Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-39036 ALERUS FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 45-0375407 (State or other jurisdiction of incorporation or ( ...

Financial Data and Key Metrics Changes - The company reported adjusted earnings per diluted share of $0.72, representing an adjusted return on assets of 1.41% [4] - Net interest income increased by 4.6% over the prior quarter, while fee income rose by 15% [11] - The net interest margin improved by 10 basis points to 3.51% [12] - Adjusted pre-provision net revenue grew by 23.2% over the prior quarter [27] Business Line Data and Key Metrics Changes - The retirement services business generated stable revenue of over $16 million, with assets under administration and management increasing by 6.3% [17][18] - The wealth management business saw revenues increase by 6.6% on a linked quarter basis, with assets under management rising by 2.5% [18] - Noninterest income from banking was $8.4 million for the second quarter, with a $2.1 million gain related to the sale of hospitality loans [16] Market Data and Key Metrics Changes - Deposits shrank by 3.3% due to expected seasonal outflows from public funds [15] - The company expects continued seasonal volatility in deposits, with average deposit account sizes growing over 20% since 2019 [15] Company Strategy and Development Direction - The company is focused on maximizing profitability through disciplined pricing and enhancing its diversified business model [4][5] - Strategic initiatives include optimizing the balance sheet and investing in talent and technology to deepen client relationships [8][9] - The company aims to achieve consistent performance levels and is targeting mid-single-digit loan growth for 2025 [22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic uncertainty and competitive pressures but emphasized a disciplined approach to growth and credit risk management [87] - The guidance for the year remains consistent, with expectations for low single-digit deposit growth and continued focus on core business lines [22][26] Other Important Information - The company recorded no provision for the quarter due to a net gain from the sale of hospitality loans [6] - The adjusted efficiency ratio improved to 52.4% from 66.9% in the prior quarter [19] - The company remains well-capitalized with a common equity Tier one capital ratio of 10.5% [21] Q&A Session Summary Question: What are the expectations for third and fourth quarter accretion? - The company expects 27 basis points of purchase accounting accretion in the third quarter and 22 basis points in the fourth quarter, with no early payoffs included [29][34] Question: What is the status of the larger construction credit? - The final certificate of occupancy was issued, and the property is currently at 57% leased, with expectations for a sale in early 2026 [37][65] Question: How does the company view the capital deployment for the rest of the year? - The company prioritizes organic balance sheet growth, maintaining dividend history, and pursuing M&A opportunities in the retirement sector [45] Question: What is the outlook for noninterest income? - The company expects noninterest income to be up low single digits for the year, factoring in seasonal downturns in the mortgage business [25][80] Question: How is the company addressing nonperforming assets? - Nonperforming assets are primarily driven by two large relationships, with resolutions expected in early 2026 [65][66] Question: What is the outlook for deposit costs? - The company anticipates an increase of 8 to 10 basis points in deposit costs due to competition and a shift from non-interest bearing to interest-bearing deposits [73][76]

Financial Data and Key Metrics Changes - The company reported an adjusted earnings per diluted share of $0.72, representing an adjusted return on assets of 1.41% [3] - Net interest income increased by 4.6% over the prior quarter, while fee income rose by 15% [10] - The net interest margin improved by 10 basis points to 3.51% [11] Business Line Data and Key Metrics Changes - The retirement services business generated stable revenue of over $16 million, with assets under administration and management increasing by 6.3% [16] - The wealth management business saw revenues increase by 6.6% on a linked quarter basis, with assets under management rising by 2.5% [17] - Noninterest income from banking was $8.4 million for the second quarter, including a $2.1 million gain from the sale of hospitality loans [15] Market Data and Key Metrics Changes - Deposits shrank by 3.3% due to expected seasonal outflows from public funds [14] - The company maintained a net retention rate of approximately 97% since the acquisition of Home Federal [15] Company Strategy and Development Direction - The company is focused on maximizing capacity and enhancing profitability in its commercial wealth bank [4] - Strategic initiatives include optimizing the balance sheet and pursuing meaningful partnerships [6] - The company aims to double the number of wealth advisers and grow assets under management at the same pace as banking assets [6] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the business, citing strong momentum and robust opportunities in the lending pipeline [4] - The guidance for the year remains consistent, with expectations for mid-single-digit loan growth and low-single-digit deposit growth [22] - Management acknowledges macroeconomic uncertainty and competitive pressures but emphasizes a disciplined approach to growth and risk management [73] Other Important Information - The company recorded no provision for the quarter due to a strategic sale of $60 million in non-owner occupied commercial real estate hospitality loans, resulting in a net gain of $2 million [5] - The adjusted efficiency ratio improved to 52.4% from 66.9% in the prior quarter, driven by core expense and revenue improvements [19] Q&A Session Summary Question: What are the expectations for third and fourth quarter accretion? - The company expects 27 basis points of purchase accounting accretion in the third quarter and 22 basis points in the fourth quarter, with no early payoffs included [28][29] Question: What is the status of the larger construction credit? - The final certificate of occupancy was issued, and the property was listed for sale, currently at 57% occupancy [31] Question: How does the company view capital deployment and M&A opportunities? - The company prioritizes organic balance sheet growth, maintaining dividend history, and pursuing M&A in the retirement sector [39] Question: What is the outlook for fee income and participant counts in the retirement business? - The company experienced a decline in participant counts due to one-time effects but expects numbers to rise in the future [42] Question: What is the outlook for loan growth and demand? - Loan growth is primarily from leveraging the current client base and taking market share rather than new credits [46] Question: How does the company plan to address nonperforming loans? - Nonperforming loans are driven by two large relationships, with resolutions expected in early 2026 [57]

Financial Performance - Net interest income for the second quarter of 2025 was $43 million, a $19 million or 46% increase from the first quarter of 2025[59] - Noninterest income increased 150% from the prior quarter[124] - Adjusted EPS increased $016 compared to the prior quarter[124] - Adjusted ROTCE was 210% in 2Q25, +34% vs 1Q25[40] - Adjusted ROAA was 141% in 2Q25, +31 bps vs 1Q25[40] Balance Sheet - Loans totaled $40 billion[40] - Deposits totaled $43 billion[40] - Synergistic deposits accounted for 212% of total deposits[40] - Tangible book value per share was $1611, an increase of $084 from the prior quarter[40] Asset Quality and Capital Strength - ACL to Total Loans was 147%[40] - CET1 was 105%, well above bank regulatory requirements[40]

Alerus (ALRS) came out with quarterly earnings of $0.72 per share, beating the Zacks Consensus Estimate of $0.56 per share. This compares to earnings of $0.31 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of +28.57%. A quarter ago, it was expected that this company would post earnings of $0.43 per share when it actually produced earnings of $0.56, delivering a surprise of +30.23%.Over the last four quarters, the company has sur ...

[Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Alerus Financial Corporation reported strong Q2 2025 results, including **$20.3 million** net income, improved KPIs, and a dividend increase Q2 2025 Earnings Summary | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income | $20.3 million | $13.3 million | $6.2 million | | Diluted EPS | $0.78 | $0.52 | $0.31 | - CEO Katie Lorenson attributed the strong performance to the company's diversified business model and disciplined execution, highlighting progress towards achieving top-tier performance[3](index=3&type=chunk) - The company optimized its balance sheet through the strategic sale of **$62.5 million** of non-owner occupied commercial real estate loans, demonstrating proactive credit risk management[3](index=3&type=chunk) Q2 2025 Key Performance Metrics (Non-GAAP) | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Adjusted Return on Average Total Assets | 1.41% | 1.10% | | Adjusted Return on Average Tangible Common Equity | 21.0% | 17.6% | | Adjusted Earnings per Diluted Common Share | $0.72 | $0.56 | - The quarterly dividend was increased by **5.0%** to **$0.21** per share, marking the 39th consecutive year of dividend increases[5](index=5&type=chunk) - Tangible book value per common share grew by over **20.0%** annualized compared to the prior quarter, reaching **$16.11**[3](index=3&type=chunk)[5](index=5&type=chunk) [Selected Financial Data](index=3&type=section&id=Selected%20Financial%20Data) Q2 2025 selected financial data demonstrates strong improvements in profitability ratios, per-share metrics, and increased assets under administration Key Performance Ratios Comparison | Performance Ratio | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Return on average total assets | 1.53% | 1.02% | 0.58% | | Return on average tangible common equity (1) | 22.65% | 16.50% | 9.40% | | Net interest margin (tax-equivalent) | 3.51% | 3.41% | 2.39% | | Efficiency ratio (1) | 60.66% | 68.76% | 72.50% | Per Common Share Data Comparison | Per Common Share Data | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Earnings per common share - diluted | $0.78 | $0.52 | $0.31 | | Dividends declared per common share | $0.21 | $0.20 | $0.20 | | Tangible book value per common share (1) | $16.11 | $15.27 | $15.77 | Assets Under Administration/Management (in thousands) | AUA/AUM | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Retirement and benefit services | $42,451,544 | $39,925,596 | $39,389,533 | | Wealth management | $4,613,102 | $4,500,852 | $4,172,290 | [Results of Operations](index=3&type=section&id=Results%20of%20Operations) Q2 2025 operating results show significant strength, with growth in net interest and noninterest income, and disciplined expense management, leading to improved profitability [Net Interest Income](index=3&type=section&id=Net%20Interest%20Income) Net interest income for Q2 2025 was **$43.0 million**, increasing **4.6%** from Q1 2025 and **79.3%** from Q2 2024, driven by higher loan yields and the HMNF acquisition, expanding NIM to **3.51%** - Net interest income increased by **$1.9 million** (**4.6%**) from Q1 2025, driven by higher yields on new and repriced loans and purchase accounting accretion[7](index=7&type=chunk) - Compared to Q2 2024, net interest income surged by **$19.0 million** (**79.3%**), largely due to earning assets acquired in the HMNF transaction and strong organic loan growth[8](index=8&type=chunk) Net Interest Margin (NIM) Trend | Period | Net Interest Margin (tax-equivalent) | | :--- | :--- | | Q2 2025 | 3.51% | | Q1 2025 | 3.41% | | Q2 2024 | 2.39% | [Noninterest Income](index=3&type=section&id=Noninterest%20Income) Q2 2025 noninterest income reached **$31.8 million**, a **15.0%** increase quarter-over-quarter, primarily driven by a **139.1%** surge in mortgage banking revenue and a **$2.1 million** gain on a loan sale - The **$4.1 million** quarter-over-quarter increase was mainly due to a **$2.1 million** rise in mortgage banking revenue and a **$2.1 million** gain on the sale of a non-mortgage loan[11](index=11&type=chunk) - Year-over-year, noninterest income increased by **$4.4 million**, driven by the loan sale gain, a **15.8%** increase in wealth revenue, and a **43.0%** increase in mortgage banking revenue[12](index=12&type=chunk) [Noninterest Expense](index=5&type=section&id=Noninterest%20Expense) Q2 2025 noninterest expense was **$48.4 million**, a **3.8%** decrease quarter-over-quarter due to disciplined management, but a **25.0%** increase year-over-year driven by the HMNF acquisition and technology investments - Quarter-over-quarter expenses decreased by **$1.9 million** (**3.8%**), mainly due to seasonal drops in employee taxes and benefits, and lower professional fees and assessments[13](index=13&type=chunk) - Year-over-year expenses increased by **$9.7 million** (**25.0%**), driven by higher compensation, benefits, intangible amortization, and technology costs associated with the HMNF acquisition and platform upgrades[14](index=14&type=chunk) [Financial Condition](index=5&type=section&id=Financial%20Condition) Alerus's financial condition remained robust as of June 30, 2025, with total assets at **$5.3 billion**, an expanded loan portfolio, improved asset quality, and total deposits at **$4.3 billion** - Total assets were **$5.3 billion** as of June 30, 2025, an increase of **$62.1 million**, or **1.2%**, from December 31, 2024[15](index=15&type=chunk) [Loans Held for Investment](index=5&type=section&id=Loans%20Held%20for%20Investment) The loan portfolio held for investment reached **$4.0 billion** as of June 30, 2025, increasing **1.3%** since year-end 2024, driven by commercial and consumer loan growth, alongside a strategic reduction in commercial real estate loans - Total loans held for investment increased by **$52.1 million** (**1.3%**) from December 31, 2024, driven by growth in commercial and consumer loans[16](index=16&type=chunk) Loan Portfolio Composition (in thousands) | Loan Category | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total commercial | $2,824,087 | $2,787,277 | | Total consumer | $1,220,570 | $1,205,257 | | **Total Loans** | **$4,044,657** | **$3,992,534** | [Deposits](index=7&type=section&id=Deposits) Total deposits were **$4.3 billion** as of June 30, 2025, a **0.9%** decrease from year-end 2024 due to seasonal outflows and a shift from noninterest-bearing to interest-bearing accounts, with increased brokered deposits - Total deposits decreased by **$40.9 million** (**0.9%**) from December 31, 2024, due to seasonal outflows and tax-related client activity[19](index=19&type=chunk) Deposit Composition (in thousands) | Deposit Category | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Noninterest-bearing demand | $790,300 | $903,466 | | Total interest-bearing | $3,547,168 | $3,474,944 | | **Total deposits** | **$4,337,468** | **$4,378,410** | [Asset Quality](index=7&type=section&id=Asset%20Quality) Q2 2025 asset quality improved, with total nonperforming assets declining to **$52.2 million**, and net charge-offs of **$3.8 million** (adjusted **0.07%**), with no provision for credit losses recorded - Total nonperforming assets decreased by **$10.7 million** from December 31, 2024, to **$52.2 million**[21](index=21&type=chunk) Asset Quality Metrics | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Nonperforming loans to total loans | 1.27% | 1.58% | | Nonperforming assets to total assets | 0.98% | 1.20% | | Allowance for credit losses on loans to total loans | 1.47% | 1.50% | - Net charge-offs were **$3.8 million**, primarily driven by a **$3.4 million** charge-off related to a hospitality loan sale. Adjusted net charge-offs (non-GAAP) were **$0.7 million**, or **0.07%** of average loans[22](index=22&type=chunk) - No provision for credit losses was recorded in Q2 2025, compared to a provision of **$0.9 million** in Q1 2025[23](index=23&type=chunk) [Capital](index=9&type=section&id=Capital) The company's capital position strengthened significantly as of June 30, 2025, with total stockholders' equity rising to **$533.2 million**, improved regulatory capital ratios, and CET1 ratio increasing to **10.54%** - Total stockholders' equity increased by **$37.7 million** since December 31, 2024, primarily due to **$23.2 million** in retained earnings and a **$13.5 million** decrease in accumulated other comprehensive loss[24](index=24&type=chunk) Capital Ratios | Ratio | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Common equity tier 1 capital to risk weighted assets | 10.54% | 9.91% | 11.66% | | Total capital to risk weighted assets | 13.10% | 12.49% | 14.67% | | Tangible common equity / tangible assets (2) | 7.87% | 7.13% | 7.26% | [Financial Statements and Reconciliations](index=13&type=section&id=Financial%20Statements%20and%20Reconciliations) This section provides detailed unaudited financial statements, including Consolidated Balance Sheets and Statements of Income, with reconciliations of non-GAAP measures and analysis of average balances and yields - The Consolidated Balance Sheet as of June 30, 2025, shows total assets of **$5.32 billion** and total stockholders' equity of **$533.2 million**[36](index=36&type=chunk) - The Consolidated Statement of Income for the three months ended June 30, 2025, reports net interest income of **$43.0 million** and net income of **$20.3 million**[37](index=37&type=chunk) - Detailed tables provide reconciliations for non-GAAP measures such as Tangible Common Equity, Adjusted Net Income, and Adjusted EPS to their nearest GAAP counterparts[38](index=38&type=chunk)[40](index=40&type=chunk) - The analysis of average balances shows a tax-equivalent net interest margin of **3.51%** for Q2 2025, up from **3.41%** in Q1 2025[42](index=42&type=chunk) [Other Information](index=9&type=section&id=Other%20Information) This section provides supplementary information, including investor conference call details, a corporate profile, and disclosures on non-GAAP financial measures and forward-looking statements - The company will host a conference call on Monday, July 28, 2025, at 10:00 a.m. Central Time to discuss the financial results[26](index=26&type=chunk) - Alerus is a commercial wealth bank and national retirement services provider with **29 offices** in states including North Dakota, Minnesota, Iowa, Wisconsin, and Arizona[27](index=27&type=chunk)[28](index=28&type=chunk) - The report includes non-GAAP financial measures to aid in performance analysis and contains forward-looking statements that are subject to various business and economic risks[29](index=29&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)

Wall Street expects a year-over-year increase in earnings on higher revenues when Alerus (ALRS) reports results for the quarter ended June 2025. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The earnings report, which is expected to be released on July 28, might help the stock move higher if these key numbers are better than expectations. On t ...

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a v ...

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics ...

Alerus (ALRS) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this company, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earn ...