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 ...

Alerus Financial Corporation (NASDAQ:ALRS) Q3 2022 Earnings Conference Call October 27, 2022 12:00 PM ET Company Representatives Katie Lorenson - President, Chief Executive Officer Jim Collins - Chief Banking and Revenue Officer Al Villalon - Chief Financial Officer Conference Call Participants Jeff Rulis - D.A. Davidson Nathan Race - Piper Sandler Operator Hello everyone! And welcome to the Alerus Financial Corporation Earnings Conference Call. [Operator Instructions] Please note, this event is being recor ...

Alerus Financial Corporation (NASDAQ:ALRS) Q2 2022 Earnings Conference Call July 28, 2022 12:00 PM ET Company Participants Katie Lorenson - President & Chief Executive Officer Alan Villalon - Executive Vice President & Chief Financial Officer Karin Taylor - Executive Vice President & Chief Risk Management Officer Conference Call Participants Ben Gerlinger - Hovde Group Jeff Rulis - D.A. Davidson Nathan Race - Piper Sandler Operator Good afternoon and welcome to the Alerus Financial Corporation Earnings Conf ...

Part I - FINANCIAL INFORMATION [Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents Alerus Financial Corporation's unaudited consolidated financial statements for Q1 2022, including balance sheets, income, comprehensive income, equity, and cash flow statements, with detailed notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased slightly to **$3.34 billion** as of March 31, 2022, primarily due to reduced cash, while stockholders' equity significantly declined to **$328.5 million** from unrealized losses on available-for-sale securities Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2022 (Unaudited) | December 31, 2021 (Audited) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $132,832 | $242,311 | | Net loans | $1,786,329 | $1,726,448 | | Investment securities (AFS & HTM) | $1,206,483 | $1,205,710 | | **Total assets** | **$3,336,199** | **$3,392,691** | | **Liabilities & Equity** | | | | Total deposits | $2,892,267 | $2,920,551 | | Total liabilities | $3,007,694 | $3,033,288 | | Accumulated other comprehensive income (loss) | ($42,324) | ($4,255) | | **Total stockholders' equity** | **$328,505** | **$359,403** | | **Total liabilities and stockholders' equity** | **$3,336,199** | **$3,392,691** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net income for Q1 2022 decreased by **33.1%** to **$10.2 million**, primarily driven by a significant **$12.2 million** reduction in mortgage banking noninterest income, while net interest income remained stable Quarterly Income Statement Summary (in thousands, except per share data) | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Net interest income | $21,673 | $22,038 | | Provision for loan losses | $0 | $0 | | Noninterest income | $29,470 | $40,881 | | *Mortgage banking* | *$4,931* | *$17,132* | | Noninterest expense | $38,071 | $43,042 | | **Net income** | **$10,184** | **$15,215** | | **Diluted EPS** | **$0.57** | **$0.86** | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The company reported a total comprehensive loss of **$27.9 million** for Q1 2022, primarily due to a **$38.1 million** other comprehensive loss from unrealized losses on available-for-sale securities, offsetting net income Quarterly Comprehensive Income (Loss) (in thousands) | Item | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Net Income | $10,184 | $15,215 | | Other comprehensive income (loss), net of tax | ($38,069) | ($13,594) | | **Total comprehensive income (loss)** | **($27,885)** | **$1,621** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents decreased by **$109.5 million** in Q1 2022, driven by net cash used in investing activities for securities purchases and financing activities from deposit decreases and dividend payments Quarterly Cash Flow Summary (in thousands) | Activity | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $34,847 | $54,841 | | Net cash used in investing activities | ($112,592) | ($180,370) | | Net cash provided by financing activities | ($31,734) | $142,784 | | **Net change in cash and cash equivalents** | **($109,479)** | **$17,255** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, investment portfolio unrealized losses, loan growth with stable credit quality, a sharp decline in mortgage banking income, and regulatory capital remaining well above minimums - The investment portfolio's total unrealized losses significantly increased from **$15.5 million** at year-end 2021 to **$80.7 million** as of March 31, 2022, primarily due to changes in interest rates[41](index=41&type=chunk)[42](index=42&type=chunk)[45](index=45&type=chunk) - Total loans grew to **$1.82 billion** from **$1.76 billion** at year-end 2021, with criticized loans decreasing from **$21.2 million** to **$16.5 million**, representing **0.91%** of total loans[56](index=56&type=chunk)[207](index=207&type=chunk) - The Mortgage segment's net income before taxes sharply fell to **$620 thousand** in Q1 2022 from **$6.7 million** in Q1 2021, reflecting the slowdown in the mortgage market[109](index=109&type=chunk)[115](index=115&type=chunk) - The Company and the Bank remain well-capitalized, with a consolidated Total capital to risk-weighted assets ratio of **18.12%** as of March 31, 2022[125](index=125&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=50&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the Q1 2022 net income decrease primarily to a **$12.2 million** decline in mortgage banking revenue, while loan growth occurred and stockholders' equity decreased due to unrealized securities losses Key Performance Ratios | Performance Ratio | March 31, 2022 | March 31, 2021 | | :--- | :--- | :--- | | Return on average total assets | 1.26% | 2.02% | | Return on average common equity | 11.78% | 18.46% | | Noninterest income as a % of revenue | 57.62% | 64.97% | | Net interest margin (tax-equivalent) | 2.83% | 3.12% | | Efficiency ratio (non-GAAP) | 72.25% | 66.43% | - The primary driver for the year-over-year decrease in net income was a **$12.2 million** decrease in mortgage banking revenue, resulting from a **$331.3 million (63.9%)** decrease in mortgage originations[189](index=189&type=chunk) - Stockholders' equity decreased by **$30.9 million**, or **8.6%**, during the quarter, primarily due to a **$38.1 million** decrease in other comprehensive income from unrealized losses on available-for-sale securities caused by rising interest rates[229](index=229&type=chunk)[231](index=231&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=84&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest-rate risk through ALCO, using simulations that project a **2.1%** decrease in NII over 12 months but a **3.5%** increase over 24 months for a **+100 bps** rate shock, with EVE decreasing by **3.1%** Net Interest Income Sensitivity Analysis (as of March 31, 2022) | Rate Shock | % Change in NII (Next 12 months) | % Change in NII (Next 24 months) | | :--- | :--- | :--- | | +300 bps | -5.3% | +2.9% | | +200 bps | -3.8% | +3.1% | | +100 bps | -2.1% | +3.5% | | -100 bps | -4.5% | -5.6% | Economic Value of Equity (EVE) Sensitivity Analysis (as of March 31, 2022) | Rate Shock | % Change in EVE | | :--- | :--- | | +300 bps | -15.2% | | +200 bps | -8.7% | | +100 bps | -3.1% | | -100 bps | 0.0% | [Controls and Procedures](index=87&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting identified during the quarter - The President and Chief Executive Officer and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of the end of the period[257](index=257&type=chunk) - No material changes to the Company's internal control over financial reporting were identified during the first quarter of 2022[258](index=258&type=chunk) Part II - OTHER INFORMATION [Legal Proceedings](index=87&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material pending legal proceedings beyond routine litigation incidental to its business - There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business[259](index=259&type=chunk) [Risk Factors](index=87&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, were reported - No material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K filed on March 11, 2022, were reported[260](index=260&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=87&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities, with **20,631 shares** repurchased at an average price of **$29.43** per share during Q1 2022, solely for employee tax withholding on vested restricted stock Issuer Repurchases of Equity Securities (Q1 2022) | Month | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Publicly Announced Plan | | :--- | :--- | :--- | :--- | | January | 240 | $29.28 | 0 | | February | 20,391 | $29.43 | 0 | | March | 0 | N/A | 0 | | **Total** | **20,631** | **$29.43** | **0** | - The stock repurchase program, authorizing up to **770,000 shares**, remains active with no shares repurchased under it during the quarter[262](index=262&type=chunk) [Exhibits](index=89&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, employment agreements, and required CEO and CFO certifications - Exhibits filed include CEO and CFO certifications required by the Sarbanes-Oxley Act (Exhibits 31.1, 31.2, 32.1, 32.2) and iXBRL data files[265](index=265&type=chunk) Signatures [Signatures](index=90&type=section&id=Signatures_summary) The Form 10-Q report was duly authorized and signed on May 6, 2022, by Katie A. Lorenson, President and Chief Executive Officer, and Alan A. Villalon, Executive Vice President and Chief Financial Officer

Alerus Financial Corporation (NASDAQ:ALRS) Q1 2022 Earnings Conference Call April 28, 2022 10:00 AM ET Company Participants Katie Lorenson - President & CEO Alan Villalon - CFO Karin Taylor - Chief Risk Officer Conference Call Participants Jeff Rulis - D.A. Davidson Nathan Race - Piper Sandler Operator Good morning, and welcome to the Alerus Financial Corporation Earnings Conference Call. All participants will be in listen-only mode. [Operator instructions] After today's presentation, there will be an oppor ...