Alerus Financial Corporation (Nasdaq: ALRS), a commercial wealth bank and national retirement services provider, reported impressive financial performance in the second quarter of 2025. The company posted net income of $20.3 million, or $0.78 per diluted common share, representing a significant increase compared to both the prior quarter and the prior year. These results underscore the strength of Alerus’ diversified business model and its ability to consistently deliver performance in varying market conditions.

Financial Highlights: Double-Digit Growth and Improved Profitability Ratios

Alerus Financial Corporation achieved net income of $20.3 million in the second quarter of 2025, up from $13.3 million in the first quarter of 2025 and $6.2 million in the second quarter of 2024. Diluted earnings per common share were $0.78, compared to $0.52 in Q1 2025 and $0.31 in Q2 2024. Excluding certain adjustments, adjusted earnings per diluted common share (non-GAAP) were $0.72, a 28.6% increase from $0.56 in Q1 2025.

Profitability ratios showed notable improvement. Return on average total assets was 1.53% in the second quarter of 2025. Adjusted return on average total assets (non-GAAP) improved to 1.41% in Q2 2025, a 31 basis point increase from 1.10% in Q1 2025. Alerus also reported an adjusted return on average tangible common equity (non-GAAP) of 21.0% in Q2 2025, an increase from 17.6% in the prior quarter. These improvements reflect both revenue growth and the company’s disciplined expense management.

Net interest income was $43.0 million in the second quarter of 2025, a 4.6% increase from $41.2 million in Q1 2025. The net interest margin (non-GAAP) was 3.51% in Q2 2025, a 10 basis point increase from 3.41% in Q1 2025, and a significant 112 basis point increase from 2.39% in Q2 2024. This increase is mainly attributable to higher loan rates on new loan originations against a stable cost of funds.

Noninterest income increased to $31.8 million in the second quarter of 2025, a 15.0% increase from $27.6 million in Q1 2025. This rise was primarily driven by increases in mortgage banking and gain on sale of non-mortgage loans, including a $2.1 million gain on the sale of a purchased credit deteriorated (PCD) hospitality loan.

The efficiency ratio was 60.7% in Q2 2025. The adjusted efficiency ratio (non-GAAP) was 62.4%, an improvement from 66.9% in Q1 2025, indicating enhanced operational efficiency.

Proactive Credit Risk Management and Portfolio Discipline

Alerus demonstrated proactive credit risk management and portfolio discipline. The bank executed a strategic sale of $62.5 million of non-owner occupied commercial real estate loans. Additionally, as of June 30, 2025, an additional $50.2 million of hospitality loans were classified as non-mortgage loans held for sale, which were subsequently sold in July 2025.

The net charge-offs to average loans ratio was 0.37% in the second quarter of 2025. Excluding charge-offs related to the hospitality loan sale, the adjusted net charge-offs to average loans (non-GAAP) were 0.07%, compared to 0.04% in Q1 2025. Alerus reported net charge-offs of $3.8 million in Q2 2025, compared to $0.4 million in Q1 2025 and $2.5 million in Q2 2024. The company recorded no provision for credit losses in Q2 2025, compared to a $0.9 million provision in Q1 2025 and a $4.5 million provision in Q2 2024.

Total nonperforming assets were $52.2 million as of June 30, 2025, a decrease of $10.7 million from December 31, 2024. The allowance for credit losses on loans was $59.3 million, or 1.47% of total loans, as of June 30, 2025.

Strong Capital Ratios and Shareholder Returns

Total stockholders’ equity amounted to $533.2 million as of June 30, 2025, an increase of $37.7 million from December 31, 2024. This change was primarily driven by an increase in retained earnings of $23.2 million and a decrease in accumulated other comprehensive loss of $13.5 million. Tangible book value per common share (non-GAAP) increased to $16.11 as of June 30, 2025, from $15.27 as of March 31, 2025.

Alerus’ capital ratios remained strong: Common equity tier 1 capital to risk weighted assets increased to 10.54% as of June 30, 2025, from 9.91% as of December 31, 2024. Tangible common equity to tangible assets (non-GAAP) increased to 7.87% as of June 30, 2025, from 7.13% as of December 31, 2024. All capital ratios exceeded “well-capitalized” regulatory benchmarks.

Alerus continues its long history of dividend increases. The bank raised its quarterly dividend by 5.00% over the first quarter of 2025 to $0.21 per share. This marks the 39th consecutive year that the company has increased its dividend, demonstrating its ongoing commitment to delivering consistent shareholder value.

Long-Term Strategy and Focus on Diversified Businesses

Katie Lorenson, President and CEO of Alerus, stated that “Alerus delivered another quarter of strong progress towards our goal of achieving sustained top tier performance”. She emphasized “the power of our diversified business model and disciplined execution”. Alerus remains focused on “executing our long-term strategy, enhancing client relationships, and driving sustainable growth across our One Alerus integrated banking, wealth, and retirement services businesses”. Alerus Financial Corporation provides diversified and comprehensive financial solutions to business and consumer clients, including banking, wealth services, and retirement and benefit plans and services.

Summary: Alerus Financial Corporation – Strong Momentum Towards Consistent Top-Tier Performance

Alerus Financial Corporation delivered a particularly strong second quarter in 2025, with impressive increases in net income and EPS, alongside significant improvements in profitability metrics such as return on assets and tangible common equity. The bank leverages its diversified business model, integrating banking, wealth, and retirement services, to drive revenue growth and control expenses. The company’s proactive credit risk management, coupled with strong capital ratios and a long tradition of increasing dividends, positions it as a stable bank with potential for continued shareholder value creation. The information in this article is provided for professional review purposes only and does not constitute financial or investment advice.