Alerus(US:ALRS)2026-01-29 18:02Financial Data and Key Metrics Changes - The company reported a core return on assets (ROA) of 1.62% for the quarter and an adjusted ROA of 1.35% with an adjusted efficiency ratio of 64.45% [3][4] - Net interest income increased by 4.7% over the prior quarter, while adjusted non-interest income rose by 8.3% [17] - The tangible common equity (TCE) ratio improved to 8.72%, up from 8.24% in the prior quarter [25] Business Line Data and Key Metrics Changes - The retirement division generated total revenue of $17.3 million, a 4.6% increase over the prior quarter, driven by growth in asset and transaction-based fees [22] - The wealth management business saw revenues increase by 13.4% to $7.4 million, with end-of-quarter assets under management rising by 0.8% [24] - Core revenues from fee income grew by 7% year-over-year, maintaining over 40% of total revenues [9] Market Data and Key Metrics Changes - The company experienced a decline in loans by 1.3% over the previous quarter due to strategic downsizing of the loan portfolio [19] - Deposits decreased by 5%, primarily due to the calling in of broker deposits and other wholesale funding [20] - The loan-to-deposit ratio stood at 96.6%, with a deposit retention rate close to 95% since the acquisition of Home Federal [21] Company Strategy and Development Direction - The company aims for sustainable organic growth and a return to top-tier profitability, focusing on enhancing its commercial bank and improving returns [5][6] - A strategic entry into the mid-market commercial and industrial (C&I) space is expected to drive growth, with strong pipelines entering 2026 [7] - The company plans to double the number of wealth management advisors and invest in technology and AI to enhance scalability and improve margins [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic position and momentum as it enters 2026, highlighting strong core financial performance and successful execution of strategic initiatives [3][4] - The company anticipates loan growth in the mid-single digits and deposit growth in the low single digits for 2026, with a projected net interest margin of around 3.5% to 3.6% [26][27] - Management noted that the competitive environment for deposits is expected to remain strong, impacting net interest margin [79] Other Important Information - The company successfully converted its entire wealth business onto a new system, achieving 100% client retention [11] - The allowance for loan losses remained robust at 1.53% of total loans, with net recoveries reported [9] - The company has close to $2.8 billion in liquidity to support loan growth and other liquidity events [25] Q&A Session Summary Question: Balancing dynamics for 2026 regarding loan and deposit growth - Management aims to maintain a loan-to-deposit ratio around 95% to 96%, acknowledging potential seasonal fluctuations [34] Question: Insights on expenses and technology investments - Guidance includes team additions and variable costs related to technology investments [36][37] Question: Loan growth expectations and credit trimming - A significant portion of loan runoff was intentional, focusing on reducing marginal credits and enhancing C&I relationships [42] Question: Non-performing loans and resolution expectations - An increase in non-performing loans was related to a multifamily loan, with expectations for resolution in the first half of the year [45] Question: Margin trajectory and expectations for 2026 - Management expects gradual improvement in net interest margin, influenced by deposit flows [46] Question: Update on capital and acquisition opportunities - The company continues to explore potential acquisitions in the retirement and HSA space while prioritizing organic growth [54] Question: Competition in deposit pricing - The deposit market remains competitive, with rational pricing generally observed [79]