ALRS

Image source: The Motley Fool. Thursday, July 30, 2026 at 12 p.m. ET President and Chief Executive Officer - Katie O'Neill Lorenson Chief Retirement Services Officer - Forrest Wilson Chief Financial Officer - Alan Villalon Chief Banking and Revenue Officer - James Collins Chief Operating Officer - Karin Taylor Operator: Good morning, and welcome to the Alerus Financial Corporation Earnings Conference Call. [Operator Instructions] Today's call will reference slides that can be found on Alerus Investor Relations website. You can also view the presentation slides directly within the website platform. [Operator Instructions] Please note, this event is being recorded. This call may contain forward-looking statements, and the company's actual results may differ materially from those indicated in any forward-looking statements. Important factors that could cause actual results to differ materially from those indicated in the forward-looking statements are listed in the earnings release and the company's SEC filings. I would like to turn the conference over to Alerus Financial Corporation President and CEO, Katie [ O'Neil ] Lorenson. Please go ahead. Katie Lorenson: Thank you. Good morning, everyone, and thank you for joining us. Joining me today on the call and in the Twin Cities is Forrest Wilson, Chief Retirement Services Officer; Al Villalon, Chief Financial Officer; Jim Collins, Chief Banking and Revenue Officer; and Karin Taylor, our Chief Operating Officer. We are pleased with our second quarter performance and believe the results further demonstrate the strength of the Alerus franchise and the benefits of the diversified business model we have purposely built over many years. Our second quarter results reflect disciplined execution across the organization with continued net interest margin expansion, solid performance from our fee-based businesses and a significant improvement in credit quality. We generated earnings per diluted share of $0.81, delivered a return on assets of 1.6% and a return on tangible common equity of nearly 20%, underscoring the earnings power of our company. The most significant highlight was the favorable resolution of the largest nonperforming loan and significantly improved credit quality metrics. Criticized loans have decreased over 60% from a year ago, with nonperforming loans now less than 20 basis points. In addition, we maintained robust reserves at 1.2%, strong capital levels with TCE exceeding 9% and continue to return capital to shareholders through buybacks and dividends. Importantly, this quarter highlights the advantages of a business model designed to generate balanced, sustainable growth, with noninterest income again representing more than 40% of total revenue. Our commercial banking, wealth advisory and retirement and benefit services businesses continue to work together to create value for clients while producing recurring revenue to allow for consistent returns to shareholders. While Al will provide additional detail on the quarterly financial results, we continue to measure our progress through the lens of long-term value creation and strategic execution. We are seeing the benefits of our shift towards full relationship commercial and private banking. We grew commercial relationships by more than 20%, expanded our core deposit franchise, increased fee-based revenues, and retirement and wealth assets reached record levels exceeding $50 billion. We also continued to reduce commercial real estate concentrations and improve the overall quality of the balance sheet. Most importantly, we see evidence that the evolution of our strategy is working. Since the launch of our IPO, we are increasingly gaining awareness from stakeholders that we are much more than just a traditional bank and instead a highly diversified financial institution with multiple engines for capital accretion and client growth. The performance demonstrates the durability of our earnings profile, the quality of our revenue streams and the advantages of a strategy designed to create long-term value. The driver behind our performance is the talented team we have assembled across Alerus. We are fortunate to have hundreds of dedicated long-tenured team members alongside exceptional new talent that continues to strengthen our organization. Together, they have played a critical role in the evolution of our company and the execution of our strategic plan. During the quarter, we continued to invest in leadership, growth markets, client-facing talent and technology capabilities. We announced the appointment of Dan Schrader as our permanent Chief Credit Officer. We expanded our commercial banking leadership and production talent in Arizona. We added new wealth management advisers in the Twin Cities and welcomed another class of interns. Lastly, we landed an experienced technology leader from FIS to help accelerate the overhaul of our retirement platform. These additions are not isolated hires. They reflect our continued ability to attract and retain the best in the business professionals and support our belief that talent, leadership and culture are among the most sustainable competitive advantages in our industry. As we look ahead, our priorities remain unchanged. We continue to position Alerus as a leading commercial wealth bank and a national retirement plan provider. Our improved balance sheet profile, reduced CRE concentration, strong capital position and diversified earnings streams provide flexibility to pursue organic growth while maintaining our disciplined approach to risk management. Investments in talent and technology will continue to drive operational efficiency, automation and scalability throughout our enterprise. Within our retirement division, we believe the technology transformation currently underway will further strengthen our position as a consolidator of choice for subscale operators across the industry. At the same time, our commercial and private banking teams continue to see attractive opportunities to deepen middle market relationships, grow treasury management, explore opportunities for wealth and retirement and add HSA and other synergistic deposits. We remain confident in our efforts and believe Alerus is uniquely positioned as very few organizations of our size operate with the same level of diversification, recurring revenue and relationship-driven growth. We believe those advantages will continue to differentiate Alerus' with clients, future acquisition targets and investors. Thank you again for your continued trust and support. And with that I'll turn the call over to Al to review the quarter in more detail. Alan Villalon: Thanks, Katie. Let's start on Page 9 of our investor deck, which is posted on the Investor Relations section of our website. Before I begin, I want to emphasize 3 themes that define the quarter: durable earnings, significant credit improvement and continued shareholder value creation. In the second quarter, we delivered another exceptionally strong quarter, highlighted by strong profitability, improving balance sheet quality, stable core margin performance and continued capital generation. We generated adjusted diluted EPS of $0.80 and reported EPS of $0.81, while repurchasing $6.8 million of common stock during the quarter. Profitability remained strong with a return on average tangible common equity of 19.33% and a return on average assets of 1.6%. Adjusted pre-provision net revenue continued to improve. We also grew tangible book value per share -- we also grew tangible book value per share of 3.2% from the prior quarter to $18.73 and improved tangible common equity to tangible assets to 9.05%. These are high-quality results, and we believe the quarter demonstrates the strength of the franchise. While earnings remained strong, the most important financial takeaway was balance sheet quality, reduced nonperforming assets by 68.3%, increased tangible book value per share and returned meaningful capital to shareholders through dividend increases and share repurchases. We are proud of our over 4--year history of returning capital to our shareholders, especially in the form of dividends. Let's turn to Page 16 to talk about earning assets. Loans were stable during the quarter as new production offset planned balance sheet actions and reductions in nonperforming loans. We continue to see healthy client activity and pipelines remain robust. The investment portfolio increased $5.9 million or 0.8% from the prior quarter as paydowns and maturities were replaced with new investments. We continue to benefit from reinvesting paydowns at higher front book yields. Our balance sheet is positioned neutrally for interest rates due to strategic loan and investment portfolio repositioning. In a 100 basis point increase or decrease scenario, we do not expect NII to be significantly impacted. While future rates remain uncertain, we believe that the balance sheet is positioned appropriately across a range of rate scenarios. Turning to deposits on Page 17. Total deposits decreased $156 million or 3.6% from March 31, 2026. The decrease was primarily driven by seasonal outflows of public depositor funds. Despite the seasonal outflows, our loan-to-deposit ratio was 96.2%. Deposit costs remain stable, and the mix of relationship-based deposits remains a key strength of the franchise. Synergistic deposits now represent 22.6% of total deposits and continues to provide a meaningful funding advantage. Those synergistic deposits grew 3.3% over the prior year, primarily from low-cost HSA deposits. Their continued contribution reinforces the strategic value of our integrated banking, wealth, retirement and benefit services model. Our synergistic deposit franchise remains one of the strongest competitive differentiators in our business model and continues to provide a funding advantage that is difficult for many peers to replicate. This matters in the current environment where deposit quality, stability and cost discipline remain top priorities. Turning to Page 18. Net interest income increased 6.2% to $47.7 million and reported net interest margin increased to 3.97%. Core margin remained stable from the prior quarter, which we view as a strong outcome given the current operating environment. Reported results benefit from purchase accounting accretion and the resolution of a nonperforming loan. But overall, we continue to feel good about the positioning of the balance sheet and our margin outlook. Turning to Page 19. Adjusted noninterest income increased to $32.3 million, up 4.6% from the prior quarter and up 8.6% from the second quarter of last year. Adjusted banking fees and other income increased 16.3% linked quarter, primarily driven by higher swap fee income and mutual fund investment gains related to deferred compensation plan assets, partially offset by lower mortgage banking revenue. Retirement and benefit service revenue was also -- was essentially stable, while wealth revenue increased 6.5% due to higher asset-based fees tied to equity markets and an increase in transaction-based fees. These businesses continue to demonstrate the strategic value of the Alerus model by generating stable recurring fee income and attracting low-cost relationship deposits and diversifying earnings. That diversification continues to lower our dependence on spread income and remains a meaningful differentiator for our company. On Page 20, banking services noninterest income increased $1.7 million or 27.2% from the prior -- from the first quarter. Other income increased meaningfully primarily due to higher swap fee income, which totaled $738,000 in the quarter. As we noted before, swap fee revenue can be variable based on client timing and activity. Mortgage revenue decreased to $0.3 million or 9.6% from the first quarter, primarily driven by lower gain-on-sale margins from product mix changes and increased competition. Turning to Page 21. Retirement and benefit services continues to be one of Alerus' most significant differentiators. It generates recurring fee income, low-cost deposits and long-term client relationships while supporting more stable performance across economic cycles. During the quarter, market appreciation supported higher retirement assets and continued growth in our HSA deposit base, which remains an attractive source of funding. On Page 22, our wealth business continues to produce strong results while supporting broader client relationships across the organization. Wealth contributes meaningful recurring fee income and relationship-based deposits while helping diversify earnings beyond traditional spread revenue. Alerus' wealth business is differentiated with nearly 90% of the revenue coming from advisory services. Turning to Page 23. Adjusted non-interest expense increased $2.4 million or 4.8% compared to the first quarter. The increase was primarily driven by compensation and benefits, including annual merit increases, talent additions and deferred compensation plan liabilities tied to market gains. Other expense increased due to higher other real estate owned balances and related holding costs as well as higher corporate insurance costs. Business services, software and technology expense declined due to lower core processing expenses and lower IT hardware expense. We continue to manage expenses carefully while investing in growth areas that support long-term scalability. Turn to Page 24. Asset quality is one of the strongest parts of the quarter. Credit quality improved significantly during the quarter. Nonperforming assets declined over 68%, criticized loans declined meaningfully and charge-offs were substantially lower than the first quarter. Overall, we made significant progress improving balance sheet quality and reducing risk. On Page 25. Capital and liquidity remained strong. Tangible book value per share increased to $18.73, and tangible common equity to tangible assets improved to 9.05%. CET1 increased to 10.81%, and total risk-based capital remained comfortably above regulatory requirements. Total liquidity was approximately $2.6 billion at the end of June 30 or approximately $1.5 billion, excluding brokered CD capacity. During the quarter, we repurchased $6.8 million of common stock at an average price of $27.10 per share, reducing common shares outstanding by 250,000 shares at the end of the quarter. We also increased the quarterly dividend by 4.76% to $0.22 per share. Through the first 6 months of 2026, we returned $23.6 million to shareholders through dividends and repurchases. We are pleased to simultaneously increase tangible book value, repurchase shares, increase the dividend and strengthen regulatory capital ratios during the quarter. The increase in tangible book value per share, combined with share repurchase and dividend growth demonstrates our continued focus on disciplined shareholder value creation. Our capital allocation priorities remain consistent, support organic growth, return capital opportunistically when it creates value and maintain flexibility for strategic opportunities. Turning to Page 26. Our 2026 guidance framework has improved and reflects continued disciplined growth, stable core margin trends and positive operating leverage. As we enter the second half of the year, we remain encouraged by our performance in the first 5 months and believe Alerus is well positioned to achieve our full year objectives. We continue to expect mid-single-digit loan growth and low single-digit deposit growth. We now expect full year reported net interest margin of approximately 3.7% to 3.8%. Our confidence in the outlook is supported by stable core margin trends, favorable loan and investment repricing and the overall positioning of the balance sheet. We expect revenues to be up mid-single digits. Within that guide, we do anticipate lower mortgage originations with the market currently pricing in potential rate hikes. Noninterest expenses will increase low to mid-single digits as we anticipate more strategic hirings. Lastly, we continue to expect full-year ROA to be above 1.25%. In summary, the second quarter reinforced what makes Alerus unique. We generated strong returns, credit quality improved. We grew tangible book value, strengthened capital and leveraged a diversified business model that continues to differentiate us from many of our peers. We entered the second half of 2026 with strong momentum, strong capital and confidence in our ability to continue creating long-term value for shareholders. With that, let's go to Q&A. Operator: [Operator Instructions] And the first question is coming from the line of Jeff Rulis of D.A. Davidson. Jeff Rulis: Al, I guess on the margin, the full year guide, I guess, would reflect or imply a pullback of reported in the 3.60% range. Do you have the -- sorry, hopping at loan yields a little bit, 6.24%. Do you have that x recovery for the quarter? And as well as do you have the spot loan yields at the quarter end? Alan Villalon: So Jeff, can you just help me understand the question a little bit further? So our guidance has the recovery. It's a full-year guide with the recovery already in there. Jeff Rulis: Right. And I hopped then to loan yields, sorry for the transition. Well, one, I was just -- I guess, the first question is implying that the reported 3.60% range in the back half of the year is -- would get you in that midpoint of the range for the year. Is that fair? Alan Villalon: If I'm understanding the question correctly, yes. I mean, we're looking -- I mean, our core margins have remained stable at end of June. We're in the mid-3s right now. Is that helpful? Jeff Rulis: Got you. Maybe switch gears, Al, on the expected accretion in the second half of this year and '27 if you have that. Alan Villalon: Yes, I have that. The expected accretion is going to decrease to roughly a couple of hundred thousand dollars in each quarter. So last quarter, we had -- that's anticipated paydowns. This quarter, we had over $3 million of total accretion. But on a contractual basis, we're expecting around $1.9 million for 3Q. Jeff Rulis: Okay. Appreciate it. Well, you had got enough guide there that we can get back into a couple of those. Maybe on the -- switching gears to the -- just the loan pace, given the -- I guess, the full year would assume that net growth really gained some steam ahead and maybe that -- the assumptions behind that, do you expect sort of payoffs to slow and begin to show a little bit more net growth in the second half? James Collins: Yes. I would say -- this is Jim Collins. The pipeline right now is the largest and most robust since I've been here in 4 years. Like we discussed in the first quarter, the growth would really happen in the back half of this year. We worked really hard the last year 8 months with credit and the line, working through some credit issues, kind of cleaning up the portfolio and really building that C&I pipeline. Second quarter, we put on 30 full mid-market C&I relationships. One of those was a regional nonprofit that is bringing 40 accounts with an average collected balance of about $30 million. Once all those deposits flow in, which hasn't happened yet, about half of those have come in. Just this week, we approved a loan package of $28 million for a new client, and that client will walk in with $30 million in deposits. So just a couple of examples of what we are doing. So the strategy is working. We're staying the course. We're working on full C&I relationships. We brought in a team that is focused on C&I relationships. They're a little harder. It's a longer lead time for C&I. But as you see, we are bringing down the CRE, growing C&I. That was the plan. That's the strategy. It is working. But I will tell you that, that was the plan, and we will have more growth in the back half of this year. Jeff Rulis: And just one follow-on is just the, I guess, the earning asset balance, do we expect that to match really loan growth? I thought I heard some, you expect to reinvest in the securities portfolio, but the -- I guess, the growth of the earning asset base, do we think that's going to match the loan growth pace for the second half? Alan Villalon: Yes, we do believe that. This is Al. Operator: The next question is coming up from the line of Brendan Nosal of Hovde Group. Brendan Nosal: Maybe to start off here on kind of capital and M&A. Stock as a currency, again, capital is a lot stronger than it had been a year ago. Can you just update us on your appetite for whole bank M&A at this point and perhaps walk through what would be of interest in terms of size, geography, business characteristics, anything like that? Katie Lorenson: Sure. I'll take that. As we have talked about, the capital priorities remain the same. We are very focused on organic growth, client selection, investing -- reinvesting in ourselves in terms of talent, technology and capabilities that really strengthen our franchise for the long term. Capital commitments or returning to shareholders has been very clearly demonstrated over many decades of this franchise. But strategic acquisitions are also a very enterprise strength of ours, and we remain committed to pursuing those that fit our culture, enhance our capabilities and meet our return thresholds. And so when we look strategically for acquisitions, those are the 3 buckets. And again, retirement, we're agnostic to location because it's a national business. We believe we are viewed as a consolidator of choice for those subscale operators. From a banking franchise standpoint, we look for -- again, middle of the country is kind of our geographic focus. From a size standpoint, we're more so looking at the client base and what it can bring to us in terms of enhancing our franchise. Brendan Nosal: Okay. Maybe turning back to the outlook, a little bit more top level. So you're adding 15 basis points to the full year margin outlook. You maintained the other components of revenue, including loan growth and fee income, but you're keeping the same revenue outlook. So help us understand why the might outlook is better, but the revenue outlook is unchanged. Alan Villalon: Yes. That's pretty simple, Brendan. Basically, we're forecasting lower originations from our mortgage business, given there's a higher probability of a rate hike coming in September. We are seeing a slowdown in our pipelines right now. So that's kind of the offset that we're anticipating for the back half of the year. Hopefully, it will be better than that. But right now, we're just trying to be -- given the market prediction for more rate hikes in September, we just wanted to give the more cautious guidance on that. Operator: [Operator Instructions] The next question is coming from the line of Damon DelMonte of KBW. Damon Del Monte: I just had a question on the paydowns that occurred this quarter. How much of that was just normal CRE paydowns like we're seeing across the industry? And how much of it was sort of like Alerus-specific targeted where you're looking to maybe exit some credits that you weren't comfortable with? Alan Villalon: So what I can tell you right now on -- we had total pays, Damon, of overall -- the total purchase accounting accretion about $3.8 million, okay? And $2.1 million of it was base. The regular payoffs -- the accelerated payoffs of $1.8 million, I would say, it is a broad mix. Damon Del Monte: Got it. Okay. And then a little bit more specifically, are you guys kind of going through the portfolio and exiting certain credits that maybe aren't meeting your standards today versus when they were originated? Did that also contribute to the paydowns in the quarter? Karin Taylor: Yes, Damon, this is Karin. It did. As Jim mentioned, our teams in credit and banking have worked very hard to identify credits that either had deteriorated or just weren't core to our business going forward. And we feel really good about the progress those teams have made. James Collins: And that will be a standard culture of ours going forward for the portfolio. Damon Del Monte: Got it. Okay. And then the loan guidance for mid-single digits, I mean, pretty much flat for the first half of the year. So I mean that would kind of imply close to 10% linked quarter annualized for each of the next 2 quarters. Is that a reasonable way to look at it? Or do you think that it's maybe a little less in the third quarter and then a really strong finish to year end? James Collins: Yes, I think that's a way to look at it. We have a pretty good solid pipeline, but we'll have a good solid push at the end of the third quarter, and we should have a good push in the fourth quarter. Damon Del Monte: Got it. Okay. And then I guess just lastly on like the provision outlook, Al, any guidance on kind of what you think a normalized provision level would be? Alan Villalon: I don't want to step on Karin's toes, so I'll let you take that one. Karin Taylor: The provision is going to be driven by loan growth at this point. And I think the level that we're at now is probably reasonably where we're going to be. Operator: Our next question is coming from the line of Nathan Race of Piper Sandler. Nathan Race: While Karin has the microphone, curious how you're thinking about kind of the normalized charge-off trajectory for Alerus going forward. Obviously, some meaningful credit cleanup occurred in the quarter. So just curious how you are looking at kind of what loss content could look like, just given all the enhancements across the franchise over the last several years and particularly just given the cleanup here in 2Q? Karin Taylor: Sure. Certainly, the back half of this year, we'll see reduced levels. I think back to our long history, probably 25 years plus, our average charge-off rate was in that 25 to 27 basis points range. And I think ultimately, that's where we're going to end up going into the future. Nathan Race: Okay. Great. And then just going back to the margin, Al, just hoping to unpack some of the moving pieces on the right side of the balance sheet that you expect in the back half of the year. It looked like borrowings were up on both an average and period basis in the quarter. So just curious what you guys are seeing in terms of kind of the core deposit gathering pipeline to fund that growth? Or do you anticipate kind of working on wholesale funding, which maybe kind of aligns with kind of your margin guide of kind of in the mid-350s for the back half of the year, which is kind of consistent with what we saw here in 2Q when you strip out the recoveries and accretion? So I just want to make sure I'm thinking about those moving pieces properly. Alan Villalon: Yes. Thanks for that question, Nate. I'll take the first part, and Jim can comment on the pipelines. In terms of what we're seeing in the back half of the year, we are anticipating a little bit more rising cost on our deposit costs given the rate hikes. We're hoping to lag it some, but we know that deposit competition is pretty intense right now. With that being said, too, we did refinance our sub debt recently, too, which put a little bit more pressure on our funding costs, but we do not anticipate too much use of wholesale funding to fund our loan growth here because we do believe that our deposits -- we should have deposit growth to offset it, but we have plenty of liquidity to offset to fund that growth if we need to tap into it. James Collins: Yes. And getting to the deposit pipeline, as I said, the full pipeline is pretty robust. That does still include the deposit pipeline. So that still goes to the forecast of deposit growth in the low single digits. Our government nonprofit group is certainly trucking along really nicely on deposits. But again, those mid-market clients carry some decent deposits to fund part of that loan growth as well. Nathan Race: Okay. Got it. And then maybe I can sneak one last one in for Katie. You guys and Alerus have always been quite proactive investing in technology, of course. With all the AI chatter out there these days, I imagine that's going to create some incremental opportunities going forward. So just curious kind of where you're seeing some early applications for AI and maybe what that can mean for some improvement in terms of just the optimization of some areas of the franchise going forward. Katie Lorenson: Yes, great question. And that is -- that has been a huge focus of us and particularly one of our top priorities in 2026. We are making investments. And we're making them in some very targeted areas where we have a really long-term high conviction for future returns, particularly as we've discussed in modernizing the retirement platform. And so as I mentioned in my opening remarks, it's -- the technology is great, but it's all about the talent leading the technology. And so a big win for us to land one of the professionals from FIS, who has -- will be instrumental in that modernization of retirement platform, which we think is one of the areas that has the most opportunity in terms of AI, automation, scalability and all of which we believe results in improving margins and improving scalability in every one of our divisions. So those investments are ongoing, and we are running pretty fast and hard, and I'm really pleased with the success that I'm seeing the teams have early on. Nathan Race: Okay. That's really helpful. I'm sorry, Al, if I could just sneak one more in on expenses. The other line was up about $900,000 quarter-over-quarter. Anything to call out there? Alan Villalon: Yes. Part of that other line on expenses that we have a deferred comp plan where there's an increase in liabilities that gets booked as an expense, but are offsetting other revenues that also flows through. Too. Operator: Next questions come from the line of Ken Kohut of Raymond James. Kenneth Kohut: Maybe starting out with asset quality. I'm just wondering if -- do you expect any more charge-offs related to that one C&I credit that drove the elevated charge-offs in 1Q and a little bit more in 2Q? Or do you think you have a good handle on that one right now? Karin Taylor: Well, we could see some. I think they're going to be at a much lower level. We do have -- continue to have about $1 million reserve on that. So as I said earlier, the charge-off level in the back half of the year is going to be quite a bit lower. Kenneth Kohut: Okay, G.reat. And then regarding the residential property and apartment complex that was moved to OREO during the quarter, how long do you expect these assets to remain on the balance sheet? And then what are the associated costs with managing these properties in the meantime? I believe you called that out in the press release regarding the increase in other expenses. But any color would be great. Karin Taylor: Sure. The residential property we expect to resolve by the end of the year and some of the holding costs associated with that were just some minor improvements that needed to be made. So I don't expect that to be ongoing. The apartment building is actually in receivership, so there are costs related to the receiver with that building. And that one will more likely be resolved in the first half of '27. Operator: This concludes today's Q&A session. I would now like to turn the call back over to Katie for closing remarks. Katie Lorenson: Thank you. Thank you to our shareholders, our analysts and our Board of Directors for your ongoing confidence and support. Most importantly, thank you to all of our team members across Alerus. The results that we discussed today are a direct reflection of their commitment to our clients, our strategy and to one another. And while we are proud of our performance, we also recognize that success is never final. We remain committed to balancing strong financial performance today with thoughtful investments in talent, technology and growth opportunities that will strengthen Alerus for the future. That discipline has helped us to build a more diversified, resilient company, and we believe positions us well to continue creating long-term value for our shareholders. Thank you again for joining us today. Operator: This now concludes today's presentation. Thank you so much for joining, and you may now disconnect. Before you buy stock in Alerus Financial, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alerus Financial wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Alerus Financial (ALRS) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in Alerus Financial? Here are five stocks we like better. Strong second-quarter performance: Alerus reported diluted EPS of $0.81, a 1.6% return on assets and a 19.33% return on average tangible common equity, supported by higher net interest income, fee growth and improved credit quality. Credit and capital strengthened: Non-performing assets fell 68.3%, non-performing loans dropped below 20 basis points and tangible book value per share rose 3.2% to $18.73. CET1 increased to 10.81%, while reserves remained at 1.2%. Growth outlook improved: Management expects mid-single-digit loan growth, low-single-digit deposit growth and mid-single-digit revenue growth in 2026, with commercial and industrial lending driving acceleration in the second half. Alerus also raised its dividend 4.76% and repurchased $6.8 million of stock during the quarter. Alerus Financial (NASDAQ:ALRS) reported second-quarter 2026 earnings per diluted share of $0.81, as the company cited net interest margin expansion, fee-income growth and a substantial improvement in credit quality. The company reported a 1.6% return on assets and a return on average tangible common equity of 19.33%. President and CEO Katie O’Neill Lorenson said the quarter reflected “disciplined execution” across the organization and highlighted the resolution of the company’s largest non-performing loan. Non-performing assets declined 68.3% during the quarter, while criticized loans were down more than 60% from a year earlier, according to management. → Why SK hynix Could Be the Best AI Chip Stock to Buy Now Chief Financial Officer Al Villalon said asset quality was among the strongest elements of the quarter. Alerus reduced non-performing assets by more than 68%, while charge-offs were substantially lower than in the first quarter. The company maintained reserves equal to 1.2% and said non-performing loans were below 20 basis points. Chief Operating Officer Karin Taylor said the company’s credit and banking teams had identified credits that had either deteriorated or were no longer considered core to Alerus’ business strategy. The company expects this portfolio review process to remain part of its ongoing credit culture. → 3 Value ETFs to Consider as Growth Stocks Lag Behind During the analyst question-and-answer session, Taylor said charge-offs should decline in the second half of 2026. Over a longer period, she said the company’s historical average charge-off rate had been about 25 to 27 basis points and that management expects to ultimately return to that range. Alerus also moved a residential property and an apartment complex into other real estate owned during the quarter. Taylor said the residential property is expected to be resolved by year-end, while the apartment building, which is in receivership, will more likely be resolved during the first half of 2027. → 5 AI Stocks Are Pulling Back—Which Growth Catalysts Still Look Strongest? The company reported tangible book value per share of $18.73, up 3.2% from the prior quarter. Its tangible common equity-to-tangible-assets ratio rose to 9.05%, while its CET1 ratio increased to 10.81%. Total liquidity was approximately $2.6 billion at June 30, or about $1.5 billion excluding brokered certificate-of-deposit capacity. Net interest income increased 6.2% from the prior quarter to $47.7 million, and reported net interest margin reached 3.97%. Villalon said reported results benefited from purchase-accounting accretion and the resolution of a non-performing loan, while core margin was stable from the first quarter. Management said its balance sheet has been positioned to be neutral to interest-rate changes following loan and investment portfolio repositioning. In a scenario involving either a 100-basis-point increase or decrease in rates, Alerus does not expect net interest income to be significantly affected. Adjusted non-interest income rose 4.6% sequentially and 8.6% from the year-earlier quarter to $32.3 million. Banking fees and other income increased 16.3% from the first quarter, helped by higher swap-fee income and mutual fund investment gains tied to deferred-compensation plan assets. Swap-fee revenue totaled $738,000 in the quarter. Wealth revenue increased 6.5%, supported by higher asset-based fees associated with equity-market performance and higher transaction-based fees. Management said nearly 90% of wealth revenue comes from advisory services. Retirement and benefits services revenue was essentially stable. Mortgage revenue declined 9.6% from the first quarter to $0.3 million, reflecting lower gain-on-sale margins from product mix changes and increased competition. Villalon said Alerus expects lower mortgage originations in the second half as the market anticipates potential rate increases. Total deposits declined $156 million, or 3.6%, from March 31, primarily because of seasonal public-depositor outflows. The loan-to-deposit ratio was 96.2%. Synergistic deposits represented 22.6% of total deposits and increased 3.3% from a year earlier, primarily driven by low-cost health savings account deposits. Loans were stable in the second quarter as new production offset planned balance-sheet actions and reductions in non-performing loans. Chief Banking and Revenue Officer Jim Collins said the company’s pipeline is its largest and most robust in his four years with Alerus. Collins said Alerus added 30 full middle-market commercial and industrial relationships during the quarter. He cited one regional nonprofit relationship expected to bring 40 accounts with average collected balances of about $30 million, as well as a newly approved $28 million loan package for a client expected to bring $30 million in deposits. Management expects growth to build during the second half, supported by commercial and industrial activity while commercial real estate exposure continues to decline. Alerus expects earning-asset growth to match loan growth in the back half of the year. Alerus updated its 2026 guidance to call for mid-single-digit loan growth, low-single-digit deposit growth, mid-single-digit revenue growth and low- to mid-single-digit growth in non-interest expense. The company now expects full-year reported net interest margin of approximately 3.7% to 3.8% and return on assets above 1.25%. Adjusted non-interest expense increased 4.8% from the prior quarter, primarily due to annual merit increases, talent additions, deferred-compensation plan liabilities tied to market gains, other-real-estate-owned costs and higher corporate insurance expense. The company said software and technology costs declined because of lower core-processing and IT hardware expenses. Alerus repurchased $6.8 million of common stock during the quarter at an average price of $27.10 per share, reducing shares outstanding by 250,000. It also raised its quarterly dividend 4.76% to $0.22 per share. Through the first six months of 2026, the company returned $23.6 million to shareholders through dividends and repurchases. Lorenson said Alerus continues to invest in talent and technology, including modernization of its retirement platform. She said the company views automation, artificial intelligence and technology scalability as opportunities to improve operating margins and support growth across its businesses. Alerus Financial Corporation (NASDAQ: ALRS) is a diversified financial services company headquartered in Grand Forks, North Dakota. The firm provides a full range of commercial and consumer banking products, including deposit accounts, lending solutions and treasury management services for individuals, small businesses and larger corporate clients. Through its community banking network, Alerus emphasizes local decision-making and personalized service to meet the needs of its varied client base. In addition to traditional banking offerings, Alerus operates a national mortgage origination and servicing platform that delivers home purchase and refinance loans. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Alerus Financial Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

Alerus (ALRS) reported $81.41 million in revenue for the quarter ended June 2026, representing a year-over-year increase of 8%. EPS of $0.80 for the same period compares to $0.72 a year ago. The reported revenue compares to the Zacks Consensus Estimate of $76.85 million, representing a surprise of +5.94%. The company delivered an EPS surprise of +2.56%, with the consensus EPS estimate being $0.78. While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectations to determine their next course of action, some key metrics always provide a better insight into a company's underlying performance. As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately. Here is how Alerus performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: Net charge-offs/(recoveries) to average loans: 0.3% versus the two-analyst average estimate of 0.1%. Efficiency ratio: 62.5% versus 64.8% estimated by two analysts on average. Net interest margin, tax-equivalent: 4% compared to the 3.7% average estimate based on two analysts. Average Balance - Total interest earning assets: $4.9 billion versus the two-analyst average estimate of $4.94 billion. Tax-equivalent net interest income: $48.47 million versus the two-analyst average estimate of $45.96 million. Retirement and benefit services: $17.35 million compared to the $17.65 million average estimate based on two analysts. Total Noninterest income: $32.95 million versus $31.41 million estimated by two analysts on average. Wealth management: $7.71 million versus the two-analyst average estimate of $7.21 million. Service charges on deposit accounts: $1.11 million versus the two-analyst average estimate of $0.95 million. Mortgage banking: $3.2 million versus $3.65 million estimated by two analysts on average. Other: $3.59 million compared to the $1.95 million average estimate based on two analysts. View all Key Company Metrics for Alerus here>>> Shares of Alerus have returned +6.5% over the past month versus the Zacks S&P 500 composite's +1.9% change. The stock currently has a Zacks Rank #2 (Buy), indicating that it could outperform the broader market in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Alerus Financial (ALRS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Alerus (ALRS) came out with quarterly earnings of $0.8 per share, beating the Zacks Consensus Estimate of $0.78 per share. This compares to earnings of $0.72 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +2.56%. A quarter ago, it was expected that this company would post earnings of $0.58 per share when it actually produced earnings of $0.89, delivering a surprise of +53.45%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Alerus, which belongs to the Zacks Financial - Miscellaneous Services industry, posted revenues of $81.41 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 5.94%. This compares to year-ago revenues of $75.39 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Alerus shares have added about 47.1% since the beginning of the year versus the S&P 500's gain of 8.5%. While Alerus has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Alerus was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.68 on $76.75 million in revenues for the coming quarter and $3.03 on $307.1 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Financial - Miscellaneous Services is currently in the bottom 27% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Chime Financial, Inc. (CHYM), has yet to report results for the quarter ended June 2026. The results are expected to be released on August 5. This company is expected to post quarterly loss of $0.01 per share in its upcoming report, which represents a year-over-year change of +99.9%. The consensus EPS estimate for the quarter has been revised 5.6% lower over the last 30 days to the current level. Chime Financial, Inc.'s revenues are expected to be $640.6 million, up 21.3% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Alerus Financial (ALRS) : Free Stock Analysis Report Chime Financial, Inc. (CHYM) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

MINNEAPOLIS, July 29, 2026 (GLOBE NEWSWIRE) -- Alerus Financial Corporation (Nasdaq: ALRS), or the Company, reported net income of $20.9 million for the second quarter of 2026, or $0.81 per diluted common share, compared to net income of $23.0 million, or $0.89 per diluted common share, for the first quarter of 2026, and net income of $20.3 million, or $0.78 per diluted common share, for the second quarter of 2025. CEO Comments President and Chief Executive Officer Katie O'Neill Lorenson said, “Our second quarter results demonstrate the continued strength of Alerus' diversified business model and the strategic investments and transformation efforts we have made over the past several years. Earnings per diluted common share of $0.81 and return on average tangible common equity(1) of 19.33% reflect disciplined execution across the franchise, including expanding net interest margin, growing fee-based revenue, and continued improvement in credit quality. “The strength of our business model is evident in our ability to generate balanced growth across multiple revenue streams. Noninterest income again represented more than 40% of total revenue, while our banking franchise continued to benefit from disciplined balance sheet management and prudent risk oversight. These results reflect the resilience of our earnings profile and the advantages of a strategy designed to create long-term value. “Most importantly, these results are a testament to the talented team we have built at Alerus and their unwavering focus on serving our clients, communities, and one another. Their consistent execution, collaboration, and focus on doing the right thing continue to translate our strategy into results. As we look ahead, we remain focused on executing our long-term growth strategy, investing in our people and capabilities, and building on the momentum that positions Alerus to deliver sustainable value for our shareholders.” Second Quarter Highlights Earnings per diluted common share of $0.81. Return on average total assets of 1.60%. Return on average tangible common equity(1) of 19.33%. Noninterest income was $32.9 million in the second quarter of 2026, an increase of 6.8% from the first quarter of 2026. Noninterest income represented 40.85% of total revenue in the second quarter of 2026. Net interest margin (on a tax-equivalent basis)(1) was 3.97%, an increase of 20 basis points compared to 3.77% in the first quarter of 2026. Net interest income was $47.7 million in the second quarter of 2026, an increase of 6.2% compared to $44.9 million in the first quarter of 2026, and an increase of 10.9% compared to $43.0 million in the second quarter of 2025. Total assets under administration/management exceeded $50.4 billion, a 7.0% increase from the first quarter of 2026. Nonperforming assets were $17.1 million as of June 30, 2026, a decrease of $36.9 million, or 68.3%, from $54.0 million as of March 31, 2026. Nonperforming assets to total assets declined to 0.32% in the second quarter of 2026 compared to 1.02% the first quarter of 2026. Repurchased $6.8 million of the Company's outstanding common stock at an average per share price of $27.10, reducing common shares outstanding by 250,000 shares at quarter-end. In the first six months of 2026, the Company returned $23.6 million to shareholders in the form of dividends and share repurchases. Increased quarterly dividend by 4.76% over the first quarter of 2026 to $0.22 per share, continuing the Company's decades-long history of increasing its dividend. Tangible book value per common share(1) was $18.73 as of June 30, 2026, an increase of 16.26% from $16.11 as of June 30, 2025. Tangible common equity to tangible assets ratio(1) was 9.05% as of June 30, 2026, an increase from 7.87% as of June 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) ______________ (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 second quarter of 2026 was $47.7 million, a $2.8 million, or 6.2%, increase from the first quarter of 2026. Interest income increased $3.6 million, or 5.4%, primarily due to higher interest income on loans from a one-time $1.6 million interest income recovery on a nonaccrual loan resolution, higher purchase accounting accretion, and higher loan yields. Interest expense increased $0.8 million, or 3.8%, from the first quarter of 2026, as average rates paid on borrowings increased following a refinancing of subordinated debt in the first quarter and higher average short-term borrowing balances. Net interest income increased $4.7 million, or 10.9%, from $43.0 million for the second quarter of 2025. Interest income increased $0.2 million, or 0.3%, from the second quarter of 2025, primarily driven by higher interest income on investment securities following the strategic balance sheet repositioning in the fourth quarter of 2025, partially offset by less purchase accounting accretion. Interest expense decreased $4.5 million, or 16.3%, from the second 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 3.97% for the second quarter of 2026, a 20 basis point increase from 3.77% for the first quarter of 2026, and a 46 basis point increase from 3.51% for the second quarter of 2025. The quarter over quarter increase was mainly attributable to a one-time $1.6 million interest income recovery on a nonaccrual loan resolution, higher purchase accounting accretion, and higher loan yields, partially offset by the impact of the first quarter subordinated debt refinancing and higher borrowing balances. The increase from the second quarter of 2025 was primarily driven by lower cost of funds and higher yields on investment securities, partially offset by less purchase accounting accretion. Noninterest Income Noninterest income for the second quarter of 2026 was $32.9 million, a $2.1 million, or 6.8%, increase from the first quarter of 2026. This increase was driven by an increase in other noninterest income and wealth advisory services revenue, partially offset by a decrease in mortgage banking revenue. Other noninterest income increased $1.9 million, or 106.9%, from the first quarter of 2026, primarily driven by a gain on the sale of a property in the Rochester, Minnesota market, increased swap fee income, and mutual fund investment gains related to the underlying assets of the deferred compensation plans. Wealth advisory services revenue increased $0.5 million, or 6.5%, from the first quarter of 2026, primarily driven by an increase in both asset-based fees tied to equity markets and transaction-based fees. Mortgage banking revenue decreased $0.3 million, or 9.6%, from the first quarter of 2026, primarily driven by lower gain on sale margins from product mix and increased competition. Noninterest income for the second quarter of 2026 increased by $1.2 million, or 3.7%, from the second quarter of 2025. This increase was driven by an increase in other noninterest income, retirement and benefit services revenue, and service charges on deposit accounts, partially offset by a decrease in the gain on sale of non-mortgage loans. Other noninterest income increased $1.7 million, or 86.1%, compared to the second quarter of 2025, primarily driven by a gain on the sale of a property in the Rochester, Minnesota market, increased swap fee income, and mutual fund investment gains related to the underlying assets of the deferred compensation plans. Retirement and benefit services revenue increased $1.3 million, or 8.3%, compared to the second quarter of 2025, primarily driven by recurring annual income. Service charges on deposit accounts increased $0.4 million, or 62.6%, compared to the second 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. Gain on sale of non-mortgage loans decreased $2.1 million, or 100.0%, compared to 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. ______________(1)    Represents a non-GAAP financial measure. See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.” Noninterest Expense Noninterest expense for the second quarter of 2026 was $52.9 million, a $2.5 million, or 4.9%, increase from the first quarter of 2026, primarily due to increases in compensation expense and other noninterest expense, partially offset by a decrease in business services, software, and technology expense. Compensation expense increased $2.1 million, or 8.6%, from the first quarter of 2026, primarily due to annual merit increases, talent additions to the Arizona commercial banking team, and increases in deferred compensation plan liabilities driven by mutual fund investment gains related to the underlying assets of the plans. Other noninterest expense increased $0.8 million, or 39.3%, from the first quarter of 2026, due to an increase in other real estate owned balances and related holding costs, as well as increased corporate insurance costs. Business services, software, and technology expense decreased $0.4 million, or 6.8%, from the first quarter of 2026, primarily due to a decrease in core processing expenses, as well as a decrease in IT hardware expenses. Noninterest expense for the second quarter of 2026 increased $4.4 million, or 9.2%, from $48.4 million in the second quarter of 2025, primarily due to increases in compensation expense, professional fees and assessments, and other noninterest expense. Compensation expense increased $1.8 million, or 7.4%, from the second quarter of 2025, primarily due to annual merit increases, as well as increases in deferred compensation plan liabilities driven by mutual fund investment gains related to the underlying assets of the plans. Other noninterest expense increased $1.5 million, or 104.3%, from the second quarter of 2025, due to an increase in other real estate owned balances and related holding costs, as well as increased corporate insurance costs. Professional fees and assessments increased $1.4 million, or 61.7%, from the second 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, as well as an increase in legal fees. Financial Condition Total assets were $5.3 billion as of June 30, 2026, an increase of $58.6 million, or 1.1%, from December 31, 2025. The increase was primarily due to a $41.8 million increase in cash and cash equivalents, a $20.1 million increase in available-for-sale investment securities, a $8.5 million increase in other assets, and a $4.8 million increase in loans held for sale, partially offset by a decrease of $13.8 million in loans held for investment. Loans Held for Investment Total loans held for investment were $4.0 billion as of June 30, 2026, a decrease of $13.8 million, or 0.3%, from December 31, 2025. The decrease was primarily driven by a $41.6 million decrease in consumer loans, partially offset by a $27.9 million increase in commercial loans. The following table presents the composition of our loans held for investment portfolio as of the dates indicated: Deposits Total deposits were $4.2 billion as of June 30, 2026, a decrease of $0.1 million, or 0.0%, from December 31, 2025. Noninterest-bearing deposits decreased $48.3 million and interest-bearing deposits increased $48.2 million from December 31, 2025. The decrease in total deposits was due primarily to seasonal outflows from public funds depositors. The following table presents the composition of the Company’s deposit portfolio as of the dates indicated: Asset Quality Total nonperforming assets were $17.1 million as of June 30, 2026, a decrease of $52.3 million, or 75.3%, from December 31, 2025. As of June 30, 2026, the allowance for credit losses on loans was $48.4 million, or 1.20% 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 second quarter of 2026, the Company had net charge-offs of $2.6 million, compared to net charge-offs of $7.0 million for the first quarter of 2026 and net charge-offs of $3.8 million for the second quarter of 2025. The quarter over quarter decrease in net charge-offs was primarily due to charge-offs of $6.4 million in the first quarter of 2026 related to one non-accruing long-term commercial and industrial client relationship. This relationship carried a specific reserve of $9.0 million as of December 31, 2025. Of the $2.6 million of net-charge offs recognized in the second quarter of 2026, $1.4 million was attributable to this same relationship. As of June 30, 2026, the relationship had a remaining reserve of $1.0 million, which represented approximately 63.3% 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 June 30, 2026 was primarily the result of problem loan resolution. The Company recorded a provision for credit losses of $0.5 million for the second quarter of 2026, compared to a provision release of $4.9 million for the first quarter of 2026, and no provision for credit losses for the second quarter of 2025. OREO and repossessed assets were $9.6 million at June 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 $36.9 million as of June 30, 2026, $43.8 million as of December 31, 2025, and $58.0 million as of June 30, 2025. Capital Total stockholders’ equity was $583.1 million as of June 30, 2026, an increase of $18.2 million from December 31, 2025. The increase was primarily driven by an increase in retained earnings of $33.0 million, partially offset by a decrease in additional paid-in capital of $11.5 million and a decrease in accumulated other comprehensive income of $2.8 million. Tangible book value per common share(1) increased to $18.73 as of June 30, 2026, from $17.55 as of December 31, 2025. Tangible common equity to tangible assets(1) increased to 9.05% as of June 30, 2026, from 8.72% as of December 31, 2025. Common equity tier 1 capital to risk weighted assets increased to 10.81% as of June 30, 2026, from 10.28% as of December 31, 2025. During the second quarter of 2026, the Company repurchased approximately $6.8 million of its outstanding common stock at an average per share price of $27.10, 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, July 30, 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 26 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. 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; 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; 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 SubsidiariesConsolidated Balance Sheets (dollars in thousands, except share and per share data) Alerus Financial Corporation and SubsidiariesConsolidated Statements of Income(dollars and shares in thousands, except per share data) Alerus Financial Corporation and SubsidiariesNon-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures (unaudited)(dollars and shares in thousands, except per share data) ______________ Alerus Financial Corporation and SubsidiariesNon-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures (unaudited)(dollars and shares in thousands, except per share data) ______________ Alerus Financial Corporation and SubsidiariesAnalysis of Average Balances, Yields, and Rates (unaudited)(dollars in thousands) ______________ Alan A. Villalon, Chief Financial Officer952.417.3733 (Office)

Core Scientific, Inc. (CORZ) came out with quarterly earnings of $0.18 per share, beating the Zacks Consensus Estimate of a loss of $0.02 per share. This compares to a loss of $0.04 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +1,000.00%. A quarter ago, it was expected that this company would post a loss of $0.02 per share when it actually produced a loss of $0.1, delivering a surprise of -400%. Over the last four quarters, the company has surpassed consensus EPS estimates two times. Core Scientific, Inc., which belongs to the Zacks Financial - Miscellaneous Services industry, posted revenues of $164.2 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 20.38%. This compares to year-ago revenues of $78.63 million. The company has topped consensus revenue estimates just once over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Core Scientific, Inc. shares have added about 42.4% since the beginning of the year versus the S&P 500's gain of 8.3%. While Core Scientific, Inc. has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Core Scientific, Inc. was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.02 on $167.2 million in revenues for the coming quarter and $0.08 on $619.65 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Financial - Miscellaneous Services is currently in the bottom 31% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Alerus (ALRS), another stock in the same industry, has yet to report results for the quarter ended June 2026. The results are expected to be released on July 29. This company is expected to post quarterly earnings of $0.78 per share in its upcoming report, which represents a year-over-year change of +8.3%. The consensus EPS estimate for the quarter has been revised 0.8% higher over the last 30 days to the current level. Alerus' revenues are expected to be $76.85 million, up 1.9% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Core Scientific, Inc. (CORZ) : Free Stock Analysis Report Alerus Financial (ALRS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

The market expects Alerus (ALRS) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended June 2026. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates. The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on July 29. On the other hand, if they miss, the stock may move lower. While management's discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it's worth having a handicapping insight into the odds of a positive EPS surprise. This company is expected to post quarterly earnings of $0.78 per share in its upcoming report, which represents a year-over-year change of +8.3%. Revenues are expected to be $76.85 million, up 1.9% from the year-ago quarter. The consensus EPS estimate for the quarter has been revised 0.75% higher over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that the direction of estimate revisions by each of the covering analysts may not always get reflected in the aggregate change. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. Our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction) -- has this insight at its core. The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For Alerus, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become bullish on the company's earnings prospects. This has resulted in an Earnings ESP of +4.70%. On the other hand, the stock currently carries a Zacks Rank of #2. So, this combination indicates that Alerus will most likely beat the consensus EPS estimate. Analysts often consider to what extent a company has been able to match consensus estimates in the past while calculating their estimates for its future earnings. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that Alerus would post earnings of $0.58 per share when it actually produced earnings of $0.89, delivering a surprise of +53.45%. Over the last four quarters, the company has beaten consensus EPS estimates four times. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Alerus appears a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. Another stock from the Zacks Financial - Miscellaneous Services industry, Community Financial System (CBU), is soon expected to post earnings of $1.19 per share for the quarter ended June 2026. This estimate indicates a year-over-year change of +22.7%. Revenues for the quarter are expected to be $222.08 million, up 11% from the year-ago quarter. The consensus EPS estimate for Community Financial has been revised 1.6% lower over the last 30 days to the current level. However, a higher Most Accurate Estimate has resulted in an Earnings ESP of +0.28%. This Earnings ESP, combined with its Zacks Rank #4 (Sell), makes it difficult to conclusively predict that Community Financial will beat the consensus EPS estimate. Over the last four quarters, the company surpassed EPS estimates just once. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Alerus Financial (ALRS) : Free Stock Analysis Report Community Financial System, Inc. (CBU) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Have you been searching for a stock that might be well-positioned to maintain its earnings-beat streak in its upcoming report? It is worth considering Alerus (ALRS), which belongs to the Zacks Financial - Miscellaneous Services industry. When looking at the last two reports, this company has recorded a strong streak of surpassing earnings estimates. The company has topped estimates by 51.29%, on average, in the last two quarters. For the most recent quarter, Alerus was expected to post earnings of $0.58 per share, but it reported $0.89 per share instead, representing a surprise of 53.45%. For the previous quarter, the consensus estimate was $0.57 per share, while it actually produced $0.85 per share, a surprise of 49.12%. With this earnings history in mind, recent estimates have been moving higher for Alerus. In fact, the Zacks Earnings ESP (Expected Surprise Prediction) for the company is positive, which is a great sign of an earnings beat, especially when you combine this metric with its nice Zacks Rank. Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce a positive surprise nearly 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat the consensus estimate could be as high as seven. The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Alerus has an Earnings ESP of +11.26% at the moment, suggesting that analysts have grown bullish on its near-term earnings potential. When you combine this positive Earnings ESP with the stock's Zacks Rank #2 (Buy), it shows that another beat is possibly around the corner. The company's next earnings report is expected to be released on July 29, 2026. Investors should note, however, that a negative Earnings ESP reading is not indicative of an earnings miss, but a negative value does reduce the predictive power of this metric. Many companies end up beating the consensus EPS estimate, but that may not be the sole basis for their stocks moving higher. On the other hand, some stocks may hold their ground even if they end up missing the consensus estimate. Because of this, it's really important to check a company's Earnings ESP ahead of its quarterly release to increase the odds of success. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Alerus Financial (ALRS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Alerus (ALRS) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company. Analysts' growing optimism on the earnings prospects of this company is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank. The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008. Consensus earnings estimates for the next quarter and full year have moved considerably higher for Alerus, as there has been strong agreement among the covering analysts in raising estimates. The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate: The earnings estimate of $0.69 per share for the current quarter represents a change of -4.2% from the number reported a year ago. Over the last 30 days, the Zacks Consensus Estimate for Alerus has increased 7.03% because one estimate has moved higher compared to no negative revisions. For the full year, the earnings estimate of $2.95 per share represents a change of +6.1% from the year-ago number. The revisions trend for the current year also appears quite promising for Alerus, with two estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 16.63%. The promising estimate revisions have helped Alerus earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500. While strong estimate revisions for Alerus have attracted decent investments and pushed the stock 10.4% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Alerus Financial (ALRS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research