Alerus Financial Q2 2025 slides: EPS surges 29%, NIM expansion continues

Alerus Financial Corporation (NASDAQ:ALRS) showcased strong second-quarter performance in its investor presentation released July 28, 2025, highlighting continued momentum from its first-quarter results with significant improvements across key financial metrics.

Quarterly Performance Highlights

Alerus reported adjusted earnings per share of $0.72 for Q2 2025, representing a substantial 29% increase from the $0.56 reported in Q1. This performance was driven by net interest income of $43.0 million, up 4.6% quarter-over-quarter and an impressive 79.3% year-over-year. The company’s adjusted return on average assets (ROAA) improved to 1.41%, a 31 basis point increase from Q1, while adjusted return on tangible common equity (ROTCE) reached 21.02%, up from 17.61% in the previous quarter.

As shown in the following quarterly highlights summary:

The company’s net interest margin expanded to 3.51%, continuing the positive trend from Q1’s 3.41%. This expansion was supported by an 8 basis point increase in loan yields and a 6 basis point decrease in deposit costs, demonstrating effective balance sheet management in the current interest rate environment.

Detailed Financial Analysis

Alerus’s revenue streams remain well-diversified, with net interest income comprising 54.4% of total revenue, while retirement and benefits services contribute 24.3%, wealth advisory 10.5%, and banking fees and other revenue 10.8%. This diversification has been a cornerstone of the company’s resilience and growth strategy.

The following chart illustrates the company’s diversified revenue model and business segments:

The company’s noninterest income showed strong growth of 15.0% quarter-over-quarter and 16.0% year-over-year, reaching $31.8 million in Q2 2025. This performance underscores the strength of Alerus’s fee-based businesses, particularly in retirement and benefit services, where assets under administration/management grew to $42.5 billion.

Net interest income performance was particularly noteworthy, as illustrated in the following breakdown:

On the deposit front, Alerus reported total deposits of $4.3 billion, a decrease of $148 million or 3.3% from March 31, 2025. The deposit portfolio remains well-balanced with noninterest-bearing deposits accounting for 18.2%, interest-bearing demand at 28.0%, money market and savings at 30.8%, time deposits at 18.4%, and public funds at 5.0%.

The deposit composition is visualized in the following chart:

Strategic Initiatives

Alerus continued to execute on several strategic initiatives during the quarter, including a strategic loan sale that resulted in a $2.1 million gain. The company transferred $50.2 million of commercial real estate loans to held-for-sale status, demonstrating proactive portfolio management.

The company’s efficiency ratio improved to 62.4% in Q2, a 4.5% decrease from Q1, reflecting disciplined expense management. Tangible book value per share increased to $16.11, up $0.84 from the previous quarter, creating additional shareholder value.

In a move that further emphasizes its commitment to shareholder returns, Alerus increased its quarterly dividend by 5.0% to $0.21 per share, returning approximately $5.3 million to shareholders.

The company’s strategic growth initiatives are outlined in the following presentation slide:

Alerus maintains a strong geographical presence across multiple states, with particular concentration in the Midwest and Arizona. The company serves a diverse client base including 57,700 consumer banking clients, 20,000 commercial banking clients, 8,500 employer-sponsored retirement plans, and 12,000 wealth clients.

The company’s franchise footprint is illustrated in the following map:

Forward-Looking Statements

Alerus’s capital position remains robust with a Common Equity Tier 1 (CET1) ratio of 10.5%, well above regulatory requirements. The allowance for credit losses to total loans stands at 1.47%, with no provision expense recorded in Q2 2025, reflecting confidence in the quality of the loan portfolio despite a slight increase in the adjusted net charge-off ratio to 0.07%.

Looking ahead, Alerus continues to focus on its "One Alerus" strategy, emphasizing collaborative leadership, leveraging growth synergies across business lines, and pursuing strategic acquisitions in the retirement, benefit services, and wealth management sectors. The company’s strategic initiatives also include becoming an employer of choice to attract and retain top talent, particularly in growth markets.

The Q2 2025 results build upon the momentum reported in Q1, when the company’s stock surged 8.56% following better-than-expected earnings. With the continued improvement in key metrics demonstrated in the Q2 presentation, Alerus appears well-positioned to maintain its growth trajectory and competitive edge in its core markets.

Full presentation:

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