Alerus Financial Corporation Reports Third Quarter 2026 Net Income of $19.2 Million

MINNEAPOLIS, Oct. 28, 2026 (GLOBE NEWSWIRE) — Alerus Financial Corporation (Nasdaq: ALRS), or the Company, reported net income of $19.2 million for the third quarter of 2026, or $0.76 per diluted common share, compared to net income of $20.9 million, or $0.81 per diluted common share, for the second quarter of 2026, and net income of $16.9 million, or $0.65 per diluted common share, for the third quarter of 2025. 

CEO Comments 

President and Chief Executive Officer Katie O’Neill Lorenson said, “Our third quarter results demonstrate the continued momentum of the Alerus franchise, with strong revenue growth across our diversified business model and strategic organic growth in our banking franchise. Net interest income increased 8.3% from the prior year, while noninterest income grew 16.7%, reflecting the complementary strength of our banking, retirement and benefit services, and wealth advisory businesses.

That growth was driven by the continued transformation of our banking franchise toward commercial and business banking. Commercial and business lending grew 36.5% from a year ago and now represents 37.1% of our loan portfolio, up from 27.7% a year ago. In the third quarter, total loans increased $150.5 million, or 3.7%, and deposits increased $111.2 million, or 2.7%, with noninterest income representing 42.4% of total revenue.

We also maintained favorable credit quality, with nonperforming assets and criticized loans continuing to improve and net recoveries during the quarter. Our strong capital position and 10.9% year-over-year growth in tangible book value per share give us the capacity to keep investing in organic growth while returning capital to shareholders, with $37.2 million returned through dividends and share repurchases in the first nine months of the year.

Most importantly, I want to thank our team members. Their talent, collaboration, and focus on helping clients achieve their goals turn our strategy into results, and we are confident in our continued ability to create sustainable value for clients, communities, team members, and shareholders.”

Third Quarter Highlights 

Selected Financial Data (unaudited) 

Results of Operations 

Net Interest Income 

Net interest income for the third quarter of 2026 was $46.7 million, a $1.0 million, or 2.1%, decrease from the second quarter of 2026. Interest income decreased $0.4 million, or 0.6%, primarily due to lower interest income on loans from a one-time $1.6 million interest income recovery on a nonaccrual loan resolution in the second quarter and less purchase accounting accretion, partially offset by higher loan and investment yields. Interest expense increased $0.6 million, or 2.4%, from the second quarter of 2026, as average rates paid on deposits and borrowings increased slightly, mainly driven by the recent increase by the Federal Reserve in the federal funds benchmark rate.

Net interest income increased $3.6 million, or 8.3%, from $43.1 million for the third quarter of 2025. Interest income decreased $0.5 million, or 0.6%, from the third quarter of 2025, primarily driven by less purchase accounting accretion and lower average interest-bearing cash balances, partially offset by higher interest income on investment securities following the strategic balance sheet repositioning in the fourth quarter of 2025. Interest expense decreased $4.0 million, or 14.7%, from the third quarter of 2025, as average rates paid on deposits and borrowings declined primarily driven by Federal Reserve rate cuts in the second half of 2025. 

Net interest margin (on a tax-equivalent basis)⁽¹⁾ was 3.84% for the third quarter of 2026, a 13 basis point decrease from 3.97% for the second quarter of 2026, and a 34 basis point increase from 3.50% for the third quarter of 2025. The quarter over quarter decrease was mainly attributable to a one-time $1.6 million interest income recovery on a nonaccrual loan resolution in the second quarter and less purchase accounting accretion, partially offset by higher loan and investment yields. The increase from the third quarter of 2025 was primarily driven by lower cost of funds and higher yields on investment securities, offset by less purchase accounting accretion. 

Noninterest Income 

Noninterest income for the third quarter of 2026 was $34.4 million, a $1.4 million, or 4.3%, increase from the second quarter of 2026. This increase was driven by increases in other noninterest income, retirement and benefit services revenue, wealth advisory services revenue, and mortgage banking revenue. Other noninterest income increased $0.5 million, or 15.1%, from the second quarter of 2026, primarily driven by a gain on the sale of a property in the Fargo, North Dakota market, partially offset by a loss on a property transferred to held for sale in the Rochester, Minnesota market. Retirement and benefit services revenue increased $0.3 million, or 1.8%, compared to the second quarter of 2026, primarily driven by an increase in recurring annual revenue.  Wealth advisory services revenue increased $0.3 million, or 3.8%, from the second quarter of 2026, primarily driven by an increase in transaction-based fees and a slight increase in asset-based revenues. Mortgage banking revenue increased $0.1 million, or 4.2%, from the second quarter of 2026, primarily driven by higher mortgage originations and gain on sale margins. 

Noninterest income for the third quarter of 2026 increased by $4.9 million, or 16.7%, from the third quarter of 2025. This increase was driven by increases in other noninterest income, retirement and benefit services revenue, wealth advisory services revenue, and service charges on deposit accounts. Other noninterest income increased $1.9 million, or 85.3%, compared to the third quarter of 2025, primarily driven by a gain on the sale of a property in the Fargo, North Dakota market, partially offset by a loss on a property transferred to held for sale in the Rochester, Minnesota market. Retirement and benefit services revenue increased $1.2 million, or 7.1%, compared to the third quarter of 2025, primarily driven by recurring annual income. Wealth advisory services revenue increased $1.4 million, or 22.0%, from the third quarter of 2025, driven by an increase in both asset-based fees and transaction-based fees.  Wealth advisory services assets under administration/management increased $351.4 million, or 7.3% during the same period.  Service charges on deposit accounts increased $0.5 million, or 73.7%, compared to the third quarter of 2025, primarily due to a reclassification of fees from other noninterest income to service charges on deposit accounts revenue in the first quarter of 2026. 

Noninterest Expense

Noninterest expense for the third quarter of 2026 was $53.9 million, a $1.0 million, or 1.9%, increase from the second quarter of 2026.  The increase was primarily due to increases in employee taxes and benefits expense, along with marketing and business development expense, partially offset by a decrease in other noninterest expense. Employee taxes and benefits expense increased $0.6 million, or 9.2%, due to self-funded group insurance costs, and marketing and business development expense increased $0.4 million, or 41.2%, due to seasonal advertising campaigns.  Other noninterest expense decreased $0.2 million, or 8.0%, from the second quarter of 2026, due to a decrease in holding costs related to other real estate owned balances, miscellaneous operational losses, as well as a decrease in corporate insurance costs.

Noninterest expense for the third quarter of 2026 increased $3.3 million, or 6.6%, from $50.5 million in the third quarter of 2025, primarily due to increases in employee taxes and benefits, compensation expense, and professional fees and assessments. Employee taxes and benefits increased $1.3 million, or 21.1%, due to self-funded group insurance costs.  Compensation expense increased $1.1 million, or 4.5%, from the third quarter of 2025, primarily due to annual merit increases, as well as an increase in employees. Professional fees and assessments increased $1.1 million, or 41.9%, from the third quarter of 2025, primarily due to the reclassification of consulting services and other third-party vendor expenses from business services, software, and technology expense to professional fees and assessments. 

Financial Condition

Total assets were $5.4 billion as of September 30, 2026, an increase of $173.0 million, or 3.3%, from December 31, 2025. The increase was primarily due to a $136.7 million increase in loans held for investment, a $35.5 million increase in available-for-sale investment securities, and an $18.0 million increase in other assets, partially offset by a $21.5 million decrease in held-to-maturity investment securities. 

Loans Held for Investment

Total loans held for investment were $4.2 billion as of September 30, 2026, an increase of $136.7 million, or 3.4%, from December 31, 2025. The increase was primarily driven by a $188.8 million increase in commercial loans, partially offset by a $52.0 million decrease in consumer loans. 

The following table presents the composition of our loans held for investment portfolio as of the dates indicated: 

Deposits

Total deposits were $4.3 billion as of September 30, 2026, an increase of $111.2 million, or 2.7%, from December 31, 2025. Noninterest-bearing deposits increased $5.6 million and interest-bearing deposits increased $105.6 million from December 31, 2025. 

The following table presents the composition of the Company’s deposit portfolio as of the dates indicated: 

Asset Quality

Total nonperforming assets were $16.4 million as of September 30, 2026, a decrease of $53.0 million, or 76.4%, from December 31, 2025. As of September 30, 2026, the allowance for credit losses on loans was $51.4 million, or 1.23% of total loans, compared to $61.9 million, or 1.53% of total loans, as of December 31, 2025. 

The following table presents selected asset quality data as of and for the periods indicated: 

For the third quarter of 2026, the Company had net recoveries of $1.0 million, compared to net charge-offs of $2.6 million for the second quarter of 2026 and net recoveries of $1.7 million for the third quarter of 2025. The quarter over quarter decrease in net charge-offs (recoveries) was primarily due to a $1.1 million recovery related to one long-term commercial and industrial client relationship on nonaccrual which was charged-off in the second quarter of 2026.  As of September 30, 2026, the relationship had a remaining reserve of $0.9 million, which represented approximately 60.6% of the book balance as of that date. Management does not believe the charge-offs resulting from this relationship are indicative of a broader credit quality trend in the Company’s loan portfolio. 

The decrease in the allowance for credit losses on loans to total loans from December 31, 2025 to September 30, 2026 was primarily the result of problem loan resolution. 

The Company recorded a provision for credit losses of $2.2 million for the third quarter of 2026, compared to a provision of $0.5 million for the second quarter of 2026, and no provision for credit losses for the third quarter of 2025. 

OREO and repossessed assets were $9.4 million at September 30, 2026, compared to $0.3 million as of December 31, 2025. The increase was primarily driven by the transfer of one 1-4 family property and one apartment complex to OREO in the second quarter of 2026. 

The unearned fair value adjustments on acquired loan portfolios were $33.4 million as of September 30, 2026, $43.8 million as of December 31, 2025, and $47.3 million as of September 30, 2025. 

Capital

Total stockholders’ equity was $576.9 million as of September 30, 2026, an increase of $11.9 million from December 31, 2025. The increase was primarily driven by an increase in retained earnings of $46.8 million, partially offset by a decrease in additional paid-in capital of $18.9 million and an increase in accumulated other comprehensive loss of $15.3 million due to recent increases in interest rates. Tangible book value per common share⁽¹⁾ increased to $18.74 as of September 30, 2026, from $17.55 as of December 31, 2025. Tangible common equity to tangible assets⁽¹⁾ increased to 8.77% as of September 30, 2026, from 8.72% as of December 31, 2025. Common equity tier 1 capital to risk weighted assets increased to 10.52% as of September 30, 2026, from 10.28% as of December 31, 2025. 

During the third quarter of 2026, the Company repurchased approximately $8.2 million of its outstanding common stock at an average per share price of $32.75, which reduced common shares outstanding by 250,000 at quarter-end. 

The following table presents our capital ratios as of the dates indicated: 

Conference Call

The Company will host a conference call at 11:00 a.m. Central Time on Thursday, October 29, 2026, to discuss its financial results. Attendees are encouraged to register ahead of time for the call at investors.alerus.com. A recording of the call and transcript will be available on the Company’s investor relations website at investors.alerus.com following the call. 

About Alerus Financial Corporation

Alerus Financial Corporation (Nasdaq: ALRS) is a commercial wealth advisory services bank and national retirement and benefit services provider with corporate offices in Grand Forks, North Dakota, and the Minneapolis-St. Paul, Minnesota metropolitan area. Through its subsidiary, Alerus Financial, National Association (the “Bank”), Alerus provides diversified and comprehensive financial solutions to business and consumer clients, including banking, wealth advisory services, and retirement and benefit plans and services. Alerus provides clients with a primary point of contact to help fully understand their unique needs and delivery channel preferences. Clients are provided with competitive products, valuable insight, and sound advice supported by digital solutions designed to meet their needs. 

Alerus operates 25 banking and commercial wealth offices, with locations in Grand Forks and Fargo, North Dakota; the Minneapolis-St. Paul, Minnesota metropolitan area; Rochester, Minnesota; Southern Minnesota; Marshalltown, Iowa; Pewaukee, Wisconsin; and Tempe and Scottsdale, Arizona. The Alerus Retirement and Benefit business serves advisors, brokers, employers, and plan participants across the United States. 

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized by U.S. Generally Accepted Accounting Principles, or GAAP. These non-GAAP financial measures include the ratio of tangible common equity to tangible assets, tangible book value per common share, return on average tangible common equity, efficiency ratio, pre-provision net revenue, adjusted noninterest (loss) income, adjusted noninterest expense, adjusted pre-provision net revenue, adjusted efficiency ratio, adjusted net income, adjusted return on average total assets, adjusted return on average tangible common equity, net interest margin (on a tax-equivalent basis), adjusted earnings per common share – diluted, and adjusted net charge-offs to average loans. Management uses these non-GAAP financial measures in its analysis of its performance, and believes financial analysts and investors frequently use these measures, and other similar measures, to evaluate capital adequacy and financial performance. Reconciliations of non-GAAP disclosures used in this press release to the comparable GAAP measures are provided in the accompanying tables. Management, banking regulators, many financial analysts and other investors use these measures in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions. 

These non-GAAP financial measures should not be considered in isolation or as a substitute for total stockholders’ equity, total assets, book value per share, return on average assets, return on average equity, or any other measure calculated in accordance with GAAP. Moreover, the manner in which the Company calculates these non-GAAP financial measures may differ from that of other companies reporting measures with similar names. 

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of Alerus Financial Corporation. These statements are often, but not always, identified by words such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”, “annualized”, “target” and “outlook”, or the negative version of those words or other comparable words of a future or forward-looking nature. Examples of forward-looking statements include, among others, statements the Company makes regarding our projected growth, anticipated future financial performance, financial condition, credit quality, management’s long-term performance goals, and the future plans and prospects of Alerus Financial Corporation. 

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent known and unknown uncertainties, risks, changes in circumstances, and other factors that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in forward-looking statements include, among others, the following: the strength of the local, state, national and international economies and financial markets (including effects of inflationary pressures and future monetary policies of the Federal Reserve and executive orders in response thereto); interest rate risk, including the effects of changes in interest rates, such as the recent increase in the benchmark federal funds rate by the Federal Reserve; effects on the U.S. economy resulting from actions taken by the federal government, including the threat or implementation of tariffs, immigration enforcement, executive orders, and changes in foreign policy; disruptions to the global supply chain, including as a result of domestic or foreign policies; our ability to successfully manage credit risk, including in the commercial real estate portfolio, and maintain an adequate level of allowance for credit losses; business and economic conditions generally and in the financial services industry, nationally and within our market areas, including the level and impact of inflation rates and possible recession; our ability to raise additional capital to implement our business plan; credit risks and risks from concentrations (including by type of borrower, geographic area, collateral, and industry) within our loan portfolio; the concentration of large loans to certain borrowers (including commercial real estate loans); the level of nonperforming assets on our balance sheet; our ability to implement organic and acquisition growth strategies; the commencement, cost, and outcome of litigation and other legal proceedings and regulatory actions against us or to which the Company may become subject, including with respect to pending actions relating to the Company’s previous employee stock ownership program fiduciary services commenced by government and private parties; the impact of economic or market conditions on our fee-based services; our ability to continue to grow our retirement and benefit services business; our ability to continue to originate a sufficient volume of residential mortgages; the occurrence of fraudulent activity, breaches or failures of our or our third-party vendors’ information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools or as a result of insider fraud; interruptions involving our information technology and telecommunications systems or third-party servicers; potential losses incurred in connection with mortgage loan repurchases; the composition of our executive management team and our ability to attract and retain key personnel; rapid and expensive technological changes implemented by us and other parties in the financial services industry, including third-party vendors, which may be more difficult to implement or more expensive than anticipated or which may have unforeseen consequences to us and our customers, including the development and implementation of tools incorporating artificial intelligence; emerging issues related to the development and use of artificial intelligence that could give rise to legal or regulatory action, damage our reputation, or otherwise materially harm our business or customers; increased competition in the financial services industry, including from non-banks such as credit unions, Fintech companies and digital asset service providers; our ability to successfully manage liquidity risk, including our need to access higher cost sources of funds such as fed funds purchased and short-term borrowings; the concentration of large deposits from certain clients, including those who have balances above current Federal Deposit Insurance Corporation insurance limits; the effectiveness of our risk management framework; potential impairment to the goodwill the Company recorded in connection with our past acquisitions, including the acquisitions of Metro Phoenix Bank and HMNF, Inc; the extensive regulatory framework that applies to us; the ability of the Bank to pay dividends to us and our ability to pay dividends to our stockholders; new or revised accounting standards, as may be adopted by state and federal regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission (the “SEC”) or the Public Company Accounting Oversight Board; fluctuations in the values of the securities held in our securities portfolio, including as a result of changes in interest rates; governmental monetary, trade and fiscal policies; risks related to climate change and the negative impact it may have on our customers and their businesses; severe weather and natural disasters, and widespread disease or pandemics; acts of war, military conflicts, or terrorism, including the wars in Iran and Ukraine, ongoing conflicts in the Middle East, and other international military conflicts, or adverse external events and changes in foreign relations that can increase levels of political and economic unpredictability, contribute to rising energy and commodity prices, affect global supply chains, increase the volatility of financial markets, and other matters beyond our control; the availability of future equity and debt issuances and other capital raising opportunities on favorable terms; any material weaknesses in our internal control over financial reporting; our success at managing and responding to the risks involved in the foregoing items; and any other risks described in the “Risk Factors” sections of the reports filed by Alerus Financial Corporation with the SEC. 

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. The Company undertakes no 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 Financial Corporation and Subsidiaries
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Alerus Financial Corporation and Subsidiaries
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