Alerus Financial Corporation · NASDAQ:ALRS
Alerus Financial — Investor Presentation (June 2021)
40 slides from Alerus Financial's investor presentation, Jun 7, 2021
Slide 1: Investor Presentation June 2021
INVESTOR PRESENTATION JUNE 2021 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: Company Profile
2 Retirement and Benefit Revenue 24.8% Wealth Management Revenue 7.4% Mortgage Revenue 29.5% Banking Fees 3.6% Net Interest Income 34.7% FOR THE TWELVE MONTHS ENDED MARCH 31, 2021 Noninterest income: $163.1 million Net interest income: $87.0 million $29.4 $27.8 $31.9 $34.2 $34.8 2017 2018 2019 2020
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: 3 full-service banking offices ▪ Fargo, ND: 3 full-service banking offices ▪ Twin Cities, MN: 6 full-servi
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 Formalized a Process Center of Excellence, implementing automation and robotics with 35 active “bots” TAILORED ADVICE
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: Skilled Advisors and Financial Guides
6 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 expect and val
Slide 8: Growth Strategy
7 ▪ Diversified client base consists of 50,400 consumers, 10,400 businesses and over 350,000 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 mar
Slide 9: Officers and Directors
8 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 MICHAEL
Slide 10: 2021 Highlights
2021 HIGHLIGHTS ~~
Slide 11: Q1 2021 Financial Highlights
10 INCOME STATEMENT Q1 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 ended March 31, 2021 was 2.95%.
Slide 12: Strategic Highlights
11 EMPLOYEES ▪ All time high of 80.9% favorable responses in 2020 employee engagement survey ▪ Named to American Banker’s Best Banks to Work for in 2020 STOCKHOLDERS ▪ Historic outperformance with a 10-year Total return: 337% ▪ Dividends increased for 34 years straight years at an average of 10% per
Slide 13: Asset Quality and Reserve Levels
12 ASSET QUALITY AND RESERVE LEVELS OVERVIEW NPAS / ASSETS (%) RESERVES / LOANS (%) RESERVES / NPLS (%) ▪ Solid asset quality ▪ Strong reserve levels ▪ Proactive approach to classification of assets and management of loan problems Excluding PPP loans, NPAs/Assets as of March 31, 2021 was 0.17% Exclu
Slide 14: Strong Capital and Sources of Liquidity
13 12.2% 12.9% 16.7% 16.8% 17.5% 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 Q1 2021 7.1% 7.5% 11.1% 9.2% 14.2% 8.3% 8.9% 12.9% 13.2% 13.9% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 2017 2018 2019 2020 Q1 2021 Tier 1 Leverage Tier 1 Capital 6.0% 6.9% 10.4%
Slide 15: Strong Core Funding Mix
14 STRONG CORE FUNDING MIX ▪ Commercial transaction accounts totaled $1.2 billion and increased 12.2% in Q1. Consumer transaction accounts totaled $668.5 million and increased 3.8% ▪ Synergistic deposits, including HSA deposits and those sourced through retirement plans and participants, totaled $56
Slide 16: Net Interest Margin
15 0.65% 0.97% 0.51% 0.20% 1.83% 2.16% 0.45% 0.08% 3.84% 3.65% 3.22% 3.12% 4.81% 4.97% 4.35% 4.21% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 2018 2019 2020 Q1 2021 NET INTEREST MARGIN (NIM) 1 – Rates have been annualized for interim periods. Source: Alerus Financial Corporation; Federal Reserve Note
Slide 17: NIM and Loan Floors
16 22,181 ( 1,262 ) ( 606 )( 13 ) 23,284 228 550 20,000 21,000 22,000 23,000 24,000 Decrease Increase 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 $ 291 41.7% 41.7% Floors Reached 285
Slide 18: Diversified
17 DIVERSIFIED
Slide 19: Our Diverse Business Lines
18 A BIG COMPANY MODEL WITH SMALL COMPANY EXECUTION OUR DIVERSE BUSINESS LINES Revenue data LTM as of 3/31/2021. TRUSTED ADVISOR BANKING WEALTH MANAGEMENT • Residential mortgage lending • Purchasing or refinancing • Residential construction lending • Home equity/second mortgages • Advisory services
Slide 20: Well Diversified Loan Portfolio
19 BY OUTSTANDING BALANCES WELL DIVERSIFIED LOAN PORTFOLIO As of 3/31/2021. 1-4 Residential 1st 20% 1-4 Residential Construction 1% 1-4 Residential Jr Lien 2% HELOC 5% RE Loans to be Sold 4% C&I 19% PPP 13% Ag Production 2% Other CRE 14% Owner Occupied CRE 10% Ag Land 1% Multifamily 4% Retail Indire
Slide 21: Strong Growth Markets and Stable Core Funding
20 North Dakota Minnesota Arizona National STRONG GROWTH MARKETS AND STABLE CORE FUNDING MARKET DISTRIBUTION DEPOSITS ($2,718) LOANS ($1,937)(1) ARB ASSETS UNDER ADMIN/MGMT. ($34,775) WM ASSETS UNDER ADMIN/MGMT. ($3,358) MORTGAGE ORIGINATIONS ($0.5) ($ IN MILLIONS) Data as of 03/31/2021. 1-Loans in
Slide 22: Retirement and Benefits Overview
21 Asset Based Retirement 29% Trust, Custody & Advisory 10% Record Keeping 17% Administration 13% Health & Welfare 11% Payroll Servicing 3% ESOP 7% Other 10% $26,902 $28,404 $25,720 $7,143 $63,316 $63,811 $60,956 $17,255 $0 $20,000 $40,000 $60,000 $80,000 2018 2019 2020 Q1 2021 Net Income Revenue $2
Slide 23: Wealth Management Services
22 Profit Margin: 54.4% 53.6% 52.5% 53.2% $8,138 $8,314 $9,162 $2,651 $14,962 $15,502 $17,451 $4,986 $0 $6,000 $12,000 $18,000 2018 2019 2020 Q1 2021 Net Income Revenue WEALTH MANAGEMENT SERVICES OVERVIEW OF SERVICES ASSETS UNDER ADMINISTRATION/MANAGEMENT PROFIT MARGIN REVENUE MIX 1 Net Income befor
Slide 24: Mortgage Banking
23 $213.5 $393.1 $462.0 $564.0 $474.1 $15.0 $38.6 $49.6 $43.2 $43.9 $228.5 $431.7 $511.6 $607.2 $518.0 $0.0 $250.0 $500.0 $750.0 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Sale Portfolio MORTGAGE BANKING OVERVIEW OF SERVICES MORTGAGE ORIGINATIONS GAIN ON SALE MARGIN ($000s) REVENUE SUMMARY ▪ 1st and 2n
Slide 25: Loan Portfolio and Credit Quality
24 LOAN PORTFOLIO AND CREDIT QUALITY
Slide 26: Commercial and Industrial Summary by Industry
25 Transportation and Warehousing 3% Health Care and Social Assistance 6% Professional, Scientific and Technical Services 7% Manufacturing 10% Real Estate and Rental and Leasing 8% Wholesale Trade 11% Construction 15% Finance and Insurance 14% Other 10% 0% Motor Vehicle and Parts Dealers 8% Food and
Slide 27: Commercial and Residential Real Estate Loans
26 Office 16% Retail 18% Warehouse 19% Manufacturing 1% Residential Development 1% Mixed Residential/Commercial 1% Mixed Commercial 6% Apartments 15% Hotel 1% Medical Or Nursing Facilities 8% Commercial/Land Development 12% Ag Land 2% LOANS SECURED BY REAL ESTATE TOTAL COMMITMENT COMMERCIAL REAL EST
Slide 28: Line of Credit Utilization
27 LINE OF CREDIT UTILIZATION C&I AND HOME EQUITY LINES OF CREDIT 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 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 C&I Funded Unfunded
Slide 29: Changes in the ALLL by Portfolio Segment
28 CHANGES IN THE ALLL BY PORTFOLIO SEGMENT ALLOWANCE FOR LOAN LOSSES Three months ended March 31, 2021 (dollars in thousands) Beginning Balance Provision for Loan Losses Loan Charge-offs Loan Recoveries Ending Balance Commercial Commercial and industrial $ 10,205 $ 316 $ (204) $ 170 $ 10,487 Real e
Slide 30: Allocation by Portfolio Segment
29 ALLOCATION BY PORTFOLIO SEGMENT ALLOWANCE FOR LOAN LOSSES March 31, 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 $ 10,487 35.0% $ 10,205 35.0% Real estate const
Slide 31: Allocation by Risk Segment
30 Risk Level Total Loans Unguaranteed Balance1 Reserve Amount Reserve / Unguaranteed Loans Reserve/Total Loans Pass $ 1,881,248 $ 1,619,738 $ 27,280 1.68% 1.45% Special Mention 10,674 10,369 427 4.12% 4.00% Substandard 37,282 36,739 4,226 11.50% 11.34% Total Loans Evaluated Collectively 1,929,204 1
Slide 32: COVID-19 Response
31 COVID-19 RESPONSE
Slide 33: COVID-19 Response Actions
32 ▪ 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 Gra
Slide 34: Well Diversified Loan Portfolio by Total Commitment
33 BY TOTAL COMMITMENT INCLUDING UNFUNDED COMMITMENT WELL DIVERSIFIED LOAN PORTFOLIO As of 3/31/2021. 1-4 Residential 1st 17% 1-4 Residential Construction 1% 1-4 Residential Jr Lien 1% HELOC 10% RE Loans to be Sold 3% C&I 26% PPP 10% Ag Production 2% Other CRE 11% Owner Occupied CRE 8% Ag Land 1% Mu
Slide 35: Industries Directly Impacted by COVID-19
34 Impacted industries, 8% All Other Loans, 92% COMMERCIAL AND INDUSTRIAL AND COMMERCIAL REAL ESTATE INDUSTRIES DIRECTLY IMPACTED BY COVID-19 As of 3/31/2021. C&I Total Commitment ($ in 000's) % of Total Accommodation and Food Services $ 10,314 0.74% Arts, Entertainment, and Recreation 3,164 0.23% O
Slide 36: COVID-19 Relief Programs: Payment Deferrals
35 PAYMENT DEFERRALS, MATURITY EXTENSIONS, AND PAYMENT MODIFICATIONS COVID-19 RELIEF PROGRAMS March 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 177 $ 2,451 $ 31 $ 25
Slide 37: SBA Paycheck Protection Program (PPP)
36 Retail Trade 15% Professional, Scientific, and Technical Services 11% Construction 11% Manufacturing 11% Wholesale Trade 5% Health Care and Social Assistance 10% Other Services (except Public Administration) 5% Administrative and Support and Waste Management and Remediation Services 3% Transporta
Slide 38: Appendix
37 APPENDIX
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. 2 Excluding PPP loans, the following ratios were TCE/TA 10.19% NPLs/Loans 0.30%, NPAs/Assets 0.19%, Allowance/Loans 2.00%, and NCOs/Average Loans 0.03% ($
Slide 40: Non-GAAP Disclosure Reconciliation
39 NON-GAAP DISCLOSURE RECONCILIATION ($000s, except where otherwise noted ) Annual Year-to-date 2017 2018 2019 2020 Q1 2020 Q1 2021 Tangible common equity to tangible assets Total common stockholders' equity $ 179,594 $ 196,954 $ 285,728 $ 330,163 $ 293,608 $ 329,234 Less: Goodwill 27,329 27,329 27