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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Alerus Financial Corporation | NASDAQ:ALRS | NASDAQ | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.42 | 2.00% | 21.37 | 17.62 | 22.33 | 21.66 | 21.19 | 21.43 | 83,899 | 22:30:00 |
From Dec 2024 to Jan 2025
Alerus Financial Corporation (Nasdaq: ALRS), or the Company, reported net income of $3.2 million for the fourth quarter of 2024, or $0.13 per diluted common share, compared to net income of $5.2 million, or $0.26 per diluted common share, for the third quarter of 2024, and net loss of $14.8 million, or ($0.73) per diluted common share, for the fourth quarter of 2023.
CEO Comments
President and Chief Executive Officer Katie Lorenson said, “We are pleased to end 2024 with a solid quarter on across-the-board improvements to our performance metrics. The fourth quarter of 2024 was highlighted by the closing and conversion of HMN Financial, Inc. (“HMNF”), the largest acquisition in our Company history, and we welcome HMNF’s employees to the Alerus team. The combination of HMNF and meaningful organic growth in our underlying core business, drove an increase in earnings per share by a robust 41.9% versus the prior quarter. Notably, the net interest margin expanded 97 basis points, while our adjusted efficiency ratio improved significantly with a decrease to 69.0% from 77.7% in the third quarter.
For the full year 2024, we achieved market share gains and strong client base growth across all our business lines with our noninterest income, which represents nearly half of our total revenues. Noninterest income grew 19.4% quarter-over-quarter.
We enter 2025 with positive momentum and plan to continue making long term investments to support and grow our diversified revenue streams while continuing to prudently manage our expenses. While our capital ratios declined in the fourth quarter due to the HMNF acquisition, we remain above all well-capitalized thresholds and expect to build capital in 2025. We bolstered our reserves with the allowance for credit losses on loans to total loans moving up to 1.50%, while we continue to proactively identify and manage credit normalization.
Looking ahead, we remain committed to driving sustainable growth and delivering value to our shareholders. Our strategic focus on organic growth, diversification, valuable fee income, and maintaining strong asset quality will continue to guide our efforts in 2025 and beyond.
I want to thank all our team members - both the new team from HMNF and the long tenured legacy team - for your hard work, dedication and invaluable contributions supporting our company, our clients and our communities in 2024. Together, we will continue to build on our successes and return Alerus to top tier financial results.”
Fourth Quarter Highlights
Full Year 2024 Highlights
Selected Financial Data (unaudited)
As of and for the
Three months ended
Year ended
December 31,
September 30,
December 31,
December 31,
December 31,
(dollars and shares in thousands, except per share data)
2024
2024
2023
2024
2023
Performance Ratios
Return on average total assets
0.24
%
0.48
%
(1.51
)%
0.47
%
0.31
%
Adjusted return on average total assets(1)
0.83
%
0.57
%
0.52
%
0.68
%
0.77
%
Return on average common equity
2.68
%
5.52
%
(16.75
)%
5.30
%
3.26
%
Return on average tangible common equity(1)
6.01
%
7.83
%
(18.85
)%
8.16
%
5.37
%
Adjusted return on average tangible common equity(1)
14.65
%
9.04
%
8.38
%
11.15
%
11.30
%
Noninterest income as a % of revenue
46.94
%
55.72
%
3.54
%
51.78
%
47.74
%
Net interest margin (tax-equivalent)
3.20
%
2.23
%
2.37
%
2.56
%
2.46
%
Adjusted net interest margin (tax-equivalent)(1)
2.81
%
2.35
%
2.31
%
2.53
%
2.42
%
Efficiency ratio(1)
73.36
%
80.29
%
165.40
%
75.93
%
85.85
%
Adjusted efficiency ratio(1)
68.97
%
77.71
%
78.18
%
73.44
%
75.50
%
Net charge-offs/(recoveries) to average loans
0.13
%
0.04
%
(0.04
)%
0.13
%
(0.04
)%
Dividend payout ratio
153.85
%
76.92
%
(26.03
)%
80.61
%
129.31
%
Per Common Share
Earnings per common share - basic
$
0.13
$
0.26
$
(0.73
)
$
1.00
$
0.59
Earnings per common share - diluted
$
0.13
$
0.26
$
(0.73
)
$
0.98
$
0.58
Adjusted earnings per common share - diluted (1)
$
0.44
$
0.31
$
0.26
$
1.44
$
1.45
Dividends declared per common share
$
0.20
$
0.20
$
0.19
$
0.79
$
0.75
Book value per common share
$
19.68
$
19.53
$
18.71
Tangible book value per common share (1)
$
14.49
$
16.50
$
15.46
Average common shares outstanding - basic
24,857
19,788
19,761
21,047
19,922
Average common shares outstanding - diluted
25,144
20,075
19,996
21,321
20,143
Other Data
Retirement and benefit services assets under administration/management
$
40,728,699
$
41,249,280
$
36,682,425
Wealth management assets under administration/management
$
4,579,189
$
4,397,505
$
4,018,846
Mortgage originations
$
88,576
$
82,388
$
65,488
$
334,318
$
364,114
____________________
(1) Represents a non-GAAP financial measure. See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.”
Results of Operations
Net Interest Income
Net interest income for the fourth quarter of 2024 was $38.3 million, a $15.7 million, or 69.8%, increase from the third quarter of 2024. The increase was primarily due to increased interest income on higher earning assets acquired in the HMNF transaction, organic loan growth, and lower average rates paid on deposit balances.
Net interest income increased $16.7 million, or 77.6%, from $21.6 million for the fourth quarter of 2023. Interest income increased $22.6 million, or 50.6%, from the fourth quarter of 2023, primarily driven by higher earning assets acquired in the HMNF transaction, strong organic loan growth at higher yields, and purchase accounting accretion. The increase in interest income was partially offset by a $5.9 million, or 25.4%, increase in interest expense, driven by an increase in interest-bearing deposits from the acquisition of HMNF and organic deposit growth.
Net interest margin (on a tax-equivalent basis) was 3.20% for the fourth quarter of 2024, a 97 basis point increase from 2.23% for the third quarter of 2024, and an 83 basis point increase from 2.37% for the fourth quarter of 2023. The increase in net interest margin (on a tax-equivalent basis) was mainly attributable to purchase accounting accretion, lower rates paid on deposits in the fourth quarter, the unwinding of the Bank Term Funding Program (“BTFP”) arbitrage trade late in the third quarter of 2024, and organic loan and deposit growth.
Noninterest Income
Noninterest income for the fourth quarter of 2024 was $33.9 million, a $5.5 million increase from the third quarter of 2024. The quarter over quarter increase was primarily driven by improvement across all fee-based businesses. Mortgage banking revenue increased $1.1 million, from $2.6 million in the third quarter of 2024, primarily driven by higher mortgage originations and higher margins on sold mortgages. Wealth revenue increased $0.3 million during the fourth quarter of 2024, a 4.9% increase from the third quarter of 2024, primarily driven by the acquisition of HMNF. Retirement and benefit services revenue increased $0.3 million in the fourth quarter of 2024, a 2.1% increase from the third quarter of 2024, primarily driven by nonmarket-based fees. Combined assets under administration/management in wealth and retirement and benefit services decreased 0.7% from September 30, 2024. The slight decrease in combined assets under administration/management was primarily due to stable equity and bond markets. Additionally, other noninterest income increased $3.6 million during the fourth quarter of 2024, a 144.9% increase from the third quarter of 2024, primarily due to a gain on the sale of fixed assets related to the sale of a Fargo, North Dakota office and increased swap fee income generated from commercial loan originations.
Noninterest income for the fourth quarter of 2024 increased by $33.1 million from the fourth quarter of 2023. The year over year increase was primarily driven by the strategic balance sheet repositioning transaction completed in the fourth quarter of 2023, which resulted in a $24.6 million loss on the sale of investment securities. Year over year, the fee-based businesses each showed improvement. Mortgage banking revenue increased $2.4 million, from $1.3 million in the fourth quarter of 2023, primarily driven by higher mortgage originations and higher margins on sold mortgages. Retirement and benefit services revenue increased $1.2 million, or 7.6%, from $15.3 million in the fourth quarter of 2023, primarily driven by an increase in assets under administration/management of 11.0% during that same period. Wealth revenue increased $1.1 million, or 18.0%, in the fourth quarter of 2024, primarily driven by an increase in assets under administration/management of 13.9% during that same period. Other noninterest income increased $3.5 million, or 137.0%, in the fourth quarter of 2024 compared to the fourth quarter of 2023, primarily due to a gain on the sale of fixed assets related to the sale of a Fargo, North Dakota office and increased swap fee income generated from commercial loan originations.
Noninterest Expense
Noninterest expense for the fourth quarter of 2024 was $56.0 million, a $13.6 million, or 32.0%, increase from the third quarter of 2024. The quarter over quarter increase was primarily driven by the acquisition of HMNF and related expenses. Compensation expense increased $5.6 million, or 26.6%, from the third quarter of 2024, primarily driven by acquisition-related compensation expenses, experienced talent acquisitions, and increased labor costs. Professional fees and assessments increased $2.3 million, or 53.0%, from the third quarter of 2024, primarily driven by increased acquisition-related expenses of $1.6 million. Business services, software and technology expense increased $2.1 million, or 42.1%, from the third quarter of 2024, primarily driven by increased core processing fees and equipment purchases in connection with the HMNF acquisition. Intangible amortization expense was $2.8 million, a $1.5 million increase from the third quarter of 2024, primarily driven by amortization expense related to the $33.5 million core deposit intangible recorded in connection with the HMNF acquisition.
Noninterest expense for the fourth quarter of 2024 increased $17.4 million, or 44.9%, from $38.7 million in the fourth quarter of 2023. The increase was primarily driven by the acquisition of HMNF and related expenses. Compensation expense increased $7.4 million, or 38.7%, in the fourth quarter of 2024, primarily due to acquisition-related compensation expenses and increased labor costs. Professional fees and assessments increased primarily due to increased acquisition-related expenses of $3.3 million in connection with the acquisition of HMNF and an increase in Federal Deposit Insurance Corporation (“FDIC”) assessments. Employee taxes and benefits expense increased $1.7 million, or 36.4%, primarily due to increased expense related to the employee stock ownership program (“ESOP”) and costs related to group insurance. Business services, software and technology expense increased $1.2 million, or 22.0%, in the fourth quarter of 2024, primarily driven by increased core processing fees and equipment purchases in connection with the HMNF acquisition. Intangible amortization expense increased $1.5 million in the fourth quarter of 2024, primarily driven by amortization expense related to the $33.5 million core deposit intangible recorded in connection with the HMNF acquisition.
Financial Condition
Total assets were $5.3 billion as of December 31, 2024, an increase of $1.4 billion, or 34.7%, from December 31, 2023. The increase was primarily due to a $1.2 billion increase in loans, a $101.3 million increase in available-for-sale investment securities, a $40.8 million increase in goodwill, and a $26.7 million increase in other intangible assets, partially offset by a decrease of $68.7 million in cash and cash equivalents and a decrease of $23.9 million in held-to-maturity investment securities. The increase in goodwill and other intangible assets was related to the acquisition of HMNF.
Loans
Total loans were $4.0 billion as of December 31, 2024, an increase of $1.2 billion, or 44.7%, from December 31, 2023. The increase was primarily driven by a $938.0 million increase in commercial loans and a $294.9 million increase in consumer loans.
The following table presents the composition of our loan portfolio as of the dates indicated:
December 31,
September 30,
June 30,
March 31,
December 31,
(dollars in thousands)
2024
2024
2024
2024
2023
Commercial
Commercial and industrial
$
666,727
$
606,245
$
591,779
$
575,259
$
562,180
Commercial real estate
Construction, land and development
294,677
173,629
161,751
125,966
124,034
Multifamily
363,123
275,377
242,041
260,609
245,103
Non-owner occupied
967,025
686,071
647,776
565,979
569,354
Owner occupied
371,418
296,366
283,356
285,211
271,623
Total commercial real estate
1,996,243
1,431,443
1,334,924
1,237,765
1,210,114
Agricultural
Land
61,299
45,821
41,410
41,149
40,832
Production
63,008
39,436
40,549
36,436
36,141
Total agricultural
124,307
85,257
81,959
77,585
76,973
Total commercial
2,787,277
2,122,945
2,008,662
1,890,609
1,849,267
Consumer
Residential real estate
First lien
921,019
690,451
686,286
703,726
697,900
Construction
33,547
11,808
22,573
18,425
28,979
HELOC
162,509
134,301
126,211
120,501
118,315
Junior lien
44,060
36,445
36,323
36,381
35,819
Total residential real estate
1,161,135
873,005
871,393
879,033
881,013
Other consumer
44,122
36,393
35,737
29,833
29,303
Total consumer
1,205,257
909,398
907,130
908,866
910,316
Total loans
$
3,992,534
$
3,032,343
$
2,915,792
$
2,799,475
$
2,759,583
Deposits
Total deposits were $4.4 billion as of December 31, 2024, an increase of $1.3 billion, or 41.4%, from December 31, 2023. Interest-bearing deposits increased $1.1 billion and noninterest-bearing deposits increased $175.4 million, from December 31, 2023. The increase in total deposits was due primarily to the recent acquisition of HMNF, expanded and new commercial deposit relationships, and synergistic deposit growth. Synergistic deposits were $973.6 million as of December 31, 2024, an increase of $122.0 million, or 14.3%, from December 31, 2023.
The following table presents the composition of the Company’s deposit portfolio as of the dates indicated:
December 31,
September 30,
June 30,
March 31,
December 31,
(dollars in thousands)
2024
2024
2024
2024
2023
Noninterest-bearing demand
$
903,466
$
657,547
$
701,428
$
692,500
$
728,082
Interest-bearing
Interest-bearing demand
1,220,173
1,034,694
1,003,585
938,751
840,711
Savings accounts
165,882
75,675
79,747
82,727
82,485
Money market savings
1,381,924
1,067,187
1,022,470
1,114,262
1,032,771
Time deposits
706,965
488,447
491,345
456,729
411,562
Total interest-bearing
3,474,944
2,666,003
2,597,147
2,592,469
2,367,529
Total deposits
$
4,378,410
$
3,323,550
$
3,298,575
$
3,284,969
$
3,095,611
Asset Quality
Total nonperforming assets were $62.9 million as of December 31, 2024, an increase of $54.1 million from December 31, 2023. $25.0 million of the increase was due to one construction, land and development loan moving to nonaccrual status in the second quarter of 2024. During the third and fourth quarters of 2024, management elected to make protective advances totaling $5.4 million in order for construction to continue on the project. Management is actively working with the borrower on strategies to complete construction, preserve value, and support repayment of the loan. One large residential real estate relationship and one CRE non-owner occupied loan moving to nonaccrual status during the third quarter of 2024 also contributed $13.6 million to the increase. A further $1.5 million of the increase in the fourth quarter of 2024 was driven by loans acquired from HMNF. Nonperforming assets included one loan over 90 days past due and still on accrual. This loan was renewed subsequent to year end.
As of December 31, 2024, the allowance for credit losses on loans was $59.9 million, or 1.50% of total loans, compared to $35.8 million, or 1.30% of total loans, as of December 31, 2023.
The following table presents selected asset quality data as of and for the periods indicated:
As of and for the three months ended
December 31,
September 30,
June 30,
March 31,
December 31,
(dollars in thousands)
2024
2024
2024
2024
2023
Nonaccrual loans
$
54,433
$
48,026
$
27,618
$
7,345
$
8,596
Accruing loans 90+ days past due
8,453
—
—
—
139
Total nonperforming loans
62,886
48,026
27,618
7,345
8,735
OREO and repossessed assets
—
—
—
3
32
Total nonperforming assets
$
62,886
$
48,026
$
27,618
$
7,348
$
8,767
Net charge-offs/(recoveries)
1,258
316
2,522
58
(238
)
Net charge-offs/(recoveries) to average loans
0.13
%
0.04
%
0.36
%
0.01
%
(0.04
)%
Nonperforming loans to total loans
1.58
%
1.58
%
0.95
%
0.26
%
0.32
%
Nonperforming assets to total assets
1.19
%
1.18
%
0.63
%
0.17
%
0.22
%
Allowance for credit losses on loans to total loans
1.50
%
1.29
%
1.31
%
1.31
%
1.30
%
Allowance for credit losses on loans to nonperforming loans
95
%
82
%
139
%
498
%
410
%
For the fourth quarter of 2024, the Company had net charge-offs of $1.3 million, compared to net charge-offs of $0.3 million for the third quarter of 2024 and net recoveries of $0.2 million for the fourth quarter of 2023. The quarter-over-quarter increase in net charge-offs was driven by a $0.6 million charge-off of one residential real estate loan and a $0.4 million charge-off of one commercial and industrial loan in the fourth quarter of 2024.
The Company recorded a provision for credit losses of $12.0 million for the fourth quarter of 2024, compared to a provision for credit losses of $1.7 million for the third quarter of 2024 and a provision for credit losses of $1.5 million for the fourth quarter of 2023. The provision for credit losses for the fourth quarter of 2024 was primarily driven by a $7.8 million day one provision for credit losses and unfunded commitment reserve related to the acquisition of HMNF, as well as loan growth and an increase in nonaccrual loans.
The unearned fair value adjustments on acquired loan portfolios were $70.6 million and $5.2 million as of December 31, 2024 and 2023, respectively.
Capital
Total stockholders’ equity was $498.7 million as of December 31, 2024, an increase of $129.6 million from December 31, 2023. This change was primarily driven by the issuance of stock in connection with to the acquisition of HMNF. Tangible book value per common share (non-GAAP) decreased to $14.49 as of December 31, 2024, from $15.46 as of December 31, 2023. Tangible common equity to tangible assets (non-GAAP) decreased to 7.15% as of December 31, 2024, from 7.94% as of December 31, 2023. Common equity tier 1 capital to risk weighted assets decreased to 9.98% as of December 31, 2024, from 11.82% as of December 31, 2023.
The following table presents our capital ratios as of the dates indicated:
December 31,
September 30,
December 31,
2024
2024
2023
Capital Ratios(1)
Alerus Financial Corporation Consolidated
Common equity tier 1 capital to risk weighted assets
9.98
%
11.12
%
11.82
%
Tier 1 capital to risk weighted assets
10.18
%
11.38
%
12.10
%
Total capital to risk weighted assets
12.55
%
14.04
%
14.76
%
Tier 1 capital to average assets
8.68
%
9.30
%
10.57
%
Tangible common equity / tangible assets (2)
7.15
%
8.11
%
7.94
%
Alerus Financial, N.A.
Common equity tier 1 capital to risk weighted assets
10.19
%
10.73
%
11.40
%
Tier 1 capital to risk weighted assets
10.19
%
10.73
%
11.40
%
Total capital to risk weighted assets
11.44
%
11.98
%
12.51
%
Tier 1 capital to average assets
8.66
%
8.90
%
9.92
%
____________________
(1)
Capital ratios for the current quarter are to be considered preliminary until the Call Report for Alerus Financial, N.A. is filed.
(2)
Represents a non-GAAP financial measure. See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.”
Conference Call
The Company will host a conference call at 11:00 a.m. Central Time on Wednesday, January 29, 2024, to discuss its financial results. Attendees are encouraged to register ahead of time for the call at investors.alerus.com. The call can also be accessed via telephone at +1 (833) 470-1428, using access code 092113. A recording of the call and transcript will be available on the Company’s investor relations website at investors.alerus.com following the call.
About Alerus Financial Corporation
Alerus Financial Corporation (Nasdaq: ALRS) is a commercial wealth bank and national retirement services provider with corporate offices in Grand Forks, North Dakota, and the Minneapolis-St. Paul, Minnesota metropolitan area. Through its subsidiary, Alerus Financial, National Association, Alerus provides diversified and comprehensive financial solutions to business and consumer clients, including banking, wealth services, and retirement and benefit plans and services. Alerus provides clients with a primary point of contact to help fully understand their unique needs and delivery channel preferences. Clients are provided with competitive products, valuable insight, and sound advice supported by digital solutions designed to meet their needs.
Alerus operates 29 banking and commercial wealth offices, with locations in Grand Forks and Fargo, North Dakota; the Minneapolis-St. Paul, Minnesota metropolitan area; Rochester, Minnesota; Southern Minnesota area; Marshalltown, Iowa; Pewaukee, Wisconsin; and Phoenix and Scottsdale, Arizona. Alerus also operates a commercial wealth office in La Crosse, Wisconsin. The Alerus Retirement and Benefit business serves advisors, brokers, employers, and plan participants across the United States.
Non-GAAP Financial Measures
Some of the financial measures included in this press release are not measures of financial performance recognized by U.S. Generally Accepted Accounting Principles, or GAAP. These non-GAAP financial measures include the ratio of 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), adjusted net interest margin (tax-equivalent), and adjusted earnings per common share - diluted. Management uses these non-GAAP financial measures 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. Reconciliations of non-GAAP disclosures used in this press release to the comparable GAAP measures are provided in the accompanying tables. 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.
These non-GAAP financial measures should not be considered in isolation or as a substitute for total stockholders’ equity, total assets, book value per share, return on average assets, return on average equity, or any other measure calculated in accordance with GAAP. Moreover, the manner in which the Company calculates these non-GAAP financial measures may differ from that of other companies reporting measures with similar names.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of Alerus Financial Corporation. These statements are often, but not always, identified by words such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”, “annualized”, “target” and “outlook”, or the negative version of those words or other comparable words of a future or forward-looking nature. Examples of forward-looking statements include, among others, statements the Company makes regarding our projected growth, anticipated future financial performance, financial condition, credit quality, management’s long-term performance goals, and the future plans and prospects of Alerus Financial Corporation.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in forward-looking statements include, among others, the following: interest rate risk, including the effects of changes in interest rates; effects on the U.S. economy resulting from the implementation of policies proposed by the new presidential administration, including tariffs, mass deportations, and tax regulations; our ability to successfully manage credit risk, including in the CRE portfolio, and maintain an adequate level of allowance for credit losses; business and economic conditions generally and in the financial services industry, nationally and within our market areas, including the level and impact of inflation rates and possible recession; the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time that resulted in several bank failures; our ability to raise additional capital to implement our business plan; the overall health of the local and national real estate market; credit risks and risks from concentrations (by type of borrower, geographic area, collateral, and industry) within our loan portfolio; the concentration of large loans to certain borrowers (including CRE loans); the level of nonperforming assets on our balance sheet; our ability to implement our organic and acquisition growth strategies, including the integration of HMNF which the Company acquired in the fourth quarter of 2024; the commencement, cost, and outcome of litigation and other legal proceedings and regulatory actions against us or to which the Company may become subject, including with respect to pending actions relating to the Company’s previous ESOP fiduciary services commenced by government or private parties; the impact of economic or market conditions on our fee-based services; our ability to continue to grow our retirement and benefit services business; our ability to continue to originate a sufficient volume of residential mortgages; the occurrence of fraudulent activity, breaches or failures of our or our third-party vendors’ information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools or as a result of insider fraud; interruptions involving our information technology and telecommunications systems or third-party servicers; potential losses incurred in connection with mortgage loan repurchases; the composition of our executive management team and our ability to attract and retain key personnel; rapid and expensive technological change in the financial services industry; increased competition in the financial services industry, including from non-banks such as credit unions, Fintech companies and digital asset service providers; our ability to successfully manage liquidity risk, including our need to access higher cost sources of funds such as fed funds purchased and short-term borrowings; the concentration of large deposits from certain clients, including those who have balances above current FDIC insurance limits; the effectiveness of our risk management framework; potential impairment to the goodwill the Company recorded in connection with our past acquisitions, including the acquisitions of Metro Phoenix Bank and HMNF; the extensive regulatory framework that applies to us; the impact of recent and future legislative and regulatory changes, including in response to prior bank failures; new or revised accounting standards, as may be adopted by state and federal regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission (the “SEC”) or the Public Company Accounting Oversight Board; fluctuations in the values of the securities held in our securities portfolio, including as a result of changes in interest rates; governmental monetary, trade and fiscal policies; risks related to climate change and the negative impact it may have on our customers and their businesses; severe weather and natural disasters, and widespread disease or pandemics; acts of war or terrorism, including ongoing conflicts in the Middle East and Russian invasion of Ukraine, or other adverse external events; any material weaknesses in our internal control over financial reporting; changes to U.S. or state tax laws, regulations and governmental policies concerning our general business, including changes in interpretation or prioritization and changes in response to prior bank failures; talent and labor shortages and employee turnover; our success at managing the risks involved in the foregoing items; and any other risks described in the “Risk Factors” sections of the reports filed by Alerus Financial Corporation with the SEC.
Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
Alerus Financial Corporation and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share and per share data)
December 31,
December 31,
2024
2023
Assets
(Unaudited)
Cash and cash equivalents
$
61,239
$
129,893
Investment securities
Trading, at fair value
3,309
—
Available-for-sale, at fair value
588,053
486,736
Held-to-maturity, at amortized cost (with an allowance for credit losses on investments of $131 and $213, respectively)
275,585
299,515
Loans held for sale
16,518
11,497
Loans
3,992,534
2,759,583
Allowance for credit losses on loans
(59,929
)
(35,843
)
Net loans
3,932,605
2,723,740
Land, premises and equipment, net
39,780
17,940
Operating lease right-of-use assets
13,438
5,436
Accrued interest receivable
20,075
15,700
Bank-owned life insurance
36,033
33,236
Goodwill
87,564
46,783
Other intangible assets
43,882
17,158
Servicing rights
7,918
2,052
Deferred income taxes, net
48,766
34,595
Other assets
90,543
83,432
Total assets
$
5,265,308
$
3,907,713
Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing
$
903,466
$
728,082
Interest-bearing
3,474,944
2,367,529
Total deposits
4,378,410
3,095,611
Short-term borrowings
238,960
314,170
Long-term debt
59,069
58,956
Operating lease liabilities
18,991
5,751
Accrued expenses and other liabilities
71,179
64,098
Total liabilities
4,766,609
3,538,586
Stockholders’ equity
Preferred stock, $1 par value, 2,000,000 shares authorized: 0 issued and outstanding
—
—
Common stock, $1 par value, 30,000,000 shares authorized: 25,344,803 and 19,734,077 issued and outstanding
25,345
19,734
Additional paid-in capital
269,708
150,343
Retained earnings
277,012
272,705
Accumulated other comprehensive loss
(73,366
)
(73,655
)
Total stockholders’ equity
498,699
369,127
Total liabilities and stockholders’ equity
$
5,265,308
$
3,907,713
Alerus Financial Corporation and Subsidiaries
Consolidated Statements of Income
(dollars and shares in thousands, except per share data)
Three months ended
Year ended
December 31,
September 30,
December 31,
December 31,
December 31,
2024
2024
2023
2024
2023
Interest Income
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Loans, including fees
$
60,009
$
42,593
$
37,731
$
183,560
$
136,918
Investment securities
Taxable
5,737
4,596
6,040
19,745
24,262
Exempt from federal income taxes
166
169
182
679
740
Other
1,395
4,854
742
17,595
2,963
Total interest income
67,307
52,212
44,695
221,579
164,883
Interest Expense
Deposits
25,521
22,285
17,169
89,243
53,387
Short-term borrowings
2,837
6,706
5,292
22,584
20,976
Long-term debt
665
679
682
2,707
2,681
Total interest expense
29,023
29,670
23,143
114,534
77,044
Net interest income
38,284
22,542
21,552
107,045
87,839
Provision for credit losses
11,992
1,661
1,507
18,141
2,057
Net interest income after provision for credit losses
26,292
20,881
20,045
88,904
85,782
Noninterest Income
Retirement and benefit services
16,488
16,144
15,317
64,365
65,294
Wealth management
7,010
6,684
5,940
26,171
21,855
Mortgage banking
3,673
2,573
1,279
10,469
8,411
Service charges on deposit accounts
644
488
341
1,976
1,280
Net gains (losses) on investment securities
—
—
(24,643
)
—
(24,643
)
Other
6,059
2,474
2,557
11,950
8,032
Total noninterest income
33,874
28,363
791
114,931
80,229
Noninterest Expense
Compensation
26,657
21,058
19,214
87,311
76,290
Employee taxes and benefits
6,245
5,400
4,578
22,967
20,051
Occupancy and equipment expense
1,963
2,082
1,858
7,766
7,477
Business services, software and technology expense
6,935
4,879
5,686
21,758
21,053
Intangible amortization expense
2,804
1,324
1,324
6,776
5,296
Professional fees and assessments
6,530
4,267
2,345
15,162
6,743
Marketing and business development
1,050
764
1,002
3,249
3,027
Supplies and postage
726
422
521
2,046
1,796
Travel
449
330
313
1,403
1,189
Mortgage and lending expenses
571
684
501
2,162
1,902
Other
2,093
1,237
1,312
5,641
5,333
Total noninterest expense
56,023
42,447
38,654
176,241
150,157
Income before income tax expense
4,143
6,797
(17,818
)
27,594
15,854
Income tax expense
921
1,590
(3,064
)
6,525
4,158
Net income
$
3,222
$
5,207
$
(14,754
)
$
21,069
$
11,696
Per Common Share Data
Earnings per common share
$
0.13
$
0.26
$
(0.73
)
$
1.00
$
0.59
Diluted earnings per common share
$
0.13
$
0.26
$
(0.73
)
$
0.98
$
0.58
Dividends declared per common share
$
0.20
$
0.20
$
0.19
$
0.79
$
0.75
Average common shares outstanding
24,857
19,788
19,761
21,047
19,922
Diluted average common shares outstanding
25,144
20,075
19,996
21,321
20,143
Alerus Financial Corporation and Subsidiaries
Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures (unaudited)
(dollars and shares in thousands, except per share data)
December 31,
September 30,
December 31,
2024
2024
2023
Tangible Common Equity to Tangible Assets
Total common stockholders’ equity
$
498,699
$
386,486
$
369,127
Less: Goodwill
87,564
46,783
46,783
Less: Other intangible assets
43,882
13,186
17,158
Tangible common equity (a)
367,253
326,517
305,186
Total assets
5,265,308
4,084,640
3,907,713
Less: Goodwill
87,564
46,783
46,783
Less: Other intangible assets
43,882
13,186
17,158
Tangible assets (b)
5,133,862
4,024,671
3,843,772
Tangible common equity to tangible assets (a)/(b)
7.15
%
8.11
%
7.94
%
Tangible Book Value Per Common Share
Total common stockholders’ equity
$
498,699
$
386,486
$
369,127
Less: Goodwill
87,564
46,783
46,783
Less: Other intangible assets
43,882
13,186
17,158
Tangible common equity (c)
367,253
326,517
305,186
Total common shares issued and outstanding (d)
25,345
19,790
19,734
Tangible book value per common share (c)/(d)
$
14.49
$
16.50
$
15.46
Three months ended
Year ended
December 31,
September 30,
December 31,
December 31,
December 31,
2024
2024
2023
2024
2023
Return on Average Tangible Common Equity
Net income
$
3,222
$
5,207
$
(14,754
)
$
21,069
$
11,696
Add: Intangible amortization expense (net of tax)(1)
2,215
1,046
1,046
5,353
4,184
Net income, excluding intangible amortization (e)
5,437
6,253
(13,708
)
26,422
15,880
Average total equity
478,128
375,229
349,382
397,747
358,268
Less: Average goodwill
84,414
46,783
46,783
56,242
46,959
Less: Average other intangible assets (net of tax)(1)
34,107
10,933
14,067
17,534
15,624
Average tangible common equity (f)
359,607
317,513
288,532
323,971
295,685
Return on average tangible common equity (e)/(f)
6.01
%
7.83
%
(18.85
)%
8.16
%
5.37
%
Efficiency Ratio
Noninterest expense
$
56,023
$
42,447
$
38,654
$
176,241
$
150,157
Less: Intangible amortization expense
2,804
1,324
1,324
6,776
5,296
Adjusted noninterest expense (g)
53,219
41,123
37,330
169,465
144,861
Net interest income
38,284
22,542
21,552
107,045
87,839
Noninterest income
33,874
28,363
791
114,931
80,229
Tax-equivalent adjustment
385
314
226
1,202
671
Total tax-equivalent revenue (h)
72,543
51,219
22,569
223,178
168,739
Efficiency ratio (g)/(h)
73.36
%
80.29
%
165.40
%
75.93
%
85.85
%
____________________
(1)
Items calculated after-tax utilizing a marginal income tax rate of 21.0%.
Alerus Financial Corporation and Subsidiaries
Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures (unaudited)
(dollars and shares in thousands, except per share data)
Three months ended
Year ended
December 31,
September 30,
December 31,
December 31,
December 31,
2024
2024
2023
2024
2023
Pre-Provision Net Revenue
Net interest income
$
38,284
$
22,542
$
21,552
$
107,045
$
87,839
Add: Noninterest income
33,874
28,363
791
114,931
80,229
Less: Noninterest expense
56,023
42,447
38,654
176,241
150,157
Pre-provision net revenue
$
16,135
$
8,458
$
(16,311
)
$
45,735
$
17,911
Adjusted Noninterest Income
Noninterest income
$
33,874
$
28,363
$
791
$
114,931
$
80,229
Less: Adjusted noninterest income items
BOLI mortality proceeds (non-taxable)
—
—
—
—
1,196
Gain on sale of ESOP trustee business
—
—
—
—
2,775
Net gains (losses) on investment securities
—
—
(24,643
)
—
(24,643
)
Net gain on sale of premises and equipment
3,459
476
—
3,941
50
Total adjusted noninterest income items (i)
3,459
476
(24,643
)
3,941
(20,622
)
Adjusted noninterest income (j)
$
30,415
$
27,887
$
25,434
$
110,990
$
100,851
Adjusted Noninterest Expense
Noninterest expense
$
56,023
$
42,447
$
38,654
$
176,241
$
150,157
Less: Adjusted noninterest expense items
HMNF merger- and acquisition-related expenses
3,295
1,661
—
5,546
—
Severance and signing bonus expense
2,276
31
422
2,901
1,897
Total adjusted noninterest expense items (k)
5,571
1,692
422
8,447
1,897
Adjusted noninterest expense (l)
$
50,452
$
40,755
$
38,232
$
167,794
$
148,260
Adjusted Pre-Provision Net Revenue
Net interest income
$
38,284
$
22,542
$
21,552
$
107,045
$
87,839
Add: Adjusted noninterest income (j)
30,415
27,887
25,434
110,990
100,851
Less: Adjusted noninterest expense (l)
50,452
40,755
38,232
167,794
148,260
Adjusted pre-provision net revenue
$
18,247
$
9,674
$
8,754
$
50,241
$
40,430
Adjusted Efficiency Ratio
Adjusted noninterest expense (l)
$
50,452
$
40,755
$
38,232
$
167,794
$
148,260
Less: Intangible amortization expense
2,804
1,324
1,324
6,776
5,296
Adjusted noninterest expense for efficiency ratio (m)
47,648
39,431
36,908
161,018
142,964
Tax-equivalent revenue
Net interest income
38,284
22,542
21,552
107,045
87,839
Add: Adjusted noninterest income (j)
30,415
27,887
25,434
110,990
100,851
Add: Tax-equivalent adjustment
385
314
226
1,202
671
Total tax-equivalent revenue (n)
69,084
50,743
47,212
219,237
189,361
Adjusted efficiency ratio (m)/(n)
68.97
%
77.71
%
78.18
%
73.44
%
75.50
%
Adjusted Net Income
Net income
$
3,222
$
5,207
$
(14,754
)
$
21,069
$
11,696
Less: Adjusted noninterest income items (net of tax)(1) (i)
2,733
376
(19,468
)
3,113
(16,040
)
Add: HMNF day one provision for credit losses and unfunded commitments (net of tax)(1)
6,140
—
—
6,140
—
Add: Adjusted noninterest expense items (net of tax)(1) (k)
4,401
1,337
333
6,673
1,499
Adjusted net income (o)
$
11,030
$
6,168
$
5,047
$
30,769
$
29,235
Adjusted Return on Average Assets
Average total assets (p)
$
5,272,816
$
4,298,080
$
3,868,206
$
4,503,493
$
3,817,017
Adjusted return on average assets (o)/(p)
0.83
%
0.57
%
0.52
%
0.68
%
0.77
%
Adjusted Return on Average Tangible Common Equity
Adjusted net income (o)
$
11,030
$
6,168
$
5,047
$
30,769
$
29,235
Add: Intangible amortization expense (net of tax)(1)
2,215
1,046
1,046
5,353
4,184
Adjusted net income, excluding intangible amortization (q)
13,245
7,214
6,093
36,122
33,419
Average total equity
478,128
375,229
349,382
397,747
358,268
Less: Average goodwill
84,414
46,783
46,783
56,242
46,959
Less: Average other intangible assets (net of tax)
34,107
10,933
14,067
17,534
15,624
Average tangible common equity (r)
359,607
317,513
288,532
323,971
295,685
Return on average tangible common equity (q)/(r)
14.65
%
9.04
%
8.38
%
11.15
%
11.30
%
____________________
(1)
Items calculated after-tax utilizing a marginal income tax rate of 21.0%.
Alerus Financial Corporation and Subsidiaries
Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures (unaudited)
(dollars and shares in thousands, except per share data)
Three months ended
Year ended
December 31,
September 30,
December 31,
December 31,
December 31,
2024
2024
2023
2024
2023
Adjusted Net Interest Margin (Tax-Equivalent)
Net interest income
$
38,284
$
22,542
$
21,552
$
107,045
$
87,839
Less: BTFP cash interest income
—
4,113
—
12,494
—
Add: BTFP interest expense
—
3,717
—
11,291
—
Less: Purchase accounting net accretion
4,692
152
521
6,121
1,490
Net interest income excluding BTFP impact
33,592
21,994
21,031
99,721
86,349
Add: Tax equivalent adjustment for loans and securities
385
314
226
1,202
671
Adjusted net interest income (s)
$
33,977
$
22,308
$
21,257
$
100,923
$
87,020
Interest earning assets
4,808,230
4,077,716
3,645,184
4,221,832
3,592,476
Less: Average cash proceeds balance from BTFP
—
303,043
—
231,366
—
Add: Change in unearned purchase accounting discount
4,692
152
521
6,121
1,490
Adjusted interest earning assets (t)
$
4,812,922
$
3,774,825
$
3,645,705
$
3,996,587
$
3,593,966
Adjusted net interest margin (tax-equivalent) (s)/(t)
2.81
%
2.35
%
2.31
%
2.53
%
2.42
%
Adjusted Earnings Per Common Share - Diluted
Adjusted net income (o)
$
11,030
$
6,168
$
5,047
$
30,769
$
29,235
Less: Dividends and undistributed earnings allocated to participating securities
(16
)
24
(247
)
79
(5
)
Net income available to common stockholders (u)
11,046
6,144
5,294
30,690
29,240
Weighted-average common shares outstanding for diluted earnings per share (v)
25,144
20,075
19,996
21,321
20,143
Adjusted earnings per common share - diluted (u)/(v)
$
0.44
$
0.31
$
0.26
$
1.44
$
1.45
____________________
(1)
Items calculated after-tax utilizing a marginal income tax rate of 21.0%.
Alerus Financial Corporation and Subsidiaries
Analysis of Average Balances, Yields, and Rates (unaudited)
(dollars in thousands)
Three months ended
Year ended
December 31, 2024
September 30, 2024
December 31, 2023
December 31, 2024
December 31, 2023
Average
Average
Average
Average
Average
Average
Yield/
Average
Yield/
Average
Yield/
Average
Yield/
Average
Yield/
Balance
Rate
Balance
Rate
Balance
Rate
Balance
Rate
Balance
Rate
Interest Earning Assets
Interest-bearing deposits with banks
$
74,054
5.35
%
$
326,350
5.47
%
$
33,920
3.23
%
$
299,625
5.39
%
$
35,395
3.40
%
Investment securities(1)
883,116
2.68
749,062
2.55
921,555
2.70
791,111
2.60
983,545
2.56
Loans held for sale
15,409
5.60
15,795
3.20
11,421
6.01
14,180
5.90
13,217
5.46
Loans
Commercial and industrial
616,356
7.28
593,685
7.26
538,694
6.90
588,269
7.23
527,795
6.63
CRE − Construction, land and development
250,869
6.33
184,611
5.68
117,765
8.12
172,700
6.77
99,315
7.66
CRE − Multifamily
351,804
6.50
242,558
5.62
227,453
5.48
272,125
5.87
185,262
5.25
CRE − Non-owner occupied
1,002,857
6.68
663,539
5.88
519,021
5.67
712,734
6.14
498,884
5.28
CRE − Owner occupied
293,169
6.56
289,963
5.41
266,274
5.18
286,540
5.71
256,690
5.07
Agricultural − Land
59,400
5.73
42,162
4.93
41,064
4.82
45,729
5.10
39,832
4.78
Agricultural − Production
58,999
7.36
40,964
6.84
34,480
6.64
43,361
6.89
30,663
6.48
RRE − First lien
904,414
4.50
689,382
3.98
691,152
3.95
747,874
4.17
673,118
3.80
RRE − Construction
31,722
9.74
16,792
3.86
32,958
4.97
22,832
6.58
33,508
4.98
RRE − HELOC
153,344
7.60
130,705
8.00
118,722
8.37
131,617
8.02
118,653
8.07
RRE − Junior lien
47,041
6.25
36,818
5.74
36,415
6.21
38,982
6.24
35,382
5.83
Other consumer
44,959
7.19
37,768
6.76
29,510
6.33
36,252
6.81
35,971
6.06
Total loans(1)
3,814,934
6.27
2,968,947
5.73
2,653,508
5.64
3,099,015
5.93
2,535,073
5.39
Federal Reserve/FHLB stock
20,717
7.66
17,562
8.25
24,780
7.48
17,901
8.12
25,246
6.98
Total interest earning assets
4,808,230
5.60
4,077,716
5.12
3,645,184
4.89
4,221,832
5.28
3,592,476
4.61
Noninterest earning assets
464,586
220,364
223,022
281,661
224,541
Total assets
$
5,272,816
$
4,298,080
$
3,868,206
$
4,503,493
$
3,817,017
Interest-Bearing Liabilities
Interest-bearing demand deposits
$
1,209,674
1.98
%
$
1,003,595
2.31
%
$
798,634
1.65
%
$
1,010,888
2.12
%
$
768,238
1.29
%
Money market and savings deposits
1,520,616
3.15
1,146,896
3.82
1,092,656
3.53
1,250,939
3.60
1,118,815
2.92
Time deposits
698,358
4.24
485,533
4.46
383,715
4.27
518,826
4.39
303,746
3.58
Fed funds purchased and BTFP
22,012
4.93
327,543
4.97
189,568
5.71
249,180
4.95
287,768
5.31
FHLB short-term advances
200,000
5.10
200,000
5.20
200,000
5.09
200,000
5.12
113,973
5.00
Long-term debt
59,055
4.48
59,027
4.58
58,943
4.59
59,013
4.59
58,900
4.55
Total interest-bearing liabilities
3,709,715
3.11
3,222,594
3.66
2,723,516
3.37
3,288,846
3.48
2,651,440
2.91
Noninterest-Bearing Liabilities and Stockholders' Equity
Noninterest-bearing deposits
847,153
628,114
719,895
704,463
737,365
Other noninterest-bearing liabilities
237,820
72,143
75,413
112,437
69,944
Stockholders’ equity
478,128
375,229
349,382
397,747
358,268
Total liabilities and stockholders’ equity
$
5,272,816
$
4,298,080
$
3,868,206
$
4,503,493
$
3,817,017
Net interest rate spread
2.49
%
1.46
%
1.52
%
1.80
%
1.70
%
Net interest margin, tax-equivalent (1)
3.20
%
2.23
%
2.37
%
2.56
%
2.46
%
____________________
(1)
Taxable-equivalent adjustment was calculated utilizing a marginal income tax rate of 21.0%.
View source version on businesswire.com: https://www.businesswire.com/news/home/20250128310319/en/
Alan A. Villalon, Chief Financial Officer 952.417.3733 (Office)
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