{"url_path":"/sec/tmp/10-k/2026/item-7a","section_key":"item-7a","section_title":"Item 7A Quantitative and Qualitative Disclosures About Market Risk","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-02-26","source_url":"https://www.sec.gov/Archives/edgar/data/1005817/0001005817-26-000027-index.html","accession_number":"0001005817-26-000027","cik":"0001005817","ticker":"TMP","issuer_name":"TOMPKINS FINANCIAL CORP","edgar_url":"https://www.sec.gov/Archives/edgar/data/1005817/0001005817-26-000027-index.html","primary_entity_key":"0001005817","primary_entity_name":"TOMPKINS FINANCIAL CORP"},"word_count":960,"has_tables":true,"body_markdown":"Item 7A. Quantitative and Qualitative Disclosures About Market Risk\n\nMarket Risk\n\nInterest 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 Board-approved levels. The Committee also considers strategies to manage this exposure and incorporates these strategies into the investment and funding decisions of the Company. The Company uses derivatives to manage various risks and to accommodate the business requirements of its customers. Additional information on derivatives is available in \"Note 23 - Derivatives and Hedging Activities\" in the Notes to Consolidated Financial Statements in Part II, \"Item 8. Financial Statements and Supplementary Data\" of this Report on Form 10-K.\n\nThe Company’s Board of Directors has set a policy that interest rate risk exposure will remain within a range whereby net interest income will not decline by more than 10% in one year as a result of a 100 basis point parallel change in rates. Based upon the most recent simulation analysis performed as of November 30, 2025, 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 1.3%, while a 200 basis point parallel decline in interest rates over a one-year period would result in a one year increase in net interest income of 0.3% from the base case. This simulation assumes no balance sheet growth, no changes in balance sheet mix, deposit rates move in a manner that reflects the historical relationship between deposit rate movement and changes in Federal funds rate, and no management action to address balance sheet mismatches.\n\nThe decrease in net interest income in the rising rate scenario is a result of the balance sheet showing a more liability sensitive position over a one year time horizon. As such, in a rising rate scenario, in the short-term, net interest income would be expected to trend slightly below the base assumption, as upward adjustments to rate sensitive deposits and short-term funding outpace increases to asset yields which are concentrated in intermediate to longer-term products. As intermediate and longer-term assets continue to reprice/adjust into higher rate environment and funding costs stabilize, the simulation shows net interest income would be expected to trend upwards.\n\nThe 200 basis point decline scenario increases net income slightly in the first year as a result of the Company's assets repricing downward to a lesser degree than the rates on the Company's interest-bearing liabilities, mainly deposits and overnight borrowings. The model assumes that prepayments accelerate in the down interest rate environment resulting in additional pressure on asset yields as proceeds are reinvested at lower rates.\n\nThe most recent simulation of a base case scenario, which in addition to the above assumptions, also assumes interest rates remain unchanged from the date of the simulation, reflects a net interest margin that is increasing over the next 12 to 18 months.\n\nAlthough the simulation model is useful in identifying potential exposure to interest rate movements, actual results may differ from those modeled as the repricing, maturity, balance sheet mix, and prepayment characteristics of financial instruments may change to a different degree than modeled. In addition, the model does not reflect actions that management may employ to manage the Company's 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.\n\nIn addition to the simulation analysis, management uses an interest rate gap measure. Table 9-Interest Rate Risk Analysis below is a Condensed Static Gap Report, which illustrates the anticipated repricing intervals of assets and liabilities as of December 31, 2025. The Company’s one-year interest rate gap was a negative $106.9 million or 1.23% of total assets at December 31, 2025, compared with a negative $565.8 million or 6.98% of total assets at December 31, 2024. The change from year-end 2024 to year-end 2025 is mainly due to commercial and commercial real estate loan growth in 2025 which generally shifted the overall loan portfolio towards earlier repricing relative to the loan portfolio at year-end 2024. A negative gap position exists when the amount of interest-bearing liabilities maturing or repricing exceeds the amount of interest-earning assets maturing or repricing within a particular time period. This analysis suggests that the Company’s net interest income has low to moderate risk in an increasing 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.\n\n51\n\n[Table of Contents](#i02a691969dd8487e9cf0e5fe6bed79ba_7)[    ](#i02a691969dd8487e9cf0e5fe6bed79ba_7)\n\nTable 9 - Interest Rate Risk Analysis\n\nDecember 31, 2025\n\n(In thousands)Total0-3 months3-6 months6-12 months12 months\n\nInterest-earning assets1\n$8,265,360 $1,993,629 $313,861 $722,144 $3,029,634 \n\nInterest-bearing liabilities5,700,810 2,347,004 428,559 360,937 3,136,500 \n\nNet gap position(353,375)(114,698)361,207 (106,866)\n\nNet gap position as a percentage of total assets(4.08)%(1.32)%4.17 %(1.23)%\n\n1Balances of available-for-sale debt securities are shown at amortized cost.\n\n52\n\n[Table of Contents](#i02a691969dd8487e9cf0e5fe6bed79ba_7)[    ](#i02a691969dd8487e9cf0e5fe6bed79ba_7)\n\n[This Page Intentionally Left Blank]\n\n \n\n53\n\n[Table of Contents](#i02a691969dd8487e9cf0e5fe6bed79ba_7)[    ](#i02a691969dd8487e9cf0e5fe6bed79ba_7)"}