Tompkins Expands Lending as Margin Holds Steady
Net interest income reached $74.0 million as average loans grew 6.5% from a year earlier.
Tompkins Financial (TMP), the regional banking and wealth-management company, increased net interest income 3.0% from the prior quarter and 23.0% from a year earlier to $74.0 million, supported by loan growth and a wider margin from last year. Net interest margin held nearly flat at 3.58% sequentially and expanded 50 bps YoY, extending a five-quarter rise from 3.08%.
The margin leveled off as a 4-bps increase in earning-asset yields met a 3-bps rise in interest-bearing liability costs. Seasonal municipal-deposit outflows led Tompkins to borrow more, while the average cost of funds remained near 1.68%, down 16 bps YoY.
Commercial lending drove balance-sheet growth. Average loans rose 6.5% YoY and 1.4% QoQ, led by commercial real estate and commercial-and-industrial credits. Period-end loans increased at a faster 6.9% YoY and 1.8% QoQ pace, providing momentum into the third quarter.
Average deposits grew 4.4% YoY and 0.9% QoQ, though period-end balances slipped 0.4% sequentially after rising 1.7% in the preceding quarter. The cost of interest-bearing deposits edged up 1 bp QoQ to 2.07% and declined 17 bps YoY, while noninterest-bearing accounts held at 26.9% of average deposits.
The sale of Tompkins Insurance Agencies continued to reshape the revenue and expense base. Noninterest income fell 41.7% YoY to $13.1 million as insurance revenue declined, while wealth-management fees rose 5.3% and card-service income increased 4.6%. Noninterest expense decreased 8.8% to $47.1 million, largely reflecting the absence of the sold unit’s costs.
Capital ratios strengthened, and the board raised the quarterly dividend by 4.5% to $0.70 a share. Tier 1 capital to average assets increased to 10.69% from 10.58% in the prior quarter, while total capital to risk-weighted assets reached 14.89%.
Credit trends were mixed. The provision held at $1.5 million, but net charge-offs more than doubled QoQ to $1.6 million and the annualized loss rate rose 5 bps to 0.10%. Criticized loans increased to $140.0 million after five performing loans totaling $18.8 million were downgraded, while nonperforming assets edged up to 0.60% of assets.
The allowance declined to 0.89% of loans as the economic forecasts used in the reserve calculation improved. With period-end loan growth outpacing average balances, the pace of commercial lending and the migration of criticized credits remained the principal forward indicators.