alrs20260630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2026

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-39036

ALERUS FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	45-0375407
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification No.)
organization)

401 Demers Avenue
Grand Forks, ND	58201
(Address of principal executive offices)	(Zip Code)

(701) 795‑3200

(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

Title of each class		Trading symbol		Name of each exchange on which registered
Common Stock, par value $1.00 per share		ALRS		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding at July 30, 2026 was 24,903,238.

Table of Contents

Alerus Financial Corporation and Subsidiaries

Table of Contents

		Page
Part I:	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Changes in Stockholders’ Equity	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63
Item 4.	Controls and Procedures	64

Part II:	OTHER INFORMATION
Item 1.	Legal Proceedings	65
Item 1A.	Risk Factors	65
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 3.	Defaults Upon Senior Securities	65
Item 4.	Mine Safety Disclosures	65
Item 5.	Other Information	65
Item 6.	Exhibits	66

Signatures		67

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PART I. FINANCIAL INFORMATION

Item 1 - Consolidated Financial Statements

Alerus Financial Corporation and Subsidiaries

Consolidated Balance Sheets (Unaudited)

	*June 30,*			*December 31,*
(dollars in thousands, except share and per share data)	*2026*			*2025*
Assets
Cash and cash equivalents	$	109,012		$	67,192
Investment securities
Trading		501			1,758
Available-for-sale, at fair value (amortized cost of $541,715 and $516,737, respectively)		534,191			514,095
Held-to-maturity, at amortized cost (fair value of $215,234 and $228,009, respectively, with an allowance for credit losses on investments of $115 and $123, respectively)		242,516			254,448
Loans held for sale		26,713			21,934
Loans		4,034,244			4,048,022
Allowance for credit losses on loans		(48,361	)		(61,915	)
Net loans		3,985,883			3,986,107
Land, premises and equipment, net		43,941			43,253
Operating lease right-of-use assets		32,105			28,761
Accrued interest receivable		20,213			21,742
Bank-owned life insurance		41,894			39,307
Goodwill		85,634			85,634
Other intangible assets, net		29,422			33,371
Servicing rights		7,022			6,383
Deferred income taxes, net		18,114			23,080
Other assets		111,557			103,019
Total assets	$	5,288,718		$	5,230,084
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Noninterest-bearing	$	759,640		$	807,896
Interest-bearing		3,432,257			3,384,107
Total deposits		4,191,897			4,192,003
Short-term borrowings		345,000			308,800
Long-term debt		59,239			59,182
Operating lease liabilities		42,752			36,282
Accrued expenses and other liabilities		66,687			68,883
Total liabilities		4,705,575			4,665,150
Commitments and contingencies (Note 12)
Stockholders’ equity
Preferred stock, $1 par value, 2,000,000 shares authorized: 0 issued and outstanding		—			—
Common stock, $1 par value, 60,000,000 and 60,000,000 shares authorized: 24,985,815 and 25,406,278 issued and outstanding		24,986			25,406
Additional paid-in capital		260,066			271,609
Retained earnings		303,070			270,075
Accumulated other comprehensive income (loss)		(4,979	)		(2,156	)
Total stockholders’ equity		583,143			564,934
Total liabilities and stockholders’ equity	$	5,288,718		$	5,230,084

See accompanying notes to consolidated financial statements (unaudited)

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Alerus Financial Corporation and Subsidiaries

Consolidated Statements of Income (Unaudited)

	*Three months ended*				*Six months ended*
	*June 30,*				*June 30,*
(dollars and shares in thousands, except per share data)	*2026*		*2025*		*2026*			*2025*
Interest Income
Loans, including fees	$	62,214	$	63,853	$	120,835		$	125,348
Investment securities
Taxable		7,258		5,310		14,363			11,017
Exempt from federal income taxes		155		160		312			320
Other		999		1,101		2,093			1,920
Total interest income		70,626		70,424		137,603			138,605
Interest Expense
Deposits		18,938		22,758		38,012			46,293
Short-term borrowings		2,935		3,982		5,292			6,821
Long-term debt		1,041		652		1,676			1,302
Total interest expense		22,914		27,392		44,980			54,416
Net interest income		47,712		43,032		92,623			84,189
Provision for (recovery of) credit losses		495		—		(4,388	)		863
Net interest income after provision for (recovery of) credit losses		47,217		43,032		97,011			83,326
Noninterest Income
Retirement and benefit services		17,347		16,024		34,754			32,130
Wealth advisory services		7,705		7,363		14,942			14,267
Mortgage banking		3,195		3,651		6,730			5,177
Service charges on deposit accounts		1,106		680		2,039			1,330
Gain on sale of non-mortgage loans		—		2,115		—			2,115
Other		3,592		1,930		5,327			4,376
Total noninterest income		32,945		31,763		63,792			59,395
Noninterest Expense
Compensation		26,155		24,343		50,242			47,304
Employee taxes and benefits		6,755		6,633		13,395			14,396
Occupancy and equipment expense		3,493		2,559		6,919			5,466
Business services, software and technology expense		5,440		5,868		11,279			11,620
Intangible amortization expense		1,974		2,710		3,949			5,419
Professional fees and assessments		3,781		2,339		7,581			5,335
Marketing and business development		869		787		1,730			1,752
Supplies and postage		540		490		1,146			1,121
Travel		357		347		718			634
Mortgage and lending expenses		614		940		1,323			1,476
Other		2,905		1,422		4,992			4,282
Total noninterest expense		52,883		48,438		103,274			98,805
Income before income taxes		27,279		26,357		57,529			43,916
Income tax expense		6,414		6,104		13,693			10,349
Net income	$	20,865	$	20,253	$	43,836		$	33,567
Per Common Share Data
Basic earnings per common share	$	0.82	$	0.79	$	1.72		$	1.31
Diluted earnings per common share	$	0.81	$	0.78	$	1.70		$	1.30
Dividends declared per common share	$	0.22	$	0.21	$	0.43		$	0.41
Average common shares outstanding		25,081		25,368		25,230			25,363
Diluted average common shares outstanding		25,395		25,714		25,537			25,683

See accompanying notes to consolidated financial statements (unaudited)

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Alerus Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)

	*Three months ended*						*Six months ended*
	*June 30,*						*June 30,*
(dollars in thousands)	*2026*			*2025*			*2026*			*2025*
Net Income	$	20,865		$	20,253		$	43,836		$	33,567
Other Comprehensive Income (Loss), Net of Tax
Net change in unrealized gains (losses) on debt securities		(1,282	)		4,586			(4,915	)		18,760
Net change in unrealized gain (losses) on cash flow hedging derivatives		278			(147	)		1,065			(587	)
Net change in unrealized gain (losses) on other derivatives		—			110			—			(123	)
Total other comprehensive income (loss), before tax		(1,004	)		4,549			(3,850	)		18,050
Income tax expense (benefit) related to items of other comprehensive income (loss)		(262	)		1,142			(1,027	)		4,531
Other comprehensive income (loss), net of tax		(742	)		3,407			(2,823	)		13,519
Total comprehensive income	$	20,123		$	23,660		$	41,013		$	47,086

See accompanying notes to consolidated financial statements (unaudited)

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Alerus Financial Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

	*Three months ended*
										*Accumulated*
				*Additional*						*Other*
	*Common*			*Paid-in*			*Retained*			*Comprehensive*
(dollars and shares in thousands)	*Stock*			*Capital*			*Earnings*			*Income (Loss)*			*Total*
Balance as of March 31, 2025		25,366		$	270,159		$	281,961		$	(63,254	)	$	514,232
Net income		—			—			20,253			—			20,253
Other comprehensive income (loss)		—			—			—			3,407			3,407
Common stock repurchased		(2	)		(47	)		—			—			(49	)
Common stock dividends		—			—			(5,336	)		—			(5,336	)
Share‑based compensation expense		—			648			—			—			648
Vesting of restricted stock		25			(25	)		—			—			—
Balance as of June 30, 2025		25,389		$	270,735		$	296,878		$	(59,847	)	$	533,155

Balance as of March 31, 2026		25,214		$	266,016		$	287,700		$	(4,237	)	$	574,693
Net income		—			—			20,865			—			20,865
Other comprehensive income (loss)		—			—			—			(742	)		(742	)
Common stock repurchased		(266	)		(6,839	)		—			—			(7,105	)
Common stock dividends		—			—			(5,495	)		—			(5,495	)
Share‑based compensation expense		—			927			—			—			927
Vesting of restricted stock		38			(38	)		—			—			—
Balance as of June 30, 2026		24,986		$	260,066		$	303,070		$	(4,979	)	$	583,143

	*Six months ended*
										*Accumulated*
				*Additional*						*Other*
	*Common*			*Paid-in*			*Retained*			*Comprehensive*
(dollars and shares in thousands)	*Stock*			*Capital*			*Earnings*			*Income (Loss)*			*Total*
Balance as of December 31, 2024		25,345		$	269,708		$	273,723		$	(73,366	)	$	495,410
Net income		—			—			33,567			—			33,567
Other comprehensive income (loss)		—			—			—			13,519			13,519
Common stock repurchased		(8	)		(168	)		—			—			(176	)
Common stock dividends		—			—			(10,412	)		—			(10,412	)
Share‑based compensation expense		—			1,247			—			—			1,247
Vesting of restricted stock		52			(52	)		—			—			—
Balance as of June 30, 2025		25,389		$	270,735		$	296,878		$	(59,847	)	$	533,155

Balance as of December 31, 2025		25,406		$	271,609		$	270,075		$	(2,156	)	$	564,934
Net income		—			—			43,836			—			43,836
Other comprehensive income (loss)		—			—			—			(2,823	)		(2,823	)
Common stock repurchased		(524	)		(13,118	)		—			—			(13,642	)
Common stock dividends		—			—			(10,841	)		—			(10,841	)
Share‑based compensation expense		—			1,679			—			—			1,679
Vesting of restricted stock		104			(104	)		—			—			—
Balance as of June 30, 2026		24,986		$	260,066		$	303,070		$	(4,979	)	$	583,143

See accompanying notes to consolidated financial statements (unaudited)

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Alerus Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

	*Six months ended*
	*June 30,*
(dollars in thousands)	*2026*			*2025*
Operating Activities
Net income	$	43,836		$	33,567
Adjustments to reconcile net income to net cash provided (used) by operating activities
Deferred income taxes		5,992			6,894
Provision for (recovery of) credit losses		(4,388	)		863
Depreciation and amortization		6,662			7,663
Amortization and accretion of premiums/discounts on investment securities		55			377
Amortization of operating lease right-of-use assets		3,126			(72	)
Share‑based compensation expense		1,679			1,247
Purchase accounting accretion, net		(6,858	)		(17,438	)
Originations of loans held for sale		(198,047	)		(113,267	)
Proceeds on loans held for sale		197,936			115,851
Realized loss (gain) on mortgage loans sold		(4,596	)		(4,405	)
Servicing rights capitalized upon sale of mortgage loans		(56	)		(101	)
(Increase) in value of bank-owned life insurance		(514	)		(370	)
Realized loss (gain) on sale of premises and equipment		(632	)		84
Realized loss (gain) on derivative instruments		(40	)		(484	)
Realized loss (gain) on sale of foreclosed assets		(15	)		21
Change in fair value of mortgage servicing rights		(583	)		835
Net change in:
Accrued interest receivable		1,529			(809	)
Other assets		(1,323	)		(2,247	)
Accrued expenses and other liabilities		2,654			(9,800	)
Net cash provided (used) by operating activities		46,417			18,409
Investing Activities
Proceeds from sales of trading investment securities		3,199			5,450
Purchases of trading investment securities		(1,806	)		(3,729	)
Proceeds from sales or calls of investment securities available-for-sale		3,000			19,000
Proceeds from maturities of investment securities available-for-sale		34,838			46,759
Purchases of investment securities available-for-sale		(62,548	)		—
Proceeds from calls of investment securities held-to-maturity		340			146
Proceeds from maturities and paydowns of investment securities held-to-maturity		11,244			11,262
Proceeds from sale of non-mortgage loans held for sale		—			12,331
Net (increase) decrease in loans		1,397			(102,662	)
Purchases of FHLB stock		(64,685	)		(108,715	)
Sales of FHLB stock		63,049			104,211
Purchases of BOLI		(2,073	)		(2,210	)
Purchases of premises and equipment		(2,713	)		(5,185	)
Proceeds from sales of foreclosed assets		390			484
Net cash provided (used) by investing activities		(16,368	)		(22,858	)
Financing Activities
Net increase (decrease) in deposits		(106	)		(40,942	)
Net increase (decrease) in short-term borrowings with maturities of three months or less		36,200			75,640
Cash dividends paid on common stock		(10,681	)		(10,408	)
Repurchase of common stock		(13,642	)		(176	)
Net cash provided (used) by financing activities		11,771			24,114
Net change in cash and cash equivalents		41,820			19,665
Cash and cash equivalents at beginning of period		67,192			61,239
Cash and cash equivalents at end of period	$	109,012		$	80,904

See accompanying notes to consolidated financial statements (unaudited)

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	*Six months ended*
	*June 30,*
	*2026*			*2025*
Supplemental Cash Flow Disclosures
Interest paid	$	45,642		$	57,569
Income taxes paid		115			501
Cash dividends declared, not paid		5,496			5,336
Supplemental Disclosures of Noncash Investing and Financing Activities
Loan collateral transferred to foreclosed assets		(9,638	)		(1,235	)
Right-of-use assets obtained in exchange for new operating lease liabilities, net		5,282			66
Loans transferred to non-mortgage loans held for sale		—			62,491

See accompanying notes to consolidated financial statements (unaudited)

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Alerus Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 Basis of Presentation

The accompanying unaudited consolidated interim financial statements and notes thereto of the Company have been prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete presentation of financial statements. In the opinion of management, the consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated balance sheets of Alerus Financial Corporation (“the Company”) as of June 30, 2026 and December 31, 2025, the consolidated statements of income for the three and six months ended June 30, 2026 and 2025, the consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2026 and 2025, the consolidated statements of changes in stockholders’ equity for the three and six months ended June 30, 2026 and 2025, and the consolidated statements of cash flows for the six months ended June 30, 2026 and 2025.

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company’s principal operating subsidiary is Alerus Financial, National Association (the “Bank”). Certain items previously reported have been reclassified to conform to the current period’s reporting format. Such reclassifications did not affect net income or stockholders’ equity. The results of operations for the interim periods are not necessarily indicative of the results for the full year or any other period. The Company has also evaluated all subsequent events for potential recognition and disclosure through the date of the filing of this Quarterly Report on Form 10-Q. These interim unaudited financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2025, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 4, 2026.

NOTE 2 Recent Accounting Pronouncements

The following Financial Accounting Standards Board (“FASB”) Accounting Standards Updates (“ASUs”) are divided into pronouncements which have been adopted by the Company since January 1, 2026, and those which are not yet effective and have been evaluated or are currently being evaluated by management as of June 30, 2026.

Adopted Pronouncements

In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements (“ASU 2025-09”). ASU 2025-09 amends existing hedge accounting guidance to improve the alignment of financial reporting with the economics of an entity's risk management activities. ASU 2025-09 is effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual reporting periods. Early adoption is permitted. The amendments in this update apply to any entity that elects to apply hedge accounting in accordance with Topic 815 and generally are to be adopted on a prospective basis, with an election available to apply the guidance to existing hedging relationships as of the adoption date. The Company adopted ASU 2025-09 on January 1, 2026 on a prospective basis. The adoption did not have a material impact on the Company's consolidated financial statements.

Pronouncements Not Yet Effective

Management evaluated recently issued accounting standards and determined that none are expected to have a material effect on the Company's consolidated financial statements.

NOTE 3 Investment Securities

Trading securities are reported on the Company’s consolidated balance sheet at fair value. The fair value of the Company’s trading securities was $0.5 million and $1.8 million as of June 30, 2026 and December 31, 2025, respectively. Changes in the fair value of trading securities are recorded in other noninterest income on the Company’s consolidated statements of income.

The following tables present amortized cost, gross unrealized gains and losses, allowance for credit losses (“ACL”) and fair value of available-for-sale (“AFS”) investment securities and the amortized cost, gross unrealized gains and losses and fair value of held-to-maturity (“HTM”) securities as of June 30, 2026 and December 31, 2025:

	*June 30, 2026*
	*Amortized*		*Unrealized*		*Unrealized*			*Allowance for*		*Fair*
(dollars in thousands)	*Cost*		*Gains*		*Losses*			*Credit Losses*		*Value*
Available-for-sale
U.S. Treasury and agencies	$	13,275	$	—	$	(41	)	$	—	$	13,234
Mortgage backed securities
Residential agency		485,442		94		(5,883	)		—		479,653
Asset backed securities		14		—		—			—		14
Corporate bonds		42,984		39		(1,733	)		—		41,290
Total available-for-sale investment securities		541,715		133		(7,657	)		—		534,191
Held-to-maturity
Obligations of state and political agencies		106,571		1		(6,676	)		68		99,896
Mortgage backed securities
Residential agency		136,060		—		(20,722	)		47		115,338
Total held-to-maturity investment securities		242,631		1		(27,398	)		115		215,234
Total investment securities	$	784,346	$	134	$	(35,055	)	$	115	$	749,425

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	*December 31, 2025*
	*Amortized*		*Unrealized*		*Unrealized*			*Allowance for*		*Fair*
(dollars in thousands)	*Cost*		*Gains*		*Losses*			*Credit Losses*		*Value*
Available-for-sale
U.S. Treasury and agencies	$	406	$	—	$	(1	)		—	$	405
Mortgage backed securities
Residential agency		476,334		988		(576	)		—		476,746
Asset backed securities		15		—		—			—		15
Corporate bonds		39,982		—		(3,053	)		—		36,929
Total available-for-sale investment securities		516,737		988		(3,630	)		—		514,095
Held-to-maturity
Obligations of state and political agencies		111,866		1		(6,462	)		72		105,405
Mortgage backed securities
Residential agency		142,705		—		(20,101	)		51		122,604
Total held-to-maturity investment securities		254,571		1		(26,563	)		123		228,009
Total investment securities	$	771,308	$	989	$	(30,193	)	$	123	$	742,104

The adequacy of the ACL on investment securities is assessed at the end of each quarter. The Company does not believe that the AFS debt securities that were in an unrealized loss position as of June 30, 2026 represented a credit loss impairment. As of both June 30, 2026 and December 31, 2025, the gross unrealized loss positions were primarily related to mortgage-backed securities issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Additionally, there were corporate bonds in gross unrealized loss positions as of both June 30, 2026 and December 31, 2025; however, all such bonds had an investment grade rating as of both dates. Total gross unrealized losses were attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. It is not likely that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity.

The ACL on HTM debt securities is estimated using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Using a probability of default and loss given default analysis, the ACL on HTM debt securities was $115 thousand and $123 thousand as of June 30, 2026 and December 31, 2025, respectively. The change in the ACL on HTM debt securities was due to a change in the provision for credit losses, with no charge-offs or recoveries for the three and six months ended June 30, 2026.

Accrued interest receivable on AFS investment securities and HTM investment securities is recorded in accrued interest receivable and is excluded from the estimate of credit losses. As of June 30, 2026, the accrued interest receivable on AFS investment securities and HTM investment securities totaled $2.1 million and $1.1 million, respectively. As of December 31, 2025, the accrued interest receivable on AFS investment securities and HTM investment securities totaled $1.9 million and $1.2 million, respectively.

The Company had no sales of AFS investment securities for the three and six months ended June 30, 2026 and 2025. The Company had calls of AFS investment securities with proceeds of $3.0 million for both the three and six months ended June 30, 2026, and had calls of AFS investment securities with proceeds of $9.0 million and $19.0 million for the three and six months ended June 30, 2025, respectively.

The Company had no sales of HTM investment securities for the three and six months ended June 30, 2026 and 2025.

The following tables present investment securities with gross unrealized losses, for which an ACL was not recorded at June 30, 2026 and December 31, 2025, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position:

			*June 30, 2026*
			*Less than 12 Months*					*Over 12 Months*					*Total*
	*Number of*		*Unrealized*			*Fair*		*Unrealized*			*Fair*		*Unrealized*			*Fair*
(dollars in thousands)	*Holdings*		*Losses*			*Value*		*Losses*			*Value*		*Losses*			*Value*
Available-for-sale
U.S. Treasury and agencies		7	$	(40	)	$	12,852	$	(1	)	$	334	$	(41	)	$	13,186
Mortgage backed securities
Residential agency		55		(5,858	)		439,937		(25	)		1,540		(5,883	)		441,477
Asset backed securities		3		—			12		—			1		—			13
Corporate bonds		6		—			—		(1,733	)		34,767		(1,733	)		34,767
Total available-for-sale investment securities		71	$	(5,898	)	$	452,801	$	(1,759	)	$	36,642	$	(7,657	)	$	489,443

			*December 31, 2025*
			*Less than 12 Months*					*Over 12 Months*					*Total*
	*Number of*		*Unrealized*			*Fair*		*Unrealized*			*Fair*		*Unrealized*			*Fair*
(dollars in thousands)	*Holdings*		*Losses*			*Value*		*Losses*			*Value*		*Losses*			*Value*
Available-for-sale
U.S. Treasury and agencies		2	$	(1	)	$	198	$	—		$	199	$	(1	)	$	397
Mortgage backed securities
Residential agency		39		(541	)		317,084		(35	)		4,908		(576	)		321,992
Asset backed securities		1		—			—		—			1		—			1
Corporate bonds		8		(4	)		478		(3,049	)		36,452		(3,053	)		36,930
Total available-for-sale investment securities		50	$	(546	)	$	317,760	$	(3,084	)	$	41,560	$	(3,630	)	$	359,320

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As of June 30, 2026 and December 31, 2025, none of the Company’s HTM debt securities were past due or on nonaccrual status. The Company did not recognize any interest income on nonaccrual HTM debt securities during the three months ended June 30, 2026 and 2025.

The following table presents the carrying value and fair value of HTM investment securities and the amortized cost and fair value of AFS investment securities as of June 30, 2026, by contractual maturity:

	*Held-to-maturity*				*Available-for-sale*
	*Carrying*		*Fair*		*Amortized*		*Fair*
(dollars in thousands)	*Value*		*Value*		*Cost*		*Value*
Due within one year or less	$	13,675	$	13,569	$	—	$	—
Due after one year through five years		58,952		55,527		2,647		2,573
Due after five years through ten years		28,741		26,133		39,070		37,416
Due after 10 years		5,203		4,667		14,556		14,549
		106,571		99,896		56,273		54,538
Mortgage-backed securities
Residential agency		136,060		115,338		485,442		479,653
Total investment securities	$	242,631	$	215,234	$	541,715	$	534,191

Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Investment securities with a total carrying value of $330.0 million and $115.1 million were pledged as of June 30, 2026 and December 31, 2025, respectively, to secure public deposits and for other purposes required or permitted by law.

As of June 30, 2026 and December 31, 2025, the carrying value of the Company’s Federal Reserve stock and Federal Home Loan Bank of Des Moines (“FHLB”) stock was as follows:

	*June 30,*		*December 31,*
(dollars in thousands)	*2026*		*2025*
Federal Reserve	$	8,631	$	8,631
FHLB		19,604		17,968

These securities can only be redeemed or sold at their par value and only to the respective issuing institution or to another member institution. The Company records these non-marketable equity securities as a component of other assets and periodically evaluates these securities for impairment. Management considers these non-marketable equity securities to be long-term investments. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value.

Visa Class B Restricted Shares

In 2008, the Company received Visa Class B restricted shares as part of Visa’s initial public offering. These shares are transferable only under limited circumstances until they can be converted into the publicly traded Class A common shares. This conversion will not occur until the settlement of certain litigation which will be indemnified by Visa members, including the Company. Visa funded an escrow account from its initial public offering to settle these litigation claims. Should this escrow account be insufficient to cover these litigation claims, Visa is entitled to fund additional amounts to the escrow account by reducing each member bank’s Class B conversion ratio to unrestricted Class A shares. As of June 30, 2026, the conversion ratio was 1.5445. Based on the existing transfer restriction and the uncertainty of the outcome of the Visa litigation mentioned above, the 6,924 Class B shares (10,694 Class A equivalents) that the Company owned as of June 30, 2026 and December 31, 2025, were carried at a zero cost basis.

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NOTE 4 Loans and Allowance for Credit Losses

The following table presents total loans outstanding, by portfolio segment, as of June 30, 2026 and December 31, 2025:

	*June 30,*		*December 31,*
(dollars in thousands)	*2026*		*2025*
Commercial
Commercial and business lending
Commercial and industrial	$	759,959	$	736,833
Commercial real estate − Owner occupied		622,241		427,260
Total commercial and business lending		1,382,200		1,164,093
Investor commercial real estate
Construction, land and development		79,850		246,238
Multifamily		361,875		383,505
Non-owner occupied		893,367		875,862
Total investor commercial real estate		1,335,092		1,505,605
Agricultural
Land		54,202		64,799
Production		53,367		62,500
Total agricultural		107,569		127,299
Total commercial		2,824,861		2,796,997
Consumer
Residential real estate
First lien		828,936		874,737
Construction		31,202		33,703
HELOC		273,124		260,883
Junior lien		31,941		36,844
Total residential real estate		1,165,203		1,206,167
Other consumer		44,180		44,858
Total consumer		1,209,383		1,251,025
Total loans	$	4,034,244	$	4,048,022

Total loans included net deferred loan (costs) fees of ($0.1) million and $0.1 million at June 30, 2026 and December 31, 2025, respectively. Unearned discounts associated with bank acquisitions totaled $36.9 million and $43.7 million as of June 30, 2026 and December 31, 2025, respectively.

Accrued interest receivable on loans is recorded within accrued interest receivable, and totaled $16.4 million at June 30, 2026 and $18.1 million at December 31, 2025.

The Company manages its loan portfolio proactively to effectively identify problem credits and assess trends early, implement effective work-out strategies, and take charge-offs as promptly as practical. In addition, the Company continuously reassesses its underwriting standards in response to credit risk posed by changes in economic conditions. The Company monitors and manages credit risk through the following governance structure:

●

The Credit Risk team, Collection and Special Assets team and the Credit Governance Committee, which is an internal management committee comprised of various executives and senior managers across business lines, including Accounting and Finance, Credit Underwriting, Collections and Special Assets, Risk, and Commercial and Retail Banking, oversee the Company’s systems and procedures to monitor the credit quality of its loan portfolio, conduct a loan review program, and maintain the integrity of the loan rating system.

●

The Loan Committee is responsible for reviewing and approving all credit requests that exceed individual limits that have not been countersigned by an individual with sufficient assigned authority. This committee has full authority to commit the Bank to any request that fits within its assigned approval authority.

●

The adequacy of the ACL is overseen by the ACL Governance Committee, which is an internal management committee comprised of various Company executives and senior managers across business lines, including Accounting and Finance, Credit Underwriting, Collections and Special Assets, Risk, and Commercial and Retail Banking. The ACL Governance Committee supports the oversight efforts of the Bank’s Board of Directors.

●

The Bank’s Board of Directors has approval authority and responsibility for all matters regarding loan policy, reviews all loans approved or declined by the Loan Committee, approves lending authority and monitors asset quality and concentration levels.

●

The ACL Governance Committee and Bank Board of Directors have approval authority and oversight responsibility for the ACL adequacy and methodology.

Loans with a carrying value of $2.5 billion as of June 30, 2026 and $2.6 billion as of December 31, 2025, were pledged to secure public deposits, and for other purposes required or permitted by law.

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ACL on Loans

The following tables present, by loan portfolio segment, a summary of the changes in the ACL on loans for the three and six months ended June 30, 2026 and 2025:

	*Three months ended June 30, 2026*
Beginning	*Provision for (Recovery*		*Loan*			*Loan*			*Ending*
(dollars in thousands)	*Balance*		of) Credit Losses⁽¹⁾			*Charge-offs*			*Recoveries*		*Balance*
Commercial
Commercial and business lending
Commercial and industrial	$	11,628	$	162		$	(2,188	)	$	875	$	10,477
Commercial real estate − Owner occupied		3,604		2,272			—			11		5,887
Total commercial and business lending		15,232		2,434			(2,188	)		886		16,364
Investor commercial real estate
Construction, land and development		6,741		(3,763	)		—			—		2,978
Multifamily		3,699		720			(500	)		—		3,919
Non-owner occupied		10,929		(349	)		—			—		10,580
Total investor commercial real estate		21,369		(3,392	)		(500	)		—		17,477
Agricultural
Land		852		31			—			—		883
Production		518		100			(50	)		—		568
Total agricultural		1,370		131			(50	)		—		1,451
Total commercial		37,971		(827	)		(2,738	)		886		35,292
Consumer
Residential real estate
First lien		9,122		244			—			—		9,366
Construction		297		69			—			—		366
HELOC		2,130		202			—			—		2,332
Junior lien		407		708			(719	)		1		397
Total residential real estate		11,956		1,223			(719	)		1		12,461
Other consumer		578		35			(33	)		28		608
Total consumer		12,534		1,258			(752	)		29		13,069
Total	$	50,505	$	431		$	(3,490	)	$	915	$	48,361

(1)	The difference in the credit loss expense reported herein compared to the consolidated statements of income is associated with the credit loss expense of $67 thousand related to off-balance sheet credit exposure and ($3) thousand related to HTM investment securities.

	*Six months ended June 30, 2026*
	*Beginning*		*Provision for (Recovery*			*Loan*			*Loan*		*Ending*
(dollars in thousands)	*Balance*		of) Credit Losses⁽¹⁾			*Charge-offs*			*Recoveries*		*Balance*
Commercial
Commercial and business lending
Commercial and industrial	$	16,216	$	1,954		$	(8,753	)	$	1,060	$	10,477
Commercial real estate − Owner occupied		3,097		2,768			—			22		5,887
Total commercial and business lending		19,313		4,722			(8,753	)		1,082		16,364
Investor commercial real estate
Construction, land and development		13,210		(10,232	)		—			—		2,978
Multifamily		4,380		595			(1,056	)		—		3,919
Non-owner occupied		11,006		(426	)		—			—		10,580
Total investor commercial real estate		28,596		(10,063	)		(1,056	)		—		17,477
Agricultural
Land		959		(76	)		—			—		883
Production		623		(199	)		(50	)		194		568
Total agricultural		1,582		(275	)		(50	)		194		1,451
Total commercial		49,491		(5,616	)		(9,859	)		1,276		35,292
Consumer
Residential real estate
First lien		9,358		8			—			—		9,366
Construction		274		92			—			—		366
HELOC		1,787		545			—			—		2,332
Junior lien		395		932			(931	)		1		397
Total residential real estate		11,814		1,577			(931	)		1		12,461
Other consumer		610		85			(146	)		59		608
Total consumer		12,424		1,662			(1,077	)		60		13,069
Total	$	61,915	$	(3,954	)	$	(10,936	)	$	1,336	$	48,361

(1)	The difference in the credit loss expense reported herein compared to the consolidated statements of income is associated with the credit loss expense of ($0.4) million related to off-balance sheet credit exposure and ($8) thousand related to HTM investment securities.

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	*Three months ended June 30, 2025*
	*Beginning*		*Provision for (Recovery*			*Loan*			*Loan*		*Ending*
(dollars in thousands)	*Balance*		of) Credit Losses⁽¹⁾			*Charge-offs*			*Recoveries*		*Balance*
Commercial
Commercial and business lending
Commercial and industrial	$	7,960	$	317		$	(79	)	$	128	$	8,326
Commercial real estate − Owner occupied		3,512		301			(6	)		11		3,818
Total commercial and business lending		11,472		618			(85	)		139		12,144
Investor commercial real estate
Construction, land and development		18,369		160			—			—		18,529
Multifamily		4,749		127			—			—		4,876
Non-owner occupied		16,342		(22	)		(3,401	)		—		12,919
Total investor commercial real estate		39,460		265			(3,401	)		—		36,324
Agricultural
Land		603		12			—			—		615
Production		913		94			(384	)		—		623
Total agricultural		1,516		106			(384	)		—		1,238
Total commercial		52,448		989			(3,870	)		139		49,706
Consumer
Residential real estate
First lien		7,042		17			—			—		7,059
Construction		467		(51	)		—			—		416
HELOC		1,180		188			(10	)		—		1,358
Junior lien		439		(63	)		—			—		376
Total residential real estate		9,128		91			(10	)		—		9,209
Other consumer		353		36			(38	)		12		363
Total consumer		9,481		127			(48	)		12		9,572
Total	$	61,929	$	1,116		$	(3,918	)	$	151	$	59,278

(1)

The difference in the credit loss expense reported herein compared to the consolidated statements of income is associated with the credit loss expense of ($1.2) million related to off-balance sheet credit exposure, ($2) thousand related to HTM investment securities, and $78 thousand related to non-mortgage loans transferred to held for sale.

	*Six months ended June 30, 2025*
	*Beginning*		*Provision for (Recovery*			*Loan*			*Loan*		*Ending*
(dollars in thousands)	*Balance*		of) Credit Losses⁽¹⁾			*Charge-offs*			*Recoveries*		*Balance*
Commercial
Commercial and business lending
Commercial and industrial	$	8,170	$	6		$	(248	)	$	398	$	8,326
Commercial real estate − Owner occupied		3,226		576			(6	)		22		3,818
Total commercial and business lending		11,396		582			(254	)		420		12,144
Investor commercial real estate
Construction, land and development		16,277		2,252			—			—		18,529
Multifamily		4,716		160			—			—		4,876
Non-owner occupied		16,513		(193	)		(3,401	)		—		12,919
Total investor commercial real estate		37,506		2,219			(3,401	)		—		36,324
Agricultural
Land		597		18			—			—		615
Production		631		364			(384	)		12		623
Total agricultural		1,228		382			(384	)		12		1,238
Total commercial		50,130		3,183			(4,039	)		432		49,706
Consumer
Residential real estate
First lien		6,921		192			(54	)		—		7,059
Construction		357		59			—			—		416
HELOC		1,339		279			(260	)		—		1,358
Junior lien		742		(66	)		(300	)		—		376
Total residential real estate		9,359		464			(614	)		—		9,209
Other consumer		440		(124	)		(77	)		124		363
Total consumer		9,799		340			(691	)		124		9,572
Total	$	59,929	$	3,523		$	(4,730	)	$	556	$	59,278

(1)

The difference in the credit loss expense reported herein compared to the consolidated statements of income is associated with the credit loss expense of ($2.7) million related to off-balance sheet credit exposure, ($4) thousand related to HTM investment securities, and $78 thousand related to non-mortgage loans transferred to held for sale.

The ACL on loans at June 30, 2026 was $48.4 million, a decrease of $13.6 million, or 21.9%, from December 31, 2025. The decrease was primarily due to a decrease in nonperforming loans.

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Credit Concentrations

The Company focuses on maintaining a well-balanced and diversified loan portfolio. Despite such efforts, it is recognized that credit concentrations may occasionally emerge as a result of economic conditions, changes in local demand, natural loan growth and runoff. To identify credit concentrations effectively, all commercial and industrial and owner occupied real estate loans are assigned Standard Industrial Classification codes, North American Industry Classification System codes and state and county codes. Property type coding is used for investment real estate. There were no industry concentrations exceeding 10% of the Company’s total loan portfolio as of June 30, 2026.

Credit Quality Indicators

The Company’s consumer loan portfolio is primarily comprised of secured loans that are evaluated at origination on a centralized basis against standardized underwriting criteria. The Company generally does not risk rate consumer loans unless a default event such as bankruptcy or extended nonperformance takes place. Credit quality for the consumer loan portfolio is measured by delinquency rates, nonaccrual amounts and actual losses incurred. These loans are rated as either performing or nonperforming.

The Company assigns a risk rating to all commercial loans, except pools of homogeneous loans, and performs detailed internal and external reviews of risk rated loans over a certain threshold to identify credit risks and to assess the overall collectability of the portfolio. These risk ratings are also subject to examination by the Company’s regulators. During the internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which the borrowers operate and the estimated fair values of collateral securing the loans. These credit quality indicators are used to assign a risk rating to each individual loan.

The Company’s ratings are aligned to pass and criticized categories. The criticized category includes special mention, substandard, and doubtful risk ratings. The risk ratings are defined as follows:

●

Pass: A pass loan is a credit with no existing or known potential weaknesses deserving of management’s close attention.

●

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

●

Substandard: Loans classified as substandard are not adequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified have a well‑defined weakness, or weaknesses that jeopardize the repayment of the debt. Well-defined weaknesses include a borrower’s lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time, or the failure to fulfill expectations. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

●

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

●

Loss: Loans classified as loss are considered uncollectible and charged off immediately.

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The following tables set forth the amortized cost basis of loans by credit quality indicator and vintage based on the most recent analysis performed, as of June 30, 2026 and December 31, 2025:

													*Revolving*
(dollars in thousands)	*Term Loans Amortized Cost Basis by Origination Year*												*Loans Amortized*
As of June 30, 2026	*2026 YTD*		*2025*		*2024*		*2023*		*2022*		*Prior*		*Cost Basis*		*Total*
Commercial and industrial
Pass	$	136,672	$	214,306	$	91,015	$	54,282	$	32,209	$	57,764	$	150,141	$	736,389
Special mention		—		2,350		8		19		150		88		—		2,615
Substandard		—		361		685		13,435		809		2,228		1,813		19,331
Doubtful		—		—		1,468		156		—		—		—		1,624
Subtotal	$	136,672	$	217,017	$	93,176	$	67,892	$	33,168	$	60,080	$	151,954	$	759,959
Gross charge-offs	$	—	$	341	$	1,544	$	255	$	—	$	48	$	—	$	2,188
CRE − Owner occupied
Pass	$	88,390	$	49,713	$	137,780	$	107,700	$	67,322	$	153,589	$	2,646	$	607,140
Special mention		—		1,268		448		—		—		1,517		—		3,233
Substandard		—		—		—		1,397		3,696		6,775		—		11,868
Doubtful		—		—		—		—		—		—		—		—
Subtotal	$	88,390	$	50,981	$	138,228	$	109,097	$	71,018	$	161,881	$	2,646	$	622,241
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
CRE − Construction, land and development
Pass	$	5,152	$	28,109	$	32,577	$	2,730	$	1,201	$	930	$	9,151	$	79,850
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Subtotal	$	5,152	$	28,109	$	32,577	$	2,730	$	1,201	$	930	$	9,151	$	79,850
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
CRE − Multifamily
Pass	$	7,299	$	6,278	$	48,690	$	97,640	$	105,291	$	77,617	$	—	$	342,815
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		5,855		—		—		13,205		—		19,060
Doubtful		—		—		—		—		—		—		—		—
Subtotal	$	7,299	$	6,278	$	54,545	$	97,640	$	105,291	$	90,822	$	—	$	361,875
Gross charge-offs	$	—	$	—	$	—	$	500	$	—	$	—	$	—	$	500
CRE − Non-owner occupied
Pass	$	63,652	$	103,969	$	240,271	$	101,347	$	157,824	$	214,401	$	773	$	882,237
Special mention		—		—		—		—		—		1,015		—		1,015
Substandard		—		—		300		4,477		—		5,338		—		10,115
Doubtful		—		—		—		—		—		—		—		—
Subtotal	$	63,652	$	103,969	$	240,571	$	105,824	$	157,824	$	220,754	$	773	$	893,367
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Agricultural − Land
Pass	$	209	$	2,905	$	7,670	$	6,442	$	15,203	$	15,146	$	—	$	47,575
Special mention		5,026		—		—		—		—		—		—		5,026
Substandard		720		229		—		—		448		204		—		1,601
Doubtful		—		—		—		—		—		—		—		—
Subtotal	$	5,955	$	3,134	$	7,670	$	6,442	$	15,651	$	15,350	$	—	$	54,202
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Agricultural − Production
Pass	$	5,995	$	2,313	$	4,376	$	3,453	$	2,496	$	585	$	29,381	$	48,599
Special mention		—		447		136		648		—		—		2,826		4,057
Substandard		—		29		—		—		—		—		682		711
Doubtful		—		—		—		—		—		—		—		—
Subtotal	$	5,995	$	2,789	$	4,512	$	4,101	$	2,496	$	585	$	32,889	$	53,367
Gross charge-offs	$	—	$	—	$	—	$	50	$	—	$	—	$	—	$	50
Residential real estate − First lien
Performing	$	21,757	$	51,267	$	34,377	$	106,512	$	191,512	$	421,174	$	—	$	826,599
Nonperforming		—		—		401		—		—		1,936		—		2,337
Subtotal	$	21,757	$	51,267	$	34,778	$	106,512	$	191,512	$	423,110	$	—	$	828,936
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential real estate − Construction
Performing	$	5,855	$	19,541	$	5,806	$	—	$	—	$	—	$	—	$	31,202
Nonperforming		—		—		—		—		—		—		—		—
Subtotal	$	5,855	$	19,541	$	5,806	$	—	$	—	$	—	$	—	$	31,202
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential real estate − HELOC
Performing	$	323	$	723	$	2,049	$	3,973	$	4,248	$	7,216	$	254,004	$	272,536
Nonperforming		—		—		—		25		236		327		—		588
Subtotal	$	323	$	723	$	2,049	$	3,998	$	4,484	$	7,543	$	254,004	$	273,124
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential real estate − Junior lien
Performing	$	2,358	$	4,176	$	3,904	$	6,928	$	6,049	$	8,130	$	324	$	31,869
Nonperforming		—		—		—		—		—		72		—		72
Subtotal	$	2,358	$	4,176	$	3,904	$	6,928	$	6,049	$	8,202	$	324	$	31,941
Gross charge-offs for the year ended	$	—	$	—	$	565	$	—	$	—	$	154	$	—	$	719
Other consumer
Performing	$	1,530	$	4,848	$	1,726	$	1,884	$	2,384	$	2,851	$	28,683	$	43,906
Nonperforming		—		—		274		—		—		—		—		274
Subtotal	$	1,530	$	4,848	$	2,000	$	1,884	$	2,384	$	2,851	$	28,683	$	44,180
Gross charge-offs	$	—	$	5	$	—	$	4	$	—	$	24	$	—	$	33
Total loans	$	344,938	$	492,832	$	619,816	$	513,048	$	591,078	$	992,108	$	480,424	$	4,034,244
Gross charge-offs	$	—	$	346	$	2,109	$	809	$	—	$	226	$	—	$	3,490

Table of Contents

													*Revolving*
(dollars in thousands)	*Term Loans Amortized Cost Basis by Origination Year*												*Loans Amortized*
As of December 31, 2025	*2025*		*2024*		*2023*		*2022*		*2021*		*Prior*		*Cost Basis*		*Total*
Commercial and industrial
Pass	$	242,893	$	131,308	$	67,934	$	43,513	$	21,143	$	51,586	$	145,133	$	703,510
Special mention		316		10		560		—		—		28		—		914
Substandard		35		26		2,701		2,970		1,072		6,459		7,115		20,378
Doubtful		1,218		8,638		1,763		298		114		—		—		12,031
Subtotal	$	244,462	$	139,982	$	72,958	$	46,781	$	22,329	$	58,073	$	152,248	$	736,833
Gross charge-offs	$	—	$	407	$	152	$	10	$	5	$	342	$	—	$	916
CRE − Owner occupied
Pass	$	42,468	$	86,030	$	55,069	$	61,790	$	39,654	$	126,951	$	1,240	$	413,202
Special mention		—		449		—		—		—		1,465		769		2,683
Substandard		—		—		1,402		2,867		2,342		4,764		—		11,375
Doubtful		—		—		—		—		—		—		—		—
Subtotal	$	42,468	$	86,479	$	56,471	$	64,657	$	41,996	$	133,180	$	2,009	$	427,260
Gross charge-offs	$	—	$	—	$	6	$	—	$	—	$	—	$	—	$	6
CRE − Construction, land and development
Pass	$	26,108	$	148,261	$	18,056	$	9,738	$	650	$	995	$	8,229	$	212,037
Special mention		—		—		—		178		—		—		—		178
Substandard		—		11,178		—		22,685		—		160		—		34,023
Doubtful		—		—		—		—		—		—		—		—
Subtotal	$	26,108	$	159,439	$	18,056	$	32,601	$	650	$	1,155	$	8,229	$	246,238
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
CRE − Multifamily
Pass	$	6,338	$	26,236	$	115,983	$	115,403	$	30,191	$	60,813	$	—	$	354,964
Special mention		—		—		—		—		831		—		—		831
Substandard		—		5,751		3,972		—		—		17,987		—		27,710
Doubtful		—		—		—		—		—		—		—		—
Subtotal	$	6,338	$	31,987	$	119,955	$	115,403	$	31,022	$	78,800	$	—	$	383,505
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
CRE − Non-owner occupied
Pass	$	102,426	$	196,932	$	134,443	$	169,100	$	86,273	$	168,082	$	1,015	$	858,271
Special mention		—		—		—		—		—		1,040		—		1,040
Substandard		—		—		5,344		7,489		2,729		989		—		16,551
Doubtful		—		—		—		—		—		—		—		—
Subtotal	$	102,426	$	196,932	$	139,787	$	176,589	$	89,002	$	170,111	$	1,015	$	875,862
Gross charge-offs	$	—	$	—	$	—	$	632	$	775	$	1,994	$	—	$	3,401
Agricultural − Land
Pass	$	8,201	$	8,285	$	8,410	$	12,363	$	5,202	$	12,221	$	2,464	$	57,146
Special mention		233		—		—		3,315		—		—		—		3,548
Substandard		—		—		303		3,583		—		219		—		4,105
Doubtful		—		—		—		—		—		—		—		—
Subtotal	$	8,434	$	8,285	$	8,713	$	19,261	$	5,202	$	12,440	$	2,464	$	64,799
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Agricultural − Production
Pass	$	4,778	$	6,219	$	4,652	$	3,154	$	370	$	720	$	38,945	$	58,838
Special mention		—		48		112		—		—		—		213		373
Substandard		—		21		553		1,237		29		342		1,107		3,289
Doubtful		—		—		—		—		—		—		—		—
Subtotal	$	4,778	$	6,288	$	5,317	$	4,391	$	399	$	1,062	$	40,265	$	62,500
Gross charge-offs	$	—	$	—	$	—	$	384	$	—	$	—	$	—	$	384
Residential real estate − First lien
Performing	$	53,688	$	37,893	$	122,651	$	210,228	$	234,461	$	213,214	$	—	$	872,135
Nonperforming		—		—		499		—		642		1,461		—		2,602
Subtotal	$	53,688	$	37,893	$	123,150	$	210,228	$	235,103	$	214,675	$	—	$	874,737
Gross charge-offs	$	—	$	—	$	—	$	—	$	7	$	48	$	—	$	55
Residential real estate − Construction
Performing	$	18,097	$	10,459	$	—	$	—	$	467	$	—	$	—	$	29,023
Nonperforming		—		—		—		4,680		—		—		—		4,680
Subtotal	$	18,097	$	10,459	$	—	$	4,680	$	467	$	—	$	—	$	33,703
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential real estate − HELOC
Performing	$	757	$	2,121	$	3,716	$	5,252	$	975	$	5,649	$	242,285	$	260,755
Nonperforming		—		—		25		50		—		53		—		128
Subtotal	$	757	$	2,121	$	3,741	$	5,302	$	975	$	5,702	$	242,285	$	260,883
Gross charge-offs	$	—	$	100	$	10	$	438	$	—	$	—	$	—	$	548
Residential real estate − Junior lien
Performing	$	4,753	$	4,995	$	8,609	$	7,090	$	3,977	$	4,995	$	50	$	34,469
Nonperforming		—		1,775		—		—		—		600		—		2,375
Subtotal	$	4,753	$	6,770	$	8,609	$	7,090	$	3,977	$	5,595	$	50	$	36,844
Gross charge-offs	$	—	$	—	$	—	$	300	$	—	$	—	$	—	$	300
Other consumer
Performing	$	5,330	$	2,318	$	3,016	$	3,056	$	157	$	3,651	$	26,982	$	44,510
Nonperforming		—		319		—		—		—		29		—		348
Subtotal	$	5,330	$	2,637	$	3,016	$	3,056	$	157	$	3,680	$	26,982	$	44,858
Gross charge-offs	$	—	$	16	$	31	$	22	$	—	$	69	$	—	$	138
Total loans	$	517,639	$	689,272	$	559,773	$	690,039	$	431,279	$	684,473	$	475,547	$	4,048,022
Gross charge-offs	$	—	$	523	$	199	$	1,786	$	787	$	2,453	$	—	$	5,748

Table of Contents

Past Due and Nonaccrual Loans

The Company closely monitors the performance of its loan portfolio. A loan is placed on nonaccrual status when the financial condition of the borrower is deteriorating, payment in full of both principal and interest is not expected as scheduled or principal or interest has been in default for 90 days or more. Exceptions may be made if the asset is secured by collateral sufficient to satisfy both the principal and accrued interest in full and collection is reasonably assured. When one loan to a borrower is placed on nonaccrual status, all other loans to the borrower are re-evaluated to determine if they should also be placed on nonaccrual status. All previously accrued and unpaid interest is reversed at that time. A loan will return to accrual when collection of principal and interest is assured and the borrower has demonstrated timely payments of principal and interest for a reasonable period, generally at least six months.

The following tables present a past due aging analysis of total loans outstanding, by portfolio segment, as of June 30, 2026 and December 31, 2025:

	*June 30, 2026*
							*90 Days*
	*Accruing*		*30 - 59 Days*		*60 - 89 Days*		*or More*				*Total*
(dollars in thousands)	*Current*		*Past Due*		*Past Due*		*Past Due*		*Nonaccrual*		*Loans*
Commercial
Commercial and business lending
Commercial and industrial	$	755,441	$	1,505	$	51	$	—	$	2,962	$	759,959
Commercial real estate − Owner occupied		622,105		—		—		—		136		622,241
Total commercial and business lending		1,377,546		1,505		51		—		3,098		1,382,200
Investor commercial real estate
Construction, land and development		79,850		—		—		—		—		79,850
Multifamily		357,425		3,578		—		—		872		361,875
Non-owner occupied		893,216		—		—		—		151		893,367
Total investor commercial real estate		1,330,491		3,578		—		—		1,023		1,335,092
Agricultural
Land		53,824		229		—		—		149		54,202
Production		53,107		65		195		—		—		53,367
Total agricultural		106,931		294		195		—		149		107,569
Total commercial		2,814,968		5,377		246		—		4,270		2,824,861
Consumer
Residential real estate
First lien		826,107		298		194		436		1,901		828,936
Construction		31,202		—		—		—		—		31,202
HELOC		272,088		440		8		—		588		273,124
Junior lien		31,778		78		13		—		72		31,941
Total residential real estate		1,161,175		816		215		436		2,561		1,165,203
Other consumer		43,789		107		10		—		274		44,180
Total consumer		1,204,964		923		225		436		2,835		1,209,383
Total	$	4,019,932	$	6,300	$	471	$	436	$	7,105	$	4,034,244

	*December 31, 2025*
							*90 Days*
	*Accruing*		*30 - 59 Days*		*60 - 89 Days*		*or More*				*Total*
(dollars in thousands)	*Current*		*Past Due*		*Past Due*		*Past Due*		*Nonaccrual*		*Loans*
Commercial
Commercial and business lending
Commercial and industrial	$	723,436	$	689	$	—	$	—	$	12,708	$	736,833
Commercial real estate − Owner occupied		426,803		—		314		—		143		427,260
Total commercial and business lending		1,150,239		689		314		—		12,851		1,164,093
Investor commercial real estate
Construction, land and development		212,515		—		—		—		33,723		246,238
Multifamily		373,308		—		—		—		10,197		383,505
Non-owner occupied		874,042		163		—		—		1,657		875,862
Total investor commercial real estate		1,459,865		163		—		—		45,577		1,505,605
Agricultural
Land		63,961		674		—		—		164		64,799
Production		62,105		53		—		—		342		62,500
Total agricultural		126,066		727		—		—		506		127,299
Total commercial		2,736,170		1,579		314		—		58,934		2,796,997
Consumer
Residential real estate
First lien		869,291		2,051		794		—		2,601		874,737
Construction		29,023		—		—		—		4,680		33,703
HELOC		260,467		287		—		—		129		260,883
Junior lien		34,362		107		—		—		2,375		36,844
Total residential real estate		1,193,143		2,445		794		—		9,785		1,206,167
Other consumer		44,471		37		4		—		346		44,858
Total consumer		1,237,614		2,482		798		—		10,131		1,251,025
Total	$	3,973,784	$	4,061	$	1,112	$	—	$	69,065	$	4,048,022

Table of Contents

In calculating expected credit losses, the Company includes loans on nonaccrual status and loans 90 days or more past due and still accruing. The following tables present the amortized cost basis on nonaccrual status loans and loans 90 days or more past due and still accruing as of June 30, 2026 and December 31, 2025:

	*As of June 30, 2026*
					*90 Days*
	*Nonaccrual*				*or More*
	*with no Allowance*				*Past Due*
(dollars in thousands)	*for Credit Losses*		*Nonaccrual*		*and Accruing*
Commercial
Commercial and business lending
Commercial and industrial	$	401	$	2,962	$	—
Commercial real estate − Owner occupied		82		136		—
Total commercial and business lending		483		3,098		—
Investor commercial real estate
Construction, land and development		—		—		—
Multifamily		203		872		—
Non-owner occupied		151		151		—
Total investor commercial real estate		354		1,023		—
Agricultural
Land		149		149		—
Production		—		—		—
Total agricultural		149		149		—
Total commercial		986		4,270		—
Consumer
Residential real estate
First lien		1,799		1,901		436
Construction		—		—		—
HELOC		391		588		—
Junior lien		—		72		—
Total residential real estate		2,190		2,561		436
Other consumer		—		274		—
Total consumer		2,190		2,835		436
Total	$	3,176	$	7,105	$	436

	*December 31, 2025*
					*90 Days*
	*Nonaccrual*				*or More*
	*with no Allowance*				*Past Due*
(dollars in thousands)	*for Credit Losses*		*Nonaccrual*		*and Accruing*
Commercial
Commercial and business lending
Commercial and industrial	$	—	$	12,708	$	—
Commercial real estate − Owner occupied		89		143		—
Total commercial and business lending		89		12,851		—
Investor commercial real estate
Construction, land and development		26,475		33,723		—
Multifamily		4,733		10,197		—
Non-owner occupied		1,657		1,657		—
Total investor commercial real estate		32,865		45,577		—
Agricultural
Land		164		164		—
Production		—		342		—
Total agricultural		164		506		—
Total commercial		33,118		58,934		—
Consumer
Residential real estate
First lien		2,298		2,601		—
Construction		4,680		4,680		—
HELOC		—		129		—
Junior lien		2,305		2,375		—
Total residential real estate		9,283		9,785		—
Other consumer		—		346		—
Total consumer		9,283		10,131		—
Total	$	42,401	$	69,065	$	—

Interest income that would have been recognized if loans on nonaccrual status had been current in accordance with their original terms for the three months ended June 30, 2026 and 2025, is estimated to have been $0.4 million and $1.1 million, respectively.

The Company’s policy is to reverse previously recorded interest income when a loan is placed on nonaccrual status. As a result, the Company did not record any interest income on its nonaccrual loans for the three months ended June 30, 2026 or 2025. At June 30, 2026 and December 31, 2025, total accrued interest receivable on loans, which had been excluded from reported amortized cost basis on loans, was $16.4 million and $18.1 million, respectively, and was reported within accrued interest receivable on the consolidated statements of condition. An allowance was not carried on the accrued interest receivable at either date.

Table of Contents

The following tables present the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans, as of June 30, 2026 and December 31, 2025:

	*As of June 30, 2026*
	*Primary Type of Collateral*
									*Allowance for*
(dollars in thousands)	*Real estate*		*Equipment*		*Other*		*Total*		*Credit Losses*
Commercial
Commercial and business lending
Commercial and industrial	$	—	$	1,624	$	1,284	$	2,908	$	1,890
Commercial real estate − Owner occupied		136		—		—		136		4
Total commercial and business lending		136		1,624		1,284		3,044		1,894
Investor commercial real estate
Construction, land and development		—		—		—		—		—
Multifamily		872		—		—		872		4
Non-owner occupied		151		—		—		151		—
Total investor commercial real estate		1,023		—		—		1,023		4
Agricultural
Land		149		—		—		149		—
Production		—		—		—		—		—
Total agricultural		149		—		—		149		—
Total commercial		1,308		1,624		1,284		4,216		1,898
Consumer
Residential real estate
First lien		1,848		—		—		1,848		15
Construction		—		—		—		—		—
HELOC		391		—		—		391		—
Junior lien		—		—		—		—		—
Total residential real estate		2,239		—		—		2,239		15
Other consumer		—		—		274		274		274
Total consumer		2,239		—		274		2,513		289
Total	$	3,547	$	1,624	$	1,558	$	6,729	$	2,187

	*As of December 31, 2025*
	*Primary Type of Collateral*
									*Allowance for*
(dollars in thousands)	*Real estate*		*Equipment*		*Other*		*Total*		*Credit Losses*
Commercial
Commercial and business lending
Commercial and industrial	$	651	$	—	$	—	$	651	$	43
Commercial real estate − Owner occupied		142		—		—		142		4
Total commercial and business lending		793		—		—		793		47
Investor commercial real estate
Construction, land and development		33,723		—		—		33,723		5,635
Multifamily		10,197		—		—		10,197		865
Non-owner occupied		1,657		—		—		1,657		—
Total investor commercial real estate		45,577		—		—		45,577		6,500
Agricultural
Land		164		—		—		164		—
Production		—		—		342		342		42
Total agricultural		164		—		342		506		42
Total commercial		46,534		—		342		46,876		6,589
Consumer
Residential real estate
First lien		2,528		—		—		2,528		229
Construction		4,680		—		—		4,680		—
HELOC		—		—		—		—		—
Junior lien		2,304		—		—		2,304		—
Total residential real estate		9,512		—		—		9,512		229
Other consumer		—		—		319		319		319
Total consumer		9,512		—		319		9,831		548
Total	$	56,046	$	—	$	661	$	56,707	$	7,137

Collateral dependent loans are loans for which the repayment is expected to be provided substantially by the underlying collateral when there are no other available and reliable sources of repayment.

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Loan Modifications to Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, the Company evaluates all loan modifications in accordance with ASU 2022-02. Under ASU 2022-02, a loan is evaluated to consider whether the loan, as modified, represents a new loan or is a continuation of an existing loan.

In cases where a borrower experiences financial difficulty, the Company may make certain concessions for which the terms of the loan are modified. Loans experiencing financial difficulty can include modifications allowing an interest rate reduction below current market rates, a forgiveness of principal balance, an extension of the loan term, an other than significant payment delay, or some combination of these or similar types of modifications.

The following table presents the amortized cost basis of loans as of June 30, 2026, by class of type of modification, that were experiencing financial difficulty during the three and six months ended June 30, 2026. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of the class of financing receivable as of June 30, 2026 is also presented below.

	*Three months ended June 30, 2026*
									*Combination Term*		*Combination Term*
	*Interest Rate*		*Principal*		*Term*		*Payment*		*Extension and*		*Extension and Interest*		*Total %*
(dollars in thousands)	*Reduction*		*Forgiveness*		*Extension*		*Delay*		*Principal Forgiveness*		*Rate Reduction*		*of Portfolio*
Commercial and industrial	$	—	$	—	$	—	$	796	$	—	$	—		0.1	%

	*Six months ended June 30, 2026*
									*Combination Term*		*Combination Term*
	*Interest Rate*		*Principal*		*Term*		*Payment*		*Extension and*		*Extension and Interest*		*Total %*
(dollars in thousands)	*Reduction*		*Forgiveness*		*Extension*		*Delay*		*Principal Forgiveness*		*Rate Reduction*		*of Portfolio*
Commercial and industrial	$	—	$	—	$	—	$	796	$	—	$	—		0.1	%

The following table presents the amortized cost basis of loans as of June 30, 2025, by class of type of modification, that were experiencing financial difficulty during the three and six months ended June 30, 2025. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of the class of financing receivable as of June 30, 2025 is also presented below.

Three months ended June 30, 2025

Combination Term

Interest Rate

Principal

Term

Payment

Extension and

Extension and Interest

Total %

(dollars in thousands)

Reduction

Forgiveness

Extension

Delay

Principal Forgiveness

Rate Reduction

of Portfolio

Agricultural − Land

—

1,457

—

2.2

	Six months ended June 30, 2025
									Combination Term		Combination Term
	*Interest Rate*		*Principal*		*Term*		*Payment*		*Extension and*		*Extension and Interest*		*Total %*
(dollars in thousands)	*Reduction*		*Forgiveness*		*Extension*		*Delay*		*Principal Forgiveness*		*Rate Reduction*		*of Portfolio*
Agricultural − Land	$	—	$	—	$	—	$	1,457	$	—	$	—		2.2	%

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of modification efforts and relevant factors are considered while assessing the adequacy of the ACL. For the three months ended June 30, 2026 and 2025, there were no modified loans to borrowers experiencing financial difficulty that were past due or for which the borrower subsequently defaulted.

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NOTE 5 Land, Premises and Equipment, Net

Components of land, premises and equipment, net at June 30, 2026 and December 31, 2025 were as follows:

	*June 30,*			*December 31,*
(dollars in thousands)	*2026*			*2025*
Land ⁽¹⁾	$	6,425		$	6,425
Buildings and improvements ⁽¹⁾		41,613			39,979
Leasehold improvements		2,657			2,657
Furniture, fixtures, and equipment		41,699			42,933
		92,394			91,994
Less accumulated depreciation		(48,453	)		(48,741	)
Total	$	43,941		$	43,253

(1)	Excludes assets held for sale.

Depreciation expense was $1.4 million and $1.1 million for the three months ended June 30, 2026 and 2025, respectively. Depreciation expense was $2.7 million and $2.2 million for the six months ended June 30, 2026 and 2025, respectively.

The Company’s West Fargo, North Dakota branch is listed for sale for $3.8 million and is expected to sell within the next 12 months. At June 30, 2026, the facility had a carrying value of approximately $0.4 million. The Company expects to record a gain on the sale upon closing, as the expected sale price is greater than the property’s carrying value. Total assets associated with this location held for sale by the Company at June 30, 2026 were $0.4 million and were included in other assets on the Company’s consolidated balance sheet and not included in the table above.

NOTE 6 Goodwill and Other Intangible Assets

The following table summarizes the carrying amount of goodwill, by segment, as of June 30, 2026 and December 31, 2025:

	*June 30,*		*December 31,*
(dollars in thousands)	*2026*		*2025*
Banking	$	74,111	$	74,111
Retirement and benefit services		11,523		11,523
Total goodwill	$	85,634	$	85,634

Goodwill is evaluated for impairment on an annual basis, at a minimum, and more frequently when the economic environment or specific circumstances warrant. The Company determined that there was no goodwill impairment as of June 30, 2026.

The gross carrying amount and accumulated amortization for each type of identifiable intangible asset, as of June 30, 2026 and December 31, 2025, were as follows:

	*June 30, 2026*							*December 31, 2025*
(dollars in thousands)	*Gross Carrying Amount*		*Accumulated Amortization*			*Total*		*Gross Carrying Amount*		*Accumulated Amortization*			*Total*
Identifiable customer intangibles	$	27,504	$	(22,961	)	$	4,543	$	27,504	$	(22,456	)	$	5,048
Core deposit intangible assets		41,092		(16,213	)		24,879		41,092		(12,769	)		28,323
Total intangible assets	$	68,596	$	(39,174	)	$	29,422	$	68,596	$	(35,225	)	$	33,371

Amortization of total intangible assets was $2.0 million and $2.7 million for the three months ended June 30, 2026 and 2025, respectively. Amortization of total intangible assets was $3.9 million and $5.4 million for the six months ended June 30, 2026 and 2025, respectively.

NOTE 7 Loan Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others totaled $623.4 million and $660.7 million as of June 30, 2026 and December 31, 2025, respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and collection and foreclosure processing. Loan servicing income is recorded on an accrual basis and includes servicing fees from investors and certain charges collected from borrowers, such as late payment fees, and is net of fair value adjustments to capitalized mortgage servicing rights. As of and for the year ended December 31, 2024, the Company elected to subsequently measure mortgage servicing rights (“MSRs”) at fair value. The Company accounted for MSRs at the lower of amortized cost or fair value for all periods prior to December 31, 2023.

The following table presents the changes in fair value of the Company’s MSR portfolio for the three and six months ended June 30, 2026 and 2025:

	*Three months ended*					*Six months ended*
	*June 30,*					*June 30,*
(dollars in thousands)	*2026*		*2025*			*2026*		*2025*
Balance at beginning of period	$	6,615	$	7,351		$	6,383	$	7,918
Additions from loans sold with servicing rights retained		44		47			56		101
Change in fair value		363		(214	)		583		(835	)
Balance at end of period	$	7,022	$	7,184		$	7,022	$	7,184

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The following is a summary of key data and assumptions used in the valuation of servicing rights as of June 30, 2026 and December 31, 2025. Increases or decreases in any one of these assumptions would result in lower or higher fair value measurements.

	*June 30,*			*December 31,*
(dollars in thousands)	*2026*			*2025*
Fair value of servicing rights	$	7,022		$	6,383
Weighted-average remaining term, years		21.1			21.5
Prepayment speeds		9.7	%		14.4	%
Discount rate		10.3	%		10.0	%

NOTE 8 Leases

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of an identified property, plant or equipment for a period of time in exchange for consideration. Substantially all of the leases in which the Company is the lessee are comprised of real property for offices and office equipment rentals with terms extending through 2045. Substantially all of the Company’s leases are classified as operating leases. The Company has no existing finance leases.

The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less) or equipment leases (deemed immaterial) on the consolidated financial statements. The following table presents the classification of the Company’s right-of-use (“ROU”) assets and lease liabilities on the consolidated financial statements as of June 30, 2026 and December 31, 2025:

		*June 30,*		*December 31,*
(dollars in thousands)		*2026*		*2025*
Lease Right-of-Use Assets	*Classification*
Operating lease right-of-use assets	Operating lease right-of-use assets	$	32,105	$	28,761
Lease Liabilities
Operating lease liabilities	Operating lease liabilities	$	42,752	$	36,282

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. The Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term for the discount rate.

	*June 30,*			*December 31,*
	*2026*			*2025*
Weighted-average remaining lease term, years
Operating leases		15.8			16.9
Weighted-average discount rate
Operating leases		5.0	%		5.1	%

As the Company elected, for all classes of underlying assets, not to separate lease and non‑lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities. Variable lease cost also includes payments for usage or maintenance of those capitalized equipment operating leases.

The following table presents lease costs and other lease information for the three and six months ended June 30, 2026 and 2025:

	*Three months ended*						*Six months ended*
	*June 30,*						*June 30,*
(dollars in thousands)	*2026*			*2025*			*2026*			*2025*
Lease costs
Operating lease cost	$	875		$	621		$	1,575		$	1,240
Variable lease cost		306			184			497			126
Short-term lease cost		36			44			147			334
Sublease income		(19	)		(80	)		(36	)		(121	)
Net lease cost	$	1,198		$	769		$	2,183		$	1,579
Other information
Cash paid for amounts included in the measurement of lease liabilities operating cash flows from operating leases	$	875		$	599		$	1,574		$	1,197
Right-of-use assets obtained in exchange for new operating lease liabilities		543			44			5,282			66

Future minimum payments for finance and operating leases with initial or remaining terms of one year or more as of June 30, 2026 were as follows:

	*Operating*
(dollars in thousands)	*Leases*
Twelve months ended
June 30, 2027	$	3,813
June 30, 2028		3,748
June 30, 2029		3,968
June 30, 2030		4,014
June 30, 2031		4,119
Thereafter		46,439
Total future minimum lease payments	$	66,101
Amounts representing interest		(23,349	)
Total operating lease liabilities	$	42,752

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NOTE 9 Deposits

The components of deposits in the consolidated balance sheets as of June 30, 2026 and December 31, 2025 were as follows:

	*June 30,*		*December 31,*
(dollars in thousands)	*2026*		*2025*
Noninterest-bearing	$	759,640	$	807,896
Interest-bearing
Interest-bearing demand		1,429,951		1,296,315
Savings accounts		173,255		173,759
Money market savings		1,252,823		1,337,491
Time deposits		576,228		576,542
Total interest-bearing		3,432,257		3,384,107
Total deposits	$	4,191,897	$	4,192,003

Certificates of deposit in excess of $250,000 totaled $194.0 million and $190.5 million at June 30, 2026 and December 31, 2025, respectively.

NOTE 10 Short‑Term Borrowings

Short-term borrowings at June 30, 2026 and December 31, 2025 consisted of the following:

	*June 30,*		*December 31,*
(dollars in thousands)	*2026*		*2025*
Fed funds purchased	$	—	$	58,800
FHLB short-term advances		345,000		250,000
Total	$	345,000	$	308,800

NOTE 11 Long‑Term Debt

Long‑term debt as of June 30, 2026 and December 31, 2025 consisted of the following:

	*June 30, 2026*
						*Period End*
	*Face*		*Carrying*			*Interest*			*Maturity*
(dollars in thousands)	*Value*		*Value*		*Interest Rate*	*Rate*			*Date*	*Call Date*
Subordinated notes payable	$	50,000	$	50,000	Fixed for first 5 years, then repriced at the FHLB rate + 3.00%		6.75	%	3/30/2036	3/30/2031
Junior subordinated debenture (Trust I)		4,124		3,696	Three-month CME SOFR + 0.26% + 3.10%		7.11	%	6/26/2033	6/26/2008
Junior subordinated debenture (Trust II)		6,186		5,543	Three-month CME SOFR + 0.26% + 1.80%		5.73	%	9/15/2036	9/15/2011
Total long-term debt	$	60,310	$	59,239

	*December 31, 2025*
						*Period End*
	*Face*		*Carrying*			*Interest*			*Maturity*
(dollars in thousands)	*Value*		*Value*		*Interest Rate*	*Rate*			*Date*	*Call Date*
Subordinated notes payable	$	50,000	$	50,000	Fixed		3.50	%	3/30/2031	3/31/2026
Junior subordinated debenture (Trust I)		4,124		3,673	Three-month CME SOFR + 0.26% + 3.10%		7.05	%	6/26/2033	6/26/2008
Junior subordinated debenture (Trust II)		6,186		5,509	Three-month CME SOFR + 0.26% + 1.80%		5.78	%	9/15/2036	9/15/2011
Total long-term debt	$	60,310	$	59,182

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NOTE 12 Commitments and Contingencies

Commitments

In the normal course of business, the Company has outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying consolidated financial statements. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making such commitments as it does for instruments that are included in the statements of financial condition.

A summary of the contractual amounts of the Company’s exposure to off-balance sheet risk as of June 30, 2026 and December 31, 2025, respectively, was as follows:

	*June 30,*		*December 31,*
(dollars in thousands)	*2026*		*2025*
Commitments to extend credit	$	1,033,270	$	1,038,347
Standby letters of credit		14,513		14,393
Total	$	1,047,782	$	1,052,740

The Company establishes an ACL on unfunded commitments, except those that are unconditionally cancellable by the Company. As of June 30, 2026 and December 31, 2025, the ACL on unfunded commitments was $3.5 million and $3.9 million, respectively. The ACL on unfunded commitments was presented within accrued expenses and other liabilities on the consolidated balance sheets. For the six months ended June 30, 2026 and 2025, the provision (recovery) for credit losses on unfunded commitments was ($0.4) million and ($2.7) million, respectively.

Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses, and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each client’s creditworthiness on a case by case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property and equipment, and income producing commercial properties.

The Company was not required to perform on any financial guarantees and did not incur any losses on its commitments during the past two years.

The Company utilizes standby letters of credit issued by either the FHLB or the Bank of North Dakota to secure public unit deposits. The Company had letters of credit outstanding with the FHLB in the amount of $17.5 million as of June 30, 2026 and $33.6 million as of December 31, 2025. With the Bank of North Dakota, the Company had no letters of credit outstanding as of June 30, 2026 and $126.0 million of letters of credit outstanding as of December 31, 2025. Letters of credit with the Bank of North Dakota were collateralized by loans pledged to the Bank of North Dakota in the amount of $511.4 million and $549.0 million as of June 30, 2026 and December 31, 2025, respectively.

Legal Contingencies

In the normal course of business, including in connection with business combinations pursued by the Company, the Company and its subsidiaries are subject to pending and threatened litigation, claims investigations and legal and administrative cases and proceedings.

Under applicable accounting standards, reserves are established for legal claims only when losses associated with the claims are judged to be probable, and the loss can be reasonably estimated. When a material loss contingency is reasonably possible, but not probable, the Company does not record a liability, but instead discloses the nature of the matter and an estimate of the loss or range of losses, to the extent such estimate can be made. Significant judgment is required in both the determination of possibility or probability, and whether the loss or range of losses is reasonably estimable. The Company’s judgments are subjective and based on the status of the legal or regulatory proceedings, the merits of the Company’s defenses and consultation with in-house and outside legal counsel. Because of uncertainties related to these matters, accruals are based on the best information available to the Company and its advisors at the time, including, among other information, settlement agreements. As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation and may revise its estimates accordingly. Due to the inherent uncertainties of the legal and regulatory processes, such judgments may be materially different than the actual outcomes. Legal costs such as outside counsel fees are expensed in the period in which the services are rendered.

Assessments of litigation exposure are difficult because they involve inherently unpredictable factors including, but not limited to: whether the proceeding is in the early stages; whether damages are unspecified, unsupported or uncertain; whether there is a potential for punitive or other pecuniary damages; whether the matter involves legal uncertainties, including novel issues of law; whether the matter involves multiple parties and/or jurisdictions; whether discovery has begun or is not complete; whether meaningful settlement discussions have commenced; and whether the proceeding involves class allegations. In many lawsuits and arbitrations, it is not possible to determine whether a liability will be incurred, or to estimate the ultimate or minimum amount of that liability, until the matter is close to resolution, in which case a reserve will not be recognized until that time. As a result, the Company may be unable to estimate reasonably possible losses with respect to litigation matters it faces.

In 2023, the Company sold its ESOP fiduciary services business but currently remains subject to two pending lawsuits related to the sold business, including one brought by the DOL.

In November 2023, the DOL brought suit against several defendants, including the Bank, alleging that the Bank, in its capacity as trustee to an ESOP, (1) breached certain of its fiduciary duties in connection with a transaction which allegedly caused the ESOP to pay more than fair market value to acquire stock, and (2) engaged in a prohibited transaction by causing the ESOP to acquire the stock from an existing company shareholder for more than adequate consideration. The Bank continues to dispute the allegations made by the DOL and intends to continue to defend itself vigorously.

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The Company believes a material loss contingency related to the DOL complaint is reasonably possible, but not probable, based on currently-available information. However, the Company is unable to estimate the ultimate or minimum loss or range of losses, if any, at this time due to a number of uncertainties, including, but not limited to: (1) the current early stages of the proceedings, (2) the absence of specificity as to alleged damages, and (3) the lack of resolution of significant factual and legal issues.

As of June 30, 2026 and December 31, 2025, the Company did not have any accrued liabilities recorded for loss contingencies that were required to be disclosed.

NOTE 13 Share-Based Compensation

On May 6, 2019, the Company’s stockholders approved the Alerus Financial Corporation 2019 Equity Incentive Plan. This plan allows the compensation committee of the Board of Directors of the Company the ability to grant a wide variety of equity awards, including stock options, stock appreciation rights, stock awards, and cash incentive awards in such forms and amounts as it deems appropriate to accomplish the goals of the plan. Since inception, all awards issued under the plan have been restricted stock and restricted stock units. Any shares subject to an award that is cancelled, forfeited, or expires prior to exercise or realization, either in full or in part, shall again become available for issuance under the plan. However, shares subject to an award shall not again be made available for issuance or delivery under the plan if such shares are (a) tendered in payment of the exercise price of a stock option, (b) delivered to, or withheld by, the Company to satisfy any tax withholding obligation, or (c) covered by a stock-settled stock appreciation right or other awards that were not issued upon the settlement of the award. Restricted stock units issued do not participate in dividends and recipients are not entitled to vote these restricted stock units until shares of the Company’s common stock are delivered after vesting of the restricted stock units. Shares vest, become exercisable and contain such other terms and conditions as determined by the compensation committee and set forth in individual agreements with the participant receiving the award. Awards issued to Company directors vest on the earlier of the first anniversary of the grant date and the next annual meeting of stockholders. The plan authorizes the issuance of up to 1,100,000 shares of common stock. As of June 30, 2026, 466,502 shares of common stock were still available for issuance under the plan.

The compensation expense relating to awards under this plan was $0.9 million and $0.6 million for the three months ended June 30, 2026 and 2025, respectively. The compensation expense relating to awards under this plan was $1.7 million and $1.2 million for the six months ended June 30, 2026 and 2025, respectively.

The following table presents the activity in the stock plan for the six months ended June 30, 2026 and 2025:

	*Six months ended June 30,*
	*2026*					*2025*
				*Weighted-*					*Weighted-*
				*Average Grant*					*Average Grant*
	*Awards*			*Date Fair Value*		*Awards*			*Date Fair Value*
Restricted Stock and Restricted Stock Unit Awards
Outstanding at beginning of period		296,468		$	20.61		289,549		$	21.94
Granted		105,955			25.59		119,012			20.11
Vested		(79,615	)		20.68		(52,669	)		23.13
Forfeited or cancelled		(9,631	)		20.36		(20,516	)		28.07
Outstanding at end of period		313,177		$	22.29		335,376		$	20.73

As of June 30, 2026, there was $4.4 million of unrecognized compensation expense related to non-vested awards granted under the plan. The expense is expected to be recognized over a weighted-average period of 2.3 years.

NOTE 14 Income Taxes

The components of income tax expense (benefit) for the three and six months ended June 30, 2026 and 2025 were as follows:

	*Three months ended June 30,*
	*2026*						*2025*
				*Percent of*						*Percent of*
(dollars in thousands)	*Amount*			*Pretax Income*			*Amount*			*Pretax Income*
Taxes at statutory federal income tax rate	$	5,729			21.0	%	$	5,535			21.0	%
Tax effect of:
Tax exempt income		(669	)		(2.5	)%		(498	)		(1.9	)%
State income taxes, net of federal benefits		1,283			4.7	%		1,392			5.3	%
Nondeductible items and other		71			0.3	%		(325	)		(1.2	)%
Applicable income taxes	$	6,414			23.5	%	$	6,104			23.2	%

	*Six months ended June 30,*
	*2026*						*2025*
				*Percent of*						*Percent of*
(dollars in thousands)	*Amount*			*Pretax Income*			*Amount*			*Pretax Income*
Taxes at statutory federal income tax rate	$	12,081			21.0	%	$	9,222			21.0	%
Tax effect of:
Tax exempt income		(1,194	)		(2.1	)%		(955	)		(2.2	)%
State income taxes, net of federal benefits		2,594			4.5	%		2,185			5.0	%
Nondeductible items and other		212			0.4	%		(103	)		(0.2	)%
Applicable income taxes	$	13,693			23.8	%	$	10,349			23.6	%

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It is the opinion of management that, as of June 30, 2026, the Company had no significant uncertain tax positions that would be subject to change upon examination.

NOTE 15 Tax Credit Investments

The Company invests in qualified affordable housing projects for the purpose of community reinvestment and obtaining tax credits. The Company’s tax credit investments are limited to existing lending relationships with well-known developers and projects within the Company’s market area.

The following table presents a summary of the Company’s investments in qualified affordable housing project tax credits as of June 30, 2026 and December 31, 2025:

		*June 30, 2026*				*December 31, 2025*
(dollars in thousands)		*Investment*		*Unfunded Commitment*		*Investment*		*Unfunded Commitment*
Investment	*Accounting Method*
Low income housing tax credit	Proportional amortization	$	32,906	$	12,272	$	22,906	$	5,082

The following table presents a summary of the amortization expense and tax benefit recognized for the Company’s qualified affordable housing projects for the three and six months ended June 30, 2026 and 2025:

	*Three months ended June 30,*
	*2026*					*2025*
	*Amortization*		*Tax Benefit*			*Amortization*		*Tax Benefit*
(dollars in thousands)	Expense ⁽¹⁾		Recognized ⁽²⁾			Expense⁽¹⁾		Recognized⁽²⁾
Low income housing tax credit	$	588	$	(736	)	$	455	$	(673	)

(1)	The amortization expense for low income housing tax credits was included in the income tax expense.

(2)	All of the tax benefits recognized were included in income tax expense.

	*Six months ended June 30,*
	*2026*					*2025*
	*Amortization*		*Tax Benefit*			*Amortization*		*Tax Benefit*
(dollars in thousands)	Expense ⁽¹⁾		Recognized ⁽²⁾			Expense ⁽¹⁾		Recognized ⁽²⁾
Low income housing tax credit	$	1,164	$	(1,489	)	$	914	$	(1,025	)

(1)	The amortization expense for low income housing tax credits was included in the income tax expense.

(2)	All of the tax benefits recognized were included in income tax expense.

NOTE 16 Segment Reporting

Beginning with the annual period ended December 31, 2024, the Company adopted the guidance within ASU 2023-07, Segment Reporting (Topic 280), which expanded disclosure requirements for significant segment expenses and other segment items. In connection with this guidance, compensation, employee taxes and benefits, business services, software and technology expense, and merger and acquisition expense are presented separately as these expenses were previously included within total noninterest expense. Financial information for prior periods were recast to conform to the current presentation.

Operating segments are components of an enterprise, which are evaluated regularly by the “chief operating decision maker” in deciding how to allocate resources and assess performance. The Company’s chief operating decision maker is the President and Chief Executive Officer of the Company, and assesses overall segment performance based on net income (loss) before taxes and uses this metric to allocate resources for each segment, focusing on budgeting and forecasting.

Reportable segments are determined based on the services offered, the significance of the services offered, the significance of those services to the Company’s financial statements, and management’s regular review of the operating results of those services. The Company currently operates through three operating segments: banking, retirement and benefit services, and wealth advisory services.

The Company’s reportable segments include the following:

	●	Banking: Offers a complete line of loan, deposit, cash management, and treasury services through 26 offices in North Dakota, Minnesota, Wisconsin, Iowa, and Arizona. These products and services are supported through web and mobile based applications. The majority of the Company’s assets and liabilities are in the Banking segment’s balance sheet.

	●	Retirement and Benefit Services: Provides the following services nationally: record-keeping and administration services to qualified and other types of retirement plans, investment fiduciary services to retirement plans, health savings accounts, flexible spending accounts, and COBRA recordkeeping and administration services. The division serves clients nationally, including within the Company's banking markets, through a geographically dispersed workforce, and maintains an office in Lakewood, Colorado.

	●	Wealth Advisory Services: Provides advisory and planning services, investment management, and trust and fiduciary services to clients across the Company’s footprint.

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The Company’s segment reporting process begins with the assignment of income and expenses directly to the applicable segments based on different cost centers within the Company. The net income (loss) before taxes for each reportable segment is further derived by the use of expense allocations. Certain expenses not directly attributable to a specific segment are allocated across all segments based on key metrics, such as number of employees and time spent working in each segment. These types of expenses include business services, software and technology expense, human resources, accounting and finance, risk management, legal, and marketing.

The financial information presented for each segment includes net interest income, provision for credit losses, noninterest income, and direct and indirect noninterest expense. As discussed above, noninterest expense is broken out between significant noninterest expenses and other noninterest expense. Other noninterest expense consists of occupancy and equipment expense, intangible amortization expense, professional fees and assessments (less merger and acquisition expenses which are included within this expense item on the consolidated statements of income), marketing and business development, supplies and postage, travel, mortgage and lending expenses, and other noninterest expenses. Corporate administration includes all remaining income and expenses not allocated to the three operating segments, including all merger and acquisition expenses.

The assignment and allocation methodologies used in the segment reporting process discussed above change from time to time as systems are enhanced, methods for evaluating segment performance or product lines change or as business segments are realigned.

The following tables present key metrics related to the Company’s segments for the periods presented:

	*As of and for the three months ended June 30, 2026*
			*Retirement and*		*Wealth Advisory*		*Corporate*
(dollars in thousands)	*Banking*		*Benefit Services*		*Services*		*Administration*			*Consolidated*
Net interest income (loss)	$	48,753	$	—	$	—	$	(1,041	)	$	47,712
Provision for credit losses		495		—		—		—			495
Noninterest income (loss)		7,039		17,347		7,705		854			32,945
Noninterest expense
Compensation		12,546		7,881		3,746		1,982			26,155
Employee taxes and benefits		3,159		2,214		638		744			6,755
Business services, software and technology expense		2,679		1,577		1,051		133			5,440
Merger and acquisition expense		—		—		—		6			6
Other noninterest expense		9,873		3,405		939		310			14,527
Total noninterest expense		28,257		15,077		6,374		3,175			52,883
Net income (loss) before taxes	$	27,040	$	2,270	$	1,331	$	(3,362	)	$	27,279
Total assets	$	5,182,014	$	31,467	$	6,477	$	68,760		$	5,288,718

	*As of and for the six months ended June 30, 2026*
				*Retirement and*		*Wealth Advisory*		*Corporate*
(dollars in thousands)	*Banking*			*Benefit Services*		*Services*		*Administration*			*Consolidated*
Net interest income (loss)	$	94,298		$	—	$	—	$	(1,675	)	$	92,623
Provision for credit losses		(4,388	)		—		—		—			(4,388	)
Noninterest income (loss)		13,387			34,754		14,942		709			63,792
Noninterest expense
Compensation		24,257			15,597		6,777		3,611			50,242
Employee taxes and benefits		6,286			4,352		1,384		1,373			13,395
Business services, software and technology expense		5,416			3,444		2,148		271			11,279
Merger and acquisition expense		—			—		—		(28	)		(28	)
Other noninterest expense		19,691			6,293		1,792		610			28,386
Total noninterest expense		55,650			29,686		12,101		5,837			103,274
Net income (loss) before taxes	$	56,423		$	5,068	$	2,841	$	(6,803	)	$	57,529
Total assets	$	5,182,014		$	31,467	$	6,477	$	68,760		$	5,288,718

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	*As of and for the three months ended June 30, 2025*
			*Retirement and*		*Wealth Advisory*		*Corporate*
(dollars in thousands)	*Banking*		*Benefit Services*		*Services*		*Administration*			*Consolidated*
Net interest income (loss)	$	43,684	$	—	$	—	$	(652	)	$	43,032
Provision for credit losses		—		—		—		—			—
Noninterest income		8,436		16,024		7,363		(60	)		31,763
Noninterest expense
Compensation		12,278		7,064		3,383		1,618			24,343
Employee taxes and benefits		3,289		2,015		721		608			6,633
Business services, software and technology expense		3,084		1,930		686		168			5,868
Merger and acquisition expense		—		—		—		11			11
Other noninterest expense		8,797		2,157		342		287			11,583
Total noninterest expense		27,448		13,166		5,132		2,692			48,438
Net income (loss) before taxes	$	24,672	$	2,858	$	2,231	$	(3,404	)	$	26,357
Total assets	$	5,244,506	$	30,817	$	6,055	$	42,444		$	5,323,822

	*As of and for the six months ended June 30, 2025*
			*Retirement and*		*Wealth Advisory*		*Corporate*
(dollars in thousands)	*Banking*		*Benefit Services*		*Services*		*Administration*			*Consolidated*
Net interest income (loss)	$	85,491	$	—	$	—	$	(1,302	)	$	84,189
Provision for credit losses		863		—		—		—			863
Noninterest income		13,083		32,130		14,267		(85	)		59,395
Noninterest expense
Compensation		23,914		14,280		6,435		2,675			47,304
Employee taxes and benefits		7,169		4,326		1,462		1,439			14,396
Business services, software and technology expense		6,048		3,924		1,304		344			11,620
Merger and acquisition expense		—		—		—		297			297
Other noninterest expense		19,528		4,253		768		639			25,188
Total noninterest expense		56,659		26,783		9,969		5,394			98,805
Net income (loss) before taxes	$	41,052	$	5,347	$	4,298	$	(6,781	)	$	43,916
Total assets	$	5,244,506	$	30,817	$	6,055	$	42,444		$	5,323,822

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NOTE 17 Earnings Per Share

The calculations of basic and diluted earnings per share using the two-class method for the three and six months ended June 30, 2026 and 2025 are presented below:

	*Three months ended*				*Six months ended*
	*June 30,*				*June 30,*
(dollars and shares in thousands, except per share data)	*2026*		*2025*		*2026*		*2025*
Net income	$	20,865	$	20,253	$	43,836	$	33,567
Dividends and undistributed earnings allocated to participating securities		191		205		400		298
Net income available to common stockholders	$	20,674	$	20,048	$	43,436	$	33,269
Weighted-average common shares outstanding for basic earnings per share		25,081		25,368		25,230		25,363
Dilutive effect of stock-based awards		314		346		307		320
Weighted-average common shares outstanding for diluted earnings per share		25,395		25,714		25,537		25,683
Earnings per common share:
Basic earnings per common share	$	0.82	$	0.79	$	1.72	$	1.31
Diluted earnings per common share	$	0.81	$	0.78	$	1.70	$	1.30

There were no antidilutive shares for the three and six months ended June 30, 2026 and 2025.

NOTE 18 Derivative Instruments

The Company uses a variety of derivative instruments to mitigate exposure to both market and credit risks inherent in its business activities. The Company manages these risks as part of its overall asset and liability management process and through its policies and procedures. Derivatives represent contracts between parties that usually require little or no initial net investment and result in one party delivering cash or another type of asset to the other party based on a notional amount and an underlying as specified in the contract.

Derivatives are often measured in terms of notional amount, but this amount is generally not exchanged, and it is not recorded on the Company’s consolidated balance sheet. The notional amount is the basis to which the underlying is applied to determine required payments under the derivative contract. The underlying is a referenced interest rate, security price, credit spread, or other index. Residential and commercial real estate (“CRE”) loan commitments associated with loans to be sold also qualify as derivative instruments.

Derivatives Designated as Hedging Instruments

The Company uses derivative instruments to hedge its exposure to economic risks, including interest rate, liquidity and credit risk. Certain hedging relationships are formally designated and qualify for hedge accounting under GAAP. On the date the Company enters into a derivative contract designated as a hedging instrument, the derivative is designated as either a fair value hedge, cash flow hedge, or a net investment hedge. When a derivative is designated as a fair value, cash flow, or net investment hedge, the Company performs an assessment, at inception and, at a minimum, quarterly thereafter, to determine the effectiveness of the derivative in offsetting changes in the value or cash flows of the hedged item(s). As of June 30, 2026, the Company only used fair value and cash flow hedges.

Fair value hedges: These derivatives are interest rate swaps the Company uses to hedge the change in fair value related to interest rate changes of its underlying mortgage-backed investment securities and mortgage loan pools. The interest rate swaps are carried on the Company’s Consolidated Balance Sheet at their fair value in other assets (when the fair value is positive) or in accrued expenses and other liabilities (when the fair value is negative). The changes in fair value of the interest rate swaps are recorded in interest income. The unrealized gains or losses due to changes in fair value of the interest rate swaps due to changes in benchmark interest rates are recorded as an adjustment to the hedged instruments and offset in the same interest income line items.

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Cash flow hedges: These derivatives are interest rate swaps the Company uses to hedge the variability of expected future cash flows due to market interest changes. The interest rate swap is carried on the Company’s consolidated balance sheet at its fair value in other assets (when the fair value is positive) or in accrued expenses and other liabilities (when the fair value is negative). Changes in fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income (loss) (“OCI”) until the cash flows of the hedged items are realized. If a derivative designated as a cash flow hedge is terminated or ceases to be highly effective, the gain or loss in OCI is amortized to earnings over the period the forecasted hedged transactions impact earnings. If a hedged forecasted transaction is no longer probable, hedge accounting is ceased and any gain or loss included in OCI is reported in earnings immediately, unless the forecasted transaction is at least reasonably possible of occurring, whereby the amounts remain within accumulated other comprehensive income (loss) (“AOCI”). The Company estimates that no additional amounts will be reclassified as an increase to interest expense over the next 12 months. All cash flow hedges were highly effective for the three and six months ended June 30, 2026. As of June 30, 2026, the maximum length of time over which forecasted transactions are hedged was 38 months.

Derivatives Not Designated as Hedging Instruments

Interest rate swaps: The Company periodically enters into commercial loan interest rate swap agreements in order to provide commercial loan customers with the ability to convert from variable to fixed interest rates. These derivative contracts relate to transactions in which the Company enters into an interest rate swap with a customer, while simultaneously entering into an offsetting interest rate swap with an institutional counterparty.

Interest rate lock commitments, forward loan sales commitments and to be announced mortgage backed securities: The Company enters into forward delivery contracts to sell mortgage loans at specific prices and dates in order to hedge the interest rate risk in its portfolio of mortgage loans held for sale and its residential mortgage interest rate lock commitments.

The following table presents the total notional amounts and gross fair values of the Company’s derivatives as of June 30, 2026 and December 31, 2025:

	Derivative Assets ⁽¹⁾				Derivative Liabilities ⁽²⁾
	*Notional*		*Fair*		*Notional*		*Fair*
(dollars in thousands)	*Amount*		*Value*		*Amount*		*Value*
*June 30, 2026*
Designated as hedging instruments:
Cash flow hedges:
Interest rate swaps		200,000		1,046		—		—
Total derivatives designated as hedging instruments	$	200,000	$	1,046	$	—	$	—
Not designated as hedging instruments:
Interest rate swaps ⁽¹⁾	$	565,464	$	6,933	$	581,464	$	7,131
Interest rate lock commitments		37,966		421		—		—
Forward loan sales commitments		5,073		62		—		—
To-be-announced mortgage backed securities		—		—		49,500		23
Total asset derivatives not designated as hedging instruments	$	608,503	$	7,416	$	630,964	$	7,154
*December 31, 2025*
Designated as hedging instruments:
Cash flow hedges:
Interest rate swaps		—		—		200,000		19
Total derivatives designated as hedging instruments	$	—	$	—	$	200,000	$	19
Not designated as hedging instruments:
Interest rate swaps ⁽³⁾	$	490,341	$	10,454	$	507,341	$	10,603
Interest rate lock commitments		17,985		256		—		—
Forward loan sales commitments		12,082		248		—		—
To-be-announced mortgage backed securities		—		—		30,500		60
Total asset derivatives not designated as hedging instruments	$	520,408	$	10,958	$	537,841	$	10,663

(1)	Derivative assets are included in other assets on the Company’s consolidated balance sheet.

(2)	Derivative liabilities are included in accrued expenses and other liabilities on the Company’s consolidated balance sheet.

(3)	Reported fair values include accrued interest receivable and payable.

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The following table shows the effective portion of the gains (losses) recognized in OCI and the gains (losses), before tax, reclassified from OCI into earnings for the periods indicated:

				*Gains (Losses)*
	*Gains (Losses)*			*Reclassified*
	*Recognized in*			*from OCI*
(dollars in thousands)	*OCI*			*into Earnings*
Derivatives designated as hedging instruments
*For the three months ended June 30, 2026*
Cash flow hedges:
Interest rate swaps	$	278		$	—

*For the three months ended June 30, 2025*
Cash flow hedges:
Interest rate swaps	$	(147	)	$	—

*For the six months ended June 30, 2026*
Cash flow hedges:
Interest rate swaps	$	1,065		$	—

*For the six months ended June 30, 2025*
Cash flow hedges:
Interest rate swaps	$	(609	)	$	(22	)

The following table shows the effect of fair value and cash flow hedge accounting on derivatives designated as hedging instruments in the Consolidated Statements of Income for the periods indicated:

	Location and Amount of Gains (Losses) Recognized in Income
	Interest Income					Interest Expense
	Loans,		Investment
	including		securities -			Short-term
(dollars in thousands)	fees		Taxable			borrowings
For the three months ended June 30, 2026
Total amounts in the Consolidated Statements of Income	$	62,214	$	7,258		$	2,935
Fair value hedges:
Interest rate swaps		—		(1	)		—
Cash flow hedges:
Interest rate swaps		—		—			—
For the three months ended June 30, 2025
Total amounts in the Consolidated Statements of Income	$	63,853	$	5,310		$	3,982
Fair value hedges:
Interest rate swaps		—		143			—
Cash flow hedges:
Interest rate swaps		—		—			—

For the six months ended June 30, 2026
Total amounts in the Consolidated Statements of Income	$	120,835	$	14,363		$	5,292
Fair value hedges:
Interest rate swaps		—		(11	)		—
Cash flow hedges:
Interest rate swaps		—		—			—
For the six months ended June 30, 2025
Total amounts in the Consolidated Statements of Income	$	125,348	$	11,017		$	6,821
Fair value hedges:
Interest rate swaps		—		291			—
Cash flow hedges:
Interest rate swaps		—		—			(22	)

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The gain (loss) recognized on derivatives not designated as hedging relationships for the three and six months ended June 30, 2026 and 2025 was as follows:

(dollars in thousands)		*Three months ended June 30,*						*Six months ended June 30,*
Derivatives not designated as hedging instruments	*Consolidated Statements of Income Location*	*2026*			*2025*			*2026*			*2025*
Interest rate swaps	Other noninterest income	$	—		$	—		$	—		$	—
Interest rate swaps	Mortgage banking		(96	)		191			(50	)		378
Interest rate lock commitments	Mortgage banking		288			275			237			597
Forward loan sales commitments	Mortgage banking		(28	)		(190	)		(186	)		(197	)
To-be-announced mortgage backed securities	Mortgage banking		(280	)		(54	)		186			(340	)
Total gain (loss) from derivatives not designated as hedging instruments		$	(116	)	$	222		$	187		$	438

The Company has third party agreements that require a minimum dollar transfer amount upon a margin call. These requirements are dependent on certain specified credit measures. There was no collateral posted with third parties at either June 30, 2026 or December 31, 2025. If any, the amount of collateral posted with third parties would be deemed to be sufficient as of those dates to collateralize both the fair market value change as well as any additional amounts that may be required as a result of a change in the specified credit measures.

Credit Risk-Related Contingent Features

By using derivatives, the Company is exposed to credit risk to the extent that counterparties to the derivative contracts do not perform as required. Should a counterparty fail to perform under the terms of a derivative contract, the Company’s credit exposure on interest rate swaps is limited to the net positive fair value and accrued interest of all swaps with each counterparty. The Company seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, where appropriate. As such, management believes the risk of incurring credit losses on derivative contracts with institutional counterparties is remote.

The Company has agreements with its derivative counterparties that contain a provision where, if the Company defaults on any of its indebtedness, including defaults where repayment of the indebtedness has not been accelerated by the lender, the Company could also be declared in default on its derivative obligations. In addition, the Company also has agreements with certain of its derivative counterparties that contain a provision where, if the Company fails to maintain its status as a well-capitalized institution, the counterparty could terminate the derivative position(s) and the Company could be required to settle its obligations under the agreements.

As of June 30, 2026 and December 31, 2025, the fair value of derivatives in a net liability position, which included accrued interest but excluded any adjustment for non-performance risk, related to these agreements was $7.1 million and $10.6 million, respectively. As of June 30, 2026 and December 31, 2025, the Company had minimum collateral posting thresholds with certain of its derivative counterparties and did not have any posted cash collateral. If the Company had breached any of these provisions at June 30, 2026 or December 31, 2025, it could have been required to settle its obligations under the agreements at their termination value of $7.1 million and $10.6 million, respectively.

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Balance Sheet Offsetting

The following tables present the Company’s derivative positions and the potential effect of netting arrangements on its financial position as of the dates indicated:

							*Gross Amount*
							*Not Offset in the*
							*Consolidated*
							*Balance Sheets*
	*Gross Amount*		*Gross Amount*		*Net Amount*
	*Recognized in the*		*Offset in the*		*Presented in the*
	*Consolidated*		*Consolidated*		*Consolidated*		*Cash Collateral*
(dollars in thousands)	*Balance Sheets*		*Balance Sheets*		*Balance Sheets*		*Pledged (Received)*			*Net Amount*
*June 30, 2026*
Derivative assets:
Interest rate swaps − Company ⁽¹⁾	$	1,046	$	—	$	1,046	$	(1,032	)	$	14
Interest rate swaps − dealer bank ⁽¹⁾		3,594		—		3,594		352			3,946
Interest rate swaps − customer ⁽²⁾		3,339		—		3,339		—			3,339
To-be-announced mortgage backed securities		—		—		—		—			—
Total	$	7,979	$	—	$	7,979	$	(680	)	$	7,299
Derivative liabilities:
Interest rate swaps − Company ⁽¹⁾	$	—	$	—	$	—	$	—		$	—
Interest rate swaps − dealer bank ⁽¹⁾		3,395		—		3,395		490			2,905
Interest rate swaps − customer ⁽²⁾		3,736		—		3,736		—			3,736
To-be-announced mortgage backed securities		23		—		23		—			23
Total	$	7,154	$	—	$	7,154	$	490		$	6,664

(1)	The Company maintains a master netting agreement with each counterparty and settles collateral on a net basis for all interest rate swaps with counterparty banks.

(2)	The Company manages its net exposure on its customer loan swaps by obtaining collateral as part of the normal loan policy and underwriting practices. The Company does not post collateral to its customers as part of its contract.

							*Gross Amount*
							*Not Offset in the*
							*Consolidated*
							*Balance Sheets*
	*Gross Amount*		*Gross Amount*		*Net Amount*
	*Recognized in the*		*Offset in the*		*Presented in the*
	*Consolidated*		*Consolidated*		*Consolidated*		*Cash Collateral*
(dollars in thousands)	*Balance Sheets*		*Balance Sheets*		*Balance Sheets*		*Pledged (Received)*			*Net Amount*
*December 31, 2025*
Derivative assets:
Interest rate swaps − Company ⁽¹⁾	$	—	$	—	$	—	$	—		$	—
Interest rate swaps − dealer bank ⁽¹⁾		2,902		—		2,902		(5,710	)		(2,808	)
Interest rate swaps − customer ⁽²⁾		7,552		—		7,552					7,552
To-be-announced mortgage backed securities		—		—		—		—			—
Total	$	10,454	$	—	$	10,454	$	(5,710	)	$	4,744
Derivative liabilities:
Interest rate swaps − Company ⁽¹⁾	$	19	$	—	$	19	$	34		$	(15	)
Interest rate swaps − dealer bank ⁽¹⁾		7,567		—		7,567		(34	)		7,601
Interest rate swaps − customer ⁽²⁾		3,036	$	—		3,036		—			3,036
To-be-announced mortgage backed securities		60		—		60		—			60
Total	$	10,682	$	—	$	10,682	$	—		$	10,682

(1)	The Company maintains a master netting agreement with each counterparty and settles collateral on a net basis for all interest rate swaps with counterparty banks.

(2)	The Company manages its net exposure on its customer loan swaps by obtaining collateral as part of the normal loan policy and underwriting practices. The Company does not post collateral to its customers as part of its contract.

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NOTE 19 Regulatory Matters

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of common equity tier 1, tier 1, and total capital (as defined in the regulations) to risk weighted assets (as defined) and of tier 1 capital (as defined) to average assets (as defined). Management believes that, at June 30, 2026 and December 31, 2025, each of the Company and the Bank had met all of the capital adequacy requirements to which it was subject.

The following tables present the Company’s and the Bank’s actual capital amounts and ratios as of June 30, 2026 and December 31, 2025:

	*June 30, 2026*
											*Minimum to be*
						*Minimum Required*					*Well Capitalized*
						*for Capital*					*Under Prompt*
	*Actual*					*Adequacy Purposes*					Corrective Action ⁽¹⁾
(dollars in thousands)	*Amount*		*Ratio*			*Amount*		*Ratio*			*Amount*		*Ratio*
Common equity tier 1 capital to risk weighted assets
Consolidated ⁽¹⁾	$	476,882		10.81	%	$	198,440		4.50	%		N/A		N/A
Bank		474,133		10.92	%		195,472		4.50	%		282,348		6.50	%
Tier 1 capital to risk weighted assets
Consolidated⁽¹⁾		486,121		11.02	%		264,587		6.00	%		N/A		N/A
Bank		474,133		10.92	%		260,629		6.00	%		347,505		8.00	%
Total capital to risk weighted assets
Consolidated⁽¹⁾		588,055		13.34	%		352,782		8.00	%		N/A		N/A
Bank		526,067		12.11	%		347,505		8.00	%		434,381		10.00	%
Tier 1 capital to average assets
Consolidated⁽¹⁾		486,121		9.49	%		204,859		4.00	%		N/A		N/A
Bank		474,133		9.26	%		204,721		4.00	%		255,901		5.00	%

(1)	“Minimum to be Well Capitalized Under Prompt Corrective Action” is not formally defined under applicable banking regulations for bank holding companies.

	*December 31, 2025*
											*Minimum to be*
						*Minimum Required*					*Well Capitalized*
						*for Capital*					*Under Prompt*
	*Actual*					*Adequacy Purposes*					Corrective Action ⁽¹⁾
(dollars in thousands)	*Amount*		*Ratio*			*Amount*		*Ratio*			*Amount*		*Ratio*
Common equity tier 1 capital to risk weighted assets
Consolidated ⁽¹⁾	$	452,125		10.28	%	$	198,002		4.50	%		N/A		N/A
Bank		448,675		10.41	%		194,009		4.50	%		280,235		6.50	%
Tier 1 capital to risk weighted assets
Consolidated ⁽¹⁾		461,307		10.48	%		264,002		6.00	%		N/A		N/A
Bank		448,675		10.41	%		258,679		6.00	%		344,905		8.00	%
Total capital to risk weighted assets
Consolidated ⁽¹⁾		566,443		12.87	%		352,003		8.00	%		N/A		N/A
Bank		502,714		11.66	%		344,905		8.00	%		431,131		10.00	%
Tier 1 capital to average assets
Consolidated ⁽¹⁾		461,307		8.86	%		208,235		4.00	%		N/A		N/A
Bank		448,675		8.62	%		208,160		4.00	%		260,200		5.00	%

(1)	“Minimum to be Well Capitalized Under Prompt Corrective Action” is not formally defined under applicable banking regulations for bank holding companies.

The Bank is subject to certain restrictions on the amount of dividends that it may pay without prior regulatory approval, including rules requiring a 2.5 percent capital conservation buffer that is added to the minimum requirements for capital adequacy purposes. A banking organization with a conservation buffer of less than the required amount will be subject to the limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. As of June 30, 2026, the capital ratios for the Company and the Bank were sufficient to meet the conservation buffer. In addition, the Company must adhere to various U.S. Department of Housing and Urban Development (“HUD”) regulatory guidelines including required minimum capital and liquidity to maintain their Federal Housing Administration approval status. Failure to comply with the HUD guidelines could result in withdrawal of this certification. As of June 30, 2026 and December 31, 2025, the Company was in compliance with the aforementioned guidelines.

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NOTE 20 Other Comprehensive Income (Loss)

The following tables present a reconciliation of the changes in the components of other comprehensive income and loss for the periods indicated, including the amount of tax (expense) benefit allocated to each component:

	*For the three months ended*
	*June 30, 2026*									*June 30, 2025*
				*Tax*									*Tax*
	*Pre-Tax*			*(Expense)*			*After-Tax*			*Pre-Tax*			*(Expense)*			*After-Tax*
(dollars in thousands)	*Amount*			*Benefit*			*Amount*			*Amount*			*Benefit*			*Amount*
Debt Securities:
Change in fair value	$	(1,270	)	$	330		$	(940	)	$	4,628		$	(1,161	)	$	3,467
Less: reclassification adjustment from amortization of securities transferred from AFS to HTM ⁽¹⁾		12			(4	)		8			42			(10	)		32
Net change		(1,282	)		334			(948	)		4,586			(1,151	)		3,435
Cash Flow Hedges:
Change in fair value		278			(72	)		206			(147	)		37			(110	)
Less: reclassified AOCI gain (loss) into interest expense (2)		—			—			—			—			—			—
Net change		278			(72	)		206			(147	)		37			(110	)
Other Derivatives:
Change in fair value		—			—			—			110			(28	)		82
Other comprehensive income (loss)	$	(1,004	)	$	262		$	(742	)	$	4,549		$	(1,142	)	$	3,407

(1)	Reclassified into taxable and/or exempt from federal income taxes interest income on investment securities on the consolidated statements of income. Refer to “NOTE 3 Investment Securities” for further details.

(2)	Reclassified into interest expense on short-term borrowings on the consolidated statements of income. Refer to “NOTE 18 Derivative Instruments” for further details.

	*For the six months ended*
	*June 30, 2026*									*June 30, 2025*
				*Tax*									*Tax*
	*Pre-Tax*			*(Expense)*			*After-Tax*			*Pre-Tax*			*(Expense)*			*After-Tax*
(dollars in thousands)	*Amount*			*Benefit*			*Amount*			*Amount*			*Benefit*			*Amount*
Debt Securities:
Change in fair value	$	(4,883	)	$	1,293		$	(3,590	)	$	18,855		$	(4,733	)	$	14,122
Less: reclassification adjustment from amortization of securities transferred from AFS to HTM ⁽¹⁾		32			(10	)		22			95			(24	)		71
Net change		(4,915	)		1,303			(3,612	)		18,760			(4,709	)		14,051
Cash Flow Hedges:
Change in fair value		1,065			(276	)		789			(609	)		153			(456	)
Less: reclassified AOCI gain (loss) into interest expense (2)		—			—			—			(22	)		6			(16	)
Net change		1,065			(276	)		789			(587	)		147			(440	)
Other Derivatives:
Change in fair value		—			—			—			(123	)		31			(92	)
Other comprehensive income (loss)	$	(3,850	)	$	1,027		$	(2,823	)	$	18,050		$	(4,531	)	$	13,519

(1)	Reclassified into taxable and/or exempt from federal income taxes interest income on investment securities on the consolidated statements of income. Refer to “NOTE 3 Investment Securities” for further details.

(2)	Reclassified into interest expense on short-term borrowings on the consolidated statements of income. Refer to “NOTE 18 Derivative Instruments” for further details.

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				*Net Unrealized*			*Net Unrealized*
	*Net Unrealized*			*Gains (Losses) on*			*Gains (Losses)*
	*Gains (Losses) on*			*Cash Flow*			*on Other*
(dollars in thousands)	Debt Securities ⁽¹⁾			Hedges ⁽¹⁾			Derivatives ⁽¹⁾			AOCI ⁽¹⁾
*For the Three Months Ended June 30, 2026*
Balance at March 31, 2026	$	(4,710	)	$	554		$	(81	)	$	(4,237	)
Other comprehensive income (loss) before reclassifications		(940	)		206			—			(734	)
Less: Amounts reclassified from AOCI		8			—			—			8
Less: reclassification adjustment for net realized losses		—			—			—			—
Other comprehensive income (loss)		(948	)		206			—			(742	)
Balance at June 30, 2026	$	(5,658	)		760			(81	)		(4,979	)

*For the Three Months Ended June 30, 2025*
Balance at March 31, 2025	$	(63,108	)	$	(3	)	$	(143	)	$	(63,254	)
Other comprehensive income (loss) before reclassifications		3,467			(110	)		82			3,439
Less: Amounts reclassified from AOCI		32			—			—			32
Other comprehensive income (loss)		3,435			(110	)		82			3,407
Balance at June 30, 2025	$	(59,673	)		(113	)		(61	)		(59,847	)

*For the Six Months Ended June 30, 2026*
Balance at December 31, 2025	$	(2,046	)	$	(29	)	$	(81	)	$	(2,156	)
Other comprehensive income (loss) before reclassifications		(3,590	)		789			—			(2,801	)
Less: Amounts reclassified from AOCI		22			—			—			22
Other comprehensive income (loss)		(3,612	)		789			—			(2,823	)
Balance at June 30, 2026	$	(5,658	)		760			(81	)		(4,979	)

*For the Six Months Ended June 30, 2025*
Balance at December 31, 2024	$	(73,724	)	$	327		$	31		$	(73,366	)
Other comprehensive income (loss) before reclassifications		14,122			(456	)		(92	)		13,574
Less: Amounts reclassified from AOCI		71			(16	)		—			55
Other comprehensive income (loss)		14,051			(440	)		(92	)		13,519
Balance at June 30, 2025	$	(59,673	)	$	(113	)	$	(61	)	$	(59,847	)

(1)	All amounts net of tax.

NOTE 21 Stock Repurchase Program

On December 12, 2023, the Board of Directors of the Company approved a stock repurchase program (the “Program”) which authorizes the Company to repurchase up to 1,000,000 shares of its common stock subject to certain limitations and conditions. The Program became effective on February 18, 2024, replacing and superseding a prior stock repurchase program, and will expire on February 18, 2027.

The Program does not obligate the Company to repurchase any shares of its common stock, and other than repurchases that have been completed to date, there is no assurance that the Company will do so or that the Company will repurchase shares at favorable prices. The Program may be suspended or terminated at any time and, even if fully implemented, the Program may not enhance long-term stockholder value. For the six months ended June 30, 2026, the Company repurchased 500,000 shares of common stock under the Program. The Company also repurchases shares to pay withholding taxes on the vesting of restricted stock awards and units.

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NOTE 22 Fair Value of Assets and Liabilities

The Company categorizes its assets and liabilities measured at estimated fair value into a three level hierarchy based on the priority of the inputs to the valuation technique used to determine estimated fair value. The estimated fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used in the determination of the estimated fair value measurement fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the estimated fair value measurement. Assets and liabilities valued at estimated fair value are categorized based on the following inputs to the valuation techniques as follows:

Level 1—Inputs that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that an entity has the ability to access.

Level 2—Inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Estimated fair values for these instruments are estimated using pricing models, quoted prices of investment securities with similar characteristics, or discounted cash flows.

Level 3—Inputs that are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. Subsequent to initial recognition, the Company may re‑measure the carrying value of assets and liabilities measured on a nonrecurring basis to estimated fair value. Adjustments to estimated fair value usually result when certain assets are impaired. Such assets are written down from their carrying amounts to their estimated fair value.

Professional standards allow entities the irrevocable option to elect to measure certain financial instruments and other items at estimated fair value for the initial and subsequent measurement on an instrument‑by‑instrument basis. The Company adopted the policy to value certain financial instruments at estimated fair value. The Company has not elected to measure any existing financial instruments at estimated fair value; however, it may elect to measure newly acquired financial instruments at estimated fair value in the future.

Recurring Basis

The Company uses estimated fair value measurements to record estimated fair value adjustments to certain assets and liabilities and to determine estimated fair value disclosures.

The following tables present the balances of the assets and liabilities measured at estimated fair value on a recurring basis as of June 30, 2026 and December 31, 2025:

	*June 30, 2026*
(dollars in thousands)	*Level 1*		*Level 2*		*Level 3*		*Total*
Trading	$	501	$	—	$	—	$	501
Available-for-sale
U.S. treasury and government agencies		—		13,234		—		13,234
Mortgage backed securities
Residential agency		—		479,653		—		479,653
Commercial		—		—		—		—
Asset backed securities		—		14		—		14
Corporate bonds		—		41,290		—		41,290
Total available-for-sale investment securities	$	—	$	534,191	$	—	$	534,191
Servicing rights ⁽¹⁾	$	—	$	—	$	7,022	$	7,022
Other assets
Derivatives	$	—	$	8,462	$	—	$	8,462
Other liabilities
Derivatives	$	—	$	7,154	$	—	$	7,154

(1)	See Note 7 Loan Servicing for more information on mortgage servicing rights (MSR).

	*December 31, 2025*
(dollars in thousands)	*Level 1*		*Level 2*		*Level 3*		*Total*
Trading	$	1,758	$	—	$	—	$	1,758
Available-for-sale
U.S. treasury and government agencies		—		405		—		405
Mortgage backed securities
Residential agency		—		476,746		—		476,746
Asset backed securities		—		15		—		15
Corporate bonds		—		36,929		—		36,929
Total available-for-sale investment securities	$	—	$	514,095	$	—	$	514,095
Servicing rights ⁽¹⁾	$	—	$	—	$	6,383	$	6,383
Other assets
Derivatives	$	—	$	10,958	$	—	$	10,958
Other liabilities
Derivatives	$	—	$	10,682	$	—	$	10,682

(1)	See Note 7 Loan Servicing for more information on mortgage servicing rights (MSR).

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The following is a description of the valuation methodologies used for instruments measured at estimated fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Investment Securities, Trading for Deferred Compensation

The fair value of trading securities for deferred compensation is reported using market quoted prices as such securities and underlying securities are actively traded and no valuation adjustments have been applied and therefore are classified as Level 1.

Investment Securities, Available-for-Sale

Generally, debt securities are valued using pricing for similar securities, recently executed transactions, and other pricing models utilizing observable inputs and therefore are classified as Level 2.

Derivatives

All of the Company’s derivatives are traded in over‑the‑counter markets where quoted market prices are not readily available. For these derivatives, estimated fair value is measured using internally developed models that use primarily market observable inputs, such as yield curves and option volatilities, and accordingly, classify as Level 2. Examples of Level 2 derivatives are basic interest rate swaps and forward contracts.

Servicing Rights

Servicing rights are measured based on valuation techniques using Level 3 inputs. The Company uses a discounted cash flow model that incorporates assumptions market participants would use in estimating the fair value of servicing rights, including, but not limited to, conditional prepayment rate utilizing the Public Securities Association (PSA) convention, servicing fee rate, ancillary fees, and cost to service.

Nonrecurring Basis

Certain assets are measured at estimated fair value on a nonrecurring basis. These assets are not measured at estimated fair value on an ongoing basis; however, they are subject to estimated fair value adjustments in certain circumstances, such as when there is evidence of impairment or a change in the amount of previously recognized impairment.

The estimated fair value of certain assets on a nonrecurring basis as of June 30, 2026 and December 31, 2025 consisted of the following:

	*June 30, 2026*
(dollars in thousands)	*Level 1*		*Level 2*		*Level 3*		*Total*
Collateral dependent loans		—		—		1,364		1,364
Foreclosed assets		—		—		9,571		9,571

	*December 31, 2025*
(dollars in thousands)	*Level 1*		*Level 2*		*Level 3*		*Total*
Collateral dependent loans	$	—	$	—	$	33,484	$	33,484
Foreclosed assets		—		—		308		308

Loans Held for Sale

Loans originated and held for sale are carried at the lower of cost or estimated fair value. The Company obtains quotes or bids on these loans directly from purchasing financial institutions. Typically, these quotes include a premium on the sale and thus these quotes indicate estimated fair value of the held for sale loans is greater than cost.

Impairment losses for loans held for sale that are carried at the lower of cost or estimated fair value represent additional net write‑downs during the period to record these loans at the lower of cost or estimated fair value, subsequent to their initial classification as loans held for sale.

Collateral Dependent Loans

The estimated fair value of collateral dependent loans is based on fair value, less estimated cost to sell. Collateral dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers appraisal analysis as the starting point for determining fair value, and then considers other factors and events in the environment that may affect fair value. Values of the collateral underlying collateral dependent loans are obtained when the loan is determined to be collateral dependent, and subsequently as deemed necessary by management. Values are reviewed for accuracy and consistency by management. The ultimate collateral values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.

Foreclosed Assets

Assets acquired through loan foreclosure are included in other assets and are initially recorded at estimated fair value less estimated selling costs. The estimated fair value of foreclosed assets is evaluated regularly and any decreases in value along with holding costs, such as taxes, insurance and utilities, are reported in noninterest expense.

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The valuation techniques and significant unobservable inputs used to measure Level 3 estimated fair values as of June 30, 2026 and December 31, 2025, were as follows:

			*June 30, 2026*
(dollars in thousands)								*Weighted*
Asset Type	*Valuation Technique*	*Unobservable Input*	*Fair Value*		*Range*			*Average*
Collateral dependent loans	Appraisal value	Property specific adjustment		1,364		19.0	%		19.0	%
Foreclosed assets	Appraisal value	Property specific adjustment		9,571		10.0	%		10.0	%
Servicing rights	Discounted cash flows	Prepayment speed assumptions		7,022		99 - 332			161
		Discount rate				10.3	%		10.3	%

			*December 31, 2025*
(dollars in thousands)								*Weighted*
Asset Type	*Valuation Technique*	*Unobservable Input*	*Fair Value*		*Range*			*Average*
Collateral dependent loans	Appraisal value	Property specific adjustment	$	33,484		10 - 35	%		30.7	%
Foreclosed assets	Appraisal value	Property specific adjustment ⁽¹⁾		308		10.0	%		10.0	%
Servicing rights	Discounted cash flows	Prepayment speed assumptions		6,383		130 - 730			239
		Discount rate				10.0	%		10.0	%

Disclosure of estimated fair value information about financial instruments, for which it is practicable to estimate that value, is required whether or not recognized in the consolidated balance sheets. In cases in which quoted market prices are not available, estimated fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. In that regard, the derived estimated fair value estimates cannot be substantiated by comparison to independent markets and, in many cases could not be realized in immediate settlement of the instruments. Certain financial instruments, with an estimated fair value that is not practicable to estimate and all non‑financial instruments, are excluded from the disclosure requirements. Accordingly, the aggregate estimated fair value amounts presented do not necessarily represent the underlying value of the Company.

The following disclosures represent financial instruments for which the ending balances, as of June 30, 2026 and December 31, 2025, were not carried at estimated fair value in their entirety on the consolidated balance sheets.

Cash and Cash Equivalents and Accrued Interest

The carrying amounts reported in the consolidated balance sheets approximate those assets and liabilities estimated fair values.

Investment Securities, Held-to-Maturity

The fair values of debt securities held-to-maturity are based on quoted market prices for the same or similar securities, recently executed transactions and pricing models.

Loans

For variable‑rate loans that reprice frequently and with no significant change in credit risk, estimated fair values are based on carrying values. The estimated fair values of other loans are estimated using discounted cash flow analysis, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

Bank‑Owned Life Insurance

Bank‑owned life insurance is carried at the amount due upon surrender of the policy, which is also the estimated fair value. This amount was provided by the insurance companies based on the terms of the underlying insurance contract.

Deposits

The estimated fair values of demand deposits are, by definition, equal to the amount payable on demand at the consolidated balance sheet date. The estimated fair values of fixed‑rate certificates of deposit are estimated using a discounted cash flow calculation that applies current incremental interest rates being offered on certificates of deposit to a schedule of aggregated expected monthly maturities of the outstanding certificates of deposit.

Short‑Term Borrowings and Long‑Term Debt

For variable‑rate borrowings that reprice frequently, estimated fair values are based on carrying values. The estimated fair values of fixed‑rate borrowings are estimated using discounted cash flow analysis, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

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Off‑Balance Sheet Credit‑Related Commitments

Off‑balance sheet credit related commitments are generally of short‑term nature. The contract amount of such commitments approximates their estimated fair value since the commitments are comprised primarily of unfunded loan commitments which are generally priced at market at the time of funding.

The estimated fair values, and related carrying or notional amounts, of the Company’s financial instruments at the dates indicated were as follows:

	*June 30, 2026*
	*Carrying*		*Estimated Fair Value*
(dollars in thousands)	*Amount*		*Level 1*		*Level 2*		*Level 3*		*Total*
Financial Assets
Cash and cash equivalents	$	109,012	$	109,012	$	—	$	—	$	109,012
Investment securities held-to-maturity		242,516		—		215,234		—		215,234
Loans, net		3,985,883		—		—		3,870,241		3,870,241
Accrued interest receivable		20,213		—		20,213		—		20,213
Bank-owned life insurance		41,894		—		41,894		—		41,894
Servicing rights		7,022		—		—		7,022		7,022
Financial Liabilities
Noninterest-bearing deposits	$	759,640	$	—	$	759,640	$	—	$	759,640
Interest-bearing deposits		2,856,029		—		2,856,029		—		2,856,029
Time deposits		576,228		—		578,419		—		578,419
Short-term borrowings		345,000		—		345,000		—		345,000
Long-term debt		59,239		—		62,725		—		62,725
Accrued interest payable		7,461		—		7,461		—		7,461

	*December 31, 2025*
	*Carrying*		*Estimated Fair Value*
(dollars in thousands)	*Amount*		*Level 1*		*Level 2*		*Level 3*		*Total*
Financial Assets
Cash and cash equivalents	$	67,192	$	67,192	$	—	$	—	$	67,192
Investment securities held-to-maturity		254,448		—		228,009		—		228,009
Loans, net		3,986,107		—		—		3,956,517		3,956,517
Accrued interest receivable		21,742		—		21,742		—		21,742
Bank-owned life insurance		39,307		—		39,307		—		39,307
Servicing rights		6,383		—		—		6,383		6,383
Financial Liabilities
Noninterest-bearing deposits	$	807,896	$	—	$	807,896	$	—	$	807,896
Interest-bearing deposits		2,807,565		—		2,807,565		—		2,807,565
Time deposits		576,542		—		580,473		—		580,473
Short-term borrowings		308,800		—		308,800		—		308,800
Long-term debt		59,182		—		59,911		—		59,911
Accrued interest payable		8,124		—		8,124		—		8,124

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ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The following discussion explains the Company’s financial condition and results of operations as of and for the three and six months ended June 30, 2026 and 2025. Annualized results for this interim period may not be indicative of results for the full year or future periods. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes presented elsewhere in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 4, 2026.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by 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 the Company’s 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 the Company’s current beliefs, expectations and assumptions regarding the Company’s 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 known and unknown uncertainties, risks, changes in circumstances, and other factors that are difficult to predict and many of which are outside of the Company’s control. The Company’s 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 the Company’s 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 Board of Governors of the Federal Reserve System (the "Federal Reserve") and executive orders in response thereto);

●

interest rate risk, including the effects of changes in interest rates;

●

effects on the U.S. economy resulting from actions taken by the federal government, including the threat or implementation of tariffs, immigration enforcement, executive orders, and changes in foreign policy;

●

disruptions to the global supply chain, including as a result of domestic or foreign policies;

●

the Company’s ability to successfully manage credit risk, including in the CRE 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 the Company’s market areas, including the level and impact of inflation rates and possible recession;

●

the Company’s ability to raise additional capital to implement its business plan;

●

credit risks and risks from concentrations (including by type of borrower, geographic area, collateral, and industry) within the Company’s loan portfolio;

●

the concentration of large loans to certain borrowers (including CRE loans);

●

the level of nonperforming assets on the Company’s balance sheet;

●

the Company’s ability to implement organic and acquisition growth strategies;

●

the commencement, cost, and outcome of litigation and other legal proceedings and regulatory actions against the Company 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 and private parties;

●

the impact of economic or market conditions on the Company’s fee-based services;

●

the Company’s ability to continue to grow the retirement and benefit services business;

●

the Company’s ability to continue to originate a sufficient volume of residential mortgages;

●

the occurrence of fraudulent activity, breaches or failures of the Company’s or its 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;

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●

interruptions involving the Company’s information technology and telecommunications systems or third-party servicers;

●

potential losses incurred in connection with mortgage loan repurchases;

●

the composition of the Company’s executive management team and the Company’s ability to attract and retain key personnel;

●

rapid and expensive technological changes implemented by the Company and other parties in the financial services industry, including third-party vendors, which may be more difficult to implement or more expensive than anticipated or which may have unforeseen consequences to us and our customers, including the development and implementation of tools incorporating artificial intelligence;

●

emerging issues related to the development and use of artificial intelligence that could give rise to legal or regulatory action, damage our reputation, or otherwise materially harm our business or customers;

●

increased competition in the financial services industry, including from non-banks such as credit unions, financial technology companies and digital asset service providers;

●

the Company’s ability to successfully manage liquidity risk, including the Company’s 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 Federal Deposit Insurance Corporation (“FDIC”) insurance limits;

●

the effectiveness of the Company’s risk management framework;

●

potential impairment to the goodwill the Company recorded in connection with the Company’s past acquisitions, including the acquisitions of Metro Phoenix Bank and HMN Financial, Inc. (“HMNF”);

●

the extensive regulatory framework that applies to the Company;

●

the ability of the Bank to pay dividends to the Company, and the Company's ability to pay dividends to its stockholders;

●

new or revised accounting standards, as may be adopted by state and federal regulatory agencies, the FASB, the SEC or the Public Company Accounting Oversight Board;

●

fluctuations in the values of the securities held in the Company’s 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 the Company’s customers and their businesses;

●

severe weather, natural disasters, and widespread disease or pandemics;

●

acts of war, military conflicts, or terrorism, including the wars in Iran and Ukraine, ongoing conflicts in the Middle East, and other international military conflicts, or adverse external events and changes in foreign relations that can increase levels of political and economic unpredictability, contribute to rising energy and commodity prices, affect global supply chains, increase the volatility of financial markets, and other matters beyond our control;

●

the availability of future equity and debt issuances and other capital raising opportunities on favorable terms;

●

any material weaknesses in the Company’s internal control over financial reporting;

●

the Company’s success at managing and responding to the risks involved in the foregoing items; and

●

any other risks described in the “Risk Factors” section of this report and in other reports filed by Alerus Financial Corporation with the SEC.

Any forward-looking statement made by the Company in this report is based only on information currently available to the Company 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.

Overview

The Company is a commercial wealth advisory services bank and national retirement and benefit services provider headquartered in Grand Forks, North Dakota. Through the Company’s subsidiary, Alerus Financial, National Association, the Company provides financial solutions to businesses and consumers through three distinct business lines—banking, retirement and benefit services, and wealth advisory services. These solutions are delivered through a relationship‑oriented primary point of contact along with responsive and client‑friendly technology.

The Company’s business model produces strong financial performance and a diversified revenue stream, which has helped the Company establish a brand and culture yielding both a loyal client base and passionate and dedicated employees. The Company generates a majority of overall revenue from noninterest income, which is driven primarily by the Company’s retirement and benefit services and wealth advisory services business lines. The remainder of the Company’s revenue consists of net interest income, which the Company derives from offering traditional banking products and services.

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Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgements and uncertainties and could potentially result in materially different results under different assumptions and conditions. In preparing the Company’s consolidated financial statements, management is required to make significant estimates and assumptions that affect assets, liabilities, revenues, and expenses reported. Actual results could differ materially from our current estimates as a result of changing conditions and future events. Several estimates are particularly critical and are susceptible to significant near term change, including (i) the ACL on loans; (ii) goodwill impairment; and (iii) fair value of loans acquired in business combinations.

The Company’s Annual Report on Form 10-K for the year ended December 31, 2025 includes a discussion of the Company’s critical accounting policies. There have been no material changes to the Company’s critical accounting policies from those disclosed within its Annual Report on Form 10-K for the year ended December 31, 2025.

Refer to “NOTE 2 Recent Accounting Pronouncements” of the consolidated financial statements included in this report for a discussion of accounting pronouncements issued but yet to be adopted and implemented.

Recent Developments

Stockholder Dividend

On May 21, 2026, the Board of Directors of the Company declared a quarterly cash dividend of $0.22 per share of common stock. This dividend was paid on July 10, 2026, to stockholders of record at the close of business on June 26, 2026.

Property Sales

The Company’s West Fargo, North Dakota branch is listed for sale for $3.8 million and is expected to sell within the next 12 months. At June 30, 2026, the facility had a carrying value of approximately $0.4 million. The Company expects to record a gain on the sale upon closing, as the expected sale price is greater than the property’s carrying value.

Operating Results Overview

The following table summarizes key financial results as of and for the periods indicated:

	Three months ended									Six months ended
	June 30,			March 31,			June 30,			June 30,			June 30,
(dollars and shares in thousands, except per share data)	2026			2026			2025			2026			2025
Performance Ratios
Return on average total assets		1.60	%		1.79	%		1.53	%		1.69	%		1.28	%
Adjusted return on average total assets ⁽¹⁾		1.58	%		1.79	%		1.41	%		1.68	%		1.26	%
Return on average common equity		14.56	%		16.44	%		15.82	%		15.49	%		13.37	%
Return on average tangible common equity ⁽¹⁾		19.33	%		21.85	%		22.65	%		20.57	%		19.66	%
Adjusted return on average tangible common equity⁽¹⁾		19.04	%		21.96	%		21.02	%		20.48	%		19.36	%
Noninterest income as a % of revenue		40.85	%		40.72	%		42.47	%		40.78	%		41.37	%
Adjusted noninterest (loss) income as a % of revenue ⁽¹⁾		40.36	%		40.73	%		40.86	%		40.54	%		40.52	%
Net interest margin (taxable-equivalent basis) ⁽¹⁾		3.97	%		3.77	%		3.51	%		3.87	%		3.46	%
Efficiency ratio ⁽¹⁾		62.53	%		63.39	%		60.66	%		62.95	%		64.54	%
Adjusted efficiency ratio ⁽¹⁾		62.76	%		63.20	%		62.35	%		62.97	%		64.55	%
Net charge-offs (recoveries) to average loans ⁽¹⁾		0.26	%		0.71	%		0.37	%		0.48	%		0.21	%
Dividend payout ratio		27.16	%		23.60	%		26.92	%		25.29	%		31.54	%
Per Common Share
Earnings per common share − basic	$	0.82		$	0.90		$	0.79		$	1.72		$	1.31
Earnings per common share − diluted	$	0.81		$	0.89		$	0.78		$	1.70		$	1.30
Adjusted earnings per common share − diluted ⁽¹⁾	$	0.80		$	0.89		$	0.72		$	1.69		$	1.27
Dividends declared per common share	$	0.22		$	0.21		$	0.21		$	0.43		$	0.41
Book value per common share	$	23.34		$	22.79		$	21.00
Tangible book value per common share ⁽¹⁾	$	18.73		$	18.15		$	16.11
Average common shares outstanding − basic		25,081			25,380			25,368			25,230			25,363
Average common shares outstanding − diluted		25,395			25,679			25,714			25,537			25,683
Other Data
Retirement and benefit services assets under administration/management	$	45,163,767		$	42,273,839		$	42,451,544
Wealth advisory services assets under administration/management	$	5,195,511		$	4,792,609		$	4,613,102
Mortgage originations	$	113,450		$	94,434		$	134,634		$	207,884		$	205,227

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

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Selected Financial Data

The following tables summarize selected financial data as of and for the periods indicated:

	Three months ended						Six months ended
	June 30,		March 31,		June 30,		June 30,		June 30,
(dollars in thousands)	2026		2026		2025		2026		2025
Selected Average Balance Sheet Data
Loans	$	4,032,142	$	4,029,719	$	4,079,084	$	4,030,939	$	4,051,129
Investment securities		773,692		771,885		823,463		772,793		841,479
Assets		5,226,319		5,218,515		5,302,728		5,222,438		5,287,622
Deposits		4,180,857		4,238,713		4,305,275		4,209,625		4,340,739
Fed funds purchased and Bank Term Funding Program		74,104		35,628		149,046		54,972		99,714
FHLB short-term advances		226,703		204,444		200,000		215,635		200,000
Long-term debt		59,225		59,195		59,112		59,210		59,098
Stockholders’ equity		574,862		566,563		513,606		570,735		506,470

	June 30,			March 31,			December 31,			June 30,			March 31,
(dollars in thousands)	2026			2026			2025			2025			2025
Selected Period End Balance Sheet Data
Loans	$	4,034,244		$	4,034,744			4,048,022		$	4,044,657		$	4,102,075
Allowance for credit losses on loans		(48,361	)		(50,505	)		(61,915	)		(59,278	)		(62,127	)
Investment securities		777,208			771,296			770,302			806,544			791,650
Assets		5,288,718			5,287,971			5,230,084			5,323,822			5,330,572
Deposits		4,191,897			4,347,882			4,192,003			4,337,468			4,412,653
Long-term debt		59,239			59,211			59,182			59,126			59,154
Total stockholders’ equity		583,143			574,693			564,933			533,155			550,687

	Three months ended							Six months ended
	June 30,		March 31,			June 30,		June 30,			June 30,
(dollars in thousands)	2026		2026			2025		2026			2025
Selected Income Statement Data
Net interest income	$	47,712	$	44,911		$	43,032	$	92,623		$	84,189
Provision for (recovery of) credit losses		495		(4,883	)		—		(4,388	)		863
Noninterest income		32,945		30,847			31,763		63,792			59,395
Noninterest expense		52,883		50,391			48,438		103,274			98,805
Income before income taxes		27,279		30,250			26,357		57,529			43,916
Income tax expense		6,414		7,279			6,104		13,693			10,349
Net income	$	20,865	$	22,971		$	20,253	$	43,836		$	33,567

Non-GAAP to GAAP Reconciliations and Calculation of Non-GAAP Financial Measures

In addition to the results presented in accordance with GAAP, the Company routinely supplements its evaluation with an analysis of certain non-GAAP financial measures. Management uses the non-GAAP financial measures presented in the tables below 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. 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.

The following tables present these non-GAAP financial measures along with the most directly comparable financial measures calculated in accordance with GAAP as of and for the periods indicated:

	June 30,			March 31,			December 31,			June 30,
(dollars and shares in thousands, except per share data)	2026			2026			2025			2025
Tangible common equity to tangible assets								.
Total common stockholders’ equity	$	583,143		$	574,693		$	564,933		$	533,155
Less: Goodwill		85,634			85,634			85,634			85,634
Less: Other intangible assets		29,422			31,397			33,371			38,462
Tangible common equity (a)		468,087			457,662			445,928			409,059
Total assets		5,288,718			5,287,971			5,230,084			5,323,822
Less: Goodwill		85,634			85,634			85,634			85,634
Less: Other intangible assets		29,422			31,397			33,371			38,462
Tangible assets (b)		5,173,662			5,170,940			5,111,079			5,199,726
Tangible common equity to tangible assets (a)/(b)		9.05	%		8.85	%		8.72	%		7.87	%
Tangible book value per common share
Tangible common equity (a)		468,087			457,662			445,928			409,059
Total common shares issued and outstanding (c)		24,986			25,214			25,406			25,389
Tangible book value per common share (a)/(c)	$	18.73		$	18.15		$	17.55		$	16.11

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	Three months ended									Six months ended
	June 30,			March 31,			June 30,			June 30,			June 30,
(dollars and shares in thousands, except per share data)	2026			2026			2025			2026			2025
Return on Average Tangible Common Equity
Net income	$	20,865		$	22,971		$	20,253		$	43,836		$	33,567
Add: Intangible amortization expense (net of tax) ⁽¹⁾		1,559			1,560			2,141			3,120			4,281
Net income, excluding intangible amortization (d)		22,424			24,531			22,394			46,956			37,848
Average total equity		574,862			566,563			513,606			570,735			506,470
Less: Average goodwill		85,634			85,634			85,634			85,634			85,634
Less: Average other intangible assets (net of tax) ⁽¹⁾		24,003			25,664			31,436			24,829			32,571
Average tangible common equity (e)		465,225			455,265			396,536			460,272			388,265
Return on average tangible common equity (d)/(e)		19.33	%		21.85	%		22.65	%		20.57	%		19.66	%
Efficiency ratio
Noninterest expense	$	52,883		$	50,392		$	48,438		$	103,274		$	98,805
Less: Intangible amortization expense		1,974			1,974			2,710			3,949			5,419
Adjusted noninterest expense (f)		50,909			48,418			45,728			99,325			93,386
Net interest income (v)		47,712			44,912			43,032			92,623			84,189
Noninterest income		32,945			30,847			31,763			63,792			59,395
Tax-equivalent adjustment		755			619			592			1,374			1,110
Total tax-equivalent revenue (g)		81,412			76,378			75,387			157,789			144,694
Efficiency ratio (f)/(g)		62.53	%		63.39	%		60.66	%		62.95	%		64.54	%
Pre-Provision Net Revenue
Net interest income	$	47,712		$	44,912		$	43,032		$	92,623		$	84,189
Add: Noninterest income		32,945			30,847			31,763			63,792			59,395
Less: Noninterest expense		52,883			50,392			48,438			103,274			98,805
Pre-provision net revenue	$	27,774		$	25,367		$	26,357		$	53,141		$	44,779
Adjusted Noninterest Income
Noninterest income	$	32,945		$	30,847		$	31,763		$	63,792		$	59,395
Less: Adjusted noninterest income items
Net gain (loss) on sale of loans		—			—			2,115			—			2,115
Net gain on sale of premises and equipment		653			(21	)		(84	)		632			(84	)
Total adjusted noninterest income items (h)		653			(21	)		2,031			632			2,031
Adjusted noninterest income (i)	$	32,292		$	30,868		$	29,732		$	63,160		$	57,364
Adjusted Noninterest (Loss) Income as a Percentage of Revenue
Adjusted noninterest income (i)	$	32,292			30,868			29,732			63,160			57,364
Net interest income (v)		47,712			44,912			43,032			92,623			84,189
Adjusted revenue (w)		80,004			75,780			72,764			155,783			141,553
Adjusted noninterest (loss) income as a percentage of revenue (i)/(w)	$	40.36	%		40.73	%		40.86	%		40.54			40.52
Adjusted Noninterest Expense
Noninterest expense	$	52,883		$	50,392		$	48,438		$	103,274		$	98,805
Less: Adjusted noninterest expense items
HMNF merger- and acquisition-related expenses		6			(34	)		11			(27	)		298
Severance and signing bonus expense		216			167			(23	)		383			1,004
Total adjusted noninterest expense items (j)		222			133			(12	)		356			1,302
Adjusted noninterest expense (k)	$	52,661		$	50,259		$	48,450		$	102,918		$	97,503
Adjusted Pre-Provision Net Revenue
Net interest income	$	47,712		$	44,912		$	43,032		$	92,623		$	84,189
Add: Adjusted noninterest income (i)		32,292			30,868			29,732			63,160			57,364
Less: Adjusted noninterest expense (k)		52,661			50,259			48,450			102,918			97,503
Adjusted pre-provision net revenue	$	27,343		$	25,521		$	24,314		$	52,865		$	44,050

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

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	Three months ended									Six months ended
	June 30,			March 31,			June 30,			June 30,			June 30,
(dollars and shares in thousands, except per share data)	2026			2026			2025			2026			2025
Adjusted Efficiency Ratio
Adjusted noninterest expense (k)	$	52,661		$	50,259		$	48,450		$	102,918		$	97,503
Less: Intangible amortization expense		1,974			1,974			2,710			3,949			5,419
Adjusted noninterest expense for efficiency ratio (l)		50,687			48,285			45,740			98,969			92,084
Tax-equivalent revenue
Net interest income		47,712			44,912			43,032			92,623			84,189
Add: Adjusted noninterest income (i)		32,292			30,868			29,732			63,160			57,364
Add: Tax-equivalent adjustment		755			619			592			1,374			1,110
Total tax-equivalent revenue (m)		80,759			76,399			73,356			157,157			142,663
Adjusted efficiency ratio (l)/(m)		62.76	%		63.20	%		62.35	%		62.97	%		64.55	%
Adjusted Net Income
Net income	$	20,865		$	22,971		$	20,253		$	43,836		$	33,567
Less: Adjusted noninterest income items (net of tax) ⁽¹⁾ (h)		516			(17	)		1,604			499			1,604
Add: Adjusted noninterest expense items (net of tax) ⁽¹⁾ (j)		175			105			(9	)		281			1,029
Adjusted net income (n)	$	20,525		$	23,093		$	18,640		$	43,618		$	32,991
Adjusted Return on Average Total Assets
Average total assets (o)	$	5,226,319		$	5,218,515		$	5,302,728		$	5,222,438		$	5,287,622
Adjusted return on average total assets (n)/(o)		1.58	%		1.79	%		1.41	%		1.68	%		1.26	%
Adjusted Return on Average Tangible Common Equity
Adjusted net income (n)	$	20,525		$	23,093		$	18,640		$	43,618		$	32,991
Add: Intangible amortization expense (net of tax) ⁽¹⁾		1,559			1,560			2,141			3,120			4,281
Adjusted net income, excluding intangible amortization (p)		22,084			24,653			20,781			46,738			37,272
Average total equity		574,862			566,563			513,606			570,735			506,470
Less: Average goodwill		85,634			85,634			85,634			85,634			85,634
Less: Average other intangible assets (net of tax) ⁽¹⁾		24,003			25,664			31,436			24,829			32,571
Average tangible common equity (q)		465,225			455,265			396,536			460,272			388,265
Adjusted return on average tangible common equity (p)/(q)		19.04	%		21.96	%		21.02	%		20.48	%		19.36	%
Adjusted Earnings Per Common Share − Diluted
Adjusted net income (n)	$	20,525		$	23,093		$	18,640		$	43,618		$	32,991
Less: Dividends and undistributed earnings allocated to participating securities		191			206			205			400			298
Adjusted net income available to common stockholders (r)		20,334			22,887			18,435			43,218			32,693
Weighted-average common shares outstanding for diluted earnings per share (s)		25,395			25,679			25,714			25,537			25,683
Adjusted earnings per common share − diluted (r)/(s)	$	0.80		$	0.89		$	0.72		$	1.69		$	1.27
Net Charge-Offs (Recoveries) to Average Loans
Net charge-offs (recoveries) (t)	$	2,575		$	7,027		$	3,767		$	9,602		$	4,174
Average total loans (u)	$	4,032,142		$	4,029,719		$	4,079,084		$	4,030,939		$	4,051,129
Net charge-offs (recoveries) to average loans (t)/(u)		0.26	%		0.71	%		0.37	%		0.48	%		0.21	%
Net Interest Margin (on a Tax-Equivalent Basis)
Net interest income (v)	$	47,712		$	44,912		$	43,032		$	92,623		$	84,189
Add: Tax equivalent adjustment for loans and securities		755			619			592			1,374			1,110
Net interest income (on a tax-equivalent basis) ⁽¹⁾ (w)	$	48,467		$	45,531		$	43,624		$	93,997		$	85,299
Interest earning assets (x)		4,896,740			4,901,399			4,988,946			3,745,132			3,870,507
Net interest margin (on a tax-equivalent basis) ⁽¹⁾ (w)/(x)		3.97	%		3.77	%		3.51	%		5.06	%		4.44	%

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

Discussion and Analysis of Results of Operations

Net Income

Net income for the three months ended June 30, 2026 was $20.9 million, or $0.81 per diluted common share, a $0.6 million, or 3.0%, increase compared to $20.3 million, or $0.78 per diluted common share, for the three months ended June 30, 2025. Earnings for the second quarter of 2026 compared to the second quarter of 2025 increased primarily due to an increase in net interest income of $4.7 million, partially offset by an increase in noninterest expense $4.4 million.

Net income for the six months ended June 30, 2026 was $43.8 million, or $1.70 per diluted common share, a $10.3 million, or 30.6%, increase compared to $33.6 million, or $1.30 per diluted common share, for the six months ended June 30, 2025. Earnings for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 increased primarily due to an increase in net interest income of $8.4 million and an increase in noninterest income of $4.4 million, partially offset by an increase in noninterest expense of $4.5 million.

Net Interest Income

Net interest income is the difference between interest income and yield related fees earned on assets and interest expense paid on liabilities. Net interest margin is the difference between the yield on interest earning assets and the cost of interest-bearing liabilities as a percentage of interest earning assets. Net interest margin is presented on a tax-equivalent basis, which means that tax-free interest income has been adjusted to a pre-tax-equivalent income, assuming a federal income tax rate of 21% for the three and six months ended June 30, 2026 and 2025.

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Net interest income for the three months ended June 30, 2026 was $47.7 million, an increase of $4.7 million, or 10.9%, compared to $43.0 million for the three months ended June 30, 2025. Interest income increased for the second quarter of 2026 compared to the second quarter of 2025 was primarily driven by higher interest income on investment securities following the strategic balance sheet repositioning in the fourth quarter of 2025, partially offset by less purchase accounting accretion. Interest expense decreased $4.5 million, or 16.3%, from the second quarter of 2025, as average rates paid on deposits and borrowings declined primarily driven by Federal Reserve rate cuts in the second half of 2025.

Net interest income for the six months ended June 30, 2026 was $92.6 million, an increase of $8.4 million, or 10.0%, compared to $84.2 million for the six months ended June 30, 2025. Interest income increased for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily due to higher interest income on investment securities following the strategic balance sheet repositioning in the fourth quarter of 2025, partially offset by less purchase accounting accretion. Interest expense decreased $9.4 million, or 17.3%, from the six months ended June 30, 2025, as average rates paid on deposits and borrowings declined primarily driven by Federal Reserve rate cuts in the second half of 2025.

Net interest margin (on a tax-equivalent basis), a non-GAAP financial measure, was 3.97% for the three months ended June 30, 2026 , a 20 basis point increase from 3.51% for the same period in 2025. The increase was mainly attributable to a one-time $1.6 million interest income recovery on a nonaccrual loan resolution, higher purchase accounting accretion and higher loan yields, partially offset by the impact of the subordinated debt refinancing and higher borrowing balances.

The following tables present average balance sheet information, interest income, interest expense and the corresponding average yields on assets, average yields earned, and rates paid for the three and six months ended June 30, 2026 and 2025. The Company derived these yields and rates by dividing income or expense by the average balance of the corresponding assets or liabilities. The Company derived average balances from the daily balances throughout the periods indicated. Average loan balances include loans that have been placed on nonaccrual status, while interest previously accrued on these loans is reversed against interest income. In these tables, adjustments are made to the yields on tax‑exempt assets in order to present tax‑exempt income and fully taxable income on a fully taxable equivalent (“FTE”) basis.

	Three months ended June 30,
	2026							2025
			Interest		Average					Interest		Average
	Average		Income/		Yield/			Average		Income/		Yield/
(dollars in thousands)	Balance		Expense		Rate			Balance		Expense		Rate
Interest-Earning Assets
Interest-bearing deposits with banks	$	45,777	$	469		4.11	%	$	35,951	$	494		5.51	%
Investment securities ⁽¹⁾		773,692		7,454		3.86			823,463		5,513		2.69
Loans held for sale		18,885		212		4.50			22,302		247		4.44
Loans
Commercial and industrial		779,471		13,736		7.07			653,635		12,242		7.51
CRE − Owner occupied		502,476		7,756		6.19			442,796		6,947		6.29
CRE − Construction, land and development		103,618		3,380		13.08			337,867		5,025		5.97
CRE − Multifamily		394,683		5,957		6.05			347,277		5,821		6.72
CRE − Non-owner occupied		922,958		13,983		6.08			955,134		15,525		6.52
Agricultural − Land		53,823		775		5.78			66,044		948		5.76
Agricultural − Production		53,351		924		6.95			67,412		1,231		7.32
RRE − First lien		838,819		10,311		4.93			898,903		11,016		4.92
RRE − Construction		34,981		578		6.63			39,682		754		7.62
RRE − HELOC		271,254		4,068		6.02			188,494		3,285		6.99
RRE − Junior lien		32,676		532		6.53			42,435		674		6.37
Other consumer		44,032		715		6.51			39,405		689		7.01
Total loans ⁽¹⁾		4,032,142		62,715		6.24			4,079,084		64,157		6.31
Federal Reserve/FHLB Stock		26,244		530		8.10			28,146		607		8.65
Total interest-earning assets		4,896,740		71,380		5.85			4,988,946		71,018		5.71
Noninterest-earning assets		329,579							313,782
Total assets	$	5,226,319						$	5,302,728
Interest-Bearing Liabilities
Interest-bearing demand deposits	$	1,378,394	$	5,758		1.68	%	$	1,247,241	$	5,582		1.80	%
Money market and savings deposits		1,441,099		8,421		2.34			1,561,977		10,799		2.77
Time deposits		571,276		4,759		3.34			687,428		6,377		3.72
Fed funds purchased		74,104		712		3.85			149,046		1,719		4.63
FHLB short-term advances		226,703		2,224		3.93			200,000		2,263		4.54
Long-term debt		59,225		1,040		7.04			59,112		652		4.42
Total interest-bearing liabilities		3,750,801		22,914		2.45			3,904,804		27,392		2.81
Noninterest-Bearing Liabilities and Stockholders' Equity
Noninterest-bearing deposits		790,088							808,629
Operating lease liabilities		43,217							18,346
Accrued expenses and other liabilities		67,351							57,343
Other noninterest-bearing liabilities		110,568							75,689
Stockholders’ equity		574,862							513,606
Total liabilities and stockholders’ equity	$	5,226,319						$	5,302,728
Net interest income on FTE basis ⁽¹⁾			$	48,466						$	43,626
Net interest rate spread on FTE basis ⁽¹⁾						3.40	%						2.90	%
Net interest margin on FTE basis ⁽¹⁾						3.97	%						3.51	%

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

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	Six months ended June 30,
	2026							2025
			Interest		Average					Interest		Average
	Average		Income/		Yield/			Average		Income/		Yield/
(dollars in thousands)	Balance		Expense		Rate			Balance		Expense		Rate
Interest-Earning Assets
Interest-bearing deposits with banks	$	53,185	$	1,107		4.20	%	$	34,695	$	884		5.14	%
Investment securities ⁽¹⁾		772,793		14,758		3.85			841,479		11,422		2.74
Loans held for sale		17,260		392		4.58			16,856		396		4.74
Loans
Commercial and industrial		751,791		26,414		7.09			655,725		24,101		7.41
CRE − Owner occupied		466,603		14,267		6.17			411,546		12,749		6.25
CRE − Construction, land and development		157,388		6,079		7.79			340,279		9,958		5.90
CRE − Multifamily		394,051		11,583		5.93			355,715		11,511		6.53
CRE − Non-owner occupied		918,823		27,454		6.03			957,629		31,297		6.59
Agricultural − Land		56,789		1,659		5.89			66,633		1,916		5.80
Agricultural − Production		56,077		1,936		6.96			64,190		2,326		7.31
RRE − First lien		851,876		20,835		4.93			899,367		21,616		4.85
RRE − Construction		33,949		1,088		6.46			38,305		1,519		8.00
RRE − HELOC		266,447		7,956		6.02			178,601		6,244		7.05
RRE − Junior lien		34,481		1,107		6.47			43,261		1,353		6.31
Other consumer		42,664		1,356		6.41			39,878		1,387		7.01
Total loans ⁽¹⁾		4,030,939		121,734		6.09			4,051,129		125,977		6.27
Federal Reserve/FHLB Stock		24,881		986		7.99			25,287		1,036		8.26
Total interest-earning assets		4,899,058		138,977		5.72			4,969,446		139,715		5.67
Noninterest-earning assets		323,380							318,176
Total assets	$	5,222,438						$	5,287,622
Interest-Bearing Liabilities
Interest-bearing demand deposits	$	1,372,863	$	11,273		1.66	%	$	1,247,482	$	11,146		1.80	%
Money market and savings deposits		1,472,276		17,205		2.36			1,576,218		22,131		2.83
Time deposits		570,176		9,535		3.37			687,995		13,016		3.82
Fed funds purchased		54,972		1,064		3.90			99,714		2,295		4.64
FHLB short-term advances		215,635		4,228		3.95			200,000		4,526		4.56
Long-term debt		59,210		1,675		5.70			59,098		1,302		4.44
Total interest-bearing liabilities		3,745,132		44,980		2.42			3,870,507		54,416		2.84
Noninterest-Bearing Liabilities and Stockholders' Equity
Noninterest-bearing deposits		794,310							829,044
Operating lease liabilities		40,848							18,586
Accrued expenses and other liabilities		71,413							63,015
Other noninterest-bearing liabilities		112,261							81,601
Stockholders’ equity		570,735							506,470
Total liabilities and stockholders’ equity	$	5,222,438						$	5,287,622
Net interest income on FTE basis ⁽¹⁾			$	93,997						$	85,299
Net interest rate spread on FTE basis ⁽¹⁾						3.30	%						2.83	%
Net interest margin on FTE basis ⁽¹⁾						3.87	%						3.46	%

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

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Interest Rates and Operating Interest Differential

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on interest earning assets and the interest incurred on interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the previous period’s volume.

	Three months ended June 30, 2026									Six months ended June 30, 2026
	Compared with									Compared with
	Three months ended June 30, 2025									Six months ended June 30, 2025
	Change due to:						Interest			Change due to:						Interest
(tax-equivalent basis, dollars in thousands)	Volume			Rate			Variance			Volume			Rate			Variance
Interest-earning assets
Interest-bearing deposits with banks	$	135		$	(160	)	$	(25	)	$	471		$	(248	)	$	223
Investment securities ⁽¹⁾		(334	)		2,275			1,941			(933	)		4,269			3,336
Loans held for sale		(38	)		3			(35	)		9			(13	)		(4	)
Loans
Commercial and industrial		1,873			(379	)		1,494			3,530			(1,217	)		2,313
CRE − Construction, land and development		(3,925	)		2,280			(1,645	)		(5,351	)		1,472			(3,879	)
CRE − Multifamily		771			(635	)		136			1,241			(1,169	)		72
CRE − Non-owner occupied		(505	)		(1,037	)		(1,542	)		(1,268	)		(2,575	)		(3,843	)
CRE − Owner occupied		1,089			(280	)		809			1,706			(188	)		1,518
Agricultural − Land		(223	)		50			(173	)		(283	)		26			(257	)
Agricultural − Production		(172	)		(135	)		(307	)		(294	)		(96	)		(390	)
RRE − First lien		(1,141	)		436			(705	)		(1,142	)		361			(781	)
RRE − Construction		(82	)		(94	)		(176	)		(173	)		(258	)		(431	)
RRE − HELOC		1,314			(531	)		783			3,071			(1,359	)		1,712
RRE − Junior lien		(171	)		29			(142	)		(275	)		29			(246	)
Other consumer		73			(47	)		26			97			(128	)		(31	)
Total loans ⁽¹⁾		(1,099	)		(343	)		(1,442	)		859			(5,102	)		(4,243	)
Federal Reserve/FHLB Stock		(41	)		(36	)		(77	)		(17	)		(33	)		(50	)
Total interest income		(1,377	)		1,739			362			389			(1,127	)		(738	)
Interest-bearing liabilities
Interest-bearing demand deposits		589			(413	)		176			1,119			(992	)		127
Money market and savings deposits		(835	)		(1,543	)		(2,378	)		(1,459	)		(3,467	)		(4,926	)
Time deposits		(1,077	)		(541	)		(1,618	)		(2,232	)		(1,249	)		(3,481	)
Fed funds purchased		(865	)		(142	)		(1,007	)		(1,029	)		(202	)		(1,231	)
FHLB short-term advances		302			(341	)		(39	)		354			(652	)		(298	)
Long-term debt		1			387			388			2			371			373
Total interest expense		(1,885	)		(2,593	)		(4,478	)		(3,245	)		(6,191	)		(9,436	)
Change in net interest income	$	508		$	4,332		$	4,840		$	3,634		$	5,064		$	8,698

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Provision for Credit Losses

The provision for credit losses was comprised of the following components for the periods presented:

	Three months ended						Six months ended
	June 30,						June 30,
(dollars in thousands)	2026			2025			2026			2025
Provision (recovery) for credit losses on loans	$	431		$	1,116		$	(3,954	)	$	3,523
Provision (recovery) for credit losses on unfunded commitments		67			(1,192	)		(426	)		(2,734	)
Provision (recovery) for HTM debt securities		(3	)		(2	)		(8	)		(4	)
Provision (recovery) for non-mortgage loans transferred to held for sale		—			78			—			78
Provision for credit losses	$	495		$	—		$	(4,388	)	$	863

The Company recorded a provision for credit losses of $0.5 million for the second quarter of 2026, compared to no provision for credit losses for the second quarter of 2025.

The Company recorded a provision release of $4.4 million for the six months ended June 30, 2026, compared to a provision for credit losses of $0.9 million for the six months ended June 30, 2025. The provision release in the first quarter of 2026 was primarily driven by changes to loan balances and loan mix, largely due to decreases in balances in the commercial real estate construction, land and development pool, which is reserved at a higher rate than most other loan pools, in addition to decreases in reserves on individually evaluated loans.

Noninterest Income

The Company’s noninterest income is generated from retirement and benefit services, wealth advisory services, mortgage banking, and other general banking services.

The following table presents the Company’s noninterest income for the three and six months ended June 30, 2026 and 2025:

	Three months ended						Six months ended
	June 30,						June 30,
(dollars in thousands)	2026			2025			2026			2025
Retirement and benefit services	$	17,347		$	16,024		$	34,754		$	32,130
Wealth advisory services		7,705			7,363			14,942			14,267
Mortgage banking		3,195			3,651			6,730			5,177
Service charges on deposit accounts		1,106			680			2,039			1,330
Gain on sale of non-mortgage loan		—			2,115			—			2,115
Other		3,592			1,930			5,327			4,376
Total noninterest income	$	32,945		$	31,763		$	63,792		$	59,395
Noninterest income as a % of revenue		40.85	%		42.47	%		40.78	%		41.37	%

Total noninterest income for the three months ended June 30, 2026 was $32.9 million, an increase of $1.2 million, or 3.7%, from the three months ended June 30, 2025. The increase was driven by an increase in other noninterest income, retirement and benefit services revenue, and service charges on deposit accounts, partially offset by a decrease in the gain on sale of non-mortgage loans. Other noninterest income increased $1.7 million, or 86.1%, compared to the second quarter of 2025, primarily driven by a gain on the sale of a property in the Rochester, Minnesota market, increased swap fee income, and mutual fund investment gains related to the underlying assets of the deferred compensation plans. Retirement and benefit services revenue increased $1.3 million, or 8.3%, in the second quarter of 2026 compared to the second quarter of 2025, primarily driven by recurring annual income. Service charges on deposit accounts increased $0.4 million, or 62.6%, compared to the second quarter of 2025, primarily due to a reclassification of fees from other noninterest income to service charges on deposit accounts revenue in the first quarter of 2026. Gain on sale of non-mortgage loans decreased $2.1 million, or 100.0%, compared to the second quarter of 2025 due to a $2.1 million gain on the sale of a PCD hospitality loan during the second quarter of 2025.

Total noninterest income for the six months ended June 30, 2026 was $63.8 million, an increase of $4.4 million, or 7.4%, from the six months ended June 30, 2025. The increase was driven by an increase in retirement and benefit services revenue, mortgage banking revenue, other noninterest income, and service charges on deposit accounts, partially offset by a decrease in the gain on sale of non-mortgage loans. Retirement and benefit services revenue increased $2.6 million, or 8.2%, in the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily driven by recurring annual income. Mortgage banking revenue increased $1.6 million, or 30.0%, in the six months ended June 30, 2026 compared to the six months ended June 30, 2025, due to an increase in the mortgage servicing asset valuation, as well as an increase in sold loan volume. Other noninterest income increased $1.0 million, or 21.7%, in the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily driven by a gain on the sale of a property in the Rochester, Minnesota market, increased swap fee income, and mutual fund investment gains related to the underlying assets of the deferred compensation plans. Service charges on deposit accounts increased $0.7 million, or 53.3%, in the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily due to a reclassification of fees from other noninterest income to service charges on deposit accounts revenue in the first quarter of 2026. Gain on sale of non-mortgage loans decreased $2.1 million, or 100.0%, in the six months ended June 30, 2026 compared to the six months ended June 30, 2025, due to a $2.1 million gain on the sale of a PCD hospitality loan during the second quarter of 2025.

See “NOTE 16 Segment Reporting” of the consolidated financial statements and Segment Reporting section below for additional discussion regarding the Company’s business lines.

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Noninterest Expense

The following table presents noninterest expense for the three and six months ended June 30, 2026 and 2025:

	Three months ended				Six months ended
	June 30,				June 30,
(dollars in thousands)	2026		2025		2026		2025
Compensation	$	26,155	$	24,343	$	50,242	$	47,304
Employee taxes and benefits		6,755		6,633		13,395		14,396
Occupancy and equipment expense		3,493		2,559		6,919		5,466
Business services, software and technology expense		5,440		5,868		11,279		11,620
Intangible amortization expense		1,974		2,710		3,949		5,419
Professional fees and assessments		3,781		2,339		7,581		5,335
Marketing and business development		869		787		1,730		1,752
Supplies and postage		540		490		1,146		1,121
Travel		357		347		718		634
Mortgage and lending expenses		614		940		1,323		1,476
Other		2,905		1,422		4,992		4,282
Total noninterest expense	$	52,883	$	48,438	$	103,274	$	98,805

Total noninterest expense for the three months ended June 30, 2026 was $52.9 million, a $4.4 million, or 9.2%, increase compared to $48.4 million for the three months ended June 30, 2025. The underlying changes were driven by increases in compensation, professional fees and assessments, and other noninterest expense. Compensation increased $1.8 million, or 7.4%, primarily due to annual merit increases, as well as increases in the deferred compensation plan liabilities driven by mutual fund investment gains related to the underlying assets of the plans. Professional fees and assessments increased $1.4 million, or 61.7%, primarily due to the reclassification of consulting services and other third-party vendor expenses from business services, software and technology expense to professional fees and assessments, as well as an increase in legal fees. Other noninterest expense increased $1.5 million, or 104.3%, due to an increase in other real estate owned balances and related holding costs, as well as increased corporate insurance costs.

Total noninterest expense for the six months ended June 30, 2026 was $103.3 million, a $4.5 million, or 4.5%, increase compared to $98.8 million for the six months ended June 30, 2025. The underlying changes were driven by increases in compensation, professional fees and assessments, occupancy and equipment expense, and other noninterest expense, offset by decreases in intangible amortization expense and employee taxes and benefits. Compensation increased $2.9 million, or 6.2%, primarily due to higher annual bonus expense, annual merit increases, as well as increases in the deferred compensation plan liabilities driven by mutual fund investment gains related to the underlying assets of the plans. Professional fees and assessments increased $2.2 million, or 42.1%, primarily due to the reclassification of consulting services and other third-party vendor expenses from business services, software and technology expense to professional fees and assessments, as well as an increase in legal fees. Occupancy and equipment expense increased $1.5 million, or 26.6%, primarily driven by facility investments and the strategic realignment of locations from owned to leased space. Other noninterest expense increased $0.7 million, or 16.6%, due to an increase in other real estate owned balances and related holding costs, as well as increased corporate insurance costs. For the six months ended June 30, 2026, intangible amortization expense decreased $1.5 million, or 27.1%, from the six months ended June 30, 2025, primarily due to the annual reset of the $33.5 million core deposit intangible recorded in connection with the HMNF transaction. For the six months ended June 30, 2026, employee taxes and benefits decreased $1.0 million, or 7.0%, from the six months ended June 30, 2025, primarily due to lower claims on group insurance.

Income Tax Expense

Income tax expense is an estimate based on the amount the Company expects to owe the applicable taxing authorities, plus the impact of deferred tax items. Accrued taxes represent the net estimated amount due, or to be received from, taxing authorities. In estimating accrued taxes, management assesses the relative merits and risks of the appropriate tax treatment of transactions, taking into account statutory, judicial, and regulatory guidance in the context of the Company’s tax position. If the final resolution of taxes payable differs from the Company’s estimates due to regulatory determination or legislative or judicial actions, adjustments to tax expense may be required.

For the three months ended June 30, 2026, the Company recognized income tax expense of $6.4 million on $27.3 million of pre-tax income, resulting in an effective tax rate of 23.5%, compared to income tax expense of $6.1 million on $26.4 million of pre-tax income for the three months ended June 30, 2025, resulting in an effective tax rate of 23.2%.

For the six months ended June 30, 2026, the Company recognized income tax expense of $13.7 million on $57.5 million of pre-tax income, resulting in an effective tax rate of 23.8%, compared to income tax expense of $10.3 million on $43.9 million of pre-tax income for the six months ended June 30, 2025, resulting in an effective tax rate of 23.6%.

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Segment Reporting

The Company determined reportable segments based on the significance of the services offered, the significance of those services to the Company’s financial condition and operating results, and the Company’s regular review of the operating results of those services. The Company has three operating segments—banking, retirement and benefit services, and wealth advisory services. These segments are components for which financial information is prepared and evaluated regularly by management in deciding how to allocate resources and assess performance.

The selected financial information presented for each segment sets forth net interest income, provision for loan losses, noninterest income, and direct and indirect noninterest expense overhead allocations. Corporate administration includes all remaining income and expenses not allocated to the three operating segments. Certain reclassification adjustments have been made between corporate administration and the various lines of business for consistency in presentation.

For additional financial information on the Company’s segments see “NOTE 16 Segment Reporting” of the Company’s consolidated financial statements.

Banking

The banking segment offers a complete line of loan, deposit, cash management, and treasury services through 26 offices in North Dakota, Minnesota, Wisconsin, Iowa, and Arizona, including 13 banking offices acquired in the HMNF transaction. These products and services are supported through web and mobile based applications. The majority of the Company’s assets and liabilities are in the banking segment’s balance sheet.

The following table presents the banking segment income statement, inclusive of corporate administration income, for the three and six months ended June 30, 2026 and 2025:

	Three months ended				Six months ended
	June 30,				June 30,
(dollars in thousands)	2026		2025		2026			2025
Net interest income	$	47,712	$	43,032	$	92,623		$	84,189
Provision for (recovery of) credit losses		495		—		(4,388	)		863
Noninterest income		7,893		8,376		14,096			12,998
Total revenue		55,110		51,408		111,107			96,324
Noninterest expense ⁽¹⁾		28,257		27,448		55,650			56,659
Net income before taxes	$	26,853	$	23,960	$	55,457		$	39,665

(1)	Noninterest expenses do not include corporate administration expenses. Corporate administration expenses include executive compensation, premises and fixed assets expenses, information technology expenses, and other expenses. These expenses are not specific to any specific segment.

Retirement and Benefit Services

The retirement and benefit services segment provides the following services nationally: record-keeping and administration services to qualified and other types of retirement plans, investment fiduciary services to retirement plans, health savings accounts, flexible spending accounts, and COBRA recordkeeping and administration services.

The following table presents the retirement and benefit services segment income statement for the three and six months ended June 30, 2026 and 2025:

	Three months ended				Six months ended
	June 30,				June 30,
(dollars in thousands)	2026		2025		2026		2025
Recurring annual income ⁽¹⁾	$	15,135	$	13,990	$	28,100	$	26,015
Transactional income ⁽²⁾		2,212		2,034		6,654		6,115
Total noninterest income		17,347		16,024		34,754		32,130
Noninterest expense		15,077		13,166		29,686		26,783
Net income before taxes	$	2,270	$	2,858	$	5,068	$	5,347

(1)	Recurring annual income primarily includes asset-based fees, administration fees, record-keeping fees, trust/custody fees, advisory fees, and health and welfare fees. $6.3 million and $6.2 million for the three months ended June 30, 2026 and 2025, respectively, was from market sensitive revenue.
(2)	Transactional income primarily includes distribution fees.

Wealth Advisory Services

The wealth advisory services segment provides advisory and planning services, investment management, and trust and fiduciary services to clients across the Company’s footprint.

The following table presents the wealth advisory services segment income statement for the three and six months ended June 30, 2026 and 2025:

	Three months ended				Six months ended
	June 30,				June 30,
(dollars in thousands)	2026		2025		2026		2025
Asset management	$	6,831	$	6,314	$	13,285	$	9,694
Brokerage		410		417		804		951
Insurance and other		464		632		853		1,243
Total noninterest income		7,705		7,363		14,942		11,888
Noninterest expense		6,374		5,132		12,101		9,969
Net income before taxes	$	1,331	$	2,231	$	2,841	$	1,919

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Financial Condition

Overview

Total assets were $5.3 billion as of June 30, 2026, an increase of $58.6 million, or 1.1%, compared to December 31, 2025. The increase was primarily due to an increase of $41.8 million in cash and cash equivalents, an increase of $20.1 million in available-for-sale investment securities, an increase of $8.5 million in other assets, and an increase of $4.8 million in loans held for sale, partially offset by a decrease of $4.8 million in loans held for investment.

Investment Securities

The following table presents the fair value composition of the Company’s investment securities portfolio as of June 30, 2026 and December 31, 2025:

	June 30, 2026					December 31, 2025
			Percent of					Percent of
(dollars in thousands)	Balance		Portfolio			Balance		Portfolio
Available-for-sale
U.S. Treasury and agencies	$	13,234		1.8	%	$	405		0.1	%
Mortgage backed securities
Residential agency		479,653		64.0			476,746		64.2
Asset backed securities		14		—			15		—
Corporate bonds		41,290		5.5			36,929		5.0
Total available-for-sale investment securities		534,191		71.3			514,095		69.3
Held-to-maturity
Obligations of state and political agencies		99,896		13.3			105,405		14.2
Mortgage backed securities
Residential agency		115,338		15.4			122,604		16.5
Total held-to-maturity investment securities		215,234		28.7			228,009		30.7
Total investment securities	$	749,425		100.0	%	$	742,104		100.0	%

The composition of the Company’s investment securities portfolio reflects the Company’s investment strategy of maintaining an appropriate level of liquidity for normal operations while providing an additional source of revenue. The investment portfolio also provides a balance to interest rate risk and credit risk in other categories of the balance sheet, while providing a vehicle for the investment of available funds, furnishing liquidity, and supplying securities to pledge as collateral.

The investment securities presented in the following table are reported at fair value and by contractual maturity as of June 30, 2026. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Additionally, residential mortgage backed securities and collateralized mortgage obligations receive monthly principal payments, which are not reflected below. The yields below are calculated on a tax-equivalent basis, assuming a 21.0% income tax rate.

	Maturity as of June 30, 2026
	One year or less					One to five years					Five to ten years					After ten years
	Fair		Average			Fair		Average			Fair		Average			Fair		Average
(dollars in thousands)	Value		Yield			Value		Yield			Value		Yield			Value		Yield
Available-for-sale
U.S. Treasury and agencies	$	—		—	%	$	146		4.02	%	$	4,569		4.65	%	$	8,519		4.81	%
Mortgage backed securities
Residential agency		36		2.39			8,861		4.10			7,948		4.21			462,809		4.73
Commercial		—		—			—		—			—		—			—		—
Asset backed securities		—		—			—		—			14		4.52			—		—
Corporate bonds		—		—			2,427		3.00			32,833		3.37			6,030		6.25
Total available-for-sale investment securities		36		2.39			11,434		3.87			45,364		3.65			477,358		4.75
Held-to-maturity
Obligations of state and political agencies		13,569		1.78			55,527		2.11			26,133		2.63			4,667		2.37
Mortgage backed securities
Residential agency		—		—			—		—			—		—			115,338		2.21
Total held-to-maturity investment securities		13,569		1.78			55,527		2.11			26,133		2.63			120,005		2.21
Total investment securities	$	13,605		1.78	%	$	66,961		2.41	%	$	71,497		3.28	%	$	597,363		4.24	%

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Loans

The loan portfolio represents a broad range of borrowers comprised of commercial and industrial, commercial real estate, agricultural, and consumer loans.

Total loans outstanding were $4.0 billion as of June 30, 2026, a decrease of $13.8 million, or 0.3%, from December 31, 2025. The decrease was primarily driven by a $41.6 million decrease in consumer loans, partially offset by a $27.9 million increase in commercial loans.

The Company’s loan portfolio is diversified. The following table presents the balance and percentage of loans outstanding by segment/industry as of the dates presented:

	June 30, 2026					December 31, 2025
			Percent of					Percent of
(dollars in thousands)	Balance		Portfolio			Balance		Portfolio
Commercial and business lending:
General business	$	376,716		9.3	%	$	290,008		7.2	%
Services		200,109		5.0			237,966		5.9
Retail trade		72,351		1.8			101,374		2.5
Manufacturing		110,783		2.7			107,485		2.7
Commercial real estate − Owner occupied		622,241		15.4			427,260		10.6
Total commercial and business lending		1,382,200		34.2			1,164,093		28.9
Investor commercial real estate:
Construction, land and development		79,850		2.0			246,238		6.1
Multifamily		361,875		9.0			383,505		9.5
Non-owner occupied
Office		127,943		3.2			142,095		3.5
Industrial		199,353		4.9			193,041		4.8
Retail		108,160		2.7			116,735		2.9
Hotel		83,440		2.1			110,022		2.7
Medical office		193,737		4.8			174,891		4.3
Medical or nursing facility		105,371		2.6			85,918		2.1
Other commercial real estate		75,363		1.9			53,160		1.3
Total non-owner occupied		893,367		22.2			875,862		21.6
Total investor commercial real estate		1,335,092		33.2			1,505,605		37.2
Agricultural:
Land		54,202		1.3			64,799		1.6
Production		53,367		1.3			62,500		1.5
Total agricultural		107,569		2.6			127,299		3.1
Consumer:
RRE − First lien		828,936		20.5			874,737		21.6
RRE − Construction		31,202		0.8			33,703		0.8
RRE − HELOC		273,124		6.8			260,883		6.4
RRE − Junior lien		31,941		0.8			36,844		0.9
Other consumer		44,180		1.1			44,858		1.1
Total consumer		1,209,383		30.0			1,251,025		30.8
Total loans	$	4,034,244		100.0	%	$	4,048,022		100.0	%

Commercial and industrial loans represent loans for working capital, purchases of equipment and other needs of commercial customers primarily located within the Bank’s geographical footprint. These loans are underwritten individually and represent ongoing relationships based on a thorough knowledge of the customer, the customer’s industry and the customer’s market. While commercial loans are generally secured by the customer’s assets, including real property, inventory, accounts receivable, operating equipment and other property, and may also include personal guarantees of the owners and related parties, the primary source of repayment of the loans is the ongoing cash flow from operations of the customer’s business. In addition, revolving lines of credit are generally governed by a borrowing base. Inherent lending risks are monitored on a continuous basis through interim reporting, covenant testing and annual underwriting.

CRE loans consist of term loans secured by a mortgage lien on real property and include both owner occupied CRE loans as well as non-owner occupied loans. Non-owner occupied CRE loans consist of mortgage loans to finance investments in real property that may include, but are not limited to, multi-family, industrial, office, retail and other specific use properties as well as CRE construction loans that are offered to builders and developers generally within the Bank’s geographical footprint. The primary risk characteristics in the non-owner occupied portfolio include impacts of overall leasing rates, absorption timelines, levels of vacancy rates and operating expenses. The Company requires collateral values in excess of the loan amounts, cash flows in excess of expected debt service requirements and equity investment in the project. The expected cash flows from all significant new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy rates and rental rates. Inherent lending risks are monitored on a continuous basis through quarterly monitoring and the Bank’s annual underwriting process, incorporating an analysis of cash flow, collateral, market conditions and guarantor liquidity, if applicable. CRE loan policies are specific to individual product types and underwriting parameters vary depending on the risk profile of each asset class. CRE loan policies are reviewed no less than semi-annually by management and approved by the Bank’s Board of Directors to ensure they align with current market conditions and the Bank’s moderate risk appetite. Construction loans are monitored monthly and includes on-site inspections. Management reviews all construction loans quarterly to ensure projects are on time and within budget. CRE concentration limits have been established by product type and are monitored quarterly by the Bank’s Credit Governance Committee and Bank Board of Directors.

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CRE loans may be adversely affected by conditions in the real estate markets or in the general economy. The Company does not monitor the CRE portfolio for attributes such as loan-to-value ratios, occupancy rates or net operating income, as these characteristics are assessed and evaluated on an individual loan basis. Portfolio stress testing is completed based on property type and takes into consideration changes to net operating income and capitalization rates. The Company does not have exposure to the office building sector in central business districts as the office portfolio is generally diversified in suburban markets with strong occupancy levels.

The following table presents the geographical markets of the collateral related to non-owner occupied and multifamily CRE loans for the periods presented:

	June 30, 2026					December 31, 2025
			Percent of					Percent of
(dollars in thousands)	Balance		Total			Balance		Total
Geographical Market:
Minnesota	$	595,467		47.4	%	$	621,747		49.4	%
North Dakota		207,961		16.6			212,077		16.8
Arizona		141,682		11.3			133,618		10.6
Wisconsin		68,583		5.5			88,229		7.0
Texas		37,027		2.9			37,113		2.9
Illinois		26,561		2.1			2,994		0.2
Oregon		19,896		1.6			17,698		1.4
Colorado		23,345		1.9			23,358		1.9
Kansas		16,970		1.4			16,656		1.3
Missouri		19,561		1.6			16,409		1.3
Georgia		14,614		1.2			14,569		1.2
Virginia		11,187		0.9			11,182		0.9
Iowa		13,868		1.1			11,155		0.9
South Dakota		10,311		0.8			10,415		0.8
Other		48,209		3.8			42,147		3.3
Total non-owner occupied and multifamily commercial real estate loans	$	1,255,242		100.0	%	$	1,259,367		100.0	%

The Bank does not currently monitor owner occupied CRE loans based on geographical markets, as the primary source of repayment for these loans is predicated on the cash flow from the underlying operating entity. These loans are generally located within the Company’s geographical footprint.

Highly competitive conditions continue to prevail in the small- and middle-market commercial segments in which the Company primarily operates. The Company maintains a commitment to generating growth in the Company’s business portfolio in a manner that adheres to its twin goals of maintaining strong asset quality and producing profitable margins. The Company continues to invest in additional personnel, technology and business development resources to further strengthen its capabilities.

Agricultural loans include loans secured by farmland and loans for agricultural production. Farmland includes purposes such as crop and livestock production. Farmland loans are typically written with amortizing payment structures. Collateral values for farmland are determined based upon appraisals and evaluations in accordance with established policy guidelines and maximum loan-to-value ratios at origination are governed by established policy and regulatory guidelines. Agricultural production loans are for the purpose of financing working capital and/or capital investment for agriculture production activities. Collateral generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant and equipment, and/or real estate in applicable. Agricultural production loans are primarily paid by the operating cash flow of the borrower. Agricultural production loans may be secured or unsecured.

Residential real estate (“RRE”) loans represent loans to consumers for the purchase or refinance of a residence. These loans are generally financed over a 15- to 30-year term and, in most cases, are extended to borrowers to finance their primary residence with both fixed-rate and adjustable-rate terms. Real estate construction loans are also offered to consumers who wish to build their own homes and are often structured to be converted to permanent loans at the end of the construction phase, which is typically twelve months. RRE loans also include home equity loans and lines of credit that are secured by a first or second lien on the borrower’s residence. Home equity lines of credit (“HELOC”) consist mainly of revolving lines of credit secured by residential real estate.

Other consumer loans include loans made to individuals not secured by real estate, including loans secured by automobiles or watercraft, and personal unsecured loans.

The Company originates both fixed and adjustable rate residential real estate loans conforming to the underwriting guidelines of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, as well as home equity loans and lines of credit that are secured by first or junior liens. Most of the Company’s fixed rate residential loans, along with some of the Company’s adjustable rate mortgages are sold to other financial institutions with which the Company has established a correspondent lending relationship.

The Company’s RRE loans have minimal direct exposure to subprime mortgages as the loans are underwritten to conform to secondary market standards. As of June 30, 2026, the Company’s RRE portfolio was $1.2 billion, representing a $41.0 million, or 3.4%, decrease from December 31, 2025. Market interest rates, expected duration, and the Company’s overall interest rate sensitivity profile continue to be the most significant factors in determining whether the Company chooses to retain versus sell portions of new consumer mortgage originations.

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The following table presents the maturities and types of interest rates for the loan portfolio as of June 30, 2026:

	June 30, 2026
			After one		After five
	One year		but within		but within		After
(dollars in thousands)	or less		five years		fifteen years		fifteen years		Total
Commercial
Commercial and business lending
Commercial and industrial	$	150,957	$	415,514	$	186,931	$	6,557	$	759,959
Commercial real estate − Owner occupied		61,772		286,323		173,780		100,366		622,241
Total commercial and business lending		212,729		701,837		360,711		106,923		1,382,200
Investor commercial real estate
Construction, land and development		14,149		44,489		14,604		6,608		79,850
Multifamily		98,342		217,402		46,131		—		361,875
Non-owner occupied		110,752		599,441		139,842		43,332		893,367
Total investor commercial real estate		223,243		861,332		200,577		49,940		1,335,092
Agricultural
Land		3,171		13,915		17,749		19,367		54,202
Production		35,990		16,958		419		—		53,367
Total agricultural		39,161		30,873		18,168		19,367		107,569
Total commercial		475,133		1,594,042		579,456		176,230		2,824,861
Consumer
Residential real estate
First lien		13,698		44,442		68,172		702,624		828,936
Construction		25,324		1,455		—		4,423		31,202
HELOC		3,389		10,081		22,409		237,245		273,124
Junior lien		1,380		4,280		17,496		8,785		31,941
Total residential real estate		43,791		60,258		108,077		953,077		1,165,203
Other consumer		17,134		21,695		3,210		2,141		44,180
Total consumer		60,925		81,953		111,287		955,218		1,209,383
Total loans	$	536,058	$	1,675,995	$	690,743	$	1,131,448	$	4,034,244
Loans with fixed interest rates:
Commercial
Commercial and business lending
Commercial and industrial	$	22,887	$	257,901	$	74,770	$	—	$	355,558
Commercial real estate − Owner occupied		51,289		183,846		36,447		1,149		272,731
Total commercial and business lending		74,176		441,747		111,217		1,149		628,289
Investor commercial real estate
Construction, land and development		8,474		16,074		1,219		—		25,767
Multifamily		42,816		117,664		19,876		—		180,356
Non-owner occupied		45,348		333,794		72,783		—		451,925
Total investor commercial real estate		96,638		467,532		93,878		—		658,048
Agricultural
Land		3,151		13,651		16,089		13,832		46,723
Production		1,372		12,846		419		—		14,637
Total agricultural		4,523		26,497		16,508		13,832		61,360
Total commercial		175,337		935,776		221,603		14,981		1,347,697
Consumer
Residential real estate
First lien		11,891		36,684		58,378		412,676		519,629
Construction		16,263		48		—		4,423		20,734
HELOC		16		1,004		5,274		3,108		9,402
Junior lien		1,027		3,249		13,603		8,215		26,094
Total residential real estate		29,197		40,985		77,255		428,422		575,859
Other consumer		1,272		10,394		3,210		192		15,068
Total consumer		30,469		51,379		80,465		428,614		590,927
Total loans with fixed interest rates	$	205,806	$	987,155	$	302,068	$	443,595	$	1,938,624
Loans with floating interest rates:
Commercial
Commercial and business lending
Commercial and industrial	$	128,070	$	157,613	$	112,161	$	6,557	$	404,401
Commercial real estate − Owner occupied		10,483		102,477		137,333		99,217		349,510
Total commercial and business lending		138,553		260,090		249,494		105,774		753,911
Investor commercial real estate
Construction, land and development		5,675		28,415		13,385		6,608		54,083
Multifamily		55,526		99,738		26,255		—		181,519
Non-owner occupied		65,404		265,647		67,059		43,332		441,442
Total investor commercial real estate		126,605		393,800		106,699		49,940		677,044
Agricultural
Land		20		264		1,660		5,535		7,479
Production		34,618		4,112		—		—		38,730
Total agricultural		34,638		4,376		1,660		5,535		46,209
Total commercial		299,796		658,266		357,853		161,249		1,477,164
Consumer
Residential real estate
First lien		1,807		7,758		9,794		289,948		309,307
Construction		9,061		1,407		—		—		10,468
HELOC		3,373		9,077		17,135		234,137		263,722
Junior lien		353		1,031		3,893		570		5,847
Total residential real estate		14,594		19,273		30,822		524,655		589,344
Other consumer		15,862		11,301		—		1,949		29,112
Total consumer		30,456		30,574		30,822		526,604		618,456
Total loans with floating interest rates	$	330,252	$	688,840	$	388,675	$	687,853	$	2,095,620

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The expected life of the Company’s loan portfolio will differ from contractual maturities because borrowers may have the right to curtail or prepay their loans with or without penalties. Consequently, the table above includes information limited to contractual maturities of the underlying loans.

Asset Quality

The Company’s strategy for credit risk management includes well‑defined, centralized credit policies; uniform underwriting criteria; and ongoing risk monitoring and review processes for all commercial and consumer credit exposures. The strategy also emphasizes diversification on a geographic, industry, and client level; regular credit examinations; and management reviews of loans experiencing deterioration of credit quality. The Company strives to identify potential problem loans early, take necessary charge‑offs promptly, and maintain adequate reserve levels for credit losses inherent in the portfolio. Management performs ongoing, internal reviews of any problem credits and continually assesses the adequacy of the allowance. The Company utilizes an internal lending division, Special Credit Services, to develop and implement strategies for the management of individual nonperforming loans.

Credit Quality Indicators

Loans are assigned a risk rating and grouped into categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The risk ratings are aligned to pass and criticized categories. The criticized categories include special mention, substandard, and doubtful risk ratings. See “NOTE 4 Loans and Allowance for Credit Losses” of the consolidated financial statements for a definition of each of the risk ratings.

The table below presents criticized loans outstanding by loan portfolio segment as of June 30, 2026 and December 31, 2025:

	June 30,			December 31,
(dollars in thousands)	2026			2025
Commercial
Commercial and business lending
Commercial and industrial	$	23,570		$	33,323
Commercial real estate − Owner occupied		15,101			14,058
Total commercial and business lending		38,671			47,381
Investor commercial real estate
Construction, land and development		—			34,201
Multifamily		19,060			28,541
Non-owner occupied		11,130			17,591
Total investor commercial real estate		30,190			80,333
Agricultural
Land		6,627			7,653
Production		4,768			3,662
Total agricultural		11,395			11,315
Total commercial		80,256			139,029
Consumer
Residential real estate
First lien		2,337			2,602
Construction		—			4,680
HELOC		588			128
Junior lien		72			2,375
Total residential real estate		2,997			9,785
Other consumer		274			348
Total consumer		3,271			10,133
Total criticized loans	$	83,527		$	149,162
Criticized loans as a percent of total loans		2.07	%		3.68	%

The following table presents information regarding nonperforming assets as of June 30, 2026 and December 31, 2025:

	June 30,			December 31,
(dollars in thousands)	2026			2025
Nonaccrual loans	$	7,105		$	69,065
Accruing loans 90+ days past due		436			—
Total nonperforming loans		7,541			69,065
OREO and repossessed assets		9,571			308
Total nonperforming assets		17,112			69,373
Total restructured accruing loans		—			1,436
Total nonperforming assets and restructured accruing loans	$	17,112		$	70,809
Nonperforming loans to total loans		0.19	%		1.71	%
Nonperforming assets to total assets		0.32	%		1.33	%
ACL on loans to nonperforming loans		641.31	%		89.65	%

Interest income lost on nonaccrual loans was approximately $0.4 million and $1.1 million for the six months ended June 30, 2026 and 2025, respectively. There was no interest income included in net interest income related to nonaccrual loans for the six months ended June 30, 2026 and 2025.

Total nonperforming loans were $7.5 million at June 30, 2026, compared to $69.1 million as of December 31, 2025. The decrease was primarily driven by the sale of three non-performing loans representing a construction, land and development relationship. There were no historical charge-offs on this relationship and there were no charge-offs recognized as a result of the transaction.

OREO and repossessed assets were $9.6 million at June 30, 2026, compared to $0.3 million as of December 31, 2025. The increase was primarily driven by the transfer of one 1-4 family property and one apartment complex to OREO in the second quarter of 2026.

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Allowance for Credit Losses

The ACL on loans is maintained at a level management believes is sufficient to absorb expected losses in the loan portfolio over the remaining estimated life of loans in the portfolio. Under the Current Expected Credit Loss accounting standard, the ACL is a valuation estimated at each balance sheet date and deducted from the amortized cost basis of loans held for investment to present the net amount expected to be collected. These evaluations are inherently subjective as they require management to make material estimates, all of which may be susceptible to significant change. The allowance is increased by provisions charged to expense and decreased by actual charge‑offs, net of recoveries.

Management estimates the ACL using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical loss experience provides the basis for estimation of expected credit losses. Adjustments to historical loss information are made for differences in the current loan-specific risk characteristics such as different underwriting standards, portfolio mix, delinquency level, or life of the loan, as well as changes in environmental conditions, levels of economic activity, unemployment rates, property values and other relevant factors. The calculation also contemplates that the Company may not be able to make or obtain such forecasts for the entire life of the financial assets and requires a reversion to historical loss information.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. The ACL on individually evaluated loans is recognized on the basis of the present value of expected future cash flows discounted at the effective interest rate, the fair value of collateral adjusted of estimated costs to sell, or observable market price as of the relevant date.

The following tables present information concerning the components of the ACL for the periods presented:

	Three months ended						Six months ended
	June 30,						June 30,
(dollars in thousands)	2026			2025			2026			2025
ACL on loans at the beginning of the period	$	50,505		$	61,929		$	61,915		$	59,929
(Credit) provision for loan losses		431			1,116			(3,954	)		3,523
Net charge-offs (recoveries)⁽¹⁾
Commercial and industrial		1,313			(49	)		7,693			(150	)
CRE − Owner occupied		(11	)		(5	)		(22	)		(16	)
CRE − Construction, land and development		—			—			—			—
CRE − Multifamily		500			—			1,056			—
CRE − Non-owner occupied		—			3,401			—			3,401
Agricultural − Land		—			—			—			—
Agricultural − Production		50			384			(144	)		372
RRE − First lien		—			—			—			54
RRE − Construction		—			—			—			—
RRE − HELOC		—			10			—			260
RRE − Junior lien		718			—			930			300
Other consumer		5			26			87			(47	)
Total net charge-offs		2,575			3,767			9,600			4,174
ACL on loans at the end of the period		48,361			59,278			48,361			59,278
Components of ACL:
ACL on HTM debt securities		115			127			115			127
ACL on loans		48,361			59,278			48,361			59,278
ACL on off-balance sheet credit exposures		3,459			4,801			3,459			4,801
ACL at end of the period		51,935			64,206			51,935			64,206
Total loans	$	4,034,244		$	4,044,657		$	4,034,244		$	4,044,657
Average total loans		4,032,142			4,079,084			4,030,939			4,051,129
ACL on loans to total loans		1.20	%		1.47	%		1.20	%		1.47	%
ACL on loans to nonaccrual loans		680.66	%		115.61	%		680.66	%		115.61	%
ACL on loans to nonperforming loans		641.31	%		115.15	%		641.31	%		115.15	%
Net charge-offs/(recoveries) to average total loans (annualized)		0.26	%		0.37	%		0.48	%		0.21	%

(1)

Additional information related to net charge-offs (recoveries) is presented in the following table for the periods indicated.

Table of Contents

	For the three months ended
	June 30,
										Net Charge-offs
	Total		Total		Net Charge-offs			Average		(Recoveries) to
(dollars in thousands)	Charge-offs		Recoveries		(Recoveries)			Loans		Average Loans
2026:
Commercial
Commercial and business lending
Commercial and industrial	$	2,188	$	875	$	1,313		$	779,471		0.68	%
Commercial real estate − Owner occupied		—		11		(11	)		505,759		(0.01	)
Total commercial and business lending		2,188		886		1,302			1,285,230		0.41
Investor commercial real estate
Construction, land and development		—		—		—			103,618		—
Multifamily		500		—		500			399,628		0.50
Non-owner occupied ⁽¹⁾		—		—		—			930,867		—
Total investor commercial real estate		500		—		500			1,434,113		0.14
Agricultural
Land		—		—		—			53,823		—
Production		50		—		50			53,351		0.38
Total agricultural		50		—		50			107,174		0.19
Total commercial		2,738		886		1,852			2,826,517		0.26
Consumer
Residential real estate
First lien		—		—		—			838,819		—
Construction		—		—		—			34,981		—
HELOC		—		—		—			271,254		—
Junior lien		719		1		718			32,676		8.81
Total residential real estate		719		1		718			1,177,730		0.24
Other consumer		33		28		5			44,032		0.05
Total consumer		752		29		723			1,221,762		0.24
Total loans	$	3,490	$	915	$	2,575		$	4,048,279		0.26	%
2025:
Commercial
Commercial and business lending
Commercial and industrial	$	79	$	128	$	(49	)	$	653,635		(0.03	)%
Commercial real estate − Owner occupied		6		11		(5	)		448,771		—
Total commercial and business lending		85		139		(54	)		1,102,406		(0.02	)
Investor commercial real estate
Construction, land and development		—		—		—			337,867		—
Multifamily		—		—		—			354,909		—
Non-owner occupied		3,401		—		3,401			974,705		1.40
Total investor commercial real estate		3,401		—		3,401			1,667,481		0.82
Agricultural
Land		—		—		—			66,044		—
Production		384		—		384			67,412		2.28
Total agricultural		384		—		384			133,456		1.15
Total commercial		3,870		139		3,731			2,903,343		0.52
Consumer
Residential real estate
First lien		—		—		—			898,903		—
Construction		—		—		—			39,682		—
HELOC		10		—		10			188,494		0.02
Junior lien		—		—		—			42,435		—
Total residential real estate		10		—		10			1,169,514		—
Other consumer		38		12		26			39,405		0.26
Total consumer		48		12		36			1,208,919		0.01
Total loans	$	3,918	$	151	$	3,767		$	4,112,262		0.37	%

Table of Contents

	For the six months ended
	June 30,
										Net Charge-offs
	Total		Total		Net Charge-offs			Average		(Recoveries) to
(dollars in thousands)	Charge-offs		Recoveries		(Recoveries)			Loans		Average Loans
2026:
Commercial
Commercial and business lending
Commercial and industrial	$	8,753	$	1,060	$	7,693		$	751,791		2.06	%
Commercial real estate − Owner occupied		—		22		(22	)		469,889		(0.01	)
Total commercial and business lending		8,753		1,082		7,671			1,221,680		1.27
Investor commercial real estate
Construction, land and development		—		—		—			157,388		—
Multifamily		1,056		—		1,056			399,236		0.53
Non-owner occupied		—		—		—			927,340		—
Total investor commercial real estate		1,056		—		1,056			1,483,964		0.14
Agricultural
Land		—		—		—			56,789		—
Production		50		194		(144	)		56,077		(0.52	)
Total agricultural		50		194		(144	)		112,866		(0.26	)
Total commercial		9,859		1,276		8,583			2,818,510		0.61
Consumer
Residential real estate
First lien		—		—		—			851,876		—
Construction		—		—		—			33,949		—
HELOC		—		—		—			266,447		—
Junior lien		931		1		930			34,481		5.44
Total residential real estate		931		1		930			1,186,753		0.16
Other consumer		146		59		87			42,664		0.41
Total consumer		1,077		60		1,017			1,229,417		0.17
Total loans	$	10,936	$	1,336	$	9,600		$	4,047,927		0.48	%
2025:
Commercial
Commercial and business lending
Commercial and industrial	$	248	$	398	$	(150	)	$	655,725		(0.05	)%
Commercial real estate − Owner occupied		6		22		(16	)		417,830		(0.01	)
Total commercial and business lending		254		420		(166	)		1,073,555		(0.03	)
Investor commercial real estate
Construction, land and development		—		—		—			340,279		—
Multifamily		—		—		—			363,710		—
Non-owner occupied		3,401		—		3,401			978,134		0.70
Total investor commercial real estate		3,401		—		3,401			1,682,123		0.41
Agricultural
Land		—		—		—			66,633		—
Production		384		12		372			64,190		1.17
Total agricultural		384		12		372			130,823		0.57
Total commercial		4,039		432		3,607			2,886,501		0.25
Consumer
Residential real estate
First lien		54		—		54			899,367		0.01
Construction		—		—		—			38,305		—
HELOC		260		—		260			178,601		0.29
Junior lien		300		—		300			43,261		1.40
Total residential real estate		614		—		614			1,159,534		0.11
Other consumer		77		124		(47	)		39,878		(0.24	)
Total consumer		691		124		567			1,199,412		0.10
Total loans	$	4,730	$	556	$	4,174		$	4,085,913		0.21	%

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The following table presents the allocation of the ACL on loans as of the dates presented:

	June 30, 2026					December 31, 2025
			Percentage					Percentage
	Allocated		of loans to			Allocated		of loans to
(dollars in thousands)	Allowance		total loans			Allowance		total loans
Commercial and industrial	$	10,477		18.8	%	$	16,216		18.3	%
CRE − Owner occupied		5,887		15.4			3,097		10.6
CRE − Construction, land and development		2,978		2.0			13,210		6.1
CRE − Multifamily		3,919		9.0			4,380		9.5
CRE − Non-owner occupied		10,580		22.2			11,006		21.6
Agricultural − Land		883		1.3			959		1.6
Agricultural − Production		568		1.3			623		1.5
RRE − First lien		9,366		20.5			9,358		21.6
RRE − Construction		366		0.8			274		0.8
RRE − HELOC		2,332		6.8			1,787		6.4
RRE − Junior lien		397		0.8			395		0.9
Other consumer		608		1.1			610		1.1
Total loans	$	48,361		100.0	%	$	61,915		100.0	%

In the ordinary course of business, the Company enters into commitments to extend credit, including commitments under credit arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded. An ACL on off-balance sheet credit exposures is measured using similar internal and external assumptions as the ACL on loans. This allowance is located in accrued expenses and other liabilities on the consolidated balance sheets. The ACL for unfunded commitments was $3.5 million and $4.8 million as of June 30, 2026 and 2025, respectively.

Deposits

Deposit inflows and outflows are influenced by prevailing market interest rates, competition, local and economic conditions, and fluctuations in the Company’s customers’ own liquidity needs and may also be influenced by recent developments in the financial services industry, including the large-scale deposit withdrawals over a short period of time that resulted in bank failures.

Total deposits were $4.2 billion as of June 30, 2026, a decrease of $0.1 million, or 0.0%, from December 31, 2025. Interest-bearing deposits increased $48.2 million during this period, while noninterest-bearing deposits decreased $48.3 million. The decrease in total deposits was due to seasonal outflows from public funds depositors.

The following table presents the composition of the Company’s deposit portfolio as of June 30, 2026 and December 31, 2025:

	June 30, 2026					December 31, 2025
			Percent of					Percent of			Change
(dollars in thousands)	Balance		Portfolio			Balance		Portfolio			Amount			Percent
Noninterest-bearing demand	$	759,640		18.1	%	$	807,896		19.3	%	$	(48,256	)		(6.0	)%
Interest-bearing demand		1,429,951		34.1			1,296,315		30.9			133,636			10.3
Money market and savings ⁽¹⁾		1,426,078		34.0			1,511,250		36.1			(85,172	)		(5.6	)
Time deposits		576,228		13.8			576,542		13.7			(314	)		(0.1	)
Total deposits	$	4,191,897		100.0	%	$	4,192,003		100.0	%	$	(106	)		-	%

(1)

Money market and savings deposits included health savings account deposits of $219.5 million and $203.4 million as of June 30, 2026 and December 31, 2025, respectively.

The following table presents the average balances and rates of the Company’s deposit portfolio for the three months ended June 30, 2026 and 2025:

	Three months ended June 30,										Six months ended June 30,
	2026					2025					2026					2025
	Average		Average			Average		Average			Average		Average			Average		Average
(dollars in thousands)	Balance		Rate			Balance		Rate			Balance		Rate			Balance		Rate
Noninterest-bearing demand	$	790,088		—	%	$	808,629		—	%	$	794,310		—	%	$	829,044		—	%
Interest-bearing demand		1,378,394		1.68			1,247,241		1.80			1,372,863		1.66	%		1,247,482		1.80	%
Money market and savings		1,441,099		2.34			1,561,977		2.77			1,472,276		2.36	%		1,576,218		2.83	%
Time deposits		571,276		3.34			687,428		3.72			570,176		3.37	%		687,995		3.82	%
Total deposits	$	4,180,857		1.82	%	$	4,305,275		2.12	%	$	4,209,625		0.90	%	$	4,340,739		1.07	%

Table of Contents

The following table presents the composition of the Company’s deposit portfolio by client segment as of June 30, 2026 and December 31, 2025:

	June 30, 2026					December 31, 2025
			Percent of					Percent of			Change
(dollars in thousands)	Balance		Portfolio			Balance		Portfolio			Amount			Percent
Commercial	$	1,496,346		35.7	%	$	1,563,239		37.3	%	$	(66,893	)		(4.3	)%
Consumer		1,507,689		36.0			1,469,813		35.1			37,876			2.6
Public ⁽¹⁾		238,769		5.7			180,755		4.3			58,014			32.1
Synergistic ⁽²⁾
Retirement and benefit services ⁽³⁾		709,039		16.9			725,618		17.3			(16,579	)		(2.3	)
Wealth advisory services ⁽⁴⁾		240,054		5.7			252,578		6.0			(12,524	)		(5.0	)
Total synergistic		949,093		22.6			978,196		23.3			(29,103	)		(7.3	)
Total deposits	$	4,191,897		100.0	%	$	4,192,003		100.0	%	$	(106	)		-	%

	(1)	Public deposits primarily represent municipalities, school districts, and other governmental entities that receive public funding.
	(2)	Synergistic deposits represent the on-balance sheet money market balances that Alerus Retirement and Benefit Services and Alerus Wealth Advisory Services clients hold in proprietary Alerus money market products.
	(3)	$379.7 million and $395.7 million of retirement and benefit services synergistic deposits were indexed as of June 30, 2026 and December 31, 2025, respectively.
	(4)	$240.1 million and $252.6 million of wealth advisory services synergistic deposits were indexed as of June 30, 2026 and December 31, 2025, respectively.

The following table presents the contractual maturity of time deposits, including certificate of deposit account registry services and IRA deposits of $250,000 and over, that were outstanding as of June 30, 2026:

	June 30,
(dollars in thousands)	2026
Maturing in:
3 months or less	$	70,858
3 months to 6 months		77,374
6 months to 1 year		24,897
1 year or greater		20,872
Total	$	194,001

The Company’s total uninsured deposits, which are amounts of deposit accounts that exceed the FDIC insurance limit, currently $250,000, were approximately $1.5 billion at June 30, 2026 and approximately $1.4 billion December 31, 2025. These amounts were estimated based on the same methodologies used for regulatory reporting purposes.

Borrowings

Borrowings as of June 30, 2026 and December 31, 2025 were as follows:

	June 30, 2026					December 31, 2025
			Percent of					Percent of
(dollars in thousands)	Balance		Portfolio			Balance		Portfolio
Fed funds purchased	$	—		—	%	$	58,800		16.0	%
FHLB short-term advances		345,000		85.3			250,000		67.9
Subordinated notes		50,000		12.4			50,000		13.6
Junior subordinated debentures		9,239		2.3			9,182		2.5
Total borrowed funds	$	404,239		100.0	%	$	367,982		100.0	%

Capital Resources

Stockholders’ equity is influenced primarily by earnings, dividends, the Company’s sales and repurchases of its common stock and changes in accumulated other comprehensive income caused primarily by fluctuations in unrealized gains or losses, net of taxes, on available-for-sale securities.

Stockholders’ equity increased $18.2 million, or 3.2%, to $583.1 million as of June 30, 2026, compared to $564.9 million as of December 31, 2025. Tangible common equity to tangible assets, a non-GAAP financial measure, increased to 9.05% as of June 30, 2026, from 8.72% as of December 31, 2025. Common equity tier 1 capital to risk weighted assets increased to 10.81% as of June 30, 2026, from 10.28% as of December 31, 2025.

The Company strives to maintain an adequate capital base to support the Company’s activities in a safe and sound manner while at the same time attempting to maximize stockholder value. Capital adequacy is assessed against the risk inherent in the Company’s balance sheet, recognizing that unexpected loss is the common denominator of risk, and that common equity has the greatest capacity to absorb unexpected loss.

The Company is subject to various regulatory capital requirements both at the Company and at the Bank level. Failure to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines must be met that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting policies. The Company has consistently maintained regulatory capital ratios at or above the well-capitalized standards.

Table of Contents

At June 30, 2026 and December 31, 2025, the Company met all the capital adequacy requirements to which the Company was subject. The table below presents the Company’s and the Bank’s regulatory capital ratios and the Company’s tangible common equity to tangible assets ratio as of June 30, 2026 and December 31, 2025:

	June 30,			December 31,
Capital Ratios	2026			2025
Alerus Financial Corporation Consolidated
Common equity tier 1 capital to risk weighted assets		10.81	%		10.28	%
Tier 1 capital to risk weighted assets		11.02	%		10.48	%
Total capital to risk weighted assets		13.34	%		12.87	%
Tier 1 capital to average assets		9.49	%		8.86	%
Tangible common equity to tangible assets ⁽¹⁾		9.05	%		8.72	%

Alerus Financial, National Association
Common equity tier 1 capital to risk weighted assets		10.92	%		10.41	%
Tier 1 capital to risk weighted assets		10.92	%		10.41	%
Total capital to risk weighted assets		12.11	%		11.66	%
Tier 1 capital to average assets		9.26	%		8.62	%

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

The regulatory capital ratios for the Company and the Bank, as of June 30, 2026, as shown in the above table, were at levels above the regulatory minimums to be considered “well capitalized.” See “NOTE 19 Regulatory Matters” of the consolidated financial statements for additional information.

Off‑Balance Sheet Arrangements

The Company is a party to financial instruments with off‑balance sheet risk in the normal course of business to meet the financing needs of the Company’s customers. These financial instruments consist primarily of commitments to extend credit and standby letters of credit. Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee. These commitments consist principally of unused commercial and consumer credit lines. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of an underlying contract with a third party. The credit risks associated with commitments to extend credit and standby letters of credit are essentially the same as that involved with extending loans to customers and are subject to normal credit policies. Collateral may be required based on management’s assessment of the customer’s creditworthiness. The fair value of these commitments is considered immaterial for disclosure purposes.

A summary of the contractual amounts of the Company’s exposure to off‑balance sheet agreements as of June 30, 2026 and December 31, 2025, was as follows:

	June 30,		December 31,
(dollars in thousands)	2026		2025
Commitments to extend credit	$	1,033,270	$	1,038,347
Standby letters of credit		14,513		14,393
Total	$	1,047,782	$	1,052,740

Liquidity

Liquidity management is the process by which the Company manages the flow of funds necessary to meet the Company’s financial commitments on a timely basis and at a reasonable cost and to take advantage of earnings enhancement opportunities. These financial commitments include withdrawals by depositors, credit commitments to borrowers, expenses of the Company’s operations, and capital expenditures. Liquidity is monitored and closely managed by the Company’s asset and liability committee (the “ALCO”), a group of senior officers from the finance, enterprise risk management, deposit, investment, treasury, and lending areas. It is the ALCO’s responsibility to ensure the Company has the necessary level of funds available for normal operations as well as maintain a contingency funding policy to ensure that potential liquidity stress events are planned for, quickly identified, and that management has plans in place to respond. The ALCO has created policies which establish limits and require measurements to monitor liquidity trends, including modeling and management reporting that identifies the amounts and costs of all available funding sources.

As of June 30, 2026, the Company had on balance sheet liquidity of $400.7 million, compared to $568.8 million as of December 31, 2025. On balance sheet liquidity includes cash and cash equivalents, federal funds sold, unencumbered securities available‑for‑sale, and over collateralized securities pledging positions available-for-sale.

As of both June 30, 2026 and December 31, 2025, the Company had off balance sheet liquidity of $2.2 billion. Off balance sheet liquidity includes FHLB borrowing capacity, federal funds lines, and brokered deposit capacity.

The Bank is a member of the FHLB, which provides short‑ and long‑term funding to its members through advances collateralized by real estate related assets and other select collateral, most typically in the form of debt securities. Actual borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. As of June 30, 2026, the Company did not have any federal funds purchased, and had $345.0 million in short-term borrowings from the FHLB. As of June 30, 2026, the Company had $2.0 billion of collateral pledged to the FHLB and, based on this collateral, the Company was eligible to borrow up to an additional $1.0 billion from the FHLB. In addition, the Company can borrow up to $125.0 million through the unsecured lines of credit the Company has established with five other correspondent banks.

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In addition, because the Bank is “well capitalized,” the Company can accept wholesale deposits up to 20.0% of total assets based on current policy limits, or $1.1 billion, as of June 30, 2026. Management believed that the Company had adequate resources to fund all of the Company’s commitments as of June 30, 2026 and December 31, 2025.

The Company’s primary sources of liquidity include liquid assets, as well as unencumbered securities that can be used to collateralize additional funding.

Though remote, the possibility of a funding crisis exists at all financial institutions. Management has addressed this issue by formulating a liquidity contingency plan, which has been reviewed and approved by both the Bank’s Board of Directors and the ALCO. The plan addresses the actions that the Company would take in response to both a short‑term and long‑term funding crisis.

A short‑term funding crisis would most likely result from a shock to the financial system, either internal or external, which disrupts orderly short‑term funding operations. Such a crisis would likely be temporary in nature and would not involve a change in credit ratings. A long‑term funding crisis would most likely be the result of both external and internal factors and would most likely result in drastic credit deterioration. Management believes that both potential circumstances have been fully addressed through detailed action plans and the establishment of trigger points for monitoring such events.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates. Interest rate risk is the risk to earnings and equity value arising from changes in market interest rates and arises in the normal course of business to the extent that there is a divergence between the amount of interest earning assets and the amount of interest‑bearing liabilities that are prepaid/withdrawn, re‑price, or mature in specified periods. The Company seeks to achieve consistent growth in net interest income and equity while managing volatility arising from shifts in market interest rates. The ALCO oversees market risk management, monitoring risk measures, limits, and policy guidelines for managing the amount of interest rate risk and its effect on net interest income and capital. The Bank’s Board of Directors approves policy limits with respect to interest rate risk.

Interest Rate Risk

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective interest rate risk management begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk position given business activities, management objectives, market expectations and ALCO policy limits and guidelines.

Interest rate risk can come in a variety of forms, including repricing risk, basis risk, yield curve risk and option risk. Repricing risk is the risk of adverse consequences from a change in interest rates that arises because of differences in the timing of when those interest rate changes impact the Company’s assets and liabilities. Basis risk is the risk of adverse consequence resulting from unequal change in the spread between two or more rates for different instruments with the same maturity. Yield curve risk is the risk of adverse consequences resulting from unequal changes in the spread between two or more rates for different maturities for the same or different instruments. Option risk in financial instruments arises from embedded options such as options provided to borrowers to make unscheduled loan prepayments, options provided to debt issuers to exercise call options prior to maturity, and depositor options to make withdrawals and early redemptions.

Management regularly reviews the Company’s exposure to changes in interest rates. Among the factors considered are changes in the mix of interest earning assets and interest‑bearing liabilities, interest rate spreads and repricing periods. The ALCO reviews, on at least a quarterly basis, the interest rate risk position.

The interest‑rate risk position is measured and monitored at the Bank using net interest income simulation models and economic value of equity sensitivity analysis that capture both short‑term and long‑term interest‑rate risk exposure.

Modeling the sensitivity of net interest income and the economic value of equity to changes in market interest rates is highly dependent on numerous assumptions incorporated into the modeling process. The models used for these measurements rely on estimates of the potential impact that changes in interest rates may have on the value and prepayment speeds on all components of the Company’s loan portfolio, investment portfolio, as well as embedded options and cash flows of other assets and liabilities. The balance sheet composition and size are assumed to remain static in the simulation modeling process. The analysis provides a framework as to what the Company’s overall sensitivity position is as of the Company’s most recent reported position and the impact that potential changes in interest rates may have on net interest income and the economic value of the Company’s equity.

Net interest income simulation involves forecasting net interest income under a variety of interest rate scenarios including instantaneous shocks.

The estimated impact on the Company’s net interest income as of June 30, 2026 and December 31, 2025, assuming immediate parallel moves in interest rates, is presented in the table below:

	June 30, 2026						December 31, 2025
	Following			Following			Following			Following
	12 months			24 months			12 months			24 months
+400 basis points		1.0	%		15.7	%		-1.2	%		14.0	%
+300 basis points		0.7	%		11.8	%		-0.7	%		10.7	%
+200 basis points		0.6	%		8.2	%		-0.1	%		7.8	%
+100 basis points		-0.1	%		3.9	%		0.1	%		4.1	%
−100 basis points		0.0	%		-4.5	%		0.6	%		-4.2	%
−200 basis points		1.6	%		-6.5	%		2.0	%		-7.9	%
−300 basis points		5.8	%		-3.3	%		4.2	%		-9.5	%
−400 basis points		6.1	%		-2.7	%		5.4	%		-8.0	%

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Management strategies may impact future reporting periods, as actual results may differ from simulated results due to the timing, magnitude, and frequency of interest rate changes, the difference between actual experience and the characteristics assumed, as well as changes in market conditions. Market-based prepayment speeds are factored into the analysis for loan and securities portfolios. Rate sensitivity for transactional deposit accounts is modeled based on both historical experience and external industry studies.

Management uses an economic value of equity sensitivity analysis to understand the impact of interest rate changes on long‑term cash flows, income, and capital. Economic value of equity is based on discounting the cash flows for all balance sheet instruments under different interest rate scenarios. Deposit premiums are based on external industry studies and utilizing historical experience.

The table below presents the change in the economic value of equity as of June 30, 2026 and December 31, 2025, assuming immediate parallel shifts in interest rates:

	June 30,			December 31,
	2026			2025
+400 basis points		-4.0	%		-5.4	%
+300 basis points		-2.6	%		-3.5	%
+200 basis points		-0.6	%		-1.2	%
+100 basis points		0.1	%		-0.1	%
−100 basis points		-1.1	%		-1.0	%
−200 basis points		-3.5	%		-3.6	%
−300 basis points		-8.5	%		-9.0	%
−400 basis points		-20.8	%		-18.4	%

Operational Risk

Operational risk is the risk of loss due to human behavior, inadequate or failed internal systems and controls, and external influences such as market conditions, fraudulent activities, disasters, and security risks. Management continuously strives to strengthen its system of internal controls, enterprise risk management, operating processes and employee awareness to assess the impact on earnings and capital and to improve the oversight of the Company’s operational risk.

Compliance Risk

Compliance risk represents the risk of regulatory sanctions, reputational impact or financial loss resulting from failure to comply with rules and regulations issued by the various banking agencies and standards of good banking practice. Activities which may expose the Company to compliance risk include, but are not limited to, those dealing with the prevention of money laundering, privacy and data protection, community reinvestment initiatives, fair lending challenges resulting from the expansion of the Company’s banking center network, employment and tax matters.

Strategic and Reputation Risk

Strategic and reputation risk represents the risk of loss due to impairment of reputation, failure to fully develop and execute business plans, failure to assess current and new opportunities in business, markets and products, and any other event not identified in the defined risk types mentioned previously. Mitigation of the various risk elements that represent strategic and/or reputation risk is achieved through initiatives to help management better understand and report on various risks, including those related to the development of new products and business initiatives.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures” (as defined in Rule 13a‑15(e) under the Securities Exchange Act of 1934, or the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, the President and Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective as of that date to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer and its Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in the Company's internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1 – Legal Proceedings

For information regarding litigation, other disputes and regulatory proceedings see the section “Legal Contingencies” in “NOTE 12 Commitments and Contingencies” of the consolidated financial statements.

Item 1A – Risk Factors

There have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K filed with the SEC on March 4, 2026.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Issuer Repurchases of Equity Securities

The following table presents information related to repurchases of shares of the Company’s common stock for each calendar month in the second quarter of 2026:

					Total Number of		Maximum Number of
	Total Number		Average		Shares Purchased as		Shares that May
	of Shares		Price Paid		Part of Publicly		Yet be Purchased
(dollars in thousands, except per share data)	Purchased⁽¹⁾		per Share		Announced Plans		Under the Plan ⁽²⁾
April 1-30, 2026		94,217	$	25.20		94,217		655,783
May 1-31, 2026		122,754		25.45		90,000		565,783
June 1-30, 2026		98,462		29.24		65,783		500,000
Total		315,433	$	26.56		250,000		500,000

(1)	Includes shares of the Company’s common stock purchased by the Company’s Employee Stock Ownership Plan in open market purchases and shares surrendered by employees to the Company to pay withholding taxes on the vesting of restricted stock awards.

(2)

On December 12, 2023, the Board of Directors of the Company approved a stock repurchase program (the “Program”), which authorized the Company to repurchase up to 1,000,000 shares of its common stock, subject to certain limitations and conditions. The Program became effective on February 18, 2024, and replaced a prior stock repurchase program. The Program will expire on February 18, 2027. The Program does not obligate the Company to repurchase any shares of its common stock and there is no assurance that the Company will do so. For the three months ended June 30, 2026, the Company repurchased 250,000 shares of common stock under the Program. Does not include shares that may be purchased by the Company’s Employee Stock Ownership Plan.

Use of Proceeds from Registered Securities

None.

Item 3 – Defaults Upon Senior Securities

None.

Item 4 – Mine Safety Disclosures

Not Applicable.

Item 5 – Other Information

During the fiscal quarter ended June 30, 2026, none of the Company’s directors or executive officers adopted, terminated, or modified any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule10b5-1(c) or any non-Rule 10b5-1 trading arrangement.

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Item 6 – Exhibits


Exhibit No.		Description

3.1		Third Amended and Restated Certificate of Incorporation of Alerus Financial Corporation (incorporated herein by reference to Exhibit 3.1 on Form S-1 filed on August 16, 2019).

3.2		Amendment to Third Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 on Form 8-K filed on May 12, 2025).

3.3		Second Amended and Restated Bylaws of Alerus Financial Corporation (incorporated herein by reference to Exhibit 3.2 on Form S-1 filed on August 16, 2019).

31.1		Chief Executive Officer’s Certifications required by Rule 13(a)‑14(a) – filed herewith.

31.2		Chief Financial Officer’s Certifications required by Rule 13(a)‑14(a) – filed herewith.

32.1		Chief Executive Officer Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – filed herewith.

32.2		Chief Financial Officer Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – filed herewith.

101.INS		iXBRL Instance Document

101.SCH		iXBRL Taxonomy Extension Schema

101.CAL		iXBRL Taxonomy Extension Calculation Linkbase

101.DEF		iXBRL Taxonomy Extension Definition Linkbase

101.LAB		iXBRL Taxonomy Extension Label Linkbase

101.PRE		iXBRL Taxonomy Extension Presentation Linkbase

104		Cover Page Interactive Data File (formatted Inline XBRL and contained in Exhibits 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ALERUS FINANCIAL CORPORATION

Date: August 3, 2026	By:	/s/ Katie A. Lorenson
		Name: Katie A. Lorenson
		Title: President and Chief Executive Officer (Principal Executive Officer)

Date: August 3, 2026	By:	/s/ Alan A. Villalon
		Name: Alan A. Villalon
		Title: Executive Vice President and Chief Financial Officer (Principal Financial Officer)