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): July 24, 2024

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 July 24, 2024, Alerus Financial Corporation (the “Company”) issued a press release announcing its financial results for the three and six months ended June 30, 2024. 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 July 24, 2024, 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 July 24, 2024
99.2<br><br>104		Investor Presentation of Alerus Financial Corporation<br><br>Cover Page Interactive Data File (embedded within the Inline XBRL 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: July 24, 2024	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 (07.24.2024)<br><br>	Alan A. Villalon, Chief Financial Officer<br><br>952.417.3733 (Office)

ALERUS FINANCIAL CORPORATION REPORTS

SECOND QUARTER 2024 NET INCOME OF $6.2 MILLION

MINNEAPOLIS, MN (July 24, 2024) – Alerus Financial Corporation (Nasdaq: ALRS), or the Company, reported net income of $6.2 million for the second quarter of 2024, or $0.31 per diluted common share, compared to net income of $6.4 million, or $0.32 per diluted common share, for the first quarter of 2024, and net income of $9.1 million, or $0.45 per diluted common share, for the second quarter of 2023.

CEO Comments

President and Chief Executive Officer Katie Lorenson said, “We continued to see improvement in our underlying core business during the second quarter of 2024. Overall revenues grew 8% sequentially from the prior quarter as both our spread based and fee based revenues grew at a similar rate. A continued rebound in our net interest margin coupled with strong balance sheet growth in loans and deposits, including noninterest bearing deposits, propelled our spread income higher. Fee based revenues benefitted from an improvement in both asset based and non-market based fees from our wealth and retirement businesses. In addition, operating leverage improved with continued prudent expense management, which drove overall expenses down slightly during the quarter. These strong core underlying trends led to sequential improvement of over 48% in pre-provision net revenue from the prior quarter. Provision expense for the quarter was $4.5 million which was driven by loan growth and moving one previously identified commercial real estate loan to nonperforming. Overall classified asset levels improved during the quarter and credit quality is strong relative to historical standards. Reserve and capital levels remain robust with an allowance of 1.31% to total loans, CET1 ratio of 11.67%, while tangible book value per common share grew more than 8% over the past year.

I want to thank all the Alerus team members for their efforts in driving continuous improvement, their expertise and commitment to our clients, communities and shareholders to make Alerus better every day.”

Second Quarter Highlights

◾	Total deposits were $3.3 billion as of June 30, 2024, an increase of $203.0 million, or 6.6%, from December 31, 2023
◾	Total loans were $2.9 billion as of June 30, 2024, an increase of $156.2 million, or 5.7%, from December 31, 2023
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◾	The loan to deposit ratio as of June 30, 2024 was 88.4%, compared to 89.1% as of December 31, 2023; brokered deposits remained at $0
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◾	Net interest margin (on a tax equivalent basis) was 2.39% in the second quarter of 2024, compared to 2.30% in the first quarter of 2024. Adjusted net interest margin (on a tax-equivalent basis) (non-GAAP) increased 13 basis points from 2.44% in the first quarter of 2024 to 2.57% in the second quarter of 2024
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◾	Net interest income was $24.0 million in the second quarter of 2024, an increase of 8.0% from $22.2 million in the first quarter of 2024
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◾	Noninterest income, which represented 53.3% of total revenues, was $27.4 million in the second quarter of 2024, an increase of 8.1% from $25.3 million in the first quarter of 2024
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◾	Noninterest expense was $38.8 million in the second quarter of 2024, a decrease of 0.7%, from $39.0 million in the first quarter of 2024
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◾	Total assets under administration/management at June 30, 2024 were $43.6 billion, a 1.9% increase from March 31, 2024
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◾	Increased quarterly dividend by 5.26% over the first quarter of 2024 to $0.20 per share
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◾	Allowance for credit losses to total loans remained stable at 1.31% as of June 30, 2024 and March 31, 2024
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◾	Tangible book value per common share (non-GAAP) was $15.77 as of June 30, 2024, a 0.9% increase from March 31, 2024
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◾	Common equity tier 1 capital to risk weighted assets as of June 30, 2024 was 11.67% and continues to be well above the minimum threshold to be “well capitalized” of 6.50%
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◾	Continued to hold cash of $355.0 million from the Bank Term Funding Program (“BTFP”), earning 52 basis points of risk free return resulting in $0.5 million in net interest income for the second quarter of 2024
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Selected Financial Data (unaudited)


	As of and for the
	Three months ended									Six months ended
	June 30,			March 31,			June 30,			June 30,			June 30,
(dollars and shares in thousands, except per share data)	2024			2024			2023			2024			2023		****
Performance Ratios
Return on average total assets		0.58	%		0.63	%		0.96	%		0.60	%		0.92	%
Return on average common equity		6.76	%		7.04	%		10.14	%		6.90	%		9.66	%
Return on average tangible common equity ^(1)^		9.40	%		9.78	%		13.71	%		9.58	%		13.15	%
Noninterest income as a % of revenue		53.28	%		53.26	%		53.69	%		53.27	%		52.65	%
Net interest margin (tax-equivalent)		2.39	%		2.30	%		2.52	%		2.35	%		2.61	%
Adjusted net interest margin (tax-equivalent) ^(1)^		2.57	%		2.44	%		2.52	%		2.50	%		2.61	%
Efficiency ratio ^(1)^		72.50	%		78.88	%		72.79	%		75.56	%		73.67	%
Net charge-offs/(recoveries) to average loans		0.36	%		0.01	%		(0.07)	%		0.19	%		(0.02)	%
Dividend payout ratio		64.52	%		59.38	%		42.22	%		61.90	%		43.53	%
Per Common Share
Earnings per common share - basic	$	0.31		$	0.32		$	0.45		$	0.64		$	0.86
Earnings per common share - diluted	$	0.31		$	0.32		$	0.45		$	0.63		$	0.85
Dividends declared per common share	$	0.20		$	0.19		$	0.19		$	0.39		$	0.37
Book value per common share	$	18.87		$	18.79		$	17.96
Tangible book value per common share ^(1)^	$	15.77		$	15.63		$	14.60
Average common shares outstanding - basic		19,777			19,739			20,033			19,758			20,030
Average common shares outstanding - diluted		20,050			19,986			20,241			20,018			20,243
Other Data
Retirement and benefit services assets under administration/management	$	39,389,533		$	38,488,523		$	35,052,652
Wealth management assets under administration/management	$	4,172,290		$	4,242,408		$	3,857,710
Mortgage originations	$	109,254		$	54,101		$	111,261		$	163,355		$	188,989

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

Results of Operations

Net Interest Income

Net interest income for the second quarter of 2024 was $24.0 million, a $1.8 million, or 8.0%, increase from the first quarter of 2024. The increase was due to interest income on increased loan balances and higher average cash balances related to the Bank Term Funding Program (“BTFP”) arbitrage trade. The increase was partially offset by an increase in interest expense on deposits, driven by higher average deposit and BTFP borrowing balances and higher deposit rates.

Net interest income increased $1.8 million, or 7.9%, from $22.2 million for the second quarter of 2023. Interest income increased $12.7 million, or 31.4%, from the second quarter of 2023, primarily driven by higher yields on new loans and strong organic loan growth, in addition to interest income on higher cash balances due to the BTFP arbitrage trade. The increase in interest income was partially offset by a $10.9 million, or 60.3%, increase in interest expense, due to both an increase in rates paid on interest-bearing deposits and higher deposit and short-term borrowing balances.

Net interest margin (on a tax-equivalent basis) was 2.39% for the second quarter of 2024, a 9 basis point increase from 2.30% for the first quarter of 2024, and a 13 basis point decrease from 2.52% for the second quarter of 2023. The increase in net interest margin (on a tax-equivalent basis) was mainly attributable to higher yields on loans and strong loan growth, partially offset by the higher cost of funds from continued growth in average interest-bearing deposit balances. Adjusted net interest margin (on a tax-equivalent basis) (non-GAAP), which excludes BTFP borrowings, was 2.57% for the second quarter of 2024, a 13 basis point increase from 2.44% for the first quarter of 2024, and a 5 basis point increase from 2.52% for the second quarter of 2023.

Noninterest Income

Noninterest income for the second quarter of 2024 was $27.4 million, a $2.0 million increase from the first quarter of 2024. The quarter over quarter increase was primarily driven by improvement across all fee-based businesses. Mortgage banking saw a $0.9 2

million increase in revenue with mortgage originations of $109.3 million in the second quarter of 2024, compared to originations of $54.1 million in the first quarter of 2024. Retirement and benefit services revenue increased $0.4 million for the second quarter of 2024, a 2.7% increase from first quarter of 2024 results, primarily due to the growth in asset-based revenue. Assets under administration/management in retirement and benefit services increased 2.3% from March 31, 2024, due to improved equity and bond markets. Wealth management revenues increased $0.2 million during the second quarter of 2024, a 4.0% increase from the first quarter of 2024, primarily due to fee schedule increases. Additionally, other noninterest income increased $0.4 million during the second quarter of 2024, a 29.0% increase from the first quarter of 2024, primarily due to client swap fees.

Noninterest income for the second quarter of 2024 was $27.4 million, an increase of $1.6 million, or 6.2%, from the second quarter of 2023. Wealth management revenues increased $0.9 million, or 16.7%, in the second quarter of 2024, as assets under administration/management increased 8.2% during that same period. Other noninterest income increased $0.7 million, or 57.2% in the second quarter of 2024 compared to the second quarter of 2023, primarily due to client swap fees. Partially offsetting this increase, mortgage revenue decreased $0.4 million, or 12.1%, from $2.9 million in the second quarter of 2023, primarily driven by timing differences related to the mortgage pipeline hedging.

Noninterest Expense

Noninterest expense for the second quarter of 2024 was $38.8 million, a $0.3 million, or 0.7%, decrease from the first quarter of 2024. Employee taxes and benefits expense decreased $1.1 million for the second quarter of 2024, a 17.0% decrease from the first quarter of 2024, primarily due to seasonality. Business services, software and technology expense decreased $0.7 million, or 14.0%, from the first quarter of 2024, primarily driven by reduced core processing and data processing expenses. The decrease in noninterest expense was partially offset by an increase in compensation and professional fees and assessments. Compensation expenses increased $0.9 million, or 4.8%, from the first quarter of 2024, primarily driven by an increase in mortgage incentive compensation. Professional fees and assessments increased $0.4 million, or 19.1%, from the first quarter of 2024, primarily driven by increased merger-related expenses of $0.5 million in connection with the pending acquisition of HMN Financial, Inc.

Noninterest expense for the second quarter of 2024 increased $2.4 million, or 6.5%, from $36.4 million in the second quarter of 2023. The increase was primarily driven by compensation expenses and professional fees and assessments. Compensation expenses increased primarily due to increased labor costs. Professional fees and assessments increased primarily due to increased merger-related expenses of $0.6 million in connection with the pending acquisition of HMN Financial, Inc. and an increase in Federal Deposit Insurance Corporation (“FDIC”) assessments.

Financial Condition

Total assets were $4.4 billion as of June 30, 2024, an increase of $450.9 million, or 11.5%, from December 31, 2023. The increase was primarily due to a $308.2 million increase in cash and cash equivalents and a $156.2 million increase in loans, partially offset by a decrease of $37.5 million in investment securities. The increase in cash and cash equivalents was primarily driven by the proceeds from BTFP borrowings.

Loans

Total loans were $2.9 billion as of June 30, 2024, an increase of $156.2 million, or 5.7%, from December 31, 2023. The increase was primarily driven by a $78.4 million increase in non-owner occupied commercial real estate (“CRE”) loans, a $37.7 million increase in construction, land and development CRE loans, and a $29.6 million increase in commercial and industrial loans, partially offset by $11.6 million and $6.4 million decreases in residential real estate first lien and construction loans, respectively.

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



		June 30,		March 31,		December 31,		September 30,		June 30,
(dollars in thousands)	****	2024		2024		2023		2023		2023
Commercial
Commercial and industrial		$	591,779	$	575,259	$	562,180	$	547,644	$	521,427
Commercial real estate
Construction, land and development			161,751		125,966		124,034		97,742		78,428
Multifamily			242,041		260,609		245,103		214,148		210,902
Non-owner occupied			647,776		565,979		569,354		504,827		500,334
Owner occupied			283,356		285,211		271,623		264,458		251,981
Total commercial real estate			1,334,924		1,237,765		1,210,114		1,081,175		1,041,645
Agricultural
Land			41,410		41,149		40,832		41,581		40,603
Production			40,549		36,436		36,141		34,743		30,435
Total agricultural			81,959		77,585		76,973		76,324		71,038
Total commercial			2,008,662		1,890,609		1,849,267		1,705,143		1,634,110
Consumer
Residential real estate
First lien			686,286		703,726		697,900		680,634		672,441
Construction			22,573		18,425		28,979		37,159		35,189
HELOC			126,211		120,501		118,315		116,296		121,474
Junior lien			36,323		36,381		35,819		36,381		35,757
Total residential real estate			871,393		879,033		881,013		870,470		864,861
Other consumer			35,737		29,833		29,303		30,817		34,552
Total consumer			907,130		908,866		910,316		901,287		899,413
Total loans		$	2,915,792	$	2,799,475	$	2,759,583	$	2,606,430	$	2,533,523

Deposits

Total deposits were $3.3 billion as of June 30, 2024, an increase of $203.0 million, or 6.6%, from December 31, 2023. Interest-bearing deposits increased $229.6 million, while noninterest-bearing deposits decreased $26.7 million, from December 31, 2023. The increase in total deposits was due to both expanded and new commercial deposit relationships, along with time deposit and synergistic deposit growth. Synergistic deposits were $874.8 million as of June 30, 2024, an increase of $23.2 million, or 2.7%, from December 31, 2023. The Company continued to have $0 of brokered deposits as of June 30, 2024.

The following table presents the composition of the Company’s deposit portfolio as of the dates indicated:


		June 30,			March 31,			December 31,			September 30,			June 30,
(dollars in thousands)	****	2024		****	2024		****	2023		****	2023		****	2023
Noninterest-bearing demand		$	701,428		$	692,500		$	728,082		$	717,990		$	715,534
Interest-bearing
Interest-bearing demand			1,003,585			938,751			840,711			759,812			753,194
Savings accounts			79,747			82,727			82,485			88,341			93,557
Money market savings			1,022,470			1,114,262			1,032,771			959,106			986,403
Time deposits			491,345			456,729			411,562			346,935			304,167
Total interest-bearing			2,597,147			2,592,469			2,367,529			2,154,194			2,137,321
Total deposits		$	3,298,575		$	3,284,969		$	3,095,611		$	2,872,184		$	2,852,855

Asset Quality

Total nonperforming assets were $27.6 million as of June 30, 2024, an increase of $18.9 million from December 31, 2023. The increase was driven by one previously identified construction, land and development loan of $21.5 million moving to nonaccrual status.

As of June 30, 2024, the allowance for credit losses on loans was $38.3 million, or 1.31% of total loans, compared to $35.8 million, or 1.30% of total loans, as of December 31, 2023.

The following table presents selected asset quality data as of and for the periods indicated:


		As of and for the three months ended
		June 30,			March 31,			December 31,			September 30,			June 30,
(dollars in thousands)	****	2024		****	2024		****	2023		****	2023		****	2023		****
Nonaccrual loans		$	27,618		$	7,345		$	8,596		$	9,007		$	2,233
Accruing loans 90+ days past due			—			—			139			—			347
Total nonperforming loans			27,618			7,345			8,735			9,007			2,580
OREO and repossessed assets			—			3			32			3			—
Total nonperforming assets		$	27,618		$	7,348		$	8,767		$	9,010		$	2,580
Net charge-offs/(recoveries)			2,522			58			(238)			(594)			(403)
Net charge-offs/(recoveries) to average loans			0.36	%		0.01	%		(0.04)	%		(0.09)	%		(0.07)	%
Nonperforming loans to total loans			0.95	%		0.26	%		0.32	%		0.35	%		0.10	%
Nonperforming assets to total assets			0.63	%		0.17	%		0.22	%		0.23	%		0.07	%
Allowance for credit losses on loans to total loans			1.31	%		1.31	%		1.30	%		1.39	%		1.41	%
Allowance for credit losses on loans to nonperforming loans			139	%		498	%		410	%		403	%		1,384	%

For the second quarter of 2024, the Company had net charge-offs of $2.5 million, compared to net charge-offs of $58 thousand for the first quarter of 2024 and net recoveries of $403 thousand for the second quarter of 2023. The increase in net charge-offs was driven by a $2.6 million charge-off of one commercial and industrial loan that had an individual reserve of $2.3 million in the first quarter of 2024.

The Company recorded a provision for credit losses of $4.5 million for the second quarter of 2024, compared to no provision for each of the first quarter of 2024 and the second quarter of 2023. The increase in the provision for credit losses was primarily driven by loan growth, as well as an increased reserve related to the previously identified $21.5 million construction, land and development loan which moved to nonaccrual status during the second quarter of 2024.

The unearned fair value adjustments on the acquired Metro Phoenix Bank loan portfolio were $4.1 million as of June 30, 2024, $5.2 million as of December 31, 2023, and $6.2 million as of June 30, 2023.

Capital

Total stockholders’ equity was $373.2 million as of June 30, 2024, an increase of $4.1 million from December 31, 2023. This change was primarily driven by an increase in retained earnings of $4.9 million. Tangible book value per common share (non-GAAP) increased to $15.77 as of June 30, 2024, from $15.46 as of December 31, 2023. Tangible common equity to tangible assets (non-GAAP) decreased to 7.26% as of June 30, 2024, from 7.94% as of December 31, 2023. Common equity tier 1 capital to risk weighted assets decreased to 11.67% as of June 30, 2024, from 11.82% as of December 31, 2023.

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


	****	June 30,		****	December 31,		****	June 30,
	****	2024		****	2023		****	2023
Capital Ratios^(1)^
Alerus Financial Corporation Consolidated
Common equity tier 1 capital to risk weighted assets			11.67	%		11.82	%		13.30	%
Tier 1 capital to risk weighted assets			11.94	%		12.10	%		13.60	%
Total capital to risk weighted assets			14.70	%		14.76	%		16.49	%
Tier 1 capital to average assets			9.60	%		10.57	%		11.15	%
Tangible common equity / tangible assets ^(2)^			7.26	%		7.94	%		7.72	%

Alerus Financial, N.A.
Common equity tier 1 capital to risk weighted assets			11.23	%		11.40	%		12.93	%
Tier 1 capital to risk weighted assets			11.23	%		11.40	%		12.93	%
Total capital to risk weighted assets			12.48	%		12.51	%		14.14	%
Tier 1 capital to average assets			9.05	%		9.92	%		10.59	%

(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, July 25, 2024, to discuss its financial results. Attendees are encouraged to register ahead of time for the call at investors.alerus.com. The call can also be accessed via telephone at 1 (833) 470-1428, using access code 287487. 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 (Nasdaq: ALRS) is a commercial wealth bank and national retirement services provider with corporate offices in Grand Forks, North Dakota, and the Minneapolis-St. Paul, Minnesota metropolitan area. Through its subsidiary, Alerus Financial, National Association, Alerus provides diversified and comprehensive financial solutions to business and consumer clients, including banking, wealth services, and retirement and benefit plans and services. 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 and wealth offices in Grand Forks and Fargo, North Dakota, the Minneapolis-St. Paul, Minnesota metropolitan area, and Phoenix and Scottsdale, Arizona. Alerus Retirement and Benefit serves advisors, brokers, employers, and plan participants across the United States.

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, adjusted tangible common equity to tangible assets, tangible book value per common share, return on average tangible common equity, efficiency ratio, pre-provision net revenue, net interest margin (tax-equivalent), and adjusted net interest margin (tax-equivalent). Management uses these non-GAAP financial measures in its analysis of its performance, and believes financial analysts and investors frequently use these measures, and other similar measures, to evaluate capital adequacy and financial performance. Reconciliations of non-GAAP disclosures used in this press release to the comparable GAAP measures are provided in the accompanying tables. Management, banking regulators, many financial analysts and other investors use these measures in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions.

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

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of Alerus Financial Corporation. These statements are often, but not always, identified by words such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”, “annualized”, “target” and “outlook”, or the negative version of those words or other comparable words of a future or forward-looking nature. Examples of forward-looking statements include, among others, statements the Company makes 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 our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in forward-looking statements include, among others, the following: interest rate risk, including the effects of sustained high interest rates; our ability to successfully manage credit risk and maintain an adequate level of allowance for credit losses; new or revised accounting standards; business and economic conditions generally and in the financial services industry, nationally and within our market areas, including high rates of inflation and possible recession; the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short-period of time that resulted in recent bank failures; the overall health of the local and national real estate market; concentrations within our loan portfolio; the level of nonperforming assets on our balance sheet; our ability to implement our organic and acquisition growth strategies, including the integration of Metro Phoenix Bank which the Company acquired in 2022 and the pending acquisition of HMN Financial, Inc.; 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 or our third party vendors’ information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools; interruptions involving our information technology and telecommunications systems or third-party servicers; potential losses incurred in connection with mortgage loan repurchases; the composition of our executive management team and our ability to attract and retain key personnel; rapid technological change in the financial services industry; increased competition in the financial services industry from non-banks such as credit unions and Fintech companies, including digital asset service providers; our ability to successfully manage liquidity risk, including our need to access higher cost sources of funds such as fed funds purchased and short-term borrowings; the concentration of large deposits from certain clients, who have balances above current FDIC insurance limits; the effectiveness of our risk management framework; the commencement and outcome of litigation and other legal proceedings and regulatory actions against us or to which the Company may become subject; potential impairment to the goodwill the Company recorded in connection with our past acquisitions, including the acquisition of Metro Phoenix Bank and the pending acquisition of HMN Financial, Inc.; the extensive regulatory framework that applies to us; the impact of recent and future legislative and regulatory changes, including in response to recent bank failures; fluctuations in the values of the securities held in our securities portfolio, including as a result of changes in interest rates; governmental monetary, trade and fiscal policies; risks related to climate change and the negative impact it may have on our customers and their businesses; severe weather, natural disasters, widespread disease or pandemics; acts of war or terrorism, including the ongoing Israeli-Palestinian conflict and the Russian invasion of Ukraine, or other adverse external events; any material weaknesses in our internal control over financial reporting; changes to U.S. or state tax laws, regulations and guidance; potential changes in federal policy and at regulatory agencies as a result of the upcoming 2024 presidential election; talent and labor shortages and employee turnover; our success at managing the risks involved in the foregoing items; and any other risks described in the “Risk Factors” sections of the reports filed by Alerus Financial Corporation with the Securities and Exchange Commission.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. The Company undertakes 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.

Additional Information and Where to Find It

The Company filed a Registration Statement on Form S-4 (Registration Statement No. 333-280815) with the SEC on July 15, 2024, in connection with a proposed transaction between the Company and HMN Financial, Inc. (“HMNF”). The registration statement includes a joint proxy statement of the Company and HMNF that also constitutes a prospectus of the Company, which will be sent to the stockholders of the Company and HMNF after the SEC declares the registration statement effective.

Before making any voting decision, the stockholders of the Company and HMNF are advised to read the joint proxy statement/prospectus, because it contains important information about the Company, HMNF and the proposed transaction.

This document and other documents relating to the proposed transaction filed by the Company can be obtained free of charge from the SEC’s website at www.sec.gov. These documents also can be obtained free of charge by accessing the Company’s website at www.alerus.com under the link “Investors Relations” and then under “SEC Filings” and HMNF’s website at www.justcallhome.com/HMNFinancial under “SEC Filings.” Alternatively, these documents can be obtained free of charge from the Company upon written request to Alerus Financial Corporation, Corporate Secretary, 401 Demers Avenue, Grand Forks, North 7

Dakota 58201 or by calling (701) 795-3200, or from HMNF upon written request to HMN Financial, Inc., Corporate Secretary, 1016 Civic Center Drive NW, Rochester, Minnesota 55901 or by calling (507) 535-1200. The contents of the websites referenced above are not deemed to be incorporated by reference into the registration statement or the joint proxy statement/prospectus.

Participants in the Solicitation

This press release does not constitute a solicitation of proxy, an offer to purchase or a solicitation of an offer to sell any securities. The Company, HMNF, and certain of their directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the stockholders of the Company and HMNF in connection with the proposed transaction under SEC rules. Information about the directors and executive officers of the Company and HMNF is included in the joint proxy statement/prospectus for the proposed transaction filed with the SEC. This document may be obtained free of charge in the manner described above under “Additional Information and Where to Find It.”

Alerus Financial Corporation and Subsidiaries

Consolidated Balance Sheets

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


	****	June 30,		****	December 31,
	****	2024		****	2023
Assets		(Unaudited)
Cash and cash equivalents		$	438,141		$	129,893
Investment securities
Trading, at fair value			2,868			—
Available-for-sale, at fair value			459,345			486,736
Held-to-maturity, at amortized cost (with an allowance for credit losses on investments of $151 and $207, respectively)			286,532			299,515
Loans held for sale			38,158			11,497
Loans			2,915,792			2,759,583
Allowance for credit losses on loans			(38,332)			(35,843)
Net loans			2,877,460			2,723,740
Land, premises and equipment, net			21,167			17,940
Operating lease right-of-use assets			4,871			5,436
Accrued interest receivable			16,877			15,700
Bank-owned life insurance			35,508			33,236
Goodwill			46,783			46,783
Other intangible assets			14,510			17,158
Servicing rights			1,963			2,052
Deferred income taxes, net			35,732			34,595
Other assets			78,708			83,432
Total assets		$	4,358,623		$	3,907,713
Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing		$	701,428		$	728,082
Interest-bearing			2,597,147			2,367,529
Total deposits			3,298,575			3,095,611
Short-term borrowings			555,000			314,170
Long-term debt			59,013			58,956
Operating lease liabilities			5,197			5,751
Accrued expenses and other liabilities			67,612			64,098
Total liabilities			3,985,397			3,538,586
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: 19,777,796 and 19,734,077 issued and outstanding			19,778			19,734
Additional paid-in capital			150,857			150,343
Retained earnings			277,620			272,705
Accumulated other comprehensive loss			(75,029)			(73,655)
Total stockholders’ equity			373,226			369,127
Total liabilities and stockholders’ equity		$	4,358,623		$	3,907,713

Alerus Financial Corporation and Subsidiaries

Consolidated Statements of Income

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


	Three months ended						Six months ended
	June 30,		March 31,		June 30,		June 30,		June 30,
	2024		2024		2023		2024		2023
Interest Income	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Loans, including fees	$	41,663	$	39,294	$	33,267	$	80,958	$	64,200
Investment securities
Taxable		4,845		4,568		6,125		9,413		12,076
Exempt from federal income taxes		170		174		186		343		376
Other		6,344		5,002		762		11,346		1,497
Total interest income		53,022		49,038		40,340		102,060		78,149
Interest Expense
Deposits		21,284		20,152		12,678		41,436		21,782
Short-term borrowings		7,053		5,989		4,763		13,042		9,156
Long-term debt		684		678		665		1,362		1,319
Total interest expense		29,021		26,819		18,106		55,840		32,257
Net interest income		24,001		22,219		22,234		46,220		45,892
Provision for credit losses		4,489		—		—		4,489		550
Net interest income after provision for credit losses		19,512		22,219		22,234		41,731		45,342
Noninterest Income
Retirement and benefit services		16,078		15,655		15,890		31,733		31,372
Wealth management		6,360		6,118		5,449		12,477		10,644
Mortgage banking		2,554		1,670		2,905		4,224		4,622
Service charges on deposit accounts		456		389		311		845		612
Other		1,923		1,491		1,223		3,415		3,781
Total noninterest income		27,371		25,323		25,778		52,694		51,031
Noninterest Expense
Compensation		20,265		19,332		18,847		39,597		38,005
Employee taxes and benefits		5,134		6,188		4,724		11,322		10,577
Occupancy and equipment expense		1,815		1,906		1,837		3,722		3,736
Business services, software and technology expense		4,599		5,345		5,269		9,944		10,593
Intangible amortization expense		1,324		1,324		1,324		2,648		2,648
Professional fees and assessments		2,373		1,993		1,530		4,366		2,682
Marketing and business development		651		785		665		1,436		1,389
Supplies and postage		370		528		406		898		866
Travel		332		292		306		624		554
Mortgage and lending expenses		467		441		215		908		712
Other		1,422		885		1,250		2,306		2,480
Total noninterest expense		38,752		39,019		36,373		77,771		74,242
Income before income tax expense		8,131		8,523		11,639		16,654		22,131
Income tax expense		1,923		2,091		2,535		4,014		4,841
Net income	$	6,208	$	6,432	$	9,104	$	12,640	$	17,290
Per Common Share Data
Earnings per common share	$	0.31	$	0.32	$	0.45	$	0.64	$	0.86
Diluted earnings per common share	$	0.31	$	0.32	$	0.45	$	0.63	$	0.85
Dividends declared per common share	$	0.20	$	0.19	$	0.19	$	0.39	$	0.37
Average common shares outstanding		19,777		19,739		20,033		19,758		20,030
Diluted average common shares outstanding		20,050		19,986		20,241		20,018		20,243

Alerus Financial Corporation and Subsidiaries

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

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


	****	June 30,			March 31,			December 31,			June 30,
	****	2024			2024			2023			2023
Tangible Common Equity to Tangible Assets
Total common stockholders’ equity		$	373,226		$	371,635		$	369,127		$	357,685
Less: Goodwill			46,783			46,783			46,783			47,087
Less: Other intangible assets			14,510			15,834			17,158			19,806
Tangible common equity (a)			311,933			309,018			305,186			290,792
Total assets			4,358,623			4,338,094			3,907,713			3,832,978
Less: Goodwill			46,783			46,783			46,783			47,087
Less: Other intangible assets			14,510			15,834			17,158			19,806
Tangible assets (b)			4,297,330			4,275,477			3,843,772			3,766,085
Tangible common equity to tangible assets (a)/(b)			7.26	%		7.23	%		7.94	%		7.72	%
Adjusted Tangible Common Equity to Tangible Assets
Tangible assets (b)		$	4,297,330		$	4,275,477		$	3,843,772		$	3,766,085
Less: Cash proceeds from BTFP			355,000			355,000			—			—
Adjusted tangible assets (c)			3,942,330			3,920,477			3,843,772			3,766,085
Adjusted tangible common equity to tangible assets (a)/(c)			7.91	%		7.88	%		7.94	%		7.72	%
Tangible Book Value Per Common Share
Total common stockholders’ equity		$	373,226		$	371,635		$	369,127		$	357,685
Less: Goodwill			46,783			46,783			46,783			47,087
Less: Other intangible assets			14,510			15,834			17,158			19,806
Tangible common equity (d)			311,933			309,018			305,186			290,792
Total common shares issued and outstanding (e)			19,778			19,777			19,734			19,915
Tangible book value per common share (d)/(e)		$	15.77		$	15.63		$	15.46		$	14.60


	Three months ended									Six months ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2024			2024			2023			2024			2023
Return on Average Tangible Common Equity
Net income	$	6,208		$	6,432		$	9,104		$	12,640		$	17,290
Add: Intangible amortization expense (net of tax)		1,046			1,046			1,046			2,092			2,092
Net income, excluding intangible amortization (f)		7,254			7,478			10,150			14,732			19,382
Average total equity		369,216			367,249			360,216			368,501			361,032
Less: Average goodwill		46,783			46,783			47,087			46,783			47,087
Less: Average other intangible assets (net of tax)		11,969			13,018			16,153			12,494			16,678
Average tangible common equity (g)		310,464			307,448			296,976			309,224			297,267
Return on average tangible common equity (f)/(g)		9.40	%		9.78	%		13.71	%		9.58	%		13.15	%
Efficiency Ratio
Noninterest expense	$	38,752		$	39,019		$	36,373		$	77,771		$	74,242
Less: Intangible amortization expense		1,324			1,324			1,324			2,648			2,648
Adjusted noninterest expense (h)		37,428			37,695			35,049			75,123			71,594
Net interest income		24,001			22,219			22,234			46,220			45,892
Noninterest income		27,371			25,323			25,778			52,694			51,031
Tax-equivalent adjustment		255			247			141			502			264
Total tax-equivalent revenue (i)		51,627			47,789			48,153			99,416			97,187
Efficiency ratio (h)/(i)		72.50	%		78.88	%		72.79	%		75.56	%		73.67	%

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)


	Three months ended									Six months ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2024			2024			2023			2024			2023
Pre-Provision Net Revenue
Income (loss) before taxes	$	8,131		$	8,523		$	11,639		$	16,654		$	22,131
Add: Provision for credit losses		4,489			—			—			4,489			550
Pre-provision net revenue	$	12,620		$	8,523		$	11,639		$	21,143		$	22,681
Adjusted Net Interest Margin (Tax-Equivalent)
Net interest income	$	24,001		$	22,219		$	22,234		$	46,220		$	45,892
Less: BTFP cash interest income		4,766			3,615			—			8,381			—
Add: BTFP interest expense		4,307			3,266			—			7,573			—
Net interest income excluding BTFP impact		23,542			21,870			22,234			45,412			45,892
Add: Tax equivalent adjustment for loans and securities		255			247			141			502			264
Adjusted net interest income (j)	$	23,797		$	22,117		$	22,375		$	45,914		$	46,156
Interest earning assets		4,075,003			3,921,530			3,564,883			3,998,265			3,566,136
Less: Average cash proceeds balance from BTFP		355,000			269,176			—			312,088			—
Adjusted interest earning assets (k)	$	3,720,003		$	3,652,354		$	3,564,883		$	3,686,177		$	3,566,136
Adjusted net interest margin (tax-equivalent) (j)/(k)		2.57	%		2.44	%		2.52	%		2.50	%		2.61	%

Alerus Financial Corporation and Subsidiaries

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

(dollars in thousands)


	Three months ended												Six months ended
	June 30, 2024				March 31, 2024				June 30, 2023				June 30, 2024				June 30, 2023
			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	$	448,245	5.38	%	$	352,038	5.33	%	$	36,418	4.00	%	$	400,141	5.36	%	$	39,167	3.59	%
Investment securities ^(1)^		756,413	2.69			775,305	2.48			1,007,792	2.53			765,859	2.59			1,020,967	2.48
Loans held for sale		16,473	8.91			9,014	5.67			14,536	5.22			12,743	7.76			12,452	5.12
Loans
Commercial and industrial		578,544	7.39			564,125	6.96			516,943	6.92			571,334	7.18			524,500	6.50
CRE − Construction, land and development		126,744	8.01			127,587	8.04			87,905	7.43			127,165	8.02			95,460	6.96
CRE − Multifamily		243,076	5.52			250,513	5.56			191,100	5.15			246,794	5.54			151,740	5.14
CRE − Non-owner occupied		617,338	5.90			564,553	5.75			473,728	5.19			590,946	5.83			492,174	5.05
CRE − Owner occupied		283,754	5.47			279,165	5.36			252,320	4.90			281,459	5.41			251,669	4.94
Agricultural − Land		40,932	4.72			40,310	4.75			39,679	4.84			40,621	4.73			38,773	4.72
Agricultural − Production		38,004	6.69			35,331	6.39			28,415	6.47			36,668	6.54			27,848	6.26
RRE − First lien		694,866	4.07			701,756	4.01			665,519	3.71			698,311	4.04			659,636	3.70
RRE − Construction		21,225	5.38			21,559	5.20			32,769	4.81			21,392	5.30			33,911	4.91
RRE − HELOC		123,233	8.30			118,957	8.30			120,344	7.97			121,095	8.30			118,459	7.83
RRE − Junior lien		36,181	6.60			35,824	6.38			35,932	5.69			36,003	6.49			34,557	5.60
Other consumer		33,335	6.67			28,835	6.43			37,759	6.03			31,085	6.57			41,126	5.94
Total loans ^(1)^		2,837,232	5.88			2,768,515	5.72			2,482,413	5.36			2,802,873	5.80			2,469,853	5.23
Federal Reserve/FHLB stock		16,640	8.53			16,658	8.14			23,724	6.75			16,649	8.33			23,697	6.82
Total interest earning assets		4,075,003	5.26			3,921,530	5.05			3,564,883	4.55			3,998,265	5.16			3,566,136	4.43
Noninterest earning assets		222,290				217,524				220,604				220,178				222,358
Total assets	$	4,297,293			$	4,139,054			$	3,785,487			$	4,218,443			$	3,788,494
Interest-Bearing Liabilities
Interest-bearing demand deposits	$	959,119	2.24	%	$	869,060	1.97	%	$	775,818	1.26	%	$	914,090	2.11	%	$	761,319	1.07	%
Money market and savings deposits		1,147,525	3.79			1,186,900	3.77			1,145,335	2.81			1,167,213	3.78			1,155,247	2.49
Time deposits		458,125	4.50			431,679	4.46			270,121	3.29			444,902	4.48			251,145	2.80
Fed funds purchased and Bank Term Funding Program		366,186	4.90			282,614	4.99			360,033	5.31			324,400	4.94			325,303	5.10
FHLB short-term advances		200,000	5.21			200,000	4.99			—	—			200,000	5.10			39,779	4.69
Long-term debt		58,999	4.66			58,971	4.62			58,886	4.53			58,985	4.64			58,872	4.51
Total interest-bearing liabilities		3,189,954	3.66			3,029,224	3.56			2,610,193	2.78			3,109,590	3.61			2,591,665	2.51
Noninterest-Bearing Liabilities and Stockholders' Equity
Noninterest-bearing deposits		665,930				675,926				748,942				670,928				768,927
Other noninterest-bearing liabilities		72,193				66,655				66,136				69,424				66,870
Stockholders’ equity		369,216				367,249				360,216				368,501				361,032
Total liabilities and stockholders’ equity	$	4,297,293			$	4,139,054			$	3,785,487			$	4,218,443			$	3,788,494
Net interest income ^(1)^
Net interest rate spread			1.60	%			1.49	%			1.77	%			1.55	%			1.92	%
Net interest margin, tax-equivalent ^(1)^			2.39	%			2.30	%			2.52	%			2.35	%			2.61	%

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

Exhibit 99.2

INVESTOR PRESENTATION<br>2Q 2024<br>NASDAQ: ALRS
DISCLAIMERS<br>Forward-Looking Statements<br>This presentation contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements<br>include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of Alerus Financial Corporation. These<br>statements are often, but not always, identified by words such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”,<br>“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<br>statements include, among others, statements we make regarding our projected growth, anticipated future financial performance, financial condition, credit quality, management’s long-term<br>performance goals and the future plans and prospects of Alerus Financial Corporation.<br>Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding our business,<br>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<br>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<br>indicated in forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ<br>materially from those indicated in forward-looking statements include, among others, the following: interest rate risk, including the effects of sustained high interest rates; our ability to successfully<br>manage credit risk and maintain an adequate level of allowance for credit losses; new or revised accounting standards; business and economic conditions generally and in the financial services industry,<br>nationally and within our market areas, including high rates of inflation and possible recession; the effects of recent developments and events in the financial services industry, including the large-scale<br>deposit withdrawals over a short-period of time that resulted in recent bank failures; the overall health of the local and national real estate market; concentrations within our loan portfolio; the level of<br>nonperforming assets on our balance sheet; our ability to implement our organic and acquisition growth strategies, including the integration of Metro Phoenix Bank which we acquired in 2022 and the<br>pending acquisition of HMN Financial, Inc.; 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<br>ability to continue to originate a sufficient volume of residential mortgages; the occurrence of fraudulent activity, breaches or failures of our or our third-party vendors’ information security controls or<br>cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools; interruptions involving our information technology and telecommunications<br>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<br>personnel; rapid technological change in the financial services industry; increased competition in the financial services industry from non-banks such as credit unions and Fintech companies, including<br>digital asset service providers; our ability to successfully manage liquidity risk, including our need to access higher cost sources of funds such as fed funds purchased and short-term borrowings; the<br>concentration of large deposits from certain clients, who have balances above current Federal Deposit Insurance Corporation (“FDIC”) insurance limits; the effectiveness of our risk management<br>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<br>recorded in connection with our past acquisitions, including the acquisition of Metro Phoenix Bank and the pending acquisition of HMN Financial, Inc.; the extensive regulatory framework that applies to<br>us; the impact of recent and future legislative and regulatory changes, including in response to the recent bank failures; fluctuations in the values of the securities held in our securities portfolio,<br>including as a result of changes in interest rates; governmental monetary, trade and fiscal policies; risks related to climate change and the negative impact it may have on our customers and their<br>businesses; severe weather, natural disasters, widespread disease or pandemics; acts of war or terrorism, including the ongoing Israeli-Palestinian conflict and the Russian invasion of Ukraine, or other<br>adverse external events; any material weaknesses in our internal control over financial reporting; changes to U.S. or state tax laws, regulations and guidance; potential changes in federal policy and at<br>regulatory agencies as a result of the upcoming 2024 presidential election; talent and labor shortages and employee turnover; our success at managing the risks involved in the foregoing items; and any<br>other risks described in the “Risk Factors” sections of the reports filed by Alerus Financial Corporation with the Securities and Exchange Commission.<br>Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to<br>publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.<br>Non-GAAP Financial Measures<br>This presentation includes certain ratios and amounts that do not conform to U.S. Generally Accepted Accounting Principles, or GAAP. Management uses certain non-GAAP financial measures to evaluate<br>financial performance and business trends from period to period and believes that disclosure of these non-GAAP financial measures will help investors, rating agencies and analysts evaluate the<br>financial performance and condition of Alerus Financial Corporation. This presentation includes a reconciliation of each non-GAAP financial measure to the most comparable GAAP equivalent.<br>Miscellaneous<br>Except as otherwise indicated, this presentation speaks as of the date hereof. The delivery of this presentation shall not, under any circumstances, create any implication that there has been no change in<br>the affairs of Alerus Financial Corporation after the date hereof. Certain of the information contained herein may be derived from information provided by industry sources. We believe that such<br>information is accurate and that the sources from which it has been obtained are reliable. We cannot guarantee the accuracy of such information, however, and we have not independently verified such<br>information.<br>1
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DISCLAIMERS (CONTINUED)<br>Additional Information and Where to Find It<br>Alerus Financial Corporation (the "Company") filed a Registration Statement on Form S-4 (Registration Statement No. 333-280815) with the Securities and Exchange Commission (the "SEC") on July 15,<br>2024, in connection with a proposed transaction between the Company and HMN Financial, Inc. (“HMNF”). The registration statement includes a joint proxy statement of the Company and HMNF that<br>also constitutes a prospectus of the Company, which will be sent to the stockholders of the Company and HMNF after the SEC declares the registration statement effective.<br>Before making any voting decision, the stockholders of the Company and HMNF are advised to read the joint proxy statement/prospectus, because it contains important information about the Company,<br>HMNF and the proposed transaction.<br>This document and other documents relating to the proposed transaction filed by the Company can be obtained free of charge from the SEC’s website at www.sec.gov. These documents also can be<br>obtained free of charge by accessing the Company’s website at www.alerus.com under the link “Investors Relations” and then under “SEC Filings” and HMNF’s website at<br>www.justcallhome.com/HMNFinancial under “SEC Filings.” Alternatively, these documents can be obtained free of charge from the Company upon written request to Alerus Financial Corporation,<br>Corporate Secretary, 401 Demers Avenue, Grand Forks, North Dakota 58201 or by calling (701) 795-3200, or from HMNF upon written request to HMN Financial, Inc., Corporate Secretary, 1016 Civic<br>Center Drive NW, Rochester, Minnesota 55901 or by calling (507) 535-1200. The contents of the websites referenced above are not deemed to be incorporated by reference into the registration<br>statement or the joint proxy statement/prospectus.<br>Participants in the Solicitation<br>This presentation does not constitute a solicitation of proxy, an offer to purchase or a solicitation of an offer to sell any securities. The Company, HMNF, and certain of their directors, executive officers<br>and other members of management and employees may be deemed to be participants in the solicitation of proxies from the stockholders of the Company and HMNF in connection with the proposed<br>transaction under SEC rules. Information about the directors and executive officers of the Company and HMNF is included in the joint proxy statement/prospectus for the proposed transaction filed with<br>the SEC. This document may be obtained free of charge in the manner described above under “Additional Information and Where to Find It.”<br>2
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Retirement &<br>Benefits<br>Revenue<br>33.7%<br>Wealth Advisory<br>Revenue<br>Banking Fees & 12.2%<br>Other Revenue<br>8.8%<br>Net Interest<br>Income<br>45.3%<br>COMPANY PROFILE<br>Alerus is a commercial wealth bank and a national retirement plan provider<br>DIVERSIFIED REVENUE(1)<br>Net Interest Income:<br>$88.2 million<br>45.3% of revenue<br>Noninterest Income:<br>$106.5 million<br>54.7% of revenue<br>BANKING<br>Business Services<br>▪ Commercial and small business<br>offerings<br>▪ Treasury Management services<br>▪ SBA & CRE Lending<br>Consumer Services<br>▪ Private banking<br>▪ Savings, money markets, CDs<br>▪ Mortgage services<br>Assets:<br>$ in billions<br>WEALTH ADVISORY<br>RETIREMENT AND BENEFITS<br>AUA / AUM:<br>$ in billions<br>Retirement<br>▪ Plan administration<br>▪ Trust and custodial offerings<br>▪ Record keeping<br>Benefits<br>▪ Health savings accounts<br>▪ Flexible spending accounts<br>▪ COBRA<br>▪ Financial Planning: Retirement	Tax	Estate planning<br>▪ Investment Management: Managed investments	Brokerage<br>▪ Trust and Fiduciary: Estate Administration	Corporate Trusteeship<br>AUA / AUM:<br>$ in billions<br>3	<br>1. Excludes net losses on investment securities of $24.6 million in 4Q 2023. See “Non-GAAP Disclosure Reconciliation.”<br>2. Banking and other revenue consists of service charges on deposit accounts, mortgage income, interchange income and other noninterest income.<br>Last Twelve Months Ended June 30, 2024<br>(2)<br>$31.9<br>$34.2<br>$36.7<br>$32.1<br>$36.7<br>$39.4<br>2019 2020 2021 2022 2023 2Q 2024<br>$3.1 $3.3<br>$4.0 $3.6 $4.0 $4.2<br>2019 2020 2021 2022 2023 2Q 2024<br>$2.4<br>$3.0 $3.4 $3.8 $3.9 $4.4<br>2019 2020 2021 2022 2023 2Q 2024
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Market Distribution and Client Base<br>FRANCHISE FOOTPRINT<br>FULL-SERVICE BANKING<br>▪ Grand Forks, ND: 4 offices<br>▪ Fargo, ND: 3 offices<br>▪ Twin Cities, MN: 6 offices<br>▪ Phoenix, AZ: 2 offices<br>RETIREMENT AND BENEFIT SERVICES<br>▪ Offices in Minnesota, North Dakota, Michigan,<br>and Colorado<br>▪ Retirement plan service clients in all 50 states<br>BANKING<br>LEGEND: North Dakota Minnesota Arizona National Synergistic<br>WEALTH ADVISORY RETIREMENT AND BENEFITS<br>	($ in millions)<br>4	<br>▪ 485,000 Employer-sponsored retirement and benefit<br>plan participants and health savings account participants<br>▪ 34,100 Flexible spending account and health<br>reimbursement arrangement participants<br>▪ 37,300 Consumer banking clients<br>▪ 16,700 Commercial banking clients<br>▪ 8,400 Employer-sponsored retirement plans<br>▪ 10,900 Wealth clients<br>Data as of 6/30/2024.<br>DEPOSITS: $3,299<br>9.3%<br>13.1%<br>77.6%<br>AUA / AUM: $39,390<br>75.3%<br>8.8%<br>4.3%<br>11.6%<br>AUA / AUM: $4,172<br>28.2%<br>57.4%<br>14.4%<br>LOANS: $2,916<br>39.2%<br>24.4%<br>9.9%<br>26.5%
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STRATEGIC GROWTH<br>To supplement our organic growth, we have executed 25 acquisitions throughout the history of our company<br>including: 15 in Banking, 10 in Retirement and Benefits. HMN Financial, Inc. will be our 26th acquisition.<br>5	<br>1. Source S&P Capital IQ.<br>2. Excludes net losses on investment securities (after-tax) of $19.2 million in 4Q 2023. See “Non-GAAP Disclosure Reconciliation.”<br>(2) (2)<br>1.08%<br>1.28%<br>1.31%<br>KBW Regional<br>Bank Index<br>(Average)<br>KBW Regional<br>Bank Index<br>(Top Quartile)<br>Alerus Financial<br>ROA(1) (5 Year History: 2019 - 2023)<br>9.2%<br>11.2%<br>12.5%<br>KBW Regional<br>Bank Index<br>(Average)<br>KBW Regional<br>Bank Index<br>(Top Quartile)<br>Alerus Financial<br>ROE(1) (5 Year History: 2019 - 2023)<br>1879<br>2022<br>2019<br>2009<br>2007<br>2000<br>Began as the Bank<br>of Grand Forks<br>Rebranded to<br>Alerus<br>Expanded to<br>Minnesota Market<br>Expanded to<br>Arizona Market<br>Completed Initial Public Offering (IPO)<br>Acquired Metro<br>Phoenix Bank<br>2024<br>Announced<br>acquisition of HMN<br>Financial, Inc.
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HMN FINANCIAL, INC. ACQUISITION HIGHLIGHTS<br>Natural Expansion of the Alerus Franchise<br>1. Data as of 6/30/2024.<br>2. Metrics disclosed with deal announcement on 5/15/2024. Metrics based on ALRS closing price of $20.69 on 5/14/2024.<br>3. No rate mark scenario assumes no loan interest rate mark, AOCI mark, MSR mark or time deposit mark<br>6	<br>Strategic Expansion Financially Attractive(2) Low Risk<br>Benefits of additional scale<br>$4.4<br>$1.1<br>$5.5<br>Assets<br>$2.9<br>$0.9<br>$3.8<br>Loans<br>$3.3<br>$1.0<br>$4.3<br>Deposits<br>Complementary mission and values with a strong<br>corporate and credit culture<br>ALRS HMNF<br>Franchise-enhancing strategic expansion into the<br>vibrant Rochester, Minnesota, MSA<br>Strong pro forma capital ratios; creation of<br>capacity for continued growth<br>Proven ability to create revenue synergies<br>across Alerus’ diverse business lines<br>Pro-forma (not modeled)<br>Deal Value Per Share / TBVPS 107%<br>TBV Earnback 2.2 years<br>TBV Earnback<br>(Excl. int. rate markets & AOCI)(3) Accretive<br>Core Deposit Premium 0.9%<br>’25 EPS Accretion 45%+<br>Internal Rate of Return 25%+<br>’25 ROAA 1.15%+<br>’25 ROAE 12.5%+<br>’25 Efficiency Ratio Improvement 615+ bps<br>Pro Forma Loans / Deposits<br>(MRQ) 85%<br>High-quality, granular<br>and long tenured loans<br>and core deposit base<br>Excellent credit discipline<br>and asset quality<br>Seamless integration of<br>straight-forward business<br>lines<br>Leverages management’s<br>transaction and<br>integration expertise<br>Extensive operational and<br>credit due diligence<br>$ in Billions<br>(1) (1) (1)
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▪ Providing secure and reliable technology that meets evolving<br>client expectations<br>▪ Integrating our full product and service offerings through our<br>fast-follower technology strategy<br>STRATEGIC INITIATIVES<br>One Alerus = Working Better Together to Grow<br>ORGANIC GROWTH<br>TALENT ACQUISITIONS<br>STRATEGIC ACQUISITION<br>PRODUCTIVITY AND EFFICIENCY<br>▪ Collaborative leadership team focused on new client acquisition,<br>retention, and deepening relationships with existing clients<br>▪ Diversified business model focused on bringing value to clients<br>through advice and specialty solutions to help clients grow<br>▪ Leveraging product synergies unavailable to traditional banking<br>organizations<br>▪ Recruiting top talent in mid-market C&I banking and specialty<br>niches to accelerate growth in our existing markets<br>▪ Jumpstarting our entrance into new markets with new talent<br>▪ Proactively positioning ourselves as an acquirer and employer<br>of choice<br>▪ Capitalizing on strategic opportunities to grow in our existing<br>markets or new markets<br>▪ Acquisition targets include banks and nationwide fee income<br>companies with complementary business models, cultural<br>similarities, and synergy and growth opportunities<br>7<br>Our Purpose Powers our Culture<br>Do the Right Thing<br>Lead with integrity and<br>provide valued advice and<br>guidance<br>One Alerus<br>Work together to provide<br>purpose-driven products<br>and services for our<br>clients<br>Passion for Excellence<br>Act with accountability and<br>sense of urgency to best serve<br>clients and achieve<br>exceptional results<br>Success is Never Final<br>Embrace opportunities to<br>adapt and growth with our<br>industry and our clients<br>One<br>Alerus<br>Client<br>Oriented<br>Diversified<br>Services<br>Synergistic<br>Growth<br>Tailored<br>Advice<br>Technology<br>Investment<br>Reinvention<br>of Processes
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OFFICERS AND DIRECTORS<br>DAN COUGHLIN<br>Since 2016<br>Chairman, Alerus Financial Corp.<br>Former MD & Co-Head – Fin’l Services<br>Inv. Banking, Raymond James; Former<br>Chairman & CEO, Howe Barnes Hoefer<br>& Arnett<br>MARY ZIMMER<br>Since 2021<br>Former Director of Diverse Client<br>Segments and Former Northern Regional<br>President, Wells Fargo Advisors;<br>Former Head of Intl. Wealth USA, Royal<br>Bank 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>JON HENDRY<br>Executive Vice President and<br>Chief Technology Officer<br>40 years with Alerus<br>KARIN TAYLOR<br>Executive Vice President and<br>Chief Risk Officer and Operating Officer<br>6 years with Alerus<br>GALEN VETTER<br>Since 2013<br>Former Global CFO, Franklin Templeton<br>Investments; Former Partner-in-Charge,<br>Upper Midwest Region, RSM<br>EXECUTIVE MANAGEMENT<br>BOARD OF DIRECTORS<br>KATIE LORENSON<br>Director, President and<br>Chief Executive Officer<br>7 years with Alerus<br>MISSY KENEY<br>Executive Vice President and<br>Chief Engagement Officer<br>19 years with Alerus<br>AL VILLALON<br>Executive Vice President and<br>Chief Financial Officer<br>2 years with Alerus<br>JIM COLLINS<br>Executive Vice President and<br>Chief Banking and Revenue Officer<br>2 years with Alerus<br>NIKKI SORUM<br>Since 2023<br>Former Head of Sales and Distribution, Thrivent;<br>Former SVP, Private Client Group,<br>RBC Wealth Management<br>JOHN URIBE<br>Since 2023<br>Chief Financial Officer<br>Blue Cross and Blue Shield of Minnesota<br>8<br>FORREST WILSON<br>Executive Vice President and<br>Chief Retirement Services Officer<br>Joined Alerus in 2024
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SECOND QUARTER<br>HIGHLIGHTS<br>Office in<br>Excelsior, Minnesota
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2Q 2024 HIGHLIGHTS<br>Success is Never Final<br>NII:<br>$24.0 million<br>+8.0% vs. 1Q24<br>NIM:<br>2.57% Adjusted(1)<br>+13 bps vs. 1Q24<br>Fee Income:<br>$27.4 million<br>+8.1% vs. 1Q24<br>53.3% of revenue in 2Q24<br>Noninterest Expense:<br>$38.8 million<br>-0.7% vs. 1Q24<br>1. Excludes impact of Bank Term Funding Program (BTFP) arbitrage trade. See “Non-GAAP Disclosure Reconciliation.”<br>2. Represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.”<br>EARNINGS<br>BALANCE<br>SHEET<br>ASSET &<br>CAPITAL<br>STRENGTH<br>VALUE<br>CREATION<br>AUA / AUM:<br>$43.6 billion<br>+1.9% vs. 1Q24<br>Loans:<br>$2.9 billion<br>+4.2% vs. 1Q24<br>Deposits:<br>$3.3 billion<br>+0.4% vs. 1Q24<br>L/D Ratio:<br>88%<br>+3.2% vs. 1Q24<br>TCE / TA:<br>7.91% Adjusted(1)<br>+3 bps vs. 1Q24<br>ACL:<br>1.31%<br>Stable vs. 1Q24<br>CET1:<br>11.7%<br>6.5% “well capitalized”<br>minimum<br>TBV(2):<br>$15.77<br>+$0.14 vs. 1Q24<br>Increased Dividend Per<br>Share 5.3% to $0.20<br>$4.0 million returned to<br>stockholders in dividends<br>Added Equipment<br>Finance Team<br>Strategically expands our<br>specialty lending capabilities<br>Announced Acquisition<br>of HMN Financial, Inc.<br>A natural expansion for our<br>premier Midwest franchise<br>10
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2Q 2024 RESULTS<br>1. Represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.”<br>Income Statement<br>11	<br>(dollars and shares in thousands, except per share data)<br>Net Interest Income $ 24,001 $ 22,219 $ 22,234 $ 46,220 $ 45,892<br>Provision for Credit Losses 4,489 — — 4,489 550<br>Net Interest Income After Provision for Credit Losses 19,512 22,219 22,234 41,731 45,342<br>Noninterest Income 27,371 25,323 25,778 52,694 51,031<br>Noninterest Expense 38,752 39,019 36,373 77,771 74,242<br>Income Before Income Taxes 8,131 8,523 11,639 16,654 22,131<br>Income Tax Expense 1,923 2,091 2,535 4,014 4,841<br>Net Income $ 6,208 $ 6,432 $ 9,104 $ 12,640 $ 17,290<br>Pre-Provision Net Revenue(1) $ 12,620 $ 8,523 $ 11,639 $ 21,143 $ 22,681<br>Per Common Share Data<br>Earnings Per Common Share - Diluted $ 0.31 $ 0.32 $ 0.45 $ 0.63 $ 0.85<br>Diluted Average Common Shares Outstanding 20,050 19,986 20,241 20,018 20,243<br>Performance Ratios<br>Return on Average Total Assets 0.58 % 0.63 % 0.96 % 0.60 % 0.92 %<br>Return on Average Tangible Common Equity (1)<br> 9.40 % 9.78 % 13.71 % 9.58 % 13.15 %<br>Noninterest Income as a % of Revenue 53.28 % 53.26 % 53.69 % 53.27 % 52.65 %<br>Net Interest Margin (Tax-Equivalent) 2.39 % 2.30 % 2.52 % 2.35 % 2.61 %<br>Efficiency Ratio (1)<br> 72.50 % 78.88 % 72.79 % 75.56 % 73.67 %<br>June 30,<br>2024<br>June 30,<br>2023<br>Three months ended Six months ended<br>2024<br>June 30, March 31,<br>2024<br>June 30,<br>2023
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PERFORMANCE RATIOS<br>1. Rates have been annualized.<br>2. Represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.” 12	<br>$14.60<br>$15.63 $15.77<br>2Q 2023 1Q 2024 2Q 2024<br>Tangible Book Value per Share(1)<br>0.96%<br>0.63%<br>0.58%<br>2Q 2023 1Q 2024 2Q 2024<br>Return on Average Assets(1)<br>13.71%<br>9.78% 9.40%<br>2Q 2023 1Q 2024 2Q 2024<br>Return on Average Tangible<br>Common Equity(1)/(2)
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$15,890 $15,655 $16,078<br>$5,449 $6,118 $6,360<br>$4,439 $3,550<br>$4,933<br>$25,778 $25,323<br>$27,371<br>2Q 2023 1Q 2024 2Q 2024<br>Noninterest Income<br>Retirement & Benefit Services Wealth Advisory Services<br>Banking Fees and Other<br>KEY REVENUE ITEMS<br>13	1. Banking fees and other consists of service charges on deposit accounts, mortgage income, interchange income and other noninterest income.<br>$ in thousands $ in thousands	% of noninterest income<br>Net Interest Income: +8.0% Linked Quarter<br>+7.9% Year-over-year<br>Noninterest Income: +8.1% Linked Quarter<br>+6.2% Year-over-year<br>(1)<br>$22,234 $22,219<br>$24,001<br>2Q 2023 1Q 2024 2Q 2024<br>Net Interest Income<br>17.2% 14.0%<br>18.0%<br>23.2%<br>21.1% 24.2%<br>61.7% 61.8% 58.8%
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2.44%<br>2.57%<br>2.52%<br>2.30% 2.39%<br>2Q 2023 1Q 2024 2Q 2024<br>NIM<br>Adjusted NIM NIM<br>2.53% 2.48% 2.69%<br>5.36% 5.72% 5.88%<br>4.55% 5.05% 5.26%<br>2Q 2023 1Q 2024 2Q 2024<br>Earning Assets<br>Investment<br>Securities Yield<br>Loan Yield Earning Asset<br>Yield<br>NET INTEREST INCOME<br>$ in Thousands<br>NIM: 2.30% 0.16% 0.16% 0.00% (0.05%) (0.18%) 2.39% 0.18% 2.57%<br>QUARTERLY HIGHLIGHTS<br>▪ Net interest income for the second quarter of 2024 increased<br>8.0% from the first quarter of 2024.<br>▪ Larger loan balances, along with higher average cash balances<br>related to the BTFP arbitrage trade, drove net interest income<br>higher. This was partially offset by an increase in interest<br>expense due to higher average deposits and deposit rates, along<br>with higher BTFP borrowing balances.<br>▪ Continued to hold cash of $355.0 million from the BTFP, earning<br>52 basis points of risk-free return resulting in $0.5 million in net<br>interest income for the second quarter of 2024.<br>YIELDS AND RATES NII AND NIM(1) WALK<br>14	<br>1. Tax-equivalent net interest margin.<br>2. Adjusted for BTFP arbitrage trade. Represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.”<br>Yields and rates have been annualized.<br>(2)<br>(2)<br>(2)<br>(1)<br>(2)<br>1.73%<br>2.56% 2.65% 2.32%<br>3.26% 3.34%<br>2.16%<br>2.91% 3.03%<br>2Q 2023 1Q 2024 2Q 2024<br>Cost of Funds<br>Cost of<br>Total Deposits<br>Cost of Interest<br>Bearing Deposits<br>Total Cost<br>of Funds
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Chart As of As of As of Change Change<br>Legend Category 6/30/2023 3/31/2024 6/30/2024 QoQ YoY<br>Commercial and industrial $ 521,427 $ 575,259 $ 591,779 2.9% 13.5%<br>CRE - Construction, land<br>and development 78,428 125,966 161,751 28.4% 106.2%<br>CRE - Multifamily 210,902 260,609 242,041 -7.1% 14.8%<br>CRE - Non-owner<br>occupied 500,334 565,979 647,776 14.5% 29.5%<br>CRE - Owner occupied 251,981 285,211 283,356 -0.7% 12.5%<br>Agriculture 71,037 77,585 81,959 5.6% 15.4%<br>Residential real estate 864,861 879,033 871,393 -0.9% 0.8%<br>Other consumer 34,552 29,833 35,737 19.8% 3.4%<br>Total $ 2,533,522 $ 2,799,475 $ 2,915,792 4.2% 15.1%<br>EARNING ASSETS<br>QUARTERLY HIGHLIGHTS<br>▪ Total loans grew 4.2% from March 31, 2024.<br>▪ Quarter over quarter growth was driven by an increase in total<br>CRE loans, which increased 7.8%, and an increase in C&I loans<br>which grew 2.9%, from the first quarter of 2024.<br>▪ Residential real estate loans decreased 0.9% quarter over<br>quarter given focused allocation of portfolio capital.<br>▪ Total Non-owner occupied and Multifamily CRE loans, to total<br>Bank risk-based capital(3) was 213% as of June 30, 2024.<br>▪ The investment portfolio decreased 2.6% from March 31, 2024<br>as prepayment rates increased.<br>LOAN PORTFOLIO(1) CHANGES<br>INVESTMENT PORTFOLIO<br>JUNE 30, 2024 LOAN PORTFOLIO(1)<br>Held-to-Maturity: 31.3% 38.0% 38.3%<br>Available-for-Sale: 68.7% 61.4% 61.3%<br>Trading Securities(2): 0.0% 0.6% 0.4%<br>% of Earning Assets: 27.4% 18.7% 18.2%<br>AOCI: $(100,742) $(74,256) $(75,029)<br>15	<br>$ in thousands<br>$ in thousands<br>1. Additional loan portfolio breakdown available in appendix<br>2. Trading securities consist of mutual funds held for deferred compensation.<br>3. Alerus Financial, N.A. (Bank) total risk-based capital was $417 million as of June 30, 2024.<br>20.3%<br>5.6%<br>8.3%<br>9.7% 22.2%<br>2.8%<br>29.9%<br>1.2%<br>35.3% 34.9% 34.6%<br>0.3%<br>0.1% 0.1%<br>45.5%<br>41.8% 41.8%<br>5.6%<br>6.4% 6.6%<br>13.3%<br>16.3% 16.5%<br>0.6% 0.4%<br>$986,088<br>$768,964 $748,896<br>6/30/2023 3/31/2024 6/30/2024<br>Trading Securities<br>Municipals<br>Corporate Debt<br>Corporate ABS & CMO<br>Agency Non-MBS<br>Agency MBS
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Chart As of As of As of Change Change<br>Legend Category 6/30/2023 3/31/2024 6/30/2024 QoQ YoY<br>Noninterest-bearing $ 715,534 $ 692,500 $ 701,428 1.3% -2.0%<br>Interest-bearing<br>demand 753,194 938,751 1,003,585 6.9% 33.2%<br>Money market<br>and savings 906,461 1,013,983 918,598 -9.4% 1.3%<br>Time deposits 304,167 456,729 491,345 7.6% 61.5%<br>HSA deposits 173,499 183,006 183,619 0.3% 5.8%<br>Total $ 2,852,855 $ 3,284,969 $ 3,298,575 0.4% 15.6%<br>Loan to deposits ratio 88.8% 85.2% 88.4%<br>21.3%<br>30.4%<br>27.8%<br>14.9%<br>5.6%<br>DEPOSIT CHARACTERISTICS<br>QUARTERLY HIGHLIGHTS<br>▪ Total deposits increased 0.4% from March 31, 2024.<br>▪ Noninterest-bearing deposits increased 1.3% from the prior<br>quarter.<br>▪ The increase in total deposits was due to both expanded and<br>new commercial deposit relationships, along with time deposit<br>and synergistic deposit growth. This was partially offset by<br>seasonal outflows of public funds.<br>▪ The Company continued to have $0 of brokered deposits as of<br>June 30, 2024.<br>JUNE 30, 2024 DEPOSIT PORTFOLIO (BY CATEGORY) DEPOSIT PORTFOLIO CHANGES<br>JUNE 30, 2024 DEPOSIT PORTFOLIO (BY CLIENT SEGMENT)<br>Synergistic(1)<br>deposits<br>grew +17.7%<br>from June 30, 2023.<br>16	<br>$ in thousands<br>Interest-bearing:<br>78.7%<br>1. Synergistic deposits are sourced from the Retirement and Benefits Services and Wealth Advisory Services segments.<br>(1)<br>Noninterest-bearing:<br>Synergistic<br>26.7%<br>Commercial<br>39.5%<br>Consumer<br>27.8%<br>Public<br>6.2%
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$2,905<br>$1,670<br>$2,554<br>$311<br>$389<br>$456<br>$514<br>$565<br>$502<br>$709<br>$926<br>$1,421<br>$4,439<br>$3,550<br>$4,933<br>2Q 2023 1Q 2024 2Q 2024<br>Mortgage Service Charges Debit Card Interchange Other<br>BANKING SERVICES<br>BANKING SERVICES QUARTERLY HIGHLIGHTS<br>▪ Mortgage income increased $884 thousand quarter over<br>quarter driven by a seasonal increase in mortgage<br>originations.<br>▪ Service charges increased $67 thousand quarter over<br>quarter.<br>▪ Other fee income increased $495 thousand quarter over<br>quarter, driven by client swap fees.<br>DIVISIONAL(1) INCOME STATEMENT NONINTEREST INCOME BREAKDOWN<br>MORTGAGE HIGHLIGHTS<br>$ in millions<br>$ in thousands<br>17	<br>$ in thousands<br>Purchase: 98.2% 94.8% 97.2%<br>Refinance: 1.8% 5.2% 2.8%<br>Fair Value Change: $474 $306 $234<br>1. Includes Corporate Administration income.<br>2. Banking noninterest income consists of service charges on deposit accounts, mortgage income, interchange income and other noninterest income.<br>(2)<br>$ in thousands<br>$90<br>$52<br>$102<br>$21<br>$2<br>$12<br>$111<br>$54<br>$114<br>2Q 2023 1Q 2024 2Q 2024<br>Portfolio<br>Sale<br>2Q 2024 1Q 2024 2Q 2023<br>Net interest income $ 24,001 $ 22,219 $ 22,234<br>Provision for loan losses 4,489 - -<br>Noninterest income 4,933 3,550 4,439<br>Total revenue 24,445 25,769 26,673<br>Noninterest expense 19,165 18,666 19,301<br>Net income before taxes: $ 5,280 $ 7,103 $ 7,372
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$230,498 $202,330 $195,617 $233,082 $247,842<br>$126,518 $153,224 $166,171<br>$176,729 $183,619<br>$136,946 $170,224 $167,796<br>$188,349 $195,023 $493,962<br>$525,778 $529,584<br>$598,160 $626,484<br>2020 2021 2022 2023 2Q 2024<br>Money Market HSA Other<br>RETIREMENT AND BENEFIT SERVICES<br>QUARTERLY HIGHLIGHTS<br>▪ Retirement and Benefit Services revenue increased 2.7%<br>compared to the first quarter of 2024.<br>▪ AUA / AUM grew 2.3% from March 31, 2024.<br>▪ 39% of Retirement and Benefit Services revenue is market<br>sensitive.<br>▪ 51.1% of Retirement and Benefit Services synergistic<br>deposits are indexed.<br>DIVISIONAL(1) INCOME STATEMENT AUA / AUM AND PARTICIPANTS<br>SYNERGISTIC DEPOSITS<br>18	<br>$ in thousands $ in millions<br>$ in thousands<br>1. Excludes funds transfer pricing credit on synergistic deposits.<br>$34,200<br>$36,733<br>$32,123<br>$36,682<br>$39,390<br>423,156<br>447,564<br>453,757<br>473,692<br>485,269<br>2020 2021 2022 2023 2Q 2024<br>AUA/AUM Participants<br>2Q 2024 1Q 2024 2Q 2023<br>Recurring annual income $ 12,664 $ 12,480 $ 13,111<br>Transactional income 3,414 3,175 2,779<br>Total noninterest income 16,078 15,655 15,890<br>Noninterest expense 13,649 14,189 12,651<br>Net income before taxes: $ 2,429 $ 1,466 $ 3,239
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WEALTH ADVISORY SERVICES<br>QUARTERLY HIGHLIGHTS<br>▪ Wealth advisory services revenue increased 4.0% from the<br>first quarter of 2024.<br>▪ Synergistic deposits have grown 18.0% compared to June<br>30, 2023.<br>▪ AUA / AUM has increased 8.2% since June 30, 2023.<br>▪ 94.5% of Wealth Advisory Services synergistic deposits are<br>indexed.<br>DIVISIONAL(1) INCOME STATEMENT AUA / AUM<br>SYNERGISTIC DEPOSITS<br>19	<br>$ in thousands $ in millions<br>$ in thousands<br>1. Excludes funds transfer pricing credit on synergistic deposits.<br>$3,339<br>$4,040<br>$3,583<br>$4,019<br>$4,172<br>2020 2021 2022 2023 2Q 2024<br>$101,621<br>$143,183<br>$161,973<br>$253,384 $248,274<br>2020 2021 2022 2023 2Q 2024<br>2Q 2024 1Q 2024 2Q 2023<br>Asset management $ 5,564 $ 5,256 $ 4,781<br>Brokerage 439 366 389<br>Insurance and advisory 357 496 279<br>Total noninterest income 6,360 6,118 5,449<br>Noninterest expense 3,953 3,750 2,990<br>Net income before taxes: $ 2,407 $ 2,368 $ 2,459
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NONINTEREST EXPENSE<br>$ in Thousands<br>YEAR-OVER-YEAR HIGHLIGHTS<br>▪ Noninterest expense increased $2.4 million, or 6.5%, compared<br>to the second quarter of 2023.<br>▪ The increase was primarily driven by higher Compensation and<br>Benefits expenses due to increased labor costs, along with<br>higher Professional Fees and Assessments expenses due to an<br>increase in FDIC assessments and expenses related to the<br>pending acquisition of HMN Financial, Inc.<br>QUARTERLY HIGHLIGHTS<br>▪ Noninterest expense decreased $0.3 million, or 0.7%, compared<br>to the first quarter of 2024.<br>▪ The second quarter of 2024 included $0.6 million of expenses in<br>Professional Fees and Assessments related to the pending<br>acquisition of HMN Financial, Inc. The quarter also included $0.3<br>million of expenses related to severance and signing bonuses in<br>Compensation and Benefits.<br>▪ Employee taxes and benefits decreased $1.1 million from the<br>first quarter of 2024, primarily due to seasonality. This was<br>offset by a $0.9 million increase in compensation primarily due<br>to an increase in mortgage incentives.<br>▪ Business services, software and technology expenses decreased<br>$0.7 million from the prior quarter primarily driven by reduced<br>data and core processing expenses.<br>20	<br>Compensation<br>and Benefits<br>Professional Fees<br>and Assessments<br>Other(1)<br>Occupancy and<br>Equipment<br>Business Services,<br>Software and Technology<br>Noninterest Expense: (0.7%) Linked Quarter<br>+6.5% Year-over-year<br>1. Other noninterest expense consists of intangible amortization, marketing and business development, supplies and postage, travel,<br>mortgage and lending, and other noninterest expense.<br>$23,571 $25,520 $25,399<br>$1,837<br>$1,906 $1,815<br>$5,269<br>$5,345 $4,599<br>$1,530<br>$1,993 $2,373<br>$4,166<br>$4,255 $4,566<br>$36,373<br>$39,019 $38,752<br>2Q 2023 1Q 2024 2Q 2024
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ASSET QUALITY AND RESERVE LEVELS<br>HIGHLIGHTS<br>▪ Reserves to total loans remained stable at 1.31% as of both<br>June 30, 2024, and March 31, 2024.<br>▪ Nonperforming assets increased $20.3 million compared to<br>March 31, 2024. The increase was driven by a previously<br>identified construction, land and development loan of<br>$21.5 million moving to nonaccrual status.<br>▪ The increase in net charge-offs to average loans was driven<br>by a $2.6 million charge-off of one commercial and<br>industrial loan that had an individual reserve of $2.3<br>million in the first quarter of 2024.<br>NCO/<br>Avg Loans 0.03% (0.04%) 0.02% (0.04%) 0.36%<br>NPA / ASSETS % RESERVES OVER NPL %<br>RESERVES / LOANS %<br>21<br>1.73% 1.80%<br>1.27% 1.30% 1.31%<br>2020 2021 2022 2023 2Q 2024<br>0.17%<br>0.09% 0.10%<br>0.22%<br>0.63%<br>2020 2021 2022 2023 2Q 2024<br>674%<br>1,437%<br>821%<br>410%<br>139%<br>2020 2021 2022 2023 2Q 2024
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16.8%<br>18.6%<br>16.5%<br>14.8% 14.7%<br>2020 2021 2022 2023 2Q 2024<br>9.2% 9.8%<br>11.3%<br>10.6%<br>9.6%<br>13.2%<br>15.1%<br>13.7%<br>12.1% 11.9%<br>2020 2021 2022 2023 2Q 2024<br>Tier 1 Leverage Tier 1 Capital<br>CAPITAL AND SOURCES OF LIQUIDITY<br>LIQUIDITY<br>COMMON EQUITY TIER 1 TIER 1 CAPITAL/TIER 1 LEVERAGE RATIOS<br>TOTAL RISK BASED CAPITAL<br>22<br>$ in Thousands<br>8%<br>Regulatory Capital Minimum to be considered adequately capitalized.<br>6%<br>Regulatory Capital Minimum to be considered adequately capitalized.<br>4%<br>Tier 1<br>Capital<br>Leverage<br>12.8%<br>14.7%<br>13.4%<br>11.8% 11.7%<br>2020 2021 2022 2023 2Q 2024<br>Total Assets $ 4,358,623<br>Cash and cash equivalents 438,141<br>Unencumbered Securities (at Market Value) 212,085<br>Total On Balance Sheet Liquidity 650,226<br>FHLB Borrowing Capacity 878,282<br>Fed Funds Lines 107,000<br>Brokered CD Capacity 871,725<br>Total Off Balance Sheet Liquidity 1,857,007<br>Total Liquidity as of 6/30/2024 $ 2,507,233<br>Total Liquidity (Ex-brokered CD Capacity) $ 1,635,508
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KEY TAKEAWAYS<br>Our diversified business model fostered a robust second quarter<br>EARNINGS<br>BALANCE<br>SHEET<br>ASSET &<br>CAPITAL<br>STRENGTH<br>VALUE<br>CREATION<br>Robust spread and fee income drove revenue growth in the quarter<br>▪ Net interest income and noninterest income growth of +8% compared to 1Q 2024<br>▪ Adjusted(1) NIM expansion of 13 bps compared to the prior quarter<br>▪ 53.3% of noninterest income to total revenue<br>Our strong talent acquisition and retention is continuing to payoff<br>▪ 4.2% growth in loans compared to March 31, 2024<br>▪ 0.4% increase in deposits compared to March 31, 2024<br>▪ 88.4% loan to deposit ratio<br>Healthy credit and capital reserves keep us well positioned<br>▪ Total reserves to loans of 1.31%<br>▪ 11.7% CET1 (5.2% over “well capitalized” 6.5% minimum)<br>▪ 7.91% adjusted(1) tangible common equity to tangible assets<br>We remain focused on the long-term success of the company<br>▪ Announced acquisition of HMN Financial, Inc. and Equipment Finance team lift out<br>▪ Increased dividend 5.3%, returning $4.0 million to stockholders through dividends<br>▪ Continued progress in returning the company to top tier performance<br>23	1. Adjusted for BTFP arbitrage trade. Represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.”
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APPENDIX<br>Office in Downtown<br>Minneapolis, Minnesota
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DIVISIONAL INCOME STATEMENT<br>25	1. Banking noninterest income consists of service charges on deposit accounts, mortgage income, interchange income and other noninterest income.<br>($ dollars in thousands)<br>Banking Services<br>Retirement and<br>Benefit Services<br>Wealth<br>Advisory Services<br>Corporate<br>Administration Consolidated<br>Net interest income $ 24,684 $ - $ - $ (683) $ 24,001<br>Provision for loan losses 4,489 - - - 4,489<br>Noninterest income(1)<br> 4,999 16,078 6,360 (66) 27,371<br>Noninterest expense 19,165 13,649 3,953 1,985 38,752<br>Net income before taxes $ 6,029 $ 2,429 $ 2,407 $ (2,734) $ 8,131<br>Banking Services<br>Retirement and<br>Benefit Services<br>Wealth<br>Advisory Services<br>Corporate<br>Administration Consolidated<br>Net interest income $ 22,897 $ - $ - $ (678) $ 22,219<br>Provision for loan losses - - - - -<br>Noninterest income(1)/(2)<br> 3,490 15,655 6,118 60 25,323<br>Noninterest expense 18,666 14,189 3,750 2,414 39,019<br>Net income before taxes $ 7,721 $ 1,466 $ 2,368 $ (3,032) $ 8,523<br>Banking Services<br>Retirement and<br>Benefit Services<br>Wealth<br>Advisory Services<br>Corporate<br>Administration Consolidated<br>Net interest income $ 22,899 $ - $ - $ (665) $ 22,234<br>Provision for loan losses - - - - -<br>Noninterest income(1)<br> 4,242 15,890 5,449 197 25,778<br>Noninterest expense 19,301 12,651 2,990 1,431 36,373<br>Net income before taxes $ 7,840 $ 3,239 $ 2,459 $ (1,899) $ 11,639<br>Quarter ended June 30, 2024<br>Quarter ended June 30, 2023<br>Quarter ended March 31, 2024
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LOAN PORTFOLIO BREAKDOWN<br>26<br>($ in thousands) Balance<br>Percent of<br>Portfolio Balance<br>Percent of<br>Portfolio<br>Commercial and industrial:<br>General business $ 288,752 10.0% $ 258,008 9.3%<br>Services 140,562 4.8% 146,318 5.3%<br>Retail trade 91,173 3.1% 91,216 3.3%<br>Manufacturing 71,292 2.4% 66,638 2.4%<br>Total commercial and industrial 591,779 20.3% 562,180 20.3%<br>Commercial real estate:<br>Construction, land and development 161,751 5.5% 124,034 4.5%<br>Multifamily 242,041 8.3% 245,103 8.9%<br>Non-owner occupied<br>Office 108,082 3.7% 124,684 4.5%<br>Industrial 111,603 3.8% 104,241 3.8%<br>Retail 112,626 3.9% 96,578 3.5%<br>Hotel 112,081 3.8% 80,576 2.9%<br>Medical Office 110,736 3.8% 63,788 2.3%<br>Medical or nursing facility 46,215 1.6% 47,625 1.7%<br>Other commercial real estate 46,433 1.7% 51,862 1.9%<br>Total non-owner occupied 647,776 22.3% 569,354 20.6%<br>Owner Occupied 283,356 9.7% 271,623 9.8%<br>Total commercial real estate 1,334,924 45.8% 1,210,114 43.8%<br>Agricultural:<br>Land 41,410 1.4% 40,832 1.5%<br>Production 40,549 1.4% 36,141 1.3%<br>Total agricultural 81,959 2.8% 76,973 2.8%<br>Consumer<br>Residential real estate first lien 686,286 23.6% 697,900 25.3%<br>Residential real estate construction 22,573 0.8% 28,979 1.1%<br>Residential real estate HELOC 126,211 4.3% 118,315 4.3%<br>Residential real estate junior lien 36,323 1.2% 35,819 1.3%<br>Other Consumer 35,737 1.2% 29,303 1.1%<br>Total consumer 907,130 31.1% 910,316 33.1%<br>Total loans $ 2,915,792 100.0% $ 2,759,583 100.0%<br>June 30, 2024 December 31, 2023
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0%<br>10%<br>20%<br>30%<br>40%<br>50%<br>60%<br> -<br> 50,000<br> 100,000<br> 150,000<br> 200,000<br> 250,000<br> 300,000<br> 350,000<br>2019 2020 2021 2022 2023 2Q<br>2023<br>3Q<br>2023<br>4Q<br>2023<br>1Q<br>2024<br>2Q<br>2024<br>Home Equity Lines of Credit<br>Funded Unfunded Funded %<br>LINE OF CREDIT UTILIZATION<br>27	Commercial and industrial loans includes revolving C&I loans and other loans. It excludes non-revolving C&I loans, ag production, and loans to public entities.<br>0%<br>10%<br>20%<br>30%<br>40%<br>50%<br>60%<br> -<br> 50,000<br> 100,000<br> 150,000<br> 200,000<br> 250,000<br> 300,000<br> 350,000<br> 400,000<br> 450,000<br>2019 2020 2021 2022 2023 2Q<br>2023<br>3Q<br>2023<br>4Q<br>2023<br>1Q<br>2024<br>2Q<br>2024<br>C&I<br>Funded Unfunded Funded %
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ALLOWANCE FOR CREDIT LOSSES ON LOANS<br>Changes in the ACL for Loans by Portfolio Segment<br>1. The difference in the credit loss expense reported herein compared to the consolidated statements of income is associated with the credit loss expense of $275 thousand related to<br>28 off-balance sheet credit exposure and ($56) thousand related to held-to-maturity investment securities.	<br>($ in thousands)<br>Commercial:<br>Commercial and industrial $ 9,508 $ (663) $ (2,730) $ 119 $ 6,234<br>Commercial real estate<br>Construction, land and development 5,922 4,898 — — 10,820<br>Multifamily 2,148 282 — — 2,430<br>Non-owner occupied 8,104 668 — — 8,772<br>Owner occupied 2,461 (190) — 9 2,280<br>Total commercial real estate 18,635 5,658 — 9 24,302<br>Agricultural<br>Land 248 11 — — 259<br>Production 219 (34) — — 185<br>Total Agriculture 467 (23) — — 444<br>Total commercial 28,610 4,972 (2,730) 128 30,980<br>Consumer:<br>Residential real estate<br>First lien 6,152 (786) — — 5,366<br>Construction 489 (31) — — 458<br>HELOC 864 22 — — 886<br>Junior lien 284 (41) (3) 74 314<br>Total residential real estate 7,789 (836) (3) 74 7,024<br>Other consumer 185 134 (1) 10 328<br>Total Consumer 7,974 (702) (4) 84 7,352<br>Total $ 36,584 $ 4,270 $ (2,734) $ 212 $ 38,332<br>Ending<br>Balance<br>Three months ended June 30, 2024<br>Loan<br>Charge-offs<br>Loan<br>Recoveries<br>Beginning<br>Balance<br>Provision for<br>Credit Losses(1)
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($ in thousands)<br>Commercial and industrial $ 6,234 1.05% $ 9,705 1.73%<br>CRE - Construction, land and development 10,820 6.69% 6,135 4.95%<br>CRE - Multifamily 2,430 1.00% 1,776 0.72%<br>CRE - Non-owner occupied 8,772 1.35% 7,726 1.36%<br>CRE - Owner occupied 2,280 0.80% 2,449 0.90%<br>Agricultural - Land 259 0.63% 96 0.24%<br>Agricultural - Production 185 0.46% 84 0.23%<br>Residential real estate first lien 5,366 0.78% 6,087 0.87%<br>Residential real estate construction 458 2.03% 485 1.67%<br>Residential real estate HELOC 886 0.70% 835 0.71%<br>Residential real estate junior lien 314 0.86% 264 0.74%<br>Other Consumer 328 0.92% 201 0.69%<br>Total loans $ 38,332 1.31% $ 35,843 1.30%<br>to segment loans<br>June 30, 2024 December 31, 2023<br>Allocated segment allowance<br>Allowance to segment loans<br>Allocated<br>Allowance<br>segment allowance<br>Percentage of Percentage of<br>ALLOWANCE FOR CREDIT LOSSES ON LOANS<br>Allocation by Loan Portfolio Segment<br>29
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FINANCIAL HIGHLIGHTS<br>30	1. Represents a non-GAAP financial measure. See “Non-GAAP Disclosure Reconciliation.”<br>($ in thousands,<br>except where otherwise noted) 2Q 2023 3Q 2023 4Q 2023 1Q 2024 2Q 2024 June 30, 2024 June 30, 2023<br>Total Assets $ 3,832,978 $ 3,869,138 $ 3,907,713 $ 4,338,093 $ 4,358,623 $ 4,358,623 $ 3,832,978<br>Total Loans 2,533,522 2,606,430 2,759,583 2,799,475 2,915,792 2,915,792 2,533,522<br>Total Deposits 2,852,855 2,872,184 3,095,611 3,284,969 3,298,575 3,298,575 2,852,855<br>Tangible Common Equity1<br> 290,792 284,137 305,186 309,018 311,933 311,933 290,792<br>Net Income $ 9,104 $ 9,161 $ (14,754) $ 6,432 $ 6,208 $ 12,640 $ 17,290<br>ROAA (%) 0.96 0.95 (1.51) 0.62 0.58 0.60 0.92<br>ROATCE(%)1<br> 13.71 13.51 (18.85) 9.78 9.40 9.58 13.15<br>Net Interest Margin (FTE) (%) 2.52 2.27 2.37 2.30 2.39 2.35 2.61<br>Efficiency Ratio (FTE) (%)1<br> 72.79 73.37 165.40 78.88 72.50 75.56 73.67<br>Non-Int. Income/Op. Rev. (%) 53.69 58.21 3.54 53.26 53.28 53.27 52.65<br>Earnings per common share - diluted $ 0.45 $ 0.45 $ (0.73) $ 0.32 $ 0.31 $ 0.63 $ 0.85<br>Total Equity/Total Assets (%) 9.33 9.03 9.45 8.57 8.56 8.56 9.33<br>Tang. Cmn. Equity/Tang. Assets (%)1<br> 7.72 7.47 7.94 7.23 7.26 7.26 7.72<br>Loans/Deposits (%) 88.81 90.75 89.15 85.22 88.40 88.40 88.81<br>NPLs/Loans (%) 0.10 0.35 0.32 0.26 0.95 0.95 0.10<br>NPAs/Assets (%) 0.07 0.23 0.22 0.17 0.63 0.63 0.07<br>Allowance/NPLs (%) 1,383.57 402.91 410.34 498.08 138.79 138.79 1,383.57<br>Allowance/Loans (%) 1.41 1.39 1.30 1.31 1.31 1.31 1.41<br>NCOs/Average Loans (%) (0.07) (0.09) (0.04) 0.01 0.36 0.19 (0.02)<br>Quarterly Six months ended
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FINANCIAL HIGHLIGHTS<br>31	1. Represents a non-GAAP financial measure. See “Non-GAAP Disclosure Reconciliation.”<br>($ in thousands, 19-'23<br>except where otherwise noted) 2019 2020 2021 2022 2023 CAGR<br>Total Assets $ 2,356,878 $ 3,013,771 $ 3,392,691 $ 3,779,637 $ 3,907,713 13.5%<br>Total Loans 1,721,279 1,979,375 1,758,020 2,443,994 2,759,583 12.5%<br>Total Deposits 1,971,316 2,571,993 2,920,551 2,915,484 3,095,611 11.9%<br>Tangible Common Equity1<br> 240,008 274,043 307,663 287,330 305,186 6.2%<br>Net Income $ 29,540 $ 44,675 $ 52,681 $ 40,005 $ 11,696<br>ROAA (%) 1.34 1.61 1.66 1.14 0.31<br>ROATCE(%)1<br> 17.46 17.74 18.89 15.09 5.37<br>Net Interest Margin (FTE) (%) 3.65 3.22 2.90 3.04 2.46<br>Efficiency Ratio (FTE) (%)1<br> 73.22 68.40 70.02 72.86 85.85<br>Non-Int. Income/Op. Rev. (%) 60.50 64.05 62.86 52.72 47.74<br>Earnings per common share - diluted 1.91 2.52 2.97 2.10 0.58<br>Total Equity/Total Assets (%) 12.12 10.96 10.59 9.44 9.45<br>Tang. Cmn. Equity/Tang. Assets (%)1<br> 10.38 9.27 9.21 7.74 7.94<br>Loans/Deposits (%) 87.32 76.96 60.19 83.83 89.15<br>NPLs/Loans (%) 0.45 0.26 0.12 0.16 0.32<br>NPAs/Assets (%) 0.33 0.17 0.09 0.10 0.22<br>Allowance/NPLs (%) 305.66 674.13 1,437.05 820.93 410.34<br>Allowance/Loans (%) 1.39 1.73 1.80 1.27 1.30<br>NCOs/Average Loans (%) 0.33 0.03 (0.04) 0.02 (0.04)<br>Annual
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NON-GAAP DISCLOSURE RECONCILIATION<br>32<br>($ in thousands, except where otherwise noted)<br>2Q 2023 3Q 2023 4Q 2023 1Q 2024 2Q 2024 June 30, 2024 June 30, 2023<br>Tangible common equity to tangible assets<br>Total common stockholders' equity $ 357,685 $ 349,402 $ 369,127 $ 371,635 $ 373,226 $ 373,226 $ 357,685<br>Less: Goodwill 47,087 46,783 46,783 46,783 46,783 46,783 47,087<br>Less: Other intangible assets 19,806 18,482 17,158 15,834 14,510 14,510 19,806<br>Tangible common equity (a) 290,792 284,137 305,186 309,018 311,933 311,933 290,792<br>Total assets 3,832,978 3,869,138 3,907,713 4,338,093 4,358,623 4,358,623 3,832,978<br>Less: Goodwill 47,087 46,783 46,783 46,783 46,783 46,783 47,087<br>Less: Other intangible assets 19,806 18,482 17,158 15,834 14,510 14,510 19,806<br>Tangible assets (b) 3,766,085 3,803,873 3,843,772 4,275,476 4,297,330 4,297,330 3,766,085<br>Tangible common equity to tangible assets (a)/(b) 7.72% 7.47% 7.94% 7.23% 7.26% 7.26% 7.72%<br>Adjusted Tangible common equity to tangible assets<br>Tangible assets (b) 3,766,085 3,803,873 3,843,772 4,275,476 4,297,330 4,297,330 3,766,085<br>Less: Cash proceeds from BTFP — — — 355,000 355,000 355,000 —<br>Adjusted tangible assets (c) 3,766,085 3,803,873 3,843,772 3,920,476 3,942,330 3,942,330 3,766,085<br>Tangible common equity to adjusted tangible assets (a)/(c) 7.72% 7.47% 7.94% 7.88% 7.91% 7.91% 7.72%<br>Tangible common equity per common share<br>Total stockholders' equity $ 357,685 $ 349,402 $ 369,127 $ 371,635 $ 373,226 $ 373,226 $ 357,685<br>Less: Goodwill 47,087 46,783 46,783 46,783 46,783 46,783 47,087<br>Less: Other intangible assets 19,806 18,482 17,158 15,834 14,510 14,510 19,806<br>Tangible common equity (d) 290,792 284,137 305,186 309,018 311,933 311,933 290,792<br>Common shares outstanding (e) 19,915 19,848 19,734 19,777 19,778 19,778 19,915<br>Tangible common equity per common share (d)/(e) $ 14.60 $ 14.32 $ 15.46 $ 15.63 $ 15.77 $ 15.77 $ 14.60<br>Return on average tangible common equity<br>Net income $ 9,104 $ 9,161 $ (14,754) $ 6,432 $ 6,208 $ 12,640 $ 17,290<br>Add: Intangible amortization expense (net of tax) 1,046 1,046 1,046 1,046 1,046 2,092 2,092<br>Net income, excluding intangible amortization (f) 10,150 10,207 (13,708) 7,478 7,254 14,732 19,382<br>Average total equity 360,216 361,735 349,382 367,248 369,217 368,499 361,032<br>Less: Average goodwill 47,087 46,882 46,783 46,783 46,783 46,783 47,087<br>Less: Average other intangible assets (net of tax) 16,153 15,109 14,067 13,018 11,969 12,494 16,678<br>Average tangible common equity (g) 296,976 299,744 288,532 307,447 310,465 309,222 297,267<br>Return on average tangible common equity (f)/(g) 13.71% 13.51% (18.85%) 9.78% 9.40% 9.58% 13.15%<br>Efficiency ratio<br>Noninterest expense $ 36,373 $ 37,260 $ 38,654 $ 39,019 $ 38,752 $ 77,771 $ 74,242<br>Less: Intangible amortization expense 1,324 1,324 1,324 1,324 1,324 2,648 2,648<br>Adjusted noninterest expense (j) 35,049 35,936 37,330 37,695 37,428 75,123 71,594<br>Net interest income 22,234 20,395 21,552 22,219 24,001 46,220 45,892<br>Noninterest income 25,778 28,407 791 25,323 27,371 52,694 51,031<br>Tax-equivalent adjustment 141 180 226 247 255 502 264<br>Total tax-equivalent revenue (k) 48,153 48,982 22,569 47,789 51,627 99,416 97,187<br>Efficiency ratio (j)/(k) 72.79% 73.37% 165.40% 78.88% 72.50% 75.56% 73.67%<br>Quarterly Six months ended
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NON-GAAP DISCLOSURE RECONCILIATION<br>33<br>($ in thousands, except where otherwise noted)<br>2019 2020 2021 2022 2023<br>Tangible common equity to tangible assets<br>Total common stockholders' equity $ 285,728 $ 330,163 $ 359,403 $ 356,872 $ 369,127<br>Less: Goodwill 27,329 30,201 31,490 47,087 46,783<br>Less: Other intangible assets 18,391 25,919 20,250 22,455 17,158<br>Tangible common equity (a) 240,008 274,043 307,663 287,330 305,186<br>Total assets 2,356,878 3,013,771 3,392,691 3,779,637 3,907,713<br>Less: Goodwill 27,329 30,201 31,490 47,087 46,783<br>Less: Other intangible assets 18,391 25,919 20,250 22,455 17,158<br>Tangible assets (b) 2,311,158 2,957,651 3,340,951 3,710,095 3,843,772<br>Tangible common equity to tangible assets (a)/(b) 10.38% 9.27% 9.21% 7.74% 7.94%<br>Tangible common equity per common share<br>Total stockholders' equity $ 285,728 $ 330,163 $ 359,403 $ 356,872 $ 369,127<br>Less: Goodwill 27,329 30,201 31,490 47,087 46,783<br>Less: Other intangible assets 18,391 25,919 20,250 22,455 17,158<br>Tangible common equity (c) 240,008 274,043 307,663 287,330 305,186<br>Common shares outstanding (d) 17,050 17,125 17,213 19,992 19,734<br>Tangible common equity per common share (c)/(d) $ 14.08 $ 16.00 $ 17.87 $ 14.37 $ 15.46<br>Return on average tangible common equity<br>Net income $ 29,540 $ 44,675 $ 52,681 $ 40,005 $ 11,696<br>Add: Intangible amortization expense (net of tax) 3,224 3,129 3,460 3,756 4,184<br>Net income, excluding intangible amortization (e) 32,764 47,804 56,141 43,761 15,880<br>Average total equity 231,084 310,208 346,059 346,355 358,268<br>Less: Average goodwill 27,329 27,439 30,385 39,415 46,959<br>Less: Average other intangible assets (net of tax) 16,101 13,309 18,548 17,018 15,624<br>Average tangible common equity (f) 187,654 269,460 297,126 289,922 295,685<br>Return on average tangible common equity (e)/(f) 17.46% 17.74% 18.89% 15.09% 5.37%<br>Efficiency Ratio<br>Noninterest expense $ 142,537 $ 163,799 $ 168,909 $ 158,770 $ 150,157<br>Less: Intangible amortization expense 4,081 3,961 4,380 4,754 5,296<br>Adjusted noninterest expense (i) 138,456 159,838 164,529 154,016 144,861<br>Net interest income 74,551 83,846 87,099 99,729 87,839<br>Noninterest income 114,194 149,371 147,387 111,223 80,229<br>Tax-equivalent adjustment 347 455 492 429 671<br>Total tax-equivalent revenue(j) 189,092 233,672 234,978 211,381 168,739<br>Efficiency ratio (i)/(j) 73.22% 68.40% 70.02% 72.86% 85.85%<br>Annual
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Twelve Months Ended<br>2Q 2023 3Q 2023 4Q 2023 1Q 2024 2Q 2024 June 30, 2024<br>Noninterest income excluding net Losses on investment securities as a percentage of<br>adjusted revenue<br>Noninterest income $ 25,778 $ 28,407 $ 791 $ 25,323 $ 27,371 $ 81,892<br>Less: Net gains (losses) on investment securities — — (24,643) — — (24,643)<br>Noninterest income excluding net losses on investment securities (a) 25,778 28,407 25,434 25,323 27,371 106,535<br>Net interest income (b) 22,234 20,395 21,552 22,219 24,001 88,167<br>Adjusted revenue (a) + (b) = (c) 48,012 48,802 46,986 47,542 51,372 194,702<br>Noninterest income excluding net losses on investment securities as a percentage of adjusted<br>revenue (a) / (c) 53.69% 58.21% 54.13% 53.26% 53.28% 54.72%<br>Banking revenue excluding net losses on investment securities as a percentage of adjusted<br>revenue<br>Banking fees and other income(1) $ 4,439 $4,531 (20,466) $3,550 $ 4,933 ($7,452)<br>Less: Net gains (losses) on investment securities — — (24,643) — — (24,643)<br>Banking fees and other income(1) excluding net losses on investment securities (d) 4,439 4,531 4,177 3,550 4,933 17,191<br>Adjusted banking revenue (d) + (b) = (e) 26,673 24,926 25,729 25,769 28,934 105,358<br>Banking revenue excluding net losses on investment securities as a percentage of adjusted<br>revenue (e) / (c) 55.55% 51.08% 54.76% 54.20% 56.32% 54.11%<br>Banking fees and other income(1) excluding net losses on investment securities as a<br>percentage of adjusted revenue<br>Banking fees and other income(1) excluding net losses on investment securities as a percentage<br>of adjusted revenue (d) / (c)<br> 9.25% 9.28% 8.89% 7.47% 9.60% 8.83%<br>($ in thousands, except for per share data and where otherwise noted) Five Year<br>2019 2020 2021 2022 2023 Average<br>Adjusted net income<br>Net Income $ 29,540 $ 44,675 $ 52,681 $ 40,005 $ 11,696<br>Less: Net gains (losses) on investment securities - - - - (19,222)<br>Adjusted Net Income(2) (f) 29,540 44,675 52,681 40,005 30,918<br>Adjusted return on average equity<br>Average total equity (g) 231,084 310,208 346,059 346,355 358,268<br>Adjusted return on average equity (f)/(g) 12.78% 14.40% 15.22% 11.55% 8.63% 12.52%<br>Adjusted return on average assets<br>Average total assets (h) 2,211,993 2,775,140 3,178,820 3,500,655 3,817,017<br>Adjusted return on average assets (f)/(h) 1.34% 1.61% 1.66% 1.14% 0.81% 1.31%<br>Annual<br>($ in thousands, except for where otherwise noted) Quarterly<br>NON-GAAP DISCLOSURE RECONCILIATION<br>1. Banking noninterest income consists of service charges on deposit accounts, mortgage income, interchange income and other noninterest income.<br>2. Adjusted items are shown after-tax using a 22% tax rate. 34
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NON-GAAP DISCLOSURE RECONCILIATION<br>35<br>2Q 2023 1Q 2024 2Q 2024 June 30, 2024 June 30, 2023<br>Adjusted net interest margin (tax-equivalent)<br>Net interest income $ 22,234 $ 22,219 $ 24,001 $ 46,220 $ 45,892<br>Less: BTFP Cash interest income - 3,615 4,766 8,381 -<br>Add: BTFP interest expense - 3,266 4,307 7,573 -<br>Net interest income excluding BTFP impact (h) 22,234 21,870 23,542 45,412 45,892<br>Add: Tax equivalent adjustment for loans and securities (i) 141 247 255 502 264<br>Adjusted net interest income (h) + (i) = (j) 22,375 22,117 23,797 45,914 46,156<br>Average earning assets 3,564,883 3,921,529 4,075,002 3,998,264 3,566,136<br>Less: Average cash proceeds balance from BTFP - 269,176 355,000 312,088 -<br>Adjusted interest earning assets (k) 3,564,883 3,652,353 3,720,002 3,686,176 3,566,136<br>Adjusted net interest margin (tax-equivalent) (j)/(k) 2.52% 2.44% 2.57% 2.50% 2.61%<br>Pre-Provision Net Revenue<br>Income (loss) before taxes $ 11,639 $ 8,523 $ 8,131 $ 16,654 $ 22,131<br>Add: Provision for credit losses - - 4,489 4,489 550<br>Pre-provision net revenue $ 11,639 $ 8,523 $ 12,620 $ 21,143 $ 22,681<br>($ in thousands, except for per share data and where otherwise noted) Quarterly Six months ended
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