Alerus Financial Corporation · NASDAQ:ALRS
Alerus Financial — Merger or Acquisition (May 2024)
17 slides from Alerus Financial's merger presentation, May 15, 2024
Slide 1: Alerus Financial Corporation to Acquire HMN Financial, Inc.
ALERUS FINANCIAL CORPORATION TO ACQUIRE HMN FINANCIAL, INC. MAY 2024 NASDAQ: ALRS Exhibit 99.2
Slide 2: Disclaimers
DISCLAIMERS Special Note Concerning Forward-Looking Statements This report 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 concernin
Slide 3: Strategic Highlights: Natural Expansion of the Alerus Franchise
STRATEGIC HIGHLIGHTS Natural Expansion of the Alerus Franchise 3 | Source: S&P Capital IQ Pro (1) Pro forma deposit market share data as of June 30, 2023; community bank defined as banks with less than $10B in total assets STRATEGIC EXPANSION FINANCIALLY ATTRACTIVE LOW RISK ▪ Franchise-enhancing str
Slide 4: Overview of HMN Financial, Inc.
OVERVIEW OF HMN FINANCIAL, INC. 4 | Source: S&P Capital IQ Pro Note: Consolidated financial data as of March 31, 2024 ▪ Headquartered in Rochester, MN ▪ Nasdaq: HMNF ▪ Holding company for Home Federal Savings Bank ▪ 14 branches HMN FINANCIAL, INC. COMPANY HIGHLIGHTS BALANCE SHEET | AS OF 3/31/2024 C
Slide 5: Further Strengthens Minnesota Franchise
$1.49B $0.59B $0.23B $0.26B $0.28B #5 Rank #4 Rank #3 Rank #1 Rank $3.61B $2.84B $2.25B $2.28B $2.29B #5 Rank #4 Rank #2 Rank #1 Rank FURTHER STRENGTHENS MINNESOTA FRANCHISE 5 | Source: S&P Capital IQ Pro; Mayo Clinic (1) Pro forma community bank deposit market share ranking as of June 30, 2023; com
Slide 6: Granular Core Deposits
0.76% 1.07% 1.44% 1.72% 1.89% 1.17% 1.52% 1.81% 2.07% 2.22% 2023Q1 2023Q2 2023Q3 2023Q4 2024Q1 GRANULAR CORE DEPOSITS Non-interest Bearing 22.6% IB, MMDA & Savings 52.7% Retail CDs 16.5% Jumbo CDs 8.3% 6 | Source: S&P Capital IQ Pro; HMNF Company files Note: Bank-level deposit data as of March 31, 2
Slide 7: High Quality Loan Portfolio
HIGH QUALITY LOAN PORTFOLIO 7 | Source: S&P Capital IQ Pro; HMNF Company files Note: Consolidated asset quality data as of March 31, 2024; bank-level loan data as of March 31, 2024; percentages may not add up to 100% due to rounding 0.41% 0.46% 0.20% 0.34% 0.24% 0.09% -0.11% 0.01% 0.04% 0.01% 2020Y
Slide 8: Leveraging the HMNF Franchise
LEVERAGING THE HMNF FRANCHISE 8 | Source: S&P Capital IQ Pro; Rochester Area Economic Development, Inc. (1) Weighted average median household income by MSA, based on June 30, 2023 deposits 1.72% 1.42% Rochester, MN USA POPULATION GROWTH ’20 – ’24 3.20% 2.40% Rochester, MN USA PROJ. POPULATION GROWTH
Slide 9: Culturally Aligned, Complementary Strengths
MRQ Cost of Deposits 2.47% 1.89% Core Deposits(1) 90% 92% Loan Portfolio LTM Fee Income % 54.2% 21.3% NPAs / Total Assets 0.17% 0.24% LTM NCOs / Avg. Loans -0.04% 0.04% ESOP Ownership 5.8% 10.8% CULTURALLY ALIGNED, COMPLEMENTARY STRENGTHS 9 | Source: S&P Capital IQ Pro Note: Financial data as of Mar
Slide 10: Enhanced Profitability & Capital Generation
83.3% 85.3% 89.1% 41.7% 24.5% 19.4% 12.6% 12.3% 10.4% ENHANCED PROFITABILITY & CAPITAL GENERATION 10 | Source: S&P Capital IQ Pro (1) Peers include Midwest major exchange traded banks with between $1B - $10B in total assets as of most recently reported period TOP QUARTILE MEDIAN Pro Forma Pro Forma
Slide 11: Transaction Overview
TRANSACTION OVERVIEW 11 | (1) Based on ALRS closing price of [$20.54] on May [13], 2024 (2) Based on fully-phased estimated 2025 cost savings ▪ [$115.5] million total transaction value ▪ [$25.68] deal value per share ▪ 100% stock consideration ▪ Fixed exchange ratio of 1.25 shares of ALRS stock for
Slide 12: Expected Financial Impact
EXPECTED FINANCIAL IMPACT 12 |(1) No rate mark scenario assumes no loan interest rate mark, AOCI mark, MSR mark, time deposit mark, or amortization as a result of CDI Without CECL double-count EXCLUDING AOCI AND RATE MARKS(1) FINANCIAL IMPACT PRO FORMA CAPITAL RATIOS AS CLOSE INCLUDING AOCI AND RATE
Slide 13: Due Diligence Process
DUE DILIGENCE PROCESS 13 | ▪ Completed a comprehensive due diligence review with executives from Alerus and HMNF, as well as third-party advisors and consultants ▪ Conducted in-depth loan review led by senior Alerus credit team ▪ Preliminary interest rate marks performed by third party LOAN REVIEW P
Slide 14: Strategic Growth
STRATEGIC GROWTH To supplement our organic growth, we have executed 25 acquisitions throughout the history of our company including: 15 in Banking, 10 in Retirement and Benefits. HMN Financial, Inc. will be our 26th acquisition. 1879 2022 2019 2009 2007 2000 Began as the Bank of Grand Forks Rebrande
Slide 15: Summary
SUMMARY 15 | ▪ Opportunity to acquire a valuable deposit franchise, strategically building market share in Rochester and other Minnesota markets while gaining exposure to key new markets ▪ Further diversifies loan and deposit portfolios ▪ Enhanced benefits of additional scale and operating leverage
Slide 16: Appendix
APPENDIX Office in Downtown Minneapolis, Minnesota
Slide 17: Non-GAAP Disclosure Reconciliation
NON-GAAP DISCLOSURE RECONCILIATION 17 |(1) Adjusted items are shown after-tax using a 22% tax rate ($ in thousands) Five Year 2019 2020 2021 2022 2023 Average Adjusted net income Net Income $ 29,540 $ 44,675 $ 52,681 $ 40,005 $ 11,696 Less: Net Gains (losses) on investment securities - - - - (19,222