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Jon Knutson, Published December 12 2009

Alerus Financial embraces growth

GRAND FORKS, N.D. - Necessity has been the mother of diversification at Alerus Financial. The financial services company – based in a slow-growth area and facing tough competition – long ago decided to expand, both geographically and by product.

“We’ve had a 25-year objective of diversifying our revenue,” said Randy Newman, chief executive officer.

Mission accomplished, at least in part.

Alerus, once strictly a Grand Forks bank, has grown into a regional company that offers a wide range of financial products and services to individuals and businesses.

One measure of Alerus’ diversification:

The company serves more than 138,000 retirement plan participants in all 50 states.

Alerus Financial has $7 billion in assets under management and administration, $1.1 billion in banking assets and $350 million in brokerage assets.

A decade ago, the company had $1.2 billion in assets under management and administration, $455 million in banking assets and $225 million in brokerage assets.

Much of the company’s growth has come through acquisitions, with this year really standing out.

The company purchases in 2009 are:

  • A bank branch in Phoenix.

  • The retirement plan practice of Eide Bailly in Minneapolis.

  • The deposits of the failed BankFirst in Minneapolis.

  • Prosperan Bank’s three branches in the Twin Cities area.

    “We’re trying to take advantage of some opportunities that have presented themselves just now,” Newman said.

    Many residents of the Twin Cities and Phoenix have strong ties to the Red River Valley, so expanding into those markets makes sense, Newman said.

    Twin Cities market

    Alerus added about 6,750 customers and $323 million in deposits through its BankFirst and Prosperan acquisitions.

    Both BankFirst and Prosperan ran into trouble after making high-risk, economically sensitive loans, and were placed under Federal Deposit Insurance Corp. control.

    Alerus investigated BankFirst and Prosperan carefully and then bid successfully for them, Newman said.

    Alerus financed the acquisitions out of its capital.

    Terms of the deals are complex, Newman said.

    Alerus paid about $2.5 million to acquire the deposits of the two banks, although the final cost to the company will be much less than that, he said.

    That’s because the FDIC agreed to share losses on Prosperan loans that Alerus acquired, he said.

    Alerus entered the Twin Cities market in 2003 by purchasing a retirement planning services company. Alerus opened a business banking office there in 2007.

    The company wanted an even bigger Twin Cities presence, preferably by acquiring existing banks there, Newman said.

    Until recently, though, such banks were too expensive to buy, he said.

    But prices have come down because of the recession and banking slump.

    That created a buying opportunity for Alerus, which avoided risky real estate loans and remains on solid footing financially, Newman said.

    What’s true for the economy overall also is true in banking, said Carol Kaplan, a spokeswoman for the Washington, D.C.-based American Bankers Association.

    “People who are in good shape financially are able to find bargains,” she said.

    North Dakota roots

    Alerus has deep ties to Grand Forks, where it is based, all the way back to 1879.

    But most area residents now think of Alerus as a Red River Valley-based, not a Grand Forks-based, company, Newman said.

    Alerus has five locations in Fargo and West Fargo and is established in the market, said Ann McConn, the company’s Fargo/West Fargo president.

    It entered the Fargo/West Fargo market with the 1987 acquisition of West Fargo State Bank.

    Alerus now has 96 Fargo/West Fargo employees, all of whom work directly with customers because operational aspects of the business are handled at other Alerus locations, McConn said.

    “Our focus is to be a community bank that provides full services, both wealth management and traditional banking services,” she said.

    It may seem strange to some that Alerus is expanding outside North Dakota when the state is doing much better financially that most of the country, Newman said.

    But North Dakota and western Minnesota have endured long stretches when the region’s agricultural-heavy economy has suffered, he said.

    Inevitably, the area’s economy will slow, increasing the importance of diversification.

    “North Dakota is our home. We’re all North Dakota natives. (But) North Dakota is a slow-growth state. We have a lot of competitors,” Newman said.

    “We felt we needed to take our business model into compatible markets that also were growing,” he said.

    Alerus continues to look for opportunities to grow and diversify. he said.

    “But we’re not going to do anything unless it makes sense.”

    Readers can reach Forum reporter Jonathan Knutson at (701) 241-5530