Alerus Financial Corporation · NASDAQ:ALRS
Alerus Financial — Investor Presentation (January 2022)
37 slides from Alerus Financial's investor presentation, Jan 26, 2022
Slide 1: Investor Presentation January 2022
INVESTOR PRESENTATION JANUARY 2022 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, estima
Slide 3: Company Profile
2 Retirement and Benefit Revenue 30.6% Wealth Management Revenue 9.0% Mortgage Revenue 20.7% Banking Fees 2.6% Net Interest Income 37.1% FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2021 Noninterest income: $147.4 million Net interest income: $87.1 million $29.4 $27.8 $31.9 $34.2 $36.7 2017 2018 2019 20
Slide 4: Franchise Footprint
3 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: 4 full - service banking offices ▪ Fargo, ND: 3 full - service banking offices ▪ Twin Cities, MN: 6 fu
Slide 5: One Alerus
4 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 st
Slide 6: Strategic Growth
5 EXPANDED TO COLORADO Acquired Retirement Planning Services, Inc. (Littleton, CO) To supplement our strong organic growth, we have executed 24 acquisitions throughout the history of our company across all business lines: STRATEGIC GROWTH 2000 2002 2003 2006 2007 2019 2009 2016 2015 2014 2013 2012 2
Slide 7: Growth strategy and diversified client base
6 ▪ Diversified client base consists of 45,600 consumers, 9,800 businesses and over 376,800 employer - sponsored retirement and benefit plan participants ▪ Harness product synergies unavailable to traditional banking organizations ▪ Capitalize on strategic opportunities to grow in our existing marke
Slide 8: Officers and Directors
7 OFFICERS AND DIRECTORS OUR MOTIVATED, DEDICATED, AND ENERGETIC LEADERS KEEP US ON THE R IGHT PATH DAN COUGHLIN Since 2016 Former MD & Co - Head – Fin’l Services Inv. Banking, Raymond James; Former Chairman & CEO, Howe Barnes Hoefer & Arnett Chicago, IL MICHAEL MATHEWS Since 2019 CIO, Deluxe Corpor
Slide 9: 2021 Highlights
8 2021 HIGHLIGHTS
Slide 10: 2021 Highlights
9 ▪ Record net income with the highest levels of production in Company history across diverse product offering while being recognized as a top workplace ▪ Paycheck Protection Program (PPP) – helped current and new clients secure nearly 2,500 loans for approximately $474 million through PPP, with ove
Slide 11: Income Statement 2021 Financial Highlights
10 INCOME STATEMENT 2021 FINANCIAL HIGHLIGHTS 1 – Represents a non - GAAP Financial measure. See “Non - GAAP Disclosure Reconciliation.” 2 – Net interest margin (tax - equivalent) excluding PPP loans for the three months and year ended December 31, 2021, was 2.62% an d 2.73%, respectively. (dollars
Slide 12: Asset Quality and Reserve Levels Overview
11 282% 318% 306% 674% 1,437% 0.00% 200.00% 400.00% 600.00% 800.00% 1,000.00% 1,200.00% 1,400.00% 1,600.00% 2017 2018 2019 2020 2021 0.30% 0.33% 0.33% 0.17% 0.09% 0.00% 0.20% 0.40% 0.60% 0.80% 2017 2018 2019 2020 2021 ASSET QUALITY AND RESERVE LEVELS OVERVIEW NPAS / ASSETS (%) RESERVES / LOANS (%) R
Slide 13: Strong Capital and Sources of Liquidity
12 12.2% 12.9% 16.7% 16.8% 18.6% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 2017 2018 2019 2020 2021 7.1% 7.5% 11.1% 9.2% 9.8% 8.3% 8.9% 12.9% 13.2% 15.1% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 2017 2018 2019 2020 2021 Tier 1 Leverage Tier 1 Capital 6.0% 6.9% 10.4% 9.3% 9
Slide 14: Strong Core Funding Mix
13 STRONG CORE FUNDING MIX ▪ Commercial transaction accounts totaled $1.3 billion and increased 14.1% YTD. Consumer transaction accounts totaled $739.2 million and decreased 14.8% YTD ▪ Synergistic deposits, including HSA deposits and those sourced through retirement plans and participants, totaled
Slide 15: Net Interest Margin
14 0.65% 0.97% 0.51% 0.20% 1.83% 2.16% 0.45% 0.08% 3.84% 3.65% 3.22% 2.90% 4.81% 4.97% 4.35% 4.14% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 2018 2019 2020 2021 NET INTEREST MARGIN (NIM) 1 – Rates have been annualized for interim periods. Source: Alerus Financial Corporation; Federal Reserve Note: N
Slide 16: NIM and Loan Floors
15 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 $ 277 43.2% 43.2% Floors Reached 215 33.6% 76.8% 0 - 50 bps to reach floor 136 21.3% 98.1% >50bps to reach floor 12 1.9% 100.0% Total $
Slide 17: Diversified
16 DIVERSIFIED
Slide 18: A Big Company Model with Small Company Execution
17 A BIG COMPANY MODEL WITH SMALL COMPANY EXECUTION OUR DIVERSE BUSINESS LINES Revenue data LTM as of 12/31/2021. TRUSTED ADVISOR BANKING WEALTH MANAGEMENT • Residential mortgage lending • Purchasing or refinancing • Residential construction lending • Home equity/second mortgages • Advisory services
Slide 19: Well Diversified Loan Portfolio
18 BY OUTSTANDING BALANCES WELL DIVERSIFIED LOAN PORTFOLIO As of 12/31/2021. 1 - 4 Residential 1st 25% 1 - 4 Residential Construction 2% 1 - 4 Residential Jr Lien 2% HELOC 5% RE Loans to be Sold 3% C&I 21% PPP 2% Ag Production 2% Other CRE 17% Owner Occupied CRE 11% Ag Land 2% Multifamily 4% Retail
Slide 20: Strong Growth Markets and Stable Core Funding
19 STRONG GROWTH MARKETS AND STABLE CORE FUNDING MARKET DISTRIBUTION DEPOSITS ($2,921) LOANS ($ 1,758 ) (1) ARB ASSETS UNDER ADMIN/MGMT. ($ 36 ,733) WM ASSETS UNDER ADMIN/MGMT. ($4,040) MORTGAGE ORIGINATIONS ($1,836) ($ IN MILLIONS) Data as of 12/31/2021. 1 - Loans in our national market are partici
Slide 21: Retirement and Benefits Overview
20 Asset Based Retirement 29% Trust, Custody & Advisory 10% Record Keeping 17% Administration 13% Health & Welfare 10% Payroll Servicing 2% ESOP 7% Other 12% $27,812 $31,905 $34,200 $36,733 350,000 365,000 380,000 395,000 410,000 425,000 440,000 455,000 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,
Slide 22: Wealth Management Services
21 $8,138 $8,314 $9,162 $12,183 $14,962 $15,502 $17,451 $21,052 $0 $6,000 $12,000 $18,000 $24,000 2018 2019 2020 2021 Net Income Revenue ▪ ADVISORY AND PLANNING SERVICES • Retirement Planning, Tax Planning, Insurance Planning, Wealth Transfer Planning and Business Transition Planning ▪ ASSET MANAGEM
Slide 23: Mortgage Banking
22 $564.0 $474.1 $465.4 $357.1 $295.4 $43.2 $43.9 $80.0 $58.7 $61.4 $607.2 $518.0 $545.4 $415.8 $356.8 $0.0 $250.0 $500.0 $750.0 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Sale Portfolio MORTGAGE BANKING OVERVIEW OF SERVICES MORTGAGE ORIGINATIONS GAIN ON SALE MARGIN ($000s) REVENUE SUMMARY ▪ 1st and 2n
Slide 24: Loan Portfolio and Credit Quality
23 LOAN PORTFOLIO AND CREDIT QUALITY
Slide 25: Commercial and Industrial Loans by Industry
24 SUMMARY BY INDUSTRY TYPE TOTAL COMMITMENT COMMERCIAL & INDUSTRIAL 1 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) Managemen
Slide 26: Loans Secured by Real Estate
25 LOANS SECURED BY REAL ESTATE TOTAL COMMITMENT COMMERCIAL REAL ESTATE 1 1 – Loans secured by commercial real estate include Multifamily loans, Ag land, Other CRE, Owner Occupied CRE, and Ag production Portfolio Avg FICO Avg LTV Serviced 762 65% Non - Serviced 779 25% Junior 756 78% HELOC 796 64% T
Slide 27: Line of Credit Utilization
26 LINE OF CREDIT UTILIZATION C&I AND HOME EQUITY LINES OF CREDIT 1 1 – Commercial and industrial loans includes revolving C & I Loans and Other Loans. It Excludes non - revolving C&I loans, Ag Prod uction, PPP and loans to Public Entities. 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% - 50,000 100,000 150,
Slide 28: Changes in the ALLL by Portfolio Segment
27 CHANGES IN THE ALLL BY PORTFOLIO SEGMENT ALLOWANCE FOR LOAN LOSSES Twelve months ended December 31, 2021 (dollars in thousands) Beginning Balance Provision for Loan Losses Loan Charge - offs Loan Recoveries Ending Balance Commercial Commercial and industrial $ 10,205 $ (1,710) $ (1,230) $ 1,660 $
Slide 29: Allocation by Portfolio Segment
28 ALLOCATION BY PORTFOLIO SEGMENT ALLOWANCE FOR LOAN LOSSES December 30, 2021 December 31, 2020 (dollars in thousands) Allocated Allowance Percentage of loans to total loans Allocated Allowance Percentage of loans to total loans Commercial and industrial $ 8,925 24.8% $ 10,205 35.0% Real estate con
Slide 30: Allocation by Risk Segment
29 Risk Level Total Loans Unguaranteed Balance 1 Reserve Amount Reserve / Unguaranteed Loans Reserve/Total Loans Pass $ 1,736,289 $ 1,686,505 $ 28,067 1.66% 1.62% Special Mention 480 480 22 4.58% 4.58% Substandard 18,499 17,752 2,019 11.37% 10.91% Total Loans Evaluated Collectively 1,755,268 1,704,7
Slide 31: COVID-Response
30 COVID - 19 RESPONSE
Slide 32: Pandemic Agility and Facilities Transformation
31 ▪ Since 2020, we exited three client offices and six admin offices (primarily housed by administrative and operational staff) ▪ Experienced minimal client and employee dissatisfaction ▪ All remaining client offices are now open across the Alerus footprint in ND, MN, and AZ PANDEMIC AGILITY RESULT
Slide 33: COVID-19 Relief Programs: Payment Deferrals
32 PAYMENT DEFERRALS, MATURITY EXTENSIONS, AND PAYMENT MODIFICATION S COVID - 19 RELIEF PROGRAMS December 31, 2021 Loan Group Number Of Loans Granted Deferral ($ in 000’s) Still on Initial Deferral ($ in 000’s) Additional Deferral ($ in 000's) Returned to Normal ($ in 000’s) Consumer 182 $ 2,514 $ 1
Slide 34: SBA Paycheck Protection Program
33 Retail Trade 19% Professional, Scientific, and Technical Services 20% Construction 11% Manufacturing 4% Wholesale Trade 7% Health Care and Social Assistance 3% Other Services (except Public Administration) 12% Administrative and Support and Waste Management and Remediation Services 5% Transportat
Slide 35: Appendix
34 APPENDIX
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. ($000s, except where otherwise noted ) Annual 17-'21 2017 2018 2019 2020 2021 CAGR Total Assets 2,136,081 $ 2,179,070 $ 2,356,878 $ 3,013,771 $ 3,392,
Slide 37: Non-GAAP Disclosure Reconciliation
36 NON - GAAP DISCLOSURE RECONCILIATION ($000s, except where otherwise noted ) Annual 2017 2018 2019 2020 2021 Tangible common equity to tangible assets Total common stockholders' equity $ 179,594 $ 196,954 $ 285,728 $ 330,163 $ 359,403 Less: Goodwill 27,329 27,329 27,329 30,201 31,490 Less: Other i
Alerus Financial — Investor Presentation (January 2022) on 6ix