8-K - ALRS - Equibles

United States

Securities And Exchange Commission Washington, DC 20549

FORM 8-K

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

Date of report (Date of earliest event reported): January 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 January 24, 2024, Alerus Financial Corporation (the “Company”) issued a press release announcing its financial results for the three and twelve months ended December 31, 2023. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

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

Item 7.01. Regulation FD Disclosure.

On January 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 January 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: January 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 (01.24.2024)<br><br>	Alan A. Villalon, Chief Financial Officer<br><br>952.417.3733 (Office)

ALERUS FINANCIAL CORPORATION ANNOUNCES

FOURTH QUARTER 2023 RESULTS, INCLUDING BALANCE SHEET REPOSITIONING

MINNEAPOLIS, MN (January 24, 2024) – Alerus Financial Corporation (Nasdaq: ALRS), or the Company, reported net loss of $14.8 million for the fourth quarter of 2023, or ($0.73) per diluted common share, compared to net income of $9.2 million, or $0.45 per diluted common share, for the third quarter of 2023, and net income of $10.9 million, or $0.53 per diluted common share, for the fourth quarter of 2022.

During the fourth quarter of 2023, the Company sold $172.3 million of available-for-sale (AFS) securities in a balance sheet repositioning. The sale resulted in a one-time pre-tax net loss of $24.6 million. Proceeds from the sale were reinvested into loans to new and existing clients throughout the communities the Company serves, in addition to paying down borrowings. Adjusted pre-provision net revenue (see non-GAAP reconciliation) was $9.0 million, compared to $8.9 million for the third quarter 2023.

CEO Comments

President and Chief Executive Officer Katie Lorenson said, “2023 was an extraordinary year that brought both challenges and opportunities. During the year, we completed several restructurings and added over 120 new team members to our organization while reducing overall headcount. The resulting transformation of our commercial wealth bank is evident, with exceptional deposit growth supporting high quality loan growth during the quarter. In addition, the well-executed balance sheet repositioning in December has provided the Company with continued momentum to improve financial performance heading into 2024 and beyond.

The ongoing successful execution of our One Alerus strategy resulted in new and expanded client relationships in all our diversified business lines. Our net interest margin expanded during the quarter and fee income remained a differentiator in the industry with a robust contribution of 54% of total revenues. Returning financial performance to top tier profitability levels through ongoing expense management remains a priority, and we continued to prudently manage credit quality while maintaining healthy reserves, capital, and liquidity levels.

We are focused on continued value creation for our shareholders, our clients, and our communities. During the quarter, we grew tangible book value per share 8.0% and returned over $5.8 million to shareholders through dividends and our expanded share buyback program. I want to thank our Alerus team members for building on our solid foundation and all that was accomplished in 2023. ”

Fourth Quarter Highlights

◾	Total deposits were $3.1 billion as of December 31, 2023, an increase of $223.4 million, or 7.8%, from September 30, 2023
◾	Total loans were $2.8 billion as of December 31, 2023, an increase of $149.7 million, or 5.7%, from September 30, 2023
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◾	The loan to deposit ratio as of December 31, 2023 was 89.0%, compared to 90.7% as of September 30, 2023, brokered deposits remained at $0
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◾	Net interest margin expanded 10 basis points from 2.27% in the third quarter to 2.37% in the fourth quarter of 2023
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◾	Net interest income increased 5.7%, from $20.4 million in the third quarter to $21.6 million in the fourth quarter of 2023
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◾	Total assets under administration/management were $40.7 billion, a 6.3% increase from the third quarter of 2023
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◾	Net recoveries to average loans of 0.04%, compared to net recoveries to average loans of 0.09% for the third quarter of 2023
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◾	Repurchased $2.1 million of the Company’s outstanding stock at an average purchase price of $17.65, reducing common shares outstanding by 118,000 at quarter end, along with recent board approval to repurchase up to a total of 1 million shares of common stock
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◾	Tangible book value per common share (non-GAAP) was $15.46, an 8.0% increase from the third quarter of 2023
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◾	Common equity tier 1 capital to risk weighted assets as of December 31, 2023 was 11.82%, compared to 13.01% as of September 30, 2023, and continues to be well above the minimum threshold to be well capitalized of 6.50%
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◾	Tangible common equity to tangible assets (non-GAAP) was 7.96% as of December 31, 2023, compared to 7.47% as of September 30, 2023
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Full Year 2023 Highlights

◾	Noninterest expense of $150.2 million, a decrease of $8.6 million, or 5.4%, compared to $158.8 million in 2022
◾	Average loans of $2.5 billion, an increase of $475.6 million, or 23.1%, from 2022
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◾	Average deposits of $2.9 billion, an increase of $48.6 million, or 1.69%, from 2022
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◾	Total deposits increased $180.1 million to $3.1 billion as of December 31, 2023, compared to $2.9 billion as of December 31, 2022
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◾	Loan to deposit ratio as of December 31, 2023 was 89.0%, compared to 83.8% as of December 31, 2022, brokered deposits remained at $0
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◾	Yield on interest earning assets increased 109 basis points from 3.52% for the year ended December 31, 2022 to 4.61% for the year ended December 31, 2023
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◾	Total assets under administration/management were $40.7 billion, a 14.0% increase from December 31, 2022
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◾	Net recoveries to average loans of 0.04%, compared to net charge-offs to average loans of 0.03% for the year ended December 31, 2022
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◾	Dividends paid per common share increased from $0.70 for the year ended December 31, 2022 to $0.75 for the year ended December 31, 2023
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◾	Repurchased $6.2 million of the Company’s outstanding stock at an average purchase price of $17.48, reducing common shares outstanding by 356,474 for the year ended December 31, 2023
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◾	Tangible book value per common share (non-GAAP) was $15.46 as of December 31, 2023, compared to $14.37 as of December 31, 2022
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◾	Tangible common equity to tangible assets (non-GAAP) was 7.96% as of December 31, 2023, compared to 7.74% as of December 31, 2022
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Selected Financial Data (unaudited)


	As of and for the
	Three months ended									Year ended
	December 31,			September 30,			December 31,			December 31,			December 31,
(dollars and shares in thousands, except per share data)	2023			2023			2022			2023			2022		****
Performance Ratios
Return on average total assets		(1.51)	%		0.95	%		1.17	%		0.31	%		1.14	%
Return on average common equity		(16.75)	%		10.05	%		12.37	%		3.26	%		11.55	%
Return on average tangible common equity ^(1)^		(18.85)	%		13.51	%		16.63	%		5.37	%		15.09	%
Noninterest income as a % of revenue		3.54	%		58.21	%		48.62	%		47.74	%		52.72	%
Net interest margin (tax-equivalent)		2.37	%		2.27	%		3.09	%		2.46	%		3.04	%
Efficiency ratio ^(1)^		165.40	%		73.37	%		69.62	%		85.85	%		72.86	%
Adjusted efficiency ratio ^(1)^		79.07	%		73.37	%		69.62	%		74.91	%		72.86	%
Net charge-offs/(recoveries) to average loans		(0.04)	%		(0.09)	%		(0.03)	%		(0.04)	%		0.02	%
Dividend payout ratio		(26.03)	%		42.22	%		33.96	%		129.31	%		33.33	%
Per Common Share
Earnings per common share - basic	$	(0.74)		$	0.46		$	0.54		$	0.59		$	2.12
Earnings per common share - diluted	$	(0.73)		$	0.45		$	0.53		$	0.58		$	2.10
Dividends declared per common share	$	0.19		$	0.19		$	0.18		$	0.75		$	0.70
Book value per common share	$	18.71		$	17.60		$	17.85
Tangible book value per common share ^(1)^	$	15.46		$	14.32		$	14.37
Average common shares outstanding - basic		19,761			19,872			19,988			19,922			18,640
Average common shares outstanding - diluted		19,996			20,095			20,232			20,143			18,884
Other Data
Retirement and benefit services assets under administration/management	$	36,682,425		$	34,552,569		$	32,122,520
Wealth management assets under administration/management	$	4,018,846		$	3,724,091		$	3,582,648
Mortgage originations	$	65,488		$	109,637		$	126,254		$	364,114		$	812,314

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

Results of Operations

Net Interest Income

Net interest income for the fourth quarter of 2023 was $21.6 million, a $1.2 million, or 5.7%, increase from the third quarter of 2023 due to interest income growth and stabilizing interest expense resulting from slowing deposit cost increases and lower short-term borrowings due to strong deposit growth. Net interest income decreased $5.4 million, or 20.1%, from $27.0 million for the fourth quarter of 2022 due to heightened deposit competition, the impact of rising short-term interest rates on indexed money market deposits, and clients moving deposits out of noninterest bearing products into interest-bearing products. Interest income increased $2.7 million, or 6.3%, from the third quarter of 2023, primarily driven by a 23 basis point increase in yield on interest earning assets mostly attributable to higher yields on new loans and strong organic loan growth. The increase in interest income was offset by a $1.5 million increase in interest expense, primarily due to an increase in rates paid on interest-bearing deposits. While the increase was the lowest quarterly increase in 2023, interest expense paid on deposits was still impacted due to heightened deposit competition, the impact of rising short-term interest rates on indexed money market deposits, and clients moving deposits out of noninterest bearing products into interest-bearing products.

Net interest margin (on a tax-equivalent basis), was 2.37% for the fourth quarter of 2023, a 10 basis point increase from 2.27% for the third quarter of 2023, and a 72 basis point decrease from 3.09% for the fourth quarter of 2022. The increase in net interest margin from the prior quarter reflected higher yields on new loans, partially offset by the impact of rising interest rates on our interest-bearing liabilities.

Noninterest Income

Noninterest income for the fourth quarter of 2023 was $0.8 million, a $27.6 million, or 97.2%, decrease from the third quarter of 2023. The quarter over quarter decrease was driven by the previously announced balance sheet repositioning, as a result of which a $24.6 million loss on the sale of investment securities was recognized in the fourth quarter of 2023. Adjusted non-interest income (non-GAAP) for the fourth quarter of 2023 was $25.4 million, a 0.8% decrease from the third quarter of 2023. Retirement and benefit services revenue decreased to $15.3 million, a 17.7% decrease from third quarter results mainly due to a $2.8 million gain recognized on the divestiture of the ESOP trustee business in the third quarter of 2023. Assets under administration/management in retirement and benefit services grew 6.2% due to improved equity and bond markets. Wealth management revenues grew $0.7 million, a 12.7% increase from the third quarter of 2023 as assets under administration/management grew 7.9% during that same period. Mortgage saw a $1.2 million seasonal decrease in mortgage banking revenue with mortgage originations of $65.5 million for the fourth quarter of 2023, compared to originations of $109.6 million in the third quarter of 2023.

Adjusted noninterest income (non-GAAP) for the fourth quarter of 2023 was $25.4 million, a decrease of $0.1 million, or 0.3%, from $25.5 million in the fourth quarter of 2022. While overall noninterest income was stable year over year, mortgage banking revenues declined $0.9 million, or 41.1%, from $2.2 million in the fourth quarter of 2022 as mortgage originations declined 48.1% during that time period due to the impact of higher interest rates. Offsetting this decline, wealth management revenues grew $0.8 million, or 15.5%, from $5.1 million in the fourth quarter of 2022 as assets under administration/management grew 12.2% during that time period.

Noninterest Expense

Noninterest expense for the fourth quarter of 2023 was $38.7 million, a $1.4 million, or 3.7%, increase from the third quarter of 2023. Compensation expense for the fourth quarter of 2023 was $19.2 million, which included severance expense of $0.4 million. Business services, software and technology expense was $5.7 million for the fourth quarter of 2023, a $0.9 million increase from the third quarter of 2023. The increase was driven by seasonally higher contract renewals due to inflationary pressures and equipment purchases. Professional fees and assessments expense was $2.3 million, a $0.6 million increase from the third quarter of 2023 driven primarily by higher fees resulting from increased audit, examination, and other professional fees. Marketing and advertising expense was $1.0 million for the fourth quarter of 2023, a $0.3 million increase from the third quarter of 2023 due to a one-time donation resulting in future tax credits.

Noninterest expense for the fourth quarter of 2023 increased $0.7 million, or 1.9%, from $37.9 million in the fourth quarter of 2022. The increase was primarily driven by inflationary pressures in business services, software and technology expense and higher professional fees and assessments due to higher auditing fees and an increase in Federal Deposit Insurance Corporation (“FDIC”) assessments.

Financial Condition

Total assets were $3.9 billion as of December 31, 2023, an increase of $117.2 million, or 3.1%, from December 31, 2022. The increase was primarily due to a $312.1 million increase in loans and a $64.2 million increase in cash and cash equivalents, partially offset by a decrease of $253.0 million in investment securities.

Loans

Total loans were $2.8 billion as of December 31, 2023, an increase of $312.1 million, or 12.8%, from December 31, 2022. The increase was primarily driven by a $245.2 million increase in commercial real estate loans, a $47.3 million increase in residential real estate loans, a $26.2 million increase in real estate construction loans, and an $11.0 million increase in commercial and industrial loans, offset by a $21.3 million decrease in other consumer revolving and installment loans.

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



		December 31,		September 30,		June 30,		March 31,		December 31,
(dollars in thousands)	****	2023		2023		2023		2023		2022
Commercial
Commercial and industrial		$	594,827	$	582,387	$	551,860	$	553,578	$	583,876
Real estate construction			124,034		97,742		78,428		108,776		97,810
Commercial real estate			1,126,912		1,025,014		1,003,821		934,324		881,670
Total commercial			1,845,773		1,705,143		1,634,109		1,596,678		1,563,356
Consumer
Residential real estate first mortgage			726,879		717,793		707,630		698,002		679,551
Residential real estate junior lien			154,134		152,677		157,231		152,281		150,479
Other revolving and installment			29,302		30,817		34,552		39,664		50,608
Total consumer			910,315		901,287		899,413		889,947		880,638
Total loans		$	2,756,088	$	2,606,430	$	2,533,522	$	2,486,625	$	2,443,994

Deposits

Total deposits were $3.1 billion as of December 31, 2023, an increase of $180.1 million, or 6.2%, from December 31, 2022. Interest-bearing deposits increased $313.0 million, while noninterest-bearing deposits decreased $132.9 million, from December 31, 2022. The increase in total deposits was due to new and expanded commercial deposit relationships along with time deposit and synergistic deposit growth. Time deposit balances increased as higher short-term CD rates attracted primarily new deposits to the Company. The Company continued to have $0 of brokered deposits as of December 31, 2023.

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


		December 31,			September 30,			June 30,			March 31,			December 31,
(dollars in thousands)	****	2023		****	2023		****	2023		****	2023		****	2022
Noninterest-bearing demand		$	728,082		$	717,990		$	715,534		$	792,977		$	860,987
Interest-bearing
Interest-bearing demand			840,711			759,812			753,194			817,675			706,275
Savings accounts			82,485			88,341			93,557			99,742			99,882
Money market savings			1,032,771			959,106			986,403			1,076,166			1,035,981
Time deposits			411,562			346,935			304,167			245,418			212,359
Total interest-bearing			2,367,529			2,154,194			2,137,321			2,239,001			2,054,497
Total deposits		$	3,095,611		$	2,872,184		$	2,852,855		$	3,031,978		$	2,915,484

Asset Quality

Total nonperforming assets were $8.8 million as of December 31, 2023, an increase of $4.9 million, or 129.3%, from December 31, 2022. This increase was primarily driven by one loan. As of December 31, 2023, the allowance for credit losses on loans was $35.8 million, or 1.30% of total loans, compared to $31.1 million, or 1.27% of total loans, as of December 31, 2022.

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


		As of and for the three months ended
		December 31,			September 30,			June 30,			March 31,			December 31,
(dollars in thousands)	****	2023		****	2023		****	2023		****	2023		****	2022		****
Nonaccrual loans		$	8,596		$	9,007		$	2,233		$	2,118		$	3,794
Accruing loans 90+ days past due			139			—			347			—			—
Total nonperforming loans			8,735			9,007			2,580			2,118			3,794
OREO and repossessed assets			32			3			—			—			30
Total nonperforming assets		$	8,767		$	9,010		$	2,580		$	2,118		$	3,824
Net charge-offs/(recoveries)			(238)			(594)			(403)			170			(178)
Net charge-offs/(recoveries) to average loans			(0.04)	%		(0.09)	%		(0.07)	%		0.03	%		(0.03)	%
Nonperforming loans to total loans			0.32	%		0.35	%		0.10	%		0.09	%		0.16	%
Nonperforming assets to total assets			0.22	%		0.23	%		0.07	%		0.05	%		0.10	%
Allowance for credit losses on loans to total loans			1.30	%		1.39	%		1.41	%		1.41	%		1.27	%
Allowance for credit losses on loans to nonperforming loans			410	%		403	%		1,384	%		1,657	%		821	%

For the fourth quarter of 2023, the Company had net recoveries of $238 thousand, compared to net recoveries of $594 thousand for the third quarter of 2023 and $178 thousand for the fourth quarter of 2022.

The Company recorded a provision for credit losses of $1.5 million for the fourth quarter of 2023, primarily driven by strong loan growth and unfunded commitments. Beginning on January 1, 2023, the allowance for credit losses on loans is computed under the current expected credit loss, or CECL, accounting standard; prior to that, the allowance for credit losses was computed using the incurred loss method. The unearned fair value adjustments on the acquired Metro Phoenix Bank loan portfolio were $5.2 million and $7.1 million, as of December 31, 2023 and 2022, respectively.

Capital

Total stockholders’ equity was $369.1 million as of December 31, 2023, an increase of $12.3 million from December 31, 2022. This change was driven by a decrease in accumulated other comprehensive loss of $25.0 million. Tangible book value per common share, a non-GAAP financial measure, increased to $15.46 as of December 31, 2023, from $14.37 as of December 31, 2022. Tangible common equity to tangible assets, a non-GAAP financial measure, increased to 7.96% as of December 31, 2023, from 7.74% as of December 31, 2022. Common equity tier 1 capital to risk weighted assets decreased to 11.85% as of December 31, 2023, from 13.39% as of December 31, 2022.

During the fourth quarter of 2023, the Company repurchased approximately $2.1 million of its outstanding stock at an average purchase price of $17.65, which reduced common shares outstanding by 118,000 at quarter end.

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


	****	December 31,		****	September 30,		****	December 31,
	****	2023		****	2023		****	2022
Capital Ratios^(1)^
Alerus Financial Corporation Consolidated
Common equity tier 1 capital to risk weighted assets			11.82	%		13.01	%		13.39	%
Tier 1 capital to risk weighted assets			12.10	%		13.30	%		13.69	%
Total capital to risk weighted assets			14.76	%		16.10	%		16.48	%
Tier 1 capital to average assets			10.57	%		11.14	%		11.25	%
Tangible common equity / tangible assets ^(2)^			7.96	%		7.47	%		7.74	%

Alerus Financial, N.A.
Common equity tier 1 capital to risk weighted assets			11.40	%		12.68	%		12.76	%
Tier 1 capital to risk weighted assets			11.40	%		12.68	%		12.76	%
Total capital to risk weighted assets			12.51	%		13.86	%		13.83	%
Tier 1 capital to average assets			9.92	%		10.72	%		10.48	%

(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, January 25, 2024, to discuss its financial results. The call can be accessed via telephone at (844) 200-6205, using access code 454002. A recording of the call and transcript will be available on the Company’s investor relations website at investors.alerus.com following the call.

About Alerus Financial Corporation

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

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized by U.S. Generally Accepted Accounting Principles, or GAAP. These non-GAAP financial measures include the ratio of tangible common equity to tangible assets, tangible common equity per share, return on average tangible common equity, net interest margin (tax-equivalent), efficiency ratio, adjusted efficiency ratio, pre-provision net revenue, adjusted pre-provision net revenue, and adjusted noninterest income. 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 recent and potential additional rate increases by the Federal Reserve; our ability to successfully manage credit risk and maintain an adequate level of allowance for credit losses; new or revised accounting standards; business and economic conditions generally and in the financial services industry, nationally and within our market areas, including continued rising rates of inflation and possible recession; the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short-period of time at Silicon Valley Bank, Signature Bank and First Republic Bank that resulted in the failure of those institutions; the overall health of the local and national real estate market; concentrations within our loan portfolio; the level of nonperforming assets on our balance sheet; our ability to implement our organic and acquisition growth strategies, including the integration of Metro Phoenix Bank which the Company acquired in 2022; the impact of economic or market conditions on our fee-based services; our ability to continue to grow our retirement and benefit services business; our ability to continue to originate a sufficient volume of residential mortgages; the occurrence of fraudulent activity, breaches or failures of our 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 fourth-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; the extensive regulatory framework that applies to us; the impact of recent and future legislative and regulatory changes, including in response to the recent failures of Silicon Valley Bank, Signature Bank and First Republic Bank in 2023; 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 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, including the new 1.0% excise tax on stock buybacks by publicly traded companies; 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.

Alerus Financial Corporation and Subsidiaries

Consolidated Balance Sheets

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


	****	December 31,		****	December 31,
	****	2023		****	2022
Assets		(Unaudited)			(Audited)
Cash and cash equivalents		$	122,485		$	58,242
Investment securities
Available-for-sale, at fair value			486,736			717,324
Held-to-maturity, at carrying value (allowance for credit losses of $213 at December 31, 2023)			299,515			321,902
Loans held for sale			11,497			9,488
Loans			2,756,088			2,443,994
Allowance for credit losses on loans			(35,843)			(31,146)
Net loans			2,720,245			2,412,848
Land, premises and equipment, net			17,940			17,288
Operating lease right-of-use assets			5,436			5,419
Accrued interest receivable			15,700			12,869
Bank-owned life insurance			33,236			33,991
Goodwill			46,783			47,087
Other intangible assets			17,158			22,455
Servicing rights			2,052			2,643
Deferred income taxes, net			34,595			42,369
Other assets			83,433			75,712
Total assets		$	3,896,811		$	3,779,637
Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing		$	728,082		$	860,987
Interest-bearing			2,367,529			2,054,497
Total deposits			3,095,611			2,915,484
Short-term borrowings			314,170			378,080
Long-term debt			58,956			58,843
Operating lease liabilities			5,751			5,902
Accrued expenses and other liabilities			53,196			64,456
Total liabilities			3,527,684			3,422,765
Stockholders’ equity
Preferred stock, $1 par value, 2,000,000 shares authorized: 0 issued and outstanding			—			—
Common stock, $1 par value, 30,000,000 shares authorized: 19,734,077 and 19,991,681 issued and outstanding			19,734			19,992
Additional paid-in capital			150,343			155,095
Retained earnings			272,705			280,426
Accumulated other comprehensive loss			(73,655)			(98,641)
Total stockholders’ equity			369,127			356,872
Total liabilities and stockholders’ equity		$	3,896,811		$	3,779,637

Alerus Financial Corporation and Subsidiaries

Consolidated Statements of Income

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


	Three months ended						Year ended
	December 31,		September 30,		December 31,		December 31,		December 31,
	2023		2023		2022		2023		2022
Interest Income	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Loans, including fees	$	37,731	$	34,986	$	29,248	$	136,918	$	89,907
Investment securities
Taxable		6,040		6,146		5,813		24,262		23,260
Exempt from federal income taxes		182		182		210		740		848
Other		742		724		541		2,963		1,562
Total interest income		44,695		42,038		35,812		164,883		115,577
Interest Expense
Deposits		17,169		14,436		5,675		53,387		9,169
Short-term borrowings		5,292		6,528		2,545		20,976		4,339
Long-term debt		682		679		628		2,681		2,340
Total interest expense		23,143		21,643		8,848		77,044		15,848
Net interest income		21,552		20,395		26,964		87,839		99,729
Provision for credit losses		1,507		—		—		2,057		—
Net interest income after provision for credit losses		20,045		20,395		26,964		85,782		99,729
Noninterest Income
Retirement and benefit services		15,317		18,605		16,599		65,294		67,135
Wealth management		5,940		5,271		5,144		21,855		20,870
Mortgage banking		1,279		2,510		2,170		8,411		16,921
Service charges on deposit accounts		341		328		282		1,280		1,434
Net gains (losses) on investment securities		(24,643)		—		—		(24,643)		—
Other		2,557		1,693		1,322		8,032		4,863
Total noninterest income		791		28,407		25,517		80,229		111,223
Noninterest Expense
Compensation		19,214		19,071		19,189		76,290		80,656
Employee taxes and benefits		4,578		4,895		4,887		20,051		21,915
Occupancy and equipment expense		1,858		1,883		1,892		7,477		7,605
Business services, software and technology expense		5,686		4,774		4,405		21,053		19,487
Intangible amortization expense		1,324		1,324		1,324		5,296		4,754
Professional fees and assessments		2,345		1,716		1,454		6,743		8,367
Marketing and business development		1,002		692		950		3,027		3,254
Supplies and postage		521		410		634		1,796		2,440
Travel		313		322		356		1,189		1,182
Mortgage and lending expenses		501		689		606		1,902		2,183
Other		1,312		1,484		2,251		5,333		6,927
Total noninterest expense		38,654		37,260		37,948		150,157		158,770
Income (loss) before income tax expense (benefit)		(17,818)		11,542		14,533		15,854		52,182
Income tax expense (benefit)		(3,064)		2,381		3,624		4,158		12,177
Net income (loss)	$	(14,754)	$	9,161	$	10,909	$	11,696	$	40,005
Per Common Share Data
Earnings (loss) per common share	$	(0.74)	$	0.46	$	0.54	$	0.59	$	2.12
Diluted earnings (loss) per common share	$	(0.73)	$	0.45	$	0.53	$	0.58	$	2.10
Dividends declared per common share	$	0.19	$	0.19	$	0.18	$	0.75	$	0.70
Average common shares outstanding		19,761		19,872		19,988		19,922		18,640
Diluted average common shares outstanding		19,996		20,095		20,232		20,143		18,884

Alerus Financial Corporation and Subsidiaries

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

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


	****	December 31,			September 30,			December 31,
	****	2023			2023			2022
Tangible Common Equity to Tangible Assets
Total common stockholders’ equity		$	369,127		$	349,402		$	356,872
Less: Goodwill			46,783			46,783			47,087
Less: Other intangible assets			17,158			18,482			22,455
Tangible common equity (a)			305,186			284,137			287,330
Total assets			3,896,811			3,869,138			3,779,637
Less: Goodwill			46,783			46,783			47,087
Less: Other intangible assets			17,158			18,482			22,455
Tangible assets (b)			3,832,870			3,803,873			3,710,095
Tangible common equity to tangible assets (a)/(b)			7.96	%		7.47	%		7.74	%
Tangible Book Value Per Common Share
Total common stockholders’ equity		$	369,127		$	349,402		$	356,872
Less: Goodwill			46,783			46,783			47,087
Less: Other intangible assets			17,158			18,482			22,455
Tangible common equity (c)			305,186			284,137			287,330
Total common shares issued and outstanding (d)			19,734			19,848			19,992
Tangible book value per common share (c)/(d)		$	15.46		$	14.32		$	14.37


	Three months ended									Year ended
	December 31,			September 30,			December 31,			December 31,			December 31,
	2023			2023			2022			2023			2022
Return on Average Tangible Common Equity
Net income (loss)	$	(14,754)		$	9,161		$	10,909		$	11,696		$	40,005
Add: Intangible amortization expense (net of tax)		1,046			1,046			1,046			4,184			3,756
Net income (loss), excluding intangible amortization (e)		(13,708)			10,207			11,955			15,880			43,761
Average total equity		349,382			361,735			349,812			358,267			346,355
Less: Average goodwill		46,783			46,882			46,283			46,959			39,415
Less: Average other intangible assets (net of tax)		14,067			15,109			18,243			15,624			17,018
Average tangible common equity (f)		288,532			299,744			285,286			295,684			289,922
Return on average tangible common equity (e)/(f)		(18.85)	%		13.51	%		16.63	%		5.37	%		15.09	%
Efficiency Ratio
Noninterest expense	$	38,654		$	37,260		$	37,948		$	150,157		$	158,770
Less: Intangible amortization expense		1,324			1,324			1,324			5,296			4,754
Adjusted noninterest expense (g)		37,330			35,936			36,624			144,861			154,016
Net interest income		21,552			20,395			26,964			87,839			99,729
Noninterest income		791			28,407			25,517			80,229			111,223
Tax-equivalent adjustment		226			180			124			671			429
Total tax-equivalent revenue (h)		22,569			48,982			52,605			168,739			211,381
Efficiency ratio (g)/(h)		165.40	%		73.37	%		69.62	%		85.85	%		72.86	%
Adjusted Efficiency Ratio
Noninterest expense	$	38,654		$	37,260		$	37,948		$	150,157		$	158,770
Less: Intangible amortization expense		1,324			1,324			1,324			5,296			4,754
Adjusted noninterest expense (i)		37,330			35,936			36,624			144,861			154,016
Net interest income		21,552			20,395			26,964			87,839			99,729
Noninterest income		791			28,407			25,517			80,229			111,223
Tax-equivalent adjustment		226			180			124			671			429
Less: Net gains (losses) on investment securities		(24,643)			—			—			(24,643)			—
Total tax-equivalent revenue (j)		47,212			48,982			52,605			193,382			211,381
Adjusted efficiency ratio (i)/(j)		79.07	%		73.37	%		69.62	%		74.91	%		72.86	%

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						Year ended
	December 31,		September 30,		December 31,		December 31,		December 31,
	2023		2023		2022		2023		2022
Pre-Provision Net Revenue
Income (loss) before taxes	$	(17,818)	$	11,542	$	14,533	$	15,854	$	52,182
Add: Provision for credit losses		1,507		—		—		2,057		—
Pre-provision net revenue	$	(16,311)	$	11,542	$	14,533	$	17,911	$	52,182
Adjusted Pre-Provision Net Revenue
Pre-provision net revenue	$	(16,311)	$	11,542	$	14,533	$	17,911	$	52,182
Add: Net gains (losses) on investment securities		(24,643)		—		—		(24,643)		—
Add: Minnesota Housing donation		250		—		—		250		—
Less: Severance and signing bonus expense		416		147		669		2,337		1,942
Less: Gain on sale of ESOP business		—		2,775		—		2,775		—
Less: BOLI mortality proceeds		—		—		—		1,196		—
Adjusted pre-provision net revenue	$	8,998	$	8,914	$	15,202	$	41,170	$	54,124
Adjusted Noninterest Income
Noninterest income	$	791	$	28,407	$	25,517	$	80,229	$	111,223
Add: Net gains (losses) on investment securities		(24,643)		—		—		(24,643)		—
Less: Gain on sale of ESOP business		—		2,775		—		2,775		—
Less: BOLI mortality proceeds		—		—		—		1,196		—
Adjusted noninterest income	$	25,434	$	25,632	$	25,517	$	100,901	$	111,223

Alerus Financial Corporation and Subsidiaries

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

(dollars in thousands)


	Three months ended												Year ended
	December 31, 2023				September 30, 2023				December 31, 2022				December 31, 2023				December 31, 2022
			Average				Average				Average				Average				Average
	Average		Yield/		Average		Yield/		Average		Yield/		Average		Yield/		Average		Yield/
	Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate
Interest Earning Assets
Interest-bearing deposits with banks	$	33,920	3.22	%	$	29,450	3.09	%	$	26,510	2.16	%	$	35,395	3.40	%	$	58,149	1.01	%
Investment securities ^(1)^		921,555	2.70	%		971,913	2.60	%		1,046,441	2.30	%		983,545	2.56	%		1,135,426	2.14	%
Fed funds sold		—	—	%		—	—	%		7,119	3.40	%		—	—	%		7,313	2.63	%
Loans held for sale		11,421	6.01	%		16,518	5.55	%		14,505	4.54	%		13,217	5.46	%		24,497	3.49	%
Loans
Commercial:
Commercial and industrial		573,174	6.89	%		555,649	6.61	%		561,252	5.80	%		558,429	6.62	%		507,040	5.13	%
Real estate construction		117,765	8.12	%		88,450	8.52	%		96,189	6.02	%		99,315	7.66	%		63,296	5.21	%
Commercial real estate		1,053,812	5.47	%		998,636	5.25	%		838,466	4.85	%		980,667	5.20	%		713,102	4.16	%
Total commercial		1,744,751	6.12	%		1,642,735	5.89	%		1,495,907	5.28	%		1,638,411	5.84	%		1,283,438	4.59	%
Consumer
Residential real estate first mortgage		724,110	4.00	%		714,874	3.89	%		665,135	3.64	%		706,626	3.85	%		587,443	3.50	%
Residential real estate junior lien		155,137	7.86	%		154,939	7.69	%		146,912	6.46	%		154,036	7.56	%		136,483	5.29	%
Other revolving and installment		29,510	6.33	%		32,288	6.11	%		51,836	5.62	%		35,971	6.06	%		52,071	4.85	%
Total consumer		908,757	4.73	%		902,101	4.62	%		863,883	4.24	%		896,633	4.58	%		775,997	3.91	%
Total loans ^(1)^		2,653,508	5.64	%		2,544,836	5.44	%		2,359,790	4.90	%		2,535,044	5.39	%		2,059,435	4.33	%
Federal Reserve/FHLB stock		24,780	7.48	%		28,761	6.83	%		19,603	6.80	%		25,246	6.98	%		13,824	5.67	%
Total interest earning assets		3,645,184	4.89	%		3,591,478	4.66	%		3,473,968	4.10	%		3,592,447	4.61	%		3,298,644	3.52	%
Noninterest earning assets		223,022				230,123				232,754				224,480				202,011
Total assets	$	3,868,206			$	3,821,601			$	3,706,722			$	3,816,927			$	3,500,655
Interest-Bearing Liabilities
Interest-bearing demand deposits	$	798,634	1.65	%	$	751,455	1.34	%	$	692,217	0.50	%	$	768,238	1.29	%	$	692,287	0.22	%
Money market and savings deposits		1,092,656	3.53	%		1,073,297	3.20	%		1,185,502	1.39	%		1,118,815	2.92	%		1,113,426	0.55	%
Time deposits		383,715	4.27	%		327,264	3.94	%		214,264	1.20	%		303,746	3.58	%		221,997	0.70	%
Fed funds purchased		189,568	5.71	%		312,121	5.50	%		86,350	3.78	%		287,768	5.31	%		63,296	2.46	%
Short-term borrowings		200,000	5.09	%		173,913	5.02	%		178,533	3.82	%		113,973	5.00	%		89,932	3.10	%
Long-term debt		58,943	4.59	%		58,914	4.57	%		58,830	4.24	%		58,900	4.55	%		58,864	3.98	%
Total interest-bearing liabilities		2,723,516	3.37	%		2,696,964	3.18	%		2,415,696	1.45	%		2,651,440	2.91	%		2,239,802	0.71	%
Noninterest-Bearing Liabilities and Stockholders' Equity
Noninterest-bearing deposits		719,895				692,742				870,948				737,365				851,821
Other noninterest-bearing liabilities		75,413				70,160				70,266				69,855				62,677
Stockholders’ equity		349,382				361,735				349,812				358,267				346,355
Total liabilities and stockholders’ equity	$	3,868,206			$	3,821,601			$	3,706,722			$	3,816,927			$	3,500,655
Net interest rate spread			1.52	%			1.48	%			2.65	%			1.70	%			2.81	%
Net interest margin, tax-equivalent ^(1)^			2.37	%			2.27	%			3.09	%			2.46	%			3.04	%

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

Exhibit 99.2

EARNINGS PRESENTATION<br>Q4 2023<br>NASDAQ: ALRS<br>Alerus
1<br>Forward-Looking Statements<br>This presentation contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements<br>include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of Alerus Financial Corporation. These<br>statements are often, but not always, identified by words such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “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 recent and potential additional rate increases by the<br>Federal Reserve; 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<br>generally and in the financial services industry, nationally and within our market areas, including continued rising rates of inflation and possible recession; the effects of recent developments and events<br>in the financial services industry, including the large-scale deposit withdrawals over a short-period of time at Silicon Valley Bank, Signature Bank and First Republic Bank that resulted in the failure of<br>those institutions; the overall health of the local and national real estate market; concentrations within our loan portfolio; the level of nonperforming assets on our balance sheet; our ability to<br>implement our organic and acquisition growth strategies, including the integration of Metro Phoenix Bank which we acquired in 2022; the impact of economic or market conditions on our fee-based<br>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<br>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<br>and similar tools; interruptions involving our information technology and telecommunications systems or third-party servicers; potential losses incurred in connection with mortgage loan repurchases;<br>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<br>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<br>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 Federal Deposit<br>Insurance Corporation (“FDIC”) insurance limits; the effectiveness of our risk management framework; the commencement and outcome of litigation and other legal proceedings and regulatory actions<br>against us or to which we may become subject; potential impairment to the goodwill we recorded in connection with our past acquisitions, including the acquisition of Metro Phoenix Bank; the extensive<br>regulatory framework that applies to us; the impact of recent and future legislative and regulatory changes, including in response to the recent failures of Silicon Valley Bank, Signature Bank and First<br>Republic Bank in 2023; 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<br>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,<br>including the 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<br>state tax laws, regulations and guidance, including the new 1.0% excise tax on stock buybacks by publicly traded companies; potential changes in federal policy and at regulatory agencies as a result of<br>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<br>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>DISCLAIMERS
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2<br>Retirement and<br>Benefit Revenue<br>33.9%<br>Wealth<br>Management<br>Revenue 11.3%<br>Mortgage Revenue<br>4.4%<br>Banking Fees and<br>Other Income 4.8%<br>Net Interest<br>Income<br>45.6%<br>FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2023(1)<br>Noninterest income(1):<br>$104.9 million<br>Net interest income:<br>$87.8 million<br>$31.9 $34.2 $36.7 $32.1 $36.7<br>2019 2020 2021 2022 2023<br>OUR MISSION<br>▪ To positively impact our clients’ financial potential-through holistic guidance, unparalleled service, and engaging technology.<br>COMPANY PROFILE<br>1 - Excludes net losses on investment securities of $24.6 million in 4Q23 which represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.”<br>2 - Banking fees and other income consists of service charges on deposit accounts, interchange income and other noninterest income.<br>Data as of 12/31/2023.<br>DIVERSIFIED REVENUE STREAM ASSET GROWTH ($ IN BILLIONS)<br>Banking Assets<br>Retirement and Benefit Services AUA/AUM<br>Wealth Management AUA/AUM<br>$3.1 $3.3 $4.0 $3.6 $4.0<br>2019 2020 2021 2022 2023<br>NONINTEREST<br>INCOME AS A %<br>OF REVENUE(1):<br>54.4%<br>DIVERSIFIED FINANCIAL SERVICES COMPANY<br>▪ $3.9 billion Banking assets<br>▪ $36.7 billion Retirement and Benefit Services AUA/AUM<br>▪ $4.0 billion Wealth Management AUA/AUM<br>▪ $364.1 million in Mortgage Originations in 2023<br>ALERUS BUSINESS LINES<br>▪ Banking<br>▪ Retirement and Benefit Services<br>▪ Wealth Management<br>▪ Mortgage<br>$2.4 $3.0 $3.4 $3.8 $3.9<br>2019 2020 2021 2022 2023<br>(1)/(2)
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3<br>A BIG COMPANY MODEL WITH SMALL COMPANY EXECUTION<br>OUR DIVERSE BUSINESS LINES<br>1 - Excludes net losses on investment securities of $24.6 million in 4Q23 which represents a non-GAAP Financial<br>measure. See “Non-GAAP Disclosure Reconciliation.”<br>Revenue data LTM as of 12/31/2023.<br>TRUSTED<br>ADVISOR<br>BANKING(1)<br>WEALTH<br>MANAGEMENT<br>• Residential mortgage lending<br>• Residential construction lending<br>• Home equity/second mortgages<br>• Advisory services<br>• Trust and fiduciary services<br>• Investment management<br>• Insurance planning<br>• Financial planning<br>• Education planning<br>• Retirement plan<br>administration and<br>recordkeeping<br>• Retirement plan<br>investment advisory<br>• Health and benefits<br>administration<br>COMMERCIAL BANKING<br>• Commercial and commercial real<br>estate lending<br>• Government and non-profit banking<br>• Small business lending<br>• Treasury management<br>• Deposit services<br>CONSUMER BANKING<br>• Private banking<br>• Deposit products<br>and services<br>• Consumer lending<br>MORTGAGE RETIREMENT &<br>BENEFIT SERVICES<br>33.9% of Revenue 4.4% of Revenue<br>11.3% of Revenue<br>50.4% of Revenue
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4<br>FRANCHISE FOOTPRINT<br>FULL-SERVICE BANKING OFFICES<br>Alerus offers banking, retirement and benefit services, mortgage<br>and wealth management services at all full-service banking offices<br>▪ Grand Forks, ND: 4 full-service banking offices<br>▪ Fargo, ND: 3 full-service banking offices<br>▪ Twin Cities, MN: 6 full-service banking offices<br>▪ Phoenix, AZ: 2 full-service banking offices<br>RETIREMENT AND BENEFIT SERVICES OFFICES<br>▪ 1 office in Minnesota<br>▪ 1 office in Michigan<br>▪ 1 office in Colorado<br>▪ Serve clients in all 50 states through retirement plan services<br>DIVERSIFIED CLIENT BASE<br>▪ 37,700 consumer clients<br>▪ 16,700 commercial clients<br>▪ 8,300 employer-sponsored retirement plans<br>Data as of 12/31/2023.<br>▪ 474,000 employer-sponsored retirement and benefit plan<br>participants and health savings account participants<br>▪ 37,550 flexible spending account and health reimbursement<br>arrangement participants
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5<br>37.2%<br>23.3% 9.3%<br>28.3% 30.2%<br>57.4%<br>14.3%<br>STRONG GROWTH MARKETS AND STABLE CORE FUNDING<br>MARKET DISTRIBUTION<br>LOANS $2,756 DEPOSITS $3,096<br>ARB ASSETS UNDER<br>ADMIN/MGMT. $36,682<br>WM ASSETS UNDER<br>ADMIN/MGMT. $4,019<br>2023 MORTGAGE<br>ORIGINATIONS $364<br>(DOLLARS IN MILLIONS)<br>Data as of 12/31/2023.<br>LEGEND<br>North Dakota<br>Minnesota<br>Arizona<br>National<br>Synergistic<br>9.4%<br>85.6%<br>5.0%<br>71.7%<br>11.2%<br>4.2% 12.9% 9.4%<br>13.4%<br>77.2%
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6<br>ONE<br>ALERUS<br>REINVENTION OF PROCESSES<br>We consistently seek new ways to enhance<br>efficiencies and improve scalability.<br>TAILORED ADVICE<br>We strive to provide each<br>client with a primary point of<br>contact — a trusted advisor —<br>who deals with individual<br>needs and integrates other<br>department’s expertise when<br>necessary.<br>SYNERGISTIC GROWTH<br>Deposits sourced from our retirement and benefit<br>services and wealth management divisions totaled<br>$851.5 million as of December 31, 2023.<br>Cumulative rollovers have added $1.3 billion of<br>assets under management.<br>Residential real estate first mortgages totaled<br>$726.9 million as of December 31, 2023.<br>TECHNOLOGY INVESTMENT<br>We have proactively invested in technology to<br>further our goal to effectively integrate all<br>departments and business lines.<br>These investments allow for digital and proactive<br>engagement with clients.<br>DIVERSIFIED SERVICES<br>We provide comprehensive<br>products and services to clients<br>including banking, mortgage,<br>wealth management, and<br>retirement and benefit services.<br>ONE ALERUS STRATEGY<br>Our collaborative One Alerus culture brings our product and service<br>offerings to clients in a cohesive and seamless manner. We believe<br>One Alerus enables us to achieve future organic growth through<br>client acquisition, retention and expansion to provide strong<br>returns to our stockholders and employees through our ESOP.<br>CULTURE + BUSINESS MODEL = SUSTAINED TOP TIER SHAREHOLDER RESULTS<br>ONE ALERUS<br>Data as of 12/31/2023.
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7<br>EXPANDED TO COLORADO<br>Acquired Retirement Planning Services, Inc.<br>(Littleton, CO)<br>To supplement our organic growth, we have executed 25 acquisitions throughout the history of our<br>company across all business lines:<br>STRATEGIC GROWTH<br>2000<br>2002<br>2003<br>2006<br>2007<br>2019<br>2009<br>2016<br>2015<br>2014<br>2013<br>2012<br>REBRANDED TO ALERUS 2011<br>Acquired a branch from BNC National Bank<br>(Fargo, ND)<br>Acquired Pension Solutions, Inc. (St. Paul, MN)<br>The catalyst to the Retirement Division<br>OPENED A TRUST AND INVESTMENT OFFICE<br>(TWIN CITIES)<br>Acquired Stanton Trust Company (Minneapolis, MN)<br>EXPANDED TO MINNESOTA MARKET<br>OPENED A BUSINESS BANKING OFFICE<br>(MINNETONKA, MN)<br>Acquired Acclaim Benefits, Inc. (Minneapolis, MN)<br>Acquired Stanton Investment Advisors<br>(Minneapolis, MN)<br>EXPANDED TO ARIZONA MARKET<br>OPENED A BUSINESS BANKING OFFICE<br>(SCOTTSDALE, AZ)<br>Acquired retirement plan practice<br>of Eide Bailly, LLP (Minneapolis, MN)<br>Acquired Prosperan Bank (Twin Cities, MN)<br>Acquired deposits from BankFirst (Minneapolis, MN)<br>Acquired Residential Mortgage Group<br>(Minnetonka, MN)<br>Acquired selected loans and deposits (in MN) and a<br>branch (in AZ) from BNC National Bank<br>EXPANDED TO MICHIGAN<br>Acquired PensionTrend, Inc. and PensionTrend<br>Investment Advisers, LLC (Okemos, MI)<br>Acquired Tegrit Administrators, LLC<br>Acquired Private Bank Minnesota (Minneapolis, MN)<br>Acquired Retirement Alliance, Inc. (Manchester, NH)<br>Acquired Interactive Retirement Systems, Ltd.<br>(Bloomington, MN)<br>Acquired Beacon Bank (Shorewood, Excelsior, Eden<br>Prairie and Duluth, MN)<br>Acquired Alliance Benefit Group North Central States,<br>Inc. (Albert Lea and Eden Prairie, MN)<br>COMPLETED INITIAL PUBLIC OFFERING (IPO)<br>2017 LAUNCHED ONE ALERUS STRATEGIC GROWTH PLAN<br>2020<br>2022 Acquired Metro Phoenix Bank (Phoenix, AZ)
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8<br>▪ Diversified client base consists of 37,700 consumers clients, 16,700 commercial clients and over 397,000<br>employer-sponsored retirement and benefit plan participants<br>▪ Harness product synergies unavailable to traditional banking organizations<br>▪ Capitalize on strategic opportunities to grow in our existing markets or new markets<br>▪ Acquisition targets include banks and nationwide fee income companies with complementary business models,<br>cultural similarities, synergy and growth opportunities<br>▪ Recruiting top talent in mid-market C&I banking and specialty niches to accelerate growth in our existing<br>markets or jumpstart our entrance into new markets<br>▪ Market disruption caused by M&A activity provides lift-out opportunities<br>▪ Purpose driven organization with a recognizable mission for clients, employees, and stakeholders<br>▪ Proactively position ourselves as an acquirer and employer of choice<br>▪ Invested in one of the leading marketing automation technologies<br>▪ Provide secure and reliable technology that meets evolving client expectations<br>▪ Integrate our full product and service offerings through our fast-follower strategy<br>KEY STRATEGIC INITIATIVES<br>GROWING THE ALERUS FRANCHISE<br>LEVERAGE OUR EXISTING<br>CLIENT BASE<br>EXECUTE STRATEGIC<br>ACQUISITIONS<br>PURSUE TALENT<br>ACQUISITION<br>ENHANCE BRAND<br>AWARENESS<br>STRENGTHEN AND BUILD<br>INFRASTRUCTURE<br>▪ Collaborative leadership team focused on growing organically through new client acquisition<br>and deepening relationships with existing clients through our expansive services<br>▪ Diversified business model focused on bringing value to the client through advice and specialty solutions to help<br>clients grow<br>ORGANIC GROWTH<br>“ONE ALERUS”
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9<br>DAN COUGHLIN<br>Since 2016<br>Chairman, Alerus Financial Corp.<br>Former MD & Co-Head – Fin’l<br>Services Inv. Banking, Raymond<br>James; Former Chairman<br>& CEO, Howe Barnes Hoefer &<br>Arnett<br>MARY ZIMMER<br>Since 2021<br>Former Director of Diverse Client Segments<br>and Former Northern Regional President,<br>Wells Fargo Advisors<br>Former Head of Intl. Wealth USA, Royal Bank<br>of Canada U.S. Wealth Mgmt.<br>JANET ESTEP<br>Since 2021<br>Former President and CEO, Nacha<br>Former EVP, US Bank Transaction Division<br>Former VP, Pace Analytical Services<br>RANDY NEWMAN<br>Since 1987<br>Former President and CEO, Alerus<br>OFFICERS AND DIRECTORS<br>MICHAEL MATHEWS<br>Since 2019<br>Former CIO, Deluxe Corporation<br>Former SVP – Technology and Enterprise<br>Programs, UnitedHealth Group<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<br>6 years with Alerus<br>KEVIN LEMKE<br>Since 1994<br>President<br>Virtual Systems, Inc.<br>GALEN VETTER<br>Since 2013<br>Former Global CFO, Franklin Templeton<br>Investments; Former Partner-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>Joined Alerus in 2022<br>JIM COLLINS<br>Executive Vice President and<br>Chief Banking and Revenue Officer<br>Joined Alerus in 2022<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
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10<br>FOURTH QUARTER HIGHLIGHTS
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11<br>▪ Returned $5.8 million to shareholders through dividends and share repurchases during the quarter<br>▪ Repurchased $2.1 million of the Company’s outstanding stock at an average per share purchase price<br>of $17.65, reducing common shares outstanding by 118,000 at quarter end<br>▪ Tangible book value per common share (non-GAAP) was $15.46, an 8.0% increase from the third<br>quarter of 2023<br>▪ Common equity tier 1 capital to risk weighted assets as of December 31, 2023 was 11.82%,<br>compared to 13.01% as of September 30, 2023, and continues to be well above the minimum<br>threshold to be well capitalized of 6.50%<br>▪ Total deposits were $3.1 billion as of December 31, 2023, an increase of $223.4 million, or 7.8%,<br>from September 30, 2023, while uninsured deposits remained steady at 24% of total deposits<br>▪ Noninterest-bearing deposits increased 1.4% compared to September 30, 2023<br>▪ Total loans were $2.8 billion as of December 31, 2023, an increase of $149.7 million, or 5.7%, from<br>September 30, 2023<br>▪ The loan to deposit ratio as of December 31, 2023 was 89.0%, compared to 90.7% as of September<br>30, 2023, with brokered deposits remaining at $0<br>▪ Net recoveries to average loans of 0.04%, compared to net recoveries to average loans of 0.09% for<br>the third quarter of 2023<br>▪ Net interest margin expanded 10 basis points, from 2.27% in the third quarter to 2.37% in the fourth<br>quarter of 2023<br>▪ Net interest income increased 5.7%, from $20.4 million in the third quarter to $21.6 million in the<br>fourth quarter of 2023<br>▪ Noninterest income, excluding net losses on investment securities of $24.6 million, was 54.13%(1) of<br>total revenue, compared to 58.21% for the third quarter of 2023<br>SUCCESS IS NEVER FINAL<br>Q4 2023 HIGHLIGHTS<br>EARNINGS<br>BALANCE SHEET<br>& ASSET QUALITY<br>CAPITAL<br>STRENGTH<br>1 - Excludes net losses on investment securities of $24.6 million in 4Q23 which represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.”
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12<br>INCOME STATEMENT<br>Q4 2023 FINANCIAL HIGHLIGHTS<br>1 – Represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.”<br>(dollars and shares in thousands, except per share data)<br>Net Interest Income $ 21,552 $ 20,395 $ 26,964 $ 87,839 $ 99,729<br>Provision for Credit Losses 1,507 — — 2,057 —<br>Net Interest Income After Provision for Credit Losses 20,045 20,395 26,964 85,782 99,729<br>Noninterest Income 791 28,407 25,517 80,229 111,223<br>Noninterest Expense 38,654 37,260 37,948 150,157 158,770<br>Income Before Income Taxes (17,818) 11,542 14,533 15,854 52,182<br>Income Tax Expense (3,064) 2,381 3,624 4,158 12,177<br>Net Income $ (14,754) $ 9,161 $ 10,909 $ 11,696 $ 40,005<br>Per Common Share Data<br>Earnings Per Common Share - Diluted $ (0.73) $ 0.45 $ 0.53 $ 0.58 $ 2.10<br>Adjusted Earnings Per Common Share - Diluted (1)<br> 0.26 0.35 0.56 1.47 2.18<br>Diluted Average Common Shares Outstanding 19,996 20,095 20,232 20,143 18,884<br>Performance Ratios<br>Return on Average Total Assets (1.51) % 0.95 % 1.17 % 0.31 % 1.14 %<br>Return on Average Tangible Common Equity (1)<br> (18.85) % 13.51 % 16.63 % 5.37 % 15.09 %<br>Noninterest Income as a % of Revenue 3.54 % 58.21 % 48.62 % 47.74 % 52.72 %<br>Net Interest Margin (Tax-Equivalent) 2.37 % 2.27 % 3.09 % 2.46 % 3.04 %<br>Efficiency Ratio (1)<br> 165.40 % 73.37 % 69.62 % 85.85 % 72.86 %<br>December 31,<br>2023<br>December 31,<br>2022<br>Three months ended Year ended<br>2023<br>December 31, September 30,<br>2023<br>December 31,<br>2022
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13<br>PERFORMANCE RATIOS<br>1 – Represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.”<br>2 – Rates have been annualized 1.22%<br>0.74%<br>0.51%<br>Q4 2022 Q3 2023 Q4 2023<br>Adjusted Return on Average<br>Assets(1)/(2)<br>17.35%<br>10.80%<br>8.30%<br>Q4 2022 Q3 2023 Q4 2023<br>Adjusted Return on Average<br>Tangible Common Equity(1)/(2)<br>$14.37 $14.32<br>$15.46<br>Q4 2022 Q3 2023 Q4 2023<br>Tangible Book Value per Share(1)
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14<br>KEY REVENUE ITEMS<br>DOLLARS IN THOUSANDS<br>1 – Banking fees and other income consists of service charges on deposit accounts, interchange income and other noninterest income.<br>2 - Excludes net losses on investment securities of $24.6 million in 4Q23 which represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.” Net Interest 5.7% Linked Quarter<br>Income (20.1%) Year-over-year<br>Noninterest (10.5)% Linked Quarter<br>Income (0.3)% Year-over-year<br>$26,964<br>$20,395<br>$21,552<br>Q4 2022 Q3 2023 Q4 2023<br>Net Interest Income<br>$16,599<br>$18,605<br>$15,317<br>$5,144<br>$5,271<br>$5,940<br>$2,170<br>$2,510<br>$1,279<br>$1,604<br>$2,021<br>$2,898<br>$25,517<br>$28,407<br>$25,434<br>Q4 2022 Q3 2023 Q4 2023<br>Noninterest Income<br>Retirement & Benefit Services Wealth Management<br>Mortgage Banking Banking Fees and Other Income<br>(1)/(2)
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15<br>NET INTEREST INCOME<br>LOAN YIELD ANDNET INTEREST MARGIN (NIM)(1)<br>AVERAGE EFFECTIVE FF RATE AND COST OF FUNDS QUARTERLY HIGHLIGHTS (1)<br>1 – Rates have been annualized for interim periods. Source: Federal Reserve.<br>▪ Interest income increased $2.7 million, or 6.3%, from the<br>third quarter of 2023, primarily driven by a 23 basis point<br>increase in yield on interest earning assets, mostly<br>attributable to higher yields on new loans and strong<br>organic loan growth<br>▪ The increase in interest income was offset by a $1.5<br>million increase in interest expense, primarily due to an<br>increase in rates paid on interest-bearing deposits<br>NET INTEREST INCOME (NII)<br>($ in Thousands)<br>NIM: 2.27% 0.13% 0.10% 0.02% 0.00% (0.15)% 2.37%<br>4.90%<br>5.44% 5.64%<br>3.09%<br>2.27% 2.37%<br>Q4 2022 Q3 2023 Q4 2023<br>Loan yield NIM<br>3.65%<br>5.26% 5.33%<br>1.07%<br>2.53% 2.67%<br>Q4 2022 Q3 2023 Q4 2023<br>Average effective FF rate Cost of funds
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16<br>DIVERSIFIED LOAN PORTFOLIO<br>TOTAL LOANS<br>DIVERSIFIED LOAN PORTFOLIO<br>HIGHLIGHTS<br>▪ Total loans grew 12.8% from December 31, 2022<br>▪ Year to date loan growth was primarily driven by<br>an increase in commercial real estate, residential<br>real estate, and C&I loans, partially offset by a<br>decrease in other consumer revolving and<br>installment loans<br>▪ Total loan yield in the current quarter increased to<br>5.64%, from 5.44% in the prior quarter<br>Commercial<br>and industrial<br>21.6% Real estate<br>construction<br>4.5%<br>Commercial real<br>estate 40.9%<br>Residential real<br>estate first<br>mortgage<br>26.4%<br>Residentital real estate<br>junior lien 5.6%<br>Other revolving and<br>installment 1.0%<br>($ in Millions)<br>PORTFOLIO CHANGES<br>As of As of As of Change Change<br>($ in Thousands) 12/31/2022 9/30/2023 12/31/2023 QoQ YoY<br>Commercial and industrial $ 583,876 582,387 $ 594,827 2.1% 1.9%<br>Real estate construction 97,810 97,742 124,034 26.9% 26.8%<br>Commercial real estate 881,670 1,025,014 1,126,912 9.9% 27.8%<br>Residential real estate first<br>mortgage 679,551 717,793 726,879 1.3% 7.0%<br>Residentital real estate<br>junior lien 150,479 152,677 154,134 1.0% 2.4%<br>Other revolving and<br>installment 50,608 30,817 29,302 -4.9% -42.1%<br>Total 2,443,994 2,606,430 2,756,088 5.7% 12.8%<br>Loans to deposits ratio 83.8% 90.7% 89.0%<br>$2,444.0<br>$2,606.4<br>$2,756.1<br>Q4 2022 Q3 2023 Q4 2023
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17<br>NonInterest-Bearing<br>Deposits 23.5%<br>Interest-Bearing<br>Demand Deposits<br>27.2%<br>Money Market &<br>Savings 30.3%<br>HSA<br>Deposits<br>5.7%<br>Time Deposits<br>13.3%<br>STRONG CORE FUNDING MIX<br>TOTAL DEPOSITS HIGHLIGHTS<br>CHECKING<br>ACCOUNTS:<br>50.7%<br>DECEMBER 31, 2023 DEPOSIT FUNDING ($3,096 MILLION) PORTFOLIO CHANGES<br>($ in Millions)<br>▪ Total deposits increased 7.8% compared to<br>September 30, 2023<br>▪ Noninterest-bearing deposits increased 1.4%<br>compared to September 30, 2023<br>▪ Time deposits increased 18.6% in the current<br>quarter as higher short-term CD rates attracted<br>both existing non-maturity deposits as well as new<br>deposits to the Company<br>$2,054.5 $2,154.2 $2,367.5<br>$861.0 $718.0<br>$728.1<br>$2,915.5 $2,872.2<br>$3,095.6<br>Q4 2022 Q3 2023 Q4 2023<br>Interest-Bearing Deposits NonInterest-Bearing Deposits<br>As of As of As of Change Change<br>($ in Thousands) 12/31/2022 9/30/2023 12/31/2023 QoQ YoY<br>Noninterest-bearing 860,987 717,990 728,082 1.4% -15.4%<br>Interest-bearing demand 706,275 759,812 840,711 10.6% 19.0%<br>Money market and savings 969,692 871,720 938,527 7.7% -3.2%<br>Time deposits<br> 212,359 346,935 411,562 18.6% 93.8%<br>HSA deposits 166,171 175,727 176,729 0.6% 6.4%<br>Total<br> 2,915,484 2,872,184 3,095,611 7.8% 6.2%
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18<br>$691.6<br>$763.7<br>$851.5<br>Q422 Q323 Q423<br>Commercial<br>36.3%<br>Consumer<br>30.5%<br>Synergistic<br>27.5%<br>Public<br>5.7%<br>DEPOSIT CHARACTERISTICS<br>STRONG LIQUIDITY WELL IN EXCESS OF UNINSURED BALANCES<br>2 – Uninsured and not collateralized deposits represent those customer deposit balances over the current FDIC<br>insurance limit of $250,000 that are not collateralized by other means such as pledged loans or pledged securities<br>COST OF FUNDS INCREASING WITH SHORT-TERM RATES DECEMBER 31, 2023 DEPOSIT COMPOSITION<br>SYNERGISTIC DEPOSIT GROWTH(1) UNINSURED VS INSURED<br>($ in Millions)<br>As of December 31, 2023, our loan to deposit ratio was<br>89% with no brokered deposits utilized<br>23% YoY growth<br>1 – Synergistic deposits are sourced from our retirement and benefit services and wealth management divisions<br>0.76%<br>1.08% 1.07%<br>2.01%<br>2.66% 2.53%<br>2.27%<br>2.99%<br>2.67%<br>Cost of<br>Total Deposits<br>Cost of Interest-Bearing Deposits<br>Total Cost of<br>Funds<br>Q4 2022 Q3 2023 Q4 2023<br>Uninsured and not<br>collateralized (2)<br>24.3%<br>Uninsured but<br>collateralized<br>7.3%<br>Uninsured Holding<br>Company deposits held<br>at Bank 2.2%<br>Insured 66.2%
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19<br>INVESTMENT PORTFOLIO<br>INVESTMENT PORTFOLIO MIX<br>AOCI<br>Yield on Securities: 2.3% 2.6% 2.7%<br>% of Earning Assets: 29.3% 26.0% 21.4%<br>($ in Thousands)<br>($ in Thousands)<br>Held-to-Maturity: 38.1% Available-for-Sale: 61.9%<br>$(98,641)<br>$(113,483)<br>$(73,655)<br>Q4 2022 Q3 2023 Q4 2023<br>Agency Non-MBS 0.1%<br>Corporate Debt<br>6.2%<br>Agency MBS<br>35.3%<br>Corporate ABS<br>& CMO 41.9%<br>Municipals<br>16.5%<br>$1,039,226 $943,269<br>$786,251<br>Q4 2022 Q3 2023 Q4 2023
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20<br>$31,905 $34,200<br>$36,733<br>$32,123<br>$36,682<br>434,045<br>423,156<br>447,564 453,757<br>473,692<br> 375,000<br> 390,000<br> 405,000<br> 420,000<br> 435,000<br> 450,000<br> 465,000<br> 480,000<br> 495,000<br>$0<br>$5,000<br>$10,000<br>$15,000<br>$20,000<br>$25,000<br>$30,000<br>$35,000<br>$40,000<br>2019 2020 2021 2022 2023<br>AUA/AUM Participants<br>$89,685<br>$230,498 $202,330 $195,617 $233,082<br>$119,728<br>$126,518 $153,224 $166,171<br>$176,729<br>$93,629<br>$136,946 $170,224 $167,796<br>$188,349<br>$303,042<br>$493,962<br>$525,778 $529,584<br>$598,160<br>2019 2020 2021 2022 2023<br>Money Market HSA Other<br>$13,496 $12,985 $12,636<br>$3,103 $2,845 $2,681<br>$16,599 $2,775<br>$18,605<br>$15,317<br>Q4 2022 Q3 2023 Q4 2023<br>Recurring annual revenue Transaction based revenue Gain on sale of ESOP business<br>RETIREMENT AND BENEFIT SERVICES<br>OVERVIEW – 8,300 PLANS – NATIONAL FOOTPRINT ASSETS UNDER ADMINISTRATION/MANAGEMENT<br>REVENUE MIX<br>▪ RETIREMENT - Provide recordkeeping and administration<br>services to qualified retirement plans<br>▪ TRUST CUSTODY & ADVISORY SERVICES - Provide investment<br>fiduciary services to retirement plans<br>▪ HEALTH AND BENEFITS - Provide HSA, FSA, COBRA<br>recordkeeping and administration services to employers<br>▪ REVENUE MIX - 35% market sensitive<br>▪ ONE ALERUS SYNERGIES<br>• IRA rollovers $132 million YTD 12/31/2023<br>• Deposits $598 million - HSA deposits, 401(k) Money Market<br>Funds, Emergency Savings, Terminated Participants<br>• Commercial Banking client expansion<br>($ in Millions)<br>STABLE SYNERGISTIC DEPOSITS<br>($ in Thousands)<br>Revenue: $63,811 $60,956 $71,709 $67,135 $65,294<br>($ in Thousands)
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21<br>$4,509 $4,726 $4,974<br>$432 $391<br>$563 $203 $154<br>$403<br>$5,144 $5,271<br>$5,940<br>Q4 2022 Q3 2023 Q4 2023<br>Asset Management Brokerage Insurance & Advisory<br>$3,103 $3,339<br>$4,040 $3,583 $4,019<br>2019 2020 2021 2022 2023<br>▪ ADVISORY AND PLANNING SERVICES<br>• Advisory Services, Insurance Planning, Financial Planning,<br>Education Planning<br>▪ INVESTMENT MANAGEMENT<br>• Personalized SMA strategies, Tax Management and Global<br>Perspective<br>▪ TRUST AND FIDUCIARY SERVICES<br>• IRA, Agency and Personal Trust<br>▪ ONE ALERUS SYNERGIES<br>• IRA rollovers<br>• 401(k) managed accounts<br>• Synergistic deposits totaled $253.4 million at Q4 2023<br>WEALTH MANAGEMENT SERVICES<br>OVERVIEW OF SERVICES ASSETS UNDER ADMINISTRATION/MANAGEMENT<br>REVENUE MIX<br>($ in Millions)<br>SYNERGISTIC DEPOSITS<br>($ in Thousands) ($ in Thousands)<br>$108,504 $101,621<br>$143,183 $161,973<br>$253,384<br>2019 2020 2021 2022 2023<br>Revenue: $15,502 $17,451 $21,052 $20,870 $21,855
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22<br>$1,633 $1,592<br>$605<br>$297<br>$146 $244<br>$207<br>$67<br>$1,779 $1,836<br>$812<br>$364<br>2020 2021 2022 2023<br>Portfolio Sale<br>MORTGAGE BANKING<br>OVERVIEW OF SERVICES YEARLY MORTGAGE ORIGINATIONS<br>($ in Millions)<br>QUARTERLY RESULTS<br>▪ 1st and 2nd mortgage product offerings through<br>centralized mortgage operations in Minneapolis,<br>Minnesota<br>▪ 86% of 2023 originations sourced from the Twin<br>Cities MSA<br>▪ Enhanced technology with 82% of applications<br>through digital channel<br>QUARTERLY ORIGINATIONS<br>Purchase: 45.2% 51.2% 88.3% 96.7%<br>Refinance: 54.8% 48.8% 11.7% 3.3%<br>Purchase: 92.2% 97.7% 94.6%<br>Refinance: 7.8% 2.3% 5.4%<br>($ in Millions)<br>Q4 Q1 Q2 Q3 Q4<br>($ in Thousands) 2022 2023 2023 2023 2023<br>Orignation and Sale $ 3,145 $ 1,463 $ 2,432 $ 2,917 $ 1,593<br>Fair Value<br>Changes (974) 254 473 (407) (314)<br>Total Revenue $ 2,171 $ 1,717 $ 2,905 $ 2,510 $ 1,279<br>Gain on Sale Margin 3.0% 3.0% 2.8% 3.0% 2.5%<br>$87 $93<br>$58<br>$39 $17<br>$7<br>$126<br>$110<br>$65<br>Q4 2022 Q3 2023 Q4 2023<br>Portfolio Sale
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23<br>$24,076 $23,966 $23,792<br>$1,892 $1,883 $1,858<br>$4,405 $4,774 $5,686<br>$1,454 $1,716 $2,345<br>$6,121 $4,921<br>$4,973<br>$37,948 $37,260<br>$38,654<br>Q4 2022 Q3 2023 Q4 2023<br>Other(1) Professional Fees and Assessments<br>Business Services, Software and Technology Occupancy and Equipment<br>Compensation and benefits<br>NONINTEREST EXPENSE<br>1 – Other noninterest expense consists of intangible amortization, marketing and business development, supplies and postage, travel, mortgage and lending, and other noninterest expense.<br>QUARTERLY HIGHLIGHTS<br>YEAR OVER YEAR HIGHLIGHTS<br>▪ Noninterest expense increased $1.4 million, or 3.7%,<br>over the last quarter<br>▪ The increase was primarily driven by a $0.9 million<br>increase in business services, software and<br>technology which was driven by seasonally higher<br>contract renewals due to inflationary pressures and<br>equipment purchases<br>▪ Additionally, there was a $0.6 million increase in<br>professional fees and assessments driven primarily<br>by higher fees resulting from increased audit,<br>examination, and other professional fees<br>▪ Noninterest expense increased $0.7 million, or 1.9%,<br>compared to the fourth quarter of 2022<br>▪ The increase was primarily driven by inflationary<br>pressures in business services, software and<br>technology expense, higher professional fees and<br>assessments due to higher auditing fees and an<br>increase in FDIC assessments<br>($ in Thousands)<br>Noninterest 3.7% Linked quarter<br>Expense 1.9% Year-over-year
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24 306%<br>674%<br>1,437%<br>821%<br>410%<br>2019 2020 2021 2022 2023<br>1.39%<br>1.73% 1.80%<br>1.27% 1.30%<br>2019 2020 2021 2022 2023<br>0.33%<br>0.17%<br>0.09% 0.10%<br>0.22%<br>2019 2020 2021 2022 2023<br>ASSET QUALITY AND RESERVE LEVELS<br>OVERVIEW NPA / ASSETS (%)<br>RESERVES / NPL (%) RESERVES / LOANS (%)<br>▪ Non-performing loans remain at low levels<br>▪ Reserve levels remain strong despite an increase in<br>non-performing loans in 2023<br>▪ Strong credit quality continues to be evidenced by a<br>third straight quarter of net recoveries<br>NCO/<br>Avg Loans 0.33% 0.03% (0.04)% 0.02% (0.04)%
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25<br>($ in thousands)<br>Total Assets $ 3,896,811<br>Cash and cash equivalents 122,485<br>Unencumbered Securities (at Market Value) 527,892<br>Total On Balance Sheet Liquidity 650,377<br>FHLB Borrowing Capacity 706,574<br>Fed Funds Lines 107,000<br>Brokered CD Capacity 779,362<br>Total Off Balance Sheet Liquidity 1,592,936<br>Total Liquidity as of 12/31/2023 $ 2,243,313<br>11.1%<br>9.2% 9.8%<br>11.3% 10.6%<br>12.9% 13.2%<br>15.1%<br>13.7%<br>12.1%<br>2019 2020 2021 2022 2023<br>Tier 1 Leverage Tier 1 Capital<br>16.7% 16.8%<br>18.6%<br>16.5%<br>14.8%<br>2019 2020 2021 2022 2023<br>STRONG CAPITAL AND SOURCES OF LIQUIDITY<br>COMMON EQUITY TIER 1 TIER 1 CAPITAL/TIER 1 LEVERAGE RATIOS<br>TOTAL RISK BASED CAPITAL SOURCES OF LIQUIDITY<br>Regulatory Capital Minimum to be considered adequately capitalized.<br>Tier 1<br>Capital<br>Leverage<br>Regulatory Capital Minimum to be considered adequately capitalized.<br>12.5% 12.8%<br>14.7%<br>13.4%<br>11.8%<br>2019 2020 2021 2022 2023<br>6%<br>4%<br>8%
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26<br>KEY TAKEAWAYS<br>ALERUS HAS ESTABLISHED A STRONG FOUNDATION HEADING INTO 2024<br>▪ Loan and deposit growth was robust in the fourth quarter, putting Alerus in a strong<br>position to start 2024<br>▪ Net interest margin increased 10 basis points from 2.27% in the third quarter to 2.37% in<br>the fourth quarter of 2023<br>▪ Noninterest income, excluding net losses on investment securities of $24.6 million,<br>was 54.1%(1) of total revenues for the quarter, highlighting our durable and<br>differentiated business model<br>▪ Total assets under administration/management were $40.7 billion, a 6.3% increase<br>from third quarter of 2023<br>▪ Credit quality remains strong as nonperforming assets are 0.22% of total assets and<br>the quarter had net recoveries of 0.04%<br>▪ Returned $5.8 million to shareholders through dividends and share repurchases<br>during the quarter<br>▪ Capital levels remain strong and continue to far exceed the minimum levels required<br>to be well capitalized<br>1 - Excludes net losses on investment securities of $24.6 million in 4Q23 which represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.”
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27<br>APPENDIX
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28<br>BY OUTSTANDING BALANCES<br>WELL DIVERSIFIED LOAN PORTFOLIO<br>Data as of 12/31/2023. 1-4 Residential 1st<br>25%<br>1-4 Residential Construction 1%<br>1-4 Residential Jr Lien 1%<br>HELOC 4%<br>RE Loans to be Sold 1%<br>C&I 20%<br>Ag Production 1%<br>Other CRE 21%<br>Owner Occupied CRE<br>10%<br>Ag Land 1%<br>Multifamily 9%<br>Other Consumer 1% RE Construction 5%
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29<br>SUMMARY BY INDUSTRY TYPE<br>TOTAL COMMITMENT COMMERCIAL & INDUSTRIAL1<br>1 – Commercial and industrial loans includes C & I, loans to public entities, and other loans. It excludes ag production loans.<br>“Other” includes to the following industries (1) Nonclassifiable establishments, (2) Management of Companies and Enterprises, (3) Administrative and Support and Waste Management and Remediation Services, (4)<br>Accommodation and Food Services, (5) Educational Services, (6) Other Services (except Public Administration), (7) Information, (8) Arts, Entertainment, and Recreation, (9) Agriculture Forestry, Fishing, and Hunting,<br>(10) Public Administration), (11) Mining Quarrying, and Oil and Gas Extraction, and (12) Utilities.<br>“Other Retail Trade” includes the following sub-industries within Retail Trade: (1) Miscellaneous Store Retailers, (2) Furniture and Home Furnishings Stores, (3) Sporting Goods, Hobby, Musical Instrument, and Book<br>Stores, (4) Clothing and Clothing Accessories Stores, and (5) General Merchandise Stores.<br>Transportation and<br>Warehousing 3%<br>Health Care and Social<br>Assistance 9%<br>Professional, Scientific and<br>Technical Services 7%<br>Manufacturing<br>13%<br>Real Estate and Rental<br>and Leasing 12%<br>Wholesale Trade 7%<br>Construction 9%<br>Finance and<br>Insurance 9%<br>Other<br>15%<br>Motor Vehicle and Parts<br>Dealers 10%<br>Food and Beverage Stores 1%<br>Electronics<br>and Appliance<br>Stores 2% Health and Personal Care<br>Services 2%<br>Other Retail Trade<br>1%<br>Retail Trade 16%<br>Data as of 12/31/2023.
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30<br>LOANS SECURED BY REAL ESTATE<br>TOTAL COMMITMENT<br>COMMERCIAL REAL ESTATE1<br>1 – Total commitment commercial real estate loans include multifamily loans, ag land, other CRE, owner occupied CRE, real estate construction and ag production.<br>2 – Total commitment investor real estate loans include multifamily loans, other CRE and real estate construction loans.<br>TOTAL COMMITMENT<br>INVESTOR REAL ESTATE2<br>Data as of 12/31/2023.<br>Office<br>13%<br>Retail<br>11%<br>Warehouse<br>10%<br>Manufacturing 1 %<br>Residential<br>Development 1%<br>Commercial Development<br>1 %<br>Mixed<br>Commercial<br>2 %<br>Apartments 15%<br>Hotel 6 %<br>Medical or<br>Nursing Facilities<br>8 %<br>Special Purpose<br>Commercial 1 %<br>Other 1 %<br>Commercial<br>Construction 27%<br>Ag Land 3 %<br>Office 10%<br>Retail 8%<br>Warehouse 7%<br>Manufacturing 1%<br>Residential<br>Development 1%<br>Mixed Commercial<br>1%<br>Apartments 19%<br>Hotel 8%<br>Medical or Nursing<br>Facilities 9%<br>Special Purpose<br>Commercial 1%<br>Other 1%<br>Commercial<br>Construction 34%
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31<br>LOANS SECURED BY REAL ESTATE<br>Portfolio Avg FICO Avg LTV<br>1<br>st Mortgage 774 53%<br>Junior 765 74%<br>HELOC 796 73%<br>TOTAL COMMITMENT RESIDENTIAL REAL ESTATE<br>1-4 1st Mortage<br>62%<br>1-4 Family Jr Liens<br>3%<br>1-4 Family<br>Revolving 30%<br>1-4 Family<br>Construction 4% Held for Sale 1%<br>Data as of 12/31/2023.
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32<br>LINE OF CREDIT UTILIZATION<br>C&I AND HOME EQUITY LINES OF CREDIT1<br>1 – Commercial and industrial loans includes revolving C & I loans and other loans. It excludes non-revolving C&I loans, ag production, and loans to public entities.<br>0%<br>5%<br>10%<br>15%<br>20%<br>25%<br>30%<br>35%<br>40%<br>45%<br>50%<br>55%<br>60%<br> -<br> 50,000<br> 100,000<br> 150,000<br> 200,000<br> 250,000<br> 300,000<br> 350,000<br> 400,000<br> 450,000<br>2017 2018 2019 2020 2021 2022 1Q23 2Q23 3Q23 4Q23<br>C&I<br>Funded Unfunded Funded%<br>0%<br>5%<br>10%<br>15%<br>20%<br>25%<br>30%<br>35%<br>40%<br>45%<br>50%<br>55%<br>60%<br> -<br> 50,000<br> 100,000<br> 150,000<br> 200,000<br> 250,000<br> 300,000<br> 350,000<br>2017 2018 2019 2020 2021 2022 1Q23 2Q23 3Q23 4Q23<br>Home Equity Lines of Credit<br>Funded Unfunded Funded%
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33<br>CECL ADOPTION – DRIVERS OF CHANGE FROM ALLL<br>ALLOWANCE FOR CREDIT LOSSES ON LOANS<br>1 – ACL is the allowance for credit losses on loans and excludes the allowance for investment securities held-for-maturity, and the allowance for unfunded commitments. Portfolio changes primarily represent the impact<br>of increases/decreases in loan balances, age and mix due to new originations, as well as credit quality and net charge-off activity. Economic/Qualitative factors primarily represent our evaluation and determination of an<br>economic forecast applied to our loan portfolio, as well as updates to qualitative factors.<br>($ in Thousands)<br>Data as of 12/31/2023.
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34<br>CHANGES IN THE ACL FOR LOANS BY PORTFOLIO SEGMENT<br>ALLOWANCE FOR CREDIT LOSSES ON LOANS<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 $2.2 million related to off-balance sheet credit exposure and<br>$40 thousand related to investment securities held-to-maturity. ($ in thousands)<br>Commercial<br>Commercial and industrial $ 9,233 $ (707) $ 645 $ (436) $ 1,158 $ 9,893<br>Real estate construction 1,437 2,550 2,125 — — 6,112<br>Commercial real estate 12,761 (131) (778) — 45 11,897<br>Total commercial 23,431 1,712 1,992 (436) 1,203 27,902<br>Consumer<br>Residential real estate first mortgage 5,857 2,269 (1,829) (49) 330 6,578<br>Residential real estate junior lien 1,318 (27) (115) (77) 52 1,151<br>Other revolving and installment 540 (96) (273) (51) 92 212<br>Total consumer 7,715 2,146 (2,217) (177) 474 7,941<br>Total $ 31,146 $ 3,858 $ (225) $ (613) $ 1,677 $ 35,843<br>Ending<br>Balance<br>Year ended December 31, 2023<br>Loan<br>Charge-offs<br>Loan<br>Recoveries<br>Beginning<br>Balance<br>Provision for<br>Credit Losses(1)<br>Adoption<br>of ASC 326(1)
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35<br>ALLOCATION BY LOAN PORTFOLIO SEGMENT<br>ALLOWANCE FOR CREDIT LOSSES ON LOANS<br>($ in thousands)<br>Commercial and industrial $ 9,893 21.6% $ 9,233 23.9%<br>Real estate construction 6,112 4.5% 1,437 4.0%<br>Commercial real estate 11,897 40.8% 12,761 36.0%<br>Residential real estate first mortgage 6,578 26.4% 5,857 27.8%<br>Residential real estate junior lien 1,151 5.6% 1,318 6.2%<br>Other revolving and installment 212 1.1% 540 2.1%<br>Total loans $ 35,843 100.0% $ 31,146 100.0%<br>total loans<br>December 31, 2023 December 31, 2022 (1)<br>Allocated of loans to<br>Allowance total loans<br>Allocated<br>Allowance<br>of loans to<br>Percentage Percentage<br>1 – Pre-ASC 326 adoption allowance for loan losses.
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36<br>FINANCIAL HIGHLIGHTS<br>1 – Represents a non-GAAP financial measure. See “Non-GAAP Disclosure Reconciliation”.<br>($ in thousands,<br>except where otherwise noted) Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 December 31, 2023 December 31, 2022<br>Total Assets $ 3,779,637 $ 3,886,773 $ 3,832,978 $ 3,869,138 $ 3,896,811 $ 3,896,810 $ 3,779,637<br>Total Loans 2,443,994 2,486,625 2,533,522 2,606,430 2,756,088 2,756,088 2,443,994<br>Total Deposits 2,915,484 3,031,978 2,852,855 2,872,184 3,095,611 3,095,611 2,915,484<br>Tangible Common Equity1<br> 287,330 290,900 290,792 284,137 305,186 305,186 287,330<br>Net Income $ 10,909 $ 8,186 $ 9,104 $ 9,161 $ (14,754) $ 11,696 $ 40,005<br>ROAA (%) 1.17 0.88 0.96 0.95 (1.51) 0.31 1.14<br>ROATCE(%)1<br> 16.63 12.58 13.71 13.51 (18.85) 5.37 15.09<br>Net Interest Margin (FTE) (%) 3.09 2.70 2.52 2.27 2.37 2.46 3.04<br>Efficiency Ratio (FTE) (%)1<br> 69.62 74.53 72.79 73.37 165.40 85.85 72.86<br>Non-Int. Income/Op. Rev. (%) 48.62 51.63 53.69 58.21 3.54 47.74 52.72<br>Earnings per common share - diluted $ 0.53 $ 0.40 $ 0.45 $ 0.45 $ (0.73) $ 0.58 $ 2.10<br>Total Equity/Total Assets (%) 9.44 9.24 9.33 9.03 9.47 9.47 9.44<br>Tang. Cmn. Equity/Tang. Assets (%)1<br> 7.74 7.62 7.72 7.47 7.96 7.96 7.74<br>Loans/Deposits (%) 83.83 82.01 88.81 90.75 89.03 89.03 83.83<br>NPLs/Loans (%) 0.16 0.09 0.10 0.35 0.32 0.32 0.16<br>NPAs/Assets (%) 0.10 0.05 0.07 0.23 0.22 0.22 0.10<br>Allowance/NPLs (%) 820.93 1,657.32 1,383.57 402.91 410.34 410.34 820.93<br>Allowance/Loans (%) 1.27 1.41 1.41 1.39 1.30 1.30 1.27<br>NCOs/Average Loans (%) (0.03) 0.03 (0.07) (0.09) (0.04) (0.04) 0.02<br>Quarterly Year ended
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37<br>FINANCIAL HIGHLIGHTS<br>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 $ 3,896,811 13.4%<br>Total Loans 1,721,279 1,979,375 1,758,020 2,443,994 2,756,088 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 9.47<br>Tang. Cmn. Equity/Tang. Assets (%)1<br> 10.38 9.27 9.21 7.74 7.96<br>Loans/Deposits (%) 87.32 76.96 60.19 83.83 89.03<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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38<br>NON-GAAP DISCLOSURE RECONCILIATION<br>($ in thousands, except where otherwise noted)<br>Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 December 31, 2023 December 31, 2022<br>Tangible common equity to tangible assets<br>Total common stockholders' equity $ 356,872 $ 359,118 $ 357,685 $ 349,402 $ 369,127 $ 369,127 $ 356,872<br>Less: Goodwill 47,087 47,087 47,087 46,783 46,783 46,783 47,087<br>Less: Other intangible assets 22,455 21,131 19,806 18,482 17,158 17,158 22,455<br>Tangible common equity (a) 287,330 290,900 290,792 284,137 305,186 305,186 287,330<br>Total assets 3,779,637 3,886,773 3,832,978 3,869,138 3,896,811 3,896,811 3,779,637<br>Less: Goodwill 47,087 47,087 47,087 46,783 46,783 46,783 47,087<br>Less: Other intangible assets 22,455 21,131 19,806 18,482 17,158 17,158 22,455<br>Tangible assets (b) 3,710,095 3,818,555 3,766,085 3,803,873 3,832,870 3,832,870 3,710,095<br>Tangible common equity to tangible assets (a)/(b) 7.74% 7.62% 7.72% 7.47% 7.96% 7.96% 7.74%<br>Tangible common equity per common share<br>Total stockholders' equity $ 356,872 $ 359,118 $ 357,685 $ 349,402 $ 369,127 $ 369,127 $ 356,872<br>Less: Goodwill 47,087 47,087 47,087 46,783 46,783 46,783 47,087<br>Less: Other intangible assets 22,455 21,131 19,806 18,482 17,158 17,158 22,455<br>Tangible common equity (c) 287,330 290,900 290,792 284,137 305,186 305,186 287,330<br>Common shares outstanding (d) 19,992 20,067 19,915 19,848 19,734 19,734 19,992<br>Tangible common equity per common share (c)/(d) $ 14.37 $ 14.50 $ 14.60 $ 14.32 $ 15.46 $ 15.46 $ 14.37<br>Return on average tangible common equity<br>Net income $ 10,909 $ 8,186 $ 9,104 $ 9,161 $ (14,754) $ 11,696 $ 40,005<br>Add: Intangible amortization expense (net of tax) 1,046 1,046 1,046 1,046 1,046 4,184 3,756<br>Net income, excluding intangible amortization (e) 11,955 9,232 10,150 10,207 (13,708) 15,880 43,761<br>Average total equity 349,812 361,857 360,216 361,735 349,382 358,267 346,355<br>Less: Average goodwill 46,283 47,087 47,087 46,882 46,783 46,959 39,415<br>Less: Average other intangible assets (net of tax) 18,243 17,209 16,153 15,109 14,067 15,624 17,018<br>Average tangible common equity (f) 285,286 297,561 296,976 299,744 288,532 295,684 289,922<br>Return on average tangible common equity (e)/(f) 16.63% 12.58% 13.71% 13.51% (18.85%) 5.37% 15.09%<br>Efficiency Ratio<br>Noninterest expense $ 37,948 $ 37,869 $ 36,373 $ 37,260 $ 38,654 $ 150,157 $ 158,770<br>Less: Intangible amortization expense 1,324 1,324 1,324 1,324 1,324 5,296 4,754<br>Adjusted noninterest expense (i) 36,624 36,545 35,049 35,936 37,330 144,861 154,016<br>Net interest income 26,964 23,658 22,234 20,395 21,552 87,839 99,729<br>Noninterest income 25,517 25,253 25,778 28,407 791 80,229 111,223<br>Tax-equivalent adjustment 124 124 140 180 226 671 429<br>Total tax-equivalent revenue(j) 52,605 49,035 48,152 48,982 22,569 168,739 211,381<br>Efficiency ratio (i)/(j) 69.62% 74.53% 72.79% 73.37% 165.40% 85.85% 72.86%<br>Quarterly Year ended
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39<br>NON-GAAP DISCLOSURE RECONCILIATION ($ 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 3,896,811<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 3,832,870<br>Tangible common equity to tangible assets (a)/(b) 10.38% 9.27% 9.21% 7.74% 7.96%<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 231,084 310,208 346,059 346,355 358,267<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) 187,654 269,460 297,126 289,922 295,684<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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40<br>NON-GAAP DISCLOSURE RECONCILIATION<br>Q4 2022 Q3 2023 Q4 2023 December 31, 2023 December 31, 2022<br>Noninterest Income Excluding Net Losses on Investment Securities as a Percentage of Adjusted Revenue<br>Noninterest income $ 25,517 $ 28,407 $ 791 $ 80,229 $ 111,223<br>Less: Net gains (losses) on investment securities — — (24,643) (24,643) —<br>Noninterest income excluding net losses on investment securities (a) 25,517 28,407 25,434 104,872 111,223<br>Net interest income (b) 26,964 20,395 21,552 87,839 99,729<br>Adjusted revenue (a) + (b) = (c) 52,481 48,802 46,986 192,711 210,952<br>Noninterest income excluding net losses on investment securities as a percentage of adjusted revenue (a) / (c) 48.62% 58.21% 54.13% 54.42% 52.72%<br>Banking Revenue Excluding Net Losses on Investment Securities as a Percentage of Adjusted Revenue<br>Banking fees and other income(1) $ 1,604 $ 2,021 $ (21,745) $ (15,331) $ 6,297<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) 1,604 2,021 2,898 9,312 6,297<br>Adjusted banking revenue (d) + (b) = (e) 28,568 22,416 24,450 97,151 106,026<br>Banking revenue excluding net losses on investment securities as a percentage of adjusted revenue (e) / (c) 54.43% 45.93% 52.04% 50.41% 50.26%<br>Banking Fees and Other Income(1) Excluding Net Losses on Investment Securities as a Percentage of Adjusted Revenue<br>Banking fees and other income(1) excluding net losses on investment securities as a percentage of adjusted revenue (d) / (c) 3.06% 4.14% 6.17% 4.83% 2.99%<br>($ in thousands, except for where otherwise noted) Quarterly Year ended<br>1 – Banking fees and other income consists of service charges on deposit accounts, interchange income and other noninterest income.
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41<br>NON-GAAP DISCLOSURE RECONCILIATION<br>Q4 2022 Q3 2023 Q4 2023 December 31, 2023 December 31, 2022<br>Adjusted Net Income<br>Net Income $ 10,909 $ 9,161 $ (14,754) $ 11,696 $ 40,005<br>Less: Net gains (losses) on investment securities — — (19,222) (19,222) —<br>Less: BOLI mortality proceeds (not taxable) — — — 1,196 —<br>Less: Gain on sale of ESOP business — 2,165 — 2,165 —<br>Add: Minnesota Housing donation — — 195 195 —<br>Add: Severance and signing bonus expense 522 115 324 1,823 1,515<br>Adjusted Net Income1<br> (a) 11,431 7,111 4,987 29,575 41,520<br>Adjusted Earnings Per Share<br>Adjusted net income (a) $ 11,431 $ 7,111 $ 4,987 $ 29,575 $ 41,520<br>Dividends and undistributed earnings allocated to participating securities 42 67 (209) (5) 416<br>Adjusted net income available to common (b) 11,389 7,044 5,196 29,580 41,104<br>Diluted average common shares outstanding (c) 20,232 20,095 19,996 20,143 18,884<br>Adjusted earnings per share (b) / (c) 0.56 0.35 0.26 1.47 2.18<br>Adjusted Return on average assets<br>Average total assets (d) 3,706,722 3,821,601 3,868,206 3,816,927 3,500,655<br>Adjusted return on average assets (a)/(d) 1.22% 0.74% 0.51% 0.77% 1.19%<br>Adjusted Return on average tangible common equity<br>Adjusted net income (a) $ 11,431 $ 7,111 $ 4,987 $ 29,575 $ 41,520<br>Add: Intangible amortization expense (net of tax) 1,046 1,046 1,046 4,184 3,756<br>Adjusted net income, excluding intangible amortization (f) 12,477 8,157 6,033 33,759 45,276<br>Average total equity 349,812 361,735 349,382 358,267 346,355<br>Less: Average goodwill 46,283 46,882 46,783 46,959 39,415<br>Less: Average other intangible assets (net of tax) 18,243 15,109 14,067 15,624 17,018<br>Average tangible common equity (g) 285,286 299,744 288,532 295,684 289,922<br>Adjusted return on average tangible common equity (f)/(g) 17.35% 10.80% 8.30% 11.42% 15.62%<br>($ in thousands, except for per share data and where otherwise noted) Quarterly Year ended<br>1 – Adjusted items are shown after-tax using a 22% tax rate. BOLI mortality proceeds are not taxable.
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