Alerus Financial Corporation · NASDAQ:ALRS
Alerus Financial — Investor Presentation (July 2020)
37 slides from Alerus Financial's investor presentation, Jul 28, 2020
Slide 1: Investor Presentation July 2020
INVESTOR PRESENTATION JULY 2020 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 Figures as of 06/30/2020. .. 515 Deferrals totaling $148M in outstanding balances Payment Deferral Loan Group # of Deferrals Total Outstanding ($ in 000's) % of Loan Group Consumer 126 $ 1,782 2.30% Resident
Slide 6: SBA Paycheck Protection Program
5 Retail Trade 16% Professional, Scientific, and Technical Services 12% Construction 12% Manufacturing 9% Wholesale Trade 8% Health Care and Social Assistance 8% Other Services (except Public Administration) 5% Administrative and Support and Waste Management and Remediation Services 3% Transportatio
Slide 7: Strong Capital and Sources of Liquidity
6 STRONG CAPITAL AND SOURCES OF LIQUIDITY TANGIBLE COMMON EQUITY/TANGIBLE ASSETS TIER 1 CAPITAL/TIER 1 LEVERAGE RATIOS PRIMARY AND SECONDARY SOURCES OF LIQUIDITY TOTAL RISK BASED CAPITAL Basel III Regulatory Capital Minimum to be considered well capitalized Cash and Cash equivalents $210,437 Unencum
Slide 8: Asset Quality and Reserve Levels Overview
7 ASSET QUALITY AND RESERVE LEVELS OVERVIEW NPAS / ASSETS (%) RESERVES / LOANS (%) RESERVES / NPLS (%) .. Solid asset quality and reserve levels .. Strengthened credit department to support growth .. Proactive approach to classification of assets Excluding PPP, NPAs/Assets as of June 30, 2020 was 0.
Slide 9: Summary by Loan Type (Outstanding Balances)
8 BY OUTSTANDING BALANCES ($ IN 000’S) SUMMARY BY LOAN TYPE 1-4 Residential 1st 444,207 21% 1-4 Residential Construction 12,530 1% 1-4 Residential Jr Lien 40,536 2% HELOC 113,815 5% RE Loans to be Sold 101,751 5% C&I 400,848 19% SBA Paycheck Protection 347,327 16% Loans to Public Entities 9,066 0% O
Slide 10: Summary by Loan Type (Total Commitment)
9 BY TOTAL COMMITMENT INCLUDING UNFUNDED COMMITMENT ($ IN 000’S) SUMMARY BY LOAN TYPE The table includes the following loan groupings; Consumer Individual close end and unsec revolving, retail indirect, and other consumer; RRE includes 1-4 Family 1st lien mortgages, 1-4 family construction, junior l
Slide 11: Second Quarter Highlights
10 SECOND QUARTER HIGHLIGHTS
Slide 12: 2Q Financial Highlights
11 2Q FINANCIAL HIGHLIGHTS 1 – Represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.” INCOME STATEMENT
Slide 13: Strong Core Funding Mix
12 STRONG CORE FUNDING MIX .. Commercial transaction accounts totaled $1.1 billion and increased 38.8% YTD. Consumer transaction accounts totaled $486.7 million and increased 7.6% .. HSA deposits sourced through retirement plan, totaled $128.6 million in deposits, with a cost of 0.19% .. CD portfoli
Slide 14: Net Interest Margin
13 NET INTEREST MARGIN 1 - Rates have been annualized for interim periods. Source: Alerus Financial Corporation; Federal Reserve Note: Net interest margin (FTE) is a non-GAAP financial measure; See “Non-GAAP Disclosure Reconciliation” in the Appendix to this presentation Loan Yield Net Interest Marg
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 $ 296 37.9% 37.9% Floors Reached 378 48.5% 86.4% 0-50 bps to reach floor 101 12.9% 99.3% >50bps to reach floor 5 0.7% 100.0% Total $ 780
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 6/30/2020. 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
16 RETIREMENT AND BENEFITS OVERVIEW OF SERVICES ASSETS UNDER ADMINISTRATION/MANAGEMENT PROFIT MARGIN REVENUE MIX (Q2 2020 YTD) MARKET SENSITIVE REVENUE: 41% 1 1 Net Income before Tax and Indirect Allocations. .. RETIREMENT - Provide recordkeeping and administration services to qualified retirement p
Slide 18: Wealth Management Services
17 WEALTH MANAGEMENT SERVICES OVERVIEW OF SERVICES ASSETS UNDER ADMINISTRATION/MANAGEMENT PROFIT MARGIN REVENUE MIX (Q2 2020 YTD) 1 Net Income before Tax and Indirect Allocations. .. ADVISORY AND PLANNING SERVICES • Retirement Planning, Tax Planning, Insurance Planning, Wealth Transfer Planning and
Slide 19: Mortgage Banking
18 MORTGAGE BANKING OVERVIEW OF SERVICES MORTGAGE ORIGINATIONS 1-4 FAMILY PORTFOLIO PRODUCT MIX ($ in Millions) PROFIT MARGIN 1 Net Income before Tax and Indirect Allocations. 1 .. 1st and 2nd mortgage product offerings through centralized mortgage operations in Minnesota .. Our Twin Cities originat
Slide 20: Loan Portfolio and Credit Quality
19 LOAN PORTFOLIO AND CREDIT QUALITY
Slide 21: Summary by Industry Type
20 SUMMARY BY INDUSTRY TYPE TOTAL COMMITMENT COMMERCIAL & INDUSTRIAL1 1 – Commercial and industrial loans includes C & I, Loans to Public Entities, and Other Loans. “Other” refers to the following industries (1)Nonclassifiable establishments, (2) Management of Companies and Enterprises, (3) Administ
Slide 22: Loans Secured by Real Estate
21 LOANS SECURED BY REAL ESTATE TOTAL COMMITMENT COMMERCIAL REAL ESTATE1 ($ IN 000’S) 1 – Loans secured by commercial real estate include Multifamily loans, Ag land, Other CRE, Owner Occupied CRE, and Ag production ‘Other’ above refers to (1) Agricultural land loans, (2) Construction and Land Develo
Slide 23: Industries Directly Impacted by COVID-19
22 COMMERCIAL AND INDUSTRIAL AND COMMERCIAL REAL ESTATE INDUSTRIES DIRECTLY IMPACTED BY COVID-19 As of 6/30/2020. Impacted industries, 10.8% All Other Loans, 89.2% C&I Total Commitment ($ in 000's) % of Total Accommodation and Food Services $ 10,430 0.62% Arts, Entertainment, and Recreation 4,403 0.
Slide 24: Line of Credit Utilization
23 LINE OF CREDIT UTILIZATION C&I AND HOME EQUITY LINES OF CREDIT .. Line of credit usage for commercial borrowers fell sharply to 23% for Q2. This is well below the three year historical average of 37% .. Home equity lines of credit - steady declines in overall average line utilization since 2017.
Slide 25: Changes in the ALLL by Portfolio Segment
24 CHANGES IN THE ALLL BY PORTFOLIO SEGMENT ALLOWANCE FOR LOAN LOSSES Six months ended June 30, 2020 (dollars in thousands) Beginning Balance Provision for Loan Losses Loan Charge-offs Loan Recoveries Ending Balance Commercial Commercial and industrial $ 12,270 $ 348 $ (2,735) $ 914 $ 10,797 Real es
Slide 26: Allocation by Portfolio Segment
25 ALLOCATION BY PORTFOLIO SEGMENT ALLOWANCE FOR LOAN LOSSES June 30, 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 $ 10,797 39.0% $ 12,270 27.8% Real estate constr
Slide 27: Allocation by Risk Segment
26 Risk Level Total Loans Unguaranteed Balance Reserve Amount Reserve / Unguaranteed Loans Reserve/Total Loans Pass $ 1,966,376 $ 1,625,073 $ 20,146 1.24% 1.02% Special Mention 18,499 11,744 473 4.03% 2.56% Substandard 43,159 39,253 4,341 11.06% 10.06% Total Loans Evaluated Collectively 2,028,034 1,
Slide 28: Appendix
27 APPENDIX
Slide 29: Company Profile
28 FOR THE TWELVE MONTHS ENDED JUNE 30, 2020 Noninterest income: $124.6 million Net interest income: $76.1 million $18.1 $26.1 $29.4 $27.8 $31.9 $30.1 2015 2016 2017 2018 2019 Q2 20 OUR MISSION .. To always act in the best interest of our clients by providing innovative and comprehensive financial s
Slide 30: Franchise Footprint
29 FRANCHISE FOOTPRINT Grand Forks, ND .. 3 full-service banking offices Fargo, ND .. 3 full-service banking offices Twin Cities, MN .. 6 full-service banking offices .. 1 mortgage office .. 1 deposit and loan production office Phoenix, AZ .. 2 full-service banking offices FULL-SERVICE BANKING OFFIC
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 expectatio
Slide 33: Growth strategy
32 .. Diversified client base consists of 48,700 consumers, 10,400 businesses and over 360,700 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 North Dakota Minnesota Arizona National STRONG GROWTH MARKETS AND STABLE CORE FUNDING MARKET DISTRIBUTION DEPOSITS ($2,453) LOANS ($2,034) ARB ASSETS UNDER ADMIN/MGMT. ($30,093) WM ASSETS UNDER ADMIN/MGMT. ($2,957) MORTGAGE ORIGINATIONS ($660.2) ($ IN MILLIONS) Data as of 6/30/2020. LEGEND
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, the following ratios were TCE/TA 10.55% NPLs/Loans 0.32%, NPAs/Assets 0.21%, Allowance/Loans 1.62%, and NCOs/Average Loans 0.31%
Slide 37: Non-GAAP Disclosure Reconciliation
36 NON-GAAP DISCLOSURE RECONCILIATION ($000s, except where otherwise noted ) Annual Year-to-date 2016 2017 2018 2019 Q2 2019 Q2 2020 Tangible common equity to tangible assets Total common stockholders' equity $ 168,251 $ 179,594 $ 196,954 $ 285,728 $ 213,765 $ 305,732 Less: Goodwill 27,329 27,329 27