ALRS

MKT CAP $780.5MP/E 29.0DIV YIELD 2.71%FCF YIELD 11.44%REV TTM —NET INCOME $27.7M −28.4%NET CASH $49.8M52W 20.93 – 34.12SEC XBRL · TTM TO Invalid Date

How ALRS rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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words, now 25,334

New in FY2025

Legal, Accounting and Compliance Risks ● the effectiveness of the Company’s risk management framework; ● the accuracy of the techniques, models and assumptions underlying the Company’s accounting estimates and risk management processes and controls; ● new or revised accounting standards; ● any material weaknesses in the Company’s internal control over financial reporting; ● the commencement, cost and outcome of litigation and other legal proceedings and regulatory actions and investigations against the Company or to which the Company may become subject, including investigations and litigation relating to the Company’s ESOP and retirement plan fiduciary services commenced by the DOL or third parties; ● the extensive regulatory framework that applies to us; and ● the impact of recent and future legislative and regulatory changes, including policies proposed by the new presidential administration.
It is currently expected that, during 2026, the Federal Open Market Committee of the Federal Reserve (“FOMC”) will continue to closely monitor interest rates, in part to manage the rate of inflation to its preferred level.
In the fourth quarter of 2025, the FOMC decreased the target range for the federal funds rate to a range of 3.50% to 3.75%, following a series of significant increases beginning in 2023.
As of December 31, 2025, the Company had $807.9 million of non-maturity, noninterest bearing deposit accounts and $2.8 billion of non-maturity interest bearing deposit accounts.
The Company does not know what market rates will be throughout 2026, including the frequency and significance with which the FOMC may continue to change the target range for the federal funds rate.
As of December 31, 2025, the fair value of the Company’s securities portfolio was approximately $742.1 million, or 14.2% of total assets.
As interest rates increased beginning in 2023, the Company’s cost of funds increased more rapidly than the yields on a substantial portion of its interest-earning assets.
In line with the foregoing, the Company has experienced and may continue to experience changes in the cost of interest-bearing liabilities primarily due to changes in the rates the Company pays on some of its deposit products to stay competitive within the Company’s market areas and variable borrowing costs resulting from changes in the federal funds rate.
The Company may also incur significant losses from strategic balance sheet repositioning efforts or future asset sales.
During the fourth quarter of 2025, the Company sold $360.1 million of available-for-sale securities as part of a strategic balance sheet repositioning, which resulted in a one-time pre-tax net loss of $68.4 million.
At December 31, 2025, the Company had $30.2 million of unrealized losses in its securities portfolio.
The Company’s securities portfolio had a weighted average effective duration of 3.5 years at December 31, 2025, so the Company expects an increase in unrealized losses if interest rates increase in 2026.
This has helped drive a significant increase in prevailing interest rates, however it has had a negative effect on the Company’s net interest income and has harmed the value of the Company’s securities portfolio, which had $3.6 million in unrealized losses in available-for-sale investment securities at December 31, 2025.
While the FOMC reduced the target range for the federal funds rate in 2025, there is no guarantee that these decreases will be continued in 2026.
In addition, there are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, proper loan underwriting, and changes in economic and industry conditions, and risks inherent in dealing with individual borrowers, including the risk that a borrower may not provide information to the Company about its business in a timely manner, or may present inaccurate or incomplete information to the Company, as well as risks relating to the value of collateral.
As of December 31, 2025, the Company’s allowance for credit losses as a percentage of total loans was 1.53%, and as a percentage of total nonperforming loans was 89.7%.
The United States has experienced elevated levels of inflation in recent years, with the consumer price index climbing approximately 2.7% in 2025, before seasonal adjustment.
At December 31, 2025, approximately 79.8% of the Company’s total loan portfolio was comprised of loans with real estate as a primary component of collateral.
Adverse changes affecting real estate values, including decreases in office occupancy due to the shift to remote working environments and the liquidity of real estate in one or more of the Company’s markets could increase the credit risk associated with the Company’s loan portfolio, significantly impair the value of property pledged as collateral on loans and affect the Company’s ability to sell the collateral upon foreclosure without a loss or additional losses or the Company’s ability to sell those loans on the secondary market.
Commercial and industrial loans represented 18.2% of the Company’s total loan portfolio at December 31, 2025.
Construction and land development loans comprised approximately 6.1% of the Company’s total loan portfolio as of December 31, 2025.
One-to-four family residential mortgage loans comprised $908.4 million and $954.6 million, or 22.4% and 23.9%, of the Company’s loan portfolio at December 31, 2025 and 2024, respectively.
As of December 31, 2025, the Company had $0.3 million of foreclosed assets, which typically consist of properties that the Company obtains through foreclosure.
The Company’s mortgage loan portfolio consists, in part, of home equity lines of credit (“HELOC”).
The conversion of a HELOC to a fully amortizing basis presents an increased level of default risk to the Company since the borrower no longer has the ability to make principal draws on the line, and the amount of the required monthly payment could substantially increase to provide for scheduled repayment of principal and interest.
A significant portion of the Company’s revenue results from fee-based services provided by the retirement and benefit and wealth services business.
For the year ended December 31, 2025, noninterest income represented approximately 23.1% of the Company’s total revenue, which includes net interest income and noninterest income, a significant portion of which is derived from the Company’s retirement and benefit services business.
The level of these fees is influenced by several factors, including the number of plans and participants the Company provides retirement, advisory and other services for, the level of transactions within the plans, the investment decisions of plans and participants and overall asset values of the plans whose fees are earned based on the level of assets in the plans, and the number of wealth clients and the asset values of their accounts.
If the Company is unable to maintain the Company’s number of retirement plans participants, and wealth clients, AUA and AUM at historical or greater levels, the Company’s fee income derived from this business may decline.
In 2025, the Company experienced outflows of $6.5 billion in the Company’s retirement and benefit services division partially offset by inflows of $5.6 billion.
The financial markets and businesses operating in the securities industry are highly volatile (meaning that performance results can vary greatly within short periods of time) and are directly affected by, among other factors, domestic and foreign economic conditions and general trends in business and finance, all of which are beyond the Company’s control.
The Company cannot assure you that broad market performance will be favorable in the future.
The Company may not be successful in generating organic growth if the Company fails to effectively execute its business strategy, or as a result of other factors, including delays in introducing and implementing new products and services and other impediments resulting from regulatory oversight or lack of qualified personnel at the Company’s office locations.
For example, in the fourth quarter of 2024, the Company completed the acquisition of HMNF, the holding company for Home Federal Savings Bank headquartered in Rochester, Minnesota.
If the Company grows through acquisitions, it may expose it to financial, execution and operational risks that could have a material adverse effect on the Company’s business, financial position, results of operations and growth prospects.
In addition to the foregoing, the Company may face risks in acquisitions to the extent the Company acquires new lines of business or new products, or enter new geographic areas, in which the Company has little or no current experience, especially if the Company loses key employees of the acquired operations.
In 2025, the Company’s retirement and benefit services business experienced outflows of AUA and AUM of $6.5 billion, due to participant withdrawals, client turnover, plan terminations and mergers and acquisition activity. the Company believes this level of runoff is typical in the industry.
As a result of the elevated interest rate environment over the past few years, the Company saw continued lower demand for mortgage loans and refinancing activity in 2025.
In 2025, the Company originated $484.8 million of mortgage loans, compared to $334.3 million in 2024.
Moreover, several large corporations, including retail companies, financial institutions and third-party vendors specializing in providing services to financial institutions, have suffered major data breaches, in some cases exposing not only confidential and proprietary corporate information, but also sensitive financial and other personal information of their clients and employees and subjecting them to potential fraudulent activity.

and 33 more.

Gone since FY2024

Legal, Accounting and Compliance Risks ● the effectiveness of the Company’s risk management framework; ● the accuracy the techniques, models and assumptions underlying the Company’s accounting estimates and risk management processes and controls; ● new or revised accounting standards; ● any material weaknesses in the Company’s internal control over financial reporting; ● the commencement, cost and outcome of litigation and other legal proceedings and regulatory actions against the Company or to which the Company may become subject, including investigations and litigation relating to the Company’s ESOP fiduciary services commenced by the DOL or third parties; ● the extensive regulatory framework that applies to us; and ● the impact of recent and future legislative and regulatory changes, including policies proposed by the new presidential administration.
It is currently expected that, during 2025, the Federal Open Market Committee of the Federal Reserve (“FOMC”) will continue to closely monitor interest rates, in part to continue to reduce the rate of inflation to its preferred level.
In the fourth quarter of 2024, the FOMC decreased the target range for the federal funds rate to a range of 4.25% to 4.50%, following a series of significant increases beginning in 2023.
As a result of the interest rate increases during 2023 and the first half of 2024, the Company experienced net interest margin compression as the Company’s interest-earning assets repriced more slowly than its interest-bearing liabilities, which had a material adverse effect on the Company’s net interest income and results of operations.
The interest rate decreases in the fourth quarter of 2024 moderated, but did not materially reverse, these adverse effects on the Company’s net interest income and results of operations.
As of December 31, 2024, the Company had $903.5 million of non-maturity, noninterest bearing deposit accounts and $2.8 billion of non-maturity interest bearing deposit accounts.
The Company does not know what market rates will be throughout 2025, including the frequency and significance with which the FOMC may continue to reduce the target range for the federal funds rate.
As of December 31, 2024, the fair value of the Company’s securities portfolio was approximately $825.0 million, or 15.7% of total assets.
As interest rates increased during 2023 and the first half of 2024, the Company’s cost of funds increased more rapidly than the yields on a substantial portion of its interest-earning assets.
In line with the foregoing, the Company has experienced and may continue to experience an increase in the cost of interest-bearing liabilities primarily due to changes in the rates the Company pays on some of its deposit products to stay competitive within the Company’s market areas and variable borrowing costs resulting from changes in the federal funds rate.
At December 31, 2024, the Company had $137.3 million of unrealized losses in its securities portfolio.
The Company’s securities portfolio has a weighted average effective duration of 4.6 years, so the Company expects an increase in unrealized losses if interest rates remain elevated or fail to decrease significantly in 2025.
This has helped drive a significant increase in prevailing interest rates, however it has had a negative effect on the Company’s net interest income and has harmed the value of the Company’s securities portfolio, which had $98.5 million in unrealized losses in available-for-sale investment securities at December 31, 2024.
While the FOMC reduced the target range for the federal funds rate in the second half of 2024, there is no guarantee that these decreases will be continued in 2025.
In addition, there are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, proper loan underwriting, changes in economic and industry conditions, and inherent in dealing with individual borrowers, including the risk that a borrower may not provide information to the Company about its business in a timely manner, or may present inaccurate or incomplete information to the Company, as well as risks relating to the value of collateral.
As of December 31, 2024, the Company’s allowance for credit losses as a percentage of total loans was 1.50%, and as a percentage of total nonperforming loans was 95.3%.
The Company ’ s high concentration of large loans to certain borrowers may increase the Company ’ s credit risk.
The Company has developed relationships with certain individuals and businesses that have resulted in a concentration of large loans to a small number of borrowers.
As of December 31, 2024, the Company’s 10 largest borrowing relationships accounted for approximately 5.6% of the total loan portfolio.
The Company has established an informal, internal limit on loans to one borrower, principal or guarantor, but the Company may, under certain circumstances, consider going above this internal limit in situations where management’s understanding of the industry, the borrower’s business and the credit quality of the borrower are commensurate with the increased size of the loan.
Along with other risks inherent in these loans, such as the deterioration of the underlying businesses or property securing these loans, this high concentration of borrowers presents a risk to the Company’s lending operations.
If any one of these borrowers becomes unable to repay its loan obligations as a result of business, economic or market conditions, or personal circumstances, such as divorce or death, the Company’s nonaccruing loans and the Company’s provision for loan losses could increase significantly, which could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.
As of December 31, 2024, the Company had $2.0 billion of CRE loans, consisting of $967.0 million of non-owner occupied loans, $371.4 million of owner occupied loans, $363.1 million of loans secured by multifamily residential properties and $294.7 million of construction and land development loans.
CRE loans represented 50.0% of the Company’s total loan portfolio and 422.9% of the Bank’s total capital at December 31, 2024.
As of December 31, 2024, the Company’s nonperforming loans (which consist of nonaccrual loans and loans past due 90 days or more) totaled $62.9 million, or 1.58% of the Company’s total loan portfolio, and the Company’s nonperforming assets (which consist of nonperforming loans, foreclosed assets and other real estate owned (“OREO”)) totaled $62.9 million, or 1.20% of total assets.
In addition, the Company had $5.3 million of accruing loans that were 31-89 days delinquent as of December 31, 2024.
As of December 31, 2024, 83.0% of the loans in the Company’s loan portfolio were made to borrowers who live in or conduct business in those states.
The United States has experienced elevated levels of inflation in recent years, with the consumer price index climbing approximately 2.9% in 2024.
At December 31, 2024, approximately 80.5% of the Company’s total loan portfolio was comprised of loans with real estate as a primary component of collateral.
Adverse changes affecting real estate values, including decreases in office occupancy due to the shift to remote working environments following the COVID-19 pandemic and the liquidity of real estate in one or more of the Company’s markets could increase the credit risk associated with the Company’s loan portfolio, significantly impair the value of property pledged as collateral on loans and affect the Company’s ability to sell the collateral upon foreclosure without a loss or additional losses or the Company’s ability to sell those loans on the secondary market.
Commercial and industrial loans represented 16.7% of the Company’s total loan portfolio at December 31, 2024.
Construction and land development loans comprised approximately 7.4% of the Company’s total loan portfolio as of December 31, 2024.
One-to-four family residential mortgage loans comprised $954.6 million and $726.9 million, or 23.9% and 26.3%, of the Company’s loan portfolio at December 31, 2024 and 2023, respectively.
As of December 31, 2024, the Company had no foreclosed assets, which typically consist of properties that the Company obtains through foreclosure.
The Company’s mortgage loan portfolio consists, in part, of home equity lines of credit.
The conversion of a home equity line of credit (“HELOC”) to a fully amortizing basis presents an increased level of default risk to the Company since the borrower no longer has the ability to make principal draws on the line, and the amount of the required monthly payment could substantially increase to provide for scheduled repayment of principal and interest.
As of December 31, 2024, the unfunded commitment related to home equity lines of credit was $266.8 million.
A significant portion of the Company’s revenue results from fee-based services provided by the retirement and benefit services business.
For the year ended December 31, 2024, noninterest income represented approximately 51.8% of the Company’s total revenue, which includes net interest income and noninterest income, a significant portion of which is derived from the Company’s retirement and benefit services business.
The level of these fees is influenced by several factors, including the number of plans and participants the Company provides retirement, advisory and other services for, the level of transactions within the plans, and the asset values of the plans whose fees are earned based on the level of assets in the plans.

and 68 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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