Alerus earned $0.81 a share in Q2 2026 (+3.8%) as cheaper deposits lifted net interest income 10.9% and NIM to 3.97%, while nonperforming assets fell 68% in a quarter; costs grew faster than revenue.
Net interest income
$48M
+10.9% YoY
Net interest margin
3.97%
Net income
$21M
+3.0% YoY
Diluted EPS
$0.81
+3.8% YoY
Efficiency ratio
62.5%
Net charge-off ratio
0.26%
CET1 capital ratio
10.8%
Return on tangible common equity
19.3%
Net interest margin (NIM): what a bank earns on its loans and securities minus what it pays for deposits and borrowing, as a share of those assets. Efficiency ratio: operating costs per dollar of revenue (lower is better). Net charge-off (NCO) ratio: loans written off as unrecoverable, net of recoveries, as a share of average loans. CET1: the bank's core capital cushion against losses, as a share of risk-weighted assets.
This period vs a year ago
Same period last year
This period
Net interest income▲+10.9%
≈$43M
$48M
Net income▲+3.0%
≈$20M
$21M
Diluted EPS+3.8%
Alerus Financial earned $20.9 million, or $0.81 per diluted share, in the second quarter of 2026, up from $20.3 million and $0.78 a year earlier. The bank's lending side did most of the work: net interest income rose 10.9% because Alerus paid noticeably less for its deposits after the Federal Reserve's 2025 rate cuts. Its fee businesses (retirement-plan administration and wealth management) supplied 40.85% of revenue. The biggest change was in loan quality. Nonperforming assets fell 68% in one quarter, from $54.0 million to $17.1 million, as several problem loans were worked out.
At a glance
Net interest margin 3.97%, up from 3.51% a year ago. Alerus now keeps almost 4 cents a year on each dollar it lends or invests, after paying for deposits and borrowings. About $1.6 million of this quarter's interest income was a one-time recovery and won't repeat.
Nonperforming assets were 0.32% of total assets, down from 1.02% in March. One large problem commercial relationship and other troubled loans were mostly resolved. Part of that "resolution" was taking over $9.4 million of property, which still has to be sold.
$50.4 billion of client assets under administration or management, up 7.0% from March. This drives the fee half of the business. Retirement and benefit services revenue rose 8.3% year over year to $17.3 million.
Results versus a year ago
Metric
Q2 2026
Q2 2025
YoY Change
Total revenue (net interest income + noninterest income)
$80.7M
$74.8M
+7.8%
Net interest income
$47.7M
$43.0M
+10.9%
Read 0 community reports on Alerus Financial Corporation, or write your own.Write a report
▲
≈$0.78
$0.81
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Noninterest (fee) income
$32.9M
$31.8M
+3.7%
Net income
$20.9M
$20.3M
+3.0%
Diluted EPS
$0.81
$0.78
+3.8%
Adjusted diluted EPS (non-GAAP)
$0.80
$0.72
+11.1%
Net interest margin (tax-equivalent, non-GAAP)
3.97%
3.51%
+0.46 pts
Efficiency ratio (non-GAAP)
62.53%
60.66%
+1.87 pts (worse)
Return on average tangible common equity (non-GAAP)
19.33%
22.65%
-3.32 pts
Net charge-offs to average loans (annualized)
0.26%
0.37%
-0.11 pts
CET1 capital ratio
10.81%
10.54%
+0.27 pts
Loans held for investment (period-end)
$4,034.2M
$4,044.7M
-0.3%
Total deposits (period-end)
$4,191.9M
$4,337.5M
-3.4%
Nonperforming assets / total assets
0.32%
0.98%
-0.66 pts
Source: Alerus earnings release for Q2 2026 (Exhibit 99.1 to the July 29, 2026 Form 8-K) and the Q2 2026 Form 10-Q. Alerus reports NIM only on a tax-equivalent basis and labels it, the efficiency ratio and ROTCE as non-GAAP measures; we use the company's figures as stated.
Takeaway: Alerus's margin has improved. Net interest income is up 10.9% while loans are flat, because deposits cost less: interest paid on deposits fell from $22.8 million to $18.9 million. Earnings per share grew only 3.8%, though, because expenses rose 9.2%, faster than revenue. The real gain this quarter was in credit quality. Problem loans fell from 1.34% to 0.19% of all loans. Nonperforming loans had been the weak spot through 2025, and the drop removes most of that drag.
How the bank made more on flat loans
Net interest income is the gap between what a bank earns on loans and securities and what it pays depositors and lenders. Net interest margin (NIM) is that gap as a share of the bank's interest-earning assets. Alerus's margin rose for two different reasons. Its income from lending barely changed and its funding costs fell:
Funding costs fell sharply. Total interest expense fell 16.3% year over year, from $27.4 million to $22.9 million. The company attributes this to lower rates on deposits and borrowings "primarily driven by Federal Reserve rate cuts in the second half of 2025." Expensive time deposits (CDs) fell from $798 million to $576 million over the year.
Interest income was flat, at +0.3%. Loan interest fell slightly, from $63.9 million to $62.2 million, because Alerus earned less "purchase accounting accretion". This is extra interest income that is gradually recognized on loans bought at a discount in past acquisitions, and it shrinks each year. The 4Q 2025 restructuring of the securities portfolio offset that: taxable securities income rose from $5.3 million to $7.3 million.
Against the prior quarter, NIM rose 20 basis points (0.20 percentage points) to 3.97%. The company says this was "mainly attributable to a one-time $1.6 million interest income recovery on a nonaccrual loan resolution," along with more accretion and higher loan yields. Higher-cost subordinated debt, refinanced in Q1, partly offset the gain. Long-term debt interest rose from $0.65 million to $1.04 million year over year.
The loan book itself isn't growing. Loans held for investment were $4.03 billion, down 0.3% from December, as consumer loans fell $41.6 million and commercial loans rose $27.9 million. Deposits were $4.19 billion. They were flat against December but down 3.6% from March's $4.35 billion, which the company puts down to "seasonal outflows from public funds depositors." To cover the gap, short-term borrowings rose to $345 million from $308.8 million in December. Uninsured deposits (balances above the $250,000 FDIC limit) were about $1.5 billion.
The fee businesses: retirement plans and wealth
Alerus is not a typical community bank. It runs three reported segments: banking, retirement and benefit services (record-keeping for 401(k)-type plans, HSAs, COBRA administration), and wealth advisory. Together these produced $32.9 million of noninterest income, or 40.85% of revenue. That is an unusually high share for a bank this size.
Segment (Q2)
Revenue 2026
Revenue 2025
Pre-tax income 2026
Pre-tax income 2025
Banking (net interest + fee income)
$55.8M
$52.1M
$27.0M
$24.7M
Retirement and benefit services
$17.3M
$16.0M
$2.3M
$2.9M
Wealth advisory services
$7.7M
$7.4M
$1.3M
$2.2M
From Note 16 (Segment Reporting) of the 10-Q. Banking revenue is net interest income plus segment noninterest income. Segment pre-tax figures include allocated shared costs. Alerus's segment methodology "change[s] from time to time," so treat the year-over-year segment profit trend with some caution.
Retirement revenue rose 8.3%, "primarily driven by recurring annual income," and assets under administration or management in that business reached $45.2 billion, up from $42.5 billion a year ago. Wealth advisory revenue rose 4.6%, and its assets grew to $5.2 billion from $4.6 billion. Both fee segments made less pre-tax profit than a year ago, though. Their expenses grew faster than their revenue: retirement-segment expenses rose from $13.2 million to $15.1 million and wealth from $5.1 million to $6.4 million. Together, the fee segments earned $3.6 million before tax this quarter, against $27.0 million for banking. The fee businesses make Alerus's revenue steadier, but most of its profit still comes from lending.
What the headline numbers hide
One-offs run in both directions. This quarter includes a $1.6 million interest recovery on a resolved nonaccrual loan and a $0.65 million gain on selling a property in Rochester, Minnesota. Last year's quarter included a $2.1 million gain on selling a hospitality loan. On the company's adjusted basis, which strips out the property and loan-sale gains (but not the interest recovery), diluted EPS rose from $0.72 to $0.80. Without the $1.6 million recovery, net interest income would have been about $46.1 million, still roughly 7% above last year. The underlying improvement holds, but it is smaller than the 46-basis-point margin jump suggests.
Costs grew faster than revenue. Noninterest expense rose 9.2% to $52.9 million, while revenue rose 7.8%. That pushed the efficiency ratio (the cents spent on operating costs for each dollar of revenue, where lower is better) from 60.66% to 62.53%. Compensation rose 7.4% because of merit raises, a larger Arizona commercial banking team and higher deferred-compensation liabilities. Professional fees rose 61.7%, partly because of an accounting reclassification and partly because of higher legal fees. The costs of holding foreclosed property also pushed "other" expense up 104%.
Part of the drop in problem loans came from foreclosures. Nonaccrual loans fell from $53.9 million to $7.1 million, but foreclosed property (OREO) rose from $0.1 million to $9.6 million. The company took over "one 1-4 family property and one apartment complex." Those assets no longer count as bad loans, but Alerus still has to sell them and carries their costs until it does.
The loan-loss reserve is much thinner after the cleanup. The allowance for credit losses fell from 1.53% of loans in December to 1.20%. Much of the reserve was set aside for loans that have now been resolved. One commercial and industrial (C&I) relationship produced $6.4 million of charge-offs in Q1 and $1.4 million in Q2. Its specific reserve dropped from $9.0 million to $1.0 million. The Q1 reserve release of $4.9 million lifted first-half earnings. Six-month net income rose 30.6% to $43.8 million, but much of that came from releasing reserves rather than from the business itself.
Buybacks added a little to EPS growth. Diluted share count fell 1.2%, to 25.4 million, after repurchases. Alerus bought back $6.8 million of stock at $27.10 a share this quarter. That explains why EPS grew 3.8% while net income grew 3.0%. The tax rate was about 23.5%, close to last year's 23.2%, so taxes did not move the number.
Cash conversion is fine. Operating cash flow for the first half was $46.4 million against net income of $43.8 million.
Legal risk. Alerus sold its ESOP trustee business in 2023 but still faces two lawsuits over it, including one from the U.S. Department of Labor. The company says a material loss is "reasonably possible, but not probable" and that it cannot estimate the amount.
Capital and returns
CET1 ratio (common equity tier 1: a bank's core loss-absorbing capital divided by its risk-weighted assets) rose to 10.81% from 10.28% in December. Tangible book value per share rose 16.3% year over year to $18.73. Return on average tangible common equity (ROTCE), the profit earned on shareholders' equity excluding goodwill from acquisitions, was 19.33%. That is lower than last year's 22.65%, which had been lifted by the loan-sale gain. Even so, it is a high return for a regional bank. Alerus raised its quarterly dividend 4.8% to $0.22.
Outlook
The release gives no numerical guidance. Based on the filing, we would watch these things in Q3:
Whether NIM holds near 3.8% to 3.9% without the one-time recovery. Lower deposit costs should last, but accretion from acquired loans keeps shrinking (the unearned fair-value adjustment fell from $58.0 million to $36.9 million over the year). Further Fed cuts would affect both sides of the balance sheet.
Whether loans start to grow. Investor commercial real estate is shrinking while commercial lending grows, and management is hiring in Arizona. Flat loans cap how far net interest income can rise from margin gains alone.
How quickly the $9.6 million of foreclosed property is sold, and at what price. Criticized loans (loans the bank flags as weak but not yet bad) fell from $212.6 million to $83.1 million over the year. If that trend holds and new problem loans don't appear, the credit problems that dominated 2025 will have largely cleared.
Our view: the core story is better funding costs and a cleaner loan book, not growth. If the next quarter shows NIM staying near 3.8% to 3.9% without one-offs and expenses growing no faster than revenue, roughly 19% ROTCE looks sustainable. If costs keep rising 9% a year on flat loans, the margin gains will get absorbed by expenses.