Alerus Financial Corporation Reports Third Quarter 2026 Net Income Of $19.2 Million
| ■ | Earnings per diluted common share of $0.76. | |
| ■ | Return on average total assets of 1.45%. | |
| ■ | Return on average tangible common equity(1) of 17.35%. | |
| ■ | Noninterest income was $34.4 million in the third quarter of 2026, an increase of 4.3% from the second quarter of 2026. Noninterest income represented 42.4% of total revenue in the third quarter of 2026. | |
| ■ | Net interest margin (on a tax-equivalent basis)(1) was 3.84% and net interest income was $46.7 million in the third quarter of 2026. | |
| ■ | Total loans were $4.2 billion as of September 30, 2026, an increase of $150.5 million, or 3.7%, from June 30, 2026. | |
| ■ | Total deposits were $4.3 billion as of September 30, 2026, an increase of $111.2 million, or 2.7%, from June 30, 2026. | |
| ■ | Nonperforming assets were $16.4 million as of September 30, 2026, a decrease of $0.7 million, or 4.3%, from $17.1 million as of June 30, 2026. | |
| ■ | Net recoveries to average loans was 0.10%. | |
| ■ | Repurchased $8.2 million of the Company's outstanding common stock at an average per share price of $32.75, reducing common shares outstanding by 250,000 shares at quarter-end. | |
| ■ | In the first nine months of 2026, the Company returned $37.2 million to shareholders in the form of dividends and share repurchases. | |
| ■ | In the first nine months of 2026, adjusted pre-provision net revenue(1) was $78.7 million, an 18.9% increase over the same time period in the prior year. | |
| ■ | Total assets under management/administration in the combined retirement and benefit and wealth segments were $50.1 billion, a 2.7% increase from September 30, 2025. | |
| ■ | Tangible book value per common share(1) was $18.74 as of September 30, 2026, an increase of 10.9% from $16.90 as of September 30, 2025. | |
| ■ | Tangible common equity to tangible assets ratio(1) was 8.77% as of September 30, 2026, an increase from 8.24% as of September 30, 2025. |
| _________________ | |
| (1) | Represents a non-GAAP financial measure. See“Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.” |
Selected Financial Data (unaudited)
| As of and for the | ||||||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||||||
| (dollars and shares in thousands, except per share data) | September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| 2026 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||
| Performance Ratios | ||||||||||||||||||||
| Return on average total assets | 1.45 | % | 1.60 | % | 1.27 | % | 1.61 | % | 1.28 | % | ||||||||||
| Adjusted return on average total assets(1) | 1.37 | % | 1.58 | % | 1.28 | % | 1.58 | % | 1.27 | % | ||||||||||
| Return on average common equity | 13.07 | % | 14.56 | % | 12.80 | % | 14.66 | % | 13.17 | % | ||||||||||
| Return on average tangible common equity(1) | 17.35 | % | 19.33 | % | 18.48 | % | 19.46 | % | 19.25 | % | ||||||||||
| Adjusted return on average tangible common equity(1) | 16.43 | % | 19.04 | % | 18.55 | % | 19.08 | % | 19.08 | % | ||||||||||
| Noninterest income as a % of revenue | 42.37 | % | 40.85 | % | 40.56 | % | 41.32 | % | 41.09 | % | ||||||||||
| Adjusted noninterest income as a % of revenue(1) | 41.24 | % | 40.36 | % | 40.58 | % | 40.78 | % | 40.54 | % | ||||||||||
| Net interest margin (on a tax-equivalent basis)(1) | 3.84 | % | 3.97 | % | 3.50 | % | 3.86 | % | 3.47 | % | ||||||||||
| Efficiency ratio(1) | 63.41 | % | 62.53 | % | 65.34 | % | 63.10 | % | 64.81 | % | ||||||||||
| Adjusted efficiency ratio(1) | 64.44 | % | 62.76 | % | 65.22 | % | 63.47 | % | 64.78 | % | ||||||||||
| Net charge-offs (recoveries) to average loans(1) | (0.10 | )% | 0.26 | % | (0.17 | )% | 0.28 | % | 0.08 | % | ||||||||||
| Dividend payout ratio | 28.95 | % | 27.16 | % | 32.31 | % | 26.42 | % | 31.79 | % | ||||||||||
| Per Common Share | ||||||||||||||||||||
| Earnings per common share - basic | $ | 0.77 | $ | 0.82 | $ | 0.66 | $ | 2.49 | $ | 1.97 | ||||||||||
| Earnings per common share - diluted | $ | 0.76 | $ | 0.81 | $ | 0.65 | $ | 2.46 | $ | 1.95 | ||||||||||
| Adjusted earnings per common share - diluted(1) | $ | 0.71 | $ | 0.80 | $ | 0.66 | $ | 2.41 | $ | 1.93 | ||||||||||
| Dividends declared per common share | $ | 0.22 | $ | 0.22 | $ | 0.21 | $ | 0.65 | $ | 0.62 | ||||||||||
| Book value per common share | $ | 23.31 | $ | 23.34 | $ | 21.68 | ||||||||||||||
| Tangible book value per common share(1) | $ | 18.74 | $ | 18.73 | $ | 16.90 | ||||||||||||||
| Average common shares outstanding - basic | 24,851 | 25,081 | 25,395 | 25,102 | 25,374 | |||||||||||||||
| Average common shares outstanding - diluted | 25,161 | 25,395 | 25,713 | 25,410 | 25,693 | |||||||||||||||
| Other Data | ||||||||||||||||||||
| Retirement and benefit services assets under administration/management | $ | 44,944,011 | $ | 45,163,767 | $ | 44,005,277 | ||||||||||||||
| Wealth advisory services assets under administration/management | $ | 5,163,688 | $ | 5,195,511 | $ | 4,812,250 | ||||||||||||||
| Mortgage originations | $ | 126,728 | $ | 113,450 | $ | 142,768 | $ | 334,612 | $ | 347,995 |
| _________________ | |
| (1) | Represents a non-GAAP financial measure. See“Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.” |
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.
| _________________ | |
| (1) | Represents a non-GAAP financial measure. See“Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.” |
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:
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
| (dollars in thousands) | 2026 | 2026 | 2026 | 2025 | 2025 | |||||||||||||||
| Commercial | ||||||||||||||||||||
| Commercial and business lending | ||||||||||||||||||||
| Commercial and industrial | $ | 861,135 | $ | 759,959 | $ | 747,447 | $ | 736,833 | $ | 702,135 | ||||||||||
| Commercial real estate − Owner occupied | 690,988 | 622,241 | 444,276 | 427,260 | 435,320 | |||||||||||||||
| Total commercial and business lending | 1,552,123 | 1,382,200 | 1,191,723 | 1,164,093 | 1,137,455 | |||||||||||||||
| Investor commercial real estate | ||||||||||||||||||||
| Construction, land and development | 87,615 | 79,850 | 146,897 | 246,238 | 349,768 | |||||||||||||||
| Multifamily | 332,535 | 361,875 | 392,097 | 383,505 | 374,761 | |||||||||||||||
| Non-owner occupied | 905,170 | 893,367 | 976,339 | 875,862 | 865,785 | |||||||||||||||
| Total investor commercial real estate | 1,325,320 | 1,335,092 | 1,515,333 | 1,505,605 | 1,590,314 | |||||||||||||||
| Agricultural | ||||||||||||||||||||
| Land | 53,725 | 54,202 | 54,028 | 64,799 | 65,900 | |||||||||||||||
| Production | 54,597 | 53,367 | 50,983 | 62,500 | 63,051 | |||||||||||||||
| Total agricultural | 108,322 | 107,569 | 105,011 | 127,299 | 128,951 | |||||||||||||||
| Total commercial | 2,985,765 | 2,824,861 | 2,812,067 | 2,796,997 | 2,856,720 | |||||||||||||||
| Consumer | ||||||||||||||||||||
| Residential real estate | ||||||||||||||||||||
| First lien | 809,835 | 828,936 | 851,551 | 874,737 | 894,402 | |||||||||||||||
| Construction | 32,620 | 31,202 | 32,872 | 33,703 | 34,124 | |||||||||||||||
| HELOC | 280,771 | 273,124 | 262,131 | 260,883 | 234,681 | |||||||||||||||
| Junior lien | 31,566 | 31,941 | 35,783 | 36,844 | 40,434 | |||||||||||||||
| Total residential real estate | 1,154,792 | 1,165,203 | 1,182,337 | 1,206,167 | 1,203,641 | |||||||||||||||
| Other consumer | 44,203 | 44,180 | 40,340 | 44,858 | 41,715 | |||||||||||||||
| Total consumer | 1,198,995 | 1,209,383 | 1,222,677 | 1,251,025 | 1,245,356 | |||||||||||||||
| Total loans | $ | 4,184,760 | $ | 4,034,244 | $ | 4,034,744 | $ | 4,048,022 | $ | 4,102,076 |
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:
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
| (dollars in thousands) | 2026 | 2026 | 2026 | 2025 | 2025 | |||||||||||||||
| Noninterest-bearing demand | $ | 813,493 | $ | 759,640 | $ | 857,625 | $ | 807,896 | $ | 776,791 | ||||||||||
| Interest-bearing | ||||||||||||||||||||
| Interest-bearing demand | 1,430,016 | 1,429,951 | 1,449,156 | 1,296,315 | 1,256,687 | |||||||||||||||
| Savings accounts | 169,556 | 173,255 | 178,347 | 173,759 | 174,113 | |||||||||||||||
| Money market savings | 1,307,677 | 1,252,823 | 1,291,794 | 1,337,491 | 1,460,006 | |||||||||||||||
| Time deposits | 582,435 | 576,228 | 570,960 | 576,542 | 745,056 | |||||||||||||||
| Total interest-bearing | 3,489,684 | 3,432,257 | 3,490,257 | 3,384,107 | 3,635,862 | |||||||||||||||
| Total deposits | $ | 4,303,177 | $ | 4,191,897 | $ | 4,347,882 | $ | 4,192,003 | $ | 4,412,653 |
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:
| As of and for the three months ended | ||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
| (dollars in thousands) | 2026 | 2026 | 2026 | 2025 | 2025 | |||||||||||||||
| Nonaccrual loans | $ | 6,909 | $ | 7,105 | $ | 53,881 | $ | 69,065 | $ | 59,644 | ||||||||||
| Accruing loans 90+ days past due | 21 | 436 | - | - | - | |||||||||||||||
| Total nonperforming loans | 6,930 | 7,541 | 53,881 | 69,065 | 59,644 | |||||||||||||||
| OREO and repossessed assets | 9,449 | 9,571 | 126 | 308 | 467 | |||||||||||||||
| Total nonperforming assets | $ | 16,379 | $ | 17,112 | $ | 54,007 | $ | 69,373 | $ | 60,111 | ||||||||||
| Criticized loans | 81,830 | 83,090 | 132,459 | 149,162 | 191,331 | |||||||||||||||
| Net charge-offs (recoveries) | (1,018 | ) | 2,575 | 7,027 | (311 | ) | (1,715 | ) | ||||||||||||
| Net charge-offs (recoveries) to average loans(1) | (0.10 | )% | 0.26 | % | 0.71 | % | (0.03 | )% | (0.17 | )% | ||||||||||
| Nonperforming loans to total loans | 0.17 | % | 0.19 | % | 1.34 | % | 1.71 | % | 1.45 | % | ||||||||||
| Nonperforming assets to total assets | 0.30 | % | 0.32 | % | 1.02 | % | 1.33 | % | 1.13 | % | ||||||||||
| Criticized loans to total loans | 1.96 | % | 2.06 | % | 3.28 | % | 3.68 | % | 4.66 | % | ||||||||||
| Allowance for credit losses on loans to total loans | 1.23 | % | 1.20 | % | 1.25 | % | 1.53 | % | 1.51 | % | ||||||||||
| Allowance for credit losses on loans to nonperforming loans | 742.40 | % | 641.31 | % | 93.73 | % | 89.65 | % | 104.16 | % |
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:
| September 30, | December 31, | September 30, | ||||||||||
| 2026 | 2025 | 2025 | ||||||||||
| Capital Ratios (1) | ||||||||||||
| Alerus Financial Corporation Consolidated | ||||||||||||
| Common equity tier 1 capital to risk weighted assets | 10.52 | % | 10.28 | % | 10.84 | % | ||||||
| Tier 1 capital to risk weighted assets | 10.72 | % | 10.48 | % | 11.05 | % | ||||||
| Total capital to risk weighted assets | 13.01 | % | 12.87 | % | 13.41 | % | ||||||
| Tier 1 capital to average assets | 9.58 | % | 8.86 | % | 9.49 | % | ||||||
| Tangible common equity / tangible assets(2) | 8.77 | % | 8.72 | % | 8.24 | % | ||||||
| Alerus Financial, N.A. | ||||||||||||
| Common equity tier 1 capital to risk weighted assets | 10.57 | % | 10.41 | % | 11.00 | % | ||||||
| Tier 1 capital to risk weighted assets | 10.57 | % | 10.41 | % | 11.00 | % | ||||||
| Total capital to risk weighted assets | 11.78 | % | 11.66 | % | 12.25 | % | ||||||
| Tier 1 capital to average assets | 9.35 | % | 8.62 | % | 9.31 | % |
| _________________ | ||
| (1 | ) | Capital ratios for the current quarter are to be considered preliminary until the Call Report for Alerus Financial, N.A. is filed. |
| (2 | ) | Represents a non-GAAP financial measure. See“Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.” |
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
Consolidated Balance Sheets
(dollars in thousands, except share and per share data)
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Assets | (Unaudited) | |||||||
| Cash and cash equivalents | $ | 65,756 | $ | 67,192 | ||||
| Investment securities | ||||||||
| Trading, at fair value | 818 | 1,758 | ||||||
| Available-for-sale, at fair value | 549,584 | 514,095 | ||||||
| Held-to-maturity, at amortized cost (with an allowance for credit losses on investments of $111 and $123, respectively) | 232,988 | 254,448 | ||||||
| Loans held for sale | 19,829 | 21,934 | ||||||
| Loans held for investment | 4,184,760 | 4,048,022 | ||||||
| Allowance for credit losses on loans | (51,448 | ) | (61,915 | ) | ||||
| Net loans | 4,133,312 | 3,986,107 | ||||||
| Land, premises and equipment, net | 39,530 | 43,253 | ||||||
| Operating lease right-of-use assets | 31,528 | 28,761 | ||||||
| Accrued interest receivable | 21,011 | 21,742 | ||||||
| Bank-owned life insurance | 42,147 | 39,307 | ||||||
| Goodwill | 85,634 | 85,634 | ||||||
| Other intangible assets | 27,448 | 33,371 | ||||||
| Servicing rights | 7,416 | 6,383 | ||||||
| Deferred income taxes, net | 25,063 | 23,080 | ||||||
| Other assets | 121,039 | 103,019 | ||||||
| Total assets | $ | 5,403,103 | $ | 5,230,084 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Deposits | ||||||||
| Noninterest-bearing | $ | 813,493 | $ | 807,896 | ||||
| Interest-bearing | 3,489,684 | 3,384,107 | ||||||
| Total deposits | 4,303,177 | 4,192,003 | ||||||
| Short-term borrowings | 318,400 | 308,800 | ||||||
| Long-term debt | 59,267 | 59,182 | ||||||
| Operating lease liabilities | 42,232 | 36,282 | ||||||
| Accrued expenses and other liabilities | 103,177 | 68,883 | ||||||
| Total liabilities | 4,826,253 | 4,665,150 | ||||||
| Stockholders' equity | ||||||||
| Preferred stock, $1 par value, 2,000,000 shares authorized: 0 issued and outstanding | - | - | ||||||
| Common stock, $1 par value, 60,000,000 and 30,000,000 shares authorized: 24,744,269 and 25,406,278 issued and outstanding | 24,744 | 25,406 | ||||||
| Additional paid-in capital | 252,754 | 271,609 | ||||||
| Retained earnings | 316,826 | 270,075 | ||||||
| Accumulated other comprehensive loss | (17,474 | ) | (2,156 | ) | ||||
| Total stockholders' equity | 576,850 | 564,934 | ||||||
| Total liabilities and stockholders' equity | $ | 5,403,103 | $ | 5,230,084 |
Alerus Financial Corporation and Subsidiaries
Consolidated Statements of Income
(dollars and shares in thousands, except per share data)
| Three months ended | Nine months ended | |||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||||
| 2026 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||
| Interest Income | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||
| Loans, including fees | $ | 61,455 | $ | 62,214 | $ | 63,875 | $ | 182,290 | $ | 189,222 | ||||||||||
| Investment securities | ||||||||||||||||||||
| Taxable | 7,525 | 7,258 | 5,091 | 21,888 | 16,108 | |||||||||||||||
| Exempt from federal income taxes | 156 | 155 | 160 | 468 | 480 | |||||||||||||||
| Other | 1,056 | 999 | 1,518 | 3,149 | 3,440 | |||||||||||||||
| Total interest income | 70,192 | 70,626 | 70,644 | 207,795 | 209,250 | |||||||||||||||
| Interest Expense | ||||||||||||||||||||
| Deposits | 19,538 | 18,938 | 24,350 | 57,550 | 70,643 | |||||||||||||||
| Short-term borrowings | 2,886 | 2,935 | 2,506 | 8,178 | 9,327 | |||||||||||||||
| Long-term debt | 1,045 | 1,041 | 652 | 2,720 | 1,955 | |||||||||||||||
| Total interest expense | 23,469 | 22,914 | 27,508 | 68,448 | 81,925 | |||||||||||||||
| Net interest income | 46,723 | 47,712 | 43,136 | 139,347 | 127,325 | |||||||||||||||
| Provision for (recovery of) credit losses | 2,199 | 495 | - | (2,188 | ) | 863 | ||||||||||||||
| Net interest income after provision for (recovery of) credit losses | 44,524 | 47,217 | 43,136 | 141,535 | 126,462 | |||||||||||||||
| Noninterest Income | ||||||||||||||||||||
| Retirement and benefit services | 17,664 | 17,347 | 16,496 | 52,418 | 48,625 | |||||||||||||||
| Wealth advisory services | 8,001 | 7,705 | 6,560 | 22,942 | 20,827 | |||||||||||||||
| Mortgage banking | 3,328 | 3,195 | 3,474 | 10,057 | 8,651 | |||||||||||||||
| Service charges on deposit accounts | 1,221 | 1,106 | 703 | 3,259 | 2,034 | |||||||||||||||
| Gain on sale of non-mortgage loans | - | - | (35 | ) | - | 2,080 | ||||||||||||||
| Other | 4,136 | 3,592 | 2,232 | 9,464 | 6,607 | |||||||||||||||
| Total noninterest income | 34,350 | 32,945 | 29,430 | 98,140 | 88,824 | |||||||||||||||
| Noninterest Expense | ||||||||||||||||||||
| Compensation | 26,096 | 26,155 | 24,984 | 76,338 | 72,288 | |||||||||||||||
| Employee taxes and benefits | 7,377 | 6,755 | 6,094 | 20,772 | 20,490 | |||||||||||||||
| Occupancy and equipment expense | 3,525 | 3,493 | 2,849 | 10,444 | 8,315 | |||||||||||||||
| Business services, software and technology expense | 5,457 | 5,440 | 6,285 | 16,736 | 17,905 | |||||||||||||||
| Intangible amortization expense | 1,974 | 1,974 | 2,710 | 5,923 | 8,129 | |||||||||||||||
| Professional fees and assessments | 3,796 | 3,781 | 2,676 | 11,377 | 8,010 | |||||||||||||||
| Marketing and business development | 1,227 | 869 | 1,069 | 2,957 | 2,821 | |||||||||||||||
| Supplies and postage | 573 | 540 | 569 | 1,719 | 1,690 | |||||||||||||||
| Travel | 464 | 357 | 385 | 1,181 | 1,019 | |||||||||||||||
| Mortgage and lending expenses | 707 | 614 | 1,025 | 2,030 | 2,501 | |||||||||||||||
| Other | 2,672 | 2,905 | 1,895 | 7,664 | 6,176 | |||||||||||||||
| Total noninterest expense | 53,868 | 52,883 | 50,541 | 157,141 | 149,344 | |||||||||||||||
| Income before income tax expense | 25,006 | 27,279 | 22,025 | 82,534 | 65,942 | |||||||||||||||
| Income tax expense | 5,806 | 6,414 | 5,101 | 19,499 | 15,451 | |||||||||||||||
| Net income | $ | 19,200 | $ | 20,865 | $ | 16,924 | $ | 63,035 | $ | 50,491 | ||||||||||
| Per Common Share Data | ||||||||||||||||||||
| Earnings per common share | $ | 0.77 | $ | 0.82 | $ | 0.66 | $ | 2.49 | $ | 1.97 | ||||||||||
| Diluted earnings per common share | $ | 0.76 | $ | 0.81 | $ | 0.65 | $ | 2.46 | $ | 1.95 | ||||||||||
| Dividends declared per common share | $ | 0.22 | $ | 0.22 | $ | 0.21 | $ | 0.65 | $ | 0.62 | ||||||||||
| Average common shares outstanding | 24,851 | 25,081 | 25,395 | 25,102 | 25,374 | |||||||||||||||
| Diluted average common shares outstanding | 25,161 | 25,395 | 25,713 | 25,410 | 25,693 |
Alerus Financial Corporation and Subsidiaries
Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures (unaudited)
(dollars and shares in thousands, except per share data)
| September 30, | June 30, | December 31, | September 30, | |||||||||||||
| 2026 | 2026 | 2025 | 2025 | |||||||||||||
| Tangible Common Equity to Tangible Assets | ||||||||||||||||
| Total common stockholders' equity | $ | 576,850 | $ | 583,143 | $ | 564,934 | $ | 550,688 | ||||||||
| Less: Goodwill | 85,634 | 85,634 | 85,634 | 85,634 | ||||||||||||
| Less: Other intangible assets | 27,448 | 29,422 | 33,371 | 35,753 | ||||||||||||
| Tangible common equity (a) | 463,768 | 468,087 | 445,929 | 429,301 | ||||||||||||
| Total assets | 5,403,103 | 5,288,718 | 5,230,084 | 5,330,573 | ||||||||||||
| Less: Goodwill | 85,634 | 85,634 | 85,634 | 85,634 | ||||||||||||
| Less: Other intangible assets | 27,448 | 29,422 | 33,371 | 35,753 | ||||||||||||
| Tangible assets (b) | 5,290,021 | 5,173,662 | 5,111,079 | 5,209,186 | ||||||||||||
| Tangible common equity to tangible assets (a)/(b) | 8.77 | % | 9.05 | % | 8.72 | % | 8.24 | % | ||||||||
| Tangible Book Value Per Common Share | ||||||||||||||||
| Tangible common equity (a) | 463,768 | 468,087 | 445,929 | 429,301 | ||||||||||||
| Total common shares issued and outstanding (c) | 24,744 | 24,986 | 25,406 | 25,397 | ||||||||||||
| Tangible book value per common share (a)/(c) | $ | 18.74 | $ | 18.73 | $ | 17.55 | $ | 16.90 |
| Three months ended | Nine months ended | |||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||||
| 2026 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||
| Return on Average Tangible Common Equity | ||||||||||||||||||||
| Net income | $ | 19,200 | $ | 20,865 | $ | 16,924 | $ | 63,035 | $ | 50,491 | ||||||||||
| Add: Intangible amortization expense (net of tax) (1) | 1,559 | 1,559 | 2,141 | 4,679 | 6,421 | |||||||||||||||
| Net income, excluding intangible amortization (d) | 20,759 | 22,424 | 19,065 | 67,714 | 56,912 | |||||||||||||||
| Average total equity | 582,770 | 574,862 | 524,459 | 574,789 | 512,533 | |||||||||||||||
| Less: Average goodwill | 85,634 | 85,634 | 85,634 | 85,634 | 85,634 | |||||||||||||||
| Less: Average other intangible assets (net of tax)(1) | 22,447 | 24,003 | 29,540 | 24,026 | 31,549 | |||||||||||||||
| Average tangible common equity (e) | 474,689 | 465,225 | 409,285 | 465,129 | 395,350 | |||||||||||||||
| Return on average tangible common equity (d)/(e) | 17.35 | % | 19.33 | % | 18.48 | % | 19.46 | % | 19.25 | % | ||||||||||
| Efficiency Ratio | ||||||||||||||||||||
| Noninterest expense | $ | 53,868 | $ | 52,883 | $ | 50,541 | $ | 157,141 | $ | 149,344 | ||||||||||
| Less: Intangible amortization expense | 1,974 | 1,974 | 2,710 | 5,923 | 8,129 | |||||||||||||||
| Noninterest expense excluding intangible amortization (f) | 51,894 | 50,909 | 47,831 | 151,218 | 141,215 | |||||||||||||||
| Net interest income (v) | 46,723 | 47,712 | 43,136 | 139,347 | 127,325 | |||||||||||||||
| Noninterest income | 34,350 | 32,945 | 29,430 | 98,140 | 88,824 | |||||||||||||||
| Tax equivalent adjustment for loans and securities | 771 | 755 | 638 | 2,145 | 1,748 | |||||||||||||||
| Total tax-equivalent revenue (g) | 81,844 | 81,412 | 73,204 | 239,632 | 217,897 | |||||||||||||||
| Efficiency ratio (f)/(g) | 63.41 | % | 62.53 | % | 65.34 | % | 63.10 | % | 64.81 | % | ||||||||||
| Pre-Provision Net Revenue | ||||||||||||||||||||
| Net interest income (v) | $ | 46,723 | $ | 47,712 | $ | 43,136 | $ | 139,347 | $ | 127,325 | ||||||||||
| Add: Noninterest income | 34,350 | 32,945 | 29,430 | 98,140 | 88,824 | |||||||||||||||
| Less: Noninterest expense | 53,868 | 52,883 | 50,541 | 157,141 | 149,344 | |||||||||||||||
| Pre-provision net revenue | $ | 27,205 | $ | 27,774 | $ | 22,025 | $ | 80,346 | $ | 66,805 | ||||||||||
| Adjusted Noninterest Income | ||||||||||||||||||||
| Noninterest income | $ | 34,350 | $ | 32,945 | $ | 29,430 | $ | 98,140 | $ | 88,824 | ||||||||||
| Less: Adjusted noninterest income items | ||||||||||||||||||||
| Net gain on sale of loans | - | - | (35 | ) | - | 2,080 | ||||||||||||||
| Net gain (loss) on sale/disposal of premises and equipment | 1,554 | 653 | - | 2,186 | (84 | ) | ||||||||||||||
| Total adjusted noninterest income (loss) items (h) | 1,554 | 653 | (35 | ) | 2,186 | 1,996 | ||||||||||||||
| Adjusted noninterest income (i) | $ | 32,796 | $ | 32,292 | $ | 29,465 | $ | 95,954 | $ | 86,828 | ||||||||||
| Adjusted Noninterest Income as a Percentage of Revenue | ||||||||||||||||||||
| Adjusted noninterest income (i) | $ | 32,796 | $ | 32,292 | $ | 29,465 | $ | 95,954 | $ | 86,828 | ||||||||||
| Net interest income (v) | 46,723 | 47,712 | 43,136 | 139,347 | 127,325 | |||||||||||||||
| Adjusted revenue (w) | $ | 79,519 | $ | 80,004 | $ | 72,601 | $ | 235,301 | $ | 214,153 | ||||||||||
| Adjusted noninterest income as a percentage of revenue (i)/(w) | 41.24 | % | 40.36 | % | 40.58 | % | 40.78 | % | 40.54 | % | ||||||||||
| Adjusted Noninterest Expense | ||||||||||||||||||||
| Noninterest expense | $ | 53,868 | $ | 52,883 | $ | 50,541 | $ | 157,141 | $ | 149,344 | ||||||||||
| Less: Adjusted noninterest expense items | ||||||||||||||||||||
| HMNF merger- and acquisition-related expenses | 15 | 6 | (43 | ) | (13 | ) | 255 | |||||||||||||
| Severance and signing bonus expense | 144 | 216 | 104 | 526 | 1,108 | |||||||||||||||
| Total adjusted noninterest expense items (j) | 159 | 222 | 61 | 513 | 1,363 | |||||||||||||||
| Adjusted noninterest expense (k) | $ | 53,709 | $ | 52,661 | $ | 50,480 | $ | 156,628 | $ | 147,981 |
| _________________ | ||
| (1 | ) | Items calculated after-tax utilizing a marginal income tax rate of 21.0%. |
Alerus Financial Corporation and Subsidiaries
Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures (unaudited)
(dollars and shares in thousands, except per share data)
| Three months ended | Nine months ended | |||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||||
| 2026 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||
| Adjusted Pre-Provision Net Revenue | ||||||||||||||||||||
| Net interest income (v) | $ | 46,723 | $ | 47,712 | $ | 43,136 | $ | 139,347 | $ | 127,325 | ||||||||||
| Add: Adjusted noninterest income (i) | 32,796 | 32,292 | 29,465 | 95,954 | 86,828 | |||||||||||||||
| Less: Adjusted noninterest expense (k) | 53,709 | 52,661 | 50,480 | 156,628 | 147,981 | |||||||||||||||
| Adjusted pre-provision net revenue | $ | 25,810 | $ | 27,343 | $ | 22,121 | $ | 78,673 | $ | 66,172 | ||||||||||
| Adjusted Efficiency Ratio | ||||||||||||||||||||
| Adjusted noninterest expense (k) | $ | 53,709 | $ | 52,661 | $ | 50,480 | $ | 156,628 | $ | 147,981 | ||||||||||
| Less: Intangible amortization expense | 1,974 | 1,974 | 2,710 | 5,923 | 8,129 | |||||||||||||||
| Adjusted noninterest expense for efficiency ratio(l) | 51,735 | 50,687 | 47,770 | 150,705 | 139,852 | |||||||||||||||
| Tax-equivalent revenue | ||||||||||||||||||||
| Net interest income (v) | 46,723 | 47,712 | 43,136 | 139,347 | 127,325 | |||||||||||||||
| Add: Adjusted noninterest income (i) | 32,796 | 32,292 | 29,465 | 95,954 | 86,828 | |||||||||||||||
| Add: Tax equivalent adjustment for loans and securities(1) | 771 | 755 | 638 | 2,145 | 1,748 | |||||||||||||||
| Total tax-equivalent revenue (m) | 80,290 | 80,759 | 73,239 | 237,446 | 215,901 | |||||||||||||||
| Adjusted efficiency ratio (l)/(m) | 64.44 | % | 62.76 | % | 65.22 | % | 63.47 | % | 64.78 | % | ||||||||||
| Adjusted Net Income | ||||||||||||||||||||
| Net income | $ | 19,200 | $ | 20,865 | $ | 16,924 | $ | 63,035 | $ | 50,491 | ||||||||||
| Less: Adjusted noninterest (loss) income items (net of tax)(1)(h) | 1,228 | 516 | (28 | ) | 1,727 | 1,577 | ||||||||||||||
| Add: Adjusted noninterest expense items (net of tax)(1)(j) | 126 | 175 | 48 | 405 | 1,077 | |||||||||||||||
| Adjusted net income (n) | $ | 18,098 | $ | 20,524 | $ | 17,000 | $ | 61,713 | $ | 49,991 | ||||||||||
| Adjusted Return on Average Total Assets | ||||||||||||||||||||
| Average total assets (o) | $ | 5,255,954 | $ | 5,226,319 | $ | 5,273,306 | $ | 5,233,732 | $ | 5,282,798 | ||||||||||
| Adjusted return on average total assets (n)/(o) | 1.37 | % | 1.58 | % | 1.28 | % | 1.58 | % | 1.27 | % | ||||||||||
| Adjusted Return on Average Tangible Common Equity | ||||||||||||||||||||
| Adjusted net income (n) | $ | 18,098 | $ | 20,524 | $ | 17,000 | $ | 61,713 | $ | 49,991 | ||||||||||
| Add: Intangible amortization expense (net of tax)(1) | 1,559 | 1,559 | 2,141 | 4,679 | 6,421 | |||||||||||||||
| Adjusted net income, excluding intangible amortization (p) | 19,657 | 22,083 | 19,141 | 66,392 | 56,412 | |||||||||||||||
| Average total equity | 582,770 | 574,862 | 524,459 | 574,789 | 512,533 | |||||||||||||||
| Less: Average goodwill | 85,634 | 85,634 | 85,634 | 85,634 | 85,634 | |||||||||||||||
| Less: Average other intangible assets (net of tax) | 22,447 | 24,003 | 29,540 | 24,026 | 31,549 | |||||||||||||||
| Average tangible common equity (q) | 474,689 | 465,225 | 409,285 | 465,129 | 395,350 | |||||||||||||||
| Adjusted return on average tangible common equity (p)/(q) | 16.43 | % | 19.04 | % | 18.55 | % | 19.08 | % | 19.08 | % | ||||||||||
| Adjusted Earnings Per Common Share - Diluted | ||||||||||||||||||||
| Adjusted net income (n) | $ | 18,098 | $ | 20,524 | $ | 17,000 | $ | 61,713 | $ | 49,991 | ||||||||||
| Less: Dividends and undistributed earnings allocated to participating securities | 171 | 192 | 148 | 571 | 444 | |||||||||||||||
| Adjusted net income available to common stockholders (r) | 17,927 | 20,332 | 16,852 | 61,142 | 49,547 | |||||||||||||||
| Weighted-average common shares outstanding for diluted earnings per share (s) | 25,161 | 25,395 | 25,713 | 25,410 | 25,693 | |||||||||||||||
| Adjusted earnings per common share - diluted (r)/(s) | $ | 0.71 | $ | 0.80 | $ | 0.66 | $ | 2.41 | $ | 1.93 | ||||||||||
| Net Charge-Offs (Recoveries) to Average Loans | ||||||||||||||||||||
| Net charge-offs (recoveries) (t) | $ | (1,018 | ) | $ | 2,575 | $ | (1,715 | ) | $ | 8,584 | $ | 2,459 | ||||||||
| Average total loans (u) | $ | 4,026,351 | $ | 4,032,142 | $ | 4,036,936 | $ | 4,029,390 | $ | 4,046,347 | ||||||||||
| Net charge-offs (recoveries) to average loans (t)/(u) | (0.10 | )% | 0.26 | % | (0.17 | )% | 0.28 | % | 0.08 | % | ||||||||||
| Net Interest Margin (on a Tax-Equivalent Basis) | ||||||||||||||||||||
| Net interest income (v) | $ | 46,723 | $ | 47,712 | $ | 43,136 | $ | 139,347 | $ | 127,325 | ||||||||||
| Add: Tax equivalent adjustment for loans and securities | 771 | 755 | 638 | 2,145 | 1,748 | |||||||||||||||
| Net interest income (on a tax-equivalent basis)(1)(y) | $ | 47,494 | $ | 48,467 | $ | 43,774 | $ | 141,492 | $ | 129,073 | ||||||||||
| Average interest earning assets (x) | $ | 4,912,782 | $ | 4,896,740 | $ | 4,965,849 | 4,903,681 | 4,968,236 | ||||||||||||
| Net interest margin (on a tax-equivalent basis)(1)(y)/(x) | 3.84 | % | 3.97 | % | 3.50 | % | 3.86 | % | 3.47 | % |
| _________________ | ||
| (1 | ) | Items calculated after-tax utilizing a marginal income tax rate of 21.0%. |
Alerus Financial Corporation and Subsidiaries
Analysis of Average Balances, Yields, and Rates (unaudited)
(dollars in thousands)
| Three months ended | Nine months ended | |||||||||||||||||||||||||||||||||||||||
| September 30, 2026 | June 30, 2026 | September 30, 2025 | September 30, 2026 | September 30, 2025 | ||||||||||||||||||||||||||||||||||||
| Average | Average | Average | Average | Average | ||||||||||||||||||||||||||||||||||||
| Average | Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||||||||||||||||
| Balance | Rate | Balance | Rate | Balance | Rate | Balance | Rate | Balance | Rate | |||||||||||||||||||||||||||||||
| Interest Earning Assets | ||||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits with banks | $ | 54,390 | 3.74 | % | $ | 45,777 | 4.11 | % | $ | 89,568 | 4.86 | % | $ | 53,591 | 4.04 | % | $ | 53,187 | 4.98 | % | ||||||||||||||||||||
| Investment securities(1) | 783,165 | 3.91 | 773,692 | 3.86 | 796,759 | 2.64 | 776,289 | 3.87 | 826,409 | 2.70 | ||||||||||||||||||||||||||||||
| Loans held for sale | 23,245 | 5.39 | 18,885 | 4.50 | 20,188 | 4.93 | 19,277 | 4.91 | 17,979 | 4.80 | ||||||||||||||||||||||||||||||
| Loans | ||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | 778,604 | 7.00 | 779,471 | 7.07 | 650,787 | 7.51 | 760,827 | 7.06 | 654,061 | 7.44 | ||||||||||||||||||||||||||||||
| CRE − Owner occupied | 649,436 | 5.98 | 502,476 | 6.19 | 435,469 | 7.73 | 528,217 | 6.09 | 419,608 | 6.77 | ||||||||||||||||||||||||||||||
| CRE − Construction, land and development | 89,571 | 7.48 | 103,618 | 13.08 | 363,466 | 5.77 | 134,534 | 7.72 | 348,093 | 5.85 | ||||||||||||||||||||||||||||||
| CRE − Multifamily | 341,997 | 5.97 | 394,683 | 6.05 | 340,709 | 6.46 | 376,509 | 5.94 | 350,658 | 6.50 | ||||||||||||||||||||||||||||||
| CRE − Non-owner occupied(2) | 858,263 | 5.95 | 922,958 | 6.08 | 887,935 | 6.26 | 898,414 | 6.00 | 934,143 | 6.48 | ||||||||||||||||||||||||||||||
| Agricultural − Land | 54,978 | 9.58 | 53,823 | 5.78 | 66,676 | 5.53 | 56,178 | 7.11 | 66,647 | 5.71 | ||||||||||||||||||||||||||||||
| Agricultural − Production | 52,005 | 6.99 | 53,351 | 6.95 | 64,685 | 6.80 | 54,704 | 6.97 | 64,357 | 7.13 | ||||||||||||||||||||||||||||||
| RRE − First lien | 818,187 | 5.01 | 838,819 | 4.93 | 898,011 | 4.83 | 840,523 | 4.96 | 898,910 | 4.84 | ||||||||||||||||||||||||||||||
| RRE − Construction | 33,030 | 7.31 | 34,981 | 6.63 | 33,834 | 6.61 | 33,639 | 6.74 | 36,798 | 7.57 | ||||||||||||||||||||||||||||||
| RRE − HELOC | 275,470 | 6.03 | 271,254 | 6.02 | 213,232 | 6.82 | 269,487 | 6.03 | 190,272 | 6.96 | ||||||||||||||||||||||||||||||
| RRE − Junior lien | 31,353 | 6.85 | 32,676 | 6.53 | 40,997 | 6.40 | 33,427 | 6.59 | 42,498 | 6.34 | ||||||||||||||||||||||||||||||
| Other consumer | 43,457 | 6.53 | 44,032 | 6.51 | 41,135 | 6.94 | 42,931 | 6.45 | 40,302 | 6.99 | ||||||||||||||||||||||||||||||
| Total loans(1) | 4,026,351 | 6.10 | 4,032,142 | 6.24 | 4,036,936 | 6.31 | 4,029,390 | 6.09 | 4,046,347 | 6.28 | ||||||||||||||||||||||||||||||
| Federal Reserve/FHLB stock | 25,631 | 8.41 | 26,244 | 8.10 | 22,398 | 7.46 | 25,134 | 8.13 | 24,314 | 8.01 | ||||||||||||||||||||||||||||||
| Total interest earning assets | 4,912,782 | 5.73 | 4,896,740 | 5.85 | 4,965,849 | 5.70 | 4,903,681 | 5.72 | 4,968,236 | 5.68 | ||||||||||||||||||||||||||||||
| Noninterest earning assets | 343,172 | 329,579 | 307,457 | 330,051 | 314,562 | |||||||||||||||||||||||||||||||||||
| Total assets | $ | 5,255,954 | $ | 5,226,319 | $ | 5,273,306 | $ | 5,233,732 | $ | 5,282,798 | ||||||||||||||||||||||||||||||
| Interest-Bearing Liabilities | ||||||||||||||||||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 1,402,505 | 1.70 | % | $ | 1,378,394 | 1.68 | % | $ | 1,227,029 | 1.80 | % | $ | 1,382,852 | 1.67 | % | $ | 1,240,589 | 1.80 | % | ||||||||||||||||||||
| Money market and savings deposits | 1,454,053 | 2.38 | 1,441,099 | 2.34 | 1,587,694 | 2.84 | 1,466,135 | 2.36 | 1,580,085 | 2.83 | ||||||||||||||||||||||||||||||
| Time deposits | 573,526 | 3.32 | 571,276 | 3.34 | 772,345 | 3.81 | 571,305 | 3.36 | 716,421 | 3.81 | ||||||||||||||||||||||||||||||
| Fed funds purchased | 24,167 | 4.05 | 74,104 | 3.85 | 16,636 | 4.94 | 44,591 | 3.93 | 71,717 | 4.67 | ||||||||||||||||||||||||||||||
| FHLB short-term advances | 262,228 | 3.99 | 226,703 | 3.93 | 200,000 | 4.56 | 231,337 | 3.97 | 200,000 | 4.56 | ||||||||||||||||||||||||||||||
| Long-term debt | 59,253 | 6.99 | 59,225 | 7.04 | 59,137 | 4.37 | 59,225 | 6.14 | 59,111 | 4.42 | ||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 3,775,732 | 2.47 | 3,750,801 | 2.45 | 3,862,841 | 2.83 | 3,755,445 | 2.44 | 3,867,923 | 2.83 | ||||||||||||||||||||||||||||||
| Noninterest-Bearing Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing deposits | 776,897 | 790,088 | 800,028 | 788,442 | 819,266 | |||||||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 120,555 | 110,568 | 85,978 | 115,056 | 83,076 | |||||||||||||||||||||||||||||||||||
| Stockholders' equity | 582,770 | 574,862 | 524,459 | 574,789 | 512,533 | |||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 5,255,954 | $ | 5,226,319 | $ | 5,273,306 | $ | 5,233,732 | $ | 5,282,798 | ||||||||||||||||||||||||||||||
| Net interest rate spread | 3.26 | % | 3.40 | % | 2.87 | % | 3.28 | % | 2.85 | % | ||||||||||||||||||||||||||||||
| Net interest margin (on a tax-equivalent basis)(1) | 3.84 | % | 3.97 | % | 3.50 | % | 3.86 | % | 3.47 | % |
| _________________ | ||
| (1 | ) | Taxable-equivalent adjustment was calculated utilizing a marginal income tax rate of 21.0%. |
Alan A. Villalon, Chief Financial Officer
952.417.3733 (Office)
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