401 Demers Avenue
Grand Forks, North Dakota 58201
(701) 795-3200

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)​

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as reasonably practicable after the Registration Statement becomes effective and after the conditions to the completion of the proposed transaction described in the proxy statement/prospectus have been satisfied or waived.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this joint proxy statement/prospectus is not complete and may be changed. We may not offer or sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

The accompanying joint proxy statement/prospectus contains a more complete description of the virtual special meetings of Alerus and HMNF stockholders and the terms of the merger. We urge you to review this entire document carefully. You may also obtain information about Alerus and HMNF from documents that Alerus and HMNF have filed with the Securities and Exchange Commission (the “SEC”). Alerus’ board of directors recommends that Alerus’ stockholders vote “FOR” the proposal to approve the merger agreement and the transactions contemplated therein, including the issuance of Alerus common stock pursuant to the merger agreement, and “FOR” the other matters to be considered at the virtual Alerus special meeting. HMNF’s board of directors recommends that HMNF’s stockholders vote “FOR” the proposal to approve the merger agreement and the transactions contemplated therein, “FOR” the proposal to approve, on an advisory (non-binding) basis, the merger-related compensation payments that will or may be paid to HMNF named executive officers and “FOR” the other matters to be considered at the virtual HMNF special meeting.

You should read this entire joint proxy statement/prospectus carefully because it contains important information about the merger. In particular, you should read carefully the information under the section entitled “Risk Factors” beginning on page 21.

Neither the SEC nor any state securities regulatory body has approved or disapproved of the securities to be issued under the accompanying joint proxy statement/prospectus or determined if the accompanying joint proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The securities to be issued in connection with the merger are not savings or deposit accounts or other obligations of any bank or nonbank subsidiary of any of the parties, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

The accompanying joint proxy statement/prospectus is dated [•], 2024, and is first being mailed to Alerus’ and HMNF’s respective stockholders on or about [•], 2024.

 

Alerus Financial Corporation

401 Demers Avenue
Grand Forks, ND 58201
(701) 795-3200

Notice of Virtual Special Meeting of Stockholders

Date:

[•], 2024

​

Time:

[•], local time

​

Access Link:

https://web.lumiconnect.com/288140204

​

Password:

alerus2024

​

TO ALERUS FINANCIAL CORPORATION STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that Alerus Financial Corporation (“Alerus”) will hold a virtual special meeting of its stockholders on [•], 2024 at [•], local time, which can be accessed virtually only, via live webcast, by visiting https://web.lumiconnect.com/288140204 and entering (i) passcode: alerus2024; and (ii) the 11-digit control number found on the proxy card distributed to each Alerus stockholder entitled to vote as of the record date. The Alerus special meeting will be held virtually only and, because there will not be a physical location for the Alerus special meeting, you will not be able to attend in person. The purpose of the virtual Alerus special meeting is to consider and vote on the following matters:

•

a proposal to approve and adopt the Agreement and Plan of Merger, dated as of May 14, 2024, between Alerus and HMN Financial, Inc. (“HMNF”), pursuant to which HMNF will merge with and into Alerus (the “merger”), and the transactions contemplated therein, including the issuance of Alerus common stock pursuant to the merger agreement (the “Alerus merger proposal”); and

​

•

a proposal to approve the adjournment of the special meeting to permit further solicitation in the event that an insufficient number of votes are cast to approve the Alerus merger proposal (the “Alerus adjournment proposal”).

​

Holders of record of Alerus common stock at the close of business on [•], 2024, are entitled to receive this notice and to vote at the virtual special meeting and any adjournments or postponements thereof. The presence, in person or by proxy, of a majority of the shares of Alerus common stock entitled to vote on the merger agreement is necessary to constitute a quorum for the special meeting. Approval of the Alerus merger proposal requires the affirmative vote, in person or by proxy, of the holders of a majority of the outstanding shares of Alerus common stock entitled to vote. Approval of the Alerus adjournment proposal requires the affirmative vote of a majority of the shares represented at the Alerus special meeting, in person or by proxy, and entitled to vote. A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/prospectus, and a summary of the terms of the merger agreement is included in the accompanying joint proxy statement/prospectus under the heading “Description of the Merger Agreement” beginning on page 91; both are incorporated by reference herein. Under Delaware law, appraisal rights are not available to Alerus stockholders with respect to the merger.

The board of directors of Alerus unanimously recommends that you vote “FOR” approval of the Alerus merger proposal, including the issuance of Alerus common stock pursuant to the merger agreement, and “FOR” the Alerus adjournment proposal.

Your vote is important. Whether or not you plan to attend the meeting, please act promptly to vote your shares. You may vote your shares by completing, signing and dating a proxy card and returning it in the accompanying postage paid envelope. Please review the instructions for each of your voting options described in the accompanying joint proxy statement/prospectus. If you attend the meeting, you may vote your shares in person during the virtual special meeting, even if you have previously submitted a proxy in writing. Submitting a proxy will ensure that your shares are represented at the meeting.

If you have any questions regarding the accompanying joint proxy statement/prospectus, you may contact Alerus’ proxy solicitor:

 

 

D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
Bank and Brokers Call Collect: (212) 269-5550
All Others, Please Call Toll-Free: (888) 605-1957
Email: alrs@dfking.com

By Order of the Alerus Board of Directors

Nicholas Brenckman
Corporate Secretary

Grand Forks, North Dakota
[•], 2024

 

 

HMN Financial, Inc.

1016 Civic Center Drive Northwest
Rochester, MN 55901
(507) 535-1200

Notice of Virtual Special Meeting of Stockholders

Date:

[•], 2024

​

Time:

[•], local time

​

Registration Link:

http://register.proxypush.com/hmnf

​

TO HMN FINANCIAL, INC. STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that HMN Financial, Inc. (“HMNF”) will hold a virtual special meeting of its stockholders on [•], 2024 at [•], local time, virtually, via live webcast only. To attend the virtual meeting, HMNF stockholders must register in advance at http://register.proxypush.com/hmnf. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you to access the virtual HMNF special meeting. The HMNF special meeting will be held virtually only and, because there will not be a physical location for the HMNF special meeting, you will not be able to attend in person. The purpose of the virtual HMNF special meeting is to consider and vote on the following matters:

•

a proposal to approve and adopt the Agreement and Plan of Merger, dated as of May 14, 2024, between Alerus Financial Corporation (“Alerus”) and HMNF, pursuant to which HMNF will merge with and into Alerus (the “merger”), and the transactions contemplated therein (“HMNF merger proposal”);

​

•

a proposal to approve, on an advisory (non-binding) basis, the compensation payments that will or may be paid to HMNF named executive officers in connection with the merger (the “merger-related compensation proposal”); and

​

•

a proposal to approve the adjournment of the special meeting to permit further solicitation in the event that an insufficient number of votes are cast to approve the HMNF merger proposal (the “HMNF adjournment proposal”).

​

Holders of record of HMNF common stock at the close of business on [•], 2024, are entitled to receive this notice and to vote at the virtual special meeting and any adjournments or postponements thereof. The presence, in person or by proxy, of a majority of the shares of HMNF common stock entitled to vote on the merger agreement is necessary to constitute a quorum for the special meeting. Approval of the HMNF merger proposal requires the affirmative vote, in person or by proxy, of the holders of a majority of the outstanding shares of HMNF common stock entitled to vote. Approval, on an advisory (non-binding) basis, of the merger-related compensation proposal requires the affirmative vote of a majority of the shares for which votes are cast at the HMNF special meeting, in person or by proxy. Approval of the HMNF adjournment proposal requires the affirmative vote of a majority of the shares for which votes are cast at the HMNF special meeting, in person or by proxy. A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/prospectus, and a summary of the terms of the merger agreement is included in the accompanying joint proxy statement/prospectus under the heading “Description of the Merger Agreement” beginning on page 91; both are incorporated by reference herein. Under Delaware law, appraisal rights are not available to HMNF stockholders with respect to the merger.

The board of directors of HMNF unanimously recommends that you vote “FOR” approval of HMNF merger proposal, “FOR” the approval, on an advisory (non-binding) basis, of the merger-related compensation proposal, and “FOR” the HMNF adjournment proposal.

Your vote is important. Whether or not you plan to attend the meeting, please act promptly to vote your shares. You may vote your shares by completing, signing and dating a proxy card and returning it in the accompanying postage paid envelope. Please review the instructions for each of your voting options described in the accompanying joint proxy statement/prospectus. If you attend the meeting, you may vote your

 

 

shares in person during the virtual special meeting, even if you have previously submitted a proxy in writing. Submitting a proxy will ensure that your shares are represented at the meeting.

We will send you a letter of transmittal separately on a later date with instructions informing you how to send in your stock certificates to the exchange agent to receive your portion of the merger consideration. Please do not send in your stock certificates at this time.

If you have any questions regarding the accompanying joint proxy statement/prospectus, you may contact HMNF’s proxy solicitor at:

D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
Bank and Brokers Call Collect: (212) 269-5550
All Others, Please Call Toll-Free: (866) 620-2536
Email: hmnf@dfking.com

By Order of the HMNF Board of Directors

Cindy K. Hamlin
Corporate Secretary

Rochester, Minnesota
[•], 2024

 

 

 

incorporated by reference into, this document. This document is dated [•], 2024, and you should assume that the information in this document is accurate only as of such date. You should assume that the information incorporated by reference into this document is accurate as of the date of such document. None of the mailing of this document to Alerus stockholders, the mailing of this document to HMNF stockholders or the issuance by Alerus of shares of Alerus common stock pursuant to the merger agreement will create any implication to the contrary.

This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

 

 

 

 

ii

 

 

iii

 

 

Q:

What will HMNF stockholders be entitled to receive in the merger?

​

A:

If the merger is consummated, each share of HMNF common stock issued and outstanding immediately prior to the effective time (other than any shares owned by Alerus or HMNF) will be converted into the right to receive 1.25 shares of Alerus common stock (the “exchange ratio”), with cash paid in lieu of fractional shares.

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Q:

Will the exchange ratio adjust based on the trading price of Alerus common stock prior to closing?

​

A:

No, the exchange ratio is fixed and will not increase or decrease due to changes in the trading price of Alerus common stock prior to the closing of the merger. The exchange ratio is, however, subject to potential downward adjustment, as described in the merger agreement, if certain financial metrics of HMNF are not met at closing. See “Description of the Merger Agreement — Consideration to be received in the merger.”

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Q:

What is the value of the per share merger consideration?

​

A:

The value of the merger consideration to be received by HMNF stockholders will fluctuate as the market price of Alerus common stock fluctuates before the consummation of the merger. This price will not be known at the time of the virtual Alerus special meeting or the virtual HMNF special meeting, and may be more or less than the current price of Alerus common stock or the price of Alerus common stock at the time of the virtual Alerus special meeting and the virtual HMNF special meeting. Based on the closing price of Alerus common stock on the Nasdaq Capital Market (“Nasdaq”) as of May 14, 2024, the trading day immediately preceding the public announcement of the merger, of $20.69, the implied merger consideration that an HMNF stockholder would be entitled to receive for each share of HMNF common stock owned would be $25.86 with an aggregate transaction value of approximately $116.4 million. Based on the closing price of Alerus common stock as reported on Nasdaq of $[•] as of [•], 2024, the latest practicable date before the date of this joint proxy statement/​prospectus, the implied merger consideration that an HMNF stockholder would be entitled to receive for each share of HMNF common stock owned would be $[•] with an aggregate transaction value of approximately $[•] million. After the merger is consummated, based on the number of issued and outstanding shares of Alerus common stock and shares of HMNF common stock on March 31, 2024, we expect that current Alerus stockholders will own approximately 78.0% of the outstanding shares of common stock of the combined company, and current HMNF stockholders will own approximately 22.0% of the outstanding shares of common stock of the combined company. We urge you to obtain current market quotations of both Alerus common stock and HMNF common stock.

​

Q:

Why do HMNF and Alerus want to engage in the merger?

​

A:

HMNF believes that the merger will provide HMNF stockholders with substantial benefits, and Alerus believes that the merger will further its strategic growth plans and provide Alerus stockholders with substantial benefits. To review the reasons for the merger in more detail, see “The Merger — Alerus’ reasons for the merger and recommendation of the Alerus Board” and “The Merger — HMNF’s reasons for the merger and recommendation of the HMNF Board.”

​

Q:

What are Alerus stockholders being asked to vote on?

​

A:

Alerus stockholders are being asked to approve and adopt the merger agreement by and between Alerus and HMNF, which provides for the merger of HMNF with and into Alerus, and the transactions contemplated by the merger agreement, including the issuance of Alerus common stock pursuant to the merger agreement. Alerus stockholders are also being asked to approve a proposal to adjourn the virtual Alerus special meeting, if necessary or appropriate, including to solicit additional proxies to approve the merger agreement and the transactions contemplated by the merger agreement. Consummation of the merger is not conditioned upon approval of the Alerus adjournment proposal.

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2

 

Q:

What does the Alerus Board recommend?

​

A:

The Alerus Board has determined that the merger agreement and the transactions contemplated therein, including the issuance of Alerus common stock pursuant to the merger agreement, are in the best interests of Alerus and its stockholders. The Alerus Board unanimously recommends that Alerus stockholders vote “FOR” the approval of the merger agreement and the transactions contemplated therein, including the issuance of Alerus common stock pursuant to the merger agreement, and “FOR” the approval to adjourn the virtual Alerus special meeting to permit further solicitation in the event that an insufficient number of votes are cast to approve the Alerus merger proposal. To review the reasons for the merger in more detail, see “The Merger — Alerus’ reasons for the merger and recommendation of the Alerus Board.”

​

Q:

What vote is required to approve each proposal at the Alerus special meeting, and how will abstentions and broker non-votes affect the vote?

​

A:

Approval of the merger agreement and the transactions contemplated therein, including the issuance of Alerus common stock pursuant to the merger agreement, requires the affirmative vote, in person or by proxy, of the holders of a majority of the outstanding shares of Alerus common stock entitled to vote. Abstentions, shares not voted and broker non-votes will have the same effect as a vote against the proposal to adopt the merger agreement. Approval of the Alerus adjournment proposal requires the affirmative vote of a majority of the shares represented at the virtual Alerus special meeting, in person or by proxy, and entitled to vote. Abstentions will have the same effect as a vote against the adjournment proposal. Shares not voted and broker non-votes will have no effect on the Alerus adjournment proposal, although they may prevent Alerus from obtaining a quorum and require Alerus to adjourn the virtual special meeting to solicit additional proxies.

​

Q:

What are HMNF stockholders being asked to vote on?

​

A:

HMNF stockholders are being asked to approve and adopt the merger agreement by and between Alerus and HMNF, which provides for the merger of HMNF with and into Alerus, and the transactions contemplated by the merger agreement. HMNF stockholders are also being asked to approve, on an advisory (non-binding) basis, the compensation payments that will or may be paid to HMNF named executive officers in connection with the merger agreement and the transactions contemplated therein. Finally, HMNF stockholders are being asked to approve a proposal to adjourn the virtual HMNF special meeting, if necessary or appropriate, including to solicit additional proxies to approve the merger agreement and the transactions contemplated by the merger agreement. Consummation of the merger is not conditioned upon approval of the merger-related compensation proposal or the HMNF adjournment proposal.

​

Q:

What does the HMNF Board recommend?

​

A:

The HMNF Board has determined that the merger agreement and the transactions contemplated therein are in the best interests of HMNF and its stockholders. The HMNF Board unanimously recommends that HMNF stockholders vote “FOR” the approval of the merger agreement and the transactions contemplated therein, “FOR” the approval, on an advisory (non-binding) basis, of the compensation payments that will or may be paid to HMNF named executive officers in connection with the merger and “FOR” the approval to adjourn the virtual HMNF special meeting to permit further solicitation in the event that an insufficient number of votes are cast to approve the HMNF merger proposal. To review the reasons for the merger in more detail, see “The Merger — HMNF’s reasons for the merger and recommendation of the HMNF Board.”

​

Q:

What vote is required to approve each proposal at the HMNF special meeting, and how will abstentions and broker non-votes affect the vote?

​

A:

Approval of the merger agreement and the transactions contemplated therein requires the affirmative vote of the holders of a majority of the outstanding shares of HMNF common stock entitled to vote, represented in person or by proxy. Abstentions, shares not voted and broker non-votes will have the

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3

 

same effect as a vote against the proposal to adopt the merger agreement. Approval, on an advisory (non-binding) basis, of the merger-related compensation proposal requires the affirmative vote of a majority of the shares for which votes are cast at the virtual HMNF special meeting, in person or by proxy. Abstentions, shares not voted and broker non-votes will have no effect on the merger-related compensation proposal. Approval of the HMNF adjournment proposal requires the affirmative vote of a majority of the shares for which votes are cast at the virtual HMNF special meeting, in person or by proxy. Abstentions, shares not voted and broker non-votes will have no effect on the HMNF adjournment proposal, although they may prevent HMNF from obtaining a quorum and require HMNF to adjourn the virtual special meeting to solicit additional proxies.

Q:

Why is my vote important?

​

A:

The merger cannot be consummated unless the merger agreement and the transactions contemplated therein, including, in the case of Alerus stockholders, the issuance of Alerus common stock pursuant to the merger agreement, is approved by Alerus’ and HMNF’s stockholders. If you fail to submit a proxy or vote in person during the appropriate virtual special meeting, or vote to abstain, or you do not provide your bank, brokerage firm or other nominee with voting instructions, as applicable, this will have the same effect as a vote against the approval of the merger agreement. The Alerus Board unanimously recommends that Alerus’ stockholders vote “FOR” the Alerus merger proposal, and the HMNF Board unanimously recommends that HMNF’s stockholders vote “FOR” the HMNF merger proposal. Consummation of the merger is not conditional upon approval of the Alerus adjournment proposal, the merger-related compensation proposal or the HMNF adjournment proposal.

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Q:

What do I need to do now? How do I vote?

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A:

Alerus special meeting.   You may vote at the virtual Alerus special meeting if you own shares of Alerus common stock of record at the close of business on the record date for the Alerus special meeting, [•], 2024. After you have carefully read and considered the information contained in this joint proxy statement/prospectus, please vote by a method described on your proxy card. This will enable your shares to be represented at the virtual Alerus special meeting. You may also vote in person during the virtual Alerus special meeting. If you do not vote by proxy or vote in person during the virtual Alerus special meeting, this will make it more difficult to achieve a quorum for the meeting. Although you may vote by mail, we ask that you vote instead by Internet or telephone. You may vote by telephone by calling the toll-free number specified on your proxy card or vote by Internet by accessing the website specified on your proxy card and by following the preprinted instructions on the proxy card. The giving of a proxy by either of these means will not affect your right to vote in person if you decide to attend the virtual Alerus special meeting.

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HMNF special meeting.   You may vote at the virtual HMNF special meeting if you own shares of HMNF common stock of record at the close of business on the record date for the HMNF special meeting, [•], 2024. After you have carefully read and considered the information contained in this joint proxy statement/prospectus, please vote by a method described on your proxy card. This will enable your shares to be represented at the virtual HMNF special meeting. You may also vote in person during the virtual HMNF special meeting. If you do not vote by proxy or vote in person during the virtual HMNF special meeting, this will make it more difficult to achieve a quorum for the meeting.

Q:

What should I do if some or all of my shares are held by the Alerus Employee Stock Ownership Plan?

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A:

If you hold shares of Alerus common stock as a participant in the Alerus Financial Corporation Employee Stock Ownership Plan (the “Alerus ESOP”), you will be receiving this joint proxy statement/​prospectus, together with separate voting instructions, from Alerus’ transfer agent, Equiniti Trust Company, LLC, Alerus’ transfer agent (“Equiniti”). If you do not vote your shares of Alerus common stock held as a participant in the Alerus ESOP pursuant to these voting instructions, the trustee of the Alerus ESOP (the “Alerus ESOP Trustee”) will vote such shares in a manner that is consistent with and proportionate to the voting instructions received from those Alerus ESOP participants and beneficiaries who did provide voting direction to the Alerus ESOP Trustee. If you have any questions regarding these procedures, you should contact the Alerus ESOP Trustee directly.

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4

 

Q:

What should I do if some or all of my shares are held by the HMN Financial, Inc. Employee Stock Ownership Plan?

​

A:

If you hold shares of HMNF common stock as a participant in the HMN Financial, Inc. Employee Stock Ownership Plan (the “HMNF ESOP”), you will be receiving this joint proxy statement/prospectus, together with separate voting instructions, from Equiniti, HMNF’s transfer agent. If you do not vote your shares of HMNF common stock held as a participant in the HMNF ESOP pursuant to these voting instructions, the trustee of the HMNF ESOP (the “HMNF ESOP Trustee”) will vote such shares in a manner that is consistent with and proportionate to the voting instructions received from those HMNF ESOP participants and beneficiaries who did provide voting direction to the HMNF ESOP Trustee. If you have any questions regarding these procedures, you should contact the HMNF ESOP Trustee directly.

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Q:

Who will solicit the proxies and pay the cost of soliciting proxies for the special meetings?

​

A:

Alerus special meeting.   Alerus will pay the cost of soliciting proxies for the Alerus special meeting. Alerus has engaged D.F. King & Co., Inc. (“D.F. King”) to assist in the solicitation of proxies for the Alerus special meeting. Alerus has agreed to pay D.F. King a fee of $11,875. Alerus will also reimburse D.F. King for reasonable out-of-pocket expenses and will indemnify D.F. King and its affiliates against certain claims, liabilities, losses, damages and expenses. Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through brokers, banks and other nominees to the beneficial owners of shares of Alerus common stock, in which case these parties will be reimbursed by Alerus for their reasonable out-of-pocket expenses. Proxies may also be solicited in person or by telephone, electronic mail or other electronic medium by certain of Alerus’ directors, officers and other employees, without additional compensation.

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HMNF special meeting.   HMNF will pay the cost of soliciting proxies for the HMNF special meeting. HMNF has engaged D.F. King to assist in the solicitation of proxies for the HMNF special meeting. HMNF has agreed to pay D.F. King a fee of $11,875. HMNF will also reimburse D.F. King for reasonable out-of-pocket expenses and will indemnify D.F. King and its affiliates against certain claims, liabilities, losses, damages and expenses. Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through brokers, banks and other nominees to the beneficial owners of shares of HMNF common stock, in which case these parties will be reimbursed by HMNF for their reasonable out-of-pocket expenses. Proxies may also be solicited in person or by telephone, electronic mail or other electronic medium by certain of HMNF’s directors, officers and other employees, without additional compensation.

Q:

If my shares of common stock are held in “street name” by my bank, broker or other fiduciary, will my bank, broker or other fiduciary automatically vote my shares for me?

​

A:

No. Your bank, broker or other fiduciary cannot vote your shares without instructions from you. If your shares are held in “street name” through a bank, broker or other fiduciary, you must provide the record holder of your shares with instructions on how to vote the shares. Please follow the voting instructions provided by the bank, broker or other fiduciary. You may not vote shares held in street name by returning a proxy card directly to Alerus or HMNF or by voting in person during the virtual Alerus special meeting or the virtual HMNF special meeting, unless you provide a “legal proxy,” which you must obtain from your broker, bank or other fiduciary. Further, banks, brokers or other fiduciaries that hold shares of Alerus common stock or HMNF common stock on behalf of their customers may not give a proxy to Alerus or to HMNF to vote those shares with respect to any of the proposals without specific instructions from their customers, as brokers, banks and other fiduciaries do not have discretionary voting power on these matters. Failure to instruct your bank, broker or other fiduciary how to vote will have the same effect as a vote against adoption of the merger agreement.

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Q:

How will my proxy be voted?

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A:

Alerus stockholders.   If you complete, sign, date and mail your proxy card, your proxy will be voted in accordance with your instructions. If you sign, date and send in your proxy card, but you do not indicate how you want to vote, your proxy will be voted “FOR” approval of the merger agreement and

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5

 

the transactions contemplated therein, including the issuance of Alerus common stock pursuant to the merger agreement; and “FOR” the other proposals in the Alerus special meeting notice, including the Alerus adjournment proposal.

HMNF stockholders.   If you complete, sign, date and mail your proxy card, your proxy will be voted in accordance with your instructions. If you sign, date and send in your proxy card, but you do not indicate how you want to vote, your proxy will be voted “FOR” approval of the merger agreement and the transactions contemplated therein; “FOR” approval, on an advisory (non-binding) basis, of the compensation payments that will or may be paid to HMNF named executive officers in connection with the merger; and “FOR” the other proposals in the HMNF special meeting notice, including the merger-related compensation proposal and the HMNF adjournment proposal.

Q:

Can I revoke my proxy and change my vote?

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A:

Alerus special meeting.   To revoke your proxy or change your vote, you must either advise the Corporate Secretary of Alerus in writing before your Alerus common stock has been voted at the Alerus special meeting, deliver a later dated proxy or attend the Alerus special meeting and vote your shares in person during the virtual special meeting. Attendance at the Alerus special meeting will not in itself constitute revocation of your proxy. If you hold your shares in the name of a broker, bank or other fiduciary and desire to revoke your proxy, you will need to contact your broker, bank or other fiduciary to revoke your proxy.

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HMNF special meeting.   To revoke your proxy or change your vote, you must either advise the Corporate Secretary of HMNF in writing before your HMNF common stock has been voted at the HMNF special meeting, deliver a later dated proxy or attend the HMNF special meeting and vote your shares in person during the virtual special meeting. Attendance at the HMNF special meeting will not in itself constitute revocation of your proxy. If you hold your shares in the name of a broker, bank or other fiduciary and desire to revoke your proxy, you will need to contact your broker, bank or other fiduciary to revoke your proxy.

Q:

What happens if I sell my shares of HMNF common stock prior to the consummation of the merger?

​

A:

If you sell or otherwise transfer your shares of HMNF common stock prior to the consummation of the merger, you will have transferred your right to receive the merger consideration. In order to receive the merger consideration, you must hold (or beneficially own, as the case may be) your shares through the effective time of the merger.

​

Q:

Are there risks I should consider in deciding to vote on the approval of the merger agreement?

​

A:

Yes, in evaluating the merger agreement and the transactions contemplated therein, you should read this joint proxy statement/prospectus carefully, including the factors discussed in the section titled “Risk Factors” beginning on page 21.

​

Q:

What if I oppose the merger? Do I have appraisal rights?

​

A:

Under Delaware law, appraisal rights are not available to Alerus or HMNF stockholders with respect to the merger. For more information regarding the virtual special meeting of Alerus stockholders, please see “Information About the Special Meeting of Alerus Stockholders” beginning on page 30. For more information regarding the virtual special meeting of HMNF stockholders, please see “Information About the Special Meeting of HMNF Stockholders” beginning on page 34.

​

Q:

What are the tax consequences of the merger to me?

​

The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and it is a condition to Alerus’ and HMNF’s obligations to consummate the merger that each of them receives a legal opinion from its tax counsel to that effect. However, Alerus and HMNF have not, and will not seek, any ruling from the Internal Revenue Service regarding any matters related to the transactions, and as a

 

6

 

result, there can be no assurance that the Internal Revenue Service would not assert that the merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, or that a court would not sustain such a position.

Provided the merger qualifies as a reorganization for United States federal income tax purposes, HMNF stockholders generally will not recognize any gain or loss upon the exchange of their HMNF common stock for shares of Alerus common stock, except with respect to cash received in lieu of fractional shares, if any.

The tax consequences of the merger to each HMNF stockholder will depend on such HMNF stockholder’s own situation and many variables not within our control. You should consult with your tax advisor for the specific tax consequences of the merger to you. See “The Merger — Material U.S. federal income tax consequences of the merger.”

Q:

When and where are the special meetings?

​

A:

Alerus special meeting.   The Alerus special meeting will take virtually place on [•], 2024, at [•] local time, which can be accessed virtually only, via live webcast, by visiting https://web.lumiconnect.com/​288140204 and entering (i) passcode: alerus2024; and (ii) the 11-digit control number found on the proxy card distributed to each Alerus stockholder entitled to vote as of the record date. The Alerus special meeting will be held virtually only and, because there will not be a physical location for the Alerus special meeting, you will not be able to attend in person. If you are not a stockholder of record but hold shares as a beneficial owner in street name, you should follow the instructions for attending the virtual Alerus special meeting provided by your bank, broker or other fiduciary. The virtual Alerus special meeting platform is fully supported across browsers and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong Internet connection wherever they intend to participate in the virtual Alerus special meeting. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior to the start of the meeting. A technical support number will be made available on the webpage during check-in for Alerus stockholders who experience technical difficulties accessing the virtual Alerus special meeting.

​

HMNF special meeting.   The HMNF special meeting will take place virtually on [•], 2024, at [•] local time, virtually only, via live webcast. The HMNF special meeting will be held virtually only and, because there will not be a physical location for the HMNF special meeting, you will not be able to attend in person. To attend the virtual meeting, HMNF stockholders must register in advance at http://register.proxypush.com/hmnf. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you to access the virtual HMNF special meeting. If you are not a stockholder of record but hold shares as a beneficial owner in street name, you should follow the instructions for attending the virtual HMNF special meeting and will need to provide the Control Number provided by your bank, broker or other fiduciary to register for the virtual special meeting. The virtual HMNF special meeting platform is fully supported across browsers and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong Internet connection wherever they intend to participate in the virtual HMNF special meeting. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior to the start of the meeting.

Q:

Who may attend the virtual special meetings?

​

A:

Alerus special meeting.   Only Alerus stockholders as of the close of business on the record date for the virtual special meeting, [•], 2024, may attend the virtual Alerus special meeting. If you are an Alerus stockholder of record, the Alerus special meeting may be accessed virtually only, via live webcast, by visiting https://web.lumiconnect.com/288140204 and entering (i) passcode: alerus2024; and (ii) the 11-digit control number found on the proxy card distributed to each Alerus stockholder entitled to vote as of the record date. If you are not a stockholder of record but hold shares as a beneficial owner in street name, you should follow the instructions for attending the virtual Alerus special meeting provided by your bank, broker or other fiduciary.

​

 

7

 

HMNF special meeting.   Only HMNF stockholders as of the close of business on the record date for the virtual special meeting, [•], 2024, may attend the virtual HMNF special meeting. If you are an HMNF stockholder of record, the HMNF special meeting may be accessed virtually only, via live webcast. To attend the virtual meeting, HMNF stockholders must register in advance at http://register.proxypush.com/hmnf. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you to access the virtual HMNF special meeting. If you are not a stockholder of record but hold shares as a beneficial owner in street name, you should follow the instructions for attending the virtual HMNF special meeting provided by your bank, broker or other fiduciary.

Q:

Will I be able to attend either special meeting in person?

​

A:

No, both the Alerus special meeting and the HMNF special meeting will be held virtually only and, because there will not be a physical location for either the Alerus special meeting or the HMNF special meeting, you will not be able to attend in person.

​

Q:

Where can I find the results of the special meetings?

​

A:

Alerus and HMNF intend to announce preliminary voting results at their respective special meetings, and intend to publish final voting results from their respective meetings on a Current Report on Form 8-K, which each must file with the SEC within four business days following their respective special meetings.

​

Q:

Should I send in my HMNF stock certificates now?

​

A:

No. The exchange agent will mail letters of transmittal within two business days following the closing date of the merger. After you receive the letter of transmittal, you should complete the letter of transmittal and, if you hold HMNF stock certificates, return them with your completed form to submit them for exchange. Please send the letter of transmittal and your HMNF stock certificates, if any, to the exchange agent, in the envelope provided with the letter of transmittal. Do not send your stock certificates with your proxy card.

​

Q:

Whom may I contact if I cannot locate my HMNF stock certificate(s)?

​

A:

If you are unable to locate your original HMNF stock certificate(s), you should follow the instructions regarding lost or stolen stock certificates set forth in the letter of transmittal that will be mailed to you by Alerus’ exchange agent following the closing of the merger.

​

Q:

What should I do if I hold my shares of HMNF common stock in book-entry form?

​

A:

If you hold shares of HMNF common stock in book-entry form, you should follow the instructions set forth in the letter of transmittal with respect to shares of HMNF common stock held in book-entry form.

​

Q:

What should I do if I receive more than one set of voting materials?

​

A:

Alerus and HMNF stockholders may receive more than one set of voting materials, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold shares of Alerus or HMNF common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold such shares. If you are a holder of record of Alerus or HMNF common stock and your shares are registered in more than one name, you will receive more than one proxy card. If you are a holder of record of both Alerus and HMNF common stock, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive or otherwise follow the voting instructions set forth in this joint proxy statement/prospectus to ensure that you vote every share of Alerus and/or HMNF common stock that you own.

​

 

8

 

Q:

When is the merger expected to be consummated?

​

A:

The merger agreement must be approved by stockholders of Alerus and HMNF, and we must obtain the necessary regulatory approvals, before we can consummate the merger. Assuming Alerus and HMNF stockholders vote to approve the merger and adopt the merger agreement and the transactions contemplated therein and we obtain the other necessary approvals and satisfaction or waiver of the other conditions to the closing described in the merger agreement, we expect to consummate the merger in the fourth quarter of 2024. See “Description of the Merger Agreement — Conditions to consummation of the merger.”

​

Q:

Is consummation of the merger subject to any conditions besides stockholder approval?

​

A:

Yes. The transaction must receive the required regulatory approvals, and there are other standard closing conditions that must be satisfied. See “Description of the Merger Agreement — Conditions to consummation of the merger.”

​

Q:

What happens if the merger is not consummated?

​

A:

Alerus and HMNF expect to consummate the merger in the fourth quarter of 2024. However, neither Alerus nor HMNF can assure you of when or if the merger will be consummated. Alerus and HMNF must first obtain the approval of Alerus’ and HMNF’s stockholders for the merger agreement, as well as obtain necessary regulatory approvals and satisfy certain other standard closing conditions. If the merger is not consummated, HMNF stockholders will not receive any consideration for their shares and will continue to be HMNF stockholders. Each of Alerus and HMNF will remain independent companies. Under certain circumstances, either Alerus or HMNF as the terminating party may be required to pay the non-terminating party a fee with respect to the termination of the merger agreement, as described under “Description of the Merger Agreement — Termination fees.”

​

Q:

Who can answer my other questions?

​

A:

If you are an Alerus stockholder and have more questions about the merger or how to submit your proxy, or if you need additional copies of this joint proxy statement/prospectus or the enclosed proxy card, you should contact:

​

If you are an HMNF stockholder and have more questions about the merger or how to submit your proxy, or if you need additional copies of this joint proxy statement/prospectus or the enclosed proxy card, you should contact:

 

9

 

 

11

 

​

12

 

13

 

​

14

 

​

15

 

​

16

 

17

 

18

 

Comparative Per Share Data

​

​

Alerus Historical

​

​

HMNF Historical

​

​

Pro Forma Combined

​

​

Equivalent Pro Forma Per Share of HMNF(1)

​

Book value per share

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of March 31, 2024

​

​

​

$

18.79

​

​

​

​

$

24.39

​

​

​

​

$

18.65

​

​

​

​

$

23.31

​

​

As of December 31, 2023

​

​

​

​

18.71

​

​

​

​

​

24.16

​

​

​

​

​

18.41

​

​

​

​

​

23.01

​

​

Cash dividends paid(2)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the three months ended March 31, 2024

​

​

​

​

0.19

​

​

​

​

​

0.08

​

​

​

​

​

0.19

​

​

​

​

​

0.24

​

​

For the year ended December 31, 2023

​

​

​

​

0.75

​

​

​

​

​

0.30

​

​

​

​

​

0.75

​

​

​

​

​

0.94

​

​

Basic earnings

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the three months ended March 31, 2024

​

​

​

​

0.32

​

​

​

​

​

0.30

​

​

​

​

​

0.46

​

​

​

​

​

0.58

​

​

For the year ended December 31, 2023

​

​

​

​

0.59

​

​

​

​

​

1.38

​

​

​

​

​

0.90

​

​

​

​

​

1.13

​

​

Diluted earnings

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the three months ended March 31, 2024

​

​

​

​

0.32

​

​

​

​

​

0.30

​

​

​

​

​

0.46

​

​

​

​

​

0.57

​

​

For the year ended December 31, 2023

​

​

​

​

0.58

​

​

​

​

​

1.37

​

​

​

​

​

0.90

​

​

​

​

​

1.12

​

​

​

​

19

 

(dollars in thousands)

​

​

For the three months ended March 31, 2024

​

​

For the year ended December 31, 2023

​

Pro forma condensed consolidated statement of income data:

​

​

​

​

​

​

​

​

​

​

​

​

​

Net interest income

​

​

​

$

35,731

​

​

​

​

$

142,130

​

​

Provision (recovery) for credit losses

​

​

​

​

(209)

​

​

​

​

​

13,937

​

​

Noninterest income

​

​

​

​

27,230

​

​

​

​

​

88,510

​

​

Noninterest expense

​

​

​

​

47,824

​

​

​

​

​

185,502

​

​

Income before income taxes

​

​

​

​

15,346

​

​

​

​

​

31,202

​

​

Net income

​

​

​

​

11,551

​

​

​

​

​

22,865

​

​

Per share data:

​

​

​

​

​

​

​

​

​

​

​

​

​

Earnings per share

​

​

​

​

​

​

​

​

​

​

​

​

​

Basic

​

​

​

​

0.46

​

​

​

​

​

0.90

​

​

Diluted

​

​

​

​

0.46

​

​

​

​

​

0.90

​

​

Cash dividends per common share

​

​

​

​

0.19

​

​

​

​

​

0.75

​

​

​	​	​	As of March 31, 2024				​
Pro forma condensed consolidated balance sheet data:	​	​
Total loans	​	​	​	$	3,602,297	​	​
Total assets	​	​	​	​	5,475,080	​	​
Total deposits	​	​	​	​	4,317,764	​	​
Total borrowings	​	​	​	​	613,985	​	​
Stockholders’ equity	​	​	​	​	467,779	​	​

20

 

 

The Market Price of Alerus Common Stock after the Merger May be Affected by Factors Different from Those Affecting the Shares of HMNF or Alerus Currently.

Upon consummation of the merger, holders of HMNF common stock will become holders of Alerus common stock. Alerus’ business differs in important respects from that of HMNF. Accordingly, the results of operations of the combined company and the market price of Alerus common stock after the consummation of the merger may be affected by factors different from those currently affecting the independent results of operations of each of Alerus and HMNF. For a discussion of the businesses and markets of Alerus and HMNF and of some important factors to consider in connection with those businesses, please see the documents incorporated by reference in this joint proxy statement/prospectus and referred to under “Where You Can Find More Information.”

Issuance of Shares of Alerus Common Stock Pursuant to the Merger Agreement May Adversely Affect the Market Price of Alerus Common Stock.

Pursuant to the merger agreement, Alerus expects to issue approximately 5,578,194 shares of Alerus common stock to HMNF stockholders, which estimate does not include outstanding restricted stock awards and stock options of HMNF that will become fully vested and exercisable immediately prior to the effective time as a result of the merger. The dilution caused by the issuance of a large number of new shares of Alerus common stock may result in fluctuations in the market price of Alerus common stock, including a potential stock price decrease.

HMNF Stockholders Will Have a Reduced Ownership and Voting Interest After the Merger and Will Exercise Less Influence Over Management.

HMNF stockholders currently have the right to vote in the election of the HMNF Board and on other matters requiring stockholder approval under Delaware law and HMNF’s certificate of incorporation and bylaws. Upon the consummation of the merger, each HMNF stockholder will become a stockholder of Alerus with a percentage ownership of Alerus that is smaller than such stockholder’s current percentage ownership of HMNF. Based on the number of issued and outstanding shares of Alerus common stock and shares of HMNF common stock on March 31, 2024, and based on the estimated total 5,578,194 shares of Alerus common stock to be issuable to HMNF stockholders pursuant to the merger agreement, which estimate does not include outstanding restricted stock awards and stock options of HMNF that will become fully vested and exercisable immediately prior to the effective time as a result of the merger, stockholders of HMNF, as a group, will receive shares in the merger constituting approximately 22.0% of Alerus common stock expected to be outstanding immediately after the merger (without giving effect to any Alerus common stock held by HMNF stockholders prior to the merger). Because of this, current HMNF stockholders, as a group, will have less influence on the board of directors, management and policies of Alerus (as the combined company following the merger) than they now have on the board of directors, management and policies of HMNF.

Alerus May Fail to Realize the Anticipated Benefits of the Merger.

Alerus and HMNF have operated and, until the consummation of the merger, will continue to operate, independently. The success of the merger, including anticipated benefits and cost savings, will depend on, among other things, Alerus’ ability to combine the businesses of Alerus and HMNF in a manner that permits growth opportunities, including, among other things, enhanced revenues and revenue synergies, an expanded market reach and operating efficiencies, and does not materially disrupt the existing customer relationships of Alerus or HMNF nor result in decreased revenues due to any loss of customers. If Alerus is not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. Failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could have an adverse effect on the surviving corporation’s business, financial condition, operating results, prospects and stock price.

While individuals employed by HMNF or Home Federal immediately prior to the effective time will automatically become employees of Alerus or Alerus Financial following the merger, certain employees may not be retained by Alerus after the merger. In addition, certain employees that Alerus wishes to retain may

 

22

 

elect to terminate their employment as a result of the merger, which could delay or disrupt the integration process. It is possible that the integration process could result in the disruption of Alerus’ or HMNF’s ongoing businesses or cause inconsistencies in standards, controls, procedures and policies that adversely affect the ability of Alerus or HMNF to maintain relationships with customers and employees or to achieve the anticipated benefits and cost savings of the merger.

Among the factors considered by the boards of directors of both Alerus and HMNF in connection with their respective approvals of the merger agreement were the anticipated benefits that could result from the merger. There can be no assurance that these benefits will be realized within the time periods contemplated or at all.

Regulatory Approvals May Not be Received, May Take Longer than Expected or May Impose Conditions that are Not Presently Anticipated or Cannot be Met.

Before the transactions contemplated in the merger agreement can be consummated, various approvals must be obtained from the bank regulatory and other governmental authorities. In deciding whether to grant regulatory clearances, the relevant governmental entities will consider a variety of factors, including the regulatory standing of each of the parties. An adverse condition or development in either party’s regulatory standing or other factors could result in an inability to obtain one or more of the required regulatory approvals, or delay their receipt. The terms and conditions of the approvals that are granted may impose requirements, limitations or costs, or may place restrictions on the conduct of the combined company’s business.

Alerus and HMNF believe that the merger should not raise significant regulatory concerns, and that the parties will be able to obtain all requisite regulatory approvals in a timely manner. Despite the parties’ commitments to use their reasonable best efforts to comply with conditions imposed by regulatory entities, under the terms of the merger agreement, Alerus and HMNF will not be required to consummate the merger if any such approvals would reasonably be expected to materially restrict or burden Alerus following the merger. There can be no assurance that regulators will not impose conditions, terms, obligations or restrictions, or that such conditions, terms, obligations or restrictions will not have the effect of delaying the consummation of the merger, imposing additional material costs on or materially limiting the revenues of the combined company following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe. In addition, neither Alerus nor HMNF can provide assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the merger. The consummation of the merger is further conditioned on the absence of certain orders, injunctions or decrees by any court or regulatory agency of competent jurisdiction that would prohibit or make illegal the consummation of the merger.

The Merger Agreement May be Terminated in Accordance with its Terms and the Merger May Not be Consummated.

The merger agreement is subject to a number of conditions which must be fulfilled in order to consummate the merger. Those conditions include, among other things: approval of the merger agreement and the transactions contemplated therein by Alerus and HMNF stockholders, including, in the case of Alerus stockholders, approval of the issuance of Alerus common stock pursuant to the merger agreement; receipt of certain requisite regulatory approvals; absence of orders prohibiting consummation of the merger; effectiveness of the registration statement of which this joint proxy statement/prospectus is a part; nonobjection of the issuance of Alerus common stock, as applicable, for listing on Nasdaq; the accuracy of the representations and warranties by both parties (subject to the materiality standards set forth in the merger agreement); the performance by both parties of their covenants and agreements as set forth in the merger agreement; and the receipt by both parties of legal opinions from their respective tax counsels. These conditions to the closing of the merger may not be fulfilled in a timely manner or at all, and, accordingly, the merger may not be consummated. In addition, the parties can mutually decide to terminate the merger agreement at any time, before or after receipt of Alerus or HMNF stockholder approval, or Alerus or HMNF may elect to terminate the merger agreement in certain other circumstances.

 

23

 

Termination of the Merger Agreement Could Negatively Impact Alerus and/or HMNF.

If the merger is not consummated for any reason, including as a result of Alerus stockholders or HMNF stockholders declining to approve the merger agreement and the transactions contemplated therein, including, in the case of Alerus stockholders, the issuance of Alerus common stock pursuant to the merger agreement, the ongoing business of Alerus and/or HMNF may be adversely impacted and, without realizing any of the anticipated benefits of completing the merger, Alerus and/or HMNF would be subject to a number of risks, including the following:

•

Alerus or HMNF may experience negative reactions from its customers, vendors and employees;

​

•

Alerus and HMNF will have incurred substantial expenses and will be required to pay certain costs relating to the merger, whether or not the merger is consummated;

​

•

the merger agreement places certain restrictions on the conduct of Alerus’ and HMNF’s respective businesses prior to consummation of the merger. Such restrictions, the waiver of which is subject to the consent of the other party (not to be unreasonably withheld, conditioned or delayed), may prevent Alerus or HMNF from making certain acquisitions or taking certain other specified actions during the pendency of the merger; and

​

•

matters relating to the merger (including integration planning) will require substantial commitments of time and resources by Alerus’ and HMNF’s respective management teams, which would otherwise have been devoted to other opportunities that may have been beneficial to Alerus or HMNF, respectively, as an independent company.

​

If the merger agreement is terminated and the HMNF Board seeks another merger or business combination, HMNF stockholders cannot be certain that HMNF will be able to find a party willing to offer equivalent or more attractive consideration than the consideration Alerus has agreed to provide in the merger, or that such other merger or business combination will be consummated. Additionally, if the merger agreement is terminated under certain circumstances, the terminating party may be required to pay a termination fee to the non-terminating party of $4.6 million.

 

24

 

•

payments due under the change in control and severance agreements between HMNF and certain of its officers. See “The Merger — Interests of certain persons in the merger — Payments Pursuant to Change in Control Agreements” and “The Merger — Interests of certain persons in the merger — Payments Pursuant to Severance Agreements.”

​

•

the continued indemnification, advancement of expenses and directors’ and officers’ insurance coverage of current HMNF and Home Federal directors and officers following the merger. See “The Merger — Interests of certain persons in the merger — Indemnification and Insurance.”

​

•

the executive officers of HMNF will or may receive certain compensation payments in connection with the merger. See “The Merger — Interests of certain persons in the merger — Quantification of Potential Payments and Benefits to HMNF’s Named Executive Officers.”

​

•

one existing member of the HMNF Board will be appointed to the Alerus Board at the effective time of the merger. See “The Merger — Interests of certain persons in the merger — Board Representation.”

​

These interests are more fully described in this joint proxy statement/prospectus under the heading “The Merger — Interests of certain persons in the merger.”

The Merger Agreement Contains Provisions that May Discourage Other Companies from Trying to Acquire HMNF for Greater Merger Consideration.

The merger agreement contains provisions that may discourage a third party from submitting a business combination proposal to HMNF that might result in greater value to HMNF’s stockholders than the proposed merger with Alerus, or that may result in a potential competing acquiror proposing to pay a lower per share price to acquire HMNF than it might otherwise have proposed to pay absent such provisions. These provisions include a general prohibition on HMNF from soliciting, or, subject to certain exceptions relating to the exercise of fiduciary duties by the HMNF Board, entering into discussions with any third party regarding any acquisition proposal or offers for competing transactions. In addition, HMNF may be required to pay Alerus a termination fee of $4.6 million upon termination of the merger agreement in certain circumstances involving acquisition proposals for competing transactions. See “Description of the Merger Agreement — Termination” and “Description of the Merger Agreement — Termination fees.”

The Opinions of Alerus’ and HMNF’s Respective Financial Advisors Will Not Reflect Changes in Circumstances Between the Signing of the Merger Agreement and the Consummation of the Merger.

Neither Alerus nor HMNF has obtained an updated opinion from its respective financial advisors as of the date of this joint proxy statement/prospectus. Changes in the operations and prospects of Alerus or HMNF, general market and economic conditions and other factors that may be beyond the control of Alerus or HMNF, and on which Alerus’ and HMNF’s respective financial advisors’ opinion were based, may significantly alter the value of HMNF, the price of the Alerus common stock to be issued to HMNF stockholders pursuant to the merger agreement or the price of HMNF common stock by the time the merger is consummated. Additionally, neither Alerus’ nor HMNF’s respective financial advisors has expressed any opinion regarding any adjustments to the exchange ratio pursuant to the merger agreement. The opinions of Alerus’ and HMNF’s respective financial advisors do not speak as of the time the merger will be consummated, or as of any date other than the dates of such opinions. Because neither Alerus nor HMNF currently anticipates asking its respective financial advisors to update their opinions, the opinions will not address the fairness of the merger consideration from a financial point of view at the time the merger is consummated.

Alerus and HMNF Will Incur Transaction and Integration Costs in Connection with the Merger.

Each of Alerus and HMNF has incurred and expects that it will incur significant, non-recurring costs in connection with consummating the merger. In addition, Alerus will incur integration costs, some of which may not be anticipated, following the consummation of the merger as Alerus integrates the businesses of the two companies, including facilities and systems consolidation costs and employment-related costs, all of which may affect the total amount or timing of Alerus’ integration costs. There can be no assurances that

 

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the expected benefits and efficiencies related to the integration of the businesses will be realized to offset these transaction and integration costs over time. See the risk factor entitled “Alerus May Fail to Realize the Anticipated Benefits of the Merger.” Alerus and HMNF may also incur additional costs to maintain employee morale and to retain key employees. Alerus and HMNF will also incur significant legal, financial advisor, accounting, banking and consulting fees, fees relating to regulatory filings and notices, regulatory filing fees, printing and mailing fees and other costs associated with the merger.

The Shares of Alerus Common Stock to be Received by HMNF Stockholders as a Result of the Merger Will Have Different Rights From the Shares of HMNF Common Stock.

Upon consummation of the merger, HMNF stockholders will become Alerus stockholders. While their rights as stockholders will continue to be governed by the DGCL, their rights will also become governed by Alerus’ certificate of incorporation and bylaws. The rights associated with HMNF common stock are different from the rights associated with Alerus common stock. Please see “Comparison of Rights of Alerus Stockholders and HMNF Stockholders” for a discussion of the different rights associated with Alerus common stock.

The Unaudited Pro Forma Combined Financial Information Included in this Joint Proxy Statement/​Prospectus is Preliminary, and the Actual Financial Condition and Results of Operations of the Combined Company After the Merger may Differ Materially.

The unaudited pro forma combined financial information in this joint proxy statement/prospectus is presented for illustrative purposes only, and is not necessarily indicative of what the combined company’s actual financial condition or results of operations would have been had the merger been consummated on the dates indicated. The unaudited pro forma combined financial information reflects adjustments, which are based upon preliminary estimates, to record HMNF’s identifiable assets acquired and liabilities assumed at fair value, and to record any resulting bargain purchase gain. The fair value estimates reflected in this joint proxy statement/prospectus are preliminary, and final amounts will be based upon the actual consideration paid and the fair value of the assets and liabilities of HMNF as of the closing date of the merger, which fair value is directly impacted by, among other things, changes in interest rates. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this joint proxy statement/prospectus. For more information, see “Unaudited Pro Forma Condensed Combined Financial Information and Notes,” beginning on page 121.

Litigation may be Filed Against Alerus or HMNF (or their Respective Boards of Directors) that Could Prevent or Delay the Consummation of the Merger or Result in the Payment of Damages Following Consummation of the Merger.

It is possible that, in connection with the merger, stockholders may file demands or putative class action lawsuits against Alerus or HMNF (or their respective boards of directors). Among other remedies, these stockholders could seek financial damages or to enjoin the merger. The outcome of any such litigation is uncertain. Additionally, one of the conditions to the closing of the merger is that there must be no order, injunction, decree, statute, rule, regulation or other legal restraint or prohibition preventing or making illegal the consummation of the merger or any of the other transactions contemplated by the merger agreement. If a dismissal is not granted or a settlement is not reached and any plaintiff were successful in obtaining an injunction prohibiting Alerus or HMNF from completing the merger or any of the other transactions contemplated by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger and could result in significant costs to Alerus or HMNF, including any cost associated with the indemnification of directors and officers of each company. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is consummated may adversely affect the combined company’s business, financial condition, results of operations and cash flows and the market price of the combined company.

The Merger May Have Adverse Tax Consequences.

Alerus and HMNF have not sought, and will not seek, any ruling from the Internal Revenue Service regarding any matters relating to the transactions, and as a result, there can be no assurance that the IRS

 

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would not assert that the merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, or that a court would not sustain such a position. If the merger were to fail to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, then each holder of HMNF common stock generally would recognize a gain or loss, as applicable, equal to the difference between such holder’s adjusted tax basis in each share of HMNF common stock surrendered and the sum of the fair value of Alerus common stock received in exchange for that share upon consummation of the merger. Because HMNF stockholders will not receive cash in exchange for their shares of HMNF common stock, they may need to use cash from other sources or may be required to sell their Alerus common stock received in the merger to satisfy the resulting tax liability. See “The Merger — Material U.S. federal income tax consequences of the merger.”

Holders of Alerus Common Stock and Holders of HMNF Common Stock Will Not Have Appraisal Rights in Connection with the Merger.

Appraisal rights (also known as dissenters’ rights) are statutory rights that, if applicable under law, enable security holders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for such dissenting stockholders’ shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to security holders in connection with the extraordinary transaction.

Under Section 262 of the DGCL, stockholders do not have appraisal rights with respect to shares of any class or series of stock if such shares of stock, or depositary receipts in respect thereof, are either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders, unless the stockholders receive in exchange for their shares anything other than shares of stock of the surviving or resulting corporation (or depositary receipts in respect thereof), or of any other corporation that is publicly listed or held by more than 2,000 holders of record, cash in lieu of fractional shares or fractional depositary receipts described above or any combination of the foregoing. Because Alerus common stock and HMNF common are both listed on Nasdaq, a national securities exchange, and because HMNF stockholders will receive in the merger only shares of Alerus common stock which will be publicly listed on Nasdaq at the effective time and cash in lieu of fractional shares, holders of Alerus common stock and holders of HMNF common stock are not entitled under the DGCL to any appraisal rights in connection with the merger.

Risks Relating to Alerus’ Business

You should read and consider the risk factors specific to Alerus’ business that will also affect the combined company after the merger. These risks are described in the sections entitled “Risk Factors” in Alerus’ Annual Report on Form 10-K for the year ended December 31, 2023, and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, and in other documents incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” of this joint proxy statement/prospectus for the location of information incorporated by reference into this joint proxy statement/prospectus.

Risks Relating to HMNF’s Business

You should read and consider the risk factors specific to HMNF’s business that will also affect the combined company after the merger. These risks are described in the sections entitled “Risk Factors” in HMNF’s Annual Report on Form 10-K/A for the year ended December 31, 2023, and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, and in other documents incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” of this joint proxy statement/prospectus for the location of information incorporated by reference into this joint proxy statement/prospectus.

 

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•

changes to tax legislation and their potential effects on the accounting for the merger;

​

•

the failure of the proposed merger to close for any other reason; and

​

•

changes in the global economy and financial market conditions and the business, results of operations and financial condition of Alerus, HMNF and the combined company.

​

These factors are not necessarily all of the factors that could cause Alerus’, HMNF’s or the combined company’s actual results, performance or achievements to differ materially from those expressed in or implied by any of the forward-looking statements. Other factors, including unknown or unpredictable factors, also could harm Alerus’, HMNF’s or the combined company’s results. Further information regarding Alerus, HMNF and factors which could affect the forward-looking statements contained herein can be found in the section entitled “Risk Factors” and set forth in Alerus’ and HMNF’s annual reports and other filings with the SEC that are incorporated by reference into this joint proxy statement/prospectus, as described in the section entitled “Where You Can Find More Information.”

Any forward-looking statement included in this joint proxy statement/prospectus is based only on information currently available to management and speaks only as of the date on which it is made. Unless required by law, neither Alerus nor HMNF undertakes any obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Alerus and HMNF expressly qualify in their entirety all forward-looking statements attributable to either Alerus or HMNF, or any person acting on behalf of Alerus of HMNF, by the cautionary statements contained or referred to in this joint proxy statement/prospectus.

 

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INFORMATION ABOUT THE SPECIAL MEETING OF ALERUS STOCKHOLDERS

Purpose

Alerus stockholders are receiving this joint proxy statement/prospectus because, at the close of business on [•], 2024, the record date for the virtual special meeting of Alerus’ stockholders to be held at [•] on [•], 2024, they owned shares of the common stock of Alerus, and the Alerus Board is soliciting proxies for the matters to be voted on at this virtual special meeting, as described in more detail below. The Alerus special meeting can be accessed virtually only, via live webcast, by visiting https://web.lumiconnect.com/288140204 and entering (i) passcode: alerus2024; and (ii) the 11-digit control number found on the proxy card distributed to each Alerus stockholder entitled to vote as of the record date. Alerus’ transfer agent, Equiniti, began to mail copies of this joint proxy statement/prospectus to holders of Alerus common stock on [•], 2024, which included a proxy card for use at the virtual special meeting and at any adjournment(s) of the meeting.

At the virtual special meeting, the Alerus Board will ask you to vote upon the following proposals:

•

to approve and adopt the merger agreement and the transactions contemplated therein, including the issuance of Alerus common stock pursuant to the merger agreement; and

​

•

to approve an adjournment of the special meeting to permit further solicitation in the event that an insufficient number of votes are cast to approve the merger agreement and the transactions contemplated therein.

​

When you sign the enclosed proxy card or otherwise vote pursuant to the instructions set forth on the proxy card, you appoint the proxy holder as your representative at the special meeting. The proxy holder will vote your shares as you have instructed in the proxy card, thereby ensuring that your shares will be voted whether or not you attend the virtual special meeting. Even if you plan to attend the virtual special meeting, we ask that you instruct the proxies how to vote your shares in advance of the special meeting just in case your plans change.

If you have not already done so, please complete, date and sign the accompanying proxy card and return it promptly in the enclosed, postage paid envelope or otherwise vote pursuant to the instructions set forth on the proxy card. If you do not vote your shares as instructed on the proxy card, or if you do not attend and cast your vote at the virtual special meeting, the effect will be a vote against the merger agreement and the transactions contemplated therein.

Record date, quorum and vote required

The record date for the virtual Alerus special meeting is [•], 2024. Alerus’ stockholders of record as of the close of business on that day will receive notice of and will be entitled to vote at the special meeting. As of the record date, there were [•] shares of Alerus common stock outstanding and entitled to vote at the special meeting. The outstanding shares are held by approximately [•] holders of record.

The presence, in person or by proxy, of a majority of the shares of Alerus common stock entitled to vote on the merger agreement is necessary to constitute a quorum for the virtual special meeting. Each share of Alerus common stock outstanding on the record date entitles its holder to one vote on the matters being brought before the special meeting.

To determine the presence of a quorum for the virtual special meeting, Alerus will also count as present the shares of Alerus common stock present in person but not voting, and the shares of Alerus common stock for which Alerus has received proxies but with respect to which the holders of such shares have abstained or signed without providing instructions. Broker non-votes are not counted as present for the purposes of determining quorum. Based on the number of shares of Alerus common stock outstanding as of the record date, at least [•] shares of Alerus common stock need to be present at the virtual Alerus special meeting, whether in person or by proxy, to constitute a quorum.

Approval of the Alerus merger proposal requires the affirmative vote, in person or by proxy, of the holders of a majority of the outstanding shares of Alerus common stock entitled to vote. Abstentions, shares not voted and broker non-votes will have the same effect as a vote against the proposal to adopt the Alerus merger proposal, including the issuance of Alerus common stock pursuant to the merger agreement.

 

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Approval of the Alerus adjournment proposal requires the affirmative vote of a majority of the shares represented at the virtual Alerus special meeting, in person or by proxy, and entitled to vote. Abstentions will have the same effect as a vote against the adjournment proposal. Shares not voted and broker non-votes will have no effect on the Alerus adjournment proposal, although they may prevent Alerus from obtaining a quorum and require Alerus to adjourn the special meeting to solicit additional proxies.

As of the record date for the special meeting, Alerus’ directors and executive officers beneficially owned a total of [•] shares, or approximately [•]% of the outstanding shares, of Alerus common stock. These individuals have entered into a written agreement with HMNF that they will vote their shares in favor of the merger agreement, except as may be limited by their fiduciary obligations. For more information regarding this written agreement, see “The Merger — Interests of certain persons in the merger” beginning on page 86.

Appraisal rights

Under Delaware law, appraisal rights are not available to Alerus stockholders with respect to the merger or the other transactions contemplated by the merger agreement.

How to vote your shares

After you have carefully read and considered the information contained in this joint proxy statement/​prospectus, please vote by a method described on your proxy card. If you properly complete and timely submit your proxy, your shares will be voted as you have directed. You may vote for, against or abstain with respect to each matter brought before the special meeting. If you are the record holder of your shares and submit your proxy without specifying a voting instruction, your shares will be voted as the Alerus Board recommends and will be voted “FOR” the approval of the Alerus merger proposal and “FOR” the approval of the Alerus adjournment proposal. If you do not vote your shares as instructed on the proxy card, or if you do not attend and cast your vote at the virtual special meeting, the effect will be a vote against the merger agreement. Although you may vote by mail, we ask that you vote instead by Internet or telephone. You may vote by telephone by calling the toll-free number specified on your proxy card or vote by Internet by accessing the website specified on your proxy card and by following the preprinted instructions on the proxy card. The giving of a proxy by either of these means will not affect your right to vote in person if you decide to attend the virtual Alerus special meeting.

Shares held in “street name”

If you hold shares in “street name” with a bank, broker or other fiduciary, you will receive voting instructions from the holder of record of your shares. Under the rules of various national and regional securities exchanges, brokers, banks and other fiduciaries may generally vote your shares on routine matters, such as the ratification of an independent registered public accounting firm, even if you provide no instructions, but may not vote on non-routine matters, such as the matters being brought before the special meeting, unless you provide voting instructions. Shares for which a broker does not have the authority to vote are recorded as “broker non-votes” and are not counted in the vote by stockholders or for purposes of a quorum. As a result, any broker non-votes will have the practical effect of a vote against the Alerus merger proposal but will not affect the Alerus adjournment proposal.

If your shares are registered in the name of your bank, broker or other fiduciary, you are the “beneficial owner” of those shares, and those shares are considered as held in “street name.” If you are a beneficial owner of shares registered in the name or your bank, broker or other fiduciary, you should have received a proxy card and voting instructions with these proxy materials from that organization, rather than directly from Alerus or Equiniti. Please follow the instructions on the proxy card provided by your bank, broker or other fiduciary to complete and mail the proxy card to ensure that your vote is counted. You may also be eligible to vote your shares held in “street name” electronically over the Internet or by telephone. A large number of banks and brokerage firms offer Internet and telephone voting. If your bank, broker or other fiduciary does not offer Internet or telephone voting, please complete and return your proxy card pursuant to the instructions on the proxy card provided by your bank, broker or other fiduciary.

 

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To vote in person at the virtual Alerus special meeting, you must first obtain a legal proxy from your bank, broker or other fiduciary, and then register in advance to attend the virtual Alerus special meeting. Follow the instructions from your broker, bank or other agent included with these proxy materials, or contact your bank, broker or other fiduciary to request a legal proxy form.

After obtaining a legal proxy form from your bank, broker or other fiduciary, to then register to attend the virtual Alerus special meeting, you must submit proof of your legal proxy reflecting the number of shares of Alerus common stock that you hold in “street name,” along with your full name and email address, to Equiniti. Requests for registration should be directed to proxy@equiniti.com. Requests for registration must be labeled as “Legal Proxy,” and be received no later than 5:00 p.m., Eastern Time, [•], 2024.

You will receive a confirmation of your registration by email after Equiniti has received your registration materials. You may attend the virtual Alerus special meeting and vote your shares held in “street name” by visiting https://web.lumiconnect.com/288140204 and entering (i) passcode: alerus2024; and (ii) the 11-digit control number provided by Equiniti following receipt of your registration materials.

Alerus ESOP participants

If you hold shares of Alerus common stock as a participant in the Alerus ESOP, you will be receiving this joint proxy statement/prospectus, together with separate voting instructions, from Alerus’ transfer agent, Equiniti. If you do not vote your shares of Alerus common stock held as a participant in the Alerus ESOP pursuant to these voting instructions, the Alerus ESOP Trustee will vote such shares in a manner that is consistent with and proportionate to the voting instructions received from those Alerus ESOP participants and beneficiaries who did provide voting direction to the Alerus ESOP Trustee. If you have any questions regarding these procedures, you should contact the Alerus ESOP Trustee directly.

Who can answer questions about voting your shares

If you have any questions about the mergers or how to submit your proxy card, or if you need additional copies of this joint proxy statement/prospectus, please contact Alerus’ Corporate Secretary, 401 Demers Avenue, Grand Forks, North Dakota 58201 or by calling (701) 795-3200, or D.F. King, Alerus’ proxy solicitor, by calling toll-free at (888) 605-1957, or for banks and brokers, collect at (212) 269-5550, or by email at alrs@dfking.com.

Revocability of proxies

You may revoke your proxy at any time before the vote is taken at the Alerus special meeting. To revoke your proxy, you must either advise the Corporate Secretary of Alerus in writing before your Alerus common stock has been voted at the special meeting, deliver a later dated proxy or attend the special meeting and vote your shares in person during the virtual special meeting. Attendance at the special meeting will not in itself constitute revocation of your proxy.

All written notices of revocation and other communication with respect to the revocation of proxies should be addressed to: Alerus Financial Corporation, Corporate Secretary, 401 Demers Avenue, Grand Forks, North Dakota 58201. If you hold your shares in the name of a broker, bank or other fiduciary and desire to revoke your proxy, you will need to contact your broker, bank or other fiduciary to revoke your proxy.

Proxy solicitation

Alerus will pay the costs associated with the solicitation of proxies for the Alerus special meeting. Alerus will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of Alerus common stock. In addition to the solicitation of proxies by mail, directors, officers and employees of Alerus may solicit proxies personally or by telephone. None of these persons will receive additional compensation for these activities.

On behalf of the Alerus Board, Alerus has engaged D.F. King, a proxy solicitation firm, to solicit proxies for the Alerus special meeting. D.F. King will be paid a fixed fee of approximately $11,875, and be reimbursed out-of-pocket expenses for its services. Alerus has also agreed to indemnify D.F. King and its affiliates against certain claims, liabilities, losses, damages and expenses.

 

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THE ALERUS PROPOSALS

Proposal 1 — Approval of the Merger Agreement

At the Alerus special meeting, stockholders of Alerus will be asked to approve the merger agreement, pursuant to which HMNF will merge with and into Alerus, and the transactions contemplated therein, including the issuance of Alerus common stock pursuant to the merger agreement. Stockholders of Alerus should read this joint proxy statement/prospectus carefully and in its entirety, including the appendices, for more detailed information concerning the merger agreement and the transactions contemplated therein. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Appendix A.

For the reasons discussed in this joint proxy statement/prospectus, the Alerus Board unanimously determined that the merger agreement and the transactions contemplated therein, including the issuance of Alerus common stock pursuant to the merger agreement, are in the best interests of Alerus and its stockholders, and unanimously adopted and approved the merger agreement. The Alerus Board unanimously recommends that Alerus stockholders vote “FOR” approval of the Alerus merger proposal.

Proposal 2 — Adjournment of the Special Meeting

If, at the Alerus special meeting, the number of shares of Alerus common stock cast in favor of the merger agreement is insufficient to approve the merger agreement and the transactions contemplated therein, including the issuance of Alerus common stock pursuant to the merger agreement, Alerus intends to move to adjourn the Alerus special meeting in order to enable the Alerus Board to solicit additional proxies for approval of the Alerus merger proposal. In this proposal, Alerus is asking its stockholders to authorize the holder of any proxy solicited by the Alerus Board, on a discretionary basis, to vote in favor of adjourning the Alerus special meeting to another time and place for the purpose of soliciting additional proxies.

The Alerus Board unanimously recommends a vote “FOR” the Alerus adjournment proposal.

 

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INFORMATION ABOUT THE SPECIAL MEETING OF HMNF STOCKHOLDERS

Purpose

HMNF stockholders are receiving this joint proxy statement/prospectus because, at the close of business on [•], 2024, the record date for the virtual special meeting of HMNF’s stockholders to be held at [•] on [•], 2024, they owned shares of the common stock of HMNF, and the HMNF Board is soliciting proxies for the matters to be voted on at this virtual special meeting, as described in more detail below. The HMNF special meeting can be accessed virtually only, via live webcast. To attend the virtual meeting, HMNF stockholders must register in advance at http://register.proxypush.com/hmnf. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you to access the virtual HMNF special meeting. HMNF’s transfer agent, Equiniti, began to mail copies of this joint proxy statement/prospectus to holders of HMNF common stock on [•], 2024, which included a proxy card for use at the virtual special meeting and at any adjournment(s) of the meeting.

At the virtual special meeting, the HMNF Board will ask you to vote upon the following proposals:

•

to approve and adopt the merger agreement and the transactions contemplated therein;

​

•

to approve, on an advisory (non-binding) basis, the compensation payments that will or may be paid to HMNF named executive officers in connection with the merger agreement and the transactions contemplated therein; and

​

•

to approve an adjournment of the special meeting to permit further solicitation in the event that an insufficient number of votes are cast to approve the merger agreement and the transactions contemplated therein.

​

When you sign the enclosed proxy card or otherwise vote pursuant to the instructions set forth on the proxy card, you appoint the proxy holder as your representative at the special meeting. The proxy holder will vote your shares as you have instructed in the proxy card, thereby ensuring that your shares will be voted whether or not you attend the virtual special meeting. Even if you plan to attend the virtual special meeting, we ask that you instruct the proxies how to vote your shares in advance of the special meeting just in case your plans change.

If you have not already done so, please complete, date and sign the accompanying proxy card and return it promptly in the enclosed, postage paid envelope or otherwise vote pursuant to the instructions set forth on the proxy card. If you do not vote your shares as instructed on the proxy card, or if you do not attend and cast your vote at the virtual special meeting, the effect will be a vote against the merger agreement and the transactions contemplated therein.

Record date, quorum and vote required

The record date for the virtual HMNF special meeting is [•], 2024. HMNF’s stockholders of record as of the close of business on that day will receive notice of and will be entitled to vote at the special meeting. As of the record date, there were [•] shares of HMNF common stock outstanding and entitled to vote at the special meeting. The outstanding shares are held by approximately [•] holders of record.

The presence, in person or by proxy, of a majority of the shares of HMNF common stock entitled to vote on the merger agreement is necessary to constitute a quorum for the virtual special meeting. Each share of HMNF common stock outstanding on the record date entitles its holder to one vote on the matters being brought before the special meeting.

To determine the presence of a quorum for the virtual special meeting, HMNF will also count as present the shares of Alerus common stock present in person but not voting, and the shares of HMNF common stock for which HMNF has received proxies but with respect to which the holders of such shares have abstained or signed without providing instructions. Broker non-votes are not counted as present for the purposes of determining quorum. Based on the number of shares of HMNF common stock outstanding as of the record date, at least [•] shares of HMNF common stock need to be present at the virtual HMNF special meeting, whether in person or by proxy, to constitute a quorum.

 

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Approval of the HMNF merger proposal requires the affirmative vote, in person or by proxy, of the holders of a majority of the outstanding shares of HMNF common stock entitled to vote. Abstentions, shares not voted and broker non-votes will have the same effect as a vote against the HMNF merger proposal. Approval, on an advisory (non-binding) basis, of the merger-related compensation proposal requires the affirmative vote of a majority of the shares for which votes are cast at the virtual HMNF special meeting, in person or by proxy. Abstentions, shares not voted and broker non-votes will have no effect on the merger-related compensation proposal. Approval of the HMNF adjournment proposal requires the affirmative vote of a majority of the shares for which votes are cast at the virtual HMNF special meeting, in person or by proxy. Abstentions, shares not voted and broker non-votes will have no effect on the HMNF adjournment proposal, although they may prevent HMNF from obtaining a quorum and require HMNF to adjourn the special meeting to solicit additional proxies.

As of the record date for the special meeting, HMNF’s directors and executive officers beneficially owned a total of [•] shares, or approximately [•]% of the outstanding shares, of HMNF common stock. These individuals have entered into a written agreement with Alerus that they will vote their shares in favor of the merger agreement, except as may be limited by their fiduciary obligations. For more information regarding this written agreement, see “Description of the Merger Agreement — Voting and support agreements” beginning on page 92. For more information regarding the interests of HMNF’s directors and executive officers in the merger agreement and the transactions contemplated therein, see “The Merger — Interests of certain persons in the merger” beginning on page 86 and “Beneficial Ownership of HMNF Common Stock by Management and Principal Stockholders of HMNF” beginning on page 105.

Appraisal rights

Under Delaware law, appraisal rights are not available to HMNF stockholders with respect to the merger or the other transactions contemplated by the merger agreement.

How to vote your shares

After you have carefully read and considered the information contained in this joint proxy statement/​prospectus, please vote by a method described on your proxy card. If you properly complete and timely submit your proxy, your shares will be voted as you have directed. You may vote for, against or abstain with respect to each matter brought before the special meeting. If you are the record holder of your shares and submit your proxy without specifying a voting instruction, your shares will be voted as the HMNF Board recommends and will be voted “FOR” the approval of the HMNF merger proposal, “FOR” the approval, on an advisory (non-binding) basis, of the merger-related compensation proposal and “FOR” the approval of the HMNF adjournment proposal. If you do not vote your shares as instructed on the proxy card, or if you do not attend and cast your vote at the virtual special meeting, the effect will be a vote against the merger agreement. Although you may vote by mail, we ask that you vote instead by Internet or telephone. You may vote by telephone by calling the toll-free number specified on your proxy card or vote by Internet by accessing the website specified on your proxy card and by following the preprinted instructions on the proxy card. The giving of a proxy by either of these means will not affect your right to vote in person if you decide to attend the virtual Alerus special meeting.

You should not send any stock certificates with your proxy card. If the merger is approved, you will receive instructions for exchanging your stock certificates after the merger has been consummated.

HMNF ESOP participants

If you hold shares of HMNF common stock as a participant in the HMNF ESOP, you will be receiving this joint proxy statement/prospectus, together with separate voting instructions, from HMNF’s transfer agent, Equiniti. If you do not vote your shares of HMNF common stock held as a participant in the HMNF ESOP pursuant to these voting instructions, the HMNF ESOP Trustee will vote such shares in a manner that is consistent with and proportionate to the voting instructions received from those HMNF ESOP participants and beneficiaries who did provide voting direction to the HMNF ESOP Trustee. If you have any questions regarding these procedures, you should contact the HMNF ESOP Trustee directly.

 

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Shares held in “street name”

If you hold shares in “street name” with a bank, broker or other fiduciary, you will receive voting instructions from the holder of record of your shares. Under the rules of various national and regional securities exchanges, brokers, banks and other fiduciaries may generally vote your shares on routine matters, such as the ratification of an independent registered public accounting firm, even if you provide no instructions, but may not vote on non-routine matters, such as the matters being brought before the special meeting, unless you provide voting instructions. Shares for which a broker does not have the authority to vote are recorded as “broker non-votes” and are not counted in the vote by stockholders or for purposes of a quorum. As a result, any broker non-votes will have the practical effect of a vote against the HMNF merger proposal but will not affect the merger-related compensation proposal or the HMNF adjournment proposal.

If your shares are registered in the name of your bank, broker or other fiduciary, you are the “beneficial owner” of those shares, and those shares are considered as held in “street name.” If you are a beneficial owner of shares registered in the name or your bank, broker or other fiduciary, you should have received a proxy card and voting instructions with these proxy materials from that organization, rather than directly from HMNF or Equiniti. Please follow the instructions on the proxy card provided by your bank, broker or other fiduciary to complete and mail the proxy card to ensure that your vote is counted. You may also be eligible to vote your shares held in “street name” electronically over the Internet or by telephone. A large number of banks and brokerage firms offer Internet and telephone voting. If your bank, broker or other fiduciary does not offer Internet or telephone voting, please complete and return your proxy card pursuant to the instructions on the proxy card provided by your bank, broker or other fiduciary.

To vote in person at the virtual HMNF special meeting, you must first obtain a legal proxy from your bank, broker or other fiduciary, and then register in advance to attend the virtual HMNF special meeting. Follow the instructions from your broker, bank or other agent included with these proxy materials, or contact your bank, broker or other fiduciary to request a legal proxy form.

After obtaining a legal proxy form from your bank, broker or other fiduciary, to then register to attend the virtual HMNF special meeting, you must submit proof of your legal proxy reflecting the number of shares of HMNF common stock that you hold in “street name,” along with your full name and email address, to Equiniti. Requests for registration should be directed to EQSS-ProxyTabulation@equiniti.com. Requests for registration must be labeled as “Legal Proxy,” and be received no later than 5:00 p.m., Eastern Time, [•], 2024.

You will receive a confirmation of your proof of legal proxy by email after Equiniti has received your legal proxy materials. To attend the virtual meeting, you must thereafter register in advance at http://register.proxypush.com/hmnf. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you to access the virtual HMNF special meeting.

Who can answer questions about voting your shares

If you have any questions about the mergers or how to submit your proxy card, or if you need additional copies of this joint proxy statement/prospectus, please contact HMNF’s Corporate Secretary , 1016 Civic Center Drive NW, Rochester, Minnesota 55901 or by calling (507) 535-1200, or D.F. King, HMNF’s proxy solicitor, by calling toll-free at (866) 620-2536, or for banks and brokers, collect at (212) 269-5550, or by email at hmnf@dfking.com.

Revocability of proxies

You may revoke your proxy at any time before the vote is taken at the HMNF special meeting. To revoke your proxy, you must either advise the Corporate Secretary of HMNF in writing before your HMNF common stock has been voted at the special meeting, deliver a later dated proxy or attend the special meeting and vote your shares in person during the virtual special meeting. Attendance at the special meeting will not in itself constitute revocation of your proxy.

All written notices of revocation and other communication with respect to the revocation of proxies should be addressed to: HMN Financial, Inc., Attn: Corporate Secretary, 1016 Civic Center Drive NW, Rochester, Minnesota 55901. If you hold your shares in the name of a broker, bank or other fiduciary and desire to revoke your proxy, you will need to contact your broker, bank or other fiduciary to revoke your proxy.

 

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Proxy solicitation

HMNF will pay the costs associated with the solicitation of proxies for the HMNF special meeting. HMNF will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of HMNF common stock. In addition to the solicitation of proxies by mail, directors, officers and employees of HMNF may solicit proxies personally or by telephone. None of these persons will receive additional compensation for these activities.

On behalf of the HMNF Board, HMNF has engaged D.F. King, a proxy solicitation firm, to solicit proxies for the HMNF special meeting. D.F. King will be paid a fixed fee of approximately $11,875, and be reimbursed out-of-pocket expenses for its services. HMNF has also agreed to indemnify D.F. King and its affiliates against certain claims, liabilities, losses, damages and expenses.

 

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THE HMNF PROPOSALS

Proposal 1 — Approval of the Merger Agreement

At the HMNF special meeting, stockholders of HMNF will be asked to approve the merger agreement, pursuant to which HMNF will merge with and into Alerus, and the transactions contemplated therein. Stockholders of HMNF should read this joint proxy statement/prospectus carefully and in its entirety, including the appendices, for more detailed information concerning the merger agreement and the transactions contemplated therein. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Appendix A.

For the reasons discussed in this joint proxy statement/prospectus, the HMNF Board unanimously determined that the merger agreement and the transactions contemplated therein are in the best interests of HMNF and its stockholders, and unanimously adopted and approved the merger agreement. The HMNF Board unanimously recommends that HMNF stockholders vote “FOR” approval of the HMNF merger proposal.

Proposal 2 — Merger-Related Compensation Proposal

Pursuant to Section 14A of the Exchange Act and Rule 14a-21(c) thereunder, HMNF is seeking a non-binding, advisory stockholder approval of the compensation of HMNF’s named executive officers that may or will be payable in connection with the merger, as disclosed in the section entitled “The Merger — Interests of certain persons in the merger — Quantification of Potential Payments and Benefits to HMNF’s Named Executive Officers,” beginning on page 86. This proposal gives holders of HMNF common stock the opportunity to vote, on a non-binding, advisory basis, on the merger-related compensation that may be paid or will be payable to HMNF’s named executive officers.

The vote on the merger-related compensation proposal is a vote separate and apart from the votes on the HMNF merger proposal and the HMNF adjournment proposal. Accordingly, if you are a holder of HMNF common stock as of the record date, you may vote to approve the HMNF merger proposal and/or the HMNF adjournment proposal but vote not to approve the merger-related compensation proposal, and vice versa. The approval of the merger-related compensation proposal by holders of HMNF common stock is not a condition to the consummation of the merger. Because the vote on the merger-related compensation proposal is advisory only, it will not be binding on HMNF or Alerus. Accordingly, because HMNF is contractually obligated to make these payments if the merger is consummated, the merger-related compensation will be paid to HMNF’s named executive officers to the extent payable in accordance with the terms of the compensation agreements and arrangements, even if stockholders of HMNF common stock fail to approve the advisory vote regarding merger-related compensation.

The HMNF Board unanimously recommends a vote “FOR” the merger-related compensation proposal.

Proposal 3 — Adjournment of the Special Meeting

If, at the HMNF special meeting, the number of shares of HMNF common stock cast in favor of the merger agreement is insufficient to approve the merger agreement and the transactions contemplated therein, HMNF intends to move to adjourn the HMNF special meeting in order to enable the HMNF Board to solicit additional proxies for approval of the HMNF merger proposal. In this proposal, HMNF is asking its stockholders to authorize the holder of any proxy solicited by the HMNF Board, on a discretionary basis, to vote in favor of adjourning the HMNF special meeting to another time and place for the purpose of soliciting additional proxies.

The HMNF Board unanimously recommends a vote “FOR” the HMNF adjournment proposal.

 

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advisors to provide the HMNF Board with valuation information relating to HMNF and to model potential merger and acquisition opportunities. Over the past ten years, HMNF has worked primarily with D.A. Davidson as its financial advisor. As part of its review and assessment of potential strategic alternatives, the HMNF Board and D.A. Davidson identified Alerus as a potential strategic acquiror. From time to time, the HMNF Board requested D.A. Davidson to prepare financial models illustrating HMNF’s potential acquisition of other financial institutions and illustrating the potential sale of HMNF to, or potential merger of HMNF with, other financial institutions, including Alerus. During this time, at the direction of the HMNF Board, management of HMNF engaged in preliminary discussions with other financial institutions, including Alerus, relating to potential strategic transactions.

In August 2021, Bradley Krehbiel, the President and Chief Executive Officer of HMNF, and Galen Vetter, a director of Alerus, met on several occasions socially. On August 31, 2021, Messrs. Krehbiel and Vetter arranged for a dinner between representatives of HMNF and representatives of Alerus so that each of HMNF and Alerus could learn more about each other’s banks, as well as the opportunities and challenges each was experiencing at that time. Representatives of HMNF included Mr. Krehbiel; Jon Eberle, Senior Vice President, Chief Financial Officer and Treasurer of HMNF and Executive Vice President, Chief Financial Officer and Treasurer of Home Federal; and Lawrence McGraw, Executive Vice President and Chief Operating Officer of Home Federal. Representatives of Alerus included Mr. Vetter; Randy Newman, Alerus’ then-present Chairman, Chief Executive Officer; and Katie Lorenson, Alerus’ then-present Executive Vice President and Chief Financial Officer. At the conclusion of the meeting, the representatives of HMNF and Alerus agreed that there were opportunities for the two institutions to partner together and, to this end, agreed to follow up with their respective Chief Credit Officers to consider working together on selected commercial loans. Following this meeting, the Chief Credit Officers of each of HMNF and Alerus explored potential opportunities for participations in commercial loans, but these opportunities did not involve any potential business combination between HMNF and Alerus.

On March 7, 2023, Mr. Krehbiel and Ms. Lorenson, who had been promoted to President and Chief Executive Officer of Alerus on January 1, 2022, met to exchange observations on current market conditions and the impact they were having on local business conditions. Neither Mr. Krehbiel nor Ms. Lorenson disclosed confidential information at this meeting. During this meeting, Mr. Krehbiel and Ms. Lorenson agreed to consider discussions regarding a potential combination of HMNF and Alerus. Mr. Krehbiel and Ms. Lorenson discussed the merits of an all-stock transaction, but did not discuss valuation or other terms of a potential transaction between HMNF and Alerus. Mr. Krehbiel relayed the substance of this conversation to the HMNF Board, which supported continued dialogue between Mr. Krehbiel and Ms. Lorenson toward a strategic transaction.

On July 14, 2023, Mr. Krehbiel again met with Ms. Lorenson to discuss a possible combination of HMNF with Alerus. Given the sense of strategic fit, as well as the interests of both HMNF and Alerus in strategic transactions, Mr. Krehbiel and Ms. Lorenson agreed to move forward with an exploration of Alerus’ potential acquisition of HMNF. Neither Mr. Krehbiel nor Ms. Lorenson disclosed confidential information at this meeting, nor did they discuss valuation or other terms of a potential transaction between HMNF and Alerus.

On July 25, 2023, at a regular meeting of the HMNF Board, Mr. Krehbiel updated the HMNF Board on his discussions with Ms. Lorenson at the July 14, 2023 meeting. The HMNF Board directed Mr. Krehbiel to enter into a mutual nondisclosure agreement with Alerus on behalf of HMNF, so that the two companies could share confidential information with one another and continue the dialogue.

Later on July 25, 2023, Alerus and HMNF entered into a mutual nondisclosure agreement. This mutual nondisclosure agreement contained a customary mutual standstill provision that automatically terminated upon execution of the merger agreement. HMNF requested that D.A. Davidson facilitate the information exchange.

On August 1, 2023, D.A. Davidson provided representatives of Alerus and HMNF with access to a virtual data room to which each party could post confidential information and review confidential information of the other.

Over the next several months, Alerus and HMNF reviewed and exchanged confidential information with one another. Over this same time period, Mr. Krehbiel and Ms. Lorenson had multiple discussions

 

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regarding the general features of the potential acquisition of HMNF by Alerus by way of merger, in which HMNF stockholders would receive shares of Alerus common stock as consideration, which was the preferred structure of HMNF due to the fact that the transaction would be expected to qualify as a tax-free reorganization for HMNF stockholders and allow an HMNF stockholder to participate in the future expected growth of Alerus or provide an HMNF stockholder with liquidity with respect to Alerus common stock received in the merger, if that stockholder so desired. However, Mr. Krehbiel and Ms. Lorenson did not discuss the amount of merger consideration to HMNF stockholders.

As these discussions continued to gain momentum in the fourth quarter of 2023, HMNF’s management worked closely with D.A. Davidson to update a model illustrating the potential merger of HMNF with Alerus for review by the HMNF Board. The HMNF Board again assessed the qualifications, expertise and reputation of D.A. Davidson, its knowledge of and involvement in recent transactions in the banking industry and its knowledge of and familiarity with HMNF’s business. As part of this selection process, D.A. Davidson disclosed, and the HMNF Board expressly considered, that D.A. Davidson had been engaged as Alerus’ financial advisor with respect to Alerus’ acquisition, completed on July 1, 2022, of MPB BHC, Inc. and its wholly-owned subsidiary Metro Phoenix Bank. The HMNF Board concluded that this prior engagement would not prevent D.A. Davidson from fulfilling its obligations as HMNF’s financial advisor, and the HMNF Board selected D.A. Davidson as its financial advisor with respect to a transaction with Alerus. HMNF formalized the engagement of D.A. Davidson to serve as its financial advisor on March 12, 2024.

On November 15, 2023, HMNF commenced sharing more detailed confidential information with Alerus through the virtual data room, with the intention that this information would enable Alerus to make a proposal for an exchange ratio, which is the number of shares of Alerus common stock that HMNF stockholders would receive per share of HMNF common stock in the proposed merger with Alerus. HMNF did not express any specific expectation regarding the exchange ratio, nor did HMNF share the financial model being prepared by D.A. Davidson with Alerus.

On January 4, 2024, Alerus, through its financial advisor Raymond James, delivered a written, non-binding indication of interest to the HMNF Board, through D.A. Davidson. In this non-binding indication of interest, Alerus proposed to acquire all the issued and outstanding shares of HMNF in a merger transaction in exchange for Alerus common stock. The merger consideration initially proposed by Alerus was between 1.25 and 1.30 shares of Alerus common stock, which at the non-binding proposed exchange ratio of 1.25 to 1.30, with a midpoint of 1.275, represented an implied premium of 18% to the closing price of HMNF’s common stock on January 3, 2024, based on the closing price of Alerus’ common stock on that date. The non-binding indication of interest also proposed that, following the merger of HMNF and Alerus, Home Federal would merge with Alerus Financial, with Alerus Financial being the surviving entity in the merger. In the non-binding indication of interest, Alerus stated that it would require voting and support agreements to be entered into by certain HMNF executive officers and directors. The non-binding indication of interest also stated that Alerus would provide tail liability insurance and indemnification for existing directors and officers of HMNF for a period of six years, subject to a cap of 250% on the premium for such tail coverage. Under the binding exclusivity provision contained in the non-binding indication of interest, HMNF would agree to negotiate exclusively and in good faith with Alerus for a period of 90 days from acceptance of the non-binding indication of interest. During this same period, HMNF would not be permitted to solicit or entertain expressions of interest from any party other than Alerus as it related to a similar strategic transaction. The non-binding indication of interest did not provide for the retention or post-closing employment of any executive officer of HMNF.

On January 8, 2024, Alerus delivered an updated written, non-binding indication of interest reflecting the same terms as presented through the January 4, 2024 non-binding indication of interest, with the addition of a provision by which Alerus agreed to add one current HMNF director to the Alerus Board, with the director to be mutually agreed by both parties. HMNF director representation on the Alerus Board had been previously discussed between Mr. Krehbiel and Ms. Lorenson, during the course of their earlier conversations.

On January 16, 2024, the HMNF Board met to review the updated January 4, 2024 non-binding indication of interest and due diligence findings relating to Alerus. At this meeting, representatives of D.A. Davidson presented an updated financial model to the HMNF Board. The HMNF Board discussed with

 

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HMNF’s management and D.A. Davidson the potential advantages and disadvantages of the transaction proposed by Alerus, as well as the terms of the non-binding indication of interest. Based on this review and discussion, the HMNF Board concluded it would not approve the updated January 4, 2024 non-binding indication of interest as presented, and instructed D.A. Davidson to negotiate on behalf of HMNF to increase the proposed exchange ratio and reduce the period of exclusivity from 90 days to 60 days.

On January 23, 2024, the HMNF Board held a regular meeting, and, during that meeting, HMNF’s management updated the HMNF Board on the current status of discussions. The HMNF Board also considered the engagement of outside legal counsel to advise the HMNF Board and to assist HMNF in the transaction. During the course of this discussion, the HMNF Board identified Ballard Spahr as a potential law firm due to its experience and expertise in bank regulatory and bank mergers and acquisitions. The HMNF Board authorized Mr. Krehbiel, in consultation with Wendy S. Shannon, Chair of the HMNF Board, to select legal counsel based on the considerations discussed in the meeting.

On January 24, 2024, Alerus issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2023. On January 25, 2024, HMNF issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2023.

On January 31, 2024, Alerus presented the HMNF Board with a revised written, non-binding indication of interest in which Alerus proposed an exchange ratio of between 1.30 and 1.35 shares of Alerus common stock, which at the non-binding proposed exchange ratio of 1.35 represented an implied premium of 48% to the closing price of HMNF’s common stock on January 31, 2024, based on the closing price of Alerus common stock on that date. The merger consideration was subject to ongoing due diligence, in particular Alerus’ confirmation of the value of the HMNF main office location. The revised January 31, 2024 non-binding indication of interest provided that the definitive merger agreement would include a customary no-shop provision and require HMNF to pay a termination fee to Alerus in the amount of 4% of the aggregate merger consideration in the event that HMNF accepted an unsolicited topping bid and terminated the definitive agreement with Alerus. The revised January 31, 2024 non-binding indication of interest also stated that the definitive agreement would provide that HMNF would be permitted to continue to pay quarterly cash dividends in its normal course. The revised January 31, 2024 non-binding indication of interest contained a binding exclusivity period of 60 day from the receipt of the majority of due diligence items. The other terms were consistent with the updated January 4, 2024 non-binding indication of interest.

On February 1, 2024, Mr. Krehbiel, in consultation with Ms. Shannon, finalized the engagement of Ballard Spahr as legal counsel for HMNF relating to the potential transaction with Alerus.

On February 5, 2024, the HMNF Board held a special meeting with Mr. Krehbiel, D.A. Davidson and Ballard Spahr to review and consider the terms and conditions of the revised January 31, 2024 non-binding indication of interest from Alerus along with an updated financial model prepared by Davidson. The HMNF Board approved the revised January 31, 2024 non-binding indication of interest, and directed Mr. Krehbiel to sign and deliver the indication of interest on behalf of HMNF, which Mr. Krehbiel did on February 5, 2024.

Beginning in mid-February 2024, Alerus and its financial, accounting and legal advisors, on the one hand, and HMNF and its financial, accounting and legal advisors, on the other hand, began an expanded due diligence investigation of HMNF and Alerus, respectively. This due diligence review included a review of both publicly available information regarding HMNF and Alerus, including reports and other materials filed by both companies with the SEC, and confidential information provided pursuant to the mutual confidentiality agreement. Also beginning in mid-February, Barack Ferrazzano, as legal counsel to Alerus, prepared an initial draft of the definitive merger agreement based on the executed indication of interest and discussed aspects of the same with members of Alerus’ management and Raymond James. On March 29, 2024, Barack Ferrazzano delivered to Ballard Spahr an initial draft of the merger agreement. The draft merger agreement was consistent with the February 5, 2024 indication of interest, and also included a mechanism for potential downward adjustment of the exchange ratio in the event of a shortfall in HMNF’s stockholders’ equity from an unspecified threshold amount, the requirement of stockholder approval by Alerus’ stockholders based on the estimated amount of Alerus common stock to be issued as consideration in the merger, as well as provisions regarding circumstances under which Alerus could terminate the merger agreement relating to the Alerus Board’s fiduciary duties and receipt of Alerus’ stockholder approval.

 

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Thereafter, and continuing until the merger agreement and the other transaction agreements were executed, the parties and their legal advisors negotiated the terms of the merger agreement and other transaction agreements, reflecting discussions between the parties regarding transaction terms.

On April 8, 2024, Ms. Shannon and Mr. Krehbiel had a telephone conference with representatives of Ballard Spahr to review terms of the merger agreement and provide feedback, as well as to discuss the process for the potential sale of HMNF.

On April 10, 2024, Ballard Spahr delivered to Barack Ferrazzano a revised draft of the merger agreement, incorporating the feedback from Ms. Shannon and Mr. Krehbiel. The revised merger agreement reflected that HMNF would require voting and support agreements by certain Alerus executive officers and directors, removed the provisions regarding potential downward adjustment of the exchange ratio, expanded the circumstances under which the HMNF Board could change its recommendation to HMNF’s stockholders and terminate the merger agreement and added a provision requiring Alerus to reimburse HMNF for its expenses in connection with termination of the agreement due to a failure of HMNF’s stockholders to approve the merger agreement, as well as expanded the representations and warranties to be made by, and the interim operating covenants of, Alerus and Alerus Financial.

On April 15, 2024, Barack Ferrazzano delivered to Ballard Spahr a revised draft of the merger agreement, which reflected an exchange ratio of 1.30, subject to potential downward adjustment in the event of a shortfall in HMNF’s stockholders’ equity as compared to a stockholders’ equity threshold of $125,498,000. This revised merger agreement defined stockholders’ equity as HMNF’s total stockholders’ equity as of the closing date, reduced for any shortfall in the valuation of HMNF’s main office location from the valuation discussed by the parties during initial due diligence. It also provided that certain transaction expenses of HMNF (defined in the merger agreement as “Company Transaction Expenses”) would be excluded from the calculation of stockholders’ equity, up to an unspecified cap amount. The revised draft merger agreement also limited the circumstances under which the HMNF Board could change its recommendation to HMNF’s stockholders and terminate the merger agreement, removed the provision regarding reimbursement of HMNF’s expenses and scaled back the representations and warranties to be made by, and the interim operating covenants of, Alerus and Alerus Financial.

On April 16, 2024, the HMNF Board held a special meeting attended by HMNF’s management, Ballard Spahr and D.A. Davidson. During this meeting, Ballard Spahr reviewed and discussed with the HMNF Board its fiduciary duties in the context of a potential merger transaction with Alerus. The HMNF Board received information from HMNF’s management, Ballard Spahr and D.A. Davidson relating to the due diligence investigation of Alerus and Alerus Financial. The HMNF Board reviewed with Ballard Spahr and D.A. Davidson the terms of the merger agreement based on the April 10, 2024 draft, and previewed certain changes reflected in the April 15, 2024 revised draft of the merger agreement. During this meeting, the HMNF Board considered whether to solicit interest in acquiring HMNF from other potential parties after the expiration of the exclusivity period, and discussed the process for maximizing HMNF stockholder value. The HMNF Board concluded that it was unlikely that there were other potential counterparties with the interest and ability to consummate a transaction with HMNF that would be more favorable to HMNF and its stockholders than the proposed transaction with Alerus. Based on this view, the HMNF Board determined to continue to exclusively negotiate with Alerus and not to solicit interest from other potential parties upon the expiration of the exclusivity period. The HMNF Board also determined to hold another meeting the following week to review the April 15, 2024 draft merger agreement in greater detail. The HMNF Board also directed D.A. Davidson, HMNF’s management and Ballard Spahr to seek additional information relating to the definition of stockholders’ equity, the stockholders’ equity threshold and estimates of various types of Company Transaction Expense. The HMNF Board also recognized that, given the fact that both HMNF and Alerus had completed the first quarter of 2024, the financial model for the merger of HMNF and Alerus should be updated for the financial results of both Alerus and HMNF for the quarter ended March 31, 2024. The HMNF Board directed Mr. Krehbiel, HMNF’s management and D.A. Davidson to update the forecasts that informed that financial model to cover the years ended December 31, 2024 to 2029. See the section entitled “— Certain unaudited prospective financial information,” beginning on page 80, for a summary of certain significant elements of this information that were used by D.A. Davidson in connection with the preparation of its fairness opinion and analyses.

 

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On April 17, 2024, representatives from HMNF conducted a due diligence conference call with members of Alerus’ management, during which a number of business, financial, credit, human resources and legal topics were discussed in detail.

On April 18, 2024, HMNF issued a press release announcing its financial results for the three months ended March 31, 2024.

On April 23, 2024, the HMNF Board held a special meeting attended by HMNF’s management, Ballard Spahr and D.A. Davidson. During this meeting, the HMNF Board received information from HMNF’s management, Ballard Spahr and D.A. Davidson relating to the due diligence investigation of Alerus and Alerus Financial. The HMNF Board reviewed with Ballard Spahr and D.A. Davidson the terms of the April 15, 2024 revised draft of the merger agreement, focusing on valuations of HMNF and Alerus, the exchange ratio, the items included in Company Transaction Expenses and the amounts thereof, potential adjustments to the exchange ratio and the value of HMNF’s main office location. Given the uncertainties relating to these key terms, the HMNF Board did not accept the exchange ratio of 1.30, the provisions relating to a downward adjustment of the exchange ratio in the event of a shortfall in HMNF’s stockholders’ equity or the HMNF stockholders’ equity threshold of $125,498,000. Instead, the HMNF Board directed HMNF’s management, Ballard Spahr and D.A. Davidson to continue their due diligence investigation and to provide the HMNF Board with additional information from which it could judge the reasonableness of the terms proposed in the April 15, 2024 revised draft, such as the value of HMNF’s main office location, an estimate of Company Transaction Expenses and the specific items thereof and financial modeling relating to HMNF stockholders’ equity over the balance of 2024. HMNF’s management and D.A. Davidson further reported to the HMNF Board that they were continuing to work on an updated financial model to reflect the financial results for each of HMNF and Alerus through March 31, 2024.

At a special meeting of the Alerus Board held on April 23, 2024, Alerus’ management, with the assistance of Alerus’ financial and legal advisors, gave a thorough presentation to the Alerus Board on various aspects of the proposed transaction, including the due diligence process and results, financial metrics, pro forma projections, employee matters and status. The presentation included detailed materials prepared by several Alerus teams, including finance, credit, legal, human resources, operations and marketing.

Alerus’ financial advisor discussed in detail the financial highlights of the proposed transaction and discussed the impact of using a fixed exchange ratio and the implications of any fluctuations in Alerus’ stock price. The Alerus Board asked the financial advisor questions about the prospects of the combined entity, how the investor community could potentially react to the transaction when announced and the potential impact on Alerus’ stock price. Alerus’ legal advisor also reviewed with the Alerus Board the April 15, 2024 draft of the merger agreement, which included substantially final, negotiated language with respect to the non-financial terms of the transactions contemplated by the merger agreement. Various provisions of the merger agreement were discussed and director questions regarding the merger agreement were asked and answered, including questions regarding terms that remained the subject of negotiation between the parties, including the potential downward adjustment of the exchange ratio in the event of a shortfall in HMNF’s stockholders’ equity and the HMNF stockholders’ equity threshold, and the status of such negotiations. Legal counsel noted for the Alerus Board that Alerus must obtain approval of the transaction by its stockholders because of the large amount of Alerus common stock being issued to HMNF stockholders, and described the process of obtaining stockholder approval.

On April 24, 2024, Alerus issued a press release announcing its financial results for the three months ended March 31, 2024.

On May 2, 2024, the HMNF Compensation Committee met to review the executive severance agreements then in place for HMNF’s executive officers, Messrs. Krehbiel, Eberle and McGraw. The HMNF Compensation Committee determined to amend the executive severance agreements to eliminate the requirement for Messrs. Eberle and McGraw that a termination of employment must occur during the two-year transition period following the Change in Control (as defined in each such severance agreement) in order for the executive to receive the executive severance agreement payments and benefits. The HMNF Compensation Committee believed that eliminating the two-year period would provide greater flexibility in the management of the combined company, and not unduly encourage the earlier termination of services of these executives. The HMNF Compensation Committee also took notice of the fact that the payments and

 

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benefits specified in the executive severance agreements were not increased or otherwise changed in amount by the amendments. The HMNF Compensation Committee approved the amendments, conditioned upon and effective upon the HMNF Board’s approval of the merger agreement with Alerus.

Between the dates of May 8 and May 9, 2024, representatives of D.A. Davidson and Raymond James conferred with one another regarding the exchange ratio, HMNF stockholders’ equity threshold and related matters. Based on the updates to its financial models for through March 31, 2024, and after consideration of the negative changes in various assumptions used by Alerus to develop the February 5, 2024 indication of interest, including the valuation of HMNF’s main office location, Raymond James advised D.A. Davidson that Alerus proposed an exchange ratio of 1.25 shares of Alerus common stock for each share of HMNF common stock. Following the discussion with Raymond James, D.A. Davidson reviewed this change with HMNF’s management and the stated rationale. HMNF’s management in turn discussed the change with the HMNF Board. At the direction of the HMNF Board, D.A. Davidson was also pursuing negotiations with Raymond James relating to the HMNF stockholders’ equity threshold and calculation of Company Transaction Expenses.

On May 9, 2024, Barack Ferrazzano circulated to Ballard Spahr an updated draft of the merger agreement reflecting an exchange ratio of 1.25, which was then forwarded through Ballard Spahr to the HMNF Board and HMNF’s management. Mr. Krehbiel summarized to the HMNF Board the information developed at the HMNF Board’s direction from the April 23, 2024 meeting, which provided the HMNF Board with greater certainty regarding the likelihood of potential adjustments to the exchange ratio based on the proposed terms of the merger agreement. After discussion with the HMNF Board, Ms. Shannon called a special meeting of the HMNF Board for May 14, 2024.

At a special meeting of the Alerus Board held on May 14, 2024,Alerus’ management provided an overview of the financial metrics of the transaction, including the projected earnback period. Alerus’ financial advisor outlined transaction value considerations and potential investor reactions to the transaction once announced. Alerus’ legal advisor described for the Alerus Board the fiduciary duties of directors in connection with the proposed transaction, which would require Alerus stockholder approval, and summarized the numerous actions taken by the Alerus Board to satisfy those duties. Alerus’ legal and financial advisors reviewed with the Alerus Board a substantially final, negotiated version of the merger agreement and related exhibits, a substantially final, negotiated version of the voting and support agreement to be entered into by directors and executive officers of Alerus, a financial presentation prepared by Raymond James providing an overview of HMNF and the financial terms of the proposed acquisition, a legal due diligence memorandum and draft board resolutions prepared by Barack Ferrazzano approving the merger agreement and the transactions contemplated therein, including the issuance of Alerus common stock pursuant to the merger agreement.

Representatives of Raymond James presented a summary of the financial terms of the proposed merger, including the merger consideration, valuation multiples of the merger consideration compared to precedent transactions, pro forma analyses and transaction analyses. Representatives of Raymond James also presented the firm’s financial analysis, which included a review of its fairness opinion process. At the end of its presentation, Raymond James delivered its oral opinion, which was subsequently confirmed in writing, to the effect that, as of May 14, 2024, and based on the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Raymond James as set forth in its opinion, the exchange ratio to be paid by Alerus in the merger pursuant to the merger agreement was fair, from a financial point of view, to Alerus and its stockholders. For more information, see the section entitled “— Opinion of Alerus’ financial advisor” and Appendix B to this joint proxy statement/prospectus. Various provisions of the merger agreement were discussed and director questions regarding the merger agreement were asked and answered.

The Alerus Board engaged in a detailed and extensive discussion of the merger agreement and the financial analyses presented by Raymond James. Following extensive discussion and questions and answers, including consideration of the factors described under “The Merger — Alerus’ reasons for the merger and recommendation of the Alerus Board,” the Alerus Board determined that the merger agreement and the transactions contemplated thereby, including the issuance of Alerus common stock pursuant to the

 

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merger agreement, were in the best interests of Alerus and its stockholders and authorized Alerus’ management to execute and deliver the merger agreement and to recommend that Alerus’ stockholders approve the merger agreement.

On May 14, 2024, the HMNF Board held a special meeting to consider the negotiated terms of the proposed merger between HMNF and Alerus and entry into the merger agreement and other transaction documents in connection with the proposed merger by HMNF. Members of HMNF’s management and representatives of Ballard Spahr and D.A. Davidson were also in attendance at the meeting. At this meeting, HMNF’s management and Ballard Spahr provided a final report on the key findings of their respective due diligence investigation of Alerus. Thereafter, HMNF’s management and D.A. Davidson reviewed in detail negotiations relating to the exchange ratio, as well as changes in HMNF’s and Alerus’ assumptions supporting the exchange ratio and the potential downward adjustment of the exchange ratio in the event of a shortfall in HMNF’s stockholders’ equity. The HMNF Board concluded that the proposed downward adjustment in the exchange ratio was reasonable under the circumstances, given the HMNF stockholders’ equity threshold and the proposed cap on Company Transaction Expenses. At this meeting, D.A. Davidson reviewed the financial aspects of the proposed merger, including the financial analyses performed by D.A. Davidson, and rendered to the HMNF Board an opinion, which was initially rendered verbally and subsequently confirmed in a written opinion dated May 14, 2024, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by D.A. Davidson as set forth in its written opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to the holders of HMNF common stock. For more information, see the section entitled “— Opinion of HMNF’s financial advisor” and Appendix C to this joint proxy statement/prospectus. Representatives of Ballard Spahr then reviewed with the HMNF Board the proposed final terms of the merger agreement and the other transaction documents to be entered into in connection with the merger, reviewed the directors’ fiduciary duties in connection with the merger, as they had previously done, and described the resolutions the HMNF Board would be asked to adopt if they were to approve the merger agreement. At the conclusion of the meeting, after careful review and discussion by the HMNF Board, including consideration of the factors described below under “The Merger — HMNF’s reasons for the merger and recommendation of the HMNF Board,” the HMNF Board unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, fair to and in the best interests of HMNF and its stockholders, (ii) adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, (iii) authorized the execution and delivery of the merger agreement and the other agreements contemplated thereby, (iv) directed that the merger agreement be submitted to the holders of HMNF common stock for approval and adoption and (v) recommended approval and adoption of the merger agreement by the holders of HMNF common stock.

Following the meetings of the HMNF Board and the Alerus Board on May 14, 2024, Alerus and HMNF executed the merger agreement on May 14, 2024. On the morning of May 15, 2024, before the opening of the financial markets, Alerus and HMNF issued a joint press release announcing the transaction and Alerus hosted an investor call where the transaction was discussed in more detail.

Alerus’ reasons for the merger and recommendation of the Alerus Board

The Alerus Board believes that the merger is advisable to its stockholders. Accordingly, the Alerus Board has approved the merger agreement and recommends that Alerus’ common stockholders vote “FOR” the approval of the merger agreement and the transactions contemplated therein, including the issuance of Alerus common stock pursuant to the merger agreement.

In deciding to approve the merger agreement, the Alerus Board after consulting with its management as well as its legal and financial advisors, considered a number of factors, including the following, which are not presented in order of priority:

•

management’s view that the acquisition of HMNF provides an attractive opportunity to enhance Alerus’ existing deposit, commercial banking, wealth management and retirement and benefits presence in the Rochester, MN and Minneapolis-St. Paul-Bloomington, MN-WI metropolitan statistical areas (“MSAs”);

​

 

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•

HMNF’s complementary relationship-oriented community banking model, and its compatibility with Alerus;

​

•

a review of the demographic, economic and financial characteristics of the markets in which HMNF operates, including existing and potential competition and history of the market area with respect to financial institutions;

​

•

management’s review of HMNF’s business, operations, earnings and financial condition, including its management, capital levels and strong asset quality;

​

•

anticipated efficiencies to come from integrating certain of HMNF’s operations into Alerus’ existing operations;

​

•

the ability of Alerus to use its common stock as consideration;

​

•

its review and discussions among Alerus’ legal and financial advisors, concerning the due diligence investigation of HMNF;

​

•

management’s expectation that Alerus will retain its strong capital position upon consummation of the transaction;

​

•

the opportunity to build a greater recognition and awareness of the Alerus brand;

​

•

the Alerus Board’s review with its legal advisors of the exclusivity and termination provisions of the merger agreement and the $4.6 million termination fee in favor of HMNF in the event that the merger agreement is terminated under certain specified circumstances;

​

•

the financial presentation and fairness opinion, dated May 14, 2024, of Raymond James, Alerus’ financial advisor, to the Alerus Board, to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Raymond James as set forth in its opinion, the exchange ratio to be paid by Alerus in the merger pursuant to the merger agreement was fair, from a financial point of view, to Alerus, as more fully described under “Opinion of Alerus’ Financial Advisor” beginning on page 48;

​

•

the similarity between HMNF’s and Alerus’ management philosophies, approaches and commitments to the communities, customers and stockholders they each serve and their respective employees; and

​

•

the terms of the merger agreement, including the expected tax treatment and termination fee provisions, which it reviewed with Alerus’ outside legal and financial advisors.

​

The Alerus Board also considered potential risks relating to the merger, including but not limited to the following:

•

the need to obtain regulatory approvals to consummate the merger;

​

•

the dilution to current Alerus stockholders from the issuance of additional shares of Alerus common stock pursuant to the merger agreement;

​

•

the potential for diversion of management and employee attention, and for employee attrition, during the period prior to the consummation of the merger and the potential effect on Alerus’ business and relations with customers, service providers and other stakeholders, whether or not the merger is consummated;

​

•

expected benefits and synergies sought in the merger, including cost savings and Alerus’ ability to successfully market its products and services to HMNF’s customers, may not be realized within the expected time period, or at all;

​

•

the challenges of integrating the businesses, operations and employees of Alerus and HMNF;

​

•

certain anticipated merger-related costs and the fact that Alerus expects to incur a number of nonrecurring costs in connection with the merger, even if the merger is not ultimately consummated, including a potential $4.6 million termination fee if the merger agreement is terminated under certain circumstances;

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•

the potential for legal claims challenging the merger; and

​

•

the other risks described in the section entitled “Risk Factors” beginning on page 21 and the risks of investing in Alerus common stock identified in the Risk Factors sections of Alerus’ periodic reports filed with the SEC and incorporated by reference herein.

​

The foregoing discussion of the information and factors considered by the Alerus Board is not intended to be exhaustive, but to include a description of material factors considered by the Alerus Board. In reaching its decision to approve the merger agreement and the transactions contemplated therein, including the merger and the issuance of Alerus common stock pursuant to the merger agreement, the Alerus Board did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Alerus Board considered all these factors as a whole, including discussions with, and questioning of, Alerus’ management and Alerus’ independent financial and legal advisors and overall considered the factors to be favorable to, and to support, its determination.

The Alerus Board unanimously recommends that Alerus stockholders vote “FOR” the approval of the Alerus merger proposal and “FOR” the approval of the Alerus adjournment proposal.

This summary of the reasoning of the Alerus Board and other information presented in this section are forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Special Notes Concerning Forward-Looking Statements.”

Opinion of Alerus’ financial advisor

Alerus retained Raymond James as its financial advisor on April 2, 2024. Alerus selected Raymond James as its financial advisor because it is a globally-recognized investment banking firm offering a full range of investment banking services to its clients. In the ordinary course of its investment banking business, Raymond James is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions. Pursuant to that engagement, the Alerus Board requested that Raymond James evaluate and deliver an opinion regarding the fairness to Alerus, from a financial point of view, of the exchange ratio to be paid in the merger pursuant to the merger agreement.

On May 14, 2024, representatives of Raymond James rendered Raymond James’ opinion to the Alerus Board (solely in its members’ capacity as directors), that, as of such date, the exchange ratio to be paid in the merger pursuant to the merger agreement was fair, from a financial point of view, to Alerus, based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Raymond James in connection with the preparation of its opinion.

The full text of the written opinion of Raymond James, dated May 14, 2024, is attached to this joint proxy statement/prospectus as Exhibit B, and is incorporated by reference herein. Any summary of the opinion of Raymond James set forth in this document is qualified in its entirety by reference to the full text of such written opinion. Alerus stockholders are urged to read the entire opinion carefully and in its entirety in connection with their consideration of the exchange ratio. Raymond James’ opinion speaks only as of the date of such opinion and does not reflect any developments that may occur or have occurred after the date of its opinion and prior to the consummation of the merger.

Raymond James provided its opinion for the information of the Alerus Board (solely in its capacity as such) in connection with, and for purposes of, the Alerus Board’s consideration of the exchange ratio to be paid in the merger pursuant to the merger agreement and its opinion only addressed whether the exchange ratio to be paid in the merger pursuant to the merger agreement was fair to Alerus, from a financial point of view, as of the date of the opinion. The opinion of Raymond James did not address any other term or aspect of the merger agreement or the transactions contemplated therein. The Raymond James opinion did not constitute a recommendation to the Alerus Board or to any Alerus or HMNF stockholder as to how the Alerus Board, such stockholders or any other person should vote or otherwise act with respect to the merger or any other matter.

 

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In connection with its review of the proposed merger and the preparation of its opinion, Raymond James reviewed, analyzed and relied upon information bearing upon the financial and operating condition of Alerus and HMNF, among other things:

•

the financial terms and conditions as stated in the substantially final draft of the merger agreement by and between Alerus and HMNF, dated as of May 10, 2024 (the most recent version made available to Raymond James);

​

•

certain information related to the historical condition and prospects of HMNF and Alerus, as made available to Raymond James by or on behalf of Alerus, including, but not limited to, (a) financial projections for HMNF for the periods ending December 31, 2024 through 2028 prepared by the management of HMNF (as adjusted and approved by Alerus’ management) (the “HMNF Projections”) and (b) financial projections for Alerus for the periods ended December 31, 2024 through 2028 as approved by Alerus’ management based on Alerus’ management-approved (i) analyst consensus estimates and (ii) long-term growth rates (collectively, the “Alerus Projections” and, together with the HMNF Projections, the “Projections”) and (c) certain forecasts and estimates of potential cost savings, operating efficiencies, revenue effects, discount rates, purchase accounting adjustments, transaction expenses and other pro forma financial adjustments expected to result from the merger, as prepared by management of Alerus for use by Raymond James (the “Merger Adjustments”);

​

•

HMNF’s and Alerus’ audited financial statements for the years ended December 31, 2023, 2022 and 2021 and unaudited financial statements for the quarterly periods ended March 31, 2024, September 30, 2023, June 30, 2023 and March 31, 2023, as they appear in HMNF’s and Alerus’ respective filings with the SEC;

​

•

HMNF’s and Alerus’ recent public filings and certain other publicly available information regarding HMNF and Alerus;

​

•

the financial and operating performance of HMNF and Alerus and those of other selected public companies that Raymond James deemed to be relevant;

​

•

certain publicly available financial terms of certain transactions Raymond James deemed to be relevant;

​

•

the current and historical market prices for HMNF and Alerus’ common stock, and the current market prices of the publicly traded securities of certain other companies that Raymond James deemed to be relevant;

​

•

certain other financial studies, analyses and inquiries and such other information and factors as Raymond James deemed appropriate;

​

•

a certificate addressed to Raymond James from a member of senior management of Alerus regarding, among other things, the accuracy of the information, data and other materials (financial or otherwise) provided to, or discussed with, Raymond James by or on behalf of Alerus;

​

•

discussions with members of the senior management of Alerus and HMNF certain information relating to the aforementioned and any other matters which Raymond James deemed relevant to Raymond James’ inquiry including, but not limited to, the past and then-current business operations of HMNF and Alerus and the financial condition and future prospects and operations of HMNF and Alerus; and

​

•

certain potential pro forma financial effects of the merger on Alerus.

​

With Alerus’ consent, Raymond James assumed and relied upon the accuracy and completeness of all information supplied by or on behalf of Alerus or HMNF or otherwise reviewed by or discussed with Raymond James, and Raymond James undertook no duty or responsibility to, nor did Raymond James actually, independently verify any of such information. Furthermore, Raymond James undertook no independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which Alerus or HMNF is a party or may be subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which Alerus or HMNF is a party or may be subject. With Alerus’ consent, the Raymond James opinion made no assumption

 

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concerning, and therefore did not consider, the potential effects of any such litigation, claims or investigations or possible assertions. Raymond James has not made or obtained an independent appraisal of the assets or liabilities (contingent or otherwise) of HMNF. Raymond James is not an expert in GAAP in general, and also specifically regarding the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowance for credit losses or any other reserves; accordingly, Raymond James assumed that such allowances and reserves are in the aggregate adequate to cover such losses. With Alerus’ consent, Raymond James assumed that the Projections, the Merger Adjustments and such other information and data relating to HMNF and Alerus provided to or otherwise reviewed by or discussed with Raymond James had been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the management of Alerus, and Raymond James relied upon Alerus to advise it promptly if any information previously provided became inaccurate, misleading or was required to be updated during the period of its review. Raymond James expressed no opinion with respect to the Projections or Merger Adjustments, or the assumptions on which they are based. Raymond James assumed that the final form of the merger agreement would be substantially similar to the draft dated May 10, 2024, and that the merger would be consummated in accordance with the terms of the merger agreement without waiver or amendment of any conditions thereto. Furthermore, Raymond James assumed, in all respects material to Raymond James’ analysis, that the representations and warranties of each party contained in the merger agreement are true and correct and that each such party will perform all of the covenants and agreements required to be performed by it under the merger agreement without being waived. Raymond James relied upon and assumed, without independent verification, that (i) the merger would be consummated in a manner that complies in all respects with all applicable international, federal and state statutes, rules and regulations, and (ii) all governmental, regulatory and other consents and approvals necessary for the consummation of the merger would be obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would have an effect on the merger, HMNF or Alerus that would be material to Raymond James’ analyses or its opinion.

Raymond James’ opinion was based upon market, economic, financial and other circumstances and conditions existing and disclosed to Raymond James as of May 13, 2024. The credit, financial and stock markets have been experiencing unusual volatility (arising from factors related to, among other things, general economic conditions, geopolitical and economic uncertainty, inflation and the recovery from the COVID-19 pandemic, including the effect of evolving governmental actions and non-actions) and Raymond James expressed no opinion or view as to any potential effects of such volatility on the merger, Alerus or HMNF. Although subsequent developments may occur, Raymond James is under no obligation to update, revise or reaffirm its analyses or its opinion. Raymond James relied upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of HMNF since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Raymond James that would be material to Raymond James’ analyses or its opinion, and that there was no information or any facts that would make any of the information reviewed by Raymond James incomplete or misleading in any material respect.

Raymond James expressed no opinion as to the underlying business decision to effect the merger, the structure or tax consequences of the merger or the availability or advisability of any alternatives to the merger. Raymond James provided advice to Alerus with respect to the proposed merger. Raymond James did not, however, recommend any specific amount of consideration or that any specific consideration constituted the only appropriate consideration for the merger. Raymond James did not solicit indications of interest with respect to a transaction involving Alerus nor did Raymond James advise Alerus with respect to its strategic alternatives. The opinion of Raymond James did not express any opinion as to the likely trading range of Alerus’ stock following the merger, which may vary depending on numerous factors that generally impact the price of securities or on the financial condition of Alerus at that time. The opinion of Raymond James is limited to the fairness, from a financial point of view, of the exchange ratio to be paid by Alerus in the merger pursuant to the merger agreement.

Raymond James expressed no opinion with respect to any other reasons, legal, business or otherwise, that may support the decision of the Alerus Board to approve or consummate the merger. Furthermore, no opinion, counsel or interpretation was intended by Raymond James on matters that require legal, accounting or tax advice. Raymond James assumed that such opinions, counsel or interpretations have been or will be obtained from the appropriate professional sources. Furthermore, Raymond James relied, with

 

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the consent of Alerus, on the fact that Alerus has been assisted by legal, accounting and tax advisors and, with the consent of Alerus, relied upon and assumed the accuracy and completeness of the assessments by Alerus and its advisors as to all legal, accounting and tax matters with respect to Alerus, HMNF and the merger, including, without limitation, that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code.

In formulating its opinion, Raymond James considered only what Raymond James understood to be the exchange ratio to be paid by Alerus in the merger pursuant to the merger agreement, and Raymond James did not consider and its opinion did not address the fairness of the amount or nature of any compensation to be paid or payable to any person or entity (including any of HMNF’s officers, directors or employees) or class of any persons and/or entities, whether relative to the consideration to be paid by Alerus or otherwise. Raymond James was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (i) the fairness of the merger to the holders of any class of securities, creditors or other constituencies of Alerus or HMNF, or to any other party, except and only to the extent expressly set forth in the last sentence of Raymond James’ opinion or (ii) the fairness of the merger to any one class or group of Alerus’, HMNF’s or any other party’s security holders or other constituencies vis-à-vis any other class or group of Alerus’, HMNF’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration to be received in the merger amongst or within such classes or groups of security holders or other constituents). Raymond James expressed no opinion as to the impact of the merger on the solvency or viability of Alerus or HMNF or the ability of Alerus or HMNF to pay their respective obligations when they come due.

Material Financial Analyses

The following summarizes the material financial analyses reviewed by Raymond James with the Alerus Board on May 14, 2024, which analyses were considered by Raymond James in rendering its opinion. No company or transaction used in the analyses described below is identical or directly comparable to Alerus, HMNF or the contemplated merger.

Contribution Analysis.   Raymond James analyzed the relative contribution of HMNF and Alerus to certain financial and operating metrics for the pro forma combined company resulting from the merger. The financial and operating metrics included: (i) total assets; (ii) total gross loans; (iii) total deposits; (iv) tangible common equity; (v) tangible common equity, excluding accumulated other comprehensive income (“AOCI”); (vi) core net income for the last twelve months (“LTM”) ended March 31, 2024 as calculated by S&P Capital IQ Pro; (vii) estimated calendar year 2024 net income; and (viii) estimated calendar year 2025 net income. Metrics (i)  – (v) above were as of March 31, 2024. The relative contribution analysis did not give effect to the Merger Adjustments. The results of this analysis are summarized below:

Discounted Cash Flow Analysis.   Raymond James performed a discounted cash flow analysis of Alerus and HMNF based on the Projections. Consistent with the periods included in the Projections, Raymond James used calendar year 2028 as the final year for the analysis and applied multiples, ranging from 9.0x to 13.0x, to calendar year 2028 adjusted net income in order to derive a range of terminal values for Alerus and HMNF in 2028.

 

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For Alerus, Raymond James assumed discount rates ranging from 10% to 14%. For HMNF, Raymond James assumed discount rates ranging from 13% to 17%. Raymond James arrived at its discount rate ranges by using the Modified CAPM (Capital Asset Pricing Model) methodology as presented in the 2023 Duff & Phelps Valuation Handbook. Raymond James reviewed the ranges of implied per share values indicated by the discounted cash flow analysis for each of Alerus and HMNF and calculated a range of implied exchange ratios by dividing the maximum implied per share value of HMNF common stock by the minimum implied per share value of Alerus common stock to calculate the maximum implied exchange ratio, and by dividing the minimum implied per share value of HMNF common stock by the maximum implied per share value of Alerus common stock to calculate the minimum implied exchange ratio. The Merger Adjustments were not included in this discounted cash flow analysis. The results of the discounted cash flow analysis are summarized in the table below:

Selected Companies Analysis.   Raymond James reviewed certain data for selected companies with publicly traded equity securities that it deemed relevant for this analysis. The selected groups represent companies Raymond James believed relevant to each of HMNF and Alerus. For HMNF, Raymond James analyzed the relative valuation multiples of eleven (11) publicly traded depository institutions that satisfied the following criteria: (i) traded over the NASDAQ, NYSE or NYSEAM stock exchanges; (ii) headquartered in the Midwest region of the United States, which includes the states of Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin; (iii) had total assets between $500.0 million and $2.0 billion; and (iv) had LTM core return on average assets greater than 0.00% as calculated by S&P Capital IQ Pro. This group excluded companies that were targets of announced mergers and acquisitions. For Alerus, Raymond James analyzed the relative valuation multiples of seventeen (17) publicly traded depository institutions that satisfied the following criteria: (i) traded over the NASDAQ, NYSE or NYSEAM stock exchanges; (ii) headquartered in the United States; (iii) had total assets between $2.0 billion and $5.0 billion; and (iv) had LTM noninterest income, excluding mortgage revenue, of greater than 20.0% of LTM operating revenue. This group excluded companies that were targets of announced mergers and acquisitions.

Information for the comparable institutions was based on the most recently available balance sheet and income statement data and on a consolidated basis where available, otherwise on bank-level data. The selected companies that Raymond James deemed relevant included the following:

Selected Companies for HMNF:

•

Hawthorn Bancshares, Inc.

​

•

Citizens Community Bancorp, Inc.

​

•

Middlefield Banc Corp.

​

•

Landmark Bancorp, Inc.

​

•

Richmond Mutual Bancorporation, Inc.

​

•

BankFinancial Corporation

​

•

Ohio Valley Banc Corp.

​

•

SB Financial Group, Inc.

​

•

First Capital, Inc.

​

•

IF Bancorp, Inc.

​

•

United Bancorp, Inc.

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Selected Companies for Alerus:

•

Arrow Financial Corporation

​

•

Capital City Bank Group, Inc.

​

•

Bar Harbor Bankshares

​

•

Civista Bancshares, Inc.

​

•

Coastal Financial Corporation

​

•

Sierra Bancorp

​

•

First Community Bankshares, Inc.

​

•

Colony Bankcorp, Inc.

​

•

First Western Financial, Inc.

​

•

Chemung Financial Corporation

​

•

Citizens & Northern Corporation

​

•

Fidelity D & D Bancorp, Inc.

​

•

ACNB Corporation

​

•

LCNB Corp.

​

•

Evans Bancorp, Inc.

​

•

Eagle Bancorp Montana, Inc.

​

•

Franklin Financial Services Corporation

​

Raymond James calculated various financial multiples for each selected public company, including price per share at close on May 13, 2024 compared to: (i) tangible book value (“TBV”) per share; (ii) TBV, excluding AOCI; (iii) LTM core earnings per share (“EPS”) as calculated by S&P Capital IQ Pro; and (iv) consensus estimated generally accepted accounting principles (“GAAP”) EPS for the calendar years ended December 31, 2024 and 2025, respectively based on mean S&P Capital Pro estimates. The estimates published by Wall Street research analysts were not prepared in connection with the merger or at the request of Raymond James and may or may not prove to be accurate. Raymond James reviewed the 75th percentile and 25th percentile relative valuation multiples of the selected public companies. The results of the selected companies analysis for each of Alerus and HMNF are summarized below:

Furthermore, Raymond James applied the 75th percentile and 25th percentile relative valuation multiples to corresponding financial data for each of HMNF and Alerus. Raymond James reviewed the ranges of implied per share values and calculated a range of implied exchange ratios by dividing the higher implied per share value of HMNF by the lower implied per share value of Alerus to calculate the high implied exchange ratio, and by dividing the lower implied per share value of HMNF by the higher implied per share value of Alerus to calculate the low implied exchange ratio. The results of the selected companies analysis are summarized below:

 

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Selected Transaction Analysis.   Raymond James analyzed publicly available information relating to selected national transactions announced since January 1, 2023, involving depository institution targets headquartered in the United States with total assets between $500.0 million and $2.0 billion and LTM return on average assets greater than 0.00%. Raymond James also analyzed publicly available information relating to selected regional transactions announced since January 1, 2023, involving depository institution targets headquartered in the Midwest region of the United States, which includes the states of Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin, with total assets between $250.0 million and $3.0 billion and LTM return on average assets greater than 0.00%. Both national and regional selected transactions excluded transactions without publicly disclosed deal value or sufficient financial information and mergers of equals. Financial data for the selected targets was based on the most recent twelve month period prior to transaction announcement and on a consolidated basis where available, otherwise on bank-level data. The selected transactions (with respective transaction announcement dates shown) used in the analysis included:

Selected National Transactions

•

Acquisition of Oakwood Bancshares, Inc. by Business First Bancshares, Inc. (4/25/2024)

​

•

Acquisition of Integrated Financial Holdings, Inc. by Capital Bancorp, Inc. (3/28/2024)

​

•

Acquisition of Touchstone Bankshares, Inc. by First National Corporation (3/25/2024)

​

•

Acquisition of Community First Bancorporation by Dogwood State Bank (2/1/2024)

​

•

Acquisition of First Financial Northwest Bank by Global Federal Credit Union (1/11/2024)

​

•

Acquisition of Catskill Hudson Bancorp, Inc. by Hudson Valley Credit Union (1/10/2024)

​

•

Acquisition of Simply Bank by First Financial Corporation (11/13/2023)

​

•

Acquisition of Community West Bancshares by Central Valley Community Bancorp (10/10/2023)

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•

Acquisition of FNCB Bancorp, Inc. by Peoples Financial Services Corp. (9/27/2023)

​

•

Acquisition of Mars Bancorp, Inc. by NexTier Incorporated (8/31/2023)

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Acquisition of Community Financial Group, Inc. by Glacier Bancorp, Inc. (8/8/2023)

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Acquisition of Blackhawk Bancorp, Inc. by First Mid Bancshares, Inc. (3/21/2023)

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Acquisition of First Miami Bancorp, Inc. by United Community Banks, Inc. (2/13/2023)

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Selected Regional Transactions

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Acquisition of Macatawa Bank Corporation by Wintrust Financial Corporation (4/15/2024)

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Acquisition of Mid-Southern Savings Bank, F.S.B. by Beacon Credit Union (1/25/2024)

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Acquisition of Rockhold Bancorp by Equity Bancshares, Inc. (12/6/2023)

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Acquisition of Merchants and Manufacturers Bank Corporation by First Busey Corporation (11/27/2023)

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Acquisition of Cincinnati Bancorp, Inc. by LCNB Corp. (5/18/2023)

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Acquisition of Blackhawk Bancorp, Inc. by First Mid Bancshares, Inc. (3/21/2023)

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Raymond James examined valuation multiples of transaction value compared to the target companies’: (i) most recent quarter TBV at announcement; (ii) most recent quarter TBV at announcement, excluding AOCI; (iii) LTM earnings at announcement; (iv) premium to most recent quarter core deposits (defined as total deposits less time deposits greater than $100,000) at announcement; and (v) premium to most recent quarter core deposits at announcement, excluding AOCI. Raymond James applied the 25th and 75th percentile TBV multiple (including and excluding AOCI), LTM earnings multiple and core deposit premium (including and excluding AOCI) to the corresponding HMNF metrics to create the range of exchange ratios used for its analysis based on financial data as of March 31, 2024 and Alerus’ closing stock price as of May 13, 2024 ($20.54). The results of the selected national and regional transactions analyses, respectively, are summarized below:

Discounted Cash Flow Analysis with Merger Adjustments.   Raymond James performed a discounted cash flow with Merger Adjustments analysis to estimate an illustrative implied equity value for HMNF, taking into account the Merger Adjustments. In this analysis, Raymond James used the HMNF Projections prepared by HMNF’s management (as adjusted and approved by Alerus’ management for Raymond James’ use) and the Merger Adjustments prepared and approved by Alerus’ management for Raymond James’ use, and Raymond James assumed discount rates ranging from 10% to 14%. Raymond James arrived at its discount rate ranges by using the Modified CAPM methodology as presented in the 2023 Duff & Phelps Valuation Handbook. The range of values was derived by adding (i) the present value of the estimated excess cash flows that HMNF could generate through December 31, 2028 and (ii) the present value of HMNF’s implied terminal value at the end of such period, in each case applying the estimated Merger Adjustments. Raymond James assumed that HMNF would maintain a tangible common equity to tangible assets ratio of 8.00% and would retain sufficient earnings to maintain that level. In calculating the terminal value of the illustrative entity, Raymond James applied a range of 9.0x to 13.0x to HMNF’s estimated calendar year 2028 adjusted net income.

 

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