Alan A. Villalon
ALERUS FINANCIALAbout Alan A. Villalon
Alan A. Villalon is Executive Vice President and Chief Financial Officer of Alerus Financial Corporation (ALRS). He is 51, joined Alerus in 2022, and has 25+ years of financial services experience spanning investor relations and equity research; he holds a BS in Accounting from the University of Notre Dame and an MBA from Carnegie Mellon University . During his tenure, company performance metrics used for pay include non-GAAP ROE (7.03% in 2024), Adjusted Net Income ($27.96M in 2024), and TSR (value of initial $100 investment was $73 in 2024 vs $82 in 2023/2022), which inform incentive outcomes and alignment .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| U.S. Bank | Deputy Director of Investor Relations & SVP | 2020–2022 | Led investor relations; brought capital markets discipline into finance function |
| Thrivent Asset Management | Senior Research Analyst | Not disclosed | Equity research expertise across financials |
| Nuveen Asset Management / First American Funds Advisors | Senior Research Analyst | Not disclosed | Equity research and valuation skillset supporting analytical rigor |
External Roles
No external public company directorships or committee roles for Villalon are disclosed in the proxy materials reviewed .
Fixed Compensation
| Item | 2024 | Notes |
|---|---|---|
| Base Salary ($) | $345,000 | 4.5% increase vs 2023 ($330,000) |
| Target Bonus (%) | 40% of salary | STI capped at 150% of target |
| Actual STI Paid ($) | $143,520 | Committee approved 104% payout vs target |
| All Other Compensation ($) | $34,959 | Auto allowance, 401(k) match, ESOP contributions |
| Total Compensation ($) | $661,479 | Summary Compensation Table |
Performance Compensation
Short-Term Incentive (STI) – 2024
| Metric | Weight | Target | Actual | Payout basis |
|---|---|---|---|---|
| Adjusted Net Income (ANI) | 50% | $27.921M | $27.955M | Total plan achievement 106.0%; Committee set payout at 104.0% |
| Adjusted Total Revenue | 25% | $199.181M | $218.035M | Same |
| Return on Equity (ROE) | 25% | 7.18% | 7.03% | Same |
| Villalon Bonus Paid | — | $138,000 target | $143,520 | Company-wide payout 104.0% |
Notes:
- Metrics use defined non-GAAP adjustments to isolate underlying performance and M&A impacts (HMNF acquisition accretion cited) .
- STI payout range: 50–150% of target; Committee retains discretion to adjust within plan parameters .
Long-Term Incentive (LTI) – 2024 Grants
| Type | Grant date | Threshold (#) | Target (#) | Maximum (#) | Fair value ($) | Metrics & weight | Vesting |
|---|---|---|---|---|---|---|---|
| Performance RSUs (PSUs) | Feb 27, 2024 | 1,896 | 3,791 | 5,687 | $82,800 | Relative 3-yr EPS CAGR (50%) and relative 3-yr Avg ROE (50%) vs KBW Regional Bank Index; 50/100/150% payout at 25th/50th/75th percentile | |
| Time-based RSUs | Feb 27, 2024 | — | 2,528 | — | $55,200 | Time vest | Vests Feb 27, 2027 (accelerates on death/disability/qualifying retirement) |
Prior cycle outcome:
- 2022–2024 PSUs based on cumulative net income did not meet threshold ($101.37M actual vs $148.31M target); performance-based equity paid zero and dividends on such units were forfeited .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial shares owned | 8,523 shares; <1% of outstanding (“*”) |
| ESOP shares included | 286 shares held in ESOP |
| Unvested time-based shares | 11,056 shares; market value $212,717 (12/31/24 close $19.24) |
| Unearned PSUs (unvested) | 8,652 units; market value $166,464 |
| Vested/unvested timeline | 5,287 restricted shares vested Jan 28, 2025; 1,326 RSUs vested Feb 3, 2025; 1,915 RSUs vest Feb 21, 2026; 2,528 RSUs vest Feb 27, 2027 |
| Stock ownership guidelines | Executives: 2x base salary; all NEOs were in compliance or within the 5-year window as of Feb 26, 2025 |
| Hedging/pledging | Hedging prohibited; no pledge disclosed for Villalon (pledge noted for another director) |
| Options | Company does not currently grant options; no option exposure |
Employment Terms
| Provision | Key terms |
|---|---|
| Agreement term | Two-year evergreen (daily auto-renew); either party may elect non-renewal with 120 days’ notice; terminates two years after a change in control |
| Severance (no change in control) | 12 monthly installments equal to 100% of annual base salary + average of last three annual bonuses + 12 months Company-paid health, disability, and life premiums; subject to release |
| Severance (change in control) | If terminated without cause or for good reason within 24 months of CoC, lump sum of 2x the above (CEO at 2.99x) |
| Restrictive covenants | Perpetual confidentiality; 24-month non-disparagement; severance conditioned on release |
| 280G | Modified cutback to optimize after-tax outcomes; no excise tax gross-ups |
| Equity acceleration (2019 Plan) | Double-trigger; full vesting/exercise if plan not assumed, or if terminated without cause/for good reason post-CoC; performance awards vest pro-rata based on attainment; options/RSAs accelerate on CoC per plan rules |
| Clawback | Adopted per SEC/Nasdaq; covers incentive comp paid in cash or stock for restatements or misconduct |
Potential payments (as of 12/31/2024 valuation assumptions):
| Scenario | Cash Severance ($) | Insurance ($) | Equity Acceleration ($) | Total ($) |
|---|---|---|---|---|
| Disability | 463,613 | 23,064 | 379,182 | 865,859 |
| Death | 463,613 | 23,064 | 379,182 | 865,859 |
| Termination without cause (no CoC) | 463,613 | 23,064 | 379,182 | 865,859 |
| Termination without cause / good reason (within 24 months of CoC) | 927,225 | 23,064 | 379,182 | 1,329,471 |
Deferred compensation:
| Item | 2024 |
|---|---|
| Executive deferral | $70,380 |
| Aggregate earnings | $2,621 |
| Aggregate balance | $73,001 |
Performance & Track Record
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| TSR – Value of $100 investment | $82 | $82 | $73 |
| GAAP Net Income ($M) | $40.0 | $11.7 | $17.8 |
| ROE (company-selected measure) | 12.74% | 9.33% | 7.03% |
- 2024 performance exceeded STI targets due to positive EPS accretion from the HMNF acquisition; Committee exercised discretion to set payout at 104% of target .
Compensation Committee Analysis
- Independent Compensation Committee (all independent directors) engages FW Cook; benchmarks pay vs a 20-company market reference group; positions NEOs around median with discretion based on experience and performance .
- Governance features include stock ownership guidelines, clawback policy, prohibition on hedging, no single-trigger severance on CoC, and no golden parachute excise tax gross-ups .
Say-on-Pay & Shareholder Feedback
- 2025 is the first say-on-pay vote after ALRS ceased emerging growth company status as of January 1, 2025; Board recommends annual say-on-pay frequency .
- Board and management conduct ongoing investor engagement to inform governance and compensation decisions .
Risk Indicators & Red Flags
- 2022–2024 PSUs paid zero due to below-threshold cumulative net income performance, demonstrating real downside for equity-linked awards and pay-for-performance discipline .
- One late Section 16 transaction in 2023 was corrected via a Form 5 filing in 2024 for Villalon; indicates minor reporting timing issue, not necessarily trading risk .
- No options currently granted, limiting repricing risks; hedging prohibited and no pledging disclosed for Villalon, reducing misalignment risk .
Equity Ownership & Vesting Detail for Villalon
| Category | Detail |
|---|---|
| Time-based RSU vest dates | 1,326 RSUs vested Feb 3, 2025; 1,915 vest Feb 21, 2026; 2,528 vest Feb 27, 2027 |
| Restricted stock | 5,287 shares vested Jan 28, 2025 |
| PSUs (2024 grant) | 3-year performance period, vest based on relative EPS CAGR and ROE vs KBW index; threshold/target/max share counts as noted above |
Investment Implications
- Pay-for-performance alignment: STI/LTI designs hinge on ANI, Adjusted Revenue, ROE, and relative EPS/ROE vs KBW banks; zero payout on 2022–2024 PSUs underscores discipline and ties to performance outcomes .
- Retention and selling pressure: Upcoming vest events in 2026–2027 for time-based RSUs may create measured supply; no pledging and anti-hedging mitigate forced selling risk; monitor Section 16 filings around vest dates .
- Change-in-control economics: Double-trigger severance at 2x for the CFO and robust equity acceleration rules create moderate CoC costs; clawback and 280G cutback are shareholder-friendly mitigants .
- Ownership alignment: Beneficial ownership is <1% of shares outstanding, but executive ownership guidelines (2x salary) and ongoing compliance help ensure “skin in the game” despite small absolute stake .
- Execution risk: TSR declined over 2022–2024, while 2024 incentives benefitted from HMNF accretion; watch sustained ROE improvement and delivery against relative LTI metrics to gauge value creation under Villalon’s finance leadership .