Alerus(US:ALRS)2021-03-11 16:00Financial Performance - As of December 31, 2020, Alerus Financial Corporation had total assets of $3.0 billion, total loans of $2.0 billion, and total deposits of $2.6 billion[21]. - The company reported $1.8 billion in mortgage originations for the year ended December 31, 2020[21]. - Noninterest income accounted for approximately 64.1% of total revenue for the year ended December 31, 2020, highlighting the company's reliance on fee-based services[177]. - The retirement and benefit services division experienced outflows of $6.8 billion in 2020, partially offset by inflows of $4.8 billion, indicating significant client turnover and market volatility[177]. - The company's 10 largest client relationships contributed approximately 11.6% of revenue in the retirement and benefit services business, emphasizing the risk of revenue loss if any major client terminates their relationship[193]. Assets and Loans - Core deposits totaled $2.5 billion, representing 97.5% of total deposits as of December 31, 2020[32]. - The company had mortgage loans held for sale amounting to $122.4 million as of December 31, 2020[36]. - Retirement and benefit services assets under administration/management totaled $25.0 billion as of December 31, 2020, representing approximately 76.0% of total retirement and benefit services assets[44]. - Approximately 61.3% of the total loan portfolio consisted of loans with real estate as a primary or secondary component of collateral, making the repayment highly dependent on real estate market conditions[152]. - Nonperforming loans totaled $5.1 million, or 0.26% of the total loan portfolio, as of December 31, 2020, which could negatively impact net interest income[162]. Capital and Regulatory Compliance - The Company and the Bank are subject to the Basel III Rule, which requires a minimum Common Equity Tier 1 Capital ratio of 4.5% of total risk-weighted assets[71]. - As of December 31, 2020, the Bank was well-capitalized, meeting all regulatory capital requirements and maintaining a capital conservation buffer of 2.5%[77]. - The Basel III Rule increased the required minimum capital ratios, with a total capital requirement of 8% of risk-weighted assets[71]. - The Company must maintain a Common Equity Tier 1 Capital ratio of 6.5% or more to be considered well-capitalized[76]. - The Federal Reserve requires bank holding companies to be well-capitalized and well-managed to effect interstate mergers or acquisitions[83]. Risk Management - The Bank's ability to manage credit risk is critical, with potential adverse effects on financial condition if credit risk is not effectively managed[139]. - The Bank is subject to the Community Reinvestment Act (CRA), which requires it to meet the credit needs of the entire community, including low- and moderate-income neighborhoods[121]. - The Bank's operational risk includes potential cybersecurity incidents and the effectiveness of its information security controls[134]. - The company is susceptible to fraudulent activity and cybersecurity-related incidents, which could result in financial losses and damage to reputation[200]. - Adverse economic conditions in the company's market areas could materially affect business, financial condition, and growth prospects[147]. Business Strategy and Growth - Alerus Financial Corporation's business model generates a majority of revenue from noninterest income, primarily from retirement and benefit services, wealth management, and mortgage segments[22]. - The "One Alerus" initiative aims to provide a cohesive client experience and enhance technology investments[25]. - The company plans to pursue organic growth by increasing loans, deposits, AUM, and AUA, but faces risks related to execution and market conditions[181]. - The company intends to expand through acquisitions of banks and financial services companies, but may encounter challenges in identifying suitable targets and securing regulatory approvals[182]. - The success of the company's growth strategies is contingent upon maintaining sufficient regulatory capital levels and favorable economic conditions in primary market areas[181]. Employee and Workforce - The company employs a total of 851 employees, with 794 being full-time and 57 part-time[46]. - The company has a diverse workforce, with 561 female employees and 290 male employees[46]. - The company’s compensation programs are designed to align employee compensation with company performance, including base salary and performance bonuses[51]. Market Presence - The company targets businesses with sales between $2.0 million and $100.0 million, focusing on specific high-priority industries[24]. - As of December 31, 2020, 93.5% of the loans in the loan portfolio were made to borrowers in North Dakota, Minnesota, and Arizona, indicating a high concentration risk in these states[148]. - The Twin Cities MSA had total deposits of $218.0 billion as of June 30, 2020, ranking as the 14th largest metropolitan statistical area in the U.S.[40]. - The Phoenix MSA had total deposits of $134.8 billion as of June 30, 2020, ranking as the 21st largest metropolitan statistical area in the U.S.[43].