Alerus Financial Corporation · NASDAQ:ALRS
Alerus Financial — Q1 2022 Earnings Presentation
37 slides from Alerus Financial's earnings presentation, Apr 27, 2022
Slide 1: Investor Presentation April 2022
INVESTOR PRESENTATION APRIL 2022 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, estima
Slide 3: Company Profile
2 Retirement and Benefit Revenue 32.4% Wealth Management Revenue 9.6% Mortgage Revenue 16.3% Banking Fees 2.8% Net Interest Income 38.9% FOR THE TWELVE MONTHS ENDED MARCH 31, 2022 Noninterest income: $136.0 million Net interest income: $86.7 million $27.8 $31.9 $34.2 $36.7 $35.3 2018 2019 2020 2021
Slide 4: Our Diverse Business Lines
3 A BIG COMPANY MODEL WITH SMALL COMPANY EXECUTION OUR DIVERSE BUSINESS LINES Revenue data LTM as of 03/31/2022. TRUSTED ADVISOR BANKING WEALTH MANAGEMENT • Residential mortgage lending • Purchasing or refinancing • Residential construction lending • Home equity/second mortgages • Advisory services
Slide 5: Franchise Footprint
4 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 fu
Slide 6: Strong Growth Markets and Stable Core Funding
5 4.4% 90.4% 5.2% 45.2% 27.5% 4.2% 23.1% 35.7% 54.2% 7.9% 2.2% STRONG GROWTH MARKETS AND STABLE CORE FUNDING MARKET DISTRIBUTION DEPOSITS ($2,892) LOANS ($ 1,818 ) (1) ARB ASSETS UNDER ADMIN/MGMT. ($35,333) WM ASSETS UNDER ADMIN/MGMT. ($ 4,585 ) MORTGAGE ORIGINATIONS ($187) ($ IN MILLIONS) Data as o
Slide 7: One Alerus
6 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 Our expectation is this initiative will continue to improve our scalability and operating costs TAILORED ADVICE We st
Slide 8: Strategic Growth
7 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 9: ▪ Diversified client base consists of 45,800 consumers, 9,800 businesses and over 385,400 employer
8 ▪ Diversified client base consists of 45,800 consumers, 9,800 businesses and over 385,400 employer - sponsored retirement and benefit plan participants ▪ Harness product synergies unavailable to traditional banking organizations ▪ Capitalize on strategic opportunities to grow in our existing marke
Slide 10: Officers and Directors
9 OFFICERS AND DIRECTORS OUR MOTIVATED, DEDICATED, AND ENERGETIC LEADERS KEEP US ON THE R IGHT PATH 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 MATHEWS Since 2019 CIO, Deluxe Corpor
Slide 11: First Quarter Highlights
10 FIRST QUARTER HIGHLIGHTS
Slide 12: Q1 2022 Summary
11 ▪ Reported net income of $10.2 million in the first quarter of 2022 or $0.57 per diluted common share. ▪ Total revenues of $51.1 million with 57.6% from noninterest income sources. ▪ Net interest income totaled $21.7 million, a $500 thousand increase from the linked quarter driven primarily by an
Slide 13: Income Statement Q1 2022 Financial Highlights
12 INCOME STATEMENT Q1 2022 FINANCIAL HIGHLIGHTS 1 – Represents a non - GAAP Financial measure. See “Non - GAAP Disclosure Reconciliation.” (dollars and shares in thousands, except per share data) Net Interest Income $ 21,673 $ 22,789 $ 22,038 Provision for Loan Losses — (1,500) — Net Interest Incom
Slide 14: Performance Ratios
13 PERFORMANCE RATIOS 1 – Represents a non - GAAP Financial measure. See “Non - GAAP Disclosure Reconciliation.” 2 – Rates have been annualized 2.02% 1.50% 1.26% Q1 2021 Q4 2021 Q1 2022 Return on Average Assets (2) 23.03% 17.36% 14.72% Q1 2021 Q4 2021 Q1 2022 Return on Average Tangible Common Equity
Slide 15: Key Balance Sheet Items
14 KEY BALANCE SHEET ITEMS DOLLARS IN MILLIONS $1,693.8 $1,718.5 $1,748.1 $251.6 $64.2 $20.1 $1,945.4 $1,782.7 $1,768.2 Q1 2021 Q4 2021 Q1 2022 Average Loans Core Loans PPP Loans $1,883.9 $2,019.4 $1,985.4 $731.7 $851.2 $831.4 $2,615.6 $2,870.6 $2,816.8 Q1 2021 Q4 2021 Q1 2022 Average Deposits Inter
Slide 16: Asset Quality and Reserve Levels Overview
15 1.30% 1.39% 1.73% 1.80% 1.74% 0.00% 0.40% 0.80% 1.20% 1.60% 2.00% 2018 2019 2020 2021 Q1 2022 0.33% 0.33% 0.17% 0.09% 0.15% 0.00% 0.20% 0.40% 0.60% 0.80% 2018 2019 2020 2021 Q1 2022 318% 306% 674% 1,437% 752% 00% 200% 400% 600% 800% 1,000% 1,200% 1,400% 1,600% 2018 2019 2020 2021 Q1 2022 ASSET QU
Slide 17: Key Revenue Items
16 KEY REVENUE ITEMS DOLLARS IN THOUSANDS 1 – Other noninterest income consists of service charges on deposit accounts income, net gains (losses) on investment securities income, and other noninterest income $19,000 $20,570 $21,075 $3,038 $2,219 $598 $22,038 $22,789 $21,673 $17,000 $18,000 $19,000 $
Slide 18: Net Interest Margin
17 NET INTEREST MARGIN (NIM) LOAN YIELD (1) /N ET INTEREST MARGIN (1) QUARTERLY HIGHLIGHTS AVERAGE EFFECTIVE FF RATE/COST OF FUNDS (1) 1 – Rates have been annualized for interim periods. Source: Alerus Financial Corporation; Federal Reserve 1.83% 2.16% 0.08% 0.12% 0.97% 0.51% 0.20% 0.20% 0.00% 0.50%
Slide 19: NII and Loan Floors
18 NII AND LOAN FLOORS VARIABLE RATE FLOORS BY INDEX VARIABLE RATE FLOORS QUARTER OVER QUARTER HIGHLIGHTS $ in Millions Balance % of Total Balance Cumulative % of Total Balance No Floors $ 254 36.4% 36.4% Floors Reached 182 26.1% 62.5% 0 - 50 bps to reach floor 83 12.0% 74.5% >50bps to reach floor 1
Slide 20: Strong Core Funding Mix
19 STRONG CORE FUNDING MIX ▪ Commercial transaction accounts totaled $1.2 billion and decreased 1.3% YTD. Consumer transaction accounts totaled $760.9 million and increased 2.9% YTD ▪ Synergistic deposits, including HSA deposits and those sourced through retirement plans and participants, totaled $6
Slide 21: Retirement and Benefits Overview
20 $31,905 $34,200 $36,733 $35,333 375,000 390,000 405,000 420,000 435,000 450,000 465,000 480,000 495,000 $29,000 $30,000 $31,000 $32,000 $33,000 $34,000 $35,000 $36,000 $37,000 $38,000 2019 2020 2021 Q1 2022 AUA/AUM Participants Asset Based Retirement 29% Trust Custody & Advisory 10% Record Keepin
Slide 22: Wealth Management Services
21 $2,651 $3,446 $3,487 $4,986 $5,633 $5,326 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 Q1 2021 Q4 2021 Q1 2022 Net Income Revenue $3,103 $3,339 $4,040 $4,585 $0 $1,000 $2,000 $3,000 $4,000 2019 2020 2021 Q1 2022 ▪ ADVISORY AND PLANNING SERVICES • Retirement Planning, Tax Planning, Insurance Plann
Slide 23: Mortgage Banking
22 $863.4 $1,632.5 $1,592.1 $151.8 $83.0 $146.5 $244.0 $35.0 $946.4 $1,779.0 $1,836.1 $186.8 $- $500.0 $1,000.0 $1,500.0 $2,000.0 2019 2020 2021 YTD Q1 2022 Portfolio Sale MORTGAGE BANKING OVERVIEW OF SERVICES YEARLY MORTGAGE ORIGINATIONS ($000s) QUARTERLY RESULT S ▪ 1st and 2nd mortgage product off
Slide 24: Noninterest Expense
23 NONINTEREST EXPENSE 1 – Other noninterest expense consists of intangible amortization expense, marketing and business development expense, supplies and postage expense, travel expense, mortgage and lending expense, and other noninterest expense QUARTERLY HIGHLIGHTS $29,511 $27,678 $25,213 $2,231
Slide 25: Strong Capital and Sources of Liquidity
24 12.9% 16.7% 16.8% 18.6% 18.1% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 2018 2019 2020 2021 Q1 2022 7.5% 11.1% 9.2% 9.8% 10.3% 8.9% 12.9% 13.2% 15.1% 14.7% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 2018 2019 2020 2021 Q1 2022 Tier 1 Leverage Tier 1 Capital STRONG CAPITAL
Slide 26: Appendix
25 APPENDIX
Slide 27: Well Diversified Loan Portfolio
26 BY OUTSTANDING BALANCES WELL DIVERSIFIED LOAN PORTFOLIO As of 03/31/2022 1 - 4 Residential 1st 26% 1 - 4 Residential Construction 2% 1 - 4 Residential Jr Lien 2% HELOC 6% RE Loans to be Sold 1% C&I 23% PPP 1% Ag Production 1% Other CRE 16% Owner Occupied CRE 11% Ag Land 2% Multifamily 4% Retail I
Slide 28: Commercial & Industrial Loans by Industry
27 SUMMARY BY INDUSTRY TYPE TOTAL COMMITMENT COMMERCIAL & INDUSTRIAL 1 1 – Commercial and industrial loans includes C & I, loans to public entities, and other loans. It excludes PPP and ag production loans “Other” includes to the following industries (1) Nonclassifiable establishments, (2) Managemen
Slide 29: Loans Secured by Real Estate
28 LOANS SECURED BY REAL ESTATE TOTAL COMMITMENT COMMERCIAL REAL ESTATE 1 1 – Loans secured by commercial real estate include multifamily loans, ag land, other CRE, owner occupied CRE, and ag production Portfolio Avg FICO Avg LTV Serviced 762 65% Non - Serviced 779 25% Junior 756 78% HELOC 796 64% T
Slide 30: Line of Credit Utilization
29 LINE OF CREDIT UTILIZATION C&I AND HOME EQUITY LINES OF CREDIT 1 1 – Commercial and industrial loans includes revolving C & I loans and other loans. It excludes non - revolving C&I loans, ag prod uction, PPP and loans to public entities. 0% 10% 20% 30% 40% 50% 60% - 50,000 100,000 150,000 200,000
Slide 31: Changes in the ALLL by Portfolio Segment
30 CHANGES IN THE ALLL BY PORTFOLIO SEGMENT ALLOWANCE FOR LOAN LOSSES Three months ended March 31, 2022 (dollars in thousands) Beginning Balance Provision for Loan Losses Loan Charge - offs Loan Recoveries Ending Balance Commercial Commercial and industrial $ 8,925 $ 771 $ (27) $ 126 $ 9,795 Real es
Slide 32: Allocation by Portfolio Segment
31 ALLOCATION BY PORTFOLIO SEGMENT ALLOWANCE FOR LOAN LOSSES March 31, 2022 December 31, 2021 (dollars in thousands) Allocated Allowance Percentage of loans to total loans Allocated Allowance Percentage of loans to total loans Commercial and industrial $ 9,795 25.7% $ 8,925 24.8% Real estate constru
Slide 33: Allowance for Loan Losses by Risk Segment
32 Risk Level Total Loans Unguaranteed Balance 1 Reserve Amount Reserve / Unguaranteed Loans Reserve/Total Loans Pass $ 1,801,369 $ 1,774,904 $ 29,615 1.67% 1.64% Special Mention – – – – % – % Substandard 12,249 11,542 1,280 11.09% 10.45% Total Loans Evaluated Collectively 1,813,618 1,786,446 30,895
Slide 34: Financial Highlights (Quarterly)
33 FINANCIAL HIGHLIGHTS 1 Represents a non - GAAP financial measure. See “Non - GAAP Disclosure Reconciliation”. (dollars in thousands, except where otherwise noted) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Total Assets 3,151,756 $ 3,157,229 $ 3,175,169 $ 3,392,691 $ 3,336,199 $ Total Loans 1,937,345
Slide 35: Financial Highlights (Annual)
34 FINANCIAL HIGHLIGHTS 1 Represents a non - GAAP financial measure. See “Non - GAAP Disclosure Reconciliation”. (dollars in thousands, 17-'21 except where otherwise noted) 2017 2018 2019 2020 2021 CAGR Total Assets 2,136,081 $ 2,179,070 $ 2,356,878 $ 3,013,771 $ 3,392,691 $ 12.3% Total Loans 1,574,
Slide 36: Non-GAAP Disclosure Reconciliation
35 NON - GAAP DISCLOSURE RECONCILIATION (dollars in thousands, except where otherwise noted) Quarterly Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Tangible common equity to tangible assets Total common stockholders' equity $ 329,234 $ 344,391 $ 353,195 $ 359,403 $ 328,505 Less: Goodwill 30,201 30,201 30
Slide 37: Non-GAAP Disclosure Reconciliation (Annual)
36 NON - GAAP DISCLOSURE RECONCILIATION (dollars in thousands, except where otherwise noted ) Annual 2017 2018 2019 2020 2021 Tangible common equity to tangible assets Total common stockholders' equity $ 179,594 $ 196,954 $ 285,728 $ 330,163 $ 359,403 Less: Goodwill 27,329 27,329 27,329 30,201 31,49