Alerus Financial Corporation · NASDAQ:ALRS
Alerus Financial — Q2 2024 Earnings Presentation
36 slides from Alerus Financial's earnings presentation, Jul 25, 2024
Slide 1: Investor Presentation 2Q 2024
INVESTOR PRESENTATION 2Q 2024 NASDAQ: ALRS
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: Disclaimers (Continued)
DISCLAIMERS (CONTINUED) Additional Information and Where to Find It Alerus Financial Corporation (the "Company") filed a Registration Statement on Form S-4 (Registration Statement No. 333-280815) with the Securities and Exchange Commission (the "SEC") on July 15, 2024, in connection with a proposed
Slide 4: Company Profile
COMPANY PROFILE Alerus is a commercial wealth bank and a national retirement plan provider DIVERSIFIED REVENUE(1) RETIREMENT AND BENEFITS Last Twelve Months Ended June 30, 2024 Retirement Benefits Retirement & Plan administration Health savings accounts Net Interest Income: Benefits Trust and
Slide 5: Franchise Footprint
FRANCHISE FOOTPRINT FULL-SERVICE BANKING Grand Forks, ND: 4 offices Fargo, ND: 3 offices Twin Cities, MN: 6 offices Phoenix, AZ: 2 offices RETIREMENT AND BENEFIT SERVICES Offices in Minnesota, North Dakota, Michigan, and Colorado Retirement plan service clients in all 50 states Market Di
Slide 6: 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 7: HMN Financial, Inc. Acquisition Highlights
HMN FINANCIAL, INC. ACQUISITION HIGHLIGHTS Natural Expansion of the Alerus Franchise Strategic Expansion Financially Attractive(2) Low Risk Complementary mission and values with a strong Deal Value Per Share / TBVPS 107% corporate and credit culture High-quality, granular TBV Earnback 2.2 years and
Slide 8: Strategic Initiatives
STRATEGIC INITIATIVES One Alerus = Working Better Together to Grow Client ORGANIC GROWTH Oriented Collaborative leadership team focused on new client acquisition, retention, and deepening relationships with existing clients Reinvention Diversified Diversified business model focused on bringing v
Slide 9: Officers and Directors
OFFICERS AND DIRECTORS AL VILLALON KARIN TAYLOR Executive Vice President and Executive Vice President and Chief Financial Officer Chief Risk Officer and Operating Officer 2 years with Alerus 6 years with Alerus JIM COLLINS MISSY KENEY Executive Vice President and Executive Vice President and Chief B
Slide 10: Second Quarter Highlights
SECOND QUARTER HIGHLIGHTS Office in Excelsior, Minnesota
Slide 11: 2Q 2024 Highlights
2Q 2024 HIGHLIGHTS Success is Never Final NII: NIM: Fee Income: Noninterest Expense: EARNINGS $24.0 million 2.57% Adjusted(1) $27.4 million $38.8 million +8.0% vs. 1Q24 +13 bps vs. 1Q24 +8.1% vs. 1Q24 -0.7% vs. 1Q24 53.3% of revenue in 2Q24 Loans: Deposits: L/D Ratio: AUA / AUM: BALANCE $2.9 billion
Slide 12: 2Q 2024 Results
2Q 2024 RESULTS Income Statement Three months ended Six months ended June 30, March 31, June 30, June 30, June 30, 2024 2024 2023 2024 2023 (dollars and shares in thousands, except per share data) Net Interest Income $ 24,001 $ 22,219 $ 22,234 $ 46,220 $ 45,892 Provision for Credit Losses 4,489 — —
Slide 13: Performance Ratios
PERFORMANCE RATIOS Return on Average Assets(1) Return on Average Tangible Tangible Book Value per Share(1) Common Equity(1)/(2) 13.71% 0.96% $15.77 $15.63 9.78% $14.60 9.40% 0.63% 0.58% 2Q 2023 1Q 2024 2Q 2024 2Q 2023 1Q 2024 2Q 2024 2Q 2023 1Q 2024 2Q 2024 12 | 1. Rates have been annualized. 2. Rep
Slide 14: Key Revenue Items
KEY REVENUE ITEMS Net Interest Income Noninterest Income $ in thousands $ in thousands | % of noninterest income Retirement & Benefit Services Wealth Advisory Services Banking Fees and Other(1) $27,371 $25,778 $25,323 $4,933 $24,001 $4,439 $3,550 18.0% 17.2% 14.0% $22,234 $22,219 $6,360 $5,449 $6,11
Slide 15: Net Interest Income
NET INTEREST INCOME YIELDS AND RATES NII AND NIM(1) WALK $ in Thousands Earning Assets 5.72% 5.88% 5.36% 5.05% 5.26% 4.55% 2.53% 2.48% 2.69% 2Q 2023 1Q 2024 2Q 2024 Investment Loan Yield Earning Asset Securities Yield Yield Cost of Funds (2) 3.26% 3.34% 2.91% 3.03% 2.56% 2.65% 2.32% 2.16% 1.73% NIM:
Slide 16: Earning Assets
EARNING ASSETS JUNE 30, 2024 LOAN PORTFOLIO(1) LOAN PORTFOLIO(1) CHANGES $ in thousands 1.2% Chart As of As of As of Change Change Legend Category 6/30/2023 3/31/2024 6/30/2024 QoQ YoY Commercial and industrial $ 521,427 $ 575,259 $ 591,779 2.9% 13.5% CRE - Construction, land 78,428 125,966 161,751
Slide 17: Deposit Characteristics
DEPOSIT CHARACTERISTICS JUNE 30, 2024 DEPOSIT PORTFOLIO (BY CATEGORY) DEPOSIT PORTFOLIO CHANGES $ in thousands Chart As of As of As of Change Change Legend Category 6/30/2023 3/31/2024 6/30/2024 QoQ YoY 5.6% Noninterest-bearing $ 715,534 $ 692,500 $ 701,428 1.3% -2.0% Noninterest- Interest-bearing 1
Slide 18: Banking Services
BANKING SERVICES DIVISIONAL(1) INCOME STATEMENT NONINTEREST INCOME BREAKDOWN $ in thousands $ in thousands 2Q 2024 1Q 2024 2Q 2023 $4,933 $4,439 Net interest income $ 24,001 $ 22,219 $ 22,234 $1,421 $709 $3,550 Provision for loan losses 4,489 - - $514 $502 Noninterest income (2) 4,933 3,550 4,439 $3
Slide 19: Retirement and Benefit Services
RETIREMENT AND BENEFIT SERVICES DIVISIONAL(1) INCOME STATEMENT AUA / AUM AND PARTICIPANTS $ in thousands $ in millions $39,390 2Q 2024 1Q 2024 2Q 2023 $36,733 $36,682 $34,200 $32,123 485,269 Recurring annual income $ 12,664 $ 12,480 $ 13,111 473,692 Transactional income 3,414 3,175 2,779 Total nonin
Slide 20: Wealth Advisory Services
WEALTH ADVISORY SERVICES DIVISIONAL(1) INCOME STATEMENT AUA / AUM $ in thousands $ in millions 2Q 2024 1Q 2024 2Q 2023 $4,172 $4,040 $4,019 Asset management $ 5,564 $ 5,256 $ 4,781 Brokerage 439 366 389 $3,583 Insurance and advisory 357 496 279 $3,339 Total noninterest income 6,360 6,118 5,449 Nonin
Slide 21: Noninterest Expense
NONINTEREST EXPENSE $ in Thousands QUARTERLY HIGHLIGHTS $39,019 $38,752 $36,373 Noninterest expense decreased $0.3 million, or 0.7%, compared $4,255 $4,566 to the first quarter of 2024. $4,166 $1,993 The second quarter of 2024 included $0.6 million of expenses in $2,373 $1,530 Professional Fees
Slide 22: Asset Quality and Reserve Levels
ASSET QUALITY AND RESERVE LEVELS NPA / ASSETS % RESERVES OVER NPL % 0.63% 1,437% 821% 0.22% 674% 0.17% 0.09% 0.10% 410% 139% 2020 2021 2022 2023 2Q 2024 NCO/ 0.03% (0.04%) 0.02% (0.04%) 0.36% 2020 2021 2022 2023 2Q 2024 Avg Loans RESERVES / LOANS % HIGHLIGHTS 1.80% 1.73% Reserves to total loans re
Slide 23: Capital and Sources of Liquidity
CAPITAL AND SOURCES OF LIQUIDITY COMMON EQUITY TIER 1 TIER 1 CAPITAL/TIER 1 LEVERAGE RATIOS 14.7% 15.1% 13.4% 13.7% 12.8% 13.2% 11.8% 11.7% 12.1% 11.9% 11.3% 10.6% 9.8% 9.6% 9.2% Tier 1 Capital 6% 4% Leverage 2020 2021 2022 2023 2Q 2024 2020 2021 2022 2023 2Q 2024 Tier 1 Leverage Tier 1 Capital Regu
Slide 24: Key Takeaways
KEY TAKEAWAYS Our diversified business model fostered a robust second quarter Robust spread and fee income drove revenue growth in the quarter EARNINGS Net interest income and noninterest income growth of +8% compared to 1Q 2024 Adjusted(1) NIM expansion of 13 bps compared to the prior quarter
Slide 25: Appendix
Office in Downtown Minneapolis, Minnesota APPENDIX
Slide 26: Divisional Income Statement
DIVISIONAL INCOME STATEMENT ($ dollars in thousands) Quarter ended June 30, 2024 Retirement and Wealth Corporate Banking Services Benefit Services Advisory Services Administration Consolidated Net interest income $ 24,684 $ - $ - $ (683) $ 24,001 Provision for loan losses 4,489 - - - 4,489 (1) Nonin
Slide 27: Loan Portfolio Breakdown
LOAN PORTFOLIO BREAKDOWN June 30, 2024 December 31, 2023 Percent of Percent of ($ in thousands) Balance Portfolio Balance Portfolio Commercial and industrial: General business $ 288,752 10.0% $ 258,008 9.3% Services 140,562 4.8% 146,318 5.3% Retail trade 91,173 3.1% 91,216 3.3% Manufacturing 71,292
Slide 28: Line of Credit Utilization
LINE OF CREDIT UTILIZATION C&I 450,000 60% 400,000 50% 350,000 300,000 40% 250,000 30% 200,000 150,000 20% 100,000 10% 50,000 - 0% 2019 2020 2021 2022 2023 2Q 3Q 4Q 1Q 2Q 2023 2023 2023 2024 2024 Funded Unfunded Funded % Home Equity Lines of Credit 350,000 60% 300,000 50% 250,000 40% 200,000 30% 150
Slide 29: Allowance for Credit Losses on Loans
ALLOWANCE FOR CREDIT LOSSES ON LOANS Changes in the ACL for Loans by Portfolio Segment Three months ended June 30, 2024 Beginning Provision for Loan Loan Ending (1) Balance Credit Losses Charge-offs Recoveries Balance ($ in thousands) Commercial: Commercial and industrial $ 9,508 $ (663) $ (2,730) $
Slide 30: Allowance for Credit Losses on Loans
ALLOWANCE FOR CREDIT LOSSES ON LOANS Allocation by Loan Portfolio Segment June 30, 2024 December 31, 2023 Percentage of Percentage of Allocated segment allowance Allocated segment allowance ($ in thousands) Allowance to segment loans Allowance to segment loans Commercial and industrial $ 6,234 1.05%
Slide 31: Financial Highlights
FINANCIAL HIGHLIGHTS ($ in thousands, Quarterly Six months ended except where otherwise noted) 2Q 2023 3Q 2023 4Q 2023 1Q 2024 2Q 2024 June 30, 2024 June 30, 2023 Total Assets $ 3,832,978 $ 3,869,138 $ 3,907,713 $ 4,338,093 $ 4,358,623 $ 4,358,623 $ 3,832,978 Total Loans 2,533,522 2,606,430 2,759,58
Slide 32: Financial Highlights
FINANCIAL HIGHLIGHTS ($ in thousands, Annual 19-'23 except where otherwise noted) 2019 2020 2021 2022 2023 CAGR Total Assets $ 2,356,878 $ 3,013,771 $ 3,392,691 $ 3,779,637 $ 3,907,713 13.5% Total Loans 1,721,279 1,979,375 1,758,020 2,443,994 2,759,583 12.5% Total Deposits 1,971,316 2,571,993 2,920,
Slide 33: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($ in thousands, except where otherwise noted) Quarterly Six months ended 2Q 2023 3Q 2023 4Q 2023 1Q 2024 2Q 2024 June 30, 2024 June 30, 2023 Tangible common equity to tangible assets Total common stockholders' equity $ 357,685 $ 349,402 $ 369,127 $ 371,635 $ 373,2
Slide 34: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($ in thousands, except where otherwise noted) Annual 2019 2020 2021 2022 2023 Tangible common equity to tangible assets Total common stockholders' equity $ 285,728 $ 330,163 $ 359,403 $ 356,872 $ 369,127 Less: Goodwill 27,329 30,201 31,490 47,087 46,783 Less: Othe
Slide 35: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($ in thousands, except for where otherwise noted) Quarterly Twelve Months Ended 2Q 2023 3Q 2023 4Q 2023 1Q 2024 2Q 2024 June 30, 2024 Noninterest income excluding net Losses on investment securities as a percentage of adjusted revenue Noninterest income $ 25,778 $
Slide 36: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($ in thousands, except for per share data and where otherwise noted) Quarterly Six months ended 2Q 2023 1Q 2024 2Q 2024 June 30, 2024 June 30, 2023 Adjusted net interest margin (tax-equivalent) Net interest income $ 22,234 $ 22,219 $ 24,001 $ 46,220 $ 45,892 Less: