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What changed in ALERUS FINANCIAL CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of ALERUS FINANCIAL CORP's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+388 added−424 removedSource: 10-K (2026-03-04) vs 10-K (2025-03-14)

Top changes in ALERUS FINANCIAL CORP's 2025 10-K

388 paragraphs added · 424 removed · 337 edited across 3 sections

Item 1. Business

Business — how the company describes what it does

221 edited+35 added−74 removed548 unchanged
Biggest changeAt this time, however, it is not possible to predict with any certainty the actual impact that the Trump Administration may have on the banking industry or the operations of the Company or the Bank. 8 Table of Contents The supervisory framework for U.S. banking organizations subjects banks and bank holding companies to regular examination by their respective banking agencies, which results in examination reports and ratings that are not publicly available and that can impact the conduct and growth of their businesses.
Biggest changeThe supervisory framework applicable to U.S. banking organizations subjects banks and bank holding companies to regular examination by their respective banking agencies. These examinations result in confidential examination reports and supervisory ratings that may impact an institution’s operations, capital levels, growth, and strategic initiatives.
The Company maintains an open-door policy to encourage open communication, feedback and discussion about any matter of importance to any employees. The Company hired Lighthouse Services to provide employees with a confidential reporting mechanism for misconduct, including discrimination, ethics, harassment and hostility, human resource issues, privacy, security and safety.
The Company maintains an open-door policy to encourage communication, feedback and discussion about any matter of importance to any employees. The Company hired Lighthouse Services to provide employees with a confidential reporting mechanism for misconduct, including discrimination, ethics, harassment and hostility, human resource issues, privacy, security and safety.
Although capital has historically been one of the key measures of the financial health of both bank holding companies and banks, its role became fundamentally more important in the wake of the global financial crisis, as the banking agencies recognized that the amount and quality of capital held by banking organizations prior to that crisis was insufficient to absorb losses during periods of severe stress.
Although capital historically has been one of the key measures of the financial health of both bank holding companies and banks, its role became fundamentally more important in the wake of the global financial crisis, as the banking agencies recognized that the amount and quality of capital held by banking organizations prior to that crisis was insufficient to absorb losses during periods of severe stress.
The Basel III Rule . The U.S. federal banking agencies adopted the U.S. Basel III regulatory capital reforms, and, at the same time, effected changes required by the Dodd-Frank Act, in regulations that were effective (with certain phase-ins) in 2015, known as the Basel III Rule.
The U.S. federal banking agencies adopted the U.S. Basel III regulatory capital reforms, and, at the same time, effected changes required by the Dodd-Frank Act, in regulations that were effective in 2015 (with certain phase-ins), known as the Basel III Rule.
Deposit Insurance . As an FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the FDIC. The FDIC has adopted a risk-based assessment system whereby FDIC-insured institutions pay insurance premiums at rates based on their risk classification.
As an FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the FDIC. The FDIC has adopted a risk-based assessment system whereby FDIC-insured institutions pay insurance premiums at rates based on their risk classification.
Branching Authority . National banks headquartered in North Dakota, such as the Bank, have the same branching rights in North Dakota as banks chartered under North Dakota law, subject to OCC approval. North Dakota law grants North Dakota-chartered banks the authority to establish branches anywhere in the State of North Dakota, subject to receipt of all required regulatory approvals.
National banks headquartered in North Dakota, such as the Bank, have the same branching rights in North Dakota as banks chartered under North Dakota law, subject to OCC approval. North Dakota law grants North Dakota-chartered banks the authority to establish branches anywhere in the State of North Dakota, subject to receipt of all required regulatory approvals.
In addition, there are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, proper loan underwriting, changes in economic and industry conditions, and inherent in dealing with individual borrowers, including the risk that a borrower may not provide information to the Company about its business in a timely manner, or may present inaccurate or incomplete information to the Company, as well as risks relating to the value of collateral.
In addition, there are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, proper loan underwriting, and changes in economic and industry conditions, and risks inherent in dealing with individual borrowers, including the risk that a borrower may not provide information to the Company about its business in a timely manner, or may present inaccurate or incomplete information to the Company, as well as risks relating to the value of collateral.
The Company’s businesses and operations, which primarily consist of lending money to clients in the form of commercial and residential mortgage loans, borrowing money from clients in the form of deposits and savings accounts, investing in securities, and providing wealth, trust and fiduciary and recordkeeping services, are sensitive to general business and economic conditions in the United States.
The Company’s businesses and operations, which primarily consist of lending money to clients in the form of commercial and residential mortgage loans, borrowing money from clients in the form of deposits and savings accounts, investing in securities, and providing wealth, trust, fiduciary and recordkeeping services, are sensitive to general business and economic conditions in the United States.
The Company may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by governmental, including the DOL, agencies regarding the Company’s current or prior business activities.
The Company may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by governmental agencies, including the DOL, regarding the Company’s current or prior business activities.
Operational, Strategic and Reputational Risks ● the impact of economic or market conditions on the Company’s fee-based services; ● the Company’s ability to implement organic and strategic acquisition growth strategies; ● the Company’s ability to raise additional capital to implement its business plan; ● potential impairment to the goodwill the Company recorded in connection with the Company’s past acquisitions; ● the Company’s ability to continue to grow the retirement and benefit services business; ● the occurrence of fraudulent activity, breaches or failures of the Company’s or its third party vendors’ information security controls or cybersecurity-related incidents, including those employing artificial intelligence or resulting from insider fraud; ● interruptions involving the Company’s information technology and telecommunications systems or third party services; ● potential losses incurred in connection with mortgage loan repurchases; ● the composition of the Company’s executive management team and the Company’s ability to attract and retain key personnel; ● labor shortages; ● regulatory scrutiny concerning the Company’s third party business relationships; ● changes in the Company’s dividend policy; ● increased competition in the financial services industry from non-banks; ● global economic and trade conditions; and ● severe weather, natural disasters, effects of climate change, widespread disease or pandemics, acts of war or terrorism, civil unrest or other adverse external events. 15 Table of Contents Liquidity and Funding Risks ● the Company’s ability to successfully manage liquidity risk, including the Company’s need to access higher cost sources of funds such as fed funds purchased and short-term borrowings; ● concentrations of large depositors who may have deposits above the FDIC insurance limit; ● the Company’s dependence on dividends from the Bank; and ● the Company’s ability to maintain sufficient capital and raise additional capital.
Operational, Strategic and Reputational Risks ● the impact of economic or market conditions on the Company’s fee-based services; ● the Company’s ability to implement organic and strategic acquisition growth strategies; ● the Company’s ability to raise additional capital to implement its business plan; ● potential impairment to the goodwill the Company recorded in connection with the Company’s past acquisitions; ● the Company’s ability to continue to grow the retirement and benefit services business; ● the occurrence of fraudulent activity, breaches or failures of the Company’s or its third-party vendors’ information security controls or cybersecurity-related incidents, including those employing artificial intelligence or resulting from insider fraud; ● interruptions involving the Company’s information technology and telecommunications systems or third-party services; ● potential losses incurred in connection with mortgage loan repurchases; ● the composition of the Company’s executive management team and the Company’s ability to attract and retain key personnel; ● labor shortages; ● regulatory scrutiny concerning the Company’s third-party business relationships; ● changes in the Company’s dividend policy; ● increased competition in the financial services industry from non-banks; ● global economic and trade conditions; and ● severe weather, natural disasters, effects of climate change, widespread disease or pandemics, acts of war or terrorism, civil unrest or other adverse external events. 16 Table of Contents Liquidity and Funding Risks ● the Company’s ability to successfully manage liquidity risk, including the Company’s need to access higher cost sources of funds such as fed funds purchased and short-term borrowings; ● concentrations of large depositors who may have deposits above the FDIC insurance limit; ● the Company’s dependence on dividends from the Bank; and ● the Company’s ability to maintain sufficient capital and raise additional capital.
The minimum capital levels for banking organizations have been expressed in terms of ratios of “capital” divided by “total assets.” The capital guidelines for U.S. banking organizations beginning in 1989 have been based upon international capital accords (known as “Basel” accords) adopted by the Basel Committee on Banking Supervision, a committee of central banks and bank supervisors that acts as the primary global standard-setter for prudential regulation, as implemented by the U.S. federal banking agencies on an interagency basis.
The minimum capital levels for banking organizations have been expressed in terms of ratios of “capital” divided by “total assets.” The capital guidelines for U.S. banking organizations beginning in 1989 have been based upon international capital accords (known as the “Basel” accords) adopted by the Basel Committee on Banking Supervision, a committee of central banks and bank supervisors that acts as the primary global standard-setter for prudential regulation, as interpreted and implemented by the U.S. federal banking agencies on an interagency basis.
As consideration for the merger, the Company issued $123.6 million of its common stock (valued at $22.28 per share as of October 9, 2024) in a stock-for-stock transaction. As a result of the acquisition, the Company acquired $867.5 million in loans and $957.6 million in deposits from Home Federal Savings Bank. 5 Table of Contents Banking Lending.
As consideration for the merger, the Company issued $123.6 million of its common stock (valued at $22.28 per share as of October 9, 2024) in a stock-for-stock transaction. As a result of the acquisition, the Company acquired $867.5 million in loans and assumed $957.6 million in deposits from Home Federal Savings Bank. 5 Table of Contents Banking Lending.
Overall, the Company competes with national commercial banks, regional banks, private banks, mortgage companies, online lenders, savings banks, credit unions, non-bank financial services companies, other financial institutions, including investment advisory and wealth management firms, financial technology (“Fintech”) companies, digital asset service providers and securities brokerage firms, operating within or near the areas the Company serves.
Overall, the Company competes with national commercial banks, regional banks, private banks, mortgage companies, online lenders, savings banks, credit unions, non-bank financial services companies, other financial institutions, including investment advisory and wealth management firms, financial technology companies, digital asset service providers and securities brokerage firms, operating within or near the areas the Company serves.
A significant portion of the Company’s revenue results from fee-based services provided by the retirement and benefit services business. This contrasts with many other community and regional banks that rely more heavily on interest-based sources of revenue, such as loans and investment securities.
A significant portion of the Company’s revenue results from fee-based services provided by the retirement and benefit and wealth services business. This contrasts with many other community and regional banks that rely more heavily on interest-based sources of revenue, such as loans and investment securities.
On October 9, 2024, the Company completed the acquisition of HMN Financial, Inc., the holding company of Home Federal Savings Bank. The primary reasons for the acquisition were to expand the Company’s business in the Rochester, Minnesota metropolitan statistical area (“Rochester MSA”), and grow the size of the Company’s business.
On October 9, 2024, the Company completed the acquisition of HMN Financial, Inc., the holding company of Home Federal Savings Bank. The primary reasons for the acquisition were to expand the Company’s business in the Rochester, Minnesota metropolitan statistical area (“Rochester MSA”), and grow the size of the overall Company.
The Bank is a national bank, chartered by the OCC under the National Bank Act. The deposit accounts of the Bank are insured by the deposit insurance fund (“DIF”) to the maximum extent provided under federal law and FDIC regulations, currently $250,000 per insured depositor category, and the Bank is a member of the Federal Reserve System.
The Bank is a national bank, chartered by the OCC under the National Bank Act, and a member of the Federal Reserve System. The deposit accounts of the Bank are insured by the deposit insurance fund (“DIF”) to the maximum extent provided under federal law and FDIC regulations, currently $250,000 per insured depositor ownership category.
Legal, Accounting and Compliance Risks ● the effectiveness of the Company’s risk management framework; ● the accuracy the techniques, models and assumptions underlying the Company’s accounting estimates and risk management processes and controls; ● new or revised accounting standards; ● any material weaknesses in the Company’s internal control over financial reporting; ● the commencement, cost and outcome of litigation and other legal proceedings and regulatory actions against the Company or to which the Company may become subject, including investigations and litigation relating to the Company’s ESOP fiduciary services commenced by the DOL or third parties; ● the extensive regulatory framework that applies to us; and ● the impact of recent and future legislative and regulatory changes, including policies proposed by the new presidential administration.
Legal, Accounting and Compliance Risks ● the effectiveness of the Company’s risk management framework; ● the accuracy of the techniques, models and assumptions underlying the Company’s accounting estimates and risk management processes and controls; ● new or revised accounting standards; ● any material weaknesses in the Company’s internal control over financial reporting; ● the commencement, cost and outcome of litigation and other legal proceedings and regulatory actions and investigations against the Company or to which the Company may become subject, including investigations and litigation relating to the Company’s ESOP and retirement plan fiduciary services commenced by the DOL or third parties; ● the extensive regulatory framework that applies to us; and ● the impact of recent and future legislative and regulatory changes, including policies proposed by the new presidential administration.
If a relationship manager, asset manager or other employee were to misappropriate any client funds or client information, the reputation of the Company’s businesses could be negatively affected, which may result in the loss of accounts and could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. 25 Table of Contents Maintenance of the Company’s reputation depends not only on its success in maintaining the Company’s service-focused culture and controlling and mitigating the various risks described in this report, but also on the Company’s success in identifying and appropriately addressing issues that may arise in the areas described above.
If a relationship manager, asset manager or other employee were to misappropriate any client funds or client information, the reputation of the Company’s businesses could be negatively affected, which may result in the loss of accounts and could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. 26 Table of Contents Maintenance of the Company’s reputation depends not only on its success in maintaining the Company’s service-focused culture and controlling and mitigating the various risks described in this report, but also on the Company’s success in identifying and appropriately addressing issues that may arise in the areas described above.
These security and privacy policies and procedures are in effect across all of the Company’s businesses and geographic locations. From time-to-time, the Company has identified cybersecurity threats and cybersecurity incidents that require the Company to make changes to its processes and to implement additional safeguards.
These security and privacy policies and procedures are in effect across all of the Company’s businesses and geographic locations. From time-to-time, the Company has identified minor cybersecurity threats and cybersecurity incidents that require the Company to make changes to its processes and to implement additional safeguards.
In addition, failures of third parties to comply with applicable laws and regulations, or fraud or misconduct on the part of employees of any of these third parties, could disrupt the Company’s operations or adversely affect its reputation. 23 Table of Contents It may be difficult for the Company to replace some of its third party vendors, particularly vendors providing the Company’s core banking and information services, in a timely manner if they are unwilling or unable to provide the Company with these services in the future for any reason and even if the Company is able to replace them, it may be at higher cost or result in the loss of clients.
In addition, failures of third parties to comply with applicable laws and regulations, or fraud or misconduct on the part of employees of any of these third parties, could disrupt the Company’s operations or adversely affect its reputation. 24 Table of Contents It may be difficult for the Company to replace some of its third-party vendors, particularly vendors providing the Company’s core banking and information services, in a timely manner if they are unwilling or unable to provide the Company with these services in the future for any reason and even if the Company is able to replace them, it may be at higher cost or result in the loss of clients.
In addition to the foregoing, the Company may face additional risks in acquisitions to the extent the Company acquires new lines of business or new products, or enter new geographic areas, in which the Company has little or no current experience, especially if the Company loses key employees of the acquired operations.
In addition to the foregoing, the Company may face risks in acquisitions to the extent the Company acquires new lines of business or new products, or enter new geographic areas, in which the Company has little or no current experience, especially if the Company loses key employees of the acquired operations.
It offers retirement and benefit services at all of the Company’s banking offices located in the three primary market areas. In addition, the Company operates one retirement and benefit services office Colorado and one in Michigan. In addition, the Company’s Chief Retirement Services Officer oversees the development of the national market’s client base.
It offers retirement and benefit services at all of the Company’s banking offices located in the three primary market areas. In addition, the Company operates one retirement and benefit services office Colorado. In addition, the Company’s Chief Retirement Services Officer oversees the development of the national market’s client base.
The Company operates full-service banking offices in Grand Forks, North Dakota (three offices), Northwood, North Dakota (one office), Fargo and West Fargo, North Dakota (three offices), the Twin Cities MSA (seven offices), the Rochester MSA (four offices), southern Minnesota (seven offices), Pewaukee, Wisconsin (one office), Marshalltown, Iowa (one office), and the Phoenix MSA (two offices).
The Company operates full-service banking offices in Grand Forks, North Dakota (three offices), Northwood, North Dakota (one office), Fargo and West Fargo, North Dakota (two offices), the Twin Cities MSA (six offices), the Rochester MSA (four offices), southern Minnesota (seven offices), Pewaukee, Wisconsin (one office), Marshalltown, Iowa (one office), and the Phoenix MSA (two offices).
Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions ( i.e. , Tier 1 Capital less all intangible assets), well above the minimum levels.
Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions ( i.e. , Tier 1 Capital less all intangible assets), well above the minimum regulatory levels.
In that event, any losses the Company might have to recognize and any increases the Company might have to make to the Company’s reserves could have a material adverse effect on the Company’s business, financial position, results of operations and growth prospects. 24 Table of Contents The Company is highly dependent on its executive management team, and the loss of any of the Company ’ s senior executive officers or other key employees, or the Company ’ s inability to attract and retain qualified personnel, could harm the Company ’ s ability to implement its strategic plan and impair the Company ’ s relationships with clients.
In that event, any losses the Company might have to recognize and any increases the Company might have to make to the Company’s reserves could have a material adverse effect on the Company’s business, financial position, results of operations and growth prospects. 25 Table of Contents The Company is highly dependent on its executive management team, and the loss of any of the Company ’ s senior executive officers or other key employees, or the Company ’ s inability to attract and retain qualified personnel, could harm the Company ’ s ability to implement its strategic plan and impair the Company ’ s relationships with clients.
Due to the larger average size of each commercial loan as compared with other loans such as residential loans, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial loans could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. 19 Table of Contents Construction and land development loans are based upon estimates of costs and values associated with the complete project.
Due to the larger average size of each commercial loan as compared with other loans such as residential loans, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial loans could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. 20 Table of Contents Construction and land development loans are based upon estimates of costs and values associated with the complete project.
The extent of the banking agencies’ powers depends on whether the banking organization in question is “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in each case as defined by regulation.
The extent of the banking agencies’ powers depends on whether the banking organization in question is “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized,” in each case as defined by regulation.
If the Company fails to offer interest at a sufficient level to keep these non-maturity deposits, core deposits may be reduced, which would require the Company to obtain funding in other ways or risk slowing future asset growth. 16 Table of Contents The Company could recognize losses on securities held in the Company ’ s securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.
If the Company fails to offer interest at a sufficient level to keep these non-maturity deposits, core deposits may be reduced, which would require the Company to obtain funding in other ways or risk slowing future asset growth. 17 Table of Contents The Company could recognize losses on securities held in the Company ’ s securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.
Risk Factors—Operational, Strategic and Reputational Risks of this Form 10-K for additional information. 36 Table of Contents Accordingly, the Company has devoted significant resources to assessing, identifying and managing risks associated with cybersecurity threats, as noted below: ● Identifying and assessing cybersecurity threats : The Company regularly evaluates its systems and data for potential vulnerabilities and analyzes the evolving cyber threat landscape, to ensure it proactively addresses risks before they materialize.
Risk Factors—Operational, Strategic and Reputational Risks of this Form 10 -K for additional information. 37 Table of Contents Accordingly, the Company has devoted significant resources to assessing, identifying and managing risks associated with cybersecurity threats, as noted below: ● Identifying and assessing cybersecurity threats : The Company regularly evaluates its systems and data for potential vulnerabilities and analyzes the evolving cyber threat landscape, to ensure it proactively addresses risks before they materialize.
The specific consequences of these or future conflicts on the Company’s business are difficult to predict at this time, but in addition to inflationary pressures affecting the Company’s operations and those of the Company’s customers and borrowers, the Company may also experience an increase in cyber-attacks against us, the Company’s customers and borrowers, service providers and other third parties. 27 Table of Contents The Company depends on the accuracy and completeness of information about clients and counterparties.
The specific consequences of these or future conflicts on the Company’s business are difficult to predict at this time, but in addition to inflationary pressures affecting the Company’s operations and those of the Company’s customers and borrowers, the Company may also experience an increase in cyber-attacks against us, the Company’s customers and borrowers, service providers and other third parties. 28 Table of Contents The Company depends on the accuracy and completeness of information about clients and counterparties.
These federal and state laws, and the regulations of the banking agencies issued under them, affect, among other things, the scope of the Company’s business; the kinds and amounts of investments that the Company and the Bank may make; required capital levels relative to the Company’s assets; the nature and amount of collateral for loans; the establishment of branches; the Company’s and the Bank’s ability to merge, consolidate and acquire; dealings with the Company’s and Bank’s insiders and affiliates; and the Company’s payment of dividends.
These laws, and the regulations of the banking agencies issued under them, affect, among other things, the scope of the Company’s business; the kinds and amounts of investments that the Company and the Bank may make; required capital levels relative to the Company’s assets; the nature and amount of collateral for loans; the establishment of branches; the Company’s and the Bank’s ability to merge, consolidate and acquire; dealings with the Company’s and Bank’s insiders and affiliates; and the Company’s payment of dividends.
Pursuant to the provisions of Section 404(b) of the Sarbanes-Oxley Act, which require that the Company’s independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting under the standards of the PCAOB, the Company engaged its independent registered public accounting firm to perform an audit of its internal control over financial reporting under PCAOB standards as of any balance sheet date reported in the Company’s financial statements as of December 31, 2024.
Pursuant to the provisions of Section 404(b) of the Sarbanes-Oxley Act, which require that the Company’s independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting under the standards of the PCAOB, the Company engaged its independent registered public accounting firm to perform an audit of its internal control over financial reporting under PCAOB standards as of any balance sheet date reported in the Company’s financial statements as of December 31, 2025.
Finally, the Bank of North Dakota enables state banks to take deposits and manage funds for municipal and county governments without meeting collateral requirements, which are waived by a letter of credit from the Bank of North Dakota. Minnesota The Company serves the Minnesota market through 18 full-service banking offices located primarily in the Twin Cities MSA and Rochester MSA.
Finally, the Bank of North Dakota enables state banks to take deposits and manage funds for municipal and county governments without meeting collateral requirements, which are waived by a letter of credit from the Bank of North Dakota. Minnesota The Company serves the Minnesota market through 19 full-service banking offices located primarily in the Twin Cities MSA and Rochester MSA.
The Company ’ s exposure to home equity lines of credit may increase the potential for loss. The Company’s mortgage loan portfolio consists, in part, of home equity lines of credit.
The Company ’ s exposure to home equity lines of credit may increase the potential for loss. The Company’s mortgage loan portfolio consists, in part, of home equity lines of credit (“HELOC”).
As a result, the Company’s inability to successfully manage credit risk could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. 17 Table of Contents The Company ’ s allowance for credit losses may prove to be insufficient to absorb potential losses in its loan portfolio.
As a result, the Company’s inability to successfully manage credit risk could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. 18 Table of Contents The Company ’ s allowance for credit losses may prove to be insufficient to absorb potential losses in its loan portfolio.
The authority of a national bank to invest in a financial subsidiary is subject to a number of conditions, including, among other things, requirements that the bank must be well-managed and well-capitalized (after deducting from capital the bank’s outstanding investments in financial subsidiaries). At this time, the Bank has not applied for approval to establish any financial subsidiaries.
The authority of a national bank to invest in a financial subsidiary is subject to conditions, including, among other things, requirements that the bank be well managed and well capitalized (after deducting from capital the bank’s outstanding investments in financial subsidiaries). At this time, the Bank has not applied for approval to establish any financial subsidiaries.
In line with the foregoing, the Company has experienced and may continue to experience an increase in the cost of interest-bearing liabilities primarily due to changes in the rates the Company pays on some of its deposit products to stay competitive within the Company’s market areas and variable borrowing costs resulting from changes in the federal funds rate.
In line with the foregoing, the Company has experienced and may continue to experience changes in the cost of interest-bearing liabilities primarily due to changes in the rates the Company pays on some of its deposit products to stay competitive within the Company’s market areas and variable borrowing costs resulting from changes in the federal funds rate.
The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve prior to November 11, 1999 to be “so closely related to banking ... as to be a proper incident thereto.” This authority permits the Company to engage in a variety of banking-related businesses, including the ownership and operation of a savings association, or any entity engaged in consumer finance, equipment leasing, the operation of a computer service bureau (including software development) and mortgage banking and brokerage services.
The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve prior to November 11, 1999 to be “so closely related to banking... as to be a proper incident thereto.” This authority permits the Company to engage in a variety of banking-related businesses, including, among other things, the ownership and operation of a savings association, or any entity engaged in consumer finance, equipment leasing, the operation of a computer service bureau (including software development), and mortgage banking and brokerage services.
The Company targets businesses with sales between $2.0 million and $100.0 million. The Company’s commitment to delivering diversified solutions is driven by the Company’s “One Alerus” initiative, launched in 2017, which enables the Company to bring all of its product and service offerings to clients in a cohesive and seamless manner.
The Company targets businesses with sales between $1.0 million and $100.0 million. The Company’s commitment to delivering diversified solutions is driven by the Company’s “One Alerus” initiative, launched in 2017, which enables the Company to bring all of its product and service offerings to clients in a cohesive and seamless manner.
Any reduction of loan production volumes could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. 22 Table of Contents The occurrence of fraudulent activity, breaches or failures of the Company ’ s information security controls or cybersecurity related incidents could have a material adverse effect on the Company ’ s business, financial condition, results of operations and growth prospects.
Any reduction of loan production volumes could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. 23 Table of Contents The occurrence of fraudulent activity, breaches or failures of the Company ’ s information security controls or cybersecurity related incidents could have a material adverse effect on the Company ’ s business, financial condition, results of operations and growth prospects.
These acquisitions may result in the Company entering new markets. 21 Table of Contents If the Company grows through acquisitions, it may expose the Company to financial, execution and operational risks that could have a material adverse effect on the Company’s business, financial position, results of operations and growth prospects.
These acquisitions may result in the Company entering new markets. 22 Table of Contents If the Company grows through acquisitions, it may expose it to financial, execution and operational risks that could have a material adverse effect on the Company’s business, financial position, results of operations and growth prospects.
The Company may also be subject to potentially adverse regulatory consequences. 30 Table of Contents Litigation and regulatory actions, including possible enforcement actions, could subject the Company to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on the Company ’ s business activities.
The Company may also be subject to potentially adverse regulatory consequences. 31 Table of Contents Litigation and regulatory actions, including possible enforcement actions, could subject the Company to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on the Company ’ s business activities.
As described above, the Bank exceeded its capital requirements under applicable guidelines as of December 31, 2024. Notwithstanding the availability of funds for dividends, however, the OCC may prohibit the payment of dividends by the Bank if it determines such payment would constitute an unsafe or unsound practice.
As described above, the Bank exceeded its capital requirements under applicable guidelines as of December 31, 2025. Notwithstanding the availability of funds for dividends, however, the OCC may prohibit the payment of dividends by the Bank if it determines such payment would constitute an unsafe or unsound practice.
In addition, federal law and regulations may affect the terms on which any person who is a director or officer of the Company or the Bank, or a principal stockholder of the Company, may obtain credit from banks with which the Bank maintains a correspondent relationship. Safety and Soundness Standards/Risk Management.
In addition, federal law and regulations may govern the terms on which any person who is a director or officer of the Company or the Bank, or a principal stockholder of the Company, may obtain credit from banks with which the Bank maintains a correspondent relationship. Safety and Soundness Standards/Risk Management.
It is also possible that other states where the Company has customers could enact similar laws. 35 Table of Contents Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact the Company ’ s business.
It is also possible that other states where the Company has customers could enact similar laws. 36 Table of Contents Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact the Company ’ s business.
In addition to offices located in the Company’s banking markets, the retirement and benefit services business administers plans in all 50 states through offices located in Colorado and Michigan. 6 Table of Contents North Dakota The Company’s corporate headquarters, which is a full-service banking office located at 401 Demers Avenue, Grand Forks, North Dakota 58201, primarily serves the eastern North Dakota market along with two other full-service banking offices located in Grand Forks, North Dakota, three full-service banking offices located in Fargo and West Fargo, North Dakota, and one full-service banking office located in Northwood, North Dakota.
In addition to offices located in the Company’s banking markets, the retirement and benefit services business administers plans in all 50 states through an office located in Colorado. 6 Table of Contents North Dakota The Company’s corporate headquarters, which is a full-service banking office located at 401 Demers Avenue, Grand Forks, North Dakota 58201, primarily serves the eastern North Dakota market along with two other full-service banking offices located in Grand Forks, North Dakota, two full-service banking offices located in Fargo and West Fargo, North Dakota, and one full-service banking office located in Northwood, North Dakota.
Losses of such accounts could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. 28 Table of Contents The Company may be adversely affected by the soundness of certain securities brokerage firms.
Losses of such accounts could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. 29 Table of Contents The Company may be adversely affected by the soundness of certain securities brokerage firms.
Any of these could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. 31 Table of Contents Changes in accounting policies or standards could materially impact the Company ’ s financial statements.
Any of these could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. 32 Table of Contents Changes in accounting policies or standards could materially impact the Company ’ s financial statements.
The Company is required to file with the Federal Reserve periodic reports of the Company’s operations and such additional information regarding the Company and the Bank as the Federal Reserve may require. Acquisitions and Activities/ Financial Holding Company Election. The primary purpose of a bank holding company is to control and manage banks.
The Company is required to file with the Federal Reserve periodic reports of the Company’s operations and such additional information regarding the Company and the Bank as the Federal Reserve may require. Acquisitions and Activities. The primary purpose of a bank holding company is to control and manage banks.
Moreover, several large corporations, including retail companies, financial institutions and third party vendors specializing in providing services to financial institutions, including MOVEit and First American Financial, have suffered major data breaches, in some cases exposing not only confidential and proprietary corporate information, but also sensitive financial and other personal information of their clients and employees and subjecting them to potential fraudulent activity.
Moreover, several large corporations, including retail companies, financial institutions and third-party vendors specializing in providing services to financial institutions, have suffered major data breaches, in some cases exposing not only confidential and proprietary corporate information, but also sensitive financial and other personal information of their clients and employees and subjecting them to potential fraudulent activity.
In addition, economic conditions in foreign countries and weakening global trade due to increased anti-globalization sentiment and tariff activity could affect the stability of global financial markets, which could hinder the economic growth of the United States.
In addition, economic conditions and political relations in foreign countries and weakening global trade due to increased anti-globalization sentiment and tariff activity could affect the stability of global financial markets, which could hinder the economic growth of the United States.
The Company’s management team is responsible for the day-to-day management of cybersecurity risks it faces, including the Company’s Executive Vice President and Chief Operating Officer and Director of Information Security. The Company’s current Director of Information Security has over 29 years of experience.
The Company’s management team is responsible for the day-to-day management of cybersecurity risks it faces, including the Company’s Executive Vice President and Chief Operating Officer and Director of Information Security. The Company’s current Director of Information Security has over 30 years of experience.
While the Company closely monitors business disruptors and seek to adapt to changing technologies, matching the pace of innovation exhibited by new and differently situated competitors may require the Company and policy-makers to adapt at a greater pace.
While the Company closely monitors business disruptors and seeks to adapt to changing technologies, matching the pace of innovation exhibited by new and differently situated competitors may require the Company and policy-makers to adapt at a greater pace.
The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including ongoing conflicts in the Middle East and between Russia and Ukraine, which have the potential to increase volatility in commodity and energy prices, create supply chain issues and cause instability in financial markets.
The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including ongoing conflicts in the Middle East, between Russia and Ukraine, and recent military actions in Venezuela, which have the potential to increase volatility in commodity and energy prices, create supply chain issues and cause instability in financial markets.
Adverse changes affecting real estate values, including decreases in office occupancy due to the shift to remote working environments following the COVID-19 pandemic and the liquidity of real estate in one or more of the Company’s markets could increase the credit risk associated with the Company’s loan portfolio, significantly impair the value of property pledged as collateral on loans and affect the Company’s ability to sell the collateral upon foreclosure without a loss or additional losses or the Company’s ability to sell those loans on the secondary market.
Adverse changes affecting real estate values, including decreases in office occupancy due to the shift to remote working environments and the liquidity of real estate in one or more of the Company’s markets could increase the credit risk associated with the Company’s loan portfolio, significantly impair the value of property pledged as collateral on loans and affect the Company’s ability to sell the collateral upon foreclosure without a loss or additional losses or the Company’s ability to sell those loans on the secondary market.
The Bank may be required to seek approval from the OCC and other banking or financial services agencies before engaging in certain acquisitions or mergers under applicable state and federal law.
The Bank may be required to obtain approval from the OCC and other applicable banking or financial services agencies before engaging in certain acquisitions or mergers under applicable state and federal law.
Under the capital regulations of the Federal Reserve for the Company and the OCC for the Bank, in order to be well capitalized, the Company must maintain: ● A Common Equity Tier 1 Capital ratio to risk-weighted assets of 6.5% or more; ● A ratio of Tier 1 Capital to total risk-weighted assets of 8% or more; ● A ratio of Total Capital to total risk-weighted assets of 10% or more; and ● A leverage ratio of Tier 1 Capital to total adjusted average quarterly assets of 5% or greater.
Under the capital regulations of the Federal Reserve for the Company and the OCC for the Bank, in order to be well capitalized, the Company and the Bank must maintain: ● A CET1 ratio to risk-weighted assets of 6.5% or more; ● A ratio of Tier 1 Capital to total risk-weighted assets of 8% or more; ● A ratio of Total Capital to total risk-weighted assets of 10% or more; and ● A leverage ratio of Tier 1 Capital to total adjusted average quarterly assets of 5% or greater.
For all other areas, the Company hired McLagan a division of Aon, to provide benchmarking and analysis for base salary structures and sales incentive programs. The Company’s benefits package provides employees medical, dental, vision, life, disability and accidental death insurance and paid time off benefits.
For all other areas, the Company has used McLagan, a division of Aon, to provide benchmarking and analysis for base salary structures and sales incentive programs. The Company’s benefits package provides employees medical, dental, vision, life, disability and accidental death insurance and paid time off benefits.
For the past 8 years, the Company’s Director of Information Security has successfully managed teams, implementing and maintaining robust cybersecurity and data protection controls to safeguard the Company’s information assets.
For the past 9 years, the Company’s Director of Information Security has successfully managed teams, implementing and maintaining robust cybersecurity and data protection controls to safeguard the Company’s information assets.
The banking agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations.
The banking agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine that such operations are unsafe or unsound, fail to comply with applicable law, or are otherwise inconsistent with laws and regulations.
If clients, including the Company’s retirement and benefit services and wealth clients, move money out of bank deposits and into other investments, the Company could lose a relatively low-cost source of funds, which would require the Company to seek other funding alternatives, including increasing the Company’s dependence on wholesale funding sources, in order to continue to grow, thereby increasing the Company’s funding costs and reducing net interest income and net income.
If clients move money out of bank deposits and into other investments, the Company could lose a relatively low-cost source of funds, which would require the Company to seek other funding alternatives, including increasing the Company’s dependence on wholesale funding sources, in order to continue to grow, thereby increasing the Company’s funding costs and reducing net interest income and net income.
Furthermore, if the Federal Reserve determines that a financial holding company’s subsidiary bank has not received a satisfactory CRA rating, the Company would not be able to commence any new financial activities or acquire a company that engages in such activities. Change in Control .
Furthermore, if the Federal Reserve determines that the Bank has not received a satisfactory CRA rating, the Company would not be able to commence any new financial activities or acquire a company that engages in such activities. Change in Control .
As a result, the Company’s growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of applicable statutes and by the regulations and policies of various banking agencies, including the Company’s primary regulator, the Board of Governors of the Federal Reserve System (“Federal Reserve”), and the Bank’s primary regulator, the Office of the Comptroller of the Currency (“OCC”), as well as the FDIC, as the insurer of the Bank’s deposits, and the Consumer Financial Protection Bureau (“CFPB”), as the regulator of consumer financial services and their providers.
As a result, the Company’s growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of applicable statutes and by the regulations and policies of various banking agencies, including the Company’s primary regulator, the Board of Governors of the Federal Reserve System (“Federal Reserve”), and the Bank’s primary regulator, the Office of the Comptroller of the Currency (“OCC”), as well as the FDIC, as the insurer of the Bank’s deposits, and consumer financial protection agencies.
FDIC-insured institutions with $10 billion or less in assets, like the Bank, continue to be examined by their applicable banking regulators.
FDIC-insured institutions with $10 billion or less in assets, like the Bank, continue to be examined by their applicable banking agencies.
Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of higher prevailing interest rates, such as the present period. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowings generally exceed the interest rates paid on deposits.
Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of higher prevailing interest rates. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowings generally exceed the interest rates paid on deposits.
The Company is currently subject to and may continue to be subject to claims and litigation relating to the Company ’ s fiduciary responsibilities. Some of the services the Company provides, such as trust and investment services, require the Company to act as fiduciary for its clients and others.
The Company is currently subject to and may continue to be subject to claims and litigation relating to the Company ’ s fiduciary responsibilities. Some of the services the Company provides, such as retirement plan administration, trust and investment services, require the Company to act as fiduciary for its clients and others.
These include trust investment law, securities law, banking law, tax law, contract law, anti-money laundering requirements, environmental law, consumer protection law, criminal law, and the sanctions laws and regulations. The Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Code are the primary sources of law governing the structure, administration, and operation of employee benefit plans.
Relevant legal frameworks include trust investment law, securities law, banking law, tax law, contract law, anti-money laundering requirements, environmental law, consumer protection law, criminal law, and sanctions laws and regulations. The Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Code are the primary sources of law governing the structure, administration, and operation of employee benefit plans.
Following the global financial crisis, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced an agreement on a strengthened set of capital requirements for banking organizations around the world, known as the Basel III accords, to address deficiencies recognized in connection with the global financial crisis.
Following the global financial crisis, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced an agreement on a strengthened set of capital requirements for banking organizations around the world, known as the Basel III accords, to address deficiencies recognized in connection with the global financial crisis. 9 Table of Contents The Basel III Rule .
The Company’s business is subject to increased litigation and regulatory risks because of a number of factors, including the highly regulated nature of the financial services industry and the focus of state and federal prosecutors on banks and the financial services industry generally.
The Company’s business is subject to increased litigation and regulatory risks because of a number of factors, including the highly regulated nature of the financial services and retirement benefits industries and the focus of state and federal prosecutors on banks and the financial services industry generally.
If clients, including the Company’s retirement and benefit and wealth clients, move money out of bank deposits or money market accounts and into investments (or similar deposit products at other institutions that may provide a higher rate of return), the Company could lose a relatively low-cost source of funds, increasing funding costs and reducing net interest income and net income. 29 Table of Contents The Company supplements its core deposit funding with non-core, short-term funding sources, including FHLB advances and fed funds purchased.
If clients move money out of bank deposits or money market accounts and into investments (or similar deposit products at other institutions that may provide a higher rate of return), the Company could lose a relatively low-cost source of funds, increasing funding costs and reducing net interest income and net income. 30 Table of Contents The Company supplements its core deposit funding with non-core, short-term funding sources, including FHLB advances and fed funds purchased.
For example, a banking organization that is well-capitalized may: (i) qualify for exemptions from prior notice or application requirements otherwise applicable to certain types of activities; (ii) qualify for expedited processing of other required notices or applications; and (iii) accept, roll-over or renew brokered deposits.
For example, a well capitalized banking organization may: (i) qualify for exemptions from prior notice or application requirements otherwise applicable to certain activities; (ii) receive expedited processing of other required notices or applications; and (iii) accept, roll-over, or renew brokered deposits.
The Company is generally not restricted from issuing additional shares of stock, up to totals of 30,000,000 shares of common stock and 2,000,000 shares of preferred stock authorized in the Company’s certificate of incorporation, which in each case could be increased by a vote of the holders of a majority of the Company’s shares of common stock.
The Company is generally not restricted from issuing additional shares of stock, up to totals of 60,000,000 shares of common stock and 2,000,000 shares of preferred stock authorized in the Company’s certificate of incorporation, as amended, which in each case could be increased by a vote of the holders of a majority of the Company’s shares of common stock.
As of December 31, 2024, the Company’s advances from the FHLB were collateralized by $1.4 billion of real estate loans. If the Company is unable to pledge sufficient qualifying collateral to secure funding from the FHLB, it may lose access to this source of liquidity.
As of December 31, 2025, the Company’s advances from the FHLB were collateralized by $1.3 billion of real estate loans. If the Company is unable to pledge sufficient qualifying collateral to secure funding from the FHLB, it may lose access to this source of liquidity.
Not only did the Basel III Rule increase most of the required minimum capital ratios in effect prior to January 1, 2015, but, in requiring that forms of capital be of higher quality to absorb loss, it introduced the concept of Common Equity Tier 1 Capital, which consists primarily of common stock, related surplus (net of Treasury stock), retained earnings, and Common Equity Tier 1 minority interests subject to certain regulatory adjustments.
Not only did the Basel III Rule increase most of the required minimum capital ratios in effect prior to January 1, 2015, but, by requiring that capital instruments be of higher quality to absorb loss, it introduced the concept of Common Equity Tier 1 Capital (“CET1”), which consists primarily of common stock, related surplus (net of Treasury stock), retained earnings, and CET1 minority interests, subject to certain regulatory adjustments and deductions.
The Company may not be successful in generating organic growth if the Company fails to effectively execute the Company’s integrated One Alerus strategy, or as a result of other factors, including delays in introducing and implementing new products and services and other impediments resulting from regulatory oversight or lack of qualified personnel at the Company’s office locations.
The Company may not be successful in generating organic growth if the Company fails to effectively execute its business strategy, or as a result of other factors, including delays in introducing and implementing new products and services and other impediments resulting from regulatory oversight or lack of qualified personnel at the Company’s office locations.
The OCC examines the Bank’s Banking business segment as part of its safety and soundness examinations, which consider not only compliance with applicable laws and regulations, but also capital levels, asset quality (with rigorous loan portfolio reviews) and risk, management ability and performance, earnings, liquidity, and various other factors. Many of these subjects are discussed further below.
The OCC examines the Bank’s Banking business segment as part of its safety and soundness examinations, which evaluate not only compliance with applicable laws and regulations, but also capital adequacy, asset quality (with rigorous loan portfolio reviews), risk management, management ability and performance, earnings, liquidity, and various other factors. Many of these topics are discussed further below.
While the FOMC reduced the target range for the federal funds rate in the second half of 2024, there is no guarantee that these decreases will be continued in 2025. The Company cannot guarantee that its stock repurchase program will be fully implemented or that it will enhance long-term stockholder value.
While the FOMC reduced the target range for the federal funds rate in 2025, there is no guarantee that these decreases will be continued in 2026. The Company cannot guarantee that its stock repurchase program will be fully implemented or that it will enhance long-term stockholder value.
For the year ended December 31, 2024, noninterest income represented approximately 51.8% of the Company’s total revenue, which includes net interest income and noninterest income, a significant portion of which is derived from the Company’s retirement and benefit services business. This fee income business presents special risks not borne by other institutions that focus exclusively on banking.
For the year ended December 31, 2025, noninterest income represented approximately 23.1% of the Company’s total revenue, which includes net interest income and noninterest income, a significant portion of which is derived from the Company’s retirement and benefit services business. This fee income business presents special risks not borne by other institutions that focus exclusively on banking.
The OCC regularly assesses the Bank’s record of meeting the credit needs of its communities. The Bank’s CRA ratings derived from these examinations can have significant impacts on the activities in which the Bank and the Company may engage.
The OCC regularly assesses the Bank’s record of meeting these credit needs through periodic CRA examinations. The Bank’s CRA ratings derived from these examinations can have significant impacts on the activities in which the Bank and the Company may engage.
Under the final rule, a community banking organization is eligible to elect to comply with its capital requirements under the CBLR framework if it has: (i) less than $10 billion in total consolidated assets, (ii) limited amounts of certain assets and off-balance sheet exposures, and (iii) a CBLR greater than 9%.
Under a final regulation promulgated by the federal banking agencies, a community banking organization is eligible to elect to comply with its capital requirements under the CBLR framework if it has: (i) less than $10 billion in total consolidated assets; (ii) limited amounts of certain assets and off-balance sheet exposures; and (iii) a CBLR greater than 9%.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company’s common stock trades on the Nasdaq Stock Market (“Nasdaq”) under the symbol “ALRS.” Stockholders As of March 7, 2025, the Company had 418 holders of record of the Company’s common stock and an estimated 2,590 additional beneficial holders of the Company’s common stock whose stock was held in street name by brokerages or fiduciaries. 37 Table of Contents Stock Repurchase Plans The following table presents information related to repurchases of the Company’s common stock for each calendar month in the fourth quarter of 2024: Total Number of Maximum Number of Total Number Average Shares Purchased as Shares that May of Shares Price Paid Part of Publicly Yet be Purchased (dollars in thousands, except per share data) Purchased (1) per Share Announced Plans Under the Plan (2) October 1-31, 2024 227 $ 21.96 — 1,000,000 November 1-30, 2024 88 22.10 — 1,000,000 December 1-31, 2024 2,778 21.50 — 1,000,000 Total 3,093 $ 21.55 — 1,000,000 (1) Represents shares of the Company’s common stock surrendered by employees to the Company to pay withholding taxes on the vesting of restricted stock awards.
Biggest changeMARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company’s common stock trades on the Nasdaq Stock Market (“Nasdaq”) under the symbol “ALRS.” Stockholders As of February 28, 2026, the Company had 418 holders of record of the Company’s common stock and an estimated 9,497 additional beneficial holders of the Company’s common stock whose stock was held in street name by brokerages or fiduciaries. 38 Table of Contents Stock Repurchase Plans The following table presents information related to repurchases of the Company’s common stock for each calendar month in the fourth quarter of 2025: Total Number of Maximum Number of Total Number Average Shares Purchased as Shares that May of Shares Price Paid Part of Publicly Yet be Purchased (dollars in thousands, except per share data) Purchased (1) per Share Announced Plans Under the Plan (2) October 1-31, 2025 227 $ 21.84 — 1,000,000 November 1-30, 2025 — — — 1,000,000 December 1-31, 2025 3,233 22.54 — 1,000,000 Total 3,460 $ 22.49 — 1,000,000 (1) Represents shares of the Company’s common stock surrendered by employees to the Company to pay withholding taxes on the vesting of restricted stock awards.
For the purposes of comparison, the graph illustrates comparable stockholder returns of the Nasdaq Composite Index and the total return of the S&P U.S. BMI Banks - Midwest Region Index.
For the purposes of comparison, the graph illustrates comparable total stockholder returns of the Nasdaq Composite Index and the S&P U.S. BMI Banks - Midwest Region Index.
For the three months ended December 31, 2024, the Company did not repurchase any shares of common stock under the Stock Repurchase Program.
For the three months ended December 31, 2025, the Company did not repurchase any shares of common stock under the Stock Repurchase Program.
Does not include shares that may be purchased by the Company’s ESOP. ​ Performance Graph The following graph compares the percentage change in the cumulative stockholder return of the Company’s common stock for the period December 31, 2020, through December 31, 2024.
Does not include shares that may be purchased by the Company’s ESOP. ​ Performance Graph The following graph compares the percentage change in the cumulative stockholder return of the Company’s common stock for the period December 31, 2021, through December 31, 2025.
Banks - Midwest Region Index 100.00 85.98 113.59 98.03 100.08 122.10 ​ 38 Table of Contents Dividend Policy It has been the Company’s policy to pay quarterly dividends to holders of its common stock and the Company currently intends to maintain or increase its dividend levels in future quarters.
Banks - Midwest Region Index 100.00 132.12 114.02 116.40 142.02 159.02 ​ 39 Table of Contents Dividend Policy It has been the Company’s policy to pay quarterly dividends to holders of its common stock and the Company currently intends to maintain or increase its dividend levels in future quarters.
The graph assumes a $100.00 investment on December 31, 2020 in each case, and measures the amount by which the market value, assuming reinvestment of dividends, has changed as of December 31, 2024. ​ December 31, December 31, December 31, December 31, December 31, December 31, 2019 2020 2021 2022 2023 2024 Alerus Financial Corporation $ 100.00 $ 123.28 $ 134.66 $ 110.56 $ 110.32 $ 98.60 Nasdaq Composite Index 100.00 145.05 177.27 119.63 173.11 224.34 S&P U.S.
The graph assumes a $100.00 investment on December 31, 2021 in each case, and measures the amount by which the market value, assuming reinvestment of dividends, has changed as of December 31, 2025. ​ December 31, December 31, December 31, December 31, December 31, December 31, 2020 2021 2022 2023 2024 2025 Alerus Financial Corporation $ 100.00 $ 109.23 $ 89.68 $ 89.48 $ 79.97 $ 97.36 Nasdaq Composite Index 100.00 122.21 82.48 119.35 154.67 187.42 S&P U.S.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeThe following tables present these non-GAAP financial measures along with the most directly comparable financial measures calculated in accordance with GAAP for the periods indicated: December 31, December 31, 2024 2023 Tangible common equity to tangible assets Total common stockholders’ equity $ 495,410 $ 369,127 Less: Goodwill 85,634 46,783 Less: Other intangible assets 43,882 17,158 Tangible common equity (a) 365,894 305,186 Total assets 5,261,673 3,907,713 Less: Goodwill 85,634 46,783 Less: Other intangible assets 43,882 17,158 Tangible assets (b) 5,132,157 3,843,772 Tangible common equity to tangible assets (a)/(b) 7.13 % 7.94 % Tangible book value per common share Total common stockholders’ equity $ 495,410 $ 369,127 Less: Goodwill 85,634 46,783 Less: Other intangible assets 43,882 17,158 Tangible common equity (c) 365,894 305,186 Total common shares issued and outstanding (d) 25,345 19,734 Tangible book value per common share (c)/(d) $ 14.44 $ 15.46 ​ 44 Table of Contents December 31, December 31, 2024 2023 Return on average tangible common equity Net income $ 17,780 $ 11,696 Add: Intangible amortization expense (net of tax) (1) 5,353 4,184 Net income, excluding intangible amortization (e) 23,133 15,880 Average total equity 397,738 358,268 Less: Average goodwill 56,237 46,959 Less: Average other intangible assets (net of tax) (1) 17,534 15,624 Average tangible common equity (f) 323,967 295,685 Return on average tangible common equity (e)/(f) 7.12 % 5.37 % Efficiency ratio Noninterest expense $ 180,675 $ 150,157 Less: Intangible amortization expense 6,776 5,296 Adjusted noninterest expense (g) 173,899 144,861 Net interest income 107,045 87,839 Noninterest income 114,930 80,229 Tax-equivalent adjustment 1,202 671 Total tax-equivalent revenue (h) 223,177 168,739 Efficiency ratio (g)/(h) 77.92 % 85.85 % Pre-Provision Net Revenue Net interest income $ 107,045 $ 87,839 Add: Noninterest income 114,930 80,229 Less: Noninterest expense 180,675 150,157 Pre-provision net revenue $ 41,300 $ 17,911 Adjusted noninterest income Noninterest income $ 114,930 $ 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 ) Net gain on sale of premises and equipment 3,941 50 Total adjusted noninterest income items (i) 3,941 (20,622 ) Adjusted noninterest income (j) $ 110,989 $ 100,851 Adjusted noninterest expense Noninterest expense $ 180,675 $ 150,157 Less: Adjusted noninterest expense items Merger- and acquisition-related expenses 9,980 — Severance and signing bonus expense 2,901 1,897 Total adjusted noninterest expense items (k) 12,881 1,897 Adjusted noninterest expense (l) $ 167,794 $ 148,260 Adjusted Pre-Provision Net Revenue Net interest income $ 107,045 $ 87,839 Add: Adjusted noninterest income (j) 110,989 100,851 Less: Adjusted noninterest expense (l) 167,794 148,260 Adjusted pre-provision net revenue $ 50,240 $ 40,430 Adjusted efficiency ratio Adjusted noninterest expense (l) $ 167,794 $ 148,260 Less: Intangible amortization expense 6,776 5,296 Adjusted noninterest expense for efficiency ratio (m) 161,018 142,964 Tax-equivalent revenue Net interest income 107,045 87,839 Add: Adjusted noninterest income (j) 110,989 100,851 Add: Tax-equivalent adjustment 1,202 671 Total tax-equivalent revenue (n) 219,236 189,361 Adjusted efficiency ratio (m)/(n) 73.45 % 75.50 % (1) Items calculated after-tax utilizing a marginal income tax rate of 21.0%. 45 Table of Contents December 31, December 31, 2024 2023 Adjusted net income Net income $ 17,780 $ 11,696 Less: Adjusted noninterest income items (net of tax) (1) (i) 3,113 (16,040 ) Add: HMNF day one provision for credit losses and unfunded commitments (net of tax) (1) 6,140 — Add: Adjusted noninterest expense items (net of tax) (1) (k) 10,176 1,499 Adjusted net income (o) $ 30,983 $ 29,235 Adjusted Return on Average Assets Average total assets (p) $ 4,503,483 $ 3,817,017 Adjusted return on average assets (o)/(p) 0.69 % 0.77 % Adjusted Return on Average Tangible Common Equity Adjusted net income (o) $ 30,983 $ 29,235 Add: Intangible amortization expense (net of tax) (1) 5,353 4,184 Adjusted net income, excluding intangible amortization (q) 36,336 33,419 Average total equity 397,738 358,268 Less: Average goodwill 56,237 46,959 Less: Average other intangible assets (net of tax) (1) 17,534 15,624 Average tangible common equity (r) 323,967 295,685 Return on average tangible common equity (q)/(r) 11.22 % 11.30 % Adjusted Net Interest Margin (Tax-Equivalent) Net interest income $ 107,045 $ 87,839 Less: BTFP cash interest income 12,494 — Add: BTFP interest expense 11,291 — Less: Purchase accounting net accretion 7,451 1,490 Net interest income excluding BTFP impact 98,391 86,349 Add: Tax equivalent adjustment for loans and securities 1,202 671 Adjusted net interest income (s) $ 99,593 $ 87,020 Interest earning assets 4,221,873 3,592,476 Less: Average cash proceeds balance from BTFP 231,366 — Add: Change in unearned purchase accounting discount 7,451 1,490 Adjusted interest earning assets (t) $ 3,997,958 $ 3,593,966 Adjusted net interest margin (tax-equivalent) (s)/(t) 2.49 % 2.42 % Adjusted Earnings Per Common Share - Diluted Adjusted net income (o) $ 30,983 $ 29,235 Less: Dividends and undistributed earnings allocated to participating securities 37 (5 ) Net income available to common stockholders (u) 30,946 29,240 Weighted-average common shares outstanding for diluted earnings per share (v) 21,321 20,143 Adjusted earnings per common share - diluted (u)/(v) $ 1.45 $ 1.45 (1) Items calculated after-tax utilizing a marginal income tax rate of 21.0%.
Biggest changeThe following tables present these non-GAAP financial measures along with the most directly comparable financial measures calculated in accordance with GAAP for the periods indicated: December 31, December 31, 2025 2024 Tangible common equity to tangible assets Total common stockholders’ equity $ 564,934 $ 495,410 Less: Goodwill 85,634 85,634 Less: Other intangible assets 33,371 43,882 Tangible common equity (a) 445,929 365,894 Total assets 5,230,084 5,261,673 Less: Goodwill 85,634 85,634 Less: Other intangible assets 33,371 43,882 Tangible assets (b) 5,111,079 5,132,157 Tangible common equity to tangible assets (a)/(b) 8.72 % 7.13 % Tangible book value per common share Total common stockholders’ equity $ 564,934 $ 495,410 Less: Goodwill 85,634 85,634 Less: Other intangible assets 33,371 43,882 Tangible common equity (c) 445,929 365,894 Total common shares issued and outstanding (d) 25,406 25,345 Tangible book value per common share (c)/(d) $ 17.55 $ 14.44 ​ 45 Table of Contents December 31, December 31, 2025 2024 Return on average tangible common equity Net income $ 17,439 $ 17,780 Add: Intangible amortization expense (net of tax) (1) 8,304 5,353 Net income, excluding intangible amortization (e) 25,743 23,133 Average total equity 525,323 397,738 Less: Average goodwill 85,634 56,237 Less: Average other intangible assets (net of tax) (1) 30,470 17,534 Average tangible common equity (f) 409,219 323,967 Return on average tangible common equity (e)/(f) 6.29 % 7.14 % Efficiency ratio Noninterest expense $ 201,227 $ 180,675 Less: Intangible amortization expense 10,511 6,776 Adjusted noninterest expense (g) 190,716 173,899 Net interest income (w) 172,499 107,045 Noninterest income 51,876 114,930 Tax-equivalent adjustment 2,402 1,202 Total tax-equivalent revenue (h) 226,777 223,177 Efficiency ratio (g)/(h) 84.10 % 77.92 % Pre-Provision Net Revenue Net interest income (w) $ 172,499 $ 107,045 Add: Noninterest income 51,876 114,930 Less: Noninterest expense 201,227 180,675 Pre-provision net revenue $ 23,148 $ 41,300 Adjusted noninterest income Noninterest income $ 51,876 $ 114,930 Less: Adjusted noninterest income items Net gains (losses) on investment securities (68,403 ) — Net gain (loss) on sale of loans 2,080 Net gain (loss) on sale of premises and equipment (530 ) 3,941 Total adjusted noninterest income items (i) (66,853 ) 3,941 Adjusted noninterest income (j) $ 118,729 $ 110,989 Adjusted Noninterest (Loss) Income as a Percentage of Revenue Adjusted noninterest income (j) $ 118,729 $ 110,989 Add: Net interest income (w) 172,499 107,045 Adjusted revenue (x) $ 291,228 $ 218,034 Adjusted noninterest (loss) income as a percentage of revenue (j)/(x) 40.77 % 50.90 % Adjusted noninterest expense Noninterest expense $ 201,227 $ 180,675 Less: Adjusted noninterest expense items Merger- and acquisition-related expenses 142 9,980 Severance and signing bonus expense 1,319 2,901 Total adjusted noninterest expense items (k) 1,461 12,881 Adjusted noninterest expense (l) $ 199,766 $ 167,794 Adjusted Pre-Provision Net Revenue Net interest income (w) $ 172,499 $ 107,045 Add: Adjusted noninterest income (j) 118,729 110,989 Less: Adjusted noninterest expense (l) 199,766 167,794 Adjusted pre-provision net revenue $ 91,462 $ 50,240 Adjusted efficiency ratio Adjusted noninterest expense (l) $ 199,766 $ 167,794 Less: Intangible amortization expense 10,511 6,776 Adjusted noninterest expense for efficiency ratio (m) 189,255 161,018 Tax-equivalent revenue Net interest income (w) 172,499 107,045 Add: Adjusted noninterest income (j) 118,729 110,989 Add: Tax-equivalent adjustment 2,402 1,202 Total tax-equivalent revenue (n) 293,630 219,236 Adjusted efficiency ratio (m)/(n) 64.45 % 73.45 % (1) Items calculated after-tax utilizing a marginal income tax rate of 21.0%. 46 Table of Contents December 31, December 31, 2025 2024 Adjusted net income Net income $ 17,439 $ 17,780 Less: Adjusted noninterest income (loss) items (net of tax) (1) (i) (52,814 ) 3,113 Add: HMNF day one provision for credit losses and unfunded commitments (net of tax) (1) — 6,140 Add: Adjusted noninterest expense items (net of tax) (1) (k) 1,154 10,176 Adjusted net income (o) $ 71,407 $ 30,983 Adjusted Return on Average Assets Average total assets (p) $ 5,277,867 $ 4,503,483 Adjusted return on average assets (o)/(p) 1.35 % 0.69 % Adjusted Return on Average Tangible Common Equity Adjusted net income (o) $ 71,407 $ 30,983 Add: Intangible amortization expense (net of tax) (1) 8,304 5,353 Adjusted net income, excluding intangible amortization (q) 79,711 36,336 Average total equity 525,323 397,738 Less: Average goodwill 85,634 56,237 Less: Average other intangible assets (net of tax) (1) 30,470 17,534 Average tangible common equity (r) 409,219 323,967 Adjusted return on average tangible common equity (q)/(r) 19.48 % 11.22 % Adjusted Net Interest Margin (Tax-Equivalent) Net interest income (w) $ 172,499 $ 107,045 Less: BTFP cash interest income — 12,494 Add: BTFP interest expense — 11,291 Less: Purchase accounting net accretion (26,580 ) (17,576 ) Adjusted net interest income excluding BTFP impact 199,079 123,418 Add: Tax equivalent adjustment for loans and securities 2,402 1,202 Adjusted net interest income (s) $ 201,481 $ 124,620 Interest-earning assets 4,957,720 4,221,873 Less: Average cash proceeds balance from BTFP — 231,366 Add: Change in unearned purchase accounting discount (26,580 ) (17,576 ) Adjusted interest-earning assets (t) $ 4,931,140 $ 3,972,931 Adjusted net interest margin (tax-equivalent) (s)/(t) 4.09 % 3.14 % Adjusted Earnings Per Common Share - Diluted Adjusted net income (o) $ 71,407 $ 30,983 Less: Dividends and undistributed earnings allocated to participating securities (29 ) 37 Net income available to common stockholders (u) 71,436 30,946 Weighted-average common shares outstanding for diluted earnings per share (v) 25,697 21,321 Adjusted earnings per common share - diluted (u)/(v) $ 2.78 $ 1.45 Adjusted Net Charge-Offs to Average Loans Net charge-offs $ 2,148 $ 4,154 Less: Charge-off of PCD reserves on loans transferred to non-mortgage loans held for sale 3,053 — Adjusted net charge-offs (recoveries) (y) (905 ) 4,154 Average loans (z) $ 4,047,034 $ 3,099,015 Adjusted net charge-offs (recoveries) to average loans (y)/(z) (0.02 )% 0.13 % (1) Items calculated after-tax utilizing a marginal income tax rate of 21.0%.
The Company’s primary banking market areas are the states of North Dakota, Minnesota, specifically, the Twin Cities MSA and Rochester MSA, and Arizona, specifically, the Phoenix MSA. In addition to the Company’s offices located in the Company’s banking markets, its retirement and benefit services business administers plans in all 50 states through offices located in Michigan, Minnesota and Colorado.
The Company’s primary banking market areas are the states of North Dakota, Minnesota, specifically, the Twin Cities MSA and Rochester MSA, and Arizona, specifically, the Phoenix MSA. In addition to the Company’s offices located in the Company’s banking markets, its retirement and benefit services business administers plans in all 50 states through offices located in Minnesota and Colorado.
Further information related to financial instruments can be found in Note 15 (Commitments and Contingencies) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K. 61 Table of Contents Liquidity Liquidity management is the process by which the Company manages the flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost and to take advantage of earnings enhancement opportunities.
Further information related to financial instruments can be found in Note 15 (Commitments and Contingencies) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K. 62 Table of Contents Liquidity Liquidity management is the process by which the Company manages the flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost and to take advantage of earnings enhancement opportunities.
The investment securities presented in the following table are reported at fair value and by contractual maturity as of December 31, 2024. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Additionally, the mortgage backed securities receive monthly principal payments, which are not reflected below.
The investment securities presented in the following table are reported at fair value and by contractual maturity as of December 31, 2025. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Additionally, the mortgage backed securities receive monthly principal payments, which are not reflected below.
For additional financial information on the Company’s segments see Note 22 (Segment Reporting) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K. Banking The banking division offers a complete line of loan, deposit, cash management, and treasury services through 29 offices in North Dakota, Minnesota, Arizona, Wisconsin, and Iowa.
For additional financial information on the Company’s segments see Note 22 (Segment Reporting) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K. Banking The banking division offers a complete line of loan, deposit, cash management, and treasury services through 27 offices in North Dakota, Minnesota, Arizona, Wisconsin, and Iowa.
Long-term debt is utilized to fund longer term assets and as a source of regulatory capital. At December 31, 2024, the Company had a $50.0 million outstanding 3.50% Fixed Rate Subordinated Note due 2031 (the “Subordinated Note”). The Subordinated Note currently bears interest at a fixed rate of 3.50% per year, payable annually through March 31, 2026.
Long-term debt is utilized to fund longer term assets and as a source of regulatory capital. At December 31, 2025, the Company had a $50.0 million outstanding 3.50% Fixed Rate Subordinated Note due 2031 (the “Subordinated Note”). The Subordinated Note currently bears interest at a fixed rate of 3.50% per year, payable annually through March 31, 2026.
The interest rate risk position is measured and monitored at the Bank using net interest income simulation models and economic value of equity sensitivity analysis that capture both short term and long term interest rate risk exposure. 62 Table of Contents Modeling the sensitivity of net interest income and the economic value of equity to changes in market interest rates is highly dependent on numerous assumptions incorporated into the modeling process.
The interest rate risk position is measured and monitored at the Bank using net interest income simulation models and economic value of equity sensitivity analysis that capture both short term and long term interest rate risk exposure. 63 Table of Contents Modeling the sensitivity of net interest income and the economic value of equity to changes in market interest rates is highly dependent on numerous assumptions incorporated into the modeling process.
The Company continues to consider qualitative factors in determining and arriving at our ACL on loans each reporting period. ​ 41 Table of Contents PCD loans are purchased loans, that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment.
The Company continues to consider qualitative factors in determining and arriving at our ACL on loans each reporting period. ​ 42 Table of Contents PCD loans are purchased loans, that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment.
The Subordinated Note matures on March 30, 2031, and the Company has the option to redeem or prepay any or all of the Subordinated Note without premium or penalty any time after March 31, 2026, or at any time in the event of certain changes that affect the deductibility of interest for tax purposes or the treatment of the notes as Tier 2 Capital.
The Subordinated Note matures on March 30, 2031, and the Company has the option to redeem or prepay any or all of the Subordinated Note without premium or penalty at the time of interest payment beginning or after March 31, 2026, or at any time in the event of certain changes that affect the deductibility of interest for tax purposes or the treatment of the notes as Tier 2 Capital.
There was no interest income included in net income related to nonaccrual loans for the years ended December 31, 2024 and 2023. Allowance for Credit Losses 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.
There was no interest income included in net income related to nonaccrual loans for the years ended December 31, 2025 and 2024. Allowance for Credit Losses 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.
The yields below are calculated on a tax equivalent basis, assuming a 21.0% income tax rate. Maturity as of December 31, 2024 One year or less One to five years Five to ten years After ten years Fair Average Fair Average Fair Average Fair Average (dollars in thousands) Value Yield Value Yield Value Yield Value Yield Available-for-sale U.S.
The yields below are calculated on a tax equivalent basis, assuming a 21.0% income tax rate. Maturity as of December 31, 2025 One year or less One to five years Five to ten years After ten years Fair Average Fair Average Fair Average Fair Average (dollars in thousands) Value Yield Value Yield Value Yield Value Yield Available-for-sale U.S.
Consequently, the table above includes information limited to contractual maturities of the underlying loans. Asset Quality The Company’s strategy for credit risk management includes well defined, centralized credit policies; uniform underwriting criteria; and ongoing risk monitoring and review processes for all commercial and consumer credit exposures.
Consequently, the table above includes information limited to contractual maturities of the underlying loans. 56 Table of Contents Asset Quality The Company’s strategy for credit risk management includes well defined, centralized credit policies; uniform underwriting criteria; and ongoing risk monitoring and review processes for all commercial and consumer credit exposures.
These expenses are not specific to any specific segment. 49 Table of Contents Retirement and Benefit Services The retirement and benefit services business provides the following services nationally: record-keeping and administration services to qualified and other types of retirement plans, investment fiduciary services to retirement plans, health savings accounts, flexible spending accounts, and COBRA recordkeeping and administration services.
These expenses are not specific to any specific segment. 50 Table of Contents Retirement and Benefit Services The retirement and benefit services business provides the following services nationally: record-keeping and administration services to qualified and other types of retirement plans, investment fiduciary services to retirement plans, health savings accounts, flexible spending accounts, and COBRA recordkeeping and administration services.
Refer to Note 1 (Significant Accounting Policies) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K for additional details of the Company’s assessment of the allowance for HTM investments as of and for the years ended December 31, 2024 and 2023.
Refer to Note 1 (Significant Accounting Policies) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K for additional details of the Company’s assessment of the allowance for HTM investments as of and for the years ended December 31, 2025 and 2024.
Refer to Note 1 (Significant Accounting Policies) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K for additional details of the Company’s assessment of the allowance for AFS investments as of and for the year ended December 31, 2024.
Refer to Note 1 (Significant Accounting Policies) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K for additional details of the Company’s assessment of the allowance for AFS investments as of and for the year ended December 31, 2025.
See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.” (2) Includes ESOP-owned shares. 43 Table of Contents Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures 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.
See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.” (2) Includes ESOP-owned shares. 44 Table of Contents Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures 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.
The significant key assumptions used with the ACL on loans calculation at December 31, 2024 using the CECL methodology, included: ​ ● Macroeconomic factors (loss drivers): Macroeconomic factors are used within our discounted cash flow model to forecast the PD over the forecast period.
The significant key assumptions used with the ACL on loans calculation at December 31, 2025 using the CECL methodology, included: ​ ● Macroeconomic factors (loss drivers): Macroeconomic factors are used within our discounted cash flow model to forecast the PD over the forecast period.
Mitigation of the various risk elements that represent strategic and/or reputation risk is achieved through initiatives to help management better understand and report on various risks, including those related to the development of new products and business initiatives. 63 Table of Contents
Mitigation of the various risk elements that represent strategic and/or reputation risk is achieved through initiatives to help management better understand and report on various risks, including those related to the development of new products and business initiatives. 64 Table of Contents
At December 31, 2024, the Company used a one-year forecast period and one-year reversion period for each loan segment to measure the ACL on loans, except for the agricultural land and agricultural production loans which utilize static PD and LGD assumptions. ​ ● Prepayment speeds: Prepayment speeds are determined for each loan segment utilizing the Company’s own historical loan data, as well as consideration of current environmental factors.
At December 31, 2025, the Company used a one-year forecast period and one-year reversion period for each loan segment to measure the ACL on loans, except for PCD agricultural land and PCD agricultural production loans which utilize static PD and LGD assumptions. ​ ● Prepayment speeds: Prepayment speeds are determined for each loan segment utilizing the Company’s own historical loan data, as well as consideration of current environmental factors.
Other than the aforementioned investments, at December 31, 2024 and December 31, 2023, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.
Other than the aforementioned investments, at December 31, 2025 and December 31, 2024, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.
Off balance sheet liquidity includes FHLB borrowing capacity, federal fund lines, and brokered deposit capacity. 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.
Off balance sheet liquidity includes FHLB borrowing capacity, Federal Reserve Bank discount window capacity, federal fund lines, and brokered deposit capacity. 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.
While the Company’s current evaluation indicates that the ACL on loans at December 31, 2024 and 2023 was appropriate, the allowance may need to be increased under adversely different conditions or assumptions.
While the Company’s current evaluation indicates that the ACL on loans at December 31, 2025 and 2024 was appropriate, the allowance may need to be increased under adversely different conditions or assumptions.
Other operational expenses are generally impacted by the Company’s business activities and needs. 40 Table of Contents ​ Operating Segments The Company measures the overall profitability of business operations based on income before income tax.
Other operational expenses are generally impacted by the Company’s business activities and needs. 41 Table of Contents ​ Operating Segments The Company measures the overall profitability of business operations based on income before income tax.
Investment Securities The following table presents the fair value composition of the Company’s investment securities portfolio at the dates indicated: December 31, 2024 December 31, 2023 Percent of Percent of (dollars in thousands) Balance Portfolio Balance Portfolio Available-for-sale U.S.
Investment Securities The following table presents the fair value composition of the Company’s investment securities portfolio at the dates indicated: December 31, 2025 December 31, 2024 Percent of Percent of (dollars in thousands) Balance Portfolio Balance Portfolio Available-for-sale U.S.
At December 31, 2024 and 2023, the Company met all capital adequacy requirements to which the Company was subject. The table below sets forth the capital ratios for the Company and the Bank as of the dates indicated.
At December 31, 2025 and 2024, the Company met all capital adequacy requirements to which the Company was subject. The table below sets forth the capital ratios for the Company and the Bank as of the dates indicated.
Results of Operations The following discussion describes the consolidated operations and financial condition of the Company and the Bank. Results of operations for the year ended December 31, 2024 are compared to the results for the year ended December 31, 2023, and the consolidated financial condition of the Company as of December 31, 2024 is compared to December 31, 2023.
Results of Operations The following discussion describes the consolidated operations and financial condition of the Company and the Bank. Results of operations for the year ended December 31, 2025 are compared to the results for the year ended December 31, 2024, and the consolidated financial condition of the Company as of December 31, 2025 is compared to December 31, 2024.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates.
A summary of the accounting policies used by management is disclosed in Note 1 (Significant Accounting Policies) and Note 3 (Business Combinations) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K. ​ 42 Table of Contents Selected Financial Data The following consolidated selected financial data is derived from the Company’s audited consolidated financial statements as of and for the three years ended December 31, 2024.
A summary of the accounting policies used by management is disclosed in Note 1 (Significant Accounting Policies) and Note 3 (Business Combinations) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K. ​ 43 Table of Contents Selected Financial Data The following consolidated selected financial data is derived from the Company’s audited consolidated financial statements as of and for the three years ended December 31, 2025.
FDIC insurance expense is also included in this line and represents the assessments that the Company pays to the FDIC for deposit insurance. ● Other operational expenses—includes costs related to marketing, donations, promotions, and expenses associated with office supplies, postage, travel expenses, meals and entertainment, dues and memberships, costs to maintain or prepare OREO, for sale, and other general corporate expenses that do not fit within one of the specific noninterest expense lines described above.
FDIC insurance expense is also included in this line and represents the assessments that the Company pays to the FDIC for deposit insurance. ● Other operational expenses—includes costs related to marketing, donations, promotions, and expenses associated with office supplies, postage, travel expenses, meals and entertainment, dues and memberships, costs to maintain or prepare other real estate owned (“OREO”), for sale, and other general corporate expenses that do not fit within one of the specific noninterest expense lines described above.
The estimated impact on the Company’s net interest income in hypothetical rising and declining rate scenarios assuming immediate, parallel moves in interest rates, calculated as of December 31, 2024 and December 31, 2023, are presented in the table below: December 31, 2024 December 31, 2023 Following Following Following Following 12 months 24 months 12 months 24 months +400 basis points 1.7 % 13.6 % 1.0 % 2.4 % +300 basis points 1.2 % 10.0 % 0.5 % 1.4 % +200 basis points 1.1 % 7.2 % 0.3 % 0.9 % +100 basis points 0.6 % 3.7 % 0.4 % 0.9 % −100 basis points 0.4 % -3.1 % -1.0 % -1.7 % −200 basis points 0.7 % -6.8 % -2.3 % -4.1 % −300 basis points 0.8 % -10.5 % -4.1 % -7.2 % −400 basis points 4.0 % -7.0 % -5.0 % -7.6 % The above interest rate simulation suggests that the Company’s balance sheet is slightly asset sensitive, in the short-term, as of December 31, 2024, demonstrating that an increase in interest rates would have a marginal positive impact on net interest income over the next 12 and 24 months.
The estimated impact on the Company’s net interest income in hypothetical rising and declining rate scenarios assuming immediate, parallel moves in interest rates, calculated as of December 31, 2025 and December 31, 2024, are presented in the table below: December 31, 2025 December 31, 2024 Following Following Following Following 12 months 24 months 12 months 24 months +400 basis points -1.2 % 14.0 % 1.7 % 13.6 % +300 basis points -0.7 % 10.7 % 1.2 % 10.0 % +200 basis points -0.1 % 7.8 % 1.1 % 7.2 % +100 basis points 0.1 % 4.1 % 0.6 % 3.7 % −100 basis points 0.6 % -4.2 % 0.4 % -3.1 % −200 basis points 2.0 % -7.9 % 0.7 % -6.8 % −300 basis points 4.2 % -9.5 % 0.8 % -10.5 % −400 basis points 5.4 % -8.0 % 4.0 % -7.0 % The above interest rate simulation suggests that the Company’s balance sheet is slightly liability sensitive, in the short-term, as of December 31, 2025, demonstrating that an increase in interest rates would have a marginal negative impact on net interest income over the next 12 months.
The table below presents the change in the economic value of equity as of December 31, 2024 and December 31, 2023, assuming immediate parallel shifts in interest rates: December 31, December 31, 2024 2023 +400 basis points -6.2 % -15.5 % +300 basis points -4.8 % -12.6 % +200 basis points -2.4 % -7.7 % +100 basis points -0.8 % -3.1 % −100 basis points 0.1 % 1.6 % −200 basis points -0.9 % 2.0 % −300 basis points -3.6 % -0.3 % −400 basis points -8.5 % -5.6 % Operational Risk Operational risk is the risk of loss due to human behavior, inadequate or failed internal systems and controls, and external influences such as market conditions, fraudulent activities, disasters, and security risks.
The table below presents the change in the economic value of equity as of December 31, 2025 and December 31, 2024, assuming immediate parallel shifts in interest rates: December 31, December 31, 2025 2024 +400 basis points -5.4 % -6.2 % +300 basis points -3.5 % -4.8 % +200 basis points -1.2 % -2.4 % +100 basis points -0.1 % -0.8 % −100 basis points -1.0 % 0.1 % −200 basis points -3.6 % -0.9 % −300 basis points -9.0 % -3.6 % −400 basis points -18.4 % -8.5 % Operational Risk Operational risk is the risk of loss due to human behavior, inadequate or failed internal systems and controls, and external influences such as market conditions, fraudulent activities, disasters, and security risks.
Results of operations for the year ended December 31, 2023 compared to results for the year ended December 31, 2022 can be found in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s annual report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 8, 2024.
Results of operations for the year ended December 31, 2024 compared to results for the year ended December 31, 2023 can be found in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s annual report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 14, 2025.
As of and for the years ended years ended December 31, 2024 and 2023, the Company did not record any allowances or write-down any of the AFS debt securities in an unrealized loss position.
As of and for the years ended years ended December 31, 2025 and 2024, the Company did not record any allowances on or write-down any of the AFS debt securities in an unrealized loss position.
Junior subordinated debentures issued to capital trusts that issued trust preferred securities were $9.1 million as of December 31, 2024, compared to $9.0 million as of December 31, 2023. The increase was due to purchase accounting amortization on the junior subordinated notes assumed in the Beacon Bank acquisition in 2016.
Junior subordinated debentures issued to capital trusts that issued trust preferred securities were $9.2 million as of December 31, 2025, compared to $9.1 million as of December 31, 2024. The increase was due to purchase accounting amortization on the junior subordinated notes assumed in the Beacon Bank acquisition in 2016.
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. As of December 31, 2024, the Company had off balance sheet liquidity of $2.3 billion, compared to $1.6 billion 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. As of December 31, 2025, the Company had off balance sheet liquidity of $2.2 billion, compared to $2.3 billion as of December 31, 2024.
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. As of December 31, 2024, the Company had on balance sheet liquidity of $579.0 million, compared to $668.2 million as of December 31, 2023.
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. As of December 31, 2025, the Company had on balance sheet liquidity of $568.8 million, compared to $579.0 million as of December 31, 2024.
The increase in interest-bearing deposit costs was the result of a rising interest rate environment and a highly competitive deposit environment. The Company competes for local deposits by offering products with competitive rates and rely on the deposit portfolio to fund loans and other asset growth.
The decrease in interest-bearing deposit costs was the result of a declining interest rate environment. The Company competes for local deposits by offering products with competitive rates and rely on the deposit portfolio to fund loans and other asset growth.
The Company had $239.0 million and $314.2 million in short term borrowings outstanding at December 31, 2024 and 2023, respectively. FHLB advances were secured by specific investment securities and real estate loans with a carrying amount of approximately $2.4 billion and $1.7 billion at December 31, 2024 and 2023, respectively.
The Company had $308.8 million and $239.0 million in short term borrowings outstanding at December 31, 2025 and 2024, respectively. FHLB advances were secured by specific investment securities and real estate loans with a carrying amount of approximately $2.1 billion and $2.4 billion at December 31, 2025 and 2024, respectively.
For the year ended December 31, 2023, the Company recognized an income tax expense of $4.2 million on $15.9 million of pre-tax income, resulting in an effective tax rate of 26.2%. The decrease in the effective tax rate was primarily driven by items related to the acquisition of HMNF in 2024 and increased tax-exempt income.
For the year ended December 31, 2024, the Company recognized income tax expense of $5.4 million on $23.2 million of pre-tax income, resulting in an effective tax rate of 23.2%. The decrease in the effective tax rate was primarily driven by items related to the acquisition of HMNF in 2024 and increased tax-exempt income.
The actual borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. As of December 31, 2024, the Company had $2.4 billion of collateral pledged to the FHLB. Based on this collateral the Company is eligible to borrow up to $2.4 billion and had $1.2 billion available capacity as of December 31, 2024.
The actual borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. As of December 31, 2025, the Company had $2.1 billion of collateral pledged to the FHLB. Based on this collateral the Company is eligible to borrow up to $1.3 billion and had $1.0 billion of available capacity as of December 31, 2025.
(2) Synergistic deposits represent the on-balance money market balances that retirement and benefit services and wealth clients hold in proprietary money market products. (3) $361.3 million and $288.9 million of retirement and benefit services synergistic deposits were indexed as of December 31, 2024 and 2023, respectively.
(2) Synergistic deposits represent the on-balance money market balances that retirement and benefit services and wealth clients hold in proprietary money market products. (3) $395.7 million and $361.3 million of retirement and benefit services synergistic deposits were indexed as of December 31, 2025 and 2024, respectively.
Management determined that a $33.2 million reserve for the quantitative portion of the ACL for collectively evaluated loans was appropriate as of December 31, 2024. As of December 31, 2024, the recorded ACL on loans was $59.9 million and represented the Company’s best estimate of expected credit losses within the loan portfolio.
Management determined that a $31.4 million reserve for the quantitative portion of the ACL for collectively evaluated loans was appropriate as of December 31, 2025. As of December 31, 2025, the recorded ACL on loans was $61.9 million and represented the Company’s best estimate of expected credit losses within the loan portfolio.
The increase in the interest income earned on interest-bearing assets was driven by a 54 basis point increase in the average rate earned on loans as well as a $563.9 million increase in the average balance of total loans, driven by strong organic growth at higher yields and increased loan balances from the acquisition of HMNF.
The increase in the interest income earned on interest-earning assets was driven by a 35 basis point increase in the average rate earned on loans as well as a $948.0 million increase in the average balance of total loans, driven by increased loan balances from the acquisition of HMNF and strong organic growth at higher yields.
As of December 31, 2024, at 331%, the Company’s applicable investor CRE loans, as a percentage of its risk-based capital, exceeded the regulatory guideline limit of 300%. Robust concentration management processes are in place to monitor this level of exposure.
As of December 31, 2025, at 303.4%, the Bank's applicable investor CRE loans, as a percentage of its risk-based capital, slightly exceeded the regulatory guideline limit of 300%. Robust concentration management processes are in place to monitor this level of exposure.
At December 31, 2024, the quantitative portion of the ACL estimate for collectively evaluated loans ranged from approximately $29.5 million when weighting the upside scenario to 100%, to approximately $65.1 million when weighting the most severe downside scenario 100%.
At December 31, 2025, the quantitative portion of the ACL estimate for collectively evaluated loans ranged from approximately $22.7 million when weighting the upside scenario to 100%, to approximately $65.0 million when weighting the most severe downside scenario 100%.
At December 31, 2024, the total fair value of investment securities was $825.0 million compared to $745.4 million at December 31, 2023. The fair value of investment securities as a percentage of total assets was 15.7% and 19.1%, as of December 31, 2024 and December 31, 2023, respectively.
At December 31, 2025, the total fair value of investment securities was $742.1 million compared to $825.0 million at December 31, 2024. The fair value of investment securities as a percentage of total assets was 14.2% and 15.7%, as of December 31, 2025 and December 31, 2024, respectively.
Such financial instruments are recorded when they are funded. A reserve for unfunded commitments is established using historical loss data and utilization assumptions. This reserve is located under accrued expenses and other liabilities on the Consolidated Balance Sheets.
Such financial instruments are recorded when they are funded. A reserve for unfunded commitments is established using historical loss data and utilization assumptions. This reserve is located under accrued expenses and other liabilities on the Consolidated Balance Sheets. The provision release for unfunded commitments for the year ended December 31, 2025 was $3.6 million.
(4) $290.4 million and $253.4 million of wealth synergistic deposits were indexed as of December 31, 2024 and 2023, respectively.
(4) $252.6 million and $290.4 million of wealth synergistic deposits were indexed as of December 31, 2025 and 2024, respectively.
AUA and AUM for the retirement and benefit services segment was $40.7 billion at December 31, 2024, an increase of $4.0 billion, or 11.0%, compared to the total at December 31, 2023. The increase was primarily driven by an increase of $4.1 billion in market impact, driven by improved bond and equity markets.
Total AUA and AUM for the retirement and benefit services segment was $44.9 billion at December 31, 2025, an increase of $4.2 billion, or 10.3%, compared to the total at December 31, 2024. The increase was primarily driven by an increase of $5.1 billion in market impact, driven by improved bond and equity markets.
The following table presents changes in the combined AUA and AUM for the Company’s retirement and benefit services segment for the periods presented: Year ended December 31, (dollars in thousands) 2024 2023 AUA & AUM balance beginning of period $ 36,682,425 $ 32,122,520 Inflows (1) 5,268,581 4,548,845 Outflows (2) (5,370,264 ) (4,836,524 ) Market impact (3) 4,147,957 4,847,584 AUA & AUM balance end of period $ 40,728,699 $ 36,682,425 Yield (4) 0.17 % 0.19 % (1) Inflows include new account assets, contributions, dividends and interest.
The following table presents changes in the combined AUA and AUM for the Company’s retirement and benefit services segment for the periods presented: Year ended December 31, (dollars in thousands) 2025 2024 AUA & AUM balance beginning of period $ 40,728,699 $ 36,682,425 Inflows (1) 5,604,459 5,268,581 Outflows (2) (6,485,947 ) (5,370,264 ) Market impact (3) 5,078,100 4,147,957 AUA & AUM balance end of period $ 44,925,311 $ 40,728,699 Yield (4) 0.15 % 0.17 % (1) Inflows include new account assets, contributions, dividends and interest.
The following table presents the contractual maturity of time deposits, including certificate of deposits and IRA deposits of $250 thousand and over, that were outstanding as of the date presented: December 31, (dollars in thousands) 2024 Maturing in: 3 months or less $ 130,437 3 months to 6 months 54,617 6 months to 1 year 48,347 1 year or greater 14,662 Total $ 248,063 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 and $1.1 billion at December 31, 2024 and 2023, respectively.
The following table presents the contractual maturity of time deposits, including certificate of deposits and IRA deposits of $250 thousand and over, that were outstanding as of the date presented: December 31, (dollars in thousands) 2025 Maturing in: 3 months or less $ 71,558 3 months to 6 months 76,072 6 months to 1 year 36,648 1 year or greater 6,215 Total $ 190,493 The Company’s total uninsured deposits, which are amounts of deposit accounts that exceed the FDIC insurance limit, currently $250,000, were approximately $1.4 billion and $1.5 billion at December 31, 2025 and 2024, respectively.
Selected financial information pertaining to the components of the Company’s borrowings and subordinated debt as of the dates indicated is as follows: December 31, 2024 December 31, 2023 Percent of Percent of (dollars in thousands) Balance Portfolio Balance Portfolio Fed funds purchased $ 38,960 13.1 % $ 114,170 30.6 % FHLB Short-term advances 200,000 67.1 200,000 53.6 Subordinated notes 50,000 16.8 50,000 13.4 Junior subordinated debentures 9,069 3.0 8,956 2.4 Total borrowed funds $ 298,029 100.0 % $ 373,126 100.0 % 60 Table of Contents Capital Resources The following table summarizes the changes in the Company’s stockholders’ equity for the periods indicated: For the years ended December 31, (dollars in thousands) 2024 2023 Beginning balance $ 369,127 $ 356,872 Cumulative effect of change in accounting principles, net of tax — (4,452 ) Net income 17,780 11,696 Other comprehensive income (loss) 289 24,986 Common stock repurchased (276 ) (6,638 ) Common stock issued 123,602 — Common stock dividends (16,762 ) (14,965 ) Stock‑based compensation expense 1,650 1,628 Ending balance $ 495,410 $ 369,127 Total stockholders’ equity was $495.4 million at December 31, 2024, an increase of $126.3 million, or 34.2%, compared to $369.1 million at December 31, 2023.
Selected financial information pertaining to the components of the Company’s borrowings and subordinated debt as of the dates indicated is as follows: December 31, 2025 December 31, 2024 Percent of Percent of (dollars in thousands) Balance Portfolio Balance Portfolio Fed funds purchased $ 58,800 16.0 % $ 38,960 13.1 % FHLB short-term advances 250,000 67.9 200,000 67.1 Subordinated notes 50,000 13.6 50,000 16.8 Junior subordinated debentures 9,182 2.5 9,069 3.0 Total borrowed funds $ 367,982 100.0 % $ 298,029 100.0 % 61 Table of Contents Capital Resources The following table summarizes the changes in the Company’s stockholders’ equity for the periods indicated: For the years ended December 31, (dollars in thousands) 2025 2024 Beginning balance $ 495,410 $ 369,127 Net income 17,439 17,780 Other comprehensive income (loss) 71,210 289 Common stock repurchased (737 ) (276 ) Common stock issued — 123,602 Common stock dividends (21,087 ) (16,762 ) Stock‑based compensation expense 2,699 1,650 Ending balance $ 564,934 $ 495,410 Total stockholders’ equity was $564.9 million at December 31, 2025, an increase of $69.5 million, or 14.0%, compared to $495.4 million at December 31, 2024.
The division services approximately 8,600 retirement plans and more than 500,200 plan participants and operates within the Company’s banking markets, as well as East Lansing, Michigan, and Lakewood, Colorado.
The division services approximately 8,800 retirement plans and more than 495,000 plan participants and operates within the Company’s banking markets, as well as Lakewood, Colorado.
The expense for provision for unfunded commitments was $0.1 million and $2.2 million for the years ended years ended December 31, 2024 and 2023, respectively.
The expense for provision for unfunded commitments for the year ended December 31, 2024 was $0.1 million.
Construction loans at 59% were below the regulatory guideline limit of 100%. 53 Table of Contents The following table presents the geographical markets of the collateral related to the non-owner occupied and multifamily CRE loans as of the dates presented: December 31, 2024 December 31, 2023 Percent of Percent of (dollars in thousands) Balance Total Balance Total Geographical Market: Minnesota $ 668,395 50.2 % $ 394,754 48.5 % North Dakota 221,693 16.7 214,884 26.4 Arizona 169,473 12.7 139,450 17.1 Texas 34,580 2.6 — — Colorado 23,386 1.8 1,246 0.2 Oregon 17,990 1.4 14,953 1.8 Wisconsin 111,502 8.4 502 0.1 Missouri 16,776 1.3 15,969 2.0 Kansas 15,183 1.1 4,343 0.5 South Dakota 14,554 1.1 14,790 1.8 Other 36,616 2.8 13,566 1.7 Total non-owner occupied and multifamily commercial real estate loans $ 1,330,148 100.0 % $ 814,457 100.0 % The Bank does not currently monitor owner occupied CRE loans based on geographical markets, as the primary source of repayment for these loans is predicated on the cash flow from the underlying operating entity.
Construction loans at 49.3% were below the regulatory guideline limit of 100%. 54 Table of Contents The following table presents the geographical markets of the collateral related to the non-owner occupied and multifamily CRE loans as of the dates presented: December 31, 2025 December 31, 2024 Percent of Percent of (dollars in thousands) Balance Total Balance Total Geographical Market: Minnesota $ 621,747 49.4 % $ 668,395 50.2 % North Dakota 212,077 16.8 221,693 16.7 Arizona 133,618 10.6 169,473 12.7 Wisconsin 88,229 7.0 111,502 8.4 Texas 37,113 2.9 34,580 2.6 Colorado 23,358 1.9 23,386 1.8 Oregon 17,698 1.4 17,990 1.4 Kansas 16,656 1.3 15,183 1.1 Missouri 16,409 1.3 16,776 1.3 Georgia 14,569 1.2 — — Virginia 11,182 0.9 — — South Dakota 10,415 0.8 14,554 1.1 Other 56,296 4.5 36,616 2.8 Total non-owner occupied and multifamily commercial real estate loans $ 1,259,367 100.0 % $ 1,330,148 100.0 % The Bank does not currently monitor owner occupied CRE loans based on geographical markets, as the primary source of repayment for these loans is predicated on the cash flow from the underlying operating entity.
December 31, December 31, Capital Ratios 2024 2023 Alerus Financial Corporation Consolidated Common equity tier 1 capital to risk weighted assets 9.91 % 11.82 % Tier 1 capital to risk weighted assets 10.12 % 12.10 % Total capital to risk weighted assets 12.49 % 14.76 % Tier 1 capital to average assets 8.65 % 10.57 % Tangible common equity to tangible assets (1) 7.13 % 7.94 % Alerus Financial, National Association Common equity tier 1 capital to risk weighted assets 10.18 % 11.40 % Tier 1 capital to risk weighted assets 10.18 % 11.40 % Total capital to risk weighted assets 11.43 % 12.51 % Tier 1 capital to average assets 8.69 % 9.92 % (1) Represents a non-GAAP financial measure.
December 31, December 31, Capital Ratios 2025 2024 Alerus Financial Corporation Consolidated Common equity tier 1 capital to risk weighted assets 10.28 % 9.91 % Tier 1 capital to risk weighted assets 10.48 % 10.12 % Total capital to risk weighted assets 12.87 % 12.49 % Tier 1 capital to average assets 8.86 % 8.65 % Tangible common equity to tangible assets (1) 8.72 % 7.13 % Alerus Financial, National Association Common equity tier 1 capital to risk weighted assets 10.41 % 10.18 % Tier 1 capital to risk weighted assets 10.41 % 10.18 % Total capital to risk weighted assets 11.66 % 11.43 % Tier 1 capital to average assets 8.62 % 8.69 % (1) Represents a non-GAAP financial measure.
As of December 31, 2024, the Company had $5.3 billion of total assets, $4.0 billion of total loans, $4.4 billion of total deposits, $495.4 million of stockholders’ equity, $40.7 billion of AUA/AUM in the Company’s retirement and benefit services segment, and $4.6 billion of AUA/AUM in the Company’s wealth segment. 39 Table of Contents Net Interest Income Net interest income represents interest income less interest expense.
As of December 31, 2025, the Company had $5.2 billion of total assets, $4.0 billion of total loans, $4.2 billion of total deposits, $564.9 million of stockholders’ equity, $44.9 billion of assets under administration/management in the Company’s retirement and benefit services segment, and $4.9 billion of assets under administration/management in the Company’s wealth segment. 40 Table of Contents Net Interest Income Net interest income represents interest income less interest expense.
Summary Net income for the year ended December 31, 2024 was $17.8 million, an increase of $6.1 million, or 52.0%, compared to $11.7 million for the year ended December 31, 2023. Diluted earnings per common share were $0.83 in 2024, compared to $0.58 in 2023. Return on average total assets was 0.39% in 2024, compared to 0.31% for 2023.
Summary Net income for the year ended December 31, 2025 was $17.4 million, a decrease of $0.3 million, or 1.9%, compared to $17.8 million for the year ended December 31, 2024. Diluted earnings per common share were $0.68 in 2025, compared to $0.83 in 2024. Return on average total assets was 0.33% in 2025, compared to 0.39% for 2024.
Future events or changes in the estimates used to determine the carrying value of goodwill could have a material impact on the Company’s results of operations. In the Company’s impairment analysis, the discount rates used for each reporting segment had the most significant impact on the analysis.
Future events or changes in the estimates used to determine the carrying value of goodwill could have a material impact on the Company’s results of operations.
The provision for credit losses expense for the year ended December 31, 2024 included $18.1 million in provision for credit losses on loans, $0.1 million in provision for credit losses on unfunded commitments and ($0.1) million recovery for credit losses on investment securities held-to-maturity (“HTM”).
The provision for credit losses expense for the year ended December 31, 2025 included $4.2 million in provision for credit losses on loans, ($3.6) million in provision release for credit losses on unfunded commitments, and ($8) thousand recovery for credit losses on investment securities held-to-maturity (“HTM”).
The increase was primarily driven by the issuance of common stock in connection with the acquisition of HMNF. The Company strives to maintain an adequate capital base to support its activities in a safe and sound manner while at the same time attempting to maximize stockholder value.
The Company strives to maintain an adequate capital base to support its activities in a safe and sound manner while at the same time attempting to maximize stockholder value.
Treasury and agencies $ 30,707 3.7 % $ 1,120 0.2 % Mortgage backed securities Residential agency 503,706 61.1 435,594 58.4 Commercial 1,251 0.2 1,353 0.2 Asset backed securities 19 — 25 — Corporate bonds 52,370 6.3 48,644 6.5 Total available-for-sale investment securities 588,053 71.3 486,736 65.3 Held-to-maturity Obligations of state and political agencies 107,985 13.1 116,990 15.7 Mortgage backed securities Residential agency 129,001 15.6 141,627 19.0 Total held-to-maturity investment securities 236,986 28.7 258,617 34.7 Total investment securities $ 825,039 100.0 % $ 745,353 100.0 % 51 Table of Contents The composition of the Company’s investment securities portfolio reflects the Company’s investment strategy of maintaining an appropriate level of liquidity for normal operations while providing an additional source of revenue.
Treasury and agencies $ 405 0.1 % $ 30,707 3.7 % Mortgage backed securities Residential agency 476,746 64.2 503,706 61.1 Commercial — - 1,251 0.2 Asset backed securities 15 — 19 — Corporate bonds 36,929 5.0 52,370 6.3 Total available-for-sale investment securities 514,095 69.3 588,053 71.3 Held-to-maturity Obligations of state and political agencies 105,405 14.2 107,985 13.1 Mortgage backed securities Residential agency 122,604 16.5 129,001 15.6 Total held-to-maturity investment securities 228,009 30.7 236,986 28.7 Total investment securities $ 742,104 100.0 % $ 825,039 100.0 % 52 Table of Contents The composition of the Company’s investment securities portfolio reflects the Company’s investment strategy of maintaining an appropriate level of liquidity for normal operations while providing an additional source of revenue.
As of and for the year ended December 31, (dollars and shares in thousands, except per share data) 2024 2023 Selected Income Statement Data Net interest income $ 107,045 $ 87,839 Provision for loan losses 18,141 2,057 Noninterest income 114,930 80,229 Noninterest expense 180,675 150,157 Income before income taxes 23,159 15,854 Income tax expense 5,379 4,158 Net income $ 17,780 $ 11,696 Per Common Share Data Earnings - basic $ 0.84 $ 0.59 Earnings - diluted $ 0.83 $ 0.58 Adjusted earnings - diluted (1) $ 1.45 $ 1.45 Dividends declared $ 0.79 $ 0.75 Tangible book value per common share (1) $ 14.44 $ 15.46 Average shares outstanding − basic 21,047 19,922 Average shares outstanding − diluted 21,321 20,143 Selected Performance Ratios Return on average total assets 0.39 % 0.31 % Adjusted return on average total assets (1) 0.69 % 0.77 % Return on average common equity 4.47 % 3.26 % Return on average tangible common equity (1) 7.12 % 5.37 % Adjusted return on average tangible common equity (1) 11.22 % 11.30 % Noninterest income as a % of revenue 51.78 % 47.74 % Net interest margin (taxable-equivalent basis) 2.56 % 2.46 % Adjusted net interest margin (taxable-equivalent basis) (1) 2.49 % 2.42 % Efficiency ratio (1) 77.92 % 85.85 % Adjusted efficiency ratio (1) 73.45 % 75.50 % Dividend payout ratio 95.18 % 129.31 % Average equity to average assets 8.83 % 9.39 % Selected Balance Sheet Data - Period Ending Loans $ 3,992,534 $ 2,759,583 Allowance for credit losses (59,929 ) (35,843 ) Investment securities 863,638 786,252 Assets 5,261,673 3,907,713 Deposits 4,378,410 3,095,611 Long-term debt 59,069 58,956 Total stockholders' equity (2) 495,410 369,127 Asset Quality Ratios Net charge-offs/(recoveries) to average loans 0.13 % (0.04 )% Nonperforming loans to total loans 1.58 % 0.32 % Nonperforming assets to total assets 1.20 % 0.22 % Allowance for credit losses to total loans 1.50 % 1.30 % Allowance for credit losses to nonperforming loans 95.30 % 410.34 % Other Data Retirement and benefit services assets under administration/management $ 40,728,699 $ 36,682,425 Wealth assets under administration/management $ 4,579,189 $ 4,018,846 Mortgage originations $ 334,318 $ 364,114 (1) Represents a Non-GAAP financial measure.
As of and for the year ended December 31, (dollars and shares in thousands, except per share data) 2025 2024 Selected Income Statement Data Net interest income $ 172,499 $ 107,045 Provision for loan losses 556 18,141 Noninterest income 51,876 114,930 Noninterest expense 201,227 180,675 Income before income taxes 22,592 23,159 Income tax expense 5,153 5,379 Net income $ 17,439 $ 17,780 Per Common Share Data Earnings - basic $ 0.69 $ 0.84 Earnings - diluted $ 0.68 $ 0.83 Adjusted earnings - diluted (1) $ 2.78 $ 1.45 Dividends declared $ 0.83 $ 0.79 Tangible book value per common share (1) $ 17.55 $ 14.44 Average shares outstanding − basic 25,380 21,047 Average shares outstanding − diluted 25,697 21,321 Selected Performance Ratios Return on average total assets 0.33 % 0.39 % Adjusted return on average total assets (1) 1.35 % 0.69 % Return on average common equity 3.32 % 4.47 % Return on average tangible common equity (1) 6.29 % 7.14 % Adjusted return on average tangible common equity (1) 19.48 % 11.22 % Noninterest income as a % of revenue 23.12 % 51.78 % Net interest margin (taxable-equivalent basis) 3.53 % 2.56 % Adjusted net interest margin (taxable-equivalent basis) (1) 4.09 % 3.14 % Efficiency ratio (1) 84.10 % 77.92 % Adjusted efficiency ratio (1) 64.45 % 73.45 % Dividend payout ratio 122.06 % 95.18 % Average equity to average assets 9.95 % 8.83 % Selected Balance Sheet Data - Period Ending Loans $ 4,048,022 $ 3,992,534 Allowance for credit losses (61,915 ) (59,929 ) Investment securities 768,543 863,638 Assets 5,230,084 5,261,673 Deposits 4,192,003 4,378,410 Long-term debt 59,182 59,069 Total stockholders' equity (2) 564,934 495,410 Asset Quality Ratios Net charge-offs/(recoveries) to average loans 0.05 % 0.13 % Nonperforming loans to total loans 1.71 % 1.58 % Nonperforming assets to total assets 1.33 % 1.20 % Allowance for credit losses to total loans 1.53 % 1.50 % Allowance for credit losses to nonperforming loans 89.65 % 95.30 % Other Data Retirement and benefit services assets under administration/management $ 44,925,311 $ 40,728,699 Wealth assets under administration/management $ 4,850,600 $ 4,579,189 Mortgage originations $ 484,775 $ 334,318 (1) Represents a Non-GAAP financial measure.
As of December 31, 2024, approximately 16.7% of loans outstanding were C&I, while 50.0% of loans outstanding were CRE, 30.2% of loans outstanding were consumer, and 3.1% of loans outstanding were agricultural.
As of December 31, 2025, approximately 18.3% of loans outstanding were C&I, while 47.8% of loans outstanding were CRE, 30.8% of loans outstanding were consumer, and 3.1% of loans outstanding were agricultural.
The increase in investment securities was primarily due to investment securities acquired in the HMNF transaction in the fourth quarter of 2024. Securities with a carrying value of $340.2 million were pledged at December 31, 2024, to secure public deposits and for other purposes required or permitted by law.
The decrease in investment securities was primarily due to principal paydowns on mortgage securities and maturities. Securities with a carrying value of $115.1 million were pledged at December 31, 2025, to secure public deposits and for other purposes required or permitted by law.
The increase in net income was primarily driven by a $34.7 million increase in noninterest income and a $19.2 million increase in net interest income, partially offset by a $30.5 million increase in noninterest expense and a $16.1 million increase in provision for credit losses expense.
The decrease in net income was primarily driven by a $63.1 million decrease in noninterest income and a $20.6 million increase in noninterest expense, offset by a $65.5 million increase in net interest income and a $17.6 million decrease in provision for credit losses expense.
In accordance with ASU 2016-13, each reporting period the Company’s HTM debt securities are assessed to determine if any allowance should be recorded or if a write-down is required. As of and for the years ended December 31, 2024 and 2023, the Company recorded an allowance of $131 thousand and $213, respectively, and did not write-down any HTM debt securities.
In accordance with ASU 2016-13, in each reporting period the Company’s HTM debt securities are assessed to determine if any allowance should be recorded or if a write-down is required.
The table below represents criticized loans outstanding by loan portfolio segment as of December 31, 2024 and 2023: December 31, December 31, (dollars in thousands) 2024 2023 Commercial Commercial and industrial $ 35,127 $ 29,840 Commercial real estate Construction, land and development 37,633 20,667 Multifamily 27,188 310 Non-owner occupied 45,173 1,018 Owner occupied 27,637 7,842 Total commercial real estate 137,631 29,837 Agricultural Land 8,034 — Production 4,813 — Total agricultural 12,847 — Total commercial 185,605 59,677 Consumer Residential real estate First lien 2,988 105 Construction 4,680 — HELOC 1,459 — Junior lien 3,210 1,781 Total residential real estate 12,337 1,886 Other consumer 339 — Total consumer 12,676 1,886 Total loans $ 198,281 $ 61,563 Criticized loans as a percent of total loans 4.97 % 2.23 % Criticized loans represented 4.97% and 2.23% of total loans as of December 31, 2024 and 2023, respectively.
The table below represents criticized loans outstanding by loan portfolio segment as of December 31, 2025 and 2024: December 31, December 31, (dollars in thousands) 2025 2024 Commercial Commercial and industrial $ 33,323 $ 35,127 Commercial real estate Construction, land and development 34,201 37,633 Multifamily 28,541 27,188 Non-owner occupied 17,591 45,173 Owner occupied 14,058 27,637 Total commercial real estate 94,391 137,631 Agricultural Land 7,653 8,034 Production 3,662 4,813 Total agricultural 11,315 12,847 Total commercial 139,029 185,605 Consumer Residential real estate First lien 2,602 2,988 Construction 4,680 4,680 HELOC 128 1,459 Junior lien 2,375 3,210 Total residential real estate 9,785 12,337 Other consumer 348 339 Total consumer 10,133 12,676 Total criticized loans $ 149,162 $ 198,281 Criticized loans as a percent of total loans 3.68 % 4.97 % Criticized loans represented 3.68% and 4.97% of total loans as of December 31, 2025 and 2024, respectively.
The following table presents the banking segment income statement, net of corporate administration, for the years ended December 31, 2024 and 2023: Year ended December 31, (dollars in thousands) 2024 2023 Net interest income $ 107,045 $ 87,839 Provision for credit losses 18,141 2,057 Noninterest income 24,394 (6,920 ) Total revenue 113,298 78,862 Noninterest expense (1) 88,502 75,858 Net income before taxes $ 24,796 $ 3,004 (1) Noninterest expense does not include corporate administration expenses.
The following table presents the banking segment income statement, net of corporate administration, for the years ended December 31, 2025 and 2024: Year ended December 31, (dollars in thousands) 2025 2024 Net interest income $ 172,499 $ 107,045 Provision for credit losses 556 18,141 Noninterest income (loss) (42,274 ) 24,394 Total revenue 129,669 113,298 Noninterest expense (1) 113,918 88,517 Net income before taxes $ 15,751 $ 24,781 (1) Noninterest expense does not include corporate administration expenses.
Net interest margin increased 10 basis points to 2.56% in 2024, from 2.46% reported in 2023. The increase in net interest margin was primarily the result of a $56.7 million increase in interest income on interest earning assets, partially offset by a $37.5 million increase in interest expense on interest-bearing liabilities.
Net interest margin increased 97 basis points to 3.53% in 2025, from 2.56% in 2024. The increase in net interest margin was primarily the result of a $58.1 million increase in interest income on interest-earning assets and a $7.4 million decrease in interest expense on interest-bearing liabilities.
Noninterest Income The following table presents noninterest income for the years ended December 31, 2024 and 2023: Year ended December 31, (dollars in thousands) 2024 2023 $ Change % Change Retirement and benefit services $ 64,365 $ 65,294 $ (929 ) (1.4 )% Wealth 26,171 21,855 4,316 19.7 % Mortgage banking 10,073 8,411 1,662 19.8 % Service charges on deposit accounts 1,976 1,280 696 54.4 % Net gains (losses) on investment securities — (24,643 ) 24,643 (100.0 )% Other noninterest income 12,345 8,032 4,313 53.7 % Total noninterest income $ 114,930 $ 80,229 $ 34,701 43.3 % Noninterest income as a % of revenue 51.8 % 47.7 % Total noninterest income increased $34.7 million, or 43.3%, to $114.9 million in 2024, from $80.2 million for 2023.
Noninterest Income The following table presents noninterest income for the years ended December 31, 2025 and 2024: Year ended December 31, (dollars in thousands) 2025 2024 $ Change % Change Retirement and benefit services $ 65,885 $ 64,365 $ 1,520 2.4 % Wealth 28,265 26,171 2,094 8.0 % Mortgage banking 11,855 10,073 1,782 17.7 % Service charges on deposit accounts 2,768 1,976 792 40.1 % Net gains (losses) on investment securities (68,403 ) — (68,403 ) 100.0 % Other noninterest income 11,506 12,345 (839 ) (6.8 )% Total noninterest income $ 51,876 $ 114,930 $ (63,054 ) (54.9 )% Noninterest income as a % of revenue 23.1 % 51.8 % Total noninterest income decreased $63.1 million, or 54.9%, to $51.9 million in 2025, from $114.9 million for 2024.
The following table presents information concerning the components of the ACL for the periods presented: Year ended December 31, (dollars in thousands) 2024 2023 ACL on loans at the beginning of the period $ 35,843 $ 31,146 Adoption of ASC 326 — 3,857 ACL on PCD acquired loans 10,151 — Non-PCD day 1 provision for loan losses 7,332 — (Credit) provision for loan losses 10,757 (225 ) Net charge-offs (recoveries) (1) Commercial and industrial 3,225 (723 ) CRE − Construction, land and development — (251 ) CRE − Multifamily — — CRE − Non-owner occupied — — CRE − Owner occupied 191 (44 ) Agricultural − Land (20 ) (1 ) Agricultural − Production 19 — RRE − First lien — 7 RRE − Construction — — RRE − HELOC 19 (39 ) RRE − Junior lien 564 27 Other consumer 156 (41 ) Total net charge-offs (recoveries) 4,154 (1,065 ) ACL on loans at the end of the period 59,929 35,843 Components of ACL: ACL on HTM debt securities 131 213 ACL on loans 59,929 35,843 ACL on off-balance sheet credit exposures 7,534 7,401 ACL at end of the period 67,594 43,457 Total loans $ 3,992,534 $ 2,759,583 Average total loans 3,099,015 2,535,073 ACL on loans to total loans 1.50 % 1.30 % ACL on loans to nonaccrual loans 110.10 % 416.97 % ACL on loans to nonperforming loans 95.30 % 410.34 % Net charge-offs/(recoveries) to average total loans (annualized) 0.13 % (0.04 )% (1) Additional information related to net charge-offs (recoveries) is presented in the following table for the periods indicated: ​ 57 Table of Contents For the year ended December 31, Net Charge-offs Total Total Net Charge-offs Average (Recoveries) to (dollars in thousands) Charge-offs Recoveries (Recoveries) Loans Average Loans 2024: Commercial Commercial and industrial $ 3,727 $ 502 $ 3,225 $ 588,269 0.73 % Commercial real estate Construction, land and development — — — 172,700 — Multifamily — — — 274,175 — Non-owner occupied — — — 718,168 — Owner occupied 237 46 191 288,114 0.09 Total commercial real estate 237 46 191 1,453,157 0.02 Agricultural Land — 20 (20 ) 45,729 (0.06 ) Production 26 7 19 43,361 0.06 Total agricultural 26 27 (1 ) 89,090 — Total commercial 3,990 575 3,415 2,130,516 0.21 Consumer Residential real estate First lien — — — 747,874 — Construction — — — 22,832 — HELOC 19 — 19 131,617 0.02 Junior lien 638 74 564 38,982 1.93 Total residential real estate 657 74 583 941,305 0.08 Other consumer 186 30 156 36,252 0.57 Total consumer 843 104 739 977,557 0.10 Total loans $ 4,833 $ 679 $ 4,154 $ 3,108,073 0.18 % 2023: Commercial Commercial and industrial $ 436 $ 1,159 $ (723 ) $ 527,795 (0.18 )% Commercial real estate Construction, land and development — 251 (251 ) 99,315 (0.34 ) Multifamily — — — 185,262 — Non-owner occupied — — — 498,884 — Owner occupied — 44 (44 ) 256,690 (0.02 ) Total commercial real estate — 295 (295 ) 1,040,151 (0.04 ) Agricultural Land — 1 (1 ) 39,832 — Production — — — 30,663 — Total agricultural — 1 (1 ) 70,495 — Total commercial 436 1,455 (1,019 ) 1,638,441 (0.08 ) Consumer Residential real estate First lien 9 2 7 673,118 — Construction — — — 33,508 — HELOC 40 79 (39 ) 118,653 (0.04 ) Junior lien 77 50 27 35,382 0.10 Total residential real estate 126 131 (5 ) 860,661 — Other consumer 51 92 (41 ) 35,971 (0.15 ) Total consumer 177 223 (46 ) 896,632 (0.01 ) Total loans $ 613 $ 1,678 $ (1,065 ) $ 2,535,073 (0.06 )% 58 Table of Contents The following table presents the allocation of the ACL as of the dates presented: December 31, 2024 December 31, 2023 Percentage Percentage Allocated of loans to Allocated of loans to (dollars in thousands) Allowance total loans Allowance total loans Commercial and industrial $ 8,170 16.7 % $ 9,705 20.4 % CRE − Construction, land and development 16,277 7.4 6,135 4.5 CRE − Multifamily 4,716 9.1 1,776 8.9 CRE − Non-owner occupied 16,513 24.2 7,726 20.5 CRE − Owner occupied 3,226 9.3 2,449 9.8 Agricultural − Land 597 1.5 96 1.5 Agricultural − Production 631 1.6 84 1.3 RRE − First lien 6,921 23.1 6,087 25.3 RRE − Construction 357 0.8 485 1.1 RRE − HELOC 1,339 4.1 835 4.3 RRE − Junior lien 742 1.1 264 1.3 Other consumer 440 1.1 201 1.1 Total loans $ 59,929 100.0 % $ 35,843 100.0 % 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.
The following table presents information concerning the components of the ACL for the periods presented: Year ended December 31, (dollars in thousands) 2025 2024 ACL on loans at the beginning of the period $ 59,929 $ 35,843 ACL on PCD acquired loans — 10,151 Non-PCD day 1 provision for loan losses — 7,332 (Credit) provision for loan losses 4,135 10,757 Net charge-offs (recoveries) (1) Commercial and industrial (1,992 ) 3,225 CRE − Construction, land and development — — CRE − Multifamily — — CRE − Non-owner occupied 3,313 — CRE − Owner occupied (39 ) 191 Agricultural − Land (5 ) (20 ) Agricultural − Production 318 19 RRE − First lien 55 — RRE − Construction — — RRE − HELOC 518 19 RRE − Junior lien (1 ) 564 Other consumer (18 ) 156 Total net charge-offs (recoveries) 2,149 4,154 ACL on loans at the end of the period 61,915 59,929 Components of ACL: ACL on HTM debt securities 123 131 ACL on loans 61,915 59,929 ACL on off-balance sheet credit exposures 3,886 7,534 ACL at end of the period 65,924 67,594 Total loans $ 4,048,022 $ 3,992,534 Average total loans 4,047,034 3,099,015 ACL on loans to total loans 1.53 % 1.50 % ACL on loans to nonaccrual loans 89.65 % 110.10 % ACL on loans to nonperforming loans 89.65 % 95.30 % Net charge-offs/(recoveries) to average total loans (annualized) 0.05 % 0.13 % (1) Additional information related to net charge-offs (recoveries) is presented in the following table for the periods indicated: ​ 58 Table of Contents For the year ended December 31, Net Charge-offs Total Total Net Charge-offs Average (Recoveries) to (dollars in thousands) Charge-offs Recoveries (Recoveries) Loans Average Loans 2025: Commercial Commercial and industrial $ 916 $ 2,908 $ (1,992 ) $ 665,635 (0.30 )% Commercial real estate Construction, land and development — — — 341,533 — Multifamily — — — 363,247 — Non-owner occupied 3,401 88 3,313 927,665 0.36 Owner occupied 6 45 (39 ) 427,412 (0.01 ) Total commercial real estate 3,407 133 3,274 2,059,857 0.16 Agricultural Land — 5 (5 ) 66,483 (0.01 ) Production 384 66 318 64,118 0.50 Total agricultural 384 71 313 130,601 0.24 Total commercial 4,707 3,112 1,595 2,856,093 0.06 Consumer Residential real estate First lien 55 — 55 895,225 0.01 Construction — — — 36,309 — HELOC 548 30 518 205,287 0.25 Junior lien 300 301 (1 ) 41,406 — Total residential real estate 903 331 572 1,178,227 0.05 Other consumer 138 156 (18 ) 40,956 (0.04 ) Total consumer 1,041 487 554 1,219,183 0.05 Total loans $ 5,748 $ 3,599 $ 2,149 $ 4,075,276 0.05 % 2024: Commercial Commercial and industrial $ 3,727 $ 502 $ 3,225 $ 588,269 0.55 % Commercial real estate Construction, land and development — — — 172,700 — Multifamily — — — 274,175 — Non-owner occupied — — — 718,168 — Owner occupied 237 46 191 288,114 0.07 Total commercial real estate 237 46 191 1,453,157 0.01 Agricultural Land — 20 (20 ) 45,729 (0.04 ) Production 26 7 19 43,361 0.04 Total agricultural 26 27 (1 ) 89,090 — Total commercial 3,990 575 3,415 2,130,516 0.16 Consumer Residential real estate First lien — — — 747,874 — Construction — — — 22,832 — HELOC 19 — 19 131,617 0.01 Junior lien 638 74 564 38,982 1.45 Total residential real estate 657 74 583 941,305 0.06 Other consumer 186 30 156 36,252 0.43 Total consumer 843 104 739 977,557 0.08 Total loans $ 4,833 $ 679 $ 4,154 $ 3,108,073 0.13 % 59 Table of Contents The following table presents the allocation of the ACL as of the dates presented: December 31, 2025 December 31, 2024 Percentage Percentage Allocated of loans to Allocated of loans to (dollars in thousands) Allowance total loans Allowance total loans Commercial and industrial $ 16,216 18.3 % $ 8,170 16.7 % CRE − Construction, land and development 13,210 6.1 16,277 7.4 CRE − Multifamily 4,380 9.5 4,716 9.1 CRE − Non-owner occupied 11,006 21.6 16,513 24.2 CRE − Owner occupied 3,097 10.6 3,226 9.3 Agricultural − Land 959 1.6 597 1.5 Agricultural − Production 623 1.5 631 1.6 RRE − First lien 9,358 21.6 6,921 23.1 RRE − Construction 274 0.8 357 0.8 RRE − HELOC 1,787 6.4 1,339 4.1 RRE − Junior lien 395 0.9 742 1.1 Other consumer 610 1.1 440 1.1 Total loans $ 61,915 100.0 % $ 59,929 100.0 % 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.
The decrease was primarily the result of an increase in nonperforming loans for the year ended December 31, 2024. The increase in nonperforming loans was primarily driven by one construction, land and development loan of $25.0 million moving to nonaccrual status in the second quarter of 2024.
The decrease was primarily the result of a $6.2 million increase in nonperforming loans for the year ended December 31, 2025. The increase in nonperforming loans was primarily driven by one commercial and industrial relationship of $12.2 million moving to nonaccrual status in the third quarter of 2025.
A short term funding crisis would most likely result from a shock to the financial system, either internal or external, which disrupts orderly short term funding operations. Such a crisis would likely be temporary in nature and would not involve a change in credit ratings.
The plan addresses the actions that the Company would take in response to both a short-term and long-term funding crisis. A short term funding crisis would most likely result from a shock to the financial system, either internal or external, which disrupts orderly short term funding operations.
Year ended December 31, 2024 2023 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ (dollars in thousands) Balance Expense Rate Balance Expense Rate Interest Earning Assets Interest-bearing deposits with banks $ 299,666 $ 16,142 5.39 % $ 35,395 $ 1,202 3.40 % Investment securities (1) 791,111 20,604 2.60 983,545 25,199 2.56 Fed funds sold — — — — — — Loans held for sale 14,180 836 5.90 13,217 721 5.46 Loans Commercial and industrial 588,269 42,505 7.23 527,795 34,999 6.63 CRE − Construction, land and development 172,700 11,699 6.77 99,315 7,607 7.66 CRE − Multifamily 272,125 15,974 5.87 185,262 9,733 5.25 CRE − Non-owner occupied 712,734 43,778 6.14 498,884 26,360 5.28 CRE − Owner occupied 286,540 16,354 5.71 256,690 13,022 5.07 Agricultural − Land 45,729 2,334 5.10 39,832 1,905 4.78 Agricultural − Production 43,361 2,988 6.89 30,663 1,987 6.48 RRE − First lien 747,874 31,153 4.17 673,118 25,570 3.80 RRE − Construction 22,832 1,503 6.58 33,508 1,670 4.98 RRE − HELOC 131,617 10,555 8.02 118,653 9,575 8.07 RRE − Junior lien 38,982 2,432 6.24 35,382 2,064 5.83 Other consumer 36,252 2,469 6.81 35,971 2,179 6.06 Total loans (1) 3,099,015 183,744 5.93 2,535,073 136,671 5.39 Federal Reserve/FHLB Stock 17,901 1,453 8.12 25,246 1,761 6.98 Total interest earning assets 4,221,873 222,779 5.28 3,592,476 165,554 4.61 Noninterest earning assets 281,610 224,541 Total assets $ 4,503,483 $ 3,817,017 Interest-Bearing Liabilities Interest-bearing demand deposits $ 1,010,888 $ 21,436 2.12 % $ 768,238 $ 9,872 1.29 % Money market and savings deposits 1,250,939 45,008 3.60 1,118,815 32,639 2.92 Time deposits 518,826 22,798 4.39 303,746 10,876 3.58 Fed funds purchased and BTFP 249,180 12,338 4.95 287,768 15,283 5.31 FHLB short-term advances 200,000 10,246 5.12 113,973 5,693 5.00 Long-term debt 59,013 2,707 4.59 58,900 2,681 4.55 Total interest-bearing liabilities 3,288,846 114,533 3.48 2,651,440 77,044 2.91 Noninterest-Bearing Liabilities and Stockholders' Equity Noninterest-bearing deposits 704,463 737,365 Other noninterest-bearing liabilities 112,436 69,944 Stockholders’ equity 397,738 358,268 Total liabilities and stockholders’ equity $ 4,503,483 $ 3,817,017 Net interest income on FTE basis (1) $ 108,246 $ 88,510 Net interest rate spread on FTE basis (1) 1.80 % 1.70 % Net interest margin on FTE basis (1) 2.56 % 2.46 % (1) Fully tax-equivalent adjustment was calculated utilizing a marginal income tax rate of 21.0%. ​ 47 Table of Contents Interest Rates and Operating Interest Differential Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest earning assets and interest-bearing liabilities, as well as changes in average interest rates.
Year ended December 31, 2025 2024 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ (dollars in thousands) Balance Expense Rate Balance Expense Rate Interest-Earning Assets Interest-bearing deposits with banks $ 54,150 $ 2,654 4.90 % $ 299,666 $ 16,142 5.39 % Investment securities (1) 813,474 21,510 2.64 791,111 20,604 2.60 Loans held for sale 18,920 909 4.80 14,180 836 5.90 Loans Commercial and industrial 665,635 49,383 7.42 588,269 42,505 7.23 CRE − Construction, land and development 341,533 22,712 6.65 172,700 11,699 6.77 CRE − Multifamily 356,019 22,828 6.41 272,125 15,974 5.87 CRE − Non-owner occupied 912,066 58,434 6.41 712,734 43,778 6.14 CRE − Owner occupied 421,997 27,920 6.62 286,540 16,354 5.71 Agricultural − Land 66,483 3,914 5.89 45,729 2,334 5.10 Agricultural − Production 64,118 4,518 7.05 43,361 2,988 6.89 RRE − First lien 895,225 43,259 4.83 747,874 31,153 4.17 RRE − Construction 36,309 2,675 7.37 22,832 1,503 6.58 RRE − HELOC 205,287 13,929 6.79 131,617 10,555 8.02 RRE − Junior lien 41,406 2,637 6.37 38,982 2,432 6.24 Other consumer 40,956 2,813 6.87 36,252 2,469 6.81 Total loans (1) 4,047,034 255,022 6.30 3,099,015 183,744 5.93 Federal Reserve/FHLB Stock 24,142 1,944 8.05 17,901 1,453 8.12 Total interest-earning assets 4,957,720 282,039 5.69 4,221,873 222,779 5.28 Noninterest-earning assets 320,147 281,610 Total assets $ 5,277,867 $ 4,503,483 Interest-Bearing Liabilities Interest-bearing demand deposits $ 1,257,069 $ 22,385 1.78 % $ 1,010,888 $ 21,436 2.12 % Money market and savings deposits 1,583,232 44,414 2.81 1,250,939 45,008 3.60 Time deposits 687,320 25,842 3.76 518,826 22,798 4.39 Fed funds purchased and BTFP 62,618 2,879 4.60 249,180 12,338 4.95 FHLB short-term advances 201,781 9,018 4.47 200,000 10,246 5.12 Long-term debt 59,126 2,599 4.40 59,013 2,707 4.59 Total interest-bearing liabilities 3,851,146 107,137 2.78 3,288,846 114,533 3.48 Noninterest-Bearing Liabilities and Stockholders' Equity Noninterest-bearing deposits 813,785 704,463 Operating lease liabilities 24,566 9,259 Accrued expenses and other liabilities 63,047 103,177 Other noninterest-bearing liabilities 87,613 112,436 Stockholders’ equity 525,323 397,738 Total liabilities and stockholders’ equity $ 5,277,867 $ 4,503,483 Net interest income on FTE basis (1) $ 174,902 $ 108,246 Net interest rate spread on FTE basis (1) 2.91 % 1.80 % Net interest margin on FTE basis (1) 3.53 % 2.56 % (1) Fully tax-equivalent adjustment was calculated utilizing a marginal income tax rate of 21.0%. ​ 48 Table of Contents Interest Rates and Operating Interest Differential Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates.
The increase in interest expense on interest-bearing liabilities was driven by a 57 basis point increase in the average rate paid on interest-bearing liabilities as well as a $637.4 million increase in the average balance of interest-bearing liabilities, driven by the acquisition of HMNF and organic deposit growth.
The decrease in interest expense on interest-bearing liabilities was driven by a 70 basis point decrease in the average rate paid on interest-bearing liabilities, partially offset by a $562.3 million increase in the average balance of interest-bearing liabilities, driven primarily by the acquisition of HMNF.
December 31, 2024 December 31, 2023 Percent of Percent of (dollars in thousands) Balance Portfolio Balance Portfolio Commercial and industrial: General business $ 340,702 8.5 % $ 258,008 9.3 % Services 177,813 4.5 146,318 5.3 Retail trade 88,105 2.2 91,216 3.3 Manufacturing 60,107 1.5 66,638 2.4 Total commercial and industrial 666,727 16.7 562,180 20.3 Commercial real estate: Construction, land and development 294,677 7.4 124,034 4.5 Multifamily 363,123 9.1 245,103 8.9 Non-owner occupied Office 168,170 4.2 124,684 4.5 Industrial 169,391 4.2 104,241 3.8 Retail 154,325 3.9 96,578 3.5 Hotel 170,982 4.3 80,576 2.9 Medical office 139,939 3.5 63,788 2.3 Medical or nursing facility 110,164 2.8 47,625 1.7 Other commercial real estate 54,054 1.3 51,862 1.9 Total non-owner occupied 967,025 24.2 569,354 20.6 Owner occupied 371,418 9.3 271,623 9.8 Total commercial real estate 1,996,243 50.0 1,210,114 43.8 Agricultural: Land 61,299 1.5 40,832 1.5 Production 63,008 1.6 36,141 1.3 Total agricultural 124,307 3.1 76,973 2.8 Consumer: RRE − First lien 921,019 23.1 697,900 25.3 RRE − Construction 33,547 0.8 28,979 1.1 RRE − HELOC 162,509 4.1 118,315 4.3 RRE − Junior lien 44,060 1.1 35,819 1.3 Other consumer 44,122 1.1 29,303 1.1 Total consumer 1,205,257 30.2 910,316 33.1 Total loans $ 3,992,534 100.0 % $ 2,759,583 100.0 % C&I loans represent loans for working capital, purchases of equipment and other needs of commercial customers primarily located within our geographical footprint.
December 31, 2025 December 31, 2024 Percent of Percent of (dollars in thousands) Balance Portfolio Balance Portfolio Commercial and industrial: General business $ 290,008 7.2 % $ 340,702 8.5 % Services 237,966 5.9 177,813 4.5 Retail trade 101,374 2.5 88,105 2.2 Manufacturing 107,485 2.7 60,107 1.5 Total commercial and industrial 736,833 18.3 666,727 16.7 Commercial real estate: Construction, land and development 246,238 6.1 294,677 7.4 Multifamily 383,505 9.5 363,123 9.1 Non-owner occupied Office 142,095 3.5 168,170 4.2 Industrial 193,041 4.8 169,391 4.2 Retail 116,735 2.9 154,325 3.9 Hotel 110,022 2.7 170,982 4.3 Medical office 174,891 4.3 139,939 3.5 Medical or nursing facility 85,918 2.1 110,164 2.8 Other commercial real estate 53,160 1.3 54,054 1.3 Total non-owner occupied 875,862 21.6 967,025 24.2 Owner occupied 427,260 10.6 371,418 9.3 Total commercial real estate 1,932,865 47.8 1,996,243 50.0 Agricultural: Land 64,799 1.6 61,299 1.5 Production 62,500 1.5 63,008 1.6 Total agricultural 127,299 3.1 124,307 3.1 Consumer: RRE − First lien 874,737 21.6 921,019 23.1 RRE − Construction 33,703 0.8 33,547 0.8 RRE − HELOC 260,883 6.4 162,509 4.1 RRE − Junior lien 36,844 0.9 44,060 1.1 Other consumer 44,858 1.1 44,122 1.1 Total consumer 1,251,025 30.8 1,205,257 30.2 Total loans $ 4,048,022 100.0 % $ 3,992,534 100.0 % C&I loans represent loans for working capital, purchases of equipment and other needs of commercial customers primarily located within our geographical footprint.
(2) Outflows include closed account assets, withdrawals and client fees. (3) Market impact reflects gains and losses on portfolio investments. (4) Wealth noninterest income divided by simple average ending balances. (5) Total wealth balance does not include brokerage assets of $892.3 million and $859.8 million for the years ended December 31, 2024 and 2023, respectively.
(2) Inflows for the year ended December 31, 2024 includes $272.5 million of AUA and AUM acquired in the HMNF transaction. (3) Outflows include closed account assets, withdrawals and client fees. (4) Market impact reflects gains and losses on portfolio investments. (5) Wealth n oninterest income divided by simple average ending balanc es.
Additionally, total wealth balance does not include $272.5 million of AUA and AUM acquired in the HMNF transaction for the year ended December 31, 2024. (6) Yield does not include brokerage and insurance and advisory revenue of $3.4 million and $2.9 million for the years ended December 31, 2024 and 2023, respectively.
(6) Yield does not include brokerage and insurance and advisory revenue of $3.9 million and $3.4 million for the years ended December 31, 2025 and 2024, respectively. Total AUA and AUM for the wealth segment was $4.9 billion at December 31, 2025, an increase of $0.3 billion, or 5.9%, compared to the total at December 31, 2024.
The increase in provision for credit losses was primarily a result a $7.3 million day one provision in connection with the acquisition of HMNF along with strong organic loan growth and increased nonaccrual loans.
The decrease in provision for credit losses was primarily a result of a $7.3 million day one provision in connection with the acquisition of HMNF in 2024 and a reduction in the unfunded commitment reserve of $3.6 million.

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