TOMPKINS FINANCIAL CORP - FORM 10-Q

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2010

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ______

Commission File Number 1-12709



Tompkins Financial Corporation
(Exact name of registrant as specified in its charter)

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

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

Registrant’s telephone number, including area code: (607) 273-3210

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

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 x No o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).*

Yes o No o.

*The registrant has not yet been phased into the interactive data requirements.

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

	Large Accelerated Filer o		Accelerated Filer x
	Non-Accelerated Filer o (Do not check if a smaller reporting company)		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes o No x.

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

Class		Outstanding as of July 28, 2010
Common Stock, $0.10 par value		10,831,415 shares

TOMPKINS FINANCIAL CORPORATION

FORM 10-Q

INDEX

			PAGE
PART I - FINANCIAL INFORMATION

	Item 1 -	Financial Statements (Unaudited)

		Condensed Consolidated Statements of Condition as of June 30, 2010 and December 31, 2009	3

		Condensed Consolidated Statements of Income for the three and six months ended June 30, 2010	4

		Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009	5

		Condensed Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2010 and 2009	6

		Notes to Unaudited Condensed Consolidated Financial Statements	7-25

	Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25-40

	Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	40-41

	Item 4 -	Controls and Procedures	41

PART II - OTHER INFORMATION

	Item 1 -	Legal Proceedings	41

	Item 1A -	Risk Factors	42

	Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	42

	Item 3 -	Defaults Upon Senior Securities	42

	Item 4 -	(Removed and Reserved)	42

	Item 5 -	Other Information	42

	Item 6 -	Exhibits	43

SIGNATURES			43

EXHIBIT INDEX			44

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

TOMPKINS FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CONDITION

(In thousands, except share and per share data) (Unaudited)	As of			As of
	06/30/2010			12/31/2009
ASSETS
Cash and noninterest bearing balances due from banks	$	47,839		$	43,686
Interest bearing balances due from banks		1,615			1,676
Federal funds sold		15,000			0
Money market funds		100			100
Cash and Cash Equivalents		64,554			45,462

Trading securities, at fair value		26,895			31,718
Available-for-sale securities, at fair value		955,090			928,770
Held-to-maturity securities, fair value of $42,567 at June 30, 2010, and $46,340 at December 31, 2009		41,235			44,825
Loans and leases, net of unearned income and deferred costs and fees		1,900,303			1,914,818
Less: Allowance for loan and lease losses		26,530			24,350
Net Loans and Leases		1,873,773			1,890,468

FHLB and FRB stock		19,330			20,041
Bank premises and equipment, net		46,818			46,650
Corporate owned life insurance		36,680			35,953
Goodwill		41,589			41,589
Other intangible assets, net		4,486			4,864
Accrued interest and other assets		51,198			62,920
Total Assets	$	3,161,648		$	3,153,260

LIABILITIES
Deposits:
Interest bearing:
Checking, savings and money market		1,198,065			1,183,145
Time		787,923			794,738
Noninterest bearing		474,235			461,981
Total Deposits		2,460,223			2,439,864

Federal funds purchased and securities sold under agreements to repurchase, including certain amounts at fair value of $5,628 at June 30, 2010, and $5,500 at December 31, 2009		175,336			192,784
Other borrowings, including certain amounts at fair value of $11,825 at June 30, 2010, and $11,335 at December 31, 2009		189,561			208,965
Trust preferred debentures		25,058			25,056
Other liabilities		42,787			41,583
Total Liabilities	$	2,892,965		$	2,908,252

EQUITY
Tompkins Financial Corporation shareholders’ equity:
Common Stock - par value $.10 per share: Authorized 25,000,000 shares; Issued and outstanding: 10,865,911 at June 30, 2010; and 9,785,265 at December 31, 2009		1,087			978
Additional paid-in capital		195,025			155,589
Retained earnings		67,456			92,402
Accumulated other comprehensive income (loss)		5,965			(3,087	)
Treasury stock, at cost – 88,784 shares at June 30, 2010, and 81,723 shares at December 31, 2009		(2,367	)		(2,326	)

Total Tompkins Financial Corporation Shareholders’ Equity		267,166			243,556
Noncontrolling interests		1,517			1,452
Total Equity	$	268,683		$	245,008
Total Liabilities and Equity	$	3,161,648		$	3,153,260

See accompanying notes to unaudited condensed consolidated financial statements.

TOMPKINS FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended					Six Months Ended
(In thousands, except per share data) (Unaudited)	06/30/2010			06/30/2009		06/30/2010			06/30/2009
INTEREST AND DIVIDEND INCOME
Loans	$	26,750		$	26,499	$	53,369		$	53,176
Due from banks		10			4		22			12
Federal funds sold		6			4		9			8
Money market funds		0			10		0			28
Trading securities		278			345		588			707
Available-for-sale securities		8,794			9,185		17,793			17,570
Held-to-maturity securities		394			483		802			986
FHLB and FRB stock		218			29		501			322
Total Interest and Dividend Income		36,450			36,559		73,084			72,809
INTEREST EXPENSE
Time certificates of deposits of $100,000 or more		1,146			1,314		2,324			2,805
Other deposits		3,502			4,827		7,329			9,960
Federal funds purchased and repurchase agreements		1,308			1,564		2,733			3,129
Trust preferred securities		436			325		803			378
Other borrowings		1,952			2,020		3,845			4,178
Total Interest Expense		8,344			10,050		17,034			20,450
Net Interest Income		28,106			26,509		56,050			52,359
Less: Provision for loan/lease losses		1,408			2,367		3,591			4,403
Net Interest Income After Provision for Loan/Lease Losses		26,698			24,142		52,459			47,956
NONINTEREST INCOME
Investment services income		3,604			3,337		7,341			6,539
Insurance commissions and fees		3,191			3,120		6,357			6,239
Service charges on deposit accounts		2,430			2,271		4,487			4,491
Card services income		1,067			933		2,041			1,723
Mark-to-market gain on trading securities		291			40		381			98
Mark-to-market (loss) gain on liabilities held at fair value		(490	)		432		(618	)		688
Other income		1,180			1,386		2,486			2,667
Gain on security transactions		58			19		176			26
Total Noninterest Income		11,331			11,538		22,651			22,471
NONINTEREST EXPENSES
Salaries and wages		10,669			10,069		21,008			19,597
Pension and other employee benefits		3,442			3,360		7,354			6,746
Net occupancy expense of premises		1,725			1,774		3,606			3,788
Furniture and fixture expense		1,143			1,128		2,326			2,244
FDIC insurance		857			2,164		1,769			2,518
Amortization of intangible assets		199			235		401			484
Other operating expense		6,481			5,944		12,547			12,586
Total Noninterest Expenses		24,516			24,674		49,011			47,963
Income Before Income Tax Expense		13,513			11,006		26,099			22,464
Income Tax Expense		4,447			3,526		8,585			7,242
Net Income attributable to Noncontrolling Interests and Tompkins Financial Corporation		9,066			7,480		17,514			15,222
Less: Net income attributable to noncontrolling interests		33			33		65			65
Net Income Attributable to Tompkins Financial Corporation	$	9,033		$	7,447	$	17,449		$	15,157
Basic Earnings Per Share	$	0.84		$	0.70	$	1.62		$	1.42
Diluted Earnings Per Share	$	0.83		$	0.69	$	1.61		$	1.41

Per share data has been retroactively adjusted to reflect 10% stock dividend paid on February 15, 2010

See accompanying notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

	06/30/2010			06/30/2009
OPERATING ACTIVITIES
Net income attributable to Tompkins Financial Corporation	$	17,449		$	15,157
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		3,591			4,403
Depreciation and amortization of premises, equipment, and software		2,353			2,271
Amortization of intangible assets		401			484
Earnings from corporate owned life insurance		(711	)		(426	)
Net amortization on securities		1,669			859
Mark-to-market gain on trading securities		(381	)		(98	)
Mark-to-market loss (gain) on liabilities held at fair value		618			(688	)
Net gain on securities transactions		(176	)		(26	)
Net gain on sale of loans		(339	)		(967	)
Proceeds from sale of loans		18,598			68,425
Loans originated for sale		(17,859	)		(69,248	)
Net (gain) loss on sale of bank premises and equipment		(37	)		1
Stock-based compensation expense		569			435
Decrease in accrued interest receivable		1,084			392
Decrease in accrued interest payable		(440	)		(250	)
Payments/maturities from trading securities		5,097			3,448
Other, net		8,741			8,136
Net Cash Provided by Operating Activities		40,227			32,308

INVESTING ACTIVITIES
Proceeds from maturities of available-for-sale securities		192,315			169,350
Proceeds from sales of available-for-sale securities		13,755			9,401
Proceeds from maturities of held-to-maturity securities		13,608			17,685
Purchases of available-for-sale securities		(219,690	)		(238,025	)
Purchases of held-to-maturity securities		(10,037	)		(6,514	)
Net decrease (increase) in loans		12,703			(23,633	)
Net decrease in FHLB and FRB stock		711			2,675
Proceeds from sale of bank premises and equipment		43			20
Purchases of bank premises and equipment		(2,233	)		(1,878	)
Other, net		(1,739	)		(1,131	)
Net Cash Used in Investing Activities		(564	)		(72,050	)

FINANCING ACTIVITIES
Net increase in demand, money market, and savings deposits		27,174			90,631
Net (decrease) increase in time deposits		(6,815	)		64,171
Net decrease in securities sold under agreements to repurchase and Federal funds purchased		(17,576	)		(6,183	)
Proceeds received from other borrowings		0			5,000
Repayment of other borrowings		(19,894	)		(84,477	)
Proceeds from issuance of trust preferred debentures, net of issuance costs		0			19,031
Cash dividends		(6,989	)		(6,597	)
Cash paid in lieu of fractional shares - 10% stock dividend		(7	)		0
Shares issued for dividend reinvestment plan		1,294			0
Shares issued for employee stock ownership plan		1,278			0
Common stock repurchased and returned to unissued status		0			(178	)
Net proceeds from exercise of stock options		853			835
Tax benefit from stock option exercises		111			145
Net Cash (Used in) Provided by Financing Activities		(20,571	)		82,378
Net Increase in Cash and Cash Equivalents		19,092			42,636
Cash and cash equivalents at beginning of period		45,462			52,349
Total Cash & Cash Equivalents at End of Period		64,554			94,985
Supplemental Information:
Cash paid during the year for - Interest	$	17,474		$	20,701
Cash paid during the year for - Taxes		8,405			13,144
Transfer of loans to other real estate owned		1,639			68

See accompanying notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands, except share data) (Unaudited)

										Accumulated
				Additional						Other						Non-
	Common			Paid-in			Retained			Comprehensive			Treasury			controlling
	Stock			Capital			Earnings			Income (Loss)			Stock			Interests		Total
Balances at January 1, 2009	$	973		$	152,842		$	73,779		$	(7,602	)	$	(2,083	)	$	1,452	$	219,361
Comprehensive Income:
Net income attributable to noncontrolling interests and Tompkins Financial Corporation								15,157									65		15,222
Other comprehensive income											85								85
Total Comprehensive Income																			15,307

Cash dividends ($0.62 per share)								(6,597	)										(6,597	)
Exercise of stock options and related tax benefit (30,668 shares, net)		3			977														980
Common stock repurchased and returned to unissued status (5,000 shares)		(1	)		(177	)													(178	)
Directors deferred compensation plan (1,120 shares, net)					81									(81	)				—
Stock-based compensation expense					435														435
Balances at June 30, 2009	$	975		$	154,158		$	82,339		$	(7,517	)	$	(2,164	)	$	1,517	$	229,308

Balances at January 1, 2010	$	978		$	155,589		$	92,402		$	(3,087	)	$	(2,326	)	$	1,452	$	245,008
Comprehensive Income:
Net income attributable to noncontrolling interests and Tompkins Financial Corporation								17,449									65		17,514
Other comprehensive income											9,052								9,052
Total Comprehensive Income																			26,566

Cash dividends ($0.65 per share)								(6,989	)										(6,989	)
Effect of 10% stock dividend (988,664 shares)1		98			35,301			(35,399	)										0
Cash paid in lieu of fractional shares								(7	)										(7	)
Exercise of stock options and related tax benefit (34,733 shares, net)		5			959														964
Directors deferred compensation plan ((823) shares, net)					41									(41	)				0
Shares issued for dividend reinvestment plan (31,027 shares)		3			1,291														1,294
Shares issued for employee stock ownership plan (34,436 shares)		3			1,275														1,278
Forfeiture of restricted stock ((330) shares)
Stock-based compensation expense					569														569
Balances at June 30, 2010	$	1,087		$	195,025		$	67,456		$	5,965		$	(2,367	)	$	1,517	$	268,683

Cash dividends per share have been retroactively adjusted to reflect 10% stock dividend paid on February 15, 2010.

1 Included in the shares issued for the 10% stock dividend in 2010 were treasury shares of 3,264, and director deferred compensation plan shares of 4,620.

See accompanying notes to unaudited condensed consolidated financial statements.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Business

Tompkins Financial Corporation (“Tompkins” or the “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 conducts its business through its (i) three wholly-owned banking subsidiaries, Tompkins Trust Company, The Bank of Castile and The Mahopac National Bank, (ii) wholly-owned insurance subsidiary, Tompkins Insurance Agencies, Inc., and (iii) wholly-owned investment services subsidiary, AM&M Financial Services, Inc. (“AM&M”). AM&M has three operating companies: (1) AM&M Planners, Inc., which provides fee based financial planning and wealth management services for corporate executives, small business owners, and high net worth individuals; (2) Ensemble Financial Services, Inc., an independent broker-dealer and outsourcing company for financial planners and investment advisors; and (3) Ensemble Risk Solutions, Inc., which creates customized risk management plans using life, disability and long-term care insurance products. Unless the context otherwise requires, the term “Company” refers to Tompkins Financial Corporation and its subsidiaries. The Company’s principal offices are located at The Commons, Ithaca, New York 14851, and its telephone number is (607) 273-3210. The Company’s common stock is traded on the NYSE-Amex under the symbol “TMP.”

2. Basis of Presentation

The unaudited condensed consolidated financial statements included in this quarterly report have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. In the application of certain accounting policies management is required to make assumptions regarding the effect of matters that are inherently uncertain. These estimates and assumptions affect the reported amounts of certain assets, liabilities, revenues, and expenses in the unaudited condensed consolidated financial statements. Different amounts could be reported under different conditions, or if different assumptions were used in the application of these accounting policies. The accounting policies that management considers critical in this respect are the determination of the allowance for loan and lease losses, the expenses and liabilities associated with the Company’s pension and post-retirement benefits, and the review of its securities portfolio for other than temporary impairment.

In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year ended December 31, 2010. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009. There have been no significant changes to the Company’s accounting policies from those presented in the 2009 Annual Report on Form 10-K. Refer to Note 3- “Accounting Standards Updates” of this Report for a discussion of recently issued accounting guidelines.

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, Federal funds sold and money market funds. Management regularly evaluates the credit risk associated with the counterparties to these transactions and believes that the Company is not exposed to any significant credit risk on cash and cash equivalents.

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

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

3. Accounting Standards Updates

Accounting Standards Update (ASU) No. 2009-16, “Transfers and Servicing (Topic 860) - Accounting for Transfers of Financial Assets.” ASU 2009-16 amends prior accounting guidance to enhance reporting about transfers of financial assets, including securitizations, and where companies have continuing exposure to the risks related to transferred financial assets. ASU 2009-16 eliminates the concept of a “qualifying special-purpose entity” and changes the requirements for derecognizing financial assets. ASU 2009-16 also requires additional disclosures about all continuing involvements with transferred financial assets including information about gains and losses resulting from transfers during the period. The provisions of ASU 2009-16 became effective on January 1, 2010 and did not have a significant impact on the Company’s financial statements.

ASU No. 2009-17, “Consolidations (Topic 810) - Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.” ASU 2009-17 amends prior guidance to change how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. ASU 2009-17 requires additional disclosures about the reporting entity’s involvement with variable-interest entities and any significant changes in risk exposure due to that involvement as well as its affect on the entity’s financial statements. As further discussed below, ASU No. 2010-10, “Consolidations (Topic 810),” deferred the effective date of ASU 2009-17 for a reporting entity’s interests in investment companies. The provisions of ASU 2009-17 became effective on January 1, 2010 and did not have a significant impact on the Company’s financial statements.

ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820) - Improving Disclosures About Fair Value Measurements.” ASU 2010-06 requires expanded disclosures related to fair value measurements including (i) the amounts of significant transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy and the reasons for the transfers, (ii) the reasons for transfers of assets or liabilities in or out of Level 3 of the fair value hierarchy, with significant transfers disclosed separately, (iii) the policy for determining when transfers between levels of the fair value hierarchy are recognized and (iv) for recurring fair value measurements of assets and liabilities in Level 3 of the fair value hierarchy, a gross presentation of information about purchases, sales, issuances and settlements. ASU 2010-06 further clarifies that (i) fair value measurement disclosures should be provided for each class of assets and liabilities (rather than major category), which would generally be a subset of assets or liabilities within a line item in the statement of financial position and (ii) companies should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for each class of assets and liabilities included in Levels 2 and 3 of the fair value hierarchy. The disclosures related to the gross presentation of purchases, sales, issuances and settlements of assets and liabilities included in Level 3 of the fair value hierarchy will be required for the Company beginning January 1, 2011. The remaining disclosure requirements and clarifications made by ASU 2010-06 became effective for the Company on January 1, 2010. See Note 11 – Fair Value.

ASU No. 2010-10, “Consolidations (Topic 810) - Amendments for Certain Investment Funds.” ASU 2010-10 defers the effective date of the amendments to the consolidation requirements made by ASU 2009-17 to a company’s interest in an entity (i) that has all of the attributes of an investment company, as specified under ASC Topic 946, “Financial Services - Investment Companies,” or (ii) for which it is industry practice to apply measurement principles of financial reporting that are consistent with those in ASC Topic 946. As a result of the deferral, a company will not be required to apply the ASU 2009-17 amendments to the Subtopic 810-10 consolidation requirements to its interest in an entity that meets the criteria to qualify for the deferral. ASU 2010-10 also clarifies that any interest held by a related party should be treated as though it is an entity’s own interest when evaluating the criteria for determining whether such interest represents a variable interest. In addition, ASU 2010-10 also clarifies that a quantitative calculation should not be the sole basis for evaluating whether a decision maker’s or service provider’s fee is a variable interest. The provisions of ASU 2010-10 became effective for the Company as of January 1, 2010 and did not have a significant impact on the Company’s financial statements.

ASU No. 2010-11, “Derivatives and Hedging (Topic 815) - Scope Exception Related to Embedded Credit Derivatives.” ASU 2010-11 clarifies that the only form of an embedded credit derivative that is exempt from embedded derivative bifurcation requirements are those that relate to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature. The provisions of ASU 2010-11 will be effective for the Company on July 1, 2010 and are not expected to have a significant impact on the Company’s financial statements.

ASU No. 2010-20, “Receivables (Topic 310) - Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” ASU 2010-20 requires entities to provide disclosures designed to facilitate financial statement users’ evaluation of (i) the nature of credit risk inherent in the entity’s portfolio of financing receivables, (ii) how that risk is analyzed and assessed in arriving at the allowance for credit losses and (iii) the changes and reasons for those changes in the allowance for credit losses. Disclosures must be disaggregated by portfolio segment, the level at which an entity develops and documents a systematic method for determining its allowance for credit losses, and class of financing receivable, which is generally a disaggregation of portfolio segment. The required disclosures include, among other things, a rollforward of the allowance for credit losses as well as information about modified, impaired, non-accrual and past due loans and credit quality indicators. ASU 2010-20 will be effective for the Company’s financial statements as of December 31, 2010, as it relates to disclosures required as of the end of a reporting period. Disclosures that relate to activity during a reporting period will be required for the Company’s financial statements that include periods beginning on or after January 1, 2011.

4. Securities

Available-for-Sale Securities

The following summarizes available-for-sale securities held by the Company at June 30, 2010:

	Available-for-Sale Securities
June 30, 2010 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	$	1,978	$	103	$	0	$	2,081
Obligations of U.S. Government sponsored entities		369,598		9,283		0		378,881
Obligations of U.S. states and political subdivisions		63,570		2,700		10		66,260
Mortgage-backed securities – residential, issued by:
U.S. Government agencies		134,885		4,309		32		139,162
U.S. Government sponsored entities		333,658		18,690		32		352,316
Non-U.S. Government agencies or sponsored entities		11,248		0		1,222		10,026
U.S. corporate debt securities		5,028		172		0		5,200
Total debt securities		919,965		35,257		1,296		953,926
Equity securities		1,164		0		0		1,164
Total available-for-sale securities	$	921,129	$	35,257	$	1,296	$	955,090

The following summarizes available-for-sale securities held by the Company at December 31, 2009:

	Available-for-Sale Securities
December 31, 2009 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	$	1,991	$	88	$	0	$	2,079
Obligations of U.S. Government sponsored entities		377,920		3,369		2,274		379,015
Obligations of U.S. states and political subdivisions		61,176		2,537		18		63,695
Mortgage-backed securities – residential, issued by:
U.S. Government agencies		75,714		2,380		39		78,055
U.S. Government sponsored entities		373,307		15,831		278		388,860
Non-U.S. Government agencies or sponsored entities		12,656		0		1,890		10,766
U.S. corporate debt securities		5,032		104		0		5,136
Total debt securities		907,796		24,309		4,499		927,606
Equity securities		1,164		0		0		1,164
Total available-for-sale securities	$	908,960	$	24,309	$	4,499	$	928,770

Held-to-Maturity Securities

The following summarizes held-to-maturity securities held by the Company at June 30, 2010:

	Held-to-Maturity Securities
June 30, 2010 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Obligations of U.S. states and political subdivisions	$	41,235	$	1,349	$	17	$	42,567
Total held-to-maturity debt securities	$	41,235	$	1,349	$	17	$	42,567

The following summarizes held-to-maturity securities held by the Company at December 31, 2009:

	Held-to-Maturity Securities
December 31, 2009 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Obligations of U.S. states and political subdivisions	$	44,825	$	1,570	$	55	$	46,340
Total held-to-maturity debt securities	$	44,825	$	1,570	$	55	$	46,340

Realized gains on available-for-sale securities were $58,000 for the three months ended June 30, 2010, and $19,000 for the three months ended June 30, 2009; realized losses on available-for-sale securities were $0 in the second quarter of 2010 and 2009.

Realized gains on available-for-sale securities were $176,000 in the first six months of 2010, and $26,000 in the first six months of 2009; realized losses on available-for-sale securities were $0 in the first six months of 2010 and 2009.

The following table summarizes available-for-sale securities that had unrealized losses at June 30, 2010:

	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 states and political subdivisions		2,075		10		0		0		2,075		10

Mortgage-backed securities – residential, issued by:
U.S. Government agencies		10,673		32		0		0		10,673		32
U.S. Government sponsored entities		770		9		3,392		23		4,162		32
Non-U.S. Government agencies or sponsored entities		1,397		3		8,629		1,219		10,026		1,222
Total available-for-sale securities	$	14,915	$	54	$	12,021	$	1,242	$	26,936	$	1,296

The following table summarizes held-to-maturity securities that had unrealized losses at June 30, 2010:

	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. states and political subdivisions	$	375	$	10	$	249	$	7	$	624	$	17

Total held-to-maturity securities	$	375	$	10	$	249	$	7	$	624	$	17

The following table summarizes available-for-sale securities that had unrealized losses at December 31, 2009:

	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	$	188,529	$	2,274	$	0	$	0	$	188,529	$	2,274
Obligations of U.S. states and political subdivisions		1,679		18		0		0		1,679		18

Mortgage-backed securities – residential, issued by:
U.S. Government agencies		11,696		39		0		0		11,696		39
U.S. Government sponsored entities		21,593		235		8,126		43		29,719		278
Non-U.S. Government agencies or sponsored entities		2,690		338		8,076		1,552		10,766		1,890
Total available-for-sale securities	$	226,187	$	2,904	$	16,202	$	1,595	$	242,389	$	4,499

The following table summarizes held-to-maturity securities that had unrealized losses at December 31, 2009:

	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. states and political subdivisions	$	1,099	$	45	$	320	$	10	$	1,419	$	55

Total held-to-maturity securities	$	1,099	$	45	$	320	$	10	$	1,419	$	55

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

The Company does not intend to sell the investment securities that are in an unrealized loss position and it is not more-likely-than not that the Company will be required to sell the investment securities, before recovery of their amortized cost basis, which may be at maturity. Accordingly, as of June 30, 2010, and December 31, 2009, management believes the unrealized losses detailed in the tables above are not other-than-temporary.

Ongoing Assessment of Other-Than-Temporary Impairment

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

required to sell the investment securities, before recovery of their amortized cost basis, then the entire unrealized loss would be recorded in earnings.

The Company considers the following factors in determining whether a credit loss exists and the period over which the debt security is expected to recover.

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

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

	-	Changes in the near term prospects of the issuer or underlying collateral of a security, such as changes in default rates, loss severities given default and significant changes in prepayment assumptions;

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

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

As of June 30, 2010, the Company held five non-U.S. Government agencies or sponsored entities mortgage backed securities with a fair value of $10.0 million. During the third quarter of 2009, the Company determined that three of these non-U.S. Government mortgage backed securities were other-than-temporarily impaired based on an analysis of the above factors for these three securities. As a result, the Company recorded other-than-temporary impairment charges of $2.0 million in the third quarter of 2009 on these investments. The credit loss component of $146,000 was recorded as other-than-temporary impairment losses in the consolidated statement of income, while the remaining non-credit portion of the impairment loss was recognized in other comprehensive income (loss) in the consolidated statements of condition and changes in shareholders’ equity. The Company reviewed these five securities in the second quarter of 2010 and determined that no additional other-than-temporary charges to the Company’s consolidated statement of income were necessary. As of June 30, 2010, the amount by which the carrying value of the securities exceeded their fair value was $1.4 million. A continuation or worsening of current economic conditions may result in additional credit loss component of other-than-temporary impairment losses related to these investments.

The following table summarizes the roll-forward of credit losses on debt securities held by the Company for which a portion of an other-than-temporary impairment is recognized in other comprehensive income:

	Three Months Ended				Six Months Ended
(in thousands)	June 30, 2010		June 30, 2009		June 30, 2010		June 30, 2009
Credit losses at beginning of the period	$	146	$	0		146	$	0
Credit losses related to securities for which an other-than-temporary impairment was not previously recognized		0		0		0		0
Ending balance of credit losses on debt securities held for which a portion of an other-than-temporary impairment was recognized in other comprehensive income	$	146	$	0		146	$	0

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.

June 30, 2010
(in thousands)	Amortized Cost		Fair Value
Available-for-sale securities:
Due in one year or less	$	7,568	$	7,692
Due after one year through five years		141,704		145,926
Due after five years through ten years		281,138		288,675
Due after ten years		9,764		10,129
Total		440,174		452,422
Mortgage-backed securities		479,791		501,504
Total available-for-sale debt securities	$	919,965	$	953,926

December 31, 2009
(in thousands)	Amortized Cost		Fair Value
Available-for-sale securities:
Due in one year or less	$	11,084	$	11,231
Due after one year through five years		128,493		130,008
Due after five years through ten years		296,734		298,694
Due after ten years		9,808		9,992
Total		446,119		449,925
Mortgage-backed securities		461,677		477,681
Total available-for-sale debt securities	$	907,796	$	927,606

June 30, 2010
(in thousands)	Amortized Cost		Fair Value
Held-to-maturity securities:
Due in one year or less	$	19,331	$	19,472
Due after one year through five years		15,837		16,709
Due after five years through ten years		4,806		5,109
Due after ten years		1,261		1,277
Total held-to-maturity debt securities	$	41,235	$	42,567

December 31, 2009
(in thousands)	Amortized Cost		Fair Value
Held-to-maturity securities:
Due in one year or less	$	17,017	$	17,153
Due after one year through five years		19,200		20,185
Due after five years through ten years		7,131		7,511
Due after ten years		1,477		1,491
Total held-to-maturity debt securities	$	44,825	$	46,340

Trading Securities

The following summarizes trading securities, at estimated fair value, as of:

(in thousands)	June 30, 2010		December 31, 2009
Obligations of U.S. Government sponsored entities	$	15,103	$	17,986
Mortgage-backed securities – residential U.S. Government sponsored entities		11,792		13,732
Total	$	26,895	$	31,718

The net gain (loss) on trading account securities, which reflects mark-to-market adjustments, totaled $291,000 and $381,000 during the three and six months ended June 30, 2010, and $40,000 and $98,000 during the three and six months ended June 30, 2009.

The Company also holds non-marketable Federal Home Loan Bank New York (“FHLBNY”) stock and non-marketable Federal Reserve Bank (“FRB”) stock, both of which are required to be held for regulatory purposes and for borrowing availability. The required investment in FHLB stock is tied to the Company’s borrowing levels with the FHLB. Holdings of FHBLNY stock and FRB stock totaled $17.2 million and $2.1 million at June 30, 2010, respectively, and $18.1 million and $1.9 million at December 31, 2009, respectively. These securities are carried at par, which is also cost. While some Federal Home Loan Banks have stopped paying dividends and repurchasing stock upon reductions in debt levels, the FHLBNY continues to pay dividends and repurchase its stock. As such, the Company has not recognized any impairment on its holdings of FHLBNY stock.

5. Earnings Per Share

The Company follows the provisions of FASB ASC Topic 260, Earnings Per Share (“EPS”). A computation of Basic EPS and Diluted EPS for the three and six months ending June 30, 2010, and 2009 is presented in the table below.

Three months ended June 30, 2010 (in thousands except share and per share data)	Net Income (Numerator)		Weighted Average Shares (Denominator)		Per Share Amount
Basic EPS:

Net income attributable to Tompkins Financial Corporation	$	9,033		10,818,218	$	0.84

Effect of potentially dilutive common shares:				58,203

Diluted EPS:

Net income attributable to Tompkins Financial Corporation plus assumed conversions	$	9,033		10,876,421	$	0.83

The effect of dilutive securities calculation for the three-month period ended June 30, 2010, excludes stock options, stock appreciation rights and restricted stock awards covering an aggregate of 690,895 shares of common stock because they are anti-dilutive.

Three months ended June 30, 2009 (in thousands except share and per share data)	Net Income (Numerator)		Weighted Average Shares (Denominator)		Per Share Amount
Basic EPS:

Net income attributable to Tompkins Financial Corporation	$	7,447		10,679,719	$	0.70

Effect of potentially dilutive common shares:				84,075

Diluted EPS:

Net income attributable to Tompkins Financial Corporation plus assumed conversions	$	7,447		10,763,794	$	0.69

The effect of dilutive securities calculation for the three-month period ended June 30, 2009, excludes stock options, stock appreciation rights and restricted stock awards covering an aggregate of 508,177 shares of common stock because they are anti-dilutive.

Six months ended June 30, 2010 (in thousands except share and per share data)	Net Income (Numerator)		Weighted Average Shares (Denominator)		Per Share Amount
Basic EPS:

Net income attributable to Tompkins Financial Corporation	$	17,449		10,764,576	$	1.62

Effect of potentially dilutive common shares:				55,320

Diluted EPS:

Net income attributable to Tompkins Financial Corporation plus assumed conversions	$	17,449		10,819,896	$	1.61

The effect of dilutive securities calculation for the six-month period ended June 30, 2010, excludes stock options, stock appreciation rights and restricted stock awards covering an aggregate of 714,530 shares of common stock because they are anti-dilutive.

Six months ended June 30, 2009 (in thousands except share and per share data)	Net Income (Numerator)		Weighted Average Shares (Denominator)		Per Share Amount
Basic EPS:

Net income attributable to Tompkins Financial Corporation	$	15,157		10,675,728	$	1.42

Effect of potentially dilutive common shares:				84,643

Diluted EPS:

Net income attributable to Tompkins Financial Corporation plus assumed conversions	$	15,157		10,760,371	$	1.41

The effect of dilutive securities calculation for the six-month period ended June 30, 2009, excludes stock options, stock appreciation rights and restricted stock awards covering an aggregate of 508,485 shares of common stock because they are anti-dilutive.

6. Comprehensive Income

	Three Months Ended						Six Months Ended
(in thousands)	06/30/2010			06/30/2009			06/30/2010			06/30/2009
Net income attributable to noncontrolling interests and Tompkins Financial Corporation	$	9,066		$	7,480		$	17,514		$	15,222

Other comprehensive income (loss), net of tax:

Unrealized gain (loss) on available-for-sale securities:
Net unrealized holding gain (loss) on available-for-sale securities arising during the period.		7,056			(3,256	)		8,598			(400	)
Memo: Pre-tax net unrealized holding gain (loss)		11,759			(5,427	)		14,328			(667	)

Reclassification adjustment for net realized gain on sale of available-for-sale securities		(35	)		(12	)		(106	)		(16	)
Memo: Pre-tax net realized gain		(58	)		(19	)		(177	)		(26	)

Employee benefit plans:
Amortization of actuarial losses, prior service cost, and transition obligation		295			263			560			501
Memo: Pre-tax amounts		494			440			935			835

Other comprehensive income (loss)		7,316			(3,005	)		9,052			85

Subtotal comprehensive income attributable to noncontrolling interests and Tompkins Financial Corporation		16,382			4,475			26,566			15,307
Less: Other comprehensive income attributable to noncontrolling interests

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TOMPKINS FINANCIAL CORP - FORM 10-Q - August 9, 2010