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 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 October 26, 2022, Alerus Financial Corporation (the “Company”) issued a press release announcing its financial results for the three and nine months ended September 30, 2022. 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 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 October 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: October 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 (10.26.2022)<br><br>	Alan A. Villalon, Chief Financial Officer<br><br>952.417.3733 (Office)

ALERUS FINANCIAL CORPORATION REPORTS

THIRD QUARTER 2022 NET INCOME OF $9.6 MILLION

MINNEAPOLIS, MN (October 26, 2022) – Alerus Financial Corporation (Nasdaq: ALRS) reported net income of $9.6 million for the third quarter of 2022, or $0.47 per diluted common share, compared to net income of $9.3 million, or $0.52 per diluted common share, for the second quarter of 2022, and net income of $13.1 million, or $0.74 per diluted common share, for the third quarter of 2021. Excluding the acquisition of Metro Phoenix Bank, earnings per diluted common share were $0.54 for the third quarter of 2022.

CEO Comments

President and Chief Executive Officer Katie Lorenson said, “We ended the quarter with net income of $9.6 million; this included $1.8 million of merger expenses as we closed and converted the Metro Phoenix Bank acquisition during the quarter. The seamless integration of Metro Phoenix Bank marks a historic milestone as the Company’s twenty-fifth acquisition.

Our financial results were highlighted by strong loan growth during the quarter, driven by the addition of new team members and expansion of existing client relationships. During the last several years we have invested further in our credit talent and infrastructure. We have improved our credit policies and deepened our credit risk management practices in preparation for improved organic loan growth. The Company’s historic net charge-off ratio is 27 basis points, dating back over 25 years. Prudent credit underwriting and client selection continue to remain a key focus as we lend through the uncertainty of the current economic cycle.

We continue to position the Company strategically as the economic environment continues to evolve. We believe our diversified business model, with recurring revenue streams, strong capital levels, liquidity profile, and underwriting culture will continue to differentiate us from the rest of the industry. I know our team will respond to any challenge and I am proud of their constant dedication to serving our clients and communities, and for delivering positive results for our shareholders.”

Quarterly Highlights

◾	Return on average total assets of 1.02%, compared to 1.14% for the second quarter of 2022. Excluding merger and acquisition expenses, return on average total assets was 1.17% for the third quarter of 2022
◾	Return on average common equity of 10.25%, compared to 11.93% for the second quarter of 2022. Excluding merger and acquisition expenses, return on average common equity was 12.18% for the third quarter of 2022
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◾	Return on average tangible common equity^(1)^ of 13.89%, compared to 15.25% for the second quarter of 2022. Excluding merger and acquisition expenses, return on average tangible common equity was 15.75% for the third quarter of 2022
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◾	Net interest margin (tax-equivalent) was 3.21%, compared to 2.98% for the second quarter of 2022. Excluding the acquisition of Metro Phoenix Bank, net interest margin (tax-equivalent) was 3.04% for the third quarter of 2022
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◾	Allowance for loan losses to total loans was 1.34% compared to 1.80% as of December 2021. Excluding Metro Phoenix Bank, the allowance for loan losses to total loas was 1.51% as of September 2022
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◾	Noninterest income for the third quarter of 2022 was 48.82% of total revenue, compared to 56.20% for the second quarter of 2022
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◾	Loans held for investment increased $560.2 million, or 31.9%, since December 31, 2021; Metro Phoenix Bank loans acquired totaled $270.4 million. Excluding the acquisition of Metro Phoenix Bank and Paycheck Protection Program, or PPP, loans, loans held for investment increased $320.5 million, or 18.2%, since December 31, 2021
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◾	Loan to deposit ratio was 78.3%, compared to 60.2% as of December 31, 2021.
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◾	Common equity tier 1 capital to risk weighted assets was 13.63%, compared to 14.65% as of December 31, 2021
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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)	2022			2022			2021			2022			2021		****
Performance Ratios
Return on average total assets		1.02	%		1.14	%		1.62	%		1.13	%		1.71	%
Return on average common equity		10.25	%		11.93	%		14.68	%		11.27	%		15.61	%
Return on average tangible common equity ^(1)^		13.89	%		15.25	%		18.13	%		14.59	%		19.44	%
Noninterest income as a % of revenue		48.82	%		56.20	%		63.04	%		54.08	%		63.87	%
Net interest margin (tax-equivalent)		3.21	%		2.98	%		2.78	%		3.02	%		2.92	%
Efficiency ratio ^(1)^		74.76	%		74.72	%		71.49	%		73.94	%		69.69	%
Net charge-offs/(recoveries) to average loans		0.07	%		0.07	%		(0.06)	%		0.04	%		0.01	%
Dividend payout ratio		38.30	%		34.62	%		21.62	%		33.33	%		20.80	%
Per Common Share
Earnings per common share - basic	$	0.48		$	0.53		$	0.75		$	1.58		$	2.29
Earnings per common share - diluted	$	0.47		$	0.52		$	0.74		$	1.56		$	2.26
Dividends declared per common share	$	0.18		$	0.18		$	0.16		$	0.52		$	0.47
Book value per common share	$	17.25		$	17.75		$	20.53
Tangible book value per common share ^(1)^	$	13.76		$	14.93		$	17.46
Average common shares outstanding - basic		19,987			17,297			17,205			18,186			17,182
Average common shares outstanding - diluted		20,230			17,532			17,499			18,431			17,488
Other Data
Retirement and benefit services assets under administration/management	$	30,545,694		$	31,749,157		$	36,202,553
Wealth management assets under administration/management	$	3,435,786		$	4,147,763		$	3,865,062
Mortgage originations	$	229,901		$	269,397		$	415,792		$	686,060		$	1,479,243

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

Results of Operations

Net Interest Income

Net interest income for the third quarter of 2022 was $28.3 million, a $5.5 million, or 24.3%, increase from the second quarter of 2022. Net interest income increased $7.2 million, or 34.0%, from $21.1 million for the third quarter of 2021. The linked quarter increase was primarily driven by increases of $7.4 million in interest income from loans and a $591 thousand increase in other interest income, partially offset by increases of $1.2 million in interest expense related to short-term borrowings and $1.0 million in interest expense from deposits, the result of a rising interest rate environment and an increase in our short-term borrowings. The increases in loans and deposits were primarily the result of the Metro Phoenix Bank acquisition which included $270.4 million in loans and $353.7 million in deposits. Short-term borrowings increased primarily due to loan growth outpacing deposit growth.

Net interest margin (tax-equivalent), a non-GAAP financial measure, was 3.21% for the third quarter of 2022, a 23 basis point increase from 2.98% for the second quarter of 2022, and a 43 basis point increase from 2.78% in the third quarter of 2021. Excluding the acquisition of Metro Phoenix Bank, net interest margin was 3.04% for the third quarter of 2022, a 6 basis point increase from the second quarter of 2022, and a 26 basis point increase from the third quarter of 2021. The quarter over quarter increase was primarily driven by a 45 basis point increase in interest earning asset yields, partially offset by a 35 basis point increase in the rate paid on interest-bearing liabilities, the result of a rising interest rate environment. Additionally, we saw the average balance on interest-earning assets and interest-bearing liabilities increase, primarily due to the loans and deposits acquired from Metro Phoenix Bank.

Noninterest Income

Noninterest income for the third quarter of 2022 was $27.0 million, a $2.2 million, or 7.6%, decrease from the second quarter of 2022. The linked quarter decrease was primarily driven by decreases of $2.3 million in mortgage banking revenue and $696 thousand in wealth management revenue. Partially offsetting these decreases was a $304 thousand increase in retirement and benefit services revenue. The decrease in mortgage banking revenue was primarily driven by a $39.5 million, or 14.7%, decrease in mortgage originations as well as an 82 basis point decrease in the gain on sale margin. Wealth management revenue decreased primarily due to a $712.0 million decrease in assets under management, the result of an overall market value decrease.

Noninterest income for the third quarter of 2022 decreased $9.0 million, or 25.1%, from $36.0 million in the third quarter of 2021. The year over year decrease was primarily driven by decreases of $7.3 million in mortgage banking revenue, $1.4 million in retirement and benefit services revenue and $443 thousand in wealth management revenue. Mortgage banking revenue decreased primarily due to a $185.9 million, or 44.7%, decrease in mortgage originations and a 94 basis point decrease in the gain on sale margin. Retirement and benefit services revenue decreased primarily due to a decrease in asset-based fees from a $5.7 billion decrease in assets under administration/management. Wealth management revenue decreased primarily as a result of a $429.3 million decrease in assets under management, the result of declines in market values.

Noninterest Expense

Noninterest expense for the third quarter of 2022 was $42.8 million, a $2.8 million, or 7.0%, increase compared to the second quarter of 2022. The linked quarter increase was primarily driven by increases of $1.7 million in other noninterest expense and $880 thousand in professional fees and assessments expense. Partially offsetting these increases was a $708 thousand decrease in employee taxes and benefits expense. The increase in other noninterest expense was primarily driven by a $1.3 million increase in the provision for unused commitments. This provision expense was the result of new business generated within our real estate construction loans. Professional fees and assessments expense included $1.8 million in merger related expenses associated with the acquisition of Metro Phoenix Bank, an increase of $998 thousand from the prior quarter. Employee taxes and benefits decreased primarily due to a $328 thousand decrease in health insurance claims from the prior quarter.

Noninterest expense for the third quarter of 2022 increased $726 thousand, or 1.7%, from $42.0 million in the third quarter of 2021. The year over year increase in noninterest expense was primarily driven by increases of $1.7 million in other noninterest expense and $1.6 million in professional fees and assessments, partially offset by a $2.1 million decrease in compensation expense. Noninterest expense increased primarily as a result of an $841 thousand increase in the provision for unused commitments, the result of new business generated within our real estate construction loans. Professional fees and assessments increased primarily due to $1.8 million in merger related expenses associated with the acquisition of Metro Phoenix Bank. The year over year decrease in mortgage originations drove the overall decrease in compensation expense as compared to the third quarter of 2021.

Financial Condition

Total assets were $3.7 billion as of September 30, 2022, an increase of $298.6 million, or 8.8%, from December 31, 2021. The overall increase in total assets included an increase of $560.2 million in loans held for investment, partially offset by decreases of $188.1 million in cash and cash equivalents and $150.2 million in investment securities.

Loans

Total loans were $2.3 billion as of September 30, 2022, an increase of $560.2 million, or 31.9%, from December 31, 2021. This increase was primarily due to increases of $270.4 million in loans acquired from Metro Phoenix Bank and $289.8 million in organic loan growth. Excluding loans acquired from Metro Phoenix Bank, the increases in organic loan growth included increases of $119.5 million in residential real estate first mortgages, $91.9 million in commercial real estate loans, and $31.3 million in commercial and industrial loans, also excluding PPP loans, commercial and industrial loans increased $62.0 million.

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)	****	2022		2022		2022		2021		2021
Commercial
Commercial and industrial ^(1)^		$	564,655	$	484,426	$	467,449	$	436,761	$	506,599
Real estate construction			89,215		48,870		41,604		40,619		37,751
Commercial real estate			819,068		599,737		602,158		598,893		573,518
Total commercial			1,472,938		1,133,033		1,111,211		1,076,273		1,117,868
Consumer
Residential real estate first mortgage			649,818		568,571		522,489		510,716		501,339
Residential real estate junior lien			143,681		135,255		130,604		125,668		130,243
Other revolving and installment			51,794		53,384		53,738		45,363		50,936
Total consumer			845,293		757,210		706,831		681,747		682,518
Total loans		$	2,318,231	$	1,890,243	$	1,818,042	$	1,758,020	$	1,800,386

(1)	Includes PPP loans of $2.9 million at September 30, 2022, $6.9 million at June 30, 2022, $13.1 million at March 31, 2022, $33.6 million at December 31, 2021 and $103.5 million at September 30, 2021.

Deposits

Total deposits were $3.0 billion as of September 30, 2022, an increase of $41.3 million, or 1.4%, from December 31, 2021. Interest-bearing deposits increased $74.9 million, while noninterest-bearing deposits decreased $33.6 million in the third quarter of 2022. The increase in total deposits was primarily due to $353.7 million of deposits acquired from Metro Phoenix Bank. Excluding deposits acquired from Metro Phoenix Bank, deposits decreased $312.4 million, or 10.7%. The decrease was primarily driven by decreases of $129.8 million in noninterest-bearing deposits, $80.0 million in interest-bearing demand deposits, and $59.3 million in time deposits. Noninterest-bearing deposits decreased primarily due to a decrease in synergistic deposits. The decrease in interest-bearing demand deposits was the result of seasonally lower balances in public unit deposits. Time deposits decreased due to clients shifting balances to more liquid accounts. Synergistic deposits, which include deposits from our retirement and benefit services and wealth management segments as well as HSA deposits, decreased $35.5 million from December 31, 2021 primarily due to year-end seasonally higher temporary balances from retirement plan terminations.

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)	****	2022		****	2022		****	2022		****	2021		****	2021
Noninterest-bearing demand		$	905,228		$	764,808		$	831,558		$	938,840		$	797,062
Interest-bearing
Interest-bearing demand			653,216			642,641			760,321			714,669			673,916
Savings accounts			101,820			97,227			99,299			96,825			92,632
Money market savings			1,079,520			914,423			976,905			937,305			924,678
Time deposits			222,027			200,451			224,184			232,912			224,800
Total interest-bearing			2,056,583			1,854,742			2,060,709			1,981,711			1,916,026
Total deposits		$	2,961,811		$	2,619,550		$	2,892,267		$	2,920,551		$	2,713,088

Asset Quality

Total nonperforming assets were $6.2 million as of September 30, 2022, an increase of $3.1 million, or 101.4%, from December 31, 2021, primarily due to a residential real estate first mortgage client that is being individually evaluated for impairment. As of September 30, 2022, the allowance for loan losses was $31.0 million, or 1.34% of total loans, compared to $31.6 million, or 1.80% of total loans, as of December 31, 2021. Excluding Metro Phoenix Bank, the allowance for loan losses to total loans was 1.51% as of September 30, 2022.

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)	****	2022		****	2022		****	2022		****	2021		****	2021		****
Nonaccrual loans		$	4,303		$	4,370		$	4,069		$	2,076		$	6,229
Accruing loans 90+ days past due			1,000			—			146			121			—
Total nonperforming loans			5,303			4,370			4,215			2,197			6,229
OREO and repossessed assets			904			860			865			885			862
Total nonperforming assets		$	6,207		$	5,230		$	5,080		$	3,082		$	7,091
Net charge-offs/(recoveries)			405			340			(141)			(1,006)			(302)
Net charge-offs/(recoveries) to average loans			0.07	%		0.07	%		(0.03)	%		(0.22)	%		(0.06)	%
Nonperforming loans to total loans			0.23	%		0.23	%		0.23	%		0.12	%		0.35	%
Nonperforming assets to total assets			0.17	%		0.16	%		0.15	%		0.09	%		0.22	%
Allowance for loan losses to total loans			1.34	%		1.66	%		1.74	%		1.80	%		1.78	%
Allowance for loan losses to nonperforming loans			584	%		718	%		752	%		1,437	%		515	%

For the third quarter of 2022, we had net charge-offs of $405 thousand compared to net charge-offs of $340 thousand for the second quarter of 2022 and $302 thousand of net recoveries for the third quarter of 2021.

There was no provision expense recorded for the three months ended September 30, 2022, no change compared to the three months ended June 30, 2022, and a $2.0 million increase as compared to the three months ended September 30, 2021. Although management saw increases in overall loan volume, based on the reduction of previous adjustments for pandemic related qualitative factors, management concluded no need for additional provision.

Capital

Total stockholders’ equity was $344.8 million as of September 30, 2022, a decrease of $14.6 million, or 4.1%, from December 31, 2021. The decrease in stockholders’ equity was primarily due to a $98.7 million decrease in accumulated other comprehensive loss, due to rising interest rates, which resulted in a lower fair value of our available-for-sale investment securities, partially offset by a $61.8 million increase in additional paid-in capital as a result of the Metro Phoenix Bank acquisition. Tangible book value per common share, a non-GAAP financial measure, decreased to $13.76 as of September 30, 2022, from $17.87 as of December 31, 2021. Tangible common equity to tangible assets, a non-GAAP financial measure, decreased to 7.59% as of September 30, 2022, from 9.21% as of December 31, 2021. Common equity tier 1 capital to risk weighted assets decreased to 13.63% as of September 30, 2022, from 14.65% as of December 31, 2021.

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


	****	September 30,		****	December 31,		****	September 30,
	****	2022		****	2021		****	2021
Capital Ratios^(1)^
Alerus Financial Corporation Consolidated
Common equity tier 1 capital to risk weighted assets			13.63	%		14.65	%		14.52	%
Tier 1 capital to risk weighted assets			13.94	%		15.06	%		14.93	%
Total capital to risk weighted assets			16.84	%		18.64	%		18.58	%
Tier 1 capital to average assets			10.82	%		9.79	%		9.88	%
Tangible common equity / tangible assets ^(2)^			7.59	%		9.21	%		9.62	%

Alerus Financial, N.A.
Common equity tier 1 capital to risk weighted assets			13.01	%		13.87	%		13.77	%
Tier 1 capital to risk weighted assets			13.01	%		13.87	%		13.77	%
Total capital to risk weighted assets			14.11	%		15.12	%		15.03	%
Tier 1 capital to average assets			11.12	%		9.01	%		9.11	%

(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 11:00 a.m. Central Time on Thursday, October 27, 2022, to discuss its financial results. The call can be accessed via telephone at (844) 200-6205, using access code 769396. A recording of the call and transcript will be available on the Company’s investor relations website at investors.alerus.com following the call.

About Alerus Financial Corporation

Alerus Financial Corporation is a diversified financial services company with corporate offices in Grand Forks, North Dakota, and the Minneapolis-St. Paul, Minnesota metropolitan area. Through its subsidiary, Alerus Financial, N.A., Alerus provides innovative and comprehensive financial solutions to business and consumer clients through four distinct business segments—banking, retirement and benefit services, wealth management, and mortgage. Alerus provides clients with a primary point of contact to help fully understand the unique needs and delivery channel preferences of each client. Clients are provided with competitive products, valuable insight and sound advice supported by digital solutions designed to meet the clients’ needs. Alerus has banking, mortgage, and wealth management offices in Grand Forks and Fargo, North Dakota, the Minneapolis-St. Paul, Minnesota metropolitan area, and Phoenix, Scottsdale, and Mesa Arizona. Alerus Retirement and Benefits plan administration hubs are located in Minnesota, Michigan, and Colorado.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized by U.S. Generally Accepted Accounting Principles, or GAAP. These non-GAAP financial measures include the ratio of tangible common equity to tangible assets, tangible common equity per share, return on average tangible common equity, net interest margin (tax-equivalent), and the efficiency ratio. Management uses these non-GAAP financial measures in its analysis of its performance, and believes financial analysts and investors frequently use these measures, and other similar measures, to evaluate capital adequacy and financial performance. Reconciliations of non-GAAP disclosures used in this press release to the comparable GAAP measures are provided in the accompanying tables. Management, banking regulators, many financial analysts and other investors use these measures in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions.

These non-GAAP financial measures should not be considered in isolation or as a substitute for total stockholders’ equity, total assets, book value per share, return on average assets, return on average equity, or any other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate these non-GAAP financial measures may differ from that of other companies reporting measures with similar names.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of Alerus Financial Corporation. These statements are often, but not always, identified by words such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”, “annualized”, “target” and “outlook”, or the negative version of those words or other comparable words of a future or forward-looking nature. Examples of forward-looking statements include, among others, statements we make regarding our projected growth, anticipated future financial performance, financial condition, credit quality, management’s long-term performance goals and the future plans and prospects of Alerus Financial Corporation.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: interest rate risks associated with our business, including the effects of recent and anticipated rate increases by the Federal Reserve; our ability to successfully manage credit risk and maintain an adequate level of allowance for loan losses; new or revised accounting standards, including as a result of the implementation of the new Current Expected Credit Loss Standard; business and economic conditions generally and in the financial services industry, nationally and within our market areas, including 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 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; fluctuations in the values of the securities held in our securities portfolio, including as a result of rising interest rates; governmental monetary, trade and fiscal policies; severe weather, natural disasters, widespread disease or pandemics, such as the COVID-19 global pandemic, the negative effects of the ongoing COVID-19 pandemic, including its effects on the economic environment, our clients, and our operations, including due to supply chain disruptions, as well as any changes to federal, state, or local government laws, regulations, or orders in response to the pandemic; acts of war or terrorism, including the Russian invasion of Ukraine, or other adverse external events; any material weaknesses in our internal control over financial reporting; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative rates; changes to U.S. or state tax laws, regulations and guidance, including the new 1.0% excise tax on stock buybacks by publicly traded companies; talent and labor shortages and employee turnover; 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)


	****	September 30,		****	December 31,
	****	2022		****	2021
Assets		(Unaudited)			(Audited)
Cash and cash equivalents		$	54,167		$	242,311
Investment securities
Available-for-sale, at fair value			729,110			853,649
Held-to-maturity, at carrying value			326,410			352,061
Fed funds sold			14,124			—
Loans held for sale			26,129			46,490
Loans			2,318,231			1,758,020
Allowance for loan losses			(30,968)			(31,572)
Net loans			2,287,263			1,726,448
Land, premises and equipment, net			17,067			18,370
Operating lease right-of-use assets			3,481			3,727
Accrued interest receivable			11,256			8,537
Bank-owned life insurance			33,777			33,156
Goodwill			46,060			31,490
Other intangible assets			23,779			20,250
Servicing rights			2,780			1,880
Deferred income taxes, net			45,889			11,614
Other assets			69,961			42,708
Total assets		$	3,691,253		$	3,392,691
Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing		$	905,228		$	938,840
Interest-bearing			2,056,583			1,981,711
Total deposits			2,961,811			2,920,551
Short-term borrowings			253,830			—
Long-term debt			58,836			58,933
Operating lease liabilities			3,802			4,275
Accrued expenses and other liabilities			68,135			49,529
Total liabilities			3,346,414			3,033,288
Stockholders’ equity
Preferred stock, $1 par value, 2,000,000 shares authorized: 0 issued and outstanding			—			—
Common stock, $1 par value, 30,000,000 shares authorized: 19,987,274 and 17,212,588 issued and outstanding			19,987			17,213
Additional paid-in capital			154,629			92,878
Retained earnings			273,132			253,567
Accumulated other comprehensive income (loss)			(102,909)			(4,255)
Total stockholders’ equity			344,839			359,403
Total liabilities and stockholders’ equity		$	3,691,253		$	3,392,691

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,
	2022		2022		2021		2022		2021
Interest Income	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Loans, including fees	$	25,379	$	17,988	$	18,888	$	60,659	$	58,779
Investment securities
Taxable		5,939		6,068		3,249		17,447		8,547
Exempt from federal income taxes		209		213		225		638		694
Other		748		157		185		1,021		432
Total interest income		32,275		24,426		22,547		79,765		68,452
Interest Expense
Deposits		1,852		813		880		3,494		2,781
Short-term borrowings		1,516		278		—		1,794		—
Long-term debt		591		559		535		1,712		1,361
Total interest expense		3,959		1,650		1,415		7,000		4,142
Net interest income		28,316		22,776		21,132		72,765		64,310
Provision for loan losses		—		—		(2,000)		—		(2,000)
Net interest income after provision for loan losses		28,316		22,776		23,132		72,765		66,310
Noninterest Income
Retirement and benefit services		16,597		16,293		18,031		50,536		53,157
Wealth management		4,852		5,548		5,295		15,726		15,419
Mortgage banking		3,782		6,038		11,116		14,751		40,535
Service charges on deposit accounts		377		412		357		1,152		1,025
Net gains (losses) on investment securities		—		—		11		—		125
Other		1,402		935		1,230		3,541		3,408
Total noninterest income		27,010		29,226		36,040		85,706		113,669
Noninterest Expense
Compensation		21,168		21,248		23,291		61,467		71,298
Employee taxes and benefits		5,079		5,787		5,058		17,028		16,443
Occupancy and equipment expense		1,926		1,737		2,063		5,713		6,212
Business services, software and technology expense		5,373		4,785		5,332		15,082		15,266
Intangible amortization expense		1,324		1,053		1,088		3,430		3,327
Professional fees and assessments		3,126		2,246		1,503		6,913		4,484
Marketing and business development		890		814		865		2,304		2,310
Supplies and postage		588		572		549		1,806		1,583
Travel		291		356		174		826		236
Mortgage and lending expenses		409		482		1,231		1,577		3,762
Other		2,593		904		887		4,676		2,712
Total noninterest expense		42,767		39,984		42,041		120,822		127,633
Income before income taxes		12,559		12,018		17,131		37,649		52,346
Income tax expense		2,940		2,725		4,064		8,553		12,370
Net income	$	9,619	$	9,293	$	13,067	$	29,096	$	39,976
Per Common Share Data
Earnings per common share	$	0.48	$	0.53	$	0.75	$	1.58	$	2.29
Diluted earnings per common share	$	0.47	$	0.52	$	0.74	$	1.56	$	2.26
Dividends declared per common share	$	0.18	$	0.18	$	0.16	$	0.52	$	0.47
Average common shares outstanding		19,987		17,297		17,205		18,186		17,182
Diluted average common shares outstanding		20,230		17,532		17,499		18,431		17,488

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,
	****	2022			2022			2021			2021
Tangible Common Equity to Tangible Assets
Total common stockholders’ equity		$	344,839		$	307,158		$	359,403		$	353,195
Less: Goodwill			46,060			31,337			31,490			30,201
Less: Other intangible assets			23,779			17,511			20,250			22,593
Tangible common equity (a)			275,000			258,310			307,663			300,401
Total assets			3,691,253			3,295,065			3,392,691			3,175,169
Less: Goodwill			46,060			31,337			31,490			30,201
Less: Other intangible assets			23,779			17,511			20,250			22,593
Tangible assets (b)			3,621,414			3,246,217			3,340,951			3,122,375
Tangible common equity to tangible assets (a)/(b)			7.59	%		7.96	%		9.21	%		9.62	%
Tangible Book Value Per Common Share
Total common stockholders’ equity		$	344,839		$	307,158		$	359,403		$	353,195
Less: Goodwill			46,060			31,337			31,490			30,201
Less: Other intangible assets			23,779			17,511			20,250			22,593
Tangible common equity (c)			275,000			258,310			307,663			300,401
Total common shares issued and outstanding (d)			19,987			17,306			17,213			17,208
Tangible book value per common share (c)/(d)		$	13.76		$	14.93		$	17.87		$	17.46


	Three months ended									Nine months ended
	September 30,			June 30,			September 30,			September 30,			September 30,
	2022			2022			2021			2022			2021
Return on Average Tangible Common Equity
Net income	$	9,619		$	9,293		$	13,067		$	29,096		$	39,976
Add: Intangible amortization expense (net of tax)		1,046			832			860			2,710			2,628
Net income, excluding intangible amortization (e)		10,665			10,125			13,927			31,806			42,604
Average total equity		372,274			312,515			353,196			345,192			342,344
Less: Average goodwill		48,141			31,488			30,201			37,101			30,201
Less: Average other intangible assets (net of tax)		19,466			14,737			18,272			16,605			19,124
Average tangible common equity (f)		304,667			266,290			304,723			291,486			293,019
Return on average tangible common equity (e)/(f)		13.89	%		15.25	%		18.13	%		14.59	%		19.44	%
Efficiency Ratio
Noninterest expense	$	42,767		$	39,984		$	42,041		$	120,822		$	127,633
Less: Intangible amortization expense		1,324			1,053			1,088			3,430			3,327
Adjusted noninterest expense (g)		41,443			38,931			40,953			117,392			124,306
Net interest income		28,316			22,776			21,132			72,765			64,310
Noninterest income		27,010			29,226			36,040			85,706			113,669
Tax-equivalent adjustment		112			100			115			306			392
Total tax-equivalent revenue (h)		55,438			52,102			57,287			158,777			178,371
Efficiency ratio (g)/(h)		74.76	%		74.72	%		71.49	%		73.94	%		69.69	%

Alerus Financial Corporation and Subsidiaries

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

(dollars in thousands)


	Three months ended												Nine months ended
	September 30, 2022				June 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
			Average				Average				Average				Average				Average
	Average		Yield/		Average		Yield/		Average		Yield/		Average		Yield/		Average		Yield/
	Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate
Interest Earning Assets
Interest-bearing deposits with banks	$	72,157	2.02	%	$	28,920	0.39	%	$	281,768	0.16	%	$	68,811	0.86	%	$	219,636	0.14	%
Investment securities ^(1)^		1,116,458	2.20	%		1,164,625	2.18	%		869,421	1.61	%		1,165,414	2.09	%		778,307	1.62	%
Fed funds sold		21,893	2.37	%		—	—	%		—	—	%		7,378	2.37	%		—	—	%
Loans held for sale		27,032	4.14	%		31,878	3.15	%		57,233	2.40	%		27,864	3.31	%		70,218	2.25	%
Loans
Commercial:
Commercial and industrial		566,987	5.41	%		463,215	4.38	%		544,811	4.95	%		488,771	4.87	%		615,310	4.73	%
Real estate construction		70,545	5.60	%		44,627	4.04	%		37,743	3.99	%		52,212	4.71	%		41,812	4.17	%
Commercial real estate		807,505	4.07	%		601,765	3.80	%		567,696	3.67	%		670,854	3.86	%		565,861	3.72	%
Total commercial		1,445,037	4.67	%		1,109,607	4.05	%		1,150,250	4.29	%		1,211,837	4.30	%		1,222,983	4.24	%
Consumer
Residential real estate first mortgage		624,826	3.54	%		543,023	3.29	%		487,699	3.32	%		561,261	3.45	%		468,395	3.53	%
Residential real estate junior lien		140,664	5.41	%		132,082	4.64	%		129,239	4.57	%		132,968	4.86	%		132,145	4.67	%
Other revolving and installment		51,834	4.98	%		53,919	4.40	%		53,683	4.45	%		52,150	4.59	%		60,785	4.37	%
Total consumer		817,324	3.96	%		729,024	3.62	%		670,621	3.65	%		746,379	3.78	%		661,325	3.84	%
Total loans ^(1)^		2,262,361	4.41	%		1,838,631	3.88	%		1,820,871	4.05	%		1,958,216	4.10	%		1,884,308	4.10	%
Federal Reserve/FHLB stock		18,449	5.35	%		10,564	4.90	%		6,505	4.33	%		11,877	5.04	%		6,273	4.37	%
Total interest earning assets		3,518,350	3.65	%		3,074,618	3.20	%		3,035,798	2.96	%		3,239,560	3.30	%		2,958,742	3.11	%
Noninterest earning assets		224,804				184,037				155,079				191,652				161,077
Total assets	$	3,743,154			$	3,258,655			$	3,190,877			$	3,431,212			$	3,119,819
Interest-Bearing Liabilities
Interest-bearing demand deposits	$	659,696	0.13	%	$	703,365	0.12	%	$	692,873	0.14	%	$	692,310	0.12	%	$	678,015	0.15	%
Money market and savings deposits		1,180,576	0.40	%		1,041,898	0.14	%		1,009,564	0.14	%		1,089,137	0.24	%		1,018,347	0.15	%
Time deposits		234,459	0.74	%		211,787	0.43	%		217,756	0.50	%		224,603	0.54	%		212,297	0.57	%
Fed funds purchased		84,149	3.71	%		81,506	1.18	%		10	—	%		55,527	2.47	%		3	—	%
Short-term borrowings		168,750	1.71	%		9,615	1.59	%		—	—	%		60,073	1.71	%		—	—	%
Long-term debt		58,843	3.98	%		58,876	3.81	%		58,968	3.60	%		58,875	3.89	%		48,002	3.79	%
Total interest-bearing liabilities		2,386,473	0.66	%		2,107,047	0.31	%		1,979,171	0.28	%		2,180,525	0.43	%		1,956,664	0.28	%
Noninterest-Bearing Liabilities and Stockholders' Equity
Noninterest-bearing deposits		920,340				783,367				799,854				845,375				762,685
Other noninterest-bearing liabilities		64,067				55,726				58,656				60,120				58,126
Stockholders’ equity		372,274				312,515				353,196				345,192				342,344
Total liabilities and stockholders’ equity	$	3,743,154			$	3,258,655			$	3,190,877			$	3,431,212			$	3,119,819
Net interest income (1)
Net interest rate spread			2.99	%			2.89	%			2.68	%			2.87	%			2.83	%
Net interest margin, tax-equivalent ^(1)^			3.21	%			2.98	%			2.78	%			3.02	%			2.92	%

(1)	Taxable-equivalent adjustment was calculated utilizing a marginal income tax rate of 21.0%.

Exhibit 99.2

INVESTOR PRESENTATION<br>OCTOBER 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>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>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>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>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>including<br>as<br>a<br>result<br>of<br>rising<br>interest<br>rates<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>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>acts<br>of<br>war<br>or<br>terrorism<br>,<br>including<br>the<br>Russian<br>invasion<br>of<br>Ukraine,<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>the<br>new<br>1<br>..<br>0<br>%<br>excise<br>tax<br>on<br>stock<br>buybacks<br>by<br>publicly<br>traded<br>companies<br>;<br>the<br>impact<br>of<br>inflation<br>and<br>recent<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 and<br>Benefit Revenue<br>32.1%<br>Wealth<br>Management<br>Revenue<br>9.9%<br>Mortgage<br>Revenue<br>10.6%<br>Banking<br>Fees<br>2.9%<br>Net<br>Interest<br>Income<br>44.5%<br>FOR THE TWELVE<br>MONTHS ENDED SEPTEMBER<br>30<br>, 2022<br>Noninterest income:<br>$119.4 million<br>Net interest income:<br>$95.6 million<br>$27.8<br>$31.9<br>$34.2<br>$36.7<br>$30.5<br>2018<br>2019<br>2020<br>2021<br>Q3 2022<br>OUR MISSION<br>▪<br>To positively impact our clients’ financial potential<br>-<br>through holistic guidance, unparalleled service, and engaging technology.<br>COMPANY PROFILE<br>Data as of 9/30/2022.<br>DIVERSIFIED REVENUE STREAM<br>ASSET GROWTH (IN BILLIONS)<br>Banking Assets<br>Retirement and Benefits AUA/AUM<br>Wealth Management AUA/AUM<br>$2.6<br>$3.1<br>$3.3<br>$4.0<br>$3.4<br>2018<br>2019<br>2020<br>2021<br>Q3 2022<br>NONINTEREST<br>INCOME AS A %<br>OF REVENUE:<br>55.5%<br>DIVERSIFIED FINANCIAL SERVICES COMPANY<br>▪<br>$3.7 billion Banking assets<br>▪<br>$30.5 billion Retirement and Benefits AUA/AUM<br>▪<br>$3.4 billion Wealth Management AUA/AUM<br>▪<br>$686.1 million in Mortgage Originations YTD<br>ALERUS BUSINESS LINES<br>▪<br>Banking<br>▪<br>Retirement and Benefits<br>▪<br>Wealth Management<br>▪<br>Mortgage<br>$2.2<br>$2.4<br>$3.0<br>$3.4<br>$3.7<br>2018<br>2019<br>2020<br>2021<br>Q3 2022
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3<br>A BIG COMPANY MODEL WITH SMALL COMPANY EXECUTION<br>OUR DIVERSE BUSINESS LINES<br>Revenue data LTM as of 09/30/2022.<br>TRUSTED<br>ADVISOR<br>BANKING<br>WEALTH<br>MANAGEMENT<br>•<br>Residential mortgage lending<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 and<br>recordkeeping<br>•<br>Retirement plan<br>investment advisory<br>•<br>Health and welfare<br>administration<br>BUSINESS BANKING<br>•<br>Commercial and commercial<br>real estate lending<br>•<br>Small business lending<br>•<br>Treasury management<br>•<br>Deposit services<br>CONSUMER BANKING<br>•<br>Private banking<br>•<br>Deposit products<br>and services<br>•<br>Consumer lending<br>MORTGAGE<br>RETIREMENT<br>AND BENEFITS<br>32% of Revenue<br>11% of Revenue<br>10% of Revenue<br>47% of Revenue
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4<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>3<br>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>38,700 consumer clients<br>▪<br>16,600 commercial clients<br>▪<br>8,000 employer<br>-<br>sponsored retirement plans<br>Data as of 09/30/2022.<br>▪<br>386,600 employer<br>-<br>sponsored retirement plan participants<br>▪<br>69,900 health savings account participants<br>▪<br>42,700 flexible spending account/health reimbursement<br>arrangement participants
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5<br>STRONG GROWTH MARKETS AND STABLE CORE FUNDING<br>MARKET DISTRIBUTION<br>DEPOSITS ($2,962)<br>LOANS ($2,318)<br>(1)<br>ARB ASSETS UNDER<br>ADMIN/MGMT. ($<br>30,546<br>)<br>WM ASSETS UNDER<br>ADMIN/MGMT. ($3,436)<br>MORTGAGE ORIGINATIONS ($686)<br>($ IN MILLIONS)<br>Data as of 09/30/2022.<br>1<br>-<br>Loans in our national market are purchased participation loans not sourced directly through advisors located in one of our ge<br>o<br>graphical markets.<br>LEGEND<br>30.1%<br>48.9%<br>18.5%<br>2.5%<br>37.7%<br>26.7%<br>13.5%<br>22.1%<br>5.0%<br>92.8%<br>2.2%<br>72.0%<br>11.9%<br>3.8%<br>12.3%<br>8.9%<br>13.3%<br>77.8%
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6<br>ONE<br>ALERUS<br>REINVENTION OF PROCESSES<br>We have aligned processes, policies, and<br>procedures throughout all departments to<br>enhance the 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 $633.5 million as of September 30,<br>2022<br>Cumulative rollovers have added $1.1 billion of<br>assets under management<br>1<br>-<br>4 Family 1<br>st<br>Liens totaled $608.1 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 offer comprehensive product<br>and service packages to our<br>clients including banking,<br>mortgage, wealth management,<br>and retirement and benefits<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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7<br>EXPANDED TO COLORADO<br>Acquired Retirement Planning Services, Inc. (Littleton,<br>CO)<br>To supplement our strong organic growth, we have executed 25 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 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<br>(in AZ) from BN<br>C 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 States,<br>Inc. (Albert Lea and Eden Prairie, MN)<br>COMPLETED INITIAL PUBLIC OFFERING (IPO)<br>2017<br>LAUNCHED ONE ALERUS STRATEGIC GROWTH PLAN<br>2020<br>2022<br>Acquired Metro Phoenix Bank (Phoenix, AZ)
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8<br>▪<br>Diversified client base<br>consists of<br>38,700<br>consumers clients,<br>16,600<br>commercial clients and over<br>386,600<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>Purpose driven<br>organization with a<br>recognizable mission<br>for clients, employees, and stakeholders<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>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>▪<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>ORGANIC GROWTH<br>“ONE ALERUS”
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9<br>DAN COUGHLIN<br>Since 2016<br>Chairman, Alerus Financial Corp.<br>Former MD & Co<br>-<br>Head<br>–<br>Fin’l<br>Services Inv. Banking, Raymond<br>James; Former Chairman<br>& CEO, Howe Barnes Hoefer &<br>Arnett<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, Royal Bank<br>of Canada U.S. Wealth Mgmt.<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>RANDY NEWMAN<br>Since 1987<br>Former President and CEO, Alerus<br>OFFICERS AND DIRECTORS<br>MICHAEL MATHEWS<br>Since 2019<br>Former CIO, Deluxe Corporation<br>Former SVP<br>–<br>Technology and Enterprise<br>Programs, UnitedHealth Group<br>JON HENDRY<br>Executive Vice President and<br>Chief Technology Officer<br>38 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>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>SENIOR EXECUTIVE TEAM<br>BOARD OF DIRECTORS<br>KATIE LORENSON<br>Director,<br>President and<br>Chief Executive Officer<br>5 years with Alerus<br>AL VILLALON<br>Executive Vice President and<br>Chief Financial Officer<br>Joined Alerus in 2022<br>JIM COLLINS<br>Executive Vice President and<br>Chief Banking and Revenue Officer<br>Joined Alerus in 2022<br>MISSY KENEY<br>Executive Vice President and<br>Chief Engagement Officer<br>17 years with Alerus<br>ANN MCCONN<br>Executive Vice President and<br>Chief Shared Services Officer<br>20 years with Alerus
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10<br>THIRD QUARTER HIGHLIGHTS
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11<br>▪<br>Reported net income of $9.6 million in the third quarter of 2022, or $0.47 per diluted<br>common share; $0.54 per diluted common share excluding a one<br>-<br>time merger related<br>expenses.<br>▪<br>Net interest income increased $5.5 million, or 24.3%, from the second quarter, primarily<br>driven by strong loan organic growth, loans acquired from Metro Phoenix Bank and an<br>increase in net interest margin, due to an increase in earning asset yields, partially offset<br>by rising rates paid on interest<br>-<br>bearing liabilities.<br>▪<br>Net interest margin increased 23bps due to an increase in earnings asset yield of 45 bps,<br>primarily as a result of a 53 bps increase in loan yield and 23% loan growth in average<br>loans, a majority of which was acquisition related.<br>▪<br>Completed the acquisition and conversion of Metro Phoenix Bank in the third quarter<br>which included $270.4 million in total loans and $353.7 million in total deposits.<br>▪<br>Loans HFI, excluding Metro Phoenix Bank, increased $289.8 million, or 17%, from the<br>prior quarter end due to organic loan growth.<br>SUCCESS IS NEVER FINAL<br>Q3 2022 SUMMARY
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12<br>INCOME STATEMENT<br>Q3 2022 FINANCIAL HIGHLIGHTS<br>1<br>–<br>Represents a non<br>-<br>GAAP Financial measure. See “Non<br>-<br>GAAP Disclosure Reconciliation.”<br>(dollars and shares in thousands, except per share data)<br>Net Interest Income<br>$<br>28,316<br><br><br>$<br>22,776<br><br><br>$<br>21,132<br><br><br>$<br>72,765<br><br><br>$<br>64,310<br><br><br>Provision for Loan Losses<br>—<br><br><br>—<br><br><br>(2,000)<br><br><br>—<br><br><br>(2,000)<br><br><br>Net Interest Income After Provision for Loan Losses<br>28,316<br><br><br>22,776<br><br><br>23,132<br><br><br>72,765<br><br><br>66,310<br><br><br>Noninterest Income<br>27,010<br><br><br>29,226<br><br><br>36,040<br><br><br>85,706<br><br><br>113,669<br><br><br>Noninterest Expense<br>42,767<br><br><br>39,984<br><br><br>42,041<br><br><br>120,822<br><br><br>127,633<br><br><br>Income Before Income Taxes<br>12,559<br><br><br>12,018<br><br><br>17,131<br><br><br>37,649<br><br><br>52,346<br><br><br>Income Tax Expense<br>2,940<br><br><br>2,725<br><br><br>4,064<br><br><br>8,553<br><br><br>12,370<br><br><br>Net Income<br>$<br>9,619<br><br><br>$<br>9,293<br><br><br>$<br>13,067<br><br><br>$<br>29,096<br><br><br>$<br>39,976<br><br><br>Per Common Share Data<br>Earnings Per Common Share - Diluted<br>$<br>0.47<br>$<br>0.52<br>$<br>0.74<br>$<br>1.56<br>$<br>2.26<br>Diluted Average Common Shares Outstanding<br>20,230<br><br><br>17,532<br><br><br>17,499<br><br><br>18,431<br><br><br>17,488<br><br><br>Performance Ratios<br>Return on Average Total Assets<br>1.02<br><br><br>%<br>1.14<br><br><br>%<br>1.62<br><br><br>%<br>1.13<br><br><br>%<br>1.71<br><br><br>%<br>Return on Average Tangible Common Equity<br>(1)<br>13.89<br><br><br>%<br>15.25<br><br><br>%<br>18.13<br><br><br>%<br>14.59<br><br><br>%<br>19.44<br><br><br>%<br>Noninterest Income as a % of Revenue<br>48.82<br><br><br>%<br>56.20<br><br><br>%<br>63.04<br><br><br>%<br>54.08<br><br><br>%<br>63.87<br><br><br>%<br>Net Interest Margin (Tax-Equivalent)<br>3.21<br><br><br>%<br>2.98<br><br><br>%<br>2.78<br><br><br>%<br>3.02<br><br><br>%<br>2.92<br><br><br>%<br>Efficiency Ratio<br>(1)<br>74.76<br><br><br>%<br>74.72<br><br><br>%<br>71.49<br><br><br>%<br>73.94<br><br><br>%<br>69.69<br><br><br>%<br>September 30,<br>2022<br>September 30,<br>2021<br>Three months ended<br>Nine months ended<br>2022<br>September 30,<br>June 30,<br>2022<br>September 30,<br>2021
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13<br>PERFORMANCE RATIOS<br>1<br>–<br>Represents a non<br>-<br>GAAP Financial measure. See “Non<br>-<br>GAAP Disclosure Reconciliation.”<br>2<br>–<br>Rates have been annualized<br>3<br>–<br>Q3 2022 Rates exclude merger and acquisition expenses associated with the acquisition of Metro Phoenix Bank.<br>1.62%<br>1.14%<br>1.02%<br>0.15%<br>1.17%<br>Q3 2021<br>Q2 2022<br>Q3 2022<br>Return on Average Assets<br>(2)/(3)<br>18.13%<br>15.25%<br>13.89%<br>1.86%<br>15.75%<br>Q3 2021<br>Q2 2022<br>Q3 2022<br>Return on Average Tangible<br>Common Equity<br>(1)/(2)/(3)<br>$17.46<br>$14.93<br>$13.76<br>Q3 2021<br>Q2 2022<br>Q3 2022<br>Tangible Book Value per Share<br>(1)
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14<br>KEY BALANCE SHEET ITEMS<br>DOLLARS IN MILLIONS<br>$1,687.1<br>$1,828.1<br>$1,976.1<br>$133.8<br>$10.5<br>$5.2<br>$281.1<br>$1,820.9<br>$1,838.6<br>$2,262.4<br>Q3 2021<br>Q2 2022<br>Q3 2022<br>Average Loans<br>Core Loans<br>PPP Loans<br>MPB Loans<br>$1,920.2<br>$1,957.1<br>$1,838.9<br>$799.9<br>$783.4<br>$829.1<br>$327.1<br>$2,720.1<br>$2,740.5<br>$2,995.1<br>Q3 2021<br>Q2 2022<br>Q3 2022<br>Average Deposits<br>Interest-Bearing Deposits<br>Non-Interest Bearing Deposits<br>MPB Deposits<br>Core<br>8.1%<br>Linked Quarter<br>Loans<br>(1)<br>17.1%<br>Year-over-year<br>Average<br>(2.6)%<br>Linked Quarter<br>Deposits<br>(1)<br>(1.9)%<br>Year-over-year<br>1<br>–<br>Changes in core loans and average deposits exclude loans and deposits acquired from Metro Phoenix Bank.
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15<br>1.30%<br>1.39%<br>1.73%<br>1.80%<br>1.34%<br>0.17%<br>1.51%<br>0.00%<br>0.40%<br>0.80%<br>1.20%<br>1.60%<br>2.00%<br>2018<br>2019<br>2020<br>2021<br>Q3 2022<br>318%<br>306%<br>674%<br>1,437%<br>584%<br>00%<br>200%<br>400%<br>600%<br>800%<br>1,000%<br>1,200%<br>1,400%<br>1,600%<br>2018<br>2019<br>2020<br>2021<br>Q3 2022<br>0.33%<br>0.33%<br>0.17%<br>0.09%<br>0.17%<br>0.00%<br>0.20%<br>0.40%<br>0.60%<br>0.80%<br>2018<br>2019<br>2020<br>2021<br>Q3 2022<br>ASSET QUALITY AND RESERVE LEVELS<br>OVERVIEW<br>NPAS / ASSETS<br>(%)<br>RESERVES<br>/ LOANS<br>(%)<br>1<br>RESERVES<br>/ NPLS (%)<br>▪<br>Solid asset quality based on low levels of<br>nonperforming assets.<br>▪<br>Strong reserve levels with a recent trend of<br>declines in criticized loans.<br>▪<br>Currently a non<br>-<br>CECL institution with strong<br>credit quality as evidenced by historic net charge<br>-<br>off ratio of 27 bps, dating back 25 years.<br>NCO/<br>Avg Loans<br>0.18%<br>0.33%<br>0.03%<br>(0.04)%<br>0.04%<br>1<br>–<br>The Q3 total excludes loans acquired from Metro Phoenix Bank
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16<br>STRONG CORE FUNDING MIX<br>▪<br>Commercial transaction accounts totaled $1.4 billion and<br>increased 12.1% YoY. Consumer transaction accounts totaled<br>$726.0 million and increased 7.5% YoY.<br>▪<br>Synergistic deposits, including HSA deposits and those sourced<br>through retirement plans and participants, totaled $633.5<br>million, with a YTD cost of 0.15%.<br>▪<br>CD portfolio is primarily 6<br>-<br>month maturity CD with over 50%<br>held by clients for 10+ years<br>▪<br>Stable deposit relationships with 23<br>-<br>year average tenure on 10<br>largest depositors.<br>As of September 30, 2022, core deposits totaled<br>$3.0 billion or 98% of our total deposits<br>OVERVIEW AS OF<br>SEPTEMBER 30<br>, 2022<br>SEPTEMBER 30<br>, 2022 DEPOSIT FUNDING<br>($2,962<br>MM<br>)<br>LOW COST OF FUNDS<br>Data YTD as of 09/30/2022.<br>Non<br>-<br>Interest Bearing<br>Deposits<br>30.6%<br>Money<br>Market &<br>Savings<br>Deposits<br>39.9%<br>Interest<br>-<br>Bearing<br>Demand Deposits<br>16.5%<br>Time<br>Deposits<br>7.5%<br>HSA<br>Deposits<br>5.5%<br>0.16%<br>0.23%<br>0.31%<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<br>Total Deposits<br>Cost of Interest-<br>Bearing Deposits<br>Total Cost of<br>Funds<br>2019<br>2020<br>2021<br>Q3 2022 YTD
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17<br>12.9%<br>16.7%<br>16.8%<br>18.6%<br>16.8%<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>2018<br>2019<br>2020<br>2021<br>Q3 2022<br>7.5%<br>11.1%<br>9.2%<br>9.8%<br>10.8%<br>8.9%<br>12.9%<br>13.2%<br>15.1%<br>13.9%<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>2018<br>2019<br>2020<br>2021<br>Q3 2022<br>Tier 1 Leverage<br>Tier 1 Capital<br>STRONG CAPITAL AND SOURCES OF LIQUIDITY<br>COMMON EQUITY TIER 1<br>TIER 1 CAPITAL/TIER 1 LEVERAGE RATIOS<br>SOURCES OF LIQUIDITY<br>TOTAL RISK BASED CAPITAL<br>Regulatory Capital Minimum to be considered well capitalized.<br>(dollars in thousands)<br>Cash and cash equivalents<br>$54,167<br>Unencumbered securities<br>–<br>AFS<br>724,735<br>FHLB borrowing availability<br>555,926<br>Brokered CD capacity<br>738,251<br>Fed<br>funds lines<br>102,000<br>Total as of 9/30/2022<br>$2,175,079<br>Tier 1<br>Capital<br>Leverage<br>Regulatory Capital Minimum to be considered well capitalized.<br>8.4%<br>12.5%<br>12.8%<br>14.7%<br>13.6%<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>2018<br>2019<br>2020<br>2021<br>Q3 2022
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18<br>KEY REVENUE ITEMS<br>DOLLARS IN THOUSANDS<br>1<br>–<br>Other noninterest income consists of service charges on deposit accounts, net gains (losses) on investment securities, speci<br>fic interchange income and other noninterest income.<br>$19,074<br>$22,523<br>$28,218<br>$2,058<br>$253<br>$98<br>$21,132<br>$22,776<br>$28,316<br>$0<br>$5,000<br>$10,000<br>$15,000<br>$20,000<br>$25,000<br>$30,000<br>Q3 2021<br>Q2 2022<br>Q3 2022<br>Net Interest Income<br>Net Interest Income<br>PPP fees<br>$18,031<br>$16,293<br>$16,597<br>$5,295<br>$5,548<br>$4,852<br>$11,116<br>$6,038<br>$3,782<br>$1,598<br>$1,347<br>$1,779<br>$36,040<br>$29,226<br>$27,010<br>Q3 2021<br>Q2 2022<br>Q3 2022<br>Noninterest Income<br>Retirement and benefits<br>Wealth management<br>Mortgage banking<br>Other(1)<br>Net Interest<br>24.3%<br><br><br>Linked Quarter<br>Income<br>34.0%<br><br><br>Year-over-year<br>Noninterest<br>(7.6)%<br>Linked Quarter<br>Income<br>(25.1)%<br>Year-over-year
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19<br>NET INTEREST MARGIN (NIM)<br>LOAN YIELD<br>(1)<br>/N<br>ET INTEREST MARGIN<br>(1)<br>QUARTERLY HIGHLIGHTS<br>AVERAGE EFFECTIVE FF RATE/COST OF FUNDS<br>(1)<br>1<br>–<br>Rates have been annualized for interim periods. Source: Alerus Financial Corporation; Federal Reserve.<br>▪<br>Loan yield increased as a result of a $7.4 million, or<br>41.1%, increase in interest income received from loans<br>compared to Q2 2022. Excluding Metro Phoenix Bank<br>loan income, interest income received from loans<br>increased $3.2 million, or 17.6%.<br>▪<br>Excluding Metro Phoenix Bank loans, average loans HFI<br>increased $142.6 million, or 7.8%, compared to Q2 2022.<br>▪<br>Net interest margin increased 23 bps from Q2 2022.<br>Excluding Metro Phoenix Bank, net interest margin<br>increased 6 bps.<br>▪<br>Average interest<br>-<br>bearing deposits increased $117.7<br>million, or 6.0%, from Q2 2022. Excluding Metro Phoenix<br>Bank deposits, average interest<br>-<br>bearing deposits would<br>have decreased $118.2 million, or 6.0%.<br>▪<br>Average noninterest<br>-<br>bearing deposits increased $137.0<br>million, or 17.5%, from Q2 2022. Excluding Metro<br>Phoenix Bank deposits, average noninterest<br>-<br>bearing<br>deposits increased $45.8 million, or 5.8%.<br>1.83%<br>2.16%<br>0.08%<br>1.04%<br>0.97%<br>0.51%<br>0.20%<br>0.31%<br>0.00%<br>0.50%<br>1.00%<br>1.50%<br>2.00%<br>2.50%<br>2019<br>2020<br>2021<br>Q3 2022 YTD<br>Average effective FF rate<br>Cost of funds<br>4.97%<br>4.35%<br>4.14%<br>4.10%<br>3.65%<br>3.16%<br>2.73%<br>2.99%<br>0.06%<br>0.17%<br>0.03%<br>3.22%<br>2.90%<br>3.02%<br>0.00%<br>1.00%<br>2.00%<br>3.00%<br>4.00%<br>5.00%<br>6.00%<br>2019<br>2020<br>2021<br>Q3 2022 YTD<br>Loan yield<br>NIM ex. PPP<br>Effect of PPP
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20<br>NII AND LOAN FLOORS<br>VARIABLE RATE FLOORS BY INDEX<br>VARIABLE RATE FLOORS<br>QUARTER OVER QUARTER HIGHLIGHTS<br>$ in Millions<br>Balance<br>% of Total<br>Balance<br>Cumulative % of<br>Total Balance<br>No Floors<br>$<br>414<br>42.3%<br>42.3%<br>At Floor<br>136<br>13.9%<br>56.2%<br>0<br>-<br>50 bps above floor<br>17<br>1.7%<br>57.9%<br>>50bps to above floor<br>411<br>42.1%<br>100.0%<br>Total<br>$<br>978<br>100.0%<br>$ in Millions<br>Index<br>Above<br>the Floor<br>At the<br>Floor<br>No Floor<br>Total<br>Total %<br>Prime<br>$<br>297<br>$<br>56<br>$<br>177<br>$<br>530<br>54.2%<br>1 Month<br>LIBOR<br>–<br>–<br>137<br>137<br>14.0%<br>12 Month LIBOR<br>91<br>1<br>75<br>167<br>17.1%<br>FHLB 5 Year<br>12<br>17<br>11<br>40<br>4.1<br>%<br>Other<br>28<br>62<br>14<br>104<br>10.6%<br>Total<br>$<br>428<br>$<br>136<br>$<br>414<br>$<br>978<br>100.0<br>%<br>Percent<br>of Total<br>43.8%<br>13.9%<br>42.3%<br>100.0%<br>NET INTEREST<br>INCOME<br>NIM:<br>2.98%<br>(0.01)%<br>0.17%<br>0.16%<br>(0.03)<br>%<br>(0.07)<br>%<br>0.01%<br>3.21%<br>▪<br>Earning asset yields up 45bps with average loan balances<br>increasing $423.7 million. Loan rates increased 53 bps due to<br>increased yield received on loans acquired from Metro Phoenix<br>Bank.<br>▪<br>Borrowing rates increased 253 bps for fed funds purchased<br>due to the rising interest rate environment. Borrowings<br>increased in the previous quarter due to loan growth outpacing<br>deposit growth.<br>▪<br>Cost of total deposits saw a modest increase of 4 bps as interest<br>rates continue to rise.
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21<br>$31,905<br>$34,200<br>$36,733<br>$30,546<br> 375,000<br> 390,000<br> 405,000<br> 420,000<br> 435,000<br> 450,000<br> 465,000<br> 480,000<br> 495,000<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>2019<br>2020<br>2021<br>Q3 2022 YTD<br>AUA/AUM<br>Participants<br>RETIREMENT AND BENEFITS<br>OVERVIEW<br>–<br>8,000<br>PLANS<br>-<br>NATIONAL FOOTPRINT<br>ASSETS UNDER ADMINISTRATION/MANAGEMENT<br>REVENUE MIX<br>2<br>▪<br>RETIREMENT<br>(59% of Revenue)<br>-<br>Provide recordkeeping and<br>administration services to qualified retirement plans<br>▪<br>TRUST CUSTODY & ADVISORY SERVICES (10%<br>of Revenue<br>)<br>-<br>Provide investment fiduciary services to retirement plans<br>▪<br>HEALTH AND WELFARE (11%<br>of Revenue<br>)<br>-<br>Provide HSA, FSA,<br>COBRA recordkeeping and administration services to employers<br>▪<br>ONE ALERUS SYNERGIES<br>•<br>IRA<br>rollovers $117.1 million<br>YTD 09/30/2022<br>•<br>Deposits $634 million<br>-<br>HSA deposits, 401(k) Money Market<br>Funds, Emergency Savings, Terminated Participants<br>•<br>Managed accounts<br>•<br>Commercial Banking client expansion<br>($ in Millions)<br>QUARTERLY RESULTS<br>($ 000s)<br>1<br>Net Income:<br>$28,404<br>$25,720<br>$31,545<br>$29,376<br>Revenue:<br>$63,811<br>$60,956<br>$71,709<br>$50,536<br>Profit Margin:<br>44.5%<br>42.2%<br>44.0%<br>58.1%<br>Profit Margin:<br>42.8%<br>59.5%<br>63.1%<br>Recurring annual<br>plan revenue<br>81%<br>Transaction<br>based revenue<br>19%<br>$7,711<br>$9,695<br>$10,467<br>$18,031<br>$16,293<br>$16,597<br>$0<br>$5,000<br>$10,000<br>$15,000<br>$20,000<br>Q3 2021<br>Q2 2022<br>Q3 2022<br>Net Income<br>Revenue<br>1<br>–<br>Net income before tax and indirect allocations. Includes funds transfer pricing credit of deposits<br>sourced by division<br>..<br>2<br>–<br>Revenue mis includes 39% market sensitive revenue.
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22<br>$3,076<br>$3,918<br>$3,258<br>$5,295<br>$5,548<br>$4,852<br>$0<br>$1,000<br>$2,000<br>$3,000<br>$4,000<br>$5,000<br>$6,000<br>$7,000<br>Q3 2021<br>Q2 2022<br>Q3 2022<br>Net Income<br>Revenue<br>$3,103<br>$3,339<br>$4,040<br>$3,436<br>$0<br>$1,000<br>$2,000<br>$3,000<br>$4,000<br>2019<br>2020<br>2021<br>Q3 2022 YTD<br>▪<br>ADVISORY AND PLANNING SERVICES<br>•<br>Retirement Planning, Tax Planning, Insurance Planning,<br>Wealth Transfer Planning and Business Transition Planning<br>▪<br>ASSET MANAGEMENT<br>•<br>Personalized SMA strategies, Tax Management and Global<br>Perspective<br>▪<br>FIDUCIARY SERVICES<br>•<br>IRA, Agency and Personal Trust<br>▪<br>ONE ALERUS SYNERGIES<br>•<br>IRA rollovers<br>•<br>401(k) managed accounts<br>WEALTH MANAGEMENT SERVICES<br>OVERVIEW OF SERVICES<br>ASSETS UNDER ADMINISTRATION/MANAGEMENT<br>REVENUE MIX<br>($ in Millions)<br>QUARTERLY RESULTS<br>1<br>($ 000s)<br>Net Income:<br>$8,314<br>$9,162<br>$12,183<br>$10,664<br>Revenue:<br>$15,502<br>$17,451<br>$21,052<br>$15,726<br>Profit Margin:<br>53.6%<br>52.2%<br>57.9%<br>67.8%<br>Profit Margin:<br>58.1%<br>70.6%<br>67.1%<br>Asset<br>Management<br>87%<br>Brokerage<br>9%<br>Insurance &<br>Advisory<br>4%<br>1<br>–<br>Net income before tax and indirect allocations. Includes funds transfer pricing credit of deposits<br>sourced by division<br>..
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23<br>MORTGAGE BANKING<br>OVERVIEW OF SERVICES<br>YEARLY MORTGAGE ORIGINATIONS<br>($000s)<br>QUARTERLY RESULT<br>S<br>▪<br>1st and 2nd mortgage product offerings through centralized<br>mortgage operations in Minneapolis, Minnesota<br>▪<br>Our Twin Cities originators averaged $58+ million in annual<br>volume over the last three years<br>▪<br>YTD 1,763 loans closed, approximately 87% purchase<br>originations, with approximately 92% sourced from the Twin<br>Cities MSA<br>▪<br>Q3 2022 98% 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 September 30, 2022, residential real estate first<br>mortgages excluding construction mortgages totaled $608<br>million<br>QUARTERLY<br>ORIGINATIONS<br>1<br>–<br>Net income before tax and indirect allocations.<br>Purchase:<br>71.2%<br>45.2%<br>51.2%<br>87.6%<br>Refinance:<br>28.8%<br>54.8%<br>48.8%<br>12.4%<br>Purchase:<br>67.5%<br>94.2%<br>94.0%<br>Refinance:<br>32.5%<br>5.8%<br>6.0%<br>$863.4<br>$1,632.5<br>$1,592.1<br>$517.5<br>$83.0<br>$146.5<br>$244.0<br>$168.6<br>$946.4<br>$1,779.0<br>$1,836.1<br>$686.1<br> $-<br> $500.0<br> $1,000.0<br> $1,500.0<br> $2,000.0<br>2019<br>2020<br>2021<br>YTD Q3 2022<br>Portfolio<br>Sale<br>$357.1<br>$201.8<br>$163.9<br>$58.7<br>$67.6<br>$66.0<br>$415.8<br>$269.4<br>$229.9<br> $-<br> $250.0<br> $500.0<br> $750.0<br>Q3 2021<br>Q2 2022<br>Q3 2022<br>Portfolio<br>Sale<br>Q3<br>Q4<br>Q1<br>Q2<br>Q3<br>($000s)<br>2021<br>2021<br>2022<br>2022<br>2022<br>Orignation<br>and Sale<br>$<br>12,925<br><br>$<br>9,812<br><br><br>$<br>4,935<br><br><br>$<br>5,821<br><br><br>$<br>5,028<br><br><br>Fair Value<br>Changes<br>(1,810)<br><br><br>(1,846)<br><br><br>(4)<br><br><br>217<br><br><br>(1,246)<br><br><br>Total<br>$<br>11,115<br><br>$<br>7,966<br><br><br>$<br>4,931<br><br><br>$<br>6,038<br><br><br>$<br>3,782<br><br><br>Net<br>income<br>(1)<br>$<br>3,151<br><br><br>$<br>1,329<br><br><br>$<br>620<br><br><br>$<br>1,387<br><br><br>$<br>(308)<br><br><br>Profit<br>Margin<br>28.3%<br><br><br>16.7%<br><br><br>12.6%<br><br><br>23.0%<br><br><br>(8.1%)<br><br><br>Gain on Sale<br>Margin<br>3.6%<br><br><br>3.2%<br><br><br>2.8%<br><br><br>3.4%<br><br><br>2.6%
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24<br>$28,349<br>$27,035<br>$26,247<br>$2,063<br>$1,737<br>$1,926<br>$5,332<br>$4,785<br>$5,373<br>$1,503<br>$1,432<br>$1,314<br>$96<br>$965<br>$1,812<br>$4,698<br>$4,030<br>$6,095<br>$42,041<br>$39,984<br>$42,767<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>$45,000<br>Q3 2021<br>Q2 2022<br>Q3 2022<br>Other(1)<br>Nonrecurring expense(2)<br>Professional Fees and Assessments<br>Business Services, Software and Technology<br>Occupancy and Equipment<br>Compensation and benefits<br>NONINTEREST EXPENSE<br>1<br>–<br>Other noninterest expense consists of intangible amortization, marketing and business development, supplies and postage, tra<br>vel, mortgage and lending, and other noninterest expense.<br>2<br>–<br>Nonrecurring expenses consists of merger & acquisition expense and 1x executive recruiting expense.<br>QUARTERLY HIGHLIGHTS<br>YEAR OVER YEAR HIGHLIGHTS<br>▪<br>Professional fees and assessments increased $588 thousand<br>due to $1.8 million in merger related expenses associated with<br>Metro Phoenix Bank acquisition.<br>▪<br>Other noninterest expense increased due to a $1.2 million<br>increase in the provision for unused commitments.<br>▪<br>Employee benefits expense decreased, driven by a decrease in<br>health insurance claims.<br>▪<br>Compensation and benefits decreased due to the decrease in<br>mortgage originations.<br>▪<br>Professional fees and assessments increased due to $1.8 million<br>in merger and acquisition expenses associated with the Metro<br>Phoenix Bank acquisition.<br>▪<br>Other noninterest expense increased due to a $841 thousand<br>increase in the provision for unused commitments.<br>Noninterest<br>7.0%<br>Linked quarter<br>Expense<br>1.7%<br>Year-over-year
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25<br>APPENDIX
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26<br>BY OUTSTANDING BALANCES<br>WELL DIVERSIFIED LOAN PORTFOLIO<br>As of 09/30/2022<br>1<br>-<br>4 Residential 1st<br>26%<br>1<br>-<br>4 Residential Construction<br>2%<br>1<br>-<br>4 Residential Jr Lien<br>1%<br>HELOC<br>5%<br>RE Loans to be Sold<br>1%<br>C&I<br>23%<br>Ag Production<br>1%<br>Other CRE<br>20%<br>Owner Occupied CRE<br>10%<br>Ag Land<br>1%<br>Multifamily<br>3%<br>Retail Indirect<br>1%<br>Other Consumer<br>2%<br>RE Construction<br>4%
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27<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 the following sub<br>-<br>industries within Retail Trade: (1) Miscellaneous Store Retailers, (2) Furniture<br>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 and Warehousing<br>3%<br>Health Care and Social Assistance<br>6%<br>Professional, Scientific and<br>Technical Services<br>8%<br>Manufacturing<br>11%<br>Real Estate and Rental<br>and Leasing<br>10%<br>Wholesale Trade<br>8%<br>Construction<br>11%<br>Finance and Insurance<br>12%<br>Other<br>18%<br>Motor Vehicle and Parts<br>Dealers<br>6%<br>Food and Beverage Stores<br>1%<br>Electronics and<br>Appliance Stores<br>2%<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 Trade<br>1%<br>Retail Trade<br>13%
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28<br>Office<br>17%<br>Retail<br>13%<br>Warehouse<br>18%<br>Manufacturing<br>1%<br>Residential<br>Development<br>1%<br>Commercial<br>Development<br>1%<br>Mixed<br>Commercial<br>3%<br>Apartments<br>13%<br>Medical or Nursing<br>Facilities<br>5%<br>Commercial/Land<br>Development<br>24%<br>Ag Land<br>4%<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>..<br>Portfolio<br>Avg<br>FICO<br>Avg LTV<br>Serviced<br>758<br>66%<br>Non<br>-<br>Serviced<br>796<br>31%<br>Junior<br>762<br>76%<br>HELOC<br>796<br>74%<br>TOTAL COMMITMENT<br>RESIDENTIAL REAL ESTATE<br>Serviced<br>53%<br>1<br>-<br>4 1st Non<br>-<br>Serviced<br>5%<br>1<br>-<br>4 Family Jr Liens<br>3%<br>1<br>-<br>4 Family Revolving<br>29%<br>1<br>-<br>4 Family<br>Construction<br>8%<br>Held for Sale<br>2%
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29<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>50%<br>55%<br>60%<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>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>Q1<br>2022<br>Q2<br>2022<br>Q3<br>2022<br>C&I<br>Funded<br>Unfunded<br>Funded%<br>0%<br>5%<br>10%<br>15%<br>20%<br>25%<br>30%<br>35%<br>40%<br>45%<br>50%<br>55%<br>60%<br> -<br> 50,000<br> 100,000<br> 150,000<br> 200,000<br> 250,000<br> 300,000<br> 350,000<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>Q1<br>2022<br>Q2<br>2022<br>Q3<br>2022<br>Home Equity Lines of Credit<br>Funded<br>Unfunded<br>Funded%
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30<br>CHANGES IN THE ALLL BY PORTFOLIO SEGMENT<br>ALLOWANCE FOR LOAN LOSSES<br>(dollars in thousands)<br>Commercial<br>Commercial and industrial<br>$<br>8,925<br><br><br>$<br>1,011<br><br><br>$<br>(1,336)<br><br><br>$<br>321<br><br><br>$<br>8,921<br><br><br>Real estate construction<br>783<br><br><br>473<br><br><br>—<br><br><br>76<br><br><br>1,332<br><br><br>Commercial real estate<br>12,376<br><br><br>(229)<br><br><br>—<br><br><br>123<br><br><br>12,270<br><br><br>Total commercial<br>22,084<br><br><br>1,255<br><br><br>(1,336)<br><br><br>520<br><br><br>22,523<br><br><br>Consumer<br>Residential real estate first mortgage<br>6,532<br><br><br>(941)<br><br><br>—<br><br><br>—<br><br><br>5,591<br><br><br>Residential real estate junior lien<br>1,295<br><br><br>(151)<br><br><br>—<br><br><br>221<br><br><br>1,365<br><br><br>Other revolving and installment<br>481<br><br><br>65<br><br><br>(130)<br><br><br>121<br><br><br>537<br><br><br>Total consumer<br>8,308<br><br><br>(1,027)<br><br><br>(130)<br><br><br>342<br><br><br>7,493<br><br><br>Unallocated<br>1,180<br><br><br>(228)<br><br><br>—<br><br><br>—<br><br><br>952<br><br><br>Total<br>$<br>31,572<br><br><br>$<br>—<br><br><br>$<br>(1,466)<br><br><br>$<br>862<br><br><br>$<br>30,968<br><br><br>Ending<br>Balance<br>Nine months ended September 30, 2022<br>Loan<br>Charge-offs<br>Loan<br>Recoveries<br>Beginning<br>Balance<br>Provision for<br>Loan Losses
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31<br>ALLOCATION BY PORTFOLIO SEGMENT<br>ALLOWANCE FOR LOAN LOSSES<br>(dollars in thousands)<br>Commercial and industrial<br>$<br>8,921<br><br><br>24.4%<br><br><br>$<br>8,925<br><br><br>24.8%<br><br><br>Real estate construction<br>1,332<br><br><br>3.8%<br><br><br>783<br><br><br>2.3%<br><br><br>Commercial real estate<br>12,270<br><br><br>35.4%<br><br><br>12,376<br><br><br>34.1%<br><br><br>Residential real estate first mortgage<br>5,591<br><br><br>28.0%<br><br><br>6,532<br><br><br>29.1%<br><br><br>Residential real estate junior lien<br>1,365<br><br><br>6.2%<br><br><br>1,295<br><br><br>7.1%<br><br><br>Other revolving and installment<br>537<br><br><br>2.2%<br><br><br>481<br><br><br>2.6%<br><br><br>Unallocated<br>952<br><br><br>—<br><br><br>1,180<br><br><br>—<br><br><br>Total loans<br>$<br>30,968<br><br><br>100.0%<br><br><br>$<br>31,572<br><br><br>100.0%<br><br><br>total loans<br>September 30, 2022<br>December 31, 2021<br>Allocated<br>of loans to<br>Allowance<br>total loans<br>Allocated<br>Allowance<br>of loans to<br>Percentage<br>Percentage
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32<br>ALLOCATION BY RISK SEGMENT (DOLLARS IN THOUSANDS)<br>ALLOWANCE FOR LOAN LOSSES<br>As of 9/30/2022.<br>1<br>-<br>Unguaranteed balances exclude PPP loans as well as loans that are guaranteed by another government agency.<br>Reserve/<br>Unguaranteed<br>Reserve/Total<br>Risk Level<br>Loans<br>Loans<br>Pass<br>$<br>2,300,624<br><br><br>$<br>2,017,705<br><br><br>$<br>28,674<br><br><br>1.4%<br><br><br>1.3%<br><br><br>Special Mention<br>3,902<br><br><br>3,902<br><br><br>160<br><br><br>4.1%<br><br><br>4.1%<br><br><br>Substandard<br>8,628<br><br><br>7,900<br><br><br>918<br><br><br>11.6%<br><br><br>10.6%<br><br><br>Total Loans Evaluated Collectively<br>2,313,154<br><br><br>2,029,507<br><br><br>29,752<br><br><br>1.5%<br><br><br>1.3%<br><br><br>Total Loans Evaluated Individually<br>5,077<br><br><br>4,852<br><br><br>264<br><br><br>5.4%<br><br><br>5.2%<br><br><br>Unallocated<br>—<br><br><br>—<br><br><br>952<br><br><br>—<br><br><br>—<br><br><br>Total<br>2,318,231<br><br><br>2,034,359<br><br><br>30,968<br><br><br>1.5%<br><br><br>1.3%<br><br><br>Amount<br>Total Loans<br>Balance<br>1<br>Reserve<br>Unguaranteed
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33<br>FINANCIAL HIGHLIGHTS<br>1<br>Represents a non<br>-<br>GAAP financial measure. See “Non<br>-<br>GAAP Disclosure Reconciliation”.<br>(dollars in thousands,<br>except where otherwise noted)<br>Q3 2021<br>Q4 2021<br>Q1 2022<br>Q2 2022<br>Q3 2022<br>September 30, 2022<br>September 30, 2021<br>Total Assets<br>3,175,169<br>$<br><br>3,392,691<br>$<br><br>3,336,199<br>$<br><br>3,295,065<br>$<br><br>3,691,253<br>$<br><br>3,691,253<br>$<br><br>3,175,169<br>$<br><br>Total Loans<br>1,800,386<br><br><br>1,758,020<br><br><br>1,818,042<br><br><br>1,890,243<br><br><br>2,318,231<br><br><br>2,318,231<br><br><br>1,800,386<br><br><br>Total Deposits<br>2,713,088<br><br><br>2,920,551<br><br><br>2,892,266<br><br><br>2,619,550<br><br><br>2,961,811<br><br><br>2,961,812<br><br><br>2,713,088<br><br><br>Tangible Common Equity<br>1<br>300,401<br><br><br>307,663<br><br><br>277,818<br><br><br>258,310<br><br><br>275,000<br><br><br>275,000<br><br><br>300,401<br><br><br>Net Income<br>13,067<br>$<br><br>12,705<br>$<br><br>10,184<br>$<br><br>9,293<br>$<br><br>9,619<br>$<br><br>29,096<br>$<br><br>39,976<br>$<br><br>ROAA (%)<br>1.62<br><br><br>1.50<br><br><br>1.26<br><br><br>1.14<br><br><br>1.02<br><br><br>1.13<br><br><br>1.71<br><br><br>ROATCE(%)<br>1<br>18.13<br><br><br>17.36<br><br><br>14.72<br><br><br>15.25<br><br><br>13.89<br><br><br>14.59<br><br><br>19.44<br><br><br>Net Interest Margin (FTE) (%)<br>2.16<br><br><br>2.84<br><br><br>2.83<br><br><br>2.98<br><br><br>3.21<br><br><br>3.02<br><br><br>2.92<br><br><br>Efficiency Ratio (FTE) (%)<br>1<br>71.49<br><br><br>71.06<br><br><br>72.25<br><br><br>74.72<br><br><br>74.76<br><br><br>73.94<br><br><br>69.69<br><br><br>Non-Int. Income/Op. Rev. (%)<br>63.04<br><br><br>59.67<br><br><br>57.62<br><br><br>56.20<br><br><br>48.82<br><br><br>54.08<br><br><br>63.87<br><br><br>Earnings per common share - diluted<br>0.74<br>$<br><br>0.72<br>$<br><br>0.57<br>$<br><br>0.52<br>$<br><br>0.47<br>$<br><br>1.56<br>$<br><br>2.26<br>$<br><br>Total Equity/Total Assets (%)<br>11.12<br><br><br>10.59<br><br><br>9.85<br><br><br>9.32<br><br><br>9.34<br><br><br>9.34<br><br><br>11.12<br><br><br>Tang. Cmn. Equity/Tang. Assets (%)<br>1<br>9.62<br><br><br>9.21<br><br><br>8.46<br><br><br>7.96<br><br><br>7.59<br><br><br>7.59<br><br><br>9.62<br><br><br>Loans/Deposits (%)<br>66.36<br><br><br>60.19<br><br><br>62.86<br><br><br>72.16<br><br><br>78.27<br><br><br>78.27<br><br><br>66.36<br><br><br>NPLs/Loans (%)<br>0.35<br><br><br>0.12<br><br><br>0.23<br><br><br>0.23<br><br><br>0.23<br><br><br>0.23<br><br><br>0.35<br><br><br>NPAs/Assets (%)<br>0.22<br><br><br>0.09<br><br><br>0.15<br><br><br>0.16<br><br><br>0.17<br><br><br>0.17<br><br><br>0.22<br><br><br>Allowance/NPLs (%)<br>514.79<br><br><br>1,437.05<br><br><br>752.38<br><br><br>717.92<br><br><br>583.97<br><br><br>583.97<br><br><br>514.79<br><br><br>Allowance/Loans (%)<br>1.78<br><br><br>1.80<br><br><br>1.74<br><br><br>1.66<br><br><br>1.34<br><br><br>1.34<br><br><br>1.78<br><br><br>NCOs/Average Loans (%)<br>(0.06)<br><br><br>(0.22)<br><br><br>(0.03)<br><br><br>0.07<br><br><br>0.07<br><br><br>0.04<br><br><br>0.01<br><br><br>Nine months ended<br>Quarterly
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34<br>FINANCIAL HIGHLIGHTS<br>1<br>Represents a non<br>-<br>GAAP financial measure. See “Non<br>-<br>GAAP Disclosure Reconciliation”.<br>(dollars in thousands,<br>17-'21<br>except where otherwise noted)<br>2017<br>2018<br>2019<br>2020<br>2021<br>CAGR<br>Total Assets<br>2,136,081<br>$<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>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>1.84<br>1.91<br>2.52<br>2.97<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)<br><br><br>Annual
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35<br>NON<br>-<br>GAAP<br>DISCLOSURE<br>RECONCILIATION<br>($000s, except where otherwise noted)<br>Q3 2021<br>Q4 2021<br>Q1 2022<br>Q2 2022<br>Q3 2022<br>September 30, 2022<br>September 30, 2021<br>Tangible common equity to tangible assets<br>Total common stockholders' equity<br>353,195<br>$<br><br>359,403<br>$<br><br>328,505<br>$<br><br>307,158<br>$<br><br>344,839<br>$<br><br>344,839<br>$<br><br>353,195<br>$<br><br>Less: Goodwill<br>30,201<br><br><br>31,490<br><br><br>31,490<br><br><br>31,337<br><br><br>46,060<br><br><br>46,060<br><br><br>30,201<br><br><br>Less: Other intangible assets<br>22,593<br><br><br>20,250<br><br><br>19,197<br><br><br>17,511<br><br><br>23,779<br><br><br>23,779<br><br><br>22,593<br><br><br>Tangible common equity (a)<br>300,401<br><br><br>307,663<br><br><br>277,818<br><br><br>258,310<br><br><br>275,000<br><br><br>275,000<br><br><br>300,401<br><br><br>Total assets<br>3,175,169<br><br><br>3,392,691<br><br><br>3,336,199<br><br><br>3,295,065<br><br><br>3,691,253<br><br><br>3,691,253<br><br><br>3,175,169<br><br><br>Less: Goodwill<br>30,201<br><br><br>31,490<br><br><br>31,490<br><br><br>31,337<br><br><br>46,060<br><br><br>46,060<br><br><br>30,201<br><br><br>Less: Other intangible assets<br>22,593<br><br><br>20,250<br><br><br>19,197<br><br><br>17,511<br><br><br>23,779<br><br><br>23,779<br><br><br>22,593<br><br><br>Tangible assets (b)<br>3,122,375<br><br><br>3,340,951<br><br><br>3,285,512<br><br><br>3,246,217<br><br><br>3,621,414<br><br><br>3,621,414<br><br><br>3,122,375<br><br><br>Tangible common equity to tangible assets (a)/(b)<br>9.62%<br><br><br>9.21%<br><br><br>8.46%<br><br><br>7.96%<br><br><br>7.59%<br><br><br>7.59%<br><br><br>9.62%<br><br><br>Tangible common equity per common share<br>Total stockholders' equity<br>353,195<br>$<br><br>359,403<br>$<br><br>328,505<br>$<br><br>307,158<br>$<br><br>344,839<br>$<br><br>344,839<br>$<br><br>353,195<br>$<br><br>Less: Goodwill<br>30,201<br><br><br>31,490<br><br><br>31,490<br><br><br>31,337<br><br><br>46,060<br><br><br>46,060<br><br><br>30,201<br><br><br>Less: Other intangible assets<br>22,593<br><br><br>20,250<br><br><br>19,197<br><br><br>17,511<br><br><br>23,779<br><br><br>23,779<br><br><br>22,593<br><br><br>Tangible common equity (c)<br>300,401<br><br><br>307,663<br><br><br>277,818<br><br><br>258,310<br><br><br>275,000<br><br><br>275,000<br><br><br>300,401<br><br><br>Common shares outstanding (d)<br>17,208<br><br><br>17,213<br><br><br>17,289<br><br><br>17,306<br><br><br>19,987<br><br><br>19,987<br><br><br>17,208<br><br><br>Tangible common equity per common share (c)/(d)<br>17.46<br>$<br><br>17.87<br>$<br><br>16.07<br>$<br><br>14.93<br>$<br><br>13.76<br>$<br><br>13.76<br>$<br><br>17.46<br>$<br><br>Return on average tangible common equity<br>Net income<br>13,067<br>$<br><br>12,705<br>$<br><br>10,184<br>$<br><br>9,293<br>$<br><br>9,619<br>$<br><br>29,096<br>$<br><br>39,976<br>$<br><br>Add: Intangible amortization expense (net of tax)<br>860<br><br><br>832<br><br><br>832<br><br><br>832<br><br><br>1,046<br><br><br>2,710<br><br><br>2,628<br><br><br>Net income, excluding intangible amortization (e)<br>13,927<br><br><br>13,537<br><br><br>11,016<br><br><br>10,125<br><br><br>10,665<br><br><br>31,806<br><br><br>42,604<br><br><br>Average total equity<br>353,196<br><br><br>357,084<br><br><br>350,545<br><br><br>312,515<br><br><br>372,274<br><br><br>345,192<br><br><br>342,344<br><br><br>Less: Average goodwill<br>30,201<br><br><br>30,930<br><br><br>31,490<br><br><br>31,488<br><br><br>48,141<br><br><br>37,101<br><br><br>30,201<br><br><br>Less: Average other intangible assets (net of tax)<br>18,272<br><br><br>16,843<br><br><br>15,569<br><br><br>14,737<br><br><br>19,466<br><br><br>16,605<br><br><br>19,124<br><br><br>Average tangible common equity (f)<br>304,723<br><br><br>309,311<br><br><br>303,486<br><br><br>266,290<br><br><br>304,667<br><br><br>291,486<br><br><br>293,019<br><br><br>Return on average tangible common equity (e)/(f)<br>18.13%<br><br><br>17.36%<br><br><br>14.72%<br><br><br>15.25%<br><br><br>13.89%<br><br><br>14.59%<br><br><br>19.44%<br><br><br>Efficiency Ratio<br>Noninterest expense<br>42,041<br>$<br><br>41,276<br>$<br><br>38,071<br>$<br><br>39,984<br>$<br><br>42,767<br>$<br><br>120,822<br>$<br><br>127,633<br>$<br><br>Less: Intangible amortization expense<br>1,088<br><br><br>1,053<br><br><br>1,053<br><br><br>1,053<br><br><br>1,324<br><br><br>3,430<br><br><br>3,327<br><br><br>Adjusted noninterest expense (i)<br>40,953<br><br><br>40,223<br><br><br>37,018<br><br><br>38,931<br><br><br>41,443<br><br><br>117,392<br><br><br>124,306<br><br><br>Net interest income<br>21,132<br><br><br>22,789<br><br><br>21,673<br><br><br>22,776<br><br><br>28,316<br><br><br>72,765<br><br><br>64,310<br><br><br>Noninterest income<br>36,040<br><br><br>33,718<br><br><br>29,470<br><br><br>29,226<br><br><br>27,010<br><br><br>85,706<br><br><br>113,669<br><br><br>Tax-equivalent adjustment<br>115<br><br><br>99<br><br><br>94<br><br><br>100<br><br><br>112<br><br><br>306<br><br><br>392<br><br><br>Total tax-equivalent revenue(j)<br>57,287<br><br><br>56,606<br><br><br>51,237<br><br><br>52,102<br><br><br>55,438<br><br><br>158,777<br><br><br>178,371<br><br><br>Efficiency ratio (i)/(j)<br>71.49%<br><br><br>71.06%<br><br><br>72.25%<br><br><br>74.72%<br><br><br>74.76%<br><br><br>73.94%<br><br><br>69.69%<br><br><br>Nine months ended<br>Quarterly
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36<br>NON<br>-<br>GAAP DISCLOSURE RECONCILIATION<br>(dollars in thousands, 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>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 (g)<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 (h)<br>171,580<br>178,435<br>189,092<br>233,672<br>234,978<br>Efficiency ratio (g)/(h)<br>75.36<br>%<br>73.80<br>%<br>73.22<br>%<br>68.40<br>%<br>70.02<br>%
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