Alerus Financial Corporation · NASDAQ:ALRS
Alerus Financial — Q1 2024 Earnings Presentation
34 slides from Alerus Financial's earnings presentation, Apr 25, 2024
Slide 1: Investor Presentation 1Q 2024
INVESTOR PRESENTATION 1Q 2024 NASDAQ: ALRS
Slide 2: Disclaimers
DISCLAIMERS 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
Slide 3: Company Profile
COMPANY PROFILE Alerus is a commercial wealth bank and a national retirement plan provider DIVERSIFIED REVENUE(1) RETIREMENT AND BENEFITS Last Twelve Months Ended March 31, 2024 Retirement Benefits Retirement & Plan administration Health savings accounts Net Interest Income: Benefits Net Interes
Slide 4: Franchise Footprint
FRANCHISE FOOTPRINT FULL-SERVICE BANKING Grand Forks, ND: 4 offices Fargo, ND: 3 offices Twin Cities, MN: 6 offices Phoenix, AZ: 2 offices RETIREMENT AND BENEFITS SERVICES Offices in Minnesota, North Dakota, Michigan, and Colorado Retirement plan service clients in all 50 states Market D
Slide 5: Strategic Growth
STRATEGIC GROWTH To supplement our organic growth, we have executed 25 acquisitions throughout the history of our company including: 15 in Banking, 10 in Retirement and Benefits Rebranded to Expanded to Acquired Metro Alerus Arizona Market Phoenix Bank 1879 2007 2019 2000 2009 2022 Began as the Bank
Slide 6: Strategic Initiatives
STRATEGIC INITIATIVES One Alerus = Working Better Together to Grow Client ORGANIC GROWTH Oriented Collaborative leadership team focused on new client acquisition, retention, and deepening relationships with existing clients Reinvention Diversified Diversified business model focused on bringing v
Slide 7: Officers and Directors
OFFICERS AND DIRECTORS AL VILLALON KARIN TAYLOR Executive Vice President and Executive Vice President and Chief Financial Officer Chief Risk Officer and Operating Officer 2 years with Alerus 6 years with Alerus JIM COLLINS MISSY KENEY Executive Vice President and Executive Vice President and Chief B
Slide 8: First Quarter Highlights
FIRST QUARTER HIGHLIGHTS Office in Excelsior, Minnesota
Slide 9: 1Q 2024 Highlights
1Q 2024 HIGHLIGHTS Success is Never Final EPS: NII: NIM: Fee Income: EARNINGS $0.33 Adjusted (1) $22.2 million 2.44% Adjusted(2) $25.3 million $0.32 Reported +3.1% vs. 4Q23 +7 bps vs. 4Q23 53.3% of revenue in 1Q 2024 Loans: Deposits: L/D Ratio: AUA / AUM: BALANCE $2.8 billion $3.3 billion 85% $42.8
Slide 10: 1Q 2024 Results
1Q 2024 RESULTS Income Statement Three months ended March 31, December 31, March 31, 2024 2023 2023 (dollars and shares in thousands, except per share data) Net Interest Income $ 22,219 $ 21,552 $ 23,658 Provision for Credit Losses — 1,507 550 Net Interest Income After Provision for Credit Losses 22
Slide 11: Performance Ratios
PERFORMANCE RATIOS Adjusted Return on Average Adjusted Return on Average Tangible Book Value per Share(1) Assets(1)/(2) Tangible Common Equity(1)/(2) 13.16% $15.63 0.92% 10.07% $15.46 8.30% $14.50 0.65% 0.51% 1Q 2023 4Q 2023 1Q 2024 1Q 2023 4Q 2023 1Q 2024 1Q 2023 4Q 2023 1Q 2024 10 | 1. Represents
Slide 12: Key Revenue Items
KEY REVENUE ITEMS Net Interest Income Noninterest Income $ in thousands $ in thousands Retirement & Benefit Services Wealth Advisory Services (1)/(2) Banking Fees and Other $25,253 $25,434 $25,323 $23,658 $22,219 $4,177 $3,550 $21,552 $4,577 $5,940 $6,118 $5,194 $15,482 $15,317 $15,655 1Q 2023 4Q 20
Slide 13: Net Interest Income
NET INTEREST INCOME YIELDS AND RATES NII AND NIM(1) WALK $ in Thousands Earning Assets 5.64% 5.72% 5.10% 4.89% 5.05% 4.31% 2.43% 2.70% 2.48% 1Q 2023 4Q 2023 1Q 2024 Investment Loan Yield Earning Asset Securities Yield Yield Cost of Funds (2) 2.99% 3.26% 2.67% 2.91% 2.56% 2.27% 1.72% 1.71% NIM: 2.37%
Slide 14: Earning Assets
EARNING ASSETS MARCH 31, 2024 LOAN PORTFOLIO LOAN PORTFOLIO CHANGES $ in thousands 1.1% Chart As of As of As of Change Change Legend Category 3/31/2023 12/31/2023 3/31/2024 QoQ YoY 5.6% Commercial and industrial $ 553,578 $ 598,321 $ 611,695 2.2% 10.5% Real estate construction 108,776 124,034 125,96
Slide 15: Deposit Characteristics
DEPOSIT CHARACTERISTICS MARCH 31, 2024 DEPOSIT PORTFOLIO (BY CATEGORY) DEPOSIT PORTFOLIO CHANGES $ in thousands Chart As of As of As of Change Change Legend Category 3/31/2023 12/31/2023 3/31/2024 QoQ YoY 5.6% Noninterest-bearing $ 792,977 $ 728,082 $ 692,500 -4.9% -12.7% 13.9% Non-IB: Interest-bear
Slide 16: Banking Services
BANKING SERVICES DIVISIONAL(1) INCOME STATEMENT NONINTEREST INCOME BREAKDOWN $ in thousands $ in thousands 1Q 2024 4Q 2023 1Q 2023 $4,577 $4,177 Net interest income $ 22,219 $ 21,552 $ 23,658 $3,550 Provision for loan losses - 1,507 550 $2,559 (2)/(3) Noninterest income 3,550 4,177 4,577 $2,557 $1,4
Slide 17: Retirement and Benefit Services
RETIREMENT AND BENEFIT SERVICES DIVISIONAL(1) INCOME STATEMENT AUA / AUM AND PARTICIPANTS $ in thousands $ in millions 1Q 2024 4Q 2023 1Q 2023 $38,489 $36,733 $36,682 Recurring annual income $ 12,480 $ 12,636 $ 12,739 $34,200 $32,123 480,862 Transactional income 3,175 2,681 2,743 473,692 Total nonin
Slide 18: Wealth Advisory Services
WEALTH ADVISORY SERVICES DIVISIONAL(1) INCOME STATEMENT AUA / AUM $ in thousands $ in millions 1Q 2024 4Q 2023 1Q 2023 $4,242 Asset management $ 5,256 $ 4,974 $ 4,455 $4,040 $4,019 Brokerage 366 563 409 $3,583 Insurance and advisory 496 403 330 $3,339 Total noninterest income 6,118 5,940 5,194 Nonin
Slide 19: Noninterest Expense
NONINTEREST EXPENSE $ in Thousands QUARTERLY HIGHLIGHTS $38,654 $39,019 $37,869 Noninterest expense increased $0.4 million, or 0.9%, over the last $4,255 quarter. $4,483 $4,973 $1,993 Compensation and benefits expense increased $1.7 million from the $1,152 $2,345 fourth quarter of 2023 primarily
Slide 20: Asset Quality and Reserve Levels
ASSET QUALITY AND RESERVE LEVELS NPA / ASSETS % RESERVES OVER NPL % 1,437% 0.22% 0.17% 0.17% 821% 0.09% 0.10% 674% 498% 410% 2020 2021 2022 2023 1Q 2024 NCO/ 0.03% (0.04%) 0.02% (0.04%) 0.01% Avg Loans 2020 2021 2022 2023 1Q 2024 RESERVES / LOANS % HIGHLIGHTS 1.80% 1.73% There was no provision for
Slide 21: Capital and Sources of Liquidity
CAPITAL AND SOURCES OF LIQUIDITY COMMON EQUITY TIER 1 TIER 1 CAPITAL/TIER 1 LEVERAGE RATIOS 14.7% 15.1% 13.4% 13.2% 13.7% 12.8% 11.8% 11.9% 12.1% 12.1% 11.3% 10.6% 9.8% 9.9% 9.2% Tier 1 Capital 6% 4% Leverage 2020 2021 2022 2023 1Q 2024 2020 2021 2022 2023 1Q 2024 Tier 1 Leverage Tier 1 Capital Regu
Slide 22: Key Takeaways
KEY TAKEAWAYS The first quarter of the year has put Alerus on a strong path for 2024 Net interest income continues to be bolstered by our diversified business model EARNINGS 3.1% growth in net interest income compared to 4Q 2023 53.3% of noninterest income to total revenue 26.9% increase in ad
Slide 23: Appendix
Office in Downtown Minneapolis, Minnesota APPENDIX
Slide 24: Divisional Income Statement
DIVISIONAL INCOME STATEMENT ($ dollars in thousands) Quarter ended March 31, 2024 Retirement and Wealth Corporate Banking Services Benefit Services Advisory Services Administration Consolidated Net interest income $ 22,897 $ - $ - $ (678) $ 22,219 Provision for loan losses - - - - - (1) Noninterest
Slide 25: Loan Portfolio Breakdown
LOAN PORTFOLIO BREAKDOWN March 31, 2024 December 31, 2023 Percent of Percent of ($ in thousands) Balance Portfolio Balance Portfolio Commercial and industrial: General business $ 316,298 11.3% $ 294,149 10.7% Services 147,584 5.3% 146,318 5.3% Retail trade 79,620 2.8% 91,216 3.3% Manufacturing 68,19
Slide 26: Line of Credit Utilization
LINE OF CREDIT UTILIZATION C&I 450,000 60% 400,000 50% 350,000 300,000 40% 250,000 30% 200,000 150,000 20% 100,000 10% 50,000 - 0% 2019 2020 2021 2022 2023 1Q 2Q 3Q 4Q 1Q 2023 2023 2023 2023 2024 Funded Unfunded Funded % Home Equity Lines of Credit 400,000 60% 350,000 50% 300,000 40% 250,000 200,000
Slide 27: Allowance for Credit Losses on Loans
ALLOWANCE FOR CREDIT LOSSES ON LOANS Changes in the ACL for Loans by Portfolio Segment Three months ended March 31, 2024 Beginning Provision for Loan Loan Ending (1) Balance Credit Losses Charge-offs Recoveries Balance ($ in thousands) Commercial Commercial and industrial $ 9,894 $ 122 $ (164) $ 123
Slide 28: Allowance for Credit Losses on Loans
ALLOWANCE FOR CREDIT LOSSES ON LOANS Allocation by Loan Portfolio Segment March 31, 2024 December 31, 2023 Percentage of Percentage of Allocated segment allowance Allocated segment allowance ($ in thousands) Allowance to segment loans Allowance to segment loans Commercial and industrial $ 9,975 1.63
Slide 29: Financial Highlights
FINANCIAL HIGHLIGHTS ($ in thousands, Quarterly except where otherwise noted) 1Q 2023 2Q 2023 3Q 2023 4Q 2023 1Q 2024 Total Assets $ 3,886,773 $ 3,832,978 $ 3,869,138 $ 3,907,713 $ 4,338,093 Total Loans 2,486,625 2,533,522 2,606,430 2,759,583 2,799,475 Total Deposits 3,031,978 2,852,855 2,872,184 3,
Slide 30: Financial Highlights
FINANCIAL HIGHLIGHTS ($ in thousands, Annual 19-'23 except where otherwise noted) 2019 2020 2021 2022 2023 CAGR Total Assets $ 2,356,878 $ 3,013,771 $ 3,392,691 $ 3,779,637 $ 3,907,713 13.5% Total Loans 1,721,279 1,979,375 1,758,020 2,443,994 2,759,583 12.5% Total Deposits 1,971,316 2,571,993 2,920,
Slide 31: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($ in thousands, except where otherwise noted) Quarterly 1Q 2023 2Q 2023 3Q 2023 4Q 2023 1Q 2024 Tangible common equity to tangible assets Total common stockholders' equity $ 359,118 $ 357,685 $ 349,402 $ 369,127 $ 371,635 Less: Goodwill 47,087 47,087 46,783 46,783
Slide 32: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($ in thousands, except where otherwise noted) Annual 2019 2020 2021 2022 2023 Tangible common equity to tangible assets Total common stockholders' equity $ 285,728 $ 330,163 $ 359,403 $ 356,872 $ 369,127 Less: Goodwill 27,329 30,201 31,490 47,087 46,783 Less: Othe
Slide 33: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($ in thousands, except for where otherwise noted) Quarterly Twelve Months Ended 1Q 2023 2Q 2023 3Q 2023 4Q 2023 1Q 2024 March 31, 2024 Noninterest income excluding net Losses on investment securities as a percentage of adjusted revenue Noninterest income $ 25,253
Slide 34: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($ in thousands, except for per share data and where otherwise noted) Quarterly 1Q 2023 4Q 2023 1Q 2024 Adjusted net income Net Income $ 8,186 $ (14,754) $ 6,432 Less: Net gains (losses) on investment securities — (19,222) — Add: Minnesota Housing donation — 195 —