Earnings

Alerus Reports $19.2 Million Q3 2026 Profit; Commercial and Business Lending Reaches 37.1% of Loans

The Tip Desk · November 10, 2026 · 5 min read

Third-quarter 2026 net interest income was $46.7 million and noninterest income $34.4 million as loans reached $4.2 billion.

Alerus Financial Corporation (ALRS), a commercial wealth advisory bank and national retirement and benefit services provider, reported net income of $19.2 million, or $0.76 a share, for the third quarter of 2026, down from $20.9 million, or $0.81 a share, in the second quarter. Net interest income was $46.7 million.

The sequential decline in net interest income followed a 6.2% increase in the prior quarter. Net interest income was $46.7 million, down $1.0 million, or 2.1%, from $47.7 million in the second quarter. The company attributed the drop to a one-time $1.6 million interest income recovery on a nonaccrual loan resolution in the second quarter and less purchase accounting accretion, partially offset by higher loan and investment yields. Interest expense rose $0.6 million, or 2.4%, as average rates paid on deposits and borrowings increased slightly after a Federal Reserve move in the federal funds benchmark.

Net interest margin on a tax-equivalent basis compressed 13 bps to 3.84% from 3.97% in the second quarter, reversing a 20 bps expansion in the prior quarter. The company said the sequential decline was mainly the second-quarter nonaccrual recovery and less purchase accounting accretion, partially offset by higher loan and investment yields.

Noninterest income was $34.4 million, up $1.4 million, or 4.3%, from $32.9 million in the second quarter, after a 6.8% sequential increase in the prior quarter. The company cited higher other noninterest income, retirement and benefit services, wealth advisory services, and mortgage banking revenue. Other noninterest income rose $0.5 million, or 15.1%, primarily on a gain on the sale of a property in Fargo, North Dakota, partially offset by a loss on a property transferred to held for sale in Rochester, Minnesota. Retirement and benefit services revenue increased $0.3 million, or 1.8%, on recurring annual revenue. Wealth advisory services revenue increased $0.3 million, or 3.8%, on higher transaction-based fees and a slight rise in asset-based revenues. Mortgage banking revenue increased $0.1 million, or 4.2%, on higher originations and gain-on-sale margins. Noninterest income represented 42.4% of total revenue.

The franchise continued to shift toward commercial and business banking. Total loans held for investment were $4.2 billion as of September 30, 2026, up $150.5 million, or 3.7%, from June 30, 2026. Commercial and business lending was $1.55 billion, up from $1.38 billion, and now represented 37.1% of the loan portfolio, up from 27.7% a year ago. Total consumer loans were $1.20 billion, down from $1.21 billion. Commercial and industrial loans were $861.1 million and owner-occupied commercial real estate $691.0 million. Investor commercial real estate was $1.33 billion. Agricultural loans were $108.3 million.

Total deposits were $4.3 billion as of September 30, 2026, up $111.2 million, or 2.7%, from June 30, 2026. Noninterest-bearing demand deposits were $813.5 million, up from $759.6 million; interest-bearing deposits were $3.49 billion, up from $3.43 billion. Money market savings were $1.31 billion and time deposits $582.4 million.

Credit quality continued to improve. Nonperforming assets were $16.4 million as of September 30, 2026, down $0.7 million, or 4.3%, from $17.1 million as of June 30, 2026. Nonperforming loans were $6.9 million, down from $7.5 million; OREO and repossessed assets were $9.4 million, down from $9.6 million. The company recorded net recoveries of $1.0 million, or a 0.10% net recovery rate to average loans, compared with net charge-offs of $2.6 million, or 0.26%, in the second quarter. It said the sequential improvement was primarily a $1.1 million recovery on a long-term commercial and industrial client that had been charged off in the second quarter. Management does not believe the charge-offs from that relationship are indicative of a broader credit quality trend. The provision for credit losses was $2.2 million. The allowance for credit losses on loans was $51.4 million, or 1.23% of total loans, compared with 1.20% as of June 30, 2026.

Noninterest expense was $53.9 million, up $1.0 million, or 1.9%, from the second quarter, primarily on higher employee taxes and benefits and marketing and business development expense. Employee taxes and benefits rose $0.6 million, or 9.2%, due to self-funded group insurance costs. Marketing and business development expense increased $0.4 million, or 41.2%, due to seasonal advertising campaigns. Other noninterest expense decreased $0.2 million, or 8.0%, on lower holding costs related to other real estate owned, miscellaneous operational losses, and corporate insurance costs. Return on average total assets was 1.45%. Return on average tangible common equity was 17.35%. The efficiency ratio was 63.41%.

The company repurchased $8.2 million of common stock at an average price of $32.75, reducing shares outstanding by 250,000 at quarter-end, after a $6.8 million buyback at $27.10 in the second quarter. Common equity tier 1 capital to risk-weighted assets was 10.52% as of September 30, 2026. Tangible book value per common share was $18.74. Combined retirement and benefit and wealth assets under management/administration were $50.1 billion.

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