Alerus(US:ALRS)2020-05-02 03:01Financial Data and Key Metrics Changes - The company reported a total capital ratio exceeding 10% at the end of Q1 2020, with an allowance to total loan ratio of 1.54% and a nonperforming assets to assets ratio of 0.29% [20][26] - The loan-to-deposit ratio was just under 83% with a solid loan growth of 2% for the quarter [28] - The net interest margin (NIM) dropped by 10 basis points, primarily due to changes in earning asset mix and lower asset yields [31] Business Line Data and Key Metrics Changes - The mortgage division achieved record-breaking total originations of over $229 million, representing an 82% year-over-year increase [32] - The retirement and benefits segment saw assets under administration decline to $27 billion from nearly $32 billion at the end of 2019, with a 21% decrease in assets with asset-based fees [34] - Wealth management revenue experienced a year-over-year increase of nearly 12%, despite a linked-quarter decline due to market conditions [35] Market Data and Key Metrics Changes - The company reported a significant increase in digital engagement, with banking client digital logins rising by 76% in mid-March [12] - The company has diversified its revenue streams, with close to 60% of revenue coming from fee-based areas of professional services, positioning it well against market fluctuations [18][19] Company Strategy and Development Direction - The company emphasized a conservative balance sheet and a diversified business model, which has allowed it to enter the current crisis with strong core operating earnings and credit quality [17][18] - Alerus plans to focus on employee safety and client service while maintaining a strong balance sheet, with intentions to pursue strategic opportunities when the timing is right [24][75] - The company has invested in technology to enhance client interactions and operational efficiency, which has proven beneficial during the pandemic [14][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertainty caused by the COVID-19 pandemic but expressed confidence in the company's ability to navigate through the crisis due to its strong foundation [24][75] - The leadership team highlighted the importance of maintaining a fortress balance sheet and core operating earnings to protect and enhance shareholder value [20][24] Other Important Information - The company has proactively reached out to clients, logging over 7,500 calls in response to the pandemic and hosting client webinars on financial topics [12][11] - Alerus has taken over 900 applications and funded over $300 million in loans through the SBA PPP program [13] Q&A Session Summary Question: What is the total exposure to most at-risk portfolios, particularly in hospitality or retail? - Management identified approximately $162 million in exposure to high-risk segments, including accommodation, food service, and retail [40] Question: How do you view the fee income contribution for the year? - Management expressed uncertainty regarding fee income due to market conditions but noted strong performance in mortgage applications [42][44] Question: What is the impact of PPP loans on margin going forward? - Management indicated that PPP loans would have a significant impact on margin, with expectations of stabilization and potential increase in 2020 [50] Question: Can you provide details on the breakdown of PPP loans between new and existing clients? - Approximately $40 million of the $300 million in PPP loans were to existing clients without prior lending relationships, with a focus on existing clients during the first round [54] Question: How does the shutdown impact the retirement and benefits business? - Management noted that while there is a solid pipeline, many clients have paused new business, which could strain future growth [70]