Alerus Financial Corporation · NASDAQ:ALRS
Alerus Financial — Merger or Acquisition (May 2024)
17 slides from Alerus Financial's merger presentation, May 2024
Slide 1: Alerus Financial Corporation to Acquire HMN Financial, Inc.
Exhibit [99.2] ALERUS FINANCIAL CORPORATION TO ACQUIRE HMN FINANCIAL, INC. MAY 2024 NASDAQ: ALRS
Slide 2: Disclaimers
DISCLAIMERS Special Note Concerning Forward-Looking Statements This report 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 concernin
Slide 3: Strategic Highlights
STRATEGIC HIGHLIGHTS Natural Expansion of the Alerus Franchise ▪ Franchise-enhancing strategic expansion into the vibrant Rochester, Minnesota, MSA ▪ Creation of premier $5B diversified financial institution STRATEGIC ▪ Continues focus on company-wide core deposit initiatives while providing expansi
Slide 4: Overview of HMN Financial, Inc.
OVERVIEW OF HMN FINANCIAL, INC. HMN FINANCIAL, INC. COMPANY HIGHLIGHTS ▪ Headquartered in Rochester, MN BALANCE SHEET | AS OF 3/31/2024 ▪ Nasdaq: HMNF ▪ Holding company for Home Federal Savings Bank $1.2B $872MM $1.0B 9.4% ▪ 14 branches Total assets Gross loans Total deposits TCE ratio PRO FORMA BRA
Slide 5: Further Strengthens Minnesota Franchise
FURTHER STRENGTHENS MINNESOTA FRANCHISE ENTRANCE INTO ATTRACTIVE ENHANCES DEPOSIT MARKET SHARE(1) ROCHESTER MSA MINNESOTA BUILDING UPON A PREMIER MIDWEST (STATE) $2.25B $2.28B $2.29B $2.84B $3.61B FRANCHISE Pro Forma ▪ HMNF provides entrance into the growing Rochester, MN, MSA, with $592MM deposits
Slide 6: Granular Core Deposits
GRANULAR CORE DEPOSITS HMNF DEPOSIT PORTFOLIO HIGHLIGHTS DEPOSIT PORTFOLIO 3/31/2024 ▪ The strength of the HMNF deposit franchise stems from long- tenured clients and its granular portfolio Non-interest Jumbo Bearing CDs 22.6% COST OF DEPOSITS | LAST 5 QUARTERS 8.3% HMNF Peers(1) 2.07% 1.89% 2.22% R
Slide 7: High Quality Loan Portfolio
HIGH QUALITY LOAN PORTFOLIO HMNF LOAN PORTFOLIO HIGHLIGHTS LOAN PORTFOLIO 3/31/2024 ▪ Superior asset quality stems from HMNF granular loans made to Home Equity high-quality clients in stable markets 1.5% Consumer C&D C&I & Other 9.3% 5.0% 5.4% ASSET QUALITY | MRQ & LAST 4 YEARS NPAs / Total NCOs / A
Slide 8: Leveraging the HMNF Franchise
LEVERAGING THE HMNF FRANCHISE GROWING A STRONG FOUNDATION HMNF MEDIAN HOUSEHOLD INCOME(1) ▪ High quality, stable client base $83,315 ▪ Ability to leverage Alerus’ diverse platform: $75,874 ▪ Existing HMNF client base ▪ Additional opportunities for growth given strong market demographics HMNF USA ROC
Slide 9: Culturally Aligned, Complementary Strengths
CULTURALLY ALIGNED, COMPLEMENTARY STRENGTHS MRQ Cost of Deposits 2.47% 1.89% HIGH QUALITY DEPOSIT BASE Core Deposits(1) 90% 92% 20.1% 56.4% 1-4 FAMILY CRE, C&D & MULTI-FAM 8.5% 5.0% C&I 44.7% 6.9% Loan Portfolio CONSUMER & OTHER 26.7% 31.7% BUSINESS MIX Pro Forma CRE 261% Concentration(2) LTM Fee In
Slide 10: Enhanced Profitability & Capital Generation
ENHANCED PROFITABILITY & CAPITAL GENERATION COMPARISON WITH $1B - $10B PEERS(1) TOP QUARTILE MEDIAN (2025E) ROAE 12.6% 12.3% 10.4% Pro Forma FEE INCOME 41.7% (2025E) 24.5% Pro Forma 19.4% LOANS / DEPOSITS 83.3% 85.3% 89.1% (MRQ) Pro Forma Source: S&P Capital IQ Pro 10 | (1) Peers include Midwest maj
Slide 11: Transaction Overview
TRANSACTION OVERVIEW ▪ $116.4 million total transaction value TRANSACTION VALUE(1) ▪ $25.86 deal value per share ▪ 100% stock consideration CONSIDERATION MIX ▪ Fixed exchange ratio of 1.25 shares of ALRS stock for each HMNF share, approximately 5.5 million ALRS shares in aggregate ▪ Total credit dis
Slide 12: Expected Financial Impact
EXPECTED FINANCIAL IMPACT INCLUDING AOCI AND RATE MARKS EXCLUDING AOCI AND RATE MARKS(1) FINANCIAL IMPACT FINANCIAL IMPACT TBV Earnback 2.2 years TBV Earnback Accretive ’25 EPS Accretion 45%+ ’25 EPS Accretion 20%+ Without CECL double-count 2.1 years PRO FORMA CAPITAL RATIOS AS CLOSE PRO FORMA CAPIT
Slide 13: Due Diligence Process
DUE DILIGENCE PROCESS ▪ Completed a comprehensive due diligence review with executives from Alerus and HMNF, as well as third- party advisors and consultants ▪ Conducted in-depth loan review led by senior Alerus credit team ▪ Preliminary interest rate marks performed by third party LOAN REVIEW PROCE
Slide 14: Strategic Growth
STRATEGIC GROWTH To supplement our organic growth, we have executed 25 acquisitions throughout the history of our company including: 15 in Banking, 10 in Retirement and Benefits. HMN Financial, Inc. will be our 26th acquisition. Rebranded to Expanded to Acquired Metro Alerus Arizona Market Phoenix B
Slide 15: Summary
SUMMARY Natural Expansion of the Alerus Franchise ▪ Opportunity to acquire a valuable deposit FINANCIALLY COMPELLING DEAL(1) franchise, strategically building market share Deal Value Per Share / TBVPS 107% in Rochester and other Minnesota markets while gaining exposure to key new markets TBV Earnbac
Slide 16: Appendix
Office in Downtown Minneapolis, Minnesota APPENDIX
Slide 17: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($ in thousands) Five Year 2019 2020 2021 2022 2023 Average Adjusted net income Net Income $ 29,540 $ 44,675 $ 52,681 $ 40,005 $ 11,696 Less: Net Gains (losses) on investment securities - - - - (19,222) Adjusted Net Income(1) (a) $ 29,540 $ 44,675 $ 52,681 $ 40,005