TOMPKINS FINANCIAL CORP

Previous wording

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 Management’s 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," and Part II, "Item 8. Financial Statements and Supplementary Data." For a comparison of our operating results for the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7 of the Company's 2023 Annual Report on Form 10-K filed on February 29, 2024.

Current wording

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," and Part II, "Item 8. Financial Statements and Supplementary Data." For a comparison of our financial condition and results of operations for the year ended December 31, 2024 to the year ended December 31, 2023, please refer to Part II, Item 7 of the Company's 2024 Annual Report on Form 10-K filed on February 28, 2025.

Previous wording

The Company is headquartered in Ithaca, New York and is registered as a Financial Holding Company with the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended. The Company is a locally oriented, community-based financial services organization that offers a full array of products and services, including commercial and consumer banking, leasing, trust and investment management, financial planning and wealth management, and insurance services. In January 2022, the Company combined its four wholly-owned banking subsidiaries into one bank, with the Bank of Castile, Mahopac Bank, and VIST Bank merging with and into Tompkins Trust Company (the "Trust Company") with the Trust Company as the surviving institution. Immediately following the merger, the Trust Company changed its name to Tompkins Community Bank. At December 31, 2024, the Company had one wholly-owned banking subsidiary, Tompkins Community Bank, and one wholly-owned insurance agency subsidiary, Tompkins Insurance and Tompkins Financial Advisors, a division of Tompkins Community Bank, which provided a full array of investment services, including investment management, trust and estate, financial and tax planning services. The Company’s principal offices are located at 118 E. Seneca Street, Ithaca, NY, 14850, and its telephone number is: (888) 503-5753. The Company’s common stock is traded on the NYSE American under the symbol "TMP."

Current wording

The Company is headquartered in Ithaca, New York and is registered as a Financial Holding Company with the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended. The Company is a locally oriented, community-based financial services organization that offers a full array of products and services, including commercial and consumer banking, leasing, trust and investment management, and financial planning and wealth management. At December 31, 2025, the Company had one wholly-owned banking subsidiary, Tompkins Community Bank. Tompkins Financial Advisors, a division of Tompkins Community Bank, provides a full array of investment services, including investment management, trust and estate, financial and tax planning services. The Company’s principal offices are located at 118 E. Seneca Street, Ithaca, NY, 14850, and its telephone number is: (888) 503-5753. The Company’s common stock is traded on the NYSE American under the symbol "TMP."

Previous wording

This Report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The statements contained in this Report that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements may be identified by use of such words as "may", "will", "estimate", "intend", "continue", "believe", "expect", "plan", or "anticipate", as well as the negative and other variations of these terms and other similar words. Examples of forward-looking statements may include statements regarding the asset quality of the Company's loan portfolios; the level of the Company's allowance for credit losses; the sufficiency of liquidity sources; the Company's exposure to changes in interest rates, and to new, changed, or extended government/regulatory expectations; the need to sell securities before recovery of amortized cost; the expected increases in interest income attributable to recent sales of available-for-sale debt securities; the impact of changes in accounting standards; and trends, plans, prospects, growth and strategies. Forward-looking statements are made based on management’s expectations and beliefs concerning future events impacting the Company and are subject to uncertainties and factors relating to the Company’s 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 expressed and/or implied by forward-looking statements and historical performance. The following factors, in addition to those listed as Risk Factors in Item 1A, are among those that could cause actual results to differ materially from the forward-looking statements and historical performance: changes in general economic, market and regulatory conditions; our ability to attract and retain deposits and other sources of liquidity; gross domestic product growth and inflation trends; the impact of the interest rate and inflationary environment on the Company's business, financial condition and results of operations; other income or cash flow anticipated from the Company's operations, investment and/or lending activities; changes in laws and regulations affecting banks, bank holding companies and/or financial holding companies, including the Dodd-Frank Act, and state and local government mandates; the impact of any change in the FDIC insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount; increased supervisory and regulatory scrutiny of financial institutions; technological developments and changes; cybersecurity incidents and threats; 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; reliance on l…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The statements contained in this Report that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements may be identified by use of such words as "may", "could", "should", "will", "would", "estimate", "intend", "continue", "believe", "expect", "plan", "commit", or "anticipate", as well as the negative and other variations of these terms, and other similar words. Examples of forward-looking statements may include statements regarding the asset quality of the Company's loan portfolios; the level of the Company's allowance for credit losses; the sufficiency of collateral to cover exposure related to special mention and substandard loans; the sufficiency of liquidity sources; expectations regarding securities revenue in future periods; the Company's exposure to changes in interest rates, and to new, changed, or extended government/regulatory expectations; the need to sell securities before recovery of amortized cost; the impact of changes in accounting standards; trends, plans, prospects, growth and strategies; projections of future financial condition, operating results, income, capital expenditures, costs or other financial items; anticipated regulatory and legislative changes; and other characterizations of future events or circumstances as well as other statements that are not statements of historical fact. Forward-looking statements are made based on management’s expectations and beliefs concerning future events impacting the Company and are subject to uncertainties and factors relating to the Company’s 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 expressed and/or implied by forward-looking statements and historical performance. The following factors, in addition to those listed as Risk Factors in Item 1A of this Report on Form 10-K, are among those that could cause actual results to differ materially from the forward-looking statements and historical performance: changes in general economic, market and regulatory conditions; our ability to attract and retain deposits and other sources of liquidity; gross domestic product growth and inflation trends; the impact of the interest rate and inflationary environment on the Company's business, financial condition and results of operations; other income or cash flow anticipated from the Company's operations, investment and/or lending activities; changes in laws and regulations affecting public companies, banks, bank holding companies and/or financial holding companies, including the Dodd-Frank Act, and other federal, state and local government mandates; the impact of any change in the FDIC insurance asse…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The Company's significant accounting policies conform with GAAP and are described in "Note 1 - Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K.. In applying those accounting policies, management of the Company is required to exercise judgment in determining many of the methodologies, assumptions and estimates to be utilized. Certain critical accounting estimates are more dependent on such judgment and in some cases may contribute to volatility in the Company's reported financial performance should the assumptions and estimates used change over time due to changes in circumstances. The most significant area in which management of the Company applies critical assumptions and estimates include the following:

Current wording

The Company's significant accounting policies conform with GAAP and are described in "Note 1 - Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K. In applying those accounting policies, management of the Company is required to exercise judgment in determining many of the methodologies, assumptions and estimates to be utilized. Certain critical accounting estimates are more dependent on such judgment and in some cases may contribute to volatility in the Company's reported financial performance should the assumptions and estimates used change over time due to changes in circumstances. The most significant area in which management of the Company applies critical assumptions and estimates was the following:

Previous wording

The Company reported diluted earnings per share of $4.97 in 2024, an increase of 653.0% compared to diluted earnings per share of $0.66 in 2023. Net income for the year ended December 31, 2024, was $70.9 million, an increase of 645.4% compared to $9.5 million in 2023. The 2023 results included an after-tax loss of $52.9 million, or a loss of $3.69 per diluted share, related to the sale of $510.5 million of available-for-sale debt securities in 2023. The sale of securities and subsequent reinvestment of the proceeds from the sale in the second and third quarters of 2023 favorably impacted securities revenue in the fourth quarter of 2023 and in 2024 as the securities sold had an average yield of 0.86%, while the proceeds of the sale were largely reinvested into securities with an estimated yield of approximately 5.09%. Earnings performance in 2024 also benefited from increased net interest income, growth in fee-based businesses and lower operating expenses compared to 2023.

Current wording

The Company reported diluted earnings per share of $11.24 in 2025, an increase of 126.2% compared to diluted earnings per share of $4.97 in 2024. Net income for the year ended December 31, 2025, was $161.1 million, an increase of 127.3% compared to $70.9 million in 2024. The increase in both diluted earnings per share and net income included the sale of all of the issued and outstanding shares of capital stock of the Company's wholly owned subsidiary, Tompkins Insurance Agencies, Inc. ("TIA") to Arthur J. Gallagher Risk Management Services, LLC. (“Gallagher”) for approximately $223.0 million in cash, subject to customary purchase price adjustments, during the fourth quarter of 2025. The transaction generated a pre-tax gain of $188.2 million recognized in noninterest income. The Company also incurred $4.3 million of expenses related to the sale of TIA, which are included in noninterest expense. Partially offsetting the gain in 2025 was a sale of $564.2 million of available-for-sale debt securities, also during the fourth quarter of 2025, which resulted in an pre-tax loss on the sale of securities of $78.7 million. Management expects this sale to favorably impact securities revenue in future periods as the securities sold had an average yield of 1.56%, while the proceeds of the sale were largely reinvested into securities with an estimated yield of approximately 4.52%.

Previous wording

Excluding the impact of the realized losses on the sales of investment securities, adjusted net income, a non-GAAP financial measure, was $70.8 million for the year ended December 31, 2024, up $8.4 million, or 13.5%, when compared to the prior year. Earnings per diluted share, adjusted to exclude the impact of realized losses on sales of investment securities (“adjusted diluted earnings per share”), also a non-GAAP financial measure, of $4.96 for the year ended December 31, 2024, increased $0.60 or 13.8% compared to the prior year. Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures are presented in the "Non-GAAP Disclosure" on page 53.

Current wording

Excluding the impact of the sale of TIA and realized losses on sales of investment securities, adjusted net income, a non-GAAP financial measure, was $90.4 million for the year ended December 31, 2025, up $19.6 million, or 27.7%, when compared to the prior year. Earnings per diluted share, adjusted to exclude the impact of the sale of TIA and realized losses on sales of investment securities (“adjusted diluted earnings per share”), also a non-GAAP financial measure, of $6.31 for the year ended December 31, 2025, increased $1.35 or 27.2% compared to the prior year. Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures are presented in the "Non-GAAP Disclosure" on page 49.

Previous wording

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 10.33% in 2024, compared to 1.50% in 2023, while ROA was 0.90% in 2024 and 0.12% in 2023. Tompkins’ 2024 ROE compared favorably with a peer ratio of 9.67%, while ROA trailed by 3 basis points when compared to peer ROA of 0.93%. The peer group data is derived from the FRB's "Bank Holding Company Performance Report", which covers banks and bank holding companies with assets between $3.0 billion and $10.0 billion as of September 30, 2024 (the most recent report available). Although the peer group data is presented based upon financial information that is one fiscal quarter behind the financial information included in this report, the Company believes that it is relevant to include certain peer group information for comparison to current period numbers. ROA and ROE adjusted to exclude the impact of realized losses on sales of investment securities ("adjusted ROA" and "adjusted ROE", which are non-GAAP financial measures), were 0.90% and 10.33% for the year ended December 31, 2024, compared to 0.82% and 9.83% for the year ended December 31, 2023. Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures are presented in "Non-GAAP Disclosure" on page 53.

Current wording

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 20.61% in 2025, compared to 10.33% in 2024, while ROA was 1.96% in 2025 and 0.90% in 2024. Tompkins’ 2025 ROE and ROA compared favorably with a peer ratio of 10.64%, and 1.09%, respectively. The peer group data presented here and elsewhere in this Annual Report on Form 10-K is derived from the FRB's "Bank Holding Company Performance Report", which covers banks and bank holding companies with assets between $3.0 billion and $10.0 billion as of September 30, 2025 (the most recent report available). Although the peer group data is presented based upon financial information that is one fiscal quarter behind the financial information included in this report, the Company believes that it is relevant to include certain peer group information for comparison to current period numbers. ROE and ROA adjusted to exclude the impact of the sale of TIA and realized losses on sales of investment securities ("adjusted ROE" and "adjusted ROA", which are non-GAAP financial measures), were 11.56% and 1.10% for the year ended December 31, 2025, compared to 10.33% and 0.90% for the year ended December 31, 2024. Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures are presented in "Non-GAAP Disclosure" on page 49.

Previous wording

The Company operates in three business segments: banking, insurance and wealth management. Insurance is comprised of property and casualty insurance services and employee benefit consulting operated under the Tompkins Insurance subsidiary. Wealth management activities include the results of the Company’s trust, financial planning, and wealth management services provided by Tompkins Financial Advisors, a division of Tompkins Community Bank. All other activities are considered banking. For additional financial information on the Company’s segments, refer to "Note 21 - Segment and Related Information" in the Notes to Consolidated Financial Statements in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K. The Company adopted ASU No. 2023-07, "Segment Reporting: Improvements to Reportable Segment Disclosures", effective for the Company for fiscal years beginning after December 15, 2024.

Current wording

Prior to October 31, 2025, the Company operated in three business segments: banking, insurance and wealth management. Following the sale of TIA on October 31, 2025, the Company operates in two business segments: banking and wealth management. Insurance was comprised of property and casualty insurance services and employee benefit consulting operated under the Tompkins Insurance subsidiary. Wealth management activities include the results of the Company’s trust, financial planning, and wealth management services provided by Tompkins Financial Advisors, a division of Tompkins Community Bank. All other activities are considered banking. For additional financial information on the Company’s segments, refer to "Note 22 - Segment and Related Information" in the Notes to Consolidated Financial Statements in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K. The Company adopted ASU No. 2023-07, "Segment Reporting: Improvements to Reportable Segment Disclosures", effective for the Company for fiscal years beginning after December 15, 2024.

Previous wording

The banking segment reported net income of $59.2 million for the year ended December 31, 2024, up $59.2 million compared to net income of $74,000 for 2023. Results for 2023 included an after-tax loss of $52.9 million related to the sale of $510.5 million of available-for-sale debt securities. Earnings performance in 2024 also benefited from increased interest income, growth in fee-based businesses and lower operating expenses compared to 2023.

Current wording

The banking segment reported net income of $149.5 million for the year ended December 31, 2025, up $90.3 million compared to net income of $59.2 million for 2024. Net income for 2025 included the gain and expenses related to the sale of TIA and pre-tax losses of $78.7 million from the sale of available-for-sale debt securities. Earnings performance in 2025 also benefited from increased net interest income, driven by increased loan volume, increases in average asset yields and lower average funding costs compared to 2024.

Previous wording

The provision for credit loss expense was $6.6 million in 2024, compared to a provision expense of $4.3 million in the prior year. The increase in the provision for credit losses in 2024 over 2023 was mainly driven by loan growth, an increase in net loan charge-offs, and model assumption updates. The ratio of the allowance to total loans at December 31, 2024 was 0.94%, up from 0.92% at December 31, 2023. For additional information, see the section titled "The Allowance for Credit Losses" below.

Current wording

The provision for credit loss expense was $11.5 million in 2025, compared to a provision expense of $6.6 million in the prior year. The increase in the provision for credit losses in 2025 over 2024 was mainly driven by an increase in net loan charge-offs, loan growth, and model assumption updates. The ratio of the allowance to total loans at December 31, 2025 was 0.89%, down from 0.94% at December 31, 2024. For additional information, see the section titled "The Allowance for Credit Losses" below.

Previous wording

The wealth management segment reported net income of $3.8 million for the year ended December 31, 2024, an increase of $906,000 or 31.5% compared to 2023. Revenue of $20.5 million increased $2.2 million or 12.2% compared to 2023, mainly as a result of higher average assets under management, favorable market conditions and gains of $558,000 on the sale of certain customer accounts. Noninterest expenses increased by $1.0 million or 7.1% compared to 2023. The increase was mainly driven by salaries and employee benefits, and technology expense related to the core wealth platform. The fair value of assets under management or in custody at December 31, 2024 totaled $3.1 billion, representing a decrease of $27.5 million or 0.9% compared to $3.1 billion at year-end 2023. While the market performance for the year was favorable, increases in asset values were offset by sales of certain customer accounts totaling about $115.0 million.

Current wording

The wealth management segment reported net income of $3.5 million for the year ended December 31, 2025, a decrease of $310,000 or 8.2% compared to 2024. Revenue of $21.4 million was up $945,000 or 4.6% compared to 2024. The increase reflects a higher non-recurring gain on the sale of certain customer accounts, with $921,000 recognized in 2025 compared to $558,000 in the prior year, as well as growth in advisory fee revenue driven by market appreciation and a more favorable business mix. Noninterest expense of $16.8 million was up by $1.4 million or 8.8% compared to 2024. The increase was mainly driven by salaries and employee benefits, up $809,000 or 8.0%, and intercompany service charges, up $431,000 or 19.8% compared to 2024. The fair value of assets under management or in custody at December 31, 2025 totaled $3.0 billion, representing a decrease of $122.9 million or 4.0% compared to $3.1 billion at year-end 2024. While new business production and market performance was favorable for the year, overall asset values declined due to the non-recurring sale of customer accounts totaling $188.5 million in assets, consisting largely of lower-yielding brokerage relationships sold, and additional low-yielding custody asset outflows.

Previous wording

Net interest income is the Company’s largest source of revenue, representing 70.6% of total revenues for the year ended December 31, 2024, and 95.3% of total revenues for the year ended December 31, 2023. The decrease in the ratio of net interest income to revenues in 2024 was largely driven by a pre-tax loss of $70.0 million on the sales of available-for-sale debt securities during 2023. Net interest income is dependent on the volume and composition of interest earning assets and interest-bearing liabilities and the level of market interest rates. 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.

Current wording

Net interest income is the Company’s largest source of revenue, representing 55.9% of total revenues for the year ended December 31, 2025, and 70.6% of total revenues for the year ended December 31, 2024. The decrease in the ratio of net interest income to total revenue in 2025 was largely driven by the pre-tax gain of $188.2 million related to the sale of TIA, partially offset by the pre-tax loss of $78.7 million on the sale of available-for-sale debt securities in the fourth quarter 2025, both of which are reported in noninterest income. Net interest income is dependent on the volume and composition of interest earning assets and interest-bearing liabilities and the level of market interest rates. 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.

Previous wording

Net interest income of $211.1 million for 2024 increased by $1.6 million or 0.8% from 2023. The slight increase was primarily due to increases in both average loan balances and average loan yields, largely offset by higher average funding costs in 2024 compared to 2023.

Current wording

Net interest income of $249.7 million for 2025 increased by $38.6 million or 18.3% over 2024. The increase was primarily due to increases in average loan balances and average loan yields, along with lower average funding costs in 2025 compared to 2024.

Previous wording

Net interest margin for 2024 was 2.79%, compared to 2.84% for 2023. The decrease in net interest margin for the year ended December 31, 2024 compared to the year ended December 31, 2023 was due to increases in the average rates paid on interest-bearing liabilities outpacing increases on interest-earning assets yields due to the higher interest rate environment, as well as increases in higher rate average other borrowings.

Current wording

Net interest margin for 2025 was 3.17%, compared to 2.79% for 2024. The increase in net interest margin for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to increased yields on interest earning assets coupled with lower funding costs resulting from improved funding mix.

Previous wording

The net interest margin was 2.93% for the fourth quarter of 2024, up 14 basis points when compared to the immediate prior quarter, and up 11 basis points from 2.82% for the fourth quarter of 2023. The increase in net interest margin, when compared to the most recent prior quarter, was mainly due to lower funding costs resulting from growth in average deposits and lower market rates. The increase in net interest margin when compared to the same period prior year was mainly a result of higher yields on average interest earning assets and higher average loan balances, and was partially offset by higher average funding costs.

Current wording

Net interest margin was 3.42% for the fourth quarter of 2025, up 22 basis points when compared to the immediate prior quarter, and up 49 basis points from 2.93% for the fourth quarter of 2024. The increase in net interest margin, when compared to the most recent prior quarter, was primarily due to securities purchased in the fourth quarter of 2025 yielding higher interest rates compared to securities sold during the same period in 2025, and lower funding costs as a result of lower rates and improved funding mix. The increase in net interest margin when compared to the same period prior year was mainly a result of higher yields on average interest earning assets and higher average loan balances, coupled with lower average funding costs.

Previous wording

Interest income increased $50.2 million or 16.9% in 2024 from 2023, driven by an increase in average interest-earning assets as well as higher interest earning asset yields due to the higher interest rate environment. Average interest-earning assets for the year ended December 31, 2024, increased $190.7 million, or 2.6%, compared to 2023. The growth in average interest-earning assets was mainly in average loans, partially offset by a decrease in average securities. For the year ended December 31, 2024, the average yield on interest-earning assets increased 56 basis points over 2023.

Current wording

Interest income increased $34.5 million or 9.9% in 2025 over 2024, driven by an increase in average interest-earning assets as well as higher interest-earning asset yields. Average interest-earning assets for the year ended December 31, 2025, increased $317.8 million, or 4.2%, compared to 2024, primarily due to an increase in average loans. For the year ended December 31, 2025, the average yield on interest-earning assets increased 25 basis points over 2024.

Previous wording

Interest income on loans for the year ended December 31, 2024, was up $41.5 million, or 15.9% compared to 2023, driven by higher average balances and higher average yields. Average loans and leases increased $410.9 million or 7.7% in 2024 compared to 2023, and represented 75.9% of average earning assets in 2024 compared to 72.3% in 2023. The increase was largely driven by growth in the commercial real estate and commercial and industrial portfolios. The average yield on loans for the year ended December 31, 2024, of 5.25%, was up 37 basis points from 2023. The increase in average loan yields was a result of market-related increases in interest rates on new loans, a significant increase in variable and adjustable rate loan yields driven by rising market interest rates, including the prime rate, and an increase in new loan originations.

Current wording

Interest income on loans for the year ended December 31, 2025, was up $32.6 million, or 10.8% compared to 2024, driven by higher average balances and higher average yields. Average loans and leases increased $409.4 million or 7.1% in 2025 compared to 2024, and represented 78.0% of average earning assets in 2025 compared to 75.9% in 2024. The average yield on loans for the year ended December 31, 2025, of 5.43%, was up 18 basis points over 2024.

Previous wording

Interest income on securities, excluding dividends on FHLB stock, for the year ended December 31, 2024, was up $7.1 million or 20.6% as compared to 2023, as higher average yields more than offset lower average balances. The average yield on total securities for the year ended December 31, 2024, increased 62 basis points, while average balances for securities decreased $234.3 million, or 11.6%, from 2023. The increase in average securities yields was driven by market interest rate increases and the repositioning of the investment portfolio through the sale of approximately $510.5 million of available-for-sale investment securities in the second and third quarters of 2023. The securities sold had an average yield of 0.86%, while the proceeds of the sale were largely reinvested into securities with an estimated average yield of approximately 5.09%. In 2024, the Company used the majority of cash flow from the securities portfolio to support loan growth.

Current wording

Interest income on securities, excluding dividends on FHLB stock, for the year ended December 31, 2025, was up $2.5 million or 6.0% as compared to 2024, as higher average yields more than offset lower average balances. The average yield on total securities for the year ended December 31, 2025, increased 27 basis points, while average balances for securities decreased $89.1 million, or 5.0%, from 2024. The increase in average securities yields was driven by repositioning of the investment portfolio through the sale of approximately $564.2 million of available-for-sale investment securities in the fourth quarter of 2025. The securities sold had an average yield of 1.56%, while the proceeds of the sale were largely reinvested into securities with an average estimated yield of approximately 4.52%. The weighted average life of the securities purchased and sold was approximately 5.5 years.

Previous wording

Interest expense for 2024 increased $48.6 million or 55.4% compared to 2023, driven mainly by the increase in average rates paid on interest-bearing liabilities and funding mix, with an increase in average borrowings and average time deposits. The average cost of interest-bearing deposits was 2.27% in 2024, an increase of 69 basis points from 1.58% in 2023, while the average cost of interest-bearing liabilities increased to 2.60% in 2024 from 1.79% in 2023.

Current wording

Interest expense for 2025 decreased $4.1 million or 3.0% compared to 2024, driven mainly by the decrease in average rates paid on interest-bearing liabilities and improved funding mix, as deposit growth contributed to a decrease in average borrowings. The average cost of interest-bearing deposits was 2.23% in 2025, a decrease of 4 basis points from 2.27% in 2024, while the average cost of interest-bearing liabilities decreased to 2.41% in 2025 from 2.60% in 2024.

Previous wording

Average interest bearing deposits in 2024 increased $80.0 million or 1.8% compared to 2023, with average time deposits up $223.8 million or 28.2% and average interest-bearing checking, savings and money market deposits down $143.8 million or 3.9%. Average noninterest bearing deposit balances in 2024 decreased $156.8 million or 7.9% versus 2023 and represented 28.7% of average total deposits in 2024 compared to 30.8% in 2023.

Current wording

Average interest-bearing deposits in 2025 increased $371.0 million or 8.1% compared to 2024, with average time deposits up $207.8 million or 20.4% and average interest-bearing checking, savings and money market deposits up $163.2 million or 4.6%. The growth in average time deposits included an increase in average brokered deposits of $79.3 million over prior year. Average noninterest bearing deposit balances in 2025 increased $13.1 million or 0.7% versus 2024 and represented 27.2% of average total deposits in 2025 compared to 28.7% in 2024.

Previous wording

1 Interest income includes the tax effects of tax-equivalent adjustments using the Federal income tax rate of 21.0% in 2024,2023 and 2022 to increase tax exempt interest income to tax-equivalent basis.

Current wording

1 Interest income includes the tax effects of tax-equivalent adjustments using the Federal income tax rate of 21.0% in 2025,2024 and 2023 to increase tax exempt interest income to tax-equivalent basis.

Previous wording

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. In 2024, net interest income increased by $1.7 million, resulting from a $50.3 million increase in interest income, partially offset by a $48.6 million increase in interest expense. The increase in interest income largely reflects increases in average loan balances and average loan yields. The increase in interest expense reflects higher rates paid on interest-bearing liabilities, both deposits and other borrowings, and increases in average other borrowings.

Current wording

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. In 2025, net interest income increased by $38.6 million, resulting from a $34.6 million increase in interest income, as well as a $4.1 million decrease in interest expense. The increase in interest income largely reflects increases in average loan balances and average loan and securities yields. The decrease in interest expense reflects lower rates paid on interest-bearing liabilities, both deposits and other borrowings, accompanied by lower average other borrowings.

Previous wording

The provision for credit loss expense represents management’s estimate of the expense necessary to maintain the allowance for credit losses at an appropriate level. The ratio of allowance to total loans and leases increased to 0.94% at December 31, 2024 from 0.92% at December 31, 2023. The increase in the ratio of allowance to total loans from year-end December 31, 2023 was mainly a result ofchanges in qualitative factors relating to loan growth and asset quality, model assumptions changes, and updates to economic forecasts for unemployment and gross domestic product. The increase in allowance for credit losses was partially offset by lower off-balance sheet reserves due to model changes related to utilization rates and a decrease in loan pipeline. The provision for credit loss expense was $6.6 million in 2024, compared to provision expense of $4.3 million in 2023. The provision for credit losses for 2024 included a provision credit of $807,000 related to off-balance sheet credit exposures compared to a provision credit of $526,000 for 2023. The section captioned "Financial Condition – The Allowance for Credit Losses" below has further details on the allowance for credit losses and asset quality metrics.

Current wording

The provision for credit loss expense represents management’s estimate of the expense necessary to maintain the allowance for credit losses at an appropriate level. The allowance for credit losses represented 0.89% of total loans and leases at December 31, 2025, from 0.94% at December 31, 2024. The decrease in the ratio of allowance to total loans from year-end 2024 was due to updated economic forecasts for unemployment and gross domestic product, as well as improved asset quality. The provision for credit loss expense was $11.5 million in 2025, compared to provision expense of $6.6 million in 2024. The increase was mainly driven by a charge-off of $4.7 million in the second quarter of 2025 on a commercial real estate relationship totaling $18.1 million, and a charge-off of $2.4 million in the fourth quarter of 2025 on a commercial real estate relationship totaling $7.4 million. At the time of the charge-offs these commercial real estate relationships had specific reserves of $4.2 million and $1.6 million, respectively. The provision for credit losses for 2025 included a provision credit of $30,000 related to off-balance sheet credit exposures compared to a provision credit of $807,000 for 2024. The section captioned "Financial Condition – The Allowance for Credit Losses" below has further details on the allowance for credit losses and asset quality metrics.

Previous wording

Wealth management fees of $19.6 million in 2024 increased $1.6 million or 9.1% compared to 2023, reflecting favorable market conditions, and an increase in average assets under management. Wealth management fees include fees from trust services, financial planning, wealth management services, and brokerage related services. The fair value of assets managed by, or in custody of, Tompkins was $3.1 billion at December 31, 2024, a decrease of $27.5 million or 0.9% from $3.1 billion at December 31, 2023. While the market performance for the year was favorable, the increases in asset values were offset by sales of certain customer accounts.

Current wording

Wealth management fees of $20.1 million in 2025 increased $526,000 or 2.7% compared to 2024, reflecting market appreciation. Wealth management fees include fees from trust services, financial planning, wealth management services, and brokerage related services. The fair value of assets managed by, or in custody of, Tompkins was $3.0 billion at December 31, 2025, a decrease of $122.9 million or 4.0% from $3.1 billion at December 31, 2024. While new business production and market performance for the year was favorable, total asset levels declined due to the non‑recurring sale of certain customer accounts, consisting largely of lower-yielding brokerage relationships sold following the termination of our LPL relationship, and additional low-yielding custody outflows.

Previous wording

Service charges on deposit accounts of $7.3 million increased $375,000 or 5.4% in 2024 compared to 2023. The increase was primarily in net overdraft fees and service fees on personal and business accounts, reflective of increased transaction activity, resulting in part from new initiatives in 2024.

Current wording

Service charges on deposit accounts of $7.3 million in 2025 were flat compared to 2024. A decrease in net overdraft fees was mainly offset by increases in service fees on personal and business accounts, reflective of increased transaction activity, resulting from marketing initiatives in 2025.

Previous wording

Card services income increased $569,000 or 5.0% in 2024 over 2023. The primary components of card services income are fees related to interchange income and transaction fees for debit card transactions, credit card transactions and ATM usage. The increase in 2024 included a $255,000 sign-on bonus related to the renewal of a card services contract.

Current wording

Card services income decreased $555,000 or 4.6% in 2025 compared to 2024. The primary components of card services income are fees related to interchange income and transaction fees for debit card transactions, credit card transactions, and ATM usage. The decrease was partially related to a $255,000 sign-on bonus related to the renewal of a card services contract in 2024, accompanied by decreases in interchange rates from NYCE income.

Previous wording

Noninterest expense for the year ended 2024 of $199.6 million, decreased $3.7 million, or 1.8% compared to 2023. The decrease in noninterest expense in 2024 over 2023 was mainly driven by lower other expenses (technology, marketing, professional fees, retirement plan expense, and travel and meeting expense), partially offset by higher FDIC insurance expense.

Current wording

Noninterest expense for the year ended 2025 of $210.2 million increased $10.6 million, or 5.3% compared to 2024. The increase in noninterest expense in 2025 over 2024 was mainly driven by higher salaries and wages and other expenses (professional fees, marketing, audit and examinations, and travel and meetings).

Previous wording

Expenses associated with salaries and wages and employee benefits are the largest component of total noninterest expense. In 2024, these expenses increased $3.1 million or 2.5% compared to 2023. Salaries and wages increased $3.8 million or 3.9% in 2024 over the prior year, driven mainly by annual merit pay increases and incentive related accruals. The number of employees as measured by average full time equivalents (FTEs) for 2024 were 966, compared to 1,014 for 2023. Other employee benefits decreased $672,000 or 2.5% over 2023, mainly in health insurance, which was down $880,000 or 7.7% in 2024 over 2023.

Current wording

Expenses associated with salaries and wages and employee benefits are the largest component of total noninterest expense. In 2025, the $7.4 million or 7.3% increase in salaries and wages expense compared to 2024 was mainly attributable to $4.3 million in expense related to the sale of TIA as well as annual merit adjustments. The number of employees as measured by average full time equivalents (FTEs) for 2025 was 960, compared to 966 for 2024.

Previous wording

Net income attributable to noncontrolling interests represents the portion of net income in consolidated majority-owned subsidiaries that is attributable to the minority owners of a subsidiary. The Company had net income attributable to noncontrolling interests of $123,000 in 2024, in line with 2023. The noncontrolling interests relate to three real estate investment trusts ("REIT"), which were substantially owned by the Company, through the fourth quarter of 2024, as discussed below under "Income Tax Expense".

Current wording

Net income attributable to noncontrolling interests represented the portion of net income in consolidated majority-owned subsidiaries that is attributable to the minority owners of a subsidiary. The noncontrolling interests related to three real estate investment trusts ("REIT"), which were substantially owned by the Company through the fourth quarter of 2024. In the fourth quarter of 2024, the Company's bank subsidiary approved the dissolution of the three REITs effective as of December 31, 2024.

Previous wording

The provision for income taxes provides for Federal, New York State, Pennsylvania and other miscellaneous state income taxes. The 2024 provision was $22.0 million, which increased $19.5 million or 781.9% compared to the 2023 provision. The increase in income tax expense between comparable periods reflects an increase in pre-tax income, as the prior year reflected realized losses on the sale of certain available-for-sale debt securities. The effective tax rate for the Company was 23.7% in 2024, up from 20.8% in 2023. Contributing to the increase in the effective tax rate in 2024 was the loss of certain New York State tax benefits related to the Company's REIT subsidiaries, discussed below. The effective rates for 2024 and 2023 differed from the U.S. statutory rate of 21.0% during those periods due to the effect of tax-exempt income from loans, securities, and life insurance assets, investments in tax credits, and excess tax benefits of stock-based compensation.

Current wording

The provision for income taxes provides for Federal, New York State, Pennsylvania and other miscellaneous state income taxes. The 2025 provision was $63.8 million, which increased $41.8 million or 189.9% compared to the 2024 provision. The effective tax rate for the Company was 28.4% in 2025, up from 23.7% in 2024. The effective rates for 2025 and 2024 differed from the U.S. statutory rate of 21.0% during those periods due to the effect of state taxes, tax-exempt income from loans, securities, and life insurance assets, investments in tax credits, and compensation related adjustments. In addition, the effective tax rate in 2025 was impacted by the sale of TIA which resulted in a significant increase to pre-tax income and an adjustment for goodwill with no tax-basis. A reconciliation from the statutory rate to the effective tax rate is provided in "Note 15 - Income Taxes" in the Notes to Consolidated Financial Statements in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K.

Previous wording

Loans and leases were 74.2% of total assets at December 31, 2024, compared to 71.7% of total assets at December 31, 2023. Total loan balances were $6.0 billion at December 31, 2024, an increase of $414.0 million or 7.4% compared to the $5.6 billion reported at year-end 2023. The increase was mainly in commercial real estate loans and commercial and industrial loans. A more detailed discussion of the loan portfolio is provided below in this section under the caption "Loans and Leases".

Current wording

Loans and leases were 74.4% of total assets at December 31, 2025, compared to 74.2% of total assets at December 31, 2024. Total loan balances were $6.4 billion at December 31, 2025, an increase of $426.3 million or 7.1% compared to the $6.0 billion reported at year-end 2024. The increase was mainly in commercial real estate loans and commercial and industrial loans. A more detailed discussion of the loan portfolio is provided below in this section under the caption "Loans and Leases".

Previous wording

As of December 31, 2024, total securities comprised 19.1% of total assets, compared to 22.1% of total assets at year-end 2023. Securities decreased $185.1 million or 10.7% at December 31, 2024, compared to December 31, 2023. Contributing to the decrease in securities from year-end 2023 was mainly maturities and principal payments on available-for-sale debt securities and, to a much lesser extent, sales of available-for-sale debt securities. These decreases were partially offset by securities purchases in 2024. A more detailed discussion of the securities portfolio is provided below in this section under the caption "Securities".

Current wording

As of December 31, 2025, total securities comprised 19.6% of total assets, compared to 19.1% of total assets at year-end 2024. Securities increased $150.6 million or 9.8% at December 31, 2025, compared to December 31, 2024. A more detailed discussion of the securities portfolio is provided below in this section under the caption "Securities".

Previous wording

Total deposits at year-end 2024 increased by $72.0 million or 1.1% compared to December 31, 2023. At December 31, 2024 time deposit balances increased $70.4 million or 7.1%, checking, savings and money market accounts increased by $74.1 million or 2.1%, and noninterest bearing deposits decreased by $72.5 million or 3.8%, when compared to December 31, 2023. Other borrowings, consisting mainly of short-term advances with the FHLB, increased $188.1 million or 31.3% from December 31, 2023. A more detailed discussion of deposits and borrowings is provided below in this section under the caption "Deposits and Other Liabilities".

Current wording

Total deposits at year-end 2025 increased by $466.0 million or 7.2% compared to December 31, 2024. Contributing to the increase, time deposit balances increased by $230.0 million or 21.5%; checking, savings and money market accounts increased by $183.5 million or 5.2%; and noninterest bearing deposits increased by $52.5 million or 2.8%. Other borrowings, consisting mainly of short-term advances with the FHLB, decreased $225.8 million or 28.6% from December 31, 2024. A more detailed discussion of deposits and borrowings is provided below in this section under the caption "Deposits and Other Liabilities".

Previous wording

The Consolidated Statements of Changes in Shareholders’ Equity included in the Consolidated Financial Statements of the Company contained in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K, detail changes in equity capital over prior year end. Total shareholders’ equity increased $43.5 million or 6.5% to $713.4 million at December 31, 2024, from $669.9 million at December 31, 2023. Additional paid-in capital increased by $2.9 million, from $297.2 million at December 31, 2023, to $300.1 million at December 31, 2024. The $2.9 million increase included $3.9 million attributed to stock-based compensation expense, partially offset by $1.2 million of restricted stock activity. Retained earnings increased by $35.6 million, reflecting net income of $70.9 million, less dividends paid of $35.1 million for the year-ended December 31, 2024.

Current wording

The Consolidated Statements of Changes in Shareholders’ Equity included in the Consolidated Financial Statements of the Company contained in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K, detail changes in equity capital over prior year end. Total shareholders’ equity increased $224.9 million or 31.5% to $938.4 million at December 31, 2025, from $713.4 million at December 31, 2024. The increase mainly reflects net income of $161.1 million, a decrease in accumulated other comprehensive loss of $99.4 million, and stock-based compensation of $3.0 million, partially offset by common stock dividends of $36.1 million and common stock repurchased of $1.6 million.

Previous wording

Accumulated other comprehensive loss decreased from $208.7 million at December 31, 2022 to $125.0 million at December 31, 2023, reflecting a $79.3 million decrease in unrealized losses on available-for-sale debt securities due to market interest rates and the aforementioned $70.0 million pre-tax loss on available-for-sale debt securities sales, and $4.4 million related to employee post-retirement benefit plans.

Current wording

Accumulated other comprehensive loss decreased from $118.5 million at December 31, 2024 to $19.1 million at December 31, 2025, reflecting a $94.7 million increase in unrealized losses on available-for-sale debt securities and a $4.7 million decrease related to employee post-retirement benefit plans. The decrease in unrealized losses on available-for-sale securities was mainly a result of the sale of $564.2 million of available-for-sale securities at pre-tax loss of $78.7 million during the fourth quarter of 2025 as well as changes in market interest rates.

Previous wording

The Company increased cash dividends per share by 1.7% in 2024 over 2023, which followed an increase of 3.9% in 2023 over 2022. Dividends per share were $2.44 in 2024, compared to $2.40 in 2023, and $2.31 in 2022. Cash dividends paid represented 49.6%, 364.6%, and 39.5% of after-tax net income in 2024, 2023, and 2022, respectively.

Current wording

The Company increased cash dividends per share by 28.3% in 2025 over 2024, which followed an increase of 1.7% in 2024 over 2023. Dividends per share were $3.13 in 2025, compared to $2.44 in 2024, and $2.40 in 2023. Cash dividends paid represented 22.4%, 49.6%, and 364.6% of after-tax net income in 2025, 2024, and 2023, respectively.

Previous wording

On October 22, 2021, the Company’s Board of Directors authorized a share repurchase plan (the "2021 Repurchase Plan") for the repurchase of up to 400,000 shares of the Company’s common stock over the 24 months following adoption of the 2021 Repurchase Plan. Under the 2021 Repurchase Plan, the Company repurchased a total of 380,182 shares at an average cost of $70.14.

Current wording

On July 20, 2023, the Company’s Board of Directors authorized a share repurchase plan (the “2023 Repurchase Plan”) under which the Company could repurchase up to 400,000 shares of the Company’s common stock over the 24 months following adoption of the plan. The 2023 Repurchase Plan expired by its terms on July 20, 2025. The Company did not repurchase any shares under the 2023 Repurchase Plan.

Previous wording

On July 20, 2023, the Company’s Board of Directors authorized a replacement share repurchase plan (the “2023 Repurchase Plan”) under which the Company may repurchase up to 400,000 shares of the Company’s common stock over the 24 months following adoption of the plan. Shares may be repurchased from time to time under the 2023 Repurchase Plan in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in accordance with federal securities laws, and the repurchase program may be suspended, modified or terminated by the Board of Directors at any time for any reason. As of December 31, 2024, there have been no shares repurchased under the 2023 Repurchase Plan.

Current wording

On July 24, 2025, the Company’s Board of Directors authorized a replacement share repurchase plan (the “2025 Repurchase Plan”) under which the Company may repurchase up to 400,000 shares of the Company’s common stock over the 24 months following adoption of the plan. Shares may be repurchased from time to time under the 2025 Repurchase Plan in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in accordance with federal securities laws. The Company has no obligation to repurchase any shares and may discontinue repurchases at any time. As of December 31, 2025, 22,339 shares had been repurchased under the 2025 Repurchase Plan at an average price of $73.86 per share.

Previous wording

The Company classifies its securities at date of purchase as available-for-sale, held-to-maturity or trading. Securities 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. Securities in the held-to-maturity portfolio would consist of obligations of the U.S. Government, U.S. Government sponsored entities and obligations of state and political subdivisions. Securities in the trading portfolio would reflect those securities that the Company elects to account for at fair value, with the adoption of ASC Topic 825, Financial Instruments.

Current wording

The Company classifies its securities at date of purchase as available-for-sale, held-to-maturity or trading. Most of the securities held by the Company are classified as available-for-sale. Securities available-for-sale may be used to enhance total return, provide additional liquidity, or reduce interest rate risk. Securities in the held-to-maturity portfolio would consist of obligations of the U.S. Government, U.S. Government sponsored entities and obligations of state and political subdivisions. Securities in the trading portfolio would reflect those securities that the Company elects to account for at fair value, with the adoption of ASC Topic 825, Financial Instruments.

Previous wording

The Company’s total securities portfolio at December 31, 2024 was $1.5 billion, compared to $1.7 billion at December 31, 2023. The table below shows the composition of the available-for-sale and held-to-maturity debt securities portfolios as of year-end 2024, 2023 and 2022. The decrease in securities from year-end 2023 was mainly a result of $198.4 million of payments, maturities and calls on available-for-sale debt securities, and $39.9 million of sales of available-for-sale debt securities, partially offset by $55.9 million of securities purchases. Unrealized losses on the available-for-sale debt securities portfolio were $135.6 million at year-end 2024, up from $131.8 million at year-end 2023. The increase in unrealized losses at year end 2024 over prior year end was primarily attributable to market conditions.

Current wording

The Company’s total securities portfolio at December 31, 2025 was $1.7 billion, compared to $1.5 billion at December 31, 2024. The table below shows the composition of the available-for-sale and held-to-maturity debt securities portfolios as of year-end 2025, 2024 and 2023. The increase in securities from year-end 2024 was largely driven by $812.6 million of securities purchases during 2025 which were partially offset by $564.2 million of sales of available-for-sale debt securities and $228.0 million of payments, maturities and calls during the year. Unrealized losses on the available-for-sale debt securities portfolio were $9.3 million at year-end 2025, down from $135.6 million at year-end 2024. The sale of securities and market conditions contributed to the decrease in unrealized losses at year-end 2025 from prior year end.