Alerus Financial Corporation, a leading commercial wealth bank and national retirement services provider, has reported its financial results for the third quarter of 2024, showcasing resilience and strategic growth amidst a challenging economic landscape. The company's CEO, Katie Lorenson, highlighted the successful completion of a significant acquisition, the continued expansion of key business segments, and the company's commitment to efficient operations and a strong balance sheet.
Alerus Financial Solidifies Its Midwest Footprint with Transformative Acquisition
Expanding Presence in Rochester and Southern Minnesota
Alerus Financial's third-quarter performance was marked by the successful completion of its largest acquisition in company history. The acquisition of HMN Financial, Inc. and its subsidiary, Home Federal Savings Bank, expanded the company's franchise into the vibrant Rochester and Southern Minnesota markets. This strategic move not only strengthened Alerus' core deposit base but also positioned the company for continued growth and diversification in the region.Enhancing Talent and Capabilities Across the Organization
In addition to the transformative acquisition, Alerus Financial continued to invest in its talent and infrastructure throughout the quarter. The company added a specialized equipment leasing team and made key hires to drive growth and efficiencies, particularly in its retirement and benefit services segment. These strategic investments underscore Alerus' commitment to maintaining its position as an employer of choice and enhancing its diversified business model.Delivering Robust Growth Across Key Business Segments
Despite the challenging and competitive environment, Alerus Financial demonstrated its ability to gain market share and grow its client base. The company's retirement and benefits business grew over 19%, its wealth management business grew 18%, and it achieved nearly 10% loan growth and over 7% deposit growth during the quarter. These impressive results highlight the strength and resilience of Alerus' diversified revenue streams.Proactive Credit Risk Management
Alerus Financial's management team remained focused on maintaining a strong credit quality profile. The company's early identification of potential problem loans, coupled with proactive and decisive actions, are a testament to its robust credit culture. During the quarter, the normalization of credit continued, with charge-offs to average loans at 0.04% and reserves to loans stable at 1.29%.Balancing Investments and Efficiency
Alerus Financial is committed to efficient headcount management, balancing investments in talent, technology, and infrastructure while maintaining a strong balance sheet and capital levels. The company's tangible book value per common share increased by 6.7% from the end of 2023, and its tangible common equity to tangible assets ratio improved to 8.11%, well above regulatory requirements.Repaying BTFP Borrowings and Optimizing Interest Rate Risk
Alerus Financial took proactive steps to manage its interest rate risk during the quarter. The company repaid its Bank Term Funding Program (BTFP) borrowings, resulting in risk-free net interest income of $1.2 million earned year-to-date. Additionally, the company's $400 million in interest rate swaps that matured during the quarter increased its liability sensitivity as the Federal Reserve began to cut interest rates.Delivering Shareholder Value
Alerus Financial's strong financial performance and strategic initiatives have translated into value for its shareholders. The company's return on average tangible common equity for the quarter was 7.83%, and its adjusted return on average tangible common equity was 9.04%. The company also maintained a healthy dividend payout ratio of 76.92% during the quarter.In conclusion, Alerus Financial's third-quarter results demonstrate the company's ability to navigate a challenging environment, execute strategic acquisitions, and drive growth across its diversified business lines. The company's focus on talent, technology, and efficient operations, coupled with its proactive credit risk management and balance sheet optimization, position Alerus Financial for continued success and the delivery of long-term value for its shareholders.
