8-K - ALRS - Equibles

United States

Securities And Exchange Commission Washington, DC 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15( d ) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): January 26, 2022

Alerus Financial Corporation (Exact Name of Registrant as Specified in Charter)

Delaware	001-39036	45-0375407
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

401 Demers Avenue Grand Forks , North Dakota **** 58201 (Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (701) 795-3200

N/A

(Former Name or Former Address, if Changed Since Last Report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Trading symbol		Name of each exchange on which registered
Common Stock, $1.00 par value per share		ALRS		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b–2 of the Securities Exchange Act of 1934 (§ 240.12b–2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition.

On January 26, 2022, Alerus Financial Corporation (the “Company”) issued a press release announcing its financial results for the three and twelve months ended December 31, 2021. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

The information in Item 2.02 of this Current Report on Form 8-K, and the related Exhibit 99.1, attached hereto is being “furnished” and will not, except to the extent required by applicable law or regulation, be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor will any of such information or exhibits be deemed incorporated by reference to any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.

Item 7.01. Regulation FD Disclosure.

On January 26, 2022, the Company posted a presentation to the Company’s investor relations website, located at investors.alerus.com. The presentation is also attached hereto as Exhibit 99.2.

The information in Item 7.01 of this Current Report on Form 8-K, and the related Exhibit 99.2, attached hereto is being “furnished” and will not, except to the extent required by applicable law or regulation, be deemed “filed” by the Company for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor will any of such information or exhibits be deemed incorporated by reference to any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits


Exhibit No.	****	Description
99.1		Press Release of Alerus Financial Corporation, dated January 26, 2022
99.2<br><br>104		Investor Presentation of Alerus Financial Corporation<br><br>Cover Page Interactive Data File (embedded within the Inline XBLR document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date: January 26, 2022	Alerus Financial Corporation


	By:	/s/ Katie A. Lorenson
	Name:	Katie A. Lorenson
	Title:	President and Chief Executive Officer

Exhibit 99.1

<br><br><br><br>	<br><br>
<br><br><br><br>FOR RELEASE (01.26.2022)<br><br>	Katie A. Lorenson, Chief Executive Officer<br><br>952.417.3725 (Office)

ALERUS FINANCIAL CORPORATION REPORTS

FOURTH QUARTER 2021 NET INCOME OF $12.7 MILLION

AND RECORD ANNUAL NET INCOME OF $52.7 MILLION

GRAND FORKS, N.D. (January 26, 2022) – Alerus Financial Corporation (Nasdaq: ALRS) reported net income of $12.7 million for the fourth quarter of 2021, or $0.72 per diluted common share, compared to net income of $13.1 million, or $0.74 per diluted common share, for the third quarter of 2021, and net income of $10.2 million, or $0.57 per diluted common share, for the fourth quarter of 2020.

CEO Comments

President and Chief Executive Officer Katie Lorenson said, “Alerus continues to be a purpose-driven company, focused on its business model, strategy and culture. Our talented Alerus team members executed at exceptional levels, resulting in a strong finish to the fourth quarter and another record setting year for Alerus with annual net income of $52.7 million. Our team is focused on serving clients holistically and with their best interests in mind. This advice-based approach coupled with our diversified business model resulted in our highest annual levels of new business in nearly every product offering of the Company. Our company continues to be agile in meeting client needs, serving more clients than ever through digital channels, all while managing our expense base. The overall quality of our credit portfolio remained strong with a significant recovery during the quarter leading to a $1.5 million reversal of provision expense. The company continues to maintain robust capital levels which we believe will position Alerus for ongoing organic and in-organic growth. We continued to execute our acquisition strategy and announced in early December our proposed acquisition of MPB BHC, Inc. and it’s wholly-owned banking subsidiary, Metro Phoenix Bank. Assuming the consummation of the transactions, this will be our twenty-fifth acquisition since 2000. We look forward to welcoming the clients and employees of the high performing Metro Phoenix Bank, a commercial focused community bank headquartered in the strong and growing Phoenix market. We are proud of our company’s performance, ability to focus on long-term growth for shareholders through our diversified business model, solid financial foundation and, strategic focus on serving clients holistically.”

Quarterly Highlights

◾	Return on average total assets of 1.50%, compared to 1.62% for the third quarter of 2021
◾	Return on average tangible common equity^(1)^ of 17.36%, compared to 18.13% for the third quarter of 2021
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◾	Net interest margin (tax-equivalent)^(1)^ was 2.84%, compared to 2.78% for the third quarter of 2021
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◾	Allowance for loan losses to total loans, excluding PPP loans was 1.83%, compared to 2.00% as of December 31, 2020
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◾	Efficiency ratio^(1)^ of 71.06%, compared to 71.49% for the third quarter of 2021
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◾	Noninterest income for the fourth quarter of 2021 was 59.67% of total revenue, compared to 63.04% for the third quarter of 2021
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◾	Mortgage originations totaled $356.8 million, a 14.2% decrease from the third quarter of 2021
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◾	Investment securities increased $613.4 million, or 103.5%, since December 31, 2020
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◾	Loans held for sale decreased $76.0 million, or 62.0%, since December 31, 2020
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◾	Loans held for investment decreased $221.4 million, or 11.2%, since December 31, 2020; excluding Paycheck Protection Program, or PPP, loans, loans held for investment increased $13.5 million, or 0.8%, since December 31, 2020
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◾	Deposits increased $348.6 million, or 13.6%, since December 31, 2020
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Full Year 2021 Highlights

◾	Net income of $52.7 million, an increase of $8.0 million, or 17.9%, compared to $44.7 million in 2020
◾	Diluted earnings per share, or EPS, of $2.97, compared to $2.52 in 2020
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◾	Return on average total assets of 1.66%, compared to 1.61% in 2020
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◾	Return on average tangible common equity^(1)^ of 18.89%, compared to 17.74% in 2020
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◾	Revenue of $234.5 million, an increase of $1.3 million, or 0.5%, compared to $233.2 million in 2020
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o	Net interest income was $87.1 million, an increase of $3.3 million, or 3.9%, compared to $83.8 million in 2020
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o	Noninterest income was $147.4 million, a decrease of $2.0 million, or 1.3%, compared to $149.4 million in 2020
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◾	Noninterest expense of $168.9 million, an increase of $5.1 million, or 3.1%, compared to $163.8 million in 2020
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◾	Provision for loan losses expense reversed $3.5 million, a decrease of $14.4 million from 2020
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◾	Average loans of $1.9 billion, a decrease of $86.9 million, or 4.5%, from 2020
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◾	Average deposits of $2.7 billion, an increase of $372.6 million, or 15.9%, from 2020
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(1)	Represents a non-GAAP financial measure. See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.”
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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)	2021			2021			2020			2021			2020		****
Performance Ratios
Return on average total assets		1.50	%		1.62	%		1.34	%		1.66	%		1.61	%
Return on average common equity		14.12	%		14.68	%		12.30	%		15.22	%		14.40	%
Return on average tangible common equity (1)		17.36	%		18.13	%		15.13	%		18.89	%		17.74	%
Noninterest income as a % of revenue		59.67	%		63.04	%		62.57	%		62.86	%		64.05	%
Net interest margin (tax-equivalent) (1)		2.84	%		2.78	%		3.23	%		2.90	%		3.22	%
Efficiency ratio (1)		71.06	%		71.49	%		74.44	%		70.02	%		68.40	%
Net charge-offs/(recoveries) to average loans		(0.22)	%		(0.06)	%		(0.30)	%		(0.04)	%		0.03	%
Dividend payout ratio		22.22	%		21.62	%		26.32	%		21.21	%		23.81	%
Per Common Share
Earnings per common share - basic	$	0.73		$	0.75		$	0.58		$	3.02		$	2.57
Earnings per common share - diluted	$	0.72		$	0.74		$	0.57		$	2.97		$	2.52
Dividends declared per common share	$	0.16		$	0.16		$	0.15		$	0.63		$	0.60
Tangible book value per common share (1)	$	17.87		$	17.46		$	16.00
Average common shares outstanding - basic		17,210			17,205			17,122			17,189			17,106
Average common shares outstanding - diluted		17,480			17,499			17,450			17,486			17,438
Other Data
Retirement and benefit services assets under administration/management	$	36,732,938		$	36,202,553		$	34,199,954
Wealth management assets under administration/management	$	4,039,931		$	3,865,062		$	3,338,594
Mortgage originations	$	356,821		$	415,792		$	607,166		$	1,836,064		$	1,778,977

(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 fourth quarter of 2021 was $22.8 million, a $1.7 million, or 7.8%, increase from the third quarter of 2021. Net interest income decreased $364 thousand, or 1.6%, from $23.2 million for the fourth quarter of 2020. During the fourth quarter of 2021, average interest earning assets increased $158.7 million, primarily due to an increase of $249.9 million in investment securities, partially offset by decreases of $49.1 million in interest-bearing deposits with banks and $38.2 million in loans held for investment. The change in the balance sheet mix resulted in a 6 basis point increase in the average earning asset yield. Net interest income earned from PPP loans during the fourth quarter of 2021 totaled $2.2 million, an increase of $160 thousand, from the $2.0 million earned during the third quarter. The cost of interest-bearing liabilities had a modest decrease of 1 basis point from the third quarter of 2021.

Net interest margin (tax-equivalent), a non-GAAP financial measure, was 2.84% for the fourth quarter of 2021, a 6 basis point increase from 2.78% for the third quarter of 2021, and a 39 basis point decrease from 3.23% in the fourth quarter of 2020. The linked quarter increase was primarily due to higher yields on interest earning assets. Excluding PPP loans, net interest margin was 2.62% for the fourth quarter of 2021, unchanged from the third quarter of 2021. The year over year decrease was primarily attributable to the historically low and flat yield curve and a more liquid balance sheet mix which resulted in a 49 basis point decrease in interest earning asset yields. The decrease in earning asset yield was offset by a 16 basis point decrease in the average rate paid on interest-bearing liabilities. 2

Noninterest Income

Noninterest income for the fourth quarter of 2021 was $33.7 million, a $2.3 million, or 6.4%, decrease from the third quarter of 2021. The decrease was primarily driven by a $3.1 million decrease in mortgage banking revenue, a result of a $59.0 million decrease in mortgage originations. The decrease in mortgage banking revenue was partially offset by increases of $521 thousand in retirement and benefit services revenue and $338 thousand in wealth management revenue.

Noninterest income for the fourth quarter of 2021 decreased $5.0 million, or 12.9%, from $38.7 million in the fourth quarter of 2020. This decrease was primarily due to an $8.8 million decrease in mortgage banking revenue, a result of a $250.3 million decrease in mortgage originations, as well as a 28 basis point decrease in the gain on sale margin. Partially offsetting this decrease was a $2.6 million increase in retirement and benefit services income, primarily driven by the December 2020 acquisition of Retirement Planning Services, Inc. and a $544 thousand increase in document restatement fees. In addition, wealth management revenue increased $826 thousand, or 17.2%, primarily driven by organic growth and market increases in assets under management.

Noninterest Expense

Noninterest expense for the fourth quarter of 2021 was $41.3 million, a decrease of $765 thousand, or 1.8%, compared to the third quarter of 2021. The decrease was primarily due to decreases of $1.2 million in compensation expense, $743 thousand in mortgage and lending expense, partially offset by increases of $532 thousand in employee taxes and benefits expense, $350 thousand in other noninterest expense, and $305 thousand in professional fees and assessments. The decreases in compensation expense as well as mortgage and lending expense were primarily attributable to the $59.0 million decrease in mortgage originations from the previous quarter. Mortgage and lending expense was also positively impacted by a $314 thousand change in the valuation of mortgage servicing rights. The increase in employee taxes and benefits expense was primarily a result of an increase in incentive awards due to the Company’s record financial performance. The $330 thousand increase in other noninterest expense was primarily attributable to an operating charge-off of $134 thousand in the fourth quarter compared to a $250 thousand recovery in the third quarter. The increase in professional fees and assessments was due to expenses related to the announced acquisition of Metro Phoenix Bank.

Noninterest expense for the fourth quarter of 2021 decreased $5.8 million, or 12.4%, from $47.1 million in the fourth quarter of 2020. The decrease was primarily attributable to decreases in compensation expense, mortgage and lending expense, and occupancy and equipment expense, partially offset by increased employee taxes and benefits expense. The decline in mortgage originations in the fourth quarter of 2021 drove the decreases of compensation expense, as well as mortgage and lending expense. Employee taxes and benefits expense increased as a result of increased health insurance expenses. Occupancy and equipment expense decreased due to the closure of certain offices in 2021 and to the transition of many of our employees to a hybrid work environment.

Financial Condition

Total assets were $3.4 billion as of December 31, 2021, an increase of $378.9 million, or 12.6%, from December 31, 2020. The overall increase in total assets included an increase of $613.4 million in investment securities, partially offset by a $221.4 million decrease in loans held for investment and a $76.0 million decrease in loans held for sale. The decrease in loans held for investment was primarily due to PPP loan balances decreasing by $234.9 million from December 31, 2020.

Loans

Total loans were $1.8 billion as of December 31, 2021, a decrease of $221.4 million, or 11.2%, from December 31, 2020. The decrease was primarily due to a $255.1 million decrease in the commercial and industrial loan portfolio, primarily attributable to a $234.9 million decrease in PPP loans. Excluding PPP loans, total loans increased $13.5 million, or 0.8%, in 2021. This increase was primarily due to a $47.3 million increase in residential real estate first mortgages and a $35.9 million increase in commercial real estate, partially offset by a $27.9 million decrease in consumer revolving and installment loans, a $20.2 million decrease in commercial and industrial loans, and a $17.7 million decrease in residential real estate junior liens.

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)	****	2021		2021		2021		2021		2020
Commercial
Commercial and industrial (1)		$	436,761	$	506,599	$	572,734	$	678,029	$	691,858
Real estate construction			40,619		37,751		36,549		40,473		44,451
Commercial real estate			598,893		573,518		567,987		569,451		563,007
Total commercial			1,076,273		1,117,868		1,177,270		1,287,953		1,299,316
Consumer
Residential real estate first mortgage			510,716		501,339		470,822		454,958		463,370
Residential real estate junior lien			125,668		130,243		130,180		130,299		143,416
Other revolving and installment			45,363		50,936		57,040		64,135		73,273
Total consumer			681,747		682,518		658,042		649,392		680,059
Total loans		$	1,758,020	$	1,800,386	$	1,835,312	$	1,937,345	$	1,979,375

(1)	Includes PPP loans of $33.6 million at December 31, 2021, $103.5 million at September 30, 2021, $165.0 million at June 30, 2021, $256.8 million at March 31, 2021 and $268.4 million at December 31, 2020.

Deposits

Total deposits were $2.9 billion as of December 31, 2021, an increase of $348.6 million, or 13.6%, from December 31, 2020. Interest-bearing deposits increased $164.4 million, while noninterest-bearing deposits increased $184.1 million in 2021. Key drivers of the increase included new deposit production, ongoing higher depositor balances due to the uncertain economic environment and volatile financial markets. Synergistic deposits increased $73.4 million to $669.0 million as of December 31, 2021. Excluding synergistic deposits, commercial transaction deposits increased $156.3 million, or 14.1%, while consumer transaction deposits increased $95.0 million, or 14.8%, since December 31, 2020. Noninterest-bearing deposits as a percentage of total deposits were 32.1% as of December 31, 2021, compared to 29.3% as of December 31, 2020.

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)	****	2021		****	2021		****	2021		****	2021		****	2020
Noninterest-bearing demand		$	938,840		$	797,062		$	758,820		$	775,434		$	754,716
Interest-bearing
Interest-bearing demand			714,669			673,916			736,043			674,466			618,900
Savings accounts			96,825			92,632			89,437			87,492			79,902
Money market savings			937,305			924,678			920,831			967,273			909,137
Time deposits			232,912			224,800			205,809			212,908			209,338
Total interest-bearing			1,981,711			1,916,026			1,952,120			1,942,139			1,817,277
Total deposits		$	2,920,551		$	2,713,088		$	2,710,940		$	2,717,573		$	2,571,993

Asset Quality

Total nonperforming assets were $3.1 million as of December 31, 2021, a decrease of $2.1 million, or 42.1%, from December 31, 2020. As of December 31, 2021, the allowance for loan losses was $31.6 million, or 1.80% of total loans, compared to $34.2 million, or 1.73% of total loans, as of December 31, 2020. Excluding PPP loans, the ratio of allowance for loan losses to total loans was 1.83% at December 31, 2021, compared to 2.00% as of December 31, 2020.

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)	****	2021		****	2021		****	2021		****	2021		****	2020		****
Nonaccrual loans		$	2,076		$	6,229		$	6,960		$	4,756		$	5,050
Accruing loans 90+ days past due			121			—			—			—			30
Total nonperforming loans			2,197			6,229			6,960			4,756			5,080
OREO and repossessed assets			885			862			858			139			63
Total nonperforming assets		$	3,082		$	7,091		$	7,818		$	4,895		$	5,143
Net charge-offs/(recoveries)			(1,006)			(302)			(6)			488			(1,509)
Net charge-offs/(recoveries) to average loans			(0.22)	%		(0.06)	%		—	%		0.10	%		(0.30)	%
Nonperforming loans to total loans			0.12	%		0.35	%		0.38	%		0.25	%		0.26	%
Nonperforming assets to total assets			0.09	%		0.22	%		0.25	%		0.16	%		0.17	%
Allowance for loan losses to total loans			1.80	%		1.78	%		1.84	%		1.74	%		1.73	%
Allowance for loan losses to nonperforming loans			1,437	%		515	%		485	%		710	%		674	%

For the fourth quarter of 2021, we had net recoveries of $1.0 million compared to net recoveries of $302 thousand for the third quarter of 2021 and $1.5 million of net recoveries for the fourth quarter of 2020. The $1.0 million recovery was the result of a payoff on a commercial real estate loan that was previously charged off.

There was a $1.5 million reversal of provision for loan losses recorded in the fourth quarter of 2021, a $500 thousand increase from the third quarter of 2021, and a decrease of $2.9 million from the fourth quarter of 2020. The negative provision in the fourth quarter of 2021 was driven by net recoveries in four of the last five quarters and improvement of credit quality indicators.

Capital

Total stockholders’ equity was $359.4 million as of December 31, 2021, an increase of $29.2 million, or 8.9%, from December 31, 2020. Tangible book value per common share, a non-GAAP financial measure, increased to $17.87 as of December 31, 2021, from $16.00 as of December 31, 2020. Tangible common equity to tangible assets, a non-GAAP financial measure, decreased to 9.21% as of December 31, 2021, from 9.27% as of December 31, 2020.

The following table presents our capital ratios as of the dates indicated:


	****	December 31,		****	September 30,		****	December 31,
	****	2021		****	2021		****	2020
Capital Ratios^(1)^
Alerus Financial Corporation Consolidated
Common equity tier 1 capital to risk weighted assets			14.65	%		14.52	%		12.75	%
Tier 1 capital to risk weighted assets			15.06	%		14.93	%		13.15	%
Total capital to risk weighted assets			18.64	%		18.58	%		16.79	%
Tier 1 capital to average assets			9.79	%		9.88	%		9.24	%
Tangible common equity / tangible assets ^(2)^			9.21	%		9.62	%		9.27	%

Alerus Financial, N.A.
Common equity tier 1 capital to risk weighted assets			13.87	%		13.77	%		12.10	%
Tier 1 capital to risk weighted assets			13.87	%		13.77	%		12.10	%
Total capital to risk weighted assets			15.12	%		15.03	%		13.36	%
Tier 1 capital to average assets			9.01	%		9.11	%		8.50	%

(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.”
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Conference Call

The Company will host a conference call at 9:00 a.m. Central Time on Thursday, January 27, 2022, to discuss its financial results. The call can be accessed via telephone at (888) 317-6016. 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 headquartered in Grand Forks, ND. 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 Financial banking and wealth management offices are located in Grand Forks and Fargo, ND, the Minneapolis-St. Paul, MN metropolitan area, and Scottsdale and Mesa, AZ. Alerus Retirement and Benefits plan administration offices are located in St. Paul, MN, East Lansing, MI, and Littleton, CO.

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: 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; our ability to successfully manage credit risk and maintain an adequate level of allowance for loan losses; new or revised accounting standards, including as a result of the implementation of the new Current Expected Credit Loss Standard; business and economic conditions generally and in the financial services industry, nationally and within our market areas, including rising rates of inflation; the overall health of the local and national real estate market; concentrations within our loan portfolio; the level of nonperforming assets on our balance sheet; our ability to implement our organic and acquisition growth strategies; the impact of economic or market conditions on our fee-based services; our ability to continue to grow our retirement and benefit services business; our ability to continue to originate a sufficient volume of residential mortgages; the occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents; interruptions involving our information technology and telecommunications systems or third-party servicers; potential losses incurred in connection with mortgage loan repurchases; the composition of our executive management team and our ability to attract and retain key personnel; rapid technological change in the financial services industry; increased competition in the financial services industry from non-banks such as credit unions and other Fintech companies; our ability to successfully manage liquidity risk, especially in light of recent excess liquidity at the Bank; the effectiveness of our risk management framework; the commencement and outcome of litigation and other legal proceedings and regulatory actions against us or to which we may become subject; potential impairment to the goodwill we recorded in connection with our past acquisitions; the extensive regulatory framework that applies to us; the impact of recent and future legislative and regulatory changes; interest rate risks associated with our business, including the effects of anticipated rate increases by the Federal Reserve; fluctuations in the values of the securities held in our securities portfolio; governmental monetary, trade and fiscal policies; severe weather, natural disasters, widespread disease or pandemics, such as the COVID-19 global pandemic, acts of war or terrorism or other adverse external events; any material weaknesses in our internal control over financial reporting; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative rates; changes to U.S. or state tax laws, regulations and guidance, including recent proposals to increase the federal corporate tax rate; talent and labor shortages and employee turnover; possible federal mask and vaccine mandates; our success at managing the risks involved in the foregoing items; and any other risks described in the “Risk Factors” sections of the reports filed by Alerus Financial Corporation with the Securities and Exchange Commission.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Alerus Financial Corporation and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands, except share and per share data)


	****	December 31,		****	December 31,
	****	2021		****	2020
Assets		(Unaudited)			(Audited)
Cash and cash equivalents		$	242,311		$	172,962
Investment securities
Available-for-sale, at fair value			853,649			592,342
Held-to-maturity, at carrying value			352,061			—
Loans held for sale			46,490			122,440
Loans			1,758,020			1,979,375
Allowance for loan losses			(31,572)			(34,246)
Net loans			1,726,448			1,945,129
Land, premises and equipment, net			18,370			20,289
Operating lease right-of-use assets			3,727			6,918
Accrued interest receivable			8,537			9,662
Bank-owned life insurance			33,156			32,363
Goodwill			31,490			30,201
Other intangible assets			20,250			25,919
Servicing rights			1,880			1,987
Deferred income taxes, net			11,614			9,409
Other assets			42,708			44,150
Total assets		$	3,392,691		$	3,013,771
Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing		$	938,840		$	754,716
Interest-bearing			1,981,711			1,817,277
Total deposits			2,920,551			2,571,993
Long-term debt			58,933			58,735
Operating lease liabilities			4,275			7,861
Accrued expenses and other liabilities			49,529			45,019
Total liabilities			3,033,288			2,683,608
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: 17,212,588 and 17,125,270 issued and outstanding			17,213			17,125
Additional paid-in capital			92,878			90,237
Retained earnings			253,567			212,163
Accumulated other comprehensive income (loss)			(4,255)			10,638
Total stockholders’ equity			359,403			330,163
Total liabilities and stockholders’ equity		$	3,392,691		$	3,013,771

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,
	2021		2021		2020		2021		2020
Interest Income	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Audited)
Loans, including fees	$	19,354	$	18,888	$	22,549	$	78,133	$	86,425
Investment securities
Taxable		4,454		3,249		2,301		13,001		7,798
Exempt from federal income taxes		231		225		237		925		949
Other		166		185		114		598		930
Total interest income		24,205		22,547		25,201		92,657		96,102
Interest Expense
Deposits		880		880		1,210		3,661		8,843
Long-term debt		536		535		838		1,897		3,413
Total interest expense		1,416		1,415		2,048		5,558		12,256
Net interest income		22,789		21,132		23,153		87,099		83,846
Provision for loan losses		(1,500)		(2,000)		1,400		(3,500)		10,900
Net interest income after provision for loan losses		24,289		23,132		21,753		90,599		72,946
Noninterest Income
Retirement and benefit services		18,552		18,031		15,922		71,709		60,956
Wealth management		5,633		5,295		4,807		21,052		17,451
Mortgage banking		7,967		11,116		16,781		48,502		61,641
Service charges on deposit accounts		370		357		334		1,395		1,409
Net gains (losses) on investment securities		—		11		15		125		2,737
Other		1,196		1,230		837		4,604		5,177
Total noninterest income		33,718		36,040		38,696		147,387		149,371
Noninterest Expense
Compensation		22,088		23,291		26,522		93,386		89,206
Employee taxes and benefits		5,590		5,058		4,962		22,033		20,050
Occupancy and equipment expense		1,936		2,063		2,443		8,148		10,058
Business services, software and technology expense		5,220		5,332		5,634		20,486		19,135
Intangible amortization expense		1,053		1,088		990		4,380		3,961
Professional fees and assessments		1,808		1,503		1,531		6,292		4,834
Marketing and business development		872		865		1,045		3,182		3,133
Supplies and postage		778		549		544		2,361		2,174
Travel		206		174		21		442		359
Mortgage and lending expenses		488		1,231		1,791		4,250		5,707
Other		1,237		887		1,642		3,949		5,182
Total noninterest expense		41,276		42,041		47,125		168,909		163,799
Income before income taxes		16,731		17,131		13,324		69,077		58,518
Income tax expense		4,026		4,064		3,144		16,396		13,843
Net income	$	12,705	$	13,067	$	10,180	$	52,681	$	44,675
Per Common Share Data
Earnings per common share	$	0.73	$	0.75	$	0.58	$	3.02	$	2.57
Diluted earnings per common share	$	0.72	$	0.74	$	0.57	$	2.97	$	2.52
Dividends declared per common share	$	0.16	$	0.16	$	0.15	$	0.63	$	0.60
Average common shares outstanding		17,210		17,205		17,122		17,189		17,106
Diluted average common shares outstanding		17,480		17,499		17,450		17,486		17,438

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,
	****	2021			2021			2020
Tangible Common Equity to Tangible Assets
Total common stockholders’ equity		$	359,403		$	353,195		$	330,163
Less: Goodwill			31,490			30,201			30,201
Less: Other intangible assets			20,250			22,593			25,919
Tangible common equity (a)			307,663			300,401			274,043
Total assets			3,392,691			3,175,169			3,013,771
Less: Goodwill			31,490			30,201			30,201
Less: Other intangible assets			20,250			22,593			25,919
Tangible assets (b)			3,340,951			3,122,375			2,957,651
Tangible common equity to tangible assets (a)/(b)			9.21	%		9.62	%		9.27	%
Tangible Book Value Per Common Share
Total common stockholders’ equity		$	359,403		$	353,195		$	330,163
Less: Goodwill			31,490			30,201			30,201
Less: Other intangible assets			20,250			22,593			25,919
Tangible common equity (c)			307,663			300,401			274,043
Total common shares issued and outstanding (d)			17,213			17,208			17,125
Tangible book value per common share (c)/(d)		$	17.87		$	17.46		$	16.00


	Three months ended									Year ended
	December 31,			September 30,			December 31,			December 31,			December 31,
	2021			2021			2020			2021			2020
Return on Average Tangible Common Equity
Net income	$	12,705		$	13,067		$	10,180		$	52,681		$	44,675
Add: Intangible amortization expense (net of tax)		832			860			782			3,460			3,129
Net income, excluding intangible amortization (e)		13,537			13,927			10,962			56,141			47,804
Average total equity		357,084			353,196			329,210			346,059			310,208
Less: Average goodwill		30,930			30,201			27,766			30,385			27,439
Less: Average other intangible assets (net of tax)		16,843			18,272			13,206			18,548			13,309
Average tangible common equity (f)		309,311			304,723			288,238			297,126			269,460
Return on average tangible common equity (e)/(f)		17.36	%		18.13	%		15.13	%		18.89	%		17.74	%
Net Interest Margin (tax-equivalent)
Net interest income	$	22,789		$	21,132		$	23,153		$	87,099		$	83,846
Tax-equivalent adjustment		99			115			131			492			455
Tax-equivalent net interest income (g)		22,888			21,247			23,284			87,591			84,301
Average earning assets (h)		3,194,530			3,035,798			2,869,767			3,018,172			2,618,427
Net interest margin (tax-equivalent) (g)/(h)		2.84	%		2.78	%		3.23	%		2.90	%		3.22	%
Efficiency Ratio
Noninterest expense	$	41,276		$	42,041		$	47,125		$	168,909		$	163,799
Less: Intangible amortization expense		1,053			1,088			990			4,380			3,961
Adjusted noninterest expense (i)		40,223			40,953			46,135			164,529			159,838
Net interest income		22,789			21,132			23,153			87,099			83,846
Noninterest income		33,718			36,040			38,696			147,387			149,371
Tax-equivalent adjustment		99			115			131			492			455
Total tax-equivalent revenue (j)		56,606			57,287			61,980			234,978			233,672
Efficiency ratio (i)/(j)		71.06	%		71.49	%		74.44	%		70.02	%		68.40	%

Alerus Financial Corporation and Subsidiaries

Analysis of Average Balances, Yields, and Rates (unaudited)

(dollars in thousands)


	Three months ended												Year ended
	December 31, 2021				September 30, 2021				December 31, 2020				December 31, 2021				December 31, 2020
			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	$	232,650	0.16	%	$	281,768	0.16	%	$	164,052	0.12	%	$	222,916	0.14	%	$	162,616	0.41	%
Investment securities (1)		1,119,370	1.68	%		869,421	1.61	%		549,198	1.88	%		864,273	1.64	%		425,219	2.12	%
Loans held for sale		53,357	2.33	%		57,233	2.40	%		122,820	2.18	%		65,968	2.26	%		79,201	2.46	%
Loans
Commercial:
Commercial and industrial		471,262	5.61	%		544,811	4.95	%		745,415	4.91	%		579,002	4.91	%		687,266	4.60	%
Real estate construction		41,573	3.89	%		37,743	3.99	%		40,009	4.31	%		41,751	4.10	%		32,804	4.54	%
Commercial real estate		587,542	3.90	%		567,696	3.67	%		545,432	3.82	%		571,326	3.77	%		523,219	4.18	%
Total commercial		1,100,377	4.63	%		1,150,250	4.29	%		1,330,856	4.45	%		1,192,079	4.34	%		1,243,289	4.42	%
Consumer
Residential real estate first mortgage		504,997	3.30	%		487,699	3.32	%		471,125	3.73	%		477,621	3.47	%		463,174	3.97	%
Residential real estate junior lien		129,238	4.52	%		129,239	4.57	%		149,456	4.72	%		131,412	4.64	%		159,844	4.81	%
Other revolving and installment		48,045	4.53	%		53,683	4.45	%		76,466	4.53	%		57,574	4.41	%		79,238	4.57	%
Total consumer		682,280	3.62	%		670,621	3.65	%		697,047	4.03	%		666,607	3.78	%		702,256	4.23	%
Total loans (1)		1,782,657	4.25	%		1,820,871	4.05	%		2,027,903	4.30	%		1,858,686	4.14	%		1,945,545	4.35	%
Federal Reserve/FHLB stock		6,496	4.34	%		6,505	4.33	%		5,794	4.46	%		6,329	4.36	%		5,846	4.55	%
Total interest earning assets		3,194,530	3.02	%		3,035,798	2.96	%		2,869,767	3.51	%		3,018,172	3.09	%		2,618,427	3.69	%
Noninterest earning assets		159,370				155,079				158,417				160,648				156,713
Total assets	$	3,353,900			$	3,190,877			$	3,028,184			$	3,178,820			$	2,775,140
Interest-Bearing Liabilities
Interest-bearing demand deposits	$	754,432	0.13	%	$	692,873	0.14	%	$	622,854	0.19	%	$	697,276	0.14	%	$	551,861	0.29	%
Money market and savings deposits		1,039,492	0.14	%		1,009,564	0.14	%		1,012,497	0.20	%		1,023,677	0.15	%		920,072	0.53	%
Time deposits		225,497	0.46	%		217,756	0.50	%		208,378	0.79	%		215,624	0.54	%		203,413	1.16	%
Short-term borrowings		—	—	%		10	—	%		—	—	%		3	—	%		80	—	%
Long-term debt		58,938	3.61	%		58,968	3.60	%		58,726	5.68	%		50,759	3.74	%		58,742	5.81	%
Total interest-bearing liabilities		2,078,359	0.27	%		1,979,171	0.28	%		1,902,455	0.43	%		1,987,339	0.28	%		1,734,168	0.71	%
Noninterest-Bearing Liabilities and Stockholders' Equity
Noninterest-bearing deposits		851,210				799,854				738,319				784,998				673,676
Other noninterest-bearing liabilities		67,247				58,656				58,200				60,424				57,088
Stockholders’ equity		357,084				353,196				329,210				346,059				310,208
Total liabilities and stockholders’ equity	$	3,353,900			$	3,190,877			$	3,028,184			$	3,178,820			$	2,775,140
Net interest rate spread			2.75	%			2.68	%			3.08	%			2.81	%			2.98	%
Net interest margin, tax-equivalent (2)			2.84	%			2.78	%			3.23	%			2.90	%			3.22	%

(1)	Taxable-equivalent adjustment was calculated utilizing a marginal income tax rate of 21.0%.
(2)	Represents a non-GAAP financial measure. See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.”
---	---

Exhibit 99.2

INVESTOR PRESENTATION<br>JANUARY 2022<br>Alerus
1<br>Forward<br>-<br>Looking<br>Statements<br>This<br>presentation<br>contains<br>“forward<br>-<br>looking<br>statements”<br>within<br>the<br>meaning<br>of<br>the<br>safe<br>harbor<br>provisions<br>of<br>the<br>U<br>..<br>S<br>..<br>Private<br>Securities<br>Litigation<br>Reform<br>Act<br>of<br>1995<br>..<br>Forward<br>-<br>looking<br>statements<br>include,<br>without<br>limitation,<br>statements<br>concerning<br>plans,<br>estimates,<br>calculations,<br>forecasts<br>and<br>projections<br>with<br>respect<br>to<br>the<br>anticipated<br>future<br>performance<br>of<br>Alerus<br>Financial<br>Corporation<br>..<br>These<br>statements<br>are<br>often,<br>but<br>not<br>always,<br>identified<br>by<br>words<br>such<br>as<br>“may”,<br>“might”,<br>“should”,<br>“could”,<br>“predict”,<br>“potential”,<br>“believe”,<br>“expect”,<br>“continue”,<br>“will”,<br>“anticipate”,<br>“seek”,<br>“estimate”,<br>“intend”,<br>“plan”,<br>“projection”,<br>“would”,<br>“annualized”,<br>“target”<br>and<br>“outlook”,<br>or<br>the<br>negative<br>version<br>of<br>those<br>words<br>or<br>other<br>comparable<br>words<br>of<br>a<br>future<br>or<br>forward<br>-<br>looking<br>nature<br>..<br>Examples<br>of<br>forward<br>-<br>looking<br>statements<br>include,<br>among<br>others,<br>statements<br>we<br>make<br>regarding<br>our<br>projected<br>growth,<br>anticipated<br>future<br>financial<br>performance,<br>financial<br>condition,<br>credit<br>quality,<br>management’s<br>long<br>-<br>term<br>performance<br>goals<br>and<br>the<br>future<br>plans<br>and<br>prospects<br>of<br>Alerus<br>Financial<br>Corporation<br>..<br>Forward<br>-<br>looking<br>statements<br>are<br>neither<br>historical<br>facts<br>nor<br>assurances<br>of<br>future<br>performance<br>..<br>Instead,<br>they<br>are<br>based<br>only<br>on<br>our<br>current<br>beliefs,<br>expectations<br>and<br>assumptions<br>regarding<br>the<br>future<br>of<br>our<br>business,<br>future<br>plans<br>and<br>strategies,<br>projections,<br>anticipated<br>events<br>and<br>trends,<br>the<br>economy<br>and<br>other<br>future<br>conditions<br>..<br>Because<br>forward<br>-<br>looking<br>statements<br>relate<br>to<br>the<br>future,<br>they<br>are<br>subject<br>to<br>inherent<br>uncertainties,<br>risks<br>and<br>changes<br>in<br>circumstances<br>that<br>are<br>difficult<br>to<br>predict<br>and<br>many<br>of<br>which<br>are<br>outside<br>of<br>our<br>control<br>..<br>Our<br>actual<br>results<br>and<br>financial<br>condition<br>may<br>differ<br>materially<br>from<br>those<br>indicated<br>in<br>the<br>forward<br>-<br>looking<br>statements<br>..<br>Therefore,<br>you<br>should<br>not<br>rely<br>on<br>any<br>of<br>these<br>forward<br>-<br>looking<br>statements<br>..<br>Important<br>factors<br>that<br>could<br>cause<br>our<br>actual<br>results<br>and<br>financial<br>condition<br>to<br>differ<br>materially<br>from<br>those<br>indicated<br>in<br>the<br>forward<br>-<br>looking<br>statements<br>include,<br>among<br>others,<br>the<br>following<br>:<br>the<br>negative<br>effects<br>of<br>the<br>ongoing<br>COVID<br>-<br>19<br>pandemic,<br>including<br>its<br>effects<br>on<br>the<br>economic<br>environment,<br>our<br>clients<br>and<br>our<br>operations<br>including<br>due<br>to<br>supply<br>chain<br>disruptions,<br>as<br>well<br>as<br>any<br>changes<br>to<br>federal,<br>state<br>or<br>local<br>government<br>laws,<br>regulations<br>or<br>orders<br>in<br>connection<br>with<br>the<br>pandemic<br>;<br>our<br>ability<br>to<br>successfully<br>manage<br>credit<br>risk<br>and<br>maintain<br>an<br>adequate<br>level<br>of<br>allowance<br>for<br>loan<br>losses<br>;<br>new<br>or<br>revised<br>accounting<br>standards,<br>including<br>as<br>a<br>result<br>of<br>the<br>future<br>implementation<br>of<br>the<br>new<br>Current<br>Expected<br>Credit<br>Loss<br>Standard<br>;<br>business<br>and<br>economic<br>conditions<br>generally<br>and<br>in<br>the<br>financial<br>services<br>industry,<br>nationally<br>and<br>within<br>our<br>market<br>areas<br>,<br>including<br>rising<br>rates<br>of<br>inflation<br>;<br>the<br>overall<br>health<br>of<br>the<br>local<br>and<br>national<br>real<br>estate<br>market<br>;<br>concentrations<br>within<br>our<br>loan<br>portfolio<br>;<br>the<br>level<br>of<br>nonperforming<br>assets<br>on<br>our<br>balance<br>sheet<br>;<br>our<br>ability<br>to<br>implement<br>our<br>organic<br>and<br>acquisition<br>growth<br>strategies<br>;<br>the<br>impact<br>of<br>economic<br>or<br>market<br>conditions<br>on<br>our<br>fee<br>-<br>based<br>services<br>;<br>our<br>ability<br>to<br>continue<br>to<br>grow<br>our<br>retirement<br>and<br>benefit<br>services<br>business<br>;<br>our<br>ability<br>to<br>continue<br>to<br>originate<br>a<br>sufficient<br>volume<br>of<br>residential<br>mortgages<br>;<br>the<br>occurrence<br>of<br>fraudulent<br>activity,<br>breaches<br>or<br>failures<br>of<br>our<br>information<br>security<br>controls<br>or<br>cybersecurity<br>related<br>incidents<br>;<br>interruptions<br>involving<br>our<br>information<br>technology<br>and<br>telecommunications<br>systems<br>or<br>third<br>-<br>party<br>servicers<br>;<br>potential<br>losses<br>incurred<br>in<br>connection<br>with<br>mortgage<br>loan<br>repurchases<br>;<br>the<br>composition<br>of<br>our<br>executive<br>management<br>team<br>and<br>our<br>ability<br>to<br>attract<br>and<br>retain<br>key<br>personnel<br>;<br>rapid<br>technological<br>change<br>in<br>the<br>financial<br>services<br>industry<br>;<br>increased<br>competition<br>in<br>the<br>financial<br>services<br>industry<br>,<br>from<br>non<br>-<br>banks<br>such<br>as<br>credit<br>unions<br>and<br>other<br>Fintech<br>companies<br>;<br>our<br>ability<br>to<br>successfully<br>manage<br>liquidity<br>risk<br>,<br>especially<br>in<br>light<br>of<br>recent<br>excess<br>liquidity<br>at<br>the<br>Bank<br>;<br>the<br>effectiveness<br>of<br>our<br>risk<br>management<br>framework<br>;<br>the<br>commencement<br>and<br>outcome<br>of<br>litigation<br>and<br>other<br>legal<br>proceedings<br>and<br>regulatory<br>actions<br>against<br>us<br>or<br>to<br>which<br>we<br>may<br>become<br>subject<br>;<br>potential<br>impairment<br>to<br>the<br>goodwill<br>we<br>recorded<br>in<br>connection<br>with<br>our<br>past<br>acquisitions<br>;<br>the<br>extensive<br>regulatory<br>framework<br>that<br>applies<br>to<br>us<br>;<br>the<br>impact<br>of<br>recent<br>and<br>future<br>legislative<br>and<br>regulatory<br>changes<br>;<br>interest<br>rate<br>risks<br>associated<br>with<br>our<br>business<br>,<br>including<br>the<br>effects<br>of<br>anticipated<br>rate<br>increases<br>by<br>the<br>Federal<br>Reserve<br>;<br>fluctuations<br>in<br>the<br>values<br>of<br>the<br>securities<br>held<br>in<br>our<br>securities<br>portfolio<br>;<br>governmental<br>monetary,<br>trade<br>and<br>fiscal<br>policies<br>;<br>severe<br>weather,<br>natural<br>disasters,<br>widespread<br>disease<br>or<br>pandemics,<br>such<br>as<br>the<br>COVID<br>-<br>19<br>global<br>pandemic,<br>acts<br>of<br>war<br>or<br>terrorism<br>or<br>other<br>adverse<br>external<br>events<br>;<br>any<br>material<br>weaknesses<br>in<br>our<br>internal<br>control<br>over<br>financial<br>reporting<br>;<br>developments<br>and<br>uncertainty<br>related<br>to<br>the<br>future<br>use<br>and<br>availability<br>of<br>some<br>reference<br>rates,<br>such<br>as<br>the<br>London<br>Interbank<br>Offered<br>Rate,<br>as<br>well<br>as<br>other<br>alternative<br>rates<br>;<br>changes<br>to<br>U<br>..<br>S<br>..<br>or<br>state<br>tax<br>laws,<br>regulations<br>and<br>guidance,<br>including<br>recent<br>proposals<br>to<br>increase<br>the<br>federal<br>corporate<br>tax<br>rate<br>;<br>the<br>impact<br>of<br>inflation<br>and<br>anticipated<br>interest<br>rate<br>increases<br>;<br>talent<br>and<br>labor<br>shortages<br>and<br>employee<br>turnover<br>;<br>possible<br>federal<br>mask<br>and<br>vaccine<br>mandates<br>;<br>our<br>success<br>at<br>managing<br>the<br>risks<br>involved<br>in<br>the<br>foregoing<br>items<br>;<br>and<br>any<br>other<br>risks<br>described<br>in<br>the<br>“Risk<br>Factors”<br>sections<br>of<br>the<br>reports<br>filed<br>by<br>Alerus<br>Financial<br>Corporation<br>with<br>the<br>Securities<br>and<br>Exchange<br>Commission<br>..<br>Any<br>forward<br>-<br>looking<br>statement<br>made<br>by<br>us<br>in<br>this<br>presentation<br>is<br>based<br>only<br>on<br>information<br>currently<br>available<br>to<br>us<br>and<br>speaks<br>only<br>as<br>of<br>the<br>date<br>on<br>which<br>it<br>is<br>made<br>..<br>We<br>undertake<br>no<br>obligation<br>to<br>publicly<br>update<br>any<br>forward<br>-<br>looking<br>statement,<br>whether<br>written<br>or<br>oral,<br>that<br>may<br>be<br>made<br>from<br>time<br>to<br>time,<br>whether<br>as<br>a<br>result<br>of<br>new<br>information,<br>future<br>developments<br>or<br>otherwise<br>..<br>Non<br>-<br>GAAP<br>Financial<br>Measures<br>This<br>presentation<br>includes<br>certain<br>ratios<br>and<br>amounts<br>that<br>do<br>not<br>conform<br>to<br>U<br>..<br>S<br>..<br>Generally<br>Accepted<br>Accounting<br>Principles,<br>or<br>GAAP<br>..<br>Management<br>uses<br>certain<br>non<br>-<br>GAAP<br>financial<br>measures<br>to<br>evaluate<br>financial<br>performance<br>and<br>business<br>trends<br>from<br>period<br>to<br>period<br>and<br>believes<br>that<br>disclosure<br>of<br>these<br>non<br>-<br>GAAP<br>financial<br>measures<br>will<br>help<br>investors,<br>rating<br>agencies<br>and<br>analysts<br>evaluate<br>the<br>financial<br>performance<br>and<br>condition<br>of<br>Alerus<br>Financial<br>Corporation<br>..<br>This<br>presentation<br>includes<br>a<br>reconciliation<br>of<br>each<br>non<br>-<br>GAAP<br>financial<br>measure<br>to<br>the<br>most<br>comparable<br>GAAP<br>equivalent<br>..<br>Miscellaneous<br>Except<br>as<br>otherwise<br>indicated,<br>this<br>presentation<br>speaks<br>as<br>of<br>the<br>date<br>hereof<br>..<br>The<br>delivery<br>of<br>this<br>presentation<br>shall<br>not,<br>under<br>any<br>circumstances,<br>create<br>any<br>implication<br>that<br>there<br>has<br>been<br>no<br>change<br>in<br>the<br>affairs<br>of<br>Alerus<br>Financial<br>Corporation<br>after<br>the<br>date<br>hereof<br>..<br>Certain<br>of<br>the<br>information<br>contained<br>herein<br>may<br>be<br>derived<br>from<br>information<br>provided<br>by<br>industry<br>sources<br>..<br>We<br>believe<br>that<br>such<br>information<br>is<br>accurate<br>and<br>that<br>the<br>sources<br>from<br>which<br>it<br>has<br>been<br>obtained<br>are<br>reliable<br>..<br>We<br>cannot<br>guarantee<br>the<br>accuracy<br>of<br>such<br>information,<br>however,<br>and<br>we<br>have<br>not<br>independently<br>verified<br>such<br>information<br>..<br>DISCLAIMERS
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2<br>Retirement<br>and Benefit<br>Revenue<br>30.6%<br>Wealth<br>Management<br>Revenue<br>9.0%<br>Mortgage<br>Revenue<br>20.7%<br>Banking<br>Fees<br>2.6%<br>Net<br>Interest<br>Income<br>37.1%<br>FOR THE TWELVE<br>MONTHS ENDED<br>DECEMBER<br>31, 2021<br>Noninterest income:<br>$147.4 million<br>Net interest income:<br>$87.1 million<br>$29.4<br>$27.8<br>$31.9<br>$34.2<br>$36.7<br>2017<br>2018<br>2019<br>2020<br>2021<br>OUR MISSION<br>▪<br>To positively impact our clients’ financial potential<br>-<br>through holistic guidance, unparalleled service, and engaging<br>technology.<br>COMPANY PROFILE<br>Data as of 12/31/2021.<br>DIVERSIFIED REVENUE STREAM<br>ASSET GROWTH (IN BILLIONS)<br>Banking Assets<br>Retirement and Benefit Services AUA/AUM<br>Wealth Management AUA/AUM<br>$2.7<br>$2.6<br>$3.1<br>$3.3<br>$4.0<br>2017<br>2018<br>2019<br>2020<br>2021<br>NONINTEREST<br>INCOME AS A %<br>OF REVENUE:<br>62.9%<br>DIVERSIFIED FINANCIAL SERVICES COMPANY<br>▪<br>$3.4 billion Banking assets<br>▪<br>$36.7 billion Retirement and Benefits AUA/AUM<br>▪<br>$4.0 billion Wealth Management AUA/AUM<br>▪<br>$1.8 billion in Mortgage Originations YTD<br>ALERUS BUSINESS LINES<br>▪<br>Banking<br>▪<br>Retirement and Benefits<br>▪<br>Wealth Management<br>▪<br>Mortgage<br>$2.1<br>$2.2<br>$2.4<br>$3.0<br>$3.4<br>2017<br>2018<br>2019<br>2020<br>2021
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3<br>FRANCHISE FOOTPRINT<br>FULL<br>-<br>SERVICE BANKING OFFICES<br>Alerus offers banking, retirement and benefits, mortgage and<br>wealth management services at all full<br>-<br>service banking offices<br>▪<br>Grand Forks, ND:<br>4<br>full<br>-<br>service banking offices<br>▪<br>Fargo, ND:<br>3 full<br>-<br>service banking offices<br>▪<br>Twin Cities, MN:<br>6 full<br>-<br>service banking offices<br>▪<br>Phoenix, AZ:<br>2 full<br>-<br>service banking offices<br>RETIREMENT AND BENEFITS SERVICES OFFICES<br>▪<br>1 office in Minnesota<br>▪<br>1 office in Michigan<br>▪<br>1 office in Colorado<br>▪<br>Serve clients in all 50 states through retirement plan services<br>DIVERSIFIED CLIENT BASE<br>▪<br>45,600 consumers<br>▪<br>9,800 businesses<br>▪<br>7,500 employer<br>-<br>sponsored retirement plans<br>Data as of 12/31/2021.<br>▪<br>376,800 employer<br>-<br>sponsored retirement plan participants<br>▪<br>65,900 health savings account participants<br>▪<br>57,200 flexible spending account/health reimbursement<br>arrangement participants
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4<br>ONE<br>ALERUS<br>REINVENTION OF PROCESSES<br>We have aligned processes, policies, and<br>procedures throughout all departments to<br>enhance client experience and improve our<br>Company's efficiency<br>Our expectation is this initiative will continue to<br>improve our scalability and operating costs<br>TAILORED ADVICE<br>We strive to provide each<br>client with a primary point of<br>contact<br>—<br>a trusted advisor<br>—<br>who deals with individual<br>needs and integrates other<br>department’s expertise when<br>necessary<br>SYNERGISTIC GROWTH<br>Deposits sourced from our retirement and benefits<br>division totaled $669.0 million as of December 31,<br>2021<br>Cumulative rollovers have added $1.0 billion of<br>assets under management<br>1<br>-<br>4 Family 1<br>st<br>Liens totaled $479.1 million in the<br>fourth quarter<br>TECHNOLOGY INVESTMENT<br>We have proactively invested in technology to<br>further our goal to effectively integrate all<br>departments and business lines<br>These investments allow for digital and proactive<br>engagement with clients<br>DIVERSIFIED SERVICES<br>We can offer comprehensive<br>product and service packages to<br>our clients including banking,<br>mortgage, wealth management,<br>retirement benefits and payroll<br>administration<br>ONE ALERUS STRATEGY<br>One Alerus enables us to bring our product and service offerings<br>to clients in a cohesive and seamless manner. We believe the One<br>Alerus initiative will enable us to achieve future organic growth by<br>leveraging our existing client base and help us continue to provide<br>strong returns to our stockholders<br>ONE ALERUS
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5<br>EXPANDED TO COLORADO<br>Acquired Retirement Planning Services, Inc. (Littleton,<br>CO)<br>To supplement our strong organic growth, we have executed 24 acquisitions throughout the history of<br>our company across all business lines:<br>STRATEGIC GROWTH<br>2000<br>2002<br>2003<br>2006<br>2007<br>2019<br>2009<br>2016<br>2015<br>2014<br>2013<br>2012<br>2011<br>REBRANDED TO ALERUS<br>Acquired a branch from BNC National Bank<br>(Fargo, ND)<br>Acquired Pension Solutions, Inc. (St. Paul, MN)<br>The catalyst to the Retirement Division<br>OPENED A TRUST AND INVESTMENT OFFICE<br>(TWIN CITIES)<br>Acquired Stanton Trust Company (Minneapolis, MN)<br>EXPANDED TO MINNESOTA MARKET<br>OPENED A BUSINESS BANKING OFFICE<br>(MINNETONKA, MN)<br>Acquired Acclaim Benefits, Inc. (Minneapolis, MN)<br>Acquired Stanton Investment Advisors<br>(Minneapolis, MN)<br>EXPANDED TO ARIZONA MARKET<br>OPENED A BUSINESS BANKING OFFICE<br>(SCOTTSDALE, AZ)<br>Acquired retirement plan practice<br>of<br>Eide<br>Bailly<br>, LLP (Minneapolis, MN)<br>Acquired<br>Prosperan<br>Bank (Twin Cities, MN)<br>Acquired deposits from<br>BankFirst<br>(Minneapolis, MN)<br>Acquired Residential Mortgage Group<br>(Minnetonka, MN)<br>Acquired selected loans and deposits (in MN) and a<br>branch<br>(in AZ) from BN<br>C National Bank<br>EXPANDED TO MICHIGAN<br>Acquired<br>PensionTrend<br>, Inc. and<br>PensionTrend<br>Investment Advisers, LLC (Okemos, MI)<br>Acquired<br>Tegrit<br>Administrators, LLC<br>EXPANDED TO NEW HAMPSHIRE<br>Acquired Private Bank Minnesota (Minneapolis, MN)<br>Acquired Retirement Alliance, Inc. (Manchester, NH)<br>Acquired Interactive Retirement Systems, Ltd.<br>(Bloomington, MN)<br>Acquired Beacon Bank (Shorewood, Excelsior, Eden<br>Prairie and Duluth, MN)<br>Acquired Alliance Benefit Group North Central States,<br>Inc. (Albert Lea and Eden Prairie, MN)<br>LAUNCHED FINANCIAL WELLNESS TECHNOLOGY<br>COMPLETED INITIAL PUBLIC OFFERING (IPO)<br>2017<br>LAUNCHED ONE ALERUS STRATEGIC GROWTH PLAN<br>2020<br>2021<br>Announced agreement to acquire Metro Phoenix Bank<br>(Phoenix, AZ)
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6<br>▪<br>Diversified client base<br>consists of<br>45,600<br>consumers,<br>9,800<br>businesses and over<br>376,800<br>employer<br>-<br>sponsored<br>retirement and benefit plan participants<br>▪<br>Harness<br>product<br>synergies<br>unavailable to traditional banking organizations<br>▪<br>Capitalize on<br>strategic opportunities<br>to grow in our existing markets or new markets<br>▪<br>Acquisition targets include<br>banks and nationwide fee income<br>companies with<br>complementary<br>business models,<br>cultural similarities, synergy and growth opportunities<br>▪<br>Recruit<br>top talent<br>to<br>accelerate growth<br>in our existing markets or jumpstart our entrance into new markets<br>▪<br>Market disruption caused by M&A activity provides<br>lift<br>-<br>out opportunities<br>▪<br>Proactively position ourselves as an<br>acquirer<br>and employer of choice<br>▪<br>Invested in one of the<br>leading marketing automation technologies<br>▪<br>Provide<br>secure and reliable<br>technology that meets evolving client expectations<br>▪<br>Integrate our full product and service offerings through our<br>fast<br>-<br>follower<br>strategy<br>▪<br>Collaborative leadership team focused on<br>growing organically<br>by deepening relationships with existing clients<br>through our expansive services<br>▪<br>Diversified business model focused on bringing value to the client through advice and specialty solutions to help<br>clients grow<br>KEY STRATEGIC INITIATIVES<br>GROWING THE ALERUS FRANCHISE<br>LEVERAGE OUR EXISTING<br>CLIENT BASE<br>EXECUTE STRATEGIC<br>ACQUISITIONS<br>PURSUE TALENT<br>ACQUISITION<br>ENHANCE BRAND<br>AWARENESS<br>STRENGTHEN AND BUILD<br>INFRASTRUCTURE<br>ORGANIC GROWTH<br>“ONE ALERUS”
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7<br>OFFICERS AND DIRECTORS<br>OUR MOTIVATED, DEDICATED, AND ENERGETIC LEADERS KEEP US ON THE R<br>IGHT PATH<br>DAN COUGHLIN<br>Since 2016<br>Former MD & Co<br>-<br>Head<br>–<br>Fin’l Services Inv.<br>Banking, Raymond James; Former Chairman<br>& CEO, Howe Barnes Hoefer & Arnett<br>Chicago, IL<br>MICHAEL MATHEWS<br>Since 2019<br>CIO, Deluxe Corporation<br>Former SVP<br>–<br>Technology and Enterprise<br>Programs, UnitedHealth Group<br>Minneapolis, MN<br>ANN MCCONN<br>Executive Vice President and<br>Chief Shared Services Officer<br>20 years with Alerus<br>KARIN TAYLOR<br>Executive Vice President and<br>Chief Risk Officer<br>4 years with Alerus<br>KEVIN LEMKE<br>Since 1994<br>President<br>Virtual Systems, Inc.<br>Grand Forks, ND<br>KAREN BOHN<br>Since 1999<br>President, Galeo Group, LLC<br>Former Chief Administrative Officer<br>Piper Jaffray Co.<br>Edina, MN<br>SALLY SMITH<br>Since 2007<br>Former President and CEO<br>Buffalo Wild Wings, Inc.<br>Minneapolis, MN<br>GALEN VETTER<br>Since 2013<br>Former Global CFO, Franklin Templeton<br>Investments; Former Partner<br>-<br>in<br>-<br>Charge,<br>Upper Midwest Region, RSM<br>Minneapolis, MN<br>JILL<br>SCHURTZ<br>Since 2021<br>CEO and CIO, St. Paul Teacher's<br>Retirement Fund Association<br>Former CEO and COO, Robeco<br>-<br>Sage Mgmt.<br>Minneapolis, MN<br>MARY<br>ZIMMER<br>Since 2021<br>Former Director of Diverse Client Segments<br>and Former Northern Regional President,<br>Wells Fargo Advisors<br>Former Head of Intl. Wealth USA,<br>Royal Bank of Canada U.S. Wealth Mgmt.<br>Minneapolis, MN<br>SENIOR EXECUTIVE TEAM<br>BOARD OF DIRECTORS<br>JANET ESTEP<br>Since 2021<br>Former President and CEO, Nacha<br>Former EVP, US Bank Transaction Division<br>Former VP, Pace Analytical Services<br>Naples, FL<br>RANDY NEWMAN<br>Since 1995<br>Executive Chairman, Alerus<br>Former President and CEO, Alerus<br>Fargo, ND<br>KATIE LORENSON<br>Director,<br>President<br>and<br>Chief Executive Officer<br>5 years with Alerus
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8<br>2021 HIGHLIGHTS
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9<br>▪<br>Record net income with the highest levels of production in Company history across<br>diverse product offering while being recognized as a top workplace<br>▪<br>Paycheck Protection Program (PPP)<br>–<br>helped current and new clients secure nearly 2,500<br>loans for approximately $474 million through PPP, with over 90% forgiven<br>▪<br>Strengthened SBA lending expertise through the successful lift out of talented 5<br>-<br>person<br>SBA team in the Minneapolis<br>-<br>St. Paul, Minnesota market<br>▪<br>2021 mortgage originations exceeded 2020 record levels, reaching a new milestone at<br>$1.8 billion<br>▪<br>Maintained exceptional credit quality, include a second consecutive year of net recoveries<br>and top tier levels of allowance to loans and capital<br>▪<br>Announced our largest bank acquisition in company history with the addition of Metro<br>Phoenix Bank, a high performing, high growth commercial bank in the robust Phoenix,<br>Arizona market<br>▪<br>Seamlessly transitioned CEO leadership and recruited three seasoned executives to the<br>Board<br>SUCCESS IS NEVER FINAL<br>2021 SUMMARY
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10<br>INCOME STATEMENT<br>2021 FINANCIAL HIGHLIGHTS<br>1<br>–<br>Represents a non<br>-<br>GAAP Financial measure. See “Non<br>-<br>GAAP Disclosure Reconciliation.”<br>2<br>–<br>Net interest margin (tax<br>-<br>equivalent) excluding PPP loans for the three months and year ended December 31, 2021, was 2.62% an<br>d 2.73%, respectively.<br>(dollars and shares in thousands, except per share data)<br>Net Interest Income<br> $<br>22,789<br>$<br>21,132<br>$<br>23,153<br>$<br>87,099<br>$<br>83,846<br>Provision for Loan Losses<br> (1,500)<br> (2,000)<br>1,400<br> (3,500)<br>10,900<br>Net Interest Income After Provision for Loan Losses<br>24,289<br>23,132<br>21,753<br>90,599<br>72,946<br>Noninterest Income<br>33,718<br>36,040<br>38,696<br>147,387<br>149,371<br>Noninterest Expense<br>41,276<br>42,041<br>47,125<br>168,909<br>163,799<br>Income Before Income Taxes<br>16,731<br>17,131<br>13,324<br>69,077<br>58,518<br>Income Tax Expense<br>4,026<br>4,064<br>3,144<br>16,396<br>13,843<br>Net Income<br>$<br>12,705<br>$<br>13,067<br>$<br>10,180<br>$<br>52,681<br>$<br>44,675<br>Per Common Share Data<br>Earnings Per Common Share – Diluted<br>$<br>0.72<br>$<br>0.74<br>$<br>0.57<br>$<br>2.97<br>$<br>2.52<br>Diluted Average Common Shares Outstanding<br>17,480<br>17,499<br>17,450<br>17,486<br>17,438<br>Performance Ratios<br> <br> <br> <br> <br> <br>Return on Average Total Assets<br>1.50%<br>1.62%<br>1.34%<br>1.66%<br>1.61%<br>Return on Average Tangible Common Equity<br>(1)<br>17.36%<br>18.13%<br>15.13%<br>18.89%<br>17.74%<br>Noninterest Income as a % of Revenue<br>59.67%<br>63.04%<br>62.57%<br>62.86%<br>64.05%<br>Net Interest Margin (Tax-Equivalent)<br>(1)(2)<br>2.84%<br>2.78%<br>3.23%<br>2.90%<br>3.22%<br>Efficiency Ratio<br>(1)<br>71.06%<br>71.49%<br>74.44%<br>70.02%<br>68.40%<br>2021<br>December,<br>December,<br>2020<br>Twelve months ended<br>Three months ended<br>December,<br>2021<br>September,<br>2021<br>December,<br> <br> <br> <br> <br>2020
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11<br>282%<br>318%<br>306%<br>674%<br>1,437%<br>0.00%<br>200.00%<br>400.00%<br>600.00%<br>800.00%<br>1,000.00%<br>1,200.00%<br>1,400.00%<br>1,600.00%<br>2017<br>2018<br>2019<br>2020<br>2021<br>0.30%<br>0.33%<br>0.33%<br>0.17%<br>0.09%<br>0.00%<br>0.20%<br>0.40%<br>0.60%<br>0.80%<br>2017<br>2018<br>2019<br>2020<br>2021<br>ASSET QUALITY AND RESERVE LEVELS<br>OVERVIEW<br>NPAS / ASSETS<br>(%)<br>RESERVES<br>/ LOANS<br>(%)<br>RESERVES<br>/ NPLS (%)<br>▪<br>Solid asset quality<br>▪<br>Strong reserve levels<br>▪<br>Proactive approach to classification of assets and<br>management of loan problems<br>1.05%<br>1.30%<br>1.39%<br>1.73%<br>1.80%<br>0.00%<br>0.40%<br>0.80%<br>1.20%<br>1.60%<br>2.00%<br>2017<br>2018<br>2019<br>2020<br>2021
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12<br>12.2%<br>12.9%<br>16.7%<br>16.8%<br>18.6%<br>0.0%<br>2.0%<br>4.0%<br>6.0%<br>8.0%<br>10.0%<br>12.0%<br>14.0%<br>16.0%<br>18.0%<br>20.0%<br>2017<br>2018<br>2019<br>2020<br>2021<br>7.1%<br>7.5%<br>11.1%<br>9.2%<br>9.8%<br>8.3%<br>8.9%<br>12.9%<br>13.2%<br>15.1%<br>0.0%<br>2.0%<br>4.0%<br>6.0%<br>8.0%<br>10.0%<br>12.0%<br>14.0%<br>16.0%<br>2017<br>2018<br>2019<br>2020<br>2021<br>Tier 1 Leverage<br>Tier 1 Capital<br>6.0%<br>6.9%<br>10.4%<br>9.3%<br>9.2%<br>0.0%<br>2.0%<br>4.0%<br>6.0%<br>8.0%<br>10.0%<br>12.0%<br>2017<br>2018<br>2019<br>2020<br>2021<br>STRONG CAPITAL AND SOURCES OF LIQUIDITY<br>TANGIBLE COMMON EQUITY/TANGIBLE ASSETS<br>1<br>TIER 1 CAPITAL/TIER 1 LEVERAGE RATIOS<br>PRIMARY AND SECONDARY SOURCES OF LIQUIDITY<br>TOTAL RISK BASED CAPITAL<br>Regulatory Capital Minimum to be considered well capitalized<br>Cash and cash equivalents<br>$242,311<br>Unencumbered securities<br>–<br>AFS<br>847,900<br>Over collateralized securities pledging<br>–<br>AFS<br>—<br>FHLB borrowing availability<br>677,418<br>Brokered CD capacity<br>678,538<br>Fed<br>funds lines<br>102,000<br>Total as of 12/31/2021<br>$2,548,167<br>Tier 1<br>Capital<br>Leverage<br>1<br>-<br>Represents a non<br>-<br>GAAP financial measure. See “Non<br>-<br>GAAP Disclosure Reconciliation.”<br>Regulatory Capital Minimum to be considered well capitalized
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13<br>STRONG CORE FUNDING MIX<br>▪<br>Commercial transaction accounts totaled $1.3 billion and<br>increased 14.1% YTD. Consumer transaction accounts totaled<br>$739.2 million and decreased 14.8% YTD<br>▪<br>Synergistic deposits, including HSA deposits and those sourced<br>through retirement plans and participants, totaled $669.0<br>million, with a YTD cost of 0.03%<br>▪<br>CD portfolio is primarily 6<br>-<br>month flex CD with over 50% held<br>by clients for 10+ years<br>▪<br>Stable deposit relationships with 22<br>-<br>year average tenure on 10<br>largest depositors<br>As of December 31, 2021, core deposits totaled<br>$2.9 billion or 97.0% of our total deposits<br>OVERVIEW AS OF<br>DECEMBER<br>31, 2021<br>DECEMBER 31<br>, 2021 DEPOSIT FUNDING<br>($<br>2,921MM<br>)<br>LOW COST OF FUNDS<br>Data YTD as of 12/31/2021.<br>Non<br>-<br>Interest Bearing<br>Deposits<br>32.1%<br>Money<br>Market &<br>Savings<br>Deposits<br>35.5%<br>Interest Bearing<br>Demand Deposits<br>19.2%<br>Time<br>Deposits<br>8.0%<br>HSA Deposits<br>5.2%<br>0.13%<br>0.19%<br>0.20%<br>0.00%<br>0.20%<br>0.40%<br>0.60%<br>0.80%<br>1.00%<br>1.20%<br>1.40%<br>Cost of Total<br> Deposits<br>Cost of Interest<br>Bearing Deposits<br>Total Cost of Funds<br>2018<br>2019<br>2020<br>2021
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14<br>0.65%<br>0.97%<br>0.51%<br>0.20%<br>1.83%<br>2.16%<br>0.45%<br>0.08%<br>3.84%<br>3.65%<br>3.22%<br>2.90%<br>4.81%<br>4.97%<br>4.35%<br>4.14%<br>0.00%<br>1.00%<br>2.00%<br>3.00%<br>4.00%<br>5.00%<br>6.00%<br>2018<br>2019<br>2020<br>2021<br>NET INTEREST MARGIN (NIM)<br>1<br>–<br>Rates have been annualized for interim periods.<br>Source: Alerus Financial Corporation; Federal Reserve<br>Note: Net interest margin (FTE) is a non<br>-<br>GAAP financial measure; See “Non<br>-<br>GAAP Disclosure Reconciliation” in the Appendix to thi<br>s presentation<br>Loan Yield<br>Net Interest Margin (fully<br>-<br>taxable equivalent “FTE”)<br>Average Effective Fed Funds Rate<br>Cost of Funds<br>1<br>1<br>1<br>1
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15<br>NIM AND LOAN FLOORS<br>VARIABLE RATE FLOORS BY INDEX<br>VARIABLE RATE FLOORS<br>COMMENTS<br>$ in Millions<br>Balance<br>% of Total<br>Balance<br>Cumulative % of<br>Total Balance<br>No Floors<br>$<br>277<br>43.2%<br>43.2%<br>Floors Reached<br>215<br>33.6%<br>76.8%<br>0<br>-<br>50 bps to reach floor<br>136<br>21.3%<br>98.1%<br>>50bps to reach floor<br>12<br>1.9%<br>100.0%<br>Total<br>$<br>640<br>100.0%<br>Quarter over quarter highlights:<br>▪<br>Loan yield was up 2bps, investment yield was up 2bps and cash<br>was up 4bps offset by increase in cash levels as a % of earning<br>assets<br>▪<br>Other borrowings yield favorable 5pbs<br>▪<br>Deposit yield was down 1bps as deposit avg balance increased<br>$43 million<br>$ in Millions<br>Index<br>In the<br>Money<br>Out of<br>the<br>Money<br>No Floor<br>Total<br>Total %<br>Prime<br>$<br>188<br>$<br>44<br>$<br>24<br>$<br>256<br>40.0%<br>1 Month<br>LIBOR<br>8<br>–<br>157<br>165<br>25.8%<br>12 Month LIBOR<br>–<br>67<br>75<br>142<br>22.2%<br>FHLB 5 Year<br>11<br>21<br>15<br>47<br>7.3%<br>Other<br>9<br>15<br>6<br>30<br>4.7%<br>Total<br>$<br>216<br>$<br>147<br>$<br>277<br>$<br>640<br>100.0%<br>Percent<br>of Total<br>33.7%<br>23.0%<br>43.3%<br>100.0%<br>NET INTEREST<br>INCOME<br>22,888<br>1,053<br>587<br>(<br>46<br>)<br>21,247<br>45<br>2<br>20,000<br>21,000<br>22,000<br>23,000<br>24,000<br>Decrease<br>Increase
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16<br>DIVERSIFIED
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17<br>A BIG COMPANY MODEL WITH SMALL COMPANY EXECUTION<br>OUR DIVERSE BUSINESS LINES<br>Revenue data LTM as of 12/31/2021.<br>TRUSTED<br>ADVISOR<br>BANKING<br>WEALTH<br>MANAGEMENT<br>•<br>Residential mortgage lending<br>•<br>Purchasing or refinancing<br>•<br>Residential construction lending<br>•<br>Home equity/second mortgages<br>•<br>Advisory services<br>•<br>Trust and fiduciary services<br>•<br>Investment management<br>•<br>Insurance planning<br>•<br>Financial planning<br>•<br>Education planning<br>•<br>Retirement plan<br>administration<br>•<br>Retirement plan<br>investment advisory<br>•<br>ESOP fiduciary services<br>•<br>Payroll administration<br>services<br>•<br>HSA/FSA/HRA<br>administration<br>•<br>COBRA<br>BUSINESS BANKING<br>•<br>Commercial and commercial<br>real estate lending<br>•<br>Agriculture lending<br>•<br>Treasury management<br>•<br>Deposit services<br>CONSUMER BANKING<br>•<br>Deposit products<br>and services<br>•<br>Consumer lending<br>•<br>Private banking<br>MORTGAGE<br>RETIREMENT<br>AND BENEFITS<br>30% of Revenue<br>21% of Revenue<br>9% of Revenue<br>40% of Revenue
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18<br>BY OUTSTANDING BALANCES<br>WELL DIVERSIFIED LOAN PORTFOLIO<br>As of 12/31/2021.<br>1<br>-<br>4 Residential 1st<br>25%<br>1<br>-<br>4 Residential Construction<br>2%<br>1<br>-<br>4 Residential Jr Lien<br>2%<br>HELOC<br>5%<br>RE Loans to be Sold<br>3%<br>C&I<br>21%<br>PPP<br>2%<br>Ag Production<br>2%<br>Other CRE<br>17%<br>Owner Occupied<br>CRE<br>11%<br>Ag Land<br>2%<br>Multifamily<br>4%<br>Retail Indirect<br>1%<br>Other Consumer<br>1%<br>RE Construction<br>2%
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19<br>STRONG GROWTH MARKETS AND STABLE CORE FUNDING<br>MARKET DISTRIBUTION<br>DEPOSITS ($2,921)<br>LOANS ($<br>1,758<br>)<br>(1)<br>ARB ASSETS UNDER<br>ADMIN/MGMT. ($<br>36<br>,733)<br>WM ASSETS UNDER<br>ADMIN/MGMT. ($4,040)<br>MORTGAGE ORIGINATIONS ($1,836)<br>($ IN MILLIONS)<br>Data as of 12/31/2021.<br>1<br>-<br>Loans in our national market are participant loans not sourced directly through advisors located in one of our geographical m<br>a<br>rkets.<br>LEGEND<br>6.6%<br>90.2%<br>3.2%<br>36.7%<br>52.8%<br>8.3%<br>2.2%<br>43.2%<br>29.5%<br>4.3%<br>23.0%<br>73.5%<br>10.1%<br>2.1%<br>14.3%<br>8.9%<br>13.6%<br>77.5%
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20<br>Asset Based Retirement<br>29%<br>Trust, Custody &<br>Advisory<br>10%<br>Record<br>Keeping<br>17%<br>Administration<br>13%<br>Health &<br>Welfare<br>10%<br>Payroll Servicing<br>2%<br>ESOP<br>7%<br>Other<br>12%<br>$27,812<br>$31,905<br>$34,200<br>$36,733<br> 350,000<br> 365,000<br> 380,000<br> 395,000<br> 410,000<br> 425,000<br> 440,000<br> 455,000<br>$0<br>$5,000<br>$10,000<br>$15,000<br>$20,000<br>$25,000<br>$30,000<br>$35,000<br>$40,000<br>2018<br>2019<br>2020<br>2021<br>AUA/AUM<br>Participants<br>$26,902<br>$28,404<br>$25,720<br>$31,545<br>$63,316<br>$63,811<br>$60,956<br>$71,709<br>$0<br>$20,000<br>$40,000<br>$60,000<br>$80,000<br>2018<br>2019<br>2020<br>2021<br>Net Income<br>Revenue<br>RETIREMENT AND BENEFITS<br>OVERVIEW<br>-<br>7,500 PLANS<br>-<br>NATIONAL FOOTPRINT<br>ASSETS UNDER ADMINISTRATION/MANAGEMENT<br>PROFIT MARGIN<br>REVENUE MIX<br>MARKET<br>SENSITIVE<br>REVENUE:<br>39%<br>1<br>1<br>Net Income before Tax and Indirect Allocations.<br>▪<br>RETIREMENT<br>-<br>Provide recordkeeping and administration<br>services to qualified retirement plans<br>▪<br>ADVISORY SERVICES<br>-<br>Provide investment fiduciary services to<br>retirement plans<br>▪<br>HEALTH AND WELFARE<br>-<br>Provide HSA, FSA, COBRA<br>recordkeeping and administration services to employers<br>▪<br>ESOP<br>-<br>Provide trustee, recordkeeping and administration to<br>employee stock ownership plans<br>▪<br>PAYROLL<br>-<br>Provide payroll and HRIS services for employers<br>▪<br>ONE ALERUS SYNERGIES<br>•<br>IRA<br>rollovers $167.9 million<br>YTD 12/31/2021<br>•<br>Deposits<br>-<br>HSA deposits, 401(k) Money Market Funds,<br>Emergency Savings, Terminated Participants<br>•<br>Managed accounts<br>($ in Millions)<br>($000s)<br>Profit Margin:<br>42.5%<br>44.5%<br>42.2%<br>44.0%
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21<br>$8,138<br>$8,314<br>$9,162<br>$12,183<br>$14,962<br>$15,502<br>$17,451<br>$21,052<br>$0<br>$6,000<br>$12,000<br>$18,000<br>$24,000<br>2018<br>2019<br>2020<br>2021<br>Net Income<br>Revenue<br>▪<br>ADVISORY AND PLANNING SERVICES<br>•<br>Retirement Planning, Tax Planning, Insurance Planning,<br>Wealth Transfer Planning and Business Transition Planning<br>▪<br>ASSET MANAGEMENT<br>•<br>Personalized SMA strategies, Tax Management and Global<br>Perspective<br>▪<br>FIDUCIARY SERVICES<br>•<br>IRA, Agency and Personal Trust<br>▪<br>ONE ALERUS SYNERGIES<br>•<br>IRA rollovers<br>•<br>401(k) managed accounts<br>WEALTH MANAGEMENT SERVICES<br>OVERVIEW OF SERVICES<br>ASSETS UNDER ADMINISTRATION/MANAGEMENT<br>PROFIT MARGIN<br>REVENUE MIX<br>1<br>Net Income before Tax and Indirect Allocations.<br>1<br>($ in Millions)<br>($000s)<br>Asset Management<br>85%<br>Brokerage<br>9%<br>Insurance &<br>Advisory<br>6%<br>$2,627<br>$3,103<br>$3,339<br>$4,040<br>$0<br>$1,000<br>$2,000<br>$3,000<br>$4,000<br>$5,000<br>2018<br>2019<br>2020<br>2021<br>Profit Margin:<br>54.4%<br>53.6%<br>52.5%<br>57.9%
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22<br>$564.0<br>$474.1<br>$465.4<br>$357.1<br>$295.4<br>$43.2<br>$43.9<br>$80.0<br>$58.7<br>$61.4<br>$607.2<br>$518.0<br>$545.4<br>$415.8<br>$356.8<br>$0.0<br>$250.0<br>$500.0<br>$750.0<br>Q4 2020<br>Q1 2021<br>Q2 2021<br>Q3 2021<br>Q4 2021<br>Sale<br>Portfolio<br>MORTGAGE BANKING<br>OVERVIEW OF SERVICES<br>MORTGAGE ORIGINATIONS<br>GAIN ON SALE MARGIN<br>($000s)<br>REVENUE SUMMARY<br>▪<br>1st and 2nd mortgage product offerings through centralized<br>mortgage operations in Minnesota<br>▪<br>Our Twin Cities originators<br>averaged $58+<br>million in annual<br>volume over the last three years<br>▪<br>YTD 5,586 loans closed, approximately 51% purchase<br>originations, with approximately 90% sourced from the Twin<br>Cities MSA<br>▪<br>Q4 2021 94.7% pull through on secondary market<br>▪<br>ONE ALERUS SYNERGIES<br>•<br>Through enhanced technology, digital applications total<br>approximately 90%. Paperless environment eliminated<br>nearly 200,000+ pages printed on a monthly basis<br>•<br>As of December 31, 2021, residential real estate first<br>mortgages excluding construction mortgages totaled $479<br>million<br>1<br>Net Income before Tax and Indirect Allocations.<br>($000s)<br>Q1<br>2021<br>Q2<br>2021<br>Q3<br>2021<br>Q4<br>2021<br>YTD<br>2020<br>YTD<br>2021<br>Origination<br>and Sale<br>$ 16,421<br>$ 17,803<br>$ 12,925<br>$ 9,812<br>$ 52,802<br>$ 56,961<br>Fair Value<br>Changes<br>711<br>(5,515)<br>(1,810)<br>(1,846)<br>8,839<br>(8,459)<br>Total<br>$ 17,132<br>$ 12,288<br>$ 11,115<br>$ 7,967<br>$ 61,641<br>$ 48,502<br>Net<br>income<br>(1)<br>$ 6,725<br>$ 2,116<br>$ 3,151<br>$ 1,329<br>$ 27,410<br>$ 13,321<br>Profit<br>Margin<br>39.3%<br>17.2%<br>28.3%<br>16.7%<br>44.5%<br>27.5%<br>3.5%<br>3.2%<br>3.7%<br>3.6%<br>3.2%<br>2.0%<br>3.0%<br>4.0%<br>Q4 2020<br>Q1 2021<br>Q2 2021<br>Q3 2021<br>Q4 2021<br>Purchase %<br>42.1%<br>32.3%<br>52.5%<br>67.5%<br>57.7%<br>Refinance %<br>57.9%<br>67.7%<br>47.5%<br>32.5%<br>42.3%
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23<br>LOAN PORTFOLIO AND CREDIT QUALITY
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24<br>SUMMARY BY INDUSTRY TYPE<br>TOTAL COMMITMENT COMMERCIAL & INDUSTRIAL<br>1<br>1<br>–<br>Commercial and industrial loans includes C & I, Loans to Public Entities, and Other Loans. It Excludes PPP and Ag Production<br>loans<br>“Other” includes to the following industries (1) Nonclassifiable establishments, (2) Management of Companies and Enterprises,<br>(3<br>) Administrative and Support and Waste Management and Remediation Services, (4)<br>Accommodation and Food Services, (5) Educational Services, (6) Other Services (except Public Administration), (7) Information<br>, (<br>8) Arts, Entertainment, and Recreation, (9) Agriculture Forestry, Fishing, and Hunting,<br>(10) Public Administration), (11) Mining Quarrying, and Oil and Gas Extraction, and (12) Utilities<br>“Other Retail Trade” includes to the following sub<br>-<br>industries within Retail Trade: (1) Miscellaneous Store Retailers, (2) Furnit<br>ure and Home Furnishings Stores, (3) Sporting Goods, Hobby, Musical Instrument, and Book<br>Stores, (4) Clothing and Clothing Accessories Stores, and (5) General Merchandise Stores<br>Transportation<br>and Warehousing<br>4%<br>Health Care and Social<br>Assistance<br>7%<br>Professional, Scientific and Technical<br>Services<br>7%<br>Manufacturing<br>10%<br>Real Estate and<br>Rental and<br>Leasing<br>12%<br>Wholesale Trade<br>6%<br>Construction<br>13%<br>Finance and<br>Insurance<br>14%<br>Other<br>9%<br>Motor Vehicle and Parts Dealers<br>8%<br>Food and Beverage Stores<br>2%<br>Electronics and<br>Appliance Stores<br>3%<br>Heath and Personal<br>Care Services<br>1%<br>Gasoline Stations<br>1%<br>Building Material and<br>Garden Equipment<br>and Supplies Dealers<br>1%<br>Nonstore Retailers<br>1%<br>Other Retail<br>Trade<br>1%<br>Retail Trade<br>18%
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25<br>LOANS SECURED BY REAL ESTATE<br>TOTAL COMMITMENT<br>COMMERCIAL REAL ESTATE<br>1<br>1<br>–<br>Loans secured by commercial real estate include Multifamily loans, Ag land, Other CRE, Owner Occupied CRE, and Ag production<br>Portfolio<br>Avg<br>FICO<br>Avg LTV<br>Serviced<br>762<br>65%<br>Non<br>-<br>Serviced<br>779<br>25%<br>Junior<br>756<br>78%<br>HELOC<br>796<br>64%<br>TOTAL COMMITMENT<br>RESIDENTIAL REAL ESTATE<br>Office<br>19%<br>Retail<br>17%<br>Warehouse<br>19%<br>Manufacturing<br>1%<br>Residential<br>Development<br>1%<br>Mixed<br>Residential/Commercial<br>1%<br>Mixed<br>Commercial<br>5%<br>Apartments<br>14%<br>Medical Or<br>Nursing Facilities<br>7%<br>Commercial/Land<br>Development<br>12%<br>Ag Land<br>4%<br>Serviced<br>51%<br>1<br>-<br>4 1st Non<br>-<br>Serviced<br>4%<br>1<br>-<br>4 Family Jr Liens<br>3%<br>1<br>-<br>4 Family Revolving<br>31%<br>1<br>-<br>4 Family Construction<br>6%<br>Held for Sale<br>5%
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26<br>LINE OF CREDIT UTILIZATION<br>C&I AND HOME EQUITY LINES OF CREDIT<br>1<br>1<br>–<br>Commercial and industrial loans includes revolving C & I Loans and Other Loans. It Excludes non<br>-<br>revolving C&I loans, Ag Prod<br>uction, PPP and loans to Public Entities.<br>0%<br>5%<br>10%<br>15%<br>20%<br>25%<br>30%<br>35%<br>40%<br>45%<br> -<br> 50,000<br> 100,000<br> 150,000<br> 200,000<br> 250,000<br> 300,000<br> 350,000<br> 400,000<br> 450,000<br>Q1<br>2019<br>Q2<br>2019<br>Q3<br>2019<br>Q4<br>2019<br>Q1<br>2020<br>Q2<br>2020<br>Q3<br>2020<br>Q4<br>2020<br>Q1<br>2021<br>Q2<br>2021<br>Q3<br>2021<br>Q4<br>2021<br>C&I<br>Funded<br>Unfunded<br>Funded%<br>0%<br>10%<br>20%<br>30%<br>40%<br>50%<br>60%<br> -<br> 50,000<br> 100,000<br> 150,000<br> 200,000<br> 250,000<br> 300,000<br>Q1<br>2019<br>Q2<br>2019<br>Q3<br>2019<br>Q4<br>2019<br>Q1<br>2020<br>Q2<br>2020<br>Q3<br>2020<br>Q4<br>2020<br>Q1<br>2021<br>Q2<br>2021<br>Q3<br>2021<br>Q4<br>2021<br>Home Equity Lines of Credit<br>Funded<br>Unfunded<br>Funded%
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27<br>CHANGES IN THE ALLL BY PORTFOLIO SEGMENT<br>ALLOWANCE FOR LOAN LOSSES<br>Twelve months<br>ended December 31,<br>2021<br>(dollars in thousands)<br>Beginning<br>Balance<br>Provision for<br>Loan<br>Losses<br>Loan<br>Charge<br>-<br>offs<br>Loan<br>Recoveries<br>Ending<br>Balance<br>Commercial<br>Commercial<br>and industrial<br>$<br>10,205<br>$<br>(1,710)<br>$<br>(1,230)<br>$<br>1,660<br>$<br>8,925<br>Real estate<br>construction<br>658<br>125<br>—<br>—<br>783<br>Commercial real estate<br>14,105<br>(2,015)<br>(536)<br>822<br>12,376<br>Total commercial<br>24,968<br>(3,600)<br>(1,766)<br>2,482<br>22,084<br>Consumer<br>Residential real estate first<br>mortgage<br>5,774<br>758<br>—<br>—<br>6,532<br>Residential real estate junior lien<br>1,373<br>(201)<br>—<br>123<br>1,295<br>Other revolving and installment<br>753<br>(259)<br>(156)<br>143<br>481<br>Total consumer<br>7,900<br>298<br>(156)<br>266<br>8,308<br>Unallocated<br>1,378<br>(198)<br>—<br>—<br>1,180<br>Total<br>$<br>34,246<br>$<br>(3,500)<br>$<br>(1,922)<br>$<br>2,748<br>$<br>31,572
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28<br>ALLOCATION BY PORTFOLIO SEGMENT<br>ALLOWANCE FOR LOAN LOSSES<br>December 30, 2021<br>December 31, 2020<br>(dollars in thousands)<br>Allocated<br>Allowance<br>Percentage<br>of loans to<br>total loans<br>Allocated<br>Allowance<br>Percentage<br>of loans to<br>total loans<br>Commercial<br>and industrial<br>$<br>8,925<br>24.8%<br>$<br>10,205<br>35.0%<br>Real estate<br>construction<br>783<br>2.3%<br>658<br>2.2%<br>Commercial real estate<br>12,376<br>34.1%<br>14,105<br>28.5%<br>Residential real estate first<br>mortgage<br>6,532<br>29.1%<br>5,774<br>23.4%<br>Residential real estate junior lien<br>1,295<br>7.1%<br>1,373<br>7.2%<br>Other revolving and installment<br>481<br>2.6%<br>753<br>3.7%<br>Unallocated<br>1,180<br>—<br>%<br>1,378<br>—<br>%<br>Total loans<br>$<br>31,572<br>100.0%<br>$<br>34,246<br>100.0%
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29<br>Risk Level<br>Total Loans<br>Unguaranteed<br>Balance<br>1<br>Reserve<br>Amount<br>Reserve /<br>Unguaranteed<br>Loans<br>Reserve/Total<br>Loans<br>Pass<br>$<br>1,736,289<br>$<br>1,686,505<br>$<br>28,067<br>1.66%<br>1.62%<br>Special Mention<br>480<br>480<br>22<br>4.58%<br>4.58%<br>Substandard<br>18,499<br>17,752<br>2,019<br>11.37%<br>10.91%<br>Total Loans Evaluated Collectively<br>1,755,268<br>1,704,737<br>30,108<br>1.77%<br>1.72%<br>Total Loans Evaluated Individually<br>2,752<br>2,520<br>284<br>11.27%<br>10.32%<br>Unallocated<br>–<br>–<br>1,180<br>–<br>–<br>Total<br>$<br>1,758,020<br>$<br>1,707,257<br>$<br>31,572<br>1.85%<br>1.80%<br>ALLOCATION BY RISK SEGMENT ($ IN 000’S)<br>ALLOWANCE FOR LOAN LOSSES<br>As of 12/31/2021.<br>1<br>-<br>Unguaranteed balances exclude PPP loans as well as loans that are guaranteed by another government agency.
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30<br>COVID<br>-<br>19 RESPONSE
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31<br>▪<br>Since 2020, we exited three client offices and six admin offices (primarily housed by<br>administrative and operational staff)<br>▪<br>Experienced minimal client and employee dissatisfaction<br>▪<br>All remaining client offices are now open across the Alerus footprint in ND, MN, and AZ<br>PANDEMIC AGILITY RESULTED IN POSITIVE LASTING IMPACT<br>POST COVID<br>-<br>19 FACILITIES TRANSFORMATION<br>Office Only<br>13%<br>Office Primary<br>22%<br>Home Primary<br>22%<br>Home Only<br>43%<br>Office Only or Primary<br>97%<br>Home Only<br>3%<br>PRE<br>-<br>COVID<br>POST<br>-<br>COVID
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32<br>PAYMENT DEFERRALS, MATURITY EXTENSIONS, AND PAYMENT MODIFICATION<br>S<br>COVID<br>-<br>19 RELIEF PROGRAMS<br>December 31, 2021<br>Loan Group<br>Number<br>Of<br>Loans<br>Granted<br>Deferral<br>($ in 000’s)<br>Still<br>on<br>Initial<br>Deferral<br>($<br>in 000’s)<br>Additional<br>Deferral<br>($ in 000's)<br>Returned<br>to<br>Normal<br>($ in 000’s)<br>Consumer<br>182<br>$ 2,514<br>$ 18<br>$<br>—<br>$ 2,496<br>Residential Real Estate<br>Serviced<br>63<br>27,419<br>54<br>3,252<br>24,113<br>Residential<br>Real Estate<br>Non<br>-<br>serviced<br>77<br>10,550<br>—<br>—<br>10,550<br>Commercial Real Estate<br>79<br>80,763<br>—<br>—<br>80,763<br>Commercial & Industrial<br>187<br>33,335<br>—<br>—<br>33,335<br>Total<br>588<br>$ 154,581<br>$ 72<br>$ 3,252<br>$ 151,257<br>Consumer<br>1%<br>Residential Real<br>Estate Serviced<br>99%
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33<br>Retail Trade<br>19%<br>Professional, Scientific, and<br>Technical Services<br>20%<br>Construction<br>11%<br>Manufacturing<br>4%<br>Wholesale<br>Trade<br>7%<br>Health Care and Social<br>Assistance<br>3%<br>Other Services (except Public<br>Administration)<br>12%<br>Administrative and Support and<br>Waste Management and Remediation<br>Services<br>5%<br>Transportation and Warehousing<br>1%<br>Accommodation and Food Services<br>6%<br>Other<br>12%<br>SBA PAYCHECK PROTECTION PROGRAM (PPP)<br>COVID<br>-<br>19 RELIEF PROGRAMS<br>As of 12/31/2021.<br>As of December 31, 2021<br>, 2,204<br>loans<br>totaling $430.7<br>million have been approved for forgiveness by the SBA.<br>Loan Amount Group<br>#<br>of Loans<br>$ Originated<br>(in 000’s)<br>$150M<br>or less<br>1,825<br>$ 75,613<br>$150M to $2MM<br>601<br>304,878<br>$2MM+<br>28<br>93,757<br>Total<br>2,454<br>$ 474,248<br>INDUSTRY BREAKDOWN OF PPP LOANS MADE TO BORROWERS<br>THROUGH 12/31/2021 SECURED SBA FINANCING OF 2,454 LOANS FOR APPR<br>OXIMATELY $474MM
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34<br>APPENDIX
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35<br>FINANCIAL HIGHLIGHTS<br>1<br>Represents a non<br>-<br>GAAP financial measure. See “Non<br>-<br>GAAP Disclosure Reconciliation” in the Appendix to this presentation.<br>($000s, except where otherwise noted )<br>Annual<br>17-'21<br>2017<br>2018<br>2019<br>2020<br>2021<br>CAGR<br>Total Assets<br>2,136,081<br>$<br><br>2,179,070<br>$<br><br>2,356,878<br>$<br><br>3,013,771<br>$<br><br>3,392,691<br>$<br><br>12.3%<br>Total Loans<br>1,574,474<br><br><br>1,701,850<br><br><br>1,721,279<br><br><br>1,979,375<br><br><br>1,758,020<br><br><br>2.8%<br>Total Deposits<br>1,834,962<br><br><br>1,775,096<br><br><br>1,971,316<br><br><br>2,571,993<br><br><br>2,920,551<br><br><br>12.3%<br>Tangible Common Equity<br>1<br>125,154<br><br><br>147,152<br><br><br>240,008<br><br><br>274,043<br><br><br>307,663<br><br><br>25.2%<br>Net Income<br>15,001<br>$<br><br>25,866<br>$<br><br>29,540<br>$<br><br>44,675<br>$<br><br>52,681<br>$<br><br>36.9%<br>ROAA (%)<br>0.75<br><br><br>1.21<br><br><br>1.34<br><br><br>1.61<br><br><br>1.66<br><br><br>ROATCE (%)<br>1<br>18.04<br><br><br>21.02<br><br><br>17.46<br><br><br>17.74<br><br><br>18.89<br><br><br>Net Interest Margin (FTE) (%)<br>1<br>3.74<br><br><br>3.84<br><br><br>3.65<br><br><br>3.22<br><br><br>2.90<br><br><br>Efficiency Ratio (FTE) (%)<br>1<br>75.36<br><br><br>73.80<br><br><br>73.22<br><br><br>68.40<br><br><br>70.02<br><br><br>Non-Int. Income / Op. Rev. (%)<br>60.36<br><br><br>57.73<br><br><br>60.50<br><br><br>64.05<br><br><br>62.86<br><br><br>Earnings per common share - diluted<br>1.07<br><br><br>1.84<br><br><br>1.91<br><br><br>2.52<br><br><br>2.97<br><br><br>Total Equity / Total Assets (%)<br>8.41<br><br><br>9.04<br><br><br>12.12<br><br><br>10.96<br><br><br>10.59<br><br><br>Tang. Cmn. Equity / Tang. Assets (%)<br>1<br>6.01<br><br><br>6.91<br><br><br>10.38<br><br><br>9.27<br><br><br>9.21<br><br><br>Loans / Deposits (%)<br>85.80<br><br><br>95.87<br><br><br>87.32<br><br><br>76.96<br><br><br>60.19<br><br><br>NPLs / Loans (%)<br>0.37<br><br><br>0.41<br><br><br>0.45<br><br><br>0.26<br><br><br>0.12<br><br><br>NPAs / Assets (%)<br>0.30<br><br><br>0.33<br><br><br>0.33<br><br><br>0.17<br><br><br>0.09<br><br><br>Allowance / NPLs (%)<br>282.04<br><br><br>318.45<br><br><br>305.66<br><br><br>674.13<br><br><br>1,437.05<br><br><br>Allowance / Loans (%)<br>1.05<br><br><br>1.30<br><br><br>1.39<br><br><br>1.73<br><br><br>1.80<br><br><br>NCOs / Average Loans (%)<br>0.16<br><br><br>0.18<br><br><br>0.33<br><br><br>0.03<br><br><br>(0.04)
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36<br>NON<br>-<br>GAAP DISCLOSURE RECONCILIATION<br>($000s, except where otherwise noted )<br>Annual<br>2017<br>2018<br>2019<br>2020<br>2021<br>Tangible common equity to tangible assets<br>Total common stockholders' equity<br>$ 179,594<br>$ 196,954<br>$ 285,728<br>$ 330,163<br>$ 359,403<br>Less: Goodwill<br>27,329<br>27,329<br>27,329<br>30,201<br>31,490<br>Less: Other intangible assets<br>27,111<br>22,473<br>18,391<br>25,919<br>20,250<br>Tangible common equity (a)<br>125,154<br>147,152<br>240,008<br>274,043<br>307,663<br>Total assets<br>2,136,081<br>2,179,070<br>2,356,878<br>3,013,771<br>3,392,691<br>Less: Goodwill<br>27,329<br>27,329<br>27,329<br>30,201<br>31,490<br>Less: Other intangible assets<br>27,111<br>22,473<br>18,391<br>25,919<br>20,250<br>Tangible assets (b)<br>2,081,641<br>2,129,268<br>2,311,158<br>2,957,651<br>3,340,951<br>Tangible common equity to tangible assets (a)/(b)<br>6.01<br>%<br>6.91<br>%<br>10.38<br>%<br>9.27<br>%<br>9.21<br>%<br>Tangible common equity per common share<br>Total stockholders' equity<br>$ 179,594<br>$ 196,954<br>$ 285,728<br>$ 330,163<br>$ 359,403<br>Less: Goodwill<br>27,329<br>27,329<br>27,329<br>30,201<br>31,490<br>Less: Other intangible assets<br>27,111<br>22,473<br>18,391<br>25,919<br>20,250<br>Tangible common equity (c)<br>125,154<br>147,152<br>240,008<br>274,043<br>307,663<br>Common shares outstanding (d)<br>13,699<br>13,775<br>17,050<br>17,125<br>17,213<br>Tangible common equity per common share (c)/(d)<br>$ 9.14<br>$ 10.68<br>$ 14.08<br>$ 16.00<br>$ 17.87<br>Return on average tangible common equity<br>Net income<br>$ 15,001<br>$ 25,866<br>$ 29,540<br>$ 44,675<br>$ 52,681<br>Add: Intangible amortization expense (net of tax)<br>3,655<br>3,664<br>3,224<br>3,129<br>3,460<br>Remeasurement due to tax reform<br>4,818<br>—<br>—<br>—<br>—<br>Net income, excluding intangible amortization (e)<br>23,474<br>29,530<br>32,764<br>47,804<br>56,141<br>Average total equity<br>176,779<br>187,341<br>231,084<br>310,208<br>346,059<br>Less: Average goodwill<br>27,329<br>27,329<br>27,329<br>27,439<br>30,385<br>Less: Average other intangible assets (net of tax)<br>19,358<br>19,522<br>16,101<br>13,309<br>18,548<br>Average tangible common equity (f)<br>130,092<br>140,490<br>187,654<br>269,460<br>297,126<br>Return on average tangible common equity (e)/(f)<br>18.04<br>%<br>21.02<br>%<br>17.46<br>%<br>17.74<br>%<br>18.89<br>%<br>Net interest margin (tax<br>-<br>equivalent)<br>Net interest income<br>$ 67,670<br>$ 75,224<br>$ 74,551<br>$ 83,846<br>$ 87,099<br>Tax equivalent adjustment<br>865<br>462<br>347<br>455<br>492<br>Tax equivalent net interest income (g)<br>68,535<br>75,686<br>74,898<br>84,301<br>87,591<br>Average earning assets (h)<br>1,833,002<br>1,970,004<br>2,052,758<br>2,618,427<br>3,018,172<br>Net interest margin (tax equivalent) (g)/(h)<br>3.74<br>%<br>3.84<br>%<br>3.65<br>%<br>3.22<br>%<br>2.90<br>%<br>Efficiency Ratio<br>Noninterest expense<br>$ 134,920<br>$ 136,325<br>$ 142,537<br>$ 163,799<br>$ 168,909<br>Less: Intangible amortization expense<br>5,623<br>4,638<br>4,081<br>3,961<br>4,380<br>Adjusted noninterest expense (i)<br>129,297<br>131,687<br>138,456<br>159,838<br>164,529<br>Net interest income<br>67,670<br>75,224<br>74,551<br>83,846<br>87,099<br>Noninterest income<br>103,045<br>102,749<br>114,194<br>149,371<br>147,387<br>Tax equivalent adjustment<br>865<br>462<br>347<br>455<br>492<br>Total tax equivalent revenue (j)<br>171,580<br>178,435<br>189,092<br>233,672<br>234,978<br>Efficiency ratio (i)/(j)<br>75.36<br>%<br>73.80<br>%<br>73.22<br>%<br>68.40<br>%<br>70.02<br>%
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