Alerus Financial Corporation · NASDAQ:ALRS
Alerus Financial — Investor Presentation (April 2020)
40 slides from Alerus Financial's investor presentation, Apr 29, 2020
Slide 1: Investor Presentation April 2020
INVESTOR PRESENTATION APRIL 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 business continuity and employee response
3 .. Activated Business Continuity Planning team and Pandemic Policy; daily or weekly meetings with key leadership teams and Risk Committee .. Response guided by safety of employees and clients; being a good corporate citizen; and encouraging digital use .. Benefit of past crisis experience; 1997 hi
Slide 5: COVID-19 Relief Programs: Payment Deferrals and Modifications
4 .. Payment relief for business and consumer loans: • Single payment extensions of P&I • Payment modifications to interest-only up to 3 months • P&I or interest payment deferrals up to 3 months .. Relief for residential mortgages follow Fannie Mae guidelines: • 3 month forbearance • No adverse cred
Slide 6: Payment relief by loan type
5 PAYMENT DEFERRALS, MATURITY EXTENSIONS, AND PAYMENT MODIFICATIONS COVID-19 RELIEF PROGRAMS Figures as of 04/21/2020. .. Percentage of outstanding balances granted payment relief by loan type .. Total Balances granted payment relief – $97MM Loan Type P&I or Interest Payment Deferral Single Payment
Slide 7: SBA Paycheck Protection Program
6 .. Helped over 900 existing and new clients apply for over $300MM in funding relief during the initial program. SBA PAYCHECK PROTECTION PROGRAM COVID-19 RELIEF PROGRAMS As of 4/16/2020. Industry % of Total $ Approve Retail Trade 17.96% Construction 14.43% Professional, Scientific, and Technical Se
Slide 8: Strong Capital and Sources of Liquidity
7 STRONG CAPITAL AND SOURCES OF LIQUIDITY TANGIBLE COMMON EQUITY/TANGIBLE ASSETS TIER 1/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 $198,489 Unencumbered se
Slide 9: Asset Quality and Reserve Levels Overview
8 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
Slide 10: Summary by Loan Type
9 1-4 Residential 1st $446,605 24% 1-4 Residential Construction $11,290 1% 1-4 Residential Jr Lien $45,691 2% Agricultural Land $12,075 1% Agricultural Production $35,568 2% C&I $454,768 25% Construction and Land $25,487 1% HELOC $124,847 7% Individual Close End and Unsec Revolving $12,814 1% Multi
Slide 11: First Quarter Highlights
10 FIRST QUARTER HIGHLIGHTS
Slide 12: 1Q Financial Highlights
11 1Q FINANCIAL HIGHLIGHTS 1 – Represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.” INCOME STATEMENT Three months ended (dollars and shares in thousands, except per share data) March 31, 2020 December 31, 2019 March 31, 2019 Net Interest Income $ 18,837 $ 18,459 $ 19,12
Slide 13: Strong Core Funding Mix
12 STRONG CORE FUNDING MIX .. Growing HSA deposit program through retirement plan sponsors to attract low cost deposits, which as of March 31, 2020, totaled $124.2 million in deposits, with a cost of 0.19% .. CD portfolio is primarily 6 month flex CD of which over 50% have been clients for 10+ years
Slide 14: Stable Net Interest Margin
13 STABLE NET INTEREST MARGIN 1Rates have been annualized for interim periods. Source: Alerus Financial Corporation; Federal Reserve Note: Net interest margin (FTE) is a non-GAAP financial measure; See “Non-GAAP Disclosure Reconciliation” in the Appendix to this presentation Loan Yield Net Interest
Slide 15: NIM and Loan Floors
14 NIM AND LOAN FLOORS VARIABLE RATE FLOORS BY INDEX NET INTEREST MARGIN ROLL FORWARD VARIABLE RATE FLOORS COMMENTS NIM Average Earning Assets 4Q 2019 3.45% 2,135,682,662 Lower Asset Yields -0.06% Asset Balance/Mix -0.09% Deposit Balance/Mix -0.02% Lower Deposit Rate 0.07% Other Borrowings 0.01% 1Q
Slide 16: A Big Company Model with Small Company Execution
15 A BIG COMPANY MODEL WITH SMALL COMPANY EXECUTION OUR DIVERSE BUSINESS LINES Revenue data LTM as of 3/31/2020. TRUSTED ADVISOR BANKING WEALTH MANAGEMENT • Residential mortgage lending • Purchasing or refinancing • Residential construction lending • Home equity/second mortgages • Advisory services
Slide 17: Retirement and Benefits
16 RETIREMENT AND BENEFITS OVERVIEW OF SERVICES ASSETS UNDER ADMINISTRATION/MANAGEMENT PROFIT MARGIN REVENUE MIX (Q1 2020 YTD) MARKET SENSITIVE REVENUE: 45% 1 1 Net Income before Tax and Indirect Allocations. .. RETIREMENT - Provide recordkeeping and administration services to qualified retirement p
Slide 18: Wealth Management Services
17 WEALTH MANAGEMENT SERVICES OVERVIEW OF SERVICES ASSETS UNDER ADMINISTRATION/MANAGEMENT PROFIT MARGIN REVENUE MIX (Q1 2020 YTD) 1 Net Income before Tax and Indirect Allocations. .. ADVISORY AND PLANNING SERVICES • Retirement Planning, Tax Planning, Insurance Planning, Wealth Transfer Planning and
Slide 19: Mortgage Banking
18 MORTGAGE BANKING OVERVIEW OF SERVICES MORTGAGE ORIGINATIONS 1-4 FAMILY PRODUCT MIX ($ 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 originators averag
Slide 20: Loan Portfolio and Credit Quality
19 LOAN PORTFOLIO AND CREDIT QUALITY
Slide 21: Summary by Industry Type
20 SUMMARY BY INDUSTRY TYPE COMMERCIAL & INDUSTRIAL Retail Trade 15% Construction 14% Finance and Insurance 14% Wholesale Trade 13% Real Estate and Rental and Leasing 8% Manufacturing 8% Health Care and Social Assistance 6% Professional, Scientific, and Technical Services 6% Transportation and Wareh
Slide 22: C&I Sub-Industry: Retail Trade
21 C&I SUB-INDUSTRY – RETAIL TRADE - $110MM IN EXPOSURE INDUSTRIES POTENTIALLY IMPACTED BY COVID-19 PANDEMIC Other includes the following Sub-Industries (as defined by 3 digit NAICS code): (1) Miscellaneous Store Retailers, (2) Furniture and Home Furnishing Stores, (3) Sporting Goods, Hobby, Musical
Slide 23: C&I Sub-Industry: Transportation and Warehousing
22 C&I SUB-INDUSTRY – TRANSPORTATION AND WAREHOUSING - $24MM IN EXPOSURE INDUSTRIES POTENTIALLY IMPACTED BY COVID-19 PANDEMIC Other includes the following Sub-Industries (as defined by 4 digit NAICS code): (1) Support Activities for Road Transportation, (2) Rail Transportation, (3) Freight Transport
Slide 24: Commercial Real Estate
23 OUTSTANDING BALANCE OF $510MM COMMERCIAL REAL ESTATE (A) Office $ 95,235 19% (B) Retail $ 118,211 23% (C) Warehouse $ 98,115 19% (D) Manufacturing $ 10,563 2% (E) Residential Development $ 5,793 1% (F) Commercial Development $ 164 0% (G) Mixed Residential/Commercial $ 13,536 3% (H) Mixed Commerci
Slide 25: Higher Risk Segments Potentially Impacted by COVID-19
24 .. Segments selected based on the following: • State stay at home orders, school cancellations and temporary business closures • Decline in travel • Cancellation of events • Nursing home and assisted living facilities deemed at risk population HIGHER RISK SEGMENTS INDUSTRIES POTENTIALLY IMPACTED
Slide 26: Loans Secured by Residential Real Estate
25 Serviced $408,884 58% 1-4 1st Non-Serviced $37,721 5% 1-4 Family Jr Liens $45,691 7% 1-4 Family Revolving $124,847 18% 1-4 Family Constrution $11,290 2% Held For Sale $72,258 10% LOANS SECURED BY RESIDENTIAL REAL ESTATE CONSUMER REAL ESTATE ($ IN 000’S) .. Average LTVs • Serviced mortgages – 62%
Slide 27: Line of Credit Utilization
26 LINE OF CREDIT UTILIZATION 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 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 % Funded Commitment ($ in 000’s) C&I Funded Unfunded %
Slide 28: Changes in the ALLL by Portfolio Segment
27 CHANGES IN THE ALLL BY PORTFOLIO SEGMENT ALLOWANCE FOR LOAN LOSSES Three months ended March 31, 2020 (dollars in thousands) Beginning Balance Provision for Loan Losses Loan Charge-offs Loan Recoveries Ending Balance Commercial Commercial and industrial $ 12,270 $ 70 $ (32) $ 593 $ 12,901 Real est
Slide 29: Allocation by Portfolio Segment
28 ALLOCATION BY PORTFOLIO SEGMENT ALLOWANCE FOR LOAN LOSSES March 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 $ 12,901 28.7% $ 12,270 27.8% Real estate const
Slide 30: Allowance for Loan Losses by Risk Segment
29 Risk Level Total Loans Unguaranteed Balance Reserve Amount Reserve / Unguaranteed Loans Reserve/Total Loans Pass $ 1,689,229 $ 1,685,730 $ 16,821 1.00% 1.00% Special Mention 18,265 18,253 687 3.76% 3.76% Substandard 42,841 41,118 4,612 11.22% 11.03% Total Loans Evaluated Collectively 1,750,335 1,
Slide 31: Appendix
30 APPENDIX
Slide 32: Company Profile
31 FOR THE TWELVE MONTHS ENDED MARCH 31, 2020 Noninterest income: $116.3 million Net interest income: $74.3 million $18.1 $26.1 $29.4 $27.8 $31.9 $27.7 2015 2016 2017 2018 2019 Q1 20 OUR MISSION .. To always act in the best interest of our clients by providing innovative and comprehensive financial
Slide 33: Franchise Footprint
32 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 34: One Alerus
33 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 35: Skilled Advisors and Financial Guides
34 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 36: Growth Strategy
35 .. Diversified client base consists of 48,600 consumers, 10,300 businesses and over 361,600 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 37: Officers and Directors
36 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 38: Strong Growth Markets and Stable Core Funding
37 North Dakota Minnesota Arizona National STRONG GROWTH MARKETS AND STABLE CORE FUNDING MARKET DISTRIBUTION DEPOSITS ($1,753) LOANS ($1,758) ARB ASSETS UNDER ADMIN/MGMT. ($27,718) WM ASSETS UNDER ADMIN/MGMT. ($2,746) MORTGAGE ORIGINATIONS ($228.6) ($ IN MILLIONS) Data as of 3/31/2020. LEGEND
Slide 39: Financial Highlights
38 FINANCIAL HIGHLIGHTS 1 Represents a non-GAAP financial measure. See “Non-GAAP Disclosure Reconciliation” in the Appendix to this presentation.
Slide 40: Non-GAAP Disclosure Reconciliation
39 NON-GAAP DISCLOSURE RECONCILIATION
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