Alerus Financial - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 delivered strong earnings with net income of $20.3M and diluted EPS of $0.78; adjusted diluted EPS was $0.72, up 28.6% q/q, driven by higher net interest income, fee growth, and expense discipline.
• Results beat S&P Global consensus: EPS $0.72 vs $0.54* and revenue $74.8M vs $70.0M*; beats were aided by net interest margin expansion to 3.51% and a $2.1M gain on sale of a hospitality loan, while core credit costs remained low after excluding PCD reserve charge-offs.
• Balance sheet optimization (sale/classification of ~$62.5M hospitality CRE) reduced risk and supported zero provision in the quarter; adjusted net charge-offs were only 0.07% of average loans.
• Guidance was largely maintained: 2025 NIM 3.25%–3.35% (reported), deposit costs expected +8–10 bps in Q3, purchase accounting attrition to moderate (27 bps in Q3, 22 bps in Q4); medium-term catalysts include sustained >40% fee mix and retirement/wealth platform upgrades.

Note: Asterisk (*) denotes values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

• Fee mix stayed a strategic differentiator at 42.5% of revenue, supporting resilience and valuation; management emphasized “industry-leading fee income,” with retirement and wealth momentum and a new wealth platform implementation.
• NIM expanded 10 bps q/q to 3.51%, with net interest income up 4.6% q/q (loan yields higher, stable cost of funds), and adjusted efficiency ratio improved to 62.4% from 66.9%.
• Proactive credit risk actions: strategic sale/classification of ~$62.5M hospitality CRE, $2.1M gain on sale, zero provision, and adjusted net charge-offs at 7 bps; CET1 rose to 10.54% and tangible common equity ratio to 7.87%.

Management quotes:

• “Industry-leading fee income of more than 42% will be the ultimate differentiator of our valuation.”
• “We are replacing [purchase accounting] with disciplined pricing on renewals of the core client base.”
• “We took proactive steps to optimize our balance sheet, including a strategic sale of $60 million in non-owner occupied CRE hospitality loans.”

What Went Wrong

• Headline net charge-offs rose to 0.37% due to $3.4M charge-off tied to the hospitality loan sale (mostly day-1 PCD reserves); adjusted NCOs remained low, but the reported metric masks underlying credit stability.
• Deposit trends showed seasonal pressure and mix shift: total deposits down 0.9% from year-end; noninterest-bearing deposits fell $113.2M, and deposit competition will lift costs by 8–10 bps in Q3.
• Noninterest expense remains elevated vs prior year (up 25% y/y) on HMNF integration, intangible amortization, tech upgrades, and occupancy expansion, even as q/q core expenses improved; mortgage revenue expected to seasonally soften in H2.

Transcript

Speaker 4

Good morning and welcome to the Alerus Financial Corporation conference call. All participants will be on a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. This call may include forward-looking statements, and the company's actual results may differ materially from those indicated in any forward-looking statement. Important factors that could cause actual results to differ materially from those indicated in the forward-looking statement are listed in the earnings release and the company's SEC filings. I would now like to turn the conference over to Alerus Financial Corporation's President and CEO, Katie Lorenson. Please go ahead.

Speaker 3

Thank you. Good morning and thank you for joining us today. I'm Katie Lorenson, President and CEO, and I'm pleased to be here with our Chief Financial Officer, Al Villalon, our Chief Banking and Revenue Officer, Karin Taylor, our Chief Banking and Revenue Officer, Jim Collins, and our Chief Retirement Services Officer, Forrest Wilson. Each of these leaders continues to play a crucial role in driving our company's progress towards transformational growth and top-tier performance. This quarter marks a significant step forward in our journey to deliver long-term, sustainable top-tier performance as we reported an adjusted earnings per diluted share of $0.72, which represents an adjusted return on assets of 1.41%. Our results reflect our efforts to build on the strength of our uniquely diversified business model, combining traditional commercial and private banking with the highly valuable and capital-light fee-based businesses in wealth management and retirement and benefits.

This business model not only differentiates us in the growing communities and client base we serve, it also provides resilience across economic cycles and the ability to outperform traditional banks. We're seeing encouraging momentum across our core businesses. The transformation in our commercial wealth bank is nearing completion, with our focus turned towards maximizing the capacity in our organization and infrastructure to further enhance profitability. While we continue to see the benefit of purchase accounting, we are replacing this with disciplined pricing on renewals of the core client base. During the quarter, deposit outflows were as expected from public to the tax payments, while client retention and legacy layers in the recently acquired Home Federal portfolio remained at high levels. We see robust opportunities in our lending pipeline, but we'll continue to be highly selective with our team focused on deposit risk opportunities and prioritizing full CNI relationships.

We also took proactive steps to optimize our balance sheet, including a strategic sale of $60 million in non-owner occupied commercial real estate hospitality loans, which resulted in a net $2 million gain during the quarter. As a result of the sale, we were able to reverse related reserves on the portfolio, which allowed us to record no provision for the quarter. Reserve levels remain robust at 1.47% of loans, and notably, net charge-offs were limited to 7 basis points when excluding the accounting entries of the hospitality loan sale. Industry-leading fee income of more than 42% will be the ultimate differentiator of our valuation. The cornerstone of our top-tier fee income levels is our retirement and benefits business. Our talented team continues to execute on several key strategic initiatives to grow our business, secure meaningful partnerships, and make impactful operational improvements.

We remain focused on this business, given the tailwinds of Secure 2.0, in addition to growing opportunities for M&A. The value of the retirement business is multifaceted due to the stability and durability it brings to our company's earnings, with minimal capital allocation and balance sheet risks, in addition to the tangible synergy we leverage in deposits and the capture of wealth business. Similarly, our wealth business has strong momentum, and we're investing in talent and technology to deepen client relationships and expand our reach. As an enhancement for the business, we upgraded our wealth management platform, which will allow us to continue to progress in our long-term goal of doubling the number of wealth advisors and growing our assets under management at the same pace as our banking assets. A shout out to all of our team members and wealth advisors who made this conversion seamless for our clients.

Results of our team's focus on expense management are evident, with another quarter of improvements in our efficiency ratio. We continue to balance our investments in talent and technology with long-term and sustainable improvements while optimizing everywhere. In short, we're making significant progress. This quarter's results were excellent, and I want to thank our team members for their continued efforts to return Alerus to top-tier performance. We know this path is not linear and requires an unwavering focus on constant improvement and expense management. Our guidance for the year remains consistent with prior quarter's communication, with the ultimate goal of achieving this quarter's level of performance consistently. The foundation is solid, the strategy is clear, and the opportunity ahead is compelling. Thank you again for your continued support, and I'll turn it over to Al to walk through the financials in more detail.

Speaker 2

Thanks, Katie. Turn to page 11 of our investment dataset posted in an investor-related news part of our website. On a recorded basis, net interest income increased 4.6% over the prior quarter, while fee income increased 15%. The increase in net interest income is primarily driven by remixing of maturing loans being replaced by organic loan growth at higher spreads, while interest expense remains relatively stable. Our fee income remains over 40% of revenues and the low hub industry average of 19%. Let's dive into the drivers of net interest income in the next slide. Turning to page 12, in the second quarter, net interest income continues to reach new heights at $43 million, and our reported net interest margin increased another 10 basis points to 3.51%. Our net interest margin continues to show improvement. Our total cost of funds remains stable at 2.33%.

We have 45 basis points of purchase accounting increase in the quarter. Of those 45 basis points, nine basis points were from early payoffs. We remain disciplined in pricing as we continue to not price on the personal yield curve for loans. In the second quarter, we continue to see strong spreads, which contributed to core net interest margin expansion, and the average rate on the loan portfolio during the quarter increased eight basis points from the end of the first quarter. Let's turn to page 13 to talk about our earning assets. At the end of the second quarter, we either sold or classified and held for sale over $60 million of hospitality loans. Net gain from the sale of all these loans was over $2 million.

Assuming the loan sale is a bifurcation, loan growth was appraisable as approximately 0.5% over the prior quarter, with the most growth in C&I and owner-occupied CRE. We remain focused on old relationships within the middle market and business banking space. For the remainder of 2025, we expect over $271 million of loan contractual maturities, which is almost 7% of total loans. Our investment portfolio declined to $807 million, or just around 15% of earning assets. AOCI includes an unrealized loss of under $60 million. For the remainder of 2025, we expect over $45 million, or close to 6% of the total portfolio, of principal payouts with a yield in the low 2% range. We will continue to collect the balance sheet we make from low-yielding investments to higher-yielding loans.

Turning to page 14, on a period-ending basis, our deposits shrank 3.3% as we saw expected seasonal outflow from public funds and our clients using liquidity for tax obligations. Since 2010, the median decrease in deposits from one Q to Q2 has been over 5%. The new expected seasonal volatility continuing increases our average deposit account size has grown over 20% since the end of 2019, due to our focused efforts to grow in the commercial space. Lastly, since the close of acquisition of Home Federal, our net retention rate remains close to 97%. Turning to page 15, I'll now talk about our banking segment, which also includes our mortgage business. I'll focus on the fee income components now since net interest income was previously discussed. Overall, non-interest income from banking was $8.4 million for the second quarter.

The quarter included a $2.1 million gain related to the sale of hospitality loans. Mortgage revenues also improved $2.1 million from the first quarter as we saw a seasonal uptick in the business. We also saw very little swap income this quarter, which tends to be more based on quarter to quarter. On page 16, I'll provide some highlights on our retirement business. Total revenue from our business was relatively stable, over $16 million. Retirement services continues to be a stable and reliable source of fee income and is not a capital intensive segment. Assets under administration and management increased 6.3%, mainly due to market performance. We continue to see volatile business production with over three of the current half of 2025. Turning to page 17, you can see highlights for our wealth management business.

On a late quarter basis, revenues increased 6.6%, while end-of-quarter assets under management increased 2.5%, mainly due to market performance. During the quarter, we transitioned to a new platform that will deliver a better experience for both clients and financial advisors. With a new and highly regarded system, we not only provide a unique value proposition to our clients, but we also are able to differentiate ourselves in our recruiting efforts to add more wealth advisors. Page 18 provides an overview of our non-interest expense. During the quarter, non-interest expense decreased 3.8% due to the seasonal decrease in benefits, less acquisition expenses in the quarter on a reported basis, and due to an insurance reimbursement. Our adjusted efficiency ratio was 62.4% versus 66.9% in the prior quarter. Most of the improvement in our adjusted efficiency ratio was driven by both core expense and revenue improvement.

Turning to page 19, you can see our credit metrics. During the quarter, adjusted net charge-offs were only 7 basis points, which excludes the impact of the hospitality loan sale. Non-performing assets remained stable at 98 basis points compared to the prior quarter. We continue to have close to $7.10 million in reserves related to the seasonal double count and approximately $50 million of fair value marks related to Home Federal acquisitions. I'll discuss our capital liquidity on page 20. We continue to remain well-capitalized with our common equity to Tier 1 capital ratio to risk-weighted assets at 10.5%, while our tangible common equity ratio improved 44 basis points to 7.87%. On the bottom right, you'll see a breakdown in the sources of $2.7 million in potential liquidity. We did utilize some broker deposits in the quarter to optimize our funding structure.

Overall, we continue to remain well-positioned from both a liquidity and capital standpoint to support future growth. Turning to page 21, I will now update you on our guidance for 2025. Our guidance for the year remains consistent with the prior quarters and has not materially changed. While we continue to make improvements, given the seasonality we experience in our businesses, improvement is never linear from quarter to quarter. We are still expecting loan growth in mid-single digits for 2025, excluding loans moved to held for sale. Deposit growth of low single digits remains the same. For the third quarter, though, we will see continued seasonal deposit outflows from our public funds. Net interest margin of 3.25% to 3.35%. Within this guidance, we're seeing several things. First, we are expecting less purchase accounting attrition in the back half of the year.

We're expecting less in purchase accounting attrition for the remaining quarters due to accelerated payoff already recognized. Currently, we're expecting 27 basis points of purchase accounting attrition in the third quarter, which is an 18 basis point reduction compared to the second quarter. For the fourth quarter, we are only expecting 22 basis points of attrition. Both attrition numbers are based on contractual payoff data. Second, we are not expecting any early payoff, which has averaged over 8 basis points over the past three quarters since the closing of the Home Federal acquisition. Lastly, we're expecting an increase in deposit cost by 8 to 10 basis points due to mitigation deposits and continued competition. We expect our non-interest income for the year to be at low single digits now on a reported basis due to the gain on loan sales recognized in the first half.

On the mortgage side, we expect mortgage to ease a little in the third quarter and hit a seasonal downturn in the fourth quarter. We expect our adjusted efficiency ratio, excluding one-time items, to be below 68% for 2025 as we continue to realize cost saves from Home Federal. In the upcoming third quarter, we expect our core expenses to be around $49 to $50 million as we recognize investments made in our core business lines in talent and technology. Summarizing page 22, we continue to build on the momentum we saw in the first quarter. Adjusted pre-provision net revenue grew 23.2% over the prior quarter. Our current adjusted return on assets of 1.41% and adjusted return on tangible common equity of over 21% are definitely in the top quartile of the banking industry. We see this as another strong quarter in the line of more to come.

With that, I will now open up for Q&A.

Speaker 4

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch screen. If you are using a speaker phone, please pick up your handset before pressing the keys. To resolve your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Jeff Rulis, who's with D.A. Davidson. Your line is open, Jeff.

Speaker 6

Thanks. Good morning. Al, I just wanted to circle back on. I missed the margin piece there or component of it. It sounds like accretion was running a little high. Could you repeat, did you outline third quarter accretion expectations and fourth?

Speaker 2

Yes, I did. Jeff, for the third quarter, we're expecting 27 basis points of purchase accounting attrition. For the fourth, we're expecting 22. Neither of those numbers has any early payoff embedded in it.

Speaker 6

If we kind of unpack on a core basis, the expectations for, on the core side in the second half.

Speaker 2

Yeah. On the second half, we still expect at the end of the year to have core margin improvement as we continue to see spreads on both loans and deposits be above our core net interest margins.

Speaker 6

Gotcha. Thanks. I think you used the non-interest income guide of, you said the up low single digits is inclusive of the gain this quarter?

Speaker 2

That is correct, Jeff.

Speaker 6

Okay. Got it, thanks. Just, I guess, talking over to the credit side, I wanted to check back in on the larger construction credit. I think we were headed toward occupancy or listing for sale this summer or June and July. I just wanted to check back in and see where the status of that is.

Speaker 0

Sure, Jeff. This is Karin. The final certificate of occupancy was issued, and the property was listed for sale in the second quarter. That's a soft listing. The project continues to be assessed. It's currently at 57%. As that progresses, obviously, it will become better positioned for sale. There's just some minor work left on the outside to complete, so it's in line with our expectations.

Speaker 6

Okay. Great. On the CRE side, it's just the acquired. Could you recall what, remind us what deal was that? Are more cleanup in that segment contemplated?

Speaker 0

Are you referring to the loan sale or to this particular construction project?

Speaker 6

No, the loan sale. Apologize. In the hospitality side.

Speaker 0

The hospitality loan sale was part of the Home Federal portfolio. You know, we saw an opportunity on that particular portfolio. The underwriting standards were a little bit more liberal than ours. We had those well-marked, and it was a market for those loans. It was a good opportunity. We'll continue to look for those opportunities to reduce risk in our balance sheet and make sure that our resources are aligned with our strategic objectives.

Speaker 6

That's okay. I mean, I guess the question is, do you think you've ring-fenced the areas where that underwriting was a little more liberal? Have you kind of attacked that piece, or is it a case-by-case?

Speaker 0

No, we addressed that with our identification of purchased credit-security-rated loans, and certainly, this particular group of loans was in that category.

Speaker 6

Okay. Great. No, thanks. I'll step back.

Speaker 4

Thank you. Your next question comes from Brendan Nosal with Piper Sandler. Please go ahead.

Speaker 7

Good morning, everybody. Hope you're doing well. Really just starting on the loan sale piece. For the piece that closed in this quarter, you recorded a nice gain on that sale. Just kind of curious for the $50 million you sold in July, any line of sight to a potential gain there?

Speaker 2

No, actually, it was just a very, very minimal loss on that one.

Speaker 7

Okay. Got it. Maybe moving over to capital, then. You folks created a fair bit of capital this quarter. Just with levels getting up to, you know, higher levels, just kind of curious how you think about deployment for the rest of this year and maybe your thoughts on the M&A landscape.

Speaker 0

Sure. Good morning. My capital priorities remain consistent as we discussed in the prior quarter. Growing for our basic pointing feature consistent with where we had pro forma loan outputs from Home Federal. We are targeting case studies for higher PCEs. Priorities are organic value growth with franchise accretive clients, as well as maintaining our dividend history and M&A on the retirement side of the business, which is typically more of the pipeline cash deals.

Speaker 7

Okay. Perfect. I'm just going to see one more in here, on the retirement business. You know, revenues were fairly flat for the quarter, but, Al, you noted a nice AUA growth. It looks like participants were down a little bit. Maybe just talk about, you know, which of these two, AUA versus participants, had a bigger impact on revenues for this business this quarter.

Speaker 2

Thanks. I'm going to let you take this one, to be honest.

Speaker 6

Can you repeat that question really quick? It was the participants versus the AUA in terms of revenue?

Speaker 7

Right, I mean, revenues.

Speaker 6

Yeah. We had some one-time effects on participants that affected us this quarter. We did some cleanup in our HSA business that was very impactful to us in a negative way in terms of participant count. With that said, these were zero balance participants that we weren't making any revenue off of. In the future, we can expect participant numbers to be going up as they have in the past, and to see that trend continue. There were some one-off events this quarter that led to that decline.

Speaker 7

Okay. All right. Thank you for taking the questions.

Speaker 4

We now have Damon DelMonte with KBW. Please go ahead, Damon.

Speaker 1

Hey, good morning, everyone. Hope you're all doing well. Thanks for taking my questions. First question on the loan growth and kind of the outlook that's supporting that. Are you seeing more demand across your footprint in the way of new credits and new customers coming on board, or is this growth opportunity more from kind of leveraging your current client base?

Speaker 7

It's leveraging the current client base, and it's taking market share. We're still not seeing a really solid, robust new generation of loans with clients and prospects necessarily. It's still the staff that we brought into all markets that's really stealing market share from the other banks and increasing with our current client base.

Speaker 1

Is there any areas, any segments that are stronger than others that have better opportunities for the growth?

Speaker 7

No, we're sticking to, you know, full CNI and really focused on that lower mid-market. We're still really focused on manufacturing, wholesaling, and distributing. That's really where we're focused. There are opportunities across the board in a lot of different segments, but with the team, it's really zeroing in on that lower mid-market. That's where we're going to find most of our growth.

Speaker 1

Got it. Okay. I appreciate that. Al, with regards to the full-year margin outlook of the 3.25% to 3.35%, is that on a reported basis? So including the benefit you guys got from the kind of accelerated fair value accretion?

Speaker 2

Yes, standard on a reported basis.

Speaker 1

On a reported basis. Okay. Great. Everything else was asked and answered. Thank you.

Speaker 0

Thank you.

Speaker 4

We now have Nathan Race with Piper Sandler. Your line is open, Nathan.

Speaker 5

Hi, everyone. Good morning. Thanks for taking the questions. In your prepared remarks, you referenced some technology upgrades and platform transitions. I was just curious, maybe Katie, if you can kind of speak to how some of these technology initiatives could increase kind of the cap rate across new clients within the Alerus franchise and just how you see opportunities to also increase existing client wallet share with all these upgrades as well.

Speaker 0

Sure. I'll start and then just can add on where I'm at. We did a full conversion of our wealth management business, that was completed in the second quarter. It went very well. This platform really improved the client experience as well as the advisor experience and the operational experience. We believe, besides our differentiated recruiting proposition that we have to advisors, the platform allows them to kind of level set and show their experience in addition to the opportunities that they have within our organizations because of the retirement synergies.

Speaker 7

Yeah, I would say Katie's right on. The new platform on the wealth side will allow us to leverage our current staff and then allow us to recruit better, and it will be a better client experience. It will also allow us better analytics to dive into that synergistic relationship and see where we can help our clients in the other areas that we have in Alerus. The other piece is, we have a very solid treasury management group to grow our C&I, and we're putting on a new online retail and commercial online system, which acts the same way as the wealth platform: better customer experience, better analytics, and the speed to market will be.

Speaker 5

Okay. That's great. That's helpful. Turning to credit, your downperformance is still almost 2X that of years on a relative basis. We need to look at the percentage of those. Maybe, Karin, just curious to get some thoughts on kind of the outlook for some larger resolutions, which is opportunities to bring down non-performance going forward.

Speaker 0

Yeah. Good morning, Nate. You know, the numbers are really being driven by the same two large relationships that we've been talking about the last couple of quarters. As I mentioned earlier, the construction deal is performing as expected in terms of meeting timelines. Realistically, that's probably an early 2026 resolution. The other one is that large residential relationship, and we are pursuing legal action on that. I would expect that would also be a first half of 2026.

Speaker 5

Okay. Great. Maybe, Al, continue to allow us to comment here on the margin outlook, but can you just maybe update us in terms of the balance sheet sensitivities to a 25 basis point Fed cut?

Speaker 2

Nate, on a 25 basis point Fed cut, we do expect our NIM to improve about 5 basis points. As a reminder, though, our guidance does not have any rate cuts embedded in it.

Speaker 5

Right. Okay, great. I appreciate all the thought. Thank you.

Speaker 0

Thanks, Dan.

Speaker 7

Great. Thanks.

Speaker 4

Thank you. We now have David Long with Raymond James. Your line is open.

Speaker 7

Morning, everyone. Al, just want to confirm on the deposit outlook, deposit cost outlook. Did you say up 8 basis points in the third quarter? As a follow-up, just wanted to get a better understanding of what your assumptions are tied to that, and also maybe some color on the overall deposit competition.

Speaker 2

David, look, what I guided you was about 8 to 10 basis points of deposit cost increase in the third quarter. They'll, you know, and then table from there going forward. Do you have anything more to take on the deposit outlook?

Speaker 7

Yeah, the deposit competition is tough, right? We have staffed up with a couple of seasoned commercial deposit bankers. Obviously, I think I talked about earlier, we have a solid treasury management group. Our strategy is still focused on full relationships of mid-market CNI and business banking. I think they have the pieces in place, but the competition is tough. Deposits are always hard to forecast, but we're sticking to our strategy.

Speaker 2

Right. Just to focus on that, David, too, if you're thinking about what's interested in competition details, we are expecting some mixture from the non-interested to interested that's going to put the pressure as part of the 8 to 10 basis point increase that we're driving to.

Speaker 7

Perfect. Thanks for that additional color. Thanks, guys.

Speaker 4

We now have a follow-up from Brendan Nosal with D.A. Davidson. Please go ahead. Brendan, please could you ensure your line is unmuted locally before speaking?

Speaker 7

Apologies. I just wanted to circle back to the fee income outlook, because it looks like you've got quite a bit of momentum. I think, you know, quarterly you're up, I don't know, 10% or so year over year, through the first half. Just help me square up the progress you've made year to date versus that relatively stable fee outlook you have for all of this year.

Speaker 2

Right. Part of it too, Brendan, is that, one, we're not forecasting the market outlook for the remainder of the year. Number two, we are expecting a seasonal downturn in our mortgage business. The fourth quarter typically is one of our weaker ones for us, and that'll put some pressure on the fee income as well. We're expecting a little bit of a pullback maybe too in the third quarter in mortgage.

Speaker 7

Okay, that's helpful. Thank you.

Speaker 4

Thank you. We have another follow-up from the line of Nathan Race with Piper Sandler. Please go ahead when you're ready.

Speaker 5

Thanks for taking the follow-up. It seems like there's been a good amount of M&A-related disruption in the Twin Cities lately. I'm just curious what the upside is to hire some additional producers, maybe on the commercial or private wealth side, or if you think some of those share gains are possible just with the existing team's capacities.

Speaker 7

I would say at this point, we have capacity with our existing team, but we are always opportunistic. If it comes to a situation where we find the right person that could come into our culture and add some benefits to us right away, we would look at that. Right now, I would say we're pretty satisfied with the team they have.

Speaker 5

Okay. Great. Thank you.

Speaker 4

Thank you. Our current and confound has just concluded our question and answer session. I would like to turn the conference back over to Katie Lorenson for any closing remarks.

Speaker 3

Yes. Thank you. Thank you, everyone, for taking the time to listen and for your investment in Alerus. Thank you for our team members who continue to make Alerus better every day. While the macroeconomic uncertainties and competitive pressures remain, we're staying disciplined and focused on getting better and better, managing credit risk proactively, maintaining strong capital and reserve levels, and investing in areas that align with our long-term strategy. While we know there's more work to do, we're confident in the path we're on, and we're proud of the incredibly talented team we have in place. Thank you, everyone. Have a great day.

Speaker 4

Thank you. This conference has now concluded. Thank you all for attending today's presentation. You may now disconnect.