ALERUS FINANCIAL CORP

Alerus Financial Corporation is a diversified financial services company headquartered in Grand Forks, North Dakota, operating through its subsidiary Alerus Financial, National Association. The company provides financial solutions to businesses and consumers through three distinct business segments: banking, retirement and benefit services, and wealth. 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 retirement and benefit services segment, and $4.9 billion of assets under administration/management in the wealth segment ^1234567. The company’s operations date back to 1879, when it was originally founded as the Bank of Grand Forks, one of the first banks chartered in the Dakota Territory.

The financial services industry is highly competitive, and the company competes with other bank and nonbank institutions, including large banks, consumer finance companies, brokerage firms, mortgage banking companies, business leasing and finance companies, credit unions, Fintech companies, and digital asset service providers. The company also faces growing competition from online businesses with few or no physical locations, including online banks, lenders, consumer and commercial lending platforms, and automated retirement and investment services providers. The company believes its client-first and advice-based philosophy, diversified business model, and history of high performance and growth distinguish it from other financial service providers.

The company generates revenues from both net interest income and noninterest income. Net interest income is derived from offering traditional banking products and services, while noninterest income is driven primarily by the retirement and benefit services and wealth business segments. The company’s business model is client centric, with a focus on offering a diversified range of solutions to clients who desire an advice-based relationship, enabling the company to become the preferred financial services provider for clients. The company targets specific business and consumer segments, classifying consumer clients based on their financial needs and goals and business clients by industry, with a focus on high priority industries including professional services, finance and insurance, wholesale, small business, construction, retail, and manufacturers, targeting businesses with sales between $1.0 million and $100.0 million ⁸⁹.

The banking segment offers a broad range of customized commercial and consumer lending products, including commercial loans, business term loans and lines of credit, owner-occupied and non-owner-occupied commercial real estate loans, construction and land development loans, and residential first mortgage loans. The company originates and sells, primarily servicing released, whole loans in the secondary market, with mortgage loan sales activities primarily directed at originating single family mortgages that generally conform to Federal National Mortgage Association and Federal Home Loan Mortgage Corporation guidelines. The banking segment also provides a broad range of deposit products and services, including demand deposits, interest-bearing transaction accounts, money market accounts, time and savings deposits, and certificates of deposit. As of December 31, 2025, core deposits totaled $4.0 billion or 95.5% of total deposits, and synergistic deposits from the retirement and benefit services and wealth segments totaled $1.0 billion, including $203.4 million of HSA deposits ^1011121314.

The retirement and benefit services segment offers retirement plan administration and investment advisory services, employee stock ownership plan administration, investment fiduciary services to retirement plans, HSA and other benefit services to clients on a nationwide basis. This segment includes advisory services providing investment fiduciary services to retirement plans, retirement services providing recordkeeping and administration services to qualified retirement plans, ESOP administration providing recordkeeping and administration services to employee stock ownership plans, and health and welfare services providing HSA, FSA, and government health insurance program recordkeeping and administration services to employers. The wealth division provides fiduciary services to consumer and commercial clients, including financial planning, investment management, personal and corporate trust services, estate administration, and custody services, as well as brokerage services. The wealth division offers two proprietary investment strategies: Dimension, a separately managed account designed for individual investors, foundations, endowments and institutions with assets typically greater than $500 thousand, and Blueprint, which uses a series of models designed to help investors gain exposure to a diversified, risk-based asset allocation ¹⁵.

On October 9, 2024, the company completed the acquisition of HMN Financial, Inc., the holding company of Home Federal Savings Bank, to expand the company’s business in the Rochester, Minnesota metropolitan statistical area and grow the size of the overall company. 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 ¹⁶¹⁷. 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 ¹⁸¹⁹. 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). The retirement and benefit services business administers plans in all 50 states through an office located in Colorado. The Grand Forks MSA had total deposits of $12.7 billion as of June 30, 2025, ranking as the 116th largest MSA in the United States in total deposits based on FDIC data ²⁰. The Fargo MSA had total deposits of $4.1 billion as of June 30, 2025, ranking as the 268th largest MSA ²¹. The Twin Cities MSA had total deposits of $232.6 billion as of June 30, 2025, ranking as the 15th largest MSA ²². The Rochester MSA had total deposits of $7.4 billion as of June 30, 2025, ranking as the 173rd largest MSA ²³. The Phoenix MSA had total deposits of $180.8 billion as of June 30, 2025, ranking as the 19th largest metropolitan statistical area ²⁴. Retirement and benefit services assets under administration/management and wealth assets under administration/management attributable to the National Market were $35.3 billion and $0.6 billion, respectively, as of December 31, 2025, representing approximately 78.6% and 11.8%, respectively, of total retirement and benefit services assets under administration/management and wealth assets under administration/management as of that date ^25262728.

The company’s business model produces strong financial performance and a diversified revenue stream. The company believes its client-first and advice-based philosophy, diversified business model, and history of high performance and growth distinguish it from other financial service providers. The company has experienced significant growth, both organically and through a series of strategic acquisitions, which has allowed it to build a diversified franchise and expand its geographic footprint into growing metropolitan areas. The company believes these initiatives have transformed it into a high tech, high touch client service provider, increased earnings, and allowed the company to return more value to stockholders.

The company’s primary growth vector is the 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. This initiative is supported by an integrated client access portal called My Alerus, which integrates diverse client applications into a unified system, allowing clients to access banking accounts, mortgages, wealth accounts, retirement accounts, and health benefit accounts through a single login. The company believes the One Alerus initiative will enable future organic growth by leveraging its existing client base and help continue to provide strong returns to stockholders. The company also targets growth through its National Market, focusing on growing synergistic deposits from the retirement and benefit services and wealth segments, with retirement and benefit services assets under administration/management and wealth assets under administration/management attributable to the National Market of $35.3 billion and $0.6 billion, respectively, as of December 31, 2025 ²⁹³⁰.

The company’s growth strategy also includes geographic expansion through acquisitions, as demonstrated by the October 9, 2024 acquisition of HMN Financial, Inc., which expanded the company’s business in the Rochester, Minnesota metropolitan statistical area. The company targets businesses with sales between $1.0 million and $100.0 million and focuses on specific high priority industries and client types, including professional services, finance and insurance, wholesale, small business, construction, retail, and manufacturers ³¹³². The company also seeks to grow its retirement and benefit services business, which administers plans in all 50 states through an office located in Colorado.

The filing does not provide specific margin or cost outlook figures, margin trajectory, cost structure evolution, or efficiency or restructuring targets.

The filing does not provide specific operational outlook details regarding supply chain posture, manufacturing capacity, technology infrastructure investments, or headcount or workforce strategy.

The filing does not provide specific capital allocation figures such as R&D spending levels, capital expenditure plans, share repurchase authorization amounts, or dividend policy with exact figures.

The filing identifies several headwinds and constraints, including the strength of the local, state, national and international economies and financial markets, including effects of inflationary pressures and future monetary policies of the Federal Reserve. Other headwinds include interest rate risk, effects on the U.S. economy resulting from actions taken by the federal government including the threat or implementation of tariffs, immigration enforcement and changes in foreign policy, disruptions to the global supply chain, and the company’s ability to successfully manage credit risk, including in the commercial real estate portfolio. The company also faces risks from concentrations within its loan portfolio, including by type of borrower, geographic area, collateral, and industry, as well as the concentration of large loans to certain borrowers including CRE loans.

Additional constraints flagged by management include the company’s ability to implement organic and acquisition growth strategies, the commencement, cost, and outcome of litigation and other legal proceedings and regulatory actions, including with respect to pending actions relating to the company’s previous employee stock ownership fiduciary services commenced by government and private parties. The company also faces risks from the impact of economic or market conditions on its fee-based services, the ability to continue to grow the retirement and benefit services business, the ability to continue to originate a sufficient volume of residential mortgages, and the occurrence of fraudulent activity, breaches or failures of information security controls or cybersecurity-related incidents. The company also notes risks related to potential losses incurred in connection with mortgage loan repurchases, the composition of its executive management team, rapid and expensive technological changes, increased competition from non-banks such as credit unions, financial technology companies and digital asset service providers, and the ability to successfully manage liquidity risk, including the need to access higher cost sources of funds such as fed funds purchased and short-term borrowings.

The company faces material credit risk from concentrations within its loan portfolio, including by type of borrower, geographic area, collateral, and industry, as well as the concentration of large loans to certain borrowers including commercial real estate loans. The company’s ability to successfully manage credit risk in the commercial real estate portfolio and maintain an adequate level of allowance for credit losses is a key risk. The company also faces significant litigation risk related to pending actions relating to its previous employee stock ownership fiduciary services commenced by government and private parties. The company’s ability to implement organic and acquisition growth strategies is subject to risk, as is its ability to continue to grow the retirement and benefit services business and originate a sufficient volume of residential mortgages. The company faces liquidity risk, including the need to access higher cost sources of funds such as fed funds purchased and short-term borrowings, and the concentration of large deposits from certain clients who have balances above current FDIC insurance limits. The company also faces risks from potential impairment to goodwill recorded in connection with past acquisitions, including the acquisitions of Metro Phoenix Bank and HMN Financial, Inc.

Management’s message emphasizes the company’s client-first and advice-based philosophy, diversified business model, and history of high performance and growth as key differentiators. The strategic priorities emphasized for the period ahead include the One Alerus initiative, which aims to bring all product and service offerings to clients in a cohesive and seamless manner, supported by the My Alerus integrated client access portal. Management also emphasizes organic growth by leveraging the existing client base and continuing to provide strong returns to stockholders.