Acquisition and Divestitures - The acquisition of HMNF was completed on October 9, 2024, valued at approximately $128.8 million, resulting in former HMNF stockholders holding about 21.9% of the Company's outstanding common stock[223]. - During the three and nine months ended September 30, 2024, the Company incurred pre-tax acquisition expenses of $1.7 million and $2.3 million, respectively, related to the acquisition of HMNF[224]. - The Company entered into a purchase agreement to sell its South Fargo branch for $5.1 million, expecting to record a gain upon closing[226]. - The West Fargo branch is listed for sale at $3.8 million, with an expected sale within the next 12 months, also anticipating a gain on sale[226]. Financial Performance - Net income for the three months ended September 30, 2024, was $5,207,000, down from $6,208,000 in the previous quarter and $9,161,000 in the same period last year[231]. - The efficiency ratio improved to 80.29% for the three months ended September 30, 2024, compared to 72.50% in the previous quarter and 73.37% a year ago[231]. - The average return on average total assets was 0.57% for the three months ended September 30, 2024, down from 0.65% in the previous quarter and 0.75% a year ago[228]. - The company declared a dividend of $0.20 per common share for the three months ended September 30, 2024, consistent with the previous quarter and up from $0.19 a year ago[231]. - Net interest income for the three months ended September 30, 2024, was $22,542,000, compared to $24,001,000 for the previous quarter and $20,395,000 for the same period last year[231]. - Provision for credit losses was $1,661,000 for the three months ended September 30, 2024, down from $4,489,000 in the previous quarter and no provision in the same period last year[231]. - Noninterest income increased to $28,363,000 for the three months ended September 30, 2024, compared to $27,371,000 in the previous quarter and $28,407,000 in the same period last year[231]. Assets and Liabilities - Total assets as of September 30, 2024, were $4,298,080,000, slightly up from $4,297,294,000 in the previous quarter and significantly higher than $3,821,601,000 a year ago[229]. - Loans outstanding increased to $2,968,947,000 as of September 30, 2024, from $2,837,232,000 in the previous quarter and $2,544,836,000 a year ago[229]. - Deposits reached $3,264,138,000 as of September 30, 2024, compared to $3,230,699,000 in the previous quarter and $2,844,758,000 a year ago[229]. - The Company’s long-term debt stands at $58.956 million as of the latest reporting period[208]. - Total common stockholders' equity reached $386,486,000 as of September 30, 2024, an increase from $373,226,000 in June 30, 2024[234]. Revenue Streams - The Company generates a majority of its revenue from noninterest income, primarily from retirement and benefit services and wealth management[217]. - The Company’s business model is designed to produce strong financial performance and a diversified revenue stream[217]. - Total tax-equivalent revenue for the nine months ended September 30, 2024, was $150,634 thousand, up from $146,170 thousand for the same period last year, representing a growth of 3.4%[235]. - The adjusted noninterest income for the nine months ended September 30, 2024, was $80,581 thousand, compared to $75,468 thousand for the same period last year, reflecting a growth of 6.5%[236]. Credit Risk Management - The Company emphasizes the importance of managing credit risk, particularly in the commercial real estate portfolio[210]. - The Company’s strategy for credit risk management includes centralized credit policies and ongoing risk monitoring, emphasizing diversification across geographic and industry levels[297]. - The Company utilizes an internal lending division, Special Credit Services, to manage individual nonperforming loans[297]. - The total loans with fixed interest rates amount to $1,673.4 million, while loans with floating interest rates total $1,358.9 million[295]. Nonperforming Loans and Allowance for Credit Losses - Nonperforming loans rose to $48,026 thousand as of September 30, 2024, compared to $8,735 thousand on December 31, 2023, indicating a significant increase of 450%[300]. - The allowance for credit losses (ACL) on loans at the end of the period was $39,142 thousand, up from $36,290 thousand, reflecting a 5% increase[307]. - Nonperforming loans to total loans ratio increased to 1.58% as of September 30, 2024, compared to 0.32% on December 31, 2023[301]. - The ACL on loans to nonperforming loans ratio decreased to 81.50% as of September 30, 2024, down from 402.91% on December 31, 2023[307]. Deposits and Liquidity - Total deposits increased by $227.9 million, or 7.4%, to $3.3 billion as of September 30, 2024, compared to December 31, 2023[314]. - Interest-bearing deposits rose by $300.4 million, while noninterest-bearing deposits decreased by $67.9 million during the same period[314]. - The company's total uninsured deposits were approximately $1.3 billion as of September 30, 2024, up from approximately $1.1 billion as of December 31, 2023[319]. - The Company had on-balance sheet liquidity of $424.8 million as of September 30, 2024, a decrease from $668.2 million as of December 31, 2023[330]. Future Outlook - The company anticipates that net interest income and adjusted net interest margin will increase in future periods due to expected interest rate cuts lowering funding costs[245]. - The company expects mortgage revenue to increase in future periods due to recent and anticipated interest rate cuts[255]. - The company anticipates continued loan growth in the commercial and industrial and CRE loan portfolios for the remainder of 2024 due to recently added production talent[281].

Alerus (ALRS) reported $50.91 million in revenue for the quarter ended September 2024, representing a year-over-year increase of 4.3%. EPS of $0.26 for the same period compares to $0.45 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $52.3 million, representing a surprise of -2.67%. The company delivered an EPS surprise of -40.91%, with the consensus EPS estimate being $0.44.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Stre ...

Company Performance - Alerus reported quarterly earnings of $0.26 per share, missing the Zacks Consensus Estimate of $0.44 per share, and down from $0.45 per share a year ago, representing an earnings surprise of -40.91% [1] - The company posted revenues of $50.91 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 2.67%, but up from $48.8 million year-over-year [2] - Over the last four quarters, Alerus has surpassed consensus EPS estimates only once, while it has topped consensus revenue estimates three times [2] Market Comparison - Alerus shares have increased by approximately 6.7% since the beginning of the year, compared to the S&P 500's gain of 22.1% [3] - The current Zacks Rank for Alerus is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.15 on revenues of $62.45 million, and for the current fiscal year, it is $1.21 on revenues of $213.75 million [7] - The outlook for the Financial - Miscellaneous Services industry, to which Alerus belongs, is currently in the bottom 43% of over 250 Zacks industries, which may impact stock performance [8]

[Overview of Q3 2024 Performance](index=1&type=section&id=Overview%20of%20Q3%202024%20Performance) Alerus Financial Corporation reported a net income of $5.2 million for Q3 2024, marked by growth in loans and deposits, and the strategic acquisition of HMN Financial [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Alerus Financial Corporation reported a net income of $5.2 million, or $0.26 per diluted share, for the third quarter of 2024, reflecting a decrease from prior periods despite growth in loans, deposits, and assets under administration Q3 2024 Key Financial Results | Metric | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Net Income | $5.2 million | $6.2 million | $9.2 million | | Diluted EPS | $0.26 | $0.31 | $0.45 | - Total loans grew to **$3.0 billion**, an increase of **9.9%** since year-end 2023, while total deposits increased by **7.4%** to **$3.3 billion** over the same period[6](index=6&type=chunk) - Assets under administration/management (AUA/M) reached **$45.6 billion**, a **4.8% increase** from the previous quarter[6](index=6&type=chunk) - Tangible book value per common share (non-GAAP) increased by **6.7%** from year-end 2023 to **$16.50**[6](index=6&type=chunk) - The company repaid its Bank Term Funding Program (BTFP) borrowings during the year, having earned **$1.2 million** in risk-free net interest income from the program year-to-date[6](index=6&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Katie Lorenson highlighted the successful closing of the company's largest acquisition, expanding into Southern Minnesota, alongside significant year-to-date growth across key business lines - The company closed its 26th and largest acquisition, expanding into the Rochester and Southern Minnesota markets with a strong core deposit base[2](index=2&type=chunk) - Significant year-to-date growth was achieved in key segments: retirement and benefits business grew over **19%**, wealth management by **18%**, loans by nearly **10%**, and deposits by over **7%**[3](index=3&type=chunk) - Credit quality normalization continued, with two large relationships driving an increase in nonaccrual loans; however, net charge-offs to average loans were minimal at **0.04%** for the quarter, and reserves to loans remained stable at **1.29%**[4](index=4&type=chunk) - Strategic focus is on efficient headcount management, balancing investments in talent and technology, while maintaining a strong balance sheet and capital levels[5](index=5&type=chunk) [HMN Financial Acquisition](index=2&type=section&id=HMN%20Financial%20Acquisition) On October 9, 2024, Alerus completed its largest-ever bank acquisition of HMN Financial, Inc., significantly expanding its footprint into Rochester, Minnesota, and increasing total assets to over $5.5 billion Post-Acquisition Company Scale | Metric | Amount | | :--- | :--- | | Total Assets | > $5.5 billion | | Total Loans | $3.8 billion | | Total Deposits | $4.3 billion | | AUA/M | ~$43.6 billion | | Locations | 29 | [Financial Performance Analysis](index=3&type=section&id=Financial%20Performance%20Analysis) The company's Q3 2024 financial performance was characterized by declining net interest income, a slight increase in noninterest income, and a significant rise in noninterest expenses [Results of Operations](index=3&type=section&id=Results%20of%20Operations) The company's operational results in Q3 2024 were marked by a decline in net interest income due to margin compression and higher funding costs, a slight quarterly increase in noninterest income, and a significant rise in noninterest expenses Key Performance Ratios (Q3 2024) | Ratio | Value | | :--- | :--- | | Return on average total assets | 0.48% | | Return on average common equity | 5.52% | | Net interest margin (tax-equivalent) | 2.23% | | Efficiency ratio | 80.29% | | Dividend payout ratio | 76.92% | [Net Interest Income](index=3&type=section&id=Net%20Interest%20Income) Net interest income (NII) for Q3 2024 was $22.5 million, a 6.1% decrease from Q2 2024, driven by lower purchase accounting accretion and higher deposit costs, with net interest margin compressing to 2.23% - NII decreased by **$1.5 million (6.1%)** from Q2 2024, primarily due to lower income from cash balances, reduced purchase accounting accretion, and higher interest expense on deposits[9](index=9&type=chunk) - NII increased by **$2.1 million (10.5%)** from Q3 2023, as strong loan growth and higher yields outweighed a significant increase in interest expense[10](index=10&type=chunk) - Net interest margin (tax-equivalent) fell by **16 basis points** QoQ to **2.23%**, attributed to less purchase accounting accretion, the impact of nonaccrual loans, and higher cost of funds[11](index=11&type=chunk) [Noninterest Income](index=4&type=section&id=Noninterest%20Income) Noninterest income was $28.4 million in Q3 2024, a 3.6% increase from Q2 2024, boosted by growth in wealth management revenue and a gain on asset sale, but remained flat year-over-year due to a prior-year divestiture gain - Noninterest income increased by **$1.0 million** QoQ, driven by a **5.1% increase** in wealth revenues and a **$0.6 million gain** on the sale of the Shorewood, Minnesota office[12](index=12&type=chunk) - Compared to Q3 2023, noninterest income was nearly flat, decreasing by **$44 thousand**, as a **$2.5 million decline** in retirement and benefit services revenue due to a prior-year divestiture gain offset a **26.8% increase** in wealth revenues[14](index=14&type=chunk) [Noninterest Expense](index=5&type=section&id=Noninterest%20Expense) Noninterest expense for Q3 2024 rose to $42.4 million, a 9.5% increase from Q2 2024 and a 13.9% increase from Q3 2023, primarily due to merger-related costs and higher compensation - Expenses increased by **$3.7 million (9.5%)** QoQ, with professional fees rising **79.8%** due to **$1.1 million** in HMNF merger-related costs, and compensation also increasing by **$0.8 million**[15](index=15&type=chunk) - Expenses increased by **$5.2 million (13.9%)** YoY, primarily due to **$1.7 million** in merger-related expenses, a **$2.0 million increase** in compensation, and higher FDIC assessments[16](index=16&type=chunk) [Financial Condition](index=5&type=section&id=Financial%20Condition) Alerus's financial condition as of Q3 2024 shows asset and loan growth, a shift in deposit mix, a significant increase in nonperforming assets, and strong capital levels [Balance Sheet Overview](index=5&type=section&id=Balance%20Sheet%20Overview) As of September 30, 2024, total assets stood at $4.1 billion, an increase of 4.5% since year-end 2023, primarily fueled by loan growth despite decreases in cash and investment securities - Total assets increased by **$176.9 million** from December 31, 2023, to **$4.1 billion**[17](index=17&type=chunk) - The asset growth was driven by a **$272.8 million increase** in loans, while cash and cash equivalents decreased by **$63.9 million** and investment securities fell by **$35.6 million**[17](index=17&type=chunk) [Loan Portfolio](index=5&type=section&id=Loan%20Portfolio) The loan portfolio grew to $3.0 billion at the end of Q3 2024, a 9.9% increase from year-end 2023, with broad-based growth across commercial lending categories - Total loans increased by **$272.8 million** since December 31, 2023, reaching **$3.0 billion**[18](index=18&type=chunk) Loan Growth by Category (vs. Dec 31, 2023) | Loan Category | Increase | | :--- | :--- | | Non-owner occupied CRE | $116.7 million | | Construction, land & development CRE | $49.6 million | | Commercial and industrial | $44.1 million | | Multifamily CRE | $30.3 million | [Deposit Portfolio](index=7&type=section&id=Deposit%20Portfolio) Total deposits reached $3.3 billion as of September 30, 2024, a 7.4% increase since year-end 2023, driven entirely by interest-bearing accounts and new commercial relationships, with no brokered deposits - Total deposits grew by **$227.9 million** from December 31, 2023, driven by new and expanded commercial relationships[21](index=21&type=chunk) - There was a notable mix shift: interest-bearing deposits grew by **$298.5 million**, while noninterest-bearing deposits decreased by **$70.5 million** since year-end 2023[21](index=21&type=chunk) - Synergistic deposits (from other business lines) grew by **$69.1 million (8.1%)** to **$920.6 million** since year-end 2023[21](index=21&type=chunk) [Asset Quality](index=7&type=section&id=Asset%20Quality) Asset quality showed signs of stress with total nonperforming assets surging to $48.0 million, primarily due to three large relationships moving to nonaccrual status, though the allowance for credit losses remained stable - Total nonperforming assets surged by **$39.3 million** since year-end 2023 to **$48.0 million**[22](index=22&type=chunk) - The increase in NPAs was primarily driven by three large relationships: a **$25.0 million** construction loan, a large residential real estate relationship, and one CRE non-owner occupied loan, which together contributed over **$38.6 million** to nonaccrual loans[22](index=22&type=chunk) Asset Quality Metrics | Metric | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Nonperforming loans to total loans | 1.58% | 0.32% | | Allowance for credit losses to total loans | 1.29% | 1.30% | | Net charge-offs to average loans (Q3'24 vs Q4'23) | 0.04% | (0.04)% | - The company recorded a provision for credit losses of **$1.7 million** in Q3 2024, compared to **$4.5 million** in Q2 2024 and zero in Q3 2023, driven by loan growth and the increase in nonaccrual loans[24](index=24&type=chunk)[25](index=25&type=chunk) [Capital](index=8&type=section&id=Capital) The company's capital position remains strong, with total stockholders' equity increasing to $386.5 million, improved tangible book value per share, and regulatory capital ratios well above 'well capitalized' minimums - Total stockholders' equity increased by **$17.4 million** since December 31, 2023, driven by a **$10.2 million improvement** in AOCI and a **$6.2 million increase** in retained earnings[25](index=25&type=chunk) Key Capital Metrics | Metric | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Tangible book value per share (non-GAAP) | $16.50 | $15.46 | | Tangible common equity to tangible assets (non-GAAP) | 8.11% | 7.94% | | Common equity tier 1 capital to risk weighted assets | 11.12% | 11.82% | [Supplementary Information and Financial Statements](index=9&type=section&id=Supplementary%20Information%20and%20Financial%20Statements) This section provides details on the upcoming conference call, company overview, consolidated financial statements, and non-GAAP reconciliations for enhanced financial analysis [Conference Call and Company Information](index=9&type=section&id=Conference%20Call%20and%20Company%20Information) Alerus Financial Corporation will host a conference call on October 30, 2024, to discuss Q3 2024 financial results, highlighting its role as a commercial wealth bank and national retirement services provider with 29 offices - A conference call to discuss Q3 2024 financial results is scheduled for **11:00 a.m. Central Time on Wednesday, October 30, 2024**[27](index=27&type=chunk) - Alerus provides banking, wealth services, and retirement and benefit plans through its subsidiary, Alerus Financial, N.A., with **29 locations** in states including North Dakota, Minnesota, Arizona, Iowa, and Wisconsin[28](index=28&type=chunk)[29](index=29&type=chunk) [Consolidated Financial Statements](index=12&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements provide detailed financial data, including the balance sheet as of September 30, 2024, showing total assets of $4.08 billion, and the income statement for Q3 2024, detailing the $5.2 million net income Consolidated Balance Sheet Highlights (Sep 30, 2024) | Account | Amount (thousands) | | :--- | :--- | | Total Assets | $4,084,640 | | Net Loans | $2,993,201 | | Total Deposits | $3,323,550 | | Total Liabilities | $3,698,154 | | Total Stockholders' Equity | $386,486 | Consolidated Income Statement Highlights (Q3 2024) | Account | Amount (thousands) | | :--- | :--- | | Net Interest Income | $22,542 | | Provision for Credit Losses | $1,661 | | Total Noninterest Income | $28,363 | | Total Noninterest Expense | $42,447 | | Net Income | $5,207 | [Non-GAAP Reconciliations and Analysis](index=9&type=section&id=Non-GAAP%20Reconciliations%20and%20Analysis) The report includes extensive reconciliations of non-GAAP financial measures to their nearest GAAP equivalents, providing investors with a clearer view of capital adequacy and financial performance through adjusted metrics and detailed analysis of net interest margin components - The company provides non-GAAP measures such as tangible book value per common share, return on average tangible common equity, and adjusted efficiency ratio to offer a clearer view of performance[30](index=30&type=chunk) - Detailed tables reconcile GAAP to non-GAAP figures, for example, calculating tangible common equity by subtracting goodwill and other intangible assets from total common stockholders' equity[39](index=39&type=chunk)[40](index=40&type=chunk) - An analysis of average balances, yields, and rates is included, breaking down the components of interest income and expense to explain the net interest margin[44](index=44&type=chunk)[45](index=45&type=chunk)

Alerus Financial (ALRS) is looking like an interesting pick from a technical perspective, as the company reached a key level of support. Recently, ALRS's 50-day simple moving average crossed above its 200-day simple moving average, known as a "golden cross."A golden cross is a technical chart pattern that can signify a potential bullish breakout. It's formed from a crossover involving a security's short-term moving average breaking above a longer-term moving average, with the most common moving averages bei ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2024 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-39036 | --- | --- | --- | |------------------------------------------------------------------|------------------------------------------------------------------ ...

Core Viewpoint - Investors in Alerus Financial Corporation (ALRS) should closely monitor the stock due to significant implied volatility in the options market, particularly for the Oct 18, 2024 $20 Put option [1] Company Analysis - Alerus Financial is currently rated as Zacks Rank 3 (Hold) within the Financial-Miscellaneous Services industry, which ranks in the top 37% of the Zacks Industry Rank [3] - Over the past 60 days, two analysts have raised their earnings estimates for the current quarter, while no analysts have decreased their estimates, resulting in an increase of the Zacks Consensus Estimate from 41 cents per share to 44 cents per share [3] Options Market Insights - The high implied volatility suggests that options traders are anticipating a significant price movement for Alerus Financial shares, indicating potential trading opportunities [4] - Seasoned options traders often seek out options with high implied volatility to sell premium, aiming to benefit from the decay of the option's value if the underlying stock does not move as much as expected [4]

Financial Data and Key Metrics Changes - The company reported net income of $6.2 million, or $0.31 per share, with pre-provision net revenue (PPNR) improving by 48% on a linked quarter basis [5][24] - Net interest income increased by approximately 8%, with adjusted net interest margin expanding by 13 basis points during the quarter [8][24] - Total fee income rose by 8.1%, contributing over 53% of total revenues [9][24] Business Line Data and Key Metrics Changes - Loans grew by 4.2%, with a loan-to-deposit ratio ending at 88% [7][24] - The retirement business saw total revenue increase by 2.7%, driven by asset-based and non-market-based fees [20] - Wealth management revenues increased by 4%, while assets under management decreased by 1.7% [21] Market Data and Key Metrics Changes - Deposits increased by 0.4% from the prior quarter, with non-interest bearing deposits growing by 1.3% [18][24] - The company experienced seasonal outflows from public funds but managed to drive organic deposit growth to offset these outflows [18][24] Company Strategy and Development Direction - The company is focused on building its commercial wealth bank and diversifying its loan portfolio, with a target loan mix of 30% commercial and industrial (C&I), 30% consumer and residential, and the remainder in commercial real estate [12] - Alerus is progressing with the acquisition of HMN Financial, targeting a closing in the fourth quarter of the year [14][56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the credit environment, noting a gradual normalization towards historical levels and proactive measures in credit management [11][66] - The company anticipates continued improvement in net interest margin and strong organic loan growth, positioning itself for sustainable growth and increasing profitability [24][66] Other Important Information - The company raised its dividend by 5.3%, maintaining its status as a dividend aristocrat [13] - The allowance for loan losses remained at 1.31%, consistent with prior quarters [11] Q&A Session Summary Question: Inquiry about the construction credit that migrated - Management indicated that 25% is reserved against the credit, which is 80% complete, and they believe feasible options exist to complete the project [26][27] Question: Clarification on margin outlook - The company expects a few basis points of margin expansion next quarter, with a return to liability sensitivity as swaps roll off [28][30] Question: Equipment finance team integration and growth potential - The equipment finance team is expected to drive growth by leveraging relationships with mid-market companies, aiming for a 30% deposit capture from equipment notes [36][38] Question: Update on the HMN Financial acquisition - Integration is progressing well, with positive feedback from employees and customers, and the company is on track for a fourth-quarter close [55][56] Question: Expectations for charge-off levels - Management noted that charge-offs are expected to normalize, with the current quarter being somewhat idiosyncratic due to specific loans [48][49]

ALERUS INVESTOR PRESENTATION 2Q 2024 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 ...

Alerus (ALRS) reported $51.37 million in revenue for the quarter ended June 2024, representing a year-over-year increase of 7%. EPS of $0.31 for the same period compares to $0.45 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $49.2 million, representing a surprise of +4.42%. The company delivered an EPS surprise of -16.22%, with the consensus EPS estimate being $0.37.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expe ...