Alerus Financial Corporation (ALRS): Business Model Canvas [Dec-2025 Updated]

You're trying to map out exactly how Alerus Financial Corporation generates its revenue, and after spending years dissecting these models, I can tell you their structure is defintely worth a close look. They aren't just a traditional bank; they run a diversified Commercial Wealth Bank model that successfully balances lending with high-value, capital-light fee services. Honestly, the proof is in the pudding: with retirement and benefit assets under administration soaring to $44.0 billion and fee income consistently over 40% of total revenue-that's double the industry average-this strategy is clearly paying off. Keep reading below to see how their $4.4 billion deposit base fuels this dual engine across all nine building blocks of their business.

Alerus Financial Corporation (ALRS) - Canvas Business Model: Key Partnerships

When you look at Alerus Financial Corporation's structure, the partnerships aren't just background noise; they are core to how they scale their fee-based businesses, especially Retirement and Benefits. They don't try to do everything themselves, which is smart, given their focus on being a premier commercial wealth bank.

The relationship with the Federal Home Loan Bank of Des Moines (FHLB Des Moines) is a clear example of community development funding leverage. Alerus uses the FHLB Des Moines Member Impact Fund, which offers up to a 3:1 matching grant ratio, to amplify its local giving. For instance, in June 2025, this partnership resulted in a $10,000 grant to Three Rivers Community Action and another $20,000 grant to the Latino Economic Development Center. Since its start in 2023, that Member Impact Fund has awarded nearly $70 million in grants across the district. You can also see the structure in their housing programs, where FHLB Des Moines offers Home$tart grants of $15,000 or $25,000 per household, which Alerus members facilitate.

For the national distribution of Retirement and Benefits, Alerus leans on established networks. They recently expanded their relationship with Osaic Institutions Inc., which supports approximately 11,000 financial professionals. This kind of network is crucial for a national provider. To give you a sense of scale for their wealth operations, as of the third quarter of 2025, Alerus reported assets under administration and management increased by 3.7% linked-quarter, with Wealth Management revenue at $6.6 million for the quarter. They are definitely using these external advisors to push growth, aiming to double their wealth advisors.

The exclusive banking partnership with the National Sports Center (NSC), announced on October 5, 2025, is a strategic marketing and community play. The NSC is a massive draw, hosting events that bring over 4 million visits annually and generating over $70 million in annual visitor economic impact. Being the exclusive bank partner gives Alerus Financial Corporation visibility within that high-traffic environment.

You also have the essential governance partnership with the external auditor. RSM US LLP is central here, having released its Fiscal Year 2025 Impact Report, signaling their ongoing role in assurance. This firm is key for maintaining stakeholder confidence, especially as Alerus focuses on top-tier performance metrics, like achieving an adjusted return on average tangible common equity of 21.0% in Q2 2025. The firm even launched the RSM US Audit Quality Board in 2025.

Finally, the technology vendor relationships are critical for operational efficiency, especially in their fee businesses. Alerus completed a transition to a new wealth management platform in mid-2025, with statements starting in June 2025. This transition was significant enough that it caused fees accrued for April and May 2025 to post in a single transaction in July. Separately, they are upgrading the core digital banking experience, with a new online banking platform and mobile app launching on November 17, 2025. This required a temporary service blackout from November 14 through November 16, 2025, for online banking, mobile banking, and wire transfers.

Here's a quick look at the scale of the entities involved in these key relationships:

The success of these external relationships directly impacts Alerus's reported figures. For instance, the growth in Assets under administration/management by 10.6% year-over-year in Q2 2025 was partly attributed to market performance and the HMNF acquisition, but the underlying infrastructure relies on these distribution and technology partners. The commitment to shareholders, reflected by the Q2 2025 dividend increase of 5.00% over Q1 2025 to $0.21 per share, is supported by the stability these partnerships help create.

You should check the latest proxy statement to confirm the specific engagement terms with RSM US LLP for the full fiscal year 2025 audit, as the 8-K from August 28, 2025, only references the auditor in the context of an executive severance agreement.

Alerus Financial Corporation (ALRS) - Canvas Business Model: Key Activities

You're looking at how Alerus Financial Corporation actually makes money and manages its balance sheet as of late 2025. Honestly, their strategy hinges on keeping those three main revenue engines-banking, wealth, and retirement-running smoothly while integrating past growth moves and keeping a tight leash on credit quality. It's a diversified model, which CEO Katie Lorenson often highlights as their ultimate differentiator.

Commercial and Private Banking lending and deposit-taking

The core banking engine is about growing the loan book and funding it with stable deposits. As of September 30, 2025, Alerus Financial Corporation reported total loans standing at $4.1 billion. Total deposits were slightly higher at $4.4 billion on the same date. This activity generated $43.1 million in net interest income for the third quarter of 2025, with the net interest margin holding steady at 3.50% for that quarter. You can see the recent momentum in the figures from the end of 2024:

The loan-to-deposit ratio, looking back to the first quarter of 2025, was 91.1%. Plus, synergistic deposits within retirement grew by 8.8% over the prior quarter as of March 31, 2025, which is a key funding source.

National Retirement and Benefit plan administration and recordkeeping

This segment provides the stable, fee-based revenue that balances the interest-rate sensitivity of the lending business. Alerus Financial Corporation is definitely active in winning new business here. They won 161 plans in the first quarter of 2025 alone. The revenue stream here is tied to assets, so market performance matters, but the underlying activity is steady administration.

• Retirement and Benefit Services revenue increased 2.9% from Q1 2024 to Q1 2025.
• Assets under administration/management (AUA/AUM) decreased 2.0% from December 31, 2024, as of March 31, 2025.

Full fiduciary Wealth Management and advising services

For wealth management, the activity centers on growing assets under management (AUM) and generating advisory fees. They saw wealth revenue increase by $0.8 million, or 12.9%, when comparing the first quarter of 2025 to the first quarter of 2024. This growth was fueled by new client acquisition and a 6.1% increase in AUA/M over that same year-over-year period. To be fair, quarter-over-quarter, end-of-quarter assets under management decreased 1.7% in Q1 2025, mostly due to market performance.

Strategic acquisitions and integration (e.g., Home Federal franchise)

A key activity has been the successful integration of past deals, with the Home Federal franchise being the most recent large bank acquisition. This was Alerus Financial Corporation's twenty-sixth acquisition since 2000. The all-stock transaction for HMN Financial was valued at approximately $128.8 million as of closing in October 2024. The integration immediately boosted the combined entity's scale:

• Total Assets: Approximately $5.5 billion post-merger.
• Total Loans: Approximately $3.8 billion post-merger.
• Total Deposits: Approximately $4.3 billion post-merger.
• Assets Under Administration and Management (AUA/M): Approximately $43.6 billion post-merger.

The plan involved a conversion to Alerus systems expected in the back half of 2024 or early 2025, which is a major integration activity for the current operating model.

Proactive risk management and credit discipline

Managing the credit quality of the loan portfolio is a constant activity, especially following acquisitions. Alerus Financial Corporation reported strong asset quality metrics in the second quarter of 2025. They achieved adjusted net charge-offs to average loans of just 0.07% in Q2 2025, which was supported by net recoveries of $1.7 million, resulting in a negative net charge-off ratio of -0.17% for that quarter. Nonperforming assets (NPAs) stood at $51.0 million as of March 31, 2025, representing an NPA ratio to total assets of 96 basis points, down 24 basis points from the prior quarter. The allowance for credit losses was set at 1.52% of total loans as of March 31, 2025.

Alerus Financial Corporation (ALRS) - Canvas Business Model: Key Resources

You're looking at the core assets that power Alerus Financial Corporation's diversified model. These aren't just line items; they are the engine for their banking, wealth, and retirement services.

The balance sheet strength provides the foundation for their lending and client services. As of the third quarter of 2025, the loan book and deposit base show sequential growth, which is key for a relationship-focused bank. The sheer scale of the off-balance sheet assets in the retirement segment is a massive, recurring revenue driver, which is a major advantage in this environment.

Here's a quick look at the primary financial anchors as of September 30, 2025:

The capital position is definitely strong, which gives Alerus Financial Corporation room to maneuver, even if economic conditions get choppy. The Tangible Common Equity ratio stood at 8.24% as of September 30, 2025, showing solid backing for their assets. That 10.8% CET1 ratio signals a conservative approach to risk management, which is what clients want to see when entrusting you with their money.

Beyond the numbers on the balance sheet, the human capital-the specialized teams-is what translates those assets into client success and fee income. Alerus Financial Corporation has focused on recruiting industry veterans to drive growth in their commercial banking verticals. This isn't just about having staff; it's about having deep expertise where it counts.

The specialized teams include:

• Industry veteran teams in commercial banking.
• Professionals with decades of experience in commercial and industrial (C&I) lending.
• Dedicated experts added to the equipment finance division, bringing over 20 years of experience each.
• Senior commercial real estate lending professionals with deep local market knowledge in key growth areas like Arizona.

These teams are embedded to enhance client relationships and drive organic growth across the banking segment. Finance: draft 13-week cash view by Friday.

Alerus Financial Corporation (ALRS) - Canvas Business Model: Value Propositions

You're looking at what Alerus Financial Corporation actually offers its clients and the market, which is really about stability through structure. The core value is built around its Diversified Commercial Wealth Bank model, which is designed for economic resilience. This isn't just a simple bank; it's a structure meant to weather different economic cycles by balancing lending with significant fee-based services.

One of the most compelling value points is the revenue mix. Alerus Financial Corporation consistently delivers a high proportion of revenue from fees, which is less sensitive to interest rate swings than pure lending income. For the third quarter of 2025, fee income hit $29.4 million. That figure represented 40.6% of total revenues for the quarter. This level of noninterest income is explicitly positioned as being over double the banking industry average, which was cited around 19% in the second quarter of 2025. That's a defintely strong differentiator.

The firm emphasizes its integrated One Alerus approach, which drives deeper, more comprehensive client relationships. This isn't just a buzzword; you see it in the numbers related to commercial clients. For instance, over 70% of their commercial deposits now come with a treasury management relationship attached. This shows they are successfully cross-selling services beyond basic deposits, locking in the client across multiple product lines.

A significant part of that integrated offering is the provision of full fiduciary wealth management and advising for clients. While transactional revenues like brokerage commissions can fluctuate, the underlying asset base shows growth. End of quarter assets under management in the Wealth Management business increased by 4.3% on a linked-quarter basis in Q3 2025, primarily due to market performance. This indicates clients are entrusting Alerus Financial Corporation with more assets to manage and advise upon.

Finally, the balance sheet structure itself is a value proposition, signaling safety and capacity for growth. They maintain a strong balance sheet, evidenced by a disciplined approach to funding. As of September 30, 2025, the loan-to-deposit ratio stood at 93.0%. This ratio, based on total loans of $4.1 billion and total deposits of $4.4 billion at that date, shows they are utilizing their deposit base effectively for lending without becoming overly reliant on wholesale funding.

Here's a quick look at the key Q3 2025 financial metrics supporting these value propositions:

The combination of a high-fee component, deep client relationships, and a well-managed balance sheet forms the bedrock of what Alerus Financial Corporation offers.

Alerus Financial Corporation (ALRS) - Canvas Business Model: Customer Relationships

Relationship-driven commercial and private banking service.

Alerus Financial Corporation continues to execute its One Alerus strategy, focusing on growing the franchise through full relationships that span commercial banking, treasury management, private banking, and wealth management. Growth in the banking segment was primarily driven by continued expansion to full commercial relationships. As of the third quarter of 2025, over 70% of Alerus Financial Corporation's commercial deposits now have a treasury management relationship with the firm. Commercial loans made up over 70% of total loans as of the first quarter of 2025. The loan-to-deposit ratio remained stable at 93% in the third quarter of 2025. The firm is focused on deepening client relationships and expanding in growth markets. Since the close of the Home Federal acquisition, the net retention rate has remained strong, close to 97% as of the second quarter of 2025 and over 97% as of the third quarter of 2025.

The depth of the relationship focus is evident in the integration of services:

• The firm is targeting a full C&I relationship Return on Equity (ROE) over 12% in banking.
• Average deposit account size has grown over 20% since the end of 2019 due to focused efforts to grow in the commercial space.

The synergistic deposit growth derived from retirement relationships provides exceptionally stable funding with no related branch or client service costs.

Dedicated financial advisors for wealth management clients are supported by platform enhancements aimed at better service delivery. Alerus Financial Corporation is investing in talent and technology to deepen client relationships, with a long-term goal of doubling the number of wealth advisers. Wealth revenue showed strong year-over-year growth, increasing 15.8% in the second quarter of 2025 compared to the second quarter of 2024. This growth was primarily driven by a 10.6% increase in assets under administration/management during that same period. As of September 30, 2025, total wealth management assets under administration/management stood at $4.8 billion.

The firm's overall retirement and benefit services segment also reflects deep client relationships, with assets under administration/management reaching $44.0 billion at September 30, 2025. The growth in HSA deposits, which carry a low cost of funds around 10 basis points, is a direct result of deepening these retirement relationships. The firm's fee income remains resilient, at over 40% of total revenues as of the third quarter of 2025, which is more than double the banking industry average.

High-touch, proactive outreach is implied through the focus on full relationships and client retention, especially given the context of market dynamics. The firm's focus on relationship-driven commercial banking and its integrated model helps maintain client loyalty, as shown by the strong net retention rate post-acquisition.

• Wealth Management AUM increased 4.3% sequentially in Q3 2025 due to market performance.
• Retirement and benefit services AUM increased 3.7% sequentially in Q3 2025.
• The firm's adjusted efficiency ratio improved to 62.4% in the second quarter of 2025.

The firm is committed to delivering a better experience for both clients and financial advisors, evidenced by the transition to a new wealth management platform during the second quarter of 2025.

Alerus Financial Corporation (ALRS) - Canvas Business Model: Channels

Alerus Financial Corporation uses a multi-channel approach to reach its diverse client base, blending a physical footprint with a national digital and service-based reach. The company emphasizes providing a primary point of contact tailored to the client's delivery channel preference.

The physical presence for banking and commercial wealth services is concentrated across a network of 29 banking and commercial wealth offices. This network spans five key states, including North Dakota (ND), Minnesota (MN), Arizona (AZ), Iowa (IA), and Wisconsin (WI). A significant recent development was the opening of a new 25,000 square foot, two-story office in Fargo, North Dakota, in 2025, designed to house approximately 90 client-facing and support employees.

For the Retirement and Benefit services segment, Alerus Financial Corporation utilizes a national sales force structure, serving advisors, brokers, employers, and plan participants across all 50 states. This national reach positions Alerus as the 25th largest retirement business in the country.

Digital channels are integral, supported by platforms that deliver competitive products and advice. The company completed a significant digital banking upgrade for personal clients in July 2025, rolling out a new online and mobile banking platform. The scale of the digital platform is evidenced by HSA deposits reaching over $202 million as of the third quarter of 2025.

Here is a breakdown of the channel distribution as of late 2025:

The service delivery model is designed to be comprehensive, integrating physical and digital touchpoints:

• Client interaction prioritizes the preferred delivery channel.
• Wealth Management revenue was 13% higher than a year ago in Q1 2025.
• The company plans to double its wealth advisors over the next several years.
• Retirement business revenue increased sequentially by 2.9% in Q3 2025.

Finance: draft 13-week cash view by Friday.

Alerus Financial Corporation (ALRS) - Canvas Business Model: Customer Segments

You're looking at the core groups Alerus Financial Corporation serves to drive its uniquely diversified revenue, which relies heavily on fee income from its non-banking segments. Here's the quick math on the scale of these customer bases as of late 2025, based on third quarter figures.

Alerus Financial Corporation serves four primary customer segments, which is key to its business model that generates fee income at a rate over 40% of total revenues, more than double the banking industry average as of the third quarter of 2025.

Mid-market Commercial and Industrial (C&I) businesses.

This group is a primary driver of the loan portfolio. Total loans for Alerus Financial Corporation stood at $4.1 billion as of September 30, 2025. The loan growth in the third quarter was specifically led by multifamily real estate, C&I, and residential real estate. Management continues to focus on deepening full relationships within the middle market space.

Business Banking clients and owner-occupied Commercial Real Estate (CRE).

The focus here is on capturing the entire client relationship. Loan growth in the third quarter of 2025 included advances in owner-occupied CRE. A key indicator of deep engagement is deposit behavior; as of the third quarter of 2025, over 70% of Alerus Financial Corporation's commercial deposits were linked to a treasury management relationship. Total deposits were $4.4 billion at the end of Q3 2025.

Private Banking clients and high-net-worth individuals.

This segment is served through the Wealth Advisory Services division. Assets under administration/management for this group reached $4.8 billion in the third quarter of 2025. Revenues from Wealth Management were $6.6 million for the third quarter of 2025. Assets under management saw an increase of 4.3% sequentially.

National Retirement Plan Sponsors and their participants.

Alerus Financial Corporation is recognized as the 25th largest provider nationally in the retirement business. Assets under administration for the retirement and benefit services grew to $42.45 billion as of the second quarter of 2025. Revenue from this business was $16.5 million in the third quarter of 2025, marking a 2.9% sequential rise. This segment provides a stable and reliable source of fee income that is not capital-intensive.

• Focus remains on organically growing revenues by deepening client relationships.
• The company is actively looking to expand in retirement and HSA businesses via potential acquisitions.
• HSA deposits specifically rose to over $202 million in Q3 2025.

Finance: draft 13-week cash view by Friday.

Alerus Financial Corporation (ALRS) - Canvas Business Model: Cost Structure

You're looking closely at where Alerus Financial Corporation is spending its money to deliver its value proposition. The cost structure is heavily influenced by its banking operations, the national retirement plan platform, and the integration following the HMNF deal.

The core non-interest expenses for Alerus Financial Corporation are running right around the guidance you mentioned. For the third quarter of 2025, total noninterest expense was reported at $50.5 million. This figure was an increase of $2.1 million, or 4.3%, from the second quarter of 2025.

The drivers for that quarterly expense increase included several key areas:

• Compensation expense.
• Software and technology expense.
• Intangible amortization expense.
• Business services.
• Occupancy and equipment expense.

Regarding technology expenses for new platform conversions and upgrades, the search results confirm that 'software and technology expense' was a primary driver in the increase of noninterest expense for the third quarter of 2025 compared to the third quarter of 2024. Specific dollar amounts for this line item alone weren't broken out in the immediate summaries, so we look at the overall efficiency to gauge cost control.

For personnel expenses for specialized talent acquisition and retention, the discussion around the Q3 2025 results noted that compensation expense was a factor in the year-over-year increase in noninterest expense. Furthermore, analysts inquired about talent acquisition in disrupted markets during the Q&A session, suggesting this is an active cost area.

Acquisition-related costs, including intangible amortization from the HMNF deal, are a visible component. The increase in noninterest expense for Q3 2025 over Q3 2024 was partly driven by intangible amortization expense. Looking at the impact from the acquisition accounting, Alerus Financial Corporation expects around 40 basis points of purchase account accretion for the full year 2025.

Operational effectiveness is measured by the efficiency ratio, which shows how well Alerus Financial Corporation is managing these costs relative to its revenue. The company has a stated goal for the full fiscal year 2025:

The adjusted efficiency ratio target is below 68% for fiscal year 2025. The actual performance demonstrates they are tracking well against this target, especially after the HMNF integration:

The Q2 2025 result of 62.4% was an improvement of 8.4 percentage points year-over-year. To be fair, the Q1 2025 ratio was 66.9%, which was an improvement from 69.0% in the fourth quarter of 2024. Finance: draft 13-week cash view by Friday.

Alerus Financial Corporation (ALRS) - Canvas Business Model: Revenue Streams

The revenue streams for Alerus Financial Corporation as of late 2025 are built upon a diversified model balancing traditional lending with fee-based services, providing resilience across economic cycles.

The primary sources of revenue are clearly segmented between Net Interest Income and Noninterest Income (Fee Income). For the third quarter of 2025, the total revenue was reported at approximately $72.5 million.

The Fee Income component is heavily supported by the capital-light Retirement and Wealth Management businesses, which is a key differentiator for Alerus Financial Corporation.

Here's a closer look at the fee-based revenue drivers as of September 30, 2025:

• Retirement and Benefit Services Assets Under Administration/Management (AUM): $44.0 billion.
• Wealth Management Assets Under Administration/Management (AUM): $4.8 billion.

Breaking down the noninterest income contribution from these specialized areas in Q3 2025:

• Retirement and Benefit Services noninterest income: $16.2 million.
• Wealth Advisory Services asset management fees: $5.6 million.
• Wealth Management revenue on a linked-quarter basis: $6.6 million.
• Total revenue from the Retirement business (including asset-based and recordkeeping fees): $16.5 million over the prior quarter.

The remaining portion of the Fee Income, which includes Mortgage banking and equipment finance revenues alongside service charges on deposit accounts and interchange income, is derived from the commercial wealth bank activities. The total Noninterest Income for the quarter was $29.430 million.

You can see the relationship between the core banking and fee income streams in the table below:

Finance: draft 13-week cash view by Friday.