Tompkins Financial Corporation
Annual Report 2016

Plain-text annual report

~ ' ~ y , ~L ~ r ' ~ ~ ~ . ~ - . . ~ , ~ . t ~ • ~ ~ t . ' . . . • , ~ f ~ ~ ` . y ~ • ~ 1 ~ t ~ ! i ~ ~ ~ r ~ ~ 'Y ~ ~ . . ~ + . ~ - , r ~ ~ ' ~ ' ' f i x ; . , . ~ ~ . ~ . - . ~ ~ L ~ r ~ ~ r ~ ~ . ; ; - . . , f ~ ~ ~ocall y FOCUSED. A world of POSSIBILITIES. The simplest ideas often have the most profound implications. Tl~e ideas that are central to Tompkins Financial Corporation can be summed up in fewer than a dozen words: Local. Community- focused. Personal. Strong. Stable. Forward-thinking. These are truly simple ideas. But we are struck by the "world of possibilities" they have helped us to realize: An organization that is respected both locally and nationally. Lives and businesses that have been powerfully impacted for the better. Financial results that are among the best in the industry. Customers who are empowered through the latest technology and innovations. Communities that are equipped to do more good for more people. It might cause one to wonder how such things came to be. But in the end, it should come as no surprise that the simplest, most focused ideas are also the most powerful ones. IN THOUSANDS. EXCEPT PER SHARE DATA Total assets Net income attributable to Tompkins Financial Corporation Diluted earnings per share Adjusted diluted earnings per share (Non-GAAP)' Cash dividends per share 2016 2015 %CHANGE 56,236,756 55,689,995 $59,340 $58,421 $3.91 53.91 $1.77 $3.87 $3.63 $1.70 9.61 1.57 1.03 ~o 7.71 4.12 % IN THOUSANDS, EXCEPT PER SHARE DATA Financial Statement Highlights Assets Total loans Deposits Other borrowings Total equity Interest and dividend income Interest expense Net interest income Provision for loan and lease losses Net gains on securities transactions Net income attributable to Tompkins Financial Corporation Per Share Information Basic earnings per share Diluted earnings per share Adjusted diluted earnings per share (Non-GAAP)' Cash dividends per share Common equity per share 1 2016 t' 2015 2014 2013 2012' 56,236,756 $5,689,995 $5,269,561 $5,003,039 $4,837,197 4,258,033 4,625,139 3,772,042 3,393,288 4,395,306 4,169,154 3,194,284 3,947,216 2,954,610 3,950,169 884,815 549,405 202,739 22,103 180,636 4,321 926 536,285 516,466 188,746 20,365 168,381 2,945 1,108 356,541 489,583 184,493 20,683 163,810 2,306 391 331,531 457,939 185,104 23,975 161,129 6,161 599 111,848 441,360 158,356 24,213 134,143 8,837 324 59,340 58,421 52,041 50,856 31,285 3.94 3.91 3.91 1.77 36.20 3.91 3.87 3.63 1.70 34.38 27.48 3.51 3.48 3.48 1.62 32.77 25.66 3.48 3.46 3.36 1.54 30.45 23.67 2.44 2.43 3.16 1.46 30.57 22.94 Tangible common equity per share (Non-GAAP)3 29.38 Selected Ratios Return on average assets Return on average equity Average shareholders' equity to average assets Dividend payout ratio Other Selected Data w vL'Hc-rL f. ~vurotAERS, UNLESS OTHERWISE NOTED Employees (average full-time equivalent) Banking offices Bank access centers (ATMs) Trust and investment services assets under management, or custody (in thousands) 1.01 % 1.07 % 1.03 % 10.85 % 9.28 % 11.51 % 10.76 % 931 % 9.54 % 1.03 % 11.47 % 9.00 % 0.76 % 8.30 % 9.21 % 44.92 % 43.48 % 46.15 % 44.25 % 59.84 % 1,019 66 85 998 63 85 1,000 65 85 989 G6 84 839 66 83 $3,941,484 $3,852,972 $3,761,972 $3,443,636 53,240,782 7 Adjustea diluted earnings per share reflec[s adjustments made Jar certain nonrecurring items, including merger and integration expenses. Adjustments for nonrecurring items in 2075 included a 53.6 million (50.24 per share) after-tax gain an a pension plan curtailment There were no adjustments in 2016 and 2014.2013 included an 5846,000 (50.06 per share) after- taxgain on the redemption of bust preferred stock and a 5771,000 (50.05 per share) after-tax gain on a deposit conversion. Also, in 2013, and 2012, after-tax merger related expenses totaled 5740,000 (50.01per share), and 59.7 million (50.75 per share), respectively. There was also an after-tax gain related to a VISA accrual adjustment of 5243,000 (50.02 per shape) in 2012. Adjusted diluted earnings per share is a non-GAAP measure. 2 Includes the impact of the acquisition of VIST Financial on August 1, 2012 3 Tangible common equity capital is used to calculate tangible common equity per share and excludes from shareholders' equity goodwill and other intangibles o/51032 million in 2016 5704.2 million in 2015, 5706.9 million in 2014, 5108.4 million in 2013, and 5170.9 million in 2072 1 2016 Corpora~e Repor~ ~ Financial Highlights Message from Tom Rochon and Steve Romaine 2016 was another exceptional year for Tompkins Financial. We enjoyed our fourth consecutive year of record earnings, and we ended the year with the best fourth quarter in our Company's history. Earnings per share were also our highest ever at $3.91. There were many financial highligh~s in 2016. Loans grew by 12.9%over the previous year. We ended the year with total loans of $43 billion. At the end of 2016, ~~~~ h~~ a decrease of 7.8% in nonperforming assets from 2015. To have such sut loan growth while simultaneously improving credit quality is a testamen~ employees who make smar~, local credit decisions each day. We surpassed $6 billion in ~o~al assets as we continued to place a heavy emphasis on deposits. Deposi~s were up 5.2% over 2015. Deposit growth will con~inue co bean important part of our business as we grow loans amid potentially rising rates. While deposi~ growth is excellent, we have also added a deposit growth ini~iaCive to our strategic plan to better position ourselves for the future. Our fee-based businesses, Tompkins Financial Advisorst and Tompkins Insurance Agencies, were strong contributors Co our overall business. More impor~antly, Their resul~s were achieved while remaining focused on what is bes~ for our customers. Our reputation for integrity is one of the biggest reasons customers nog only stay wish us. but also turn ~o us for more and more of their financial needs. Such values are the cornerstone of our Company. Honesty, integrity, respect and collaboration inform everything we do. These values differentiae us from our competitors —and They are one of the keys to our ongoing financial performance. We are commiCted to maintaining our high e~hical standards in every aspect of our business. 2016 Corpora~e Report ~ Message to Shareholders 2 ~c.~-~ Dr. Thomas R. Rochon CHAIRMAN S~ephen S. Romaine PRESIDENT &CEO recognized financial services organizations. Brian will also be serving In )uly, we welcomed Brian Howard as she new President of The MasterCard transition was just one of our efforts to improve cybersecurity —bosh for our customers and for our Company. Tompkins Financial Advisors. Brian brings with him more than 30 years of banking and leadership experience with nationally Cyber attacks on the financial services industry are becoming more sophisticated and persistent. We are commit~ed to protecting every Hype of information that is at risk. Our Informa~ion Security Program is based on three central tenets: attracting and retaining she best information securi~y ~alen~, continually improving our policies and procedures, and investing in proper technology. The importance of this pursuit cannot be understated, and we will continue to make it as a member of the senior leadership team for Tompkins Financial The construction of our new headquarters building is underway. Corpora ion. We are pleased and excited to have Brian with us. The decision co build it in the heart of Ithaca underscores our longstanding commitment to this city's downtown. The building atop priority for our Company. will consolidate employees from seven difFerent locations in Ithaca, helping to create significant workplace efficiencies. Over 300 employees will work here, including team members from Tompkins Financial Advisors and Tompkins Insurance Agencies. The first Aoor will house Tompkins Trust Company's first Branch of the Future, which will use technology and personalized service co enhance the customer experience. The building is slated to open in April of 2018. In 2016, we laid the groundwork foran important newonline lending service called Lightning Loans. I~ will give small businesses a faster and easier way to get the loans they need. A simple online interface will walk customers Through the application process in minutes. Lending decisions will still be made in each of our local geographies, buy will be assisted by technology chat will help us to expedite she decision process. This new approach to lending fits with the desire of our cus~omers to do more and more of their banking online, while still leveraging our differentia~or of local decision-making. The rollout of Lightning Loans cook place in the first quarter of this year. We comple~ed the switch to Debi Mas~erCard with the EMV chip for enhanced security. The shift, which took place during the first half of 2016, was essential for she protection of our customers. I~ provides crucial new benefits, such as Iden~iry Theh Resolution Services and Zero Liability for unauthorized purchases. There are many big issues impac~ing our industry, and we are committed to being a voice co help guide it. We were pleased to see Steve Romaine elected Chairman of the New York Banker's Association in 2016. He is dedicated to being a strong and sable presence in support of the banking industry. We invite all of our shareholders to join us for our Annual Meeting. We will hold the Annual Meeting of Shareholders on May 8 at 530 p.m. ac the Country Club of Ithaca. The Shareholder Information Meeting for western New York will be held on May 10 at 530 p.m. ac she Genesee Country Village &Museum in Mumford. The Shareholder Information Meeting for Pennsylvania will be on May 23 at 430 p.m. at the Double Tree Hilton in Reading. And the Shareholder Information Meeting for she Hudson Valley region will be on May 25 at 6:00 p.m. at the Mt. Kisco Country Club. We look forward co seeing you at one of these mee~ings. There are many factors that go into our success year after year: our values, our commitment to local decision-making, and our support of the communities we serve. But nothing is more important Shan our people and their s~eadfas~ resolve to do the right thing for our customers. The numbers in this report, while impressive, are only an indicator of she countless people and businesses our employees have helped to prosper and flourish. 3 2016 Corporate Report ~ Message to Shareholders Central New York In September of 2016, Tompkins Trust Company opened a new office at Lyndon Corners in Fayetteville, NY, just east of the City of Syracuse. While we have been serving Onondaga County for many years —and already had many customer relationships in this region —the opening of this office cemented our presence in the Syracuse area. In a very short time, the Lyndon Corners office exceeded our goals and expectations. This can largely be at~ribu~ed to the great team we assembled to run it, including key personnel who are well known in the area. The Syracuse region has experienced an economic resurgence in recent years, giving us a strong market to serve. Overall, 2016 was another outstanding year for central New York. Tompkins Trust Company broke records for loan originations and loan growth. Deposits outpaced our projections and we continued to see very solid demand in residential mortgages. Agricultural business, in particular, had a very good year. Our region is bursting with large farms, smaller organic farms, micro farms, wineries, craft breweries, cideries, cheese producers and other ag-related businesses. Off=ering financial support for them is not only a huge opportunity for our Company, it is the right thing to do. This past year, we saw solid growth in all of our agricultural business initiatives, including commercial lending, insurance and cash management. It is incredibly gratifying ~o watch these businesses grow, succeed and make central New York a thriving place to live and work. r 1 ~_ ~ , nd Courtland Longo ~o, )r. (shown) Their high-tech equipment helped build the spire on the new World Trade Center in NYC. But when Blair Construction opened its doors back in 1985, Blair and Leah Longo never suspected their business would one day be one of the area's most advanced metal welding and fabrication facilities. As they grew — thecompany now employs over 20 people, including sons Blair Jr. and Courtland — they realized they needed a better financial partner. "One of the Tompkin Insurance people visited us quite a few times," says Leah. "So we called them back. Their quotes were great, and the transition was fantastic!" After moving their workers' comp and liability insurance to Tompkins, Blair and Leah began shifting their bank accounts and 401 (k) services, too. "If they say they'll do something, they do it," says Leah. "I just can't imagine working with anyone else" 2016 Corporate Repor~ ~ Central New York 4 -- ~ r -T 5 2016 Corporate Report Central New York '' a~ ► • ~ ~~ A:' ~, \ ~ ~ ~ 1' ~ ., , y ~ .a ~' ~+ ,~~ s ~, l 4 '_ r ~~ `~ ,,. l r~ ~. ~~ ~i rte. ~1 ~,"" .~ On a summer night in 2014, a truck that had lost its brakes came careening down Route 79 into the city of Ithaca. It crashed into the building that housed Simeon's, killing a young bartender and causing the front of the building to collapse. "It was traumatic," says Dean Zervos. "Amanda was part of our family." The day of the accident, representatives from Tompkins Insurance Agencies were on hand to help. "They helped make the whole process easy," says Dean. Interruption insurance from Tompkins also provided income to the employees of Simeon's. While the leased building was being rebuilt, Dean and partner, Rich Avery, worked with Tompkins Trust Company on a commercial loan to help expand their restaurant with an upstairs dining room. And on August 23 of last year, Simeon's reopened—with many of the employees who had been with them at the time of the crash. "Tompkins has been absolutely fantastic," says Dean. "I would recommend them 100%" ~` Simeon's American Bistro Dean Zervos and Richard Avery, Owners ,_. C', ,. ; ,: " , if ` ~ , , .~.i ~ _ - ~ ~ .. ~ ~ ~ ~~~~ . ~ ,~~ ~~` ~~ i .. a ~~ I~ i ~~~ ~ ~ ~~~~ ~ ~ ~' ` u d ~ l~ ~``'~ ~~~ l~ ~ ~~E A ~. ~~ ~~,H 11r ~!~ I~: • II .. _~ ~ _' { ~ } .~► ~~ +~_ For Tompkins Insurance Agencies and Tompkins Financial Advisors, we focus on qualified referrals. Our efforts do not revolve around selling, but rather on introducing our customers to other professionals from the Company they already know and trust. focus on professionals under the age of 40. The program was a tremendous success. We are proud to help support and encourage young professionals who are giving their all to make great change happen in our communities. For quite some time, we have been looking for a way to celebrate the achievements of young professionals in central New York. We have now found it. In 2016, Tompkins Trust Company partnered with Tompkins Connect, she Uni~ed Way and the Tompkins County Chamber of Commerce, to produce the Fab S Young Professionals Awards. This is the first awards program of its kind in Tompkins County to As always, we remain steadfastly committed to she communities we serve. We continue to ofFer support to more than 200 local non-profits through gifts of time and donations. Our employees spend countless hours volunteering in our communities and serving on boards and committees throughout our footprint. We are proud of our employees, we are proud of our communi~ies, and we are proud to have this opportunity to serve. 7 2016 Corporate Report I Central New York Western New York 2016 was a year of exceptional growth in our core markets. We brought this about by sticking to our fundamentals. Our 364 employees in western New York consistently demonstrated the personal service, local decision-making and community service for which we are known. Tompkins Bank of Castile once again achieved record net income lass year, up 11% from 2015. We now have over 51.0 billion in loans — a major milesCone —and total assets of nearly $1.4 billion. And, in the midst of this continued growth, our already outstanding credit quali~y con~inued to improve. Disruption is still prevalent in the markets we serve. While some of our competitors are busy with branch closures and other cutbacks, we continue to invest — in technology, in people and in our branches Themselves. One way our bank succeeds is by persistently pursuing customers we would like to work with —sometimes for years. In 2016, we began a new banking rela~ionship with a sixth-generation dairy farm, one of the strongest and largest operators in the region. We had stayed in touch with this customer for decades. When the competition faltered, the farm reached out co us, forging an important new banking relationship. Our investment in a branch in Pittsford in 2014 was pivotal to our ongoing success in Monroe County. Last year, the office again grew its deposi~ base significantly, exceeding its goals. Among many other successes in the region, we closed on a very large commercial banking relationship chat was several years in the making. ~- Our commi~menC Co western New York was once again demonstrated through our involvement in the communities we serve. In aggregate, our employees con~ributed over 13,000 hours of their own time, providing support to more than 300 worthy organizations. We cannot overstaCe how proud we are of all our employees for the way they selflessly give of themselves to support the communities where we live and work. 2016 Corpora~e Report ', Western New York 8 ''' - .~~ ~ ^'~, J«c?~ —_—~-- ,~~ ,~,~.. E :. . _T "y~~ ~ ,, ~ - r ~ :~ ~. ~~ s / ~~ ,~r~ J / ~h ~~r' s F ' ~~: •c rJ~ y:=— Mercy Flight Central Jeff Bartkoski, President and CEO When asked how Tompkins Bank of Castile has impacted his organization, Jeff Bartkoski's response is simple: "They've helped us save lives" Mercy Flight's helicopters take patients from the scene of accidents to trauma centers like Strong Memorial Hospital. They also provide rapid transfer of patients between hospitals. "When we needed to purchase a fourth helicopter, Tompkins financed it," says JefF "That helped us expand our reach to the Adirondacks and beyond" Tompkins also financed the purchase of assets that Mercy Flight had formerly leased, helping to put the organization on a stronger financial footing. "They don't put on a flight suit," Je~says of Tompkins. "But they are an integral part of helping us save lives on a daily basis" ~~ 2016 Corpora~e Report Western New York 2016 also brought noteworthy changes for both our insurance and wealth management groups in western New York. We purchased Shepard, Maxwell &Hale, an insurance agency with offices in Batavia and Hamlin, and subsequently moved the Hamlin office to Brockport. The customer care centers for insurance and banking were consolidated in newly-renovated space in Batavia, helping us co deliver an even better customer experience. "* n ~, ,'~ ~~~ ~~. E ,~ ~ ; ~ . ~_ ~ ~ ~~~ h~; ~ ~ i Rt / ~ ~~ s ,~ • ~.* • ~ 1 .. ~'`'1'~,I.,. 1 e r ~i "~ _ +1~~ ~ .. • ` ~R~/ ~ ¤ ~~1A •• S . ~-' M~. ~ " - ~ ~. , t ~~ y .~. w +~ "' t~ ~ .;~ ~~ ~ ~ . r ~~ ,.. "~:,. ~~ 2016 Corpora~e Report I Western New York 10 Genesee Country Village &Museum Tompkins Financial Advisors named )im Sperry its new managing director in western New York. Jim has been with our Company since 2010 and is excited to take on this opportunity. With many important pieces now in place, we are focused on the future for wealth management in this area. Despiceoursuccessin2016,weseeevengreateropportunities for the future. Many of our commercial relationships extend and have naturally led to us doing business in the Buffalo area. As These relationships continue to expand, we will actively look for ways co better serve and grow our presence in that region. The credit for our success, once again, goes to our people. They care deeply about the people and organizations in the communities they serve, and that is wha~ community banking is all about. I ~,~'~' ~,1 ~ K ~ '~ r ' ` ~ XI ~ ` ' ~ J ~ ~ ~ ~ ~. ~~ ~ . .r ~ ` ~ ,. :~ 1 _ ~, ,~ ~ r . ;;;; ~. :- ~N ~ A'~ ~~ ~~. ,~, ,~ w•~ . . ~ ~. ~ ~ ~ _~ ~ ~- .' ~ ~ #sr ~ ~, ~ . 4. ! y ~ A. ~1 .. • 11 2016 Corporate Report I Western New York Hudson Valley In 2016, Tompkins Mahopac Bank continued to thrive by giving customers what they need most: consistent, high-touch personal service. There were few new mergers last year, buy there was still a high level of dissatisfaction with mergers from she past few years. By doing the right thing for our customers and the community, and by working hard at our business development initiatives, we continue to attract customers who are yearning for something beater. As a result, Tompkins Mahopac Bank once again had one of she strongest years in our history, achieving record net income. In commercial lending, we set a record for new loan originations. We also supported a substantial number of new construction projects, helping to ensure continued economic growth in the geographies we serve. It was a particularly strong year for residential lending. With rates still near historic lows, we provided financing through several affordable housing programs. By ofFering people better ways to finance their first homes —and by giving them grew personal service Throughout the process — we are often able to win customers for life. Our Power of Partnership internal referral program was a big part of our success in 2016. Our bank works closely with Tompkins Financial Advisors to help customers get the maximum value from their relationship with us. Unlike some larger compe~itor banks, though, our program is not mo~iva~ed by sales pressure, but by doing the right thing for our customers. This region holds great potential for wealth management, and we're pleased to see our team in the Hudson Valley recognized with she Five Star Award from Westchester Magazine for the second year in a row. 2016 Corporate Report ! Hudson Valley 1? r~ • With more than 50 commercial properties ~ and 7 million square feet under management, Diamond Property Management has dozens d Hof banking relationships. But when the company wante to comp ete y renova e an aging bowling center and turn it into Spins Bowl — an entertainment center offering ~ bowling, laser tag, arcades and great food t I I ~, -~1~• ;.~ - , ~. l ~t~~,~~ Sy~wl~ y y .. •.. a~- c ~, ~ '~~~~ilA,r; ~ and beverages —they turned to Tompkins ,~, Mahopac Bank. "They're easy to work with, ~`'. , .. they make quick decisions, and they keep ~. ~ ~; ~ `~ ~~ the process simple," says Bill Diamond, the ~~ company's president. Tompkins' financing ~ , w ''~ enabled Bill's company to create a highly ~R successful entertainment venue that appeals to millennials as well as families. "It's nice when youcan makeacall orsendan email to your bank and they get back to you quickly," says Bill. "That lets us focus on continually improving our business" ~= Diamond Aroperty Management Bill Diamond, President ,. u~,V ` '' =~-~ - 2016 Corporat~teporc ~ Hudson Valley ~. i ~' ~. ~j~~ ~ ~' ~: y ~~`~{ ~ ~' // .~ ~ ~ ~"~~ ~ r ~ .., '~! We were proud to continue our support of more than 175 Nothing matters more than what our customers think of us. Even charitable organizations throughout the Hudson Valley. We also so, it is highly gratifying when other organizations recognize our supported a brand new efFort this year, called the Community efForts and achievements. In 2016, this happened in two diA"erent Minute Challenge. Six charities were selected to vie fora gift of ways. Bauer Financial, a top independent financial ratings firm, $2,000 in three separate rounds. Each charity told its story on once again gave Tompkins Mahopac Bank a five star rating — its social media, and people were invi~ed to voce for their favorite. highest rating. We were also named one of the Top Workplaces This effort created a tremendous amount of exposure for all of the in the Hudson Valley by the Journal News. It is hard to imagine a charities, while also sharing the word on how Tompkins supports better combination of awards: one saying that we are strong and the community. We look forward to continuing this effort in 2017. stable for our customers, the other saying that we are a great place to work for our employees. Thank you to all of our people for making this a truly exceptional year. 2016 Corporare Report Hudson Valley 14 %~ ~ . ~: r ~~ ~'~ ~ ---- ~- Peter Ferraro Sr. started YB Storage over 25 years ago. But as Peter —now semi-retired and CEO of the New York Self Storage Association —passes the reins to his sons, the family sees even greater opportunities for the future. "Self storage is the hottest real estate sector in the country," says Peter Ferraro )r. So he and his brother Paul talked to ~ Tompkins Mahopac Bank about financing a new project in Tarrytown. "It's state of the art" says Peter Jr. "It's a three- story, fully climate-controlled facility with 500 rooms" The new building will dramatically expand their ability to ~`- serve the Westchester area. "Tompkins Mahopac works ~ fast, they're very accommodating, they don't play games," he says. "My father always had a great relationship with them. And now, they've given our second generation the opportunity to grow at a very rapid pace:' YB Storage Properties Peter Ferraro Sr., Paul Ferraro and Peter Ferraro Jr. ~~ li 2016 Corpora~e Report Hudson Valley s ~ Mar-Anne Farms David and Cindy Wolfskill "It's not a job, it's a way of life," says David Wolfskill. His farm has been in the family since 1948. But as their business made a major transition —expanding through the purchase of two farms —David and his wife Cindy wondered whether they were with the right bank. So when their favorite loan officer took a job with Tompkins VIST Bank, David and Cindy followed him. "We could have gotten a loan from any bank;' says David. "But when you need something, Tompkins VIST is there immediately." The couple has been surprised at the highly personal service they have received. "They treat you like a family member, not like a number," says Cindy.And when their health insurance premiums leapt by nearly $1,000 per month, Tompkins Insurance showed them how they could save money by switching. Says David: "They really go above and beyond" 2016 Corporate Repor~ Sou(heastern Pennsylvania 76 We opened two new branches co take advantage of marker disruption — in Pottstown and Boyertown. These cwo openings bridge the gap in our geography, connecting our original base in Berks County with our offices in the Philadelphia area. The Pottstown office is already a huge success. Opened in June of 2016, the branch achieved 90°/o of its 12-month goal in just seven months. The oppor~uni~y co acquire the location in Boyertown was presented co us in July, and by December, the new branch was already open. This was an extraordinarily quick turnaround. We look forward to providing this community with the locally-focused banking they were lacking due to acquisitions by larger banks. ~-~~ .. _! , ~ ~. _ ~:~ ~"~~, ~ - .~ ~4 17 +r ~ .~ p •y w, +~,, *' , _ ~ 4 ~ ~~ , } +a a ~ F~ i; ~'~~ ~_` S ~,~ ~ ~ When David Gray describes the ~~~~~~-.. ballet, he likes to say, We are in ~~ €~~'.w._~. " ' ~i~~ the dream business" But when David arrived at the Pennsylvania Ballet 2%z years ago, he saw an organization that was under- capitalized and experiencing cash flow problems. On the recommendationofaconsultant, David switched to Tom kins VIST Bank. "Our previous bank had to get the okay from a home o~Fice thousands of miles away," he says. "But Tompkins VIST was ready to help us with decisions made locally." By rolling their debt into along-term mortgage and providing a new line of credit, Tompkins VIST helped solve the ballet's cash flow concerns. "Our old bank made us jump through endless hoops," he says. "It's refreshing to work with a bank . _ ` p ~~ ~~ that wants to see us succeed" Pennsylvania Ballet David Gray Executive Director 2016 Corporate Report Southeasteri~i Penns ,;~ , _~«.. =~ .,, ~..::~ . .- ~- .'. a r., ~~, .. ~ We had an excellent year in lending while maintaining strong credit quality. We exceeded our lending goals in almost every area and had total loan growth of 11.4%. Agricultural lending continued to perform extremely well. We have lending relationships with a diverse group of agricultural businesses, including dairy, poultry, crop and commercial ag businesses. This is an important part of our local economy, and we foresee a significant upside for many years to come. Our employees have completely embraced community involvement. In 2016, our people gave over 7,700 hours of their time to help make our communities kinder, better places to live. This is a stunning achievement. Whether our employees are helping children, supporting the elderly or providing food ~o the hungry, they are making adifference — anddoing itfor the right reasons. Partnership with insurance and wealth management is ingrained in everything we do. Tompkins Insurance Agencies implemented a very focused program to introduce more bank customers to our insurance offerings. In addition, a new approach to claims was instituted last year, providing 24/7 call service to our customers. This resulted in a 99% claims satisfaction rating.* Tompkins Financial Advisors expanded our trust services into Pennsylvania. We now provide a very similar client experience in wealth management Throughout all four of our regions. For the third year, Tompkins VIST Bank was recognized as Best in Berks. This is a great honor, especially considering than Berks County is where we originated. It is a testament to our people, their commitment, their energy level, their willingness to share our message and their investment in the communities we serve. In this environment of dissatisfaction with larger banks, we are incredibly well positioned for further growth. '" Customer claims satisfaction rate based on survey responses received from personal insurance customers who had a homeowners or auto claim in 2016. 2016 Corpora~e Report Southeastern Pennsylvania ~. '" IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA Assets Cash and noninterest bearing balances due from banks Interest bearing balances due from banks Cash and Cash Equivalents Trading securities, at fair value Available-for-sale securities, at fair value (amortized cost of $1,442,724 at December 31, 2016 and 51,390,255 at December 31, 2015) Held-to-maturity securities, at amortized cost (fair value of 5142,832 at December 31, 2016 and 5146,686 at December 31, 2015) Originated loans and leases, net of unearned income and deferred costs and fees Acquired loans Less: Allowance for loan and lease losses Net Loans and Leases Federal Home Loan Bank and other stock Bank premises and equipment, net Corporate-owned life insurance Goodwill Other intangible assets, net Accrued interest and other assets Total Assets Liabilities Deposits: Interest bearing: Checking, savings and money market Time Noninterest bearing Total Deposits Federal funds purchased and securities sold under agreements to repurchase Other borrowings Trust preferred debentures Other liabilities Total Liabilities Equity Tompkins Financial Corporation Shareholders' Equity: Common Stock -par value 5.10 per share: Authorized 25,000,000 shares; Issued: 15,171,816 at December 31, 2016; and 15,015,594 at December 31, 2015 Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock, ac cost - 117,997 shares at December 31, 2016, and 116,126 shares at December 31, 2015 Total Tompkins Financial Corporation Shareholders' Equity Noncontrolling interests Total Equity Total Liabilities and Equity AS OF DECEMBER 31. 2016 2015 $62,074 1,880 63,954 $56,261 1,996 58,257 0 7,368 1,429,538 1,385,684 142,119 3,863,922 394,111 35,755 146,071 3310,768 461,274 32,004 4,222,278 3,740,038 43,133 70,016 77,905 92,623 11,349 83,841 29,969 60,331 75,792 91,792 12,448 82,245 $6,236,756 $5,659,995 2,518,318 870,788 1,236,033 2,401,519 855,133 1,138,654 4,625,139 4,395,306 69,062 884,875 37,681 70,654 136,513 536,285 37,509 67,916 $ 5,687,351 55,173,529 1,517 357,414 230,182 1,502 350,823 197,445 (37,109) (31,007) (4,051) 547,953 1,452 (3,755) 515,074 1,452 $ 549,405 5576,466 56,236,756 55,689,995 2016 Corpora~e Repor~ ~ Consolidated Statements of Condition 20 W THOUSANDS, t ~~r l'i !tik ~.~i,;n! ;~-~~~~ Interest and Dividend Income Loans Due from banks Trading securities Available-for-sale securities Held-to-maturity securities Federal Home Loan Bank stock and Federal Reserve Bank stock Total Interest and Dividend Income Interest Expense Time certificates of deposits of 5250,000 or more Other deposits Federal funds purchased and securities sold under agreements to repurchase Trust preferred debentures Other borrowings Total Interest Expense Net Interest Income Less: Provision for loan and lease losses Net Interest Income Aker Provision for Loan and Lease Losses Noninterest Income Insurance commissions and fees Inves[ment services income Service charges on deposit accounts Card services income Mark-to-marke[ontrading securities Mark-to-market gain on liabilities held at fair value Other income Net gain on securities transactions Total Noninterest Income 68,808 926 Noninterest Expenses Salaries and wages Pension and other employee benefits Net occupancy expense of premises Furniture and fixture expense FDIC insurance Amortization of in[angible assets Other operating expenses Total Noninterest Expenses Income Before Income Tax Expense Income Tax Expense Net Income Attributable to Noncontrolling Interests and Tompkins Financial Corporation Less: Net income attribu[able to noncontrolling interests Net Income Attributable to Tompkins Financial Corporation Basic Earnings Per Share Diluted Earnings Per Share 76,950 20,496 72,521 6,450 3,024 2,090 37,076 158,607 86,516 27,045 59,471 131 5 59,340 53.94 53.91 YEAR ENDED DECEMBER 31, 2016 2015 2014 5169,630 $154,636 5150,966 6 220 27,846 3,603 1,434 4 352 29,525 3,100 1,129 2 418 31,298 999 810 202,739 188,746 184,493 1,654 9,059 2,228 2,390 6,772 22,103 780,636 4,321 776,315 29,492 15,203 8,793 8.058 (182) 227 6,291 1,367 9,084 2,709 2,308 4,897 20,365 168,381 2,945 165,436 29,286 15,416 9,325 7,837 (295) 385 8,878 1,108 1,370 9,711 2,947 2,287 4,368 20,683 163,810 2,306 161,504 28,489 15,493 9,404 7,942 (269) 331 8,984 391 71,940 70,765 72,707 16,025 12,312 6,146 2,992 2,013 37,667 149,862 87,514 28,962 58,552 131 S 58,421 53.91 53.87 69,558 21,102 12,203 5,708 2,906 2,095 41,121 154,693 77,576 25,404 52,172 131 $ 52,041 53.51 53.48 21 2016 Corporate Repor[ Consolidated Statements of Income Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company's common stock is graded under she symbol "TMP" on the NYSE MKT LLC. The high and low closing sale prices, which represen[ ac[ual transactions as quoted on the Exchange, of the Company's common sock for each quarterly period in 2015 and 2016 are presented to the right. The per share dividends paid by she Company in each quarterly period in 2015 and 2016 and the payment dates of these dividends are also presented. 2015 1st Quarter 2nd Quarter Low Market Price High 554.57 55.48 550.91 50.65 3rd Quarter 55.45 50.81 4th Quarter 62.78 52.70 Cash Dividends Amount Date Paid $0.42 z/~7/~5 0.42 S/15/15 0.42 0.44 8/17/15 11/16/15 2016 1st Quarter 564.41 551.47 50.44 znd Quarter 3rd Quarter 69.10 61.99 76.41 63.68 0.44 0.44 2/16/16 5/16/16 8/15/16 4th Quarter 95.84 73.17 0.45 11/15/16 $3.87 $3.91 $1.77 0.00 12 13 14 15 16 12 13 14 15 16 Diluted Earnings' PER SHARE IN DOLLARS Cash Dividends PER SHARE IN DOLLARS 1.The lighter shaded sections of the bars reflect GAAP earnings per share. The darker shaded sections in 2012, 2013 and 2015 are non-GAAP measures which reflect [he after-tax impact ofinerger-related expenses as well as other nonrecurring items. Refer to the footnotes to the table on page 1 of this report for a reconciliation of these non-GAAP measures. Report of Independent Registered Public Accounting Firm The Board of Direc~ors and Shareholders Tompkins Financial Corporation We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), she consolidated statements of condition of Tompkins Financial Corporation and subsidiaries as of December 31.2016 and 2015, and she related consolidated sta~emencs of income, comprehensive income, cash Aows, and changes in shareholders' equity for each of the years in the three year period ended December 31, 2016 (not presented herein); and in our report dared February 28, 2017 we expressed an unqualified opinion on those consolidated financial sta~emen~s. In our opinion, the information set forth in the accompanying consolidated condensed financial statements is fairly stated, in all material respec~s, in relation to the consolida~ed financial statements from which it has been derived. ~PN~(G LL'P Rochester, NY February 28, 2017 2016 Corporate Report ~ Financial Highlights 22 Thomas R. Rochon Chairman Presiden~, I~haca College James W. Fulmer Vice Chairman Stephen 5. Romaine President &CEO John E. Alexander Founder, The CBORD Group, Inc. Paul J. Battaglia, CPA Managing Director Freed Maxick CPAs, f?C. Daniel J. Fessenden Execu~ive Director Fred L. Emerson Foundation, Inc. Patricia A. Johnson VP of Finance &Administration Lehigh Universi~y Frank C. Milewski Re~ired VP Regional Opera ions Pa~hways Health Sandra A. Parker Retired Presiden~ &CEO Rochester Business Alliance Michael H. Spain Executive Vice President Brown &Brown Alfred J. Weber Presiden~, Tweed-Weber, Inc. Craig Yunker Managing Partner, CY Farms TOMPKINS TRUST COMPANY TOMPKINS BANK OF CASTLE TOMPKINS MAHOPAC BANK TOMPKINS VIST BANK Stephen S. Romaine Chairman Presiden~ &CEO Tompkins Financial Corporation James W. Fulmer Chairman John M. McKenna President &CEO Gregory J. Hartz President &CEO John E. Alexander Founder The CBORD Group, Inc. Larry F. Baum Founder The Computing Censer Daniel J. Fessenden Execu~ive Director Fred L. Emerson Founda~ion, Inc. Carl E. Haynes' Presiden~ Tompkins Cortland Communi~y College Susan A. Henry, Ph.D. Professor, Depar~men~ of Molecular Biology and Generics Cornell University Thomas R. Rochon Presiden[ Ithaca College Jennifer Tegan Par~ner and VP Finance/ Administration Cayuga Venture Fund " Re~iring May 2017 Paul J. Battaglia, CPA Managing Director Freed Maxick, CPAs, P.C. Joseph G. Bucci Jr. Environmental Manager American Rock Salt Company, LLC Phillip J. Clark, RE. Chairman Clark Paterson Lee David N. DeLaVergne Re~ired Senior Vice Presiden~ Tompkins Bank of Castile John D. McClurg President McClurg Chrysler Dodge Jeep, Inc. &McClurg Chevrolet Buick. Inc. Sandra A. Parker Re~ired Presiden[ &CEO Rochester Business Alliance Stephen S. Romaine Presiden~ &CEO Tompkins Financial Corporation Stephen R. Stoddard, DVM ParCner Perry Veterinary Clinic Craig Yunker Managing Par[ner, CY Farms William D. Spain, Jr. Chairman Managing Partner Spain &Spain, PC Gerald J. Klein, Jr. President &CEO Alfred J. Weber Chairman President Tweed-Weber, Inc. Scott L. Gruber President &CEO Francis M. Fetsko EVf? COO, CFO &Treasurer Tompkins Financial Corpora ion Edward C. Barrett, CPA Retired EVP &CFO Tompkins VIST Bank James W. Fulmer Vice Chairman Tompkins Financial Corpora ion James W. Fulmer Vice Chairman Tompkins Financial Corporation Stephen S. Romaine Presiden~ &CEO Tompkins Financial Corporation Philip E. Hughes, Esq., CPA Vice Chairman Keys~one Industries C. Compton Spain Attorney, Spain &Spain, PC Michael H. Spain Execu~ive Vice President Brown &Brown Patricia A. Johnson VP of Finance &Administration Lehigh University Frank C. Milewski Retired VP Regional Operations Pathways Health Harry J. O'Neill, III President Empire Group Karen A. Rightmire Executive Director The Wyomissing Founda~ion Stephen S. Romaine Presiden~ &CEO Tompkins Financial Corpora ion TOMPKINS INSURANCE AGENCIES, INC. James W. Fulmer Chairman Vice Chairman Tompkins Financial Corpora ion David S. Boyce President &CEO Stephen S. Romaine President &CEO Tompkins Financial Corporation Frank Vitagliano, Jr. Senior Vice President Tompkins Insurance Agencies 2016 Corporate Report j Boards of Directors 24 TOMPKINS FINANCIAL CORPORATION CORPORATE OFFICERS Stephen S. Romaine Presiden~ &CEO David S. Boyce Executive Vice President Francis M. fetsko Executive Vice President, COO, CFO &Treasurer Alyssa H. Fontaine Execu~ive Vice President & General Counsel Scott L. Gruber Executive Vice Presiden~ Gregory J. Hartz Executive Vice Presiden~ Brian A. Howard Executive Vice President Gerald J. Klein, Jr. Execu~ive Vice President John M. McKenna Executive Vice Presiden~ Susan M. Valenti Executive Vice President, Corporate Marketing Officer Bradley G. James Senior Vice President, Chief Technology Officer Bonita N. Lindberg Senior Vice President, Director of Human Resources Gregory H. Smith Senior Vice President, Corporate Risk Manager Janet L. Hewitt Assistant Vice President, Corporate Administrative & Investor Relations Officer Kathleen A. Manley Assistant Vice President, Corporate Secretary CORPORATION OFFICE Tompkins Financial Corpora ion P.O. Box 460 Ithaca. NY 14851 (888)503-5753 Website: www.tompkinsfinancial.com E-mail: shareholder@tompkinsfinancial.com SUBSIDIARIES Tompkins Trust Company P.O. Box 460 Ithaca, NY 14851 (607)273-3210 www.~ompki nstrust.com Tompkins Bank of Castile 90 Main St. Batavia, NY 14020 (585)345-0122 www. ban kofcasci le.com Tompkins Mahopac Bank 1441 Roue 22 Brewster, NY 10509 (845) 278-1000 www.mahopacbank.com Tompkins VIST Bank P.O. Box 6219 Wyomissing, PA 19610 (610)478-9922 www.vistbank.com Tompkins Insurance Agencies, Inc. 90 Main St. Batavia, NY 14020 (585)344-0833 www.tompkinsins.com Tompkins Financial Advisors' PO. Box 6437 Ithaca, NY 14851 (607)273-0037 www.tompkinsfinancialadvisors.com STOCK LISTING Tompkins Financial Corpora ion common stock is traded on she NYSE MKT LLC under she symbol TMP. The Tompkins Financial Stock Purchase Plan is administered by the American Sock Transfer & Truss Company, LLC as transfer agen~ for Tompkins Financial Corporation. It ofFers a convenient way for shareholders co increase their investment in the Company. The plan enables shareholders to reinves~ all or part of their cash dividends or to make optional cash payments, with some restrictions, in order co purchase shares of Tompkins Financial Corporation common sock wi~hout incurring charges for brokerage commissions or service charges. Shareholders who are interested in the plan may receive enrollment information and a plan enrollment application by con acting: American Stock Transfer &Trust Company, LLC Toll-free number: 1-877-573-4008 Internet: www.amstock.com Mailing address: American Stock Transfer &Trust Company, LLC Attn: Dividend Reinvestment Department P.O. Box 922 Wall Street Station New York, NY 10269-0560 For answers to many of your shareholder questions or to request forms, visit American Stock Transfer & Trust Company's websi~e www.amstock.com orcontact: American Stock Transfer &Trust Company, LLC Shareholder Relayions 6201 15th Avenue Brooklyn, NY 11219 Overnigh~ address: 6201 15th Avenue Brooklyn, NY 11219 1-800-937-5449 or1-718-921-8200 E-mail address: info@amstock.com Also, Tompkins Financial Stock Purchase Plan enrollmen~ information can be requested and shareholder questions answered by contac~ing she Company: Janet L. Hewitt, AVP Tompkins Financial Corporation P.O. Box 460 Ithaca, NY 14851 1-888-503-5753 or 1-607-274-2004 E-mail address: jhewitt@tompkinsfinancial.com Form 10-K Copies of the Company's Form 10-K (Annual Repor[) for 2016, filed with the Securi~ies and Exchange Commission, may be obtained by shareholders, by written request, from Francis M. Fetsko, Executive Vice President and Chief Financial Officer, P.O. Box 460, Ithaca, NY 14851. Copies can also be obtained from our website: www.tompkinsfinancial.com GO GREEN If you would like to receive future Tompkins Financial Corporation Corporate Reports and proxy materials electronically, please follow the instructions on your proxy card for voting via the interne and select she op~ion for electronic transmission of proxy materials. The savings below are achieved when PC recycled paper is used in place of virgin fiber. This project uses 5,761 Ibs of paper which has a postconsumer recycled percentage of 10%. 75 trees preserved for the future 625 Ibs wa~erborne waste not created 3,229 gallons wastewater Aow saved 205 Ibs solid waste not generated 2,278 Ibs net greenhouse gases prevented 2,237,127 BTUs energy not consumed t Investment Services provided through Tompkins Wealth Advisors. Trust and Estate Services provided through Tompkins Trust Company. Securi~ies and advisory services offered through LPL Financial, a Regis~ered Inves~men~ Advisor, Member FINRA/SIPC. Insurance products offered [hrough LPL Financial or its licensed affilia~es. The investmen~ products sold through LPL Financial are nog insured Tompkins Truss Company deposi~s and are nog FDIC insured. These products are nog obligations of Tompkins Trust Company and are nor endorsed, recommended or guaranteed by Tompkins Trust Company or any government agency. The value of she inves~men[ may fluc~ua~e, [he reeurn on the investment is not guaranteed and loss of principal is possible. Tompkins Trust Company, Tompkins Financial Advisors and Tompkins Wealth Advisors are nog registered broker/dealers and are nor affiliated wi[h LPL Financial. ~ ~ — ~ w :s ~~ ` • f u t ~~ is i . i •... . ! ~ ~~ ~ ~~ ~ ~ ~ `• '' ~~ ~,,~ .~f ~- .- . ~ , r 1` 1~_. '~ ,.~_- ,a. ~~. ~, M A ` ~ .~ .. - ~! r ~: ti ~ ~ \ ~ ~ TOMPKINSFINANCIAL.COM ~~ ` ;'fit t~ ,~ ` ~-~ 

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