Alerus Financial (ALRS)

Randy Newman Chairman, President & CEO
Katie Lorenson EVP & CFO
Karin Taylor EVP & Chief Risk Officer
Jeffrey Rulis D.A. Davidson & Co.
Daniel Cardenas Raymond James & Associates, Inc.
Nathan Race Piper Sandler & Co.
Call transcript
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Good day, and welcome to the Alerus Financial Corporation's earnings conference call. [Operator Instructions]. Please note that this event is being recorded.

This call may include forward-looking statements and the company's actual results may differ materially from those indicated in any forward-looking statements. Important factors that could cause actual results to differ materially from those indicated in the forward-looking statements are listed in the earnings release and the company's SEC filings.

turn and over CEO, to Corporation Alerus like President Chairman, Randy now the to conference Financial I'd Newman. Please go ahead.

Randy Newman

Thank morning, everyone. good you, and

the Let high-level as by begin overall fourth of some XXXX. me well quarter about giving comments as first overview a

net report in income the over net of $X.XXX Alaris the of XXXX. XX.X% of $XX.XX $XX.XX to fourth pleased million and reported quarter are income We increase million record for for million, an

there but about Our XXXX. in Lorenson, more million CFO, nonrecurring a will results in later, Katie $X our explain detail was income in

$X.X that over If our you take out, or core increase. earnings X% increased million a XXXX

but was fully XXXX X.XX, in in in increased and EPS shareholders' by from ROA basis from shares ratios $X.X was and on $X.XX and the also the and ROTCE was by affected in of XXXX equity ROTC September. Earnings a to in share XXXX. capital increased increase XX.XX% earnings, for by result in IPO. were both share influenced Year-to-date the Dividends the the $X.XX also was in $X.XX, The per by per ROE ROE increase as outstanding XXXX. increase the share both raise earnings XX.XX in diluted per $X.XX million to a increase share

execution, as the decade. a focused was momentum for of and several great for successful XXXX financial objectives. we of have Alerus, with disciplined Alerus year begin and well the a foundation planning as achievement established very results key XXXX both significantly us with new as and record With improved strategic we

NASDAQ-listed, to acquisition currency potentially organically acquisitions. as quality the gives and an credit in selectively our urgency us positioned grow improved became of capital offering IPO opportunities. leadership. well improves ratios both alternative for option We potential sense of and We shareholder a our we as exercised completed we made XXXX, us which our our and that successfully improvements stock liquidity by and credit both In an

clients' needle technology addition, projects from client in improving we several from the advance the In us acquisitions synergies ability professional our decade. last our completed do help and our grow the These just services high-value projects, aimed to business also we more move revenue than terms of numerous at experiences They experience. completed and enhancing model have all over organically.

year, past client have the application a we of In technologies. number completed

results with solution Our financial the strong financial by operating earning allowed and achieve delivery and needs our have investing diversified a to while digital us access their meeting technologies application core client to of clients total still better-than-average in information.

in added with of and also area metropolitan our In the we growing Minnesota new our national the Alerus addition of addition ESOP and Phoenix-Scottsdale high-performing as Arizona. and decade, the franchise, significantly benefit the on growth Twin strategic lines tripled complementary services a of national and mortgage Cities focus We Alerus. practice, entered we the of the last business the line We company. with size of business mortgage a two result markets, planning grew advisory

and our client enhance while product greatly and initiatives offerings our brand recognition, strategic financial These base service increasing performance.

a that we management residential led our XXXX have we in and strategic a synergies To $XXX loans they plan retirement strong excellent that million organic added from of naming IRA produced date, have quality single-family focus $XXX our synergies national have very benefit our clients, in million have of loan portfolio addition, areas of is This to of president. over wealth In added million sourced and division. of HSA $XXX deposits a strategies growth significant market and in balance to these national rollovers market revenue and Alaris. provided and our the sheet the to of formalization

initiatives November, strategic the XXXX Board portal. the key September, In As improved in strategic ALERUS acquisitions client approved focusing and we MY IPO have we launched digital foundation. completed capital. significantly deploy our strategic IPO to completed holistic that organic and several In a our our mentioned, year on plan, five

and projects infrastructure, As leadership technology by mentioned, position developed aimed talent to we at promoting internal in several leadership, necessary. enhancing completed grown externally. client and we're where After have we focus external a adding while several strengthening leaders experience, and depth now and our our talent foundation

financials Katie Lorenson, now will more to I it over our in detail. to turn CFO, our discuss

Katie Lorenson

Thank Good our on In are today the call the for some for color minutes XXXX. and seeing pleased quarter, you last just quarter. built into very the few we today. few look additional financial carrying will Randy. results the forward we the with morning, results strong months in joining you, providing a the to everyone. I momentum of Thank spend a summary,

in excluding quarter. interest with The business. net and to income deposit which the And been our in the start I'll few about and a money would've third and wealth interest in a the and market from funding This the a estate dropped real was it quarter, was elevated the for in Net our from include to liquidity primarily up commercial of to source growth decline lines our portfolio. for see recovery X.XX% We decrease income comments third quarter. margin our the fairly due the stable slightly. the the net accounts, margin. growth costs, interest X.XX% most retirement did deposit significantly

through our business continued earnings margins, continuing the noninterest focus drive and diversified building our model With is on on to through pressure revenue our income.

quarter end all Our delivered to great mortgage results of wealth and the year. divisions retirement management a

The to starting in the quarter line change to is late should onetime noted of nature. document fourth with this of approximately regulations $XXX,XXX IRS planned a of late business. in XXXX. be couple fees. in This quarter retirement our related of note, included law, It third benefits A -- highlights

share been related third the but returned changes quarter fee also seasonality we've We nearly of average fees partly $X stabilized rate run from Revenue schedule to in in also recognized to and million approximately $XXX,XXX. that quarter, due XXXX. throughout an increase third to the implementing

record and business ESOP our the Lastly, year. a closed quarter with finished strong

management a wealth business over record of had million. line quarter with $X.X also revenue fourth Our

advisers largest several threshold well impressive delivered billion key were $XXX $XX surpass Grand under owner Fargo markets assets our as the business our year-end. at company of Forks, million, as of wins in all business IRA and liquidity new Minneapolis which Our history pushed management at to and million, in $X there event

February income the at year as in split. of office million We capacity in The two QX returned of investments a continued and well run the versus of this our the as the year of the Express Revenue rate purchase after refi robust our in in QX. the pace a the nearly Other Grand technology in to mandatory greatly with in division, to Randy improved operation. land efficiency division our ended the $XXX at XX-XX transition of mortgage in originators noninterest more Duluth a sale QX. the from has the quarters originations profitability with of nonrecurring of sale gains, typical and the branch mentioned, as Forks delivery

benefits and technology a our incentives fairly expense tremendous sales load significant related expenses. investments to past -- experienced change and From investments provision Moving mortgage clean payroll accruals credit credit in talent to the an some standpoint, From training. loan over and seasonal in taxes. leadership, in a expected quarter, standpoint, of That decreases we in on XX mortgages change quality and a included company months. to

to We realigned specifically consumer also either client-facing team business on or our focus clients.

CRE decrease in over improve was change. in or Nonperforming was expertise Loan million see of aligned markets, these We to growth the investments. to increase credit. the are through for this a changes low The the fueled leadership increased and one due result was concentration advantage continues with and the of sheet quarter portfolio of a quality expense growth. nonowner-occupied very impact CRE criticized with loans of our our pleased during solid XX%. quarter our by to in commercial opportunities the to Overall, provision the the quarter in $XX of loans acquired begin balance for and credit relatively taking the year-over-year

assets level with allowance at of However, $X low the nonperforming to remained over overall Xx. nonperforming ratio of an million

side growth very core was funding the synergies funding sheet balance and the on Lastly, side, of strong. in our

nearly balanced Our the portfolio of benefit treasury some markets, national noninterest-bearing $XXX from management, deposits. across we and peers. by our looking in be to well which, We relative continues million for with deposit deposit again, We've that to aren't our had higher for deposits one continue lines percentages of deposits XXXX. our business a to increased really location, commercial physical in those tied portfolio to are nice our wins

that, concludes remarks. our With prepared that

questions. will we any So welcome


Instructions]. [Operator

question first comes from The Rulis, D.A. Jeff Davidson.

Jeffrey Rulis

that get to specifically, or about over -- comments, transition on more and expect year. MY externally. into question to of speak opening Maybe a expense see Wanted kind that the balance an efficiency. focusing -- the Just the kind either in translates update steady you the XXXX how to run to spoke rate you'd the ALERUS of of the on Randy, accelerating

Katie Lorenson

I all Katie. that will take question. are -- is this These

and, So these ALERUS silos new development. things, the way It of course, again, down client do well a couple many relationships, focusing optimizing of through our also But on our our breaking and company culture. as as within building life. of such MY throughout things. is is we expanding everything clients that, it involves as

expenses we as look to to So look into we it's XXXX. very, in have very low specifically, broad. growth expenses, single-digit But the

I quarter quarter the in what first -- think fourth rate should me. be XXXX, we similar of to saw XXXX the run excuse in pretty or

Jeffrey Rulis

Got it.

I still that margin some if quarter, then, guess, the pressure. And saw recovery on exclude you margin, in Okay. third the interest

outlook. to of on that front the You I for perhaps -- maybe the kind 'XX translates some has that. of how what the and walked margin through reasons guess the changed

Katie Lorenson

is portfolio. the compression that liquidity continued question. down deposit of the into as level in result time see put QX to This just that further well around -- we Good and and into And as portfolio some X.XX% the taking and the in Katie, portfolio do to to loan growth really bond again. a expect

is we -- impact to of that the on rate changes no compression. expect in some stabilize, having assuming So an it or But XXXX. subsequent do mix certainly


concludes question-and-answer One This in. -- to just moment, I Instructions]. questions the now conference came [Operator please. turn Excuse over back session. to our two Newman. there me, like has Randy

Next question Cardenas James. from Raymond Daniel comes from

Daniel Cardenas

the on again, side. a environment M&A now are bank the like renewed what's Maybe interest Or the if retirement having a looking on right benefit you side? quick focus the a and, primarily on of just traditional reminder and provide you front, the of could update kind just

Randy Newman

Well, we're fortunate.

split are We maintain we put We are sourced like We And S-X. in at, we with looking to the have. right have of number the that. consistent looking that opportunities would a and we what we we what like call been able have income the again, to branch we in some at and/or benefit acquisitions couple showing primarily, now, fee been solely and banking have retirement we areas. look of or And a opportunities.

Daniel Cardenas

little Great. feel really quarter. for on loan this you the in of overall of from your QX a side, loan 'XX? kind that kind And outlook growth XXXX? robbed And bit what's loan then better-than-expected growth Do

Karin Taylor

quarter. This is No, rob I from Karin. it necessarily think don't Sure, Dan. first

We are have for a fairly growth. solid pipeline. mid-single-digit still expecting we Overall, XXXX,


question Nathan Our from next comes Sandler. Piper Race,

Nathan Race

I in provided on color any was retirement the late. a nice I services quarter. a was benefit curious apologize But little Obviously, for increase I just the XXXX. income sequentially growth and on and got outlook just the fourth fee if there

should curious of this So think of how run we the trajecting course kind about year. over the rate just

Katie Lorenson

This Great Yes. question. Katie is Lorenson.

-- say outlook the would So I we flat. think 'XX, it's for

be the excluding there down, towards -- be to numbers, the there less always There quarter. that will fourth seasonality quarter. -- expect ESOP recognized the et quarter fourth in first there actually be, the some the there is transactions, will be we it'll some $XXX,XXX the going-forward and seasonality, for weighting be cetera, because because would will mid-XX lumpiness so of in the onetime is but we So in

Nathan Race

you. there Katie, elevated caught right. was mentioned in I $XXX,XXX quarter, you fees And Got that the if fourth of

Katie Lorenson

correct. Yes. That's

Nathan Race

what just [indiscernible] Okay. if as provide if an drove was provisioning just But on that credit any for Great. outlook it quality, curious XXXX And just pulling in quarter. to I'm can and touched sure I'm on. you not well. back overall color

Katie Lorenson

serviced increase to by commercial real The nonperforming It to It's department special does Sure. estate actually some was a credit time. loan. continue in services credit has been pay. due our for one --

will in nonaccrual. quarter, believe credit it be to updated some and the we it choose information the late to quality did stable fourth improved, through with In year. general, we has move fairly that However,

of provisioning, we the probably In down mid-$X to expect from it terms range. million in come XXXX,

Nathan Race

of expectations. that just going the Okay. helpful. guys loan given could deposit that are your expectations mid-single-digit the commentary that That's balance I with I appreciate seeing to then in on sheet overall guess expectation One XXXX? loans kind that Alerus, growth very growth. you And synergies all just exceed the back Is

Katie Lorenson

It's a good question.

to we it pace it, and we as said, as saw in will aligned. look That a -- we've be in that those capitalize certainly for we XXXX, look think there fourth XXXX. pools the our be of deposits seen in at XXXX. being also at be markets very some did growth I the the But what also significant couple and of the in commercial is we on the fairly We deposits opportunities increases really as far impressive. the believe won't quarter, was from more within

at not that, help pace. robust up anticipate make the will a that growing So market from of some of we ground national the as do

also. growth mid- that deposit put in range, would I to digit upper-single So


Instructions]. session. the question-and-answer concludes [Operator This

the Newman for Mr. closing over Now like to I'd remarks. Randy turn to conference any back

Randy Newman

you. Thank

Let this listening, extend joined questions. for who our Thank to you appreciation morning. your thank and me everyone you our call for

you We both discussion, of This in achieving in initiatives. strategic a terms nonfinancial investments long-term As performance. chance. achieving terms and by balanced was heard technology Alerus, for solid performance while in simultaneously of very financial also our good our year strategic not is record XXXX

We continuously by employees perform of backed have an team planning, of a engaged at who levels. high long history

or next stronger. opportunities has organized in clients, synergistic strong in many you joining growth a our the great for capital transformative entering was technologies and have of Thank momentum and again XXXX key never so progress focused continued decade. an our client we on call. ways, serving foundation consumer been team place, position, today's With business


The you conference has attending for now concluded. presentation. Thank today's

You may now disconnect.