Alerus Financial Corporation Reports 52% Increase in Net Income for 2024

Alerus Financial Corporation (Alerus) reported net income of $17.78 million for the year ended December 31, 2024, a 52% increase compared to $11.69 million in 2023. Diluted earnings per share rose to $0.83 in 2024 from $0.58 in 2023. This increase stemmed from a $34.7 million rise in noninterest income and a $19.2 million increase in net interest income, partially offset by a $30.5 million increase in noninterest expenses and a $16.1 million increase in the provision for credit losses. Total assets reached $5.3 billion, a 34.6% increase year-over-year.

The increase in noninterest income was primarily due to a $24.6 million loss on investment securities recognized in 2023, coupled with a $4.3 million increase in wealth revenue in 2024. Net interest income growth resulted from higher yields on assets, organic loan growth, and lower average deposit rates. The rise in noninterest expenses was driven by an $11 million increase in compensation and a $12.9 million increase in professional fees, largely attributed to acquisition-related costs. The company's net interest margin increased by 10 basis points to 2.56% in 2024.

During 2024, Alerus completed two significant acquisitions. On October 9, 2024, the company acquired HMN Financial, Inc., adding $867.5 million in loans and $957.6 million in deposits, primarily expanding its presence in the Rochester, Minnesota MSA. The acquisition was financed with $123.6 million in common stock. Previously, on July 1, 2022, Alerus acquired MPB BHC, Inc., the parent company of Metro Phoenix Bank, expanding its presence in the Phoenix MSA with the addition of $270.4 million in loans and $353.7 million in deposits, using $64 million in common stock. As of December 31, 2024, Alerus employed 892 people, with 846 full-time and 46 part-time employees.

Key operational developments included a 44.7% increase in total loans to $4 billion, driven by organic growth and acquisitions. Total deposits increased by 41.4% to $4.4 billion. Assets under administration/management in the retirement and benefit services segment reached $40.7 billion, while those in the wealth segment totaled $4.6 billion. The company also highlighted its "One Alerus" initiative, launched in 2017, which integrates its product and service offerings through technology and advisors. The company's My Alerus client portal integrates various financial accounts into a single platform.

Alerus noted several risk factors, including interest rate risk, credit risk (particularly concerning commercial real estate loans), operational risks, liquidity and funding risks, legal and compliance risks, and competitive pressures from both traditional banks and non-bank financial service providers. The company also acknowledged a material weakness in its internal control over financial reporting related to business combination controls, specifically concerning the HMNF acquisition. The company stated its intention to remediate this weakness and outlined its plans to do so. The company also disclosed that it had $137.3 million in unrealized losses in its securities portfolio as of December 31, 2024. The company's outlook includes a plan to maintain or increase dividend levels in future quarters, although it retains the discretion to alter its dividend policy.