Alerus Financial Corporation (NASDAQ:ALRS) Q3 2022 Earnings Conference Call October 27, 2022 12:00 PM ET

Company Representatives

Katie Lorenson - President, Chief Executive Officer

Jim Collins - Chief Banking and Revenue Officer

Al Villalon - Chief Financial Officer

Conference Call Participants

Jeff Rulis - D.A. Davidson

Nathan Race - Piper Sandler

Operator

Hello everyone! And welcome to the Alerus Financial Corporation Earnings Conference Call. [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. 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.

I would now like to turn the conference over to Alerus Financial Corporation, President and CEO, Katie Lorenson. Please go ahead.

Katie Lorenson

Thank you. Good morning, everyone, and thank you for dialing into our call today. Joining me today is Jim Collins, our Chief Banking and Revenue Officer and Al Villalon our CFO.

We ended the third quarter with net income of $9.6 million or $0.47 of earnings per share. Included in the quarter were $1.8 million of merger related expenses as we closed and converted the Metro Phoenix Bank acquisition during the quarter. Adjusted earnings per share, excluding the merger and integration related expenses, was $0.54 per share.

The integration of Metro Phoenix Bank marks a historic milestone as the company’s 25^th Acquisition and System Conversion. This strategic acquisition adds greater scale in the fastest growing major MSA in the country. We look forward to watching the team’s continued success in attracting more talent as one of the few community banks in the market.

Highlights for the quarter included strong production and continued NIM expansion. Our retirement and wealth management division saw a decline in assets, but revenues displayed their durability in the face of ongoing volatile markets.

We continued to emphasize the recurring noncapital intensive revenues of our fee income with over 80% of revenues in our retirement division tied to annual plan revenue and 87% of our wealth management revenue related to asset management and not transaction based.

Production in both business units is exceeding expectations than prior year levels. Mortgage production headwinds continued during the quarter and gain on sale margins hit a low point. We have and will continue to adjust for the decline in business through expense rightsizing. Expense management is a priority of the team and solid cost controls were evident again this quarter as expenses, excluding merger related and unfunded commitments tied to loan growth, were down for the quarter even while we added on the Metro team.