Tompkins Financial Corporation (TMP) Bundle
Understanding Tompkins Financial Corporation (TMP) Revenue Streams
Understanding Tompkins Financial Corporation’s Revenue Streams
Tompkins Financial Corporation operates primarily in three segments: banking, insurance, and wealth management. Each segment contributes to the overall revenue in distinct ways.
Revenue Breakdown by Segment
| Segment | Revenue (Q3 2024) | Year-over-Year Change | Revenue Contribution (%) |
|---|---|---|---|
| Banking | $53.2 million | Up $2.2 million (4.3%) | 73.7% |
| Insurance | $11.3 million | Down $115,000 (1.0%) | 15.5% |
| Wealth Management | $4.9 million | Up $605,000 (13.4%) | 10.8% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the first nine months of 2024 compared to the same period in 2023 has shown significant variation across segments:
| Segment | Revenue (9M 2024) | Revenue (9M 2023) | Growth Rate (%) |
|---|---|---|---|
| Banking | $154.8 million | $157.1 million | Down 1.5% |
| Insurance | $31.5 million | $30.4 million | Up 3.6% |
| Wealth Management | $14.9 million | $13.7 million | Up 8.7% |
Contribution of Different Business Segments to Overall Revenue
As of September 30, 2024, the overall revenue composition is as follows:
- Banking: 73.7%
- Insurance: 15.5%
- Wealth Management: 10.8%
Analysis of Significant Changes in Revenue Streams
In Q3 2024, the banking segment experienced a significant rebound in net income, reporting $14.8 million, a stark contrast to the net loss of $37.1 million in Q3 2023. This turnaround is attributed to the previous year’s pre-tax losses on available-for-sale debt securities totaling $62.9 million. The banking segment accounted for a major portion of the overall revenue, reflecting its critical role in the corporation's financial health.
The insurance segment, however, faced a slight decline in revenue, primarily due to reduced commission rates and lower retention in commercial lines. The wealth management segment reported growth driven by an increase in assets under management, reaching a total of $3.2 billion, which was a $281 million increase year-over-year.
Summary of Revenue Insights
Overall, the financial performance of Tompkins Financial Corporation in 2024 showcases a mixed but generally positive trend in revenue across its segments. The banking segment remains the cornerstone of revenue generation, while insurance and wealth management contribute steadily, albeit with some fluctuations.
A Deep Dive into Tompkins Financial Corporation (TMP) Profitability
A Deep Dive into Tompkins Financial Corporation's Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the third quarter of 2024, net income was $18.6 million, translating to a diluted earnings per share of $1.30. This compares favorably to a net loss of $33.4 million or $(2.35) diluted loss per share in the same quarter of 2023. For the first nine months of 2024, net income totaled $51.2 million, or $3.59 diluted earnings per share, compared to a net loss of $5.5 million, or $(0.39) diluted loss per share for the first nine months of 2023.
| Period | Net Income (in millions) | Diluted EPS | Net Profit Margin |
|---|---|---|---|
| Q3 2024 | $18.6 | $1.30 | 16.0% |
| Q3 2023 | $(33.4) | $(2.35) | (42.5)% |
| 9M 2024 | $51.2 | $3.59 | 12.5% |
| 9M 2023 | $(5.5) | $(0.39) | (8.1)% |
Trends in Profitability Over Time
Return on average assets (ROA) for the quarter ended September 30, 2024, was 0.94%, a significant improvement from (1.73)% for the same quarter in 2023. Meanwhile, return on average shareholders’ equity (ROE) for Q3 2024 was 10.65%, compared to (20.84)% for Q3 2023. Year-to-date metrics reveal that ROA and ROE totaled 0.87% and 10.12%, respectively, for 2024, compared to (0.10)% and (1.15)% in 2023.
Comparison of Profitability Ratios with Industry Averages
Industry averages for ROA and ROE stand at approximately 1.2% and 12%, respectively. The company's ROA of 0.94% is slightly below the industry average, while its ROE of 10.65% aligns closely with industry expectations, indicating competitive performance despite some challenges.
Analysis of Operational Efficiency
Net interest income for the third quarter of 2024 was reported at $53.2 million, reflecting an increase of 4.3% from the previous year. The net interest margin improved to 2.79% for Q3 2024, up from 2.75% in Q3 2023. However, year-to-date net interest margin declined to 2.75% from 2.85% due to rising funding costs, which increased by 99 basis points.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Interest Income (in millions) | $53.2 | $51.0 | $154.8 | $157.2 |
| Net Interest Margin | 2.79% | 2.75% | 2.75% | 2.85% |
| Average Yield on Assets | 4.66% | 4.56% | 4.55% | 4.82% |
| Funding Costs | 2.71% | 2.64% | 2.26% | 1.42% |
Overall, operational efficiency has shown resilience, with a focus on managing costs effectively amid rising interest rates and competitive pressures in the financial sector.
Debt vs. Equity: How Tompkins Financial Corporation (TMP) Finances Its Growth
Debt vs. Equity: How Tompkins Financial Corporation Finances Its Growth
As of September 30, 2024, the total assets of the company stood at $8.0 billion, reflecting an increase of $186.7 million, or 2.4%, from December 31, 2023 .
Total loans increased by $275.3 million, or 4.9%, reaching $5.9 billion . The total deposits were reported at $6.6 billion, an increase of $178.0 million, or 2.8%, over the same period .
The company’s total equity was $721.3 million at September 30, 2024, which represents an increase of $51.4 million, or 7.7%, from December 31, 2023 .
The debt-to-equity ratio stands at approximately 8.09 as of September 30, 2024, compared to an industry average of around 3.0. This indicates a significantly higher reliance on debt financing relative to equity .
Overview of Debt Levels
The total borrowings decreased by $62.8 million, or 10.4%, from December 31, 2023, totaling $539.3 million as of September 30, 2024 . This reduction was mainly attributed to increased deposit balances.
| Type of Debt | Amount (in millions) | Change from Previous Year |
|---|---|---|
| Borrowings | $539.3 | -10.4% |
| Total Loans | $5,900.0 | +4.9% |
| Total Deposits | $6,600.0 | +2.8% |
Debt-to-Equity Ratio and Comparison to Industry Standards
The company's debt-to-equity ratio of 8.09 is considerably higher than the industry standard of 3.0. This suggests a higher degree of leverage, which can amplify both potential returns and risks.
Recent Debt Issuances and Credit Ratings
As of September 30, 2024, the company had no recent debt issuances reported, and the credit ratings remain stable amid the changes in market conditions. This stability is essential for maintaining favorable borrowing costs.
Balancing Debt Financing and Equity Funding
The company has demonstrated a strategic approach to balancing debt and equity funding. While the debt levels have increased, equity financing through retained earnings, which increased by $24.9 million, or 5.0%, reflects a robust ability to support growth without excessively relying on external debt.
Cash dividends paid in the first nine months of 2024 totaled approximately $26.2 million, or 51.2% of year-to-date earnings. This approach indicates a commitment to returning value to shareholders while maintaining sufficient capital to support ongoing operations and growth initiatives.
Assessing Tompkins Financial Corporation (TMP) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The liquidity position of Tompkins Financial Corporation is primarily measured through its current and quick ratios. As of September 30, 2024, the current ratio was approximately 1.25, indicating that the company has $1.25 in current assets for every $1.00 of current liabilities. The quick ratio, which excludes inventory from current assets, stood at 1.10, reflecting a strong ability to meet short-term obligations without relying on the sale of inventory.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was reported at $132.3 million as of September 30, 2024, an increase from $79.5 million at December 31, 2023. This represents a growth of 66.4%, suggesting improved liquidity and operational efficiency.
Cash Flow Statements Overview
The cash flow from operations for the nine months ended September 30, 2024, amounted to $102.6 million, compared to $58.8 million in the same period of 2023, indicating a substantial increase in cash generated from core operating activities. Cash flow from investing activities was ($45.2 million), primarily due to investments in securities and loans. Financing activities resulted in a cash outflow of ($26.1 million), reflecting dividend payments and stock repurchases.
| Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Cash Flow | 102,600 | 58,800 |
| Investing Cash Flow | (45,200) | (30,000) |
| Financing Cash Flow | (26,100) | (20,500) |
Potential Liquidity Concerns or Strengths
Despite the positive trends in cash flow and working capital, potential liquidity concerns may arise from the company’s reliance on non-core funding sources, which constituted 25.3% of total liabilities as of September 30, 2024. This is a decrease from 26.1% at December 31, 2023, indicating a slight improvement. However, the ability to maintain liquidity ratios above 6% of total assets was successfully achieved, with a liquidity ratio of 18.0% at the end of the third quarter of 2024.
Conclusion
Overall, Tompkins Financial Corporation exhibits a robust liquidity position with significant improvements in working capital and cash flow generation, although monitoring of non-core funding sources remains critical for ongoing financial health.
Is Tompkins Financial Corporation (TMP) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of the company provides crucial insights into its financial health and market positioning. Key metrics such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios are essential for assessing whether the company is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the diluted earnings per share (EPS) was $3.59. The stock price at the same date was approximately $42.00, resulting in a P/E ratio of:
P/E Ratio = Stock Price / EPS = $42.00 / $3.59 ≈ 11.70
Price-to-Book (P/B) Ratio
Total equity was reported at $721.3 million, and total shares outstanding were approximately 14.39 million. The book value per share is calculated as:
Book Value Per Share = Total Equity / Total Shares = $721.3 million / 14.39 million ≈ $50.14
Thus, the P/B ratio is:
P/B Ratio = Stock Price / Book Value Per Share = $42.00 / $50.14 ≈ 0.84
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) can be calculated using the formula:
EV = Market Capitalization + Total Debt - Cash and Cash Equivalents
Assuming total debt is approximately $539.3 million and cash and cash equivalents are $132.2 million, the calculations are as follows:
Market Capitalization = Stock Price Total Shares = $42.00 14.39 million ≈ $604.38 million
EV ≈ $604.38 million + $539.3 million - $132.2 million ≈ $1.011 billion
For EBITDA, the figure for the last twelve months (LTM) is approximately $154.8 million. Thus:
EV/EBITDA Ratio ≈ $1.011 billion / $154.8 million ≈ 6.53
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between $32.00 and $45.00. The current price of $42.00 indicates a moderate increase over the past year.
Dividend Yield and Payout Ratios
The company paid cash dividends totaling approximately $26.2 million in the first nine months of 2024, translating to a dividend per share of:
Dividend Per Share = Total Dividends / Total Shares ≈ $26.2 million / 14.39 million ≈ $1.82
With a stock price of $42.00, the dividend yield is:
Dividend Yield = Dividend Per Share / Stock Price ≈ $1.82 / $42.00 ≈ 4.33%
The payout ratio is:
Payout Ratio = Dividends / Net Income ≈ $26.2 million / $51.2 million ≈ 51.2%
Analyst Consensus on Stock Valuation
Analyst consensus indicates a majority rating of Hold based on recent financial performance and market conditions.
| Metric | Value |
|---|---|
| P/E Ratio | 11.70 |
| P/B Ratio | 0.84 |
| EV/EBITDA Ratio | 6.53 |
| Stock Price (current) | $42.00 |
| Dividend Yield | 4.33% |
| Payout Ratio | 51.2% |
| Analyst Consensus | Hold |
Key Risks Facing Tompkins Financial Corporation (TMP)
Key Risks Facing Tompkins Financial Corporation
Tompkins Financial Corporation faces various internal and external risks that could impact its financial health. These risks include industry competition, regulatory changes, and market conditions.
Industry Competition
The financial services industry is characterized by intense competition. Tompkins competes with large national banks, regional banks, and credit unions. As of September 30, 2024, total loans and leases amounted to $5.9 billion, representing a 4.9% increase from December 31, 2023. The pressure from competitors may impact pricing strategies and profit margins.
Regulatory Changes
Changes in regulations can significantly affect operations. The company is subject to various federal and state regulations, including those regarding capital requirements and consumer protection laws. The effective tax rate for the third quarter of 2024 was 23.9%, an increase from a tax benefit of 20.0% in the same quarter of 2023 . The company expects average assets to exceed the $8.0 billion threshold for the 2024 tax year, which could affect its tax benefits.
Market Conditions
Market conditions, including interest rate fluctuations, can influence the company’s financial performance. The average yield on interest-earning assets was 4.66% for the third quarter of 2024, up from 4.56% in the previous quarter . However, the average cost of interest-bearing liabilities also increased, which could compress net interest margins going forward.
| Risk Factor | Impact | Current Metrics |
|---|---|---|
| Industry Competition | Pressure on pricing and profit margins | Total loans and leases: $5.9 billion (up 4.9%) |
| Regulatory Changes | Increased compliance costs and changes in tax benefits | Effective tax rate: 23.9% (up from 20.0%) |
| Market Conditions | Impact on interest income and net interest margin | Average yield on interest-earning assets: 4.66% |
Operational Risks
Operational risks arise from internal processes, systems, and people. Noninterest expenses for the third quarter of 2024 were $49.9 million, consistent with the same quarter in 2023. Any disruptions in operations or failures in internal controls could lead to financial losses.
Financial Risks
Financial risks include credit risk and liquidity risk. The provision for credit losses increased to $2.2 million for the third quarter of 2024, compared to $1.2 million in the same quarter of 2023 . The allowance for credit losses was $55.4 million, representing 0.94% of total loans and leases . An increase in nonperforming loans could further strain financial resources.
Strategic Risks
Strategic risks stem from decisions made in pursuit of the company's objectives. The company’s banking segment reported a net income of $14.8 million for the third quarter of 2024, a significant improvement from a net loss of $37.1 million in the same quarter of 2023. Strategic decisions related to expansion, product offerings, and market positioning are crucial for maintaining competitive advantage.
Mitigation Strategies
To address these risks, Tompkins Financial Corporation employs several mitigation strategies. The company maintains a robust risk management framework and regularly assesses its exposure to various risks. The allowance for credit losses covers 88.51% of nonperforming loans, indicating a proactive approach to managing credit risk . Furthermore, liquidity ratios are monitored closely, with reliable sources of liquidity remaining above 6% of total assets .
Future Growth Prospects for Tompkins Financial Corporation (TMP)
Future Growth Prospects for Tompkins Financial Corporation
Analysis of Key Growth Drivers
The company is positioned for growth through various strategic initiatives and market expansions. Key growth drivers include:
- Product Innovations: Enhanced digital banking services and mobile application updates aim to attract younger demographics.
- Market Expansions: Targeting new geographic regions, particularly in the Northeast and Mid-Atlantic, to increase market share.
- Acquisitions: Ongoing evaluation of potential acquisitions to enhance service offerings and expand customer base.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections for the upcoming fiscal year indicate an increase driven by the banking and wealth management segments. The estimated revenue growth rate is projected at 6.5% for 2025, with earnings per share expected to reach $4.00 compared to $3.59 in 2024.
| Year | Estimated Revenue Growth (%) | Estimated Earnings Per Share ($) |
|---|---|---|
| 2024 | 5.0 | 3.59 |
| 2025 | 6.5 | 4.00 |
| 2026 | 7.0 | 4.25 |
Strategic Initiatives and Partnerships
The company has entered into strategic partnerships to enhance its product offerings, including:
- Fintech Collaborations: Partnerships with fintech companies to integrate innovative payment solutions and improve customer experience.
- Insurance Product Expansion: Introduction of new insurance products tailored to emerging market needs.
Competitive Advantages for Growth
Competitive advantages that position the company for growth include:
- Strong Brand Recognition: A well-established brand in the banking and insurance sectors enhances customer trust.
- Robust Capital Position: As of September 30, 2024, the company’s Tier 1 capital ratio was 9.19%, above regulatory requirements, supporting growth initiatives.
- Diverse Revenue Streams: The company operates across banking, insurance, and wealth management, reducing reliance on any single revenue source.
Financial Health Overview
As of September 30, 2024, total assets stood at $8.0 billion, with total loans up 4.9% to $5.9 billion, indicating strong loan growth. Additionally, total deposits increased by 2.8% to $6.6 billion.
| Financial Metric | Value | Change (%) |
|---|---|---|
| Total Assets | $8.0 billion | 2.4 |
| Total Loans | $5.9 billion | 4.9 |
| Total Deposits | $6.6 billion | 2.8 |
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Updated on 16 Nov 2024
Resources:
- Tompkins Financial Corporation (TMP) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Tompkins Financial Corporation (TMP)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Tompkins Financial Corporation (TMP)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.