Alerus Financial Corporation (Nasdaq: ALRS) reported net income
of $9.6 million for the third quarter of 2022, or $0.47 per diluted
common share, compared to net income of $9.3 million, or $0.52 per
diluted common share, for the second quarter of 2022, and net
income of $13.1 million, or $0.74 per diluted common share, for the
third quarter of 2021. Excluding the acquisition of Metro Phoenix
Bank, earnings per diluted common share were $0.54 for the third
quarter of 2022.
CEO Comments
President and Chief Executive Officer Katie Lorenson said, “We
ended the quarter with net income of $9.6 million; this included
$1.8 million of merger expenses as we closed and converted the
Metro Phoenix Bank acquisition during the quarter. The seamless
integration of Metro Phoenix Bank marks a historic milestone as the
Company’s twenty-fifth acquisition.
Our financial results were highlighted by strong loan growth
during the quarter, driven by the addition of new team members and
expansion of existing client relationships. During the last several
years we have invested further in our credit talent and
infrastructure. We have improved our credit policies and deepened
our credit risk management practices in preparation for improved
organic loan growth. The Company’s historic net charge-off ratio is
27 basis points, dating back over 25 years. Prudent credit
underwriting and client selection continue to remain a key focus as
we lend through the uncertainty of the current economic cycle.
We continue to position the Company strategically as the
economic environment continues to evolve. We believe our
diversified business model, with recurring revenue streams, strong
capital levels, liquidity profile, and underwriting culture will
continue to differentiate us from the rest of the industry. I know
our team will respond to any challenge and I am proud of their
constant dedication to serving our clients and communities, and for
delivering positive results for our shareholders.”
Quarterly Highlights
- Return on average total assets of 1.02%, compared to 1.14% for
the second quarter of 2022. Excluding merger and acquisition
expenses, return on average total assets was 1.17% for the third
quarter of 2022
- Return on average common equity of 10.25%, compared to 11.93%
for the second quarter of 2022. Excluding merger and acquisition
expenses, return on average common equity was 12.18% for the third
quarter of 2022
- Return on average tangible common equity(1) of 13.89%, compared
to 15.25% for the second quarter of 2022. Excluding merger and
acquisition expenses, return on average tangible common equity was
15.75% for the third quarter of 2022
- Net interest margin (tax-equivalent) was 3.21%, compared to
2.98% for the second quarter of 2022. Excluding the acquisition of
Metro Phoenix Bank, net interest margin (tax-equivalent) was 3.04%
for the third quarter of 2022
- Allowance for loan losses to total loans was 1.34% compared to
1.80% as of December 2021. Excluding Metro Phoenix Bank, the
allowance for loan losses to total loas was 1.51% as of September
2022
- Noninterest income for the third quarter of 2022 was 48.82% of
total revenue, compared to 56.20% for the second quarter of
2022
- Loans held for investment increased $560.2 million, or 31.9%,
since December 31, 2021; Metro Phoenix Bank loans acquired totaled
$270.4 million. Excluding the acquisition of Metro Phoenix Bank and
Paycheck Protection Program, or PPP, loans, loans held for
investment increased $320.5 million, or 18.2%, since December 31,
2021
- Loan to deposit ratio was 78.3%, compared to 60.2% as of
December 31, 2021.
- Common equity tier 1 capital to risk weighted assets was
13.63%, compared to 14.65% as of December 31, 2021
(1)
Represents a non-GAAP financial measure.
See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP
Financial Measures.”
Selected Financial Data (unaudited)
As of and for the
Three months ended
Nine months ended
September 30,
June 30,
September 30,
September 30,
September 30,
(dollars and shares in thousands, except
per share data)
2022
2022
2021
2022
2021
Performance Ratios
Return on average total assets
1.02
%
1.14
%
1.62
%
1.13
%
1.71
%
Return on average common equity
10.25
%
11.93
%
14.68
%
11.27
%
15.61
%
Return on average tangible common equity
(1)
13.89
%
15.25
%
18.13
%
14.59
%
19.44
%
Noninterest income as a % of revenue
48.82
%
56.20
%
63.04
%
54.08
%
63.87
%
Net interest margin (tax-equivalent)
3.21
%
2.98
%
2.78
%
3.02
%
2.92
%
Efficiency ratio (1)
74.76
%
74.72
%
71.49
%
73.94
%
69.69
%
Net charge-offs/(recoveries) to average
loans
0.07
%
0.07
%
(0.06
)
%
0.04
%
0.01
%
Dividend payout ratio
38.30
%
34.62
%
21.62
%
33.33
%
20.80
%
Per Common Share
Earnings per common share - basic
$
0.48
$
0.53
$
0.75
$
1.58
$
2.29
Earnings per common share - diluted
$
0.47
$
0.52
$
0.74
$
1.56
$
2.26
Dividends declared per common share
$
0.18
$
0.18
$
0.16
$
0.52
$
0.47
Book value per common share
$
17.25
$
17.75
$
20.53
Tangible book value per common share
(1)
$
13.76
$
14.93
$
17.46
Average common shares outstanding -
basic
19,987
17,297
17,205
18,186
17,182
Average common shares outstanding -
diluted
20,230
17,532
17,499
18,431
17,488
Other Data
Retirement and benefit services assets
under administration/management
$
30,545,694
$
31,749,157
$
36,202,553
Wealth management assets under
administration/management
$
3,435,786
$
4,147,763
$
3,865,062
Mortgage originations
$
229,901
$
269,397
$
415,792
$
686,060
$
1,479,243
(1)
Represents a non-GAAP financial measure.
See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP
Financial Measures.”
Results of Operations
Net Interest Income
Net interest income for the third quarter of 2022 was $28.3
million, a $5.5 million, or 24.3%, increase from the second quarter
of 2022. Net interest income increased $7.2 million, or 34.0%, from
$21.1 million for the third quarter of 2021. The linked quarter
increase was primarily driven by increases of $7.4 million in
interest income from loans and a $591 thousand increase in other
interest income, partially offset by increases of $1.2 million in
interest expense related to short-term borrowings and $1.0 million
in interest expense from deposits, the result of a rising interest
rate environment and an increase in our short-term borrowings. The
increases in loans and deposits were primarily the result of the
Metro Phoenix Bank acquisition which included $270.4 million in
loans and $353.7 million in deposits. Short-term borrowings
increased primarily due to loan growth outpacing deposit
growth.
Net interest margin (tax-equivalent), a non-GAAP financial
measure, was 3.21% for the third quarter of 2022, a 23 basis point
increase from 2.98% for the second quarter of 2022, and a 43 basis
point increase from 2.78% in the third quarter of 2021. Excluding
the acquisition of Metro Phoenix Bank, net interest margin was
3.04% for the third quarter of 2022, a 6 basis point increase from
the second quarter of 2022, and a 26 basis point increase from the
third quarter of 2021. The quarter over quarter increase was
primarily driven by a 45 basis point increase in interest earning
asset yields, partially offset by a 35 basis point increase in the
rate paid on interest-bearing liabilities, the result of a rising
interest rate environment. Additionally, we saw the average balance
on interest-earning assets and interest-bearing liabilities
increase, primarily due to the loans and deposits acquired from
Metro Phoenix Bank.
Noninterest Income
Noninterest income for the third quarter of 2022 was $27.0
million, a $2.2 million, or 7.6%, decrease from the second quarter
of 2022. The linked quarter decrease was primarily driven by
decreases of $2.3 million in mortgage banking revenue and $696
thousand in wealth management revenue. Partially offsetting these
decreases was a $304 thousand increase in retirement and benefit
services revenue. The decrease in mortgage banking revenue was
primarily driven by a $39.5 million, or 14.7%, decrease in mortgage
originations as well as an 82 basis point decrease in the gain on
sale margin. Wealth management revenue decreased primarily due to a
$712.0 million decrease in assets under management, the result of
an overall market value decrease.
Noninterest income for the third quarter of 2022 decreased $9.0
million, or 25.1%, from $36.0 million in the third quarter of 2021.
The year over year decrease was primarily driven by decreases of
$7.3 million in mortgage banking revenue, $1.4 million in
retirement and benefit services revenue and $443 thousand in wealth
management revenue. Mortgage banking revenue decreased primarily
due to a $185.9 million, or 44.7%, decrease in mortgage
originations and a 94 basis point decrease in the gain on sale
margin. Retirement and benefit services revenue decreased primarily
due to a decrease in asset-based fees from a $5.7 billion decrease
in assets under administration/management. Wealth management
revenue decreased primarily as a result of a $429.3 million
decrease in assets under management, the result of declines in
market values.
Noninterest Expense
Noninterest expense for the third quarter of 2022 was $42.8
million, a $2.8 million, or 7.0%, increase compared to the second
quarter of 2022. The linked quarter increase was primarily driven
by increases of $1.7 million in other noninterest expense and $880
thousand in professional fees and assessments expense. Partially
offsetting these increases was a $708 thousand decrease in employee
taxes and benefits expense. The increase in other noninterest
expense was primarily driven by a $1.3 million increase in the
provision for unused commitments. This provision expense was the
result of new business generated within our real estate
construction loans. Professional fees and assessments expense
included $1.8 million in merger related expenses associated with
the acquisition of Metro Phoenix Bank, an increase of $998 thousand
from the prior quarter. Employee taxes and benefits decreased
primarily due to a $328 thousand decrease in health insurance
claims from the prior quarter.
Noninterest expense for the third quarter of 2022 increased $726
thousand, or 1.7%, from $42.0 million in the third quarter of 2021.
The year over year increase in noninterest expense was primarily
driven by increases of $1.7 million in other noninterest expense
and $1.6 million in professional fees and assessments, partially
offset by a $2.1 million decrease in compensation expense.
Noninterest expense increased primarily as a result of an $841
thousand increase in the provision for unused commitments, the
result of new business generated within our real estate
construction loans. Professional fees and assessments increased
primarily due to $1.8 million in merger related expenses associated
with the acquisition of Metro Phoenix Bank. The year over year
decrease in mortgage originations drove the overall decrease in
compensation expense as compared to the third quarter of 2021.
Financial Condition
Total assets were $3.7 billion as of September 30, 2022, an
increase of $298.6 million, or 8.8%, from December 31, 2021. The
overall increase in total assets included an increase of $560.2
million in loans held for investment, partially offset by decreases
of $188.1 million in cash and cash equivalents and $150.2 million
in investment securities.
Loans
Total loans were $2.3 billion as of September 30, 2022, an
increase of $560.2 million, or 31.9%, from December 31, 2021. This
increase was primarily due to increases of $270.4 million in loans
acquired from Metro Phoenix Bank and $289.8 million in organic loan
growth. Excluding loans acquired from Metro Phoenix Bank, the
increases in organic loan growth included increases of $119.5
million in residential real estate first mortgages, $91.9 million
in commercial real estate loans, and $31.3 million in commercial
and industrial loans, also excluding PPP loans, commercial and
industrial loans increased $62.0 million.
The following table presents the composition of our loan
portfolio as of the dates indicated:
September 30,
June 30,
March 31,
December 31,
September 30,
(dollars in thousands)
2022
2022
2022
2021
2021
Commercial
Commercial and industrial (1)
$
564,655
$
484,426
$
467,449
$
436,761
$
506,599
Real estate construction
89,215
48,870
41,604
40,619
37,751
Commercial real estate
819,068
599,737
602,158
598,893
573,518
Total commercial
1,472,938
1,133,033
1,111,211
1,076,273
1,117,868
Consumer
Residential real estate first mortgage
649,818
568,571
522,489
510,716
501,339
Residential real estate junior lien
143,681
135,255
130,604
125,668
130,243
Other revolving and installment
51,794
53,384
53,738
45,363
50,936
Total consumer
845,293
757,210
706,831
681,747
682,518
Total loans
$
2,318,231
$
1,890,243
$
1,818,042
$
1,758,020
$
1,800,386
______________ (1)
Includes PPP loans of $2.9 million at
September 30, 2022, $6.9 million at June 30, 2022, $13.1 million at
March 31, 2022, $33.6 million at December 31, 2021 and $103.5
million at September 30, 2021.
Deposits
Total deposits were $3.0 billion as of September 30, 2022, an
increase of $41.3 million, or 1.4%, from December 31, 2021.
Interest-bearing deposits increased $74.9 million, while
noninterest-bearing deposits decreased $33.6 million in the third
quarter of 2022. The increase in total deposits was primarily due
to $353.7 million of deposits acquired from Metro Phoenix Bank.
Excluding deposits acquired from Metro Phoenix Bank, deposits
decreased $312.4 million, or 10.7%. The decrease was primarily
driven by decreases of $129.8 million in noninterest-bearing
deposits, $80.0 million in interest-bearing demand deposits, and
$59.3 million in time deposits. Noninterest-bearing deposits
decreased primarily due to a decrease in synergistic deposits. The
decrease in interest-bearing demand deposits was the result of
seasonally lower balances in public unit deposits. Time deposits
decreased due to clients shifting balances to more liquid accounts.
Synergistic deposits, which include deposits from our retirement
and benefit services and wealth management segments as well as HSA
deposits, decreased $35.5 million from December 31, 2021 primarily
due to year-end seasonally higher temporary balances from
retirement plan terminations.
The following table presents the composition of our deposit
portfolio as of the dates indicated:
September 30,
June 30,
March 31,
December 31,
September 30,
(dollars in thousands)
2022
2022
2022
2021
2021
Noninterest-bearing demand
$
905,228
$
764,808
$
831,558
$
938,840
$
797,062
Interest-bearing
Interest-bearing demand
653,216
642,641
760,321
714,669
673,916
Savings accounts
101,820
97,227
99,299
96,825
92,632
Money market savings
1,079,520
914,423
976,905
937,305
924,678
Time deposits
222,027
200,451
224,184
232,912
224,800
Total interest-bearing
2,056,583
1,854,742
2,060,709
1,981,711
1,916,026
Total deposits
$
2,961,811
$
2,619,550
$
2,892,267
$
2,920,551
$
2,713,088
Asset Quality
Total nonperforming assets were $6.2 million as of September 30,
2022, an increase of $3.1 million, or 101.4%, from December 31,
2021, primarily due to a residential real estate first mortgage
client that is being individually evaluated for impairment. As of
September 30, 2022, the allowance for loan losses was $31.0
million, or 1.34% of total loans, compared to $31.6 million, or
1.80% of total loans, as of December 31, 2021. Excluding Metro
Phoenix Bank, the allowance for loan losses to total loans was
1.51% as of September 30, 2022.
The following table presents selected asset quality data as of
and for the periods indicated:
As of and for the three months
ended
September 30,
June 30,
March 31,
December 31,
September 30,
(dollars in thousands)
2022
2022
2022
2021
2021
Nonaccrual loans
$
4,303
$
4,370
$
4,069
$
2,076
$
6,229
Accruing loans 90+ days past due
1,000
—
146
121
—
Total nonperforming loans
5,303
4,370
4,215
2,197
6,229
OREO and repossessed assets
904
860
865
885
862
Total nonperforming assets
$
6,207
$
5,230
$
5,080
$
3,082
$
7,091
Net charge-offs/(recoveries)
405
340
(141
)
(1,006
)
(302
)
Net charge-offs/(recoveries) to average
loans
0.07
%
0.07
%
(0.03
)
%
(0.22
)
%
(0.06
)
%
Nonperforming loans to total loans
0.23
%
0.23
%
0.23
%
0.12
%
0.35
%
Nonperforming assets to total assets
0.17
%
0.16
%
0.15
%
0.09
%
0.22
%
Allowance for loan losses to total
loans
1.34
%
1.66
%
1.74
%
1.80
%
1.78
%
Allowance for loan losses to nonperforming
loans
584
%
718
%
752
%
1,437
%
515
%
For the third quarter of 2022, we had net charge-offs of $405
thousand compared to net charge-offs of $340 thousand for the
second quarter of 2022 and $302 thousand of net recoveries for the
third quarter of 2021.
There was no provision expense recorded for the three months
ended September 30, 2022, no change compared to the three months
ended June 30, 2022, and a $2.0 million increase as compared to the
three months ended September 30, 2021. Although management saw
increases in overall loan volume, based on the reduction of
previous adjustments for pandemic related qualitative factors,
management concluded no need for additional provision.
Capital
Total stockholders’ equity was $344.8 million as of September
30, 2022, a decrease of $14.6 million, or 4.1%, from December 31,
2021. The decrease in stockholders’ equity was primarily due to a
$98.7 million decrease in accumulated other comprehensive loss, due
to rising interest rates, which resulted in a lower fair value of
our available-for-sale investment securities, partially offset by a
$61.8 million increase in additional paid-in capital as a result of
the Metro Phoenix Bank acquisition. Tangible book value per common
share, a non-GAAP financial measure, decreased to $13.76 as of
September 30, 2022, from $17.87 as of December 31, 2021. Tangible
common equity to tangible assets, a non-GAAP financial measure,
decreased to 7.59% as of September 30, 2022, from 9.21% as of
December 31, 2021. Common equity tier 1 capital to risk weighted
assets decreased to 13.63% as of September 30, 2022, from 14.65% as
of December 31, 2021.
The following table presents our capital ratios as of the dates
indicated:
September 30,
December 31,
September 30,
2022
2021
2021
Capital Ratios(1)
Alerus Financial Corporation
Consolidated
Common equity tier 1 capital to risk
weighted assets
13.63
%
14.65
%
14.52
%
Tier 1 capital to risk weighted assets
13.94
%
15.06
%
14.93
%
Total capital to risk weighted assets
16.84
%
18.64
%
18.58
%
Tier 1 capital to average assets
10.82
%
9.79
%
9.88
%
Tangible common equity / tangible assets
(2)
7.59
%
9.21
%
9.62
%
Alerus Financial, N.A.
Common equity tier 1 capital to risk
weighted assets
13.01
%
13.87
%
13.77
%
Tier 1 capital to risk weighted assets
13.01
%
13.87
%
13.77
%
Total capital to risk weighted assets
14.11
%
15.12
%
15.03
%
Tier 1 capital to average assets
11.12
%
9.01
%
9.11
%
(1)
Capital ratios for the current quarter are
to be considered preliminary until the Call Report for Alerus
Financial, N.A. is filed.
(2)
Represents a non-GAAP financial measure.
See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP
Financial Measures.”
Conference Call
The Company will host a conference call at 11:00 a.m. Central
Time on Thursday, October 27, 2022, to discuss its financial
results. The call can be accessed via telephone at (844) 200-6205,
using access code 769396. A recording of the call and transcript
will be available on the Company’s investor relations website at
investors.alerus.com following the call.
About Alerus Financial Corporation
Alerus Financial Corporation is a diversified financial services
company with corporate offices in Grand Forks, North Dakota, and
the Minneapolis-St. Paul, Minnesota metropolitan area. Through its
subsidiary, Alerus Financial, N.A., Alerus provides innovative and
comprehensive financial solutions to business and consumer clients
through four distinct business segments—banking, retirement and
benefit services, wealth management, and mortgage. Alerus provides
clients with a primary point of contact to help fully understand
the unique needs and delivery channel preferences of each client.
Clients are provided with competitive products, valuable insight
and sound advice supported by digital solutions designed to meet
the clients’ needs. Alerus has banking, mortgage, and wealth
management offices in Grand Forks and Fargo, North Dakota, the
Minneapolis-St. Paul, Minnesota metropolitan area, and Phoenix,
Scottsdale, and Mesa Arizona. Alerus Retirement and Benefits plan
administration hubs are located in Minnesota, Michigan, and
Colorado.
Non-GAAP Financial Measures
Some of the financial measures included in this press release
are not measures of financial performance recognized by U.S.
Generally Accepted Accounting Principles, or GAAP. These non-GAAP
financial measures include the ratio of tangible common equity to
tangible assets, tangible common equity per share, return on
average tangible common equity, net interest margin
(tax-equivalent), and the efficiency ratio. Management uses these
non-GAAP financial measures in its analysis of its performance, and
believes financial analysts and investors frequently use these
measures, and other similar measures, to evaluate capital adequacy
and financial performance. Reconciliations of non-GAAP disclosures
used in this press release to the comparable GAAP measures are
provided in the accompanying tables. Management, banking
regulators, many financial analysts and other investors use these
measures in conjunction with more traditional bank capital ratios
to compare the capital adequacy of banking organizations with
significant amounts of goodwill or other intangible assets, which
typically stem from the use of the purchase accounting method of
accounting for mergers and acquisitions.
These non-GAAP financial measures should not be considered in
isolation or as a substitute for total stockholders’ equity, total
assets, book value per share, return on average assets, return on
average equity, or any other measure calculated in accordance with
GAAP. Moreover, the manner in which we calculate these non-GAAP
financial measures may differ from that of other companies
reporting measures with similar names.
Forward-Looking Statements
This press release 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, identified
by words such as “may”, “might”, “should”, “could”, “predict”,
“potential”, “believe”, “expect”, “continue”, “will”, “anticipate”,
“seek”, “estimate”, “intend”, “plan”, “projection”, “would”,
“annualized”, “target” and “outlook”, or the negative version of
those words or other comparable words of a future or
forward-looking nature. Examples of forward-looking statements
include, among others, statements we make regarding our projected
growth, anticipated future financial performance, financial
condition, credit quality, management’s long-term performance goals
and the future plans and prospects of Alerus Financial
Corporation.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based only on
our current beliefs, expectations and assumptions regarding the
future of our business, future plans and strategies, projections,
anticipated events and trends, the economy and other future
conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of our control. Our actual results and financial
condition may differ materially from those indicated in the
forward-looking statements. Therefore, you should not rely on any
of these forward-looking statements. Important factors that could
cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements
include, among others, the following: interest rate risks
associated with our business, including the effects of recent and
anticipated rate increases by the Federal Reserve; our ability to
successfully manage credit risk and maintain an adequate level of
allowance for loan losses; new or revised accounting standards,
including as a result of the implementation of the new Current
Expected Credit Loss Standard; business and economic conditions
generally and in the financial services industry, nationally and
within our market areas, including rising rates of inflation; the
overall health of the local and national real estate market;
concentrations within our loan portfolio; the level of
nonperforming assets on our balance sheet; our ability to implement
our organic and acquisition growth strategies; the impact of
economic or market conditions on our fee-based services; our
ability to continue to grow our retirement and benefit services
business; our ability to continue to originate a sufficient volume
of residential mortgages; the occurrence of fraudulent activity,
breaches or failures of our information security controls or
cybersecurity-related incidents; interruptions involving our
information technology and telecommunications systems or
third-party servicers; potential losses incurred in connection with
mortgage loan repurchases; the composition of our executive
management team and our ability to attract and retain key
personnel; rapid technological change in the financial services
industry; increased competition in the financial services industry
from non-banks such as credit unions and Fintech companies; our
ability to successfully manage liquidity risk, especially in light
of recent excess liquidity at the Bank; the effectiveness of our
risk management framework; the commencement and outcome of
litigation and other legal proceedings and regulatory actions
against us or to which we may become subject; potential impairment
to the goodwill we recorded in connection with our past
acquisitions; the extensive regulatory framework that applies to
us; the impact of recent and future legislative and regulatory
changes; fluctuations in the values of the securities held in our
securities portfolio, including as a result of rising interest
rates; governmental monetary, trade and fiscal policies; severe
weather, natural disasters, widespread disease or pandemics, such
as the COVID-19 global pandemic, the negative effects of the
ongoing COVID-19 pandemic, including its effects on the economic
environment, our clients, and our operations, including due to
supply chain disruptions, as well as any changes to federal, state,
or local government laws, regulations, or orders in response to the
pandemic; acts of war or terrorism, including the Russian invasion
of Ukraine, or other adverse external events; any material
weaknesses in our internal control over financial reporting;
developments and uncertainty related to the future use and
availability of some reference rates, such as the London Interbank
Offered Rate, as well as other alternative rates; changes to U.S.
or state tax laws, regulations and guidance, including the new 1.0%
excise tax on stock buybacks by publicly traded companies; talent
and labor shortages and employee turnover; possible federal mask
and vaccine mandates; our success at managing the risks involved in
the foregoing items; and any other risks described in the “Risk
Factors” sections of the reports filed by Alerus Financial
Corporation with the Securities and Exchange Commission.
Any forward-looking statement made by us in this press release
is based only on information currently available to us and speaks
only as of the date on which it is made. We undertake no obligation
to publicly update any forward-looking statement, whether written
or oral, that may be made from time to time, whether as a result of
new information, future developments or otherwise.
Alerus Financial Corporation and
Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share and
per share data)
September 30,
December 31,
2022
2021
Assets
(Unaudited)
(Audited)
Cash and cash equivalents
$
54,167
$
242,311
Investment securities
Available-for-sale, at fair value
729,110
853,649
Held-to-maturity, at carrying value
326,410
352,061
Fed funds sold
14,124
—
Loans held for sale
26,129
46,490
Loans
2,318,231
1,758,020
Allowance for loan losses
(30,968
)
(31,572
)
Net loans
2,287,263
1,726,448
Land, premises and equipment, net
17,067
18,370
Operating lease right-of-use assets
3,481
3,727
Accrued interest receivable
11,256
8,537
Bank-owned life insurance
33,777
33,156
Goodwill
46,060
31,490
Other intangible assets
23,779
20,250
Servicing rights
2,780
1,880
Deferred income taxes, net
45,889
11,614
Other assets
69,961
42,708
Total assets
$
3,691,253
$
3,392,691
Liabilities and Stockholders’
Equity
Deposits
Noninterest-bearing
$
905,228
$
938,840
Interest-bearing
2,056,583
1,981,711
Total deposits
2,961,811
2,920,551
Short-term borrowings
253,830
—
Long-term debt
58,836
58,933
Operating lease liabilities
3,802
4,275
Accrued expenses and other liabilities
68,135
49,529
Total liabilities
3,346,414
3,033,288
Stockholders’ equity
Preferred stock, $1 par value, 2,000,000
shares authorized: 0 issued and outstanding
—
—
Common stock, $1 par value, 30,000,000
shares authorized: 19,987,274 and 17,212,588 issued and
outstanding
19,987
17,213
Additional paid-in capital
154,629
92,878
Retained earnings
273,132
253,567
Accumulated other comprehensive income
(loss)
(102,909
)
(4,255
)
Total stockholders’ equity
344,839
359,403
Total liabilities and stockholders’
equity
$
3,691,253
$
3,392,691
Alerus Financial Corporation and
Subsidiaries
Consolidated Statements of
Income
(dollars and shares in thousands, except
per share data)
Three months ended
Nine months ended
September 30,
June 30,
September 30,
September 30,
September 30,
2022
2022
2021
2022
2021
Interest Income
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Loans, including fees
$
25,379
$
17,988
$
18,888
$
60,659
$
58,779
Investment securities
Taxable
5,939
6,068
3,249
17,447
8,547
Exempt from federal income taxes
209
213
225
638
694
Other
748
157
185
1,021
432
Total interest income
32,275
24,426
22,547
79,765
68,452
Interest Expense
Deposits
1,852
813
880
3,494
2,781
Short-term borrowings
1,516
278
—
1,794
—
Long-term debt
591
559
535
1,712
1,361
Total interest expense
3,959
1,650
1,415
7,000
4,142
Net interest income
28,316
22,776
21,132
72,765
64,310
Provision for loan losses
—
—
(2,000
)
—
(2,000
)
Net interest income after provision for
loan losses
28,316
22,776
23,132
72,765
66,310
Noninterest Income
Retirement and benefit services
16,597
16,293
18,031
50,536
53,157
Wealth management
4,852
5,548
5,295
15,726
15,419
Mortgage banking
3,782
6,038
11,116
14,751
40,535
Service charges on deposit accounts
377
412
357
1,152
1,025
Net gains (losses) on investment
securities
—
—
11
—
125
Other
1,402
935
1,230
3,541
3,408
Total noninterest income
27,010
29,226
36,040
85,706
113,669
Noninterest Expense
Compensation
21,168
21,248
23,291
61,467
71,298
Employee taxes and benefits
5,079
5,787
5,058
17,028
16,443
Occupancy and equipment expense
1,926
1,737
2,063
5,713
6,212
Business services, software and technology
expense
5,373
4,785
5,332
15,082
15,266
Intangible amortization expense
1,324
1,053
1,088
3,430
3,327
Professional fees and assessments
3,126
2,246
1,503
6,913
4,484
Marketing and business development
890
814
865
2,304
2,310
Supplies and postage
588
572
549
1,806
1,583
Travel
291
356
174
826
236
Mortgage and lending expenses
409
482
1,231
1,577
3,762
Other
2,593
904
887
4,676
2,712
Total noninterest expense
42,767
39,984
42,041
120,822
127,633
Income before income taxes
12,559
12,018
17,131
37,649
52,346
Income tax expense
2,940
2,725
4,064
8,553
12,370
Net income
$
9,619
$
9,293
$
13,067
$
29,096
$
39,976
Per Common Share Data
Earnings per common share
$
0.48
$
0.53
$
0.75
$
1.58
$
2.29
Diluted earnings per common share
$
0.47
$
0.52
$
0.74
$
1.56
$
2.26
Dividends declared per common share
$
0.18
$
0.18
$
0.16
$
0.52
$
0.47
Average common shares outstanding
19,987
17,297
17,205
18,186
17,182
Diluted average common shares
outstanding
20,230
17,532
17,499
18,431
17,488
Alerus Financial Corporation and
Subsidiaries
Non-GAAP to GAAP Reconciliations and
Calculation of Non-GAAP Financial Measures (unaudited)
(dollars and shares in thousands, except
per share data)
September 30,
June 30,
December 31,
September 30,
2022
2022
2021
2021
Tangible Common Equity to Tangible
Assets
Total common stockholders’ equity
$
344,839
$
307,158
$
359,403
$
353,195
Less: Goodwill
46,060
31,337
31,490
30,201
Less: Other intangible assets
23,779
17,511
20,250
22,593
Tangible common equity (a)
275,000
258,310
307,663
300,401
Total assets
3,691,253
3,295,065
3,392,691
3,175,169
Less: Goodwill
46,060
31,337
31,490
30,201
Less: Other intangible assets
23,779
17,511
20,250
22,593
Tangible assets (b)
3,621,414
3,246,217
3,340,951
3,122,375
Tangible common equity to tangible assets
(a)/(b)
7.59
%
7.96
%
9.21
%
9.62
%
Tangible Book Value Per Common
Share
Total common stockholders’ equity
$
344,839
$
307,158
$
359,403
$
353,195
Less: Goodwill
46,060
31,337
31,490
30,201
Less: Other intangible assets
23,779
17,511
20,250
22,593
Tangible common equity (c)
275,000
258,310
307,663
300,401
Total common shares issued and outstanding
(d)
19,987
17,306
17,213
17,208
Tangible book value per common share
(c)/(d)
$
13.76
$
14.93
$
17.87
$
17.46
Three months ended
Nine months ended
September 30,
June 30,
September 30,
September 30,
September 30,
2022
2022
2021
2022
2021
Return on Average Tangible Common
Equity
Net income
$
9,619
$
9,293
$
13,067
$
29,096
$
39,976
Add: Intangible amortization expense (net
of tax)
1,046
832
860
2,710
2,628
Net income, excluding intangible
amortization (e)
10,665
10,125
13,927
31,806
42,604
Average total equity
372,274
312,515
353,196
345,192
342,344
Less: Average goodwill
48,141
31,488
30,201
37,101
30,201
Less: Average other intangible assets (net
of tax)
19,466
14,737
18,272
16,605
19,124
Average tangible common equity
(f)
304,667
266,290
304,723
291,486
293,019
Return on average tangible common equity
(e)/(f)
13.89
%
15.25
%
18.13
%
14.59
%
19.44
%
Efficiency Ratio
Noninterest expense
$
42,767
$
39,984
$
42,041
$
120,822
$
127,633
Less: Intangible amortization expense
1,324
1,053
1,088
3,430
3,327
Adjusted noninterest expense
(g)
41,443
38,931
40,953
117,392
124,306
Net interest income
28,316
22,776
21,132
72,765
64,310
Noninterest income
27,010
29,226
36,040
85,706
113,669
Tax-equivalent adjustment
112
100
115
306
392
Total tax-equivalent revenue
(h)
55,438
52,102
57,287
158,777
178,371
Efficiency ratio (g)/(h)
74.76
%
74.72
%
71.49
%
73.94
%
69.69
%
Alerus Financial Corporation and
Subsidiaries
Analysis of Average Balances, Yields,
and Rates (unaudited)
(dollars in thousands)
Three months ended
Nine months ended
September 30, 2022
June 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Average
Average
Average
Average
Average
Average
Yield/
Average
Yield/
Average
Yield/
Average
Yield/
Average
Yield/
Balance
Rate
Balance
Rate
Balance
Rate
Balance
Rate
Balance
Rate
Interest Earning Assets
Interest-bearing deposits with banks
$
72,157
2.02
%
$
28,920
0.39
%
$
281,768
0.16
%
$
68,811
0.86
%
$
219,636
0.14
%
Investment securities (1)
1,116,458
2.20
%
1,164,625
2.18
%
869,421
1.61
%
1,165,414
2.09
%
778,307
1.62
%
Fed funds sold
21,893
2.37
%
—
—
%
—
—
%
7,378
2.37
%
—
—
%
Loans held for sale
27,032
4.14
%
31,878
3.15
%
57,233
2.40
%
27,864
3.31
%
70,218
2.25
%
Loans
Commercial:
Commercial and industrial
566,987
5.41
%
463,215
4.38
%
544,811
4.95
%
488,771
4.87
%
615,310
4.73
%
Real estate construction
70,545
5.60
%
44,627
4.04
%
37,743
3.99
%
52,212
4.71
%
41,812
4.17
%
Commercial real estate
807,505
4.07
%
601,765
3.80
%
567,696
3.67
%
670,854
3.86
%
565,861
3.72
%
Total commercial
1,445,037
4.67
%
1,109,607
4.05
%
1,150,250
4.29
%
1,211,837
4.30
%
1,222,983
4.24
%
Consumer
Residential real estate first mortgage
624,826
3.54
%
543,023
3.29
%
487,699
3.32
%
561,261
3.45
%
468,395
3.53
%
Residential real estate junior lien
140,664
5.41
%
132,082
4.64
%
129,239
4.57
%
132,968
4.86
%
132,145
4.67
%
Other revolving and installment
51,834
4.98
%
53,919
4.40
%
53,683
4.45
%
52,150
4.59
%
60,785
4.37
%
Total consumer
817,324
3.96
%
729,024
3.62
%
670,621
3.65
%
746,379
3.78
%
661,325
3.84
%
Total loans (1)
2,262,361
4.41
%
1,838,631
3.88
%
1,820,871
4.05
%
1,958,216
4.10
%
1,884,308
4.10
%
Federal Reserve/FHLB stock
18,449
5.35
%
10,564
4.90
%
6,505
4.33
%
11,877
5.04
%
6,273
4.37
%
Total interest earning assets
3,518,350
3.65
%
3,074,618
3.20
%
3,035,798
2.96
%
3,239,560
3.30
%
2,958,742
3.11
%
Noninterest earning assets
224,804
184,037
155,079
191,652
161,077
Total assets
$
3,743,154
$
3,258,655
$
3,190,877
$
3,431,212
$
3,119,819
Interest-Bearing Liabilities
Interest-bearing demand deposits
$
659,696
0.13
%
$
703,365
0.12
%
$
692,873
0.14
%
$
692,310
0.12
%
$
678,015
0.15
%
Money market and savings deposits
1,180,576
0.40
%
1,041,898
0.14
%
1,009,564
0.14
%
1,089,137
0.24
%
1,018,347
0.15
%
Time deposits
234,459
0.74
%
211,787
0.43
%
217,756
0.50
%
224,603
0.54
%
212,297
0.57
%
Fed funds purchased
84,149
3.71
%
81,506
1.18
%
10
—
%
55,527
2.47
%
3
—
%
Short-term borrowings
168,750
1.71
%
9,615
1.59
%
—
—
%
60,073
1.71
%
—
—
%
Long-term debt
58,843
3.98
%
58,876
3.81
%
58,968
3.60
%
58,875
3.89
%
48,002
3.79
%
Total interest-bearing liabilities
2,386,473
0.66
%
2,107,047
0.31
%
1,979,171
0.28
%
2,180,525
0.43
%
1,956,664
0.28
%
Noninterest-Bearing Liabilities and
Stockholders' Equity
Noninterest-bearing deposits
920,340
783,367
799,854
845,375
762,685
Other noninterest-bearing liabilities
64,067
55,726
58,656
60,120
58,126
Stockholders’ equity
372,274
312,515
353,196
345,192
342,344
Total liabilities and stockholders’
equity
$
3,743,154
$
3,258,655
$
3,190,877
$
3,431,212
$
3,119,819
Net interest income (1)
Net interest rate spread
2.99
%
2.89
%
2.68
%
2.87
%
2.83
%
Net interest margin, tax-equivalent
(1)
3.21
%
2.98
%
2.78
%
3.02
%
2.92
%
______________ (1)
Taxable-equivalent adjustment was
calculated utilizing a marginal income tax rate of 21.0%.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221026006059/en/
Alan A. Villalon, Chief Financial Officer 952.417.3733
(Office)
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