Annual Report of Employee Stock Plans (11-k)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 11-K

FOR ANNUAL REPORTS OF EMPLOYEE STOCK

PURCHASE, SAVINGS AND SIMILAR PLANS

PURSUANT TO SECTION 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

☒  ANNUAL REPORT TO SECTION 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Fiscal year ended: December 31, 2016

☐  TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number: 1-12709

TOMPKINS FINANCIAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN

---

(Full title of plan)

TOMPKINS FINANCIAL CORPORATION

(Name of issuer of the securities held pursuant to the plan)

P.O. Box 460, The Commons

Ithaca, New York 14851

[phone]

(Address of principal executive offices)

 

TOMPKINS FINANCIAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

ITHACA, NEW YORK

AUDITED FINANCIAL STATEMENTS

SUPPLEMENTAL SCHEDULES

AND

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

DECEMBER 31, 2016 AND 2015

 

 

CONTENTS

AUDITED FINANCIAL STATEMENTS							PAGE
	Report of Independent Registered Public Accounting Firm						3-4
	Statements of Net Assets Available for Benefits						5
	Statements of Changes in Net Assets Available for Benefits						6
	Notes to Financial Statements						7-12
SUPPLEMENTAL SCHEDULES
	Form 5500 - Schedule H - Part IV:
		Item 4i - Schedule of Assets Held for Investment Purposes
			at End of Year - December 31, 2016				14
		Item 4j - Schedule of Reportable Transactions -
			Year Ended December 31, 2016				15

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

Audit Committee

Tompkins Financial Corporation

  Employee Stock Ownership Plan

We have audited the accompanying statements of net assets available for benefits of the Tompkins Financial Corporation Employee Stock Ownership Plan as of December 31, 2016 and 2015, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2016 and 2015, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

 

- 3 -

The supplementary information in the accompanying schedules of Schedule of Assets Held for Investment Purposes At End of Year – December 31, 2016 and Schedule of Reportable Transactions – Year Ended December 31, 2016 have been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental information is presented for the purpose of additional analysis and is not a required part of the financial statements but includes supplemental information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules are the responsibility of the Plan’s management. Our audit procedures included determining whether the supplemental schedules reconcile to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedules. In forming our opinion on the supplemental schedules, we evaluated whether the supplemental schedules, including their form and content, are presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental schedules are fairly stated, in all material respects, in relation to the financial statements as a whole.

Elmira, New York

June 27, 2017

 

 

 

 

 

 

 

 

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TOMPKINS FINANCIAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

 

		December 31,
		2016				2015
ASSETS
Investments, at fair value:
Tompkins Financial Corporation common stock		$	56,814,600			$	33,135,003
Investments, at contract value:
Guaranteed Income Fund			—				142
TOTAL INVESTMENTS			56,814,600				33,135,145
Employer contribution receivable			2,295,435				1,937,911
NET ASSETS AVAILABLE
FOR BENEFITS		$	59,110,035			$	35,073,056

 

The accompanying notes are an integral part of the financial statements.

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TOMPKINS FINANCIAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

 

		Year ended December 31,
		2016				2015
ADDITIONS
Additions to net assets attributed to:
Investment income:
Interest and dividends		$	1,060,917			$	1,005,154
Net appreciation in fair value of investments			23,059,913				515,838
			24,120,830				1,520,992
Contributions - employer			2,294,319				1,938,192
TOTAL ADDITIONS			26,415,149				3,459,184
DEDUCTIONS
Deductions from net assets attributed to:
Benefits paid to participants			2,302,618				1,566,204
TOTAL DEDUCTIONS			2,302,618				1,566,204
NET INCREASE			24,112,531				1,892,980
Net assets available for benefits
at beginning of year			35,073,056				33,387,185
Transfer to Tompkins Financial Corporation Investment
and Stock Ownership Plan			(75,552	)			(207,109	)
NET ASSETS AVAILABLE FOR BENEFITS
AT END OF YEAR		$	59,110,035			$	35,073,056

 

The accompanying notes are an integral part of the financial statements.

 

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TOMPKINS FINANCIAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

NOTE A: DESCRIPTION OF PLAN

The following description of the Tompkins Financial Corporation Employee Stock Ownership Plan (the “Plan”) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions.

General

The Plan is an employee stock ownership plan covering eligible employees who have met certain age and service requirements. The Plan is administered by the Executive, Compensation/Personnel Committee appointed by Tompkins Financial Corporation’s Board of Directors, and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). All investments of the Plan are non-participant directed.

Eligibility

An employee shall become eligible for participation in the Plan on the first day of the month coinciding with completing one year of credited service and attaining the age of twenty-one. Leased employees, employees covered under a collective bargaining agreement and “On-Call” employees are not eligible to participate.

Vesting

Participants will become vested in all contributions and earnings over a three-year period.

Contributions

Tompkins Financial Corporation shall contribute to the Plan a discretionary amount, which shall not exceed 5% of participant compensation. The Executive, Compensation/Personnel Committee approved a 4.0% and 3.5% discretionary contribution to the Plan for the years ended December 31, 2016 and 2015, respectively. These contributions are used by the Employee Stock Ownership Plan to acquire company common stock. These common stock shares are allocated annually to participant accounts. The Plan sponsor has the right to discontinue such discretionary contributions at any time.

Diversification and transfers

Diversification is offered to participants close to retirement so that they may have the opportunity to move part of the value of their investment in the Plan sponsor stock into investments which are more diversified. Participants who are at least age 55 with at least 10 years of participation in the Plan may elect to diversify a portion of their account. Diversification is offered to each eligible participant over multiple years. In each of the first five years, a participant may diversify up to 25 percent of the number of post-1986 shares allocated to his or her account, less any shares previously diversified. After the fifth year, the percentage changes to 50 percent. The funds elected to be diversified are transferred to the Tompkins Financial Corporation Investment and Stock Ownership Plan (“ISOP”) and invested in funds as chosen by the participant. During the years ended December 31, 2016 and 2015, the Plan transferred $75,552 and $207,109 into the ISOP, respectively.

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TOMPKINS FINANCIAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

NOTES TO FINANCIAL STATEMENTS, Cont’d

DECEMBER 31, 2016 AND 2015

NOTE A: DESCRIPTION OF PLAN , Cont’d

Participants’ accounts

Each participant’s account is credited with an allocation of the Tompkins Financial Corporation’s discretionary and non-elective contributions and an allocation of plan earnings. Allocations of company contributions are based upon the participant’s compensation and the allocations of plan earnings are based upon participant account balances. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account. Forfeitures of non-vested account balances are allocated to participants’ accounts as company contributions.

Payment of benefits

Upon termination of service, the participant’s account is either maintained in the Plan, transferred to an individual retirement account in the participant’s name, directly rolled over into a qualified retirement plan or paid to the participant in a lump sum.

Forfeitures

Plan forfeitures are allocated to each participant's account based upon the relation of the participant's eligible compensation to total eligible compensation for the Plan year. Forfeited non-vested accounts to be allocated to participant accounts in future years as of December 31, 2016 and 2015, were $36,606 and $87,800, respectively.

NOTE B: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of accounting

The financial statements of the Plan are prepared under the accrual method of accounting.

Investment valuation and income recognition

The Plan’s investments are stated at fair value (except for fully benefit-responsive investment contracts, which are reported at contract value). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Interest income is accrued when earned. Dividends are recorded on the ex-dividend date.

Administrative expenses

The Plan’s expenses are paid either by the Plan or the Plan sponsor, as provided by the plan document. Expenses that are paid directly by the Plan sponsor are excluded from these financial statements. In addition, certain investment related expenses are included in net appreciation of fair value of investments presented in the accompanying statement of changes in net assets available for benefits.

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TOMPKINS FINANCIAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

NOTES TO FINANCIAL STATEMENTS, Cont’d

DECEMBER 31, 2016 AND 2015

NOTE B: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cont’d

Use of estimates in the preparation of financial statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Plan’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates and assumptions.

Payment of benefits

Benefits are recorded when paid.

New accounting pronouncements

In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) . ASU 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share (NAV) practical expedient. It also eliminates certain disclosures for all investments that are eligible to be measured at fair value using the NAV practical expedient. ASU 2015-07 requires retrospective application and is effective for fiscal years beginning after December 15, 2015. In 2016, the Plan adopted the provisions of this new standard. Accordingly, the standard was retrospectively applied.

In July 2015, the FASB issued ASU No. 2015-12, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health And Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient . Part I eliminates the requirements to measure the fair value of fully benefit-responsive investment contracts (FBRICs) and provide certain disclosures. Part II eliminates the requirements to disclose individual investments that represent 5 percent or more of net assets available for benefits and the net appreciation or depreciation in fair value of investments by general type. Part II also simplifies the level of disaggregation of investments that are measured using fair value. Plans will continue to disaggregate investments that are measured using fair value by general type; however, plans are no longer required to also disaggregate investments by nature, characteristics and risks. Further, the disclosure of information about fair value measurements shall be provided by general type of plan asset. Part III is not applicable to the Plan. ASU 2015-12 requires retrospective application and is effective for fiscal years beginning after December 15, 2015. In 2016, the Plan adopted the provisions of this new standard. Accordingly, the standard was retrospectively applied.

Subsequent events

The Plan has evaluated subsequent events and determined no significant subsequent events have occurred requiring adjustments to the financial statements or disclosures.

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TOMPKINS FINANCIAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

NOTES TO FINANCIAL STATEMENTS, Cont’d

DECEMBER 31, 2016 AND 2015

NOTE C: FAIR VALUE MEASUREMENTS

Accounting principles generally accepted in the United States of America provides a framework for measuring fair value. That framework provides 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). The three levels of the fair value hierarchy are described below:

Level 1

Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2

Inputs to the valuation methodology include:

-        Quoted prices for similar assets or liabilities in active markets;

-        Quoted prices for identical or similar assets or liabilities in inactive markets;

-        Inputs other than quoted prices that are observable for the asset and liability;

-

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Following is a description of the valuation methodology used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2016 and 2015.

Tompkins Financial Corporation Common Stock : Valued at the closing price reported on the active market on which the stock is traded.

The preceding method described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

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TOMPKINS FINANCIAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

NOTES TO FINANCIAL STATEMENTS, Cont’d

DECEMBER 31, 2016 AND 2015

NOTE C: FAIR VALUE MEASUREMENTS , Cont’d

The following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2016 and 2015:

 

		Level 1				Level 2				Level 3				Total
December 31, 2016
Tompkins Financial Corporation
common stock		$	56,814,600			$	—			$	—			$	56,814,600
		$	56,814,600			$	—			$	—			$	56,814,600
December 31, 2015
Tompkins Financial Corporation
common stock		$	33,135,003			$	—			$	—			$	33,135,003
		$	33,135,003			$	—			$	—			$	33,135,003

 

NOTE D: GUARANTEED INCOME FUND

The Plan maintains a fully benefit-responsive investment contract, the guaranteed income fund, with Prudential Retirement Insurance and Annuity Company. Because the contract is fully benefit-responsive, contract value is the relevant measurement attribute for that portion of the net assets available for benefits attributable to the investment contract. The contract is presented on the face of the statements of net assets available for benefits at contract value, which approximates fair value.

 

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TOMPKINS FINANCIAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

NOTES TO FINANCIAL STATEMENTS, Cont’d

DECEMBER 31, 2016 AND 2015

NOTE E: TAX STATUS

The Internal Revenue Service has determined and informed the Company by a letter dated September 13, 2013, that the Plan and related trust are designed in accordance with the applicable sections of the Internal Revenue Code (IRC). The Plan has been amended since receiving the determination letter. However, the Plan administrator and the Plan’s legal counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of IRC.

Accounting principles generally accepted in the United States of America require Plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The Plan Administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2016 and 2015, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements.

NOTE F: PLAN TERMINATION

Although it has not expressed any intent to do so, the Plan sponsor has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants have a fully vested interest in their accounts and their accounts will be paid to them as provided by the plan document.

NOTE G: TRANSACTIONS WITH PARTIES-IN-INTEREST

The Plan invests in shares of the Guaranteed Income Fund managed by an affiliate of Prudential Retirement. Prudential Retirement acts as trustee for only those investments as defined by the Plan. Transactions in this investment qualify as party-in-interest transactions which are exempt from the prohibited transactions rules.

Tompkins Financial Corporation is the Plan sponsor. The Plan invests primarily in Tompkins Financial Corporation common stock.

NOTE H: RISKS AND UNCERTAINTIES

The Plan invests primarily in Tompkins Financial Corporation common stock. These investment securities are exposed to market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the accompanying statements of net assets available for benefits.

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TOMPKINS FINANCIAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

SUPPLEMENTAL SCHEDULES

 

 

 

TOMPKINS FINANCIAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

EIN: 15-0470650

PLAN #: 003

FORM 5500 - SCHEDULE H - PART IV

ITEM 4i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES

AT END OF YEAR - DECEMBER 31, 2016

 

(a)

(b)

(c)

(d)

(e)

Description of investment,

Party

including maturity date, rate of

in

Identity of issue, borrower,

interest, collateral, par or

Current

interest

lessor or similar party

maturity value

Cost

value

*

Tompkins Financial

600,958 Shares of

Corporation

Common Stock

$

21,826,339

$

56,814,600

TOTAL INVESTMENTS

$

21,826,339

$

56,814,600

 

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TOMPKINS FINANCIAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

EIN: 15-0470650

PLAN #: 003

FORM 5500 - SCHEDULE H - PART IV

ITEM 4j - SCHEDULE OF REPORTABLE TRANSACTIONS

YEAR ENDED DECEMBER 31, 2016

Reportable transactions are transactions or a series of transactions in excess of 5% of the value of the Plan assets as of January 1, 2016 as defined in Section 2520.103-6 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under ERISA:

 

(a)		(b)		(c)				(d)				(g)				(h)				(i)
																Current
																value of
		Description of asset (including														asset on
		interest rate and maturity		Purchase				Selling				Cost of				transaction				Net gain
Identity of party involved		in case of a loan)		price				price				asset				date				or (loss)
Individual transactions
Tompkins Financial Corporation		Tompkins Financial Corporation		$	1,920,414			$	—			$	1,920,414			$	1,920,414			$	—
Series of transactions
Tompkins Financial Corporation		Series of 79 Sales		$	—			$	2,329,777			$	1,234,712			$	2,329,777			$	1,095,065
Tompkins Financial Corporation		Series of 10 Purchases		$	2,949,461			$	—			$	2,949,461			$	2,949,461			$	—
Note:  Columns (e) and (f) are not applicable.

 

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

TOMPKINS FINANCIAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN

	Administrator:   TOMPKINS TRUST COMPANY
Date:  June 27, 2017	By:	/s/ Francis M. Fetsko
		Francis M. Fetsko
		Executive Vice President
		Chief Financial Officer

 

 

 

Exhibit Number		Description		Page
23.1		Consent of Mengel, Metzger, Barr & Co. LLP