United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to ______

Commission File Number 1-12709

Tompkins Financial Corporation

(Exact name of registrant as specified in its charter)


New York						16-1482357
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

P.O. Box 460, Ithaca, NY

(Address of principal executive offices)

14851

(Zip Code)

Registrant’s telephone number, including area code: (888) 503-5753

Former name, former address, and former fiscal year, if changed since last report: NA

Indicate the number of shares of the Registrant’s Common Stock outstanding as of the latest practicable date:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 par value	TMP	NYSE American, LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~"large accelerated ~~filer”~~filer", ~~“accelerated filer”~~"accelerated filer", ~~“smaller~~"smaller reporting ~~company”~~company", and ~~“emerging~~"emerging growth ~~company”~~company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒.

Indicate the number of shares of the Registrant's Common Stock outstanding as of the latest practicable date: ~~14,905,037~~14,523,821 shares as of April ~~22, 2021.~~26, 2022.

TOMPKINS FINANCIAL CORPORATION

FORM 10-Q

INDEX


PART I -FINANCIAL INFORMATION
			PAGE
	Item 1 –	Financial Statements Consolidated Statements of Condition as of March 31, ~~202~~1 2022 (Unaudited) and December 31, 20 20 2021 (Audited)	31

		Consolidated Statements of Income for the three months ended March 31, ~~202~~1 2022 and 20 20 2021 (Unaudited)	2

		Consolidated Statements of Comprehensive Income for the three months ended March 31, 202 12 and 20 202021 (Unaudited)	3

		Consolidated Statements of Cash Flows for the three months ended March 31, 202 12 and 20202 201 (Unaudited)	4

		Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 202 12 and 20202 201 (Unaudited)	6

		Notes to Unaudited Consolidated Financial Statements	7

	Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3537

	Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	5354

	Item 4 -	Controls and Procedures	5556

PART II - OTHER INFORMATION

	Item 1 –	Legal Proceedings	5556

	Item 1A – Risk Factors		5556

	Item 2 –	Unregistered Sales of Equity Securities and Use of Proceeds	5556

	Item 3 -	Defaults Upon Senior Securities	5657

	Item 4 -	Mine Safety Disclosures	5657

	Item 5 -	Other Information	5657

	Item 6 -	Exhibits	5657

SIGNATURES			5759

Item 1. Financial Statements

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CONDITION

(In thousands, except share and per share data) As of As of
ASSETS 03/31/2021 12/31/2020
(unaudited) (audited)
Cash and noninterest bearing balances due from banks $ 20,482 $ 21,245
Interest bearing balances due from banks 497,943 367,217
Cash and Cash Equivalents 518,425 388,462
Available-for-sale debt securities, at fair value (amortized cost of $1,941,284 at March 31, 2021 and $1,599,894 at December 31, 2020) 1,934,815 1,627,193
Equity securities, at fair value (amortized cost $916 at March 31, 2021 and $929 at December 31, 2020) 916 929
Total loans and leases, net of unearned income and deferred costs and fees 5,292,793 5,260,327
Less: Allowance for credit losses 49,339 51,669
Net Loans and Leases 5,243,454 5,208,658
Federal Home Loan Bank and other stock 16,382 16,382
Bank premises and equipment, net 87,518 88,709
Corporate owned life insurance 85,157 84,736
Goodwill 92,447 92,447
Other intangible assets, net 4,601 4,905
Accrued interest and other assets 111,627 109,750
Total Assets $ 8,095,342 $ 7,622,171
LIABILITIES
Deposits:
Interest bearing:
Checking, savings and money market 4,135,067 3,761,933
Time 749,792 746,234
Noninterest bearing 2,061,682 1,929,585
Total Deposits 6,946,541 6,437,752
Federal funds purchased and securities sold under agreements to repurchase 47,496 65,845
Other borrowings 265,000 265,000
Trust preferred debentures 13,260 13,220
Other liabilities 113,109 122,665
Total Liabilities $ 7,385,406 $ 6,904,482
EQUITY
Tompkins Financial Corporation shareholders' equity:
Common Stock - par value $0.10 per share: Authorized 25,000,000 shares; Issued: 14,942,695 at March 31, 2021; and 14,964,389 at December 31, 2020 1,494 1,496
Additional paid-in capital 333,247 333,976
Retained earnings 435,990 418,413
Accumulated other comprehensive loss (56,950) (32,074)
Treasury stock, at cost – 118,454 shares at March 31, 2021, and 124,849 shares at December 31, 2020 (5,288) (5,534)
Total Tompkins Financial Corporation Shareholders’ Equity 708,493 716,277
Noncontrolling interests 1,443 1,412
Total Equity $ 709,936 $ 717,689
Total Liabilities and Equity $ 8,095,342 $ 7,622,171


(In thousands, except share and per share data)	As of		As of
ASSETS	03/31/2022		12/31/2021
	(unaudited)		(audited)
Cash and noninterest bearing balances due from banks	$	19,750	$	23,078
Interest bearing balances due from banks	155,325		40,029
Cash and Cash Equivalents	175,075		63,107

Available-for-sale debt securities, at fair value (amortized cost of $2,106,906 at March 31, 2022 and $2,063,790 at December 31, 2021)	1,981,148		2,044,513
Held-to-maturity securities, at amortized cost (fair value of $280,917 at March 31, 2022 and $282,288 at December 31, 2021)	303,524		284,009
Equity securities, at fair value (amortized cost $855 at March 31, 2022 and $902 at December 31, 2021)	855		902
Total loans and leases, net of unearned income and deferred costs and fees	5,063,451		5,075,467
Less: Allowance for credit losses	42,126		42,843
Net Loans and Leases	5,021,325		5,032,624

Federal Home Loan Bank and other stock	7,115		10,996
Bank premises and equipment, net	83,502		85,416
Corporate owned life insurance	86,922		86,495
Goodwill	92,447		92,447
Other intangible assets, net	3,382		3,643
Accrued interest and other assets	135,816		115,830
Total Assets	$	7,891,111	$	7,819,982
LIABILITIES
Deposits:
Interest bearing:
Checking, savings and money market	4,263,413		4,016,025
Time	615,936		639,674
Noninterest bearing	2,137,390		2,135,736
Total Deposits	7,016,739		6,791,435

Federal funds purchased and securities sold under agreements to repurchase	57,115		66,787
Other borrowings	60,000		124,000

Other liabilities	99,765		108,819
Total Liabilities	$	7,233,619	$	7,091,041
EQUITY
Tompkins Financial Corporation shareholders' equity:
Common Stock - par value $0.10 per share: Authorized 25,000,000 shares; Issued: 14,597,360 at March 31, 2022; and 14,696,911 at December 31, 2021	1,460		1,470
Additional paid-in capital	305,880		312,538
Retained earnings	490,200		475,262
Accumulated other comprehensive loss	(135,849)		(55,950)
Treasury stock, at cost – 120,342 shares at March 31, 2022, and 124,709 shares at December 31, 2021	(5,642)		(5,791)
Total Tompkins Financial Corporation Shareholders’ Equity	656,049		727,529
Noncontrolling interests	1,443		1,412
Total Equity	$	657,492	$	728,941
Total Liabilities and Equity	$	7,891,111	$	7,819,982

See notes to unaudited consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME


		Three Months Ended				Three Months Ended
(In thousands, except per share data) (Unaudited)	(In thousands, except per share data) (Unaudited)	03/31/2021		03/31/2020			(In thousands, except per share data) (Unaudited)	03/31/2022		03/31/2021
INTEREST AND DIVIDEND INCOME	INTEREST AND DIVIDEND INCOME						INTEREST AND DIVIDEND INCOME
Loans	Loans	$	54,206	$	55,614		Loans	$	51,131	$	54,206
Due from banks	Due from banks	85		6			Due from banks	41		85
Available-for-sale debt securities	Available-for-sale debt securities	5,250		7,144			Available-for-sale debt securities	6,770		5,250

Held-to-maturity securities							Held-to-maturity securities	1,129		0
Federal Home Loan Bank and other stock	Federal Home Loan Bank and other stock	213		435			Federal Home Loan Bank and other stock	105		213
Total Interest and Dividend Income	Total Interest and Dividend Income	59,754		63,199			Total Interest and Dividend Income	59,176		59,754
INTEREST EXPENSE	INTEREST EXPENSE						INTEREST EXPENSE
Time certificates of deposits of $250,000 or more	Time certificates of deposits of $250,000 or more	639		843			Time certificates of deposits of $250,000 or more	426		639
Other deposits	Other deposits	2,511		6,356			Other deposits	1,620		2,511

Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase	16		36			Federal funds purchased and securities sold under agreements to repurchase	16		16
Trust preferred debentures	Trust preferred debentures	175		289			Trust preferred debentures	0		175
Other borrowings	Other borrowings	1,376		2,706			Other borrowings	500		1,376
Total Interest Expense	Total Interest Expense	4,717		10,230			Total Interest Expense	2,562		4,717
Net Interest Income	Net Interest Income	55,037		52,969			Net Interest Income	56,614		55,037
Less: (Credit) provision for credit loss expense		(2,510)		16,294
Net Interest Income After Provision for Credit Loss Expense		57,547		36,675
Less: Credit for credit loss expense							Less: Credit for credit loss expense	(520)		(1,830)
Net Interest Income After Credit for Credit Loss Expense							Net Interest Income After Credit for Credit Loss Expense	57,134		56,867
NONINTEREST INCOME	NONINTEREST INCOME						NONINTEREST INCOME
Insurance commissions and fees	Insurance commissions and fees	9,166		8,045			Insurance commissions and fees	9,317		9,166
Investment services income	Investment services income	4,673		4,202			Investment services income	4,917		4,673
Service charges on deposit accounts	Service charges on deposit accounts	1,470		1,983			Service charges on deposit accounts	1,779		1,470
Card services income	Card services income	2,383		2,183			Card services income	2,543		2,383
Other income	Other income	1,974		2,104			Other income	1,476		1,974
Net gain on securities transactions		317		443
Net (loss) gain on securities transactions							Net (loss) gain on securities transactions	(47)		317
Total Noninterest Income	Total Noninterest Income	19,983		18,960			Total Noninterest Income	19,985		19,983
NONINTEREST EXPENSE	NONINTEREST EXPENSE						NONINTEREST EXPENSE
Salaries and wages	Salaries and wages	22,660		22,494			Salaries and wages	23,272		22,660
Other employee benefits	Other employee benefits	5,484		5,684			Other employee benefits	5,797		5,484
Net occupancy expense of premises	Net occupancy expense of premises	3,462		3,328			Net occupancy expense of premises	3,541		3,462
Furniture and fixture expense	Furniture and fixture expense	1,950		1,985			Furniture and fixture expense	1,991		1,950

Amortization of intangible assets	Amortization of intangible assets	330		374			Amortization of intangible assets	218		330
Other operating expense	Other operating expense	11,305		11,875			Other operating expense	12,020		10,625
Total Noninterest Expenses	Total Noninterest Expenses	45,191		45,740			Total Noninterest Expenses	46,839		44,511
Income Before Income Tax Expense	Income Before Income Tax Expense	32,339		9,895			Income Before Income Tax Expense	30,280		32,339
Income Tax Expense	Income Tax Expense	6,680		1,909			Income Tax Expense	6,976		6,680
Net Income Attributable to Noncontrolling Interests and Tompkins Financial Corporation	Net Income Attributable to Noncontrolling Interests and Tompkins Financial Corporation	25,659		7,986			Net Income Attributable to Noncontrolling Interests and Tompkins Financial Corporation	23,304		25,659
Less: Net Income Attributable to Noncontrolling Interests	Less: Net Income Attributable to Noncontrolling Interests	33		37			Less: Net Income Attributable to Noncontrolling Interests	31		33
Net Income Attributable to Tompkins Financial Corporation	Net Income Attributable to Tompkins Financial Corporation	$	25,626	$	7,949		Net Income Attributable to Tompkins Financial Corporation	$	23,273	$	25,626
Basic Earnings Per Share	Basic Earnings Per Share	$	1.73	$	0.53		Basic Earnings Per Share	$	1.61	$	1.73
Diluted Earnings Per Share	Diluted Earnings Per Share	$	1.72	$	0.53		Diluted Earnings Per Share	$	1.60	$	1.72

See notes to unaudited consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


		Three Months Ended					Three Months Ended
(In thousands) (Unaudited)	(In thousands) (Unaudited)	03/31/2021		03/31/2020		(In thousands) (Unaudited)	03/31/2022		03/31/2021
Net income attributable to noncontrolling interests and Tompkins Financial Corporation	Net income attributable to noncontrolling interests and Tompkins Financial Corporation	$	25,659	$	7,986	Net income attributable to noncontrolling interests and Tompkins Financial Corporation	$	23,304	$	25,659
Other comprehensive (loss) income, net of tax:	Other comprehensive (loss) income, net of tax:					Other comprehensive (loss) income, net of tax:

Available-for-sale debt securities:	Available-for-sale debt securities:					Available-for-sale debt securities:
Change in net unrealized gain/(loss) during the period	Change in net unrealized gain/(loss) during the period	(25,246)		22,123		Change in net unrealized gain/(loss) during the period	(80,405)		(25,246)
Reclassification adjustment for net realized gain on sale of available-for-sale debt securities included in net income	Reclassification adjustment for net realized gain on sale of available-for-sale debt securities included in net income	(249)		(324)		Reclassification adjustment for net realized gain on sale of available-for-sale debt securities included in net income	0		(249)

Employee benefit plans:	Employee benefit plans:					Employee benefit plans:
Amortization of net retirement plan actuarial loss	Amortization of net retirement plan actuarial loss	577		454		Amortization of net retirement plan actuarial loss	464		577
Amortization of net retirement plan prior service cost	Amortization of net retirement plan prior service cost	42		40		Amortization of net retirement plan prior service cost	42		42

Other comprehensive (loss) income		(24,876)		22,293
Other comprehensive loss						Other comprehensive loss	(79,899)		(24,876)

Subtotal comprehensive income attributable to noncontrolling interests and Tompkins Financial Corporation		783		30,279
Subtotal comprehensive (loss) income attributable to noncontrolling interests and Tompkins Financial Corporation						Subtotal comprehensive (loss) income attributable to noncontrolling interests and Tompkins Financial Corporation	(56,595)		783
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	(33)		(37)		Less: Net income attributable to noncontrolling interests	(31)		(33)
Total comprehensive income attributable to Tompkins Financial Corporation		$	750	$	30,242
Total comprehensive (loss) income attributable to Tompkins Financial Corporation						Total comprehensive (loss) income attributable to Tompkins Financial Corporation	$	(56,626)	$	750

See notes to unaudited consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


		Three Months Ended					Three Months Ended
(In thousands) (Unaudited)	(In thousands) (Unaudited)	03/31/2021		03/31/2020		(In thousands) (Unaudited)	03/31/2022		03/31/2021
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income attributable to Tompkins Financial Corporation	Net income attributable to Tompkins Financial Corporation	$	25,626	$	7,949	Net income attributable to Tompkins Financial Corporation	$	23,273	$	25,626
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
(Reversal of provision) provision for credit loss expense		(2,510)		16,294
Credit for credit loss expense						Credit for credit loss expense	(520)		(1,830)
Depreciation and amortization of premises, equipment, and software	Depreciation and amortization of premises, equipment, and software	2,506		2,554		Depreciation and amortization of premises, equipment, and software	2,650		2,506
Amortization of intangible assets	Amortization of intangible assets	330		374		Amortization of intangible assets	218		330
Earnings from corporate owned life insurance	Earnings from corporate owned life insurance	(541)		(324)		Earnings from corporate owned life insurance	(423)		(541)
Net amortization on securities	Net amortization on securities	3,481		1,937		Net amortization on securities	1,819		3,481
Amortization/accretion related to purchase accounting	Amortization/accretion related to purchase accounting	(299)		(372)		Amortization/accretion related to purchase accounting	(191)		(299)

Net gain on securities transactions		(317)		(443)
Net loss (gain) on securities transactions						Net loss (gain) on securities transactions	47		(317)
Net gain on sale of loans originated for sale	Net gain on sale of loans originated for sale	(429)		(176)		Net gain on sale of loans originated for sale	(4)		(429)
Proceeds from sale of loans originated for sale	Proceeds from sale of loans originated for sale	10,897		4,260		Proceeds from sale of loans originated for sale	139		10,897
Loans originated for sale	Loans originated for sale	(6,425)		(4,514)		Loans originated for sale	(685)		(6,425)
Net gain on sale of bank premises and equipment	Net gain on sale of bank premises and equipment	0		(3)		Net gain on sale of bank premises and equipment	(17)		0

Net excess tax benefit from stock based compensation	Net excess tax benefit from stock based compensation	85		118		Net excess tax benefit from stock based compensation	21		85
Stock-based compensation expense	Stock-based compensation expense	1,175		1,180		Stock-based compensation expense	945		1,175
Increase in accrued interest receivable		559		1,286
Decrease in accrued interest receivable						Decrease in accrued interest receivable	1,047		559
Decrease in accrued interest payable	Decrease in accrued interest payable	(121)		(242)		Decrease in accrued interest payable	(106)		(121)

Other, net	Other, net	(3,761)		(5,735)		Other, net	(4,295)		(4,441)
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	30,256		24,143		Net Cash Provided by Operating Activities	23,918		30,256
INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Proceeds from maturities, calls and principal paydowns of available-for-sale debt securities	Proceeds from maturities, calls and principal paydowns of available-for-sale debt securities	36,723		156,834		Proceeds from maturities, calls and principal paydowns of available-for-sale debt securities	79,753		36,723
Proceeds from sales of available-for-sale debt securities	Proceeds from sales of available-for-sale debt securities	132,203		42,584		Proceeds from sales of available-for-sale debt securities	0		132,203

Purchases of available-for-sale debt securities	Purchases of available-for-sale debt securities	(513,468)		(226,103)		Purchases of available-for-sale debt securities	(124,668)		(513,468)

Net increase in loans		(36,139)		(20,879)
Purchases of held-to-maturity securities						Purchases of held-to-maturity securities	(19,534)		0
Net decrease (increase) in loans						Net decrease (increase) in loans	12,662		(36,139)
Proceeds from sale/redemptions of Federal Home Loan Bank stock	Proceeds from sale/redemptions of Federal Home Loan Bank stock	0		34,088		Proceeds from sale/redemptions of Federal Home Loan Bank stock	12,751		0
Purchases of Federal Home Loan Bank and other stock	Purchases of Federal Home Loan Bank and other stock	0		(24,605)		Purchases of Federal Home Loan Bank and other stock	(8,870)		0
Proceeds from sale of bank premises and equipment	Proceeds from sale of bank premises and equipment	31		4		Proceeds from sale of bank premises and equipment	42		31
Purchases of bank premises, equipment and software	Purchases of bank premises, equipment and software	(811)		(909)		Purchases of bank premises, equipment and software	(27)		(811)
Redemption of corporate owned life insurance	Redemption of corporate owned life insurance	168		446		Redemption of corporate owned life insurance	0		168

Other, net	Other, net	124		102		Other, net	0		124
Net Cash (Used in) Provided by Investing Activities		(381,169)		(38,438)
Net Cash Used in Investing Activities						Net Cash Used in Investing Activities	(47,891)		(381,169)
FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Net increase in demand, money market, and savings deposits	Net increase in demand, money market, and savings deposits	505,231		162,523		Net increase in demand, money market, and savings deposits	249,042		505,231
Net increase in time deposits		3,703		34,141
Net (decrease) increase in Federal funds purchased and securities sold under agreements to repurchase		(18,349)		8,647
Increase in other borrowings		0		74,583
Net (decrease) increase in time deposits						Net (decrease) increase in time deposits	(23,630)		3,703
Net decrease in Federal funds purchased and securities sold under agreements to repurchase						Net decrease in Federal funds purchased and securities sold under agreements to repurchase	(9,672)		(18,349)

Repayment of other borrowings	Repayment of other borrowings	0		(274,700)		Repayment of other borrowings	(64,000)		0

Cash dividends	Cash dividends	(8,049)		(7,789)		Cash dividends	(8,335)		(8,049)

Repurchase of common stock	Repurchase of common stock	(1,508)		(5,620)		Repurchase of common stock	(10,370)		(1,508)

Shares issued for employee stock ownership plan						Shares issued for employee stock ownership plan	2,951		0
Net shares issued related to restricted stock awards						Net shares issued related to restricted stock awards	(3)		0
Net proceeds from exercise of stock options	Net proceeds from exercise of stock options	(152)		(209)		Net proceeds from exercise of stock options	(42)		(152)
Net Cash Provided by (Used in) Financing Activities		480,876		(8,424)
Net Increase (Decrease) in Cash and Cash Equivalents		129,963		(22,719)
Net Cash Provided by Financing Activities						Net Cash Provided by Financing Activities	135,941		480,876
Net Increase in Cash and Cash Equivalents						Net Increase in Cash and Cash Equivalents	111,968		129,963
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	388,462		137,982		Cash and cash equivalents at beginning of period	63,107		388,462
Total Cash and Cash Equivalents at End of Period	Total Cash and Cash Equivalents at End of Period	$	518,425	$	115,263	Total Cash and Cash Equivalents at End of Period	$	175,075	$	518,425

See notes to unaudited consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


		Three Months Ended					Three Months Ended
(In thousands) (Unaudited)	(In thousands) (Unaudited)	03/31/2021		03/31/2020		(In thousands) (Unaudited)	03/31/2022		03/31/2021
Supplemental Information:	Supplemental Information:					Supplemental Information:
Cash paid during the year for - Interest	Cash paid during the year for - Interest	$	4,984	$	10,694	Cash paid during the year for - Interest	$	2,775	$	4,984
Cash paid during the year for - Taxes	Cash paid during the year for - Taxes	933		1,214		Cash paid during the year for - Taxes	1,396		933
Transfer of loans to other real estate owned	Transfer of loans to other real estate owned	0		104		Transfer of loans to other real estate owned	49		0
Initial recognition of operating lease right-of-use assets	Initial recognition of operating lease right-of-use assets	0		0		Initial recognition of operating lease right-of-use assets	0		0
Initial recognition of operating lease liabilities	Initial recognition of operating lease liabilities	0		0		Initial recognition of operating lease liabilities	0		0
Right-of-use assets obtained in exchange for new lease liabilities	Right-of-use assets obtained in exchange for new lease liabilities	21		17		Right-of-use assets obtained in exchange for new lease liabilities	552		21

See notes to unaudited consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


(In thousands except share and per share data)(Unaudited)	(In thousands except share and per share data)(Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock		Non- controlling Interests		Total		(In thousands except share and per share data)(Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock		Non- controlling Interests		Total
Balances at January 1, 2020		$	1,501	$	338,507	$	370,477	$	(43,564)	$	(5,279)	$	1,412	$	663,054
Impact of adoption of ASU 2016-13						1,707								1,707
Net income attributable to noncontrolling interests and Tompkins Financial Corporation						7,949						37		7,986
Other comprehensive income								22,293						22,293
Total Comprehensive Income														30,279
Cash dividends ($0.52 per share)						(7,789)								(7,789)
Net exercise of stock options (3,011 shares)		0		(209)										(209)
Common stock repurchased and returned to unissued status (71,288 shares)		(7)		(5,613)										(5,620)

Stock-based compensation expense				1,180										1,180

Directors deferred compensation plan (6,016 shares)				(203)						203				0
Restricted stock activity (2,365 shares)		0		0										0

Partial repurchase of noncontrolling interest												(5)		(5)
Balances at March 31, 2020		$	1,494	$	333,662	$	372,344	$	(21,271)	$	(5,076)	$	1,444	$	682,597

Balances at January 1, 2021	Balances at January 1, 2021	$	1,496	$	333,976	$	418,413	$	(32,074)	$	(5,534)	$	1,412	$	717,689	Balances at January 1, 2021	$	1,496	$	333,976	$	418,413	$	(32,074)	$	(5,534)	$	1,412	$	717,689
Net income attributable to noncontrolling interests and Tompkins Financial Corporation	Net income attributable to noncontrolling interests and Tompkins Financial Corporation					25,626						33		25,659		Net income attributable to noncontrolling interests and Tompkins Financial Corporation					25,626						33		25,659
Other comprehensive loss	Other comprehensive loss							(24,876)						(24,876)		Other comprehensive loss							(24,876)						(24,876)
Total Comprehensive Income	Total Comprehensive Income													783		Total Comprehensive Income													783
Cash dividends ($0.54 per share)	Cash dividends ($0.54 per share)					(8,049)								(8,049)		Cash dividends ($0.54 per share)					(8,049)								(8,049)
Net exercise of stock options (2,733 shares)	Net exercise of stock options (2,733 shares)			(152)										(152)		Net exercise of stock options (2,733 shares)			(152)										(152)
Common stock repurchased and returned to unissued status (21,531 shares)	Common stock repurchased and returned to unissued status (21,531 shares)	(2)		(1,506)										(1,508)		Common stock repurchased and returned to unissued status (21,531 shares)	(2)		(1,506)										(1,508)

Stock-based compensation expense	Stock-based compensation expense			1,175										1,175		Stock-based compensation expense			1,175										1,175

Directors deferred compensation plan (6,395 shares)	Directors deferred compensation plan (6,395 shares)			(246)						246				0		Directors deferred compensation plan (6,395 shares)			(246)						246				0
Restricted stock activity (2,896 shares)	Restricted stock activity (2,896 shares)			0										0		Restricted stock activity (2,896 shares)			0										0

Partial repurchase of noncontrolling interest	Partial repurchase of noncontrolling interest											(2)		(2)		Partial repurchase of noncontrolling interest											(2)		(2)
Balances at March 31, 2021	Balances at March 31, 2021	$	1,494	$	333,247	$	435,990	$	(56,950)	$	(5,288)	$	1,443	$	709,936	Balances at March 31, 2021	$	1,494	$	333,247	$	435,990	$	(56,950)	$	(5,288)	$	1,443	$	709,936

Balances at January 1, 2022																Balances at January 1, 2022	$	1,470	$	312,538	$	475,262	$	(55,950)	$	(5,791)	$	1,412	$	728,941
Net income attributable to noncontrolling interests and Tompkins Financial Corporation																Net income attributable to noncontrolling interests and Tompkins Financial Corporation					23,273						31		23,304
Other comprehensive loss																Other comprehensive loss							(79,899)						(79,899)
Total Comprehensive Loss																Total Comprehensive Loss													(56,595)
Cash dividends ($0.57 per share)																Cash dividends ($0.57 per share)					(8,335)								(8,335)
Net exercise of stock options (630 shares)																Net exercise of stock options (630 shares)	0		(42)										(42)
Common stock repurchased and returned to unissued status (130,168 shares)																Common stock repurchased and returned to unissued status (130,168 shares)	(13)		(10,357)										(10,370)

Stock-based compensation expense																Stock-based compensation expense			945										945
Shares issued for employee stock ownership plan (37,454 shares)																Shares issued for employee stock ownership plan (37,454 shares)	4		2,947										2,951
Directors deferred compensation plan (4,367 shares)																Directors deferred compensation plan (4,367 shares)			(149)						149				0
Restricted stock activity (7,467 shares)																Restricted stock activity (7,467 shares)	(1)		(2)										(3)

Balances at March 31, 2022																Balances at March 31, 2022	$	1,460	$	305,880	$	490,200	$	(135,849)	$	(5,642)	$	1,443	$	657,492

See notes to unaudited consolidated financial statements.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Business

Tompkins Financial Corporation ~~(“Tompkins”~~("Tompkins" or the ~~“Company”~~"Company") is headquartered in Ithaca, New York and is registered as a Financial Holding Company with the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended. The Company is a locally oriented, community-based financial services organization that offers a full array of products and services, including commercial and consumer banking, leasing, trust and investment management, financial planning and wealth management, and insurance services. ~~At March 31, 2021,~~Effective January 1, 2022, the ~~Company had~~Company's 4 wholly-owned banking subsidiaries: Tompkins Trust Company (the “Trust Company”), The Bank of Castile (DBA Tompkins Bank of Castile), Mahopac Bank (DBA Tompkins Mahopac Bank), and VIST Bank (DBA Tompkins VIST Bank). The Company’s banks have announced plans for a rebranding effort, pursuant to which the Company’s four wholly-owned banking subsidiaries ~~will be~~were combined into one bank, with ~~The~~the Bank of of Castile, Mahopac Bank, and VIST Bank merging with and into Tompkins Trust ~~Company. The combined bank will conduct business under the “Tompkins” brand name, with a legal name of “Tompkins Community Bank.” The~~ Company ~~expects to file applications with applicable regulators during the second quarter of 2021,~~(the "Trust Company") with the ~~re-branding and combination anticipated~~Trust Company as the surviving institution. Immediately following the merger, the Trust Company changed its name to ~~take effect later in 2021, subject to regulatory approval.~~Tompkins Community Bank. At March 31, 2022, the Company had 1 wholly-owned banking subsidiary, Tompkins Community Bank. The Company also has a wholly-owned insurance agency subsidiary, Tompkins Insurance Agencies, Inc. (“("Tompkins ~~Insurance”~~Insurance"). ~~The Trust Company~~Tompkins Community Bank provides a full array of trust and ~~investment~~wealth management services under the Tompkins Financial Advisors brand, including investment management, trust and estate, financial and tax planning as well as life, disability and long-term care insurance services. The Company’s principal offices are located at 118 E. Seneca Street, Ithaca, New York, 14850, and its telephone number is (888) 503-5753. The Company’s common stock is traded on the NYSE American under the symbol ~~“TMP.”~~"TMP."

As a registered financial holding company, the Company is regulated under the Bank Holding Company Act of 1956 (“("BHC ~~Act”~~Act"), as amended and is subject to examination and comprehensive regulation by the Federal Reserve Board ~~(“FRB”~~("FRB"). The Company is also subject to the jurisdiction of the Securities and Exchange Commission ~~(“SEC”~~("SEC") and is subject to disclosure and regulatory requirements under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The Company is subject to the rules of the NYSE American for listed companies.

~~The Company’s banking subsidiaries are~~Tompkins Community Bank is subject to examination and comprehensive regulation by various regulatory authorities, including the Federal Deposit Insurance Corporation ~~(“FDIC”~~("FDIC"), and the New York State Department of Financial Services ~~(“NYSDFS”), and the Pennsylvania Department of Banking and Securities (“PDBS”~~("NYSDFS"). Each of these agencies issues regulations and requires the filing of reports describing the activities and financial condition of the entities under its jurisdiction. Likewise, such agencies conduct examinations on a recurring basis to evaluate the safety and soundness of the institutions, and to test compliance with various regulatory requirements, including: consumer protection, privacy, fair lending, the Community Reinvestment Act, the Bank Secrecy Act, sales of non-deposit investments, electronic data processing, and trust department activities. These agencies also examine and regulate the trust business of Tompkins Community Bank.

~~The trust division of~~ Tompkins ~~Trust Company is subject to examination and comprehensive regulation by the FDIC and NYSDFS.~~

~~The Company’s insurance subsidiary~~Insurance is subject to examination and regulation by the NYSDFS and the Pennsylvania Insurance Department.

2. Basis of Presentation

The unaudited consolidated financial statements included in this quarterly report do not include all of the information and footnotes required by U.S. Generally Accepted Accounting Principles ("GAAP") for a full year presentation and certain disclosures have been condensed or omitted in accordance with rules and regulations of the SEC. In the application of certain accounting policies, management is required to make assumptions regarding the effect of matters that are inherently uncertain. These estimates and assumptions affect the reported amounts of certain assets, liabilities, revenues, and expenses in the unaudited consolidated financial statements. Different amounts could be reported under different conditions, or if different assumptions were used in the application of these accounting policies. The accounting policies that management considers critical in this respect are the determination of the allowance for credit losses and the review of its securities portfolio for other than temporary impairment.

In management’s opinion, the unaudited consolidated financial statements reflect all adjustments of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year ended December 31, ~~2021.~~2022. The unaudited consolidated financial statements should be read in conjunction with the

audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Cash and cash equivalents in the consolidated statements of cash flow include cash and noninterest bearing balances due from banks, interest-bearing balances due from banks, and money market funds. Management regularly evaluates the credit risk associated with the counterparties to these transactions and believes that the Company is not exposed to any significant credit risk on cash and cash equivalents.

The Company has evaluated subsequent events for potential recognition and/or disclosure, and determined that no further disclosures were required.

The consolidated financial information included herein combines the results of operations, the assets, liabilities, and shareholders’ equity of the Company and its subsidiaries. Amounts in the prior periods’ unaudited consolidated financial statements are reclassified when necessary to conform to the current periods’ presentation. All significant intercompany balances and transactions are eliminated in consolidation.

3. Securities

Available-for-Sale Debt Securities

The following table summarizes available-for-sale debt securities held by the Company at March 31, ~~2021:~~2022:


		Available-for-Sale Debt Securities									Available-for-Sale Debt Securities
March 31, 2021		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2022										March 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(In thousands)	(In thousands)									(In thousands)
U.S. Treasuries	U.S. Treasuries	$	29,634	$	0	$	523	$	29,111	U.S. Treasuries	$	190,997	$	0	$	12,094	$	178,903
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	793,360		8,063		13,636		787,787		Obligations of U.S. Government sponsored entities	852,733		898		51,524		802,107
Obligations of U.S. states and political subdivisions	Obligations of U.S. states and political subdivisions	117,242		2,286		207		119,321		Obligations of U.S. states and political subdivisions	100,287		152		4,778		95,661
Mortgage-backed securities – residential, issued by	Mortgage-backed securities – residential, issued by									Mortgage-backed securities – residential, issued by
U.S. Government agencies	U.S. Government agencies	141,110		2,163		1,069		142,204		U.S. Government agencies	68,435		157		2,315		66,277
U.S. Government sponsored entities	U.S. Government sponsored entities	857,438		9,999		13,461		853,976		U.S. Government sponsored entities	891,954		83		56,264		835,773

U.S. corporate debt securities	U.S. corporate debt securities	2,500		0		84		2,416		U.S. corporate debt securities	2,500		0		73		2,427
Total available-for-sale debt securities	Total available-for-sale debt securities	$	1,941,284	$	22,511	$	28,980	$	1,934,815	Total available-for-sale debt securities	$	2,106,906	$	1,290	$	127,048	$	1,981,148

The following table summarizes available-for-sale debt securities held by the Company at December 31, ~~2020:~~2021:


		Available-for-Sale Debt Securities									Available-for-Sale Debt Securities
December 31, 2020		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2021										December 31, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(In thousands)	(In thousands)									(In thousands)

U.S. Treasuries										U.S. Treasuries	$	160,291	$	85	$	2,542	$	157,834
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	599,652		9,820		1,992		607,480		Obligations of U.S. Government sponsored entities	843,218		4,527		15,372		832,373
Obligations of U.S. states and political subdivisions	Obligations of U.S. states and political subdivisions	126,642		3,144		40		129,746		Obligations of U.S. states and political subdivisions	102,177		2,092		100		104,169
Mortgage-backed securities – residential, issued by	Mortgage-backed securities – residential, issued by									Mortgage-backed securities – residential, issued by
U.S. Government agencies	U.S. Government agencies	179,538		3,216		646		182,108		U.S. Government agencies	76,502		1,187		532		77,157
U.S. Government sponsored entities	U.S. Government sponsored entities	691,562		14,593		675		705,480		U.S. Government sponsored entities	879,102		5,735		14,281		870,556

U.S. corporate debt securities	U.S. corporate debt securities	2,500		0		121		2,379		U.S. corporate debt securities	2,500		0		76		2,424
Total available-for-sale debt securities	Total available-for-sale debt securities	$	1,599,894	$	30,773	$	3,474	$	1,627,193	Total available-for-sale debt securities	$	2,063,790	$	13,626	$	32,903	$	2,044,513

Held-to-Maturity Debt Securities

The following table summarizes held-to-maturity debt securities held by the Company atMarch 31, 2022:


	Held-to-Maturity Securities
March 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(In thousands)
U.S. Treasuries	$	86,635	$	0	$	6,002	$	80,633
Obligations of U.S. Government sponsored entities	216,889		0		16,605		200,284

Total held-to-maturity debt securities	$	303,524	$	0	$	22,607	$	280,917

The following table summarizes held-to-maturity debt securities held by the Company at December 31, 2021:


	Held-to-Maturity Securities
December 31, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(In thousands)
U.S. Treasuries	$	86,689	$	279	$	600	$	86,368
Obligations of U.S. Government sponsored entities	$	197,320	$	389	$	1,789	$	195,920

Total held-to-maturity debt securities	$	284,009	$	668	$	2,389	$	282,288

The Company may from time to time sell debt securities from its available-for-sale portfolio. There were no sales of available-for-sale debt securities for the three months ended March 31, 2022. Realized gains on sales of available-for-sale debt securities were $329,000 for the three months ended March 31, 2021 and ~~$178,000~~we recorded $0 in realized gains (losses), for the same period during ~~2020. Realized losses on sales of available-for-sale debt securities were $0 for the three months ended March 31, 2021 and $0 for the same period during 2020.~~2021. The sales of available-for-sale investment securities were the result of general investment portfolio and interest rate risk management. The Company's available-for-sale portfolio includes callable securities that may be called prior to maturity. Realized gains on called available-for-sale debt securities were $0 for the three months ended March 31, ~~2021~~2022 and ~~$251,000~~$0 for the ~~three months ended March 31, 2020.~~same period during 2021. The Company also recognized losses on equity securities of ~~$12,000~~$47,000 for the three months ended March 31, ~~2021~~2022 and ~~gains~~losses of ~~$14,000~~$12,000 for the ~~three months ended March 31, 2020,~~same period during 2021, reflecting the change in fair value.

The following table summarizes available-for-sale debt securities that had unrealized losses at March 31, ~~2021:~~2022:

Less than 12 Months 12 Months or Longer Total
(In thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
U.S. Treasuries $ 29,111 $ 523 $0 $0 $ 29,111 $ 523
Obligations of U.S. Government sponsored entities 531,501 13,636 0 0 531,501 13,636
Obligations of U.S. states and political subdivisions 19,227 207 0 0 19,227 207
Mortgage-backed securities – residential, issued by
U.S. Government agencies 55,053 642 4,736 427 59,789 1,069
U.S. Government sponsored entities 471,855 13,347 5,378 114 477,233 13,461
U.S. corporate debt securities 0 0 2,416 84 2,416 84
Total available-for-sale debt securities $ 1,106,747 $ 28,355 $ 12,530 $ 625 $ 1,119,277 $ 28,980


	Less than 12 Months				12 Months or Longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

U.S. Treasuries	$	174,290	$	11,756	$	4,613	$	338	$	178,903	$	12,094
Obligations of U.S. Government sponsored entities	269,829		18,755		394,741		32,769		664,570		51,524
Obligations of U.S. states and political subdivisions	65,155		4,291		3,378		487		68,533		4,778
Mortgage-backed securities – residential, issued by
U.S. Government agencies	30,557		996		17,796		1,319		48,353		2,315
U.S. Government sponsored entities	542,511		25,160		275,733		31,104		818,244		56,264
U.S. corporate debt securities	0		0		2,427		73		2,427		73
Total available-for-sale debt securities	$	1,082,342	$	60,958	$	698,688	$	66,090	$	1,781,030	$	127,048

The following table summarizes available-for-sale debt securities that had unrealized losses at December 31, ~~2020:~~2021:


		Less than 12 Months				12 Months or Longer				Total					Less than 12 Months				12 Months or Longer				Total
(In thousands)	(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasuries														U.S. Treasuries	$	147,810	$	2,542	$	0	$	0	$	147,810	$	2,542
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	$	310,711	$	1,992	$	0	$	0	$	310,711	$	1,992	Obligations of U.S. Government sponsored entities	362,895		6,694		289,210		8,678		652,105		15,372
Obligations of U.S. states and political subdivisions	Obligations of U.S. states and political subdivisions	8,868		40		0		0		8,868		40		Obligations of U.S. states and political subdivisions	9,700		85		1,283		15		10,983		100
Mortgage-backed securities – residential, issued by	Mortgage-backed securities – residential, issued by													Mortgage-backed securities – residential, issued by
U.S. Government agencies	U.S. Government agencies	10,560		396		1,819		250		12,379		646		U.S. Government agencies	22,074		160		16,846		372		38,920		532
U.S. Government sponsored entities	U.S. Government sponsored entities	87,643		586		5,068		89		92,711		675		U.S. Government sponsored entities	553,351		11,440		84,537		2,841		637,888		14,281
U.S. corporate debt securities	U.S. corporate debt securities	0		0		2,379		121		2,379		121		U.S. corporate debt securities	0		0		2,424		76		2,424		76
Total available-for-sale debt securities	Total available-for-sale debt securities	$	417,782	$	3,014	$	9,266	$	460	$	427,048	$	3,474	Total available-for-sale debt securities	$	1,095,830	$	20,921	$	394,300	$	11,982	$	1,490,130	$	32,903

The following table summarizes held-to-maturity debt securities that had unrealized losses at March 31, 2022:


	Less than 12 Months				12 Months or Longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasuries	$	80,633	$	6,002	$	0	$	0	$	80,633	$	6,002
Obligations of U.S. Government sponsored entities	$	200,284	$	16,605	$	0	$	0	$	200,284	$	16,605

Total held-to-maturity debt securities	$	280,917	$	22,607	$	0	$	0	$	280,917	$	22,607

The following table summarizes held-to-maturity debt securities that had unrealized losses at December 31, 2021:


	Less than 12 Months				12 Months or Longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasuries	$	35,280	$	600	$	0	$	0	$	35,280	$	600
Obligations of U.S. Government sponsored entities	$	84,592	$	1,789	$	0	$	0	$	84,592	$	1,789

Total held-to-maturity debt securities	$	119,872	$	2,389	$	0	$	0	$	119,872	$	2,389

The Company evaluates available-for-sale debt securities for expected credit losses ~~(“ECL”~~("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.

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 nationally recognized statistical rating organization.

• Changes in tax or regulatory guidelines that impact a security or underlying issuer.

For ~~available for sale~~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 (technical impairment) is the result of changes in interest rates or reflects a fundamental change in the credit worthiness of the underlying issuer.Any impairment that is not credit related is recognized in other comprehensive income (loss), net of applicable taxes.Credit-related impairment is recognized as an allowance for credit losses ~~(“ACL”~~("ACL") on the ~~Statements~~Statement 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.

The gross unrealized losses reported for residential mortgage-backed securities relate to investment securities issued by U.S. government sponsored entities such as Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, and

U.S. government agencies such as Government National Mortgage Association. 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.~~In addition, the~~ The Company does not ~~intend~~have the intent to sell ~~other-than-temporarily impaired investment~~these securities ~~that are in an unrealized loss position until recovery of unrealized losses (which may be until maturity),~~ and does not believe it is ~~not more-likely-than~~more likely than not that the Company will be required to sell these securities before a recovery of amortized cost.

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 March 31, 2022, the held-to- maturity portfolio consisted of U.S. Treasury securities and securities issued by U.S. government-sponsored enterprises, including The Federal National Mortgage Agency and the 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 March 31, 2022.

The Company did not recognize any net credit impairment charge to earnings on investment securities ~~before recovery~~in the first quarter of ~~their amortized cost basis, which may be at maturity.~~2022.

The amortized cost and estimated fair value of debt securities by contractual maturity are shown in the following table. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities are shown separately since they are not due at a single maturity date.

March 31, 2021
(In thousands) Amortized Cost Fair Value
Available-for-sale debt securities:
Due in one year or less $ 76,967 $ 77,746
Due after one year through five years 427,769 432,308
Due after five years through ten years 372,692 363,992
Due after ten years 65,308 64,589
Total 942,736 938,635
Mortgage-backed securities 998,548 996,180
Total available-for-sale debt securities $ 1,941,284 $ 1,934,815


March 31, 2022
(In thousands)	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due in one year or less	$	58,553	$	58,888
Due after one year through five years	525,430		501,283
Due after five years through ten years	508,112		470,234
Due after ten years	54,422		48,693
Total	1,146,517		1,079,098
Mortgage-backed securities	960,389		902,050
Total available-for-sale debt securities	$	2,106,906	$	1,981,148

December 31, 2020
(In thousands) Amortized Cost Fair Value
Available-for-sale debt securities:
Due in one year or less $ 54,484 $ 55,008
Due after one year through five years 379,044 388,132
Due after five years through ten years 228,572 229,107
Due after ten years 66,694 67,358
Total 728,794 739,605
Mortgage-backed securities 871,100 887,588
Total available-for-sale debt securities $ 1,599,894 $ 1,627,193

1011


December 31, 2021
(In thousands)	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due in one year or less	$	77,159	$	77,892
Due after one year through five years	474,537		471,776
Due after five years through ten years	501,748		492,573
Due after ten years	54,742		54,559
Total	1,108,186		1,096,800
Mortgage-backed securities	955,604		947,713
Total available-for-sale debt securities	$	2,063,790	$	2,044,513


March 31, 2022
(In thousands)	Amortized Cost		Fair Value
Held-to-maturity debt securities:


Due after five years through ten years	$	303,524	$	280,917
Total held-to-maturity debt securities	$	303,524	$	280,917


December 31, 2021
(In thousands)	Amortized Cost		Fair Value
Held-to-maturity debt securities:


Due after five years through ten years	$	284,009	$	282,288
Total held-to-maturity debt securities	$	284,009	$	282,288

The Company also holds non-marketable Federal Home Loan Bank New York ~~(“FHLBNY”) stock, non-marketable Federal Home Loan Bank Pittsburgh (“FHLBPITT”~~("FHLBNY") stock and non-marketable Atlantic Community Bankers Bank ("ACBB") stock, all of which are required to be held for regulatory purposes and for borrowing availability. The required investment in FHLB stock is tied to the Company’s borrowing levels with the FHLB. Holdings of FHLBNY stock ~~FHLBPITT stock,~~ and ACBB stock totaled ~~$11.0 million, $5.2~~$7.0 million and $95,000, respectively, at March 31, ~~2021.~~2022. These securities are carried at par, which is also cost. The FHLBNY ~~and FHLBPITT continue~~continues to pay dividends and repurchase stock. Quarterly, we evaluate our investment in the FHLB for impairment. We evaluate recent and long-term operating performance, liquidity, funding and capital positions, stock repurchase history, dividend history and impact of legislative and regulatory changes. Based on our most recent evaluation, as of March 31, ~~2021,~~2022, we determined that no impairment write-downs were required.

4. Loans and Leases

Loans and Leases at March 31, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


(In thousands)	(In thousands)	03/31/2021		12/31/2020		(In thousands)	03/31/2022		12/31/2021
Commercial and industrial	Commercial and industrial					Commercial and industrial
Agriculture	Agriculture	$	80,692	$	94,489	Agriculture	$	81,269	$	99,172
Commercial and industrial other	Commercial and industrial other	762,956		792,987		Commercial and industrial other	708,626		699,121
PPP loans*	PPP loans*	370,007		291,252		PPP loans*	24,095		71,260
Subtotal commercial and industrial	Subtotal commercial and industrial	1,213,655		1,178,728		Subtotal commercial and industrial	813,990		869,553
Commercial real estate	Commercial real estate					Commercial real estate
Construction	Construction	176,730		163,016		Construction	185,503		178,582
Agriculture	Agriculture	200,211		201,866		Agriculture	199,652		195,973
Commercial real estate other	Commercial real estate other	2,202,898		2,204,310		Commercial real estate other	2,292,099		2,278,599
Subtotal commercial real estate	Subtotal commercial real estate	2,579,839		2,569,192		Subtotal commercial real estate	2,677,254		2,653,154
Residential real estate	Residential real estate					Residential real estate
Home equity	Home equity	192,902		200,827		Home equity	179,798		182,671
Mortgages	Mortgages	1,233,578		1,235,160		Mortgages	1,312,913		1,290,911
Subtotal residential real estate	Subtotal residential real estate	1,426,480		1,435,987		Subtotal residential real estate	1,492,711		1,473,582
Consumer and other	Consumer and other					Consumer and other
Indirect	Indirect	7,447		8,401		Indirect	3,857		4,655
Consumer and other	Consumer and other	63,969		61,399		Consumer and other	66,601		67,396
Subtotal consumer and other	Subtotal consumer and other	71,416		69,800		Subtotal consumer and other	70,458		72,051
Leases	Leases	15,056		14,203		Leases	13,881		13,948
Total loans and leases	Total loans and leases	5,306,446		5,267,910		Total loans and leases	5,068,294		5,082,288
Less: unearned income and deferred costs and fees	Less: unearned income and deferred costs and fees	(13,653)		(7,583)		Less: unearned income and deferred costs and fees	(4,843)		(6,821)
Total loans and leases, net of unearned income and deferred costs and fees	Total loans and leases, net of unearned income and deferred costs and fees	$	5,292,793	$	5,260,327	Total loans and leases, net of unearned income and deferred costs and fees	$	5,063,451	$	5,075,467
*SBA Paycheck Protection Program ("PPP")	*SBA Paycheck Protection Program ("PPP")					*SBA Paycheck Protection Program ("PPP")

The Company has adopted comprehensive lending policies, underwriting standards and loan review procedures. Management reviews these policies and procedures on a regular basis. The Company discussed its lending policies and underwriting guidelines for its various lending portfolios in Note 3 – ~~“Loans~~"Loans and ~~Leases”~~Leases" in the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. There have been no significant changes in these policies and guidelines since the date of that report. 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 origination, loan quality, concentrations of credit, loan delinquencies and nonperforming loans and potential problem loans.

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments are due. Generally loans are placed on nonaccrual status if principal or interest payments become 90 days or more contractually past due and/or management deems the collectability of the principal and/or interest to be in question as well as when required by regulatory agencies. When interest accrual is discontinued, all unpaid accrued interest is reversed. Payments received on loans on nonaccrual are generally applied to reduce the principal balance of the loan. Loans are generally returned

to accrual status when all the principal and interest amounts contractually due are brought current, the borrower has established a payment history, and future payments are reasonably assured. When management determines that the collection of principal in full is not probable, management will charge-off a partial amount or full amount of the loan balance. Management considers specific facts and circumstances relative to each individual credit in making such a determination. For residential and consumer loans, management uses specific regulatory guidance and thresholds for determining charge-offs.

The below tables are an age analysis of past due loans, segregated by class of loans as of March 31, ~~2021~~2022 and December 31, ~~2020.~~2021:


March 31, 2021
March 31, 2022														March 31, 2022
(In thousands)	(In thousands)	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total Loans		(In thousands)	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total Loans
Loans and Leases	Loans and Leases													Loans and Leases
Commercial and industrial	Commercial and industrial													Commercial and industrial
Agriculture	Agriculture	$	42	$	0	$	42	$	84	$	80,608	$	80,692	Agriculture	$	0	$	0	$	0	$	0	$	81,269	$	81,269
Commercial and industrial other	Commercial and industrial other	146		11		665		822		762,134		762,956		Commercial and industrial other	6		4		370		380		708,246		708,626
PPP loans	PPP loans	0		0		0		0		370,007		370,007		PPP loans	24		0		0		24		24,095		24,095
Subtotal commercial and industrial	Subtotal commercial and industrial	188		11		707		906		1,212,749		1,213,655		Subtotal commercial and industrial	30		4		370		404		813,610		813,990
Commercial real estate	Commercial real estate													Commercial real estate
Construction	Construction	279		0		0		279		176,451		176,730		Construction	0		0		318		318		185,185		185,503
Agriculture	Agriculture	0		0		0		0		200,211		200,211		Agriculture	118		0		0		118		199,534		199,652
Commercial real estate other	Commercial real estate other	0		0		7,564		7,564		2,195,334		2,202,898		Commercial real estate other	284		0		6,606		6,890		2,285,209		2,292,099
Subtotal commercial real estate	Subtotal commercial real estate	279		0		7,564		7,843		2,571,996		2,579,839		Subtotal commercial real estate	402		0		6,924		7,326		2,669,928		2,677,254
Residential real estate	Residential real estate													Residential real estate
Home equity	Home equity	109		46		1,185		1,340		191,562		192,902		Home equity	134		129		1,150		1,413		178,385		179,798
Mortgages	Mortgages	518		394		3,814		4,726		1,228,852		1,233,578		Mortgages	540		346		4,151		5,037		1,307,876		1,312,913
Subtotal residential real estate	Subtotal residential real estate	627		440		4,999		6,066		1,420,414		1,426,480		Subtotal residential real estate	674		475		5,301		6,450		1,486,261		1,492,711
Consumer and other	Consumer and other													Consumer and other
Indirect	Indirect	139		41		46		226		7,221		7,447		Indirect	30		0		116		146		3,711		3,857
Consumer and other	Consumer and other	60		5		78		143		63,826		63,969		Consumer and other	104		16		268		388		66,213		66,601
Subtotal consumer and other	Subtotal consumer and other	199		46		124		369		71,047		71,416		Subtotal consumer and other	134		16		384		534		69,924		70,458
Leases	Leases	0		0		0		0		15,056		15,056		Leases	0		0		0		0		13,881		13,881
Total loans and leases	Total loans and leases	1,293		497		13,394		15,184		5,291,262		5,306,446		Total loans and leases	1,240		495		12,979		14,714		5,053,604		5,068,294
Less: unearned income and deferred costs and fees	Less: unearned income and deferred costs and fees	0		0		0		0		(13,653)		(13,653)		Less: unearned income and deferred costs and fees	0		0		0		0		(4,843)		(4,843)
Total loans and leases, net of unearned income and deferred costs and fees	Total loans and leases, net of unearned income and deferred costs and fees	$	1,293	$	497	$	13,394	$	15,184	$	5,277,609	$	5,292,793	Total loans and leases, net of unearned income and deferred costs and fees	$	1,240	$	495	$	12,979	$	14,714	$	5,048,761	$	5,063,451

1214


December 31, 2020
December 31, 2021														December 31, 2021
(In thousands)	(In thousands)	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total Loans		(In thousands)	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total Loans
Loans and Leases	Loans and Leases													Loans and Leases
Commercial and industrial	Commercial and industrial													Commercial and industrial
Agriculture	Agriculture	$	0	$	18	$	0	$	18	$	94,471	$	94,489	Agriculture	$	0	$	0	$	0	$	0	$	99,172	$	99,172
Commercial and industrial other	Commercial and industrial other	44		7		1,516		1,567		791,420		792,987		Commercial and industrial other	506		6		88		600		698,521		699,121
PPP loans	PPP loans	0		0		0		0		291,252		291,252		PPP loans	0		0		0		0		71,260		71,260
Subtotal commercial and industrial	Subtotal commercial and industrial	44		25		1,516		1,585		1,177,143		1,178,728		Subtotal commercial and industrial	506		6		88		600		868,953		869,553
Commercial real estate	Commercial real estate													Commercial real estate
Construction	Construction	0		0		0		0		163,016		163,016		Construction	0		0		0		0		178,582		178,582
Agriculture	Agriculture	263		0		0		263		201,603		201,866		Agriculture	121		0		0		121		195,852		195,973
Commercial real estate other	Commercial real estate other	0		0		7,125		7,125		2,197,185		2,204,310		Commercial real estate other	150		257		3,305		3,712		2,274,887		2,278,599
Subtotal commercial real estate	Subtotal commercial real estate	263		0		7,125		7,388		2,561,804		2,569,192		Subtotal commercial real estate	271		257		3,305		3,833		2,649,321		2,653,154
Residential real estate	Residential real estate													Residential real estate
Home equity	Home equity	713		224		1,126		2,063		198,764		200,827		Home equity	441		417		798		1,656		181,015		182,671
Mortgages	Mortgages	521		879		4,210		5,610		1,229,550		1,235,160		Mortgages	7		839		3,917		4,763		1,286,148		1,290,911
Subtotal residential real estate	Subtotal residential real estate	1,234		1,103		5,336		7,673		1,428,314		1,435,987		Subtotal residential real estate	448		1,256		4,715		6,419		1,467,163		1,473,582
Consumer and other	Consumer and other													Consumer and other
Indirect	Indirect	175		35		91		301		8,100		8,401		Indirect	77		86		2		165		4,490		4,655
Consumer and other	Consumer and other	115		18		232		365		61,034		61,399		Consumer and other	120		45		45		210		67,186		67,396
Subtotal consumer and other	Subtotal consumer and other	290		53		323		666		69,134		69,800		Subtotal consumer and other	197		131		47		375		71,676		72,051
Leases	Leases	0		0		0		0		14,203		14,203		Leases	0		0		0		0		13,948		13,948
Total loans and leases	Total loans and leases	1,831		1,181		14,300		17,312		5,250,598		5,267,910		Total loans and leases	1,422		1,650		8,155		11,227		5,071,061		5,082,288
Less: unearned income and deferred costs and fees	Less: unearned income and deferred costs and fees	0		0		0		0		(7,583)		(7,583)		Less: unearned income and deferred costs and fees	0		0		0		0		(6,821)		(6,821)
Total loans and leases, net of unearned income and deferred costs and fees	Total loans and leases, net of unearned income and deferred costs and fees	$	1,831	$	1,181	$	14,300	$	17,312	$	5,243,015	$	5,260,327	Total loans and leases, net of unearned income and deferred costs and fees	$	1,422	$	1,650	$	8,155	$	11,227	$	5,064,240	$	5,075,467

The following tables present the amortized cost basis of loans on nonaccrual status and the amortized cost basis of loans on nonaccrual status for which there was no related allowance for credit losses. The below tables are an age analysis of nonaccrual loans segregated by class of loans, as of March 31, ~~2021~~2022 and December 31, ~~2020.~~2021:

1315


March 31, 2021
March 31, 2022								March 31, 2022
(In thousands)	(In thousands)	Nonaccrual Loans and Leases with no Allowance for Credit Losses		Nonaccrual Loans and Leases		Loans and Leases Past Due Over 89 Days and Accruing		(In thousands)	Nonaccrual Loans and Leases with no ACL		Nonaccrual Loans and Leases		Loans and Leases Past Due Over 89 Days and Accruing
Loans and Leases	Loans and Leases							Loans and Leases
Commercial and industrial	Commercial and industrial							Commercial and industrial

Commercial and industrial other	Commercial and industrial other	$	732	$	768	$	0	Commercial and industrial other	$	454	$	806	$	0

Subtotal commercial and industrial	Subtotal commercial and industrial	732		768		0		Subtotal commercial and industrial	454		806		0
Commercial real estate	Commercial real estate							Commercial real estate
Construction								Construction	658		318		0

Agriculture		0		115		0
Commercial real estate other	Commercial real estate other	27,305		27,732		0		Commercial real estate other	11,846		13,305		0
Subtotal commercial real estate	Subtotal commercial real estate	27,305		27,847		0		Subtotal commercial real estate	12,504		13,623		0
Residential real estate	Residential real estate							Residential real estate
Home equity	Home equity	408		2,909		0		Home equity	574		2,215		0
Mortgages	Mortgages	1,071		9,836		0		Mortgages	1,256		7,985		0
Subtotal residential real estate	Subtotal residential real estate	1,479		12,745		0		Subtotal residential real estate	1,830		10,200		0
Consumer and other	Consumer and other							Consumer and other
Indirect	Indirect	3		163		0		Indirect	0		255		0
Consumer and other	Consumer and other	0		133		0		Consumer and other	0		316		0
Subtotal consumer and other	Subtotal consumer and other	3		296		0		Subtotal consumer and other	0		571		0
Leases		0		0		0

Total loans and leases	Total loans and leases	$	29,519	$	41,656	$	0	Total loans and leases	$	14,788	$	25,200	$	0


December 31, 2020
December 31, 2021								December 31, 2021
(In thousands)	(In thousands)	Nonaccrual Loans and Leases with no Allowance for Credit Losses		Nonaccrual Loans and Leases		Loans and Leases Past Due Over 89 Days and Accruing		(In thousands)	Nonaccrual Loans and Leases with no ACL		Nonaccrual Loans and Leases		Loans and Leases Past Due Over 89 Days and Accruing
Loans and Leases	Loans and Leases							Loans and Leases
Commercial and industrial	Commercial and industrial							Commercial and industrial

Commercial and industrial other	Commercial and industrial other	$	803	$	1,775	$	0	Commercial and industrial other	$	502	$	533	$	0

Subtotal commercial and industrial	Subtotal commercial and industrial	803		1,775		0		Subtotal commercial and industrial	502		533		0
Commercial real estate	Commercial real estate							Commercial real estate

Construction								Construction	671		671		0
Agriculture	Agriculture	0		118		0		Agriculture	348		456		0
Commercial real estate other	Commercial real estate other	23,080		23,509		0		Commercial real estate other	12,483		12,766		0
Subtotal commercial real estate	Subtotal commercial real estate	23,080		23,627		0		Subtotal commercial real estate	13,502		13,893		0
Residential real estate	Residential real estate							Residential real estate
Home equity	Home equity	767		2,965		0		Home equity	380		2,459		0
Mortgages	Mortgages	1,365		10,180		0		Mortgages	716		8,719		0
Subtotal residential real estate	Subtotal residential real estate	2,132		13,145		0		Subtotal residential real estate	1,096		11,178		0
Consumer and other	Consumer and other							Consumer and other
Indirect	Indirect	3		169		0		Indirect	1		246		0
Consumer and other	Consumer and other	0		260		0		Consumer and other	0		183		0
Subtotal consumer and other	Subtotal consumer and other	3		429		0		Subtotal consumer and other	1		429		0
Leases		0		0		0

Total loans and leases	Total loans and leases	$	26,018	$	38,976	$	0	Total loans and leases	$	15,101	$	26,033	$	0

The Company recognized $0 of interest income on nonaccrual loans during the three months ended March 31, ~~2021.~~2022.

5. Allowance for Credit Losses

Management reviews the appropriateness of the allowance for credit losses ~~(“allowance”~~("allowance" or "ACL") on a regular basis. Management considers the accounting policy relating to the allowance to be a critical accounting policy, given the inherent uncertainty in evaluating the levels of the allowance required to cover credit losses in the portfolio and the material effect that assumptions could have on the 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 allowance 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~~ ~~(ASU 2016-3)~~.Losses.

The Company uses a ~~DCF~~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 instrument level wherein payment expectations are adjusted for estimated prepayment speed, 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 forecasts of 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 instrument 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.

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 March 31, ~~2021,~~2022, considers the allowance to be appropriate, under different conditions or assumptions, the Company would need to increase or decrease the allowance. In addition, various federal and State regulatory agencies, 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 judgements and information available to them at the time of their examinations.

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 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 cancelable, through a charge to credit loss expense for off-balance sheet credit exposures included in ~~other noninterest~~provision for credit loss expense in the Company's consolidated statements of income.

The following table details activity in the allowance for credit losses on loans and leases for the three months ended March 31, ~~2021~~2022 and ~~2020. The Company adopted ASU 2016-13 on January 1, 2020 using the modified retrospective approach. The transition adjustment included a decrease in the allowance of $2.5 million.~~2021. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

1517


Three Months Ended March 31, 2021
Three Months Ended March 31, 2022														Three Months Ended March 31, 2022
(In thousands)	(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total		(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for credit losses:	Allowance for credit losses:													Allowance for credit losses:
Beginning balance	Beginning balance	$	9,239	$	30,546	$	10,257	$	1,562	$	65	$	51,669	Beginning balance	$	6,335	$	24,813	$	10,139	$	1,492	$	64	$	42,843
Charge-offs	Charge-offs	(116)		0		0		(91)		0		(207)		Charge-offs	(23)		(27)		0		(196)		0		(246)
Recoveries	Recoveries	97		213		34		43		0		387		Recoveries	20		42		109		92		0		263
Provision (credit) for credit loss expense		(1,470)		(292)		(821)		69		4		(2,510)
(Credit) provision for credit loss expense														(Credit) provision for credit loss expense	695		(1,846)		199		200		18		(734)
Ending Balance	Ending Balance	$	7,750	$	30,467	$	9,470	$	1,583	$	69	$	49,339	Ending Balance	$	7,027	$	22,982	$	10,447	$	1,588	$	82	$	42,126


Three Months Ended March 31, 2020
Three Months Ended March 31, 2021														Three Months Ended March 31, 2021
(In thousands)	(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total		(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for credit losses:	Allowance for credit losses:													Allowance for credit losses:
Beginning balance, prior to adoption of ASU 2016-13		$	10,541	$	21,608	$	6,381	$	1,362	$	0	39,892
Impact of adopting ASU 2016-13		(2,008)		(5,917)		4,459		850		82		(2,534)
Beginning balance														Beginning balance	$	9,239	$	30,546	$	10,257	$	1,562	$	65	51,669
Charge-offs	Charge-offs	(1)		(1,290)		(2)		(137)		0		(1,430)		Charge-offs	(116)		0		0		(91)		0		(207)
Recoveries	Recoveries	16		18		79		69		0		182		Recoveries	97		213		34		43		0		387
Provision (credit) for credit loss expense		3,117		8,027		5,413		(261)		(2)		16,294
(Credit) provision for credit loss expense														(Credit) provision for credit loss expense	(1,470)		(292)		(821)		69		4		(2,510)
Ending Balance	Ending Balance	$	11,665	$	22,446	$	16,330	$	1,883	$	80	$	52,404	Ending Balance	$	7,750	$	30,467	$	9,470	$	1,583	$	69	$	49,339

The following table details activity in the Liabilities for off-balance sheet credit exposures for the three months ended March 31, 2022 and 2021:


(In thousands)	2022		2021
Liabilities for off-balance sheet credit exposures at beginning of period	$	2,507	$	1,920

Provision for credit loss expense related to off-balance sheet credit exposures	214		680
Liabilities for off-balance sheet credit exposures at end of period	$	2,721	$	2,600

The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related allowance for credit losses allocated to these loans:


March 31, 2022												March 31, 2022
(In thousands)	(In thousands)	Real Estate		Business Assets		Other		Total		ACL Allocation		(In thousands)	Real Estate		Business Assets		Other		Total		ACL Allocation
March 31, 2021
Commercial and Industrial	Commercial and Industrial	$	93	$	549	$	517	$	1,159	$	5	Commercial and Industrial	$	374	$	425	$	668	$	1,467	$	24
Commercial Real Estate	Commercial Real Estate	26,542		105		0		26,647		184		Commercial Real Estate	12,130		0		0		12,130		40

Commercial Real Estate - Agriculture												Commercial Real Estate - Agriculture	1,544		0		0		1,544		0
Total	Total	$	26,635	$	654	$	517	$	27,806	$	189	Total	$	14,048	$	425	$	668	$	15,141	$	64


December 31, 2021												December 31, 2021
(In thousands)	(In thousands)	Real Estate		Business Assets		Other		Total		ACL Allocation		(In thousands)	Real Estate		Business Assets		Other		Total		ACL Allocation
December 31, 2020
Commercial and Industrial	Commercial and Industrial	$	103	$	582	$	110	$	795	$	122	Commercial and Industrial	$	142	$	395	$	328	$	865	$	26
Commercial Real Estate	Commercial Real Estate	24,277		1,418		0		25,695		186		Commercial Real Estate	13,334		0		1,931		15,265		40

Commercial Real Estate - Agriculture												Commercial Real Estate - Agriculture	0		0		0		0		0
Residential Real Estate												Residential Real Estate	32		0		0		32		1
Total	Total	$	24,380	$	2,000	$	110	$	26,490	$	308	Total	$	13,508	$	395	$	2,259	$	16,162	$	67

Loans are considered modified in a troubled debt restructuring ("TDR") when, due to a borrower’s financial difficulties, the Company makes concessions to the borrower that it would not otherwise consider. These modifications may include, among others, an extension for the term of the loan, and granting a period when interest-only payments can be made with the principal payments made over the remaining term of the loan or at maturity.

There were no new TDRs in the first quarter of ~~2021. The following table presents information on loans modified in a TDR during the period ended March 31, 2020. Post-modification amounts are presented as of March 31, 2020.~~

March 31, 2020 Three Months Ended
Defaulted TDRs2
(In thousands) Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Loans Post-Modification Outstanding Recorded Investment
Commercial real estate
Commercial real estate other 0 $ 0 $ 0 1 $ 37
Residential real estate
Home equity1
2 121 121 1 87
Total 2 $ 121 $ 121 2 $ 124

12022 or 2021~~Represents the following concessions: extension of term and reduction of rate.~~

2~~TDRs that defaulted during the three months ended March 31, 2020 that had been restructured in the prior twelve months.~~.

~~The~~In 2020, the Company implemented ~~and continues to utilize~~ a loan payment deferral program to assist both consumer and business borrowers that ~~may be~~were experiencing financial hardship due to COVID-19. The Company's program ~~allows~~allowed for deferral of payments of principal and interest. The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") and interagency guidance issued by Federal banking regulators provided guidance and clarification related to modifications and deferral programs to assist borrowers who ~~are~~were negatively impacted by the COVID-19 national emergency. The guidance and clarifications detail certain provisions whereby banks are permitted to make deferrals and modifications to the terms of a loan which would not require the loan to be reported as a TDR. In accordance with the CARES Act and the interagency guidance, the Company elected to adopt the provisions to not report eligible loan modifications as TDRs.

The relief related to TDRs under the CARES Act was extended by the Consolidated Appropriations Act, 2021 ("CAA Act"). Under the CAA Act, the relief under the CARES Act ~~will continue~~continued until the ~~earlier of (i) 60 days after the date the COVID-19 national emergency comes to an end or (ii)~~ January 1, 2022.

~~The following tables present credit quality indicators by total loans on an amortized cost basis by origination year as of March 31, 2021 and December 31, 2020.~~

~~March 31, 2021~~

(In thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Loans
Commercial & Industrial - Other:
Internal risk grade:
Pass $ 39,717 $ 69,614 $ 68,152 $ 52,359 $ 54,137 $ 318,853 $ 149,103 $ 167 $ 752,102
Special Mention 29 899 345 341 697 1,810 2,197 0 6,318
Substandard 30 409 304 878 396 873 1,646 0 4,536
Total Commercial & Industrial - Other $ 39,776 $ 70,922 $ 68,801 $ 53,578 $ 55,230 $ 321,536 $ 152,946 $ 167 $ 762,956
Commercial and Industrial - PPP:
Pass $ 200,794 $ 169,213 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 370,007
Special Mention 0 0 0 0 0 0 0 0 0
Substandard 0 0 0 0 0 0 0 0 0
Total Commercial and Industrial - PPP $ 200,794 $ 169,213 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 370,007
Commercial and Industrial - Agriculture:
Pass $ 613 $ 9,851 $ 7,253 $ 10,446 $ 6,575 $ 4,668 $ 33,804 $ 295 $ 73,505
Special Mention 0 0 0 27 681 0 1,586 0 2,294
Substandard 0 96 72 0 156 2,300 2,269 0 4,893
Total Commercial and Industrial - Agriculture $ 613 $ 9,947 $ 7,325 $ 10,473 $ 7,412 $ 6,968 $ 37,659 $ 295 $ 80,692
Commercial Real Estate
Pass $ 51,512 $ 272,752 $ 246,240 $ 225,940 $ 232,958 $ 924,083 $ 93,777 $ 698 $ 2,047,960
Special Mention 0 36 13,000 3,892 4,613 80,088 139 0 101,768
Substandard 0 0 4,933 18,540 6,172 23,231 294 0 53,170
Total Commercial Real Estate $ 51,512 $ 272,788 $ 264,173 $ 248,372 $ 243,743 $ 1,027,402 $ 94,210 $ 698 $ 2,202,898
Commercial Real Estate - Agriculture:
Pass $ 4,538 $ 22,338 $ 33,141 $ 43,997 $ 21,536 $ 56,972 $ 6,116 $ 2,100 $ 190,738
Special Mention 0 1,946 0 592 1,353 1,047 49 0 4,987
Substandard 0 0 0 0 1,776 2,011 699 0 4,486
Total Commercial Real Estate - Agriculture $ 4,538 $ 24,284 $ 33,141 $ 44,589 $ 24,665 $ 60,030 $ 6,864 $ 2,100 $ 200,211
Commercial Real Estate - Construction
Pass $ 1,740 $ 15,365 $ 19,350 $ 7,792 $ 2,447 $ 3,283 $ 120,952 $ 4,464 $ 175,393
Special Mention 0 0 0 0 0 404 615 0 1,019
Substandard 0 0 0 0 0 318 0 0 318
Total Commercial Real Estate - Construction $ 1,740 $ 15,365 $ 19,350 $ 7,792 $ 2,447 $ 4,005 $ 121,567 $ 4,464 $ 176,730

~~December 31, 2020~~

(In thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Loans
Commercial & Industrial - Other:
Internal risk grade:
Pass $ 91,597 $ 72,639 $ 56,191 $ 60,714 $ 33,402 $ 301,027 $ 149,969 $ 16,301 $ 781,840
Special Mention 1,064 367 344 912 2,045 228 1,331 0 6,291
Substandard 412 305 933 485 292 783 1,646 0 4,856
Total Commercial & Industrial - Other $ 93,073 $ 73,311 $ 57,468 $ 62,111 $ 35,739 $ 302,038 $ 152,946 $ 16,301 $ 792,987
Commercial and Industrial - Agriculture:
Pass $ 11,536 $ 8,005 $ 11,162 $ 6,531 $ 3,539 $ 2,599 $ 41,936 $ 1,340 $ 86,648
Special Mention 0 0 28 729 0 0 2080 0 2837
Substandard 99 83 0 202 0 2308 2312 0 5004
Total Commercial and Industrial - Agriculture $ 11,635 $ 8,088 $ 11,190 $ 7,462 $ 3,539 $ 4,907 $ 46,328 $ 1,340 $ 94,489
Commercial and Industrial - PPP:
Pass $ 291,252 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 291,252
Special Mention 0 0 0 0 0 0 0 0 0
Substandard 0 0 0 0 0 0 0 0 0
Total Commercial and Industrial - PPP $ 291,252 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 291,252
Commercial Real Estate
Pass $ 278,747 $ 246,331 $ 232,651 $ 237,487 $ 290,106 $ 664,027 $ 33,117 $ 64,903 $ 2,047,369
Special Mention 35 13,016 5,612 4,654 34,310 46,074 203 0 103,904
Substandard 0 4,933 18,395 6,172 5,625 17,610 302 0 53,037
Total Commercial Real Estate $ 278,782 $ 264,280 $ 256,658 $ 248,313 $ 330,041 $ 727,711 $ 33,622 $ 64,903 $ 2,204,310
Commercial Real Estate - Agriculture:
Pass $ 22,440 $ 35,081 $ 44,519 $ 22,356 $ 17,081 $ 44,559 $ 919 $ 5,602 $ 192,557
Special Mention 1,960 0 575 1,366 1,053 6 49 0 5,009
Substandard 0 0 0 1,777 713 1,527 283 0 4,300
Total Commercial Real Estate - Agriculture $ 24,400 $ 35,081 $ 45,094 $ 25,499 $ 18,847 $ 46,092 $ 1,251 $ 5,602 $ 201,866
Commercial Real Estate - Construction
Pass $ 14,465 $ 20,705 $ 7,999 $ 2,478 $ 1,879 $ 6,682 $ 85,513 $ 21,051 $ 160,772
Special Mention 0 0 0 0 0 467 1,453 0 1,920
Substandard 0 0 0 0 0 324 0 0 324
Total Commercial Real Estate - Construction $ 14,465 $ 20,705 $ 7,999 $ 2,478 $ 1,879 $ 7,473 $ 86,966 $ 21,051 $ 163,016

The following tables present credit quality indicators by total loans on an amortized cost basis by origination year as of March 31, ~~2021~~2022 and December 31, ~~2020, continued.~~2021:

~~March 31, 2021~~


March 31, 2022
(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans
Commercial and Industrial - Other:
Internal risk grade:
Pass	$	59,972	$	109,152	$	52,407	$	52,415	$	41,753	$	176,794	$	204,489	$	1,054	$	698,036
Special Mention	0		149		424		402		81		1,531		1,591		0		4,178
Substandard	0		0		870		44		521		977		4,000		0		6,412
Total Commercial and Industrial - Other	$	59,972	$	109,301	$	53,701	$	52,861	$	42,355	$	179,302	$	210,080	$	1,054	$	708,626

Commercial and Industrial - PPP:
Pass	$	0	$	23,429	$	666	$	0	$	0	$	0	$	0	$	0	$	24,095
Special Mention	0		0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		0		0		0		0
Total Commercial and Industrial - PPP	$	0	$	23,429	$	666	$	0	$	0	$	0	$	0	$	0	$	24,095

Commercial and Industrial - Agriculture:
Pass	$	2,444	$	7,892	$	6,357	$	5,294	$	9,470	$	9,049	$	36,632	$	0	$	77,138
Special Mention	0		0		0		0		0		0		0		0		0
Substandard	0		0		82		4		0		2,383		1,662		0		4,131
Total Commercial and Industrial - Agriculture	$	2,444	$	7,892	$	6,439	$	5,298	$	9,470	$	11,432	$	38,294	$	0	$	81,269

Commercial Real Estate
Pass	$	60,779	$	372,476	$	296,469	$	293,389	$	217,355	$	889,454	$	25,526	$	18,938	$	2,174,386
Special Mention	0		3,468		1,752		11,694		3,186		67,476		0		0		87,576
Substandard	0		0		0		3,166		2,396		24,177		398		0		30,137
Total Commercial Real Estate	$	60,779	$	375,944	$	298,221	308,249		222,937		981,107		$	25,924	$	18,938	$	2,292,099

Commercial Real Estate - Agriculture:
Pass	$	5,642	$	22,989	$	22,129	$	28,086	$	40,827	$	73,318	$	4,633	$	147	$	197,771
Special Mention	0		0		0		219		0		407		0		0		626
Substandard	0		0		0		0		39		1,216		0		0		1,255
Total Commercial Real Estate - Agriculture	$	5,642	$	22,989	$	22,129	$	28,305	$	40,866	$	74,941	$	4,633	$	147	$	199,652

Commercial Real Estate - Construction
Pass	$	4,103	$	47,620	$	72,993	$	29,262	$	8,940	$	14,312	$	5,841	$	1,648	$	184,719
Special Mention	$	0	$	0	$	0	$	0	$	0	0		0		0		0
Substandard	$	0	$	0	$	0	$	784	$	0	0		0		0		784
Total Commercial Real Estate - Construction	$	4,103	$	47,620	$	72,993	$	30,046	$	8,940	$	14,312	$	5,841	$	1,648	$	185,503

(In thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Loans
Residential - Home Equity
Performing $ 132 $ 1,372 $ 3,533 $ 895 $ 1,353 $ 104 $ 181,932 $ 672 $ 189,993
Nonperforming 0 0 18 0 0 677 2,214 0 2,909
Total Residential - Home Equity $ 132 $ 1,372 $ 3,551 $ 895 $ 1,353 $ 781 $ 184,146 $ 672 $ 192,902
Residential - Mortgages
Performing $ 69,755 $ 297,688 $ 185,225 $ 116,236 $ 145,978 $ 394,149 $ 14,515 $ 196 $ 1,223,742
Nonperforming 0 0 0 451 701 8,642 42 0 9,836
Total Residential - Mortgages $ 69,755 $ 297,688 $ 185,225 $ 116,687 $ 146,679 $ 402,791 $ 14,557 $ 196 $ 1,233,578
Consumer - Direct
Performing $ 7,664 $ 13,471 $ 10,291 $ 7,405 $ 6,165 $ 12,209 $ 6,631 $ 0 $ 63,836
Nonperforming 0 0 39 81 13 0 0 0 133
Total Consumer - Direct $ 7,664 $ 13,471 $ 10,330 $ 7,486 $ 6,178 $ 12,209 $ 6,631 $ 0 $ 63,969
Consumer - Indirect
Performing $ 351 $ 1,304 $ 2,583 $ 1,873 $ 844 $ 329 $ 0 $ 0 $ 7,284
Nonperforming 0 0 68 58 0 37 0 0 163
Total Consumer Indirect $ 351 $ 1,304 $ 2,651 $ 1,931 $ 844 $ 366 $ 0 $ 0 $ 7,447


December 31, 2021
(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans
Commercial and Industrial - Other:
Internal risk grade:
Pass	$	123,996	$	58,432	$	54,116	$	42,093	$	35,725	$	239,093	$	125,476	$	10,039	$	688,970
Special Mention	156		770		450		100		201		393		1,417		0		3,487
Substandard	179		584		47		575		0		637		4,642		0		6,664
Total Commercial and Industrial - Other	$	124,331	$	59,786	$	54,613	$	42,768	$	35,926	$	240,123	$	131,535	$	10,039	$	699,121

Commercial and Industrial - Agriculture:
Pass	$	8,573	$	6,782	$	5,700	$	10,136	$	6,867	$	3,186	$	53,145	$	595	$	94,984
Special Mention	0		0		0		23		0		0		0		0		23
Substandard	0		85		11		0		93		2316		1660		0		4165
Total Commercial and Industrial - Agriculture	$	8,573	$	6,867	$	5,711	$	10,159	$	6,960	$	5,502	$	54,805	$	595	$	99,172

Commercial and Industrial - PPP:
Pass	$	71,260	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	71,260
Special Mention	0		0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		0		0		0		0
Total Commercial and Industrial - PPP	$	71,260	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	71,260

Commercial Real Estate
Pass	$	325,874	$	271,680	$	249,266	$	201,992	$	212,991	$	810,713	$	44,264	$	43,225	$	2,160,005
Special Mention	0		1,763		11,772		3,217		2,167		61,723		358		0		81,000
Substandard	3,482		0		2,262		2,518		8,509		20,401		422		0		37,594
Total Commercial Real Estate	$	329,356	$	273,443	$	263,300	$	207,727	$	223,667	$	892,837	$	45,044	$	43,225	$	2,278,599

Commercial Real Estate - Agriculture:
Pass	$	23,151	$	21,856	$	28,943	$	41,064	$	23,195	$	50,809	$	1,949	$	2,850	$	193,817
Special Mention	0		479		0		0		0		350		35		0		864
Substandard	0		0		0		39		0		1,253		0		0		1,292
Total Commercial Real Estate - Agriculture	$	23,151	$	22,335	$	28,943	$	41,103	$	23,195	$	52,412	$	1,984	$	2,850	$	195,973

Commercial Real Estate - Construction
Pass	$	12,840	$	10,025	$	16,325	$	7,542	$	1,274	$	6,559	$	112,537	$	10,037	$	177,139
Special Mention	0		0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		643		800		0		1,443
Total Commercial Real Estate - Construction	$	12,840	$	10,025	$	16,325	$	7,542	$	1,274	$	7,202	$	113,337	$	10,037	$	178,582

2021

The following tables present credit quality indicators by total loans on an amortized cost basis by origination year as of March 31, 2022 and December 31, ~~2020~~2021, continued:


March 31, 2022																				March 31, 2022
(In thousands)	(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans		(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans

Residential - Home Equity	Residential - Home Equity																			Residential - Home Equity
Performing	Performing	$	1,440	$	2,764	$	1,052	$	2,120	$	722	$	1,106	$	188,614	$	44	$	197,862	Performing	$	216	$	1,255	$	726	$	1,154	$	893	$	4,260	$	168,403	$	676	$	177,583
Nonperforming	Nonperforming	0		18		0		0		194		506		2,247		0		2,965		Nonperforming	0		0		0		15		0		75		2,125		0		2,215
Total Residential - Home Equity	Total Residential - Home Equity	$	1,440	$	2,782	$	1,052	$	2,120	$	916	$	1,612	$	190,861	$	44	$	200,827	Total Residential - Home Equity	$	216	$	1,255	$	726	$	1,169	$	893	$	4,335	$	170,528	$	676	$	179,798

Residential - Mortgages	Residential - Mortgages																			Residential - Mortgages
Performing	Performing	$	305,476	$	193,543	$	123,205	$	155,699	$	178,149	$	255,556	$	11,735	$	1,617	$	1,224,980	Performing	$	59,751	$	280,315	$	256,287	$	128,140	$	73,586	$	506,849	$	0	$	0	$	1,304,928
Nonperforming	Nonperforming	0		258		455		706		1,404		7,305		52		0		10,180		Nonperforming	0		0		0		236		773		6,976		0		0		7,985
Total Residential - Mortgages	Total Residential - Mortgages	$	305,476	$	193,801	$	123,660	$	156,405	$	179,553	$	262,861	$	11,787	$	1,617	$	1,235,160	Total Residential - Mortgages	$	59,751	$	280,315	$	256,287	$	128,376	$	74,359	$	513,825	$	0	$	0	$	1,312,913

Consumer - Direct	Consumer - Direct																			Consumer - Direct
Performing	Performing	$	14,840	$	11,127	$	8,011	$	6,632	$	2,854	$	10,840	$	6,835	$	0	$	61,139	Performing	$	8,374	$	19,893	$	9,903	$	7,929	$	5,515	$	9,365	$	5,306	$	0	$	66,285
Nonperforming	Nonperforming	5		74		167		12		0		2		0		0		260		Nonperforming	0		0		4		25		104		11		172		0		316
Total Consumer - Direct	Total Consumer - Direct	$	14,845	$	11,201	$	8,178	$	6,644	$	2,854	$	10,842	$	6,835	$	0	$	61,399	Total Consumer - Direct	$	8,374	$	19,893	$	9,907	$	7,954	$	5,619	$	9,376	$	5,478	$	0	$	66,601

Consumer - Indirect	Consumer - Indirect																			Consumer - Indirect
Performing	Performing	$	1,424	$	1,878	$	3,327	$	1,128	$	382	$	93	$	0	$	0	$	8,232	Performing	$	0	$	194	$	245	$	1,813	$	1,070	$	280	$	0	$	0	$	3,602
Nonperforming	Nonperforming	0		67		44		7		36		15		0		0		169		Nonperforming	$	0	$	0	$	0	$	196	$	47	$	12	0		0		255
Total Consumer Indirect		$	1,424	$	1,945	$	3,371	$	1,135	$	418	$	108	$	0	$	0	$	8,401
Total Consumer - Indirect																				Total Consumer - Indirect	$	0	$	194	$	245	$	2,009	$	1,117	$	292	$	0	$	0	$	3,857


December 31, 2021
(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans

Residential - Home Equity
Performing	$	2,033	$	1,142	$	3,041	$	1,600	$	1,572	$	3,144	$	161,630	$	6,050	$	180,212
Nonperforming	0		0		16		0		0		604		1,839		0		2,459
Total Residential - Home Equity	$	2,033	$	1,142	$	3,057	$	1,600	$	1,572	$	3,748	$	163,469	$	6,050	$	182,671

Residential - Mortgages
Performing	$	324,967	$	282,202	$	162,574	$	97,778	$	124,221	$	275,133	$	14,112	$	1,205	$	1,282,192
Nonperforming	0		0		241		702		693		7,060		23		0		8,719
Total Residential - Mortgages	$	324,967	$	282,202	$	162,815	$	98,480	$	124,914	$	282,193	$	14,135	$	1,205	$	1,290,911

Consumer - Direct
Performing	$	20,653	$	10,735	$	9,397	$	5,542	$	4,849	$	10,602	$	5,435	$	0	$	67,213
Nonperforming	0		9		44		117		12		0		1		0		183
Total Consumer - Direct	$	20,653	$	10,744	$	9,441	$	5,659	$	4,861	$	10,602	$	5,436	$	0	$	67,396

Consumer - Indirect
Performing	$	1,809	$	854	$	812	$	506	$	362	$	66	$	0	$	0	$	4,409
Nonperforming	0		2		148		81		1		14		0		0		246
Total Consumer - Indirect	$	1,809	$	856	$	960	$	587	$	363	$	80	$	0	$	0	$	4,655

6. Earnings Per Share

Earnings per share in the table below, for the three month periods ended March 31, ~~2021~~2022 and ~~2020~~2021 are calculated under the two-class method as required by ASC Topic 260, Earnings Per Share (ASC 260). ASC 260 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The Company has issued restricted stock awards that contain such rights and are therefore considered participating securities. Basic earnings per common share are calculated by dividing net income allocable to common stock by the weighted average number of common shares, excluding participating securities, during the period. Diluted earnings per common share include the dilutive effect of participating securities.

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		Three Months Ended					Three Months Ended
(In thousands, except share and per share data)	(In thousands, except share and per share data)	3/31/2021		3/31/2020		(In thousands, except share and per share data)	3/31/2022		3/31/2021
Basic	Basic					Basic
Net income available to common shareholders	Net income available to common shareholders	$	25,626	$	7,949	Net income available to common shareholders	$	23,273	$	25,626
Less: income attributable to unvested stock-based compensation awards	Less: income attributable to unvested stock-based compensation awards	(186)		(99)		Less: income attributable to unvested stock-based compensation awards	(76)		(186)
Net earnings allocated to common shareholders	Net earnings allocated to common shareholders	25,440		7,850		Net earnings allocated to common shareholders	23,197		25,440

Weighted average shares outstanding, including unvested stock-based compensation awards	Weighted average shares outstanding, including unvested stock-based compensation awards	14,912,502		14,904,067		Weighted average shares outstanding, including unvested stock-based compensation awards	14,611,709		14,912,502

Less: average unvested stock-based compensation awards	Less: average unvested stock-based compensation awards	(236,092)		(185,119)		Less: average unvested stock-based compensation awards	(211,706)		(236,092)
Weighted average shares outstanding - Basic	Weighted average shares outstanding - Basic	14,676,410		14,718,948		Weighted average shares outstanding - Basic	14,400,003		14,676,410

Diluted	Diluted					Diluted
Net earnings allocated to common shareholders	Net earnings allocated to common shareholders	25,440		7,850		Net earnings allocated to common shareholders	23,197		25,440

Weighted average shares outstanding - Basic	Weighted average shares outstanding - Basic	14,676,410		14,718,948		Weighted average shares outstanding - Basic	14,400,003		14,676,410

Plus: incremental shares from assumed conversion of stock-based compensation awards	Plus: incremental shares from assumed conversion of stock-based compensation awards	81,148		55,321		Plus: incremental shares from assumed conversion of stock-based compensation awards	78,180		81,148
Weighted average shares outstanding - Diluted	Weighted average shares outstanding - Diluted	14,757,558		14,774,269		Weighted average shares outstanding - Diluted	14,478,183		14,757,558

Basic EPS	Basic EPS	$	1.73	$	0.53	Basic EPS	$	1.61	$	1.73
Diluted EPS	Diluted EPS	$	1.72	$	0.53	Diluted EPS	$	1.60	$	1.72

Stock-based compensation awards representing ~~15,983~~1,848 and ~~17,956~~15,983 of common shares during the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively, were not included in the computations of diluted earnings per common share because the effect on those periods would have been anti-dilutive.

7. Other Comprehensive Income (Loss)

The following tables present reclassifications out of the accumulated other comprehensive income (loss) for the three month periods ended March 31, ~~2021~~2022 and ~~2020.~~2021:


		Three Months Ended March 31, 2021							Three Months Ended March 31, 2022
(In thousands)	(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax		(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax
Available-for-sale debt securities:	Available-for-sale debt securities:							Available-for-sale debt securities:
Change in net unrealized gain/loss during the period	Change in net unrealized gain/loss during the period	$	(33,439)	$	8,193	$	(25,246)	Change in net unrealized gain/loss during the period	$	(106,481)	$	26,076	$	(80,405)
Reclassification adjustment for net realized gain on sale of available-for-sale debt securities included in net income		(329)		80		(249)
Reclassification adjustment for net realized loss on sale of available-for-sale debt securities included in net income								Reclassification adjustment for net realized loss on sale of available-for-sale debt securities included in net income	0		0		0
Net unrealized gains/losses	Net unrealized gains/losses	(33,768)		8,273		(25,495)		Net unrealized gains/losses	(106,481)		26,076		(80,405)

Employee benefit plans:	Employee benefit plans:							Employee benefit plans:
Amortization of net retirement plan actuarial gain	Amortization of net retirement plan actuarial gain	764		(187)		577		Amortization of net retirement plan actuarial gain	615		(151)		464
Amortization of net retirement plan prior service cost	Amortization of net retirement plan prior service cost	56		(14)		42		Amortization of net retirement plan prior service cost	56		(14)		42
Employee benefit plans	Employee benefit plans	820		(201)		619		Employee benefit plans	671		(165)		506
Other comprehensive (loss) income	Other comprehensive (loss) income	$	(32,948)	$	8,072	$	(24,876)	Other comprehensive (loss) income	$	(105,810)	$	25,911	$	(79,899)

2224


		Three Months Ended March 31, 2020							Three Months Ended March 31, 2021
(In thousands)	(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax		(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax
Available-for-sale debt securities:	Available-for-sale debt securities:							Available-for-sale debt securities:
Change in net unrealized gain/loss during the period	Change in net unrealized gain/loss during the period	$	29,302	$	(7,179)	$	22,123	Change in net unrealized gain/loss during the period	$	(33,439)	$	8,193	$	(25,246)
Reclassification adjustment for net realized gain on sale of available-for-sale debt securities included in net income	Reclassification adjustment for net realized gain on sale of available-for-sale debt securities included in net income	(429)		105		(324)		Reclassification adjustment for net realized gain on sale of available-for-sale debt securities included in net income	(329)		80		(249)
Net unrealized gains/losses	Net unrealized gains/losses	28,873		(7,074)		21,799		Net unrealized gains/losses	(33,768)		8,273		(25,495)

Employee benefit plans:	Employee benefit plans:							Employee benefit plans:
Amortization of net retirement plan actuarial gain	Amortization of net retirement plan actuarial gain	601		(147)		454		Amortization of net retirement plan actuarial gain	764		(187)		577
Amortization of net retirement plan prior service cost	Amortization of net retirement plan prior service cost	53		(13)		40		Amortization of net retirement plan prior service cost	56		(14)		42
Employee benefit plans	Employee benefit plans	654		(160)		494		Employee benefit plans	820		(201)		619
Other comprehensive income		$	29,527	$	(7,234)	$	22,293
Other comprehensive (loss) income								Other comprehensive (loss) income	$	(32,948)	$	8,072	$	(24,876)

The following table presents the activity in our accumulated other comprehensive income (loss) for the periods indicated:


(In thousands)	(In thousands)	Available-for- Sale Debt Securities		Employee Benefit Plans		Accumulated Other Comprehensive (Loss) Income		(In thousands)	Available-for- Sale Debt Securities		Employee Benefit Plans		Accumulated Other Comprehensive (Loss) Income
Balance at January 1, 2022								Balance at January 1, 2022	$	(14,560)	$	(41,390)	$	(55,950)
Other comprehensive (loss) income before reclassifications								Other comprehensive (loss) income before reclassifications	(80,405)		0		(80,405)
Amounts reclassified from accumulated other comprehensive (loss) income								Amounts reclassified from accumulated other comprehensive (loss) income	0		506		506
Net current-period other comprehensive (loss) income								Net current-period other comprehensive (loss) income	(80,405)		506		(79,899)
Balance at March 31, 2022								Balance at March 31, 2022	$	(94,965)	$	(40,884)	$	(135,849)

Balance at January 1, 2021	Balance at January 1, 2021	$	20,609	$	(52,683)	$	(32,074)	Balance at January 1, 2021	$	20,609	$	(52,683)	$	(32,074)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(25,246)		0		(25,246)		Other comprehensive (loss) income before reclassifications	(25,246)		0		(25,246)
Amounts reclassified from accumulated other comprehensive (loss) income	Amounts reclassified from accumulated other comprehensive (loss) income	(249)		619		370		Amounts reclassified from accumulated other comprehensive (loss) income	(249)		619		370
Net current-period other comprehensive (loss) income	Net current-period other comprehensive (loss) income	(25,495)		619		(24,876)		Net current-period other comprehensive (loss) income	(25,495)		619		(24,876)
Balance at March 31, 2021		$	(4,886)	$	(52,064)	$	(56,950)

Balance at January 1, 2020		$	4,039	$	(47,603)	$	(43,564)
Other comprehensive (loss) income before reclassifications		22,123		0		22,123
Amounts reclassified from accumulated other comprehensive (loss) income		(324)		494		170
Net current-period other comprehensive income		21,799		494		22,293
Balance at March 31, 2020		$	25,838	$	(47,109)	$	(21,271)
March 31, 2021								March 31, 2021	$	(4,886)	$	(52,064)	$	(56,950)

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The following tables present the amounts reclassified out of each component of accumulated other comprehensive (loss) income for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021:


Three Months Ended March 31, 2022
Details about Accumulated other Comprehensive Income (Loss) Components (In thousands)	Amount Reclassified from Accumulated Other Comprehensive (Loss) Income1		Affected Line Item in the Statement Where Net Income is Presented
Available-for-sale debt securities:
Unrealized gains and losses on available-for-sale debt securities	$	0	Net (loss) gain on securities transactions
	0		Tax expense
	0		Net of tax
Employee benefit plans:
Amortization of the following 2
Net retirement plan actuarial loss	(615)		Other operating expense
Net retirement plan prior service cost	(56)		Other operating expense
	(671)		Total before tax
	165		Tax benefit
	$	(506)	Net of tax


Three Months Ended March 31, 2021
Details about Accumulated other Comprehensive Income (Loss) Components (In thousands)	Amount Reclassified from Accumulated Other Comprehensive (Loss) Income1		Affected Line Item in the Statement Where Net Income is Presented
Available-for-sale debt securities:
Unrealized gains and losses on available-for-sale debt securities	$	329	Net (loss) gain on securities transactions
	(80)		Tax expense
	249		Net of tax
Employee benefit plans:
Amortization of the following 2
Net retirement plan actuarial loss	(764)		Other operating expense
Net retirement plan prior service cost	(56)		Other operating expense
	(820)		Total before tax
	201		Tax benefit
	$	(619)	Net of tax


~~Three Months Ended March 31, 2020~~
~~Details about Accumulated other Comprehensive Income (Loss) Components (In thousands)~~	Amount Reclassified from Accumulated Other Comprehensive (Loss) Income1		Affected Line Item in the Statement Where Net Income is Presented
~~Available-for-sale debt securities:~~
~~Unrealized gains and losses on available-for-sale debt securities~~	$	~~429~~	~~Net gain on securities transactions~~
	~~(105)~~		~~Tax expense~~
	~~324~~		~~Net of tax~~
~~Employee benefit plans:~~
~~Amortization of the following~~ 2
~~Net retirement plan actuarial loss~~	~~(601)~~		~~Other operating expense~~
~~Net retirement plan prior service cost~~	~~(53)~~		~~Other operating expense~~
	~~(654)~~		~~Total before tax~~
	~~160~~		~~Tax benefit~~
	$	~~(494)~~	~~Net of tax~~

1 Amounts in parentheses indicated debits in income statement.

2 The accumulated other comprehensive (loss) income components are included in the computation of net periodic benefit cost (See Note 8 - ~~“Employee~~"Employee Benefit ~~Plan”~~Plan").

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8. Employee Benefit Plan

The following table sets forth the amount of the net periodic benefit cost recognized by the Company for the Company’s pension plan, post-retirement plan (Life and Health), and supplemental employee retirement plans ~~(“SERP”~~("SERP") including the following components: service cost, interest cost, expected return on plan assets for the period, amortization of net retirement plan actuarial loss, and prior service cost recognized.

Components of Net Periodic Benefit ~~Cost~~Cost:


		Pension Benefits Three Months Ended				Life and Health Three Months Ended				SERP Benefits Three Months Ended					Pension Benefits Three Months Ended				Life and Health Three Months Ended				SERP Benefits Three Months Ended
(In thousands)	(In thousands)	3/31/2021		3/31/2020		3/31/2021		3/31/2020		3/31/2021		3/31/2020		(In thousands)	3/31/2022		3/31/2021		3/31/2022		3/31/2021		3/31/2022		3/31/2021
Service cost	Service cost	$	0	$	0	$	52	$	41	$	60	$	46	Service cost	$	0	$	0	$	44	$	52	$	52	$	60
Interest cost	Interest cost	487		641		54		64		199		240		Interest cost	463		487		52		54		201		199
Expected return on plan assets	Expected return on plan assets	(1,415)		(1,355)		0		0		0		0		Expected return on plan assets	(1,468)		(1,415)		0		0		0		0
Amortization of net retirement plan actuarial loss	Amortization of net retirement plan actuarial loss	383		350		74		26		307		225		Amortization of net retirement plan actuarial loss	323		383		52		74		240		307
Amortization of net retirement plan prior service (credit) cost	Amortization of net retirement plan prior service (credit) cost	0		(3)		(15)		(15)		71		71		Amortization of net retirement plan prior service (credit) cost	0		0		(15)		(15)		71		71
Net periodic benefit (income) cost	Net periodic benefit (income) cost	$	(545)	$	(367)	$	165	$	116	$	637	$	582	Net periodic benefit (income) cost	$	(682)	$	(545)	$	133	$	165	$	564	$	637

The service component of net periodic benefit cost for the Company's benefit plans is recorded as a part of salaries and wages in the consolidated statements of income. All other components are recorded as part of other operating expenses in the consolidated statements of income.

The Company realized approximately ~~$619,000~~$506,000 and ~~$494,000,~~$619,000, net of tax, as amortization of amounts previously recognized in accumulated other comprehensive (loss) income, for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

The Company is not required to contribute to the pension plan in ~~2021,~~2022, but it may make voluntary contributions. The Company did 0tnot contribute to the pension plan in the first three months of ~~2021~~2022 and ~~2020.~~2021.

9. Other Income and Operating Expense

Other income and operating expense totals are presented in the table below. Components of these totals exceeding 1% of the aggregate of total noninterest income and total noninterest expenses for any periods presented below are stated separately.


		Three Months Ended					Three Months Ended
(In thousands)	(In thousands)	3/31/2021		3/31/2020		(In thousands)	3/31/2022		3/31/2021
Noninterest Income	Noninterest Income					Noninterest Income
Other service charges	Other service charges	$	720	$	805	Other service charges	$	627	$	720
Earnings from corporate owned life insurance	Earnings from corporate owned life insurance	541		324		Earnings from corporate owned life insurance	423		541
Net gains on the sales of loans originated for sale	Net gains on the sales of loans originated for sale	429		176		Net gains on the sales of loans originated for sale	4		429
Other income	Other income	284		799		Other income	422		284
Total other income	Total other income	$	1,974	$	2,104	Total other income	$	1,476	$	1,974
Noninterest Expenses	Noninterest Expenses					Noninterest Expenses
Marketing expense	Marketing expense	$	494	$	941	Marketing expense	$	1,056	$	494
Professional fees	Professional fees	1,894		1,835		Professional fees	1,606		1,894
Legal fees	Legal fees	220		222		Legal fees	210		220
Technology expense	Technology expense	2,927		2,863		Technology expense	3,683		2,927
Cardholder expense	Cardholder expense	787		829		Cardholder expense	1,141		787
Other expenses	Other expenses	4,983		5,185		Other expenses	4,324		4,303
Total other operating expense	Total other operating expense	$	11,305	$	11,875	Total other operating expense	$	12,020	$	10,625

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10. Revenue Recognition

As stated in Note 1 - "Summary of Significant Accounting Policies," in the ~~2020~~2021 Annual Report on Form 10-K, the Company adopted ASU No. 2014-09 "“Revenue from Contracts with ~~Customers”~~Customers" (ASC 606) and all subsequent ASUs that modified ASC 606, on January 1, 2018. ASC 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope of ASC 606. ASC 606 is applicable to noninterest revenue streams such as trust and asset management income, deposit related fees, interchange fees, merchant income, and annuity and insurance commissions. However, the recognition of these revenue streams did not change significantly upon adoption of ASC 606.

Insurance Commissions and Fees

Insurance commissions and fees from insurance product sales are typically earned upon the effective date of bound coverage, as no significant performance obligation remains after coverage is bound. Commission revenue on policies billed in installments is now accrued based upon the completion of the performance obligation creating a current asset for the unbilled revenue until such time as an invoice is generated, typically not to exceed twelve months. The impact of these changes was not significant, but it will result in slight variances from quarter to quarter. Contingent commissions are estimated based upon management’s expectations for the year with an appropriate constraint applied and accrued relative to the recognition of the corresponding core commissions.

Trust & Asset Management

Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered.

Mutual Fund & Investment Income

Mutual fund and investment income consists of other recurring revenue streams such as commissions from sales of mutual funds and other investments, investment advisory fees from the Company’s Strategic Asset Management Services (SAM) wealth management product. Commissions from the sale of mutual funds and other investments are recognized on trade date, which is when the Company has satisfied its performance obligation. The Company also receives periodic service fees (i.e., trailers) from mutual fund companies typically based on a percentage of net asset value, recorded over time, usually monthly or quarterly, as net asset value is determined. Investment advisor fees from the wealth management product is earned over time and based on an annual percentage rate of the net asset value. The investment advisor fees are charged to the customer’s account in advance on the first month of the quarter, and the revenue is recognized over the following three-month period. The Company does engage a third party, LPL Financial, LLC (LPL), to satisfy part of this performance obligation, and therefore this income is reported net of any corresponding expenses paid to LPL.

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Company’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

Card Services Income

Fees, exchange, and other service charges are primarily comprised of debit and credit card income, ATM fees, merchant services income, and other service charges. Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as MasterCard. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. The Company’s performance obligation for fees and exchange are largely satisfied,

2628

and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

Other

Other service charges include revenue from processing wire and ACH transfers, lock box service and safe deposit box rental. Payment on these revenue streams is received primarily through a direct charge to the customer’s account, immediately or in the following month, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time.

The following table presents noninterest income, segregated by revenue streams, for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021:


		Three Months Ended					Three Months Ended
(In thousands)	(In thousands)	03/31/2021		03/31/2020		(In thousands)	03/31/2022		03/31/2021
Noninterest Income	Noninterest Income					Noninterest Income
In-scope of Topic 606:	In-scope of Topic 606:					In-scope of Topic 606:
Commissions and Fees	Commissions and Fees	$	7,684	$	7,385	Commissions and Fees	$	7,964	$	7,684
Installment Billing	Installment Billing	35		(30)		Installment Billing	44		35
Refund of Commissions	Refund of Commissions	(20)		(127)		Refund of Commissions	(28)		(20)
Contract Liabilities/Deferred Revenue	Contract Liabilities/Deferred Revenue	(1)		(4)		Contract Liabilities/Deferred Revenue	(1)		(1)
Contingent Commissions	Contingent Commissions	1,468		821		Contingent Commissions	1,338		1,468
Subtotal Insurance Revenues	Subtotal Insurance Revenues	9,166		8,045		Subtotal Insurance Revenues	9,317		9,166
Trust and Asset Management	Trust and Asset Management	3,366		2,943		Trust and Asset Management	3,503		3,366
Mutual Fund & Investment Income	Mutual Fund & Investment Income	1,307		1,259		Mutual Fund & Investment Income	1,414		1,307
Subtotal Investment Service Income	Subtotal Investment Service Income	4,673		4,202		Subtotal Investment Service Income	4,917		4,673
Service Charges on Deposit Accounts	Service Charges on Deposit Accounts	1,470		1,983		Service Charges on Deposit Accounts	1,779		1,470
Card Services Income	Card Services Income	2,383		2,183		Card Services Income	2,543		2,383
Other	Other	300		314		Other	316		300
Noninterest Income (in-scope of ASC 606)	Noninterest Income (in-scope of ASC 606)	17,992		16,727		Noninterest Income (in-scope of ASC 606)	18,872		17,992
Noninterest Income (out-of-scope of ASC 606)	Noninterest Income (out-of-scope of ASC 606)	1,991		2,233		Noninterest Income (out-of-scope of ASC 606)	1,113		1,991
Total Noninterest Income	Total Noninterest Income	$	19,983	$	18,960	Total Noninterest Income	$	19,985	$	19,983

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Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration or before payment is due, which would result in contract receivables or assets, respectively. A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment or for which payment is due from the customer. The Company’s noninterest revenue streams, excluding some insurance commissions and fees, are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Receivables primarily consist of amounts due for insurance and wealth management services performed for which the Company's performance obligations have been fully satisfied. Receivables for the insurance and wealth management services amounted to ~~$4.1~~$5.2 million and ~~$2.1~~$2.8 million, respectively, at March 31, ~~2021,~~2022, compared to ~~$5.2~~$6.0 million and ~~$2.2~~$2.3 million, respectively, at December 31, ~~2020.~~2021. Additionally, the Company had contract assets related to contingent income of ~~$489,000~~$700,000 and ~~$2.5~~$3.0 million, respectively, at March 31, ~~2021~~2022 and ~~2020,~~December 31, 2021, and contract liabilities of $1.0 million and ~~$2.0~~$1.7 million, respectively at March 31, ~~2021~~2022 and ~~2020.~~December 31, 2021.

Contract Acquisition Costs

In connection with the adoption of ASC 606, an entity is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, sales commission). The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less. Upon adoption of ASC 606, the Company did not capitalize any contract acquisition costs.

11. Financial Guarantees

The Company currently does not issue any guarantees that would require liability recognition or disclosure, other than standby letters of credit. The Company extends standby letters of credit to its customers in the normal course of business. The standby letters of credit are generally short-term. As of March 31, ~~2021,~~2022, the Company’s maximum potential obligation under standby letters of credit was ~~$32.9~~$38.9 million compared to ~~$32.0~~$39.8 million at December 31, ~~2020.~~2021. Management uses the same credit policies to extend standby letters of credit that it uses for on-balance sheet lending decisions and may require collateral to support standby letters of credit based upon its evaluation of the counterparty. Management does not anticipate any significant losses as a result of these transactions, and has determined that the fair value of standby letters of credit is not significant.

12. Segment and Related Information

The Company manages its operations through 3 reportable business segments in accordance with the standards set forth in FASB ASC 280, ~~“Segment Reporting”~~"Segment Reporting": (i) banking ~~(“Banking”~~("Banking"), (ii) insurance (“("Tompkins ~~Insurance”~~Insurance") and (iii) wealth management (“("Tompkins Financial ~~Advisors”~~Advisors"). The Company’s insurance services and wealth management services, other than trust services, are managed separately from the Banking segment.

Banking

~~The Banking segment is primarily comprised of the Company’s 4 banking subsidiaries:~~ Tompkins ~~Trust Company, a commercial bank with 14~~Community Bank has 13 banking offices located in Ithaca, NY and surrounding communities; ~~The Bank of Castile (DBA Tompkins Bank of Castile), a commercial bank with~~ 16 banking offices located in the Genesee Valley region of New York State as well as Monroe County; ~~Mahopac Bank (DBA Tompkins Mahopac Bank), a commercial bank with~~ 14 ~~full-service~~ banking offices located in the counties north of New York City; and ~~VIST Bank (DBA Tompkins VIST Bank), a banking organization with~~ 20 banking offices headquartered and operating in the areas surrounding southeastern Pennsylvania.

Insurance

The Company provides property and casualty insurance services and employee benefits consulting through Tompkins Insurance Agencies, Inc., a 100% wholly-owned subsidiary of the Company, headquartered in Batavia, New York. Tompkins Insurance is an independent insurance agency, representing many major insurance carriers and provides employee benefit consulting to employers in Western and Central New York and Southeastern Pennsylvania, assisting them with their medical, group life insurance and group disability insurance. Tompkins Insurance has 5 stand-alone offices in Western New York.

Wealth Management

The Wealth Management segment is generally organized under the Tompkins Financial Advisors brand. Tompkins Financial Advisors offers a comprehensive suite of financial services to customers, including trust and estate services, investment management and financial and insurance planning for individuals, corporate executives, small business owners and high net worth individuals. Tompkins Financial Advisors has offices in each of the Company’s ~~4 subsidiary banks.~~regional markets.

Summarized financial information concerning the Company’s reportable segments and the reconciliation to the Company’s consolidated results is shown in the following table. Investment in subsidiaries is netted out of the presentations below. The “Intercompany” column identifies the intercompany activities of revenues, expenses and other assets between the banking, insurance and wealth management services segments. The Company accounts for intercompany fees and services at an estimated fair value according to regulatory requirements for the services provided. Intercompany items relate primarily to the use of human resources, information systems, accounting and marketing services provided by ~~any of~~ the ~~banks~~bank and the holding company. All other accounting policies are the same as those described in the summary of significant accounting policies in the Company's ~~2020~~2021 Annual Report on Form 10-K.


Three months ended March 31, 2021
Three months ended March 31, 2022												Three months ended March 31, 2022
(In thousands)	(In thousands)	Banking		Insurance		Wealth Management		Intercompany		Consolidated		(In thousands)	Banking		Insurance		Wealth Management		Intercompany		Consolidated
Interest income	Interest income	$	59,755	$	0	$	0	$	(1)	$	59,754	Interest income	$	59,176	$	1	$	0	$	(1)	$	59,176
Interest expense	Interest expense	4,718		0		0		(1)		4,717		Interest expense	2,563		0		0		(1)		2,562
Net interest income	Net interest income	55,037		0		0		0		55,037		Net interest income	56,613		1		0		0		56,614
Provision for credit loss expense		(2,510)		0		0		0		(2,510)
Credit for credit loss expense												Credit for credit loss expense	(520)		0		0		0		(520)
Noninterest income	Noninterest income	6,318		9,413		4,782		(530)		19,983		Noninterest income	6,193		9,434		4,934		(576)		19,985
Noninterest expense	Noninterest expense	36,009		6,435		3,277		(530)		45,191		Noninterest expense	37,190		6,501		3,724		(576)		46,839
Income before income tax expense	Income before income tax expense	27,856		2,978		1,505		0		32,339		Income before income tax expense	26,136		2,934		1,210		0		30,280
Income tax expense	Income tax expense	5,515		801		364		0		6,680		Income tax expense	5,791		815		370		0		6,976
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	22,341		2,177		1,141		0		25,659		Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	20,345		2,119		840		0		23,304
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	33		0		0		0		33		Less: Net income attributable to noncontrolling interests	31		0		0		0		31
Net Income attributable to Tompkins Financial Corporation	Net Income attributable to Tompkins Financial Corporation	$	22,308	$	2,177	$	1,141	$	0	$	25,626	Net Income attributable to Tompkins Financial Corporation	$	20,314	$	2,119	$	840	$	0	$	23,273

Depreciation and amortization	Depreciation and amortization	$	2,436	$	56	$	14	$	0	$	2,506	Depreciation and amortization	$	2,578	$	44	$	28	$	0	$	2,650
Assets	Assets	8,038,864		43,084		29,091		(15,697)		8,095,342		Assets	7,835,767		44,247		26,684		(15,587)		7,891,111
Goodwill	Goodwill	64,370		19,866		8,211		0		92,447		Goodwill	64,500		19,866		8,081		0		92,447
Other intangibles, net	Other intangibles, net	2,218		2,299		84		0		4,601		Other intangibles, net	1,402		1,917		63		0		3,382
Net loans and leases	Net loans and leases	5,243,454		0		0		0		5,243,454		Net loans and leases	5,021,325		0		0		0		5,021,325
Deposits	Deposits	6,961,266		0		0		(14,725)		6,946,541		Deposits	7,031,223		0		(10)		(14,474)		7,016,739
Total Equity	Total Equity	$	650,326	$	32,569	$	27,041	$	0	$	709,936	Total Equity	$	598,707	$	34,128	$	24,657	$	0	$	657,492

2931


Three months ended March 31, 2020
Three months ended March 31, 2021												Three months ended March 31, 2021
(In thousands)	(In thousands)	Banking		Insurance		Wealth Management		Intercompany		Consolidated		(In thousands)	Banking		Insurance		Wealth Management		Intercompany		Consolidated
Interest income	Interest income	$	63,199	$	1	$	0	$	(1)	$	63,199	Interest income	$	59,755	$	0	$	0	$	(1)	$	59,754
Interest expense	Interest expense	10,231		0		0		(1)		10,230		Interest expense	4,718		0		0		(1)		4,717
Net interest income	Net interest income	52,968		1		0		0		52,969		Net interest income	55,037		0		0		0		55,037
Provision for credit loss expense		16,294		0		0		0		16,294
Credit for credit loss expense												Credit for credit loss expense	(1,830)		0		0		0		(1,830)
Noninterest income	Noninterest income	6,992		8,150		4,374		(556)		18,960		Noninterest income	6,318		9,413		4,782		(530)		19,983
Noninterest expense	Noninterest expense	36,689		6,562		3,045		(556)		45,740		Noninterest expense	35,329		6,435		3,277		(530)		44,511
Income before income tax expense	Income before income tax expense	6,977		1,589		1,329		0		9,895		Income before income tax expense	27,856		2,978		1,505		0		32,339
Income tax expense	Income tax expense	1,157		430		322		0		1,909		Income tax expense	5,515		801		364		0		6,680
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	5,820		1,159		1,007		0		7,986		Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	22,341		2,177		1,141		0		25,659
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	37		0		0		0		37		Less: Net income attributable to noncontrolling interests	33		0		0		0		33
Net Income attributable to Tompkins Financial Corporation	Net Income attributable to Tompkins Financial Corporation	$	5,783	$	1,159	$	1,007	$	0	$	7,949	Net Income attributable to Tompkins Financial Corporation	$	22,308	$	2,177	$	1,141	$	0	$	25,626

Depreciation and amortization	Depreciation and amortization	$	2,485	$	59	$	10	$	0	$	2,554	Depreciation and amortization	$	2,436	$	56	$	14	$	0	$	2,506
Assets	Assets	6,690,574		41,444		24,562		(13,466)		6,743,114		Assets	8,038,864		43,084		29,091		(15,697)		8,095,342
Goodwill	Goodwill	64,585		19,866		7,996		0		92,447		Goodwill	64,370		19,866		8,211		0		92,447
Other intangibles, net	Other intangibles, net	2,972		2,741		134		0		5,847		Other intangibles, net	2,218		2,299		84		0		4,601
Net loans and leases	Net loans and leases	4,885,418		0		0		0		4,885,418		Net loans and leases	5,243,454		0		0		0		5,243,454
Deposits	Deposits	5,422,258		0		0		(12,895)		5,409,363		Deposits	6,961,266		0		0		(14,725)		6,946,541
Total Equity	Total Equity	$	627,223	$	32,632	$	22,742	$	0	$	682,597	Total Equity	$	650,326	$	32,569	$	27,041	$	0	$	709,936

13. Fair Value Measurements

FASB ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. FASB ASC Topic 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Transfers between levels, when determined to be appropriate, are recognized at the end of each reporting period.

The three levels of the fair value hierarchy under FASB ASC Topic 820 are:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

3032

The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, segregated by the level of valuation inputs within the fair value hierarchy used to measure fair ~~value.~~value:


Recurring Fair Value Measurements	Recurring Fair Value Measurements									Recurring Fair Value Measurements
March 31, 2021
March 31, 2022										March 31, 2022
(In thousands)	(In thousands)	Total		(Level 1)		(Level 2)		(Level 3)		(In thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities
U.S. Treasuries	U.S. Treasuries	$	29,111	$	0	$	29,111	$	0	U.S. Treasuries	$	178,903	$	0	$	178,903	$	0
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	787,787		0		787,787		0		Obligations of U.S. Government sponsored entities	802,107		0		802,107		0
Obligations of U.S. states and political subdivisions	Obligations of U.S. states and political subdivisions	119,321		0		119,321		0		Obligations of U.S. states and political subdivisions	95,661		0		95,661		0
Mortgage-backed securities – residential, issued by:	Mortgage-backed securities – residential, issued by:									Mortgage-backed securities – residential, issued by:
U.S. Government agencies	U.S. Government agencies	142,204		0		142,204		0		U.S. Government agencies	66,277		0		66,277		0
U.S. Government sponsored entities	U.S. Government sponsored entities	853,976		0		853,976		0		U.S. Government sponsored entities	835,773		0		835,773		0

U.S. corporate debt securities	U.S. corporate debt securities	2,416		0		2,416		0		U.S. corporate debt securities	2,427		0		2,427		0
Total Available-for-sale debt securities	Total Available-for-sale debt securities	$	1,934,815	$	0	$	1,934,815	$	0	Total Available-for-sale debt securities	$	1,981,148	$	0	$	1,981,148	$	0
Equity securities, at fair value	Equity securities, at fair value	$	916	$	0	$	0	$	916	Equity securities, at fair value	$	855	$	0	$	0	$	855


Recurring Fair Value Measurements	Recurring Fair Value Measurements									Recurring Fair Value Measurements
December 31, 2020
December 31, 2021										December 31, 2021
(In thousands)	(In thousands)	Total		(Level 1)		(Level 2)		(Level 3)		(In thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities

U.S. Treasuries										U.S. Treasuries	$	157,834	$	0	$	157,834	$	0
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	607,480		0		607,480		0		Obligations of U.S. Government sponsored entities	832,373		0		832,373		0
Obligations of U.S. states and political subdivisions	Obligations of U.S. states and political subdivisions	129,746		0		129,746		0		Obligations of U.S. states and political subdivisions	104,169		0		104,169		0
Mortgage-backed securities – residential, issued by:	Mortgage-backed securities – residential, issued by:									Mortgage-backed securities – residential, issued by:
U.S. Government agencies	U.S. Government agencies	182,108		0		182,108		0		U.S. Government agencies	77,157		0		77,157		0
U.S. Government sponsored entities	U.S. Government sponsored entities	705,480		0		705,480		0		U.S. Government sponsored entities	870,556		0		870,556		0

U.S. corporate debt securities	U.S. corporate debt securities	2,379		0		2,379		0		U.S. corporate debt securities	2,424		0		2,424		0
Total Available-for-sale debt securities	Total Available-for-sale debt securities	$	1,627,193	$	0	$	1,627,193	$	0	Total Available-for-sale debt securities	$	2,044,513	$	0	$	2,044,513	$	0
Equity securities, at fair value	Equity securities, at fair value	$	929	$	0	$	0	$	929	Equity securities, at fair value	$	902	$	0	$	0	$	902

Securities: Fair values for U.S. Treasury securities are based on quoted market prices. Fair values for obligations of U.S. government sponsored entities, mortgage-backed securities-residential, obligations of U.S. states and political subdivisions, and U.S. corporate debt securities are based on quoted market prices, where available, as provided by third party pricing vendors. If quoted market prices were not available, fair values are based on quoted market prices of comparable instruments in active markets and/or based upon a matrix pricing methodology, which uses comprehensive interest rate tables to determine market price, movement and yield relationships. These securities are reviewed periodically to determine if there are any events or changes in circumstances that would adversely affect their value.

The change in the fair value of equity securities valued using significant unobservable inputs (level 3), between December 31, ~~2020~~2021 and March 31, ~~2021,~~2022, was immaterial.

There were no transfers between Levels 1, 2 and 3 for the three months ended March 31, ~~2021.~~2022.

The Company determines fair value for its available-for-sale debt securities using an independent bond pricing service for identical assets or very similar securities. The Company determines fair value for its equity securities based on the underlying equity fund’s pricing and valuation procedures which consider recent sales price, market quotations from a pricing service, or market quotes from an independent broker-dealer. The Company has reviewed the pricing sources, including methodologies used, and finds them to be fairly stated.

Certain assets are measured at fair value on a nonrecurring basis. For the Company, these include loans held for sale, collateral dependent individually evaluated loans, and other real estate owned ~~(“OREO”~~("OREO"). ~~During the first quarter~~As of March 31, 2022 and 2021, certain collateral dependent evaluated loans were remeasured and reported at fair value through a specific valuation allowance and/or partial charge-offs for credit losses based upon the fair value of the underlying collateral. Collateral values are estimated using Level 2 inputs based upon observable market data. In addition to collateral dependent evaluated loans, certain other real estate owned were remeasured and reported at fair value based upon the fair value of the underlying collateral. The fair values of other real estate owned are estimated using Level 2 inputs based on observable market data or Level 3 inputs based on customized discounting criteria. In general, the fair values of other real estate owned are based upon appraisals, with discounts made to reflect estimated costs to sell the real estate.inputs. Upon initial recognition, fair value write-downs are taken through a charge-off to the allowance for credit losses. Subsequent fair value write-downs on other real estate owned are reported in other noninterest expense.

Three months ended March 31, 2021
(In thousands) Fair value measurements at reporting
date using: Gain (losses)
from fair
value changes
Assets: As of 03/31/2021 Quoted prices in
active markets for
identical assets
(Level 1) Significant other
observable inputs
(Level 2) Significant
unobservable inputs
(Level 3) Three months ended 03/31/2021
Collateral dependent $ 4,537 $ 0 $ 4,537 $ 0 $ 0

Three months ended March 31, 2020
(In thousands) Fair value measurements at reporting
date using: Gain (losses)
from fair
value changes
Assets: As of 03/31/2020 Quoted prices in
active markets for
identical assets
(Level 1) Significant other
observable inputs
(Level 2) Significant
unobservable inputs
(Level 3) Three months ended 03/31/2020
Collateral dependent $ 4,893 $ 0 $ 4,893 $ 0 $ (1,290)
Other real estate owned 220 0 220 0 (52)

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments at March 31, ~~2021~~2022 and December 31, ~~2020.~~2021. The carrying amounts shown in the table are included in the Consolidated Statements of Condition under the indicated ~~captions.~~captions:


Three months ended March 31, 2022
(In thousands)			Fair value measurements at reporting date using:						Gain (losses) from fair value changes
Assets:	As of 03/31/2022		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Three months ended 03/31/2022
Individually evaluated loans	$	1,624	$	0	$	0	$	1,624	$	0
Other real estate owned	0		0		0		0		22


Three months ended March 31, 2021
(In thousands)			Fair value measurements at reporting date using:						Gain (losses) from fair value changes
Assets:	As of 03/31/2021		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Three months ended 03/31/2021
Individually evaluated loans	$	4,537	$	0	$	4,537	$	0	$	0

The fair value estimates, methods and assumptions set forth below for the Company's financial instruments, including those financial instruments carried at cost, are made solely to comply with disclosures required by U.S. GAAP and should be read in conjunction with the financial statements and notes included herein.

For loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For real estate loans, fair value of the loan’s collateral is determined by third party appraisals, which are then adjusted for the estimated selling and closing costs related to liquidation of the collateral. For this asset class, the actual valuation methods (income, sales comparable, or cost) vary based on the status of the project or property. For example, land is generally based on the sales comparable method while construction is based on the income and/or sales comparable methods. The unobservable inputs may vary depending on the individual assets with no one of the three methods being the predominant approach. The Company reviews the third party appraisal for appropriateness and adjusts the value downward to consider selling and closing costs, which typically range from 5% to 8% of the appraised value. For non-real estate loans, fair value of the loan’s collateral may be determined using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business.

3234


Estimated Fair Value of Financial Instruments	Estimated Fair Value of Financial Instruments											Estimated Fair Value of Financial Instruments
March 31, 2021
March 31, 2022												March 31, 2022
(In thousands)	(In thousands)	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)		(In thousands)	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:	Financial Assets:											Financial Assets:
Cash and cash equivalents	Cash and cash equivalents	$	518,425	$	518,425	$	518,425	$	0	$	0	Cash and cash equivalents	$	175,075	$	175,075	$	175,075	$	0	$	0

Securities - held-to-maturity												Securities - held-to-maturity	303,524		280,917		0		280,917		0
FHLB and other stock	FHLB and other stock	16,382		16,382		0		16,382		0		FHLB and other stock	7,115		7,115		0		7,115		0
Accrued interest receivable	Accrued interest receivable	31,466		31,466		0		31,466		0		Accrued interest receivable	21,550		21,550		0		21,550		0
Loans/leases, net1	Loans/leases, net1	5,243,454		5,264,218		0		4,537		5,259,681		Loans/leases, net1	5,021,325		4,958,348		0		0		4,958,348

Financial Liabilities:	Financial Liabilities:											Financial Liabilities:

Time deposits	Time deposits	$	749,792	$	755,432	$	0	$	755,432	$	0	Time deposits	$	615,936	$	609,446	$	0	$	609,446	$	0
Other deposits	Other deposits	6,196,749		6,196,749		0		6,196,749		0		Other deposits	6,400,803		6,400,803		0		6,400,803		0
Fed funds purchased and securities sold	Fed funds purchased and securities sold											Fed funds purchased and securities sold
under agreements to repurchase	under agreements to repurchase	47,496		47,496		0		47,496		0		under agreements to repurchase	57,115		57,115		0		57,115		0
Other borrowings	Other borrowings	265,000		272,625		0		272,625		0		Other borrowings	60,000		59,260		0		59,260		0
Trust preferred debentures		13,260		18,586		0		18,586		0
Accrued interest payable	Accrued interest payable	1,606		1,606		0		1,606		0		Accrued interest payable	795		795		0		795		0


Estimated Fair Value of Financial Instruments	Estimated Fair Value of Financial Instruments											Estimated Fair Value of Financial Instruments
December 31, 2020
December 31, 2021												December 31, 2021
(In thousands)	(In thousands)	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)		(In thousands)	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:	Financial Assets:											Financial Assets:
Cash and cash equivalents	Cash and cash equivalents	$	388,462	$	388,462	$	388,462	$	0	$	0	Cash and cash equivalents	$	63,107	$	63,107	$	63,107	$	0	$	0

Securities - held to maturity												Securities - held to maturity	284,009		282,288		0		282,288		0
FHLB and other stock	FHLB and other stock	16,382		16,382		0		16,382		0		FHLB and other stock	10,996		10,996		0		10,996		0
Accrued interest receivable	Accrued interest receivable	32,025		32,025		0		32,025		0		Accrued interest receivable	22,597		22,597		0		22,597		0
Loans/leases, net1	Loans/leases, net1	5,208,658		5,226,301		0		22,171		5,204,130		Loans/leases, net1	5,032,624		5,028,734		0		0		5,028,734

Financial Liabilities:	Financial Liabilities:											Financial Liabilities:

Time deposits	Time deposits	$	746,234	$	753,045	$	0	$	753,045	$	0	Time deposits	$	639,674	$	641,517	$	0	$	641,517	$	0
Other deposits	Other deposits	5,691,518		5,691,518		0		5,691,518		0		Other deposits	6,151,761		6,151,761		0		6,151,761		0
Fed funds purchased and securities	Fed funds purchased and securities											Fed funds purchased and securities
sold under agreements to repurchase	sold under agreements to repurchase	65,845		65,845		0		65,845		0		sold under agreements to repurchase	66,787		66,787		0		66,787		0
Other borrowings	Other borrowings	265,000		274,238		0		274,238		0		Other borrowings	124,000		125,700		0		125,700		0
Trust preferred debentures		13,220		18,483		0		18,483		0
Accrued interest payable	Accrued interest payable	1,727		1,727		0		1,727		0		Accrued interest payable	901		901		0		901		0

1 Lease receivables, although excluded from the scope of ASC Topic 825, are included in the estimated fair value amounts at their carrying value.

The following methods and assumptions were used in estimating fair value disclosures for financial instruments.

Cash and Cash Equivalents: The carrying amounts reported in the Consolidated Statements of Condition for cash, noninterest-bearing deposits, money market funds, and Federal funds sold approximate the fair value of those assets.

FHLB Stock: The carrying amount of FHLB stock approximates fair value. If the stock is redeemed, the Company will receive an amount equal to the par value of the stock. For ~~miscellaneous equity securities,~~other stock reported above, carrying value is cost.

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Loans and Leases: Fair value for loans are calculated using an exit price notion. The Company's valuation methodology takes into account factors such as estimated cash flows, including contractual cash flow and assumptions for prepayments; liquidity risk; and credit risk. The fair values of residential loans were estimated using discounted cash flow analyses, based upon available market benchmarks for rates and prepayment assumptions. The fair values of commercial and consumer loans were estimated using discounted cash flow analyses, based upon interest rates currently offered for loans and leases with similar terms and credit quality. The fair values of loans held for sale were determined based upon contractual prices for loans with similar characteristics.

Accrued Interest Receivable and Accrued Interest Payable: The carrying amount of these short term instruments approximate fair value.

Deposits: The fair values disclosed for noninterest bearing accounts and accounts with no stated maturities are equal to the amount payable on demand at the reporting date. The fair value of time deposits is based upon discounted cash flow analyses using rates offered for FHLB advances, which is the Company’s primary alternative source of funds.

~~Trust Preferred Debentures:~~Other borrowings: The fair value of ~~the trust preferred debentures has been estimated using a~~other borrowings is based upon discounted cash flow ~~analysis which uses a discount factor of a market spread over~~analyses using current ~~interest~~ rates offered for FHLB advances, with similar ~~instruments.~~terms.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

BUSINESS

Overview

Tompkins Financial Corporation ~~(“Tompkins”~~("Tompkins" or the ~~“Company”~~"Company") is headquartered in Ithaca, New York and is registered as a Financial Holding Company with the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended. The Company is a locally oriented, community-based financial services organization that offers a full array of products and services, including commercial and consumer banking, leasing, trust and investment management, financial planning and wealth management, and insurance services. At March 31, ~~2021,~~2022, the Company had ~~four~~one wholly-owned banking ~~subsidiaries:~~subsidiary, Tompkins Trust Company (the “Trust Company”), The Bank of Castile (DBA Tompkins Bank of Castile), Mahopac Bank (DBA Tompkins Mahopac Bank), and VIST Bank (DBA Tompkins VIST Bank). The Company’s banks have announced plans for a rebranding effort, pursuant to which the Company’s four wholly-owned banking subsidiaries will be combined into one bank, with The Bank of Castile, Mahopac Bank, and VIST Bank merging with and into Tompkins Trust Company. The combined bank will conduct business under the “Tompkins” brand name, with a legal name of “Tompkins Community Bank.” The Company expects to file applications with applicable regulators during the second quarter of 2021, with the re-branding and combination anticipated to take effect later in 2021, subject to regulatory approval. The Company also has a wholly-owned insurance agency subsidiary, Tompkins Insurance Agencies, Inc. (“("Tompkins ~~Insurance”~~Insurance"). ~~The trust division of the Trust Company~~Tompkins Community Bank provides a full array of investment services, including investment management, trust and estate, financial and tax planning as well as life, disability and long-term care insurance services. The Company’s principal offices are located at 118 E. Seneca Street, P.O. Box 460, 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.”~~"TMP."

The Tompkins strategy centers around our core values and a commitment to delivering long-term value to our clients, communities, and shareholders. A key strategic initiative for the Company is a focus on responsible and sustainable growth, including initiatives to grow organically through our current businesses, as well as through possible acquisitions of financial institutions, branches, and financial services businesses. As such, the Company has acquired, and from time to time considers acquiring, banks, thrift institutions, branch offices of banks or thrift institutions, or other businesses that would complement the Company’s business or its geographic reach. The Company generally targets merger or acquisition partners that are culturally similar and have experienced management and possess either significant market presence or have potential for improved profitability through financial management, economies of scale and expanded services.

Business Segments

Banking services consist primarily of attracting deposits from the areas served by ~~the Company’s four banking subsidiaries’ 64~~Tompkins Community Bank, which has 63 banking offices ~~(44~~(43 offices in New York and 20 offices in Pennsylvania) and using those deposits to originate a variety of commercial loans, agricultural loans, consumer loans, real estate loans, and leases. The Company’s lending function is managed within the guidelines of a comprehensive Board-approved lending policy. Reporting systems are in place to provide management with ongoing information related to loan production, loan quality, concentrations of credit, loan delinquencies, and nonperforming and potential problem loans. Banking services also include a full suite of products such as debit cards, credit cards, remote deposit, electronic banking, mobile banking, cash management, and safe deposit services.

Wealth management services consist of investment management, trust and estate, financial and tax planning as well as life, disability and long-term care insurance services. Wealth management services are provided under the trade name Tompkins Financial Advisors. Tompkins Financial Advisors ~~has office locations,~~offers services to customers of Tompkins Community Bank and ~~services are available to all customers, at~~shares offices in each of the ~~Company's four subsidiary banks.~~banking markets.

Insurance services include property and casualty insurance, employee benefit consulting, and life, long-term care and disability insurance. Tompkins Insurance is headquartered in Batavia, New York. Over the years, Tompkins Insurance has acquired smaller insurance agencies in the market areas serviced by the Company’s banking subsidiaries and successfully consolidated them into Tompkins Insurance. Tompkins Insurance offers services to customers of Tompkins Community Bank and shares offices in each of the ~~Company’s~~ banking ~~subsidiaries by sharing offices with The Bank of Castile, Trust Company, and VIST Bank.~~markets. In addition to these shared offices, Tompkins Insurance has five stand-alone offices in Western New York, and one stand-alone office in Tompkins County, New York.

The Company’s principal expenses are interest on deposits, interest on borrowings, and operating and general administrative expenses, as well as provisions for credit losses. Funding sources, other than deposits, include borrowings, securities sold under agreements to repurchase, and cash flow from lending and investing activities.

Competition

Competition for commercial banking and other financial services is strong in the Company’s market areas. In one or more aspects of its business, the Company’s subsidiaries compete with other commercial banks, savings and loan associations, credit unions, finance companies, Internet-based financial services companies, mutual funds, insurance companies, brokerage and investment banking companies, and other financial intermediaries. Some of these competitors have substantially greater resources and lending capabilities and may offer services that the Company does not currently provide. In addition, many of the Company’s non-bank competitors are not subject to the same extensive Federal regulations that govern financial holding companies and Federally-insured banks.

Competition among financial institutions is based upon interest rates offered on deposit accounts, interest rates charged on loans and other credit and service charges, the quality and scope of the services rendered, the convenience of facilities and services, and, in the case of loans to commercial borrowers, relative lending limits. Management believes that a community-based financial organization is better positioned to establish personalized financial relationships with both commercial customers and individual households. The Company’s community commitment and involvement in its primary market areas, as well as its commitment to quality and personalized financial services, are factors that contribute to the Company’s competitiveness. Management believes that ~~each of~~ the Company’s subsidiary ~~banks~~bank can compete successfully in its primary market areas by making prudent lending decisions quickly and more efficiently than its competitors, without compromising asset quality or profitability. In addition, the Company focuses on providing unparalleled customer service, which includes offering a strong suite of products and services, including products that are accessible to our customers through digital means. Although management feels that this business model has caused the Company to grow its customer base in recent years and allows it to compete effectively in the markets it serves, we cannot assure you that such factors will result in future success.

Regulation

Banking, insurance services and wealth management are highly regulated. As a financial holding company ~~with four~~including a community ~~banks,~~bank, a registered investment adviser, and an insurance agency subsidiary, the Company and its subsidiaries are subject to examination and regulation by the Federal Reserve Board ~~(“FRB”~~("FRB"), Securities and Exchange Commission ~~(“SEC”~~("SEC"), the Federal Deposit Insurance Corporation ~~(“FDIC”~~("FDIC"), the New York State Department of Financial Services, ~~Pennsylvania Department of Banking and Securities,~~ the Financial Industry Regulatory Authority, and the Pennsylvania Insurance Department.

OTHER IMPORTANT INFORMATION

The following discussion is intended to provide an understanding of the consolidated financial condition and results of operations of the Company for the three months ended March 31, ~~2021.~~2022. It should be read in conjunction with the Company’s Audited Consolidated Financial Statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, and the Unaudited Consolidated Financial Statements and notes thereto included in Part I of this Quarterly Report on Form 10-Q.

In this Report, there are comparisons of the Company’s performance to that of a peer group, which is comprised of the group of ~~148~~152 domestic bank holding companies with $3 billion to $10 billion in total assets as defined in the Federal Reserve’s ~~“Bank~~"Bank Holding Company Performance ~~Report”~~Report" for December 31, ~~2020~~2021 (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 quarter numbers.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The statements contained in this Report that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements may be identified by use of such words as "may", "will", "estimate", "intend", "continue", "believe", "expect", "plan", or "anticipate", 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; whether, when and how borrowers will repay deferred amounts and resume scheduled payments; the sufficiency of liquidity sources; the Company's exposure to changes in interest rates, and to new, changed, or extended government/regulatory expectations; the impact of changes in accounting standards; and trends, plans, prospects, growth and strategies. Forward-looking statements are made based on management’s expectations and beliefs concerning future events impacting the Company and are subject to certain uncertainties and factors relating to the Company’s operations and economic environment, all of which are difficult to predict and many of which are beyond the control of the Company, that could cause actual results of the Company to differ materially from those expressed and/or implied by forward-looking statements. The following factors, in addition to those listed as Risk Factors in Item 1A of our Annual

Report on Form 10-K for the year ended December 31, ~~2020,~~2021, are among those that could cause actual results to differ materially from the forward-looking statements: changes in general economic, market and regulatory conditions; the severity and duration of the COVID-19 outbreak and the impact of the outbreak (including the government’s response to the outbreak) on economic and financial markets, potential regulatory actions, and modifications to our operations, products, and services relating thereto; disruptions in our and our customers’ operations and loss of revenue due to pandemics, epidemics, widespread health emergencies, government-imposed travel/business restrictions, or outbreaks of infectious diseases such as the COVID-19, and the associated adverse impact on our financial position, liquidity, and our customers’ abilities or willingness to repay their obligations to us or willingness to obtain financial services products from the Company; a decision to amend or modify the terms under which our customers are obligated to repay amounts owed to us; the development of an interest rate environment that may adversely affect the Company’s interest rate spread, other income or cash flow anticipated from the

Company’s operations, investment and/or lending activities; changes in laws and regulations affecting banks, bank holding companies and/or financial holding companies, such as the Dodd-Frank Act and Basel III and the Economic Growth, Regulatory Relief, and Consumer Protection Act; legislative and regulatory changes in response to COVID-19 with which we and our subsidiaries must comply, including the CARES Act and the Consolidated Appropriations Act, 2021, and the rules and regulations promulgated thereunder, and federal, state and local government mandates; technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; governmental and public policy changes, including environmental regulation; reliance on large customers; uncertainties arising from national and global events, including the war in Ukraine, as well as the potential impact of widespread protests, civil unrest, and political uncertainty on the economy and the financial services industry; and financial resources in the amounts, at the times and on the terms required to support the Company’s future businesses.

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 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”~~("allowance", or ~~“ACL”~~"ACL"), and the review of the securities portfolio for other-than-temporary impairment to be critical accounting policies because of the uncertainty and subjectivity involved in these policies and the material effect that estimates related to these areas can have on the Company’s results of operations.

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~~"Summary of Significant Accounting ~~Policies”~~Policies" in the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. Refer to "Recently Issued Accounting Standards" in Management's Discussion and Analysis in this Quarterly Report on Form 10-Q for a discussion of recent accounting updates.

Critical Accounting Estimates

The Company's significant accounting policies conform with U.S. generally accepted accounting principles ("GAAP") and are described in Note 1 of Notes to Financial Statements. 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 more significant area in which management of the Company applies critical assumptions and estimates includes the following:

•Accounting for credit losses - Effective January 1, 2020 the Company adopted amended accounting guidance that impacts how the allowance for credit losses is determined. Under this accounting guidance, 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 limitations or biases of the models. Subsequent to the forecast period, the Company utilizes longer-term historical loss experience to estimate losses 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 losses in future periods. A discussion of facts and circumstances considered by management in determining the allowance for credit losses is included herein in Note 4 of Notes to Financial Statements.

COVID-19 Pandemic and Recent Events

The COVID-19 global pandemic continued to present health and economic challenges ~~on an unprecedented scale during~~in the first quarter of 2022, but conditions were generally improved from 2021. ~~During the first quarter, the Company continued to focus on the health and well-being of its workforce, meeting its clients' needs, and supporting its communities.~~ The Company has designated a Pandemic Planning Committee, which includes key individuals across the Company as well as members of Senior Management, to oversee the Company’s response to COVID-19, and has implemented a number of risk mitigation measures designed to protect our employees and customers while maintaining services for our customers and community. These measures included restrictions on business travel, establishment of a remoteCompany's hybrid work environment for most ~~non-customer facing employees, and social distancing restrictions for those employees working at our offices and branch locations.~~ ~~In July 2020, we began initiating the reopening of our offices and reinstatement of branch services, and the return of our workforce, but as of March 31, 2021, approximately 85% of our~~ noncustomer facing employees ~~continued~~is in place and travel restrictions eliminated. On March 17, 2022, the NY State Department of Labor announced that the department ended the designation of COVID-19 as an airborne infectious disease that presents a serious risk of harm to ~~work remotely. With a view toward protecting~~public health under the ~~health~~HERO Act and ~~well-being of the Company's workforce, customers, and visitors as we reopen, we implemented several new social distancing~~our protocols ~~and other protective measures, such as temperature screenings, distribution of personal protective equipment, and workforce self-certifications.~~have been updated accordingly.

~~Tompkins continues~~The Company's payment deferral program that was implemented in 2020 to ~~offer~~provide assistance to its customers ~~affected by the COVID-19 pandemic by implementing a payment deferral program to assist both consumer and business borrowers~~ that ~~may be~~were experiencing financial hardship due to ~~COVID-19. Our standard program allowed for~~ the ~~deferral of loan payments for up~~COVID-19 pandemic has been reduced as customers return to ~~90 days; in certain cases we extended additional deferrals or other accommodations. As part of this program, the Company deferred approximately 3,843 loans totaling $1.6 billion.~~repayment status. As of March 31, ~~2021, 3,654 loans totaling approximately $1.5 billion had moved out of the deferral status, and of those loans 0.3% were more than 30 days past due. As of March 31, 2021~~,2022, total loans that continued in a deferral status amounted to approximately ~~$195.6~~$2.6 million, representing ~~3.7%~~0.05% of total ~~loans. W~~loans, and of those loans approximately 0.47% were past due. e expect that loans in the deferral program will continue to accrue interest during the deferral period unless otherwise classified as nonperforming. The provisions of the CARES Act and the interagency guidance issued by Federal banking regulators provided clarification related to modifications and deferral programs to assist borrowers who are negatively impacted by the COVID-19 national emergency. The guidance and clarifications detail certain provisions whereby banks are permitted to make deferrals and modifications to the terms of a loan which would not require the loan to be reported as a troubled debt restructuring ("TDR"). In accordance with the ~~CARES~~Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") and the interagency guidance, the Company elected to adopt the provisions to not report qualified loan modifications as ~~TDRs.~~troubled debt restructurings ("TDRs"). The relief related to TDRs under the CARES Act was extended by the Consolidated Appropriations Act, 2021. Under the Consolidated Appropriations Act, relief under the CARES Act ~~will continue~~was extended until the earlier of (i) 60 days after the date the COVID-19 national emergency comes to an end or (ii) January 1, 2022.

Management continues to monitor credit conditions carefully at the individual borrower level, as well as by industry segment, in order to be responsive to changing credit conditions. It is difficult to assess whether a customer that continues to experience COVID-19 related financial hardship will be able to perform under the original terms of the loan once the deferral period ends. Any such inability to perform may result in increases in past due and nonperforming loans. The table below list certain larger industry concentrations within our loan portfolio and the percentage of each segment that are currently in a deferral status.

Deferral Credit Concentrations
(In thousands) March 31, 2021
Description Portfolio Balance ($) Concentration* Deferral Balance ($) Percent of Loans Currently in Deferral Status
Lessors of Residential Buildings and Dwellings $ 538,144 16.80 % $ 203 0.04 %
Hotels and Motels 205,383 6.40 % 113,789 55.40 %
Dairy Cattle and Milk Production 190,151 5.90 % 0 0.00 %
Health Care and Social Assistance 154,439 4.80 % 0 0.00 %
Lessors of Other Real Estate Property 112,076 3.50 % 6,885 6.14 %
$ 1,200,193 $ 120,877
*Concentration is defined as outstanding loan balances as a percentage of total commercial and commercial real estate loans.

~~The~~In 2020 and 2021, the Company is also ~~participating~~participated in the U.S. Small Business Administration ~~(“SBA”~~("SBA") Paycheck Protection Program ~~(“PPP”~~("PPP"). This program provides borrower guarantees for lenders, and envisions a certain amount of loan forgiveness for loan recipients who properly utilize funds, all in accordance with the rules and regulations established by the SBA for the PPP. The Company began accepting applications for PPP loans on April 3, 2020, and ~~had funded 2,998 loans totaling about $465.6 million when~~continued through the ~~initial~~ program ~~ended. As of April 10, 2021, approximately 2,314 of these PPP loans totaling $300.8 million had been forgiven by the SBA under the terms of the PPP program.~~

~~In addition, on~~end date in 2020. On January 19, 2021, the Company began accepting both first draw and second draw applications for the reopening of the PPP program. AsThe 2021 PPP program funding closed on May 12, 2021. The Company funded over 5,100 applications totaling about $694.0 million in 2020 and 2021. Of the $694.0 million of ~~April 10, 2021,~~PPP loans that the Company ~~had submitted 2,013 applications totaling $223.4~~funded, approximately $664.0 million ~~to the SBA, of which 1,919 applications totaling $215.9 million had~~have been ~~approved~~forgiven by the SBA ~~and disbursed~~under the terms of the program. Total net deferred fees on the remaining balance of PPP loans amounted to ~~customers.~~

As of March 31, 2021, the Company's nonperforming assets represented 0.59% of total assets, down from 0.60% at December 31, 2020. Despite relatively stable trends in nonperforming assets and other delinquency, some customers have experienced continued cash flow stress related to the pandemic, resulting in an increase in loans rated Special Mention, which totaled $185.2$1.0 million at March 31, 2021, up from $90.0 million at March 31, 2020, but down from $189.9 million at December 31, 2020. The downgrades to Special Mention were mainly in the retail, hospitality, and agriculture industries. At March 31, 2021, nonaccrual loans and loans rated Substandard included 12 loans totaling $35.5 million that are currently in deferral status, as described above.2022.

RESULTS OF OPERATION

Performance Summary

Net income for the first quarter of ~~2021~~2022 was ~~$25.6~~$23.3 million or ~~$1.72~~$1.60 diluted earnings per share, compared to ~~$7.9~~$25.6 million or ~~$0.53~~$1.72 diluted earnings per share for the same period in ~~2020.~~2021. The ~~2020 results included~~decrease in net income for the first quarter of 2022 compared to the first quarter of 2021 was mainly a result of a decrease in the credit to the provision for credit loss expense, ~~of $16.3 million resulting from the COVID-19 pandemic~~a decrease in PPP fees and ~~related market and economic impacts, and the adoption of ASU 2016-13.~~an increase in noninterest expenses.

Return on average assets ~~(“ROA”~~("ROA") for the quarter ended March 31, ~~2021~~2022 was ~~1.33%~~1.19%, compared to ~~0.48%~~1.33% for the quarter ended March 31, ~~2020.~~2021. Return on average shareholders’ equity ~~(“ROE”~~("ROE") for the first quarter of ~~2021~~2022 was ~~14.42%~~13.24%, compared to ~~4.71%~~14.42% for the same period in ~~2020.~~2021.

Segment Reporting

The Company operates in the following three business segments, banking, insurance, and wealth management. Insurance is comprised of property and casualty insurance services and employee benefit consulting operated under the Tompkins Insurance Agencies, Inc. subsidiary. Wealth management activities include the results of the Company’s trust, financial planning, and wealth management services, organized under the Tompkins Financial Advisors brand. All other activities are considered banking.

Banking Segment

The banking segment reported net income of ~~$22.3~~$20.3 million for the first quarter of ~~2021, up $16.5~~2022, down $2.0 million or ~~285.8%~~8.9% from net income of ~~$5.8~~$22.3 million for the same period in ~~2020.~~2021.

Net interest income of ~~$55.0~~$56.6 million for the first quarter of ~~2021~~2022 was up ~~$2.1~~$1.6 million or ~~3.9%~~2.9% from the same period in ~~2020.~~2021. The increase in net interest income was mainly a result of a decrease in interest expense. Interest expense ~~driven by lower market interest rates. The provision for credit losses was~~benefited from growth in average deposit balances and a ~~credit of $2.5 million for the three months ended March 31, 2021, which~~decrease in average borrowings. Interest income was down ~~$18.8 million compared to~~in the ~~same period in 2020. The~~ first quarter of ~~2020 included a provision expense of $16.3 million related~~2022 compared to the impact of the economic conditions due to COVID-19 on economic forecasts and other model assumptions relied upon by management in determining the allowance, and reflects the calculation of the allowance for credit losses in accordance with ASU 2016-13. For additional information, see the section titled "The Allowance for Credit Losses" below. Net interest income for the first quarter of 2021 as lower yields offset growth in average earning assets. The first quarter of 2022 included ~~$2.9~~$2.0 million of net deferred loan fees associated with PPP loans, compared to net deferred loan fees of ~~$4.5~~$2.8 million ~~in the fourth quarter of 2020. There were no net deferred loan fees related to PPP loans~~ in the first quarter of ~~2020.~~2021.

The provision for credit losses was a credit of $520,000 for the three months ended March 31, 2022, compared to a credit of $1.8 million for the same period in 2021. For additional information, see the section titled "The Allowance for Credit Losses" below.

Noninterest income of ~~$6.3~~$6.2 million for the three months ended March 31, ~~2021~~2022 was down ~~$674,000~~$125,000 or ~~9.6%~~2.0% compared to the same period in ~~2020.~~2021. The decrease in the three months ended March 31, ~~2021~~2022 from the same period in ~~2020~~2021 was mainly in lower gains on security transactions and lower gains on sales of residential loans in the first quarter of 2022. These decreases were slightly offset by service charges on deposit accounts and ~~reflects a decrease in overdraft fees in~~card services income both being higher than the first quarter of 2021.

Noninterest expense of ~~$36.0~~$37.2 million for the first quarter of ~~2021~~2022 was ~~down $680,000~~up $1.9 million or ~~1.9%~~5.3% from the same period in ~~2020. The decrease was~~2021. Salaries and employee benefits were up compared to the same period in 2021 mainly ~~a result of lower~~due to yearly merit increases and higher healthcare expense. Also contributing to increases in noninterest expense were higher marketing ~~expense~~and technology expenses in the first quarter of ~~2021~~2022 compared to same period in ~~2020.~~2021.

Insurance Segment

The insurance segment reported net income of ~~$2.2~~$2.1 million for the three months ended March 31, ~~2021,~~2022, which was ~~up $1.0 million~~down $58,000 or ~~87.8%~~2.7% compared to the first quarter of ~~2020.~~2021. Noninterest income in the first quarter of ~~2021 increased by $1.3 million or 15.5%~~2022 was flat compared to the same period in ~~2020. The increase in noninterest income in~~2021. Insurance commissions were up $271,000 or 3.5% while contingency revenue was $130,000 less than the first quarter of ~~2021 over the same period in 2020, was mainly in contingency income and property and casualty commissions, which were up $647,000 or 78.7% and $284,000 or 8.2%, respectively.~~2021. Noninterest income for the first quarter of 2021 also included gains on life insurance proceeds of $140,000.

Noninterest expenses were ~~down $127,000~~up $66,000 or ~~1.9%~~1.0% compared to the first quarter of ~~2020.~~2021. The ~~decrease~~increase was mainly in salaries ~~wages and employee benefits and reflects lower commission expense~~ and healthcare ~~expense. Travel and entertainment~~ expenses ~~were also down~~partially offset by decreases in ~~the first quarter of 2021 compared to prior year, mainly due to travel restrictions related to the COVID-19 pandemic.~~other employee benefits.

Wealth Management Segment

The wealth management segment reported net income of ~~$1.1 million~~$840,000 for the three months ended March 31, ~~2021,~~2022, which was ~~up $134,000~~down $301,000 or ~~13.3%~~26.4% compared to the first quarter of ~~2020.~~2021. The ~~increase~~decrease in net income for the three month period ended March 31, ~~2021,~~2022, was mainly attributable to an increase in ~~advisory fee income as well as market improvement from the first quarter of 2020.~~expenses. Noninterest expense for the first quarter of ~~2021~~2022 was up ~~$232,000~~$447,000 or ~~7.6%~~13.6% compared to the same period in ~~2020.~~2021. The increase was ~~primarily within~~mainly attributable to an increase in salaries and employee benefits, mainly ~~driven by merit increases~~incentives and ~~other incentives.~~healthcare, and an increase in technology expenses associated with system upgrades.

4041

Net Interest Income

The following table shows average interest-earning assets and interest-bearing liabilities, and the corresponding yield or cost associated with each for the three month periods ended March 31, ~~2021~~2022 and ~~2020.~~2021:


Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)	Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)													Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)
		Quarter Ended													Quarter Ended
		March 31, 2021						March 31, 2020							March 31, 2022						March 31, 2021
		Average						Average							Average						Average
		Balance				Average		Balance				Average			Balance				Average		Balance				Average
(Dollar amounts in thousands)	(Dollar amounts in thousands)	(QTD)		Interest		Yield/Rate		(QTD)		Interest		Yield/Rate		(Dollar amounts in thousands)	(QTD)		Interest		Yield/Rate		(QTD)		Interest		Yield/Rate
ASSETS	ASSETS													ASSETS
Interest-earning assets	Interest-earning assets													Interest-earning assets
Interest-bearing balances due from banks	Interest-bearing balances due from banks	$	408,642	$	85	0.08	%	$	1,525	$	6	1.58	%	Interest-bearing balances due from banks	$	134,129	$	41	0.12	%	$	408,642	$	85	0.08	%
Securities (1)	Securities (1)													Securities (1)
U.S. Government securities	U.S. Government securities	1,635,143		4,612		1.14	%	1,194,754		6,576		2.21	%	U.S. Government securities	2,293,611		7,362		1.30	%	1,635,143		4,612		1.14	%

State and municipal (2)	State and municipal (2)	120,959		775		2.60	%	97,480		666		2.75	%	State and municipal (2)	101,746		649		2.59	%	120,959		775		2.60	%
Other securities (2)	Other securities (2)	3,425		23		2.75	%	3,422		36		4.23	%	Other securities (2)	3,390		23		2.73	%	3,425		23		2.75	%
Total securities	Total securities	1,759,527		5,410		1.25	%	1,295,656		7,278		2.26	%	Total securities	2,398,747		8,034		1.36	%	1,759,527		5,410		1.25	%
FHLBNY and FRB stock	FHLBNY and FRB stock	16,382		213		5.27	%	26,558		435		6.59	%	FHLBNY and FRB stock	10,098		105		4.23	%	16,382		213		5.27	%
Total loans and leases, net of unearned income (2)(3)	Total loans and leases, net of unearned income (2)(3)	5,291,295		54,454		4.17	%	4,914,034		55,906		4.58	%	Total loans and leases, net of unearned income (2)(3)	5,055,948		51,355		4.12	%	5,291,295		54,454		4.17	%
Total interest-earning assets	Total interest-earning assets	7,475,846		60,162		3.26	%	6,237,773		63,625		4.10	%	Total interest-earning assets	7,598,922		59,535		3.18	%	7,475,846		60,162		3.26	%
Other assets	Other assets	350,826						435,175						Other assets	311,125						350,826
Total assets	Total assets	$	7,826,672					$	6,672,948					Total assets	$	7,910,047					$	7,826,672
LIABILITIES & EQUITY	LIABILITIES & EQUITY													LIABILITIES & EQUITY
Deposits	Deposits													Deposits
Interest-bearing deposits	Interest-bearing deposits													Interest-bearing deposits
Interest bearing checking, savings, & money market	Interest bearing checking, savings, & money market	3,949,304		1,093		0.11	%	3,212,543		4,366		0.55	%	Interest bearing checking, savings, & money market	4,160,946		750		0.07	%	3,949,304		1,093		0.11	%
Time deposits	Time deposits	749,328		2,057		1.11	%	680,248		2,833		1.68	%	Time deposits	631,594		1,296		0.83	%	749,328		2,057		1.11	%
Total interest-bearing deposits	Total interest-bearing deposits	4,698,632		3,150		0.27	%	3,892,791		7,199		0.74	%	Total interest-bearing deposits	4,792,540		2,046		0.17	%	4,698,632		3,150		0.27	%
Federal funds purchased & securities sold under agreements to repurchase	Federal funds purchased & securities sold under agreements to repurchase	59,584		16		0.11	%	63,528		36		0.23	%	Federal funds purchased & securities sold under agreements to repurchase	64,237		16		0.10	%	59,584		16		0.11	%
Other borrowings	Other borrowings	265,001		1,376		2.11	%	498,428		2,706		2.18	%	Other borrowings	125,298		500		1.62	%	265,001		1,376		2.11	%
Trust preferred debentures	Trust preferred debentures	13,234		175		5.35	%	17,050		289		6.82	%	Trust preferred debentures	0		0		0.00	%	13,234		175		5.35	%
Total interest-bearing liabilities	Total interest-bearing liabilities	5,036,451		4,717		0.38	%	4,471,797		10,230		0.92	%	Total interest-bearing liabilities	4,982,075		2,562		0.21	%	5,036,451		4,717		0.38	%
Noninterest bearing deposits	Noninterest bearing deposits	1,949,643						1,409,661						Noninterest bearing deposits	2,108,825						1,949,643
Accrued expenses and other liabilities	Accrued expenses and other liabilities	119,860						112,673						Accrued expenses and other liabilities	106,120						119,860
Total liabilities	Total liabilities	7,105,954						5,994,131						Total liabilities	7,197,020						7,105,954
Tompkins Financial Corporation Shareholders’ equity	Tompkins Financial Corporation Shareholders’ equity	719,290						677,394						Tompkins Financial Corporation Shareholders’ equity	711,601						719,290
Noncontrolling interest	Noncontrolling interest	1,428						1,423						Noncontrolling interest	1,426						1,428
Total equity	Total equity	720,718						678,817						Total equity	713,027						720,718
Total liabilities and equity	Total liabilities and equity	$	7,826,672					$	6,672,948					Total liabilities and equity	$	7,910,047					$	7,826,672
Interest rate spread	Interest rate spread					2.88	%					3.18	%	Interest rate spread					2.97	%					2.88	%
Net interest income/margin on earning assets	Net interest income/margin on earning assets			55,445		3.01	%			53,395		3.44	%	Net interest income/margin on earning assets			56,973		3.04	%			55,445		3.01	%

Tax Equivalent Adjustment	Tax Equivalent Adjustment			(408)						(426)				Tax Equivalent Adjustment			(359)						(408)

Net interest income per consolidated financial statements	Net interest income per consolidated financial statements			$	55,037					$	52,969			Net interest income per consolidated financial statements			$	56,614					$	55,037

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 taxable-equivalent adjustments using an effective income tax rate of 21% in ~~2021~~2022 and ~~2020~~2021 to increase tax exempt interest income to taxable-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 of the Company’s consolidated financial statements included in Part 1 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

4142

Net Interest Income

Net interest income is the Company’s largest source of revenue, representing ~~73.4%~~73.9% of total revenues for the three months ended March 31, ~~2021,~~2022, compared to ~~73.6%~~73.4% for the same period in ~~2020.~~2021. 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. The above table shows average interest-earning assets and interest-bearing liabilities, and the corresponding yield or cost associated with each.

Taxable-equivalent net interest income for the three months ended March 31, ~~2021,~~2022, was up ~~$2.0~~$1.5 million or ~~3.8%~~2.8% over the same period in ~~2020.~~2021. The increase was ~~mainly~~ due to lower interest expense in the first quarter of ~~2021~~March 31, 2022 compared to the same period in ~~2020,~~2021, driven ~~by lower market interest rates and~~ by deposit growth, ~~which contributed to a reduction in higher cost~~including average noninterest bearing deposits and lower average borrowings. For the three months ended March 31, ~~2021,~~2022, average total deposits represented ~~93.6%~~95.9% of average total liabilities compared to ~~88.5%~~93.6% for the same period in ~~2020,~~2021, while total average borrowings represented ~~4.8%~~1.7% of average total liabilities in 2022 compared to 3.7% in 2021. Average earnings assets for the three months ended March 31, 2022 were up $123.1 million or 1.7% over the same period in 2021, ~~and 9.7% in 2020.~~while average asset yields for the first quarter of 2022 were down 8 basis points from the first quarter of 2021.

Net interest margin for the three months ended March 31, ~~2021~~2022 was ~~3.01%~~3.04% compared to ~~3.44%~~3.01% for the same period in ~~2020.~~2021. The ~~decrease~~increase in net interest margin for ~~2021~~2022 compared to ~~2020~~2021 was mainly a result of ~~the~~a decrease in ~~the yield on average interest earning assets exceeding the decrease in average cost of interest bearing liabilities. The decrease in yield on average interest earning assets was~~funding costs, mainly due to ~~lower market rates and a shift in~~ the ~~composition of average earning assets, with a greater~~ mix of ~~lower yielding average~~funding sources, and higher yields and balances of securities ~~and interest bearing balances.~~for the first quarter of 2022 compared to the first quarter of 2021.

Taxable-equivalent interest income for the three months ended March 31, ~~2021,~~2022, was ~~$60.2~~$59.5 million, down ~~5.4%~~1.0% compared to the same period in ~~2020.~~2021, as the yield on average interest-earning assets decreased 8 basis points, while average interest earning assets increased $123.1 million or 1.7%, primarily in the investment portfolio as excess liquidity was invested in securities and loans. The decrease in taxable-equivalent interest income was ~~mainly due to~~in interest and fees on loans, driven by lower ~~asset~~ yields and lower average balances for the three months ended March 31, ~~2021,~~2022, compared to the same period in ~~2020, reflecting lower market~~2021. Average loan balances for the first quarter of 2022 were down $235.3 million or 4.5% from the first quarter of 2021, while the average yield on loans of 4.12% for the first quarter of 2022 was down 5 basis points from the average loan yield in the first quarter of 2021. The decrease in average loan balances was mainly in PPP loans. Interest income in the first quarter of 2022 included $2.0 million of net deferred loan fees related to PPP loans compared to net deferred loan fees of $2.8 million in the first quarter of 2021. For the three months ended March 31, 2022, average balances for securities were up $639.2 million or 36.3% over the first quarter of 2021, while the average yield on securities of 1.36% for the first quarter of 2022 was up 11 basis points. Average interest ~~rates. Average yields for loans and securities~~bearing balances for the three months ended March 31, ~~2021~~2022 were ~~4.17% and 1.25%, respectively,~~ down ~~41 basis points and 101 basis points~~$274.5 million or 67.2% from the same period in 2020. The lower asset yields were partially offset by the growth in average earning assets, including loans, securities and interest bearing balances due from banks. For the three months ended March 31, 2021, average balances for loans, securities and interest bearing balances due from banks, were up $377.3 million, or 7.7%, $463.9 million or 35.8%, and $407.1 million over the first quarter of 2020, respectively. The increase in average loans was mainly in commercial loans, driven largely by PPP loans and commercial real estate loans, while the increase in securities from year-end 2020 was largely due to the investment of excess liquidity resulting from strong deposit growth during the quarter.2021.

Interest expense for the three months ended March 31, ~~2021,~~2022 decreased by ~~$5.5~~$2.2 million or ~~53.9%~~45.7% compared to the same period in ~~2020, driven mainly by lower market~~2021, as the cost of interest ~~rates, and~~bearing liabilities for the first quarter of 2022 decreased 17 basis points from the first quarter of 2021. Funding costs benefited from a decrease in average other borrowings, which were down as a result of the increase in average deposit balances. Average interest bearing deposits for the first quarter of ~~2021~~2022 were up ~~$805.8~~$93.9 million or ~~20.7%~~2.0% compared to the same period in ~~2020.~~2021. Average other borrowings for the three months ended March 31, ~~2021~~2022 were down ~~$233.4~~$139.7 million or ~~46.8%~~52.7% compared to the same period in ~~2020.~~2021. The average cost of interest bearing deposits was 0.17% for the first quarter of 2022, compared to 0.27% for the first quarter of ~~2021, compared to 0.74% for the first quarter of 2020. The average cost of interest bearing liabilities decreased to 0.38% for the first quarter of 2021 from 0.92% for the first quarter of 2020.~~2021.

Provision for Credit Losses

The provision for credit losses represents management’s estimate of the amount necessary to maintain the allowance for credit losses at an appropriate level. The provision for credit losses for the three months ended March 31, ~~2021~~2022 was a credit of ~~$2.5 million~~$520,000 compared to ~~an expense~~a credit of ~~$16.3~~$2.5 million for the same period in ~~2020.The~~2021. Included in the provision credits for the first quarter of ~~2020 reflected the highly uncertain economic conditions~~2022 and 2021 were provision expenses of $214,000 and $680,000, respectively, related to ~~COVID-19 and economic forecasts and other model assumptions relied upon by management in determining the allowance as well as the calculation of the allowance for~~off-balance sheet credit ~~losses in accordance with ASU 2016-13.~~exposures. The ~~favorable variance~~provision credit in the first quarter of ~~2021 is largely~~2022 was mainly driven by ~~improvements~~improvement in ~~economic forecasts compared to~~ the ~~first quarter of 2020.~~ macroeconomic factor assumptions utilized in the calculation as well as was improved credit quality. The section captioned ~~“Financial~~"Financial Condition – The Allowance for Credit ~~Losses”~~Losses" below has further details on the allowance for credit losses and asset quality metrics.

Noninterest Income

Noninterest income was $20.0 million for the first quarter of ~~2021,~~2022, which was ~~up 5.4% compared to~~in line with the same period prior year. Noninterest income represented ~~26.6%~~26.1% of total revenue for the three months ended March 31, ~~2021,~~2022, compared to ~~26.4%~~26.6% for the same period in ~~2020.~~2021.

Insurance commissions and fees ~~were $9.2~~of $9.3 million ~~for~~in the first quarter of ~~2021,~~2022 was up ~~13.9%~~$151,000 or 1.7% compared to the same period prior year. ~~The increase in insurance~~Insurance commissions ~~and fees in~~were up $271,000 or 3.5% while contingency revenue was down $130,000 compared to the first quarter of ~~2021 over the same period in 2020, was mainly in contingency income and property and casualty commissions, which were up $647,000 or 78.7% and $284,000 or 8.2%, respectively.~~2021.

4243

Investment services income of ~~$4.7~~$4.9 million in the first quarter of ~~2021~~2022 was up ~~$471,000~~$244,000 or ~~11.2%~~5.2% compared to the first quarter of ~~2020~~2021, mainly due to an increase in ~~advisory fee income resulting from growth in assets under~~investment management ~~as well as market improvement from the first quarter of 2020.~~services. Investment services income includes investment management, trust ~~services,~~and estate, financial and tax planning, ~~wealth management services,~~ and brokerage related services. The fair value of assets managed by, or in custody of, Tompkins was $4.4 billion at March 31, 2022, compared to $4.8 billion at March 31, ~~2021, compared to $3.9 billion at March 31, 2020.~~2021. The fair value of assets in custody at March 31, ~~2021~~2022 includes ~~$1.4~~$1.3 billion of Company-owned securities where Tompkins Trust Company is custodian.

Card services income of ~~$2.4~~$2.5 million in the first quarter of ~~2021~~2022 was up ~~$200,000~~$160,000 or ~~9.2%~~6.7% compared to the same period in ~~2020.~~2021. Debit card income was up ~~$240,000~~$70,000 or ~~16.1%~~4.0% in the first quarter of ~~2021~~2022 compared to the same period in ~~2020,~~2021, driven by higher transaction volume in ~~2021~~2022 compared to the same period in ~~2020.~~2021.

~~The Company recognized $317,000 in gains on sales/calls of available-for-sale debt securities in the first quarter of 2021, compared to $443,000 of gains in the first three months of~~ ~~2020. The sales of available-for-sale debt securities were generally the result of routine portfolio maintenance and interest rate risk management.~~

Other income of ~~$2.0~~$1.5 million in the first quarter of ~~2021~~2022 was down ~~$130,000~~$498,000 or ~~6.2%~~25.2% compared to the same period in ~~2020.~~ 2021. The decrease in the first quarter of ~~2021~~2022 was mainly attributable to ~~the recapture~~a decrease in gains on sales of ~~fees from~~residential loans ~~that had been previously charged off and were recognized in~~of $425,000, compared to the first quarter of ~~2020.~~2021.

Noninterest Expense

Noninterest expense was ~~$45.2~~$46.8 million for the first quarter of ~~2021, down 1.2%~~2022, up 5.2% compared toto the same period in ~~2020.~~2021. Noninterest expense as a percentage of total revenue for the first quarter of ~~2021~~2022 was ~~60.2%~~61.2% compared to ~~63.6% for~~60.2% for the same period in ~~2020.~~2021.

Expenses associated with salaries and wages and employee benefits are the largest component of noninterest expense, representing ~~62.3%~~62.1% of total noninterest expense for the three months ended March 31, ~~2021~~2022 and ~~61.6%~~62.3% for the three months ended March 31, ~~2020.~~2021. Salaries and wages and employee benefit expense for the three months ended March 31, ~~2021 was flat compared to the~~2022 were up $925,000 or 3.3% for same period in ~~2020 as increases~~2021 resulting from normal merit adjustments and ~~incentive compensation were mainly offset by lower health care costs, and~~ an increase in ~~salary costs deferred as loan origination costs primarily related to the high volume of PPP loan originations during~~healthcare expense in the first quarter of ~~2021. Salary cost deferred in connection with loan originations will be recognized as a yield adjustment component of interest income~~2022 over the ~~remaining terms of these loans.~~same period prior year.

Other expense categories not related to compensation and benefits, such as marketing, technology, ~~expense~~ and professional ~~fees,~~fee expenses, for the three months ended March 31, ~~2021,~~2022, were ~~in line with~~up $1.4 million or 13.1% compared to the same period in ~~2020.~~2021. Marketing expenses for the three months ended March 31, ~~2021,~~2022 were ~~down $447,000~~up $562,000 or 113.7% from the same period in ~~2020, mainly a result of fewer events held~~2021, partly due to the ~~pandemic. FDIC expense~~consolidation of the Company's four banking subsidiaries. Technology expenses for the first quarter of ~~2021 was~~2022 were up ~~$252,000~~$756,000 or ~~51.2%~~25.8% over the same period in ~~2020,~~2021, driven largely by ~~the growth in total assets.~~software related conversion expenses. Business related travel and entertainment expenses for the first quarter of ~~2021~~2022 were ~~down $249,000~~up $102,000 or ~~78.2%~~147.4% from the same period in ~~2020. Other expenses for~~2021 due to increased travel and entertainment activities as compared to the ~~three months ended March 31, 2021 and 2020, included $680,000 and $465,000, respectively,~~prior period as the economy continued to ~~increase~~open following the ~~allowance for off-balance sheet exposures.~~most recent peak of the pandemic.

Income Tax Expense

The provision for income taxes was $7.0 million for an effective rate of 23.0% for the first quarter of 2022, compared to tax expense of $6.7 million ~~for~~and an effective rate of 20.7% for the ~~first quarter of 2021, compared to tax expense of $1.9 million and an effective rate of 19.3% for the~~ same quarter in ~~2020.~~2021. The effective rates differ from the U.S. statutory rate primarily due to the effect of tax-exempt income from loans, securities and life insurance assets, and the income tax effects associated with stock based compensation. The increase in the effective tax rate for the three months ended March 31, 2022, over the same period in 2021, is largely due to the anticipated loss of certain New York State tax benefits due to the expectation that average assets will exceed $8.0 billion for the 2022 tax year.

The Company's banking subsidiary has an investment in a real estate investment trust that provides certain benefits on its New York State tax return for qualifying entities. A condition to claim the benefit is that the consolidated company has average assets of no more than $8 billion for the taxable year. The Company expects average assets to exceed the $8.0 billion threshold for the 2022 tax year. As of March 31, 2022, the Company's consolidated average assets, as defined by New York tax law, were slightly under the $8.0 billion threshold. The Company will continue to monitor the consolidated average assets during 2022 to determine future eligibility.

FINANCIAL CONDITION

Total assets were ~~$8.1~~$7.9 billion at March 31, ~~2021,~~2022, up ~~$473.2~~$71.1 million or ~~6.2%~~0.9% from December 31, ~~2020.~~2021. The increase in total assets was mainly in ~~securities and~~ cash and cash equivalents ~~balances.~~balances, which were up $112.0 million or 177.4%. Total securities were ~~up $307.6~~down $43.9 million or ~~18.9%~~1.9% compared to December 31, ~~2020, while total cash and cash equivalents were up $130.0 million or 33.5% over December 31, 2020.~~2021. The decrease was the result of an increase in ~~securities and cash and cash equivalents~~unrealized losses on the available-for-sale portfolio from $19.3 million at year-end ~~2020 was largely due~~2021 to $125.8 million at March 31, 2022, as a result of the ~~investment~~increase in market interest rates in the first quarter of ~~excess liquidity into securities and interest bearing balances.~~2022. Total loan balances ~~were $5.3~~of $5.1 billion at March 31, ~~2021~~2022 were in line with year-end ~~2020.~~2021. Total deposits were up ~~$508.8~~$225.3 million or ~~7.9%~~3.3% from December 31, ~~2020.~~2021. The increase in deposits at March 31, 2022 was mainly in checking, savings and money market accounts.

4344

Securities

As of March 31, ~~2021,~~2022, the Company’s securities portfolio was ~~$1.9~~$2.3 billion or ~~23.9%~~29.0% of total assets, compared to ~~$1.6~~$2.3 billion or ~~21.4%~~29.8% of total assets at year-end ~~2020. The increase in securities from year-end 2020, was largely due to the investment of excess liquidity resulting from strong deposit growth during the quarter.~~2021. The following table details the composition of ~~available-for-sale debt securities.~~the securities portfolio:


Available-for-Sale Debt Securities	Available-for-Sale Debt Securities									Available-for-Sale Debt Securities
		March 31, 2021				December 31, 2020					March 31, 2022				December 31, 2021
(In thousands)	(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value

U.S. Treasuries	U.S. Treasuries	$	29,634	$	29,111	$0				U.S. Treasuries	$	190,997	$	178,903	$160,291		$157,834
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	793,360		787,787		599,652		607,480		Obligations of U.S. Government sponsored entities	852,733		802,107		843,218		832,373
Obligations of U.S. states and political subdivisions	Obligations of U.S. states and political subdivisions	117,242		119,321		126,642		129,746		Obligations of U.S. states and political subdivisions	100,287		95,661		102,177		104,169
Mortgage-backed securities - residential, issued by	Mortgage-backed securities - residential, issued by									Mortgage-backed securities - residential, issued by
U.S. Government agencies	U.S. Government agencies	141,110		142,204		179,538		182,108		U.S. Government agencies	68,435		66,277		76,502		77,157
U.S. Government sponsored entities	U.S. Government sponsored entities	857,438		853,976		691,562		705,480		U.S. Government sponsored entities	891,954		835,773		879,102		870,556

U.S. corporate debt securities	U.S. corporate debt securities	2,500		2,416		2,500		2,379		U.S. corporate debt securities	2,500		2,427		2,500		2,424
Total available-for-sale debt securities	Total available-for-sale debt securities	$	1,941,284	$	1,934,815	$	1,599,894	$	1,627,193	Total available-for-sale debt securities	$	2,106,906	$	1,981,148	$	2,063,790	$	2,044,513


Held-to-Maturity Debt Securities
	March 31, 2022				December 31, 2021
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. Treasuries	$86,635		$80,633		$86,689		$86,368
Obligations of U.S. Government sponsored entities	216,889		200,284		197,320		195,920

Total held-to-maturity debt securities	$	303,524	$	280,917	$	284,009	$	282,288

The increase in unrealized losses, which reflects the amount that amortized cost exceeds fair value, related to the available-for-sale debt portfolio was due primarily to changes in market interest rates during the first three months of ~~2021.~~2022. Management’s policy is to purchase investment grade securities that on average have relatively short duration, which helps mitigate interest rate risk and provides sources of liquidity without significant risk to capital.

~~The Company evaluates~~For available-for-sale debt securities in an unrealized loss ~~positions at each measurement date~~position, the Company evaluates the securities to determine whether the decline in the fair value below the amortized cost basis ~~(impairment)~~(technical impairment) is ~~due to credit-related factors~~the result of changes in interest rates or ~~noncredit-related factors.~~reflects a fundamental change in the credit worthiness of the underlying issuer. Any impairment that is not credit related is recognized in other comprehensive income (loss), net of applicable taxes. Credit-related impairment is recognized as an ~~ACL~~allowance for credit losses ("ACL") on the ~~balance sheet,~~Statements of Condition, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to ~~earnings via credit loss expense.~~earnings. Both the ACL and the adjustment to net income may be reversed if conditions change.

The ~~Company determined that at March 31, 2021, all impaired available-for-sale debt~~gross unrealized losses reported for residential mortgage-backed securities ~~experienced a decline~~relate to investment securities issued by U.S. government sponsored entities such as Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, and U.S. government agencies such as Government National Mortgage Association. The total gross unrealized losses, shown in ~~fair value below~~ the ~~amortized cost basis~~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 ~~noncredit-related factors. In addition,~~ the credit-related quality of the investment securities. The Company does not ~~intend~~have the intent to sell ~~other-than-temporarily impaired investment~~these securities ~~that are in an unrealized loss position until recovery of unrealized losses (which may be until maturity),~~ and does not believe it is ~~not more-likely-than~~more likely than not that the Company will be required to sell ~~the investment~~these securities before a recovery of ~~their~~ amortized ~~cost~~cost.

Management measures expected credit losses on held-to-maturity debt securities on a collective basis ~~which may be at maturity. Therefore,~~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 ~~Company carried no ACL at~~accounting policy election to exclude accrued interest receivable on held-to-maturity debt securities from the estimate of credit losses. As of March 31, ~~2021 and there was no credit loss expense recognized by~~2022, the ~~Company with respect to the securities portfolio during the three months ended March 31, 2021.~~held-to-

4445

Loans and Leases
Loans and leases as of the end of the first quarter and prior year-end periods were as follows:
(In thousands) 03/31/2021 12/31/2020
Commercial and industrial
Agriculture $ 80,692 $ 94,489
Commercial and industrial other 762,956 792,987
PPP loans 370,007 291,252
Subtotal commercial and industrial 1,213,655 1,178,728
Commercial real estate
Construction 176,730 163,016
Agriculture 200,211 201,866
Commercial real estate other 2,202,898 2,204,310
Subtotal commercial real estate 2,579,839 2,569,192
Residential real estate
Home equity 192,902 200,827
Mortgages 1,233,578 1,235,160
Subtotal residential real estate 1,426,480 1,435,987
Consumer and other
Indirect 7,447 8,401
Consumer and other 63,969 61,399
Subtotal consumer and other 71,416 69,800
Leases 15,056 14,203
Total loans and leases 5,306,446 5,267,910
Less: unearned income and deferred costs and fees (13,653) (7,583)
Total loans and leases, net of unearned income and deferred costs and fees $ 5,292,793 $ 5,260,327
maturity portfolio consisted of U.S. Treasury securities and securities issued by U.S. government-sponsored enterprises, including The Federal National Mortgage Agency and the 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 March 31, 2022.

The Company did not recognize any net credit impairment charge to earnings on investment securities in the first quarter of 2022.


Loans and Leases
Loans and leases as of the end of the first quarter and prior year-end periods were as follows:

(In thousands)	03/31/2022		12/31/2021
Commercial and industrial
Agriculture	$	81,269	$	99,172
Commercial and industrial other	708,626		699,121
PPP loans	24,095		71,260
Subtotal commercial and industrial	813,990		869,553
Commercial real estate
Construction	185,503		178,582
Agriculture	199,652		195,973
Commercial real estate other	2,292,099		2,278,599
Subtotal commercial real estate	2,677,254		2,653,154
Residential real estate
Home equity	179,798		182,671
Mortgages	1,312,913		1,290,911
Subtotal residential real estate	1,492,711		1,473,582
Consumer and other
Indirect	3,857		4,655
Consumer and other	66,601		67,396
Subtotal consumer and other	70,458		72,051
Leases	13,881		13,948
Total loans and leases	5,068,294		5,082,288
Less: unearned income and deferred costs and fees	(4,843)		(6,821)
Total loans and leases, net of unearned income and deferred costs and fees	$	5,063,451	$	5,075,467

Total loans and leases of ~~$5.3~~$5.1 billion at March 31, ~~2021~~2022 were ~~up $32.5~~down $12.0 million or ~~0.6%~~0.2% from December 31, ~~2020.~~2021. The decrease was mainly in PPP loans, which were down $47.2 million to $24.1 million at March 31, 2022, from $71.3 million at December 31, 2021. Excluding PPP loans, total loans at March 31, 2022 were up $35.1 million or 0.7% from December 31, 2021. As of March 31, ~~2021,~~2022, total loans and leases represented ~~65.4%~~64.2% of total assets compared to ~~69.0%~~64.9% of total assets at December 31, ~~2020.~~2021.

Residential real estate loans, including home equity loans were ~~$1.4~~$1.5 billion at March 31, ~~2021, down $9.5~~2022, up $19.1 million or ~~0.7%~~1.3% compared to December 31, ~~2020,~~2021, and comprised ~~27.0%~~29.5% of total loans and leases at March 31, ~~2021.~~2022. Changes in residential loan balances are 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 Committee meets regularly and establishes standards for selling and retaining residential real estate mortgage originations.

The Company may sell residential real estate loans in the secondary market based on interest rate considerations. These residential real estate loans are generally sold to Federal Home Loan Mortgage Corporation ~~(“FHLMC”~~("FHLMC") or State of New York Mortgage Agency ~~(“SONYMA”~~("SONYMA") 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 the first three months of ~~2021~~2022 and ~~2020,~~2021, the Company sold residential loans totaling ~~$10.5 million~~$135,000 and ~~$4.1~~$10.5 million, respectively, recognizing gains on these sales of ~~$429,000~~$4,000 and ~~$176,000,~~$429,000, respectively. These residential real estate loans were sold without recourse in accordance with standard secondary market loan sale agreements. When residential mortgage loans are sold, the Company typically retains all servicing rights, which provides the Company with a source of fee income. Mortgage servicing rights totaled $1.0 million at both March 31, ~~2021~~2022 and ~~$805,000 at~~ December 31, ~~2020.~~2021.

Commercial real estate loans and commercial and industrial loans totaled ~~$2.6~~$2.7 billion and ~~$1.2 billion,~~$814.0 million, respectively, and represented ~~48.7%~~52.9% and ~~22.9%~~16.1%, respectively of total loans as of March 31, ~~2021.~~2022. The commercial real estate portfolio was ~~in line with~~up $24.1 million or 0.9% over year-end ~~2020,~~2021, while commercial and industrial loans were ~~up 3.0%.~~down $55.6 million or 6.4% from year-end 2021. The ~~increase~~decrease in commercial and industrial loans over year-end ~~2020~~2021 was mainly in PPP loans, which were ~~up $78.8~~down $47.2 million or ~~27.0%~~66.2% to ~~$370.0 million. The Company originated $200.8~~$24.1 million ~~of PPP loans in the first quarter of 2021; these originations were partially offset by $122.0 million of PPP loans originated in 2020 being forgiven by the SBA during the first quarter of 2021.~~at March 31, 2022.

As of March 31, ~~2021,~~2022, agriculturally-related loans totaled $280.9 million or ~~5.3%~~5.5% of total loans and leases, compared to ~~$296.4~~$295.1 million or ~~5.6%~~5.8% of total loans and leases at December 31, ~~2020.~~2021. Agriculturally-related loans include loans to dairy farms and crop farms. Agricultural-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 Company has adopted comprehensive lending policies, underwriting standards and loan review procedures. Management reviews these policies and procedures on a regular basis. The Company discussed its lending policies and underwriting guidelines for its various lending portfolios in Note 4 – ~~“Loans~~"Loans and ~~Leases”~~Leases" in the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. There have been no significant changes in these policies and guidelines since the date of that report. 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.

The Company’s loan and lease customers are located primarily in the New York and Pennsylvania communities served by its ~~four~~ subsidiary ~~banks.~~bank. Although operating in numerous communities in New York State 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.

Allowance for Credit Losses

The below tables represents the allowance for credit losses as of March 31, ~~2021~~2022 and December 31, ~~2020.~~2021. The tables provide, as of the dates indicated, an allocation of the allowance for credit losses for inherent loan losses by type. The allocation is neither indicative of the specific amounts or the loan categories in which future charge-offs may occur, nor is it an indicator of future loss trends. The allocation of the allowance for credit losses to each category does not restrict the use of the allowance to absorb losses in any category.

(In thousands) 3/31/2021 12/31/2020
Allowance for credit losses
Commercial and industrial $ 7,750 $ 9,239
Commercial real estate 30,467 30,546
Residential real estate 9,470 10,257
Consumer and other 1,583 1,562
Finance leases 69 65
Total $ 49,339 $ 51,669


(In thousands)	3/31/2022		12/31/2021
Allowance for credit losses
Commercial and industrial	$	7,027	$	6,335
Commercial real estate	22,982		24,813
Residential real estate	10,447		10,139
Consumer and other	1,588		1,492
Finance leases	82		64
Total	$	42,126	$	42,843

As of March 31, ~~2021,~~2022, the total allowance for credit losses for loans was ~~$49.3~~$42.1 million, down ~~$2.3 million~~$717,000 or ~~4.5%~~1.7% compared to December 31, ~~2020.~~2021. The ACL as a percentage of total loans measured ~~0.93%~~0.83% at March 31, ~~2021,~~2022, compared to ~~0.98%~~0.84% at December 31, ~~2020.~~2021.

The decrease in the ACL from year-end ~~2020 reflects lower estimated reserves~~2021 was driven by continued improvements in unemployment forecasts ~~for unemployment~~ and ~~the gross domestic product~~decreases in qualitative adjustments used in our model, ~~and lower than expected net credit losses of $412,000 reported for the trailing twelve-month period ended March 31, 2021. The decrease in the ACL is partially~~ offset by ~~increases in qualitative reserves for loans within the hospitality and certain other industries that may have~~ an ~~elevated level of risk~~increase due to ~~the adverse economic impact~~lower forecasted GDP growth. Qualitative reserves established in 2020 and 2021 as a result of the COVID-19 ~~pandemic.~~pandemic to address specific portfolios with increased risk characteristics, including loans in our hotel portfolio, and loans in our deferral program, continue to move lower as a result of improved conditions in the hotel industry and payment performance of loans coming out of the deferral program. Although we have seen improved occupancy rates in the hospitality industry in recent months, resulting in a decrease of qualitative reserves, we continue to closely monitor this industry. Qualitative reserves related to loans that remain in the Company's payment deferral program implemented in response to the COVID-19 pandemic have also slightly increased, although we are encouraged to see low delinquency rates of 0.13% for customers who returned to repayment status during 2020. The qualitative reserves were added to all portfolio segments with the majority in commercial real estate and then commercial and residential real estate. The Company had net recoveries of $180,000 in the first quarter of 2021, compared to net charge-offs of $1.2 million for the same period in 2020.

In addition to the decrease in the ACL, the decrease in the ratio of ACL to total loans also reflects the growth in PPP loans from year end 2020. Since PPP loans are guaranteed by the SBA, there are no reserves allocated to these loans. Excluding PPP loans from total loans results in an ACL to total loan ratio of 1.00% at March 31, 2021, down from 1.04% at December 31, 2020.

Asset quality measures at March 31, ~~2021~~2022 were generally ~~in line with~~favorable compared to December 31, ~~2020.~~2021. Loans internally-classified Special Mention or Substandard were ~~up $4.7~~down $2.5 million or ~~2.5%~~1.8% compared to December 31, ~~2020.~~2021. Nonperforming loans and leases were ~~up $1.9 million~~down $893,000 or ~~4.3%~~2.9% from year end ~~2020~~2021 and represented ~~0.90%~~0.60% of total loans at March 31, ~~2021~~2022 compared to ~~0.87%~~0.61% at December 31, ~~2020.~~2021. The allowance for credit losses covered ~~103.38%~~139.20% of nonperforming loans and leases as of March 31, ~~2021,~~2022, compared to ~~112.87%~~137.51% at December 31, ~~2020.~~

2021. The Company had net recoveries of $17,000 in the first quarter of 2022, compared to net recoveries of $180,000 for the same period in 2021.

4748

Activity in the Company’s allowance for credit losses during the first three months of ~~2021~~2022 and ~~2020~~2021 is illustrated in the table ~~below.~~below:


Analysis of the Allowance for Credit Losses	Analysis of the Allowance for Credit Losses							Analysis of the Allowance for Credit Losses
(In thousands)	(In thousands)	3/31/2021			3/31/2020			(In thousands)	3/31/2022			3/31/2021
Average loans outstanding during period	Average loans outstanding during period	$	5,291,295		$	4,914,035		Average loans outstanding during period	$	5,055,948		$	5,291,295
Allowance at beginning or year, prior to adoption of ASU 2016-13		51,669			39,892
Impact of adopting ASU 2016-13		0			(2,534)
Balance of allowance at beginning of year	Balance of allowance at beginning of year	51,669			37,358			Balance of allowance at beginning of year	42,843			51,669
LOANS CHARGED-OFF:	LOANS CHARGED-OFF:							LOANS CHARGED-OFF:
Commercial and industrial	Commercial and industrial	116			1			Commercial and industrial	23			116
Commercial real estate	Commercial real estate	0			1,290			Commercial real estate	27			0
Residential real estate		0			2

Consumer and other	Consumer and other	91			137			Consumer and other	196			91
Finance leases		0			0

Total loans charged-off	Total loans charged-off	$	207		$	1,430		Total loans charged-off	$	246		$	207
RECOVERIES OF LOANS PREVIOUSLY CHARGED-OFF:	RECOVERIES OF LOANS PREVIOUSLY CHARGED-OFF:							RECOVERIES OF LOANS PREVIOUSLY CHARGED-OFF:
Commercial and industrial	Commercial and industrial	97			16			Commercial and industrial	20			97
Commercial real estate	Commercial real estate	213			18			Commercial real estate	42			213
Residential real estate	Residential real estate	34			79			Residential real estate	109			34
Consumer and other	Consumer and other	43			69			Consumer and other	92			43
Finance Leases		0			0

Total loans recovered	Total loans recovered	$	387		$	182		Total loans recovered	$	263		$	387
Net loans (recovered) charged-off		(180)			1,248
(Reductions) additions to allowance for credit losses charged to operations		(2,510)			16,294
Net loans recovered								Net loans recovered	(17)			(180)
Credit for credit losses related to loans								Credit for credit losses related to loans	(734)			(2,510)
Balance of allowance at end of period	Balance of allowance at end of period	$	49,339		$	52,404		Balance of allowance at end of period	$	42,126		$	49,339
Allowance for credit losses as a percentage of total loans and leases	Allowance for credit losses as a percentage of total loans and leases	0.93		%	1.06		%	Allowance for credit losses as a percentage of total loans and leases	0.83		%	0.93		%
Annualized net (recoveries) charge-offs on loans to average total loans and leases during the period	Annualized net (recoveries) charge-offs on loans to average total loans and leases during the period	(0.01)		%	0.10		%	Annualized net (recoveries) charge-offs on loans to average total loans and leases during the period	0.00		%	(0.01)		%

Net loan and lease recoveries for the quarter ended March 31, 2020 were $180,000 compared to net charge-offs of $1.2 million for the quarter ended March 31, 2020. The first quarter of 2020 included a write-down on one credit in the commercial real estate portfolio for $1.2 million.

The provision for credit losses for loans was a credit of $734,000 for the three months ended March 31, 2022, compared to a credit of $2.5 million for the ~~three months ended March 31, 2021, compared to a provision of $16.3 million for the~~ same period in ~~2020.~~2021. The provision expense for credit losses related to loans is based upon the Company's quarterly evaluation of the appropriateness of the allowance for credit losses. As discussed above, the ACL model estimated lower reserves at Q1 2022 compared to year-end 2021, mainly driven by improving macroeconomic conditions, the need for lower qualitative reserves related to risks related to COVID-19 and improving asset quality metrics. As such, the provision for credit losses for loans for the first three months of 2022 was a credit of $734,000.

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 ~~larger than normal~~Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument 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 cancelable, through a charge to credit loss expense for off-balance sheet credit exposures included in provision for credit loss expense in the Company's consolidated statements of ~~$16.3 million for~~income.

For the three months ended March 31, ~~2020~~2022, the provision for credit losses for off-balance sheet credit exposures was ~~mainly a result of~~$214,000 compared to $680,000 for the ~~economic forecasts and other model assumptions impacted by the COVID-19 pandemic.~~same period in 2021. The provision ~~credit of $2.5 million for the first three months of 2021 reflects lower estimated reserves~~in 2022 was driven by ~~improvements~~an increase in forecasts for unemployment and the gross domestic product used in our model, partially offset by increases in qualitative reserves for loans within the hospitality and certain other industries that may have an elevated level of risk due to the adverse economic impact of the COVID-19 pandemic, as well as loans that remain in the Company's payment deferral program implemented in response to the COVID-19 pandemic.off-balance sheet exposures, specifically commercial real estate loan commitments.

4849


Analysis of Past Due and Nonperforming Loans	Analysis of Past Due and Nonperforming Loans										Analysis of Past Due and Nonperforming Loans
(In thousands)	(In thousands)	3/31/2021			12/31/2020			3/31/2020			(In thousands)	3/31/2022			12/31/2021			3/31/2021
Loans 90 days past due and accruing	Loans 90 days past due and accruing										Loans 90 days past due and accruing
Commercial and industrial		$	0		$	0		$	0
Commercial real estate											Commercial real estate	$	0		$	0		$	0
Consumer and other	Consumer and other	0			0			0			Consumer and other	0			0			0
Total loans 90 days past due and accruing	Total loans 90 days past due and accruing	$	0		$	0		$	0		Total loans 90 days past due and accruing	$	0		$	0		$	0
Nonaccrual loans	Nonaccrual loans										Nonaccrual loans
Commercial and industrial	Commercial and industrial	768			1,775			2,049			Commercial and industrial	806			533			768
Commercial real estate	Commercial real estate	27,847			23,627			9,698			Commercial real estate	13,623			13,893			27,847
Residential real estate	Residential real estate	12,745			13,145			11,544			Residential real estate	10,200			11,178			12,745
Consumer and other	Consumer and other	296			429			265			Consumer and other	571			429			296
Total nonaccrual loans	Total nonaccrual loans	$	41,656		$	38,976		$	23,556		Total nonaccrual loans	$	25,200		$	26,033		$	41,656
Troubled debt restructurings not included above	Troubled debt restructurings not included above	6,069			6,803			7,137			Troubled debt restructurings not included above	5,064			5,124			6,069
Total nonperforming loans and leases	Total nonperforming loans and leases	$	47,725		$	45,779		$	30,693		Total nonperforming loans and leases	$	30,264		$	31,157		$	47,725
Other real estate owned	Other real estate owned	88			88			466			Other real estate owned	88			135			88
Total nonperforming assets	Total nonperforming assets	$	47,813		$	45,867		$	31,159		Total nonperforming assets	$	30,352		$	31,292		$	47,813
Allowance as a percentage of nonperforming loans and leases	Allowance as a percentage of nonperforming loans and leases	103.38		%	112.87		%	170.74		%	Allowance as a percentage of nonperforming loans and leases	139.20		%	137.51		%	103.38		%
Total nonperforming loans and leases as percentage of total loans and leases	Total nonperforming loans and leases as percentage of total loans and leases	0.90		%	0.87		%	0.62		%	Total nonperforming loans and leases as percentage of total loans and leases	0.60		%	0.61		%	0.90		%
Total nonperforming assets as percentage of total assets	Total nonperforming assets as percentage of total assets	0.59		%	0.60		%	0.46		%	Total nonperforming assets as percentage of total assets	0.38		%	0.40		%	0.59		%

Nonperforming assets include nonaccrual loans, TDR, and foreclosed real estate/other real estate owned. Total nonperforming assets of ~~$47.8~~$30.4 million at March 31, ~~2021~~2022 were ~~up $1.9 million~~down $940,000 or ~~4.2%~~3.0% compared to December 31, ~~2020,~~2021, and ~~up $16.7~~down $17.5 million or ~~53.5%~~36.5% compared to March 31, ~~2020.~~2021. The ~~increase~~decrease in nonperforming assets from March 31, ~~2020,~~2021, was mainly in the commercial real estate and residential real estate ~~portfolios, as result of unfavorable economic conditions related to the COVID-19 pandemic. Nonperforming~~portfolios. The decrease in commercial real estate loans atfrom March 31, 2021, ~~included~~was due to the payoff of one ~~credit~~relationship totaling $11.8 million in the hospitality industry and a $6.0 million charge-off of another relationship that ~~was downgraded to Substandard and placed on nonaccrual status~~included two loans in the hospitality industry during the fourth quarter of ~~2020. The loan was also in the Company's deferral payment program at March 31,~~ 2021. Nonperforming assets represented ~~0.59%~~0.38% of total assets at March 31, ~~2021,~~2022, down from ~~0.60%~~0.40% at December 31, ~~2020,~~2021, and up from ~~0.46%~~0.59% at March 31, ~~2020.~~2021. The Company’s ratio of nonperforming assets to total assets is in line with our peer group’s most recent ratio of ~~0.60%~~0.41% at December 31, ~~2020.~~2021.

Loans are considered modified in a TDR when, due to a borrower’s financial difficulties, the Company makes a concession(s) to the borrower that it would not otherwise consider and the borrower could not obtain elsewhere. These modifications may include, among others, an extension of the term of the loan, and granting a period when interest-only payments can be made, with the principal payments made over the remaining term of the loan or at maturity. TDRs are included in the above table within the following categories: ~~“loans~~"loans 90 days past due and ~~accruing”~~accruing", ~~“nonaccrual loans”~~"nonaccrual loans", or ~~“troubled~~"troubled debt restructurings not included ~~above”~~above". Loans in the latter category include loans that meet the definition of a TDR but are performing in accordance with the modified terms and ~~therefore classified as accruing loans.~~have shown a satisfactory period of repayment (generally six consecutive months) and where full collection of all is reasonably assured. At March 31, ~~2021,~~2022, the Company had ~~$7.7~~$6.3 million in TDRs, and of that total ~~$1.6~~$1.2 million were reported as nonaccrual and ~~$6.1~~$5.1 million were considered performing and included in the table 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 required by applicable regulations. 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.

The ratio of the allowance to nonperforming loans and leases (loans past due 90 days and accruing, nonaccrual loans and restructured troubled debt) was 139.20% at March 31, 2022, compared to 137.51% at December 31, 2021, and 103.38% at March 31, ~~2021, compared to 112.87% at December 31, 2020, and 170.74% at March 31, 2020.~~2021. The Company’s nonperforming loans and leases are mostly ~~made up~~comprised of collateral dependent impaired loans with limited exposure or loans that require limited specific reserve due to the level of collateral available with respect to these loans and/or previous charge-offs.

4950

The Company, through its internal loan review function, identified 3121 commercial relationships totaling ~~$36.6~~$27.5 million at March 31, ~~2021~~2022 that were potential problem loans. At December 31, ~~2020,~~2021, the Company had identified 3525 relationships totaling ~~$40.8~~$36.5 million that were potential problem loans. Of the 3121 commercial relationships at March 31, ~~2021~~2022 that were Substandard, there were 107 relationships that equaled or exceeded $1.0 million, which in aggregate totaled ~~$31.0~~$23.2 million, the largest of which was ~~$6.8~~$7.4 million. The 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 nonperforming. Accordingly, management’s attention is focused on these credits, which are reviewed on at least a quarterly basis.

Capital

Total equity was ~~$709.9~~$657.5 million at March 31, ~~2021,~~2022, a decrease of ~~$7.8~~$71.4 million or ~~1.1%~~9.8% from December 31, ~~2020.~~2021. The decrease was mainly a result of the increase in accumulated other comprehensive loss, reflecting the change in unrealized gains/loss on available-for-sale securities from aan unrealized ~~gain~~loss of ~~$20.6~~$14.6 million at December 31, ~~2020~~2021 to an unrealized loss of ~~$4.9~~$95.0 million at March 31, ~~2021.~~2022. The decrease was partially offset by an increase in retained earnings.

Additional paid-in capital ~~declined~~decreased from ~~$334.0~~$312.5 million at December 31, ~~2020,~~2021, to ~~$333.2~~$305.9 million at March 31, ~~2021.~~2022. The decrease was primarily attributable to a ~~$1.5~~$10.4 million aggregate purchase price related to the Company's repurchase and retirement of ~~21,531~~130,168 shares of its common stock during the first quarter of ~~2021~~2022 pursuant to its publicly announced stock repurchase plan, ~~$0.2~~partially offset by $2.9 million related to shares issued for the ~~exercise of~~employee stock ~~options~~ownership program and ~~$0.2 million related to the Company's director deferred compensation plan partially offset by $1.2 million~~$945,000 related to stock based compensation. Retained earnings increased by ~~$17.6~~$14.9 million from ~~$418.4~~$475.3 million at December 31, ~~2020,~~2021, to ~~$436.0~~$490.2 million at March 31, ~~2021,~~2022, reflecting net income of ~~$25.6~~$23.3 million less dividends ~~paid~~ of ~~$8.1~~$8.3 million. Accumulated other comprehensive loss increased from a net loss of ~~$32.1~~$56.0 million at December 31, ~~2020,~~2021, to a net loss of ~~$57.0~~$135.8 million at March 31, ~~2021,~~2022, reflecting a ~~$25.5~~$80.4 million increase in unrealized losses on available-for-sale debt securities due to changes in market rates coupled with a ~~$0.6 million~~$506,000 decrease related to post-retirement benefit plans.

Cash dividends paid in the first three months of ~~2021~~2022 totaled approximately $8.3 million or $0.57 per common share, representing 35.8% of year to date 2022 earnings through March 31, 2022, and were up 5.6% over cash dividends of $8.0 million or $0.54 ~~per common share, representing 31.4% of year to date 2021 earnings through March 31, 2021, and were up 3.9% over cash dividends of $7.8 million or $0.52~~ per common share paid in the first three months of ~~2020.~~2021.

The Company and its subsidiary ~~banks~~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 operation and financial condition. Under capital adequacy guidelines and the regulatory framework for prompt corrective action (PCA), banks must meet specific guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classifications of the Company and its subsidiary banks are also subject to qualitative judgments by regulators concerning components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the maintenance of minimum amounts and ratios 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 ~~banks~~bank meet all capital adequacy requirements to which they are subject.

In addition to setting higher minimum capital ratios, the Basel III Capital Rules introduced a 2.5% capital conservation buffer, which has been fully phased in and must be added to each of the minimum capital ratios and is designed to absorb losses during periods of economic stress. ~~The capital conservation buffer was phased in over a three-year period that began on January 1, 2016, and was fully phased-in on January 1, 2019 at 2.5%.~~

5051

The following table provides a summary of the Company’s capital ratios as of March 31, ~~2021:~~2022:


Regulatory Capital Analysis	Regulatory Capital Analysis													Regulatory Capital Analysis
March 31, 2021		Actual				Minimum Capital Required - Basel III Fully Phased-In				Well Capitalized Requirement
March 31, 2022														March 31, 2022	Actual				Minimum Capital Required - Basel III Fully Phased-In				Well Capitalized Requirement
(dollar amounts in thousands)	(dollar amounts in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		(dollar amounts in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to risk weighted assets)	Total Capital (to risk weighted assets)	$	736,598	14.62	%	$	528,967	10.50	%	$	503,779	10.00	%	Total Capital (to risk weighted assets)	$	743,353	14.23	%	$	548,588	10.50	%	$	522,464	10.00	%
Tier 1 Capital (to risk weighted assets)	Tier 1 Capital (to risk weighted assets)	684,414		13.59	%	428,212		8.50	%	403,023		8.00	%	Tier 1 Capital (to risk weighted assets)	697,063		13.34	%	444,095		8.50	%	417,971		8.00	%
Tier 1 Common Equity (to risk weighted assets)	Tier 1 Common Equity (to risk weighted assets)	671,153		13.32	%	352,645		7.00	%	327,456		6.50	%	Tier 1 Common Equity (to risk weighted assets)	697,063		13.34	%	365,725		7.00	%	339,602		6.50	%
Tier 1 Capital (to average assets)	Tier 1 Capital (to average assets)	684,414		8.89	%	308,064		4.00	%	385,080		5.00	%	Tier 1 Capital (to average assets)	697,063		8.89	%	313,543		4.00	%	391,928		5.00	%

As of March 31, ~~2021,~~2022, the Company’s capital ratios exceeded the minimum required capital ratios plus the fully phased-in capital conservation buffer, and the minimum required capital ratios for well capitalized institutions. The capital levels required to be considered well capitalized, presented in the above table, are based upon prompt corrective action regulations, as amended to reflect the changes under Basel III Capital Rules.

Total capital as a percent of risk weighted assets increased to ~~14.6%~~14.2% at March 31, ~~2021,~~2022, compared with ~~14.4%~~14.2% as of December 31, ~~2020.~~2021. Tier 1 capital as a percent of risk weighted assets ~~increased~~remained unchanged from 13.3% at the end of ~~2020~~2021 to ~~13.6%~~13.3% as of March 31, ~~2021.~~2022. Tier 1 capital as a percent of average assets was 8.9% at March 31, ~~2021,~~2022, which is up from ~~8.8%~~8.7% at December 31, ~~2020.~~2021. Common equity Tier 1 capital was 13.3% at the end of the first quarter of ~~2021, up~~2022, unchanged from ~~13.1%~~13.3% at the end of ~~2020.~~2021.

As of March 31, ~~2021,~~2022, the capital ratios for the Company’s subsidiary banks also exceeded the minimum required capital ratios plus the fully phased-in capital conservation buffer, and the minimum required capital ratios for well capitalized institutions.

In the first quarter of 2020, U.S. Federal regulatory authorities issued an interim final rule that provides banking organizations that adopt CECL during the 2020 calendar year with the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay (i.e., a five-year transition in total). In connection with our adoption of CECL on January 1, 2020, we have elected to utilize the five-year CECL transition.

Deposits and Other Liabilities

Total deposits of ~~$6.9~~$7.0 billion at March 31, ~~2021~~2022 were up ~~$508.8~~$225.3 million or ~~7.9%~~3.3% from December 31, ~~2020.~~2021. The increase from year-end was primarily in checking, money market and savings balances, which collectively were up ~~$373.1~~$247.4 million or ~~9.9%~~6.2% from year end ~~2020.~~2021. The majority of the increase was in money market deposit balances and reflects growth in municipal ~~non-personal and personal~~ deposits. Noninterest bearing deposits were flat compared to year-end 2021 and time deposits were ~~up $132.1~~down $23.7 million or ~~6.8% and up $3.6 million or 0.5%~~3.7%, respectively, from year-end ~~2020. Deposit balances have benefited from PPP loan originations and government stimulus. The majority of the Company's PPP loan originations were deposited in Tompkins checking accounts.~~2021.

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 and municipal money market deposits and reciprocal deposit relationships with municipalities. Core deposits were up by ~~$470.4~~$110.6 million or ~~9.1%~~1.9% from year-end ~~2020,~~2021, to ~~$5.6~~$5.9 billion at March 31, ~~2021.~~2022. Core deposits represented ~~81.0%~~84.0% of total deposits at March 31, ~~2021,~~2022, compared to ~~80.1%~~85.1% of total deposits at December 31, ~~2020.~~2021.

The Company uses both retail and wholesale repurchase agreements. Retail repurchase agreements are arrangements with local customers of the Company, in which the Company agrees to sell securities to the customer with an agreement to repurchase those securities at a specified later date. Retail repurchase agreements totaled ~~$47.5~~$57.1 million at March 31, ~~2021,~~2022, and ~~$65.8~~$66.8 million at December 31, ~~2020.~~2021. Management generally views local repurchase agreements as an alternative to large time deposits.

The Company’s other borrowings totaled ~~$265.0~~$60.0 million at ~~both~~ March 31, ~~2021, and~~2022, compared to $124.0 at December 31, ~~2020.~~2021. The decrease in borrowings was primarily due to the prepayment of $50.0 million of FHLB term advances, with no prepayment penalties. Borrowings at March 31, ~~2021 and December 31, 2021, included $265.0~~2022 represented $60.0 million of FHLB term advances. The $124.0 million in borrowings at December 31, 2021, represented $14.0 million in overnight advances from the FHLB and $110.0 million in term advances from the FHLB. Of the ~~$265.0~~$60.0 million in FHLB term advances at March 31, ~~2021, $235.0~~2022, $50.0 million was due in over one year.

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Liquidity

As of March 31, ~~2021,~~2022, the Company had not experienced any significant impact to our liquidity or funding capabilities as a result of the COVID-19 pandemic. The Company is participating in the PPP under the CARES ~~Act. The Federal Reserve Bank has provided a lending facility that may be used by banks to obtain funding specifically for PPP loans.~~Act and at March 31, 2022, PPP loans ~~would be pledged as collateral on any of the Bank's borrowings under the Federal Reserve Bank's PPP lending facility.~~totaled $24.1 million. The Company has a long-standing liquidity plan in place that is designed to ensure that appropriate liquidity resources are available to fund the balance sheet. Additionally, given the uncertainties related to the impact of the COVID-19 crisis on liquidity, the Company has confirmed the availability of funds at the FHLB of NY ~~and FHLB of Pittsburgh, completed actions required to activate participation in the Federal Reserve Bank PPP lending facility,~~ and confirmed availability of Federal Fund lines with correspondent bank partners.

The objective of liquidity management is to ensure the availability of adequate funding sources to satisfy the 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 banks 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.

Core deposits, discussed above under ~~“Deposits~~"Deposits and Other ~~Liabilities”~~Liabilities", are a primary and ~~low cost~~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, brokered deposits, municipal money market deposits, reciprocal deposits, bank borrowings, securities sold under agreements to repurchase, overnight and term advances from the FHLB and other funding sources. Rates and terms are the primary determinants of the mix of these funding sources. Non-core funding sources of ~~$1.6~~$1.2 billion at March 31, ~~2021~~2022 increased ~~$20.0~~$41.1 million or ~~1.2%~~3.4% as compared to year end ~~2020.~~2021. Non-core funding sources, as a percentage of total liabilities, were ~~22.1%~~17.2% at March 31, ~~2021,~~2022, compared to ~~27.1%~~17.0% at December 31, ~~2020.~~2021.

Non-core funding sources may require securities to be pledged against the underlying liability. Securities carried at ~~$1.4~~$1.6 billion at March 31, ~~2021~~2022 and at ~~$1.2~~$1.4 billion at December 31, ~~2020,~~2021, were either pledged or sold under agreements to repurchase. Pledged securities represented ~~70.3%~~66.7% of total securities at March 31, ~~2021,~~2022, compared to ~~75.3%~~59.4% of total securities at December 31, ~~2020.~~2021.

Cash and cash equivalents totaled ~~$518.4~~$175.1 million as of March 31, ~~2021~~2022 which increased from ~~$388.5~~$63.1 million at December 31, ~~2020.~~2021. Short-term investments, consisting of securities due in one year or less, ~~increased~~decreased from ~~$55.0~~$77.9 million at December 31, ~~2020,~~2021, to ~~$77.7~~$58.9 million at March 31, ~~2021.~~2022.

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 ~~$996.2~~$902.1 million at March 31, ~~2021~~2022 compared with ~~$887.6~~$947.7 million at December 31, ~~2020.~~2021. Outstanding principal balances of residential mortgage loans, consumer loans, and leases totaled approximately ~~$1.5~~$1.6 billion at March 31, ~~2021, down $7.0~~2022, up $17.5 million or ~~0.5%~~1.1% compared with year end ~~2020.~~2021. Aggregate amortization from monthly payments on these assets provides significant additional cash flow to the Company.

The Company's liquidity is enhanced by ready access to national and regional wholesale funding sources including Federal funds purchased, repurchase agreements, brokered deposits, and FHLB advances. Through its subsidiary ~~banks,~~bank, the Company has borrowing relationships with the FHLB and correspondent banks, which provide secured and unsecured borrowing capacity. ~~At March 31, 2021, the unused borrowing capacity on established lines with the FHLB was $2.1 billion.~~

As members of the FHLB, the ~~Company’s subsidiary banks~~Company can use certain unencumbered mortgage-related assets and securities to secure ~~additional~~ borrowings from the FHLB. At March 31, ~~2021, total~~2022, the established borrowing capacity with the FHLB was $1.47 billion, with available unencumbered ~~residential mortgage loans and securities were $1.7~~mortgage-related assets of $1.41 billion. Additional assets may also qualify as collateral for FHLB advances, upon approval of the FHLB.

~~Newly Adopted Accounting Standards~~

~~ASU No 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.”~~ ASU 2019-12 removes certain exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles. ASU 2019-12 was effective for the Company on January 1, 2021, and did not have a significant impact on our consolidated financial statements.

Accounting Standards Pending Adoption

ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. It provides optional expedients and

exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. Tompkins is currently evaluating the potential impact of ASU 2020-04 on our consolidated financial statements.

~~The Company reviewed new~~Accounting Standard Update ("ASU") ASU 2022-01, "Derivatives and Hedging (Topic 815)" ("ASU 2022-01") clarifies the guidance in ASC 815 on fair value hedge accounting ~~standards as issued. Management has~~of interest rate risk for portfolios and financial assets. Among other things, the amended guidance established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible and renamed that method the “portfolio layer” method. ASU 2022-01 is effective January 1, 2023 and is not ~~identified any other new standards that it believes will~~expected to have a significant impact on ~~the Company’s~~our consolidated financial statements.

ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326)" ("ASU 2022-02") eliminates the guidance on troubled debt restructurings and requires entities to evaluate all loan modifications to determine if they result in a new loan or a continuation of the existing loan. ASU 2022-02 also requires that entities disclose current-period gross charge-offs by year of origination for loans and leases. ASU 2022-02 is effective January 1, 2023, with early adoption permitted. Tompkins is currently assessing the impact that ASU 2022-02 will have on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Interest rate risk is the primary market risk category associated with the Company’s operations. Interest rate risk refers to the volatility of earnings caused by changes in interest rates. The Company manages interest rate risk using income simulation to measure interest rate risk inherent in its on-balance sheet and off-balance sheet financial instruments at a given point in time. The simulation models are used to estimate the potential effect of interest rate shifts on net interest income for future periods. Each quarter, the Company’s Asset/Liability Management Committee reviews the simulation results to determine whether the exposure of net interest income to changes in interest rates remains within levels approved by the Company’s Board of Directors. The Committee also considers strategies to manage this exposure and incorporates these strategies into the investment and funding decisions of the Company. The Company does not currently use derivatives, such as interest rate swaps, to manage its interest rate risk exposure, but may consider such instruments in the future.

The Company’s Board of Directors has set a policy that interest rate risk exposure will remain within a range whereby net interest income will not decline by more than 10% in one year as a result of a 100 basis point parallel change in rates. Based upon the simulation analysis performed as of February 28, ~~2021,~~2022, a 200 basis point parallel upward change in interest rates over a one-year time frame would result in a one-year decrease in net interest income from the base case of approximately ~~2.2%~~3.2%, while a 100 basis point parallel decline in interest rates over a one-year period would result in a one year decrease in ~~one-year~~ net interest income of 1.3% from the base ~~case of 1.8%.~~case. The simulation assumes no balance sheet growth and no management action to address balance sheet mismatches.

The decrease in net interest income in the rising rate scenario is a result of the balance sheet showing a more liability sensitive position over a one year time horizon. As such, in the short-term net interest income is expected to trend below the base assumption, as upward adjustments to rate sensitive deposits and short-term funding outpace increases to asset yields which are concentrated in intermediate to longer-term products. As intermediate and longer-term assets continue to reprice/adjust into higher rate environment and funding costs stabilize, net interest income is expected to trend upwards.

The down 100 rate scenario increases net interest income slightly in the first year as a result of the Company's assets repricing downward to a lesser degree than the rates on the Company's interest-bearing liabilities, mainly deposits and overnight borrowings. Rates on savings and money market accounts have moved down ~~in the last 3 months, approaching~~and are at or near historically low levels allowing for minimal interest ~~rate~~expense relief in the first year of a declining rate scenario. In addition, the model assumes that prepayments accelerate in the down interest rate environment resulting in additional pressure on asset yields as proceeds are reinvested at lower rates.

The most recent simulation of a base case scenario, which assumes interest rates remain unchanged from the date of the simulation, reflects a net interest margin that is declining slightly over the next 12 to 18 months.

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Although the simulation model is useful in identifying potential exposure to interest rate movements, actual results may differ from those modeled as the repricing, maturity, and prepayment characteristics of financial instruments may change to a different degree than modeled. In addition, the model does not reflect actions that management may employ to manage the Company’s interest rate risk exposure. The Company’s current liquidity profile, capital position, and growth prospects, offer a level of flexibility for management to take actions that could offset some of the negative effects of unfavorable movements in interest rates. Management believes the current exposure to changes in interest rates is not significant in relation to the earnings and capital strength of the Company.

In addition to the simulation analysis, management uses an interest rate gap measure. The table below is a Condensed Static Gap Report, which illustrates the anticipated repricing intervals of assets and liabilities as of March 31, ~~2021.~~2022. The Company’s one-year net interest rate gap was a ~~positive $30.8~~negative $352.8 million or ~~0.38%~~4.5% of total assets at March 31, ~~2021,~~2022, compared with a ~~positive $58.9~~negative $331.5 million or ~~0.77%~~4.24% of total assets at December 31, ~~2020.~~2021. A ~~positive~~negative gap position exists when the amount of interest-bearing ~~assets~~liabilities maturing or repricing exceeds the amount of interest-earning ~~liabilities~~assets maturing or repricing within a particular time period. This analysis suggests that the Company’s net interest income ~~is equally at~~contains a higher degree of risk in ~~both an increasing and decreasing~~a rising rate environment over the next 12 months. An interest rate gap measure could be significantly affected by external factors such as a rise or decline in interest rates, loan or securities prepayments, and deposit withdrawals.


Condensed Static Gap - March 31, 2021							Repricing Interval
Condensed Static Gap - March 31, 2022																Condensed Static Gap - March 31, 2022						Repricing Interval
(In thousands)	(In thousands)	Total		0-3 months			3-6 months			6-12 months			Cumulative 12 months			(In thousands)	Total		0-3 months			3-6 months			6-12 months			Cumulative 12 months

Interest-earning assets1	Interest-earning assets1	$	7,749,402	$	1,677,684		$	418,486		$	858,421		$	2,954,591		Interest-earning assets1	$	7,637,321	$	1,214,966		$	331,799		$	630,689		$	2,177,454
Interest-bearing liabilities	Interest-bearing liabilities	5,210,615		2,394,605			198,827			330,333			2,923,765			Interest-bearing liabilities	4,996,464		2,173,252			148,776			208,194			2,530,222
Net gap position	Net gap position			(716,921)			219,659			528,088			30,826			Net gap position			(958,286)			183,023			422,495			(352,768)
Net gap position as a percentage of total assets	Net gap position as a percentage of total assets			(8.86)		%	2.71		%	6.52		%	0.38		%	Net gap position as a percentage of total assets			(12.14)		%	2.32		%	5.35		%	(4.47)		%

1 Balances of available securities are shown at amortized cost

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, ~~2021.~~2022.

Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Report on Form 10-Q, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal control over financial reporting that occurred during the quarter ended March 31, ~~2021,~~2022, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is subject to various claims and legal actions that arise in the ordinary course of conducting business. As of March 31, ~~2021,~~2022, management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against the Company or its subsidiaries will be material to the Company's consolidated financial position. On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection with such legal proceedings. Although the Company does not believe that the outcome of pending litigation will be material to the Company's consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations for a particular reporting period in the future.

Item 1A. Risk Factors

There have been no material changes in the risk factors previously disclosed under Item 1A. of the Company’s Annual Report on Form 10-K, for the fiscal year ended December 31, ~~2020.~~2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
(a) (b) (c) (d)
January 1, 2021 through January 31, 2021 14,325 $ 71.03 12,963 259,347
February 1, 2021 through February 28, 2021 9,178 70.06 8,568 250,779
March 1, 2021 through March 31, 2021 0 0 0 250,779
Total 23,503 $ 70.65 21,531 250,779


	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
	(a)	(b)		(c)	(d)
January 1, 2022 through January 31, 2022	26,765	$	82.16	24,885	342,912
February 1, 2022 through February 28, 2022	46,805	79.12		46,141	296,771
March 1, 2022 through March 31, 2022	59,142	79.08		59,142	237,629
Total	132,712	$	79.71	130,168	237,629

Included above are ~~1,362~~1,880 shares purchased in January ~~2021,~~2022, at an average cost of ~~$77.49,~~$83.18, and ~~585~~638 shares purchased in February ~~2021,~~2022, at an average cost of ~~$76.23,~~$80.94, by the trustee of the rabbi trust established by the Company under the Company’s Stock Retainer Plan For Eligible Directors of Tompkins Financial Corporation and Participating Subsidiaries, which were part of the director deferred compensation under that plan. In addition, the table includes 2526 shares delivered to the Company in February ~~2021~~2022 at an average cost of ~~$81.28~~$80.26 to satisfy mandatory tax withholding requirements upon vesting of restricted stock under the Company's 2009 Equity Plan.

On ~~January 30, 2020,~~October 22, 2021, the Company’s Board of Directors authorized a share repurchase plan (the ~~“2020~~"2021 Repurchase ~~Plan”~~Plan") for the repurchase of 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 ~~2020~~2021 Repurchase Plan in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in accordance with federal securities laws, and the repurchase program may be suspended, modified or terminated by the Board of Directors at any time for any reason. Under the ~~2020~~2021 Repurchase Plan, the Company had repurchased ~~149,221~~162,371 shares through March 31, ~~2021,~~2022, at an average cost of ~~$71.91.~~$79.85.

Recent Sales of Unregistered Securities

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

Item 6. Exhibits

EXHIBIT INDEX


Exhibit Number			Description
~~Pages~~3.1			Amended and Restated Certificate of Incorporation of the Company, incorporated herein by reference to Exhibit 3(i) to the Company’s Form 10-Q, filed with the Commission on August 11, 2008.
3.2			Second Amended and Restated Bylaws of the Company, incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Commission on January 31, 2011.
4.1			Form of Specimen Common Stock Certificate of the Company, incorporated herein by reference to Exhibit 4 to the Company’s Registration Statement on Form 8-A (No. 0-27514), filed with the Commission on December 29, 1995.
31.1			Certification of Principal Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

31.2			Certification of Principal Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

32.1			Certification of Principal Executive Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, 18 U.S.C. Section 1350

32.2			Certification of Principal Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, 18 U.S.C. Section 1350

101 INS**			The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document

101 SCH**			Inline XBRL Taxonomy Extension Schema Document

101 CAL**			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101 DEF**			Inline XBRL Taxonomy Extension Definition Linkbase Document

101 LAB**			Inline XBRL Taxonomy Extension Label Linkbase Document

101 PRE**			Inline XBRL Taxonomy Extension Presentation Linkbase Document

104			Cover Page Interactive Data File - the cover page interactive data file does not appear in the interactive date file because its XBRL tags are embedded with the inline XBRL document.

** Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Condition as of March 31, ~~2021~~2022 and December 31, ~~2020;~~2021; (ii) Consolidated Statements of Income for the three months ended March 31, ~~2021~~2022 and ~~2020;~~2021; (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, ~~2021~~2022 and ~~2020;~~2021; (iv) Consolidated Statements of Cash Flows for the three months ended March 31, ~~2021~~2022 and ~~2020;~~2021; (v) Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, ~~2021~~2022 and ~~2020;~~2021; and (vi) Notes to Unaudited Consolidated Financial Statements.

5658

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May ~~7, 2021~~9, 2022

TOMPKINS FINANCIAL CORPORATION


By:			/s/ Stephen S. Romaine
			Stephen S. Romaine
			President and Chief Executive Officer
			(Principal Executive Officer)


By:			/s/ Francis M. Fetsko
			Francis M. Fetsko
			Executive Vice President, Chief Financial Officer, and Chief Operating Officer
			(Principal Financial Officer)
			(Principal Accounting Officer)

5759


March 31, 2020	Three Months Ended
						Defaulted TDRs2
(In thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Post-Modification Outstanding Recorded Investment


Commercial real estate
Commercial real estate other	0	$	0	$	0	1	$	37
Residential real estate
Home equity1	2	121		121		1	87
Total	2	$	121	$	121	2	$	124


Deferral Credit Concentrations
(In thousands)	March 31, 2021
Description	Portfolio Balance ($)		Concentration*		Deferral Balance ($)		Percent of Loans Currently in Deferral Status

Lessors of Residential Buildings and Dwellings	$	538,144	16.80	%	$	203	0.04	%
Hotels and Motels	205,383		6.40	%	113,789		55.40	%
Dairy Cattle and Milk Production	190,151		5.90	%	0		0.00	%
Health Care and Social Assistance	154,439		4.80	%	0		0.00	%
Lessors of Other Real Estate Property	112,076		3.50	%	6,885		6.14	%
	$	1,200,193			$	120,877
*Concentration is defined as outstanding loan balances as a percentage of total commercial and commercial real estate loans.