ALERUS FINANCIAL CORP
For the period ended Mar 31, 2025. Filed May 6, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 6, 2025
ALRS$33.81-0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0001437749-24-032818
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-06.
0001437749-25-014641
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 143 previous paragraphs and 130 current paragraphs.
87 unchanged; 39 reworded; 4 added; 16 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 81 previous and 80 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
In addition to the results presented in accordance with GAAP, the Company routinely supplements its evaluation with an analysis of certain non-GAAP financial measures. Management uses the non-GAAP financial measures presented in the tables below in its analysis of its performance, and believes financial analysts and investors frequently use these measures, and other similar measures, to evaluate capital adequacy and financial performance. Management, banking regulators, many financial analysts and other investors use these measures in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions.
Current report
Total noninterest income for the three months ended March 31, 2025 was $27.6 million, an increase of $2.3 million, or 9.1%, from the three months ended March 31, 2024. The increase in noninterest income was primarily driven by an increase of $0.8 million in wealth revenue, driven by new client growth and assets under administration/management growth. Retirement and benefit services revenue increased $0.5 million, driven by assets under administration/management growth. Other noninterest income increased $1.0 million, driven by increased swap fee income generated from commercial loan originations and increased fee income resulting from the HMNF transaction.
Current report
Retirement and Benefit Services
Current report
The Company’s loan portfolio is diversified. The following table presents the balance and percentage of loans outstanding by segment/industry as of the dates presented:
Removed paragraphs (16)
Previous report
The JOBS Act permits the Company an extended transition period for complying with new or revised accounting standards affecting public companies. The Company has elected to take advantage of this extended transition period, which means that the financial statements included in this report, as well as any financial statements filed in the future, will not be subject to all new or revised accounting standards generally applicable to public companies for the transition period for so long as the Company remains an emerging growth company or until the Company affirmatively and irrevocably opts out of the extended transition period under the JOBS Act.
Previous report
Business Combination
Previous report
On October 9, 2024, the Company completed the acquisition of HMNF and its wholly owned subsidiary, Home Federal Savings Bank. As a result of the transaction, HMNF merged with and into Alerus Financial Corporation, and Home Federal Savings Bank merged with and into Alerus Financial, National Association. The all-stock transaction was valued at approximately $128.8 million as of closing, based on the closing price of the Company’s common stock October 8, 2024, the trading day immediately preceding the closing of the merger, of $22.90. Former stockholders of HMNF received 1.25 shares of the Company’s common stock for each share of HMNF common stock, resulting in the issuance of 5,547,658 shares of the Company’s common stock. The merger was structured to qualify as a tax-free reorganization for HMNF’s stockholders. Following the transaction, former stockholders of HMNF now hold approximately 21.9% of the Company’s outstanding common stock.
Previous report
During the three and nine months ended September 30, 2024, the Company incurred $1.7 million and $2.3 million, respectively, in pre-tax acquisition expenses related to the acquisition of HMNF, comprised of legal and professional fees included in professional fees and assessments expense in the consolidated statements of income.
Previous report
In addition to the results presented in accordance with GAAP, the Company routinely supplements its evaluation with an analysis of certain non-GAAP financial measures. These non-GAAP financial measures include the ratio of tangible common equity to tangible assets, adjusted tangible common equity to tangible assets, tangible book value per common share, return on average tangible common equity, efficiency ratio, pre-provision net revenue, adjusted noninterest income, adjusted noninterest expense, adjusted pre-provision net revenue, adjusted efficiency ratio, adjusted net income, adjusted return on average assets, adjusted return on average tangible common equity, net interest margin (tax-equivalent), and adjusted net interest margin (tax-equivalent). Management uses these non-GAAP financial measures in its analysis of its performance, and believes financial analysts and others frequently use these measures, and other similar measures, to evaluate capital adequacy. Management calculates: (i) tangible common equity as total common stockholders’ equity less goodwill and other intangible assets; (ii) adjusted tangible common equity as total common stockholders’ equity less goodwill, other intangible assets, and cash proceeds from BTFP; (iii) tangible book value per common share as tangible common equity divided by shares of common stock outstanding; (iv) tangible assets as total assets, less goodwill and other intangible assets; (v) return on average tangible common equity as net income adjusted for intangible amortization net of tax, divided by average tangible common equity; (vi) efficiency ratio as noninterest expense less intangible amortization expense, divided by net interest income plus noninterest income plus a tax-equivalent adjustment; (vii) pre-provision net revenue as net interest income plus noninterest income less noninterest expense; (viii) adjusted noninterest income as noninterest income less BOLI mortality proceeds less gain on sale of ESOP trustee business less net gain on sale of premises and equipment; (ix) adjusted noninterest expense as noninterest expense less HMNF merger- and acquisition-related expenses less severance and signing bonus; (x) adjusted pre-provision net revenue as net interest income plus adjusted noninterest income less adjusted noninterest expense; (xii) adjusted efficiency ratio as adjusted noninterest expense less intangible amortization expense, divided by net interest income plus adjusted noninterest income plus a tax-equivalent adjustment; (xiii) adjusted net income as net income less adjusted noninterest income items net of tax plus adjusted noninterest expense items net of tax; (xiv) adjusted return on average assets as adjusted net income divided by average total assets; (xv) adjusted return on average tangible common equity as adjusted net income adjusted for intangible amortization net of tax, divided by average tangible common equity; (xvi) adjusted net interest margin (tax equivalent) as net inter…
Excerpt shortened here; the source contains the full paragraph.
Previous report
Net income for the nine months ended September 30, 2024, was $17.8 million, or $0.89 per diluted common share, a $8.6 million, or 32.5%, decrease compared to $26.5 million, or $1.30 per diluted common share, for the nine months ended September 30, 2023. Earnings for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 decreased primarily due to an $8.7 million increase in noninterest expense and a $5.6 million increase in provision for credit losses. This negative result was partially offset by a $2.5 million increase in net interest income and a $1.6 million increase in noninterest income.
Previous report
Net interest income for the nine months ended September 30, 2024 was $68.8 million, an increase of $2.5 million, or 3.7%, compared to $66.3 million for the nine months ended September 30, 2023. Net interest income for the first nine months of 2024 increased compared to the first nine months of 2023 primarily due to a $34.1 million increase in interest income, as average interest earning assets increased $450.3 million while the average interest earning asset yield increased 64 basis points. This was partially offset by the increased cost of interest-bearing liabilities as interest expense increased $31.6 million, mainly driven by an increase of 89 basis points in the average rate paid on interest-bearing liabilities. In addition, the average balance of interest-bearing liabilities increased $520.4 million. The increase in interest earning assets was primarily due to organic loan growth and increased cash balances from deposit growth and BTFP borrowings. The increase in interest-bearing liabilities was due to core deposit growth, a shift from noninterest-bearing deposits to interest-bearing deposits and BTFP borrowings.
Previous report
The high target federal funds interest rate continues to pressure funding costs. However, the Company anticipates that net interest income and net interest margin (on an adjusted tax equivalent basis) will increase in future periods as the impact of recent and anticipated interest rate cuts lower funding costs and fixed interest rate derivatives mature.
Previous report
Total noninterest income for the three months ended September 30, 2024 was $28.4 million, a slight decrease of $44 thousand, or 0.2%, from the three months ended September 30, 2023. The decrease in noninterest income was primarily driven by a decrease of $2.5 million in retirement and benefit services revenue, driven by the divestiture of the Employee Stock Ownership Program (“ESOP”) trustee business included in the three months ended September 30, 2023, which resulted in a recognized gain of $2.8 million. This decrease was partially offset by a $1.4 million increase in wealth management revenue, primarily due to assets under administration/management growth as well as a $0.8 million increase in other noninterest income, primarily due to a gain on the sale of fixed assets related to the sale of the Shorewood, Minnesota branch in the western suburbs of the Twin Cities as well as increased client swap fees.
Previous report
Total noninterest income for the nine months ended September 30, 2024 was $81.1 million, a $1.6 million, or 2.0%, increase compared to $79.4 million for the nine months ended September 30, 2023. The increase in noninterest income was primarily driven by an increase of $3.2 million in wealth management revenue due to assets under administration/management growth, primarily driven by improved equity and bond markets. Other noninterest income increased $0.4 million, primarily driven by a gain on the sale of fixed assets related to the sale of the Shorewood, Minnesota branch. This increase was partially offset by a $2.1 million decrease in retirement and benefits services, primarily driven by the divestiture of the ESOP trustee business included in the nine months ended September 30, 2023, which resulted in a recognized gain of $2.8 million.
Previous report
The Company anticipates that noninterest income will continue to be adversely affected in future periods if interest rates remain higher than in periods prior to the Fed's rate hikes beginning in 2022 and inflationary pressure continues. These factors have adversely affected mortgage originations and mortgage banking revenue in recent periods. The Company believes mortgage revenue will increase in future periods as a result of recent and anticipated interest rate cuts.
Previous report
Total noninterest expense for the nine months ended September 30, 2024 was $120.2 million, a $8.7 million, or 7.8%, increase compared to $111.5 million for the nine months ended September 30, 2023. The increase was primarily driven by increases of $4.2 million in professional fees and assessments, $3.6 million in compensation, and $1.3 million in employee taxes and benefits expense. The increase in professional fees and assessments was primarily due to increased merger-related expenses in connection with the acquisition of HMNF and an increase in FDIC assessments. The increase in compensation expense was primarily due to rising labor costs. The increase in employee taxes and benefits expense was primarily due to increased costs related to group insurance and payroll taxes. These increases were partially offset by a $0.5 million decrease in business services, software and technology expense primarily due to reduced core processing and information technology hardware expenses.
Previous report
Retirement and Benefits Services
Previous report
The Company’s loan portfolio is highly diversified. As of September 30, 2024, approximately 19.9% of loans outstanding were commercial and industrial, 47.3% of loans outstanding were CRE, 2.8% of loans outstanding were agricultural, and 30.0% of loans outstanding were consumer.
Previous report
Despite headwinds from a higher interest rate environment and competition in the Company’s market areas, the Company anticipates continued loan growth in the remainder of 2024 for the commercial and industrial and CRE loan portfolios as a result of recently added production talent.
Previous report
$25.0 million of the increase in nonaccrual loans was driven by one construction, land and development loan moving to nonaccrual status in the second quarter of 2024 and an additional advance on the same loan in the third quarter of 2024. During the third quarter of 2024, management elected to make protective advances in order for construction to continue on that project. Management is actively working with the borrower on strategies to complete construction, preserve value and support repayment of the loan. A large RRE relationship and one non-owner occupied CRE loan moving to nonaccrual status also contributed $13.6 million to the increase in nonaccrual loans during the third quarter of 2024.
Reworded paragraphs (39)
Previous wording
The following discussion explains the Company’s financial condition and results of operations as of and for the three and nine months ended September 30, 2024 and 2023*. Annualized results for this interim period may not be indicative of results for the full year or future periods. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes presented elsewhere in this report and the Company*’s Annual Report on Form 10-K for the year ended December 31, 2023*, filed with the SEC on March 8, 2024.*
Current wording
The following discussion explains the Company’s financial condition and results of operations as of and for the three months ended March 31, 2025 and 2024*. Annualized results for this interim period may not be indicative of results for the full year or future periods. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes presented elsewhere in this report and the Company*’s Annual Report on Form 10-K for the year ended December 31, 2024*, filed with the SEC on March 14, 2025.*
Previous wording
The Company is a commercial wealth bank and national retirement services provider headquartered in Grand Forks, North Dakota. Through the Company’s subsidiary, Alerus Financial, National Association, the Company provides financial solutions to businesses and consumers through three distinct business lines—banking, retirement and benefit services, and wealth management. These solutions are delivered through a relationship‑oriented primary point of contact along with responsive and client‑friendly technology.
Current wording
The Company is a commercial wealth bank and national retirement services provider headquartered in Grand Forks, North Dakota. Through the Company’s subsidiary, Alerus Financial, National Association, the Company provides financial solutions to businesses and consumers through three distinct business lines—banking, retirement and benefit services, and wealth. These solutions are delivered through a relationship‑oriented primary point of contact along with responsive and client‑friendly technology.
Previous wording
The Company’s business model produces strong financial performance and a diversified revenue stream, which has helped the Company establish a brand and culture yielding both a loyal client base and passionate and dedicated employees. The Company generates a majority of overall revenue from noninterest income, which is driven primarily by the Company’s retirement and benefit services and wealth management business lines. The remainder of the Company’s revenue consists of net interest income, which the Company derives from offering traditional banking products and services.
Current wording
The Company’s business model produces strong financial performance and a diversified revenue stream, which has helped the Company establish a brand and culture yielding both a loyal client base and passionate and dedicated employees. The Company generates a majority of overall revenue from noninterest income, which is driven primarily by the Company’s retirement and benefit services and wealth business lines. The remainder of the Company’s revenue consists of net interest income, which the Company derives from offering traditional banking products and services.
Previous wording
Critical accounting policies are defined as those that are reflective of significant judgements and uncertainties and could potentially result in materially different results under different assumptions and conditions. In preparing the Company’s consolidated financial statements, management is required to make significant estimates and assumptions that affect assets, liabilities, revenues, and expenses reported. Actual results could differ materially from our current estimates as a result of changing conditions and future events. Several estimates are particularly critical and are susceptible to significant near term change, including (i) the ACL, including the ACL on investment securities, loans, and unfunded commitments; (ii) goodwill and intangible assets impairment; and (iii) fair value measurements.
Current wording
Critical accounting policies are defined as those that are reflective of significant judgements and uncertainties and could potentially result in materially different results under different assumptions and conditions. In preparing the Company’s consolidated financial statements, management is required to make significant estimates and assumptions that affect assets, liabilities, revenues, and expenses reported. Actual results could differ materially from our current estimates as a result of changing conditions and future events. Several estimates are particularly critical and are susceptible to significant near term change, including (i) the ACL, including the ACL on investment securities, loans, and unfunded commitments; (ii) goodwill impairment; and (iii) fair value of loans acquired in business combinations.
Previous wording
There have been no material changes to the Company’s critical accounting policies from those disclosed within its Annual Report on Form 10-K for the year ended December 31, 2023. Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of the Company’s critical accounting policies.
Current wording
The Company’s Annual Report on Form 10-K for the year ended December 31, 2024 includes a discussion of the Company’s critical accounting policies. There have been no material changes to the Company’s critical accounting policies from those disclosed within its Annual Report on Form 10-K for the year ended December 31, 2024.
Previous wording
On July 1, 2024, the Company entered into a purchase agreement to sell its South Fargo branch in Fargo, North Dakota. The completion of the sale of this facility is likely to occur in 2024, and the Company expects to record a gain on the sale upon closing, since the purchase price of $5.1 million is greater than the property’s carrying value of approximately $1.7 million. The Company’s West Fargo, North Dakota branch is listed for sale for $3.8 million and is expected to sell within the next 12 months. At September 30, 2024, the facility included assets with a carrying value of approximately $0.4 million. The Company expects to record a gain on the sale upon closing, as the expected sale price is greater than the property’s carrying value.
Current wording
The Company’s West Fargo, North Dakota branch is listed for sale for $3.8 million and is expected to sell within the next 12 months. At March 31, 2025, the facility had a carrying value of approximately $0.4 million. The Company expects to record a gain on the sale upon closing, as the expected sale price is greater than the property’s carrying value.
Previous wording
Net income for the three months ended September 30, 2024, was $5.2 million, or $0.26 per diluted common share, a $4.0 million, or 43.2%, decrease compared to $9.2 million, or $0.45 per diluted common share, for the three months ended September 30, 2023. Earnings for the third quarter of 2024 compared to the third quarter of 2023 decreased primarily due to a $5.2 million increase in noninterest expense and $1.7 million increase in provision for credit losses. This negative result was partially offset by a $2.1 million increase in net interest income.
Current wording
Net income for the three months ended March 31, 2025, was $13.3 million, or $0.52 per diluted common share, a $6.9 million, or 107.0%, increase compared to $6.4 million, or $0.32 per diluted common share, for the three months ended March 31, 2024. Earnings for the first quarter of 2025 compared to the first quarter of 2024 increased primarily due to an $18.9 million increase in net interest income and a $2.3 million increase in noninterest income. This positive result was partially offset by an $11.3 million increase in noninterest expense.
Previous wording
Net interest income is the difference between interest income and yield related fees earned on assets and interest expense paid on liabilities. Net interest margin is the difference between the yield on interest earning assets and the cost of interest-bearing liabilities as a percentage of interest earning assets. Net interest margin is presented on a tax-equivalent basis, which means that tax-free interest income has been adjusted to a pre-tax-equivalent income, assuming a federal income tax rate of 21% for the three and nine months ended September 30, 2024 and 2023.
Current wording
Net interest income is the difference between interest income and yield related fees earned on assets and interest expense paid on liabilities. Net interest margin is the difference between the yield on interest earning assets and the cost of interest-bearing liabilities as a percentage of interest earning assets. Net interest margin is presented on a tax-equivalent basis, which means that tax-free interest income has been adjusted to a pre-tax-equivalent income, assuming a federal income tax rate of 21% for the three months ended March 31, 2025 and 2024.
Previous wording
Net interest income for the three months ended September 30, 2024 was $22.5 million, an increase of $2.1 million, or 10.5%, compared to $20.4 million for the three months ended September 30, 2023. Net interest income for the third quarter of 2024 increased compared to the third quarter of 2023 primarily due to a $10.2 million increase in interest income, as interest earning assets increased $486.2 million while the average interest earning asset yield increased 46 basis points. This was partially offset by the increasing cost of interest-bearing liabilities as interest expense increased $8.0 million, mainly driven by an increase of 48 basis points in the average rate paid on interest-bearing liabilities. In addition, the average balance of interest-bearing liabilities increased $525.6 million. The increase in interest earning assets was primarily due to organic loan growth and increased cash balances from deposit growth and BTFP borrowings. The increase in interest-bearing liabilities was due to core deposit growth, a shift from noninterest-bearing deposits to interest-bearing deposits and BTFP borrowings.
Current wording
Net interest income for the three months ended March 31, 2025 was $41.2 million, an increase of $18.9 million, or 85.2%, compared to $22.2 million for the three months ended March 31, 2024. Net interest income for the first quarter of 2025 increased compared to the first quarter of 2024 primarily due to a $19.1 million increase in interest income, as average interest earning assets increased $1.0 billion while the average interest earning asset yield increased 58 basis points. This was partially offset by the increasing cost of interest-bearing liabilities as interest expense increased $0.2 million, mainly driven by an $806.6 million increase in the average balance of interest-bearing liabilities, which was largely offset by a 70 basis point decline in the average rate paid on interest-bearing liabilities. The increase in interest earning assets was primarily due to acquired earning assets in the HMNF transaction, strong organic loan growth at higher yields, and purchase accounting accretion. The increase in interest-bearing liabilities was due to the increase in interest-bearing deposits stemming from the acquisition of HMNF and organic deposit growth.
Previous wording
Net interest margin (on a tax-equivalent basis) for the three months ended September 30, 2024 was 2.23%, compared to 2.27% for the same period in 2023. The decrease in net interest margin (on a tax-equivalent basis) was mainly attributable to higher earning assets at lower yields resulting from the BTFP funding as those proceeds were held at the Federal Reserve Bank. Adjusted net interest margin (on a tax-equivalent basis) (non-GAAP), which excludes BTFP borrowings and purchase accounting accretion, was 2.35% for the third quarter of 2024, a 11 basis point increase from 2.24% for the third quarter of 2023.
Current wording
Net interest margin (on a tax-equivalent basis) for the three months ended March 31, 2025 was 3.41%, compared to 2.30% for the same period in 2024. The increase in net interest margin (on a tax-equivalent basis) was mainly attributable to higher rates on interest earning assets from organic loan growth and the HMNF acquisition, purchase accounting accretion, and lower rates paid on deposits.
Previous wording
The following table presents average balance sheet information, interest income, interest expense and the corresponding average yields on assets, average yields earned, and rates paid for the three and nine months ended September 30, 2024 and 2023. The Company derived these yields and rates by dividing income or expense by the average balance of the corresponding assets or liabilities. The Company derived average balances from the daily balances throughout the periods indicated. Average loan balances include loans that have been placed on nonaccrual status, while interest previously accrued on these loans is reversed against interest income. In these tables, adjustments are made to the yields on tax‑exempt assets in order to present tax‑exempt income and fully taxable income on a fully taxable equivalent (“FTE”) basis.
Current wording
The following table presents average balance sheet information, interest income, interest expense and the corresponding average yields on assets, average yields earned, and rates paid for the three months ended March 31, 2025 and 2024. The Company derived these yields and rates by dividing income or expense by the average balance of the corresponding assets or liabilities. The Company derived average balances from the daily balances throughout the periods indicated. Average loan balances include loans that have been placed on nonaccrual status, while interest previously accrued on these loans is reversed against interest income. In these tables, adjustments are made to the yields on tax‑exempt assets in order to present tax‑exempt income and fully taxable income on a fully taxable equivalent (“FTE”) basis.
Previous wording
The provision for credit losses was made up of the following components for the periods presented:
Current wording
The provision for credit losses was comprised of the following components for the periods presented:
Previous wording
The Company recorded a provision for credit losses of $1.7 million for the third quarter of 2024, compared to no provision for the third quarter of 2023. The increase in the provision for credit losses was primarily driven by loan growth and an increase in nonaccrual loans.
Current wording
The Company recorded a provision for credit losses of $0.9 million for the first quarter of 2025, compared to no provision for the first quarter of 2024. The increase in the provision for credit losses was primarily driven by loan growth.
Previous wording
The Company’s noninterest income is generated from retirement and benefit services, wealth management, mortgage banking, and other general banking services.
Current wording
The Company’s noninterest income is generated from retirement and benefit services, wealth, mortgage banking, and other general banking services.
Previous wording
The following table presents the Company’s noninterest income for the three and nine months ended September 30, 2024 and 2023:
Current wording
The following table presents the Company’s noninterest income for the three months ended March 31, 2025 and 2024:
Previous wording
The following table presents noninterest expense for the three and nine months ended September 30, 2024 and 2023:
Current wording
The following table presents noninterest expense for the three months ended March 31, 2025 and 2024:
Previous wording
Total noninterest expense for the three months ended September 30, 2024 was $42.4 million, a $5.2 million, or 13.9%, increase compared to $37.3 million for the three months ended September 30, 2023. The year over year increase was primarily driven by higher professional fees and assessments, compensation, and employee taxes and benefits expenses. Professional fees and assessments increased primarily due to increased merger-related expenses of $1.7 million in connection with the acquisition of HMNF and an increase in FDIC assessments. Compensation expense increased primarily due to increased labor costs. Employee taxes and benefits expense increased primarily due to increased costs related to group insurance.
Current wording
Total noninterest expense for the three months ended March 31, 2025 was $50.4 million, an $11.3 million, or 29.1%, increase compared to $39.0 million for the three months ended March 31, 2024. The year over year increase was primarily driven by higher compensation expense, employee taxes and benefits expense, intangible amortization expense, professional fees and assessments, and occupancy and equipment expense. Professional fees and assessments increased primarily due to increased merger-related expenses of $1.7 million in connection with the acquisition of HMNF and an increase in FDIC assessments. Compensation expense and employee taxes and benefits expense increased primarily due to increased head count resulting from the HMNF transaction and talent acquisition hires throughout 2024. Intangible amortization expense increased primarily due to the $33.5 million core deposit intangible recorded in connection with the HMNF acquisition. Occupancy and equipment expense increased primarily due to increased branch footprint resulting from the HMNF acquisition.
Previous wording
For the three months ended September 30, 2024, the Company recognized income tax expense of $1.6 million on $6.8 million of pre-tax income, resulting in an effective tax rate of 23.4%, compared to income tax expense of $2.4 million on $11.5 million of pre-tax income for the three months ended September 30, 2023, resulting in an effective tax rate of 20.6%.
Current wording
For the three months ended March 31, 2025, the Company recognized income tax expense of $4.2 million on $17.6 million of pre-tax income, resulting in an effective tax rate of 24.2%, compared to income tax expense of $2.1 million on $8.5 million of pre-tax income for the three months ended March 31, 2024, resulting in an effective tax rate of 24.5%.
Previous wording
The banking division offers a complete line of loan, deposit, cash management, and treasury services through fourteen offices in North Dakota, Minnesota, and Arizona. After the closing of the HMNF acquisition, the Company added 15 banking offices in Minnesota, Wisconsin, and Iowa. These products and services are supported through web and mobile based applications. The majority of the Company’s assets and liabilities are in the banking segment’s balance sheet.
Current wording
The banking segment offers a complete line of loan, deposit, cash management, and treasury services through 29 offices in North Dakota, Minnesota, Wisconsin, Iowa, and Arizona, including 15 banking offices acquired in the HMNF transaction. These products and services are supported through web and mobile based applications. The majority of the Company’s assets and liabilities are in the banking segment’s balance sheet.
Previous wording
The following table presents the banking segment income statement, net of corporate administration, for the three and nine months ended September 30, 2024 and 2023:
Current wording
The following table presents the banking segment income statement, net of corporate administration, for the three months ended March 31, 2025 and 2024:
Previous wording
The following table presents the retirement and benefits services segment income statement for the three and nine months ended September 30, 2024 and 2023:
Current wording
The following table presents the retirement and benefits services segment income statement for the three months ended March 31, 2025 and 2024:
Previous wording
The wealth division provides advisory and planning services, investment management, and trust and fiduciary services to clients across the Company’s footprint.
Current wording
The wealth segment provides advisory and planning services, investment management, and trust and fiduciary services to clients across the Company’s footprint.
Previous wording
The following table presents the wealth segment income statement for the three and nine months ended September 30, 2024 and 2023:
Current wording
The following table presents the wealth segment income statement for the three months ended March 31, 2025 and 2024:
Previous wording
Total assets were $4.1 billion as of September 30, 2024, an increase of $176.9 million, or 4.5%, compared to December 31, 2023. The increase was primarily due to a $272.8 million increase in loans, partially offset by a decrease of $63.9 million in cash and cash equivalents and a decrease of $35.6 million in investment securities.
Current wording
Total assets were $5.3 billion as of March 31, 2025, an increase of $77.9 million, or 1.5%, compared to December 31, 2024. The increase was primarily due to a $92.9 million increase in loans and an increase of $21.7 million in cash and cash equivalents, partially offset by a decrease of $20.3 million in available-for-sale investment securities and a decrease of $7.0 million in held-to-maturity investment securities.
Previous wording
Total loans outstanding were $3.0 billion as of September 30, 2024, an increase of $272.8 million, or 9.9%, from December 31, 2023. The increase was primarily driven by a $116.7 million increase in non-owner occupied CRE loans, a $49.6 million increase in construction, land and development CRE loans, a $44.1 million increase in commercial and industrial loans, a $30.3 million increase in multifamily CRE loans, and a $24.7 million increase in owner occupied CRE loans, partially offset by $7.4 million and $17.2 million decreases in residential real estate first lien and residential real estate construction loans, respectively.
Current wording
Total loans outstanding were $4.1 billion as of March 31, 2025, an increase of $92.9 million, or 2.3%, from December 31, 2024. The increase was primarily driven by a $93.3 million increase in CRE loans and an $8.8 million increase in agricultural loans, partially offset by $8.3 million and $0.9 million decreases in commercial and industrial loans and consumer loans, respectively.
Previous wording
Residential real estate loans represent loans to consumers for the purchase or refinance of a residence. These loans are generally financed over a 15- to 30-year term and, in most cases, are extended to borrowers to finance their primary residence with both fixed-rate and adjustable-rate terms. Real estate construction loans are also offered to consumers who wish to build their own homes and are often structured to be converted to permanent loans at the end of the construction phase, which is typically twelve months. RRE loans also include home equity loans and lines of credit that are secured by a first or second lien on the borrower’s residence. Home equity lines of credit, or “HELOC”, consist mainly of revolving lines of credit secured by residential real estate.
Current wording
Residential real estate (“RRE”) loans represent loans to consumers for the purchase or refinance of a residence. These loans are generally financed over a 15- to 30-year term and, in most cases, are extended to borrowers to finance their primary residence with both fixed-rate and adjustable-rate terms. Real estate construction loans are also offered to consumers who wish to build their own homes and are often structured to be converted to permanent loans at the end of the construction phase, which is typically twelve months. RRE loans also include home equity loans and lines of credit that are secured by a first or second lien on the borrower’s residence. Home equity lines of credit (“HELOC”) consist mainly of revolving lines of credit secured by residential real estate.
Previous wording
The Company’s RRE loans have minimal direct exposure to subprime mortgages as the loans are underwritten to conform to secondary market standards. As of September 30, 2024, the Company’s RRE portfolio was $873.0 million, representing a $8.0 million, or 0.9%, decrease from $881.0 million as of December 31, 2023. Market interest rates, expected duration, and the Company’s overall interest rate sensitivity profile continue to be the most significant factors in determining whether the Company chooses to retain versus sell portions of new consumer mortgage originations.
Current wording
The Company’s RRE loans have minimal direct exposure to subprime mortgages as the loans are underwritten to conform to secondary market standards. As of March 31, 2025, the Company’s RRE portfolio was $1.2 billion, representing a $4.3 million, or 0.4%, increase from December 31, 2024. Market interest rates, expected duration, and the Company’s overall interest rate sensitivity profile continue to be the most significant factors in determining whether the Company chooses to retain versus sell portions of new consumer mortgage originations.
Previous wording
Interest income lost on nonaccrual loans approximated $2.8 million and $0.3 million for the nine months ended September 30, 2024 and 2023, respectively. There was no interest income included in net interest income related to nonaccrual loans for the nine months ended September 30, 2024 and 2023.
Current wording
Interest income lost on nonaccrual loans was approximately $1.1 million and $0.7 million for the three months ended March 31, 2025 and 2024, respectively. There was no interest income included in net interest income related to nonaccrual loans for the three months ended March 31, 2025 and 2024.
Previous wording
The allowance for credit losses, or ACL, on loans is maintained at a level management believes is sufficient to absorb expected losses in the loan portfolio over the remaining estimated life of loans in the portfolio. Under the Current Expected Credit Loss accounting standard, the ACL is a valuation estimated at each balance sheet date and deducted from the amortized cost basis of loans held for investment to present the net amount expected to be collected. These evaluations are inherently subjective as they require management to make material estimates, all of which may be susceptible to significant change. The allowance is increased by provisions charged to expense and decreased by actual charge‑offs, net of recoveries.
Current wording
The ACL, on loans is maintained at a level management believes is sufficient to absorb expected losses in the loan portfolio over the remaining estimated life of loans in the portfolio. Under the Current Expected Credit Loss accounting standard, the ACL is a valuation estimated at each balance sheet date and deducted from the amortized cost basis of loans held for investment to present the net amount expected to be collected. These evaluations are inherently subjective as they require management to make material estimates, all of which may be susceptible to significant change. The allowance is increased by provisions charged to expense and decreased by actual charge‑offs, net of recoveries.
Previous wording
In the ordinary course of business, the Company enters into commitments to extend credit, including commitments under credit arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded. An ACL on off-balance sheet credit exposures is measured using similar internal and external assumptions as the ACL on loans. This allowance is located in accrued expenses and other liabilities on the consolidated balance sheets. The ACL for unfunded commitments was $7.4 million and $5.2 million as of September 30, 2024 and 2023, respectively.
Current wording
In the ordinary course of business, the Company enters into commitments to extend credit, including commitments under credit arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded. An ACL on off-balance sheet credit exposures is measured using similar internal and external assumptions as the ACL on loans. This allowance is located in accrued expenses and other liabilities on the consolidated balance sheets. The ACL for unfunded commitments was $6.0 million and $6.6 million as of March 31, 2025 and 2024, respectively.
Previous wording
Total deposits were $3.3 billion as of September 30, 2024, an increase of $227.9 million, or 7.4%, from December 31, 2023. Interest-bearing deposits increased $300.4 million during this period, while noninterest-bearing deposits decreased $67.9 million. The increase in total deposits was due to both expanded and new commercial deposit relationships, along with time deposit and synergistic deposit growth. Noninterest-bearing deposits decreased from 23.5% of total deposits as of December 31, 2023 to 19.8% as of September 30, 2024, as higher yields on interest-bearing accounts and other investment alternatives, such as U.S. treasuries, attracted such funds. Time deposit balances increased as higher short-term CD rates attracted both existing non-maturity deposits as well as new deposits to the Company.
Current wording
Total deposits were $4.5 billion as of March 31, 2025, an increase of $106.9 million, or 2.4%, from December 31, 2024. Interest-bearing deposits increased $121.1 million during this period, while noninterest-bearing deposits decreased $14.2 million. The increase in total deposits was due to both expanded and new commercial deposit relationships along with synergistic deposit growth. Noninterest-bearing deposits decreased from 20.6% of total deposits as of December 31, 2024 to 19.8% as of March 31, 2025, as higher yields on interest-bearing accounts and other investment alternatives, such as U.S. treasuries, attracted such funds.
Previous wording
The Company’s total uninsured deposits, which are amounts of deposit accounts that exceed the FDIC insurance limit, currently $250,000, were approximately $1.3 billion at September 30, 2024, and approximately $1.1 billion at December 31, 2023. These amounts were estimated based on the same methodologies used for regulatory reporting purposes.
Current wording
The Company’s total uninsured deposits, which are amounts of deposit accounts that exceed the FDIC insurance limit, currently $250,000, were approximately $1.5 billion at both March 31, 2025 and December 31, 2024. These amounts were estimated based on the same methodologies used for regulatory reporting purposes.
Previous wording
Stockholders’ equity increased $17.4 million, or 4.7%, to $386.5 million as of September 30, 2024, compared to $369.1 million as of December 31, 2023. Tangible common equity to tangible assets, a non-GAAP financial measure, increased to 8.11% as of September 30, 2024, from 7.94% as of December 31, 2023. Common equity tier 1 capital to risk weighted assets decreased to 11.12% as of September 30, 2024, from 11.82% as of December 31, 2023.
Current wording
Stockholders’ equity increased $18.8 million, or 3.8%, to $514.2 million as of March 31, 2025, compared to $495.4 million as of December 31, 2024. Tangible common equity to tangible assets, a non-GAAP financial measure, increased to 7.43% as of March 31, 2025, from 7.13% as of December 31, 2024. Common equity tier 1 capital to risk weighted assets increased to 10.10% as of March 31, 2025, from 9.91% as of December 31, 2024.
Previous wording
Liquidity management is the process by which the Company manages the flow of funds necessary to meet the Company’s financial commitments on a timely basis and at a reasonable cost and to take advantage of earnings enhancement opportunities. These financial commitments include withdrawals by depositors, credit commitments to borrowers, expenses of the Company’s operations, and capital expenditures. Liquidity is monitored and closely managed by the Company’s asset and liability committee, or the ALCO, a group of senior officers from the finance, enterprise risk management, deposit, investment, treasury, and lending areas. It is the ALCO’s responsibility to ensure the Company has the necessary level of funds available for normal operations as well as maintain a contingency funding policy to ensure that potential liquidity stress events are planned for, quickly identified, and that management has plans in place to respond. The ALCO has created policies which establish limits and require measurements to monitor liquidity trends, including modeling and management reporting that identifies the amounts and costs of all available funding sources.
Current wording
Liquidity management is the process by which the Company manages the flow of funds necessary to meet the Company’s financial commitments on a timely basis and at a reasonable cost and to take advantage of earnings enhancement opportunities. These financial commitments include withdrawals by depositors, credit commitments to borrowers, expenses of the Company’s operations, and capital expenditures. Liquidity is monitored and closely managed by the Company’s asset and liability committee (the “ALCO”), a group of senior officers from the finance, enterprise risk management, deposit, investment, treasury, and lending areas. It is the ALCO’s responsibility to ensure the Company has the necessary level of funds available for normal operations as well as maintain a contingency funding policy to ensure that potential liquidity stress events are planned for, quickly identified, and that management has plans in place to respond. The ALCO has created policies which establish limits and require measurements to monitor liquidity trends, including modeling and management reporting that identifies the amounts and costs of all available funding sources.
Previous wording
As of September 30, 2024, the Company had on balance sheet liquidity of $424.8 million, compared to $668.2 million as of December 31, 2023. On balance sheet liquidity includes cash and cash equivalents, federal funds sold, unencumbered securities available‑for‑sale, and over collateralized securities pledging positions available-for-sale.
Current wording
As of March 31, 2025, the Company had on balance sheet liquidity of $410.2 million, compared to $579.0 million as of December 31, 2024. On balance sheet liquidity includes cash and cash equivalents, federal funds sold, unencumbered securities available‑for‑sale, and over collateralized securities pledging positions available-for-sale.
Previous wording
As of September 30, 2024, the Company had off balance sheet liquidity of $1.8 billion, compared to $1.6 billion as of December 31, 2023. Off balance sheet liquidity includes FHLB borrowing capacity, federal funds lines, and brokered deposit capacity. There were no brokered deposits as of September 30, 2024 and December 31, 2023.
Current wording
As of March 31, 2025, the Company had off balance sheet liquidity of $2.5 billion, compared to $2.3 billion as of December 31, 2024. Off balance sheet liquidity includes FHLB borrowing capacity, federal funds lines, and brokered deposit capacity.
Previous wording
The Bank is a member of the FHLB, which provides short‑ and long‑term funding to its members through advances collateralized by real estate related assets and other select collateral, most typically in the form of debt securities. Actual borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. As of September 30, 2024, the Company had $44.7 million in federal funds purchased and $200.0 million in short-term borrowings from the FHLB. As of September 30, 2024, the Company had $1.1 billion of collateral pledged to the FHLB and, based on this collateral, the Company was eligible to borrow up to an additional $851.4 million from the FHLB. In addition, the Company can borrow up to $107.0 million through the unsecured lines of credit the Company has established with four other correspondent banks.
Current wording
The Bank is a member of the FHLB, which provides short‑ and long‑term funding to its members through advances collateralized by real estate related assets and other select collateral, most typically in the form of debt securities. Actual borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. As of March 31, 2025, the Company had no federal funds purchased and $200.0 million in short-term borrowings from the FHLB. As of March 31, 2025, the Company had $2.4 billion of collateral pledged to the FHLB and, based on this collateral, the Company was eligible to borrow up to an additional $1.3 billion from the FHLB. In addition, the Company can borrow up to $127.0 million through the unsecured lines of credit the Company has established with five other correspondent banks.
Previous wording
In addition, because the Bank is “well capitalized,” the Company can accept wholesale deposits up to 20.0% of total assets based on current policy limits, or $816.9 million, as of September 30, 2024. Management believed that the Company had adequate resources to fund all of the Company’s commitments as of September 30, 2024 and December 31, 2023.
Current wording
In addition, because the Bank is “well capitalized,” the Company can accept wholesale deposits up to 20.0% of total assets based on current policy limits, or $1.1 billion, as of March 31, 2025. Management believed that the Company had adequate resources to fund all of the Company’s commitments as of March 31, 2025 and December 31, 2024.
Previous wording
Though remote, the possibility of a funding crisis exists at all financial institutions. The economic impact of the recent rise in inflation and rising interest rates could place increased demand on the Company’s liquidity if the Company experiences significant credit deterioration and as the Company meets borrowers’ needs. Accordingly, management has addressed this issue by formulating a liquidity contingency plan, which has been reviewed and approved by both the Bank’s Board of Directors and the ALCO. The plan addresses the actions that the Company would take in response to both a short‑term and long‑term funding crisis.
Current wording
Though remote, the possibility of a funding crisis exists at all financial institutions. Management has addressed this issue by formulating a liquidity contingency plan, which has been reviewed and approved by both the Bank’s Board of Directors and the ALCO. The plan addresses the actions that the Company would take in response to both a short‑term and long‑term funding crisis.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
For the nine months ended September 30, 2024, the Company recognized income tax expense of $5.6 million on $23.5 million of pre-tax income, resulting in an effective tax rate of 23.9%, compared to income tax expense of $7.2 million on $33.7 million of pre-tax income for the nine months ended September 30, 2023, resulting in an effective tax rate of 21.4%.