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, ~~2021~~2022


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

For the transition period from _____ to ______

Commission File Number 1-12709

Tompkins Financial Corporation

(Exact name of registrant as specified in its charter)


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

P.O. Box 460, Ithaca, NY

(Address of principal executive offices)

14851

(Zip Code)

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

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

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


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

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

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

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

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

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

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

Indicate the number of shares of the Registrant's Common Stock outstanding as of the latest practicable date: ~~14,659,195~~14,483,757 shares as of ~~11/2/2021.~~November 2, 2022.

TOMPKINS FINANCIAL CORPORATION

FORM 10-Q

INDEX


PART I -FINANCIAL INFORMATION
			PAGE
	Item 1 –	Financial Statements Consolidated Statements of Condition as of September 30, ~~2021~~2022 (Unaudited) and December 31, ~~2020~~2021 (Audited)	1
		Consolidated Statements of Income for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)	2
		Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)	3
		Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)	4
		Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)	6
		Notes to Unaudited Consolidated Financial Statements	8
	Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4546
	Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	65
	Item 4 -	Controls and Procedures	66
PART II - OTHER INFORMATION
	Item 1 –	Legal Proceedings	6766
	Item 1A – Risk Factors		6766
	Item 2 –	Unregistered Sales of Equity Securities and Use of Proceeds	67
	Item 3 -	Defaults Upon Senior Securities	67
	Item 4 -	Mine Safety Disclosures	67
	Item 5 -	Other Information	6867
	Item 6 -	Exhibits	6968
SIGNATURES			7069

Item 1. Financial Statements

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CONDITION


(In thousands, except share and per share data)	(In thousands, except share and per share data)	As of				(In thousands, except share and per share data)	As of
ASSETS	ASSETS	9/30/2021		12/31/2020		ASSETS	9/30/2022		12/31/2021
		(unaudited)		(audited)			(unaudited)		(audited)
Cash and noninterest bearing balances due from banks	Cash and noninterest bearing balances due from banks	$	22,441	$	21,245	Cash and noninterest bearing balances due from banks	$	20,342	$	23,078
Interest bearing balances due from banks	Interest bearing balances due from banks	311,046		367,217		Interest bearing balances due from banks	83,270		40,029
Cash and Cash Equivalents	Cash and Cash Equivalents	333,487		388,462		Cash and Cash Equivalents	103,612		63,107

Available-for-sale debt securities, at fair value (amortized cost of $2,072,498 at September 30, 2021 and $1,599,894 at December 31, 2020)		2,066,927		1,627,193
Held-to-maturity securities, at amortized cost (fair value of $268,283 at September 30, 2021 and $0 December 31, 2020)		269,268		0
Equity securities, at fair value (amortized cost $910 at September 30, 2021 and $929 at December 31, 2020)		910		929
Available-for-sale debt securities, at fair value (amortized cost of $2,010,101 at September 30, 2022 and $2,063,790 at December 31, 2021)						Available-for-sale debt securities, at fair value (amortized cost of $2,010,101 at September 30, 2022 and $2,063,790 at December 31, 2021)	1,740,936		2,044,513
Held-to-maturity securities, at amortized cost (fair value of $258,755 at September 30, 2022 and $282,288 December 31, 2021)						Held-to-maturity securities, at amortized cost (fair value of $258,755 at September 30, 2022 and $282,288 December 31, 2021)	312,329		284,009
Equity securities, at fair value (amortized cost $771 at September 30, 2022 and $902 at December 31, 2021)						Equity securities, at fair value (amortized cost $771 at September 30, 2022 and $902 at December 31, 2021)	771		902
Total loans and leases, net of unearned income and deferred costs and fees	Total loans and leases, net of unearned income and deferred costs and fees	5,096,778		5,260,327		Total loans and leases, net of unearned income and deferred costs and fees	5,208,436		5,075,467
Less: Allowance for credit losses	Less: Allowance for credit losses	46,259		51,669		Less: Allowance for credit losses	44,772		42,843
Net Loans and Leases	Net Loans and Leases	5,050,519		5,208,658		Net Loans and Leases	5,163,664		5,032,624

Federal Home Loan Bank and other stock	Federal Home Loan Bank and other stock	10,366		16,382		Federal Home Loan Bank and other stock	9,156		10,996
Bank premises and equipment, net	Bank premises and equipment, net	85,955		88,709		Bank premises and equipment, net	82,636		85,416
Corporate owned life insurance	Corporate owned life insurance	86,094		84,736		Corporate owned life insurance	86,857		86,495
Goodwill	Goodwill	92,447		92,447		Goodwill	92,602		92,447
Other intangible assets, net	Other intangible assets, net	3,989		4,905		Other intangible assets, net	2,932		3,643
Accrued interest and other assets	Accrued interest and other assets	113,148		109,750		Accrued interest and other assets	184,446		115,830
Total Assets	Total Assets	$	8,113,110	$	7,622,171	Total Assets	$	7,779,941	$	7,819,982
LIABILITIES	LIABILITIES					LIABILITIES
Deposits:	Deposits:					Deposits:
Interest bearing:	Interest bearing:					Interest bearing:
Checking, savings and money market	Checking, savings and money market	4,211,732		3,761,933		Checking, savings and money market	4,076,753		4,016,025
Time	Time	675,499		746,234		Time	599,612		639,674
Noninterest bearing	Noninterest bearing	2,203,667		1,929,585		Noninterest bearing	2,260,361		2,135,736
Total Deposits	Total Deposits	7,090,898		6,437,752		Total Deposits	6,936,726		6,791,435

Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase	72,490		65,845		Federal funds purchased and securities sold under agreements to repurchase	55,340		66,787
Other borrowings	Other borrowings	110,000		265,000		Other borrowings	101,000		124,000
Trust preferred debentures		0		13,220

Other liabilities	Other liabilities	117,365		122,665		Other liabilities	113,916		108,819
Total Liabilities	Total Liabilities	$	7,390,753	$	6,904,482	Total Liabilities	$	7,206,982	$	7,091,041
EQUITY	EQUITY					EQUITY
Tompkins Financial Corporation shareholders' equity:	Tompkins Financial Corporation shareholders' equity:					Tompkins Financial Corporation shareholders' equity:
Common Stock - par value $0.10 per share: Authorized 25,000,000 shares; Issued: 14,695,105 at September 30, 2021; and 14,964,389 at December 31, 2020		1,470		1,496
Common Stock - par value $0.10 per share: Authorized 25,000,000 shares; Issued: 14,519,667 at September 30, 2022; and 14,696,911 at December 31, 2021						Common Stock - par value $0.10 per share: Authorized 25,000,000 shares; Issued: 14,519,667 at September 30, 2022; and 14,696,911 at December 31, 2021	1,452		1,470
Additional paid-in capital	Additional paid-in capital	315,957		333,976		Additional paid-in capital	303,431		312,538
Retained earnings	Retained earnings	464,152		418,413		Retained earnings	515,870		475,262
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(55,094)		(32,074)		Accumulated other comprehensive loss	(243,237)		(55,950)
Treasury stock, at cost – 122,824 shares at September 30, 2021, and 124,849 shares at December 31, 2020		(5,634)		(5,534)
Treasury stock, at cost – 125,944 shares at September 30, 2022, and 124,709 shares at December 31, 2021						Treasury stock, at cost – 125,944 shares at September 30, 2022, and 124,709 shares at December 31, 2021	(6,063)		(5,791)
Total Tompkins Financial Corporation Shareholders’ Equity	Total Tompkins Financial Corporation Shareholders’ Equity	720,851		716,277		Total Tompkins Financial Corporation Shareholders’ Equity	571,453		727,529

Noncontrolling interests	Noncontrolling interests	1,506		1,412		Noncontrolling interests	1,506		1,412
Total Equity	Total Equity	$	722,357	$	717,689	Total Equity	$	572,959	$	728,941
Total Liabilities and Equity	Total Liabilities and Equity	$	8,113,110	$	7,622,171	Total Liabilities and Equity	$	7,779,941	$	7,819,982

See notes to unaudited consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
(In thousands, except per share data) (Unaudited)	(In thousands, except per share data) (Unaudited)	9/30/2021		9/30/2020		9/30/2021		9/30/2020		(In thousands, except per share data) (Unaudited)	9/30/2022		9/30/2021		9/30/2022		9/30/2021
INTEREST AND DIVIDEND INCOME	INTEREST AND DIVIDEND INCOME									INTEREST AND DIVIDEND INCOME
Loans	Loans	$	53,738	$	57,892	$	161,598	$	169,639	Loans	$	55,041	$	53,738	$	158,677	$	161,598
Due from banks	Due from banks	136		83		266		90		Due from banks	85		136		190		266
Available-for-sale debt securities	Available-for-sale debt securities	6,312		6,035		17,188		20,101		Available-for-sale debt securities	7,157		6,312		20,990		17,188
Held-to-maturity securities	Held-to-maturity securities	732		0		1,044		0		Held-to-maturity securities	1,221		732		3,551		1,044
Federal Home Loan Bank and other stock	Federal Home Loan Bank and other stock	196		306		608		1,130		Federal Home Loan Bank and other stock	166		196		391		608
Total Interest and Dividend Income	Total Interest and Dividend Income	61,114		64,316		180,704		190,960		Total Interest and Dividend Income	63,670		61,114		183,799		180,704
INTEREST EXPENSE	INTEREST EXPENSE									INTEREST EXPENSE
Time certificates of deposits of $250,000 or more	Time certificates of deposits of $250,000 or more	518		755		1,724		2,458		Time certificates of deposits of $250,000 or more	563		518		1,389		1,724
Other deposits	Other deposits	2,088		3,450		6,835		13,723		Other deposits	3,631		2,088		6,898		6,835
Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase	17		19		48		76		Federal funds purchased and securities sold under agreements to repurchase	14		17		45		48
Trust preferred debentures	Trust preferred debentures	1,237		216		2,233		758		Trust preferred debentures	0		1,237		0		2,233
Other borrowings	Other borrowings	1,156		1,623		3,883		6,357		Other borrowings	1,351		1,156		2,480		3,883
Total Interest Expense	Total Interest Expense	5,016		6,063		14,723		23,372		Total Interest Expense	5,559		5,016		10,812		14,723
Net Interest Income	Net Interest Income	56,098		58,253		165,981		167,588		Net Interest Income	58,111		56,098		172,987		165,981
Less: (Credit) provision for credit loss expense		(1,232)		(218)		(6,133)		17,418
Net Interest Income After Provision for Credit Loss Expense		57,330		58,471		172,114		150,170
Less: Provision (credit) for credit loss expense										Less: Provision (credit) for credit loss expense	1,056		(1,232)		1,392		(6,133)
Net Interest Income After Credit for Credit Loss Expense										Net Interest Income After Credit for Credit Loss Expense	57,055		57,330		171,595		172,114
NONINTEREST INCOME	NONINTEREST INCOME									NONINTEREST INCOME
Insurance commissions and fees	Insurance commissions and fees	9,833		8,916		27,053		24,216		Insurance commissions and fees	10,825		9,833		28,571		27,053
Investment services income		4,957		4,292		14,347		12,414
Wealth management fees										Wealth management fees	4,337		4,957		13,850		14,347
Service charges on deposit accounts	Service charges on deposit accounts	1,638		1,444		4,579		4,675		Service charges on deposit accounts	1,917		1,638		5,452		4,579
Card services income	Card services income	2,717		2,419		8,051		6,885		Card services income	2,731		2,717		8,233		8,051
Other income	Other income	1,769		1,818		5,408		6,388		Other income	977		1,769		3,694		5,408
Net (loss) gain on securities transactions	Net (loss) gain on securities transactions	(60)		(2)		257		446		Net (loss) gain on securities transactions	(95)		(60)		(179)		257
Total Noninterest Income	Total Noninterest Income	20,854		18,887		59,695		55,024		Total Noninterest Income	20,692		20,854		59,621		59,695
NONINTEREST EXPENSE	NONINTEREST EXPENSE									NONINTEREST EXPENSE
Salaries and wages	Salaries and wages	24,825		23,951		71,477		69,482		Salaries and wages	25,344		24,825		73,012		71,477
Other employee benefits	Other employee benefits	5,777		6,690		17,887		18,260		Other employee benefits	6,489		5,777		18,627		17,887
Net occupancy expense of premises	Net occupancy expense of premises	3,019		3,162		10,042		9,530		Net occupancy expense of premises	3,258		3,019		9,930		10,042
Furniture and fixture expense	Furniture and fixture expense	2,066		1,886		6,220		5,759		Furniture and fixture expense	2,056		2,066		6,051		6,220
Amortization of intangible assets	Amortization of intangible assets	329		371		988		1,120		Amortization of intangible assets	218		329		655		988
Other operating expense	Other operating expense	14,164		10,706		35,519		33,553		Other operating expense	12,237		14,164		37,286		35,519
Total Noninterest Expenses	Total Noninterest Expenses	50,180		46,766		142,133		137,704		Total Noninterest Expenses	49,602		50,180		145,561		142,133
Income Before Income Tax Expense	Income Before Income Tax Expense	28,004		30,592		89,676		67,490		Income Before Income Tax Expense	28,145		28,004		85,655		89,676
Income Tax Expense	Income Tax Expense	6,630		6,330		19,781		13,779		Income Tax Expense	6,774		6,630		20,079		19,781
Net Income Attributable to Noncontrolling Interests and Tompkins Financial Corporation	Net Income Attributable to Noncontrolling Interests and Tompkins Financial Corporation	21,374		24,262		69,895		53,711		Net Income Attributable to Noncontrolling Interests and Tompkins Financial Corporation	21,371		21,374		65,576		69,895
Less: Net Income Attributable to Noncontrolling Interests	Less: Net Income Attributable to Noncontrolling Interests	32		32		96		101		Less: Net Income Attributable to Noncontrolling Interests	31		32		94		96
Net Income Attributable to Tompkins Financial Corporation	Net Income Attributable to Tompkins Financial Corporation	$	21,342	$	24,230	$	69,799	$	53,610	Net Income Attributable to Tompkins Financial Corporation	$	21,340	$	21,342	$	65,482	$	69,799
Basic Earnings Per Share	Basic Earnings Per Share	$	1.46	$	1.63	$	4.74	$	3.60	Basic Earnings Per Share	$	1.49	$	1.46	$	4.55	$	4.74
Diluted Earnings Per Share	Diluted Earnings Per Share	$	1.45	$	1.63	$	4.72	$	3.59	Diluted Earnings Per Share	$	1.48	$	1.45	$	4.53	$	4.72

See notes to unaudited consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


		Three Months Ended					Three Months Ended
(In thousands) (Unaudited)	(In thousands) (Unaudited)	9/30/2021		9/30/2020		(In thousands) (Unaudited)	9/30/2022		9/30/2021
Net income attributable to noncontrolling interests and Tompkins Financial Corporation	Net income attributable to noncontrolling interests and Tompkins Financial Corporation	$	21,374	$	24,262	Net income attributable to noncontrolling interests and Tompkins Financial Corporation	$	21,371	$	21,374
Other comprehensive (loss) income, net of tax:	Other comprehensive (loss) income, net of tax:					Other comprehensive (loss) income, net of tax:

Available-for-sale debt securities:	Available-for-sale debt securities:					Available-for-sale debt securities:
Change in net unrealized loss during the period	Change in net unrealized loss during the period	(7,852)		(3,303)		Change in net unrealized loss during the period	(64,873)		(7,852)
Reclassification adjustment for net realized loss on sale of available-for-sale debt securities included in net income	Reclassification adjustment for net realized loss on sale of available-for-sale debt securities included in net income	41		0		Reclassification adjustment for net realized loss on sale of available-for-sale debt securities included in net income	37		41

Employee benefit plans:	Employee benefit plans:					Employee benefit plans:
Amortization of net retirement plan actuarial loss	Amortization of net retirement plan actuarial loss	557		447		Amortization of net retirement plan actuarial loss	427		557
Amortization of net retirement plan prior service cost	Amortization of net retirement plan prior service cost	42		40		Amortization of net retirement plan prior service cost	41		42

Other comprehensive (loss) income		(7,212)		(2,816)
Other comprehensive loss						Other comprehensive loss	(64,368)		(7,212)

Subtotal comprehensive income attributable to noncontrolling interests and Tompkins Financial Corporation		14,162		21,446
Subtotal comprehensive (loss) income attributable to noncontrolling interests and Tompkins Financial Corporation						Subtotal comprehensive (loss) income attributable to noncontrolling interests and Tompkins Financial Corporation	(42,997)		14,162
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	(32)		(32)		Less: Net income attributable to noncontrolling interests	(31)		(32)
Total comprehensive income attributable to Tompkins Financial Corporation		$	14,130	$	21,414
Total comprehensive (loss) income attributable to Tompkins Financial Corporation						Total comprehensive (loss) income attributable to Tompkins Financial Corporation	$	(43,028)	$	14,130


		Nine Months Ended					Nine Months Ended
(In thousands) (Unaudited)	(In thousands) (Unaudited)	9/30/2021		9/30/2020		(In thousands) (Unaudited)	9/30/2022		9/30/2021
Net income attributable to noncontrolling interests and Tompkins Financial Corporation	Net income attributable to noncontrolling interests and Tompkins Financial Corporation	$	69,895	$	53,711	Net income attributable to noncontrolling interests and Tompkins Financial Corporation	$	65,576	$	69,895
Other comprehensive income, net of tax:	Other comprehensive income, net of tax:					Other comprehensive income, net of tax:

Available-for-sale debt securities:	Available-for-sale debt securities:					Available-for-sale debt securities:
Change in net unrealized gain/(loss) during the period		(24,609)		18,563
Reclassification adjustment for net realized gain on sale of available-for-sale debt securities included in net income		(208)		(324)
Change in net unrealized loss during the period						Change in net unrealized loss during the period	(188,727)		(24,609)
Reclassification adjustment for net realized loss (gain) on sale of available-for-sale debt securities included in net income						Reclassification adjustment for net realized loss (gain) on sale of available-for-sale debt securities included in net income	37		(208)

Employee benefit plans:	Employee benefit plans:					Employee benefit plans:

Amortization of net retirement plan actuarial loss	Amortization of net retirement plan actuarial loss	1,671		1,340		Amortization of net retirement plan actuarial loss	1,280		1,671
Amortization of net retirement plan prior service cost	Amortization of net retirement plan prior service cost	126		121		Amortization of net retirement plan prior service cost	123		126

Other comprehensive (loss) income		(23,020)		19,700
Other comprehensive loss						Other comprehensive loss	(187,287)		(23,020)

Subtotal comprehensive income attributable to noncontrolling interests and Tompkins Financial Corporation		46,875		73,411
Subtotal comprehensive (loss) income attributable to noncontrolling interests and Tompkins Financial Corporation						Subtotal comprehensive (loss) income attributable to noncontrolling interests and Tompkins Financial Corporation	(121,711)		46,875
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	(96)		(101)		Less: Net income attributable to noncontrolling interests	(94)		(96)
Total comprehensive income attributable to Tompkins Financial Corporation		$	46,779	$	73,310
Total comprehensive (loss) income attributable to Tompkins Financial Corporation						Total comprehensive (loss) income attributable to Tompkins Financial Corporation	$	(121,805)	$	46,779

See notes to unaudited consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


		Nine Months Ended					Nine Months Ended
(In thousands) (Unaudited)	(In thousands) (Unaudited)	9/30/2021		9/30/2020		(In thousands) (Unaudited)	9/30/2022		9/30/2021
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income attributable to Tompkins Financial Corporation	Net income attributable to Tompkins Financial Corporation	$	69,799	$	53,610	Net income attributable to Tompkins Financial Corporation	$	65,482	$	69,799
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
(Credit) provision for credit loss expense		(6,133)		17,418
Provision (credit) for credit loss expense						Provision (credit) for credit loss expense	1,392		(6,133)
Depreciation and amortization of premises, equipment, and software	Depreciation and amortization of premises, equipment, and software	7,696		7,654		Depreciation and amortization of premises, equipment, and software	7,977		7,696
Amortization of intangible assets	Amortization of intangible assets	988		1,120		Amortization of intangible assets	655		988
Earnings from corporate owned life insurance	Earnings from corporate owned life insurance	(1,478)		(1,617)		Earnings from corporate owned life insurance	(357)		(1,478)
Net amortization on securities	Net amortization on securities	9,360		7,233		Net amortization on securities	4,512		9,360
Amortization/accretion related to purchase accounting	Amortization/accretion related to purchase accounting	1,187		(743)		Amortization/accretion related to purchase accounting	(712)		1,187
Net gain on securities transactions		(257)		(446)
Net loss (gain) on securities transactions						Net loss (gain) on securities transactions	179		(257)
Penalties on prepayment of FHLB borrowings	Penalties on prepayment of FHLB borrowings	2,929		0		Penalties on prepayment of FHLB borrowings	0		2,929
Net gain on sale of loans originated for sale	Net gain on sale of loans originated for sale	(878)		(1,245)		Net gain on sale of loans originated for sale	(140)		(878)
Proceeds from sale of loans originated for sale	Proceeds from sale of loans originated for sale	28,623		36,568		Proceeds from sale of loans originated for sale	7,468		28,623
Loans originated for sale	Loans originated for sale	(23,378)		(38,484)		Loans originated for sale	(7,123)		(23,378)
Net loss (gain) on sale of bank premises and equipment		11		(3)
Net (gain) loss on sale of bank premises and equipment						Net (gain) loss on sale of bank premises and equipment	(92)		11

Net excess tax benefit from stock based compensation	Net excess tax benefit from stock based compensation	346		118		Net excess tax benefit from stock based compensation	42		346
Stock-based compensation expense	Stock-based compensation expense	3,845		3,372		Stock-based compensation expense	3,062		3,845
Decrease (increase) in accrued interest receivable		8,675		(18,919)
Decrease in accrued interest receivable						Decrease in accrued interest receivable	514		8,675
Decrease in accrued interest payable	Decrease in accrued interest payable	(827)		(785)		Decrease in accrued interest payable	(20)		(827)

Other, net	Other, net	(9,154)		(3,535)		Other, net	(516)		(9,154)
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	91,354		61,316		Net Cash Provided by Operating Activities	82,323		91,354
INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Proceeds from maturities, calls and principal paydowns of available-for-sale debt securities	Proceeds from maturities, calls and principal paydowns of available-for-sale debt securities	377,593		405,886		Proceeds from maturities, calls and principal paydowns of available-for-sale debt securities	179,305		377,593
Proceeds from sales of available-for-sale debt securities	Proceeds from sales of available-for-sale debt securities	142,679		42,333		Proceeds from sales of available-for-sale debt securities	24,621		142,679

Purchases of available-for-sale debt securities	Purchases of available-for-sale debt securities	(1,002,004)		(799,039)		Purchases of available-for-sale debt securities	(154,798)		(1,002,004)
Purchases of held-to-maturity securities	Purchases of held-to-maturity securities	(269,225)		0		Purchases of held-to-maturity securities	(28,320)		(269,225)
Net decrease (increase) in loans		160,532		(478,455)
Net (increase) decrease in loans						Net (increase) decrease in loans	(132,051)		160,532
Proceeds from sale/redemptions of Federal Home Loan Bank stock	Proceeds from sale/redemptions of Federal Home Loan Bank stock	9,182		41,169		Proceeds from sale/redemptions of Federal Home Loan Bank stock	57,152		9,182
Purchases of Federal Home Loan Bank and other stock	Purchases of Federal Home Loan Bank and other stock	(3,166)		(25,393)		Purchases of Federal Home Loan Bank and other stock	(55,312)		(3,166)
Proceeds from sale of bank premises and equipment	Proceeds from sale of bank premises and equipment	63		4		Proceeds from sale of bank premises and equipment	188		63
Purchases of bank premises, equipment and software	Purchases of bank premises, equipment and software	(3,315)		(2,894)		Purchases of bank premises, equipment and software	(6,188)		(3,315)
Redemption of corporate owned life insurance	Redemption of corporate owned life insurance	169		446		Redemption of corporate owned life insurance	0		169

Other, net	Other, net	124		398		Other, net	(142)		124
Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(587,368)		(815,545)		Net Cash Used in Investing Activities	(115,545)		(587,368)
FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Net increase in demand, money market, and savings deposits	Net increase in demand, money market, and savings deposits	723,881		1,356,930		Net increase in demand, money market, and savings deposits	185,353		723,881
Net (decrease) increase in time deposits		(70,358)		31,856
Net decrease in Federal funds purchased and securities sold under agreements to repurchase		6,645		3,227
Net decrease in time deposits						Net decrease in time deposits	(39,691)		(70,358)
Net (decrease) increase in Federal funds purchased and securities sold under agreements to repurchase						Net (decrease) increase in Federal funds purchased and securities sold under agreements to repurchase	(11,447)		6,645
Increase in other borrowings	Increase in other borrowings	0		74,583		Increase in other borrowings	235,600		0
Repayment of other borrowings	Repayment of other borrowings	(157,929)		(447,683)		Repayment of other borrowings	(258,600)		(157,929)

Redemption of trust preferred debentures	Redemption of trust preferred debentures	(15,150)		0		Redemption of trust preferred debentures	0		(15,150)
Cash dividends	Cash dividends	(24,060)		(23,296)		Cash dividends	(24,874)		(24,060)

Repurchase of common stock	Repurchase of common stock	(21,177)		(5,620)		Repurchase of common stock	(15,430)		(21,177)
Shares issued for dividend reinvestment plan	Shares issued for dividend reinvestment plan	2		1,529		Shares issued for dividend reinvestment plan	0		2

Shares issued for employee stock ownership plan						Shares issued for employee stock ownership plan	2,951		0
Net shares issued related to restricted stock awards	Net shares issued related to restricted stock awards	(122)		(292)		Net shares issued related to restricted stock awards	(80)		(122)
Net proceeds from exercise of stock options	Net proceeds from exercise of stock options	(693)		(248)		Net proceeds from exercise of stock options	(55)		(693)
Net Cash Provided by Financing Activities	Net Cash Provided by Financing Activities	441,039		990,986		Net Cash Provided by Financing Activities	73,727		441,039
Net (Decrease) Increase in Cash and Cash Equivalents		(54,975)		236,757
Net Increase (Decrease) in Cash and Cash Equivalents						Net Increase (Decrease) in Cash and Cash Equivalents	40,505		(54,975)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	388,462		137,982		Cash and cash equivalents at beginning of period	63,107		388,462
Total Cash and Cash Equivalents at End of Period	Total Cash and Cash Equivalents at End of Period	$	333,487	$	374,739	Total Cash and Cash Equivalents at End of Period	$	103,612	$	333,487

See notes to unaudited consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


		Nine Months Ended					Nine Months Ended
(In thousands) (Unaudited)	(In thousands) (Unaudited)	9/30/2021		9/30/2020		(In thousands) (Unaudited)	9/30/2022		9/30/2021
Supplemental Information:	Supplemental Information:					Supplemental Information:
Cash paid during the year for - Interest	Cash paid during the year for - Interest	$	15,935	$	24,626	Cash paid during the year for - Interest	$	11,203	$	15,935
Cash paid during the year for - Taxes	Cash paid during the year for - Taxes	23,386		16,243		Cash paid during the year for - Taxes	17,540		23,386
Transfer of loans to other real estate owned	Transfer of loans to other real estate owned	46		192		Transfer of loans to other real estate owned	315		46
Initial recognition of operating lease right-of-use assets		1,072		0
Initial recognition of operating lease liabilities		1,072		0

Right-of-use assets obtained in exchange for new lease liabilities	Right-of-use assets obtained in exchange for new lease liabilities	1,204		1,230		Right-of-use assets obtained in exchange for new lease liabilities	2,488		1,204

See notes to unaudited consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(In thousands except share and per share data) (Unaudited)	(In thousands except share and per share data) (Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock		Non- controlling Interests		Total		(In thousands except share and per share data) (Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock		Non- controlling Interests		Total
Balances at July 1, 2020		$	1,495	$	335,268	$	386,025	$	(21,048)	$	(5,187)	$	1,476	$	698,029
Net income attributable to noncontrolling interests and Tompkins Financial Corporation						24,230						32		24,262
Other comprehensive income								(2,816)						(2,816)
Total Comprehensive Income														21,446
Cash dividends ($0.52 per share)						(7,757)								(7,757)
Net exercise of stock options (417 shares)		0		(32)										(32)

Shares issued for dividend reinvestment plan (12,723 shares)		1		847										848
Stock-based compensation expense				1,078										1,078

Directors deferred compensation plan (2,776 shares)				168						(168)				0
Restricted stock activity (1,346 shares)				0										0

Partial repurchase of noncontrolling interest												(1)		(1)
Balances at September 30, 2020		$	1,496	$	337,329	$	402,498	$	(23,864)	$	(5,355)	$	1,507	$	713,611

Balances at July 1, 2021	Balances at July 1, 2021	$	1,487	$	327,881	$	450,773	$	(47,882)	$	(5,480)	$	1,474	$	728,253	Balances at July 1, 2021	$	1,487	$	327,881	$	450,773	$	(47,882)	$	(5,480)	$	1,474	$	728,253
Net income attributable to noncontrolling interests and Tompkins Financial Corporation	Net income attributable to noncontrolling interests and Tompkins Financial Corporation					21,342						32		21,374		Net income attributable to noncontrolling interests and Tompkins Financial Corporation					21,342						32		21,374
Other comprehensive loss	Other comprehensive loss							(7,212)						(7,212)		Other comprehensive loss							(7,212)						(7,212)
Total Comprehensive Income	Total Comprehensive Income													14,162		Total Comprehensive Income													14,162
Cash dividends ($0.54 per share)	Cash dividends ($0.54 per share)					(7,963)								(7,963)		Cash dividends ($0.54 per share)					(7,963)								(7,963)
Net exercise of stock options (3,276 shares)	Net exercise of stock options (3,276 shares)	0		(190)										(190)		Net exercise of stock options (3,276 shares)			(190)										(190)
Common stock repurchased and returned to unissued status (170,775 shares)	Common stock repurchased and returned to unissued status (170,775 shares)	(17)		(13,177)										(13,194)		Common stock repurchased and returned to unissued status (170,775 shares)	(17)		(13,177)										(13,194)

Stock-based compensation expense	Stock-based compensation expense			1,411										1,411		Stock-based compensation expense			1,411										1,411

Directors deferred compensation plan (1,977 shares)	Directors deferred compensation plan (1,977 shares)			154						(154)				0		Directors deferred compensation plan (1,977 shares)			154						(154)				0
Restricted stock activity (3,179 shares)	Restricted stock activity (3,179 shares)			(122)										(122)		Restricted stock activity (3,179 shares)			(122)										(122)

Balances at September 30, 2021	Balances at September 30, 2021	$	1,470	$	315,957	$	464,152	$	(55,094)	$	(5,634)	$	1,506	$	722,357	Balances at September 30, 2021	$	1,470	$	315,957	$	464,152	$	(55,094)	$	(5,634)	$	1,506	$	722,357

Balances at July 1, 2022																Balances at July 1, 2022	$	1,454	$	303,335	$	502,770	$	(178,869)	$	(5,847)	$	1,475	$	624,318
Net income attributable to noncontrolling interests and Tompkins Financial Corporation																Net income attributable to noncontrolling interests and Tompkins Financial Corporation					21,340						31		21,371
Other comprehensive loss																Other comprehensive loss							(64,368)						(64,368)
Total Comprehensive Loss																Total Comprehensive Loss													(42,997)
Cash dividends ($0.57 per share)																Cash dividends ($0.57 per share)					(8,240)								(8,240)
Net exercise of stock options (257 shares)																Net exercise of stock options (257 shares)			(13)										(13)
Common stock repurchased and returned to unissued status (18,182 shares)																Common stock repurchased and returned to unissued status (18,182 shares)	(2)		(1,300)										(1,302)

Stock-based compensation expense																Stock-based compensation expense			1,089										1,089

Directors deferred compensation plan (2,914 shares)																Directors deferred compensation plan (2,914 shares)			216						(216)				0
Restricted stock activity (2,922 shares)																Restricted stock activity (2,922 shares)			(51)										(51)

Adjustment to goodwill																Adjustment to goodwill			155		0								155

Balances at September 30, 2022																Balances at September 30, 2022	$	1,452	$	303,431	$	515,870	$	(243,237)	$	(6,063)	$	1,506	$	572,959


(In thousands except share and per share data)(Unaudited)	(In thousands except share and per share data)(Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock		Non- controlling Interests		Total		(In thousands except share and per share data)(Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock		Non- controlling Interests		Total
Balances at January 1, 2020		$	1,501	$	338,507	$	370,477	$	(43,564)	$	(5,279)	$	1,412	$	663,054
Impact of adoption of ASU 2016-13						1,707								1,707
Net income attributable to noncontrolling interests and Tompkins Financial Corporation						53,610						101		53,711
Other comprehensive income								19,700						19,700
Total Comprehensive Income														73,411
Cash dividends ($1.56 per share)						(23,296)								(23,296)
Net exercise of stock options (3,605 shares)				(248)										(248)
Common stock repurchased and returned to unissued status (71,288 shares)		(7)		(5,613)										(5,620)
Shares issued for dividend reinvestment plan (24,752 shares)		2		1,527										1,529
Stock-based compensation expense				3,372										3,372

Directors deferred compensation plan (2,088 shares)				76						(76)				0
Restricted stock activity (9,406 shares)				(292)										(292)

Partial repurchase of noncontrolling interest												(6)		(6)
Balances at September 30, 2020		$	1,496	$	337,329	$	402,498	$	(23,864)	$	(5,355)	$	1,507	$	713,611

Balances at January 1, 2021	Balances at January 1, 2021	$	1,496	$	333,976	$	418,413	$	(32,074)	$	(5,534)	$	1,412	$	717,689	Balances at January 1, 2021	$	1,496	$	333,976	$	418,413	$	(32,074)	$	(5,534)	$	1,412	$	717,689

Net income attributable to noncontrolling interests and Tompkins Financial Corporation	Net income attributable to noncontrolling interests and Tompkins Financial Corporation					69,799						96		69,895		Net income attributable to noncontrolling interests and Tompkins Financial Corporation					69,799						96		69,895
Other comprehensive loss	Other comprehensive loss							(23,020)						(23,020)		Other comprehensive loss							(23,020)						(23,020)
Total Comprehensive Income	Total Comprehensive Income													46,875		Total Comprehensive Income													46,875
Cash dividends ($1.62 per share)	Cash dividends ($1.62 per share)					(24,060)								(24,060)		Cash dividends ($1.62 per share)					(24,060)								(24,060)
Net exercise of stock options (11,386 shares)	Net exercise of stock options (11,386 shares)	1		(694)										(693)		Net exercise of stock options (11,386 shares)	1		(694)										(693)
Common stock repurchased and returned to unissued status (272,310 shares)	Common stock repurchased and returned to unissued status (272,310 shares)	(27)		(21,150)										(21,177)		Common stock repurchased and returned to unissued status (272,310 shares)	(27)		(21,150)										(21,177)
Shares issued for dividend reinvestment plan (32 shares)	Shares issued for dividend reinvestment plan (32 shares)	0		2										2		Shares issued for dividend reinvestment plan (32 shares)	0		2										2
Stock-based compensation expense	Stock-based compensation expense			3,845										3,845		Stock-based compensation expense			3,845										3,845

Directors deferred compensation plan (2,025 shares)	Directors deferred compensation plan (2,025 shares)			100						(100)				0		Directors deferred compensation plan (2,025 shares)			100						(100)				0
Restricted stock activity (8,392 shares)	Restricted stock activity (8,392 shares)			(122)										(122)		Restricted stock activity (8,392 shares)			(122)										(122)

Partial repurchase of noncontrolling interest	Partial repurchase of noncontrolling interest											(2)		(2)		Partial repurchase of noncontrolling interest											(2)		(2)
Balances at September 30, 2021	Balances at September 30, 2021	$	1,470	$	315,957	$	464,152	$	(55,094)	$	(5,634)	$	1,506	$	722,357	Balances at September 30, 2021	$	1,470	$	315,957	$	464,152	$	(55,094)	$	(5,634)	$	1,506	$	722,357

Balances at January 1, 2022																Balances at January 1, 2022	$	1,470	$	312,538	$	475,262	$	(55,950)	$	(5,791)	$	1,412	$	728,941

Net income attributable to noncontrolling interests and Tompkins Financial Corporation																Net income attributable to noncontrolling interests and Tompkins Financial Corporation					65,482						94		65,576
Other comprehensive loss																Other comprehensive loss							(187,287)						(187,287)
Total Comprehensive Loss																Total Comprehensive Loss													(121,711)
Cash dividends ($1.71 per share)																Cash dividends ($1.71 per share)					(24,874)								(24,874)
Net exercise of stock options (887 shares)																Net exercise of stock options (887 shares)			(55)										(55)
Common stock repurchased and returned to unissued status (197,979 shares)																Common stock repurchased and returned to unissued status (197,979 shares)	(20)		(15,410)										(15,430)

Stock-based compensation expense																Stock-based compensation expense			3,062										3,062
Shares issued for employee stock ownership plan (37,454 shares)																Shares issued for employee stock ownership plan (37,454 shares)	4		2,947										2,951
Directors deferred compensation plan (1,235 shares)																Directors deferred compensation plan (1,235 shares)			272						(272)				0
Restricted stock activity (17,606 shares)																Restricted stock activity (17,606 shares)	(2)		(78)										(80)
Adjustment to goodwill																Adjustment to goodwill			155										155

Balances at September 30, 2022																Balances at September 30, 2022	$	1,452	$	303,431	$	515,870	$	(243,237)	$	(6,063)	$	1,506	$	572,959

See notes to unaudited consolidated financial statements

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Business

Tompkins Financial Corporation ~~(“Tompkins”~~("Tompkins" or the ~~“Company”~~"Company") is headquartered in Ithaca, New York and is registered as a Financial Holding Company with the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended. The Company is a locally oriented, community-based financial services organization that offers a full array of products and services, including commercial and consumer banking, leasing, trust and investment management, financial planning and wealth management, and insurance services. ~~At September 30, 2021,~~Effective January 1, 2022, the Company had 4 wholly-owned banking subsidiaries: Tompkins Trust Company (the “Trust Company”), The Bank of Castile (DBA Tompkins Bank of Castile), Mahopac Bank (DBA Tompkins Mahopac Bank), and VIST Bank (DBA Tompkins VIST Bank). The Company’s banks have announced plans for a rebranding effort, pursuant to which the Company’s 4Company's four wholly-owned banking subsidiaries ~~will be~~were combined into one bank, with ~~The~~the Bank of of Castile, Mahopac Bank, and VIST Bank merging with and into Tompkins Trust ~~Company. The~~ Company ~~has received all applicable regulatory approvals, and~~(the "Trust Company") with the ~~combined bank will conduct business under~~Trust Company as the ~~“Tompkins” brand~~surviving institution. Immediately following the merger, the Trust Company changed its name ~~with a legal name of “Tompkins~~to Tompkins Community Bank.” At September 30, 2022, the Company had one wholly-owned banking subsidiary, Tompkins Community Bank. The Company also has a wholly-owned insurance agency subsidiary, Tompkins Insurance Agencies, Inc. (“("Tompkins ~~Insurance”~~Insurance"). ~~The Trust Company~~Tompkins Community Bank provides a full array of trust and investment services under the Tompkins Financial Advisors brand, including investment management, trust and estate, financial and tax planning as well as life, disability and long-term care insurance services. The Company’s principal offices are located at 118 E. Seneca Street, Ithaca, New York, 14850, and its telephone number is (888) 503-5753. The Company’s common stock is traded on the NYSE American under the symbol ~~“TMP.”~~"TMP."

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

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

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

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

2. Basis of Presentation

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

In management’s opinion, the unaudited consolidated financial statements reflect all adjustments of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year ended December 31, ~~2021.~~2022. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~

2021.

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

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

3. Securities

Available-for-Sale Debt Securities

The following ~~table summarizes~~tables summarize available-for-sale debt securities held by the Company at September 30, 2022 and December 31, 2021:


		Available-for-Sale Debt Securities									Available-for-Sale Debt Securities
September 30, 2021		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2022										September 30, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(In thousands)	(In thousands)									(In thousands)

U.S. Treasuries	U.S. Treasuries	$	140,373	$	2	$	1,447	$	138,928	U.S. Treasuries	$	191,108	$	0	$	24,504	$	166,604
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	813,833		6,001		9,491		810,343		Obligations of U.S. Government sponsored entities	828,313		0		98,285		730,028
Obligations of U.S. states and political subdivisions	Obligations of U.S. states and political subdivisions	107,912		2,144		145		109,911		Obligations of U.S. states and political subdivisions	95,162		0		12,101		83,061
Mortgage-backed securities – residential, issued by	Mortgage-backed securities – residential, issued by									Mortgage-backed securities – residential, issued by
U.S. Government agencies	U.S. Government agencies	88,135		1,607		422		89,320		U.S. Government agencies	61,553		9		6,503		55,059
U.S. Government sponsored entities	U.S. Government sponsored entities	919,745		8,267		12,008		916,004		U.S. Government sponsored entities	831,465		0		127,651		703,814

U.S. corporate debt securities	U.S. corporate debt securities	2,500		0		79		2,421		U.S. corporate debt securities	2,500		0		130		2,370
Total available-for-sale debt securities	Total available-for-sale debt securities	$	2,072,498	$	18,021	$	23,592	$	2,066,927	Total available-for-sale debt securities	$	2,010,101	$	9	$	269,174	$	1,740,936

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


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

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

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

Held-to-Maturity Debt Securities

The following ~~table summarizes~~tables summarize held-to-maturity debt securities held by the Company at September 30, 2022 and December 31, 2021:


		Held-to-Maturity Securities									Held-to-Maturity Securities
September 30, 2021		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2022										September 30, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(In thousands)	(In thousands)									(In thousands)
U.S. Treasuries	U.S. Treasuries	$	86,740	$	321	$	630	$	86,431	U.S. Treasuries	$	86,530	$	0	$	13,494	$	73,036
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	182,528		793		1,469		181,852		Obligations of U.S. Government sponsored entities	225,799		0		40,080		185,719

Total held-to-maturity debt securities	Total held-to-maturity debt securities	$	269,268	$	1,114	$	2,099	$	268,283	Total held-to-maturity debt securities	$	312,329	$	0	$	53,574	$	258,755

~~There were no held-to-maturity debt securities at December 31, 2020.~~


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

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

~~The available-for-sale portfolio also includes callable securities that may be called by the issuer prior to maturity.~~ The Company may from time to time sell debt securities from its available-for-sale portfolio. Realized gains on sales of available-for-sale debt securities were ~~$797,000~~$0 for the three and nine months ended September 30, 2022 and $796,000 and $1.1 million for the three and nine months ended September 30, ~~2021~~2021. Realized losses on sales of available-for-sale debt securities were $48,500 for both the three and $0nine months ended September 30, 2022, and ~~$178,000~~$851,000 for both the three and nine months ended September 30, 2021. Proceeds from the sale of available-for-sale debt securities were $24.6 million for the three and nine months ended September 30, ~~2020. Realized losses on available-for-sale debt securities were $851,000 for the three~~2022, and ~~nine months ended September 30, 2021 and $0 for the three and nine months ended September 30, 2020. Proceeds from the sale of available-for-sale debt securities were~~ $103.8 million and $142.7 million for the three and nine months ended September 30, 2021, ~~and $0 and $42.3 million for the three and nine months ended September 30, 2020.~~respectively. Sales of available-for-sale investment securities were the result of general investment portfolio and interest rate risk management. The Company's investment portfolio includes callable securities that may be called prior to maturity. There were no realized gains or losses on called available-for-sale debt securities for both the three and nine months ended September 30, 2022 and September 30, 2021. ~~Realized gains on called available-for-sale debt securities were $0~~The Company also recognized net losses of $46,900 and ~~$251,000~~$130,600 for the three and nine months ended September 30, ~~2020~~. ~~The Company also recognized~~2022, and net losses of $6,000 and $18,000 for the three and nine months ended September 30, 2021 ~~and net losses of $2,000 and net gains of $17,000 for the three and nine months ended September 30, 2020~~ on equity securities, reflecting the change in fair value.

The following table summarizes available-for-sale debt securities that had unrealized losses at September 30, ~~2021~~2022, and December 31, ~~2020.~~2021:


		Less than 12 Months				12 Months or Longer				Total
September 30, 2022														September 30, 2022	Less than 12 Months				12 Months or Longer				Total
(In thousands)	(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasuries	U.S. Treasuries	$	137,935	$	1,447	$	0	$	0	$	137,935	$	1,447	U.S. Treasuries	$	46,222	$	5,380	$	120,382	$	19,124	$	166,604	$	24,504
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	326,852		3,879		276,710		5,612		603,562		9,491		Obligations of U.S. Government sponsored entities	182,146		13,817		547,882		84,468		730,028		98,285
Obligations of U.S. states and political subdivisions	Obligations of U.S. states and political subdivisions	14,192		126		1,281		19		15,473		145		Obligations of U.S. states and political subdivisions	74,961		9,682		8,075		2,419		83,036		12,101

Mortgage-backed securities – residential, issued by	Mortgage-backed securities – residential, issued by													Mortgage-backed securities – residential, issued by
U.S. Government agencies	U.S. Government agencies	34,808		405		1,285		17		36,093		422		U.S. Government agencies	30,615		2,076		24,071		4,427		54,686		6,503
U.S. Government sponsored entities	U.S. Government sponsored entities	609,541		10,743		33,837		1,265		643,378		12,008		U.S. Government sponsored entities	233,738		25,929		470,077		101,722		703,815		127,651
U.S. corporate debt securities	U.S. corporate debt securities	0		0		2,421		79		2,421		79		U.S. corporate debt securities	0		0		2,370		130		2,370		130
Total available-for-sale debt securities	Total available-for-sale debt securities	$	1,123,328	$	16,600	$	315,534	$	6,992	$	1,438,862	$	23,592	Total available-for-sale debt securities	$	567,682	$	56,884	$	1,172,857	$	212,290	$	1,740,539	$	269,174

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 $ 310,711 $ 1,992 $ 0 $ 0 $ 310,711 $ 1,992
Obligations of U.S. states and political subdivisions 8,868 40 0 0 8,868 40
Mortgage-backed securities – residential, issued by
U.S. Government agencies 10,560 396 1,819 250 12,379 646
U.S. Government sponsored entities 87,643 586 5,068 89 92,711 675
U.S. corporate debt securities 0 0 2,379 121 2,379 121
Total available-for-sale debt securities $ 417,782 $ 3,014 $ 9,266 $ 460 $ 427,048 $ 3,474


December 31, 2021	Less than 12 Months				12 Months or Longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasuries	$	147,810	$	2,542	$	0	$	0	$	147,810	$	2,542
Obligations of U.S. Government sponsored entities	362,895		6,694		289,210		8,678		652,105		15,372
Obligations of U.S. states and political subdivisions	9,700		85		1,283		15		10,983		100

Mortgage-backed securities – residential, issued by
U.S. Government agencies	22,074		160		16,846		372		38,920		532
U.S. Government sponsored entities	553,351		11,440		84,537		2,841		637,888		14,281
U.S. corporate debt securities	0		0		2,424		76		2,424		76
Total available-for-sale debt securities	$	1,095,830	$	20,921	$	394,300	$	11,982	$	1,490,130	$	32,903

The following table summarizes held-to-maturity debt securities that had unrealized losses at September 30, ~~2021~~2022 and .December 31, 2021:


		Less than 12 Months				12 Months or Longer				Total
September 30, 2022														September 30, 2022	Less than 12 Months				12 Months or Longer				Total
(In thousands)	(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasuries	U.S. Treasuries	$	35,277	$	630	$	0	$	0	$	35,277	$	630	U.S. Treasuries	$	43,325	$	7,410	$	29,711	$	6,084	$	73,036	$	13,494
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	79,986		1,469		$	0	$	0	$	79,986	1,469		Obligations of U.S. Government sponsored entities	119,809		24,768		65,910		15,312		185,719		40,080
Total held-to-maturity debt securities	Total held-to-maturity debt securities	$	115,263	$	2,099	$	0	$	0	$	115,263	$	2,099	Total held-to-maturity debt securities	$	163,134	$	32,178	$	95,621	$	21,396	$	258,755	$	53,574

~~There were no held-to-maturity debt securities at December 31, 2020.~~


December 31, 2021	Less than 12 Months				12 Months or Longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasuries	$	35,280	$	600	$	0	$	0	$	35,280	$	600
Obligations of U.S. Government sponsored entities	84,592		1,789		0		0		84,592		1,789

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

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

Factors that may be indicative of ECL include, but are not limited to, the following:

• Extent to which the fair value is less than the amortized cost basis.

• Adverse conditions specifically related to the security, an industry, or geographic area (changes in technology,

business practice).

• Payment structure of the debt security with respect to underlying issuer or obligor.

• Failure of the issuer to make scheduled payment of principal and/or interest.

• Changes to the rating of a security or issuer by a nationally recognized statistical rating organization.

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

For available-for-sale debt securities in an unrealized loss position, the Company evaluates the securities to determine whether the decline in the fair value below the amortized cost basis (technical impairment) is the result of changes in interest rates or reflects a fundamental change in the credit worthiness of the underlying issuer. Any impairment that is not credit related is recognized in other comprehensive income (loss), net of applicable taxes. Credit-related impairment is recognized as an

allowance for credit losses ~~(“ACL”~~("ACL") on the Statement of Condition, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings. Both the ACL and the adjustment to net income may be reversed if conditions change.

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

U.S. government agencies such as Government National Mortgage Association. The total gross unrealized losses, shown in the tables above, were primarily attributable to changes in interest rates and levels of market liquidity, relative to when the investment securities were purchased, and not due to the credit-related quality of the investment securities. The Company does not have the intent to sell these securities and does not believe it is more likely than not that the Company will be required to sell these securities before a recovery of amortized cost.

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type with each type sharing similar risk characteristics and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management has made the accounting policy election to exclude accrued interest receivable on held-to-maturity debt securities from the estimate of credit losses. As of September 30, ~~2021,~~2022, the held-to-maturity portfolio consisted of U.S. Treasury securities and securities issued by U.S. government-sponsored enterprises, including The Federal National Mortgage Agency and the Federal Farm Credit Banks Funding Corporation. U.S. Treasury securities are backed by the full faith and credit of and/or guaranteed by the U.S. government, and it is expected that the securities will not be settled at prices less than the amortized cost bases of the securities. Securities issued by U.S. government agencies or U.S. government-sponsored enterprises carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as ~~“risk-free,”~~"risk-free," and have a long history of zero credit loss. As such, the Company did not record an allowance for credit losses for these securities as of September 30, 2022 or December 31, 2021.

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.


September 30, 2021
September 30, 2022						September 30, 2022
(In thousands)	(In thousands)	Amortized Cost		Fair Value		(In thousands)	Amortized Cost		Fair Value
Available-for-sale debt securities:	Available-for-sale debt securities:					Available-for-sale debt securities:
Due in one year or less	Due in one year or less	$	57,011	$	57,604	Due in one year or less	$	32,225	$	31,929
Due after one year through five years	Due after one year through five years	463,136		465,980		Due after one year through five years	572,260		520,304
Due after five years through ten years	Due after five years through ten years	487,701		481,464		Due after five years through ten years	470,646		398,123
Due after ten years	Due after ten years	56,770		56,555		Due after ten years	41,952		31,707
Total	Total	1,064,618		1,061,603		Total	1,117,083		982,063
Mortgage-backed securities	Mortgage-backed securities	1,007,880		1,005,324		Mortgage-backed securities	893,018		758,873
Total available-for-sale debt securities	Total available-for-sale debt securities	$	2,072,498	$	2,066,927	Total available-for-sale debt securities	$	2,010,101	$	1,740,936


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

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


September 30, 2022
(In thousands)	Amortized Cost		Fair Value
Held-to-maturity debt securities:


Due after five years through ten years	$	312,329	$	258,755
Total held-to-maturity debt securities	$	312,329	$	258,755

September 30, 2021
(In thousands) Amortized Cost Fair Value
Held-to-maturity debt securities:
Due after five years through ten years $ 269,268 $ 268,283
Total held-to-maturity debt securities $ 269,268 $ 268,283

~~There were no held-to-maturity debt securities at December 31, 2020.~~


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


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

The Company also holds non-marketable Federal Home Loan Bank New York ~~(“FHLBNY”) stock, non-marketable Federal Home Loan Bank Pittsburgh (“FHLBPITT”~~("FHLBNY") stock and non-marketable Atlantic Community Bankers Bank ("ACBB") stock, all of which are required to be held for regulatory purposes and for borrowing availability. The required investment in FHLB stock is tied to the Company’s borrowing levels with the FHLB. The required investment in FHLB stock is tied to the Company’s borrowing levels with the FHLB. Holdings of FHLBNY ~~stock, FHLBPITT~~ stock and ACBB stock totaled ~~$9.3 million, $1.0~~$9.1 million and $95,000, respectively, at September 30, ~~2021.~~2022. These securities are carried at par, which is also cost. The FHLBNY ~~and FHLBPITT continue~~continues to pay dividends and repurchase stock. Quarterly, we evaluate our investment in the FHLB for impairment. We evaluate recent and long-term operating performance, liquidity, funding and capital positions, stock repurchase history, dividend history and impact of legislative and regulatory changes. Based on our most recent evaluation, as of September 30, ~~2021,~~2022, we determined that no impairment write-downs were required.

4. Loans and Leases

Loans and leases at September 30, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


(In thousands)	(In thousands)	9/30/2021		12/31/2020		(In thousands)	9/30/2022		12/31/2021
Commercial and industrial	Commercial and industrial					Commercial and industrial
Agriculture	Agriculture	$	78,335	$	94,489	Agriculture	$	66,576	$	99,172
Commercial and industrial other	Commercial and industrial other	727,944		792,987		Commercial and industrial other	718,726		699,121
PPP loans*	PPP loans*	141,930		291,252		PPP loans*	875		71,260
Subtotal commercial and industrial	Subtotal commercial and industrial	948,209		1,178,728		Subtotal commercial and industrial	786,177		869,553
Commercial real estate	Commercial real estate					Commercial real estate
Construction	Construction	170,646		163,016		Construction	199,144		178,582
Agriculture	Agriculture	192,183		201,866		Agriculture	210,140		195,973
Commercial real estate other	Commercial real estate other	2,253,190		2,204,310		Commercial real estate other	2,399,951		2,278,599
Subtotal commercial real estate	Subtotal commercial real estate	2,616,019		2,569,192		Subtotal commercial real estate	2,809,235		2,653,154
Residential real estate	Residential real estate					Residential real estate
Home equity	Home equity	185,625		200,827		Home equity	188,002		182,671
Mortgages	Mortgages	1,270,005		1,235,160		Mortgages	1,344,741		1,290,911
Subtotal residential real estate	Subtotal residential real estate	1,455,630		1,435,987		Subtotal residential real estate	1,532,743		1,473,582
Consumer and other	Consumer and other					Consumer and other
Indirect	Indirect	5,595		8,401		Indirect	2,712		4,655
Consumer and other	Consumer and other	66,694		61,399		Consumer and other	66,262		67,396
Subtotal consumer and other	Subtotal consumer and other	72,289		69,800		Subtotal consumer and other	68,974		72,051
Leases	Leases	14,337		14,203		Leases	15,749		13,948
Total loans and leases	Total loans and leases	5,106,484		5,267,910		Total loans and leases	5,212,878		5,082,288
Less: unearned income and deferred costs and fees	Less: unearned income and deferred costs and fees	(9,706)		(7,583)		Less: unearned income and deferred costs and fees	(4,442)		(6,821)
Total loans and leases, net of unearned income and deferred costs and fees	Total loans and leases, net of unearned income and deferred costs and fees	$	5,096,778	$	5,260,327	Total loans and leases, net of unearned income and deferred costs and fees	$	5,208,436	$	5,075,467
*SBA Paycheck Protection Program ("PPP")	*SBA Paycheck Protection Program ("PPP")					*SBA Paycheck Protection Program ("PPP")

The Company has adopted comprehensive lending policies, underwriting standards and loan review procedures. Management reviews these policies and procedures on a regular basis. The Company discussed its lending policies and underwriting guidelines for its various lending portfolios in Note 3 – ~~“Loans~~"Loans and ~~Leases”~~Leases" in the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. There have been no significant changes in these policies and guidelines since the date of that report. As such, these policies are reflective of new originations as well as those balances held at December 31, ~~2020.~~2021. 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 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 due are brought current, the borrower has established a payment history, and future payments are reasonably assured. When management determines that the collection of principal in full is not probable, management will charge-off a partial amount or full amount of the loan balance. Management considers specific facts and circumstances relative to each individual credit in making such a determination. For residential and consumer loans, management uses specific regulatory guidance and thresholds for determining charge-offs.

The below ~~table is~~tables are an age analysis of past due loans, segregated by class of loans, as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021:


September 30, 2021
September 30, 2022														September 30, 2022
(In thousands)	(In thousands)	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total Loans		(In thousands)	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total Loans
Loans and Leases	Loans and Leases													Loans and Leases
Commercial and industrial	Commercial and industrial													Commercial and industrial
Agriculture	Agriculture	$	29	$	0	$	0	$	29	$	78,306	$	78,335	Agriculture	$	0	$	0	$	0	$	0	$	66,576	$	66,576
Commercial and industrial other	Commercial and industrial other	459		4		424		887		727,057		727,944		Commercial and industrial other	37		400		185		622		718,104		718,726
PPP loans	PPP loans	0		0		0		0		141,930		141,930		PPP loans	31		0		0		31		844		875
Subtotal commercial and industrial	Subtotal commercial and industrial	488		4		424		916		947,293		948,209		Subtotal commercial and industrial	68		400		185		653		785,524		786,177
Commercial real estate	Commercial real estate													Commercial real estate
Construction	Construction	0		0		0		0		170,646		170,646		Construction	0		0		0		0		199,144		199,144
Agriculture	Agriculture	58		0		0		58		192,125		192,183		Agriculture	0		0		219		219		209,921		210,140
Commercial real estate other	Commercial real estate other	0		0		21,651		21,651		2,231,539		2,253,190		Commercial real estate other	0		0		12,722		12,722		2,387,229		2,399,951
Subtotal commercial real estate	Subtotal commercial real estate	58		0		21,651		21,709		2,594,310		2,616,019		Subtotal commercial real estate	0		0		12,941		12,941		2,796,294		2,809,235
Residential real estate	Residential real estate													Residential real estate
Home equity	Home equity	159		0		1,039		1,198		184,427		185,625		Home equity	307		306		1,226		1,839		186,163		188,002
Mortgages	Mortgages	93		365		5,325		5,783		1,264,222		1,270,005		Mortgages	0		1,342		6,417		7,759		1,336,982		1,344,741
Subtotal residential real estate	Subtotal residential real estate	252		365		6,364		6,981		1,448,649		1,455,630		Subtotal residential real estate	307		1,648		7,643		9,598		1,523,145		1,532,743
Consumer and other	Consumer and other													Consumer and other
Indirect	Indirect	91		77		155		323		5,272		5,595		Indirect	35		67		86		188		2,524		2,712
Consumer and other	Consumer and other	82		19		110		211		66,483		66,694		Consumer and other	571		64		94		729		65,533		66,262
Subtotal consumer and other	Subtotal consumer and other	173		96		265		534		71,755		72,289		Subtotal consumer and other	606		131		180		917		68,057		68,974
Leases	Leases	0		0		0		0		14,337		14,337		Leases	0		0		0		0		15,749		15,749
Total loans and leases	Total loans and leases	971		465		28,704		30,140		5,076,344		5,106,484		Total loans and leases	981		2,179		20,949		24,109		5,188,769		5,212,878
Less: unearned income and deferred costs and fees	Less: unearned income and deferred costs and fees	0		0		0		0		(9,706)		(9,706)		Less: unearned income and deferred costs and fees	0		0		0		0		(4,442)		(4,442)
Total loans and leases, net of unearned income and deferred costs and fees	Total loans and leases, net of unearned income and deferred costs and fees	$	971	$	465	$	28,704	$	30,140	$	5,066,638	$	5,096,778	Total loans and leases, net of unearned income and deferred costs and fees	$	981	$	2,179	$	20,949	$	24,109	$	5,184,327	$	5,208,436


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

The following ~~table presents~~tables present the amortized cost basis of loans on nonaccrual status and the amortized cost basis of loans on nonaccrual status for which there was no related allowance for credit ~~losses~~losses. The below tables are an age analysis of nonaccrual loans segregated by class of loans, as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021:


September 30, 2021
September 30, 2022								September 30, 2022
(In thousands)	(In thousands)	Nonaccrual Loans and Leases with no Allowance for Credit Losses		Nonaccrual Loans and Leases		Loans and Leases Past Due Over 89 Days and Accruing		(In thousands)	Nonaccrual Loans and Leases with no ACL		Nonaccrual Loans and Leases		Loans and Leases Past Due Over 89 Days and Accruing
Loans and Leases	Loans and Leases							Loans and Leases
Commercial and industrial	Commercial and industrial							Commercial and industrial

Commercial and industrial other	Commercial and industrial other	$	480	$	543	$	0	Commercial and industrial other	$	478	$	803	$	0
Subtotal commercial and industrial	Subtotal commercial and industrial	480		543		0		Subtotal commercial and industrial	478		803		0
Commercial real estate	Commercial real estate							Commercial real estate
Construction		675		675		0

Agriculture	Agriculture	377		487		0		Agriculture	219		219		0
Commercial real estate other	Commercial real estate other	24,518		33,860		7,463		Commercial real estate other	14,677		15,682		161
Subtotal commercial real estate	Subtotal commercial real estate	25,570		35,022		7,463		Subtotal commercial real estate	14,896		15,901		161
Residential real estate	Residential real estate							Residential real estate
Home equity	Home equity	188		2,427		0		Home equity	385		2,357		0
Mortgages	Mortgages	705		9,538		0		Mortgages	1,780		10,684		0
Subtotal residential real estate	Subtotal residential real estate	893		11,965		0		Subtotal residential real estate	2,165		13,041		0
Consumer and other	Consumer and other							Consumer and other
Indirect	Indirect	2		265		0		Indirect	0		151		0
Consumer and other	Consumer and other	0		146		0		Consumer and other	0		117		0
Subtotal consumer and other	Subtotal consumer and other	2		411		0		Subtotal consumer and other	0		268		0
Leases		0		0		0

Total loans and leases	Total loans and leases	$	26,945	$	47,941	$	7,463	Total loans and leases	$	17,539	$	30,013	$	161


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

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

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

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

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

The Company recognized $0 of interest income on nonaccrual loans during the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

5. Allowance for Credit Losses

Management reviews the appropriateness of the allowance for credit losses ~~(“allowance”~~("allowance" or "ACL") on a regular basis. Management considers the accounting policy relating to the allowance to be a critical accounting policy, given the inherent uncertainty in evaluating the levels of the allowance required to cover credit losses in the portfolio and the material effect that assumptions could have on the Company’s results of operations. The Company has developed a methodology to measure the amount of estimated credit loss exposure inherent in the loan portfolio to assure that an appropriate allowance is maintained. The Company’s methodology is based upon guidance provided in SEC Staff Accounting Bulletin No. 119, Measurement of Credit Losses on Financial Instruments ("CECL"), and Financial Instruments - Credit Losses and ASC Topic 326, Financial Instruments - Credit Losses (ASU 2016-3).

The Company uses a discounted cash flow ("DCF") method to estimate expected credit losses for all loan segments excluding the leasing segment. For each of these loan segments, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, recovery lag, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on internal historical data.

The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers. For all loans utilizing the DCF method, management utilizes forecasts of national unemployment and a one year percentage change in national gross domestic product as loss drivers in the model.

For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over eight quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics.

The combination of adjustments for credit expectations and timing expectations produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce a net present value of expected cash flows ("NPV"). An ACL is established for the difference between the NPV and amortized cost basis.

Since the methodology is based upon historical experience and trends, current conditions, and reasonable and supportable forecasts, as well as management’s judgment, factors may arise that result in different estimates. While management’s evaluation of the allowance as of September 30, ~~2021,~~2022, considers the allowance to be appropriate, under certain conditions or assumptions, the Company would need to increase or decrease the allowance. In addition, various federal and State regulatory agencies, as part of their examination process, review the Company's allowance and may require the Company to recognize additions to the allowance based on their judgements and information available to them at the time of their examinations.

Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans, and commercial letters of credit. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancellable, through a charge to credit loss expense for off-balance sheet credit exposures included in provision expense in the Company's consolidated statements of income.

The following table details activity in the allowance for credit losses on loans for the three and nine months ended September 30, ~~2021~~2022 and ~~2020. The Company adopted ASU 2016-13 on January 1, 2020 using the modified retrospective approach. The transition adjustment included a decrease in the allowance of $2.5 million.~~2021. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.


Three Months Ended September 30, 2021
Three Months Ended September 30, 2022														Three Months Ended September 30, 2022
(In thousands)	(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total		(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for credit losses:	Allowance for credit losses:													Allowance for credit losses:
Beginning balance	Beginning balance	$	7,113	$	29,201	$	9,534	$	1,590	$	67	$	47,505	Beginning balance	$	7,814	$	23,227	$	11,082	$	1,591	$	79	$	43,793
Charge-offs	Charge-offs	(157)		0		0		(53)		0		(210)		Charge-offs	(343)		0		51		(132)		0		(424)
Recoveries	Recoveries	16		2		65		58		0		141		Recoveries	106		105		8		83		0		302
(Credit) provision for credit loss expense	(Credit) provision for credit loss expense	(774)		(119)		(184)		(99)		(1)		(1,177)		(Credit) provision for credit loss expense	(1,053)		3,207		(698)		(362)		7		1,101
Ending Balance	Ending Balance	$	6,198	$	29,084	$	9,415	$	1,496	$	66	$	46,259	Ending Balance	$	6,524	$	26,539	$	10,443	$	1,180	$	86	$	44,772


Three Months Ended September 30, 2020
Three Months Ended September 30, 2021														Three Months Ended September 30, 2021
(In thousands)	(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total		(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for credit losses:	Allowance for credit losses:													Allowance for credit losses:
Beginning balance	Beginning balance	$	11,113	$	24,286	$	15,012	$	1,596	$	75	$	52,082	Beginning balance	$	7,113	$	29,201	$	9,534	$	1,590	$	67	$	47,505
Charge-offs	Charge-offs	0		0		(30)		(145)		0		(175)		Charge-offs	(157)		0		0		(53)		0		(210)
Recoveries	Recoveries	89		9		16		73		0		187		Recoveries	16		2		65		58		0		141
(Credit) provision for credit loss expense	(Credit) provision for credit loss expense	(3,918)		4,264		(65)		(75)		(7)		199		(Credit) provision for credit loss expense	(774)		(119)		(184)		(99)		(1)		(1,177)
Ending Balance	Ending Balance	$	7,284	$	28,559	$	14,933	$	1,449	$	68	$	52,293	Ending Balance	$	6,198	$	29,084	$	9,415	$	1,496	$	66	$	46,259


Nine Months Ended September 30, 2021
Nine Months Ended September 30, 2022														Nine Months Ended September 30, 2022
(In thousands)	(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total		(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for credit losses:	Allowance for credit losses:													Allowance for credit losses:
Beginning balances		$	9,239	$	30,546	$	10,257	$	1,562	$	65	$	51,669
Beginning balance														Beginning balance	$	6,335	$	24,813	$	10,139	$	1,492	$	64	$	42,843
Charge-offs	Charge-offs	(274)		0		(51)		(218)		0		(543)		Charge-offs	(366)		(50)		0		(410)		0		(826)
Recoveries	Recoveries	116		1,040		229		153		0		1,538		Recoveries	132		910		315		251		0		1,608
(Credit) provision for credit loss expense	(Credit) provision for credit loss expense	(2,883)		(2,502)		(1,020)		(1)		1		(6,405)		(Credit) provision for credit loss expense	423		866		(11)		(153)		22		1,147
Ending Balance	Ending Balance	$	6,198	$	29,084	$	9,415	$	1,496	$	66	$	46,259	Ending Balance	$	6,524	$	26,539	$	10,443	$	1,180	$	86	$	44,772


Nine Months Ended September 30, 2020
Nine Months Ended September 30, 2021														Nine Months Ended September 30, 2021
(In thousands)	(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total		(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for credit losses:	Allowance for credit losses:													Allowance for credit losses:
Beginning balance, prior to adoption of ASC 326		$	10,541	$	21,608	$	6,381	$	1,362	$	0	$	39,892
Impact of adopting ASC 326		(2,008)		(5,917)		4,459		850		82		(2,534)
Beginning balance														Beginning balance	$	9,239	$	30,546	$	10,257	$	1,562	$	65	$	51,669
Charge-offs	Charge-offs	(1)		(1,305)		(33)		(409)		0		(1,748)		Charge-offs	(274)		0		(51)		(218)		0		(543)
Recoveries	Recoveries	125		40		178		195		0		538		Recoveries	116		1,040		229		153		0		1,538
(Credit) provision for credit loss expense	(Credit) provision for credit loss expense	(1,373)		14,133		3,948		(549)		(14)		16,145		(Credit) provision for credit loss expense	(2,883)		(2,502)		(1,020)		(1)		1		(6,405)
Ending Balance	Ending Balance	$	7,284	$	28,559	$	14,933	$	1,449	$	68	$	52,293	Ending Balance	$	6,198	$	29,084	$	9,415	$	1,496	$	66	$	46,259

~~At September 30, 2021 and December 31, 2020,~~The following table details activity in the ~~balance of the allowance~~liabilities for ~~credit losses for off-balance sheet exposures was $2.2 million and $1.9 million, respectively. The Company recorded a provision credit of $55,000 and a provision expense of $272,000 related to~~ off-balance sheet credit exposures for the ~~third quarter of 2021~~three and ~~for the~~ nine months ended September 30, ~~2021, respectively, compared to a provision credit of $417,000~~2022 and ~~provision expense of $1.3 million, respectively, for the same periods in 2020.~~2021:


Three Months Ended September 30,
(In thousands)	2022		2021
Liabilities for off-balance sheet credit exposures at beginning of period	$	2,796	$	2,247
Credit for credit loss expense related to off-balance sheet credit exposures	(45)		(55)
Liabilities for off-balance sheet credit exposures at end of period	$	2,751	$	2,192


Nine Months Ended September 30,
(In thousands)	2022		2021
Liabilities for off-balance sheet credit exposures at beginning of period	$	2,506	$	1,920

Provision for credit loss expense related to off-balance sheet credit exposures	245		272
Liabilities for off-balance sheet credit exposures at end of period	$	2,751	$	2,192

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:


(In thousands)	(In thousands)	Real Estate		Business Assets		Other		Total		ACL Allocation		(In thousands)	Real Estate		Business Assets		Other		Total		ACL Allocation
September 30, 2021
September 30, 2022												September 30, 2022
Commercial and Industrial	Commercial and Industrial	$	107	$	461	$	328	$	896	$	29	Commercial and Industrial	$	435	$	335	$	172	$	942	$	159
Commercial Real Estate	Commercial Real Estate	36,494		0		2		36,496		3,180		Commercial Real Estate	12,268		0		2,628		14,896		0

Commercial Real Estate - Agriculture												Commercial Real Estate - Agriculture	1,525		0		0		1,525		0
Residential Real Estate												Residential Real Estate	335		0		0		335		28
Total	Total	$	36,601	$	461	$	330	$	37,392	$	3,209	Total	$	14,563	$	335	$	2,800	$	17,698	$	187

(In thousands) Real Estate Business Assets Other Total ACL Allocation
December 31, 2020
Commercial and Industrial $ 103 $ 582 $ 110 $ 795 $ 122
Commercial Real Estate 24,277 1,418 0 25,695 186
Total $ 24,380 $ 2,000 $ 110 $ 26,490 $ 308


(In thousands)	Real Estate		Business Assets		Other		Total		ACL Allocation
December 31, 2021
Commercial and Industrial	$	142	$	395	$	328	$	865	$	26
Commercial Real Estate	13,334		0		1,931		15,265		40

Residential Real Estate	32		0		0		32		1
Total	$	13,508	$	395	$	2,259	$	16,162	$	67

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

The following tables present information on loans modified in a TDR during the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. Post-modification amounts are presented as of September 30, ~~2021~~2022 and September 30, ~~2020.~~2021.


September 30, 2021		Three Months Ended
September 30, 2022										September 30, 2022	Three Months Ended
							Defaulted TDRs2									Defaulted TDRs2
(In thousands)	(In thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Post-Modification Outstanding Recorded Investment		(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	Residential real estate									Residential real estate
Home equity1		1	$	112	$	112	1	$	201
Residential real estate1										Residential real estate1	6	$	608	$	608	0	$	0

Total	Total	1	$	112	$	112	1	$	201	Total	6	$	608	$	608	0	$	0

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

2 TDRs that defaulted during the three months ended September 30, ~~2021~~2022 that were restructured in the prior twelve months.

September 30, 2020 Three Months Ended
Defaulted TDRs2
(In thousands) Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Loans Post-Modification Outstanding Recorded Investment
Commercial & industrial
Commercial real estate other1
1 $ 196 $ 196 0 $ 0
Consumer and other
Consumer and other1
1 4 4 0 0
Total 2 $ 200 $ 200 0 $ 0


September 30, 2021	Three Months Ended
						Defaulted TDRs2
(In thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Post-Modification Outstanding Recorded Investment




Residential real estate
Home equity1	1	$	112	$	112	1	$	201


Total	1	$	112	$	112	1	$	201

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

2 TDRs that defaulted during the three months ended September 30, ~~2020~~2021 that were restructured in the prior twelve months.


September 30, 2022	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
Mortgages1	6	$	608	$	608	0	$	0



Total	6	$	608	$	608	0	$0

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

2 TDRs that defaulted during the nine months ended September 30, 2022 that were restructured in the prior twelve months.


September 30, 2021	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	1	$	112	$	112	1	$	201


Total	1	$	112	$	112	1	$	201

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

2 TDRs that defaulted during the nine months ended September 30, 2021 ~~that were restructured in the prior twelve months.~~

Nine Months Ended
September 30, 2020
Defaulted TDRs2
(In thousands) Number of
Loans Pre-
Modification
Outstanding
Recorded
Investment Post-Modification Outstanding Recorded Investment Number of
Loans Post-
Modification
Outstanding
Recorded
Investment
Commercial real estate
Commercial real estate other1
1 $ 196 $ 196 1 $ 37
Residential real estate
Home equity1
2 121 121 0 87
Consumer and other
Consumer and other1
1 4 4 0 0
Total 4 $ 321 $ 321 2 $ 124

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

2~~TDRs that defaulted during the nine months ended September 30, 2020~~ that were restructured in the prior twelve months.

The following table presents credit quality indicators by total loans on an amortized cost basis by origination year as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021:


September 30, 2021
September 30, 2022																				September 30, 2022
(In thousands)	(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans		(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans
Commercial & Industrial - Other:
Commercial and Industrial - Other:																				Commercial and Industrial - Other:
Pass	Pass	$	99,129	$	62,023	$	57,126	$	46,264	$	43,901	$	264,656	$	138,153	$	9,713	$	720,965	Pass	$	105,118	$	100,909	$	43,941	$	45,679	$	36,484	$	162,074	$	208,925	$	3,849	$	706,979
Special Mention	Special Mention	164		815		532		141		310		523		705		0		3,190		Special Mention	0		135		455		275		11		1,432		764		0		3,072
Substandard	Substandard	0		383		298		731		231		680		1,466		0		3,789		Substandard	0		119		474		39		454		519		7,070		0		8,675
Total Commercial & Industrial - Other		$	99,293	$	63,221	$	57,956	$	47,136	$	44,442	$	265,859	$	140,324	$	9,713	$	727,944
Total Commercial and Industrial - Other																				Total Commercial and Industrial - Other	$	105,118	$	101,163	$	44,870	$	45,993	$	36,949	$	164,025	$	216,759	$	3,849	$	718,726

Commercial and Industrial - PPP:	Commercial and Industrial - PPP:																			Commercial and Industrial - PPP:
Pass	Pass	$	139,564	$	2,366	$	0	$	0	$	0	$	0	$	0	$	0	$	141,930	Pass	$	0	$	498	$	377	$	0	$	0	$	0	$	0	$	0	$	875
Special Mention	Special Mention	0		0		0		0		0		0		0		0		0		Special Mention	0		0		0		0		0		0		0		0		0
Substandard	Substandard	0		0		0		0		0		0		0		0		0		Substandard	0		0		0		0		0		0		0		0		0
Total Commercial and Industrial - PPP	Total Commercial and Industrial - PPP	$	139,564	$	2,366	$	0	$	0	$	0	$	0	$	0	$	0	$	141,930	Total Commercial and Industrial - PPP	$	0	$	498	$	377	$	0	$	0	$	0	$	0	$	0	$	875

Commercial and Industrial - Agriculture:	Commercial and Industrial - Agriculture:																			Commercial and Industrial - Agriculture:
Pass	Pass	$	4,615	$	7,736	$	6,035	$	9,497	$	6,239	$	3,590	$	35,276	$	566	$	73,554	Pass	$	11,505	$	4,460	$	5,359	$	4,528	$	8,132	$	5,610	$	22,960	$	239	$	62,793
Special Mention	Special Mention	0		0		0		24		0		0		225		0		249		Special Mention	0		0		0		0		0		0		0		0		0
Substandard	Substandard	0		89		17		0		106		2,328		1,992		0		4,532		Substandard	0		0		74		0		0		2,298		1,411		0		3,783
Total Commercial and Industrial - Agriculture	Total Commercial and Industrial - Agriculture	$	4,615	$	7,825	$	6,052	$	9,521	$	6,345	$	5,918	$	37,493	$	566	$	78,335	Total Commercial and Industrial - Agriculture	$	11,505	$	4,460	$	5,433	$	4,528	$	8,132	$	7,908	$	24,371	$	239	$	66,576

Commercial Real Estate	Commercial Real Estate																			Commercial Real Estate
Pass	Pass	$	229,984	$	269,752	$	255,296	$	205,093	$	226,830	$	824,671	$	56,018	$	33,366	$	2,101,010	Pass	$	276,588	$	362,770	$	312,387	$	279,146	$	206,351	$	836,400	$	10,778	$	25,170	$	2,309,590
Special Mention	Special Mention	0		1,774		11,982		3,151		2,190		74,499		360		0		93,956		Special Mention	643		3,427		1,700		11,542		2,965		43,006		0		0		63,283
Substandard	Substandard	0		0		5,012		18,472		8,516		26,051		173		0		58,224		Substandard	83		112		0		3,572		2,250		20,920		141		0		27,078
Total Commercial Real Estate	Total Commercial Real Estate	$	229,984	$	271,526	$	272,290	$	226,716	$	237,536	$	925,221	$	56,551	$	33,366	$	2,253,190	Total Commercial Real Estate	$	277,314	$	366,309	$	314,087	$	294,260	$	211,566	$	900,326	$	10,919	$	25,170	$	2,399,951

Commercial Real Estate - Agriculture:	Commercial Real Estate - Agriculture:																			Commercial Real Estate - Agriculture:
Pass	Pass	$	13,096	$	22,063	$	30,564	$	42,335	$	23,616	$	53,458	$	2,252	$	2,553	$	189,937	Pass	$	24,003	$	24,407	$	23,558	$	26,739	$	38,919	$	67,610	$	2,810	$	1,248	$	209,294
Special Mention	Special Mention	0		483		0		0		0		381		49		0		913		Special Mention	0		0		0				0		375		0		0		375
Substandard	Substandard	0		0		0		40		0		1,293		0		0		1,333		Substandard	0		0		0		219		38		214		0		0		471
Total Commercial Real Estate - Agriculture	Total Commercial Real Estate - Agriculture	$	13,096	$	22,546	$	30,564	$	42,375	$	23,616	$	55,132	$	2,301	$	2,553	$	192,183	Total Commercial Real Estate - Agriculture	$	24,003	$	24,407	$	23,558	$	26,958	$	38,957	$	68,199	$	2,810	$	1,248	$	210,140

Commercial Real Estate - Construction	Commercial Real Estate - Construction																			Commercial Real Estate - Construction
Pass	Pass	$	10,828	$	11,619	$	17,533	$	7,591	$	1,343	$	7,391	$	105,778	$	7,148	$	169,231	Pass	$	12,059	$	76,821	$	44,319	$	24,559	$	9,511	$	7,380	$	23,187	$	1,308	$	199,144
Special Mention	Special Mention	0		0		0		0		0		0		0		0		0		Special Mention	0		0		0		0		0		0		0		0		0
Substandard	Substandard	0		0		0		0		0		648		767		0		1,415		Substandard	0		0		0		0		0		0		0		0		0
Total Commercial Real Estate - Construction	Total Commercial Real Estate - Construction	$	10,828	$	11,619	$	17,533	$	7,591	$	1,343	$	8,039	$	106,545	$	7,148	$	170,646	Total Commercial Real Estate - Construction	$	12,059	$	76,821	$	44,319	$	24,559	$	9,511	$	7,380	$	23,187	$	1,308	$	199,144


December 31, 2020
December 31, 2021																				December 31, 2021
(In thousands)	(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans		(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans
Commercial & Industrial - Other:
Commercial and Industrial - Other:																				Commercial and Industrial - Other:
Internal risk grade:	Internal risk grade:																			Internal risk grade:
Pass	Pass	$	91,597	$	72,639	$	56,191	$	60,714	$	33,402	$	301,027	$	149,969	$	16,301	$	781,840	Pass	$	123,996	$	58,432	$	54,116	$	42,093	$	35,725	$	239,093	$	125,476	$	10,039	$	688,970
Special Mention	Special Mention	1,064		367		344		912		2,045		228		1,331		0		6,291		Special Mention	156		770		450		100		201		393		1,417		0		3,487
Substandard	Substandard	412		305		933		485		292		783		1,646		0		4,856		Substandard	179		584		47		575		0		637		4,642		0		6,664
Total Commercial & Industrial - Other		$	93,073	$	73,311	$	57,468	$	62,111	$	35,739	$	302,038	$	152,946	$	16,301	$	792,987
Total Commercial and Industrial - Other																				Total Commercial and Industrial - Other	$	124,331	$	59,786	$	54,613	$	42,768	$	35,926	$	240,123	$	131,535	$	10,039	$	699,121

Commercial and Industrial - Agriculture:	Commercial and Industrial - Agriculture:																			Commercial and Industrial - Agriculture:
Pass	Pass	$	11,536	$	8,005	$	11,162	$	6,531	$	3,539	$	2,599	$	41,936	$	1,340	$	86,648	Pass	$	8,573	$	6,782	$	5,700	$	10,136	$	6,867	$	3,186	$	53,145	$	595	$	94,984
Special Mention	Special Mention	0				28		729		0				2,080		0		2,837		Special Mention	0						23		0				0		0		23
Substandard	Substandard	99		83		0		202		0		2,308		2,312		0		5,004		Substandard	0		85		11		0		93		2,316		1,660		0		4,165
Total Commercial and Industrial - Agriculture	Total Commercial and Industrial - Agriculture	$	11,635	$	8,088	$	11,190	$	7,462	$	3,539	$	4,907	$	46,328	$	1,340	$	94,489	Total Commercial and Industrial - Agriculture	$	8,573	$	6,867	$	5,711	$	10,159	$	6,960	$	5,502	$	54,805	$	595	$	99,172

Commercial and Industrial - PPP:	Commercial and Industrial - PPP:																			Commercial and Industrial - PPP:
Pass	Pass	$	291,252	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	291,252	Pass	$	71,260	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	71,260
Special Mention	Special Mention	0		0		0		0		0		0		0		0		0		Special Mention	0		0		0		0		0		0		0		0		0
Substandard	Substandard	0		0		0		0		0		0		0		0		0		Substandard	0		0		0		0		0		0		0		0		0
Total Commercial and Industrial - PPP	Total Commercial and Industrial - PPP	$	291,252	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	291,252	Total Commercial and Industrial - PPP	$	71,260	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	71,260

Commercial Real Estate	Commercial Real Estate																			Commercial Real Estate
Pass	Pass	$	278,747	$	246,331	$	232,651	$	237,487	$	290,106	$	664,027	$	33,117	$	64,903	$	2,047,369	Pass	$	325,874	$	271,680	$	249,266	$	201,992	$	212,991	$	810,713	$	44,264	$	43,225	$	2,160,005
Special Mention	Special Mention	35		13,016		5,612		4,654		34,310		46,074		203		0		103,904		Special Mention	0		1,763		11,772		3,217		2,167		61,723		358		0		81,000
Substandard	Substandard	0		4,933		18,395		6,172		5,625		17,610		302		0		53,037		Substandard	3,482		0		2,262		2,518		8,509		20,401		422		0		37,594
Total Commercial Real Estate	Total Commercial Real Estate	$	278,782	$	264,280	$	256,658	$	248,313	$	330,041	$	727,711	$	33,622	$	64,903	$	2,204,310	Total Commercial Real Estate	$	329,356	$	273,443	$	263,300	$	207,727	$	223,667	$	892,837	$	45,044	$	43,225	$	2,278,599

Commercial Real Estate - Agriculture:	Commercial Real Estate - Agriculture:																			Commercial Real Estate - Agriculture:
Pass	Pass	$	22,440	$	35,081	$	44,519	$	22,356	$	17,081	$	44,559	$	919	$	5,602	$	192,557	Pass	$	23,151	$	21,856	$	28,943	$	41,064	$	23,195	$	50,809	$	1,949	$	2,850	$	193,817
Special Mention	Special Mention	1,960		0		575		1,366		1,053		6		49		0		5,009		Special Mention	0		479		0		0		0		350		35		0		864
Substandard	Substandard	0		0		0		1,777		713		1,527		283		0		4,300		Substandard	0		0		0		39		0		1,253		0		0		1,292
Total Commercial Real Estate - Agriculture	Total Commercial Real Estate - Agriculture	$	24,400	$	35,081	$	45,094	$	25,499	$	18,847	$	46,092	$	1,251	$	5,602	$	201,866	Total Commercial Real Estate - Agriculture	$	23,151	$	22,335	$	28,943	$	41,103	$	23,195	$	52,412	$	1,984	$	2,850	$	195,973

Commercial Real Estate - Construction	Commercial Real Estate - Construction																			Commercial Real Estate - Construction
Pass	Pass	$	14,465	$	20,705	$	7,999	$	2,478	$	1,879	$	6,682	$	85,513	$	21,051	$	160,772	Pass	$	12,840	$	10,025	$	16,325	$	7,542	$	1,274	$	6,559	$	112,537	$	10,037	$	177,139
Special Mention	Special Mention	0		0		0		0		0		467		1,453		0		1,920		Special Mention	0		0		0		0		0		0		0		0		0
Substandard	Substandard	0		0		0		0		0		324		0		0		324		Substandard	0		0		0		0		0		643		800		0		1,443
Total Commercial Real Estate - Construction	Total Commercial Real Estate - Construction	$	14,465	$	20,705	$	7,999	$	2,478	$	1,879	$	7,473	$	86,966	$	21,051	$	163,016	Total Commercial Real Estate - Construction	$	12,840	$	10,025	$	16,325	$	7,542	$	1,274	$	7,202	$	113,337	$	10,037	$	178,582

The following table presents credit quality indicators by total loans on an amortized cost basis by origination year as of September 30, ~~2021~~2022 and December 31, ~~2020, continued.~~2021, continued:


September 30, 2021
September 30, 2022																				September 30, 2022
(In thousands)	(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans		(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans

Residential - Home Equity	Residential - Home Equity																			Residential - Home Equity
Performing	Performing	$	1,395	$	1,246	$	3,157	$	1,719	$	1,728	$	3,446	$	165,588	$	4,919	$	183,198	Performing	$	1,603	$	1,115	$	671	$	1,026	$	839	$	3,442	$	175,683	$	1,267	$	185,646
Nonperforming	Nonperforming	0		0		16		0		0		596		1,815		0		2,427		Nonperforming	0		0		0		14		0		67		2,275		0		2,356
Total Residential - Home Equity	Total Residential - Home Equity	$	1,395	$	1,246	$	3,173	$	1,719	$	1,728	$	4,042	$	167,403	$	4,919	$	185,625	Total Residential - Home Equity	$	1,603	$	1,115	$	671	$	1,040	$	839	$	3,509	$	177,958	$	1,267	$	188,002

Residential - Mortgages	Residential - Mortgages																			Residential - Mortgages
Performing	Performing	$	233,145	$	289,745	$	168,894	$	104,697	$	132,204	$	317,803	$	13,062	$	917	$	1,260,467	Performing	$	159,027	$	274,096	$	244,259	$	120,582	$	67,999	$	468,094	$	0	$	0	$	1,334,057
Nonperforming	Nonperforming	0		0		242		568		696		8,006		26		0		9,538		Nonperforming	0		340		635		603		1,566		7,540		0		0		10,684
Total Residential - Mortgages	Total Residential - Mortgages	$	233,145	$	289,745	$	169,136	$	105,265	$	132,900	$	325,809	$	13,088	$	917	$	1,270,005	Total Residential - Mortgages	$	159,027	$	274,436	$	244,894	$	121,185	$	69,565	$	475,634	$	0	$	0	$	1,344,741

Consumer - Direct	Consumer - Direct																			Consumer - Direct
Performing	Performing	$	17,310	$	11,569	$	10,163	$	5,962	$	5,180	$	11,265	$	5,099	$	0	$	66,548	Performing	$	17,881	$	15,882	$	7,825	$	6,937	$	4,764	$	8,439	$	4,417	$	0	$	66,145
Nonperforming	Nonperforming	0		5		64		63		11		0		3		$	0	146		Nonperforming	0		0		3		22		77		9		6		$	0	117
Total Consumer - Direct	Total Consumer - Direct	$	17,310	$	11,574	$	10,227	$	6,025	$	5,191	$	11,265	$	5,102	$	0	$	66,694	Total Consumer - Direct	$	17,881	$	15,882	$	7,828	$	6,959	$	4,841	$	8,448	$	4,423	$	0	$	66,262

Consumer - Indirect	Consumer - Indirect																			Consumer - Indirect
Performing	Performing	$	1,484	$	965	$	308	$	1,987	$	484	$	102	$	0	$	0	$	5,330	Performing	$	0	$	169	$	171	$	1,307	$	780	$	134	$	0	$	0	$	2,561
Nonperforming	Nonperforming	0		0		137		98		2		28		0		0		265		Nonperforming	0		0		0		95		38		18		0		0		151
Total Consumer Indirect		$	1,484	$	965	$	445	$	2,085	$	486	$	130	$	0	$	0	$	5,595
Total Consumer - Indirect																				Total Consumer - Indirect	$	0	$	169	$	171	$	1,402	$	818	$	152	$	0	$	0	$	2,712


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

Residential - Home Equity	Residential - Home Equity																			Residential - Home Equity
Performing	Performing	$	1,440	$	2,764	$	1,052	$	2,120	$	722	$	1,106	$	188,614	$	44	$	197,862	Performing	$	2,033	$	1,142	$	3,041	$	1,600	$	1,572	$	3,144	$	161,630	$	6,050	$	180,212
Nonperforming	Nonperforming	0		18		0		0		194		506		2,247		0		2,965		Nonperforming	0		0		16		0		0		604		1,839		0		2,459
Total Residential - Home Equity	Total Residential - Home Equity	$	1,440	$	2,782	$	1,052	$	2,120	$	916	$	1,612	$	190,861	$	44	$	200,827	Total Residential - Home Equity	$	2,033	$	1,142	$	3,057	$	1,600	$	1,572	$	3,748	$	163,469	$	6,050	$	182,671

Residential - Mortgages	Residential - Mortgages																			Residential - Mortgages
Performing	Performing	$	305,476	$	193,543	$	123,205	$	155,699	$	178,149	$	255,556	$	11,735	$	1,617	$	1,224,980	Performing	$	324,967	$	282,202	$	162,574	$	97,778	$	124,221	$	275,133	$	14,112	$	1,205	$	1,282,192
Nonperforming	Nonperforming	0		258		455		706		1,404		7,305		52		0		10,180		Nonperforming	0		0		241		702		693		7,060		23		0		8,719
Total Residential - Mortgages	Total Residential - Mortgages	$	305,476	$	193,801	$	123,660	$	156,405	$	179,553	$	262,861	$	11,787	$	1,617	$	1,235,160	Total Residential - Mortgages	$	324,967	$	282,202	$	162,815	$	98,480	$	124,914	$	282,193	$	14,135	$	1,205	$	1,290,911

Consumer - Direct	Consumer - Direct																			Consumer - Direct
Performing	Performing	$	14,840	$	11,127	$	8,011	$	6,632	$	2,854	$	10,840	$	6,835	$	0	$	61,139	Performing	$	20,653	$	10,735	$	9,397	$	5,542	$	4,849	$	10,602	$	5,435	$	0	$	67,213
Nonperforming	Nonperforming	5		74		167		12		0		2		0		0		260		Nonperforming	0		9		44		117		12		0		1		0		183
Total Consumer - Direct	Total Consumer - Direct	$	14,845	$	11,201	$	8,178	$	6,644	$	2,854	$	10,842	$	6,835	$	0	$	61,399	Total Consumer - Direct	$	20,653	$	10,744	$	9,441	$	5,659	$	4,861	$	10,602	$	5,436	$	0	$	67,396

Consumer - Indirect	Consumer - Indirect																			Consumer - Indirect
Performing	Performing	$	1,424	$	1,878	$	3,327	$	1,128	$	382	$	93	$	0	$	0	$	8,232	Performing	$	1,809	$	854	$	812	$	506	$	362	$	66	$	0	$	0	$	4,409
Nonperforming	Nonperforming	0		67		44		7		36		15		0		0		169		Nonperforming	0		2		148		81		1		14		0		0		246
Total Consumer Indirect		$	1,424	$	1,945	$	3,371	$	1,135	$	418	$	108	$	0	$	0	$	8,401
Total Consumer - Indirect																				Total Consumer - Indirect	$	1,809	$	856	$	960	$	587	$	363	$	80	$	0	$	0	$	4,655

6. Earnings Per Share

Earnings per share in the table below, for the three and nine month periods ended September 30, ~~2021~~2022 and ~~2020~~2021 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)	(In thousands, except share and per share data)	9/30/2021		9/30/2020		(In thousands, except share and per share data)	9/30/2022		9/30/2021
Basic	Basic					Basic
Net income available to common shareholders	Net income available to common shareholders	$	21,342	$	24,230	Net income available to common shareholders	$	21,340	$	21,342
Less: income attributable to unvested stock-based compensation awards	Less: income attributable to unvested stock-based compensation awards	(154)		(278)		Less: income attributable to unvested stock-based compensation awards	(66)		(154)
Net earnings allocated to common shareholders	Net earnings allocated to common shareholders	21,188		23,952		Net earnings allocated to common shareholders	21,274		21,188

Weighted average shares outstanding, including unvested stock-based compensation awards	Weighted average shares outstanding, including unvested stock-based compensation awards	14,724,141		14,920,924		Weighted average shares outstanding, including unvested stock-based compensation awards	14,489,970		14,724,141

Less: average unvested stock-based compensation awards	Less: average unvested stock-based compensation awards	(229,608)		(223,392)		Less: average unvested stock-based compensation awards	(200,948)		(229,608)
Weighted average shares outstanding - Basic	Weighted average shares outstanding - Basic	14,494,533		14,697,532		Weighted average shares outstanding - Basic	14,289,022		14,494,533

Diluted	Diluted					Diluted
Net earnings allocated to common shareholders	Net earnings allocated to common shareholders	21,188		23,952		Net earnings allocated to common shareholders	21,274		21,188

Weighted average shares outstanding - Basic	Weighted average shares outstanding - Basic	14,494,533		14,697,532		Weighted average shares outstanding - Basic	14,289,022		14,494,533

Plus: incremental shares from assumed conversion of stock-based compensation awards	Plus: incremental shares from assumed conversion of stock-based compensation awards	73,801		30,209		Plus: incremental shares from assumed conversion of stock-based compensation awards	78,127		73,801
Weighted average shares outstanding - Diluted	Weighted average shares outstanding - Diluted	14,568,334		14,727,741		Weighted average shares outstanding - Diluted	14,367,149		14,568,334

Basic EPS	Basic EPS	$	1.46	$	1.63	Basic EPS	$	1.49	$	1.46
Diluted EPS	Diluted EPS	$	1.45	$	1.63	Diluted EPS	$	1.48	$	1.45

Stock-based compensation awards representing ~~2,032~~369 and ~~10,449~~2,032 of common shares during the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, were not included in the computations of diluted earnings per common share because the effect on those periods would have been anti-dilutive.


		Nine Months Ended					Nine Months Ended
(In thousands, except share and per share data)	(In thousands, except share and per share data)	9/30/2021		9/30/2020		(In thousands, except share and per share data)	9/30/2022		9/30/2021
Basic	Basic					Basic
Net income available to common shareholders	Net income available to common shareholders	$	69,799	$	53,610	Net income available to common shareholders	$	65,482	$	69,799
Less: income attributable to unvested stock-based compensation awards	Less: income attributable to unvested stock-based compensation awards	(504)		(628)		Less: income attributable to unvested stock-based compensation awards	(209)		(504)
Net earnings allocated to common shareholders	Net earnings allocated to common shareholders	69,295		52,982		Net earnings allocated to common shareholders	65,273		69,295

Weighted average shares outstanding, including unvested stock-based compensation awards	Weighted average shares outstanding, including unvested stock-based compensation awards	14,840,420		14,929,628		Weighted average shares outstanding, including unvested stock-based compensation awards	14,541,772		14,840,420

Less: unvested stock-based compensation awards	Less: unvested stock-based compensation awards	(232,538)		(230,181)		Less: unvested stock-based compensation awards	(206,738)		(232,538)
Weighted average shares outstanding - Basic	Weighted average shares outstanding - Basic	14,607,882		14,699,447		Weighted average shares outstanding - Basic	14,335,034		14,607,882

Diluted	Diluted					Diluted
Net earnings allocated to common shareholders	Net earnings allocated to common shareholders	69,295		52,982		Net earnings allocated to common shareholders	65,273		69,295

Weighted average shares outstanding - Basic	Weighted average shares outstanding - Basic	14,607,882		14,699,447		Weighted average shares outstanding - Basic	14,335,034		14,607,882

Plus: incremental shares from assumed conversion of stock-based compensation awards	Plus: incremental shares from assumed conversion of stock-based compensation awards	79,303		39,474		Plus: incremental shares from assumed conversion of stock-based compensation awards	75,498		79,303
Weighted average shares outstanding - Diluted	Weighted average shares outstanding - Diluted	14,687,185		14,738,921		Weighted average shares outstanding - Diluted	14,410,532		14,687,185

Basic EPS	Basic EPS	$	4.74	$	3.60	Basic EPS	$	4.55	$	4.74
Diluted EPS	Diluted EPS	$	4.72	$	3.59	Diluted EPS	$	4.53	$	4.72

Stock-based compensation awards representing approximately ~~6,113~~4,719 and ~~10,090~~6,113 of common shares during the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively were not included in the computations of diluted earnings per common share because the effect on those periods would have been anti-dilutive.

7. Other Comprehensive Income (Loss)

The following tables present reclassifications out of accumulated other comprehensive income (loss) for the three and nine month periods ended September 30, ~~2021~~2022 and ~~2020.~~2021:


		Three Months Ended September 30, 2021							Three Months Ended September 30, 2022
(In thousands)	(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax		(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax
Available-for-sale debt securities:	Available-for-sale debt securities:							Available-for-sale debt securities:
Change in net unrealized gain/loss during the period		$	(10,400)	$	2,548	$	(7,852)
Change in net unrealized loss during the period								Change in net unrealized loss during the period	$	(85,912)	$	21,039	$	(64,873)
Reclassification adjustment for net realized loss on sale of available-for-sale debt securities included in net income	Reclassification adjustment for net realized loss on sale of available-for-sale debt securities included in net income	54		(13)		41		Reclassification adjustment for net realized loss on sale of available-for-sale debt securities included in net income	49		(12)		37
Net unrealized gains/losses	Net unrealized gains/losses	(10,346)		2,535		(7,811)		Net unrealized gains/losses	(85,863)		21,027		(64,836)

Employee benefit plans:	Employee benefit plans:							Employee benefit plans:
Amortization of net retirement plan actuarial gain	Amortization of net retirement plan actuarial gain	738		(181)		557		Amortization of net retirement plan actuarial gain	565		(138)		427
Amortization of net retirement plan prior service cost	Amortization of net retirement plan prior service cost	56		(14)		42		Amortization of net retirement plan prior service cost	54		(13)		41
Employee benefit plans	Employee benefit plans	794		(195)		599		Employee benefit plans	619		(151)		468
Other comprehensive loss		$	(9,552)	$	2,340	$	(7,212)
Other comprehensive (loss) income								Other comprehensive (loss) income	$	(85,244)	$	20,876	$	(64,368)


		Three Months Ended September 30, 2020							Three Months Ended September 30, 2021
(In thousands)	(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax		(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax
Available-for-sale debt securities:	Available-for-sale debt securities:							Available-for-sale debt securities:
Change in net unrealized gain/loss during the period		$	(4,374)	$	1,071	$	(3,303)
Reclassification adjustment for net realized gain on sale of available-for-sale debt securities included in net income		0		0		0
Change in net unrealized loss during the period								Change in net unrealized loss during the period	$	(10,400)	$	2,548	$	(7,852)
Reclassification adjustment for net realized loss on sale of available-for-sale debt securities included in net income								Reclassification adjustment for net realized loss on sale of available-for-sale debt securities included in net income	54		(13)		41
Net unrealized gains/losses	Net unrealized gains/losses	(4,374)		1,071		(3,303)		Net unrealized gains/losses	(10,346)		2,535		(7,811)

Employee benefit plans:	Employee benefit plans:							Employee benefit plans:
Amortization of net retirement plan actuarial gain	Amortization of net retirement plan actuarial gain	593		(146)		447		Amortization of net retirement plan actuarial gain	738		(181)		557
Amortization of net retirement plan prior service cost	Amortization of net retirement plan prior service cost	53		(13)		40		Amortization of net retirement plan prior service cost	56		(14)		42
Employee benefit plans	Employee benefit plans	646		(159)		487		Employee benefit plans	794		(195)		599
Other comprehensive loss		$	(3,728)	$	912	$	(2,816)
Other comprehensive (loss) income								Other comprehensive (loss) income	$	(9,552)	$	2,340	$	(7,212)


		Nine Months Ended September 30, 2021							Nine Months Ended September 30, 2022
(In thousands)	(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax		(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax
Available-for-sale debt securities:	Available-for-sale debt securities:							Available-for-sale debt securities:
Change in net unrealized gain/loss during the period		$	(32,595)	$	7,986	$	(24,609)
Reclassification adjustment for net realized gain on sale of available-for-sale debt securities included in net income		(275)		67		(208)
Change in net unrealized loss during the period								Change in net unrealized loss during the period	$	(249,937)	$	61,210	$	(188,727)
Reclassification adjustment for net realized loss on sale of available-for-sale debt securities included in net income								Reclassification adjustment for net realized loss on sale of available-for-sale debt securities included in net income	49		(12)		37
Net unrealized gains/losses	Net unrealized gains/losses	(32,870)		8,053		(24,817)		Net unrealized gains/losses	(249,888)		61,198		(188,690)

Employee benefit plans:	Employee benefit plans:							Employee benefit plans:
Amortization of net retirement plan actuarial loss	Amortization of net retirement plan actuarial loss	2,213		(542)		1,671		Amortization of net retirement plan actuarial loss	1,695		(415)		1,280
Amortization of net retirement plan prior service cost	Amortization of net retirement plan prior service cost	167		(41)		126		Amortization of net retirement plan prior service cost	162		(39)		123
Employee benefit plans	Employee benefit plans	2,380		(583)		1,797		Employee benefit plans	1,857		(454)		1,403
Other comprehensive loss		$	(30,490)	$	7,470	$	(23,020)
Other comprehensive (loss) income								Other comprehensive (loss) income	$	(248,031)	$	60,744	$	(187,287)


		Nine Months Ended September 30, 2020							Nine Months Ended September 30, 2021
(In thousands)	(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax		(In thousands)	Before-Tax Amount		Tax (Expense) Benefit		Net of Tax
Available-for-sale debt securities:	Available-for-sale debt securities:							Available-for-sale debt securities:
Change in net unrealized gain/loss during the period		$	24,592	$	(6,029)	$	18,563
Change in net unrealized loss during the period								Change in net unrealized loss during the period	$	(32,595)	$	7,986	$	(24,609)
Reclassification adjustment for net realized gain on sale of available-for-sale debt securities included in net income	Reclassification adjustment for net realized gain on sale of available-for-sale debt securities included in net income	(429)		105		(324)		Reclassification adjustment for net realized gain on sale of available-for-sale debt securities included in net income	(275)		67		(208)
Net unrealized gains/losses	Net unrealized gains/losses	24,163		(5,924)		18,239		Net unrealized gains/losses	(32,870)		8,053		(24,817)

Employee benefit plans:	Employee benefit plans:							Employee benefit plans:
Amortization of net retirement plan actuarial loss	Amortization of net retirement plan actuarial loss	1,775		(435)		1,340		Amortization of net retirement plan actuarial loss	2,213		(542)		1,671
Amortization of net retirement plan prior service cost	Amortization of net retirement plan prior service cost	160		(39)		121		Amortization of net retirement plan prior service cost	167		(41)		126
Employee benefit plans	Employee benefit plans	1,935		(474)		1,461		Employee benefit plans	2,380		(583)		1,797
Other comprehensive income		$	26,098	$	(6,398)	$	19,700
Other comprehensive (loss) income								Other comprehensive (loss) income	$	(30,490)	$	7,470	$	(23,020)

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


(In thousands)	(In thousands)	Available-for- Sale Debt Securities		Employee Benefit Plans		Accumulated Other Comprehensive (Loss) Income		(In thousands)	Available-for- Sale Debt Securities		Employee Benefit Plans		Accumulated Other Comprehensive (Loss) Income
Balance at June 30, 2021		$	3,603	$	(51,485)	$	(47,882)
Balance at June 30, 2022								Balance at June 30, 2022	$	(138,414)	$	(40,455)	$	(178,869)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(7,852)		0		(7,852)		Other comprehensive (loss) income before reclassifications	(64,873)		0		(64,873)
Amounts reclassified from accumulated other comprehensive (loss) income	Amounts reclassified from accumulated other comprehensive (loss) income	41		599		640		Amounts reclassified from accumulated other comprehensive (loss) income	37		468		505
Net current-period other comprehensive (loss) income	Net current-period other comprehensive (loss) income	(7,811)		599		(7,212)		Net current-period other comprehensive (loss) income	(64,836)		468		(64,368)
Balance at September 30, 2021		$	(4,208)	$	(50,886)	$	(55,094)
Balance at September 30, 2022								Balance at September 30, 2022	$	(203,250)	$	(39,987)	$	(243,237)

Balance at January 1, 2021		$	20,609	$	(52,683)	$	(32,074)
Balance at January 1, 2022								Balance at January 1, 2022	$	(14,560)	$	(41,390)	$	(55,950)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(24,609)		0		(24,609)		Other comprehensive (loss) income before reclassifications	(188,727)		0		(188,727)
Amounts reclassified from accumulated other comprehensive (loss) income	Amounts reclassified from accumulated other comprehensive (loss) income	(208)		1,797		1,589		Amounts reclassified from accumulated other comprehensive (loss) income	37		1,403		1,440
Net current-period other comprehensive (loss) income	Net current-period other comprehensive (loss) income	(24,817)		1,797		(23,020)		Net current-period other comprehensive (loss) income	(188,690)		1,403		(187,287)
Balance at September 30, 2021		$	(4,208)	$	(50,886)	$	(55,094)
Balance at September 30, 2022								Balance at September 30, 2022	$	(203,250)	$	(39,987)	$	(243,237)

(In thousands) Available-for-
Sale Debit Securities Employee
Benefit Plans Accumulated
Other
Comprehensive
(Loss) Income
Balance at July 1, 2020 $ 25,581 $ (46,629) $ (21,048)
Other comprehensive income (loss) before reclassifications (3,303) 0 (3,303)
Amounts reclassified from accumulated other comprehensive (loss) income 0 487 487
Net current-period other comprehensive (loss) income (3,303) 487 (2,816)
Balance at September 30, 2020 $ 22,278 $ (46,142) $ (23,864)
Balance at January 1, 2020 $ 4,039 $ (47,603) $ (43,564)
Other comprehensive income (loss) before reclassifications 18,563 0 18,563
Amounts reclassified from accumulated other comprehensive (loss) income (324) 1,461 1,137
Net current-period other comprehensive income 18,239 1,461 19,700
Balance at September 30, 2020 $ 22,278 $ (46,142) $ (23,864)


(In thousands)	Available-for- Sale Debit Securities		Employee Benefit Plans		Accumulated Other Comprehensive (Loss) Income
Balance at June 30, 2021	$	3,603	$	(51,485)	$	(47,882)
Other comprehensive (loss) income before reclassifications	(7,852)		0		(7,852)
Amounts reclassified from accumulated other comprehensive (loss) income	41		599		640
Net current-period other comprehensive (loss) income	(7,811)		599		(7,212)
Balance at September 30, 2021	$	(4,208)	$	(50,886)	$	(55,094)

Balance at January 1, 2021	$	20,609	$	(52,683)	$	(32,074)
Other comprehensive (loss) income before reclassifications	(24,609)		0		(24,609)
Amounts reclassified from accumulated other comprehensive (loss) income	(208)		1,797		1,589
Net current-period other comprehensive (loss) income	(24,817)		1,797		(23,020)
Balance at September 30, 2021	$	(4,208)	$	(50,886)	$	(55,094)

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, ~~2021~~2022 and ~~2020.~~2021:


Three Months Ended September 30, 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	$	(49)	Net (loss) gain on securities transactions
	12		Tax expense
	(37)		Net of tax
Employee benefit plans:
Amortization of the following 2
Net retirement plan actuarial loss	(565)		Other operating expense
Net retirement plan prior service cost	(54)		Other operating expense
	(619)		Total before tax
	151		Tax benefit
	$	(468)	Net of tax


Three Months Ended September 30, 2021
Details about Accumulated other Comprehensive Income (Loss) Components (In thousands)	Amount Reclassified from Accumulated Other Comprehensive (Loss) Income1		Affected Line Item in the Statement Where Net Income is Presented
Available-for-sale debt securities:
Unrealized gains and losses on available-for-sale debt securities	$	(54)	Net (loss) gain on securities transactions
	13		Tax expense
	(41)		Net of tax
Employee benefit plans:
Amortization of the following2
Net retirement plan actuarial loss	(738)		Other operating expense
Net retirement plan prior service cost	(56)		Other operating expense
	(794)		Total before tax
	195		Tax benefit
	$	(599)	Net of tax


~~Three~~Nine Months Ended September 30, ~~2020~~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 (49)	Net (loss) gain on securities transactions
	012		Tax expense
	0 (37)		Net of tax
Employee benefit plans:
Amortization of the following2
Net retirement plan actuarial loss	~~(593)~~(1,695)		Other operating expense
Net retirement plan prior service cost	~~(53)~~(162)		Other operating expense
	~~(646)~~(1,857)		Total before tax
	~~159~~454		Tax benefit
	$	~~(487)~~(1,403)	Net of tax


Nine Months Ended September 30, 2021
Details about Accumulated other Comprehensive Income (Loss) Components (In thousands)	Amount Reclassified from Accumulated Other Comprehensive (Loss) Income1		Affected Line Item in the Statement Where Net Income is Presented
Available-for-sale debt securities:
Unrealized gains and losses on available-for-sale debt securities	$	275	Net (loss) gain on securities transactions
	(67)		Tax expense
	208		Net of tax
Employee benefit plans:
Amortization of the following2
Net retirement plan actuarial loss	(2,213)		Other operating expense
Net retirement plan prior service cost	(167)		Other operating expense
	(2,380)		Total before tax
	583		Tax benefit
	$	(1,797)	Net of tax


~~Nine Months Ended September 30, 2020~~
~~Details about Accumulated other Comprehensive Income (Loss) Components (In thousands)~~	Amount Reclassified from Accumulated Other Comprehensive (Loss) Income1		Affected Line Item in the Statement Where Net Income is Presented
~~Available-for-sale debt securities:~~
~~Unrealized gains and losses on available-for-sale debt securities~~	$	~~429~~	~~Net (loss) gain on securities transactions~~
	~~(105)~~		~~Tax expense~~
	~~324~~		~~Net of tax~~
~~Employee benefit plans:~~
~~Amortization of the following~~2
~~Net retirement plan actuarial loss~~	~~(1,775)~~		~~Other operating expense~~
~~Net retirement plan prior service cost~~	~~(160)~~		~~Other operating expense~~
	~~(1,935)~~		~~Total before tax~~
	~~474~~		~~Tax benefit~~
	$	~~(1,461)~~	~~Net of tax~~

1 Amounts in parentheses indicated debits in income statement.

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

8. Employee Benefit Plans

The following tables set 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, and the amounts of recognized gains and losses, prior service cost recognized, and gain or loss recognized due to settlement or curtailment.

Components of Net Periodic Benefit Cost


															Pension Benefits				Life and Health				SERP Benefits
		Pension Benefits Three Months Ended				Life and Health Three Months Ended				SERP Benefits Three Months Ended					Three Months Ended
(In thousands)	(In thousands)	9/30/2021		9/30/2020		9/30/2021		9/30/2020		9/30/2021		9/30/2020		(In thousands)	9/30/2022		9/30/2021		9/30/2022		9/30/2021		9/30/2022		9/30/2021
Service cost	Service cost	$	0	$	0	$	47	$	43	$	58	$	54	Service cost	$	0	$	0	$	43	$	47	$	19	$	58
Interest cost	Interest cost	407		593		45		61		173		228		Interest cost	496		407		56		45		203		173
Expected return on plan assets	Expected return on plan assets	(1,413)		(1,354)		0		0		0		0		Expected return on plan assets	(1,471)		(1,413)		0		0		0		0
Amortization of net retirement plan actuarial loss	Amortization of net retirement plan actuarial loss	390		353		78		39		270		200		Amortization of net retirement plan actuarial loss	304		390		49		78		212		270
Amortization of net retirement plan prior service (credit) cost	Amortization of net retirement plan prior service (credit) cost	0		(2)		(15)		(15)		71		71		Amortization of net retirement plan prior service (credit) cost	0		0		(15)		(15)		69		71
Net periodic benefit (income) cost	Net periodic benefit (income) cost	$	(616)	$	(410)	$	155	$	128	$	572	$	553	Net periodic benefit (income) cost	$	(671)	$	(616)	$	133	$	155	$	503	$	572


															Pension Benefits				Life and Health				SERP Benefits
		Pension Benefits Nine Months Ended				Life and Health Nine Months Ended				SERP Benefits Nine Months Ended					Nine Months Ended
(In thousands)	(In thousands)	9/30/2021		9/30/2020		9/30/2021		9/30/2020		9/30/2021		9/30/2020		(In thousands)	9/30/2022		9/30/2021		9/30/2022		9/30/2021		9/30/2022		9/30/2021
Service cost	Service cost	$	0	$	0	$	140	$	129	$	173	$	161	Service cost	$	0	$	0	$	130	$	140	$	58	$	173
Interest cost	Interest cost	1,221		1,778		135		183		519		685		Interest cost	1,489		1,221		167		135		610		519
Expected return on plan assets	Expected return on plan assets	(4,239)		(4,062)		0		0		0		0		Expected return on plan assets	(4,414)		(4,239)		0		0		0		0
Amortization of net retirement plan actuarial loss	Amortization of net retirement plan actuarial loss	1,170		1,058		234		116		810		600		Amortization of net retirement plan actuarial loss	913		1,170		147		234		635		810
Amortization of net retirement plan prior service cost (credit)	Amortization of net retirement plan prior service cost (credit)	0		(7)		(45)		(45)		212		214		Amortization of net retirement plan prior service cost (credit)	0		0		(46)		(45)		208		212

Net periodic benefit (income) cost	Net periodic benefit (income) cost	$	(1,848)	$	(1,233)	$	464	$	383	$	1,714	$	1,660	Net periodic benefit (income) cost	$	(2,012)	$	(1,848)	$	398	$	464	$	1,511	$	1,714

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

The Company realized approximately ~~$1.8~~$1.4 million and ~~$1.5~~$1.8 million, net of tax, as amortization of amounts previously recognized in accumulated other comprehensive (loss) income, for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

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

9. Other Income and Operating Expense

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


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
(In thousands)	(In thousands)	9/30/2021		9/30/2020		9/30/2021		9/30/2020		(In thousands)	9/30/2022		9/30/2021		9/30/2022		9/30/2021
Noninterest Income	Noninterest Income									Noninterest Income
Other service charges	Other service charges	$	685	$	720	$	2,064	$	2,108	Other service charges	$	721	$	685	$	2,017	$	2,064
Earnings from corporate owned life insurance		367		559		1,478		1,617
Earnings (loss) from corporate owned life insurance										Earnings (loss) from corporate owned life insurance	(236)		367		357		1,478
Net gains on the sales of loans originated for sale	Net gains on the sales of loans originated for sale	296		378		878		1,245		Net gains on the sales of loans originated for sale	83		296		140		878
Other income	Other income	421		161		988		1,418		Other income	409		421		1,180		988
Total other income	Total other income	$	1,769	$	1,818	$	5,408	$	6,388	Total other income	$	977	$	1,769	$	3,694	$	5,408
Noninterest Expenses	Noninterest Expenses									Noninterest Expenses
Marketing expense	Marketing expense	$	1,171	$	927	$	2,798	$	2,806	Marketing expense	$	1,207	$	1,171	$	3,719	$	2,798
Professional fees	Professional fees	1,854		1,398		5,280		4,654		Professional fees	1,665		1,854		4,990		5,280
Legal fees	Legal fees	294		418		735		955		Legal fees	298		294		1,006		735
Technology expense	Technology expense	2,913		2,941		8,818		8,771		Technology expense	3,890		2,913		11,253		8,818
Cardholder expense	Cardholder expense	827		827		2,489		2,396		Cardholder expense	1,129		827		3,551		2,489
Penalties on prepayment of FHLB borrowings		2,929		0		2,929		0
Other expenses	Other expenses	4,176		4,195		12,470		13,971		Other expenses	4,048		7,105		12,767		15,399
Total other operating expense	Total other operating expense	$	14,164	$	10,706	$	35,519	$	33,553	Total other operating expense	$	12,237	$	14,164	$	37,286	$	35,519

10. Revenue Recognition

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

Insurance Commissions and Fees

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

Trust & Asset Management

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

Mutual Fund & Investment Income

Mutual fund and investment income consists of other recurring revenue streams such as commissions from sales of mutual funds and other investments, and 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 the 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 tables present noninterest income, segregated by revenue streams in-scope and out-of-scope of ASC 606, for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021:


		Three Months Ended					Three Months Ended
(In thousands)	(In thousands)	09/30/2021		09/30/2020		(In thousands)	09/30/2022		09/30/2021
Noninterest Income	Noninterest Income					Noninterest Income
In-scope of Topic 606:	In-scope of Topic 606:					In-scope of Topic 606:
Commissions and Fees	Commissions and Fees	$	8,930	$	8,136	Commissions and Fees	$	9,827	$	8,930
Installment Billing	Installment Billing	166		175		Installment Billing	126		166
Refund of Commissions	Refund of Commissions	(103)		(104)		Refund of Commissions	(133)		(103)

Contract Liabilities/Deferred Revenue						Contract Liabilities/Deferred Revenue	1		0
Contingent Commissions	Contingent Commissions	840		709		Contingent Commissions	1,004		840
Subtotal Insurance Revenues	Subtotal Insurance Revenues	9,833		8,916		Subtotal Insurance Revenues	10,825		9,833
Trust and Asset Management	Trust and Asset Management	3,522		3,070		Trust and Asset Management	3,209		3,522
Mutual Fund & Investment Income	Mutual Fund & Investment Income	1,435		1,222		Mutual Fund & Investment Income	1,128		1,435
Subtotal Investment Service Income	Subtotal Investment Service Income	4,957		4,292		Subtotal Investment Service Income	4,337		4,957
Service Charges on Deposit Accounts	Service Charges on Deposit Accounts	1,638		1,444		Service Charges on Deposit Accounts	1,917		1,638
Card Services Income	Card Services Income	2,717		2,419		Card Services Income	2,731		2,717
Other	Other	286		285		Other	332		286
Noninterest Income (in-scope of ASC 606)	Noninterest Income (in-scope of ASC 606)	19,431		17,356		Noninterest Income (in-scope of ASC 606)	20,142		19,431
Noninterest Income (out-of-scope of ASC 606)	Noninterest Income (out-of-scope of ASC 606)	1,423		1,531		Noninterest Income (out-of-scope of ASC 606)	550		1,423
Total Noninterest Income	Total Noninterest Income	$	20,854	$	18,887	Total Noninterest Income	$	20,692	$	20,854


		Nine Months Ended					Nine Months Ended
(In thousands)	(In thousands)	9/30/2021		9/30/2020		(In thousands)	9/30/2022		9/30/2021
Noninterest Income	Noninterest Income					Noninterest Income
In-scope of Topic 606:	In-scope of Topic 606:					In-scope of Topic 606:
Commissions and Fees	Commissions and Fees	$	24,101	$	22,545	Commissions and Fees	$	25,663	$	24,101
Installment Billing	Installment Billing	149		96		Installment Billing	124		149
Refund of Commissions	Refund of Commissions	(92)		(458)		Refund of Commissions	(151)		(92)
Contract Liabilities/Deferred Revenue	Contract Liabilities/Deferred Revenue	(237)		(208)		Contract Liabilities/Deferred Revenue	(266)		(237)
Contingent Commissions	Contingent Commissions	3,132		2,241		Contingent Commissions	3,201		3,132
Subtotal Insurance Revenues	Subtotal Insurance Revenues	27,053		24,216		Subtotal Insurance Revenues	28,571		27,053
Trust and Asset Management	Trust and Asset Management	10,222		8,798		Trust and Asset Management	9,834		10,222
Mutual Fund & Investment Income	Mutual Fund & Investment Income	4,125		3,616		Mutual Fund & Investment Income	4,016		4,125
Subtotal Investment Service Income	Subtotal Investment Service Income	14,347		12,414		Subtotal Investment Service Income	13,850		14,347
Service Charges on Deposit Accounts	Service Charges on Deposit Accounts	4,579		4,675		Service Charges on Deposit Accounts	5,452		4,579
Card Services Income	Card Services Income	8,051		6,885		Card Services Income	8,233		8,051
Other	Other	885		837		Other	957		885
Noninterest Income (in-scope of ASC 606)	Noninterest Income (in-scope of ASC 606)	54,915		49,027		Noninterest Income (in-scope of ASC 606)	57,063		54,915
Noninterest Income (out-of-scope of ASC 606)	Noninterest Income (out-of-scope of ASC 606)	4,780		5,997		Noninterest Income (out-of-scope of ASC 606)	2,558		4,780
Total Noninterest Income	Total Noninterest Income	$	59,695	$	55,024	Total Noninterest Income	$	59,621	$	59,695

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 segments amounted to ~~$6.4~~$5.7 million and ~~$2.1~~$2.4 million, respectively, at September 30, ~~2021,~~2022, compared to ~~$5.2~~$6.0 million and ~~$2.2~~$2.3 million, respectively, at December 31, ~~2020.~~2021. Included in those amounts are contract assets related to contingent income of ~~$1.9~~$2.1 million and ~~$2.5~~$3.0 million, respectively, at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, and contract liabilities of ~~$0.5 million~~$747,847 and ~~$2.0~~$1.7 million, respectively at September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Contract Acquisition Costs

The Company 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.

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, ~~2021,~~2022, the Company’s maximum potential obligation under standby letters of credit was ~~$39.2~~$35.7 million compared to ~~$31.4~~$39.8 million at December 31, ~~2020.~~2021. Management uses the same credit policies to extend standby letters of credit that it uses for on-balance sheet lending decisions and may require collateral to support standby letters of credit based upon its evaluation of the counterparty. Management does not anticipate any significant losses as a result of these transactions, and has determined that the fair value of standby letters of credit is not significant.

12. Segment and Related Information

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

Banking

~~The Banking segment is primarily comprised of the Company’s 4 banking subsidiaries:~~ Tompkins ~~Trust Company, a commercial bank with 13~~Community Bank has thirteen banking offices located in Ithaca, NY and surrounding communities; ~~The Bank of Castile (DBA Tompkins Bank of Castile), a commercial bank with 16~~sixteen banking offices located in the Genesee Valley region of New York State as well as Monroe County; ~~Mahopac Bank (DBA Tompkins Mahopac Bank), a commercial bank with 14~~fourteen full-service banking offices located in the counties north of New York City; and ~~VIST Bank (DBA Tompkins VIST Bank), a banking organization with 20~~nineteen banking offices headquartered and operating in the areas surrounding southeastern Pennsylvania. As described above in greater detail in Note 1 - "Business", the Company's subsidiary banks have announced plans for a rebranding effort, pursuant to which the Company's four wholly-owned banking subsidiaries will be combined into one bank which will conduct business under the "Tompkins" brand name, with a legal name of "Tompkins Community Bank."

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 5five stand-alone offices in Western New York.

Wealth Management

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

Summarized financial information concerning the Company’s reportable segments and the reconciliation to the Company’s consolidated results is shown in the following table. Investment in subsidiaries is netted out of the presentations below. The ~~“Intercompany”~~"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 and the holding company. All other accounting policies are the same as those described in the summary of significant accounting policies in the ~~2020~~2021 Annual Report on Form 10-K.

As of and for the three months ended September 30, 2021
(In thousands) Banking Insurance Wealth Management Intercompany Consolidated
Interest income $ 61,110 $ 8 $ 0 $ (4) $ 61,114
Interest expense 5,020 0 0 (4) 5,016
Net interest income 56,090 8 0 0 56,098
(Credit) provision for credit loss expense (1,232) 0 0 0 (1,232)
Noninterest income 6,416 9,950 5,047 (559) 20,854
Noninterest expense 40,587 6,846 3,306 (559) 50,180
Income before income tax expense 23,151 3,112 1,741 0 28,004
Income tax expense 5,351 855 424 0 6,630
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation 17,800 2,257 1,317 0 21,374
Less: Net income attributable to noncontrolling interests 32 0 0 0 32
Net Income attributable to Tompkins Financial Corporation $ 17,768 $ 2,257 $ 1,317 $ 0 $ 21,342
Depreciation and amortization $ 2,528 $ 52 $ 14 $ 0 $ 2,594
Assets 8,051,446 45,855 32,257 (16,448) 8,113,110
Goodwill 64,370 19,866 8,211 0 92,447
Other intangibles, net 1,814 2,102 73 0 3,989
Net loans and leases 5,050,519 0 0 0 5,050,519
Deposits 7,105,651 0 0 (14,753) 7,090,898
Total Equity 659,365 33,529 29,463 0 722,357


Three Months Ended September 30, 2022
(In thousands)	Banking		Insurance		Wealth Management		Intercompany		Consolidated
Interest income	$	63,670	$	1	$	0	$	(1)	$	63,670
Interest expense	5,560		0		0		(1)		5,559
Net interest income	58,110		1		0		0		58,111
Credit for credit loss expense	1,056		0		0		0		1,056
Noninterest income	5,973		10,953		4,342		(576)		20,692
Noninterest expense	39,448		7,178		3,552		(576)		49,602
Income before income tax expense	23,579		3,776		790		0		28,145
Income tax expense	5,528		1,052		194		0		6,774
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	18,051		2,724		596		0		21,371
Less: Net income attributable to noncontrolling interests	31		0		0		0		31
Net Income attributable to Tompkins Financial Corporation	$	18,020	$	2,724	$	596	$	0	$	21,340

Depreciation and amortization	$	2,652	$	44	$	36	$	0	$	2,732
Assets	7,721,022		46,807		28,761		(16,649)		7,779,941
Goodwill	64,655		19,866		8,081		0		92,602
Other intangibles, net	1,137		1,742		53		0		2,932
Net loans and leases	5,163,664		0		0		0		5,163,664
Deposits	6,954,839		0		(1,974)		(16,139)		6,936,726
Total Equity	511,298		35,625		26,036		0		572,959


As of and for the three months ended September 30, 2020
Three Months Ended September 30, 2021												Three Months Ended September 30, 2021
(In thousands)	(In thousands)	Banking		Insurance		Wealth Management		Intercompany		Consolidated		(In thousands)	Banking		Insurance		Wealth Management		Intercompany		Consolidated
Interest income	Interest income	$	64,316	$	1	$	0	$	(1)	$	64,316	Interest income	$	61,110	$	8	$	0	$	(4)	$	61,114
Interest expense	Interest expense	6,064		0		0		(1)		6,063		Interest expense	5,020		0		0		(4)		5,016
Net interest income	Net interest income	58,252		1		0		0		58,253		Net interest income	56,090		8		0		0		56,098
Provision for credit loss expense		(218)		0		0		0		(218)
Credit for credit loss expense												Credit for credit loss expense	(1,232)		0		0		0		(1,232)
Noninterest income	Noninterest income	5,976		9,023		4,434		(546)		18,887		Noninterest income	6,416		9,950		5,047		(559)		20,854
Noninterest expense	Noninterest expense	37,405		6,559		3,348		(546)		46,766		Noninterest expense	40,587		6,846		3,306		(559)		50,180
Income before income tax expense	Income before income tax expense	27,041		2,465		1,086		0		30,592		Income before income tax expense	23,151		3,112		1,741		0		28,004
Income tax expense	Income tax expense	5,397		670		263		0		6,330		Income tax expense	5,351		855		424		0		6,630
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	21,644		1,795		823		0		24,262		Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	17,800		2,257		1,317		0		21,374
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	32		0		0		0		32		Less: Net income attributable to noncontrolling interests	32		0		0		0		32
Net Income attributable to Tompkins Financial Corporation	Net Income attributable to Tompkins Financial Corporation	$	21,612	$	1,795	$	823	$	0	$	24,230	Net Income attributable to Tompkins Financial Corporation	$	17,768	$	2,257	$	1,317	$	0	$	21,342

Depreciation and amortization	Depreciation and amortization	$	2,474	$	57	$	18	$	0	$	2,549	Depreciation and amortization	$	2,528	$	52	$	14	$	0	$	2,594
Assets	Assets	7,738,933		42,269		26,956		(13,656)		7,794,502		Assets	8,051,446		45,855		32,257		(16,448)		8,113,110
Goodwill	Goodwill	64,585		19,866		7,996		0		92,447		Goodwill	64,370		19,866		8,211		0		92,447
Other intangibles, net	Other intangibles, net	2,600		2,507		104		0		5,211		Other intangibles, net	1,814		2,102		73		0		3,989
Net loans and leases	Net loans and leases	5,346,004		0		0		0		5,346,004		Net loans and leases	5,050,519		0		0		0		5,050,519
Deposits	Deposits	6,613,421		0		0		(12,183)		6,601,238		Deposits	7,105,651		0		0		(14,753)		7,090,898
Total Equity	Total Equity	657,370		32,095		24,146		0		713,611		Total Equity	659,365		33,529		29,463		0		722,357


As of and for the nine months ended September 30, 2021
Nine Months Ended September 30, 2022												Nine Months Ended September 30, 2022
(In thousands)	(In thousands)	Banking		Insurance		Wealth Management		Intercompany		Consolidated		(In thousands)	Banking		Insurance		Wealth Management		Intercompany		Consolidated
Interest income	Interest income	$	180,708	$	10	$	0	$	(14)	$	180,704	Interest income	$	183,798	$	4	$	0	$	(3)	$	183,799
Interest expense	Interest expense	14,737		0		0		(14)		14,723		Interest expense	10,815		0		0		(3)		10,812
Net interest income	Net interest income	165,971		10		0		0		165,981		Net interest income	172,983		4		0		0		172,987
(Credit) provision for credit loss expense		(6,133)		0		0		0		(6,133)
Provision for credit loss expense												Provision for credit loss expense	1,392		0		0		0		1,392
Noninterest income	Noninterest income	19,175		27,531		14,638		(1,649)		59,695		Noninterest income	18,495		28,959		13,874		(1,707)		59,621
Noninterest expense	Noninterest expense	113,792		20,044		9,946		(1,649)		142,133		Noninterest expense	116,031		20,492		10,745		(1,707)		145,561
Income before income tax expense	Income before income tax expense	77,487		7,497		4,692		0		89,676		Income before income tax expense	74,055		8,471		3,129		0		85,655
Income tax expense	Income tax expense	16,595		2,057		1,129		0		19,781		Income tax expense	16,948		2,361		770		0		20,079
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	60,892		5,440		3,563		0		69,895		Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	57,107		6,110		2,359		0		65,576
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	96		0		0		0		96		Less: Net income attributable to noncontrolling interests	94		0		0		0		94
Net Income attributable to Tompkins Financial Corporation	Net Income attributable to Tompkins Financial Corporation	$	60,796	$	5,440	$	3,563	$	0	$	69,799	Net Income attributable to Tompkins Financial Corporation	$	57,013	$	6,110	$	2,359	$	0	$	65,482

Depreciation and amortization	Depreciation and amortization	$	7,493	$	162	$	41	$	0	$	7,696	Depreciation and amortization	$	7,745	$	132	$	100	$	0	$	7,977


As of and for the nine months ended September 30, 2020
Nine Months Ended September 30, 2021												Nine Months Ended September 30, 2021
(In thousands)	(In thousands)	Banking		Insurance		Wealth Management		Intercompany		Consolidated		(In thousands)	Banking		Insurance		Wealth Management		Intercompany		Consolidated
Interest income	Interest income	$	190,960	$	3	$	0	$	(3)	$	190,960	Interest income	$	180,708	$	10	$	0	$	(14)	$	180,704
Interest expense	Interest expense	23,375		0		0		(3)		23,372		Interest expense	14,737		0		0		(14)		14,723
Net interest income	Net interest income	167,585		3		0		0		167,588		Net interest income	165,971		10		0		0		165,981
Provision for credit loss expense		17,418		0		0		0		17,418
Credit for credit loss expense												Credit for credit loss expense	(6,133)		0		0		0		(6,133)
Noninterest income	Noninterest income	19,217		24,533		12,903		(1,629)		55,024		Noninterest income	19,175		27,531		14,638		(1,649)		59,695
Noninterest expense	Noninterest expense	110,114		19,479		9,740		(1,629)		137,704		Noninterest expense	113,792		20,044		9,946		(1,649)		142,133
Income before income tax expense	Income before income tax expense	59,270		5,057		3,163		0		67,490		Income before income tax expense	77,487		7,497		4,692		0		89,676
Income tax expense	Income tax expense	11,665		1,362		752		0		13,779		Income tax expense	16,595		2,057		1,129		0		19,781
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	47,605		3,695		2,411		0		53,711		Net Income attributable to noncontrolling interests and Tompkins Financial Corporation	60,892		5,440		3,563		0		69,895
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	101		0		0		0		101		Less: Net income attributable to noncontrolling interests	96		0		0		0		96
Net Income attributable to Tompkins Financial Corporation	Net Income attributable to Tompkins Financial Corporation	$	47,504	$	3,695	$	2,411	$	0	$	53,610	Net Income attributable to Tompkins Financial Corporation	$	60,796	$	5,440	$	3,563	$	0	$	69,799

Depreciation and amortization	Depreciation and amortization	$	7,443	$	173	$	38	$	0	$	7,654	Depreciation and amortization	$	7,493	$	162	$	41	$	0	$	7,696

13. Fair Value Measurements

FASB ASC Topic 820, Fair Value Measurements and Disclosures(ASC 820), defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. ASC 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 ASC 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 financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, segregated by the level of valuation inputs within the fair value hierarchy used to measure fair ~~value.~~value:


Recurring Fair Value Measurements	Recurring Fair Value Measurements									Recurring Fair Value Measurements
September 30, 2021
September 30, 2022										September 30, 2022
(In thousands)	(In thousands)	Total		(Level 1)		(Level 2)		(Level 3)		(In thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities
U.S. Treasuries	U.S. Treasuries	$	138,928	$	0	$	138,928	$	0	U.S. Treasuries	$	166,604	$	0	$	166,604	$	0
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	810,343		0		810,343		0		Obligations of U.S. Government sponsored entities	730,028		0		730,028		0
Obligations of U.S. states and political subdivisions	Obligations of U.S. states and political subdivisions	109,911		0		109,911		0		Obligations of U.S. states and political subdivisions	83,061		0		83,061		0
Mortgage-backed securities – residential, issued by:	Mortgage-backed securities – residential, issued by:									Mortgage-backed securities – residential, issued by:
U.S. Government agencies	U.S. Government agencies	89,320		0		89,320		0		U.S. Government agencies	55,059		0		55,059		0
U.S. Government sponsored entities	U.S. Government sponsored entities	916,004		0		916,004		0		U.S. Government sponsored entities	703,814		0		703,814		0

U.S. corporate debt securities	U.S. corporate debt securities	2,421		0		2,421		0		U.S. corporate debt securities	2,370		0		2,370		0
Total Available-for-sale debt securities	Total Available-for-sale debt securities	$	2,066,927	$	0	$	2,066,927	$	0	Total Available-for-sale debt securities	$	1,740,936	$	0	$	1,740,936	$	0

Equity securities, at fair value	Equity securities, at fair value	$	910	$	0	$	0	$	910	Equity securities, at fair value	$	771	$	0	$	0	$	771


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

U.S. Treasuries										U.S. Treasuries	$	138,928	$	0	$	138,928	$	0
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	$	607,480	$	0	$	607,480	$	0	Obligations of U.S. Government sponsored entities	810,343		0		810,343		0
Obligations of U.S. states and political subdivisions	Obligations of U.S. states and political subdivisions	129,746		0		129,746		0		Obligations of U.S. states and political subdivisions	109,911		0		109,911		0
Mortgage-backed securities – residential, issued by:	Mortgage-backed securities – residential, issued by:									Mortgage-backed securities – residential, issued by:
U.S. Government agencies	U.S. Government agencies	182,108		0		182,108		0		U.S. Government agencies	89,320		0		89,320		0
U.S. Government sponsored entities	U.S. Government sponsored entities	705,480		0		705,480		0		U.S. Government sponsored entities	916,004		0		916,004		0

U.S. corporate debt securities	U.S. corporate debt securities	2,379		0		2,379		0		U.S. corporate debt securities	2,421		0		2,421		0
Total Available-for-sale debt securities	Total Available-for-sale debt securities	$	1,627,193	$	0	$	1,627,193	$	0	Total Available-for-sale debt securities	$	2,066,927	$	0	$	2,066,927	$	0

Equity securities, at fair value	Equity securities, at fair value	$	929	$	0	$	0	$	929	Equity securities, at fair value	$	910	$	0	$	0	$	910

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

The change in the fair value of equity securities valued using significant unobservable inputs (level 3), for the periods ended September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, was immaterial.

There were no transfers between Levels 1, 2 and 3 for the nine months ended September 30, ~~2021.~~2022.

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

Certain assets are measured at fair value on a nonrecurring basis. For the Company, these include loans held for sale, individually evaluated loans, and other real estate owned ~~(“OREO”~~("OREO"). For the three and nine months ended September 30, ~~2021,~~2022, certain individually evaluated loans were remeasured and reported at fair value through a specific valuation allowance and/or partial charge-offs for credit losses based upon the fair value of the underlying collateral. Collateral values are estimated using Level 3 inputs based upon customized discounting criteria. In addition to collateral dependent evaluated loans, certain other real estate owned were remeasured and reported at fair value based upon the fair value of the underlying collateral. The fair values of other real estate owned are estimated using Level 2 inputs based on observable market data or Level 3 inputs based on customized discounting criteria. In general, the fair values of other real estate owned are based upon appraisals, with discounts made to reflect estimated costs to sell the real estate. Upon initial recognition, fair value write-downs are taken through a charge-off to the allowance for credit losses. Subsequent fair value write-downs on other real estate owned are reported in other noninterest expense.


Three months ended September 30, 2021
Three months ended September 30, 2022												Three months ended September 30, 2022
(In thousands)	(In thousands)			Fair value measurements at reporting date using:						Gain (losses) from fair value changes		(In thousands)			Fair value measurements at reporting date using:						Gain (losses) from fair value changes
Assets:	Assets:	As of 09/30/2021		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Three months ended 9/30/2021		Assets:	As of 09/30/2022		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Three months ended 9/30/2022
Individually evaluated		$	1,122	$	0	$	0	$	1,122	$	(150)
Individually evaluated loans												Individually evaluated loans	$	8,099	$	0	$	0	$	8,099	$	0
Other real estate owned	Other real estate owned	46		0		46		0		0		Other real estate owned	247		0				247		27

Three months ended September 30, 2020
(In thousands) Fair value measurements at reporting
date using: Gain (losses)
from fair
value changes
Assets: As of 09/30/2020 Quoted prices in
active markets for
identical assets
(Level 1) Significant other
observable inputs
(Level 2) Significant
unobservable inputs
(Level 3) Three months ended 9/30/2020
Individually evaluated $ 6,330 $ 0 $ 6,330 $ 0 $ 0
Other real estate owned 36 0 36 0 (4)


Three months ended September 30, 2021
(In thousands)			Fair value measurements at reporting date using:						Gain (losses) from fair value changes
Assets:	As of 09/30/2021		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Three months ended 9/30/2021
Individually evaluated loans	$	1,122	$	0	$	0	$	1,122	$	(150)


Nine months ended September 30, 2021
Nine months ended September 30, 2022												Nine months ended September 30, 2022
(In thousands)	(In thousands)			Fair value measurements at reporting date using:						Gain (losses) from fair value changes		(In thousands)			Fair value measurements at reporting date using:						Gain (losses) from fair value changes
Assets:	Assets:	As of 09/30/2021		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Nine months ended 9/30/2021		Assets:	As of 09/30/2022		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Nine months ended 9/30/2022
Individually evaluated		$	30,848	$	0	$	0	$	30,848	$	(150)
Individually evaluated loans												Individually evaluated loans	$	10,138	$	0	$	0	$	10,138	$	59
Other real estate owned	Other real estate owned	46		0		46		0		(8)		Other real estate owned	247		0				247		49

Nine months ended September 30, 2020
(In thousands) Fair value measurements at reporting
date using: Gain (losses)
from fair
value changes
Assets: As of 09/30/2020 Quoted prices in
active markets for
identical assets
(Level 1) Significant other
observable inputs
(Level 2) Significant
unobservable inputs
(Level 3) Nine months ended 9/30/2020
Individually evaluated $ 10,759 $ 0 $ 10,759 $ 0 $ (1,305)
Other real estate owned 124 0 124 0 (27)


Nine months ended September 30, 2021
(In thousands)			Fair value measurements at reporting date using:						Gain (losses) from fair value changes
Assets:	As of 09/30/2021		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Nine months ended 9/30/2021
Individually evaluated loans	$	30,848	$	0	$	0	$	30,848	$	(150)

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments at September 30, 2021 and December 31, 2020. 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 U.S. GAAP and should be read in conjunction with the financial statements and notes included in this Report.

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
September 30, 2021
(In thousands) Carrying
Amount Fair Value (Level 1) (Level 2) (Level 3)
Financial Assets:
Cash and cash equivalents $ 333,487 $ 333,487 $ 333,487 $ 0 $ 0
Securities - held-to-maturity 269,268 268,283 0 268,283 0
FHLB and other stock 10,366 10,366 0 10,366 0
Accrued interest receivable 23,350 23,350 0 23,350 0
Loans/leases, net1
5,050,519 5,072,855 0 0 5,072,855
Financial Liabilities:
Time deposits $ 675,499 $ 679,335 $ 0 $ 679,335 $ 0
Other deposits 6,415,399 6,415,399 0 6,415,399 0
Fed funds purchased and securities sold
under agreements to repurchase 72,490 72,490 0 72,490 0
Other borrowings 110,000 112,573 0 112,573 0
Trust preferred debentures 0 0 0 0 0
Accrued interest payable 900 900 0 900 0

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments at September 30, 2022 and December 31, 2021. The carrying amounts shown in the table are included in the Consolidated Statements of Condition under the indicated captions.


Estimated Fair Value of Financial Instruments
September 30, 2022
(In thousands)	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and cash equivalents	$	103,612	$	103,612	$	103,612	$	0	$	0

Securities - held-to-maturity	312,329		258,755		0		258,755		0
FHLB and other stock	9,156		9,156		0		9,156		0
Accrued interest receivable	22,083		22,083		0		22,083		0
Loans/leases, net1	5,163,664		4,954,596		0		0		4,954,596

Financial Liabilities:

Time deposits	$	599,612	$	584,165	$	0	$	584,165	$	0
Other deposits	6,337,114		6,337,114		0		6,337,114		0
Fed funds purchased and securities sold
under agreements to repurchase	55,340		55,340		0		55,340		0
Other borrowings	101,000		98,817		0		98,817		0

Accrued interest payable	881		881		0		881		0


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

FHLB and other stock	FHLB and other stock	16,382		16,382		0		16,382		0		FHLB and other stock	10,996		10,996		0		10,996		0
Accrued interest receivable	Accrued interest receivable	32,025		32,025		0		32,025		0		Accrued interest receivable	22,597		22,597		0		22,597		0
Loans/leases, net1	Loans/leases, net1	5,208,658		5,226,301		0		22,171		5,204,130		Loans/leases, net1	5,032,624		5,028,734		0		0		5,028,734

Financial Liabilities:	Financial Liabilities:											Financial Liabilities:

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

Accrued interest payable	Accrued interest payable	1,727		1,727		0		1,727		0		Accrued interest payable	901		901		0		901		0

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

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

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

FHLB Stock and Other 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, 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.

~~Trust Preferred Debentures:~~Other borrowings: The fair value of ~~the trust preferred debentures has been estimated using a~~other borrowings is based upon discounted cash flow ~~analysis which uses~~analyses using current rates offered

for FHLB advances, with similar 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 ~~discount factor~~wide variety of ~~a market spread over current~~business and operational risks through management of its core business activities. The Company manages economic risks, including interest ~~rates for similar instruments.~~

rate, liquidity, and credit risk, primarily by managing the

amount, sources, and duration of its assets and liabilities. The Company’s 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 September 30, 2022 and December 31, 2021. The Company began entering into derivative transactions in the second quarter of 2022.


Derivative Liabilities
	September 30, 2022
	Notional		Balance Sheet	Fair
(In thousands)	Amount		Location	Value
Derivatives not designated as hedging instruments
Interest Rate Products	$	0	Other Liabilities	$	0
Other Contracts	7,499		Other Liabilities	22
Total derivatives not designated as hedging instruments				$	22

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 and nine months ended September 30, 2022:


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		Amount of Gain or (Loss) Recognized in Income on Derivative
(In thousands)		Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022

Interest Rate Products	Other income / (expense)	$	0	$	0
Other Contracts	Other income / (expense)	15		56
Total		$	15	$	56

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, 2021,~~Effective January 1, 2022, the Company had four wholly-owned banking subsidiaries: Tompkins Trust Company (the “Trust Company”), The Bank of Castile (DBA Tompkins Bank of Castile), Mahopac Bank (DBA Tompkins Mahopac Bank), and VIST Bank (DBA Tompkins VIST Bank). The Company’s banks have announced plans for a rebranding effort, pursuant to which the Company’sCompany's four wholly-owned banking subsidiaries ~~will be~~were combined into one bank, with ~~The~~the Bank of of Castile, Mahopac Bank, and VIST Bank merging with and into Tompkins Trust ~~Company. The~~ Company ~~has received all applicable regulatory approvals, and~~(the "Trust Company") with the ~~combined bank will conduct business under~~Trust Company as the ~~“Tompkins” brand~~surviving institution. Immediately following the merger, the Trust Company changed its name ~~with a legal name of “Tompkins~~to Tompkins Community Bank.~~” The re-branding and combination is anticipated to take effect in January 2022.~~ At September 30, 2022, the Company had one wholly-owned banking subsidiary, Tompkins Community Bank. The Company also has a wholly-owned insurance agency subsidiary, Tompkins Insurance Agencies, Inc. (“("Tompkins ~~Insurance”~~Insurance"). The trust division of the Trust Company provides a full array of investment services, including investment management, trust and estate, financial and tax planning as well as life, disability and long-term care insurance services. The Company’s principal offices are located at 118 E. Seneca Street, Ithaca, NY, 14850, and its telephone number is (888) 503-5753. The Company’s common stock is traded on the NYSE American under the Symbol ~~“TMP.”~~"TMP."

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

Business Segments

Banking services consist primarily of attracting deposits from the areas served by the Company’s ~~four~~one banking ~~subsidiaries’ 63~~subsidiary’s 62 banking offices (43 offices in New York and 2019 offices in Pennsylvania) and using those deposits to originate a variety of commercial 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~~Tompkins Community Bank under the trade name Tompkins Financial Advisors. Tompkins Financial Advisors ~~has office locations, and~~offers services ~~are available~~ to customers atof Tompkins Community Bank and shares offices in each of the ~~Company’s four subsidiary banks.~~banking markets.

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

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

4546

Competition

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

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

Regulation

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

OTHER IMPORTANT INFORMATION

The following discussion is intended to provide an understanding of the consolidated financial condition and results of operations of the Company for the three and nine months ended September 30, ~~2021.~~2022. It should be read in conjunction with the Company’s Audited Consolidated Financial Statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, and the Unaudited Consolidated Financial Statements and notes thereto included in Part I of this Quarterly Report on Form 10-Q.

In this Report, there are comparisons of the Company’s performance to that of a peer group, which is comprised of the group of ~~146~~164 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, ~~2021~~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

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The statements contained in this Report that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements may be identified by use of such words as "may", "will", "estimate", "intend", "continue", "believe", "expect", "plan", or "anticipate", and other similar words. Examples of forward-looking statements may include statements regarding the asset quality of the Company's loan portfolios; the level of the Company's allowance for credit losses; whether, when and how borrowers will repay deferred amounts and resume scheduled payments; the sufficiency of liquidity sources; the Company's exposure to changes in interest rates, and to new, changed, or extended government/regulatory expectations; the impact of changes in accounting standards; and trends, plans, prospects, growth and strategies. Forward-looking statements are made based on management’s expectations and beliefs concerning future events impacting the Company and are subject to certain uncertainties and factors relating to the Company’s operations and economic environment, all of which are difficult to predict and many of which are beyond the control of the Company, that could cause actual results of the Company to differ materially from those expressed and/or implied by forward-looking statements. The following factors, in addition to those listed as Risk Factors in Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, are among those that could cause actual results to differ

4647

materially from the forward-looking statements: changes in general economic, market and regulatory conditions; ~~the severity~~GDP growth and ~~duration of the COVID-19 pandemic and~~inflation trends; the impact of the pandemic (including governments' responses to the pandemic) on economic and financial markets, potential regulatory actions, and modifications to our operations, products, and services relating thereto; disruptions in our and our customers’ operations and loss of revenue due to pandemics, epidemics, widespread health emergencies, government-imposed travel/business restrictions, or outbreaks of infectious diseases such as the COVID-19, and the associated adverse impact on our financial position, liquidity, and our customers’ abilities or willingness to repay their obligations to us or willingness to obtain financial services products from the Company; a decision to amend or modify the terms under which our customers are obligated to repay amounts owed to us; the development of an interest rate 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 the ~~Company’s~~Company's operations, investment and/or lending activities; changes in laws and regulations affecting banks, bank holding companies and/or financial holding companies, such as the Dodd-Frank Act and Basel III and the Economic Growth, Regulatory Relief, and Consumer Protection Act; ~~legislative and regulatory changes~~the impact of any change in ~~response to COVID-19 with which we and our subsidiaries must comply, including~~ the ~~Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and the Consolidated Appropriations Act, 2021, and~~FDIC insurance assessment rate or the rules and regulations ~~promulgated thereunder, and federal, state and local government mandates;~~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; reliance on large customers; uncertainties arising from national and global events, including the war in Ukraine, as well as the potential impact of widespread protests, civil unrest, ~~and~~ political uncertainty on the economy and the financial services ~~industry;~~industry, and pandemics or other public health crises, including the COVID-19 pandemic; and financial resources in the amounts, at the times and on the terms required to support the Company’s future businesses.

Critical Accounting Policies

The accounting and reporting policies followed by the Company conform, in all material respects, to U.S. generally accepted accounting principles ("GAAP") and to general practices within the financial services industry. In the course of normal business activity, management must select and apply many accounting policies and methodologies and make estimates and assumptions that lead to the financial results presented in the Company’s consolidated financial statements and accompanying notes. There are uncertainties inherent in making these estimates and assumptions, which could materially affect the Company’s results of operations and financial position.

Management considers accounting estimates to be critical to reported financial results if (i) the accounting estimates require management to make assumptions about matters that are highly uncertain, and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on the Company’s financial statements. Management considers the accounting policies relating to the allowance for credit losses ~~(“allowance”~~("allowance", or ~~“ACL”~~"ACL"), and the review of the securities portfolio for other-than-temporary impairment to be critical accounting policies because of the uncertainty and subjectivity involved in these policies and the material effect that estimates related to these areas can have on the Company’s results of operations. On January 1, 2020, the Company adopted ASU 2016-13, "Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments," which resulted in changes to the Company's existing critical accounting policy that existed at December 31, 2019.

For information on the Company's significant accounting policies and to gain a greater understanding of how the Company’s financial performance is reported, refer to Note 1 – ~~“Summary~~"Summary of Significant Accounting ~~Policies”~~Policies" in the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. Refer to "Recently Issued Accounting Standards" in Management's Discussion and Analysis in this Quarterly Report on Form 10-Q for a discussion of recent accounting updates.

Critical Accounting Estimates

The Company's significant accounting policies conform with U.S. generally accepted accounting principles ("GAAP") and are described in Note 1 of Notes to Financial Statements. In applying those accounting policies, management of the Company is required to exercise judgment in determining many of the methodologies, assumptions and estimates to be utilized. Certain critical accounting estimates are more dependent on such judgment and in some cases may contribute to volatility in the Company's reported financial performance should the assumptions and estimates used change over time due to changes in circumstances. The more significant area in which management of the Company applies critical assumptions and estimates includes the following:

•Accounting for credit losses - 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 4 of Notes to Financial Statements.

COVID-19 Pandemic and Recent Events

The COVID-19 global pandemic continued to present health and economic challenges ~~during~~in the third quarter of 2021. During the third quarter, the Company continued to focus on the health and well-being of its workforce, meeting its clients' needs, and supporting its communities. The Company has designated a Pandemic Planning Committee, which includes key individuals across the Company as well as members of Senior Management, to oversee the Company’s response to COVID-19, and has implemented a number of risk mitigation measures designed to protect our employees and customers while maintaining services for our customers and community. These measures included restrictions on business travel, establishment of a remote work environment for most non-customer facing employees, and social distancing restrictions for those employees working at our offices and branch locations. In July 2020, we began initiating the reopening of our offices and reinstatement of branch services, and the return of our workforce,2022, but as of September 30, 2021, approximately 85% of our noncustomer facing employees continued to work remotely. As New York State has eased COVID-19 restrictions, we have lifted our own restrictions including opening our facilities to employees and customers, lifting travel restrictions, and discontinuing other

guidelines put in place as a result of the COVID-19 pandemic. However, on-site employees who have not provided proof of vaccination are required to wear masks and follow distancing requirements consistent with CDC guidelines.

Tompkins continues to offer, on a limited basis, assistance to its customers affected by the COVID-19 pandemic by implementing a payment deferral program to assist both consumer and business borrowers that may be experiencing financial hardship due to COVID-19. Our standard program allowed for the deferral of loan payments for up to 90 days; in certain cases we extended additional deferrals or other accommodations. As part of this program, the Company deferred approximately 3,843 loans totaling $1.6 billion. As of September 30, 2021, 3,791 loans totaling approximately $1.4 billion had moved out of the deferral status, of those loans 1.3%conditions were more than 30 days past due. As of September 30, 2021, total loans that continued in a deferral status amounted to approximately $12.8 million, representing 0.25% of total loans. We expect that loans in the deferral program will continue to accrue interest during the deferral period unless otherwise classified as nonperforming. The provisions of the CARES Act and the interagency guidance issued by Federal banking regulators provided clarification related to modifications and deferral programs to assist borrowers who are negatively impacted by the COVID-19 national emergency. The guidance and clarifications detail certain provisions whereby banks are permitted to make deferrals and modifications to the terms of a loan which would not require the loan to be reported as a troubled debt restructuring ("TDR").generally improved from 2021. In accordance with the ~~CARES~~Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") and the interagency guidance, the Company elected to adopt the provisions to not report qualified loan modifications as ~~TDRs.~~troubled debt restructurings ("TDRs"). The relief related to TDRs under the CARES Act was extended by the Consolidated Appropriations Act, 2021. Under the Consolidated Appropriations Act, relief under the CARES Act ~~will continue~~was extended until the earlier of (i) 60 days after the date the COVID-19 national emergency comes to an end or (ii) January 1, 2022.

Management continues to monitor credit conditions carefully at the individual borrower level, as well as by industry segment, in order to be responsive to changing credit conditions. It is difficult to assess whether a customer that continues to experience COVID-19 related financial hardship will be able to perform under the original terms of the loan once the deferral period ends. Any such inability to perform may result in increases in past due and nonperforming loans. The balance of loans in deferral as of September 30, 2021 reflects a continued decrease, resulting in immaterial industry concentrations as a percentage of each loan segment.

The Company ~~also participated in the U.S. Small Business Administration (“SBA”)~~funded a total of 5,140 applications for Paycheck Protection ~~Program (“PPP”~~Plan ("PPP"). This program provides borrower guarantees for lenders, and envisions a certain amount of loan forgiveness for loan recipients who properly utilize funds, all in accordance with the rules and regulations established by the SBA for the PPP. The Company began accepting applications for PPP loans ~~on April 3,~~totaling $694.1 million in 2020 and had funded 2,998 loans totaling about $465.6 million when the initial program ended. On January 19, 2021, the Company began accepting both first draw and second draw applications for the reopening of the PPP program. The 2021 PPP program funding closed for new applications on May 12, 2021. ~~The Company funded 2,142 PPP loan applications totaling $228.5 million in 2021.~~

Out of the ~~total~~ $694.1 million of PPP loans that the Company ~~had~~ funded, ~~through October 12, 2021,~~ approximately ~~$552.0~~$693.2 million ~~had~~have been forgiven by the ~~SBA~~Small Business Administration ("SBA") under the terms of the ~~program.~~program as of September 30, 2022, or paid back by the borrower. As of September 30, 2022, there were fourteen outstanding PPP loans totaling approximately $875,000. Total net deferred fees on the remaining balance of PPP loans amounted to ~~$6.2 million~~$19,000 at September 30, ~~2021.~~2022.

As of September 30, 2021, the Company's nonperforming assets represented 0.75% of total assets, up from 0.60% at December 31, 2020. Despite relatively stable trends in nonperforming assets and other delinquency, some customers have experienced continued cash flow stress related to the pandemic, resulting in an increase in loans rated Substandard, which totaled $70.2 million at September 30, 2021, up from $68.6 million at December 31, 2020, and up from $45.4 million at September 30, 2020. The downgrades to Substandard were primarily due to one commercial real estate loan totaling $7.5 million, which continues to accrue interest. At September 30, 2021, loans rated Special Mention declined to $98.3 million from $122.7 million at September 30, 2020. As mentioned above, the Company is working with its customers who are dealing with hardships caused by the pandemic, and as part of those efforts, the Company implemented a loan payment deferral program in March 2020 and participates in the PPP. As of September 30, 2021, the Company had not experienced any significant impact to our liquidity or funding capabilities as a result of COVID-19. The Company’s participation as a lender in the PPP has been a use of liquidity; however, the Federal Reserve Bank has provided a lending facility that may be used by banks to obtain funding specifically for PPP loans. PPP loans would be pledged as collateral on a bank's borrowings under the Federal Reserve Bank's designated PPP lending facility. As of September 30, 2021, the Company has not accessed this Federal Reserve Bank PPP lending facility.

RESULTS OF OPERATION

Performance Summary

Net income for the third quarter of ~~2021~~2022 was $21.3 million or ~~$1.45~~$1.48 diluted earnings per share, compared to ~~$24.2~~$21.3 million or ~~$1.63~~$1.45 diluted earnings per share for the same period in ~~2020.~~2021. Net income for the first nine months of ~~2021~~2022 was ~~$69.8~~$65.5 million or ~~$4.72~~$4.53 diluted earnings per share compared to ~~$53.6~~$69.8 million or ~~$3.59~~$4.72 diluted earnings per share for the first nine months of ~~2020.~~

2021. Net income for the third quarter of ~~2021~~2022 was ~~down $2.9 million or 11.9% when compared to~~in line with the same quarter in ~~2020.~~2021. For the ~~year to date~~year-to-date period ~~ending~~ended September 30, ~~2021,~~2022, net income ~~increased~~decreased by ~~$16.2~~$4.3 million or ~~30.1%~~6.2%. Results for the third quarter of 2021 were negatively impacted by approximately $4.1 million ($0.21 per share) of nonrecurring expenses related to the prepayment of borrowings and the redemption of trust preferred securities. Though these transactions had a negative impact on earnings during the third quarter of 2021, management expects that they will have a favorable impact on future earnings by way of reduced interest expense. The ~~increase~~decrease in net income for the nine ~~months ended September 30, 2021 over~~month period in 2022 compared to the same period in ~~2020~~2021 was mainly a result of ~~lower provisions~~the provision for credit losses, ~~and higher noninterest revenues, partially offset by higher noninterest expenses~~ which ~~included penalties~~was an expense of ~~$2.9~~$1.4 million ~~related to the prepayment~~in 2022, versus a credit of ~~FHLB advances, and~~$6.1 million in 2021, a ~~higher effective tax rate.~~pre-tax variance of $7.5 million.

Return on average assets ~~(“ROA”~~("ROA") for the quarter ended September 30, ~~2021~~2022 was ~~1.05%~~1.08%, compared to ~~1.27%~~1.05% for the quarter ended September 30, ~~2020.~~2021. Return on average shareholders’ equity ~~(“ROE”~~("ROE") for the third quarter of ~~2021~~2022 was ~~11.55%~~13.33%, compared to ~~13.59%~~11.55% for the same period in ~~2020.~~2021. For the year-to-date period ended September 30, ~~2021,~~2022, ROA and ROE totaled ~~1.17%~~1.11% and ~~12.87%~~13.22%, respectively, compared to ~~0.99%~~1.17% and ~~10.33%~~12.87%, for the same period in ~~2020.~~2021.

Segment Reporting

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

Banking Segment

The banking segment reported net income of ~~$17.8~~$18.0 million for the third quarter of ~~2021, a decrease~~2022, an increase of ~~$3.8 million~~$252,000 or ~~17.8%~~1.4% from net income of ~~$21.6~~$17.8 million for the same period in ~~2020.~~2021. For the nine months ended September 30, ~~2021,~~2022, the banking segment reported net income of ~~$60.8~~$57.0 million, ~~an increase~~a decrease of ~~$13.3~~$3.8 million or ~~28.0%~~6.2% from the same period in ~~2020.~~2021. The year-to-date decrease in net income was mainly due to a $7.5 million increase in provision expense over prior year, partially offset by increased net interest income.

Net interest income of ~~$56.1~~$58.1 million for the third quarter of ~~2021~~2022 was ~~down $2.2~~up $2.0 million or ~~3.7%~~3.6% from the same period in ~~2020.~~2021. For the nine months ended September 30, ~~2021,~~2022, net interest income of ~~$166.0~~$173.0 million was ~~down $1.6~~up $7.0 million or ~~1.0%~~4.2% compared to the first nine months of ~~2020. The decrease~~2021, the improvement is mainly due to higher yields on interest earning assets as well as lower interest expense on other borrowings due to lower balances in ~~net interest income for~~ the ~~three and~~first nine ~~month period ended September 30, 2021 over~~months of 2022 compared to the same ~~periods~~period in ~~2020 was mainly driven by the decrease in average asset yields offsetting the favorable impact of an increase in average earning assets and lower funding costs.~~2021. Net interest income for the three and nine months ended September 30, ~~2021~~2022 included net deferred loan fees associated with PPP loans of ~~$3.3 million~~$88,000 and ~~$8.0~~$3.0 million, respectively, compared to net deferred loan fees of ~~$2.4~~$3.3 million and ~~$4.8~~$8.0 million for the three and nine months ended September 30, ~~2020,~~2021, respectively. Interest expense for the three and nine months ended September 30, 2021, respectively, was negatively impacted by an accelerated non-cash purchase accounting discount of $1.2 million and $1.9 million, respectively, related to the redemption of trust preferred securities.

The provision for credit losses was ~~a credit~~an expense of ~~$1.2~~$1.1 million for the three months ended September 30, ~~2021,~~2022, compared to a credit of ~~$218,000~~$1.2 million for the same period in ~~2020.~~2021. For the nine month period ended September 30, ~~2021,~~2022, the provision for credit losses was ~~a credit~~an expense of ~~$6.1~~$1.4 million compared to a ~~provision~~credit of ~~$17.4~~$6.1 million for the same period in ~~2020.~~2021. The ~~first quarter of 2020 included a~~increase in provision ~~expense of $16.8 million related to the impact of the economic conditions due to COVID-19 on economic forecasts and other model assumptions relied upon by management in determining the allowance~~ for credit losses for both the three and ~~reflects the calculation of the allowance for credit losses in accordance~~nine month periods is mainly driven by current economic forecasts coupled with ~~ASU 2016-13.~~loan growth. For additional information, see the section titled "The Allowance for Credit Losses" below.

Noninterest income of ~~$6.4~~$6.0 million for the three months ended September 30, ~~2021~~2022 was ~~up $440,000~~down $443,000 or ~~7.4%~~6.9% compared to the same period in ~~2020. The increase was mainly in card services income and service charges on deposits accounts, which were up $298,000 or 12.3% and $194,000 or 13.4%, respectively, over the same quarter in 2020.~~2021. For the nine months ended September 30, ~~2021,~~2022, noninterest income of ~~$19.2~~$18.5 million was down ~~$42,000~~$680,000 or ~~0.2%~~3.6% compared to the nine months ended September 30, ~~2020.~~2021. The decrease was mainly driven by reduced income on bank owned life insurance and lower gains on sales of residential loans, which were down $604,000 and $213,000, respectively, in the third quarter of 2022 compared to the same quarter in 2021, and down $1.2 million and $738,000, respectively, for the year-to-date period ended September 30, 2022 compared to the same period in 2021. Service charges on deposit accounts were up $279,000 or 17.0% in the third quarter of 2022 over the third quarter of 2021 and up $873,000 or 19.1% for the nine months ended September 30, 2022 over the same period in 2021.

Noninterest expense of ~~$40.6~~$39.4 million and ~~$113.8~~$116.0 million ~~respectively,~~ for the three and nine months ended September 30, ~~2021,~~2022, respectively, was ~~up $3.2~~down $1.1 million or ~~8.5%~~2.8% and ~~$3.7~~$2.2 million or ~~3.3%~~2.0%, respectively, ~~from~~over the same periods in ~~2020. Included~~2021. The main driver for the decrease in ~~the quarter and year-to-date periods of 2021 were~~noninterest expenses was mainly due to penalties of $2.9 million related to the prepayment of $135.0 million in FHLB fixed rate ~~advances. The~~ advances ~~which~~paid in the third quarter of 2021. Included in the quarter and year-to-date periods of 2022 were ~~paid off in September 2021, carried a weighted average interest rate~~nonrecurring expenses of ~~2.26%~~$196,000 and ~~had a weighted average maturity~~$1.2 million, respectively, related to the consolidation of ~~1.25 years.~~the Company's four banking charters, including the related conversion of the core banking system and rebranding.

Insurance Segment

The insurance segment reported net income of ~~$2.3~~$2.7 million for the three months ended September 30, ~~2021,~~2022, which was up ~~$462,000~~$467,000 or ~~25.7%~~20.7% compared to the third quarter of ~~2020.~~2021. Total noninterest revenue was up ~~$927,000~~$1.0 million or ~~10.3%~~10.1% for the third quarter of ~~2021~~2022 compared to the same quarter in the prior year, primarily due to growth in both commercial and personal lines, ~~revenue.~~and property and casualty commissions. The growth in ~~commercial lines~~property and casualty commission revenue is attributed to ~~increased~~ new business, growth within the existing client base, and premium increases related to change in general market conditions.

For the nine months ended September 30, ~~2021,~~2022, net income was up ~~$1.7 million~~$670,000 or ~~47.2%~~12.3% compared to the same period in the prior year. Total revenue for the year-to-date period ended September 30, 2022, was up ~~$3.0~~$1.4 million or ~~12.2%~~5.2% compared to the same period in ~~the prior year.~~September 30, 2021. The increase in revenues and net income for the nine months ended September 30, ~~2021~~2022 compared to the prior year is mainly due to growth in overall commission revenue of $1.5 million or ~~6.8%~~6.4%, primarily in commercial and personal lines, which were up 10.8% and contingency income, which was up $890,000 or 39.7%. In addition, revenue for the prior year was reduced by an increase in reserves for cancellations and policy changes as a result of economic uncertainties related to COVID-19.5.1% respectively.

Noninterest expenses for the three months ended September 30, ~~2021~~2022 were up ~~$287,000~~$332,000 or ~~4.4%~~4.9% compared to the three months ended September 30, ~~2020.~~2021. Year-to-date noninterest expenses were up ~~$565,000~~$448,000 or ~~2.9%~~2.2% compared to the nine months ended September 30, ~~2020.~~2021. The increases in noninterest expenses for the three and nine months ended September 30, ~~2021~~2022 were mainly the result of increases in wages and new business commissions along with related ~~taxes~~tax and ~~benefits~~benefit expenses tied to the increase in commission revenue. ~~Certain expenses continue to be below average as a result of pandemic-related travel and business restrictions.~~

Wealth Management Segment

The wealth management segment reported net income of ~~$1.3 million~~$596,000 for the three months ended September 30, ~~2021,~~2022, which was ~~up $494,000~~down $721,000 or ~~60.0%~~54.8% compared to the third quarter of ~~2020.~~2021. Revenue for the third quarter of ~~2021~~2022 was ~~up $614,000~~down $705,000 or ~~13.8%~~14.0% compared to the third quarter of ~~2020.~~ 2021.The ~~increase~~decrease for the three months ended September 30, ~~2021~~2022 was mainly ~~due to an increase~~ in advisory ~~fee income resulting from the growth~~revenues related to a decrease in assets under ~~management.~~management, largely a result of unfavorable market conditions. Total expense for the third quarter of ~~2021~~2022 was ~~in line with~~up $246,000 or 7.4% compared to the third quarter of ~~2020.~~2021. The increase in expense was primarily due to technology costs, mainly related to the implementation of a new core platform. For the nine months ended September 30, ~~2021,~~2022, net income of ~~$3.6~~$2.4 million was updown $1.2 million or ~~47.8%~~33.8% compared to the prior year, mainly due to ~~an increase in advisory fee income over~~ the same period prior year, for the same reason as the quarterly increase. Noninterest expense for the nine months ended September 30, 2021, was up 2.1% over the same period in 2020, driven mainly by increases in salaries and wages.items outlined above.

Net Interest Income

The following tables show 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, ~~2021~~2022 and ~~2020.~~2021:


Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)	Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)													Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)
		Quarter Ended													Quarter Ended
		September 30, 2021						September 30, 2020							September 30, 2022						September 30, 2021
		Average						Average							Average						Average
		Balance				Average		Balance				Average			Balance				Average		Balance				Average
(Dollar amounts in thousands)	(Dollar amounts in thousands)	(QTD)		Interest		Yield/Rate		(QTD)		Interest		Yield/Rate		(Dollar amounts in thousands)	(QTD)		Interest		Yield/Rate		(QTD)		Interest		Yield/Rate
ASSETS	ASSETS													ASSETS
Interest-earning assets	Interest-earning assets													Interest-earning assets
Interest-bearing balances due from banks	Interest-bearing balances due from banks	$	376,341	$	136	0.14	%	$	326,908	$	83	0.10	%	Interest-bearing balances due from banks	$	63,516	$	85	0.53	%	$	376,341	$	136	0.14	%
Securities (1)	Securities (1)													Securities (1)
U.S. Government securities	U.S. Government securities	2,133,984		6,467		1.20	%	1,332,240		5,362		1.60	%	U.S. Government securities	2,276,380		7,853		1.37	%	2,133,984		6,467		1.20	%

State and municipal (2)	State and municipal (2)	109,375		697		2.53	%	122,932		816		2.64	%	State and municipal (2)	95,627		614		2.55	%	109,375		697		2.53	%
Other securities (2)	Other securities (2)	3,417		23		2.64	%	3,433		25		2.88	%	Other securities (2)	3,323		37		4.44	%	3,417		23		2.64	%
Total securities	Total securities	2,246,776		7,187		1.27	%	1,458,605		6,203		1.69	%	Total securities	2,375,330		8,504		1.42	%	2,246,776		7,187		1.27	%
FHLBNY and FRB stock	FHLBNY and FRB stock	15,330		196		5.07	%	18,319		307		6.66	%	FHLBNY and FRB stock	15,058		166		4.38	%	15,330		196		5.07	%
Total loans and leases, net of unearned income (2)(3)	Total loans and leases, net of unearned income (2)(3)	5,115,253		53,989		4.19	%	5,400,217		58,507		4.31	%	Total loans and leases, net of unearned income (2)(3)	5,185,219		55,265		4.23	%	5,115,253		53,989		4.19	%
Total interest-earning assets	Total interest-earning assets	7,753,700		61,508		3.15	%	7,204,049		65,100		3.59	%	Total interest-earning assets	7,639,123		64,020		3.32	%	7,753,700		61,508		3.15	%
Other assets	Other assets	348,370						377,960						Other assets	214,724						348,370
Total assets	Total assets	$	8,102,070					$	7,582,009					Total assets	$	7,853,847					$	8,102,070
LIABILITIES & EQUITY	LIABILITIES & EQUITY													LIABILITIES & EQUITY
Deposits	Deposits													Deposits
Interest-bearing deposits	Interest-bearing deposits													Interest-bearing deposits
Interest bearing checking, savings, & money market	Interest bearing checking, savings, & money market	4,090,840		906		0.09	%	3,796,615		1,671		0.18	%	Interest bearing checking, savings, & money market	3,979,590		2,863		0.29	%	4,090,840		906		0.09	%
Time deposits	Time deposits	707,212		1,700		0.95	%	697,026		2,534		1.45	%	Time deposits	596,299		1,331		0.89	%	707,212		1,700		0.95	%
Total interest-bearing deposits	Total interest-bearing deposits	4,798,052		2,606		0.22	%	4,493,641		4,205		0.37	%	Total interest-bearing deposits	4,575,889		4,194		0.36	%	4,798,052		2,606		0.22	%
Federal funds purchased & securities sold under agreements to repurchase	Federal funds purchased & securities sold under agreements to repurchase	60,798		17		0.11	%	47,527		19		0.16	%	Federal funds purchased & securities sold under agreements to repurchase	53,810		14		0.10	%	60,798		17		0.11	%
Other borrowings	Other borrowings	224,459		1,156		2.04	%	303,587		1,623		2.13	%	Other borrowings	232,158		1,351		2.31	%	224,459		1,156		2.04	%
Trust preferred debentures	Trust preferred debentures	3,444		1,237		142.50	%	17,135		216		5.02	%	Trust preferred debentures	0		0		0.00	%	3,444		1,237		142.50	%
Total interest-bearing liabilities	Total interest-bearing liabilities	5,086,753		5,016		0.39	%	4,861,890		6,063		0.50	%	Total interest-bearing liabilities	4,861,857		5,559		0.45	%	5,086,753		5,016		0.39	%
Noninterest bearing deposits	Noninterest bearing deposits	2,165,537						1,897,999						Noninterest bearing deposits	2,250,263						2,165,537
Accrued expenses and other liabilities	Accrued expenses and other liabilities	116,663						112,636						Accrued expenses and other liabilities	106,403						116,663
Total liabilities	Total liabilities	7,368,953						6,872,525						Total liabilities	7,218,523						7,368,953
Tompkins Financial Corporation Shareholders’ equity	Tompkins Financial Corporation Shareholders’ equity	731,629						707,996						Tompkins Financial Corporation Shareholders’ equity	633,837						731,629
Noncontrolling interest	Noncontrolling interest	1,488						1,488						Noncontrolling interest	1,487						1,488
Total equity	Total equity	733,117						709,484						Total equity	635,324						733,117

Total liabilities and equity	Total liabilities and equity	$	8,102,070					$	7,582,009					Total liabilities and equity	$	7,853,847					$	8,102,070
Interest rate spread	Interest rate spread					2.76	%					3.10	%	Interest rate spread					2.87	%					2.76	%
Net interest income/margin on earning assets	Net interest income/margin on earning assets			56,492		2.89	%			59,037		3.26	%	Net interest income/margin on earning assets			58,461		3.04	%			56,492		2.89	%

Tax Equivalent Adjustment	Tax Equivalent Adjustment			(394)						(784)				Tax Equivalent Adjustment			(350)						(394)
Net interest income per consolidated financial statements	Net interest income per consolidated financial statements			$	56,098					$	58,253			Net interest income per consolidated financial statements			$	58,111					$	56,098

5152


Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)	Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)													Average Consolidated Statements of Condition and Net Interest Analysis (Unaudited)
		Year to Date Period Ended													Year to Date Period Ended
		September 30, 2021						September 30, 2020							September 30, 2022						September 30, 2021
		Average						Average							Average						Average
		Balance				Average		Balance				Average			Balance				Average		Balance				Average
(Dollar amounts in thousands)	(Dollar amounts in thousands)	(YTD)		Interest		Yield/Rate		(YTD)		Interest		Yield/Rate		(Dollar amounts in thousands)	(YTD)		Interest		Yield/Rate		(YTD)		Interest		Yield/Rate
ASSETS	ASSETS													ASSETS
Interest-earning assets	Interest-earning assets													Interest-earning assets
Interest-bearing balances due from banks	Interest-bearing balances due from banks	$	333,769	$	266	0.11	%	$	111,775	$	90	0.11	%	Interest-bearing balances due from banks	$	94,988	$	190	0.27	%	$	333,769	$	266	0.11	%
Securities (1)	Securities (1)													Securities (1)
U.S. Government securities	U.S. Government securities	1,920,717		16,417		1.14	%	1,242,659		18,236		1.96	%	U.S. Government securities	2,291,636		22,960		1.34	%	1,920,717		16,417		1.14	%

State and municipal (2)	State and municipal (2)	114,809		2,200		2.56	%	110,058		2,225		2.70	%	State and municipal (2)	98,262		1,882		2.56	%	114,809		2,200		2.56	%
Other securities (2)	Other securities (2)	3,420		69		2.70	%	3,429		93		3.61	%	Other securities (2)	3,349		88		3.52	%	3,420		69		2.70	%
Total securities	Total securities	2,038,946		18,686		1.23	%	1,356,146		20,554		2.02	%	Total securities	2,393,247		24,930		1.39	%	2,038,946		18,685		1.23	%
FHLBNY and FRB stock	FHLBNY and FRB stock	16,328		608		4.98	%	22,175		1,130		6.81	%	FHLBNY and FRB stock	12,481		391		4.19	%	16,328		608		4.98	%
Total loans and leases, net of unearned income (2)(3)	Total loans and leases, net of unearned income (2)(3)	5,225,087		162,355		4.15	%	5,197,757		170,853		4.40	%	Total loans and leases, net of unearned income (2)(3)	5,119,309		159,353		4.16	%	5,225,087		162,355		4.15	%
Total interest-earning assets	Total interest-earning assets	7,614,130		181,915		3.19	%	6,687,853		192,627		3.85	%	Total interest-earning assets	7,620,025		184,864		3.24	%	7,614,130		181,915		3.19	%
Other assets	Other assets	346,441						536,424						Other assets	244,615						346,441
Total assets	Total assets	$	7,960,571					$	7,224,278					Total assets	$	7,864,640					$	7,960,571
LIABILITIES & EQUITY	LIABILITIES & EQUITY													LIABILITIES & EQUITY
Deposits	Deposits													Deposits
Interest-bearing deposits	Interest-bearing deposits													Interest-bearing deposits
Interest bearing checking, savings, & money market	Interest bearing checking, savings, & money market	4,002,724		2,943		0.10	%	3,557,326		7,973		0.30	%	Interest bearing checking, savings, & money market	4,070,607		4,502		0.15	%	4,002,724		2,943		0.10	%
Time deposits	Time deposits	727,445		5,616		1.03	%	693,922		8,208		1.58	%	Time deposits	610,432		3,785		0.83	%	727,445		5,616		1.03	%
Total interest-bearing deposits	Total interest-bearing deposits	4,730,169		8,559		0.24	%	4,251,248		16,181		0.51	%	Total interest-bearing deposits	4,681,039		8,287		0.24	%	4,730,169		8,559		0.24	%
Federal funds purchased & securities sold under agreements to repurchase	Federal funds purchased & securities sold under agreements to repurchase	57,498		48		0.11	%	54,481		76		0.19	%	Federal funds purchased & securities sold under agreements to repurchase	57,606		45		0.10	%	57,498		48		0.11	%
Other borrowings	Other borrowings	254,002		3,883		2.04	%	397,511		6,357		2.14	%	Other borrowings	176,007		2,480		1.88	%	254,002		3,883		2.04	%
Trust preferred debentures	Trust preferred debentures	9,849		2,233		30.32	%	17,093		758		5.93	%	Trust preferred debentures	0		0		0.00	%	9,849		2,233		30.32	%
Total interest-bearing liabilities	Total interest-bearing liabilities	5,051,518		14,723		0.39	%	4,720,332		23,372		0.66	%	Total interest-bearing liabilities	4,914,652		10,812		0.29	%	5,051,518		14,723		0.39	%
Noninterest bearing deposits	Noninterest bearing deposits	2,066,567						1,699,317						Noninterest bearing deposits	2,183,258						2,066,567
Accrued expenses and other liabilities	Accrued expenses and other liabilities	117,383						111,643						Accrued expenses and other liabilities	104,446						117,383
Total liabilities	Total liabilities	7,235,468						6,531,292						Total liabilities	7,202,356						7,235,468
Tompkins Financial Corporation Shareholders’ equity	Tompkins Financial Corporation Shareholders’ equity	723,645						691,530						Tompkins Financial Corporation Shareholders’ equity	660,826						723,645
Noncontrolling interest	Noncontrolling interest	1,458						1,456						Noncontrolling interest	1,458						1,458
Total equity	Total equity	725,103						692,986						Total equity	662,284						725,103

Total liabilities and equity	Total liabilities and equity	$	7,960,571					$	7,224,278					Total liabilities and equity	$	7,864,640					$	7,960,571
Interest rate spread	Interest rate spread					2.80	%					3.19	%	Interest rate spread					2.95	%					2.80	%
Net interest income/margin on earning assets	Net interest income/margin on earning assets			167,192		2.94	%			169,255		3.38	%	Net interest income/margin on earning assets			174,052		3.05	%			167,192		2.94	%

Tax Equivalent Adjustment	Tax Equivalent Adjustment			(1,211)						(1,667)				Tax Equivalent Adjustment			(1,065)						(1,211)
Net interest income per consolidated financial statements	Net interest income per consolidated financial statements			$	165,981					$	167,588			Net interest income per consolidated financial statements			$	172,987					$	165,981

1 Average balances and yields on available-for-sale debt securities are based on historical amortized ~~cost~~cost.

2 Interest income includes the tax effects of taxable-equivalent adjustments using an effective income tax rate of 21% in ~~2021~~2022 and ~~2020~~2021 to increase tax exempt interest income to taxable-equivalent basis.

3 Nonaccrual loans are included in the average asset totals presented above. Payments received on nonaccrual loans have been recognized as disclosed in Note 1 of the Company’s consolidated financial statements included in Part 1 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Net Interest Income

Net interest income is the Company’s largest source of revenue, representing ~~72.9%~~73.7% and ~~73.5%~~74.4%, respectively, of total revenues for the three and nine months ended September 30, ~~2021,~~2022, compared to ~~75.5%~~72.9% and ~~75.3%~~73.6% for the same periods in ~~2020.~~2021. Net interest income is dependent on the volume and composition of interest earning assets and interest-bearing liabilities and the level of market interest rates. The above table shows average interest-earning assets and interest-bearing liabilities, and the corresponding yield or cost associated with each.

5253

Taxable-equivalent net interest income for the three months ended September 30, ~~2021 decreased $2.2~~2022 increased $2.0 million or ~~3.7%~~3.5% from the same period in the prior year. The ~~decrease resulted~~increase in net interest income for the three months ended September 30, 2022, was mainly ~~from~~a result of the ~~decrease~~17 basis point increase in ~~average asset yields more than offsetting lower average funding costs~~rates paid on interest earning assets, and ~~the growth in average interest-earning assets.~~was partially offset by a 6 basis point increase on rates paid on interest earning liabilities. Taxable-equivalent net interest income for the nine month period ended September 30, ~~2021 decreased $1.6~~2022 increased $6.9 million or ~~1.0%~~4.1% from the nine month period ended September 30, ~~2020.~~2021. Net interest income in the first nine months of ~~2021~~2022 benefited from the growth in average ~~earning assets,~~securities balances and average yields on securities, which were up ~~13.9%~~17.4% and 16 basis points over the same nine month period in ~~2020,~~2021, and ~~lower average funding costs. The growth in average earning assets and lower average funding costs were more than offset by the~~a 10 basis point decrease in the average ~~asset yields resulting from lower market interest rates over the trailing twelve month period as well as a greater percentage of earning assets being comprised of lower yielding securities and~~rate paid on interest bearing ~~balances due from banks, when compared to the same period in 2020.~~liabilities.

Net interest margin for the three months ended September 30, ~~2021~~2022 was ~~2.89%~~3.04% compared to ~~3.26%~~2.89% for the same period in ~~2020.~~2021. Net interest margin for the nine months ended September 30, ~~2021~~2022 was ~~2.94%~~3.05% compared to ~~3.38%~~2.94% for the same period in ~~2020.~~2021. The ~~decrease~~increase in net interest margin for the three and nine months ended September 30, ~~2021~~2022 compared to the same periods in ~~2020~~2021 was mainly due to an increase in higher yielding securities, reflecting the ~~effect~~investment of ~~declining market interest rates on earning asset yields and a shift~~excess liquidity in ~~composition of average earning assets, with a greater mix of lower yielding average earning assets, mainly securities and interest bearing balances, partially offset by lower funding costs.~~securities.

Taxable-equivalent interest income for the three and nine months ended September 30, ~~2021,~~2022, was ~~$61.5~~$64.0 million and ~~$181.9~~$184.9 million, ~~respectively, down 5.5%~~up 4.1% and ~~5.6%~~1.6%, respectively, compared to the same periods in ~~2020. Both~~2021. The growth in the ~~quarter-over-quarter and year-over-year decrease in taxable-equivalent interest income was mainly a result of lower~~three month period reflects higher average asset yields ~~partially offset by~~and growth in total securities, while the year-to-date reflects growth in average earning assets. Average asset yields for the three ~~and nine~~ months ended September 30, ~~2021~~2022 were ~~down 44 and 66~~up 17 basis points ~~respectively,~~ compared to the same ~~periods~~period in ~~2020, mainly~~2021 driven by ~~the decrease in market interest rates as well as the~~ growth in ~~lower~~higher yielding securities and interest bearing balances. For the three and nine months ended September 30, 2021, average earning assets were up $549.7 million or 7.6% and $926.3 million or 13.9%, respectively, over the same periods in 2020, with the majority of growthas excess liquidity was invested in securities and ~~interest bearing balances due from banks. Average loan balances for~~loans. For the three months ended September 30, 2022, the average yield on securities and loans were up 15 and 4 basis points, respectively, over the same period in 2021 ~~were $285.0 million or 5.3% below the three months ended September 30, 2020, and~~Average asset yields for the nine months ended September 30, ~~2021~~2022 were ~~in line with the nine months ended September 30, 2020, while the average yield on loans decreased 12 and 25~~up 5 basis points ~~respectively, for the three and nine months ended September 30, 2021,~~ compared to the same ~~periods~~period in ~~2020. The decrease in average loans was primarily due to a decline in average PPP loans from the third quarter of 2020 to the third quarter of~~ 2021. As a result of its participation in the SBA's PPP, the Company recorded net deferred loan fees of ~~$3.3 million~~$88,000 and ~~$8.0~~$3.0 million, respectively, in the three and nine months ended September 30, ~~2021,~~2022, compared to ~~$2.4~~$3.3 million and ~~$4.8~~$8.0 million, respectively, for the three and nine months ended September 30, ~~2020.~~2021. These net deferred loan fees are included in interest income.

For the three months ended September 30, 2022, average earning assets were down $114.6 million or 1.5% over the same period in 2021 with the majority of the decrease in average interest-bearing balances due from banks and partially off-set by increases in average securities and loan balances. Average earning assets for the nine months ended September 30, 2022 were in line with same period in 2021. Average loan balances for the three months ended September 30, 2022, were up $70.0 million or 1.4% from the three months ended September 30, 2021. Average loan balances for the nine months ended September 30, 2022 were down $105.8 million or 2.0% from the nine months ended September 30, 2021. The decrease in average loans was primarily due to a decline in average PPP loans. Average securities balances for the three and nine months ended September 30, ~~2021,~~2022, were up ~~$788.2~~$128.6 million or ~~54.0%~~5.7%, and ~~$682.8~~$354.3 million or ~~50.4%~~17.4%, ~~respectively, and the average yield on securities was~~respectively. Average interest-bearing balances due from banks were down 42 basis points and down 79 basis points, respectively, compared to the same periods in 2020. Average interest bearing balances for the three and nine months ended September 30, 2021, were up $49.4 million and $222.0 million, respectively, over the same periods in 2020.

~~Interest expense for the three and nine months ended September 30, 2021, decreased by $1.0~~$312.8 million or ~~17.3%~~83.1%, and ~~$8.6~~$238.8 million or ~~37.0%~~71.5%, respectively, compared to the same periods in ~~2020, driven mainly by decreases in rates paid on deposits and borrowings as a result of lower market interest rates, and a decrease in average borrowings.~~ 2021.

Interest expense for the three ~~and nine~~ months ended September 30, ~~2021 was negatively impacted~~2022, increased $543,000 or 10.8%, and for the nine month period ended September 30, 2022 decreased by ~~an accelerated non-cash purchase accounting discount related~~$3.9 million or 26.6% compared to the ~~redemption of trust preferred securities of $1.2 million and $1.9 million, respectively. Growth~~same periods in ~~average deposit balances contributed to a decrease in higher cost borrowings.~~2021. The average cost of interest-bearing deposits during the three and nine months ended September 30, ~~2021~~2022 was ~~0.22%~~0.45% and ~~0.24%~~0.29%, respectively, ~~down 16~~up 6 basis points for the three month period and 27down 10 basis points ~~respectively,~~for the nine months period end, compared to the same periods in ~~2020.~~2021. Average interest-bearing deposits were down $222.2 million or 4.6% and $49.1 million or 1.0%, respectively, for the ~~third quarter of 2021 were up $304.4 million or 6.8% compared to the~~ same ~~period in 2020, while year-to-date average interest-bearing deposits were up $478.9 million or 11.3% compared to the same period in 2020.~~three and nine months ended 2021. Average noninterest bearing deposits were up ~~$267.5~~$84.7 million or ~~14.1%~~3.9% for the three months ended September 30, ~~2021~~2022 when compared to the third quarter of ~~2020,~~2021, and for the nine months ended September 30, ~~2021~~2022 were up ~~$367.3~~$116.7 million or ~~21.6%~~5.7% compared to the same period in 2020. Average deposit balances continue to benefit from the PPP loan program, as the majority of the proceeds of the PPP loans funded by Tompkins during 2020 and the first half of 2021 were deposited in Tompkins checking accounts. ~~Additionally, consumer deposit balances benefited from other government stimulus programs.~~2021. Average other borrowings for the three and nine months ended September 30, ~~2021~~2022 were ~~down $79.1~~up $7.7 million or ~~26.1%~~3.4%, and ~~$143.5~~down $78.0 million or ~~36.1%~~30.7%, respectively, compared to the same periods in ~~2020, mainly due~~2021.

Net interest margin for the third quarter of 2022 of 3.04% was down from a net interest margin of 3.09% for the second quarter of 2022. Taxable-equivalent interest income was up $2.5 million or 4.1%, as yields on average earning assets were up 9 basis points over the second quarter of 2022 to ~~decreases~~3.32%, while average earning assets were flat compared to the second quarter of 2022. Interest expense was up $2.9 million or 106.6%, as the average cost of interest bearing liabilities increased 23 basis points over the second quarter of 2022 to 0.45%; reflecting a 18 basis point increase in ~~term~~the average cost of interest bearing deposits and a 182 basis point increase in the average cost of borrowings with the FHLB as a result of deposit growth. In September 2021, the Company prepaid $135.0 million of fixed rate FHLB advances, incurring prepayment penalties of $2.9 million. The advances carried a weighted average rate of 2.26% and had a weighted average maturity of 1.25 years.FHLB.

5354

Provision for Credit Losses

The provision for credit losses represents management’s estimate of the amount necessary to maintain the allowance for credit losses ("ACL") at an appropriate level. Provision for credit losses in the third quarter of ~~2021~~2022 was ~~a credit of $1.2~~$1.1 million compared to a credit of ~~$218,000~~$1.2 million for the third quarter of ~~2020.~~2021. Provision for credit losses for the nine months ended September 30, ~~2021~~2022 was an expense of $1.4 million compared to a provision credit of $6.1 ~~million, compared to an expense of $17.4~~ million for the same period in ~~2020.~~2021. The provision for credit losses for the three and nine months ended September 30, ~~2021~~2022 included a provision credit ~~to provision~~ of ~~$55,000~~$45,000 and ~~a provision~~ expense of ~~$273,000~~$245,000, respectively, related to off-balance sheet credit exposures compared to a provision credit ~~to provision~~ of ~~$417,000~~$55,000 and a provision expense of ~~$1.3 million,~~$272,000, respectively, for the same periods in ~~2020.~~2021. The ~~changes compared to prior year were mainly due to improvement~~increase in ~~the macroeconomic factor assumptions utilized in the calculation which resulted in a negative~~ provision expense for the three months ended September 30, 2021 due to the improving economic conditions. The first quarter of 2020 included a provision expense of $16.8 million related to the impact of COVID-19 on economic forecasts and other model assumptions relied upon by management in determining the allowance, and reflects the calculation of the allowance for credit losses ~~in accordance~~for both the three and nine month periods is mainly driven by current economic forecasts coupled with ~~ASU 2016-13.~~loan growth. The section captioned ~~“Financial~~"Financial Condition – The Allowance for Credit ~~Losses”~~Losses" below has further details on the allowance for credit losses and asset quality metrics.

Noninterest Income

Noninterest income was ~~$20.9~~$20.7 million and $59.6 million for the ~~third quarter of 2021, which was up 10.4% compared to the third quarter of 2020,~~three and ~~was $59.7 million for the first~~ nine months ~~of 2021, up 8.5% from~~ended September 30, 2022, which were both in line with the same ~~period prior year.~~periods in 2021. Noninterest income represented ~~27.1%~~26.3% of total revenue for the third quarter of ~~2021~~2022 and ~~26.5%~~25.6% for the nine months ended September 30, ~~2021,~~2022, compared to ~~24.5%~~27.1% and ~~24.7%~~26.5%, respectively, for the same periods in ~~2020.~~2021.

Insurance commissions and fees, the largest component of noninterest income, were ~~$9.8~~$10.8 million for the third quarter of ~~2021,~~2022, an increase of ~~10.3%~~10.1% from the same period prior year. The increase in insurance commissions and fees in the third quarter of ~~2021~~2022 over the same period in ~~2020,~~2021 was mainly in commercial and personal lines property and casualty commissions which grew by 17.6% and ~~contingency income.~~4.9%, respectively. For the first nine months of ~~2021,~~2022, insurance commissions and fees were up ~~$2.8~~$1.5 million or ~~11.7%~~5.6% compared to the same period in ~~2020.~~2021. The increase in revenues for the nine months ended September 30, ~~2021,~~2022, compared to the prior year was primarily due to growth in commercial lines and personal lines revenue, which were up 10.8% and 5.1%, respectively, and attributable to increased new business, growth within the existing client base, and premium increases related to ~~change~~changes in general market conditions and exposures for certain business sectors. ~~In addition, revenues for the prior year were reduced by an increase in reserves for cancellations and policy changes as a result of economic uncertainties related to the COVID-19 pandemic.~~

~~Investment services income~~Wealth management fees of ~~$5.0~~$4.3 million in the third quarter of ~~2021 was up $665,000~~2022 were down $620,000 or ~~15.5%~~12.5% compared to the third quarter of ~~2020.~~2021. For the first nine months of ~~2021, investment services income was up $1.9 million~~2022, wealth management fees were down $497,000 or ~~15.6%~~3.5% compared to the same period in ~~2020. The increase for both the three and nine month periods in 2021 was mainly due to an increase in advisory fee income resulting from the growth in assets under~~2021. Wealth management ~~driven by new business and an increase in fair value due to favorable market conditions. Investment services income includes~~fees include trust services, financial planning, wealth management services, and brokerage related services. The fair value of assets managed by, or in custody of, Tompkins was $2.8 billion at September 30, 2022. The fair value of assets managed by, or in custody of, Tompkins was $5.3 billion at September 30, 2021, which included $1.7 billion of Company-owned securities where Tompkins ~~Trust Company~~ is custodian. The ~~fair value~~decline in assets from prior year resulted in part from the outsourcing of ~~assets managed by, or in~~the management of the Tompkins Retirement Account ($94.0 million) and custody of Company-owned securities where Tompkins was ~~$4.3 billion at September 30, 2020.~~custodian ($1.7 billion); however, as these were inter-company related items, they did not have a meaningful impact on total income. The remaining decline in assets is related to negative market performance seen throughout the year.

~~Card services income~~Service fees were up and included service charges on deposit accounts of $1.9 million and $5.5 million for the three and nine months ended September 30, 2022, up $279,000 or 17.0% and $873,000 or 19.1%, respectively, over the same periods in 2021.

Card services income in the third quarter of 2022 was in line with the same three month period end in 2021, while the nine months ended September 30, 2022, was up ~~$298,000~~$182,000 or ~~12.3%, and $1.2 million or 17.0%, respectively,~~2.3% compared to the same ~~periods~~period in ~~2020.~~2021. Debit card income, the largest component of card services income, was in line with both the three and nine month period ended September 30, 2022. Interchange income related to credit card services was up ~~$199,000 or 11.4%~~$37,000 and $167,000, respectively, compared to the same ~~quarter~~three and nine month periods in the prior year, and up $971,000 or 19.7% from the first nine months of 2020. Contributing to the increase in debit card income were higher transaction volumes in 2021 when compared to 2020 levels, which had been lower due to the COVID-19 pandemic.2021.

Other income of ~~$1.8~~$1.0 million in the third quarter of ~~2021~~2022 was down ~~$49,000~~$792,000 or ~~2.7%~~44.8% compared to the same period in ~~2020.~~2021. For the first nine months of ~~2021,~~2022, other income of ~~$5.4~~$3.7 million was down ~~$980,000~~$1.7 million or ~~15.3%~~31.7% compared to the same period in ~~2020.~~2021. The decrease for the three and nine months ended September 30, ~~2021~~2022 compared to the same ~~period~~periods in ~~2020,~~2021, was mainly due to lower earnings on bank owned life insurance and lower gains on sales of residential ~~mortgage loans, which were down $367,000 or 29.5%, and lower earnings~~loans. Earnings on ~~corporate~~bank owned life insurance ~~which~~ were down ~~$123,000 or 7.5%.~~$603,000 and $1.2 million, respectively, as certain separate account policies were unfavorably impacted by decreases in the market value of the underlying assets. Gains on sales of loans were down $213,000 and $738,000, respectively, for the three and nine months ended September 30, 2022, compared to the same periods in the prior year.

Noninterest Expense

Noninterest expense of ~~$50.2~~$49.6 million for the third quarter of ~~2021~~2022 and ~~$142.1~~$145.6 million for the first nine months of ~~2021,~~2022, was down 1.2% for the third quarter of 2022, and up ~~7.3% and 3.2%, respectively,~~2.4% for the first nine months of 2022, compared to the same periods in ~~2020.~~2021.

Expenses associated with compensation and benefits comprise the largest component of noninterest expense, representing ~~61.0%~~64.2% and ~~62.9%~~63.0% of total noninterest expense for the three and nine months ended September 30, ~~2021.~~2022. Salaries and wages expense for the three and nine months ended September 30, ~~2021~~2022 increased by ~~$874,000~~$519,000 or ~~3.7%~~2.1%, and ~~$2.0~~$1.5 million or ~~2.9%~~2.1%,

respectively, compared to the same periods in ~~2020.~~2021. The increases were mainly due to normal merit ~~adjustments and increases in incentive-related compensation.~~adjustments. Employee benefits for the three and nine months ended September 30, ~~2021, decreased~~2022 increased by ~~$913,000~~$712,000 or ~~13.7%~~12.3% and $740,000 or 4.1%, ~~and $373,000 or 2.0%, respectively, over the same periods in 2020,~~respectively. The increase is mainly as a result of ~~lower~~higher health care ~~expense for the three and nine month periods ended September 30, 2021 compared to the same periods in 2020.~~expense.

Other expense categories, not related to compensation and benefits, for the three and nine months ended September 30, ~~2021~~2022 were ~~up $3.5~~down $1.8 million or ~~21.4%~~9.2%, and up $1.2 million or 2.2%, respectively. The main driver for the three ~~months ended September 30, 2020, and up $2.8 million or 5.6% for the same nine~~ month period end decline in ~~2020. Expenses for~~balance was due to penalties of $2.9 million related to the prepayment of $135.0 million in FHLB fix rate advances paid in the third quarter of 2021. For the three and nine months ended September 30, 2021, included a nonrecurring expense of $2.9 million representing the prepayment penalty related to prepayment of $135.0 million in FHLB fixed rate advances. The advances, which were paid off in September 2021, carried a weighted average interest rate of 2.26% and had a weighted average maturity of 1.25 years. This transaction had a negative impact on current period earnings, but management expect it to have a favorable impact on future earnings by way of reduced interest expense. Marketing expenses for the three months ended September 30, 2021 were up $244,000 or 26.3%, and for the first nine months of 2021 were flat when2022, compared to the same periods in 2021, marketing expenses were up $35,000 or 3.0% and $921,000 or 32.9%, respectively, cardholder expense was up $302,000 or 36.6% and $1.1 million or 42.7%, respectively, and technology expense was up $967,000 or 33.2% and $2.4 million or 27.6%, respectively. Contributing to the growth in these expenses for the year-to-date period ~~in 2020. Professional fees expense~~ended September 30, 2022, were nonrecurring expenses of $1.2 million, related to the consolidation of the Company's four banking charters, including the related conversion of the core banking system and rebranding. Business travel and related expenses were up $222,000 or 106.2% and $520,000 or 130.3%, respectively, for the three and nine months ended September 30, ~~2021 were up $456,000 or 32.6% and $626,000 or 13.5%, respectively, when compared to~~2022, over the same periods in ~~2020.~~2021. Also included in other expense was a one-time lease expense of $452,000, which was related to one lease that included seven branches in Pennsylvania region.

Income Tax Expense

The provision for income taxes was $6.8 million for an effective rate of 24.1% for the third quarter of 2022, compared to tax expense of $6.6 million ~~for~~and an effective rate of 23.7% for the ~~third~~same quarter in 2021. For the first nine months of ~~2021,~~2022, the provision for income taxes was $20.1 million for an effective rate of 23.4% compared to tax expense of ~~$6.3~~$19.8 million and an effective rate of ~~20.7% for the same quarter in 2020. For the first nine months of 2021, the provision for income taxes was $19.8 million for an effective rate of~~ 22.1% ~~compared to tax expense of $13.8 million and an effective rate of 20.4%~~ for the same period in ~~2020.~~2021. The effective rates differ from the U.S. and state statutory rates primarily due to the effect of tax-exempt income from loans, securities and life insurance assets, and the income tax effects associated with stock based compensation. The increase in the effective tax rate for the three and nine months ended September 30, ~~2021~~2022, over the same ~~periods~~period in ~~2020 was~~2021, is largely due to ~~a higher level~~the anticipated loss of ~~taxable income~~certain New York State tax benefits due to ~~total income.~~the expectation that average assets will exceed $8.0 billion for the 2022 tax year.

The Company's ~~three New York based~~ banking ~~subsidiaries each have~~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$8.0 billion for the taxable year. The Company expects average assets to exceed the $8.0 billion threshold for the 2022 tax year. As of September 30, ~~2021,~~2022, the Company's consolidated average assets, as defined by New York tax law, were ~~under~~slightly over the $8.0 ~~billion.~~billion threshold. The Company will continue to monitor the consolidated average assets ~~through year-end 2021~~during 2022 to determine future eligibility.

FINANCIAL CONDITION

Total assets were ~~$8.1~~$7.8 billion at September 30, ~~2021, up $490.9~~2022, down $40.0 million or ~~6.4%~~0.5% from December 31, ~~2020.~~2021. The ~~increase~~decrease in total assets ~~over~~from year-end ~~2020~~2021 was mainly due to decreased security balances partially offset by an increase in ~~securities balances, which increased $709.0 million or 43.6%~~the loan portfolio, compared to December 31, ~~2020.~~2021. Total ~~loan balances~~securities were ~~$5.1~~$2.1 billion at September 30, ~~2021,~~2022, down ~~$163.5~~$275.4 million or ~~3.1%~~11.8% compared to the ~~$5.3~~$2.3 billion reported at year-end ~~2020.~~2021. The decrease was the result of an increase in unrealized losses on the available-for-sale portfolio from $19.3 million at year-end 2021 to $269.2 million at September 30, 2022, as a result of the increase in market interest rates in 2022. Total cash and cash equivalents were ~~down $55.0~~up $40.5 million or ~~14.2%~~64.2% compared to December 31, ~~2020.~~2021. Total deposits at September 30, ~~2021~~2022 were up ~~$653.1~~$145.3 million or ~~10.2%~~2.1% from December 31, ~~2020.~~2021. Other borrowings at September 30, ~~2021~~2022 decreased ~~$155.0~~$23.0 million or ~~58.5%~~18.6% from December 31, ~~2020,~~2021, as loan growth outpaced deposit ~~growth was used to reduce borrowings.~~growth.

5556

Securities

As of September 30, ~~2021,~~2022, the Company’s securities portfolio was ~~$2.3~~$2.1 billion or ~~28.8%~~26.4% of total assets, compared to ~~$1.6~~$2.3 billion or ~~21.4%~~29.8% of total assets at year end ~~2020. The increase in securities from year-end 2020 was largely due to the investment of excess cash driven by deposit growth and PPP loan forgiveness, into the securities portfolio.~~2021. The following table details the composition of the securities ~~portfolio.~~portfolio:


Available-for-Sale Debt Securities	Available-for-Sale Debt Securities									Available-for-Sale Debt Securities
		September 30, 2021				December 31, 2020					September 30, 2022				December 31, 2021
(In thousands)	(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. Treasuries	U.S. Treasuries	$	140,373	$	138,928	$	0	$	0	U.S. Treasuries	$	191,108	$	166,604	$	160,291	$	157,834
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	813,833		810,343		599,652		607,480		Obligations of U.S. Government sponsored entities	828,313		730,028		843,218		832,373
Obligations of U.S. states and political subdivisions	Obligations of U.S. states and political subdivisions	107,912		109,911		126,642		129,746		Obligations of U.S. states and political subdivisions	95,162		83,061		102,177		104,169
Mortgage-backed securities - residential, issued by	Mortgage-backed securities - residential, issued by									Mortgage-backed securities - residential, issued by
U.S. Government agencies	U.S. Government agencies	88,135		89,320		179,538		182,108		U.S. Government agencies	61,553		55,059		76,502		77,157
U.S. Government sponsored entities	U.S. Government sponsored entities	919,745		916,004		691,562		705,480		U.S. Government sponsored entities	831,465		703,814		879,102		870,556

U.S. corporate debt securities	U.S. corporate debt securities	2,500		2,421		2,500		2,379		U.S. corporate debt securities	2,500		2,370		2,500		2,424
Total available-for-sale debt securities	Total available-for-sale debt securities	$	2,072,498	$	2,066,927	$	1,599,894	$	1,627,193	Total available-for-sale debt securities	$	2,010,101	$	1,740,936	$	2,063,790	$	2,044,513


Held-to-Maturity Debt Securities	Held-to-Maturity Debt Securities									Held-to-Maturity Debt Securities
		September 30, 2021				December 31, 2020					September 30, 2022				December 31, 2021
(In thousands)	(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. Treasuries	U.S. Treasuries	$	86,740	$	86,431	$	0	$	0	U.S. Treasuries	$	86,530	$	73,036	$	86,689	$	86,368
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities	182,528		181,852		0		0		Obligations of U.S. Government sponsored entities	225,799		185,719		197,320		195,920

Total held-to-maturity debt securities	Total held-to-maturity debt securities	$	269,268	$	268,283	$	0	$	0	Total held-to-maturity debt securities	$	312,329	$	258,755	$	284,009	$	282,288

As of September 30, ~~2021,~~2022, the available-for-sale debt securities portfolio had net unrealized losses of ~~$5.6~~$269.2 million compared to net unrealized ~~gains~~losses of ~~$29.5~~$19.3 million at December 31, ~~2020.~~2021. The ~~decrease~~increase in unrealized ~~gains~~losses related to the available-for-sale debt securities portfolio, which reflects the amount that the amortized cost exceeds fair value, was due ~~primarily~~ to ~~decreases~~increases in market interest rates during the first nine months of ~~2021.~~2022. Management’s policy is to purchase investment grade securities that on average have relatively short duration, which helps mitigate interest rate risk and provides sources of liquidity without significant risk to capital.

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

The Company determined that at September 30, ~~2021,~~2022, all impaired available-for-sale and held-to-maturity debt securities were ~~primarily attributable to~~because of changes in interest rates and levels of market liquidity, relative to when the investment securities were purchased, and not due to the credit worthiness of the underlying issuers. The Company does not have the intent to sell these securities and does not believe it is more likely than not that the Company will be required to sell these securities before a recovery of amortized cost. Therefore, the Company carried no ACL at September 30, ~~2021~~2022 and there was no credit loss expense recognized by the Company with respect to the securities portfolio during the three and nine months ended September 30, ~~2021.~~

2022.

5657


Loans and Leases	Loans and Leases					Loans and Leases
Loans and leases as of the end of the third quarter and prior year-end period were as follows:
(In thousands)	(In thousands)	9/30/2021		12/31/2020		(In thousands)	9/30/2022		12/31/2021
Commercial and industrial	Commercial and industrial					Commercial and industrial
Agriculture	Agriculture	$	78,335	$	94,489	Agriculture	$	66,576	$	99,172
Commercial and industrial other	Commercial and industrial other	727,944		792,987		Commercial and industrial other	718,726		699,121
PPP loans	PPP loans	141,930		291,252		PPP loans	875		71,260
Subtotal commercial and industrial	Subtotal commercial and industrial	948,209		1,178,728		Subtotal commercial and industrial	786,177		869,553
Commercial real estate	Commercial real estate					Commercial real estate
Construction	Construction	170,646		163,016		Construction	199,144		178,582
Agriculture	Agriculture	192,183		201,866		Agriculture	210,140		195,973
Commercial real estate other	Commercial real estate other	2,253,190		2,204,310		Commercial real estate other	2,399,951		2,278,599
Subtotal commercial real estate	Subtotal commercial real estate	2,616,019		2,569,192		Subtotal commercial real estate	2,809,235		2,653,154
Residential real estate	Residential real estate					Residential real estate
Home equity	Home equity	185,625		200,827		Home equity	188,002		182,671
Mortgages	Mortgages	1,270,005		1,235,160		Mortgages	1,344,741		1,290,911
Subtotal residential real estate	Subtotal residential real estate	1,455,630		1,435,987		Subtotal residential real estate	1,532,743		1,473,582
Consumer and other	Consumer and other					Consumer and other
Indirect	Indirect	5,595		8,401		Indirect	2,712		4,655
Consumer and other	Consumer and other	66,694		61,399		Consumer and other	66,262		67,396
Subtotal consumer and other	Subtotal consumer and other	72,289		69,800		Subtotal consumer and other	68,974		72,051
Leases	Leases	14,337		14,203		Leases	15,749		13,948
Total loans and leases	Total loans and leases	5,106,484		5,267,910		Total loans and leases	5,212,878		5,082,288
Less: unearned income and deferred costs and fees	Less: unearned income and deferred costs and fees	(9,706)		(7,583)		Less: unearned income and deferred costs and fees	(4,442)		(6,821)
Total loans and leases, net of unearned income and deferred costs and fees	Total loans and leases, net of unearned income and deferred costs and fees	$	5,096,778	$	5,260,327	Total loans and leases, net of unearned income and deferred costs and fees	$	5,208,436	$	5,075,467

Total loans and leases of ~~$5.1~~$5.2 billion at September 30, ~~2021~~2022 were ~~down $163.5~~up $133.0 million or ~~3.1%~~2.6% from December 31, ~~2020,~~2021, mainly in the commercial ~~portfolio~~real estate and ~~largely due to a net~~residential real estate portfolios, and partially offset by the decline in PPP ~~loans.~~loan balances. PPP loans decreased ~~$149.4~~$70.4 million from ~~$291.3~~$71.3 million at year-end ~~2020~~2021, to ~~$141.9 million~~$875,000 at September 30, 2022. Excluding PPP loans, total loans at September 30, 2022 were up $203.4 million or 4.1% from December 31, 2021. As of September 30, ~~2021,~~2022, total loans and leases represented ~~62.8%~~66.9% of total assets compared to ~~69.0%~~64.9% of total assets at December 31, ~~2020. The decrease in total loans and leases as a percentage of total assets reflects growth in the securities portfolio driven by deposit growth and PPP loan forgiveness since December 31, 2020.~~2021.

Residential real estate loans, including home equity loans, were $1.5 billion at September 30, ~~2021,~~2022, up ~~$19.6~~$59.2 million or ~~1.4%~~4.0% compared to December 31, ~~2020,~~2021, and comprised ~~28.6%~~29.4% of total loans and leases at September 30, ~~2021.~~2022. Changes in residential loan balances reflect 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 months of ~~2021~~2022 and ~~2020,~~2021, the Company sold residential loans totaling ~~$27.7~~$7.3 million and ~~$35.3~~$27.7 million, respectively, recognizing gains of ~~$878,000~~$140,000 and ~~$1.2 million,~~$878,000, respectively. These residential real estate loans were sold without recourse in accordance with standard secondary market loan sale agreements. When residential mortgage loans are sold, the Company typically retains all servicing rights, which provides the Company with a source of fee income. Mortgage servicing rights totaled ~~$1.1~~$1.0 million at both September 30, ~~2021~~2022 and ~~$981,000 at~~ December 31, ~~2020.~~ 2021.

5758

Commercial real estate loans and commercial and industrial loans totaled ~~$2.6~~$2.8 billion and ~~$948.2~~$786.2 million, respectively, and represented ~~51.3%~~53.9% and ~~18.6%~~15.1%, respectively, of total loans and leases as of September 30, ~~2021.~~2022. The commercial real estate portfolio was up ~~$46.8~~$156.1 million or ~~1.8%~~5.9% over year-end ~~2020,~~2021, while commercial and industrial loans were down ~~$230.5~~$83.4 million or ~~19.6%~~9.6%. The decrease in commercial and industrial loans over year-end ~~included a net decline of $149.3 million of~~2021 was mainly in PPP loans, ~~that had been forgiven by the SBA under the terms of the program.~~ which were down $70.4 million or 98.8% to $875,000 at September 30, 2022.

As of September 30, ~~2021,~~2022, agriculturally-related loans totaled ~~$270.5~~$276.7 million or 5.3% of total loans and leases, compared to ~~$296.4~~$295.1 million or ~~5.6%~~5.8% of total loans and leases at December 31, ~~2020.~~2021. Agriculturally-related loans include loans to dairy farms and crop farms. ~~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 ~~(commercial real estate)~~ or other business assets such as accounts receivable, livestock, equipment or commodities/~~crops (commercial).~~crops.

The Company has adopted comprehensive lending policies, underwriting standards and loan review procedures. Management reviews these policies and procedures on a regular basis. The Company discussed its lending policies and underwriting guidelines for its various lending portfolios in Note 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, ~~2020.~~2021. 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 December 31, 2020, 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~~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. The suspension of business activities in our market area related to the COVID-19 pandemic led to a significant increase in unemployment rates in 2020 as compared to pre-pandemic levels and has had a negative effect on our customers. Although New York and Pennsylvania unemployment rates have improved since their peak in the second quarter of 2020, there continues to be uncertainty regarding how long those conditions will continue to exist and whether continued restrictions will cause an increase in unemployment rates or other worsening of economic conditions. As a result, the economic consequences of the pandemic on our market area generally and on the Company in particular continue to be difficult to quantify.

The Allowance for Credit Losses

The below table represents the allowance for credit losses as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The table provides, as of the dates indicated, an allocation of the allowance for credit losses for inherent loan losses by type. The allocation is neither indicative of the specific amounts or the loan categories in which future charge-offs may occur, nor is it an indicator of future loss trends. The allocation of the allowance for credit losses to each category does not restrict the use of the allowance to absorb losses in any category.


(In thousands)	(In thousands)	9/30/2021		12/31/2020		(In thousands)	9/30/2022		12/31/2021
Allowance for credit losses	Allowance for credit losses					Allowance for credit losses
Commercial and industrial	Commercial and industrial	$	6,198	$	9,239	Commercial and industrial	$	6,524	$	6,335
Commercial real estate	Commercial real estate	29,084		30,546		Commercial real estate	26,539		24,813
Residential real estate	Residential real estate	9,415		10,257		Residential real estate	10,443		10,139
Consumer and other	Consumer and other	1,496		1,562		Consumer and other	1,180		1,492
Finance leases	Finance leases	66		65		Finance leases	86		64
Total	Total	$	46,259	$	51,669	Total	$	44,772	$	42,843

As of September 30, ~~2021,~~2022, the total allowance for credit losses was ~~$46.3~~$44.8 million, ~~down $5.4~~up $1.9 million or ~~10.5%~~4.5% compared to December 31, ~~2020.~~2021. The ACL as a percentage of total loans measured ~~0.91%~~0.86% at September 30, ~~2021,~~2022, compared to ~~0.98%~~0.84% at December 31, ~~2020.~~2021.

The ~~decrease~~increase in the ACL from year-end ~~2020~~2021 reflects ~~lower estimated reserves driven primarily by improvements in~~updated economic forecasts for unemployment and ~~the~~ gross domestic product ~~used~~("GDP") coupled with loan growth, mainly in the ~~model relied upon by management in the third quarter of 2021~~real estate portfolios. Forecasts related to unemployment are beginning to deteriorate and GDP forecasts continue to weaken showing less growth compared to ~~the forecasts at year-end 2020. The decrease in the ACL resulting from favorable economic forecasts was partially~~

~~offset by increases in~~prior forecasts. Qualitative reserves ~~for specific loans within the hospitality industry that have an elevated level of risk due to the adverse economic impact~~established as a result of the COVID-19 ~~pandemic. Although we have seen improved occupancy rates in the hospitality industry in recent months, we continue~~pandemic to ~~closely monitor this industry.~~

~~During the third quarter of 2021, we continued to see a decrease in the number and balances of~~address specific portfolios with increased risk characteristics, including loans in our pandemic-related payment deferral program compared to prior periods, as loans returned to repayment status. Loans in our payment deferral program totaled $12.8 million at September 30, 2021, down from $129.4 million at June 30, 2021 and $212.2 million at December 31, 2020. At September 30, 2021, the delinquency rate for customers who returned to repayment status remained low, at 1.31%. We continue tohotel portfolio, have qualitative reserves for loans that were in the payment deferral program, based on a period of performance. Estimates of future delinquency and credit loss performance is extremely difficult given the uncertainties centering around the evolution of the virus, including the spread of the Delta variant, the efficacy of vaccination programs, the related pace of the full resumption of business activities, and the strength of the economic recovery as government assistance programs are phased out. The qualitative reserves were added to all portfolio segments, with the majority in commercial real estate, followed by residential real estate and commercial and industrial. The Company had net recoveries of $995,000 in the first nine months of 2021, compared to net charge-offs of $1.2 million for the same period in 2020.

The ratio of ACL to total loans is also impacted by the inclusion of PPP loans in our loan portfolio. Since PPP loans are guaranteed by the SBA, there are no reserves allocated to these loans. Excluding PPP loans from total loans results in an ACL to total loan ratio of 0.93% at September 30, 2021, down from 1.04% at December 31, 2020.

Asset quality measures at September 30, 2021 were mixed compared with December 31, 2020. Loans internally-classified Special Mention or Substandard were down $21.4 million or 11.3% compared to December 31, 2020. Nonperforming loans and leases were up $15.0 million or 32.7% from year end 2020 and represented 1.19% of total loans at September 30, 2021 compared to 0.87% at December 31, 2020. The increase in nonperforming loans and leases compared to year-end 2020 was mainly related to two commercial real estate relationships, one with a principal balance of $9.1 million, which was placed on nonaccrual in the second quarter of 2021, and one with a principal balance of $7.5 million, which moved into the 90 days past due category during the third quarter of 2021, but continues to accrue interest. The allowance for credit losses covered 76.15% of nonperforming loans and leasesbeen removed as of September 30, ~~2021, compared~~2022, due to ~~112.87% at December 31, 2020.~~improved metrics that have stabilized and are in line with pre-pandemic trends.

Analysis of the Allowance for Credit Losses
(In thousands) 9/30/2021 9/30/2020
Average loans outstanding during period $ 5,225,087 $ 5,197,757
Allowance at beginning of year, prior to adoption of ASU 2016-13 51,669 39,892
Impact of adopting ASU 2016-13 0 (2,534)
Balance of allowance at beginning of year 51,669 37,358
LOANS CHARGED-OFF:
Commercial and industrial 274 1
Commercial real estate 0 1,305
Residential real estate 51 33
Consumer and other 218 409
Finance leases 0 0
Total loans charged-off $ 543 $ 1,748
RECOVERIES OF LOANS PREVIOUSLY CHARGED-OFF:
Commercial and industrial 116 125
Commercial real estate 1,040 40
Residential real estate 229 178
Consumer and other 153 195
Finance Leases 0 0
Total loans recovered $ 1,538 $ 538
Net loans (recovered) charged-off (995) 1,210
(Credit) provision for credit losses related to loans (6,405) 16,145
Balance of allowance at end of period $ 46,259 $ 52,293
Allowance for credit losses as a percentage of total loans and leases 0.91 % 0.97 %
Annualized net (recoveries) charge-offs on loans to average total loans and leases during the period (0.01) % 0.00 %
Asset quality measures at September 30, 2022 were generally favorable compared with December 31, 2021. Loans internally-classified Special Mention or Substandard were down $30.8 million or 22.4% compared to December 31, 2021. Nonperforming loans and leases were up $3.7 million or 12.0% from year end 2021 and represented 0.67% of total loans at September 30, 2022 compared to 0.61% at December 31, 2021. The allowance for credit losses covered 128.27% of nonperforming loans and leases at September 30, 2022, compared to 137.51% at December 31, 2021. The increase in nonperforming loans and leases is mainly due to one commercial real estate relationship, made up of two loans, totaling approximately $7.4 million that moved into nonaccrual during the third quarter of 2022, this loan has previously been reported as substandard.

Analysis of Off-Balance Sheet Reserves
(In thousands) 9/30/2021 9/30/2020
Liabilities for off-balance sheet credit exposures at beginning of period $ 1,920 $ 477
Impact of Adopting ASU 2016-13 0 381
Provision for credit losses related to off-balance sheet credit exposures 272 1,273
Liabilities for off-balance sheet credit exposures at end of period $ 2,192 $ 2,131
Activity in the Company’s allowance for credit losses during the nine months of 2022 and 2021 is illustrated in the table below:


Analysis of the Allowance for Credit Losses
(In thousands)	9/30/2022			9/30/2021
Average loans outstanding during period	$	5,119,309		$	5,225,087
Allowance at beginning of year, prior to adoption of ASU 2016-13	42,843			51,669

LOANS CHARGED-OFF:
Commercial and industrial	366			274
Commercial real estate	50			0
Residential real estate	0			51
Consumer and other	410			218
Finance leases	0			0
Total loans charged-off	$	826		$	543
RECOVERIES OF LOANS PREVIOUSLY CHARGED-OFF:
Commercial and industrial	132			116
Commercial real estate	910			1,040
Residential real estate	315			229
Consumer and other	251			153
Finance Leases	0			0
Total loans recovered	$	1,608		$	1,538
Net loans recovered	(782)			(995)
Provision (credit) for credit losses related to loans	1,147			(6,405)
Balance of allowance at end of period	$	44,772		$	46,259
Allowance for credit losses as a percentage of total loans and leases	0.86		%	0.91		%
Annualized net (recoveries) charge-offs on loans to average total loans and leases during the period	(0.02)		%	(0.01)		%

~~Net loan and lease recoveries~~The provision for credit losses for loans was an expense of $1.1 million for the ~~nine~~three months ended September 30, ~~2021 were $995,000~~2022, compared to ~~net charge-offs~~a credit of $1.2 million for the same period in 2020. The first quarter of 2020 included a write-down on one credit in the commercial real estate portfolio for $1.2 million. Annualized net recoveries as a percentage of average loans and leases were (0.01)% at September 30, 2021, compared to annualized net charge-offs of 0.00% at September 30, 2020.

~~The provision for credit losses was a credit of $1.2 million for the three months ended September 30, 2021, compared to a credit of $218,000 for the same period in 2020.~~2021. For the nine month period ended September 30, ~~2021,~~2022, the provision for credit losses for loans was ~~a credit~~an expense of ~~$6.1~~$1.1 million compared to ~~provision expense~~credit of ~~$17.4~~$6.4 million for the same period in 2020. The provision for credit losses for the three and nine months ended September 30, 2021 included a $54,000 provision credit and a provision expense of $272,000 related to off-balance sheet credit exposures compared to a provision credit of $417,000 and provision expense of $1.3 million, respectively, for the same periods in 2020.

2021. The provision expense for credit losses for loans is based upon the Company's quarterly evaluation of the appropriateness of the allowance for credit losses. ~~The larger than normal provision expense of $17.4 million~~As discussed above, the ACL model estimated higher reserves at September 30, 2022 due to lower GDP and unemployment forecasts coupled with loan growth. Net loan and lease recoveries for the nine months ended September 30, ~~2020 was mainly a result~~2022 were $782,000 compared to net recoveries of $995,000 for the ~~economic forecasts~~same period in 2021.

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 ~~other model assumptions impacted~~commercial letters of credit. The Company's exposure to credit loss in the event of nonperformance by the ~~COVID-19 pandemic.~~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 cancellable, 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 September 30, 2022, the provision for credit losses for off-balance sheet credit exposures was a credit of ~~$6.1 million~~$45,000 compared to a credit of $55,000 for the ~~first~~same period in 2021. For the nine ~~months of~~month period ended September 30, ~~2021 reflects lower estimated reserves~~2022, the provision for credit losses for off-balance sheet credit exposures was $245,000 compared to $272,000 for the same nine month period in 2021. The provision in 2022 was driven by ~~improvements~~an increase in forecasts for unemployment and the gross domestic product used in our model, partially offset by increased reserves for individually analyzed loans, qualitative reserves for loans within the hospitality and certain other industries that may have an elevated level of risk due to the adverse economic impact of the COVID-19 pandemic, as well as loans that were in the Company's payment deferral program implemented in response to the COVID-19 pandemic.off-balance sheet exposures, specifically commercial real estate loan commitments.


Analysis of Past Due and Nonperforming Loans	Analysis of Past Due and Nonperforming Loans										Analysis of Past Due and Nonperforming Loans
(In thousands)	(In thousands)	9/30/2021			12/31/2020			9/30/2020			(In thousands)	9/30/2022			12/31/2021			9/30/2021
Loans 90 days past due and accruing	Loans 90 days past due and accruing										Loans 90 days past due and accruing
Commercial real estate	Commercial real estate	$	7,463		$	0		$	0		Commercial real estate	$	161		$	0		$	7,463

Total loans 90 days past due and accruing	Total loans 90 days past due and accruing	$	7,463		$	0		$	0		Total loans 90 days past due and accruing	$	161		$	0		$	7,463
Nonaccrual loans	Nonaccrual loans										Nonaccrual loans
Commercial and industrial	Commercial and industrial	$	543		$	1,775		$	1,636		Commercial and industrial	$	803		$	533		$	543
Commercial real estate	Commercial real estate	35,022			23,627			12,777			Commercial real estate	15,901			13,893			35,022
Residential real estate	Residential real estate	11,965			13,145			12,203			Residential real estate	13,041			11,178			11,965
Consumer and other	Consumer and other	411			429			328			Consumer and other	268			429			411
Total nonaccrual loans	Total nonaccrual loans	$	47,941		$	38,976		$	26,944		Total nonaccrual loans	$	30,013		$	26,033		$	47,941
Troubled debt restructurings not included above	Troubled debt restructurings not included above	5,343			6,803			6,864			Troubled debt restructurings not included above	4,730			5,124			5,343
Total nonperforming loans and leases	Total nonperforming loans and leases	$	60,747		$	45,779		$	33,808		Total nonperforming loans and leases	$	34,904		$	31,157		$	60,747
Other real estate owned	Other real estate owned	135			88			196			Other real estate owned	335			135			135
Total nonperforming assets	Total nonperforming assets	$	60,882		$	45,867		$	34,004		Total nonperforming assets	$	35,239		$	31,292		$	60,882
Allowance as a percentage of nonperforming loans and leases	Allowance as a percentage of nonperforming loans and leases	76.15		%	112.87		%	154.68		%	Allowance as a percentage of nonperforming loans and leases	128.27		%	137.51		%	76.15		%
Total nonperforming loans and leases as percentage of total loans and leases	Total nonperforming loans and leases as percentage of total loans and leases	1.19		%	0.87		%	0.63		%	Total nonperforming loans and leases as percentage of total loans and leases	0.67		%	0.61		%	1.19		%
Total nonperforming assets as percentage of total assets	Total nonperforming assets as percentage of total assets	0.75		%	0.60		%	0.44		%	Total nonperforming assets as percentage of total assets	0.45		%	0.40		%	0.75		%

Nonperforming assets include loans past due 90 days and accruing, nonaccrual loans, TDRs, and foreclosed real estate/other real estate owned. Total nonperforming assets of ~~$60.9~~$35.2 million at September 30, ~~2021~~2022 were up ~~$15.0~~$3.9 million or ~~32.7%~~12.6% compared to December 31, ~~2020,~~2021, and ~~up $26.9~~down $25.6 million or ~~79.0%~~42.1% compared to September 30, ~~2020.~~2021. The ~~increase~~decrease in nonperforming assets from September 30, ~~2020,~~2021, was mainly in the commercial real estate portfolio ~~as a result~~and included the payoff of ~~unfavorable economic conditions related to the COVID-19 pandemic. In the first nine months of 2021, two commercial real estate relationships~~one relationship totaling ~~$16.6~~$11.8 million ~~were added to nonperforming loans. Included in the $16.6 million was one relationship~~ in the hospitality industry ~~with an outstanding balance~~and a $7.0 million charge-off of ~~$9.1~~another relationship that included two loans in the hospitality industry during the fourth quarter of 2021. During the third quarter of 2022 there was one commercial real estate relationship totaling approximately $7.4 million ~~which~~that was moved into nonaccrual, ~~during the second quarter of 2021,~~this relationship was previously, and ~~one relationship with an outstanding balance of $7.5 million, which moved into the 90 days past due and accruing category during the third quarter of 2021 and continues to accrue interest.~~currently, included in Substandard loans. Nonperforming assets represented ~~0.75%~~0.45% of total assets at September 30, ~~2021,~~2022, up from ~~0.60%~~0.40% at December 31, ~~2020,~~2021, and ~~0.44% at~~down from the 0.75% reported for September 30, ~~2020.~~2021. The ~~Company’s~~Company's ratio of nonperforming assets to total assets ~~of 0.75% compared~~compares to our peer ~~group’s~~groups's most recent ratio of ~~0.54%~~0.38% at June 30, ~~2021.~~2022.

Loans are considered modified in a TDR when, due to a borrower’s financial difficulties, the Company makes a concession(s) to the borrower that it would not otherwise consider and the borrower could not obtain elsewhere. These modifications may include, among others, an extension of the term of the loan, and granting a period when interest-only payments can be made, with the principal payments made over the remaining term of the loan or at maturity. TDRs are included in the above table within the following categories: ~~“loans~~"loans 90 days past due and ~~accruing”~~accruing", ~~“nonaccrual loans”~~"nonaccrual loans", or ~~“troubled~~"troubled debt restructurings not included ~~above”~~above". Loans in the latter category include loans that meet the definition of a TDR but are performing in accordance with the modified terms and therefore classified as accruing loans. At September 30, ~~2021,~~2022, the Company had ~~$7.2~~$6.6 million in TDRs, and of that total $1.9 million was reported as nonaccrual and ~~$5.3~~$4.7 million was considered performing and included in the table above. The provisions of the CARES Act guidance issued by Federal banking regulators provided guidance and clarification related to modifications and deferral programs to assist borrowers who are negatively impacted by the COVID-19 national emergency. The guidance and clarifications detail certain provisions whereby banks are permitted to make deferrals and modifications to the terms of a loan which would not require the loan to be reported as a TDR. In accordance with the CARES Act and the interagency guidance, the Company elected to adopt the provisions to not report qualified loan modifications as TDRs.

In general, the Company places a loan on nonaccrual status if principal or interest payments become 90 days or more past due and/or management deems the collectability of the principal and/or interest to be in question, as well as when required by

applicable regulations. Although in nonaccrual status, the Company may continue to receive payments on these loans. These payments are generally recorded as a reduction to principal, and interest income is recorded only after principal recovery is reasonably assured.

The ratio of the allowance to nonperforming loans and leases (loans past due 90 days and accruing, nonaccrual loans and restructured troubled debt) was 128.27% at September 30, 2022, compared to 137.51% at December 31, 2021, and 76.15% at September 30, ~~2021, compared to 112.87% at December 31, 2020, and 154.68% at September 30, 2020.~~2021. The Company’s nonperforming loans and leases are mostly made up of individually evaluated loans with limited exposure or loans that require limited specific reserves due to the level of collateral available with respect to these loans and/or previous charge-offs.

The Company, through its internal loan review function, identified 3117 commercial relationships from the loan portfolio totaling ~~$36.7~~$22.9 million at September 30, ~~2021,~~2022, that were potential problem loans. At December 31, ~~2020,~~2021, the Company had identified 3525 relationships totaling ~~$40.8~~$36.5 million that were potential problem loans. Of the 3117 relationships at September 30, ~~2021,~~2022, that were Substandard, there were 86 relationships that equaled or exceeded $1.0 million, which in aggregate totaled ~~$31.5~~$19.1 million, the largest of which was ~~$11.8~~$4.0 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 ~~$722.4~~$573.0 million at September 30, ~~2021, an increase~~2022, a decrease of ~~$4.7~~$156.0 million or ~~0.7%~~21.4% from December 31, ~~2020.~~2021. The decrease was the result of an increase ~~reflects growth~~ in ~~retained earnings;~~unrealized losses on the available-for-sale portfolio from $14.6 million at year-end 2021 to $203.2 million at September 30, 2022, as a result of the increase in market interest rates in 2022. The decrease was partially offset by an increase in ~~accumulated other comprehensive losses and a decline in additional paid-in capital.~~retained earnings.

Additional paid-in capital decreased by ~~$18.0~~$9.1 million, from ~~$334.0~~$312.5 million at December 31, ~~2020,~~2021, to ~~$316.0~~$303.4 million at September 30, ~~2021.~~2022. The decrease was primarily attributable to a ~~$21.2~~$15.4 million aggregate purchase price related to the Company's repurchase and retirement of ~~272,310~~197,979 shares of its common stock during the first nine months of ~~2021~~2022 pursuant to its publicly announced stock repurchase ~~plan, $694,000 related to the exercise of stock options and $122,000 related to restricted stock activity. These amounts were~~plan; partially offset by ~~$3.8~~$2.9 million related shares issued for the employee stock ownership program and $3.1 million attributed to stock-based ~~compensation and $100,000 related to director deferred~~ compensation.

Retained earnings increased by ~~$45.7~~$40.6 million or ~~10.9%~~8.5% from ~~$418.4~~$475.3 million at December 31, ~~2020,~~2021, to ~~$464.2~~$515.9 million at September 30, ~~2021,~~2022, mainly reflecting net income of ~~$69.8~~$65.5 million for the year-to-date period, less dividends ~~paid~~ of ~~$24.1~~$24.9 million.

Accumulated other comprehensive loss increased from a net loss of ~~$32.1~~$56.0 million at December 31, ~~2020,~~2021, to a net loss of ~~$55.1~~$243.2 million at September 30, ~~2021,~~2022, reflecting a ~~$24.8~~$188.7 million increase in unrealized losses on available-for-sale debt securities mainly due to changes in market rates, partially offset by a ~~$1.8~~$1.4 million decrease related to post-retirement benefit plan losses.

Cash dividends paid in the first nine months of ~~2021~~2022 totaled approximately ~~$24.1~~$24.9 million or ~~$1.62~~$1.71 per common share, representing ~~34.5%~~38.0% of year to date ~~2021~~2022 earnings through September 30, ~~2021,~~2022, compared to cash dividends of ~~$23.3~~$24.1 million or ~~$1.56~~$1.62 per common share paid in the first nine months of ~~2020.~~2021. Cash dividends per share during the first nine months of ~~2021~~2022 were up ~~3.9%~~5.6% over the same period in ~~2020.~~2021.

The Company and its subsidiary ~~banks~~bank are subject to various regulatory capital requirements administered by Federal bank regulatory agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on the Company’s business, results of operation and financial condition. Under capital adequacy guidelines and the regulatory framework for prompt corrective action (PCA), banks must meet specific guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classifications of the Company and its subsidiary banks are also subject to qualitative judgments by regulators concerning components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the maintenance of minimum amounts and ratios of common equity Tier 1 capital, Total capital and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Management believes that the Company and its subsidiary ~~banks meet~~bank meets all capital adequacy requirements to which they are subject.

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

The following table provides a summary of the Company’s capital ratios as of September 30, ~~2021:~~2022:


Regulatory Capital Analysis	Regulatory Capital Analysis													Regulatory Capital Analysis
September 30, 2021		Actual				Minimum Capital Required - Basel III Fully Phased-In				Well Capitalized Requirement
September 30, 2022														September 30, 2022	Actual				Minimum Capital Required - Basel III Fully Phased-In				Well Capitalized Requirement
(dollar amounts in thousands)	(dollar amounts in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		(dollar amounts in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to risk weighted assets)	Total Capital (to risk weighted assets)	$	731,074	14.21	%	$	540,235	10.50	%	$	514,510	10.00	%	Total Capital (to risk weighted assets)	$	769,165	14.26	%	$	566,543	10.50	%	$	539,564	10.00	%
Tier 1 Capital (to risk weighted assets)	Tier 1 Capital (to risk weighted assets)	$	681,442	13.24	%	$	437,333	8.50	%	$	411,608	8.00	%	Tier 1 Capital (to risk weighted assets)	$	720,136	13.35	%	$	458,630	8.50	%	$	431,652	8.00	%
Tier 1 Common Equity (to risk weighted assets)	Tier 1 Common Equity (to risk weighted assets)	$	681,442	13.24	%	$	360,157	7.00	%	$	334,431	6.50	%	Tier 1 Common Equity (to risk weighted assets)	$	720,136	13.35	%	$	377,695��	7.00	%	$	350,717	6.50	%
Tier 1 Capital (to average assets)	Tier 1 Capital (to average assets)	$	681,442	8.54	%	$	319,363	4.00	%	$	399,203	5.00	%	Tier 1 Capital (to average assets)	$	720,136	9.14	%	$	315,268	4.00	%	$	394,085	5.00	%

As of September 30, ~~2021,~~2022, the Company’s capital ratios exceeded the minimum required capital ratios plus the fully phased-in capital conservation buffer, and the minimum required capital ratios for well capitalized institutions. The capital levels required to be considered well capitalized, presented in the above table, are based upon prompt corrective action regulations, as amended to reflect the changes under Basel III Capital Rules.

Total capital as a percent of risk weighted assets ~~decreased~~increased to ~~14.2%~~14.3% at September 30, ~~2021,~~2022, compared with ~~14.4%~~14.2% as of December 31, ~~2020.~~2021. Tier 1 capital as a percent of risk weighted assets ~~decreased~~increased from 13.3% at the end of ~~2020~~2021 to ~~13.2%~~13.4% as of September 30, ~~2021.~~2022. Tier 1 capital as a percent of average assets was ~~8.5%~~9.1% at September 30, ~~2021, down~~2022, up from ~~8.8%~~8.7% as of December 31, ~~2020.~~2021. Common equity Tier 1 capital was ~~13.2%~~13.4% at the end of the third quarter of ~~2021,~~2022, up from ~~13.1%~~13.3% at the end of ~~2020.~~2021.

As of September 30, ~~2021,~~2022, the capital ratios for the Company’s subsidiary ~~banks~~bank also exceeded the minimum required capital ratios for well capitalized institutions, plus the fully phased-in capital conservation buffer.

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 elected to utilize the five-year CECL transition.

Deposits and Other Liabilities

Total deposits of ~~$7.1~~$6.9 billion at September 30, ~~2021~~2022 were up ~~$653.1~~$145.3 million or ~~10.1%~~2.1% from December 31, ~~2020.~~2021. The increase from year-end ~~2020~~2021 was primarily in noninterest bearing deposits up $124.6 million or 5.8% and in checking, money market and savings balances, which collectively were up ~~$449.8~~$60.7 million or ~~12.0%~~1.5%. ~~The increase~~These were slightly offset by decreases in ~~money market deposit balances reflect growth in municipal, non-personal and personal deposits. Noninterest bearing~~time deposits, which were ~~up $274.1~~down $40.1 million or ~~14.2% and time deposits declined $70.7 million or 9.5%, respectively from year-end 2020. Deposit balances have benefited from PPP loan originations and government stimulus payments related~~6.3% compared to ~~COVID-19. The majority of the Company's PPP loan originations were deposited in Tompkins checking accounts.~~December 31, 2021.

The most significant source of funding for the Company is core deposits. The Company defines core deposits as total deposits less time deposits of $250,000 or more, brokered deposits, municipal money market deposits, and reciprocal deposit relationships with municipalities. Core deposits grew by ~~$916.8~~$191.0 million or ~~17.8%~~3.3% from year-end ~~2020,~~2021, to ~~$6.1~~$6.0 billion at September 30, ~~2021.~~2022. Core deposits represented ~~85.6%~~86.1% of total deposits at September 30, ~~2021,~~2022, compared to ~~80.1%~~85.1% of total deposits at December 31, ~~2020.~~2021.

The Company uses both retail and wholesale repurchase agreements. Retail repurchase agreements are arrangements with local customers of the Company, in which the Company agrees to sell securities to the customer with an agreement to repurchase those securities at a specified later date. Retail repurchase agreements totaled ~~$72.5~~$55.3 million at September 30, ~~2021,~~2022, and ~~$65.8~~$66.8 million at December 31, ~~2020.~~2021. Management generally views retail repurchase agreements as an alternative to large time deposits.

The Company’s other borrowings totaled ~~$110.0~~$101.0 million at September 30, ~~2021,~~2022, down ~~$155.0~~$23.0 million or ~~58.5%~~18.6% from ~~$265.0~~$124.0 million at December 31, 2020. In the third quarter of 2021, the Company prepaid $135.0 million of FHLB fixed rate advances and incurred prepayment penalties of $2.9 million, recorded in noninterest expense. The advances, which were paid off in September 2021, carried a weighted average rate of 2.26% and had a weighted average maturity of 1.25 years.2021. Borrowings at September 30, ~~2021~~2022 consisted of ~~$110.0~~$41.0 million in overnight FHLB advances and $60.0 million of FHLB term advances, compared to ~~$265.0~~$14.0 million in FHLB overnight advances and $110.0 million of FHLB term advances at year end ~~2020. All $110.0~~2021. Of the $60.0 million in FHLB term advances at September 30, ~~2021, are~~2022, $20.0 million is due to mature in less than one year and $40.0 million is due to mature in over one year.

During the three and nine months ended September 30, 2021, the Company redeemed trust preferred securities with par values of $10.0 million and $15.2 million, respectively, and recognized accelerated non-cash purchase accounting discounts of $650,000 and $1.9 million, respectively, for the three and nine months ended September 30, 2021. The $15.2 million in redeemed trust preferred securities carried a weighted average interest rate of 5.26% at the time they were redeemed and had a weighted average final maturity of slightly more than 11 years.

Liquidity

As of September 30, 2021, the Company had not experienced any significant impact to our liquidity or funding capabilities as a result of the COVID-19 pandemic. The Company is participating as a lender in the PPP under the CARES Act. The Federal Reserve Bank has provided a lending facility that may be used by banks to obtain funding specifically for PPP loans. PPP loans would be pledged as collateral on any of the Bank's borrowings under the Federal Reserve Bank's PPP lending facility. The Company has a long-standing liquidity plan in place that is designed to ensure that appropriate liquidity resources are available to fund the balance sheet, and as of September 30, 2021 had not accessed the Federal Reserve's PPP lending facility. Additionally, given the uncertainties related to the impact of the COVID-19 crisis on liquidity, the Company has confirmed the availability of funds at the FHLB of NY and FHLB of Pittsburgh, completed actions required to activate participation in the Federal Reserve Bank PPP lending facility, and confirmed availability of Federal Fund lines with correspondent bank partners.

The objective of liquidity management is to ensure the availability of adequate funding sources to satisfy the demand for credit, deposit withdrawals, and business investment opportunities. The Company’s large, stable core deposit base and strong capital position are the foundation for the Company’s liquidity position. The Company uses a variety of resources to meet its liquidity needs, which include deposits, cash and cash equivalents, short-term investments, cash flow from lending and investing activities, repurchase agreements, and borrowings. The Company’s Asset/Liability Management Committee monitors asset and liability positions of the Company’s subsidiary banks individually and on a combined basis. The Committee reviews periodic reports on liquidity and interest rate sensitivity positions. Comparisons with industry and peer groups are also monitored. The Company’s strong reputation in the communities it serves, along with its strong financial condition, provides access to numerous sources of liquidity as described below. Management believes these diverse liquidity sources provide sufficient means to meet all demands on the Company’s liquidity that are reasonably likely to occur.

Core deposits, discussed above under ~~“Deposits~~"Deposits and Other ~~Liabilities”~~Liabilities", are a primary and low cost 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, municipal money market deposits, reciprocal deposits, bank borrowings, securities sold under agreements to repurchase and overnight and term advances from the FHLB. Rates and terms are the primary determinants of the mix of these funding sources. Non-core funding sources of ~~$1.2~~$1.1 billion at September 30, ~~2021~~2022 decreased ~~$412.0~~$80.1 million or ~~25.5%~~6.7% as compared to year-end 2020. The decrease was driven mainly by the repayment of $200.0 million of brokered time deposits that matured during the second quarter of 2021 and the prepayment of $135.0 million of FHLB term borrowings during the third quarter of 2021. Non-core funding sources, as a percentage of total liabilities, were ~~16.3%~~15.6% at September 30, ~~2021,~~2022, compared to ~~23.4%~~17.0% at December 31, ~~2020.~~2021.

Non-core funding sources may require securities to be pledged against the underlying liability. Securities held at fair value were ~~$1.6~~$1.7 billion at September 30, ~~2021~~2022 and ~~$1.2~~$1.4 billion at December 31, ~~2020,~~2021, and were either pledged or sold under agreements to repurchase. Pledged securities represented ~~69.9%~~71.5% of total securities at September 30, ~~2021,~~2022, compared to ~~75.3%~~59.4% of total securities at December 31, ~~2020.~~2021.

Cash and cash equivalents totaled ~~$333.5~~$103.6 million as of September 30, ~~2021~~2022 which ~~decreased~~increased from ~~$388.5~~$63.1 million at December 31, ~~2020. The decrease in cash from year-end was mainly due to the investment of excess cash into higher-yielding securities.~~2021. Short-term investments, consisting of securities due in one year or less, ~~increased~~decreased from ~~$55.0~~$77.9 million at December 31, ~~2020,~~2021, to ~~$57.6~~$31.9 million on September 30, ~~2021.~~2022.

Cash flow from the loan and investment portfolios provides a significant source of liquidity. These assets may have stated maturities in excess of one year, but have monthly principal reductions. Total mortgage-backed securities, at fair value, were ~~$1.0 billion~~$758.9 million at September 30, ~~2021~~2022 compared with ~~$887.6~~$947.7 million at December 31, ~~2020.~~2021. Outstanding principal balances of residential mortgage loans, consumer loans, and leases totaled approximately ~~$1.5~~$1.6 billion at September 30, ~~2021, flat~~2022, up $57.9 million or 3.7% compared with year-end ~~2020.~~2021. Aggregate amortization from monthly payments on these assets provides significant additional cash flow to the Company.

The Company's liquidity is enhanced by ready access to national and regional wholesale funding sources including Federal funds purchased, repurchase agreements, brokered ~~certificates of deposit,~~deposits, and FHLB advances. Through its subsidiary ~~banks,~~bank, the Company has borrowing relationships with the FHLB and correspondent banks, which provide secured and unsecured borrowing capacity. ~~At September 30, 2021, the unused borrowing capacity on established lines with the FHLB was $2.3 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, ~~2021, total~~2022, the established borrowing capacity with the FHLB was $1.6 billion, with available unencumbered ~~residential mortgage loans and securities were $1.7~~mortgage-related assets of $1.5 billion. Additional assets may also qualify as collateral for FHLB advances, upon approval of the FHLB.

~~Newly Adopted Accounting Standards~~

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

Accounting Standards Pending Adoption

ASU No. 2020-06, "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 2022-06 is effective December 15, 2023 and is not expected to have a significant impact on our consolidated financial statements.

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. ~~Tompkins~~The Company does not expect the adoption of this standard to 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 is ~~currently evaluating the potential~~effective January 1, 2023 and is not expected to have a significant impact ~~of ASU 2020-04~~ on our consolidated financial statements.

~~The~~ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326)" ("ASU 2022-02") eliminates the guidance on troubled debt restructurings and requires entities to evaluate all loan modifications to determine if they result in a new loan or a continuation of the existing loan. ASU 2022-02 also requires that entities disclose current-period gross charge-offs by year of origination for loans and leases. ASU 2022-02 is effective January 1, 2023, with early adoption permitted. While the guidance will result in expanded disclosures, the Company ~~reviewed new accounting standards as issued. Management has~~does not ~~identified any other new standards that it believes will~~expect the adoption of this standard to have a ~~significant~~material impact on ~~the Company’s~~our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

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

The Company’s Board of Directors has set a policy that interest rate risk exposure will remain within a range whereby net interest income will not decline by more than 10% in one year as a result of a 100 basis point parallel change in rates. Based upon the simulation analysis performed as of August 31, ~~2021,~~2022, a 200 basis point parallel upward change in interest rates over a one-year time frame would result in a one-year decrease in net interest income from the base case of approximately ~~2.7%~~3.6%, while a 100 basis point parallel decline in interest rates over a one-year period would result in a ~~decrease~~one year increase in ~~one-year~~ net interest income of 1.0% from the base ~~case of 3.8%.~~case. The simulation assumes no balance sheet growth and no management action to address balance sheet mismatches.

The decrease in net interest income in the rising rate scenario is a result of the balance sheet showing a more liability sensitive position over a ~~one~~two 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 a higher rate environment and funding costs stabilize, net interest income is expected to trend upwards.

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

The most recent simulation of a base case scenario, which assumes interest rates remain unchanged from the date of the simulation, reflects a net interest margin that is ~~declining~~increasing slightly over the next 12 to 18 ~~months.~~months as assets reprice/adjust into higher rates and funding costs are assumed to remain stabilized.

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

In addition to the simulation analysis, management uses an interest rate gap measure. The table below is a Condensed Static Gap Report, which illustrates the anticipated repricing intervals of assets and liabilities as of September 30, ~~2021.~~2022. The Company’s one-year net interest rate gap was a ~~positive $35.6~~negative $520.9 million or ~~0.44%~~6.70% of total assets at September 30, ~~2021,~~2022, compared with a ~~positive $58.9~~negative $331.5 million or ~~0.77%~~4.24% of total assets at December 31, ~~2020.~~2021. A ~~positive~~negative gap position exists when the amount of interest-bearing ~~assets~~liabilities maturing or repricing exceeds the amount of interest-earning ~~liabilities~~assets maturing or repricing within a particular time period. This analysis suggests that the Company’s net interest income ~~is equally at~~contains a higher degree of risk in ~~an increasing and decreasing~~a rising rate environment over the next 12 months. An interest rate gap measure could be ~~significantly~~ affected by external factors such as a rise or decline in interest rates, loan or securities prepayments, and deposit withdrawals.


Condensed Static Gap - September 30, 2021							Repricing Interval
Condensed Static Gap - September 30, 2022																Condensed Static Gap - September 30, 2022						Repricing Interval
(In thousands)	(In thousands)	Total		0-3 months			3-6 months			6-12 months			Cumulative 12 months			(In thousands)	Total		0-3 months			3-6 months			6-12 months			Cumulative 12 months

Interest-earning assets1	Interest-earning assets1	$	7,760,955	$	1,653,759		$	506,755		$	784,136		$	2,944,650		Interest-earning assets1	$	7,624,064	$	1,070,326		$	298,004		$	573,387		$	1,941,717
Interest-bearing liabilities	Interest-bearing liabilities	5,069,721		2,518,214			163,576			227,282			2,909,072			Interest-bearing liabilities	4,832,705		2,159,187			140,327			163,117			2,462,631
Net gap position	Net gap position			$	(864,455)		$	343,179		$	556,854		$	35,578		Net gap position			$	(1,088,861)		$	157,677		$	410,270		$	(520,914)
Net gap position as a percentage of total assets	Net gap position as a percentage of total assets			(10.66)		%	4.23		%	6.86		%	0.44		%	Net gap position as a percentage of total assets			(14.00)		%	2.03		%	5.27		%	(6.70)		%

1 Balances of available securities are shown at amortized cost

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, ~~2021.~~2022.

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

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal control over financial reporting that occurred during the quarter ended September 30, ~~2021,~~2022, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is subject to various claims and legal actions that arise in the ordinary course of conducting business. As of September 30, ~~2021,~~2022, management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against the Company or its subsidiaries will be material to the Company's consolidated financial position. On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection with such legal proceedings. Although the Company does not believe that the outcome of pending litigation will be material to the Company's consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations for a particular reporting period in the future.

Item 1A. Risk Factors

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

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

Issuer Purchases of Equity Securities

Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
(a) (b) (c) (d)
July 1, 2021 through July 31, 2021 85,752 $ 76.05 84,349 86,426
August 1, 2021 through August 31, 2021 56,615 78.88 56,042 30,384
September 1, 2021 through September 30, 2021 31,988 77.62 30,384 0
Total 174,355 $ 77.26 170,775 0


	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)
July 1, 2022 through July 31, 2022	15,220	$	71.67	12,958	175,042
August 1, 2022 through August 31, 2022	3,536	73.21		2,437	172,605
September 1, 2022 through September 30, 2022	3,034	72.09		2,787	169,818
Total	21,790	$	71.98	18,182	169,818

Included in the table above are ~~1,403~~2,262 shares purchased in July ~~2021,~~2022, at an average cost of ~~$76.24,~~$72.94, and ~~573~~652 shares purchased in August ~~2021,~~2022, at an average cost of ~~$81.46,~~$78.11, 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 ~~1,604~~447 shares delivered to the Company in August 2022 in addition to 247 shares in September ~~2021~~ at an average cost of ~~$76.94~~$72.73 and 76.23, respectively to satisfy mandatory tax withholding requirements upon vesting of restricted stock under the Company's 2009 and 2019 Equity Plans.

On ~~January 30, 2020,~~October 22, 2021, the Company’s Board of Directors authorized a share repurchase plan (the ~~“2020~~"2021 Repurchase ~~Plan”~~Plan") for the repurchase of up to 400,000 shares of the Company’s common stock over the 24 months following adoption of the ~~plan.~~2021 Repurchase Plan. Shares may be repurchased from time to time under the ~~2020~~2021 Repurchase Plan in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in accordance with federal securities laws, and the repurchase program may be suspended, modified or terminated by the Board of Directors at any time for any reason. Under the ~~2020~~2021 Repurchase Plan, the Company had repurchased ~~400,000~~230,182 shares through September 30, ~~2021,~~2022, at an average cost of ~~$75.99.~~$78.31.

Recent Sales of Unregistered Securities

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

~~None~~ Effective November 9, 2022, the Compensation Committee of the Tompkins Financial Board of Directors adopted performance-based restricted stock units as a component of its 2022 executive compensation program, in which each Named Executive Officer participates. Previously, performance-based restricted stock replaced a portion of time-vested restricted stock in grants to our President & Chief Executive Officer, and to our Executive Vice President, Chief Financial Officer & Chief Operating Officer. Beginning in 2022, all of our Named Executive Officers will now receive a portion of their equity award as performance-based restricted stock, and a portion as time-vested restricted stock (vesting over a 5-year period). The performance-based restricted stock units will vest over a three-year performance period, and recipients will have the opportunity to earn an amount in excess of the target number of performance-based restricted stock units for achievement of enhanced performance goals. Payout can range from 0-170% of the target amount depending on the performance level achieved and recipient's position within the organization.

6867

Item 6. Exhibits

EXHIBIT INDEX


Exhibit Number			Description
3.1			Amended and Restated Certificate of Incorporation of the Company, incorporated herein by reference to Exhibit 3(i) to the Company’s Form 10-Q, filed with the Commission on August 11, 2008.
3.2			Second Amended and Restated Bylaws of the Company, incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Commission on January 31, 2011.
10.1			Form of Performance Share Award Agreement - 2019 Equity Incentive Plan .
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 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.C. Section 1350
32.2			Certification of Principal Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, 18 U.S.C. Section 1350
101 INS**			The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document
101 SCH**			Inline XBRL Taxonomy Extension Schema Document
101 CAL**			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101 DEF**			Inline XBRL Taxonomy Extension Definition Linkbase Document
101 LAB**			Inline XBRL Taxonomy Extension Label Linkbase Document
101 PRE**			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File - the cover page interactive data file does not appear in the interactive date file because its XBRL tags are embedded with the inline XBRL document.
** Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Condition as of September 30, ~~2021~~2022 and December 31, ~~2020;~~2021; (ii) Consolidated Statements of Income for the three and nine months ended September 30, ~~2021~~2022 and ~~2020;~~2021; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, ~~2021~~2022 and ~~2020;~~2021; (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2021~~2022 and ~~2020;~~2021; (v) Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 30, ~~2021~~2022 and ~~2020;~~2021; and (vi Notes to Unaudited Consolidated Financial Statements.

6968

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 ~~08, 2021~~07, 2022

TOMPKINS FINANCIAL CORPORATION


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


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

7069


Analysis of Off-Balance Sheet Reserves
(In thousands)	9/30/2021		9/30/2020
Liabilities for off-balance sheet credit exposures at beginning of period	$	1,920	$	477
Impact of Adopting ASU 2016-13	0		381
Provision for credit losses related to off-balance sheet credit exposures	272		1,273
Liabilities for off-balance sheet credit exposures at end of period	$	2,192	$	2,131