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 ~~September 30, 2017~~March 31, 2023



☐			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.)

~~The Commons, P.O. Box 460, Ithaca, NY~~	~~14851~~
~~(Address of principal executive offices)~~	~~(Zip Code)~~

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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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

☐

~~Large Accelerated Filer ☒~~

~~Accelerated Filer ☐~~

~~Non-Accelerated Filer ☐ (Do not check if a smaller reporting company)~~

~~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~~Registrant's Common Stock outstanding as of the latest practicable date: 14,518,876 shares as of May 4, 2023.



~~Class~~		~~Outstanding as of October 23, 2017~~
~~Common Stock, $0.10 par value~~		~~15,203,250~~ ~~shares~~

TOMPKINS FINANCIAL CORPORATION

FORM 10-Q

INDEX



PART I -FINANCIAL INFORMATION
								PAGE
			Item 1 –			~~Condensed~~ Financial Statements Consolidated Statements of Condition as of ~~September 30, 2017~~March 31, 2023 (Unaudited) and December 31, ~~2016~~2022 (Audited)		31

		Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (Unaudited)			42

		Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (Unaudited)			53

		Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (Unaudited)			64

		Consolidated Statements of Changes in Shareholders’ Equity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (Unaudited)			86

		Notes to Unaudited Consolidated ~~Condensed~~ Financial Statements			97

	Item 2 -			Management’s Discussion and Analysis of Financial Condition and Results of Operations			5037

	Item 3 -			Quantitative and Qualitative Disclosures About Market Risk			6955

	Item 4 -			Controls and Procedures			7157

PART II - OTHER INFORMATION

	Item 1 –			Legal Proceedings			7157

	Item 1A – Risk Factors						7157

	Item 2 –			Unregistered Sales of Equity Securities and Use of Proceeds			7158

	Item 3 -			Defaults Upon Senior Securities			7258

	Item 4 -			Mine Safety Disclosures			7258

	Item 5 -			Other Information			7258

	Item 6 -			Exhibits			7258

SIGNATURES			7360

~~EXHIBIT INDEX~~			74

Item 1. Financial Statements

TOMPKINS FINANCIAL CORPORATION

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF CONDITION


(In thousands, except share and per share data)	As of		As of
ASSETS	03/31/2023		12/31/2022
	(unaudited)		(audited)
Cash and noninterest bearing balances due from banks	$	49,753	$	18,572
Interest bearing balances due from banks	20,784		59,265
Cash and Cash Equivalents	70,537		77,837

Available-for-sale debt securities, at fair value (amortized cost of $1,795,423 at March 31, 2023 and $1,831,791 at December 31, 2022)	1,585,854		1,594,967
Held-to-maturity securities, at amortized cost (fair value of $267,099 at March 31, 2023 and $261,692 at December 31, 2022)	312,357		312,344
Equity securities, at fair value	790		777
Total loans and leases, net of unearned income and deferred costs and fees	5,273,671		5,268,911
Less: Allowance for credit losses	46,099		45,934
Net Loans and Leases	5,227,572		5,222,977

Federal Home Loan Bank and other stock	19,326		17,720
Bank premises and equipment, net	81,633		82,140
Corporate owned life insurance	86,175		85,556
Goodwill	92,602		92,602
Other intangible assets, net	2,605		2,708
Accrued interest and other assets	164,920		181,058
Total Assets	$	7,644,371	$	7,670,686
LIABILITIES
Deposits:
Interest bearing:
Checking, savings and money market	3,774,092		3,820,739
Time	725,338		631,411
Noninterest bearing	2,009,579		2,150,145
Total Deposits	6,509,009		6,602,295

Federal funds purchased and securities sold under agreements to repurchase	63,491		56,278
Other borrowings	327,000		291,300

Other liabilities	95,106		103,423
Total Liabilities	$	6,994,606	$	7,053,296
EQUITY
Tompkins Financial Corporation shareholders' equity:
Common Stock - par value $0.10 per share: Authorized 25,000,000 shares; Issued: 14,555,658 at March 31, 2023; and 14,555,741 at December 31, 2022	1,456		1,456
Additional paid-in capital	303,357		302,763
Retained earnings	537,331		526,727
Accumulated other comprehensive loss	(187,846)		(208,689)
Treasury stock, at cost – 120,879 shares at March 31, 2023, and 128,749 shares at December 31, 2022	(5,976)		(6,279)
Total Tompkins Financial Corporation Shareholders’ Equity	648,322		615,978
Noncontrolling interests	1,443		1,412
Total Equity	$	649,765	$	617,390
Total Liabilities and Equity	$	7,644,371	$	7,670,686

See notes to unaudited consolidated financial statements.

(In thousands, except share and per share data) As of As of
ASSETS 9/30/2017 12/31/2016
(unaudited) (audited)
Cash and noninterest bearing balances due from banks $ 122,213
$ 62,074
Interest bearing balances due from banks 7,199
1,880
Cash and Cash Equivalents 129,412
63,954

Available-for-sale securities, at fair value (amortized cost of $1,413,238 at September 30, 2017 and $1,442,724 at December 31, 2016) 1,406,231
1,429,538
Held-to-maturity securities, at amortized cost (fair value of $142,007 at September 30, 2017 and $142,832 at December 31, 2016) 139,968
142,119
Originated loans and leases, net of unearned income and deferred costs and fees 4,167,254
3,863,922
Acquired loans and leases 323,259
394,111
Less: Allowance for loan and lease losses 38,038
35,755
Net Loans and Leases 4,452,475
4,222,278

Federal Home Loan Bank and other stock 40,310
43,133
Bank premises and equipment, net 79,940
70,016
Corporate owned life insurance 79,548
77,905
Goodwill 92,291
92,623
Other intangible assets, net 9,750
11,349
Accrued interest and other assets 94,135
83,841
Total Assets $ 6,524,060
$ 6,236,756
LIABILITIES

Deposits:

Interest bearing:

Checking, savings and money market 2,747,345
2,518,318
Time 786,301
870,788
Noninterest bearing 1,410,298
1,236,033
Total Deposits 4,943,944
4,625,139

Federal funds purchased and securities sold under agreements to repurchase 73,874
69,062
Other borrowings 834,574
884,815
Trust preferred debentures 16,648
37,681
Other liabilities 65,152
70,654
Total Liabilities $ 5,934,192
$ 5,687,351
EQUITY

Tompkins Financial Corporation shareholders’ equity:

Common Stock - par value $.10 per share: Authorized 25,000,000 shares; Issued: 15,238,354 at September 30, 2017; and 15,171,816 at December 31, 2016 1,524
1,517
Additional paid-in capital 364,150
357,414
Retained earnings 259,738
230,182
Accumulated other comprehensive loss (32,715 ) (37,109 )
Treasury stock, at cost – 119,142 shares at September 30, 2017, and 117,997 shares at December 31, 2016 (4,348 ) (4,051 )
Total Tompkins Financial Corporation Shareholders’ Equity 588,349
547,953

Noncontrolling interests 1,519
1,452
Total Equity $ 589,868
$ 549,405
Total Liabilities and Equity $ 6,524,060
$ 6,236,756

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended
(In thousands, except per share data) (Unaudited)	03/31/2023		03/31/2022
INTEREST AND DIVIDEND INCOME
Loans	$	60,842	$	51,131
Due from banks	139		41
Available-for-sale debt securities	6,743		6,770
Held-to-maturity securities	1,214		1,129
Federal Home Loan Bank and other stock	300		105
Total Interest and Dividend Income	69,238		59,176
INTEREST EXPENSE
Time certificates of deposits of $250,000 or more	1,788		426
Other deposits	10,394		1,620

Federal funds purchased and securities sold under agreements to repurchase	14		16

Other borrowings	2,796		500
Total Interest Expense	14,992		2,562
Net Interest Income	54,246		56,614
Less: (Credit) for credit loss expense	(825)		(520)
Net Interest Income After Credit for Credit Loss Expense	55,071		57,134
NONINTEREST INCOME
Insurance commissions and fees	9,509		9,317
Wealth management fees	4,509		4,917
Service charges on deposit accounts	1,746		1,779
Card services income	2,682		2,543
Other income	1,941		1,476
Net gain (loss) on securities transactions	13		(47)
Total Noninterest Income	20,400		19,985
NONINTEREST EXPENSE
Salaries and wages	24,512		23,272
Other employee benefits	6,741		5,797
Net occupancy expense of premises	3,299		3,541
Furniture and fixture expense	2,054		1,991

Amortization of intangible assets	83		218
Other operating expense	13,469		12,020
Total Noninterest Expenses	50,158		46,839
Income Before Income Tax Expense	25,313		30,280
Income Tax Expense	5,901		6,976
Net Income Attributable to Noncontrolling Interests and Tompkins Financial Corporation	19,412		23,304
Less: Net Income Attributable to Noncontrolling Interests	31		31
Net Income Attributable to Tompkins Financial Corporation	$	19,381	$	23,273
Basic Earnings Per Share	$	1.35	$	1.61
Diluted Earnings Per Share	$	1.35	$	1.60

See notes to unaudited ~~condensed~~ consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended
(In thousands) (Unaudited)	03/31/2023		03/31/2022
Net income attributable to noncontrolling interests and Tompkins Financial Corporation	$	19,412	$	23,304
Other comprehensive (loss) income, net of tax:

Available-for-sale debt securities:
Change in net unrealized gain (loss) during the period	20,578		(80,405)
Reclassification adjustment for net realized loss on sale of available-for-sale debt securities included in net income	0		0

Employee benefit plans:
Amortization of net retirement plan actuarial loss	224		464
Amortization of net retirement plan prior service cost	41		42

Other comprehensive income (loss)	20,843		(79,899)

Subtotal comprehensive income (loss) attributable to noncontrolling interests and Tompkins Financial Corporation	40,255		(56,595)
Less: Net income attributable to noncontrolling interests	(31)		(31)
Total comprehensive income (loss) attributable to Tompkins Financial Corporation	$	40,224	$	(56,626)

Three Months Ended Nine Months Ended
(In thousands, except per share data) (Unaudited) 9/30/2017 9/30/2016 9/30/2017 9/30/2016
INTEREST AND DIVIDEND INCOME

Loans $ 48,949
$ 43,057
$ 141,257
$ 125,378
Due from banks 9
2
15
5
Trading securities 0
62
0
220
Available-for-sale securities 7,415
6,683
22,384
21,498
Held-to-maturity securities 865
898
2,613
2,712
Federal Home Loan Bank and other stock 534
375
1,466
990
Total Interest and Dividend Income
57,772
51,077
167,735
150,803
INTEREST EXPENSE

Time certificates of deposits of $250,000 or more 457
402
1,364
1,214
Other deposits 2,679
2,291
7,508
6,764
Federal funds purchased and securities sold under agreements to repurchase 44
630
195
1,940
Trust preferred debentures 265
600
888
1,783
Other borrowings 3,327
1,837
8,445
4,840
Total Interest Expense
6,772
5,760
18,400
16,541
Net Interest Income
51,000
45,317
149,335
134,262
Less: Provision for loan and lease losses 402
782
2,147
2,615
Net Interest Income After Provision for Loan and Lease Losses
50,598
44,535
147,188
131,647
NONINTEREST INCOME

Insurance commissions and fees 7,682
7,729
21,892
22,808
Investment services income 3,862
3,735
11,544
11,355
Service charges on deposit accounts 2,125
2,203
6,337
6,559
Card services income 2,190
2,037
6,875
5,980
Mark-to-market loss on trading securities 0
(76 ) 0
(182 )
Mark-to-market gain on liabilities held at fair value 0
77
0
227
Other income 1,766
1,745
5,667
4,819
(Loss) gain on sale of available-for-sale securities (423 ) 455
(423 ) 926
Total Noninterest Income
17,202
17,905
51,892
52,492
NONINTEREST EXPENSES

Salaries and wages 20,931
19,801
60,868
58,123
Pension and other employee benefits 5,344
5,218
16,195
15,435
Net occupancy expense of premises 3,064
3,046
9,965
9,193
Furniture and fixture expense 1,585
1,707
4,819
4,973
FDIC insurance 620
783
1,775
2,388
Amortization of intangible assets 481
524
1,459
1,572
Other operating expense 9,858
9,245
29,738
27,534
Total Noninterest Expenses
41,883
40,324
124,819
119,218
Income Before Income Tax Expense
25,917
22,116
74,261
64,921
Income Tax Expense
8,491
6,945
24,127
20,601
Net Income attributable to Noncontrolling Interests and Tompkins Financial Corporation
17,426
15,171
50,134
44,320
Less: Net income attributable to noncontrolling interests 32
33
97
98
Net Income Attributable to Tompkins Financial Corporation
$ 17,394
$ 15,138
$ 50,037
$ 44,222
Basic Earnings Per Share $ 1.14
$ 1.01
$ 3.30
$ 2.94
Diluted Earnings Per Share $ 1.14
$ 1.00
$ 3.27
$ 2.92

See notes to unaudited ~~condensed~~ consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE INCOME~~CASH FLOWS


	Three Months Ended
(In thousands) (Unaudited)	03/31/2023		03/31/2022
OPERATING ACTIVITIES
Net income attributable to Tompkins Financial Corporation	$	19,381	$	23,273
Adjustments to reconcile net income to net cash provided by operating activities:
(Credit) for credit loss expense	(825)		(520)
Depreciation and amortization of premises, equipment, and software	2,678		2,650
Amortization of intangible assets	83		218
Earnings from corporate owned life insurance	(615)		(423)
Net amortization on securities	961		1,819
Amortization/accretion related to purchase accounting	(213)		(191)


Net (gain) loss on securities transactions	(13)		47
Net gain on sale of loans originated for sale	(38)		(4)
Proceeds from sale of loans originated for sale	1,345		139
Loans originated for sale	(1,453)		(685)
Net gain on sale of bank premises and equipment	(20)		(17)

Net excess tax benefit from stock based compensation	41		21
Stock-based compensation expense	1,045		945
Decrease in accrued interest receivable	1,236		1,047
Increase (decrease) in accrued interest payable	159		(106)



Other, net	(994)		(4,295)
Net Cash Provided by Operating Activities	22,758		23,918
INVESTING ACTIVITIES
Proceeds from maturities, calls and principal paydowns of available-for-sale debt securities	35,646		79,753
Proceeds from sales of available-for-sale debt securities	0		0

Purchases of available-for-sale debt securities	(252)		(124,668)
Purchases of held-to-maturity securities	0		(19,534)
Net (increase) decrease in loans	(3,218)		12,662
Proceeds from sale/redemptions of Federal Home Loan Bank stock	25,507		12,751
Purchases of Federal Home Loan Bank and other stock	(27,113)		(8,870)
Proceeds from sale of bank premises and equipment	55		42
Purchases of bank premises, equipment and software	(1,406)		(27)


Other, net	(138)		0
Net Cash Provided by (Used in) Investing Activities	29,081		(47,891)
FINANCING ACTIVITIES
Net (decrease) increase in demand, money market, and savings deposits	(187,213)		249,042
Net increase (decrease) in time deposits	94,021		(23,630)
Net increase (decrease) in Federal funds purchased and securities sold under agreements to repurchase	7,213		(9,672)
Increase in other borrowings	85,000		0
Repayment of other borrowings	(49,300)		(64,000)

Cash dividends	(8,712)		(8,335)

Repurchase of common stock	0		(10,370)

Shares issued for employee stock ownership plan	0		2,951
Net shares issued related to restricted stock awards	(40)		(3)
Net proceeds from exercise of stock options	(108)		(42)
Net Cash (Used) Provided by Financing Activities	(59,139)		135,941
Net (Decrease) Increase in Cash and Cash Equivalents	(7,300)		111,968
Cash and cash equivalents at beginning of period	77,837		63,107
Total Cash and Cash Equivalents at End of Period	$	70,537	$	175,075

Three Months Ended
(In thousands) (Unaudited) 9/30/2017 9/30/2016
Net income attributable to noncontrolling interests and Tompkins Financial Corporation $ 17,426
$ 15,171
Other comprehensive income, net of tax:

Available-for-sale securities:

Change in net unrealized gain/loss during the period 426
(3,333 )
Reclassification adjustment for net realized loss (gain) on sale of available-for-sale securities included in net income 254
(273 )

Employee benefit plans:

Amortization of net retirement plan actuarial gain 227
201
Amortization of net retirement plan prior service (credit) cost 2
12

Other comprehensive income (loss) 909
(3,393 )

Subtotal comprehensive income attributable to noncontrolling interests and Tompkins Financial Corporation 18,335
11,778
Less: Net income attributable to noncontrolling interests (32 ) (33 )
Total comprehensive income attributable to Tompkins Financial Corporation $ 18,303
$ 11,745

See notes to unaudited ~~condensed~~ consolidated financial statements.

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

Nine Months Ended
(In thousands) (Unaudited) 9/30/2017 9/30/2016
Net income attributable to noncontrolling interests and Tompkins Financial Corporation $ 50,134
$ 44,320
Other comprehensive income, net of tax:

Available-for-sale securities:

Change in net unrealized gain during the period 3,454
14,260
Reclassification adjustment for net realized loss (gain) on sale of available-for-sale securities included in net income 254
(556 )

Employee benefit plans:

Amortization of net retirement plan actuarial gain 679
602
Amortization of net retirement plan prior service cost 7
35

Other comprehensive income 4,394
14,341

Subtotal comprehensive income attributable to noncontrolling interests and Tompkins Financial Corporation 54,528
58,661
Less: Net income attributable to noncontrolling interests (97 ) (98 )
Total comprehensive income attributable to Tompkins Financial Corporation $ 54,431
$ 58,563

~~See notes to unaudited condensed consolidated financial statements.~~

~~TOMPKINS FINANCIAL CORPORATION~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

Nine Months Ended
(In thousands) (Unaudited) 9/30/2017 9/30/2016
OPERATING ACTIVITIES

Net income attributable to Tompkins Financial Corporation $ 50,037
$ 44,222
Adjustments to reconcile net income to net cash provided by operating activities:

Provision for loan and lease losses 2,147
2,615
Depreciation and amortization of premises, equipment, and software 5,666
5,049
Amortization of intangible assets 1,459
1,572
Earnings from corporate owned life insurance (1,644 ) (1,615 )
Net amortization on securities 7,884
8,214
Amortization/accretion related to purchase accounting (2,060 ) (2,320 )
Mark-to-market loss on trading securities 0
182
Mark-to-market gain on liabilities held at fair value 0
(227 )
Net loss (gain) on securities transactions 423
(926 )
Net gain on sale of loans originated for sale (39 ) (57 )
Proceeds from sale of loans originated for sale 2,249
2,018
Loans originated for sale (2,409 ) (1,661 )
Net (gain) loss on sale of bank premises and equipment (19 ) 18
Net excess tax benefit from stock based compensation 299
607
Stock-based compensation expense 2,120
1,715
Increase in accrued interest receivable (3,081 ) (927 )
Increase (decrease) in accrued interest payable 29
(111 )
Proceeds from sales of trading securities 0
1,397
Proceeds from maturities and payments of trading securities 0
5,781
Contribution to pension plan (1,750 ) (1,300 )
Other, net (6,126 ) 466
Net Cash Provided by Operating Activities 55,185
64,712
INVESTING ACTIVITIES

Proceeds from maturities, calls and principal paydowns of available-for-sale securities 125,761
188,137
Proceeds from sales of available-for-sale securities 23,828
84,270
Proceeds from maturities, calls and principal paydowns of held-to-maturity securities 6,626
8,411
Purchases of available-for-sale securities (128,118 ) (241,991 )
Purchases of held-to-maturity securities (4,768 ) (7,277 )
Net increase in loans (230,739 ) (317,012 )
Net decrease (increase) in Federal Home Loan Bank stock 2,823
(4,277 )
Proceeds from sale of bank premises and equipment 85
72
Purchases of bank premises, equipment and software (23,208 ) (8,049 )
Net cash used in acquisition 0
�� (218 )
Other, net 1,104
123
Net Cash Used in Investing Activities (226,606 ) (297,811 )
FINANCING ACTIVITIES

Net increase in demand, money market, and savings deposits 403,292
272,700
Net (decrease) increase in time deposits (83,667 ) 23,283
Net increase (decrease) in Federal funds purchased and securities sold under agreements to repurchase 4,812
(59,137 )
Increase in other borrowings 468,749
536,301
Repayment of other borrowings (518,991 ) (401,359 )
Redemption of trust preferred debentures (21,161 ) 0
Cash dividends (20,481 ) (19,825 )
Repurchase of common stock 0
(1,166 )
Shares issued for dividend reinvestment plan 2,872
2,237
Shares issued for employee stock ownership plan 2,296
1,938
Net shares issued related to restricted stock awards (561 ) (420 )
Net proceeds from exercise of stock options (281 ) (124 )
Net Cash Provided by Financing Activities 236,879
354,428
Net Increase in Cash and Cash Equivalents 65,458
121,329
Cash and cash equivalents at beginning of period 63,954
58,257
Total Cash & Cash Equivalents at End of Period $ 129,412
$ 179,586

~~See notes to unaudited condensed consolidated financial statements.~~

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine months ended					Three Months Ended
(In thousands) (Unaudited)	9/30/2017		9/30/2016		(In thousands) (Unaudited)	03/31/2023		03/31/2022
Supplemental Information:					Supplemental Information:
Cash paid during the year for - Interest	$	19,192	$	17,641	Cash paid during the year for - Interest	$	14,927	$	2,775
Cash paid during the year for - Taxes	13,801		17,746		Cash paid during the year for - Taxes	1,249		1,396
Transfer of loans to other real estate owned	2,693		1,179		Transfer of loans to other real estate owned	0		49
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 liabilities					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	418		552

See notes to unaudited ~~condensed~~ consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

~~(Unaudited)~~

(In thousands except share and per share data) Common
Stock Additional Paid-in Capital Retained
Earnings Accumulated Other Comprehensive (Loss) Income Treasury
Stock Non-
controlling Interests Total
Balances at January 1, 2016 $ 1,502
$ 350,823
$ 197,445
$ (31,001 ) $ (3,755 ) $ 1,452
$ 516,466
Net income attributable to noncontrolling interests and Tompkins Financial Corporation

44,222

98
44,320
Other comprehensive income

14,341

14,341
Total Comprehensive Income

58,661
Cash dividends ($1.32 per share)

(19,825 )

(19,825 )
Net exercise of stock options (19,018 shares) 2
(126 )

(124 )
Stock-based compensation expense
1,715

1,715
Common stock repurchased and returned to unissued status (22,356 shares) (2 ) (1,164 )

(1,166 )
Shares issued for employee stock ownership plan (31,435 shares) 3
1,935

1,938
Directors deferred compensation plan ((77) shares)
157

(157 )
0
Common stock issued for purchase acquisition (32,553 shares) 3
1,705

1,708
Restricted stock activity ((17,504) shares) (2 ) (418 )

(420 )
Shares issued for dividend reinvestment plan (33,124 shares) 3
2,234

2,237
Balances at September 30, 2016 $ 1,509
$ 356,861
$ 221,842
$ (16,660 ) $ (3,912 ) $ 1,550
$ 561,190

Balances at January 1, 2017 $ 1,517
$ 357,414
$ 230,182
$ (37,109 ) $ (4,051 ) $ 1,452
$ 549,405
Net income attributable to noncontrolling interests and Tompkins Financial Corporation

50,037

97
50,134
Other comprehensive income

4,394

4,394
Total Comprehensive Income

54,528
Cash dividends ($1.35 per share)

(20,481 )

(20,481 )
Net exercise of stock options (12,677 shares) 1
(282 )

(281 )
Shares issued for dividend reinvestment plan (34,750 shares) 4
2,868

2,872
Stock-based compensation expense
2,120

2,120
Shares issued for employee stock ownership plan (27,412 shares) 3
2,293

2,296
Directors deferred compensation plan (1,145 shares)
297

(297 )
0
Restricted stock activity ((8,301) shares) (1 ) (560 )

(561 )
Partial repurchase of noncontrolling interest

(30 ) (30 )
Balances at September 30, 2017 $ 1,524
$ 364,150
$ 259,738
$ (32,715 ) $ (4,348 ) $ 1,519
$ 589,868


(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, 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					23,273						31		23,304
Other comprehensive loss							(79,899)						(79,899)
Total Comprehensive Loss													(56,595)
Cash dividends ($0.57 per share)					(8,335)								(8,335)
Net exercise of stock options (630 shares)			(42)										(42)
Common stock repurchased and returned to unissued status (130,168 shares)	(13)		(10,357)										(10,370)

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


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

Balances at January 1, 2023	$	1,456	$	302,763	$	526,727	$	(208,689)	$	(6,279)	$	1,412	$	617,390
Net income attributable to noncontrolling interests and Tompkins Financial Corporation					19,381						31		19,412
Other comprehensive income							20,843						20,843
Total Comprehensive Income													40,255
Cash dividends ($0.60 per share)					(8,712)								(8,712)
Net exercise of stock options (1,509 shares)			(108)										(108)


Stock-based compensation expense			1,045										1,045

Directors deferred compensation plan (7,870 shares)			(303)						303				0
Restricted stock activity (1,592 shares)			(40)										(40)

Adoption of Accounting Guidance					(65)								(65)

Balances at March 31, 2023	$	1,456	$	303,357	$	537,331	$	(187,846)	$	(5,976)	$	1,443	$	649,765

See notes to unaudited ~~condensed~~ consolidated financial ~~statements~~statements.

NOTES TO UNAUDITED ~~CONDENSED~~ 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 ~~September 30, 2017,~~March 31, 2023, the ~~Company’s subsidiaries included: four~~Company had one wholly-owned banking subsidiaries, Tompkins Trust Company (the “Trust Company”), The Bank of Castile (DBA Tompkins Bank of Castile), Mahopac Bank (formerly known as Mahopac National Bank, DBA Tompkins Mahopac Bank), VIST Bank (DBA Tompkins VIST Bank); and a wholly-owned insurance agency subsidiary, Tompkins ~~Insurance Agencies, Inc. (“~~Community Bank. Tompkins ~~Insurance”). The trust division of the Trust Company~~Community Bank provides a full array of ~~investment~~trust and 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 also has a wholly-owned insurance agency subsidiary, Tompkins Insurance Agencies, Inc. ("Tompkins Insurance"). The Company’s principal offices are located at ~~The Commons,~~118 E. Seneca Street, Ithaca, New York, ~~14851,~~14850, and its telephone number is (888) 503-5753. The Company’s common stock is traded on the NYSE American ~~LLC~~ under the ~~Symbol “TMP.”~~symbol "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 ~~LLC~~ 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.

~~The~~ These agencies also examine and regulate the trust ~~division~~business of Tompkins ~~Trust Company is subject to examination and comprehensive regulation by the FDIC and NYSDFS.~~Community Bank.

~~The Company’s insurance subsidiary~~Tompkins 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 ~~GAAP~~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 ~~condensed~~ 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 ~~loan and lease~~credit losses ~~the expenses and liabilities associated with the Company’s pension and post-retirement benefits,~~ and the review of its securities portfolio for other than temporary impairment.

In management’s opinion, the unaudited ~~condensed~~ 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, ~~2017.~~2023. The unaudited ~~condensed~~ 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, 2016. There have been no significant changes to the Company’s accounting policies from those presented in the 2016 Annual Report on Form 10-K. Refer to Note 3- “Accounting Standards Updates” of this Report for a discussion of recently issued accounting guidelines.2022.

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 ~~condensed~~ consolidated financial statements are reclassified when necessary to conform to the current periods’ presentation. Information for the third quarter, second quarter, and first quarter of 2016 has been revised to reflect the impact of the adoption of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting", in the fourth quarter of 2016, retroactive to January 1, 2016. All significant intercompany balances and transactions are eliminated in consolidation.

3. ~~Accounting Standards Updates~~

~~ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).”~~ ASU 2014-09 implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 was originally going to be effective for us on January 1, 2017; however, the FASB issued ~~ASU 2015-14, “Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date"~~ which deferred the effective date of ASU 2014-09 by one year to January 1, 2018. The majority of Tompkins’ revenue is comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09. With respect to noninterest income, the Company has identified revenue streams within the scope of the guidance, and is performing an evaluation of the underlying revenue contracts potentially affected by this guidance, including insurance commissions and fees, trust and wealth management fees, deposit related fees, and interchange fees. While Tompkins does not expect these changes to have a significant impact on the Company’s consolidated financial statements, Tompkins is still in the process of completing its review. The Company expects that this standard will require enhanced monitoring and tracking of affected contracts. The Company plans to adopt the standard in the first quarter of 2018 with a cumulative effect adjustment to opening retained earnings, if such adjustment is deemed to be significant.

~~ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.~~” ASU 2016-01, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (viii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. ASU 2016-01 will be effective for us on January 1, 2018 and is not expected to have a significant impact on our consolidated financial statements.

~~ASU 2016-02,“Leases (Topic 842).”~~ ASU 2016-02 will, among other things, require lessees to recognize a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model and ASC Topic 606, “Revenue from Contracts with Customers.” ASU 2016-2 will be effective for Tompkins on January 1, 2019 and will require transition using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company occupies certain banking offices and uses certain equipment under noncancelable operating lease agreements, which currently are not reflected in its consolidated statement of condition. Tompkins is preparing an inventory

of its leases and evaluating the impact of this ASU on these leases. Upon adoption of the guidance, the Company expects to report increased assets and increased liabilities as a result of recognizing right-of-use assets and lease liabilities on its consolidated statement of condition. Tompkins is currently evaluating the extent of the impact that the adoption of this ASU will have on our consolidated financial statements.

~~ASU 2016-05“Derivatives and Hedging (Topic 815) Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.”~~ ~~ASU 2016-05~~clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under ASC Topic 815 does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. ASU 2016-05 became effective for Tompkins on January 1, 2017 and did not have a significant impact on our consolidated financial statements.

~~ASU 2016-07, “Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting.”~~ The amendments affect all entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence. ASU 2016-07 simplifies the transition to the equity method of accounting by eliminating retroactive adjustment of the investment when an investment qualifies for use of the equity method, among other things. ASU 2016-07 became effective for Tompkins on January 1, 2017 and did not have a significant impact on our consolidated financial statements.

~~ASU 2016-08~~, ~~“Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).”~~ ~~ASU 2016-08 was issued to clarify certain principal versus agent considerations within the implementation guidance of ASC Topic 606, “Revenue from Contracts with Customers.” The effective date and transition of ASU 2016-08 is the same as the effective date and transition of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," as discussed above. Tompkins is currently evaluating the potential impact of ASU 2016-08 on our consolidated financial statements.~~

~~ASU No. 2016-10~~, ~~“Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.”~~ ~~ASU 2016-10 was issued to clarify~~ ~~ASC Topic 606, “Revenue from Contracts with Customers”~~ related to (i) identifying performance obligations; and (ii) the licensing implementation guidance. The effective date and transition of ASU 2016-10 is the same as the effective date and transition of ASU 2014-09~~, “Revenue from Contracts with Customers (Topic 606),”~~ ~~as discussed above. Tompkins is currently evaluating the potential impact of ASU 2016-10 on our consolidated financial statements.~~

~~ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”~~ ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will be effective on January 1, 2020. Tompkins is currently evaluating the requirements of the new guidance to determine what modifications to our existing allowance methodology may be required. The Company expects that the new guidance will likely result in an increase in the allowance; however, Tompkins is unable to quantify the impact at this time since we are still reviewing the guidance. The extent of any impact to our allowance will depend, in part, upon the composition of our loan portfolio at the adoption date as well as economic conditions and loss forecasts at that date.

~~ASU 2016-15, “Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments.”~~ ASU 2016-15 provides guidance related to certain cash flow issues in order to reduce the current and potential future diversity in practice. ASU 2016-15 will be effective for us on January 1, 2018. Tompkins is currently evaluating the potential impact of ASU 2016-15 on our consolidated financial statements.

~~ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment.”~~ ASU 2017-04 eliminates Step 2 from the goodwill impairment test which required entities to compute the implied fair value of goodwill. Under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 will be effective for us on January 1, 2020, with early adoption permitted for interim or annual impairment tests beginning in 2017. Tompkins is currently evaluating the potential impact of ASU 2017-04 on our consolidated financial statements.

ASU 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) - Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.” ~~ASU 2017-05 clarifies the~~

scope of Subtopic 610-20 and adds guidance for partial sales of nonfinancial assets, including partial sales of real estate. Historically, U.S. GAAP contained several different accounting models to evaluate whether the transfer of certain assets qualified for sale treatment. ASU 2017-05 reduces the number of potential accounting models that might apply and clarifies which model does apply in various circumstances. ASU 2017-05 will be effective for us on January 1, 2018. Tompkins is currently evaluating the potential impact of ASU 2017-05 on our consolidated financial statements.

~~ASU 2017-07, “Compensation-Retirement Benefits (Topic 715 - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.”),~~ which requires that the service cost component of the Company's net periodic pension cost and net periodic postretirement benefit cost be included in the same line item as other compensation costs arising from services rendered by employees, with the other components of net periodic benefit cost being classified outside of a subtotal of income from operations. Of the components of net periodic benefit cost, only the service cost component will be eligible for asset capitalization. ASU 2017-07 is effective for the Company beginning January 1, 2018 and is required to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement. Tompkins is currently evaluating the potential impact of ASU 2017-07 on our consolidated financial statements.

~~ASU 2017-08 “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20) - Premium Amortization on Purchased Callable Debt Securities.”~~ ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium to require such premiums to be amortized to the earliest call date unless applicable guidance related to certain pools of securities is applied to consider estimated prepayments. Under prior guidance, entities were generally required to amortize premiums on individual, non-pooled callable debt securities as a yield adjustment over the contractual life of the security. ASU 2017-08 does not change the accounting for callable debt securities held at a discount. ASU 2017-08 will be effective for us on January 1, 2019, with early adoption permitted. Tompkins is currently evaluating the potential impact of ASU 2017-08 on our consolidated financial statements.

~~ASU 2017-09~~, ~~“Compensation-Stock Compensation (Topic 718)- Scope of Modification Accounting.”~~ ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under ASU 2017-09, an entity will not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the award's fair value, (ii) the award's vesting conditions and (iii) the award's classification as an equity or liability instrument. ASU 2017-09 will be effective for us on January 1, 2018 and is not expected to have a significant impact on our consolidated financial statements.

4. Securities

~~Available-for-Sales~~Available-for-Sale Debt Securities

The following table summarizes available-for-sale debt securities held by the Company at ~~September 30, 2017:~~March 31, 2023:


										Available-for-Sale Debt Securities
	Available-for-Sale Securities
September 30, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(in thousands)
March 31, 2023									March 31, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(In thousands)									(In thousands)
U.S. Treasuries									U.S. Treasuries	$	190,220	$	0	$	19,406	$	170,814
Obligations of U.S. Government sponsored entities	$	532,958	$	2,466	$	1,222	$	534,202	Obligations of U.S. Government sponsored entities	670,978		0		71,216		599,762
Obligations of U.S. states and political subdivisions	91,771		558		286		92,043		Obligations of U.S. states and political subdivisions	92,915		10		6,241		86,684
Mortgage-backed securities – residential, issued by									Mortgage-backed securities – residential, issued by
U.S. Government agencies	145,470		903		1,700		144,673		U.S. Government agencies	56,224		15		5,348		50,891
U.S. Government sponsored entities	639,454		1,561		8,869		632,146		U.S. Government sponsored entities	782,586		0		107,276		675,310
Non-U.S. Government agencies or sponsored entities	85		0		0		85

U.S. corporate debt securities	2,500		0		338		2,162		U.S. corporate debt securities	2,500		0		107		2,393
Total debt securities	1,412,238		5,488		12,415		1,405,311
Equity securities	1,000		0		80		920
Total available-for-sale securities	$	1,413,238	$	5,488	$	12,495	$	1,406,231
Total available-for-sale debt securities									Total available-for-sale debt securities	$	1,795,423	$	25	$	209,594	$	1,585,854

The following table summarizes available-for-sale debt securities held by the Company at December 31, ~~2016:~~ 2022:


	Available-for-Sale Debt Securities
December 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(In thousands)
U.S. Treasuries	$	190,170	$	0	$	22,919	$	167,251
Obligations of U.S. Government sponsored entities	681,192		0		80,025		601,167
Obligations of U.S. states and political subdivisions	93,599		8		8,326		85,281
Mortgage-backed securities – residential, issued by
U.S. Government agencies	58,727		12		6,071		52,668
U.S. Government sponsored entities	805,603		0		119,381		686,222

U.S. corporate debt securities	2,500		0		122		2,378
Total available-for-sale debt securities	$	1,831,791	$	20	$	236,844	$	1,594,967

Available-for-Sale Securities
December 31, 2016 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value
(in thousands)

Obligations of U.S. Government sponsored entities $ 527,057
$ 2,873
$ 2,303
$ 527,627
Obligations of U.S. states and political subdivisions 89,910
286
1,140
89,056
Mortgage-backed securities – residential, issued by

U.S. Government agencies 159,417
1,081
2,272
158,226
U.S. Government sponsored entities 662,724
1,993
13,287
651,430
Non-U.S. Government agencies or sponsored entities 116
0
0
116
U.S. corporate debt securities 2,500
0
338
2,162
Total debt securities 1,441,724
6,233
19,340
1,428,617
Equity securities 1,000
0
79
921
Total available-for-sale securities $ 1,442,724
$ 6,233
$ 19,419
$ 1,429,538

Held-to-Maturity Debt Securities

The following table summarizes held-to-maturity debt securities held by the Company at ~~September 30, 2017:~~ March 31, 2023:

Held-to-Maturity Securities
September 30, 2017 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value
(in thousands)

Obligations of U.S. Government sponsored entities $ 131,805
$ 1,941
$ 41
$ 133,705
Obligations of U.S. states and political subdivisions 8,163
143
4
8,302
Total held-to-maturity debt securities $ 139,968
$ 2,084
$ 45
$ 142,007


	Held-to-Maturity Securities
March 31, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(In thousands)
U.S. Treasuries	$	86,425	$	0	$	10,966	$	75,459
Obligations of U.S. Government sponsored entities	225,932		0		34,292		191,640

Total held-to-maturity debt securities	$	312,357	$	0	$	45,258	$	267,099

The following table summarizes held-to-maturity debt securities held by the Company at December 31, ~~2016:~~ 2022:

Held-to-Maturity Securities
December 31, 2016 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value
(in thousands)

Obligations of U.S. Government sponsored entities $ 132,098
$ 804
$ 283
$ 132,619
Obligations of U.S. states and political subdivisions 10,021
195
3
10,213
Total held-to-maturity debt securities $ 142,119
$ 999
$ 286
$ 142,832


	Held-to-Maturity Securities
December 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(In thousands)
U.S. Treasuries	$	86,478	$	0	$	12,937	$	73,541
Obligations of U.S. Government sponsored entities	225,866		0		37,715		188,151

Total held-to-maturity debt securities	$	312,344	$	0	$	50,652	$	261,692

The Company may from time to time sell ~~investment~~debt securities from its available-for-sale portfolio. There were no sales of available-for-sale debt securities for both the three months ended March 31, 2023 and the three months ended March 31, 2022. Realized gains (losses) on sales of available-for-sale debt securities were ~~$3,000~~$0 for both the three months ended March 31, 2023 and the three months ended March 31, 2022. The Company's available-for-sale portfolio includes callable securities that may be called prior to maturity. There were no realized gains (losses) on called available-for-sale debt securities for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~$455,000~~the three months ended March 31, 2022. The Company also recognized net gains on equity securities of $13,000 for the three months ended March 31, 2023 and ~~$$926,000~~net losses of $47,000 for the same ~~periods~~period during ~~2016. Realized losses on available-for-sale securities were $426,000 for~~2022, reflecting the three and nine months ended September 30, 2017 and $0 for the same periods during 2016. The sales of available-for-sale investment securities were the result of general investment portfolio and interest rate risk management.change in fair value.

The following table summarizes available-for-sale debt securities that had unrealized losses at ~~September 30, 2017:~~ March 31, 2023:


	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	$	0	$	0	$	170,814	$	19,406	$	170,814	$	19,406
Obligations of U.S. Government sponsored entities	95,536		1,931		504,226		69,286		599,762		71,217
Obligations of U.S. states and political subdivisions	20,397		306		58,598		5,936		78,995		6,242
Mortgage-backed securities – residential, issued by
U.S. Government agencies	5,484		183		45,046		5,164		50,530		5,347
U.S. Government sponsored entities	16,950		761		658,360		106,514		675,310		107,275
U.S. corporate debt securities	0		0		2,393		107		2,393		107
Total available-for-sale debt securities	$	138,367	$	3,181	$	1,439,437	$	206,413	$	1,577,804	$	209,594

Less than 12 Months 12 Months or Longer Total
(in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Obligations of U.S. Government sponsored entities $ 130,038
$ 1,109
$ 7,446
$ 113
$ 137,484
$ 1,222
Obligations of U.S. states and political subdivisions 20,411
185
12,029
101
32,440
286

Mortgage-backed securities – residential, issued by

U.S. Government agencies 62,581
682
55,561
1,018
118,142
1,700
U.S. Government sponsored entities 300,477
2,794
242,432
6,075
542,909
8,869
U.S. corporate debt securities 0
0
2,163
338
2,163
338
Equity securities 0
0
920
80
920
80
Total available-for-sale securities $ 513,507
$ 4,770
$ 320,551
$ 7,725
$ 834,058
$ 12,495

The following table summarizes available-for-sale debt securities that had unrealized losses at December 31, ~~2016:~~ 2022:


														Less than 12 Months				12 Months or Longer				Total
	Less than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(In thousands)													(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasuries													U.S. Treasuries	$	28,602	$	2,132	$	138,649	$	20,787	$	167,251	$	22,919
Obligations of U.S. Government sponsored entities	$	208,940	$	2,303	$	0	$	0	$	208,940	$	2,303	Obligations of U.S. Government sponsored entities	143,794		7,508		457,373		72,517		601,167		80,025
Obligations of U.S. states and political subdivisions	58,852		1,139		751		1		59,603		1,140		Obligations of U.S. states and political subdivisions	46,638		2,385		33,435		5,941		80,073		8,326

Mortgage-backed securities – residential, issued by													Mortgage-backed securities – residential, issued by
U.S. Government agencies	98,307		1,570		22,376		702		120,683		2,272		U.S. Government agencies	22,945		1,258		29,356		4,813		52,301		6,071
U.S. Government sponsored entities	463,009		8,933		123,915		4,354		586,924		13,287		U.S. Government sponsored entities	186,690		16,869		499,532		102,512		686,222		119,381
U.S. corporate debt securities	0		0		2,162		338		2,162		338		U.S. corporate debt securities	0		0		2,378		122		2,378		122
Equity securities	0		0		921		79		921		79
Total available-for-sale securities	$	829,108	$	13,945	$	150,125	$	5,474	$	979,233	$	19,419
Total available-for-sale debt securities													Total available-for-sale debt securities	$	428,669	$	30,152	$	1,160,723	$	206,692	$	1,589,392	$	236,844

The following table summarizes held-to-maturity debt securities that had unrealized losses at ~~September 30, 2017.~~March 31, 2023:


	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	$	0	$	0	$	75,459	$	10,966	$	75,459	$	10,966
Obligations of U.S. Government sponsored entities	8,293		604		183,347		33,688		191,640		34,292

Total held-to-maturity debt securities	$	8,293	$	604	$	258,806	$	44,654	$	267,099	$	45,258

The following table summarizes held-to-maturity debt securities that had unrealized losses at December 31, ~~2016.~~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	$	0	$	0	$	73,542	$	12,937	$	73,542	$	12,937
Obligations of U.S. Government sponsored entities	24,543		3,903		163,607		33,812		188,150		37,715

Total held-to-maturity debt securities	$	24,543	$	3,903	$	237,149	$	46,749	$	261,692	$	50,652

The Company evaluates available-for-sale debt securities for expected credit losses ("ECL") in unrealized loss positions at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors.

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 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

Less than 12 Months 12 Months or Longer Total
(in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Obligations of U.S. Government sponsored entities $ 40,802
$ 283
$ 0
$ 0
$ 40,802
$ 283

Obligations of U.S. states and political subdivisions 2,567
3
0
0
2,567
3
Total held-to-maturity securities $ 43,369
$ 286
$ 0
$ 0
$ 43,369
$ 286
recognized in other comprehensive income (loss), net of applicable taxes. Credit-related impairment is recognized as an allowance for credit losses ("ACL") on the 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.

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, 2023, 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 "low-risk," 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, 2023.

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 basis, which may be at maturity. Accordingly, as of September 30, 2017, and December 31, 2016, management has determined that the unrealized losses detailed in the tables above are not other-than-temporary.cost.

~~Ongoing Assessment of Other-Than-Temporary Impairment~~

On a quarterly basis, the Company performs an assessment to determine whether there have been any events or economic circumstances indicating that a security with an unrealized loss has suffered other-than-temporary impairment (“OTTI”). A debt security is considered impaired if the fair value is less than its amortized cost basis (including any previous OTTI charges) at the reporting date. If impaired, the Company then assesses whether the unrealized loss is other-than-temporary. An unrealized loss on a debt security is generally deemed to be other-than-temporary and a credit loss is deemed to exist if the present value, discounted at the security’s effective rate, of the expected future cash flows is less than the amortized cost basis of the debt security. As a result, the credit loss component of an other-than-temporary impairment write-down for debt securities is recorded in earnings while the remaining portion of the impairment loss is recognized, net of tax, in other comprehensive income provided that the Company does not intend to sell the underlying debt security and it is more-likely-than not that the Company would not have to sell the debt security prior to recovery of the unrealized loss, which may be to maturity. If the Company intended to sell any securities with an unrealized loss or it is more-likely-than not that the Company would be required to sell the investment securities, before recovery of their amortized cost basis, then the entire unrealized loss would be recorded in earnings.

The Company ~~considers the following factors in determining whether a~~did not recognize any net credit ~~loss exists.~~

~~The length of time and the extent~~impairment charge to ~~which the fair value has been less than the amortized cost basis;~~

~~The level of credit enhancement provided by the structure which includes, but is not limited to, credit subordination positions, excess spreads, overcollateralization, protective triggers;~~

~~Changes~~earnings on investment securities in the ~~near term prospects~~first quarter of ~~the issuer or underlying collateral of a security, such as changes in default rates, loss severities given default and significant changes in prepayment assumptions;~~2023.

~~The level of excess cash flow generated from the underlying collateral supporting the principal and interest payments of the debt securities; and~~

~~Any adverse change to the credit conditions of the issuer or the security such as credit downgrades by the rating agencies.~~

~~As a result of the other-than-temporarily impairment review process, the Company does not consider any investment security held at September 30, 2017 to be other-than-temporarily impaired.~~

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, 2023
(In thousands)	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due in one year or less	$	40,237	$	39,828
Due after one year through five years	554,392		506,082
Due after five years through ten years	325,346		283,610
Due after ten years	36,638		30,133
Total	956,613		859,653
Mortgage-backed securities	838,810		726,201
Total available-for-sale debt securities	$	1,795,423	$	1,585,854


September 30, 2017
(in thousands)	Amortized Cost		Fair Value
Available-for-sale securities:
December 31, 2022					December 31, 2022
(In thousands)					(In thousands)	Amortized Cost		Fair Value
Available-for-sale debt securities:					Available-for-sale debt securities:
Due in one year or less	$	32,167	$	32,279	Due in one year or less	$	50,922	$	50,269
Due after one year through five years	403,739		405,216		Due after one year through five years	508,880		459,721
Due after five years through ten years	172,316		172,276		Due after five years through ten years	367,743		314,408
Due after ten years	19,007		18,636		Due after ten years	39,916		31,679
Total	627,229		628,407		Total	967,461		856,077
Mortgage-backed securities	785,009		776,904		Mortgage-backed securities	864,330		738,890
Total available-for-sale debt securities	$	1,412,238	$	1,405,311	Total available-for-sale debt securities	$	1,831,791	$	1,594,967


March 31, 2023
(In thousands)	Amortized Cost		Fair Value
Held-to-maturity debt securities:


Due after five years through ten years	$	312,357	$	267,099
Total held-to-maturity debt securities	$	312,357	$	267,099

December 31, 2016

(in thousands) Amortized Cost Fair Value
Available-for-sale securities:

Due in one year or less $ 17,878
$ 18,034
Due after one year through five years 376,777
378,631
Due after five years through ten years 210,985
208,999
Due after ten years 13,827
13,181
Total 619,467
618,845
Mortgage-backed securities 822,257
809,772
Total available-for-sale debt securities $ 1,441,724
$ 1,428,617


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


Due after five years through ten years	$	312,344	$	261,692
Total held-to-maturity debt securities	$	312,344	$	261,692

September 30, 2017

(in thousands) Amortized Cost Fair Value
Held-to-maturity securities:

Due in one year or less $ 6,483
$ 6,495
Due after one year through five years 42,080
42,764
Due after five years through ten years 91,405
92,748
Total held-to-maturity debt securities $ 139,968
$ 142,007

December 31, 2016

(in thousands) Amortized Cost Fair Value
Held-to-maturity securities:

Due in one year or less $ 7,452
$ 7,469
Due after one year through five years 27,480
27,866
Due after five years through ten years 107,187
107,497
Due after ten years 0
0
Total held-to-maturity debt securities $ 142,119
$ 142,832

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 ~~stock~~ ("ACBB"), stock, all of which are required to be held for regulatory purposes and for borrowing availability. The required investment in ~~FHLB~~Federal Home Loan Bank ("FHLB") stock is tied to the Company’s borrowing levels with the FHLB. Holdings of FHLBNY stock ~~FHLBPITT stock,~~ and ACBB stock totaled ~~$26.6 million, $13.6~~$19.2 million and $95,000, respectively, at ~~September 30, 2017, respectively.~~March 31, 2023. 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 ~~September 30, 2017,~~March 31, 2023, we ~~have~~ determined that no impairment write-downs ~~are currently~~were required.

5.4. Loans and Leases

Loans and Leases at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~2022 were as follows:


(In thousands)	03/31/2023		12/31/2022
Commercial and industrial
Agriculture	$	65,223	$	85,073
Commercial and industrial other	673,104		705,700
PPP loans*	686		756
Subtotal commercial and industrial	739,013		791,529
Commercial real estate
Construction	219,789		201,116
Agriculture	214,014		214,963
Commercial real estate other	2,476,532		2,437,339
Subtotal commercial real estate	2,910,335		2,853,418
Residential real estate
Home equity	183,636		188,623
Mortgages	1,342,214		1,346,318
Subtotal residential real estate	1,525,850		1,534,941
Consumer and other
Indirect	1,783		2,224
Consumer and other	83,775		75,412
Subtotal consumer and other	85,558		77,636
Leases	18,016		16,134
Total loans and leases	5,278,772		5,273,658
Less: unearned income and deferred costs and fees	(5,101)		(4,747)
Total loans and leases, net of unearned income and deferred costs and fees	$	5,273,671	$	5,268,911
*SBA Paycheck Protection Program ("PPP")

9/30/2017 12/31/2016
(in thousands) Originated Acquired Total Loans and Leases Originated Acquired Total Loans and Leases
Commercial and industrial

Agriculture $ 91,054
$ 0
$ 91,054
$ 118,247
$ 0
$ 118,247
Commercial and industrial other 895,348
53,484
948,832
847,055
79,317
926,372
Subtotal commercial and industrial 986,402
53,484
1,039,886
965,302
79,317
1,044,619
Commercial real estate

Construction 217,218
1,526
218,744
135,834
8,936
144,770
Agriculture 122,304
257
122,561
102,509
267
102,776
Commercial real estate other 1,537,194
212,646
1,749,840
1,431,690
241,605
1,673,295
Subtotal commercial real estate 1,876,716
214,429
2,091,145
1,670,033
250,808
1,920,841
Residential real estate

Home equity 213,570
31,305
244,875
209,277
37,737
247,014
Mortgages 1,017,205
23,167
1,040,372
947,378
25,423
972,801
Subtotal residential real estate 1,230,775
54,472
1,285,247
1,156,655
63,160
1,219,815
Consumer and other

Indirect 12,632
0
12,632
14,835
0
14,835
Consumer and other 48,928
874
49,802
44,393
826
45,219
Subtotal consumer and other 61,560
874
62,434
59,228
826
60,054
Leases 15,522
0
15,522
16,650
0
16,650
Total loans and leases 4,170,975
323,259
4,494,234
3,867,868
394,111
4,261,979
Less: unearned income and deferred costs and fees (3,721 ) 0
(3,721 ) (3,946 ) 0
(3,946 )
Total loans and leases, net of unearned income and deferred costs and fees $ 4,167,254
$ 323,259
$ 4,490,513
$ 3,863,922
$ 394,111
$ 4,258,033

~~The outstanding principal balance and the related carrying amount of the Company’s loans acquired in the VIST Bank acquisition are as follows at September 30, 2017 and December 31, 2016:~~

(in thousands) 9/30/2017 12/31/2016
Acquired Credit Impaired Loans

Outstanding principal balance $ 19,521
$ 26,237
Carrying amount 14,646
22,517

Acquired Non-Credit Impaired Loans

Outstanding principal balance 311,191
375,471
Carrying amount 308,613
371,594

Total Acquired Loans

Outstanding principal balance 330,712
401,708
Carrying amount 323,259
394,111

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, ~~2016.~~2022. There have been no significant changes in these policies and guidelines since the date of that report. ~~As such, these policies are reflective of new originations as well as those balances held at September 30, 2017.~~ 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.

Acquired loans that met the criteria for nonaccrual of interest prior to the acquisition may be considered performing after the date of acquisition, regardless of whether the customer is contractually delinquent, if we can reasonably estimate the timing and amount of the expected cash flows on such loans and if the Company expects to fully collect the new carrying value of the loans. As such, we may no longer consider the loan to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable discount. To the extent we cannot reasonably estimate cash flows, interest income recognition is discontinued. The Company has determined that it can reasonably estimate future cash flows on our acquired loans that are past due 90 days or more and accruing interest and the Company expects to fully collect the carrying value of the loans.

The below ~~table is~~tables are an age analysis of past due loans, segregated by ~~originated~~class of loans as of March 31, 2023 and ~~acquired loan~~December 31, 2022:


March 31, 2023
(In thousands)	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total Loans
Loans and Leases
Commercial and industrial
Agriculture	$	152	$	0	$	0	$	152	$	65,071	$	65,223
Commercial and industrial other	2,586		46		371		3,003		670,101		673,104
PPP loans*	0		0		0		0		686		686
Subtotal commercial and industrial	2,738		46		371		3,155		735,858		739,013
Commercial real estate
Construction	0		0		0		0		219,789		219,789
Agriculture	170		0		0		170		213,844		214,014
Commercial real estate other	0		0		10,037		10,037		2,466,495		2,476,532
Subtotal commercial real estate	170		0		10,037		10,207		2,900,128		2,910,335
Residential real estate
Home equity	512		400		1,426		2,338		181,298		183,636
Mortgages	1,741		30		6,505		8,276		1,333,938		1,342,214
Subtotal residential real estate	2,253		430		7,931		10,614		1,515,236		1,525,850
Consumer and other
Indirect	56		11		41		108		1,675		1,783
Consumer and other	120		70		104		294		83,481		83,775
Subtotal consumer and other	176		81		145		402		85,156		85,558
Leases	0		0		0		0		18,016		18,016
Total loans and leases	5,337		557		18,484		24,378		5,254,394		5,278,772
Less: unearned income and deferred costs and fees	0		0		0		0		(5,101)		(5,101)
Total loans and leases, net of unearned income and deferred costs and fees	$	5,337	$	557	$	18,484	$	24,378	$	5,249,293	$	5,273,671
*SBA Paycheck Protection Program ("PPP")


December 31, 2022
(In thousands)	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total Loans
Loans and Leases
Commercial and industrial
Agriculture	$	58	$	0	$	0	$	58	$	85,015	$	85,073
Commercial and industrial other	50		381		82		513		705,187		705,700
PPP loans*	0		0		0		0		756		756
Subtotal commercial and industrial	108		381		82		571		790,958		791,529
Commercial real estate
Construction	0		0		0		0		201,116		201,116
Agriculture	128		0		0		128		214,835		214,963
Commercial real estate other	0		0		11,449		11,449		2,425,890		2,437,339
Subtotal commercial real estate	128		0		11,449		11,577		2,841,841		2,853,418
Residential real estate
Home equity	435		204		1,628		2,267		186,356		188,623
Mortgages	1,748		0		6,802		8,550		1,337,768		1,346,318
Subtotal residential real estate	2,183		204		8,430		10,817		1,524,124		1,534,941
Consumer and other
Indirect	66		31		53		150		2,074		2,224
Consumer and other	52		19		112		183		75,229		75,412
Subtotal consumer and other	118		50		165		333		77,303		77,636
Leases	0		0		0		0		16,134		16,134
Total loans and leases	2,537		635		20,126		23,298		5,250,360		5,273,658
Less: unearned income and deferred costs and fees	0		0		0		0		(4,747)		(4,747)
Total loans and leases, net of unearned income and deferred costs and fees	$	2,537	$	635	$	20,126	$	23,298	$	5,245,613	$	5,268,911
*SBA Paycheck Protection Program ("PPP")

The following tables present the amortized cost basis of loans on nonaccrual status and ~~lease portfolios, 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 ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016.~~2022:


March 31, 2023
(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
Commercial and industrial
Agriculture	$	0	$	17	$	0
Commercial and industrial other	0		906		0

Subtotal commercial and industrial	0		923		0
Commercial real estate

Agriculture	0		183		0
Commercial real estate other	10,547		12,197		0
Subtotal commercial real estate	10,547		12,380		0
Residential real estate
Home equity	0		2,547		0
Mortgages	181		12,322		0
Subtotal residential real estate	181		14,869		0
Consumer and other
Indirect	0		78		0
Consumer and other	0		174		13
Subtotal consumer and other	0		252		13

Total loans and leases	$	10,728	$	28,424	$	13


December 31, 2022
(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
Commercial and industrial

Commercial and industrial other	$	411	$	618	$	25

Subtotal commercial and industrial	411		618		25
Commercial real estate


Agriculture	186		186		0
Commercial real estate other	13,101		13,672		0
Subtotal commercial real estate	13,287		13,858		0
Residential real estate
Home equity	318		2,391		0
Mortgages	1,177		11,153		0
Subtotal residential real estate	1,495		13,544		0
Consumer and other
Indirect	0		94		0
Consumer and other	0		175		0
Subtotal consumer and other	0		269		0

Total loans and leases	$	15,193	$	28,289	$	25

September 30, 2017
(in thousands) 30-89 days 90 days or more Current Loans Total Loans
90 days and accruing1
Nonaccrual
Originated Loans and Leases
Commercial and industrial

Agriculture $ 0
$ 0
$ 91,054
$ 91,054
$ 0
$ 0
Commercial and industrial other 1,009
1,109
893,230
895,348
0
2,367
Subtotal commercial and industrial 1,009
1,109
984,284
986,402
0
2,367
Commercial real estate

Construction 0
0
217,218
217,218
0
0
Agriculture 14
0
122,290
122,304
0
0
Commercial real estate other 1,014
3,547
1,532,633
1,537,194
0
4,237
Subtotal commercial real estate 1,028
3,547
1,872,141
1,876,716
0
4,237
Residential real estate

Home equity 653
113
212,804
213,570
0
1,454
Mortgages 2,349
3,005
1,011,851
1,017,205
0
7,223
Subtotal residential real estate 3,002
3,118
1,224,655
1,230,775
0
8,677
Consumer and other

Indirect 381
233
12,018
12,632
0
356
Consumer and other 147
30
48,751
48,928
0
30
Subtotal consumer and other 528
263
60,769
61,560
0
386
Leases 0
0
15,522
15,522
0
0
Total loans and leases 5,567
8,037
4,157,371
4,170,975
0
15,667
Less: unearned income and deferred costs and fees 0
0
(3,721 ) (3,721 ) 0
0
Total originated loans and leases, net of unearned income and deferred costs and fees $ 5,567
$ 8,037
$ 4,153,650
$ 4,167,254
$ 0
$ 15,667
Acquired Loans and Leases

Commercial and industrial

Commercial and industrial other 881
28
52,575
53,484
28
0
Subtotal commercial and industrial 881
28
52,575
53,484
28
0
Commercial real estate

Construction 0
0
1,526
1,526
0
0
Agriculture 0
0
257
257
0
0
Commercial real estate other 777
1,523
210,346
212,646
578
944
Subtotal commercial real estate 777
1,523
212,129
214,429
578
944
Residential real estate

Home equity 835
957
29,513
31,305
166
1,009
Mortgages 358
1,618
21,191
23,167
534
1,199
Subtotal residential real estate 1,193
2,575
50,704
54,472
700
2,208
Consumer and other

Consumer and other 6
0
868
874
0
0
Subtotal consumer and other 6
0
868
874
0
0
Total acquired loans and leases, net of unearned income and deferred costs and fees $ 2,857
$ 4,126
$ 316,276
$ 323,259
$ 1,306
$ 3,152
The Company recognized $0 of interest income on nonaccrual loans during the three months ended March 31, 2023.

December 31, 2016
(in thousands) 30-89 days 90 days or more Current Loans Total Loans
90 days and accruing¹
Nonaccrual
Originated loans and leases
Commercial and industrial

Agriculture $ 0
$ 0
$ 118,247
$ 118,247
$ 0
$ 0
Commercial and industrial other 1,312
281
845,462
847,055
0
526
Subtotal commercial and industrial 1,312
281
963,709
965,302
0
526
Commercial real estate

Construction 0
0
135,834
135,834
0
0
Agriculture 17
0
102,492
102,509
0
162
Commercial real estate other 2,546
3,071
1,426,073
1,431,690
0
5,988
Subtotal commercial real estate 2,563
3,071
1,664,399
1,670,033
0
6,150
Residential real estate

Home equity 433
1,954
206,890
209,277
0
2,016
Mortgages 1,749
3,244
942,385
947,378
0
5,442
Subtotal residential real estate 2,182
5,198
1,149,275
1,156,655
0
7,458
Consumer and other

Indirect 444
376
14,015
14,835
0
166
Consumer and other 193
8
44,192
44,393
0
0
Subtotal consumer and other 637
384
58,207
59,228
0
166
Leases 0
0
16,650
16,650
0
0
Total loans and leases 6,694
8,934
3,852,240
3,867,868
0
14,300
Less: unearned income and deferred costs and fees 0
0
(3,946 ) (3,946 ) 0
0
Total originated loans and leases, net of unearned income and deferred costs and fees $ 6,694
$ 8,934
$ 3,848,294
$ 3,863,922
$ 0
$ 14,300
Acquired loans and leases

Commercial and industrial

Commercial and industrial other 12
87
79,218
79,317
40
212
Subtotal commercial and industrial 12
87
79,218
79,317
40
212
Commercial real estate

Construction 0
0
8,936
8,936
0
0
Agriculture 0
0
267
267
0
0
Commercial real estate other 1,461
3,952
236,192
241,605
1,402
2,926
Subtotal commercial real estate 1,461
3,952
245,395
250,808
1,402
2,926
Residential real estate

Home equity 251
637
36,849
37,737
185
663
Mortgages 829
1,651
22,943
25,423
930
940
Subtotal residential real estate 1,080
2,288
59,792
63,160
1,115
1,603
Consumer and other

Consumer and other 0
0
826
826
0
0
Subtotal consumer and other 0
0
826
826
0
0
Total acquired loans and leases, net of unearned income and deferred costs and fees $ 2,553
$ 6,327
$ 385,231
$ 394,111
$ 2,557
$ 4,741

¹~~Includes acquired loans that were recorded at fair value at the acquisition date.~~

6.5. Allowance for ~~Loan and Lease~~Credit Losses

~~Originated Loans and Leases~~

Management reviews the appropriateness of the allowance for ~~loan and lease~~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 ~~loan~~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. ~~102,~~ ~~Selected Loan Loss Allowance Methodology~~119, Measurement of Credit Losses on Financial Instruments ("CECL"), and ~~Documentation Issues~~Financial Instruments - Credit Losses and ASC Topic ~~310,~~ ~~Receivables~~ ~~and ASC Topic 450,~~ ~~Contingencies~~.326, Financial Instruments - Credit Losses.

The ~~model is comprised~~Company uses a Discounted Cash Flow ("DCF") method to estimate expected credit losses for all loan segments excluding the leasing segment. For each of ~~four major components that~~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 ~~deemed appropriate in evaluating~~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 ~~appropriateness~~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.

Due to the size and characteristics of the leasing portfolio, the Company uses the remaining life method, using the historical loss rate of the commercial and industrial segment, to determine the allowance for ~~loan~~credit losses.

The combination of adjustments for credit expectations and ~~lease losses. While none of these components, when used independently,~~timing expectations produces an expected cash flow stream at the instrument level. Instrument effective yield is ~~effective in arriving at a reserve level that appropriately measures the risk inherent in the portfolio, management believes that using them collectively, provides reasonable measurement~~calculated, net of the ~~loss exposure in~~impacts of prepayment assumptions, and the ~~portfolio. The four components include: impaired loans; individually reviewed~~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 ~~graded loans; historical loss experience; and qualitative or subjective analysis.~~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. Significant factors that could give rise to changes in these estimates may include, but are not limited to, changes in economic conditions in the local area, concentration of risk, changes in interest rates, and declines in local property values. While management’s evaluation of the allowance as of ~~September 30, 2017,~~March 31, 2023, considers the allowance to be appropriate, under adversely different conditions or assumptions, the Company would need to increase or decrease the allowance.

~~Acquired Loans~~ In addition, various federal and ~~Leases~~

~~Acquired loans accounted for under ASC 310-30~~

~~For our acquired loans, our~~State regulatory agencies, as part of their examination process, review the Company's allowance ~~for loan losses is estimated based upon our expected cash flows for these loans. To~~and may require the ~~extent that we experience a deterioration in borrower credit quality resulting in a decrease in our expected cash flows subsequent~~Company to recognize additions to the ~~acquisition~~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 ~~loans,~~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 ~~loan losses would be established based on our estimate of future~~ credit losses ~~over~~on off-balance sheet credit exposures, unless the ~~remaining life of the loans.~~

~~Acquired loans accounted~~commitments to extend credit are unconditionally cancellable, through a charge to credit loss expense for ~~under ASC 310-20~~

~~We establish our allowance for loan losses through a~~off-balance sheet credit exposures included in provision for credit ~~losses based upon an evaluation process that is similar to our evaluation process used for originated loans. This evaluation, which includes a review~~loss expense in the Company's consolidated statements of loans on which full collectability may not be reasonably assured, considers, among other matters, the estimated fair value of the underlying collateral, economic conditions, historical net loan loss experience, carrying value of the loans, which includes the remaining net purchase discount or premium, and other factors that warrant recognition in determining our allowance for loan losses.income.

The following ~~tables detail~~table details activity in the allowance for ~~loan~~credit losses on loans and ~~lease losses segregated by originated and acquired loan and lease portfolios and by portfolio segment~~leases for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016.~~2022. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.


Three months ended September 30, 2017
(in thousands)	Commercial and Industrial			Commercial Real Estate		Residential Real Estate			Consumer and Other			Finance Leases		Total
Allowance for originated loans and leases
Three Months Ended March 31, 2023																	Three Months Ended March 31, 2023
(In thousands)																	(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for credit losses:																	Allowance for credit losses:
Beginning balance	$	10,842		$	19,121	$	5,761		$	1,236		$	0	$	36,960		Beginning balance	$	6,039	$	27,287	$	11,154	$	1,358	$	96	$	45,934

Impact of adopting ASU 2022-22																	Impact of adopting ASU 2022-22	2		16		46		0		0		64
Charge-offs	(85		)	0		(41		)	(212		)	0		(338		)	Charge-offs	0		0		(2)		(106)		0		(108)
Recoveries	(18		)	264		33			71			0		350			Recoveries	46		1,246		64		33		0		1,389
Provision (credit)	951			70		(262		)	172			0		931
(Credit) provision for credit loss expense																	(Credit) provision for credit loss expense	229		(1,363)		(404)		343		15		(1,180)
Ending Balance	$	11,690		$	19,455	$	5,491		$	1,267		$	0	$	37,903		Ending Balance	$	6,316	$	27,186	$	10,858	$	1,628	$	111	$	46,099

Three months ended September 30, 2017

(in thousands) Commercial
and Industrial
Commercial
Real Estate
Residential
Real Estate
Consumer
and Other
Finance
Leases
Total
Allowance for acquired loans

Beginning balance $ 50
$ 87
$ 54
$ 6
$ 0
$ 197

Charge-offs 0
(10 ) (34 ) (1 ) 0
(45 )
Recoveries 0
499
12
1
0
512
Provision (credit) (50 ) (501 ) 22
0
0
(529 )
Ending Balance $ 0
$ 75
$ 54
$ 6
$ 0
$ 135

Three months ended September 30, 2016

(in thousands) Commercial
and Industrial
Commercial
Real Estate
Residential
Real Estate
Consumer
and Other
Finance
Leases
Total
Allowance for originated loans and leases

Beginning balance $ 8,937
$ 18,229
$ 4,486
$ 1,316
$ 0
$ 32,968

Charge-offs (133 ) 0
(19 ) (94 ) 0
(246 )
Recoveries 110
216
17
23
0
366
Provision (credit) 340
331
223
(26 ) 0
868
Ending Balance $ 9,254
$ 18,776
$ 4,707
$ 1,219
$ 0
$ 33,956

Three months ended September 30, 2016

(in thousands) Commercial
and Industrial
Commercial
Real Estate
Residential
Real Estate
Consumer
and Other
Covered
Loans
Total
Allowance for acquired loans

Beginning balance $ 47
$ 65
$ 23
$ 22
$ 0
$ 157

Charge-offs (12 ) 0
(19 ) 0
0
(31 )
Recoveries 20
96
0
0
0
116
Provision (credit) (55 ) (84 ) 53
0
0
(86 )
Ending Balance $ 0
$ 77
$ 57
$ 22
$ 0
$ 156

Nine months ended September 30, 2017

(in thousands) Commercial
and Industrial
Commercial
Real Estate
Residential
Real Estate
Consumer
and Other
Finance
Leases
Total
Allowance for originated loans and leases

Beginning balance $ 9,389
$ 19,836
$ 5,149
$ 1,224
$ 0
$ 35,598

Charge-offs (162 ) (21 ) (483 ) (742 ) 0
(1,408 )
Recoveries 112
717
169
336
0
1,334
Provision (credit) 2,351
(1,077 ) 656
449
0
2,379
Ending Balance $ 11,690
$ 19,455
$ 5,491
$ 1,267
$ 0
$ 37,903

Nine months ended September 30, 2017

(in thousands) Commercial
and Industrial
Commercial
Real Estate
Residential
Real Estate
Consumer
and Other
Covered
Loans
Total
Allowance for acquired loans
Beginning balance $ 0
$ 97
$ 54
$ 6
$ 0
$ 157

Charge-offs (74 ) (84 ) (186 ) (1 ) 0
(345 )
Recoveries 0
524
24
7
0
555
Provision (credit) 74
(462 ) 162
(6 ) 0
(232 )
Ending Balance $ 0
$ 75
$ 54
$ 6
$ 0
$ 135

Nine months ended September 30, 2016

(in thousands) Commercial
and Industrial
Commercial
Real Estate
Residential
Real Estate
Consumer
and Other
Finance
Leases
Total
Allowance for originated loans and leases

Beginning balance $ 10,495
$ 15,479
$ 4,070
$ 1,268
$ 0
$ 31,312

Charge-offs (584 ) (12 ) (220 ) (455 ) 0
(1,271 )
Recoveries 217
636
49
295
0
1,197
Provision (credit) (874 ) 2,673
808
111
0
2,718
Ending Balance $ 9,254
$ 18,776
$ 4,707
$ 1,219
$ 0
$ 33,956

Nine months ended September 30, 2016

(in thousands) Commercial
and Industrial
Commercial
Real Estate
Residential
Real Estate
Consumer
and Other
Covered
Loans
Total
Allowance for acquired loans

Beginning balance $ 433
$ 61
$ 198
$ 0
$ 0
$ 692

Charge-offs (399 ) (182 ) (35 ) (93 ) 0
(709 )
Recoveries 20
256
0
0
0
276
Provision (credit) (54 ) (58 ) (106 ) 115
0
(103 )
Ending Balance $ 0
$ 77
$ 57
$ 22
$ 0
$ 156

~~At September 30, 2017 and December 31, 2016, the allocation of the allowance for loan and lease losses summarized on the basis of the Company’s impairment methodology was as follows:~~

(in thousands) Commercial
and Industrial
Commercial
Real Estate
Residential
Real Estate
Consumer
and Other
Finance
Leases
Total
Allowance for originated loans and leases

September 30, 2017

Individually evaluated for impairment $ 518
$ 19
$ 2
$ 0
$ 0
$ 539
Collectively evaluated for impairment 11,172
19,436
5,489
1,267
0
37,364
Ending balance $ 11,690
$ 19,455
$ 5,491
$ 1,267
$ 0
$ 37,903

(in thousands) Commercial
and Industrial
Commercial Real Estate
Residential Real Estate
Consumer
and Other
Covered Loans
Total
Allowance for acquired loans

September 30, 2017

Individually evaluated for impairment $ 0
$ 75
$ 0
$ 0
$ 0
$ 75
Collectively evaluated for impairment 0
0
54
6
0
60
Ending balance $ 0
$ 75
$ 54
$ 6
$ 0
$ 135

(in thousands) Commercial and Industrial
Commercial Real Estate
Residential Real Estate
Consumer
and Other
Finance Leases
Total
Allowance for originated loans and leases

December 31, 2016

Individually evaluated for impairment $ 95
$ 322
$ 0
$ 0
$ 0
$ 417
Collectively evaluated for impairment 9,294
19,514
5,149
1,224
0
35,181
Ending balance $ 9,389
$ 19,836
$ 5,149
$ 1,224
$ 0
$ 35,598

(in thousands) Commercial and Industrial
Commercial Real Estate
Residential Real Estate
Consumer
and Other
Covered Loans
Total
Allowance for acquired loans

December 31, 2016

Individually evaluated for impairment $ 0
$ 76
$ 0
$ 0
$ 0
$ 76
Collectively evaluated for impairment 0
21
54
6
0
81
Ending balance $ 0
$ 97
$ 54
$ 6
$ 0
$ 157


Three Months Ended March 31, 2022
(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for credit losses:
Beginning balance	$	6,335	$	24,813	$	10,139	$	1,492	$	64	42,843
Charge-offs	(23)		(27)		0		(196)		0		(246)
Recoveries	20		42		109		92		0		263
(Credit) provision for credit loss expense	695		(1,846)		199		200		18		(734)
Ending Balance	$	7,027	$	22,982	$	10,447	$	1,588	$	82	$	42,126

The ~~recorded investment~~following table details activity in ~~loans and leases summarized on~~ the ~~basis of the Company’s impairment methodology as of September 30, 2017 and December 31, 2016 was as follows:~~

(in thousands) Commercial and Industrial
Commercial Real Estate
Residential Real Estate
Consumer
and Other
Finance Leases
Total
Originated loans and leases

September 30, 2017

Individually evaluated for impairment $ 1,425
$ 6,396
$ 3,396
$ 0
$ 0
$ 11,217
Collectively evaluated for impairment 984,977
1,870,320
1,227,379
61,560
15,522
4,159,758
Total $ 986,402
$ 1,876,716
$ 1,230,775
$ 61,560
$ 15,522
$ 4,170,975

(in thousands) Commercial and Industrial
Commercial Real Estate
Residential Real Estate
Consumer
and Other
Covered Loans
Total
Acquired loans

September 30, 2017

Individually evaluated for impairment $ 0
$ 2,109
$ 1,365
$ 0
$ 0
$ 3,474
Loans acquired with deteriorated credit quality 353
7,711
6,582
0
0
14,646
Collectively evaluated for impairment 53,131
204,609
46,525
874
0
305,139
Total $ 53,484
$ 214,429
$ 54,472
$ 874
$ 0
$ 323,259

(in thousands) Commercial and Industrial
Commercial Real Estate
Residential Real Estate
Consumer
and Other
Finance Leases
Total
Originated loans and leases

December 31, 2016

Individually evaluated for impairment $ 635
$ 8,812
$ 3,507
$ 0
$ 0
$ 12,954
Collectively evaluated for impairment 964,667
1,661,221
1,153,148
59,228
16,650
3,854,914
Total $ 965,302
$ 1,670,033
$ 1,156,655
$ 59,228
$ 16,650
$ 3,867,868

(in thousands) Commercial and Industrial
Commercial Real Estate
Residential Real Estate
Consumer
and Other
Covered Loans
Total
Acquired loans

December 31, 2016

Individually evaluated for impairment $ 172
$ 4,081
$ 1,372
$ 0
$ 0
$ 5,625
Loans acquired with deteriorated credit quality 448
14,368
7,701
0
0
22,517
Collectively evaluated for impairment 78,697
232,359
54,087
826
0
365,969
Total $ 79,317
$ 250,808
$ 63,160
$ 826
$ 0
$ 394,111

A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans consist of our non-homogenous nonaccrual loans, and all loans restructured in a troubled debt restructuring (TDR). Specific reserves on individually identified impaired loans that are not collateral dependent are measured based on the present value of expected future cash flows discounted at the original effective interest rate of each loan. For loans that are collateral dependent, impairment is measured based on the fair value of the collateral less estimated selling costs, and such impaired amounts are generally charged off. The majority of impaired loans are collateral dependent impaired loans that have limited exposure or require limited specific reserves because of the amount of collateral support with respect to these loans, and previous charge-offs. Interest payments on impaired loans are typically applied to principal unless collectibility of the principal amount is reasonably assured. In these cases, interest is recognized on a cash basis. Impaired loans are as follows:

9/30/2017 12/31/2016
(in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance
Originated loans and leases with no related allowance

Commercial and industrial

Commercial and industrial other $ 653
$ 657
$ 0
$ 276
$ 370
$ 0
Commercial real estate

Commercial real estate other 6,296
6,737
0
6,979
7,263
0
Residential real estate

Home equity 3,247
3,332
0
3,507
3,535
0
Subtotal $ 10,196
$ 10,726
$ 0
$ 10,762
$ 11,168
$ 0

Originated loans and leases with related allowance

Commercial and industrial

Commercial and industrial other 772
791
518
359
276
95
Commercial real estate

Commercial real estate other 100
100
19
1,833
2,042
322
Residential real estate
Home equity $ 149
$ 149
$ 2
$ 0
$ 0
$ 0
Subtotal $ 1,021
$ 1,040
$ 539
$ 2,192
$ 2,318
$ 417
Total $ 11,217
$ 11,766
$ 539
$ 12,954
$ 13,486
$ 417

9/30/2017 12/31/2016
(in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance
Acquired loans and leases with no related allowance

Commercial and industrial

Commercial and industrial other $ 0
$ 0
$ 0
$ 172
$ 472
$ 0
Commercial real estate

Commercial real estate other 1,842
2,035
0
4,003
4,386
0
Residential real estate

Home equity 1,365
1,397
0
1,372
1,372
0
Subtotal $ 3,207
$ 3,432
$ 0
$ 5,547
$ 6,230
$ 0

Acquired loans and leases with related allowance

Commercial real estate

Commercial real estate other 267
267
75
78
78
76
Subtotal $ 267
$ 267
$ 75
$ 78
$ 78
$ 76
Total $ 3,474
$ 3,699
$ 75
$ 5,625
$ 6,308
$ 76

~~The average recorded investment and interest income recognized on impaired loans~~liabilities for off-balance sheet credit exposures for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016 was as follows:~~2022:


(In thousands)	2023		2022
Liabilities for off-balance sheet credit exposures at beginning of period	$	2,796	$	2,507

Provision for credit loss expense related to off-balance sheet credit exposures	355		214
Liabilities for off-balance sheet credit exposures at end of period	$	3,151	$	2,721

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, 2023
(In thousands)	Real Estate		Business Assets		Other		Total		ACL Allocation

Commercial Real Estate	$	10,547	$	0	$	0	$	10,547	$	0
Residential Real Estate	181		0		0		181		0
Total	$	10,728	$	0	$	0	$	10,728	$	0


December 31, 2022
(In thousands)	Real Estate		Business Assets		Other		Total		ACL Allocation
Commercial and Industrial	$	642	$	28	$	0	$	670	$	0
Commercial Real Estate	13,209		0		78		13,287		0
Commercial Real Estate - Agriculture	1,515		0		0		1,515		0
Residential Real Estate	188		0		0		188		3
Total	$	15,554	$	28	$	78	$	15,660	$	3

The Company adopted ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326)" ("ASU 2022-02") effective January 1, 2023. ASU 2022-02 eliminates the guidance on troubled debt restructurings (TDRs) 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, which has been incorporated in the credit quality table below.

Three Months Ended 09/30/2017 Three Months Ended 09/30/2016
(in thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized
Originated loans and leases with no related allowance

Commercial and industrial

Commercial and industrial other 404
0
146
0
Commercial real estate

Commercial real estate other 6,409
0
7,422
0
Residential real estate

Home equity 3,581
0
3,097
0
Subtotal $ 10,394
$ 0
$ 10,665
$ 0

Originated loans and leases with related allowance

Commercial and industrial

Commercial and industrial other 1,083
0
77
0
Commercial real estate

Commercial real estate other 50
0
636
0
Subtotal $ 1,133
$ 0
$ 713
$ 0
Total $ 11,527
$ 0
$ 11,378
$ 0

Three Months Ended 09/30/2017 Three Months Ended 09/30/2016
(in thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized
Acquired loans and leases with no related allowance

Commercial and industrial

Commercial and industrial other 0
0
6
0
Commercial real estate

Construction 0
0
126
0
Commercial real estate other 1,516
0
4,201
0
Residential real estate

Home equity 1,440
0
1,319
0
Subtotal $ 2,956
$ 0
$ 5,652
$ 0

Acquired loans and leases with related allowance

Commercial real estate

Commercial real estate other 267
0
78
0
Subtotal $ 267
$ 0
$ 78
$ 0
Total $ 3,223
$ 0
$ 5,730
$ 0

~~The average recorded investment and interest income recognized on impaired loans for the nine months ended September 30, 2017 and 2016 was as follows:~~

Nine Months Ended 09/30/17 Nine Months Ended 09/30/16
(in thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized
Originated loans and leases with no related allowance

Commercial and industrial

Commercial and industrial other 290
0
476
0
Commercial real estate

Commercial real estate other 7,569
0
6,351
0
Residential real estate

Home equity 3,441
0
2,694
0
Subtotal $ 11,300
$ 0
$ 9,521
$ 0

Originated loans and leases with related allowance

Commercial and industrial

Commercial and industrial other 335
0
48
0
Commercial real estate

Commercial real estate other 20
0
641
0
Subtotal $ 355
$ 0
$ 689
$ 0
Total $ 11,655
$ 0
$ 10,210
$ 0

Nine Months Ended 09/30/17 Nine Months Ended 09/30/16
(in thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized
Acquired loans and leases with no related allowance

Commercial and industrial

Commercial and industrial other 66
0
303
0
Commercial real estate

Construction 16
0
242
0
Commercial real estate other 2,402
0
4,320
0
Residential real estate

Home equity 1,722
0
1,267
0
Subtotal $ 4,206
$ 0
$ 6,132
$ 0

Acquired loans and leases with related allowance

Commercial real estate

Commercial real estate other 267
0
54
0
Subtotal $ 267
$ 0
$ 54
$ 0
Total $ 4,473
$ 0
$ 6,186
$ 0

Loans are considered modified in a 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 for the three months ended September 30, 2017.~~

~~The following tables present information on loans modified in troubled debt restructuring during the periods indicated.~~

September 30, 2016 Three Months Ended

Defaulted TDRs³
(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 other¹
1
50
50
1
1,800
Residential real estate

Home equity²
5
382
382
0
0
Total 6
$ 432
$ 432
1
$ 1,800

1~~Represents the following concessions: extension of term and reduction of rate.~~

2 ~~Represents the following concessions: extension of term and reduction of rate.~~

~~3 TDRs that defaulted during the three months ended September 30, 2016 that were restructured~~borrowers experiencing financial difficulty in the ~~prior twelve months.~~

September 30, 2017 Nine 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
Residential real estate

Home equity¹
2
162
162
1
55
Total 2
$ 162
$ 162
1
$ 55

1~~Represents the following concessions: extension~~first quarter of ~~term~~2023, and ~~reduction of rate.~~

2 no new TDRs ~~that defaulted during the nine months ended September 30, 2017 that had been restructured~~reported in the ~~prior twelve months.~~first quarter of 2022.

September 30, 2016 Nine Months Ended

Defaulted TDRs⁴
(in thousands) Number of
Loans Pre-
Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment Number of
Loans Post-
Modification
Outstanding
Recorded
Investment
Commercial and industrial

  Commercial and industrial other¹
2
$ 1,115
$ 1,115
0
$ 0
Commercial real estate

  Commercial real estate other²
1
50
50
1
1,800
Residential real estate

  Home equity³
10
1,164
1,164
0
0
Total 13
$ 2,329
$ 2,329
1
$ 1,800

1~~Represents the following concessions: extension of term and reduction of rate.~~

2~~Represents the following concessions: extension of term and reduction of rate.~~

3 ~~Represents the following concessions: extension of term and reduction of rate.~~

4 ~~TDRs that defaulted during the nine months ended September 30, 2016 that had been restructured in the prior twelve months.~~

The following tables present credit quality indicators (internal risk grade) by class of commercial and industrial loans and commercial real estate loans as of September 30, 2017 and December 31, 2016.

September 30, 2017
Commercial and Industrial Commercial and Industrial CommercialReal Estate CommercialReal Estate CommercialReal Estate
(in thousands) Other Agriculture Other Agriculture Construction Total
Originated Loans and Leases

Internal risk grade:

Pass $ 876,622
$ 81,523
$ 1,503,943
$ 112,857
$ 217,218
$ 2,792,163
Special Mention 12,943
9,455
18,578
9,447
0
50,423
Substandard 5,783
76
14,673
0
0
20,532
Total $ 895,348
$ 91,054
$ 1,537,194
$ 122,304
$ 217,218
$ 2,863,118

September 30, 2017
Commercial and Industrial Commercial and Industrial Commercial Real Estate Commercial Real Estate Commercial Real Estate
(in thousands) Other Agriculture Other Agriculture Construction Total
Acquired Loans and Leases

Internal risk grade:

Pass $ 52,370
$ 0
$ 205,028
$ 257
$ 1,526
$ 259,181
Special Mention 0
0
539
0
0
539
Substandard 1,114
0
7,079
0
0
8,193
Total $ 53,484
$ 0
$ 212,646
$ 257
$ 1,526
$ 267,913

December 31, 2016
Commercial and Industrial Commercial and Industrial Commercial Real Estate Commercial Real Estate Commercial Real Estate
(in thousands) Other Agriculture Other Agriculture Construction Total
Originated Loans and Leases
Internal risk grade:

Pass $ 836,788
$ 117,135
$ 1,403,370
$ 101,407
$ 135,834
$ 2,594,534
Special Mention 7,218
755
11,939
573
0
20,485
Substandard 3,049
357
16,381
529
0
20,316
Total $ 847,055
$ 118,247
$ 1,431,690
$ 102,509
$ 135,834
$ 2,635,335

December 31, 2016
Commercial and Industrial Commercial and Industrial Commercial Real Estate Commercial Real Estate Commercial Real Estate
(in thousands) Other Agriculture Other Agriculture Construction Total
Acquired Loans and Leases
Internal risk grade:

Pass $ 77,921
$ 0
$ 229,334
$ 267
$ 8,936
$ 316,458
Special Mention 0
0
526
0
0
526
Substandard 1,396
0
11,745
0
0
13,141
Total $ 79,317
$ 0
$ 241,605
$ 267
$ 8,936
$ 330,125

The following tables present credit quality indicators by ~~class of residential real estate~~total loans ~~and~~on an amortized cost basis by ~~class of consumer loans. Nonperforming loans include nonaccrual, impaired, and loans 90 days past due and accruing interest. All other loans are considered performing~~origination year as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016. For purposes~~2022:


March 31, 2023
(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans
Commercial and Industrial - Other:
Internal risk grade:
Pass	$	16,897	$	113,621	$	80,606	$	36,432	$	44,230	$	167,183	$	203,174	$	1,170	$	663,313
Special Mention	0		0		120		338		132		1,339		800		0		2,729
Substandard	0		0		102		417		65		1,562		4,916		0		7,062
Total Commercial and Industrial - Other	$	16,897	$	113,621	$	80,828	$	37,187	$	44,427	$	170,084	$	208,890	$	1,170	$	673,104
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

Commercial and Industrial - PPP:
Pass	$	0	$	0	$	383	$	303	$	0	$	0	$	0	$	0	$	686
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	$	0	$	383	$	303	$	0	$	0	$	0	$	0	$	686
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

Commercial and Industrial - Agriculture:
Pass	$	2,152	$	15,034	$	4,399	$	4,162	$	3,479	$	12,092	$	23,745	$	0	$	65,063
Special Mention	0		0		56		0		0		0		20		0		76
Substandard	0		0		0		67		0		13		4		0		84
Total Commercial and Industrial - Agriculture	$	2,152	$	15,034	$	4,455	$	4,229	$	3,479	$	12,105	$	23,769	$	0	$	65,223
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

Commercial Real Estate
Pass	$	39,210	$	340,604	$	367,485	$	317,991	$	278,372	$	1,021,145	$	35,794	$	2,056	$	2,402,657
Special Mention	0		643		0		1,682		11,380		21,234		0		0		34,939
Substandard	0		74		109		0		3,147		35,482		124		0		38,936
Total Commercial Real Estate	$	39,210	$	341,321	$	367,594	319,673		292,899		1,077,861		$	35,918	$	2,056	$	2,476,532
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

Commercial Real Estate - Agriculture:
Pass	$	2,578	$	34,652	$	23,976	$	22,525	$	24,893	$	100,038	$	2,158	$	1,450	$	212,270
Special Mention	0		0		0		0		396		1,115		0		0		1,511
Substandard	0		0		0		0		183		50		0		0		233
Total Commercial Real Estate - Agriculture	$	2,578	$	34,652	$	23,976	$	22,525	$	25,472	$	101,203	$	2,158	$	1,450	$	214,014
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0


(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans

Commercial Real Estate - Construction
Pass	$	0	$	30,152	$	73,446	$	17,738	$	11,859	$	16,312	$	62,168	$	8,114	$	219,789
Special Mention	0		0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		0		0		0		0
Total Commercial Real Estate - Construction	$	0	$	30,152	$	73,446	$	17,738	$	11,859	$	16,312	$	62,168	$	8,114	$	219,789
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Residential - Home Equity
Performing	$	499	$	2,357	$	1,033	$	610	$	953	$	10,589	$	164,730	$	317	$	181,088
Nonperforming	0		0		0		0		0		288		2,260		0		2,548
Total Residential - Home Equity	$	499	$	2,357	$	1,033	$	610	$	953	$	10,877	$	166,990	$	317	$	183,636
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	2	$	0	$	0	$	2

Residential - Mortgages
Performing	$	15,811	$	192,106	$	269,413	$	235,432	$	116,045	$	501,085	$	0	$	0	$	1,329,892
Nonperforming	0		218		330		619		670		10,485		0		0		12,322
Total Residential - Mortgages	$	15,811	$	192,324	$	269,743	$	236,051	$	116,715	$	511,570	$	0	$	0	$	1,342,214
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

Consumer - Direct
Performing	$	26,213	$	16,366	$	13,338	$	6,844	$	5,762	$	11,873	$	3,205	$	0	$	83,601
Nonperforming	0		0		0		0		63		108		3		0		174
Total Consumer - Direct	$	26,213	$	16,366	$	13,338	$	6,844	$	5,825	$	11,981	$	3,208	$	0	$	83,775
Current-period gross writeoffs	$	33	$	0	$	0	$	14	$	20	$	3	$	0	$	0	$	70

Consumer - Indirect
Performing	$	0	$	0	$	139	$	127	$	885	$	554	$	0	$	0	$	1,705
Nonperforming	0		0		0		0		55		23		0		0		78
Total Consumer - Indirect	$	0	$	0	$	139	$	127	$	940	$	577	$	0	$	0	$	1,783
Current-period gross writeoffs	$	0	$	0	$	0	$	0	$	31	$	5	$	0	$	0	$	36


December 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	$	124,190	$	79,861	$	38,158	$	41,391	$	33,238	$	156,038	$	215,890	$	6,466	$	695,232
Special Mention	0		127		421		285		271		1,380		501		0		2,985
Substandard	0		111		442		35		733		503		5,659		0		7,483
Total Commercial and Industrial - Other	$	124,190	$	80,099	$	39,021	$	41,711	$	34,242	$	157,921	$	222,050	$	6,466	$	705,700

Commercial and Industrial - Agriculture:
Pass	$	16,694	$	4,120	$	4,944	$	4,186	$	7,734	$	4,883	$	42,097	$	215	$	84,873
Special Mention	0		58		0		0		0		0		50		0		108
Substandard	0		0		71		0		0		16		5		0		92
Total Commercial and Industrial - Agriculture	$	16,694	$	4,178	$	5,015	$	4,186	$	7,734	$	4,899	$	42,152	$	215	$	85,073

Commercial and Industrial - PPP:
Pass	$	0	$	416	$	340	$	0	$	0	$	0	$	0	$	0	$	756
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	$	416	$	340	$	0	$	0	$	0	$	0	$	0	$	756

Commercial Real Estate
Pass	$	342,311	$	367,104	$	311,607	$	279,587	$	203,016	$	812,563	$	10,906	$	24,503	$	2,351,597
Special Mention	643		3,406		1,688		11,462		2,555		25,361		0		0		45,115
Substandard	78		110		0		3,394		1,692		35,221		132		0		40,627
Total Commercial Real Estate	$	343,032	$	370,620	$	313,295	$	294,443	$	207,263	$	873,145	$	11,038	$	24,503	$	2,437,339

Commercial Real Estate - Agriculture:
Pass	$	33,241	$	24,125	$	22,831	$	25,576	$	37,835	$	65,112	$	3,131	$	1,235	$	213,086
Special Mention	0		0		0		401		0		1,142		0		0		1,543
Substandard	0		0		0		186		38		110		0		0		334
Total Commercial Real Estate - Agriculture	$	33,241	$	24,125	$	22,831	$	26,163	$	37,873	$	66,364	$	3,131	$	1,235	$	214,963

Commercial Real Estate - Construction
Pass	$	23,105	$	75,245	$	27,584	$	14,842	$	9,083	$	7,268	$	42,701	$	1,288	$	201,116
Special Mention	0		0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		0		0		0		0
Total Commercial Real Estate - Construction	$	23,105	$	75,245	$	27,584	$	14,842	$	9,083	$	7,268	$	42,701	$	1,288	$	201,116

The following tables present credit quality indicators by total loans on an amortized cost basis by origination year as of ~~this footnote, acquired loans that were recorded at fair value at the acquisition date and are 90 days or greater past due are considered performing.~~December 31, 2022, continued:

September 30, 2017
(in thousands) Residential
Home Equity Residential
Mortgages Consumer
Indirect Consumer
Other Total
Originated Loans and Leases

Performing $ 212,116
$ 1,009,982
$ 12,276
$ 48,898
$ 1,283,272
Nonperforming 1,454
7,223
356
30
9,063
Total $ 213,570
$ 1,017,205
$ 12,632
$ 48,928
$ 1,292,335


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

Residential - Home Equity
Performing	$	3,030	$	1,062	$	637	$	992	$	792	$	3,183	$	175,451	$	1,085	$	186,232
Nonperforming	0		0		0		14		0		25		2,352		0		2,391
Total Residential - Home Equity	$	3,030	$	1,062	$	637	$	1,006	$	792	$	3,208	$	177,803	$	1,085	$	188,623

Residential - Mortgages
Performing	$	187,129	$	272,235	$	239,584	$	117,391	$	66,605	$	452,221	$	0	$	0	$	1,335,165
Nonperforming	218		335		628		682		1,552		7,738		0		0		11,153
Total Residential - Mortgages	$	187,347	$	272,570	$	240,212	$	118,073	$	68,157	$	459,959	$	0	$	0	$	1,346,318

Consumer - Direct
Performing	$	31,243	$	13,999	$	7,372	$	6,138	$	4,386	$	8,029	$	4,070	$	0	$	75,237
Nonperforming	0		0		3		93		76		0		3		0		175
Total Consumer - Direct	$	31,243	$	13,999	$	7,375	$	6,231	$	4,462	$	8,029	$	4,073	$	0	$	75,412

Consumer - Indirect
Performing	$	0	$	156	$	146	$	1,092	$	635	$	101	$	0	$	0	$	2,130
Nonperforming	0		0		0		76		10		8		0		0		94
Total Consumer - Indirect	$	0	$	156	$	146	$	1,168	$	645	$	109	$	0	$	0	$	2,224

September 30, 2017
(in thousands) Residential
Home Equity Residential
Mortgages Consumer
Indirect Consumer
Other Total
Acquired Loans and Leases

Performing $ 30,296
$ 21,968
$ 0
$ 874
$ 53,138
Nonperforming 1,009
1,199
0
0
2,208
Total $ 31,305
$ 23,167
$ 0
$ 874
$ 55,346

December 31, 2016
(in thousands) Residential
Home Equity Residential
Mortgages Consumer
Indirect Consumer
Other Total
Originated Loans and Leases

Performing $ 207,261
$ 941,936
$ 14,669
$ 44,393
$ 1,208,259
Nonperforming 2,016
5,442
166
0
7,624
Total $ 209,277
$ 947,378
$ 14,835
$ 44,393
$ 1,215,883

December 31, 2016
(in thousands) Residential
Home Equity Residential
Mortgages Consumer
Indirect Consumer
Other Total
Acquired Loans and Leases

Performing $ 37,074
$ 24,483
$ 0
$ 826
$ 62,383
Nonperforming 663
940
0
0
1,603
Total $ 37,737
$ 25,423
$ 0
$ 826
$ 63,986

~~7. FDIC Indemnification Asset Related to Covered Loans~~

Prior to the third quarter of 2016, the Company had certain loans acquired in the VIST Financial acquisition which were covered loans with loss share agreements with the FDIC. Based on an analysis of outstanding loans covered under the one remaining loss share agreement, management decided to early terminate its one remaining loss share agreement with the FDIC during the third quarter of 2016. At that time the Company recorded pre-tax expense of $313,000 to terminate the agreement and write-off the remaining book value of the FDIC indemnification asset, which included $174,000 in expense for early termination and $139,000 to write off the remaining asset. The remaining balances of the loans previously reported as Covered Loans are included in the acquired loan balances by loan type subsequent to termination.

8.6. Earnings Per Share

Earnings per share in the table below, for the three ~~and nine~~ month periods ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 are calculated under the two-class method as required by ASC Topic 260, Earnings Per ~~Share.~~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.


								Three Months Ended
	Three Months Ended
(in thousands, except share and per share data)	9/30/2017			9/30/2016
(In thousands, except share and per share data)							(In thousands, except share and per share data)	03/31/2023		03/31/2022
Basic							Basic
Net income available to common shareholders	$	17,394		$	15,138		Net income available to common shareholders	$	19,381	$	23,273
Less: income attributable to unvested stock-based compensation awards	(266		)	(219		)	Less: income attributable to unvested stock-based compensation awards	(18)		(76)
Net earnings allocated to common shareholders	17,128			14,919			Net earnings allocated to common shareholders	19,363		23,197

Weighted average shares outstanding, including unvested stock-based compensation awards	15,197,180			15,047,113			Weighted average shares outstanding, including unvested stock-based compensation awards	14,520,092		14,611,709

Less: unvested stock-based compensation awards	(230,949		)	(217,891		)
Less: average unvested stock-based compensation awards							Less: average unvested stock-based compensation awards	(193,497)		(211,706)
Weighted average shares outstanding - Basic	14,966,231			14,829,222			Weighted average shares outstanding - Basic	14,326,595		14,400,003

Diluted							Diluted
Net earnings allocated to common shareholders	17,128			14,919			Net earnings allocated to common shareholders	19,363		23,197

Weighted average shares outstanding - Basic	14,966,231			14,829,222			Weighted average shares outstanding - Basic	14,326,595		14,400,003

Plus: incremental shares from assumed conversion of stock-based compensation awards	112,324			136,011			Plus: incremental shares from assumed conversion of stock-based compensation awards	63,078		78,180

Weighted average shares outstanding - Diluted	15,078,555			14,965,233			Weighted average shares outstanding - Diluted	14,389,673		14,478,183

Basic EPS	1.14			1.01			Basic EPS	$	1.35	$	1.61
Diluted EPS	1.14			1.00			Diluted EPS	$	1.35	$	1.60

Stock-based compensation awards representing ~~21,804~~2,860 and 01,848 of common shares during the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively, were not included in the computations of diluted earnings per common share because the effect on those periods would have been anti-dilutive.

Nine Months Ended
(in thousands, except share and per share data) 9/30/2017 9/30/2016
Basic

Net income available to common shareholders $ 50,037
$ 44,222
Less: income attributable to unvested stock-based compensation awards (792 ) (677 )
Net earnings allocated to common shareholders 49,245
43,545

Weighted average shares outstanding, including unvested stock-based compensation awards 15,178,039
15,025,776

Less: unvested stock-based compensation awards (240,478 ) (229,693 )
Weighted average shares outstanding - Basic 14,937,561
14,796,083

Diluted

Net earnings allocated to common shareholders 49,245
43,545

Weighted average shares outstanding - Basic 14,937,561
14,796,083

Plus: incremental shares from assumed conversion of stock-based compensation awards 125,309
114,014

Weighted average shares outstanding - Diluted 15,062,870
14,910,097

Basic EPS 3.30
2.94
Diluted EPS 3.27
2.92

Stock-based compensation awards representing approximately 21,126 and 15,994 of common shares during the nine months ended September 30, 2017 and 2016, respectively were not included in the computations of diluted earnings per common share because the effect on those periods would have been anti-dilutive.

9.7. Other Comprehensive Income (Loss)

The following tables present reclassifications out of the accumulated other comprehensive income (loss) for the three ~~and nine~~ month periods ended ~~September 30, 2017~~March 31, 2023 and ~~2016.~~2022:

Three Months Ended September 30, 2017
(in thousands) Before-Tax
Amount Tax (Expense)
Benefit Net of Tax
Available-for-sale securities:

Change in net unrealized gain/loss during the period $ 712
$ (286 ) $ 426
Reclassification adjustment for net realized loss on sale of available-for-sale securities included in net income 423
(169 ) 254
Net unrealized gains 1,135
(455 ) 680

Employee benefit plans:

Amortization of net retirement plan actuarial gain 376
(149 ) 227
Amortization of net retirement plan prior service cost 3
(1 ) 2
Employee benefit plans 379
(150 ) 229
Other comprehensive income $ 1,514
$ (605 ) $ 909


	Three Months Ended March 31, 2023
(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax
Available-for-sale debt securities:
Change in net unrealized gain (loss) during the period	$	27,255	$	(6,677)	$	20,578

Net unrealized gains/losses	27,255		(6,677)		20,578

Employee benefit plans:
Amortization of net retirement plan actuarial gain	297		(73)		224
Amortization of net retirement plan prior service cost	55		(14)		41
Employee benefit plans	352		(87)		265
Other comprehensive (loss) income	$	27,607	$	(6,764)	$	20,843

Three Months Ended September 30, 2016
(in thousands) Before-Tax
Amount Tax (Expense)
Benefit Net of Tax
Available-for-sale securities:

Change in net unrealized gain/loss during the period $ (5,554 ) $ 2,221
$ (3,333 )
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income (455 ) 182
(273 )
Net unrealized losses (6,009 ) 2,403
(3,606 )

Employee benefit plans:

Amortization of net retirement plan actuarial gain 335
(134 ) 201
Amortization of net retirement plan prior service cost 20
(8 ) 12
Employee benefit plans 355
(142 ) 213
Other comprehensive loss $ (5,654 ) $ 2,261
$ (3,393 )


	Three Months Ended March 31, 2022
(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax
Available-for-sale debt securities:
Change in net unrealized (loss) gain during the period	$	(106,481)	$	26,076	$	(80,405)

Net unrealized gains/losses	(106,481)		26,076		(80,405)

Employee benefit plans:
Amortization of net retirement plan actuarial gain	615		(151)		464
Amortization of net retirement plan prior service cost	56		(14)		42
Employee benefit plans	671		(165)		506
Other comprehensive (loss) income	$	(105,810)	$	25,911	$	(79,899)

Nine Months Ended September 30, 2017
(in thousands) Before-Tax
Amount Tax (Expense)
Benefit Net of Tax
Available-for-sale securities:

Change in net unrealized gain/loss during the period $ 5,756
$ (2,302 ) $ 3,454
Reclassification adjustment for net realized loss on sale of available-for-sale securities included in net income 423
(169 ) 254
Net unrealized gains 6,179
(2,471 ) 3,708

Employee benefit plans:

Amortization of net retirement plan actuarial gain 1,130
(451 ) 679
Amortization of net retirement plan prior service cost 11
(4 ) 7
Employee benefit plans 1,141
(455 ) 686
Other comprehensive income $ 7,320
$ (2,926 ) $ 4,394

Nine Months Ended September 30, 2016
(in thousands) Before-Tax
Amount Tax (Expense)
Benefit Net of Tax
Available-for-sale securities:

Change in net unrealized gain/loss during the period $ 23,763
$ (9,503 ) $ 14,260
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income (926 ) 370
(556 )
Net unrealized gains 22,837
(9,133 ) 13,704

Employee benefit plans:

Amortization of net retirement plan actuarial gain 1,004
(402 ) 602
Amortization of net retirement plan prior service credit 58
(23 ) 35
Employee benefit plans 1,062
(425 ) 637

Other comprehensive income $ 23,899
$ (9,558 ) $ 14,341

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


(In thousands)	Available-for- Sale Debt Securities		Employee Benefit Plans		Accumulated Other Comprehensive (Loss) Income
Balance at January 1, 2023	$	(178,803)	$	(29,886)	$	(208,689)
Other comprehensive income before reclassifications	20,578		0		20,578
Amounts reclassified from accumulated other comprehensive (loss) income	0		265		265
Net current-period other comprehensive income (loss)	20,578		265		20,843
Balance at March 31, 2023	$	(158,225)	$	(29,621)	$	(187,846)

Balance at January 1, 2022	$	(14,560)	$	(41,390)	$	(55,950)
Other comprehensive loss before reclassifications	(80,405)		0		(80,405)
Amounts reclassified from accumulated other comprehensive (loss) income	0		506		506
Net current-period other comprehensive income (loss)	(80,405)		506		(79,899)
March 31, 2022	$	(94,965)	$	(40,884)	$	(135,849)

(in thousands) Available-for-
Sale Securities Employee
Benefit Plans Accumulated
Other
Comprehensive
(Loss) Income
Balance at July 1, 2017 $ (4,887 ) $ (28,737 ) $ (33,624 )
Other comprehensive income before reclassifications 426
0
426
Amounts reclassified from accumulated other comprehensive (loss) income 254
229
483
Net current-period other comprehensive income 680
229
909
Balance at September 30, 2017 $ (4,207 ) $ (28,508 ) $ (32,715 )

Balance at January 1, 2017 $ (7,915 ) $ (29,194 ) $ (37,109 )
Other comprehensive income before reclassifications 3,454
0
3,454
Amounts reclassified from accumulated other comprehensive (loss) income 254
686
940
Net current-period other comprehensive income 3,708
686
4,394
Balance at September 30, 2017 $ (4,207 ) $ (28,508 ) $ (32,715 )

(in thousands) Available-for-
Sale Securities Employee
Benefit Plans Accumulated
Other
Comprehensive
(Loss) Income
Balance at July 1, 2016 $ 14,566
$ (27,833 ) $ (13,267 )
Other comprehensive loss before reclassifications (3,333 ) 0
(3,333 )
Amounts reclassified from accumulated other comprehensive (loss) income (273 ) 213
(60 )
Net current-period other comprehensive loss (3,606 ) 213
(3,393 )
Balance at September 30, 2016 $ 10,960
$ (27,620 ) $ (16,660 )

Balance at January 1, 2016 $ (2,744 ) $ (28,257 ) $ (31,001 )
Other comprehensive income before reclassifications 14,260
0
14,260
Amounts reclassified from accumulated other comprehensive (loss) income (556 ) 637
81
Net current-period other comprehensive income 13,704
637
14,341
Balance at September 30, 2016 $ 10,960
$ (27,620 ) $ (16,660 )

The following tables present the amounts reclassified out of each component of accumulated other comprehensive (loss) income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016.~~ 2022:



Three Months Ended ~~September 30, 2017~~March 31, 2023
Details about Accumulated other Comprehensive Income (Loss) Components ~~(in~~(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	$	~~(423~~0	)		~~(Loss)~~Net (loss) gain on ~~sale of available-for-sale~~ securities transactions
	~~169~~0				Tax ~~(expense) benefit~~expense
	~~(254~~0		)		Net of tax
Employee benefit plans:
Amortization of the following²
Net retirement plan actuarial ~~gain~~loss	~~(376~~(297)		)		~~Pension and other employee benefits~~Other operating expense
Net retirement plan prior service cost	(3(55)		)		~~Pension and other employee benefits~~Other operating expense
	~~(379~~(352)		)		Total before tax
	~~150~~87				Tax ~~(expense)~~ benefit
	~~(229~~$	)(265)		Net of tax


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

Nine Months Ended September 30, 2017
Details about Accumulated other Comprehensive Income 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 securities:


Unrealized gains and losses on available-for-sale securities $ (423 ) (Loss) gain on sale of available-for-sale securities

169
Tax (expense) benefit

(254 ) Net of tax
Employee benefit plans:


Amortization of the following²


Net retirement plan actuarial loss (1,130 ) Pension and other employee benefits
Net retirement plan prior service credit (11 ) Pension and other employee benefits

(1,141 ) Total before tax

455
Tax (expense) benefit

(686 ) Net of tax

Three Months Ended September 30, 2016
Details about Accumulated other Comprehensive Income 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 securities:


Unrealized gains and losses on available-for-sale securities $ 455
(Loss) gain on sale of available-for-sale securities

(182 ) Tax (expense) benefit

273
Net of tax
Employee benefit plans:
Amortization of the following ²

Net retirement plan actuarial gain (335 ) Pension and other employee benefits
Net retirement plan prior service credit (20 ) Pension and other employee benefits

(355 ) Total before tax

142
Tax (expense) benefit

(213 ) Net of tax

Nine Months Ended September 30, 2016
Details about Accumulated other Comprehensive Income 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 securities:


Unrealized gains and losses on available-for-sale securities $ 926
(Loss) gain on sale of available-for-sale securities

(370 ) Tax expense

556
Net of tax
Employee benefit plans:


Amortization of the following ²


Net retirement plan actuarial loss (1,004 ) Pension and other employee benefits
Net retirement plan prior service cost (58 ) Pension and other employee benefits

(1,062 ) Total before tax

425
Tax benefit

(637 ) Net of tax

1Amounts in parentheses indicated debits in income statement.

2The accumulated other comprehensive (loss) income components are included in the computation of net periodic benefit cost (See Note 108 - ~~“Employee~~"Employee Benefit ~~Plan”~~Plan").

10.8. 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 ~~the unrecognized transitional obligation or transition asset,~~net retirement plan actuarial loss, and ~~the amounts of recognized gains and losses,~~ prior service cost ~~recognized, and gain or loss recognized due to settlement or curtailment.~~recognized.

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


	Pension Benefits				Life and Health				SERP Benefits
	Three Months Ended				Three Months Ended				Three Months Ended
(In thousands)	03/31/2023		03/31/2022		03/31/2023		03/31/2022		03/31/2023		03/31/2022
Service cost	$	0	$	0	$	15	$	44	$	14	$	52
Interest cost	823		463		89		52		299		201
Expected return on plan assets	(1,199)		(1,468)		0		0		0		0
Amortization of net retirement plan actuarial loss	304		323		(7)		52		0		240
Amortization of net retirement plan prior service (credit) cost	0		0		(15)		(15)		70		71
Net periodic benefit (income) cost	$	(72)	$	(682)	$	82	$	133	$	383	$	564

Pension Benefits
Three Months Ended Life and Health
Three Months Ended SERP Benefits
Three Months Ended
(in thousands) 9/30/2017
9/30/2016
9/30/2017
9/30/2016
9/30/2017
9/30/2016
Service cost $ 0
$ 0
$ 48
$ 64
$ 42
$ 43
Interest cost 625
618
67
71
213
208
Expected return on plan assets (1,293 ) (1,211 ) 0
0
0
0
Amortization of net retirement plan actuarial loss 269
244
9
1
100
90
Amortization of net retirement plan prior service (credit) cost (3 ) (4 ) (15 ) 4
22
19
Net periodic benefit (income) cost $ (402 ) $ (353 ) $ 109
$ 140
$ 377
$ 360

~~Components of Net periodic Benefit Cost~~

Pension Benefits
Nine Months Ended Life and Health
Nine Months Ended SERP Benefits
Nine Months Ended
(in thousands) 9/30/2017
9/30/2016
9/30/2017
9/30/2016
9/30/2017
9/30/2016
Service cost $ 0
$ 0
$ 144
$ 193
$ 125
$ 128
Interest cost 1,875
1,855
201
212
639
624
Expected return on plan assets (3,816 ) (3,633 ) 0
0
0
0
Amortization of net retirement plan actuarial loss 806
731
26
4
299
269
Amortization of net retirement plan prior service cost (credit) (8 ) (11 ) (47 ) 12
65
56
Net periodic benefit (income) cost $ (1,143 ) $ (1,058 ) $ 324
$ 421
$ 1,128
$ 1,077

The service component of net periodic benefit ~~(income)~~ cost for the ~~Company’s~~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 ~~a component~~part of ~~salaries and benefits~~other operating expenses in the consolidated statements of income.

The Company realized approximately ~~$686,000~~$266,000 and ~~$637,000,~~$506,000, net of tax, as amortization of amounts previously recognized in accumulated other comprehensive (loss) income, for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively.

The Company is not required to contribute to the pension plan in ~~2017,~~2023, but it may make voluntary contributions. The Company ~~contributed $1.8 million and $1.3 million~~did not contribute to the pension plan in the ~~nine~~first three months ~~ended September 30, 2017~~of 2023 and ~~2016 respectively.~~

2022.

~~11.~~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 ~~of the years~~periods presented below are stated separately.


										Three Months Ended
	Three Months Ended				Nine Months Ended
(in thousands)	9/30/2017		9/30/2016		9/30/2017		9/30/2016
(In thousands)									(In thousands)	03/31/2023		03/31/2022
Noninterest Income									Noninterest Income
Other service charges	$	742	$	619	$	2,289	$	1,986	Other service charges	$	615	$	627
Increase in cash surrender value of corporate owned life insurance	456		489		1,644		1,615
Earnings from corporate owned life insurance									Earnings from corporate owned life insurance	615		423
Net gains on the sale of loans originated for sale									Net gains on the sale of loans originated for sale	38		4
Other income	568		637		1,734		1,218		Other income	673		422
Total other income	$	1,766	$	1,745	$	5,667	$	4,819	Total other income	$	1,941	$	1,476
Noninterest Expenses									Noninterest Expenses
Marketing expense	$	1,107	$	1,248	$	3,523	$	3,566	Marketing expense	$	1,105	$	1,056
Professional fees	1,440		1,389		4,134		4,083		Professional fees	1,804		1,606
Legal fees	187		313		712		992		Legal fees	419		210
Technology expense	1,775		1,322		4,856		3,938		Technology expense	4,007		3,683
FDIC insurance									FDIC insurance	1,054		701
Cardholder expense	735		548		2,777		1,973		Cardholder expense	1,016		1,141
Other expenses	4,614		4,425		13,736		12,982		Other expenses	4,064		3,623
Total other operating expense	$	9,858	$	9,245	$	29,738	$	27,534	Total other operating expense	$	13,469	$	12,020

~~12.~~

10. Revenue Recognition

As stated in Note 1 - "Summary of Significant Accounting Policies," in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, the Company adopted ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers on January 1, 2022. The update relates to the previous adoption of ASC 606, "Revenue from Contracts with Customers" and all subsequent ASUs that modified ASC 606, and will be applied to future acquisitions. As there were no acquisitions during the current year, the adoption of ASU No. 2021-08 had no effect on the financial statements for the current fiscal year.

Generally, this new guidance strives to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity and inconsistency amongst entities in measuring contract assets and liabilities. The update requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 as if it had originated the contract. Changes in the acquiree’s balance of contract asset and contract liabilities identified as necessary to conform to the acquirer’s accounting policies would result in a reallocation of the purchase price.

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, 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, 2023 and 2022:


	Three Months Ended
(In thousands)	03/31/2023		03/31/2022
Noninterest Income
In-scope of Topic 606:
Commissions and Fees	$	8,517	$	7,964
Installment Billing	1		44
Refund of Commissions	59		(28)
Contract Liabilities/Deferred Revenue	(3)		(1)
Contingent Commissions	935		1,338
Subtotal Insurance Revenues	9,509		9,317
Trust and Asset Management	3,435		3,503
Mutual Fund & Investment Income	1,074		1,414
Subtotal Investment Service Income	4,509		4,917
Service Charges on Deposit Accounts	1,746		1,779
Card Services Income	2,682		2,543
Other	351		316
Noninterest Income (in-scope of ASC 606)	18,797		18,872
Noninterest Income (out-of-scope of ASC 606)	1,603		1,113
Total Noninterest Income	$	20,400	$	19,985

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 $4.3 million and $2.8 million, respectively, at March 31, 2023, compared to $6.1 million and $2.5 million, respectively, at December 31, 2022. Additionally, the Company had contract assets related to contingent income of $0.7 million and $2.9 million, respectively, at March 31, 2023 and December 31, 2022, and contract liabilities of $0.8 million and $1.6 million, respectively at March 31, 2023 and December 31, 2022.

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 ~~September 30, 2017,~~March 31, 2023, the Company’s maximum potential obligation under standby letters of credit was ~~$29.7~~$34.9 million compared to ~~$57.7~~$35.8 million at December 31, ~~2016.~~2022. 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.

~~13.~~12. Segment and Related Information

The Company manages its operations through three 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 four banking subsidiaries:~~ Tompkins ~~Trust Company, a commercial bank with fourteen~~Community Bank has twelve banking offices located in Ithaca, NY and surrounding communities; ~~The Bank of Castile (DBA Tompkins Bank of Castile), a commercial bank with seventeen~~sixteen banking offices located in the Genesee Valley region of New York State, ~~as well as~~which includes Monroe County; ~~Mahopac Bank (DBA Tompkins Mahopac Bank), a commercial bank with fourteen full-service~~thirteen banking offices located in the counties north of New York City; and ~~VIST Bank (DBA Tompkins VIST Bank), a banking organization with twenty-one~~nineteen 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 five stand-alone offices in Western New ~~York, one stand-alone office in Tompkins County, New York and one stand-alone office in Montgomery County, Pennsylvania.~~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 ~~four 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 ~~2016~~Company's Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2022.


Three months ended March 31, 2023
(In thousands)	Banking		Insurance		Wealth Management		Intercompany		Consolidated
Interest income	$	69,238	$	1	$	0	$	(1)	$	69,238
Interest expense	14,993		0		0		(1)		14,992
Net interest income	54,245		1		0		0		54,246
Credit for credit loss expense	(825)		0		0		0		(825)
Noninterest income	6,698		9,636		4,621		(555)		20,400
Noninterest expense	39,848		7,215		3,650		(555)		50,158
Income before income tax expense	21,920		2,422		971		0		25,313
Income tax expense	4,989		673		239		0		5,901
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	16,931		1,749		732		0		19,412
Less: Net income attributable to noncontrolling interests	31		0		0		0		31
Net Income attributable to Tompkins Financial Corporation	$	16,900	$	1,749	$	732	$	0	$	19,381

Depreciation and amortization	$	2,589	$	44	$	45	$	0	$	2,678
Assets	7,586,753		43,779		29,013		(15,174)		7,644,371
Goodwill	64,655		19,866		8,081		0		92,602
Other intangibles, net	984		1,576		45		0		2,605
Net loans and leases	5,227,572		0		0		0		5,227,572
Deposits	6,527,953		0		(4,245)		(14,699)		6,509,009
Total Equity	$	584,650	$	35,625	$	29,490	$	0	$	649,765


As of and for the three months ended September 30, 2017
(in thousands)	Banking		Insurance		Wealth Management		Intercompany			Consolidated
Three months ended March 31, 2022												Three months ended March 31, 2022
(In thousands)												(In thousands)	Banking		Insurance		Wealth Management		Intercompany		Consolidated
Interest income	$	57,772	$	0	$	0	$	0		$	57,772	Interest income	$	59,176	$	1	$	0	$	(1)	$	59,176
Interest expense	6,772		0		0		0			6,772		Interest expense	2,563		0		0		(1)		2,562
Net interest income	51,000		0		0		0			51,000		Net interest income	56,613		1		0		0		56,614
Provision for loan and lease losses	402		0		0		0			402
Credit for credit loss expense												Credit for credit loss expense	(520)		0		0		0		(520)
Noninterest income	5,795		7,729		4,130		(452		)	17,202		Noninterest income	6,193		9,434		4,934		(576)		19,985
Noninterest expense	32,876		6,204		3,255		(452		)	41,883		Noninterest expense	37,190		6,501		3,724		(576)		46,839
Income before income tax expense	23,517		1,525		875		0			25,917		Income before income tax expense	26,136		2,934		1,210		0		30,280
Income tax expense	7,635		572		284		0			8,491		Income tax expense	5,791		815		370		0		6,976
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	15,882		953		591		0			17,426		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	32		0		0		0			32		Less: Net income attributable to noncontrolling interests	31		0		0		0		31
Net Income attributable to Tompkins Financial Corporation	$	15,850	$	953	$	591	$	0		$	17,394	Net Income attributable to Tompkins Financial Corporation	$	20,314	$	2,119	$	840	$	0	$	23,273

Depreciation and amortization	$	1,963	$	64	$	14	$	0		$	2,041	Depreciation and amortization	$	2,578	$	44	$	28	$	0	$	2,650
Assets	6,479,292		40,791		16,579		(12,602		)	6,524,060		Assets	7,835,767		44,247		26,684		(15,587)		7,891,111
Goodwill	64,370		19,710		8,211		0			92,291		Goodwill	64,500		19,866		8,081		0		92,447
Other intangibles, net	5,474		3,979		297		0			9,750		Other intangibles, net	1,402		1,917		63		0		3,382
Net loans and leases	4,452,475		0		0		0			4,452,475		Net loans and leases	5,021,325		0		0		0		5,021,325
Deposits	4,955,033		0		0		(11,089		)	4,943,944		Deposits	7,031,223		0		(10)		(14,474)		7,016,739
Total Equity	544,417		31,615		13,836		0			589,868		Total Equity	$	598,707	$	34,128	$	24,657	$	0	$	657,492

As of and for the three months ended September 30, 2016
(in thousands) Banking Insurance Wealth
Management Intercompany Consolidated
Interest income $ 51,077
$ 0
$ 0
$ 0
$ 51,077
Interest expense 5,760
0
0
0
5,760
Net interest income
45,317
0
0
0
45,317
Provision for loan and lease losses 782
0
0
0
782
Noninterest income 6,335
7,862
4,004
(296 ) 17,905
Noninterest expense 31,337
6,281
3,002
(296 ) 40,324
Income before income tax expense
19,533
1,581
1,002
0
22,116
Income tax expense 5,964
642
339
0
6,945
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation 13,569
939
663
0
15,171
Less: Net income attributable to noncontrolling interests 33
0
0
0
33
Net Income attributable to Tompkins Financial Corporation $ 13,536
$ 939
$ 663
$ 0
$ 15,138

Depreciation and amortization $ 1,587
$ 87
$ 19
$ 0
$ 1,693
Assets 6,056,855
39,618
14,366
(8,624 ) 6,102,215
Goodwill 64,370
20,042
8,211
0
92,623
Other intangibles, net 6,778
4,748
376
0
11,902
Net loans and leases 4,055,435
0
0
0
4,055,435
Deposits 4,698,847
0
0
(8,547 ) 4,690,300
Total Equity 518,707
30,780
11,703
0
561,190

For the nine months ended September 30, 2017
(in thousands) Banking Insurance Wealth
Management Intercompany Consolidated
Interest income $ 167,735
$ 1
$ 0
$ (1 ) $ 167,735
Interest expense 18,401
0
0
(1 ) 18,400
Net interest income 149,334
1
0
0
149,335
Provision for loan and lease losses 2,147
0
0
0
2,147
Noninterest income 18,917
22,177
12,056
(1,258 ) 51,892
Noninterest expense 98,182
18,343
9,552
(1,258 ) 124,819
Income before income tax expense
67,922

3,835

2,504

0
74,261
Income tax expense 21,816
1,475
836
0
24,127
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation 46,106

2,360

1,668

0
50,134
Less: Net income attributable to noncontrolling interests 97
0
0
0
97
Net Income attributable to Tompkins Financial Corporation $ 46,009

$ 2,360

$ 1,668

$ 0
$ 50,037

Depreciation and amortization $ 5,402
$ 221
$ 43
$ 0
$ 5,666

For the nine months ended September 30, 2016
(in thousands) Banking Insurance Wealth
Management Intercompany Consolidated
Interest income $ 150,803
$ 1
$ 0
$ (1 ) $ 150,803
Interest expense 16,541
1
0
(1 ) 16,541
Net interest income
134,262
0
0
0
$ 134,262
Provision for loan and lease losses 2,615
0
0
0
2,615
Noninterest income 18,468
23,017
11,870
(863 ) 52,492
Noninterest expense 92,357
18,780
8,944
(863 ) 119,218
Income before income tax expense
57,758

4,237

2,926

0
$ 64,921
Income tax expense 17,906
1,719
976
0
20,601
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation 39,852

2,518

1,950

0
$ 44,320
Less: Net income attributable to noncontrolling interests 98
0
0
0
98
Net Income attributable to Tompkins Financial Corporation $ 39,754

$ 2,518

$ 1,950

$ 0
$ 44,222
0
Depreciation and amortization $ 4,724
$ 269
$ 56
$ 0
$ 5,049

13. Fair Value Measurements

~~14. Fair Value~~

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).

The following ~~table summarizes~~tables summarize financial assets and financial liabilities measured at fair value on a recurring basis as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, segregated by the level of valuation inputs within the fair value hierarchy used to measure fair ~~value.~~value:


Recurring Fair Value Measurements
March 31, 2023
(In thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Available-for-sale debt securities
U.S. Treasuries	$	170,814	$	0	$	170,814	$	0
Obligations of U.S. Government sponsored entities	599,762		0		599,762		0
Obligations of U.S. states and political subdivisions	86,684		0		86,684		0
Mortgage-backed securities – residential, issued by:
U.S. Government agencies	50,891		0		50,891		0
U.S. Government sponsored entities	675,310		0		675,310		0

U.S. corporate debt securities	2,393		0		2,393		0
Total Available-for-sale debt securities	$	1,585,854	$	0	$	1,585,854	$	0
Equity securities, at fair value	$	790	$	0	$	0	$	790


Recurring Fair Value Measurements
December 31, 2022
(In thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Available-for-sale debt securities
U.S. Treasuries	$	167,251	$	0	$	167,251	$	0
Obligations of U.S. Government sponsored entities	601,167		0		601,167		0
Obligations of U.S. states and political subdivisions	85,281		0		85,281		0
Mortgage-backed securities – residential, issued by:
U.S. Government agencies	52,668		0		52,668		0
U.S. Government sponsored entities	686,222		0		686,222		0

U.S. corporate debt securities	2,378		0		2,378		0
Total Available-for-sale debt securities	$	1,594,967	$	0	$	1,594,967	$	0
Equity securities, at fair value	$	777	$	0	$	0	$	777

Recurring Fair Value Measurements
September 30, 2017
(in thousands) Total (Level 1)
(Level 2)
(Level 3)
Available-for-sale securities
Obligations of U.S. Government sponsored entities $ 534,202
$ 0
$ 534,202
$ 0
Obligations of U.S. states and political subdivisions 92,043
0
92,043
0
Mortgage-backed securities – residential, issued by:
U.S. Government agencies 144,673
0
144,673
0
U.S. Government sponsored entities 632,146
0
632,146
0
Non-U.S. Government agencies or sponsored entities 85
0
85
0
U.S. corporate debt securities 2,162
0
2,162
0
Equity securities 920
0
0
920

~~The change in the fair value of available-for-sale equity securities valued using significant unobservable inputs (level 3), between January 1, 2017 and September 30, 2017 was immaterial.~~

Recurring Fair Value Measurements
December 31, 2016
(in thousands) Total (Level 1)
(Level 2)
(Level 3)
Available-for-sale securities

Obligations of U.S. Government sponsored entities 527,627
0
527,627
0
Obligations of U.S. states and political subdivisions 89,056
0
89,056
0
Mortgage-backed securities – residential, issued by:

U.S. Government agencies 158,226
0
158,226
0
U.S. Government sponsored entities 651,430
0
651,430
0
Non-U.S. Government agencies or sponsored entities 116
0
116
0
U.S. corporate debt securities 2,162
0
2,162
0
Equity securities 921
0
0
921

~~The change in the fair value of available-for-sale equity securities valued using significant unobservable inputs (level 3), between January 1, 2016 and December 31, 2016 was immaterial.~~

~~There were no transfers between Levels 1, 2 and 3 for the nine months ended September 30, 2017.~~

The Company determines fair value for its trading securities using independently quoted market prices. The Company determines fair value for its available-for-sale securities using an independent bond pricing service for identical assets or very similar securities. 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 impaired loans, and other real estate owned (“OREO”). During the third quarter and first nine months of 2017, certain collateral dependent impaired loans were remeasured and reported at fair value through a specific valuation allowance and/or partial charge-offs for loan and lease 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 impaired 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. Upon initial recognition, fair value write-downs on other real estate owned are taken through a charge-off to the allowance for loan and lease losses. Subsequent fair value write-downs on other real estate owned are reported in other noninterest expense.

Three months ended September 30, 2017
Fair value measurements at reporting
date using: Gain (losses)
from fair
value changes
Assets: As of 09/30/2017 Quoted prices in
active markets for
identical assets
(Level 1) Significant other
observable inputs
(Level 2) Significant
unobservable inputs
(Level 3) Three months
ended
09/30/2017
Impaired loans $ 1,603
$ 0
$ 1,603
$ 0
$ 0
Other real estate owned 1,520
0
1,520
0
(100 )

Three months ended September 30, 2016
Fair value measurements at reporting
date using: Gain (losses)
from fair
value changes
Assets: As of
09/30/2016 Quoted prices in
active markets for
identical assets
(Level 1) Significant other
observable inputs
(Level 2) Significant
unobservable inputs
(Level 3) Three months
ended
09/30/2016
Impaired loans $ 0
$ 0
$ 0
$ 0
$ (65 )
Other real estate owned 731
0
731
0
28

Nine months ended September 30, 2017
Fair value measurements at reporting
date using: Gain (losses)
from fair
value changes
Assets: As of
09/30/2017 Quoted prices in
active markets for
identical assets
(Level 1) Significant other
observable inputs
(Level 2) Significant
unobservable inputs
(Level 3) Nine months
ended
09/30/2017
Impaired Loans $ 3,982
$ 0
$ 3,982
$ 0
$ (332 )
Other real estate owned 2,030
0
2,030
0
(282 )

Nine months ended September 30, 2016
Fair value measurements at reporting
date using: Gain (losses)
from fair
value changes
Assets: As of
09/30/2016 Quoted prices in
active markets for
identical assets
(Level 1) Significant other
observable inputs
(Level 2) Significant
unobservable inputs
(Level 3) Nine months
ended
09/30/2016
Impaired Loans $ 2,747
$ 0
$ 2,747
$ 0
$ (234 )
Other real estate owned 1,008
0
1,008
0
24

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments at September 30, 2017 and December 31, 2016. The carrying amounts shown in the table are included in the Consolidated Statements of Condition under the indicated captions.

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 generally accepted accounting principles in the United States and do not always incorporate the exit-price concept of fair value prescribed by ASC Topic 820-10 and should be read in conjunction with the financial statements and notes included in this Report.

Estimated Fair Value of Financial Instruments
September 30, 2017
(in thousands)
Carrying
Amount Fair Value (Level 1) (Level 2) (Level 3)
Financial Assets:

Cash and cash equivalents $ 129,412
$ 129,412
$ 129,412
$ 0
$ 0
Securities - held to maturity 139,968
142,007
0
142,007
0
FHLB and other stock 40,310
40,310
0
40,310
0
Accrued interest receivable 20,472
20,472
0
20,472
0
Loans/leases, net¹
4,452,475
4,401,416
0
3,982
4,397,434

Financial Liabilities:

Time deposits $ 786,301
$ 784,161
$ 0
$ 784,161
$ 0
Other deposits 4,157,643
4,157,643
0
4,157,643
0
Fed funds purchased and securities sold

under agreements to repurchase 73,874
73,874
0
73,874
0
Other borrowings 834,574
833,839
0
833,839
0
Trust preferred debentures 16,648
22,073
0
22,073
0
Accrued interest payable 1,931
1,931
0
1,931
0

Estimated Fair Value of Financial Instruments
December 31, 2016
(in thousands)
Carrying
Amount Fair Value (Level 1) (Level 2) (Level 3)
Financial Assets:

Cash and cash equivalents $ 63,954
$ 63,954
$ 63,954
$ 0
$ 0
Securities - held to maturity 142,119
142,832
0
142,832
0
FHLB and other stock 43,133
43,133
0
43,133
0
Accrued interest receivable 17,390
17,390
0
17,390
0
Loans/leases, net¹
4,222,278
4,187,415
0
7,296
4,180,119

Financial Liabilities:

Time deposits $ 870,788
$ 867,921
$ 0
$ 867,921
$ 0
Other deposits 3,754,351
3,754,351
0
3,754,351
0
Fed funds purchased and securities

sold under agreements to repurchase 69,062
69,109
0
69,109
0
Other borrowings 884,815
884,842
0
884,842
0
Trust preferred debentures 37,681
43,321
0
43,321
0
Accrued interest payable 1,902
1,902
0
1,902
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.~~

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.

~~Loans and Leases:~~The fair values of residential loans are estimated using discounted cash flow analyses, based upon available market benchmarks for rates and prepayment assumptions. The fair values of commercial and consumer loans are estimated using discounted cash flow analyses, based upon interest rates currently offered for loans and leases with similar terms and credit quality. Thechange in the fair value of equity securities valued using significant unobservable inputs (level 3), between December 31, 2022 and March 31, 2023, was immaterial.

There were no transfers between Levels 1, 2 and 3 for the three months ended March 31, 2023.

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, ~~are determined~~collateral dependent individually evaluated loans, and other real estate owned ("OREO"). As of March 31, 2023 and 2022, 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 ~~contractual prices~~the fair value of the underlying collateral. Collateral values are estimated using Level 3 inputs. Upon initial recognition, fair value write-downs are taken through a charge-off to the allowance for ~~loans with similar characteristics.~~credit losses. Subsequent fair value write-downs on other real estate owned are reported in other noninterest expense.

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments at March 31, 2023 and 2022. The carrying amounts shown in the table are included in the Consolidated Statements of Condition under the indicated captions:


Three months ended March 31, 2023
(In thousands)			Fair value measurements at reporting date using:						Gain (losses) from fair value changes
Assets:	As of 03/31/2023		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Three months ended 03/31/2023
Individually evaluated loans	$	0	$	0	$	0	$	0	$	826
Other real estate owned	36		0				36		22


December 31, 2022
(In thousands)			Fair value measurements at reporting date using:						Gain (losses) from fair value changes
Assets:	As of 12/31/2022		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Three months ended 12/31/2022
Individually evaluated loans	$	9,460	$	0	$	0	$	9,460	$	59
Other real estate owned	152		0		0		152		15

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.


Estimated Fair Value of Financial Instruments
March 31, 2023
(In thousands)	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and cash equivalents	$	70,537	$	70,537	$	70,537	$	0	$	0
Securities - held-to-maturity	312,357		267,099		0		267,099		0
FHLB and other stock	19,326		19,326		0		19,326		0
Accrued interest receivable	23,629		23,629		0		23,629		0
Loans/leases, net1	5,227,572		4,911,105		0		0		4,911,105

Financial Liabilities:
Time deposits	$	725,338	$	713,125	$	0	$	713,125	$	0
Other deposits	5,783,671		5,783,671		0		5,783,671		0
Fed funds purchased and securities sold
under agreements to repurchase	63,491		63,491		0		63,491		0
Other borrowings	327,000		324,849		0		324,849		0
Accrued interest payable	1,579		1,579		0		1,579		0


Estimated Fair Value of Financial Instruments
December 31, 2022
(In thousands)	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and cash equivalents	$	77,837	$	77,837	$	77,837	$	0	$	0
Securities - held to maturity	312,344		261,692		0		261,692		0
FHLB and other stock	17,720		17,720		0		17,720		0
Accrued interest receivable	24,865		24,865		0		24,865		0
Loans/leases, net1	5,222,977		4,939,246		0		0		4,939,246

Financial Liabilities:
Time deposits	$	631,411	$	616,488	$	0	$	616,488	$	0
Other deposits	5,970,884		5,970,884		0		5,970,884		0
Fed funds purchased and securities
sold under agreements to repurchase	56,278		56,278		0		56,278		0
Other borrowings	291,300		289,234		0		289,234		0
Accrued interest payable	1,420		1,420		0		1,420		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.

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.

~~Securities Sold Under Agreements to Repurchase:~~ The carrying amounts of repurchase agreements and other short-term borrowings approximate their fair values. Fair values of long-term borrowings are estimated using a discounted cash flow approach, based on current market rates for similar borrowings. For securities sold under agreements to repurchase where the Company has elected the fair value option, the Company also receives pricing information from third parties, including the FHLB.

Other ~~Borrowings:~~ The fair values of other borrowings are estimated using discounted cash flow analysis, discounted at the Company’s current incremental borrowing rate for similar borrowing arrangements. For other borrowings where the Company has elected the fair value option, the Company also receives pricing information from third parties, including the FHLB.

~~Trust Preferred Debentures:~~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.

14. Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Management of economic risks, by the Company, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. Existing credit derivatives result from participation in loan participation arrangements, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities.

Non-designated Hedges

The Company’s existing credit derivatives result from participation in or out of interest rate swaps provided by or to external lenders as part of loan participation arrangements, and therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain lenders which participate in loans.

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated statements of condition as of March 31, 2023 and December 31, 2022. The Company began entering into derivative transactions in the second quarter of 2022.

Derivative Liabilities

March 31, 2023

December 31, 2022

Notional

Balance Sheet

Fair

Balance Sheet

Fair

(In thousands)

Amount

Location

Value

Location

Value

Derivatives not designated as hedging instruments

Interest Rate Products

Other Liabilities

Risk Participation Agreement

7,499

Other Liabilities

Total derivatives not designated as hedging instruments

Tabular Disclosure of the Effect of Derivatives Not Designated as Hedging Instruments on the Income Statement

The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the consolidated statements of income for the three months ended March 31, 2023:

Effect of Derivatives Not Designated as Hedging Instruments on the Statement of Financial Performance

Derivatives Not Designated as Hedging Instruments under Subtopic 815-20

Location of Gain or (Loss) Recognized in Income on Derivative

Amount of Gain or (Loss) Recognized in Income on Derivative

(In thousands)

Three Months Ended March 31, 2023

Interest Rate Products

Other income / (expense)

Risk Participation Agreement

Other income / (expense)

(6)

Total

(6)

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

BUSINESS

~~Corporate~~ Overview ~~and Strategic Initiatives~~

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 ~~September 30, 2017,~~March 31, 2023, the ~~Company’s subsidiaries included: four~~Company had one wholly-owned banking subsidiaries, Tompkins Trust Company (the “Trust Company”), The Bank of Castile (DBA Tompkins Bank of Castile), Mahopac Bank (formerly known as Mahopac National Bank, DBA Tompkins Mahopac Bank), VIST Bank (DBA Tompkins VIST Bank); and a wholly-owned insurance agency subsidiary, Tompkins ~~Insurance Agencies, Inc. (“~~Community Bank. Tompkins ~~Insurance”). The trust division of the Trust Company~~Community Bank provides a full array of ~~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 also has a wholly-owned insurance agency subsidiary, Tompkins Insurance Agencies, Inc. ("Tompkins Insurance"). The Company’s principal offices are located at ~~The Commons,~~118 E. Seneca Street, P.O. Box 460, Ithaca, ~~New York, 14851,~~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 ~~Company’s~~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 ~~include diversification within its markets, growth of its fee-based~~to grow organically through our current businesses, ~~and growth internally and~~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 ~~within markets currently served by the Company or in other locations~~ 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. ~~The Company has pursued acquisition opportunities in the past, and continues to review new opportunities.~~

Business Segments

Banking services consist primarily of attracting deposits from the areas served by ~~the Company’s four banking subsidiaries’ 66~~Tompkins Community Bank, which has 60 banking offices ~~(45~~(41 offices in New York and 2119 offices in Pennsylvania) and using those deposits to originate a variety of commercial loans, agricultural loans, consumer loans, real estate loans, ~~(including commercial loans collateralized by real estate),~~ 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 ~~by the Trust Company~~ 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, at all four~~shares offices in each of the ~~Company’s 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 ~~past fourteen~~ 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, most recently acquiring Shepard, Maxwell & Hale Insurance on January 1, 2016 as previously reported.~~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, ~~two stand-alone offices in Tompkins County, New York~~ and one stand-alone office in ~~Montgomery~~Tompkins County, ~~Pennsylvania.~~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 ~~loan and lease~~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 ~~businesses,~~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 ~~service~~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 as a ~~community based~~community-based financial ~~institution, it~~organization is ~~well~~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, although no assurances can be given~~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 ~~assure~~result in future success.

Regulation

Banking, insurance services and wealth management are highly regulated. As a ~~publicly-traded~~ financial holding company ~~with four~~including a community ~~banks,~~bank, a registered investment ~~advisor,~~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 ~~and nine~~ months ended ~~September 30, 2017.~~March 31, 2023. 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, ~~2016,~~2022, 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. Unless otherwise stated, this peer~~ group, which is comprised of ~~the group of 145~~167 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 ~~June 30, 2017~~December 31, 2022 (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

~~The Company is making this statement in order to satisfy~~This Quarterly Report on Form 10-Q contains "forward-looking statements" within the ~~“Safe Harbor” provision contained in~~meaning of the Private Securities Litigation Reform Act of 1995. The statements contained in this ~~Quarterly~~ Report ~~on Form 10-Q~~ that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties. ~~Such~~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 need to sell securities before recovery of amortized cost; 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. These uncertainties and factors~~Company, that could cause actual results of the Company to differ materially from those ~~matters~~ expressed and/or implied by ~~such~~ forward-looking ~~statements.~~statements and historical performance. The following factors, in addition to those listed as Risk Factors in Item 1A of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022, are among those that could cause actual results to differ materially from the forward-looking ~~statements:~~ statements and historical performance: changes in general economic, market and regulatory conditions; our ability to attract and retain deposits and other sources of liquidity; GDP growth and inflation trends; the ~~development~~impact of anthe interest rate and inflationary environment ~~that may adversely affect~~on the ~~Company’s interest rate spread,~~Company' business, financial condition and results of operations; other income or cash flow anticipated ~~from~~from the ~~Company’s~~Company's operations, investment and/or lending activities; changes in laws and regulations affecting banks, ~~insurance companies,~~ bank holding companies and/or financial holding companies, such as state and local government mandates, the Dodd-Frank ~~Wall Street Reform~~Act and Basel III and the Economic Growth, Regulatory Relief, and Consumer Protection ~~Act~~Act; the impact of any change in the FDIC insurance assessment rate or the rules and ~~Basel III;~~regulations related to the calculation of the FDIC insurance assessment amount; 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; ~~protection and validity of intellectual property rights;~~ reliance on large customers; the ~~expenses~~impact of national and ~~reputational damage if there were ever a material cybersecurity breach;~~global events, including the response to recent bank failures, the war in Ukraine, widespread protests, civil unrest, political uncertainty, and pandemics or other public health crises, including the COVID-19 pandemic on the economy and the financial services industry; and access to financial resources in the amounts, at the times and on the terms required to support the Company’s future businesses; and other factors discussed elsewhere in this Quarterly Report on Form 10-Q and in other reports we file with the SEC, in particular the “Risk Factors” discussed in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. In addition, such forward-looking statements could be affected by general industry and market conditions and growth rates, general economic and political conditions (including changes in economic conditions in the Company’s primary market areas), including interest rate and currency exchange rate fluctuations, and other factors.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 ~~generally accepted in the United States~~("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 ~~loan and lease~~credit losses ~~(“allowance”~~("allowance", or "ACL"), ~~pension and post-retirement benefits,~~ 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.

The Company’s methodology for estimating the allowance considers available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. Refer to "Allowance for Credit Losses" below, Note 5 - "Allowance for Credit Losses", and Note 1 – "Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

For ~~additional~~ information on ~~critical~~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 ~~and the section captioned “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations,~~ contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016. There have been no significant changes in the Company’s application of critical accounting policies since December 31, 2016.~~2022. Refer to ~~Note 3 – “Accounting Standards Updates”~~"Recently Issued Accounting Standards" in ~~the Notes to Unaudited Consolidated Financial Statements included~~Management's Discussion and Analysis in ~~Part I of~~ 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 "Summary of Significant Accounting 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, 2022. 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 - The Company accounts for the allowance for credit losses using the current expected credit loss model. 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 5 - "Allowance for Credit Losses" in the Note to the Unaudited Consolidated Financial Statements.

Recent Events

During the first quarter of 2023, the banking industry experienced significant volatility with the recent high-profile bank failures, which resulted in industry wide concerns related to liquidity, deposit outflows, unrealized securities losses and eroding consumer confidence in the banking system. In response to these recent developments, the Company took a number of preemptive actions, which included proactive outreach to clients and actions to maximize its funding sources such as establishing the ability to borrow through the newly established Federal Reserve borrowing program called the Bank Term Funding Program. The Company maintains ready access liquidity of $1.7 billion through its membership with the FHLB and FRB. As of March 31, 2023, the Company’s liquidity and balance sheet remain well positioned and stable. The Company’s total deposits of $6.5 billion at March 31, 2023 were down $93.3 million or 1.4% from December 31, 2022, reflecting minimal deposit outflow. At March 31, 2023, the Company estimates total uninsured deposits of $2.6 billion, which is unchanged from December 31, 2022, including $1.1 billion of collateralized government deposits and $1.5 billion of uninsured customer deposits without liquid collateral pledged. Total insured deposits and collateralized government deposits represent 76.9% of the Company's total deposits of $6.5 billion at March 31, 2023. Furthermore, the Company’s regulatory capital ratios at March 31, 2023, were up over December 31, 2022. At March 31, 2023, Tier 1 leverage and Total Capital ratios were 9.63% and 14.62%, respectively, compared to 9.34% and 14.42% at December 31, 2022.

RESULTS OF ~~OPERATION~~OPERATIONS

Performance Summary

Net income for the ~~third~~first quarter of ~~2017~~2023 was ~~$17.4~~$19.4 million or ~~$1.14~~$1.35 diluted earnings per share, compared to ~~$15.1~~$23.3 million or ~~$1.00~~$1.60 diluted earnings per share for the same period in ~~2016. Net~~2022. The decrease in net income for the first ~~nine months~~quarter of ~~2017 was $50.0 million or $3.27 diluted earnings per share~~2023 compared to ~~$44.2 million or $2.92 diluted earnings per share for~~ the first ~~nine months~~quarter of ~~2016.~~2022 was mainly a result of increased interest expense and increases in other operating expenses.

Return on average assets ~~(“ROA”~~("ROA") for the quarter ended ~~September 30, 2017~~March 31, 2023 was ~~1.07%~~1.03%, compared to ~~1.01%~~1.19% for the quarter ended ~~September 30, 2016.~~March 31, 2022. Return on average shareholders’ equity ~~(“ROE”~~("ROE") for the ~~third~~first quarter of ~~2017~~2023 was ~~11.77%~~12.45%, compared to ~~10.81%,~~13.24% for the same period in 2016. For the year-to-date period ended September 30, 2017, ROA and ROE totaled 1.06% and 11.70%, respectively, compared to 1.01% and 10.88% for the same periods in 2016. Tompkins’ year-to-date ROA and ROE compare to the most recent peer average ratios of 1.04% and 9.50%, respectively, ranking Tompkins’ ROA in the 51st percentile and ROE in the 79th ~~percentile of the peer group.~~2022.

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 ~~$15.9~~$16.9 million for the ~~third~~first quarter of ~~2017, up $2.6~~2023, a decrease of $3.4 million or ~~19.5%~~16.8% from net income of ~~$13.3~~$20.3 million for the same period in ~~2016. For the nine months ended September 30, 2017, the banking segment reported~~2022. The decrease in net income for the first quarter of ~~$46.0 million, up $6.9 million or 17.5% over~~2023 compared to the ~~same period~~first quarter of 2022 was primarily due to increased funding costs coupled with increases in ~~2016.~~operating expenses.

Net interest income of ~~$51.0~~$54.2 million for the ~~third~~first quarter of ~~2017~~2023 was ~~up $5.7~~down $2.4 million or ~~12.5% over~~4.2% from the same period in ~~2016. For the nine months ended September 30, 2017,~~2022. The decrease in net interest income was primarily due to higher funding costs and a decrease in average earnings assets, partially offset by an increase in the average yield on interest-earning assets in the first quarter of ~~$149.3 million was up $15.1 million or 11.2%~~2023 compared to the first ~~nine months~~quarter of 2022. The average yield on interest-earning assets benefited from higher market interest rates as well as a shift in the ~~prior year. The Company’s~~composition of average earning assets with growth in average ~~earning assets and improved net interest margin contributed to favorable year-over-year comparisons in net interest income.~~loan balances.

The provision for ~~loan and lease~~credit losses was ~~$402,000~~a credit of $825,000 for the three months ended ~~September 30, 2017, down $380,000~~March 31, 2023, compared to a credit of $520,000 for the same period in 2022. For additional information, see the section titled "The Allowance for Credit Losses" below.

Noninterest income of $6.7 million for the three months ended March 31, 2023 was up $505,000 or ~~48.6%~~8.2% compared to the same period in ~~2016. Provision expense of $2.1 million for the nine months ended September 30, 2017 was down $468,000 or 17.9% compared to the first nine months of 2016.~~2022. The ~~decrease in provision expense in 2017 compared to the same periods in 2016 were mainly a result of an~~ increase in ~~net loan recoveries in 2017 over 2016.~~

~~Noninterest income of $5.8 million for~~ the three months ended ~~September 30, 2017 decreased $539,000~~March 31, 2023, from the same period in 2022 included an increase in earnings on bank-owned life insurance ("BOLI") and incentive fees related to renewal of our debit card services contract.

Noninterest expense of $39.8 million for the first quarter of 2023 was up $2.7 million or ~~8.5%~~7.2% from the same period in 2022. Salaries and employee benefits were up compared to the same period in ~~2016. Noninterest income~~2022 mainly due to yearly merit increases and higher healthcare expense. Higher FDIC insurance expense and technology expenses in the first quarter of ~~$18.9 million for the nine months ended September 30, 2017 was up $450,000 or 2.4%~~2023 also contributed to increases in noninterest expense as compared to ~~the nine months ended September 30, 2016. The decrease~~same period in ~~the third quarter of 2017~~2022. Higher FDIC insurance expense was mainly a result of realized losses on sales of available-for-sale securities during the quarter. The third quarter of 2017 included realized losses on sales of available-for-sale securities of $423,000 compared to realized gains on the sales of available-for-sale securities of $455,000 in the third quarter of 2016. Sales of available-for-sale securities are generally the result of general investment security portfolio maintenance and interest rate risk management. The increase in noninterest income for the nine month period ended September 30, 2017 includes: card services fees (up $894,000), loan fees (up $141,000), miscellaneous deposit fees (up $140,000) and other real estate owned (up $127,000). Partially offsetting these items was an increase in losses on sales of available for sale securities (up $1.3 million over the nine months ended September 30, 2016).

Noninterest expense of $32.9 million for the third quarter of 2017 and $98.2 million for the nine months ended September 30, 2017 was up $1.5 million or 4.9% and up $5.8 million or 6.3%, respectively from the same periods in 2016. The increase was mainly attributeddue to an increase in ~~salary and wages and employee benefits reflecting normal annual merit and incentive adjustments and higher health insurance costs, respectively, over the comparable periods~~assessment rates in ~~the prior year.~~2023.

Insurance Segment

The insurance segment reported net income of ~~$953,000~~$1.7 million for the three months ended ~~September 30, 2017,~~March 31, 2023, which was ~~up $14,000~~down $370,000 or ~~1.5%~~17.5% compared to the ~~third~~first quarter of ~~2016. For the nine months ended September 30, 2017, net income was down $158,000 or 6.3% compared to the same period prior year.~~2022. Noninterest income ~~was down $133,000 or 1.7%~~ in the ~~third~~first quarter of ~~2017,~~2023 increased by $202,000 or 2.1% compared to the same period in ~~2016. For the nine months ended September 30, 2017, noninterest income~~2022. Insurance commissions were up $617,000 or 7.6%, partially offset by lower contingency revenue, which was down ~~$840,000~~$402,000 or ~~3.6%~~30.1% from the first quarter of 2022.

Noninterest expenses were up $714,000 or 11.0% compared to the same period in 2016. The decrease in noninterest income was mainly in life and health insurance commissions and largely reflects impacts of the sale of certain customer relationships in the Pennsylvania market in the second half of 2016 and first quarter of 2017. Noninterest expenses for the three and nine months ended September 30, 2017 were down $77,000 or 1.2% and $437,000 or 2.3%, respectively, compared to the three and nine months ended September 30, 2016.2022. The ~~decrease in noninterest expense for the third quarter and the nine month period ended September 30, 2017 is~~increase was mainly in salaries and wages, reflecting annual merit increases; incentive commissions related to new business and ~~mainly a result of a decrease~~growth in ~~the number of employees.~~revenues; and employee benefits, including increases in health insurance.

Wealth Management Segment

The wealth management segment reported net income of ~~$591,000~~$732,000 for the three months ended ~~September 30, 2017,~~March 31, 2023, which was down ~~$72,000~~$108,000 or ~~10.9%~~12.9% compared to the ~~third~~first quarter of ~~2016. For the nine months ended September 30, 2017,~~2022. The decrease in net ~~income of $1.7 million was down $282,000 or 14.5% compared to prior year. Noninterest~~ income for the ~~third quarter of 2017 was up $126,000 or 3.1% and for the first nine months of 2017 was up $186,000 or 1.6% compared to the same periods in the prior year. Noninterest expenses for the~~ three ~~months~~month period ended ~~September 30, 2017 were up $253,000 or 8.4% and were up $608,000 or 6.8% for the nine months ended September 30, 2017~~March 31, 2023, compared to the same period in ~~2016.~~2022, was mainly attributable to a decrease in revenue, driven by a decrease in assets under management; which was primarily a result of volatile market conditions. Noninterest expense for the first quarter of 2023 decreased $74,000 or 2.0% compared to the same period of 2022. The ~~increase in 2017 over 2016~~decrease was mainly in salaries, wages and ~~wages, reflecting annual merit increases and higher staffing levels in 2017~~benefits, which were down $141,000 or 5.7% for the first three months of 2023 compared to ~~2016.~~the same period prior year.

Net Interest Income

The following ~~tables show~~table shows average interest-earning assets and interest-bearing liabilities, and the corresponding yield or cost associated with each for the three ~~and nine~~ month periods ended ~~September 30, 2017~~March 31, 2023 and ~~2016.~~2022:


Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)
	Quarter Ended						Quarter Ended
	March 31, 2023						March 31, 2022
	Average						Average
	Balance				Average		Balance				Average
(Dollar amounts in thousands)	(QTD)		Interest		Yield/Rate		(QTD)		Interest		Yield/Rate
ASSETS
Interest-earning assets
Interest-bearing balances due from banks	$	12,733	$	139	4.42	%	$	134,129	$	41	0.12	%
Securities (1)
U.S. Government securities	2,033,307		7,424		1.48	%	2,293,611		7,362		1.30	%

State and municipal (2)	93,201		599		2.60	%	101,746		649		2.59	%
Other securities (2)	3,284		53		6.55	%	3,390		23		2.73	%
Total securities	2,129,792		8,076		1.54	%	2,398,747		8,034		1.36	%
FHLBNY and FRB stock	16,750		300		7.26	%	10,098		105		4.23	%
Total loans and leases, net of unearned income (2)(3)	5,251,278		61,034		4.71	%	5,055,948		51,355		4.12	%
Total interest-earning assets	7,410,553		69,549		3.81	%	7,598,922		59,535		3.18	%
Other assets	223,240						311,125
Total assets	$	7,633,793					$	7,910,047
LIABILITIES & EQUITY
Deposits
Interest-bearing deposits
Interest bearing checking, savings, & money market	3,833,566		8,641		0.91	%	4,160,946		750		0.07	%
Time deposits	673,871		3,541		2.13	%	631,594		1,296		0.83	%
Total interest-bearing deposits	4,507,437		12,182		1.10	%	4,792,540		2,046		0.17	%
Federal funds purchased & securities sold under agreements to repurchase	57,523		14		0.10	%	64,237		16		0.10	%
Other borrowings	269,752		2,796		4.20	%	125,298		500		1.62	%

Total interest-bearing liabilities	4,834,712		14,992		1.26	%	4,982,075		2,562		0.21	%
Noninterest bearing deposits	2,065,701						2,108,825
Accrued expenses and other liabilities	102,172						106,120
Total liabilities	7,002,585						7,197,020
Tompkins Financial Corporation Shareholders’ equity	629,784						711,601
Noncontrolling interest	1,424						1,426
Total equity	631,208						713,027
Total liabilities and equity	$	7,633,793					$	7,910,047
Interest rate spread					2.55	%					2.97	%
Net interest income/margin on earning assets			54,557		2.99	%			56,973		3.04	%

Tax Equivalent Adjustment			(311)						(359)

Net interest income per consolidated financial statements			$	54,246					$	56,614

Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)
Quarter Ended Quarter Ended
September 30, 2017 September 30, 2016
Average Average
Balance Average Balance Average
(Dollar amounts in thousands) (QTD) Interest Yield/Rate (QTD) Interest Yield/Rate
ASSETS
Interest-earning assets
Interest-bearing balances due from banks $ 3,498
$ 9
1.02 % $ 1,874
$ 2
0.42 %
Securities (1)

U.S. Government securities 1,474,389
7,730
2.08 % 1,419,808
7,058
1.98 %
Trading securities 0
0
0.00 % 5,452
62
4.52 %
State and municipal (2) 100,060
851
3.37 % 96,607
809
3.33 %
Other securities (2) 3,592
33
3.64 % 3,632
30
3.29 %
Total securities 1,578,041
8,614
2.17 % 1,525,499
7,959
2.08 %
FHLBNY and FRB stock 45,994
534
4.61 % 35,841
375
4.16 %
Total loans and leases, net of unearned income (2)(3) 4,444,736
49,725
4.44 % 4,014,671
43,772
4.34 %
Total interest-earning assets 6,072,269
58,882
3.85 % 5,577,885
52,108
3.72 %

Other assets 358,228

364,375

Total assets 6,430,497

5,942,260

LIABILITIES & EQUITY
Deposits
Interest-bearing deposits
Interest bearing checking, savings, & money market 2,632,467
1,355
0.20 % 2,478,292
1,021
0.16 %
Time deposits 800,769
1,781
0.88 % 871,937
1,672
0.76 %
Total interest-bearing deposits 3,433,236
3,136
0.36 % 3,350,229
2,693
0.32 %
Federal funds purchased & securities sold under agreements to repurchase 58,397
44
0.30 % 99,387
630
2.52 %
Other borrowings 955,353
3,327
1.38 % 681,654
1,837
1.07 %
Trust preferred debentures 16,620
265
6.33 % 37,609
600
6.35 %
Total interest-bearing liabilities 4,463,606
6,772
0.60 % 4,168,879
5,760
0.55 %
Noninterest bearing deposits 1,313,773

1,148,081

Accrued expenses and other liabilities 66,447

68,019

Total liabilities 5,843,826

5,384,979

Tompkins Financial Corporation Shareholders’ equity 585,171

555,747

Noncontrolling interest 1,500

1,534

Total equity 586,671

557,281

Total liabilities and equity 6,430,497

5,942,260

Interest rate spread

3.25 %

3.17 %
Net interest income/margin on earning assets
52,110
3.40 %
46,348
3.31 %

Tax Equivalent Adjustment (1,110 ) (1,031 )

Net interest income per consolidated financial statements $ 51,000

$ 45,317

Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)
Year to Date Period Ended Year to Date Period Ended
September 30, 2017 September 30, 2016
Average Average
Balance Average Balance Average
(Dollar amounts in thousands) (YTD) Interest Yield/Rate (YTD) Interest Yield/Rate
ASSETS
Interest-earning assets
Interest-bearing balances due from banks $ 3,547
$ 15
0.57 % $ 1,968
$ 5
0.34 %
Securities (1)

U.S. Government securities 1,476,459
23,352
2.11 % 1,447,450
22,608
2.09 %
Trading securities 0
0
0.00 % 6,536
220
4.50 %
State and municipal (2) 101,080
2,552
3.38 % 97,906
2,488
3.39 %
Other securities (2) 3,602
96
3.56 % 3,653
91
3.33 %
Total securities 1,581,141
26,000
2.20 % 1,555,545
25,407
2.18 %
FHLBNY and FRB stock 41,639
1,466
4.71 % 31,767
990
4.16 %
Total loans and leases, net of unearned income (2)(3) 4,352,292
143,497
4.41 % 3,897,461
127,484
4.37 %
Total interest-earning assets 5,978,619
170,978
3.82 % 5,486,741
153,886
3.75 %

Other assets 355,983

351,944

Total assets 6,334,602

5,838,685

LIABILITIES & EQUITY
Deposits
Interest-bearing deposits
Interest bearing checking, savings, & money market 2,664,405
3,620
0.18 % 2,514,159
2,958
0.16 %
Time deposits 845,058
5,252
0.83 % 876,947
5,020
0.76 %
Total interest-bearing deposits 3,509,463
8,872
0.34 % 3,391,106
7,978
0.31 %
Federal funds purchased & securities sold under agreements to repurchase 65,798
195
0.40 % 108,189
1,940
2.40 %
Other borrowings 861,289
8,445
1.31 % 589,726
4,840
1.10 %
Trust preferred debentures 18,903
888
6.28 % 37,567
1,783
6.34 %
Total interest-bearing liabilities 4,455,453
18,400
0.55 % 4,126,588
16,541
0.54 %
Noninterest bearing deposits 1,241,173

1,103,108

Accrued expenses and other liabilities 66,094

65,978

Total liabilities 5,762,720

5,295,674

Tompkins Financial Corporation Shareholders’ equity 570,403

541,510

Noncontrolling interest 1,479

1,501

Total equity 571,882

543,011

Total liabilities and equity 6,334,602

5,838,685

Interest rate spread

3.27 %

3.21 %
Net interest income/margin on earning assets
152,578
3.41 %
137,345
3.34 %

Tax Equivalent Adjustment (3,243 ) (3,083 )

Net interest income per consolidated financial statements $ 149,335

$ 134,262

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 ~~a combined New York State and Federal~~an effective income tax rate of ~~40%~~21% in 2023 and 2022 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, ~~2016.~~ 2022.

Net Interest Income

Net interest income is the Company’s largest source of revenue, representing ~~74.8% and 74.2%, respectively,~~72.7% of total revenues for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023, compared to ~~71.7% and 71.9%~~73.9% for the same ~~periods~~period in ~~2016.~~2022. Net interest income is dependent on the volume and composition of ~~interest earning~~interest-earning assets and interest-bearing liabilities and the level of market interest rates. The above ~~tables show~~table shows average interest-earning assets and interest-bearing liabilities, and the corresponding yield or cost associated with each.

~~Taxable-equivalent net~~Net interest income for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023, was ~~up 12.4%~~down $2.4 million or 4.2% from the same period in 2022. The decrease was primarily due to higher funding costs and ~~11.1%, respectively,~~a decrease in average earnings assets, partially offset by an increase in the average yield on interest-earning assets in the quarter ended March 31, 2023 compared to the same period in 2022. For the three months ended March 31, 2023, average total deposits represented 93.9% of average total liabilities compared to 95.9% for the same period in 2022, while total average borrowings represented 3.9% of average total liabilities for the period ended March 31, 2023 compared to 1.7% in 2022. Average earnings assets for the three months ended March 31, 2023 were down $188.4 million or 2.5% over the same ~~periods~~period in ~~2016, benefiting~~2022, while average asset yields for the first quarter of 2023 were up 63 basis points from ~~growth~~the first quarter of 2022.

Net interest margin for the three months ended March 31, 2023 was 2.99% compared to 3.04% for the same period in ~~average earning assets, an improved~~2022. The decrease in net interest margin and growth in noninterest bearing deposits. Net interest income benefited from a slight shift in the composition of average earning assets, with loans, which carry higher average yields than securities, comprising an increased percentage of average earning assets. For the three and nine months ended September 30, 2017, average loans represented 73.2% and 72.8% of average earning assetsfor 2023 compared to ~~72.0% and 71.0% for~~2022 was due to an increase in interest rates on interest-bearing liabilities outpacing increases on interest earning asset yields due to the ~~same periods~~higher interest rate environment, as well as increases in ~~2016.~~higher rate borrowings due to lower deposit balances.

~~Taxable-equivalent interest~~Interest income for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023, was ~~$58.9~~$69.5 million, ~~and $171.0 million, respectively,~~ up ~~13.0% and 11.1%~~17.0% compared to the same ~~periods~~period in ~~2016.~~2022, reflecting higher average yields, partially offset by lower average balances of interest-earning assets. The average yield on interest-earning assets increased 63 basis points, while average interest earning assets decreased $188.4 million or 2.5%. The increase in ~~taxable-equivalent~~ interest income was mainly ~~the result of an increase~~ in ~~average~~interest and fees on loans, ~~as well as~~driven by higher yields onand higher average ~~loans.~~balances for the three months ended March 31, 2023, compared to the same period in 2022. Average loan balances for the ~~three and nine months ended September 30, 2017,~~first quarter of 2023 were up ~~$430.1~~$195.3 million or ~~10.7% and $454.8 million or 11.7%, respectively,~~3.9% from the first quarter of 2022, while the average yield on loans ~~increased 10 basis points in the third quarter~~ of ~~2017 compared to the third quarter of 2016, and was up 4 basis points~~4.71% for the first ~~nine months~~quarter of ~~2017~~2023 was up 59 basis points from the average loan yield in the first quarter of 2022. Interest income in the first quarter of 2023 included $2,000 of net deferred loan fees related to PPP loans compared to net deferred loan fees of $2.0 million in the first ~~nine~~quarter of 2022. For the three months ~~of 2016. Average securities~~ended March 31, 2023, average balances for ~~the three and nine months ended September 30, 2017,~~securities were ~~up $52.5~~down $269.0 million or ~~3.4% and $25.6 million or 1.7%, respectively, and~~11.2% over the first quarter of 2022, while the average yield on securities ~~increased 9~~of 1.54% for the first quarter of 2023 was up 18 basis ~~points and 2~~points. For the three months ended March 31, 2023, average interest-bearing balances were down $121.4 million or 90.5%, while the average yield on interest-bearing balances of 4.42% was up 330 basis ~~point compared to the same periods in 2016.~~points.

Interest expense for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023 increased by ~~$1.1~~$12.4 million or ~~17.6% and $1.9 million or 11.2%, respectively,~~485.2% compared to the same ~~periods~~period in ~~2016, driven mainly~~2022, reflecting higher average costs of funds and a shift in funding mix, partially offset by a decrease in average interest-bearing liabilities. The average cost of interest-bearing liabilities for the first quarter of 2023 increased 105 basis points from the first quarter of 2022 as a result of higher market interest rates and a change in the mix of interest-bearing liabilities, with an increase in average time deposits and average other borrowings. The average cost of interest bearing liabilities was 1.26% for the ~~average volume~~first quarter of ~~borrowings and deposits, which supported~~2023, compared to 0.21% for the ~~growth in average loans.~~first quarter of 2022. Average interest bearing deposits for the ~~third~~first quarter of ~~2017~~2023 were ~~up $83.0~~down $285.1 million or ~~2.5%~~6.0% compared to the same period in ~~2016, while year-to-date average interest bearing deposits~~2022. Average other borrowings for the three months ended March 31, 2023 were up ~~$118.4~~$144.5 million or ~~3.5%~~115.3% compared to the same period in 2016. Average noninterest bearing deposits for the three and nine months ended September 30, 2017 were up $165.7 million or 14.4% and $138.1 million or 12.5%, respectively, compared to the same periods in 2016. Average other borrowings for the three and nine months ended September 30, 2017 were up $273.7 million or 40.2% and $271.6 million or 46.1% compared to the same periods in 2016; this increase was mainly in overnight borrowings with the FHLB. The increase in overnight borrowings is mainly a result of loan growth out-pacing deposit growth. The average rate paid on interest bearing deposits during the three and nine months ended September 30, 2017, was 0.36% and 0.34% compared to 0.32% and 0.31% for the same periods in 2016.2022.

Provision for ~~Loan and Lease~~Credit Losses

The provision for ~~loan and lease~~credit losses represents management’s estimate of the amount necessary to maintain the allowance for ~~loan and lease~~credit losses at an ~~adequate~~appropriate level. The provision for ~~loan and lease~~credit losses for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 was ~~$402,000 and $2.1 million, respectively, which was down 48.6% and 17.9%~~a credit of $825,000 compared to a credit of $520,000 for the same ~~periods~~period in ~~2016.~~2022. Included in the credits for both the first quarter of 2023 and 2022 were provision expenses of $355,000 and $214,000, respectively, related to off-balance sheet credit exposures. The ~~decrease~~provision credit in ~~provision expense in 2017 compared to~~ the ~~same periods in 2016~~first quarter of 2023 was mainly ~~a result of an increase~~driven by improvement in the macroeconomic factor assumptions utilized in the allowance calculation as well as net loan recoveries ~~in 2017 over 2016.~~during the quarter and stable asset quality. The section captioned ~~“Financial~~"Financial Condition – The Allowance for ~~Loan and Lease Losses and Nonperforming Assets”~~Credit Losses" below has further details on the allowance for ~~loan and lease~~credit losses and asset quality metrics.

Noninterest Income

Noninterest income was ~~$17.2 million for the third quarter of 2017, which was down 3.9% compared to the third quarter of 2016, and $51.9~~$20.4 million for the first ~~nine~~quarter of 2023, up 2.1% compared to the first quarter of 2022. Noninterest income represented 27.3% of total revenue for the three months ended March 31, 2023, compared to 26.1% for the same period in 2022.

Insurance commissions and fees of ~~2017, which was down 1.1%~~$9.5 million in the first quarter of 2023 were up $192,000 or 2.1% compared to the same period prior year. Noninterest income represented 25.2% of total revenue for the third quarter of 2017 and 25.8% for the nine months ended September 30, 2017, compared to 28.3% and 28.1% for the same periods in 2016. The decrease is mainly a result of the growth in net interest income outpacing the growth in noninterest income.

Insurance commissions were up $617,000 or 7.6%, while contingency and ~~fees, the largest component of noninterest income, were $7.7 million for the third quarter of 2017, which~~other revenue was ~~in line with the same period prior year. For the first nine months of 2017, insurance commissions and fees were~~ down ~~$916,000 or 4.0%~~$416,000 compared to the ~~same period in 2016. The decrease in insurance revenues in the~~ first ~~nine months~~quarter of ~~2017 compared to the same period in 2016 was mainly due to the sale of certain customer relationships in our Pennsylvania market, which reduced commissions and fees.~~2022.

Investment services income of ~~$3.9~~$4.5 million in the ~~third~~first quarter of ~~2017~~2023 was ~~up $127,000~~down $408,000 or ~~3.4%~~8.3% compared to the ~~third~~first quarter of ~~2016. For the first nine months of 2017,~~2022. The decrease in investment services income for the three-month period ended March 31, 2023, was ~~up $189,000 or 1.7%~~mainly attributable to a decrease in advisory fees related to a decrease in period end assets compared to the same ~~period in 2016.~~quarter prior year, primarily due to volatile market conditions throughout 2022. Investment services income includes investment management, trust ~~services,~~and estate, financial and tax planning, ~~wealth management services,~~ and brokerage related services. ~~With fees largely based on the market value and the mix of assets managed, the general direction of the stock market can have a considerable impact on fee income.~~ The fair value of assets managed by, or in custody of, Tompkins was ~~$4.0~~$3.1 billion at ~~September 30, 2017, which is in line with September 30, 2016.~~March 31, 2023, compared to $4.4 billion at March 31, 2022. The fair value of assets at ~~September 30, 2017~~March 31, 2022, includes ~~$1.1~~$1.3 billion of Company-owned securities where Tompkins ~~Trust~~is custodian. The Company ~~is custodian.~~outsourced the custody of Company-owned securities to a third party in 2022.

~~Service charges on deposit accounts were down $78,000 or 3.6% for~~Card services income of $2.7 million in the ~~third~~first quarter of ~~2017~~2023 was up $139,000 or 5.6% compared to the same period in ~~2016 and were down $222,000 or 3.4% for~~2022. Debit card income, the ~~first nine months~~largest component of ~~2017~~card services income, was in line compared to the same period in 2016. Net overdraft fees, the largest component of service charges on deposit accounts, were up 1.2% and 3.2% for the three and nine months ended September 30, 2017 over the same periods in 2016. Net deposit cycle fees were down 9.3% and 13.9% for the three and nine months ended September 30, 2017 compared to the same periods in 2016. The decline in net deposit cycle fees was primarily attributable to customer behaviors.2022.

Card services income for the three and nine months ended September 30, 2017 was up $153,000 or 7.5% and $894,000 or 15.0%, respectively, compared to the same periods in 2016. The primary components of card services income are fees related to interchange income and transaction fees for debit card transactions, credit card transactions and ATM usage. The increase in revenue for the nine month period included approximately $500,000 of volume based incentives related to our branding agreement with MasterCard.

The Company recognized losses on the sales/calls of available-for-sale securities of $423,000 for the three and nine months ended September 30, 2017 compared to gains of $455,000 and $926,000 for the three and nine months ended September 30, 2016. Sales of available-for-sale securities are generally the result of general portfolio maintenance and interest rate risk management.

Other income of ~~$1.8~~$1.9 million in the ~~third~~first quarter of ~~2017~~2023 was ~~flat~~up $465,000 or 31.5% compared to the same period in ~~2016. For~~2022. The increase in the first ~~nine months~~quarter of ~~2017, other income of $5.7 million was up 17.6%~~2023 compared to the same period in ~~2016. The significant components of other income are other service charges, increases~~2022, included an increase in ~~cash surrender value of corporate~~earnings on bank owned life insurance ~~("COLI"), gains on sales~~(up $192,000) and recognition of ~~residential mortgage loans, and income from miscellaneous equity investments. The increase~~incentives related to card services contract ($450,000).

Noninterest Expense

Noninterest expense was $50.1 million for the first ~~nine months~~quarter of ~~2017~~2023, up 7.1% compared to the same period ~~prior year is mainly attributable to loan related income, including recoveries of nonaccrual interest on loans previously charged off.~~

~~Noninterest Expense~~

in 2022. Noninterest expense ~~was $41.9 million for the third quarter~~as a percentage of ~~2017 and $124.8 million~~total revenue for the first ~~nine months~~quarter of ~~2017, up 3.9% and 4.7%, respectively,~~2023 was 67.2% compared to 61.2% for the same ~~periods~~period in ~~2016.~~2022.

Expenses associated with ~~compensation~~salaries and wages and employee benefits are the largest component of noninterest expense, representing ~~62.7% and 61.7%~~62.3% of total noninterest expense for the ~~three and nine months ended September 30, 2017.~~first quarter of 2023, compared to 62.1% for the first quarter of 2022. Salaries and wages and employee benefit expense for the three ~~and nine~~ months ended ~~September 30, 2017 increased by $1.1~~March 31, 2023 were up $2.2 million or ~~5.7% and $2.7 million or 4.7%, respectively, compared to~~7.5% from the same ~~periods~~period in ~~2016. The increases are mainly due to~~2022, resulting from normal merit adjustments and an increase in healthcare expense in the ~~number~~first quarter of ~~employees, normal merit and market adjustments, and higher incentive based compensation expense. Pension and other employee related benefits expenses were up $125,000 and $760,000~~2023 over the three and nine month periods in 2016, respectively, mainly as a result of higher costs associated with health insurance and post-retirement benefits. For the nine months ended September 30, 2017, health insurance expense was up $605,000 or 12.4% over the first nine months of 2016.same period prior year.

Other expense categories not related to compensation and benefits, such as technology, FDIC insurance, and professional fee expenses, for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023, were up ~~$303,000 or 2.0% and $2.1~~$1.4 million or ~~4.6%, respectively, over the same periods in 2016. Expenses for the year~~12.1% compared to ~~date period ended September 30, 2017, included $726,000 of expense related to our core system conversion which was completed in the second quarter of 2017. Core conversion expenses for~~ the same period in ~~2016~~2022. Technology expenses for the first quarter of 2023 were ~~$240,000. Higher expenses associated with occupancy, technology and card services also contributed to the increases in the current year~~up $324,000 or 8.8% over the ~~prior year periods.~~same period in 2022, driven mainly by annual software increases. FDIC insurance expense for the first quarter of 2023 was up $353,000 or 50.4% over the same period in 2022, driven by an increase in assessment rates.

Income Tax Expense

The provision for income taxes was ~~$8.5~~$5.9 million for an effective rate of ~~32.8%~~23.3% for the ~~third~~first quarter of ~~2017,~~2023, compared to tax expense of ~~$6.9~~$7.0 million and an effective rate of ~~31.4%~~23.0% for the same quarter in ~~2016. For the first nine months of 2017, the provision for income taxes was $24.1 million for an effective rate of 32.5% compared to an effective rate of 31.7% for the same period in 2016.~~2022. The effective rates differ from the U.S. statutory rate ~~of 35.0%~~ 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 effective tax rate assumes the anticipated loss of certain New York State tax benefits due to the expectation that average assets will exceed $8.0 billion for the 2023 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 2023 tax year. As of March 31, 2023, 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 2023 to determine future eligibility.

FINANCIAL CONDITION

Total assets were ~~$6.5~~$7.6 billion at ~~September 30, 2017, up $287.3~~March 31, 2023, down $26.3 million or ~~4.6% over~~0.3% from December 31, ~~2016. The growth over~~2022. Total securities and total loans at March 31, 2023 were in line with year-end ~~was primarily attributable to growth in originated loans, which~~2022. Total deposits were down $93.3 million or 1.4% from December 31, 2022, and total borrowings were up ~~$303.3~~$35.7 million or ~~7.9%. This growth~~12.3% from December 31, 2022. The decrease in deposits at March 31, 2023 was ~~partially offset by expected run-off~~ in ~~acquired loans,~~noninterest bearing deposits, which were down ~~$70.9~~$140.6 million or ~~18.0%. Total deposits increased $318.8~~6.5%, and checking, savings and money market account, which were down $46.6 million or ~~6.9% compared to December~~1.2%. Time deposits at March 31, ~~2016. Other borrowings decreased by $50.2~~2023, were up $93.9 million or ~~5.7%~~14.9% from December 31, ~~2016.~~2022.

Securities

As of ~~September 30, 2017,~~March 31, 2023, the Company’s securities portfolio was ~~$1.55~~$1.9 billion or ~~23.7%~~24.8% of total assets, compared to ~~$1.57~~$1.9 billion or ~~25.2%~~24.9% of total assets at year-end ~~2016.~~2022. The following table details the composition of ~~available-for-sale and held-to-maturity securities.~~the securities portfolio:


Available-for-Sale Debt Securities
	March 31, 2023				December 31, 2022
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value

U.S. Treasuries	$	190,220	$	170,814	$	190,170	$	167,251
Obligations of U.S. Government sponsored entities	670,978		599,762		681,192		601,167
Obligations of U.S. states and political subdivisions	92,915		86,684		93,599		85,281
Mortgage-backed securities - residential, issued by
U.S. Government agencies	56,224		50,891		58,727		52,668
U.S. Government sponsored entities	782,586		675,310		805,603		686,222

U.S. corporate debt securities	2,500		2,393		2,500		2,378
Total available-for-sale debt securities	$	1,795,423	$	1,585,854	$	1,831,791	$	1,594,967

Available-for-Sale Securities
9/30/2017 12/31/2016
(in thousands) Amortized Cost Fair Value Amortized Cost Fair Value
Obligations of U.S. Government sponsored entities $ 532,958
$ 534,202
$ 527,057
$ 527,627
Obligations of U.S. states and political subdivisions 91,771
92,043
89,910
89,056
Mortgage-backed securities - residential, issued by

U.S. Government agencies 145,470
144,673
159,417
158,226
U.S. Government sponsored entities 639,454
632,146
662,724
651,430
Non-U.S. Government agencies or sponsored entities 85
85
116
116
U.S. corporate debt securities 2,500
2,162
2,500
2,162
Total debt securities 1,412,238
1,405,311
1,441,724
1,428,617
Equity securities 1,000
920
1,000
921
Total available-for-sale securities $ 1,413,238
$ 1,406,231
$ 1,442,724
$ 1,429,538

Held-to-Maturity Securities

9/30/2017 12/31/2016
(in thousands) Amortized Cost Fair Value Amortized Cost Fair Value
Obligations of U.S. Government sponsored entities $ 131,805
$ 133,705
$ 132,098
$ 132,619
Obligations of U.S. states and political subdivisions $ 8,163
$ 8,302
$ 10,021
$ 10,213
Total held-to-maturity debt securities $ 139,968
$ 142,007
$ 142,119
$ 142,832


Held-to-Maturity Debt Securities
	March 31, 2023				December 31, 2022
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. Treasuries	$	86,425	$	75,459	$	86,478	$	73,541
Obligations of U.S. Government sponsored entities	225,932		191,640		225,866		188,151

Total held-to-maturity debt securities	$	312,357	$	267,099	$	312,344	$	261,692

The decrease in unrealized losses, which reflects the amount that amortized cost exceeds fair value, related to the available-for-sale ~~portfolio~~debt and held-to-maturity debt portfolios was due primarily to changes in market interest rates during the first ~~nine~~three months of ~~2017.~~2023. 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.

~~Quarterly,~~For available-for-sale debt securities in an unrealized loss position, the Company evaluates ~~all investment~~the securities ~~with a~~to determine whether the decline in the fair value ~~less than~~below the amortized cost ~~to identify any other-than-temporary impairment as defined under generally accepted accounting principles. As a~~basis (technical impairment) is the result of ~~the other-than-temporary impairment review process, the Company does not consider any investment security held at September 30, 2017 to be other-than-temporarily impaired. Future~~ changes in interest rates or reflects a fundamental change in the credit ~~quality and credit support~~worthiness of the underlying ~~issuers~~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") on the Statements of Condition, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings. Both the ACL and the adjustment to net income may ~~reduce~~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 ~~value~~liquidity, relative to when the investment securities were purchased, and not due to the credit-related quality of the investment securities. The Company does not have the intent to sell these securities and ~~other securities. If such decline~~does not believe it is ~~determined to be other~~more likely than ~~temporary,~~not that the Company will be required to sell these securities before a recovery of amortized cost.

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 ~~the necessary~~an allowance for credit losses for these securities as of March 31, 2023. Net unrealized losses on held-to-maturity securities, tax effected, at March 31, 2023, totaled 5.3% of total common equity capital and 6.2% of tangible common equity compared to 6.2% of total equity capital and 7.3% of tangible common equity capital at December 31, 2022.

The Company did not recognize any net credit impairment charge to earnings ~~and/or accumulated other comprehensive income to reduce~~on investment securities in the ~~securities to their then current fair value.~~first quarter of 2023.


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

(In thousands)	03/31/2023		12/31/2022
Commercial and industrial
Agriculture	$	65,223	$	85,073
Commercial and industrial other	673,104		705,700
PPP loans*	686		756
Subtotal commercial and industrial	739,013		791,529
Commercial real estate
Construction	219,789		201,116
Agriculture	214,014		214,963
Commercial real estate other	2,476,532		2,437,339
Subtotal commercial real estate	2,910,335		2,853,418
Residential real estate
Home equity	183,636		188,623
Mortgages	1,342,214		1,346,318
Subtotal residential real estate	1,525,850		1,534,941
Consumer and other
Indirect	1,783		2,224
Consumer and other	83,775		75,412
Subtotal consumer and other	85,558		77,636
Leases	18,016		16,134
Total loans and leases	5,278,772		5,273,658
Less: unearned income and deferred costs and fees	(5,101)		(4,747)
Total loans and leases, net of unearned income and deferred costs and fees	$	5,273,671	$	5,268,911
*SBA Paycheck Protection Program ("PPP")

The below table shows a more detailed break-out of CRE loans as of March 31, 2023 and December 31, 2022.


	03/31/2023				12/31/2022
CRE Concentration	Balance		% CRE		Balance		% CRE
Construction	$	219,789	7.55	%	$	201,031	7.05	%
Multi-family/Single family real estate	600,816		20.64	%	587,467		20.59	%
Agriculture	215,038		7.39	%	211,231		7.40	%
Retail1	432,076		14.85	%	434,998		15.25	%
Hotels/motels	151,517		5.21	%	144,710		5.07	%
Office space2	242,585		8.34	%	236,281		8.28	%
Mixed/Other	1,048,515		36.03	%	1,037,614		36.36	%
Total CRE	$	2,910,336	100.00	%	$	2,853,332	100.00	%
1Reatail includes 3.1% and 3.2% of owner occupied real estate at March 31, 2023 and December 31, 2022.
2Office space includes 1.5% of owner occupied real estate at both March 31, 2023 and December 31, 2022.

Total loans and leases of $5.3 billion at March 31, 2023 were up $4.8 million or 0.1% from December 31, 2022. The increase was mainly in commercial real estate loans, which were up $56.9 million or 2.0%, to $2.9 billion at March 31, 2023. As of March 31, 2023, total loans and leases represented 69.0% of total assets compared to 68.7% of total assets at December 31, 2022.

Loans and Leases
Loans and leases at September 30, 2017 and December 31, 2016 were as follows:
9/30/2017 12/31/2016
(in thousands) Originated Acquired Total
Loans and
Leases Originated
Acquired
Total Loans
and Leases
Commercial and industrial

Agriculture $ 91,054
$ 0
$ 91,054
$ 118,247
$ 0
$ 118,247
Commercial and industrial other 895,348
53,484
948,832
847,055
79,317
926,372
Subtotal commercial and industrial 986,402
53,484
1,039,886
965,302
79,317
1,044,619
Commercial real estate

Construction 217,218
1,526
218,744
135,834
8,936
144,770
Agriculture 122,304
257
122,561
102,509
267
102,776
Commercial real estate other 1,537,194
212,646
1,749,840
1,431,690
241,605
1,673,295
Subtotal commercial real estate 1,876,716
214,429
2,091,145
1,670,033
250,808
1,920,841
Residential real estate

Home equity 213,570
31,305
244,875
209,277
37,737
247,014
Mortgages 1,017,205
23,167
1,040,372
947,378
25,423
972,801
Subtotal residential real estate 1,230,775
54,472
1,285,247
1,156,655
63,160
1,219,815
Consumer and other

Indirect 12,632
0
12,632
14,835
0
14,835
Consumer and other 48,928
874
49,802
44,393
826
45,219
Subtotal consumer and other 61,560
874
62,434
59,228
826
60,054
Leases 15,522
0
15,522
16,650
0
16,650
Total loans and leases 4,170,975
323,259
4,494,234
3,867,868
394,111
4,261,979
Less: unearned income and deferred costs and fees (3,721 ) 0
(3,721 ) (3,946 ) 0
(3,946 )
Total loans and leases, net of unearned income and deferred
costs and fees $ 4,167,254
$ 323,259
$ 4,490,513
$ 3,863,922
$ 394,111
$ 4,258,033

Residential real estate loans, including home equity loans were ~~$1.3~~$1.5 billion at ~~September 30, 2017, up $65.4~~March 31, 2023, down $9.1 million or ~~5.4%~~0.6% compared to December 31, ~~2016,~~2022, and comprised ~~28.6%~~28.9% of total loans and leases at ~~September 30, 2017. Growth~~March 31, 2023. Changes in residential loan balances isare 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 ~~nine~~three months of ~~2017~~2023 and ~~2016,~~2022, the Company ~~retained the vast majority of~~sold residential ~~mortgage~~ loans ~~originated, selling only $2.2~~totaling $1.3 million and ~~$2.0 million,~~$135,000, respectively, recognizing gains on these sales of ~~$39,000~~$38,000 and ~~$57,000,~~$4,000, 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 ~~$0.7~~$1.0 million at ~~September 30, 2017~~both March 31, 2023 and ~~$0.8 million at~~ December 31, ~~2016.~~2022.

Commercial real estate loans and commercial and industrial loans totaled ~~$2.1~~$2.9 billion and ~~$1.0 billion,~~$739.0 million, respectively, and represented ~~46.6%~~55.2% and ~~23.2%~~14.0%, respectively of total loans as of ~~September 30, 2017.~~March 31, 2023. The commercial real estate portfolio was up ~~$170.3~~$56.9 million or ~~8.9%~~2.0% over year-end ~~2016,~~2022, while commercial and industrial loans were ~~in line with~~down $52.5 million or 6.6% from year-end ~~2016.~~ 2022.

As of ~~September 30, 2017,~~March 31, 2023, agriculturally-related loans totaled ~~$213.6~~$279.2 million or ~~4.8%~~5.3% of total loans and leases, compared to ~~$221.0~~$300.0 million or ~~5.2%~~5.7% of total loans and leases at December 31, ~~2016.~~2022. Agriculturally-related loans include loans to dairy farms and ~~cash and vegetable~~ crop farms. ~~Agriculturally-related~~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 acquired loans in the above table reflect loans acquired in the acquisition of VIST Financial Corp. during the third quarter of 2012. The acquired loans were recorded at fair value pursuant to the purchase accounting guidelines in FASB ASC 805 – “Fair Value Measurements and Disclosures” (as determined by the present value of expected future cash flows) with no valuation allowance (i.e., the allowance for loan losses). Upon acquisition, the Company evaluated whether each acquired loan (regardless of size) was within the scope of ASC 310-30, “Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality”.

The carrying value of acquired loans accounted for in accordance with this guidance was $14.6 million at September 30, 2017 as compared to $22.5 million at December 31, 2016. The carrying value of loans not exhibiting evidence of credit impairment at the time of the acquisition (i.e. loans outside of the scope of ASC 310-30) was $308.2 million at September 30, 2017, compared to $371.6 million at December 31, 2016.

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 34 – ~~“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, ~~2016.~~2022. There have been no significant changes in these policies and guidelines since the date of that report. ~~Therefore, both new originations as well as those balances held at September 30, 2017, reflect these policies and guidelines.~~ 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. ~~Other than geographic and general economic risks, management is not aware of any material concentrations of credit risk to any industry or individual borrower.~~

Allowance for Credit Losses

The ~~Allowance~~below tables represents the allowance for ~~Loan~~credit losses as of March 31, 2023 and ~~Lease Losses~~

December 31, 2022. The tables ~~below~~ provide, as of the dates indicated, an allocation of the allowance for ~~probable and~~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) 9/30/2017 12/31/2016 9/30/2016
Allowance for originated loans and leases

Commercial and industrial $ 11,690
$ 9,389
$ 9,254
Commercial real estate 19,455
19,836
18,776
Residential real estate 5,491
5,149
4,707
Consumer and other 1,267
1,224
1,219
Total $ 37,903
$ 35,598
$ 33,956


(In thousands)	03/31/2023		12/31/2022
Allowance for credit losses
Commercial and industrial	$	6,316	$	6,039
Commercial real estate	27,186		27,287
Residential real estate	10,858		11,154
Consumer and other	1,628		1,358
Finance leases	111		96
Total	$	46,099	$	45,934

(in thousands) 9/30/2017
12/31/2016
9/30/2016
Allowance for acquired loans

Commercial and industrial $ 0
$ 0
$ 0
Commercial real estate 75
97
77
Residential real estate 54
54
57
Consumer and other 6
6
22
Total $ 135
$ 157
$ 156

As of ~~September 30, 2017,~~March 31, 2023, the total allowance for ~~loan~~credit losses for loans was $46.1 million, and ~~lease losses~~ was ~~$38.0 million, which increased by $2.1 million or 6.4% over year-end 2016. The increase~~ in the allowance compared to year-end 2016 was mainly due to growth in the originated loan portfolio, which was up $303.3 million or 7.9% over year-end 2016. In addition, although most credit quality metrics remained relatively stable for the quarter, the level of Special Mention loans increased during the quarter to $51.0 million, up from $21.0 million at year-end 2016 and up from $27.8 million at September 30, 2016. The increase is largely related to the Company’s agricultural portfolio which was negatively impacted by lower average milk prices in 2016, which had an unfavorable impact on operations of our agricultural customers. Milk prices have rebounded in 2017 and as of September 30, 2017, payments on all loans in our agricultural portfolio were current. line with December 31, 2022. The allowance for ~~loan~~credit losses as a percentage of total loans measured 0.87% at both March 31, 2023 and ~~lease~~December 31, 2022.

Asset quality measures at March 31, 2023 were generally favorable compared to December 31, 2022. Loans internally-classified Special Mention or Substandard were down $12.7 million or 12.9% compared to December 31, 2022. Nonperforming loans and leases were down $4.4 million or 13.4% from year end 2022 and represented 0.54% of total loans at March 31, 2023 compared to 0.62% at December 31, 2022. The allowance for credit losses covered ~~170.12%~~162.11% of nonperforming loans and leases as of ~~September 30, 2017,~~March 31, 2023, compared to ~~164.98%~~139.86% at December 31, ~~2016, and 186.45% at September 30, 2016.~~2022. The ~~ratio of nonperforming loans and leases to total loans and leases was 0.50% at September 30, 2017 compared to 0.51% at December 31, 2016 and 0.45% at September 30, 2016.~~

The Company’s allowance for originated loan and lease losses totaled $37.9 million at September 30, 2017, which represented 0.91% of total originated loans, down from 0.92% at December 31, 2016 and September 30, 2016. Asset quality metrics in the originated portfolio showed some modest deterioration at September 30, 2017. Originated loans internally-classified as Special Mention, Substandard and Doubtful totaled $71.0 million at September 30, 2017, up from $40.8 million at year-end 2016 and up from $45.3 million at September 30, 2016. As stated above, the increase was in Special Mention loans in the Company's agricultural loan portfolio. Nonaccrual originated loans were $15.7 million as of September 30, 2017, up $1.4 million from year-end 2016, and up from $11.6 million at September 30, 2016. Net charge-offs of originated loans were $74,000 for the nine months ended September 30, 2017, which was in line with the nine months ended September 30, 2016.

The allowance for acquired loans at September 30, 2017 was $135,000, down $22,000 compared to year-end 2016 and September 30, 2016. As part of the determination of the fair value of acquired loans at the time of acquisition, the Company established a credit mark to provide for future credit losses in the acquired portfolio. To the extent that credit quality deteriorates subsequent to acquisition, such deterioration will result in the establishment of an allowance for the acquired portfolio. The amount of acquired loans internally-classified as Special Mention, Substandard and Doubtful totaled $8.7 million at September 30, 2017, down from $13.7 million at year-end 2016 and $14.5 million at September 30, 2016. Loan pay downs coupled with charge offs contributed to the decrease from September 30, 2016 and year-end 2016. Nonaccrual acquired loans were $3.2 million as of September 30, 2017 compared to $4.7 million at year-end 2016, and $4.6 million at September 30, 2016. The acquired portfolio had net recoveries of ~~$210,000 for~~$1.3 million in the ~~nine months ended September 30, 2017~~first quarter of 2023, compared to net ~~charge-offs~~recoveries of ~~$433,000~~$17,000 for the ~~nine months ended September 30, 2016.~~same period in 2022.

Activity in the Company’s allowance for ~~loan and lease~~credit losses during the first ~~nine~~three months of ~~2017~~2023 and ~~2016~~2022 is illustrated in the table ~~below.~~below:


Analysis of the Allowance for Credit Losses
(In thousands)	03/31/2023			03/31/2022
Average loans outstanding during period	$	5,251,278		$	5,055,948
Allowance at beginning of year, prior to adoption of ASU 2022-02	45,934			42,843
Impact of adopting ASU 2022-02	64			0
Balance of allowance at beginning of year	45,998			42,843
LOANS CHARGED-OFF:
Commercial and industrial	0			23
Commercial real estate	0			27
Residential real estate	2			0
Consumer and other	106			196

Total loans charged-off	$	108		$	246
RECOVERIES OF LOANS PREVIOUSLY CHARGED-OFF:
Commercial and industrial	46			20
Commercial real estate	1,246			42
Residential real estate	64			109
Consumer and other	33			92

Total loans recovered	$	1,389		$	263
Net loans recovered	(1,281)			(17)
(Credit) for credit losses related to loans	(1,180)			(734)
Balance of allowance at end of period	$	46,099		$	42,126
Allowance for credit losses as a percentage of total loans and leases	0.87		%	0.83		%
Annualized net (recoveries) charge-offs on loans to average total loans and leases during the period	(0.10)		%	0.00		%

Analysis of the Allowance for Originated Loan and Lease Losses
(in thousands) 9/30/2017
9/30/2016
Average originated loans outstanding during period $ 3,990,966
$ 3,457,688
Balance of originated allowance at beginning of year $ 35,598
$ 31,312
ORIGINATED LOANS CHARGED-OFF:

Commercial and industrial 162
584
Commercial real estate 21
12
Residential real estate 483
220
Consumer and other 742
455
Total loans charged-off $ 1,408
$ 1,271
RECOVERIES OF ORIGINATED LOANS PREVIOUSLY CHARGED-OFF:

Commercial and industrial 112
217
Commercial real estate 717
636
Residential real estate 169
49
Consumer and other 336
295
Total loans recoveries $ 1,334
$ 1,197
Net loans charged-off (recovered) 74
74
Additions to originated allowance charged to operations 2,379
2,718
Balance of originated allowance at end of period $ 37,903
$ 33,956
Allowance for originated loans and leases as a percentage of originated loans and leases 0.91 % 0.92 %
Annualized net charge-offs (recoveries) on originated loans to average total originated loans and leases during the period 0.00 % 0.00 %

Analysis of the Allowance for Acquired Loan Losses
(in thousands) 9/30/2017
9/30/2016
Average acquired loans outstanding during period $ 361,326
$ 439,773
Balance of acquired allowance at beginning of year 157
692
ACQUIRED LOANS CHARGED-OFF:

Commercial and industrial 74
399
Commercial real estate 84
182
Residential real estate 186
35
Consumer and other 1
93
Total loans charged-off $ 345
$ 709
Commercial real estate 524
256
Residential real estate 24
0
Consumer and other $ 7
$ 0
Total loans recovered $ 555
$ 276
Net loans charged-off (210 ) 433
Additions to acquired allowance charged to operations (232 ) (103 )
Balance of acquired allowance at end of period $ 135
$ 156
Allowance for acquired loans as a percentage of acquired loans outstanding acquired loans and leases 0.04 % 0.04 %
Annualized net (recoveries) charge-offs on acquired loans as a percentage of average acquired loans and leases outstanding during the period (0.08 )% 0.13 %
Annualized total net charge-offs as a percentage of average loans and leases outstanding during the period 0.00 % 0.02 %

~~Net loan and lease recoveries totaled $136,000~~The provision for credit losses for loans was a credit of $1.2 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, compared to ~~net charge offs~~a credit of ~~$507,000~~$734,000 for the same period in ~~2016. Annualized net chargeoffs~~2022. The provision for credit losses for loans is based upon the Company's quarterly evaluation of the appropriateness of the allowance for credit losses. The March 31, 2023, allowance for credit losses model estimated a modest increase in reserves compared to year-end 2022. Increases in qualitative and large loan reserves were ~~0.00% of average total~~mainly offset by lower quantitative reserves as forecasts for economic growth and unemployment were slightly improved as compared to December 31, 2022.

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 ~~leases, down~~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 provision for credit loss expense in the Company's consolidated statements of income.

For the three months ended March 31, 2023, the provision for credit losses for off-balance sheet credit exposures was $355,000 compared to ~~0.02%~~$214,000 for the same period in ~~2016. The most recent peer percentage is 0.07%.~~

2022. The provision ~~for loan and lease losses~~in 2023 was $402,000 and $2.1 million for the three and nine months ended September 30, 2017, compared to $782,000 and $2.6 million for the same periods in 2016. The decrease in provision expense in 2017 compared to the same periods in 2016 was mainly a result ofdriven by an increase in ~~net~~off-balance sheet exposures, specifically commercial real estate loan ~~recoveries in 2017 over 2016.~~commitments.


Analysis of Past Due and Nonperforming Loans										Analysis of Past Due and Nonperforming Loans
(in thousands)	9/30/2017			12/31/2016			9/30/2016
(In thousands)										(In thousands)	03/31/2023			12/31/2022			03/31/2022
Loans 90 days past due and accruing										Loans 90 days past due and accruing

Commercial and industrial	0			0			0			Commercial and industrial	$	0		$	25		$	0
Residential real estate	0			0			35
Consumer and other										Consumer and other	13			0			0
Total loans 90 days past due and accruing	0			0			35			Total loans 90 days past due and accruing	$	13		$	25		$	0
Nonaccrual loans										Nonaccrual loans
Commercial and industrial	2,367			738			340			Commercial and industrial	923			618			806
Commercial real estate	5,181			9,076			7,129			Commercial real estate	12,380			13,858			13,623
Residential real estate	10,885			9,061			8,421			Residential real estate	14,869			13,544			10,200
Consumer and other	386			166			223			Consumer and other	252			269			571
Total nonaccrual loans	18,819			19,041			16,113			Total nonaccrual loans	$	28,424		$	28,289		$	25,200
Troubled debt restructurings not included above	3,541			2,631			2,148
Performing troubled debt restructuring*										Performing troubled debt restructuring*	0			4,530			5,064
Total nonperforming loans and leases	22,360			21,672			18,296			Total nonperforming loans and leases	$	28,437		$	32,844		$	30,264
Other real estate owned	2,030			908			1,008			Other real estate owned	36			152			88
Total nonperforming assets	$	24,390		$	22,580		$	19,304		Total nonperforming assets	$	28,473		$	32,996		$	30,352
Allowance as a percentage of nonperforming loans and leases	170.12		%	164.98		%	186.45		%	Allowance as a percentage of nonperforming loans and leases	162.11		%	139.86		%	139.20		%
Total nonperforming loans and leases as percentage of total loans and leases	0.50		%	0.51		%	0.45		%	Total nonperforming loans and leases as percentage of total loans and leases	0.54		%	0.62		%	0.60		%
Total nonperforming assets as percentage of total assets	0.37		%	0.36		%	0.32		%	Total nonperforming assets as percentage of total assets	0.37		%	0.43		%	0.38		%

*No amount shown for periods subsequent to the Company's adoption of ASU 2022-02 effective January 1, 2023.

¹The September 30, 2017, December 31, 2016, and September 30, 2016 columns in the above table exclude $1.3 million, $2.6 million, and $2.6 million, respectively, of acquired loans that are 90 days past due and accruing interest. These loans were originally recorded at fair value on the acquisition date of August 1, 2012. These loans are considered to be accruing as we can reasonably estimate future cash flows on these acquired loans and we expect to fully collect the carrying value of these loans. Therefore, we are accreting the difference between the carrying value of these loans and their expected cash flows into interest income.

Nonperforming assets include nonaccrual loans, ~~troubled debt restructurings (“TDR”),~~TDRs, and foreclosed real estate/other real estate owned. Total nonperforming assets of $28.5 million at March 31, 2023 were down $4.5 million or 13.7% compared to December 31, 2022, and down $1.9 million or 6.2% compared to March 31, 2022. The decrease in nonperforming assets from March 31, 2022, was mainly due to the adoption of ASU 2022-02, which eliminates the TDR designation and requires entities to evaluate all loan modifications under the same guidance and report on modifications where the borrower is experiencing financial difficulty at the time of the modification. Nonperforming assets represented 0.37% of total assets at ~~September 30, 2017, compared to 0.36%~~March 31, 2023, down from 0.43% at December 31, ~~2016,~~2022, and ~~0.32%~~0.38% at ~~September 30, 2016. The Company’s~~March 31, 2022. Our peer group's average ratio of nonperforming assets to total assets ~~continues to compare favorably to our peer group’s most recent ratio of 0.67%~~was 0.35% at ~~June 30, 2017. Total nonperforming assets of $24.4 million at September 30, 2017 were up $1.8 million compared to~~ December 31, ~~2016,~~2022.

The Company adopted ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326)" ("ASU 2022-02") effective January 1, 2023. ASU 2022-02 eliminates the guidance on TDRs and ~~$ 5.1 million compared~~requires entities to ~~September 30, 2016. Total nonperforming~~evaluate all loan modifications to determine if they result in a new loan or a continuation of the existing loan. Loans in the current period are reported using ASU 2022-02, while loans and leases of $22.4 million were up $1.6 million or 7.5% from year end 2016, and up $4.1 million or 7.5% from September 30, 2016. A breakdown of nonperforming loans and leases by portfolio segment is shown above.

for prior periods are reported using the previous TDR guidance. Loans are considered modified ~~in a TDR when, due to a borrower’s financial difficulties,~~if the Company makes a concession(s) to ~~the~~a borrower experiencing financial difficulty 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. Modified loans and TDRs reported for prior periods 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 debt restructurings~~"borrowers experiencing financial difficulty not included ~~above”~~above". Loans in the latter category include loans that meet the definition of a ~~TDR~~modified loan 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 ~~September 30, 2017,~~March 31, 2023, the Company had ~~$7.4 million in TDRs, and of that total $3.9 million were reported as nonaccrual and $3.5 million were considered performing and included in~~no modified loans under the ~~table above.~~new guidance.

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 Company’s recorded investment in loans and leases that are considered impaired totaled $14.7 million at September 30, 2017, compared to $18.6 million at December 31, 2016. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans consist of our non-homogenous nonaccrual loans, and all TDRs. Specific reserves on individually identified impaired loans that are not collateral dependent are measured based on the present value of expected future cash flows discounted at the original effective interest rate of each loan. For loans that are collateral dependent, impairment is measured based on the fair value of the collateral less estimated selling costs, and such impaired amounts are generally charged off.

The year to date average recorded investment in impaired loans and leases was $14.8 million at September 30, 2017, compared to $17.1 million at September 30, 2016. At September 30, 2017, there was a specific reserve of $614,000 on impaired loans compared to $493,000 of specific reserves at December 31, 2016. The specific reserve of $614,000 at September 30, 2017 includes specific reserves of $539,000 for the originated portfolio, and specific reserves of $75,000 for the acquired portfolio. The majority of impaired loans are collateral dependent impaired loans that have limited exposure or require limited specific reserve because of the amount of collateral support with respect to these loans and previous charge-offs. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured. In these cases, interest is recognized on a cash basis.

The ratio of the allowance to nonperforming loans and leases (loans past due 90 days and accruing, nonaccrual loans and restructured troubled debt) was ~~170.12%~~162.11% at ~~September 30, 2017, improved from 164.98%~~March 31, 2023, compared to 139.86% at December 31, ~~2016,~~2022, and ~~down from the 186.45%~~139.20% at ~~September 30, 2016.~~March 31, 2022. 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.

Management reviews the loan portfolio continuously for evidence of potential problem loans and leases. Potential problem loans and leases are loans and leases that are currently performing in accordance with contractual terms, but where known information about possible credit problems of the related borrowers causes management to have doubt as to the ability of such borrowers to comply with the present loan payment terms and may result in such loans and leases becoming nonperforming at some time in the future. Management considers loans and leases classified as Substandard, which continue to accrue interest, to be potential problem loans and leases. The Company, through its internal loan review function, identified 3217 commercial relationships ~~from the originated portfolio and 15 commercial relationships from the acquired portfolio~~ totaling ~~$12.5~~$32.8 million ~~and $6.2 million, respectively~~ at ~~September 30, 2017~~March 31, 2023 that were potential problem loans. At December 31, ~~2016,~~2022, the Company had identified 2717 relationships totaling ~~$7.6~~$33.3 million ~~in the originated portfolio and 18 relationships totaling $8.4 million in the acquired portfolio~~ that were potential problem loans. Of the 3217 commercial relationships ~~in the originated portfolio~~ at ~~September 30, 2017~~March 31, 2023 that were Substandard, there were 5 relationships that equaled or exceeded $1.0 million, which in aggregate totaled ~~$8.7~~$28.8 million, the largest of which was $3.0 million. Of the 15 commercial relationships from the acquired loan portfolio at September 30, 2017 that were Substandard, there was 1 relationship that equaled or exceeded $1.0 million, which in aggregate totaled $1.9$16.9 million. The ~~Company continues to monitor these~~ potential problem ~~relationships; however, management cannot predict the extent to which continued weak economic conditions or other factors may further impact borrowers. These~~ 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 ~~$589.9~~$649.8 million at ~~September 30, 2017,~~March 31, 2023, an increase of ~~$40.5~~$32.4 million or ~~7.4%~~5.2% from December 31, ~~2016.~~2022. The increase ~~reflects growth in retained earnings, additional paid-in capital, and~~was mainly a result of the decrease in accumulated other comprehensive ~~losses.~~loss, reflecting the change in unrealized gains/loss on available-for-sale securities from an unrealized loss of $178.8 million at December 31, 2022 to an unrealized loss of $158.2 million at March 31, 2023. During the first quarter of 2023, retained earnings increased $10.7 million.

Additional paid-in capital increased ~~by $6.7 million,~~ from ~~$357.4~~$302.8 million at December 31, ~~2016,~~2022, to ~~$364.2~~$303.4 million at ~~September 30, 2017.~~March 31, 2023. The increase iswas primarily attributable to ~~the following: $2.9 million related to shares issued in connection with the dividend reinvestment plan, $2.3 million related to shares issued under the employee stock ownership plan, and $2.1~~$1.0 million related to stock based compensation; partially offset by $303,000 of deferred director compensation. Retained earnings increased by ~~$29.6~~$10.6 million from ~~$230.2~~$526.7 million at December 31, ~~2016,~~2022, to ~~$259.7~~$537.3 million at ~~September 30, 2017,~~March 31, 2023, reflecting net income of ~~$50.0~~$19.4 million less dividends ~~paid~~ of ~~$20.5~~$8.7 million. Accumulated other comprehensive loss decreased from a net loss of ~~$37.1~~$208.7 million at December 31, ~~2016,~~2022, to a net loss of ~~$32.7~~$187.8 million at ~~September 30, 2017,~~March 31, 2023, reflecting a ~~$3.7~~$20.6 million decrease in unrealized losses on available-for-sale debt securities due to changes in market rates ~~and~~coupled with a ~~$0.7 million increase~~$265,000 decrease related to post-retirement benefit plans. In connection with the Basel III Capital Rules on January 1, 2015, the Company elected to opt-out of the requirement to include most components of other comprehensive income in regulatory capital. Accordingly, amounts reported as accumulated other comprehensive income/loss related to net unrealized gain or loss on available-for-sale securities and the funded status of the Company’s defined benefit post-retirement benefit plans do not increase or reduce regulatory capital and are not included in the calculation of risk-based capital and leverage ratios.

Cash dividends paid in the first ~~nine~~three months of ~~2017~~2023 totaled approximately ~~$20.5~~$8.7 million or $0.60 per common share, representing ~~40.9%~~45.0% of year to date ~~2017 earnings. Cash~~2023 earnings through March 31, 2023, and were up 5.3% over cash dividends of ~~$1.35~~$8.3 million or $0.57 per common share paid in the first ~~nine~~three months of ~~2017 were up 2.3% over cash dividends of $1.32 per common share paid in the first nine months of 2016.~~

On July 21, 2016, the Company’s Board of Directors authorized a stock repurchase plan for the Company to repurchase up to 400,000 shares of the Company’s common stock (the "2016 Repurchase Plan"). Purchases may be made over the 24 months following adoption of the plan. The repurchase program may be suspended, modified or terminated by the Board of Directors at any time for any reason. The 2016 Repurchase Plan replaced the Company’s 400,000 share repurchase plan announced on July 25, 2014 (the “2014 Repurchase Plan”).

The Company repurchased 22,356 shares under the 2014 Repurchase Plan during the first nine months of 2016, at an average price of $52.18. As of September 30, 2017, the Company had not purchased any shares under the 2016 Repurchase Plan.2022.

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 is being phased-in over five years beginning on January 1, 2016 and ranges from 0.625% in 2016, to 1.25% in 2017, to 1.875% in 2018 and to 2.5% when fully phased-in on January 1, 2019.

The following table provides a summary of the Company’s capital ratios as of ~~September 30, 2017.~~ March 31, 2023:


REGULATORY CAPITAL ANALYSIS
September 30, 2017	Actual				Well Capitalized Requirement
Regulatory Capital Analysis									Regulatory Capital Analysis
March 31, 2023									March 31, 2023	Actual				Minimum Capital Required - Basel III Fully Phased-In				Well Capitalized Requirement
(dollar amounts in thousands)	Amount		Ratio		Amount		Ratio		(dollar amounts in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to risk weighted assets)	$	578,102	12.52	%	$	461,779	10.00	%	Total Capital (to risk weighted assets)	$	792,609	14.62	%	$	569,163	10.50	%	$	542,060	10.00	%
Tier 1 Capital (to risk weighted assets)	$	538,167	11.65	%	$	369,423	8.00	%	Tier 1 Capital (to risk weighted assets)	741,915		13.69	%	460,751		8.50	%	433,648		8.00	%
Tier 1 Common Equity (to risk weighted assets)	$	521,519	11.29	%	$	300,156	6.50	%	Tier 1 Common Equity (to risk weighted assets)	741,915		13.69	%	379,442		7.00	%	352,339		6.50	%
Tier 1 Capital (to average assets)	$	538,167	8.52	%	$	315,735	5.00	%	Tier 1 Capital (to average assets)	741,915		9.63	%	308,123		4.00	%	385,153		5.00	%

~~On September 30, 2017,~~As of March 31, 2023, the Company’s capital ratios exceeded ~~the minimum required capital ratios plus the required conservation buffer,~~ 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 ~~12.5%~~14.6% at ~~September 30, 2017,~~March 31, 2023, compared with ~~12.2%~~14.4% as of December 31, ~~2016.~~2022. Tier 1 capital as a percent of risk weighted assets increased ~~slightly~~ from ~~11.4%~~13.5% at the end of ~~2016~~2022 to ~~11.7%~~13.7% as of ~~September 30, 2017.~~March 31, 2023. Tier 1 capital as a ~~percentage~~percent of average assets was ~~8.5%~~9.6% at ~~September 30, 2017, compared to 8.4% as of~~March 31, 2023, which is up from 9.3% at December 31, ~~2016.~~2022. Common equity ~~tier~~Tier 1 capital was ~~11.3%~~13.7% at the end of the ~~third~~first quarter of ~~2017,~~2023, up ~~slightly~~ from ~~11.0%~~13.5% at the end of ~~2016.~~2022.

On January 31, 2017, the Company redeemed all of the trust preferred securities of Tompkins Capital Trust I for an aggregate of $20.5 million, at a redemption price equal to 100% of the liquidation amount of the securities ($1,000 per security), plus any accrued and unpaid interest up to the redemption date.

As of ~~September 30, 2017,~~March 31, 2023, the capital ratios for the Company’s subsidiary banks also exceeded ~~the minimum required capital ratios plus the required conservation buffer,~~ 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 ~~$4.9~~$6.5 billion at ~~September 30, 2017 increased $318.8~~March 31, 2023 were down $93.3 million or ~~6.9%~~1.4% from December 31, ~~2016.~~2022. The ~~increase~~decrease from year-end ~~2016~~ was ~~comprised mainly of increases~~primarily in checking, money market and savings balances, which collectively were down $46.6 million or 1.2% and ~~interest~~in non-interest bearing ~~checking~~ deposits, ~~which~~down $140.6 million or 6.5% from year end 2022. The decrease was partially offset by an increase in ~~aggregate were up $229.0 million.~~time deposits of $93.9 million or 14.9%. The ~~growth~~decline in elevated customer deposit balances was largely driven by stimulus funding and tightening monetary policy that has led to a declining trend in bank deposits ~~reflects increases in municipal balances~~on a national level, as ~~well as both personal and business balances over year end.~~reported by the Federal Reserve.

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.~~deposits and reciprocal deposit relationships with municipalities. Core deposits ~~grew~~were down by ~~$338.6~~$181.1 million or ~~9.0%~~3.2% from year-end 2022, to ~~$4.1~~$5.4 billion at ~~September 30, 2017, from $3.7 billion at year-end 2016.~~March 31, 2023. Core deposits represented ~~82.7%~~82.9% of total deposits at ~~September 30, 2017,~~March 31, 2023, compared to ~~81.1%~~84.5% of total deposits at December 31, ~~2016.~~2022.

Municipal money market savings accounts totaled $529.0 million at September 30, 2017 which was an increase of 4.1% compared to year-end 2016. In general, there is a seasonal pattern to municipal deposits starting with a low point during July and August. Account balances tend to increase throughout the fall and into the winter months from tax deposits and an additional inflow at the end of March from the electronic deposit of state funds.

The Company uses both retail and wholesale repurchase agreements. Retail repurchase agreements are arrangements with local customers of the Company, in which the Company agrees to sell securities to the customer with an agreement to repurchase those securities at a specified later date. Retail repurchase agreements totaled ~~$73.9~~$63.5 million at ~~September 30, 2017,~~March 31, 2023, and ~~$59.1~~$56.3 million at December 31, ~~2016.~~2022. Management generally views local repurchase agreements as an alternative to large time deposits.

The Company’s other borrowings totaled ~~$834.6~~$327.0 million at ~~September 30, 2017, down $50.2 million or 5.7% from $884.8 million~~March 31, 2023, compared to $291.3 at December 31, ~~2016. Borrowings decreased due~~2022. Lower deposit balances compared to ~~a rise~~year-end 2022 contributed to the increase in ~~seasonal deposit balances. Borrowings~~other borrowings. Other borrowings at ~~September 30, 2017 included $340.6 million in FHLB overnight advances, $485.0 million of FHLB term advances, and a $9.0 million advance from a bank. Borrowings at year-end 2016 included $503.8~~March 31, 2023 represented $192.0 million in overnight advances from the FHLB ~~$365.0~~and $135.0 million of FHLB term ~~advances, and a $16.0~~advances. The $291.3 million in other borrowings at December 31, 2022, represented $241.3 million in overnight advances from ~~a bank.~~the FHLB and $50.0 million in term advances from the FHLB. Of the ~~$485.0~~$135.0 million in FHLB term advances at ~~September 30, 2017, $290.0~~March 31, 2023, $115.0 million iswas due in over one year.

Liquidity

~~Liquidity~~

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~~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 ~~time~~ deposits, ~~national deposit listing services,~~ municipal money market deposits, reciprocal deposits, bank borrowings, securities sold under agreements to repurchase, ~~and~~ overnight and term advances from the ~~FHLB.~~FHLB and other funding sources. Rates and terms are the primary determinants of the mix of these funding sources. Non-core funding sources of ~~$1.8~~$1.5 billion at ~~September 30, 2017 decreased $65.3~~March 31, 2023 increased $130.8 million or ~~3.6%~~9.5% as compared to year end ~~2016. The decrease in non-core funding sources reflects mainly by a decrease in brokered deposits compared to year-end 2016.~~2022. Non-core funding sources, as a percentage of total liabilities, were ~~29.7%~~21.5% at ~~September 30, 2017,~~March 31, 2023, compared to ~~32.2%~~19.4% at December 31, ~~2016.~~2022.

Non-core funding sources may require securities to be pledged against the underlying liability. Securities carried at ~~$1.4~~$1.8 billion at ~~September 30, 2017~~both March 31, 2023 and December 31, ~~2016,~~2022, were either pledged or sold under agreements to repurchase. Pledged securities represented ~~92.6%~~85.6% of total securities at ~~September 30, 2017,~~March 31, 2023, compared to ~~75.0%~~82.4% of total securities at December 31, ~~2016. The increase is attributable to the growth of deposits from municipal customers and the shift of investment balances into higher yielding loans.~~2022.

Cash and cash equivalents totaled ~~$129.4~~$70.5 million as of ~~September 30, 2017~~March 31, 2023 which ~~increased~~decreased from ~~$64.0~~$77.8 million at December 31, ~~2016.~~2022. Short-term investments, consisting of securities due in one year or less, ~~increased~~decreased from ~~$25.5~~$50.3 million at December 31, ~~2016,~~2022, to ~~$38.8~~$39.8 million ~~on September 30, 2017.~~at March 31, 2023.

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 ~~$776.9~~$726.2 million at ~~September 30, 2017~~March 31, 2023 compared with ~~$810.0~~$738.9 million at December 31, ~~2016.~~2022. Outstanding principal balances of residential mortgage loans, consumer loans, and leases totaled approximately ~~$1.4~~$1.6 billion at ~~September 30, 2017, increased by $66.7 million or 5.1%~~March 31, 2023, unchanged compared with year end ~~2016.~~2022. 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 ~~certificates of deposit,~~deposits, Federal Reserve Bank Discount Window advances and FHLB advances. Through its subsidiary ~~banks,~~bank, the Company has borrowing relationships with the FHLB, the Federal Reserve Bank and correspondent banks, which provide secured and unsecured borrowing capacity. ~~At September 30, 2017, the unused borrowing capacity on established lines with the FHLB was $1.1 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 ~~September 30, 2017, total~~March 31, 2023, the established borrowing capacity with the FHLB was $1.6 billion, with available unencumbered ~~residential mortgage loans and securities were $508.8 million.~~mortgage-related assets of $1.31 billion. Additional assets may also qualify as collateral for FHLB advances, upon approval of the FHLB. Through various programs at the Federal Reserve Bank, the Company has the ability to use certain unencumbered mortgage-related assets and securities to secure borrowings from the Federal Reserve Bank's Discount Window. At March 31, 2023 the available borrowing capacity with the Federal Reserve Bank was $157 million, secured by investment securities. In addition to the available borrowing lines at the FHLB and Federal Reserve Bank, the Company maintains $265 million of unencumbered securities which could be pledged to further enhance secured borrowing capacity.

Non-GAAP Financial Information

The following table includes disclosure of non-GAAP financial measures. Tangible common equity, a non-GAAP financial measure, is total stockholders' equity less intangible assets. Tangible book value per share is tangible equity divided by total shares issued and outstanding. These measures adjust common equity per share to exclude the effects of goodwill and intangible amortization expense on earnings, equity, and capital. The Company believes the non-GAAP measures provide meaningful comparisons of our underlying operational performance and facilitate management's and investors' assessments of business and performance trends in comparison to others in the financial services industry. These non-GAAP financial measures should be considered as supplemental in nature and not as a substitute for our superior to the related financial information prepared in accordance with GAAP. Tangible book value per share as presented herein may be different from non-GAAP financial measures used by other companies, and may not be comparable to similarly titled measures reported by other companies.


Reconciliation of Tangible Book Value Per Share (non-GAAP) to Common Equity Book Value Per Share (GAAP)
	Quarter-Ended		Year-ended
	03/31/2023		12/31/2022
Total common equity	$	648,322	$	615,978
Less: Goodwill and intangibles	94,253		94,336
Tangible common equity (Non-GAAP)	554,069		521,642
Ending shares outstanding	14,519,748		14,519,831
Common equity per share	$	44.65	$	42.42
Tangible book value per share (Non-GAAP)	$	38.16	$	35.93

Newly Adopted Accounting Standards

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 U.S. 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. The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

ASU 2022-01, "Derivatives and Hedging (Topic 815)" ("ASU 2022-01") clarifies the guidance in ASC 815 on fair value hedge accounting 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 became effective for the Company on January 1, 2023. As there are no securities in our portfolio that are subject to this pronouncement in the current or prior year of adoption, the adoption of ASU 2022-01 had no effect on the financial statements for the current fiscal year, and the Company will apply the guidance prospectively, where applicable.

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 became effective for the Company on January 1, 2023. The Company elected to apply the ASU on a modified retrospective basis to recognize any change in the allowance for credit losses that had been recognized for receivables previously modified (or reasonably expected to be modified) in a TDR. This election resulted in cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The amount of the adjustment to retained earnings was a decrease of $64,000. See Note 5 in the Consolidated Financial Statements for changes in disclosures related to this adoption. The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

ASU No. 2022-03, "Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions." The amendments in this update provides clarification on guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and provides new disclosure requirements for equity securities subject to contractual sale restrictions, that are

measured at fair value. ASU 2022-03 became effective for the Company on January 1, 2023. As there are no equity securities subject to contract sales during the current or prior year, the adoption of ASU 2022-03 had no effect on the financial statements for the current fiscal year, and the Company will apply the guidance prospectively to future acquisitions.

Accounting Standards Pending Adoption

ASU No. 2023-02, "Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method." This update will allow reporting entities to consistently account for equity investments made primarily for the purpose of receiving income tax credits or other income tax benefits. This update applies this to all reporting entities that hold (1) tax equity investments that meet the conditions for and elect to account for them using the proportional amortization method or (2) an investment in a LIHTC structure through a limited liability entity that is not accounted for using the proportional amortization method and to which certain LIHTC specific guidance removed from Subtopic 323-740 has been applied. Additionally, the disclosure requirements apply to investments that generate income tax credits and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method (including investments within that elected program that do not meet the conditions to apply the proportional amortization method). The amendments in this Update permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. ASU 2023-02 is effective for fiscal years beginning after December 15, 2023 and interim periods in those years. Tompkins is currently evaluating the potential impact of ASU 2023-02 on our consolidated financial statements.

The Company reviewed new accounting standards as issued. Management has not identified any ~~trends or circumstances~~other new standards that ~~are reasonably likely to result in material increases or decreases in liquidity in~~it believes will have a significant impact on the ~~near term.~~Company’s financial statements.

Item 3. Quantitative and Qualitative Disclosure About Market Risk


~~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.~~Board-approved levels. 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 most recent simulation analysis performed as of ~~August 31, 2017,~~February 28, 2023, 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 ~~0.7%~~4.3%, while a ~~100~~200 basis point parallel decline in interest rates over a one-year period would result in ~~an decrease~~a one year increase in ~~one-year~~ net interest income of 2.6% from the base ~~case of 1.8%. The~~case. This simulation assumes no balance sheet growth, no changes in balance sheet mix, deposit rates move in a manner that reflects the historical relationship between deposit rate movement and changes in Federal funds rate, 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 slightly 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, the simulation shows net interest income is expected to trend upwards.

The ~~exposure~~down 200 basis point scenario increases net income slightly in the ~~100 basis point decline scenario results from~~first year as a result of the ~~Company’s~~Company's assets repricing downward to a ~~greater~~lesser degree than the rates on the ~~Company’s~~Company's interest-bearing liabilities, mainly ~~deposits. Rates on savings~~deposits and ~~money market accounts are at low levels given the historically low interest rate environment experienced in recent years. In addition, the~~overnight borrowings. 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 in addition to the above assumptions, also assumes interest rates remain unchanged from the date of the simulation, reflects a net interest margin that is ~~stable to higher~~increasing slightly over the next 12 to 18 months.

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, balance sheet mix, 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~~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 ~~September 30, 2017.~~March 31, 2023. The Company’s one-year net interest rate gap was a negative ~~$581.0~~$738.8 million or ~~8.91%~~9.67% of total assets at ~~September 30, 2017,~~March 31, 2023, compared with a negative ~~$520.7~~$656.5 million or ~~8.35%~~8.56% of total assets at December 31, ~~2016.~~2022. A negative gap position exists when the amount of interest-bearing liabilities maturing or repricing exceeds the amount of interest-earning assets maturing or repricing within a particular time period. This analysis suggests that the Company’s net interest income ~~is moderately more vulnerable to an increasing~~contains a higher degree of risk in a rising rate environment ~~than it is to a prolonged declining interest 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, 2023						Repricing Interval
(In thousands)	Total		0-3 months			3-6 months			6-12 months			Cumulative 12 months

Interest-earning assets1	$	7,422,351	$	950,893		$	309,368		$	529,553		$	1,789,814
Interest-bearing liabilities	4,889,921		2,133,366			142,679			252,614			2,528,659
Net gap position			(1,182,473)			166,689			276,939			(738,845)
Net gap position as a percentage of total assets			(15.47)		%	2.18		%	3.62		%	(9.67)		%

Condensed Static Gap – September 30, 2017 Repricing Interval
(in thousands) Total 0-3 months 3-6 months 6-12 months Cumulative 12 months

Interest-earning assets¹
$ 6,091,228
$ 1,240,640
$ 251,917
$ 524,879
$ 2,017,436
Interest-bearing liabilities 4,458,742
2,072,027
242,499
283,958
2,598,484
Net gap position
(831,387 ) 9,418
240,921
(581,048 )
Net gap position as a percentage of total assets
(12.74 )% 0.14 % 3.69 % (8.91 )%

¹Balances of available securities are shown at amortized cost


~~Item 4.~~	~~Controls and Procedures~~

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 ~~September 30, 2017.~~ March 31, 2023.

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~~

Reporting

There were no changes in the ~~Company’s~~Company's internal control over financial reporting that occurred during the quarter ended ~~September 30, 2017,~~March 31, 2023, that materially affected, or are reasonably likely to materially affect, the ~~Company’s~~Company's internal control over financial reporting.

PART II - OTHER INFORMATION


~~Item 1.~~	~~Legal Proceedings~~

Item 1. Legal Proceedings

~~Due to the nature of the Company’s business, the~~The Company is ~~party~~subject to ~~a certain amount of litigation arising out of~~various claims and legal actions that arise in the ordinary course of conducting business. As of March 31, 2023, management, after consultation with legal counsel, does not anticipate that the ~~Company’s business. In~~aggregate ultimate liability arising out of litigation pending or threatened against the ~~opinion~~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 ~~management, there are no~~ pending ~~claims which, if determined adversely, would have a~~litigation will be material ~~effect on~~to the ~~Company’s~~Company's consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations ~~or financial condition.~~for a particular reporting period in the future.


~~Item 1A.~~	~~Risk Factors~~

~~There have been no material changes in~~

Item 1A. Risk Factors

The following risk factors supplement the risk factors previously disclosed under Item ~~1A. of~~1A in the ~~Company’s~~Company's Annual Report on Form 10-K ~~as amended,~~ for the fiscal year ended December 31, ~~2016.~~2022 and should be read in conjunction therewith.

Adverse developments affecting the banking industry, and resulting media coverage, have contributed to market volatility and eroded confidence in the banking system and could have a material effect on the Company's results of operations and/or stock price.


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

Recent events impacting the financial services industry, including bank failures, have resulted in decreased confidence in banks among investors, customers and counterparties, which has generated significant market volatility among publicly traded bank holding companies. As a result, customers may choose to maintain deposits with other financial institutions or invest in higher yielding short term fixed income securities, which could adversely impact our liquidity and results of operations. Uncertainty and concern regarding soundness or creditworthiness of other financial institutions has been, and may be in the future, compounded by advances in technology that increase the speed at which deposits can be moved, as well as the speed and reach of media attention, including social media, and its ability to disseminate concerns or rumors, in each case potentially exacerbating liquidity concerns and market disruption within the financial services industry, and may increase the risk of a wider economic recession. These recent events have, and could continue to, adversely impact the market price and volatility of the Company's common stock.

These recent events may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements. The cost of resolving the recent bank failures may prompt the FDIC to increase its premiums above the recently increased levels or to issue additional special assessments. Any of these changes could have a material impact on our business, financial condition and results of operations.

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

Issuer Purchases of Equity Securities

Total Number of Shares Purchased (a)
Average Price Paid Per Share (b)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (c)
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (d)

July 1, 2017 through July 31, 2017 1,354
$ 78.84
0
400,000

August 1, 2017 through August 31, 2017 2,189
74.73
0
400,000

September 1, 2017 through September 30, 2017 0
0
0
400,000

Total 3,543
$ 76.30
0
400,000


	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, 2023 through January 31, 2023	1,487	$	75.83	0	169,818
February 1, 2023 through February 28, 2023	1,186	77.51		0	169,818
March 1, 2023 through March 31, 2023	0	0		0	169,818
Total	2,673	$	76.58	0	169,818

Included ~~in the table~~ above are ~~1,354~~1,487 shares purchased ~~on the open market~~ in ~~July 2017,~~January 2023, at an average cost of ~~$78.84,~~$75.83, and ~~486~~663 shares purchased ~~on the open market~~ in ~~August 2017,~~February 2023, at an average cost of ~~$76.66,~~$77.46, 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 ~~1,703~~523 shares ~~in August 2017~~ delivered to the Company ~~by employees~~in February 2023 at an average cost of ~~$74.18~~$77.51 to satisfy mandatory tax withholding requirements upon ~~the~~ vesting of restricted stock under the Company's 2009 Equity Plan.

On ~~July 21, 2016,~~October 22, 2021, the Company’s Board of Directors authorized a ~~stock~~share repurchase plan (the "2021 Repurchase Plan") for the ~~Company to~~ repurchase of up to 400,000 shares of the Company’s common ~~stock. Purchases may be made~~stock over the 24 months following adoption of the plan. ~~The~~Shares may be repurchased from time to time under the 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. NoUnder the 2021 Repurchase Plan, the Company has repurchased a total of 230,182 shares ~~have been repurchased under this Plan as~~through March 31, 2023, at an average cost of ~~the date of this report.~~$78.31.

Recent Sales of Unregistered Securities

None


~~Item 3.~~ Item 3.Defaults Upon Senior Securities	~~Defaults Upon Senior Securities~~

None


~~Item 4.~~ Item 4.Mine Safety Disclosures	~~Mine Safety Disclosures~~

Not applicable

Item 5.Other Information

None

Item 6. Exhibits

EXHIBIT INDEX


~~Item 5.~~ Exhibit Number			~~Other Information~~

~~None~~

	Description
~~Item 6.~~3.1		~~Exhibits~~ 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.

~~The information called~~** 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, 2023 and December 31, 2022; (ii) Consolidated Statements of Income for ~~by this item is incorporated by reference~~the three months ended March 31, 2023 and 2022; (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2023 and 2022; (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022; (v) Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2023 and 2022; and (vi) Notes to ~~the Exhibit Index included in this Quarterly Report on Form 10-Q, immediately following the signature page.~~Unaudited Consolidated Financial Statements.

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:~~	~~November 9, 2017~~ Date: May 10, 2023

TOMPKINS FINANCIAL CORPORATION



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



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

~~EXHIBIT INDEX~~



~~Exhibit Number~~	~~Description~~	~~Pages~~

~~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~~	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Condition as of September 30, 2017 and December 31, 2016; (ii) Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016; (v) Condensed Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 30, 2017 and 2016; and (vi) Notes to Unaudited Condensed Consolidated Financial Statements.



	Available-for-Sale Securities
December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(in thousands)
Obligations of U.S. Government sponsored entities	$	527,057	$	2,873	$	2,303	$	527,627
Obligations of U.S. states and political subdivisions	89,910		286		1,140		89,056
Mortgage-backed securities – residential, issued by
U.S. Government agencies	159,417		1,081		2,272		158,226
U.S. Government sponsored entities	662,724		1,993		13,287		651,430
Non-U.S. Government agencies or sponsored entities	116		0		0		116
U.S. corporate debt securities	2,500		0		338		2,162
Total debt securities	1,441,724		6,233		19,340		1,428,617
Equity securities	1,000		0		79		921
Total available-for-sale securities	$	1,442,724	$	6,233	$	19,419	$	1,429,538



September 30, 2017
(in thousands)	30-89 days		90 days or more		Current Loans			Total Loans			90 days and accruing1		Nonaccrual
Originated Loans and Leases
Commercial and industrial
Agriculture	$	0	$	0	$	91,054		$	91,054		$	0	$	0
Commercial and industrial other	1,009		1,109		893,230			895,348			0		2,367
Subtotal commercial and industrial	1,009		1,109		984,284			986,402			0		2,367
Commercial real estate
Construction	0		0		217,218			217,218			0		0
Agriculture	14		0		122,290			122,304			0		0
Commercial real estate other	1,014		3,547		1,532,633			1,537,194			0		4,237
Subtotal commercial real estate	1,028		3,547		1,872,141			1,876,716			0		4,237
Residential real estate
Home equity	653		113		212,804			213,570			0		1,454
Mortgages	2,349		3,005		1,011,851			1,017,205			0		7,223
Subtotal residential real estate	3,002		3,118		1,224,655			1,230,775			0		8,677
Consumer and other
Indirect	381		233		12,018			12,632			0		356
Consumer and other	147		30		48,751			48,928			0		30
Subtotal consumer and other	528		263		60,769			61,560			0		386
Leases	0		0		15,522			15,522			0		0
Total loans and leases	5,567		8,037		4,157,371			4,170,975			0		15,667
Less: unearned income and deferred costs and fees	0		0		(3,721		)	(3,721		)	0		0
Total originated loans and leases, net of unearned income and deferred costs and fees	$	5,567	$	8,037	$	4,153,650		$	4,167,254		$	0	$	15,667
Acquired Loans and Leases
Commercial and industrial
Commercial and industrial other	881		28		52,575			53,484			28		0
Subtotal commercial and industrial	881		28		52,575			53,484			28		0
Commercial real estate
Construction	0		0		1,526			1,526			0		0
Agriculture	0		0		257			257			0		0
Commercial real estate other	777		1,523		210,346			212,646			578		944
Subtotal commercial real estate	777		1,523		212,129			214,429			578		944
Residential real estate
Home equity	835		957		29,513			31,305			166		1,009
Mortgages	358		1,618		21,191			23,167			534		1,199
Subtotal residential real estate	1,193		2,575		50,704			54,472			700		2,208
Consumer and other
Consumer and other	6		0		868			874			0		0
Subtotal consumer and other	6		0		868			874			0		0
Total acquired loans and leases, net of unearned income and deferred costs and fees	$	2,857	$	4,126	$	316,276		$	323,259		$	1,306	$	3,152



Three months ended September 30, 2016
(in thousands)	Commercial and Industrial			Commercial Real Estate		Residential Real Estate			Consumer and Other			Finance Leases		Total
Allowance for originated loans and leases
Beginning balance	$	8,937		$	18,229	$	4,486		$	1,316		$	0	$	32,968

Charge-offs	(133		)	0		(19		)	(94		)	0		(246		)
Recoveries	110			216		17			23			0		366
Provision (credit)	340			331		223			(26		)	0		868
Ending Balance	$	9,254		$	18,776	$	4,707		$	1,219		$	0	$	33,956



Nine months ended September 30, 2017
(in thousands)	Commercial and Industrial			Commercial Real Estate			Residential Real Estate			Consumer and Other			Finance Leases		Total
Allowance for originated loans and leases
Beginning balance	$	9,389		$	19,836		$	5,149		$	1,224		$	0	$	35,598

Charge-offs	(162		)	(21		)	(483		)	(742		)	0		(1,408		)
Recoveries	112			717			169			336			0		1,334
Provision (credit)	2,351			(1,077		)	656			449			0		2,379
Ending Balance	$	11,690		$	19,455		$	5,491		$	1,267		$	0	$	37,903



Nine months ended September 30, 2016
(in thousands)	Commercial and Industrial			Commercial Real Estate			Residential Real Estate			Consumer and Other			Finance Leases		Total
Allowance for originated loans and leases
Beginning balance	$	10,495		$	15,479		$	4,070		$	1,268		$	0	$	31,312

Charge-offs	(584		)	(12		)	(220		)	(455		)	0		(1,271		)
Recoveries	217			636			49			295			0		1,197
Provision (credit)	(874		)	2,673			808			111			0		2,718
Ending Balance	$	9,254		$	18,776		$	4,707		$	1,219		$	0	$	33,956



	Three Months Ended 09/30/2017				Three Months Ended 09/30/2016
(in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Originated loans and leases with no related allowance
Commercial and industrial
Commercial and industrial other	404		0		146		0
Commercial real estate
Commercial real estate other	6,409		0		7,422		0
Residential real estate
Home equity	3,581		0		3,097		0
Subtotal	$	10,394	$	0	$	10,665	$	0

Originated loans and leases with related allowance

Commercial and industrial
Commercial and industrial other	1,083		0		77		0
Commercial real estate
Commercial real estate other	50		0		636		0
Subtotal	$	1,133	$	0	$	713	$	0
Total	$	11,527	$	0	$	11,378	$	0



	Nine Months Ended 09/30/17				Nine Months Ended 09/30/16
(in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Originated loans and leases with no related allowance

Commercial and industrial
Commercial and industrial other	290		0		476		0
Commercial real estate
Commercial real estate other	7,569		0		6,351		0
Residential real estate
Home equity	3,441		0		2,694		0
Subtotal	$	11,300	$	0	$	9,521	$	0

Originated loans and leases with related allowance

Commercial and industrial
Commercial and industrial other	335		0		48		0
Commercial real estate
Commercial real estate other	20		0		641		0
Subtotal	$	355	$	0	$	689	$	0
Total	$	11,655	$	0	$	10,210	$	0



September 30, 2016	Three Months Ended
						Defaulted TDRs³
(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 other¹	1	50		50		1	1,800
Residential real estate
Home equity²	5	382		382		0	0
Total	6	$	432	$	432	1	$	1,800



September 30, 2017	Nine 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
Residential real estate
Home equity¹	2	162		162		1	55
Total	2	$	162	$	162	1	$	55



September 30, 2016	Nine Months Ended
						Defaulted TDRs⁴
(in thousands)	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans	Post- Modification Outstanding Recorded Investment
Commercial and industrial
Commercial and industrial other¹	2	$	1,115	$	1,115	0	$	0
Commercial real estate
Commercial real estate other²	1	50		50		1	1,800
Residential real estate
Home equity³	10	1,164		1,164		0	0
Total	13	$	2,329	$	2,329	1	$	1,800



September 30, 2017
(in thousands)	Residential Home Equity		Residential Mortgages		Consumer Indirect		Consumer Other		Total
Originated Loans and Leases
Performing	$	212,116	$	1,009,982	$	12,276	$	48,898	$	1,283,272
Nonperforming	1,454		7,223		356		30		9,063
Total	$	213,570	$	1,017,205	$	12,632	$	48,928	$	1,292,335



(in thousands)	Available-for- Sale Securities			Employee Benefit Plans			Accumulated Other Comprehensive (Loss) Income
Balance at July 1, 2017	$	(4,887	)	$	(28,737	)	$	(33,624	)
Other comprehensive income before reclassifications	426			0			426
Amounts reclassified from accumulated other comprehensive (loss) income	254			229			483
Net current-period other comprehensive income	680			229			909
Balance at September 30, 2017	$	(4,207	)	$	(28,508	)	$	(32,715	)

Balance at January 1, 2017	$	(7,915	)	$	(29,194	)	$	(37,109	)
Other comprehensive income before reclassifications	3,454			0			3,454
Amounts reclassified from accumulated other comprehensive (loss) income	254			686			940
Net current-period other comprehensive income	3,708			686			4,394
Balance at September 30, 2017	$	(4,207	)	$	(28,508	)	$	(32,715	)



	Pension Benefits Three Months Ended						Life and Health Three Months Ended					SERP Benefits Three Months Ended
(in thousands)	9/30/2017			9/30/2016			9/30/2017			9/30/2016		9/30/2017		9/30/2016
Service cost	$	0		$	0		$	48		$	64	$	42	$	43
Interest cost	625			618			67			71		213		208
Expected return on plan assets	(1,293		)	(1,211		)	0			0		0		0
Amortization of net retirement plan actuarial loss	269			244			9			1		100		90
Amortization of net retirement plan prior service (credit) cost	(3		)	(4		)	(15		)	4		22		19
Net periodic benefit (income) cost	$	(402	)	$	(353	)	$	109		$	140	$	377	$	360



	Pension Benefits Nine Months Ended						Life and Health Nine Months Ended					SERP Benefits Nine Months Ended
(in thousands)	9/30/2017			9/30/2016			9/30/2017			9/30/2016		9/30/2017		9/30/2016
Service cost	$	0		$	0		$	144		$	193	$	125	$	128
Interest cost	1,875			1,855			201			212		639		624
Expected return on plan assets	(3,816		)	(3,633		)	0			0		0		0
Amortization of net retirement plan actuarial loss	806			731			26			4		299		269
Amortization of net retirement plan prior service cost (credit)	(8		)	(11		)	(47		)	12		65		56
Net periodic benefit (income) cost	$	(1,143	)	$	(1,058	)	$	324		$	421	$	1,128	$	1,077



Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)
	Year to Date Period Ended							Year to Date Period Ended
	September 30, 2017							September 30, 2016
	Average							Average
	Balance					Average		Balance					Average
(Dollar amounts in thousands)	(YTD)		Interest			Yield/Rate		(YTD)		Interest			Yield/Rate
ASSETS
Interest-earning assets
Interest-bearing balances due from banks	$	3,547	$	15		0.57	%	$	1,968	$	5		0.34	%
Securities (1)
U.S. Government securities	1,476,459		23,352			2.11	%	1,447,450		22,608			2.09	%
Trading securities	0		0			0.00	%	6,536		220			4.50	%
State and municipal (2)	101,080		2,552			3.38	%	97,906		2,488			3.39	%
Other securities (2)	3,602		96			3.56	%	3,653		91			3.33	%
Total securities	1,581,141		26,000			2.20	%	1,555,545		25,407			2.18	%
FHLBNY and FRB stock	41,639		1,466			4.71	%	31,767		990			4.16	%
Total loans and leases, net of unearned income (2)(3)	4,352,292		143,497			4.41	%	3,897,461		127,484			4.37	%
Total interest-earning assets	5,978,619		170,978			3.82	%	5,486,741		153,886			3.75	%

Other assets	355,983							351,944
Total assets	6,334,602							5,838,685
LIABILITIES & EQUITY
Deposits
Interest-bearing deposits
Interest bearing checking, savings, & money market	2,664,405		3,620			0.18	%	2,514,159		2,958			0.16	%
Time deposits	845,058		5,252			0.83	%	876,947		5,020			0.76	%
Total interest-bearing deposits	3,509,463		8,872			0.34	%	3,391,106		7,978			0.31	%
Federal funds purchased & securities sold under agreements to repurchase	65,798		195			0.40	%	108,189		1,940			2.40	%
Other borrowings	861,289		8,445			1.31	%	589,726		4,840			1.10	%
Trust preferred debentures	18,903		888			6.28	%	37,567		1,783			6.34	%
Total interest-bearing liabilities	4,455,453		18,400			0.55	%	4,126,588		16,541			0.54	%
Noninterest bearing deposits	1,241,173							1,103,108
Accrued expenses and other liabilities	66,094							65,978
Total liabilities	5,762,720							5,295,674
Tompkins Financial Corporation Shareholders’ equity	570,403							541,510
Noncontrolling interest	1,479							1,501
Total equity	571,882							543,011

Total liabilities and equity	6,334,602							5,838,685
Interest rate spread						3.27	%						3.21	%
Net interest income/margin on earning assets			152,578			3.41	%			137,345			3.34	%

Tax Equivalent Adjustment			(3,243		)					(3,083		)

Net interest income per consolidated financial statements			$	149,335						$	134,262



Loans and Leases
Loans and leases at September 30, 2017 and December 31, 2016 were as follows:
	9/30/2017								12/31/2016
(in thousands)	Originated			Acquired		Total Loans and Leases			Originated			Acquired		Total Loans and Leases
Commercial and industrial
Agriculture	$	91,054		$	0	$	91,054		$	118,247		$	0	$	118,247
Commercial and industrial other	895,348			53,484		948,832			847,055			79,317		926,372
Subtotal commercial and industrial	986,402			53,484		1,039,886			965,302			79,317		1,044,619
Commercial real estate
Construction	217,218			1,526		218,744			135,834			8,936		144,770
Agriculture	122,304			257		122,561			102,509			267		102,776
Commercial real estate other	1,537,194			212,646		1,749,840			1,431,690			241,605		1,673,295
Subtotal commercial real estate	1,876,716			214,429		2,091,145			1,670,033			250,808		1,920,841
Residential real estate
Home equity	213,570			31,305		244,875			209,277			37,737		247,014
Mortgages	1,017,205			23,167		1,040,372			947,378			25,423		972,801
Subtotal residential real estate	1,230,775			54,472		1,285,247			1,156,655			63,160		1,219,815
Consumer and other
Indirect	12,632			0		12,632			14,835			0		14,835
Consumer and other	48,928			874		49,802			44,393			826		45,219
Subtotal consumer and other	61,560			874		62,434			59,228			826		60,054
Leases	15,522			0		15,522			16,650			0		16,650
Total loans and leases	4,170,975			323,259		4,494,234			3,867,868			394,111		4,261,979
Less: unearned income and deferred costs and fees	(3,721		)	0		(3,721		)	(3,946		)	0		(3,946		)
Total loans and leases, net of unearned income and deferred costs and fees	$	4,167,254		$	323,259	$	4,490,513		$	3,863,922		$	394,111	$	4,258,033



	Total Number of Shares Purchased (a)	Average Price Paid Per Share (b)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (c)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (d)

July 1, 2017 through July 31, 2017	1,354	$	78.84	0	400,000

August 1, 2017 through August 31, 2017	2,189	74.73		0	400,000

September 1, 2017 through September 30, 2017	0	0		0	400,000

Total	3,543	$	76.30	0	400,000