Alerus Financial Corporation · NASDAQ:ALRS
Alerus Financial — Q3 2024 Earnings Presentation
35 slides from Alerus Financial's earnings presentation, Oct 30, 2024
Slide 1: Investor Presentation 3Q 2024
INVESTOR PRESENTATION 3Q 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: Company Profile
COMPANY PROFILE Alerus is a commercial wealth bank and a national retirement plan provider DIVERSIFIED REVENUE(1) RETIREMENT AND BENEFIT SERVICES Last Twelve Months Ended September 30, 2024 Retirement Benefits Retirement & Plan administration Health savings accounts Net Interest Income: Benefits
Slide 4: 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 5: Strategic Growth
STRATEGIC GROWTH To supplement our organic growth, we have executed 26 acquisitions throughout the history of our company including: 16 in Banking, and 10 in Retirement and Benefits. Rebranded to Expanded to Acquired Metro Alerus Arizona Market Phoenix Bank 1879 2007 2019 2024 2000 2009 2022 Began a
Slide 6: 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 7: 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 8: Third Quarter Highlights
THIRD QUARTER HIGHLIGHTS Office in Excelsior, Minnesota
Slide 9: 3Q 2024 Highlights
3Q 2024 HIGHLIGHTS Success is Never Final NII: Fee Income: Diversified Earnings: $22.5 million $28.4 million Fee Income 55.7% EARNINGS 2.35% adjusted(1) NIM +3.6% vs. 2Q24 of revenue in 3Q24 Loans: Deposits: L/D Ratio: AUA / AUM: BALANCE $3.0 billion $3.3 billion 91% $45.6 billion SHEET +4.0% vs. 2Q
Slide 10: 3Q 2024 Results
3Q 2024 RESULTS Income Statement Three months ended Nine months ended September 30, June 30, September 30, September 30, September 30, 2024 2024 2023 2024 2023 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (dollars and shares in thousands, except per share data) Net Interest Income $ 2
Slide 11: Performance Ratios
PERFORMANCE RATIOS Return on Average Assets(1) Return on Average Tangible Tangible Book Value per Share(2) (2) Common Equity(1)/(2) Reported Adjusted (2) Reported Adjusted $16.50 13.51% $15.77 0.95% 10.97% 10.30% $14.32 0.75% 9.40% 9.04% 0.65% 0.58% 0.57% 7.83% 0.48% 3Q 2023 2Q 2024 3Q 2024 3Q 2023
Slide 12: Key Revenue Items
KEY REVENUE ITEMS Net Interest Income Noninterest Income $ in thousands $ in thousands | % of noninterest income Retirement & Benefit Services Wealth Advisory (1) Banking Fees and Other $28,407 $28,363 $27,371 $4,531 16.0% $5,535 $4,933 19.5% $24,001 18.0% $22,542 $5,271 $20,395 18.5% $6,360 $6,684
Slide 13: Net Interest Income
NET INTEREST INCOME YIELDS AND RATES NII AND NIM(1) WALK $ in Thousands Earning Assets $471 $245 $24,001 $(26) $(300) 5.44% 5.88% 5.73% 5.26% 5.12% $22,542 4.66% $(1,849) 2.60% 2.69% 2.55% 3Q 2023 2Q 2024 3Q 2024 2Q 2024 Asset Accrual Liability Liability Asset 3Q 2024 Investment Loan Yield Total Ear
Slide 14: Earning Assets
EARNING ASSETS SEPTEMBER 30, 2024 LOAN PORTFOLIO(1) LOAN PORTFOLIO(1) CHANGES $ in thousands Chart As of As of As of Change Change 1.2% Legend Category 9/30/2023 6/30/2024 9/30/2024 QoQ YoY Commercial and industrial $ 547,644 $ 591,779 $ 606,245 2.4% 10.7% CRE - Construction, land 97,742 161,751 173
Slide 15: Deposit Characteristics
DEPOSIT CHARACTERISTICS SEPTEMBER 30, 2024 DEPOSIT PORTFOLIO (BY CATEGORY) DEPOSIT PORTFOLIO CHANGES $ in thousands Chart As of As of As of Change Change Legend Category 9/30/2023 6/30/2024 9/30/2024 QoQ YoY 5.6% Noninterest-bearing $ 717,990 $ 701,428 $ 657,547 -6.3% -8.4% Noninterest- Interest-bea
Slide 16: Banking Services
BANKING SERVICES DIVISIONAL(1) INCOME STATEMENT NONINTEREST INCOME BREAKDOWN $ in thousands $ in thousands 3Q 2024 2Q 2024 3Q 2023 $5,535 $4,933 Net interest income $ 22,542 $ 24,001 $ 20,395 $4,531 $1,972 Provision for credit losses 1,661 4,489 - $1,135 $1,421 Noninterest income (2) 5,536 4,933 4,5
Slide 17: Retirement and Benefit Services
RETIREMENT AND BENEFIT SERVICES DIVISIONAL(1) INCOME STATEMENT AUA / AUM AND PARTICIPANTS $ in thousands $ in millions $41,249 3Q 2024 2Q 2024 3Q 2023 $36,733 $36,682 $34,200 492,504 Recurring annual income $ 12,827 $ 12,647 $ 12,959 $32,123 Transactional income 3,317 3,431 2,871 473,692 Gain on sal
Slide 18: Wealth Advisory Services
WEALTH ADVISORY SERVICES DIVISIONAL(1) INCOME STATEMENT AUA / AUM $ in thousands $ in millions 3Q 2024 2Q 2024 3Q 2023 $4,398 Asset management 5,972 $ 5,564 $ 4,726 $4,040 $4,019 Brokerage 365 439 391 $3,583 Insurance and advisory 347 357 154 $3,339 Total noninterest income 6,684 6,360 5,271 Noninte
Slide 19: Noninterest Expense
NONINTEREST EXPENSE $42,447 $ in Thousands QUARTERLY HIGHLIGHTS $1,692 $38,752 $37,260 $878 $4,761 Noninterest expense increased $3.7 million, or 9.5%, compared $343 to the second quarter of 2024. $4,566 $4,921 $2,606 $1,810 Professional fees and assessments increased $0.8 million, or $1,716 $4,
Slide 20: Asset Quality and Reserve Levels
ASSET QUALITY AND RESERVE LEVELS NPA / ASSETS % RESERVES OVER NPL % 1.18% 1,437% 821% 674% 0.22% 0.17% 0.09% 0.10% 410% 2020 2021 2022 2023 3Q 2024 82% NCO/ 0.03% (0.04%) 0.02% (0.04%) 0.04% 2020 2021 2022 2023 3Q 2024 Avg Loans RESERVES / LOANS % HIGHLIGHTS For the third quarter of 2024, the Comp
Slide 21: 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% 12.1% 11.1% 11.3% 11.4% 10.6% 9.8% 9.3% 9.2% Tier 1 Capital 6% 4% Leverage 2020 2021 2022 2023 3Q 2024 2020 2021 2022 2023 3Q 2024 Tier 1 Leverage Tier 1 Capital Regu
Slide 22: Key Takeaways
KEY TAKEAWAYS Alerus remains well positioned to grow following the acquisition of HMN A diverse business model bolstered the third quarter EARNINGS Noninterest income grew across all categories compared to 2Q 2024 55.7% of noninterest income to total revenue Net interest income of $22.5 millio
Slide 23: Appendix
Office in Downtown Minneapolis, Minnesota APPENDIX
Slide 24: Divisional Income Statement
DIVISIONAL INCOME STATEMENT ($ dollars in thousands) Quarter ended September 30, 2024 Retirement and Wealth Corporate Banking Services Benefit Services Advisory Services Administration Consolidated Net interest income $ 23,220 $ - $ - $ (678) $ 22,542 Provision for loan losses 1,661 - - - 1,661 Noni
Slide 25: Loan Portfolio Breakdown
LOAN PORTFOLIO BREAKDOWN September 30, 2024 December 31, 2023 Percent of Percent of ($ in thousands) Balance Portfolio Balance Portfolio Commercial and industrial: General business $ 301,629 9.9% $ 258,008 9.3% Services 152,354 5.0% 146,318 5.3% Retail trade 93,437 3.1% 91,216 3.3% Manufacturing 58,
Slide 26: 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 3Q 4Q 1Q 2Q 3Q 2023 2023 2024 2024 2024 Funded Unfunded Funded % Home Equity Lines of Credit 400,000 60% 350,000 50% 300,000 40% 250,000 200,000
Slide 27: Allowance for Credit Losses on Loans
ALLOWANCE FOR CREDIT LOSSES ON LOANS Changes in the ACL for Loans by Portfolio Segment Three months ended September 30, 2024 Beginning Provision for Loan Loan Ending Balance Credit Losses(1) Charge-offs Recoveries Balance ($ in thousands) Commercial: Commercial and industrial $ 6,234 $ 660 $ (246) $
Slide 28: Allowance for Credit Losses on Loans
ALLOWANCE FOR CREDIT LOSSES ON LOANS Allocation by Loan Portfolio Segment September 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 $ 6,801
Slide 29: Financial Highlights
FINANCIAL HIGHLIGHTS ($ in thousands, Quarterly Nine months ended except where otherwise noted) 3Q 2023 4Q 2023 1Q 2024 2Q 2024 3Q 2024 September 30, 2024 September 30, 2023 Total Assets $ 3,869,138 $ 3,907,713 $ 4,338,093 $ 4,358,623 $ 4,084,640 $ 4,084,640 $ 3,869,138 Total Loans 2,606,430 2,759,5
Slide 30: 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 31: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($ in thousands, except where otherwise noted) Quarterly Nine months ended 3Q 2023 4Q 2023 1Q 2024 2Q 2024 3Q 2024 September 30, 2024 September 30, 2023 Tangible common equity to tangible assets Total common stockholders' equity $ 349,402 $ 369,127 $ 371,635 $ 373,
Slide 32: 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 33: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($ in thousands, except for where otherwise noted) Quarterly Twelve Months Ended 3Q 2023 4Q 2023 1Q 2024 2Q 2024 3Q 2024 September 30, 2024 Noninterest income excluding net Losses on investment securities as a percentage of adjusted revenue Noni nteres t i ncome $
Slide 34: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($ in thousands, except for per share data and where otherwise noted) Quarterly Nine months ended 3Q 2023 2Q 2024 3Q 2024 September 30, 2024 September 30, 2023 Pre-provision net revenue Add: Net interest income $ 20,395 $ 24,001 $ 22,542 $ 68,761 $ 66,287 Add: Noni
Slide 35: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION ($ in thousands, except for per share data and where otherwise noted) Quarterly Nine months ended Lettered items are continued from the prior slide 3Q 2023 2Q 2024 3Q 2024 September 30, 2024 September 30, 2023 Adjusted net income Net Income $ 9,161 $ 6,208 $ 5,207