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Note 16 - Segment Reporting
 6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

NOTE 16 Segment Reporting

 

Beginning with the annual period ended  December 31, 2024, the Company adopted the guidance within ASU 2023-07, Segment Reporting (Topic 280), which expanded disclosure requirements for significant segment expenses and other segment items. In connection with this guidance, compensation, employee taxes and benefits, business services, software and technology expense, and merger and acquisition expense are presented separately as these expenses were previously included within total noninterest expense. Financial information for prior periods were recast to conform to the current presentation.

 

Operating segments are components of an enterprise, which are evaluated regularly by the “chief operating decision maker” in deciding how to allocate resources and assess performance. The Company’s chief operating decision maker is the President and Chief Executive Officer of the Company, and assesses overall segment performance based on net income (loss) before taxes and uses this metric to allocate resources for each segment, focusing on budgeting and forecasting.

 

Reportable segments are determined based on the services offered, the significance of the services offered, the significance of those services to the Company’s financial statements, and management’s regular review of the operating results of those services. The Company currently operates through three operating segments: banking, retirement and benefit services, and wealth. 

 

The Company’s reportable segments include the following:

 

 

●

Banking: Offers a complete line of loan, deposit, cash management, and treasury services through 29 offices in North Dakota, Minnesota, Wisconsin, Iowa, and Arizona, including 15 banking offices acquired in the HMN Financial, Inc. (“HMNF”) transaction. These products and services are supported through web and mobile based applications. The majority of the Company’s assets and liabilities are in the Banking segment’s balance sheet.

   
 ●Retirement and Benefit Services: Provides the following services nationally: record-keeping and administration services to qualified and other types of retirement plans, investment fiduciary services to retirement plans, health savings accounts, flexible spending accounts, and COBRA recordkeeping and administration services. The division operates within each of the banking markets, as well as in East Lansing, Michigan and Lakewood, Colorado.
   
 ●Wealth: Provides advisory and planning services, investment management, and trust and fiduciary services to clients across the Company’s footprint.

 

The Company’s segment reporting process begins with the assignment of income and expenses directly to the applicable segments based on different cost centers withing the Company. The net income (loss) before taxes for each reportable segment is further derived by the use of expense allocations. Certain expenses not directly attributable to a specific segment are allocated across all segments based on key metrics, such as number of employees and time spent working in each segment. These types of expenses include business services, software and technology expense, human resources, accounting and finance, risk management, legal, and marketing. 

 

The financial information presented for each segment includes net interest income, provision for credit losses, noninterest income, and direct and indirect noninterest expense. As discussed above, noninterest expense is broken out between significant noninterest expenses and other noninterest expense. Other noninterest expense consists of occupancy and equipment expense, intangible amortization expense, professional fees and assessments (less merger and acquisition expenses which are included within this expense item on the consolidated statements of income), marketing and business development, supplies and postage, travel, mortgage and lending expenses, and other noninterest expenses. Corporate administration includes all remaining income and expenses not allocated to the three operating segments, including all merger and acquisition expenses.

 

The assignment and allocation methodologies used in the segment reporting process discussed above change from time to time as systems are enhanced, methods for evaluating segment performance or product lines change or as business segments are realigned.

 

The following tables present key metrics related to the Company’s segments for the periods presented:

 

  

As of and for the three months ended June 30, 2025

 
      

Retirement and

      

Corporate

     

(dollars in thousands)

 

Banking

  

Benefit Services

  

Wealth

  

Administration

  

Consolidated

 

Net interest income (loss)

 $43,684  $—  $—  $(652) $43,032 

Provision for credit losses

  —   —   —   —   — 

Noninterest income (loss)

  8,436   16,024   7,363   (60)  31,763 

Noninterest expense

                    

Compensation

  12,278   7,064   3,383   1,618   24,343 

Employee taxes and benefits

  3,289   2,015   721   608   6,633 

Business services, software and technology expense

  3,084   1,930   686   168   5,868 

Merger and acquisition expense

  —   —   —   11   11 

Other noninterest expense

  8,797   2,157   342   287   11,583 

Total noninterest expense

  27,448   13,166   5,132   2,692   48,438 

Net income (loss) before taxes

 $24,672  $2,858  $2,231  $(3,404) $26,357 

Total assets

 $5,244,506  $30,817  $6,055  $42,444  $5,323,822 

 

  

As of and for the six months ended June 30, 2025

 
      

Retirement and

      

Corporate

     

(dollars in thousands)

 

Banking

  

Benefit Services

  

Wealth

  

Administration

  

Consolidated

 

Net interest income (loss)

 $85,491  $—  $—  $(1,302) $84,189 

Provision for credit losses

  863   —   —   —   863 

Noninterest income (loss)

  13,083   32,130   14,267   (85)  59,395 

Noninterest expense

                    

Compensation

  23,914   14,280   6,435   2,675   47,304 

Employee taxes and benefits

  7,169   4,326   1,462   1,439   14,396 

Business services, software and technology expense

  6,048   3,924   1,304   344   11,620 

Merger and acquisition expense

  —   —   —   297   297 

Other noninterest expense

  19,528   4,253   768   639   25,188 

Total noninterest expense

  56,659   26,783   9,969   5,394   98,805 

Net income (loss) before taxes

 $41,052  $5,347  $4,298  $(6,781) $43,916 

Total assets

 $5,244,506  $30,817  $6,055  $42,444  $5,323,822 

 

  

As of and for the three months ended June 30, 2024

 
      

Retirement and

  

Wealth

  

Corporate

     

(dollars in thousands)

 

Banking

  

Benefit Services

  

Management

  

Administration

  

Consolidated

 

Net interest income (loss)

 $24,684  $—  $—  $(683) $24,001 

Provision for credit losses

  4,489   —   —   —   4,489 

Noninterest income

  4,999   16,078   6,360   (66)  27,371 

Noninterest expense

                    

Compensation

  9,590   6,841   2,517   1,317   20,265 

Employee taxes and benefits

  2,450   1,841   588   255   5,134 

Business services, software and technology expense

  2,247   1,644   581   127   4,599 

Merger and acquisition expense

  —   —   —   563   563 

Other noninterest expense

  4,628   3,096   222   245   8,191 

Total noninterest expense

  18,915   13,422   3,908   2,507   38,752 

Net income (loss) before taxes

 $6,279  $2,656  $2,452  $(3,256) $8,131 

Total assets

 $4,282,868  $34,695  $5,125  $35,935  $4,358,623 

 

  

As of and for the six months ended June 30, 2024

 
      

Retirement and

      

Corporate

     

(dollars in thousands)

 

Banking

  

Benefit Services

  

Wealth

  

Administration

  

Consolidated

 

Net interest income (loss)

 $47,581  $—  $—  $(1,361) $46,220 

Provision for credit losses

  4,489   —   —   —   4,489 

Noninterest income

  8,489   31,733   12,477   (5)  52,694 

Noninterest expense

                    

Compensation

  18,044   13,796   5,096   2,661   39,597 

Employee taxes and benefits

  5,252   3,898   1,313   859   11,322 

Business services, software and technology expense

  4,814   3,687   1,178   265   9,944 

Merger and acquisition expense

  —   —   —   591   591 

Other noninterest expense

  9,476   6,230   71   540   16,317 

Total noninterest expense

  37,586   27,611   7,658   4,916   77,771 

Net income (loss) before taxes

 $13,995  $4,122  $4,819  $(6,282) $16,654 

Total assets

 $4,282,868  $34,695  $5,125  $35,935  $4,358,623