N.D.'s Alerus expands retail presence in Twin Cities

Alerus Financial of Grand Forks, N.D., said Thursday that it has bought the mortgage division of Maple Grove-based Inter Savings Bank for an undisclosed sum.

The division, called Residential Mortgage Group, is Alerus Financial's third acquisition of 2009 in the Twin Cities as the North Dakota company benefits from the bank bust and builds its retail presence in the metro area in banking and wealth management.

The deal also caps a tumultuous year for Minnesota's community banks, some of which have suffered from high concentrations of loans backed by commercial real estate such as stores, strip malls and housing developments.

Alerus Financial has bank assets of about $1.1 billion and more than $7 billion in customer assets under management. It has about 300 shareholders and trades on the pink sheets, according to Executive Vice President David Latta.

In July, Alerus Financial snapped up the Twin Cities deposits of BankFirst, a bank in Sioux Falls, S.D., that was seized by the Federal Deposit Insurance Corp. In November, it bought the deposits and three branches of Prosperan Bank in Oakdale after that bank failed and was taken over by federal regulators.

Inter Savings Bank, technically a thrift and better known as InterBank, had assets of about $754 million as of September. Most of its loan portfolio consists of residential mortgages. By law, thrifts are required to have most of their assets in home mortgages or other consumer retail holdings.

The Office of Thrift Supervision hit InterBank with a cease-and-desist order in June ordering it to clean up its balance sheet and raise capital.

"It was an internal decision on our part about whether or not to be in the mortgage banking business," Stelter said. "It has nothing to do with the cease-and-desist."

Residential Mortgage Group (RMG) has about 55 employees, mostly in Minnetonka but also in Arden Hills, and generated about $720 million in mortgages in 2009, according to Alerus.

Latta, the Alerus executive, said RMG is profitable, and never made stated-income or exotic subprime mortgages. Latta called the operation a good fit with Alerus Financial's small, traditional mortgage operation focused on the Red River Valley along the Minnesota-North Dakota border.

"Any time we have a chance to broaden and deepen our earnings stream, it's a wise thing to do," Latta said.

There are no plans to downsize RMG and its current management will stay in place, he said.