Alerus Financial Corporation (Nasdaq: ALRS) reported net income
of $10.9 million for the fourth quarter of 2022, or $0.53 per
diluted common share, compared to net income of $9.6 million, or
$0.47 per diluted common share, for the third quarter of 2022, and
net income of $12.7 million, or $0.72 per diluted common share, for
the fourth quarter of 2021.
CEO Comments
President and Chief Executive Officer Katie Lorenson said, “2022
was a year of transitions and milestones for our Company. We
completed our largest acquisition with Metro Phoenix Bank, which
was transformational to our growth in the Arizona market. We added
new leadership and had continued momentum in talent acquisitions
with successful lift outs and additions of commercial bankers,
treasury management professionals, and wealth and retirement
advisors. We remain focused on client acquisition and deepening of
relationships with existing clients through our diversified
business model. We continue to right size our infrastructure and
manage expenses, despite facing inflationary pressures. During the
year, we returned over 33% of our earnings to our shareholders by
increasing our dividend 11%. We remain focused on creating
long-term value for our clients, and in return, our shareholders. I
want to thank our employees for all their continued hard work in
developing the strong foundation from which we will continue to
grow from in 2023 and beyond.”
Quarterly Highlights
- Return on average total assets of 1.17%, compared to 1.02% for
the third quarter of 2022
- Return on average common equity of 12.37%, compared to 10.25%
for the third quarter of 2022
- Return on average tangible common equity(1) of 16.63%, compared
to 13.89% for the third quarter of 2022
- Net interest margin (tax-equivalent) was 3.09%, compared to
3.21% for the third quarter of 2022
- Noninterest expense was $37.9 million, a $4.8 million, or
11.3%, decrease compared to $42.8 million for the third quarter of
2022
- Efficiency ratio(1) of 69.6%, compared to 74.8% for the third
quarter of 2022
- Allowance for loan losses to total loans was 1.27% compared to
1.80% as of December 31, 2021. Excluding the acquisition of Metro
Phoenix Bank the allowance for loan losses to total loans was 1.43%
as of December 31, 2022
- Noninterest income for the third quarter of 2022 was 48.62% of
total revenue, compared to 48.82% for the third quarter of
2022
- Loan to deposit ratio was 83.8%, compared to 60.2% as of
December 31, 2021
- Common equity tier 1 capital to risk weighted assets was
13.39%, compared to 14.65% as of December 31, 2021
Full Year 2022 Highlights
- Net income of $40.0 million, a decrease of $12.7 million, or
24.1%, compared to $52.7 million in 2021
- Noninterest expense of $158.8 million, a decrease of $10.1
million, or 6.0%, compared to $168.9 million in 2021
- No provision for loan losses expense in 2022, compared to a
$3.5 million reversal of provision for loan losses expense in
2021
- Loans held for investment increased $686.0 million, or 39.0%,
since December 31, 2021, including $270.4 million of loans acquired
from Metro Phoenix Bank. Excluding the acquisition of Metro Phoenix
Bank and Paycheck Protection Program, or PPP, loans, loans held for
investment increased $448.4 million, or 25.5%, since December 31,
2021
- Average loans of $2.1 billion, an increase of $200.7 million,
or 10.8%, from 2021
- Average deposits of $2.9 billion, an increase of $158.0
million, or 5.8%, from 2021
- Diluted earnings per share, or EPS, of $2.10, compared to $2.97
in 2021
- Return on average total assets of 1.14%, compared to 1.66% in
2021
- Return on average common equity of 11.55%, compared to 15.22%
in 2021
- Return on average tangible common equity(1) of 15.09%, compared
to 18.89% in 2021
- Revenue of $211.0 million, a decrease of $23.5 million, or
10.0%, compared to $234.5 million in 2021
- Net interest income was $99.7 million, an increase of $12.6
million, or 14.5%, compared to $87.1 million in 2021
- Noninterest income was $111.2 million, a decrease of $36.2
million, or 24.5%, compared to $147.4 million in 2021
- Dividends declared per common share were $0.70, a $0.07, or
11.1% increase compared to $0.63 in 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
Year ended
December 31,
September 30,
December 31,
December 31,
December 31,
(dollars and shares in thousands, except
per share data)
2022
2022
2021
2022
2021
Performance Ratios
Return on average total assets
1.17
%
1.02
%
1.50
%
1.14
%
1.66
%
Return on average common equity
12.37
%
10.25
%
14.12
%
11.55
%
15.22
%
Return on average tangible common equity
(1)
16.63
%
13.89
%
17.36
%
15.09
%
18.89
%
Noninterest income as a % of revenue
48.62
%
48.82
%
59.67
%
52.72
%
62.86
%
Net interest margin (tax-equivalent)
3.09
%
3.21
%
2.84
%
3.04
%
2.90
%
Efficiency ratio (1)
69.62
%
74.76
%
71.06
%
72.86
%
70.02
%
Net charge-offs/(recoveries) to average
loans
(0.03)
%
0.07
%
(0.22)
%
0.02
%
(0.04)
%
Dividend payout ratio
33.96
%
38.30
%
22.22
%
33.33
%
21.21
%
Per Common Share
Earnings per common share - basic
$
0.54
$
0.48
$
0.73
$
2.12
$
3.02
Earnings per common share - diluted
$
0.53
$
0.47
$
0.72
$
2.10
$
2.97
Dividends declared per common share
$
0.18
$
0.18
$
0.16
$
0.70
$
0.63
Book value per common share
$
17.85
$
17.25
$
20.88
Tangible book value per common share
(1)
$
14.37
$
13.76
$
17.87
Average common shares outstanding -
basic
19,988
19,987
17,210
18,640
17,189
Average common shares outstanding -
diluted
20,232
20,230
17,480
18,884
17,486
Other Data
Retirement and benefit services assets
under administration/management
$
32,122,520
$
30,545,694
$
36,732,938
Wealth management assets under
administration/management
$
3,582,648
$
3,435,786
$
4,039,931
Mortgage originations
$
126,254
$
229,901
$
356,821
$
812,314
$
1,836,064
(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 $27.0
million, a $1.4 million, or 4.8%, decrease from the third quarter
of 2022. Net interest income increased $4.2 million, or 18.3%, from
$22.8 million for the fourth quarter of 2021. The quarter over
quarter decrease in net interest income was primarily driven by an
increase of $4.8 million, or 123.5%, in interest expense, partially
offset by a $3.5 million, or 11.0%, increase in interest income.
The increase in interest expense was primarily due to increases of
$3.8 million in interest expense paid on deposits and $1.0 million
in interest expense paid on short-term borrowings. The increase in
interest expense paid on deposits was primarily due to deposit rate
increases in response to a highly competitive deposit environment
arising from the Federal Reserve Bank raising short-term rates.
Short-term borrowings expense increased as short-term rates
increased and the average balance of short-term borrowings
increased as loan growth outpaced deposit growth in the fourth
quarter of 2022.
Net interest margin (tax-equivalent), a non-GAAP financial
measure, was 3.09% for the fourth quarter of 2022, a 12 basis point
decrease from 3.21% for the third quarter of 2022, and a 25 basis
point increase from 2.84% in the fourth quarter of 2021. The linked
quarter decrease was primarily driven by a 79 basis point increase
in the rate paid on interest-bearing liabilities, partially offset
by a 45 basis point increase in interest earning asset yields. The
increase in the rate paid on interest-bearing liabilities was the
result of a 73 basis point increase on the rate paid on
interest-bearing deposits and a 143 basis point increase in the
rate paid on fed funds purchased and short-term borrowings. The
increase in interest earning asset yields was primarily driven by a
49 basis point increase in loan yields. Additionally, we saw a
$97.4 million increase in average total loans, primarily due to a
$56.6 million increase in the average balance of commercial real
estate and real estate construction loans.
Noninterest Income
Noninterest income for the fourth quarter of 2022 was $25.5
million, a $1.5 million, or 5.5%, decrease from the third quarter
of 2022. The quarter over quarter decrease was primarily driven by
a $1.6 million decrease in mortgage banking revenue, partially
offset by a $292 thousand increase in wealth management revenue.
The decrease in mortgage banking revenue was primarily due to a
$103.6 million, or 45.1%, decrease in mortgage originations driven
by macroeconomic challenges, partially offset by a 41 basis point
increase in the gain on sale margin. The increase in wealth
management revenue was primarily driven by a $146.9 million
increase in assets under management, due to increased market value
from improved bond and equity markets.
Noninterest income for the fourth quarter of 2022 decreased $8.2
million, or 24.3%, from $33.7 million in the fourth quarter of
2021. The decrease in noninterest income was primarily due to
decreases of $5.8 million in mortgage banking revenue, $2.0 million
in retirement and benefit services revenue and $489 thousand in
wealth management revenue. The decrease in mortgage banking revenue
was primarily due to a $230.6 million decrease in mortgage
originations driven by macroeconomic challenges. The decrease in
retirement and benefit services revenue was primarily due to a $4.6
billion decrease in assets under administration/management. Wealth
management revenue decreased primarily due to a $457.3 million
decrease in assets under management. Both decreases in assets under
administration/management were mainly driven by lower bond and
equity markets.
Noninterest Expense
Noninterest expense for the fourth quarter of 2022 was $37.9
million, a $4.8 million, or 11.3%, decrease compared to the third
quarter of 2022. The linked quarter decrease in noninterest expense
was primarily due to decreases of $2.0 million in compensation
expense, $1.7 million in professional fees and assessments, and
$968 thousand in business services, software and technology
expense. Compensation expense decreased primarily due to lower
mortgage incentives associated with the decrease in mortgage
originations as well as an accrual adjustment to performance bonus
accruals. The decrease in professional fees and assessments was
primarily driven by a decline in the one-time expenses associated
with the acquisition of Metro Phoenix Bank. Business services,
software and technology expense decreased primarily due to the
timing of contract renewals.
Noninterest expense for the fourth quarter of 2022 decreased
$3.3 million, or 8.1%, from $41.3 million in the fourth quarter of
2021. The year over year decrease in noninterest expense was
primarily driven by decreases of $2.9 million in compensation
expense, $815 thousand of business services, software and
technology expense, and $703 thousand in employee taxes and
benefits expense, partially offset by a $1.0 million increase in
other noninterest expense. The decrease in compensation expense was
primarily due to lower mortgage incentives associated with the
decrease in mortgage originations. Business services, software and
technology expense decreased primarily due to the timing of
contract renewals. The decrease in employee taxes and benefits
expense was primarily due to a $531 thousand decrease in
share-based compensation from an acceleration upon employee
retirements. The increase in other noninterest expense included
$469 thousand in one-time expenses from our divestiture of payroll
services and $247 thousand increase in the provision for unfunded
commitments.
Financial Condition
Total assets were $3.8 billion as of December 31, 2022, an
increase of $386.9 million, or 11.4%, from December 31, 2021. The
increase in assets included an increase of $686.0 million in loans
held for investment, partially offset by decreases of $184.1
million in cash and cash equivalents and $166.5 million in
investment securities.
Loans
Total loans were $2.4 billion as of December 31, 2022, an
increase of $686.0 million, or 39.0%, from December 31, 2021. The
increase in total loans was primarily due to increases of $415.6
million in organic loan growth and $270.4 million in loans acquired
from Metro Phoenix Bank. Excluding loans acquired from Metro
Phoenix Bank, the increase in organic loan growth included
increases of $154.5 million in commercial real estate, $149.2
million in residential real estate first mortgages and $50.5
million in commercial and industrial loans. Excluding PPP loans and
loans acquired from Metro Phoenix Bank, commercial and industrial
loans increased $83.4 million.
The following table presents the composition of our loan
portfolio as of the dates indicated:
December 31,
September 30,
June 30,
March 31,
December 31,
(dollars in thousands)
2022
2022
2022
2022
2021
Commercial
Commercial and industrial (1)
$
583,876
$
564,655
$
484,426
$
467,449
$
436,761
Real estate construction
97,810
89,215
48,870
41,604
40,619
Commercial real estate
881,670
819,068
599,737
602,158
598,893
Total commercial
1,563,356
1,472,938
1,133,033
1,111,211
1,076,273
Consumer
Residential real estate first mortgage
679,551
649,818
568,571
522,489
510,716
Residential real estate junior lien
150,479
143,681
135,255
130,604
125,668
Other revolving and installment
50,608
51,794
53,384
53,738
45,363
Total consumer
880,638
845,293
757,210
706,831
681,747
Total loans
$
2,443,994
$
2,318,231
$
1,890,243
$
1,818,042
$
1,758,020
(1)
Includes PPP loans of $737 thousand at
December 31, 2022, $2.9 million at September 30, 2022, $6.9 million
at June 30, 2022, $13.1 million at March 31, 2022 and $33.6 million
at December 31, 2021.
Deposits
Total deposits were $2.9 billion as of December 31, 2022, a
decrease of $5.1 million, or 0.2%, from December 31, 2021.
Interest-bearing deposits increased $72.8 million, while
noninterest-bearing deposits decreased $77.9 million in the fourth
quarter of 2022. In the third quarter of 2022, we acquired $353.7
million in deposits from our acquisition of Metro Phoenix Bank.
Excluding deposits acquired from Metro Phoenix Bank, deposits
decreased $358.8 million, or 12.3%, from December 31, 2021. The
decrease was primarily due to decreases of $184.7 million in
interest-bearing deposits and $174.0 million in noninterest-bearing
deposits. Interest-bearing deposits decreased primarily due to a
$84.9 million decrease in money market savings accounts, and a
$69.0 million decrease in time deposits. Noninterest-bearing
deposits decreased primarily due to a $68.3 million decrease in
synergistic deposits. Synergistic deposits, which include deposits
from our retirement and benefit services and wealth management
segments as well as HSA deposits, increased $22.6 million from
December 31, 2021, primarily due to increases in our synergistic
deposits from our wealth management division.
The following table presents the composition of our deposit
portfolio as of the dates indicated:
December 31,
September 30,
June 30,
March 31,
December 31,
(dollars in thousands)
2022
2022
2022
2022
2021
Noninterest-bearing demand
$
860,987
$
905,228
$
764,808
$
831,558
$
938,840
Interest-bearing
Interest-bearing demand
706,275
653,216
642,641
760,321
714,669
Savings accounts
99,882
101,820
97,227
99,299
96,825
Money market savings
1,035,981
1,079,520
914,423
976,905
937,305
Time deposits
212,359
222,027
200,451
224,184
232,912
Total interest-bearing
2,054,497
2,056,583
1,854,742
2,060,709
1,981,711
Total deposits
$
2,915,484
$
2,961,811
$
2,619,550
$
2,892,267
$
2,920,551
Asset Quality
Total nonperforming assets were $3.8 million as of December 31,
2022, an increase of $742 thousand, or 24.1%, from December 31,
2021. As of December 31, 2022, the allowance for loan losses was
$31.1 million, or 1.27% 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
1.43% as of December 31, 2022.
The following table presents selected asset quality data as of
and for the periods indicated:
As of and for the three months
ended
December 31,
September 30,
June 30,
March 31,
December 31,
(dollars in thousands)
2022
2022
2022
2022
2021
Nonaccrual loans
$
3,794
$
4,303
$
4,370
$
4,069
$
2,076
Accruing loans 90+ days past due
—
1,000
—
146
121
Total nonperforming loans
3,794
5,303
4,370
4,215
2,197
OREO and repossessed assets
30
904
860
865
885
Total nonperforming assets
$
3,824
$
6,207
$
5,230
$
5,080
$
3,082
Net charge-offs/(recoveries)
(178)
405
340
(141)
(1,006)
Net charge-offs/(recoveries) to average
loans
(0.03)
%
0.07
%
0.07
%
(0.03)
%
(0.22)
%
Nonperforming loans to total loans
0.16
%
0.23
%
0.23
%
0.23
%
0.12
%
Nonperforming assets to total assets
0.10
%
0.17
%
0.16
%
0.15
%
0.09
%
Allowance for loan losses to total
loans
1.27
%
1.34
%
1.66
%
1.74
%
1.80
%
Allowance for loan losses to nonperforming
loans
821
%
584
%
718
%
752
%
1,437
%
For the fourth quarter of 2022, we had net recoveries of $178
thousand compared to net charge-offs of $405 thousand for the third
quarter of 2022 and $1.0 million of net recoveries for the fourth
quarter of 2021.
There was no provision expense recorded for the three months
ended December 31, 2022, no change compared to the three months
ended September 30, 2022, and a $1.5 million increase as compared
to the three months ended December 31, 2021. With the decrease in
nonperforming assets, as well as adjustments for pandemic related
qualitative factors, management concluded no need for additional
provision expense in the period.
Capital
Total stockholders’ equity was $356.9 million as of December 31,
2022, a decrease of $2.5 million, or 0.7%, from December 31, 2021.
The decrease in stockholders’ equity was primarily due to a $94.4
million decrease in other comprehensive loss, due to rising
interest rates, which resulted in a lower fair value of our
available-for-sale investment securities portfolio. Tangible book
value per common share, a non-GAAP financial measure, decreased to
$14.37 as of December 31, 2022, from $17.87 as of December 31,
2021. Tangible common equity to tangible assets, a non-GAAP
financial measure, decreased to 7.74% as of December 31, 2022, from
9.21% as of December 31, 2021. Common equity tier 1 capital to risk
weighted assets decreased to 13.39% as of December 31, 2022, from
14.65% as of December 31, 2021.
The following table presents our capital ratios as of the dates
indicated:
December 31,
September 30,
December 31,
2022
2022
2021
Capital Ratios(1)
Alerus Financial Corporation
Consolidated
Common equity tier 1 capital to risk
weighted assets
13.39
%
13.63
%
14.65
%
Tier 1 capital to risk weighted assets
13.69
%
13.94
%
15.06
%
Total capital to risk weighted assets
16.48
%
16.84
%
18.64
%
Tier 1 capital to average assets
11.25
%
10.82
%
9.79
%
Tangible common equity / tangible assets
(2)
7.74
%
7.59
%
9.21
%
Alerus Financial, N.A.
Common equity tier 1 capital to risk
weighted assets
12.76
%
13.01
%
13.87
%
Tier 1 capital to risk weighted assets
12.76
%
13.01
%
13.87
%
Total capital to risk weighted assets
13.83
%
14.11
%
15.12
%
Tier 1 capital to average assets
10.48
%
11.12
%
9.01
%
(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, January 26, 2023, to discuss its financial
results. The call can be accessed via telephone at (844) 200-6205,
using access code 249132. 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 continued 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, including the
integration of Metro Phoenix Bank which we acquired in 2022; 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,
including digital asset service providers; our ability to
successfully manage liquidity risk, including our need to access
higher cost sources of funds such as fed funds purchased and
short-term borrowings; 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, including the
acquisition of Metro Phoenix Bank; 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, which has resulted in unrealized
losses in our portfolio; governmental monetary, trade and fiscal
policies; risks related to climate change and the negative impact
it may have on our customers and their businesses; 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 expected
discontinuation of the London Interbank Offered Rate, as well as
the development and implementation of other alternative reference
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;
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)
December 31,
December 31,
2022
2021
Assets
(Unaudited)
(Audited)
Cash and cash equivalents
$
58,242
$
242,311
Investment securities
Available-for-sale, at fair value
717,324
853,649
Held-to-maturity, at carrying value
321,902
352,061
Fed funds sold
—
—
Loans held for sale
9,488
46,490
Loans
2,443,994
1,758,020
Allowance for loan losses
(31,146)
(31,572)
Net loans
2,412,848
1,726,448
Land, premises and equipment, net
17,288
18,370
Operating lease right-of-use assets
5,419
3,727
Accrued interest receivable
12,869
8,537
Bank-owned life insurance
33,991
33,156
Goodwill
47,087
31,490
Other intangible assets
22,455
20,250
Servicing rights
2,643
1,880
Deferred income taxes, net
42,369
11,614
Other assets
75,712
42,708
Total assets
$
3,779,637
$
3,392,691
Liabilities and Stockholders’
Equity
Deposits
Noninterest-bearing
$
860,987
$
938,840
Interest-bearing
2,054,497
1,981,711
Total deposits
2,915,484
2,920,551
Short-term borrowings
378,080
—
Long-term debt
58,843
58,933
Operating lease liabilities
5,902
4,275
Accrued expenses and other liabilities
64,456
49,529
Total liabilities
3,422,765
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: 19,991,681 and 17,212,588 issued and
outstanding
19,992
17,213
Additional paid-in capital
155,095
92,878
Retained earnings
280,426
253,567
Accumulated other comprehensive income
(loss)
(98,641)
(4,255)
Total stockholders’ equity
356,872
359,403
Total liabilities and stockholders’
equity
$
3,779,637
$
3,392,691
Alerus Financial Corporation and
Subsidiaries
Consolidated Statements of
Income
(dollars and shares in thousands, except
per share data)
Three months ended
Year ended
December 31,
September 30,
December 31,
December 31,
December 31,
2022
2022
2021
2022
2021
Interest Income
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Audited)
Loans, including fees
$
29,248
$
25,379
$
19,354
$
89,907
$
78,133
Investment securities
Taxable
5,813
5,939
4,454
23,260
13,001
Exempt from federal income taxes
210
209
231
848
925
Other
541
748
166
1,562
598
Total interest income
35,812
32,275
24,205
115,577
92,657
Interest Expense
Deposits
5,675
1,852
880
9,169
3,661
Short-term borrowings
2,545
1,516
—
4,339
—
Long-term debt
628
591
536
2,340
1,897
Total interest expense
8,848
3,959
1,416
15,848
5,558
Net interest income
26,964
28,316
22,789
99,729
87,099
Provision for loan losses
—
—
(1,500)
—
(3,500)
Net interest income after provision for
loan losses
26,964
28,316
24,289
99,729
90,599
Noninterest Income
Retirement and benefit services
16,599
16,597
18,552
67,135
71,709
Wealth management
5,144
4,852
5,633
20,870
21,052
Mortgage banking
2,170
3,782
7,967
16,921
48,502
Service charges on deposit accounts
282
377
370
1,434
1,395
Net gains (losses) on investment
securities
—
—
—
—
125
Other
1,322
1,402
1,196
4,863
4,604
Total noninterest income
25,517
27,010
33,718
111,223
147,387
Noninterest Expense
Compensation
19,189
21,168
22,088
80,656
93,386
Employee taxes and benefits
4,887
5,079
5,590
21,915
22,033
Occupancy and equipment expense
1,892
1,926
1,936
7,605
8,148
Business services, software and technology
expense
4,405
5,373
5,220
19,487
20,486
Intangible amortization expense
1,324
1,324
1,053
4,754
4,380
Professional fees and assessments
1,454
3,126
1,808
8,367
6,292
Marketing and business development
950
890
872
3,254
3,182
Supplies and postage
634
588
778
2,440
2,361
Travel
356
291
206
1,182
442
Mortgage and lending expenses
606
409
488
2,183
4,250
Other
2,251
2,593
1,237
6,927
3,949
Total noninterest expense
37,948
42,767
41,276
158,770
168,909
Income before income taxes
14,533
12,559
16,731
52,182
69,077
Income tax expense
3,624
2,940
4,026
12,177
16,396
Net income
$
10,909
$
9,619
$
12,705
$
40,005
$
52,681
Per Common Share Data
Earnings per common share
$
0.54
$
0.48
$
0.73
$
2.12
$
3.02
Diluted earnings per common share
$
0.53
$
0.47
$
0.72
$
2.10
$
2.97
Dividends declared per common share
$
0.18
$
0.18
$
0.16
$
0.70
$
0.63
Average common shares outstanding
19,988
19,987
17,210
18,640
17,189
Diluted average common shares
outstanding
20,232
20,230
17,480
18,884
17,486
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)
December 31,
September 30,
December 31,
2022
2022
2021
Tangible Common Equity to Tangible
Assets
Total common stockholders’ equity
$
356,872
$
344,839
$
359,403
Less: Goodwill
47,087
46,060
31,490
Less: Other intangible assets
22,455
23,779
20,250
Tangible common equity (a)
287,330
275,000
307,663
Total assets
3,779,637
3,691,253
3,392,691
Less: Goodwill
47,087
46,060
31,490
Less: Other intangible assets
22,455
23,779
20,250
Tangible assets (b)
3,710,095
3,621,414
3,340,951
Tangible common equity to tangible assets
(a)/(b)
7.74
%
7.59
%
9.21
%
Tangible Book Value Per Common
Share
Total common stockholders’ equity
$
356,872
$
344,839
$
359,403
Less: Goodwill
47,087
46,060
31,490
Less: Other intangible assets
22,455
23,779
20,250
Tangible common equity (c)
287,330
275,000
307,663
Total common shares issued and outstanding
(d)
19,992
19,987
17,213
Tangible book value per common share
(c)/(d)
$
14.37
$
13.76
$
17.87
Three months ended
Year ended
December 31,
September 30,
December 31,
December 31,
December 31,
2022
2022
2021
2022
2021
Return on Average Tangible Common
Equity
Net income
$
10,909
$
9,619
$
12,705
$
40,005
$
52,681
Add: Intangible amortization expense (net
of tax)
1,046
1,046
832
3,756
3,460
Net income, excluding intangible
amortization (e)
11,955
10,665
13,537
43,761
56,141
Average total equity
349,812
372,274
357,084
346,355
346,059
Less: Average goodwill
46,283
48,141
30,930
39,415
30,385
Less: Average other intangible assets (net
of tax)
18,243
19,466
16,843
17,018
18,548
Average tangible common equity
(f)
285,286
304,667
309,311
289,922
297,126
Return on average tangible common equity
(e)/(f)
16.63
%
13.89
%
17.36
%
15.09
%
18.89
%
Efficiency Ratio
Noninterest expense
$
37,948
$
42,767
$
41,276
$
158,770
$
168,909
Less: Intangible amortization expense
1,324
1,324
1,053
4,754
4,380
Adjusted noninterest expense
(g)
36,624
41,443
40,223
154,016
164,529
Net interest income
26,964
28,316
22,789
99,729
87,099
Noninterest income
25,517
27,010
33,718
111,223
147,387
Tax-equivalent adjustment
124
112
99
429
492
Total tax-equivalent revenue
(h)
52,605
55,438
56,606
211,381
234,978
Efficiency ratio (g)/(h)
69.62
%
74.76
%
71.06
%
72.86
%
70.02
%
Alerus Financial Corporation and
Subsidiaries
Analysis of Average Balances, Yields,
and Rates (unaudited)
(dollars in thousands)
Three months ended
Year ended
December 31, 2022
September 30, 2022
December 31, 2021
December 31, 2022
December 31, 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
$
26,510
2.16
%
$
72,157
2.02
%
$
232,650
0.16
%
$
58,149
1.01
%
$
222,916
0.14
%
Investment securities (1)
1,046,441
2.30
%
1,116,458
2.20
%
1,119,370
1.68
%
1,135,426
2.14
%
864,273
1.64
%
Fed funds sold
7,119
3.40
%
21,893
2.37
%
—
—
%
7,313
2.63
%
—
—
%
Loans held for sale
14,505
4.54
%
27,032
4.14
%
53,357
2.33
%
24,497
3.49
%
65,968
2.26
%
Loans
Commercial:
Commercial and industrial
561,252
5.80
%
566,987
5.41
%
471,262
5.61
%
507,040
5.13
%
579,002
4.91
%
Real estate construction
96,189
6.02
%
70,545
5.60
%
41,573
3.89
%
63,296
5.21
%
41,751
4.10
%
Commercial real estate
838,466
4.85
%
807,505
4.07
%
587,542
3.90
%
713,102
4.16
%
571,326
3.77
%
Total commercial
1,495,907
5.28
%
1,445,037
4.67
%
1,100,377
4.63
%
1,283,438
4.59
%
1,192,079
4.34
%
Consumer
Residential real estate first mortgage
665,135
3.64
%
624,826
3.54
%
504,997
3.30
%
587,443
3.50
%
477,621
3.47
%
Residential real estate junior lien
146,912
6.46
%
140,664
5.41
%
129,238
4.52
%
136,483
5.29
%
131,412
4.64
%
Other revolving and installment
51,836
5.62
%
51,834
4.98
%
48,045
4.53
%
52,071
4.85
%
57,574
4.41
%
Total consumer
863,883
4.24
%
817,324
3.96
%
682,280
3.62
%
775,997
3.91
%
666,607
3.78
%
Total loans (1)
2,359,790
4.90
%
2,262,361
4.41
%
1,782,657
4.25
%
2,059,435
4.33
%
1,858,686
4.14
%
Federal Reserve/FHLB stock
19,603
6.80
%
18,449
5.35
%
6,496
4.34
%
13,824
5.67
%
6,329
4.36
%
Total interest earning assets
3,473,968
4.10
%
3,518,350
3.65
%
3,194,530
3.02
%
3,298,644
3.52
%
3,018,172
3.09
%
Noninterest earning assets
232,754
224,804
159,370
202,011
160,648
Total assets
$
3,706,722
$
3,743,154
$
3,353,900
$
3,500,655
$
3,178,820
Interest-Bearing Liabilities
Interest-bearing demand deposits
$
692,217
0.50
%
$
659,696
0.13
%
$
754,432
0.13
%
$
692,287
0.22
%
$
697,276
0.14
%
Money market and savings deposits
1,185,502
1.39
%
1,180,576
0.40
%
1,039,492
0.14
%
1,113,426
0.55
%
1,023,677
0.15
%
Time deposits
214,264
1.20
%
234,459
0.74
%
225,497
0.46
%
221,997
0.70
%
215,624
0.54
%
Fed funds purchased
86,350
3.78
%
84,149
2.31
%
—
—
%
63,296
2.46
%
3
—
%
Short-term borrowings
178,533
3.82
%
168,750
2.41
%
—
—
%
89,932
3.10
%
—
—
%
Long-term debt
58,830
4.24
%
58,843
3.98
%
58,938
3.61
%
58,864
3.98
%
50,759
3.74
%
Total interest-bearing liabilities
2,415,696
1.45
%
2,386,473
0.66
%
2,078,359
0.27
%
2,239,802
0.71
%
1,987,339
0.28
%
Noninterest-Bearing Liabilities and
Stockholders' Equity
Noninterest-bearing deposits
870,948
920,340
851,210
851,821
784,998
Other noninterest-bearing liabilities
70,266
64,067
67,247
62,677
60,424
Stockholders’ equity
349,812
372,274
357,084
346,355
346,059
Total liabilities and stockholders’
equity
$
3,706,722
$
3,743,154
$
3,353,900
$
3,500,655
$
3,178,820
Net interest income (1)
Net interest rate spread
2.65
%
2.99
%
2.75
%
2.81
%
2.81
%
Net interest margin, tax-equivalent
(1)
3.09
%
3.21
%
2.84
%
3.04
%
2.90
%
(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/20230125005825/en/
Alan A. Villalon, Chief Financial Officer 952.417.3733
(Office)
Alerus Financial (NASDAQ:ALRS)
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