Alerus Financial Corporation · NASDAQ:ALRS
Alerus Financial — Investor Presentation (January 2021)
37 slides from Alerus Financial's investor presentation, Jan 27, 2021
Slide 1: Investor Presentation January 2021
INVESTOR PRESENTATION JANUARY 2021 Alerus
Slide 2: Forward-Looking Statements
1 Forward-Looking Statements This presentation contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculat
Slide 3: COVID-19 Response
2 COVID-19 RESPONSE
Slide 4: COVID-19 response actions
3 .. Activated Business Continuity Planning team and Pandemic Policy; frequent meetings with key leadership teams .. Response guided by safety of employees and clients; being a good corporate citizen; and encouraging digital use .. Benefit of past crisis experience; 1997 historic Flood and Fire in G
Slide 5: Payment Deferrals, Maturity Extensions, and Payment Modifications
4 PAYMENT DEFERRALS, MATURITY EXTENSIONS, AND PAYMENT MODIFICATIONS COVID-19 RELIEF PROGRAMS December 31, 2020 Loan Group Number Of Loans Granted Deferral ($ in 000’s) Still on Initial Deferral ($ in 000’s) Second Deferral ($ in 000's) Returned to Normal ($ in 000’s) Consumer 174 $ 2,420 $ 125 $ 26
Slide 6: SBA Paycheck Protection Program (PPP)
5 Retail Trade 20% Professional, Scientific, and Technical Services 13% Construction 12% Manufacturing 10% Wholesale Trade 5% Health Care and Social Assistance 8% Other Services (except Public Administration) 5% Administrative and Support and Waste Management and Remediation Services 3% Transportati
Slide 7: Strong Capital and Sources of Liquidity
6 6.9% 7.1% 7.5% 11.1% 9.2% 8.2% 8.3% 8.9% 12.9% 13.2% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 2016 2017 2018 2019 2020 Tier 1 Leverage Tier 1 Capital 12.3% 12.2% 12.9% 16.7% 16.8% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 2016 2017 2018 2019 2020 STRONG CAPITAL AND SOURCES OF LIQUID
Slide 8: Asset Quality and Reserve Levels Overview
7 1.14% 1.05% 1.30% 1.39% 1.73% 0.00% 0.40% 0.80% 1.20% 1.60% 2.00% 2016 2017 2018 2019 2020 0.47% 0.30% 0.33% 0.33% 0.17% 0.00% 0.20% 0.40% 0.60% 0.80% 2016 2017 2018 2019 2020 ASSET QUALITY AND RESERVE LEVELS OVERVIEW NPAS / ASSETS (%) RESERVES / LOANS (%) RESERVES / NPLS (%) .. Solid asset qualit
Slide 9: Well Diversified Loan Portfolio by Outstanding Balances
8 BY OUTSTANDING BALANCES WELL DIVERSIFIED LOAN PORTFOLIO As of 12/31/2020. 1-4 Residential 1st 21% 1-4 Residential Construction 1% 1-4 Residential Jr Lien 2% HELOC 5% RE Loans to be Sold 6% C&I 18% PPP 13% Loans to Public Entities 0% Other Loans 0% Ag Production 2% Other CRE 12% Owner Occupied CRE
Slide 10: Well Diversified Loan Portfolio by Total Commitment
9 BY TOTAL COMMITMENT INCLUDING UNFUNDED COMMITMENT WELL DIVERSIFIED LOAN PORTFOLIO As of 12/31/2020. 1-4 Residential 1st 17% 1-4 Residential Construction 1% 1-4 Residential Jr Lien 1% HELOC 10% RE Loans to be Sold 5% C&I 25% PPP 10% Loans to Public Entities 0% Other Loans 0% Ag Production 2% Other
Slide 11: 2020 Highlights
10 2020 HIGHLIGHTS
Slide 12: Income statement and performance ratios
11 Net Interest Income $ 23,153 $ 21,765 $ 18,459 $ 83,846 $ 74,551 Provision for Loan Losses 1,400 3,500 1,797 10,900 7,312 Net Interest Income After Provision for Loan Losses 21,753 18,265 16,662 72,946 67,239 Noninterest Income 38,696 45,256 29,556 149,371 114,194 Noninterest Expense 47,125 40,21
Slide 13: Strong Core Funding Mix
12 STRONG CORE FUNDING MIX .. Commercial transaction accounts totaled $1.1 billion and increased 35.5% YTD. Consumer transaction accounts totaled $644.2 million and increased 20.2% .. Synergistic deposits, including HSA deposits and those sourced through retirement plans and participants, totaled $5
Slide 14: Net Interest Margin (NIM)
13 0.44% 0.65% 0.97% 0.51% 1.00% 1.83% 2.16% 0.45% 3.74% 3.84% 3.65% 3.22% 4.63% 4.81% 4.97% 4.35% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 2017 2018 2019 2020 NET INTEREST MARGIN (NIM) Source: Alerus Financial Corporation; Federal Reserve Note: Net interest margin (FTE) is a non-GAAP financial mea
Slide 15: NIM and Loan Floors
14 NIM AND LOAN FLOORS VARIABLE RATE FLOORS BY INDEX VARIABLE RATE FLOORS COMMENTS $ in Millions Balance % of Total Balance Cumulative % of Total Balance No Floors $ 310 42.4% 42.4% Floors Reached 311 42.5% 84.9% 0-50 bps to reach floor 103 14.1% 99.0% >50bps to reach floor 7 1.0% 100.0% Total $ 731
Slide 16: A Big Company Model with Small Company Execution
15 A BIG COMPANY MODEL WITH SMALL COMPANY EXECUTION OUR DIVERSE BUSINESS LINES Revenue data LTM as of 12/31/2020. TRUSTED ADVISOR BANKING WEALTH MANAGEMENT • Residential mortgage lending • Purchasing or refinancing • Residential construction lending • Home equity/second mortgages • Advisory services
Slide 17: Retirement and Benefits Overview
16 $29,366 $27,812 $31,905 $34,200 340,000 345,000 350,000 355,000 360,000 365,000 370,000 375,000 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 2017 2018 2019 2020 AUA/AUM Participants $20,413 $26,902 $28,404 $25,720 $62,390 $63,316 $63,811 $60,956 $0 $20,000 $40,000 $60,000 $80,000 201
Slide 18: Wealth Management Services
17 $6,370 $8,138 $8,314 $9,162 $14,010 $14,962 $15,502 $17,451 $0 $6,000 $12,000 $18,000 2017 2018 2019 2020 Net Income Revenue WEALTH MANAGEMENT SERVICES OVERVIEW OF SERVICES ASSETS UNDER ADMINISTRATION/MANAGEMENT PROFIT MARGIN REVENUE MIX 1 Net Income before Tax and Indirect Allocations. .. ADVISO
Slide 19: Mortgage Banking
18 $237.5 $213.5 $393.1 $462.0 $564.0 $23.8 $15.0 $38.6 $49.6 $43.2 $261.3 $228.5 $431.7 $511.6 $607.2 $0.0 $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 $700.0 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Sale Portfolio MORTGAGE BANKING OVERVIEW OF SERVICES MORTGAGE ORIGINATIONS GAIN ON SALE MARGIN ($000s)
Slide 20: Loan Portfolio and Credit Quality
19 LOAN PORTFOLIO AND CREDIT QUALITY
Slide 21: Summary by Industry Type: Commercial & Industrial
20 SUMMARY BY INDUSTRY TYPE TOTAL COMMITMENT COMMERCIAL & INDUSTRIAL1 1 – Commercial and industrial loans includes C & I, Loans to Public Entities, and Other Loans. It Excludes PPP and Ag Production loans “Other” includes to the following industries (1) Nonclassifiable establishments, (2) Management
Slide 22: Loans Secured by Real Estate
21 Serviced 46% 1-4 1st Non-Serviced 4% 1-4 Family Jr Liens 4% 1-4 Family Revolving 29% 1-4 Family Construction 3% Held for Sale 14% LOANS SECURED BY REAL ESTATE TOTAL COMMITMENT COMMERCIAL REAL ESTATE1 1 – Loans secured by commercial real estate include Multifamily loans, Ag land, Other CRE, Owner
Slide 23: Industries Directly Impacted by COVID-19
22 Impacted industries, 8% All Other Loans, 92% COMMERCIAL AND INDUSTRIAL AND COMMERCIAL REAL ESTATE INDUSTRIES DIRECTLY IMPACTED BY COVID-19 As of 12/31/2020. C&I Total Commitment ($ in 000's) % of Total Accommodation and Food Services $ 8,756 0.61% Arts, Entertainment, and Recreation 3,689 0.26% O
Slide 24: Line of Credit Utilization
23 LINE OF CREDIT UTILIZATION C&I AND HOME EQUITY LINES OF CREDIT 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 C&I Funded Unfunded
Slide 25: Changes in the ALLL by Portfolio Segment
24 CHANGES IN THE ALLL BY PORTFOLIO SEGMENT ALLOWANCE FOR LOAN LOSSES Year ended December 31, 2020 (dollars in thousands) Beginning Balance Provision for Loan Losses Loan Charge-offs Loan Recoveries Ending Balance Commercial Commercial and industrial $ 12,270 $ (2,168) $ (4,249) $ 4,352 $ 10,205 Rea
Slide 26: Allocation by Portfolio Segment
25 ALLOCATION BY PORTFOLIO SEGMENT ALLOWANCE FOR LOAN LOSSES December 31, 2020 December 31, 2019 (dollars in thousands) Allocated Allowance Percentage of loans to total loans Allocated Allowance Percentage of loans to total loans Commercial and industrial $ 10,205 35.1% $ 12,270 27.8% Real estate co
Slide 27: Allocation by Risk Segment
26 Risk Level Total Loans Unguaranteed Balance Reserve Amount Reserve / Unguaranteed Loans Reserve/Total Loans Pass $ 1,912,644 $ 1,649,499 $ 27,238 1.65% 1.42% Special Mention 21,388 15,006 639 4.26% 2.99% Substandard 36,813 32,832 3,786 11.53% 10.28% Total Loans Evaluated Collectively 1,970,845 1,
Slide 28: Appendix
27 APPENDIX
Slide 29: Company Profile
28 Retirement and Benefit Revenue 26.1% Wealth Management Revenue 7.5% Mortgage Revenue 26.4% Banking Fees 4.0% Net Interest Income 36.0% FOR THE TWELVE MONTHS ENDED DEC. 31, 2020 Noninterest income: $149.4 million Net interest income: $83.8 million $26.1 $29.4 $27.8 $31.9 $34.2 2016 2017 2018 2019
Slide 30: Franchise Footprint
29 FRANCHISE FOOTPRINT FULL-SERVICE BANKING OFFICES* Alerus offers banking, retirement and benefits, mortgage and wealth management services at all full-service banking offices .. Grand Forks, ND: 3 full-service banking offices .. Fargo, ND: 3 full-service banking offices .. Twin Cities, MN: 6 full-
Slide 31: One Alerus
30 ONE ALERUS REINVENTION OF PROCESSES We have aligned processes, policies, and procedures throughout all departments to enhance client experience and improve our Company's efficiency Our expectation is this initiative will continue to improve our scalability and operating costs TAILORED ADVICE We s
Slide 32: Skilled Advisors and Financial Guides
31 SKILLED ADVISORS AND FINANCIAL GUIDES .. Team is organized around consumer or business; focuses on holistic needs of clients; depth and breadth of Alerus service offering .. Proprietary Financial Fitness Playbook delivers consistency and augments Financial Workout technology .. Clients expect and
Slide 33: Growth strategy and client base
32 .. Diversified client base consists of 48,200 consumers, 10,400 businesses and over 373,100 employer-sponsored retirement plan participants .. Harness product synergies unavailable to traditional banking organizations .. Capitalize on strategic opportunities to grow in our existing markets or new
Slide 34: Officers and Directors
33 OFFICERS AND DIRECTORS OUR MOTIVATED, DEDICATED, AND ENERGETIC LEADERS KEEP US ON THE RIGHT PATH SENIOR EXECUTIVE TEAM BOARD OF DIRECTORS DAN COUGHLIN Since 2016 Former MD & Co-Head – Fin’l Services Inv. Banking, Raymond James; Former Chairman & CEO, Howe Barnes Hoefer & Arnett Chicago, IL MICHAE
Slide 35: Strong Growth Markets and Stable Core Funding
34 41.8% 30.6% 4.4% 23.2% North Dakota Minnesota Arizona National STRONG GROWTH MARKETS AND STABLE CORE FUNDING MARKET DISTRIBUTION DEPOSITS ($2,572) LOANS ($1,979)(1) ARB ASSETS UNDER ADMIN/MGMT. ($34,200) WM ASSETS UNDER ADMIN/MGMT. ($3,339) MORTGAGE ORIGINATIONS ($1,779) ($ IN MILLIONS) Data as o
Slide 36: Financial Highlights
35 FINANCIAL HIGHLIGHTS 1 Represents a non-GAAP financial measure. See “Non-GAAP Disclosure Reconciliation” in the Appendix to this presentation. 2 Excluding PPP loans, the following ratios were TCE/TA 10.19% NPLs/Loans 0.30%, NPAs/Assets 0.19%, Allowance/Loans 2.00%, and NCOs/Average Loans 0.03% ($
Slide 37: Non-GAAP Disclosure Reconciliation
36 NON-GAAP DISCLOSURE RECONCILIATION ($000s, except where otherwise noted ) Annual 2016 2017 2018 2019 2020 Tangible common equity to tangible assets Total common stockholders' equity $ 168,251 $ 179,594 $ 196,954 $ 285,728 $ 330,163 Less: Goodwill 27,329 27,329 27,329 27,329 30,201 Less: Other int
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