# Alerus Financial Corp: Form 10-Q for the period ended Mar 31, 2025

- Company: [Alerus Financial Corp](/companies/alrs.md) (CIK 903419)
- Form: 10-Q
- Filed: 2025-05-06
- Accepted by EDGAR: May 6, 2025, 13:01 ET
- Period: 2025-03-31
- Accession: 0001437749-25-014641
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/903419/000143774925014641/alrs20250331_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/903419/000143774925014641/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $4.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $13.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.52 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.52 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 25,653,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $7.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $2.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $5.1m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2025-01-01 to 2025-03-31 | $127.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2025-03-31 | $83.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2025-03-31 | $5.34bn | us-gaap:Assets |
| Total liabilities | at 2025-03-31 | $4.83bn | us-gaap:Liabilities |
| Long-term debt | at 2025-03-31 | $59.1m | us-gaap:LongTermDebt |
| Short-term borrowings | at 2025-03-31 | $200.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2025-03-31 | $514.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 86,775 characters.

### General

*The following discussion explains the Company’s financial condition and results of operations as of and for the three months ended March 31, 2025 and 2024. Annualized results for this interim period may not be indicative of results for the full year or future periods. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes presented elsewhere in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 14, 2025.*

### Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of Alerus Financial Corporation. These statements are often, but not always, identified by words such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would,” “annualized,” “target” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. Examples of forward-looking statements include, among others, statements the Company makes regarding the Company’s projected growth, anticipated future financial performance, financial condition, credit quality, management’s long-term performance goals and the future plans and prospects of Alerus Financial Corporation.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on the Company’s current beliefs, expectations and assumptions regarding the Company’s business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company’s control. The Company’s actual results and financial condition may differ materially from those indicated in forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause the Company’s actual results and financial condition to differ materially from those indicated in forward-looking statements include, among others, the following:

- 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 in response thereto);
- interest rate risk, including the effects of changes in interest rates;
- effects on the U.S. economy resulting from the threat or implementation of, or changes to, existing policies and executive orders, including tariffs, immigration policy, regulatory and other governmental agencies, foreign policy and tax regulations;
- disruptions to the global supply chain, including as a result of domestic or foreign policies;
- the Company’s ability to successfully manage credit risk, including in the commercial real estate portfolio, and maintain an adequate level of allowance for credit losses;
- business and economic conditions generally and in the financial services industry, nationally and within the Company’s market areas, including the level and impact of inflation rates and possible recession;
- the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time that resulted in several bank failures;
- the Company’s ability to raise additional capital to implement its business plan;
- the overall health of the local and national real estate market;
- credit risks and risks from concentrations (by type of borrower, geographic area, collateral, and industry) within the Company’s loan portfolio;
- the concentration of large loans to certain borrowers (including commercial real estate loans);
- the level of nonperforming assets on the Company’s balance sheet;
- the Company’s ability to implement organic and acquisition growth strategies, including the integration HMNF which the Company acquired in the fourth quarter of 2024;
- the commencement, cost, and outcome of litigation and other legal proceedings and regulatory actions against the Company or to which the Company may become subject, including with respect to pending actions relating to the Company’s previous ESOP fiduciary services commenced by government or private parties;
- the impact of economic or market conditions on the Company’s fee-based services;
- the Company’s ability to continue to grow the retirement and benefit services business;
- the Company’s ability to continue to originate a sufficient volume of residential mortgages;
- the occurrence of fraudulent activity, breaches or failures of the Company’s or the Company’s third party vendors’ information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools or as a result of insider fraud;
- interruptions involving the Company’s information technology and telecommunications systems or third party servicers;
- 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;
- rapid and expensive technological change in the financial services industry;
- increased competition in the financial services industry, including from non-banks such as credit unions, Fintech companies and digital asset service providers;
- 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;
- the concentration of large deposits from certain clients, including those who have balances above current Federal Deposit Insurance Corporation (“FDIC”) insurance limits;
- the effectiveness of the Company’s risk management framework;
- potential impairment to the goodwill the Company recorded in connection with the Company’s past acquisitions, including the acquisitions of Metro Phoenix Bank and HMNF;
- the extensive regulatory framework that applies to the Company;
- changes in local, state and federal laws, regulations and governmental policies concerning the Company’s general business, including changes in interpretation and prioritization of such laws, regulations and policies;
- new or revised accounting standards, as may be adopted by state and federal regulatory agencies, the FASB, the SEC or the Public Company Accounting Oversight Board;
- fluctuations in the values of the securities held in the Company’s securities portfolio, including as a result of changes in interest rates;
- governmental monetary, trade and fiscal policies;
- risks related to climate change and the negative impact it may have on the Company’s customers and their businesses;
- severe weather, natural disasters, and widespread disease or pandemics;
- acts of war or terrorism, including ongoing conflicts in the Middle East and the Russian invasion of Ukraine, or other adverse external events;
- any material weaknesses in the Company’s internal control over financial reporting;
- changes to U.S. or state tax laws, regulations and governmental policies concerning the Company’s general business, including changes in interpretation or prioritization and changes in response to prior bank failures;
- talent and labor shortages and employee turnover;
- the Company’s success at managing and responding to the risks involved with the foregoing items; and
- any other risks described in the “Risk Factors” section of this report and in other reports filed by Alerus Financial Corporation with the SEC.

Any forward-looking statement made by the Company in this report is based only on information currently available to the Company and speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

### Overview

The Company is a commercial wealth bank and national retirement services provider headquartered in Grand Forks, North Dakota. Through the Company’s subsidiary, Alerus Financial, National Association, the Company provides financial solutions to businesses and consumers through three distinct business lines—banking, retirement and benefit services, and wealth. These solutions are delivered through a relationship‑oriented primary point of contact along with responsive and client‑friendly technology.

The Company’s business model produces strong financial performance and a diversified revenue stream, which has helped the Company establish a brand and culture yielding both a loyal client base and passionate and dedicated employees. The Company generates a majority of overall revenue from noninterest income, which is driven primarily by the Company’s retirement and benefit services and wealth business lines. The remainder of the Company’s revenue consists of net interest income, which the Company derives from offering traditional banking products and services.

### Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgements and uncertainties and could potentially result in materially different results under different assumptions and conditions. In preparing the Company’s consolidated financial statements, management is required to make significant estimates and assumptions that affect assets, liabilities, revenues, and expenses reported. Actual results could differ materially from our current estimates as a result of changing conditions and future events. Several estimates are particularly critical and are susceptible to significant near term change, including (i) the ACL, including the ACL on investment securities, loans, and unfunded commitments; (ii) goodwill impairment; and (iii) fair value of loans acquired in business combinations.

The Company’s Annual Report on Form 10-K for the year ended December 31, 2024 includes a discussion of the Company’s critical accounting policies. There have been no material changes to the Company’s critical accounting policies from those disclosed within its Annual Report on Form 10-K for the year ended December 31, 2024.

Refer to “NOTE 2 Recent Accounting Pronouncements” of the consolidated financial statements included in this report for a discussion of accounting pronouncements issued but yet to be adopted and implemented.

### Recent Developments

### Stockholder Dividend

On February 26, 2025, the Board of Directors of the Company declared a quarterly cash dividend of $0.20 per common share. This dividend was paid on April 11, 2025, to stockholders of record at the close of business on March 14, 2025.

### Property Sale

The Company’s West Fargo, North Dakota branch is listed for sale for $3.8 million and is expected to sell within the next 12 months. At March 31, 2025, the facility had a carrying value of approximately $0.4 million. The Company expects to record a gain on the sale upon closing, as the expected sale price is greater than the property’s carrying value.

### Operating Results Overview

The following table summarizes key financial results as of and for the periods indicated:

*(dollars and shares in thousands, except per share data)*

| Performance Ratios | Three months ended March 31, 2025 | December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: |
| Return on average total assets | 1.02% | —% | 0.63% |
| Adjusted return on average total assets (1) | 1.10% | 0.85% | 0.65% |
| Return on average common equity | 10.82% | (0.05)% | 7.04% |
| Return on average tangible common equity (1) | 16.50% | 2.38% | 9.78% |
| Adjusted return on average tangible common equity (1) | 17.61% | 14.89% | 10.10% |
| Noninterest income as a % of revenue | 40.17% | 46.94% | 53.26% |
| Net interest margin (taxable-equivalent basis) | 3.41% | 3.20% | 2.30% |
| Efficiency ratio (1) | 68.76% | 79.47% | 78.88% |
| Adjusted efficiency ratio (1) | 66.86% | 68.97% | 78.24% |
| Average equity to average assets | 9.47% | 9.07% | 8.87% |
| Net charge-offs/(recoveries) to average loans | 0.04% | 0.13% | 0.01% |
| Dividend payout ratio | 38.46% | —% | 59.38% |
| **Per Common Share** |  |  |  |
| Earnings (losses) per common share − basic | $0.52 | $— | $0.32 |
| Earnings (losses) per common share − diluted | $0.52 | $— | $0.32 |
| Adjusted earnings (losses) per common share − diluted (1) | $0.56 | $0.45 | $0.33 |
| Dividends declared per common share | $0.20 | $0.20 | $0.19 |
| Book value per common share | $20.27 | $19.55 | $18.79 |
| Tangible book value per common share (1) | $15.27 | $14.44 | $15.63 |
| Average common shares outstanding − basic | 25,359 | 24,857 | 19,739 |
| Average common shares outstanding − diluted | 25,653 | 25,144 | 19,986 |
| **Other Data** |  |  |  |
| Retirement and benefit services assets under administration/management | $39,925,596 | $40,728,699 | $38,488,523 |
| Wealth assets under administration/management | $4,500,852 | $4,579,189 | $4,242,408 |
| Mortgage originations | $70,593 | $88,576 | $54,101 |

(1) Represents a non-GAAP financial measure. See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.”

### Selected Financial Data

The following tables summarize selected financial data as of and for the periods indicated:

*(dollars in thousands)*

| Selected Average Balance Sheet Data | Three months ended March 31, 2025 | December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: |
| Loans | $4,022,863 | $3,814,933 | $2,768,514 |
| Investment securities | 859,696 | 883,116 | 775,305 |
| Assets | 5,272,319 | 5,272,777 | 4,139,053 |
| Deposits | 4,376,597 | 4,275,801 | 3,163,565 |
| Fed funds purchased and Bank Term Funding Program | 49,834 | 22,012 | 282,614 |
| FHLB short-term advances | 200,000 | 200,000 | 200,000 |
| Long-term debt | 59,084 | 59,055 | 58,971 |
| Stockholders’ equity | 499,224 | 478,092 | 367,248 |

*(dollars in thousands)*

| Selected Period End Balance Sheet Data | March 31, 2025 | December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: |
| Loans | $4,085,483 | $3,992,534 | $2,799,475 |
| Allowance for credit losses on loans | (61,929) | (59,929) | (36,584) |
| Investment securities | 839,406 | 866,947 | 768,757 |
| Assets | 5,339,620 | 5,261,673 | 4,338,093 |
| Deposits | 4,485,291 | 4,378,410 | 3,284,969 |
| Long-term debt | 59,098 | 59,069 | 58,985 |
| Total stockholders’ equity | 514,232 | 495,410 | 371,635 |

*(dollars in thousands)*

| Selected Income Statement Data | Three months ended March 31, 2025 | December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: |
| Net interest income | $41,157 | $38,284 | $22,219 |
| Provision for credit losses | 863 | 11,992 | — |
| Noninterest income | 27,632 | 33,874 | 25,323 |
| Noninterest expense | 50,365 | 60,457 | 39,019 |
| Income before income taxes | 17,561 | (291) | 8,523 |
| Income tax expense | 4,246 | (225) | 2,091 |
| Net income | $13,315 | $(66) | $6,432 |

### 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. Management uses the non-GAAP financial measures presented in the tables below in its analysis of its performance, and believes financial analysts and investors frequently use these measures, and other similar measures, to evaluate capital adequacy and financial performance. Management, banking regulators, many financial analysts and other investors use these measures in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions.

The following tables present these non-GAAP financial measures along with the most directly comparable financial measures calculated in accordance with GAAP as of and for the periods indicated:

*(dollars and shares in thousands, except per share data)*

| Tangible common equity to tangible assets | March 31, 2025 | December 31, 2024 | March 31, 2024 . |
| --- | ---: | ---: | ---: |
| Total common stockholders’ equity | $514,232 | $495,410 | $371,635 |
| Less: Goodwill | 85,634 | 85,634 | 46,783 |
| Less: Other intangible assets | 41,172 | 43,882 | 15,834 |
| Tangible common equity (a) | 387,426 | 365,894 | 309,018 |
| Total assets | 5,339,620 | 5,261,673 | 4,338,093 |
| Less: Goodwill | 85,634 | 85,634 | 46,783 |
| Less: Other intangible assets | 41,172 | 43,882 | 15,834 |
| Tangible assets (b) | 5,212,814 | 5,132,157 | 4,275,476 |
| Tangible common equity to tangible assets (a)/(b) | 7.43% | 7.13% | 7.23% |
| **Tangible book value per common share** |  |  |  |
| Tangible common equity (a) | 387,426 | 365,894 | 309,018 |
| Total common shares issued and outstanding (c) | 25,366 | 25,345 | 19,777 |
| Tangible book value per common share (a)/(c) | $15.27 | $14.44 | $15.63 |

39

*(dollars and shares in thousands, except per share data)*

| Return on Average Tangible Common Equity | Three months ended March 31, 2025 | December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: |
| Net income | $13,315 | $(66) | $6,432 |
| Add: Intangible amortization expense (net of tax) (1) | 2,141 | 2,215 | 1,046 |
| Net income, excluding intangible amortization (d) | 15,456 | 2,149 | 7,478 |
| Average total equity | 499,224 | 478,092 | 367,248 |
| Less: Average goodwill | 85,634 | 84,393 | 46,783 |
| Less: Average other intangible assets (net of tax) (1) | 33,718 | 34,107 | 13,018 |
| Average tangible common equity (e) | 379,872 | 359,592 | 307,447 |
| Return on average tangible common equity (d)/(e) | 16.50% | 2.38% | 9.78% |
| **Efficiency ratio** |  |  |  |
| Noninterest expense | $50,365 | $60,457 | $39,019 |
| Less: Intangible amortization expense | 2,710 | 2,804 | 1,324 |
| Adjusted noninterest expense (f) | 47,655 | 57,653 | 37,695 |
| Net interest income | 41,157 | 38,284 | 22,219 |
| Noninterest income | 27,632 | 33,874 | 25,323 |
| Tax-equivalent adjustment | 520 | 385 | 246 |
| Total tax-equivalent revenue (g) | 69,309 | 72,543 | 47,788 |
| Efficiency ratio (f)/(g) | 68.76% | 79.47% | 78.88% |
| **Pre-Provision Net Revenue** |  |  |  |
| Net interest income | $41,157 | $38,284 | $22,219 |
| Add: Noninterest income | 27,632 | 33,874 | 25,323 |
| Less: Noninterest expense | 50,365 | 60,457 | 39,019 |
| Pre-provision net revenue | $18,424 | $11,701 | $8,523 |
| **Adjusted Noninterest Income** |  |  |  |
| Noninterest income | $27,632 | $33,874 | $25,323 |
| Less: Adjusted noninterest income items |  |  |  |
| Net gain on sale of premises and equipment | — | 3,459 | 5 |
| Total adjusted noninterest income items (h) | — | 3,459 | 5 |
| Adjusted noninterest income (i) | $27,632 | $30,415 | $25,318 |
| **Adjusted Noninterest Expense** |  |  |  |
| Noninterest expense | $50,365 | $60,457 | $39,019 |
| Less: Adjusted noninterest expense items |  |  |  |
| HMNF merger- and acquisition-related expenses | 286 | 7,729 | 28 |
| Severance and signing bonus expense | 1,027 | 2,276 | 280 |
| Total adjusted noninterest expense items (j) | 1,313 | 10,005 | 308 |
| Adjusted noninterest expense (k) | $49,052 | $50,452 | $38,711 |
| **Adjusted Pre-Provision Net Revenue** |  |  |  |
| Net interest income | $41,157 | $38,284 | $22,219 |
| Add: Adjusted noninterest income (i) | 27,632 | 30,415 | 25,318 |
| Less: Adjusted noninterest expense (k) | 49,052 | 50,452 | 38,711 |
| Adjusted pre-provision net revenue | $19,737 | $18,247 | $8,826 |
| **Adjusted Efficiency Ratio** |  |  |  |
| Adjusted noninterest expense (k) | $49,052 | $50,452 | $38,711 |
| Less: Intangible amortization expense | 2,710 | 2,804 | 1,324 |
| Adjusted noninterest expense for efficiency ratio (l) | 46,342 | 47,648 | 37,387 |
| Tax-equivalent revenue |  |  |  |
| Net interest income | 41,157 | 38,284 | 22,219 |
| Add: Adjusted noninterest income (i) | 27,632 | 30,415 | 25,318 |
| Add: Tax-equivalent adjustment | 520 | 385 | 246 |
| Total tax-equivalent revenue (m) | 69,309 | 69,084 | 47,783 |
| Adjusted efficiency ratio (l)/(m) | 66.86% | 68.97% | 78.24% |

(1) Items calculated after-tax utilizing a marginal income tax rate of 21.0%.

*(dollars and shares in thousands, except per share data)*

| Adjusted Net Income | Three months ended March 31, 2025 | December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: |
| Net income | $13,315 | $(66) | $6,432 |
| Less: Adjusted noninterest income items (net of tax) (1) (h) | — | 2,733 | 4 |
| 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) (j) | 1,037 | 7,904 | 243 |
| Adjusted net income (o) | $14,352 | $11,245 | $6,671 |
| **Adjusted Return on Average Total Assets** |  |  |  |
| Average total assets (o) | $5,272,319 | $5,272,777 | $4,139,053 |
| Adjusted return on average total assets (n)/(o) | 1.10% | 0.85% | 0.65% |
| **Adjusted Return on Average Tangible Common Equity** |  |  |  |
| Adjusted net income (n) | $14,352 | $11,245 | $6,671 |
| Add: Intangible amortization expense (net of tax) (1) | 2,141 | 2,215 | 1,046 |
| Adjusted net income, excluding intangible amortization (p) | 16,493 | 13,460 | 7,717 |
| Average total equity | 499,224 | 478,092 | 367,248 |
| Less: Average goodwill | 85,634 | 84,393 | 46,783 |
| Less: Average other intangible assets (net of tax) (1) | 33,718 | 34,107 | 13,018 |
| Average tangible common equity (q) | 379,872 | 359,592 | 307,447 |
| Adjusted return on average tangible common equity (p)/(q) | 17.61% | 14.89% | 10.10% |
| **Adjusted Earnings Per Common Share − Diluted** |  |  |  |
| Adjusted net income (o) | $14,352 | $11,245 | $6,671 |
| Less: Dividends and undistributed earnings allocated to participating securities | 99 | (54) | 40 |
| Net income available to common stockholders (r) | 14,253 | 11,299 | 6,631 |
| Weighted-average common shares outstanding for diluted earnings per share (s) | 25,653 | 25,144 | 19,986 |
| Adjusted earnings per common share − diluted (r)/(s) | $0.56 | $0.45 | $0.33 |

(1) Items calculated after-tax utilizing a marginal income tax rate of 21.0%.

### Discussion and Analysis of Results of Operations

### Net Income

Net income for the three months ended March 31, 2025, was $13.3 million, or $0.52 per diluted common share, a $6.9 million, or 107.0%, increase compared to $6.4 million, or $0.32 per diluted common share, for the three months ended March 31, 2024. Earnings for the first quarter of 2025 compared to the first quarter of 2024 increased primarily due to an $18.9 million increase in net interest income and a $2.3 million increase in noninterest income. This positive result was partially offset by an $11.3 million increase in noninterest expense.

### Net Interest Income

Net interest income is the difference between interest income and yield related fees earned on assets and interest expense paid on liabilities. Net interest margin is the difference between the yield on interest earning assets and the cost of interest-bearing liabilities as a percentage of interest earning assets. Net interest margin is presented on a tax-equivalent basis, which means that tax-free interest income has been adjusted to a pre-tax-equivalent income, assuming a federal income tax rate of 21% for the three months ended March 31, 2025 and 2024.

Net interest income for the three months ended March 31, 2025 was $41.2 million, an increase of $18.9 million, or 85.2%, compared to $22.2 million for the three months ended March 31, 2024. Net interest income for the first quarter of 2025 increased compared to the first quarter of 2024 primarily due to a $19.1 million increase in interest income, as average interest earning assets increased $1.0 billion while the average interest earning asset yield increased 58 basis points. This was partially offset by the increasing cost of interest-bearing liabilities as interest expense increased $0.2 million, mainly driven by an $806.6 million increase in the average balance of interest-bearing liabilities, which was largely offset by a 70 basis point decline in the average rate paid on interest-bearing liabilities. The increase in interest earning assets was primarily due to acquired earning assets in the HMNF transaction, strong organic loan growth at higher yields, and purchase accounting accretion. The increase in interest-bearing liabilities was due to the increase in interest-bearing deposits stemming from the acquisition of HMNF and organic deposit growth.

Net interest margin (on a tax-equivalent basis) for the three months ended March 31, 2025 was 3.41%, compared to 2.30% for the same period in 2024. The increase in net interest margin (on a tax-equivalent basis) was mainly attributable to higher rates on interest earning assets from organic loan growth and the HMNF acquisition, purchase accounting accretion, and lower rates paid on deposits.

The following table presents average balance sheet information, interest income, interest expense and the corresponding average yields on assets, average yields earned, and rates paid for the three months ended March 31, 2025 and 2024. The Company derived these yields and rates by dividing income or expense by the average balance of the corresponding assets or liabilities. The Company derived average balances from the daily balances throughout the periods indicated. Average loan balances include loans that have been placed on nonaccrual status, while interest previously accrued on these loans is reversed against interest income. In these tables, adjustments are made to the yields on tax‑exempt assets in order to present tax‑exempt income and fully taxable income on a fully taxable equivalent (“FTE”) basis.

*(dollars in thousands)*

| Interest Earning Assets | Three months ended March 31, 2025 Average Balance | Interest Income/ Expense | Average Yield/ Rate | 2024 Average Balance | Interest Income/ Expense | Average Yield/ Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest-bearing deposits with banks | $33,425 | $391 | 4.74% | $352,038 | $4,665 | 5.33 |
| Investment securities (1) | 859,696 | 5,910 | 2.79 | 775,305 | 4,787 | 2.48 |
| Loans held for sale | 11,348 | 149 | 5.32 | 9,014 | 127 | 5.67 |
| Loans |  |  |  |  |  |  |
| Commercial and industrial | 657,838 | 11,860 | 7.31 | 564,125 | 9,763 | 6.96 |
| CRE − Construction, land and development | 342,718 | 4,933 | 5.84 | 127,587 | 2,549 | 8.04 |
| CRE − Multifamily | 364,247 | 5,691 | 6.34 | 250,513 | 3,462 | 5.56 |
| CRE − Non-owner occupied | 960,152 | 15,772 | 6.66 | 564,552 | 8,073 | 5.75 |
| CRE − Owner occupied | 379,948 | 5,802 | 6.19 | 279,165 | 3,720 | 5.36 |
| Agricultural − Land | 67,228 | 969 | 5.85 | 40,310 | 476 | 4.75 |
| Agricultural − Production | 60,933 | 1,094 | 7.28 | 35,331 | 561 | 6.39 |
| RRE − First lien | 899,835 | 10,600 | 4.78 | 701,756 | 7,001 | 4.01 |
| RRE − Construction | 36,913 | 765 | 8.40 | 21,559 | 279 | 5.20 |
| RRE − HELOC | 168,599 | 2,958 | 7.12 | 118,957 | 2,456 | 8.30 |
| RRE − Junior lien | 44,096 | 679 | 6.24 | 35,824 | 568 | 6.38 |
| Other consumer | 40,356 | 699 | 7.02 | 28,835 | 461 | 6.43 |
| Total loans (1) | 4,022,863 | 61,822 | 6.23 | 2,768,514 | 39,369 | 5.72 |
| Federal Reserve/FHLB Stock | 22,397 | 429 | 7.77 | 16,658 | 337 | 8.14 |
| Total interest earning assets | 4,949,729 | 68,701 | 5.63 | 3,921,529 | 49,285 | 5.05 |
| Noninterest earning assets | 322,590 |  |  | 217,524 |  |  |
| Total assets | $5,272,319 |  |  | $4,139,053 |  |  |
| **Interest-Bearing Liabilities** |  |  |  |  |  |  |
| Interest-bearing demand deposits | $1,247,725 | $5,564 | 1.81% | $869,060 | $4,249 | 1.97 |
| Money market and savings deposits | 1,590,616 | 11,332 | 2.89 | 1,186,900 | 11,117 | 3.77 |
| Time deposits | 688,569 | 6,639 | 3.91 | 431,679 | 4,785 | 4.46 |
| Fed funds purchased and BTFP | 49,834 | 576 | 4.69 | 282,614 | 3,508 | 4.99 |
| FHLB short-term advances | 200,000 | 2,263 | 4.59 | 200,000 | 2,482 | 4.99 |
| Long-term debt | 59,084 | 650 | 4.46 | 58,971 | 678 | 4.62 |
| Total interest-bearing liabilities | 3,835,828 | 27,024 | 2.86 | 3,029,224 | 26,819 | 3.56 |
| **Noninterest-Bearing Liabilities and Stockholders' Equity** |  |  |  |  |  |  |
| Noninterest-bearing deposits | 849,687 |  |  | 675,926 |  |  |
| Other noninterest-bearing liabilities | 87,580 |  |  | 66,655 |  |  |
| Stockholders’ equity | 499,224 |  |  | 367,248 |  |  |
| Total liabilities and stockholders’ equity | $5,272,319 |  |  | $4,139,053 |  |  |
| Net interest income on FTE basis (1) |  | $41,677 |  |  | $22,466 |  |
| Net interest rate spread on FTE basis (1) |  |  | 2.77% |  |  | 1.49 |
| Net interest margin on FTE basis (1) |  |  | 3.41% |  |  | 2.30 |

(1) Taxable equivalent adjustment was calculated utilizing a marginal income tax rate of 21.0 percent.

### 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 following table shows the effect that these factors had on the interest earned on interest earning assets and the interest incurred on interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the previous period’s volume.

*(tax-equivalent basis, dollars in thousands)*

| Interest earning assets | Three months ended March 31, 2025 Compared with Three months ended March 31, 2024 Change due to: Volume | Rate | Interest Variance |
| --- | ---: | ---: | ---: |
| Interest-bearing deposits with banks | $(4,187) | $(87) | $(4,274) |
| Investment securities | 516 | 606 | 1,122 |
| Fed funds sold | — | — | — |
| Loans held for sale | 33 | (11) | 22 |
| Loans |  |  |  |
| Commercial and industrial | 1,608 | 489 | 2,097 |
| CRE − Construction, land and development | 4,265 | (1,881) | 2,384 |
| CRE − Multifamily | 1,559 | 670 | 2,229 |
| CRE − Non-owner occupied | 5,609 | 2,090 | 7,699 |
| CRE − Owner occupied | 1,332 | 750 | 2,082 |
| Agricultural − Land | 315 | 178 | 493 |
| Agricultural − Production | 403 | 130 | 533 |
| RRE − First lien | 1,959 | 1,640 | 3,599 |
| RRE − Construction | 197 | 289 | 486 |
| RRE − HELOC | 1,016 | (514) | 502 |
| RRE − Junior lien | 130 | (19) | 111 |
| Other consumer | 183 | 55 | 238 |
| Total loans | 18,576 | 3,877 | 22,453 |
| Federal Reserve/FHLB Stock | 115 | (23) | 92 |
| Total interest income | 15,053 | 4,362 | 19,415 |
| **Interest-bearing liabilities** |  |  |  |
| Interest-bearing demand deposits | 1,839 | (524) | 1,315 |
| Money market and savings deposits | 3,753 | (3,538) | 215 |
| Time deposits | 2,825 | (972) | 1,853 |
| Fed funds purchased and BTFP | (2,864) | (68) | (2,932) |
| FHLB short-term advances | — | (219) | (219) |
| Long-term debt | 1 | (29) | (28) |
| Total interest expense | 5,554 | (5,350) | 204 |
| Change in net interest income | $9,499 | $9,712 | $19,211 |

### Provision for Credit Losses

The provision for credit losses was comprised of the following components for the periods presented:

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Provision (recovery) for loan losses | $2,407 | $799 |
| Provision (recovery) for credit losses on unfunded commitments | (1,542) | (793) |
| Provision (recovery) for HTM debt securities | (2) | (6) |
| Provision for credit losses | $863 | $— |

The Company recorded a provision for credit losses of $0.9 million for the first quarter of 2025, compared to no provision for the first quarter of 2024. The increase in the provision for credit losses was primarily driven by loan growth.

### Noninterest Income

The Company’s noninterest income is generated from retirement and benefit services, wealth, mortgage banking, and other general banking services.

The following table presents the Company’s noninterest income for the three months ended March 31, 2025 and 2024:

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Retirement and benefit services | $16,106 | $15,655 |
| Wealth | 6,905 | 6,118 |
| Mortgage banking | 1,527 | 1,670 |
| Service charges on deposit accounts | 651 | 389 |
| Other | 2,443 | 1,491 |
| Total noninterest income | $27,632 | $25,323 |
| Noninterest income as a % of revenue | 40.17% | 53.26% |

Total noninterest income for the three months ended March 31, 2025 was $27.6 million, an increase of $2.3 million, or 9.1%, from the three months ended March 31, 2024. The increase in noninterest income was primarily driven by an increase of $0.8 million in wealth revenue, driven by new client growth and assets under administration/management growth. Retirement and benefit services revenue increased $0.5 million, driven by assets under administration/management growth. Other noninterest income increased $1.0 million, driven by increased swap fee income generated from commercial loan originations and increased fee income resulting from the HMNF transaction.

See “NOTE 16 Segment Reporting” of the consolidated financial statements and Segment Reporting section below for additional discussion regarding the Company’s business lines.

### Noninterest Expense

The following table presents noninterest expense for the three months ended March 31, 2025 and 2024:

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Compensation | $22,961 | $19,332 |
| Employee taxes and benefits | 7,762 | 6,188 |
| Occupancy and equipment expense | 2,907 | 1,906 |
| Business services, software and technology expense | 5,752 | 5,345 |
| Intangible amortization expense | 2,710 | 1,324 |
| Professional fees and assessments | 2,996 | 1,993 |
| Marketing and business development | 965 | 685 |
| Supplies and postage | 630 | 528 |
| Travel | 287 | 292 |
| Mortgage and lending expenses | 536 | 441 |
| Other | 2,859 | 985 |
| Total noninterest expense | $50,365 | $39,019 |

Total noninterest expense for the three months ended March 31, 2025 was $50.4 million, an $11.3 million, or 29.1%, increase compared to $39.0 million for the three months ended March 31, 2024. The year over year increase was primarily driven by higher compensation expense, employee taxes and benefits expense, intangible amortization expense, professional fees and assessments, and occupancy and equipment expense. Professional fees and assessments increased primarily due to increased merger-related expenses of $1.7 million in connection with the acquisition of HMNF and an increase in FDIC assessments. Compensation expense and employee taxes and benefits expense increased primarily due to increased head count resulting from the HMNF transaction and talent acquisition hires throughout 2024. Intangible amortization expense increased primarily due to the $33.5 million core deposit intangible recorded in connection with the HMNF acquisition. Occupancy and equipment expense increased primarily due to increased branch footprint resulting from the HMNF acquisition.

### Income Tax Expense

Income tax expense is an estimate based on the amount the Company expects to owe the applicable taxing authorities, plus the impact of deferred tax items. Accrued taxes represent the net estimated amount due, or to be received from, taxing authorities. In estimating accrued taxes, management assesses the relative merits and risks of the appropriate tax treatment of transactions, taking into account statutory, judicial, and regulatory guidance in the context of the Company’s tax position. If the final resolution of taxes payable differs from the Company’s estimates due to regulatory determination or legislative or judicial actions, adjustments to tax expense may be required.

For the three months ended March 31, 2025, the Company recognized income tax expense of $4.2 million on $17.6 million of pre-tax income, resulting in an effective tax rate of 24.2%, compared to income tax expense of $2.1 million on $8.5 million of pre-tax income for the three months ended March 31, 2024, resulting in an effective tax rate of 24.5%.

### Segment Reporting

The Company determined reportable segments based on the significance of the services offered, the significance of those services to the Company’s financial condition and operating results, and the Company’s regular review of the operating results of those services. The Company has three operating segments—banking, retirement and benefit services, and wealth. These segments are components for which financial information is prepared and evaluated regularly by management in deciding how to allocate resources and assess performance.

The selected financial information presented for each segment sets forth net interest income, provision for loan losses, noninterest income, and direct and indirect noninterest expense overhead allocations. Corporate administration includes all remaining income and expenses not allocated to the three operating segments. Certain reclassification adjustments have been made between corporate administration and the various lines of business for consistency in presentation.

For additional financial information on the Company’s segments see “NOTE 16 Segment Reporting” of the Company’s consolidated financial statements.

### Banking

The banking segment offers a complete line of loan, deposit, cash management, and treasury services through 29 offices in North Dakota, Minnesota, Wisconsin, Iowa, and Arizona, including 15 banking offices acquired in the HMNF transaction. These products and services are supported through web and mobile based applications. The majority of the Company’s assets and liabilities are in the banking segment’s balance sheet.

The following table presents the banking segment income statement, net of corporate administration, for the three months ended March 31, 2025 and 2024:

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Net interest income | $41,157 | $22,219 |
| Provision for credit losses | 863 | — |
| Noninterest income | 4,621 | 3,550 |
| Total revenue | 44,915 | 25,769 |
| Noninterest expense (1) | 29,211 | 18,671 |
| Net income before taxes | $15,704 | $7,098 |

(1) Noninterest expenses do not include corporate administration expenses. Corporate administration expenses include executive compensation, premises and fixed assets expenses, and information technology expenses. These expenses are not specific to any specific segment.

### Retirement and Benefit Services

The retirement and benefit services segment 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.

The following table presents the retirement and benefits services segment income statement for the three months ended March 31, 2025 and 2024:

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Recurring annual income (1) | $13,164 | $12,461 |
| Transactional income (2) | 2,942 | 3,194 |
| Total noninterest income | 16,106 | 15,655 |
| Noninterest expense | 13,617 | 14,189 |
| Net income before taxes | $2,489 | $1,466 |

(1) Recurring annual income primarily includes asset based fees, administration fees, record-keeping fees, trust/custody fees, and health and welfare fees. $6.3 million and $5.8 million for the three months ended March 31, 2025 and 2024, respectively, were due to movements in the market.

(2) Transactional income primarily includes advisory fees and distribution fees.

45

### Wealth

The wealth segment provides advisory and planning services, investment management, and trust and fiduciary services to clients across the Company’s footprint.

The following table presents the wealth segment income statement for the three months ended March 31, 2025 and 2024:

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Asset management | $5,760 | $5,255 |
| Brokerage | 534 | 366 |
| Insurance and advisory | 610 | 496 |
| Total noninterest income | 6,904 | 6,117 |
| Noninterest expense | 4,837 | 3,750 |
| Net income before taxes | $2,067 | $2,367 |

### Financial Condition

### Overview

Total assets were $5.3 billion as of March 31, 2025, an increase of $77.9 million, or 1.5%, compared to December 31, 2024. The increase was primarily due to a $92.9 million increase in loans and an increase of $21.7 million in cash and cash equivalents, partially offset by a decrease of $20.3 million in available-for-sale investment securities and a decrease of $7.0 million in held-to-maturity investment securities.

### Investment Securities

The following table presents the fair value composition of the Company’s investment securities portfolio as of March 31, 2025 and December 31, 2024:

*(dollars in thousands)*

| Available-for-sale | March 31, 2025 Balance | Percent of Portfolio | December 31, 2024 Balance | Percent of Portfolio |
| --- | ---: | ---: | ---: | ---: |
| U.S. Treasury and agencies | $10,676 | 1.3% | $30,707 | 3.7% |
| Mortgage backed securities |  |  |  |  |
| Residential agency | 501,700 | 62.5 | 503,706 | 61.1 |
| Commercial | 1,274 | 0.2 | 1,251 | 0.2 |
| Asset backed securities | 18 | — | 19 | — |
| Corporate bonds | 54,060 | 6.7 | 52,370 | 6.3 |
| Total available-for-sale investment securities | 567,728 | 70.7 | 588,053 | 71.3 |
| Held-to-maturity |  |  |  |  |
| Obligations of state and political agencies | 105,695 | 13.2 | 107,985 | 13.1 |
| Mortgage backed securities |  |  |  |  |
| Residential agency | 128,880 | 16.1 | 129,001 | 15.6 |
| Total held-to-maturity investment securities | 234,575 | 29.3 | 236,986 | 28.7 |
| Total investment securities | $802,303 | 100.0% | $825,039 | 100.0% |

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. The investment portfolio also provides a balance to interest rate risk and credit risk in other categories of the balance sheet, while providing a vehicle for the investment of available funds, furnishing liquidity, and supplying securities to pledge as collateral.

The investment securities presented in the following table are reported at fair value and by contractual maturity as of March 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, residential mortgage backed securities and collateralized mortgage obligations receive monthly principal payments, which are not reflected below. The yields below are calculated on a tax-equivalent basis, assuming a 21.0% income tax rate.

*(dollars in thousands)*

| Available-for-sale | Maturity as of March 31, 2025 One year or less Fair Value | Average Yield | One to five years Fair Value | Average Yield | Five to ten years Fair Value | Average Yield | After ten years Fair Value | Average Yield |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| U.S. Treasury and agencies | $4,999 | 4.50% | $5,324 | 4.50% | $— | —% | $353 | 4.94% |
| Mortgage backed securities |  |  |  |  |  |  |  |  |
| Residential agency | 32 | 2.48 | 3,427 | 3.41 | 25,169 | 4.11 | 473,072 | 2.33 |
| Commercial | — | — | 1,274 | 2.40 | — | — | — | — |
| Asset backed securities | — | — | — | — | 18 | 4.93 | — | — |
| Corporate bonds | — | — | — | — | 54,060 | 3.67 | — | — |
| Total available-for-sale investment securities | 5,031 | 4.51 | 10,025 | 4.22 | 79,247 | 3.84 | 473,425 | 2.36 |
| Held-to-maturity |  |  |  |  |  |  |  |  |
| Obligations of state and political agencies | 6,808 | 1.33 | 50,595 | 1.71 | 41,740 | 2.17 | 6,552 | 2.24 |
| Mortgage backed securities |  |  |  |  |  |  |  |  |
| Residential agency | — | — | — | — | — | — | 128,880 | 2.23 |
| Total held-to-maturity investment securities | 6,808 | 0.87 | 50,595 | 1.55 | 41,740 | 2.09 | 135,432 | 2.20 |
| Total investment securities | $11,839 | 3.38% | $60,620 | 2.32% | $120,987 | 3.23% | $608,857 | 2.32% |

### Loans

The loan portfolio represents a broad range of borrowers comprised of commercial and industrial, commercial real estate, agricultural, and consumer loans.

Total loans outstanding were $4.1 billion as of March 31, 2025, an increase of $92.9 million, or 2.3%, from December 31, 2024. The increase was primarily driven by a $93.3 million increase in CRE loans and an $8.8 million increase in agricultural loans, partially offset by $8.3 million and $0.9 million decreases in commercial and industrial loans and consumer loans, respectively.

The Company’s loan portfolio is diversified. The following table presents the balance and percentage of loans outstanding by segment/industry as of the dates presented:

*(dollars in thousands)*

| Commercial and industrial: | March 31, 2025 Balance | Percent of Portfolio | December 31, 2024 Balance | Percent of Portfolio |
| --- | ---: | ---: | ---: | ---: |
| General business | $329,879 | 8.1% | $340,702 | 8.5% |
| Services | 177,036 | 4.3 | 177,813 | 4.5 |
| Retail trade | 87,002 | 2.1 | 88,105 | 2.2 |
| Manufacturing | 64,529 | 1.6 | 60,107 | 1.5 |
| Total commercial and industrial | 658,446 | 16.1 | 666,727 | 16.7 |
| **Commercial real estate:** |  |  |  |  |
| Construction, land and development | 360,024 | 8.8 | 294,677 | 7.4 |
| Multifamily | 353,060 | 8.6 | 363,123 | 9.1 |
| Non-owner occupied |  |  |  |  |
| Office | 165,914 | 4.1 | 168,170 | 4.2 |
| Industrial | 171,259 | 4.2 | 169,391 | 4.2 |
| Retail | 149,250 | 3.7 | 154,325 | 3.9 |
| Hotel | 170,497 | 4.2 | 170,982 | 4.3 |
| Medical office | 166,912 | 4.1 | 139,939 | 3.5 |
| Medical or nursing facility | 84,873 | 2.1 | 110,164 | 2.8 |
| Other commercial real estate | 42,854 | 0.9 | 54,054 | 1.3 |
| Total non-owner occupied | 951,559 | 23.3 | 967,025 | 24.2 |
| Owner occupied | 424,880 | 10.4 | 371,418 | 9.3 |
| Total commercial real estate | 2,089,523 | 51.1 | 1,996,243 | 50.0 |
| **Agricultural:** |  |  |  |  |
| Land | 68,894 | 1.7 | 61,299 | 1.5 |
| Production | 64,240 | 1.6 | 63,008 | 1.6 |
| Total agricultural | 133,134 | 3.3 | 124,307 | 3.1 |
| **Consumer:** |  |  |  |  |
| RRE − First lien | 907,534 | 22.2 | 921,019 | 23.1 |
| RRE − Construction | 38,553 | 0.9 | 33,547 | 0.8 |
| RRE − HELOC | 175,600 | 4.3 | 162,509 | 4.1 |
| RRE − Junior lien | 43,740 | 1.1 | 44,060 | 1.1 |
| Other consumer | 38,953 | 1.0 | 44,122 | 1.1 |
| Total consumer | 1,204,380 | 29.5 | 1,205,257 | 30.2 |
| Total loans | $4,085,483 | 100.0% | $3,992,534 | 100.0% |

Commercial and industrial loans represent loans for working capital, purchases of equipment and other needs of commercial customers primarily located within the Bank’s geographical footprint. These loans are underwritten individually and represent ongoing relationships based on a thorough knowledge of the customer, the customer’s industry and the customer’s market. While commercial loans are generally secured by the customer’s assets, including real property, inventory, accounts receivable, operating equipment and other property, and may also include personal guarantees of the owners and related parties, the primary source of repayment of the loans is the ongoing cash flow from operations of the customer’s business. In addition, revolving lines of credit are generally governed by a borrowing base. Inherent lending risks are monitored on a continuous basis through interim reporting, covenant testing and annual underwriting.

CRE loans consist of term loans secured by a mortgage lien on real property and include both owner occupied CRE loans as well as non-owner occupied loans. Non-owner occupied CRE loans consist of mortgage loans to finance investments in real property that may include, but are not limited to, multi-family, industrial, office, retail and other specific use properties as well as CRE construction loans that are offered to builders and developers generally within the Bank’s geographical footprint. The primary risk characteristics in the non-owner occupied portfolio include impacts of overall leasing rates, absorption timelines, levels of vacancy rates and operating expenses. The Company requires collateral values in excess of the loan amounts, cash flows in excess of expected debt service requirements and equity investment in the project. The expected cash flows from all significant new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy rates and rental rates. Inherent lending risks are monitored on a continuous basis through quarterly monitoring and the Bank’s annual underwriting process, incorporating an analysis of cash flow, collateral, market conditions and guarantor liquidity, if applicable. CRE loan policies are specific to individual product types and underwriting parameters vary depending on the risk profile of each asset class. CRE loan policies are reviewed no less than semi-annually by management and approved by the Bank’s Board of Directors to ensure they align with current market conditions and the Bank’s moderate risk appetite. Construction loans are monitored monthly and includes on-site inspections. Management reviews all construction loans quarterly to ensure projects are on time and within budget. CRE concentration limits have been established by product type and are monitored quarterly by the Bank’s Credit Governance Committee and Bank Board of Directors.

CRE loans may be adversely affected by conditions in the real estate markets or in the general economy. The Company does not monitor the CRE portfolio for attributes such as loan-to-value ratios, occupancy rates or net operating income, as these characteristics are assessed and evaluated on an individual loan basis. Portfolio stress testing is completed based on property type and takes into consideration changes to net operating income and capitalization rates. The Company does not have exposure to the office building sector in central business districts as the office portfolio is generally diversified in suburban markets with strong occupancy levels.

The following table presents the geographical markets of the collateral related to non-owner occupied and multifamily CRE loans for the periods presented:

*(dollars in thousands)*

| Geographical Market: | March 31, 2025 Balance | Percent of Total | December 31, 2024 Balance | Percent of Total |
| --- | ---: | ---: | ---: | ---: |
| Minnesota | $612,722 | 47.0% | $668,395 | 50.2% |
| North Dakota | 212,156 | 16.3 | 221,693 | 16.7 |
| Arizona | 163,278 | 12.5 | 169,473 | 12.7 |
| Texas | 37,114 | 2.8 | 34,580 | 2.6 |
| Colorado | 23,379 | 1.8 | 23,386 | 1.8 |
| Oregon | 17,898 | 1.4 | 17,990 | 1.4 |
| Wisconsin | 120,955 | 9.3 | 111,502 | 8.4 |
| Missouri | 16,684 | 1.3 | 16,776 | 1.3 |
| Kansas | 15,785 | 1.2 | 15,183 | 1.1 |
| South Dakota | 16,624 | 1.3 | 14,554 | 1.1 |
| Virginia | 11,173 | 0.9 | — | — |
| Other | 56,851 | 4.4 | 36,616 | 2.8 |
| Total non-owner occupied and multifamily commercial real estate loans | $1,304,619 | 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. These loans are generally located within the Company’s geographical footprint.

Highly competitive conditions continue to prevail in the small- and middle-market commercial segments in which the Company primarily operates. The Company maintains a commitment to generating growth in the Company’s business portfolio in a manner that adheres to its twin goals of maintaining strong asset quality and producing profitable margins. The Company continues to invest in additional personnel, technology and business development resources to further strengthen its capabilities.

Agricultural loans include loans secured by farmland and loans for agricultural production. Farmland includes purposes such as crop and livestock production. Farmland loans are typically written with amortizing payment structures. Collateral values for farmland are determined based upon appraisals and evaluations in accordance with established policy guidelines and maximum loan-to-value ratios at origination are governed by established policy and regulatory guidelines. Agricultural production loans are for the purpose of financing working capital and/or capital investment for agriculture production activities. Collateral generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant and equipment, and/or real estate in applicable. Agricultural production loans are primarily paid by the operating cash flow of the borrower. Agricultural production loans may be secured or unsecured.

Residential real estate (“RRE”) loans represent loans to consumers for the purchase or refinance of a residence. These loans are generally financed over a 15- to 30-year term and, in most cases, are extended to borrowers to finance their primary residence with both fixed-rate and adjustable-rate terms. Real estate construction loans are also offered to consumers who wish to build their own homes and are often structured to be converted to permanent loans at the end of the construction phase, which is typically twelve months. RRE loans also include home equity loans and lines of credit that are secured by a first or second lien on the borrower’s residence. Home equity lines of credit (“HELOC”) consist mainly of revolving lines of credit secured by residential real estate.

Other consumer loans include loans made to individuals not secured by real estate, including loans secured by automobiles or watercraft, and personal unsecured loans.

The Company originates both fixed and adjustable rate residential real estate loans conforming to the underwriting guidelines of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, as well as home equity loans and lines of credit that are secured by first or junior liens. Most of the Company’s fixed rate residential loans, along with some of the Company’s adjustable rate mortgages are sold to other financial institutions with which the Company has established a correspondent lending relationship.

The Company’s RRE loans have minimal direct exposure to subprime mortgages as the loans are underwritten to conform to secondary market standards. As of March 31, 2025, the Company’s RRE portfolio was $1.2 billion, representing a $4.3 million, or 0.4%, increase from December 31, 2024. Market interest rates, expected duration, and the Company’s overall interest rate sensitivity profile continue to be the most significant factors in determining whether the Company chooses to retain versus sell portions of new consumer mortgage originations.

The following table presents the maturities and types of interest rates for the loan portfolio as of March 31, 2025:

*(dollars in thousands)*

| Commercial | March 31, 2025 One year or less | After one but within five years | After five but within fifteen years | After fifteen years | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Commercial and industrial | $158,421 | $324,361 | $172,845 | $2,851 | $658,478 |
| Commercial real estate |  |  |  |  |  |
| Construction, land and development | 119,398 | 156,951 | 68,664 | 15,011 | 360,024 |
| Multifamily | 40,386 | 250,015 | 62,659 | — | 353,060 |
| Non-owner occupied | 94,905 | 651,016 | 184,166 | 21,472 | 951,559 |
| Owner occupied | 38,906 | 221,847 | 117,512 | 46,615 | 424,880 |
| Total commercial real estate | 293,595 | 1,279,829 | 433,001 | 83,098 | 2,089,523 |
| Agricultural | — | — | — | — | — |
| Land | 9,609 | 21,225 | 11,959 | 26,101 | 68,894 |
| Production | 39,644 | 22,336 | 2,260 | — | 64,240 |
| Total agricultural | 49,253 | 43,561 | 14,219 | 26,101 | 133,134 |
| Total commercial | 501,269 | 1,647,751 | 620,065 | 112,050 | 2,881,135 |
| **Consumer** |  |  |  |  |  |
| Residential real estate |  |  |  |  |  |
| First lien | 9,293 | 46,610 | 80,808 | 770,823 | 907,534 |
| Construction | 25,839 | 4,811 | — | 7,903 | 38,553 |
| HELOC | 4,693 | 13,131 | 24,044 | 133,732 | 175,600 |
| Junior lien | 3,429 | 6,833 | 22,060 | 11,418 | 43,740 |
| Total residential real estate | 43,254 | 71,385 | 126,912 | 923,876 | 1,165,427 |
| Other consumer | 11,194 | 22,597 | 5,162 | — | 38,953 |
| Total consumer | 54,448 | 93,982 | 132,074 | 923,876 | 1,204,380 |
| Total loans | $555,717 | $1,741,733 | $752,139 | $1,035,926 | $4,085,515 |
| **Loans with fixed interest rates:** |  |  |  |  |  |
| **Commercial** |  |  |  |  |  |
| Commercial and industrial | $29,231 | $233,857 | $54,059 | $— | $317,147 |
| Commercial real estate |  |  |  |  |  |
| Construction, land and development | 59,261 | 44,429 | 1,430 | — | 105,120 |
| Multifamily | 25,609 | 143,704 | 27,974 | — | 197,287 |
| Non-owner occupied | 54,364 | 401,742 | 77,988 | 430 | 534,524 |
| Owner occupied | 32,896 | 168,099 | 59,229 | 1,311 | 261,535 |
| Total commercial real estate | 172,130 | 757,974 | 166,621 | 1,741 | 1,098,466 |
| Agricultural |  |  |  |  |  |
| Land | 3,868 | 21,106 | 10,128 | 17,860 | 52,962 |
| Production | 3,594 | 20,830 | 2,260 | — | 26,684 |
| Total agricultural | 7,462 | 41,936 | 12,388 | 17,860 | 79,646 |
| Total commercial | 208,823 | 1,033,767 | 233,068 | 19,601 | 1,495,259 |
| **Consumer** |  |  |  |  |  |
| Residential real estate |  |  |  |  |  |
| First lien | 8,323 | 38,657 | 70,419 | 417,925 | 535,324 |
| Construction | 12,523 | 760 | — | 3,002 | 16,285 |
| HELOC | 3 | 1,989 | 7,975 | 4,095 | 14,062 |
| Junior lien | 2,507 | 4,498 | 14,850 | 10,491 | 32,346 |
| Total residential real estate | 23,356 | 45,904 | 93,244 | 435,513 | 598,017 |
| Other consumer | 3,741 | 15,214 | 5,162 | — | 24,117 |
| Total consumer | 27,097 | 61,118 | 98,406 | 435,513 | 622,134 |
| Total loans with fixed interest rates | $235,920 | $1,094,885 | $331,474 | $455,114 | $2,117,393 |
| **Loans with floating interest rates:** |  |  |  |  |  |
| **Commercial** |  |  |  |  |  |
| Commercial and industrial | $129,190 | $90,504 | $118,786 | $2,851 | $341,331 |
| Commercial real estate |  |  |  |  |  |
| Construction, land and development | 60,137 | 112,522 | 67,234 | 15,011 | 254,904 |
| Multifamily | 14,777 | 106,311 | 34,685 | — | 155,773 |
| Non-owner occupied | 40,541 | 249,274 | 106,178 | 21,042 | 417,035 |
| Owner occupied | 6,010 | 53,748 | 58,283 | 45,304 | 163,345 |
| Total commercial real estate | 121,465 | 521,855 | 266,380 | 81,357 | 991,057 |
| Agricultural |  |  |  |  |  |
| Land | 5,741 | 119 | 1,831 | 8,241 | 15,932 |
| Production | 36,050 | 1,506 | — | — | 37,556 |
| Total agricultural | 41,791 | 1,625 | 1,831 | 8,241 | 53,488 |
| Total commercial | 292,446 | 613,984 | 386,997 | 92,449 | 1,385,876 |
| **Consumer** |  |  |  |  |  |
| Residential real estate |  |  |  |  |  |
| First lien | 970 | 7,953 | 10,389 | 352,898 | 372,210 |
| Construction | 13,316 | 4,051 | — | 4,901 | 22,268 |
| HELOC | 4,690 | 11,142 | 16,069 | 129,637 | 161,538 |
| Junior lien | 922 | 2,335 | 7,210 | 927 | 11,394 |
| Total residential real estate | 19,898 | 25,481 | 33,668 | 488,363 | 567,410 |
| Other consumer | 7,453 | 7,383 | — | — | 14,836 |
| Total consumer | 27,351 | 32,864 | 33,668 | 488,363 | 582,246 |
| Total loans with floating interest rates | $319,797 | $646,848 | $420,665 | $580,812 | $1,968,122 |

50

The expected life of the Company’s loan portfolio will differ from contractual maturities because borrowers may have the right to curtail or prepay their loans with or without penalties. 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. The strategy also emphasizes diversification on a geographic, industry, and client level; regular credit examinations; and management reviews of loans experiencing deterioration of credit quality. The Company strives to identify potential problem loans early, take necessary charge‑offs promptly, and maintain adequate reserve levels for credit losses inherent in the portfolio. Management performs ongoing, internal reviews of any problem credits and continually assesses the adequacy of the allowance. The Company utilizes an internal lending division, Special Credit Services, to develop and implement strategies for the management of individual nonperforming loans.

### Credit Quality Indicators

Loans are assigned a risk rating and grouped into categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The risk ratings are aligned to pass and criticized categories. The criticized categories include special mention, substandard, and doubtful risk ratings. See “NOTE 4 Loans and Allowance for Credit Losses” of the consolidated financial statements for a definition of each of the risk ratings.

The table below presents criticized loans outstanding by loan portfolio segment as of March 31, 2025 and December 31, 2024:

*(dollars in thousands)*

| Commercial | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Commercial and industrial | $32,266 | $35,127 |
| Commercial real estate |  |  |
| Construction, land and development | 40,479 | 37,633 |
| Multifamily | 52,053 | 27,188 |
| Non-owner occupied | 50,830 | 45,173 |
| Owner occupied | 29,471 | 27,637 |
| Total commercial real estate | 172,833 | 137,631 |
| Agricultural |  |  |
| Land | 8,801 | 8,034 |
| Production | 4,886 | 4,813 |
| Total agricultural | 13,687 | 12,847 |
| Total commercial | 218,786 | 185,605 |
| **Consumer** |  |  |
| Residential real estate |  |  |
| First lien | 2,533 | 2,988 |
| Construction | 4,680 | 4,680 |
| HELOC | 1,391 | 1,459 |
| Junior lien | 2,905 | 3,210 |
| Total residential real estate | 11,509 | 12,337 |
| Other consumer | 74 | 339 |
| Total consumer | 11,583 | 12,676 |
| Total criticized loans | $230,369 | $198,281 |
| Criticized loans as a percent of total loans | 5.64% | 4.97% |

The following table presents information regarding nonperforming assets as of March 31, 2025 and December 31, 2024:

*(dollars in thousands)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Nonaccrual loans | $50,517 | $54,433 |
| Accruing loans 90+ days past due | — | 8,453 |
| Total nonperforming loans | 50,517 | 62,886 |
| OREO and repossessed assets | 493 | — |
| Total nonperforming assets | 51,010 | 62,886 |
| Total restructured accruing loans | — | — |
| Total nonperforming assets and restructured accruing loans | $51,010 | $62,886 |
| Nonperforming loans to total loans | 1.24% | 1.58% |
| Nonperforming assets to total assets | 0.96% | 1.20% |
| ACL on loans to nonperforming loans | 123% | 95% |

Interest income lost on nonaccrual loans was approximately $1.1 million and $0.7 million for the three months ended March 31, 2025 and 2024, respectively. There was no interest income included in net interest income related to nonaccrual loans for the three months ended March 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. Under the Current Expected Credit Loss accounting standard, the ACL is a valuation estimated at each balance sheet date and deducted from the amortized cost basis of loans held for investment to present the net amount expected to be collected. These evaluations are inherently subjective as they require management to make material estimates, all of which may be susceptible to significant change. The allowance is increased by provisions charged to expense and decreased by actual charge‑offs, net of recoveries.

Management estimates the ACL using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical loss experience provides the basis for estimation of expected credit losses. Adjustments to historical loss information are made for differences in the current loan-specific risk characteristics such as different underwriting standards, portfolio mix, delinquency level, or life of the loan, as well as changes in environmental conditions, levels of economic activity, unemployment rates, property values and other relevant factors. The calculation also contemplates that the Company may not be able to make or obtain such forecasts for the entire life of the financial assets and requires a reversion to historical loss information.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. The ACL on individually evaluated loans is recognized on the basis of the present value of expected future cash flows discounted at the effective interest rate, the fair value of collateral adjusted of estimated costs to sell, or observable market price as of the relevant date.

The following table presents information concerning the components of the ACL for the periods presented:

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| **ACL on loans at the beginning of the period** | $59,929 | $35,843 |
| (Credit) provision for loan losses | 2,407 | 799 |
| **Net charge-offs (recoveries) (1)** |  |  |
| Commercial and industrial | (101) | 41 |
| CRE − Construction, land and development | — | — |
| CRE − Multifamily | — | — |
| CRE − Non-owner occupied | — | — |
| CRE − Owner occupied | (11) | 18 |
| Agricultural − Land | — | — |
| Agricultural − Production | (12) | — |
| RRE − First lien | 54 | — |
| RRE − Construction | — | — |
| RRE − HELOC | 250 | — |
| RRE − Junior lien | 300 | — |
| Other consumer | (73) | (1) |
| **Total net charge-offs (recoveries)** | 407 | 58 |
| **ACL on loans at the end of the period** | 61,929 | 36,584 |
| **Components of ACL:** |  |  |
| ACL on HTM debt securities | 129 | 207 |
| ACL on loans | 61,929 | 36,584 |
| ACL on off-balance sheet credit exposures | 5,992 | 6,607 |
| **ACL at end of the period** | 68,050 | 43,398 |
| Total loans | $4,085,483 | $2,799,475 |
| Average total loans | 4,022,863 | 2,768,514 |
| ACL on loans to total loans | 1.52% | 1.31% |
| ACL on loans to nonaccrual loans | 122.59% | 67.21% |
| ACL on loans to nonperforming loans | 122.59% | 95.30% |
| Net charge-offs/(recoveries) to average total loans (annualized) | 0.04% | 0.01% |

(1) Additional information related to net charge-offs (recoveries) is presented in the following table for the periods indicated:

*(dollars in thousands)*

| 2025: Commercial | Three months ended March 31, Total Charge-offs | Total Recoveries | Net Charge-offs (Recoveries) | Average Loans | Net Charge-offs (Recoveries) to Average Loans |
| --- | ---: | ---: | ---: | ---: | ---: |
| Commercial and industrial | $169 | $270 | $(101) | $657,838 | (0.06)% |
| Commercial real estate |  |  |  |  |  |
| Construction, land and development | — | — | — | 342,718 | — |
| Multifamily | — | — | — | 372,608 | — |
| Non-owner occupied | — | — | — | 981,601 | — |
| Owner occupied | — | 11 | (11) | 386,545 | (0.01) |
| Total commercial real estate | — | 11 | (11) | 2,083,472 | — |
| Agricultural |  |  |  |  |  |
| Land | — | — | — | 67,228 | — |
| Production | — | 12 | (12) | 60,933 | (0.08) |
| Total agricultural | — | 12 | (12) | 128,161 | (0) |
| Total commercial | 169 | 293 | (124) | 2,869,471 | (0.02) |
| Consumer |  |  |  |  |  |
| Residential real estate |  |  |  |  |  |
| First lien | 54 | — | 54 | 899,835 | 0.02 |
| Construction | — | — | — | 36,913 | — |
| HELOC | 250 | — | 250 | 168,599 | 0.60 |
| Junior lien | 300 | — | 300 | 44,096 | 2.76 |
| Total residential real estate | 604 | — | 604 | 1,149,443 | 0.21 |
| Other consumer | 39 | 112 | (73) | 40,356 | (0.73) |
| Total consumer | 643 | 112 | 531 | 1,189,799 | 0.18 |
| Total loans | $812 | $405 | $407 | $4,059,270 | 0.04% |
| **2024:** |  |  |  |  |  |
| Commercial |  |  |  |  |  |
| Commercial and industrial | $164 | $123 | $41 | $564,125 | 0.03% |
| Commercial real estate |  |  |  |  |  |
| Construction, land and development | — | — | — | 127,587 | — |
| Multifamily | — | — | — | 250,513 | — |
| Non-owner occupied | — | — | — | 564,554 | — |
| Owner occupied | 29 | 11 | 18 | 279,165 | 0.03 |
| Total commercial real estate | 29 | 11 | 18 | 1,221,819 | 0.01 |
| Agricultural |  |  |  |  |  |
| Land | — | — | — | 40,310 | — |
| Production | — | — | — | 35,331 | — |
| Total agricultural | — | — | — | 75,641 | — |
| Total commercial | 193 | 134 | 59 | 1,861,585 | 0.01 |
| Consumer |  |  |  |  |  |
| Residential real estate |  |  |  |  |  |
| First lien | — | — | — | 701,757 | — |
| Construction | — | — | — | 21,559 | — |
| HELOC | — | — | — | 118,957 | — |
| Junior lien | — | — | — | 35,824 | — |
| Total residential real estate | — | — | — | 878,097 | — |
| Other consumer | 12 | 13 | (1) | 28,835 | (0.01) |
| Total consumer | 12 | 13 | (1) | 906,932 | — |
| Total loans | $205 | $147 | $58 | $2,768,517 | 0.01% |

53

The following table presents the allocation of the ACL on loans as of the dates presented:

*(dollars in thousands)*

|  | March 31, 2025 Allocated Allowance | Percentage of loans to total loans | December 31, 2024 Allocated Allowance | Percentage of loans to total loans |
| --- | ---: | ---: | ---: | ---: |
| Commercial and industrial | $7,960 | 16.1% | $8,170 | 16.7% |
| CRE − Construction, land and development | 18,369 | 8.8 | 16,277 | 7.4 |
| CRE − Multifamily | 4,749 | 8.6 | 4,716 | 9.1 |
| CRE − Non-owner occupied | 16,342 | 23.3 | 16,513 | 24.2 |
| CRE − Owner occupied | 3,512 | 10.4 | 3,226 | 9.3 |
| Agricultural − Land | 603 | 1.7 | 597 | 1.5 |
| Agricultural − Production | 913 | 1.6 | 631 | 1.6 |
| RRE − First lien | 7,042 | 22.2 | 6,921 | 23.1 |
| RRE − Construction | 467 | 0.9 | 357 | 0.8 |
| RRE − HELOC | 1,180 | 4.3 | 1,339 | 4.1 |
| RRE − Junior lien | 439 | 1.1 | 742 | 1.1 |
| Other consumer | 353 | 1.0 | 440 | 1.1 |
| Total loans | $61,929 | 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. Such financial instruments are recorded when they are funded. An ACL on off-balance sheet credit exposures is measured using similar internal and external assumptions as the ACL on loans. This allowance is located in accrued expenses and other liabilities on the consolidated balance sheets. The ACL for unfunded commitments was $6.0 million and $6.6 million as of March 31, 2025 and 2024, respectively.

### Deposits

Deposit inflows and outflows are influenced by prevailing market interest rates, competition, local and economic conditions, and fluctuations in the Company’s customers’ own liquidity needs and may also be influenced by recent developments in the financial services industry, including the large-scale deposit withdrawals over a short period of time that resulted in recent bank failures.

Total deposits were $4.5 billion as of March 31, 2025, an increase of $106.9 million, or 2.4%, from December 31, 2024. Interest-bearing deposits increased $121.1 million during this period, while noninterest-bearing deposits decreased $14.2 million. The increase in total deposits was due to both expanded and new commercial deposit relationships along with synergistic deposit growth. Noninterest-bearing deposits decreased from 20.6% of total deposits as of December 31, 2024 to 19.8% as of March 31, 2025, as higher yields on interest-bearing accounts and other investment alternatives, such as U.S. treasuries, attracted such funds.

The following table presents the composition of the Company’s deposit portfolio as of March 31, 2025 and December 31, 2024:

*(dollars in thousands)*

|  | March 31, 2025 Balance | Percent of Portfolio | December 31, 2024 Balance | Percent of Portfolio | Change Amount | Percent |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Noninterest-bearing demand | $889,270 | 19.8% | $903,466 | 20.6% | $(14,196) | (1.6)% |
| Interest-bearing demand | 1,283,031 | 28.6 | 1,220,173 | 27.9 | 62,858 | 5.2 |
| Money market and savings (1) | 1,649,468 | 36.8 | 1,547,806 | 35.4 | 101,662 | 6.6 |
| Time deposits | 663,522 | 14.8 | 706,965 | 16.1 | (43,443) | (6.1) |
| Total deposits | $4,485,291 | 100.0% | $4,378,410 | 100.0% | $106,881 | 2.4% |

(1) Money market and savings deposits included health savings account deposits of $198.7 million and $190.3 million as of March 31, 2025 and December 31, 2024, respectively.

The following table presents the average balances and rates of the Company’s deposit portfolio for the three months ended March 31, 2025 and 2024:

*(dollars in thousands)*

|  | Three months ended March 31, 2025 Average Balance | Average Rate | 2024 Average Balance | Average Rate |
| --- | ---: | ---: | ---: | ---: |
| Noninterest-bearing demand | $849,687 | —% | $675,926 | —% |
| Interest-bearing demand | 1,247,725 | 1.81 | 869,060 | 1.97 |
| Money market and savings | 1,590,616 | 2.89 | 1,186,900 | 3.77 |
| Time deposits | 688,569 | 3.91 | 431,679 | 4.46 |
| Total deposits | $4,376,597 | 2.14% | $3,163,565 | 2.53% |

54

The following table presents the composition of the Company’s deposit portfolio by client segment as of March 31, 2025 and December 31, 2024:

*(dollars in thousands)*

|  | March 31, 2025 Balance | Percent of Portfolio | December 31, 2024 Balance | Percent of Portfolio | Change Amount | Percent |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial | $1,564,571 | 34.8% | $1,647,131 | 37.7% | $(82,560) | (5.0)% |
| Consumer | 1,534,323 | 34.2 | 1,556,522 | 35.5 | (22,199) | (1.4) |
| Public (1) | 339,352 | 7.6 | 201,197 | 4.6 | 138,155 | 68.7 |
| Synergistic (2) |  |  |  |  |  |  |
| Retirement and benefit services (3) | 743,089 | 16.6 | 683,149 | 15.6 | 59,940 | 8.8 |
| Wealth (4) | 303,956 | 6.8 | 290,411 | 6.6 | 13,545 | 4.7 |
| Total synergistic | 1,047,045 | 23.4 | 973,560 | 22.2 | 73,485 | 13.5 |
| Total deposits | $4,485,291 | 100.0% | $4,378,410 | 100.0% | $106,881 | 2.4% |

(1) Public deposits primarily represent municipalities, school districts, and other governmental entities that receive public funding.

(2) Synergistic deposits represent the on-balance sheet money market balances that Alerus Retirement and Benefit Services and Alerus Wealth clients hold in proprietary Alerus money market products.

(3) $390.2 million and $361.3 million of retirement and benefit services synergistic deposits were indexed as of March 31, 2025 and December 31, 2024, respectively.

(4) $304.0 million and $290.4 million of wealth synergistic deposits were indexed as of March 31, 2025 and December 31, 2024, respectively.

The following table presents the contractual maturity of time deposits, including certificate of deposit account registry services and IRA deposits of $250,000 and over, that were outstanding as of March 31, 2025:

*(dollars in thousands)*

| Maturing in: | March 31, 2025 |
| --- | ---: |
| 3 months or less | $62,368 |
| 3 months to 6 months | 107,894 |
| 6 months to 1 year | 31,237 |
| 1 year or greater | 25,896 |
| Total | $227,395 |

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 at both March 31, 2025 and December 31, 2024. These amounts were estimated based on the same methodologies used for regulatory reporting purposes.

### Borrowings

Borrowings as of March 31, 2025 and December 31, 2024 were as follows:

*(dollars in thousands)*

|  | March 31, 2025 Balance | Percent of Portfolio | December 31, 2024 Balance | Percent of Portfolio |
| --- | ---: | ---: | ---: | ---: |
| Fed funds purchased | $— | —% | $38,960 | 13.1% |
| FHLB short-term advances | 200,000 | 77.2 | 200,000 | 67.1 |
| Subordinated notes | 50,000 | 19.3 | 50,000 | 16.8 |
| Junior subordinated debentures | 9,098 | 3.5 | 9,069 | 3.0 |
| Total borrowed funds | $259,098 | 100.0% | $298,029 | 100.0% |

### Capital Resources

Stockholders’ equity is influenced primarily by earnings, dividends, the Company’s sales and repurchases of its common stock and changes in accumulated other comprehensive income caused primarily by fluctuations in unrealized gains or losses, net of taxes, on available-for-sale securities.

Stockholders’ equity increased $18.8 million, or 3.8%, to $514.2 million as of March 31, 2025, compared to $495.4 million as of December 31, 2024. Tangible common equity to tangible assets, a non-GAAP financial measure, increased to 7.43% as of March 31, 2025, from 7.13% as of December 31, 2024. Common equity tier 1 capital to risk weighted assets increased to 10.10% as of March 31, 2025, from 9.91% as of December 31, 2024.

The Company strives to maintain an adequate capital base to support the Company’s activities in a safe and sound manner while at the same time attempting to maximize stockholder value. Capital adequacy is assessed against the risk inherent in the Company’s balance sheet, recognizing that unexpected loss is the common denominator of risk, and that common equity has the greatest capacity to absorb unexpected loss.

The Company is subject to various regulatory capital requirements both at the Company and at the Bank level. Failure to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines must be met that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting policies. The Company has consistently maintained regulatory capital ratios at or above the well-capitalized standards.

At March 31, 2025 and December 31, 2024, the Company met all the capital adequacy requirements to which the Company was subject. The table below presents the Company’s and the Bank’s regulatory capital ratios and the Company’s tangible common equity to tangible assets ratio as of March 31, 2025 and December 31, 2024:

| Capital Ratios Alerus Financial Corporation Consolidated | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Common equity tier 1 capital to risk weighted assets | 10.10% | 9.91% |
| Tier 1 capital to risk weighted assets | 10.31% | 10.12% |
| Total capital to risk weighted assets | 12.67% | 12.49% |
| Tier 1 capital to average assets | 8.86% | 8.65% |
| Tangible common equity to tangible assets (1) | 7.43% | 7.13% |
| Alerus Financial, National Association |  |  |
| Common equity tier 1 capital to risk weighted assets | 10.36% | 10.18% |
| Tier 1 capital to risk weighted assets | 10.36% | 10.18% |
| Total capital to risk weighted assets | 11.61% | 11.43% |
| Tier 1 capital to average assets | 9.06% | 8.69% |

(1) Represents a non-GAAP financial measure. See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.”

The regulatory capital ratios for the Company and the Bank, as of March 31, 2025, as shown in the above table, were at levels above the regulatory minimums to be considered “well capitalized.” See “NOTE 19 Regulatory Matters” of the consolidated financial statements for additional information.

***Off‑Balance Sheet Arrangements***

The Company is a party to financial instruments with off‑balance sheet risk in the normal course of business to meet the financing needs of the Company’s customers. These financial instruments consist primarily of commitments to extend credit and standby letters of credit. Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee. These commitments consist principally of unused commercial and consumer credit lines. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of an underlying contract with a third party. The credit risks associated with commitments to extend credit and standby letters of credit are essentially the same as that involved with extending loans to customers and are subject to normal credit policies. Collateral may be required based on management’s assessment of the customer’s creditworthiness. The fair value of these commitments is considered immaterial for disclosure purposes.

A summary of the contractual amounts of the Company’s exposure to off‑balance sheet agreements as of March 31, 2025 and December 31, 2024, was as follows:

*(dollars in thousands)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Commitments to extend credit | $1,047,185 | $1,090,114 |
| Standby letters of credit | 18,424 | 30,033 |
| Total | $1,065,609 | $1,120,147 |

### Liquidity

Liquidity management is the process by which the Company manages the flow of funds necessary to meet the Company’s financial commitments on a timely basis and at a reasonable cost and to take advantage of earnings enhancement opportunities. These financial commitments include withdrawals by depositors, credit commitments to borrowers, expenses of the Company’s operations, and capital expenditures. Liquidity is monitored and closely managed by the Company’s asset and liability committee (the “ALCO”), a group of senior officers from the finance, enterprise risk management, deposit, investment, treasury, and lending areas. It is the ALCO’s responsibility to ensure the Company has the necessary level of funds available for normal operations as well as maintain a contingency funding policy to ensure that potential liquidity stress events are planned for, quickly identified, and that management has plans in place to respond. The 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 March 31, 2025, the Company had on balance sheet liquidity of $410.2 million, compared to $579.0 million as of December 31, 2024. 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 March 31, 2025, the Company had off balance sheet liquidity of $2.5 billion, compared to $2.3 billion as of December 31, 2024. Off balance sheet liquidity includes FHLB borrowing capacity, federal funds 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. Actual borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. As of March 31, 2025, the Company had no federal funds purchased and $200.0 million in short-term borrowings from the FHLB. As of March 31, 2025, the Company had $2.4 billion of collateral pledged to the FHLB and, based on this collateral, the Company was eligible to borrow up to an additional $1.3 billion from the FHLB. In addition, the Company can borrow up to $127.0 million through the unsecured lines of credit the Company has established with five other correspondent banks.

In addition, because the Bank is “well capitalized,” the Company can accept wholesale deposits up to 20.0% of total assets based on current policy limits, or $1.1 billion, as of March 31, 2025. Management believed that the Company had adequate resources to fund all of the Company’s commitments as of March 31, 2025 and December 31, 2024.

The Company’s primary sources of liquidity include liquid assets, as well as unencumbered securities that can be used to collateralize additional funding.

Though remote, the possibility of a funding crisis exists at all financial institutions. Management has addressed this issue by formulating a liquidity contingency plan, which has been reviewed and approved by both the Bank’s Board of Directors and the ALCO. 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. Such a crisis would likely be temporary in nature and would not involve a change in credit ratings. A long‑term funding crisis would most likely be the result of both external and internal factors and would most likely result in drastic credit deterioration. Management believes that both potential circumstances have been fully addressed through detailed action plans and the establishment of trigger points for monitoring such events.

## Market risk

As filed, 7,897 characters.

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates. Interest rate risk is the risk to earnings and equity value arising from changes in market interest rates and arises in the normal course of business to the extent that there is a divergence between the amount of interest earning assets and the amount of interest‑bearing liabilities that are prepaid/withdrawn, re‑price, or mature in specified periods. The Company seeks to achieve consistent growth in net interest income and equity while managing volatility arising from shifts in market interest rates. The ALCO oversees market risk management, monitoring risk measures, limits, and policy guidelines for managing the amount of interest rate risk and its effect on net interest income and capital. The Bank’s Board of Directors approves policy limits with respect to interest rate risk.

### Interest Rate Risk

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective interest rate risk management begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk position given business activities, management objectives, market expectations and ALCO policy limits and guidelines.

Interest rate risk can come in a variety of forms, including repricing risk, basis risk, yield curve risk and option risk. Repricing risk is the risk of adverse consequences from a change in interest rates that arises because of differences in the timing of when those interest rate changes impact the Company’s assets and liabilities. Basis risk is the risk of adverse consequence resulting from unequal change in the spread between two or more rates for different instruments with the same maturity. Yield curve risk is the risk of adverse consequences resulting from unequal changes in the spread between two or more rates for different maturities for the same or different instruments. Option risk in financial instruments arises from embedded options such as options provided to borrowers to make unscheduled loan prepayments, options provided to debt issuers to exercise call options prior to maturity, and depositor options to make withdrawals and early redemptions.

Management regularly reviews the Company’s exposure to changes in interest rates. Among the factors considered are changes in the mix of interest earning assets and interest‑bearing liabilities, interest rate spreads and repricing periods. The ALCO reviews, on at least a quarterly basis, the interest rate risk position.

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.

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 models used for these measurements rely on estimates of the potential impact that changes in interest rates may have on the value and prepayment speeds on all components of the Company’s loan portfolio, investment portfolio, as well as embedded options and cash flows of other assets and liabilities. The balance sheet composition and size are assumed to remain static in the simulation modeling process. The analysis provides a framework as to what the Company’s overall sensitivity position is as of the Company’s most recent reported position and the impact that potential changes in interest rates may have on net interest income and the economic value of the Company’s equity.

Net interest income simulation involves forecasting net interest income under a variety of interest rate scenarios including instantaneous shocks.

The estimated impact on the Company’s net interest income as of March 31, 2025 and December 31, 2024, assuming immediate parallel moves in interest rates, is presented in the table below:

|  | March 31, 2025 Following 12 months | Following 24 months | December 31, 2024 Following 12 months | Following 24 months |
| --- | ---: | ---: | ---: | ---: |
| +400 basis points | 0.5% | 12.3% | 1.7% | 13.6% |
| +300 basis points | 0.3% | 9.0% | 1.2% | 10.0% |
| +200 basis points | 0.5% | 6.7% | 1.1% | 7.2% |
| +100 basis points | 0.4% | 3.6% | 0.6% | 3.7% |
| −100 basis points | 0.6% | -3.0% | 0.4% | -3.1% |
| −200 basis points | 1.0% | -6.6% | 0.7% | -6.8% |
| −300 basis points | 1.8% | -9.2% | 0.8% | -10.5% |
| −400 basis points | 4.3% | -6.7% | 4.0% | -7.0% |

57

Management strategies may impact future reporting periods, as actual results may differ from simulated results due to the timing, magnitude, and frequency of interest rate changes, the difference between actual experience and the characteristics assumed, as well as changes in market conditions. Market-based prepayment speeds are factored into the analysis for loan and securities portfolios. Rate sensitivity for transactional deposit accounts is modeled based on both historical experience and external industry studies.

Management uses an economic value of equity sensitivity analysis to understand the impact of interest rate changes on long‑term cash flows, income, and capital. Economic value of equity is based on discounting the cash flows for all balance sheet instruments under different interest rate scenarios. Deposit premiums are based on external industry studies and utilizing historical experience.

The table below presents the change in the economic value of equity as of March 31, 2025 and December 31, 2024, assuming immediate parallel shifts in interest rates:

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| +400 basis points | -5.2% | -6.2% |
| +300 basis points | -4.0% | -4.8% |
| +200 basis points | -1.6% | -2.4% |
| +100 basis points | -0.2% | -0.8% |
| −100 basis points | -0.5% | 0.1% |
| −200 basis points | -2.2% | -0.9% |
| −300 basis points | -6.6% | -3.6% |
| −400 basis points | -13.8% | -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. Management continuously strives to strengthen its system of internal controls, enterprise risk management, operating processes and employee awareness to assess the impact on earnings and capital and to improve the oversight of the Company’s operational risk.

### Compliance Risk

Compliance risk represents the risk of regulatory sanctions, reputational impact or financial loss resulting from failure to comply with rules and regulations issued by the various banking agencies and standards of good banking practice. Activities which may expose the Company to compliance risk include, but are not limited to, those dealing with the prevention of money laundering, privacy and data protection, community reinvestment initiatives, fair lending challenges resulting from the expansion of the Company’s banking center network, employment and tax matters.

### Strategic and/or Reputation Risk

Strategic and/or reputation risk represents the risk of loss due to impairment of reputation, failure to fully develop and execute business plans, failure to assess current and new opportunities in business, markets and products, and any other event not identified in the defined risk types mentioned previously. 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.

## Controls and procedures

As filed, 2,517 characters.

### Evaluation of Disclosure Controls and Procedures

The Company’s management, including the President and Chief Executive Officer, the Chief Financial Officer, and the Chief Accounting Officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures” (as defined in Rule 13a‑15(e) under the Securities Exchange Act of 1934, or the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, the President and Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective as of that date to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer and its Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

### Changes in Internal Control over Financial Reporting

In its Annual Report on Form 10-K for the period ended December 31, 2024, management concluded that the Company’s disclosure controls and procedures over financial reporting were not effective as of the end of such period, due to the existence of a material weakness related to a unique, one-time transaction, where goodwill initially calculated by the Company was inaccurate. The Company has since designed and implemented control activities to ensure that there is the appropriate periodic assessment of its business combination accounting policies and procedures, and its accounting department employees have participated in education and training related to business combination accounting and discussed with accounting experts to provide appropriate guidance in connection with accounting for business combinations. Other than disclosed herein, there have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a 15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 147 characters.

There have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2025.

Filed May 6, 2025.
Source: SEC EDGAR, the filing index for accession 0001437749-25-014641. Last ingested by Listed: Oct 24, 2026, 15:00 ET. No prices; not investment advice.