10-Q/A: Tompkins Financial Reports Strong Q3 2025 Earnings Growth

Tompkins Financial Corporation announced a significant increase in net income and diluted earnings per share for the third quarter and year-to-date periods of 2025, driven by robust net interest income and loan growth.

Summary

• Net income for Q3 2025 increased by 27.4% to $23.7 million, with diluted EPS rising 26.9% to $1.65, compared to Q3 2024.
• Year-to-date net income for September 30, 2025, grew 26.6% to $64.8 million, and diluted EPS increased 25.9% to $4.52, over the same period in 2024.
• Net interest income for Q3 2025 rose 20.1% to $63.9 million, and year-to-date net interest income increased 16.7% to $180.7 million.
• Total assets reached $8.469 billion at September 30, 2025, a 4.4% increase from December 31, 2024.
• Total loans and leases grew 4.5% to $6.288 billion, and total deposits increased 9.0% to $7.053 billion since year-end 2024.
• Nonperforming assets decreased by 18.7% to $53.0 million at September 30, 2025, representing 0.63% of total assets.
• The company's capital ratios remain strong, exceeding 'well capitalized' requirements, with a Common Equity Tier 1 ratio of 12.30%.

Sentiment

Score: 8

Explanation: The company reported strong financial performance with significant increases in net income, EPS, and net interest income. Asset quality improved, and capital ratios remain robust. While there was an increase in provision for credit losses due to a specific commercial real estate charge-off, the overall trend is positive, indicating healthy growth and financial stability.

Positives

• Net income for Q3 2025 increased by $5.1 million (27.4%) to $23.7 million compared to Q3 2024.
• Diluted earnings per share for Q3 2025 increased by $0.35 (26.9%) to $1.65 compared to Q3 2024.
• Return on average assets (ROA) improved to 1.13% for Q3 2025 from 0.94% in Q3 2024.
• Return on average shareholders' equity (ROE) improved to 12.17% for Q3 2025 from 10.65% in Q3 2024.
• Net interest income for Q3 2025 increased by $10.7 million (20.1%) to $63.9 million, driven by increased yields on average interest-earning assets, higher average loan balances, and lower funding costs.
• Total loans and leases grew by $268.1 million (4.5%) to $6.288 billion at September 30, 2025, from December 31, 2024.
• Total deposits increased by $581.3 million (9.0%) to $7.053 billion at September 30, 2025, from December 31, 2024, with core deposits up 6.8% to $5.6 billion.
• Other borrowings decreased by $345.4 million (43.7%) to $444.9 million at September 30, 2025, from December 31, 2024, due to increased deposit balances.
• Net unrealized losses on available-for-sale debt securities decreased to $89.7 million at September 30, 2025, from $135.6 million at December 31, 2024.
• Nonperforming assets decreased by $12.2 million (18.7%) to $53.0 million at September 30, 2025, and as a percentage of total assets, improved to 0.63% from 0.80% at December 31, 2024.
• All regulatory capital ratios (Total Capital, Tier 1 Capital, Common Equity Tier 1, Tier 1 Capital to Average Assets) significantly exceeded 'well capitalized' requirements as of September 30, 2025.
• Tangible book value per share increased to $48.19 at September 30, 2025, from $42.93 at December 31, 2024.

Negatives

• Provision for credit loss expense for the nine months ended September 30, 2025, increased significantly to $10.6 million from $5.2 million in the same period of 2024, mainly due to a $4.7 million partial charge-off related to one commercial real estate relationship.
• Net loan and lease charge-offs for the nine months ended September 30, 2025, increased to $7.1 million from $1.6 million in the same period of 2024, largely related to the aforementioned commercial real estate relationship.
• The insurance segment's net income for Q3 2025 decreased by $213,000 (6.9%) to $2.9 million compared to Q3 2024.
• The wealth management segment's net income for Q3 2025 decreased by $129,000 (17.1%) to $626,000 compared to Q3 2024, and for the nine months ended September 30, 2025, decreased by $235,000 (8.3%) to $2.6 million.
• Card services income for the nine months ended September 30, 2025, decreased by $471,000 (5.2%) compared to the same period in 2024.
• Derivatives related income for the nine months ended September 30, 2025, decreased by $473,000 compared to the same period in 2024.
• Income related to bank owned life insurance for the nine months ended September 30, 2025, decreased by $388,000 compared to the same period in 2024.
• Total noninterest expense for Q3 2025 increased by $4.0 million (8.0%) to $53.8 million, primarily due to increases in compensation and benefits, professional fees, and marketing expense.
• Loans internally-classified Special Mention or Substandard were up $33.1 million (29.8%) compared to December 31, 2024, mainly due to two loans totaling $41.2 million being downgraded.

Risks

• Changes in general economic, market, and regulatory conditions.
• Ability to attract and retain deposits and other sources of liquidity.
• Impact of interest rate and inflationary environment on business, financial condition, and results of operations.
• Changes in laws and regulations affecting public companies, banks, bank holding companies, and financial holding companies, including the Dodd-Frank Act and FDIC insurance assessment rates.
• Changes in supervisory and regulatory scrutiny of financial institutions.
• Technological developments and changes, including cybersecurity incidents and threats.
• 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 and geographic concentration of business.
• Ability to access financial resources in the amounts, at the times, and on the terms required to support future businesses.
• Economic impact, including potential market volatility, of national and global events such as bank failures, war and geopolitical matters (Middle East, Ukraine), tariffs, trade wars, widespread protests, civil unrest, political uncertainty, and pandemics or other public health crises.

Future Outlook

Management's simulation analysis suggests that net interest income is expected to trend higher over the next 12 to 18 months under a base case scenario where interest rates remain unchanged. However, a 200 basis point parallel upward shift in interest rates could result in a 2.3% decrease in net interest income over one year, while a 200 basis point parallel decline could result in a 2.3% increase.

Management Comments

• Management believes that a community-based financial organization is better positioned to establish personalized financial relationships with both commercial customers and individual households.
• Management believes that the Company's subsidiary bank can compete successfully in its primary market areas by making prudent lending decisions quickly and more efficiently than its competitors, without compromising asset quality or profitability.
• Management believes the current exposure to changes in interest rates is not significant in relation to the earnings and capital strength of the Company.
• Management believes that as of September 30, 2025, the Company and its subsidiary bank met all capital adequacy requirements to which they are subject.
• Management believes these diverse liquidity sources provide sufficient means to meet all demands on the Company's liquidity that are reasonably likely to occur.

Industry Context

Tompkins Financial operates in a highly competitive financial services market, competing with various commercial banks, credit unions, and other financial intermediaries, some with greater resources. The company emphasizes its community-based model and personalized services to differentiate itself. Its nonperforming assets to total assets ratio of 0.63% at September 30, 2025, is slightly above the peer group average of 0.60% at June 30, 2025, indicating generally comparable asset quality relative to its peers.

Comparison to Industry Standards

• The company's nonperforming assets to total assets ratio was 0.63% at September 30, 2025, which is slightly above the peer group average of 0.60% for domestic bank holding companies with $3 billion to $10 billion in total assets as of June 30, 2025.
• All of the company's regulatory capital ratios (Total Capital, Tier 1 Capital, Common Equity Tier 1, Tier 1 Capital to Average Assets) significantly exceeded the minimum requirements for 'well capitalized' institutions under Basel III.

Corporate Governance

Legal Proceedings

• The company is subject to various claims and legal actions that arise in the ordinary course of conducting business.
• Management does not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against the company or its subsidiaries will be material to the company's consolidated financial position.
• The company assesses its liabilities and contingencies quarterly, but cannot rule out the possibility that such outcomes will be material to the consolidated results of operations for a particular reporting period in the future.

Related Party Transactions

• 590 shares of common stock were issued to non-employee members of the Board of Directors on July 3, 2025, as part of their deferred compensation under the Director Retainer Plan, valued at $65.65 per share for an aggregate of $38,733.50.

Stakeholder Impact

• Shareholders: Positive impact due to increased net income, diluted EPS, ROA, ROE, and tangible book value per share. The new share repurchase plan could also benefit shareholders.
• Employees: Positive impact due to increases in salaries, incentives, and employee benefits.
• Customers: The company's focus on a strong suite of products and services, including digital accessibility, aims to benefit customers.
• Creditors: Strong capital position and diverse liquidity sources enhance the company's ability to meet obligations.

Next Steps

• Management will continue to monitor potential problem loans, which are reviewed on at least a quarterly basis.
• The company will continue to evaluate the potential impact of pending accounting standards updates (ASU 2023-09 and ASU 2024-03) on its consolidated financial statements.

Key Dates

Recommendation

Tompkins Financial Corporation has demonstrated strong financial performance in Q3 2025 and year-to-date, with significant growth in net income, EPS, and net interest income. The company's asset quality metrics are improving, and its capital ratios are robust, well exceeding regulatory requirements. While there was an increase in credit loss provision due to a specific commercial real estate charge-off, this appears to be an isolated event. The company's strategic focus on organic growth, strong deposit base, and effective liquidity management position it favorably for continued performance. The positive outlook for net interest income further supports a 'buy' recommendation for investors seeking exposure to a well-managed regional bank.

Keywords

Tompkins Financial Corporation, TMP, banking, financial services, wealth management, insurance, Q3 2025 earnings, SEC filing, 10-Q/A, net interest income, loan growth, deposit growth, capital ratios, asset quality, community bank