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Alerus Financial (ALRS)

Participants
Katie Lorenson Chairman, President & CEO
Karin Taylor Chief Risk Officer
Jeff Rulis D.A. Davidson
Nathan Race Piper Sandler
Call transcript
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Operator

Good morning, and welcome to the Alerus Financial Corporation Earnings Conference Call. All participants will be in listen-only mode. [Operator instructions] After today's presentation, there will be an opportunity to ask questions. Please note, 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. SEC cause the to in forward-looking release the could those materially the that and in indicated statements, company's factors actual differ results from earnings Important filings. are listed turn I would Corporation President, CEO, and conference to Lorenson. Alerus Chairman, the Katie now Financial over to like Please ahead. go

Katie Lorenson

to you. Thank listening morning, today. welcome and call Good all to our

work record expand exceeded recognized base externally an current clients. advice-based our grow a you internally privilege as Today, holistic XXXX in client in the time serving first an to delivered President our Officer, for year. income and approach. top because to members, will and In Risk relationships by the and our to hard client strong continues possible company, Taylor, culminating provide an of business Alerus. perseverance XX.XX% while The Chief being today with team continued exceptional as CEO days twin Here as of of to last goals, all time I is our my cities, results experience, to my the we diversified members CFO, net drive returns, to with Alerus shareholder Karin and and and ROTC XXXX, Alerus speak production the approach workplace. team of of our this clients their tremendous and I’m in our to joined by cover made model, throughout for have it and longstanding to the shareholders,

continues be revenue. of year our for diversified for Maintaining a was total high business of is model, to our priority income and the Our levels performance our fee exceptional income anchored XX% in company. fee

XXXX. contributor again to was a in team mortgage Our results our significant

team over billion offset a the our unwind reminder, of the am year volume and hedge $X.X of the mortgage of includes $X.X proud the million. of surpassed in reported XXXX, who the finished I As of the revenue, record million $XX.X originations.

and maintain members Alerus we clients our over XX% embraced due served channels. industry-leading have addition, our the digital through team and margins pull-through with to continued technology, and of option, clients X,XXX execution. In in invested has the

me heard special We've has purchase high had and business volume mortgage with business. itself. and on Alerus our level say is You've this most is of a in of company, focused a division historically special repeat before. clients, been our

We great a have team. reputation an and exceptional

Alerus industry. the see closer volume outperforming many still In surpassed Although participants. benefits source the of our statistics the again can is as base company industry Alerus, in in in client projecting their whom of division, outperforms. believe we retirement million, and XX% push revenue that to us a XXX,XXX XXXX, XX% primary of volume XXXX, decline and a decline our information are for keep decrease We we but in a retirement surpassed readiness, $XX of to

HSA grew restatement a million also This is these of Our to revenue $X.X significant source retirement fees. and business of million. $XXX $XX and million year's approximately document total included deposits, balances

these As but not we've are previous fees. discussed recurring, calls, on annual

at those replace with generation, to revenue new look levels. We fees revenue anticipate will holding XXXX and

including wealth clients $XX and ever, than million. than greater management and new Our brought through mind production $XXX million peace of under team new advice planning to with assets members of management, of more consecutive production months four

in digital a or few rolled clicks, goals understand ended is distribution Here reaching out managed, out too, are member opened. and with investments establish a QX, technology Alerus option team and rollovers the accounts proactively shine. this invested, plan. a year late With help We to XXX

experienced have successful been momentum talent. recruiting have in exceptional and We this area, in

had The we headwind, another banking in strong did nearly to XXXX of as revenue same pace the could be to XXXX. we Alerus grow market continue a year. the in Although look commercial at units

the team have XX% relationships the of a puts in of as X,XXX scored continued portfolio in commercial expected In PPP clients through country. Alerus for serving our That members our in loans PPP. the top we to total, over quartile growth great In fourth Our loan program. done acquired was the job clients. Alerus because reached loan with new expand Overall for while new quarter, year levels. XXXX, we production the the

is members more earnings $XXX relationships management. portfolio. pull feel credit quality, investment deposit invest and but it and interest And drag utilization the increasing low a treasury in We although and on our we to worth on at base been our perspective, the throughout excess the equity. our beyond. We grow a by cover opted balance loan which XXXX continue new to this XX% continued repeating that has to balances million. liquidity earnings commercial although grew doubled expanding XXXX, resulted robust margin, to a level, portfolio we've X We as year-over-year to than look account in this significant excel released team allowance into headwind we the and remain included in move reserves into From QX, balance of sheet payoffs. size Karin and historic by million several in in net will continues of

were While in exceeded expectations revenue, for we in line. expenses quarter the

execution quarter we members’ controlling managed solid and delivered another of team in Our expenses. continues, costs

our our extract processes, in to clients while closures, operations, and offerings. facilities growing digital base engaging in efficiencies client We and continue

ahead feeling the certainly continue XXXX, Looking flat current we our We new positions projecting cost into as expenses. are wage Metro pressure are as controls, excluding and transaction, execution in to well acknowledge the hires. and and looking in

and SBA fee Denver team and a nearly immediately engaged exceeded has We sought expectations. out recognized converted we XXX% production team. XXXX, with During after highly our This retention. lifted nationally income acquisition, integrated

XXth in a acquisition Phoenix, of performing, high We also our Arizona bank commercial-focused announced robust growth market. high the

over rebuild a in acquisition then addition and price open and in we capital purchase book in and drove remains through targets now acquisitions, space. pipelines of growth a partners building Our strong XXXX. and tangible to in turn Karin, of by income amortization on earning priority, will for fee focus questions. it constant the our the to it up for I'll growth the XX% Organic

Karin Taylor

Katie, you, morning, and everyone. Thank good

continued programs to over the past pandemic-related quarter. Our down wind

of XX, balances points, leaving portfolio. improve or loans loans books. the continued to were XX loan $XXX the $XX XX in a workouts decrease from on third loans over in portfolio, points primarily approximately at as resulting on down to to in Credit end metrics in XX% million, $X.X As million million the deferral, totaled January residential several in long-term quarter, of fourth the estate remain forgiven basis basis that non-performing quarter. resolved, of balances PPP real the about total

for $X million. of recorded we recoveries the net addition, quarter In

result, in quarter, in total PPP a million to we $X.X the released loans, X.XX%. excluding As fourth allowance reserves bringing to loans, our

past clients. the utilization its team to increased variant the exposures on Commercial in agile surged quarter. dropped Our Despite and focused Omicron remained through XX%, our lowest market, line as remain resilient serving illness and years. five our over point teams

While our Market CRA excess by real the system production or demand first commercial net for quarter, C&I across for $XX X.XX% the loans, footprint. PPP, estate growth in liquidity estate residential by increase on remains increased million, met in a and to portfolios. challenging, and of was improve driven loan mortgage real continues loans the and both The expectations linked-quarter.

it That focused and and first prepared building concludes we'll their open strong for remain business up remarks, in Our advisors pipelines our momentum is on questions. quarter. early the

Operator

the [Operator question-and-answer now We’ll session you. Thank instructions]. begin

comes Jeff, Rulis ahead. question first go please from Our Jeff from D.A. Davidson.

Jeff Rulis

Thanks. morning. Good

activity linked-quarter Just or you payoff loan that demand, happen to think, as growth as on have do I the you but follow to towards levels, the well on or quarter-over-quarter? end, the touched Karin, pipeline the payoff

Karin Taylor

the our quarter. Jeff. continued be numbers, that I have you through elevated I can to payoff the tell - activity don't exact the

Jeff Rulis

Okay.

XQ So - similar versus saw payoffs you similar XQ? in

Karin Taylor

Uh-huh.

Jeff Rulis

pipeline. the And

Karin Taylor

obviously, had year. I'm had sorry. - large of on end oh, in of of And the a that We of a And lines to that the we utilization couple couple low credit at pay-downs contributed, fact,

Jeff Rulis

Okay.

you picking just net and just general. PPP ex exiting up, here, ‘XX, growth high-level in So, but about is in guess demand thoughts the on I I talk guess

Katie Lorenson

are sheet. regard. do participations the transaction. gave on digit Metro for of intend still high all on believe still to the that pull in to balance that with track in We the some sold Yes. deal, within their Alerus back Metro then we that - projections mid course, December And single the of We we back with for the

digits we to high mid the expect Metro double digits sheet. So, for balance single to for growth and high our

Jeff Rulis

Great. The those you PPPs have do Thank you. what's linked-quarter, and remaining? also,

Karin Taylor

remaining. There's And to Jeff. million the Yes. come $X about you me let that - on back in one, linked-quarter

Jeff Rulis

XX? just with - or into one, I'll provision expectation expense last on one would the close maybe of Oh, expectations No for Karin, levels. reserves, quick a grow in to any an problem. provision just expect more you okay. housekeeping

Karin Taylor

to think, that's at way good I look Jeff, it. a

growth expect any credit point, to economic related that We our At things offset would expect to this that. would significant on decreases as reserve loan improve, see don't we continue required horizon. that factors the as that deterioration we

Jeff Rulis

Okay. step back. I’ll

Karin Taylor

And Jeff, fees fourth quarter $X.X for had compared million on in we $X - third the in quarter. the in to revenue, million the approximately PPP

levels. consistent fairly So,

Jeff Rulis

you. Thank

Operator

Jeff. you, instructions]. Thank [Operator

please comes question from ahead. from next Piper Our Nathan Race go Nathan, Sandler.

Nathan Race

Yes. Good Karin. Hi. and morning, Katie,

imagine to and benefit within extent, the I strong some business. within the to opportunities you really attrition but AUA XXXX. guys still The On line deal obviously RPS that offset are retirement some revenue, seeing of of that helped services obviously natural a

facilities XXXX? kind revenue notwithstanding of So, I in RBNS of kind are see. market guys’ you that we I may guess, how thinking about equity guess growth

Katie Lorenson

Right. was - reasons. XXXX Yes. certainly strong for number of We had a

retention, accruals which the and acquisition recurring, Of markets and our not nature. the the and are in then had again, we annual course, restatement they're and Denver also but fees, strong, were

$X.X in were revenue approximately of And those so, million the XXXX.

our business XXXX new replace that to And outlook with so, for revenue is generation.

revenue in XXXX. to be flat versus we expect XXXX fairly So,

Nathan Race

expense peers that lower benefit volumes. XXXX. And in that I been imagine expect the is maybe process you given coming with will expenses volume over. some of technology. you just the several just terms the terms But But the well never some guys in in probably really for understand quarters. to growth have that context, down guys over ahead XXXX of guys understand guys have last in hires that also industrywide about Very within I expectations, outperform have Got you thinking And of that helpful. most I it. the outlook mortgage Obviously, extent of you anticipated made to then, investing salary

guys you a any on what Katie, are terms basis thoughts expecting high-level in just of year-over-year growth expense for in So, XXXX? maybe

Katie Lorenson

Yes.

are are hold five targeting adds rate. have run some we to $X XXXX, approximately million. - and transaction Alerus of estimated we'll course million then, or expenses that And have to so with expenses Metro about we'll flat So, -

Nathan Race

Okay.

the So, kind of operating flat business. on

Katie Lorenson

of are we looking investment, cetera, Right, seeing. to But from the which in et a course regard. technology that we're pressure given hold challenge be wage will that a

Nathan Race

excess dry ample just so Okay, with then maybe to perfect. still And speak. powder, capital, you to guys turning operate

of just would can dividend so, update seeing here. to get just And remain but an if the the what given pressures, acquisition near additional terms levels. some you updated And And several industrywide within of are any that last over weeks thoughts opportunities. its guys in buyback, not the kind particularly current in we love to only Alerus, on valuation potential on context, expect

Katie Lorenson

We I buyback. side, income continue build acquisition From the to Companies fee pipeline. an stock and standpoint evaluate the well. generally the on continue performing dividend quite to are on the

the appetite that putting And these look being first we when we're lines to more and is exit, call. just believe huge and a business. be do exiting for so, there there, And phone now selling the out companies that not right we’ll said,

sit we where as well or capital, fee the organic do well opportunity, deploy that the best as buyback short-term those but as acquisitions so, as we continuing increases. evaluate to to dividend income that's today, growth, anticipate And are

Nathan Race

one on Okay, perfect. And if sheet dynamics. ask balance overall just more just I could

on guys You some growth, are industrywide having deposit from only and perspective. of deposit like but growth, kind some good sounds just factors synergistic going the also you macro have guys not of it given

given thoughts outlook into just growth So, you of earlier? we of growth just the kind just the high how on mid base expect Do growth, deposit should assets, remix kind that you opportunities? any this digit loan given a earning expect earning single continued to And that some synergistic projects year. just of asset just described

Katie Lorenson

Yes. hold looking for That in to, to is point. steady change, that will mix at but right, this believe asset base regards fairly we're the

Nathan Race

the a quarter. great. congrats you Okay, and appreciate all the taking I and questions on all great guys color,

Operator

turn you. Thank to over concludes closing like Katie the would any I our to for back conference This Lorenson session. question-and-answer remarks.

Katie Lorenson

to and shine by with thank emerge the you our working and their I'm like future company Alerus a Directors, year XXXX about interest in We Alerus we've Board positioned day, listening members And and Thank is of and to finished a grow. you. than together call. in our or the ever to to higher am We we everyone. of company. team of continue to shareholders members, growing with and than to although Alerus beyond. felt for others our this relationships. expanding momentum this our continued one Again, industry, face all level for approach a excited in support I our ever culture, excited headwinds see company. and in joining Have team investment today's good thank XXXX our and stronger

Operator

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

You may now disconnect your line.