Alerus Financial Corporation — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net income for the third quarter of 2026 was $19.2 million ($0.76 per diluted share), compared to $20.9 million ($0.81 per diluted share) in the second quarter of 2026 and $16.9 million ($0.65 per diluted share) in the third quarter of 2025.
• Net interest income was $46.7 million, an 8.3% increase year-over-year from $43.1 million in Q3 2025, but a 2.1% decrease from $47.7 million in Q2 2026.
• Noninterest income was $34.4 million, a 16.7% increase year-over-year from $29.4 million in Q3 2025 and a 4.3% increase from $32.9 million in Q2 2026, representing 42.4% of total revenue.
• Noninterest expense was $53.9 million, a 6.6% increase year-over-year from $50.5 million in Q3 2025 and a 1.9% increase from $52.9 million in Q2 2026.
• Return on average total assets was 1.45% for Q3 2026, compared to 1.27% in Q3 2025 and 1.60% in Q2 2026.
• Return on average tangible common equity was 17.35% for Q3 2026, compared to 18.48% in Q3 2025 and 19.33% in Q2 2026.
• Net interest margin (tax-equivalent) was 3.84% for Q3 2026, an increase of 34 basis points from 3.50% in Q3 2025 and a decrease of 13 basis points from 3.97% in Q2 2026.
• Efficiency ratio was 63.41% for Q3 2026, compared to 65.34% in Q3 2025 and 62.53% in Q2 2026.
• Total assets were $5.4 billion as of September 30, 2026, an increase of 3.3% from December 31, 2025.
• Total stockholders' equity was $576.9 million as of September 30, 2026, an increase of $11.9 million from December 31, 2025.
• Tangible book value per common share was $18.74 as of September 30, 2026, a 10.9% increase from $16.90 in Q3 2025.
• Tangible common equity to tangible assets ratio was 8.77% as of September 30, 2026, up from 8.24% in Q3 2025.
• Common equity tier 1 capital to risk-weighted assets was 10.52% as of September 30, 2026, up from 10.28% at December 31, 2025.

Guidance and Future Outlook:

• Management expressed confidence in the continued ability to create sustainable value for clients, communities, team members, and shareholders.
• The company stated it has the capacity to keep investing in organic growth while returning capital to shareholders.
• The press release contains forward-looking statements regarding projected growth, anticipated future financial performance, credit quality, and management's long-term performance goals, noting these are subject to inherent risks and uncertainties.

Business Segments and Product Lines:

• Commercial and business lending grew 36.5% year-over-year and now represents 37.1% of the loan portfolio, up from 27.7% a year ago.
• Total loans increased $150.5 million (3.7%) to $4.2 billion as of September 30, 2026.
• Total deposits increased $111.2 million (2.7%) to $4.3 billion as of September 30, 2026.
• Retirement and benefit services revenue increased 7.1% year-over-year, driven by recurring annual income.
• Wealth advisory services revenue increased 22.0% year-over-year, driven by increases in asset-based and transaction-based fees; assets under administration/management in this segment increased 7.3% to $5.2 billion.
• Mortgage banking revenue increased 4.2% from the second quarter of 2026, driven by higher mortgage originations and gain on sale margins.
• 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.
• Nonperforming assets decreased 4.3% to $16.4 million from June 30, 2026.
• Net recoveries to average loans were 0.10% for the quarter.

Market and Competitive Landscape:

• The company operates 25 banking and commercial wealth offices across North Dakota, Minnesota, Iowa, Wisconsin, and Arizona.
• The Alerus Retirement and Benefit business serves advisors, brokers, employers, and plan participants across the United States.
• Management highlighted the complementary strength of its banking, retirement and benefit services, and wealth advisory businesses.

Risks and Challenges:

• Risks include interest rate risk, inflationary pressures, and future monetary policies of the Federal Reserve.
• Credit risk management, particularly within the commercial real estate portfolio, and maintaining adequate allowance for credit losses.
• Concentration risks related to borrower type, geographic area, collateral, and industry, including large loans to certain borrowers.
• Potential losses from mortgage loan repurchases and fraudulent activity or cybersecurity incidents.
• Competition from non-banks, credit unions, Fintech companies, and digital asset service providers.
• Regulatory changes, litigation, and the impact of economic conditions on fee-based services.
• Risks related to climate change, severe weather, and international military conflicts affecting global supply chains and markets.

Management Commentary and Tone:

• CEO Katie O'Neill Lorenson stated that third-quarter results demonstrate continued momentum with strong revenue growth across the diversified business model and strategic organic growth in the banking franchise.
• Management noted favorable credit quality with improving nonperforming assets and criticized loans, along with net recoveries during the quarter.
• The CEO thanked team members for their talent and focus, expressing confidence in the strategy's ability to turn into results.
• Management indicated that the charge-offs from a specific long-term commercial and industrial client relationship are not indicative of a broader credit quality trend.

Other Key Points:

• The company returned $37.2 million to shareholders through dividends and share repurchases in the first nine months of 2026.
• In the third quarter of 2026, the company repurchased $8.2 million of common stock at an average price of $32.75 per share, reducing shares outstanding by 250,000.
• Adjusted pre-provision net revenue for the first nine months of 2026 was $78.7 million, an 18.9% increase over the same period in the prior year.
• The company recorded a provision for credit losses of $2.2 million for the third quarter of 2026, compared to $0.5 million in Q2 2026 and no provision in Q3 2025.
• A conference call to discuss financial results was scheduled for October 29, 2026, at 11:00 a.m. Central Time.