Ahead Of The Curve
The leadership of Tompkins Financial, which posted large gains in 2008, while other financial institutions were being leveled by the sagging economy. From left, Frank Fetsko, Tompkins Financial executive vice president and chief financial officer; Steve Romaine, Tompkins Financial president and chief executive officer; Jim Byrnes, chairman of Tompkins Financial and Tompkins Trust Company; and Greg Hartz, Tompkins Trust Company president and chief executive officer, take a moment to reflect on their successes in 2008. (Photo by Rachel Philipson)

As Wall Street was crumbling around itself this year, the news was dominated by headlines of major banking institutions failing and asking for bailouts.

What didn't make the front page was how Tompkins Financial was quietly steeling itself against the economic disaster, on its way to another successful year. In fact, despite a 2 percent drop in fourth-quarter profits (from the fourth quarter of 2007), the company reported an overall increase in profits for 2008 totaling $29.8 million. The company's stock shares rose by 49 percent in 2008 while major U.S. stocks were collapsing by 33 percent and the Dow Jones industrial average was hit for its worst plummet in 77 years.

"We've had a pretty consistent perspective," said Steve Romaine, Tompkins Financial Corporation president and chief executive officer, when asked why the financial holding company was so successful amidst the economic turmoil of 2008. "I think it's because of all the things we did prior to 2008.

"Everyone has a pretty short-term perspective, and we made efforts in prior years to prepare for a difficult economy," he added. "That served us well in 2008."

What is Tompkins Financial?

Tompkins Financial Corporation is a financial holding company, formerly known as Tompkins Trustco Inc. Under its umbrella are Tompkins Trust Company, Mahopac National Bank and The Bank of Castile, which together operate 45 offices throughout New York. Also part of Tompkins Financial's holdings are Tompkins Investment Services, AM&M Financial Services Inc. and Tompkins Insurance Agencies Inc.

Romaine said the corporation has worked to build a structure that is community oriented, which is why they conducted focus groups to determine what people wanted out of their banking experience.

"What we heard was they wanted local people they could trust, with a greater breadth of services for their financial needs," he said. "So, we built a company that does banking, and can handle insurance and financial planning."

The other significant thing Tompkins Financial did, in 2007, was to look at its efficiency and see how it matched up with its motto, "Built to Last." Romaine said the corporation was prepared to grow and knew it was coming, so it looked at how it could be more efficient, saving money in the process.

"We realized we needed to be well standardized," he said. "People know that if they walk into one of our (Tompkins Trust) branches around here, they will get the same service in the same setting. But what if they walk into one of our branches (one of the Castile or Mahopac branches) hours away from here?

"We want that to be the same experience," Romaine added.

Looking out for customers is one part of the mission, but Tompkins Financial also is beholden to shareholders in the publicly-traded corporation.

"We also wanted to make sure we were efficient for our shareholders," Romaine said. "The last advantage that our planning brought us was we were able to look at other companies that hadn't followed the strategy we followed, and had decided it was time to sell.

"If you were looking to get into financial services today, it would be too late because of the start-up costs," he added. "Having gotten out ahead of it, we were able to grow when others were having difficulty."

Tompkins Financial even added banks - Sleepy Hollow Bancorp. - in 2008, adding it to the Mahopac National Bank chain in the Hudson Valley region of the state. Because of its work on making things more efficient, Romaine said they were able to close the acquisition one day and open back up the next as a fully-integrated branch.

Tompkins Financial's banks focus on being community institutions, a much different beast than the major banks - the ones that are struggling. That focus, with the services provided by the insurance and investment arms of the company, is a good marriage for its customers.

"A Tompkins Trust Company customer can enjoy the personal, local touch you would expect from a community bank with local decision making focused in the Central New York market," Greg Hartz, Tompkins Trust Company president and chief executive officer, said. "What we've done by adding the depth and breadth (of the insurance and investment services) is give our customers access to a much broader range of services.

"We can do it better, and can now invest in the support services that make our product better," he added.

Success during economic stress

Jim Byrnes has seen the changing face of Tompkins Trust and its parent company, having joined the bank as president in 1989, with his duties expanding to chairman in 1992. He has since retired as president, but serves as chairman of both Tompkins Financial and Tompkins Trust Company. Byrnes said the performance was partly due to the company's success and partly due to others' poor performances, but the quality of Tompkins Financial through the years has led it to greater limelight.

"Part of it is the contrast where everything else seemed to be sliding," he said, "so investors were looking around for the relatively few good companies that continue to perform so well. I think that was a factor.

"In the long run, earning performance and quality of the company drive stock prices," Byrnes added. "Not only did we do fairly well last year, but we have a long track record of success, which, I think, has given us a good base in our market area. We are a relatively small company, but the people in our market areas are familiar with it, comfortable with it, and we're starting to get some national recognition of our performance."

Frank Fetsko, Tompkins Financial executive vice president and chief financial officer, said the success is derived directly from the organizations values - making sure its business is good for shareholders, clients, customers and the community.

"When we define our strategy, it's always surrounded by those values," he said. We look at a long-term focus rather than trying to focus on quarter-by-quarter results.

"By staying focused on the right things, we've been able to succeed over a longer period of time, because we're not just trying to hit a home run in a particular quarter," Fetsko added. "And, as a result of following those values, we didn't get involved in a lot of the riskier type of investments, such as subprime loans, as some others did trying to chase a short-term result."

Not that the attractive short-term gainers weren't inviting, it's just that Tompkins Financial didn't bite.

"We looked at them and decided they weren't the type of things that has kept us producing over the long term," Fetsko said. "We look at types of things we can do that will succeed over the long term.

"We also want to be a responsible lender, and give people loans that have terms they should be able to repay and that will help us succeed over the long term," he added. "I feel like it's worked out pretty well for us so far."

Things are even going so well, Tompkins Financial was one of 20 banking institutions across the country - many of them also community-banking organizations - to decline to participate in the government's bank bailout. Tompkins Financial was slated to receive $15 million under the program, strange for a corporation that made money in 2008.

Byrnes said the potential strings - and not needing the handout - fueled the company's decision to decline the federal funds.

"First of all, we didn't need it because we are in sound condition without it," he said. "The only reason to accept it would be to beef up capital ratios that would give more flexibility for the future and we felt there would be other opportunities to do that.

"We also did not want to have the federal government as our partner and we had no idea what kind of additional red tape that would ensnarl us in," Byrnes added.

Behind the change

Byrnes is the main reason that Tompkins Financial is in the shape it is today, stemming from his time as its president and chief executive officer.

"Jim had the foresight, back in the mid-1990s, to form the corporate holding company, which, at the time, only held Tompkins County Trust Company, as it was called then," Romaine said. "It was the beginning of its flexibility and the thought of what could be brought to other acquisitions.

"If not for those underpinnings, the thought of integrating the banks of Castile and Mahopac, the acquisition of the other pieces, we wouldn't be where we are today," he added. "Jim really did have that vision to put that together."

Hartz also credited Byrnes for the stable foundation the holding company is based upon.

"He had the vision in the mid-90s where this industry was going and the need to diversify geographically," he said. "This company, financially and from a performance aspect, has been strong forever; certainly in recent history it's been a strong company.

"In order to accomplish that, Jim had a nice vision to put the structure in place for the next evolution," Hartz added.

The benefit of growth

Jerry Klein is president and chief executive officer of Mahopac National Bank, one of the two bank chains not in Central New York operated by Tompkins Financial. He said it's an advantage for his bank to be part of the larger corporation because of the additional resources it can provide to its customers.

"We have the ability to write much larger loans than we might normally do because we have more capital to work with," he said. "Being down in the Hudson Valley, where we have tremendous opportunity to attract businesses, we might not have been able to do more something in the $7 million range.

"The advantage of being affiliated, we can write loans up to the $25 million range," Klein added. "It gives us a significant advantage in real estate loan and larger commercial loan opportunities that we couldn't attract otherwise."

When Mahopac joined the Tompkins Financial fold, it didn't lose its identity, although the two brands did integrate a bit. Klein said his operations are known as Mahopac National Bank, a Tompkins Community Bank.

"Every time you see Mahopac National Bank, you do see Tompkins, along with the oak leaves and acorn," he said. "Our brand is Mahopac National Bank, but I believe people see us as having the strength and stability of a much larger organization behind us.

"I think it's been a win-win in our brand identity," Klein added.

Adding insurance services to the other financial entities - banks and investment services - may not seem like a typical move, but it's becoming more common.

That's according to David Boyce, president and chief executive officer of Tompkins Insurance Agencies Inc., who said the trend has been growing over the last five years.

"What led to that was the bank could see the net interest margin was going to be compressed over time," he said. "There really is a pretty good relationship between bank and insurance company."

Boyce stressed that the insurance branch is not owned by the banking branch, rather that both are under the financial holding company's purview, but noted the connection is a natural one.

"It allows customers a one-stop shop, and also allows us to be efficient and effective," he said. "If someone is getting a mortgage on a new home, or a new car or even a business loan, the referral is really easy (to the insurance company).

"The part that makes it easy for us (the insurance company) is we don't have to develop a new relationship with a customer," Boyce added. "Their relationship with the bank opens the door for us to do what we do."

Aside from the fact the insurance company is run by a corporation that also owns banking and investment services institutions, Tompkins Insurance is like any other insurance agency.

"When you look in the Yellow Pages, we are listed as an insurance agency," Boyce said. "As much as we want to be integrated, we are an insurance agency, not a bank.

"We are similar to any other independent insurance agency," he added. "We represent 27 different insurance carriers and they look at us like any other agency, whether we're bank owned or not."

The difference comes when you look at the resources available to the insurance company as a result of being owned by Tompkins Financial.

"It has allowed us to invest in our people in a way most agencies can't afford to," Boyce said, adding the agency totaled 5,500-plus training hours in 2008. "We have around 100 people working for us, so that's about 53 hours of training per person.

"Most companies can't or aren't willing to invest like that," he added, "but we have the facilities and trainers to do that, and we want to make sure we have some of the most knowledgeable people in the industry."

A bright spot among the gloom

One thing that exudes from all of the Tompkins Financial players is a sense of pride in having a good model of business, one that allowed it to not only keep from struggling along with others, but flourish in a difficult economic climate. They all noted that while the banking industry is certainly facing troubles, not all corporations are having problems, especially community banks.

"One of the things that concerns me the most is the public is hearing nothing but the train wrecks these days," said Romaine. "They certainly exist, but we are getting very little information on businesses and the parts of Main Street that are having success.

"We are still here, working side-by-side with people here to make the community the best, but news like that doesn't seem to be making it to the forefront," he added. "I'm concerned people will be making decisions that are unfounded based on the bad news. I'm the first one to admit there are major problems right now, but not everyone is having problems."

Slow and steady growth doesn't make many headlines during boom times, Fetsko said, because the excitement surrounds companies that are booming along with them. It's when there is a shakeup that the responsible ones pop up on the radar.

"It doesn't get noticed in times where the economy is really humming and everybody is doing well," Fetsko said, "but when times are tough, everybody starts to notice. It does validate our business model.

"There may have been times when, in the not-too-distant past, we've looked at companies getting attention in the market, favorable attention, and it's kind of hard to tell a message that is not as exciting," he added. "But, we stuck to what we felt was the right model, said it was the long term that matters - not the short term - and this environment validates that model."

What does the future hold?

Romaine said Tompkins Financial is poised for more growth, keeping in line with its focus and mission.

"We have done a very good job of delivering the model we have today and we have huge potential to do more of that integration," he said. "We can sell more banking services to insurance clients and more insurance services to banking clients. We won't be able to reach out to all of them, but I truly believe there is significant untapped potential."

The corporation also is ready to acquire more institutions - if they fit with the current businesses.

"One thing important to us is we've established a filter for what we want to be," Romaine said. "If a company doesn't meet those filters then we won't move forward.

"If one doesn't, there are plenty that do," he added. "There are companies that acquisitions are only growth oriented, ours are done with the right fit."

Any changes within Tompkins Financial in the future won't be classified in the "wild" category, Fetsko said, but it may look at other business opportunities.

"Whether it be expanding banking through new branches, new acquisitions or new products within the banking model, adding new options to the services available now or expanding geographically either by growing organically or acquisition," he said, "there will probably be some opportunities to do all of those things.

"Stronger companies are going to be in a better position to benefit from the opportunities right now," Fetsko added, "and I feel we're in a good position to look for those opportunities."

Fetsko said it's tough to tell where the market is headed, but is hopeful the U.S. is close to a valley and headed back.

"There are so many moving parts to economy, that's why it's really difficult to tell," he said. "Whether we're already there (at the valley) yet or still a little ways to go, certainly the news in the early part of 2009 hasn't been very favorable, suggesting perhaps there is a little more to go in terms of job loss."

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