Alerus Financial : Fourth Quarter 2022 Presentation

Alerus

EARNINGS PRESENTATION

4Q 2022

DISCLAIMERS

Forward-Looking Statements

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 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: interest rate risks associated with our business, including the effects of recent and anticipated rate increases by the Federal Reserve; 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, including continued rising rates of inflation; the overall health of the local and national real estate market; concentrations within our loan portfolio; the level of nonperforming assets on our balance sheet; our ability to implement our organic and acquisition growth strategies, including the integration of Metro Phoenix Bank which we acquired in 2022; the impact of economic or market conditions on our fee-based services; our ability to continue to grow our retirement and benefit services business; our ability to continue to originate a sufficient volume of residential mortgages; the occurrence of fraudulent activity, breaches or failures of our 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 from non-banks such as credit unions and Fintech companies, including digital asset service providers; our ability to successfully manage liquidity risk, including our need to access higher cost sources of funds such as fed funds purchased and short-term borrowings; the 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, including the acquisition of Metro Phoenix Bank; the extensive regulatory framework that applies to us; the impact of recent and future legislative and regulatory changes; fluctuations in the values of the securities held in our securities portfolio, including as a result of rising interest rates, which has resulted in unrealized losses in our portfolio; governmental monetary, trade and fiscal policies; risks related to climate change and the negative impact it may have on our customers and their businesses; severe weather, natural disasters, widespread disease or pandemics, such as the COVID-19 global pandemic, the negative effects of the ongoing COVID-19 pandemic, including its effects on the economic environment, our clients, and our operations, including due to supply chain disruptions, as well as any changes to federal, state, or local government laws, regulations, or orders in response to the pandemic; acts of war or terrorism, including the Russian invasion of Ukraine, 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 expected discontinuation of the London Interbank Offered Rate, as well as the development and implementation of other alternative reference rates; changes to U.S. or state tax laws, regulations and guidance, including the new 1.0% excise tax on stock buybacks by publicly traded companies; talent and labor shortages and employee turnover; our success at managing the risks involved in the foregoing items; and any other risks described in the "Risk Factors" sections of the reports filed by Alerus Financial Corporation with the Securities and Exchange Commission.

Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to 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.

Non-GAAP Financial Measures

This presentation includes certain ratios and amounts that do not conform to U.S. Generally Accepted Accounting Principles, or GAAP. Management uses certain non-GAAP financial measures to evaluate financial performance and business trends from period to period and believes that disclosure of these non-GAAP financial measures will help investors, rating agencies and analysts evaluate the financial performance and condition of Alerus Financial Corporation. This presentation includes a reconciliation of each non-GAAP financial measure to the most comparable GAAP equivalent.

Miscellaneous

Except as otherwise indicated, this presentation speaks as of the date hereof. The delivery of this presentation shall not, under any circumstances, create any implication that there has been no change in the affairs of Alerus Financial Corporation after the date hereof. Certain of the information contained herein may be derived from information provided by industry sources. We believe that such information is accurate and that the sources from which it has been obtained are reliable. We cannot guarantee the accuracy of such information, however, and we have not independently verified such information.

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COMPANY PROFILE

OUR MISSION

• To positively impact our clients' financial potential-through holistic guidance, unparalleled service, and engaging technology.

ALERUS BUSINESS LINES	DIVERSIFIED FINANCIAL SERVICES COMPANY
▪	Banking	▪ $3.8 billion Banking assets
▪	Retirement and Benefits	▪ $32.1 billion Retirement and Benefits AUA/AUM
▪	Wealth Management	▪	$3.6 billion Wealth Management AUA/AUM
▪	Mortgage	▪	$812.3 million in Mortgage Originations YTD

DIVERSIFIED REVENUE STREAM

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2022

Noninterest income:
$111.2 million	NONINTEREST
Net interest income:	INCOME AS A %
OF REVENUE:
$99.7 million	52.7%
	Retirement and
Net	Benefit Revenue
Interest	31.8%
Income
47.3%

Wealth

Management

Revenue 9.9%

	Mortgage
Banking	Revenue
Fees 3.0%	8.0%

Data as of 12/31/2022.

ASSET GROWTH (IN BILLIONS)

Banking Assets

$2.2	$2.4	$3.0	$3.4	$3.8
2018	2019	2020	2021	2022

Retirement and Benefits AUA/AUM

$27.8	$31.9	$34.2	$36.7	$32.1
2018	2019	2020	2021	2022

Wealth Management AUA/AUM

$2.6	$3.1	$3.3	$4.0	$3.6
2018	2019	2020	2021	2022

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OUR DIVERSE BUSINESS LINES

A BIG COMPANY MODEL WITH SMALL COMPANY EXECUTION

BUSINESS BANKING

• Commercial and commercial real estate lending
• Small business lending
• Treasury management
• Deposit services

RETIREMENT

AND BENEFITS

32% of Revenue

•	Retirement plan
	administration and
	recordkeeping
•	Retirement plan

BANKING

50% of Revenue

TRUSTED

ADVISOR

CONSUMER BANKING

• Private banking
• Deposit products and services
• Consumer lending

MORTGAGE

8% of Revenue

• Residential mortgage lending
• Residential construction lending
• Home equity/second mortgages

investment advisory

• Health and welfare

administration

Revenue data LTM as of 12/31/2022.

WEALTH

MANAGEMENT

10% of Revenue

• Advisory services
• Trust and fiduciary services
• Investment management
• Insurance planning
• Financial planning
• Education planning

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FRANCHISE FOOTPRINT

FULL-SERVICE BANKING OFFICES

Alerus offers banking, retirement and benefits, mortgage and wealth management services at all full-service banking offices

• Grand Forks, ND: 4 full-service banking offices
• Fargo, ND: 3 full-service banking offices
• Twin Cities, MN: 6 full-service banking offices
• Phoenix, AZ: 3 full-service banking offices

RETIREMENT AND BENEFITS SERVICES OFFICES

• 1 office in Minnesota
• 1 office in Michigan
• 1 office in Colorado
• Serve clients in all 50 states through retirement plan services

DIVERSIFIED CLIENT BASE

▪	38,500 consumer clients	▪ 384,800 employer-sponsored retirement plan participants
▪	16,600 commercial clients	▪	69,000 health savings account participants
▪ 8,100 employer-sponsored retirement plans	▪	37,900 flexible spending account/health reimbursement
			arrangement participants

Data as of 12/31/2022.

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