in 2018. The second quarter of 2018 included a gain on sale of two properties totaling $2.9 million. The sale of these properties was related to the completion of the new Company headquarters building in the second quarter of 2018. Fee income associated with insurance, wealth management, deposit services, and card services for the second quarter of 2019 were up a combined $323,000, or 2.0% over the same period in 2018.

NONINTEREST EXPENSE

Noninterest expense was $46.1 million for the second quarter of 2019, up $1.1 million, or 2.4%, over the second quarter of 2018. For the year-to-date period, noninterest expense was $90.3 million, up $1.6 million, or 1.8%, from the same period in 2018. The increase in noninterest expense for both the second quarter and year-to-date periods included normal annual increases in salaries and wages.

INCOME TAX EXPENSE

The Company's effective tax rate was 19.6% in the second quarter of 2019, compared to 20.7% for the same period in 2018.

ASSET QUALITY

Asset quality trends remained strong in the second quarter of 2019. Nonperforming assets represented 0.39% of total assets at June 30, 2019, compared to 0.42% at December 31, 2018, and at June 30, 2018. Nonperforming asset levels continue to be well below the most recent Federal Reserve Board Peer Group Average1 of 0.60%.

Provision for loan and lease losses was $601,000 for the second quarter of 2019, compared to $1.0 million for the second quarter ended June 30, 2018. Net charge-offs for the second quarter of 2019 were $139,000 compared to $31,000 reported in the second quarter of 2018.

The Company's allowance for originated loan and lease losses totaled $40.6 million at June 30, 2019, and represented 0.88% of total originated loans and leases at June 30, 2019, compared to 0.91% at June 30, 2018, and 0.89% for the most recent prior quarter. The total allowance represented 171.42% of total nonperforming loans and leases at June 30, 2019, compared to 163.25% at December 31, 2018, and 158.08% at June 30, 2018.

CAPITAL POSITION

Capital ratios remain well above the regulatory well capitalized minimums. The ratio of tangible common equity to tangible assets was 8.50% at June 30, 2019, improved from the 8.24% reported for the most recent prior quarter ended March 31, 2019, and the 7.36% reported for June 30, 2018. During the quarter, the Company repurchased 155,093 shares at a total cost of $12.3 million.

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