to loan production, loan quality, concentrations of
credit, loan delinquencies and nonperforming and potential problem loans. The
Company has an independent loan review process that reviews and validates the
risk identification and assessment made by the lenders and credit personnel.
The results of these reviews are presented to the Board of Directors of each of
the Companys banking subsidiaries, and the Companys Audit Committee.
The
Companys principal expenses are interest on deposits, interest on borrowings,
and operating and general administrative expenses, as well as provisions for
loan and lease losses. Funding sources, other than deposits, include
borrowings, securities sold under agreements to repurchase, and cash flow from
lending and investing activities. Tompkins provides a variety of financial
services to individuals and small business customers. Some of the traditional
banking services and financial services are detailed below.
Commercial Services
The
Companys subsidiary banks provide financial services to corporations and other
business clients. Lending activities include loans for a variety of business
purposes, including real estate financing, construction, equipment financing,
accounts receivable financing, and commercial leasing. Other commercial
services include deposit and cash management services, letters of credit, sweep
accounts, credit cards, purchasing cards, Internet-based account services, and
remote deposit services.
Retail Services
The
Companys subsidiary banks provide a variety of retail banking services
including checking accounts, savings accounts, time deposits, IRA products,
brokerage services, residential mortgage loans, personal loans, home equity
loans, credit cards, debit cards and safe deposit services. Retail services are
accessible through a variety of delivery systems including branch facilities,
ATMs, voice response, Internet banking, and remote deposit services, a service
that brings deposit capability to an individuals desk any time of the day or
night.
Securities Portfolio
The
Company maintains a portfolio of securities such as U.S. government sponsored
entities securities, obligations of states and political subdivisions thereof,
equity securities, and interest-bearing deposits. Management typically invests
in securities with short to intermediate average lives in order to better match
the interest rate sensitivities of its assets and liabilities.
Investment
decisions are made within policy guidelines established by the Companys Board
of Directors. The investment policy established by the Companys Board of
Directors is based on the asset/liability management goals of the Company, and
is monitored by the Companys Asset/Liability Management Committee. The intent
of the policy is to establish a portfolio of high quality diversified
securities, which optimizes net interest income within safety and liquidity
limits deemed acceptable by the Asset/Liability Management Committee.
Securities, other than certain obligations of states and political subdivisions
thereof, are generally classified as available-for-sale. Securities
available-for-sale may be used to enhance total return, provide additional liquidity,
or reduce interest rate risk.
The
Company adopted FASB ASC Topic 825,
Financial
Instruments
(ASC Topic 825), effective
January 1, 2008. With the adoption, the Company elected to account for certain
securities and certain borrowings at fair value, with unrealized gains or
losses included in earnings.
Trust and Investment Management
Services
The
Company provides trust and investment services through Tompkins Investment
Services (TIS), a division of Tompkins Trust Company, and investment services
through AM&M. Tompkins Investment Services, with office locations at all
three of the Companys subsidiary banks, provides a full range of money
management services, including investment management accounts, custody
accounts, trusts, retirement plans and rollovers, estate settlement, and
financial planning. AM&M provides fee-based financial planning and wealth
management services for small business owners, professionals and corporate
executives and other individuals with complex financial needs.
Broker-Dealer Services
AM&M
operates a broker-dealer subsidiary, Ensemble Financial Services, Inc., which
is an outsourcing company for financial planners and investment advisors.
Insurance Services
The
Company provides property and casualty insurance services and employee benefits
consulting through Tompkins Insurance. Tompkins Insurance is an independent
insurance agency, representing many major insurance carriers. Tompkins
Insurance has automated systems for record keeping, claim processing and
coverage confirmation, and can provide insurance pricing comparisons from a
wide range of insurance companies. Tompkins Insurance provides employee
benefits consulting to employers in Western and Central New York, assisting
them with their medical, group life insurance and group disability insurance.
In addition to its seven stand-alone offices, Tompkins Insurance shares several
offices with The Bank of Castile and The Trust Company. AM&M operates a
subsidiary that creates customized risk management plans using life, disability
and long-term care insurance products.
2
Subsidiaries
The
Company operates three banking subsidiaries, an insurance agency subsidiary,
and a financial planning, wealth management, and broker-dealer subsidiary in
New York. In addition, The Company also owns 100% of the common stock of
Tompkins Capital Trust I and Sleepy Hollow Capital Trust I. The Companys
subsidiary banks operate 45 offices, including 3 limited-service offices,
serving communities in New York. The decision to operate as three locally
managed community banks reflects managements commitment to community banking
as a business strategy. For Tompkins, personal delivery of high quality
services, a commitment to the communities in which we operate, and the
convergence of a single-source financial service provider characterize
managements community banking approach. The combined resources of the Tompkins
organization provides increased capacity for growth and the greater capital
resources necessary to make investments in technology and services. Tompkins
has developed several specialized financial services that are now available in
markets served by all three subsidiary banks. These services include trust and
investment services, insurance, leasing, card services, Internet banking, and
remote deposit services.
Tompkins Trust Company (the Trust
Company)
The
Trust Company is a New York State-chartered commercial bank that has operated
in Ithaca, New York and surrounding communities since 1836. The Trust Company
operates 15 banking offices, including 2 limited-service banking offices in the
counties of Tompkins, Cortland, Cayuga and Schuyler, New York. The Trust
Companys largest market area is Tompkins County, which has a population of
approximately 101,000. Education plays a significant role in the Tompkins
County economy with Cornell University and Ithaca College being two of the
countys major employers. The negative trends affecting the national economy
have had an impact on the markets served by the Trust Company, as evidenced by an
increase in the unemployment rate. Nevertheless, trends for unemployment and
housing compare favorably to New York State and national trends. The Trust
Company has a full-service office in Cortland, New York and a full-service
office in Auburn, New York. Both of these offices are located in counties
contiguous to Tompkins County.
The Bank of Castile (The Bank of
Castile)
The
Bank of Castile is a New York State-chartered commercial bank and conducts its
operations through its 15 banking offices, in towns situated in and around the
areas commonly known as the Letchworth State Park area and the Genesee Valley
region of New York State. The main business office for The Bank of Castile is
located in Batavia, New York and is shared with Tompkins Insurance. The Bank of
Castile serves a five-county market, much of which is rural in nature, but also
includes Monroe County, where the city of Rochester is located. The population
of the counties served by The Bank of Castile, other than Monroe, is
approximately 205,000. The Bank of Castile lending portfolio includes loans to
the agricultural industry. Weak economic conditions and low milk prices
strained the agricultural industry in 2009.
The Mahopac National Bank (Mahopac
National Bank)
Mahopac
National Bank operates 15 banking offices, including 1 limited-service office
in counties near New York City. The 15 banking offices include 5 full-service
offices in Putnam County, New York, 3 full-service offices in Dutchess County,
New York, and 6 full-service offices, 1 limited-service office, in Westchester
County, New York. Mahopacs presence in Westchester County increased with the
Companys May 9, 2008 acquisition of Sleepy Hollow Bancorp, Inc., (Sleepy
Hollow), a privately held bank holding company located in Sleepy Hollow, New
York. At the time of the acquisition, Sleepy Hollow Bank, the wholly-owned
subsidiary of Sleepy Hollow, operated 5 full-service offices and 1
limited-service facility, all in Westchester County, New York. Upon completion
of the Sleepy Hollow acquisition, Sleepy Hollow Bank was merged into Mahopac
National Bank.
Putnam County has a population of approximately 99,000 and is
about 60 miles north of Manhattan. Dutchess County has a population of
approximately 293,000, and Westchester County has a population of approximately
954,000. All three counties have seen an increase in the unemployment rate as a
result of the downturn in the State and national economies. Given the
proximities of these counties to New York City, the significant layoffs at financial
firms and large corporations are likely to have an impact on the local
economies, the extent of which is difficult to estimate. The recent turbulence
experienced by many financial industry competitors has also provided continued
opportunities for growth.
Tompkins Insurance Agencies, Inc.
(Tompkins Insurance)
Tompkins
Insurance is headquartered in Batavia, New York, and offers property and
casualty insurance to individuals and businesses primarily in Western and
Central New York. Over the past several years, Tompkins Insurance has acquired
smaller insurance agencies generally in the market areas serviced by the
Companys banking subsidiaries. Tompkins Insurance offers services to customers
of the Companys banking subsidiaries by sharing offices with The Bank of
Castile and The Trust Company. In addition to these shared offices, Tompkins
Insurance has four stand-alone offices in Western New York, and two stand-alone
offices in Tompkins County, New York.
AM&M Financial Services, Inc.
(AM&M)
AM&M
is headquartered in Pittsford, New York and offers financial services through
three operating companies: (1) AM&M Planners, Inc., which provides fee
based financial planning and wealth management services for corporate
executives, small business owners and high net worth individuals; (2) Ensemble
Financial Services, Inc., an independent broker-dealer and outsourcing company
for financial planners and investment advisors; and (3) Ensemble Risk
Solutions, Inc., which creates customized risk management plans using life,
disability and long-term care insurance products.
3
Tompkins Capital Trust I
Tompkins
Capital Trust I is a Delaware statutory business trust formed in 2009. In 2009,
the Tompkins Capital Trust I issued $20.5 million of trust preferred securities
and lent the proceeds to the Company to support business growth and for general
corporate purposes. The Company guarantees, on a subordinated basis, payments
of distributions on the trust preferred securities and payments on the
redemption of the trust preferred securities. Tompkins Capital Trust I is a
variable interest entity for which the Company is not the primary beneficiary.
In accordance with the applicable accounting standards related to variable
interest entities, the accounts of Tompkins Capital Trust I are not included in
the Companys consolidated financial statements. However, the $20.5 million of
trust preferred securities issued by Tompkins Capital Trust I are included in
the Tier 1 capital of the Company for regulatory capital purposes pursuant to
regulatory guidelines.
Sleepy Hollow Capital Trust I
Sleepy
Hollow Capital Trust I, a Delaware statutory business trust, was formed in
August 2003 and issued $4.0 million of floating rate (three-month LIBOR plus
305 basis points) trust preferred securities. The Company acquired Sleepy
Hollow Capital Trust I through the acquisition of Sleepy Hollow Bancorp, Inc.
in May 2008.
For
additional details on Tompkins Capital Trust I and Sleepy Hollow Capital Trust
I refer to Note 12 Trust Preferred Debentures in the Notes to Consolidated
Financial Statements in Part II, Item 7. of this Report.
Competition
Competition
for commercial banking and other financial services is strong in the Companys
market areas. In one or more aspects of its business, the Companys
subsidiaries compete with other commercial banks, savings and loan
associations, credit unions, finance companies, Internet-based financial
services companies, mutual funds, insurance companies, brokerage and investment
banking companies, and other financial intermediaries. Some of these
competitors have substantially greater resources and lending capabilities and
may offer services that the Company does not currently provide. In addition,
many of the Companys non-bank competitors are not subject to the same
extensive Federal regulations that govern financial holding companies and
Federally insured banks.
Competition
among financial institutions is based upon interest rates offered on deposit
accounts, interest rates charged on loans and other credit and service charges,
the quality and scope of the services rendered, the convenience of facilities
and, in the case of loans to commercial borrowers, relative lending limits.
Management believes that a community based financial organization is better
positioned to establish personalized financial relationships with both
commercial customers and individual households. The Companys community
commitment and involvement in its primary market areas, as well as its
commitment to quality and personalized financial services, are factors that
contribute to the Companys competitiveness. Management believes that each of
the Companys subsidiary banks can compete successfully in its primary market
areas by making prudent lending decisions quickly and more efficiently than its
competitors, without compromising asset quality or profitability, although no
assurances can be given that such factors will assure success.
Supervision and Regulation
Regulatory Agencies
As
a registered financial holding company, the Company is subject to examination
and comprehensive regulation by the Federal Reserve Board (FRB). The
Companys banking subsidiaries are subject to examination and comprehensive
regulation by various regulatory authorities, including the Federal Deposit
Insurance Corporation (FDIC), the Office of the Comptroller of the Currency
(OCC), and the New York State Banking Department (NYSBD). Each of these
agencies issues regulations and requires the filing of reports describing the
activities and financial condition of the entities under its jurisdiction.
Likewise, such agencies conduct examinations on a recurring basis to evaluate
the safety and soundness of the institutions, and to test compliance with
various regulatory requirements, including: consumer protection, privacy, fair
lending, the Community Reinvestment Act, the Bank Secrecy Act, sales of
non-deposit investments, electronic data processing, and trust department
activities.
The
Companys financial services subsidiaries are subject to examination and
regulation by various regulatory agencies, including the New York State
Insurance Department, Securities and Exchange Commission (SEC), and the
Financial Industry Regulatory Authority (FINRA). Tompkins Investment Services
is subject to examination and comprehensive regulation by the FDIC and NYSBD.
Share Repurchases and Dividends
Under
FRB regulations, the Company may not, without providing prior notice to the
FRB, purchase or redeem its own common stock if the gross consideration for the
purchase or redemption, combined with the net consideration paid for all such
purchases or redemptions during the preceding twelve months, is equal to ten
percent or more of the Companys consolidated net worth.
FRB
regulations provide that dividends shall not be paid except out of current
earnings and unless the prospective rate of earnings retention by the Company
appears consistent with its capital needs, asset quality, and overall financial
condition. Tompkins primary source of funds to pay dividends on its common
stock is dividends from its subsidiary banks. The subsidiary banks are subject
to regulations that restrict the dividends that they may pay to Tompkins.
4
Liability of Commonly Controlled
Institutions
FDIC-insured
depository institutions can be held liable for any loss incurred, or reasonably
expected to be incurred, by the FDIC due to the default of an FDIC-insured
depository institution controlled by the same bank holding company, or for any
assistance provided by the FDIC to an FDIC-insured depository institution
controlled by the same bank holding company that is in danger of default.
Default means generally the appointment of a conservator or receiver. In
danger of default means generally the existence of certain conditions indicating
that default is likely to occur in the absence of regulatory assistance.
Intercompany Transactions
There
are Federal laws and regulations that govern transactions between the Companys
non-bank subsidiaries and its banking subsidiaries. These laws establish
certain quantitative limits and other prudent requirements for loans, purchases
of assets, and certain other transactions between a member bank and its
affiliates. In general, transactions between the banking subsidiaries and its
non-bank subsidiaries must be on terms and conditions, including credit
standards, that are substantially the same or at least as favorable to the
banking subsidiaries as those prevailing at the time for comparable
transactions involving non-affiliated companies.
Capital Adequacy
The
Federal Reserve Board, the OCC and the FDIC have substantially similar
risk-based capital ratio and leverage ratio guidelines for banking
institutions. The guidelines are intended to ensure that banking organizations
have adequate capital given the risk levels of assets and off-balance sheet
financial instruments. Under the guidelines, banking organizations are required
to maintain minimum ratios for Tier I capital and total capital to
risk-weighted assets. For purposes of calculating the ratios, a banking
organizations assets and some of its specified off-balance sheet commitments
and obligations are assigned to various risk categories. A depository
institutions or holding companys capital, in turn, is classified in one of
three tiers, depending upon type:
Core Capital (Tier 1).
Tier 1 capital includes common equity,
retained earnings, qualifying non-cumulative preferred stock, a limited amount
of qualifying cumulative preferred stock at the holding company level, minority
interests in equity accounts of consolidated subsidiaries, qualifying trust
preferred securities, less goodwill, most intangible assets and certain other
assets.
Supplementary Capital (Tier 2).
Tier 2 capital includes, among other things,
perpetual preferred stock and trust preferred securities not meeting the Tier 1
definition, qualifying mandatory convertible debt securities, qualifying
subordinated debt, and allowances for possible loan losses, subject to
limitations.
Market Risk Capital (Tier 3).
Tier 3 capital includes qualifying unsecured
subordinated debt.
Tompkins,
like other bank holding companies, is required to maintain Tier 1 capital and
total capital (the sum of Tier 1, Tier 2 and Tier 3 capital) equal to at
least 4.0% and 8.0%, respectively, of its total risk-weighted assets. The bank
subsidiaries, like other depository institutions, are required to maintain
similar capital levels under capital adequacy guidelines. For a depository
institution to be well capitalized under the regulatory framework for prompt
corrective action, its Tier 1 and total capital ratios must be at least 6.0%
and 10.0% on a risk-adjusted basis, respectively.
Bank
holding companies and banks are also required to comply with minimum leverage
ratio requirements. The leverage ratio is the ratio of a banking organizations
Tier 1 capital to its total adjusted quarterly average assets. The minimum
permissible leverage ratio is 3.0% for financial holding companies and banks
that either have the highest supervisory rating or have implemented the
appropriate federal regulatory authoritys risk-adjusted measure for market
risk. All other financial holding companies and banks are required to maintain
a minimum leverage ratio of 4.0%, unless a different minimum is specified by an
appropriate regulatory authority. For a depository institution to be considered
well capitalized under the regulatory framework for prompt corrective action,
its leverage ratio must be at least 5.0%.
For
further information concerning the regulatory capital requirements, actual
capital amounts and the ratios of Tompkins and its bank subsidiaries, see the
discussion in Note 20 Regulations and Supervision in Notes to Consolidated
Financial Statements in Part II, Item 7. of this Report.
Deposit Insurance
Historically,
all deposit accounts of the Companys subsidiary banks were insured by the
Deposit Insurance Fund (DIF), generally in amounts up to $100,000 per
depositor. Certain types of retirement accounts are insured up to $250,000 per
insured depositor. In October 2008, the FDIC announced the Temporary Liquidity
Guarantee Program (TLGP). The TLGP provides full FDIC deposit insurance on
funds invested in noninterest-bearing transaction accounts, and Negotiable
Order of Withdrawal (NOW) accounts paying less than 0.5% interest per annum
held at participating FDIC insured institutions. In November 2008, Tompkins
elected to participate in the TLGP. For this additional insurance coverage,
participating depository institutions paid a fee of 10 basis points per quarter
on amounts in covered accounts exceeding $250,000. The TLGP was initially set
to end on December 31, 2009, but was extended until June 30, 2010. The
extension provided an opportunity to opt out of the program, however, Tompkins
has elected to continue enrollment. A new risk-based pricing schedule will
accompany this extension and cost increases will range from an additional 5 -
15 basis points (annualized) for Risk Category I through IV institutions. Risk
Category I institutions would be assessed an additional 5 basis points for
continued participation in the program. All of Tompkins subsidiary banks fall
within the Risk Category I classification as of the report date. Separately,
Congress extended the temporary increase in the standard coverage limit to $250,000
until December 31, 2013.
5
On
December 16, 2008, the Board of Directors of the FDIC voted to adopt a final
rule increasing risk-based assessment rates uniformly by 7 basis points (7
cents for every $100 of deposits), on an annual basis, for the first quarter of
2009. This increase is a response to higher levels of bank failures that
occurred in 2008. The assessment increase creates a path for the DIF to return
to its statutorily mandated level. Under the final rule, risk-based rates would
range between 12 and 50 basis points (annualized) for the first quarter 2009
assessment. The Chairman of the Committee on Banking, Housing, and Urban
Affairs also introduced legislation which was in approved by Congress in May
2009, The Depositor Protection Act of 2009, which increased the FDICs
borrowing authority with the U.S. Treasury to $100.0 billion from $30.0 billion
with a temporary ceiling of $500.0 billion through 2010.
On
May 22 2009, the FDIC approved a final rule for a special assessment of 5 basis
points on each insured depository institutions assets minus Tier 1 capital;
not to exceed 10 basis points of the institutions risk-based assessment as of
June 30, 2009, to restore the DIF. The Companys subsidiary banks paid a
special assessment of $1.4 million in 2009.
On
November 12, 2009, the FDIC adopted a final rule requiring insured depository
institutions to prepay their estimated quarterly insurance premium for the
fourth quarter of 2009, and all of 2010, 2011 and 2012. For purposes of
calculating the assessment; beginning on September 29, 2009, the FDIC increased
annual assessment rates uniformly by 3 basis points beginning in 2011. In
addition, an institutions third quarter 2009 assessment base was increased
quarterly at a 5 percent annual growth rate through the end of 2012. On
December 30, 2009, the Company paid $12.2 million related to the 3 year premium
FDIC insurance prepayments for its subsidiary banks.
Insurance
premiums for periods covered in this report were governed by The Federal
Deposit Insurance Reform Act of 2005 and The Federal Deposit Insurance Reform
Conforming Amendments Act of 2005 (collectively the Reform Act). Under the
Reform Act, the FDIC modified its risk-based deposit premium assessment system
under which each depository institution is placed in one of four assessment
categories based on the institutions capital classification under the prompt
corrective action provisions and an institutions long-term debt issuer
ratings. Effective January 1, 2007, the adjusted assessment rates for insured
institutions under the modified system range from 5 basis points to 43 basis
points depending upon the assessment category into which the insured
institution is placed. Under the previous assessment system, the adjusted
assessment rates ranged from 0 basis points to 27 basis points.
The
Reform Act provided for a one-time assessment credit for eligible insured
depository institutions (those institutions that were in existence on December
31, 1996 and paid a deposit insurance assessment prior to that date, or are a
successor to any such institution). The credit was to be used to offset up to
100% of the 2007 DIF assessment, and if not completely used in 2007, was to be
applied to not more than 90% of each of the aggregate 2008, 2009 and 2010 DIF
assessments. The Companys one-time historical assessment credit was $1.0
million, of which $370,000 and $657,000 were used to offset the Federal deposit
insurance assessments in 2008 and 2007, respectively. FDIC insurance expense,
excluding the TLGP program, special assessments levied in 2009, and Financing
Corporation (FICO) assessments totaled $2.9 million in 2009, $865,000 in 2008
and $14,000 in 2007.
In
addition to the risk-based deposit insurance assessments, the FDIC is a
collection agent for additional assessments imposed by FICO, a separate U.S.
government agency affiliated with the FDIC, on insured deposits to pay for the
interest cost of FICO bonds. The Company paid FICO assessments of $246,000 in
2009 and $225,000 in 2008.
Depositor Preference
The
Federal Deposit Insurance Act provides that, in the event of the liquidation
or other resolution of an insured depository, the claims of depositors of the
institution, including the claims of the FDIC, as subrogee of the insured
depositors, and certain claims for administrative expenses of the FDIC as
receiver, will have priority over other general unsecured claims against the
institution. If an insured depository institution fails, insured and uninsured
depositors, along with the FDIC, will have priority in payment ahead of
unsecured, non-deposit creditors, including the parent bank holding company,
with respect to any extensions of credit they have made to such insured
depository institutions.
Community Reinvestment Act
The
Companys subsidiary banks are subject to the Community Reinvestment Act
(CRA) and to certain fair lending and reporting requirements that relate to
home mortgage lending. The CRA requires the federal banking regulators to
assess the record of a financial institution in meeting the credit needs of the
local communities, including low-and moderate-income neighborhoods, consistent
with the safe and sound operation of the bank. The federal agencies consider an
institutions performance under the CRA in evaluating applications for mergers
and acquisitions, and new offices. The ratings assigned by the federal agencies
are publicly disclosed.
6
Sarbanes-Oxley Act of 2002
The
Sarbanes-Oxley Act of 2002 implemented a broad range of corporate governance,
accounting and reporting requirements for companies that have securities
registered under the Exchange Act of 1934. These requirements include: (1)
requirements for audit committees, including independence and financial
expertise; (2) certification of financial statements by the chief executive
officer and chief financial officer of the reporting company; (3) standards for
auditors and regulation of audits; (4) disclosure and reporting requirements
for the reporting company and directors and executive officers; and (5) a range
of civil and criminal penalties for fraud and other violations of securities
laws.
The USA Patriot Act
The
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (USA Patriot Act) imposes
obligations on financial institutions, including banks and broker-dealer
subsidiaries to implement policies, procedures and controls which are
reasonably designed to detect and report instances of money laundering and the
financing of terrorism.
The Emergency Economic Stabilization
Act of 2008
In
the third quarter of 2008, the Federal Reserve, the U.S. Treasury, and the FDIC
initiated measures to stabilize the financial markets and to provide liquidity
for financial institutions. The Emergency Economic Stabilization Act of 2008
(EESA) was enacted in October of 2008 and authorizes the U.S. Treasury to
provide funds to be used to restore liquidity and stability to the U.S.
financial system. Under authority of EESA, the U.S. Treasury initiated a
voluntary capital purchase program to encourage financial institutions to build
capital to increase lending and to support the economy. Under the program, the
U.S. Treasury has been purchasing senior preferred shares of financial
institutions, together with warrants to purchase shares of common stock. The
Company determined that it did not need additional capital and, although
eligible to participate in this program, elected not to issue and sell shares
of preferred stock. As mentioned above, EESA also increased FDIC insurance
deposit limits for most accounts from $100,000 to $250,000 through December 31,
2009.
Financial Privacy
In
accordance with the Gramm Leach Bliley Act, federal banking regulators adopted
rules that limit the ability of banks and other financial institutions to
disclose non-public information about consumers to non-affiliated third
parties. These limitations require disclosure of privacy policies to consumers
and, in some circumstances, allow consumers to prevent disclosure of certain
personal information to a non-affiliated third party. These provisions affect
how consumer information is transmitted through diversified financial companies
and conveyed to outside vendors.
Office of Foreign Assets Control
Regulation
The
United States has imposed economic sanctions that affect transactions with
designated foreign countries, nationals and others. These are known as the
OFAC rules based on their administration by the US Treasury Department Office
of Foreign Assets Control (OFAC). The OFAC-administered sanctions take many
forms. Generally, however, they include restrictions on trade with or
investment in a sanctioned country and a blocking of assets in which the
government or specially designated nationals of the sanctioned country have an
interest.
Consumer Protection Laws
In
connection with their lending and leasing activities, the Companys banking
subsidiaries are subject to a number of federal and state laws designed to
protect borrowers and promote lending. These laws include the Equal Credit
Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the
Home Mortgage Disclosure Act, and the Real Estate Settlement Procedures Act,
and similar laws at the State level.
Effective
July 1, 2010, a new federal banking rule under the Electronic Fund Transfer Act
will prohibit financial institutions from charging consumers fees for paying
overdrafts on automated teller machines (ATM) and one-time debit card
transactions, unless a consumer consents, or opts in, to the overdraft service
for those type of transactions. If a consumer does not opt in, any ATM
transaction or debit that overdraws the consumers account will be denied.
Overdrafts on the payment of checks and regular electronic bill payments are
not covered by this new rule. Before opting in, the consumer must be provided a
notice that explains the financial institutions overdraft services, including
the fees associated with the service, and the consumers choices. Financial
institutions must provide consumers who do not opt in with the same account
terms, conditions and features (including pricing) that they provide to
consumers who do opt in.
Other Legislative Initiatives
From
time to time, various legislative and regulatory initiatives are introduced in
Congress and state legislatures, as well as by regulatory authorities. These
initiatives may include proposals to expand or contract the powers of bank
holding companies and depository institutions or proposals to change the
financial institution regulatory environment. Such legislation could change
banking laws and the operating environment of Tompkins in substantial, but
unpredictable ways. We cannot predict whether any such legislation will be
enacted, and, if enacted, the effect that it, or any implementing regulations would
have on our financial condition or results of operations.
7
Employees
At
December 31, 2009, the Company had 744 employees, approximately 80 of whom were
part-time. No employees are covered by a collective bargaining agreement and
the Company believes its employee relations are excellent.
Available Information
The
Company maintains a website at www.tompkinsfinancialcorp.com. The Company makes
available free of charge (other than an investors own Internet access charges)
through its website its annual reports on Form 10-K, quarterly reports on Form
10-Q, and current reports on Form 8-K, its proxy statements related to its
annual shareholders meetings, and amendments to these reports or statements,
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 as amended (the Exchange Act), as soon as reasonably
practicable after the Company electronically files such material with, or
furnishes such material to, the Securities and Exchange Commission (the SEC).
Copies of these reports are also available at no charge to any person who
requests them, with such requests directed to Tompkins Financial Corporation,
Investor Relations Department, The Commons, Ithaca, New York 14851, telephone
no. (607) 273-3210. Materials that the Company files with the SEC may be read
and copied at the SECs Public Reference Room at 100 F Street, NE, Washington,
D.C. 20549. This information may also be obtained by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet website that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC at www.sec.gov. The Company is
not including the information contained on the Companys website as a part of,
or incorporating it by reference into, this Annual Report on Form 10-K, or into
any other report filed with or furnished to the SEC by the Company.
I
tem 1A. Risk
Factors
The
Companys business, operating results, financial condition, liquidity, and cash
flow may be impacted by numerous factors, including but not limited to those
discussed below. These items may cause the Companys results to vary materially
from recent results.
Economic Conditions / Financial Markets
General
economic conditions impact the banking and financial services industry. The
Companys financial performance generally, and in particular the ability of
borrowers to pay interest on and repay the principal of outstanding loans and
the value of collateral securing these loans, is highly dependent upon the
business environment in the markets where the Company operates. Unfavorable or
uncertain economic and market conditions could lead to credit quality concerns
related to repayment ability and collateral protection as well as reduced
demand for the services offered by the Companys two business segments.
Economic
conditions have been weak over the last three years. Overall
market conditions in 2009 included a weakened housing market with falling home
prices and rising foreclosures, higher unemployment, difficulties in financial
and credit markets, slowdown in consumer spending, a decrease in consumer
confidence, slumping auto sales, and generally reduced business activity across
a wide range of industries and regions in the U.S.
The
U.S. government, the Federal Reserve and other regulators have taken numerous
steps to increase liquidity and to restore investor confidence; however, there
continues to be pressure on asset values and liquidity and a general lack of
confidence in the financial markets. As such, the followings risks are
associated with economic conditions:
|
|
|
A
further downturn in the housing markets and continued pressure on real estate
values may result in higher delinquencies, foreclosures, and charge-offs,
which would negatively affect the Companys financial condition and results
of operations.
|
|
|
|
A
continued rise in unemployment may result in lower demand for the Companys
products and services.
|
|
|
|
Weak
equities markets and declining stock market prices may affect the volume of
income and demand for fee-based services in the Companys financial services
segment.
|
|
|
|
Lower
earnings could result from other-than-temporary impairment charges related to
the Companys investment securities portfolio.
|
|
|
|
An
increase in bank failures may result in additional increases in FDIC premiums as well as additional banking
regulations, which would negatively affect the Companys results of
operations. In 2009, the Companys FDIC insurance deposit expense increased
significantly over prior year as a result of higher deposit premium rates and
a special assessment in the second quarter of 2009.
|
Economic
conditions in 2008 and 2009 contributed to an increase in the Companys past
due loans and leases, nonperforming assets and net loan and lease losses as
well as a decrease in income from certain fee based products and services.
While Tompkins operates in markets that have been impacted to a lesser extent
than many areas around the country, there is no assurance that these conditions
may not adversely affect the credit quality of the Companys loans, results of
operations and financial condition going forward.
8
Interest Rate Risk
The Companys earnings, financial condition and liquidity are
susceptible to fluctuations in market interest rates. This exposure is a result
of assets and liabilities repricing at different times and by different amounts
as interest rates changes. Net interest income, which is the difference between
interest earned on loans and investments and interest paid on deposits and
borrowings, is the largest component of the Companys total revenues. The level
of net interest income is dependent upon the volume and mix of interest-earning
assets and interest-bearing liabilities, the level of nonperforming assets, and
the level and trend of interest rates. Changes in market interest rates will
also affect the level of prepayments on the Companys loans and payments on
mortgage-backed securities, resulting in the receipt of proceeds that may be
reinvested at a lower rate than the loan or mortgage-backed security being
prepaid. Interest rates are highly sensitive to many factors, including:
inflation, economic growth, employment levels, monetary policy and
international markets. Significant fluctuations in interest rates could have a
material adverse affect on the Companys earnings, financial condition, and
liquidity.
The
Company manages interest rate risk using income simulation to measure interest
rate risk inherent in its on-balance sheet and off-balance sheet financial
instruments at a given point in time by showing the potential effect of
interest rate shifts on net interest income for future periods. Each quarter
the Companys Asset/Liability Management Committee reviews the simulation
results to determine whether the exposure of net interest income to changes in
interest rates remains within Board-approved levels. The Committee also
discusses strategies to manage this exposure and incorporates these strategies
into the investment and funding decisions of the Company. In addition, the
Company has focused on expanding its fee-based business to help mitigate its
exposure to fluctuations in interest rates.
For additional information about how the Company manages its interest
rate risk, refer to Part II, Item 6A, Quantitative and Qualitative Disclosures
About Market Risk of this Report.
Credit Risk
The
Companys business of originating and underwriting loans involves credit risk,
which is the risk of loss of principal or interest because borrowers,
guarantors and related parties fail to perform in accordance with the terms of
their loan agreements. The Company has seen some deterioration in asset quality
measures over the past two years, driven in large part by weak economic
conditions. While management believes that it has appropriately identified and
reserved for the credit exposure in these lending relationships, a continuation
or worsening of the current economic conditions may result in further declines
in asset quality measures and increases in loan losses. To help mitigate credit
risk, the Company has adopted comprehensive credit policies, underwriting
standards, and loan review procedures. The Company has developed an internal loan grading system which is
applied to all commercial and commercial real estate loans. On a quarterly
basis, the Company reviews all commercial and commercial real estate loans
greater than $500,000 that are below a certain risk rating. Meetings are held
to discuss these relationships, including operating results, future cash flows,
recent developments and the borrowers outlook, accrual status, and the timing
and extent of potential losses, considering collateral valuation and other
factors. The Company maintains an allowance for loan losses that in
managements judgment is adequate to absorb losses inherent in the loan and
lease portfolio.
As of December 31, 2009, residential real estate loans represented
approximately 32.5% of the Companys loan portfolio. In light of the Companys
underwriting standards, historical experience, and current trends within the
residential portfolio, these types of loans are generally viewed as having less
risk of default than commercial or commercial real estate loans. See Part II, Item 7, Loans and Leases and
The Allowance for Loan and Lease Losses of this Report for further discussion
of the lending portfolio and the allowance for loan and lease losses.
The
Company regularly reviews its investment securities for declines in value below
amortized cost that might be characterized as other-than-temporary. Any
declines in value below amortized cost that are deemed to be other-than-
temporary are charged to earnings. Management believes that it has established policies and procedures that
are appropriate to mitigate the risk of loss. Nonetheless, these policies and
procedures may not prevent unexpected losses that could have a material adverse
effect on the Companys business, financial condition, results of operations,
or liquidity.
With
weak economic conditions throughout 2009 and into 2010, credit risk may
continue to increase. A weakening economy, increasing unemployment or further
deterioration of housing markets could result in increased credit losses.
Government Laws and Regulations
The Company is subject to extensive state and federal laws and
regulations, supervision, and legislation that affect how it conducts its
business. The majority of these laws and regulations are for the protection of
consumers, depositors and the deposit insurance funds. The regulations
influence such things as the Companys lending practices, capital structure,
investment practices, and dividend policy. Given the current unfavorable and
uncertain conditions in the economy and financial markets, it is likely that
there will be significant changes to the regulatory environment for the banking
and financial services industry. Any changes to state and federal banking laws
and regulations may negatively impact the Companys ability to expand services
and to increase shareholder value. There can also be significant cost related
to compliance with various laws and regulations. The Company has established an
extensive internal control structure to ensure compliance with governing laws
and regulations, including those related to financial reporting. Refer to
Supervision and Regulation for additional information on laws and
regulations.
9
The Federal Reserves monetary policies also affect the Companys
operating results and financial condition. These policies, which include open
market operations in U.S. Government securities, changes in the discount rate
on member bank borrowings, and changes in reserve requirements against member
bank deposits, can have a major effect upon the source and cost of funds and
the rates of return earned on loans and investments.
The Company is subject to state and federal tax laws and regulations.
Changes to these regulations could impact future tax expense and the value of
deferred tax assets. Each of the Companys banking subsidiaries is a majority
owner of a real estate investment trust (REIT). Legislation is periodically
proposed at the State level that would change the treatment of dividends paid
by the REITs. Changes to the laws governing the taxation of REITs would likely
result in additional income tax expense.
Competition
Competition for commercial banking and other financial services is
strong in the Companys market areas. In one or more aspects of its business,
the Companys subsidiaries compete with other commercial banks, savings and
loan associations, credit unions, finance companies, Internet-based financial
services companies, mutual funds, insurance companies, brokerage and investment
banking companies, and other financial intermediaries. Some of these
competitors have substantially greater resources and lending capabilities and
may offer services that the Company does not currently provide. In addition,
many of the Companys non-bank competitors are not subject to the same
extensive Federal regulations that govern financial holding companies and
Federally insured banks. The Company focuses on providing unparalleled customer
service, which includes offering a strong suite of products and services. Based
upon our ability to grow our customer base in recent years, management feels
that this business model does allow the Company to compete effectively in the
markets it serves.
Operational Risk
The Company is subject to certain operational risks, including, but not
limited to, data processing system failures and errors, customer or employee
fraud and catastrophic failures resulting from terrorist acts or natural
disasters. The
Company depends upon data processing, software, communication, and information
exchange on a variety of computing platforms and networks and over the
Internet. Despite instituted safeguards, the Company cannot be certain that all
of its systems are entirely free from vulnerability to attack or other
technological difficulties or failures. If information security is breached or
other technology difficulties or failures occur, information may be lost or
misappropriated, services and operations may be interrupted and the Company
could be exposed to claims from customers. Any of these results could have a
material adverse effect on the Companys business, financial condition, results
of operations or liquidity. The Company maintains a system of internal
controls to mitigate against such occurrences and maintains insurance coverage
for exposures that are insurable. The Company regularly tests internal controls
to ensure that they are appropriate and functioning as designed.
Technological Development and Changes
The financial services industry is subject to rapid technological
changes with frequent introductions of new technology driven products and
services. In addition to improving the Companys ability to serve customers,
the effective use of technology increases efficiencies and helps to maintain or
reduce expenses. The Companys ability to keep pace with technological changes
affecting the financial industry and to introduce new products and services
based on this new technology will be important to the Companys continued
success.
Integration of Acquisitions
The Company periodically reviews potential acquisition opportunities
involving other financial institutions and financial services companies. The
Company seeks merger or acquisition partners that are culturally similar,
present long-term growth opportunities, have experienced management, and have
the potential for improved profitability through economies of scale or expanded
services. Risks associated with acquisitions include potential exposure to
asset quality issues of the acquired entity, the difficulty and expense of
integrating the operations and personnel of the acquired entity, potential
disruption to the business of the acquired entity, potential diversion of
management time and attention from other matters and impairment of
relationships with, and the possible loss of, key employees and customers of
the acquired entity. Failure to realize expected revenue increases, cost
savings, and/or other projected benefits from an acquisition could have a
material adverse effect on the Companys financial condition and results of
operations.
|
|
I
tem 1B.
|
Unresolved Staff Comments
|
None.
The Companys executive offices are located at 110 North Tioga Street,
Ithaca, New York. The Companys banking subsidiaries have 45 branch offices, of
which 28 are owned and 17 are leased at market rents. The Companys insurance
subsidiary has 5 stand-alone offices, of which 3 are owned by the Company and 2
are leased at market rents. The Companys wealth management and financial
planning subsidiary has 1 office, which it leases at a market rent. Management believes
the current facilities are suitable for their present and intended purposes.
For additional information about the Companys facilities, including rental
expenses, see Note 8 Bank Premises and Equipment in Notes to Consolidated
Financial Statements in Part II, Item 7. of this Report.
10
|
|
I
tem 3.
|
Legal Proceedings
|
In
October 2007, Visa USA (Visa) completed a reorganization in contemplation of
its initial public offering (IPO), which was completed in the first quarter
of 2008. As part of that reorganization, Tompkins and other member banks of
Visa received shares of common stock of Visa, Inc. Those banks are also
obligated under various agreements with Visa to share in losses stemming from
certain litigation (Covered Litigation). Tompkins is not a named defendant in
any of the Covered Litigation. Although Visa set aside a portion of the
proceeds from its IPO in an escrow account to fund any judgments or settlements
that may arise out of the Covered Litigation, guidance from the Securities and
Exchange Commission (SEC) indicated that Visa member banks should record a
liability for the fair value of the contingent obligation to Visa. As of
December 31, 2009, the Company had a liability of $450,000 related to the Visa
litigation.
The Company is involved in legal proceedings in the normal course of
business, none of which are expected to have a material adverse impact on the
financial condition or results of operations of the Company.
E
xecutive Officers
of the Registrant
The information concerning the Companys executive officers is provided
below as of March 1, 2010. Unless otherwise stated, executive officers
terms run until the first meeting of the board of directors after the Companys
annual meeting of shareholders, and until their successors are elected and
qualified.
|
|
|
|
Name
|
Age
|
Title
|
Year Joined Company
|
|
|
|
|
Stephen S.
Romaine
|
45
|
President
and CEO
|
January 2000
|
James W.
Fulmer
|
58
|
Vice
Chairman of the Board
|
January 2000
|
Robert B.
Bantle
|
58
|
Executive
Vice President
|
March 2001
|
David S.
Boyce
|
43
|
Executive
Vice President
|
January 2001
|
Francis M.
Fetsko
|
45
|
Executive
Vice President and CFO
|
October 1996
|
Gregory J.
Hartz
|
49
|
Executive
Vice President
|
August 2002
|
Gerald J.
Klein, Jr.
|
51
|
Executive
Vice President
|
January 2000
|
Richard W.
Page, Jr.
|
48
|
Senior Vice
President and Chief Technology Officer
|
August 2008
|
Thomas J.
Rogers
|
39
|
Executive
Vice President
|
January 2006
|
Kathleen M.
Rooney
|
57
|
Executive
Vice President
|
April 2004
|
Business Experience of the Executive
Officers:
Stephen S. Romaine
was appointed President and
Chief Executive Officer of the Company effective January 1, 2007. From 2003
through 2006, he served as President and Chief Executive Officer of Mahopac
National Bank. Prior to this appointment, Mr. Romaine was Executive Vice President
and Chief Financial Officer of Mahopac National Bank. Mr. Romaine currently
serves on the board of the New York Bankers Association.
James W. Fulmer
has served as Vice Chairman
since January 1, 2007, and Director of the Company since 2000. He previously
served as President of the Company since 2000. He has also served as a Director
of The Bank of Castile since 1988 and as its Chairman since 1992. Effective
December 18, 2002, he assumed the additional responsibilities of President and
Chief Executive Officer of The Bank of Castile. Mr. Fulmer has served as a
Director of Mahopac National Bank since 1999, as Chairman of Tompkins Insurance
Agencies since January 1, 2001, and as Chairman of AM&M Financial Services,
Inc. since January 2006. He served as the President and Chief Executive Officer
of Letchworth Independent Bancshares Corporation from 1991 until its merger
with the Company in 1999. Mr. Fulmer also served as the Chief Executive Officer
of The Bank of Castile from 1996 through April 2000. He was elected to the
Board of the Federal Home Loan Bank in 2006, effective January 2007.
Robert B. Bantle
has
been employed by the Company since March 2001. He currently serves as Executive
Vice President of Tompkins Services, a group that provides support to the
Company in the areas of Human Resources, Training & Development, Consumer
and Residential Lending Services, Collections, and Commercial Loan Operations.
Prior to this assignment, he was also responsible for several additional areas
including Operations, Information Technology, Remote Banking, and Card
Services.
David S. Boyce
has been employed by the Company since January
2001 and was promoted to Executive Vice President in April 2004. He was
appointed President and Chief Executive Officer of Tompkins Insurance Agencies
in 2002. He has been employed by Tompkins Insurance Agencies, and a predecessor
company to Tompkins Insurance Agencies for 16 years.
Francis M. Fetsko
has been employed by the Company since 1996, and
has served as Chief Financial Officer since December 2000. In July 2003, he was
promoted to Executive Vice President. Mr. Fetsko also serves as Chief Financial
Officer of Tompkins Trust Company, The Bank of Castile, and Mahopac National
Bank.
11
Gregory J. Hartz
has been employed by the Company since 2002 and
was appointed President and Chief Executive Officer of Tompkins Trust Company
and Executive Vice President of the Company effective January 1, 2007.
Previously, he was Senior Vice President of Tompkins Trust Company, with
responsibility for Tompkins Investment Services.
Gerald J. Klein, Jr.
has been employed by the Company since 2000 and
was appointed President and Chief Executive Officer of Mahopac National Bank
and Executive Vice President of the Company effective January 1, 2007. Previously,
he was Executive Vice President of Mahopac National Bank, responsible for all
lending and credit functions at the Bank.
Richard W. Page, Jr.
has
been employed with Tompkins since 2007 as its Senior Vice President and Chief
Technology Officer. He was made a Senior Vice President of the Company,
effective August 4, 2008. He was formerly with IBM, and is a graduate of
Buffalo University, with an MBA from Syracuse University.
Thomas J. Rogers
has been employed by the Company since its
acquisition of AM&M Financial Services, Inc. in January 2006, and was
appointed President and Chief Executive Officer of AM&M Financial Services,
Inc. at that time. He was appointed Executive Vice President of the Company on
January 24, 2007. He has been employed by AM&M Financial Services, Inc.
since 1998.
Kathleen M. Rooney
has been employed by the Company since April 2004 and served as Senior
Vice President and Corporate Marketing Officer since April 2005. She was
appointed Executive Vice President, Corporate Marketing Officer of the Company
on April 24, 2007. Ms. Rooney is also a Senior Vice President of Mahopac
National Bank with responsibility for the Banks Community Banking Division.
Prior to joining the Company, Ms. Rooney was employed by JPMorgan Chase for
over 28 years in various capacities, most recently as the Senior Vice President
and Investments Executive responsible for sales, service, operation and
compliance of brokerage, portfolio management and trust products for the retail
bank.
P
ART II
|
|
I
tem 4.
|
Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Market Price and Dividend Information
The Companys common stock is traded under the symbol TMP on the
NYSE-Amex (the Exchange). The high and low closing sale prices, which
represent actual transactions as quoted on the Exchange, of the Companys
common stock for each quarterly period in 2008 and 2009 are presented below.
The per share dividends paid by the Company in each quarterly period in 2008 and
2009 and the payment dates of these dividends are also presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Price
|
|
Cash Dividends
|
|
|
|
|
|
|
High
|
|
Low
|
|
Amount
|
|
Date Paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
1
st
Quarter
|
|
$
|
46.00
|
|
$
|
32.88
|
|
$
|
.29
|
|
|
2/15/08
|
|
|
|
|
2
nd
Quarter
|
|
|
46.50
|
|
|
33.82
|
|
|
.29
|
|
|
5/15/08
|
|
|
|
|
3
rd
Quarter
|
|
|
49.55
|
|
|
33.16
|
|
|
.31
|
|
|
8/15/08
|
|
|
|
|
4
th
Quarter
|
|
|
53.91
|
|
|
33.86
|
|
|
.31
|
|
|
11/14/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
1
st
Quarter
|
|
$
|
50.76
|
|
$
|
29.55
|
|
$
|
.31
|
|
|
2/16/09
|
|
|
|
|
2
nd
Quarter
|
|
|
45.95
|
|
|
36.64
|
|
|
.31
|
|
|
5/15/09
|
|
|
|
|
3
rd
Quarter
|
|
|
43.59
|
|
|
38.25
|
|
|
.31
|
|
|
8/14/09
|
|
|
|
|
4
th
Quarter
|
|
|
41.23
|
|
|
35.68
|
|
|
.31
|
|
|
11/16/09
|
|
Cash
dividends per share and the high and low market prices in the table above have
been retroactively adjusted to reflect a 10% stock dividend paid on February
15, 2010.
As of February 22, 2010, there were approximately 2,087 holders of
record of the Companys common stock.
The
Companys ability to pay dividends is generally limited to earnings from the
prior year, although retained earnings and dividends from its subsidiaries may
also be used to pay dividends under certain circumstances. The Companys
primary source of funds to pay for shareholder dividends is receipt of
dividends from its subsidiaries. Future dividend payments to the Company by its
subsidiaries will be dependent on a number of factors, including the earnings
and financial condition of each subsidiary, and are subject to the regulatory
limitations discussed in Note 20 Regulations and Supervision in Notes to
Consolidated Financial Statements in Part II, Item 7. of this Report.
12
Issuer Purchases of Equity Securities
The following table includes all Company repurchases, including those
made pursuant to publicly announced plans or programs during the quarter ended
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total Number of
Shares Purchased
(a)
|
|
Average Price Paid
Per Share
(b)
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans or
Programs
(c)
|
|
Maximum Number
(or Approximate
Dollar Value) of
Shares that May Yet
Be Purchased Under
the Plans or
Programs
(d)
|
|
|
|
|
|
|
|
|
|
|
|
October 1, 2009 through October 31, 2009
|
|
|
1,122
|
|
$
|
43.11
|
|
|
0
|
|
|
143,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 1, 2009 through November 30, 2009
|
|
|
400
|
|
$
|
40.64
|
|
|
0
|
|
|
143,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 1, 2009 through December 31, 2009
|
|
|
1,055
|
|
$
|
40.41
|
|
|
0
|
|
|
143,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,577
|
|
$
|
41.62
|
|
|
0
|
|
|
143,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On July 22, 2008, the Companys Board of Directors approved a stock
repurchase plan (the 2008 Plan). The 2008 Plan authorizes the repurchase of
up to 150,000 shares of the Companys outstanding common stock over a two-year
period. The 2008 Plan replaces a previous repurchase plan that expired in July
2008. The Company did not purchase any shares under the 2008 Plan during the
fourth quarter of 2009. The Company has purchased 6,500 shares under the 2008
Plan since its inception: 5,000 shares at an average price of $35.51 during the
first quarter of 2009 and 1,500 shares at an average price of $38.53 in 2008.
Included above are 1,122 shares purchased in October 2009, at an
average cost of $43.11, 400 shares purchased in November 2009 at an average
cost of $40.64, and 1,055 shares purchased in December 2009, at an average cost
of $40.41 by the trustee of the rabbi trust established by the Company under
the Companys Stock Retainer Plan For Eligible Directors of Tompkins Financial
Corporation and Participating Subsidiaries, and were part of the director
deferred compensation under that plan. Shares purchased under the rabbi trust
are not part of the Board approved stock repurchase plan.
Recent Sales of Unregistered Securities
None
Equity Compensation Plan Information
Information regarding securities authorized for issuance under equity
compensation plans is provided in Part III, Item 11. Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters of
this Report.
Performance Graph
The following graph compares the Companys cumulative total stockholder
return since December 31, 2004, with (1) the total return index for the NASDAQ
Composite and (2) the total return index for SNL Bank Index. The graph assumes
$100.00 was invested on December 31, 2004, in the Companys common stock and
the comparison groups and assumes the reinvestment of all cash dividends prior
to any tax effect and retention of all stock dividends.
In accordance with and to the extent permitted by applicable law or
regulation, the information set forth below under the heading Performance
Graph shall not be incorporated by reference into any future filing under the
Securities Act of 1933, as amended (the Securities Act), or Exchange Act and
shall not be deemed to be soliciting material or to be filed with the SEC
under the Securities Act or the Exchange Act. The performance graph represents
past performance and should not be considered an indication of future
performance.
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ending
|
|
|
|
Index
|
|
12/31/04
|
|
12/31/05
|
|
12/31/06
|
|
12/31/07
|
|
12/31/08
|
|
12/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tompkins Financial
Corporation
|
|
|
100.00
|
|
|
94.63
|
|
|
108.45
|
|
|
95.60
|
|
|
146.94
|
|
|
105.87
|
|
NASDAQ Composite
|
|
|
100.00
|
|
|
101.37
|
|
|
111.03
|
|
|
121.92
|
|
|
72.49
|
|
|
104.31
|
|
SNL Bank
|
|
|
100.00
|
|
|
101.36
|
|
|
118.57
|
|
|
92.14
|
|
|
52.57
|
|
|
52.03
|
|
|
|
Item 5.
|
Selected Financial Data
|
The
following consolidated selected financial data is taken from the Companys
audited financial statements as of and for the five years ended December 31,
2009. The following selected financial data should be read in conjunction with
the consolidated financial statements and the notes thereto in Part II, Item 7.
of this Report. All of the Companys acquisitions during this five year period
were accounted for using the purchase method. Accordingly, the operating
results of the acquired companies are included in the Companys results of
operations since their respective acquisition dates.
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
(in thousands except per share data)
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
STATEMENT HIGHLIGHTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
3,153,260
|
|
$
|
2,867,722
|
|
$
|
2,359,459
|
|
$
|
2,210,837
|
|
$
|
2,106,870
|
|
Total loans
|
|
|
1,914,818
|
|
|
1,817,531
|
|
|
1,440,122
|
|
|
1,326,298
|
|
|
1,271,349
|
|
Deposits
|
|
|
2,439,864
|
|
|
2,134,007
|
|
|
1,720,826
|
|
|
1,709,420
|
|
|
1,683,010
|
|
Other borrowings
|
|
|
208,956
|
|
|
274,791
|
|
|
210,862
|
|
|
85,941
|
|
|
63,673
|
|
Shareholders equity
|
|
|
245,008
|
|
|
219,361
|
|
|
198,647
|
|
|
191,072
|
|
|
182,673
|
|
Interest and dividend income
|
|
|
146,795
|
|
|
140,783
|
|
|
132,441
|
|
|
121,041
|
|
|
106,707
|
|
Interest expense
|
|
|
39,758
|
|
|
50,393
|
|
|
58,412
|
|
|
48,184
|
|
|
31,686
|
|
Net interest income
|
|
|
107,037
|
|
|
90,390
|
|
|
74,029
|
|
|
72,857
|
|
|
75,021
|
|
Provision for loan and lease losses
|
|
|
9,288
|
|
|
5,428
|
|
|
1,529
|
|
|
1,424
|
|
|
2,659
|
|
Net securities gains (losses)
|
|
|
348
|
|
|
477
|
|
|
384
|
|
|
15
|
|
|
(1,526
|
)
|
Net income
|
|
|
31,831
|
|
|
29,834
|
|
|
26,371
|
|
|
27,767
|
|
|
27,685
|
|
PER SHARE
INFORMATION (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
2.98
|
|
|
2.81
|
|
|
2.47
|
|
|
2.56
|
|
|
2.55
|
|
Diluted earnings per share
|
|
|
2.96
|
|
|
2.78
|
|
|
2.45
|
|
|
2.52
|
|
|
2.52
|
|
Cash dividends per share
|
|
|
1.24
|
|
|
1.20
|
|
|
1.13
|
|
|
1.04
|
|
|
0.97
|
|
Book value per share
|
|
|
22.87
|
|
|
20.44
|
|
|
18.71
|
|
|
17.49
|
|
|
16.70
|
|
SELECTED
RATIOS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
1.06
|
%
|
|
1.13
|
%
|
|
1.16
|
%
|
|
1.30
|
%
|
|
1.36
|
%
|
Return on average equity
|
|
|
13.66
|
%
|
|
14.15
|
%
|
|
13.88
|
%
|
|
14.90
|
%
|
|
15.69
|
%
|
Average shareholders equity to average assets
|
|
|
7.74
|
%
|
|
8.01
|
%
|
|
8.38
|
%
|
|
8.71
|
%
|
|
8.66
|
%
|
Dividend payout ratio
|
|
|
41.61
|
%
|
|
42.70
|
%
|
|
45.75
|
%
|
|
40.63
|
%
|
|
38.04
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
SELECTED DATA
(in whole numbers, unless otherwise noted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees (average
full-time equivalent)
|
|
|
720
|
|
|
686
|
|
|
662
|
|
|
658
|
|
|
587
|
|
Banking offices
|
|
|
45
|
|
|
45
|
|
|
39
|
|
|
37
|
|
|
34
|
|
Bank access centers (ATMs)
|
|
|
67
|
|
|
69
|
|
|
61
|
|
|
59
|
|
|
51
|
|
Trust and investment services assets under management, or custody (in
thousands)
|
|
$
|
2,542,792
|
|
$
|
2,161,484
|
|
$
|
2,345,575
|
|
$
|
2,183,114
|
|
$
|
1,534,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Per share data has been retroactively adjusted to
reflect a 10% stock dividend paid on February 15, 2010 and a 10% stock dividend
paid on May 15, 2006.
|
|
Item 6.
|
Managements Discussion and Analysis of Financial Condition and
Results of Operations
|
The
following analysis is intended to provide the reader with a further
understanding of the consolidated financial condition and results of operations
of the Company and its operating subsidiaries for the periods shown. This
Managements Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with other sections of this Report on
Form 10-K, including Part I, Item 1. Business, Part II, Item 5. Selected
Financial Data, and Part II, Item 7. Financial Statements and Supplementary
Data.
OVERVIEW
Tompkins
Financial Corporation (Tompkins or the Company), is registered as a
financial holding company with the Federal Reserve Board under the Bank Holding
Company Act of 1956, as amended. Tompkins is the corporate parent of 3
community banks, Tompkins Trust Company (Trust Company), The Bank of Castile,
and The Mahopac National Bank (Mahopac National Bank), which together operate
45 banking offices, including 3 limited-service offices, in local market areas
throughout New York State. The Company expanded its banking offices in 2008
with the acquisition of Sleepy Hollow Bancorp, Inc., effective May 9, 2008,
which added 6 banking offices, including 1 limited service office, all in
Westchester County, New York.
In
addition to traditional banking products and services, the Company provides a
full range of money management services through Tompkins Investment Services, a
division of Tompkins Trust Company, and AM&M Financial Services, Inc.
(AM&M); and insurance products and services through Tompkins Insurance
Agencies, Inc. (Tompkins Insurance). AM&M, a fee-based financial planning
and wealth management firm headquartered in Pittsford, New York, has three
operating companies: (1) AM&M Planners, Inc., which provides fee based
financial planning and wealth management services for corporate executives,
small business owners, and high net worth individuals; (2) Ensemble Financial
Services, Inc., an independent broker-dealer and leading outsourcing company
for financial planners and investment advisors; and (3) Ensemble Risk
Solutions, Inc., which creates customized risk management plans using life,
disability and long-term care insurance products.
15
Tompkins
Insurance is an independent insurance agency with a history of over 100 years
of service to individual and business clients throughout Western New York.
Tompkins Insurance has expanded its geographic footprint into the Ithaca, New
York market area with the acquisition of three insurance agencies over the past
three years.
Each
Tompkins subsidiary operates with a community focus, meeting the needs of the
unique communities served. The Company conducts its business through its
wholly-owned subsidiaries, Tompkins Trust Company, The Bank of Castile, Mahopac
National Bank, Tompkins Insurance, and AM&M. Unless the context otherwise
requires, the term Company refers to Tompkins Financial Corporation and its
subsidiaries.
Forward-Looking Statements
The
Company is making this statement in order to satisfy the Safe Harbor provision
contained in the Private Securities Litigation Reform Act of 1995. The
statements contained in this Report on Form 10-K that are not statements of
historical fact may include forward-looking statements that involve a number of
risks and uncertainties. Such forward-looking statements are made based on
managements expectations and beliefs concerning future events impacting the
Company and are subject to certain uncertainties and factors relating to the
Companys operations and economic environment, all of which are difficult to
predict and many of which are beyond the control of the Company, that could
cause actual results of the Company to differ materially from those matters
expressed and/or implied by forward-looking statements. The following factors
are among those that could cause actual results to differ materially from the
forward-looking statements: changes in general economic, market and regulatory
conditions; the development of an interest rate environment that may adversely
affect the Companys interest rate spread, other income or cash flow
anticipated from the Companys operations, investment and/or lending
activities; changes in laws and regulations affecting banks, bank holding
companies and/or financial holding companies; technological developments and
changes; the ability to continue to introduce competitive new products and
services on a timely, cost-effective basis; governmental and public policy
changes, including environmental regulation; protection and validity of
intellectual property rights; reliance on large customers; and financial
resources in the amounts, at the times and on the terms required to support the
Companys future businesses. In addition, such forward-looking statements could
be affected by general industry and market conditions and growth rates, general
economic and political conditions, including interest rate and currency
exchange rate fluctuations, and other factors.
Critical Accounting Policies
In
the course of normal business activity, management must select and apply many
accounting policies and methodologies and make estimates and assumptions that
lead to the financial results presented in the consolidated financial
statements and accompanying notes of the Company. There are uncertainties
inherent in making these estimates and assumptions, which could materially
affect our results of operations and financial position. Management considers
the accounting policy relating to the allowance for loan and lease losses
(allowance) to be a critical accounting policy because of the uncertainty and
subjectivity inherent in estimating the levels of allowance needed to cover
probable credit losses within the loan portfolio and the material effect that
these estimates can have on the Companys results of operations.
The
Company has developed a methodology to measure the amount of estimated loan
loss exposure inherent in the loan portfolio to assure that an adequate
allowance is maintained. The Companys methodology is based upon guidance
provided in SEC Staff Accounting Bulletin No. 102,
Selected Loan Loss Allowance Methodology and Documentation Issues
and includes allowance allocations calculated in accordance with Accounting
Standards Codification (ASC) Topic 310,
Receivables
,
and allowance allocations calculated in accordance with ASC Topic 450
Contingencies.
The Companys methodology
for determining and allocating the allowance for loan and lease losses focuses
on ongoing reviews of larger individual loans and leases, historical net
charge-offs, delinquencies in the loan and lease portfolio, the level of
impaired and nonperforming assets, values of underlying loan and lease
collateral, the overall risk characteristics of the portfolios, changes in
character or size of the portfolios, geographic location, current economic
conditions, changes in capabilities and experience of lending management and
staff, and other relevant factors. The various factors used in the
methodologies are reviewed on a periodic basis.
Since
the methodology is based upon historical experience, market trends, and
managements judgment, factors may arise that result in different estimations.
Significant factors that could give rise to changes in these estimates may
include, but are not limited to, changes in economic conditions in the local
area, changes in interest rates, concentration of risk, declines in local
property values, and the view of regulatory authorities towards loan
classifications. While management considers the allowance to be adequate as of
December 31, 2009, under adversely different conditions or assumptions, the
Company would need to increase the allowance. Refer to the section captioned
Allowance for Loan and Lease Losses elsewhere in this discussion for further
details on the Companys methodology and allowance.
Another
critical accounting policy is the policy for pensions and other post-retirement
benefits. The calculation of the expenses and liabilities related to pensions
and post-retirement benefits requires estimates and assumptions of key factors
including, but not limited to, discount rate, return on plan assets, future
salary increases, employment levels, employee retention, and life expectancies
of plan participants. The Company uses an actuarial firm in making these
estimates and assumptions. Changes in these assumptions due to market
conditions, governing laws and regulations, or Company specific circumstances
may result in material changes to the Companys pension and other
post-retirement expenses and liabilities.
Another
critical accounting policy is the policy for reviewing available-for-sale
securities and held-to-maturity securities to determine if declines in fair
value below amortized cost are other-than-temporary as required by FASB ASC
Topic 320,
Investments Debt and
16
Equity Securities.
When an other-than-temporary impairment has occurred,
the amount of the other-than-temporary impairment recognized in earnings
depends on whether the Company intends to sell the security or more likely than
not will be required to sell the security before recovery of its amortized cost
basis less any current-period credit loss. If the Company intends to sell the
security or more likely than not will be required to sell the security before
recovery of its amortized cost basis less any current-period credit loss, the
other-than-temporary impairment is recognized in earnings equal to the entire
difference between the investments amortized cost basis and its fair value at
the balance sheet date. If the Company does not intend to sell the security and
it is not more likely than not that the Company will be required to sell the
security before recovery of its amortized cost basis less any current-period
credit loss, the other-than-temporary impairment is separated into the amount
representing the credit loss and the amount related to all other factors. The
amount of the total other-than-temporary impairment related to the credit loss
is recognized in earnings. In estimating other-than-temporary impairment
losses, management considers, among other factors, the length of time and extent
to which the fair value has been less than cost, the financial condition and
near term prospects of the issuer, underlying collateral of the security, and
the structure of the security.
All
accounting policies are important and the reader of the financial statements
should review these policies, described in Note 1 Summary of Significant
Accounting Policies in Notes to Consolidated Financial Statements in Part II,
Item 7. of this Form 10-K, to gain a better understanding of how the Companys
financial performance is reported.
RESULTS OF OPERATIONS
(Comparison of December 31, 2009 and 2008 results)
General
The
Company reported diluted earnings per share of $2.96 in 2009, an increase of
6.5% over diluted earnings per share of $2.78 in 2008. Net income for the year
ended December 31, 2009, was $31.8 million, up 6.7% compared to $29.8 million
in 2008. Improvement in 2009 results over prior year was largely due to
improved net interest margin and growth in earning assets. Both 2009 and 2008
results included certain nonrecurring items. Net income for 2009 included $1.4
million of expense related to the FDICs special deposit insurance assessment.
This item negatively impacted 2009 diluted earnings per share by $0.07. Net
income for 2008 included after-tax income of $983,000 ($1.6 million pre-tax)
related to the Visa IPO. This item added $0.09 to 2008 diluted earnings per
share.
In
addition to earnings per share, key performance measurements for the Company
include return on average shareholders equity (ROE) and return on average
assets (ROA). ROE was 13.66% in 2009, compared to 14.15% in 2008, while ROA was
1.06% in 2009, compared to 1.13% in 2008. Tompkins ROA and ROE continue to
compare favorably to peer ratios, ranking in the 83
rd
percentile for
ROA and the 89
th
percentile for ROE of its peer group. The peer
group is from the Federal Reserve Board and represents banks and bank holding
companies with assets between $3.0 billion and $10.0 billion. The peer ratios
are as of December 31, 2009, the most recent data available from the Federal
Reserve Board. Total revenues, consisting of net interest income and
noninterest income, were $153.3 million in 2009, up $16.8 million or 12.3% over
2008. Revenues in 2008 included $1.6 million of income related to the Visa IPO.
Total revenues in 2009 benefited from solid growth in net interest income,
resulting from lower funding costs and growth in average earning assets. Low
market interest rates in 2009 affected both asset yields and funding costs.
However, deposit pricing strategies resulted in funding costs decreasing at a
faster rate than asset yields. Noninterest income in 2009 benefited from net
gains on assets and liabilities held at fair value and gains on the sales of
residential mortgage loans as low interest rates led to higher volumes of loan
originations.
Total
assets were up 10.0% to $3.2 billion at December 31, 2009. Asset growth over
the past twelve months included a $97.3 million increase in total loans and
leases and a $168.7 million increase in the securities portfolio. Nonperforming
assets increased to 1.12% of total assets, up from 0.56% at year-end 2008,
driven in part by deteriorating trends in asset quality due to weak economic
conditions.
Segment Reporting
The
Company has identified two business segments, banking and financial services.
Financial services activities consist of the results of the Companys trust,
financial planning and wealth management, broker-dealer services, and risk
management operations. All other activities are considered banking.
The Banking
segment reported net income of $28.4 million in 2009, up $2.4 million or 9.5%
from net income of $26.0 million in 2008, driven by strong growth in net
interest income. Net interest income of $106.8 million was up $16.6 million, or
18.4% in 2009 from $90.2 million in 2008. Net interest income benefited from
growth in average earning assets and lower rates paid on interest-bearing
liabilities. Both 2009 and 2008 had nonrecurring items, which affect the
year-over-year comparison of operating results. Noninterest expense in 2009
included $1.4 million of expense ($0.07 per diluted share) related to the
FDICs special assessment, while noninterest income in 2008 included $1.6
million ($0.09 per diluted share) related to the Visa IPO.
The
provision for loan and lease losses in 2009 was $9.3 million, compared to $5.4
million in 2008. The higher provision expense reflects deterioration in asset
quality measures as evidenced by an increase in net charge-offs and
nonperforming loans, growth in loans and leases, and the impacts of a weak
economy.
17
Noninterest
income of $21.2 million in 2009 was up 1.6% over 2008. As previously mentioned,
2008 noninterest income included $1.6 million of proceeds from the Visa IPO.
Service charges on deposit accounts were down $880,000 or 8.6% in 2009 from the
prior year. Noninterest income in 2009 benefited from net mark-to-market gains
on securities and liabilities held at fair value of $1.5 million compared to
net mark-to-market losses of $1.2 million in 2008. Higher residential loan
originations and sales in 2009 produced gains on sales of loans of $1.4 million
in 2009, up from $105,000 in 2008.
Noninterest
expenses totaled $76.7 million in 2009, an increase of $9.0 million or 13.3%
over the same period in 2008. The two main contributors to the growth in
noninterest expense were FDIC deposits insurance assessments and salaries and
benefits. FDIC deposit insurance assessments totaled $5.0 million in 2009, up
from $933,000 in 2008, reflecting the special assessment and higher deposit
premiums.
The
Financial Services segment had net income of $3.4 million in 2009, a decrease
of $464,000 or 12.0% from net income of $3.9 million in 2008. Noninterest
income derived from the Financial Services segment was $25.6 million in 2009, a
decrease of $207,000 or 0.8% compared the same period in 2008. Volatility in
the bond and equity markets and a weak overall economy in 2009 had an adverse
affect on fee-based businesses, including investment services income. The
market value of assets managed by or in custody of the Company at year-end 2009
was up over prior year-end, increasing over the course of the year as a result
of higher market levels and new business initiatives. Insurance revenues were
up $700,000 or 6.0% in 2009 over prior year. Noninterest expenses of $20.5
million in 2009 were up $550,000 or 2.8% over the same period prior year. The
increase was mainly in salaries and benefits, reflecting annual merit
increases, stock-based and other incentive compensation accruals, and other
operating expenses.
Net Interest Income
Table 1 Average Statements of Condition and Net Interest
Analysis
shows
average interest-earning assets and interest-bearing liabilities, and the
corresponding yield or cost associated with each. Taxable-equivalent net
interest income for 2009 was $110.0 million, an increase of $16.8 million, or
18.0%, compared to the same period in 2008. The favorable year-over-year
comparison primarily resulted from an increase in the average volume of
interest-earning assets, and an increase in net interest margin compared to the
same period in the prior year. For 2009, average earning assets were up $359.4
million or 14.7%, over the same period in 2008. The taxable-equivalent net
interest margin for 2009 of 3.92% was up from 3.81% in 2008. The net interest
margin benefited from the decrease in short-term market interest rates
throughout 2009, which reduced both asset yields and funding costs. The lower
short-term market rates led to a 54 basis point decrease in the yield on
average earning assets to 5.34% for 2009, compared to 5.88% for 2008; however,
the decrease in yield on average earning assets was more than offset by lower
funding costs. The average cost of interest-bearing liabilities for 2009 was
down 83 basis points to 1.72%, compared to 2.55% for 2008.
Taxable-equivalent
interest income was up 4.3% in 2009 over 2008. The growth in taxable-equivalent
interest income was primarily a result of higher average loan and investment
balances as average yields were lower year-over-year. Average loan balances
were up $237.7 million or 14.7% in 2009 over 2008, while the average yield on
loans decreased 56 basis points to 5.83%. Loan growth in 2009 included a $125.5
million increase in average commercial real estate loans, and a $47.8 million
increase in average residential real estate loans. The decrease in yields on
average loans in 2009 was partly due to refinancing activity as a result of the
prime interest rate reduction of 400 basis points in 2008. Average securities balances
were up $97.7 million in 2009 over 2008, while average yields were down 31
basis points.
Interest
expense for 2009 was down 21.1% compared to 2008, reflecting lower average
rates paid on deposits and borrowings, partially offset by growth in average
balances. The average rate paid on interest-bearing deposits during 2009 of
1.28% was 90 basis points lower than the average rate paid in 2008. The
decrease in the average cost of interest-bearing deposits reflects a decrease
in the interest rates offered on deposit products due to decreases in average
market rates combined with an increase in the relative proportion of lower cost
savings and money market deposits. Average interest-bearing deposit balances
increased by $314.5 million or 19.9% in 2009 compared to 2008. The majority of
the increase was in average interest checking, savings and money market deposit
balances, which were up 24.5% to $1.1 billion, and average time deposits of
$100,000 or less balances were up 9.2% to $420.4 million. Average noninterest
bearing deposit balances of $427.0 million were up 4.8% in 2009 over the same
period in 2008. Average other borrowings of $204.5 million were up 6.4% over
prior year, while the average yield was down 27 basis points from prior year.
18
Table 1 - Average Statements of Condition and
Net Interest Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
(dollar amounts in thousands)
|
|
Average
Balance
|
|
Interest
|
|
Average
Yield/Rate
|
|
Average
Balance
|
|
Interest
|
|
Average
Yield/Rate
|
|
Average
Balance
|
|
Interest
|
|
Average
Yield/Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
SSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit, other banks
|
|
$
|
17,017
|
|
$
|
27
|
|
0.16
|
%
|
$
|
6,239
|
|
$
|
133
|
|
2.13
|
%
|
$
|
4,820
|
|
$
|
217
|
|
4.50
|
%
|
Money market funds
|
|
|
17,130
|
|
|
36
|
|
0.21
|
|
|
9,064
|
|
|
246
|
|
2.71
|
|
|
4,149
|
|
|
205
|
|
4.94
|
|
Securities (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government securities
|
|
|
721,438
|
|
|
31,812
|
|
4.41
|
|
|
615,234
|
|
|
29,130
|
|
4.73
|
|
|
535,700
|
|
|
25,619
|
|
4.78
|
|
Trading securities
|
|
|
35,067
|
|
|
1,362
|
|
3.88
|
|
|
43,331
|
|
|
1,923
|
|
4.44
|
|
|
59,213
|
|
|
2,762
|
|
4.66
|
|
State and municipal (2)
|
|
|
111,253
|
|
|
6,715
|
|
6.04
|
|
|
110,551
|
|
|
6,648
|
|
6.01
|
|
|
103,213
|
|
|
6,270
|
|
6.07
|
|
Other securities (2)
|
|
|
20,710
|
|
|
1,064
|
|
5.14
|
|
|
21,620
|
|
|
1,177
|
|
5.44
|
|
|
18,499
|
|
|
1,031
|
|
5.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
|
|
|
888,468
|
|
|
40,953
|
|
4.61
|
|
|
790,736
|
|
|
38,878
|
|
4.92
|
|
|
716,625
|
|
|
35,682
|
|
4.98
|
|
Federal funds sold
|
|
|
8,542
|
|
|
15
|
|
0.18
|
|
|
5,258
|
|
|
115
|
|
2.19
|
|
|
4,120
|
|
|
217
|
|
5.27
|
|
FHLB and FRB stock
|
|
|
20,274
|
|
|
893
|
|
4.40
|
|
|
18,490
|
|
|
1,074
|
|
5.81
|
|
|
13,450
|
|
|
1,010
|
|
7.51
|
|
Loans, net of unearned income (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
|
623,176
|
|
|
33,576
|
|
5.39
|
|
|
575,356
|
|
|
34,057
|
|
5.92
|
|
|
490,839
|
|
|
31,359
|
|
6.39
|
|
Commercial real estate
|
|
|
660,887
|
|
|
41,903
|
|
6.34
|
|
|
535,366
|
|
|
33,711
|
|
6.30
|
|
|
424,748
|
|
|
31,418
|
|
7.40
|
|
Commercial loans (2)
|
|
|
466,076
|
|
|
25,461
|
|
5.46
|
|
|
402,263
|
|
|
28,383
|
|
7.06
|
|
|
355,084
|
|
|
28,272
|
|
7.96
|
|
Consumer and other
|
|
|
87,283
|
|
|
6,083
|
|
6.97
|
|
|
85,350
|
|
|
6,118
|
|
7.17
|
|
|
81,865
|
|
|
5,862
|
|
7.16
|
|
Lease financing (2)
|
|
|
13,031
|
|
|
784
|
|
6.02
|
|
|
14,381
|
|
|
841
|
|
5.85
|
|
|
9,881
|
|
|
627
|
|
6.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income
|
|
|
1,850,453
|
|
|
107,807
|
|
5.83
|
|
|
1,612,716
|
|
|
103,110
|
|
6.39
|
|
|
1,362,417
|
|
|
97,538
|
|
7.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
2,801,884
|
|
|
149,731
|
|
5.34
|
|
|
2,442,503
|
|
|
143,556
|
|
5.88
|
|
|
2,105,581
|
|
|
134,869
|
|
6.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets
|
|
|
207,123
|
|
|
|
|
|
|
|
190,517
|
|
|
|
|
|
|
|
160,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,009,007
|
|
|
|
|
|
|
$
|
2,633,020
|
|
|
|
|
|
|
$
|
2,266,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L
IABILITIES
& S
HAREHOLDERS
E
QUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits Interest checking, savings, and money market
|
|
$
|
1,128,648
|
|
$
|
8,694
|
|
0.77
|
%
|
$
|
906,404
|
|
$
|
12,983
|
|
1.43
|
%
|
$
|
723,297
|
|
$
|
14,361
|
|
1.99
|
%
|
Time Deposits > $100,000
|
|
|
303,761
|
|
|
5,442
|
|
1.79
|
|
|
282,547
|
|
|
9,039
|
|
3.20
|
|
|
304,614
|
|
|
14,750
|
|
4.84
|
|
Time Deposits < $100,000
|
|
|
420,351
|
|
|
9,223
|
|
2.19
|
|
|
384,903
|
|
|
12,273
|
|
3.19
|
|
|
343,969
|
|
|
15,651
|
|
4.55
|
|
Brokered Time Dep. < $100,000
|
|
|
43,218
|
|
|
852
|
|
1.97
|
|
|
7,580
|
|
|
233
|
|
3.07
|
|
|
14,729
|
|
|
723
|
|
4.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
1,895,978
|
|
|
24,211
|
|
1.28
|
|
|
1,581,434
|
|
|
34,528
|
|
2.18
|
|
|
1,386,609
|
|
|
45,485
|
|
3.28
|
|
Federal funds purchased and securities sold under agreements to
repurchase
|
|
|
190,975
|
|
|
6,254
|
|
3.27
|
|
|
203,385
|
|
|
7,496
|
|
3.69
|
|
|
199,126
|
|
|
8,125
|
|
4.08
|
|
Other borrowings
|
|
|
204,467
|
|
|
8,206
|
|
4.01
|
|
|
192,144
|
|
|
8,216
|
|
4.28
|
|
|
100,824
|
|
|
4,802
|
|
4.76
|
|
Trust preferred debentures
|
|
|
17,311
|
|
|
1,087
|
|
6.28
|
|
|
2,552
|
|
|
153
|
|
6.00
|
|
|
0
|
|
|
0
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
2,308,731
|
|
|
39,758
|
|
1.72
|
|
|
1,979,515
|
|
|
50,393
|
|
2.55
|
|
|
1,686,559
|
|
|
58,412
|
|
3.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
|
427,025
|
|
|
|
|
|
|
|
407,336
|
|
|
|
|
|
|
|
356,457
|
|
|
|
|
|
|
Accrued expenses and other liabilities
|
|
|
40,242
|
|
|
|
|
|
|
|
35,384
|
|
|
|
|
|
|
|
33,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,775,998
|
|
|
|
|
|
|
|
2,422,235
|
|
|
|
|
|
|
|
2,076,262
|
|
|
|
|
|
|
Tompkins Financial Corporation shareholders equity
|
|
|
231,498
|
|
|
|
|
|
|
|
207,382
|
|
|
|
|
|
|
|
188,482
|
|
|
|
|
|
|
Noncontrolling interest
|
|
|
1,511
|
|
|
|
|
|
|
|
3,403
|
|
|
|
|
|
|
|
1,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
233,009
|
|
|
|
|
|
|
|
210,785
|
|
|
|
|
|
|
|
189,962
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
3,009,007
|
|
|
|
|
|
|
$
|
2,633,020
|
|
|
|
|
|
|
$
|
2,266,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread
|
|
|
|
|
|
|
|
3.62
|
%
|
|
|
|
|
|
|
3.33
|
%
|
|
|
|
|
|
|
2.95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/margin on earning assets
|
|
|
|
|
$
|
109,973
|
|
3.92
|
%
|
|
|
|
$
|
93,163
|
|
3.81
|
%
|
|
|
|
$
|
76,457
|
|
3.63
|
%
|
Tax equivalent adjustment
|
|
|
|
|
|
(2,936
|
)
|
|
|
|
|
|
|
(2,773
|
)
|
|
|
|
|
|
|
(2,428
|
)
|
|
|
Net interest income per consolidated financial statements
|
|
|
|
|
$
|
107,037
|
|
|
|
|
|
|
$
|
90,390
|
|
|
|
|
|
|
$
|
74,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Average balances and yields on available-for-sale
securities are based on amortized cost.
(2) Interest income includes the tax effects of
taxable-equivalent adjustments using a combined New York State and Federal
effective income tax rate of 40% to increase tax-exempt interest income to a
taxable equivalent basis.
(3) Nonaccrual loans are included in the average loan totals
presented above. Payments received on nonaccrual loans have been recognized as
disclosed in Note 1 Summary of Significant Accounting Policies in the Notes
to Consolidated Financial Statements in Part II, Item 7. of this Report.
19
Table 2 - Analysis of Changes in Net Interest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) (taxable equivalent)
|
|
2009 vs. 2008
|
|
2008 vs. 2007
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) Due to Change in
|
|
Increase (Decrease) Due to Change in
|
|
|
|
Volume
|
|
Average
Yield/Rate
|
|
Total
|
|
Volume
|
|
Average
Yield/Rate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit, other banks
|
|
$
|
91
|
|
$
|
(197
|
)
|
$
|
(106
|
)
|
$
|
52
|
|
$
|
(136
|
)
|
$
|
(84
|
)
|
Money market funds
|
|
|
120
|
|
|
(330
|
)
|
|
(210
|
)
|
|
164
|
|
|
(123
|
)
|
|
41
|
|
Federal funds sold
|
|
|
45
|
|
|
(145
|
)
|
|
(100
|
)
|
|
49
|
|
|
(151
|
)
|
|
(102
|
)
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
4,418
|
|
|
(2,410
|
)
|
|
2,008
|
|
|
3,190
|
|
|
(372
|
)
|
|
2,818
|
|
Tax-exempt
|
|
|
(4
|
)
|
|
71
|
|
|
67
|
|
|
415
|
|
|
(37
|
)
|
|
378
|
|
FHLB and FRB stock
|
|
|
96
|
|
|
(277
|
)
|
|
(181
|
)
|
|
325
|
|
|
(261
|
)
|
|
64
|
|
Loans, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
14,276
|
|
|
(9,886
|
)
|
|
4,390
|
|
|
16,235
|
|
|
(10,849
|
)
|
|
5,386
|
|
Tax-exempt
|
|
|
88
|
|
|
219
|
|
|
307
|
|
|
365
|
|
|
(179
|
)
|
|
186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
19,130
|
|
$
|
(12,955
|
)
|
$
|
6,175
|
|
$
|
20,795
|
|
$
|
(12,108
|
)
|
$
|
8,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest checking, savings, and money market
|
|
|
2,673
|
|
|
(6,962
|
)
|
|
(4,289
|
)
|
|
3,153
|
|
|
(4,531
|
)
|
|
(1,378
|
)
|
Time
|
|
|
2,653
|
|
|
(8,681
|
)
|
|
(6,028
|
)
|
|
541
|
|
|
(10,120
|
)
|
|
(9,579
|
)
|
Federal funds purchased and securities sold under agreements to
repurchase
|
|
|
(439
|
)
|
|
(803
|
)
|
|
(1,242
|
)
|
|
171
|
|
|
(800
|
)
|
|
(629
|
)
|
Other borrowings
|
|
|
1,251
|
|
|
(327
|
)
|
|
924
|
|
|
4,010
|
|
|
(443
|
)
|
|
3,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
6,138
|
|
$
|
(16,773
|
)
|
$
|
(10,635
|
)
|
$
|
7,875
|
|
$
|
(15,894
|
)
|
$
|
(8,019
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
12,992
|
|
$
|
3,818
|
|
$
|
16,810
|
|
$
|
12,920
|
|
$
|
3,786
|
|
$
|
16,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes: See notes to Table 1 above.
Changes
in net interest income occur from a combination of changes in the volume of
interest-earning assets and interest-bearing liabilities, and in the rate of
interest earned or paid on them. The above table illustrates changes in
interest income and interest expense attributable to changes in volume (change
in average balance multiplied by prior year rate), changes in rate (change in
rate multiplied by prior year volume), and the net change in net interest
income. The net change attributable to the combined impact of volume and rate
has been allocated to each in proportion to the absolute dollar amounts of the
change. The $16.8 million increase in taxable-equivalent net interest income
from 2008 to 2009 resulted from a $6.2 million increase in interest income and
an $10.6 million decrease in interest expense. An increased volume of interest
earning assets, in excess of interest bearing liabilities contributed to a net
$13.0 million increase in taxable-equivalent net interest income between 2008
and 2009, while changes in interest rates increased taxable-equivalent net
interest income by $3.8 million, resulting in the net increase of $16.8 million
from 2008.
Provision for Loan and Lease Losses
The
provision for loan and lease losses represents managements estimate of the
expense necessary to maintain the allowance for loan and lease losses at an
adequate level. The provision for loan and lease losses was $9.3 million in
2009, compared to $5.4 million in 2008. The increase in 2009 over prior year
was due to growth in the overall loan portfolio, increases in nonperforming
loans and leases and net charge-offs, as well as concerns over deteriorating
economic conditions and uncertain real estate markets. Nonperforming loans and
leases were $34.9 million or 1.82% of total loans and leases at December 31,
2009, compared with $16.0 million or 0.88% of total loans and leases at
December 31, 2008. Net charge-offs of $3.6 million in 2009 represented 0.20% of
average loans and leases during the period, compared to net charge-offs of $2.8
million in 2008, representing 0.18% of average loans and leases. See the
section captioned The Allowance for Loan and Lease Losses included within
Managements Discussion and Analysis of Financial Condition and Results of
Operations-Financial Condition of this Report for further analysis of the
Companys allowance for loan and lease losses.
Noninterest Income
Noninterest
income is a significant source of income for the Company, representing 30.2% of
total revenues in 2009, and 33.7% in 2008, and is an important factor in the
Companys results of operations. The decrease in noninterest income as a
percentage of revenues in 2009 compared to 2008 was due to the $16.6 million or
18.4% growth in net interest income outpacing the growth in noninterest income
which remained relatively flat compared to 2008. The May 2008 acquisition of
Sleepy Hollow Bancorp, Inc.
20
(Sleepy
Hollow) contributed to the stronger growth in net interest income, as the
impact of the acquisition on the Companys financial statements is included for
a full year in 2009, and only a partial year in 2008.
Investment
services income was $13.3 million in 2009, a decrease of 6.0% from $14.2
million in 2008. Investment services income reflects income from Tompkins
Investment Services (TIS), a division within the Trust Company, and AM&M.
Investment services income includes trust services, financial planning, wealth
management services, and brokerage related services. TIS generates fee income
through managing trust and investment relationships, managing estates,
providing custody services, and managing investments in employee benefits
plans. TIS also oversees retail brokerage activities in the Companys banking
offices. AM&M provides financial planning services, wealth management
services, and brokerage services to independent financial planners and
investment advisors. With fees largely based on the market value and the mix of
assets managed, the general direction of the stock market can have a
considerable impact on fee income. The market value of assets managed by, or in
custody of, Tompkins was $2.5 billion at December 31, 2009, up 13.6% from $2.2
billion at December 31, 2008. These figures include $733.0 million and $541.1
million, respectively, of Company-owned securities where TIS is custodian. The
increase in the market value of assets over prior year, reflects a rebound in
equity markets and new business. The Company was successful with business
development initiatives and customer retention despite the challenging equities
markets in 2009 and the recent turmoil in the financial markets.
Insurance
commissions and fees were $12.3 million in 2009, an increase of $700,000 or
6.0% over 2008. The growth was at Tompkins Insurance and AM&M. Health and
benefit related insurance commissions and fees were up $302,000 or 112.8% over
prior year. The Company established this business line in late 2007, and added
staff to expand its presence in the life, health and benefits areas. Revenues
for personal lines were up $139,000 or 3.0% over prior year, while revenues for
commercial lines were in line with prior year. Tompkins Insurance and AM&M
continue to increase their penetration rate for customers of the Companys
banking subsidiaries.
Service
charges on deposit accounts were $9.3 million in 2009, down 8.6% compared to
$10.2 million in 2008. The largest component of this category is overdraft
fees, which is largely driven by customer activity. Customer activity has been
changing over the past several years, with electronic transactions such as
debit cards and Internet banking reducing the volume of checks.
Card
services income of $3.7 million in 2009 was up $326,000 or 9.8% from 2008. The
primary components of card services income are fees related to debit card
transactions and ATM usage. Debit card income increased by 7.8% compared to
2008 to $2.3 million, the increase was mainly due to higher volume, partially
attributable to the full year impact of a reward based program implemented in
the second quarter of 2008. ATM fee income increased by 7.8% compared to 2008,
mainly due increased foreign transaction fees.
Net
mark-to-market gains on securities and borrowings held at fair value totaled
$1.5 million in 2009, compared to net mark-to-market losses of $1.2 million in
2008. Mark-to-market losses or gains relate to the change in the fair value of
securities and borrowings where the Company has elected the fair value option.
The favorable gain year-over-year is mainly attributed to changes in market
interest rates.
The $1.6 million gain on Visa stock redemption in 2008 relates
to the proceeds received from the Companys allocation of the Visa, Inc.
initial public offering (the Visa IPO), and consists of a $1.2 million gain
on the partial redemption of Visa stock and a $0.4 million partial reversal of
a fourth quarter 2007 accrual for indemnification charges. Visa withheld a
portion of the shares allocated to its member banks to create an escrow account
to cover the costs and liabilities associated with certain litigation for which
its member banks are obligated to indemnify Visa. Visas funding of this escrow
account allowed member banks to reverse litigation related accruals made in the
fourth quarter of 2007, up to each banks proportionate membership interest in
the $3.0 billion used to fund the escrow account.
Other
income of $5.9 million in 2009 is up $140,000 or 2.4% from 2008. The primary
components of other income are other service charges, increases in cash
surrender value of life insurance, gains on sales of residential mortgage loans
and income from miscellaneous equity investments, including the Companys
investment in a Small Business Investment Company (SBIC).
Other
service charge income of $1.9 million was down $720,000 or 27.1% compared to
the same period in 2008. Lower safe deposit box fees, lower loan related fees,
and lower servicing income were the primary contributors to the decrease in
other service charge income.
Increases
in cash surrender value of corporate owned life insurance (COLI), net of
mortality expense, were $1.1 million in 2009, compared to $1.4 million in 2008.
The COLI relates to life insurance policies covering certain senior officers of
the Company and its subsidiaries. The Companys average investment in COLI was
$35.3 million during 2009, compared to $32.8 million during 2008. The increase
reflects earnings as well as the full year impact of the $3.5 million of COLI
acquired in the Sleepy Hollow acquisition during the second quarter of 2008.
Although income associated with the insurance policies is not included in
interest income, the COLI produced an annualized tax-equivalent return of 5.1%
for 2009, compared to 7.4% for 2008.
Net
gains on the sales of residential mortgage loans totaled $1.4 million for 2009,
compared to net gains of $105,000 in 2008. The increase in gains on sales of
residential mortgage loans in 2009 is mainly a result of increased residential
mortgage refinancing activity
21
and the decision to sell certain loans in the
secondary market to FHLMC. Low market interest rates led to a significant
increase in the volume of homeowners refinancing existing mortgages to lower
fixed rates. To manage interest rate risk exposures, the Company sold certain
fixed rate loan production that had rates below or maturities greater than the
thresholds set by the Companys Asset/Liability Committee.
As of December 31,
2009, the Companys miscellaneous equity investments, including its investment
in an SBIC, totaled $4.3 million, compared to $4.5 million at year-end 2008.
Income related to these investments was $767,000 in 2009, up from $546,000 in
2008. The increase in 2009 over 2008 reflects gains on the sale of one equity
investment as the company was acquired. This gain was partially offset by lower
income related to the Companys SBIC investment. For 2009, the Company
recognized income from this investment of $212,000, compared with income of
$546,000 in 2008. The Company believes that as of December 31, 2009, there is
no impairment with respect to this SBIC investment.
Management
may periodically sell available-for-sale securities for liquidity purposes, to
improve yields, or to adjust the risk profile of the portfolio. In 2009, the
Company recognized net gains of $348,000 on sales of available-for-sale
securities, primarily securities of U.S. government entities. The net gains on
sales of available-for-sale securities of $477,000 in 2008 were primarily on
the sale of the Companys Mastercard stock that it received as a member bank at
the time of Mastercards initial public offering.
Noninterest Expense
Noninterest
expenses for 2009 were $96.6 million, an increase of 11.0% over noninterest
expenses of $87.1 million for 2008. The increase in 2009 over 2008 was
primarily in compensation and benefits related expenses, and FDIC deposit
insurance expense. The acquisition of Sleepy Hollow impacted several
noninterest expense categories discussed below.
Personnel-related
expense increased by $3.4 million or 6.7% in 2009 over 2008. The increase was
mainly in pension and other employee benefit related expenses, which were up
$3.1 million or 29.7% in 2009 over 2008. Pension expense was up $2.0 million,
while health and dental insurance was up $598,000 for the year ended December
31, 2009, when compared to the same period in 2008. The increase was partially
due to an increase in average full-time equivalent employees (FTEs).
Year-to-date December 31, 2009 FTEs of 720 were up from 686 at December 31, 2008.
Salaries and wages were also up over prior year as a result of the increase in
average FTEs, as well as annual merit increases.
Expenses
related to bank premises and furniture and fixtures increased by $561,000 or
5.1% for the twelve months ended December 31, 2009 over the same period in
2008. 2009 reflected a full year of additional expense associated with the May
2008 acquisition of Sleepy Hollow, which added six banking offices to the
Companys branch network.
FDIC
insurance of $5.0 million in 2009 is over prior year by $4.0 million, or
433.3%. The increase reflects higher insurance premiums and a special deposit
insurance assessment of $1.4 million in the second quarter of 2009. The
increase in 2009 was also partly related to the additional 10 basis points paid
on covered transaction accounts exceeding the $250,000 under the Temporary
Liquidity Guaranty Program. Deposit insurance expense in 2008 was also
favorably impacted by the Companys use of available credits to offset deposit
assessments; these credits were fully used in 2008.
Other
operating expenses increased by $1.6 million or 6.6% in 2009 when compared to
2008. The primary components of other operating expense are marketing expense,
professional fees, software licensing and maintenance, cardholder expense and
other.
Professional
fees for 2009 increased by $296,000 or 9.8% compared to 2008. Professional fees
include amounts paid to outside consultants for assistance on projects or
initiatives.
Software
licensing and maintenance fee expense increased by $309,000 or 12.4% in 2009
over 2008. The increase in 2009 was mainly due to increased licensing fees
related to the core operating system and the implementation of new software
applications.
Cardholder
expenses were up $307,000 or 25.1% for 2009 over 2008, as a result of higher
volume of customer transactions.
Additional
items contributing to the change in other operating expenses were the
following: legal expense (up $253,000), audit and examination expense (up
$147,000), education and training (up $115,000), telephone (up $241,000),
printing and supplies (down $202,000), and merger related expenses (down
$266,000).
The
Companys efficiency ratio, defined as operating expense excluding amortization
of intangible assets, divided by tax-equivalent net interest income plus
noninterest income before securities gains and losses (increase in the cash
surrender value of COLI is shown on a tax equivalent basis), improved to 61.2%
in 2009, compared to 61.7% in 2008. Tax equivalency was based upon a 40% tax
rate. Excluding the tax equivalent adjustments for tax-exempt securities and
tax-exempt loans and leases, the efficiency ratio would be 62.3% in 2009 and
63.0% in 2008.
22
Noncontrolling Interest
Noncontrolling
interest expense represents the portion of net income in consolidated
majority-owned subsidiaries that is attributable to the minority owners of a
subsidiary. The Company had noncontrolling interest expense of $131,000 in
2009, down from $297,000 in the prior year. The noncontrolling interests are
mainly in three real estate investment trusts, which are substantially owned by
the Companys banking subsidiaries. In 2008, the Company acquired noncumulative
redeemable preferred stock of $4.5 million in connection with the acquisition
of Sleepy Hollow. This preferred stock was accounted for as a noncontrolling
interest on the consolidated financial statements. On October 15, 2008, the
Company redeemed all noncumulative redeemable preferred stock acquired in the
acquisition of Sleepy Hollow.
Income Tax Expense
The
provision for income taxes provides for Federal and New York State income
taxes. The 2009 provision was $15.4 million, compared to $13.8 million in 2008.
The effective tax rate for the Company was 32.6% in 2009 compared to 31.6% in
2008. The increase in the effective rate in 2009 compared to 2008 was primarily
the result of a lower proportion of tax advantaged income as a percentage of
total pre-tax income.
RESULTS OF OPERATIONS
(Comparison of December 31, 2008 and 2007 results)
General
The
Company reported diluted earnings per share of $2.78 in 2008, an increase of
13.5% over diluted earnings per share of $2.45 in 2007. Net income for the year
ended December 31, 2008, was $29.8 million, up 13.1% compared to $26.4 million
in 2007. Improvement in 2008 results over prior year was largely due to
improved net interest margin and growth in earning assets. Both 2008 and 2007
net income included certain nonrecurring items. Net income for 2008 included
after-tax income of $983,000 ($1.6 million pre-tax) related to the Visa IPO.
This item added $0.09 to 2008 diluted earnings per share. Net income for 2007
included an after-tax charge of $517,000 for the Companys estimated contingent
obligation related to VISA USA litigation indemnification and an after-tax
charge of $712,000 for reorganization and associated consulting charges related
to certain profit improvement initiatives. These two items reduced diluted
earnings per share by $0.11 in 2007.
Return
on average shareholders equity was 14.15% in 2008, compared to 13.88% in 2007,
while return on average assets was 1.13% in 2008, compared to 1.16% in 2007.
Total
revenues, consisting of net interest income and noninterest income, were $136.4
million in 2008, up $18.3 million or 15.5% over 2007. Revenues in 2008 included
$1.6 million of income related to the Visa IPO. Total revenues in 2008
benefited from solid growth in net interest income, resulting from lower
funding costs and growth in average earning assets. Market interest rates were
significantly lower in 2008 than in 2007, affecting both asset yields and
funding costs. However, deposit pricing strategies resulted in funding costs
decreasing at a faster rate than asset yields. The downward trend in the
equities market and overall economy in 2008 had an adverse affect on fee-based
businesses, including investment services income. Noninterest income in 2008
benefited from the successful implementation of certain profit improvement
initiatives (implemented in 2007), the $1.6 million pre-tax gain related to the
Visa IPO, the acquisitions of Sleepy Hollow and a small insurance agency, and
gains on sales of available-for-sale securities.
Total
assets were up 21.5% to $2.9 billion at December 31, 2008. Asset growth over
the previous twelve months included a $377.4 million increase in total loans
and leases and a $107.9 million increase in the securities portfolio. The
acquisition of Sleepy Hollow, with $269.2 million in total assets at the time
of acquisition on May 9, 2008, contributed to the asset growth. Nonperforming
assets increased to 0.56% of total assets, up from 0.40% at year-end 2007,
driven in part by weak economic conditions.
Segment Reporting
The
Banking segment reported net income of $26.0 million in 2008, up $4.4 million
or 20.6% from net income of $21.5 million in 2007, driven by strong growth in
net interest income. Both 2008 and 2007 had nonrecurring items, which affect
the year-over-year comparison of net income. Net income in 2008 included
after-tax income of $983,000 related to the Visa IPO. Net income in 2007
included an after-tax charge of $712,000 ($1.2 million pre-tax) in
reorganization and associated consulting charges related to certain profit
improvement initiatives and an after-tax charge of $517,000 ($862,000 pre-tax)
related to certain contingent liabilities associated with the Companys
membership in Visa USA. Net interest income in 2008 was $90.2 million, up $16.4
million or 22.3% over 2007, driven by lower funding costs and growth in average
earning assets.
The
provision for loan and lease losses in 2008 was $5.4 million, compared to $1.5
million in 2007. The increase reflects growth in total loans and leases, an
increase in net charge-offs and nonperforming loans, and the impacts of a
slowing economy.
Noninterest
income of $20.9 million in 2008 was up 9.2% over 2007, mainly a result of the
$1.6 million of proceeds from the Visa IPO. Service charges on deposit accounts
totaled $10.2 million, a decrease of 2.0% from 2007.
23
Noninterest expenses totaled $67.7 million in 2008, an increase of $7.3
million or 12.1% over the same period in 2007. The increase over prior year is
mainly in salaries and benefit expenses and occupancy expenses, both of which
were directly impacted by the Sleepy Hollow acquisition with the addition of
five staffed branches.
The
Financial Services segment had net income of $3.9 million in 2008, a decrease
of $977,000 or 20.2% from net income of $4.8 million in 2007. Noninterest
income was $25.8 million in 2008, an increase of $365,000 or 1.4% over the same
period in 2007. The downward trend in the equities market and overall economy
in 2008 had an adverse affect on fee-based businesses, including investment
services income. Noninterest expenses of $20.0 million in 2008 were up $1.8
million or 10.1% over the same period prior year. The increase was mainly in
salaries and benefits, reflecting annual merit increases, stock-based and other
incentive compensation accruals, and other operating expenses.
Net Interest Income
Table 1 Average Statements of Condition and Net Interest Analysis
shows
average interest-earning assets and interest-bearing liabilities, and the
corresponding yield or cost associated with each. Taxable-equivalent net
interest income for 2008 was $93.2 million, an increase of $16.7 million, or
21.9%, compared to the same period in 2007. The favorable year-over-year
comparison primarily resulted from an increase in the average volume of
interest-earning assets, and an increase in net interest margin compared to the
same period in the prior year. For 2008, average earning assets were up $336.9
million or 16.0%, over the same period in 2007. Contributing to the growth was
the acquisition of Sleepy Hollow in May 2008. The taxable-equivalent net interest
margin for 2008 of 3.81% was up from 3.63% in 2007. The net interest margin
benefited from the decrease in short-term market interest rates during the
latter part of 2007 and throughout 2008. The lower short-term market rates led
to a 53 basis point decrease in the yield on average earning assets to 5.88%
for 2008 compared to 6.41% for 2007; however, the decrease in yield on average
earning assets was more than offset by lower funding costs. The average cost of
interest-bearing liabilities for 2008 was down 91 basis points to 2.55%,
compared to 3.46% for 2007.
Taxable-equivalent
interest income was up 6.4% in 2008 over 2007. The growth in taxable-equivalent
interest income was primarily a result of higher average loan and investment
balances as average yields were lower year-over-year. Average loan balances
were up $250.3 million or 18.4% in 2008 over 2007, while the average yield on
loans decreased 77 basis points to 6.39%. Loan growth in 2008 included a $110.6
million increase in average commercial real estate loans, $84.5 million
increase in average residential real estate loans and a $47.2 million increase
in average commercial loans. The decrease in yields on average loans in 2008
compared to 2007 is mainly a result of the prime interest rate reduction of 400
basis points in 2008. Average securities balances were up $74.1 million in 2008
over 2007, while average yields were down 6 basis points.
Interest
expense for 2008 was down 13.7% compared to 2007, reflecting lower average
rates paid on deposits and borrowings, partially offset by growth in average
balances. The average rate paid on interest bearing deposits during 2008 of
2.18% was 110 basis points lower than the average rate paid in 2007. The
decrease in the average cost of interest bearing deposits reflects a decrease
in the interest rates offered on deposit products due to decreases in average
market rates combined with an increase in the relative proportion of lower cost
savings and money market deposits. Average interest-bearing deposit balances
increased by $194.8 million or 14.1% in 2008 compared to 2007. The majority of
the increase was in average interest checking, savings and money market deposit
balances, which were up 25.3% to $906.4 million. Average time deposits of
$100,000 or more balances were down 7.2% to $282.5 million. Average noninterest
bearing deposit balances of $407.3 million were up 14.3% in 2008 over the same
period in 2007. Contributing to the growth in average deposit balances was the
acquisition of Sleepy Hollow in May 2008. Average other borrowings were up
$91.3 million or 90.6% over prior year, while the average cost was down 48
basis points.
Changes
in net interest income occur from a combination of changes in the volume of
interest-earning assets and interest-bearing liabilities, and in the rate of
interest earned or paid on them.
Table 2
Analysis of Changes in Net Interest Income
illustrates changes in
interest income and interest expense attributable to changes in volume (change
in average balance multiplied by prior year rate), changes in rate (change in
rate multiplied by prior year volume), and the net change in net interest
income. The net change attributable to the combined impact of volume and rate
has been allocated to each in proportion to the absolute dollar amounts of the
change. The $16.7 million increase in taxable-equivalent net interest income
from 2007 to 2008 resulted from an $8.7 million increase in interest income and
an $8.0 million decrease in interest expense. An increased volume of interest
earning assets, in excess of interest bearing liabilities contributed to a net
$12.9 million increase in taxable-equivalent net interest income between 2007
and 2008, while changes in interest rates increased taxable-equivalent net
interest income by $3.8 million, resulting in the net increase of $16.7 million
from 2007.
Provision for Loan and Lease Losses
The
provision for loan and lease losses was $5.4 million in 2008, compared to $1.5
million in 2007. The increase in 2008 over prior year was due to increases in
nonperforming loans and leases and net charge-offs, as well as concerns over
deteriorating economic conditions and uncertain real estate markets.
Nonperforming loans and leases were $16.0 million or 0.88% of total loans and
leases at December 31, 2008, compared with $9.3 million or 0.65% of total loans
and leases at December 31, 2007. Net charge-offs of $2.8 million in 2008
represented 0.18% of average loans and leases during the period, compared to
net charge-offs of $1.3 million in 2007, representing 0.09% of average loans
and leases.
24
Noninterest Income
Noninterest
income accounted for 33.7% of total revenues in 2008, and 37.3% in 2007. The
decrease in noninterest income as a percentage of revenues in 2008 compared to
2007 was due to the $16.4 million or 22.1% growth in net interest income
outpacing the $2.0 million or 4.5% growth in noninterest income.
Investment
services income was $14.2 million in 2008, a decrease of 1.8% from $14.4
million in 2007. With fees largely based on the market value and the mix of
assets managed, the general direction of the stock market can have a
considerable impact on fee income. Equities markets were down significantly in
2008 compared to 2007, which contributed to the decrease in the market value of
assets managed by, or in custody of Tompkins. The market value of assets
managed by, or in custody of, Tompkins was $2.2 billion at December 31, 2008,
down 7.9% from $2.3 billion at December 31, 2007. These figures include $541.1
million and $484.5 million, respectively, of Company-owned securities where TIS
is custodian. The Company was successful with business development initiatives
and customer retention despite the challenging equities markets in 2008 and the
recent turmoil in the financial markets.
Insurance
commissions and fees were $11.6 million in 2008, an increase of $561,000 or
5.1% over 2007. The increase in insurance commissions and fees was mainly in
health and benefit related insurance products. This product line was started
late in the fourth quarter of 2007. Revenues for personal and commercial lines
were slightly ahead of prior year. Commissions and fees in 2008 also benefited
from the acquisition of a firm that specializes in insurance solutions for
investment professionals during 2008.
Service
charges on deposit accounts were $10.2 million in 2008, down 2.0% compared to
$10.4 million in 2007. The largest component of this category is overdraft
fees, which is largely driven by customer activity. Customer activity has been
changing over the past several years, with electronic transactions such as
debit cards and Internet banking reducing the volume of checks. The Company
reviewed and revised the way that it processes these transactions during the
second quarter of 2007 to process electronic transactions substantially the
same as paper transactions, which had a favorable impact on overdraft income in
2007.
Card
services income of $3.3 million in 2008 was down $115,000 or 3.3% from 2007.
The primary components of card services income are fees related to debit card
transactions and ATM transactions. ATM fee income increased by 17.0% compared
to 2007, mainly due to higher volume and increased foreign transaction fees.
Debit card income for 2008 was down compared to 2007. The Company introduced a
new rewards program in the second quarter of 2008, and the Companys liability
under the new rewards program has offset debit card income.
Net
mark-to-market losses on securities and borrowings held at fair value totaled
$1.2 million in 2008 compared to net mark-to-market losses of $736,000 in 2007.
Mark-to-market losses or gains relate to the change in the fair value of
securities and borrowings where the Company has elected the fair value option.
The $1.6 million gain on Visa stock redemption relates to the proceeds received
from the Companys allocation of the Visa, Inc. initial public offering (the
Visa IPO), and consists of a $1.2 million gain on the partial redemption of
Visa stock and a $0.4 million partial reversal of a fourth quarter 2007 accrual
for indemnification charges. Visa withheld a portion of the shares allocated to
its member banks to create an escrow account to cover the costs and liabilities
associated with certain litigation for which its member banks are obligated to
indemnify Visa. Visas funding of this escrow account allowed member banks to
reverse litigation related accruals made in the fourth quarter of 2007, up to
each banks proportionate membership interest in the $3.0 billion used to fund
the escrow account.
Other
income increased by $738,000 or 14.6% in 2008 over 2007. The primary components
of other income are other service charges, increases in cash surrender value of
life insurance, gains on sales of residential mortgage loans and income from
miscellaneous equity investments, including the Companys investment in a SBIC.
The majority of the increase over prior year was due to higher income on the
Companys COLI investment and SBIC investment.
2008
noninterest income includes $1.4 million of net increases in cash surrender
value of corporate owned life insurance (COLI), which is up $326,000 or 29.1%
compared with 2007. The Companys average investment in COLI was $32.8 million
during 2008, compared to $26.5 million during 2007. The Company purchased $3.0
million of additional insurance in the fourth quarter of 2007 and acquired $3.5
million in the acquisition of Sleepy Hollow. Although income associated with
the insurance policies is not included in interest income, the COLI produced an
annualized tax-equivalent return of 7.35% for 2008, compared to 7.06% for 2007.
For
2008, the Company recognized income of $546,000 related to its SBIC investment,
compared with income of $331,000 in 2007.
Net
gains on sales of available-for-sale securities of $477,000 in 2008 reflect
sales of available-for-sale securities, for which prices were favorably
impacted by the Federal Reserve actions to reduce interest rates in 2008. The
net gains on sales of available-for-sale securities of $384,000 in 2007 were
primarily on the sale of the Companys Mastercard stock that it received as a
member bank at the time of Mastercards initial public offering.
25
Noninterest Expense
Noninterest
expenses for 2008 were $87.1 million, an increase of 11.5% over noninterest
expenses of $78.1 million for 2007. The increase in 2008 over 2007 was
primarily in compensation and benefits related expenses, and regulatory agency
expense. The acquisition of Sleepy Hollow impacted several noninterest expense
categories discussed below.
Personnel-related
expense increased by $5.2 million or 11.6% in 2008 over 2007. The acquisition
of Sleepy Hollow included the addition of six banking offices, including one
limited service office, and 30 full time equivalent employees (FTEs).
Year-to-date December 31, 2008 average FTEs of 686 were up from 662 at December
31, 2007. Salaries and wages associated with the increased number of average
FTEs, annual salary adjustments and higher incentive compensation accruals,
recognizing the Companys improved performance, contributed to the increase
over 2007. Personnel-related expense for 2007 included pre-tax severance
charges of $740,000 related to reorganization and profit improvement
initiatives implemented in 2007.
Expenses
related to bank premises and furniture and fixtures increased by $1.1 million
or 11.3% for the twelve months ended December 31, 2008 over the same period in
2007. Additions to the Companys branch network, as well as higher real estate
taxes and utility costs contributed to the increased expenses for premises and
furniture and fixtures year-over-year. The acquisition of Sleepy Hollow in May
of 2008 added six banking offices to the Companys branch network.
FDIC
insurance expense was up $727,000 or 352.9% in 2008 when compared to 2007. The
increase was partially due to higher insurance premiums in 2008. In addition,
2008 expenses benefitted from the use of one-time FDIC assessment credits.
These credits reduced 2008 expense by $370,000.
Other
operating expenses increased by $1.7 million or 7.5% in 2008 when compared to
2007. The primary components of other operating expense are marketing expense,
professional fees, software licensing and maintenance, cardholder expense and
other.
Marketing
expenses of $3.6 million in 2008 were up 18.9% over 2007. The primary reason
for the period over period increase was the expenses for ad campaigns and
mailings related to the addition of six new branches in the acquisition of
Sleepy Hollow.
Software
license and maintenance fee expense increased by $432,000 or 20.9% in 2008 over
2007. The increase in 2008 was mainly due to increased licensing fees related
to the core operating system and the implementation of new software
applications, including software to increase efficiencies in loan underwriting.
Professional
fees for 2008 were down by $247,000 or 7.6% compared to 2007. Professional fees
in 2007 included consulting fees of $827,000, related to the implementation of
certain profit improvement initiatives in 2007.
Cardholder
expenses were up $251,000 or 25.8% for 2008 over 2007, mainly due to the
conversion of a new debit and ATM operating system. The new system was
implemented in April 2008. In addition, transaction volume was up over prior
year.
Also
contributing to the increase in other operating expenses were the following:
fair value adjustments related to nonmarketable equity investments (up
$545,000), merger related expenses (up $274,000), printing and supplies (up
$237,000); and telephone (up $129,000).
The
Companys efficiency ratio, defined as operating expense excluding amortization
of intangible assets, divided by tax-equivalent net interest income plus
noninterest income before securities gains and losses (increase in the cash
surrender value of COLI is shown on a tax equivalent basis), improved to 61.7%
in 2008, compared to 64.1% in 2007. Tax equivalency was based upon a 40% tax
rate. Excluding the tax equivalent adjustments for tax-exempt securities and
tax-exempt loans and leases, the efficiency ratio would be 63.0% in 2008 and
65.4% in 2007.
Noncontrolling Interest
Noncontrolling
interest expense represents the portion of net income in consolidated
majority-owned subsidiaries that is attributable to the minority owners of a
subsidiary. The Company had noncontrolling interest expense of $297,000 in
2008, up $166,000 compared to prior year. The noncontrolling interests are
mainly in three real estate investment trusts, which are substantially owned by
the Companys banking subsidiaries. In addition, the Company acquired
noncumulative redeemable preferred stock of $4.5 million in connection with the
acquisition of Sleepy Hollow. This preferred stock was accounted for as a
noncontrolling interest on the consolidated financial statements. On October
15, 2008, the Company redeemed this preferred stock.
Income Tax Expense
The
provision for income taxes provides for Federal and New York State income
taxes. The 2008 provision was $13.8 million, compared to $12.0 million in 2007.
The effective tax rate for the Company was 31.6% in 2008 compared to 31.3% in
2007.
26
FINANCIAL CONDITION
Total
assets grew by $285.5 million or 10.0% to $3.2 billion at December 31, 2009,
compared to $2.9 billion at December 31, 2008.
Table
3-Balance Sheet Comparisons
below provides a comparison of average
and year-end balances of selected balance sheet categories over the past three
years, and the change in those balances between 2008 and 2009. Management has
focused on growing average earning assets to increase net interest income and
offset the negative impact of declining yields on interest-earning assets.
Earning asset growth over year-end 2008 included a $97.3 million increase in
the total loans and leases, and a $171.5 million increase in securities.
Loans
and leases totaled $1.9 billion or 60.7% of total assets at December 31, 2009,
compared to $1.8 billion or 63.4% of total assets at December 31, 2008. The
5.4% growth in total loans and leases from year-end 2008 was primarily in
commercial and commercial real estate loans. The residential real estate
portfolio was in line with year-end 2008, as the Company decided to sell
certain loans in the secondary market to FHLMC. A more detailed discussion of
the loan portfolio is provided below in this section under the caption Loans
and Leases.
Nonperforming
loans (loans on nonaccrual, loans past due 90 days or more and still accruing
interest, and loans restructured in a troubled debt restructuring) were $34.9
million at December 31, 2009, up from $16.0 million at December 31, 2008.
Nonperforming loans represented 1.82% of total loans at December 31, 2009,
compared to 0.88% of total loans at December 31, 2008. For 2009, net
charge-offs were $3.6 million, up from $2.8 million in the same period of 2008.
A more detailed discussion of nonperforming loans and other asset quality
measures is provided below in this section under the caption Allowance for
Loan and Lease Losses.
Over
the past year, there has been significant attention to subprime consumer real
estate lending in the media. The Company has not engaged in the origination or
purchase of subprime loans as a line of business. As a result, losses in the
Companys residential portfolio have been relatively low, totaling $511,000 for
the twelve months ended December 31, 2009, and $585,000 for the same period in
2008.
As
of December 31, 2009, total securities were $1.0 billion or 31.9% of total
assets, compared to $833.8 million or 29.1% of total assets at year-end 2008.
The securities portfolio is comprised primarily of mortgage-backed securities,
obligations of U.S. Government sponsored entities, and obligations of states
and political subdivisions. The Company has no investments in preferred stock
of U.S. Government sponsored entities and no investments in pools of Trust
Preferred securities. A more detailed discussion of the securities portfolio is
provided below in this section under the caption Securities.
Total
deposits were $2.4 billion at December 31, 2009, up $305.9 million or 14.3%
over December 31, 2008. The growth in total deposits from December 31, 2008 was
mainly in money market and savings balances, which were up $189.5 million or
20.7%. Noninterest bearing deposit balances were up $11.1 million or 2.5%. Time
deposit balances were up $91.6 million or 13.0%. Other funding sources include
Federal funds purchased, securities sold under agreements to repurchase, other
borrowings, and trust preferred debentures. These funding sources totaled
$426.8 million at December 31, 2009, down $48.2 million or 10.1% from $475.0
million at December 31, 2008. Included in this total are certain borrowings that
the Company elected to account for at fair value. As of December 31, 2009, the
Company had $15.0 million of borrowings with the FHLB accounted for at fair
value, with an aggregate fair value of $16.8 million. During 2009, the Company
issued $20.5 million aggregate liquidation amount of 7.0% cumulative trust
preferred securities through a newly-formed subsidiary, Tompkins Capital Trust
I, a wholly-owned Delaware statutory trust. A more detailed discussion of
deposits and borrowings is provided below in this section under the caption
Deposits and Other Liabilities. In addition, refer to Note 10 Securities
Sold Under Agreements to Repurchase and Federal Funds Purchased, Note 11
Other Borrowings, and Note 12 Trust Preferred Debentures in Notes to Consolidated
Financial Statements in Part II, Item 7. of this Report for further details on
these funding sources.
27
Table 3 - Balance Sheet Comparisons
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE
BALANCE SHEET
|
|
As of December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
(2008 to 2009)
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
Amount
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,009,007
|
|
$
|
2,633,020
|
|
$
|
2,266,224
|
|
|
375,987
|
|
|
14.28
|
%
|
Earning assets *
|
|
|
2,801,884
|
|
|
2,442,503
|
|
|
2,105,581
|
|
|
359,381
|
|
|
14.71
|
%
|
Total loans and leases, less unearned income and net deferred costs
and fees
|
|
|
1,850,453
|
|
|
1,612,716
|
|
|
1,362,417
|
|
|
237,737
|
|
|
14.74
|
%
|
Securities *
|
|
|
888,468
|
|
|
790,736
|
|
|
716,624
|
|
|
97,732
|
|
|
12.36
|
%
|
Core deposits **
|
|
|
1,674,159
|
|
|
1,516,226
|
|
|
1,318,859
|
|
|
157,933
|
|
|
10.42
|
%
|
Time deposits of $100,000 and more
|
|
|
303,761
|
|
|
282,547
|
|
|
304,614
|
|
|
21,214
|
|
|
7.51
|
%
|
Federal funds purchased and securities sold under agreements to
repurchase
|
|
|
190,975
|
|
|
203,385
|
|
|
199,126
|
|
|
(12,410
|
)
|
|
(6.10
|
%)
|
Other borrowings
|
|
|
204,467
|
|
|
192,144
|
|
|
100,824
|
|
|
12,323
|
|
|
6.41
|
%
|
Shareholders equity
|
|
|
233,009
|
|
|
210,785
|
|
|
189,962
|
|
|
22,224
|
|
|
10.54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENDING
BALANCE SHEET
|
|
As of December 31,
|
|
Change
(2008 to 2009)
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
Amount
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,153,260
|
|
$
|
2,867,722
|
|
$
|
2,359,459
|
|
|
285,538
|
|
|
9.96
|
%
|
Earning assets *
|
|
|
2,922,138
|
|
|
2,664,650
|
|
|
2,189,920
|
|
|
257,488
|
|
|
9.66
|
%
|
Total loans and leases, less unearned income and net deferred costs
and fees
|
|
|
1,914,818
|
|
|
1,817,531
|
|
|
1,440,122
|
|
|
97,288
|
|
|
5.35
|
%
|
Securities *
|
|
|
985,503
|
|
|
820,030
|
|
|
728,206
|
|
|
165,473
|
|
|
20.18
|
%
|
Core deposits **
|
|
|
1,725,315
|
|
|
1,631,354
|
|
|
1,351,412
|
|
|
93,961
|
|
|
5.76
|
%
|
Time deposits of $100,000 and more
|
|
|
327,890
|
|
|
277,847
|
|
|
245,375
|
|
|
50,043
|
|
|
18.01
|
%
|
Federal funds purchased and securities sold under agreements to
repurchase
|
|
|
192,784
|
|
|
196,304
|
|
|
195,447
|
|
|
(3,520
|
)
|
|
(1.79
|
%)
|
Other borrowings
|
|
|
208,965
|
|
|
274,791
|
|
|
210,862
|
|
|
(65,826
|
)
|
|
(23.95
|
%)
|
Shareholders equity
|
|
|
245,008
|
|
|
219,361
|
|
|
198,647
|
|
|
25,647
|
|
|
11.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Balances of available-for-sale securities are shown at
amortized cost.
** Core deposits equal total deposits less time deposits of
$100,000 and more, brokered deposits, and municipal money market deposits.
Shareholders Equity
The
Consolidated Statements of Changes in Shareholders Equity included in the
Consolidated Financial Statements of the Company contained in Part II, Item 8.
of this Report, detail the changes in equity capital, including payments to
shareholders in the form of cash and stock dividends. The Company continued its
long history of increasing cash dividends with a per share increase of 3.3% in
2009, which follows an increase of 6.2% in 2008. Dividends per share amounted
to $1.24 in 2009, compared to $1.20 in 2008, and $1.13 in 2007. Dividends per
share were retroactively adjusted to reflect a 10% stock dividend paid February
15, 2010. Cash dividends paid represented 41.5%, 42.7%, and 45.6% of after-tax
net income in each of 2009, 2008, and 2007, respectively.
Total
shareholders equity was up $25.6 million or 11.7% to $245.0 million at
December 31, 2009, from $219.4 million at December 31, 2008. The increase was
mainly in retained earnings, which increased by $18.6 million to $92.4 million,
reflecting net income of $31.8 million less dividend of $13.2 million.
Additional paid-in capital increased by $2.7 million, from $152.8 million at
December 31, 2008, to $155.6 million at December 31, 2009. The $2.7 million
included the following: $952,000 of proceeds from stock option exercises and
the related tax benefits of $163,000; $938,000 related to stock-based
compensation; $629,000 related to shares issued for dividend reinvestment
plans; and $243,000 related to shares issued for director deferred compensation
plan. In the fourth quarter of 2009, the Company began to issue shares of the
Companys common stock for its dividend reinvestment plan. Previously, the
shares were purchased in the open market by the plan. The Company repurchased
5,000 shares of its common stock for $177,000 during the twelve month period
ended December 31, 2009.
Accumulated
other comprehensive loss decreased by $4.5 million, from a net unrealized loss
of $7.6 million at December 31, 2008, to a net unrealized loss of $3.1 million
at December 31, 2009. The change resulted from a $3.6 million increase in
unrealized gains on available-for-sale securities due to lower market rates,
and an $875,000 positive adjustment related to postretirement benefit plans.
Under regulatory requirements, amounts reported as accumulated other
comprehensive income/loss related to net unrealized gain or loss on
available-for-sale securities and the funded status of the Companys defined
benefit post-retirement benefit plans do not increase or reduce regulatory
capital and are not included in the calculation of risk-based capital and
leverage ratios.
28
Total shareholders equity was up $20.7 million or 10.4% to $219.4
million at December 31, 2008, from $198.6 million at December 31, 2007.
Additional paid-in capital increased by $5.1 million, from $147.7 million at
December 31, 2007, to $152.8 million at December 31, 2008, reflecting the
effects of the exercise of stock options and stock-based compensation expense.
The Company repurchased 1,500 shares of its common stock for $58,000 during the
twelve month period ended December 31, 2008. Retained earnings increased $16.5
million from $57.3 million at December 31, 2007, to $73.8 million at December
31, 2008, reflecting net income of $29.8 million less dividends paid of $12.7
million and a cumulative-effect adjustment of $582,000 related to the adoption
new authoritative accounting guidance under ASC Topic 715,
Compensation-Retirement Benefits
.
Accumulated other comprehensive loss increased by $702,000 from a net
unrealized loss of $6.9 million at December 31, 2007, to a net unrealized loss
of $7.6 million at December 31, 2008, reflecting an increase in unrealized
gains on available-for-sale securities due to lower market rates, offset by
amounts recognized in other comprehensive income related to postretirement
benefit plans.
On July 22, 2008, the Companys Board of Directors approved a stock
repurchase plan (the 2008 Plan). The 2008 Plan authorizes the repurchase of
up to 150,000 shares of the Companys outstanding common stock over a two-year
period. The Company repurchased 5,000 shares of common stock at an average
price of $35.51 under the 2008 Plan during the first quarter of 2009; no shares
were repurchased during the remainder of 2009. Since inception of the 2008
Plan, the Company has repurchased 6,500 shares at an average price of $36.21.
During 2009, the Company issued $20.5 million aggregate liquidation
amount of 7.0% cumulative trust preferred securities through a newly-formed
subsidiary, Tompkins Capital Trust I, a wholly-owned Delaware statutory trust
(Tompkins Capital Trust I). The Trust Preferred Securities were offered and
sold in reliance upon the exemption from registration provided by Rule 506 of
Regulation D of the Securities Act of 1933, as amended (the Securities Act).
The proceeds from the issuance of the Trust Preferred Securities, together with
the Companys capital contribution of $636,000 to the trust, were used to
acquire the Companys Subordinated Debentures that are due concurrently with
the Trust Preferred Securities. The net proceeds of the offering are being used
to support business growth and for general corporate purposes.
The Trust Preferred Securities have a 30 year maturity, and carry a
fixed rate of interest of 7.0%. The Trust Preferred Securities have a
liquidation amount of $1,000 per security. The Company has retained the right
to redeem the Trust Preferred Securities at par (plus accrued but unpaid
interest) at a date which is no earlier than 5 years from the date of issuance.
Commencing in 2019, and during specified annual windows thereafter, holders may
convert the Trust Preferred Securities into shares of the Companys common
stock at a conversion price equal to the greater of (i) $41.35, or (ii) the
average closing price of Tompkins Financial Corporations common stock during
the first three months of the year in which the conversion will be completed.
The Company has guaranteed the distributions with respect to, and
amounts payable upon liquidation or redemption of, the Trust Preferred
Securities on a subordinated basis as and to the extent set forth in the Preferred
Securities Guarantee Agreement entered into on April 10, 2009, between the
Company and Wilmington Trust Company, as Preferred Guarantee Trustee.
In accordance with the applicable accounting standards related to
variable interest entities, the accounts of Tompkins Capital Trust I will not
be included in the Companys consolidated financial statements. However, $20.5
million in Tompkins Subordinated Debentures issued to Tompkins Capital Trust I
will be included in the Tier 1 capital of the Company for regulatory capital
purposes pursuant to regulatory guidelines.
The Company and its subsidiary banks are subject to quantitative
capital measures established by regulation to ensure capital adequacy.
Consistent with the objective of operating a sound financial organization, the
Company and its subsidiary banks maintain capital ratios well above regulatory
minimums, as detailed in Note 20 Regulations and Supervision in Notes to
Consolidated Financial Statements in Part II, Item 7. of this Report on Form 10-K.
Securities
The Companys securities portfolio (excluding fair value adjustments on
available-for-sale securities) at December 31, 2009, was $985.5 million,
reflecting an increase of 20.2% from $820.0 million at December 31, 2008. Note
3 Securities in Notes to Consolidated Financial Statements in Part II, Item 7.
of this Report, details the types of securities held, the carrying and fair
values, and the contractual maturities as of December 31, 2009 and 2008.
29
The following tables summarize available-for-sale and held-to-maturity
securities held by the Company at year end.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale Securities
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
1,991
|
|
$
|
2,079
|
|
$
|
3,102
|
|
$
|
3,263
|
|
$
|
0
|
|
$
|
0
|
|
Obligations of U.S. Government sponsored entities
|
|
|
377,920
|
|
|
379,015
|
|
|
191,435
|
|
|
196,262
|
|
|
180,765
|
|
|
181,622
|
|
Obligations of U.S. states and political subdivisions
|
|
|
61,176
|
|
|
63,695
|
|
|
63,158
|
|
|
63,554
|
|
|
51,852
|
|
|
52,292
|
|
Mortgage-backed securities residential
|
|
|
461,677
|
|
|
477,681
|
|
|
465,612
|
|
|
473,971
|
|
|
381,290
|
|
|
382,225
|
|
U.S. Corporate debt securities
|
|
|
5,032
|
|
|
5,136
|
|
|
2,500
|
|
|
2,500
|
|
|
2,500
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
907,796
|
|
|
927,606
|
|
|
725,807
|
|
|
739,550
|
|
|
616,407
|
|
|
618,639
|
|
Equity securities
|
|
|
1,164
|
|
|
1,164
|
|
|
1,669
|
|
|
1,669
|
|
|
2,071
|
|
|
2,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities
|
|
$
|
908,960
|
|
$
|
928,770
|
|
$
|
727,476
|
|
$
|
741,219
|
|
$
|
618,478
|
|
$
|
620,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities also include miscellaneous investments carried at
fair value, which approximates cost.
Substantially all of the above mortgage-backed securities are
residential direct pass through securities or collateralized mortgage
obligations issued or backed by Federal sponsored enterprises.
Available-for-sale mortgage-backed securities also include non-agency issue
mortgage-backed securities, which totaled $12.7 million (amortized cost) at
December 31, 2009, $17.3 million (amortized cost) at December 31, 2008, and
$10.4 million (amortized cost) at December 31, 2007. During the third quarter
of 2009, the Company determined that three non-agency issue mortgage-backed
securities were other-than-temporarily impaired based on our analysis of these
three securities. As a result, the Company recorded other-than-temporary
impairment charges of $2.0 million in the third quarter of 2009 on these
investments. The $2.0 million represented the amount by which the cost exceeded
the estimated fair value of these securities. The credit loss component of
$146,000 was recorded as net other-than-temporary impairment losses in the
accompanying consolidated statements of income, while the remaining non-credit
portion of the impairment loss was recognized in other comprehensive income
(loss) in the accompanying consolidated statements of condition and changes in
shareholders equity. The Company reviewed these securities in the fourth
quarter of 2009 and determined that no additional other-than-temporary charges
were necessary. As of December 31, 2009, the amount by which the cost of these
securities exceeded fair was $1.8 million. A continuation or worsening of
current economic conditions may result in additional other-than-temporary
impairment losses related to these investments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity Securities
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. states and political subdivisions
|
|
$
|
44,825
|
|
$
|
46,340
|
|
$
|
54,453
|
|
$
|
55,064
|
|
$
|
49,593
|
|
$
|
50,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity securities
|
|
$
|
44,825
|
|
$
|
46,340
|
|
$
|
54,453
|
|
$
|
55,064
|
|
$
|
49,593
|
|
$
|
50,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
The following table summarizes held-for-trading securities held by the
Company at year end.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-for-Trading
Securities
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Fair
Value
|
|
Fair
Value
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
Obligations of U.S.
Government sponsored entities
|
|
$
|
17,986
|
|
$
|
18,370
|
|
$
|
37,110
|
|
Mortgage-backed securities
residential
|
|
|
13,732
|
|
$
|
19,731
|
|
|
23,025
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
held-for-trading securities
|
|
$
|
31,718
|
|
$
|
38,101
|
|
$
|
60,135
|
|
|
|
|
|
|
|
|
|
|
|
|
In the first quarter of 2007, the Company elected to apply the fair
value option for certain securities within its available-for-sale portfolio
with an aggregate cost basis of $65.9 million and an aggregate book value of
$63.4 million as of the January 1, 2007 date of adoption. Included in the $65.9
million were $40.6 million of obligations of U.S. Government sponsored entities
(total portfolio of $217.5 million) and $25.3 million of mortgage-backed
securities (total portfolio of $349.8 million). The Company selected these securities
based upon yield and average remaining life. The securities selected had yields
of less than 4.0% and average lives greater than 1.5 years. As a result of the
election to early adopt, the cumulative unrealized loss related to these
available-for-sale securities of $2.5 million was recorded directly in the
Companys financial statements as a cumulative-effect adjustment, net of tax,
to retained earnings.
Tompkins subsequently sold the approximately $62.0 million in
securities that were carried in the Companys trading portfolio and reinvested
the proceeds in trading securities that provide for a higher yield and will
reflect an improvement in the Companys liquidity and interest rate risk
exposure position. However, while in the aggregate the impacts of the early
adoption of the accounting guidelines and related transactions resulted in
overall improvement in earnings for accounting purposes, it had no impact on
the overall cash proceeds.
As of December 31, 2009, the Companys trading securities totaled $31.7
million compared to $38.1 million as of December 31, 2008. The decrease in
trading securities reflects maturities or calls during 2009. The pre-tax
mark-to-market gains on trading securities in 2009 were $204,000, compared to
pre-tax net mark-to-market gains of $811,000 in 2008 and $612,000 in 2007.
The Company holds non-marketable Federal Home Loan Bank New York
(FHLBNY) stock and non-marketable Federal Reserve Bank (FRB) stock, both of
which are required to be held for regulatory purposes and for borrowing
availability. The required investment in FHLB stock is tied to the Companys
borrowing levels with the FHLB. Holdings of FHLBNY stock and FRB stock totaled
$18.1 million and $1.9 million at December 31, 2009, respectively, $21.0
million and $1.9 million at December 31, 2008, respectively, and $17.6 million
and $729,000 at December 31, 2007, respectively. These securities are carried
at par, which is also cost. While some Federal Home Loan Banks have stopped
paying dividends and repurchasing stock upon reductions in debt levels, the
FHLBNY continues to pay dividends and repurchase its stock. As such, the
Company has not recognized any credit loss other-than-temporary impairment on its holdings of FHLBNY stock.
Managements policy is to purchase investment grade securities that, on
average, have relatively short expected durations. This policy helps mitigate
interest rate risk and provides sources of liquidity without significant risk
to capital. A large percentage of securities are direct obligations of the
Federal government and its agencies. The contractual maturity distribution of
debt securities and mortgage-backed securities as of December 31, 2009, along
with the weighted average yield of each category, is presented in
Table 4-Maturity Distribution
below.
Balances are shown at amortized cost and weighted average yields are calculated
on a fully taxable-equivalent basis. Expected maturities will differ from
contractual maturities presented in
Table
4-Maturity Distribution
below, because issuers may have the right to
call or prepay obligations with or without penalty and mortgage-backed
securities will pay throughout the periods prior to contractual maturity.
31
Table
4 - Maturity Distribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
|
|
|
|
|
Securities
Available-for-Sale *
|
|
Securities
Held-to-Maturity
|
|
|
|
|
|
|
|
(dollar amounts in thousands)
|
|
Amount
|
|
Yield (FTE)
|
|
Amount
|
|
Yield (FTE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
$
|
0
|
|
|
0.00
|
%
|
$
|
0
|
|
|
0.00
|
%
|
Over 1 to 5 years
|
|
|
1,991
|
|
|
2.88
|
%
|
|
0
|
|
|
0.00
|
%
|
Over 5 to 10 years
|
|
|
0
|
|
|
0.00
|
%
|
|
0
|
|
|
0.00
|
%
|
Over 10 years
|
|
|
0
|
|
|
0.00
|
%
|
|
0
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,991
|
|
|
2.88
|
%
|
$
|
0
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of U.S. Government sponsored entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
$
|
5,500
|
|
|
3.24
|
%
|
$
|
0
|
|
|
0.00
|
%
|
Over 1 to 5 years
|
|
|
94,770
|
|
|
2.67
|
%
|
|
0
|
|
|
0.00
|
%
|
Over 5 to 10 years
|
|
|
272,621
|
|
|
3.86
|
%
|
|
0
|
|
|
0.00
|
%
|
Over 10 years
|
|
|
5,029
|
|
|
5.10
|
%
|
|
0
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
377,920
|
|
|
3.57
|
%
|
$
|
0
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of U.S. state and political subdivisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
$
|
5,584
|
|
|
5.31
|
%
|
$
|
17,017
|
|
|
4.56
|
%
|
Over 1 to 5 years
|
|
|
29,200
|
|
|
5.20
|
%
|
|
19,200
|
|
|
5.90
|
%
|
Over 5 to 10 years
|
|
|
24,113
|
|
|
5.53
|
%
|
|
7,131
|
|
|
6.32
|
%
|
Over 10 years
|
|
|
2,279
|
|
|
6.01
|
%
|
|
1,477
|
|
|
7.16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
61,176
|
|
|
5.37
|
%
|
$
|
44,825
|
|
|
5.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed
securities residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
$
|
0
|
|
|
0.00
|
%
|
$
|
0
|
|
|
0.00
|
%
|
Over 1 to 5 years
|
|
|
9,025
|
|
|
4.48
|
%
|
|
0
|
|
|
0.00
|
%
|
Over 5 to 10 years
|
|
|
103,065
|
|
|
4.45
|
%
|
|
0
|
|
|
0.00
|
%
|
Over 10 years
|
|
|
349,587
|
|
|
4.82
|
%
|
|
0
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
461,677
|
|
|
4.73
|
%
|
$
|
0
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
$
|
0
|
|
|
0.00
|
%
|
$
|
0
|
|
|
0.00
|
%
|
Over 1 to 5 years
|
|
|
2,532
|
|
|
4.01
|
%
|
|
0
|
|
|
0.00
|
%
|
Over 5 to 10 years
|
|
|
0
|
|
|
0.00
|
%
|
|
0
|
|
|
0.00
|
%
|
Over 10 years
|
|
|
2,500
|
|
|
3.03
|
%
|
|
0
|
|
|
0.00
|
%
|
Equity securities
|
|
|
1,164
|
|
|
1.35
|
%
|
|
0
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,196
|
|
|
3.12
|
%
|
$
|
0
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
$
|
11,084
|
|
|
4.29
|
%
|
$
|
17,017
|
|
|
4.56
|
%
|
Over 1 to 5 years
|
|
|
137,518
|
|
|
3.31
|
%
|
|
19,200
|
|
|
5.90
|
%
|
Over 5 to 10 years
|
|
|
399,799
|
|
|
4.11
|
%
|
|
7,131
|
|
|
6.32
|
%
|
Over 10 years
|
|
|
359,395
|
|
|
4.82
|
%
|
|
1,477
|
|
|
7.16
|
%
|
Equity securities
|
|
|
1,164
|
|
|
1.35
|
%
|
|
0
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
908,960
|
|
|
4.27
|
%
|
$
|
44,825
|
|
|
5.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Balances of available-for-sale securities are shown at
amortized cost.
At
December 31, 2009, there were no holdings of any one issuer, other than the
U.S. Government sponsored entities, in an amount greater than 10% of the
Companys shareholders equity.
32
Loans and Leases
Interest
and fees earned on loans is the Companys primary source of revenues. Total
loans and leases, net of unearned income and net deferred loan fees and costs,
grew by $97.3 million or 5.4%, to $1.91 billion at December 31, 2009, from
$1.82 billion at December 31, 2008. Loan growth in 2009 was affected by $89.0
million of sales of residential mortgage loans during the year. Demand for
residential mortgage loans was strong in 2009, largely driven by the low
interest rate environment. The growth in 2008 over 2009 included $151.2 million
of loans acquired in connection with the acquisition of Sleepy Hollow in May
2008. As of December 31, 2009, total loans represented 60.7% of total assets
compared to 63.4% as of December 31, 2008.
Table
5-Loan and Lease Classification Summary
below details the
composition and volume changes in the loan and lease portfolio over the past
five years.
Table 5 Loan and Lease Classification
Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in
thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
622,942
|
|
$
|
625,263
|
|
$
|
504,353
|
|
$
|
469,146
|
|
$
|
475,155
|
|
Commercial real estate
|
|
|
641,737
|
|
|
571,929
|
|
|
422,279
|
|
|
393,829
|
|
|
347,443
|
|
Real estate construction
|
|
|
58,125
|
|
|
52,114
|
|
|
43,002
|
|
|
26,130
|
|
|
30,309
|
|
Commercial
|
|
|
494,495
|
|
|
467,420
|
|
|
381,666
|
|
|
345,194
|
|
|
306,410
|
|
Consumer and other
|
|
|
86,687
|
|
|
87,998
|
|
|
80,730
|
|
|
82,341
|
|
|
100,249
|
|
Leases
|
|
|
12,821
|
|
|
14,968
|
|
|
10,832
|
|
|
11,962
|
|
|
14,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
|
1,916,807
|
|
|
1,819,692
|
|
|
1,442,862
|
|
|
1,328,602
|
|
|
1,274,430
|
|
Less: unearned income and deferred costs and fees
|
|
|
(1,989
|
)
|
|
(2,161
|
)
|
|
(2,740
|
)
|
|
(2,304
|
)
|
|
(3,081
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases, net of unearned income and deferred costs and
fees
|
|
$
|
1,914,818
|
|
$
|
1,817,531
|
|
$
|
1,440,122
|
|
$
|
1,326,298
|
|
$
|
1,271,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate loans, including home equity loans, of $622.9 million at year-end
2009 decreased by $2.3 million or 0.37% from $625.3 million at year-end 2008,
and comprised 32.5% of total loans and leases at December 31, 2009. Residential
real estate mortgage loans are generally underwritten in accordance with
secondary market guidelines to enhance the liquidity of these generally
longer-term assets. As part of its asset/liability management strategy the
Company may sell certain residential mortgage loans in the secondary market.
The Company generally sells loans without recourse. Loans are generally sold to
Federal Home Loan Mortgage Corporation (FHLMC) or State of New York Mortgage Agency
(SONYMA). During 2009, 2008, and 2007, the Company sold residential mortgage
loans totaling $89.0 million, $11.3 million, and $10.7 million, respectively,
and realized gains on these sales of $1.4 million, $105,000, and $159,000,
respectively. When residential mortgage loans are sold or securitized, the
Company typically retains all servicing, providing the Company with a source of
fee income. Residential mortgage loans serviced for others totaled $206.0
million at December 31, 2009, compared to $149.9 million at December 31, 2008.
In connection with the loan sales and securitizations in 2009, 2008, and 2007,
the Company recorded mortgage-servicing assets of $648,000, $26,000, and
$46,000, respectively. Amortization of mortgage servicing amounted to $245,000
in 2009, $117,000 in 2008 and $122,000 in 2007. Capitalized mortgage servicing
rights totaled $1.4 million at December 31, 2009, and $961,000 at December 31,
2008, and are reported as intangible assets on the Consolidated Statements of
Condition.
Commercial
real estate loans increased by $69.8 million, or 12.2%, from $571.9 million at
year-end 2008 to $641.7 million at year-end 2009. Commercial real estate loans
of $641.7 million represented 33.5% of total loans and leases at December 31,
2009. Commercial loans totaled $494.5 million at December 31, 2009, which is a
5.8% increase from commercial loans of $467.4 million at December 31, 2008.
Growth in commercial lending, including commercial real estate, reflects the
Companys continued emphasis on commercial lending. Management believes that
the Companys community banking strategy provides value to small business
customers, while commercial lending products are typically attractive to the
Company from a yield and interest rate risk perspective.
The
consumer loan portfolio includes personal installment loans, indirect
automobile financing, and overdraft lines of credit. The Company faces
significant competition from local and national lenders as well as auto finance
companies for consumer lending products. Consumer and other loans were $86.7
million at December 31, 2009, down from $88.0 million at December 31, 2008.
The
lease portfolio decreased by 14.3% to $12.8 million at December 31, 2009, from
$15 million at December 31, 2008. The lease portfolio has traditionally
consisted of leases on vehicles for consumers and small businesses. Competition
for automobile financing has led to a decline in the consumer lease portfolio
over the past several years. Management continues to review leasing opportunities,
primarily commercial leasing and municipal leasing. As of December 31, 2009,
commercial leases and municipal leases represented 96.1% of total leases, while
consumer leases made up the remaining 3.9%. As of December 31, 2008, commercial
leases and municipal leases represented 95.7% of total leases, while consumer
leases made up the remaining 4.3%.
The
Companys loan and lease customers are located primarily in the New York
communities served by its three subsidiary banks.
33
Other
than general economic risks, management is not aware of any material
concentrations of credit risk to any industry or individual borrower. Further
information on the Companys lending activities, including related party
transactions, is provided in Note 5 Loan and Lease Classification Summary and
Related Party Transactions in Notes to Consolidated Financial Statements in
Part II, Item 7. of this Report.
The Allowance for Loan and Lease Losses
Management
reviews the adequacy of the allowance for loan and lease losses (allowance)
on a regular basis. Management considers the accounting policy relating to the
allowance to be a critical accounting policy, given the inherent uncertainty in
evaluating the levels of the allowance required to cover credit losses in the
portfolio and the material effect that assumptions could have on the Companys
results of operations. The Companys methodology for determining and allocating
the allowance for loan and lease losses focuses on ongoing reviews of larger
individual loans and leases, historical net charge-offs, delinquencies in the
loan and lease portfolio, the level of impaired and nonperforming assets,
values of underlying loan and lease collateral, the overall risk
characteristics of the portfolios, changes in character or size of the
portfolios, geographic location, current economic conditions, changes in
capabilities and experience of lending management and staff, and other relevant
factors. The various factors used in the methodologies are reviewed on a
periodic basis.
The
Company has developed a methodology to measure the amount of estimated loan
loss exposure inherent in the loan portfolio to assure that an adequate
allowance is maintained. The Companys methodology is based upon guidance
provided in SEC Staff Accounting Bulletin No. 102,
Selected Loan Loss Allowance Methodology and Documentation Issues
and includes an estimate of exposure for the following: specifically reviewed
and graded loans; historical loss experience by product type; past due and
nonperforming loans; and other internal and external factors such as local and
regional economic conditions, growth trends, and credit policy and underwriting
standards.
At
least annually, management reviews all commercial and commercial real estate
loans exceeding a certain threshold and assigns a risk rating grade. At least
quarterly, management reviews all loans and leases over a certain dollar
threshold that are internally risk rated below a predetermined grade, giving
consideration to payment history, debt service payment capacity, collateral
support, strength of guarantors, industry trends, and other factors relevant to
the particular borrowing relationship. Through this process, management
identifies impaired loans. For loans and leases considered impaired, estimated
exposure amounts are based upon collateral values or discounted cash flows. For
internally reviewed commercial and commercial real estate loans that are not
impaired but whose internal risk rating is below a certain level, estimated
exposures are assigned based upon several factors, including the borrowers
financial condition, payment history, collateral adequacy, and business
conditions, and historical loss factors.
For
commercial loans and commercial mortgage loans not specifically reviewed, and
for homogenous loan portfolios such as residential mortgage loans and consumer
loans, estimated exposure amounts are assigned based upon historical loss
experience and current charge-off trends, past due status, and managements
judgment of the effects of current economic conditions on portfolio
performance.
In
addition to the above components, amounts are maintained based upon
managements judgment and assessment of other quantitative and qualitative
factors such as regional and local economic conditions, concentrations of
credit, industry concerns, adverse market changes in estimated or appraised
collateral value, and portfolio growth trends.
Since
the methodology is based upon historical experience and trends as well as
managements judgment, factors may arise that result in different estimations.
Significant factors that could give rise to changes in these estimates may
include, but are not limited to, changes in economic conditions in the local
area, concentration of risk, changes in interest rates, and declines in local
property values. While managements evaluation of the allowance as of December
31, 2009, considers the allowance to be adequate, under adversely different
conditions or assumptions, the Company would need to increase the allowance.
The
allocation of the Companys allowance as of December 31, 2009, and each of the
previous four years is illustrated in
Table
6- Allocation of the Allowance for Loan and Lease Losses
, below.
34
Table 6 - Allocation of the Allowance for
Loan and Lease Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(dollar amounts in
thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans outstanding at end of year
|
|
$
|
1,914,818
|
|
$
|
1,817,531
|
|
$
|
1,440,122
|
|
$
|
1,326,298
|
|
$
|
1,271,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLOCATION OF THE ALLOWANCE BY LOAN TYPE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
7,143
|
|
$
|
6,274
|
|
$
|
6,135
|
|
$
|
6,308
|
|
$
|
5,354
|
|
Real estate
|
|
|
14,857
|
|
|
10,116
|
|
|
6,640
|
|
|
5,609
|
|
|
5,357
|
|
Consumer and all other
|
|
|
2,350
|
|
|
2,282
|
|
|
1,832
|
|
|
2,236
|
|
|
2,850
|
|
Unallocated
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
175
|
|
|
116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
24,350
|
|
$
|
18,672
|
|
$
|
14,607
|
|
$
|
14,328
|
|
$
|
13,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLOCATION OF THE ALLOWANCE AS A PERCENTAGE
OF TOTAL ALLOWANCE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
29
|
%
|
|
34
|
%
|
|
42
|
%
|
|
44
|
%
|
|
39
|
%
|
Real estate
|
|
|
61
|
%
|
|
54
|
%
|
|
45
|
%
|
|
39
|
%
|
|
39
|
%
|
Consumer and all other
|
|
|
10
|
%
|
|
12
|
%
|
|
13
|
%
|
|
16
|
%
|
|
21
|
%
|
Unallocated
|
|
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
1
|
%
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOAN AND LEASE TYPES AS A PERCENTAGE OF
TOTAL LOANS AND LEASES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
26
|
%
|
|
26
|
%
|
|
27
|
%
|
|
26
|
%
|
|
24
|
%
|
Real estate
|
|
|
69
|
%
|
|
68
|
%
|
|
67
|
%
|
|
67
|
%
|
|
67
|
%
|
Consumer and all other
|
|
|
5
|
%
|
|
6
|
%
|
|
6
|
%
|
|
7
|
%
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management is committed to early recognition of loan problems and to
maintaining an adequate allowance. The above allocation is neither indicative
of the specific amounts or the loan categories in which future charge-offs may
occur, nor is it an indicator of future loss trends. The allocation of the
allowance to each category does not restrict the use of the allowance to absorb
losses in any category. The increase in the overall allowance over the past two
years reflects higher allocations driven by deterioration in asset quality
measures, including higher net charge-offs, internally-classified loans, and
nonperforming loans and leases; weak economic conditions; soft real estate
markets; and growth in the loan portfolio. The higher net charge-offs during
2009 and 2008 directly increased the historical loss factors in the allowance
model. The allocations assigned to the internally-classified loans were also up
in 2009 with the increase in the balances of loans internally-classified.
Allocations for the internally-classified credits are based upon a specific
review of these credits and historical loss experience, which has increased
over the past two years with the increase in net charge-offs. Factors
contributing to the increase in the allocation for real estate loans include:
higher balances of internally-classified commercial real estate loans in 2009;
weak and uncertain economic conditions and soft real estate markets; and growth
in the portfolio.
The
level of future charge-offs is dependent upon a variety of factors such as
national and local economic conditions, trends in various industries, underwriting
characteristics, and conditions unique to each borrower. Given uncertainties
surrounding these factors, it is difficult to estimate future losses.
The principal balances of nonperforming loans and leases, including
impaired loans and leases, as of December 31, are detailed in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollar amounts in
thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans 90 days past due and accruing
|
|
$
|
369
|
|
$
|
161
|
|
$
|
312
|
|
$
|
8
|
|
$
|
12
|
|
Nonaccrual loans
|
|
|
31,289
|
|
|
15,798
|
|
|
8,890
|
|
|
2,994
|
|
|
4,072
|
|
Troubled debt restructurings not included
above
|
|
|
3,265
|
|
|
69
|
|
|
145
|
|
|
0
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans and leases
|
|
|
34,923
|
|
|
16,028
|
|
|
9,347
|
|
|
3,002
|
|
|
4,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
|
299
|
|
|
110
|
|
|
5
|
|
|
348
|
|
|
366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets
|
|
$
|
35,222
|
|
$
|
16,138
|
|
$
|
9,352
|
|
$
|
3,350
|
|
$
|
4,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance as a percentage of loans and
leases outstanding
|
|
|
1.27
|
%
|
|
1.03
|
%
|
|
1.01
|
%
|
|
1.08
|
%
|
|
1.08
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance as a percentage of nonperforming
loans and leases
|
|
|
69.72
|
%
|
|
116.50
|
%
|
|
156.27
|
%
|
|
477.28
|
%
|
|
330.84
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets as percentage of
total assets
|
|
|
1.12
|
%
|
|
0.56
|
%
|
|
0.40
|
%
|
|
0.15
|
%
|
|
0.21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets include nonaccrual
loans, troubled debt restructurings (TDR), and foreclosed real estate.
Nonperforming assets of $35.2 million at December 31, 2009 were up $19.1
million or 118.3% over year-end 2008. In general, the increase in nonperforming
assets is reflective of the current weak economy, which has pressured real
estate values in some of the Companys markets and stressed the financial
35
conditions of various commercial borrowers and agricultural borrowers. As of
December 31, 2009, nonperforming loans included $19.6 million of commercial
real estate loans, $7.6 million of commercial loans and $6.0 million of
residential real estate loans. As of December 31, 2008, nonperforming loans
included $7.7 million of commercial real estate loans, $2.7 million of
commercial loans and $4.9 million of residential real estate loans. As of
December 31, 2009, approximately $5.1 million of nonperforming loans were
secured by U.S. government guarantees, while $6.0 million were secured by
one-to-four family residential properties. The TDR consists of one commercial relationship, consisting of two
commercial real estate loans. The two loans were modified with concessions
granted due to the stressed financial condition of the borrower. The loan is
currently performing according to the modified terms.
Although up from year-end 2008, the Companys
ratio of nonperforming assets to total assets of 1.12% continues to compare
favorably to a peer ratio of 3.70%. The peer data is from the Federal Reserve
Board and represents banks or bank holding companies with assets between $3.0
billion and $10.0 billion. The peer ratio is as of December 31, 2009, the most recent
data available from the Federal Reserve Board.
As of December 31, 2009, the Companys recorded investment in loans and
leases that are considered impaired totaled $30.0 million compared to $9.7
million at December 31, 2008. A loan is impaired when, based on current information and events, it is
probable that we will be unable to collect all amounts due according to the
contractual terms of the loan agreement. Impaired loans consist of our
nonaccrual loans, loans that are 90 days or more past due, and other loans
for which the Company determine that noncompliance with contractual terms of
the loan agreement is probable. Losses on individually identified impaired
loans that are not collateral dependent are measured based on the present value
of expected future cash flows discounted at the original effective interest
rate of each loan. For loans that are collateral dependent, impairment is
measured based on the fair value of the collateral less estimated selling
costs. The $23.6 million of impaired loans at December 30, 2009, had
related allowances of $803,000, and the $9.7 million of impaired loans at
December 31, 2008, had related allowances of $520,000.
The allowance represented 1.27% of total
loans and leases outstanding at December 31, 2009, up from 1.03% at December
31, 2008. The
increase in the ratio of the allowance to total loans and leases outstanding
was consistent with the increase in our nonperforming assets, net charge-offs
and internally-classified loans during 2009 as well as the overall weakness in
the economy.
The allowance coverage of nonperforming loans (loans past due 90 days
and accruing, nonaccrual loans, and restructured troubled debt) was 0.70 times
at December 31, 2009, compared to 1.17 times at December 31, 2008. This ratio
has trended downward since 2006 as the growth in nonperforming loans has
outpaced the growth in the allowance. Although nonperforming loans are up over
the past two years, the Companys loss experience continues to be low compared
to industry levels with net charge-offs to average total loans and leases of
0.20% in 2009.
The difference between the interest income that would have been
recorded if nonaccrual loans and leases had been paid in accordance with their
original terms and the interest income recorded for the years ended December
31, 2009 was $669,000. For December 31, 2008 and 2007, the amounts were not
material.
A discussion of the Companys policy for placing loans on nonaccrual
status is included in Note 1 Summary of Significant Accounting Policies in Notes
to Consolidated Financial Statements in Part II, Item 7. of this Report.
The Companys historical loss experience is detailed in
Table
7-Analysis of the Allowance for Loan and Lease Losses.
36
Table 7 - Analysis of the Allowance for Loan
and Lease Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average loans outstanding during year
|
|
$
|
1,850,453
|
|
$
|
1,612,716
|
|
$
|
1,362,417
|
|
$
|
1,269,650
|
|
$
|
1,220,016
|
|
Balance of allowance at beginning of year
|
|
|
18,672
|
|
|
14,607
|
|
|
14,328
|
|
|
13,677
|
|
|
12,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOANS CHARGED-OFF:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, agricultural
|
|
|
1,929
|
|
|
1,490
|
|
|
672
|
|
|
333
|
|
|
890
|
|
Real estate mortgage
|
|
|
511
|
|
|
585
|
|
|
118
|
|
|
43
|
|
|
408
|
|
Real estate construction
|
|
|
599
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Installment loans to individuals
|
|
|
742
|
|
|
725
|
|
|
448
|
|
|
504
|
|
|
595
|
|
Lease financing
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
210
|
|
|
0
|
|
Other loans
|
|
|
453
|
|
|
490
|
|
|
522
|
|
|
174
|
|
|
344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans charged-off
|
|
$
|
4,234
|
|
$
|
3,290
|
|
$
|
1,760
|
|
$
|
1,264
|
|
$
|
2,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECOVERIES OF LOANS PREVIOUSLY CHARGED-OFF:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, agricultural
|
|
|
267
|
|
|
94
|
|
|
143
|
|
|
136
|
|
|
210
|
|
Real estate mortgage
|
|
|
32
|
|
|
2
|
|
|
9
|
|
|
19
|
|
|
32
|
|
Installment loans to individuals
|
|
|
147
|
|
|
170
|
|
|
241
|
|
|
226
|
|
|
277
|
|
Lease financing
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
3
|
|
|
37
|
|
Other loans
|
|
|
178
|
|
|
176
|
|
|
117
|
|
|
107
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans recovered
|
|
$
|
624
|
|
$
|
442
|
|
$
|
510
|
|
$
|
491
|
|
$
|
706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans charged-off
|
|
|
3,610
|
|
|
2,848
|
|
|
1,250
|
|
|
773
|
|
|
1,531
|
|
Allowance acquired in purchase acquisition
|
|
|
0
|
|
|
1,485
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Additions to allowance charged to
operations
|
|
|
9,288
|
|
|
5,428
|
|
|
1,529
|
|
|
1,424
|
|
|
2,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance of allowance at end of year
|
|
$
|
24,350
|
|
$
|
18,672
|
|
$
|
14,607
|
|
$
|
14,328
|
|
$
|
13,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs as a percentage of average
loans and leases outstanding during the year
|
|
|
0.20
|
%
|
|
0.18
|
%
|
|
0.09
|
%
|
|
0.06
|
%
|
|
0.13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
previously stated, the provision for loan and lease losses represents
managements estimate of the expense necessary to maintain the allowance for
loan and lease losses at an adequate level. The provision for loan and lease
losses was $9.3 million in 2009, compared to $5.4 million in 2008. The increase
in 2009 over prior year was due to increases in nonperforming loans and leases
and net charge-offs as well as concerns over weak economic conditions and uncertain
real estate markets. The Company acquired an allowance of $1.5 million in
connection with the acquisition of Sleepy Hollow in May 2008. The ratio of net
charge-offs to average total loans and leases of 0.20% is up over prior year,
but is favorable to a peer ratio of 1.58%. The peer data is from the Federal Reserve Board and represents banks or
bank holding companies with assets between $3.0 billion and $10.0 billion. The
peer ratio is as of December 31, 2009, the most recent data available from the
Federal Reserve Board.
Management reviews the loan portfolio continuously for evidence of
potential problem loans and leases. Potential problem loans and leases are
loans and leases that are currently performing in accordance with contractual
terms, but where known information about possible credit problems of the
related borrowers causes management to have doubt as to the ability of such
borrowers to comply with the present loan payment terms and may result in such
loans and leases becoming nonperforming at some time in the future. Management
considers loans and leases classified as Substandard, which continue to accrue
interest, to be potential problem loans and leases. The Company, through its
internal loan review function, identified 67 commercial relationships totaling
$83.9 million at December 31, 2009, and 36 commercial relationships totaling
$20.3 million at December 31, 2008, which it classified as Substandard, which
continue to accrue interest. Of the 67 commercial relationships, there are 19
relationships that equaled or exceeded $1.0 million, which in aggregate totaled
$71.4 million. The Company has seen an increase in potential problem loans over
the course of 2009 as weak economic conditions have strained the cash flows and
collateral values of its borrowers. The Company continues to monitor these
relationships; however, management cannot predict the extent to which continued
weak economic conditions or other factors may further impact borrowers. These
loans remain in a performing status due to a variety of factors, including
payment history, the value of collateral supporting the credits, and personal
or government guarantees. These factors, when considered in the aggregate, give
management reason to believe that the current risk exposure on these loans does
not warrant accounting for these loans as nonperforming. However, these loans
do exhibit certain risk factors, which have the potential to cause them to
become nonperforming. Accordingly, managements attention is focused on these
credits, which are reviewed on at least a quarterly basis.
37
Deposits and Other Liabilities
Total deposits of $2.4 billion at December 31, 2009, were up $305.9
million or 14.3% over year-end 2008. Deposit growth included $203.1 million in
interest checking, savings and money market balances, $91.6 million in time
deposits and $11.1 million in noninterest bearing deposits.
Core deposits, defined as total deposits less time deposits of $100,000
or more, brokered deposits and municipal money market deposits, grew by $94.0
million or 5.8% to $1.7 billion at year-end 2009 from $1.6 billion at year-end
2008. Core deposits represented 70.7% of total deposits at December 31, 2009,
compared to 76.4% of total deposits at December 31, 2008. Municipal money
market accounts increased by $137.2 million, or 67.2% to $341.1 million at
year-end 2009 from $203.9 million at year-end 2008. Time deposits of $100,000
and more were up $50.0 million or 18.0% between year-end 2009 and year-end
2008.
Table 1-Average Statements of
Condition and Net Interest Analysis
shows the average balance and
average rate paid on the Companys primary deposit categories for the years
ended December 31, 2009, 2008, and 2007. A maturity schedule of time deposits
outstanding at December 31, 2009, is included in Note 9 Deposits in Notes to
Consolidated Financial Statements in Part II, Item 7. of this Report.
The Company uses both retail and wholesale repurchase agreements.
Retail repurchase agreements are arrangements with local customers of the
Company, in which the Company agrees to sell securities to the customer with an
agreement to repurchase those securities at a specified later date. Retail
repurchase agreements totaled $47.3 million at December 31, 2009, and $42.1
million at December 31, 2008. Management generally views local repurchase
agreements as an alternative to large time deposits. The Companys wholesale
repurchase agreements are primarily with the Federal Home Loan Bank (FHLB)
and amounted to $145.5 million at December 31, 2009, and $153.2 million at
December 31, 2008. Included in the $145.5 million of wholesale repurchase
agreements at year-end 2008, is a $5.5 million repurchase agreement with the
FHLB where the Company elected to adopt the fair value option. The fair value
of this repurchase agreement decreased by $177,000 (net mark-to-market pre-tax
gain of $177,000) over the 12-months ended December 31, 2009. During 2009, the
Company prepaid a $10.0 million repurchase agreement with the FHLB, where the
Company had elected the fair value option. Net mark-to-market pre-tax gains of
$242,000 related to this repurchase agreement are included in 2009. The
$242,000 pre-tax gain and the $177,000 pre-tax gain are included on the
Companys Consolidated Statements of Income in Mark-to-Market Gain (Loss) on
Liabilities Held at Fair Value. Refer to Note 10 Securities Sold Under
Agreements to Repurchase and Federal Funds Purchased in Notes to Consolidated
Financial Statements in Part II, Item 7. of this Report for further details on
the Companys repurchase agreements.
The Companys other borrowings totaled $209.0
million at year-end 2009, down $65.8 million or 24.0% from $274.8 million at
year-end 2008. The $209.0 million in borrowings at December 31, 2009, included
$170.3 million in term advances, $13.5 million of overnight FHLB advances, and
a $25.0 million advance from a money center bank. Of the $170.3
million of the FHLB term advances at year-end 2009, $150.3 million are due over
one year and have a weighted average rate of 4.35%. In 2007, the Company elected to account for a $10.0 million advance
with the FHLB at fair value. The fair value of this advance decreased by
$844,000 (net mark-to-market gain of $844,000) over the 12-months ended December 31, 2009. Refer to Note 11 Other
Borrowings in Notes to Consolidated Financial Statements in Part II, Item 7.
of this Report for further details on the Companys term borrowings with the
FHLB.
Other borrowings included a term borrowing with a bank totaling $25.0
million at December 31, 2009, and $24.0 million at December 31, 2008. There
were also a Treasury Tax and Loan Note account with the Federal Reserve Bank of
New York totaling $100,000 at December 31, 2009 and 2008, and borrowings from
unrelated financial institutions totaling $30,000 and $39,000 at December 31,
2009 and 2008, respectively.
LIQUIDITY MANAGEMENT
The objective of liquidity management is to ensure the availability of
adequate funding sources to satisfy the demand for credit, deposit withdrawals,
operating expenses, and business investment opportunities. The Companys large,
stable core deposit base and strong capital position are the foundation for the
Companys liquidity position. The Company uses a variety of resources to meet
its liquidity needs, which include deposits, cash and cash equivalents,
short-term investments, cash flow from lending and investing activities,
repurchase agreements, and borrowings. The Company may also use borrowings as
part of a growth strategy. Asset and liability positions are monitored
primarily through the Asset/Liability Management Committee of the Companys
subsidiary banks. This Committee reviews periodic reports on the liquidity and
interest rate sensitivity positions. Comparisons with industry and peer groups
are also monitored. The Companys strong reputation in the communities it
serves, along with its strong financial condition, provides access to numerous
sources of liquidity as described below. Management believes these diverse
liquidity sources provide sufficient means to meet all demands on the Companys
liquidity that are reasonably likely to occur.
Core deposits are a primary low cost funding source obtained mainly
through the Companys branch network. Core deposits totaled $1.7 billion at
year-end 2009, up $94.0 million or 5.8% from year-end 2008, with the increase
mainly in money market and savings deposits and noninterest-bearing deposits.
Core deposits represented 70.7% of total deposits and 59.3% of total
liabilities at December 31, 2009, compared to 76.4% of total deposits and 61.6%
of total liabilities at December 31, 2008.
38
In addition to core deposits, the Company uses non-core funding sources
to support asset growth. These non-core funding sources include time deposits
of $100,000 or more, brokered time deposits, municipal money market accounts,
securities sold under agreements to repurchase, overnight borrowings and term
advances from the FHLB and other funding sources. Rates and terms are the
primary determinants of the mix of these funding sources. Non-core funding sources increased by $142.5
million to $1.1 billion at year end 2009, from $973.7 million at year-end 2008.
As a percentage of total liabilities, non-core funding sources increased from
36.8% at year-end 2008 to 38.4% at year-end 2009. Overnight borrowing from the
FHLB declined $60.0 million during 2009 offsetting growth of $137.1 million in
municipal money market accounts, $50.0 million in time deposits of $100,000 or
more and $24.7 million in brokered time deposits.
Non-core funding sources may require
securities to be pledged against the underlying liability. Securities carried
at $772.7 million and $699.6 million at December 31, 2009 and 2008,
respectively, were either pledged or sold under agreements to repurchase.
Pledged securities represented 83.9% of total securities at December 31, 2009,
compared to 79.1% of total securities at December 31, 2008.
Cash and cash equivalents totaled $45.5 million as of December 31,
2009, down from $52.3 million at December 31, 2008. Short-term investments,
consisting of securities due in one year or less, decreased from $41.9 million
at December 31, 2008, to $30.1 million on December 31, 2009. The Company also
has $31.7 million of securities designated as trading securities.
Cash flow from the loan and investment portfolios provides a
significant source of liquidity. These assets
may have stated maturities in excess of one year, but have monthly principal
reductions. Total mortgage-backed securities, at fair value, were $477.7
million at December 31, 2009 compared with $474.0 million at December 31, 2008.
Outstanding principal balances of residential mortgage loans, consumer
loans, and leases totaled approximately $722.5 million at December 31, 2009 as
compared to $728.2 million at December 31, 2008. Aggregate amortization from
monthly payments on these assets provides significant additional cash flow to
the Company.
Liquidity is enhanced by ready access to national and regional
wholesale funding sources including Federal funds purchased, repurchase
agreements, brokered certificates of deposit, and FHLB advances. Through its subsidiary
banks, the Company has borrowing relationships with the FHLB and correspondent
banks, which provide secured and unsecured borrowing capacity. At December 31,
2009, the unused borrowing capacity on established lines with the FHLB was
$508.4 million. As members of the FHLB, the Companys subsidiary banks can use
certain unencumbered mortgage-related assets to secure additional borrowings
from the FHLB. At December 31, 2009, total unencumbered residential mortgage
loans of the Company were $213.2 million. Additional assets may also qualify as
collateral for FHLB advances upon approval of the FHLB.
The Company has not identified any trends or circumstances that are
reasonably likely to result in material increases or decreases in liquidity in
the near term.
Table 8-Loan Maturity
details total scheduled maturities of selected loan categories.
Table 8 - Loan
Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining maturity of selected loans
|
|
At December 31, 2009
|
|
(in thousands)
|
|
Total
|
|
Within 1 year
|
|
1-5 years
|
|
After 5 years
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
real estate
|
|
$
|
641,737
|
|
$
|
11,026
|
|
$
|
67,623
|
|
$
|
563,088
|
|
Real estate
construction
|
|
|
58,125
|
|
|
21,303
|
|
|
1,865
|
|
|
34,957
|
|
Commercial
|
|
|
492,647
|
|
|
163,139
|
|
|
153,671
|
|
|
175,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,192,509
|
|
$
|
195,468
|
|
$
|
223,159
|
|
$
|
773,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balances are shown net of unearned
income and deferred costs and fees.
Of the loan amounts shown above in
Table 8-Loan Maturity
maturing over one
year, $664.0 million have fixed rates and $528.5 million have adjustable rates.
OFF-BALANCE
SHEET ARRANGEMENTS
In the normal course of business the Company is party to certain
financial instruments, which in accordance with accounting principles generally
accepted in the United States, are not included in its Consolidated Statements
of Condition. These transactions include commitments under standby letters of
credit, unused portions of lines of credit, and commitments to fund new loans
and are undertaken to accommodate the financing needs of the Companys
customers. Loan commitments are agreements by the Company to lend monies at a
future date. These loan and letter of credit commitments are subject to the
same credit policies and reviews as the Companys loans. Because most of these
loan commitments expire within one year from the date of issue, the total
amount of these loan commitments as of December 31, 2009, are not necessarily
indicative of future cash requirements. Further information on these
commitments and contingent liabilities is provided in Note 17 Commitments and
Contingent Liabilities in Notes to Consolidated Financial Statements in Part
II, Item 7. of this Report.
39
CONTRACTUAL
OBLIGATIONS
The Company leases land, buildings, and equipment under operating lease
arrangements extending to the year 2090. Most leases include options to renew
for periods ranging from 5 to 20 years. In addition, the Company has a software
contract for its core banking application through July 31, 2015, along with
contracts for more specialized software programs through 2016. Further
information on the Companys lease arrangements is provided in Note 8 Premises
and Equipment in Notes to Consolidated Financial Statements in Part II, Item
7. of this Report. The Companys contractual obligations as of December 31,
2009, are shown in
Table 9-Contractual
Obligations and Commitments
below.
Table 9 Contractual
Obligations and Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Cash Obligations
|
|
Payments Due By Period
|
|
(in thousands)
As of December 31, 2009
|
|
Total
|
|
Within
1 year
|
|
1-3 years
|
|
3-5 years
|
|
Over 5
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
$
|
370,253
|
|
$
|
42,332
|
|
$
|
98,742
|
|
$
|
103,388
|
|
$
|
125,791
|
|
Operating
leases
|
|
|
19,610
|
|
|
2,208
|
|
|
3,157
|
|
|
2,478
|
|
|
11,767
|
|
Software contracts
|
|
|
3,517
|
|
|
1,291
|
|
|
1,718
|
|
|
477
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$
|
393,380
|
|
$
|
45,831
|
|
$
|
103,617
|
|
$
|
106,343
|
|
$
|
137,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECENTLY ISSUED
ACCOUNTING STANDARDS
Refer to Note 1 Summary of Significant Accounting Policies in Notes
to Consolidated Financial Statements in Part II, Item 7. of this Form 10-K for
details of recently issued accounting pronouncements and their expected impact
on the Companys financial statements.
Fourth Quarter Summary
The
Company reported diluted earnings per share of $0.76 for the fourth quarter of
2009, an 11.8% increase from $0.68 for the comparable year-ago period, and a
3.8% decrease from $0.79 per share reported in the third quarter of 2009.
Fourth quarter 2009 net income was $8.2 million, up 12.9% over fourth quarter
2008 net income of $7.3 million and down 2.9% from third quarter 2009 net
income of $8.5 million.
Taxable-equivalent
net interest income rose 12.2% to $28.6 million in the fourth quarter of
2009 from $25.5 million in the same quarter 2008 and represented a record
quarterly level for the Company. The growth in taxable-equivalent net increase
income was due to growth in average earning assets, which increased $306.9
million or 11.8%, to $2.9 billion in the fourth quarter of 2009 from $2.6
billion in the fourth quarter of 2008, and lower rates paid on interest-bearing
liabilities. The growth in average earnings assets in the fourth quarter over
the year-earlier quarter included a $140.1 million or 8.0% increase in average
loans and leases, and a $111.1 million or 13.0% increase in average securities.
The yield on interest earning assets was 5.18% in the fourth quarter of 2009,
down 49 basis points from 5.67% in the fourth quarter of 2008. The rate paid on
interest-bearing liabilities was 1.57% in the fourth quarter of 2009, down 63
basis points from 2.20% in the same quarter prior year.
The
provision for loan and lease losses was $2.8 million for the fourth quarter of
2009, compared to $2.1 million for the fourth quarter of 2008. The increase in
the provision in 2009 over prior year was due to increases in nonperforming
loans and leases and net charge-offs as well as concerns over weak economic
conditions and uncertain real estate markets. Nonperforming loans and leases
were $34.9 million or 1.82% of total loans and leases at December 31, 2009,
compared with $16.0 million or 0.88% of total loans and leases at December 31,
2008. Net charge-offs totaled $1.2 million in the fourth quarter of 2009,
representing an annualized 0.25% of average loans and leases compared with net
charge-offs of $739,000 or an annualized 0.17% of average loans and lease in
the same period of 2008.
Total
noninterest income in the fourth quarter of 2009 was $12.1 million, up $1.8
million, or 17.5%, from the fourth quarter of 2008. Key fee income categories
in the fourth quarter of 2009 were comparable to the same quarter prior year.
Net mark-to-market gains on securities and liabilities held at fair value
totaled $352,000 in the fourth quarter of 2009 compared to net mark-to-market
losses of $856,000 in the same quarter prior year. Increased residential
mortgage loan origination volume in 2009 resulted in gains on sales of loans of
$202,000 in the fourth quarter of 2009 compared to gains of $15,000 in the same
quarter prior year.
Noninterest
expense totaled $24.9 million for the 2009 fourth quarter, up $2.2 million, or
9.7%, from $22.7 million for the 2008 fourth quarter. Salary and benefit
related expenses were up $536,000 or 4.0% over the same quarter prior year. The
increase was due to annual salary adjustments, additional FTEs, and higher
benefit-related expenses, mainly pension and health insurance. Higher FDIC
insurance deposit assessments were also a significant contributor to the
increase in noninterest expenses in the quarter.
40
|
|
I
tem 6A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
MARKET RISK
Interest
rate risk is the primary market risk category associated with the Companys
operations. Interest rate risk refers to the volatility of earnings caused by
changes in interest rates. The Company manages interest rate risk using income
simulation to measure interest rate risk inherent in its on-balance sheet and
off-balance sheet financial instruments at a given point in time by showing the
potential effect of interest rate shifts on net interest income for future
periods. Each quarter the Companys Asset/Liability Management Committee
reviews the simulation results to determine whether the exposure of net
interest income to changes in interest rates remains within Board-approved
levels. The Committee also discusses strategies to manage this exposure and
incorporates these strategies into the investment and funding decisions of the
Company. The Company does not currently use derivatives, such as interest rate
swaps, to manage its interest rate risk exposure, but may consider such
instruments in the future.
The
Companys Board of Directors has set a policy that interest rate risk exposure
will remain within a range whereby net interest income will not decline by more
than 10% in one year as a result of a 100 basis point parallel change in rates.
Based upon the simulation analysis performed as of November 30, 2009, a 200
basis point parallel upward change in interest rates over a one-year time frame
would result in a one-year decline in net interest income from the base case of
approximately 1.7%, while a 100 basis point parallel decline in interest rates
over a one-year period would result in a marginal decrease in one-year net
interest income from the base case of 1.2%. The simulation assumes no balance
sheet growth and no management action to address balance sheet mismatches.
The
negative exposure in a rising rate environment is mainly driven by the
repricing assumptions of the Companys core deposit base and the lag in the
repricing of the Companys adjustable rate assets. Longer-term, the impact of a
rising rate environment is positive as the asset base continues to reset at
higher levels, while the repricing of the rate sensitive liabilities moderates.
The moderate exposure in the 100 basis point decline scenario results from the
Companys assets repricing downward to a greater degree than the rates on the
Companys interest-bearing liabilities, mainly deposits. Rates on savings and
money market accounts are at low levels given the historically low interest
rate environment experienced in recent years. In addition, the model assumes
that prepayments accelerate in the down interest rate environment resulting in
additional pressure on asset yields as proceeds are reinvested at lower rates.
In
our most recent simulation, the base case scenario, which assumes interest
rates remain unchanged from the date of the simulation, showed a relatively
flat net interest margin during 2010.
Although the simulation model is useful in identifying potential
exposure to interest rate movements, actual results may differ from those
modeled as the repricing, maturity, and prepayment characteristics of financial
instruments may change to a different degree than modeled. In addition, the
model does not reflect actions that management may employ to manage its
interest rate risk exposure. The Companys
current liquidity profile, capital position, and growth prospects, offer
a level of flexibility for management to take actions that could offset some of
the negative effects of unfavorable movements in interest rates. Management believes the current exposure
to changes in interest rates is not significant in relation to the earnings and
capital strength of the Company.
In addition
to the simulation analysis, management uses an interest rate gap measure.
Table 10-Interest Rate Risk Analysis
below is a Condensed Static Gap Report, which
illustrates the anticipated repricing intervals of assets and liabilities as of
December 31, 2009. The Companys one-year interest rate gap was a negative
$113,000 or 3.59% of total assets at December 31, 2009, compared with a
negative $12,000 or .44% of total assets at December 31, 2008. A negative gap
position exists when the amount of interest-bearing liabilities maturing or
repricing exceeds the amount of interest-earning assets maturing or repricing
within a particular time period. This analysis suggests that the Companys net
interest income is more vulnerable to an increasing rate environment than it is
to a prolonged declining interest rate environment. An interest rate gap
measure could be significantly affected by external factors such as a rise or
decline in interest rates, loan or securities prepayments, and deposit
withdrawals.
Table 10 Interest
Rate Risk Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Static Gap - December 31, 2009
|
|
Repricing Interval
|
|
(dollar amounts in
thousands)
|
|
Total
|
|
0-3 months
|
|
3-6 months
|
|
6-12 months
|
|
Cumulative
12 months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets*
|
|
$
|
2,922,138
|
|
$
|
723,268
|
|
$
|
227,652
|
|
$
|
327,716
|
|
$
|
1,278,636
|
|
Interest-bearing
liabilities
|
|
|
2,404,688
|
|
|
965,084
|
|
|
178,338
|
|
|
248,471
|
|
|
1,391,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gap
position
|
|
|
|
|
|
(241,816)
|
|
|
49,314
|
|
|
79,245
|
|
|
(113,257)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gap
position as a percentage of total assets
|
|
|
|
|
|
(7.67%)
|
|
|
1.56%
|
|
|
2.51%
|
|
|
(3.59%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Balances of available-for-sale securities
are shown at amortized cost
41
[This Page Intentionally Left Blank]
42
|
|
I
tem 7.
|
Financial Statements and Supplementary Data
|
Financial
Statements and Supplementary Data consist of the consolidated financial
statements as indexed and presented below and the Unaudited Quarterly Financial
Data presented in Part II, Item 7. of this Report
43
M
anagements Statement
of Responsibility
Management
is responsible for preparation of the consolidated financial statements and
related financial information contained in all sections of this annual report,
including the determination of amounts that must necessarily be based on
judgments and estimates. It is the belief of management that the consolidated
financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America.
Management
establishes and monitors the Companys system of internal accounting controls
to meet its responsibility for reliable financial statements. The system is
designed to provide reasonable assurance that assets are safeguarded, and that
transactions are executed in accordance with managements authorization and are
properly recorded.
The
Audit/Examining Committee of the board of directors, composed solely of outside
directors, meets periodically and privately with management, internal auditors,
and independent registered public accounting firm, KPMG LLP, to review matters
relating to the quality of financial reporting, internal accounting control,
and the nature, extent, and results of audit efforts. The independent
registered public accounting firm and internal auditors have unlimited access
to the Audit/Examining Committee to discuss all such matters. The consolidated
financial statements have been audited by KPMG, LLP for the purpose of
expressing an opinion on the consolidated financial statements. In addition, KPMG,
LLP has audited internal control over financial reporting.
|
|
|
|
|
|
Date: March 12, 2010
|
|
|
|
|
Stephen S. Romaine
|
|
Francis M. Fetsko
|
|
Chief Executive Officer
|
|
Chief Financial Officer
|
|
44
R
eport of Independent
Registered Public Accounting Firm
The Board of Directors and
Shareholders
Tompkins Financial Corporation:
We
have audited the accompanying consolidated statements of condition of Tompkins
Financial Corporation and subsidiaries (the Company) as of December 31, 2009
and 2008, and the related consolidated statements of income, changes in
shareholders equity, and cash flows for each of the years in the three-year
period ended December 31, 2009. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Tompkins Financial
Corporation and subsidiaries as of December 31, 2009 and 2008, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2009, in conformity with U.S. generally
accepted accounting principles.
We
also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), Tompkins Financial Corporation and subsidiaries internal control over financial reporting as of December 31, 2009, based on
criteria established in
Internal Control
Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated March 12,
2010 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial
reporting.
Syracuse, New York
March 12, 2010
45
R
eport of Independent
Registered Public Accounting Firm
The Board of Directors and
Shareholders
Tompkins Financial Corporation:
We
have audited Tompkins Financial Corporation and subsidiaries (the Company) internal control
over financial reporting as of December 31, 2009, based on criteria established
in
Internal Control-Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The Companys management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying
Managements Annual Report on Internal Control over
Financial Reporting
.
Our responsibility is to express an opinion on the Companys internal control
over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A
companys internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A companys internal control
over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and the directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the companys assets that could have a material effect on the
financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In
our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2009, based on
criteria established in
Internal
Control-Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
We
have also 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,
2009 and 2008, and the related consolidated statements of income, changes in
shareholders equity, and cash flows for each of the years in the three-year
period ended December 31, 2009, and our report dated March 12, 2010 expressed
an unqualified opinion on those consolidated financial statements.
Syracuse, New York
March 12, 2010
46
C
onsolidated Statements of Condition
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
(in thousands except share and per share
data)
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and noninterest bearing balances due from banks
|
|
$
|
43,686
|
|
$
|
48,133
|
|
Interest bearing balances due from banks
|
|
|
1,676
|
|
|
4,116
|
|
Money market funds
|
|
|
100
|
|
|
100
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
|
45,462
|
|
|
52,349
|
|
|
|
|
|
|
|
|
|
Trading securities, at fair value
|
|
|
31,718
|
|
|
38,101
|
|
Available-for-sale securities, at fair value
|
|
|
928,770
|
|
|
741,219
|
|
Held-to-maturity securities, fair value of $46,340 at December 31,
2009, and $55,064 at December 31, 2008
|
|
|
44,825
|
|
|
54,453
|
|
Loans and leases, net of unearned income and deferred costs and fees
|
|
|
1,914,818
|
|
|
1,817,531
|
|
Less: Allowance for loan and lease losses
|
|
|
24,350
|
|
|
18,672
|
|
|
|
|
|
|
|
|
|
Net Loans and Leases
|
|
|
1,890,468
|
|
|
1,798,859
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank and Federal Reserve Bank stock
|
|
|
20,041
|
|
|
22,874
|
|
Bank premises and equipment, net
|
|
|
46,650
|
|
|
46,613
|
|
Corporate owned life
insurance
|
|
|
35,953
|
|
|
34,804
|
|
Goodwill
|
|
|
41,589
|
|
|
41,479
|
|
Other intangible assets
|
|
|
4,864
|
|
|
5,299
|
|
Accrued interest and other
assets
|
|
|
62,920
|
|
|
31,672
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
3,153,260
|
|
$
|
2,867,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
Interest bearing:
|
|
|
|
|
|
|
|
Checking, savings, and money market
|
|
$
|
1,183,145
|
|
$
|
980,011
|
|
Time
|
|
|
794,738
|
|
|
703,107
|
|
Noninterest bearing
|
|
|
461,981
|
|
|
450,889
|
|
|
|
|
|
|
|
|
|
Total Deposits
|
|
|
2,439,864
|
|
|
2,134,007
|
|
|
|
|
|
|
|
|
|
Federal funds purchased and securities sold under agreement to
repurchase ($5,500 valued at fair value at December 31, 2009 and $16,170
valued at fair value at December 31, 2008)
|
|
|
192,784
|
|
|
196,304
|
|
Other borrowings ($11,335 valued at fair value at December 31, 2009
and $12,179 valued at fair value at December 31, 2008)
|
|
|
208,965
|
|
|
274,791
|
|
Trust preferred debentures
|
|
|
25,056
|
|
|
3,888
|
|
Other liabilities
|
|
|
41,583
|
|
|
39,371
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
2,908,252
|
|
|
2,648,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Tompkins Financial Corporation shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock par value $0.10 per share: Authorized 25,000,000
shares; Issued: 9,785,265 shares at December 31, 2009, and 9,727,418 shares at
December 31, 2008
|
|
|
978
|
|
|
973
|
|
Additional paid-in capital
|
|
|
155,589
|
|
|
152,842
|
|
Retained earnings
|
|
|
92,402
|
|
|
73,779
|
|
Accumulated other comprehensive loss
|
|
|
(3,087
|
)
|
|
(7,602
|
)
|
Treasury stock at cost- 81,723 shares at December 31, 2009, and 76,881
shares at December 31, 2008
|
|
|
(2,326
|
)
|
|
(2,083
|
)
|
|
|
|
|
|
|
|
|
Total Tompkins Financial Corporation Shareholders Equity
|
|
$
|
243,556
|
|
$
|
217,909
|
|
Noncontrolling Interest
|
|
|
1,452
|
|
|
1,452
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
$
|
245,008
|
|
$
|
219,361
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
|
$
|
3,153,260
|
|
$
|
2,867,722
|
|
|
|
|
|
|
|
|
|
See notes to consolidated
financial statements.
47
C
onsolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
(in thousands except per share data)
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST
AND DIVIDEND INCOME
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
107,452
|
|
$
|
102,840
|
|
$
|
97,418
|
|
Due from banks
|
|
|
27
|
|
|
133
|
|
|
217
|
|
Federal funds sold
|
|
|
15
|
|
|
115
|
|
|
217
|
|
Money market funds
|
|
|
36
|
|
|
246
|
|
|
0
|
|
Trading securities
|
|
|
1,362
|
|
|
1,923
|
|
|
2,762
|
|
Available-for-sale
securities
|
|
|
35,196
|
|
|
32,561
|
|
|
28,763
|
|
Held-to-maturity securities
|
|
|
1,814
|
|
|
1,891
|
|
|
2,054
|
|
Other
|
|
|
893
|
|
|
1,074
|
|
|
1,010
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest and Dividend Income
|
|
|
146,795
|
|
|
140,783
|
|
|
132,441
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST
EXPENSE
|
|
|
|
|
|
|
|
|
|
|
Time certificates of
deposit of $100,000 or more
|
|
|
5,442
|
|
|
9,039
|
|
|
14,750
|
|
Other deposits
|
|
|
18,769
|
|
|
25,489
|
|
|
30,735
|
|
Federal funds purchased and securities sold under agreements to
repurchase
|
|
|
6,254
|
|
|
7,496
|
|
|
8,125
|
|
Other borrowings
|
|
|
8,206
|
|
|
8,216
|
|
|
4,802
|
|
Trust preferred debentures
|
|
|
1,087
|
|
|
153
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest Expense
|
|
|
39,758
|
|
|
50,393
|
|
|
58,412
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income
|
|
|
107,037
|
|
|
90,390
|
|
|
74,029
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Provision for Loan/Lease Losses
|
|
|
9,288
|
|
|
5,428
|
|
|
1,529
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income After Provision for Loan/Lease Losses
|
|
|
97,749
|
|
|
84,962
|
|
|
72,500
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST
INCOME
|
|
|
|
|
|
|
|
|
|
|
Investment services income
|
|
|
13,328
|
|
|
14,179
|
|
|
14,446
|
|
Insurance commissions and
fees
|
|
|
12,307
|
|
|
11,607
|
|
|
11,046
|
|
Service charges on deposit
accounts
|
|
|
9,312
|
|
|
10,192
|
|
|
10,401
|
|
Card services income
|
|
|
3,664
|
|
|
3,338
|
|
|
3,453
|
|
Mark-to-market gain on
trading securities
|
|
|
204
|
|
|
811
|
|
|
612
|
|
Mark-to-market gain (loss)
on liabilities held at fair value
|
|
|
1,263
|
|
|
(2,001
|
)
|
|
(1,348
|
)
|
Gain on VISA stock
redemption
|
|
|
0
|
|
|
1,639
|
|
|
0
|
|
Other income
|
|
|
5,933
|
|
|
5,793
|
|
|
5,055
|
|
Net other than temporary
impairment losses (1)
|
|
|
(146
|
)
|
|
0
|
|
|
0
|
|
Net gain on sale of
available-for-sale securities
|
|
|
348
|
|
|
477
|
|
|
384
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Noninterest Income
|
|
|
46,213
|
|
|
46,035
|
|
|
44,049
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
Salaries and wages
|
|
|
40,459
|
|
|
40,140
|
|
|
35,225
|
|
Pension and other employee
benefits
|
|
|
13,367
|
|
|
10,307
|
|
|
9,986
|
|
Net occupancy expense of
bank premises
|
|
|
7,135
|
|
|
6,839
|
|
|
6,046
|
|
Furniture and fixture
expense
|
|
|
4,462
|
|
|
4,197
|
|
|
3,866
|
|
FDIC insurance
|
|
|
4,976
|
|
|
933
|
|
|
206
|
|
Amortization of intangible
assets
|
|
|
915
|
|
|
906
|
|
|
653
|
|
Other operating expenses
|
|
|
25,303
|
|
|
23,734
|
|
|
22,074
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Noninterest Expenses
|
|
|
96,617
|
|
|
87,056
|
|
|
78,056
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Tax Expense
|
|
|
47,345
|
|
|
43,941
|
|
|
38,493
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense
|
|
|
15,383
|
|
|
13,810
|
|
|
11,991
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
Attributable to Noncontrolling Interests and
|
|
|
|
|
|
|
|
|
|
|
Tompkins Financial Corporation
|
|
|
31,962
|
|
|
30,131
|
|
|
26,502
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Net Income Attributable to Noncontrolling Interest
|
|
|
131
|
|
|
297
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Tompkins Financial Corporation
|
|
$
|
31,831
|
|
$
|
29,834
|
|
$
|
26,371
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share (2)
|
|
$
|
2.98
|
|
$
|
2.81
|
|
$
|
2.47
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share (2)
|
|
$
|
2.96
|
|
$
|
2.78
|
|
$
|
2.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In 2009, $1.78 million of
gross other-than-temporary impairment losses on debt securities available for
sale were recognized, of which $1.63 million, were recognized in accumulated
other comprehensive loss, net of tax.
|
|
|
|
|
(2)
|
Per share data has been
retroactively adjusted to reflect a 10% stock dividend paid on February 15,
2010.
|
See notes to consolidated
financial statements.
48
|
|
|
|
|
|
|
|
|
|
|
C
onsolidated Statements of Cash Flows
|
|
Year ended December 31
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Tompkins
Financial Corporation
|
|
$
|
31,831
|
|
$
|
29,834
|
|
$
|
26,371
|
|
Adjustments to reconcile net income
attributable to Tompkins Financial Corporation to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
Provision for loan/lease losses
|
|
|
9,288
|
|
|
5,428
|
|
|
1,529
|
|
Depreciation and amortization premises,
equipment, and software
|
|
|
4,484
|
|
|
4,670
|
|
|
4,334
|
|
Amortization of intangible assets
|
|
|
915
|
|
|
906
|
|
|
653
|
|
Earnings from corporate owned life
insurance, net
|
|
|
(1,090
|
)
|
|
(1,448
|
)
|
|
(1,122
|
)
|
Net amortization on securities
|
|
|
1,878
|
|
|
1,326
|
|
|
1,443
|
|
Other-than-temporary impairment loss
|
|
|
146
|
|
|
0
|
|
|
0
|
|
Mark-to-market gain on trading securities,
net
|
|
|
(204
|
)
|
|
(811
|
)
|
|
(612
|
)
|
Mark-to-market (gain) loss on liabilities
held at fair value
|
|
|
(1,263
|
)
|
|
2,001
|
|
|
1,348
|
|
Deferred income tax (benefit) expense
|
|
|
(1,854
|
)
|
|
1,124
|
|
|
(1,529
|
)
|
Net gain on sale of securities
|
|
|
(348
|
)
|
|
(477
|
)
|
|
(384
|
)
|
Net gain on sale of loans
|
|
|
(1,357
|
)
|
|
(105
|
)
|
|
(159
|
)
|
Proceeds from sale of loans
|
|
|
90,357
|
|
|
11,453
|
|
|
10,906
|
|
Loans originated for sale
|
|
|
(90,206
|
)
|
|
(11,010
|
)
|
|
(11,059
|
)
|
Net loss (gain) on sale of bank premises
and equipment
|
|
|
7
|
|
|
(52
|
)
|
|
27
|
|
Stock-based compensation expense
|
|
|
938
|
|
|
931
|
|
|
713
|
|
Increase in interest receivable
|
|
|
(139
|
)
|
|
(257
|
)
|
|
(203
|
)
|
Decrease in interest payable
|
|
|
(799
|
)
|
|
(1,108
|
)
|
|
(399
|
)
|
Proceeds from sales of trading securities
|
|
|
0
|
|
|
479
|
|
|
61,912
|
|
Purchases of trading securities
|
|
|
0
|
|
|
(3,998
|
)
|
|
(72,300
|
)
|
Proceeds from payments/maturities of
trading securities
|
|
|
6,315
|
|
|
26,007
|
|
|
14,034
|
|
Contribution to pension plan
|
|
|
0
|
|
|
(10,000
|
)
|
|
0
|
|
Increase in FDIC prepaid insurance
|
|
|
(11,423
|
)
|
|
0
|
|
|
0
|
|
Other, net
|
|
|
(13,612
|
)
|
|
6,638
|
|
|
2,070
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
23,864
|
|
|
61,531
|
|
|
37,573
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Proceeds from maturities of
available-for-sale securities
|
|
|
303,700
|
|
|
225,873
|
|
|
125,292
|
|
Proceeds from sales of available-for-sale
securities
|
|
|
32,510
|
|
|
62,571
|
|
|
61,714
|
|
Proceeds from maturities of
held-to-maturity securities
|
|
|
21,506
|
|
|
12,511
|
|
|
16,961
|
|
Purchases of available-for-sale securities
|
|
|
(519,902
|
)
|
|
(351,666
|
)
|
|
(221,357
|
)
|
Purchases of held-to-maturity securities
|
|
|
(11,930
|
)
|
|
(17,447
|
)
|
|
(7,622
|
)
|
Net increase in loans/leases
|
|
|
(99,691
|
)
|
|
(229,428
|
)
|
|
(114,762
|
)
|
Net decrease (increase) in Federal Home
Loan Bank and Federal Reserve Bank stock
|
|
|
2,833
|
|
|
(4,536
|
)
|
|
(6,004
|
)
|
Proceeds from sales of bank premises and equipment
|
|
|
53
|
|
|
119
|
|
|
134
|
|
Purchase of bank premises and equipment
|
|
|
(5,165
|
)
|
|
(2,771
|
)
|
|
(5,548
|
)
|
Purchase of corporate owned life insurance
|
|
|
0
|
|
|
0
|
|
|
(3,000
|
)
|
Net cash provided by (used in) acquisitions
|
|
|
0
|
|
|
12,176
|
|
|
(314
|
)
|
Other, net
|
|
|
(1,875
|
)
|
|
(103
|
)
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
|
(277,961
|
)
|
|
(292,701
|
)
|
|
(154,549
|
)
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net increase in demand, money market, and
savings deposits
|
|
|
214,226
|
|
|
177,350
|
|
|
95,486
|
|
Net increase (decrease) in time deposits
|
|
|
91,631
|
|
|
6,794
|
|
|
(84,080
|
)
|
Net (decrease) increase in securities sold
under agreements to repurchase and Federal funds purchased
|
|
|
(3,102
|
)
|
|
240
|
|
|
3,404
|
|
Increase in other borrowings
|
|
|
11,000
|
|
|
145,200
|
|
|
208,100
|
|
Repayment of other borrowings
|
|
|
(75,981
|
)
|
|
(82,655
|
)
|
|
(83,974
|
)
|
Cash dividends
|
|
|
(13,208
|
)
|
|
(12,728
|
)
|
|
(12,023
|
)
|
Proceeds from issuance of trust preferred
debentures, net of issuance cost
|
|
|
21,073
|
|
|
0
|
|
|
0
|
|
Shares issued for dividend reinvestment plans
|
|
|
631
|
|
|
0
|
|
|
0
|
|
Repurchase of common stock
|
|
|
(178
|
)
|
|
(58
|
)
|
|
(12,914
|
)
|
Redemption of preferred stock
|
|
|
0
|
|
|
(4,524
|
)
|
|
0
|
|
Net proceeds from exercise of stock options
|
|
|
955
|
|
|
3,354
|
|
|
611
|
|
Tax benefit from stock option
exercises
|
|
|
163
|
|
|
587
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
247,210
|
|
|
233,560
|
|
|
114,661
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash
equivalents
|
|
|
(6,887
|
)
|
|
2,390
|
|
|
(2,315
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of
year
|
|
|
52,349
|
|
|
49,959
|
|
|
52,274
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year
|
|
$
|
45,462
|
|
$
|
52,349
|
|
$
|
49,959
|
|
|
|
|
|
|
|
|
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for - Interest
|
|
$
|
40,558
|
|
$
|
51,501
|
|
$
|
58,811
|
|
Cash paid during the year for - Income
taxes
|
|
|
28,117
|
|
|
9,872
|
|
|
9,802
|
|
Non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
Fair value of non-cash assets other than
goodwill acquired in purchase acquisitions
|
|
|
0
|
|
|
208,101
|
|
|
9
|
|
Fair value of liabilities assumed in
purchase acquisitions
|
|
|
0
|
|
|
238,737
|
|
|
0
|
|
Goodwill related to acquisitions
|
|
|
0
|
|
|
18,585
|
|
|
1,659
|
|
Fair value of shares issued for
acquisitions
|
|
|
0
|
|
|
0
|
|
|
701
|
|
Transfer of available-for-sale securities
to trading securities with adoption of fair value option
|
|
|
0
|
|
|
0
|
|
|
63,383
|
|
See notes to consolidated financial
statements.
50
C
onsolidated
Statements of Changes in Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands except share and per share data)
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
|
Treasury
Stock
|
|
Noncontrolling
Interest
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES AT DECEMBER 31, 2006
|
|
$
|
989
|
|
$
|
158,203
|
|
$
|
44,429
|
|
$
|
(12,487
|
)
|
$
|
(1,514
|
)
|
$
|
1,452
|
|
$
|
191,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interest and Tompkins
Financial Corporation
|
|
|
|
|
|
|
|
|
26,371
|
|
|
|
|
|
|
|
|
131
|
|
|
26,502
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
4,065
|
|
|
|
|
|
|
|
|
4,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends ($1.13 per share)
|
|
|
|
|
|
|
|
|
(12,023
|
)
|
|
|
|
|
|
|
|
|
|
|
(12,023
|
)
|
Exercise of stock options, and related tax benefit (34,495 shares, net)
|
|
|
4
|
|
|
658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
662
|
|
Common stock repurchased and returned to unissued status (332,347 shares)
|
|
|
(33
|
)
|
|
(12,881
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,914
|
)
|
Stock issued for purchase acquisition (23,713 shares)
|
|
|
2
|
|
|
699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
701
|
|
Directors deferred compensation plan (6,748 shares)
|
|
|
|
|
|
265
|
|
|
|
|
|
|
|
|
(265
|
)
|
|
|
|
|
0
|
|
Cumulative effect adjustment adoption of SFAS 159
|
|
|
|
|
|
|
|
|
(1,522
|
)
|
|
1,522
|
|
|
|
|
|
|
|
|
0
|
|
Stock-based compensation expense
|
|
|
|
|
|
713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
713
|
|
Dividend to minority interest holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(131
|
)
|
|
(131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES
AT DECEMBER 31, 2007
|
|
$
|
962
|
|
$
|
147,657
|
|
$
|
57,255
|
|
$
|
(6,900
|
)
|
$
|
(1,779
|
)
|
$
|
1,452
|
|
$
|
198,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interest and Tompkins
Financial Corporation
|
|
|
|
|
|
|
|
|
29,834
|
|
|
|
|
|
|
|
|
297
|
|
|
30,131
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
(702
|
)
|
|
|
|
|
|
|
|
(702
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends ($1.20 per share)
|
|
|
|
|
|
|
|
|
(12,728
|
)
|
|
|
|
|
|
|
|
|
|
|
(12,728
|
)
|
Exercise of stock options and related tax benefit (116,236 shares, net)
|
|
|
12
|
|
|
3,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,941
|
|
Common stock repurchased and returned to Unissued status (1,500 shares)
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58
|
)
|
Reduction in shares issued for purchase acquisition (2,748 shares)
|
|
|
(1
|
)
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
|
|
Directors deferred compensation plan (5,985 shares)
|
|
|
|
|
|
304
|
|
|
|
|
|
|
|
|
(304
|
)
|
|
|
|
|
0
|
|
Cumulative effect adjustment adoption of EITF 06-4
|
|
|
|
|
|
|
|
|
(582
|
)
|
|
|
|
|
|
|
|
|
|
|
(582
|
)
|
Stock-based compensation expense
|
|
|
|
|
|
931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
931
|
|
Noncontrolling interest acquired in connection with Sleepy Hollow Bancorp, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,443
|
|
|
4,443
|
|
Repayment of noncontrolling interest acquired in connection with Sleepy Hollow Bancorp,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,443
|
)
|
|
(4,443
|
)
|
Dividend to minority interest holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(297
|
)
|
|
(297
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES AT DECEMBER 31, 2008
|
|
$
|
973
|
|
$
|
152,842
|
|
$
|
73,779
|
|
$
|
(7,602
|
)
|
$
|
(2,083
|
)
|
$
|
1,452
|
|
$
|
219,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interest and Tompkins
Financial Corporation
|
|
|
|
|
|
|
|
|
31,831
|
|
|
|
|
|
|
|
|
131
|
|
|
31,962
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
4,515
|
|
|
|
|
|
|
|
|
4,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends ($1.24 per share)
|
|
|
|
|
|
|
|
|
(13,208
|
)
|
|
|
|
|
|
|
|
|
|
|
(13,208
|
)
|
Exercise of stock options and related tax benefit (34,393 shares, net)
|
|
|
3
|
|
|
1,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,118
|
|
Common stock repurchased and returned to unissued status (5,000 shares)
|
|
|
(1
|
)
|
|
(177
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(178
|
)
|
Stock-based compensation expense
|
|
|
|
|
|
938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
938
|
|
Shares issued for dividend reinvestment plan (15,554 shares)
|
|
|
2
|
|
|
629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
631
|
|
Directors deferred compensation plan (4,842 shares)
|
|
|
|
|
|
243
|
|
|
|
|
|
|
|
|
(243
|
)
|
|
|
|
|
0
|
|
Net shares issued related restricted stock awards (12,900 shares)
|
|
|
1
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
Dividend to minority interest holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(131
|
)
|
|
(131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES
AT DECEMBER 31, 2009
|
|
$
|
978
|
|
$
|
155,589
|
|
$
|
92,402
|
|
$
|
(3,087
|
)
|
$
|
(2,326
|
)
|
$
|
1,452
|
|
$
|
245,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data has been retroactively adjusted to
reflect a 10% stock dividend paid on February 15, 2010.
See notes to consolidated
financial statements.
51
Note
1 Summary of Significant Accounting Policies
BASIS OF PRESENTATION:
Tompkins Financial Corporation (Tompkins
or the Company) is a registered Financial Holding Company with the Federal
Reserve Board pursuant to the Bank Holding Company Act of 1956, as amended,
organized under the laws of New York State, and is the parent company of
Tompkins Trust Company (the Trust Company), The Bank of Castile, The Mahopac
National Bank (Mahopac National Bank), Tompkins Insurance Agencies, Inc.
(Tompkins Insurance) and AM&M Financial Services, Inc. (AM&M).
Unless the context otherwise requires, the term Company refers to Tompkins
Financial Corporation and its subsidiaries.
The
consolidated financial information included herein combines the results of operations,
the assets, liabilities, and shareholders equity (including comprehensive
income or loss) of the Company and all entities in which the Company has a
controlling financial interest. All significant intercompany balances and
transactions are eliminated in consolidation.
The
Company determines whether it has a controlling financial interest in an entity
by first evaluating whether the entity is a voting interest entity or a
variable interest entity under U.S. accounting principles generally accepted.
Voting interest entities are entities in which the total equity investment at
risk is sufficient to enable the entity to finance itself independently and
provides the equity holders with the obligation to absorb losses, the right to
receive residual returns and the right to make decisions about the entitys
activities. The Company consolidates voting interest entities in which it has
all, or at least a majority of, the voting interest. As defined in applicable
accounting standards, variable interest entities (VIEs) are entities that lack
one or more of the characteristics of a voting interest entity. A controlling
financial interest in an entity is present when an enterprise has a variable
interest, or a combination of variable interests, that will absorb a majority
of the entitys expected losses, receive a majority of the entitys expected
residual returns, or both. The enterprise with a controlling financial
interest, known as the primary beneficiary, consolidates the VIE. The Companys
wholly owned subsidiaries, Tompkins Capital Trust I and Sleepy Hollow Capital
Trust I, are VIEs for which the Company is not the primary beneficiary.
Accordingly, the accounts of these entities are not included in the Companys
consolidated financial statements.
The
consolidated financial statements have been prepared in accordance with U.S.
generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclose contingent
assets and liabilities, at the date of the financial statements and the
reported amounts of revenue and expense during the reporting period. Actual
results could differ from those estimates. Significant items subject to such
estimates and assumptions include the allowance for loan and lease losses,
valuation of intangible assets, deferred income tax assets,
other-than-temporary impairment on investments, and obligations related to
employee benefits. Amounts in the prior years consolidated financial
statements are reclassified when necessary to conform to the current years
presentation.
The
Company has evaluated subsequent events for potential recognition and/or
disclosure through March 12, 2010, the date the consolidated financial
statements included in this Annual Report on Form 10-K were issued.
CASH EQUIVALENTS:
Cash equivalents in the Consolidated Statements of Cash Flows include
cash and noninterest bearing balances due from banks, interest-bearing balances
due from banks, Federal funds sold, and money market funds. Management
regularly evaluates the credit risk associated with the counterparties to these
transactions and believes that the Company is not exposed to any significant
credit risk on cash and cash equivalents. Each bank subsidiary is required to
maintain reserve balances by the Federal Reserve Bank of New York. At December
31, 2009, and December 31, 2008 the reserve requirements for the Companys
banking subsidiaries totaled $3,704,000 and $5,995,000, respectively.
SECURITIES:
Management determines the appropriate classification of debt and
equity securities at the time of purchase. Securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity. Held-to-maturity securities are stated at amortized
cost. Debt securities not classified as held-to-maturity and marketable equity
securities are classified as either available-for-sale or trading.
Available-for-sale securities are stated at fair value with the unrealized
gains and losses, net of tax, excluded from earnings and reported as a separate
component of accumulated comprehensive income or loss, in shareholders equity.
Trading securities are stated at fair value, with unrealized gains or losses
included in earnings.
Securities
with limited marketability or restricted equity securities, such as Federal
Home Loan Bank stock and Federal Reserve Bank stock, are carried at cost.
Premiums
and discounts are amortized or accreted over the expected life of the related
security as an adjustment to yield using the interest method. Dividend and
interest income are recognized when earned. Realized gains and losses on the
sale of securities are included in securities gains (losses). The cost of securities
sold is based on the specific identification method.
At
least quarterly, the Company reviews its investment portfolio to identify any
securities where there is other-than-temporary impairment. In cases where fair value is less than amortized cost and
the Company intends to sell a debt security, it is more likely than not to be
required to sell a debt security before recovery of its amortized cost basis,
or the Company does not expect to recover the entire amortized cost basis of a
debt security, an other-than-temporary impairment is considered to have
occurred. If the Company intends to sell the debt security or more likely than
not will be required to sell the security before recovery of its amortized cost
basis, the other-than-temporary impairment is recognized in earnings equal to
the entire difference between the debt securitys amortized cost basis and its
fair value at the balance sheet date. If the Company does not expect to recover
the entire amortized cost basis of the security, the Company does not intend to
sell the security and it is not more likely than not that the Company will be
required to sell the security before recovery of its amortized cost basis, the
other-than-temporary impairment is separated into (a) the amount representing
the credit loss and (b) the amount related to all other factors. The amount of
52
Note 1 Summary of Significant Accounting
Policies
(continued)
the other-than-temporary impairment related to the credit loss is recognized in
earnings while the amount related to other factors is recognized in other
comprehensive income, net of applicable taxes. Subsequently, the Company
accounts for the other-than-temporarily impaired debt security as if the
security had been purchased on the measurement date of the other-than-temporary
impairment at an amortized cost basis equal to the previous amortized cost
basis less the other-than-temporary impairment recognized in earnings. The cost
basis of individual equity securities is written down to estimated fair value
through a charge to earnings when declines in value below cost are considered
to be other than temporary. Realized gains and losses on the sales of
investment securities are determined using the specific identification method.
LOANS AND LEASES:
Loans are reported at their principal outstanding balance, net of
deferred loan origination fees and costs, and unearned income. The Company has
the ability and intent to hold its loans for the foreseeable future, except for
certain residential real estate loans held-for-sale. The Company provides motor
vehicle and equipment financing to its customers through direct financing
leases. These leases are carried at the aggregate of lease payments receivable,
plus estimated residual values, less unearned income. Unearned income on direct
financing leases is amortized over the lease terms, resulting in a level rate
of return.
Interest income on loans is accrued and credited to income based
upon the principal amount outstanding. Loan origination fees and costs are
deferred and recognized over the life of the loan as an adjustment to yield.
Residential
real estate loans originated and intended for sale in the secondary market are
carried at the lower of aggregate cost or estimated fair value. Fair value is
determined on the basis of the rates quoted in the secondary market. Net
unrealized losses attributable to changes in market interest rates are
recognized through a valuation allowance by charges to income. Loans are
generally sold on a non-recourse basis with servicing retained. Any gain or
loss on the sale of loans is recognized at the time of sale as the difference
between the recorded basis in the loan and the net proceeds from the sale. The
Company may use commitments at the time loans are originated or identified for
sale to mitigate interest rate risk. The commitments to sell loans are
considered derivatives under ASC Topic 815. The impact of the estimated fair
value adjustment was not significant to the consolidated financial statements.
The
Company accounts for impaired loans under FASB ASC Topic 310,
Receivables
(ASC Topic 310), which
requires that impaired loans, except for large groups of smaller-balance
homogeneous loans, be measured based on either the present value of expected
future cash flows discounted at the loans effective interest rate, the loans
observable market price or the fair value of the collateral (less costs to
sell) if the loan is collateral dependent. If the measurement of the impaired
loan is less than the recorded investment in the loan, an impairment reserve is
recognized as part of the allowance for loan losses.
The
Company applies the provisions of ASC Topic 310 to all impaired commercial and
commercial real estate loans over $250,000 and to all loans restructured in a troubled debt restructuring.
Allowances for loan losses for the remaining loans are recognized in accordance
with ASC Topic 450,
Contingencies
(ASC
Topic 450). Management considers a loan to be impaired if, based on current
information, it is probable that the Company will be unable to collect all
scheduled payments of principal or interest when due, according to the
contractual terms of the loan agreement. When a loan is considered to be
impaired, the amount of the impairment is measured based on the present value
of expected future cash flows discounted at the effective interest rate of the
loan or, as a practical expedient, at the observable market price or the fair
value of collateral (less costs to sell) if the loan is collateral dependent.
Management excludes large groups of smaller balance homogeneous loans such as
residential mortgages, consumer loans, and leases, which are collectively
evaluated.
Loans
are considered to have been modified in a troubled debt restructuring (TDR)
when due to a borrowers financial difficulties, the Company makes certain
concessions to the borrower that it would not otherwise consider. Modifications
may include interest rate reductions, principal or interest forgiveness,
forbearance, and other actions intended to minimize economic loss and to avoid
foreclosure or repossession of collateral. Generally, a nonaccrual loan that
has been modified in a TDR remains on non-accrual status for a period of six
months to demonstrate that the borrower is able to meet the terms of the
modified loan. However, performance prior to the modification, or significant
events that coincide with the modification, are included in assessing whether
the borrower can meet the new terms and may result in the loan being returned
to accrual status at the time of loan modification or after a shorter
performance period. If the borrowers ability to meet the revised payment
schedule is uncertain, the loan remains on nonaccrual status.
ALLOWANCE FOR LOAN AND LEASE LOSSES:
Management regularly reviews the allowance
for loan and lease losses in order to maintain the allowance at a level
consistent with the inherent risk of loss in the loan and lease portfolios. The
Company has developed a methodology to measure the amount of estimated loan
loss exposure inherent in the loan portfolio to ensure that an adequate
allowance is maintained. The methodology includes an estimate of exposure for
the following: specifically reviewed and graded loans; historical loss
experience by product type; past due and nonperforming loans; and other
internal and external factors such as local and regional economic conditions,
growth trends, collateral values, and credit policy and underwriting standards.
The methodology includes a review of loans considered impaired in accordance
with ASC Topic 310. In addition, other commercial loans and commercial mortgage
loans are evaluated using an internal rating system. An estimated exposure
amount is assigned to these internally reviewed credits based upon a review of
the borrowers financial condition, payment history, collateral adequacy,
business conditions, and historical loss experience. For commercial loans and
commercial mortgage loans not specifically reviewed, and for homogenous loan
portfolios such as residential mortgage loans and consumer loans, estimated
exposure amounts are assigned based upon historical loss experience as well as
past due status. Lastly, additional allowances are maintained based upon
management judgment and assessment of other quantitative and qualitative
factors such as regional and local economic conditions, portfolio growth
trends, new lending products, and new market areas.
53
Note 1 Summary of Significant Accounting
Policies
(continued)
Since
the methodology is based upon historical experience and trends as well as
managements judgment, factors may arise that result in different estimations.
Significant factors that could give rise to changes in these estimates may
include, but are not limited to, changes in economic conditions in the local
area, concentration of risk, and declines in local property values. In
addition, various Federal and State regulatory agencies, as part of their
examination process, review the Companys allowance and may require the Company
to recognize additions to the allowance based on their judgments about
information available to them at the time of their examination which may not be
currently available to management.
INCOME RECOGNITION ON IMPAIRED AND NONACCRUAL LOANS AND
LEASES:
Loans and
leases, including impaired loans, are generally classified as nonaccrual if
they are past due as to maturity or payment of principal or interest for a
period of more than 90 days, unless such loans are well secured and in the
process of collection. Loans that are past due less than 90 days may also be
classified as nonaccrual if repayment in full of principal or interest is in
doubt.
Loans may be returned to accrual status when all principal and interest
amounts contractually due (including arrearages) are reasonably assured of
repayment within an acceptable time period, and there is a sustained period of
repayment performance by the borrower in accordance with the contractual terms
of the loan agreement. Payments received on loans carried as nonaccrual are
generally applied as a reduction to the outstanding balance on the Companys
books. When the future collectibility of the recorded loan balance is expected,
interest income may be recognized on a cash basis.
OTHER REAL ESTATE OWNED:
Other real estate owned consists of
properties formerly pledged as collateral to loans, which have been acquired by
the Company through foreclosure proceedings or acceptance of a deed in lieu of
foreclosure. Upon transfer of a loan to foreclosure status, an appraisal is
obtained and any excess of the loan balance over the fair value, less estimated
costs to sell, is charged against the allowance for loan/lease losses. Expenses
and subsequent adjustments to the fair value are treated as other operating
expense.
PREMISES AND EQUIPMENT:
Land is carried at cost. Premises and
equipment are stated at cost, less allowances for depreciation. The provision
for depreciation for financial reporting purposes is computed generally by the
straight-line method at rates sufficient to write-off the cost of such assets
over their estimated useful lives. Buildings are amortized over a period of
10-39 years, and furniture, fixtures, and equipment are amortized over a period
of 2-20 years. Maintenance and repairs are charged to expense as incurred.
Gains or losses on disposition are reflected in earnings.
INCOME TAXES:
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. Deferred taxes are reviewed quarterly and reduced
by a valuation allowance if, based upon the information available, it is more
likely than not that some or all of the deferred tax assets will not be
realized. Realization of deferred tax assets is dependent upon the generation
of a sufficient level of future taxable income and recoverable taxes paid in
prior years. Although realization is not assured, management believes it is
more likely than not that all of the deferred tax assets will be realized. The
Companys policy is to recognize interest and penalties on unrecognized tax
benefits in income tax expense in the Consolidated Statements of Income.
GOODWILL:
Goodwill represents the excess of purchase price over the fair value
of assets acquired in a transaction using purchase accounting. The Company
tests goodwill for impairment at least annually.
OTHER INTANGIBLE ASSETS:
Other intangible assets include core deposit
intangibles, customer related intangibles, covenants not to compete, and
mortgage servicing rights. Core deposit intangibles represent a premium paid to
acquire a base of stable, low cost deposits in the acquisition of a bank, or a
bank branch, using purchase accounting. The amortization period for core
deposit intangible ranges from 5 years to 10 years, using an accelerated
method. The covenants not to compete are amortized on a straight-line basis
over 3 to 6 years, while the customer related intangible is amortized on an
accelerated basis over a range of 6 to 15 years. The amortization period is
monitored to determine if circumstances require such periods to be revised. The
Company periodically reviews its intangible assets for changes in circumstances
that may indicate the carrying amount of the asset is impaired. The Company
tests its intangible assets for impairment on an annual basis or more frequently
if conditions indicate that an impairment loss has more likely than not been
incurred.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE:
Securities sold under agreements to
repurchase (repurchase agreements) are agreements in which the Company
transfers the underlying securities to a third-party custodians account that
explicitly recognizes the Companys interest in the securities. The agreements
are accounted for as secured financing transactions provided the Company
maintains effective control over the transferred securities and meets other
criteria as specified in FASB ASC Topic 860,
Transfers
and Servicing
(ASC Topic 860). The Companys agreements are
accounted for as secured financings; accordingly, the transaction proceeds are
reflected as liabilities and the securities underlying the agreements continue
to be carried in the Companys securities portfolio.
Under
FASB ASC Topic 825,
Financial Instruments
(ASC Topic 825) the Company elected to account for certain repurchase
agreements at fair value, with unrealized gains or losses included in earnings.
TREASURY STOCK:
The cost of treasury stock is shown on the Consolidated Statements of
Condition as a separate component of shareholders equity, and is a reduction
to total shareholders equity. Shares are released from treasury at fair value,
identified on an average cost basis.
54
Note 1 Summary of Significant Accounting
Policies
(continued)
TRUST AND INVESTMENT SERVICES:
Assets held in fiduciary or agency
capacities for customers are not included in the accompanying Consolidated
Statements of Condition, since such items are not assets of the Company. Fees
associated with providing trust and investment services are included in
noninterest income.
EARNINGS PER SHARE:
Basic earnings per share is calculated by dividing net income
available to common shareholders by the weighted average number of shares
outstanding during the year. Diluted earnings per share is calculated by
dividing net income available to common shareholders by the weighted average number
of shares outstanding during the year plus the dilutive effect of stock
issuable upon conversion of common stock equivalents (primarily stock options)
or certain other contingencies.
SEGMENT REPORTING:
The Company has identified two business segments, banking and
financial services. Financial services activities consist of the results of the
Companys trust, financial planning and wealth management, broker-dealer, and
risk management operations. All other activities are considered banking.
COMPREHENSIVE INCOME:
For the Company, comprehensive income
represents net income plus the net change in unrealized gains or losses on
securities available-for-sale for the period (net of taxes), and the actuarial
gain or loss and amortization of unrealized amounts in the Companys
defined-benefit retirement and pension plan, supplemental employee retirement
plan, and post-retirement life and healthcare benefit plan (net of taxes), and
is presented in the Consolidated Statements of Changes in Shareholders Equity.
Accumulated other comprehensive income (loss) represents the net unrealized
gains or losses on securities available-for-sale (net of tax) and unrecognized
net actuarial gain or loss, unrecognized prior service costs, and unrecognized
net initial obligation (net of tax) in the Companys defined-benefit retirement
and pension plan, supplemental employee retirement plan, and post-retirement
life and healthcare benefit plan.
PENSION AND OTHER EMPLOYEE BENEFITS:
The Company incurs certain employment-related
expenses associated with its noncontributory defined-benefit pension plan,
supplemental employee retirement plan and post-retirement healthcare benefit
plan. In order to measure the expense associated with these plans, various
assumptions are made including the discount rate used to value certain
liabilities, expected return on plan assets, anticipated mortality rates, and
expected future healthcare costs. The assumptions are based on historical
experience as well as current facts and circumstances. A third-party actuarial
firm is used to assist management in measuring the expense and liability
associated with the plans. The Company uses a December 31 measurement date for
its plans. As of the measurement date, plan assets are determined based on fair
value, generally representing observable market prices. The projected benefit
obligation is primarily determined based on the present value of projected
benefit distributions at an assumed discount rate.
Periodic
pension expense or credits include service costs, interest costs based on the
assumed discount rate, the expected return on plan assets based on actuarially
derived market-related values, and amortization of actuarial gains or losses.
Periodic postretirement benefit expense or credits include service costs, interest
costs based on the assumed discount rate, amortization of unrecognized net
transition obligations, and recognized actuarial gains or losses.
STOCK BASED COMPENSATION:
Under FASB ASC Topic 718,
Compensation - Stock Compensation
(ASC
Topic 718), compensation costs recognized include: (a) the compensation cost
for all share-based payments granted prior to, but not yet vested as of January
1, 2006, based upon the grant date fair value estimated in accordance with the
provisions of ASC Topic 718, and (b) the compensation cost for all share-based
payments granted subsequent to January 1, 2006, based on the grant date fair
value estimated. Compensation cost is recorded on a straight-line basis over
the vesting period of the awards.
The
Companys stock-based employee compensation plan is described in Note 14 Stock
Plans and Stock Based Compensation, of this Report.
FAIR VALUE MEASUREMENTS:
On January 1, 2007, the Company adopted the
provisions of FASB ASC Topic 820,
Fair Value
Measurements and Disclosures
(ASC Topic 820), for financial assets
and financial liabilities. ASC Topic 820 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements. See Note 19 Fair
Value Measurements.
In
general, fair values of financial instruments are based upon quoted market
prices, where available. If such quoted market prices are not available, fair
value is based upon internally developed models that primarily use, as inputs,
observable market-based parameters. Valuation adjustments may be made to ensure
that financial instruments are recorded at fair value. These adjustments may
include amounts to reflect counterparty credit quality and the Companys creditworthiness,
among other things, as well as unobservable parameters. Any such valuation
adjustments are applied consistently over time.
ENDORSEMENT SPLIT-DOLLAR LIFE INSURANCE:
On January 1, 2008, the Company adopted FASB
ASC Topic 718
Compensation Retirement
Benefits
(ASC Topic 718). With the adoption, the Company
recognized a cumulative-effect adjustment to retained earnings totaling
$582,000 related to accounting for certain endorsement split-dollar life
insurance arrangements.
55
Note 1 Summary of Significant Accounting
Policies
(continued)
RECENT ACCOUNTING PRONOUNCEMENTS
The
Financial Accounting Standards Boards (FASB) Accounting Standards
Codification (ASC) became effective on July 1, 2009. At that date, the ASC
became FASBs officially recognized source of authoritative U.S. generally
accepted accounting principles (GAAP) applicable to all public and non-public
non-governmental entities, superseding existing FASB, American Institute of
Certified Public Accountants, Emerging Issues Task Force (EITF) and related
literature. Rules and interpretive releases of the SEC under the authority of
federal securities laws are also sources of authoritative GAAP for SEC
registrants. All other accounting literature is considered non-authoritative.
The switch to the ASC affects how companies refer to U.S. GAAP in financial
statements and accounting policies. Citing particular content in the ASC
involves specifying the unique numeric path to the content through the Topic,
Subtopic, Section and Paragraph structure. The Company adopted this accounting
standard as of September 30, 2009. The adoption of this accounting standard,
which was subsequently codified into ASC Topic 105,
Generally Accepted Accounting Principles,
did not have an
impact on the Companys consolidated financial statements.
FASB
ASC Topic 260
, Earnings Per Share
(ASC
Topic 260)
.
On January 1, 2009,
the Company adopted new authoritative accounting guidance under ASC Topic 260,
which provides that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and shall be included in the computation
of earnings per share pursuant to the two-class method. The Companys adoption
of this guidance did not have a material impact on the Companys consolidated
financial statements.
FASB
ASC Topic 320
, Investments - Debt and Equity
Securities
(ASC Topic 320)
.
New
authoritative accounting guidance under ASC Topic 320 (i) changes existing
guidance for determining whether an impairment is other than temporary to debt
securities and (ii) replaces the existing requirement that the entitys
management assert it has both the intent and ability to hold an impaired
security until recovery with a requirement that management assert: (a) it does
not have the intent to sell the security; and (b) it is more likely than not it
will not have to sell the security before recovery of its cost basis. Under ASC
Topic 320, declines in the fair value of held-to-maturity and
available-for-sale securities below their cost that are deemed to be other than
temporary are reflected in earnings as realized losses to the extent the
impairment is related to credit losses. The amount of the impairment related to
other factors is recognized in other comprehensive income. The Companys
adoption of the provisions of the new authoritative accounting guidance under
ASC Topic 320 during the second quarter of 2009 did not have a material impact
on the Companys consolidated financial statements. See Note 3 Securities
for details on the Companys impairment analysis of debt securities.
FASB
ASC Topic 715
, Compensation - Retirement
Benefits
(ASC Topic 715)
.
New
authoritative accounting guidance under ASC Topic 715 provides guidance related
to an employers disclosures about plan assets of defined benefit pension or
other post-retirement benefit plans. Under ASC Topic 715, disclosures should
provide users of financial statements with an understanding of how investment
allocation decisions are made, the factors that are pertinent to an
understanding of investment policies and strategies, the major categories of
plan assets, the inputs and valuation techniques used to measure the fair value
of plan assets, the effect of fair value measurements using significant
unobservable inputs on changes in plan assets for the period and significant
concentrations of risk within plan assets. The disclosures required by ASC
Topic 715 will be included in the Companys financial statements beginning with
the financial statements for the year ended December 31, 2009.
FASB
ASC Topic 805
, Business Combinations
(ASC
Topic 805). On January 1, 2009, new authoritative accounting guidance under
ASC Topic 805 became applicable to the accounting for business combinations
closing on or after January 1, 2009. ASC Topic 805 applies to all transactions
and other events in which one entity obtains control over one or more other
businesses. ASC Topic 805 requires an acquirer, upon initially obtaining
control of another entity, to recognize the assets, liabilities and any
non-controlling interest in the acquiree at fair value as of the acquisition
date. Contingent consideration is required to be recognized and measured at
fair value on the date of acquisition rather than at a later date when the
amount of that consideration may be determinable beyond a reasonable doubt.
This fair value approach replaces the cost-allocation process required under
previous accounting guidance whereby the cost of an acquisition was allocated
to the individual assets acquired and liabilities assumed based on their
estimated fair value. ASC Topic 805 requires acquirers to expense
acquisition-related costs as incurred rather than allocating such costs to the
assets acquired and liabilities assumed, as was previously the case under prior
accounting guidance. Assets acquired and liabilities assumed in a business
combination that arise from contingencies are to be recognized at fair value if
fair value can be reasonably estimated. If fair value of such an asset or
liability cannot be reasonably estimated, the asset or liability would
generally be recognized in accordance with FASB ASC Topic 450,
Contingencies
(ASC Topic 450). Under ASC
Topic 805, the requirements of FASB ASC Topic 420,
Exit or Disposal Cost Obligations
, would have to be met in
order to accrue for a restructuring plan in purchase accounting.
Pre-acquisition contingencies are to be recognized at fair value, unless it is
a non-contractual contingency that is not likely to materialize, in which case,
nothing should be recognized in purchase accounting and, instead, that
contingency would be subject to the probable and estimable recognition criteria
of ASC Topic 450. The requirements of ASC Topic 805 will apply prospectively to
any future business combinations closing on or after January 1, 2009. As of
December 31, 2009, the adoption of this standard did not have an impact on the
Companys financial statements. However, the adoption of this standard will
have a significant impact on how the Company accounts for acquisitions, if any,
prospectively.
56
Note 1 Summary of Significant Accounting
Policies
(continued)
FASB
ASC Topic 810
, Consolidation
(ASC
Topic 810). New authoritative accounting guidance under ASC Topic 810 amended
prior guidance to establish accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. Under ASC Topic 810, a non-controlling interest in a subsidiary,
which is sometimes referred to as minority interest, is an ownership interest
in the consolidated entity that should be reported as a component of equity in
the consolidated financial statements. Among other requirements, ASC Topic 810
requires consolidated net income to be reported at amounts that include the
amounts attributable to both the parent and the non-controlling interest. It
also requires disclosure, on the face of the consolidated income statement, of
the amounts of consolidated net income attributable to the parent and to the
non-controlling interest. The new authoritative accounting guidance under ASC
Topic 810 became effective on January 1, 2009 and did not have a significant
impact on the Companys consolidated financial statements.
Further
new authoritative accounting guidance under ASC Topic 810 amends prior guidance
to change how a company determines when an entity that is insufficiently
capitalized or is not controlled through voting (or similar rights) should be
consolidated. The determination of whether a company is required to consolidate
an entity is based on, among other things, an entitys purpose and design and a
companys ability to direct the activities of the entity that most
significantly impact the entitys economic performance. The new authoritative
accounting guidance requires additional disclosures about the reporting
entitys involvement with variable-interest entities and any significant
changes in risk exposure due to that involvement as well as its affect on the
entitys financial statements. The new authoritative accounting guidance under
ASC Topic 810 will be effective January 1, 2010 and is not expected to have a
significant impact on the Companys consolidated financial statements.
FASB
ASC Topic 815
, Derivatives and Hedging
(ASC
Topic 815). New authoritative accounting guidance under ASC Topic 815 amends
prior guidance to amend and expand the disclosure requirements for derivatives
and hedging activities to provide greater transparency about (i) how and why an
entity uses derivative instruments, (ii) how derivative instruments and related
hedge items are accounted for under ASC Topic 815, and (iii) how derivative
instruments and related hedged items affect an entitys financial position,
results of operations and cash flows. To meet those objectives, the new authoritative
accounting guidance requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about fair value
amounts of gains and losses on derivative instruments and disclosures about
credit-risk-related contingent features in derivative agreements. The new
authoritative accounting guidance under ASC Topic 815 became effective on
January 1, 2009 and did not have a significant impact on the Companys
consolidated financial statements.
FASB
ASC Topic 820
, Fair Value Measurements and
Disclosures
(ASC Topic 820). New authoritative accounting guidance
under ASC Topic 820 affirms that the objective of fair value when the market
for an asset is not active is the price that would be received to sell the
asset in an orderly transaction, and clarifies and includes additional factors
for determining whether there has been a significant decrease in market
activity for an asset when the market for that asset is not active. ASC Topic
820 requires an entity to base its conclusion about whether a transaction was
not orderly on the weight of the evidence. The new accounting guidance amended
prior guidance to expand certain disclosure requirements. The Companys
adoption of the new authoritative accounting guidance under ASC Topic 820
during the second quarter of 2009 did not significantly impact the Companys
consolidated financial statements.
Further
new authoritative accounting guidance (Accounting Standards Update No. 2009-5)
under ASC Topic 820 provides guidance for measuring the fair value of a
liability in circumstances in which a quoted price in an active market for the
identical liability is not available. In such instances, a reporting entity is
required to measure fair value utilizing a valuation technique that uses (i) the
quoted price of the identical liability when traded as an asset, (ii) quoted
prices for similar liabilities or similar liabilities when traded as assets, or
(iii) another valuation technique that is consistent with the existing
principles of ASC Topic 820, such as an income approach or market approach. The
new authoritative accounting guidance also clarifies that when estimating the
fair value of a liability, a reporting entity is not required to include a
separate input or adjustment to other inputs relating to the existence of a
restriction that prevents the transfer of the liability. The new authoritative
accounting guidance under ASC Topic 820 was effective for the Companys
financial statements for fiscal years beginning after October 1, 2009 and did
not have a significant impact on the Companys consolidated financial
statements.
FASB
ASC Topic 825,
Financial Instruments
(ASC
Topic 825). New authoritative accounting guidance under ASC Topic 825 requires
an entity to provide disclosures about the fair value of financial instruments
in interim financial information and amends prior guidance to require those
disclosures in summarized financial information at interim reporting periods.
The interim disclosures required under Topic 825 are included in Note 19- Fair
Value Measurements.
FASB
ASC Topic 855
, Subsequent Events
(ASC
Topic 855). New authoritative accounting guidance under ASC Topic 855
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued
or available to be issued. ASC Topic 855 defines (i) the period after the
balance sheet date during which a reporting entitys management should evaluate
events or transactions that may occur for potential recognition or disclosure
in the financial statements, (ii) the circumstances under which an entity
should recognize events or transactions occurring after the balance sheet date
in its financial statements, and (iii) the disclosures an entity should make about
events or transactions that occurred after the balance sheet date. The new
authoritative accounting guidance under ASC Topic 855 became effective for the
Companys financial statements for periods ending after June 15, 2009 and did
not have a significant impact on the Companys consolidated financial
statements.
57
Note 1 Summary of Significant Accounting
Policies
(continued)
FASB
ASC Topic 860
, Transfers and Servicing,
(ASC
Topic 860). New authoritative accounting guidance under ASC Topic 860 amends
prior accounting guidance to enhance reporting about transfers of financial
assets, including securitizations, and where companies have continuing exposure
to the risks related to transferred financial assets. The new authoritative
accounting guidance eliminates the concept of a qualifying special-purpose
entity and changes the requirements for derecognizing financial assets. The
new authoritative accounting guidance also requires additional disclosures
about all continuing involvements with transferred financial assets including
information about gains and losses resulting from transfers during the period.
The new authoritative accounting guidance under ASC Topic 860 will be effective
January 1, 2010 and is not expected to have a significant impact on the
Companys financial statements.
Note 2 Mergers and Acquisitions
The
acquisitions discussed below were accounted for as purchase transactions. The
purchase price was allocated to the underlying assets and liabilities based on
estimated fair values at the date of acquisition. The operating results of the
acquired companies are included in the Companys results of operations since
their respective dates of acquisition.
On
May 9, 2008, the Company acquired Sleepy Hollow Bancorp, Inc., (Sleepy
Hollow), a privately held bank holding company located in Sleepy Hollow, New
York. The outstanding shares of common stock of Sleepy Hollow were cancelled
and exchanged for the right to receive the per-share cash merger consideration
totaling $30.2 million. The total cost of the Sleepy Hollow acquisition was
approximately $30.5 million, including acquisition related costs of
approximately $234,000. Sleepy Hollow Bank, the wholly-owned subsidiary of
Sleepy Hollow, was merged into Mahopac National Bank.
The
transaction resulted in intangible assets of $21.1 million, including goodwill
of $18.4 million, core deposit intangibles of $2.4 million, and a
covenant-not-to-compete of $313,000. The core deposit intangible asset is being
amortized over 10 years using an accelerated method. The
covenant-not-to-compete is being amortized over 3 years. The goodwill is not
being amortized but will be evaluated at least annually for impairment.
Goodwill is not deductible for taxes. The results of operations of Sleepy
Hollow are included in the Companys consolidated earnings commencing on May 9,
2008.
On
May 1, 2008, AM&M acquired the stock of Robert G. Relph Comprehensive
Brokerage Services, Inc., a local insurance agency engaged in the provision of
insurance brokerage services, in a cash transaction. The transaction resulted
in goodwill of $234,000, customer related intangibles of $68,000 and a
covenant-not-to-compete of $12,000. The customer related intangibles and
covenant-not-to-compete are being amortized over 15 years and 5 years,
respectively. Additional merger consideration of $23,000 was paid in 2009 as
certain criteria was met, and recorded as part of goodwill.
On
September 28, 2007, AM&M acquired the assets of Francis M. Celona, CPA,
P.C., a local accounting and financial services company in Honeoye Falls, New
York, in a cash transaction. The transaction resulted in initial goodwill of
$47,000, customer related intangibles of $56,000 and a covenant-not-to-compete
of $6,000. The customer related intangibles and covenant-not-to-compete are
being amortized over 15 years and 5 years, respectively. In addition to the
merger consideration paid at closing, additional contingent amounts of up to
$180,000 may be paid over a period of three years from closing, depending on
certain criteria being met. Additional payments of $60,000 and $58,000 were
made in 2009 and 2008, respectively, and recorded as part of goodwill.
On
September 1, 2007, Tompkins Insurance acquired Flint-Farrell Insurance Agency,
an insurance agency in Amherst, New York, in a cash transaction. The
transaction resulted in goodwill of $110,000, customer related intangibles of
$58,000 and a covenant-not-to-compete of $24,000. The customer related
intangibles and covenant-not-to-compete are being amortized over 15 and 5 years,
respectively. Goodwill was increased by $18,000 in 2008 as the requirements for
contingent consideration were met.
On
January 6, 2006, the Company completed its acquisition of AM&M Financial
Services, Inc. (AM&M), a fee-based financial planning firm headquartered
in Pittsford, New York. Under the terms of the Agreement and Plan of Merger
dated November 21, 2005 by and between the Company and AM&M, the Company
acquired all of the issued and outstanding shares of AM&M stock for an
initial merger consideration of $2,375,000 in cash and 59,377 shares of
Tompkins common stock. The transaction resulted in intangible assets of $4.7
million, including goodwill of $3.7 million, customer related intangible of
$968,000, and a covenant-not-to-compete of $108,000. The customer related
intangible and the covenant-not-to-compete are being amortized over 15 years
and 5 years, respectively.
In
addition to the merger consideration paid at closing, additional contingent
amounts of up to $8.5 million (payable one-half in cash and one-half in
Tompkins common stock) may be paid over a period of four years from closing,
depending on the operating results of AM&M. There was no provision for
contingent consideration in 2008. Operating results for AM&M in 2007 and 2006
resulted in additional consideration, which was recorded as goodwill at the
time of payment, under the criteria established by SFAS No. 141. The amount of
additional goodwill recorded in 2007 and 2006 were $1.5 million and $2.2
million, respectively. In 2008, the Company adjusted the goodwill recorded at
year-end 2007 related to the contingent consideration by $79,000.
58
Note 3
Securities
Available-for-Sale Securities
The following
summarizes available-for-sale securities held by the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale Securities
|
|
|
|
|
|
|
|
|
December 31, 2009
(in thousands)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
1,991
|
|
$
|
88
|
|
$
|
0
|
|
$
|
2,079
|
|
Obligations of U.S. Government sponsored
entities
|
|
|
377,920
|
|
|
3,369
|
|
|
2,274
|
|
|
379,015
|
|
Obligations of U.S. states and political
subdivisions
|
|
|
61,176
|
|
|
2,537
|
|
|
18
|
|
|
63,695
|
|
Mortgage-backed securities residential
|
|
|
461,677
|
|
|
18,211
|
|
|
2,207
|
|
|
477,681
|
|
U.S. corporate debt securities
|
|
|
5,032
|
|
|
104
|
|
|
0
|
|
|
5,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
907,796
|
|
|
24,309
|
|
|
4,499
|
|
|
927,606
|
|
Equity securities
|
|
|
1,164
|
|
|
0
|
|
|
0
|
|
|
1,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities
|
|
$
|
908,960
|
|
$
|
24,309
|
|
$
|
4,499
|
|
$
|
928,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale Securities
|
|
|
|
|
|
|
|
|
December 31, 2008
(in thousands)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
3,102
|
|
$
|
161
|
|
$
|
0
|
|
$
|
3,263
|
|
Obligations of U.S. Government sponsored
entities
|
|
|
191,435
|
|
|
4,913
|
|
|
86
|
|
|
196,262
|
|
Obligations of U.S. states and political
subdivisions
|
|
|
63,158
|
|
|
721
|
|
|
325
|
|
|
63,554
|
|
Mortgage-backed securities residential
|
|
|
465,612
|
|
|
11,323
|
|
|
2,964
|
|
|
473,971
|
|
U.S. corporate debt securities
|
|
|
2,500
|
|
|
0
|
|
|
0
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
725,807
|
|
|
17,118
|
|
|
3,375
|
|
|
739,550
|
|
Equity securities
|
|
|
1,669
|
|
|
0
|
|
|
0
|
|
|
1,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities
|
|
$
|
727,476
|
|
$
|
17,118
|
|
$
|
3,375
|
|
$
|
741,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities include miscellaneous
investments carried at fair value, which approximates cost.
Substantially all of the above
mortgage-backed securities are residential direct pass through securities or
collateralized mortgage obligations issued or backed by Federal sponsored
entities. Available-for-sale mortgage-backed securities also
include non-agency issue mortgage-backed securities, which totaled $12.7
million (amortized cost) at December 31, 2009, and $17.3 million (amortized
cost) at December 31, 2008.
Held-to-Maturity Securities
The following
summarizes held-to-maturity securities held by the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity Securities
|
|
|
|
|
|
|
|
|
December 31, 2009
(in thousands)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of U.S. states and political subdivisions
|
|
$
|
44,825
|
|
$
|
1,570
|
|
$
|
55
|
|
$
|
46,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity debt securities
|
|
$
|
44,825
|
|
$
|
1,570
|
|
$
|
55
|
|
$
|
46,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
Note 3 Securities
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity Securities
|
|
|
|
|
|
|
|
|
December 31, 2008
(in thousands)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of U.S. states and political subdivisions
|
|
$
|
54,453
|
|
$
|
829
|
|
$
|
218
|
|
$
|
55,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity debt securities
|
|
$
|
54,453
|
|
$
|
829
|
|
$
|
218
|
|
$
|
55,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized
gains on available-for-sale securities were $411,000 in 2009, $547,000 in 2008
and $423,000 in 2007; realized losses on available-for-sale securities were
$63,000 in 2009, $70,000 in 2008, and $39,000 in 2007.
The following table summarizes
available-for-sale and held-to-maturity securities that had unrealized losses
at December 31, 2009 and December 31, 2008, segregated according to the length
of time the securities had been in a continuous unrealized loss position.
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale Securities
|
|
Less than 12 Months
|
|
12 Months or Longer
|
|
Total
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of U.S. Government sponsored entities
|
|
$
|
188,529
|
|
$
|
2,274
|
|
$
|
0
|
|
$
|
0
|
|
$
|
188,529
|
|
$
|
2,274
|
|
Obligations
of U.S. states and political subdivisions
|
|
|
1,679
|
|
|
18
|
|
|
0
|
|
|
0
|
|
|
1,679
|
|
|
18
|
|
Mortgage-backed
securities residential
|
|
|
35,979
|
|
|
612
|
|
|
16,202
|
|
|
1,595
|
|
|
52,181
|
|
|
2,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities
|
|
$
|
226,187
|
|
$
|
2,904
|
|
$
|
16,202
|
|
$
|
1,595
|
|
$
|
242,389
|
|
$
|
4,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity Securities
|
|
Less than 12 Months
|
|
12 Months or Longer
|
|
Total
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of U.S. states and political subdivisions
|
|
$
|
1,099
|
|
$
|
45
|
|
$
|
320
|
|
$
|
10
|
|
$
|
1,419
|
|
$
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity securities
|
|
$
|
1,099
|
|
$
|
45
|
|
$
|
320
|
|
$
|
10
|
|
$
|
1,419
|
|
$
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale Securities
|
|
Less than 12 Months
|
|
12 Months or Longer
|
|
Total
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of U.S. Government sponsored entities
|
|
$
|
7,267
|
|
$
|
86
|
|
$
|
0
|
|
$
|
0
|
|
$
|
7,267
|
|
$
|
86
|
|
Obligations
of U.S. states and political subdivisions
|
|
|
18,872
|
|
|
320
|
|
$
|
105
|
|
$
|
5
|
|
$
|
18,977
|
|
$
|
325
|
|
Mortgage-backed
securities residential
|
|
|
22,801
|
|
|
2,683
|
|
|
10,010
|
|
|
281
|
|
|
32,811
|
|
|
2,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
|
|
$
|
48,940
|
|
$
|
3,089
|
|
$
|
10,115
|
|
$
|
286
|
|
$
|
59,055
|
|
$
|
3,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
Note 3 Securities
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity Securities
|
|
Less than 12 Months
|
|
12 Months or Longer
|
|
Total
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of U.S. states and political subdivisions
|
|
$
|
13,350
|
|
$
|
189
|
|
$
|
326
|
|
$
|
29
|
|
$
|
13,676
|
|
$
|
218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity securities
|
|
$
|
13,350
|
|
$
|
189
|
|
$
|
326
|
|
$
|
29
|
|
$
|
13,676
|
|
$
|
218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The gross unrealized losses
reported for mortgage-backed securities-residential relate to investment
securities issued by U.S. government sponsored enterprises such as Federal
National Mortgage Association and Federal Home Loan Mortgage Corporation, U.S.
government agencies such as Government National Mortgage Association, and
non-agencies. Total gross unrealized losses were primarily attributable to
changes in interest rates and levels of market liquidity, relative to when the
investment securities were purchased, and not due to the credit quality of the
investment securities.
The
Company does not intend to sell the investment securities that are in an
unrealized loss position and it is not more-likely-than not that the Company
will be required to sell the investment securities, before recovery of their
amortized cost basis, which may be at maturity. Accordingly, as of December 31,
2009, and December 31, 2008, management believes the unrealized losses
detailed in the tables above are not other-than-temporary.
Ongoing
Assessment of Other-Than-Temporary Impairment
On a quarterly basis, the Company performs an assessment to determine
whether there have been any events or economic circumstances indicating that a
security with an unrealized loss has suffered other-than-temporary impairment.
A debt security is considered impaired if the fair value is less than its
amortized cost basis at the reporting date. If impaired, the Company then
assesses whether the unrealized loss is other-than-temporary. An unrealized
loss on a debt security is generally deemed to be other-than-temporary and a
credit loss is deemed to exist if the present value, discounted at the
securitys effective rate, of the expected future cash flows is less than the
amortized cost basis of the debt security. As a result, the credit loss
component of an other-than-temporary impairment write-down for debt securities
is recorded in earnings while the remaining portion of the impairment loss is
recognized, net of tax, in other comprehensive income provided that the Company
does not intend to sell the underlying debt security and it is more-likely-than
not that the Company would not have to sell the debt security prior to recovery
of the unrealized loss. If the Company intended to sell any securities with an
unrealized loss or it is more-likely-than not that the Company would be
required to sell the investment securities, before recovery of their amortized
cost basis, then the entire unrealized loss would be recorded in earnings.
The
Company considers the following factors in determining whether a credit loss
exists and the period over which the debt security is expected to recover.
|
|
|
|
-
|
The length of time and the
extent to which the fair value has been less than the amortized cost basis;
|
|
|
|
|
-
|
The level of credit
enhancement provided by the structure which includes, but is not limited to,
credit subordination positions, excess spreads, overcollateralization,
protective triggers;
|
|
|
|
|
-
|
Changes in the near term
prospects of the issuer or underlying collateral of a security, such as
changes in default rates, loss severities given default and significant
changes in prepayment assumptions;
|
|
|
|
|
-
|
The level of excess cash
flow generated from the underlying collateral supporting the principal and
interest payments of the debt securities; and
|
|
|
|
|
-
|
Any adverse change to the
credit conditions of the issuer or the security such as credit downgrades by
the rating agencies.
|
During the third
quarter of 2009, the Company determined that three private label mortgage
backed securities were other-than-temporarily impaired based on our analysis of
the above factors for these three securities. As a result, the Company recorded
other-than-temporary impairment charges of $2.0 million in the third quarter of
2009 on these investments. The credit loss component of $146,000 was recorded
as net other-than-temporary impairment losses in the accompanying consolidated
statements of income, while the remaining non-credit portion of the impairment
loss was recognized in other comprehensive income (loss) in the accompanying
consolidated statements of condition and changes in shareholders equity. The
Company reviewed these securities in the fourth quarter of 2009 and determined
that no additional other-than-temporary charges were necessary. As of December
31, 2009, the amount by which the cost of these securities exceeded fair was
$1.8 million. A continuation or worsening of current economic conditions may
result in additional other-than-temporary impairment losses related to these
investments.
61
Note 3
Securities
(continued)
The following table summarizes the roll-forward of credit losses on
debt securities held by the Company for which a portion of an
other-than-temporary impairment is recognized in other comprehensive income:
|
|
|
|
|
(in thousands)
|
|
December 31, 2009
|
|
|
|
|
|
Credit losses at beginning of the period
|
|
$
|
0
|
|
Credit losses related to securities for
which an other-than-temporary impairment was not previously recognized
|
|
|
146
|
|
|
|
|
|
|
Ending balance of credit losses on debt
securities held for which a portion of an other-than-temporary impairment was
recognized in other comprehensive income
|
|
$
|
146
|
|
|
|
|
|
|
The amortized cost and estimated fair value of debt securities by
contractual maturity are shown in the following table. Expected maturities may
differ from contractual maturities because issuers may have the right to call
or prepay obligations with or without call or prepayment penalties.
Mortgage-backed securities are shown separately since they are not due at a
single maturity date.
|
|
|
|
|
|
|
|
December 31, 2009
(in thousands)
|
|
Amortized
Cost
|
|
Fair
Value
|
|
|
|
|
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
11,084
|
|
$
|
11,231
|
|
Due after one year through five years
|
|
|
128,493
|
|
|
130,008
|
|
Due after five years through ten years
|
|
|
296,734
|
|
|
298,694
|
|
Due after ten years
|
|
|
9,808
|
|
|
9,992
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
446,119
|
|
|
449,925
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
461,677
|
|
|
477,681
|
|
|
|
|
|
|
|
|
|
Total available-for-sale debt securities
|
|
$
|
907,796
|
|
$
|
927,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
(in thousands)
|
|
Amortized
Cost
|
|
Fair
Value
|
|
|
|
|
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
16,640
|
|
$
|
16,742
|
|
Due after one year through five years
|
|
|
70,769
|
|
|
71,999
|
|
Due after five years through ten years
|
|
|
159,268
|
|
|
163,137
|
|
Due after ten years
|
|
|
13,518
|
|
|
13,701
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
260,195
|
|
|
265,579
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
465,612
|
|
|
473,971
|
|
|
|
|
|
|
|
|
|
Total available-for-sale debt securities
|
|
$
|
725,807
|
|
$
|
739,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
(in thousands)
|
|
Amortized
Cost
|
|
Fair
Value
|
|
|
|
|
|
|
|
Held-to-maturity
securities:
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
17,017
|
|
$
|
17,153
|
|
Due after one year through five years
|
|
|
19,200
|
|
|
20,185
|
|
Due after five years through ten years
|
|
|
7,131
|
|
|
7,511
|
|
Due after ten years
|
|
|
1,477
|
|
|
1,491
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity debt securities
|
|
$
|
44,825
|
|
$
|
46,340
|
|
|
|
|
|
|
|
|
|
62
Note 3 Securities
(continued)
|
|
|
|
|
|
|
|
December 31, 2008
(in thousands)
|
|
Amortized
Cost
|
|
Fair
Value
|
|
|
|
|
|
|
|
Held-to-maturity
securities:
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
20,474
|
|
$
|
20,528
|
|
Due after one year through five years
|
|
|
21,608
|
|
|
22,089
|
|
Due after five years through ten years
|
|
|
10,389
|
|
|
10,552
|
|
Due after ten years
|
|
|
1,982
|
|
|
1,895
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity debt securities
|
|
$
|
54,453
|
|
$
|
55,064
|
|
|
|
|
|
|
|
|
|
Trading Securities
The following summarizes trading securities, at estimated fair value,
as of:
|
|
|
|
|
|
|
|
(in thousands)
|
|
December 31, 2009
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of U.S. Government sponsored entities
|
|
$
|
17,986
|
|
$
|
18,370
|
|
Mortgage-backed
securities residential
|
|
|
13,732
|
|
|
19,731
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
31,718
|
|
$
|
38,101
|
|
|
|
|
|
|
|
|
|
The net gains on trading account securities, which reflect
mark-to-market adjustments, totaled $204,000 in 2009, $811,000 in 2008 and
$612,000 in 2007.
The Company pledges securities as collateral
for public deposits and other borrowings, and sells securities under agreements
to repurchase (see Note 10 Securities Sold Under Agreements to Repurchase and
Federal Funds Purchased). Securities carried of $772.7 million and $699.6
million at December 31, 2009 and 2008, respectively, were either
pledged or sold under agreements to repurchase.
Except for U.S. government securities, there
were no holdings, when taken in the aggregate, of any single issuer that
exceeded 10% of shareholders equity at December 31, 2009.
The Company has an equity investment in a
small business investment company (SBIC) established for the purpose of
providing financing to small businesses in market areas served by the Company.
As of December 31, 2009 and 2008, this investment totaled $3.4 million and $3.5
million, respectively, and was included in other assets on the Companys
Consolidated Statements of Condition. The investment is accounted for under the
equity method of accounting. As of December 31, 2009, the Company reviewed this
investment and determined that there was no impairment.
The Company also holds non-marketable Federal
Home Loan Bank New York (FHLBNY) stock and non-marketable Federal Reserve
Bank (FRB) stock, both of which are required to be held for regulatory
purposes and for borrowing availability. The required investment in FHLB stock
is tied to the Companys borrowing levels with the FHLB. Holdings of FHLBNY
stock and FRB stock totaled $18.1 million and $1.9 million at December 31,
2009, respectively, and $21.0 million and $1.9 million at December 31, 2008,
respectively. These securities are carried at par, which is also cost. While
some Federal Home Loan Banks have stopped paying dividends and repurchasing
stock upon reductions in debt levels, the FHLBNY continues to pay dividends and
repurchase its stock. As such, the Company has not recognized any credit loss
other-than-temporary impairment on its holdings of FHLBNY stock.
63
Note 4 Comprehensive Income
Comprehensive
income for the three years ended December 31 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling
interests and Tompkins Financial Corporation
|
|
$
|
31,962
|
|
$
|
30,131
|
|
$
|
26,502
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain on available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
Net unrealized holding gain on
available-for-sale securities arising during the year. Pre-tax net unrealized
holding gain was $8,048 in 2009 $11,988 in 2008 and $7,977 in 2007.
|
|
|
4,829
|
|
|
7,193
|
|
|
4,786
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustment for net
realized gain on the sale of available-for-sale securities (pre-tax net gain
of $348 in 2009, $477 in 2008, and $384 in 2007).
|
|
|
(209
|
)
|
|
(286
|
)
|
|
(230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other-than-temporary impairment on
available-for-sale securities (includes $1,779 of gross OTTI losses less $146
of gross losses recognized in income) Pre-tax unrealized loss of $1,633 in
2009, $0 in 2008 and $0 in 2007.
|
|
|
(980
|
)
|
|
0
|
|
|
0
|
|
Employee
benefit plans:
|
|
|
|
|
|
|
|
|
|
|
Amortization of actuarial gains (losses),
prior service cost, and transition obligation (pre-tax of $(1,458) in 2009,
$12,682 in 2008, and $1,299 in 2007).
|
|
|
875
|
|
|
(7,609
|
)
|
|
(491
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss)
|
|
|
4,515
|
|
|
(702
|
)
|
|
4,065
|
|
Subtotal comprehensive income attributable
to noncontrolling interest and Tompkins Financial Corporation
|
|
|
36,477
|
|
|
29,429
|
|
|
30,567
|
|
Less: Other comprehensive income
attributable to noncontrolling interest
|
|
|
(131
|
)
|
|
(297
|
)
|
|
(131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to
Tompkins Financial Corporation
|
|
$
|
36,346
|
|
$
|
29,132
|
|
$
|
30,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive loss, net of tax,
as of year-end were follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Net unfunded
liability for employee benefit plans
|
|
$
|
(14,973
|
)
|
$
|
(15,848
|
)
|
$
|
(8,239
|
)
|
Net
unrealized gain (loss) on available-for-sale securities
|
|
|
11,886
|
|
|
8,246
|
|
|
1,339
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive loss
|
|
$
|
(3,087
|
)
|
$
|
(7,602
|
)
|
$
|
(6,900
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Note 5 Loan and Lease Classification
Summary and Related Party Transactions
Loans and
Leases at December 31 were as follows:
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
622,942
|
|
$
|
625,263
|
|
Commercial
real estate
|
|
|
641,737
|
|
|
571,929
|
|
Real estate
construction
|
|
|
58,125
|
|
|
52,114
|
|
Commercial
|
|
|
494,495
|
|
|
467,420
|
|
Consumer and
other
|
|
|
86,687
|
|
|
87,998
|
|
Leases
|
|
|
12,821
|
|
|
14,968
|
|
|
|
|
|
|
|
|
|
Total loans
and leases
|
|
|
1,916,807
|
|
|
1,819,692
|
|
Less
unearned income and net deferred costs and fees
|
|
|
(1,989
|
)
|
|
(2,161
|
)
|
|
|
|
|
|
|
|
|
Total loans and leases, net of unearned income and deferred costs and
fees
|
|
$
|
1,914,818
|
|
$
|
1,817,531
|
|
|
|
|
|
|
|
|
|
As part of its
asset/liability management strategy the Company may sell certain residential
mortgage loans in the secondary market. Loans are generally sold to Federal
Home Loan Mortgage Corporation (FHLMC) or State of New York Mortgage Agency
(SONYMA). During 2009, 2008, and 2007, the Company sold residential mortgage
loans totaling $89.0 million, $11.3 million, and $10.7 million, respectively,
and realized gains on these sales of $1.4 million, $105,000, and $159,000,
respectively. When residential
mortgage loans are sold, the Company typically retains all servicing rights,
which provides the Company with a source of
64
Note 5 Loan and Lease Classification
Summary and Related Party Transactions
(continued)
fee income. In connection with the
sales in 2009, 2008, and 2007, the Company recorded mortgage-servicing assets
of $648,000, $26,000, and $46,000, respectively.
Amortization of mortgage servicing assets amounted to $245,000 in 2009,
$117,000 in 2008 and $122,000 in 2007. At December 31, 2009 and 2008, the
Company serviced residential mortgage loans aggregating $206.0 million and
$149.9 million, including loans securitized and held as available-for-sale
securities. Mortgage servicing rights, at amortized basis evaluated for impairment,
totaled $1.4 million at December 31, 2009 and $961,000 at December 31, 2008.
Loans held for sale, which are included in residential real estate in the table
above, totaled $1.4 million and $145,000 at December 31, 2009 and 2008,
respectively. No loans were securitized in 2009 and 2008.
As members of the FHLB, the Companys subsidiary banks may use
unencumbered mortgage related assets to secure borrowings from the FHLB. At
December 31, 2009, the Company had $170.3 million in term advances from the FHLB
that were secured by residential mortgage loans.
The Companys loan and lease customers are located primarily in the
upstate New York communities served by its three subsidiary banks. The Trust
Company operates fourteen banking offices in the counties of Tompkins, Cayuga,
Cortland, and Schuyler, New York. The Bank of Castile operates fourteen banking
offices in towns situated in and around the areas commonly known as the
Letchworth State Park area and the Genesee Valley region of New York State.
Mahopac National Bank is located in Putnam County, New York, and operates five
offices in that county, three offices in neighboring Dutchess County, New York,
and six offices in Westchester County, New York. Other than general economic
risks, management is not aware of any material concentrations of credit risk to
any industry or individual borrower.
Directors and officers of the Company and its affiliated companies were
customers of, and had other transactions with, the Companys banking
subsidiaries in the ordinary course of business. Such loans and commitments
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons not related to the Company, and did not involve more than normal
risk of collectibility or present other unfavorable features.
Loan
transactions with related parties at December 31 are summarized as follows:
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
Balance at
beginning of year
|
|
$
|
10,504
|
|
$
|
12,653
|
|
New
Directors/Executive Officers
|
|
|
159
|
|
|
480
|
|
Former
Directors/Executive Officers
|
|
|
0
|
|
|
(518
|
)
|
New loans
and advancements
|
|
|
20,789
|
|
|
2,232
|
|
Loan
payments
|
|
|
(5,836
|
)
|
|
(4,343
|
)
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
25,615
|
|
$
|
10,504
|
|
|
|
|
|
|
|
|
|
Note 6 Allowance for Loan and Lease Losses
Changes in the
allowance for loan and lease losses at December 31 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Allowance at
beginning of year
|
|
$
|
18,672
|
|
$
|
14,607
|
|
$
|
14,328
|
|
Provisions
charged to operations
|
|
|
9,288
|
|
|
5,428
|
|
|
1,529
|
|
Recoveries
on loans and leases
|
|
|
624
|
|
|
442
|
|
|
510
|
|
Loans and
leases charged-off
|
|
|
(4,234
|
)
|
|
(3,290
|
)
|
|
(1,760
|
)
|
Allowance
acquired in purchase acquisition
|
|
|
0
|
|
|
1,485
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance at end of year
|
|
$
|
24,350
|
|
$
|
18,672
|
|
$
|
14,607
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys recorded investment in loans and leases that are
considered impaired totaled $30.0 million at December 31, 2009 and $9.7 million
at December 31, 2008. The average recorded investment in impaired
loans and leases was $17.0 million in 2009, $8.6 million in 2008, $6.8 million
in 2007. At December 31, 2009, $13.1 million of impaired loans had specific
reserve allocations of $803,000 and $16.9 million had no specific reserve
allocation. At December 31, 2008, $4.6 million of impaired loans had specific
reserve allocations of $414,000 and $5.1 million had no specific reserve
allocations. Interest income recognized on impaired loans and leases, all collected
in cash, and was $1.4 million for 2009, $455,000 for 2008, and $283,000 for
2007.
65
Note 6 Allowance for Loan and Lease Losses
(continued)
The principal balances of nonperforming loans and leases, including
impaired loans and leases, at December 31 are detailed in the table below.
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Loans 90
days past due and accruing
|
|
$
|
369
|
|
$
|
161
|
|
Nonaccrual
loans
|
|
|
31,289
|
|
|
15,798
|
|
Troubled
debt restructurings not included above
|
|
|
3,265
|
|
|
69
|
|
|
|
|
|
|
|
|
|
Nonperforming loans and leases
|
|
$
|
34,923
|
|
$
|
16,028
|
|
|
|
|
|
|
|
|
|
The difference between the interest income
that would have been recorded if these loans and leases had been paid in
accordance with their original terms and the interest income that was recorded
for the year ended December 31, 2009 was $669,000. The amounts for the years ended
December 31, 2008, and 2007 were not significant. The Company had no material commitments to
make additional advances to borrowers with nonperforming loans.
Note 7 Goodwill and Other Intangible Assets
Information regarding the carrying amount and the amortization expense
of the Companys acquired intangible assets are disclosed in the tables below.
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
(in thousands
)
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|
|
|
|
|
|
|
|
|
Amortized
intangible assets:
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangible
|
|
$
|
7,891
|
|
$
|
6,158
|
|
$
|
1,733
|
|
Other intangibles
|
|
|
6,492
|
|
|
3,361
|
|
|
3,131
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
amortized intangible assets
|
|
|
14,383
|
|
|
9,519
|
|
|
4,864
|
|
Goodwill
Banking segment
|
|
|
25,323
|
|
|
1,723
|
|
|
23,600
|
|
Goodwill
Financial Services segment
|
|
|
18,290
|
|
|
301
|
|
|
17,989
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
goodwill
|
|
|
43,613
|
|
|
2,024
|
|
|
41,589
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
57,996
|
|
$
|
11,543
|
|
$
|
46,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
(in thousands
)
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
intangible assets:
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangible
|
|
$
|
7,891
|
|
$
|
5,672
|
|
$
|
2,219
|
|
Other intangibles
|
|
|
5,766
|
|
|
2,686
|
|
|
3,080
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
amortized intangible assets
|
|
|
13,657
|
|
|
8,358
|
|
|
5,299
|
|
Goodwill
Banking segment
|
|
|
25,296
|
|
|
1,723
|
|
|
23,573
|
|
Goodwill
Financial Services segment
|
|
|
18,207
|
|
|
301
|
|
|
17,906
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
goodwill
|
|
|
43,503
|
|
|
2,024
|
|
|
41,479
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
57,160
|
|
$
|
10,382
|
|
$
|
46,778
|
|
|
|
|
|
|
|
|
|
|
|
|
The changes in the carrying amount of goodwill for the year ended
December 31, 2009 are provided in the following table. The changes in goodwill
were in both the Banking segment and the Financial Services segment.
|
|
|
|
|
|
|
|
(in thousands
)
|
|
Gross Carrying Amount
|
|
Net Carrying Amount
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2009
|
|
$
|
43,503
|
|
$
|
41,479
|
|
Goodwill adjustments related to prior year
acquisitions Banking Segment
|
|
|
27
|
|
|
27
|
|
Goodwill adjustments related to prior year
acquisitions Financial Services Segment
|
|
|
83
|
|
|
83
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
$
|
43,613
|
|
$
|
41,589
|
|
|
|
|
|
|
|
|
|
At December 31, 2009, the Company had unamortized goodwill related to
its various acquisitions totaling $41.6 million compared with $41.5 million at
December 31, 2008. During 2009, the Company recorded additional goodwill of
$60,000 related to the acquisition of Fran Celona, CPA, P.C., and $23,000
related to the acquisition of Robert G. Relph Comprehensive Brokerage Services,
Inc., as the requirement for contingent consideration was met resulting in
additional consideration being paid. In addition, the Company adjusted the
goodwill recorded during 2008 related to the acquisition of Sleepy Hollow
Bancorp, Inc. by $27,000.
66
Note 7 Goodwill and Other Intangible Assets
(continued)
At December 31, 2009, the Company had core deposit intangible assets
related to various acquisitions of $1.7 million compared to $2.2 million at
December 31, 2008. Amortization of core deposit intangible assets amounted to
$485,000 in 2009, $470,000 in 2008 and $278,000 in 2007.
At December 31, 2009, other intangible assets, consisting of mortgage
servicing rights, customer lists and contracts, and covenants-not-to-compete,
totaled $3.1 million compared with $3.1 million at December 31, 2008.
The Company reviews its goodwill and intangible assets annually, or
more frequently if conditions warrant, for impairment. In testing goodwill for
impairment, the Company compares the estimated fair value of each reporting
unit to their respective carrying amounts, including goodwill. Based on the
Companys 2009 review, there was no impairment of its goodwill or intangible
assets. The Companys estimated fair value significantly exceeds the carrying
value for all reporting units. The Companys goodwill impairment testing is,
however, highly sensitive to certain assumptions and estimates used. In the
event that further significant deterioration in the economy and credit
conditions beyond the levels already reflected in our cash flow forecasts
occur, or changes in the strategy or performance of our business or product
offerings occur, additional interim impairment tests may be required.
Amortization
expense related to intangible assets totaled $915,000 in 2009, $906,000 in
2008, and $653,000 in 2007. The estimated aggregate future amortization expense
for intangible assets remaining as of December 31, 2009 is as follows:
|
|
|
|
|
Estimated
amortization expense: *
|
|
|
|
|
For the year ended December 31, 2010
|
|
$
|
764
|
|
For the year ended December 31, 2011
|
|
|
563
|
|
For the year ended December 31, 2012
|
|
|
456
|
|
For the year ended December 31, 2013
|
|
|
370
|
|
For the year ended December 31, 2014
|
|
|
313
|
|
|
|
|
|
|
*Excludes the amortization of mortgage servicing rights. Amortization
of mortgage servicing rights was $245,000, $117,000, and $122,000 in 2009,
2008, and 2007, respectively.
Note 8 Premises and Equipment
Premises and equipment
at December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
7,652
|
|
$
|
7,727
|
|
$
|
7,591
|
|
Premises
|
|
|
52,395
|
|
|
51,418
|
|
|
47,473
|
|
Furniture,
fixtures, and equipment
|
|
|
36,434
|
|
|
34,116
|
|
|
31,934
|
|
Accumulated
depreciation and amortization
|
|
|
(49,831
|
)
|
|
(46,648
|
)
|
|
(42,187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
46,650
|
|
$
|
46,613
|
|
$
|
44,811
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization expenses in 2009, 2008, and 2007 are included in operating
expenses as follows:
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Premises
|
|
$
|
1,633
|
|
$
|
1,768
|
|
$
|
1,378
|
|
Furniture,
fixtures, and equipment
|
|
|
2,439
|
|
|
2,443
|
|
|
2,431
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,072
|
|
$
|
4,211
|
|
$
|
3,809
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the future minimum lease payments under
non-cancelable operating leases as of December 31, 2009:
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2,212
|
|
2011
|
|
|
1,680
|
|
2012
|
|
|
1,477
|
|
2013
|
|
|
1,295
|
|
2014
|
|
|
1,183
|
|
Thereafter
|
|
|
11,767
|
|
|
|
|
|
|
Total
|
|
$
|
19,614
|
|
|
|
|
|
|
67
Note 8 Premises and Equipment
(continued)
The Company leases land, buildings and equipment under operating lease
arrangements extending to the year 2090. Total gross rental expense amounted to
$2.4 million in 2009, $2.4 million in 2008, and $2.1 million in 2007. Most
leases include options to renew for periods ranging from 5 to 20 years. Options
to renew are not included in the above future minimum rental commitments. The
Company has two land lease commitments with terms expiring in 2042 and 2090.
Note 9 Deposits
The aggregate time deposits of $100,000 or more were $327.9 million at
December 31, 2009, and $277.8 million at December 31, 2008. Scheduled
maturities of time deposits at December 31, 2009, were as follows:
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Less than
$100,000
|
|
$100,000
and over
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity
|
|
|
|
|
|
|
|
|
|
|
Three months or less
|
|
$
|
117,852
|
|
$
|
144,598
|
|
$
|
262,450
|
|
Over three through six months
|
|
|
113,068
|
|
|
64,786
|
|
|
177,854
|
|
Over six through twelve months
|
|
|
145,920
|
|
|
82,615
|
|
|
228,535
|
|
|
|
|
|
|
|
|
|
|
|
|
Total due in
2010
|
|
|
376,840
|
|
|
291,999
|
|
|
668,839
|
|
2011
|
|
|
62,716
|
|
|
24,207
|
|
|
86,923
|
|
2012
|
|
|
17,256
|
|
|
7,701
|
|
|
24,957
|
|
2013
|
|
|
3,148
|
|
|
1,773
|
|
|
4,921
|
|
2014
|
|
|
1,899
|
|
|
440
|
|
|
2,339
|
|
2015 and thereafter
|
|
|
4,989
|
|
|
1,770
|
|
|
6,759
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
466,848
|
|
$
|
327,890
|
|
$
|
794,738
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 10 Securities Sold Under Agreements
to Repurchase and Federal Funds Purchased
Information
regarding securities sold under agreements to repurchase and Federal funds
purchased for the years ended December 31, is detailed in the tables below:
|
|
|
|
|
|
|
|
|
|
|
Securities Sold Under Agreements to Repurchase
(dollar amounts in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
outstanding at December 31
|
|
$
|
192,784
|
|
$
|
195,304
|
|
$
|
195,447
|
|
Maximum
month-end balance
|
|
|
203,094
|
|
|
225,065
|
|
|
206,888
|
|
Average
balance during the year
|
|
|
190,965
|
|
|
203,219
|
|
|
198,950
|
|
Weighted
average rate at December 31
|
|
|
2.97
|
%
|
|
3.46
|
%
|
|
3.97
|
%
|
Average
interest rate paid during the year
|
|
|
3.27
|
%
|
|
3.69
|
%
|
|
4.08
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Funds Purchased
(dollar amounts in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Total
outstanding at December 31
|
|
$
|
0
|
|
$
|
1,000
|
|
$
|
0
|
|
Maximum
month-end balance
|
|
|
0
|
|
|
1,000
|
|
|
6,800
|
|
Average
balance during the year
|
|
|
91
|
|
|
165
|
|
|
176
|
|
Weighted
average rate at December 31
|
|
|
N/A
|
|
|
0.50
|
%
|
|
N/A
|
|
Average
interest rate paid during the year
|
|
|
0.52
|
%
|
|
2.42
|
%
|
|
5.39
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase are secured borrowings
that typically mature within thirty to ninety days, although the Company has
entered into repurchase agreements with the Federal Home Loan Bank (FHLB)
with maturities that extend through 2017. As of December 31, 2009, the Company
had $145.0 million in repurchase agreements with the FHLB, of which $135.0
million mature over one year. Maturities of repurchase agreements due over one
year include $20.0 million in 2011, $5.0 million in 2012, $35.0 million in
2013, $20.0 million in 2014, $45.0 million in 2016, and $10.0 million in 2017.
Securities sold under agreements to repurchase are stated at the amount
of cash received in connection with the transaction. The Company may be
required to provide additional collateral based on the fair value of the
underlying securities.
68
Note 10 Securities Sold Under Agreements
to Repurchase and Federal Funds Purchased
(continued)
Total securities sold under agreements to repurchase at December 31,
2009, includes a $5.0 million, 7-year repo convertible FHLB advance at 4.715%,
convertible at the end of 3 years, where the Company elected to apply the fair
value option pursuant to FASB ASC Topic 825. The $5.0 million identified for
fair value was selected because the duration was similar to the duration of
trading securities. As of December 31, 2009, the aggregate fair value of the
$5.0 million of securities sold under agreements to repurchase was $5.5
million. For the twelve months ended December 31, 2009, the fair value of these
borrowings decreased by $177,000. During 2009, the Company prepaid a $10.0
million repurchase agreement with the FHLB, where the Company had elected the
fair value option. Net mark-to-market pre-tax gains of $242,000 related to this
repurchase agreement are included in 2009 results. The $242,000 pre-tax gain
and the $177,000 pre-tax gain are included on the Companys Consolidated
Statements of Income in Mark-to-Market Gain (Loss) on Liabilities Held at Fair
Value.
Federal funds
purchased are short-term borrowings that typically mature within one to ninety
days.
Note 11 Other Borrowings
The following
table summarizes the Companys borrowings as of December 31:
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Overnight
FHLB advances
|
|
$
|
13,500
|
|
$
|
73,500
|
|
Term FHLB
advances
|
|
|
170,335
|
|
|
177,152
|
|
Other
|
|
|
25,130
|
|
|
24,139
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
$
|
208,965
|
|
$
|
274,791
|
|
|
|
|
|
|
|
|
|
The Company, through its subsidiary banks, had available line-of-credit
agreements with banks permitting borrowings to a maximum of approximately $28.0
million at December 31, 2009 and 2008. There were no outstanding advances
against those lines at December 31, 2009; there were $1.0 million of
outstanding advances at December 31, 2008.
Through its subsidiary banks, the Company has borrowing relationships
with the FHLB and correspondent banks, which provide secured and unsecured
borrowing capacity. At December 31, 2009, the unused borrowing capacity on
established lines with the FHLB was $508.4 million.
As members of the FHLB, the Companys subsidiary banks can use certain
unencumbered mortgage-related assets to secure additional borrowings from the
FHLB. At December 31, 2009, total unencumbered residential mortgage loans of
the Company were $213.2 million. Additional assets may also qualify as
collateral for FHLB advances upon approval of the FHLB. At December 31, 2009,
there were $170.3 million in term advances with the FHLB with a weighted
average rate of 4.32% compared to $177.2 million at December 31, 2008 with a
weighted average rate of 4.38%. Of the $170.3 million of term advances with the
FHLB at December 31, 2009, $20.0 million matures in one year and $150.3 million
matures over one year. Maturities of advances due over one year include $24.0
million in 2011, $30.0 million in 2012, $15.0 million in 2013, $20.0 million in
2014, $10.0 million in 2015, and $51.3 million in 2017.
The Companys FHLB borrowings at December 31, 2009 included $131.5
million, at cost, in fixed-rate callable borrowings, which can be called by the
FHLB if certain conditions are met. Additional details on the fixed-rate
callable advances are provided in the following table.
69
Note 11 Other Borrowings
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Balance
|
|
|
Rate
|
|
Maturity Date
|
|
Call Date
|
|
Call
Frequency
|
|
Call Features
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,000,000
|
|
|
4.945
|
|
December 21,
2010
|
|
March 21,
2010
|
|
Quarterly
|
|
FHLB option
|
|
|
|
|
3,000,000
|
|
|
5.120
|
|
January 31,
2011
|
|
January 31,
2010
|
|
Quarterly
|
|
FHLB option
|
|
|
|
|
3,000,000
|
|
|
4.880
|
|
January 31,
2011
|
|
January 31,
2010
|
|
Quarterly
|
|
FHLB option
|
|
|
|
|
3,000,000
|
|
|
5.120
|
|
March 7,
2011
|
|
March 5,
2010
|
|
Quarterly
|
|
FHLB option
|
|
|
|
|
5,000,000
|
|
|
4.710
|
|
November 28,
2011
|
|
February 28,
2010
|
|
Quarterly
|
|
FHLB option
|
|
|
|
|
12,500,000
|
|
|
4.416
|
|
September
28, 2012
|
|
September
28, 2010
|
|
One time
|
|
FHLB option
|
|
|
|
|
5,000,000
|
|
|
2.800
|
|
January 22,
2013
|
|
January 22,
2011
|
|
One time
|
|
FHLB option
|
|
|
|
|
5,000,000
|
|
|
3.065
|
|
February 28,
2013
|
|
February 28,
2011
|
|
Quarterly
|
|
FHLB option
|
|
|
|
|
5,000,000
|
|
|
3.390
|
|
May 2, 2013
|
|
May 2, 2011
|
|
One time
|
|
FHLB option
|
|
|
|
|
10,000,000
|
|
|
4.680
|
|
June 9, 2014
|
|
March 8,
2010
|
|
Quarterly
|
|
FHLB option
|
|
|
|
|
10,000,000
|
|
|
4.756
|
|
June 9, 2014
|
|
March 8,
2010
|
|
Quarterly
|
|
FHLB option
|
|
|
|
|
10,000,000
|
|
|
3.850
|
|
June 3, 2015
|
|
June 3, 2010
|
|
One time
|
|
FHLB option
|
|
|
|
|
5,000,000
|
|
|
4.405
|
|
March 29,
2017
|
|
March 29,
2010
|
|
Quarterly
|
|
Libor strike
6.0%
|
|
|
|
|
5,000,000
|
|
|
4.894
|
|
May 22, 2017
|
|
May 22, 2010
|
|
Quarterly
|
|
Libor strike
7.0%
|
|
|
|
|
10,000,000
|
|
|
4.915
|
|
June 8, 2017
|
|
June 8, 2010
|
|
Quarterly
|
|
FHLB option
|
|
|
|
|
10,000,000
|
|
|
5.135
|
|
June 8, 2017
|
|
March 8,
2010
|
|
Quarterly
|
|
Libor strike
7.0%
|
|
|
|
|
10,000,000
|
|
|
5.189
|
|
June 8, 2017
|
|
June 8, 2012
|
|
Quarterly
|
|
FHLB option
|
|
|
|
|
10,000,000
|
|
|
5.183
|
|
June 28,
2017
|
|
June 28,
2012
|
|
One time
|
|
FHLB option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
131,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other borrowings included a term borrowing with a bank totaling $25.0
million and $24.0 million at December 31, 2009 and 2008. There were also a
Treasury Tax and Loan Note account with the Federal Reserve Bank of New York
totaling $100,000 at December 31, 2009 and 2008, and borrowings from unrelated
financial institutions totaling $30,000 and $39,000 at December 31, 2009 and
2008, respectively.
The
Company elected to apply the fair value option for a $10.0 million, 10-year
fixed convertible FLHB advance at 5.183%, convertible at the end of 3 years
with a maturity of June 28, 2017. The $10.0 million advance identified for fair
value was selected because its duration was similar to the durations of trading
securities. As of December 31, 2009, the aggregate fair value of the $10.0
million FHLB advance was approximately $11.3 million. For the twelve months
ended December 31, 2009, the fair value of this advance decreased by $844,000.
The change in fair value is included on the Companys Consolidated Statements
of Income in Mark-to-Market Gain (Loss) on Liabilities Held at Fair Value.
Note 12 Trust Preferred Debentures
Tompkins Capital Trust I
During
2009, the Company issued $20.5 million aggregate liquidation amount of 7.0%
cumulative trust preferred securities through a newly-formed subsidiary,
Tompkins Capital Trust I, a Delaware statutory trust, whose common stock is
100% owned by the Company. The Trust Preferred Securities were offered and sold
in reliance upon the exemption from registration provided by Rule 506 of
Regulation D of the Securities Act of 1933, as amended (the Securities Act).
The proceeds from the issuance of the Trust Preferred Securities, together with
the Companys capital contribution of $636,000 to the trust, were used to
acquire the Companys Subordinated Debentures that are due concurrently with
the Trust Preferred Securities. The net proceeds of the offering are being used
to support business growth and for general corporate purposes.
The
Trust Preferred Securities and the Companys debentures are dated April 10,
2009, have a 30 year maturity, and carry a fixed rate of interest of 7.0%. The
Trust Preferred Securities have a liquidation amount of $1,000 per security.
The Company has retained the right to redeem the Trust Preferred Securities at
par (plus accrued but unpaid interest) at a date which is no earlier than 5
years from the date of issuance. Commencing in 2019, and during specified
annual windows thereafter, holders may convert the Trust Preferred Securities
into shares of the Companys common stock at a conversion price equal to the
greater of (i) $41.35, or (ii) the average closing price of the Companys
common stock during the first three months of the year in which the conversion
will be completed.
The
Company has guaranteed the distributions with respect to, and amounts payable
upon liquidation or redemption of, the Trust Preferred Securities on a
subordinated basis as and to the extent set forth in the Preferred Securities
Guarantee Agreement entered into on April 10, 2009, between the Company and
Wilmington Trust Company, as Preferred Guarantee Trustee (the Guarantee).
70
Note 12 Trust Preferred Debentures
(continued)
Sleepy Hollow Capital Trust I
In August 2003, Sleepy Hollow Capital Trust I issued $4.0 million of
floating rate (three-month LIBOR plus 305 basis points) trust preferred
securities, which represent beneficial interests in the assets of the trust.
The trust preferred securities will mature on August 30, 2033. Distributions on
the trust preferred securities are payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year. Sleepy Hollow Capital Trust
I also issued $0.1 million of common equity securities to the Company. The
proceeds of the offering were used to acquire the Companys Subordinated
Debentures that are due concurrently with the Trust Preferred Securities.
Note 13 Employee Benefit Plans
The Company maintains a noncontributory defined-benefit retirement and
pension plan (the Pension Plan) covering substantially all employees of the
Company. The benefits are based on years of service and percentage of the
employees average compensation. Assets of the Companys Pension Plan are
invested in common and preferred stock, U. S. Government securities, corporate
bonds and notes, and mutual funds. At December 31, 2009, the plan assets
included 38,357 shares of Tompkins common stock that had a fair value of $1.6
million.
The Company acquired Sleepy Hollow Bancorp, Inc., (Sleepy Hollow)
effective May 9, 2008. At the time of acquisition, Sleepy Hollow was in the
process of terminating its defined benefit pension plan. During 2009, the
remaining assets of the plan were distributed and the termination completed.
The Company maintains supplemental employee retirement plans (the
SERP) for certain executives. All benefits provided under the SERP are
unfunded and the Corporation makes payments to plan participants.
The
Company also maintains a post-retirement life and healthcare benefit plan (the
Life and Healthcare Plan), which was amended in 2005. For employees
commencing employment after January 1, 2005, the Company does not contribute
towards the Life and Healthcare Plan. Retirees and employees who were eligible
to retire when the Life and Healthcare Plan was amended were unaffected.
Generally, all other employees were eligible for Health Savings Accounts
(HSA) with an initial balance equal to the amount of the Companys estimated
then current liability. Contributions to the plan are limited to an annual
contribution of 4% of the total HSA balances. Employees, upon retirement, will
be able to utilize their HSA for qualified health costs and deductibles.
The Company engages independent, external actuaries to compute the
amounts of liabilities and expenses relating to these plans, subject to the
assumptions that the Company selects. The benefit obligation for these plans
represents the liability of the Company for current and retired employees, and
is affected primarily by the following: service cost (benefits attributed to employee
service during the period); interest cost (interest on the liability due to the
passage of time); actuarial gains/losses (experience during the year different
from that assumed and changes in plan assumptions); and benefits paid to
participants.
The following table sets forth the changes in the projected benefit
obligation for the Pension Plan and SERP and the accumulated benefit obligation
for the Life and Healthcare Plan; and the respective plan assets, and the
plans funded status and amounts recognized in the Companys Consolidated
Statements of Condition at December 31, 2009 and 2008 (the measurement dates of
the plans).
71
Note 13 Employee Benefit Plans
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
Life and Healthcare Plan
|
|
SERP Plan
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
40,328
|
|
$
|
37,596
|
|
$
|
6,004
|
|
$
|
5,245
|
|
$
|
9,107
|
|
$
|
8,506
|
|
Service cost
|
|
|
2,178
|
|
|
1,908
|
|
|
98
|
|
|
133
|
|
|
164
|
|
|
169
|
|
Interest cost
|
|
|
2,410
|
|
|
2,249
|
|
|
372
|
|
|
346
|
|
|
559
|
|
|
515
|
|
Plan participants contributions
|
|
|
0
|
|
|
0
|
|
|
142
|
|
|
106
|
|
|
0
|
|
|
0
|
|
Actuarial loss (gain)
|
|
|
1,295
|
|
|
231
|
|
|
341
|
|
|
139
|
|
|
540
|
|
|
73
|
|
Benefits paid
|
|
|
(1,795
|
)
|
|
(1,656
|
)
|
|
(402
|
)
|
|
(340
|
)
|
|
(315
|
)
|
|
(259
|
)
|
Plan amendments
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
375
|
|
|
0
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
44,416
|
|
$
|
40,328
|
|
$
|
6,555
|
|
$
|
6,004
|
|
$
|
10,055
|
|
$
|
9,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of
year
|
|
$
|
35,581
|
|
$
|
36,407
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
Actual return (loss) on plan assets
|
|
|
4,600
|
|
|
(9,170
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Plan participants contributions
|
|
|
0
|
|
|
0
|
|
|
142
|
|
|
106
|
|
|
0
|
|
|
0
|
|
Employer contribution
|
|
|
0
|
|
|
10,000
|
|
|
260
|
|
|
234
|
|
|
315
|
|
|
259
|
|
Benefits paid
|
|
|
(1,795
|
)
|
|
(1,656
|
)
|
|
(402
|
)
|
|
(340
|
)
|
|
(315
|
)
|
|
(259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
$
|
38,386
|
|
$
|
35,581
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unfunded status
|
|
$
|
(6,030
|
)
|
$
|
(4,747
|
)
|
$
|
(6,555
|
)
|
$
|
(6,004
|
)
|
$
|
(10,055
|
)
|
$
|
(9,107
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accumulated benefit obligation for the Pension
Plan for 2009 and 2008 was $43.3
million and $39.2 million, respectively. The accumulated benefit obligation for
the SERP for 2009 and 2008 was $6.4 million and $6.0 million, respectively. The unfunded status of the pension, life and
healthcare and SERP plans has been recognized in other liabilities in the
Consolidated Statement of Condition at December 31, 2009, in the amounts of
$6.0 million, $6.6 million, and $10.1 million, respectively. The
unfunded status of the pension, life and healthcare and SERP plans has been
recognized in other liabilities in the Consolidated Statement of Condition at
December 31, 2008, in the amounts of $4.7 million, $6.0 million, and $9.1
million, respectively.
Net periodic
benefit cost and other comprehensive income includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Pension
Plan
|
|
Life and
Healthcare Plan
|
|
SERP Plan
|
|
|
|
|
|
|
|
|
|
Components
of net periodic benefit cost
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
2,178
|
|
$
|
1,908
|
|
$
|
1,872
|
|
$
|
98
|
|
$
|
133
|
|
$
|
120
|
|
$
|
164
|
|
$
|
169
|
|
$
|
173
|
|
Interest
cost
|
|
|
2,410
|
|
|
2,249
|
|
|
2,049
|
|
|
372
|
|
|
346
|
|
|
306
|
|
|
559
|
|
|
515
|
|
|
484
|
|
Expected
return on plan assets
|
|
|
(2,638
|
)
|
|
(3,277
|
)
|
|
(2,885
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Amortization
of prior service (credit) cost
|
|
|
(105
|
)
|
|
(105
|
)
|
|
(107
|
)
|
|
16
|
|
|
16
|
|
|
0
|
|
|
101
|
|
|
101
|
|
|
93
|
|
Recognized
net actuarial loss
|
|
|
1,502
|
|
|
546
|
|
|
577
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
91
|
|
|
61
|
|
|
92
|
|
Amortization
of transition liability
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
67
|
|
|
67
|
|
|
67
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic
benefit cost
|
|
$
|
3,347
|
|
$
|
1,321
|
|
$
|
1,506
|
|
$
|
553
|
|
$
|
562
|
|
$
|
493
|
|
$
|
915
|
|
$
|
846
|
|
$
|
842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
changes in plan assets and benefit obligations recognized in other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
actuarial (gain) loss
|
|
$
|
(667
|
)
|
$
|
12,678
|
|
$
|
1,755
|
|
$
|
341
|
|
$
|
139
|
|
$
|
(99
|
)
|
$
|
540
|
|
$
|
73
|
|
$
|
338
|
|
Recognized
actuarial loss
|
|
|
(1,502
|
)
|
|
(546
|
)
|
|
(577
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(91
|
)
|
|
(61
|
)
|
|
(92
|
)
|
Prior
service cost
|
|
|
0
|
|
|
0
|
|
|
27
|
|
|
0
|
|
|
375
|
|
|
0
|
|
|
0
|
|
|
103
|
|
|
0
|
|
Recognized
prior service cost (credit)
|
|
|
105
|
|
|
105
|
|
|
107
|
|
|
(16
|
)
|
|
(16
|
)
|
|
0
|
|
|
(101
|
)
|
|
(101
|
)
|
|
(93
|
)
|
Recognized net initial
obligation
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(67
|
)
|
|
(67
|
)
|
|
(67
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized
in other comprehensive income
|
|
$
|
(2,064
|
)
|
$
|
12,237
|
|
$
|
1,312
|
|
$
|
258
|
|
$
|
431
|
|
$
|
(166
|
)
|
$
|
348
|
|
$
|
14
|
|
$
|
153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in net periodic benefit
cost and other comprehensive income
|
|
$
|
1,283
|
|
$
|
13,558
|
|
$
|
2,818
|
|
$
|
811
|
|
$
|
993
|
|
$
|
327
|
|
$
|
1,263
|
|
$
|
860
|
|
$
|
995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
Note 13 Employee Benefit Plans
(continued)
Pre-tax amounts recognized
as a component of accumulated other comprehensive income as of year-end that
have not been recognized as a component of the Companys combined net periodic
benefit cost of the Companys defined benefit retirement and pension plan,
post-retirement healthcare benefit plan and SERP are presented in the following
table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Pension Plan
|
|
Life and Healthcare Plan
|
|
SERP Plan
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss (gain)
|
|
$
|
21,820
|
|
$
|
23,989
|
|
$
|
11,857
|
|
$
|
276
|
|
$
|
(65
|
)
|
$
|
(204
|
)
|
$
|
2,367
|
|
$
|
1,918
|
|
$
|
1,906
|
|
Prior service cost (credit)
|
|
|
(601
|
)
|
|
(706
|
)
|
|
(811
|
)
|
|
343
|
|
|
359
|
|
|
0
|
|
|
499
|
|
|
600
|
|
|
598
|
|
Unrecognized net initial obligation
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
252
|
|
|
319
|
|
|
386
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
21,219
|
|
$
|
23,283
|
|
$
|
11,046
|
|
$
|
871
|
|
$
|
613
|
|
$
|
182
|
|
$
|
2,866
|
|
$
|
2,518
|
|
$
|
2,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The pre-tax amounts included
in accumulated other comprehensive income that are expected to be recognized in
net periodic pension cost during the fiscal year ended December 31, 2010 are
shown below.
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Pension
Plan
|
|
Life and
Healthcare
Plan
|
|
SERP Plan
|
|
|
|
|
|
|
|
|
|
Actuarial loss
|
|
$
|
1,284
|
|
$
|
0
|
|
$
|
100
|
|
Prior service cost
|
|
|
(131
|
)
|
|
16
|
|
|
101
|
|
Net initial obligation
|
|
|
0
|
|
|
67
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,153
|
|
$
|
83
|
|
$
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions
used in accounting for the plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
Life and Healthcare Plan
|
|
SERP Plan
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit Cost for Plan Year
|
|
|
6.05
|
%
|
|
6.25
|
%
|
|
6.00
|
%
|
|
6.05
|
%
|
|
6.25
|
%
|
|
6.00
|
%
|
|
6.05
|
%
|
|
6.25
|
%
|
|
6.00
|
%
|
Benefit Obligation at End of Plan Year
|
|
|
5.90
|
%
|
|
6.05
|
%
|
|
6.25
|
%
|
|
5.90
|
%
|
|
6.05
|
%
|
|
6.25
|
%
|
|
5.90
|
%
|
|
6.05
|
%
|
|
6.25
|
%
|
Expected long-term return on plan assets
|
|
|
7.50
|
%
|
|
8.25
|
%
|
|
8.25
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Rate of compensation
increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit Cost for Plan Year
|
|
|
5.50
|
%
|
|
5.50
|
%
|
|
5.00
|
%
|
|
5.50
|
%
|
|
5.50
|
%
|
|
4.00
|
%
|
|
5.00
|
%
|
|
5.00
|
%
|
|
5.00
|
%
|
Benefit Obligation at End of Plan Year
|
|
|
5.50
|
%
|
|
5.50
|
%
|
|
5.50
|
%
|
|
5.50
|
%
|
|
5.50
|
%
|
|
5.50
|
%
|
|
5.00
|
%
|
|
5.00
|
%
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tompkins
Trust Company offers post-retirement life and healthcare benefits, although as
previously mentioned, has discontinued adding participants to the plan
effective January 1, 2005. The weighted average annual assumed rate of increase
in the per capita cost of covered benefits (the health care cost trend rate) is
8.0% beginning in 2009, and is assumed to decrease gradually to 5.0% in 2020
and beyond. A 1% increase in the assumed health care cost trend rate, would
increase service and interest costs by approximately $11,000 and increase the
Companys benefit obligation by approximately $139,000. A 1% decrease in the
assumed health care cost trend rate, would decrease service and interest costs
by approximately $11,000 and decrease the Companys benefit obligation by
approximately $136,000.
To
develop the expected long-term rate of return on asset assumption, the Company
considered the historical returns and the future expectations for returns for
each asset class, as well as target asset allocations of the pension portfolio.
Based on this analysis, the Company selected 7.50% as the long-term rate of
return on assets assumption.
The
discount rate used to determine the Companys pension and other post-retirement
benefit obligations as of December 31, 2009, and December 31, 2008, were
determined by matching estimated benefit cash flows to a yield curve derived
from Citigroups regular bond yield and above-median bond yield curve at
December 31, 2009 and December 31, 2008.
Cash Flows
Plan
assets are amounts that have been segregated and restricted to provide
benefits, and include amounts contributed by the Company and amounts earned
from investing contributions, less benefits paid. The Company funds the cost of
the SERP and the post-retirement medical and life insurance benefits on a
pay-as-you-go basis.
73
Note 13 Employee Benefit Plans
(continued)
The
benefits as of December 31, 2009, expected to be paid in each of the next five
fiscal years, and in the aggregate for the five fiscal years thereafter were as
follows:
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Pension
Plan
|
|
Life and
Healthcare Plan
|
|
SERP Plan
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
1,975
|
|
|
376
|
|
|
285
|
|
2011
|
|
|
2,052
|
|
|
388
|
|
|
283
|
|
2012
|
|
|
2,167
|
|
|
401
|
|
|
281
|
|
2013
|
|
|
2,296
|
|
|
430
|
|
|
278
|
|
2014
|
|
|
2,440
|
|
|
447
|
|
|
268
|
|
2015-2019
|
|
|
15,764
|
|
|
2,526
|
|
|
2,333
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
26,694
|
|
$
|
4,568
|
|
$
|
3,728
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company is not required to make a contribution to its Pension Plan in 2010;
however, the Company may contribute to the pension plan in 2010.
Plan Assets
The
Companys defined benefit retirement and pension plan weighted-average asset
allocations at December 31, 2009 and 2008, by asset category are as follows:
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
Equity securities
|
|
|
74
|
%
|
|
56
|
%
|
Debt
securities
|
|
|
25
|
%
|
|
28
|
%
|
Other
|
|
|
1
|
%
|
|
16
|
%
|
|
|
|
|
|
|
|
|
Total Allocation
|
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
It
is the policy of the Trustees to invest the Pension Trust Fund (the Fund) for
total return. The Trustees seek the maximum return consistent with the
interests of the participants and beneficiaries and prudent investment
management. The management of the Funds assets is in compliance with the
guidelines established in the Companys Pension Plan and Trust Investment
Policy, which is reviewed and approved annually by the Tompkins Board of
Directors, and the Pension Investment Review Committee.
The
intention is for the Fund to be prudently diversified. The Funds investments
will be invested among the fixed income, equity and cash equivalent sectors.
The pension committee will designate minimum and maximum positions in any of
the sectors. In no case shall more than 10% of the Fund assets consist of
qualified securities or real estate of the Company. Unless otherwise approved
by the Trustees, the following investments are prohibited:
|
|
|
|
1.
|
Restricted stock, private
placements, short positions, calls, puts, or margin transactions;
|
|
|
|
|
2.
|
Commodities, oil and gas
properties, real estate properties, or
|
|
|
|
|
3.
|
Any investment that would
constitute a prohibited transaction as described in the Employee Retirement
Income Security Act of 1974 (ERISA), section 407, 29 U.S.C. 1106.
|
In
general, the investment in debt securities is limited to readily marketable
debt securities having a Standard & Poors rating of A or Moodys rating
of A, securities of, or guaranteed by the United States Government or its
agencies, or obligations of banks or their holding companies that are rated in
the three highest ratings assigned by Fitch Investor Service, Inc. In addition,
investments in equity securities must be listed on the NYSE or are traded on
the national Over The Counter market or listed on the NASDAQ. Cash equivalents
generally may be United States Treasury obligations, commercial paper having a
Standard & Poors rating of A-1 or Moodys National Credit Officer rating
of P-1or higher.
74
Note 13 Employee Benefit Plans
(continued)
The
major categories of assets in the Companys Pension Plan as of year-end are
presented in the following table. Assets are segregated by the level of
valuation inputs within the fair value hierarchy established by ASC Topic 820
utilized to measure fair value (see Note 19 Fair Value Measurements).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
Measurements
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fair
Value
12/31/09
|
|
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
478
|
|
$
|
478
|
|
$
|
0
|
|
$
|
0
|
|
U.S. Treasury securities
|
|
|
1,871
|
|
|
1,871
|
|
|
0
|
|
|
0
|
|
U.S. Government agency
securities
|
|
|
1,739
|
|
|
0
|
|
|
1,739
|
|
|
0
|
|
Corporate bonds and notes
|
|
|
6,016
|
|
|
0
|
|
|
6,016
|
|
|
0
|
|
Common stocks
|
|
|
14,204
|
|
|
14,204
|
|
|
0
|
|
|
0
|
|
Mutual funds
|
|
|
13,328
|
|
|
13,328
|
|
|
0
|
|
|
0
|
|
Preferred stocks
|
|
|
750
|
|
|
0
|
|
|
750
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value of Plan
Assets
|
|
$
|
38,386
|
|
$
|
29,881
|
|
$
|
8,505
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company determines the fair value for its pension plan assets using an
independent pricing service. The pricing service uses a variety of techniques
to determine fair value, including market maker bids, quotes and pricing
models. Inputs to the model include recent trades, benchmark interest rates,
spreads, and actual and projected cash flows. Based on the inputs used by our
independent pricing services, we identify the appropriate level within the fair
value hierarchy to report these fair values. U.S. Treasury securities, common
stocks and mutual funds are considered Level 1 based on quoted prices in active
markets.
The
Company has an Employee Stock Ownership Plan (ESOP) and a 401(k) Investment and
Stock Ownership Plan (ISOP) covering substantially all employees of the
Company. The ESOP allows for Company contributions in the form of common stock
of the Company. Annually, the Tompkins Board of Directors determines a
profit-sharing payout to its employees in accordance with a performance-based
formula. A percentage of the approved amount is paid in Company common stock
into the ESOP. Contributions are limited to a maximum amount as stipulated in the
ESOP. The remaining percentage is either paid out in cash or deferred into the
ISOP at the direction of the employee. Compensation expense related to the ESOP
and ISOP totaled $2.7 million in 2009, $2.7 million in 2008, and $1.4 million
in 2007.
Under
the ISOP, employees may contribute a percentage of their eligible compensation
with a Company match of such contributions up to a maximum match of 4%. The
Company provided certain matching contributions to the ISOP based upon the
amount of contributions made by plan participants. The expense associated with
these matching provisions was $1.2 million in 2009, $1.2 million in 2008, and
$1.1 million in 2007.
Life
insurance benefits are provided to certain officers of the Company. In
connection with these policies, the Company reflects life insurance assets on
its Consolidated Statements of Condition of $36.0 million at December 31, 2009,
and $34.8 million at December 31, 2008. The insurance is carried at its cash
surrender value on the Consolidated Statements of Condition. Increases in the
cash surrender value of the insurance are reflected as noninterest income, net
of any related mortality expense.
The
Company provides split dollar life insurance benefits to certain employees. On
January 1, 2008, the Company changed its accounting policy and recognized a
cumulative-effect adjustment to retained earnings totaling $582,000 related to
accounting for certain endorsement split-dollar life insurance arrangements in
connection with the adoption of FASB ASC Topic 718,
Compensation Retirement Benefits
(ASC Topic 718). The
plan is unfunded and the estimated liability of the plan of $728,000 was
recorded in other liabilities in the Consolidated Statements of Condition at
December 31, 2009. Compensation expense related to the split dollar life
insurance was approximately $64,000 in 2009.
Note 14 Stock Plans and Stock Based
Compensation
Under
the Tompkins Financial Corporation 2009 Equity Plan (2009 Equity Plan), the
Company may grant incentive stock options, stock appreciation rights, shares of
restricted stock and restricted stock units covering up to 902,000 common
shares to certain officers, employees, and nonemployee directors. Stock options
are granted at an exercise price equal to the stocks fair market value at the
date of grant, may not have a term in excess of ten years, and have vesting
periods that range between one and seven years from the grant date. Prior to
the adoption of the 2009 Equity Plan, the Company had similar stock option
plans, which remain in effect solely with respect to unexercised options issued
under these plans. The Company granted 235,070 equity awards to its employees
in
75
Note 14 Stock Plans and Stock Based
Compensation
(continued)
the third quarter of 2009. The third quarter 2009 awards included 14,190 of
restricted stock and 220,880 of stock appreciation rights. The Company granted
2,200 incentive stock options in 2008 and 325,875 incentive stock options in
2007. The Companys practice is to issue original issue shares of its common
stock upon exercise of equity awards rather than treasury shares. Share numbers
and share prices have been retroactively adjusted to reflect the 10% stock
dividend paid on February 15, 2010.
The following table presents
the activity related to stock options under all plans for the twelve months
ended December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual Term
|
|
Aggregate
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1,
2009
|
|
|
888,328
|
|
$
|
35.44
|
|
|
|
|
|
|
|
Granted
|
|
|
220,880
|
|
|
41.71
|
|
|
|
|
|
|
|
Exercised
|
|
|
(46,152
|
)
|
|
28.71
|
|
|
|
|
|
|
|
Expired
|
|
|
0
|
|
|
0.00
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(19,213
|
)
|
|
37.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2009
|
|
|
1,043,843
|
|
$
|
37.08
|
|
|
6.65
|
|
$
|
1,475,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at December 31, 2009
|
|
|
419,399
|
|
$
|
33.68
|
|
|
4.41
|
|
$
|
1,475,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based
compensation expense for stock options was $912,000 in 2009, $931,000 in 2008
and $713,000 in 2007.
The
total intrinsic value, which is the amount by which the fair value of the
underlying stock exceeds the exercise price of an option on the exercise date,
of options exercised was $730,000 in 2009, $2.1 million in 2008 and $780,000 in
2007.
As of December 31, 2009, unrecognized compensation cost related to
unvested stock options totaled $5.6 million. The cost is expected to be
recognized over a weighted average period of 5.4 years. The amount of cash
received from the exercise of stock options was $1.0 million in 2009, $3.4
million for 2008, and $647,000 for 2007, respectively. The tax benefit realized
from stock options exercised during 2009, 2008, and 2007 was $163,000, $587,000,
and $51,000, respectively.
The
Company uses the Black-Scholes option-valuation model to determine the fair
value of each incentive stock options and stock appreciation rights at the date
of grant. This valuation model estimates fair value based on the assumptions
listed in the table below. The risk-free interest rate is the interest rate
available on zero-coupon U.S. Treasury instruments with a remaining term equal
to the expected term of the share option at the time of grant. The expected
dividend yield is based on dividend trends and the market price of the
Companys stock price at grant. Volatility is largely based on historical
volatility of the Companys stock price. Expected term is based upon historical
experience of employee exercises and terminations as well as the vesting term
of the grants.
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Weighted per share average
fair value at grant date
|
|
$
|
13.12
|
|
$
|
13.45
|
|
$
|
10.17
|
|
Risk-free interest rate
|
|
|
2.90
|
%
|
|
3.69
|
%
|
|
3.55
|
%
|
Expected dividend yield
|
|
|
3.13
|
%
|
|
2.57
|
%
|
|
3.12
|
%
|
Volatility
|
|
|
40.03
|
%
|
|
33.00
|
%
|
|
32.97
|
%
|
Expected life (years)
|
|
|
6.50
|
|
|
6.50
|
|
|
6.50
|
|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes
outstanding and exercisable options at December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
|
|
|
|
|
|
|
Range of
Exercise
Prices
|
|
Number
Outstanding
|
|
Weighted Average
Remaining
Contractual Life
|
|
Weighted
Average
Exercise Price
|
|
Number
Exercisable
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$20.00-29.30
|
|
|
|
131,276
|
|
|
|
|
2.21
|
|
|
|
$
|
26.95
|
|
|
|
|
131,276
|
|
|
|
$
|
26.95
|
|
|
$29.31-35.70
|
|
|
|
8,011
|
|
|
|
|
4.04
|
|
|
|
$
|
34.95
|
|
|
|
|
8,011
|
|
|
|
$
|
34.95
|
|
|
$35.71-35.78
|
|
|
|
154,983
|
|
|
|
|
4.34
|
|
|
|
$
|
35.77
|
|
|
|
|
154,983
|
|
|
|
$
|
35.77
|
|
|
$35.79-36.00
|
|
|
|
2,420
|
|
|
|
|
5.76
|
|
|
|
$
|
35.87
|
|
|
|
|
2,420
|
|
|
|
$
|
35.87
|
|
|
$36.01-37.50
|
|
|
|
279,132
|
|
|
|
|
7.91
|
|
|
|
$
|
37.28
|
|
|
|
|
47,552
|
|
|
|
$
|
37.28
|
|
|
$37.51-41.00
|
|
|
|
244,941
|
|
|
|
|
6.19
|
|
|
|
$
|
38.68
|
|
|
|
|
75,157
|
|
|
|
$
|
38.62
|
|
|
$41.01-50.00
|
|
|
|
223,080
|
|
|
|
|
9.70
|
|
|
|
$
|
41.75
|
|
|
|
|
0
|
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,043,843
|
|
|
|
|
6.65
|
|
|
|
$
|
37.08
|
|
|
|
|
419,399
|
|
|
|
$
|
33.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
Note 14 Stock Plans and Stock Based
Compensation
(continued)
The
Company granted 14,190 restricted stock awards during the third quarter of
2009, with a grant date fair value of $41.71, which was the closing price of
the Companys common stock on the grant date. Prior to 2009, there were no
restricted stock awards. The Company recognized stock-based compensation
related to these restricted stock awards of $26,000 in 2009. Unrecognized
compensation costs related to the restricted stock awards totaled $539,000 at
December 31, 2009 and will be recognized over 6.7 years on a weighted average
basis.
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted Average Exercise
Price
|
|
|
|
|
|
|
|
|
|
Unvested at January 1, 2009
|
|
|
0
|
|
$
|
0.00
|
|
Granted
|
|
|
14,190
|
|
|
41.71
|
|
Vested
|
|
|
0
|
|
|
0.00
|
|
Forfeited
|
|
|
0
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
Unvested
at December 31, 2009
|
|
|
14,190
|
|
$
|
41.71
|
|
|
|
|
|
|
|
|
|
Note 15 Other Noninterest Income and Expense
Other
noninterest income and expense totals are presented in the table below.
Components of these totals exceeding 1% of the aggregate of total interest
income and total noninterest income for any of the years presented below are
stated separately.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
(in
thousands except per share data)
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
NONINTEREST
INCOME
|
|
|
|
|
|
|
|
|
|
|
Other service charges
|
|
$
|
1,937
|
|
$
|
2,657
|
|
$
|
2,643
|
|
Increase in cash surrender
value of corporate owned life insurance
|
|
|
1,090
|
|
|
1,448
|
|
|
1,122
|
|
Net gain on sale of loans
|
|
|
1,357
|
|
|
105
|
|
|
159
|
|
Other income
|
|
|
1,549
|
|
|
1,583
|
|
|
1,131
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Noninterest Income
|
|
$
|
5,933
|
|
$
|
5,793
|
|
$
|
5,055
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
Marketing expense
|
|
$
|
3,778
|
|
$
|
3,581
|
|
$
|
3,013
|
|
Professional Fees
|
|
|
3,307
|
|
|
3,011
|
|
|
3,258
|
|
Software licensing and
maintenance
|
|
|
2,812
|
|
|
2,503
|
|
|
2,071
|
|
Cardholder expense
|
|
|
1,532
|
|
|
1,225
|
|
|
974
|
|
Other operating expenses
|
|
|
13,874
|
|
|
13,414
|
|
|
12,758
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Noninterest Expenses
|
|
$
|
25,303
|
|
$
|
23,734
|
|
$
|
22,074
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 16 Income Taxes
The income tax (benefit)
expense attributable to income from operations is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
Current
|
|
Deferred
|
|
Total
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
15,896
|
|
$
|
(1,362
|
)
|
$
|
14,055
|
|
State
|
|
|
1,341
|
|
|
(492
|
)
|
|
1,328
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
17,237
|
|
$
|
(1,854
|
)
|
$
|
15,383
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
11,538
|
|
$
|
1,090
|
|
$
|
12,628
|
|
State
|
|
|
1,148
|
|
|
34
|
|
|
1,182
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,686
|
|
$
|
1,124
|
|
$
|
13,810
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
12,806
|
|
$
|
(1,351
|
)
|
$
|
11,455
|
|
State
|
|
|
714
|
|
|
(178
|
)
|
|
536
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
13,520
|
|
$
|
(1,529
|
)
|
$
|
11,991
|
|
|
|
|
|
|
|
|
|
|
|
|
77
Note 16 Income Taxes
(continued)
The
primary reasons for the differences between income tax expense and the amount
computed by applying the statutory federal income tax rate to earnings are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Statutory federal income
tax rate
|
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes, net of federal benefit
|
|
|
1.8
|
|
|
1.8
|
|
|
0.9
|
|
Tax exempt income
|
|
|
(3.3
|
)
|
|
(3.3
|
)
|
|
(3.2
|
)
|
All other
|
|
|
(0.9
|
)
|
|
(1.9
|
)
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
32.6
|
%
|
|
31.6
|
%
|
|
31.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of the
Companys deferred tax assets and liabilities as of December 31 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses
|
|
$
|
9,544
|
|
$
|
7,344
|
|
$
|
5,803
|
|
Compensation and benefits
|
|
|
8,218
|
|
|
7,161
|
|
|
6,860
|
|
Liabilities held at fair value
|
|
|
727
|
|
|
1,327
|
|
|
534
|
|
Other
|
|
|
2,050
|
|
|
4,165
|
|
|
2,170
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
deferred tax assets
|
|
$
|
20,539
|
|
$
|
19,997
|
|
$
|
15,367
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
$
|
6,017
|
|
$
|
7,334
|
|
$
|
3,895
|
|
Depreciation
|
|
|
748
|
|
|
1,149
|
|
|
382
|
|
Intangibles
|
|
|
2,306
|
|
|
1,360
|
|
|
499
|
|
Other
|
|
|
829
|
|
|
1,369
|
|
|
817
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
deferred tax liabilities
|
|
$
|
9,900
|
|
$
|
11,212
|
|
$
|
5,593
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
deferred tax asset at year-end
|
|
$
|
10,639
|
|
$
|
8,785
|
|
$
|
9,774
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
deferred tax asset at beginning of year
|
|
$
|
8,785
|
|
$
|
9,774
|
|
$
|
7,243
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in net
deferred tax asset
|
|
|
1,854
|
|
|
(989
|
)
|
|
2,531
|
|
Purchase accounting
adjustments, net
|
|
|
0
|
|
|
135
|
|
|
(1,002
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax (benefit) expense
|
|
$
|
(1,854
|
)
|
$
|
1,124
|
|
$
|
(1,529
|
)
|
|
|
|
|
|
|
|
|
|
|
|
This
analysis does not include recorded deferred tax liabilities of $7.9 million and
$5.5 million as of December 31, 2009 and 2008, respectively, related to net
unrealized holding gains in the available-for-sale securities portfolio. In
addition, the analysis excludes the recorded deferred tax assets of $10.0
million and $10.6 million, as of December 31, 2009 and 2008, respectively,
related to employee benefit plans.
Realization
of deferred tax assets is dependent upon the generation of future taxable
income or the existence of sufficient taxable income within the carry-back
period. A valuation allowance is provided when it is more likely than not that
some portion of the deferred tax assets will not be realized. In assessing the
need for a valuation allowance, management considers the scheduled reversal of
the deferred tax liabilities, the level of historical taxable income, and the
projected future taxable income over the periods in which the temporary
differences comprising the deferred tax assets will be deductible. Based on its
assessment, management determined that no valuation allowance is necessary at
December 31, 2009 and 2008.
At
December 31, 2009 and December 31, 2008, the Company had no unrecognized tax
benefits. The Company does not expect the total amount of unrecognized tax
benefits to significantly increase within the next twelve months. The Company
recognizes interest and penalties on unrecognized tax benefits in income tax
expense in its Consolidated Statements of Income.
The
Company is subject to U.S. federal income tax and income tax in various state
jurisdictions. All tax years ending after December 31, 2006 are open to examination
by the taxing authorities.
78
Note 17 Commitments and Contingent
Liabilities
The
Company, in the normal course of business, is a party to financial instruments
with off-balance-sheet risk to meet the financial needs of its customers. These
financial instruments include loan commitments, standby letters of credit, and
unused portions of lines of credit. The contract, or notional amount, of these
instruments represents the Companys involvement in particular classes of
financial instruments. These instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amount recognized on the
Consolidated Statements of Condition. The Company minimizes its exposure to
loss under these commitments by subjecting them to credit approval and
monitoring procedures.
The
Companys maximum potential obligations to extend credit for loan commitments
(unfunded loans, unused lines of credit, and standby letters of credit)
outstanding on December 31 were as follows:
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
Loan commitments
|
|
$
|
135,769
|
|
$
|
54,143
|
|
Standby letters of credit
|
|
|
50,522
|
|
|
45,092
|
|
Undisbursed portion of
lines of credit
|
|
|
231,900
|
|
|
289,713
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
418,191
|
|
$
|
388,948
|
|
|
|
|
|
|
|
|
|
Commitments
to extend credit (including lines of credit) are agreements to lend to a
customer as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Standby letters of credit
are conditional commitments to guarantee the performance of a customer to a
third party. The Company extends standby letters of credit to its customers in
the normal course of business. The standby letters of credit are generally
short-term. As of December 31, 2009, the Companys maximum potential obligation
under standby letters of credit was $50.5 million. Management uses the same
credit policies in making commitments to extend credit and standby letters of
credit as are used for on-balance-sheet lending decisions. Based upon
managements evaluation of the counterparty, the Company may require collateral
to support commitments to extend credit and standby letters of credit. The
credit risk amounts are equal to the contractual amounts, assuming the amounts
are fully advanced and collateral or other security is of no value. The Company
does not anticipate losses as a result of these transactions. These commitments
also have off-balance-sheet interest-rate risk, in that the interest rate at
which these commitments were made may not be at market rates on the date the
commitments are fulfilled. Since some commitments and standby letters of credit
are expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash flow requirements.
At
December 31, 2009, the Company had rate lock agreements associated with
mortgage loans to be sold in the secondary market (certain of which relate to
loan applications for which no formal commitment has been made) amounting to approximately
$6.5 million. In order to limit the interest rate risk associated with rate
lock agreements, as well as the interest rate risk associated with mortgages
held for sale, if any, the Company enters into agreements to sell loans in the
secondary market to unrelated investors on a loan-by-loan basis. At December
31, 2009, the Company had approximately $6.5 million of commitments to sell
mortgages to unrelated investors on a loan-by-loan basis.
In
the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management, based upon the review with counsel,
the proceedings are not expected to have a material effect on the Companys
financial condition or results of operations.
In
October 2007, Visa USA (Visa) completed a reorganization in contemplation of
its initial public offering (IPO) expected to occur in 2008. As part of that
reorganization, Tompkins and other member banks of Visa received shares of
common stock of Visa, Inc. Those banks are also obligated under various
agreements with Visa to share in losses stemming from certain litigation
(Covered Litigation). Tompkins is not a named defendant in any of the Covered
Litigation. Guidance from the Securities and Exchange Commission (SEC)
indicates that Visa member banks should record a liability for the fair value
of the contingent obligation to Visa in accordance with accounting guidance.
The estimation of the Companys proportionate share of any potential losses
related to the Covered Litigation is extremely difficult and involves a great
deal of judgment.
As
of December 31, 2009, the Company has a liability of $450,000 included as a
component of Other Liabilities in the Consolidated Statements of Condition,
representing its estimate of the fair value of potential losses related to the
remaining covered Visa litigation. The estimation of the Companys
proportionate share of any potential losses related to certain Covered
Litigation is extremely difficult and involves a high degree of judgment. The
Companys proportionate share of the remaining covered Visa litigation is
subject to change depending upon future litigation developments. Class B shares
which were not redeemed will be converted to Class A shares, at a conversion
rate to be determined based upon the member banks actual liability for
litigation expenses, on the later of three years or the settlement of the
litigation indemnified by the member banks. However, the remaining Class B
shares are available to fund future Visa litigation liabilities indemnified by
the member banks until that time.
79
Note 18 Earnings Per Share
Calculation
of basic earnings per share (Basic EPS) and diluted earnings per share (Diluted
EPS) is shown below. Share and per share data was retroactively adjusted to reflect
a 10% stock dividend approved on January 26, 2010, and paid on February 15,
2010.
|
|
|
|
|
|
|
|
|
|
|
For year ended
December 31, 2009
(in thousands except share and per share
data)
|
|
Net
Income
(Numerator)
|
|
Weighted
Average
Shares
(Denominator)
|
|
Per Share
Amount
|
|
|
|
|
|
|
|
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Tompkins Financial Corporation
|
|
$
|
31,831
|
|
|
10,686,989
|
|
$
|
2.98
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of potentially dilutive common shares:
|
|
|
|
|
|
72,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Tompkins Financial Corporation plus assumed
conversions
|
|
$
|
31,831
|
|
|
10,759,520
|
|
$
|
2.96
|
|
|
|
|
|
|
|
|
|
|
|
|
The
effect of dilutive securities calculation for the year ended December 31, 2009,
excludes stock options and stock appreciation rights covering an aggregate of
637,436 of common stock because they are anti-dilutive.
|
|
|
|
|
|
|
|
|
|
|
For year ended
December 31, 2008
(in thousands except share and per share
data)
|
|
Net
Income
(Numerator)
|
|
Weighted
Average
Shares
(Denominator)
|
|
Per Share
Amount
|
|
|
|
|
|
|
|
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Tompkins Financial Corporation
|
|
$
|
29,834
|
|
|
10,616,475
|
|
$
|
2.81
|
|
|
Effect of potentially dilutive common shares:
|
|
|
|
|
|
102,367
|
|
|
|
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Tompkins Financial Corporation plus assumed
conversions
|
|
$
|
29,834
|
|
|
10,718,842
|
|
$
|
2.78
|
|
|
|
|
|
|
|
|
|
|
|
|
The
effect of dilutive securities calculation for the year ended December 31, 2008,
excludes stock options covering 536,100 shares of common stock because they are
anti-dilutive.
|
|
|
|
|
|
|
|
|
|
|
For year ended
December 31, 2007
(in thousands except share and per share
data)
|
|
Net
Income
(Numerator)
|
|
Weighted
Average
Shares
(Denominator)
|
|
Per Share
Amount
|
|
|
|
|
|
|
|
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Tompkins Financial Corporation
|
|
$
|
26,371
|
|
|
10,666,396
|
|
$
|
2.47
|
|
|
Effect of potentially dilutive common shares:
|
|
|
|
|
|
83,130
|
|
|
|
|
Shares issuable as contingent consideration for acquisition
|
|
|
|
|
|
10,442
|
|
|
|
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Tompkins Financial Corporation plus assumed
conversions
|
|
$
|
26,371
|
|
|
10,759,968
|
|
$
|
2.45
|
|
|
|
|
|
|
|
|
|
|
|
|
The
effect of dilutive securities calculation for the year ended December 31, 2007,
excludes stock options covering 422,077 shares of common stock because they are
anti-dilutive.
80
Note 19 Fair Value Measurements
FASB
ASC Topic 820,
Fair Value Measurements and
Disclosures,
defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. FASB ASC Topic 820 also establishes
a fair value hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (level 1
measurements) and the lowest priority to unobservable inputs (Level 3
measurements).
The
three levels of the fair value hierarchy are:
Level
1 Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities;
Level
2 Quoted prices for similar assets or liabilities in active markets, quoted
prices for identical or similar assets or liabilities in markets that are not
active, or inputs that are observable, either directly or indirectly, for
substantially the full term of the asset or liability;
Level
3 Prices or valuation techniques that require inputs that are both
significant to the fair value measurement and unobservable (i.e., supported by
little or no market activity).
The
following table summarizes financial assets and financial liabilities measured
at fair value on a recurring basis as of December 31, 2009 and 2008, segregated
by the level of valuation inputs within the fair value hierarchy used to measure
fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Fair Value
Measurements
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fair
Value
12/31/09
|
|
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
Trading
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. Government sponsored entities
|
|
$
|
17,986
|
|
$
|
17,986
|
|
$
|
0
|
|
$
|
0
|
|
Mortgage-backed securities residential
|
|
|
13,732
|
|
|
13,732
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
|
2,079
|
|
|
2,079
|
|
|
0
|
|
|
0
|
|
Obligations of U.S. Government sponsored entities
|
|
|
379,015
|
|
|
0
|
|
|
379,015
|
|
|
0
|
|
Obligations of U.S. states and political subdivisions
|
|
|
63,695
|
|
|
0
|
|
|
63,695
|
|
|
0
|
|
Mortgage-backed securities residential
|
|
|
477,681
|
|
|
0
|
|
|
477,681
|
|
|
0
|
|
U.S. corporate debt securities
|
|
|
5,136
|
|
|
0
|
|
|
5,136
|
|
|
0
|
|
Equity securities
|
|
|
1,164
|
|
|
0
|
|
|
0
|
|
|
1,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreement to Repurchase
|
|
|
5,500
|
|
|
0
|
|
|
5,500
|
|
|
0
|
|
Other borrowings
|
|
|
11,335
|
|
|
0
|
|
|
11,335
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
change in the fair value of the $1.2 million of available-for-sale securities
valued using significant unobservable inputs (Level 3), between January 1, 2009
and December 31, 2009 was immaterial.
81
Note 19 Fair Value Measurements
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Fair Value
Measurements
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fair
Value
12/31/08
|
|
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. Government sponsored entities
|
|
$
|
18,370
|
|
$
|
18,370
|
|
$
|
0
|
|
$
|
0
|
|
Mortgage-backed securities Residential
|
|
|
19,731
|
|
|
19,731
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
|
3,263
|
|
|
3,263
|
|
|
0
|
|
|
0
|
|
Obligations of U.S. Government sponsored entities
|
|
|
196,262
|
|
|
0
|
|
|
196,262
|
|
|
0
|
|
Obligations of U.S. states and political subdivisions
|
|
|
63,554
|
|
|
0
|
|
|
63,554
|
|
|
0
|
|
Mortgage-backed securities residential
|
|
|
473,971
|
|
|
0
|
|
|
473,971
|
|
|
0
|
|
U.S. corporate debt securities
|
|
|
2,500
|
|
|
0
|
|
|
2,500
|
|
|
0
|
|
Equity securities
|
|
|
1,669
|
|
|
0
|
|
|
0
|
|
|
1,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreement to Repurchase
|
|
|
16,170
|
|
|
0
|
|
|
16,170
|
|
|
0
|
|
Other borrowings
|
|
|
12,179
|
|
|
0
|
|
|
12,179
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company determines fair value for its trading securities using independently
quoted market prices. The Company determines fair value for its
available-for-sale securities using an independent bond pricing service for
identical assets or very similar securities. The pricing service uses a variety
of techniques to determine fair value, including market maker bids, quotes and
pricing models. Inputs to the model include recent trades, benchmark interest
rates, spreads, and actual and projected cash flows. Based on the inputs used
by our independent pricing services, we identify the appropriate level within
the fair value hierarchy to report these fair values.
Fair
values of borrowings are estimated using Level 2 inputs based upon observable
market data. The Company determines fair value for its borrowings using a
discounted cash flow technique based upon expected cash flows and current
spreads on FHLB advances with the same structure and terms. The Company also
receives pricing information from third parties, including the FHLB. The
pricing obtained is considered representative of the transfer price if the
liabilities were assumed by a third party. The Companys potential credit risk
did not have a material impact on the quoted settlement prices used in
measuring the fair value of the FHLB borrowings for the twelve months ended December
31, 2009.
Certain
assets are measured at fair value on a nonrecurring basis. For the Company,
these include loans held for sale, collateral dependent impaired loans, other
real estate owned, goodwill and other intangible assets. During the fourth quarter
of 2009, certain collateral dependent impaired loans were remeasured and
reported at fair value through a specific valuation allowance for loan and
lease losses based upon the fair value of the underlying collateral. Collateral
values are estimated using Level 2 inputs based upon observable market data or
Level 3 inputs based upon customized discounting criteria.
82
Note 19 Fair Value Measurements
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Recurring
Fair Value Measurements
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fair
Value
12/31/09
|
|
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
Collateral Dependent
Impaired Loans
|
|
$
|
13,123
|
|
$
|
|
|
$
|
13,123
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Real Estate Owned
|
|
|
299
|
|
|
|
|
|
299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents
the carrying amounts and estimated fair values of the Companys financial
instruments at December 31, 2009 and 2008. The carrying amounts shown in the
table are included in the Consolidated Statements of Condition under the
indicated captions. The fair value estimates, methods and assumptions set forth
below for the Companys financial instruments, including those financial
instruments carried at cost, are made solely to comply with disclosures
required by generally accepted accounting principles in the United States and
does not always incorporate the exit-price concept of fair value prescribed by
ASC Topic 820-10 and should be read in conjunction with the financial
statements and notes included in this Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Fair Value of Financial Instruments
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
( in thousands)
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
45,462
|
|
$
|
45,462
|
|
$
|
52,349
|
|
$
|
52,349
|
|
Securities trading
|
|
|
31,718
|
|
|
31,718
|
|
|
38,101
|
|
|
38,101
|
|
Securities available-for-sale
|
|
|
928,770
|
|
|
928,770
|
|
|
741,219
|
|
|
741,219
|
|
Securities held-to-maturity
|
|
|
44,825
|
|
|
46,340
|
|
|
54,453
|
|
|
55,064
|
|
Loans and leases, net
1
|
|
|
1,890,468
|
|
|
1,904,400
|
|
|
1,798,859
|
|
|
1,860,467
|
|
FHLB and FRB stock
|
|
|
20,041
|
|
|
20,041
|
|
|
22,874
|
|
|
22,874
|
|
Accrued interest receivable
|
|
|
13,474
|
|
|
13,474
|
|
|
13,336
|
|
|
13,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
$
|
794,738
|
|
$
|
799,830
|
|
$
|
703,107
|
|
$
|
705,813
|
|
Other deposits
|
|
|
1,645,126
|
|
|
1,645,126
|
|
|
1,430,900
|
|
|
1,430,900
|
|
Securities sold under agreements to repurchase
|
|
|
187,284
|
|
|
198,781
|
|
|
180,134
|
|
|
190,596
|
|
Securities sold under agreements to repurchase (valued at fair value)
|
|
|
5,500
|
|
|
5,500
|
|
|
16,170
|
|
|
16,170
|
|
Other borrowings
|
|
|
197,630
|
|
|
208,118
|
|
|
262,612
|
|
|
280,154
|
|
Other borrowings (valued at fair value)
|
|
|
11,335
|
|
|
11,335
|
|
|
12,179
|
|
|
12,179
|
|
Trust preferred debentures
|
|
|
25,056
|
|
|
25,777
|
|
|
3,888
|
|
|
3,859
|
|
Accrued interest payable
|
|
|
2,461
|
|
|
2,461
|
|
|
3,260
|
|
|
3,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Lease receivables, although
excluded from the scope of ASC Topic 825, are included in the estimated fair
value amounts at their carrying value.
|
The following methods and
assumptions were used in estimating fair value disclosures for financial
instruments.
CASH AND CASH EQUIVALENTS:
The carrying amounts reported in the
Consolidated Statements of Condition for cash, noninterest-bearing deposits,
money market funds, and Federal funds sold approximate the fair value of those
assets.
SECURITIES:
Fair values for U.S. Treasury securities are based on quoted market
prices. Fair values for obligations of U.S. government sponsored entities,
mortgage-backed securities-residential, obligations of U.S. states and
political subdivisions, and U.S. corporate debt securities are based on quoted
market prices, where available, as provided by third party pricing vendors. If
quoted market prices were not available, fair values are based on quoted market
prices of comparable instruments in active markets and/or based upon matrix
pricing methodology, which uses comprehensive interest rate tables to determine
market price, movement and yield relationships.
83
Note 19 Fair Value Measurements
(continued)
FHLB AND FRB STOCK:
The carrying amount of FHLB and FRB stock approximates fair value. If
the stock is redeemed, the Company will receive an amount equal to the par
value of the stock. For miscellaneous equity securities, carrying value is
cost. These securities are reviewed periodically to determine if there are any
events or changes in circumstances that would adversely affect their value.
LOANS AND LEASES:
The fair values of residential loans are estimated using discounted
cash flow analyses, based upon available market benchmarks for rates and
prepayment assumptions. The fair values of commercial and consumer loans are
estimated using discounted cash flow analyses, based upon interest rates
currently offered for loans and leases with similar terms and credit quality.
The fair value of loans held for sale are determined based upon contractual
prices for loans with similar characteristics.
ACCRUED INTEREST RECEIVABLE AND ACCRUED INTEREST PAYABLE:
The carrying amount of these short term
instruments approximate fair value.
DEPOSITS:
The fair values disclosed for noninterest bearing accounts and
accounts with no stated maturities are equal to the amount payable on demand at
the reporting date. The fair value of time deposits is based upon discounted
cash flow analyses using rates offered for FHLB advances, which is the
Companys primary alternative source of funds.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE:
The carrying amounts of repurchase agreements
and other short-term borrowings approximate their fair values. Fair values of
long-term borrowings are estimated using a discounted cash flow approach, based
on current market rates for similar borrowings. For securities sold under
agreements to repurchase where the Company has elected the fair value option,
the Company also receives pricing information from third parties, including the
FHLB.
OTHER BORROWINGS:
The fair values of other borrowings are estimated using discounted cash
flow analysis, discounted at the Companys current incremental borrowing rate
for similar borrowing arrangements. For other borrowings where the Company has
elected the fair value option, the Company also receives pricing information
from third parties, including the FHLB.
TRUST PREFERRED DEBENTURES:
The fair value of the trust preferred
debentures has been estimated using a discounted cash flow analysis which uses
a discount factor of a market spread over current interest rates for similar
instruments.
Note 20 Regulations and Supervision
The
Company and its subsidiary banks are subject to various regulatory capital
requirements administered by Federal bank regulatory agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary actions by regulators that, if undertaken, could have
a direct material adverse effect on the Companys business, results of
operation and financial condition. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action (PCA), banks must meet
specific guidelines that involve quantitative measures of assets, liabilities,
and certain off-balance-sheet items as calculated under regulatory accounting
practices. Capital amounts and classifications of the Company and its
subsidiary banks are also subject to qualitative judgments by regulators
concerning components, risk weightings, and other factors. Quantitative
measures established by regulation to ensure capital adequacy require the
maintenance of minimum amounts and ratios (set forth in the table below) of
total capital and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 capital to average assets (as
defined). Management believes that the Company and its subsidiary banks meet
all capital adequacy requirements to which they are subject.
As
of December 31, 2009, the most recent notifications from Federal bank
regulatory agencies categorized the Tompkins Trust Company, The Bank of Castile
and Mahopac National Bank as well capitalized under the regulatory framework
for PCA. To be categorized as well capitalized, the Company and its subsidiary
banks must maintain total risk-based, Tier 1 risk-based, and Tier 1 leverage
ratios as set forth in the table below. There are no conditions or events since
that notification that management believes have changed the capital category of
the Company or its subsidiary banks. Actual capital amounts and ratios of the Company
and its subsidiary banks are as follows:
84
Note 20 Regulations and Supervision
(continued)
|
|
|
|
|
|
|
|
|
|
Actual
|
|
Required
to be
Adequately Capitalized
|
|
Required
to be
Well Capitalized
|
|
|
|
|
|
|
|
|
|
(dollar amounts in thousands)
|
|
Amount/Ratio
|
|
Amount/Ratio
|
|
Amount/Ratio
|
|
|
|
|
|
|
|
|
|
December
31, 2009
|
|
|
|
|
|
|
|
Total Capital (to
risk-weighted assets)
|
|
|
|
|
|
|
|
The Company (consolidated)
|
|
$252,271/12.1%
|
|
>$166,987/>8.0%
|
|
>$208,734/>10.0%
|
|
Trust Company
|
|
$118,393/13.2%
|
|
>$71,524/>8.0%
|
|
>$89,405/>10.0%
|
|
Castile
|
|
$64,281/11.5%
|
|
>$44,654/>8.0%
|
|
>$55,817/>10.0%
|
|
Mahopac
|
|
$75,358/12.6%
|
|
>$47,786/>8.0%
|
|
>$59,732/>10.0%
|
|
Tier I Capital (to
risk-weighted assets)
|
|
|
|
|
|
|
|
The Company (consolidated)
|
|
$227,765/10.9%
|
|
>$83,494/>4.0%
|
|
>$125,240/>6.0%
|
|
Trust Company
|
|
$109,347/12.2%
|
|
>$35,762/>4.0%
|
|
>$53,643/>6.0%
|
|
Castile
|
|
$57,301/10.3%
|
|
>$22,327/>4.0%
|
|
>$33,490/>6.0%
|
|
Mahopac
|
|
$67,881/11.4%
|
|
>$23,893/>4.0%
|
|
>$35,839/>6.0%
|
|
Tier I Capital (to average
assets)
|
|
|
|
|
|
|
|
The Company (consolidated)
|
|
$227,765/7.4%
|
|
>$92,766/>3.0%
|
|
>$154,610/>5.0%
|
|
Trust Company
|
|
$109,347/7.4%
|
|
>$44,319/>3.0%
|
|
>$73,866/>5.0%
|
|
Castile
|
|
$57,301/7.4%
|
|
>$23,348/>3.0%
|
|
>$38,913/>5.0%
|
|
Mahopac
|
|
$67,881/8.1%
|
|
>$25,099/>3.0%
|
|
>$41,831/>5.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
Total Capital (to
risk-weighted assets)
|
|
|
|
|
|
|
|
The Company (consolidated)
|
|
$204,656/10.6%
|
|
>$154,458/>8.0%
|
|
>$193,073/>10.0%
|
|
Trust Company
|
|
$99,909/12.0%
|
|
>$66,622/>8.0%
|
|
>$83,277/>10.0%
|
|
Castile
|
|
$51,978/10.3%
|
|
>$40,218/>8.0%
|
|
>$50,273/>10.0%
|
|
Mahopac
|
|
$62,002/10.6%
|
|
>$46,712/>8.0%
|
|
>$58,390/>10.0%
|
|
Tier I Capital (to
risk-weighted assets)
|
|
|
|
|
|
|
|
The Company (consolidated)
|
|
$185,828/9.6%
|
|
>$77,229/>4.0%
|
|
>$115,844/>6.0%
|
|
Trust Company
|
|
$92,680/11.1%
|
|
>$33,311/>4.0%
|
|
>$49,966/>6.0%
|
|
Castile
|
|
$46,303/9.2%
|
|
>$20,109/>4.0%
|
|
>$30,164/>6.0%
|
|
Mahopac
|
|
$56,077/9.6%
|
|
>$23,356/>4.0%
|
|
>$35,034/>6.0%
|
|
Tier I Capital (to average
assets)
|
|
|
|
|
|
|
|
The Company (consolidated)
|
|
$185,828/6.7%
|
|
>$83,050/>3.0%
|
|
>$138,416/>5.0%
|
|
Trust Company
|
|
$92,680/7.1%
|
|
>$39,127/>3.0%
|
|
>$65,211/>5.0%
|
|
Castile
|
|
$46,303/6.6%
|
|
>$20,921/>3.0%
|
|
>$34,868/>5.0%
|
|
Mahopac
|
|
$56,077/7.1%
|
|
>$23,662/>3.0%
|
|
>$39,436/>5.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Generally,
dividends from the banking subsidiaries to the Company are limited to retained
net profits for the current year and two preceding years, unless specific
approval is received from the appropriate bank regulatory authority. At
December 31, 2009 the retained net profits of the Companys bank subsidiaries
available to pay dividends were $29.4 million.
Each
bank subsidiary is required to maintain reserve balances by the Federal Reserve
Bank of New York. At December 31, 2009, and December 31, 2008 the reserve
requirements for the Companys banking subsidiaries totaled $3,704,000 and
$5,995,000, respectively.
85
Note 21 Condensed Parent Company Only
Financial Statements
Condensed financial
statements for Tompkins (the Parent Company) as of December 31 are presented
below.
|
|
|
|
|
|
|
|
|
|
|
Condensed Statements of Condition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
$
|
5,714
|
|
$
|
3,662
|
|
Available-for-sale
securities, at fair value
|
|
|
|
|
|
225
|
|
|
641
|
|
Investment in subsidiaries,
at equity
|
|
|
|
|
|
278,588
|
|
|
233,743
|
|
Other
|
|
|
|
|
|
6,392
|
|
|
5,457
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
290,919
|
|
$
|
243,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
|
|
$
|
25,000
|
|
$
|
24,000
|
|
Trust Preferred Debentures
Issued to Non-Consolidated Subsidiary
|
|
|
|
|
|
21,161
|
|
|
0
|
|
Other Liabilities
|
|
|
|
|
|
1,202
|
|
|
1,594
|
|
Tompkins Financial
Corporation Shareholders Equity
|
|
|
|
|
|
243,556
|
|
|
217,909
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity
|
|
$
|
290,919
|
|
$
|
243,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from
available-for-sale securities
|
|
$
|
1
|
|
$
|
2
|
|
$
|
2
|
|
Dividends received from
subsidiaries
|
|
|
8,726
|
|
|
23,730
|
|
|
30,545
|
|
Other income
|
|
|
613
|
|
|
44
|
|
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Income
|
|
|
9,340
|
|
|
23,776
|
|
|
30,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
1,389
|
|
|
578
|
|
|
0
|
|
Other expenses
|
|
|
4,907
|
|
|
4,367
|
|
|
3,413
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
6,296
|
|
|
4,945
|
|
|
3,413
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Taxes and Equity in Undistributed
|
|
|
|
|
|
|
|
|
|
|
Earnings of Subsidiaries
|
|
|
3,044
|
|
|
18,831
|
|
|
27,263
|
|
Income tax benefit
|
|
|
2,224
|
|
|
1,983
|
|
|
1,330
|
|
(Distributions in excess of earnings of subsidiaries)/Equity in
undistributed earnings of subsidiaries
|
|
|
26,563
|
|
|
9,020
|
|
|
(2,222
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
31,831
|
|
$
|
29,834
|
|
$
|
26,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
Note 21 Condensed Parent Company Only
Financial Statements
(continued)
Condensed Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
31,831
|
|
$
|
29,834
|
|
$
|
26,371
|
|
Adjustments to reconcile net income to net cash provided by operating
activities: Distributions in excess of earnings of subsidiaries (equity in
undistributed earnings of subsidiaries)
|
|
|
(26,563
|
)
|
|
(9,020
|
)
|
|
2,222
|
|
Stock-based compensation expense
|
|
|
938
|
|
|
931
|
|
|
713
|
|
Other, net
|
|
|
34
|
|
|
1,097
|
|
|
(3,658
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash
Provided by Operating Activities
|
|
|
6,240
|
|
|
22,842
|
|
|
25,648
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net cash used in acquisitions
|
|
|
0
|
|
|
(30,434
|
)
|
|
0
|
|
Investments in subsidiaries
|
|
|
(13,385
|
)
|
|
(5,121
|
)
|
|
0
|
|
Other, net
|
|
|
(1,238
|
)
|
|
(121
|
)
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in
Investing Activities
|
|
|
(14,623
|
)
|
|
(35,676
|
)
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Borrowing, net
|
|
|
22,072
|
|
|
24,000
|
|
|
0
|
|
Cash dividends
|
|
|
(13,208
|
)
|
|
(12,728
|
)
|
|
(12,023
|
)
|
Repurchase of common shares
|
|
|
(178
|
)
|
|
(58
|
)
|
|
(12,914
|
)
|
Shares issued for dividend reinvestment plans
|
|
|
631
|
|
|
0
|
|
|
0
|
|
Net proceeds from exercise of stock options
|
|
|
955
|
|
|
3,354
|
|
|
611
|
|
Tax benefits of stock options exercised
|
|
|
163
|
|
|
587
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash
Provided by (Used in) Financing Activities
|
|
|
10,435
|
|
|
15,155
|
|
|
(24,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
2,052
|
|
|
2,321
|
|
|
1,330
|
|
Cash at beginning of year
|
|
|
3,662
|
|
|
1,341
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at End of
Year
|
|
$
|
5,714
|
|
$
|
3,662
|
|
$
|
1,341
|
|
|
|
|
|
|
|
|
|
|
|
|
A
statement of changes in shareholders equity has not been presented since it is
the same as the Consolidated Statement of Changes in Shareholders Equity
previously presented.
Note 22 Segment and Related Information
The
Company manages its operations through two business segments: banking and
financial services. Financial services activities consist of the results of the
Companys trust, financial planning and wealth management, broker-dealer, and
risk management operations. All other activities, including holding company
activities, are considered banking. The Company accounts for intercompany fees
and services at an estimated fair value according to regulatory requirements
for the services provided. Intercompany items relate primarily to the use of
human resources, accounting and marketing services provided by any of the Banks
and the holding company. All other accounting policies are the same as those
described in the summary of significant accounting policies.
87
Note 22 Segment and Related Information
(continued)
Summarized
financial information concerning the Companys reportable segments and the
reconciliation to the Companys consolidated results is shown in the following
table. Investment in subsidiaries is netted out of the presentations below. The
Intercompany column identifies the intercompany activities of revenues,
expenses and other assets between the banking and financial services segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the year ended December 31, 2009
|
|
|
|
|
|
(in thousands)
|
|
Banking
|
|
Financial
Services
|
|
Intercompany
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
146,563
|
|
$
|
260
|
|
$
|
(28
|
)
|
$
|
146,795
|
|
Interest expense
|
|
|
39,783
|
|
|
3
|
|
|
(28
|
)
|
|
39,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
106,780
|
|
|
257
|
|
|
0
|
|
|
107,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and
lease losses
|
|
|
9,288
|
|
|
0
|
|
|
0
|
|
|
9,288
|
|
Noninterest income
|
|
|
21,209
|
|
|
25,574
|
|
|
(570
|
)
|
|
46,213
|
|
Noninterest expense
|
|
|
76,650
|
|
|
20,537
|
|
|
(570
|
)
|
|
96,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
42,051
|
|
|
5,294
|
|
|
0
|
|
|
47,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
13,492
|
|
|
1,891
|
|
|
0
|
|
|
15,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income attributable to noncontrolling interests
and Tompkins Financial Corporation
|
|
|
28,559
|
|
|
3,403
|
|
|
0
|
|
|
31,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income
attributable to noncontrolling interest
|
|
|
131
|
|
|
0
|
|
|
0
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income attributable to Tompkins Financial
Corporation
|
|
$
|
28,428
|
|
$
|
3,403
|
|
$
|
0
|
|
$
|
31,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
$
|
4,297
|
|
$
|
187
|
|
$
|
0
|
|
$
|
4,484
|
|
Assets
|
|
|
3,128,772
|
|
|
28,057
|
|
|
(3,569
|
)
|
|
3,153,260
|
|
Goodwill
|
|
|
23,600
|
|
|
17,989
|
|
|
0
|
|
|
41,589
|
|
Other intangibles
|
|
|
3,266
|
|
|
1,598
|
|
|
0
|
|
|
4,864
|
|
Loans, net
|
|
|
1,890,468
|
|
|
0
|
|
|
0
|
|
|
1,890,468
|
|
Deposits
|
|
|
2,443,192
|
|
|
0
|
|
|
(3,328
|
)
|
|
2,439,864
|
|
Total equity
|
|
|
222,552
|
|
|
22,456
|
|
|
0
|
|
|
245,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the year ended December 31, 2008
|
|
|
|
|
|
(in thousands)
|
|
Banking
|
|
Financial
Services
|
|
Intercompany
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
140,601
|
|
$
|
234
|
|
$
|
(52
|
)
|
$
|
140,783
|
|
Interest expense
|
|
|
50,438
|
|
|
7
|
|
|
(52
|
)
|
|
50,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
|
|
90,163
|
|
|
227
|
|
|
0
|
|
|
90,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and lease losses
|
|
|
5,428
|
|
|
0
|
|
|
0
|
|
|
5,428
|
|
Noninterest income
|
|
|
20,867
|
|
|
25,781
|
|
|
(613
|
)
|
|
46,035
|
|
Noninterest expense
|
|
|
67,682
|
|
|
19,987
|
|
|
(613
|
)
|
|
87,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
income tax expense
|
|
|
37,920
|
|
|
6,021
|
|
|
0
|
|
|
43,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
11,656
|
|
|
2,154
|
|
|
0
|
|
|
13,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
attributable to noncontrolling interests and Tompkins Financial Corporation
|
|
|
26,264
|
|
|
3,867
|
|
|
0
|
|
|
30,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
297
|
|
|
0
|
|
|
0
|
|
|
297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
attributable to Tompkins Financial Corporation
|
|
$
|
25,967
|
|
$
|
3,867
|
|
$
|
0
|
|
$
|
29,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
4,436
|
|
$
|
234
|
|
$
|
0
|
|
$
|
4,670
|
|
Assets
|
|
|
2,838,923
|
|
|
32,209
|
|
|
(3,410
|
)
|
|
2,867,722
|
|
Goodwill
|
|
|
23,573
|
|
|
17,906
|
|
|
0
|
|
|
41,479
|
|
Other intangibles
|
|
|
3,428
|
|
|
1,871
|
|
|
0
|
|
|
5,299
|
|
Loans, net
|
|
|
1,798,859
|
|
|
0
|
|
|
0
|
|
|
1,798,859
|
|
Deposits
|
|
|
2,137,238
|
|
|
0
|
|
|
(3,231
|
)
|
|
2,134,007
|
|
Total equity
|
|
|
196,190
|
|
|
23,171
|
|
|
0
|
|
|
219,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
Note
22 Segment and Related Information
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2007
|
|
|
|
|
|
(in thousands)
|
|
Banking
|
|
Financial
Services
|
|
Intercompany
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
132,172
|
|
$
|
324
|
|
$
|
(55
|
)
|
$
|
132,441
|
|
Interest expense
|
|
|
58,457
|
|
|
10
|
|
|
(55
|
)
|
|
58,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
73,715
|
|
|
314
|
|
|
0
|
|
|
74,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and
lease losses
|
|
|
1,529
|
|
|
0
|
|
|
0
|
|
|
1,529
|
|
Noninterest income
|
|
|
19,106
|
|
|
25,416
|
|
|
(473
|
)
|
|
44,049
|
|
Noninterest expense
|
|
|
60,377
|
|
|
18,152
|
|
|
(473
|
)
|
|
78,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
30,915
|
|
|
7,578
|
|
|
0
|
|
|
38,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
9,257
|
|
|
2,734
|
|
|
0
|
|
|
11,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income attributable to noncontrolling interests
and Tompkins Financial Corporation
|
|
|
21,658
|
|
|
4,844
|
|
|
0
|
|
|
26,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income
attributable to noncontrolling interest
|
|
|
131
|
|
|
0
|
|
|
0
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income attributable to Tompkins Financial
Corporation
|
|
$
|
21,527
|
|
$
|
4,844
|
|
$
|
0
|
|
$
|
26,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U
naudited Quarterly Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
(in thousands
except per share data)
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend
income
|
|
$
|
36,251
|
|
$
|
36,559
|
|
$
|
36,558
|
|
$
|
37,427
|
|
Interest expense
|
|
|
10,400
|
|
|
10,050
|
|
|
9,778
|
|
|
9,530
|
|
Net interest income
|
|
|
25,851
|
|
|
26,509
|
|
|
26,780
|
|
|
27,897
|
|
Provision for loan and
lease losses
|
|
|
2,036
|
|
|
2,367
|
|
|
2,127
|
|
|
2,758
|
|
Income before income tax
|
|
|
11,459
|
|
|
11,006
|
|
|
12,530
|
|
|
12,350
|
|
Net income
|
|
|
7,710
|
|
|
7,447
|
|
|
8,460
|
|
|
8,214
|
|
Net income per common share
(basic)
|
|
|
.72
|
|
|
.70
|
|
|
.79
|
|
|
.77
|
|
Net income per common share
(diluted)
|
|
|
.72
|
|
|
.69
|
|
|
.79
|
|
|
.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
(in thousands
except per share data)
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend
income
|
|
$
|
33,543
|
|
$
|
34,507
|
|
$
|
36,200
|
|
$
|
36,533
|
|
Interest expense
|
|
|
13,861
|
|
|
12,640
|
|
|
12,162
|
|
|
11,730
|
|
Net interest income
|
|
|
19,682
|
|
|
21,867
|
|
|
24,038
|
|
|
24,803
|
|
Provision for loan and
lease losses
|
|
|
625
|
|
|
1,183
|
|
|
1,515
|
|
|
2,105
|
|
Income before income tax
|
|
|
11,343
|
|
|
10,522
|
|
|
11,775
|
|
|
10,301
|
|
Net income
|
|
|
7,508
|
|
|
7,119
|
|
|
7,933
|
|
|
7,274
|
|
Net income per common share
(basic)
|
|
|
.71
|
|
|
.67
|
|
|
.75
|
|
|
.68
|
|
Net income per common share
(diluted)
|
|
|
.70
|
|
|
.66
|
|
|
.74
|
|
|
.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and dividend income, and interest expense for the first and second quarters of
2008 were adjusted from the amounts previously reported in the Quarterly Form
10-Q, as certain amounts were reclassified.
89
|
|
I
tem 8.
|
Changes in
and Disagreements with Accountants on Accounting and Financial Disclosure
|
None.
|
|
I
tem 8A.
|
Controls
and Procedures
|
Evaluation of Disclosure Controls and
Procedures
The
Companys management, including its Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operations of the
Companys disclosure controls and procedures (as defined in Rule 13a-15 under
the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of
December 31, 2009. Based upon that evaluation, the Companys Chief Executive
Officer and Chief Financial Officer concluded that as of the end of the period
covered by this Form 10-K, the Companys disclosure controls and procedures
were effective in providing reasonable assurance that information required to be
disclosed by the Company in its reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules and forms and that
material information relating to the Company and its subsidiaries is made known
to management, including the Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding disclosure.
Managements Annual Report on Internal
Control Over Financial Reporting
The
Companys management is responsible for establishing and maintaining adequate
internal control over financial reporting for the Company. As of December 31,
2009, management assessed the effectiveness of the Companys internal control
over financial reporting based on the framework for effective internal control
over financial reporting established in Internal Control - Integrated
Framework, issued by the Committee of Sponsoring Organizations (COSO) of the
Treadway Commission. Based on its evaluation under the COSO framework,
management concluded that the Companys internal control over financial
reporting was effective as of December 31, 2009 to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external reporting purposes in accordance with
generally accepted accounting principles. The results of managements
assessment was reviewed with the Companys Audit Committee of its Board of
Directors. The Companys registered public accounting firm has issued an
attestation report on the Companys internal controls over financial reporting,
which is included in Part II, Item 7 of this Report.
Changes in Internal Control Over
Financial Reporting
There
were no changes in the Companys internal control over financial reporting that
occurred during the Companys fourth quarter ended December 31, 2009, that has
materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.
|
|
I
tem 8B.
|
Other
Information
|
None.
P
ART III
|
|
I
tem 9.
|
Directors,
Executive Officers and Corporate Governance
|
The
information required by this item is incorporated herein by reference to the
material under the captions Proposal 1 Election of Directors and Section
16(a) Beneficial Ownership Reporting Compliance; the discussion of the
Companys code of ethics under the caption Corporate Governance Matters-Policy
Regarding Director Attendance at Annual Meetings; the discussion of director
nominees by stockholders and the Audit/Examining Committee under the caption
Board of Director Meetings and Committees all in the Companys definitive
proxy statement relating to its 2010 annual meeting of shareholders to be held
May 10, 2010 (the Proxy Statement); and the material captioned Executive
Officers of the Registrant in Part I of this Report on Form 10-K.
90
|
|
I
tem 10.
|
Executive Compensation
|
The
information called for by this item is incorporated herein by reference to the
material under the captions, Executive Compensation, Compensation Committee
Interlocks and Insider Participation and Compensation Committee Report in
the Proxy Statement.
The
material incorporated herein by reference to the material under the caption
Compensation Committee Report in the Proxy Statement shall be deemed
furnished, and not filed, in this Report on Form 10-K and shall not be deemed
incorporated by reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, as a result of
this furnishing, except to the extent that the Company specifically
incorporates it by reference.
|
|
I
tem 11.
|
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
Information
regarding stock-based compensation awards outstanding and available for future
grant as of December 31, 2009 is presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
Category
|
|
Number of Securities to be
Issued Upon Exercise of
Outstanding Options, Warrants
and Rights
(a)
|
|
Weighted Average Exercise
Price
of Outstanding Options,
Warrants and
Rights
(b)
|
|
Number of Securities
Remaining Available For
Future Issuance Under Equity
Compensation Plans
(excluding Securities in
Column (a)
(c)
|
|
|
|
|
|
|
|
|
|
Equity Compensation Plans Approved by Security Holders
|
|
|
1,058,033
|
|
$
|
37.08
|
|
|
666,930
|
|
Equity Compensation Plans Not Approved by Security Holders
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I
tem 12.
|
Certain Relationships and Related Transactions, and Director
Independence
|
The
information called for by this item is incorporated herein by reference to the
material under the captions Director Independence and Transactions with
Related Persons in the Proxy Statement.
|
|
I
tem 13.
|
Principal Accounting Fees and Services
|
The
information called for by this item is incorporated herein by reference to the
material under the caption Independent Auditors in the Proxy Statement.
P
ART IV
|
|
I
tem 14.
|
Exhibits and Financial Statement Schedules
|
|
|
(a)(1)
|
The
following financial statements and Report of KPMG are included in this Annual
Report on Form
10-K:
|
|
|
|
Report of KPMG LLP,
Independent Registered Public Accounting Firm
|
|
|
|
Consolidated Statements of
Condition for the years ended December 31, 2009 and 2008
|
|
|
|
Consolidated Statements of
Income for the years ended December 31, 2009, 2008, and 2007
|
|
|
|
Consolidated Statements of
Cash Flows for the years ended December 31, 2009, 2008, and 2007
|
|
|
|
Consolidated Statements of
Changes in Shareholders Equity for the years ended December 31, 2009, 2008,
and 2007
|
91
|
|
|
Notes to Consolidated
Financial Statements
|
|
|
|
Unaudited Quarterly
Financial Data
|
|
|
(a)(2)
|
List of
Financial Schedules
|
|
|
|
Not Applicable.
|
|
|
(a)(3)
|
Exhibits
|
|
|
|
|
Item No.
|
|
Description
|
|
|
|
|
2.1
|
|
Agreement and Plan of
Reorganization, dated as of March 14, 1995, among the Bank, the Company and
the Interim Bank incorporated herein by reference to Exhibit 2 to the
Companys Registration Statement on Form 8-A (No. 0-27514), filed with the
Commission on December 29, 1995, and amended by the Companys Form 8-A/A
filed with the Commission of January 22, 1996.
|
|
|
|
|
|
2.2
|
|
Agreement and Plan of
Reorganization, dated as of July 30, 1999 between the Company and Letchworth,
incorporated by reference to Annex A to the Companys Registration Statement
of Form S-4 (Registration No. 333-90411), filed with the Commission of November
5, 1999.
|
|
|
|
|
|
3.1
|
|
Amended and Restated
Certificate of Incorporation of the Company, incorporated herein by reference
to Exhibit 3(i) to the Companys Form 10-Q, filed with the Commission on
August 11, 2008.
|
|
|
|
|
|
3.2
|
|
Amended and Restated Bylaws
of the Company, incorporated herein by reference to Exhibit 3(ii) to the
Companys Form 10-Q, filed with the Commission on August 11, 2008.
|
|
|
|
|
|
4.
|
|
Form of Specimen Common
Stock Certificate of the Company, incorporated herein by reference to Exhibit
4 to the Companys Registration Statement on Form 8-A (No. 0-27514), filed
with the Commission on December 29, 1995.
|
|
|
|
|
|
4.1
|
|
Form of Specimen Common
Stock Certificate of the Company, incorporated herein by reference to Exhibit
4 to the Companys Registration Statement on Form 8-A (No. 0-27514), filed
with the Commission on December 29, 1995.
|
|
|
|
|
|
4.2
|
|
Indenture, dated as of
April 10, 2009, incorporated herein by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K, filed with the Commission on April 16,
2009.
|
|
|
|
|
|
4.3
|
|
Form of Subordinated
Debenture (included as Exhibit A to Exhibit 4.2)
|
|
|
|
|
|
4.4
|
|
Amended and Restated Trust
Agreement, dated as of April 10, 2009, incorporated herein by reference to
Exhibit 4.3 to the Companys Current Report on Form 8-K, filed with the
Commission on April 16, 2009.
|
|
|
|
|
|
4.5
|
|
Form of Convertible
Preferred Security Certificate of Tompkins Capital Trust I (included as
Exhibit D to Exhibit 4.4)
|
|
|
|
|
|
4.6
|
|
Preferred Securities
Guarantee Agreement, dated as of April 10, 2009, incorporated herein by
reference to Exhibit 4.5 to the Companys Current Report on Form 8-K, filed
with the Commission on April 16, 2009.
|
|
|
|
|
|
4.7
|
|
Agreement as to Expenses
and Liabilities, dated as of April 10, 2009, incorporated herein by reference
to Exhibit 4.6 to the Companys Current Report on Form 8-K, filed with the
Commission on April 16, 2009.
|
|
|
|
|
|
10.1*
|
|
1992 Stock Option Plan,
incorporated herein by reference to Exhibit 10.2 to the Companys
Registration Statement on Form 8-A (No. 0-27514), filed with the Commission
on December 29, 1995.
|
|
|
|
|
|
10.2*
|
|
Amended and Restated
Retainer Plan for Eligible Directors of Tompkins Financial Corporation and
Its Wholly-owned Subsidiaries.
|
|
|
|
|
|
10.3*
|
|
Form of Director Deferred
Compensation Agreement, incorporated herein by reference to Exhibit 10.4 to
the Companys Registration Statement on Form 8-A (No. 0-27514), filed with
the Commission on December 29, 1995.
|
|
|
|
|
|
10.4*
|
|
Deferred Compensation Plan
for Senior Officers, incorporated herein by reference to Exhibit 10.5 to the
Companys Registration Statement on Form 8-A (No. 0-27514), filed with the
Commission on December 29, 1995
|
92
|
|
|
|
|
10.5*
|
|
Supplemental Executive
Retirement Agreement with James J. Byrnes, incorporated herein by reference
to Exhibit 10.6 to the Companys Registration Statement on Form 8-A (No.
0-27514), filed with the Commission on December 29, 1995.
|
|
|
|
|
|
10.6*
|
|
Severance Agreement with
James J. Byrnes, incorporated herein by reference to Exhibit 10.7 to the
Companys Registration Statement on Form 8-A (No. 0-27514), filed with the
Commission on December 29, 1995.
|
|
|
|
|
|
10.7
|
|
Lease Agreement dated
August 20, 1993, between Tompkins County Trust Company and Comex Plaza
Associates, relating to leased property at the Rothschilds Building, Ithaca,
NY, incorporated herein by reference to Exhibit 10.8 to the Companys Form
10-K, filed with the Commission on March 26, 1996.
|
|
|
|
|
|
10.8*
|
|
Employment Agreement,
dated September 12, 1989, by and between Registrant and James W. Fulmer,
incorporated by reference to the Registrants Amendment No. 1 to Form S-18
Registration Statement (Reg. No. 33-3114-NY), filed with the Commission on
October 31, 1989 and wherein such Exhibit is designated as Exhibit 10(a).
|
|
|
|
|
|
10.9*
|
|
2001 Stock Option Plan,
incorporated herein by reference to Exhibit 99 to the Companys Registration
Statement on Form S-8 (No. 333-75822), filed with the Commission on December
12, 2001.
|
|
|
|
|
|
10.11*
|
|
Summary of Compensation
Arrangements for Named Executive Officers and Directors, incorporated herein
by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K,
filed with the Commission on February 1, 2010.
|
|
|
|
|
|
10.12*
|
|
Supplemental Executive
Retirement Agreement between James W. Fulmer and Tompkins Trustco, Inc.,
dated December 28, 2005, incorporated herein by reference to Exhibit 10.14 to
the Companys Annual Report on Form 10-K for the year ended December 31,
2005, filed with the Commission on March 16, 2006.
|
|
|
|
|
|
10.14*
|
|
Supplemental Executive
Retirement Agreement between Stephen S. Romaine and Tompkins Trustco, Inc.,
dated December 28, 2005, incorporated herein by reference to Exhibit 10.16 to
the Companys Annual Report on Form 10-K for the year ended December 31, 2005,
filed with the Commission on March 16, 2006.
|
|
|
|
|
|
10.15*
|
|
Supplemental Executive
Retirement Agreement between Francis M. Fetsko and Tompkins Trustco, Inc.,
dated December 28, 2005, incorporated herein by reference to Exhibit 10.17 to
the Companys Annual Report on Form 10-K for the year ended December 31,
2005, filed with the Commission on March 16, 2006.
|
|
|
|
|
|
10.16*
|
|
Supplemental Executive
Retirement Agreement between David S. Boyce and Tompkins Trustco, Inc., dated
December 28, 2005, incorporated herein by reference to Exhibit 10.18 to the
Companys Annual Report on Form 10-K for the year ended December 31, 2005,
filed with the Commission on March 16, 2006.
|
|
|
|
|
|
10.17*
|
|
Supplemental Executive
Retirement Agreement between Robert B. Bantle and Tompkins Trustco, Inc.,
dated December 28, 2005, incorporated herein by reference to Exhibit 10.19 to
the Companys Annual Report on Form 10-K for the year ended December 31,
2005, filed with the Commission on March 16, 2006.
|
|
|
|
|
|
10.18*
|
|
Form of Officer Group Term
Life Replacement Plan (the Plan) among Tompkins Trustco, Inc., or Tompkins
Trust Company and the Participants in the Plan, including form of Split
Dollar Policy Endorsement Exhibit D to the Plan, including Exhibit D to
Officer Group Term Replacement Plan for each executive officer filed
individually.
|
|
|
|
|
|
10.19*
|
|
Consulting Agreement
between Russell K. Achzet and Tompkins Trustco, Inc., dated January 5, 2006,
incorporated herein by reference to Exhibit 10.21 to the Companys Annual
Report on Form 10-K for the year ended December 31, 2005, filed with the
Commission on March 16, 2006.
|
|
|
|
|
|
10.20*
|
|
Amendment to the Tompkins
Trustco, Inc. Supplemental Retirement Agreement with James J. Byrnes,
incorporated herein by reference to Exhibit 10.1 to the Companys Form 10-Q,
filed with the Commission on August 9, 2006.
|
|
|
|
|
|
10.21*
|
|
Tompkins Trustco, Inc.
Officer Group Term Replacement Plan, as amended on June 26, 2006,
incorporated herein by reference to Exhibit 10.2 to the Companys Form 10-Q, filed
with the Commission on August 9, 2006.
|
|
|
|
|
|
10.22*
|
|
2009 Equity Plan,
incorporated herein by reference to Exhibit 99 to the Companys Registration
Statement on Form S-8 (No. 333-160738) filed with the Commission on July 22,
2009.
|
93
|
|
|
|
|
14.
|
|
Tompkins Trustco, Inc.
Code of Ethics For Chief Executive Officer and Senior Financial Officers
dated April 25, 2006, incorporated herein by reference to Exhibit 10.22 to
the Companys Annual Report on Form 10-K for the year ended December 31,
2006, filed with the Commission on March 15, 2007.
|
|
|
|
|
|
21.
|
|
Subsidiaries of
Registrant, incorporated by reference to Exhibit 21 to the Companys Annual
Report on Form 10-K for the year ended December 31, 2003, filed with the
Commission on March 15, 2004.
|
|
|
|
|
|
23.
|
|
Consent of Independent
Registered Public Accounting Firm (filed herewith)
|
|
|
|
|
|
24.
|
|
Power of Attorney,
included on page 95 of this Report on Form 10-K.
|
|
|
|
|
|
31.1
|
|
Certification of the Chief
Executive Officer as required pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
|
|
|
|
|
|
31.2
|
|
Certification of the Chief
Financial Officer as required pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
|
|
|
|
|
|
32.1
|
|
Certification of the Chief
Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
|
|
|
|
32.2
|
|
Certification of the Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
|
*
|
Management contracts and
compensatory plans and arrangements required to be filed as Exhibits to this
Report on Form 10-K pursuant to Item 15(c) of the Report.
|
94
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
TOMPKINS
FINANCIAL CORPORATION
|
|
|
|
|
|
|
|
|
|
By:
|
Stephen S. Romaine
|
|
|
President
and Chief Executive Officer
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
Date: March
12, 2010
|
|
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Stephen S.
Romaine and Frank M. Fetsko, and each of them, as his or her true and lawful
attorneys-in-fact and agents, each with full power of substitution, for him or
her, and in his or her name, place and stead, in any and all capacities, to
sign any amendments to this Report on Form 10-K, and to file the same, with
Exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done as fully to all intents
and purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
Signature
|
|
Date
|
|
Capacity
|
|
Signature
|
|
Date
|
|
Capacity
|
|
|
|
|
|
|
|
|
|
|
|
/S/ James J.
Byrnes
|
|
3/12/10
|
|
Chairman of
the Board
|
|
/S/
Elizabeth W. Harrison
|
|
3/12/10
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
James J.
Byrnes
|
|
|
|
|
|
Elizabeth W.
Harrison
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/S/ Stephen
S. Romaine
|
|
3/12/10
|
|
President
and Chief Executive Officer
|
|
/S/ James R.
Hardie
|
|
3/12/10
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
Stephen S.
Romaine
|
|
|
|
(Principal
Executive Officer)
|
|
James R.
Hardie
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/S/ Thomas
R. Salm
|
|
3/12/10
|
|
Vice
Chairman, Director
|
|
/S/ Carl E.
Haynes
|
|
3/12/10
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
Thomas R.
Salm
|
|
|
|
|
|
Carl E.
Haynes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/S/ James W.
Fulmer
|
|
3/12/10
|
|
Vice
Chairman, Director
|
|
/S/ Patricia
A. Johnson
|
|
3/12/10
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
James W.
Fulmer
|
|
|
|
|
|
Patricia A.
Johnson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/S/ Francis
M. Fetsko
|
|
3/12/10
|
|
Executive
Vice President and
|
|
/S/ Hunter R. Rawlings, III
|
|
3/12/10
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
Francis M.
Fetsko
|
|
|
|
Chief
Financial Officer
|
|
Hunter R.
Rawlings, III
|
|
|
|
|
|
|
|
|
(Principal
Financial Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/S/ Russell K. Achzet
|
|
3/12/10
|
|
Director
|
|
/S/ Thomas
R. Rochon
|
|
3/12/10
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
Russell K.
Achzet
|
|
|
|
|
|
Thomas R.
Rochon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/S/ John E.
Alexander
|
|
3/12/10
|
|
Director
|
|
/S/ Michael
H. Spain
|
|
3/12/10
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
John E.
Alexander
|
|
|
|
|
|
Michael H.
Spain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/S/ Daniel
J. Fessenden
|
|
3/12/10
|
|
Director
|
|
/S/ William
D. Spain, Jr.
|
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3/12/10
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Director
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Daniel J.
Fessenden
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William D.
Spain, Jr.
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/S/ Reeder
D. Gates
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3/12/10
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Director
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/S/ Craig Yunker
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3/12/10
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Director
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Reeder D.
Gates
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Craig Yunker
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95
Exhibits Index
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Item No.
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Description
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2.1
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Agreement
and Plan of Reorganization, dated as of March 14, 1995, among the Bank, the
Company and the Interim Bank incorporated herein by reference to Exhibit 2 to
the Companys Registration Statement on Form 8-A (No. 0-27514), filed with
the Commission on December 29, 1995, and amended by the Companys Form 8-A/A
filed with the Commission of January 22, 1996.
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2.2
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Agreement
and Plan of Reorganization, dated as of July 30, 1999 between the Company and
Letchworth, incorporated by reference to Annex A to the Companys
Registration Statement of Form S-4 (Registration No. 333-90411), filed with
the Commission of November 5, 1999.
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3.1
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Amended and
Restated Certificate of Incorporation of the Company, incorporated herein by
reference to Exhibit 3(i) to the Companys Form 10-Q, filed with the
Commission on August 11, 2008.
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3.2
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Amended and
Restated Bylaws of the Company, incorporated herein by reference to Exhibit
3(ii) to the Companys Form 10-Q, filed with the Commission on August 11,
2008.
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4.
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Form of
Specimen Common Stock Certificate of the Company, incorporated herein by
reference to Exhibit 4 to the Companys Registration Statement on Form 8-A
(No. 0-27514), filed with the Commission on December 29, 1995.
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4.1
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Form of
Specimen Common Stock Certificate of the Company, incorporated herein by
reference to Exhibit 4 to the Companys Registration Statement on Form 8-A
(No. 0-27514), filed with the Commission on December 29, 1995.
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4.2
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Indenture,
dated as of April 10, 2009, incorporated herein by reference to Exhibit 4.1
to the Companys Current Report on Form 8-K, filed with the Commission on
April 16, 2009.
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4.3
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Form of
Subordinated Debenture (included as Exhibit A to Exhibit 4.2)
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4.4
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Amended and
Restated Trust Agreement, dated as of April 10, 2009, incorporated herein by
reference to Exhibit 4.3 to the Companys Current Report on Form 8-K, filed
with the Commission on April 16, 2009.
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4.5
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Form of
Convertible Preferred Security Certificate of Tompkins Capital Trust I
(included as Exhibit D to Exhibit 4.4)
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4.6
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Preferred
Securities Guarantee Agreement, dated as of April 10, 2009, incorporated
herein by reference to Exhibit 4.5 to the Companys Current Report on Form
8-K, filed with the Commission on April 16, 2009.
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4.7
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Agreement as
to Expenses and Liabilities, dated as of April 10, 2009, incorporated herein
by reference to Exhibit 4.6 to the Companys Current Report on Form 8-K,
filed with the Commission on April 16, 2009.
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10.1*
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1992 Stock
Option Plan, incorporated herein by reference to Exhibit 10.2 to the
Companys Registration Statement on Form 8-A (No. 0-27514), filed with the
Commission on December 29, 1995.
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10.2*
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Amended and
Restated Retainer Plan for Eligible Directors of Tompkins Financial
Corporation and Its Wholly-owned Subsidiaries.
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10.3*
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Form of
Director Deferred Compensation Agreement, incorporated herein by reference to
Exhibit 10.4 to the Companys Registration Statement on Form 8-A (No.
0-27514), filed with the Commission on December 29, 1995.
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10.4*
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Deferred
Compensation Plan for Senior Officers, incorporated herein by reference to
Exhibit 10.5 to the Companys Registration Statement on Form 8-A (No.
0-27514), filed with the Commission on December 29, 1995
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10.5*
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Supplemental
Executive Retirement Agreement with James J. Byrnes, incorporated herein by
reference to Exhibit 10.6 to the Companys Registration Statement on Form 8-A
(No. 0-27514), filed with the Commission on December 29, 1995.
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10.6*
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Severance
Agreement with James J. Byrnes, incorporated herein by reference to Exhibit
10.7 to the Companys Registration Statement on Form 8-A (No. 0-27514), filed
with the Commission on December 29, 1995.
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10.7
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Lease
Agreement dated August 20, 1993, between Tompkins County Trust Company and
Comex Plaza Associates, relating to leased property at the Rothschilds
Building, Ithaca, NY, incorporated herein by reference to Exhibit 10.8 to the
Companys Form 10-K, filed with the Commission on March 26, 1996.
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10.8*
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Employment
Agreement, dated September 12, 1989, by and between Registrant and James W.
Fulmer, incorporated by reference to the Registrants Amendment No. 1 to Form
S-18 Registration Statement (Reg. No. 33-3114-NY), filed with the Commission
on October 31, 1989 and wherein such Exhibit is designated as Exhibit 10(a).
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10.9*
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2001 Stock
Option Plan, incorporated herein by reference to Exhibit 99 to the Companys
Registration Statement on Form S-8 (No. 333-75822), filed with the Commission
on December 12, 2001.
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10.11*
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Summary of
Compensation Arrangements for Named Executive Officers and Directors,
incorporated herein by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K, filed with the Commission on February 1, 2010.
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10.12*
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Supplemental
Executive Retirement Agreement between James W. Fulmer and Tompkins Trustco,
Inc., dated December 28, 2005, incorporated herein by reference to Exhibit
10.14 to the Companys Annual Report on Form 10-K for the year ended December
31, 2005, filed with the Commission on March 16, 2006.
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10.14*
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Supplemental
Executive Retirement Agreement between Stephen S. Romaine and Tompkins
Trustco, Inc., dated December 28, 2005, incorporated herein by reference to
Exhibit 10.16 to the Companys Annual Report on Form 10-K for the year ended
December 31, 2005, filed with the Commission on March 16, 2006.
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10.15*
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Supplemental
Executive Retirement Agreement between Francis M. Fetsko and Tompkins
Trustco, Inc., dated December 28, 2005, incorporated herein by reference to
Exhibit 10.17 to the Companys Annual Report on Form 10-K for the year ended
December 31, 2005, filed with the Commission on March 16, 2006.
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10.16*
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Supplemental
Executive Retirement Agreement between David S. Boyce and Tompkins Trustco,
Inc., dated December 28, 2005, incorporated herein by reference to Exhibit
10.18 to the Companys Annual Report on Form 10-K for the year ended December
31, 2005, filed with the Commission on March 16, 2006.
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10.17*
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Supplemental
Executive Retirement Agreement between Robert B. Bantle and Tompkins Trustco,
Inc., dated December 28, 2005, incorporated herein by reference to Exhibit
10.19 to the Companys Annual Report on Form 10-K for the year ended December
31, 2005, filed with the Commission on March 16, 2006.
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10.18*
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Form of
Officer Group Term Life Replacement Plan (the Plan) among Tompkins Trustco,
Inc., or Tompkins Trust Company and the Participants in the Plan, including
form of Split Dollar Policy Endorsement Exhibit D to the Plan, including
Exhibit D to Officer Group Term Replacement Plan for each executive officer
filed individually.
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10.19*
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Consulting
Agreement between Russell K. Achzet and Tompkins Trustco, Inc., dated January
5, 2006, incorporated herein by reference to Exhibit 10.21 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2005, filed with
the Commission on March 16, 2006.
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10.20*
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Amendment to
the Tompkins Trustco, Inc. Supplemental Retirement Agreement with James J.
Byrnes, incorporated herein by reference to Exhibit 10.1 to the Companys
Form 10-Q, filed with the Commission on August 9, 2006.
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10.21*
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Tompkins
Trustco, Inc. Officer Group Term Replacement Plan, as amended on June 26,
2006, incorporated herein by reference to Exhibit 10.2 to the Companys Form
10-Q, filed with the Commission on August 9, 2006.
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10.22*
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2009 Equity
Plan, incorporated herein by reference to Exhibit 99 to the Companys
Registration Statement on Form S-8 (No. 333-160738) filed with the Commission
on July 22, 2009.
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14.
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Tompkins
Trustco, Inc. Code of Ethics For Chief Executive Officer and Senior Financial
Officers dated April 25, 2006, incorporated herein by reference to Exhibit 10.22
to the Companys Annual Report on Form 10-K for the year ended December 31,
2006, filed with the Commission on March 15, 2007.
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21.
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Subsidiaries
of Registrant, incorporated by reference to Exhibit 21 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2003, filed with
the Commission on March 15, 2004.
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23.
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Consent of
Independent Registered Public Accounting Firm (filed herewith)
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24.
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Power of
Attorney, included on page 91 of this Report on Form 10-K.
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31.1
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Certification
of the Chief Executive Officer as required pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith).
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31.2
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Certification
of the Chief Financial Officer as required pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith).
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32.1
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Certification
of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
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32.2
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Certification
of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
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*
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Management
contracts and compensatory plans and arrangements required to be filed as
Exhibits to this Report on Form 10-K pursuant to Item 15(c) of the Report.
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