MINNEAPOLIS–(BUSINESS WIRE)–Alerus Financial Corporation (Nasdaq: ALRS), or the Company, reported net income of $16.9 million for the third quarter of 2025, or $0.65 per diluted common share, compared to net income of $20.3 million, or $0.78 per diluted common share, for the second quarter of 2025, and net income of $5.2 million, or $0.26 per diluted common share, for the third quarter of 2024.

CEO Comments

President and Chief Executive Officer Katie Lorenson said, “Alerus delivered another strong quarter, building on the momentum established earlier this year. Our results reflect the strength and resilience of our diversified business model, coupled with disciplined execution by an exceptional team of professionals. The strategic addition of the Home Federal franchise and team, in addition to the transformative changes made to the commercial wealth bank over the last several years, are driving stronger results with a return on total average assets of 1.28% through the first nine months of 2025.

In the third quarter, we continued to grow our balance sheet with strong sequential organic growth in both loans and deposits. This growth propelled net interest income to $43.1 million, a record level in our company history. Fee income remains resilient and, at over 40% of total revenues, is more than double the banking industry average. Our focus on relationship-driven commercial banking, combined with growth in our retirement, benefits, and wealth management businesses, positions us well for long-term success.

With an annualized return on tangible equity over 19%, we saw exceptional tangible book value growth of almost 5% in the third quarter. We remain committed to achieving superior returns and increasing shareholder value by organically growing revenues through client expansion, managing expenses prudently, and maintaining credit discipline. Our capital and reserve levels are ready to weather potential economic uncertainty as our tangible common equity ratio is now over 8% and our allowance for credit losses on loans to total loans was 1.51% as of the end of the third quarter.

As we continue to demonstrate the ability to deliver stronger returns, I am proud of our team’s commitment and dedication to executing our strategy, supporting our clients and communities, and delivering consistent results while building sustainable value for our shareholders.”

Third Quarter Highlights

Return on average total assets was 1.27% in the third quarter of 2025.
Return on average tangible common equity (non-GAAP)⁽¹⁾ was 18.48% in the third quarter of 2025.
Earnings per diluted common share in the third quarter of 2025 of $0.65.
Net interest income was $43.1 million in the third quarter of 2025, an increase of 0.2% from $43.0 million in the second quarter of 2025.
Net interest margin was 3.50% in the third quarter of 2025, which remained stable when compared to 3.51% in the second quarter of 2025.
Noninterest income, which represented 40.6% of total revenues, was $29.4 million in the third quarter of 2025. Adjusted noninterest income (non-GAAP)⁽¹⁾ was $29.4 million in the third quarter of 2025, which was stable in comparison to adjusted noninterest income (non-GAAP)⁽¹⁾ of $29.7 million in the second quarter of 2025.
Total loans were $4.1 billion as of September 30, 2025, an increase of $109.5 million, or 2.7%, from December 31, 2024.
Total deposits were $4.4 billion as of September 30, 2025, an increase of $34.2 million, or 0.8%, from December 31, 2024.
Total retirement and benefit services assets under administration/management at September 30, 2025 were $44.0 billion, a 3.7% increase from June 30, 2025.
Total wealth management assets under administration/management at September 30, 2025 were $4.8 billion, a 4.3% increase from June 30, 2025.
Net charge-offs (recoveries) to average loans was (0.17)% in the third quarter of 2025. Adjusted net charge-offs (recoveries) to average loans (non-GAAP)⁽¹⁾ was (0.17)% in the third quarter of 2025, compared to adjusted net charge-offs (recoveries) to average loans (non-GAAP)⁽¹⁾ of 0.07% in the second quarter of 2025.
Tangible book value per common share (non-GAAP)⁽¹⁾ was $16.90 as of September 30, 2025, an increase of 4.9% from $16.11 as of June 30, 2025.
Tangible common equity to tangible assets ratio (non-GAAP)⁽¹⁾ was 8.24% as of September 30, 2025, an increase from 7.87% as of June 30, 2025.

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(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
	September 30,			June 30,			September 30,			September 30,			September 30,
(dollars and shares in thousands, except per share data)	2025			2025			2024			2025			2024
Performance Ratios
Return on average total assets		1.27	%		1.53	%		0.48	%		1.28	%		0.56	%
Adjusted return on average total assets (1)		1.28	%		1.41	%		0.57	%		1.27	%		0.62	%
Return on average common equity		12.80	%		15.82	%		5.52	%		13.17	%		6.43	%
Return on average tangible common equity (1)		18.48	%		22.65	%		7.83	%		19.25	%		8.98	%
Adjusted return on average tangible common equity (1)		18.55	%		21.02	%		9.04	%		19.08	%		9.79	%
Noninterest income as a % of revenue		40.56	%		42.47	%		55.72	%		41.09	%		54.10	%
Net interest margin (tax-equivalent)		3.50	%		3.51	%		2.23	%		3.47	%		2.31	%
Efficiency ratio (1)		65.34	%		60.66	%		80.29	%		64.81	%		77.17	%
Adjusted efficiency ratio (1)		65.22	%		62.35	%		77.71	%		64.78	%		75.50	%
Net charge-offs (recoveries) to average loans		(0.17	)%		0.37	%		0.04	%		0.08	%		0.14	%
Adjusted net charge-offs (recoveries) to average loans		(0.17	)%		0.07	%		0.04	%		(0.02	)%		0.14	%
Dividend payout ratio		32.31	%		26.92	%		76.92	%		31.79	%		66.29	%
Per Common Share
Earnings per common share – basic	$	0.66		$	0.79		$	0.26		$	1.97		$	0.90
Earnings per common share – diluted	$	0.65		$	0.78		$	0.26		$	1.95		$	0.89
Adjusted earnings per common share – diluted (1)	$	0.66		$	0.72		$	0.31		$	1.93		$	0.98
Dividends declared per common share	$	0.21		$	0.21		$	0.20		$	0.62		$	0.59
Book value per common share	$	21.68		$	21.00		$	19.53
Tangible book value per common share (1)	$	16.90		$	16.11		$	16.50
Average common shares outstanding – basic		25,395			25,368			19,788			25,374			19,768
Average common shares outstanding – diluted		25,713			25,714			20,075			25,693			20,037
Other Data
Retirement and benefit services assets under administration/management	$	44,005,277		$	42,451,544		$	41,249,280
Wealth management assets under administration/management	$	4,812,250		$	4,613,102		$	4,397,505
Mortgage originations	$	142,768		$	134,634		$	82,388		$	347,995		$	245,743

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(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 2025 was $43.1 million, a $0.1 million, or 0.2%, increase from the second quarter of 2025. The increase was primarily due to strong organic loan growth and increased income from higher average interest-earning cash balances resulting from deposit growth.

Net interest income increased $20.6 million, or 91.4%, from $22.5 million for the third quarter of 2024. Interest income increased $18.4 million, or 35.3%, from the third quarter of 2024, primarily driven by earning assets acquired in the HMN Financial, Inc. (“HMNF”) acquisition, strong organic loan growth at higher yields, and purchase accounting accretion. Interest expense decreased $2.2 million, or 7.3%, from the third quarter of 2024, as the average borrowing balance declined, alongside a decrease in the average rate paid on deposits, which more than offset the increase in interest-bearing deposits stemming from the HMNF acquisition and organic deposit growth.

Net interest margin (on a tax-equivalent basis) (non-GAAP) was 3.50% for the third quarter of 2025, a one basis point decrease from 3.51% for the second quarter of 2025, and a 127 basis point increase from 2.23% for the third quarter of 2024. The quarter over quarter decrease was mainly attributable to lower average loan balances following the sale of a pool of hospitality loans early in the third quarter of 2025. The increase from the third quarter of 2024 was primarily driven by higher rates on interest earning assets from organic loan growth and the HMNF acquisition, purchase accounting accretion, lower rates paid on deposits, and lower borrowing balances.

Noninterest Income

Noninterest income for the third quarter of 2025 was $29.4 million, a $2.3 million, or 7.3%, decrease from the second quarter of 2025. The quarter over quarter decrease was primarily driven by decreases from the gain on sale of non-mortgage loans and wealth management revenue, partially offset by an increase in retirement and benefit services revenue. Gain on sale of non-mortgage loans decreased from the second quarter of 2025 due to a $2.1 million gain on the sale of a PCD hospitality loan during the second quarter of 2025. Wealth management revenue decreased $0.8 million, or 10.9%, from the second quarter of 2025, primarily due to the timing of the wealth management platform conversion and a decrease in brokerage and insurance commissions. Retirement and benefit services revenue increased $0.5 million, or 2.9%, from the second quarter of 2025, primarily driven by asset-based fees.

Noninterest income for the third quarter of 2025 increased by $1.1 million, or 3.8%, from the third quarter of 2024. Mortgage banking revenue increased $0.9 million, or 35.0%, in the third quarter of 2025 compared to the third quarter of 2024, primarily driven by higher mortgage originations as a result of expansion into HMNF legacy markets. Retirement and benefit services revenue increased $0.4 million, or 2.2%, in the third quarter of 2025 compared to the third quarter of 2024, primarily driven by a 6.7% increase in assets under administration/management during that same period.

Noninterest Expense

Noninterest expense for the third quarter of 2025 was $50.5 million, a $2.1 million, or 4.3%, increase from the second quarter of 2025. Compensation expense increased $0.6 million, or 2.6%, from the second quarter of 2025, primarily due to higher incentives paid. Other noninterest expense increased $0.5 million, or 33.3%, from the second quarter of 2025, primarily driven by an insurance reimbursement payment received in the second quarter of 2025. Business services, software and technology expense increased $0.4 million, or 7.1%, from the second quarter of 2025, primarily driven by platform upgrades. Professional fees and assessments increased $0.3 million, or 14.4%, from the second quarter of 2025, primarily driven by an increase in legal fees. Occupancy and equipment expense increased $0.3 million, or 11.3%, from the second quarter of 2025, primarily driven by the consolidation of two offices and the opening of a new facility in our Fargo, North Dakota market. Employee taxes and benefits expense decreased $0.5 million, or 8.1%, from the second quarter of 2025, primarily due to seasonal reductions in benefit related expenses.

Noninterest expense for the third quarter of 2025 increased $8.1 million, or 19.1%, from $42.4 million in the third quarter of 2024. The increase was primarily driven by increases in compensation expense, business services, software and technology expense, intangible amortization expense, occupancy and equipment expense, and employee taxes and benefits expense. In the third quarter of 2025, compensation expense increased $3.9 million, or 18.6%, and employee taxes and benefits expense increased $0.7 million, or 12.9%. Both compensation expense and employee taxes and benefits expense increased compared to the third quarter of 2024 primarily due to increased headcount resulting from the HMNF acquisition. Business services, software and technology expense increased $1.4 million, or 28.8%, from the third quarter of 2024, primarily driven by the increased company size following the HMNF acquisition along with multiple platform upgrades. Intangible amortization expense increased $1.4 million, or 104.7%, in the third quarter of 2025, primarily driven by the $33.5 million core deposit intangible recorded in connection with the HMNF acquisition. Occupancy and equipment expense increased $0.8 million, or 36.8%, from the third quarter of 2024, primarily driven by the increased branch footprint resulting from the HMNF acquisition.

Financial Condition

Total assets were $5.3 billion as of September 30, 2025, an increase of $68.9 million, or 1.3%, from December 31, 2024. The increase was primarily due to a $109.5 million increase in loans held for investment and a $30.8 million increase in cash and cash equivalents, partially offset by a decrease of $57.0 million in available-for-sale investment securities and a decrease of $16.4 million in held-to-maturity investment securities.

Loans Held for Investment

Total loans held for investment were $4.1 billion as of September 30, 2025, an increase of $109.5 million, or 2.7%, from December 31, 2024. The increase was primarily driven by a $69.4 million increase in commercial loans and a $40.1 million increase 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)	2025		2025		2025		2024		2024
Commercial
Commercial and industrial	$	702,135	$	675,892	$	658,446	$	666,727	$	606,245
Commercial real estate
Construction, land and development		349,768		352,749		360,024		294,677		173,629
Multifamily		374,761		333,307		353,060		363,123		275,377
Non-owner occupied		865,785		887,643		951,559		967,025		686,071
Owner occupied		435,320		440,170		424,880		371,418		296,366
Total commercial real estate		2,025,634		2,013,869		2,089,523		1,996,243		1,431,443
Agricultural
Land		65,900		66,395		68,894		61,299		45,821
Production		63,051		67,931		64,240		63,008		39,436
Total agricultural		128,951		134,326		133,134		124,307		85,257
Total commercial		2,856,720		2,824,087		2,881,103		2,787,277		2,122,945
Consumer
Residential real estate
First lien		894,402		901,738		907,534		921,019		690,451
Construction		34,124		35,754		38,553		33,547		11,808
HELOC		234,681		200,624		175,600		162,509		134,301
Junior lien		40,434		41,450		43,740		44,060		36,445
Total residential real estate		1,203,641		1,179,566		1,165,427		1,161,135		873,005
Other consumer		41,714		41,004		38,953		44,122		36,393
Total consumer		1,245,355		1,220,570		1,204,380		1,205,257		909,398
Total loans	$	4,102,075	$	4,044,657	$	4,085,483	$	3,992,534	$	3,032,343

Deposits

Total deposits were $4.4 billion as of September 30, 2025, an increase of $34.2 million, or 0.8%, from December 31, 2024. Interest-bearing deposits increased $160.9 million and noninterest-bearing deposits decreased $126.7 million from December 31, 2024. The increase in total deposits was driven by growth in commercial deposits due to new and expanded client relationships and funding structure diversification through the utilization of callable brokered CDs. This growth was partially offset by outflows from our public funds depositors, which reached a typical season low in the third quarter of 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)	2025		2025		2025		2024		2024
Noninterest-bearing demand	$	776,791	$	790,300	$	889,270	$	903,466	$	657,547
Interest-bearing
Interest-bearing demand		1,256,687		1,214,597		1,283,031		1,220,173		1,034,694
Savings accounts		174,113		175,586		177,341		165,882		75,675
Money market savings		1,460,006		1,358,516		1,472,127		1,381,924		1,067,187
Time deposits		745,056		798,469		663,522		706,965		488,447
Total interest-bearing		3,635,862		3,547,168		3,596,021		3,474,944		2,666,003
Total deposits	$	4,412,653	$	4,337,468	$	4,485,291	$	4,378,410	$	3,323,550

Asset Quality

Total nonperforming assets were $60.1 million as of September 30, 2025, a decrease of $2.8 million, or 4.4%, from December 31, 2024. As of September 30, 2025, the allowance for credit losses on loans was $62.1 million, or 1.51% of total loans, compared to $59.9 million, or 1.50% of total loans, as of December 31, 2024.

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)	2025			2025			2025			2024			2024
Nonaccrual loans	$	59,644		$	51,276		$	50,517		$	54,433		$	48,026
Accruing loans 90+ days past due		—			202			—			8,453			—
Total nonperforming loans		59,644			51,478			50,517			62,886			48,026
OREO and repossessed assets		467			751			493			—			—
Total nonperforming assets	$	60,111		$	52,229		$	51,010		$	62,886		$	48,026
Net charge-offs (recoveries)		(1,715	)		3,767			407			1,258			316
Net charge-offs (recoveries) to average loans		(0.17	)%		0.37	%		0.04	%		0.13	%		0.04	%
Nonperforming loans to total loans		1.45	%		1.27	%		1.24	%		1.58	%		1.58	%
Nonperforming assets to total assets		1.13	%		0.98	%		0.96	%		1.20	%		1.18	%
Allowance for credit losses on loans to total loans		1.51	%		1.47	%		1.52	%		1.50	%		1.29	%
Allowance for credit losses on loans to nonperforming loans		104	%		115	%		123	%		95	%		82	%

For the third quarter of 2025, the Company had net recoveries of $1.7 million, compared to net charge-offs of $3.8 million for the second quarter of 2025 and net charge-offs of $0.3 million for the third quarter of 2024. The quarter over quarter decrease in net charge-offs was primarily driven by a $1.9 million recovery in the third quarter of 2025 related to a loan that had previously been charged-off , compared to a $3.4 million charge-off related to the sale of one PCD non-owner occupied commercial real estate hospitality loan and the transfer of a pool of non-owner occupied commercial real estate hospitality loans to non-mortgage loans held for sale in the second quarter of 2025. Of the $3.4 million charge-off in the second quarter of 2025, $3.1 million represented reserves on PCD loans acquired in the HMNF acquisition that were reserved in the day 1 accounting of the acquisition. Excluding the charge-off of such PCD reserves, the Company had adjusted net charge-offs (non-GAAP) of $0.7 million and adjusted net charge-offs to average loans (non-GAAP) of 0.07% for the second quarter of 2025.

The Company recorded no provision for credit losses for both the third quarter of 2025 and the second quarter of 2025, compared to a provision for credit losses of $1.7 million for the third quarter of 2024.

The unearned fair value adjustments on acquired loan portfolios were $47.3 million as of September 30, 2025, $70.6 million as of December 31, 2024, and $3.8 million as of September 30, 2024.

Capital

Total stockholders’ equity was $550.7 million as of September 30, 2025, an increase of $55.3 million from December 31, 2024. The change was primarily driven by an increase in retained earnings of $34.7 million and an increase in accumulated other comprehensive income of $19.0 million. Tangible book value per common share (non-GAAP) increased to $16.90 as of September 30, 2025, from $14.44 as of December 31, 2024. Tangible common equity to tangible assets (non-GAAP) increased to 8.24% as of September 30, 2025, from 7.13% as of December 31, 2024. Common equity tier 1 capital to risk weighted assets increased to 10.84% as of September 30, 2025, from 9.91% as of December 31, 2024.

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

	September 30,			December 31,			September 30,
	2025			2024			2024
Capital Ratios⁽¹⁾
Alerus Financial Corporation Consolidated
Common equity tier 1 capital to risk weighted assets		10.84	%		9.91	%		11.12	%
Tier 1 capital to risk weighted assets		11.05	%		10.12	%		11.38	%
Total capital to risk weighted assets		13.41	%		12.49	%		14.04	%
Tier 1 capital to average assets		9.49	%		8.65	%		9.30	%
Tangible common equity / tangible assets ⁽²⁾		8.24	%		7.13	%		8.11	%

Alerus Financial, N.A.
Common equity tier 1 capital to risk weighted assets		11.00	%		10.18	%		10.73	%
Tier 1 capital to risk weighted assets		11.00	%		10.18	%		10.73	%
Total capital to risk weighted assets		12.25	%		11.43	%		11.98	%
Tier 1 capital to average assets		9.31	%		8.69	%		8.90	%

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(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 Friday, October 31, 2025, 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 bank and national retirement 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 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 28 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 Phoenix and Scottsdale, Arizona. Alerus also operates a commercial wealth office in La Crosse, Wisconsin. 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 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 (tax-equivalent), adjusted earnings per common share – diluted, and adjusted net charge-offs to average loans.

Contacts

Alan A. Villalon, Chief Financial Officer

952.417.3733 (Office)

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