Alerus Financial Corporation (Nasdaq: ALRS), or the Company,
reported net income of $8.2 million for the first quarter of 2023,
or $0.40 per diluted common share, compared to net income of $10.9
million, or $0.53 per diluted common share, for the fourth quarter
of 2022, and net income of $10.2 million, or $0.57 per diluted
common share, for the first quarter of 2022.
CEO Comments
President and Chief Executive Officer Katie Lorenson said,
“Alerus’ highly diversified business model is a unique
differentiator in this challenging economic environment with fee
income making up over 50.0% of total revenues, our banking
franchise is anchored by a strong foundation of capital, risk
management, and diversification. Our common equity tier 1 capital
ratio at the end of the first quarter was 13.3% and our nearly
all-core granular deposit based increased balances by 4.0% during
the quarter. Our liquidity position is strong, with total available
liquidity to uninsured and not collateralized deposits of 286%. The
Company’s loan portfolio remains well diversified by sector and
geography, with limited exposure to commercial office borrowers at
3.9% of total loans. The allowance for credit losses to was 1.4% to
total loans and 1,675% of non-performing loans. Credit quality
remains pristine with net charge-offs of 3 basis points, below the
Company’s historical net charge-off rates of 0.27%.
Financial results for the first quarter were impacted by
continuing margin pressure and headwinds in the mortgage sector. We
are focused on improving long-term profitability and shareholder
returns through ongoing restructuring and efficiency enhancing
opportunities. We continue to have success in the transformation of
our organic growth model and synergistic expansion as we added core
holistic relationships in banking and wealth management. Our
momentum in talent acquisition continued in the first quarter with
key talent adds to the banking and treasury management teams. Thank
you to our Alerus employees for your dedication and constant focus
on building relationships with clients by bringing value to every
interaction and together taking Alerus to new heights.”
Quarterly Highlights
- Total deposits were $3.0 billion as of March 31, 2023, an
increase of $116.5 million, or 4.0%, from December 31, 2022
- Loan to deposit ratio as of March 31, 2023 was 82.0%, compared
to 83.8% as of December 31, 2022
- Common equity tier 1 capital to risk weighted assets as of
March 31, 2023 was 13.30%, compared to 13.39% as of December 31,
2022
- Return on average total assets of 0.88%, compared to 1.17% for
the fourth quarter of 2022
- Return on average common equity of 9.17%, compared to 12.37%
for the fourth quarter of 2022
- Return on average tangible common equity(1) of 12.58%, compared
to 16.63% for the fourth quarter of 2022
- Net interest margin (tax-equivalent) was 2.70%, compared to
3.09% for the fourth quarter of 2022
- Noninterest expense was $37.9 million, no change compared to
$37.9 million for the fourth quarter of 2022
- Noninterest income was 51.63% of total revenue, compared to
48.62 for the fourth quarter of 2022
- Allowance for credit losses to total loans was 1.41% compared
to 1.27% as of December 31, 2022
- Expanded the Company’s commercial banking team with the
addition of four highly experienced mid-market and treasury
management professionals
- The Board of Directors previously declared a regular quarterly
cash dividend of $0.18 per share, which was paid on April 14, 2023
to shareholders of record as of March 15, 2023. As previously
reported, this dividend represents a 12.5% increase over the
dividend declared during the first quarter 2022.
(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
March 31,
December 31,
March 31,
(dollars and shares in thousands, except
per share data)
2023
2022
2022
Performance Ratios
Return on average total assets
0.88
%
1.17
%
1.26
%
Return on average common equity
9.17
%
12.37
%
11.78
%
Return on average tangible common equity
(1)
12.58
%
16.63
%
14.72
%
Noninterest income as a % of revenue
51.63
%
48.62
%
57.62
%
Net interest margin (tax-equivalent)
2.70
%
3.09
%
2.83
%
Efficiency ratio (1)
74.53
%
69.62
%
72.25
%
Net charge-offs/(recoveries) to average
loans
0.03
%
(0.03
)
%
(0.03
)
%
Dividend payout ratio
45.00
%
33.96
%
28.07
%
Per Common Share
Earnings per common share - basic
$
0.41
$
0.54
$
0.58
Earnings per common share - diluted
$
0.40
$
0.53
$
0.57
Dividends declared per common share
$
0.18
$
0.18
$
0.16
Book value per common share
$
17.90
$
17.85
$
19.00
Tangible book value per common share
(1)
$
14.50
$
14.37
$
16.07
Average common shares outstanding -
basic
20,028
19,988
17,244
Average common shares outstanding -
diluted
20,246
20,232
17,500
Other Data
Retirement and benefit services assets
under administration/management
$
33,404,342
$
32,122,520
$
35,333,131
Wealth management assets under
administration/management
$
3,675,684
$
3,582,648
$
4,584,856
Mortgage originations
$
77,728
$
126,254
$
186,762
(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 first quarter of 2023 was $23.7
million, a $3.3 million, or 12.3%, decrease from the fourth quarter
of 2022. Net interest income increased $2.0 million, or 9.2%, from
$21.7 million for the first quarter of 2022. The linked quarter
decrease in net interest income was primarily driven by a $5.3
million, or 59.9%, increase in interest expense, partially offset
by a $2.0 million, or 5.6%, increase in interest income. The
increase in interest expense was primarily driven by a $3.4 million
increase in interest expense paid on deposits and $1.8 million in
interest expense paid on short-term borrowings. The increase in
interest expense paid on deposits was primarily due to the rapid
increase in short-term rates and heightened deposit competition.
Short-term borrowings expense increased as interest rates have
increased and the average balance of fed funds purchased and
short-term borrowings increased $105.3 million as compared to the
fourth quarter of 2022. This increase was primarily driven by a
$97.4 million increase in average loan balances, and a $29.9
million decline in average deposit balances, partially offset by a
$12.2 million decline in average investment securities balance.
Net interest margin (tax-equivalent), was 2.70% for the first
quarter of 2023, a 39 basis point decrease from 3.09% for the
fourth quarter of 2022, and a 13 basis point decrease from 2.83% in
the first quarter of 2022. The linked quarter decrease was
primarily driven by a 78 basis point increase in the average rate
paid on interest-bearing liabilities, partially offset by a 21
basis point increase in interest earning asset yields. The increase
in the average rate paid on interest-bearing liabilities was the
result of a 100 basis point increase in the average rate paid on
fed funds purchased and short-term borrowings as well as a 65 basis
point increase in the rate paid on interest-bearing deposits.
Noninterest Income
Noninterest income for the first quarter of 2023 was $25.3
million, a $264 thousand, or 1.0%, decrease from the fourth quarter
of 2022. The quarter over quarter decrease was primarily driven by
decreases of $1.1 million in retirement and benefit services
revenue and $453 thousand in mortgage banking revenue, partially
offset by a $1.2 million increase in other noninterest income. The
decrease in retirement and benefit services revenue was primarily
the result of seasonal decreases in administration fees, ESOP
transaction fees and loan and distribution fees. Mortgage banking
revenue decreased primarily due to a $48.5 million, or 38.4%,
decrease in mortgage originations due to the rising interest rate
environment and seasonality. Other noninterest income increased
primarily due to a $1.2 million increase in proceeds received on a
bank-owned life insurance claim.
Noninterest income for the first quarter of 2023 decreased $4.2
million, or 14.3%, from $29.5 million in the first quarter of 2022.
The decrease in noninterest income was primarily due to a $3.2
million decrease in mortgage banking revenue and a $2.2 million
decrease in retirement and benefit services revenue, partially
offset by a $1.4 million increase in other noninterest income.
Mortgage banking revenue decreased primarily due to a $109.0
million, or 58.4% decrease in mortgage originations, driven by the
rising interest rate environment and a reduction in mortgage
personnel. Retirement and benefit services revenue decreased
primarily due to a decrease in asset based fees as assets under
administration/management decreased $1.9 billion, or 5.5%.
Additionally, retirement and benefit services revenue experienced
decreases of $528 thousand in payroll service fees resulting from
the exit of payroll services and $310 thousand in plan document
restatement fees. Other noninterest income increased for reasons
previously stated.
Noninterest Expense
Noninterest expense for both the first quarter of 2023 and the
fourth quarter of 2022 was $37.9 million. The minor linked quarter
changes in noninterest expense included a $983 thousand decrease in
other noninterest expense and a $302 thousand decrease in
professional fees and assessments, partially offset by an increase
of $966 thousand in employee taxes and benefits, $919 thousand
increase in business services, software and technology.
Compensation expense remained flat quarter over quarter, despite
the first quarter including one-time expenses of $484 thousand in
severance costs and $415 thousand related to talent acquisition.
The decrease in other noninterest expense was primarily driven by a
reduction of the provision for unfunded commitments which is now
being reported within the provision for credit losses, as the
Company adopted the new Current Expected Credit Loss, or CECL,
accounting standard on January 1, 2023. Professional fees and
assessments declined, primarily due to a decrease in the legal fees
and mergers and acquisition expenses associated with the
acquisition of Metro Phoenix Bank, which was completed in the third
quarter of 2022. Employee taxes and benefits increased primarily
due to seasonality. Business services, software and technology
expense increased primarily due to the recognition of the benefits
of renegotiated contracts at lower rates in the fourth quarter.
Noninterest expense for the first quarter of 2023 decreased $202
thousand, or 0.5%, from $38.1 million in the first quarter of 2022.
The year over year decrease in noninterest expense was primarily
driven by a $389 thousand decrease in professional fees and
assessments, partially offset by a $400 thousand increase in
business services, software and technology expense. Professional
fees and assessments decreased primarily due to a $284 thousand
decrease in recruitment expenses. Business services, software and
technology expense increased primarily due to increased technology
expenses associated with the acquisition and integration of Metro
Phoenix Bank.
Financial Condition
Total assets were $3.9 billion as of March 31, 2023, an increase
of $107.1 million, or 2.8%, from December 31, 2022. The increase in
assets included increases of $86.9 million in cash and cash
equivalents, $42.6 million in loans held for investment, partially
offset by a $19.8 million decrease in investment securities from
December 31, 2022.
Loans
Total loans were $2.5 billion as of March 31, 2023, an increase
of $42.6 million, or 1.7%, from December 31, 2022. The increase in
total loans was primarily due to increases of $52.7 million in
commercial real estate loans, $11.0 million in real estate
construction loans and $20.3 million in residential real estate
loans, partially offset by a $30.3 million decrease in commercial
and industrial loans.
The following table presents the composition of our loan
portfolio as of the dates indicated:
March 31,
December 31,
September 30,
June 30,
March 31,
(dollars in thousands)
2023
2022
2022
2022
2022
Commercial
Commercial and industrial
$
553,578
$
583,876
$
564,655
$
484,426
$
467,449
Real estate construction
108,776
97,810
89,215
48,870
41,604
Commercial real estate
934,324
881,670
819,068
599,737
602,158
Total commercial
1,596,678
1,563,356
1,472,938
1,133,033
1,111,211
Consumer
Residential real estate first mortgage
698,002
679,551
649,818
568,571
522,489
Residential real estate junior lien
152,281
150,479
143,681
135,255
130,604
Other revolving and installment
39,664
50,608
51,794
53,384
53,738
Total consumer
889,947
880,638
845,293
757,210
706,831
Total loans
$
2,486,625
$
2,443,994
$
2,318,231
$
1,890,243
$
1,818,042
Deposits
Total deposits were $3.0 billion as of March 31, 2023, an
increase of $116.5 million, or 4.0%, from December 31, 2022.
Interest-bearing deposits increased $184.5 million, while
noninterest-bearing deposits decreased $68.0 million in the first
quarter of 2023. The increase in interest-bearing deposits included
increases of $111.4 million in interest-bearing demand deposits,
$40.2 million in money market savings accounts and $33.1 million in
time deposits. Interest-bearing deposits increased primarily due to
an increase in our synergistic, commercial and public funds
deposits. Synergistic deposits, which include deposits from our
retirement and benefit services and wealth management segments
including HSA deposits, increased $66.4 million. Excluding
synergistic deposits, commercial transaction deposits including
public funds increased $65.0 million, while consumer transaction
deposits decreased $48.8 million in the first quarter of 2023.
Noninterest bearing deposits as a percentage of total deposits was
26.2% as of March 31, 2023, compared to 29.5% as of December 31,
2022.
The following table presents the composition of our deposit
portfolio as of the dates indicated:
March 31,
December 31,
September 30,
June 30,
March 31,
(dollars in thousands)
2023
2022
2022
2022
2022
Noninterest-bearing demand
$
792,977
$
860,987
$
905,228
$
764,808
$
831,558
Interest-bearing
Interest-bearing demand
817,675
706,275
653,216
642,641
760,321
Savings accounts
99,742
99,882
101,820
97,227
99,299
Money market savings
1,076,166
1,035,981
1,079,520
914,423
976,905
Time deposits
245,418
212,359
222,027
200,451
224,184
Total interest-bearing
2,239,001
2,054,497
2,056,583
1,854,742
2,060,709
Total deposits
$
3,031,978
$
2,915,484
$
2,961,811
$
2,619,550
$
2,892,267
Asset Quality
Effective January 1, 2023, the Company adopted the new CECL
accounting standard. The adoption of CECL resulted in the Company’s
allowance for credit losses increasing by approximately $5.9
million relative to the allowance held as of December 31, 2022. The
adoption of CECL resulted in additional allowance of $3.9 million
in the allowance for credit losses on loans and $1.9 million in
additional allowance for credit losses on unfunded commitments.
Total nonperforming assets were $2.1 million as of March 31, 2023,
a decrease of $1.7 million, or 44.6%, from December 31, 2022. As of
March 31, 2023, the allowance for credit losses on loans was $35.1
million, or 1.41% of total loans, compared to $31.1 million, or
1.27% of total loans, as of December 31, 2022. In addition, the
fair value mark on the acquired Metro Phoenix Bank loan portfolio
was $6.9 million and $7.1 million, as of March 31, 2023 and
December 31, 2022, respectively.
The following table presents selected asset quality data as of
and for the periods indicated:
As of and for the three months
ended
March 31,
December 31,
September 30,
June 30,
March 31,
(dollars in thousands)
2023
2022
2022
2022
2022
Nonaccrual loans
$
2,118
$
3,794
$
4,303
$
4,370
$
4,069
Accruing loans 90+ days past due
—
—
1,000
—
146
Total nonperforming loans
2,118
3,794
5,303
4,370
4,215
OREO and repossessed assets
—
30
904
860
865
Total nonperforming assets
$
2,118
$
3,824
$
6,207
$
5,230
$
5,080
Net charge-offs/(recoveries)
170
(178
)
405
340
(141
)
Net charge-offs/(recoveries) to average
loans
0.03
%
(0.03
)
%
0.07
%
0.07
%
(0.03
)
%
Nonperforming loans to total loans
0.09
%
0.16
%
0.23
%
0.23
%
0.23
%
Nonperforming assets to total assets
0.05
%
0.10
%
0.17
%
0.16
%
0.15
%
Allowance for credit losses on loans to
total loans
1.41
%
1.27
%
1.34
%
1.66
%
1.74
%
Allowance for credit losses on loans to
nonperforming loans
1,657
%
821
%
584
%
718
%
752
%
For the first quarter of 2023, the Company had net charge-offs
of $170 thousand compared to net recoveries of $178 thousand for
the fourth quarter of 2022 and $141 thousand of net recoveries for
the first quarter of 2022.
The Company recorded a provision for credit losses expense of
$550 thousand in the three months ended March 31, 2023, a $550
thousand increase compared to both the three months ended December
31, 2022, and March 31, 2022. The provision for credit losses
expense for the three months ended March 31, 2023, included $269
thousand in provision for credit losses on loans and $230 thousand
in provision for credit losses on unfunded commitments. The
increase in provision for credit losses was primarily a result of a
change in forecasting assumptions in the new methodology with the
adoption of CECL.
Capital
Total stockholders’ equity was $359.1 million as of March 31,
2023, an increase of $2.2 million, or 0.6%, from December 31, 2022.
While stockholders’ equity remained relatively flat, the Company
saw decreases of $4.5 million in retained earnings as a result of
the adoption of CECL, partially offset by a $2.3 million decrease
in the amount of other comprehensive loss. Tangible book value per
common share, a non-GAAP financial measure, increased to $14.50 as
of March 31, 2023, from $14.37 as of December 31, 2022. Tangible
common equity to tangible assets, a non-GAAP financial measure,
decreased to 7.62% as of March 31, 2023, from 7.74% as of December
31, 2022. Common equity tier 1 capital to risk weighted assets
decreased to 13.30% as of March 31, 2023, from 13.39% as of
December 31, 2022.
The following table presents our capital ratios as of the dates
indicated:
March 31,
December 31,
March 31,
2023
2022
2022
Capital Ratios(1)
Alerus Financial Corporation
Consolidated
Common equity tier 1 capital to risk
weighted assets
13.30
%
13.39
%
14.27
%
Tier 1 capital to risk weighted assets
13.60
%
13.69
%
14.66
%
Total capital to risk weighted assets
16.51
%
16.48
%
18.12
%
Tier 1 capital to average assets
11.00
%
11.25
%
10.30
%
Tangible common equity / tangible assets
(2)
7.62
%
7.74
%
8.46
%
Alerus Financial, N.A.
Common equity tier 1 capital to risk
weighted assets
12.67
%
12.76
%
13.52
%
Tier 1 capital to risk weighted assets
12.67
%
12.76
%
13.52
%
Total capital to risk weighted assets
13.87
%
13.83
%
14.77
%
Tier 1 capital to average assets
10.24
%
10.48
%
9.50
%
(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, April 27, 2023, to discuss its financial results.
The call can be accessed via telephone at (844) 200-6205, using
access code 057461. 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., the Company 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. The Company
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. The Company 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 the Company calculates 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
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 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 credit 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 effects of recent developments and events in the
financial services industry, including the large-scale deposit
withdrawals over a short-period of time at Silicon Valley Bank and
Signature Bank that resulted in the failure of those institutions;
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 concentration of large deposits from
certain clients, who have balances above current FDIC insurance
limits and may withdraw deposits to diversify their exposure; 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,
including in response to the recent failures of Silicon Valley Bank
and Signature Bank; 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; 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)
March 31,
December 31,
2023
2022
Assets
(Unaudited)
(Audited)
Cash and cash equivalents
$
145,181
$
58,242
Investment securities
Available-for-sale, at fair value
705,825
717,324
Held-to-maturity, at carrying value
(allowance for credit losses of $223 at March 31, 2023)
313,648
321,902
Loans held for sale
16,900
9,488
Loans
2,486,625
2,443,994
Allowance for credit losses on loans
(35,102
)
(31,146
)
Net loans
2,451,523
2,412,848
Land, premises and equipment, net
17,631
17,288
Operating lease right-of-use assets
5,122
5,419
Accrued interest receivable
12,983
12,869
Bank-owned life insurance
32,583
33,991
Goodwill
47,087
47,087
Other intangible assets
21,131
22,455
Servicing rights
2,421
2,643
Deferred income taxes, net
41,620
42,369
Other assets
73,118
75,712
Total assets
$
3,886,773
$
3,779,637
Liabilities and Stockholders’
Equity
Deposits
Noninterest-bearing
$
792,977
$
860,987
Interest-bearing
2,239,001
2,054,497
Total deposits
3,031,978
2,915,484
Short-term borrowings
372,145
378,080
Long-term debt
58,872
58,843
Operating lease liabilities
5,545
5,902
Accrued expenses and other liabilities
59,115
64,456
Total liabilities
3,527,655
3,422,765
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: 20,066,807 and 19,991,681 issued and
outstanding
20,067
19,992
Additional paid-in capital
154,818
155,095
Retained earnings
280,540
280,426
Accumulated other comprehensive income
(loss)
(96,307
)
(98,641
)
Total stockholders’ equity
359,118
356,872
Total liabilities and stockholders’
equity
$
3,886,773
$
3,779,637
Alerus Financial Corporation and
Subsidiaries
Consolidated Statements of
Income
(dollars and shares in thousands, except
per share data)
Three months ended
March 31,
December 31,
March 31,
2023
2022
2022
Interest Income
(Unaudited)
(Unaudited)
(Unaudited)
Loans, including fees
$
30,933
$
29,248
$
17,292
Investment securities
Taxable
5,951
5,813
5,440
Exempt from federal income taxes
190
210
216
Other
735
541
116
Total interest income
37,809
35,812
23,064
Interest Expense
Deposits
9,104
5,675
829
Short-term borrowings
4,393
2,545
—
Long-term debt
654
628
562
Total interest expense
14,151
8,848
1,391
Net interest income
23,658
26,964
21,673
Provision for credit losses
550
—
—
Net interest income after provision for
credit losses
23,108
26,964
21,673
Noninterest Income
Retirement and benefit services
15,482
16,599
17,646
Wealth management
5,194
5,144
5,326
Mortgage banking
1,717
2,170
4,931
Service charges on deposit accounts
301
282
363
Other
2,559
1,322
1,204
Total noninterest income
25,253
25,517
29,470
Noninterest Expense
Compensation
19,158
19,189
19,051
Employee taxes and benefits
5,853
4,887
6,162
Occupancy and equipment expense
1,899
1,892
2,051
Business services, software and technology
expense
5,324
4,405
4,924
Intangible amortization expense
1,324
1,324
1,053
Professional fees and assessments
1,152
1,454
1,541
Marketing and business development
686
950
600
Supplies and postage
460
634
646
Travel
248
356
179
Mortgage and lending expenses
497
606
686
Other
1,268
2,251
1,178
Total noninterest expense
37,869
37,948
38,071
Income before income taxes
10,492
14,533
13,072
Income tax expense
2,306
3,624
2,888
Net income
$
8,186
$
10,909
$
10,184
Per Common Share Data
Earnings per common share
$
0.41
$
0.54
$
0.58
Diluted earnings per common share
$
0.40
$
0.53
$
0.57
Dividends declared per common share
$
0.18
$
0.18
$
0.16
Average common shares outstanding
20,028
19,988
17,244
Diluted average common shares
outstanding
20,246
20,232
17,500
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)
March 31,
December 31,
March 31,
2023
2022
2022
Tangible Common Equity to Tangible
Assets
Total common stockholders’ equity
$
359,118
$
356,872
$
328,505
Less: Goodwill
47,087
47,087
31,490
Less: Other intangible assets
21,131
22,455
19,197
Tangible common equity (a)
290,900
287,330
277,818
Total assets
3,886,773
3,779,637
3,336,199
Less: Goodwill
47,087
47,087
31,490
Less: Other intangible assets
21,131
22,455
19,197
Tangible assets (b)
3,818,555
3,710,095
3,285,512
Tangible common equity to tangible assets
(a)/(b)
7.62
%
7.74
%
8.46
%
Tangible Book Value Per Common
Share
Total common stockholders’ equity
$
359,118
$
356,872
$
328,505
Less: Goodwill
47,087
47,087
31,490
Less: Other intangible assets
21,131
22,455
19,197
Tangible common equity (c)
290,900
287,330
277,818
Total common shares issued and outstanding
(d)
20,067
19,992
17,289
Tangible book value per common share
(c)/(d)
$
14.50
$
14.37
$
16.07
Three months ended
March 31,
December 31,
March 31,
2023
2022
2022
Return on Average Tangible Common
Equity
Net income
$
8,186
$
10,909
$
10,184
Add: Intangible amortization expense (net
of tax)
1,046
1,046
832
Net income, excluding intangible
amortization (e)
9,232
11,955
11,016
Average total equity
361,857
349,812
350,545
Less: Average goodwill
47,087
46,283
31,490
Less: Average other intangible assets (net
of tax)
17,209
18,243
15,569
Average tangible common equity
(f)
297,561
285,286
303,486
Return on average tangible common equity
(e)/(f)
12.58
%
16.63
%
14.72
%
Efficiency Ratio
Noninterest expense
$
37,869
$
37,948
$
38,071
Less: Intangible amortization expense
1,324
1,324
1,053
Adjusted noninterest expense
(g)
36,545
36,624
37,018
Net interest income
23,658
26,964
21,673
Noninterest income
25,253
25,517
29,470
Tax-equivalent adjustment
124
124
94
Total tax-equivalent revenue
(h)
49,035
52,605
51,237
Efficiency ratio (g)/(h)
74.53
%
69.62
%
72.25
%
Alerus Financial Corporation and
Subsidiaries
Analysis of Average Balances, Yields,
and Rates (unaudited)
(dollars in thousands)
Three months ended
March 31, 2023
December 31, 2022
March 31, 2022
Average
Average
Average
Average
Yield/
Average
Yield/
Average
Yield/
Balance
Rate
Balance
Rate
Balance
Rate
Interest Earning Assets
Interest-bearing deposits with banks
$
41,947
3.23
%
$
26,510
2.16
%
$
105,726
0.18
%
Investment securities (1)
1,034,288
2.43
%
1,046,441
2.30
%
1,216,256
1.90
%
Fed funds sold
—
—
%
7,119
3.40
%
—
—
%
Loans held for sale
10,345
4.98
%
14,505
4.54
%
24,656
2.57
%
Loans
Commercial:
Commercial and industrial
559,416
6.09
%
561,252
5.80
%
434,656
4.68
%
Real estate construction
103,099
6.56
%
96,189
6.02
%
41,139
3.89
%
Commercial real estate
911,634
4.95
%
838,466
4.85
%
601,024
3.64
%
Total commercial
1,574,149
5.46
%
1,495,907
5.28
%
1,076,819
4.07
%
Consumer
Residential real estate first mortgage
688,754
3.76
%
665,135
3.64
%
514,724
3.49
%
Residential real estate junior lien
149,720
7.21
%
146,912
6.46
%
125,997
4.45
%
Other revolving and installment
44,531
5.86
%
51,836
5.62
%
50,686
4.38
%
Total consumer
883,005
4.45
%
863,883
4.24
%
691,407
3.73
%
Total loans (1)
2,457,154
5.10
%
2,359,790
4.90
%
1,768,226
3.94
%
Federal Reserve/FHLB stock
23,668
6.87
%
19,603
6.80
%
6,486
4.38
%
Total interest earning assets
3,567,402
4.31
%
3,473,968
4.10
%
3,121,350
3.01
%
Noninterest earning assets
224,134
232,754
165,459
Total assets
$
3,791,536
$
3,706,722
$
3,286,809
Interest-Bearing Liabilities
Interest-bearing demand deposits
$
746,660
0.87
%
$
692,217
0.50
%
$
714,472
0.12
%
Money market and savings deposits
1,165,269
2.17
%
1,185,502
1.39
%
1,043,430
0.14
%
Time deposits
231,959
2.23
%
214,264
1.20
%
227,485
0.44
%
Fed funds purchased
290,187
4.85
%
86,350
3.78
%
—
—
%
Short-term borrowings
80,000
4.69
%
178,533
3.82
%
—
—
%
Long-term debt
58,858
4.51
%
58,830
4.24
%
58,908
3.87
%
Total interest-bearing liabilities
2,572,933
2.23
%
2,415,696
1.45
%
2,044,295
0.28
%
Noninterest-Bearing Liabilities and
Stockholders' Equity
Noninterest-bearing deposits
789,134
870,948
831,441
Other noninterest-bearing liabilities
67,612
70,266
60,528
Stockholders’ equity
361,857
349,812
350,545
Total liabilities and stockholders’
equity
$
3,791,536
$
3,706,722
$
3,286,809
Net interest income (1)
Net interest rate spread
2.08
%
2.65
%
2.73
%
Net interest margin, tax-equivalent
(1)
2.70
%
3.09
%
2.83
%
(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/20230426006021/en/
Alan A. Villalon, Chief Financial Officer 952.417.3733
(Office)
Alerus Financial (NASDAQ:ALRS)
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