Earnings call transcript Q2 2023

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Operator

Hello! And welcome to the Alerus Financial Corporation Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. 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, and Katie CEO, conference to Please ahead. Alerus President go the Lorenson. now Financial over to like

Katie Lorenson

Thank to thank Directors as research our employers to and analysts listen morning, for morning, and you this well Good joining taking as time the for in. you Bailey. our our call investors,

This Alerus. addition in I investment of and a interest your provider. Alerus top-performing in appreciate some national provide strength our a on and to morning commentary wealth to We will execution bank commercial retirement strategic foundational evolution the

and am Alerus’s Today, joined results who CFO, the by will quarter. Villalon, financial I Alan for performance discuss our

Operating about Taylor, Jim will join In our and Chief and questions and any the have answer Risk Chief you Revenue Officer; Baking Karin may quarter. us Officer, our Collins, addition, to

a current positioned well is Alerus for our and as to in shareholders. from the value creation returns headwind clear emerge winner

building off the optimizing grow company's while tangible to model, return while are infrastructure value. profitability, of strength book to strong business company our diversified the a the continuing to unique delivering We

market bankers. SBA, talent to path to and notably the in of and second team retaining continued commercial business-baking tendered year in we've join sought-after we success and and build significant adding professionals. is Well, our specialty in of our experience as CRA, professionals well-respected and the to continues this transformation in our hired quarter, more added members These and momentum dozens attracting team our professionals in bankers widely and franchise. This

Team, deposit closely and our team we've size critical of work and banking in retention hit specialty we've relationships, success ground had with six doubled the wins, continue our last they to commercial Treasury months, the group. as running the of and In early has the Management mid-market

bankers model Alerus in wealth, the launch Minneapolis, franchise. seasoned integrated members One for team an private mortgage we provide banking team out listed of These and business our formally and who with advice our products. week, Last a clients experience will leverage will

Along X% reduced acquisition with by optimizing in remain our and and focus bank We our momentum have decline on we the evidenced disciplined investments infrastructure which was investments our continued with expense are by talent year-over-year, expense. management. we by our Bank. Phoenix urgency. XX% linked Today, Metro total non-interest and our in headcount quarter the balancing the company our includes in acquisition, talent This whole of

fundamental include reserve strong focus of strategic XX% sheet our balance on from fundamental and enterprise is our a by over business multi-faceted. by highlighted This Alerus's model diversification fortress Our with the best-in-class strengths is coming fee anchored capital, levels, diversification and income. diversification. across revenues and credit and

despite XX% revenue shareholder streams operating the which continue support in throughout the and of of and no our minimal revenues will ranked build was require in capital top These ties majority durable industry. allocation, Benefits revenues from those business, banking the XX The virtually faced in to in new and the with National sheet Over returns risk. are nature derived again balance Retirement capital country. environment and along are challenging these recurring

asset client. and diversified a geography, model strategy. industry, critical class, goes remains size loan by Diversification the diversification types, our loan well business loan beyond portfolio is Alerus's as portfolio

ongoing the portfolio. continue Throughout conduct our second in to we testing of review quarter, credit stress

CRE noting threshold as worth current of XXX%. our is XXX% investor environment, it a is at capital of percentage regulatory compared to the Given the

located are in by business of X.X% properties none Alerus's secured which loans, exposure district. to office is central limited the to of

of X.XX% of the loans Reserve remaining Phoenix levels $X.X Asset on million acquired remains mark non-performing net year-to-date loans a quality minimal with and the remains pristine robust, portfolio. recovery. and Metro with total

On the market, clients. remains portfolio products funding diversified among deposit side balance and our well sheet, the of

and a deposits synergistically are our retirement deposits uninsured core are Our of and XX.X% management wealth stored through areas. our

of In our dollars collaboration deposits deposit our management because banking several driven quarter holistic our good We XX% and continue teams. wealth constant offering, with consumer wealth of between approach. model key and client-base relationship retentions by commercial to are our management our the treasury service wins within of during see and the retention with integrated bank,

was funds seasonal public of During patterns. the half expected, the seasonal we follow from their anticipate year quarter outfalls typical activity we as and second experienced second account. the our This imposing to

and higher in large or monitor report new usual accounts. for do several of We close net accounts overall We and our to unexpected pleased portfolio Alerus are any deposit dollars acquired wins activities. not and million to see $XX consistently

However, to generally lines draw down balances their utilizing speaking, incentive are versus continuing credit. of clients

opportunities experienced income saw and have In wealth. maximize consultant is and business prioritize and look nationally within mortgage our engagement targeted we and and in next originations acquisitions. market enhancements, scaled through efficiency level and to will business. our operational which rebound in retirement the the fee an take Strategically, us we business, at we our as a This retirement to engaged values to large, position organic growth

of company, cash flow continue passage opportunity we there the believe with the with Act the And in client believe across significant further to margins market base we new over have our country. embedded business We this expand value SECURE share and gain X.X, and tremendous improve passage. to is the time

capital standpoint, capital and strong From to is level, our CET TCE continue build but XX.X%. X.XX% is on we a

X.X%. a history also continued increased During the long we that and dividend active were quarter, second and in in purchases, by quarter share paying the dividend and we our

enterprise. focused continues higher managing The on and to prudently having expenses client the our move urgency clients client to our do acquisition differentiated the and be is And we manner. strategic purposeful pressure the model across frictionless expertise We're are with responsive Alerus success restructuring. on near-term on level diversified fast, bring While ads in executing expansion. talent significant positioning of approach to highly and added margins, our business value a in knowledge is leading there key in we each plan, and

tailwinds and are synergistic businesses retirement continue Community long-term continuing space. these to substantial, in in to and believe We Bank's in wealth as the the platforms, management is a embedded expansion value build differentiator

client are acquisition We on top-tier and and delivering focused talent shareholder returns.

that, I performance. for With financial will over to our Al quarter’s turn

Alan Villalon

Thanks, Katie. of Investor I’ll our Page start my XX part investor relations posted of in website. that commentary the on is our Deck

Let's our drivers. key start on revenue

interest net income declined Net by represents basis, was on a interest basis. linked funding The reported of XX.X% primarily X% a costs. On increase now in driven decline quarter income continued revenues.

into we a about the of basis, income challenges. stability income across as provide non-interest businesses. all in each to detail revenue on later despite saw Switching income our improvement fee linked fee quarter I'll income, slides. the X.X% income Fee of rate segment to increased interest go continues

Net a in was Turning our to second basis our was $XX.X our basis point increase asset was with XX quarter. a of interest interest Page basis margin prior X.XX%, million the offset points XX yields for liabilities. in rate XX, XX from in the decrease net point income quarter. A increase

dot from Fed points a of our we expect our margin on by hikes compression continue which When the not Phoenix magnitude The X the hikes, the interest pause expect year, pauses Impacting funds another Fed [ph] more be stabilize. of continue and cost shift points the the deal. by the compress eventually, with potentially assets loan yields basis to determined whether about quarter. Metro here. re-pricing basis of to will improve earning XX third was was Fed we at beginning Fed to the net in mixed Based in net margin interest from to as

Let's and offset from turn construction a quarter, residential Total real commercial estate, XX a by a decline grew driven loans in estate about prior growth consumer to by loan real in Page and talk loans. portfolio. X.X%

modest we XXXX, growth. continue For to expect loan

X.X% to our ending Page the quarter. a basis, XX, declined period based prior from Turning on deposits

last to we clients. call, main guided outflow, Despite seasonal very we experienced decline public in and by clients’ seasonal As a retention we deposits. high outflow funds, the continue the was to new earnings attract the the of remain which cause in

continue the the wins. half rebound the the inflow year, deposit year, seasonal remainder client balances continued expect and For the quarter, second to back expect of the of from in we funds as we from to public

XX, breakdown deposit our in to characteristics. can Page further you see a Turning

from the within prior synergistic over wealth and and for growth of strong businesses our deposits, segment. return by (inaudible) source growth in mainly grew X.X% quarter. was year-over-your prior organic year, driven Our The our wealth client deposits the XX% over synergistic strong

our businesses account now sourced XX% of base. current for Synergistic from deposit wealth deposits our

Continued our synergistic slide deposit growth differentiated uninsured and of business you'll model. our a unique the see exposure. shows this deposits On too, strength in

collateralized Our liquidity deposits coverage XXX%. uninsured now to not and exceeds

for almost XX% sale our about maturity. details see our you'll XX, health Page securities available investment XX% Currently, of to are in portfolio. Turning versus

rest Within are securities, approximately are in XX% municipal the in MBS. the portfolio, held-to-maturity while

towards let so We run sheet continue the portfolio higher management yielding commercial to balance investment and relationships. lending the loans and relationships, we'll treasury down add remix

total our under which increase business, X.X% approximately businesses. retirement domestic the grown I'll accounts provide of client Page for talking XX, quarter due On retirement a X.X% income second higher have On In wins. equity markets highlights this asset Participants to our page, administration some in fee quarter, revenues. on start year-to-date. I'll continued XX% management about and our within and

organic a growth. assets quarter on linked and basis, mainly to X.X% increased due Revenues higher average

XX% for Retirement Our synergistic our of now deposits. source retirement the for funding business continues strong to accounts be over a of bank.

For we the business third slightly. quarter, be market impact, retirement to up expect fee our for any excluding income

X.X%, to under wealth a asset linked increase revenues highlights see of XX, while you and quarter administration On business. can basis, end increased our Turning X%. management quarter page management our of

in and as acquisition see to our strategy. markets retirement national Alerus established and continue from One We on execute rollovers our we markets in strong client geographic our

of deposits. bank accounts over source strong for the our XX% it the provide now of for synergistic will retirement Life funding as

business excluding income wealth expect be our we For up market impact, here to any also for fee slightly.

Page about our the the XX% over quarter, $X.X XX% originations as increase. purchase million increase which from business. mortgage Turning over Mortgage from than low quarter. I'll saw quarter increased which seasonally was XX% or prior rebounded originations a a index to revenues from Mortgage slightly prior MBA the XX, talk better

low third index inventories we MBA stable of X% Cities. sales forecast originations Twin remain quarter, the expect For the as the in purchase mortgage remain homes of for versus growth

expect to the decline continue fourth quarter. originations we However, season in the

non-interest Page XX of overview our provides an expense.

committed assessments. remain decreased decreased expense the to we to while professional as improving quarter to higher X% expense Compensation headcount, increase due due non-interest profitability. reduction fees our in During FDIC

for pressures, down digits low basis. do be expect year-over-year now to we inflationary Despite mid-single XXXX on a expenses

expense We continue continue right to throughout sizing to numerous on profitability reducing organization. We be progress through focused on capacity our expenses our our by and initiatives. increasing improving infrastructure recently our may

Some of initiatives. efficiency improvement production these expenses revenue and into will be reinvested

quarter. remain Page of recovery to continues very X XX, net credit basis had second Turning We in points to strong. the

compared points in the X basis X with percentage to basis assets non-performing Our prior quarter. points

Our see as This over the total credit loans losses non-performing to on allowance at you remains for X,XXX% on currently bottom coverage can left. stable provides loans reserve loans X.XX%. over to

liquidity and capital our in Page discuss XX. I'll

Our capital regulatory even remains well share during above is repurchase the done quarter. after loans,

in On billion the to we the liquidity bottom sources of both breakdown potential uncertainty. capital the well-positioned $X see weather liquidity. the from economic the Overall, you'll any and standpoint in right, to remain continue

To summarize interest to on to fee of and Despite businesses strong rapid returns revenues our a be improvement for to in provide challenging continue our and rates, fundamental XX, funding. rise Page improving making the continue we our source stakeholders. to headwinds stability from remain the our income committed

remains prudently. strong we committed Our to and capital capital remain returning

Q&A. for up open now will I that, With

Operator

Thank you. Instructions]. [Operator

line the Our Hovde. Ben from first question go today Please Gerlinger comes Ben. of ahead, from

Your is now line open.

Ben Gerlinger

morning, Good Hey!

Katie Lorenson

Hey Ben.

Ben Gerlinger

you your digits be or should prepared said single that non-interest down so about remarks, expense percentage. In

math So is my back goes that slowest, up probably here. the says little XQ a from bit probably [inaudible]

that where is give money How But just curious, did is think compensation? going? was about you we of it you talk more Is investment. if should it kind I can about granular. more I'm also curious technology? the

Alan Villalon

especially Yeah, so be year, mortgage in some of of it's number half back incentive just going because the some business. the on one, to comp, terms there, it’s have timing in we

when it going to we XQ that when versus be comes And will some it bit little comes QX also as be that'll through compensation, to it the be – is XQ. on higher go a year. So side

So some be there timing is going there. differences to

Ben Gerlinger

Got you.

deposit here, to Okay, then bearing from deposit were a and going when about margin factor. non-interest and you think the just play big flows

the we're is kind of that at. you rate just terminal If where assume

material move. have I but a we're to don't you I think I another know safe assumption. going quarter any think that's that here, see fairly

it's But to When you in and don't of hand hold early the just of have think the sheet, your think expansion. feet fire. like about is your about think which of I a the you're the re-pricing a and hit to you then just magnitude right of left I'm the think the six know to of cadence probably re-pricing balance and both going it's favor I you to the do trying margin slower the side months in-flex moving. each until

Alan Villalon

it way – be rate about so move thinking the indexed. any basically are this do quarter more will that funds. market there's have given here we're Yes, money is we That rate deposits And about XX% the our both if our hits re-priced yesterday, that, this quarter, one recent in October. moving of in

see that But our will attractive time XQ. spreads with said continue So though, in very loans. happen to in being that we

in So, we year. book, later price we back and are then maturing as for see margin of hopefully know we'll uplift our months more stuff book expecting that this on matures you rates, higher or the would it that

Ben Gerlinger

kind whoever banking big competitive just it. of just relative you seems it today, would than take environment a finally, market Midwest one When other more to Minneapolis areas. is a some of then or And of wants you. picture, the guess the like the Jim, bit Katie think Got to

think is of banks number small the due especially banks, of in private so the this I ones. the amount part area, of to

areas I in growth. just about lending for the think

out. because Are appealing there bit are there the that some are that where categories risk pockets there like little more competitors stuck any loan being have have have areas of a out some appealing, that pulled or adjusted any away returns more become now are that – priced banks

Jim Collins

come some lot on verticals, only more a better specific not this Yeah, retracting – say they more banks because thanks on also it focused but I would can deposits. We're credit, because offering some they very for with we are are way. the question. generally spread a get and

just amount loans So of get would going can or services be non-profit after we some which of an is deposits verticals C&I, of the versus a deposits. regular after, lot and area smaller were heavy mid-market going where professional i.e., a government loans predominantly of

their competition a number much, as areas. looking kind from your a and a lending and just that finding are we're because standpoint, sheet lot question? more a not more of in success a specific balance all activity have Does that, banks banks So help but in positioned with lot at weird are of those

Ben Gerlinger

Yeah, that's helpful, step in I’ll back you. thank queue.

Operator

D.A. Jeff. the Thank today line Jeff you. Davidson. Rulis ahead Please The from go of question from next comes

Your line is now open.

Jeff Rulis

on you I for mid-single know half or the Al, kind Checking think does muted of or had if maybe I morning. year-to-date, of year, mentioned Thanks. being in X% conversation. Good don't But kind that. year of the loan pretty low suggest I full growth that we're I know, that guess up didn't flattish? to digits. the back caught X% I

Alan Villalon

a as right seeing demand loan at slowing these to digits rate I the – The side. mid-single low of interest there's on side, have on interest rates comment basically loans bit growth was we're so the the we're on modest. thing seeing Yeah, just expense a levels. here, is But risen that now for

of little from demand there's it. and for slowing been clients just So in a our appetite bit hence,

to So think out be pipeline that's why so really still we're see we comments. can there why hence done, trying and modest the the what

Jeff Rulis

as Okay. trending well? payoff guess, benefit sort that that as mean, I how And or I consistent payoffs slower seeing the is activity a you are pretty net are churn to net well? if is of

Alan Villalon

at we're Yes, mean, right activity. seeing payoff jumping just there's us really I out nothing consistent now.

Jeff Rulis

quarter. Circling to had you buyback got back going Okay, it. the capital, this

well You've you're regulatory hiked capital. and the minimums on above dividends regular,

about there? or product be anything Katie, the buyback a within to the like Just touch whether on bank ongoing. sounds any again, And if there's appetite is on conversation checking that line, M&A, in for

Katie Lorenson

capital, say to regards would priorities the In same. remain Sure. I

much maintaining sense, focused talent, where pencils as strong the includes repurchase growth, dividend of levels, via balance capital continuous strong shareholders and and sheets, it out very list then organic maintaining numbers make on We’re as the which capital and to returning out. the out the where well list

terms front, And across the conversations would history continuing in in our of I to regards of our particularly acquisition, say the continuing to income M&A have fee country first awareness as expand reputation in strong acquisitions same quarter execution on in for space. the to the sentiment and and

Jeff Rulis

could, last I one one little if creep And it. the up non-performers. a Got in

guess You there, or maybe tell to a any not more you're footprint much little I cautious you segments on know, could detail. but that that

Karin Taylor

this Jeff, Sure is Karin.

You know, in pattern deterioration. we're not a of seeing terms any

expect see that pretty to and credits think I stress normalize. we're But we'll metrics, experiencing seem we're would beginning so be particular to strong a do still that The that of see some bit normalization. credit little specific of begin to at indicative not pattern. I of over think any historically maybe just time are

Jeff Rulis

you. thank Okay,

Alan Villalon

Jeff. Thanks

Operator

Thank from is now Nathan, next open. of line the question Piper your Race Sandler. you. The today Nathan ahead. from go line Please comes

Nathan Race

everyone's Yeah. doing everyone, good Hi well. morning? Hope

Alan Villalon

Hey Nate.

Nathan Race

your are things going the of perhaps engagement engagement look Katie, with the side does any synergies at revenue to kind road. the Would platform, curious, retirement harvest you more or growth your on there longer this engagement behind term, of going that that expectations opportunity the of to you looking impetus kind and look back of just love to color comments be out you're just as earlier forward. some know on consultants to down may expense get

Katie Lorenson

the Sure. both, just revenue Absolutely. our efficiency the and It's division. side within on well infrastructure on optimizing as as that

that new as the the space and number of So was we existed passage new the already to look of plans, terms in SECURE significant in it the prior X.X, of retirement participants. opportunity the really, at of Act number

and to opportunity that's targeted much successful at plans The be our Act given the out and to highly to positioning is just participants level us next amount of that SECURE share the market X.X to takes passage there. growing continue in to very take continue engagement of so new and

really grow us So will it's more on to as plans and opportunity. as those well plans new two-fold take allow that and faster

Nathan Race

like sales it XQ just appreciation retirement equity momentum good parse on the was way out there new how markets. having great. growth any wins way you've Okay, much Is – in the lately. driven And in of a the then client to versus kind sounds platform of by

Alan Villalon

Hey Nate, question. that thanks for

retirement typically organic. way a to and it, of going be at it third rest about look is sensitive, market the think revenues side then you're attribute the you on the of to our If it about

Nathan Race

on Okay, great. case the well? side things the same as Is that of wealth

Alan Villalon

little say though, going there, us, The been has for bit would client wealth be doing have but is we wealth of to a there. I because organic higher wins a really great lot seen

know, came You really note see as deposit I synergistic my did from commentary, side. some in did a wealth that growth we

was that I the So growth synergistic growth think that a of big wealth. because in from majority deposit, came

Nathan Race

how Got it, we XQ. on XQ more you should short hear. is and just of for forward in growth, growth your going Any and up, like looks loan guys kind quarter. term great the of levels about wholesale funding the kind funding, the expectations which to And on that’s up are think just this, modest came thoughts it in the how borrowings

Alan Villalon

continuing to overnight borrowings utilize We're growth just right now. – we're now. Yes, to loan deposit right fund it's

seasonal come that outflow have We out.

that. So the more deposits to door and we'd come have we're focused in love on

that to and there. we’ll fund mature overnight borrowings got investment are we if know, fully lot of we and also have But probably capacity you We loan to do so, letting growth, into to roll use that continue still loans. remix the to a over

Nathan Race

much us have you come out securities the quarter? how each flow can cash book remind Okay,

Alan Villalon

duration – way have it to about has investment years. portfolio about of five a six So I our we know you about think is that the

so. there, XX% like take lumpy yearly at be an fold in then would maybe off to and and of can yearly that is an a for bit look it I say quarterly of going basis. but The basis you'd just a here little quarter, our So the like average you is going just

Nathan Race

you kind was a flatten Okay earlier overall, the growth great. of deposit But around just expectations may expectations, to see some growth quarter not-interest any fund And and when of kind deposit public tied of then I clients. lot just the decline out? levels appreciate go kind of comments in back same to of the

Alan Villalon

All and right right, risk just of – to that's given term everybody's five, mean, this accounts free right now bit a the short now. is there's predict high rate north into where rate difficult parking money I in

because us, still So think I pressure be across more just being to on is the by experienced that whole going there's to bearing, not but come industry. non-interest

get year significantly. in from see we back we're until quarter come this down growth start in, still to the – back think think I not quarter on some second in back public near where expecting levels. here. some these term we’ll the deposit of So see least going know, rates fund subside our – side levels from are I and pressure still hopefully we’ll that we're the half from to can we though, But – growth you least But see from the second coming probably

Nathan Race

moderating Okay, footprint got that easing that pressures case degree you We've company any it. And guys? the more then, in are you from across pricing guys it’s deposit Is with the some banks some other of heard recently. these kind to seeing days?

Alan Villalon

seen has footprint, one some loan that's to definitely over deposit them. pressure an But the we've growth uptake where in more ratio the and seen exceeded on thing XXX% we've our there. We've in lower moderation too banks putting Yeah. noticed the loan for

meet are in would to But, deposit trying was quarter. say though definitely in deposits by more. there data first up they the the second that I that there's more So pricing than quarter

definitely moderating. that seeing we're So

Nathan Race

one of think over maybe we've just do you there And that's the several the that Karen. Is you. Got last kind to periodically largely its now a quarters one recoveries scores? last run for tail seen, or

Karen Bohn

the You of their know, I have Nate think run kind course. recoveries larger

things, some quarters. to in I on coming payments monthly would expect some level decrease but that get to continue We

Nathan Race

I and Great quarter. all Okay, color. appreciate guys the you questions taking the great. all

Alan Villalon

Nate. Okay. Thanks,

Operator

Eric. line today next The Please go Spector question Eric Raymond from James. you. ahead, comes the of from Thank

Your line is now open.

Eric Spector

and been appreciate I quite almost questions public everybody. of questions. David curious, in bit answered. But the the the outflows Hey, with loan is growth obviously This taking funds, ticked for already quarter, Eric like my asked a you and the XX%. line Feaster. deposit loan have Most ratio to up the just guys of on the to

you're where forward. comfortable with curious that Just going

Alan Villalon

I But of Yeah. the it'd range. Ideally, we out lot and we there’s a a coming bit probably system, of that a of that definitely of know to liquidities be little to might higher XX% also little XXX%. that mean from south ratio want target a XX%. gravitate bit understand

Eric Spector

Yes, okay. And makes sense, Yes, you makes mortgage sense. more on can color just the then market. just provide

little You early but trending. in bit kind the how think did paper in you just gain the sale, marks, about portfolio a are of margins third versus how trending on volumes are how and and quarter

Alan Villalon

Yes.

I'd So margins volumes do in are as I'd they'll in the similar pretty quarter and there. say third too. the stable second they be say

outlook comes we're see the snow probably and in the going that Minnesota, quarter. again, quarter similar in downtick early then snow in is sometimes third unfortunately the But to fourth Minnesota. Our in when it comes

Eric Spector

what’s in you CRE And for Have to competition able yields new trending makes there? loan yields raid segments. are just and other Yes, and new then – been how the push sense. loans

Jim Collins

that I are general say would pushing they little bit. a up in

more banks better have pricing. the or little which currently pulling a in that down, more slowing know, You out there's the market are is banks are bit allowing and

more is So, a little on down half happened I will are probably just tightening bit the banks month screws is think that a and still more and probably production. the last continue and

Eric Spector

quarter. a good on Great, me. all you it congrats right, and that's for Thank

Alan Villalon

Thank you.

Operator

Damon next from you. question go of the today from comes KBW. Damon ahead. The please DelMonte Thank line

now is line open. Your

Damon DelMonte

well everybody's Hope everybody. morning good today. doing Hey,

Katie Lorenson

Damon. Hey

Damon DelMonte

Hey Al.

you, Just wanted off to a for start actually. with question

accreditable On about was quarter I the yield you the that of think margin, noted this points transaction. X from basis there recent

than was first model thought going kind I So level similar should just we a lower little a bit forward? quarter of that.

Alan Villalon

the about points it about think accretion that, to Metro margin Bank to I we've is Yes, Yes. acquisition. would four guided way from previously the Phoenix so two around basis

loan is which difference we in in a coming off about the deals. quarter, you the basis see typically points in four three pay sometimes or had is quarter, these from So

Damon DelMonte

a four quarter. two so it, like points or more Got okay basis

it's sense. – kind did then, direction And makes with know to did I Okay, regards that seems lower. it – margin still And to you you trend of of like think answer your going questions here, the say the like you months you the last couple end in year see that monthly you this margin to your by the other of stabilizing. of of like could the one

Alan Villalon

that's I I we're Actually going that's it's rebound. think – what Yes, to what on. commented

was quarter delay the thought – be one that we So more going quite bit previously down to a fed now rebound. we quarter but to the pipe, hikes rebound, a the saw rain given where little on came this right feds two to that of

So quarter. fourth see in the of more kind that happen we'll

Damon DelMonte

kind position, you just remind in you're And rates Okay. then the cut can you be margin? the us to of fed benefit how see XXXX, going your to to were if positioned immediate given would

Alan Villalon

high single in we’ll XXX I'd say somewhere our Yes, a basis digits see so you go down, see improvement know, in ALN [ph] you'll in NII. modeling that typically rates when points,

annualized So, but an that's on basis.

there. there loan being addressing positive on maintaining big thing discipline So but the the able then side still and our to rate – also pricing is the side, assets cut

into that's favor. where So LIBOR our our sensitivity plays

Damon DelMonte

Got on outlook. provision one okay. then just And last the question it,

couple growth in loan meaningful the you second strong bit to a needing think limited reserve, visibility credit that next prospect discontinued just a any to quarters. here and the trends slow half any the on would reserve you're and with in know You probably NPL going book formation, underlying be

Karin Taylor

Hi Damon. is Karin. This

really You think know, with what the… on happens going it's to I depend

Damon DelMonte

Karin. Hi

Karin Taylor

Hi there.

your loan forecast. driver be really related the to that here if And environment would I see think a certainly moderate to it’s going second to then happens point, the with not growth, half, in that probably macro have the we what on provisioning. and depend significant know you

Damon DelMonte

it. Got

much. helpful. very you Thank Okay, that's

Alan Villalon

Damon. Thanks,

Operator

Instructions]. [Operator you. Thank

follow-up Hovde. line Please next Our go – is question Ben open. from today comes from Ben, no a question Gerlinger ahead. is your

Ben Gerlinger

Thanks.

Alan Villalon

Ben. back Welcome

Ben Gerlinger

a – of up to wasn't add I some figured ask figured hi. value. kind probably yeah, shareholder it’ll but I this follow I in going call,

franchise. a Karin enhancing core the half the task ago. took specifically role main about deposit was like and more this year So, bank, biggest you and a I feel

phenomenal, with any rates relationships rates get are pretty we the have have relative half be opportunity But you I a bank and you good especially mean, what looking potentially made people past in course saying assess just XXX you core, the and years, new rather you've think points should shop guys then the indicators couple performance you and to than put the once income place the seem you moving at to over could done lowered? the year up that really job. the But their in key that had. a fee the are front of of of core hires to again, there over are past basis

Karen Bohn

Thanks the standpoint client ourselves even bankers, on your we as is and tremendous on commercial the organic environment. terms professionals this we focus and is to why. Ben growth I bank in Very in historically. segments. think of got question, priority Building much reason support you and an our to you've look analysis selection opportunity, those, positioning on where if strong well bringing focused experienced and a are spot much From as believe for focused wealth then over specific very

deposit, successes. seeing commercial that we're the is will the both seeing and banking, side, can And and the So we success that absolute growth relationship transactional lending, the our Full value responsive not bank already view business. can way fast forward on those relationships, that bring client the to the think evidence really growth. that private wealth I going become you be relationship is the early and wealth

that Certainly from their long they and and rate be doing credits are environment, been relation they are coming the of over banker Does And looking a time. maturity. they've refinance and answer a that to period question with coming to for follow in are Ben? your going this that with loans those will work opportunities

Ben Gerlinger

the just is cultures the and of it like you kind that, have, following Yes, seems people off intact.

we verticals in terms Are or any probably that have In higher relationships. fact, on could the deepening of upgraded see in add the not personnel. might there you you additional or any potential already than that

Alan Villalon

be have not to to continue already more up verticals. I additional that ones, can we going those the expand will we to one. additional build handle probably we've verticals as Yes, started but any talent in adding success. to We're

overstaff, start the all we're add pool the as segments to in winning over to place. certainly but going not So talent going ready we're to various we staff keep

Ben Gerlinger

I And XX continuous correct? month, a like XX that's plan. assume not It's a or

Alan Villalon

Yes, no continuous. that's

some you well kind think but are I be kind as in mid-market commented of banking deposit and verticals. growth, hires, the earlier, know about those to synergistic the, they key our strategic continue wealth, and those of specifically talking on to of we’ll private like are I gathering key loans as verticals those I'm we verticals as

not only private commercial of and lot C&I, about but private original We'll and – mortgage. wealth become to those core find relationships a and in in core your question in banking, in are they success

that So where that's is – growth. those growth over all core you you those that a can that see can clearly see and areas going

Ben Gerlinger

That’s helpful color. Thank you.

Karen Bohn

Ben. Thanks

Operator

our would you. Thank so additional over waiting, any no this remarks. the like [Operator closing questions There concludes turn question-and-answer Lorenson Instructions]. for session. are back I conference to to Katie

Katie Lorenson

the listening, questions. thank you, and you to Thank you thank you this for for and Thank joining for call morning. everyone our

top term substantial Our unique long retaining differentiator for serving diversified and as and is business a well highly talent. clients, in our shareholder, our driving as attracting value model

client and clients mindset to members thank us our shareholders for your our team the trust and put focus. We for that service you and in you our

to Alerus the national term us benefits top wealth returns a providers, helping For top shareholder and tier commercial bank evolve and and performance. retirement performing long in into delivering

a and Thank day! have great you everyone

Operator

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

may You disconnect. now

Alerus Financial (ALRS) 29 Jul 232023 Q2 Earnings call transcript