Alerus Financial Corporation · NASDAQ:ALRS
Alerus Financial — Investor Presentation (October 2021)
38 slides from Alerus Financial's investor presentation, October 2021
Slide 1: Investor Presentation October 2021
Alerus INVESTOR PRESENTATION OCTOBER 2021
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 OUR MISSION To positively impact our clients’ financial potential-through holistic guidance, unparalleled service, and engaging technology. ALERUS BUSINESS LINES DIVERSIFIED FINANCIAL SERVICES COMPANY Banking $3.2 billion Banking assets Retirement and Benefits $36.2 billion
Slide 4: Franchise Footprint
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 full-service
Slide 5: One Alerus
ONE ALERUS ONE ALERUS STRATEGY One Alerus enables us to bring our product and service offerings TECHNOLOGY INVESTMENT to clients in a cohesive and seamless manner. We believe the One We have proactively invested in technology to Alerus initiative will enable us to achieve future organic growth by fu
Slide 6: Strategic Growth
STRATEGIC GROWTH To supplement our strong organic growth, we have executed 24 acquisitions throughout the history of our company across all business lines: 2000 REBRANDED TO ALERUS 2011 Acquired selected loans and deposits (in MN) and a branch (in AZ) from BNC National Bank 2002 Acquired a branch fr
Slide 7: Key Strategic Initiatives
KEY STRATEGIC INITIATIVES GROWING THE ALERUS FRANCHISE LEVERAGE OUR EXISTING Diversified client base consists of 45,200 consumers, 10,200 businesses and over 375,800 employer-sponsored retirement and benefit plan participants CLIENT BASE Harness product synergies unavailable to traditional banki
Slide 8: Officers and Directors
OFFICERS AND DIRECTORS OUR MOTIVATED, DEDICATED, AND ENERGETIC LEADERS KEEP US ON THE RIGHT PATH RANDY NEWMAN Chairman, President, and Chief Executive Officer 40 years with Alerus SENIOR EXECUTIVE TEAM BOARD OF DIRECTORS KATIE LORENSON Executive Vice President and Chief Financial Officer KEVIN LEMKE
Slide 9: Third Quarter Highlights
THIRD QUARTER HIGHLIGHTS ~YS
Slide 10: Q3 2021 Financial Highlights
Q3 2021 FINANCIAL HIGHLIGHTS INCOME STATEMENT Three months ended Nine months ended September June September September September (dollars and shares in thousands, except per share data) 2021 2021 2020 2021 2020 Net Interes t Income $ 21,132 $ 21,140 $ 21,765 $ 64,310 $ 60,693 Provi s i on for Loa n L
Slide 11: Asset Quality and Reserve Levels
ASSET QUALITY AND RESERVE LEVELS OVERVIEW NPAS / ASSETS (%) 0.80% Solid asset quality 0.60% Strong reserve levels 0.40% 0.33% 0.33% Proactive approach to classification of assets and 0.20% 0.30% 0.22% management of loan problems 0.17% 0.00% 2017 2018 2019 2020 Q3 2021 Excluding PPP loans, NPAs
Slide 12: Strong Capital and Sources of Liquidity
STRONG CAPITAL AND SOURCES OF LIQUIDITY TANGIBLE COMMON EQUITY/TANGIBLE ASSETS1 TIER 1 CAPITAL/TIER 1 LEVERAGE RATIOS 12.0% Tier 1 Leverage Tier 1 Capital 10.4% 9.3% 9.6% 10.0% 16.0% 14.9% 14.0% 12.9% 13.2% 8.0% 6.9% 11.1% 6.0% 12.0% 7.5% 9.9% 6.0% 10.0% 7.1% 8.9% 9.2% 8.3% Tier 1 8.0% Capital 4.0%
Slide 13: Strong Core Funding Mix
STRONG CORE FUNDING MIX OVERVIEW AS OF SEPTEMBER 30, 2021 SEPTEMBER 30, 2021 DEPOSIT FUNDING ($2,713MM) Commercial transaction accounts totaled $1.2 billion and decreased 0.1% in Q3. Consumer transaction accounts totaled $675.3 million and decreased 6.2% As of September 30, 2021, core deposits tot
Slide 14: Net Interest Margin (NIM)
NET INTEREST MARGIN (NIM) 6.00% Loan Yield 4.97% 5.00% 4.81% 4.35% 1 4.10% 4.00% 3.84% 3.65% 3.22% 1 2.92% 3.00% Net Interest Margin (fully‐taxable equivalent “FTE”) 2.16% Average Effective Fed Funds Rate 2.00% 1.83% 1.00% 0.97% 0.45% 1 0.65% 0.20% Cost of Funds 0.51% 1 0.00% 0.08% 2018 2019 2020 Q3
Slide 15: NIM and Loan Floors
NIM AND LOAN FLOORS VARIABLE RATE FLOORS BY INDEX VARIABLE RATE FLOORS $ in Millions In the Out of % of Total Cumulative % of $ in Millions Balance Index Money the Money No Floor Total Total % Balance Total Balance Prime $ 203 $ 39 $ 20 $ 262 39.6% No Floors $ 266 40.2% 40.2% 1 Month LIBOR 11 – 165
Slide 16: Diversified
DIVERSIFIED ~YS
Slide 17: Our Diverse Business Lines
OUR DIVERSE BUSINESS LINES A BIG COMPANY MODEL WITH SMALL COMPANY EXECUTION BUSINESS BANKING BANKING CONSUMER BANKING • Commercial and commercial • Deposit products real estate lending 39% of Revenue and services • Agriculture lending • Consumer lending • Treasury management • Private banking • Depo
Slide 18: Well Diversified Loan Portfolio
WELL DIVERSIFIED LOAN PORTFOLIO BY OUTSTANDING BALANCES Retail Indirect 2% Other Consumer 1% RE Construction 2% Multifamily 4% Ag Land 1% 1‐4 Residential 1st Owner Occupied 25% CRE 11% 1‐4 Residential Construction 1% Other CRE 15% 1‐4 Residential Jr Lien 2% HELOC 5% C&I 20% PPP 6% Ag Production 2% R
Slide 19: Market Distribution
MARKET DISTRIBUTION STRONG GROWTH MARKETS AND STABLE CORE FUNDING ($ IN MILLIONS) LOANS ($1,800)(1) DEPOSITS ($2,713) LEGEND 2.2% 8.7% 21.3% 4.3% 39.2% 42.8% 49.9% 31.6% WM ASSETS UNDER ARB ASSETS UNDER MORTGAGE ORIGINATIONS ($1,479) ADMIN/MGMT. ($3,865) ADMIN/MGMT. ($36,203) 3.2% 6.6% 1.8% 8.9% 14.
Slide 20: Retirement and Benefits
RETIREMENT AND BENEFITS OVERVIEW‐7,500 PLANS‐ NATIONAL FOOTPRINT ASSETS UNDER ADMINISTRATION/MANAGEMENT RETIREMENT - Provide recordkeeping and administration ($ in Millions) services to qualified retirement plans $40,000 455,000 ADVISORY SERVICES - Provide investment fiduciary services to $35,00
Slide 21: Wealth Management Services
WEALTH MANAGEMENT SERVICES OVERVIEW OF SERVICES ASSETS UNDER ADMINISTRATION/MANAGEMENT ADVISORY AND PLANNING SERVICES ($ in Millions) • Retirement Planning, Tax Planning, Insurance Planning, $4,000 Wealth Transfer Planning and Business Transition Planning ASSET MANAGEMENT $3,000 • Personalized S
Slide 22: Mortgage Banking
MORTGAGE BANKING OVERVIEW OF SERVICES MORTGAGE ORIGINATIONS 1st and 2nd mortgage product offerings through centralized ($000s) Sale Portfolio mortgage operations in Minnesota $750.0 Our Twin Cities originators averaged $42+ million in annual $607.2 $545.4 volume over the last three years $511.6
Slide 23: Loan Portfolio and Credit Quality
LOAN PORTFOLIO AND CREDIT QUALITY 22
Slide 24: Summary by Industry Type
SUMMARY BY INDUSTRY TYPE TOTAL COMMITMENT COMMERCIAL & INDUSTRIAL 1 Electronics and Heath and Personal Appliance Stores Care Services Food and Beverage Stores 3% 1% Finance and 2% Insurance 15% Other 9% Gasoline Stations Construction 1% 14% Building Material and Garden Retail Trade Wholesale Trade E
Slide 25: Loans Secured by Real Estate
LOANS SECURED BY REAL ESTATE TOTAL COMMITMENT TOTAL COMMITMENT COMMERCIAL REAL ESTATE 1 RESIDENTIAL REAL ESTATE Ag Land 1‐4 Family Construction 5% 2% Medical Or Held for Sale Nursing Facilities Commercial/Land Office 7% 10% Development 16% 10% 1‐4 Family Revolving Hotel 30% 1% Retail 17% Apartments
Slide 26: Line of Credit Utilization
LINE OF CREDIT UTILIZATION C&I AND HOME EQUITY LINES OF CREDIT 1 C&I Home Equity Lines of Credit 450,000 45% 300,000 60% 400,000 40% 250,000 50% 350,000 35% 300,000 30% 200,000 40% 250,000 25% 150,000 30% 200,000 20% 150,000 15% 100,000 20% 100,000 10% 50,000 10% 50,000 5% ‐ 0% ‐ 0% Q4 Q1 Q2 Q3 Q4 Q
Slide 27: Allowance for Loan Losses
ALLOWANCE FOR LOAN LOSSES CHANGES IN THE ALLL BY PORTFOLIO SEGMENT Nine months ended September 30, 2021 Beginning Provision for Loan Loan Ending (dollars in thousands) Balance Loan Losses Charge‐offs Recoveries Balance Commercial Commercial and industrial $ 10,205 $ (1,378) $ (1,224) $ 1,497 $ 9,100
Slide 28: Allowance for Loan Losses
ALLOWANCE FOR LOAN LOSSES ALLOCATION BY PORTFOLIO SEGMENT September 30, 2021 December 31, 2020 Percentage Percentage Allocated of loans to Allocated of loans to (dollars in thousands) Allowance total loans Allowance total loans Commercial and industrial $ 9,100 28.1% $ 10,205 35.0% Real estate const
Slide 29: Allowance for Loan Losses
ALLOWANCE FOR LOAN LOSSES ALLOCATION BY RISK SEGMENT ($ IN 000’S) Reserve / Unguaranteed Reserve Unguaranteed Reserve/Total Risk Level Total Loans Balance1 Amount Loans Loans Pass $ 1,768,566 $ 1,654,210 $ 28,045 1.70% 1.59% Special Mention 4,238 4,097 182 4.44% 4.29% Substandard 20,631 19,854 2,264
Slide 30: COVID-19 Response
COVID‐19 RESPONSE 29
Slide 31: COVID-19 Response Summary
COVID-19 RESPONSE SUMMARY PROACTIVELY RESPONDING WITH AGILITY AND SUPPORT Activated Business Continuity Planning team and Pandemic Policy; frequent meetings with key leadership teams LEADING DURING THE Response guided by safety of employees and clients; being a good corporate citizen; and encour
Slide 32: Post COVID-19 Facilities Transformation
POST COVID-19 FACILITIES TRANSFORMATION PANDEMIC AGILITY RESULTED IN POSITIVE LASTING IMPACT PRE‐COVID POST‐COVID Home Only 3% Office Only 13% Home Only 43% Office Primary 22% Office Only or Primary 97% Home Primary 22% Since 2020, we exited three client offices and six admin offices (primarily ho
Slide 33: Industries Directly Impacted by COVID-19
INDUSTRIES DIRECTLY IMPACTED BY COVID-19 COMMERCIAL AND INDUSTRIAL AND COMMERCIAL REAL ESTATE Total Commitment C&I ($ in 000's) % of Total Accommodation and Food Services $ 8,688 0.63% Arts, Entertainment, and Recreation 2,891 0.21% Oil and Gas 488 0.04% Other Retail Trade 3,446 0.25% Total $ 15,513
Slide 34: COVID-19 Relief Programs
COVID-19 RELIEF PROGRAMS PAYMENT DEFERRALS, MATURITY EXTENSIONS, AND PAYMENT MODIFICATIONS Consumer 1% Residential Real Estate Serviced 99% September 30, 2021 Number Granted Still on Initial Additional Returned Of Deferral Deferral Deferral to Normal Loan Group Loans ($ in 000’s) ($ in 000’s) ($ in
Slide 35: COVID-19 Relief Programs: PPP
COVID-19 RELIEF PROGRAMS SBA PAYCHECK PROTECTION PROGRAM (PPP) INDUSTRY BREAKDOWN OF PPP LOANS MADE TO BORROWERS THROUGH 09/30/2021 SECURED SBA FINANCING OF 2,454 LOANS FOR APPROXIMATELY $474MM $ Originated Loan Amount Group # of Loans (in 000’s) $150M or less 1,825 $ 75,613 $150M to $2MM 601 304,87
Slide 36: Appendix
APPENDIX 35
Slide 37: Financial Highlights
FINANCIAL HIGHLIGHTS ($000s, except where otherwise noted ) Annual 17‐'20 Year‐to‐date 2017 2018 2019 2020 CAGR Q3 2020 Q3 2021 Total Assets $ 2,136,081 $ 2,179,070 $ 2,356,878 $ 3,013,771 12.2% $ 2,898,809 $3,175,169 Total Loans 1,574,474 1,701,850 1,721,279 1,979,375 7.9% 2,058,419 1,800,386 Total
Slide 38: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($000s, except where otherwise noted ) Annual Year‐to‐date 2017 2018 2019 2020 Q3 2020 Q3 2021 Tangible common equity to tangible assets Total common stockholders' equity $ 179,594 $ 196,954 $ 285,728 $ 330,163 $ 322,003 $ 353,195 Less: Goodwill 27,329 27,329 27,32
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