Note 16 - Segment Reporting

9 Months Ended

Sep. 30, 2025

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

NOTE 16 Segment Reporting

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

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

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

The Company’s reportable segments include the following:

● Banking: Offers a complete line of loan, deposit, cash management, and treasury services through 28 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 September 30, 2025
			Retirement and				Corporate
(dollars in thousands)	Banking		Benefit Services		Wealth		Administration			Consolidated
Net interest income (loss)	$	43,788	$	—	$	—	$	(652	)	$	43,136
Provision for credit losses		—		—		—		—			—
Noninterest income (loss)		6,216		16,496		6,560		158			29,430
Noninterest expense
Compensation		12,562		7,364		3,519		1,539			24,984
Employee taxes and benefits		3,001		1,899		561		633			6,094
Business services, software and technology expense		2,909		1,852		1,379		145			6,285
Merger and acquisition expense		—		—		—		(43	)		(43	)
Other noninterest expense		10,225		2,279		424		293			13,221
Total noninterest expense		28,697		13,394		5,883		2,567			50,541
Net income (loss) before taxes	$	21,307	$	3,102	$	677	$	(3,061	)	$	22,025
Total assets	$	5,236,412	$	30,941	$	5,777	$	57,443		$	5,330,573

	As of and for the nine months ended September 30, 2025
			Retirement and				Corporate
(dollars in thousands)	Banking		Benefit Services		Wealth		Administration			Consolidated
Net interest income (loss)	$	129,279	$	—	$	—	$	(1,954	)	$	127,325
Provision for credit losses		863		—		—		—			863
Noninterest income (loss)		19,298		48,625		20,827		74			88,824
Noninterest expense
Compensation		36,476		21,644		9,954		4,214			72,288
Employee taxes and benefits		10,170		6,225		2,023		2,072			20,490
Business services, software and technology expense		8,957		5,776		2,683		489			17,905
Merger and acquisition expense		—		—		—		254			254
Other noninterest expense		29,753		6,532		1,192		930			38,407
Total noninterest expense		85,356		40,177		15,852		7,959			149,344
Net income (loss) before taxes	$	62,358	$	8,448	$	4,975	$	(9,839	)	$	65,942
Total assets	$	5,236,412	$	30,941	$	5,777	$	57,443		$	5,330,573

	As of and for the three months ended September 30, 2024
			Retirement and		Wealth		Corporate
(dollars in thousands)	Banking		Benefit Services		Management		Administration			Consolidated
Net interest income (loss)	$	23,220	$	—	$	—	$	(678	)	$	22,542
Provision for credit losses		1,661		—		—		—			1,661
Noninterest income		4,940		16,144		6,684		595			28,363
Noninterest expense
Compensation		9,972		7,209		2,349		1,528			21,058
Employee taxes and benefits		2,441		1,896		538		525			5,400
Business services, software and technology expense		2,219		1,825		703		132			4,879
Merger and acquisition expense		—		—		—		1,661			1,661
Other noninterest expense		5,637		3,224		249		339			9,449
Total noninterest expense		20,269		14,154		3,839		4,185			42,447
Net income (loss) before taxes	$	6,230	$	1,990	$	2,845	$	(4,268	)	$	6,797
Total assets	$	4,009,535	$	32,882	$	5,288	$	310,918		$	4,358,623

	As of and for the nine months ended September 30, 2024
			Retirement and				Corporate
(dollars in thousands)	Banking		Benefit Services		Wealth		Administration			Consolidated
Net interest income (loss)	$	70,803	$	—	$	—	$	(2,042	)	$	68,761
Provision for credit losses		6,150		—		—		—			6,150
Noninterest income		13,428		47,876		19,161		592			81,057
Noninterest expense
Compensation		28,016		21,005		7,445		4,189			60,655
Employee taxes and benefits		7,693		5,794		1,851		1,384			16,722
Business services, software and technology expense		7,033		5,512		1,881		397			14,823
Merger and acquisition expense		—		—		—		2,252			2,252
Other noninterest expense		15,113		9,454		320		879			25,766
Total noninterest expense		57,855		41,765		11,497		9,101			120,218
Net income (loss) before taxes	$	20,226	$	6,111	$	7,664	$	(10,551	)	$	23,450
Total assets	$	4,009,535	$	32,882	$	5,288	$	310,918		$	4,358,623