Tompkins Financial Corporation
Annual Report 2018

Plain-text annual report

TURNING POSSIBILITIES into REALITIES. Tompkins Financial 2018 Corporate Report 2018 CORPOR ATE REPORT | CORPOR ATE INFORM ATION — 25 TURNING POSSIBILITIES into REALITIES.together.Bold ideas burned brighter throughout New York State and Pennsylvania last year. People in need found affordable food for their families. Business leaders financed a successful future for themselves and their employees. Patients received confidential, quality care in their own neighborhoods.In 2018, all of this happened. And it took all of us to do it.At Tompkins Financial Corporation, customers come to us with a vision of how things could be. Then we combine the insights of banking, insurance and investment professionals to design solutions just as creative. IMAGINE HOW MUCH MORE we can ACHIEVE. together.Financial | HIGHLIGHTS IN THOUSANDS, EXCEPT PER SHARE DATA 2018 2017 % CHANGE Total assets Net income attributable to Tompkins Financial Corporation Diluted earnings per share Adjusted diluted earnings per share1 Cash dividends per share $6,758,436 82,308 5.35 5.33 1.94 $6,648,290 52,494 3.43 4.42 1.82 1.66% 56.80% 55.98% 20.59% 6.59% \ Selected | FINANCIAL DATA IN THOUSANDS, EXCEPT PER SHARE DATA 2018 2017 2016 2015 2014 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 (losses) 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 share1 Cash dividends per share Common equity per share Selected Ratios Return on average assets Return on average equity Average shareholders’ equity to average assets Dividend payout ratio Other Selected Data IN WHOLE NUMBERS, 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) $6,758,436 4,833,939 4,888,959 1,076,075 620,871 251,592 39,792 211,800 3,942 (466) $6,648,290 4,669,120 4,837,807 1,071,742 576,202 226,764 25,460 201,304 4,161 (407) $6,236,756 4,258,033 4,625,139 884,815 549,405 202,739 22,103 180,636 4,321 926 $5,689,995 3,772,042 4,395,306 536,285 516,466 188,746 20,365 168,381 2,945 1,108 $5,269,561 3,393,288 4,169,154 356,541 489,583 184,493 20,683 163,810 2,306 391 82,308 52,494 59,340 58,421 52,041 5.39 5.35 5.33 1.94 40.45 1.23 % 13.93 % 8.83 % 35.99 % 3.46 3.43 4.42 1.82 37.65 0.82 % 9.09 % 9.04 % 52.60 % 3.94 3.91 3.91 1.77 36.20 1.01 % 10.85 % 9.28 % 44.92 % 3.91 3.87 3.63 1.70 34.38 1.07 % 11.51 % 9.31 % 43.48 % 3.51 3.48 3.48 1.62 32.77 1.03 % 10.76 % 9.54 % 46.15 % 1,035 66 83 1,041 65 84 1,019 66 85 998 63 85 1,000 65 85 $3,806,274 $4,017,363 $3,941,484 $3,852,972 $3,761,972 1Adjusted diluted earnings per share reflects adjustments made for certain nonrecurring items. Adjustments for nonrecurring items in 2018 included a $2.2 million gain on sale of real estate and a $1.9 million write-down of impaired leases ($0.02 per share). Adjustments in 2017 included a $14.9 million ($0.99 per share) one-time non-cash write-down of net deferred tax assets related to the Tax Cuts and Jobs Act of 2017. Adjustments in 2015 included a $3.6 million ($0.24 per share) after-tax gain on a pension plan curtailment. There were no adjustments in 2016 and 2014. Adjusted diluted earnings per share is a non-GAAP measure. This adjusted measure is defined in the Company’s Form 10-K. 2018 CORPOR ATE REPORT | FI NAN CI AL H I G H LI G HTS — 1 Message from | TOM ROCHON & STEVE ROMAINE 2018 was a great year for Tompkins Financial in terms of building a strong foundation for our future—fguratively and literally. We not only achieved another year of strong fnancial performance, we also completed and moved into a new headquarters building that will serve our Company for decades to come. While year-over-year comparisons are challenging due to the impact of the Tax Cuts and Jobs Act of 2017, overall, we had another year of record earnings in 2018, with full-year diluted earnings per share of $5.35, an increase of 56% over last year. Our deposit gathering continued to be a key area of focus in 2018. Tanks to the success of some of our key strategic initiatives in this area, we were able to grow total deposits in a challenging rate environment. We also saw growth in loans, which ended the year up 3.5% over the prior year. At the same time, our credit quality remained strong with nonperforming assets remaining near historically low levels. Tere is little doubt the banking industry as a whole faced numerous challenges in 2018. Tere was pressure on our net interest margin due to rising rates and uncertainty in the political and economic environments that slowed the pace of business investment. As these trends are expected to continue into 2019, they highlight the importance of our business model, including the value of our fee-based businesses—Tompkins Insurance Agencies and Stephen S. Romaine P R E S I D E N T & C E O Dr. Tomas R. Rochon C H A I R M A N 2 — 2018 CORPOR ATE REPORT | ME SSAGE TO SHAREHOLDER S    Tompkins Financial Advisors†. Both afliates grew over the past year, adding new talent with a wealth of experience. Noninterest income now represents nearly 27% of total revenues. Team in April 2018. Te team of employees, representing every area of the Company, is tasked with identifying the next generation of products and processes we should pursue as we build the customer experience of the future. Managing risk and cybersecurity remains critically important to our Company. In 2018, we made signifcant investments in both people and technology to remain current and vigilant in protecting our information security. In June, we welcomed Steve Cribbs as our new Chief Risk Ofcer, a professional with 20 years of experience in fnance and risk management, including eight years with the Federal Reserve and 12 years with various fnancial institutions. Steve is now responsible for overseeing compliance, audit, information security and enterprise risk management functions. In recognition of Steve’s ability to contribute more broadly to our Company and the importance of his area of expertise, he was appointed to our Senior Leadership Team. Last year, the team at Tompkins Financial grew closer together, literally. In June, we celebrated the grand opening of our new building in downtown Ithaca that is now home to many of our Central New York- based employees. We are proud to attract more business to Ithaca’s core, including 305 employees brought together from seven previous sites. Te new building is environmentally friendly, consistent with our commitment to sustainability and ofers more modern, private and comfortable space, advanced technology and convenient parking for customers and staf. Few things are as important to us as our customers. We implemented a customer survey platform last year to get to know our customers better and discover new ways to serve them. We are integrating all feedback into our work to continuously improve the customer experience. We are committed to ofering state-of-the-art technology solutions that will enhance our online banking, mobile and cash management platforms in 2019, empowering customers to do more online. With this commitment in mind, we launched Tompkins Financial’s frst Innovation It’s important we stay on top of changes in our industry and ofer our voice where it is needed. We remain dedicated to being a strong and stable presence in the banking industry. In 2018, Steve Romaine was appointed to the board of the Federal Home Loan Bank of New York. Susan Henry is retiring from the Board of Directors in May of 2019, having reached retirement age. She joined both the Trust Company Board and the holding company Board in May of 2010. We appreciate her nine years of service and wish her well in retirement. We invite all our shareholders to join us for our Annual Meeting. We will hold the Annual Meeting of Shareholders on Tuesday, May 7 at 5:30 p.m. at the Country Club of Ithaca. Te Shareholder Information Meeting for Pennsylvania will be held Wednesday, May 8 at 4:30 p.m. at the Berkshire Country Club in Reading. Te Shareholder Information Meeting for the Hudson Valley will be held Tursday, May 9 at 6:00 p.m. at the Mt. Kisco Country Club. Te Shareholder Information Meeting for Western New York will be held Tuesday, May 14 at 5:30 p.m. at the Genesee Country Village & Museum in Mumford. Tis is always a special time for us—when we get to look back on a successful year, recognize our achievements as a Company and thank the people who made them possible. We could not be more proud of the work our employees accomplished in 2018, and we are grateful to our customers and shareholders for your continued support. 2018 CORPOR ATE REPORT | ME SSAGE TO SHAREHOLDER S — 3     Central | N E W YO R K Tompkins Trust Company is now housed in our new headquarters building in downtown Ithaca. Te new Main Ofce features state-of-the art technology and a spacious, welcoming layout, but of course our caring customer service hasn’t changed. We’ve also preserved the original vault door and moved it over to the new lobby. Reafrming our commitment to our customers, Ithaca’s downtown and the Ithaca Commons, we sold the building that had housed Tompkins Trust Company since 1935 to Tompkins County. Te building is now home to the Tompkins Center for History and Culture, featuring multimedia exhibits and presentations about local and regional history. It is also the new home to many local nonprofts including Visit Ithaca, Te Dorothy Cotton Institute and Community Arts Partnership. We’re excited to help bring more people to our city’s center. 2018 saw another record year of earnings, with growth in loans and deposits for our region. New business was strong and there was a noticeable shift in residential lending from refnancing loans to purchase mortgages. We reafrmed our commitment to frst-time home buyer programs. We are a leader in the marketplace for delivering home mortgages. Tompkins Trust Company remained committed to giving back to the communities we serve. We partnered with United Way of Tompkins County to host a Community Carnival for a Cause on the Ithaca Commons that successfully brought our community together in the downtown area for a common purpose. Te event was conceived, planned and executed by Tompkins employees from all Central New York afliates and featured local celebrities, politicians, and personalities. Our Lyndon Corners ofce in Syracuse had a great year of continued growth and added new members to the team. Te commercial team had strong growth in loans and deposits in response to the overall positive reception we’ve experienced from the Syracuse community. Tompkins Insurance Agencies added both commercial and personal producers to the team in Syracuse. Tis is in addition to wealth management, trust services, cash management, residential mortgage lending, and retail branch services that previously existed in this ofce. Te Financial Center now ofers a full complement of banking services to the Syracuse community. Central New York was the frst region of Tompkins Financial Advisors to employ a full team approach. Ofering clients the combined experience of a wealth advisor, portfolio manager, trust ofcer and fnancial planner proved highly efective by further improving upon the client experience. 4 — 2018 CORPOR ATE REPORT | CENTR AL NEW YORK 4 Cayuga Health System includes Cayuga Medical Center (CMC) in Ithaca and Schuyler Hospital in Montour Falls, as well as Cayuga Medical Associates, a multi- disciplinary physician organization. Te Health System has chosen Tompkins Financial to help them with various fnancing and insurance needs over the years because they know we understand how important it is to have successful hospitals and physicians providing care to our communities. Tompkins Financial Advisors is the custodian of Cayuga Health System’s investment accounts, Tompkins Insurance handles all of the Medical Center’s and Cayuga Medical Associates’ insurance needs, and Tompkins Trust Company provided a loan that enabled CMC to purchase two MRIs and renovate their Lab and Operating Room. “Te missions of both Cayuga Medical Center and Tompkins Trust Company focus heavily on the communities we serve,” says John Rudd, President and CEO of Cayuga Health System. “Community has been at the foundation of both our organizations since we were established in the 1800s.” CAYUGA HEALTH SYSTEM John R. Rudd President & CEO 2018 CORPOR ATE REPORT | CENTR AL NEW YORK — 5 SCHNEIDER PACKAGING EQUIPMENT CO., INC. Bob Brotzki President 6 — 2018 CORPOR ATE REPORT | CENTR AL NEW YORK With almost half a century of industry problem-solving in end-of-line automation, Schneider Packaging Equipment Co., Inc., of Brewerton, NY, has become a leading manufacturer of case packing and robotic palletizing solutions. After 48 years as a family-owned business, senior management wanted to acquire the company. “As part of our due diligence we looked at a group of banks, and Tompkins Trust Company really stood out,” says Bob Brotzki, President. “Instead of just saying ‘this is what we can do for you,’ Tompkins looked closely at our prospectus, projections and what we wanted to accomplish and came back with an impressive package. It was clear they wanted our business. We’re a company that knows about workfow and adding value to a process without disrupting it,” says Brotzki. “It’s clear Tompkins is, too. Tey really understand our needs and how we run our business. Te system and procedures they helped put in place work efortlessly for us.” 2018 CORPOR ATE REPORT | CENTR AL NEW YORK — 7 Western | N E W YO R K In 2018, we stayed true to our commitment to existing customers and the communities we serve across Western New York while expanding our oferings and footprint. Our decades-long, multi-generational relationships are the cornerstone of our business. 2019 marks the 150th anniversary of Tompkins Bank of Castile. Consistency is a key strategy for our Company and, we believe, is also the foundation of our long-term sustainable and proftable growth. You see it in the employment longevity of our people and their continuous dedication to providing great service to our customers and our communities. TRILLIUM HEALTH Andrea DeMeo President & CEO Jason Barnecut-Kearns Senior Vice President & CFO 8 — 2018 CORPOR ATE REPORT | WE STERN NEW YORK Tompkins Bank of Castile continued to prove our fnancial stability with another record year of earnings. We opened our frst Tompkins Bank of Castile ofce in the Bufalo market in December of 2018 after years of serving the market from other nearby ofces. Bufalo is the largest market in the Western New York (WNY) region, larger than Rochester and Genesee, Livingston, Orleans and Wyoming Counties combined. Now there is a dedicated team of banking, insurance and wealth management professionals working side-by-side, full- time in Amherst. building a strong team for the new Amherst ofce. Like the bank, wealth management is putting in place the leadership, talent and experience to support continued growth. Tompkins Insurance Agencies has had an ofce in Erie County for decades. Tey are now expanding their presence in the new Amherst ofce to work alongside bank and wealth management partners. Tere are now 10 employees in the new ofce with plans to keep growing to support the Bufalo market presence. During 2018, Tompkins Financial Advisors also expanded in both Bufalo and Rochester, including We continued to ofer all of our customers convenient ways to bank with us, including mobile apps that support consumer and commercial deposits. For our Trillium Health is an innovative, patient-centered health care organization who wants partners as committed to the community as they are. Tis year, they chose Tompkins Bank of Castile and Tompkins Financial Advisors for the fnancing and investment strategies to purchase and renovate a building that will house a new clinic. Te clinic will be Article 28-compliant and dedicated to women’s health services and pediatrics for a nine-county service area. “Trillium Health is expanding to serve the needs of women and children in our community who are vulnerable and most at risk, and Tompkins Bank of Castile has been by our side with the sound advice and fnancial backing we need,” said Andrea DeMeo, President and Chief Executive Ofcer. “Te bank has inspired the trust and confdence of our team, which supports our strategic growth at a pivotal time in our history,” adds Jason Barnecut-Kearns, Senior Vice President and Chief Financial Ofcer. 2018 CORPOR ATE REPORT | WE STERN NEW YORK — 9 small business customers, we continued to ofer Lightning LoansSM. We were the frst community bank in WNY to partner with a leading industry platform that enables small businesses to learn about, apply for and typically get notifed about approval of loans in under 48 hours. In a challenging mortgage market, we added to our product selection. Our Community Heroes Program ofers teachers, frefghters and emergency responders low-money-down home loans. We were the frst in the WNY market to ofer a lending product specifc to these unique customers. Our commitment to WNY agriculture customers remained a strong diferentiator for the bank. We continued to invest in people who have an expertise in this area and supported them with banking and credit policies unique to their agricultural client base. We remained deeply involved in the WNY communities we served. In 2018, our employees dedicated thousands of hours of their time to local organizations including creating Tanksgiving baskets for the Small Business Council of Rochester and supporting organizations like the United Way of Wyoming County, Genesee County Business Education Alliance, Junior Achievement and Focus on the Children. We are one of the largest employers in the City of Batavia once again. We employ 145 people there, nearly half the total number of our employees in WNY. Tis location gives us access to an impressive talent pool and is a convenient and cost-efective place to operate a facility of this size. Our Customer Care Center, located in Batavia, supported insurance and banking customers in every region of our Company. Last year, we further enhanced the training and capabilities of our staf there. Dr. James Sunser doesn’t take switching banks lightly. “It’s a substantial undertaking,” says the President of Genesee Community College (GCC). “We only want to make a move if there will be a substantial beneft.” Te college invited proposals from several banks, including Tompkins Bank of Castile. “We had worked with Tompkins Insurance Agencies for our insurance needs for several years,” says Dr. Sunser. “And we were very happy with that relationship.” What tipped the decision in Tompkins’ favor was the bank’s stability and local connection. “So many banks have transitioned from one name to another,” says Dr. Sunser. “With Tompkins, we can depend on them being the same bank, and having the same people answering the phone.” GCC’s focus on its students also weighed heavily in the decision. “If more of our students end up working for Tompkins, that would be a very good thing.” 10 — 2018 CORPOR ATE REPORT | WE STERN NEW YORK GENESEE COMMUNITY COLLEGE James M. Sunser, Ed. D. President 2018 CORPOR ATE REPORT | WE STERN NEW YORK — 11 Hudson Valley | N E W YO R K Our commitment to our business and consumer customers remained strong in 2018. Our newly relocated branches in Pleasantville and Yonkers continue to thrive and attract new customers with their combination of the latest technology and personal service. In Yonkers, we recently added two new team members in the roles of branch manager and business development ofcer. Both are Yonkers natives with deep personal knowledge of their customers’ needs. JONNA SPILBOR LAW Jonna M. Spilbor, Esq. Attorney/Owner 12 — 2018 CORPOR ATE REPORT | HUDSON VALLEY Te business community continues to grow in the Hudson Valley and healthcare is one of the industries leading the way. It is now the largest industry here and we have supported its growth by ofering a unique suite of products that include expedited credit approval and a customized product and service approach. Te products, coupled with the expertise of our lenders, have been well received by our clients and supported by our partners in the accounting and legal professions who serve the health care industry in our region. We continued our support of the business community with our involvement on the Council of Industry, which specializes in the needs of the growing manufacturing industry in the Hudson Valley. We have long served the needs of the many diverse businesses in our region and understanding their unique needs and designing tailored solutions has historically been a strength of ours. Investing in our people is core to our values. Our newly launched Commercial Lending Development Ever since she was three years old, Jonna Spilbor wanted to be an actress. “But my dad said I needed a plan B!” she says. “And plan B was being a lawyer.” She worked for other law frms for 15 years. Ten, 10 years ago, Jonna started her own frm. “After I paid my frst month’s rent, I had zero dollars in the bank,” she recalls. Not long after, a friend told her about Tompkins Mahopac Bank. “Now, I do all of my banking with them,” says Jonna. “Tey are the best business partner I could have.” Jonna’s frm has grown exponentially, and she is now a regular guest analyst on CNN, Fox News and Oxygen. “Te personal relationship Tompkins has with you is essential,” she says. “I couldn’t have experienced this growth without them.” 2018 CORPOR ATE REPORT | HUDSON VALLEY — 13 Program is designed as a way for some of our top talent who are interested in becoming commercial lenders to learn the business. Commercial lenders are key advisors to many of our biggest customers and play a critical role for Tompkins. Our Professional Development Program is another opportunity for our people to learn more broadly about banking and its many facets. Last year, we gave back to our communities by hosting Food Truck Fridays at our two Mahopac branches, providing free lunch to anyone who stopped in. We served several hundred community members through the program. Martabano Real Estate Management Corp. (MRE) is a family owned development company in Mount Kisco, New York. A personal relationship with a community bank was always important to them. “My brother John was originally doing our fnancing through our local bank,” explains Donald Martabano, MRE President. “He actually served on one of their boards. When they were bought out, we missed that hometown bank feeling. Fortunately, we soon met Tompkins Mahopac Bank and found what we needed.” Warmth isn’t the only thing MRE enjoys. “Beyond great service while managing accounts and providing fnancing, they’re almost like our business advisors,” says Martabano. “We trust their guidance.” It’s a two-way relationship. When MRE was looking for their new bank back in 2004, they were working on a new building on Lexington Avenue in Mount Kisco. Tat building has been the home of a Tompkins Mahopac Bank branch ever since. 14 — 2018 CORPOR ATE REPORT | HUDSON VALLEY p. A — 2018 | WESTERN NEW YORK We also continued to support more than 200 charitable organizations throughout the Hudson Valley and started the Acorn Alliance program that allows employees to volunteer for local nonprofts during business hours as just another way of serving the community. Power of Partnership referrals remain a solid foundation for growth and success in the region. Bankers and wealth advisors continue to work closely together to ensure customers are getting full value from our relationship with them. Tompkins Financial Advisors grew the size and expertise of our team signifcantly in 2018, hiring a senior wealth advisor, portfolio manager, and transitioning a trust ofcer. MARTABANO REAL ESTATE MANAGEMENT CORP. (MRE) Donald Martabano President 2018 CORPOR ATE REPORT | HUDSON VALLEY — 15 p. A — 2018 | WESTERN NEW YORK Southeastern | PENNSYLVANIA Smart growth while protecting asset quality remained a key strategy in our region in 2018. With so many mergers and acquisitions in Southeastern Pennsylvania in the past few years, many personal and commercial banking customers lost the community bank they had known. We want them to fnd the personal services, convenience and local decision making they’re looking for at Tompkins VIST Bank, but we need to be vigilant to maintain the asset quality we’ve achieved. We seek customers of exceptional character who are interested in forming a relationship with our bank and our people. Tis strategy has been key to growing sustainably and weathering the ups and downs in the economy. Another strategy that supported our continued loan growth last year was diversifcation of our loan portfolio. Diversifcation into specifc markets such as agriculture and small business helps mitigate risk while supporting our communities. In 2018, we hired a new agricultural loan ofcer to support our expanding agricultural portfolio. Tompkins Insurance added four new producers in Southeastern Pennsylvania in 2018 and had a strong year of sales growth. Continuing our Power of Partnership strategy, bank and afliate representatives shared leads, and 15% of new insurance relationships came from bank partner referrals. One way we continued to support small business lending in our region last year was through our Lightning LoansSM program. Lightning LoansSM lets small businesses go online for a faster and more efcient application process. In 2018, 90% of Tompkins VIST Bank’s loan applications went through our Lightning LoansSM platform, demonstrating that customers like using cutting edge technology, but enjoy having access to local decision makers. Deposits helped support loan growth and attracting deposits remained an important part of our strategy, especially in a fercely competitive marketplace. Our Gold Rush program is an internal initiative that combines team members from diferent lines of business and branches and has led to higher deposits and an increased collaboration throughout our Tompkins VIST Bank organization in 2018. Tompkins Financial Advisors continued to transition from a broker/dealer to a fduciary model and is expanding the team of professionals serving each of our clients to now include a wealth advisor, portfolio manager, trust ofcer and fnancial planner. We don’t just say we’re a community bank, we live it. Our Tompkins VIST Bank employees volunteered thousands of hours of community service in 2018. Tompkins VIST Bank employees serve on local boards, volunteer services, fundraise and advocate for local nonproft organizations. We want to make our communities a better place to live and work. It’s just the right thing to do. 16 — 2018 CORPOR ATE REPORT | SOUTHE ASTERN PENNSYLVANIA Humane Pennsylvania is reinventing animal welfare. “We help animals by helping people,” says President and CEO Karel Minor. “When we provide veterinary services to people who are in need, we keep more animals safe and sound in their homes.” Humane PA started as a merger between two of Pennsylvania’s most respected sheltering organizations. To accommodate the sudden change in their organization, they needed a new partner. “Tompkins VIST Bank understands nonprofts in a way that other banks don’t,” says Karel. With Tompkins’ guidance, Humane PA was able to secure a $3.1 million grant that will help provide even more assistance to pets and their families. Humane PA now relies on Tompkins for banking, investments and employee health insurance. Says Karel, “Tey keep fnding new ways to help us grow and succeed.” HUMANE PENNSYLVANIA Karel Minor President and CEO 2018 CORPOR ATE REPORT | SOUTHE ASTERN PENNSYLVANIA — 17 SHARE FOOD PROGRAM, INC. Steveanna Wynn Executive Director, Retired Eloise McBride, Co-Interim Director 18 — 2018 CORPOR ATE REPORT | SOUTHE ASTERN PENNSYLVANIA Of course, a community food program knew just what they needed in a community bank. “We do business based on trust and respect,” says Steveanna Wynn, recently retired Share Food Program Executive Director. Te program provides food packages across Pennsylvania, Delaware, Maryland, New Jersey and New York from their facility in Philadelphia. “We know we can come to Tompkins VIST Bank with our goals, and they’ll come back with fnancial solutions to make them possible. We trust them and that’s special.” When the organization needed to bring the electrical service of their hundred-year-old building into this century, Tompkins VIST Bank put together the right combination of fnancing and state resources. “We’re committed to treating people with respect and dignity, and that’s the relationship we have with our bank… they even come to our anniversary party every year,” says Wynn with a smile. 2018 CORPOR ATE REPORT | SOUTHE ASTERN PENNSYLVANIA — 19 Consolidated | STATEMENTS OF CONDITION 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 Available-for-sale securities, at fair value (amortized cost of $1,363,902 at December 31, 2018 and $1,408,996 at December 31, 2017) Held-to-maturity securities, at amortized cost (fair value of $139,377 at December 31, 2018 and $140,315 at December 31, 2017) Equity securities, at fair value (amortized cost $1,000 at December 31, 2018 and $1,000 at December 31, 2017) 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 $.10 per share: Authorized 25,000,000 shares; Issued: 15,348,287 at December 31, 2018; and 15,301,524 at December 31, 2017 Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock, at cost – 122,227 shares at December 31, 2018, and 120,805 shares at December 31, 2017 Total Tompkins Financial Corporation Shareholders’ Equity Noncontrolling interests Total Equity Total Liabilities and Equity 20 — 2018 CORPOR ATE REPORT | STATE MENTS OF CONDITION YEAR ENDED DECEMBER 31, 2018 2017 $78,524 1,865 80,389 $77,688 6,615 84,303 1,332,658 1,391,862 140,579 139,216 887 4,568,741 265,198 43,410 4,790,529 52,262 97,202 81,928 92,283 7,628 82,091 913 4,358,543 310,577 39,771 4,629,349 50,498 86,995 80,106 92,291 9,263 83,494 $6,758,436 $6,648,290 2,853,190 637,295 1,398,474 4,888,959 2,615,632 748,250 1,437,925 4,837,807 81,842 75,177 1,076,075 1,071,742 16,863 73,826 16,691 70,671 $ 6,137,565 $6,072,088 1,535 366,595 319,396 (63,165) (4,902) 619,459 1,412 $620,871 1,530 364,031 265,007 (51,296) (4,492) 574,780 1,422 $576,202 $6,758,436 $6,648,290 Consolidated | STATEMENTS OF INCOME { CONSOLIDATED STATEMENTS OF INCOME } YEAR ENDED DECEMBER 31, IN THOUSANDS, EXCEPT PER SHARE DATA 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 certifcates of deposits of $250,000 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 After Provision for Loan and Lease Losses Noninterest Income Insurance commissions and fees Investment services income Service charges on deposit accounts Card services income Mark-to-market on trading securities Mark-to-market gain on liabilities held at fair value Other income Net (loss) gain on securities transactions Total Noninterest Income Noninterest Expenses Salaries and wages Pension and other employee benefts Net occupancy expense of premises Furniture and fxture expense FDIC insurance Amortization of intangible 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 attributable to noncontrolling interests Net Income Attributable to Tompkins Financial Corporation Basic Earnings Per Share Diluted Earnings Per Share YEAR ENDED DECEMBER 31, 2018 2017 2016 $214,370 $191,410 $169,630 31 0 30,377 3,437 3,377 251,592 1,712 14,883 152 1,227 21,818 39,792 211,800 3,942 207,858 29,369 17,288 8,435 9,693 0 0 13,130 (466) 77,449 85,625 22,090 13,309 7,351 2,618 1,771 48,303 181,067 104,240 21,805 82,435 127 $ 82,308 $5.39 $5.35 37 0 29,721 3,475 2,121 6 220 27,846 3,603 1,434 226,764 202,739 1,880 10,253 235 1,158 11,934 25,460 201,304 4,161 197,143 28,778 15,665 8,437 9,100 0 0 7,631 (407) 69,204 81,948 21,458 13,214 7,028 2,527 1,932 42,998 171,105 95,242 42,620 52,622 128 1,654 9,059 2,228 2,390 6,772 22,103 180,636 4,321 176,315 29,492 15,203 8,793 8,058 (182) 227 6,291 926 68,808 77,379 19,909 12,521 6,450 3,024 2,090 37,234 158,607 86,516 27,045 59,471 131 $ 52,494 $ 59,340 $3.46 $3.43 $3.94 $3.91 2018 CORPOR ATE REPORT | STATE MENTS OF INCOME — 21 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Te Company’s common stock is traded under the symbol “TMP” on the NYSE American. Te high and low closing sale prices–which represent actual transactions as quoted on the Exchange–of the Company’s common stock for each quarterly period in 2017 and 2018 are presented to the right. Te per share dividends paid by the Company in each quarterly period in 2017 and 2018 and the payment dates of these dividends are also presented. $5.35 $5.33 $3.87 $3.63 $3.91 $3.48 $4.42 $3.43 Market Price Low High Cash Dividends Amount Date Paid 2017 1st Quarter $96.00 $79.63 $0.45 2/15/17 2nd Quarter 3rd Quarter 87.43 86.14 75.81 72.20 0.45 0.45 5/16/17 8/15/17 4th Quarter 89.99 79.06 0.47 11/15/17 2018 1st Quarter $85.82 $74.35 2nd Quarter 3rd Quarter 89.15 91.14 4th Quarter 83.00 75.00 80.12 69.67 $0.48 0.48 0.48 0.50 2/15/18 5/15/18 8/15/18 11/15/18 $1.94 $1.77 $1.82 $1.70 $1.62 0.00 0.00 16 17 Diluted Earnings1 PER SHARE IN DOLLARS 18 16 17 Cash Dividends PER SHARE IN DOLLARS 18 1The darker shaded sections of the bars reflect GAAP earnings per share. The lighter bars reflect adjusted diluted earnings per share. Adjusted diluted earnings per share reflects adjustments made for certain nonrecurring items. Adjustments for nonrecurring items in 2018 included a $2.2 million gain on sale of real estate and a $1.9 mil- lion write-down of impaired leases ($0.02 per share). Adjustments in 2017 included a $14.9 million ($0.99 per share) one-time non-cash write-down of net deferred tax assets related to the Tax Cuts and Jobs Act of 2017. Adjustments in 2015 included a $3.6 million ($0.24 per share) after-tax gain on a pension plan curtailment. There were no adjustments in 2016 and 2014. Adjusted diluted earnings per share is a non-GAAP measure. This adjusted measure is defined in the Company’s Form 10-K. Te Shareholders and Board of Directors | Tompkins Financial Corporation: Report of Independent Registered Public Accounting Firm We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of condition of Tompkins Financial Corporation and subsidiaries as of December 31, 2018 and 2017, and the related consolidated statements of income, comprehensive income, cash fows, and changes in shareholders’ equity for each of the years in the three-year period ended December 31, 2018 (not presented herein); and in our report dated March 1, 2019, we expressed an unqualifed opinion on those consolidated fnancial statements. In our opinion, the information set forth in the accompanying condensed consolidated fnancial statements is fairly stated, in all material respects, in relation to the consolidated fnancial statements from which it has been derived. Albany, NY March 1, 2019 22 — 2018 CORPOR ATE REPORT | FINANCIAL HIGHLIGHTS Tompkins Financial | CO R P O R ATI O N B OAR D O F D I R ECTO R S Patricia A. Johnson VP of Finance & Administration Lehigh University Frank C. Milewski Retired VP Regional Operations Pathways Health Michael H. Spain Executive Vice President Brown & Brown Alfred J. Weber President, Tweed-Weber-Danks, Inc. Craig Yunker Managing Partner, CY Farms * Retiring May 2019 Tomas R. Rochon Chairman President, ERB Stephen S. Romaine President & CEO James W. Fulmer Vice Chairman John E. Alexander Founder, Te CBORD Group, Inc. Paul J. Battaglia, CPA Retired Director Freed Maxick, CPAs, P.C. Daniel J. Fessenden Executive Director Fred L. Emerson Foundation, Inc. Susan A. Henry, Ph.D., Professor* Department of Molecular Biology and Genetics Cornell University 2018 CORPOR ATE REPORT | CORPOR ATION B OARD OF DIRECTOR S — 23 B OAR D S O F D I R EC TO R S TOMPKINS TRUST COMPANY TOMPKINS BANK OF CASTILE TOMPKINS MAHOPAC BANK TOMPKINS VIST BANK Stephen S. Romaine Chairman President & CEO Tompkins Financial Corporation James W. Fulmer Chairman Vice Chairman Tompkins Financial Corporation Michael H. Spain Chairman Executive Vice President Brown & Brown Alfred J. Weber Chairman President Tweed-Weber-Danks, Inc. Gregory J. Hartz President & CEO John M. McKenna President & CEO Gerald J. Klein, Jr. President & CEO Scott L. Gruber President & CEO John E. Alexander Founder Te CBORD Group, Inc. Larry F. Baum Founder Te Computing Center Daniel J. Fessenden Executive Director Fred L. Emerson Foundation, Inc. Susan A. Henry, Ph.D.* Professor Department of Molecular Biology and Genetics Cornell University Dr. Ryan Lombardi Vice President Student & Campus Life Cornell University Jennifer Tegan Partner and VP Finance/ Administration Cayuga Venture Fund * Retiring May 2019 Paul J. Battaglia, CPA Retired Director Freed Maxick, CPAs, P.C. Joseph G. Bucci Jr. Environmental Manager American Rock Salt Company, LLC David N. DeLaVergne Retired Senior Vice President Tompkins Bank of Castile John D. McClurg President McClurg Chrysler Dodge Jeep, Inc. & McClurg Chevrolet Buick, Inc. Stephen S. Romaine President & CEO Tompkins Financial Corporation Francis M. Fetsko EVP, CFO, COO & Treasurer Tompkins Financial Corporation Edward C. Barrett, CPA Retired EVP & CFO Tompkins VIST Bank James W. Fulmer Vice Chairman Tompkins Financial Corporation James W. Fulmer Vice Chairman Tompkins Financial Corporation Ita M. Rahilly, CPA, AEP* Partner RBT CPAs, LLP Philip E. Hughes, Esq., CPA Vice Chairman Keystone Industries Kevin J. Plunkett* Director of Strategic Initiatives Simone Development Companies Tomas R. Rochon President, ERB Patricia A. Johnson VP of Finance & Administration Lehigh University Frank C. Milewski Retired VP Regional Operations Pathways Health Stephen S. Romaine President & CEO Tompkins Financial Corporation Harry J. O’Neill, III President Empire Group Stephen R. Stoddard, DVM Partner Perry Veterinary Clinic C. Compton Spain Attorney, Spain & Spain, PC Craig Yunker Managing Partner, CY Farms * Elected July 2018 Karen A. Rightmire* Executive Director Te Wyomissing Foundation Stephen S. Romaine President & CEO Tompkins Financial Corporation * Retired December 31, 2018 TOMPKINS INSURANCE AGENCIES, INC. James W. Fulmer Chairman Vice Chairman Tompkins Financial Corporation David S. Boyce President & CEO Stephen S. Romaine President & CEO Tompkins Financial Corporation 24 — 2018 CORPOR ATE REPORT | BOARDS OF DIRECTOR S TOMPKINS FINANCIAL CORPORATION CORPORATE OFFICERS Stephen S. Romaine President & CEO David S. Boyce Executive Vice President Francis M. Fetsko Executive Vice President, CFO, COO & Treasurer Alyssa H. Fontaine Executive Vice President & General Counsel Scott L. Gruber Executive Vice President Gregory J. Hartz Executive Vice President Brian A. Howard Executive Vice President Gerald J. Klein, Jr. Executive Vice President John M. McKenna Executive Vice President Susan M. Valenti Executive Vice President, Corporate Marketing Ofcer Steven W. Cribbs Senior Vice President, Chief Risk Ofcer Bradley G. James Senior Vice President, Chief Technology Ofcer Bonita N. Lindberg Senior Vice President, Director of Human Resources Janet L. Hewitt Assistant Vice President, Corporate Administrative & Investor Relations Ofcer Kathleen A. Manley Assistant Vice President, Corporate Secretary Corporate | I N F O RM ATI O N CORPORATE OFFICE Tompkins Financial Corporation P.O. Box 460 Ithaca, NY 14851 (888) 503-5753 Website: www.tompkinsfnancial.com E-mail: shareholder@tompkinsfnancial.com SUBSIDIARIES Tompkins Trust Company P.O. Box 460 Ithaca, NY 14851 (607) 273-3210 www.tompkinstrust.com Tompkins Bank of Castile 90 Main St. Batavia, NY 14020 (585) 345-0122 www.bankofcastile.com Tompkins Mahopac Bank 1441 Route 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† P.O. Box 6437 Ithaca, NY 14851 (607) 273-0037 www.tompkinsfnancialadvisors.com STOCK LISTING Tompkins Financial Corporation common stock is traded on the NYSE American under the symbol TMP. Te Tompkins Financial Stock Purchase Plan is administered by American Stock Transfer & Trust Company, LLC as transfer agent for Tompkins Financial Corporation. It ofers a convenient way for shareholders to increase their investment in the Company. Te plan enables shareholders to reinvest all or part of their cash dividends or to make optional cash payments, with some restrictions, in order to purchase shares of Tompkins Financial Corporation common stock without 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 contacting: American Stock Transfer & Trust Company, LLC Toll-free number: 1-877-573-4008 Internet: www.astfnancial.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 website www.astfnancial.com or contact: American Stock Transfer & Trust Company, LLC Shareholder Relations 6201 15th Avenue Brooklyn, NY 11219 Overnight address: 6201 15th Avenue Brooklyn, NY 11219 1-800-937-5449 or 1-718-921-8200 E-mail address: info@astfnancial.com Also, Tompkins Financial Stock Purchase Plan enrollment information can be requested and shareholder questions answered by contacting the 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@tompkinsfnancial.com Form 10-K Copies of the Company’s Form 10-K (Annual Report) for 2018, fled with the Securities and Exchange Commission, may be obtained by shareholders, by written request, from Francis M. Fetsko, Executive Vice President and Chief Financial Ofcer, P.O. Box 460, Ithaca, NY 14851. Copies can also be obtained from our website: www.tompkinsfnancial.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 internet and select the option for electronic transmission of proxy materials. Te savings below are achieved when PC recycled paper is used in place of virgin fber. Tis project uses 4,864 lbs of paper which has a postconsumer recycled percentage of 10%. 70 trees preserved for the future 580 lbs waterborne waste not created 2,900 gallons wastewater fow saved 190 lbs solid waste not generated 2,000 lbs net greenhouse gases prevented 2,230,000 BTUs energy not consumed † Investment Services provided through Tompkins Wealth Advisors. Trust and Estate Services provided through Tompkins Trust Company. Securities and advisory services ofered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC. Insurance products ofered through LPL Financial or its licensed afliates. Te investment products sold through LPL Financial are not insured Tompkins Trust Company deposits and are not FDIC insured. Tese products are not obligations of Tompkins Trust Company and are not endorsed, recommended or guaranteed by Tompkins Trust Company or any government agency. Te value of the investment may fuctuate, the return on the investment is not guaranteed, and loss of principal is possible. Tompkins Trust Company, Tompkins Financial Advisors and Tompkins Wealth Advisors are not registered broker/dealers and are not afliated with LPL Financial. 2018 CORPOR ATE REPORT | CORPOR ATE INFORM ATION — 25 

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