Alerus Financial Reports 70.8% Decrease in Net Income

Alerus Financial Corporation has recently released its 10-K report, providing a detailed look at its financial performance and operations. The company, headquartered in Grand Forks, North Dakota, offers a range of financial services to businesses and consumers through its subsidiary, Alerus Financial, National Association. Alerus operates in four segments: Banking, Retirement and Benefit Services, Wealth Management, and Mortgage, offering various deposit products, treasury management products, commercial and consumer lending products, retirement plan administration and investment advisory services, and other financial services.

In its 2022 annual report on Form 10-K filed with the SEC on March 10, 2023, Alerus Financial Corporation reported a net income of $11.7 million for the year ended December 31, 2023, representing a significant decrease of $28.3 million, or 70.8%, compared to the $40.0 million reported for the year ended December 31, 2022. Diluted earnings per common share were $0.58 in 2023, down from $2.10 in 2022. The return on average total assets also saw a decline, dropping to 0.31% in 2023 from 1.14% in 2022. The decrease in net income was primarily driven by a $31.0 million decrease in noninterest income and an $11.9 million decrease in net interest income, partially offset by an $8.6 million decrease in noninterest expense.

The net interest income for Alerus Financial totaled $87.8 million in 2023, reflecting a decrease of $11.9 million, or 11.90%, from 2022. The net interest margin also decreased by 58 basis points to 2.46% in 2023, from the 3.04% reported in 2022. This decrease was primarily a result of a $61.2 million increase in interest expense on interest-bearing liabilities, partially offset by a $49.3 million increase in interest income on interest-earning assets. The company attributed the increase in interest expense to a 220 basis point rise in the average rate paid on interest-bearing liabilities due to increases in short-term interest rates and a highly competitive deposit environment.

Alerus Financial Corporation also recorded a provision for credit losses expense of $2.1 million for the year ended December 31, 2023, compared to no provision for credit losses expense for the year ended December 31, 2022. The increase in provision for credit losses is primarily a result of a change in forecasting assumptions brought about by the new methodology as well as strong loan growth and unfunded commitments.

Additionally, the company's noninterest income decreased by $31.0 million, or 27.9%, to $80.2 million in 2023, from $111.2 million for 2022. The decrease in noninterest income was primarily driven by a $24.6 million loss on the sale of investment securities and a $8.5 million decrease in mortgage banking revenue due to a decrease in mortgage originations resulting from higher interest rates. Similarly, the total noninterest expense decreased by $8.6 million, or 5.4%, to $150.2 million for the year ended December 31, 2023, from $158.8 million for the year ended December 31, 2022. This decrease was primarily driven by reductions in compensation expense, employee taxes and benefits expense, and professional fees and assessments expense, partially offset by an increase in business services, software, and technology expense.

or the full picture, make sure to review Alerus Financial's 10-K report.

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