Tompkins Financial Corp. :TMP-US: Earnings Analysis: Q4, 2016 By the Numbers : January 30, 2017

Tompkins Financial Corp. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of Tompkins Financial Corp. – Signature Bank, Community Bank System, Inc., NBT Bancorp Inc., Chemung Financial Corporation and Bridge Bancorp, Inc. (SBNY-US, CBU-US, NBTB-US, CHMG-US and BDGE-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 62.69 million, Net Earnings of USD 15.12 million.
  • Net interest income margins widened from 70.89% to 73.97% compared to the same period last year.
  • Net loan assets changed 12.89% compared to same period last year and 4.11% from previous period, total deposits changed 5.23% compared to same period last year and -1.39% from previous period.
  • Earnings growth from operating margin improvements as well as from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 62.69 63.22 61.96 61.53 61.28
Revenue Growth (%YOY) 2.31 5.73 2.82 4.47 2.53
Earnings (mil) 15.12 14.65 14.35 13.95 13.63
Earnings Growth (%YOY) 10.93 2.38 -16.37 11.63 8.69
Net Margin (%) 24.12 23.17 23.16 22.67 22.24
EPS 0.99 0.97 0.96 0.94 0.92
Return on Equity (%) 10.89 10.5 10.49 10.57 10.54
Return on Assets (%) 0.98 0.97 0.98 0.97 0.97

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Market Share Versus Profits

Revenues History
Earnings History

TMP-US‘s change in revenue this period compared to the same period last year of 2.31% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that TMP-US is holding onto its market share. Also, for comparison purposes, revenues changed by -0.84% and earnings by 3.20% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by the following factors: (1) Year-on-year improvements in net interest income margins from 70.89% to 73.97% and (2) improvement in loan loss provisions. As a result, net interest income after provisions margins improved from 68.38% to 71.25% compared to the same period last year. Loan loss provisions as a percentage of net interest income were 3.68% this period and 3.53% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s improvement in net interest income margins was influenced by the relative increase in the level of net loan assets. In addition, total deposits as a percentage of equity went from 8.51% to 8.42%. On an absolute basis, net loan assets changed 12.89% compared to the same period last year and 4.11% from the previous period, while total deposits changed 5.23% compared to the same period last year and -1.39% from the previous period.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from 33.36% to 34.45% and (2) one-time items. The company’s pretax margins are now 34.45%, compared to 33.36% for the same period last year.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

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Company Profile

Tompkins Financial Corp. is a financial holding company, which provides financial services. It operates through the following segments: Banking, Insurance, and Wealth Management. The Insurance segment is comprised of property and casualty insurance services and employee benefit consulting operated under the Tompkins Insurance Agencies, Inc. subsidiary. The Wealth management activities include the rest of the Company’s trust, financial planning, and wealth management services conducted under the trust department of the Trust Company. The Banking segment is considered as all its other activities. The company was founded in 1995 and is headquartered in Ithaca, NY.

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