Hello, everyone, and welcome to the Alerus Financial Corporation earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there'll 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. 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. 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 25th 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 continue to emphasize the recurring non-capital 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 in prior year levels. Mortgage production headwinds continued during the quarter and gain on sale margins hit a low point. Pipelines were robust coming into the third quarter, and our team members and clients were able to close many of the opportunities before the quarter end. Loan growth continues to be very planful and purposeful. More than four years ago, the company began to restructure the credit team and establish a robust credit infrastructure. We have invested in expertise and significantly improved our risk management. We have, and continue to add and retain talented producers who deeply understand the segment they work in and their clients' businesses. We are focused on client selection and diversification. While we remain disciplined in credit underwriting and deal selection, we will also continue to attract talent to our franchise as we are uniquely well positioned for sustainable and profitable growth. Alerus presents a compelling opportunity for teams and professionals to have continued success through the current and upcoming economic cycles. We have strong capital levels and resilient revenues to support superior loan growth. We are well-diversified in our loan portfolio and well-positioned in strong geographic markets. Our regulatory capital levels remain robust, with fully funded reserves of 1.51%, excluding the Metro Phoenix Bank portfolio. Lastly, we have long prioritized core deposits and maintaining a strong core funding base, as evidenced by our loan-to-deposit ratio of 78%. With that, I will hand it off to Al to discuss the financial details of the quarter. Thanks, Katie. I'll start my commentary on page 14 of our investor deck that is posted on the investor relations part of our website. For the third quarter of 2022, reported average loans increased 23.1% on a linked-quarter basis. Excluding the impact of PPP and Metro, average core loans increased 8.1% on a linked-quarter basis, which was in line with the guidance provided. The increase in core average loans was driven by 10.3% growth in CRE and 3.8% growth in C&I. We saw a pickup in commercial loan demand as clients pulled forward loan growth in anticipation of further rate hikes. Excluding the impact of Metro, average deposits declined 2.7% on a linked-quarter basis due to a seasonal decline in interest-bearing deposits in the second quarter that lingered into the third quarter. While average balances were down in the quarter, we did see the typical seasonal increase during the fall as end-of-period core deposits, excluding Metro, were up 1.7%. Turning to page 15. Credit continues to remain very strong. We had net charge-offs of 7 basis points in the third quarter, which showed no change from the prior quarter. Our non-performing assets percentage was 17 basis points compared to 16 basis points in the prior quarter. Our allowance is 1.34, 1.34% of period-end loans, which included the acquisition of Metro Phoenix Bank. On page 16, our core funding mix remains very strong. We saw a small increase in our cost of funds due to rising interest rates. Given the further rise in interest rates, we have responded by increasing our deposit rates more recently. We have been strategic in lagging our deposit costs in this rapidly rising interest rate environment. However, we are seeing more competitive pressures, and we have started to respond by offering competitive deposit rates. Despite the competitive pressures, our funding base remains very strong and sticky as our loan-to-deposit ratio is at 78.3%. On page 17, our capital base remains very strong as our common equity Tier 1 ratio is at 13.6%. As a frame of reference, the median common equity Tier 1 for the largest financial institutions subjected to the Dodd-Frank Act Stress Test was 8.0%. On this slide, you'll also notice that we have over $2 billion in potential liquidity. Given increasing concerns of potential economic uncertainty, we are well positioned from both a capital and liquidity standpoint. Turning to page 18 are some key revenue metrics. On a reported basis, net interest income increased 24.3% on a linked quarter basis. Excluding the impact of PPP and Metro, net interest income increased 5.7%, mainly due to higher loan growth and higher net interest margin. Non-interest income declined 7.6% on a linked quarter basis due to lower mortgage and wealth management and slightly higher retirement revenues. This was a little worse than expected as the markets and higher mortgage rates pressured these segments again. I'll go into further detail about those segments in later slides. Turning to page 19. Net interest margin was 3.21% in the second quarter, an increase of 23 basis points from the prior quarter. There was no purchase account accretion in the reported net interest margin. Excluding the impact of Metro, our core net interest margin was 3.04%, an increase of 6 basis points from the prior quarter, which is consistent with the guidance we gave of margin expansion. Core net interest margin benefited from higher investment portfolio yields along with higher loan yields from our commercial real estate and C&I portfolios. Turning to page 20. $978 million or over 42% of our loans are floating, as you can see at the top left of the slide. As you see, almost all of our variable loans are above their stated floors or have no floors. On the bottom left, you can see a waterfall of net interest income and net interest margin. Better volumes and rate, as previously mentioned, positively impacted our results. On page 21, I'll provide some highlights on our retirement business. AUM declined 3.8% due mainly to market volatility, with S&P 500 and Aggregate Bond Index both down 5.3% in the third quarter. While AUM declined, we did see the number of participants increase to approximately 457,000 versus 450,000 in the prior quarter. Revenues increased 1.9% from the prior quarter due to a one-time document restatement fee of $721,000 from the SECURE Act. Turning to page 22, you can see highlights of our wealth management business. Revenues declined approximately $700,000 from the prior quarter as lower insurance sales, brokerage commissions, and AUM levels impacted our results. AUM declined 17.2% from the prior quarter, mainly due to decrease in custody assets from a temporary account. The temporary custody account was related to the sale of a business by one of our commercial clients. Executing on our One Alerus strategy, the team converted numerous participants into wealth management opportunities. Going forward, the custody account rolled off, but the annualized revenue picked up from these wealth management opportunities will exceed the custody revenue. Excluding this custody deal, AUM declined 2.8% due to market volatility. Turning to page 23, I'll talk about our mortgage business. Mortgage revenues declined $2.3 million from the prior quarter due to lower originations and gain on sale margin as the environment remained challenged. Mortgage originations decreased approximately 15% from the prior quarter as the mortgage banker's purchase index saw a similar decline of approximately 19%. While originations are tracking slightly higher than 2019 levels, the environment has become more challenging as the 30-year mortgage has eclipsed 7%. Lastly, turning to page 24 is an overview of our non-interest expense. During the quarter, non-interest expense increased 7% mainly due to the inclusion of Metro. We also saw an increase in professional fees due to higher M&A expenses of $1.8 million in the quarter. Other expenses increased as a result of higher provision for unfunded commitments, as we saw an increase in commitments related to the growth in commercial real estate. This higher provision will be part of other expenses upon implementation of CECL in 2023. Excluding the impact of Metro and merger-related costs, non-interest expenses were down 0.4%, which was in line with our expectations of core expenses being flat over the prior quarter. Now I'll provide some forward-looking guidance for the fourth quarter. We are expecting loan growth on an average balance basis to moderate in the quarter. While we expect growth in our Arizona market, especially with Metro, we expect some headwinds in our more seasoned markets. We saw some pull forward of loan growth in the third quarter ahead of further rate hikes, as we have previously experienced loan growth of 18.2%, excluding Metro and PPP since the end of 2021. We expect net interest margin to be stable. We are anticipating rising deposit costs due to further Fed rate hikes while offsetting improvement from loan yields. We do expect 3-5 basis points of loan accretion from the Metro deal. On the fee income side, we expect the following. Mortgage volumes will likely decrease in 4Q as we only expect $800 million of total originations for 2022. We typically see a seasonal slowdown in the Twin Cities in the fourth quarter. The seasonal slowdown, coupled with higher mortgage rates and continued low inventory levels in the Twin Cities, will continue to pressure our mortgage business. Wealth revenues will be stable as we're not anticipating any equity or bond market growth. Then for retirement, excluding the one-time plan restatement fees from the SECURE Act and third quarter results, we expect retirement revenues to increase by low single digits. Credit. We expect credit to remain strong and continue to expect charge-offs to be below historic levels. Finally, on a reported basis, we expect non-interest expenses will be down mid-single digits. Overall, this decline in expenses will drive positive operating leverage in the fourth quarter. With that, let me open it up for Q&A. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question today comes from Jeff Rulis from D.A. Davidson. Your line is now open. Thank you. Good morning. Hey, Jeff. Morning. Wanted to follow up on the expenses. Katie, you mentioned, you know, it's been a focal point and I just wanted to make sure because it came right after the mortgage discussion. Is that tightening of expenses really focused on the mortgage unit or is it more broad-based sort of bank-wide? It is both, Jeff. Certainly from an immediacy standpoint in the mortgage division, but it has been initiatives and a focus throughout the company. Okay. You know, I think ex-merger costs, you know, inside of flat incrementally, you know, I think that's encouraging. The guide to somewhat lower in the fourth quarter. Just wanted to see as we roll into 2023 and not so much guidance, but just kind of get a frame of reference for that expense focus. I guess kind of remind us of the conversion timing. Is that complete? Do you have sort of cost savings or tailwinds that might drive I guess getting to a expense growth rate in 2023, any commentary about what we should be thinking about a little further out? Sure. We did complete the conversion and integration on September 17th this quarter. As we look at historically our company in terms of efficiency ratio, we have done a nice job managing that down. We believe there is continued capacity in this company to grow without adding incremental expense and continue to drive that efficiency ratio down. From a cost perspective for the Metro deal, we are tracking according to plan if not ahead of plan, and we'll continue to see some expense saves into 2023 from that transaction. Okay. Thank you. Just wanted to check in on the margin. You know, a lot going on. I trying to get a sense for the impact of Metro. I think they carried a little bit higher margin, you know, smaller in scale, but just wanted to see how that and how margin trended in the quarter. I know that you're speaking to sort of flattish margin sequentially in the fourth quarter. How does that trend kind of legacy margin versus as Metro was rolled in, just the puts and takes, would be helpful. Hey, Jeff, it's Al. Yeah. On our core margin, actually it expanded about six basis points quarter-over-quarter. You know, excluding the impact of Metro and PPP. We did see some margin expansion there on the core legacy books. You know, we are seeing very good loan yields come on our books, you know, especially with rising rates. We're able to lag deposit pricing again another quarter. With that being said, though, the guidance of, you know, stable margin is because we are seeing higher deposit costs coming in the markets now. In terms of Metro itself, you know, they do have a higher margin and came in at a higher margin than us, you know, and that's what lifted us up to about 3.21%. About 17 basis points. Al, gotcha. Your comment about having to increase deposit rates, did that come on later in the quarter or most recently, or was that sort of a process throughout the third quarter? It's very recent. We're, you know, it did not impact us in 3Q, and it's just, you know, more recent that we're actually now doing that. Okay. I appreciate it. Thank you. Welcome, Jeff. Again, if you would like to ask a question on today's call, please press star then one. Our next question today comes from Nathan Race from Piper Sandler. Please go ahead. Yep. Hi, everyone. Good morning. Thanks for taking the questions. A couple questions just on some of the balance sheet dynamics, as it relates to the margin outlook going forward. You know, curious if, you know, the plan for loan growth funding going forward is largely just going to be a function of securities portfolio cash runoff. I'm curious how much of that you have, per quarter in terms of coming off the securities book. If, you know, that can maybe help support, you know, some additional margins expansion into the first half of next year. Yep. Nate, the strategy on the balance sheet right now is we are running off some of our investment portfolio, you know, to the tune of, you know, I would say, you know, $30 million a quarter right now. You know, I'd like to get that percentage of earning assets from investments down some. That's gonna be funding and remixing toward to help support loan growth that we're seeing, especially both C&I, CRE. We'd like to remix that into there. There is gonna be a little bit lift that we're expecting because as we mix the investment side into more, you know, higher loan yielding side for us. Again, though, the thing I've been telling a lot of people, you know, with deposit costs, it's kind of like that beach ball being kept under water. It's being at the top now. We're seeing, you know, especially with a lot of banks out there with loan-to-deposit ratios north of 100%, you know, they're increasing deposit costs very rapidly right now. We're beginning to respond to that. Okay. Understood. Does that outlook, Al, kind of contemplate, you know, continued stable deposit balances? I think excluding, Metro Phoenix in the quarter, your legacy balances were stable. As you guys, you know, become a little bit more competitive on deposit pricing, how do you think that impacts your deposit growth prospects going forward? Yeah. You know, we are trying to be competitive in deposits because, you know, we definitely wanna make sure our deposit base stays, you know, with us. Also too, we would like to gather deposits. You know, we have a 78% loan to deposit ratio, but we know that other banks are trying to gear up to get deposits elsewhere, and we don't wanna be a source of funds for them. With that being said, though, you know, we are looking at maintaining our balances and growing them, and we are seeing the seasonal pickup, you know, in our deposit balances. Hence why I commented on the end of period deposits were up for us, you know, versus 2Q, ex-Metro. Gotcha. I apologize if you touched on it earlier. Just related to the retirement and benefit services growth outlook going forward. I think typically looking back over the last couple of years, you guys typically see an increase in 4Q within that line. Is that something that we can continue to expect into the fourth quarter this year? Just, you know, in terms of what you guys are doing within RB&S to make it a more durable and less market sensitive piece of the revenue pie going forward, what are kind of your expectations for RB&S revenue growth into 2023? Albeit I know we're in the early innings of kind of thinking about 2023 financials. Yeah. I think, you know, right now I don't think we have much to comment on 2023. You know, what we're looking at for the fourth quarter is, you know, low single digits increase in that segment. You know, we do know that there's some seasonality there as well, and that's incorporated in our numbers. You know, with that being said, we are starting up a little bit lower AUM base going into 2023. You know, we are actually having a commercial expansion strategy right now to expand and increase our One Alerus strategy to other commercial clients. That hopefully will provide some more revenue uplift for us as well. Yeah. I would add, Nate, in terms of we are focused more than ever on organic growth within that business unit. We've pulled levers that we haven't pulled historically in our company in terms of adding to our sales force, getting ourselves onto different platforms, as well as investing internal resource time in streamlining the onboarding of the clients and their client experience to reduce attrition. Certainly a number of levers there that we're pulling to not only sustain the levels of growth but continue to grow it. As we've talked about in previous calls, there is a natural organic component within that as we add plans and companies grow and add participants. That's another lever that just pushes the organic growth higher. Our planned sales, as I mentioned in my comments, as well as participants are up this year compared to prior years and exceeding expectations. Mm-hmm. Katie, are those new plan sales largely offsetting just the natural attrition of client assets that you guys typically see in retirement in RB&S? Yeah. I believe for the third quarter, they were, yes. Okay, great. Good to hear. I apologize for the housekeeping questions. The other fee income line was up about $500,000 or so versus the second quarter. Anything to call out there? Is that kind of run rate going forward? Flattish going forward. From the third quarter out? Yeah. Yes. Okay, great. Just maybe one last one. Just thinking about the outlook for the reserve going forward. You know, obviously credit continues to improve and you guys have very low levels of non-performing assets and criticized loans pretty much relative to any institution out there. So just curious, you know, should we expect provisioning to remain pretty negligible at least over the next couple of quarters? Or how are you guys thinking about maybe just providing some additional reserves just given the increasing macro uncertainty that exists today? I would say that, you know, our credit remains very healthy right now and strong. I mean, I think the expectations of, you know, minimal would be fair. With that being said, though, we are running CECL parallel right now, and we'll have, you know, a day one adjustment that will be coming in next year. And that's really gonna be dependent on that CECL day one adjustment will be dependent on what macro factors and Q&E factors are at the end of the quarter. Mm-hmm. Gotcha. One last one, just kind of longer term on the loan growth outlook. With all the recent hires you've made and with Jim coming on board, I guess what inning do you think we are in in terms of, you know, a number of those hires, you know, kind of hitting their stride, bringing over the relationships from their prior institutions and really kind of augmenting, you know, the long-term growth trajectory of Alerus from a loan and deposit growth perspective, I suppose? This is Jim Collins, I'll take that one. You know, as we brought in the CRE group, and we've bolstered the SBA group and fine-tuned that, those teams are off and running and looking really good. We will start bringing in additional talent towards the end of fourth quarter into first quarter of 2023 and really focusing on, you know, the C&I part of banking and broadening those relationships into our other cores of private banking and retirements. Going into first quarter is probably the most key part. Got it. Putting those pieces together, is it fair to assume that, you know, even with some macro slowdowns or a recession to some degree, you know, you guys still feel like just by pulling market share that you can generate maybe mid-single digit loan growth into 2023? Yes. Okay, great. I appreciate you guys taking all the questions. Thank you. Thank you. Thanks. Thanks. We have no further questions at this time, so that concludes our question and answer session. I would like to turn the conference back over to Katie Lorenson for any closing remarks. Thank you. Thank you everyone for joining our call this morning, and thank you for listening and for the questions. We wanna take this time to thank our Alerus team members for their tremendous hard work and dedication. Despite the higher than anticipated headwinds of mortgage, our diversified business model is proving its value as we grow our client base and continue to retain and expand clients with One Alerus wins. As we add scale and sustainably grow revenues, we remain committed to becoming more efficient and providing our clients with a fast and seamless experience. Our goal remains to maintain a top quartile return on equity and ultimately drive value creation while we continue to differentiate ourselves from the rest of the industry with our durable fee income and robust capital and long-term book value accretion. Thank you everyone and have a great day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your line.