Third quarter of 2026
Filed Oct 28, 2026ALERUS FINANCIAL CORPORATION REPORTS Third QUARTER 2026 NET INCOME OF $19.2 MILLION
Third-quarter net income and diluted EPS declined sequentially but rose from the prior year, supported by 8.3% net interest income growth and 16.7% noninterest income growth. Loan and deposit growth, improved nonperforming assets, net recoveries, and substantial capital returns were offset by a sequentially lower net interest margin, higher provision expense, and higher operating expenses.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net income, three months ended September 30, 2026GAAP | $19.2M | – | – |
| Earnings per common share - diluted, three months ended September 30, 2026GAAP | $0.76 | – | – |
| Adjusted earnings per common share - diluted, three months ended September 30, 2026non-GAAP | $0.71 | – | – |
| Net interest income, three months ended September 30, 2026GAAP | $46.7M | (2.1%) | 8.3% |
| Net interest margin (on a tax-equivalent basis), three months ended September 30, 2026non-GAAP | 3.84% | a 13 basis point decrease | a 34 basis point increase |
| Total noninterest income, three months ended September 30, 2026GAAP | $34.4M | 4.3% | 16.7% |
| Noninterest income as a % of revenue, three months ended September 30, 2026GAAP | 42.37% | – | – |
| Total noninterest expense, three months ended September 30, 2026GAAP | $53.9M | 1.9% | 6.6% |
| Provision for (recovery of) credit losses, three months ended September 30, 2026GAAP | $2.2M | – | – |
| Income before income tax expense, three months ended September 30, 2026GAAP | $25.01M | – | – |
| Income tax expense, three months ended September 30, 2026GAAP | $5.81M | – | – |
| Return on average total assets, three months ended September 30, 2026GAAP | 1.45% | – | – |
| Return on average tangible common equity, three months ended September 30, 2026non-GAAP | 17.35% | – | – |
| Efficiency ratio, three months ended September 30, 2026non-GAAP | 63.41% | – | – |
| Adjusted pre-provision net revenue, nine months ended September 30, 2026non-GAAP | $78.7M | – | 18.9% |
| Total assets, as of September 30, 2026GAAP | $5.4B | – | – |
| Total loans, as of September 30, 2026GAAP | $4.2B | 3.7% | – |
| Total deposits, as of September 30, 2026GAAP | $4.3B | 2.7% | – |
| Total nonperforming assets, as of September 30, 2026GAAP | $16.4M | (4.3%) | – |
| Net charge-offs (recoveries) to average loans, three months ended September 30, 2026non-GAAP | (0.10)% | – | – |
| Allowance for credit losses on loans, as of September 30, 2026GAAP | $51.4M | – | – |
| Tangible book value per common share, as of September 30, 2026non-GAAP | $18.74 | – | 10.9% |
| Tangible common equity to tangible assets ratio, as of September 30, 2026non-GAAP | 8.77% | – | – |
| Common equity tier 1 capital to risk weighted assets, as of September 30, 2026other | 10.52% | – | – |
| Total assets under management/administration in the combined retirement and benefit and wealth segments, as of September 30, 2026other | $50.1B | – | 2.7% |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Retirement and benefit servicesThe increase from the second quarter of 2026 was primarily driven by an increase in recurring annual revenue, while the increase from the third quarter of 2025 was primarily driven by recurring annual income. | $17.66M | 1.8% | 7.1% |
| Wealth advisory servicesSequential growth was primarily driven by an increase in transaction-based fees and a slight increase in asset-based revenues. Year-over-year growth was driven by an increase in both asset-based fees and transaction-based fees. | $8.00M | 3.8% | 22.0% |
| Mortgage bankingSequential growth was primarily driven by higher mortgage originations and gain on sale margins. | $3.33M | 4.2% | – |
| Service charges on deposit accountsThe year-over-year increase was primarily due to a reclassification of fees from other noninterest income to service charges on deposit accounts revenue in the first quarter of 2026. | $1.22M | – | 73.7% |
| Other noninterest incomeGrowth was primarily driven by a gain on the sale of a property in the Fargo, North Dakota market, partially offset by a loss on a property transferred to held for sale in the Rochester, Minnesota market. | $4.14M | 15.1% | 85.3% |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Capital returns
- Repurchased $8.2 million of the Company's outstanding common stock at an average per share price of $32.75, reducing common shares outstanding by 250,000 shares at quarter-end.
- In the first nine months of 2026, the Company returned $37.2 million to shareholders in the form of dividends and share repurchases.
- Dividends declared per common share were $0.22 for the third quarter of 2026, compared to $0.22 for the second quarter of 2026 and $0.21 for the third quarter of 2025.
What drove it
- Commercial and business lending grew 36.5% from a year ago and represented 37.1% of the loan portfolio, compared to 27.7% a year ago.
- Total loans increased $150.5 million, or 3.7%, from June 30, 2026, led by commercial and business lending.
- Net interest income increased from the third quarter of 2025 due to lower cost of funds and higher yields on investment securities, partially offset by less purchase accounting accretion.
- Noninterest income increased from the third quarter of 2025 through growth in retirement and benefit services revenue, wealth advisory services revenue, other noninterest income, and service charges on deposit accounts.
- Interest expense decreased $4.0 million, or 14.7%, from the third quarter of 2025 as average rates paid on deposits and borrowings declined primarily driven by Federal Reserve rate cuts in the second half of 2025.
- The company reported net recoveries of $1.0 million in the third quarter of 2026.
Concerns
- Net interest income decreased $1.0 million, or 2.1%, from the second quarter of 2026, and net interest margin declined 13 basis points sequentially to 3.84%.
- The sequential net interest margin decline was mainly attributable to a one-time $1.6 million interest income recovery on a nonaccrual loan resolution in the second quarter and less purchase accounting accretion.
- Provision for credit losses was $2.2 million, compared to $0.5 million in the second quarter of 2026 and no provision for credit losses in the third quarter of 2025.
- OREO and repossessed assets were $9.4 million at September 30, 2026, compared to $0.3 million as of December 31, 2025.
- Noninterest expense increased $3.3 million, or 6.6%, from the third quarter of 2025, primarily due to employee taxes and benefits, compensation expense, and professional fees and assessments.
- Accumulated other comprehensive loss increased $15.3 million due to recent increases in interest rates.
What to watch
- Whether net interest margin stabilizes following the 13 basis point sequential decline to 3.84%.
- The durability of commercial and business lending growth, which increased 36.5% from a year ago.
- Credit performance following the $2.2 million third-quarter provision for credit losses and the increase in OREO and repossessed assets to $9.4 million.
- The progression of recurring annual revenue in retirement and benefit services and asset-based and transaction-based fees in wealth advisory services.
- The impact of self-funded group insurance costs, merit increases, employee growth, and professional fees on noninterest expense.
Balance sheet and cash flow
- Cash and cash equivalents were $65,756 as of September 30, 2026, compared to $67,192 as of December 31, 2025.
- Total assets were $5.4 billion as of September 30, 2026, an increase of $173.0 million, or 3.3%, from December 31, 2025.
- Total deposits were $4.3 billion as of September 30, 2026, an increase of $111.2 million, or 2.7%, from June 30, 2026.
- Short-term borrowings were $318,400 as of September 30, 2026, compared to $308,800 as of December 31, 2025.
- Long-term debt was $59,267 as of September 30, 2026, compared to $59,182 as of December 31, 2025.
- Total stockholders' equity was $576.9 million as of September 30, 2026, an increase of $11.9 million from December 31, 2025.
- Operating cash flow and free cash flow were not reported.
Analysis
Alerus reported third-quarter 2026 net income of $19.2 million, or $0.76 per diluted common share, compared with $20.9 million, or $0.81 per diluted common share, in the second quarter of 2026 and $16.9 million, or $0.65 per diluted common share, in the third quarter of 2025. The year-over-year increase reflects a 8.3% increase in net interest income and a 16.7% increase in noninterest income. Sequential earnings were lower as net interest income declined 2.1%, provision expense increased to $2.2 million, and noninterest expense increased 1.9%.
Core spread performance improved from a year earlier but softened sequentially. Net interest income was $46.7 million and net interest margin on a tax-equivalent basis was 3.84%, up 34 basis points from 3.50% in the third quarter of 2025 but down 13 basis points from 3.97% in the second quarter of 2026. Management attributed the sequential decline principally to a one-time $1.6 million interest income recovery on a nonaccrual loan resolution in the preceding quarter and less purchase accounting accretion. The year-over-year improvement reflected lower funding costs and higher investment-security yields, partly offset by less purchase accounting accretion.
Fee income remained a significant component of the model, representing 42.37% of revenue. Retirement and benefit services revenue increased 7.1% year over year to $17,664, wealth advisory services increased 22.0% to $8,001, and other noninterest income increased 85.3% to $4,136. The other-income result included a gain on the sale of a Fargo property and was partly offset by a loss on a Rochester property transferred to held for sale. Expenses rose 6.6% from the prior year to $53.9 million, driven by employee taxes and benefits, compensation, and professional fees and assessments. The efficiency ratio improved from 65.34% a year earlier to 63.41%, but increased from 62.53% in the preceding quarter.
Balance-sheet growth was concentrated in commercial lending. Total loans were $4.2 billion as of September 30, 2026, up $150.5 million, or 3.7%, from June 30, while deposits increased $111.2 million, or 2.7%, to $4.3 billion. Commercial and business lending grew 36.5% from a year ago and represented 37.1% of the loan portfolio. Asset quality improved materially from year-end, with nonperforming assets at $16.4 million, down $53.0 million, or 76.4%, from December 31, 2025, and the company recorded net recoveries of $1.0 million. However, OREO and repossessed assets were $9.4 million, compared with $0.3 million at December 31, 2025, and the third-quarter provision for credit losses was $2.2 million.
Capital remained a support for shareholder returns and organic growth. Tangible book value per common share was $18.74, up 10.9% from $16.90 a year earlier, while tangible common equity to tangible assets was 8.77%. The company repurchased $8.2 million of common stock at an average price of $32.75 during the quarter and returned $37.2 million through dividends and share repurchases in the first nine months of 2026. The filing provided no forward financial guidance, leaving subsequent margin performance, commercial lending growth, fee-income momentum, expense trends, and credit costs as the principal reported operating items to monitor.
Management, verbatim
Our third quarter results demonstrate the continued momentum of the Alerus franchise, with strong revenue growth across our diversified business model and strategic organic growth in our banking franchise.
Katie O'Neill Lorenson, President and Chief Executive Officer
We also maintained favorable credit quality, with nonperforming assets and criticized loans continuing to improve and net recoveries during the quarter.
Katie O'Neill Lorenson, President and Chief Executive Officer
Not in the filing
stated, not guessed- Forward revenue, margin, expense, tax-rate, EPS, loan-growth, deposit-growth, capital-return, or other financial guidance
- Previous outlook section and prior-guidance comparison
- Operating cash flow
- Free cash flow
- GAAP total revenue line item
- Gross profit or gross margin
- Share-price reaction
- Consensus estimates or analyst expectations
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.