The past few months have been pretty quiet for smaller banks like Tompkins Financial Corporation (NYSE: TMP ). Despite reporting healthy earnings growth in its most recent quarter, shares of this Ithaca, New York-based community lender have slipped a little since myI like to take a long term, buy-and-hold approach to investing, with a bias toward stocks that can sustainably post high quality earnings. Mostly found in the dividend and income section. Blog about various US/Canadian stocks at 'The Compound Inv ...

Core Viewpoint - Smaller banks like Tompkins Financial Corporation have experienced a quiet period despite reporting healthy earnings growth in the most recent quarter, leading to a slight decline in share prices [1]. Company Summary - Tompkins Financial Corporation is based in Ithaca, New York, and operates as a community lender [1]. - The company has shown healthy earnings growth recently, indicating strong financial performance [1]. Investment Approach - The investment strategy focuses on a long-term, buy-and-hold approach, particularly favoring stocks that can sustainably deliver high-quality earnings [1]. - The emphasis is on dividend and income stocks, suggesting a preference for stable returns [1].

Core Insights - Tompkins Financial Corporation has divested its insurance subsidiary, Tompkins Insurance Agencies (TIA), to Arthur J. Gallagher & Co for approximately $223 million in cash, resulting in a pre-tax gain of $183 million for Tompkins Financial [1][2] Group 1: Transaction Details - The sale of TIA, which has been operational for 150 years, includes its property and casualty insurance services as well as employee benefits services in Pennsylvania and New York [1] - Following the acquisition, all TIA leadership and staff will join Gallagher, with David Boyce continuing as the leader of TIA [2][3] Group 2: Strategic Implications - Tompkins Financial's CEO emphasized that the partnership with Gallagher is in the long-term interests of TIA employees and customers, ensuring continued success [2] - The proceeds from the sale will allow Tompkins Financial to invest in replacing the earnings from Tompkins Insurance in the near term and support strategic investments in the long term [2] Group 3: Gallagher's Perspective - Arthur J. Gallagher's CEO expressed that the acquisition of Tompkins Insurance Agencies enhances their brokerage capabilities across commercial lines, personal lines, and employee benefits [4] - The integration of TIA's customer base into Gallagher's network will provide enhanced resources and services [3]

Financial Performance - Net income attributable to Tompkins Financial Corporation for the three months ended September 30, 2025, was $23,673 thousand, up from $18,638 thousand in the same period of 2024, marking a growth of 27.4%[17] - Net income attributable to Tompkins Financial Corporation for the nine months ended September 30, 2025, was $64,823,000, an increase of 26.5% compared to $51,192,000 for the same period in 2024[21] - Basic earnings per share for the nine months ended September 30, 2025, increased to $4.55 from $3.60 in the same period of 2024, representing a rise of 26.4%[17] - Basic earnings per share (EPS) for the three months ended September 30, 2025, was $1.66, up from $1.31 in the same period of 2024, reflecting a 26.7% growth[76] - Diluted EPS for the three months ended September 30, 2025, was $1.65, compared to $1.30 in the prior year, indicating a 27.0% increase[76] Asset Growth - Total assets increased to $8,468,731 thousand as of September 30, 2025, up from $8,109,080 thousand at December 31, 2024, representing a growth of 4.4%[15] - Total deposits rose to $7,053,070 thousand as of September 30, 2025, compared to $6,471,805 thousand at December 31, 2024, indicating an increase of 9.0%[15] - Total equity increased to $788,805 thousand as of September 30, 2025, from $713,444 thousand at December 31, 2024, reflecting a growth of 10.5%[15] - Total loans and leases amounted to $6,292,717, an increase from $6,025,108 as of December 31, 2024, representing a growth of approximately 4.45%[50] Income and Expenses - Net interest income after provision for credit loss expense for the nine months ended September 30, 2025, was $170,113 thousand, compared to $149,621 thousand for the same period in 2024, reflecting an increase of 13.7%[17] - Noninterest income for the nine months ended September 30, 2025, totaled $71,108 thousand, compared to $67,298 thousand for the same period in 2024, showing a growth of 5.2%[17] - Noninterest expense for the three months ended September 30, 2025, was $53,847,000, compared to $49,877,000 in the same period of 2024, an increase of 8.0%[91] - Total Noninterest Expenses for the nine months ended September 30, 2025, were $156,077,000, an increase from $149,676,000 in the same period of 2024[17] Credit Losses and Provisions - The provision for credit loss expense for the nine months ended September 30, 2025, was $10,557 thousand, compared to $5,200 thousand for the same period in 2024, reflecting a significant increase of 103.4%[17] - The allowance for credit losses (ACL) at the end of September 30, 2025, was $59,889, an increase from $58,555 at the end of September 30, 2024[65] - The provision for credit loss expense for the three months ended September 30, 2025, was $2,454, compared to $3,237 for the same period in 2024[65] - The total charge-offs for the three months ended September 30, 2025, were $1,333, compared to $1,049 for the same period in 2024[65] Investment and Securities - Total available-for-sale debt securities as of September 30, 2025, amounted to $1,291,053,000, with unrealized losses of $102,068,000[40] - Held-to-maturity debt securities totaled $281,624,000 as of September 30, 2025, with unrealized losses of $30,886,000[41] - The company recognized net gains on equity securities of $10,000 and $25,500 for the three and nine months ended September 30, 2025, respectively[41] - The total fair value of available-for-sale debt securities with unrealized losses was $835,428,000 as of September 30, 2025[42] Cash Flow and Liquidity - Net cash provided by operating activities increased to $76,073,000, up from $71,717,000, reflecting a growth of 6.0% year-over-year[21] - Total cash and cash equivalents at the end of the period reached $193,492,000, compared to $132,320,000 at the end of September 30, 2024, marking a 46.2% increase[21] - The company reported a net cash used in investing activities of $(270,248,000), compared to $(125,048,000) in the previous year, indicating increased investment activity[21] Comprehensive Income - Total comprehensive income attributable to Tompkins Financial Corporation for the nine months ended September 30, 2025, was $99,542 thousand, compared to $74,997 thousand for the same period in 2024, indicating an increase of 32.8%[19] - Other comprehensive income for the three months ended September 30, 2025, was $11,342, compared to $34,470 for the same period in 2024, reflecting a decrease of approximately 67.1%[79] - For the nine months ended September 30, 2025, the other comprehensive income was $34,719, compared to $23,805 for the same period in 2024, representing an increase of approximately 45.9%[80] Regulatory and Accounting Standards - The company is currently evaluating the potential impact of ASU No. 2023-09 on its consolidated financial statements, effective for fiscal years beginning after December 15, 2024[37] - The company has adopted new accounting standards that improve segment reporting disclosures, effective for fiscal years beginning after December 15, 2023[34] - The company has not identified any new accounting standards that it believes will have a material impact on its financial statements[39] Loan Performance - The total past due loans as of September 30, 2025, amounted to $52,697, with a significant portion attributed to commercial real estate[53] - Nonaccrual loans and leases totaled $9,047 as of September 30, 2025, with $52,805 past due over 89 days[55] - The total performing loans for Residential Mortgages reached $1,343,743,000, a significant increase from $649,101,000 in the previous year[72] - The total loans for Commercial Real Estate - Agriculture reached $226,656,000, with a significant portion classified as Pass[71]

Financial Performance - Diluted earnings per share for Q3 2025 were $1.65, up 10.0% from Q2 2025 and up 26.9% from Q3 2024[1] - Net income for Q3 2025 was $23.7 million, an increase of $2.2 million or 10.3% compared to Q2 2025, and up $5.0 million or 27.0% from Q3 2024[1] - Basic earnings per share increased to $1.66 for the three months ended September 30, 2025, up from $1.31 in the same period last year, representing a growth of 26.7%[27] - Net income attributable to Tompkins Financial Corporation was $23,673,000, compared to $21,471,000 in the previous quarter, marking an increase of 10.3%[34] Income and Expenses - Net interest income for Q3 2025 was $63.9 million, up $3.7 million or 6.2% from Q2 2025, and up $10.7 million or 20.1% from Q3 2024[5] - Noninterest income for Q3 2025 was $23.6 million, up $179,000 or 0.8% compared to Q3 2024[12] - Noninterest expense for Q3 2025 was $53.8 million, up $4.0 million or 8.0% compared to Q3 2024[13] - Total noninterest expenses increased to $53,847 thousand for the three months ended September 30, 2025, compared to $49,877 thousand for the same period in 2024, reflecting an increase of 8.0%[27] Credit and Loans - Provision for credit losses for Q3 2025 was $2.5 million, compared to $2.2 million for Q3 2024[16] - The allowance for credit losses represented 0.95% of total loans and leases at September 30, 2025, unchanged from the prior quarter[15] - Net loans and leases rose to $6,228,182 thousand, an increase of 4.5% from $5,963,426 thousand at the end of 2024[25] - Total loans and leases reached $6,216,384 thousand for the quarter ended September 30, 2025, compared to $5,830,899 thousand for the same quarter last year, reflecting an increase of 6.61%[28] Assets and Deposits - Total assets increased to $8,468,731 thousand as of September 30, 2025, up from $8,109,080 thousand at December 31, 2024, representing a growth of 4.4%[25] - Total deposits at September 30, 2025 were $7.1 billion, up $337.3 million or 5.0% compared to Q2 2025, and up $475.2 million or 7.2% from Q3 2024[10] - Total deposits grew to $7,053,070 thousand, reflecting a 9.0% increase from $6,471,805 thousand at December 31, 2024[25] - Total deposits rose to $7,053,070 thousand as of September 30, 2025, compared to $6,471,805 thousand a year prior, indicating an increase of 8.99%[31] Capital and Equity - The company's retained earnings increased to $575,112 thousand as of September 30, 2025, up from $537,157 thousand at December 31, 2024, a growth of 7.1%[25] - Total equity rose to $788,805 thousand as of September 30, 2025, compared to $713,444 thousand at December 31, 2024, representing an increase of 10.5%[25] - Total equity increased to $771,527 thousand as of September 30, 2025, compared to $696,532 thousand a year earlier, reflecting a growth of 10.77%[28] Performance Ratios - The return on average assets improved to 1.13%, up from 1.05% in the previous quarter[36] - The Tier 1 Capital ratio to average assets was reported at 9.41%, slightly up from 9.36% in the previous quarter, indicating strong capital adequacy[36] - The average yield on interest-earning assets improved to 4.90% for the quarter ended September 30, 2025, compared to 4.66% for the same quarter last year[28] - The interest rate spread for the quarter was 2.45%, an increase from 1.95% in the same quarter of the previous year[28]

Core Insights - Tompkins Financial Corporation has seen a strong rally in its shares over the past few months, recovering losses from the "Liberation Day" panic [1] Group 1: Company Performance - The company has returned to a strong position, indicating resilience in its stock performance [1] Group 2: Investment Strategy - A long-term, buy-and-hold investment approach is favored, particularly for stocks that can sustainably generate high-quality earnings [1]

PART I - FINANCIAL INFORMATION [Item 1 – Financial Statements](index=5&type=section&id=Item%201%20%E2%80%93%20Financial%20Statements) Presents unaudited consolidated financial statements, including condition, income, cash flows, equity, and detailed notes for H1 2025 [Consolidated Statements of Condition](index=5&type=section&id=Consolidated%20Statements%20of%20Condition) Summarizes the company's financial position, assets, liabilities, and equity at specific reporting dates **Consolidated Statements of Condition (In thousands)** | Metric | 06/30/2025 | 12/31/2024 | | :----------------------------------- | :--------- | :--------- | | **ASSETS** | | | | Total Assets | $8,373,818 | $8,109,080 | | Cash and Cash Equivalents | $212,551 | $134,398 | | Available-for-sale debt securities | $1,275,370 | $1,231,532 | | Held-to-maturity debt securities | $312,493 | $312,462 | | Net Loans and Leases | $6,114,099 | $5,963,426 | | **LIABILITIES** | | | | Total Deposits | $6,715,795 | $6,471,805 | | Federal funds purchased and securities sold under agreements to repurchase | $127,111 | $37,036 | | Other borrowings | $672,696 | $790,247 | | Total Liabilities | $7,612,025 | $7,395,636 | | **EQUITY** | | | | Total Equity | $761,793 | $713,444 | | Total Liabilities and Equity | $8,373,818 | $8,109,080 | - Total Assets increased by **$264.7 million (3.3%)** from December 31, 2024, to June 30, 2025, driven by increases in cash and cash equivalents, total securities, and total loans[15](index=15&type=chunk)[202](index=202&type=chunk) - Total Deposits increased by **$244.0 million (3.8%)** from December 31, 2024, to June 30, 2025, while Other Borrowings decreased by **$117.6 million (14.9%)**[15](index=15&type=chunk)[202](index=202&type=chunk) [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) Details the company's revenues, expenses, and net income over specific reporting periods **Consolidated Statements of Income (In thousands, except per share data)** | Metric | Three Months Ended 06/30/2025 | Three Months Ended 06/30/2024 | Six Months Ended 06/30/2025 | Six Months Ended 06/30/2024 | | :------------------------------------------------ | :---------------------------- | :---------------------------- | :-------------------------- | :-------------------------- | | Total Interest and Dividend Income | $93,646 | $85,240 | $183,108 | $168,423 | | Total Interest Expense | $33,516 | $34,287 | $66,316 | $66,795 | | Net Interest Income | $60,130 | $50,953 | $116,792 | $101,628 | | Provision for credit loss expense | $2,780 | $2,172 | $8,067 | $3,026 | | Total Noninterest Income | $22,512 | $21,776 | $47,544 | $43,913 | | Total Noninterest Expenses | $51,623 | $49,942 | $102,230 | $99,799 | | Income Before Income Tax Expense | $28,239 | $20,615 | $54,039 | $42,716 | | Income Tax Expense | $6,768 | $4,902 | $12,889 | $10,100 | | Net Income Attributable to Tompkins Financial Corporation | $21,471 | $15,682 | $41,150 | $32,554 | | Basic Earnings Per Share | $1.51 | $1.10 | $2.89 | $2.29 | | Diluted Earnings Per Share | $1.50 | $1.10 | $2.87 | $2.29 | - Net income attributable to Tompkins Financial Corporation increased by **36.9%** for the three months ended June 30, 2025, and by **26.4%** for the six months ended June 30, 2025, compared to the same periods in 2024[17](index=17&type=chunk)[165](index=165&type=chunk) - Diluted EPS increased by **$0.40 (36.4%)** for the three months ended June 30, 2025, and by **$0.58 (25.3%)** for the six months ended June 30, 2025, year-over-year[17](index=17&type=chunk)[165](index=165&type=chunk) [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Reports net income and other comprehensive income items, reflecting total non-owner changes in equity **Consolidated Statements of Comprehensive Income (In thousands)** | Metric | Three Months Ended 06/30/2025 | Three Months Ended 06/30/2024 | Six Months Ended 06/30/2025 | Six Months Ended 06/30/2024 | | :---------------------------------------------------------------- | :---------------------------- | :---------------------------- | :-------------------------- | :-------------------------- | | Net income attributable to noncontrolling interests and Tompkins Financial Corporation | $21,471 | $15,713 | $41,150 | $32,616 | | Other comprehensive income (loss) | $7,095 | $(854) | $23,377 | $(10,665) | | Total comprehensive income attributable to Tompkins Financial Corporation | $28,566 | $14,828 | $64,527 | $21,889 | - Total comprehensive income attributable to Tompkins Financial Corporation significantly increased by **92.6%** for the three months ended June 30, 2025, and by **194.8%** for the six months ended June 30, 2025, primarily due to a positive change in net unrealized gain (loss) on available-for-sale debt securities[19](index=19&type=chunk)[87](index=87&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Outlines cash inflows and outflows from operating, investing, and financing activities **Consolidated Statements of Cash Flows (In thousands)** | Activity | Six Months Ended 06/30/2025 | Six Months Ended 06/30/2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Net Cash Provided by Operating Activities | $41,172 | $50,523 | | Net Cash (Used in) Provided by Investing Activities | $(161,900) | $(84,745) | | Net Cash Provided by (Used in) Financing Activities | $198,881 | $25,595 | | Net Increase (Decrease) in Cash and Cash Equivalents | $78,153 | $(8,627) | | Cash and cash equivalents at end of period | $212,551 | $70,915 | - Net cash provided by operating activities decreased by **18.5%** year-over-year for the six months ended June 30, 2025[21](index=21&type=chunk) - Net cash provided by financing activities saw a substantial increase, turning from a net inflow of **$25.6 million** in 2024 to **$198.9 million** in 2025, primarily due to increased net time deposits and other borrowings[21](index=21&type=chunk) - The company experienced a net increase in cash and cash equivalents of **$78.2 million** for the six months ended June 30, 2025, a significant improvement from a net decrease of **$8.6 million** in the prior year[21](index=21&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Details changes in equity components, including net income, OCI, dividends, and stock activities **Consolidated Statements of Changes in Shareholders' Equity (In thousands)** | Metric | Balance at 01/01/2025 | Net Income | Other Comprehensive Income | Cash Dividends | Other Activities | Balance at 06/30/2025 | | :-------------------------------- | :-------------------- | :--------- | :------------------------- | :------------- | :--------------- | :-------------------- | | Total Equity | $713,444 | $41,150 | $23,377 | $(17,922) | $1,744 | $761,793 | **Key Changes (Six Months Ended June 30, 2025)** * **Net Income:** $41,150 thousand * **Other Comprehensive Income:** $23,377 thousand * **Cash Dividends:** $(17,922) thousand * **Treasury Stock Issued:** $73 thousand * **Stock-based Compensation Expense:** $1,795 thousand * **Restricted Stock Activity:** $(121) thousand - Total Equity increased by **$48.3 million (6.8%)** from December 31, 2024, to June 30, 2025, primarily driven by net income generation and a significant increase in accumulated other comprehensive income[25](index=25&type=chunk)[229](index=229&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the consolidated financial statements [Note 1. Business](index=12&type=section&id=1.%20Business) Describes the company's operations as a financial holding company offering diverse financial services - Tompkins Financial Corporation operates as a Financial Holding Company, offering commercial and consumer banking, leasing, trust and investment management, financial planning, wealth management, and insurance services through its wholly-owned subsidiaries, Tompkins Community Bank and Tompkins Insurance Agencies, Inc[26](index=26&type=chunk) - The Company is regulated by the Federal Reserve Board, SEC, FDIC, NYSDFS, and Pennsylvania Insurance Department[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) [Note 2. Basis of Presentation](index=12&type=section&id=2.%20Basis%20of%20Presentation) Explains the accounting principles, critical policies, and impact of new accounting standards - The unaudited consolidated financial statements are prepared in accordance with GAAP and SEC rules, with certain disclosures condensed or omitted. Management's critical accounting policy includes the determination of the allowance for credit losses[29](index=29&type=chunk) - Newly adopted accounting standards ASU 2023-07 (Segment Reporting) and ASU 2024-02 (Codification Improvements) did not significantly impact financial statements or disclosures[34](index=34&type=chunk)[35](index=35&type=chunk) - ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Disaggregation of Income Statement Expenses) are pending adoption, with ASU 2023-09's potential impact currently being evaluated[37](index=37&type=chunk)[38](index=38&type=chunk) [Note 3. Securities](index=13&type=section&id=3.%20Securities) Details available-for-sale and held-to-maturity debt securities, including fair values and unrealized gains/losses **Available-for-Sale Debt Securities (In thousands)** | Metric | 06/30/2025 | 12/31/2024 | | :------------------------------------------ | :--------- | :--------- | | Amortized Cost | $1,380,080 | $1,367,123 | | Fair Value | $1,275,370 | $1,231,532 | | Gross Unrealized Gains | $9,152 | $3,835 | | Gross Unrealized Losses | $113,862 | $139,426 | **Held-to-Maturity Debt Securities (In thousands)** | Metric | 06/30/2025 | 12/31/2024 | | :------------------------------------------ | :--------- | :--------- | | Amortized Cost | $312,493 | $312,462 | | Fair Value | $278,948 | $267,295 | | Gross Unrealized Losses | $33,545 | $45,167 | - Net unrealized losses on available-for-sale debt securities decreased from **$135.6 million** at December 31, 2024, to **$104.7 million** at June 30, 2025, primarily due to interest rate volatility and maturities[40](index=40&type=chunk)[41](index=41&type=chunk)[56](index=56&type=chunk) - The Company determined that all impaired available-for-sale and held-to-maturity debt securities were impaired due to changes in interest rates and market liquidity, not creditworthiness, and therefore no allowance for credit losses was recorded for these securities[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[205](index=205&type=chunk) [Note 4. Loans and Leases](index=18&type=section&id=4.%20Loans%20and%20Leases) Provides a breakdown of loan and lease portfolios, including past due and nonaccrual balances **Loans and Leases (In thousands)** | Loan Type | 06/30/2025 | 12/31/2024 | | :------------------------------------------ | :--------- | :--------- | | Commercial and industrial | $1,007,087 | $965,575 | | Commercial real estate | $3,500,581 | $3,379,817 | | Residential real estate | $1,570,566 | $1,570,840 | | Consumer and other | $87,836 | $96,392 | | Leases | $11,001 | $12,484 | | **Total loans and leases, net** | **$6,172,654** | **$6,019,922** | **Past Due Loans (In thousands)** | Category | 06/30/2025 | 12/31/2024 | | :------------------------------------------ | :--------- | :--------- | | Total Past Due Loans (30+ days) | $50,281 | $52,907 | | 90 Days or More Past Due | $44,424 | $24,079 | **Nonaccrual Loans (In thousands)** | Category | 06/30/2025 | 12/31/2024 | | :------------------------------------------ | :--------- | :--------- | | Total Nonaccrual Loans | $52,325 | $50,548 | - Total loans and leases increased by **$152.7 million (2.5%)** from December 31, 2024, to June 30, 2025, primarily driven by growth in commercial real estate and commercial and industrial portfolios[53](index=53&type=chunk)[206](index=206&type=chunk) - Loans 90 days or more past due significantly increased from **$24.1 million** at December 31, 2024, to **$44.4 million** at June 30, 2025, mainly in commercial real estate[55](index=55&type=chunk)[56](index=56&type=chunk) [Note 5. Allowance for Credit Losses](index=21&type=section&id=5.%20Allowance%20for%20Credit%20Losses) Details the allowance for credit losses, including activity, charge-offs, recoveries, and key ratios **Allowance for Credit Losses (ACL) Activity (In thousands)** | Metric | Three Months Ended 06/30/2025 | Three Months Ended 06/30/2024 | Six Months Ended 06/30/2025 | Six Months Ended 06/30/2024 | | :------------------------------------------ | :---------------------------- | :---------------------------- | :-------------------------- | :-------------------------- | | Beginning balance | $61,023 | $51,704 | $56,496 | $51,584 | | Charge-offs | $(5,413) | $(656) | $(6,377) | $(1,101) | | Recoveries | $159 | $147 | $390 | $364 | | Provision for credit loss expense | $2,786 | $1,864 | $8,046 | $2,212 | | Ending Balance | $58,555 | $53,059 | $58,555 | $53,059 | **ACL Ratios** | Metric | 06/30/2025 | 12/31/2024 | 06/30/2024 | | :------------------------------------------ | :--------- | :--------- | :--------- | | ACL as a percentage of total loans and leases | 0.95% | 0.94% | 0.92% | | ACL / nonperforming loans and leases | 111.55% | 111.06% | 84.94% | - The ACL increased to **$58.6 million** at June 30, 2025, from **$56.5 million** at year-end 2024, reflecting loan growth, updated economic forecasts, and increased qualitative reserves for commercial and industrial loans[217](index=217&type=chunk) - Net charge-offs for the six months ended June 30, 2025, significantly increased to **$6.0 million** from **$737,000** in the prior year, largely due to a **$4.7 million** partial charge-off on one commercial real estate relationship[71](index=71&type=chunk)[219](index=219&type=chunk) [Note 6. Earnings Per Share](index=30&type=section&id=6.%20Earnings%20Per%20Share) Presents basic and diluted earnings per share calculations and related weighted average shares **Earnings Per Share (In thousands, except share and per share data)** | Metric | Three Months Ended 06/30/2025 | Three Months Ended 06/30/2024 | Six Months Ended 06/30/2025 | Six Months Ended 06/30/2024 | | :------------------------------------------------ | :---------------------------- | :---------------------------- | :-------------------------- | :-------------------------- | | Net earnings allocated to common shareholders | $21,471 | $15,682 | $41,150 | $32,554 | | Weighted average shares outstanding - Basic | 14,246,395 | 14,214,574 | 14,246,266 | 14,213,242 | | Weighted average shares outstanding - Diluted | 14,320,125 | 14,239,626 | 14,319,781 | 14,238,992 | | Basic EPS | $1.51 | $1.10 | $2.89 | $2.29 | | Diluted EPS | $1.50 | $1.10 | $2.87 | $2.29 | - Basic and Diluted EPS increased significantly for both the three and six months ended June 30, 2025, compared to the prior year, reflecting higher net income[85](index=85&type=chunk)[86](index=86&type=chunk) [Note 7. Other Comprehensive Income (Loss)](index=32&type=section&id=7.%20Other%20Comprehensive%20Income%20(Loss)) Details components of other comprehensive income and accumulated other comprehensive income **Other Comprehensive Income (Loss) (In thousands, Net of Tax)** | Metric | Three Months Ended 06/30/2025 | Three Months Ended 06/30/2024 | Six Months Ended 06/30/2025 | Six Months Ended 06/30/2024 | | :---------------------------------------------------------------- | :---------------------------- | :---------------------------- | :-------------------------- | :-------------------------- | | Change in net unrealized gain (loss) on AFS debt securities | $7,044 | $(1,051) | $23,161 | $(11,079) | | Employee benefit plans (amortization) | $51 | $197 | $216 | $414 | | Total Other Comprehensive Income (Loss) | $7,095 | $(854) | $23,377 | $(10,665) | **Accumulated Other Comprehensive (Loss) Income (In thousands)** | Metric | Balance at 01/01/2025 | Net Current-Period OCI | Balance at 06/30/2025 | | :------------------------------------------ | :-------------------- | :--------------------- | :-------------------- | | Available-for-Sale Debt Securities | $(101,694) | $23,161 | $(78,533) | | Employee Benefit Plans | $(16,798) | $216 | $(16,582) | | Total Accumulated Other Comprehensive (Loss) Income | $(118,492) | $23,377 | $(95,115) | - Other comprehensive income significantly improved from a loss of **$10.7 million** in the first six months of 2024 to a gain of **$23.4 million** in the first six months of 2025, primarily driven by a positive change in net unrealized gains on available-for-sale debt securities[87](index=87&type=chunk)[88](index=88&type=chunk) [Note 8. Financial Guarantees](index=35&type=section&id=8.%20Financial%20Guarantees) Outlines the company's financial guarantees, primarily standby letters of credit, and associated risks - The Company's maximum potential obligation under standby letters of credit was **$35.4 million** at June 30, 2025, a decrease from **$38.5 million** at December 31, 2024[93](index=93&type=chunk) - Management does not anticipate significant losses from these transactions and uses the same credit policies as for on-balance sheet lending decisions, often requiring collateral[93](index=93&type=chunk) [Note 9. Segment and Related Information](index=36&type=section&id=9.%20Segment%20and%20Related%20Information) Provides financial performance data for the Banking, Insurance, and Wealth Management segments - The Company manages its operations through three reportable business segments: Banking, Insurance (Tompkins Insurance Agencies, Inc.), and Wealth Management (Tompkins Financial Advisors)[94](index=94&type=chunk) **Net Income Attributable to Tompkins Financial Corporation by Segment (In thousands)** | Segment | Three Months Ended 06/30/2025 | Three Months Ended 06/30/2024 | Six Months Ended 06/30/2025 | Six Months Ended 06/30/2024 | | :------------------------------------------ | :---------------------------- | :---------------------------- | :-------------------------- | :-------------------------- | | Banking | $18,694 | $12,971 | $34,378 | $26,522 | | Insurance | $1,621 | $1,553 | $4,794 | $3,946 | | Wealth Management | $1,156 | $1,158 | $1,978 | $2,086 | | **Consolidated Total** | **$21,471** | **$15,682** | **$41,150** | **$32,554** | - The Banking segment's net income increased by **44.1%** for the three months and **29.6%** for the six months ended June 30, 2025, year-over-year, primarily due to increased net interest income[100](index=100&type=chunk)[102](index=102&type=chunk)[105](index=105&type=chunk)[168](index=168&type=chunk) - The Insurance segment's net income increased by **4.4%** for the three months and **21.5%** for the six months ended June 30, 2025, year-over-year, driven by growth in commissions and contingency revenue[100](index=100&type=chunk)[102](index=102&type=chunk)[105](index=105&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - The Wealth Management segment's net income remained stable for the three months but decreased by **5.2%** for the six months ended June 30, 2025, year-over-year, despite revenue growth from customer account sales and trust termination fees, due to higher noninterest expenses[100](index=100&type=chunk)[102](index=102&type=chunk)[105](index=105&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk) [Note 10. Fair Value Measurements](index=38&type=section&id=10.%20Fair%20Value%20Measurements) Details fair value measurements for financial instruments, categorized by valuation input levels **Recurring Fair Value Measurements (In thousands) as of June 30, 2025** | Asset Type | Total Fair Value | Level 1 | Level 2 | Level 3 | | :------------------------------------------ | :--------------- | :------ | :------ | :------ | | Available-for-sale debt securities | $1,275,370 | $0 | $1,275,370 | $0 | | Equity securities, at fair value | $784 | $0 | $0 | $784 | | Derivatives designated as hedging instruments | $350 | $0 | $350 | $0 | | Derivatives not designated as hedging instruments | $4,554 | $0 | $4,554 | $0 | **Estimated Fair Value of Financial Instruments (In thousands) as of June 30, 2025** | Instrument | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | | :------------------------------------------ | :-------------- | :--------- | :------ | :------ | :------ | | Cash and cash equivalents | $212,551 | $212,551 | $212,551 | $0 | $0 | | Securities - held-to-maturity | $312,493 | $278,948 | $0 | $278,948 | $0 | | Loans/leases, net | $6,114,099 | $5,810,384 | $0 | $0 | $5,810,384 | - The Company's available-for-sale debt securities and derivatives are primarily valued using **Level 2 inputs**, while equity securities and net loans/leases utilize **Level 3 inputs**[108](index=108&type=chunk)[120](index=120&type=chunk) - Individually evaluated loans and OREO are measured at fair value on a nonrecurring basis, with collateral values estimated using **Level 3 inputs** based on appraisals and customized discounting criteria[113](index=113&type=chunk)[118](index=118&type=chunk) [Note 11. Derivatives and Hedging Activities](index=43&type=section&id=11.%20Derivatives%20and%20Hedging%20Activities) Explains the company's use of interest rate derivatives for hedging and risk management - The Company uses interest rate swaps to manage fair value exposure on fixed-rate assets (designated as fair value hedges) and to help commercial loan borrowers manage interest rate risk (not designated as hedges)[127](index=127&type=chunk)[128](index=128&type=chunk)[131](index=131&type=chunk) **Derivative Assets (In thousands)** | Type | Notional Amount (06/30/2025) | Fair Value (06/30/2025) | Notional Amount (12/31/2024) | Fair Value (12/31/2024) | | :------------------------------------------ | :--------------------------- | :---------------------- | :--------------------------- | :---------------------- | | Designated as hedging instruments | $100,000 | $350 | $150,000 | $864 | | Not designated as hedging instruments | $193,867 | $4,554 | $175,865 | $1,831 | **Derivative Liabilities (In thousands)** | Type | Notional Amount (06/30/2025) | Fair Value (06/30/2025) | Notional Amount (12/31/2024) | Fair Value (12/31/2024) | | :------------------------------------------ | :--------------------------- | :---------------------- | :--------------------------- | :---------------------- | | Not designated as hedging instruments | $193,867 | $4,906 | $178,646 | $1,990 | | Risk Participation Agreement | $61,227 | $128 | $44,387 | $83 | - The fair value of derivatives in a net liability position related to credit-risk-related contingent features increased from **$1.3 million** at December 31, 2024, to **$4.9 million** at June 30, 2025[144](index=144&type=chunk) [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis of financial condition and results for H1 2025, covering key performance drivers and financial health [BUSINESS](index=47&type=section&id=BUSINESS) Overview of the company's community-based financial services, strategic focus, and competitive landscape - Tompkins Financial Corporation is a community-based financial services organization offering banking, wealth management, and insurance services, with a strategic focus on responsible and sustainable organic growth and potential acquisitions[146](index=146&type=chunk) - The Company's banking segment operates 54 offices across New York and Pennsylvania, providing commercial, agricultural, consumer, and real estate loans, alongside various digital banking services[147](index=147&type=chunk) - Competition is strong from various financial institutions, but Tompkins leverages its community-based model, personalized services, and efficient lending decisions to compete effectively[151](index=151&type=chunk)[152](index=152&type=chunk) [OTHER IMPORTANT INFORMATION](index=48&type=section&id=OTHER%20IMPORTANT%20INFORMATION) Discusses forward-looking statements, critical accounting policies, and recent regulatory developments - The report includes forward-looking statements subject to risks and uncertainties, such as changes in economic, market, and regulatory conditions, interest rates, and cybersecurity threats[156](index=156&type=chunk)[157](index=157&type=chunk) - The allowance for credit losses (ACL) is identified as a critical accounting policy due to the inherent uncertainty and subjectivity in estimating credit losses, which relies on borrower-specific data and macroeconomic assumptions[159](index=159&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) - Recent federal tax law amendments (HR.1 – One Big Beautiful Bill Act, signed July 4, 2025) are currently being evaluated for their potential impact on future periods[164](index=164&type=chunk) [RESULTS OF OPERATIONS](index=50&type=section&id=RESULTS%20OF%20OPERATIONS) Analyzes net interest income, credit loss provision, noninterest income/expense, and overall profitability **Performance Summary (In millions, except per share data)** | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------------ | :------ | :------ | :------- | :------- | | Net Income | $21.5 | $15.7 | $41.2 | $32.6 | | Diluted EPS | $1.50 | $1.10 | $2.87 | $2.29 | | Return on Average Assets (ROA) | 1.05% | 0.81% | 1.02% | 0.84% | | Return on Average Shareholders' Equity (ROE) | 11.48% | 9.51% | 11.23% | 9.85% | - Net interest income increased by **18.0%** for Q2 2025 and **14.9%** for YTD 2025 year-over-year, driven by higher average loan balances, increased loan yields, and reduced funding costs[169](index=169&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - Provision for credit losses increased to **$2.8 million** for Q2 2025 and **$8.1 million** for YTD 2025, up from **$2.2 million** and **$3.0 million** respectively in 2024, mainly due to a commercial real estate charge-off and updated economic forecasts[170](index=170&type=chunk)[193](index=193&type=chunk) - Noninterest income increased by **3.4%** for Q2 2025 and **8.3%** for YTD 2025, primarily from insurance commissions and other income, including gains on OREO sales and residential loans[194](index=194&type=chunk)[195](index=195&type=chunk)[198](index=198&type=chunk) - Noninterest expense rose by **3.4%** for Q2 2025 and **2.4%** for YTD 2025, mainly due to higher compensation and benefits, partially offset by lower technology expenses[199](index=199&type=chunk)[200](index=200&type=chunk) [FINANCIAL CONDITION](index=55&type=section&id=FINANCIAL%20CONDITION) Examines asset growth, securities portfolio, loan quality, equity, deposits, and liquidity position - Total assets grew by **$264.7 million (3.3%)** to **$8.4 billion** at June 30, 2025, with increases in loans, cash, and securities[202](index=202&type=chunk) - The securities portfolio, at **$1.6 billion**, saw a decrease in net unrealized losses from **$135.6 million** at December 31, 2024, to **$104.7 million** at June 30, 2025, due to interest rate volatility and maturities[203](index=203&type=chunk) - Total loans and leases increased by **$152.7 million (2.5%)** to **$6.2 billion**, driven by commercial real estate and commercial and industrial loan growth[206](index=206&type=chunk) - Nonperforming assets decreased by **$12.6 million (19.3%)** to **$52.6 million** at June 30, 2025, primarily due to the sale of a **$14.3 million** OREO property[225](index=225&type=chunk) - Total equity increased by **$48.3 million (6.8%)** to **$761.8 million**, supported by net income and a rise in accumulated other comprehensive income[229](index=229&type=chunk) - Total deposits increased by **$244.0 million (3.8%)** to **$6.7 billion**, with growth in checking, money market, savings, and time deposits, including brokered deposits[234](index=234&type=chunk) - Liquidity remains strong, with reliable sources of liquidity at **15.0%** of total assets (**18.0%** including Federal Reserve Bank borrowing capacity), exceeding the Board's **6%** policy limit[240](index=240&type=chunk)[241](index=241&type=chunk) [Item 3 - Quantitative and Qualitative Disclosures About Market Risk](index=64&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details the company's interest rate risk management, including simulation models and static gap analysis - Interest rate risk is the primary market risk, managed using income simulation models to estimate the potential effect of interest rate shifts on net interest income[250](index=250&type=chunk) - The Board's policy limits net interest income decline to no more than **10%** in one year from a **100 basis point** parallel rate change[251](index=251&type=chunk) **Interest Rate Sensitivity Analysis (May 31, 2025)** | Scenario | One-Year Change in Net Interest Income | | :------------------------------------------ | :------------------------------------- | | +200 basis point parallel shift | -3.2% | | -200 basis point parallel shift | +3.2% | - The Company's one-year net interest rate gap was a negative **$413.8 million (4.94% of total assets)** at June 30, 2025, suggesting higher risk in a rising rate environment over the next 12 months[256](index=256&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk) [Item 4 - Controls and Procedures](index=66&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management assessed the effectiveness of disclosure controls and internal control over financial reporting - The Company's disclosure controls and procedures were deemed effective as of June 30, 2025[259](index=259&type=chunk)[260](index=260&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[261](index=261&type=chunk) PART II - OTHER INFORMATION [Item 1 – Legal Proceedings](index=66&type=section&id=Item%201%20%E2%80%93%20Legal%20Proceedings) Discusses ongoing legal claims and actions, with no material aggregate ultimate liability anticipated - Management does not anticipate material aggregate ultimate liability from pending or threatened legal proceedings[262](index=262&type=chunk) [Item 1A – Risk Factors](index=66&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factors) Confirms no material changes to risk factors previously disclosed in the 2024 Annual Report on Form 10-K - No material changes to previously disclosed risk factors in the 2024 Form 10-K[263](index=263&type=chunk) [Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds](index=66&type=section&id=Item%202%20%E2%80%93%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details issuer purchases of equity securities, unregistered sales, and the expiration of the share repurchase plan **Issuer Purchases of Equity Securities (April 1, 2025 - June 30, 2025)** | Period | Total Shares Purchased | Average Price Paid Per Share | | :------------------------------------------ | :--------------------- | :--------------------------- | | April 1, 2025 through April 30, 2025 | 2,072 | $63.35 | | May 1, 2025 through May 31, 2025 | 2,120 | $64.53 | | June 1, 2025 through June 30, 2025 | 0 | $0.00 | | **Total** | **4,192** | **$63.94** | - The 2023 Repurchase Plan, authorizing up to **400,000 shares**, expired on July 20, 2025, with no shares repurchased under the plan[266](index=266&type=chunk) - On April 3, 2025, **581 shares** of common stock were issued to non-employee directors under the Director Retainer Plan, valued at **$36,806.35**[267](index=267&type=chunk) [Item 3 - Defaults Upon Senior Securities](index=67&type=section&id=Item%203%20-%20Defaults%20Upon%20Senior%20Securities) Reports no defaults upon senior securities - No defaults upon senior securities[268](index=268&type=chunk) [Item 4 - Mine Safety Disclosures](index=67&type=section&id=Item%204%20-%20Mine%20Safety%20Disclosures) States that this item is not applicable to the company - Not applicable[268](index=268&type=chunk) [Item 5 - Other Information](index=67&type=section&id=Item%205%20-%20Other%20Information) Indicates no other information was reported under this item - No other information[268](index=268&type=chunk) [Item 6 - Exhibits](index=68&type=section&id=Item%206%20-%20Exhibits) Lists all exhibits filed with the Form 10-Q, including corporate governance documents and certifications - Exhibits include corporate governance documents (Certificate of Incorporation, Bylaws), certifications (Rule 13a-14(a), 18 U.S.C. Section 1350), and Inline XBRL taxonomy documents for financial statements[269](index=269&type=chunk) [SIGNATURES](index=69&type=section&id=SIGNATURES) Confirms the report's official signing by the President/CEO and EVP/CFO/Treasurer on August 05, 2025 - The report was signed by Stephen S. Romaine (President and CEO) and Matthew D. Tomazin (EVP, CFO, and Treasurer) on August 05, 2025[272](index=272&type=chunk)

Core Viewpoint - Artelo Biosciences has received positive feedback from the UK's MHRA regarding its clinical study plans for ART12.11, a novel cocrystal of Cannabidiol (CBD) and Tetramethylpyrazine (TMP), which may accelerate its development and market access [1][2][3][4]. Group 1: Regulatory Feedback - The MHRA has agreed that existing nonclinical and clinical evidence for CBD and TMP supports a streamlined clinical trial application for ART12.11 [2]. - The agency confirmed that the proposed first-in-human study design is methodologically sound for characterizing ART12.11's pharmacokinetic profile [2]. - Specific guidance was provided by the MHRA for completing the data package for the Phase 1 trial [2]. Group 2: Innovative Licensing and Access Pathway (ILAP) - ART12.11 may qualify for the ILAP, which aims to accelerate the development and patient access of new therapies through collaboration with regulatory and health bodies [3]. - Artelo plans to evaluate a formal application for ILAP in the coming months, aligning with the program's criteria due to ART12.11's potential to address unmet needs in anxiety and depression [3]. Group 3: Clinical Efficacy and Comparison - Nonclinical studies have shown ART12.11's promising profile compared to traditional antidepressants and CBD alone [4]. - In a depression model, ART12.11 demonstrated efficacy comparable to sertraline (Zoloft) and superior cognitive restoration [4]. - In a rodent model of stress-induced anxiety and depression, ART12.11 outperformed CBD alone, even at a higher dosage of CBD [4]. Group 4: Financial and Market Implications - The regulatory assurance from the MHRA is expected to reduce expenses for the ART12.11 program [5]. - An accelerated development strategy could lead to a longer period of market exclusivity, with patents valid in 20 countries until the end of 2038 [5]. - Artelo aims to finalize preparations to initiate clinical studies for ART12.11 early next year [5]. Group 5: Product Overview - ART12.11 is a proprietary cocrystal composition of CBD and TMP, exhibiting better pharmacokinetics and improved efficacy compared to other CBD forms [6]. - Enhanced pharmaceutical properties of ART12.11 may lead to increased safety and efficacy in humans, making it a preferred CBD pharmaceutical composition [6]. - The U.S. patent for ART12.11 is enforceable until December 10, 2038, with additional patents granted in 19 countries [6].

Core Insights - Tompkins Financial reported strong Q2 2025 results, with both GAAP earnings per share and revenue exceeding Wall Street forecasts, driven by growth in core banking activities and improved net interest margin [1][5][12] Financial Performance - Diluted earnings per share (GAAP) for Q2 2025 reached $1.50, surpassing analyst expectations of $1.43 and the previous year's $1.10, marking a 36.4% year-over-year increase [2][5] - Revenue for Q2 2025 was $82.6 million, exceeding the anticipated $81.1 million and up 13.7% from $72.7 million in Q2 2024 [2][5] - Net interest margin improved to 3.08% in Q2 2025 from 2.73% in Q2 2024, reflecting better loan yields and modest balance sheet growth [2][5] - Total loans increased to $6.17 billion, up $410.8 million or 7.1% year-over-year, with significant growth in commercial real estate and business lending [6][12] - Total deposits reached $6.7 billion, with a loan-to-deposit ratio of 91.9% as of Q2 2025 [6] Asset Quality - Nonperforming assets decreased to 0.63% of total assets from 0.79% a year earlier, indicating improved asset quality [2][7] - A provision for credit loss expense of $2.8 million was recorded, influenced by a $4.7 million charge-off from a single commercial real estate loan [7][14] - Despite the charge-off, the ratio of loan loss reserves to total loans was 0.95%, and the ratio of loan loss reserves to nonperforming loans rose to 111.55% [7][14] Strategic Focus - Tompkins Financial emphasizes a community-focused banking model, maintaining close ties with local customers to support stable deposit bases and quick lending decisions [3][10] - Recent strategic efforts include investing in digital banking technology, managing competition from larger banks and fintechs, and recruiting skilled teams [4][11] - The company has a robust capital position, with Tier 1 capital at 9.36% of average assets and liquidity at $1.5 billion, representing 18.0% of total assets [9][15] Future Outlook - Management expressed confidence in the bank's growth potential and capital flexibility, supported by a solid balance sheet and a recently authorized share repurchase program [16] - Investors are advised to monitor asset quality, particularly in commercial real estate loans, and the impact of rising personnel and operating expenses on margins [17]

Tompkins Financial Corporation Reports Improved Second Quarter Financial Results [Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) Tompkins Financial Corporation reported strong financial results for the second quarter of 2025, with significant year-over-year and sequential growth in net income and earnings per share, primarily driven by net interest margin expansion and solid growth in average loans, deposits, and fee-based services revenue Q2 2025 Earnings Summary | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change (QoQ) | Change (YoY) | | :--- | :--- | :--- | :--- | :--- | :--- | | Diluted EPS | $1.50 | $1.37 | $1.10 | +9.5% | +36.4% | | Net Income | $21.5M | $19.7M | $15.7M | +9.1% | +36.9% | Year-to-Date 2025 Earnings Summary | Metric | H1 2025 | H1 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Diluted EPS | $2.87 | $2.29 | +25.3% | | Net Income | $41.2M | $32.6M | +26.4% | - CEO Stephen Romaine attributed the positive results to net interest margin expansion and broad-based business growth, highlighting year-to-date average loan growth of **7.5%**, average deposit growth of **5.2%**, and fee-based services revenue growth of **4.5%**[3](index=3&type=chunk) Key Performance Indicators - Q2 2025 | Indicator | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Margin | 3.08% | 2.98% | 2.73% | | Total Loans (Period End) | $6.17B | $6.07B | $5.76B | | Total Deposits (Period End) | $6.7B | $6.7B | $6.3B | | Loan to Deposit Ratio | 91.9% | 89.8% | 91.7% | [Detailed Financial Analysis](index=2&type=section&id=Detailed%20Financial%20Analysis) The company's detailed financial performance for Q2 2025 shows robust growth in net interest income, driven by margin expansion and loan growth, with noninterest income increasing from fees, noninterest expenses rising moderately due to personnel costs, and a stable effective tax rate [Net Interest Income](index=2&type=section&id=NET%20INTEREST%20INCOME) Net interest income for Q2 2025 reached $60.1 million, increasing 18.0% year-over-year and 6.1% quarter-over-quarter, driven by a 35 basis point net interest margin expansion to 3.08% and a 7.8% increase in average loans Net Interest Income Performance | Period | Net Interest Income | Change (vs. prior period) | | :--- | :--- | :--- | | Q2 2025 | $60.1M | +6.1% vs Q1 2025 | | Q2 2025 | $60.1M | +18.0% vs Q2 2024 | | H1 2025 | $116.8M | +14.9% vs H1 2024 | - The net interest margin improved to **3.08%** in Q2 2025, up **10 basis points** from Q1 2025 and **35 basis points** from Q2 2024, driven by higher yields on earning assets, increased average loan balances, and an improved funding mix[7](index=7&type=chunk) - Average loans for Q2 2025 grew by **$442.0 million** (**7.8%**) compared to Q2 2024, with the average yield on interest-earning assets rising to **4.79%**[8](index=8&type=chunk) [Noninterest Income](index=3&type=section&id=NONINTEREST%20INCOME) Noninterest income for Q2 2025 reached $22.5 million, a 3.4% increase from Q2 2024, primarily driven by a 5.7% rise in insurance commissions and a 2.4% increase in wealth management fees, despite a 3.9% decline in card services income Noninterest Income Breakdown (Q2 2025 vs Q2 2024) | Category | Q2 2025 | Change (YoY) | | :--- | :--- | :--- | | **Total Noninterest Income** | **$22.5M** | **+3.4%** | | Insurance commissions and fees | $9.6M | +5.7% | | Wealth management fees | $5.0M | +2.4% | | Card services income | $3.2M | -3.9% | - Year-to-date noninterest income of **$47.5 million** was up **8.3%** from the prior year, largely due to a **$1.8 million** increase in other income, which included a **$1.9 million** gain on the sale of other real estate owned[11](index=11&type=chunk) [Noninterest Expense](index=3&type=section&id=NONINTEREST%20EXPENSE) Noninterest expense increased by 3.4% to $51.6 million in Q2 2025 compared to the same period in 2024, primarily driven by a 6.6% increase in personnel-related expenses, with year-to-date expenses rising by 2.4% Noninterest Expense Summary | Period | Noninterest Expense | Change (YoY) | Key Driver | | :--- | :--- | :--- | :--- | | Q2 2025 | $51.6M | +3.4% | Personnel expenses (+6.6%) | | H1 2025 | $102.2M | +2.4% | Personnel expenses (+4.9%) | [Income Tax Expense](index=3&type=section&id=INCOME%20TAX%20EXPENSE) The provision for income tax was $6.8 million for Q2 2025, resulting in an effective tax rate of 24.0%, slightly higher than the 23.8% rate in Q2 2024, with the year-to-date rate at 23.9% Income Tax Provision and Effective Rate | Period | Tax Expense | Effective Tax Rate | | :--- | :--- | :--- | | Q2 2025 | $6.8M | 24.0% | | Q2 2024 | $4.9M | 23.8% | | H1 2025 | $12.9M | 23.9% | | H1 2024 | $10.1M | 23.6% | [Financial Condition](index=4&type=section&id=Financial%20Condition) The company's financial condition as of June 30, 2025, remains strong, characterized by improving asset quality, robust capital, and a stable liquidity profile with ample funding access [Asset Quality](index=4&type=section&id=ASSET%20QUALITY) Asset quality improved, with nonperforming assets decreasing to 0.63% of total assets, largely due to a reclassification, and the allowance for credit losses to nonperforming loans ratio strengthening to 111.55% Key Asset Quality Ratios | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Allowance for credit losses / Total loans | 0.95% | 1.01% | 0.92% | | Nonperforming assets / Total assets | 0.63% | 0.87% | 0.79% | | Allowance / Nonperforming loans | 111.55% | 85.85% | 84.94% | - The company recorded a **$4.7 million** partial charge-off on one commercial real estate relationship, which was the main driver for the increase in net charge-offs to **$5.3 million** in Q2 2025[15](index=15&type=chunk) - Special Mention and Substandard loans decreased to **$96.8 million** at June 30, 2025, down from **$110.8 million** at March 31, 2025, and **$116.2 million** at June 30, 2024[17](index=17&type=chunk) [Capital Position](index=5&type=section&id=CAPITAL%20POSITION) The company's capital position remains well above regulatory minimums, with the Tier 1 capital to average assets ratio improving to 9.36% at June 30, 2025, and a new stock repurchase program authorized for up to 400,000 shares Regulatory Capital Ratios | Ratio | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Total capital to risk-weighted assets | 13.15% | 13.28% | 13.26% | | Tier 1 capital to average assets | 9.36% | 9.31% | 9.15% | - A new Stock Repurchase Program was approved, authorizing the repurchase of up to **400,000 shares** of common stock over the next 24 months[19](index=19&type=chunk) [Liquidity Position](index=5&type=section&id=LIQUIDITY%20POSITION) The company's liquidity position was stable and robust as of June 30, 2025, maintaining ready access to $1.5 billion in liquidity, equivalent to 18.0% of total assets, through various wholesale funding sources - The company had available liquidity of **$1.5 billion**, or **18.0%** of total assets, at the end of Q2 2025[20](index=20&type=chunk) - Liquidity sources include Federal funds purchased, repurchase agreements, brokered deposits, Federal Reserve Bank's Discount Window, and Federal Home Loan Bank (FHLB) advances[20](index=20&type=chunk) [Consolidated Financial Statements and Other Data](index=7&type=section&id=Consolidated%20Financial%20Statements%20and%20Other%20Data) The appended financial statements provide a detailed view of the company's financial health, showing asset growth, drivers of net income, net interest margin analysis, multi-quarter trends, and non-GAAP measure reconciliation [Consolidated Statements of Condition](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CONDITION) As of June 30, 2025, total assets stood at $8.37 billion, an increase from year-end 2024, supported by a rise in net loans to $6.11 billion and total deposits to $6.72 billion, with total shareholders' equity increasing to $761.8 million Selected Balance Sheet Data (in thousands) | Account | Jun 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | $8,373,818 | $8,109,080 | | Net Loans and Leases | $6,114,099 | $5,963,426 | | Total Deposits | $6,715,795 | $6,471,805 | | Total Liabilities | $7,612,025 | $7,395,636 | | Total Equity | $761,793 | $713,444 | [Consolidated Statements of Income](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) For Q2 2025, the company generated $60.1 million in net interest income and $22.5 million in noninterest income, resulting in $21.5 million in net income, or $1.50 per diluted share, after a $2.8 million provision for credit losses and $51.6 million in noninterest expenses Income Statement Summary (in thousands, except per share data) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Interest Income | $60,130 | $50,953 | | Provision for credit loss | $2,780 | $2,172 | | Noninterest Income | $22,512 | $21,776 | | Noninterest Expenses | $51,623 | $49,942 | | Net Income | $21,471 | $15,682 | | Diluted EPS | $1.50 | $1.10 | [Average Consolidated Statements of Condition and Net Interest Analysis](index=9&type=section&id=Average%20Consolidated%20Statements%20of%20Condition%20and%20Net%20Interest%20Analysis) This analysis details the net interest margin components, showing an average yield on interest-earning assets of 4.79% and an average rate on interest-bearing liabilities of 2.44% for Q2 2025, resulting in a 2.34% interest rate spread and a 3.08% tax-equivalent net interest margin Quarterly Net Interest Margin Analysis | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Avg. Yield on Interest-Earning Assets | 4.79% | 4.69% | 4.56% | | Avg. Rate on Interest-Bearing Liabilities | 2.44% | 2.44% | 2.64% | | Interest Rate Spread | 2.34% | 2.25% | 1.91% | | Net Interest Margin (Tax-Equivalent) | 3.08% | 2.98% | 2.73% | [Summary Financial Data](index=11&type=section&id=Summary%20Financial%20Data) The summary data provides a five-quarter trend view of key financial metrics, highlighting steady increases in loans, assets, and equity, with profitability ratios like ROA at 1.05% and ROE at 11.48% for Q2 2025, and a significant decrease in nonperforming assets Quarterly Profitability Ratios (Annualized) | Ratio | Jun-25 | Mar-25 | Dec-24 | Sep-24 | Jun-24 | | :--- | :--- | :--- | :--- | :--- | :--- | | Return on average assets | 1.05% | 0.99% | 0.98% | 0.94% | 0.81% | | Return on average equity | 11.48% | 10.96% | 10.91% | 10.65% | 9.51% | | Net interest margin (TE) | 3.08% | 2.98% | 2.93% | 2.79% | 2.73% | Quarterly Nonperforming Assets (in thousands) | Period | Jun-25 | Mar-25 | Dec-24 | Sep-24 | Jun-24 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total nonperforming assets | $52,572 | $71,159 | $65,185 | $62,655 | $62,548 | [Non-GAAP Measures](index=13&type=section&id=Non-GAAP%20Measures) The company presents a reconciliation for the non-GAAP measure of Tangible Book Value Per Share, which was $46.31 as of June 30, 2025, demonstrating growth from $44.88 in the prior quarter and $40.35 in the prior year Reconciliation of Book Value Per Share | Per Share Value | Jun-25 | Mar-25 | Jun-24 | | :--- | :--- | :--- | :--- | | Common equity book value (GAAP) | $52.79 | $51.36 | $46.86 | | Tangible book value (Non-GAAP) | $46.31 | $44.88 | $40.35 |