Alerus Financial Corporation Reports First Quarter 2021 Net Income of $15.2 Million

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Alerus Financial Corporation (Nasdaq: ALRS) reported a net income of $15.2 million for Q1 2021, equating to $0.86 per diluted share, a significant increase from $10.2 million in Q4 2020 and $5.4 million in Q1 2020. Key highlights include a return on average total assets of 2.02% and a return on average tangible common equity of 23.03%. The bank's mortgage originations reached $518 million, while retirement revenue grew over 8%. Deposits increased by 5.7% to $145.6 million.

Positive

Net income of $15.2 million, up 48% YoY.
Return on average total assets increased to 2.02%.
Return on average tangible common equity rose to 23.03%.
Mortgage originations exceeded $500 million.
Retirement revenue increased by over 8% following acquisition integration.
Deposits increased by $145.6 million or 5.7%.

Negative

Mortgage originations decreased by 14.7% from Q4 2020.
Loans held for sale decreased by 35.8% from Q4 2020.
Loans held for investment decreased by $42 million or 2.1%.

04/28/2021 - 04:00 PM

Alerus Financial Corporation (Nasdaq: ALRS) reported net income of $15.2 million for the first quarter of 2021, or $0.86 per diluted common share, compared to net income of $10.2 million, or $0.57 per diluted common share, for the fourth quarter of 2020, and net income of $5.4 million, or $0.30 per diluted common share, for the first quarter of 2020.

CEO Comments

Chairman, President, and Chief Executive Officer Randy Newman said, “We are pleased to report our record performance of 2020 carried through into the first quarter of 2021. We believe Alerus continues to be well positioned for growth with our diversified business model, large and growing client base, and holistic, advisor-focused approach to serving clients. We started 2021 with several hiring initiatives and were pleased to have two high performing mortgage bankers join our Twin Cities team in the first quarter. We continue to focus on adding talent to our organization, especially in areas that will grow revenue.

Our fee income business lines delivered strong results lead by our mortgage division with mortgage originations exceeding $500 million for the quarter. Retirement and benefits revenue increased over 8% during the quarter as the integration of our recent acquisition of RPS/24HourFlex continues to perform as planned. Wealth management revenue grew almost 4% during the quarter as our advisors remained focused on proactive outreach to clients in our local footprint and nationwide.

On the banking side, we continued to see stable credit quality, strengthening local economies and low levels of loan deferrals during the quarter. Our reserve levels remain very robust at over 2% of loans (excluding Paycheck Protection Program, or PPP). In addition, we saw a modest uptick in commercial line utilization, solid loan demand, and building pipelines.

In addition to our emphases on growth, we are also focused on technology investments. Over the last several years, we have invested in new technology for both our business and consumer clients, and now, we continue to develop robotics and other automation processes to improve our efficiency and support our ongoing growth initiatives. Today, we have 26 automated process robots in production across our organization. Many of these robots were developed within the last year to support unprecedented mortgage volume and new loans under the PPP. Furthermore, we recently became one of 66 limited partners in a fund focused on the acceleration of technology for community banks. We believe this is a valued partnership that will allow us to stay abreast of emerging technology trends in the community banking landscape.

Also in the first quarter, we redeemed our previously issued subordinated debt with a rate of 5.75% and refinanced with subordinated debt issued to the Bank of North Dakota with an initial fixed annual rate of 3.50%. Our capital levels remain strong and we believe we have strong capital return potential with our proven ability to execute accretive M&A, our history of strong dividend yields, and our newly approved stock buyback plan. We believe our ability to execute a diversified business model in tandem with our strong financial foundation will maximize stockholder value long-term.”

Quarterly Highlights

Return on average total assets of 2.02%, compared to 1.34% for the fourth quarter of 2020
Return on average tangible common equity⁽¹⁾ of 23.03%, compared to 15.13% for the fourth quarter of 2020
Net interest margin (tax-equivalent)⁽¹⁾ was 3.12%, compared to 3.23% for the fourth quarter of 2020
Allowance for loan losses to total loans, excluding Paycheck Protection Program, or PPP, loans, was 2.01%, compared to 2.00% as of December 31, 2020
Efficiency ratio⁽¹⁾ of 66.43%, compared to 74.44% for the fourth quarter of 2020
Noninterest income increased $2.2 million and was 64.97% of total revenue, compared to 62.57% for the fourth quarter of 2020
Mortgage originations totaled $518.0 million, a 14.7% decrease from the fourth quarter of 2020
Investment securities increased $202.8 million, or 34.2%, from the fourth quarter of 2020
Loans held for sale decreased $43.8 million, or 35.8%, from the fourth quarter of 2020
Loans held for investment decreased $42.0 million, or 2.1%, from the fourth quarter of 2020
Deposits increased $145.6 million, or 5.7%, from the fourth quarter of 2020

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

Selected Financial Data (unaudited)

As of and for the

Three months ended

March 31,

December 31,

March 31,

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

2021

2020

Performance Ratios

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