[Part 1. FINANCIAL INFORMATION](index=3&type=section&id=Part%201.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements and management's analysis of its financial condition and operating results [Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents Alerus Financial Corporation's unaudited consolidated financial statements and detailed notes for the periods ended June 30, 2023 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$3.83 billion** driven by loan growth, while deposits slightly decreased and short-term borrowings rose Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 (Unaudited) | December 31, 2022 (Audited) | | :--- | :--- | :--- | | **Total Assets** | **$3,832,978** | **$3,779,637** | | Net loans | $2,497,826 | $2,412,848 | | Total investment securities (AFS & HTM) | $985,870 | $1,039,226 | | **Total Liabilities** | **$3,475,293** | **$3,422,765** | | Total deposits | $2,852,855 | $2,915,484 | | Short-term borrowings | $492,060 | $378,080 | | **Total Stockholders' Equity** | **$357,685** | **$356,872** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net income for Q2 2023 slightly decreased to **$9.1 million** due to lower noninterest and net interest income Income Statement Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $22,234 | $22,776 | $45,892 | $44,449 | | Provision for credit losses | $0 | $0 | $550 | $0 | | Noninterest income | $25,778 | $29,226 | $51,031 | $58,696 | | Noninterest expense | $36,373 | $39,984 | $74,242 | $78,055 | | **Net income** | **$9,104** | **$9,293** | **$17,290** | **$19,477** | | Diluted EPS | $0.45 | $0.52 | $0.85 | $1.10 | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income improved significantly to **$4.7 million** in Q2 2023, driven by a smaller other comprehensive loss Comprehensive Income (Loss) Summary (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $9,104 | $9,293 | $17,290 | $19,477 | | Other comprehensive income (loss), net of tax | $(4,435) | $(28,081) | $(2,101) | $(66,150) | | **Total comprehensive income (loss)** | **$4,669** | **$(18,788)** | **$15,189** | **$(46,673)** | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity slightly increased to **$357.7 million**, influenced by net income, share repurchases, dividends, and an accounting principle change - For the six months ended June 30, 2023, stockholders' equity was impacted by a **$4.5 million** reduction to retained earnings due to the adoption of a new accounting principle (CECL)[13](index=13&type=chunk) - Key activities affecting equity in the first six months of 2023 included **$17.3 million** in net income, **$7.4 million** in common stock dividends, and **$3.3 million** in common stock repurchases[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was **$12.0 million**, with investing activities using **$45.4 million** and financing providing **$40.6 million** Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $12,000 | $17,731 | | Net cash used in investing activities | $(45,383) | $(157,962) | | Net cash provided (used) by financing activities | $40,612 | $(65,037) | | **Net change in cash and cash equivalents** | **$7,229** | **$(205,268)** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section details accounting policies, including CECL adoption, and provides insights into investment securities, loans, and segment reporting - The company operates as a diversified financial services company with four distinct business lines: banking, retirement and benefit services, wealth management, and mortgage[21](index=21&type=chunk) - The company qualifies as an "emerging growth company" under the JOBS Act and has elected to use the extended transition period for complying with new or revised accounting standards[27](index=27&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Q2 2023 financial performance, highlighting net interest margin pressure, declining mortgage revenue, expense management, and strong asset quality - The company generates a majority of its overall revenue from noninterest income, driven by its retirement and benefit services, wealth management, and mortgage business lines[161](index=161&type=chunk) - Net income for Q2 2023 was **$9.1 million**, a **2%** decrease from Q2 2022, primarily due to a **$3.4 million** decrease in noninterest income and a **$0.5 million** decrease in net interest income, partially offset by a **$3.6 million** decrease in noninterest expense[174](index=174&type=chunk) - Total assets increased by **$53.3 million** (**1.4%**) to **$3.8 billion** since year-end 2022, driven by an **$89.5 million** increase in loans[194](index=194&type=chunk) [Operating Results Overview](index=49&type=section&id=Operating%20Results%20Overview) Key Q2 2023 performance metrics include a **0.96%** ROA, **13.71%** ROTCE, **2.52%** net interest margin, and **53.69%** noninterest income as a percentage of revenue Key Performance Ratios | Performance Ratio | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Return on average total assets | 0.96% | 1.14% | | Return on average tangible common equity (Non-GAAP) | 13.71% | 15.25% | | Net interest margin (taxable-equivalent) | 2.52% | 2.98% | | Efficiency ratio (Non-GAAP) | 72.79% | 74.72% | | Noninterest income as a % of revenue | 53.69% | 56.20% | [Net Interest Income](index=52&type=section&id=Net%20Interest%20Income) Net interest income decreased by **2.4%** to **$22.2 million** in Q2 2023, with net interest margin compressing to **2.52%** due to rising interest expenses - Net interest income decreased by **$542 thousand** (**2.4%**) YoY to **$22.2 million** in Q2 2023[177](index=177&type=chunk) - The net interest margin (FTE) for Q2 2023 was **2.52%**, a decrease from **2.98%** in Q2 2022, due to rising costs of interest-bearing liabilities[177](index=177&type=chunk) Rate/Volume Analysis of Net Interest Income Change (Q2 2023 vs Q2 2022, in thousands) | Description | Change due to Volume | Change due to Rate | Total Interest Variance | | :--- | :--- | :--- | :--- | | Total interest income | $5,254 | $10,700 | $15,954 | | Total interest expense | $902 | $15,554 | $16,456 | | **Change in net interest income** | **$4,352** | **$(4,854)** | **$(502)** | [Noninterest Income](index=55&type=section&id=Noninterest%20Income) Total noninterest income decreased by **11.8%** to **$25.8 million** in Q2 2023, primarily due to a **$3.1 million** drop in mortgage banking revenue Noninterest Income Breakdown (in thousands) | Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | Retirement and benefit services | $15,890 | $16,293 | | Wealth management | $5,449 | $5,548 | | Mortgage banking | $2,905 | $6,038 | | Other | $1,534 | $1,347 | | **Total noninterest income** | **$25,778** | **$29,226** | - The decrease in noninterest income was primarily driven by a **$3.1 million** decline in mortgage banking revenue, as originations decreased by **$158.1 million** (**58.7%**) compared to 2022[188](index=188&type=chunk) [Noninterest Expense](index=57&type=section&id=Noninterest%20Expense) Total noninterest expense decreased by **9%** to **$36.4 million** in Q2 2023, mainly due to lower compensation and employee benefits Noninterest Expense Breakdown (in thousands) | Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | Compensation | $18,847 | $21,248 | | Employee taxes and benefits | $4,724 | $5,787 | | Business services, software and technology | $5,269 | $4,785 | | Professional fees and assessments | $1,530 | $2,246 | | Other | $6,003 | $5,888 | | **Total noninterest expense** | **$36,373** | **$39,984** | - The number of full-time equivalent employees was reduced by **65**, or **8.1%**, from Q2 2022 (after adjusting for the Metro Phoenix Bank acquisition), contributing to lower expenses[191](index=191&type=chunk) [Financial Condition](index=58&type=section&id=Financial%20Condition) Total assets reached **$3.8 billion** driven by loan growth, while deposits decreased, and asset quality and capital ratios remained strong - Total loans grew by **$89.5 million** (**3.7%**) since year-end 2022, primarily driven by a **$122.2 million** increase in commercial real estate loans[195](index=195&type=chunk) - Nonperforming assets decreased to **$2.6 million**, or **0.07%** of total assets, as of June 30, 2023, compared to **$3.8 million**, or **0.10%** of total assets, at year-end 2022[203](index=203&type=chunk) - Total deposits decreased by **$62.6 million** (**2.1%**) since year-end 2022, with a notable shift from noninterest-bearing deposits (down **$145.5 million**) to interest-bearing deposits (up **$82.8 million**)[218](index=218&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=68&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, managed through NII simulation and EVE sensitivity analysis, indicating liability sensitivity to rising rates - The company's primary market risk is interest rate risk, managed by the ALCO through NII simulation and EVE sensitivity analysis[230](index=230&type=chunk)[232](index=232&type=chunk) Net Interest Income Sensitivity Analysis (as of June 30, 2023) | Rate Shock | Change in NII (Next 12 Months) | Change in NII (Next 24 Months) | | :--- | :--- | :--- | | +400 bps | -35.0% | -18.2% | | +200 bps | -17.5% | -9.2% | | +100 bps | -8.5% | -4.1% | | -100 bps | +7.7% | +2.8% | Economic Value of Equity (EVE) Sensitivity Analysis | Rate Shock | Change in EVE (June 30, 2023) | Change in EVE (Dec 31, 2022) | | :--- | :--- | :--- | | +400 bps | -27.7% | -19.5% | | +200 bps | -14.6% | -10.4% | | +100 bps | -6.9% | -4.9% | | -100 bps | +5.7% | +4.0% | [Controls and Procedures](index=70&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The President and CEO, CFO, and Chief Accounting Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[235](index=235&type=chunk)[238](index=238&type=chunk) - There were no changes in internal control over financial reporting during the fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[239](index=239&type=chunk) [Part 2: OTHER INFORMATION](index=71&type=section&id=Part%202%3A%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity sales, and other disclosures [Legal Proceedings](index=71&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material pending legal proceedings beyond ordinary routine litigation incidental to its business - There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business[240](index=240&type=chunk) [Risk Factors](index=71&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K have occurred[241](index=241&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **170,046** shares of common stock at an average price of **$17.37** per share during Q2 2023 Issuer Repurchases of Equity Securities (Q2 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2023 | — | $— | | May 2023 | 62,513 | $16.13 | | June 2023 | 107,533 | $18.09 | | **Total** | **170,046** | **$17.37** | - The stock repurchase program, approved on February 18, 2021, authorizes the repurchase of up to **770,000** shares and is set to continue until February 28, 2024[243](index=243&type=chunk) [Other Information](index=72&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the quarter ended June 30, 2023 - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the fiscal quarter[245](index=245&type=chunk) [Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and iXBRL data files [Signatures](index=74&type=section&id=Signatures) The report is duly signed and authorized by the President and CEO, and the Executive Vice President and CFO, on August 3, 2023

Alerus EARNINGS PRESENTATION Q2 2023 NASDAQ: ALRS DISCLAIMERS Forward-Looking Statements Thispresentation 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, calculations, forecasts and projections with respect to the anticipated future performance of Alerus Financial Corporation. These statements are often, but not a ...

Financial Data and Key Metrics Changes - Net interest income declined by 6% on a linked quarter basis, now representing 46.3% of total revenues [13][14] - Non-interest income increased by 2.1% on a linked quarter basis, showing improvement across all income businesses [13] - Net interest margin decreased by 18 basis points to 2.52% due to rising funding costs [14] - Total loans grew by 1.9% from the prior quarter, driven by commercial and residential real estate [15] - Deposits declined by 5.9% from the prior quarter, primarily due to seasonal outflows from public funds [15] Business Line Data and Key Metrics Changes - The retirement business accounted for approximately 32% of total revenues, with assets under management increasing by 4.9% [18] - Wealth management revenues increased by 4.9% on a linked quarter basis, with assets under management also rising by 5% [19] - Mortgage revenues surged by 69% from the prior quarter, with originations increasing by over 43% [20] Market Data and Key Metrics Changes - The company’s uninsured deposits are at 23.6%, with a liquidity coverage ratio exceeding 300% [8][17] - Synergistic deposits sourced from wealth and retirement businesses grew by 27% year-over-year [16] Company Strategy and Development Direction - The company is focused on transforming into a top-performing commercial wealth bank and national retirement provider [3][4] - Alerus is optimizing its infrastructure while balancing investments, evidenced by a 4% linked quarter decline in non-interest expenses [6] - The company aims to leverage the SECURE Act 2.0 to expand its client base and improve margins [11] Management's Comments on Operating Environment and Future Outlook - Management noted near-term pressure on margins but emphasized prudent expense management [12] - The company expects modest loan growth for the remainder of the year due to rising interest rates impacting demand [15][33] - Management remains optimistic about the long-term embedded value in their diversified business model [12] Other Important Information - The company reduced its total headcount by 10% year-over-year, including the acquisition of Metro Phoenix Bank [6] - The company increased its dividend by 5.6% during the quarter [11] Q&A Session Summary Question: Non-interest expense outlook - Management indicated that non-interest expenses are expected to decrease in the low to mid-single digits for 2023, with some timing differences in compensation [25][26] Question: Loan growth expectations - Management noted that loan growth is expected to be modest due to slowing demand as interest rates rise [33] Question: Capital management and M&A - Management confirmed a focus on maintaining strong capital levels and ongoing conversations regarding potential M&A opportunities [37] Question: Non-performing loans and credit quality - Management stated that there is no significant pattern of deterioration in credit quality, with historically strong credit metrics [39] Question: Retirement platform engagement - Management emphasized that the engagement with consultants aims to enhance both revenue growth and operational efficiency [42][43] Question: Deposit growth expectations - Management expects public fund deposits to rebound in the second half of the year, despite recent outflows [53] Question: Mortgage market trends - Management indicated stable margins and volumes in the mortgage market, with expectations of a seasonal decline in the fourth quarter [62]

Financial Performance - For the three months ended March 31, 2023, the return on average total assets was 0.88%, down from 1.26% in the same period of 2022[197]. - The return on average common equity decreased to 9.17% from 11.78% year-over-year[197]. - Earnings per common share (diluted) for Q1 2023 was $0.40, a decrease from $0.57 in Q1 2022[197]. - Net income for the three months ended March 31, 2023, was $8.2 million, a decrease of $2.0 million, or 19.6%, compared to $10.2 million for the same period in 2022[206]. - The efficiency ratio increased to 74.53% from 72.25% in the same quarter of the previous year[197]. Income and Revenue - Noninterest income as a percentage of revenue increased to 51.63% compared to 57.62% in the prior year[197]. - Noninterest income for the three months ended March 31, 2023, was $25.3 million, a decrease from $29.5 million for the same period in 2022[206]. - Total interest income for the three months ended March 31, 2023, was $37.9 million, a $5.7 million decrease compared to $43.6 million for the same period in 2022, primarily due to a decrease in mortgage banking revenue[220]. - Noninterest income for the three months ended March 31, 2023, was $25.3 million, a 14.3% decrease from $29.5 million in the same period in 2022, driven by a $3.2 million decrease in mortgage banking revenue and a $2.2 million decrease in retirement and benefit services revenue[220]. Assets and Liabilities - Total assets as of March 31, 2023, were $3,886,773, an increase from $3,336,199 as of March 31, 2022[205]. - Loans increased to $2,486,625 as of March 31, 2023, compared to $1,818,042 as of March 31, 2022[205]. - Deposits as of March 31, 2023, were $3,886,773, up from $3,336,199 as of March 31, 2022[205]. - Total assets increased to $3.9 billion as of March 31, 2023, reflecting a growth of $107.1 million, or 2.8%, compared to December 31, 2022[226]. - Total loans outstanding reached $2.5 billion as of March 31, 2023, an increase of $42.6 million, or 1.7%, from December 31, 2022[230]. Loan and Credit Quality - The provision for credit loss expense for the three months ended March 31, 2023, was $550 thousand, an increase of $550 thousand compared to the same period in 2022, reflecting changes in forecasting assumptions[217]. - Nonperforming loans decreased to $2,118 thousand as of March 31, 2023, from $3,794 thousand as of December 31, 2022, a reduction of 44.3%[239]. - The allowance for credit losses on loans increased to $35,102 thousand as of March 31, 2023, from $31,713 thousand as of December 31, 2022, reflecting a rise of 10.0%[244]. - The ratio of nonperforming loans to total loans improved to 0.09% as of March 31, 2023, down from 0.16% as of December 31, 2022[239]. Capital and Equity - Stockholders' equity increased by $2.2 million, or 0.6%, to $359.1 million as of March 31, 2023[263]. - Common equity tier 1 capital to risk-weighted assets decreased to 13.30% as of March 31, 2023, from 13.39% as of December 31, 2022[263]. - Total capital to risk-weighted assets increased to 16.50% as of March 31, 2023, compared to 16.48% at the end of 2022[268]. Future Outlook - The company anticipates that net interest income and net interest margin will remain under pressure in future periods due to expected increases in the target federal funds interest rate[210]. - The company anticipates that noninterest income will be adversely affected in future periods due to increasing interest rates and inflationary pressures[221]. - The company anticipates that loan growth will slow down in future periods due to the increasing interest rate environment and competition in market areas[232].

Alerus Financial Corporation (NASDAQ:ALRS) Q1 2023 Earnings Conference Call April 27, 2023 ET Company Participants Katie Lorenson - President, Chief Executive Officer Alan Villalon - Chief Financial Officer Karin Taylor - Chief Risk Officer Jim Collins - Chief Banking and Revenue Officer Karen Bohn - Independent Director Barret Lahm - Treasurer Conference Call Participants Jeff Rulis - D.A. Davidson Eric Spector - Raymond James Nathan Race - Piper Sandler Damon DelMonte - Keefe, Bruyette, & Woods Operator ...

Alerus EARNINGS PRESENTATION Q1 2023 NASDAQ: ALRS 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, calculations, forecasts and projections with respect to the anticipated future performance of Alerus Financial Corporation. These statements are often, but not ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39036 ALERUS FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 45-0375407 (State or other juri ...

Alerus Financial Corporation (NASDAQ:ALRS) Q4 2022 Earnings Conference Call January 26, 2023 12:00 PM ET Company Participants Katie Lorenson - President, Chief Executive Officer Alan Villalon - Chief Financial Officer Karin Taylor - Chief Risk Officer Jim Collins - Chief Banking and Revenue Officer Karen Bohn - Independent Director Conference Call Participants Jeff Rulis - D.A. Davidson Nathan Race - Piper Sandler Eric Grubelich - Private Investor Ben Gerlinger - Hovde Group Operator Good morning or good af ...

Alerus EARNINGS PRESENTATION 4Q 2022 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, calculations, forecasts and projections with respect to the anticipated future performance of Alerus Financial Corporation. These statements are often, but not always, ident ...