v3.25.1
Note 16 - Segment Reporting
 3 Months Ended
Mar. 31, 2025
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

NOTE 16 Segment Reporting

 

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

 

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

 

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

 

The Company’s reportable segments include the following:

 

 

●

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

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

 

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

 

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

 

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

 

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

 

  

As of and for the three months ended March 31, 2025

 
      

Retirement and

      

Corporate

     

(dollars in thousands)

 

Banking

  

Benefit Services

  

Wealth

  

Administration

  

Consolidated

 

Net interest income (loss)

 $41,807  $—  $—  $(650) $41,157 

Provision for credit losses

  863   —   —   —   863 

Noninterest income (loss)

  4,647   16,106   6,905   (26)  27,632 

Noninterest expense

                    

Compensation

  11,636   7,216   3,052   1,057   22,961 

Employee taxes and benefits

  3,880   2,311   741   830   7,762 

Business services, software and technology expense

  2,964   1,994   618   176   5,752 

Merger and acquisition expense

  —   —   —   286   286 

Other noninterest expense

  10,731   2,096   426   351   13,604 

Total noninterest expense

  29,211   13,617   4,837   2,700   50,365 

Net income (loss) before taxes

 $16,380  $2,489  $2,068  $(3,376) $17,561 

Total assets

 $5,257,508  $31,302  $5,471  $45,339  $5,339,620 

 

 

  

As of and for the three months ended March 31, 2024

 
      

Retirement and

  

Wealth

  

Corporate

     

(dollars in thousands)

 

Banking

  

Benefit Services

  

Management

  

Administration

  

Consolidated

 

Net interest income (loss)

 $22,897  $—  $—  $(678) $22,219 

Provision for credit losses

  —   —   —   —   — 

Noninterest income

  3,490   15,655   6,118   60   25,323 

Noninterest expense

                    

Compensation

  8,454   6,955   2,579   1,344   19,332 

Employee taxes and benefits

  2,802   2,057   725   604   6,188 

Business services, software and technology expense

  2,567   2,043   597   138   5,345 

Merger and acquisition expense

  —   —   —   28   28 

Other noninterest expense

  4,848   3,134   (151)  295   8,126 

Total noninterest expense

  18,671   14,189   3,750   2,409   39,019 

Net income (loss) before taxes

 $7,716  $1,466  $2,368  $(3,027) $8,523 

Total assets

 $4,262,600  $33,636  $4,787  $37,070  $4,338,093