Alerus Financial to expand in Minnesota with bank acquisition

May 15, 2024 8:56 am
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Alerus Financial in Grand Forks, North Dakota, said it would pay $116.4 million to buy HMN Financial in Rochester, Minnesota, which is home to the Mayo Clinic.

Alerus Financial in Grand Forks, North Dakota, said it would pay $116.4 million in stock to acquire Upper Midwest peer HMN Financial in Rochester, Minnesota.

The $4.4 billion-asset Alerus, a prolific acquirer, said it would gain a foothold in and around Rochester, home of the Mayo Clinic. The $1.2 billion-asset HMN, parent of Home Federal Savings Bank, has 12 branches in a region southwest of Minneapolis and near the borders of both Iowa and Wisconsin. At the heart of this area is the world-renowned Mayo health care system, which is Minnesota’s biggest employer.

Mayo previously announced it would begin a major expansion project this year that would add to a footprint that already spans much of Rochester’s downtown. It expects to attract thousands of workers as the new facilities begin to open in 2029. That sets the stage for loan and deposit expansion across a local economy that also includes computer technology, manufacturing and food processing.

“Home Federal has built a valuable core deposit franchise based on long-standing client relationships, and we believe their culture, vision and purpose align remarkably well with ours,” Katie Lorenson, president and CEO of Alerus, said in a press release Wednesday announcing the deal.

Founded in 1934, Home Federal has $872 million of loans and $1 billion of deposits.

D.A. Davidson analyst Jeff Rulis said that the deal gives Alerus “added scale” in a “solid” and growing metropolitan area of 230,000.

The transaction, should it close in the fourth quarter as planned, would mark the 26th acquisition for Alerus Financial since 2000. The deals include banks, insurance operations, asset managers and other financial services companies.

“Alerus has a proven history of successful strategic acquisitions that strengthen our ability to serve the growing needs of our clients and communities,” Lorenson added. “We look forward to welcoming our new team members and supporting their ongoing efforts in providing excellent client service, developing new business and expanding relationships with a larger balance sheet, robust treasury management and diversified financial services.”

The combined company would have about $5.5 billion of assets, including $3.7 billion of loans, and $4.3 billion of total deposits. It also would have assets under administration and management of more than $43 billion. Its branch network would span 29 locations across the Midwest and Arizona.

Alerus said the deal is expected to be immediately accretive to its earnings before one-time costs, with a tangible book value earn-back of just over two years. Cost savings are targeted at 30% of the target’s expenses.

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