Alerus Financial Corporation (Nasdaq: ALRS), or the Company,
reported net income of $9.1 million for the second quarter of 2023,
or $0.45 per diluted common share, compared to net income of $8.2
million, or $0.40 per diluted common share, for the first quarter
of 2023, and net income of $9.3 million, or $0.52 per diluted
common share, for the second quarter of 2022.
CEO Comments
President and Chief Executive Officer Katie Lorenson said,
“During the second quarter, we continued to evolve Alerus into a
high performing commercial wealth bank and a national retirement
and benefits provider through strategic talent acquisitions and
infrastructure optimization. The foundational strength and unique
business model of our Company allowed us to continue to attract
experienced professionals who will continue to build our commercial
banking segment in addition to doubling the size of our treasury
management team. More recently, we lifted out a highly regarded and
seasoned team to lead the launch of our private banking franchise.
We believe that the addition of these professionals coupled with
our tenured talent will drive continued new client acquisition and
existing client expansion throughout our growing markets.
While the macroeconomic environment remains uncertain, our
diversified business model shined in the second quarter as fee
income represented 53.7% of total revenues, an industry leading
standard, driven primarily by our nationally scaled retirement
services and growing wealth management business.
During the quarter, we continued to execute on prudent expense
management as noninterest expenses declined 4% from the prior
quarter. Our focus on a client-centric organizational structure has
resulted in efficiency improvements across the organization. As of
July, these improvements have allowed us to reduce total headcount
by 10% over the past 12 months, even after taking account of the
acquisition of Metro Phoenix Bank.
Despite ongoing industry and economic challenges, we believe
Alerus is positioned to emerge stronger than ever. Our unique
business model is anchored by durable and highly recurring fee
income and our balance sheet is characterized by superior capital
and reserves, a highly diversified loan and deposit portfolio, and
a long history of strong credit performance. We remain optimistic
about our continued ability to attract and retain the best talent
and are seeing the benefits of our ongoing implementation of
infrastructure optimization.
We are grateful for our Alerus team members whose ongoing
collaboration and client focus are continuing to position the
company’s future for top tier shareholder returns and
performance.”
Second Quarter Highlights
- Return on average tangible common equity(1) of 13.71%, compared
to 12.58% for the first quarter of 2023
- Return on average common equity of 10.14%, compared to 9.17%
for the first quarter of 2023
- Return on average total assets of 0.96%, compared to 0.88% for
the first quarter of 2023
- Repurchased $3.0 million of the Company’s outstanding stock,
reducing common shares outstanding by 170,046 at quarter end
- Increased quarterly dividend by 5.6% to $0.19 per share
- Loan to deposit ratio as of June 30, 2023 was 88.8%, compared
to 83.8% as of December 31, 2022
- Common equity tier 1 capital to risk weighted assets as of June
30, 2023 was 13.30%, compared to 13.39% as of December 31,
2022
- Noninterest expense was $36.4 million, compared to $37.9
million for the first quarter of 2023
- Efficiency ratio improved to 72.79% compared to 74.53% for the
first quarter of 2023
- Noninterest income was 53.69% of total revenue, compared to
51.63% for the first quarter of 2023
- Allowance for credit losses to total loans was 1.41% compared
to 1.27% as of December 31, 2022
- Net recoveries to average loans of 0.07% compared to net
charge-offs to average loans of 0.03% for the first quarter of
2023
(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
Six months ended
June 30,
March 31,
June 30,
June 30,
June 30,
(dollars and shares in thousands, except
per share data)
2023
2023
2022
2023
2022
Performance Ratios
Return on average total assets
0.96
%
0.88
%
1.14
%
0.92
%
1.20
%
Return on average common equity
10.14
%
9.17
%
11.93
%
9.66
%
11.85
%
Return on average tangible common equity
(1)
13.71
%
12.58
%
15.25
%
13.15
%
14.97
%
Noninterest income as a % of revenue
53.69
%
51.63
%
56.20
%
52.65
%
56.91
%
Net interest margin (tax-equivalent)
2.52
%
2.70
%
2.98
%
2.61
%
2.91
%
Efficiency ratio (1)
72.79
%
74.53
%
74.72
%
73.67
%
73.50
%
Net charge-offs/(recoveries) to average
loans
(0.07
)
%
0.03
%
0.07
%
(0.02
)
%
0.02
%
Dividend payout ratio
42.22
%
45.00
%
34.62
%
43.53
%
30.91
%
Per Common Share
Earnings per common share - basic
$
0.45
$
0.41
$
0.53
$
0.86
$
1.11
Earnings per common share - diluted
$
0.45
$
0.40
$
0.52
$
0.85
$
1.10
Dividends declared per common share
$
0.19
$
0.18
$
0.18
$
0.37
$
0.34
Book value per common share
$
17.96
$
17.90
$
17.75
Tangible book value per common share
(1)
$
14.60
$
14.50
$
14.93
Average common shares outstanding -
basic
20,033
20,028
17,297
20,030
17,271
Average common shares outstanding -
diluted
20,241
20,246
17,532
20,243
17,517
Other Data
Retirement and benefit services assets
under administration/management
$
35,052,652
$
33,404,342
$
31,749,157
Wealth management assets under
administration/management
$
3,857,710
$
3,675,684
$
4,147,763
Mortgage originations
$
111,261
$
77,728
$
269,397
$
188,989
$
456,159
(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 second quarter of 2023 was $22.2
million, a $1.4 million, or 6.0%, decrease from the first quarter
of 2023. Net interest income decreased $542.0 thousand, or 2.4%,
from $22.8 million for the second quarter of 2022. Interest income
increased $2.5 million, or 6.7% from the first quarter of 2023,
primarily driven by a 24 basis point increase in yield on interest
earning assets. Contributing factors to higher asset yields were
higher new loan yields and accretion of fair value marks from the
Metro Phoenix Bank transaction. The increase in interest income was
more than offset by a $4.0 million increase in interest expense,
primarily due to an increase in rates paid on interest-bearing
deposits. The increase in interest expense paid on deposits was due
to heightened deposit competition, the impact of rising short-term
interest rates on indexed money market deposits and clients moving
deposits out of noninterest bearing products into interest-bearing
products.
Net interest margin (tax-equivalent), was 2.52% for the second
quarter of 2023, an 18 basis point decrease from 2.70% for the
first quarter of 2023, and a 46 basis point decrease from 2.98% for
the second quarter of 2022. The decrease in net interest margin
from the prior quarter reflected the impact of rising interest
rates on our interest-bearing liabilities partially offset by
slightly higher yields on new loans and accretion of fair value
marks from the Metro Phoenix Bank transaction.
Noninterest Income
Noninterest income for the second quarter of 2023 was $25.8
million, a $525.0 thousand, or 2.1%, increase from the first
quarter of 2023. The quarter over quarter increase was primarily
driven by improvement across all fee-based business segments.
Mortgage saw a $1.2 million, or 69.2%, increase in mortgage banking
revenue due to a seasonal rebound in originations as mortgage
originations grew 43% from the prior quarter. Retirement and
benefit services revenue increased $408 thousand, or 2.6%, mainly
due to increased administration, recordkeeping, and asset-based
fees. Assets under management/administration grew due to improved
equity markets and organic growth in plans and participants. Wealth
management revenue increased $256 thousand, or 4.9%, as assets
under management/administration grew due to improved equity markets
and organic net inflows from new and existing relationships.
Noninterest income for the second quarter of 2023 decreased $3.4
million, or 11.8%, from $29.2 million in the second quarter of
2022. The year over year decrease was primarily driven by a $3.1
million decrease in mortgage revenue due to a $158.1 million
decrease in mortgage originations as higher interest rates
dramatically impacted demand. Retirement and benefit services
decreased $403 thousand mainly from the exit of the payroll
services business and one-time document restatement fees recognized
in 2022.
Noninterest Expense
Noninterest expense for the second quarter of 2023 was $36.4
million, a $1.5 million, or 4.0% decrease from the first quarter of
2023. The quarter over quarter decrease was primarily driven by a
$1.1 million decrease in employee taxes and benefits resulting from
lower headcount and lower group insurance costs. Compensation
expense decreased $311 thousand from the first quarter of 2023 due
to a reduction in severance costs and salaries, offset by increased
mortgage incentive compensation. Offsetting the improvement in
compensation and benefits expense, professional fees and
assessments increased $378 thousand due to higher Federal Deposit
Insurance Corporation (FDIC) assessment fees.
Noninterest expense for the second quarter of 2023 decreased
$3.6 million, or 9.0%, from $40.0 million in the second quarter of
2022. The year over year decrease was primarily due to a $2.4
million decrease in compensation, $1.1 million decrease in employee
taxes and benefits, and $716 thousand decrease in professional fees
and assessments. Compensation decreased primarily due to a decrease
in mortgage related incentive compensation from lower mortgage
originations. The decrease in employee taxes and benefits resulted
from lower group insurance claims, reduced headcount, and lower
compensation costs.
Financial Condition
Total assets were $3.8 billion as of June 30, 2023, an increase
of $53.3 million, or 1.4%, from December 31, 2022. The increase was
primarily due to an $89.5 million increase in loans, an $11.4
million increase in loans held for sale and a $7.2 million increase
in cash and cash equivalents, offset by a decrease of $53.4 million
in investment securities.
Loans
Total loans were $2.5 billion as of June 30, 2023, an increase
of $89.5 million, or 3.7%, from December 31, 2022. The increase was
primarily driven by a $122.2 million increase in commercial real
estate and a $34.8 million increase in residential real estate
loans, offset by a $32.0 million decrease in commercial and
industrial, a $19.4 million decrease in real estate construction
and a $16.1 million decrease in other consumer revolving and
installment loans.
The following table presents the composition of our loan
portfolio as of the dates indicated:
June 30,
March 31,
December 31,
September 30,
June 30,
(dollars in thousands)
2023
2023
2022
2022
2022
Commercial
Commercial and industrial
$
551,860
$
553,578
$
583,876
$
564,655
$
484,426
Real estate construction
78,428
108,776
97,810
89,215
48,870
Commercial real estate
1,003,821
934,324
881,670
819,068
599,737
Total commercial
1,634,109
1,596,678
1,563,356
1,472,938
1,133,033
Consumer
Residential real estate first mortgage
707,630
698,002
679,551
649,818
568,571
Residential real estate junior lien
157,231
152,281
150,479
143,681
135,255
Other revolving and installment
34,552
39,664
50,608
51,794
53,384
Total consumer
899,413
889,947
880,638
845,293
757,210
Total loans
$
2,533,522
$
2,486,625
$
2,443,994
$
2,318,231
$
1,890,243
Deposits
Total deposits were $2.9 billion as of June 30, 2023, a decrease
of $62.6 million, or 2.1%, from December 31, 2022. Interest-bearing
deposits increased $82.8 million, while noninterest-bearing
deposits decreased $145.5 million from December 31, 2022. The
decrease in total deposits was due to both public unit depositor
seasonality and clients using excess liquidity and paying down
revolving debt. Noninterest-bearing deposits decreased from 29.5%
of total deposits to 25.1% as higher interest rates continued a
migration to interest-bearing accounts. Time deposit balances
increased as higher short-term CD rates attracted both internal
transfers of current deposits as well as new clients and deposits
to the Company.
The following table presents the composition of our deposit
portfolio as of the dates indicated:
June 30,
March 31,
December 31,
September 30,
June 30,
(dollars in thousands)
2023
2023
2022
2022
2022
Noninterest-bearing demand
$
715,534
$
792,977
$
860,987
$
905,228
$
764,808
Interest-bearing
Interest-bearing demand
753,194
817,675
706,275
653,216
642,641
Savings accounts
93,557
99,742
99,882
101,820
97,227
Money market savings
986,403
1,076,166
1,035,981
1,079,520
914,423
Time deposits
304,167
245,418
212,359
222,027
200,451
Total interest-bearing
2,137,321
2,239,001
2,054,497
2,056,583
1,854,742
Total deposits
$
2,852,855
$
3,031,978
$
2,915,484
$
2,961,811
$
2,619,550
Asset Quality
Total nonperforming assets were $2.6 million as of June 30,
2023, a decrease of $1.2 million, or 32.5%, from December 31, 2022.
As of June 30, 2023, the allowance for credit losses on loans was
$35.7 million, or 1.41% of total loans, compared to $31.1 million,
or 1.27% of total loans, 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
June 30,
March 31,
December 31,
September 30,
June 30,
(dollars in thousands)
2023
2023
2022
2022
2022
Nonaccrual loans
$
2,233
$
2,118
$
3,794
$
4,303
$
4,370
Accruing loans 90+ days past due
347
—
—
1,000
—
Total nonperforming loans
2,580
2,118
3,794
5,303
4,370
OREO and repossessed assets
—
—
30
904
860
Total nonperforming assets
$
2,580
$
2,118
$
3,824
$
6,207
$
5,230
Net charge-offs/(recoveries)
(403
)
170
(178
)
405
340
Net charge-offs/(recoveries) to average
loans
(0.07
)
%
0.03
%
(0.03
)
%
0.07
%
0.07
%
Nonperforming loans to total loans
0.10
%
0.09
%
0.16
%
0.23
%
0.23
%
Nonperforming assets to total assets
0.07
%
0.05
%
0.10
%
0.17
%
0.16
%
Allowance for credit losses on loans to
total loans
1.41
%
1.41
%
1.27
%
1.34
%
1.66
%
Allowance for credit losses on loans to
nonperforming loans
1,384
%
1,657
%
821
%
584
%
718
%
For the second quarter of 2023, the Company had net recoveries
of $403 thousand compared to net charge-offs of $170 thousand for
the first quarter of 2023 and $340 thousand of net charge-offs for
the second quarter of 2022.
The Company did not record a provision for credit losses for the
second quarter of 2023 due to strong credit quality indicators and
net recoveries for the quarter. The allowance for credit losses on
loans to total loans increased from 1.27% at December 31, 2022 to
1.41% at June 30, 2023. Beginning on January 1, 2023 the allowance
for credit losses on loans is computed under the current expected
credit loss, or CECL, accounting standard and prior to that the
allowance for credit losses was computed using the incurred loss
method. The unearned fair value adjustments on the acquired Metro
Phoenix Bank loan portfolio were $6.2 million and $7.1 million, as
of June 30, 2023 and December 31, 2022, respectively.
Capital
Total stockholders’ equity was $357.7 million as of June 30,
2023, an increase of $813 thousand from December 31, 2022. Tangible
book value per common share, a non-GAAP financial measure,
increased to $14.60 as of June 30, 2023, from $14.37 as of December
31, 2022. Tangible common equity to tangible assets, a non-GAAP
financial measure, decreased to 7.72% as of June 30, 2023, from
7.74% as of December 31, 2022. Common equity tier 1 capital to risk
weighted assets decreased to 13.30% as of June 30, 2023, from
13.39% as of December 31, 2022.
During the second quarter of 2023, the Company repurchased
approximately $3.0 million of its outstanding stock, which reduced
common shares outstanding by 170,046 at quarter end.
The following table presents our capital ratios as of the dates
indicated:
June 30,
December 31,
June 30,
2023
2022
2022
Capital Ratios(1)
Alerus Financial Corporation
Consolidated
Common equity tier 1 capital to risk
weighted assets
13.30
%
13.39
%
14.19
%
Tier 1 capital to risk weighted assets
13.60
%
13.69
%
14.56
%
Total capital to risk weighted assets
16.49
%
16.48
%
17.95
%
Tier 1 capital to average assets
11.15
%
11.25
%
10.80
%
Tangible common equity / tangible assets
(2)
7.72
%
7.74
%
7.96
%
Alerus Financial, N.A.
Common equity tier 1 capital to risk
weighted assets
12.93
%
12.76
%
13.64
%
Tier 1 capital to risk weighted assets
12.93
%
12.76
%
13.64
%
Total capital to risk weighted assets
14.14
%
13.83
%
14.89
%
Tier 1 capital to average assets
10.59
%
10.48
%
10.12
%
(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, July 27, 2023, to discuss its financial results.
The call can be accessed via telephone at (833) 470-1428, using
access code 067281. 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 benefit services 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 and possible recession; 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, Signature Bank and First Republic
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, including as a result of
sophisticated attacks using artificial intelligence and similar
tools; 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; 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, Signature Bank and First Republic Bank; fluctuations
in the values of the securities held in our securities portfolio,
including as a result of changes in interest rates; 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; 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)
June 30,
December 31,
2023
2022
Assets
(Unaudited)
(Audited)
Cash and cash equivalents
$
65,471
$
58,242
Investment securities
Available-for-sale, at fair value
677,454
717,324
Held-to-maturity, at carrying value
(allowance for credit losses of $218 at June 30, 2023)
308,416
321,902
Loans held for sale
20,893
9,488
Loans
2,533,522
2,443,994
Allowance for credit losses on loans
(35,696
)
(31,146
)
Net loans
2,497,826
2,412,848
Land, premises and equipment, net
17,488
17,288
Operating lease right-of-use assets
6,440
5,419
Accrued interest receivable
13,587
12,869
Bank-owned life insurance
32,793
33,991
Goodwill
47,087
47,087
Other intangible assets
19,806
22,455
Servicing rights
2,351
2,643
Deferred income taxes, net
43,709
42,369
Other assets
79,657
75,712
Total assets
$
3,832,978
$
3,779,637
Liabilities and Stockholders’
Equity
Deposits
Noninterest-bearing
$
715,534
$
860,987
Interest-bearing
2,137,321
2,054,497
Total deposits
2,852,855
2,915,484
Short-term borrowings
492,060
378,080
Long-term debt
58,900
58,843
Operating lease liabilities
6,746
5,902
Accrued expenses and other liabilities
64,732
64,456
Total liabilities
3,475,293
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: 19,914,884 and 19,991,681 issued and
outstanding
19,915
19,992
Additional paid-in capital
152,673
155,095
Retained earnings
285,839
280,426
Accumulated other comprehensive income
(loss)
(100,742
)
(98,641
)
Total stockholders’ equity
357,685
356,872
Total liabilities and stockholders’
equity
$
3,832,978
$
3,779,637
Alerus Financial Corporation and
Subsidiaries
Consolidated Statements of
Income
(dollars and shares in thousands, except
per share data)
Three months ended
Six months ended
June 30,
March 31,
June 30,
June 30,
June 30,
2023
2023
2022
2023
2022
Interest Income
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Loans, including fees
$
33,267
$
30,933
$
17,988
$
64,200
$
35,280
Investment securities
Taxable
6,125
5,951
6,068
12,076
11,508
Exempt from federal income taxes
186
190
213
376
429
Other
762
735
157
1,497
273
Total interest income
40,340
37,809
24,426
78,149
47,490
Interest Expense
Deposits
12,678
9,104
813
21,782
1,642
Short-term borrowings
4,763
4,393
278
9,156
278
Long-term debt
665
654
559
1,319
1,121
Total interest expense
18,106
14,151
1,650
32,257
3,041
Net interest income
22,234
23,658
22,776
45,892
44,449
Provision for credit losses
—
550
—
550
—
Net interest income after provision for
credit losses
22,234
23,108
22,776
45,342
44,449
Noninterest Income
Retirement and benefit services
15,890
15,482
16,293
31,372
33,939
Wealth management
5,450
5,194
5,548
10,644
10,874
Mortgage banking
2,905
1,717
6,038
4,622
10,969
Service charges on deposit accounts
311
301
412
612
775
Other
1,222
2,559
935
3,781
2,139
Total noninterest income
25,778
25,253
29,226
51,031
58,696
Noninterest Expense
Compensation
18,847
19,158
21,248
38,005
40,299
Employee taxes and benefits
4,724
5,853
5,787
10,577
11,949
Occupancy and equipment expense
1,837
1,899
1,737
3,736
3,788
Business services, software and technology
expense
5,269
5,324
4,785
10,593
9,709
Intangible amortization expense
1,324
1,324
1,053
2,648
2,106
Professional fees and assessments
1,530
1,152
2,246
2,682
3,787
Marketing and business development
648
686
814
1,334
1,414
Supplies and postage
406
460
572
866
1,218
Travel
306
248
356
554
535
Mortgage and lending expenses
215
497
482
712
1,168
Other
1,267
1,268
904
2,535
2,082
Total noninterest expense
36,373
37,869
39,984
74,242
78,055
Income before income taxes
11,639
10,492
12,018
22,131
25,090
Income tax expense
2,535
2,306
2,725
4,841
5,613
Net income
$
9,104
$
8,186
$
9,293
$
17,290
$
19,477
Per Common Share Data
Earnings per common share
$
0.45
$
0.41
$
0.53
$
0.86
$
1.11
Diluted earnings per common share
$
0.45
$
0.40
$
0.52
$
0.85
$
1.10
Dividends declared per common share
$
0.19
$
0.18
$
0.18
$
0.37
$
0.34
Average common shares outstanding
20,033
20,028
17,297
20,030
17,271
Diluted average common shares
outstanding
20,241
20,246
17,532
20,243
17,517
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)
June 30,
March 31,
December 31,
June 30,
2023
2023
2022
2022
Tangible Common Equity to Tangible
Assets
Total common stockholders’ equity
$
357,685
$
359,118
$
356,872
$
307,158
Less: Goodwill
47,087
47,087
47,087
31,337
Less: Other intangible assets
19,806
21,131
22,455
17,511
Tangible common equity (a)
290,792
290,900
287,330
258,310
Total assets
3,832,978
3,886,773
3,779,637
3,295,065
Less: Goodwill
47,087
47,087
47,087
31,337
Less: Other intangible assets
19,806
21,131
22,455
17,511
Tangible assets (b)
3,766,085
3,818,555
3,710,095
3,246,217
Tangible common equity to tangible assets
(a)/(b)
7.72
%
7.62
%
7.74
%
7.96
%
Tangible Book Value Per Common
Share
Total common stockholders’ equity
$
357,685
$
359,118
$
356,872
$
307,158
Less: Goodwill
47,087
47,087
47,087
31,337
Less: Other intangible assets
19,806
21,131
22,455
17,511
Tangible common equity (c)
290,792
290,900
287,330
258,310
Total common shares issued and outstanding
(d)
19,915
20,067
19,992
17,306
Tangible book value per common share
(c)/(d)
$
14.60
$
14.50
$
14.37
$
14.93
Three months ended
Six months ended
June 30,
March 31,
June 30,
June 30,
June 30,
2023
2023
2022
2023
2022
Return on Average Tangible Common
Equity
Net income
$
9,104
$
8,186
$
9,293
$
17,290
$
19,477
Add: Intangible amortization expense (net
of tax)
1,046
1,046
832
2,092
1,664
Net income, excluding intangible
amortization (e)
10,150
9,232
10,125
19,382
21,141
Average total equity
360,216
361,857
312,515
361,032
331,425
Less: Average goodwill
47,087
47,087
31,488
47,087
31,489
Less: Average other intangible assets (net
of tax)
16,153
17,209
14,737
16,678
15,151
Average tangible common equity
(f)
296,976
297,561
266,290
297,267
284,785
Return on average tangible common equity
(e)/(f)
13.71
%
12.58
%
15.25
%
13.15
%
14.97
%
Efficiency Ratio
Noninterest expense
$
36,373
$
37,869
$
39,984
$
74,242
$
78,055
Less: Intangible amortization expense
1,324
1,324
1,053
2,648
2,106
Adjusted noninterest expense
(g)
35,049
36,545
38,931
71,594
75,949
Net interest income
22,234
23,658
22,776
45,892
44,449
Noninterest income
25,778
25,253
29,226
51,031
58,696
Tax-equivalent adjustment
140
124
100
264
194
Total tax-equivalent revenue
(h)
48,152
49,035
52,102
97,187
103,339
Efficiency ratio (g)/(h)
72.79
%
74.53
%
74.72
%
73.67
%
73.50
%
Alerus Financial Corporation and
Subsidiaries
Analysis of Average Balances, Yields,
and Rates (unaudited)
(dollars in thousands)
Three months ended
Six months ended
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
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
$
36,418
4.00
%
$
41,947
3.23
%
$
28,920
0.39
%
$
39,167
3.59
%
$
67,111
0.22
%
Investment securities (1)
1,007,792
2.53
%
1,034,288
2.43
%
1,164,625
2.18
%
1,020,967
2.48
%
1,190,298
2.04
%
Loans held for sale
14,536
5.22
%
10,345
4.98
%
31,878
3.15
%
12,452
5.12
%
28,287
2.90
%
Loans
Commercial:
Commercial and industrial
545,357
6.90
%
559,416
6.09
%
463,215
4.38
%
552,348
6.49
%
449,014
4.52
%
Real estate construction
87,905
7.43
%
103,099
6.56
%
44,627
4.04
%
95,460
6.96
%
42,893
3.97
%
Commercial real estate
956,828
5.09
%
911,634
4.95
%
601,765
3.80
%
934,356
5.02
%
601,397
3.72
%
Total commercial
1,590,090
5.84
%
1,574,149
5.46
%
1,109,607
4.05
%
1,582,164
5.65
%
1,093,304
4.06
%
Consumer
Residential real estate first mortgage
698,288
3.76
%
688,754
3.76
%
543,023
3.29
%
693,547
3.76
%
528,952
3.39
%
Residential real estate junior lien
156,276
7.44
%
149,720
7.21
%
132,082
4.64
%
153,016
7.33
%
129,056
4.55
%
Other revolving and installment
37,759
6.03
%
44,531
5.86
%
53,919
4.40
%
41,126
5.94
%
52,311
4.39
%
Total consumer
892,323
4.50
%
883,005
4.45
%
729,024
3.62
%
887,689
4.48
%
710,319
3.67
%
Total loans (1)
2,482,413
5.36
%
2,457,154
5.10
%
1,838,631
3.88
%
2,469,853
5.23
%
1,803,623
3.91
%
Federal Reserve/FHLB stock
23,724
6.76
%
23,668
6.87
%
10,564
4.90
%
23,697
6.82
%
8,536
4.70
%
Total interest earning assets
3,564,883
4.55
%
3,567,402
4.31
%
3,074,618
3.20
%
3,566,136
4.43
%
3,097,855
3.10
%
Noninterest earning assets
220,604
224,134
184,037
222,358
174,799
Total assets
$
3,785,487
$
3,791,536
$
3,258,655
$
3,788,494
$
3,272,654
Interest-Bearing Liabilities
Interest-bearing demand deposits
$
775,818
1.26
%
$
746,660
0.87
%
$
703,365
0.12
%
$
761,319
1.07
%
$
708,888
0.12
%
Money market and savings deposits
1,145,335
2.81
%
1,165,269
2.17
%
1,041,898
0.14
%
1,155,247
2.49
%
1,042,660
0.14
%
Time deposits
270,121
3.29
%
231,959
2.23
%
211,787
0.43
%
251,145
2.80
%
219,592
0.44
%
Fed funds purchased
360,033
5.31
%
290,187
4.85
%
81,506
1.18
%
325,303
5.10
%
40,978
1.18
%
Short-term borrowings
—
—
%
80,000
4.69
%
9,615
1.59
%
39,779
4.69
%
4,834
1.59
%
Long-term debt
58,886
4.52
%
58,858
4.51
%
58,876
3.81
%
58,872
4.51
%
58,892
3.84
%
Total interest-bearing liabilities
2,610,193
2.78
%
2,572,933
2.23
%
2,107,047
0.31
%
2,591,665
2.51
%
2,075,844
0.30
%
Noninterest-Bearing Liabilities and
Stockholders' Equity
Noninterest-bearing deposits
748,942
789,134
783,367
768,927
807,271
Other noninterest-bearing liabilities
66,136
67,612
55,726
66,870
58,114
Stockholders’ equity
360,216
361,857
312,515
361,032
331,425
Total liabilities and stockholders’
equity
$
3,785,487
$
3,791,536
$
3,258,655
$
3,788,494
$
3,272,654
Net interest income (1)
Net interest rate spread
1.77
%
2.08
%
2.89
%
1.92
%
2.80
%
Net interest margin, tax-equivalent
(1)
2.52
%
2.70
%
2.98
%
2.61
%
2.91
%
(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/20230726487813/en/
Alan A. Villalon, Chief Financial Officer 952.417.3733
(Office)
Alerus Financial (NASDAQ:ALRS)
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