8-K - ALRS - Equibles

United States

Securities And Exchange Commission Washington, DC 20549

FORM 8-K

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

Date of report (Date of earliest event reported): July 28, 2021

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

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

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

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

N/A

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

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

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

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

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

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

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


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

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

Emerging growth company ☒

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

Item 2.02. Results of Operations and Financial Condition.

On July 28, 2021, Alerus Financial Corporation (the “Company”) issued a press release announcing its financial results for the three and six months ended June 30, 2021. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

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

Item 7.01. Regulation FD Disclosure.

On July 28, 2021, the Company posted a presentation to the Company’s investor relations website, located at investors.alerus.com. The presentation is also attached hereto as Exhibit 99.2.

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

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits


Exhibit No.	****	Description
99.1		Press Release of Alerus Financial Corporation, dated July 28, 2021
99.2<br><br>104		Investor Presentation of Alerus Financial Corporation<br><br>Cover Page Interactive Data File (embedded within the Inline XBLR document)

SIGNATURES

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


Date: July 28, 2021	Alerus Financial Corporation


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

Exhibit 99.1

<br><br><br><br>	<br><br>
<br><br><br><br>FOR RELEASE (7.28.2021)	Katie A. Lorenson, Chief Financial Officer<br><br>952.417.3725 (Office)

ALERUS FINANCIAL CORPORATION REPORTS

SECOND QUARTER 2021 NET INCOME OF $11.7 MILLION

GRAND FORKS, N.D. (July 28, 2021) – Alerus Financial Corporation (Nasdaq: ALRS) reported net income of $11.7 million for the second quarter of 2021, or $0.66 per diluted common share, compared to net income of $15.2 million, or $0.86 per diluted common share, for the first quarter of 2021, and net income of $11.5 million, or $0.65 per diluted common share, for the second quarter of 2020.

CEO Comments

Chairman, President, and Chief Executive Officer Randy Newman said, “Alerus continues to deliver top tier financial performance, driven by our long-term strategies and focus on offering valued advice to clients, resulting in extraordinary revenue diversification and growth opportunities. Alerus continues to establish itself as a premier provider of holistic solutions to our consumer and business clients. Our client base of more than 540,000 consumer clients and 18,300 business clients is a significant differentiator in our ability to continue to grow and provide superior returns to our shareholders.

Our diversified business is rooted by our long standing culture, focused on advice and working in the best interests of our clients, a foundation which has been built over decades of meeting our clients on their financial journey and guiding them to their path for financial success. This relationship focused model is a key differentiator both in working with clients and attracting talented professionals to our organization.

During the quarter we strengthened our U.S. Small Business Administration, or SBA, lending capabilities with the addition of an experienced SBA team. Led by industry veteran John Kimball, who most recently served as SBA lending manager at a large, regional community bank, the five-person team collectively has more than 100 years of business banking and small business lending experience at community and regional banks. These team members are aligned with our culture of providing expertise and value to our business clients so they can continue to grow and expand.”

Quarterly Highlights

◾	Return on average total assets of 1.50%, compared to 2.02% for the first quarter of 2021
◾	Return on average tangible common equity^(1)^ of 17.36%, compared to 23.03% for the first quarter of 2021
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◾	Net interest margin (tax-equivalent)^(1)^ was 2.88%, compared to 3.12% for the first quarter of 2021
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◾	Allowance for loan losses to total loans, excluding Paycheck Protection Program, or PPP, loans, was 2.02%, compared to 2.00% as of December 31, 2020
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◾	Efficiency ratio^(1)^ of 71.46%, compared to 66.43% for the first quarter of 2021
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◾	Noninterest income decreased $4.1 million from the first quarter of 2021 and was 63.48% of total revenue, compared to 64.97% for the first quarter of 2021
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◾	Mortgage originations totaled $545.4 million, a 5.3% increase from the first quarter of 2021
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◾	Investment securities increased $205.5 million, or 34.7%, from the fourth quarter of 2020
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◾	Loans held for sale decreased $55.6 million, or 45.4%, from the fourth quarter of 2020
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◾	Loans held for investment decreased $144.1 million, or 7.3%, from the fourth quarter of 2020
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◾	Deposits increased $138.9 million, or 5.4%, from the fourth quarter of 2020
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(1)	Represents a non-GAAP financial measure. See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.”
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Selected Financial Data (unaudited)


	As of and for the
	Three months ended									Six months ended
	June 30,			March 31,			June 30,			June 30,			June 30,
(dollars and shares in thousands, except per share data)	2021			2021			2020			2021			2020		****
Performance Ratios
Return on average total assets		1.50	%		2.02	%		1.68	%		1.76	%		1.31	%
Return on average common equity		13.82	%		18.46	%		15.30	%		16.11	%		11.35	%
Return on average tangible common equity (1)		17.36	%		23.03	%		18.88	%		20.15	%		14.39	%
Noninterest income as a % of revenue		63.48	%		64.97	%		65.55	%		64.26	%		62.69	%
Net interest margin (tax-equivalent) (1)		2.88	%		3.12	%		3.14	%		3.00	%		3.24	%
Efficiency ratio (1)		71.46	%		66.43	%		66.31	%		68.84	%		71.23	%
Net charge-offs/(recoveries) to average loans		—	%		0.10	%		0.66	%		0.05	%		0.29	%
Dividend payout ratio		24.24	%		17.44	%		23.08	%		20.39	%		31.58	%
Per Common Share
Earnings per common share - basic	$	0.67		$	0.87		$	0.66		$	1.54		$	0.97
Earnings per common share - diluted	$	0.66		$	0.86		$	0.65		$	1.52		$	0.95
Dividends declared per common share	$	0.16		$	0.15		$	0.15		$	0.31		$	0.30
Tangible book value per common share (1)	$	16.89		$	15.95		$	15.30
Average common shares outstanding - basic		17,194			17,145			17,111			17,170			17,091
Average common shares outstanding - diluted		17,497			17,465			17,445			17,482			17,425
Other Data
Retirement and benefit services assets under administration/management	$	36,964,961		$	34,774,650		$	30,093,095
Wealth management assets under administration/management		3,538,959			3,357,530			2,957,213
Mortgage originations		545,437			518,014			431,638		$	1,063,451		$	660,206

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

Results of Operations

Net Interest Income

Net interest income for the second quarter of 2021 was $21.1 million, a decrease of $898 thousand, or 4.1%, from $22.0 million for the first quarter of 2021, and an increase of $1.0 million, or 5.2%, from $20.1 million for the second quarter of 2020. The linked quarter decrease in net interest income was primarily driven by a $1.2 million decrease in interest income from loans as average total loans decreased $57.5 million while the average yield decreased by 17 basis points. During the second quarter of 2021, average interest earning assets increased $78.2 million, primarily due to increases of $138.4 million in investment securities and $7.3 million in interest-bearing deposits with banks, partially offset by decreases of $57.5 million in loans held for investment and $10.8 million in loans held for sale. The change in the balance sheet mix resulted in a 22 basis point decrease in the average earning asset yield. Net interest income earned from PPP loans during the second quarter of 2021 totaled $2.6 million, a decrease of $477 thousand, from the $3.0 million earned during the first quarter. The cost of interest-bearing liabilities had a modest increase of 2 basis points from the first quarter of 2021 primarily due to increased average balances in interest-bearing demand deposits as well as long-term debt.

Net interest margin (tax-equivalent), a non-GAAP financial measure, was 2.88% for the second quarter of 2021, a 24 basis point decrease from 3.12% for the first quarter of 2021, and a 26 basis point decrease from 3.14% in the second quarter of 2020. The linked quarter decrease was primarily due to lower yields on interest earning assets. Excluding PPP loans, net interest margin was 2.75% for the second quarter of 2021, a 20 basis point decrease from 2.95% for the first quarter of 2021. The year over year decrease was primarily attributable to the historically low and flat yield curve and a more liquid balance sheet mix which resulted in a 60 basis point decrease in interest earning asset yields.

Noninterest Income

Noninterest income for the second quarter of 2021 was $36.7 million, a $4.1 million, or 10.1%, decrease from the first quarter of 2021. The decrease was primarily driven by a $4.8 million decrease in mortgage banking revenue. The decrease in mortgage banking revenue was primarily a result of a $6.2 million decline in fair market value of the secondary market hedge, partially offset by a 56 basis point increase in the gain on sale margin.

Noninterest income for the second quarter of 2021 decreased $1.5 million, or 3.9%, from $38.2 million in the second quarter of 2020. This decrease was primarily due to a $5.3 million decrease in mortgage banking revenue, a result of a $11.5 million decline in fair market value on the secondary market hedge, partially offset by a 56 basis point increase in the gain on sale margin. Offsetting this decrease was a $4.2 million increase in retirement and benefit services income, primarily driven by the revenue attributable to the 2

acquisition of Retirement Planning Services, Inc. (doing business as RPS Plan Administrators and 24HourFlex) and a $693 thousand increase in document restatement fees, and a $1.0 million increase in wealth management revenue primarily driven by organic growth and market increases in assets under administration/management.

Noninterest Expense

Noninterest expense for the second quarter of 2021 was $42.6 million, a decrease of $492 thousand, or 1.1%, compared to the first quarter of 2021. The decrease was primarily due to decreases of $447 thousand in other noninterest expense, $313 thousand decrease in occupancy and equipment expense and $241 thousand decrease in employee taxes and benefits, partially offset by a $611 thousand increase in compensation expense. The decrease in other noninterest expense was a result of a loss recognized in the first quarter of 2021 on the redemption of the Company’s subordinated notes which were redeemed during the first quarter. The decrease in occupancy and equipment expense is attributable to the termination of facility leases and closure of nine office locations in 2020. The increase in compensation expense was primarily due to an increase in mortgage related compensation and incentives.

Noninterest expense for the second quarter of 2021 increased $2.8 million, or 7.1%, from $39.7 million in the second quarter of 2020. The increase was primarily attributable to increased compensation expense, employee taxes and benefits, primarily as a result of the significant year over year increase in mortgage originations. Additionally, compensation expense and employee taxes and benefits increased as a result of the acquisition of RPS, as the number of full time employees increased from 791 employees in the second quarter of 2020 to 835 employees in the second quarter of 2021.

Financial Condition

Total assets were $3.2 billion as of June 30, 2021, an increase of $143.5 million, or 4.8%, from December 31, 2020. The overall increase in total assets included increases of $205.5 million in investment securities and $142.5 million in cash and cash equivalents, partially offset by a $55.6 million decrease in loans held for sale and a $144.1 million decrease in loans held for investment.

Loans

Total loans were $1.84 billion as of June 30, 2021, a decrease of $144.1 million, or 7.3%, from December 31, 2020. The decrease was primarily due to a $119.1 million decrease in the commercial and industrial loan portfolio, as approximately $213.5 million of PPP loans were forgiven, and $110.5 million of new PPP loans were funded. Excluding PPP loans, the commercial loan portfolio decreased by $18.6 million, or 1.8%, from December 31, 2020. The consumer loan portfolio decreased $22.0 million from December 31, 2020, due to high levels of refinancing and our strategic exit from indirect lending.

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



		June 30,		March 31,		December 31,		September 30,		June 30,
(dollars in thousands)	****	2021		2021		2020		2020		2020
Commercial
Commercial and industrial (1)		$	572,734	$	678,029	$	691,858	$	789,036	$	794,204
Real estate construction			36,549		40,473		44,451		33,169		31,344
Commercial real estate			567,987		569,451		563,007		535,216		519,104
Total commercial			1,177,270		1,287,953		1,299,316		1,357,421		1,344,652
Consumer
Residential real estate first mortgage			470,822		454,958		463,370		469,050		456,737
Residential real estate junior lien			130,180		130,299		143,416		152,487		154,351
Other revolving and installment			57,040		64,135		73,273		79,461		78,457
Total consumer			658,042		649,392		680,059		700,998		689,545
Total loans		$	1,835,312	$	1,937,345	$	1,979,375	$	2,058,419	$	2,034,197

(1)	Includes PPP loans of $165.0 million at June 30, 2021, $256.8 million at March 31, 2021, $268.4 million at December 31, 2020, $348.9 million at September 30, 2020 and $347.3 million at June 30, 2020.

Deposits

Total deposits were $2.71 billion as of June 30, 2021, an increase of $138.9 million, or 5.4%, from December 31, 2020. Interest-bearing deposits increased $134.8 million while noninterest-bearing deposits increased $4.1 million. Key drivers of the increase included ongoing higher depositor balances due to the uncertain economic environment, government stimulus programs and volatile financial markets. Although overall deposits increased, there was a $44.0 million decrease in synergistic deposits, primarily in 3

the retirement and benefit services accounts as participants moved balances back into the markets. Excluding synergistic deposits, commercial transaction deposits increased $113.9 million, or 10.3%, while consumer transaction deposits increased, $75.8 million, or 11.8%, since December 31, 2020. Noninterest-bearing deposits as a percentage of total deposits was 28.0% as of June 30, 2021 compared to 29.3% as of December 31, 2020.

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


		June 30,			March 31,			December 31,			September 30,			June 30,
(dollars in thousands)	****	2021		****	2021		****	2020		****	2020		****	2020
Noninterest-bearing demand		$	758,820		$	775,434		$	754,716		$	693,450		$	700,892
Interest-bearing
Interest-bearing demand			736,043			674,466			618,900			590,366			579,840
Savings accounts			89,437			87,492			79,902			78,659			75,973
Money market savings			920,831			967,273			909,137			892,473			892,717
Time deposits			205,809			212,908			209,338			207,422			203,731
Total interest-bearing			1,952,120			1,942,139			1,817,277			1,768,920			1,752,261
Total deposits		$	2,710,940		$	2,717,573		$	2,571,993		$	2,462,370		$	2,453,153

Asset Quality

Total nonperforming assets were $7.8 million as of June 30, 2021, an increase of $2.7 million, or 52.0%, from December 31, 2020. As of June 30, 2021, the allowance for loan losses was $33.8 million, or 1.84% of total loans, compared to $34.2 million, or 1.73% of total loans, as of December 31, 2020. Excluding PPP loans, the ratio of allowance for loan losses to total loans was 2.02% at June 30, 2021, compared to 2.00% as of December 31, 2020.

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


		As of and for the three months ended
		June 30,			March 31,			December 31,			September 30,			June 30,
(dollars in thousands)	****	2021		****	2021		****	2020		****	2020		****	2020		****
Nonaccrual loans		$	6,960		$	4,756		$	5,050		$	4,795		$	5,328
Accruing loans 90+ days past due			—			—			30			—			—
Total nonperforming loans			6,960			4,756			5,080			4,795			5,328
OREO and repossessed assets			858			139			63			10			26
Total nonperforming assets		$	7,818		$	4,895		$	5,143		$	4,805		$	5,354
Net charge-offs/(recoveries)			(6)			488			(1,509)			(581)			3,264
Net charge-offs/(recoveries) to average loans			—	%		0.10	%		(0.30)	%		(0.11)	%		0.66	%
Nonperforming loans to total loans			0.38	%		0.25	%		0.26	%		0.23	%		0.26	%
Nonperforming assets to total assets			0.25	%		0.16	%		0.17	%		0.17	%		0.19	%
Allowance for loan losses to total loans			1.84	%		1.74	%		1.73	%		1.52	%		1.34	%
Allowance for loan losses to nonperforming loans			485	%		710	%		674	%		654	%		512	%

For the second quarter of 2021, we had net recoveries of $6 thousand compared to net charge-offs of $488 thousand for the first quarter of 2021 and $3.3 million of net charge-offs for the second quarter of 2020.

There was no provision recorded for the second quarter of 2021, no change from the first quarter of 2021 and a decrease of $3.5 million from the second quarter of 2020. Management decided additional provisions were not necessary in the second quarter of 2021 as credit quality indicators remained strong and loan balances decreased.

The ratio of nonperforming loans to total loans at June 30, 2021 was 0.38%, and if PPP loans were excluded, this ratio would have been 0.42%. Nonperforming assets as a percentage of total assets was 0.25% at June 30, 2021. Excluding PPP loans, nonperforming assets as a percentage of total assets would have been 0.26% at June 30, 2021.

Beginning in 2020, in accordance with the Interagency Statement on Loan Modifications and Reporting for Financial Institutions as issued on April 7, 2020, through June 30, 2021, we had entered into principal and interest deferrals on 584 loans, representing $154.5 million in total outstanding principal balances. Of those loans, 12 loans with a total outstanding principal balance of $5.3 million have been granted additional deferrals, 4 loans with a total outstanding principal balance of $653 thousand remain on the first deferral and the remaining loans have been returned to normal payment status. These loan modifications are not considered troubled debt restructurings.

Capital

Total stockholders’ equity was $344.4 million as of June 30, 2021, an increase of $14.2 million from December 31, 2020. The tangible book value per common share, a non-GAAP financial measure, increased to $16.89 as of June 30, 2021, from $16.00 as of December 31, 2020. Tangible common equity to tangible assets, a non-GAAP financial measure, increased to 9.36% as of June 30, 2021, from 9.27% as of December 31, 2020.

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


	****	June 30,		****	December 31,		****	June 30,
	****	2021		****	2020		****	2020
Capital Ratios^(1)^
Alerus Financial Corporation Consolidated
Common equity tier 1 capital to risk weighted assets			14.30	%		12.75	%		12.58	%
Tier 1 capital to risk weighted assets			14.71	%		13.15	%		12.99	%
Total capital to risk weighted assets			18.43	%		16.79	%		16.70	%
Tier 1 capital to average assets			9.62	%		9.24	%		9.75	%
Tangible common equity / tangible assets ^(2)^			9.36	%		9.27	%		9.25	%

Alerus Financial, N.A.
Common equity tier 1 capital to risk weighted assets			13.57	%		12.10	%		11.99	%
Tier 1 capital to risk weighted assets			13.57	%		12.10	%		11.99	%
Total capital to risk weighted assets			14.82	%		13.36	%		13.24	%
Tier 1 capital to average assets			8.98	%		8.50	%		9.00	%

(1)	Capital ratios for the current quarter are to be considered preliminary until the Call Report for Alerus Financial, N.A. is filed.
(2)	Represents a non-GAAP financial measure. See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.”
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Conference Call

The Company will host a conference call at 9:00 a.m. Central Time on Thursday, July 29, 2021, to discuss its financial results. The call can be accessed via telephone at (888) 317-6016. A recording of the call and transcript will be available on the Company’s investor relations website at investors.alerus.com following the call.

About Alerus Financial Corporation

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

Non-GAAP Financial Measures

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

These non-GAAP financial measures should not be considered in isolation or as a substitute for total stockholders’ equity, total assets, book value per share, return on average assets, return on average equity, or any other measure calculated in accordance 5

with GAAP. Moreover, the manner in which we calculate these non-GAAP financial measures may differ from that of other companies reporting measures with similar names.

Forward-Looking Statements

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

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: the effects of the COVID-19 pandemic, including its effects on the economic environment, our clients, and our operations, as well as any changes to federal, state, or local government laws, regulations, or orders in response to the pandemic; our ability to successfully manage credit risk and maintain an adequate level of allowance for loan losses; new or revised accounting standards, including as a result of the implementation of the new Current Expected Credit Loss Standard; business and economic conditions generally and in the financial services industry, nationally and within our market areas; the overall health of the local and national real estate market; concentrations within our loan portfolio; the level of nonperforming assets on our balance sheet; our ability to implement our organic and acquisition growth strategies; the impact of economic or market conditions on our fee-based services; our ability to continue to grow our retirement and benefit services business; our ability to continue to originate a sufficient volume of residential mortgages; the occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents; interruptions involving our information technology and telecommunications systems or third-party servicers; potential losses incurred in connection with mortgage loan repurchases; the composition of our executive management team and our ability to attract and retain key personnel; rapid technological change in the financial services industry; increased competition in the financial services industry; our ability to successfully manage liquidity risk; the effectiveness of our risk management framework; the commencement and outcome of litigation and other legal proceedings and regulatory actions against us or to which we may become subject; potential impairment to the goodwill we recorded in connection with our past acquisitions; the extensive regulatory framework that applies to us; the impact of recent and future legislative and regulatory changes; interest rate risks associated with our business; fluctuations in the values of the securities held in our securities portfolio; governmental monetary, trade and fiscal policies; severe weather, natural disasters, widespread disease or pandemics, such as the COVID-19 global pandemic, acts of war or terrorism or other adverse external events; any material weaknesses in our internal control over financial reporting; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative rates; changes to U.S. tax laws, regulations and guidance; our success at managing the risks involved in the foregoing items; and any other risks described in the “Risk Factors” sections of the reports filed by Alerus Financial Corporation with the Securities and Exchange Commission.

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

Alerus Financial Corporation and Subsidiaries

Consolidated Balance Sheets

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


	****	June 30,		****	December 31,
	****	2021		****	2020
Assets		(Unaudited)			(Audited)
Cash and cash equivalents		$	315,430		$	172,962
Investment securities
Available-for-sale, at fair value			651,546			592,342
Held-to-maturity, at carrying value			146,316			—
Loans held for sale			66,856			122,440
Loans			1,835,312			1,979,375
Allowance for loan losses			(33,764)			(34,246)
Net loans			1,801,548			1,945,129
Land, premises and equipment, net			18,847			20,289
Operating lease right-of-use assets			4,203			6,918
Accrued interest receivable			8,463			9,662
Bank-owned life insurance			32,752			32,363
Goodwill			30,201			30,201
Other intangible assets			23,680			25,919
Servicing rights			1,964			1,987
Deferred income taxes, net			11,522			9,409
Other assets			43,901			44,150
Total assets		$	3,157,229		$	3,013,771
Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing		$	758,820		$	754,716
Interest-bearing			1,952,120			1,817,277
Total deposits			2,710,940			2,571,993
Long-term debt			58,992			58,735
Operating lease liabilities			4,868			7,861
Accrued expenses and other liabilities			38,038			45,019
Total liabilities			2,812,838			2,683,608
Stockholders’ equity
Preferred stock, $1 par value, 2,000,000 shares authorized: 0 issued and outstanding			—			—
Common stock, $1 par value, 30,000,000 shares authorized: 17,197,771 and 17,125,270 issued and outstanding			17,198			17,125
Additional paid-in capital			91,273			90,237
Retained earnings			233,397			212,163
Accumulated other comprehensive income (loss)			2,523			10,638
Total stockholders’ equity			344,391			330,163
Total liabilities and stockholders’ equity		$	3,157,229		$	3,013,771

Alerus Financial Corporation and Subsidiaries

Consolidated Statements of Income

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


	Three months ended						Six months ended
	June 30,		March 31,		June 30,		June 30,		June 30,
	2021		2021		2020		2021		2020
Interest Income	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Loans, including fees	$	19,324	$	20,567	$	21,372	$	39,891	$	41,914
Investment securities
Taxable		2,897		2,401		1,765		5,298		3,524
Exempt from federal income taxes		233		236		239		469		474
Other		130		117		130		247		700
Total interest income		22,584		23,321		23,506		45,905		46,612
Interest Expense
Deposits		906		995		2,558		1,901		5,950
Long-term debt		538		288		857		826		1,734
Total interest expense		1,444		1,283		3,415		2,727		7,684
Net interest income		21,140		22,038		20,091		43,178		38,928
Provision for loan losses		—		—		3,500		—		6,000
Net interest income after provision for loan losses		21,140		22,038		16,591		43,178		32,928
Noninterest Income
Retirement and benefit services		17,871		17,255		13,710		35,126		29,930
Wealth management		5,138		4,986		4,112		10,124		8,158
Mortgage banking		12,287		17,132		17,546		29,419		22,591
Service charges on deposit accounts		330		338		297		668		720
Net gains (losses) on investment securities		—		114		1,294		114		1,294
Other		1,122		1,056		1,271		2,178		2,726
Total noninterest income		36,748		40,881		38,230		77,629		65,419
Noninterest Expense
Compensation		24,309		23,698		21,213		48,007		39,944
Employee taxes and benefits		5,572		5,813		4,747		11,385		10,055
Occupancy and equipment expense		1,918		2,231		2,612		4,149		5,104
Business services, software and technology expense		4,958		4,976		4,580		9,934		9,123
Intangible amortization expense		1,088		1,151		991		2,239		1,981
Professional fees and assessments		1,509		1,472		1,177		2,981		2,233
Marketing and business development		769		676		549		1,445		1,159
Supplies and postage		503		531		675		1,034		1,382
Travel		36		26		51		62		312
Mortgage and lending expenses		1,199		1,332		1,341		2,531		2,482
Other		689		1,136		1,798		1,825		2,685
Total noninterest expense		42,550		43,042		39,734		85,592		76,460
Income before income taxes		15,338		19,877		15,087		35,215		21,887
Income tax expense		3,644		4,662		3,613		8,306		5,050
Net income	$	11,694	$	15,215	$	11,474	$	26,909	$	16,837
Per Common Share Data
Earnings per common share	$	0.67	$	0.87	$	0.66	$	1.54	$	0.97
Diluted earnings per common share	$	0.66	$	0.86	$	0.65	$	1.52	$	0.95
Dividends declared per common share	$	0.16	$	0.15	$	0.15	$	0.31	$	0.30
Average common shares outstanding		17,194		17,145		17,111		17,170		17,091
Diluted average common shares outstanding		17,497		17,465		17,445		17,482		17,425

Alerus Financial Corporation and Subsidiaries

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

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


	****	June 30,			March 31,			December 31,			June 30,
	****	2021			2021			2020			2020
Tangible Common Equity to Tangible Assets
Total common stockholders’ equity		$	344,391		$	329,234		$	330,163		$	305,732
Less: Goodwill			30,201			30,201			30,201			27,329
Less: Other intangible assets			23,680			24,768			25,919			16,411
Tangible common equity (a)			290,510			274,265			274,043			261,992
Total assets			3,157,229			3,151,756			3,013,771			2,875,457
Less: Goodwill			30,201			30,201			30,201			27,329
Less: Other intangible assets			23,680			24,768			25,919			16,411
Tangible assets (b)			3,103,348			3,096,787			2,957,651			2,831,717
Tangible common equity to tangible assets (a)/(b)			9.36	%		8.86	%		9.27	%		9.25	%
Tangible Book Value Per Common Share
Total common stockholders’ equity		$	344,391		$	329,234		$	330,163		$	305,732
Less: Goodwill			30,201			30,201			30,201			27,329
Less: Other intangible assets			23,680			24,768			25,919			16,411
Tangible common equity (c)			290,510			274,265			274,043			261,992
Total common shares issued and outstanding (d)			17,198			17,190			17,125			17,120
Tangible book value per common share (c)/(d)		$	16.89		$	15.95		$	16.00		$	15.30


	Three months ended									Six months ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2021			2021			2020			2021			2020
Return on Average Tangible Common Equity
Net income	$	11,694		$	15,215		$	11,474		$	26,909		$	16,837
Add: Intangible amortization expense (net of tax)		860			909			783			1,769			1,565
Net income, excluding intangible amortization (e)		12,554			16,124			12,257			28,678			18,402
Average total equity		339,439			334,188			301,719			336,830			298,221
Less: Average goodwill		30,201			30,201			27,329			30,201			27,329
Less: Average other intangible assets (net of tax)		19,123			19,995			13,345			19,556			13,737
Average tangible common equity (f)		290,115			283,992			261,045			287,073			257,155
Return on average tangible common equity (e)/(f)		17.36	%		23.03	%		18.88	%		20.15	%		14.39	%
Net Interest Margin (tax-equivalent)
Net interest income	$	21,140		$	22,038		$	20,091		$	43,178		$	38,928
Tax-equivalent adjustment		135			143			109			278			209
Tax-equivalent net interest income (g)		21,275			22,181			20,200			43,456			39,137
Average earning assets (h)		2,958,468			2,880,255			2,584,037			2,919,578			2,427,519
Net interest margin (tax-equivalent) (g)/(h)		2.88	%		3.12	%		3.14	%		3.00	%		3.24	%
Efficiency Ratio
Noninterest expense	$	42,550		$	43,042		$	39,734		$	85,592		$	76,460
Less: Intangible amortization expense		1,088			1,151			991			2,239			1,981
Adjusted noninterest expense (i)		41,462			41,891			38,743			83,353			74,479
Net interest income		21,140			22,038			20,091			43,178			38,928
Noninterest income		36,748			40,881			38,230			77,629			65,419
Tax-equivalent adjustment		135			143			109			278			209
Total tax-equivalent revenue (j)		58,023			63,062			58,430			121,085			104,556
Efficiency ratio (i)/(j)		71.46	%		66.43	%		66.31	%		68.84	%		71.23	%

Alerus Financial Corporation and Subsidiaries

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

(dollars in thousands)


	Three months ended												Six months ended
	June 30, 2021				March 31, 2021				June 30, 2020				June 30, 2021				June 30, 2020
			Average				Average				Average				Average				Average
	Average		Yield/		Average		Yield/		Average		Yield/		Average		Yield/		Average		Yield/
	Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate
Interest Earning Assets
Interest-bearing deposits with banks	$	191,695	0.12	%	$	184,376	0.12	%	$	153,197	0.16	%	$	188,056	0.12	%	$	158,274	0.72	%
Investment securities (1)		800,812	1.60	%		662,413	1.65	%		369,247	2.25	%		731,995	1.62	%		353,203	2.35	%
Loans held for sale		71,447	2.26	%		82,249	2.13	%		69,606	2.69	%		76,818	2.19	%		51,372	2.81	%
Loans
Commercial:
Commercial and industrial		627,613	4.55	%		674,935	4.72	%		739,816	4.12	%		651,143	4.64	%		609,553	4.57	%
Real estate construction		42,511	4.28	%		45,264	4.22	%		31,660	4.48	%		43,880	4.25	%		29,191	4.73	%
Commercial real estate		568,827	3.71	%		560,986	3.79	%		513,497	4.31	%		564,928	3.75	%		510,831	4.46	%
Total commercial		1,238,951	4.15	%		1,281,185	4.30	%		1,284,973	4.21	%		1,259,951	4.23	%		1,149,575	4.53	%
Consumer
Residential real estate first mortgage		459,278	3.53	%		457,882	3.76	%		459,789	4.09	%		458,584	3.65	%		460,258	4.10	%
Residential real estate junior lien		129,544	4.58	%		137,745	4.86	%		163,345	4.79	%		133,622	4.72	%		168,390	4.98	%
Other revolving and installment		60,213	4.31	%		68,625	4.38	%		77,921	4.56	%		64,396	4.35	%		80,587	4.63	%
Total consumer		649,035	3.81	%		664,252	4.05	%		701,055	4.31	%		656,602	3.93	%		709,235	4.37	%
Total loans (1)		1,887,986	4.04	%		1,945,437	4.21	%		1,986,028	4.24	%		1,916,553	4.13	%		1,858,810	4.47	%
Federal Reserve/FHLB stock		6,528	4.36	%		5,780	4.49	%		5,959	4.59	%		6,156	4.42	%		5,860	4.67	%
Total interest earning assets		2,958,468	3.08	%		2,880,255	3.30	%		2,584,037	3.68	%		2,919,578	3.19	%		2,427,519	3.88	%
Noninterest earning assets		161,272				167,006				156,293				164,124				152,476
Total assets	$	3,119,740			$	3,047,261			$	2,740,330			$	3,083,702			$	2,579,995
Interest-Bearing Liabilities
Interest-bearing demand deposits	$	697,789	0.14	%	$	642,832	0.16	%	$	534,733	0.30	%	$	670,462	0.15	%	$	496,880	0.38	%
Money market and savings deposits		1,015,358	0.14	%		1,030,348	0.16	%		900,812	0.67	%		1,022,812	0.15	%		852,325	0.85	%
Time deposits		208,338	0.56	%		210,719	0.66	%		201,147	1.30	%		209,521	0.61	%		200,117	1.44	%
Short-term borrowings		—	—	%		—	—	%		321	—	%		—	—	%		161	—	%
Long-term debt		58,996	3.66	%		25,677	4.55	%		58,747	5.87	%		42,429	3.93	%		58,751	5.94	%
Total interest-bearing liabilities		1,980,481	0.29	%		1,909,576	0.27	%		1,695,760	0.81	%		1,945,224	0.28	%		1,608,234	0.96	%
Noninterest-Bearing Liabilities and Stockholders' Equity
Noninterest-bearing deposits		755,773				731,680				692,500				743,793				628,404
Other noninterest-bearing liabilities		44,047				71,817				50,351				57,855				45,136
Stockholders’ equity		339,439				334,188				301,719				336,830				298,221
Total liabilities and stockholders’ equity	$	3,119,740			$	3,047,261			$	2,740,330			$	3,083,702			$	2,579,995
Net interest rate spread			2.79	%			3.03	%			2.87	%			2.91	%			2.92	%
Net interest margin, tax-equivalent (2)			2.88	%			3.12	%			3.14	%			3.00	%			3.24	%

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

Exhibit 99.2

INVESTOR PRESENTATION<br>JULY 2021<br>Alerus
1<br>Forward-Looking Statements<br>This presentation contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements<br>include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of Alerus Financial Corporation. These<br>statements are often, but not always, identified by words such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”,<br>“intend”, “plan”, “projection”, “would”, “annualized”, “target” and “outlook”, or the negative version of those words or other comparable words of a future or forward-looking nature. Examples of<br>forward-looking statements include, among others, statements we make regarding our projected growth, anticipated future financial performance, financial condition, credit quality, management’s<br>long-term performance goals and the future plans and prospects of Alerus Financial Corporation.<br>Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the<br>future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future,<br>they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition<br>may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our<br>actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: the effects of the COVID-19 pandemic,<br>including its effects on the economic environment, our clients and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the<br>pandemic; our ability to successfully manage credit risk and maintain an adequate level of allowance for loan losses; new or revised accounting standards, including as a result of the future<br>implementation of the new Current Expected Credit Loss Standard; business and economic conditions generally and in the financial services industry, nationally and within our market areas; the<br>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<br>acquisition growth strategies; the impact of economic or market conditions on our fee-based services; our ability to continue to grow our retirement and benefit services business; our ability to<br>continue to originate a sufficient volume of residential mortgages; the occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity related incidents;<br>interruptions involving our information technology and telecommunications systems or third-party servicers; potential losses incurred in connection with mortgage loan repurchases; the<br>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; our ability to successfully manage liquidity risk; the effectiveness of our risk management framework; the commencement and outcome of litigation and other legal<br>proceedings and regulatory actions against us or to which we may become subject; potential impairment to the goodwill we recorded in connection with our past acquisitions; the extensive<br>regulatory framework that applies to us; the impact of recent and future legislative and regulatory changes; interest rate risks associated with our business; fluctuations in the values of the<br>securities held in our securities portfolio; governmental monetary, trade and fiscal policies; severe weather, natural disasters, widespread disease or pandemics, such as the COVID-19 global<br>pandemic, acts of war or terrorism or other adverse external events; any material weaknesses in our internal control over financial reporting; developments and uncertainty related to the future<br>use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative rates; changes to U.S. tax laws, regulations and guidance; our success at<br>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<br>Commission.<br>Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation<br>to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.<br>Non-GAAP Financial Measures<br>This presentation includes certain ratios and amounts that do not conform to U.S. Generally Accepted Accounting Principles, or GAAP. Management uses certain non-GAAP financial measures to<br>evaluate financial performance and business trends from period to period and believes that disclosure of these non-GAAP financial measures will help investors, rating agencies and analysts<br>evaluate the financial performance and condition of Alerus Financial Corporation. This presentation includes a reconciliation of each non-GAAP financial measure to the most comparable GAAP<br>equivalent.<br>Miscellaneous<br>Except as otherwise indicated, this presentation speaks as of the date hereof. The delivery of this presentation shall not, under any circumstances, create any implication that there has been no<br>change in the affairs of Alerus Financial Corporation after the date hereof. Certain of the information contained herein may be derived from information provided by industry sources. We believe<br>that such information is accurate and that the sources from which it has been obtained are reliable. We cannot guarantee the accuracy of such information, however, and we have not independently<br>verified such information.<br>DISCLAIMERS
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2<br>FOR THE TWELVE MONTHS ENDED JUNE 30, 2021<br>Noninterest income:<br>$161.6 million<br>Net interest income:<br>$88.1 million<br>$29.4 $27.8 $31.9 $34.2 $37.0<br>2017 2018 2019 2020 Q2 2021<br>OUR MISSION<br>▪ To positively impact our clients’ financial potential-through holistic guidance, unparalleled service, and engaging<br>technology.<br>COMPANY PROFILE<br>Data as of 06/30/2021.<br>DIVERSIFIED REVENUE STREAM ASSET GROWTH (IN BILLIONS)<br>$2.1 $2.2 $2.4 $3.0 $3.2<br>2017 2018 2019 2020 Q2 2021<br>Banking Assets<br>Retirement and Benefit Services AUA/AUM<br>Wealth Management AUA/AUM<br>$2.7 $2.6 $3.1 $3.3 $3.5<br>2017 2018 2019 2020 Q2 2021<br>NONINTEREST<br>INCOME AS A %<br>OF REVENUE:<br>63%<br>DIVERSIFIED FINANCIAL SERVICES COMPANY<br>▪ $3.2 billion Banking assets<br>▪ $37.0 billion Retirement and Benefits AUA/AUM<br>▪ $3.5 billion Wealth Management AUA/AUM<br>▪ $1.1 billion in Mortgage Originations<br>ALERUS BUSINESS LINES<br>▪ Banking<br>▪ Retirement and Benefits<br>▪ Wealth Management<br>▪ Mortgage<br>Retirement<br>and Benefit<br>Revenue<br>26.5%<br>Wealth<br>Management<br>Revenue<br>7.8% Mortgage<br>Revenue<br>27.4%<br>Banking<br>Fees<br>3.0%<br>Net<br>Interest<br>Income<br>35.3%
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3<br>FRANCHISE FOOTPRINT<br>FULL-SERVICE BANKING OFFICES<br>Alerus offers banking, retirement and benefits, mortgage and<br>wealth management services at all full-service banking offices<br>▪ Grand Forks, ND: 4 full-service banking offices<br>▪ Fargo, ND: 3 full-service banking offices<br>▪ Twin Cities, MN: 6 full-service banking offices<br>▪ Phoenix, AZ: 2 full-service banking offices<br>RETIREMENT AND BENEFITS SERVICES OFFICES<br>▪ 1 retirement and benefits office in Minnesota<br>▪ 1 retirement and benefits office in Michigan<br>▪ 1 retirement and benefits office in Colorado<br>▪ Serve clients in all 50 states through retirement plan services<br>DIVERSIFIED CLIENT BASE<br>▪ 46,200 consumers<br>▪ 10,200 businesses<br>▪ 8,100 employer-sponsored retirement plans<br>Data as of 06/30/2021.<br>▪ 375,200 employer-sponsored retirement plan participants<br>▪ 62,300 health savings account participants<br>▪ 60,200 flexible spending account/health reimbursement<br>arrangement participants
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4<br>ONE<br>ALERUS<br>REINVENTION OF PROCESSES<br>We have aligned processes, policies, and<br>procedures throughout all departments to<br>enhance client experience and improve our<br>Company's efficiency<br>Our expectation is this initiative will continue to<br>improve our scalability and operating costs<br>TAILORED ADVICE<br>We strive to provide each<br>client with a primary point of<br>contact —a trusted advisor—<br>who deals with individual<br>needs and integrates other<br>department’s expertise when<br>necessary<br>SYNERGISTIC GROWTH<br>Deposits sourced from our retirement and benefits<br>divisions totaled $551.6 million as of June 30, 2021<br>Cumulative rollovers have added $905.1 million of<br>assets under management<br>1-4 Family 1st Liens totaled $451.6 million in the<br>second quarter<br>TECHNOLOGY INVESTMENT<br>We have proactively invested in technology to<br>further our goal to effectively integrate all<br>departments and business lines<br>These investments allow for digital and proactive<br>engagement with clients<br>DIVERSIFIED SERVICES<br>We can offer comprehensive<br>product and service packages to<br>our clients including banking,<br>mortgage, wealth management,<br>retirement benefits and payroll<br>administration<br>ONE ALERUS STRATEGY<br>One Alerus enables us to bring our product and service offerings<br>to clients in a cohesive and seamless manner. We believe the One<br>Alerus initiative will enable us to achieve future organic growth by<br>leveraging our existing client base and help us continue to provide<br>strong returns to our stockholders<br>ONE ALERUS
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5<br>EXPANDED TO COLORADO<br>Acquired Retirement Planning Services, Inc.<br>(Littleton, CO)<br>To supplement our strong organic growth, we have executed 24 acquisitions throughout the history<br>of our company across all business lines:<br>STRATEGIC GROWTH<br>2000<br>2002<br>2003<br>2006<br>2007<br>2019<br>2009<br>2016<br>2015<br>2014<br>2013<br>2012<br>2011 REBRANDED TO ALERUS<br>Acquired a branch from BNC National Bank<br>(Fargo, ND)<br>Acquired Pension Solutions, Inc. (St. Paul, MN)<br>The catalyst to the Retirement Division<br>OPENED A TRUST AND INVESTMENT OFFICE<br>(TWIN CITIES)<br>Acquired Stanton Trust Company (Minneapolis, MN)<br>EXPANDED TO MINNESOTA MARKET<br>OPENED A BUSINESS BANKING OFFICE<br>(MINNETONKA, MN)<br>Acquired Acclaim Benefits, Inc. (Minneapolis, MN)<br>Acquired Stanton Investment Advisors<br>(Minneapolis, MN)<br>EXPANDED TO ARIZONA MARKET<br>OPENED A BUSINESS BANKING OFFICE<br>(SCOTTSDALE, AZ)<br>Acquired retirement plan practice<br>of Eide Bailly, LLP (Minneapolis, MN)<br>Acquired Prosperan Bank (Twin Cities, MN)<br>Acquired deposits from BankFirst (Minneapolis, MN)<br>Acquired Residential Mortgage Group<br>(Minnetonka, MN)<br>Acquired selected loans and deposits from<br>BNC National Bank (MN & AZ)<br>Acquired branch of BNC National Bank<br>(Scottsdale, AZ)<br>EXPANDED TO MICHIGAN<br>Acquired PensionTrend, Inc. and PensionTrend<br>Investment Advisers, LLC (Okemos, MI)<br>Acquired Tegrit Administrators, LLC<br>EXPANDED TO NEW HAMPSHIRE<br>Acquired Private Bank Minnesota (Minneapolis, MN)<br>Acquired Retirement Alliance, Inc. (Manchester, NH)<br>Acquired Interactive Retirement Systems, Ltd.<br>(Bloomington, MN)<br>Acquired Beacon Bank (Shorewood, Excelsior, Eden<br>Prairie and Duluth, MN)<br>Acquired Alliance Benefit Group North Central<br>States, Inc. (Albert Lea and Eden Prairie, MN)<br>LAUNCHED FINANCIAL WELLNESS TECHNOLOGY<br>2017 LAUNCHED ONE ALERUS STRATEGIC GROWTH PLAN<br>2020
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6<br>SKILLED ADVISORS AND FINANCIAL GUIDES<br>▪ Team is organized around consumer or business; focuses on holistic needs of clients; depth and breadth of Alerus<br>service offering<br>▪ Proprietary Financial Fitness Playbook delivers consistency and augments Financial Workout technology<br>▪ Clients expect and value guidance from their advisor, supported by seamless technology<br>EMPOWERING CLIENTS WITH RESPONSIVE TECHNOLOGY<br>▪ Omni-Channel<br>Seamless experience via desktop and mobile<br>▪ Leading Account Aggregation<br>Holistic view of entire financial life<br>▪ Single Sign On<br>Remove friction in being an Alerus client<br>▪ Financial Wellness Score<br>Your most current financial data is used<br>to create easy, intuitive workouts<br>IMPROVING CLIENTS’ FINANCIAL WELLBEING THROUGH PEOPLE + TECHNOLOGY<br>THE PATH TO FINANCIAL CONFIDENCE<br>WORKOUTS COMPLETED BY CLIENTS SINCE LAUNCH<br> -<br> 2,000<br> 4,000<br> 6,000<br> 8,000<br> 10,000<br> 12,000<br> 14,000<br>Debt Emergency HSA Insurance Retirement
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7<br>▪ Diversified client base consists of 46,200 consumers, 10,200 businesses and over 375,200 employer-sponsored<br>retirement plan participants<br>▪ Harness product synergies unavailable to traditional banking organizations<br>▪ Capitalize on strategic opportunities to grow in our existing markets or new markets<br>▪ Acquisition targets include banks and nationwide fee income companies with complementary business models,<br>cultural similarities, synergy and growth opportunities<br>▪ Recruit top talent to accelerate growth in our existing markets or jumpstart our entrance into new markets<br>▪ Market disruption caused by M&A activity provides lift-out opportunities<br>▪ Proactively position ourselves as an acquirer and employer of choice<br>▪ Invested in one of the leading marketing automation technologies<br>▪ Provide secure and reliable technology that meets evolving client expectations<br>▪ Integrate our full product and service offerings through our fast-follower strategy<br>▪ Collaborative leadership team focused on growing organically by deepening relationships with existing clients<br>through our expansive services<br>▪ Maintain relationship-driven business model while engaging and attracting new clients digitally and diversifying<br>the composition of our business model<br>KEY STRATEGIC INITIATIVES<br>GROWING THE ALERUS FRANCHISE<br>LEVERAGE OUR EXISTING<br>CLIENT BASE<br>EXECUTE STRATEGIC<br>ACQUISITIONS<br>PURSUE TALENT<br>ACQUISITION<br>ENHANCE BRAND<br>AWARENESS<br>STRENGTHEN AND BUILD<br>INFRASTRUCTURE<br>ORGANIC GROWTH<br>“ONE ALERUS”
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8<br>OFFICERS AND DIRECTORS<br>OUR MOTIVATED, DEDICATED, AND ENERGETIC LEADERS KEEP US ON THE RIGHT PATH<br>SENIOR<br>EXECUTIVE<br>TEAM<br>BOARD OF<br>DIRECTORS<br>DAN COUGHLIN<br>Since 2016<br>Former MD & Co-Head – Fin’l Services Inv.<br>Banking, Raymond James; Former Chairman<br>& CEO, Howe Barnes Hoefer & Arnett<br>Chicago, IL<br>MICHAEL MATHEWS<br>Since 2019<br>CIO, Deluxe Corporation<br>Former SVP – Technology and Enterprise<br>Programs, UnitedHealth Group<br>Minneapolis, MN<br>KATIE LORENSON<br>Executive Vice President and<br>Chief Financial Officer<br>4 years with Alerus<br>ANN MCCONN<br>Executive Vice President and<br>Chief Shared Services Officer<br>19 years with Alerus<br>RYAN GOLDBERG<br>Executive Vice President and<br>Chief Revenue Officer<br>1 year with Alerus<br>KARIN TAYLOR<br>Executive Vice President and<br>Chief Risk Officer<br>3 years with Alerus<br>KAREN BOHN<br>Since 1999<br>President, Galeo Group, LLC<br>Former Chief Administrative Officer<br>Piper Jaffray Co.<br>Edina, MN<br>KEVIN LEMKE<br>Since 1994<br>President<br>Virtual Systems, Inc.<br>Grand Forks, ND<br>RANDY NEWMAN<br>Chairman, President, and<br>Chief Executive Officer<br>40 years with Alerus<br>SALLY SMITH<br>Since 2007<br>Former President and CEO<br>Buffalo Wild Wings, Inc.<br>Minneapolis, MN<br>GALEN VETTER<br>Since 2013<br>Former Global CFO, Franklin Templeton<br>Investments; Former Partner-in-Charge,<br>Upper Midwest Region, RSM<br>Minneapolis, MN
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9<br>SECOND QUARTER HIGHLIGHTS
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10<br>INCOME STATEMENT<br>Q2 2021 FINANCIAL HIGHLIGHTS<br>1 – Represents a non-GAAP Financial measure. See “Non-GAAP Disclosure Reconciliation.”<br>2 – Net interest margin (tax-equivalent) excluding PPP loans for the three and six months ended June 30, 2021, was 2.75% and 2.85%, respectively.<br>(dollars and shares in thousands, except per share data)<br>Net Interest Income $ 21,140 $ 22,038 $ 20,091 $ 43,178 $ 38,928<br>Provision for Loan Losses — — 3,500 — 6,000<br>Net Interest Income After Provision for Loan Losses 21,140 22,038 16,591 43,178 32,928<br>Noninterest Income 36,748 40,881 38,230 77,629 65,419<br>Noninterest Expense 42,550 43,042 39,734 85,592 76,460<br>Income Before Income Taxes 15,338 19,877 15,087 35,215 21,887<br>Income Tax Expense 3,644 4,662 3,613 8,306 5,050<br>Net Income $ 11,694 $ 15,215 $ 11,474 $ 26,909 $ 16,837<br>Per Common Share Data<br>Earnings Per Common Share – Diluted $ 0.66 $ 0.86 $ 0.65 $ 1.52 $ 0.95<br>Diluted Average Common Shares Outstanding 17,497 17,465 17,445 17,482 17,425<br>Performance Ratios<br>Return on Average Total Assets 1.50% 2.02% 1.68% 1.76% 1.31%<br>Return on Average Tangible Common Equity(1) 17.36% 23.03% 18.88% 20.15% 14.39%<br>Noninterest Income as a % of Revenue 63.48% 64.97% 65.55% 64.26% 62.69%<br>Net Interest Margin (Tax-Equivalent)(1)(2) 2.88% 3.12% 3.14% 3.00% 3.24%<br>Efficiency Ratio(1) 71.46% 66.43% 66.31% 68.84% 71.23%<br><br><br>2020<br><br><br><br>Three months ended<br>June<br>2021<br>March<br>2021<br>June<br>2021<br>June June<br>2020<br>Six months ended
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11<br>EMPLOYEES<br>▪ All time high of 80.9% favorable responses in<br>2020 employee engagement survey<br>▪ Named to American Banker’s Best Banks to<br>Work for in 2020<br>STOCKHOLDERS<br>▪ Strong historical performance with a 10-year<br>total return of: 337%<br>▪ Dividends increased year over year for 34<br>straight years at an average of 10% per year<br>▪ Long term strategic focus on diversification of<br>revenue and serving clients holistically to<br>create and sustain long-term value TALENT ACQUISITIONS<br>▪ Hired a 5-person SBA team during 2021<br>▪ Hired two regional top mortgage producers<br>during 2021<br>HIGH PERFORMING FINANCIAL ORGANIZATION<br>▪ 2020 Piper Sandler Companies Sm-All Stars<br>▪ 2020 Raymond James Community Bankers Cup<br>▪ 2021 Hovde’s High Performers<br>(Small Cap Banks)<br>A STRONG FOUNDATION TO FUEL ORGANIC GROWTH AND CONTINUE INNOVATION<br>STRATEGIC HIGHLIGHTS<br>TECHNOLOGY<br>▪ Surpassed 260,000 users on My Alerus<br>(consumer client online access)<br>▪ One of 66 banks to join FINTop fund; one of 12<br>members of executive committee<br>▪ Formalized Process Center of Excellence,<br>expanding robotics and process reinvention<br>through process champions
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12<br>282% 318% 306%<br>674%<br>485%<br>0.00%<br>100.00%<br>200.00%<br>300.00%<br>400.00%<br>500.00%<br>600.00%<br>700.00%<br>800.00%<br>2017 2018 2019 2020 Q2 2021<br>0.30% 0.33% 0.33%<br>0.17%<br>0.25%<br>0.00%<br>0.20%<br>0.40%<br>0.60%<br>0.80%<br>2017 2018 2019 2020 Q2 2021<br>ASSET QUALITY AND RESERVE LEVELS<br>OVERVIEW NPAS / ASSETS (%)<br>RESERVES / LOANS (%) RESERVES / NPLS (%)<br>▪ Solid asset quality<br>▪ Strong reserve levels<br>▪ Proactive approach to classification of assets and<br>management of loan problems<br>Excluding PPP loans, NPAs/Assets as of June 30, 2021, was 0.26%<br>Excluding PPP loans, Reserves/Loans as of June 30, 2021, was 2.02%<br>1.05%<br>1.30% 1.39%<br>1.73% 1.84%<br>0.00%<br>0.40%<br>0.80%<br>1.20%<br>1.60%<br>2.00%<br>2017 2018 2019 2020 Q2 2021
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13<br>12.2% 12.9%<br>16.7% 16.8%<br>18.4%<br>0.0%<br>2.0%<br>4.0%<br>6.0%<br>8.0%<br>10.0%<br>12.0%<br>14.0%<br>16.0%<br>18.0%<br>20.0%<br>2017 2018 2019 2020 Q2 2021<br>7.1% 7.5%<br>11.1%<br>9.2% 9.6%<br>8.3% 8.9%<br>12.9% 13.2%<br>14.7%<br>0.0%<br>2.0%<br>4.0%<br>6.0%<br>8.0%<br>10.0%<br>12.0%<br>14.0%<br>16.0%<br>2017 2018 2019 2020 Q2 2021<br>Tier 1 Leverage Tier 1 Capital<br>6.0%<br>6.9%<br>10.4%<br>9.3% 9.4%<br>0.0%<br>2.0%<br>4.0%<br>6.0%<br>8.0%<br>10.0%<br>12.0%<br>2017 2018 2019 2020 Q2 2021<br>STRONG CAPITAL AND SOURCES OF LIQUIDITY<br>TANGIBLE COMMON EQUITY/TANGIBLE ASSETS1 TIER 1 CAPITAL/TIER 1 LEVERAGE RATIOS<br>PRIMARY AND SECONDARY SOURCES OF LIQUIDITY TOTAL RISK BASED CAPITAL<br>Regulatory Capital Minimum to be considered well capitalized<br>Cash and cash equivalents $315,430<br>Unencumbered securities 628,385<br>FHLB borrowing availability 645,595<br>Brokered CD capacity 630,845<br>Fed funds lines 102,000<br>Total as of 6/30/2021 $2,322,255<br>Tier 1<br>Capital<br>Leverage<br>Excluding PPP, Tangible Common Equity/Tangible Assets on June 30, 2021, was 9.89%<br>1- Represents a non-GAAP financial measure. See “Non-GAAP Disclosure Reconciliation.”<br>Regulatory Capital Minimum to be considered well capitalized
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14<br>STRONG CORE FUNDING MIX<br>▪ Commercial transaction accounts totaled $1.2 billion and<br>decreased 1.7% in Q2. Consumer transaction accounts totaled<br>$720.0 million and increased 7.7%<br>▪ Synergistic deposits, including HSA deposits and those sourced<br>through retirement plans and participants, totaled $551.6<br>million, with a YTD cost of 0.03%<br>▪ CD portfolio is primarily 6-month flex CD with over 50% held<br>by clients for 10+ years<br>▪ Stable deposit relationships with 22-year average tenure on 10<br>largest depositors<br>As of June 30, 2021, core deposits totaled $2.6<br>billion or 97.7% of our total deposits<br>OVERVIEW AS OF JUNE 30, 2021 JUNE 30, 2021 DEPOSIT FUNDING ($2,711MM)<br>LOW COST OF FUNDS<br>Data YTD as of 6/30/2021.<br>Non-Interest Bearing<br>Deposits<br>28.0%<br>Money<br>Market &<br>Savings<br>Deposits<br>37.2%<br>Interest Bearing<br>Demand Deposits<br>22.3%<br>Time<br>Deposits<br>7.6%<br>HSA Deposits<br>4.9%<br>0.14% 0.20%<br>0.20%<br>0.00%<br>0.20%<br>0.40%<br>0.60%<br>0.80%<br>1.00%<br>1.20%<br>1.40%<br>Cost of Total<br> Deposits<br>Cost of Interest<br>Bearing Deposits<br>Total Cost of Funds<br>2018 2019 2020 Q2 2021 YTD
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15<br>0.65%<br>0.97%<br>0.51%<br>0.20%<br>1.83%<br>2.16%<br>0.45%<br>0.08%<br>3.84%<br>3.65%<br>3.22%<br>3.00%<br>4.81% 4.97%<br>4.35%<br>4.13%<br>0.00%<br>1.00%<br>2.00%<br>3.00%<br>4.00%<br>5.00%<br>6.00%<br>2018 2019 2020 Q2 2021<br>NET INTEREST MARGIN (NIM)<br>1 – Rates have been annualized for interim periods.<br>Source: Alerus Financial Corporation; Federal Reserve<br>Note: Net interest margin (FTE) is a non-GAAP financial measure; See “Non-GAAP Disclosure Reconciliation” in the Appendix to this presentation<br>Loan Yield<br>Net Interest Margin (fully-taxable equivalent “FTE”)<br>Average Effective Fed Funds Rate<br>Cost of Funds<br>1<br>1<br>1<br>1
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16<br>NIM AND LOAN FLOORS<br>VARIABLE RATE FLOORS BY INDEX VARIABLE RATE FLOORS<br>COMMENTS<br>$ in Millions Balance % of Total<br>Balance<br>Cumulative % of<br>Total Balance<br>No Floors $ 260 38.9% 38.9%<br>Floors Reached 273 40.9% 79.8%<br>0-50 bps to reach floor 128 19.2% 99.0%<br>>50bps to reach floor 7 1.0% 100.0%<br>Total $ 668 100.0%<br>Quarter over quarter highlights:<br>▪ Decreased asset yields driven by lower investment yields of<br>4bps as portfolio increased on average $138 million<br>▪ Lower loan yields of 18bps due to lower C&I yields as loan<br>renewals were repriced at lower rates and SBA yield was down<br>45bps due to lower deferred fees recognized as a % of<br>outstanding<br>▪ Other borrowings yield favorable 90bps as sub debt was<br>refinanced at the end of the 1st quarter at a new yield of 3.5%<br>down from 5.75%<br>▪ Deposit yield was down 1bps as deposit avg balance decreased<br>$62 million<br>$ in Millions<br>Index<br>In the<br>Money<br>Out of<br>the Money No Floor Total Total %<br>Prime $ 220 $ 30 $ 14 $ 264 39.6%<br>1 Month LIBOR 3 2 169 174 26.0%<br>12 Month LIBOR 1 92 61 154 23.1%<br>FHLB 5 Year 23 11 11 45 6.7%<br>Other 26 – 5 31 4.6%<br>Total $ 273 $ 135 $ 260 $ 668 100.0%<br>Percent of Total 40.9% 20.2% 38.9% 100.0%<br>1 – NIM excluding PPP for the three months ended June 30, 2021, was 2.75%<br>NET INTEREST INCOME1<br>21,275 ( 651 )( 95 )( 21 )<br>22,181<br>110<br>(249)<br>20,000<br>21,000<br>22,000<br>23,000<br>24,000<br>Decrease Increase
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17<br>DIVERSIFIED
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18<br>A BIG COMPANY MODEL WITH SMALL COMPANY EXECUTION<br>OUR DIVERSE BUSINESS LINES<br>Revenue data LTM as of 6/30/2021.<br>TRUSTED<br>ADVISOR<br>BANKING<br>WEALTH<br>MANAGEMENT<br>• Residential mortgage lending<br>• Purchasing or refinancing<br>• Residential construction lending<br>• Home equity/second mortgages<br>• Advisory services<br>• Trust and fiduciary services<br>• Investment management<br>• Insurance planning<br>• Financial planning<br>• Education planning<br>• Retirement plan<br>administration<br>• Retirement plan<br>investment advisory<br>• ESOP fiduciary services<br>• Payroll administration<br>services<br>• HSA/FSA/HRA<br>administration<br>• COBRA<br>BUSINESS BANKING<br>• Commercial and commercial<br>real estate lending<br>• Agriculture lending<br>• Treasury management<br>• Deposit services<br>CONSUMER BANKING<br>• Deposit products<br>and services<br>• Consumer lending<br>• Private banking<br>MORTGAGE RETIREMENT<br>AND BENEFITS<br>27% of Revenue 27% of Revenue<br>8% of Revenue<br>38% of Revenue
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19<br>BY OUTSTANDING BALANCES<br>WELL DIVERSIFIED LOAN PORTFOLIO<br>As of 6/30/2021.<br>1-4 Residential 1st<br>21%<br>1-4 Residential Construction<br>1%<br>1-4 Residential Jr Lien 2%<br>HELOC 5%<br>RE Loans to be Sold 4% C&I 20% PPP 9%<br>Ag Production 2%<br>Other CRE 15%<br>Owner Occupied<br>CRE 11%<br>Ag Land 1%<br>Multifamily 4%<br>Retail Indirect 2% Other Consumer<br>1% RE Construction 2%
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20<br>North Dakota<br>Minnesota<br>Arizona<br>National<br>STRONG GROWTH MARKETS AND STABLE CORE FUNDING<br>MARKET DISTRIBUTION<br>DEPOSITS ($2,711) LOANS ($1,835)(1)<br>ARB ASSETS UNDER<br>ADMIN/MGMT. ($36,965)<br>WM ASSETS UNDER<br>ADMIN/MGMT. ($3,539) MORTGAGE ORIGINATIONS ($1,063)<br>($ IN MILLIONS)<br>Data as of 06/30/2021.<br>1-Loans in our national market are participant loans not sourced directly through advisors located in one of our geographical markets.<br>LEGEND<br>40.1%<br>48.7%<br>9.2%<br>2.0%<br>43.5%<br>31.8%<br>4.3% 20.4%<br>6.7%<br>90.0%<br>3.3%<br>9.8%<br>13.6%<br>76.6% 72.1%<br>10.5%<br>1.9% 15.5%
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21<br>$26,902 $28,404 $25,720<br>$15,026<br>$63,316 $63,811 $60,956<br>$35,126<br>$0<br>$20,000<br>$40,000<br>$60,000<br>$80,000<br>2018 2019 2020 Q2 2021 YTD<br>Net Income Revenue<br>Asset Based Retirement<br>29%<br>Trust, Custody &<br>Advisory<br>10%<br>Record<br>Keeping<br>17%<br>Administration<br>13%<br>Health &<br>Welfare<br>11%<br>Payroll Servicing<br>2%<br>ESOP<br>7%<br>Other<br>11%<br>$27,812 $31,905 $34,200 $36,965<br> 345,000<br> 350,000<br> 355,000<br> 360,000<br> 365,000<br> 370,000<br> 375,000<br> 380,000<br>$0<br>$5,000<br>$10,000<br>$15,000<br>$20,000<br>$25,000<br>$30,000<br>$35,000<br>2018 2019 2020 Q2 2021<br>AUA/AUM Participants<br>RETIREMENT AND BENEFITS<br>OVERVIEW-7,600 PLANS- NATIONAL FOOTPRINT ASSETS UNDER ADMINISTRATION/MANAGEMENT<br>PROFIT MARGIN REVENUE MIX<br>MARKET<br>SENSITIVE<br>REVENUE:<br>39%<br>1<br>1 Net Income before Tax and Indirect Allocations.<br>▪ RETIREMENT - Provide recordkeeping and administration<br>services to qualified retirement plans<br>▪ ADVISORY SERVICES - Provide investment fiduciary services to<br>retirement plans<br>▪ HEALTH AND WELFARE - Provide HSA, FSA, COBRA<br>recordkeeping and administration services to employers<br>▪ ESOP - Provide trustee, recordkeeping and administration to<br>employee stock ownership plans<br>▪ PAYROLL - Provide payroll and HRIS services for employers<br>▪ ONE ALERUS SYNERGIES<br>• IRA rollovers $32.2 million YTD 6/30/2021<br>• Deposits - HSA deposits, 401(k) Money Market Funds,<br>Emergency Savings, Terminated Participants<br>• Managed accounts<br>($ in Millions)<br>($000s)<br>Profit Margin: 42.5% 44.5% 42.2% 42.8%
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22<br>$8,138 $8,314 $9,162<br>$5,661<br>$14,962 $15,502<br>$17,451<br>$10,124<br>$0<br>$6,000<br>$12,000<br>$18,000<br>2018 2019 2020 Q2 2021 YTD<br>Net Income Revenue<br>▪ ADVISORY AND PLANNING SERVICES<br>• Retirement Planning, Tax Planning, Insurance Planning,<br>Wealth Transfer Planning and Business Transition Planning<br>▪ ASSET MANAGEMENT<br>• Personalized SMA strategies, Tax Management and Global<br>Perspective<br>▪ FIDUCIARY SERVICES<br>• IRA, Agency and Personal Trust<br>▪ ONE ALERUS SYNERGIES<br>• IRA rollovers<br>• 401(k) managed accounts<br>WEALTH MANAGEMENT SERVICES<br>OVERVIEW OF SERVICES ASSETS UNDER ADMINISTRATION/MANAGEMENT<br>PROFIT MARGIN REVENUE MIX<br>1 Net Income before Tax and Indirect Allocations.<br>1<br>($ in Millions)<br>($000s)<br>$2,627<br>$3,103 $3,339 $3,539<br>$0<br>$1,000<br>$2,000<br>$3,000<br>2018 2019 2020 Q2 2021<br>Asset<br>Management<br>85%<br>Brokerage<br>10%<br>Insurance &<br>Advisory<br>5%<br>Profit Margin: 54.4% 53.6% 52.5% 55.9%
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23<br>$393.1 $462.0<br>$564.0<br>$474.1 $465.4<br>$38.6<br>$49.6<br>$43.2<br>$43.9 $80.0 $431.7<br>$511.6<br>$607.2<br>$518.0 $545.4<br>$0.0<br>$250.0<br>$500.0<br>$750.0<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021<br>Sale Portfolio<br>MORTGAGE BANKING<br>OVERVIEW OF SERVICES MORTGAGE ORIGINATIONS<br>GAIN ON SALE MARGIN<br>($000s)<br>REVENUE SUMMARY<br>▪ 1st and 2nd mortgage product offerings through centralized<br>mortgage operations in Minnesota<br>▪ Our Twin Cities originators averaged $42+ million in annual<br>volume over the last three years<br>▪ YTD 3,392 loans closed, approximately 41% purchase<br>originations, with approximately 90% sourced from the Twin<br>Cities MSA<br>▪ Q2 94.5% pull through on secondary market<br>▪ ONE ALERUS SYNERGIES<br>• Through enhanced technology, digital applications total<br>approximately 90%. Paperless environment eliminated<br>nearly 200,000+ pages printed on a monthly basis<br>• As of June 30, 2021, residential real estate first mortgages<br>excluding construction mortgages totaled $452 million<br>1 Net Income before Tax and Indirect Allocations.<br>($000s)<br>Q2<br>2020<br>Q3<br>2020<br>Q4<br>2020<br>Q1<br>2021<br>Q2<br>2021<br>Origination<br>and Sale $ 11,516 $ 16,289 $ 19,071 $ 16,421 $ 17,803<br>Fair Value<br>Changes 6,030 5,980 (2,290) 711 (5,515)<br>Total $ 17,546 $ 22,269 $ 16,781 $ 17,132 $ 12,288<br>Net<br>income (1) $ 10,056 $ 13,113 $ 4,367 $ 6,725 $ 2,116<br>Profit<br>Margin 55.6% 57.3% 25.0% 38.3% 16.6%<br>3.2%<br>3.6% 3.5%<br>3.2%<br>3.7%<br>2.0%<br>3.0%<br>4.0%<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021<br>Purchase % 37.7% 52.8% 42.1% 32.3% 52.5%<br>Refinance % 62.3% 47.2% 57.9% 67.7% 47.5%
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24<br>LOAN PORTFOLIO AND CREDIT QUALITY
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25<br>SUMMARY BY INDUSTRY TYPE<br>TOTAL COMMITMENT COMMERCIAL & INDUSTRIAL1<br>1 – Commercial and industrial loans includes C & I, Loans to Public Entities, and Other Loans. It Excludes PPP and Ag Production loans<br>“Other” includes to the following industries (1) Nonclassifiable establishments, (2) Management of Companies and Enterprises, (3) Administrative and Support and Waste Management and Remediation Services, (4)<br>Accommodation and Food Services, (5) Educational Services, (6) Other Services (except Public Administration), (7) Information, (8) Arts, Entertainment, and Recreation, (9) Agriculture Forestry, Fishing, and Hunting,<br>(10) Public Administration), (11) Mining Quarrying, and Oil and Gas Extraction, and (12) Utilities<br>“Other Retail Trade” includes to the following sub-industries within Retail Trade: (1) Miscellaneous Store Retailers, (2) Furniture and Home Furnishings Stores, (3) Sporting Goods, Hobby, Musical Instrument, and Book<br>Stores, (4) Clothing and Clothing Accessories Stores, and (5) General Merchandise Stores<br>Transportation<br>and Warehousing<br>4% Health Care and Social<br>Assistance<br>7% Professional, Scientific and Technical<br>Services<br>7%<br>Manufacturing<br>12%<br>Real Estate and<br>Rental and<br>Leasing 8%<br>Wholesale Trade<br>10%<br>Construction<br>13%<br>Finance and Insurance<br>14%<br>Other<br>8%<br>Motor Vehicle and Parts Dealers<br>8%<br>Food and<br>Beverage<br>Stores<br>2%<br>Electronics and<br>Appliance Stores<br>2%<br>Heath and Personal<br>Care Services<br>1%<br>Gasoline Stations<br>1%<br>Building Material and<br>Garden Equipment<br>and Supplies Dealers<br>1%<br>Nonstore Retailers<br>1%<br>Other Retail<br>Trade<br>1%<br>Retail Trade<br>17%
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26<br>Serviced 49%<br>1-4 1st Non-Serviced<br>4%<br>1-4 Family Jr Liens<br>4%<br>1-4 Family Revolving<br>31%<br>1-4 Family Construction 4%<br>Held for Sale<br>8% Office<br>16%<br>Retail<br>17%<br>Warehouse<br>20%<br>Manufacturing<br>1%<br>Residential<br>Development<br>1%<br>Mixed<br>Residential/Commercial<br>1%<br>Mixed<br>Commercial<br>6%<br>Apartments<br>15%<br>Hotel<br>1%<br>Medical Or<br>Nursing Facilities<br>10%<br>Commercial/Land<br>Development<br>10%<br>Ag Land<br>2%<br>LOANS SECURED BY REAL ESTATE<br>TOTAL COMMITMENT<br>COMMERCIAL REAL ESTATE1<br>1 – Loans secured by commercial real estate include Multifamily loans, Ag land, Other CRE, Owner Occupied CRE, and Ag production<br>Portfolio Avg FICO Avg LTV<br>Serviced 758 53%<br>Non-Serviced 793 33%<br>Junior 752 78%<br>HELOC 794 75%<br>TOTAL COMMITMENT<br>RESIDENTIAL REAL ESTATE
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27<br>LINE OF CREDIT UTILIZATION<br>C&I AND HOME EQUITY LINES OF CREDIT<br>0%<br>5%<br>10%<br>15%<br>20%<br>25%<br>30%<br>35%<br>40%<br>45%<br> -<br> 50,000<br> 100,000<br> 150,000<br> 200,000<br> 250,000<br> 300,000<br> 350,000<br> 400,000<br> 450,000<br> 500,000<br>Q3<br>2018<br>Q4<br>2018<br>Q1<br>2019<br>Q2<br>2019<br>Q3<br>2019<br>Q4<br>2019<br>Q1<br>2020<br>Q2<br>2020<br>Q3<br>2020<br>Q4<br>2020<br>Q1<br>2021<br>Q2<br>2021<br>C&I<br>Funded Unfunded Funded%<br>0%<br>10%<br>20%<br>30%<br>40%<br>50%<br>60%<br> -<br> 50,000<br> 100,000<br> 150,000<br> 200,000<br> 250,000<br> 300,000<br>Q3<br>2018<br>Q4<br>2018<br>Q1<br>2019<br>Q2<br>2019<br>Q3<br>2019<br>Q4<br>2019<br>Q1<br>2020<br>Q2<br>2020<br>Q3<br>2020<br>Q4<br>2020<br>Q1<br>2021<br>Q2<br>2021<br>Home Equity Lines of Credit<br>Funded Unfunded Funded%
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28<br>CHANGES IN THE ALLL BY PORTFOLIO SEGMENT<br>ALLOWANCE FOR LOAN LOSSES<br>Six months ended June 30, 2021<br>(dollars in thousands)<br>Beginning<br>Balance<br>Provision for<br>Loan Losses<br>Loan<br>Charge-offs<br>Loan<br>Recoveries<br>Ending<br>Balance<br>Commercial<br>Commercial and industrial $ 10,205 $ (553) $ (477) $ 445 $ 9,620<br>Real estate construction 658 (71) —— 587<br>Commercial real estate 14,105 (636) (536) 4 12,937<br>Total commercial 24,968 (1,260) (1,013) 449 23,144<br>Consumer<br>Residential real estate first mortgage 5,774 402 —— 6,176<br>Residential real estate junior lien 1,373 (69) — 97 1,401<br>Other revolving and installment 753 (164) (93) 78 574<br>Total consumer 7,900 169 (93) 175 8,151<br>Unallocated 1,378 1,091 —— 2,469<br>Total $ 34,246 $ — $ (1,106) $ 624 $ 33,764
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29<br>ALLOCATION BY PORTFOLIO SEGMENT<br>ALLOWANCE FOR LOAN LOSSES<br>June 30, 2021 December 31, 2020<br>(dollars in thousands)<br>Allocated<br>Allowance<br>Percentage<br>of loans to<br>total loans<br>Allocated<br>Allowance<br>Percentage<br>of loans to<br>total loans<br>Commercial and industrial $ 9,620 31.2% $ 10,205 35.0%<br>Real estate construction 587 2.0% 658 2.2%<br>Commercial real estate 12,937 30.9% 14,105 28.4%<br>Residential real estate first mortgage 6,176 25.7% 5,774 23.4%<br>Residential real estate junior lien 1,401 7.1% 1,373 7.2%<br>Other revolving and installment 574 3.1% 753 3.7%<br>Unallocated 2,469 —% 1,378 —%<br>Total loans $ 33,764 100.0% $ 34,246 100.0%
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30<br>Risk Level Total Loans<br>Unguaranteed<br>Balance1<br>Reserve<br>Amount<br>Reserve /<br>Unguaranteed<br>Loans<br>Reserve/Total<br>Loans<br>Pass $ 1,794,539 $ 1,621,561 $ 26,925 1.66% 1.50%<br>Special Mention 5,247 4,951 218 4.40% 4.15%<br>Substandard 27,815 27,312 3,230 11.83% 11.61%<br>Total Loans Evaluated Collectively 1,827,601 1,653,824 30,373 1.84% 1.66%<br>Total Loans Evaluated Individually 7,711 7,441 922 12.39% 11.96%<br>Unallocated –– 2,469 ––<br>Total $ 1,835,312 $ 1,661,265 $ 33,764 2.03% 1.84%<br>ALLOCATION BY RISK SEGMENT ($ IN 000’S)<br>ALLOWANCE FOR LOAN LOSSES<br>As of 06/30/2021.<br>1 - Unguaranteed balances exclude PPP loans as well as loans that are guaranteed by another government agency.
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31<br>COVID-19 RESPONSE
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32<br>▪ Activated Business Continuity Planning team and Pandemic Policy; frequent meetings with key leadership teams<br>▪ Response guided by safety of employees and clients; being a good corporate citizen; and encouraging digital use<br>▪ Benefit of past crisis experience; 1997 historic Flood and Fire in Grand Forks, ND<br>▪ Early adoption and continuation of self-quarantine recommendations and restricting non-essential business travel<br>▪ 82% of staff transitioned to working remote in 1 week; 85% remain working remote<br>▪ Established On-Site Pay for staff in offices; introduced Relief Pay for office closures or daycare/school closures<br>▪ Frequent all employee virtual calls hosted by C*Suite; shifted from biweekly in 2020 to monthly in 2021<br>▪ Built integrated access between client documents and CRM, allowing team to quickly access client information<br>▪ Robotic Process Automation: continue to add robots to automate operational processes<br>▪ Leveraged DocuSign to develop pre-filled, dynamic Paycheck Protection Program Forgiveness Application<br>▪ Simplified client experience, moving various loan, wealth management, and investment documents to DocuSign<br>▪ Built upon holistic financial picture for consumer clients by integrating wealth management and brokerage<br>accounts held with Alerus into My Alerus, simplifying the online account experience down to one login<br>▪ Moved all retirement statements and confirmations to electronic format as the default, further driving online<br>engagement<br>▪ Paycheck Protection Program: helped over 2,289 new and existing clients secure ~ $447 million in funding relief<br>▪ Ongoing virtual webinars to provide guidance and help clients with their financial issues on various topics<br>▪ Waived fees on loan extensions, loan payment deferrals, or early CD withdrawals due to COVID-19 related hardship<br>▪ Proactively helping participants navigate retirement distributions or other lending options<br>▪ ND: lobbies closed in mid-March 2020, open by appointment only in early June 2020, lobbies reopened in mid-June<br>2020, markets were never subject to stay at home order and markets are widely open for business<br>▪ MN: lobbies closed in mid-March 2020, open by appointment only in August, continued progress of state’s four-<br>phases approach to businesses reopening with lobbies opened in April - July 2021<br>▪ AZ: lobbies closed in mid-March, drive-up remained open, open by appointment only in September 2020, lobbies<br>opened May 2021<br>▪ Adopted a flexible approach to work environment, allowing many of our employees to work from home long term<br>COVID-19 RESPONSE SUMMARY<br>PROACTIVELY RESPONDING WITH AGILITY AND SUPPORT<br>LEADING DURING THE<br>PANDEMIC CRISIS<br>TAKING CARE OF<br>EMPLOYEES<br>LEVERAGING<br>INFRASTRUCTURE<br>INVESTMENTS<br>INCREASED DIGITAL<br>ENGAGEMENT<br>SERVING IN<br>THE BEST INTEREST<br>OF CLIENTS<br>THE NEW NORMAL
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33<br>▪ Since 2020, we exited three client offices and six admin offices (primarily housed by<br>administrative and operational staff)<br>▪ Experienced minimal client and employee dissatisfaction<br>▪ All remaining client offices are now open across the Alerus footprint in ND, MN, and AZ<br>PANDEMIC AGILITY RESULTED IN POSITIVE LASTING IMPACT<br>POST COVID-19 FACILITIES TRANSFORMATION<br>Office Only<br>13%<br>Office Primary<br>22%<br>Home Primary<br>22%<br>Home Only<br>43%<br>Office Only or Primary<br>97%<br>Home Only<br>3%<br>PRE-COVID POST-COVID
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34<br>BY TOTAL COMMITMENT INCLUDING UNFUNDED COMMITMENT<br>WELL DIVERSIFIED LOAN PORTFOLIO<br>As of 6/30/2021.<br>1-4 Residential 1st<br>18%<br>1-4 Residential<br>Construction 1%<br>1-4 Residential Jr<br>Lien 1%<br>HELOC 11%<br>RE Loans to be Sold<br>3%<br>C&I 27%<br>PPP 7%<br>Ag Production 2%<br>Other CRE 11%<br>Owner Occupied CRE 9%<br>Ag Land 1%<br>Multifamily 3%<br>Retail Indirect 1%<br>Other Consumer 2% RE Construction 3%
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35<br>Impacted industries,<br>8%<br>All Other Loans, 92%<br>COMMERCIAL AND INDUSTRIAL AND COMMERCIAL REAL ESTATE<br>INDUSTRIES DIRECTLY IMPACTED BY COVID-19<br>As of 6/30/2021.<br>C&I<br>Total<br>Commitment<br>($ in 000's) % of Total<br>Accommodation and Food Services $ 9,131 0.66%<br>Arts, Entertainment, and Recreation 2,955 0.21%<br>Oil and Gas 916 0.07%<br>Other Retail Trade 3,763 0.27%<br>Total $ 16,765 1.21%<br>CRE<br>Total<br>Commitment<br>($ in 000's) % of Total<br>Retail $ 106,077 7.64%<br>Medical or Nursing Facilities 62,840 4.53%<br>Hotel 5,249 0.38%<br>Total $ 174,166 12.54%
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36<br>PAYMENT DEFERRALS, MATURITY EXTENSIONS, AND PAYMENT MODIFICATIONS<br>COVID-19 RELIEF PROGRAMS<br>June 30, 2021<br>Loan Group<br>Number<br>Of<br>Loans<br>Granted<br>Deferral<br>($ in 000’s)<br>Still on Initial<br>Deferral<br>($ in 000’s)<br>Additional<br>Deferral<br>($ in 000's)<br>Returned<br>to Normal<br>($ in 000’s)<br>Consumer 178 $ 2,456 $ 5 $ 18 $ 2,433<br>Residential Real Estate<br>Serviced 63 27,419 648 5,294 21,477<br>Residential Real Estate<br>Non-serviced 77 10,550 —— 10,550<br>Commercial Real Estate 79 80,763 —— 80,763<br>Commercial & Industrial 187 33,335 —— 33,335<br>Total 584 $ 154,523 $ 653 $ 5,312 $ 148,558<br>Consumer<br>1%<br>Residential Real<br>Estate Serviced<br>99%
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37<br>Retail Trade<br>8%<br>Professional, Scientific,<br>and Technical Services<br>11%<br>Construction<br>13%<br>Manufacturing<br>7%<br>Wholesale<br>Trade<br>8%<br>Health Care and Social<br>Assistance<br>21%<br>Other Services (except Public<br>Administration)<br>6%<br>Administrative and Support and<br>Waste Management and<br>Remediation Services<br>2%<br>Transportation and Warehousing<br>2%<br>Accommodation and Food<br>Services<br>5%<br>Other<br>17%<br>SBA PAYCHECK PROTECTION PROGRAM (PPP)<br>COVID-19 RELIEF PROGRAMS<br>As of 6/30/2021.<br>As of June 30, 2021, 1,447 loans totaling $297.7 million have been approved for forgiveness by the SBA.<br>Loan Amount Group # of Loans<br>$ Originated<br>(in 000’s)<br>$150M or less 1,825 $ 75,613<br>$150M to $2MM 601 304,878<br>$2MM+ 28 93,757<br>Total 2,454 $ 474,248<br>INDUSTRY BREAKDOWN OF PPP LOANS MADE TO BORROWERS<br>THROUGH 06/30/2021 SECURED SBA FINANCING OF 2,454 LOANS FOR APPROXIMATELY $474MM
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38<br>APPENDIX
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39<br>FINANCIAL HIGHLIGHTS<br>1 Represents a non-GAAP financial measure. See “Non-GAAP Disclosure Reconciliation” in the Appendix to this presentation.<br>2 Excluding PPP loans, the following ratios were TCE/TA 9.89% NPLs/Loans 0.42%, NPAs/Assets 0.26%, Allowance/Loans 2.02%, and NCOs/Average Loans 0.05%<br>($000s, except where otherwise noted ) Annual 17-'20 Year-to-date<br>2017 2018 2019 2020 CAGR Q2 2020 Q2 2021<br>Total Assets 2,136,081 $ 2,179,070 $ 2,356,878 $ 3,013,771 $ 12.2% 2,875,457 $ 3,157,229 $<br>Total Loans 1,574,474 1,701,850 1,721,279 1,979,375 7.9% 2,034,197 1,835,312<br>Total Deposits 1,834,962 1,775,096 1,971,316 2,571,993 11.9% 2,453,153 2,710,940<br>Tangible Common Equity1 125,154 147,152 240,008 274,043 29.9% 261,992 290,510<br>Net Income 15,001 $ 25,866 $ 29,540 $ 44,675 $ 43.9% 16,837 $ 26,909 $<br>ROAA (%) 0.75 1.21 1.34 1.61 1.31 1.76<br>ROATCE (%)1 18.04 21.02 17.46 17.74 14.39 20.15<br>Net Interest Margin (FTE) (%)1 3.74 3.84 3.65 3.22 3.24 3.00<br>Efficiency Ratio (FTE) (%)1 75.36 73.80 73.22 68.40 71.23 68.84<br>Non-Int. Income / Op. Rev. (%) 60.36 57.73 60.50 64.05 62.69 64.26<br>Earnings per common share - diluted 1.07 1.84 1.91 2.52 0.95 1.52<br>Total Equity / Total Assets (%) 8.41 9.04 12.12 10.96 10.63 10.91<br>Tang. Cmn. Equity / Tang. Assets (%)1 2 6.01 6.91 10.38 9.27 9.25 9.36<br>Loans / Deposits (%) 85.80 95.87 87.32 76.96 82.92 67.70<br>NPLs / Loans (%)2 0.37 0.41 0.45 0.26 0.26 0.38<br>NPAs / Assets (%)2 0.30 0.33 0.33 0.17 0.19 0.25<br>Allowance / NPLs (%) 282.04 318.45 305.66 674.13 511.56 485.11<br>Allowance / Loans (%)2 1.05 1.30 1.39 1.73 1.34 1.84<br>NCOs / Average Loans (%)2 0.16 0.18 0.33 0.03 0.29 0.05
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40<br>NON-GAAP DISCLOSURE RECONCILIATION<br>($000s, except where otherwise noted ) Annual Year-to-date<br>2017 2018 2019 2020 Q2 2020 Q2 2021<br>Tangible common equity to tangible assets<br>Total common stockholders' equity $ 179,594 $ 196,954 $ 285,728 $ 330,163 $ 305,732 $ 344,391<br>Less: Goodwill 27,329 27,329 27,329 30,201 27,329 30,201<br>Less: Other intangible assets 27,111 22,473 18,391 25,919 16,411 23,680<br>Tangible common equity (a) 125,154 147,152 240,008 274,043 261,992 290,510<br>Total assets 2,136,081 2,179,070 2,356,878 3,013,771 2,875,457 3,157,229<br>Less: Goodwill 27,329 27,329 27,329 30,201 27,329 30,201<br>Less: Other intangible assets 27,111 22,473 18,391 25,919 16,411 23,680<br>Tangible assets (b) 2,081,641 2,129,268 2,311,158 2,957,651 2,831,717 3,103,348<br>Tangible common equity to tangible assets (a)/(b) 6.01 % 6.91 % 10.38 % 9.27 % 9.25 % 9.36 %<br>Tangible common equity per common share<br>Total stockholders' equity $ 179,594 $ 196,954 $ 285,728 $ 330,163 $ 305,732 $ 344,391<br>Less: Goodwill 27,329 27,329 27,329 30,201 27,329 30,201<br>Less: Other intangible assets 27,111 22,473 18,391 25,919 16,411 23,680<br>Tangible common equity (c) 125,154 147,152 240,008 274,043 261,992 290,510<br>Common shares outstanding (d) 13,699 13,775 17,050 17,125 17,120 17,198<br>Tangible common equity per common share (c)/(d) $ 9.14 $ 10.68 $ 14.08 $ 16.00 $ 15.30 $ 16.89<br>Return on average tangible common equity<br>Net income $ 15,001 $ 25,866 $ 29,540 $ 44,675 $ 16,837 $ 26,909<br>Add: Intangible amortization expense (net of tax) 3,655 3,664 3,224 3,129 1,565 1,769<br>Remeasurement due to tax reform 4,818 —————<br>Net income, excluding intangible amortization (e) 23,474 29,530 32,764 47,804 18,402 28,678<br>Average total equity 176,779 187,341 231,084 310,208 298,221 336,830<br>Less: Average goodwill 27,329 27,329 27,329 27,439 27,329 30,201<br>Less: Average other intangible assets (net of tax) 19,358 19,522 16,101 13,309 13,737 19,556<br>Average tangible common equity (f) 130,092 140,490 187,654 269,460 257,155 287,073<br>Return on average tangible common equity (e)/(f) 18.04 % 21.02 % 17.46 % 17.74 % 14.39 % 20.15 %<br>Net interest margin (tax-equivalent)<br>Net interest income $ 67,670 $ 75,224 $ 74,551 $ 83,846 $ 38,928 $ 43,178<br>Tax equivalent adjustment 865 462 347 455 209 278<br>Tax equivalent net interest income (g) 68,535 75,686 74,898 84,301 39,137 43,456<br>Average earning assets (h) 1,833,002 1,970,004 2,052,758 2,618,427 2,427,519 2,919,578<br>Net interest margin (tax equivalent) (g)/(h) 3.74 % 3.84 % 3.65 % 3.22 % 3.24 % 3.00 %<br>Efficiency Ratio<br>Noninterest expense $ 134,920 $ 136,325 $ 142,537 $ 163,799 $ 76,460 $ 85,592<br>Less: Intangible amortization expense 5,623 4,638 4,081 3,961 1,981 2,239<br>Adjusted noninterest expense (i) 129,297 131,687 138,456 159,838 74,479 83,353<br>Net interest income 67,670 75,224 74,551 83,846 38,928 43,178<br>Noninterest income 103,045 102,749 114,194 149,371 65,419 77,629<br>Tax equivalent adjustment 865 462 347 455 209 278<br>Total tax equivalent revenue (j) 171,580 178,435 189,092 233,672 104,556 121,085<br>Efficiency ratio (i)/(j) 75.36 % 73.80 % 73.22 % 68.40 % 71.23 % 68.84 %
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