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): October 27, 2021

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 October 27, 2021, Alerus Financial Corporation (the “Company”) issued a press release announcing its financial results for the three and nine months ended September 30, 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 October 27, 2021, 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 October 27, 2021
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: October 27, 2021	Alerus Financial Corporation


	By:	/s/ Randy L. Newman
	Name:	Randy L. Newman
	Title:	Chairman, Chief Executive Officer and President

Exhibit 99.1

<br><br><br><br>	<br><br>
<br><br><br><br>FOR RELEASE (10.27.2021)	Katie A. Lorenson, Chief Financial Officer<br><br>952.417.3725 (Office)

ALERUS FINANCIAL CORPORATION REPORTS

THIRD QUARTER 2021 NET INCOME OF $13.1 MILLION

GRAND FORKS, N.D. (October 27, 2021) – Alerus Financial Corporation (Nasdaq: ALRS) reported net income of $13.1 million for the third quarter of 2021, or $0.74 per diluted common share, compared to net income of $11.7 million, or $0.66 per diluted common share, for the second quarter of 2021, and net income of $17.7 million, or $0.99 per diluted common share, for the third quarter of 2020.

CEO Comments

Chairman, President, and Chief Executive Officer Randy Newman said, “Our diversified business model continues to drive strong financial performance, as we ended the third quarter with a return on tangible common equity of over 18.0%. We generated $57.2 million of revenue through continued momentum in our retirement, wealth management and mortgage businesses, while net interest income and loan growth (excluding Paycheck Protection Program, or PPP, loans) showed incremental improvement with average total earning assets growing 10.6% year-over-year. Credit quality was better than expected with another net recovery quarter driving a negative provision for the quarter. Tangible book value grew over 7.0% from a year ago, which includes the intangibles recognized in the December 2020 acquisition of the Denver based, 24HourFlex/RPS. During the quarter, we converted 24HourFlex clients to Alerus and are pleased to see exceptional client retention and growth. We greatly appreciate all of our employees for their continued hard work, remarkable ongoing engagement and dedication to serving our clients, and their ability to help us produce strong returns for our shareholders.”

Quarterly Highlights

◾	Return on average total assets of 1.62%, compared to 1.50% for the second quarter of 2021
◾	Return on average tangible common equity^(1)^ of 18.13%, compared to 17.36% for the second quarter of 2021
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◾	Net interest margin (tax-equivalent)^(1)^ was 2.78%, compared to 2.88% for the second quarter of 2021
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◾	Allowance for loan losses to total loans, excluding PPP loans was 1.89%, compared to 2.00% as of December 31, 2020
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◾	Efficiency ratio^(1)^ of 71.49%, compared to 71.46% for the second quarter of 2021
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◾	Noninterest income for the second quarter of 2021 was 63.04% of total revenue, compared to 63.48% for the second quarter of 2021
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◾	Mortgage originations totaled $415.8 million, a 23.8% decrease from the second quarter of 2021
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◾	Investment securities increased $425.5 million, or 71.8%, since December 31, 2020
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◾	Loans held for sale decreased $61.5 million, or 50.3%, since December 31, 2020
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◾	Loans held for investment decreased $179.0 million, or 9.0%, since December 31, 2020. Excluding PPP loans, loans held for investment decreased $14.1 million, or 0.8%, since December 31, 2020
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◾	Deposits increased $141.1 million, or 5.5%, since December 31, 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									Nine months ended
	September 30,			June 30,			September 30,			September 30,			September 30,
(dollars and shares in thousands, except per share data)	2021			2021			2020			2021			2020		****
Performance Ratios
Return on average total assets		1.62	%		1.50	%		2.42	%		1.71	%		1.71	%
Return on average common equity		14.68	%		13.82	%		22.31	%		15.61	%		15.17	%
Return on average tangible common equity (1)		18.13	%		17.36	%		26.67	%		19.44	%		18.70	%
Noninterest income as a % of revenue		63.04	%		63.48	%		67.53	%		63.87	%		64.58	%
Net interest margin (tax-equivalent) (1)		2.78	%		2.88	%		3.17	%		2.92	%		3.22	%
Efficiency ratio (1)		71.49	%		71.46	%		58.42	%		69.69	%		66.22	%
Net charge-offs/(recoveries) to average loans		(0.06)	%		—	%		(0.11)	%		0.01	%		0.15	%
Dividend payout ratio		21.62	%		24.24	%		15.15	%		20.80	%		23.20	%
Per Common Share
Earnings per common share - basic	$	0.75		$	0.67		$	1.01		$	2.29		$	1.98
Earnings per common share - diluted	$	0.74		$	0.66		$	0.99		$	2.26		$	1.94
Dividends declared per common share	$	0.16		$	0.16		$	0.15		$	0.47		$	0.45
Tangible book value per common share (1)	$	17.46		$	16.89		$	16.31
Average common shares outstanding - basic		17,205			17,194			17,121			17,182			17,101
Average common shares outstanding - diluted		17,499			17,497			17,453			17,488			17,435
Other Data
Retirement and benefit services assets under administration/management	$	36,202,553		$	36,964,961		$	30,470,645
Wealth management assets under administration/management		3,865,062			3,538,959			3,043,173
Mortgage originations		415,792			545,437			511,605		$	1,479,243		$	1,171,811

(1)Represents a non-GAAP financial measure. See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.”

Results of Operations

Net Interest Income

Net interest income for the third quarter of 2021 was $21.1 million, unchanged from the second quarter of 2021. Net interest income decreased $633 thousand, or 2.9%, from $21.8 million for the third quarter of 2020. During the third quarter of 2021, average interest earning assets increased $77.3 million, primarily due to increases of $90.1 million in interest-bearing deposits with banks and $68.6 million in investment securities, partially offset by decreases of $67.1 million in loans held for investment and $14.2 million in loans held for sale. The change in the balance sheet mix resulted in a 12 basis point decrease in the average earning asset yield. Net interest income earned from PPP loans during the third quarter of 2021 totaled $2.1 million, a decrease of $502 thousand, from the $2.6 million earned during the second quarter. The cost of interest-bearing liabilities had a modest decrease of 1 basis point from the second quarter of 2021.

Net interest margin (tax-equivalent), a non-GAAP financial measure, was 2.78% for the third quarter of 2021, a 10 basis point decrease from 2.88% for the second quarter of 2021, and a 39 basis point decrease from 3.17% in the third quarter of 2020. The linked quarter decrease was primarily due to lower yields on interest earning assets. Excluding PPP loans, net interest margin was 2.62% for the third quarter of 2021, a 13 basis point decrease from 2.75% for the second 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 58 basis point decrease in interest earning asset yields. The decrease in earning asset yield was offset by a 27 basis point decrease in the average rate paid on interest-bearing liabilities.

Noninterest Income

Noninterest income for the third quarter of 2021 was $36.0 million, a $708 thousand, or 1.9%, decrease from the second quarter of 2021. The decrease was primarily driven by a $1.2 million decrease in mortgage banking revenue, a result of a decrease of $129.6 million in mortgage originations. The decrease in mortgage banking revenue was partially offset by modest increases in both retirement and benefit services and wealth management revenue.

Noninterest income for the third quarter of 2021 decreased $9.2 million, or 20.4%, from $45.3 million in the third quarter of 2020. This decrease was primarily due to an $11.2 million decrease in mortgage banking revenue, a result of a $7.8 million decrease in the fair market value on the secondary market hedge, a decrease of $95.8 million in mortgage originations, and a 4 basis point decrease in the gain on sale margin. Partially offsetting this decrease was a $2.9 million increase in retirement and benefit services 2

income, primarily driven by the revenue attributable to the acquisition of Retirement Planning Services, Inc. (doing business as RPS Plan Administrators and 24HourFlex), or RPS, and a $893 thousand increase in document restatement fees. In addition, wealth management revenue increased $809 thousand, or 18.0%, primarily driven by organic growth and market increases in assets under management.

Noninterest Expense

Noninterest expense for the third quarter of 2021 was $42.0 million, a decrease of $509 thousand, or 1.2%, compared to the second quarter of 2021. The decrease was primarily due to decreases of $1.0 million in compensation expense, $514 thousand in employee benefits and taxes, partially offset by increases of $374 thousand in business services, software and technology expense and $198 thousand in other noninterest expense. The decreases in compensation expense and employee taxes and benefits were primarily attributable to the $129.6 million decrease in mortgage originations from the previous quarter, partially offset by other personnel related accruals. The increase in business services, software and technology expense is primarily a result of non-recurring expenses related to investments in automated processing and integration expenses associated with the acquisition of RPS. The increase in other noninterest expense is primarily attributable to a $234 thousand increase in the provision for unfunded commitments. The increase in the provision for unfunded commitments was a result of lower credit line utilization. Unfunded commitments increased 2.0% from the second quarter of 2021.

Noninterest expense for the third quarter of 2021 increased $1.8 million, or 4.5%, from $40.2 million in the third quarter of 2020. The increase was primarily attributable to increases of business services, software and technology expense as well as compensation expense, partially offset by decreased occupancy and equipment expense. Business services, software and technology expense increased primarily as a result of our increased investment in processing innovations as previously stated. Additionally, compensation expense increased as a result of the acquisition of RPS, as the number of full time employees increased from 790 employees in the third quarter of 2020 to 825 employees in the third quarter of 2021. Occupancy and equipment expense decreased due to the closure of certain offices in 2021 due to our transition to a hybrid work environment.

Financial Condition

Total assets were $3.2 billion as of September 30, 2021, an increase of $161.4 million, or 5.4%, from December 31, 2020. The overall increase in total assets included an increase of $425.5 million in investment securities, partially offset by a $179.0 million decrease in loans held for investment and a $61.5 million decrease in loans held for sale. The decrease in loans held for investment was primarily due to PPP loan balances decreasing by $164.9 million from December 31, 2020.

Loans

Total loans were $1.80 billion as of September 30, 2021, a decrease of $179.0 million, or 9.0%, from December 31, 2020. The decrease was primarily due to a $185.3 million decrease in the commercial and industrial loan portfolio, primarily attributable to a $164.9 million decrease in PPP loans. Excluding PPP loans, the commercial loan portfolio decreased by $16.5 million, or 1.6%, from December 31, 2020, primarily as a result of lower credit line utilization. The outstanding balances of lines of credit decreased $2.0 million, or 0.4%, from December 31, 2020. The consumer loan portfolio increased $2.5 million from December 31, 2020, due to a net increase of $24.8 million in residential real estate mortgages, which was partially offset by a decrease in other consumer loans as a result of discontinuing our indirect auto lending.

The following table presents the composition of our loan portfolio as of the dates indicated:



		September 30,		June 30,		March 31,		December 31,		September 30,
(dollars in thousands)	****	2021		2021		2021		2020		2020
Commercial
Commercial and industrial (1)		$	506,599	$	572,734	$	678,029	$	691,858	$	789,036
Real estate construction			37,751		36,549		40,473		44,451		33,169
Commercial real estate			573,518		567,987		569,451		563,007		535,216
Total commercial			1,117,868		1,177,270		1,287,953		1,299,316		1,357,421
Consumer
Residential real estate first mortgage			501,339		470,822		454,958		463,370		469,050
Residential real estate junior lien			130,243		130,180		130,299		143,416		152,487
Other revolving and installment			50,936		57,040		64,135		73,273		79,461
Total consumer			682,518		658,042		649,392		680,059		700,998
Total loans		$	1,800,386	$	1,835,312	$	1,937,345	$	1,979,375	$	2,058,419

(1)	Includes PPP loans of $103.5 million at September 30, 2021, $165.0 million at June 30, 2021, $256.8 million at March 31, 2021, $268.4 million at December 31, 2020 and $348.9 million at September 30, 2020.

Deposits

Total deposits were $2.71 billion as of September 30, 2021, an increase of $141.1 million, or 5.5%, from December 31, 2020. Interest-bearing deposits increased $98.7 million, while noninterest-bearing deposits increased $42.3 million. Key drivers of the increase included ongoing higher depositor balances due to the uncertain economic environment, government stimulus programs and volatile financial markets. Synergistic deposits decreased $19.6 million to $576.0 million as retirement participants transitioned balances back into the markets. Excluding synergistic deposits, commercial transaction deposits increased $112.5 million, or 10.2%, while consumer transaction deposits increased, $31.2 million, or 4.8%, since December 31, 2020. Noninterest-bearing deposits as a percentage of total deposits were 29.4% as of September 30, 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:


		September 30,			June 30,			March 31,			December 31,			September 30,
(dollars in thousands)	****	2021		****	2021		****	2021		****	2020		****	2020
Noninterest-bearing demand		$	797,062		$	758,820		$	775,434		$	754,716		$	693,450
Interest-bearing
Interest-bearing demand			673,916			736,043			674,466			618,900			590,366
Savings accounts			92,632			89,437			87,492			79,902			78,659
Money market savings			924,678			920,831			967,273			909,137			892,473
Time deposits			224,800			205,809			212,908			209,338			207,422
Total interest-bearing			1,916,026			1,952,120			1,942,139			1,817,277			1,768,920
Total deposits		$	2,713,088		$	2,710,940		$	2,717,573		$	2,571,993		$	2,462,370

Asset Quality

Total nonperforming assets were $7.1 million as of September 30, 2021, an increase of $1.9 million, or 37.9%, from December 31, 2020. As of September 30, 2021, the allowance for loan losses was $32.1 million, or 1.78% 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 1.89% at September 30, 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
		September 30,			June 30,			March 31,			December 31,			September 30,
(dollars in thousands)	****	2021		****	2021		****	2021		****	2020		****	2020		****
Nonaccrual loans		$	6,229		$	6,960		$	4,756		$	5,050		$	4,795
Accruing loans 90+ days past due			—			—			—			30			—
Total nonperforming loans			6,229			6,960			4,756			5,080			4,795
OREO and repossessed assets			862			858			139			63			10
Total nonperforming assets		$	7,091		$	7,818		$	4,895		$	5,143		$	4,805
Net charge-offs/(recoveries)			(302)			(6)			488			(1,509)			(581)
Net charge-offs/(recoveries) to average loans			(0.06)	%		—	%		0.10	%		(0.30)	%		(0.11)	%
Nonperforming loans to total loans			0.35	%		0.38	%		0.25	%		0.26	%		0.23	%
Nonperforming assets to total assets			0.22	%		0.25	%		0.16	%		0.17	%		0.17	%
Allowance for loan losses to total loans			1.78	%		1.84	%		1.74	%		1.73	%		1.52	%
Allowance for loan losses to nonperforming loans			515	%		485	%		710	%		674	%		654	%

For the third quarter of 2021, we had net recoveries of $302 thousand compared to net recoveries of $6 thousand for the second quarter of 2021 and $581 thousand of net recoveries for the third quarter of 2020.

There was a $2.0 million reversal of provision for loan losses recorded for the third quarter of 2021, a $2.0 million decrease from the second quarter of 2021, and a decrease of $5.5 million from the third quarter of 2020. The negative provision in the third quarter of 2021 was driven by net recoveries in four of the last five quarters and continuous improvements of credit quality indicators and economic conditions.

The ratio of nonperforming loans to total loans at September 30, 2021 was 0.35%. Excluding PPP loans, the ratio of nonperforming loans to total loans was 0.37% at September 30, 2021. Nonperforming assets as a percentage of total assets was 0.22% at September 30, 2021. Excluding PPP loans, nonperforming assets as a percentage of total assets would have been 0.23% at September 30, 2021.

Beginning in 2020, in accordance with the Interagency Statement on Loan Modifications and Reporting for Financial Institutions as issued on April 7, 2020, through September 30, 2021, we had entered into principal and interest deferrals on 587 loans, representing $154.5 million in total outstanding principal balances. Of those loans, 8 loans with a total outstanding principal balance of $3.4 million have been granted additional deferrals, 2 loans with a total outstanding principal balance of $69 thousand remain on the first deferral and the remaining loans have been returned to normal payment status. These loan modifications are not considered troubled debt restructurings.

Capital

Total stockholders’ equity was $353.2 million as of September 30, 2021, an increase of $23.0 million, or 7.0%, from December 31, 2020. Tangible book value per common share, a non-GAAP financial measure, increased to $17.46 as of September 30, 2021, from $16.00 as of December 31, 2020. Tangible common equity to tangible assets, a non-GAAP financial measure, increased to 9.62% as of September 30, 2021, from 9.27% as of December 31, 2020.

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


	****	September 30,		****	December 31,		****	September 30,
	****	2021		****	2020		****	2020
Capital Ratios^(1)^
Alerus Financial Corporation Consolidated
Common equity tier 1 capital to risk weighted assets			14.52	%		12.75	%		13.08	%
Tier 1 capital to risk weighted assets			14.93	%		13.15	%		13.48	%
Total capital to risk weighted assets			18.58	%		16.79	%		17.13	%
Tier 1 capital to average assets			9.88	%		9.24	%		9.76	%
Tangible common equity / tangible assets ^(2)^			9.62	%		9.27	%		9.78	%

Alerus Financial, N.A.
Common equity tier 1 capital to risk weighted assets			13.77	%		12.10	%		12.47	%
Tier 1 capital to risk weighted assets			13.77	%		12.10	%		12.47	%
Total capital to risk weighted assets			15.03	%		13.36	%		13.72	%
Tier 1 capital to average assets			9.11	%		8.50	%		9.03	%

(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, October 28, 2021, 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. 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. 6

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 effects of the 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; 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; our ability to successfully manage liquidity risk; 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; 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; 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 and shares in thousands, except per share data)


	****	September 30,		****	December 31,
	****	2021		****	2020
Assets		(Unaudited)			(Audited)
Cash and cash equivalents		$	159,454		$	172,962
Investment securities
Available-for-sale, at fair value			655,282			592,342
Held-to-maturity, at carrying value			362,586			—
Loans held for sale			60,912			122,440
Loans			1,800,386			1,979,375
Allowance for loan losses			(32,066)			(34,246)
Net loans			1,768,320			1,945,129
Land, premises and equipment, net			18,403			20,289
Operating lease right-of-use assets			3,821			6,918
Accrued interest receivable			8,836			9,662
Bank-owned life insurance			32,954			32,363
Goodwill			30,201			30,201
Other intangible assets			22,593			25,919
Servicing rights			1,776			1,987
Deferred income taxes, net			11,609			9,409
Other assets			38,422			44,150
Total assets		$	3,175,169		$	3,013,771
Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing		$	797,062		$	754,716
Interest-bearing			1,916,026			1,817,277
Total deposits			2,713,088			2,571,993
Long-term debt			58,963			58,735
Operating lease liabilities			4,428			7,861
Accrued expenses and other liabilities			45,495			45,019
Total liabilities			2,821,974			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: 17,208,077 and 17,125,270 issued and outstanding			17,208			17,125
Additional paid-in capital			91,783			90,237
Retained earnings			243,638			212,163
Accumulated other comprehensive income (loss)			566			10,638
Total stockholders’ equity			353,195			330,163
Total liabilities and stockholders’ equity		$	3,175,169		$	3,013,771

Alerus Financial Corporation and Subsidiaries

Consolidated Statements of Income

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


	Three months ended						Nine months ended
	September 30,		June 30,		September 30,		September 30,		September 30,
	2021		2021		2020		2021		2020
Interest Income	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Loans, including fees	$	18,888	$	19,324	$	21,962	$	58,779	$	63,876
Investment securities
Taxable		3,249		2,897		1,973		8,547		5,497
Exempt from federal income taxes		225		233		238		694		712
Other		185		130		116		432		816
Total interest income		22,547		22,584		24,289		68,452		70,901
Interest Expense
Deposits		880		906		1,683		2,781		7,633
Long-term debt		535		538		841		1,361		2,575
Total interest expense		1,415		1,444		2,524		4,142		10,208
Net interest income		21,132		21,140		21,765		64,310		60,693
Provision for loan losses		(2,000)		—		3,500		(2,000)		9,500
Net interest income after provision for loan losses		23,132		21,140		18,265		66,310		51,193
Noninterest Income
Retirement and benefit services		18,031		17,871		15,104		53,157		45,034
Wealth management		5,295		5,138		4,486		15,419		12,644
Mortgage banking		11,116		12,287		22,269		40,535		44,860
Service charges on deposit accounts		357		330		355		1,025		1,075
Net gains (losses) on investment securities		11		—		1,428		125		2,722
Other		1,230		1,122		1,614		3,408		4,340
Total noninterest income		36,040		36,748		45,256		113,669		110,675
Noninterest Expense
Compensation		23,291		24,309		22,740		71,298		62,684
Employee taxes and benefits		5,058		5,572		5,033		16,443		15,088
Occupancy and equipment expense		2,063		1,918		2,511		6,212		7,615
Business services, software and technology expense		5,332		4,958		4,378		15,266		13,501
Intangible amortization expense		1,088		1,088		990		3,327		2,971
Professional fees and assessments		1,503		1,509		1,070		4,484		3,303
Marketing and business development		865		769		929		2,310		2,088
Supplies and postage		549		503		248		1,583		1,630
Travel		174		36		26		236		338
Mortgage and lending expenses		1,231		1,199		1,434		3,762		3,916
Other		887		689		855		2,712		3,540
Total noninterest expense		42,041		42,550		40,214		127,633		116,674
Income before income taxes		17,131		15,338		23,307		52,346		45,194
Income tax expense		4,064		3,644		5,648		12,370		10,698
Net income	$	13,067	$	11,694	$	17,659	$	39,976	$	34,496
Per Common Share Data
Earnings per common share	$	0.75	$	0.67	$	1.01	$	2.29	$	1.98
Diluted earnings per common share	$	0.74	$	0.66	$	0.99	$	2.26	$	1.94
Dividends declared per common share	$	0.16	$	0.16	$	0.15	$	0.47	$	0.45
Average common shares outstanding		17,205		17,194		17,121		17,182		17,101
Diluted average common shares outstanding		17,499		17,497		17,453		17,488		17,435

Alerus Financial Corporation and Subsidiaries

Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures (unaudited)

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


	****	September 30,			June 30,			December 31,			September 30,
	****	2021			2021			2020			2020
Tangible Common Equity to Tangible Assets
Total common stockholders’ equity		$	353,195		$	344,391		$	330,163		$	322,003
Less: Goodwill			30,201			30,201			30,201			27,329
Less: Other intangible assets			22,593			23,680			25,919			15,421
Tangible common equity (a)			300,401			290,510			274,043			279,253
Total assets			3,175,169			3,157,229			3,013,771			2,898,809
Less: Goodwill			30,201			30,201			30,201			27,329
Less: Other intangible assets			22,593			23,680			25,919			15,421
Tangible assets (b)			3,122,375			3,103,348			2,957,651			2,856,059
Tangible common equity to tangible assets (a)/(b)			9.62	%		9.36	%		9.27	%		9.78	%
Tangible Book Value Per Common Share
Total common stockholders’ equity		$	353,195		$	344,391		$	330,163		$	322,003
Less: Goodwill			30,201			30,201			30,201			27,329
Less: Other intangible assets			22,593			23,680			25,919			15,421
Tangible common equity (c)			300,401			290,510			274,043			279,253
Total common shares issued and outstanding (d)			17,208			17,198			17,125			17,122
Tangible book value per common share (c)/(d)		$	17.46		$	16.89		$	16.00		$	16.31


	Three months ended									Nine months ended
	September 30,			June 30,			September 30,			September 30,			September 30,
	2021			2021			2020			2021			2020
Return on Average Tangible Common Equity
Net income	$	13,067		$	11,694		$	17,659		$	39,976		$	34,496
Add: Intangible amortization expense (net of tax)		860			860			782			2,628			2,347
Net income, excluding intangible amortization (e)		13,927			12,554			18,441			42,604			36,843
Average total equity		353,196			339,439			314,921			342,344			303,825
Less: Average goodwill		30,201			30,201			27,329			30,201			27,329
Less: Average other intangible assets (net of tax)		18,272			19,123			12,565			19,124			13,343
Average tangible common equity (f)		304,723			290,115			275,027			293,019			263,153
Return on average tangible common equity (e)/(f)		18.13	%		17.36	%		26.67	%		19.44	%		18.70	%
Net Interest Margin (tax-equivalent)
Net interest income	$	21,132		$	21,140		$	21,765		$	64,310		$	60,693
Tax-equivalent adjustment		115			135			116			392			325
Tax-equivalent net interest income (g)		21,247			21,275			21,881			64,702			61,018
Average earning assets (h)		3,035,798			2,958,468			2,744,758			2,958,742			2,534,038
Net interest margin (tax-equivalent) (g)/(h)		2.78	%		2.88	%		3.17	%		2.92	%		3.22	%
Efficiency Ratio
Noninterest expense	$	42,041		$	42,550		$	40,214		$	127,633		$	116,674
Less: Intangible amortization expense		1,088			1,088			990			3,327			2,971
Adjusted noninterest expense (i)		40,953			41,462			39,224			124,306			113,703
Net interest income		21,132			21,140			21,765			64,310			60,693
Noninterest income		36,040			36,748			45,256			113,669			110,675
Tax-equivalent adjustment		115			135			116			392			325
Total tax-equivalent revenue (j)		57,287			58,023			67,137			178,371			171,693
Efficiency ratio (i)/(j)		71.49	%		71.46	%		58.42	%		69.69	%		66.22	%

Alerus Financial Corporation and Subsidiaries

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

(dollars in thousands)


	Three months ended												Nine months ended
	September 30, 2021				June 30, 2021				September 30, 2020				September 30, 2021				September 30, 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	$	281,768	0.16	%	$	191,695	0.12	%	$	169,770	0.12	%	$	219,636	0.14	%	$	162,134	0.51	%
Investment securities (1)		869,421	1.61	%		800,812	1.60	%		443,705	2.04	%		778,307	1.62	%		383,591	2.23	%
Loans held for sale		57,233	2.40	%		71,447	2.26	%		90,634	2.44	%		70,218	2.25	%		64,555	2.64	%
Loans
Commercial:
Commercial and industrial		544,811	4.95	%		627,613	4.55	%		782,853	4.34	%		615,310	4.73	%		667,742	4.48	%
Real estate construction		37,743	3.99	%		42,511	4.28	%		32,747	4.47	%		41,812	4.17	%		30,385	4.64	%
Commercial real estate		567,696	3.67	%		568,827	3.71	%		525,514	4.02	%		565,861	3.72	%		515,761	4.31	%
Total commercial		1,150,250	4.29	%		1,238,951	4.15	%		1,341,114	4.22	%		1,222,983	4.24	%		1,213,888	4.41	%
Consumer
Residential real estate first mortgage		487,699	3.32	%		459,278	3.53	%		460,995	3.96	%		468,395	3.53	%		460,505	4.05	%
Residential real estate junior lien		129,239	4.57	%		129,544	4.58	%		153,326	4.54	%		132,145	4.67	%		163,332	4.84	%
Other revolving and installment		53,683	4.45	%		60,213	4.31	%		79,343	4.50	%		60,785	4.37	%		80,169	4.58	%
Total consumer		670,621	3.65	%		649,035	3.81	%		693,664	4.15	%		661,325	3.84	%		704,006	4.30	%
Total loans (1)		1,820,871	4.05	%		1,887,986	4.04	%		2,034,778	4.20	%		1,884,308	4.10	%		1,917,894	4.37	%
Federal Reserve/FHLB stock		6,505	4.33	%		6,528	4.36	%		5,871	4.40	%		6,273	4.37	%		5,864	4.58	%
Total interest earning assets		3,035,798	2.96	%		2,958,468	3.08	%		2,744,758	3.54	%		2,958,742	3.11	%		2,534,038	3.75	%
Noninterest earning assets		155,079				161,272				163,386				161,077				156,144
Total assets	$	3,190,877			$	3,119,740			$	2,908,144			$	3,119,819			$	2,690,182
Interest-Bearing Liabilities
Interest-bearing demand deposits	$	692,873	0.14	%	$	697,789	0.14	%	$	589,633	0.27	%	$	678,015	0.15	%	$	528,024	0.34	%
Money market and savings deposits		1,009,564	0.14	%		1,015,358	0.14	%		961,669	0.32	%		1,018,347	0.15	%		889,039	0.66	%
Time deposits		217,756	0.50	%		208,338	0.56	%		204,969	0.98	%		212,297	0.57	%		201,747	1.29	%
Short-term borrowings		10	—	%		—	—	%		—	—	%		3	—	%		107	—	%
Long-term debt		58,968	3.60	%		58,996	3.66	%		58,739	5.70	%		48,002	3.79	%		58,747	5.85	%
Total interest-bearing liabilities		1,979,171	0.28	%		1,980,481	0.29	%		1,815,010	0.55	%		1,956,664	0.28	%		1,677,664	0.81	%
Noninterest-Bearing Liabilities and Stockholders' Equity
Noninterest-bearing deposits		799,854				755,773				698,594				762,685				651,971
Other noninterest-bearing liabilities		58,656				44,047				79,619				58,126				56,722
Stockholders’ equity		353,196				339,439				314,921				342,344				303,825
Total liabilities and stockholders’ equity	$	3,190,877			$	3,119,740			$	2,908,144			$	3,119,819			$	2,690,182
Net interest rate spread			2.68	%			2.79	%			2.99	%			2.83	%			2.94	%
Net interest margin, tax-equivalent (2)			2.78	%			2.88	%			3.17	%			2.92	%			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>OCTOBER 2021<br>Alerus
1<br>Forward-Looking Statements<br>This presentation 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<br>include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of Alerus Financial Corporation. These<br>statements are often, but not always, identified by words such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”,<br>“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<br>forward-looking statements include, among others, statements we make regarding our projected growth, anticipated future financial performance, financial condition, credit quality, management’s<br>long-term performance goals and the future plans and prospects of Alerus Financial Corporation.<br>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<br>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,<br>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<br>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<br>actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: the effects of the COVID-19 pandemic,<br>including its effects on the economic environment, our clients and our operations including due to supply chain disruptons, as well as any changes to federal, state or local government laws,<br>regulations or orders in connection with the pandemic; our ability to successfully manage credit risk and maintain an adequate level of allowance for loan losses; new or revised accounting<br>standards, including as a result of the future implementation of the new Current Expected Credit Loss Standard; business and economic conditions generally and in the financial services industry,<br>nationally and within our market areas; the overall health of the local and national real estate market; concentrations within our loan portfolio; the level of nonperforming assets on our balance<br>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<br>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<br>controls or cybersecurity related incidents; interruptions involving our information technology and telecommunications systems or third-party servicers; potential losses incurred in connection<br>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<br>industry; increased competition in the financial services industry; our ability to successfully manage liquidity risk; the effectiveness of our risk management framework; the commencement and<br>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<br>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;<br>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,<br>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<br>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,<br>regulations and guidance, including recent proposals to increase the federal corporate tax rate; our success at managing the risks involved in the foregoing items; and any other risks described in<br>the “Risk Factors” sections of the reports filed by Alerus Financial Corporation with the Securities and Exchange Commission.<br>Any forward-looking statement made by us in this presentation 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<br>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.<br>Non-GAAP Financial Measures<br>This presentation includes certain ratios and amounts that do not conform to U.S. Generally Accepted Accounting Principles, or GAAP. Management uses certain non-GAAP financial measures to<br>evaluate financial performance and business trends from period to period and believes that disclosure of these non-GAAP financial measures will help investors, rating agencies and analysts<br>evaluate the financial performance and condition of Alerus Financial Corporation. This presentation includes a reconciliation of each non-GAAP financial measure to the most comparable GAAP<br>equivalent.<br>Miscellaneous<br>Except as otherwise indicated, this presentation speaks as of the date hereof. The delivery of this presentation shall not, under any circumstances, create any implication that there has been no<br>change in the affairs of Alerus Financial Corporation after the date hereof. Certain of the information contained herein may be derived from information provided by industry sources. We believe<br>that such information is accurate and that the sources from which it has been obtained are reliable. We cannot guarantee the accuracy of such information, however, and we have not independently<br>verified such information.<br>DISCLAIMERS
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2<br>FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2021<br>Noninterest income:<br>$152.4 million<br>Net interest income:<br>$87.5 million<br>$29.4 $27.8 $31.9 $34.2 $36.2<br>2017 2018 2019 2020 Q3 2021<br>OUR MISSION<br>▪ To positively impact our clients’ financial potential-through holistic guidance, unparalleled service, and engaging<br>technology.<br>COMPANY PROFILE<br>Data as of 09/30/2021.<br>DIVERSIFIED REVENUE STREAM ASSET GROWTH (IN BILLIONS)<br>Banking Assets<br>Retirement and Benefit Services AUA/AUM<br>Wealth Management AUA/AUM<br>$2.7 $2.6 $3.1 $3.3 $3.9<br>2017 2018 2019 2020 Q3 2021<br>NONINTEREST<br>INCOME AS A %<br>OF REVENUE:<br>63.6%<br>DIVERSIFIED FINANCIAL SERVICES COMPANY<br>▪ $3.2 billion Banking assets<br>▪ $36.2 billion Retirement and Benefits AUA/AUM<br>▪ $3.9 billion Wealth Management AUA/AUM<br>▪ $1.5 billion in Mortgage Originations YTD<br>ALERUS BUSINESS LINES<br>▪ Banking<br>▪ Retirement and Benefits<br>▪ Wealth Management<br>▪ Mortgage<br>$2.1 $2.2 $2.4 $3.0 $3.2<br>2017 2018 2019 2020 Q3 2021<br>Retirement<br>and Benefit<br>Revenue<br>29.0%<br>Wealth<br>Management<br>Revenue<br>8.4%<br>Mortgage<br>Revenue<br>23.8%<br>Banking<br>Fees<br>2.4%<br>Net<br>Interest<br>Income<br>36.4%
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3<br>FRANCHISE FOOTPRINT<br>FULL-SERVICE BANKING OFFICES<br>Alerus offers banking, retirement and benefits, mortgage and<br>wealth management services at all full-service banking offices<br>▪ Grand Forks, ND: 4 full-service banking offices<br>▪ Fargo, ND: 3 full-service banking offices<br>▪ Twin Cities, MN: 6 full-service banking offices<br>▪ Phoenix, AZ: 2 full-service banking offices<br>RETIREMENT AND BENEFITS SERVICES OFFICES<br>▪ 1 office in Minnesota<br>▪ 1 office in Michigan<br>▪ 1 office in Colorado<br>▪ Serve clients in all 50 states through retirement plan services<br>DIVERSIFIED CLIENT BASE<br>▪ 45,200 consumers<br>▪ 10,200 businesses<br>▪ 7,500 employer-sponsored retirement plans<br>Data as of 09/30/2021.<br>▪ 375,800 employer-sponsored retirement plan participants<br>▪ 62,900 health savings account participants<br>▪ 54,100 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 —a trusted advisor—<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>divisions totaled $576.0 million as of September 30,<br>2021<br>Cumulative rollovers have added $930.0 million of<br>assets under management<br>1-4 Family 1st Liens totaled $477.5 million in the<br>third 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.<br>(Littleton, CO)<br>To supplement our strong organic growth, we have executed 24 acquisitions throughout the history<br>of 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 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 Eide Bailly, LLP (Minneapolis, MN)<br>Acquired Prosperan Bank (Twin Cities, MN)<br>Acquired deposits from BankFirst (Minneapolis, MN)<br>Acquired Residential Mortgage Group<br>(Minnetonka, MN)<br>Acquired selected loans and deposits (in MN) and a<br>branch (in AZ) from BNC National Bank<br>EXPANDED TO MICHIGAN<br>Acquired PensionTrend, Inc. and PensionTrend<br>Investment Advisers, LLC (Okemos, MI)<br>Acquired Tegrit 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<br>States, Inc. (Albert Lea and Eden Prairie, MN)<br>LAUNCHED FINANCIAL WELLNESS TECHNOLOGY<br>COMPLETED INITIAL PUBLIC OFFERING (IPO)<br>2017 LAUNCHED ONE ALERUS STRATEGIC GROWTH PLAN<br>2020
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6<br>▪ Diversified client base consists of 45,200 consumers, 10,200 businesses and over 375,800 employer-sponsored<br>retirement and benefit plan participants<br>▪ Harness product synergies unavailable to traditional banking organizations<br>▪ Capitalize on strategic opportunities to grow in our existing markets or new markets<br>▪ Acquisition targets include banks and nationwide fee income companies with complementary business models,<br>cultural similarities, synergy and growth opportunities<br>▪ Recruit top talent to accelerate growth in our existing markets or jumpstart our entrance into new markets<br>▪ Market disruption caused by M&A activity provides lift-out opportunities<br>▪ Proactively position ourselves as an acquirer and employer of choice<br>▪ Invested in one of the leading marketing automation technologies<br>▪ Provide secure and reliable technology that meets evolving client expectations<br>▪ Integrate our full product and service offerings through our fast-follower strategy<br>▪ Collaborative leadership team focused on growing organically by deepening relationships with existing clients<br>through our expansive services<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 RIGHT PATH<br>DAN COUGHLIN<br>Since 2016<br>Former MD & Co-Head – 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 – Technology and Enterprise<br>Programs, UnitedHealth Group<br>Minneapolis, MN<br>ANN MCCONN<br>Executive Vice President and<br>Chief Shared Services Officer<br>19 years with Alerus<br>KARIN TAYLOR<br>Executive Vice President and<br>Chief Risk Officer<br>3 years with Alerus<br>RANDY NEWMAN<br>Chairman, President, and Chief Executive Officer<br>40 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-in-Charge,<br>Upper Midwest Region, RSM<br>Minneapolis, MN<br>KATIE LORENSON<br>Executive Vice President and<br>Chief Financial Officer<br>President and CEO Elect,<br>effective Jan. 1, 2022<br>4 years with Alerus<br>JILL SCHURTZ<br>Since 2021<br>CEO and CIO, St. Paul Teacher's<br>Retirement Fund Association<br>Former CEO and COO, Robeco-Sage Mgmt.<br>Minneapolis, MN<br>MARY 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 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
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8<br>THIRD QUARTER HIGHLIGHTS
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9<br>INCOME STATEMENT<br>Q3 2021 FINANCIAL HIGHLIGHTS<br>1 – Represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.”<br>2 – Net interest margin (tax-equivalent) excluding PPP loans for the three and nine months ended September 30, 2021, was 2.62% and 2.77%, respectively.<br>(dollars and shares in thousands, except per share data)<br>Net Interest Income $ 21,132 $ 21,140 $ 21,765 $ 64,310 $ 60,693<br>Provision for Loan Losses (2,000) — 3,500 (2,000) 9,500<br>Net Interest Income After Provision for Loan Losses 23,132 21,140 18,265 66,310 51,193<br>Noninterest Income 36,040 36,748 45,256 113,669 110,675<br>Noninterest Expense 42,041 42,550 40,214 127,633 116,674<br>Income Before Income Taxes 17,131 15,338 23,307 52,346 45,194<br>Income Tax Expense 4,064 3,644 5,648 12,370 10,698<br>Net Income $ 13,067 $ 11,694 $ 17,659 $ 39,976 $ 34,496<br>Per Common Share Data<br>Earnings Per Common Share – Diluted $ 0.74 $ 0.66 $ 0.99 $ 2.26 $ 1.94<br>Diluted Average Common Shares Outstanding 17,499 17,497 17,453 17,488 17,435<br>Performance Ratios<br>Return on Average Total Assets 1.62% 1.50% 2.42% 1.71% 1.71%<br>Return on Average Tangible Common Equity(1) 18.13% 17.36% 26.67% 19.44% 18.70%<br>Noninterest Income as a % of Revenue 63.04% 63.48% 67.53% 63.87% 64.58%<br>Net Interest Margin (Tax-Equivalent)(1)(2) 2.78% 2.88% 3.17% 2.92% 3.22%<br>Efficiency Ratio(1) 71.49% 71.46% 58.42% 69.69% 66.22%<br><br><br>2020<br><br><br><br>Three months ended<br>September<br>2021<br>June<br>2021<br>September<br>2021<br>September September<br>2020<br>Nine months ended
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10<br>ASSET QUALITY AND RESERVE LEVELS<br>OVERVIEW NPAS / ASSETS (%)<br>RESERVES / LOANS (%) RESERVES / NPLS (%)<br>▪ Solid asset quality<br>▪ Strong reserve levels<br>▪ Proactive approach to classification of assets and<br>management of loan problems<br>Excluding PPP loans, NPAs/Assets as of September 30, 2021, was 0.23%<br>Excluding PPP loans, Reserves/Loans as of September 30, 2021, was 1.89%<br>0.30% 0.33% 0.33%<br>0.17%<br>0.22%<br>0.00%<br>0.20%<br>0.40%<br>0.60%<br>0.80%<br>2017 2018 2019 2020 Q3 2021<br>282% 318% 306%<br>674%<br>515%<br>0.00%<br>100.00%<br>200.00%<br>300.00%<br>400.00%<br>500.00%<br>600.00%<br>700.00%<br>800.00%<br>2017 2018 2019 2020 Q3 2021<br>1.05%<br>1.30% 1.39%<br>1.73% 1.78%<br>0.00%<br>0.40%<br>0.80%<br>1.20%<br>1.60%<br>2.00%<br>2017 2018 2019 2020 Q3 2021
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11<br>12.2% 12.9%<br>16.7% 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 2018 2019 2020 Q3 2021<br>7.1% 7.5%<br>11.1%<br>9.2% 9.9%<br>8.3% 8.9%<br>12.9% 13.2%<br>14.9%<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 2018 2019 2020 Q3 2021<br>Tier 1 Leverage Tier 1 Capital<br>6.0%<br>6.9%<br>10.4%<br>9.3% 9.6%<br>0.0%<br>2.0%<br>4.0%<br>6.0%<br>8.0%<br>10.0%<br>12.0%<br>2017 2018 2019 2020 Q3 2021<br>STRONG CAPITAL AND SOURCES OF LIQUIDITY<br>TANGIBLE COMMON EQUITY/TANGIBLE ASSETS1 TIER 1 CAPITAL/TIER 1 LEVERAGE RATIOS<br>PRIMARY AND SECONDARY SOURCES OF LIQUIDITY TOTAL RISK BASED CAPITAL<br>Regulatory Capital Minimum to be considered well capitalized<br>Cash and cash equivalents $159,454<br>Unencumbered securities – AFS 589,914<br>Over collateralized securities pledging – AFS 40,089<br>FHLB borrowing availability 657,917<br>Brokered CD capacity 635,034<br>Fed funds lines 102,000<br>Total as of 9/30/2021 $2,184,408<br>Tier 1<br>Capital<br>Leverage<br>Excluding PPP, Tangible Common Equity/Tangible Assets on September 30, 2021, was 9.95%<br>1- Represents a non-GAAP financial measure. See “Non-GAAP Disclosure Reconciliation.” Regulatory Capital Minimum to be considered well capitalized
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12<br>0.14% 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 2019 2020 Q3 2021 YTD<br>STRONG CORE FUNDING MIX<br>▪ Commercial transaction accounts totaled $1.2 billion and<br>decreased 0.1% in Q3. Consumer transaction accounts totaled<br>$675.3 million and decreased 6.2%<br>▪ Synergistic deposits, including HSA deposits and those sourced<br>through retirement plans and participants, totaled $576.0<br>million, with a YTD cost of 0.03%<br>▪ CD portfolio is primarily 6-month flex CD with over 50% held<br>by clients for 10+ years<br>▪ Stable deposit relationships with 22-year average tenure on 10<br>largest depositors<br>As of September 30, 2021, core deposits totaled<br>$2.6 billion or 97.0% of our total deposits<br>OVERVIEW AS OF SEPTEMBER 30, 2021 SEPTEMBER 30, 2021 DEPOSIT FUNDING ($2,713MM)<br>LOW COST OF FUNDS<br>Data YTD as of 9/30/2021.<br>Non-Interest Bearing<br>Deposits<br>29.5%<br>Money<br>Market &<br>Savings<br>Deposits<br>37.4%<br>Interest Bearing<br>Demand Deposits<br>19.2%<br>Time<br>Deposits<br>8.3%<br>HSA Deposits<br>5.6%
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13<br>0.65%<br>0.97%<br>0.51%<br>0.20%<br>1.83%<br>2.16%<br>0.45%<br>0.08%<br>3.84%<br>3.65%<br>3.22%<br>2.92%<br>4.81% 4.97%<br>4.35%<br>4.10%<br>0.00%<br>1.00%<br>2.00%<br>3.00%<br>4.00%<br>5.00%<br>6.00%<br>2018 2019 2020 Q3 2021<br>NET INTEREST MARGIN (NIM)<br>1 – Rates have been annualized for interim periods.<br>Source: Alerus Financial Corporation; Federal Reserve<br>Note: Net interest margin (FTE) is a non-GAAP financial measure; See “Non-GAAP Disclosure Reconciliation” in the Appendix to this presentation<br>Loan Yield<br>Net Interest Margin (fully-taxable equivalent “FTE”)<br>Average Effective Fed Funds Rate<br>Cost of Funds<br>1<br>1<br>1<br>1
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14<br>NIM AND LOAN FLOORS<br>VARIABLE RATE FLOORS BY INDEX VARIABLE RATE FLOORS<br>COMMENTS<br>$ in Millions Balance % of Total<br>Balance<br>Cumulative % of<br>Total Balance<br>No Floors $ 266 40.2% 40.2%<br>Floors Reached 255 38.5% 78.7%<br>0-50 bps to reach floor 125 18.9% 97.6%<br>>50bps to reach floor 16 2.4% 100.0%<br>Total $ 662 100.0%<br>Quarter over quarter highlights:<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>▪ Other borrowings yield favorable 5pbs<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 Money No Floor Total Total %<br>Prime $ 203 $ 39 $ 20 $ 262 39.6%<br>1 Month LIBOR 11 – 165 176 26.6%<br>12 Month LIBOR 1 83 66 150 22.7%<br>FHLB 5 Year 16 17 13 46 6.9%<br>Other 24 2 2 28 4.2%<br>Total $ 255 $ 141 $ 266 $ 662 100.0%<br>Percent of Total 38.5% 21.3% 40.2% 100.0%<br>1 – NIM excluding PPP for the three months ended September 30, 2021, was 2.62%<br>NET INTEREST INCOME1<br>21,247<br>417<br>( 474 )( 14 )<br>21,275 41 2<br>20,000<br>21,000<br>22,000<br>23,000<br>24,000<br>Decrease Increase
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15<br>DIVERSIFIED
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16<br>A BIG COMPANY MODEL WITH SMALL COMPANY EXECUTION<br>OUR DIVERSE BUSINESS LINES<br>Revenue data LTM as of 9/30/2021.<br>TRUSTED<br>ADVISOR<br>BANKING<br>WEALTH<br>MANAGEMENT<br>• Residential mortgage lending<br>• Purchasing or refinancing<br>• Residential construction lending<br>• Home equity/second mortgages<br>• Advisory services<br>• Trust and fiduciary services<br>• Investment management<br>• Insurance planning<br>• Financial planning<br>• Education planning<br>• Retirement plan<br>administration<br>• Retirement plan<br>investment advisory<br>• ESOP fiduciary services<br>• Payroll administration<br>services<br>• HSA/FSA/HRA<br>administration<br>• COBRA<br>BUSINESS BANKING<br>• Commercial and commercial<br>real estate lending<br>• Agriculture lending<br>• Treasury management<br>• Deposit services<br>CONSUMER BANKING<br>• Deposit products<br>and services<br>• Consumer lending<br>• Private banking<br>MORTGAGE RETIREMENT<br>AND BENEFITS<br>29% of Revenue 24% of Revenue<br>8% of Revenue<br>39% of Revenue
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17<br>BY OUTSTANDING BALANCES<br>WELL DIVERSIFIED LOAN PORTFOLIO<br>As of 9/30/2021.<br>1-4 Residential 1st<br>25%<br>1-4 Residential Construction<br>1%<br>1-4 Residential Jr Lien 2% HELOC 5%<br>RE Loans to be Sold 3%<br>C&I 20%<br>PPP 6% Ag Production 2%<br>Other CRE 15%<br>Owner Occupied<br>CRE 11%<br>Ag Land 1%<br>Multifamily 4%<br>Retail Indirect 2% Other Consumer<br>1% RE Construction 2%
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18<br>North Dakota<br>Minnesota<br>Arizona<br>National<br>STRONG GROWTH MARKETS AND STABLE CORE FUNDING<br>MARKET DISTRIBUTION<br>DEPOSITS ($2,713) LOANS ($1,800)(1)<br>ARB ASSETS UNDER<br>ADMIN/MGMT. ($36,203)<br>WM ASSETS UNDER<br>ADMIN/MGMT. ($3,865) MORTGAGE ORIGINATIONS ($1,479)<br>($ IN MILLIONS)<br>Data as of 09/30/2021.<br>1-Loans in our national market are participant loans not sourced directly through advisors located in one of our geographical markets.<br>LEGEND<br>39.2%<br>49.9%<br>8.7%<br>2.2%<br>42.8%<br>31.6%<br>4.3% 21.3%<br>6.6%<br>90.2%<br>3.2%<br>8.9%<br>13.6%<br>77.5% 74.0%<br>9.8%<br>1.8%<br>14.4%
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19<br>$27,812 $31,905 $34,200 $36,203<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 2019 2020 Q3 2021<br>AUA/AUM Participants<br>$26,902 $28,404 $25,720 $22,736<br>$63,316 $63,811 $60,956<br>$53,157<br>$0<br>$20,000<br>$40,000<br>$60,000<br>$80,000<br>2018 2019 2020 Q3 2021 YTD<br>Net Income Revenue<br>RETIREMENT AND BENEFITS<br>OVERVIEW-7,500 PLANS- NATIONAL FOOTPRINT ASSETS UNDER ADMINISTRATION/MANAGEMENT<br>PROFIT MARGIN REVENUE MIX<br>MARKET<br>SENSITIVE<br>REVENUE:<br>39%<br>1<br>1 Net Income before Tax and Indirect Allocations.<br>▪ RETIREMENT - Provide recordkeeping and administration<br>services to qualified retirement plans<br>▪ ADVISORY SERVICES - Provide investment fiduciary services to<br>retirement plans<br>▪ HEALTH AND WELFARE - Provide HSA, FSA, COBRA<br>recordkeeping and administration services to employers<br>▪ ESOP - Provide trustee, recordkeeping and administration to<br>employee stock ownership plans<br>▪ PAYROLL - Provide payroll and HRIS services for employers<br>▪ ONE ALERUS SYNERGIES<br>• IRA rollovers $106.8 million YTD 9/30/2021<br>• Deposits - HSA deposits, 401(k) Money Market Funds,<br>Emergency Savings, Terminated Participants<br>• Managed accounts<br>($ in Millions)<br>($000s)<br>Profit Margin: 42.5% 44.5% 42.2% 42.8%<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%
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20<br>$2,627<br>$3,103 $3,339<br>$3,865<br>$0<br>$1,000<br>$2,000<br>$3,000<br>$4,000<br>2018 2019 2020 Q3 2021<br>▪ ADVISORY AND PLANNING SERVICES<br>• Retirement Planning, Tax Planning, Insurance Planning,<br>Wealth Transfer Planning and Business Transition Planning<br>▪ ASSET MANAGEMENT<br>• Personalized SMA strategies, Tax Management and Global<br>Perspective<br>▪ FIDUCIARY SERVICES<br>• IRA, Agency and Personal Trust<br>▪ ONE ALERUS SYNERGIES<br>• IRA rollovers<br>• 401(k) managed accounts<br>WEALTH MANAGEMENT SERVICES<br>OVERVIEW OF SERVICES ASSETS UNDER ADMINISTRATION/MANAGEMENT<br>PROFIT MARGIN REVENUE MIX<br>1 Net Income before Tax and Indirect Allocations.<br>1<br>($ in Millions)<br>($000s)<br>Asset<br>Management<br>85%<br>Brokerage<br>10%<br>Insurance &<br>Advisory<br>5%<br>Profit Margin: 54.4% 53.6% 52.5% 56.7%<br>$8,138 $8,314 $9,162 $8,737<br>$14,962 $15,502<br>$17,451<br>$15,419<br>$0<br>$6,000<br>$12,000<br>$18,000<br>2018 2019 2020 Q3 2021 YTD<br>Net Income Revenue
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21<br>MORTGAGE BANKING<br>OVERVIEW OF SERVICES MORTGAGE ORIGINATIONS<br>GAIN ON SALE MARGIN<br>($000s)<br>REVENUE SUMMARY<br>▪ 1st and 2nd mortgage product offerings through centralized<br>mortgage operations in Minnesota<br>▪ Our Twin Cities originators averaged $42+ million in annual<br>volume over the last three years<br>▪ YTD 4,616 loans closed, approximately 50% purchase<br>originations, with approximately 90% sourced from the Twin<br>Cities MSA<br>▪ Q3 94.7% pull through on secondary market<br>▪ ONE ALERUS SYNERGIES<br>• Through enhanced technology, digital applications total<br>approximately 90%. Paperless environment eliminated<br>nearly 200,000+ pages printed on a monthly basis<br>• As of September 30, 2021, residential real estate first<br>mortgages excluding construction mortgages totaled $478<br>million<br>1 Net Income before Tax and Indirect Allocations.<br>($000s)<br>Q3<br>2020<br>Q4<br>2020<br>Q1<br>2021<br>Q2<br>2021<br>Q3<br>2021<br>Origination<br>and Sale $ 16,289 $ 19,071 $ 16,421 $ 17,803 $ 12,925<br>Fair Value<br>Changes 5,980 (2,290) 711 (5,515) (1,810)<br>Total $ 22,269 $ 16,781 $ 17,132 $ 12,288 $ 11,115<br>Net<br>income (1) $ 13,113 $ 4,367 $ 6,725 $ 2,116 $ 3,151<br>Profit<br>Margin 57.3% 25.0% 38.3% 16.6% 27.1%<br>3.6% 3.5%<br>3.2%<br>3.7% 3.6%<br>2.0%<br>3.0%<br>4.0%<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Purchase % 52.8% 42.1% 32.3% 52.5% 67.5%<br>Refinance % 47.2% 57.9% 67.7% 47.5% 32.5%<br>$462.0<br>$564.0 $474.1 $465.4<br>$357.1<br>$49.6<br>$43.2<br>$43.9 $80.0<br>$58.7<br>$511.6<br>$607.2<br>$518.0 $545.4<br>$415.8<br>$0.0<br>$250.0<br>$500.0<br>$750.0<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Sale Portfolio
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22<br>LOAN PORTFOLIO AND CREDIT QUALITY
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23<br>SUMMARY BY INDUSTRY TYPE<br>TOTAL COMMITMENT COMMERCIAL & INDUSTRIAL1<br>1 – Commercial and industrial loans includes C & I, Loans to Public Entities, and Other Loans. It Excludes PPP and Ag Production loans<br>“Other” includes to the following industries (1) Nonclassifiable establishments, (2) Management of Companies and Enterprises, (3) 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, (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-industries within Retail Trade: (1) Miscellaneous Store Retailers, (2) Furniture 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 6%<br>Wholesale Trade<br>10%<br>Construction<br>14%<br>Finance and<br>Insurance<br>15%<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<br>and Garden<br>Equipment and<br>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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24<br>LOANS SECURED BY REAL ESTATE<br>TOTAL COMMITMENT<br>COMMERCIAL REAL ESTATE1<br>1 – Loans secured by commercial real estate include Multifamily loans, Ag land, Other CRE, Owner Occupied CRE, and Ag production<br>Portfolio Avg FICO Avg LTV<br>Serviced 759 65%<br>Non-Serviced 780 28%<br>Junior 755 78%<br>HELOC 795 64%<br>TOTAL COMMITMENT<br>RESIDENTIAL REAL ESTATE<br>Office<br>16%<br>Retail<br>17%<br>Warehouse<br>20%<br>Manufacturing<br>1%<br>Residential<br>Development<br>1%<br>Mixed<br>Residential/Commercial<br>1%<br>Mixed<br>Commercial<br>6%<br>Apartments<br>15%<br>Hotel<br>1%<br>Medical Or<br>Nursing Facilities<br>10%<br>Commercial/Land<br>Development<br>10%<br>Ag Land<br>2%<br>Serviced 51%<br>1-4 1st Non-Serviced<br>3%<br>1-4 Family Jr Liens<br>4%<br>1-4 Family Revolving<br>30%<br>1-4 Family Construction 5%<br>Held for Sale<br>7%
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25<br>LINE OF CREDIT UTILIZATION<br>C&I AND HOME EQUITY LINES OF CREDIT1<br>1 – Commercial and industrial loans includes revolving C & I Loans and Other Loans. It Excludes non-revolving C&I loans, Ag Production, 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>Q4<br>2018<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>C&I<br>Funded Unfunded 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>Q4<br>2018<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>Home Equity Lines of Credit<br>Funded Unfunded Funded%
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26<br>CHANGES IN THE ALLL BY PORTFOLIO SEGMENT<br>ALLOWANCE FOR LOAN LOSSES<br>Nine months ended September 30, 2021<br>(dollars in thousands)<br>Beginning<br>Balance<br>Provision for<br>Loan Losses<br>Loan<br>Charge-offs<br>Loan<br>Recoveries<br>Ending<br>Balance<br>Commercial<br>Commercial and industrial $ 10,205 $ (1,378) $ (1,224) $ 1,497 $ 9,100<br>Real estate construction 658 21 —— 679<br>Commercial real estate 14,105 (1,049) (536) 4 12,524<br>Total commercial 24,968 (2,406) (1,760) 1,501 22,303<br>Consumer<br>Residential real estate first mortgage 5,774 1,027 —— 6,801<br>Residential real estate junior lien 1,373 (63) — 113 1,423<br>Other revolving and installment 753 (196) (139) 105 523<br>Total consumer 7,900 768 (139) 218 8,747<br>Unallocated 1,378 (362) —— 1,016<br>Total $ 34,246 $ (2,000) $ (1,899) $ 1,719 $ 32,066
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27<br>ALLOCATION BY PORTFOLIO SEGMENT<br>ALLOWANCE FOR LOAN LOSSES<br>September 30, 2021 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 and industrial $ 9,100 28.1% $ 10,205 35.0%<br>Real estate construction 679 2.1% 658 2.2%<br>Commercial real estate 12,524 32.0% 14,105 28.4%<br>Residential real estate first mortgage 6,801 27.8% 5,774 23.4%<br>Residential real estate junior lien 1,423 7.2% 1,373 7.2%<br>Other revolving and installment 523 2.8% 753 3.7%<br>Unallocated 1,016 —% 1,378 —%<br>Total loans $ 32,066 100.0% $ 34,246 100.0%
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28<br>Risk Level Total Loans<br>Unguaranteed<br>Balance1<br>Reserve<br>Amount<br>Reserve /<br>Unguaranteed<br>Loans<br>Reserve/Total<br>Loans<br>Pass $ 1,768,566 $ 1,654,210 $ 28,045 1.70% 1.59%<br>Special Mention 4,238 4,097 182 4.44% 4.29%<br>Substandard 20,631 19,854 2,264 11.40% 10.97%<br>Total Loans Evaluated Collectively 1,793,435 1,678,161 30,491 1.82% 1.70%<br>Total Loans Evaluated Individually 6,951 6,700 559 8.34% 8.04%<br>Unallocated –– 1,016 ––<br>Total $ 1,800,386 $ 1,684,861 $ 32,066 1.90% 1.78%<br>ALLOCATION BY RISK SEGMENT ($ IN 000’S)<br>ALLOWANCE FOR LOAN LOSSES<br>As of 09/30/2021.<br>1 - Unguaranteed balances exclude PPP loans as well as loans that are guaranteed by another government agency.
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29<br>COVID-19 RESPONSE
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30<br>▪ Activated Business Continuity Planning team and Pandemic Policy; frequent meetings with key leadership teams<br>▪ Response guided by safety of employees and clients; being a good corporate citizen; and encouraging digital use<br>▪ Benefit of past crisis experience; 1997 historic Flood and Fire in Grand Forks, ND<br>▪ Early adoption and continuation of self-quarantine recommendations and restricting non-essential business travel<br>▪ 82% of staff transitioned to working remote in 1 week; 85% remain working remote<br>▪ Established On-Site Pay for staff in offices; introduced Relief Pay for office closures or daycare/school closures<br>▪ Frequent all employee virtual calls hosted by C*Suite; shifted from biweekly in 2020 to monthly in 2021<br>▪ Built integrated access between client documents and CRM, allowing team to quickly access client information<br>▪ Robotic Process Automation: continue to add robots to automate operational processes<br>▪ Leveraged DocuSign to develop pre-filled, dynamic Paycheck Protection Program Forgiveness Application<br>▪ Simplified client experience, moving various loan, wealth management, and investment documents to DocuSign<br>▪ Built upon holistic financial picture for consumer clients by integrating wealth management and brokerage<br>accounts held with Alerus into My Alerus, simplifying the online account experience down to one login<br>▪ Moved all retirement statements and confirmations to electronic format as the default, further driving online<br>engagement<br>▪ Paycheck Protection Program: helped over 2,289 new and existing clients secure ~ $447 million in funding relief<br>▪ Ongoing virtual webinars to provide guidance and help clients with their financial issues on various topics<br>▪ Waived fees on loan extensions, loan payment deferrals, or early CD withdrawals due to COVID-19 related hardship<br>▪ Proactively helping participants navigate retirement distributions or other lending options<br>▪ ND: lobbies closed in mid-March 2020, open by appointment only in early June 2020, lobbies reopened in mid-June<br>2020, markets were never subject to stay at home order and markets are widely open for business<br>▪ MN: lobbies closed in mid-March 2020, open by appointment only in August, continued progress of state’s four-<br>phases approach to businesses reopening with lobbies opened in April - July 2021<br>▪ AZ: lobbies closed in mid-March, drive-up remained open, open by appointment only in September 2020, lobbies<br>opened May 2021<br>▪ Adopted a flexible approach to work environment, allowing many of our employees to work from home long term<br>COVID-19 RESPONSE SUMMARY<br>PROACTIVELY RESPONDING WITH AGILITY AND SUPPORT<br>LEADING DURING THE<br>PANDEMIC CRISIS<br>TAKING CARE OF<br>EMPLOYEES<br>LEVERAGING<br>INFRASTRUCTURE<br>INVESTMENTS<br>INCREASED DIGITAL<br>ENGAGEMENT<br>SERVING IN<br>THE BEST INTEREST<br>OF CLIENTS<br>THE NEW NORMAL
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31<br>▪ Since 2020, we exited three client offices and six admin offices (primarily housed by<br>administrative and operational staff)<br>▪ Experienced minimal client and employee dissatisfaction<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-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-COVID POST-COVID
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32<br>Impacted industries,<br>8%<br>All Other Loans, 92%<br>COMMERCIAL AND INDUSTRIAL AND COMMERCIAL REAL ESTATE<br>INDUSTRIES DIRECTLY IMPACTED BY COVID-19<br>As of 9/30/2021.<br>C&I<br>Total<br>Commitment<br>($ in 000's) % of Total<br>Accommodation and Food Services $ 8,688 0.63%<br>Arts, Entertainment, and Recreation 2,891 0.21%<br>Oil and Gas 488 0.04%<br>Other Retail Trade 3,446 0.25%<br>Total $ 15,513 1.13%<br>CRE<br>Total<br>Commitment<br>($ in 000's) % of Total<br>Retail $ 103,029 7.42%<br>Medical or Nursing Facilities 52,453 3.78%<br>Hotel 5,180 0.37%<br>Total $ 160,662 11.57%
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33<br>PAYMENT DEFERRALS, MATURITY EXTENSIONS, AND PAYMENT MODIFICATIONS<br>COVID-19 RELIEF PROGRAMS<br>September 30, 2021<br>Loan Group<br>Number<br>Of<br>Loans<br>Granted<br>Deferral<br>($ in 000’s)<br>Still on Initial<br>Deferral<br>($ in 000’s)<br>Additional<br>Deferral<br>($ in 000's)<br>Returned<br>to Normal<br>($ in 000’s)<br>Consumer 181 $ 2,496 $ 15 $ 5 $ 2,476<br>Residential Real Estate<br>Serviced 63 27,419 54 3,395 23,970<br>Residential Real Estate<br>Non-serviced 77 10,550 —— 10,550<br>Commercial Real Estate 79 80,763 —— 80,763<br>Commercial & Industrial 187 33,335 —— 33,335<br>Total 587 $ 154,563 $ 69 $ 3,400 $ 151,094<br>Consumer<br>1%<br>Residential Real<br>Estate Serviced<br>99%
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34<br>Retail Trade<br>14%<br>Professional, Scientific,<br>and Technical Services<br>13%<br>Construction<br>12%<br>Manufacturing<br>9% Wholesale<br>Trade<br>8%<br>Health Care and Social<br>Assistance<br>11%<br>Other Services (except Public<br>Administration)<br>5%<br>Administrative and Support<br>and Waste Management<br>and Remediation Services<br>3%<br>Transportation and Warehousing<br>2%<br>Accommodation<br>and Food Services<br>4%<br>Other<br>19%<br>SBA PAYCHECK PROTECTION PROGRAM (PPP)<br>COVID-19 RELIEF PROGRAMS<br>As of 9/30/2021.<br>As of September 30, 2021, 1,937 loans totaling $376.7 million have been approved for forgiveness by the SBA.<br>Loan Amount Group # of Loans<br>$ Originated<br>(in 000’s)<br>$150M or less 1,825 $ 75,613<br>$150M to $2MM 601 304,878<br>$2MM+ 28 93,757<br>Total 2,454 $ 474,248<br>INDUSTRY BREAKDOWN OF PPP LOANS MADE TO BORROWERS<br>THROUGH 09/30/2021 SECURED SBA FINANCING OF 2,454 LOANS FOR APPROXIMATELY $474MM
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35<br>APPENDIX
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36<br>($000s, except where otherwise noted ) Annual 17-'20 Year-to-date<br>2017 2018 2019 2020 CAGR Q3 2020 Q3 2021<br>Total Assets 2,136,081 $ 2,179,070 $ 2,356,878 $ 3,013,771 $ 12.2% 2,898,809 $ 3,175,169 $<br>Total Loans 1,574,474 1,701,850 1,721,279 1,979,375 7.9% 2,058,419 1,800,386<br>Total Deposits 1,834,962 1,775,096 1,971,316 2,571,993 11.9% 2,462,370 2,713,088<br>Tangible Common Equity1 125,154 147,152 240,008 274,043 29.9% 279,253 300,401<br>Net Income 15,001 $ 25,866 $ 29,540 $ 44,675 $ 43.9% 34,496 $ 39,976 $<br>ROAA (%) 0.75 1.21 1.34 1.61 1.71 1.71<br>ROATCE (%)1 18.04 21.02 17.46 17.74 18.70 19.44<br>Net Interest Margin (FTE) (%)1 3.74 3.84 3.65 3.22 3.22 2.92<br>Efficiency Ratio (FTE) (%)1 75.36 73.80 73.22 68.40 66.22 69.69<br>Non-Int. Income / Op. Rev. (%) 60.36 57.73 60.50 64.05 64.58 63.87<br>Earnings per common share - diluted 1.07 1.84 1.91 2.52 1.94 2.26<br>Total Equity / Total Assets (%) 8.41 9.04 12.12 10.96 11.11 11.12<br>Tang. Cmn. Equity / Tang. Assets (%)1 2 6.01 6.91 10.38 9.27 9.78 9.62<br>Loans / Deposits (%) 85.80 95.87 87.32 76.96 83.60 66.36<br>NPLs / Loans (%)2 0.37 0.41 0.45 0.26 0.23 0.35<br>NPAs / Assets (%)2 0.30 0.33 0.33 0.17 0.17 0.22<br>Allowance / NPLs (%) 282.04 318.45 305.66 674.13 653.53 514.79<br>Allowance / Loans (%)2 1.05 1.30 1.39 1.73 1.52 1.78<br>NCOs / Average Loans (%)2 0.16 0.18 0.33 0.03 0.15 0.01<br>FINANCIAL HIGHLIGHTS<br>1 Represents a non-GAAP financial measure. See “Non-GAAP Disclosure Reconciliation” in the Appendix to this presentation.<br>2 Excluding PPP loans, the following ratios were TCE/TA 9.95% NPLs/Loans 0.37%, NPAs/Assets 0.23%, Allowance/Loans 1.89%, and NCOs/Average Loans 0.01%
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37<br>NON-GAAP DISCLOSURE RECONCILIATION<br>($000s, except where otherwise noted ) Annual Year-to-date<br>2017 2018 2019 2020 Q3 2020 Q3 2021<br>Tangible common equity to tangible assets<br>Total common stockholders' equity $ 179,594 $ 196,954 $ 285,728 $ 330,163 $ 322,003 $ 353,195<br>Less: Goodwill 27,329 27,329 27,329 30,201 27,329 30,201<br>Less: Other intangible assets 27,111 22,473 18,391 25,919 15,421 22,593<br>Tangible common equity (a) 125,154 147,152 240,008 274,043 279,253 300,401<br>Total assets 2,136,081 2,179,070 2,356,878 3,013,771 2,898,809 3,175,169<br>Less: Goodwill 27,329 27,329 27,329 30,201 27,329 30,201<br>Less: Other intangible assets 27,111 22,473 18,391 25,919 15,421 22,593<br>Tangible assets (b) 2,081,641 2,129,268 2,311,158 2,957,651 2,856,059 3,122,375<br>Tangible common equity to tangible assets (a)/(b) 6.01 % 6.91 % 10.38 % 9.27 % 9.78 % 9.62 %<br>Tangible common equity per common share<br>Total stockholders' equity $ 179,594 $ 196,954 $ 285,728 $ 330,163 $ 322,003 $ 353,195<br>Less: Goodwill 27,329 27,329 27,329 30,201 27,329 30,201<br>Less: Other intangible assets 27,111 22,473 18,391 25,919 15,421 22,593<br>Tangible common equity (c) 125,154 147,152 240,008 274,043 279,253 300,401<br>Common shares outstanding (d) 13,699 13,775 17,050 17,125 17,122 17,208<br>Tangible common equity per common share (c)/(d) $ 9.14 $ 10.68 $ 14.08 $ 16.00 $ 16.31 $ 17.46<br>Return on average tangible common equity<br>Net income $ 15,001 $ 25,866 $ 29,540 $ 44,675 $ 34,496 $ 39,976<br>Add: Intangible amortization expense (net of tax) 3,655 3,664 3,224 3,129 2,347 2,628<br>Remeasurement due to tax reform 4,818 —————<br>Net income, excluding intangible amortization (e) 23,474 29,530 32,764 47,804 36,843 42,604<br>Average total equity 176,779 187,341 231,084 310,208 303,825 342,344<br>Less: Average goodwill 27,329 27,329 27,329 27,439 27,329 30,201<br>Less: Average other intangible assets (net of tax) 19,358 19,522 16,101 13,309 13,343 19,124<br>Average tangible common equity (f) 130,092 140,490 187,654 269,460 263,153 293,019<br>Return on average tangible common equity (e)/(f) 18.04 % 21.02 % 17.46 % 17.74 % 18.70 % 19.44 %<br>Net interest margin (tax-equivalent)<br>Net interest income $ 67,670 $ 75,224 $ 74,551 $ 83,846 $ 60,693 $ 64,310<br>Tax equivalent adjustment 865 462 347 455 325 392<br>Tax equivalent net interest income (g) 68,535 75,686 74,898 84,301 61,018 64,702<br>Average earning assets (h) 1,833,002 1,970,004 2,052,758 2,618,427 2,534,038 2,958,742<br>Net interest margin (tax equivalent) (g)/(h) 3.74 % 3.84 % 3.65 % 3.22 % 3.22 % 2.92 %<br>Efficiency Ratio<br>Noninterest expense $ 134,920 $ 136,325 $ 142,537 $ 163,799 $ 116,674 $ 127,633<br>Less: Intangible amortization expense 5,623 4,638 4,081 3,961 2,971 3,327<br>Adjusted noninterest expense (i) 129,297 131,687 138,456 159,838 113,703 124,306<br>Net interest income 67,670 75,224 74,551 83,846 60,693 64,310<br>Noninterest income 103,045 102,749 114,194 149,371 110,675 113,669<br>Tax equivalent adjustment 865 462 347 455 325 392<br>Total tax equivalent revenue (j) 171,580 178,435 189,092 233,672 171,693 178,371<br>Efficiency ratio (i)/(j) 75.36 % 73.80 % 73.22 % 68.40 % 66.22 % 69.69 %
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