EX-99.1 2 ex_794906.htm EXHIBIT 99.1

Exhibit 99.1

| Alan A. Villalon, Chief Financial Officer 952.417.3733 (Office)

FOR RELEASE (04.28.2025)

ALERUS FINANCIAL CORPORATION REPORTS

First QUARTER 2025 NET INCOME OF $13.3 MILLION

MINNEAPOLIS, MN (April 28, 2025) – Alerus Financial Corporation (Nasdaq: ALRS), or the Company, reported net income of $13.3 million for the first quarter of 2025, or $0.52 per diluted common share, compared to a net loss of ($0.1) million, or $0.00 per diluted common share, for the fourth quarter of 2024, and net income of $6.4 million, or $0.32 per diluted common share, for the first quarter of 2024.

CEO Comments

President and Chief Executive Officer Katie Lorenson said, “This quarter marked a strong start to the year, reflecting our team’s commitment to disciplined execution and strategic integration efforts following our merger with Home Federal. We achieved notable improvements across key financial metrics, with balanced growth in loans and deposits resulting in a strengthened net interest margin. Our uniquely diversified business model and top decile fee income remain significant differentiators and reinforce the stability and resilience of our revenue streams. At the same time, we remain mindful of the evolving economic landscape and are proactively managing risk while maintaining our focus on efficiency and long-term shareholder value. With a well-diversified balance sheet and robust reserve levels, we will continue to adapt to market conditions, optimize operations, and drive strategic growth opportunities. I want to extend my appreciation to our employees for their dedication in navigating these dynamic times and delivering value to our stakeholders.”

First Quarter Highlights

| ■ | Earnings per common share - diluted in the first quarter of 2025 of $0.52. Adjusted earnings per common share - diluted (non-GAAP) of $0.56 in the first quarter of 2025, an increase of 24.4% from $0.45 in the fourth quarter of 2024.
| ■ | Net income was $13.3 million in the first quarter of 2025. Adjusted net income (non-GAAP) was $14.4 million in the first quarter of 2025, an increase of 27.6% from $11.2 million in the fourth quarter of 2024.
| ■ | Total loans were $4.1 billion as of March 31, 2025, an increase of $92.9 million, or 2.3%, from December 31, 2024.
| ■ | Total deposits were $4.5 billion as of March 31, 2025, an increase of $106.9 million, or 2.4%, from December 31, 2024.

| ■ | The loan to deposit ratio was 91.1% as of March 31, 2025, compared to 91.2% as of December 31, 2024.

| ■ | Net interest income was $41.2 million in the first quarter of 2025, an increase of 7.5% from $38.3 million in the fourth quarter of 2024.

| ■ | Net interest margin was 3.41% in the first quarter of 2025, an increase of 21 basis points from 3.20% in the fourth quarter of 2024.

| ■ | Pre-provision net revenue (non-GAAP) was $18.4 million in the first quarter of 2025. Adjusted pre-provision net revenue (non-GAAP) was $19.7 million in the first quarter of 2025, an increase of 8.2% from $18.2 million in the fourth quarter of 2024.

| ■ | Efficiency ratio was 68.8% in the first quarter of 2025. Adjusted efficiency ratio (non-GAAP) was 66.9% in the first quarter of 2025, improved from 69.0% in the fourth quarter of 2024.
| ■ | Net charge-offs to average loans were 0.04% for the first quarter of 2025, compared to 0.13% for the fourth quarter of 2024.
| ■ | The ratio of nonperforming loans to total loans was 1.24% as of March 31, 2025, compared to 1.58% as of December 31, 2024.
| ■ | Tangible book value per common share (non-GAAP) was $15.27 as of March 31, 2025, an increase of 5.7%, from $14.44 as of December 31, 2024.
| ■ | Return on average total assets was 1.02% in the first quarter of 2025. Adjusted return on average total assets (non-GAAP) was 1.10% in the first quarter of 2025, an increase of 26 basis points from 0.85% in the fourth quarter of 2024.
| ■ | Return on average tangible common equity (non-GAAP) was 16.50% in the first quarter of 2025. Adjusted return on average tangible common equity (non-GAAP) was 17.6% in the first quarter of 2025, an increase from 14.9% in the fourth quarter of 2024.

Selected Financial Data (unaudited)

|  | As of and for the |
|  | Three months ended |
|  | March 31, |  |  | December 31, |  |  | March 31, |
(dollars and shares in thousands, except per share data) |  | 2025 |  |  | 2024 |  |  | 2024 |
Performance Ratios |  |  |  |  |  |  |  |  |  |  |  |
Return on average total assets |  |  | 1.02 | % |  |  | (0.00 | )% |  |  | 0.63 | %
Adjusted return on average total assets (1) |  |  | 1.10 | % |  |  | 0.85 | % |  |  | 0.65 | %
Return on average common equity |  |  | 10.82 | % |  |  | (0.05 | )% |  |  | 7.04 | %
Return on average tangible common equity (1) |  |  | 16.50 | % |  |  | 2.38 | % |  |  | 9.78 | %
Adjusted return on average tangible common equity (1) |  |  | 17.61 | % |  |  | 14.89 | % |  |  | 10.10 | %
Noninterest income as a % of revenue |  |  | 40.17 | % |  |  | 46.94 | % |  |  | 53.26 | %
Net interest margin (tax-equivalent) |  |  | 3.41 | % |  |  | 3.20 | % |  |  | 2.30 | %
Efficiency ratio (1) |  |  | 68.76 | % |  |  | 79.47 | % |  |  | 78.88 | %
Adjusted efficiency ratio (1) |  |  | 66.86 | % |  |  | 68.97 | % |  |  | 78.24 | %
Net charge-offs to average loans |  |  | 0.04 | % |  |  | 0.13 | % |  |  | 0.01 | %
Dividend payout ratio |  |  | 38.46 | % |  |  | — | % |  |  | 59.38 | %
Per Common Share |  |  |  |  |  |  |  |  |  |  |  |
Earnings per common share - basic |  | $ | 0.52 |  |  | $ | — |  |  | $ | 0.32 |
Earnings per common share - diluted |  | $ | 0.52 |  |  | $ | — |  |  | $ | 0.32 |
Adjusted earnings per common share - diluted (1) |  | $ | 0.56 |  |  | $ | 0.45 |  |  | $ | 0.33 |
Dividends declared per common share |  | $ | 0.20 |  |  | $ | 0.20 |  |  | $ | 0.19 |
Book value per common share |  | $ | 20.27 |  |  | $ | 19.55 |  |  | $ | 18.79 |
Tangible book value per common share (1) |  | $ | 15.27 |  |  | $ | 14.44 |  |  | $ | 15.63 |
Average common shares outstanding - basic |  |  | 25,359 |  |  |  | 24,857 |  |  |  | 19,739 |
Average common shares outstanding - diluted |  |  | 25,653 |  |  |  | 25,144 |  |  |  | 19,986 |
Other Data |  |  |  |  |  |  |  |  |  |  |  |
Retirement and benefit services assets under administration/management |  | $ | 39,925,596 |  |  | $ | 40,728,699 |  |  | $ | 38,488,523 |
Wealth management assets under administration/management |  | $ | 4,500,852 |  |  | $ | 4,579,189 |  |  | $ | 4,242,408 |
Mortgage originations |  | $ | 70,593 |  |  | $ | 88,576 |  |  | $ | 54,101 |

(1) Represents a non-GAAP financial measure. See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.”

Results of Operations

Net Interest Income

Net interest income for the first quarter of 2025 was $41.2 million, a $2.9 million, or 7.5%, increase from the fourth quarter of 2024. The increase was primarily due to lower average rates paid on deposit balances and increased interest income from organic loan growth at higher yields and earning assets acquired in the HMN Financial, Inc. (“HMNF”) transaction.

Net interest income increased $18.9 million, or 85.2%, from $22.2 million for the first quarter of 2024. Interest income increased $19.1 million, or 39.0%, from the first quarter of 2024, primarily driven by acquired earning assets acquired in the HMNF transaction, strong organic loan growth at higher yields, and purchase accounting accretion. Interest expense remained relatively stable, increasing just $0.2 million, or 0.8%, from the first quarter of 2024, as a decrease in the average rate paid on deposits largely offset the increase in interest-bearing deposits stemming from the acquisition of HMNF and organic deposit growth.

Net interest margin (on a tax-equivalent basis) was 3.41% for the first quarter of 2025, a 21 basis point increase from 3.20% for the fourth quarter of 2024, and a 111 basis point increase from 2.30% for the first quarter of 2024. The quarter over quarter increase was mainly attributable to lower rates paid on deposits and organic loan growth at higher yields. The increase from the first quarter of 2024 was primarily driven by higher rates on interest earning assets from organic loan growth and the HMNF acquisition, purchase accounting accretion, and lower rates paid on deposits.

Noninterest Income

Noninterest income for the first quarter of 2025 was $27.6 million, a $6.2 million decrease from the fourth quarter of 2024. The quarter over quarter decrease was primarily driven by a decrease in other noninterest income of $4.0 million, or 62.2%, from the fourth quarter of 2024, primarily due to a $3.5 million gain on the sale of fixed assets recorded in the fourth quarter of 2024 and decreased swap fee income due to fewer commercial loan originations with swaps. Mortgage banking revenue decreased $1.8 million in the first quarter of 2025, from $3.3 million in the fourth quarter of 2024, primarily driven by a decrease of $0.7 million in the fair value of mortgage servicing rights. Retirement and benefit services revenue decreased $0.4 million in the first quarter of 2025, a 2.3% decrease from the fourth quarter of 2024, primarily driven by a decline in asset-based and other fees. Wealth revenue remained stable with a decrease of $0.1 million, or 1.5%, during the first quarter of 2025, compared to the fourth quarter of 2024. Combined assets under administration/management in retirement and benefit services and wealth decreased 1.9% from December 31, 2024. The slight decrease in combined assets under administration/management was due to net outflows and decreased market values.

Noninterest income for the first quarter of 2025 increased by $2.3 million from the first quarter of 2024. Wealth revenue increased $0.8 million, or 12.9%, in the first quarter of 2025 compared to the first quarter of 2024, primarily driven by new client growth and a 6.1% increase in assets under administration/management during that same period. Retirement and benefit services revenue increased $0.5 million, or 2.9%, from $15.7 million in the first quarter of 2024, primarily driven by a 3.7% increase in assets under administration/management during that same period. Other noninterest income increased $1.0 million, or 63.8%, in the first quarter of 2025 compared to the first quarter of 2024, primarily due to increased swap fee income generated from commercial loan originations and increased fee income resulting from the HMNF transaction.

2

Noninterest Expense

Noninterest expense for the first quarter of 2025 was $50.4 million, a $10.1 million, or 16.7%, decrease from the fourth quarter of 2024. The quarter over quarter decrease was primarily driven by expenses related to the acquisition of HMNF incurred in the fourth quarter of 2024. Professional fees and assessments decreased $8.0 million, or 72.7%, from the fourth quarter of 2024, primarily driven by a $7.4 million decrease in acquisition-related expenses. Compensation expense decreased $3.7 million, or 13.9%, from the fourth quarter of 2024, primarily due to acquisition-related compensation expenses only recognized in the fourth quarter of 2024 in connection with the closing of the acquisition of HMNF. Business services, software and technology expense decreased $1.2 million, or 17.1%, from the fourth quarter of 2024, primarily driven by decreased core processing fees and computer supplies, both of which were driven by expense synergies realized from the HMNF transaction. Employee taxes and benefits expense increased $1.5 million, or 24.3%, from the fourth quarter of 2024, primarily due to seasonality.

Noninterest expense for the first quarter of 2025 increased $11.3 million, or 29.1%, from $39.0 million in the first quarter of 2024. The increase was primarily driven by compensation expense, employee taxes and benefits expense, intangible amortization expense, professional fees and assessments, and occupancy and equipment expense. Compensation expense increased $3.6 million, or 18.8%, in the first quarter of 2025. Employee taxes and benefits expense increased $1.6 million, or 25.4%. Both compensation expense and employee taxes and benefits expense increased primarily due to increased headcount resulting from the HMNF transaction and talent acquisition hires throughout 2024. Intangible amortization expense increased $1.4 million in the first quarter of 2025, primarily driven by the $33.5 million core deposit intangible recorded in connection with the HMNF acquisition. Professional fees and assessments increased $1.0 million, or 50.3%, from the first quarter of 2024, primarily due to an increase in Federal Deposit Insurance Corporation (“FDIC”) assessments. Occupancy and equipment expense increased $1.0 million, or 52.5%, from the first quarter of 2024, primarily driven by increased branch footprint resulting from the HMNF acquisition.

Financial Condition

Total assets were $5.3 billion as of March 31, 2025, an increase of $77.9 million, or 1.5%, from December 31, 2024. The increase was primarily due to a $92.9 million increase in loans and an increase of $21.7 million in cash and cash equivalents, partially offset by a decrease of $20.3 million in available-for-sale investment securities and a decrease of $7.0 million in held-to-maturity investment securities.

Loans

Total loans were $4.1 billion as of March 31, 2025, an increase of $92.9 million, or 2.3%, from December 31, 2024. The increase was primarily driven by a $93.8 million increase in commercial loans, partially offset by a $0.9 million decrease in consumer loans.

The following table presents the composition of our loan portfolio as of the dates indicated:

|  | March 31, |  |  | December 31, |  |  | September 30, |  |  | June 30, |  |  | March 31, |
(dollars in thousands) |  | 2025 |  |  | 2024 |  |  | 2024 |  |  | 2024 |  |  | 2024 |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 658,446 |  |  | $ | 666,727 |  |  | $ | 606,245 |  |  | $ | 591,779 |  |  | $ | 575,259 |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land and development |  |  | 360,024 |  |  |  | 294,677 |  |  |  | 173,629 |  |  |  | 161,751 |  |  |  | 125,966 |
Multifamily |  |  | 353,060 |  |  |  | 363,123 |  |  |  | 275,377 |  |  |  | 242,041 |  |  |  | 260,609 |
Non-owner occupied |  |  | 951,559 |  |  |  | 967,025 |  |  |  | 686,071 |  |  |  | 647,776 |  |  |  | 565,979 |
Owner occupied |  |  | 424,880 |  |  |  | 371,418 |  |  |  | 296,366 |  |  |  | 283,356 |  |  |  | 285,211 |
Total commercial real estate |  |  | 2,089,523 |  |  |  | 1,996,243 |  |  |  | 1,431,443 |  |  |  | 1,334,924 |  |  |  | 1,237,765 |
Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land |  |  | 68,894 |  |  |  | 61,299 |  |  |  | 45,821 |  |  |  | 41,410 |  |  |  | 41,149 |
Production |  |  | 64,240 |  |  |  | 63,008 |  |  |  | 39,436 |  |  |  | 40,549 |  |  |  | 36,436 |
Total agricultural |  |  | 133,134 |  |  |  | 124,307 |  |  |  | 85,257 |  |  |  | 81,959 |  |  |  | 77,585 |
Total commercial |  |  | 2,881,103 |  |  |  | 2,787,277 |  |  |  | 2,122,945 |  |  |  | 2,008,662 |  |  |  | 1,890,609 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
First lien |  |  | 907,534 |  |  |  | 921,019 |  |  |  | 690,451 |  |  |  | 686,286 |  |  |  | 703,726 |
Construction |  |  | 38,553 |  |  |  | 33,547 |  |  |  | 11,808 |  |  |  | 22,573 |  |  |  | 18,425 |
HELOC |  |  | 175,600 |  |  |  | 162,509 |  |  |  | 134,301 |  |  |  | 126,211 |  |  |  | 120,501 |
Junior lien |  |  | 43,740 |  |  |  | 44,060 |  |  |  | 36,445 |  |  |  | 36,323 |  |  |  | 36,381 |
Total residential real estate |  |  | 1,165,427 |  |  |  | 1,161,135 |  |  |  | 873,005 |  |  |  | 871,393 |  |  |  | 879,033 |
Other consumer |  |  | 38,953 |  |  |  | 44,122 |  |  |  | 36,393 |  |  |  | 35,737 |  |  |  | 29,833 |
Total consumer |  |  | 1,204,380 |  |  |  | 1,205,257 |  |  |  | 909,398 |  |  |  | 907,130 |  |  |  | 908,866 |
Total loans |  | $ | 4,085,483 |  |  | $ | 3,992,534 |  |  | $ | 3,032,343 |  |  | $ | 2,915,792 |  |  | $ | 2,799,475 |

3

Deposits

Total deposits were $4.5 billion as of March 31, 2025, an increase of $106.9 million, or 2.4%, from December 31, 2024. Interest-bearing deposits increased $121.1 million and noninterest-bearing deposits decreased $14.2 million, from December 31, 2024. The increase in total deposits was due primarily to expanded and new commercial deposit relationships and synergistic deposit growth. Synergistic deposits were $1.0 billion as of March 31, 2025, an increase of $73.5 million, or 7.5%, from December 31, 2024.

The following table presents the composition of the Company’s deposit portfolio as of the dates indicated:

|  | March 31, |  |  | December 31, |  |  | September 30, |  |  | June 30, |  |  | March 31, |
(dollars in thousands) |  | 2025 |  |  | 2024 |  |  | 2024 |  |  | 2024 |  |  | 2024 |
Noninterest-bearing demand |  | $ | 889,270 |  |  | $ | 903,466 |  |  | $ | 657,547 |  |  | $ | 701,428 |  |  | $ | 692,500 |
Interest-bearing |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing demand |  |  | 1,283,031 |  |  |  | 1,220,173 |  |  |  | 1,034,694 |  |  |  | 1,003,585 |  |  |  | 938,751 |
Savings accounts |  |  | 177,341 |  |  |  | 165,882 |  |  |  | 75,675 |  |  |  | 79,747 |  |  |  | 82,727 |
Money market savings |  |  | 1,472,127 |  |  |  | 1,381,924 |  |  |  | 1,067,187 |  |  |  | 1,022,470 |  |  |  | 1,114,262 |
Time deposits |  |  | 663,522 |  |  |  | 706,965 |  |  |  | 488,447 |  |  |  | 491,345 |  |  |  | 456,729 |
Total interest-bearing |  |  | 3,596,021 |  |  |  | 3,474,944 |  |  |  | 2,666,003 |  |  |  | 2,597,147 |  |  |  | 2,592,469 |
Total deposits |  | $ | 4,485,291 |  |  | $ | 4,378,410 |  |  | $ | 3,323,550 |  |  | $ | 3,298,575 |  |  | $ | 3,284,969 |

Asset Quality

Total nonperforming assets were $51.0 million as of March 31, 2025, a decrease of $11.9 million from December 31, 2024. As of March 31, 2025, the allowance for credit losses on loans was $61.9 million, or 1.52% of total loans, compared to $59.9 million, or 1.50% of total loans, as of December 31, 2024.

The following table presents selected asset quality data as of and for the periods indicated:

|  | As of and for the three months ended |
|  | March 31, |  |  | December 31, |  |  | September 30, |  |  | June 30, |  |  | March 31, |
(dollars in thousands) |  | 2025 |  |  | 2024 |  |  | 2024 |  |  | 2024 |  |  | 2024 |
Nonaccrual loans |  | $ | 50,517 |  |  | $ | 54,433 |  |  | $ | 48,026 |  |  | $ | 27,618 |  |  | $ | 7,345 |
Accruing loans 90+ days past due |  |  | — |  |  |  | 8,453 |  |  |  | — |  |  |  | — |  |  |  | — |
Total nonperforming loans |  |  | 50,517 |  |  |  | 62,886 |  |  |  | 48,026 |  |  |  | 27,618 |  |  |  | 7,345 |
OREO and repossessed assets |  |  | 493 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3 |
Total nonperforming assets |  | $ | 51,010 |  |  | $ | 62,886 |  |  | $ | 48,026 |  |  | $ | 27,618 |  |  | $ | 7,348 |
Net charge-offs/(recoveries) |  |  | 407 |  |  |  | 1,258 |  |  |  | 316 |  |  |  | 2,522 |  |  |  | 58 |
Net charge-offs/(recoveries) to average loans |  |  | 0.04 | % |  |  | 0.13 | % |  |  | 0.04 | % |  |  | 0.36 | % |  |  | 0.01 | %
Nonperforming loans to total loans |  |  | 1.24 | % |  |  | 1.58 | % |  |  | 1.58 | % |  |  | 0.95 | % |  |  | 0.26 | %
Nonperforming assets to total assets |  |  | 0.96 | % |  |  | 1.20 | % |  |  | 1.18 | % |  |  | 0.63 | % |  |  | 0.17 | %
Allowance for credit losses on loans to total loans |  |  | 1.52 | % |  |  | 1.50 | % |  |  | 1.29 | % |  |  | 1.31 | % |  |  | 1.31 | %
Allowance for credit losses on loans to nonperforming loans |  |  | 123 | % |  |  | 95 | % |  |  | 82 | % |  |  | 139 | % |  |  | 498 | %

For the first quarter of 2025, the Company had net charge-offs of $0.4 million, compared to net charge-offs of $1.3 million for the fourth quarter of 2024 and net charge-offs of $58 thousand for the first quarter of 2024. The quarter over quarter decrease in net charge-offs was driven by a $0.6 million charge-off of one residential real estate loan and a $0.4 million charge-off of one commercial and industrial loan in the fourth quarter of 2024.

The Company recorded a provision for credit losses of $0.9 million for the first quarter of 2025, compared to a provision for credit losses of $12.0 million for the fourth quarter of 2024 and no provision for credit losses for the first quarter of 2024. The provision for credit losses for the first quarter of 2025 was primarily driven by loan growth in CRE construction, land and development loans. The provision for credit losses for the fourth quarter of 2024 was primarily driven by a $7.8 million day one provision for credit losses and unfunded commitment reserve related to the acquisition of HMNF, as well as loan growth.

The unearned fair value adjustments on acquired loan portfolios were $65.3 million as of March 31, 2025, $70.6 million as of December 31, 2024, and $4.7 million as of March 31, 2024.

4

Capital

Total stockholders’ equity was $514.2 million as of March 31, 2025, an increase of $18.8 million from December 31, 2024. The change was primarily driven by an increase in retained earnings of $8.3 million and a decrease in accumulated other comprehensive loss of $10.1 million. Tangible book value per common share (non-GAAP) increased to $15.27 as of March 31, 2025, from $14.44 as of December 31, 2024. Tangible common equity to tangible assets (non-GAAP) increased to 7.43% as of March 31, 2025, from 7.13% as of December 31, 2024. Common equity tier 1 capital to risk weighted assets increased to 10.10% as of March 31, 2025, from 9.91% as of December 31, 2024.

The following table presents our capital ratios as of the dates indicated:

|  | March 31, |  |  | December 31, |  |  | March 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
Capital Ratios(1) |  |  |  |  |  |  |  |  |  |  |  |
Alerus Financial Corporation Consolidated |  |  |  |  |  |  |  |  |  |  |  |
Common equity tier 1 capital to risk weighted assets |  |  | 10.10 | % |  |  | 9.91 | % |  |  | 11.86 | %
Tier 1 capital to risk weighted assets |  |  | 10.31 | % |  |  | 10.12 | % |  |  | 12.13 | %
Total capital to risk weighted assets |  |  | 12.67 | % |  |  | 12.49 | % |  |  | 14.79 | %
Tier 1 capital to average assets |  |  | 8.86 | % |  |  | 8.65 | % |  |  | 9.89 | %
Tangible common equity / tangible assets (2) |  |  | 7.43 | % |  |  | 7.13 | % |  |  | 7.23 | %
Alerus Financial, N.A. |  |  |  |  |  |  |  |  |  |  |  |
Common equity tier 1 capital to risk weighted assets |  |  | 10.36 | % |  |  | 10.18 | % |  |  | 11.71 | %
Tier 1 capital to risk weighted assets |  |  | 10.36 | % |  |  | 10.18 | % |  |  | 11.71 | %
Total capital to risk weighted assets |  |  | 11.61 | % |  |  | 11.43 | % |  |  | 12.87 | %
Tier 1 capital to average assets |  |  | 9.06 | % |  |  | 8.69 | % |  |  | 9.30 | %

(1) | Capital ratios for the current quarter are to be considered preliminary until the Call Report for Alerus Financial, N.A. is filed.

(2) | Represents a non-GAAP financial measure. See “Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures.”

Conference Call

The Company will host a conference call at 11:00 a.m. Central Time on Tuesday, April 29, 2025, to discuss its financial results. Attendees are encouraged to register ahead of time for the call at investors.alerus.com. The call can also be accessed via telephone at +1 (833) 470-1428, using access code 031147. A recording of the call and transcript will be available on the Company’s investor relations website at investors.alerus.com following the call.

About Alerus Financial Corporation

Alerus Financial Corporation (Nasdaq: ALRS) is a commercial wealth bank and national retirement services provider with corporate offices in Grand Forks, North Dakota, and the Minneapolis-St. Paul, Minnesota metropolitan area. Through its subsidiary, Alerus Financial, National Association, Alerus provides diversified and comprehensive financial solutions to business and consumer clients, including banking, wealth services, and retirement and benefit plans and services. Alerus provides clients with a primary point of contact to help fully understand their unique needs and delivery channel preferences. Clients are provided with competitive products, valuable insight, and sound advice supported by digital solutions designed to meet their needs.

Alerus operates 29 banking and commercial wealth offices, with locations in Grand Forks and Fargo, North Dakota; the Minneapolis-St. Paul, Minnesota metropolitan area; Rochester, Minnesota; Southern Minnesota area; Marshalltown, Iowa; Pewaukee, Wisconsin; and Phoenix and Scottsdale, Arizona. Alerus also operates a commercial wealth office in La Crosse, Wisconsin. The Alerus Retirement and Benefit business serves advisors, brokers, employers, and plan participants across the United States.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized by U.S. Generally Accepted Accounting Principles, or GAAP. These non-GAAP financial measures include the ratio of tangible common equity to tangible assets, tangible book value per common share, return on average tangible common equity, efficiency ratio, pre-provision net revenue, adjusted noninterest income, adjusted noninterest expense, adjusted pre-provision net revenue, adjusted efficiency ratio, adjusted net income, adjusted return on average total assets, adjusted return on average tangible common equity, net interest margin (tax-equivalent), and adjusted earnings per common share - diluted. Management uses these non-GAAP financial measures in its analysis of its performance, and believes financial analysts and investors frequently use these measures, and other similar measures, to evaluate capital adequacy and financial performance. Reconciliations of non-GAAP disclosures used in this press release to the comparable GAAP measures are provided in the accompanying tables. Management, banking regulators, many financial analysts and other investors use these measures in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions.

These non-GAAP financial measures should not be considered in isolation or as a substitute for total stockholders’ equity, total assets, book value per share, return on average assets, return on average equity, or any other measure calculated in accordance with GAAP. Moreover, the manner in which the Company calculates these non-GAAP financial measures may differ from that of other companies reporting measures with similar names.

5

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of Alerus Financial Corporation. These statements are often, but not always, identified by words such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”, “annualized”, “target” and “outlook”, or the negative version of those words or other comparable words of a future or forward-looking nature. Examples of forward-looking statements include, among others, statements the Company makes regarding our projected growth, anticipated future financial performance, financial condition, credit quality, management’s long-term performance goals, and the future plans and prospects of Alerus Financial Corporation.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in forward-looking statements include, among others, the following: the strength of the local, state, national and international economies and financial markets (including effects of inflationary pressures and future monetary policies of the Federal Reserve in response thereto); interest rate risk, including the effects of changes in interest rates; effects on the U.S. economy resulting from the threat or implementation of, or changes to, existing policies and executive orders, including tariffs, immigration policy, regulatory and other governmental agencies, foreign policy and tax regulations; disruptions to the global supply chain, including as a result of domestic or foreign policies; our ability to successfully manage credit risk, including in the commercial real estate portfolio, and maintain an adequate level of allowance for credit losses; business and economic conditions generally and in the financial services industry, nationally and within our market areas, including the level and impact of inflation rates and possible recession; the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time that resulted in several bank failures; our ability to raise additional capital to implement our business plan; the overall health of the local and national real estate market; credit risks and risks from concentrations (by type of borrower, geographic area, collateral, and industry) within our loan portfolio; the concentration of large loans to certain borrowers (including commercial real estate loans); the level of nonperforming assets on our balance sheet; our ability to implement our organic and acquisition growth strategies, including the integration of HMNF which the Company acquired in the fourth quarter of 2024; the commencement, cost, and outcome of litigation and other legal proceedings and regulatory actions against us or to which the Company may become subject, including with respect to pending actions relating to the Company’s previous ESOP fiduciary services commenced by government or private parties; the impact of economic or market conditions on our fee-based services; our ability to continue to grow our retirement and benefit services business; our ability to continue to originate a sufficient volume of residential mortgages; the occurrence of fraudulent activity, breaches or failures of our or our third-party vendors’ information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools or as a result of insider fraud; interruptions involving our information technology and telecommunications systems or third-party servicers; potential losses incurred in connection with mortgage loan repurchases; the composition of our executive management team and our ability to attract and retain key personnel; rapid and expensive technological change in the financial services industry; increased competition in the financial services industry, including from non-banks such as credit unions, Fintech companies and digital asset service providers; our ability to successfully manage liquidity risk, including our need to access higher cost sources of funds such as fed funds purchased and short-term borrowings; the concentration of large deposits from certain clients, including those who have balances above current FDIC insurance limits; the effectiveness of our risk management framework; potential impairment to the goodwill the Company recorded in connection with our past acquisitions, including the acquisitions of Metro Phoenix Bank and HMNF; the extensive regulatory framework that applies to us; changes in local, state and federal laws, regulations and governmental policies concerning the Company’s general business, including changes in interpretation and prioritization of such laws, regulations and policies; new or revised accounting standards, as may be adopted by state and federal regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission (the “SEC”) or the Public Company Accounting Oversight Board; fluctuations in the values of the securities held in our securities portfolio, including as a result of changes in interest rates; governmental monetary, trade and fiscal policies; risks related to climate change and the negative impact it may have on our customers and their businesses; severe weather and natural disasters, and widespread disease or pandemics; acts of war or terrorism, including ongoing conflicts in the Middle East and Russian invasion of Ukraine, or other adverse external events; any material weaknesses in our internal control over financial reporting; changes to U.S. or state tax laws, regulations and governmental policies concerning our general business, including changes in interpretation or prioritization and changes in response to prior bank failures; talent and labor shortages and employee turnover; our success at managing and responding to the risks involved in the foregoing items; and any other risks described in the “Risk Factors” sections of the reports filed by Alerus Financial Corporation with the SEC.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

6

Alerus Financial Corporation and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands, except share and per share data)

|  | March 31, |  |  | December 31, |
|  | 2025 |  |  | 2024 |
Assets |  | (Unaudited) |  |  |  |  |
Cash and cash equivalents |  | $ | 82,979 |  |  | $ | 61,239 |
Investment securities |  |  |  |  |  |  |  |
Trading, at fair value |  |  | 3,047 |  |  |  | 3,309 |
Available-for-sale, at fair value |  |  | 567,728 |  |  |  | 588,053 |
Held-to-maturity, at amortized cost (with an allowance for credit losses on investments of $129 and $131, respectively) |  |  | 268,631 |  |  |  | 275,585 |
Loans held for sale |  |  | 12,905 |  |  |  | 16,518 |
Loans |  |  | 4,085,483 |  |  |  | 3,992,534 |
Allowance for credit losses on loans |  |  | (61,929 | ) |  |  | (59,929 | )
Net loans |  |  | 4,023,554 |  |  |  | 3,932,605 |
Land, premises and equipment, net |  |  | 40,733 |  |  |  | 39,780 |
Operating lease right-of-use assets |  |  | 12,983 |  |  |  | 13,438 |
Accrued interest receivable |  |  | 20,505 |  |  |  | 20,075 |
Bank-owned life insurance |  |  | 36,392 |  |  |  | 36,033 |
Goodwill |  |  | 85,634 |  |  |  | 85,634 |
Other intangible assets |  |  | 41,172 |  |  |  | 43,882 |
Servicing rights |  |  | 7,351 |  |  |  | 7,918 |
Deferred income taxes, net |  |  | 45,162 |  |  |  | 52,885 |
Other assets |  |  | 90,844 |  |  |  | 84,719 |
Total assets |  | $ | 5,339,620 |  |  | $ | 5,261,673 |
Liabilities and Stockholders’ Equity |  |  |  |  |  |  |  |
Deposits |  |  |  |  |  |  |  |
Noninterest-bearing |  | $ | 889,270 |  |  | $ | 903,466 |
Interest-bearing |  |  | 3,596,021 |  |  |  | 3,474,944 |
Total deposits |  |  | 4,485,291 |  |  |  | 4,378,410 |
Short-term borrowings |  |  | 200,000 |  |  |  | 238,960 |
Long-term debt |  |  | 59,098 |  |  |  | 59,069 |
Operating lease liabilities |  |  | 18,515 |  |  |  | 18,991 |
Accrued expenses and other liabilities |  |  | 62,484 |  |  |  | 70,833 |
Total liabilities |  |  | 4,825,388 |  |  |  | 4,766,263 |
Stockholders’ equity |  |  |  |  |  |  |  |
Preferred stock, $1 par value, 2,000,000 shares authorized: 0 issued and outstanding |  |  | — |  |  |  | — |
Common stock, $1 par value, 30,000,000 shares authorized: 25,365,662 and 25,344,803 issued and outstanding |  |  | 25,366 |  |  |  | 25,345 |
Additional paid-in capital |  |  | 270,159 |  |  |  | 269,708 |
Retained earnings |  |  | 281,961 |  |  |  | 273,723 |
Accumulated other comprehensive loss |  |  | (63,254 | ) |  |  | (73,366 | )
Total stockholders’ equity |  |  | 514,232 |  |  |  | 495,410 |
Total liabilities and stockholders’ equity |  | $ | 5,339,620 |  |  | $ | 5,261,673 |

7

Alerus Financial Corporation and Subsidiaries

Consolidated Statements of Income

(dollars and shares in thousands, except per share data)

|  | Three months ended |
|  | March 31, |  |  | December 31, |  |  | March 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
Interest Income |  | (Unaudited) |  |  | (Unaudited) |  |  | (Unaudited) |
Loans, including fees |  | $ | 61,495 |  |  | $ | 60,009 |  |  | $ | 39,294 |
Investment securities |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  |  | 5,707 |  |  |  | 5,737 |  |  |  | 4,568 |
Exempt from federal income taxes |  |  | 160 |  |  |  | 166 |  |  |  | 174 |
Other |  |  | 819 |  |  |  | 1,395 |  |  |  | 5,002 |
Total interest income |  |  | 68,181 |  |  |  | 67,307 |  |  |  | 49,038 |
Interest Expense |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 23,535 |  |  |  | 25,521 |  |  |  | 20,152 |
Short-term borrowings |  |  | 2,839 |  |  |  | 2,837 |  |  |  | 5,989 |
Long-term debt |  |  | 650 |  |  |  | 665 |  |  |  | 678 |
Total interest expense |  |  | 27,024 |  |  |  | 29,023 |  |  |  | 26,819 |
Net interest income |  |  | 41,157 |  |  |  | 38,284 |  |  |  | 22,219 |
Provision for credit losses |  |  | 863 |  |  |  | 11,992 |  |  |  | — |
Net interest income after provision for credit losses |  |  | 40,294 |  |  |  | 26,292 |  |  |  | 22,219 |
Noninterest Income |  |  |  |  |  |  |  |  |  |  |  |
Retirement and benefit services |  |  | 16,106 |  |  |  | 16,488 |  |  |  | 15,655 |
Wealth management |  |  | 6,905 |  |  |  | 7,010 |  |  |  | 6,118 |
Mortgage banking |  |  | 1,527 |  |  |  | 3,277 |  |  |  | 1,670 |
Service charges on deposit accounts |  |  | 651 |  |  |  | 644 |  |  |  | 389 |
Other |  |  | 2,443 |  |  |  | 6,455 |  |  |  | 1,491 |
Total noninterest income |  |  | 27,632 |  |  |  | 33,874 |  |  |  | 25,323 |
Noninterest Expense |  |  |  |  |  |  |  |  |  |  |  |
Compensation |  |  | 22,961 |  |  |  | 26,657 |  |  |  | 19,332 |
Employee taxes and benefits |  |  | 7,762 |  |  |  | 6,245 |  |  |  | 6,188 |
Occupancy and equipment expense |  |  | 2,907 |  |  |  | 1,963 |  |  |  | 1,906 |
Business services, software and technology expense |  |  | 5,752 |  |  |  | 6,935 |  |  |  | 5,345 |
Intangible amortization expense |  |  | 2,710 |  |  |  | 2,804 |  |  |  | 1,324 |
Professional fees and assessments |  |  | 2,996 |  |  |  | 10,964 |  |  |  | 1,993 |
Marketing and business development |  |  | 965 |  |  |  | 1,050 |  |  |  | 685 |
Supplies and postage |  |  | 630 |  |  |  | 726 |  |  |  | 528 |
Travel |  |  | 287 |  |  |  | 449 |  |  |  | 292 |
Mortgage and lending expenses |  |  | 536 |  |  |  | 571 |  |  |  | 441 |
Other |  |  | 2,859 |  |  |  | 2,093 |  |  |  | 985 |
Total noninterest expense |  |  | 50,365 |  |  |  | 60,457 |  |  |  | 39,019 |
Income before income tax expense |  |  | 17,561 |  |  |  | (291 | ) |  |  | 8,523 |
Income tax expense |  |  | 4,246 |  |  |  | (225 | ) |  |  | 2,091 |
Net income |  | $ | 13,315 |  |  | $ | (66 | ) |  | $ | 6,432 |
Per Common Share Data |  |  |  |  |  |  |  |  |  |  |  |
Earnings per common share |  | $ | 0.52 |  |  | $ | — |  |  | $ | 0.32 |
Diluted earnings per common share |  | $ | 0.52 |  |  | $ | — |  |  | $ | 0.32 |
Dividends declared per common share |  | $ | 0.20 |  |  | $ | 0.20 |  |  | $ | 0.19 |
Average common shares outstanding |  |  | 25,359 |  |  |  | 24,857 |  |  |  | 19,739 |
Diluted average common shares outstanding |  |  | 25,653 |  |  |  | 25,144 |  |  |  | 19,986 |

8

Alerus Financial Corporation and Subsidiaries

Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures (unaudited)

(dollars and shares in thousands, except per share data)

|  | March 31, |  |  | December 31, |  |  | March 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
Tangible Common Equity to Tangible Assets |  |  |  |  |  |  |  |  |  |  |  |
Total common stockholders’ equity |  | $ | 514,232 |  |  | $ | 495,410 |  |  | $ | 371,635 |
Less: Goodwill |  |  | 85,634 |  |  |  | 85,634 |  |  |  | 46,783 |
Less: Other intangible assets |  |  | 41,172 |  |  |  | 43,882 |  |  |  | 15,834 |
Tangible common equity (a) |  |  | 387,426 |  |  |  | 365,894 |  |  |  | 309,018 |
Total assets |  |  | 5,339,620 |  |  |  | 5,261,673 |  |  |  | 4,338,093 |
Less: Goodwill |  |  | 85,634 |  |  |  | 85,634 |  |  |  | 46,783 |
Less: Other intangible assets |  |  | 41,172 |  |  |  | 43,882 |  |  |  | 15,834 |
Tangible assets (b) |  |  | 5,212,814 |  |  |  | 5,132,157 |  |  |  | 4,275,476 |
Tangible common equity to tangible assets (a)/(b) |  |  | 7.43 | % |  |  | 7.13 | % |  |  | 7.23 | %
Tangible Book Value Per Common Share |  |  |  |  |  |  |  |  |  |  |  |
Tangible common equity (a) |  |  | 387,426 |  |  |  | 365,894 |  |  |  | 309,018 |
Total common shares issued and outstanding (c) |  |  | 25,366 |  |  |  | 25,345 |  |  |  | 19,777 |
Tangible book value per common share (a)/(c) |  | $ | 15.27 |  |  | $ | 14.44 |  |  | $ | 15.63 |

|  | Three months ended |
|  | March 31, |  |  | December 31, |  |  | March 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
Return on Average Tangible Common Equity |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 13,315 |  |  | $ | (66 | ) |  | $ | 6,432 |
Add: Intangible amortization expense (net of tax) (1) |  |  | 2,141 |  |  |  | 2,215 |  |  |  | 1,046 |
Net income, excluding intangible amortization (d) |  |  | 15,456 |  |  |  | 2,149 |  |  |  | 7,478 |
Average total equity |  |  | 499,224 |  |  |  | 478,092 |  |  |  | 367,248 |
Less: Average goodwill |  |  | 85,634 |  |  |  | 84,393 |  |  |  | 46,783 |
Less: Average other intangible assets (net of tax) (1) |  |  | 33,718 |  |  |  | 34,107 |  |  |  | 13,018 |
Average tangible common equity (e) |  |  | 379,872 |  |  |  | 359,592 |  |  |  | 307,447 |
Return on average tangible common equity (d)/(e) |  |  | 16.50 | % |  |  | 2.38 | % |  |  | 9.78 | %
Efficiency Ratio |  |  |  |  |  |  |  |  |  |  |  |
Noninterest expense |  | $ | 50,365 |  |  | $ | 60,457 |  |  | $ | 39,019 |
Less: Intangible amortization expense |  |  | 2,710 |  |  |  | 2,804 |  |  |  | 1,324 |
Adjusted noninterest expense (f) |  |  | 47,655 |  |  |  | 57,653 |  |  |  | 37,695 |
Net interest income |  |  | 41,157 |  |  |  | 38,284 |  |  |  | 22,219 |
Noninterest income |  |  | 27,632 |  |  |  | 33,874 |  |  |  | 25,323 |
Tax-equivalent adjustment |  |  | 520 |  |  |  | 385 |  |  |  | 246 |
Total tax-equivalent revenue (g) |  |  | 69,309 |  |  |  | 72,543 |  |  |  | 47,788 |
Efficiency ratio (f)/(g) |  |  | 68.76 | % |  |  | 79.47 | % |  |  | 78.88 | %
Pre-Provision Net Revenue |  |  |  |  |  |  |  |  |  |  |  |
Net interest income |  | $ | 41,157 |  |  | $ | 38,284 |  |  | $ | 22,219 |
Add: Noninterest income |  |  | 27,632 |  |  |  | 33,874 |  |  |  | 25,323 |
Less: Noninterest expense |  |  | 50,365 |  |  |  | 60,457 |  |  |  | 39,019 |
Pre-provision net revenue |  | $ | 18,424 |  |  | $ | 11,701 |  |  | $ | 8,523 |
Adjusted Noninterest Income |  |  |  |  |  |  |  |  |  |  |  |
Noninterest income |  | $ | 27,632 |  |  | $ | 33,874 |  |  | $ | 25,323 |
Less: Adjusted noninterest income items |  |  |  |  |  |  |  |  |  |  |  |
Net gain on sale of premises and equipment |  |  | — |  |  |  | 3,459 |  |  |  | 5 |
Total adjusted noninterest income items (h) |  |  | — |  |  |  | 3,459 |  |  |  | 5 |
Adjusted noninterest income (i) |  | $ | 27,632 |  |  | $ | 30,415 |  |  | $ | 25,318 |
Adjusted Noninterest Expense |  |  |  |  |  |  |  |  |  |  |  |
Noninterest expense |  | $ | 50,365 |  |  | $ | 60,457 |  |  | $ | 39,019 |
Less: Adjusted noninterest expense items |  |  |  |  |  |  |  |  |  |  |  |
HMNF merger- and acquisition-related expenses |  |  | 286 |  |  |  | 7,729 |  |  |  | 28 |
Severance and signing bonus expense |  |  | 1,027 |  |  |  | 2,276 |  |  |  | 280 |
Total adjusted noninterest expense items (j) |  |  | 1,313 |  |  |  | 10,005 |  |  |  | 308 |
Adjusted noninterest expense (k) |  | $ | 49,052 |  |  | $ | 50,452 |  |  | $ | 38,711 |

(1) | Items calculated after-tax utilizing a marginal income tax rate of 21.0%.

9

Alerus Financial Corporation and Subsidiaries

Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures (unaudited)

(dollars and shares in thousands, except per share data)

|  | Three months ended |
|  | March 31, |  |  | December 31, |  |  | March 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
Adjusted Pre-Provision Net Revenue |  |  |  |  |  |  |  |  |  |  |  |
Net interest income |  | $ | 41,157 |  |  | $ | 38,284 |  |  | $ | 22,219 |
Add: Adjusted noninterest income (i) |  |  | 27,632 |  |  |  | 30,415 |  |  |  | 25,318 |
Less: Adjusted noninterest expense (k) |  |  | 49,052 |  |  |  | 50,452 |  |  |  | 38,711 |
Adjusted pre-provision net revenue |  | $ | 19,737 |  |  | $ | 18,247 |  |  | $ | 8,826 |
Adjusted Efficiency Ratio |  |  |  |  |  |  |  |  |  |  |  |
Adjusted noninterest expense (k) |  | $ | 49,052 |  |  | $ | 50,452 |  |  | $ | 38,711 |
Less: Intangible amortization expense |  |  | 2,710 |  |  |  | 2,804 |  |  |  | 1,324 |
Adjusted noninterest expense for efficiency ratio (l) |  |  | 46,342 |  |  |  | 47,648 |  |  |  | 37,387 |
Tax-equivalent revenue |  |  |  |  |  |  |  |  |  |  |  |
Net interest income |  |  | 41,157 |  |  |  | 38,284 |  |  |  | 22,219 |
Add: Adjusted noninterest income (i) |  |  | 27,632 |  |  |  | 30,415 |  |  |  | 25,318 |
Add: Tax-equivalent adjustment |  |  | 520 |  |  |  | 385 |  |  |  | 246 |
Total tax-equivalent revenue (m) |  |  | 69,309 |  |  |  | 69,084 |  |  |  | 47,783 |
Adjusted efficiency ratio (l)/(m) |  |  | 66.86 | % |  |  | 68.97 | % |  |  | 78.24 | %
Adjusted Net Income |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 13,315 |  |  | $ | (66 | ) |  | $ | 6,432 |
Less: Adjusted noninterest income items (net of tax) (1) (h) |  |  | — |  |  |  | 2,733 |  |  |  | 4 |
Add: HMNF day one provision for credit losses and unfunded commitments (net of tax) (1) |  |  | — |  |  |  | 6,140 |  |  |  | — |
Add: Adjusted noninterest expense items (net of tax) (1) (j) |  |  | 1,037 |  |  |  | 7,904 |  |  |  | 243 |
Adjusted net income (n) |  | $ | 14,352 |  |  | $ | 11,245 |  |  | $ | 6,671 |
Adjusted Return on Average Total Assets |  |  |  |  |  |  |  |  |  |  |  |
Average total assets (o) |  | $ | 5,272,319 |  |  | $ | 5,272,777 |  |  | $ | 4,139,053 |
Adjusted return on average total assets (n)/(o) |  |  | 1.10 | % |  |  | 0.85 | % |  |  | 0.65 | %
Adjusted Return on Average Tangible Common Equity |  |  |  |  |  |  |  |  |  |  |  |
Adjusted net income (n) |  | $ | 14,352 |  |  | $ | 11,245 |  |  | $ | 6,671 |
Add: Intangible amortization expense (net of tax) (1) |  |  | 2,141 |  |  |  | 2,215 |  |  |  | 1,046 |
Adjusted net income, excluding intangible amortization (p) |  |  | 16,493 |  |  |  | 13,460 |  |  |  | 7,717 |
Average total equity |  |  | 499,224 |  |  |  | 478,092 |  |  |  | 367,248 |
Less: Average goodwill |  |  | 85,634 |  |  |  | 84,393 |  |  |  | 46,783 |
Less: Average other intangible assets (net of tax) |  |  | 33,718 |  |  |  | 34,107 |  |  |  | 13,018 |
Average tangible common equity (q) |  |  | 379,872 |  |  |  | 359,592 |  |  |  | 307,447 |
Adjusted return on average tangible common equity (p)/(q) |  |  | 17.61 | % |  |  | 14.89 | % |  |  | 10.10 | %
Adjusted Earnings Per Common Share - Diluted |  |  |  |  |  |  |  |  |  |  |  |
Adjusted net income (n) |  | $ | 14,352 |  |  | $ | 11,245 |  |  | $ | 6,671 |
Less: Dividends and undistributed earnings allocated to participating securities |  |  | 99 |  |  |  | (54 | ) |  |  | 40 |
Net income available to common stockholders (r) |  |  | 14,253 |  |  |  | 11,299 |  |  |  | 6,631 |
Weighted-average common shares outstanding for diluted earnings per share (s) |  |  | 25,653 |  |  |  | 25,144 |  |  |  | 19,986 |
Adjusted earnings per common share - diluted (r)/(s) |  | $ | 0.56 |  |  | $ | 0.45 |  |  | $ | 0.33 |

(1) | Items calculated after-tax utilizing a marginal income tax rate of 21.0%.

10

Alerus Financial Corporation and Subsidiaries

Analysis of Average Balances, Yields, and Rates (unaudited)

(dollars in thousands)

|  | Three months ended |
|  | March 31, 2025 |  |  | December 31, 2024 |  |  | March 31, 2024 |
|  |  |  |  |  | Average |  |  |  |  |  |  | Average |  |  |  |  |  |  | Average |
|  | Average |  |  | Yield/ |  |  | Average |  |  | Yield/ |  |  | Average |  |  | Yield/ |
|  | Balance |  |  | Rate |  |  | Balance |  |  | Rate |  |  | Balance |  |  | Rate |
Interest Earning Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing deposits with banks |  | $ | 33,425 |  |  |  | 4.74 | % |  | $ | 74,217 |  |  |  | 5.34 | % |  | $ | 352,038 |  |  |  | 5.33 | %
Investment securities (1) |  |  | 859,696 |  |  |  | 2.79 |  |  |  | 883,116 |  |  |  | 2.68 |  |  |  | 775,305 |  |  |  | 2.48 |
Loans held for sale |  |  | 11,348 |  |  |  | 5.32 |  |  |  | 15,409 |  |  |  | 5.60 |  |  |  | 9,014 |  |  |  | 5.67 |
Loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 657,838 |  |  |  | 7.31 |  |  |  | 616,356 |  |  |  | 7.28 |  |  |  | 564,125 |  |  |  | 6.96 |
CRE − Construction, land and development |  |  | 342,718 |  |  |  | 5.84 |  |  |  | 250,869 |  |  |  | 6.33 |  |  |  | 127,587 |  |  |  | 8.04 |
CRE − Multifamily |  |  | 364,247 |  |  |  | 6.34 |  |  |  | 351,804 |  |  |  | 6.50 |  |  |  | 250,513 |  |  |  | 5.56 |
CRE − Non-owner occupied |  |  | 960,152 |  |  |  | 6.66 |  |  |  | 1,002,857 |  |  |  | 6.68 |  |  |  | 564,552 |  |  |  | 5.75 |
CRE − Owner occupied |  |  | 379,948 |  |  |  | 6.19 |  |  |  | 293,169 |  |  |  | 6.56 |  |  |  | 279,165 |  |  |  | 5.36 |
Agricultural − Land |  |  | 67,228 |  |  |  | 5.85 |  |  |  | 59,400 |  |  |  | 5.73 |  |  |  | 40,310 |  |  |  | 4.75 |
Agricultural − Production |  |  | 60,933 |  |  |  | 7.28 |  |  |  | 58,999 |  |  |  | 7.36 |  |  |  | 35,331 |  |  |  | 6.39 |
RRE − First lien |  |  | 899,835 |  |  |  | 4.78 |  |  |  | 904,414 |  |  |  | 4.50 |  |  |  | 701,756 |  |  |  | 4.01 |
RRE − Construction |  |  | 36,913 |  |  |  | 8.40 |  |  |  | 31,722 |  |  |  | 9.74 |  |  |  | 21,559 |  |  |  | 5.20 |
RRE − HELOC |  |  | 168,599 |  |  |  | 7.12 |  |  |  | 153,344 |  |  |  | 7.60 |  |  |  | 118,957 |  |  |  | 8.30 |
RRE − Junior lien |  |  | 44,096 |  |  |  | 6.24 |  |  |  | 47,041 |  |  |  | 6.25 |  |  |  | 35,824 |  |  |  | 6.38 |
Other consumer |  |  | 40,356 |  |  |  | 7.02 |  |  |  | 44,959 |  |  |  | 7.19 |  |  |  | 28,835 |  |  |  | 6.43 |
Total loans (1) |  |  | 4,022,863 |  |  |  | 6.23 |  |  |  | 3,814,934 |  |  |  | 6.27 |  |  |  | 2,768,514 |  |  |  | 5.72 |
Federal Reserve/FHLB stock |  |  | 22,397 |  |  |  | 7.77 |  |  |  | 20,717 |  |  |  | 7.66 |  |  |  | 16,658 |  |  |  | 8.14 |
Total interest earning assets |  |  | 4,949,729 |  |  |  | 5.63 |  |  |  | 4,808,393 |  |  |  | 5.60 |  |  |  | 3,921,529 |  |  |  | 5.05 |
Noninterest earning assets |  |  | 322,590 |  |  |  |  |  |  |  | 464,384 |  |  |  |  |  |  |  | 217,524 |  |  |  |  |
Total assets |  | $ | 5,272,319 |  |  |  |  |  |  | $ | 5,272,777 |  |  |  |  |  |  | $ | 4,139,053 |  |  |  |  |
Interest-Bearing Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing demand deposits |  | $ | 1,247,725 |  |  |  | 1.81 | % |  | $ | 1,209,674 |  |  |  | 1.98 | % |  | $ | 869,060 |  |  |  | 1.97 | %
Money market and savings deposits |  |  | 1,590,616 |  |  |  | 2.89 |  |  |  | 1,520,616 |  |  |  | 3.15 |  |  |  | 1,186,900 |  |  |  | 3.77 |
Time deposits |  |  | 688,569 |  |  |  | 3.91 |  |  |  | 698,358 |  |  |  | 4.24 |  |  |  | 431,679 |  |  |  | 4.46 |
Fed funds purchased and BTFP |  |  | 49,834 |  |  |  | 4.69 |  |  |  | 22,012 |  |  |  | 4.93 |  |  |  | 282,614 |  |  |  | 4.99 |
FHLB short-term advances |  |  | 200,000 |  |  |  | 4.59 |  |  |  | 200,000 |  |  |  | 5.10 |  |  |  | 200,000 |  |  |  | 4.99 |
Long-term debt |  |  | 59,084 |  |  |  | 4.46 |  |  |  | 59,055 |  |  |  | 4.48 |  |  |  | 58,971 |  |  |  | 4.62 |
Total interest-bearing liabilities |  |  | 3,835,828 |  |  |  | 2.86 |  |  |  | 3,709,715 |  |  |  | 3.11 |  |  |  | 3,029,224 |  |  |  | 3.56 |
Noninterest-Bearing Liabilities and Stockholders' Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing deposits |  |  | 849,687 |  |  |  |  |  |  |  | 847,153 |  |  |  |  |  |  |  | 675,926 |  |  |  |  |
Other noninterest-bearing liabilities |  |  | 87,580 |  |  |  |  |  |  |  | 237,817 |  |  |  |  |  |  |  | 66,655 |  |  |  |  |
Stockholders’ equity |  |  | 499,224 |  |  |  |  |  |  |  | 478,092 |  |  |  |  |  |  |  | 367,248 |  |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 5,272,319 |  |  |  |  |  |  | $ | 5,272,777 |  |  |  |  |  |  | $ | 4,139,053 |  |  |  |  |
Net interest rate spread |  |  |  |  |  |  | 2.77 | % |  |  |  |  |  |  | 2.49 | % |  |  |  |  |  |  | 1.49 | %
Net interest margin, tax-equivalent (1) |  |  |  |  |  |  | 3.41 | % |  |  |  |  |  |  | 3.20 | % |  |  |  |  |  |  | 2.30 | %

(1) | Taxable-equivalent adjustment was calculated utilizing a marginal income tax rate of 21.0%.

11