Dive Brief:

• Grand Forks, North Dakota-based Alerus Financial has agreed to acquire Rochester, Minnesota-based HMN Financial in an all-stock deal valued at roughly $116.4 million, the companies announced Wednesday.
• The combined company will have roughly $5.5 billion in assets, $3.7 billion in loans and $4.3 billion in deposits after the transaction closes, expected in the fourth quarter, the companies said. along with assets under administration and management of nearly $43.1 billion.
• HMN, through its banking subsidiary Home Federal, will provide Alerus with a gateway into the Rochester market with $592 million in deposits, according to an investor presentation. The combined entity will have 29 branches across the Midwest and Arizona.

Dive Insight:

The deal will mark Alerus's 26th acquisition since 2000, when the Bank of Grand Forks rebranded. To date, the firm has made 15 acquisitions in banking and 10 in retirement and benefits services, according to the investor presentation.

“We are pleased with this partnership and the strategic expansion into the growing and vibrant Rochester, Minnesota, market and other communities Home Federal serves,” Alerus CEO Katie Lorenson said in a statement. “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.”

Home Federal, with $1.2 billion in assets, operates 12 branches in Minnesota and one each in Iowa and Wisconsin.

“We believe we have found an exceptional partner in Alerus,” Brad Krehbiel, CEO of HMN, said in a statement Wednesday. “They have a proven track record of diversification, profitable growth and the ability to execute acquisitions. We are confident this merger will serve all our constituents well, including our stockholders, clients, employees and communities.”

Under the agreement, HMN shareholders will receive 1.25 shares of Alerus common stock for each share of HMN common stock they own, for an aggregate deal value of $25.86 per share. The deal is expected to be immediately accretive to Alerus’s estimated earnings before one-time costs, with a tangible book value earn-back of a little over two years. 

After the deal is complete, one director from HMN will join Alerus’s board, the company said.

“Alerus has a proven history of successful strategic acquisitions that strengthen our ability to serve the growing needs of our clients and communities,” Lorenson said.