Alerus(US:ALRS)2023-07-30 08:00Financial Data and Key Metrics Changes - Net interest income declined by 6% on a linked quarter basis, now representing 46.3% of total revenues [13][14] - Non-interest income increased by 2.1% on a linked quarter basis, showing improvement across all income businesses [13] - Net interest margin decreased by 18 basis points to 2.52% due to rising funding costs [14] - Total loans grew by 1.9% from the prior quarter, driven by commercial and residential real estate [15] - Deposits declined by 5.9% from the prior quarter, primarily due to seasonal outflows from public funds [15] Business Line Data and Key Metrics Changes - The retirement business accounted for approximately 32% of total revenues, with assets under management increasing by 4.9% [18] - Wealth management revenues increased by 4.9% on a linked quarter basis, with assets under management also rising by 5% [19] - Mortgage revenues surged by 69% from the prior quarter, with originations increasing by over 43% [20] Market Data and Key Metrics Changes - The company’s uninsured deposits are at 23.6%, with a liquidity coverage ratio exceeding 300% [8][17] - Synergistic deposits sourced from wealth and retirement businesses grew by 27% year-over-year [16] Company Strategy and Development Direction - The company is focused on transforming into a top-performing commercial wealth bank and national retirement provider [3][4] - Alerus is optimizing its infrastructure while balancing investments, evidenced by a 4% linked quarter decline in non-interest expenses [6] - The company aims to leverage the SECURE Act 2.0 to expand its client base and improve margins [11] Management's Comments on Operating Environment and Future Outlook - Management noted near-term pressure on margins but emphasized prudent expense management [12] - The company expects modest loan growth for the remainder of the year due to rising interest rates impacting demand [15][33] - Management remains optimistic about the long-term embedded value in their diversified business model [12] Other Important Information - The company reduced its total headcount by 10% year-over-year, including the acquisition of Metro Phoenix Bank [6] - The company increased its dividend by 5.6% during the quarter [11] Q&A Session Summary Question: Non-interest expense outlook - Management indicated that non-interest expenses are expected to decrease in the low to mid-single digits for 2023, with some timing differences in compensation [25][26] Question: Loan growth expectations - Management noted that loan growth is expected to be modest due to slowing demand as interest rates rise [33] Question: Capital management and M&A - Management confirmed a focus on maintaining strong capital levels and ongoing conversations regarding potential M&A opportunities [37] Question: Non-performing loans and credit quality - Management stated that there is no significant pattern of deterioration in credit quality, with historically strong credit metrics [39] Question: Retirement platform engagement - Management emphasized that the engagement with consultants aims to enhance both revenue growth and operational efficiency [42][43] Question: Deposit growth expectations - Management expects public fund deposits to rebound in the second half of the year, despite recent outflows [53] Question: Mortgage market trends - Management indicated stable margins and volumes in the mortgage market, with expectations of a seasonal decline in the fourth quarter [62]