Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following analysis is intended to provide the reader with a further understanding of the consolidated financial condition and results of operations of the Company and its subsidiaries for the periods shown. This Management’s Discussion and Analysis of
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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.
Overview
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."
Forward-Looking Statements
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 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 assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount; changes in supervisory and regulatory of financial institutions; technological developments and changes; cybersecurity and ; the ability to continue to introduce competitive new products and services on a timely, cost- basis; governmental and public policy changes, including environmental regulation; reliance on large customers; the geographic concentration of our business; the ability to access financial resources in the amounts, at the times, and on the terms required to support the Company's future businesses; and the economic impact, including potential market , of national and global events, including the response to bank , war and geopolitical matters (including continuing or increasing hostilities in the Middle East and the war in Ukraine), tariffs and trade wars, widespread , civil , political uncertainty, and pandemics or other public health ; and the related financial on borrowers and changes to customer behavior and credit risk as a result of any of the foregoing. The Company does not undertake any obligation to update its forward-looking statements.
Critical Accounting Policies
The accounting and reporting policies followed by the Company conform, in all material respects, to U.S. generally accepted accounting principles ("GAAP") and to general practices within the financial services industry. In the course of normal business
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activity, management must select and apply many accounting policies and methodologies and make estimates and assumptions that lead to the financial results presented in the Company’s consolidated financial statements and accompanying notes. There are uncertainties inherent in making these estimates and assumptions, which could materially affect the Company’s results of operations and financial position.
Management considers accounting estimates to be critical to reported financial results if (i) the accounting estimates require management to make assumptions about matters that are highly uncertain, and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on the Company’s financial statements. Management considers the accounting policies relating to the allowance for credit losses ("allowance", or "ACL") to be a critical accounting policy because of the uncertainty and subjectivity involved in this policy and the material effect that estimates related to this area can have on the Company’s financial condition and results of operations.
The Company’s methodology for estimating the allowance considers available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. Refer to "Allowance for Credit Losses" below, "Note 5 - Allowance for Credit Losses", and "Note 1 - Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K for additional discussion regarding the allowance.
For information on the Company's significant accounting policies and to gain a greater understanding of how the Company’s financial performance is reported, refer to "Note 1 - Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K.
Critical Accounting Estimates
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:
• Accounting for credit losses - The Company accounts for the allowance for credit losses using the current expected credit loss model. Under this model, the allowance for credit losses represents a valuation account that is deducted from the amortized cost basis of certain financial assets, including loans and leases, to present the net amount expected to be collected at the balance sheet date. A provision for credit losses is recorded to adjust the level of the allowance as deemed necessary by management. In estimating expected losses in the loan and lease portfolio, borrower-specific financial data and macro-economic assumptions are utilized to project losses over a reasonable and supportable forecast period. For certain loan pools that share similar risk characteristics, the Company utilizes statistically developed models to estimate amounts and timing of expected future cash flows, collateral values and other factors used to determine the borrowers' abilities to repay obligations. Such models consider historical correlations of credit losses with various macroeconomic assumptions including unemployment and gross domestic product. These forecasts may be adjusted for inherent or biases of the models. Subsequent to the forecast period, the Company utilizes longer-term historical experience to estimate over the remaining contractual life of the loans. Changes in the circumstances considered when determining management's estimates and assumptions could result in changes in those estimates and assumptions, which could result in adjustment of the allowance for credit in future periods. A discussion of facts and circumstances considered by management in determining the allowance for credit is included herein in "Note 5 - Allowance for Credit " in the Notes to the Unaudited Consolidated Financial Statements included in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K.
Results of Operations
General
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
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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% .
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 .
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 .
Segment Reporting
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.
Banking Segment
As previously mentioned, banking includes all activities of the Company except for insurance (which the Company engaged in through October 31, 2025), and wealth management. In addition to the operations of its banking subsidiary, the main other activity of the Company included in the banking segment is the operations of the parent holding company, Tompkins Financial Corporation, which has historically had minimal impact on the results of operations of the banking segment. As mentioned above, the Company sold TIA on October 31, 2025 and recognized a gain on the sale of $188.2 million, which is included in noninterest income. In addition, the Company recognized $4.3 million of noninterest expenses related to the sale. The net after-tax impact of the sale was approximately $129.0 million. Since the parent holding company was the sole owner of TIA, the transaction was recorded on the parent company's books, and is therefore included in the results of operations of the banking segment.
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
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increased net interest income, driven by increased loan volume, increases in average asset yields and lower average funding costs compared to 2024.
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.
Noninterest income of $141.2 million in 2025 increased $111.2 million or 370.8% compared to 2024. Noninterest income included $188.2 million related to the sale of TIA, partially offset by pre-tax losses of $78.7 million from repositioning of the securities portfolio. The increase in 2025 compared to 2024 also included a $1.1 million increase in gains on sales of residential loans, which was partially offset by a $550,000 decrease in card services income. For the year ended December 31, 2025, derivative income related to customer swap arrangements decreased by $818,000 or 46.0% mainly due to a decrease in volume in 2025 compared to 2024.
Noninterest expense of $170.2 million for the year ended December 31, 2025, increased by $12.9 million or 8.2% compared to 2024. The increase was mainly attributable to an increase in salaries and wages and other employee benefits, up $10.1 million or 10.7%, and professional fees, up $3.0 million or 49.2%. The increase in salaries and wages and other employee benefits was mainly due to the previously mentioned $4.3 million in expenses related to the sale of TIA and normal merit adjustments.
Insurance Segment
The insurance segment reported net income of $8.1 million for 2025, which was up $247,000 or 3.2% compared to 2024. Noninterest revenue for 2025 decreased by $3.5 million or 8.7%, which was more than offset by a decrease in noninterest expense of $3.7 million or 12.9%. The decreases in both revenue and expense were largely due to the sale of TIA on October 31, 2025, which resulted in ten months of operating results in 2025 compared to 12 months in 2024.
Wealth Management Segment
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.
Net Interest Income
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.
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.
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.
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
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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.
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.
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.
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.
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.
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.
Average other borrowings decreased by $131.9 million or 20.7% in 2025 compared to 2024. The average rate paid on other borrowings for the year ended December 31, 2025, was down 75 basis points compared to 2024.
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Table 1 - Average Statements of Condition and Net Interest Analysis
For the Quarters Ended
December 31, 2025
September 30, 2025
December 31, 2024
(dollar amounts in thousands)
Average
Balance
(QTD)
Interest
Average
Yield/Rate
Average
Balance
(QTD)
Interest
Average
Yield/Rate
Average
Balance
(QTD)
Interest
Average
Yield/Rate
ASSETS
Interest-earning assets
Interest-bearing balances due from banks
Securities 1
U.S. Government securities
State and municipal 2
Other Securities 2
Total securities
FHLBNY and FRB stock
Total loans and leases, net of unearned income 2,3
Total interest-earning assets
Other assets
Total assets
LIABILITIES & EQUITY
Deposits
Interest-bearing deposits
Interest bearing checking, savings, & money market
Time deposits
Total interest-bearing deposits
Federal funds purchased & securities sold under agreements to repurchase
Other borrowings
Total interest-bearing liabilities
Noninterest bearing deposits
Accrued expenses and other liabilities
Total liabilities
Tompkins Financial Corporation Shareholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
Interest rate spread
Tax-equivalent net interest income/margin on earning assets
Tax-equivalent adjustment
Net interest income
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For the year ended December 31,
(dollar amounts in thousands)
Average
Balance
(YTD)
Interest
Average
Yield/Rate
Average
Balance
(YTD)
Interest
Average
Yield/Rate
Average
Balance
(YTD)
Interest
Average
Yield/Rate
ASSETS
Interest-earning assets
Interest-bearing balances due from banks
Securities 1
U.S. Government securities
State and municipal 2
Other securities 2
Total securities
FHLBNY and FRB stock
Total loans and leases, net of unearned income 2,3
Total interest-earning assets
Other assets
Total assets
LIABILITIES & EQUITY
Deposits
Interest-bearing deposits
Interest bearing checking, savings, & money market
Time deposits
Total interest-bearing deposits
Federal funds purchased & securities sold under agreements to repurchase
Other borrowings
Total interest-bearing liabilities
Noninterest bearing deposits
Accrued expenses and other liabilities
Total liabilities
Tompkins Financial Corporation Shareholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
Interest rate spread
Tax-equivalent net interest income/margin on earning assets
Tax-equivalent adjustment
Net interest income
1 Average balances and yields on available-for-sale debt securities are based on historical amortized cost.
2 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.
3 Nonaccrual loans are included in the average asset totals presented above. Payments received on nonaccrual loans have been recognized as disclosed in "Note 1 - Summary of Significant Accounting Policies" of the Company’s consolidated financial statements included in Part 1 of this Report on Form 10-K.
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Table 2 - Analysis of Changes in Net Interest Income
Increase (Decrease) Due to Change
in Average
Increase (Decrease) Due to Change
in Average
(In thousands)(taxable equivalent)
Volume
Yield/Rate
Total
Volume
Yield/Rate
Total
INTEREST INCOME:
Interest-bearing balances due from bank
Investments 1
Taxable
Tax-exempt
FHLB and FRB stock
Loans, net 1
Total interest income
INTEREST EXPENSE:
Interest-bearing deposits:
Interest checking, savings and money market
Time
Federal funds purchased and securities sold under agreements to repurchase
Other borrowings
Total interest expense
Net interest income
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.
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.
Provision for Credit Loss Expense
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 " below has further details on the allowance for credit and asset quality metrics.
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Noninterest Income
Year ended December 31,
(In thousands)
Insurance commissions and fees
Wealth management fees
Service charges on deposit accounts
Card services income
Gain on sale of TIA
Other income
Net gain (loss) on securities transactions
Total
Noninterest income of $196.9 million for the year-ended December 31, 2025 increased $108.7 million or 123.4% from 2024. Noninterest income represented 44.1% of total revenues in 2025, up from 29.5% in 2024.
As indicated by the above table, insurance commissions and fees decreased in 2025 compared to 2024 largely due to the sale of TIA on October 31, 2025, which resulted in ten months of operating results in 2025 compared to 12 months in 2024.
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.
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.
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.
The gain on sale of TIA was related to the sale of the Company's insurance agency subsidiary to Gallagher in the fourth quarter of 2025 at a pre-tax gain of $188.2 million, as discussed above.
Other income of $12.9 million increased $2.8 million or 28.0% compared to 2024. The increase in 2025 compared to 2024 was mainly attributable to a $1.9 million gain on the sale of OREO and gains on sales of residential loans, which were up $1.2 million over 2024. These increases were partially offset by an $818,000 decrease in derivatives related income, and a $353,000 decrease in income related to bank owned life insurance.
The net loss on securities transactions for the year ended December 31, 2025 was $78.7 million, compared to gain of $32,000 for 2024. The loss was a result of the sale of $564.2 million of available-for-sale debt securities during the fourth quarter of 2025 as part of a previously discussed balance sheet repositioning.
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Noninterest Expense
Year ended December 31,
(In thousands)
Salaries and wages
Other employee benefits
Net occupancy expense of premises
Furniture and fixture expense
Amortization of intangible assets
Other operating expense
Total
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).
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.
Other operating expenses of $54.0 million increased by $2.8 million or 5.4% compared to 2024, including increases in marketing, up $905,000; professional fees, up $2.9 million; and travel and meeting expense, up $401,000. Partially offsetting these increases was a $1.6 million decrease in certain post-retirement benefit expenses year-over-year, which was partially the result of curtailment gains of $916,000 related to certain benefit plans in connection with sale of TIA recognized in 2025.
Noncontrolling Interests
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.
Income Tax Expense
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.
Financial Condition
Total assets were $8.7 billion at December 31, 2025, up by $559.2 million or 6.9% from the previous year end. The increase over prior year end was mainly in loans and securities and supported by deposit growth.
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".
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".
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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".
Shareholders’ Equity
The Consolidated Statements of Changes in Shareholders’ Equity included in the Consolidated Financial Statements of the Company contained in Part II, "Item 8. 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.
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.
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.
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.
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.
The Company and its subsidiary bank are subject to various regulatory capital requirements administered by federal bank regulatory agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on the Company’s business, results of operations and financial condition. Under capital adequacy guidelines and the regulatory framework for prompt corrective action (PCA), banks must meet specific guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classifications of the Company and its subsidiary bank are also subject to qualitative judgments by regulators concerning components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the maintenance of minimum amounts and ratios of common equity Tier 1 capital, Total capital and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Management believes that the Company and its subsidiary bank meet all capital adequacy requirements to which they are subject.
As of December 31, 2025, the capital ratios for the Company’s subsidiary bank exceeded the minimum levels required to be considered well capitalized. Additional information on the Company’s capital ratios and regulatory requirements is provided in "Note 20 - Regulations and Supervision" in the Notes to Consolidated Financial Statements in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K.
Securities
The Company maintains a portfolio of securities such as U.S. Treasuries, U.S. government sponsored entities securities, U.S. government agencies, non-U.S. Government agencies or sponsored entities mortgage-backed securities, obligations of states and political subdivisions thereof and equity securities. Management typically invests in securities with short to intermediate
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average lives in order to better match the interest rate sensitivities of its assets and liabilities. Investment decisions are made within policy guidelines established by the Company’s Board of Directors. The investment policy established by the Company’s Board of Directors is based on the asset/liability management goals of the Company, and is monitored by the Company’s Asset/Liability Management Committee and Investment Committee. The intent of the policy is to establish a portfolio of high-quality diversified securities, which optimizes net interest income within safety and liquidity limits deemed acceptable by the Asset/Liability Management Committee.
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 .
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.
Additional information on the securities portfolio is available in "Note 3 - Securities" in the Notes to Consolidated Financial Statements in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K, which details the types of securities held, the carrying and fair values, and the contractual maturities as of December 31, 2025 and 2024.
As of December 31,
Available-for-Sale Debt Securities
(In thousands)
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
U.S. Treasuries
Obligations of U.S. Government sponsored entities
Obligations of U.S. states and political subdivisions
Mortgage-backed securities-residential, issued by
U.S. Government agencies
U.S. Government sponsored entities
U.S. corporate debt securities
Total available-for-sale debt securities
As of December 31,
Held-to-Maturity Debt Securities
(In thousands)
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
U. S. Treasuries
Obligations of U.S. Government sponsored entities
Total held-to-maturity debt securities
The Company evaluates available-for-sale debt securities for expected credit losses ("ECL") in unrealized loss positions at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors.
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Factors that may be indicative of ECL include, but are not limited to, the following:
• Extent to which the fair value is less than the amortized cost basis.
• Adverse conditions specifically related to the security, an industry, or geographic area (changes in technology, business practice).
• Payment structure of the debt security with respect to underlying issuer or obligor.
• Failure of the issuer to make scheduled payment of principal and/or interest.
• Changes to the rating of a security or issuer by a NRSRO.
• Changes in tax or regulatory guidelines that impact a security or underlying issuer.
For available-for-sale debt securities in an unrealized loss position, the Company evaluates the securities to determine whether the decline in the fair value below the amortized cost basis is the result of changes in interest rates or reflects a fundamental change in the creditworthiness of the underlying issuer. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an allowance for credit losses ("ACL") on the Company's Statements of Condition, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings. Both the ACL and the adjustment to net income may be reversed if conditions change.
Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type with each type sharing similar risk characteristics and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management has made the accounting policy election to exclude accrued interest receivable on held-to-maturity debt securities from the estimate of credit losses. As of December 31, 2025, the held-to-maturity portfolio consisted of U.S. Treasury securities and securities issued by U.S. government-sponsored enterprises, including Federal National Mortgage Agency, Federal Home Loan Bank, and Federal Farm Credit Banks Funding Corporation. U.S. Treasury securities are backed by the full faith and credit of and/or guaranteed by the U.S. government, and it is expected that the securities will not be settled at prices less than the amortized cost bases of the securities. Securities issued by U.S. government agencies or U.S. government-sponsored enterprises carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as "risk-free," and have a long history of zero credit loss. As such, the Company did not record an allowance for credit losses for these securities as of December 31, 2025.
The total gross unrealized losses, shown in the tables above, were primarily attributable to changes in interest rates and levels of market liquidity, relative to when the investment securities were purchased, and not due to the credit-related quality of the investment securities. The Company does not have the intent to sell these securities and does not believe it is more likely than not that the Company will be required to sell these securities before a recovery of amortized cost.
The Company also holds non-marketable Federal Home Loan Bank New York ("FHLBNY") stock and non-marketable Atlantic Community Bankers Bank ("ACBB") stock, which are required to be held for regulatory purposes and for borrowing availability. The required investment in FHLBNY stock is tied to the Company’s borrowing levels with the FHLBNY. Holdings of FHLBNY stock and ACBB stock totaled $32.2 million and $95,000 at December 31, 2025, respectively, compared to $42.2 million and $95,000, respectively, at December 31, 2024. These securities are carried at par, which is also cost. During 2025, the FHLBNY continued to pay dividends and repurchase stock. As such, the Company has not recognized any impairment on its holdings of FHLBNY.
Management’s policy is to purchase investment grade securities that, on average, have relatively short expected durations. This policy helps mitigate interest rate risk and provides sources of liquidity without significant risk to capital. The contractual maturity distribution of debt securities and mortgage-backed securities as of December 31, 2025, along with the weighted average yield of each category, is presented in Table 3-Maturity Distribution below. Balances are shown at amortized cost and weighted average yields are calculated on a fully tax-equivalent basis. Expected maturities may differ from contractual maturities presented in Table 3-Maturity Distribution below, because issuers may have the right to call or prepay obligations with or without penalty and mortgage-backed securities may pay throughout the periods prior to contractual maturity.
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Table 3 - Maturity Distribution
As of December 31, 2025
Securities
Available-for-Sale 1
Securities
Held-to-Maturity
(dollar amounts in thousands)
Amount
Yield 2
Amount
Yield 2
U.S. Treasury
Within 1 year
Over 1 to 5 years
Over 5 to 10 years
Obligations of U.S. Government sponsored entities
Within 1 year
Over 1 to 5 years
Over 5 to 10 years
Over 10 years
Obligations of U.S. state and political subdivisions
Within 1 year
Over 1 to 5 years
Over 5 to 10 years
Over 10 years
Mortgage-backed securities - residential
Within 1 year
Over 1 to 5 years
Over 5 to 10 years
Over 10 years
Other securities
Over 1 to 5 years
Total securities
Within 1 year
Over 1 to 5 years
Over 5 to 10 years
Over 10 years
1 Balances of available-for-sale debt securities are shown at amortized cost.
2 Interest income includes the tax effects of tax-equivalent adjustments using a combined New York State and Federal effective income tax rate of 24.5% to increase tax-exempt interest income to tax-equivalent basis.
The average tax-equivalent yield on the securities portfolio was 2.63% in 2025, 2.36% in 2024 and 1.74% in 2023.
At December 31, 2025, there were no holdings of any one issuer, other than the U.S. Government sponsored entities, in an amount greater than 10% of the Company’s shareholders’ equity.
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Loans and Leases
Table 4 - Composition of Loan and Lease Portfolio
As of December 31,
(In thousands)
Commercial and industrial
Agriculture
Commercial and industrial other 1
Subtotal commercial and industrial
Commercial real estate
Construction
Agriculture
Commercial real estate other
Subtotal commercial real estate
Residential real estate
Home equity
Mortgages
Subtotal residential real estate
Consumer and other
Indirect
Consumer and other
Subtotal consumer and other
Leases
Total loans and leases
Less: unearned income and deferred costs and fees
Total loans and leases, net of unearned income and deferred costs and fees
1 Commercial and industrial other includes $7,000, $159,000, $404,000, $756,000, and $71.3 million respectively, of Payment Protection Program "PPP" loans as of December 31, 2025, 2024, 2023, 2022, and 2021.
The below table shows a more detailed breakout of commercial real estate ("CRE") loans as of December 31, 2025 and December 31, 2024:
As of December 31,
CRE Concentrations
(In thousands)
Balance
% CRE
Balance
% CRE
Construction
Multi-family/Single family real estate
Agriculture
Retail 1
Hotels/motels
Office space 2
Industrial 3
Mixed Use
Medical 4
Other
Total
1 Retail included 2.1% and 2.5%, respectively, of owner occupied real estate at December 31, 2025 and 2024.
2 Office space included 1.7%, respectively, of owner occupied real estate at both December 31, 2025 and 2024.
3 Industrial included 2.79% and 2.59%, respectively, of owner occupied real estate at December 31, 2025 and 2024 .
4 Medical included 1.71% and 2.37%, respectively, of owner occupied real estate at December 31, 2025 and 2024.
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Total loans and leases of $6.4 billion at December 31, 2025 increased $426.3 million or 7.1% from December 31, 2024. The increase was mainly in commercial real estate loans and commercial and industrial loans. At December 31, 2025, total loans and leases represented 74.4% of total assets compared to 74.2% of total assets at December 31, 2024.
Residential real estate loans, including home equity loans, were $1.6 billion at December 31, 2025, an increase of $20.3 million or 1.3% compared to $1.6 billion at year-end 2024. Residential real estate loans comprised 24.7% of total loans and leases at December 31, 2025 compared to 26.1% at December 31, 2024. Growth in residential loan balances is impacted by the Company’s decision to retain these loans or sell them in the secondary market due to interest rate considerations. The Company’s Asset/Liability Management Committee meets regularly and establishes standards for selling or retaining residential real estate mortgage originations.
Residential real estate loans are generally sold to Federal Home Loan Mortgage Corporation ("FHLMC") without recourse in accordance with standard secondary market loan sale agreements. These residential real estate loans also are subject to customary representations and warranties made by the Company, including representations and warranties related to gross incompetence and fraud. The Company has not had to repurchase any loans as a result of these representations and warranties.
During 2025, 2024, and 2023, the Company sold residential mortgage loans totaling $85.6 million, $40.1 million, and $4.5 million, respectively, and realized net gains on these sales of $2.2 million, $1.0 million, and $96,000, respectively. When residential mortgage loans are sold to FHLMC, the Company typically retains all servicing rights, which provides the Company with a source of fee income. In connection with the sales in 2025, 2024, and 2023, the Company recorded mortgage-servicing assets of $642,000, $299,000, and $34,000, respectively.
The Company originates fixed rate and adjustable rate residential mortgage loans. The Company also originates loans that have characteristics of both, such as a 7/6 adjustable rate mortgage, which has a fixed rate for the first seven years and then adjusts semi-annually thereafter. The majority of residential mortgage loans originated by the Company over the last several years have been fixed rate loans. Adjustable rate loans increased in 2024 and 2025 as a result of the higher interest rate environment. Adjustable rate residential real estate loans are underwritten based upon the initial rate when the fixed rate period is 5 years or longer. For loans with an initial fixed rate of less than 5 years, the fully indexed rate is utilized for ability to repay qualifying and underwriting. This underwriting practice matches secondary market guidelines.
Commercial real estate loans totaled $3.7 billion at December 31, 2025, an increase of $282.2 million or 8.4% compared to December 31, 2024, and represented 56.8% of total loans and leases at December 31, 2025, compared to 56.1% at December 31, 2024.
Commercial and industrial loans totaled $1.1 billion at December 31, 2025, which was an increase of $135.1 million or 14.0% from December 31, 2024. Commercial and industrial loans represented 17.1% of total loans at December 31, 2025 compared to 16.0% at December 31, 2024.
As of December 31, 2025, agriculturally-related loans totaled $348.8 million or 5.4% of total loans and leases compared to $327.6 million or 5.4% of total loans and leases at December 31, 2024. Agriculturally-related loans include loans to dairy farms and cash and vegetable crop farms. Agriculturally related loans are primarily made based on identified cash flows of the borrower with consideration given to underlying collateral, personal guarantees, and government related guarantees. Agriculturally-related loans are generally secured by the assets or property being financed or other business assets such as accounts receivable, livestock, equipment or commodities/crops.
The consumer loan portfolio includes personal installment loans, indirect automobile financing, and overdraft lines of credit. Consumer and other loans were $86.5 million at December 31, 2025, compared to $96.4 million at December 31, 2024.
The lease portfolio decreased by 16.6% to $10.4 million at December 31, 2025 from $12.5 million at December 31, 2024. As of December 31, 2025, commercial leases and municipal leases represented 100.0% of total leases.
The Company has adopted comprehensive lending policies, underwriting standards and loan review procedures. There were no significant changes to the Company’s existing policies, underwriting standards and loan review procedures during 2025. The Company’s Board of Directors approves the lending policies at least annually. The Company recognizes that exceptions to policy guidelines may occasionally occur and has established procedures for approving exceptions to these policy guidelines. Management has also implemented reporting systems to monitor loan originations, loan quality, concentrations of credit, loan delinquencies and nonperforming loans and potential problem loans.
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The Company’s loan and lease customers are located primarily in the New York and Pennsylvania communities served by its subsidiary bank. Although operating in numerous communities in New York and Pennsylvania, the Company is still dependent on the general economic conditions of these states and the local economic conditions of the communities within those states in which the Company does business.
Analysis of Past Due and Nonperforming Loans
As of December 31,
(In thousands)
Loans 90 days past due and accruing
Commercial and industrial
Residential real estate
Consumer and other
Total loans 90 days past due and accruing
Nonaccrual loans
Commercial and industrial
Commercial real estate
Residential real estate
Consumer and other
Total nonaccrual loans and leases
Troubled debt restructurings not included above
Total nonperforming loans and leases
Other real estate owned
Total nonperforming assets
Total nonperforming loans and leases as a percentage of total loans and leases
Total nonperforming assets as a percentage of total assets
Allowance as a percentage of nonperforming loans and leases
Asset quality measures were generally favorable at December 31, 2025 compared to December 31, 2024. The above table shows a decrease in nonperforming loans and nonperforming assets at year-end 2025 from year-end 2024. The Company’s total nonperforming assets as a percentage of total assets was 0.56% at December 31, 2025 compared to 0.80% at December 31, 2024, compared to its peer group's most recent ratio of 0.58% at September 30, 2025. The peer data is from the Federal Reserve Board and represents banks or bank holding companies with assets between $3.0 billion and $10.0 billion. The decrease in nonperforming assets was mainly due to a $14.2 million decrease related to one commercial property being transferred from commercial real estate loans into other real estate owned during the fourth quarter of 2024, and subsequently being sold in the first quarter of 2025.
Nonperforming loans and leases totaled $47.9 million at December 31, 2025 and decreased 5.8% from December 31, 2024. Nonperforming loans and leases represented 0.74% of total loans at December 31, 2025, compared to 0.85% of total loans at December 31, 2024. Nonperforming loans and leases in the commercial real estate portfolio at year-end 2025 decreased by $9.7 million compared to year-end 2024. During the fourth quarter of 2025, a $7.4 million commercial real estate loan was removed from nonaccrual loans, reflecting a payoff of $5.0 million, with a partial charge-off of $2.4 million.
Loans past due 30-89 days totaled $8.8 million or 0.14% of total loans at December 31, 2025, and $28.8 million or 0.48% of total loans at December 31, 2024. The decrease in loans past due 30-89 days when compared to December 31, 2024 was mainly due to one commercial real estate loan totaling $17.3 million being moved to nonaccrual loans and leases in the first quarter of 2025.
Loans internally-classified Special Mention or Substandard totaled $134.5 million at December 31, 2025, compared to $111.1 million at December 31, 2024. The increase at December 31, 2025 compared to prior year end was largely due to the downgrade of one performing commercial loan totaling $20.1 million to Substandard during 2025.
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The Company adopted ASU 2022-02 effective January 1, 2023. This standard eliminated the previous troubled debt restructuring ("TDR") accounting model and replaced it with guidance and disclosure requirements for identifying modifications to loans to borrowers experiencing financial difficulty. Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. Prior year TDRs are included in the above table within the following categories: "loans 90 days past due and accruing", "nonaccrual loans", or "troubled debt restructurings not included above".
In general, the Company places a loan on nonaccrual status if principal or interest payments become 90 days or more past due and/or management deems the collectability of the principal and/or interest to be in question, as well as when called for by regulatory requirements. Although in nonaccrual status, the Company may continue to receive payments on these loans. These payments are generally recorded as a reduction to principal and interest income is recorded only after principal recovery is reasonably assured. For additional financial information on the difference between the interest income that would have been recorded if these loans and leases had been paid in accordance with their original terms and the interest income that was recorded, refer to "Note 4 - Loans and Leases" 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’s recorded investment in loans and leases that are individually evaluated totaled $26.1 million at December 31, 2025, and $31.7 million at December 31, 2024. A loan is individually evaluated when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Individually evaluated loans consist of our non-homogenous nonaccrual loans and loans that are 90 days or more past due. Specific reserves on individually evaluated loans that are not collateral dependent are measured based on the present value of expected future cash flows discounted at the original effective interest rate of each loan. For loans that are collateral dependent, impairment is measured based on the fair value of the collateral less estimated selling costs, and such impaired amounts are generally charged off.
At December 31, 2025, there were specific reserves of $1.4 million, related to one commercial real estate relationship totaling $17.3 million and one residential real estate relationship totaling $2.4 million, compared to $1.7 million of specific reserves on three commercial real estate relationships totaling $7.5 million at December 31, 2024. The majority of the individually evaluated loans are collateral dependent loans that have limited exposure or require limited specific reserves because of the amount of collateral support with respect to these loans or the loans have been written down to fair value. Interest payments on individually evaluated loans are typically applied to principal unless collectability of the principal amount is reasonably assured. In these cases, interest is recognized on a cash basis. There was no interest income recognized on individually evaluated loans and leases for 2025, 2024 and 2023.
The ratio of the allowance to nonperforming loans was 120.30% at December 31, 2025, compared to 111.06% at December 31, 2024. The increase in the ratio from year-end 2025 from year-end 2024 was mainly due to the decrease in nonperforming loans discussed in more detail above and, to a lesser extent, the increase in the allowance for credit losses. The Company’s nonperforming loans are mostly made up of collateral dependent loans requiring little to no specific allowance due to the level of collateral available with respect to these loans and/or previous charge-offs.
Management reviews the loan portfolio for evidence of potential problem loans and leases. Potential problem loans and leases are loans and leases that are currently performing in accordance with contractual terms, but where known information about possible credit problems of the related borrowers causes management to have doubt as to the ability of such borrowers to comply with the present loan payment terms and may result in such loans and leases becoming nonperforming at some time in the future. Management considers loans and leases classified as Substandard, which continue to accrue interest, to be potential problem loans and leases. The Company, through its credit administration function, identified 12 commercial relationships in the loan portfolio totaling $5.0 million at December 31, 2025 that were potential problem loans. At December 31, 2024, there were 16 commercial relationships totaling $41.2 million that were considered potential problem loans. Of the 12 commercial relationships from the portfolio that were classified as potential problem loans at December 31, 2025, there was 1 relationship that individually equaled or exceeded $1.0 million, which totaled $1.6 million. The decrease in the aggregate amount of potential loans at year-end 2025 from year-end 2024 was mainly due to the of one commercial real estate loan totaling $17.3 million to being reported as individually evaluated.
Potential problem loans remain in a performing status due to a variety of factors, including payment history, the value of collateral supporting the credits, and personal or government guarantees. These factors, when considered in the aggregate, give management reason to believe that the current risk exposure on these loans does not warrant accounting for these loans as nonperforming. However, these loans do exhibit certain risk factors, which have the potential to cause them to become
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nonperforming. Accordingly, management’s attention is focused on these credits, which are reviewed on at least a quarterly basis.
The Allowance for Credit Losses
Management reviews the appropriateness of the ACL on a regular basis. Management considers the accounting policy relating to the ACL to be a critical accounting policy, given the inherent uncertainty in evaluating the levels of the ACL required to cover credit losses in the portfolio and the material effect that assumptions could have on the Company’s results of operations. The Company has developed a methodology to measure the amount of estimated credit loss exposure inherent in the loan portfolio to assure that an appropriate ACL is maintained. The Company’s methodology is based upon guidance provided in SEC Staff Accounting Bulletin No. 119, Measurement of Credit Losses on Financial Instruments ("CECL"), and Financial Instruments - Credit Losses and ASC Topic 326, Financial Instruments - Credit Losses.
The Company uses a discounted cash flow ("DCF") method to estimate expected credit losses for all loan segments excluding the leasing segment. For each of these loan segments, the Company generates cash flow projections at the loan level wherein payment expectations are adjusted for estimated prepayment speeds, curtailments, recovery lag, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on internal historical data.
The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers. For all loans utilizing the DCF method, management utilizes and forecasts national unemployment and a one year percentage change in national gross domestic product as loss drivers in the model.
For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over eight quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of economic forecasts, and scenario weightings, are also considered by management when developing the forecast metrics.
The combination of adjustments for credit expectations and timing expectations produces an expected cash flow stream at the loan level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce a net present value of expected cash flows ("NPV"). An ACL is established for the difference between the NPV and amortized cost basis.
The model also considers the need to qualitatively adjust expected loss estimates for information not already captured in the loss estimation process. These qualitative factors include, but are not limited to, those suggested by the Interagency Policy Statement on Allowances for Credit Losses. These qualitative factor adjustments may increase or decrease the Company's estimate of expected credit losses.
Due to the size and characteristics of the leasing portfolio, the remaining life method, using the historical loss rate of the commercial and industrial segment, is used to determine the allowance for credit losses.
Loans that do not share similar risk characteristics are evaluated on an individual basis. The ACL for individually evaluated loans is measured using the DCF method based on the loan's contractual interest rate, or at the loan's observable market price, or if the loan is collateral dependent, at the fair value of the collateral, less cost to sell.
Since the methodology is based upon historical experience and trends, current conditions, and reasonable and supportable forecasts, as well as management’s judgment, factors may arise that result in different estimates. While management’s evaluation of the allowance as of December 31, 2025 considers the allowance to be appropriate, under adversely different conditions or assumptions, the Company would need to increase or decrease the allowance. In addition, various federal regulatory agencies and the NYSDFS, as part of their examination process, review the Company's allowance and may require the Company to recognize additions to the allowance based on their judgments and information available to them at the time of their examinations.
Tables 5 and 6 below show additional information on the ACL as of December 31, 2025 and the prior four years.
The allocation of the Company’s allowance as of December 31, 2025, and each of the previous four years is illustrated in the below table. The table provides an allocation of the allowance for credit losses for inherent loan losses by type. The allocation is
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neither indicative of the specific amounts or the loan categories in which future charge-offs may occur, nor is it an indicator of future loss trends. The allocation of the allowance for credit losses to each category does not restrict the use of the allowance to absorb losses in any category. The table shows a fairly consistent allocation of the loan portfolio and allowance over the period with commercial real estate and residential real estate representing the largest proportion of total loans and the allowance.
Table 5 - Allocation of the Allowance for Credit Losses
As of December 31,
(In thousands)
Total loans outstanding at end of year
Allocation of the ACL by loan type:
Commercial and industrial
Commercial real estate
Residential real estate
Consumer and other
Leases
Total
Allocation of the ACL as a percentage of total allowance:
Commercial and industrial
Commercial real estate
Residential real estate
Consumer and other
Leases
Total
Loan and lease types as a percentage of total loans and leases:
Commercial and industrial
Commercial real estate
Residential real estate
Consumer and other
Leases
Total
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Table 6 - Analysis of the Allowance for Credit Losses
As of December 31,
(In thousands)
Average loans outstanding during year
Balance of allowance at beginning of year
Impact of adopting ASU 2022-02
Loan charge-offs:
Commercial and industrial
Commercial real estate
Residential real estate
Consumer and other
Total loan charge-offs
Recoveries of loans previously charged-off:
Commercial and industrial
Commercial real estate
Residential real estate
Consumer and other
Total loan recoveries
Net loan charge-offs (recoveries)
Additions/(Reductions) to allowance charged to operations
Balance of allowance at end of year
Allowance as a percentage of total loans and leases outstanding
Net charge-offs (recoveries) as a percentage of average loans and leases outstanding during the year
The above table shows the activity in the allowance for credit losses over the past five years as well as the allowance coverage of total loans at the end of each of the past five years. As of December 31, 2025, the ACL was $57.7 million, an increase of $1.2 million or 2.1% from year-end 2024. The increase reflects provision for credit loss expense of $11.6 million, less net loan charge-offs of $10.4 million. The ratio of the allowance for credit losses as a percentage of total loans was 0.89% at year-end 2025 compared to 0.94% at year-end 2024.
The increase in the ACL from year-end 2024 reflects loan growth, mainly in commercial real estate and commercial and industrial loans, partially offset by updated model assumptions based on the annual model review and a decrease in qualitative reserves driven by asset quality improvements. Reserves on loans individually evaluated for impairment decreased approximately $284,000 from year end 2024 primarily related to the sale of two commercial relationships. This portion of the ACL estimate reflects the difference between fair value of collateral less costs to sell and the amortized cost basis of the loans.
Provision for credit losses loans for the year ended December 31, 2025 was $11.6 million compared to $7.4 million for the same period in 2024. The increase in provision expense for 2025 compared to 2024 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, the two commercial real estate relationships had specific reserves of $4.2 million and $1.6 million, respectively. Net charge-offs / (recoveries) as a percentage of average loans was 0.17% for 2025 compared to 0.04% in 2024, and (0.01)% in 2023.
Management believes that, based upon its evaluation as of December 31, 2025, the allowance is appropriate.
Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposures
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans, and commercial letters of credit. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument
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for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancellable, through a charge to credit loss expense for off-balance sheet credit exposures included in other noninterest expense in the Company's consolidated statements of income. As of December 31, 2025, the Company's reserve for off-balance sheet credit exposures was $1.4 million, compared to $1.5 million at December 31, 2024.
Deposits and Other Liabilities
Total deposits were $6.9 billion at December 31, 2025, an increase of $466.0 million or 7.2% compared to year-end 2024. The increase from year-end 2024 primarily consisted of increases in savings and money market balances which were up $183.5 million, and time deposits which were up $230.0 million. The increase in time deposits included $114.4 million of brokered time deposits.
The most significant source of funding for the Company is core deposits. The Company defines core deposits as total deposits less time deposits of $250,000 or more, brokered deposits, municipal money market deposits and reciprocal deposit relationships with municipalities. Core deposits increased by $255.4 million or 4.9% to $5.5 billion at year-end 2025 from $5.3 billion at year-end 2024. Core deposits represented 79.5% of total deposits at December 31, 2025, compared to 81.3% of total deposits at December 31, 2024.
Municipal money market accounts and reciprocal deposit relationships with municipalities totaled $404.0 million at year-end 2025, which decreased 5.3% from year-end 2024. In general, there is a seasonal pattern to municipal deposits starting with a low point during July and August. Account balances tend to increase throughout the fall and into the winter months from tax deposits and receive an additional inflow at the end of March from the electronic deposit of state funds.
The Company uses both retail and wholesale repurchase agreements. Retail repurchase agreements are arrangements with local customers of the Company, in which the Company agrees to sell securities to the customer with an agreement to repurchase those securities at a specified later date. Retail repurchase agreements totaled $45.6 million at December 31, 2025, and $37.0 million at December 31, 2024. Management generally views local repurchase agreements as an alternative to large time deposits. Refer to "Note 9 - Federal Funds Purchased and Securities Sold Under Agreements to Repurchase" in the Notes to Consolidated Financial Statements in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K for further details on the Company’s repurchase agreements.
The Company’s other borrowings totaled $564.4 million at year-end 2025, which were down $225.8 million from prior year end. The $564.4 million in borrowings at December 31, 2025, included $395.0 million in overnight advances from the FHLB and $169.4 million in term advances from the FHLB. Borrowings of $790.2 million at year-end 2024 represented $247.0 million in overnight borrowings and $543.2 million in FHLB term advances. Of the $169.4 million in FHLB term advances at year-end 2025, $45.0 million were due within three months, $20.0 million were due between three months and six months, $29.4 million were due between six months and one year, and $75.0 million were due in over one year. Refer to "Note 10 - Other Borrowings" in Notes to Consolidated Financial Statements in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K for further details on the Company’s term borrowings with the FHLB.
Liquidity Management
The objective of liquidity management is to ensure the availability of adequate funding sources to satisfy anticipated demand for credit, deposit withdrawals, and business investment opportunities. The Company’s large, stable core deposit base and strong capital position are the foundation for the Company’s liquidity position. The Company uses a variety of resources to meet its liquidity needs, which include deposits, cash and cash equivalents, short-term investments, cash flow from lending and investing activities, repurchase agreements, and borrowings. The Company’s Asset/Liability Management Committee monitors asset and liability positions of the Company’s subsidiary bank individually and on a combined basis. The Committee reviews periodic reports on liquidity and interest rate sensitivity positions. Comparisons with industry and peer groups are also monitored. The Company’s strong reputation in the communities it serves, along with its strong financial condition, provides access to numerous sources of liquidity as described below. Management believes these diverse liquidity sources provide sufficient means to meet all demands on the Company’s liquidity that are reasonably likely to occur. Management measures liquidity, including the level of cash, unencumbered securities, and the availability of borrowing sources. The Board has set a policy limit stating that reliable sources of liquidity should remain in excess of 6% of total assets. The ratio was 16.2% at December 31, 2025 and 14.7% at December 31, 2024. In addition, the Company maintains access to the Federal Reserve Bank borrowing facility, which the reliable sources of liquidity ratio by an additional 2.9% at December 31, 2025, and 1.7% at December 31, 2024, to 19.1% and 16.4%, respectively. The Company also maintains board policy limits requiring that on-balance sheet liquidity, which includes liquid assets including cash, overnight funds sold, short-term investments, fair
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value of encumbered investment securities, and the guaranteed portion of government and agency loans, remain above 3% of total assets. As of December 31, 2025, this ratio was 11.1%.
Core deposits, discussed above under "Deposits and Other Liabilities", are a primary and low cost funding source obtained primarily through the Company’s branch network. In addition to core deposits, the Company uses non-core funding sources to support asset growth. These non-core funding sources include time deposits of $250,000 or more, municipal money market deposits, brokered deposits, reciprocal deposits, bank borrowings, securities sold under agreements to repurchase and overnight and term advances from the FHLB. Rates and terms are the primary determinants of the mix of these funding sources. Non-core funding sources of $2.1 billion at December 31, 2025 increased $43.3 million, or 2.1% as compared to December 31, 2024. Non-core funding sources, as a percentage of total liabilities, were 26.9% at December 31, 2025, compared to 27.5% at December 31, 2024.
Non-core funding sources may require securities to be pledged against the underlying liability. Securities carried at $887.5 million at December 31, 2025 were either pledged or sold under agreements to repurchase, compared to $904.2 million at December 31, 2024. Pledged securities or securities sold under agreements to repurchase represented 52.1% of total securities at December 31, 2025, compared to 53.8% of total securities at December 31, 2024.
Cash and cash equivalents totaled $132.8 million as of December 31, 2025 which decreased from $134.4 million at December 31, 2024. Short-term investments, consisting of securities due in one year or less, decreased from $99.2 million at December 31, 2024, to $74.1 million at December 31, 2025.
Cash flow from the loan and investment portfolios provides a significant source of liquidity. These assets may have stated maturities in excess of one year, but have monthly principal reductions. Total mortgage-backed securities, at fair value, were $901.1 million at December 31, 2025 compared with $699.6 million at December 31, 2024. Outstanding principal balances of residential mortgage loans, consumer loans, and leases totaled approximately $1.7 billion at December 31, 2025, up $8.4 million, or 0.5% compared with December 31, 2024. Aggregate amortization from monthly payments on these assets provides significant additional cash flow to the Company.
Liquidity is enhanced by ready access to national and regional wholesale funding sources including Federal funds purchased, repurchase agreements, brokered certificates of deposit, and FHLB advances. Through its subsidiary bank, the Company has borrowing relationships with the FHLB and correspondent banks, which provide secured and unsecured borrowing capacity. As members of the FHLB, the Company’s subsidiary banks can use certain unencumbered mortgage-related assets and securities to secure additional borrowings from the FHLB. At December 31, 2025, the established borrowing capacity with the FHLB was $1.3 billion, or 15.2% of total assets, with available unencumbered mortgage-related assets of $525.5 million. In addition to the $564.4 million of FHLB borrowings outstanding at December 31, 2025, the Company had utilized $225 million of availability at December 31, 2025, to collateralize municipal deposits through several standby letters of credit with the FHLB. Additional assets may also qualify as collateral for FHLB advances upon approval of the FHLB.
Through various programs at the Federal Reserve Bank, the Company has the ability to use certain unencumbered loans and securities to secure borrowings from the Federal Reserve Bank's Discount Window. At December 31, 2025 the available borrowing capacity with the Federal Reserve Bank was $252.8 million, secured by commercial and mortgage-related loans. In addition to the available borrowing lines at the FHLB and Federal Reserve Bank, the Company maintains $799.1 million of unencumbered securities which could be pledged to further enhance secured borrowing capacity.
The Company has not identified any trends or circumstances that are reasonably likely to result in material increases or decreases in liquidity in the near term.
Table 7 - Loan Maturity
Remaining maturity of loans
December 31, 2025
(In thousands)
Total
Less than 1 year
After 1 year to 5 years
After 5 years to 15 years
After 15 years
Commercial and industrial
Commercial real estate
Residential real estate
Total
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Of the loan amounts shown above in Table 7 - Loan Maturity, maturing over 1 year, $2.3 billion have fixed rates and $3.5 billion have adjustable rates.
Off-Balance Sheet Arrangements
In the normal course of business, the Company is party to certain financial instruments, which in accordance with accounting principles generally accepted in the United States, are not included in its Consolidated Statements of Condition. These transactions include commitments under standby letters of credit, unused portions of lines of credit, and commitments to fund new loans and are undertaken to accommodate the financing needs of the Company’s customers. Loan commitments are agreements by the Company to lend monies at a future date. These loan and letter of credit commitments are subject to the same credit policies and reviews as the Company’s loans. Because most of these loan commitments expire within one year from the date of issue, the total amount of these loan commitments as of December 31, 2025, are not necessarily indicative of future cash requirements. Further information on these commitments and contingent liabilities is provided in "Note 17 - Commitments and Contingent Liabilities" in the Notes to Consolidated Financial Statements in Part II, "Item 8. Financial Statements and Supplementary Data" of this Report on Form 10-K.
Contractual Obligations
The Company leases land, buildings, and equipment under operating lease arrangements extending to the year 2090. Most leases include options to renew for periods ranging from 5 to 20 years. In addition, the Company has a software contract for its core banking application through June 30, 2030 along with contracts for more specialized software programs through 2029. Further information on the Company’s lease arrangements is provided in "Note 7 - Premises and Equipment" 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’s contractual obligations as of December 31, 2025, are shown in Table 8-Contractual Obligations and Commitments below.
Table 8 - Contractual Obligations and Commitments
Contractual cash obligations
At December 31, 2025
Payments due within
(In thousands)
Total
1 year
1-3 years
3-5 years
After 5 years
Long-term debt
Operating leases 1
Software contracts
Total contractual cash obligations
1 Operating leases include renewals the Company considers reasonably certain to exercise.
Non-GAAP Disclosure
The following table summarizes the Company’s results of operations on a GAAP basis and on an operating (non-GAAP) basis for the periods indicated. The non-GAAP financial measures adjust GAAP measures to exclude the effects of non-operating items, such as the effects of the sales of available-for-sale debt securities, and significant nonrecurring income or expense on earnings, equity, and capital. The Company believes the non-GAAP measures provide meaningful comparisons of our underlying operational performance and facilitate management's and investors' assessments of business and performance trends in comparison to others in the financial services industry. These non-GAAP financial measures should not be considered in isolation or as a measure of the Company's profitability or liquidity; they are in addition to, and are not a substitute for, financial measures under GAAP. The non-GAAP financial measures presented herein may be different from non-GAAP financial measures used by other companies, and may not be comparable to similarly titled measures reported by other companies. In the future, the Company may utilize other measures to illustrate performance. Non-GAAP financial measures have limitations since they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP.
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Reconciliation of Net Income Available to Common Shareholders/Diluted Earnings Per Share (GAAP) to Adjusted Net Operating Income Available to Common Shareholders/Adjusted Diluted Earnings Per Share (Non-GAAP); Return on Average Assets and Return on Average Equity (GAAP) to Adjusted Return on Average Assets, Adjusted Return on Average Equity and Adjusted Operating Return on Average Shareholders' Tangible Common Equity (Non-GAAP)
For the year ended December 31,
(In thousands, except per share data)
Net income available to common shareholders
Less: income attributable to unvested stock-based compensation awards
Net earnings allocated to common shareholders (GAAP)
Diluted earnings per share (GAAP)
Adjustments for non-operating income and expense:
(Gain) loss on sale of investment securities
(Gain) from sale of Tompkins Insurance Agencies, Inc.
Total adjustments
Tax expense
Total adjustments, net of tax
Adjusted net income or operating income (Non-GAAP)
Adjusted net earnings allocated to common shareholders (Non-GAAP)
Weighted average shares outstanding (basic)
Weighted average shares outstanding (diluted)
Adjusted/operating basic earnings per share (Non-GAAP)
Adjusted/operating diluted earnings per share (Non-GAAP)
Net income available to common shareholders
Adjusted net income or operating income (Non-GAAP)
Average total assets
Return on average assets (GAAP)
Adjusted return on average assets (Non-GAAP)
Net income available to common shareholders
Adjusted net income or operating income (Non-GAAP)
Average total equity
Return on average equity (GAAP)
Adjusted return on average equity (Non-GAAP)
Adjusted net income or operating income (Non-GAAP)
Average Tompkins Financial Corporation shareholders' equity
Amortization of intangibles
Tax expense
Amortization of intangibles, net of tax
Adjusted net income or operating income (Non-GAAP)
Average Tompkins Financial Corporation shareholders' equity
Average goodwill and intangibles
Average Tompkins Financial Corporation shareholders' tangible common equity (Non-GAAP)
Adjusted operating return on average shareholders' tangible common equity (Non-GAAP)
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