Alerus to acquire southeast Minnesota bank

Grand Forks, N.D.-based Alerus Financial will expand in southeast Minnesota by acquiring Rochester, Minn.-based savings and loan company HMN Financial in a $116.4 million all-stock merger..The acquisition is Alerus' 26th since 2000. The combined company is expected to have $5.5 billion in assets, $3.7 billion in loans and $4.3 billion in deposits, along with $43.1 billion in assets under administration and management and 29 locations across the Midwest and Arizona. .HMN Financial is the parent company of Home Federal Savings Bank. The $1.2 billion Home Federal has a dozen branches in Minnesota and one branch each in Wisconsin and Iowa. .Alerus President and CEO Katie Lorenson said 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." .HMNF stockholders are expected to receive 1.25 shares of Alerus common stock for each share of HMNF common stock they own. The deal is expected to be immediately accretive to Alerus' estimated earnings before one-time costs, with a tangible book value earnback of slightly more than two years and an internal rate of return of more than 25 percent..One HMNF director is expected to join the Alerus board of directors following the merger. "We believe we have found an exceptional partner in Alerus," said HMNF President and CEO Brad Krehbiel. "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." .The deal is expected to close in the fourth quarter of this year. .St. Petersburg, Fla.-based Raymond James & Associates was financial adviser to Alerus, while Chicago-based Barack Ferrazzano Kirschbaum & Nagelberg LLP was legal counsel. For HMNF, Great Falls, Mont.-based D.A. Davidson & Co. was the financial adviser while Philadelphia-based Ballard Spahr LLP provided legal counsel.