Tompkins Financial Corporation (TMP) Q3 2026 earnings review
Tompkins lending profit rises, while problem property loans increase
Tompkins Financial Corporation, a community bank in New York and Pennsylvania, earned more from lending while problem commercial loans grew. Profit per share jumped 21% from a year ago to $2.00 because higher bond and loan yields lifted its lending spread for a fifth straight quarter. Chief executive Stephen Romaine raised the quarterly dividend to $0.74, even though doubling the credit loss provision nudged profit down 2% from last quarter.
| Revenue from businesses owned a year ago | $89.9M +18.0% from a year ago (by our math) |
|---|---|
| Net interest margin | 3.65% +0.45 percentage points from a year ago |
| Diluted profit per share | $2.00 +21.2% from a year ago |
| Fourth-quarter dividend plan | Raised $0.04 $0.74 per share (+13.8% from a year ago) |
⚖️ Verdict: 🟢 Bullish
The story got better because customer deposit inflows allowed the bank to pay off a quarter of its wholesale debt, locking in lower funding costs. Excluding the insurance unit sold last year, underlying revenue grew 18% from a year ago by our math. One caution: loans showing credit weakness rose for a second straight quarter to $151 million after two commercial property downgrades, and underlying staff costs climbed 8% by our math.
The question now is whether the commercial real estate downgrades are isolated cases or the start of broader loan losses. Either borrower collateral covers the troubled loans as management expects, or more of the $90 million in watch-list loans slip into default and require higher credit provisions. Fourth-quarter loan migration and charge-offs will show which way credit quality is heading.
🐂 Bull Case
Lending Spreads Widen For A Fifth Quarter
Tompkins earns most of its money from net interest income, the gap between what it collects on loans and bonds and what it pays on deposits. That income rose 21.0% from a year ago to $77.3 million because its net interest margin — the profit spread on its earning assets — widened for a fifth straight quarter.
- Net interest margin: 3.65%, up 0.45 percentage points from a year ago and 0.07 points from last quarter
- Average yield on bond securities: 3.53%, up 0.95 percentage points from a year ago
- Average yield on loans: 5.60%, up 0.08 percentage points from a year ago
- Average cost of funds: 1.67%, down 0.16 percentage points from a year ago
The spread widened because the New York lender sold low-yielding bonds late last year and reinvested the cash at higher rates, while loan yields kept climbing. At the same time, lower rates on certificates of deposit cut its funding costs, lifting pre-tax profit to 42.0% of net revenue from 35.6% a year ago by our math.
What to watch: the cost of interest-bearing checking, savings and money market accounts next quarter. That rate rose 0.07 percentage points from last quarter to 1.77%, and further increases would slow margin gains.
Deposit Inflows Pay Down Expensive Debt
Chief executive Stephen Romaine said that "consistent levels of loan and deposit growth along with further expansion in net interest margin continue to provide momentum". In the third quarter, customer deposits grew nearly three times as fast as loans, bringing in $379.9 million of new funding to reach $7.41 billion at period end.
Average noninterest-bearing deposits — accounts on which Tompkins pays no interest — rose $90.5 million, or 4.8% from last quarter, to $1.98 billion. Because customers brought in so much cash, the regional bank paid down $187.5 million of wholesale borrowings and cut brokered deposits by $28.9 million. Replacing 3.91% wholesale debt with lower-cost deposits protects future earnings.
What to watch: period-end deposit balances in the fourth quarter. Third-quarter deposits often swell with seasonal municipal tax collections, so a fourth-quarter outflow would force the bank back into wholesale borrowing.
Higher Capital Ratios Support Another Dividend Raise
"Given our strength in earnings and capital position we have approved another dividend increase, payable in the fourth quarter of 2026," Romaine said. The board raised the quarterly payout to $0.74 per share, up 5.7% from the third quarter and 13.8% from the fourth quarter of last year.
Tompkins can afford the bigger payout because last year's insurance unit sale and rising earnings rebuilt its capital buffer. Tier 1 capital to average assets — a core regulatory measure of bank solvency — reached 10.73%, up from 9.41% a year ago. The lender also bought back 18,118 shares for $1.8 million during the quarter.
What to watch: quarterly share repurchase spending in the fourth quarter. With tangible book value near $60 per share, faster buybacks would reduce the share count, which stayed at 14.35 million diluted shares.
🐻 Bear Case
Problem Commercial Property Loans Rise Again
Tompkins is expanding its loan book, which management said was "primarily driven by growth in the commercial real estate and commercial and industrial portfolios". Yet those same commercial property loans are generating more credit trouble. Loans graded Special Mention or Substandard — borrowers showing early financial stress or credit weakness — rose $11.1 million from last quarter to $151.1 million.
- Special Mention and Substandard loans: $151.1 million, up 7.9% from last quarter and up 25.5% over two quarters by our math
- Quarter-over-quarter credit downgrades: one $12.7 million commercial real estate loan moved to Special Mention, and a $4.6 million loan worsened to Substandard
- Early-stage past-due loans (30–89 days): $6.7 million, up 43.6% from $4.7 million last quarter
- Quarterly provision for credit losses: $3.0 million, double the $1.5 million charge in the second quarter
The company said that "the collateral securing these credits remains sufficient to mitigate potential loss exposure". Even so, the bank had to set aside specific reserves for individually evaluated nonaccrual commercial loans, which doubled its quarterly credit provision expense and caused net income to dip 2.2% from the second quarter.
What to watch: Substandard and nonaccrual loan balances in the fourth quarter. If the $90.4 million of Special Mention loans keep migrating into Substandard or nonaccrual status, credit provisions will take a larger bite out of earnings.
Underlying Operating Costs Outpace Fee Income
Last fourth quarter, Tompkins sold its insurance agency subsidiary, Tompkins Insurance Agencies (TIA). That sale removed $11.3 million of quarterly insurance commissions and $7.5 million of operating costs from the year-ago comparison, making reported noninterest expenses look 8.8% lower at $49.1 million.
Excluding the sold insurance unit from last year's figures, underlying operating expenses rose 5.9% from a year ago by our math. Salaries and employee benefits — the cost of paying staff — fell 5.3 percentage points of net revenue on a reported basis, but climbed 8.3% on an underlying basis to $29.9 million. The company cited "annual merit increases and higher other employee benefit costs, including health insurance, as well as increases in technology expense". Meanwhile, remaining fee businesses like wealth management and card services grew just 2.2% from a year ago to $12.6 million by our math.
What to watch: total noninterest expense in the fourth quarter, which is the first clean year-over-year comparison after the insurance sale. Continued 6% cost growth without insurance fees would make the bank more reliant on lending spreads.
👓 Other Themes
Bond Portfolio Losses Trim Quarterly Book Value
Tangible book value per share — the bank's net worth excluding goodwill — rose 24.8% from a year ago to $60.12 because of last year's insurance sale gain, but slipped 2.5% from $61.68 in the second quarter. The quarterly drop happened because unrealized after-tax losses on its available-for-sale bond portfolio widened to $73.2 million from $32.1 million in June, reducing reported shareholders' equity by $23.6 million.
💲 Other KPIs
Period-end loans rose 6.9% from a year ago and 1.9% from last quarter, adding $127.8 million in three months. Growth accelerated from 0.5% quarterly growth in the first quarter and 1.8% in the second quarter, led by commercial real estate and business lending.
Wealth management — investment, trust and estate planning under the Tompkins Financial Advisors brand — is the bank's largest fee business after the insurance sale. Fees rose 6.8% from a year ago and 1.7% from last quarter, outpacing the 5.0% growth rate over the first nine months of the year.
Nonperforming assets — defaulted loans that are no longer accruing interest plus foreclosed property — ticked up $0.9 million from last quarter. As a share of total assets, they held at 0.60%, unchanged from June and down from 0.63% a year ago, while credit reserves covered 113.1% of nonperforming loans.
🔮 Guidance
Raised. The board approved a fourth-quarter cash dividend of $0.74 per share, up $0.04 or 5.7% from the third-quarter payout and up 13.8% from the $0.65 paid in the fourth quarter of 2025. It is the second dividend increase this year, following a $0.03 raise in the third quarter.
❓ Key Questions
What property types are driving the commercial real estate downgrades?
Special Mention and Substandard loans rose $30.7 million over the past two quarters to $151.1 million, including two commercial real estate relationships downgraded this quarter. Investors need to know which property sectors and regions carry this stress.
How much of the $380 million deposit inflow is seasonal?
Period-end deposits rose 5.4% in a single quarter, allowing Tompkins to pay down $187.5 million of wholesale debt. Because New York banks often see third-quarter municipal tax inflows, management should clarify how much of this cash will stay in the fourth quarter.
Why did unrealized bond losses jump by $41 million?
Accumulated other comprehensive loss widened to $73.2 million from $32.1 million at June 30, trimming tangible book value by $1.56 per share. The release does not explain what drove the larger mark-to-market loss on its available-for-sale securities.
When will underlying staff and technology cost growth slow down?
Excluding the sold insurance business, salaries and employee benefits rose 8.3% from a year ago and total operating expenses rose 5.9% by our math. Without insurance commissions, the bank needs slower cost growth to protect its efficiency.