DEF 14A of Alerus Financial Corp
Filed Mar 25, 2024 · FY20230001558370-24-003818
What happens if a director nominee is unable to stand for election?
What happens if a director nominee is unable to stand for election? The Board may, by resolution, provide for a lesser number of directors or designate a substitute nominee. In the latter case, shares represented by proxies may be voted for a substitute nominee. You cannot vote for more than eight director nominees. The Board has no reason to believe any nominee will be unable to stand for election.
Where do I find the voting results of the meeting?
| The Board, acting upon the recommendation of the Nominating and Corporate Governance Committee, has nominated the following eight director nominees for election at the Annual Meeting, each to hold office for a one-year term expiring at the annual meeting of stockholders in 2024 or until a successor is elected and qualified: Daniel E. Coughlin, Katie A. Lorenson, Randy L. Newman, Janet O. Estep, Galen G. Vetter, Mary E. Zimmer, John Uribe and Nikki L. Sorum. All of the director nominees are currently serving on the Board. Kevin D. Lemke, a director since 1994, has made the decision not to stand for reelection, and to step down from his board position effective as of the date of the Annual Meeting. Mr. Lemke’s decision not to stand for reelection did not result from a disagreement with the Company on any matter relating the Company’s operations, policies or practices. Additionally, on February 14, 2024, Michael S. Mathews, a director since 2019, stepped down from his Board position. Mr. Mathews informed the Company that his decision to resign was to avoid any appearance of a conflict of interest given his new role at an investment banking organization owned by a regional banking organization. | Accordingly, the Board did not nominate Mr. Lemke or Mr. Mathews for election at the Annual Meeting. As a result, Mr. Mathews directorship ended on February 14, 2024 and Mr. Lemke’s directorship will end at the Annual Meeting. We thank them both for their service. The Board also decreased the size of the Board to eight members effective at the Annual Meeting. Proxies cannot be voted for more than eight director nominees. All of the director nominees have consented to serve. If for any reason any nominee becomes unavailable for election, the Board may designate a substitute nominee, in which event the shares represented by proxies properly returned to the Company will be voted for the substitute nominee, unless an instruction to the contrary is indicated on the proxy card. The eight individuals receiving the highest number of votes cast “FOR” their election will be elected as directors of the Company. In an uncontested election, all director nominees will be elected if they receive at least one vote “FOR” their election. Abstentions and broker non-votes, if any, will not affect the outcome of the election. |
Nominees
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| Daniel E. Coughlin Director, Executive Chairman | | | Age: 61 Director since: 2016 Committees: ◾ Compensation ◾ Audit | Mr. Coughlin, a director of the Company since 2016, served as the Managing Director and Co-Head of the Financial Services Practice at Raymond James & Associates from 2011 until his retirement in 2014. ■ Beginning in 2001, Mr. Coughlin served as Chairman and CEO of Howe Barnes Hoefer & Arnett prior to its 2011 merger with Raymond James and served eight additional years with Howe Barnes Hoefer & Arnett in various capacities. ■ Mr. Coughlin also spent seven years with the Federal Reserve Bank of Chicago, where he assessed the competitive implications of bank mergers and acquisitions. ■ As an industry veteran with over 40 years of financial services experience, Mr. Coughlin has knowledge and experience in areas such as strategic planning, risk management, mergers, and acquisitions, and capital formation. |
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| Katie A. Lorenson Director, President and Chief Executive Officer | | | Age: 43 Director since: 2021 | Ms. Lorenson serves as the President and Chief Executive Officer of the Company after being named to those positions in 2021. Ms. Lorenson joined the Company as Executive Vice President and Chief Financial Officer in December 2017 and assumed leadership over the Company’s retirement, wealth management, mortgage and banking product areas in 2020. ■ Ms. Lorenson is a seasoned executive with extensive experience overseeing financial service organizations and product and services management, most recently serving as Chief Financial Officer at MidWestOne Financial Group, Inc. ■ Ms. Lorenson previously served as Chief Financial Officer for Central Bancshares, Inc. which was acquired by MidWestOne Financial Group, Inc. in 2015. Prior to these roles, Ms. Lorenson served as Manager on the Financial Institutions Team for RSM (formerly, McGladrey & Pullen). |
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| 2024 Proxy Statement | 8 |
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| Randy L. Newman Director | | | Age: 70 Director since: 1988 Committees: ◾ Risk (chair) | Mr. Newman, a director of the Company since 1995, joined the Company, formerly First National Bank of North Dakota in 1981, and became its President in 1987 and its Chief Executive Officer in 1995. He served in those roles until he retired on December 31, 2021. ■ Prior to joining the Company, Mr. Newman taught Corporate Finance and Business Strategy courses at the University of North Dakota. He was a director of the Federal Home Loan Bank of Des Moines from 1997 to 2007. ■ Mr. Newman served as a Class A Director of the Federal Reserve Bank of Minneapolis from 2012 to 2018. ■ Mr. Newman received his BSBA in 1975 and his MBA in 1979 from the University of North Dakota. |
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| Janet O. Estep Director | | | Age: 67 Director since: 2021 Committees: ◾ Governance Committee (chair) ◾ Risk Other public boards: ◾ ACI Worldwide | Ms. Estep, a director of the Company since October 2021, is the former Chief Executive Officer and President of Nacha, the governing body for the US ACH payment network, a position she held since 2008. ■ Ms. Estep is an accomplished executive with extensive knowledge of digital technology, electronic payments, strategic planning, mergers and acquisitions, product development and sales, marketing, and risk management. ■ Before joining Nacha, Ms. Estep served as Executive Vice President of U.S. Bank’s Transaction Services Division. Ms. Estep previously led the sales and marketing teams of Pace Analytical and was general manager of its major environmental lab location. ■ Before Pace Analytical, Ms. Estep developed extensive technology knowledge through many field and headquarters positions with IBM, managing sales teams and product development for both hardware and software. ■ Ms. Estep received a B.A. in Economics and Psychology from St. Olaf College and currently serves on the board of ACI Worldwide, a global payments software provider, also serving on its Nominating and Governance and its Audit/Risk Committees. |
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| 2024 Proxy Statement | 9 |
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| Galen G. Vetter Director | | | Age: 72 Director since: 2013 Committees: ◾ Audit (chair) ◾ Nominating and Corporate Governance | Mr. Vetter has served as a director of the Company since 2013. Mr. Vetter has varied and broad board of director experience, having served on over a dozen boards over the past three decades. ■ Mr. Vetter is a retired CPA with an extensive background, including executive-level positions at Franklin Templeton Investments and RSM. ■ Mr. Vetter’s roles at RSM included Partner In-Charge of the Upper Midwest Region and National Executive Partner, with leadership responsibilities for financial management, information technology, and development of professional services industry practices. ■ As CFO and Senior Vice President at Franklin Templeton, Mr. Vetter’s responsibilities included oversight of accounting, financial compliance, and filings in dozens of counties for the funds. ■ Mr. Vetter holds a Bachelor of Science degree with an accounting emphasis from the University of Northern Iowa. |
Nominees
| Mary E. Zimmer Director | | | Age: 61 Director since: 2021 Committees: ◾ Audit ◾ Compensation (chair) | Ms. Zimmer, a director of the Company since October 2021, is the former Regional President for Wells Fargo Advisors’, or WFA, wealth management business. She brings more than 35 years of experience in financial services with an extensive background in wealth management, capital markets, strategic planning, client segmentation, and product development. ■ In her role as Regional President of WFA, Ms. Zimmer led the Northern Region covering ten states across the Midwest and Northwest. Ms. Zimmer later launched and led WFA’s Diverse Client Segments team. ■ Prior to WFA, Ms. Zimmer held leadership roles at Royal Bank of Canada U.S. Wealth Management, including Head of International Wealth USA, Head of Wealth Management Services, and Chief Operating Officer/Chief Administrative Officer. ■ Before beginning her wealth management career, Ms. Zimmer worked in public accounting as a licensed CPA at Arthur Young, now Ernst & Young. ■ Ms. Zimmer received her B.A. in Business and Accounting at the University of Saint Thomas and her M.B.T. in Business Taxation at the University of Minnesota – Carlson School of Management. |
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| 2024 Proxy Statement | 10 |
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| John Uribe Director | | | Age: 56 Director since: 2023 Committees: ◾ Audit ◾ Risk | Mr. Uribe, a director of the Company since December 2023, is the current Chief Financial Officer at Blue Cross and Blue Shield of Minnesota, a position he has held since 2022. Mr. Uribe brings more than 30 years of financial and strategic leadership experience with expertise in mergers and acquisitions, financial planning and analysis, and general management. ■ Prior to his appointment as Chief Financial Officer at Blue Cross and Blue Shield of Minnesota, Mr. Uribe served as Vice President of Corporate Development and Interim Treasurer since 2012. Before joining Blue Cross, Mr. Uribe served in various finance leadership roles at RedBrick Health, GE Commercial Finance-Fleet Services, General Mills, and NCR Corporation. ■ Mr. Uribe is a board member for organizations including the Bakken Museum, and the Latino Economic Development Center ■ Mr. Uribe holds a bachelor’s degree in accounting and an MBA in finance and international business from Indiana University Bloomington. | | Nikki L. Sorum Director | | | Age: 62 Director since: 2023 Committees: ◾ Nominating and Corporate Governance ◾ Compensation | Ms. Sorum, a director of the Company since December 2023, is the former Head of Sales and Distribution at Thrivent Advisors, a position she held from 2020 until 2023. Ms. Sorum brings 40 years of experience as a leader in the financial services industry. ■ Prior to her time at Thrivent, Ms. Sorum served in Senior Vice President roles at RBC Wealth Management and was a partner at McKinsey & Co. ■ Ms. Sorum holds a bachelor’s degree in economics from the University of Minnesota Twin Cities and an MBA from Harvard Business School. |
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BOARD DIVERSITY Nasdaq Listing Rule 5605(f) (the “Diverse Board Representation Rule”) requires Nasdaq-listed companies, subject to certain exceptions, (1) to have at least one director who self-identifies as a female, and (2) to have at least one director who self-identifies as Black or African American, Hispanic or Latinx, Asian, Native American or Alaskan Native, Native Hawaiian or Pacific Islander, two or more races or ethnicities, or as LGBTQ+, or (3) to explain why the reporting company does not have at least two directors on its board who self-identify in the categories listed above. We are not required to fully comply with the Diverse Board Representation Rule until 2025. In addition, Nasdaq Listing Rule 5606 (the “Board Diversity Disclosure Rule”) requires each Nasdaq-listed company, subject to certain exceptions, to provide statistical information about such company’s Board of Directors, in a uniform format, related to each director’s self-identified gender, race and self-identification as LGTBQ+.
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| 2024 Proxy Statement | 11 |
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In the matrices below, we have provided the statistical information required by the Board Diversity Disclosure Rule as of March 25, 2024 and March 25, 2023.
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| BOARD DIVERSITY MATRIX (AS OF MARCH 25, 2024) | | | | | | Total number of directors | 9 | | | | | Gender | Male | Female | Non-Binary | Undisclosed | | Number of directors based on gender identity | 5* | 4 | — | — | | Number of directors who identify in any of the categories below: | | | | | | African American or Black | — | — | — | — | | Alaskan Native or American Indian | — | — | — | — | | Asian | — | — | — | — | | Hispanic or Latinx | 1 | — | — | — | | Native Hawaiian or Pacific Islander | — | — | — | — | | White | 4 | 4 | — | — | | Two or more races or ethnicities | — | — | — | — | | LGBTQ+ | — | — | — | — | | Undisclosed | — | — | — | — |
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*Mr. Lemke has made the decision not to stand for reelection, and to step down from his board position effective as of the date of the Annual Meeting.
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| BOARD DIVERSITY MATRIX (AS OF MARCH 25, 2023) | | | | | | Total number of directors | 8 | | | | | Gender | Male | Female | Non-Binary | Undisclosed | | Number of directors based on gender identity | 5 | 3 | — | — | | Number of directors who identify in any of the categories below: | | | | | | African American or Black | — | — | — | — | | Alaskan Native or American Indian | — | — | — | — | | Asian | — | — | — | — | | Hispanic or Latinx | — | — | — | — | | Native Hawaiian or Pacific Islander | — | — | — | — | | White | 5 | 3 | — | — | | Two or more races or ethnicities | — | — | — | — | | LGBTQ+ | | | | | | Undisclosed | — | — | — | — |
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| 2024 Proxy Statement | 12 |
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Corporate Governance and The Board of Directors We currently have nine directors serving on our Board, a majority of whom we have determined to be “independent,” as that term is defined by Nasdaq. Our Board has evaluated the independence of its members based upon the rules of Nasdaq and the SEC. Applying these standards and based on information provided by each director concerning his or her background, employment and affiliations, our Board has affirmatively determined that, with the exception of Ms. Lorenson and Mr. Newman, each of our current directors is an independent director, as defined under the applicable rules. The Board determined that Ms. Lorenson does not qualify as an independent director because she is an executive officer of the Company and the Bank, and that Mr. Newman does not qualify as an independent director because he was an executive officer of the Company and the Bank within the past three years. Generally, the Board oversees our business and monitors the performance of our management. In accordance with our corporate governance procedures, the Board does not involve itself in the day-to-day operations of the Company, which are monitored by our executive officers and management. Our directors fulfill their duties and responsibilities by attending regular meetings of the full Board, with additional special meetings held from time to time. Our directors also discuss business and other matters with Ms. Lorenson, other key executives and our principal external advisers (legal counsel, auditors and other consultants) at times other than regularly scheduled meetings when appropriate. Our Board has established standing committees in connection with the discharge of its responsibilities. These committees include the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Risk Committee. Our Board also may establish such other committees as it deems appropriate, in accordance with applicable laws and regulations, our Certificate of Incorporation and Bylaws. The current charters of the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Risk Committee are available on the Company’s website at investors.alerus.com under the “Corporate Governance – Governance Documents” heading. BOARD AND COMMITTEE MEETINGS During the fiscal year ended December 31, 2023, the Board held four regular meetings and no special meetings. During 2023, all directors attended at least 75 percent of the aggregate of the total number of meetings of the Board and the total number of meetings held by the committees on which they served. In 2024, the full Board intends to meet at least four times with special meetings held from time to time when necessary and through committee membership, which is discussed below. Although we do not have a formal policy regarding director attendance at the Annual Meeting, we encourage and expect all of our directors to attend. In 2023, all of the directors serving at that time were present at the Annual Meeting. The Board also regularly holds executive sessions of the independent (non-management) members of the Board, without inside directors or executive management present. Our independent Executive Chairman, Mr. Coughlin serves as Chairman at these executive sessions. The Chairman is responsible for coordinating with the Chief Executive Officer to set the agenda for Board meetings and advising the Chief Executive Officer on various Board matters. COMMITTEE STRUCTURE The Board exercises certain of its powers through the following committees: Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee, and Risk Committee. Each committee has a charter that addresses its purpose, authority, and responsibilities and contains other provisions relating to membership and meeting requirements. As required by its charter, each committee annually reviews and assesses its charter, but may recommend amendments at any time. In addition, each charter requires the committee to annually review its performance. Each committee has the authority to engage outside advisors to the extent it considers appropriate to assist the committee in its work. Each committee is comprised of non-employee directors only, and each non-employee director, other than Mr. Newman sits on at least two committees. Each committee chair reports to the full Board on the matters undertaken at each committee meeting.
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| 2024 Proxy Statement | 13 |
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The following table summarizes the current membership of each of the committees of the Board:
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| | | | NOMINATING AND | | | | | | CORPORATE | | | | AUDIT | COMPENSATION | GOVERNANCE | RISK | | DIRECTOR NAME | COMMITTEE | COMMITTEE | COMMITTEE | COMMITTEE | | Daniel E. Coughlin | X | X | | | | Galen G. Vetter | Chair | | X | | | Janet O. Estep | | | Chair | X | | Kevin D. Lemke(1) | X | | X | | | Mary E. Zimmer | X | Chair | | | | Randy L. Newman | | | | Chair | | John Uribe | X | | | X | | Nikki L. Sorum | | X | X | |
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| (1) Mr. Lemke will step down from his board position effective as of the Annual Meeting, and will therefore no longer serve on the Audit Committee or the Nominating and Corporate Governance Committee following the Annual Meeting. |
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The following is a summary of the functions of each committee:
Risk Committee
| | FEES EARNED | | | | | OR | | | | | PAID IN | STOCK | | | NAME | CASH(2) | AWARDS(3) | Total | | Kevin D. Lemke | $44,000 | $35,000 | $79,000 | | Nikki L. Sorum | 14,583 | 14,583 | 29,166 | | Randy L. Newman | 46,000 | 35,000 | 81,000 | | John Uribe(1) | 14,583 | 14,583 | 29,166 | | Galen G. Vetter | 54,000 | 35,000 | 89,000 | | Daniel E. Coughlin | 72,875 | 35,000 | 107,875 | | Michael S. Mathews | 45,000 | 35,000 | 80,000 | | Mary E. Zimmer | 50,625 | 35,000 | 85,625 | | Janet O. Estep | 53,000 | 35,000 | 88,000 |
Risk Committee
| (3) The stock awards were granted under the Company’s 2019 Equity Incentive Plan. Mr. Uribe and Ms. Sorum received prorated stock grants as a result of their appointment to the Board in December 2023. |
Risk Committee
EXECUTIVE OFFICERS The business and banking background and experience of each of our executive officers, other than Ms. Lorenson, who also serves as a director and whose background and experience are set forth above, for at least the past five years is set forth below. No executive officer has any family relationship, as defined in Item 401 of Regulation S-K, with any other executive officer or any of our current directors. There are no arrangements or understandings between any of the officers and any other person pursuant to which he or she was selected as an officer.
Risk Committee
| Alan A. Villalon Executive Vice President and Chief Financial Officer | | | Age: 50 2 years with Alerus | Mr. Villalon joined the Company as Executive Vice President and Chief Financial Officer in January 2022. He has over 25 years of industry experience, including a distinct background in financial analysis and investor relations. ■ Mr. Villalon most recently served as Deputy Director of Investor Relations and Senior Vice President at U.S. Bank, a position he held since 2020. ■ Prior to U.S. Bank, Mr. Villalon spent most of his career in equity analyst research roles, including serving as a Senior Research Analyst at Nuveen Asset Management/First American Funds Advisors. ■ Mr. Villalon holds a Bachelor’s degree in accounting from the University of Notre Dame and a Master’s degree in business administration from Carnegie Mellon University. |
Risk Committee
| 2024 Proxy Statement | 19 |
Risk Committee
| Jim R. Collins Executive Vice President and Chief Banking and Revenue Officer | | | Age: 52 2 years with Alerus | Mr. Collins serves as Executive Vice President and Chief Banking and Revenue Officer, a position he has occupied since May 2022, overseeing our Company’s revenue-related functions including sales and business development, client segmentation, and client servicing. Mr. Collins has more than 30 years of commercial banking experience. ■ Before joining the Company, Mr. Collins served as the Minnesota regional Chief Executive Officer and President of corporate banking for Old National Bank. ■ Mr. Collins’ past experience includes various leadership roles for Anchor Bank over 13 years, including Senior Vice President of Commercial, Community and Wealth when the Anchor Bank was acquired by Old National Bank in 2017. | | Forrest R. Wilson Executive Vice President and Chief Retirement Services Officer | | | Age: 54 Started with Alerus on February 26, 2024 | Mr. Wilson joined Alerus as Executive Vice President and Chief Retirement Services Officer in February 2024. In this role, he is responsible for the overall leadership and direction of Alerus’s retirement and benefits division, which serves third-party advisors, plan sponsors, and participants nationwide. Additionally, he ensures all client-related areas are aligned with Alerus’ client-centric, holistic, and collaborative approach to client service, focusing on the needs of Alerus’ third-party advisors, plan sponsors, and participants. ■ Mr. Wilson is a well-rounded retirement industry professional with over 25 years of experience on both the platform/recordkeeping and investment sides of the business. He has extensive knowledge in sales and distribution growth, product oversight and strategy, acquisitions, digital engagement, implementation, and service delivery, and has experience with all types of defined contribution plans. ■ Before joining the Company, he served as Senior Vice President of Retirement Plans Sales and Distribution at Ameritas Mutual Holding Company, where he was accountable for all aspects of the business strategy, including several successful acquisitions, while consistently delivering strong results. ■ Mr. Wilson holds a bachelor’s degree in marketing from Central Connecticut State University and an MBA in finance and marketing from New York University Stern School of Business. | | Karin M. Taylor Executive Vice President and Chief Risk and Operating Officer | | | Age: 56 6 years with Alerus | Ms. Taylor joined the Company as Executive Vice President and Chief Risk and Operating Officer in November 2018. Ms. Taylor has more than 30 years of industry experience, including in the area of risk management. ■ Ms. Taylor most recently served as Chief Risk Officer at MidWestOne Bank and, prior thereto, as Chief Risk Officer for Central Bank, which was acquired by MidWestOne Financial Group, Inc. in 2015. ■ Prior to these roles, Ms. Taylor served as the Director of Risk Management Consulting at RSM (formerly, RSM McGladrey). ■ Ms. Taylor received a Bachelor of Arts degree from St. Olaf College and graduated with honors from the Graduate School of Banking at the University of Colorado, Boulder in 2018. |
Risk Committee
| 2024 Proxy Statement | 20 |
Risk Committee
| Missy S. Keney Executive Vice President and Chief Engagement Officer | | | Age: 42 19 years with Alerus | Ms. Keney serves as Executive Vice President and Chief Engagement Officer, a position she has occupied since July 2022, overseeing our Company’s employee and client engagement strategies, including strategic alignment and planning in the areas of marketing and client experience, human resources, and facilities. ■ Ms. Keney joined the Company in 2005 and previously served as the Company’s Director of Marketing and Client experience. ■ Ms. Keney received a Bachelor of Science degree in business administration from North Dakota State University and also earned the Certified Financial Marketing Professional designation through the Institute of Certified Bankers. |
Risk Committee
| Jon N. Hendry Executive Vice President and Chief Technology Officer | | | Age: 58 40 years with Alerus | Mr. Hendry serves as Executive Vice President and Chief Technology Officer, a position he has occupied since July 2022, overseeing our Company’s technology infrastructure and initiatives. Mr. Hendry brings a wealth of knowledge in information technology as he also leads new and innovative technological solutions to clients. ■ Throughout his nearly 40-year career with the Company, Mr. Hendry has played an integral role in implementing many technological advances for the benefit of our clients. ■ Mr. Hendry also served as director of the Company’s consumer segment for many years. In that role, he developed and implemented strategies for expanding the consumer portfolio in all markets by aligning sales, marketing and product leadership. ■ Additionally, Mr. Hendry was responsible for the growth and customer service of the Company’s retail banking division. |
Risk Committee
| 2024 Proxy Statement | 21 |
Risk Committee
Executive Compensation As an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies” as such term is defined in the rules promulgated under the Securities Act of 1933, as amended (the “Securities Act”), which permit us to limit the reporting of the Company’s compensation disclosures to our principal executive officer and our two other most highly compensated executive officers, which are referred to as our "named executive officers." The compensation reported in the Summary Compensation Table below is not necessarily indicative of how we will compensate our named executive officers in the future. We will continue to review, evaluate and modify our compensation framework to maintain a competitive total compensation package. As such, the compensation program in the future could vary from our historical practices. Our named executive officers for 2023 were:
Risk Committee
| ■ | Katie Lorenson, President and Chief Executive Officer; |
Risk Committee
| ■ | Jim Collins, Executive Vice President and Chief Banking and Revenue Officer; and |
Risk Committee
| ■ | Karin Taylor, Executive Vice President and Chief Risk and Operating Officer. |
Summary Compensation Table
Summary Compensation Table The following table sets forth information regarding the compensation paid, awarded to, or earned for our fiscal years ended December 31, 2023 and 2022 for each of our named executive officers:
Summary Compensation Table
| | | | | | NON-EQUITY | | | | | | | | STOCK | INCENTIVE PLAN | ALL OTHER | | | NAME AND PRINCIPAL POSITION | YEAR | SALARY(1) | BONUS(2) | AWARDS(3) | COMPENSATION(4) | COMPENSATION(5) | TOTAL | | Katie A. Lorenson | 2023 | $550,000 | $64,625 | $275,000 | $173,250 | $30,530 | $1,093,405 | | President & Chief Executive Officer | 2022 | 550,000 | - | 275,000 | 247,320 | 28,955 | 1,101,275 | | Jim R. Collins | 2023 | 422,212 | 40,420 | 129,000 | 108,360 | 30,530 | 730,522 | | Executive Vice President & Chief Banking & Revenue Officer(6) | | | | | | | — | | Karin M. Taylor | 2023 | 357,212 | 34,310 | 109,500 | 91,980 | 29,880 | 622,882 | | Executive Vice President & Chief Risk & Operating Officer | 2022 | 332,500 | - | 99,756 | 119,613 | 27,606 | 579,475 |
Summary Compensation Table
| (1) Amounts reflect base salary earned in each fiscal year. |
Summary Compensation Table
| (2) With respect to 2023, the amount reflected represents a positive adjustment made by our Compensation Committee to the incentive compensation earned pursuant to the Alerus Financial Corporation Short-Term Incentive Plan. |
Summary Compensation Table
| (3) The amounts set forth in the “Stock Awards” column reflect the aggregate grant date fair value of stock awards for the years ended December 31, 2023 and 2022 in accordance with FASB ASC Topic 718. The amounts reflected assume a target level of performance as that was the probable outcome at the time of grant. The amounts reflected for 2023 represent awards granted on February 21, 2023 and are based on a grant date fair market value of $19.74 per share. The 2023 awards are subject to a three-year performance-based vesting schedule based on a combination 60% performance-based vesting and 40% time-based vesting. In the instance of performance at a maximum level, the performance-vesting 2023 awards have the following values: Ms. Lorenson: $247,500, Mr. Collins: $116,100, and Ms. Taylor $98.550. The value reflected for 2023 time-based awards is as follows: Ms. Lorenson: $110,000 Mr. Collins: $51,600, and Ms. Taylor $43,800. The amounts reflected for 2022 represent awards granted on February 3, 2022 and are based on a grant date fair market value of $28.51 per share. The 2022 awards were subject to a three-year vesting schedule based on a combination of 60% performance-based vesting and 40% time-based vesting. In the instance of performance at a maximum level, the performance vesting 2022 awards have the following values: Ms. Lorenson: $247,500 and Ms. Taylor $89,800. The value reflected for 2022 time-based awards is as follows: Ms. Lorenson: $110,000 and Ms. Taylor $39,914. |
Summary Compensation Table
| (4) Amounts reflect annual cash incentive awards earned pursuant to the Alerus Financial Corporation Short-Term Incentive Plan. |
Summary Compensation Table
| (5) “All Other Compensation” for the named executive officers during 2023 is summarized below. |
Summary Compensation Table
| (6) Mr. Collins was not a named executive officer in 2022. |
Summary Compensation Table
| 2024 Proxy Statement | 22 |
Summary Compensation Table
| | | COMPANY | | TOTAL | | | | 401(k) | | "ALL OTHER | | NAME | PERQUISITES(1) | MATCH(2) | ESOP(3) | COMPENSATION" | | Katie A. Lorenson | $5,780 | $14,850 | $9,900 | $30,530 | | Jim R. Collins | 5,780 | 14,850 | 6,441 | 27,071 | | Karin M. Taylor | 5,130 | 14,850 | 9,900 | 29,880 |
Summary Compensation Table
| (1) For each of Ms. Lorenson, Mr. Collins and Ms. Taylor, amounts reflect an annual automobile allowance of $5,000 and a cell phone allowance of $780 for Ms. Lorenson and Mr. Collins and cell phone allowance of $130 for Ms. Taylor. |
Summary Compensation Table
| (2) Amounts reflect Company contributions under the 401(k) Plan with respect to 2023. |
Summary Compensation Table
| (3) Amounts reflect Company contributions under the ESOP with respect to 2023. |
Summary Compensation Table
GENERAL We compensate our named executive officers through a combination of base salary, annual incentive bonus, equity awards and other benefits including perquisites. The Compensation Committee believes our executive compensation practices should attract, motivate, and retain key talent, while also tying pay to performance to promote stockholder value and core values of the Company. Each element of compensation is designed to achieve a specific purpose and to contribute to a total package that is competitive with similar packages provided by other institutions that compete for the services of individuals like our executive officers. BASE SALARY On an annual basis, the Compensation Committee reviews base salaries of the Company’s executive officers. The Compensation Committee determines the base salary for Ms. Lorenson without involvement of any executive officers. With respect to the other executive officers, the Compensation Committee oversees the process and has the authority to override any compensation decisions, but it has historically allowed Ms. Lorenson to establish base salaries. When setting the base salary of our named executive officers, the Compensation Committee has considered input from independent compensation consultants. In 2023, the Compensation Committee retained F.W. Cook & Co. to provide compensation consulting services. ANNUAL INCENTIVE BONUS Our named executive officers are eligible to receive an annual cash bonus under the Alerus Financial Corporation Short-Term Incentive Plan (the “STIP”). The purpose of the STIP is to incentivize our executive officers to drive Company performance metrics established by the Committee on an annual basis. Under the STIP, the Compensation Committee establishes a target bonus as a percentage of annual base salary. Bonus pay out is based upon actual levels of achievement. As provided under the terms of the STIP, the Compensation Committee establishes Company performance metrics no later than February of the respective year. The Company performance goals are comprised of specific Company performance metrics. In 2023, the Compensation Committee selected net income, return on equity, and revenue as the Company’s performance metrics. The following table sets forth the parts of each named executive officer’s target bonus in 2023:
Summary Compensation Table
| | TARGET BONUS | COMPANY PERFORMANCE (100%) | | | | NAME | (AS % OF SALARY) | NET INCOME | RETURN ON EQUITY | REVENUE | | Katie A. Lorenson | 50% | 50% | 25% | 25% | | Jim R. Collins | 40% | 50% | 25% | 25% | | Karin M. Taylor | 40% | 50% | 25% | 25% |
Summary Compensation Table
With respect to annual cash bonus earned by our named executive officers during 2023, in determining the Company’s achievement of the net income performance metric, the Compensation Committee adjusted net income to reflect one-time operating expense items including adjustment for severance payments and signing bonuses incurred as a result of certain strategic staffing changes undertaken by the Company as well as certain actions taken by the Company to reposition its balance sheet in accordance with its long-term strategic plan. In determining the ultimate payouts for 2023 under the STIP, the Compensation Committee also made positive adjustments to the amounts otherwise earned by our named executive officers pursuant to the STIP. The dollar amounts of these adjustments are reflected in the “Bonus” column of the Summary Compensation Table.
Summary Compensation Table
| 2024 Proxy Statement | 23 |
Summary Compensation Table
The combined effect of the Company’s actual performance along with the Compensation Committee’s actions resulted in 2023 annual cash bonuses paid under the STIP to our named executive officers at a level of achievement between the established threshold and target levels. The actual percentage of base salary awarded as annual cash bonus was 86.5% for each of our named executive officers. EQUITY AWARDS Our named executive officers are eligible for long-term equity incentive awards under the Alerus Financial Corporation Long-Term Incentive Plan (the “LTIP”). The equity incentive awards due pursuant to the LTIP are granted under the Company’s 2019 Equity Incentive Plan. The purpose of the LTIP is to enhance Company performance consistent with our corporate strategic values, focus our executives on long-term performance results consistent with the Company’s long-term strategic plan, strengthen the link between executive pay and performance through utilization of measurable Company goals, and strengthen the link between executives and our stockholders by creating a shared interest in the Company’s growth. The Committee establishes a target award for each named executive officer, which is stated as a percentage of annual base salary. Awards vest over time based upon qualifying time and performance considerations, as set forth in each award agreement and the terms of the applicable equity incentive plan. Among other terms, our award agreements provide that upon the expiration of a three-year performance-measuring period, participants will vest in a portion of the award relative to the level of attainment of the Company’s target cumulative net income goal. The maximum a named executive officer can earn is 150% of the target opportunity, and the minimum threshold a named executive officer can earn is 50% of the target opportunity. For performance below the minimum threshold level, no incentive is earned. Award payouts for performance between the minimum threshold and target, or for performance between the target and maximum is determined by linear interpolation. The performance target and award payout ranges for the 2023 long-term equity incentive awards were as follows:
Summary Compensation Table
| | LEVEL OF ATTAINMENT | | | | OF NET INCOME GOAL | AWARD PAYOUT | | Minimum | 80% | 50% | | Target | 100% | 100% | | Maximum | 120% | 150% |
Summary Compensation Table
In 2023, the target awards were: 50% of base salary for Ms. Lorenson, and 30% of base salary for each of Mr. Collins and Ms. Taylor. The terms of the 2019 Equity Incentive Plan are described in more detail below. DEFERRED COMPENSATION Under the Alerus Financial Corporation Deferred Compensation Plan for Executives (the “Deferred Compensation Plan”), our named executive officers may voluntarily defer a portion of their annual cash compensation, subject to the limit established by the Company. Elective deferrals are subject to earnings as set forth in the Deferred Compensation Plan and are not matched by the Company. The Company has discretion to make a separate contribution to participant accounts. In 2023, no named executive officers received a contribution from the Company, and no named executive officers elected to defer compensation. Accounts are credited with earnings at the prime rate of interest as published by The Wall Street Journal. In December of 2023, the Company adopted a new deferred compensation plan called the Alerus Financial Corporation Deferred Compensation Plan (the “New Deferred Compensation Plan”) and froze the existing Deferred Compensation Plan. The New Deferred Compensation Plan went into effect on January 1, 2024 and allows for employee contributions of base salary, bonus, and incentives, and discretionary company contributions. Participants in the New Deferred Compensation Plan are permitted the opportunity to accumulate earnings on their deferrals by selecting hypothetical investments from among those offered as investments funds under the Alerus 401(k) Plan. BENEFITS AND OTHER PERQUISITES Our named executive officers are eligible to participate in the same benefit plans available to all of our eligible full-time and part-time employees, including medical, dental, vision, life, disability and accidental death insurance. We also provide our employees, including our named executive officers, with several retirement benefits. Our retirement plans are designed to assist our employees with planning for and securing appropriate levels of income during retirement. We believe these plans help us attract and retain quality employees, including executives, by offering benefits similar to those offered by our competitors. Alerus Financial Corporation Safe Harbor 401(k) Plan. The Alerus Financial Corporation Safe Harbor 401(k) Plan (the “401(k) Plan”) is designed to provide retirement benefits to all eligible full-time and part-time employees of the Company. The 401(k) Plan provides employees with the opportunity to save for retirement on a tax-favored basis. Named executive officers, all of whom were eligible during 2023, may elect to participate in the 401(k) Plan on the same basis as all other employees. Participants may defer into the 401(k) Plan a portion of their annual compensation up to the applicable IRS limit. We currently provide a safe harbor matching contribution on behalf of each eligible participant
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| 2024 Proxy Statement | 24 |
Summary Compensation Table
equal to 100% of participant contributions on the first 3% of compensation and 50% of participant contributions on the next 3% of compensation, up to the applicable IRS limit. The Company match is contributed in the form of cash and is invested according to the employee’s current investment allocation. Although the Company may also make a discretionary matching contribution of up to 4% of each eligible participant’s compensation, we did not do so in 2022 or 2023. Alerus Financial Corporation Employee Stock Ownership Plan. The ESOP is designed to reward eligible employees who complete a minimum number of service hours with an additional tax-qualified retirement benefit and an ownership interest in the Company. Each year, the Company may make a contribution of cash or stock to the ESOP, which eligible employees, including our named executive officers, equally share in proportion to an eligible portion of total annual compensation. For 2023, the Company elected to contribute cash to the ESOP in an amount equal to 3% of employee compensation, up to the applicable IRS limit. Health and Welfare Benefits. Our named executive officers are eligible to participate in our standard health and welfare benefits program, which offers a choice of medical, dental, vision, life, disability and accidental death insurance. Starting in 2024, our executive officers are eligible to obtain an annual executive physical exam at the Mayo Clinic in Rochester, Minnesota; Scottsdale, Arizona; or Jacksonville, Florida at the executive officer’s option and the Company’s expense. Perquisites. We provide our named executive officers with perquisites that we believe are reasonable and consistent with our overall compensation program to better enable us to attract and retain executive talent. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to named executive officers. Based on such review, perquisites are awarded or adjusted on an individual basis. Additionally, starting in 2024, our executive officers are eligible to obtain an annual executive physical exam at the Mayo Clinic in Rochester, Minnesota; Scottsdale, Arizona; or Jacksonville, Florida at the executive officer’s option and the Company’s expense. The perquisites received by our named executive officers in 2023 consisted of an automobile allowance for Ms. Lorenson, Mr. Collins, and Ms. Taylor, and a cell phone allowance for Ms. Lorenson, Mr. Collins and Ms. Taylor. Executive Severance Agreements In the fall of 2018, we entered into severance agreements with Ms. Lorenson and Ms. Taylor and in 2022 we entered into a severance agreement with each of Mr. Collins, Mr. Villalon, Ms. Keney and Mr. Hendry. In February of 2024 we entered into a severance agreement with Mr. Wilson. The severance agreements generally set forth the duties and obligations of each party in the event of a termination of employment and provide us with a measure of protection by subjecting the named executive officers to certain restrictive covenants during employment and for a specified duration following termination of employment. The severance agreements provide for an initial term of two years, with automatic renewal for an additional day on each day after the effective date, such that the agreement term is two years at all times. Either party may elect nonrenewal upon notice of 120 days prior to termination. The severance agreements automatically terminate on the second anniversary of a change in control, as such term is defined in each severance agreement. In the event the Company terminates a named executive officer for any reason other than for cause prior to a change in control, the named executive officer is eligible to receive a severance payment in 12 monthly increments equal to the sum of (i) 100% of annual base salary; (ii) the average of the named executive officer’s three most recent annual bonuses; and (iii) twelve months of the Company’s portion of premiums for health, disability, and life insurance policies in which the executive was entitled to participate immediately prior to termination. In the event of a termination within a 24-month period following a change in control by the Company without cause or by the named executive officer for a good reason, the executive is eligible to receive a severance payment in a lump sum equal to twice the amount described above. Each named executive officer is subject to a confidentiality provision for 24 months following termination of employment, which prohibits disclosure, and use of, the Company’s trade secrets, confidential information, customer lists and other types of proprietary information. Our obligation to pay any severance is also conditioned upon the execution by the named executive officer of a general release and waiver of any and all claims with respect to his or her employment with the Company. The severance agreements contain a modified 280G cutback provision, which provides for automatic reduction of payments if such reduction would result in a better net-after-tax result for the named executives officers after taking into account the impact of the golden parachute excise tax of the Internal Revenue Code.
Summary Compensation Table
| 2024 Proxy Statement | 25 |
Summary Compensation Table
Outstanding Equity Awards at Fiscal Year End The following table provides information about outstanding equity awards held by our named executive officers as of December 31, 2023:
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| | NUMBER OF SHARES OR UNITS | MARKET VALUE OF SHARES OR | EQUITY INCENTIVE PLAN AWARDS: | EQUITY INCENTIVE PLAN AWARDS: | | | OF STOCK THAT HAVE NOT | UNITS OF STOCK THAT HAVE NOT | NUMBER OF UNEARNED | MARKET VALUE OF UNEARNED | | | NOT VESTED | YET VESTED ($) | SHARES THAT HAVE NOT VESTED | SHARES THAT HAVE NOT VESTED | | Name | (#)(1) | | (#)(2) | ($)(3) | | Katie A. Lorenson | 3,263 | 73,059 | 27,170 | 608,336 | | Jim R. Collins | 10,336 | 231,423 | 10,062 | 225,288 | | Karin M. Taylor | 6,024 | 134,877 | 11,759 | 263,284 |
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| (1) These shares represent awards granted to each executive at time of hire. For Ms. Lorenson, the vesting dates for 3,263 shares is December 14, 2027; for Mr. Collins, the vesting dates are December 31, 2024 for 5,168 shares, and December 31, 2025 for 5,168 shares; and for Ms. Taylor the vesting dates are November 12, 2024 for 3,012 shares, and November 12, 2028 for 3,012 shares. |
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| (2) The awards vest based on either time or the Company’s attainment of pre-established performance goals as measured over a specified performance period generally spanning three years from the date of grant. If the executive’s employment ends due to retirement at or after age 60 with at least 5 years of service or age 62, the executive will remain eligible to vest in the number of shares that would otherwise vest as of the certification date as if the executive had been actively employed. If the executive’s employment ends due to death, or disability, upon such termination the executive shall become vested at the target level of performance. |
Summary Compensation Table
| (3) The market value of the shares as reported here is based on the closing price of our shares on December 29, 2023 (the last trading day for 2023), which was $22.39. |
Summary Compensation Table
Equity Incentive Plans All outstanding stock awards were made under either our 2009 Stock Plan or our 2019 Equity Incentive Plan. All stock awards made to non-employee directors were previously issued under our Stock Grant Plan for Non-Employee Directors. Future awards will be made under our 2019 Equity Incentive Plan, which was approved by the Board on February 21, 2019, and approved by our stockholders on May 6, 2019. Each plan is described in more detail below.