Financial Performance - For the three months ended September 30, 2025, the return on average total assets was 1.27%, compared to 0.48% for the same period in 2024[200]. - The Company reported a diluted earnings per common share of $0.65 for the three months ended September 30, 2025, compared to $0.26 for the same period in 2024[200]. - Net income for the three months ended September 30, 2025, was $16,924 thousand, down from $20,252 thousand in the same period in 2024, a decrease of 16.3%[202]. - Net income for Q3 2025 was $16.9 million, a 225.0% increase from $5.2 million in Q3 2024, resulting in $0.65 per diluted share[209]. - For the nine months ended September 30, 2025, net income reached $50.5 million, up 182.9% from $17.8 million in the same period of 2024, translating to $1.95 per diluted share[210]. Revenue and Income Sources - Noninterest income as a percentage of revenue was 40.56% for the three months ended September 30, 2025, down from 55.72% in the same period of 2024[200]. - Noninterest income for the nine months ended September 30, 2025, was $88,824 thousand, up from $81,057 thousand in the same period of 2024, indicating a rise of 9.5%[202]. - Total noninterest income for the three months ended September 30, 2025 was $29.4 million, an increase of $1.1 million, or 3.8%, from the same period in 2024[225]. - Mortgage banking revenue for the three months ended September 30, 2025 increased by $0.9 million, or 35.0%, compared to the same period in 2024[225]. Asset and Loan Growth - Total assets reached $5,330,573 thousand as of September 30, 2025, compared to $4,084,640 thousand a year prior, marking a growth of 30.5%[202]. - Loans increased to $4,102,075 thousand as of September 30, 2025, up from $3,032,343 thousand a year earlier, representing a growth of 35.4%[202]. - Total loans for the nine months ended September 30, 2025 amounted to $52.1 million, an increase of $14.5 million, or 38.5%, compared to the same period in 2024[222]. - Total loans outstanding reached $4.1 billion as of September 30, 2025, an increase of $109.5 million, or 2.7%, from December 31, 2024[248]. Equity and Capital - Total stockholders' equity increased to $550,688 thousand as of September 30, 2025, from $386,486 thousand a year earlier, a growth of 42.4%[202]. - Tangible common equity to tangible assets ratio improved to 8.24% as of September 30, 2025, compared to 7.13% a year earlier[204]. - Stockholders' equity increased by $55.3 million, or 11.2%, to $550.7 million as of September 30, 2025[284]. - Common equity tier 1 capital to risk-weighted assets increased to 10.84% as of September 30, 2025, from 9.91% as of December 31, 2024[288]. Interest Income and Margin - Net interest income for the three months ended September 30, 2025, was $43,136 thousand, compared to $22,542 thousand for the same period in 2024, reflecting an increase of 91.2%[202]. - The net interest margin (taxable-equivalent basis) for the three months ended September 30, 2025, was 3.50%, compared to 2.23% for the same period in 2024[200]. - Total interest income for the three months ended September 30, 2025 was $11.9 million, an increase of $6.9 million, or 138.5%, compared to the same period in 2024[222]. - The net interest margin for Q3 2025 was 3.50%, compared to 2.23% in Q3 2024, driven by higher rates on interest-earning assets and lower rates paid on deposits[216]. Expenses and Efficiency - The efficiency ratio for the three months ended September 30, 2025, was 65.34%, compared to 80.29% for the same period in 2024[200]. - Total noninterest expense for the three months ended September 30, 2025 was $50.5 million, an increase of $8.1 million, or 19.1%, compared to $42.4 million for the same period in 2024[228]. - The company experienced a $29.1 million increase in noninterest expenses for the nine months ended September 30, 2025, impacting overall earnings[211]. - Adjusted efficiency ratio improved to 65.22% for the three months ended September 30, 2025, from 62.35% in the previous quarter[207]. Credit Quality and Risk Management - The provision for credit losses was $1,661 thousand for the three months ended September 30, 2025, compared to $863 thousand for the same period in 2024, reflecting an increase of 92.5%[202]. - Nonperforming loans increased from $62,886 thousand as of December 31, 2024 to $59,644 thousand as of September 30, 2025, with nonperforming loans to total loans ratio at 1.45%[265]. - The allowance for credit losses (ACL) on loans increased from $39,142 thousand as of September 30, 2024 to $62,127 thousand as of September 30, 2025, reflecting a rise of approximately 58.7%[269]. - The company employs a centralized credit risk management strategy, focusing on diversification across geographic, industry, and client levels[262]. Liquidity and Funding - Total deposits increased to $4.4 billion as of September 30, 2025, up $34.2 million, or 0.8%, from December 31, 2024[275]. - On-balance sheet liquidity was $566.9 million as of September 30, 2025, compared to $579.0 million as of December 31, 2024[292]. - Off-balance sheet liquidity decreased to $2.2 billion as of September 30, 2025, down from $2.3 billion as of December 31, 2024[293]. - The Company can accept wholesale deposits up to 20.0% of total assets, equating to $1.1 billion, as of September 30, 2025[295]. Operational and Strategic Risk - Operational risk management focuses on strengthening internal controls and enterprise risk management to mitigate potential losses[309]. - Compliance risk includes potential regulatory sanctions and reputational impacts related to various banking regulations[310]. - Strategic risk is mitigated through initiatives aimed at understanding and reporting on various risks, including new product development[311].

Group 1 - The article does not provide any specific information or data regarding companies or industries [1]

Financial Data and Key Metrics Changes - Net interest income increased by 0.2% over the prior quarter, while fee income decreased by 7.3% [17][18] - Net interest income reached $43.1 million with a stable net interest margin of 3.5% [19] - Non-performing assets to total assets increased to 1.13%, up 15 basis points from the prior quarter [28] Business Line Data and Key Metrics Changes - Retirement business revenue increased to $16.5 million, a 2.9% increase over the prior quarter, driven by asset-based fees [25] - Wealth management revenues decreased to $6.6 million, with assets under management increasing by 4.3% due to market performance [27] - Non-interest income for the banking segment was $6.4 million, excluding one-time items [24] Market Data and Key Metrics Changes - Total deposits grew by 1.7%, primarily driven by the expansion of full commercial relationships [22] - HSA deposits grew almost 2% over the prior quarter, reaching over $202 million [26] - The loan mix is approximately 50% fixed and 50% floating, with loans growing by 1.4% over the previous quarter [21] Company Strategy and Development Direction - The company aims to deepen client relationships and expand in growth markets while leveraging technology and AI for efficiency [15] - A focus on organic and inorganic growth in the retirement business, which is the 25th largest in the country [13] - The company has strategically divested non-core business lines and retained a number one market share in its hometown market [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy and the opportunities ahead, emphasizing a solid foundation and energized team [16][80] - The company expects loan growth to continue at a mid-single-digit rate, with potential upside if rates decrease [39][40] - Management highlighted the importance of proactive risk management and capital allocation to support future growth [10][15] Other Important Information - The company returned $5.3 million to shareholders through dividends [10] - The tangible common equity ratio improved to 8.24%, indicating a strong capital position [29] Q&A Session Summary Question: On provisioning levels and recovery - Management noted that the lack of provision was driven by recoveries and a decrease in the requirement for pool loans [36] Question: Outlook on loan growth with potential lower rates - If rates decrease, loan growth could approach 10-12%, focusing on full C&I relationship growth [39][40] Question: Drivers of margin outlook and core margin improvement - The expectation for margin improvement is based on good spreads on loans and deposits, with a new business margin exceeding 350 basis points [45][46] Question: Fee income growth and market assumptions - Fee income growth is expected to be under pressure, particularly in the mortgage sector, with conservative modeling for market growth [48] Question: Drivers of attrition and capture rates in wealth and retirement - Trends in attrition and capture rates are consistent, with successful recruitment of advisors and improved technology enhancing client experiences [50] Question: Impact of M&A disruptions on growth - The company is opportunistic in talent acquisition and is finding success in attracting clients from disrupted banks [52][53] Question: Legacy expense growth and budgeting process - The budgeting process is ongoing, with evaluations for reinvestment and cost-saving opportunities [55] Question: Technology expenses and future expectations - Technology expenses are expected to see a slight uptick due to contract escalators [58]

Financial Performance - Net interest income for 3Q 2025 was $43.1 million, a 0.2% increase from 2Q 2025[35, 38, 54] - Noninterest income was $29.4 million, representing 40.6% of revenue[35, 38, 118] - Adjusted EPS was $0.66 and adjusted ROAA was 1.28%[35, 118] - Tangible book value per share was $16.90, an increase of $0.79 from the prior quarter[35, 40, 118] Balance Sheet - Total loans reached $4.1 billion, a 1.4% increase from June 30, 2025[15, 35, 61, 118] - Total deposits amounted to $4.4 billion, a 1.7% increase from June 30, 2025[15, 35, 68, 118] - The loan to deposit ratio was 93.0%, a 0.2% decrease from the previous quarter[35, 68, 71, 118] Asset Quality and Capital Strength - Total reserves to loans were 1.51%[35, 100, 104, 118] - CET1 was 10.8%, well above bank regulatory requirements[35, 106, 118] - Net recoveries to average loans were (0.17)% for the quarter[35, 98, 104] Divisional Performance - Banking services noninterest income decreased 23.9% from 2Q 2025, primarily due to a $2.1 million gain on sale of a purchased credit deteriorated hospitality loan in 2Q 2025[75, 80] - Retirement and Benefit Services revenue increased 2.9% compared to 2Q 2025, driven by an increase in asset-based fees[85] - Wealth Advisory Services revenue decreased 10.9% from 2Q 2025, primarily due to the timing of the wealth management platform conversion and a decrease in brokerage and insurance commissions[90]

Core Insights - Alerus reported a revenue of $73.2 million for the quarter ended September 2025, marking a 43.8% increase year-over-year, with an EPS of $0.66 compared to $0.26 in the previous year [1] - The revenue exceeded the Zacks Consensus Estimate of $71.55 million by 2.31%, and the EPS surpassed the consensus estimate of $0.59 by 11.86% [1] Financial Performance Metrics - Net charge-offs to average loans were -0.2%, better than the average estimate of 0.1% from two analysts [4] - The efficiency ratio was reported at 65.3%, outperforming the average estimate of 69.2% [4] - The net interest margin was 3.5%, exceeding the estimated 3.3% [4] - Average balance of total interest-earning assets was $4.97 billion, slightly below the $5 billion estimate [4] - Net interest income reached $43.14 million, surpassing the average estimate of $40.73 million [4] - Total noninterest income was $29.43 million, slightly below the average estimate of $30.03 million [4] - Wealth management income was $6.56 million, below the average estimate of $7.24 million [4] - Service charges on deposit accounts were $0.7 million, significantly lower than the $1.18 million estimate [4] - Mortgage banking income was $3.47 million, above the average estimate of $3.05 million [4] - Other income was reported at $2.23 million, slightly above the average estimate of $2.01 million [4] Stock Performance - Alerus shares have returned -4% over the past month, while the Zacks S&P 500 composite has increased by 3.6% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Insights - Alerus (ALRS) reported quarterly earnings of $0.66 per share, exceeding the Zacks Consensus Estimate of $0.59 per share, and showing significant growth from $0.26 per share a year ago, resulting in an earnings surprise of +11.86% [1] - The company achieved revenues of $73.2 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 2.31% and increasing from $50.9 million year-over-year [2] - Alerus has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] Earnings Outlook - The sustainability of Alerus's stock price movement will largely depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.58 on revenues of $71.45 million, and for the current fiscal year, it is $2.44 on revenues of $285.3 million [7] Industry Context - Alerus operates within the Zacks Financial - Miscellaneous Services industry, which is currently ranked in the top 36% of over 250 Zacks industries, indicating a favorable industry outlook [8] - The correlation between near-term stock movements and earnings estimate revisions suggests that tracking these revisions can provide insights into stock performance [5][6]

Financial Performance - Alerus Financial Corporation reported net income of $16.9 million for Q3 2025, down from $20.3 million in Q2 2025 and up from $5.2 million in Q3 2024[2]. - Noninterest income was $29.4 million in Q3 2025, a 7.3% decrease from Q2 2025 but a 3.8% increase from Q3 2024[12][13]. - The return on average total assets was 1.27% in Q3 2025, down from 1.53% in Q2 2025[7]. - Net income for the three months ended September 30, 2025, was $16,924,000, down from $20,253,000 in the same quarter of 2024, a decrease of 16.3%[38]. - Adjusted net income for Q3 2025 was $17,000, down from $18,640 in Q2 2025, representing a decline of 8.8%[41]. - Earnings per common share for the nine months ended September 30, 2025, was $1.97, compared to $0.90 for the same period in 2024, representing a 118.9% increase[38]. Income and Expenses - Net interest income reached a record $43.1 million in Q3 2025, a 0.2% increase from Q2 2025 and a 91.4% increase from Q3 2024[4][10]. - Noninterest expense for Q3 2025 was $50.5 million, a 4.3% increase from Q2 2025[15]. - Noninterest expense for Q3 2025 increased by $8.1 million, or 19.1%, to $50.5 million, primarily due to higher compensation and technology expenses related to the HMNF acquisition[16]. - Total noninterest expense for the nine months ended September 30, 2025, was $149,344,000, up from $120,218,000 in 2024, marking a 24.2% increase[38]. Assets and Loans - Total loans increased by $109.5 million, or 2.7%, to $4.1 billion since December 31, 2024[7]. - Total assets as of September 30, 2025, were $5.3 billion, an increase of $68.9 million, or 1.3%, from December 31, 2024, driven by a $109.5 million increase in loans held for investment[17]. - Total loans held for investment reached $4.1 billion as of September 30, 2025, up $109.5 million, or 2.7%, from December 31, 2024, with commercial loans increasing by $69.4 million[18]. - Net loans amounted to $4.04 billion as of September 30, 2025, an increase from $3.93 billion as of December 31, 2024[37]. Deposits - Total deposits rose by $34.2 million, or 0.8%, to $4.4 billion since December 31, 2024[7]. - Total deposits were $4.4 billion as of September 30, 2025, an increase of $34.2 million, or 0.8%, from December 31, 2024, driven by growth in commercial deposits[21]. - Interest-bearing deposits increased by $160.9 million, while noninterest-bearing deposits decreased by $126.7 million from December 31, 2024[21]. Equity and Capital Ratios - Total stockholders' equity increased to $550.7 million as of September 30, 2025, up by $55.3 million from December 31, 2024[26]. - Tangible common equity to tangible assets (non-GAAP) improved to 8.24% as of September 30, 2025, compared to 7.13% as of December 31, 2024[27]. - Common equity tier 1 capital to risk-weighted assets increased to 10.84% as of September 30, 2025, from 9.91% as of December 31, 2024[27]. Asset Quality - Total nonperforming assets decreased by $2.8 million, or 4.4%, to $60.1 million as of September 30, 2025, with the allowance for credit losses on loans at $62.1 million, or 1.51% of total loans[23]. - The company recorded net recoveries of $1.7 million in Q3 2025, compared to net charge-offs of $3.8 million in Q2 2025, indicating improved asset quality[24]. - The provision for credit losses for the three months ended September 30, 2025, was $0, compared to $1,661,000 in the same period of 2024, indicating a significant reduction[38]. Operational Efficiency - Efficiency ratio increased to 65.34% in September 2025, compared to 60.66% in June 2025, indicating a decline in operational efficiency[39]. - Adjusted efficiency ratio for Q3 2025 was 65.22%, compared to 62.35% in Q2 2025, indicating a decline in operational efficiency[41]. Conference and Market Presence - The company will host a conference call on October 31, 2025, to discuss its financial results[28]. - Alerus operates 28 banking and commercial wealth offices across multiple states, enhancing its market presence[30].

Core Insights - Alerus Financial Corporation (NASDAQ:ALRS) is recognized as one of the Best Dividend Stocks for a Dividend Champions List, highlighting its strong performance in dividend payments [1][4] Group 1: Business Segments - Alerus Financial operates in three main areas: banking, retirement and benefit services, and wealth management, providing a balanced revenue stream that mitigates risks from weaknesses in any single segment [2] - The retirement and benefit services segment generates steady fee income through account administration, while the wealth management division focuses on investment advice and planning for clients [2] Group 2: Growth Strategy - The company has been expanding its market presence through acquisitions, entering new markets such as Phoenix and Rochester [3] - Alerus is enhancing its digital capabilities via the "One Alerus" program, which integrates technology upgrades across the customer experience [3] - Management has set key objectives including cost reduction, growth in assets under management, diversification of income streams, and improved operational efficiency [3] Group 3: Dividend Performance - Alerus Financial has a strong track record of rewarding shareholders, having increased dividends for 39 consecutive years [4] - The current quarterly dividend is $0.21 per share, resulting in a dividend yield of 3.85% as of October 2 [4]

PART 1. FINANCIAL INFORMATION This section presents the Company's unaudited consolidated financial statements, management's analysis, market risk, and internal controls [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes on accounting policies [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section details the Company's financial position, including assets, liabilities, and stockholders' equity, at specific reporting dates | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | Percentage Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------------------ | | Total Assets | $5,323,822 | $5,261,673 | $62,149 | 1.18% | | Cash and cash equivalents | $80,904 | $61,239 | $19,665 | 32.11% | | Investment securities | $806,544 | $866,946 | $(60,402) | -6.97% | | Loans, net | $3,985,379 | $3,932,605 | $52,774 | 1.34% | | Total Liabilities | $4,790,667 | $4,766,263 | $24,404 | 0.51% | | Total Deposits | $4,337,468 | $4,378,410 | $(40,942) | -0.93% | | Noninterest-bearing deposits | $790,300 | $903,466 | $(113,166) | -12.53% | | Interest-bearing deposits | $3,547,168 | $3,474,944 | $72,224 | 2.08% | | Short-term borrowings | $314,600 | $238,960 | $75,640 | 31.65% | | Total Stockholders' Equity | $533,155 | $495,410 | $37,745 | 7.62% | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) This section presents the Company's financial performance over specific periods, detailing revenues, expenses, and net income | Metric (in thousands, except per share) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (QoQ) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change (YoY) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Total interest income | $70,424 | $53,022 | +32.82% | $138,605 | $102,060 | +35.81% | | Total interest expense | $27,392 | $29,021 | -5.61% | $54,416 | $55,840 | -2.55% | | Net interest income | $43,032 | $24,001 | +79.30% | $84,189 | $46,220 | +82.15% | | Provision for credit losses | $0 | $4,489 | -100.00% | $863 | $4,489 | -80.77% | | Total noninterest income | $31,763 | $27,371 | +16.05% | $59,395 | $52,694 | +12.72% | | Total noninterest expense | $48,438 | $38,752 | +25.00% | $98,805 | $77,771 | +27.04% | | Net income | $20,253 | $6,208 | +226.25% | $33,567 | $12,640 | +165.56% | | Basic earnings per common share | $0.79 | $0.31 | +154.84% | $1.31 | $0.64 | +104.69% | | Diluted earnings per common share | $0.78 | $0.31 | +151.61% | $1.30 | $0.63 | +106.35% | | Dividends declared per common share | $0.21 | $0.20 | +5.00% | $0.41 | $0.39 | +5.13% | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section reports net income and other comprehensive income items, reflecting changes in equity from non-owner sources | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (QoQ) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change (YoY) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Net Income | $20,253 | $6,208 | +226.25% | $33,567 | $12,640 | +165.56% | | Net change in unrealized gains (losses) on debt securities | $4,586 | $(1,221) | +474.04% | $18,760 | $(4,739) | +495.99% | | Other comprehensive income (loss), net of tax | $3,407 | $(773) | +540.88% | $13,519 | $(1,374) | +1083.26% | | Total comprehensive income (loss) | $23,660 | $5,435 | +335.35% | $47,086 | $11,266 | +317.95% | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section outlines the changes in the Company's equity accounts over time, including net income, dividends, and stock transactions | Metric (in thousands) | Balance as of Dec 31, 2024 | Net Income (YTD) | Other Comprehensive Income (Loss) (YTD) | Common Stock Repurchased (YTD) | Common Stock Dividends (YTD) | Share-based Compensation Expense (YTD) | Vesting of Restricted Stock (YTD) | Balance as of Jun 30, 2025 | | :-------------------------------------- | :------------------------- | :--------------- | :-------------------------------------- | :----------------------------- | :--------------------------- | :------------------------------------- | :----------------------------- | :------------------------- | | Common Stock | $25,345 | — | — | $(8) | — | — | $52 | $25,389 | | Additional Paid-in Capital | $269,708 | — | — | $(168) | — | $1,247 | $(52) | $270,735 | | Retained Earnings | $273,723 | $33,567 | — | — | $(10,412) | — | — | $296,878 | | Accumulated Other Comprehensive Income (Loss) | $(73,366) | — | $13,519 | — | — | — | — | $(59,847) | | **Total Stockholders' Equity** | **$495,410** | **$33,567** | **$13,519** | **$(176)** | **$(10,412)** | **$1,247** | **—** | **$533,155** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section categorizes cash inflows and outflows from operating, investing, and financing activities over specific periods | Metric (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change (YoY) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Net cash provided (used) by operating activities | $18,409 | $(748) | +2560.29% | | Net cash provided (used) by investing activities | $(22,858) | $(127,124) | +82.02% | | Net cash provided (used) by financing activities | $24,114 | $436,120 | -94.47% | | Net change in cash and cash equivalents | $19,665 | $308,248 | -93.62% | | Cash and cash equivalents at end of period | $80,904 | $438,141 | -81.53% | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the consolidated financial statements, covering accounting policies, financial instruments, and regulatory matters [NOTE 1 Basis of Presentation](index=9&type=section&id=NOTE%201%20Basis%20of%20Presentation) This note describes the basis for preparing the unaudited consolidated interim financial statements in accordance with GAAP and Form 10-Q - The unaudited consolidated interim financial statements adhere to **Form 10-Q instructions and GAAP**, including normal recurring accruals, encompassing Alerus Financial Corporation and its subsidiaries[19](index=19&type=chunk)[20](index=20&type=chunk) [NOTE 2 Recent Accounting Pronouncements](index=9&type=section&id=NOTE%202%20Recent%20Accounting%20Pronouncements) This note discusses recent accounting standards updates and their potential impact on the Company's financial reporting - No new ASUs have been adopted since **January 1, 2025**, with ASU 2023-09 on income tax disclosures effective for annual periods beginning after **December 15, 2024**[22](index=22&type=chunk)[23](index=23&type=chunk) [NOTE 3 Investment Securities](index=9&type=section&id=NOTE%203%20Investment%20Securities) This note details the Company's investment securities portfolio, including trading, available-for-sale, and held-to-maturity classifications | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Trading securities (fair value) | $1,686 | $3,309 | -49.05% | | Available-for-sale securities (fair value) | $541,152 | $588,053 | -7.97% | | Held-to-maturity securities (amortized cost) | $263,706 | $275,585 | -4.31% | | Total investment securities (fair value) | $772,656 | $825,039 | -6.35% | | Gross unrealized losses (AFS) | $(79,977) | $(98,522) | +18.82% | | Allowance for credit losses (HTM) | $127 | $131 | -3.05% | | Pledged investment securities (carrying value) | $439,100 | $340,200 | +29.07% | - The Company considers unrealized losses on AFS debt securities to be due to **interest rate changes**, not credit impairment, as they are primarily **U.S. government-backed or investment-grade bonds**, with no intent to sell before cost recovery[27](index=27&type=chunk) [NOTE 4 Loans and Allowance for Credit Losses](index=14&type=section&id=NOTE%204%20Loans%20and%20Allowance%20for%20Credit%20Losses) This note provides details on the Company's loan portfolio, including its composition, credit quality, and the allowance for credit losses | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Total loans outstanding | $4,044,657 | $3,992,534 | +1.31% | | Allowance for credit losses on loans | $59,278 | $59,929 | -1.09% | | Non-mortgage loans held for sale | $50,160 | $0 | N/A | | Loans pledged | $2,900,000 | $2,900,000 | 0.00% | - The decrease in the ACL on loans was primarily due to the transfer of non-mortgage loans to held for sale, offset by loan growth and economic conditions[39](index=39&type=chunk)[47](index=47&type=chunk) - The Company actively manages its loan portfolio to identify problem credits early, reassess underwriting standards, and monitors credit risk through a structured governance process[47](index=47&type=chunk) - As of June 30, 2025, there were no industry concentrations exceeding **10% of the Company's total loan portfolio**[48](index=48&type=chunk) - The Company provided no modifications to loans under financial difficulty during the three and six months ended June 30, 2025 and 2024, except for **Agricultural – Land loans totaling $1.457 million**[65](index=65&type=chunk)[67](index=67&type=chunk) [NOTE 5 Land, Premises and Equipment, Net](index=31&type=section&id=NOTE%205%20Land%2C%20Premises%20and%20Equipment%2C%20Net) This note details the Company's property, plant, and equipment, including their carrying values and associated depreciation expenses | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Land, premises and equipment, net | $42,693 | $39,780 | +7.32% | | Depreciation expense (Q2) | $1,100 | $700 | +57.14% | | Depreciation expense (YTD) | $2,200 | $1,300 | +69.23% | - The Company's West Fargo, North Dakota branch is listed for sale for **$3.8 million**, with a carrying value of approximately **$0.4 million**, and is expected to result in a gain on sale[70](index=70&type=chunk) [NOTE 6 Goodwill and Other Intangible Assets](index=33&type=section&id=NOTE%206%20Goodwill%20and%20Other%20Intangible%20Assets) This note outlines the Company's goodwill and other intangible assets, including their carrying amounts and amortization expenses | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Total goodwill | $85,634 | $85,634 | 0.00% | | Other intangible assets, net | $38,462 | $43,882 | -12.40% | | Amortization of total intangible assets (Q2) | $2,710 | $1,324 | +104.68% | | Amortization of total intangible assets (YTD) | $5,419 | $2,648 | +104.64% | - The Company determined there was **no goodwill impairment** as of June 30, 2025[72](index=72&type=chunk) [NOTE 7 Loan Servicing](index=33&type=section&id=NOTE%207%20Loan%20Servicing) This note provides information on the Company's loan servicing activities, including the unpaid principal balance of loans serviced and the fair value of servicing rights | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Unpaid principal balance of loans serviced for others | $701,000 | $728,500 | -3.83% | | Fair value of servicing rights | $7,184 | $7,918 | -9.27% | | Weighted-average remaining term (years) | 21.8 | 22.0 | -0.91% | | Prepayment speeds | 12.2% | 9.9% | +23.23% | | Discount rate | 10.5% | 10.5% | 0.00% | [NOTE 8 Leases](index=35&type=section&id=NOTE%208%20Leases) This note details the Company's lease arrangements, including right-of-use assets, lease liabilities, and associated lease costs | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Operating lease right-of-use assets | $12,535 | $13,438 | -6.72% | | Operating lease liabilities | $18,017 | $18,991 | -5.13% | | Weighted-average remaining lease term (years) | 12.5 | 12.6 | -0.79% | | Weighted-average discount rate | 4.6% | 4.5% | +2.22% | | Net lease cost (Q2) | $769 | $664 | +15.81% | | Net lease cost (YTD) | $1,579 | $1,380 | +14.42% | [NOTE 9 Deposits](index=37&type=section&id=NOTE%209%20Deposits) This note provides a breakdown of the Company's deposit liabilities, distinguishing between interest-bearing and noninterest-bearing accounts | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Total deposits | $4,337,468 | $4,378,410 | -0.93% | | Noninterest-bearing deposits | $790,300 | $903,466 | -12.53% | | Interest-bearing deposits | $3,547,168 | $3,474,944 | +2.08% | | Certificates of deposit > $250,000 | $219,500 | $227,400 | -3.47% | [NOTE 10 Short-Term Borrowings](index=37&type=section&id=NOTE%2010%20Short-Term%20Borrowings) This note details the Company's short-term borrowing activities, including Fed funds purchased and FHLB advances | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Total short-term borrowings | $314,600 | $238,960 | +31.65% | | Fed funds purchased | $114,600 | $38,960 | +194.14% | | FHLB short-term advances | $200,000 | $200,000 | 0.00% | [NOTE 11 Long-Term Debt](index=37&type=section&id=NOTE%2011%20Long-Term%20Debt) This note describes the Company's long-term debt obligations, including subordinated notes and junior subordinated debentures | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Total long-term debt | $59,126 | $59,069 | +0.10% | | Subordinated notes payable | $50,000 | $50,000 | 0.00% | | Junior subordinated debenture (Trust I) | $3,650 | $3,628 | +0.61% | | Junior subordinated debenture (Trust II) | $5,476 | $5,441 | +0.64% | - Subordinated notes payable have a **fixed interest rate of 3.50%** and mature on **March 30, 2031**, with a call date of **March 31, 2026**[87](index=87&type=chunk) - Junior subordinated debentures feature **floating interest rates** linked to three-month CME SOFR plus a spread[87](index=87&type=chunk) [NOTE 12 Commitments and Contingencies](index=38&type=section&id=NOTE%2012%20Commitments%20and%20Contingencies) This note discloses the Company's off-balance sheet commitments and potential contingent liabilities, including legal proceedings | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Commitments to extend credit | $1,002,440 | $1,090,114 | -8.04% | | Standby letters of credit | $17,943 | $30,033 | -40.26% | | Total off-balance sheet risk | $1,020,383 | $1,120,147 | -8.89% | | ACL on unfunded commitments | $4,800 | $7,500 | -36.00% | | Provision (recovery) for credit losses on unfunded commitments (YTD) | $(2,700) | $(500) | -440.00% | - The Company is subject to a pending DOL lawsuit related to its previously sold ESOP fiduciary services business[96](index=96&type=chunk) - Management believes a material loss contingency is **reasonably possible but not probable**, and the ultimate loss cannot be reasonably estimated due to early proceedings and lack of damage specificity[97](index=97&type=chunk)[99](index=99&type=chunk) [NOTE 13 Share-Based Compensation](index=40&type=section&id=NOTE%2013%20Share-Based%20Compensation) This note details the Company's share-based compensation plans, including expense recognition and shares available for issuance | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (QoQ) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Compensation expense | $648 | $121 | +435.54% | | Shares available for issuance | 555,709 | N/A | N/A | | Unrecognized compensation expense | $4,400 | N/A | N/A | - The Company's 2019 Equity Incentive Plan authorizes up to **1,100,000 shares** of common stock, with **555,709 shares still available** as of June 30, 2025[101](index=101&type=chunk)[103](index=103&type=chunk) - Unrecognized compensation expense of **$4.4 million** is expected to be recognized over a weighted-average period of **2.2 years**[103](index=103&type=chunk) [NOTE 14 Income Taxes](index=40&type=section&id=NOTE%2014%20Income%20Taxes) This note provides information on the Company's income tax expense, effective tax rates, and the impact of recent tax legislation | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (QoQ) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Income tax expense | $6,104 | $1,923 | +217.42% | | Effective tax rate | 23.2% | 23.7% | -2.11% | | Income tax expense (YTD) | $10,349 | $4,014 | +157.83% | | Effective tax rate (YTD) | 23.6% | 24.1% | -2.07% | - The President signed H.R. 1, the 'One Big Beautiful Bill Act,' into law on **July 4, 2025**, which includes changes to federal tax law allowing more favorable deductibility of certain business expenses[107](index=107&type=chunk) - The Company is currently evaluating the impact of this legislation on future periods[107](index=107&type=chunk) [NOTE 15 Tax Credit Investments](index=42&type=section&id=NOTE%2015%20Tax%20Credit%20Investments) This note describes the Company's investments in tax credit projects and the associated tax benefits recognized | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Low income housing tax credit investment | $22,906 | $17,906 | +27.92% | | Unfunded Commitment | $6,907 | $3,968 | +74.09% | | Tax Benefit Recognized (Q2) | $(673) | $(370) | +81.89% | | Tax Benefit Recognized (YTD) | $(1,025) | $(751) | +36.48% | - The Company invests in qualified affordable housing projects for community reinvestment and tax credits, limiting investments to existing lending relationships and projects within its market area[108](index=108&type=chunk) [NOTE 16 Segment Reporting](index=42&type=section&id=NOTE%2016%20Segment%20Reporting) This note provides financial information by reportable segment, including net income before taxes for Banking, Retirement and Benefit Services, and Wealth - The Company operates through three reportable segments: **Banking, Retirement and Benefit Services, and Wealth**[113](index=113&type=chunk)[114](index=114&type=chunk) - Performance is assessed based on **net income (loss) before taxes**, with certain expenses allocated across segments[117](index=117&type=chunk) | Segment (in thousands) | Net Income (Loss) Before Taxes (Q2 2025) | Net Income (Loss) Before Taxes (Q2 2024) | Change (QoQ) | | :-------------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Banking | $24,672 | $6,279 | +292.94% | | Retirement and Benefit Services | $2,858 | $2,656 | +7.60% | | Wealth | $2,231 | $2,452 | -8.97% | | Corporate Administration | $(3,404) | $(3,256) | +4.54% | | **Consolidated Total** | **$26,357** | **$8,131** | **+224.15%** | [NOTE 17 Earnings Per Share](index=46&type=section&id=NOTE%2017%20Earnings%20Per%20Share) This note presents the calculation of basic and diluted earnings per common share, including the weighted-average shares outstanding | Metric (in thousands, except per share) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (QoQ) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Net income available to common stockholders | $20,048 | $6,170 | +224.93% | | Basic earnings per common share | $0.79 | $0.31 | +154.84% | | Diluted earnings per common share | $0.78 | $0.31 | +151.61% | | Weighted-average common shares outstanding (diluted) | 25,714 | 20,050 | +28.25% | - There were **no antidilutive shares** for the three and six months ended June 30, 2025 and 2024[124](index=124&type=chunk) [NOTE 18 Derivative Instruments](index=46&type=section&id=NOTE%2018%20Derivative%20Instruments) This note describes the Company's use of derivative instruments to manage market and credit risks, including their fair values and hedging designations - The Company uses derivative instruments, including **interest rate swaps and forward loan sales commitments**, to mitigate exposure to market and credit risks[125](index=125&type=chunk)[127](index=127&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - Some derivatives are designated as fair value or cash flow hedges, while others are not designated for hedging[125](index=125&type=chunk)[127](index=127&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Total notional amount (hedging instruments) | $200,000 | $400,000 | -50.00% | | Total notional amount (non-hedging instruments) | $454,468 | $407,867 | +11.43% | | Total derivative assets (fair value) | $11,348 | $9,105 | +24.63% | | Total derivative liabilities (fair value) | $11,225 | $8,600 | +30.52% | | Gain (loss) from derivatives not designated as hedging (Q2) | $222 | $319 | -30.39% | - The Company is exposed to credit risk from counterparties, minimized through **credit approvals, limits, monitoring, and collateral**[140](index=140&type=chunk)[141](index=141&type=chunk) - Agreements with counterparties contain provisions for default or failure to maintain 'well-capitalized' status, which could require settlement of obligations[142](index=142&type=chunk) [NOTE 19 Regulatory Matters](index=54&type=section&id=NOTE%2019%20Regulatory%20Matters) This note provides information on the Company's compliance with regulatory capital adequacy requirements and its 'well capitalized' status - Alerus Financial Corporation and its subsidiary bank met all regulatory capital adequacy requirements as of **June 30, 2025, and December 31, 2024**, maintaining 'well capitalized' status[150](index=150&type=chunk)[153](index=153&type=chunk) | Capital Ratio | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Consolidated Common equity tier 1 capital to risk weighted assets | 10.54% | 9.91% | | Consolidated Tier 1 capital to risk weighted assets | 10.74% | 10.12% | | Consolidated Total capital to risk weighted assets | 13.10% | 12.49% | | Consolidated Tier 1 capital to average assets | 9.16% | 8.65% | | Bank Common equity tier 1 capital to risk weighted assets | 10.78% | 10.18% | | Bank Tier 1 capital to risk weighted assets | 10.78% | 10.18% | | Bank Total capital to risk weighted assets | 12.04% | 11.43% | | Bank Tier 1 capital to average assets | 9.34% | 8.69% | [NOTE 20 Other Comprehensive Income (Loss)](index=56&type=section&id=NOTE%2020%20Other%20Comprehensive%20Income%20%28Loss%29) This note details the components of other comprehensive income (loss), including unrealized gains and losses on debt securities and derivatives | Metric (in thousands, after-tax) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (QoQ) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Net change in unrealized gains (losses) on debt securities | $3,435 | $(914) | +475.93% | | Net change in unrealized gains (losses) on cash flow hedges | $(110) | $(16) | +587.50% | | Net change in unrealized gains (losses) on other derivatives | $82 | $157 | -47.80% | | Other comprehensive income (loss), net of tax | $3,407 | $(773) | +540.88% | | Accumulated Other Comprehensive Income (Loss) (AOCI) | $(59,847) | $(75,029) | +20.10% | [NOTE 21 Stock Repurchase Program](index=58&type=section&id=NOTE%2021%20Stock%20Repurchase%20Program) This note provides information on the Company's stock repurchase program, including authorization and repurchase activity - The Board of Directors approved a stock repurchase program on **December 12, 2023**, authorizing the repurchase of up to **1,000,000 shares** of common stock, effective **February 18, 2024**, and expiring on **February 18, 2027**[160](index=160&type=chunk)[161](index=161&type=chunk) - No shares were repurchased under this program for the six months ended June 30, 2025[161](index=161&type=chunk) [NOTE 22 Fair Value of Assets and Liabilities](index=59&type=section&id=NOTE%2022%20Fair%20Value%20of%20Assets%20and%20Liabilities) This note explains the Company's fair value measurements for assets and liabilities, categorized into a three-level hierarchy based on input observability - The Company categorizes assets and liabilities measured at fair value into a **three-level hierarchy** based on input priority: Level 1 for quoted prices in active markets, Level 2 for observable inputs, and Level 3 for unobservable inputs[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) | Asset/Liability Type (in thousands) | June 30, 2025 Fair Value | Level 1 | Level 2 | Level 3 | | :-------------------------------------- | :----------------------- | :------ | :------ | :------ | | Trading securities | $1,686 | $1,686 | $0 | $0 | | Available-for-sale investment securities | $541,152 | $0 | $541,152 | $0 | | Servicing rights | $7,184 | $0 | $0 | $7,184 | | Derivatives (assets) | $11,348 | $0 | $11,348 | $0 | | Derivatives (liabilities) | $11,225 | $0 | $11,225 | $0 | | Non-mortgage loans held for sale (nonrecurring) | $50,160 | $0 | $0 | $50,160 | | Collateral dependent loans (nonrecurring) | $29,722 | $0 | $0 | $29,722 | | Foreclosed assets (nonrecurring) | $751 | $0 | $0 | $751 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=65&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance and condition, discussing key drivers of income, asset quality, and capital resources [General](index=65&type=section&id=General) This section explains the Company's financial condition and results of operations for the reported interim periods - The discussion explains the Company's financial condition and results of operations for the three and six months ended June 30, 2025 and 2024, noting that annualized interim results may not be indicative of full-year or future periods[187](index=187&type=chunk) [Forward-Looking Statements](index=65&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements subject to inherent uncertainties and risks that could cause actual results to differ materially - This section contains forward-looking statements based on current beliefs and assumptions, subject to inherent uncertainties, risks, and changes in circumstances that could cause actual results to differ materially[188](index=188&type=chunk)[189](index=189&type=chunk) - Key risk factors include **economic conditions, interest rate risk, credit risk, regulatory changes, and litigation**[193](index=193&type=chunk) [Company Overview](index=68&type=section&id=Company%20Overview) This section provides a brief overview of Alerus Financial Corporation as a commercial wealth bank and national retirement services provider - Alerus Financial Corporation is a **commercial wealth bank and national retirement services provider**, offering financial solutions through banking, retirement and benefit services, and wealth management[194](index=194&type=chunk) - The Company generates a majority of its overall revenue from **noninterest income**[195](index=195&type=chunk) [Critical Accounting Policies](index=69&type=section&id=Critical%20Accounting%20Policies) This section discusses the Company's critical accounting policies that involve significant judgments and uncertainties - Critical accounting policies involve significant judgments and uncertainties, including the **Allowance for Credit Losses (ACL) on loans, goodwill impairment, and fair value of acquired loans**[196](index=196&type=chunk) - There have been no material changes to these policies since the Annual Report on Form 10-K for the year ended December 31, 2024[197](index=197&type=chunk) [Recent Developments](index=69&type=section&id=Recent%20Developments) This section outlines recent significant events, including dividend declarations and asset sales - The Board of Directors declared a quarterly cash dividend of **$0.21 per common share** on May 22, 2025[199](index=199&type=chunk) - The Company's West Fargo, North Dakota branch is listed for sale for **$3.8 million**, with an expected gain on sale as its carrying value is approximately **$0.4 million**[200](index=200&type=chunk) [Operating Results Overview](index=69&type=section&id=Operating%20Results%20Overview) This section provides a summary of key performance ratios and metrics for the Company's operating results | Performance Ratio | Q2 2025 | Q2 2024 | Change (QoQ) | | :-------------------------------------- | :------ | :------ | :----------- | | Return on average total assets | 1.53% | 0.58% | +163.79% | | Return on average common equity | 15.82% | 6.76% | +134.02% | | Net interest margin (taxable-equivalent) | 3.51% | 2.39% | +46.86% | | Efficiency ratio | 60.66% | 72.50% | -16.20% | | Diluted earnings per common share | $0.78 | $0.31 | +151.61% | | Mortgage originations (in thousands) | $134,634 | $109,254 | +23.23% | [Selected Financial Data](index=71&type=section&id=Selected%20Financial%20Data) This section presents key financial metrics and balances for comparative periods, highlighting significant changes in the Company's financial position and performance | Metric (in thousands) | June 30, 2025 | June 30, 2024 | Change (YoY) | | :-------------------------------------- | :------------ | :------------ | :----------- | | Average Loans | $4,079,084 | $2,837,232 | +43.77% | | Average Deposits | $4,305,275 | $3,230,699 | +33.27% | | Period End Total Assets | $5,323,822 | $4,358,623 | +22.15% | | Period End Total Stockholders' Equity | $533,155 | $373,226 | +42.87% | | Net Interest Income (Q2) | $43,032 | $24,001 | +79.30% | | Net Income (Q2) | $20,253 | $6,208 | +226.25% | [Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures](index=71&type=section&id=Non-GAAP%20to%20GAAP%20Reconciliations%20and%20Calculation%20of%20Non-GAAP%20Financial%20Measures) This section provides reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures, used by management to analyze performance - Management uses non-GAAP financial measures to analyze performance and evaluate capital adequacy, believing these measures are frequently used by financial analysts and investors to compare banking organizations with significant goodwill or other intangible assets[204](index=204&type=chunk) | Non-GAAP Metric | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Tangible common equity to tangible assets | 7.87% | 7.13% | +10.38% | | Tangible book value per common share | $16.11 | $14.44 | +11.56% | | Adjusted diluted earnings per common share (Q2) | $0.72 | $0.34 | +111.76% | | Adjusted efficiency ratio (Q2) | 62.35% | 70.80% | -11.93% | [Discussion and Analysis of Results of Operations](index=75&type=section&id=Discussion%20and%20Analysis%20of%20Results%20of%20Operations) This section provides a detailed narrative analysis of the Company's financial performance, explaining significant changes in income, expenses, and segment results [Net Income](index=75&type=section&id=Net%20Income) This section analyzes the drivers of the Company's net income and diluted earnings per common share for the reported periods | Metric (in millions, except per share) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (QoQ) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Net income | $20.3 | $6.2 | +227.42% | | Diluted common share | $0.78 | $0.31 | +151.61% | | Net income (YTD) | $33.6 | $12.6 | +166.67% | | Diluted common share (YTD) | $1.30 | $0.63 | +106.35% | - The significant increase in net income was primarily driven by a **$19.0 million increase in net interest income** and a **$4.4 million increase in noninterest income**, partially offset by a **$9.6 million increase in noninterest expense**[210](index=210&type=chunk)[212](index=212&type=chunk) [Net Interest Income](index=76&type=section&id=Net%20Interest%20Income) This section analyzes the Company's net interest income and net interest margin, explaining changes in interest income and expense | Metric (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (QoQ) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Net interest income | $43.0 | $24.0 | +79.17% | | Net interest margin (tax-equivalent) | 3.51% | 2.39% | +46.86% | | Net interest income (YTD) | $84.2 | $46.2 | +82.25% | | Net interest margin (tax-equivalent, YTD) | 3.46% | 2.35% | +47.23% | - The increase in net interest income was primarily due to a **$17.4 million increase in interest income**, as average earning assets increased by **$1.0 billion** and the average interest earning asset yield increased by **43 basis points**[214](index=214&type=chunk)[216](index=216&type=chunk) - Interest expense decreased by **$1.6 million** due to an **85 basis point decline** in the average rate paid on interest-bearing liabilities, partially offset by a **$714.9 million increase** in the average balance of interest-bearing liabilities[214](index=214&type=chunk)[216](index=216&type=chunk) - These changes were largely influenced by the **HMNF transaction** and organic loan and deposit growth[214](index=214&type=chunk)[216](index=216&type=chunk) [Provision for Credit Losses](index=81&type=section&id=Provision%20for%20Credit%20Losses) This section discusses the Company's provision for credit losses, explaining the factors contributing to its changes | Metric (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (QoQ) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Provision for credit losses | $0.0 | $4.5 | -100.00% | | Provision for credit losses (YTD) | $0.9 | $4.5 | -80.00% | - The decrease in the provision for credit losses was primarily driven by changes in net loans and a decrease in the required reserve for unfunded commitments[225](index=225&type=chunk)[226](index=226&type=chunk) [Noninterest Income](index=81&type=section&id=Noninterest%20Income) This section analyzes the components of the Company's noninterest income, highlighting significant increases from various sources | Metric (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (QoQ) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Total noninterest income | $31.8 | $27.4 | +16.06% | | Gain on sale of non-mortgage loan | $2.1 | $0.0 | N/A | | Wealth revenue | $7.4 | $6.4 | +15.63% | | Mortgage banking revenue | $3.7 | $2.6 | +42.31% | - The increase in noninterest income was primarily driven by a **$2.1 million gain on the sale of a PCD hospitality loan**, a **15.8% increase in wealth revenue** due to improved markets and the HMNF transaction, and a **43.0% increase in mortgage banking revenue** from a higher gain on sale rate and increased mortgage servicing revenue due to the HMNF transaction[227](index=227&type=chunk)[228](index=228&type=chunk) [Noninterest Expense](index=83&type=section&id=Noninterest%20Expense) This section examines the Company's noninterest expenses, detailing the factors contributing to their changes | Metric (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (QoQ) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Total noninterest expense | $48.4 | $38.8 | +24.74% | | Compensation | $24.3 | $20.3 | +19.70% | | Employee taxes and benefits | $6.6 | $5.1 | +29.41% | | Intangible amortization expense | $2.7 | $1.3 | +107.69% | | Occupancy and equipment expense | $2.6 | $1.8 | +44.44% | - The increase in noninterest expense was primarily driven by higher compensation, employee taxes and benefits, intangible amortization, and occupancy and equipment expenses, largely due to increased headcount and branch footprint resulting from the **HMNF transaction**[230](index=230&type=chunk)[231](index=231&type=chunk) [Income Tax Expense](index=83&type=section&id=Income%20Tax%20Expense) This section analyzes the Company's income tax expense and effective tax rate for the reported periods | Metric (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (QoQ) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Income tax expense | $6.1 | $1.9 | +221.05% | | Pre-tax income | $26.4 | $8.1 | +225.93% | | Effective tax rate | 23.2% | 23.7% | -2.11% | [Segment Reporting](index=84&type=section&id=Segment%20Reporting) This section provides a detailed breakdown of financial performance by the Company's operating segments - The Banking segment's net income before taxes significantly increased, while Retirement and Benefit Services saw a modest increase, and Wealth experienced a slight decrease[239](index=239&type=chunk)[241](index=241&type=chunk)[244](index=244&type=chunk) | Segment (in thousands) | Net Income Before Taxes (Q2 2025) | Net Income Before Taxes (Q2 2024) | Change (QoQ) | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Banking | $21,268 | $5,530 | +284.59% | | Retirement and Benefit Services | $2,858 | $2,656 | +7.60% | | Wealth | $2,231 | $2,452 | -8.97% | [Financial Condition](index=86&type=section&id=Financial%20Condition) This section details the Company's balance sheet changes, highlighting the increase in total assets driven by loan growth and the composition of its investment securities and diversified loan portfolio [Overview](index=86&type=section&id=Overview) This section provides a high-level summary of the changes in the Company's total assets and their primary drivers - Total assets increased by **$62.1 million, or 1.2%**, to **$5.3 billion** as of June 30, 2025, primarily due to a **$52.1 million increase in loans held for investment** and a **$50.2 million non-cash transfer to non-mortgage loans held for sale**, partially offset by decreases in investment securities[245](index=245&type=chunk) [Investment Securities](index=86&type=section&id=Investment%20Securities) This section describes the composition and changes in the Company's investment securities portfolio | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Total available-for-sale investment securities | $541,152 | $588,053 | -7.97% | | Total held-to-maturity investment securities | $231,504 | $236,986 | -2.31% | | Total investment securities | $772,656 | $825,039 | -6.35% | - The investment portfolio composition reflects the Company's strategy for liquidity, interest rate risk balance, and revenue generation, with actual maturities potentially differing from contractual due to call or prepayment rights[247](index=247&type=chunk) [Loans](index=88&type=section&id=Loans) This section provides a detailed analysis of the Company's loan portfolio, including its diversification across various segments and associated risk management | Loan Segment (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Total loans outstanding | $4,044,657 | $3,992,534 | +1.31% | | Commercial and industrial | $675,892 | $666,727 | +1.37% | | Total commercial real estate | $2,013,869 | $1,996,243 | +0.88% | | Total agricultural | $134,326 | $124,307 | +8.06% | | Total consumer | $1,220,570 | $1,205,257 | +1.27% | | Residential real estate (RRE) portfolio | $1,179,566 | $1,161,135 | +1.59% | - The loan portfolio is diversified across **commercial and industrial, commercial real estate, agricultural, and consumer loans**[250](index=250&type=chunk) - Commercial real estate loans are monitored for market conditions, cash flow, and collateral, with policies reviewed semi-annually[253](index=253&type=chunk)[254](index=254&type=chunk) - The RRE portfolio has **minimal direct exposure to subprime mortgages**[262](index=262&type=chunk) [Asset Quality](index=93&type=section&id=Asset%20Quality) This section outlines the Company's credit risk management, including loan risk ratings, nonperforming assets, and the Allowance for Credit Losses (ACL) [Credit Quality Indicators](index=93&type=section&id=Credit%20Quality%20Indicators) This section discusses the Company's credit quality indicators, including risk ratings for loans and trends in criticized loans | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Total criticized loans | $212,592 | $198,281 | +7.22% | | Criticized loans as a percent of total loans | 5.26% | 4.97% | +5.84% | - Loans are assigned risk ratings (pass, special mention, substandard, doubtful, loss) based on borrower's ability to service debt, financial condition, and economic trends[266](index=266&type=chunk) - Criticized loans increased, indicating ongoing monitoring of credit risk[267](index=267&type=chunk) [Nonperforming Assets](index=93&type=section&id=Nonperforming%20Assets) This section details the Company's nonperforming assets, including nonperforming loans and their ratios to total loans and assets | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Total nonperforming loans | $51,478 | $62,886 | -18.14% | | Total nonperforming assets | $52,229 | $62,886 | -16.94% | | Nonperforming loans to total loans | 1.27% | 1.58% | -19.62% | | Nonperforming assets to total assets | 0.98% | 1.20% | -18.33% | | ACL on loans to nonperforming loans | 115% | 95% | +21.05% | - Nonperforming assets decreased, driven by a reduction in nonaccrual loans and accruing loans 90+ days past due[268](index=268&type=chunk) - Interest income lost on nonaccrual loans was approximately **$2.3 million** for the six months ended June 30, 2025[268](index=268&type=chunk) [Allowance for Credit Losses](index=95&type=section&id=Allowance%20for%20Credit%20Losses) This section explains the methodology for estimating the Allowance for Credit Losses (ACL) and its changes, including net charge-offs | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | ACL on loans at end of period | $59,278 | $59,929 | -1.09% | | Net charge-offs (recoveries) (Q2) | $3,767 | $2,522 | +49.37% | | Net charge-offs (recoveries) (YTD) | $4,174 | $2,580 | +61.78% | | ACL on loans to total loans | 1.47% | 1.31% | +12.21% | | ACL on loans to nonaccrual loans | 115.61% | 138.79% | -16.70% | | Net charge-offs/(recoveries) to average total loans (annualized, Q2) | 0.37% | 0.36% | +2.78% | - The ACL on loans is maintained to absorb expected losses, estimated using historical loss experience adjusted for current conditions and forecasts[269](index=269&type=chunk)[270](index=270&type=chunk) - A **$3.4 million charge-off** in Q2 2025 was related to the sale and transfer of non-owner occupied commercial real estate hospitality loans[272](index=272&type=chunk) [Deposits](index=98&type=section&id=Deposits) This section analyzes the Company's deposit portfolio, noting a slight decrease in total deposits due to seasonal outflows and reduced synergistic deposits, partially offset by an increase in brokered deposits | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Total deposits | $4,337,468 | $4,378,410 | -0.93% | | Noninterest-bearing demand | $790,300 | $903,466 | -12.53% | | Interest-bearing demand | $1,214,597 | $1,220,173 | -0.46% | | Money market and savings | $1,534,102 | $1,547,806 | -0.88% | | Time deposits | $798,469 | $706,965 | +12.94% | | Total uninsured deposits | $1,400,000 | $1,500,000 | -6.67% | - The decrease in total deposits was primarily due to seasonal outflows from public funds depositors and a decrease in clearing and synergistic deposits, partially offset by an increase in brokered deposit balances to diversify funding structure[277](index=277&type=chunk) [Borrowings](index=100&type=section&id=Borrowings) This section details the Company's borrowed funds, showing an increase driven by Fed funds purchased, while FHLB short-term advances remained constant | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Total borrowed funds | $373,726 | $298,029 | +25.47% | | Fed funds purchased | $114,600 | $38,960 | +194.14% | | FHLB short-term advances | $200,000 | $200,000 | 0.00% | | Subordinated notes | $50,000 | $50,000 | 0.00% | | Junior subordinated debentures | $9,126 | $9,069 | +0.63% | [Capital Resources](index=100&type=section&id=Capital%20Resources) This section highlights the growth in stockholders' equity and the Company's strong capital ratios, which exceed regulatory minimums and reflect its 'well capitalized' status | Capital Metric | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Stockholders' equity | $533,200 | $495,400 | +7.63% | | Tangible common equity to tangible assets | 7.87% | 7.13% | +10.38% | | Common equity tier 1 capital to risk weighted assets (Consolidated) | 10.54% | 9.91% | +6.36% | | Common equity tier 1 capital to risk weighted assets (Bank) | 10.78% | 10.18% | +5.89% | - The Company consistently maintains regulatory capital ratios at or above the **'well-capitalized' standards**, ensuring an adequate capital base to support its activities and absorb unexpected losses[287](index=287&type=chunk)[289](index=289&type=chunk) [Off-Balance Sheet Arrangements](index=102&type=section&id=Off-Balance%20Sheet%20Arrangements) This section summarizes the Company's off-balance sheet credit-related commitments, which primarily consist of commitments to extend credit and standby letters of credit | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | Commitments to extend credit | $1,002,440 | $1,090,114 | -8.04% | | Standby letters of credit | $17,943 | $30,033 | -40.26% | | Total off-balance sheet arrangements | $1,020,383 | $1,120,147 | -8.89% | - The credit risks associated with these commitments are managed with the same policies as on-balance sheet loans, and collateral may be required based on creditworthiness[291](index=291&type=chunk) [Liquidity](index=102&type=section&id=Liquidity) This section describes the Company's liquidity management process, which involves monitoring funds to meet financial commitments and having contingency plans for potential funding crises | Metric (in millions) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------------- | :------------ | :---------------- | :----- | | On-balance sheet liquidity | $505.9 | $579.0 | -12.62% | | Off-balance sheet liquidity | $2,200.0 | $2,300.0 | -4.35% | | Available FHLB borrowing capacity | $1,100.0 | N/A | N/A | | Unsecured lines of credit | $127.0 | N/A | N/A | - Liquidity is managed by the ALCO, which ensures sufficient funds for normal operations and maintains a contingency funding policy for stress events[293](index=293&type=chunk) - The Bank, being 'well capitalized,' can accept wholesale deposits up to **20.0% of total assets**[297](index=297&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=104&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the Company's exposure to market risk, primarily interest rate risk, and outlines its management strategies and other operational and compliance risks [Interest Rate Risk](index=104&type=section&id=Interest%20Rate%20Risk) This section details the Company's management of interest rate risk through monitoring, simulation models, and sensitivity analysis - Interest rate risk is actively managed through monitoring loan and deposit flows, investment and funding activities, and using **net interest income simulation models** and **economic value of equity sensitivity analysis** to capture short-term and long-term exposure[301](index=301&type=chunk)[304](index=304&type=chunk)[305](index=305&type=chunk) | Interest Rate Shift | Net Interest Income Sensitivity (12 months, June 30, 2025) | Net Interest Income Sensitivity (12 months, December 31, 2024) | | :-------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | | +400 basis points | 0.5% | 1.7% | | +300 basis points | 0.3% | 1.2% | | +200 basis points | 0.5% | 1.1% | | +100 basis points | 0.4% | 0.6% | | -100 basis points | 0.6% | 0.4% | | -200 basis points | 1.0% | 0.7% | | -300 basis points | 1.8% | 0.8% | | -400 basis points | 4.3% | 4.0% | | Interest Rate Shift | Economic Value of Equity Sensitivity (June 30, 2025) | Economic Value of Equity Sensitivity (December 31, 2024) | | :-------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | | +400 basis points | -2.5% | -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](index=106&type=section&id=Operational%20Risk) This section defines operational risk and outlines the Company's strategies for managing it through internal controls and processes - Operational risk, defined as loss from human behavior, failed internal systems, or external influences, is managed through continuous strengthening of **internal controls, enterprise risk management, operating processes, and employee awareness**[311](index=311&type=chunk) [Compliance Risk](index=106&type=section&id=Compliance%20Risk) This section addresses compliance risk, which is the potential for regulatory sanctions or financial loss due to non-compliance with rules and regulations - Compliance risk, the risk of regulatory sanctions or financial loss from non-compliance with rules and regulations, is addressed across various activities including **anti-money laundering, privacy, community reinvestment, and fair lending**[312](index=312&type=chunk) [Strategic and/or Reputation Risk](index=106&type=section&id=Strategic%20and%2For%20Reputation%20Risk) This section discusses strategic and/or reputation risk, encompassing losses from impaired reputation or failure to execute business plans - Strategic and/or reputation risk, encompassing loss from impaired reputation or failure to execute business plans, is mitigated through initiatives that enhance management's understanding and reporting of risks related to new products and business initiatives[313](index=313&type=chunk) [Item 4. Controls and Procedures](index=106&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures, concluding their effectiveness, and outlines the remediation of a previously identified material weakness [Evaluation of Disclosure Controls and Procedures](index=106&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on the effectiveness of the Company's disclosure controls and procedures as evaluated by management - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were **effective as of June 30, 2025**, providing reasonable assurance for timely and accurate reporting of information required under the Exchange Act[314](index=314&type=chunk) [Changes in Internal Control over Financial Reporting](index=106&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section describes any material changes in the Company's internal control over financial reporting during the period - A material weakness related to goodwill calculation identified in the 2024 Form 10-K has been addressed through the design and implementation of new control activities and employee training on business combination accounting[316](index=316&type=chunk) - No other material changes to internal control over financial reporting occurred during the quarter[316](index=316&type=chunk) PART II—OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, other information, exhibits, and signatures [Item 1. Legal Proceedings](index=108&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the detailed disclosures on legal proceedings, litigation, and regulatory actions provided in Note 12 of the consolidated financial statements - For information regarding litigation, other disputes, and regulatory proceedings, refer to the **'Legal Contingencies' section in Note 12** of the consolidated financial statements[318](index=318&type=chunk) [Item 1A. Risk Factors](index=108&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K - 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[319](index=319&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=108&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports no unregistered sales of equity securities and details common stock repurchases made for withholding taxes on restricted stock awards - No unregistered sales of equity securities occurred[320](index=320&type=chunk) - The Company repurchased **67,826 shares of common stock** in May 2025 at an average price of **$21.59 per share**, primarily for withholding taxes on vesting restricted stock awards[321](index=321&type=chunk) - No shares were repurchased under the publicly announced stock repurchase program during the second quarter of 2025[322](index=322&type=chunk) [Item 3. Defaults Upon Senior Securities](index=108&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that there were no defaults upon senior securities during the reported period - There were **no defaults upon senior securities**[324](index=324&type=chunk) [Item 4. Mine Safety Disclosures](index=108&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that the disclosures related to mine safety are not applicable to the Company - Mine Safety Disclosures are **not applicable** to the Company[325](index=325&type=chunk) [Item 5. Other Information](index=108&type=section&id=Item%205.%20Other%20Information) This section reports that no directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025 - No directors or executive officers adopted or terminated any **Rule 10b5-1 trading arrangements** during the fiscal quarter ended June 30, 2025[326](index=326&type=chunk) [Item 6. Exhibits](index=109&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, certifications from the CEO and CFO, and XBRL data files - The exhibits include the Company's **Third Amended and Restated Certificate of Incorporation, Second Amended and Restated Bylaws, CEO and CFO certifications** (Rule 13(a)-14(a) and 18 U.S.C. Section 1350), and iXBRL taxonomy files[327](index=327&type=chunk) [Signatures](index=110&type=section&id=Signatures) This section contains the required signatures of the Company's President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, certifying the filing of the report - The report was signed on **August 5, 2025**, by **Katie A. Lorenson**, President and Chief Executive Officer, and **Alan A. Villalon**, Executive Vice President and Chief Financial Officer[331](index=331&type=chunk)

Financial Data and Key Metrics Changes - The company reported adjusted earnings per diluted share of $0.72, representing an adjusted return on assets of 1.41% [4] - Net interest income increased by 4.6% over the prior quarter, while fee income rose by 15% [11] - The net interest margin improved by 10 basis points to 3.51% [12] - Adjusted pre-provision net revenue grew by 23.2% over the prior quarter [27] Business Line Data and Key Metrics Changes - The retirement services business generated stable revenue of over $16 million, with assets under administration and management increasing by 6.3% [17][18] - The wealth management business saw revenues increase by 6.6% on a linked quarter basis, with assets under management rising by 2.5% [18] - Noninterest income from banking was $8.4 million for the second quarter, with a $2.1 million gain related to the sale of hospitality loans [16] Market Data and Key Metrics Changes - Deposits shrank by 3.3% due to expected seasonal outflows from public funds [15] - The company expects continued seasonal volatility in deposits, with average deposit account sizes growing over 20% since 2019 [15] Company Strategy and Development Direction - The company is focused on maximizing profitability through disciplined pricing and enhancing its diversified business model [4][5] - Strategic initiatives include optimizing the balance sheet and investing in talent and technology to deepen client relationships [8][9] - The company aims to achieve consistent performance levels and is targeting mid-single-digit loan growth for 2025 [22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic uncertainty and competitive pressures but emphasized a disciplined approach to growth and credit risk management [87] - The guidance for the year remains consistent, with expectations for low single-digit deposit growth and continued focus on core business lines [22][26] Other Important Information - The company recorded no provision for the quarter due to a net gain from the sale of hospitality loans [6] - The adjusted efficiency ratio improved to 52.4% from 66.9% in the prior quarter [19] - The company remains well-capitalized with a common equity Tier one capital ratio of 10.5% [21] Q&A Session Summary Question: What are the expectations for third and fourth quarter accretion? - The company expects 27 basis points of purchase accounting accretion in the third quarter and 22 basis points in the fourth quarter, with no early payoffs included [29][34] Question: What is the status of the larger construction credit? - The final certificate of occupancy was issued, and the property is currently at 57% leased, with expectations for a sale in early 2026 [37][65] Question: How does the company view the capital deployment for the rest of the year? - The company prioritizes organic balance sheet growth, maintaining dividend history, and pursuing M&A opportunities in the retirement sector [45] Question: What is the outlook for noninterest income? - The company expects noninterest income to be up low single digits for the year, factoring in seasonal downturns in the mortgage business [25][80] Question: How is the company addressing nonperforming assets? - Nonperforming assets are primarily driven by two large relationships, with resolutions expected in early 2026 [65][66] Question: What is the outlook for deposit costs? - The company anticipates an increase of 8 to 10 basis points in deposit costs due to competition and a shift from non-interest bearing to interest-bearing deposits [73][76]