Alerus Financial Corporation · NASDAQ:ALRS
Alerus Financial — Q1 2021 Earnings Presentation
37 slides from Alerus Financial's earnings presentation, May 3, 2021
Slide 1: Investor Presentation April 2021
INVESTOR PRESENTATION APRIL 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: COVID-19 Response
2 COVID-19 RESPONSE
Slide 4: COVID-19 response actions
3 .. 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 G
Slide 5: Payment Deferrals, Maturity Extensions, and Payment Modifications
4 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 6: SBA Paycheck Protection Program (PPP)
5 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% Transportat
Slide 7: Strong Capital and Sources of Liquidity
6 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 8: Asset Quality and Reserve Levels Overview
7 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% Exc
Slide 9: Well Diversified Loan Portfolio by Outstanding Balances
8 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 Indirec
Slide 10: Well Diversified Loan Portfolio by Total Commitment
9 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% Mul
Slide 11: First Quarter Highlights
10 FIRST QUARTER HIGHLIGHTS
Slide 12: Income Statement Q1 2021 Financial Highlights
11 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 13: Strong Core Funding Mix
12 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 $
Slide 14: Net Interest Margin (NIM)
13 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 15: NIM and Loan Floors
14 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 16: A Big Company Model with Small Company Execution
15 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 17: Retirement and Benefits Overview
16 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 18: Wealth Management Services
17 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 19: Mortgage Banking
18 $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 ($000s) REVENUE SUMMARY .. 1st and 2
Slide 20: Loan Portfolio and Credit Quality
19 LOAN PORTFOLIO AND CREDIT QUALITY
Slide 21: Commercial & Industrial Summary by Industry Type
20 Transportation and Warehousing 3% Health Care and Social Assistance 6% Professional, Scientific and Technical Services 7% Manufacturing 10% Real Estate and Rental and Leasing 8% Wholesale Trade 11% Construction 15% Finance and Insurance 14% Other 10% 0 % Motor Vehicle and Parts Dealers 8% Food an
Slide 22: Commercial and Residential Real Estate Loans
21 Office 16% Retail 18% Warehouse 19% Manufacturing 1% Residential Development 1% Mixed Residential/Commercial 1% Mixed Commercial 6% Apartments 15% Hotel 1% Medical Or Nursing Facilities 8% Commercial/Land Development 12% Ag Land 2% LOANS SECURED BY REAL ESTATE TOTAL COMMITMENT COMMERCIAL REAL EST
Slide 23: Industries Directly Impacted by COVID-19
22 Impacted industries, 8% All Other Loans, 92% COMMERCIAL AND INDUSTRIAL AND COMMERCIAL REAL ESTATE INDUSTRIES DIRECTLY IMPACTED BY COVID-19 As of 3/31/2021. C&I Total Commitment ($ in 000's) % of Total Accommodation and Food Services $ 10,314 0.74% Arts, Entertainment, and Recreation 3,164 0.23% O
Slide 24: Line of Credit Utilization
23 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 25: Changes in the ALLL by Portfolio Segment
24 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 26: Allocation by Portfolio Segment
25 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 27: Allocation by Risk Segment
26 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 28: Appendix
27 APPENDIX
Slide 29: Company Profile
28 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 30: Franchise Footprint
29 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-s
Slide 31: One Alerus
30 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 s
Slide 32: Skilled Advisors and Financial Guides
31 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
Slide 33: Officers and Directors
32 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 MICHAE
Slide 34: Growth strategy and client base
33 .. 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
Slide 35: Strong Growth Markets and Stable Core Funding
34 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 36: Financial Highlights
35 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 37: Non-GAAP Disclosure Reconciliation
36 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