You are cordially invited to attend the annual meeting of shareholders of FS Bancorp, Inc. to be held at the 1st Security Bank Administrative Office, located at 6920 220th Street SW, Mountlake Terrace, Washington, on Thursday, May 28, 202027, 2021 at 2:00 p.m., local time.
The notice of annual meeting of shareholders and proxy statement appearing on the following pages describe the formal business to be transacted at the meeting. During the meeting, we will also report on our operations. Directors and officers of FS Bancorp, Inc., as well as a representative of Moss Adams LLP, our independent registered public accounting firm, will be present to respond to appropriate questions of shareholders.
It is important that your shares are represented at the meeting, whether or not you attend in person and regardless of the number of shares you own. To make sure your shares are represented, we urge you to completevote via the Internet or by telephone, or by completing and mailmailing the enclosed proxy card. If you attend the meeting, you may vote in person even if you have previously mailed a proxy card.voted.
We look forward to seeing you at the meeting.
FS BANCORP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 27, 2021 |
Notice is hereby given that the annual meeting of shareholders of FS Bancorp, Inc. will be held at the 1st Security Bank Administrative Office, located at 6920 220th Street SW, Mountlake Terrace, Washington, on Thursday, May 28, 2020,27, 2021, at 2:00 p.m., local time, for the following purposes:
| Proposal 1. | Election of twothree directors to each serve for a three-year term. |
| Proposal 2. | Advisory (non-binding) approval of the compensation of our named executive officers as disclosed in this proxy statement. |
| Proposal 3. | Ratification of the Audit Committee’s appointment of Moss Adams LLP as our independent registered public accounting firm for 2020.2021. |
We will also consider and act upon such other business as may properly come before the meeting, or any adjournment or postponement thereof. As of the date of this notice, we are not aware of any other business to come before the annual meeting.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to Be Held on May 28, 2020.27, 2021. Our proxy statement and 20192020 Annual Report to Shareholders are available at http://investorrelations.fsbwa.com/CorporateProfile.
The Board of Directors has fixed the close of business on March 27, 202026, 2021 as the record date for the annual meeting. This means that shareholders of record at the close of business on that date are entitled to receive notice of and to vote at the meeting and any adjournment thereof. To ensure that your shares are represented at the meeting, please take the time to vote via the Internet or by telephone, or by signing, dating and mailing the enclosed proxy card which is solicited by the Board of Directors. The proxy will not be used if you attend and vote at the annual meeting in person. Regardless of the number of shares you own, your vote is very important. Please act today.
| BY ORDER OF THE BOARD OF DIRECTORS
|
|
|
| /s/ MATTHEW D. MULLET |
| MATTHEW D. MULLET
|
| MATTHEW D. MULLET
SECRETARY |
Mountlake Terrace, Washington
April 13, 202012, 2021
IMPORTANT: The prompt return of proxies will save us the expense of further requests for proxies in order to ensure a quorum. A pre-addressed envelope is enclosed for your convenience. No postage is required if mailed in the United States.
IMPORTANT: The prompt return of proxies will save us the expense of further requests for proxies in order to ensure a quorum. You may vote via the Internet or by telephone. Alternatively, a pre-addressed envelope is enclosed for your convenience. No postage is required if mailed in the United States. |
PROXY STATEMENT
OF
FS BANCORP, INC.
6920 220TH STREET SW
MOUNTLAKE TERRACE, WASHINGTON 98043
(425) 771-5299
ANNUAL MEETING OF SHAREHOLDERSMAY 28, 2020
MAY 27, 2021 |
The Board of Directors of FS Bancorp, Inc. is using this proxy statement to solicit proxies from our shareholders for use at our annual meeting of shareholders. We are first mailing this proxy statement and the enclosed form of proxy to our shareholders on or about April 13, 2020.12, 2021.
The information provided in this proxy statement relates to FS Bancorp, Inc. and its wholly-owned subsidiary, 1st Security Bank of Washington. FS Bancorp, Inc. may also be referred to as “FS Bancorp” and 1st Security Bank of Washington may also be referred to as “1st Security Bank” or the “Bank.” References to “we,” “us” and “our” refer to FS Bancorp and, as the context requires, 1st Security Bank.
INFORMATION ABOUT THE ANNUAL MEETING
INFORMATION ABOUT THE ANNUAL MEETING |
Time and Place of the Annual Meeting
Our annual meeting will be held as follows:
| Date: | Thursday, May 28, 202027, 2021 |
| Time: | 2:00 p.m., local time |
| Place: | 1st Security Bank Administrative Office 6920 220th Street SW, Mountlake Terrace, Washington |
Matters to Be Considered at the Annual Meeting
At the meeting, you will be asked to consider and vote upon the following proposals:
| Proposal 1. | Election of twothree directors to each serve for a three-year term. |
| Proposal 2. | Advisory (non-binding) approval of the compensation of our named executive officers as disclosed in this proxy statement. |
| Proposal 3. | Ratification of the appointment of Moss Adams LLP as our independent registered public accounting firm for 2020.2021. |
We also will transact any other business that may properly come before the annual meeting. As of the date of this proxy statement, we are not aware of any other business to be presented for consideration at the annual meeting other than the matters described in this proxy statement.
Who is Entitled to Vote?
We have fixed the close of business on March 27, 202026, 2021 as the record date for shareholders entitled to notice of and to vote at our annual meeting. Only holders of record of FS Bancorp’s common stock on that date are entitled to notice of and to vote at the annual meeting. You are entitled to one vote for each share of FS Bancorp common stock you own, unless you own more than 10% of FS Bancorp’s outstanding shares. As provided in our Articles of Incorporation, record holders of common stock who beneficially own in excess of 10% of FS Bancorp’s
outstanding shares are not entitled to any vote in respect of the shares held in excess of the 10% limit unless our Board of
Directors has granted permission in advance. On March 27, 2020,26, 2021, there were 4,332,1964,233,040 shares of FS Bancorp common stock outstanding and entitled to vote at the annual meeting.
How Do I Vote at the Annual Meeting?
Proxies are solicited to provide all shareholders on the voting record date an opportunity to vote on matters scheduled for the annual meeting and described in these materials. This question provides voting instructions for shareholders of record. You are a shareholder of record if your shares of FS Bancorp common stock are held in your name. If you are a beneficial owner of FS Bancorp common stock held by a broker, bank or other nominee (i.e., in “street name”), please see the instructions below under “What if My Shares Are Held in Street Name?”
Shares of FS Bancorp common stock can only be voted if the shareholder is present in person or by proxy at the annual meeting. To ensure your representation at the annual meeting, we recommend you vote by proxy even if you plan to attend the annual meeting. You can always change your vote at the meeting if you are a shareholder of record.
Voting instructions are included on your proxy card. Shares of FS Bancorp common stock represented by properly executed proxies will be voted by the individuals named on the proxy card in accordance with the shareholder’s instructions. Where properly executed proxies are returned to us with no specific instruction as how to vote at the annual meeting, the persons named in the proxy will vote the shares FOR the election of each of our director nominees, FOR advisory approval of the compensation of our named executive officers as disclosed in this proxy statement and FOR ratification of the appointment of Moss Adams LLP as our independent registered public accounting firm. If any other matters are properly presented at the annual meeting for action, the persons named in the enclosed proxy and acting thereunder will have the discretion to vote on these matters in accordance with their best judgment. We do not currently expect that any other matters will be properly presented for action at the annual meeting.
You may receive more than one proxy card depending on how your shares are held. For example, you may hold some of your shares individually, some jointly with your spouse and some in trust for your children. In this case, you will receive three separate proxy cards to vote.
What if My Shares Are Held in Street Name?
If you are the beneficial owner of shares held in “street name” by a broker, bank or other nominee ("nominee"(“nominee”), the nominee, as the record holder of the shares, is required to vote the shares in accordance with your instructions. If your common stock is held in street name, you will receive instructions from the nominee that you must follow in order to have your shares voted. The nominee may allow you to deliver your voting instructions via telephone or the Internet. Please see the instruction form that accompanies this proxy statement. If you do not give instructions to the nominee, the nominee may nevertheless vote the shares with respect to discretionary items, but will not be permitted to vote your shares with respect to non-discretionary items, pursuant to current industry practice. In the case of non-discretionary items, shares not voted will be treated as “broker non-votes.” The proposal to elect directors and the advisory vote on executive compensation are considered non-discretionary items; therefore, you must provide instructions to the nominee in order to have your shares voted with respect to these proposals.
If your shares are held in street name, you will need proof of ownership to be admitted to the annual meeting. A recent brokerage statement or letter from the record holder of your shares are examples of proof of ownership. If you want to vote your shares of common stock held in street name in person at the annual meeting, you will have to get a written proxy in your name from the broker, bank or other nominee who holds your shares.
How Will My Shares of Common Stock Held in the Employee Stock Ownership Plan Be Voted?
We maintain the FS Bancorp, Inc. Employee Stock Ownership Plan (“ESOP”), which owns 5.57%5.66% of FS Bancorp’s common stock. Employees of FS Bancorp and 1st Security Bank participate in the ESOP. Each ESOP participant may instruct the trustee how to vote the shares of FS Bancorp common stock allocated to his or her
2
account under the ESOP by completing the vote authorization form. If an ESOP participant properly executes a vote
2
authorization form, the ESOP trustee will vote the participant’s shares in accordance with the participant’s instructions. Allocated shares for which proper voting instructions are not received and unallocated shares held by the ESOP will be voted by the trustee in the same proportion as shares for which the trustee has received voting instructions. In order to give the trustees sufficient time to vote, all vote authorization forms from ESOP participants must be received by the transfer agent on or before May 22, 2020.24, 2021.
How Many Shares Must Be Present to Hold the Meeting?
A quorum must be present at the meeting for any business to be conducted. The presence at the meeting, in person or by proxy, of at least a majority of the shares of FS Bancorp common stock entitled to vote at the annual meeting as of the record date will constitute a quorum. Proxies received but marked as abstentions or broker non-votes will be included in the calculation of the number of shares considered to be present at the meeting.
What if a Quorum Is Not Present at the Meeting?
If a quorum is not present at the scheduled time of the meeting, a majority of the shareholders present or represented by proxy may adjourn the meeting until a quorum is present. The time and place of the adjourned meeting will be announced at the time the adjournment is taken, and no other notice will be given unless the adjourned meeting is set to be held 120 days or more after the original meeting. An adjournment will have no effect on the business that may be conducted at the meeting.
Vote Required to Approve Proposal 1: Election of Directors
Directors are elected by a plurality of the votes cast, in person or by proxy, at the annual meeting by holders of FS Bancorp common stock. Accordingly, the twothree nominees for election as directors who receive the highest number of votes actually cast will be elected. Pursuant to our Articles of Incorporation, shareholders are not permitted to cumulate their votes for the election of directors. Votes may be cast for or withheld from each nominee. Votes that are withheld will have no effect on the outcome of the election because the twothree nominees receiving the greatest number of votes will be elected. Our Board of Directors unanimously recommends that you vote FOR the election of each of its director nominees.
Vote Required to Approve Proposal 2: Advisory Approval of Executive Compensation
Advisory (non-binding) approval of the compensation of our named executive officers, as disclosed in this proxy statement, requires the affirmative vote of a majority of the votes cast, in person or by proxy, at the annual meeting. Abstentions and broker non-votes will have no effect on the outcome of the proposal. Our Board of Directors unanimously recommends that you vote FOR approval of the compensation of our named executive officers.
Vote Required to Approve Proposal 3: Ratification of the Appointment of the Independent Registered Public Accounting Firm
Ratification of the appointment of Moss Adams LLP as our independent registered public accounting firm for the fiscal year ending December 31, 20202021 requires the affirmative vote of a majority of the votes cast, in person or by proxy, at the annual meeting. Abstentions will have no effect on the outcome of the proposal. Our Board of Directors unanimously recommends that you vote FOR the ratification of the appointment of the independent registered public accounting firm.
May I Revoke My Proxy?
You may revoke your proxy before it is voted by:
submitting a new proxy with a later date;
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notifying the Secretary of FS Bancorp in writing before the annual meeting that you have revoked your proxy; or
voting in person at the annual meeting.
3
If you plan to attend the annual meeting and wish to vote in person, we will give you a ballot at the annual meeting. However, if your shares are held in street name, you must bring a validly executed proxy from the nominee indicating that you have the right to vote your shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
The following table sets forth, as of March 27, 2020,26, 2021, the voting record date, information regarding share ownership of:
those persons or entities (or groups of affiliated person or entities) known by management to beneficially own more than five percent of FS Bancorp’s common stock other than directors and executive officers;
each director and director nominee of FS Bancorp;
each executive officer of FS Bancorp or any of its subsidiaries named in the Summary Compensation Table appearing under “Executive Compensation” below (known as “named executive officers”); and
all current directors and executive officers of FS Bancorp and its subsidiaries as a group.
Persons and groups who beneficially own in excess of five percent of FS Bancorp’s common stock are required to file with the Securities and Exchange Commission (“SEC”), and provide us a copy of, reports disclosing their ownership pursuant to the Securities Exchange Act of 1934. To our knowledge, no other person or entity, other than the ones set forth below, beneficially owned more than five percent of the outstanding shares of FS Bancorp’s common stock as of the close of business on the voting record date.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In accordance with Rule 13d-3 of the Securities Exchange Act, a person is deemed to be the beneficial owner of any shares of common stock if he or she has voting and/or investment power with respect to those shares. Therefore, the table below includes shares owned by spouses, other immediate family members in trust, shares held in retirement accounts or funds for the benefit of the named individuals, shares held in the ESOP, and other forms of ownership, over which shares the persons named in the table may possess voting and/or investment power. In addition, in computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to outstanding options that are currently exercisable or exercisable within 60 days after the voting record date are included in the number of shares beneficially owned by the person and are deemed outstanding for the purpose of calculating the person’s percentage ownership. These shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
As of the voting record date, there were 4,332,1964,233,040 shares of FS Bancorp common stock outstanding.
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| | Number of Shares | | Percent of Shares |
Name
| | Beneficially Owned (1) | | Outstanding (%) |
| | | | |
Beneficial Owners of More Than 5% | | | | | |
| | | | | |
FS Bancorp, Inc. Employee Stock Ownership Plan | | 241,353 | (2) | | 5.57 |
T. Rowe Price Small-Cap Value Fund, Inc. | | 233,990 | (3) | | 5.40 |
| | | | | |
Directors | | | | | |
| | | | | |
Joseph C. Adams* | | 83,782 | (4) | | 1.91 |
Michael J. Mansfield | | 38,171 | (5) | | ** |
Ted A. Leech | | 37,917 | (6) | | ** |
Joseph P. Zavaglia | | 13,797 | (7) | | ** |
Marina Cofer-Wildsmith | | 8,978 | | | ** |
Margaret R. Piesik | | 21,151 | (8) | | ** |
Mark H. Tueffers | | 22,560 | (9) | | ** |
| | | | | |
Named Executive Officers | | | | | |
| | | | | |
Dennis V. O'Leary | | 51,510 | | | 1.18 |
Donn C. Costa | | 69,331 | | | 1.60 |
| | | | | |
All Executive Officers and Directors as a Group (14 persons) | | 419,337 | | | 9.42 |
__________
| | Number of Shares | | Percent of Shares |
| | | | | |
Beneficial Owners of More Than 5% | | | | | |
| | | | | |
T. Rowe Price Associates, Inc. 100 East Pratt Street, Baltimore, Maryland 21202 | | 369,711 | (2) | | 8.73 |
| | | | | |
FS Bancorp, Inc. Employee Stock Ownership Plan 6920 220th Street SW, Mountlake Terrace, Washington 98043 | | 239,667 | (3) | | 5.66 |
| | | | | |
The Vanguard Group 100 Vanguard Boulevard, Malvern, Pennsylvania 19355 | | 218,733 | (4) | | 5.17 |
| | | | | |
BlackRock, Inc. 55 East 52nd Street, New York, New York 10055 | | 217,547 | (5) | | 5.14 |
| | | | | |
Directors | | | | | |
| | | | | |
Joseph C. Adams* | | 99,544 | (6) | | 2.32 |
Pamela M. Andrews | | 3,761 | (7) | | ** |
Michael J. Mansfield | | 39,491 | (8) | | ** |
Ted A. Leech | | 39,237 | (9) | | ** |
Joseph P. Zavaglia | | 12,517 | (10) | | ** |
Marina Cofer-Wildsmith | | 5,500 | | | ** |
Margaret R. Piesik | | 22,471 | (11) | | ** |
Mark H. Tueffers | | 19,380 | (12) | | ** |
| | | | | |
Named Executive Officers | | | | | |
| | | | | |
Donn C. Costa | | 82,186 | | | 1.94 |
Matthew D. Mullet | | 58,056 | | | 1.37 |
| | | | | |
All Executive Officers and Directors as a Group (16 persons) | | 491,903 | | | 11.26 |
___________
* | Mr. Adams is also a named executive officer of FS Bancorp. |
** | Less than one percent of shares outstanding. |
(1) | Shares of restricted stock, as to which the holders have voting power but not investment power, are included as follows: Director Adams, 8,56011,420 shares; Directors Mansfield, Leech, Zavaglia, Cofer-Wildsmith, Piesik and Tueffers, 880750 shares each; Mr. O'Leary, 3,035Costa, 6,995 shares; Mr. Costa, 5,755Mullet, 4,955 shares; and all executive officers and directors as a group, 35,21547,363 shares. The amounts shown also include the following number of shares which the indicated individuals have the right to acquire within 60 days of the voting record date through the exercise of stock options: Director Adams, 44,56051,520 shares; DirectorDirectors Mansfield 680 shares;and Cofer-Wildsmith, 1,760 shares each; Director Leech, 8,1808,260 shares; Director Zavaglia, 5,880 shares; Director Cofer-Wildsmith, 5,4784,360 shares; Director Piesik, 12,68013,760 shares; Director Tueffers, 8,480 shares; Mr. O'Leary, 18,4609,560 shares; Mr. Costa, 3,6808,605 shares; Mr. Mullet, 5,202 shares; and all executive officers and directors as a group, 120,915137,416 shares. |
(2) | Based solely on a Schedule 13G/A dated February 16, 2021, regarding shares owned as of December 31, 2020. According to the filing, T. Rowe Price Associates, Inc. has sole voting power over 99,811 shares and sole dispositive power over 369,711 shares, and T. Rowe Price Small-Cap Value Fund, Inc. has sole voting power over 269,900 shares. |
(3) | Represents shares held in the ESOP. The ESOP has shared voting and dispositive power over the shares reported. The address of the ESOP is 6920 220th Street SW, Mountlake Terrace, Washington 98043. |
(3)(4) | Based solely on a Schedule 13G/A13G dated February 14, 2020,8, 2021, regarding shares owned as of December 31, 2019.2020. According to the filing, T. Rowe Price Small-Cap Value Fund,The Vanguard Group has shared voting power over 3,093 shares, sold dispositive power over 214,192 shares and shared dispositive power over 4,541 shares. |
(5) | Based solely on a Schedule 13G dated February 2, 2021, regarding shares owned as of December 31, 2020. According to the filing, BlackRock, Inc. has sole voting power over the213,416 shares reported. The address of T. Rowe Price Associates, Inc. is 100 East Pratt Street, Baltimore, Maryland 21202.and sole dispositive power over 217,547 shares. |
(4)(6) | Includes 23,278 shares held jointly with spouse. |
(5)(7) | Held jointly with spouse. |
(8) | Includes 18,331 shares held jointly with spouse and 7,310 shares held in an individual retirement account (“IRA”). |
(6)(9) | Includes 7,18730,227 shares held jointly with spouse and 1,000 shares held in trust.spouse. |
(7)(10) | Includes 7501,250 shares held jointly with spouse and 4,807 shares held in an IRA. |
(8)(11) | Includes 626 shares held in an IRA. |
(9)(12) | Includes 13,100 shares held in an IRA and 100 shares held in his spouse’s IRA. |
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PROPOSAL 1 – ELECTION OF DIRECTORS
PROPOSAL 1 – ELECTION OF DIRECTORS |
Our Board of Directors currently consists of seveneight members and is divided into three classes. On January 28, 2021, the Board appointed Pamela M. Andrews as a director. Ms. Andrews was recommended for appointment to the Board by the current directors. Approximately one-third of the directors are elected annually to serve for a three-year period or until their respective successors are elected and qualified. The table below sets forth information regarding each director of FS Bancorp and each nominee for director. The Nominating/Nominating and Environmental, Social, Governance Committee of the Board of Directors selects nominees for election as directors. Michael J. MansfieldJoseph C. Adams, Pamela M. Andrews, and Margaret R. PiesikJoseph P. Zavaglia currently serve as FS Bancorp directors and have been nominated to each serve a three-year term.
Each nominee has consented to being named in this proxy statement and has agreed to serve if elected. If a nominee is unable to stand for election, the Board of Directors may either reduce the number of directors to be elected or select a substitute nominee. If a substitute nominee is selected, the proxy holders will vote your shares for the substitute nominee, unless you have withheld authority. At this time, we are not aware of any reason why a nominee might be unable to serve if elected.
The Board of Directors recommends a vote FOR the election of Michael J. MansfieldJoseph C. Adams, Pamela M. Andrews and Margaret R. Piesik.Joseph P. Zavaglia.
| | Age as of | | Year First Elected or | | Term to |
Name | | December 31, 2019 | | Appointed Director (1) | | Expire |
| | | | | | |
Board Nominees |
| | | | | | |
Michael J. Mansfield | | 63 | | 2008 | | 2023 (2) |
Margaret R. Piesik | | 69 | | 2006 | | 2023 (2) |
| | | | | | |
Directors Continuing in Office |
| | | | | | |
Joseph C. Adams | | 60 | | 2005 | | 2021 |
Joseph P. Zavaglia | | 71 | | 2011 | | 2021 |
Ted A. Leech | | 72 | | 2005 | | 2022 |
Marina Cofer-Wildsmith | | 52 | | 2012 | | 2022 |
Mark H. Tueffers | | 61 | | 2016 | | 2022 |
___________
| | Age as of | | Year First Elected or | | Term to |
| | | | | | |
Board Nominees |
| | | | | | |
Joseph C. Adams | | 61 | | 2005 | | 2024 (2) |
Pamela M. Andrews | | 62 | | 2021 | | 2024 (2) |
Joseph P. Zavaglia | | 72 | | 2011 | | 2024 (2) |
| | | | | | |
Directors Continuing in Office |
| | | | | | |
Ted A. Leech | | 73 | | 2005 | | 2022 |
Marina Cofer-Wildsmith | | 53 | | 2012 | | 2022 |
Mark H. Tueffers | | 62 | | 2016 | | 2022 |
Michael J. Mansfield | | 64 | | 2008 | | 2023 |
Margaret R. Piesik | | 70 | | 2006 | | 2023 |
______________ |
(1) | IncludesFor years before 2013, includes prior service on the Board of Directors of 1st Security Bank, with the exception of Mr. Tueffers, who has served on the Bank’s Board since 2013 but was first elected to FS Bancorp’s Board in 2016.Bank. |
(2) | Assuming election or reelection. |
Information Regarding Nominees for Election.Election
Set forth below is the present principal occupation and other business experience during at least the last five years of each nominee for election, as well as a brief discussion of the particular experience, qualifications, attributes and skills that led the Board to conclude that the nominee should serve as a director of FS Bancorp.
Joseph C. Adams is a director and has been the Chief Executive Officer of 1st Security Bank of Washington since July 2004. He has also served in those capacities for FS Bancorp since its formation in September 2011. He joined 1st Security Bank of Washington in April 2003 as its Chief Financial Officer. Mr. Adams served as Supervisory Committee Chairperson from 1993 to 1999 when the bank was Washington’s Credit Union. Mr. Adams is a lawyer, having worked for Deloitte as a tax consultant, K&L Gates as a lawyer and then at Univar USA as a lawyer and Director of Regulatory Affairs. As the Director of Regulatory Affairs for Univar USA, the largest chemical distribution company in the United States, Mr. Adams used his environmental law expertise to ensure Univar stayed in compliance with all relevant local, state and federal environmental laws, rules and regulations. He is a member of the Board of Directors of the Central Washington University Foundation and the Community Bankers of Washington. Mr. Adams received a masters degree equivalent from the Pacific Coast Banking School in 2007. Mr. Adams’ legal and accounting backgrounds, as well as his duties as Chief Executive Officer of 1st Security Bank of Washington, bring a special knowledge of the financial, economic and regulatory challenges faced by the Bank, which makes him well-suited to educating the Board on these matters.
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Pamela M. Andrews joined the law firm of Floyd, Pflueger & Ringer, Seattle, Washington, as Of Counsel in 2021. Prior to that, she was a partner at the law firm of Andrews Skinner, P.S., Seattle, Washington, beginning in 1989, serving as its President from 2005 until 2020. Ms. Andrews’ practice focuses on professional liability, medical malpractice, nursing home/assisted living, mental healthcare, and general civil litigation. She is also active in animal welfare groups and associations in the Puget Sound area. Ms. Andrews adds important skills to the Board, including legal, litigation, insurance, human resources, small business experience and operations management.
Joseph P. Zavaglia has been the owner and operator since February 2008 of Zavaglia Consulting, L.L.C., which provides retail banking and small business advisory services to community banks. He also runs From the Heart of Italy, an Italian cooking school. Mr. Zavaglia started his career in 1975 and over a period of 45 years has worked in numerous areas of banking, including commercial lending, retail and small business banking, human resources, investments, incentive compensation and executive administration with both large national institutions and community banks. Upon retiring from his last executive banking position, he served as a board member for nine years and was an employee of Pacific Coast Banking School. Mr. Zavaglia then worked with the Washington Bankers Association in co-creating four developmental programs and currently serves as an instructor and facilitator for the programs, which are now being offered in throughout the United States. Mr. Zavaglia received his undergraduate degree in Business Management from Seattle University, and his Masters Degree in Education from Western Washington University. He is also a graduate of Pacific Coast Banking School and formerly held Series 6, 63 and 26 securities licenses and his state insurance license for life and disability. Giving back to the communities he serves has been his passion. Mr. Zavaglia served as Chair of the Board of Regents at Seattle University for three years and as a board member for nine additional years, State Board Chair of the March of Dimes for 15 years, Chair of the Italian Studies Board at the University of Washington, Chair of the Deans Advisory Board for Woodring College of Education at Western Washington University for four years. In 2007, he was inducted into the Athletic Hall of Fame at Seattle University. In 2012, he received the Distinguished Alumnus award from the Woodring College of Education, and in 2015, was awarded the University Service Award from Seattle University. Mr. Zavaglia brings strong leadership, management, human resource, and interpersonal skills to our board.
Information Regarding Incumbent Directors
Set forth below is the present principal occupation and other business experience during at least the last five years of each director continuing in office, as well as a brief discussion of the particular experience, qualifications, attributes and skills that led the Board to conclude that the director should serve on FS Bancorp’s Board of Directors.
Ted A. Leech, Board Chair of FS Bancorp and 1st Security Bank, is retired from Univar Corporation. From January 2003 to February 2005, Mr. Leech was Vice President of Business Development where he conducted feasibility studies and investigated potential investments in China, Hong Kong, Singapore, Australia, Malaysia, Indonesia and Brazil. Prior to that, Mr. Leech was Senior Vice President of Administration for Univar USA where he was responsible for accounting, payables/receivables, information systems, treasury, legal, human resources and internal audit. As a result of his professional experiences, Mr. Leech brings strong leadership, management, finance, accounting and human resource skills to our board. Mr. Leech’s expertise also qualifies him as a financial expert, which was the basis of his selection as Chairperson of the Audit Committee.
Marina Cofer-Wildsmith has spent 30 years working in nonprofit management and business development. Her background includes serving as Executive Director of Bainbridge Youth Services from 2012 to 2017, business consulting from 2009 to 2012, and Chief Executive Officer of the American Lung Association of Washington and the Northwest from 2003 to 2007. Other American Lung Association positions held from 1990 to 2003 included program development, marketing and communications. Key career achievements include leading the Washington Smoke Free Restaurants and Bars Initiative, developing with the U.S. Environmental Protection Agency the air quality forecasting model used by the media, promoting strong indoor air quality standards and advocating for other essential air pollution reduction and public health legislation. Ms. Cofer-Wildsmith is very active in the community. Currently, she serves as the President of the Rotary Club of Bainbridge Island. Other board service has included Public-at-Large Director for the Puget Sound Clean Agency from 2005 to 2013 and World Community Service Director for the Rotary Club of Bainbridge Island from 2012 to 2015. She has her Bachelor of Science degree in Biology from the College of William and Mary, Williamsburg, Virginia and her Masters degree in Educational Processes from Maryville University, St. Louis, Missouri. Leadership recognition includes awards from the Chamber of Commerce, Rotary, Environmental Protection Agency, Conservation Federation and Governor
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Gregoire. As a result of her professional experiences and active community involvement, Ms. Cofer-Wildsmith brings strong leadership, management, organization and interpersonal skills to our organization.
Mark H. Tueffers retired in 2016 as owner of Gallina, LLP, a regional CPA firm serving businesses and individuals. Prior to joining Gallina, LLP in 2014, he was a founder and longtime owner of Seattle-area CPA firms, Tueffers, Guckian & Gamon, PLLC and Sutor & Tueffers. He served a diverse clientele including both general contractors and subcontractors, and including women- and minority-owned small businesses. During nearly 30 years of focusing solely on construction industry clients, he developed a substantial expertise in matters of taxation. In the business and financial planning arena, his experience spans a wide range of capabilities. Mr. Tueffers has served as a director of 1st Security Bank since 2013. Prior to serving as a director of 1st Security Bank, he served as a Director of Golf Savings Bank from 2006 to 2010, when it was merged into Sterling Financial Corporation. Mr. Tueffers also served as a Special Advisor to the Board of the American Marine Corporation. He holds a Bachelors Degree in Business Administration (emphasis on accounting) from the University of Washington, and a Juris Doctorate degree from the University of Puget Sound. Mr. Tueffers’ training in accounting and law, experience as a small business owner, long history of advising clients on business transactions and experience as a director of banks suits him to director service.
Michael J. Mansfield spent 16 years with Deloitte LLP before joining Moss Adams LLP in 1995, where he was a partner for more than 10 years. During his time with Moss Adams, Mr. Mansfield served as the lead of the Business Owner Succession Services Practice in the Seattle office and he served as a member of the firm’s Tax Committee. He provided taxation, business, and financial accounting services to a variety of clients in the financial services, construction, manufacturing and distribution, and service industries. In January 2008, Mr. Mansfield left Moss Adams to start Family Fortunes, LLC, a consulting company aimed at assisting individuals and business owners develop and execute strategic plans, with the goals of enhancing value proposition and creating a legacy vision for families and business owners. Mr. Mansfield is also a minority owner/part-time Chief Financial Officer for two construction companies (Pacific Pile & Marine, L.P. and R Miller, Inc.) and a minority owner in seven other privately-owned businesses, in addition to serving on the advisory board of two other private companies. Mr. Mansfield’s 29 years of experience as a public accountant, together with his experience of being part of the management/advisory team of several small- to medium-sized businesses, has provided him with strong leadership, financial and administrative insights that are valuable to FS Bancorp.
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Margaret R. Piesik worked at Microsoft for 11 years until retiring in 1998. She served on the board of directors of the Providence Hospital Foundation from 2001 to 2003 and since 2004 has served as the President of Swedish Medical Center Service League. She is a co-owner of White Barn Farm, a family-owned organic flower and vegetable farm. She previously served on the board of the Kirkland Performance Center. Ms. Piesik is also active in several local service organizations. Ms. Piesik’s managerial experience, together with her experience serving on several boards and active participation in the local community, brings valuable knowledge and skills to our organization.
Information Regarding Incumbent Directors. Set forth below is
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Director Qualifications and Experience
The following table identifies the present principal occupation and other business experience during at least the last five years of each director continuing in office, as well as a brief discussion of the particular experience, qualifications, attributes, and skills that led the BoardNominating and Environmental, Social, Governance Committee considered in making its decision to concludenominate directors to our Board. The fact that a particular attribute was not considered does not mean that the director should serve on FS Bancorp’s lacks such an attribute.
| Adams | Andrews | Cofer-Wildsmith | Leech | Mansfield | Piesik | Tueffers | Zavaglia |
Experience, Qualification, Skill or Attribute | | | | | | | | |
Professional standing in chosen field | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Expertise in financial services or related industry | ✓ | | | | ✓ | ✓ | ✓ | ✓ |
Certified public accountant or financial expert | ✓ | | | ✓ | ✓ | | ✓ | ✓ |
Attorney | ✓ | ✓ | | | | | ✓ | |
Civic and community involvement | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Leadership and team building skills | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Diversity by race, ethnicity or gender | ✓ | ✓ | ✓ | | | ✓ | | |
Specific skills/knowledge: | | | | | | | | |
Finance | ✓ | | ✓ | ✓ | ✓ | | ✓ | ✓ |
Technology | | | | | | ✓ | | |
Securities | ✓ | | | | | | ✓ | ✓ |
Marketing | ✓ | | ✓ | ✓ | | ✓ | | ✓ |
Public affairs | ✓ | | | | | ✓ | | |
Human resources | ✓ | ✓ | ✓ | ✓ | | ✓ | ✓ | ✓ |
Environmental, social and governance | ✓ | | ✓ | | | | | ✓ |
Board of Directors.Independence and Tenure
Our common stock is listed on the Nasdaq Global Select Market. In accordance with Nasdaq requirements, at least a majority of our directors must be independent directors. The Board has determined that seven of our eight directors (87.5%) are independent, as defined by Nasdaq. Directors Andrews, Cofer-Wildsmith, Leech, Mansfield, Piesik, Tueffers and Zavaglia are all independent. Only Joseph C. Adams, who is a director and has been theour Chief Executive Officer, is not independent.
Our goal is to have a diverse mix of 1st Security Bank of Washington since July 2004. He has also served in those capacities fordirectors with the appropriate experience, independence, knowledge, and skills to oversee FS Bancorp sinceand its formation in September 2011. He joined 1st Security Bankmanagement team. As part of Washington in April 2003 as its Chief Financial Officer. Mr. Adams served as Supervisory Committee Chairperson from 1993 to 1999 whenour Board refreshment efforts, the bank was Washington’s Credit Union. Mr. Adams is a lawyer having worked for DeloitteBoard added Pamela M. Andrews as a tax consultant, K&L Gates as a lawyerdirector in January 2021. New directors bring fresh perspectives and then at Univar USA as a lawyer and Director, Regulatory Affairs. He is a membervalued skill sets. The directors have an average tenure of 10.5 years, which the Board believes appropriately balances experience and new outlooks.
Diversity
As part of Directors ofits director nominee evaluation process, the Central Washington University FoundationBoard considers diverse viewpoints, backgrounds and the Community Bankers of Washington. Mr. Adams received a Masters Degree equivalent from the Pacific Coast Banking School in 2007. Mr. Adams’ legal and accounting backgrounds,experiences, as well as his dutiesgender, age, race and ethnicity, as Chief Executive Officer of 1st Security Bank of Washington, bring a special knowledge of the financial, economic and regulatory challenges faced by the Bank which makes him well-suited to educating the Board on these matters.
Joseph P. Zavaglia has been the owner and operator of Zavaglia Consulting, L.L.C. since February 2008, which provides retail banking and small business advisory services to community banks. He also runs From the Heart of Italy, an Italian cooking school. Mr. Zavaglia started his career with Rainier Bank in 1975 in branch operations and was ultimately promoted to manager, overseeing up to 13 branches. From 1987 until 2003, he served as a Senior Vice President and Regional Manager with Security Pacific Bank, which acquired Rainier Bank in 1987, and then with Bank of America, which acquired Security Pacific Bank in 1992. In February 2003, Mr. Zavaglia joined First Mutual Bank as its Executive Vice President, Retail Banking Group manager. After experiencing his seventh bank merger in 2008, he made the decision to begin his consulting company and cooking school. Mr. Zavaglia has formerly held Series 6, 63, and 26 securities licenses and his state insurance license for life and disabilities. He was a member of the board of Pacific Coast Banking School for nine years, was employed as the Director of Extension Programs for four years, and is a 1986 graduate of the program. He was a member of the Pete Gross House Board for 14 years, was chair of the Italian Studies board at the University of Washington, is past State Board Chair for the March of Dimes where he served for 15 years, and is a former mentorimportant in the Seattle University mentorship program and a former memberselection of directors to enhance the Dean’s advisory board forBoard’s diversity. All Board members must also fit the School of Business at Seattle University. Mr. Zavaglia is a member of the Athletic Hall of Fame, Chair of the Board of Regents, and a member of the Hall of Fame selection committee at Seattle University. Additionally, in 2012 he received a Distinguished Alumnus award from the Woodring College of Education of Western Washington University. Mr. Zavaglia’s extensive banking experience, together with his numerous board experiences, educational background and active participation in the local community, brings valuable knowledge, experience and skills to our organization.
Ted A. Leech, Chairman of the Boardculture of FS Bancorp and 1st Security Bank, is retired from Univar Corporation. From January 2003 to February 2005, Mr. Leech was Vice President of Business Development where he conducted feasibility studies and investigated potential investments in China, Hong Kong, Singapore, Australia, Malaysia, Indonesia and Brazil. Prior to that, Mr. Leech was Senior Vice President of Administration for Univar USA where he was responsible for accounting, payables/receivables, information systems, treasury, legal, human resources and internal audit. As a result of his professional experiences, Mr. Leech brings strong leadership, management, finance, accounting and human resource skillsincluding living up to our board. Mr. Leech’s expertise also qualifies him asCore Values and embodying our “Smart, Driven, Nice” commitment. Three of our eight directors are women, and one of our directors is a financial expert, which was the basis of his selection as Chairman of the Audit Committee.
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Marina Cofer-Wildsmith has spent 30 years working in nonprofit management and business development. Currently, Ms. Cofer-Wildsmith is the President Elect of the Rotary Club of Bainbridge Island. Her background includes serving as Executive Director of Bainbridge Youth Services (2012-2017), a business consultant (2009-2012) and Chief Executive Officer of the American Lung Association of Washington, and the American Lung Association of the Northwest (2003-2007). Other American Lung Association positions include Director of Adult Lung Disease and Environmental Lung Health, Director of Program Developments and Director of Marketing ad Communications (1990-2003). Her career achievements include leading the Washington Smoke Free Restaurants and Bars Initiative, developing and mobilizing the air quality forecasting model used by the media nationally, establishing the first regional office of the American Lung Association in the Pacific Northwest, and advocating for other essential legislation to improve public health. Ms. Wildsmith is also very active in the community. She has served on several boards including eight years as a director for the Puget Sound Clean Agency (2005-2013) and three years as a director for the Rotary Club of Bainbridge Island (2012-2015). She has her undergraduate degree in Biology and Anthropology from the College of William and Mary, Williamsburg, VA and her graduate degree in Educational Processes from Maryville University, St. Louis, Missouri. As a result of her professional experiences and active community involvement, Ms. Wildsmith brings strong leadership, management, organization and interpersonal skills to our organization.
Mark H. Tueffers retired in 2016 as owner of Gallina, LLP, a regional CPA firm serving businesses and individuals. Prior to joining Gallina, LLP in 2014, he was a founder and longtime owner of Seattle-area CPA firms, Tueffers, Guckian & Gamon, PLLC and Sutor & Tueffers. He served a diverse clientele including both general contractors and subcontractors. In the course of nearly 30 years of focusing solely on construction industry clients, he developed a substantial expertise in matters of taxation. In the business and financial planning arena, his experience spans a wide range of capabilities. Mr. Tueffers has served as a director of 1st Security Bank since 2013. Prior to serving as a director of 1st Security Bank, he served as a Director of Golf Savings Bank from 2006 to 2010, when it was merged into Sterling Financial Corporation. Mr. Tueffers also served as a Special Advisor to the Board of the American Marine Corporation. He holds a Bachelors Degree in Business Administration (emphasis on accounting) from the University of Washington, and a Juris Doctorate degree from the University of Puget Sound. Mr. Tueffers's training in accounting and law, experience as a small business owner, long history of advising clients on business transactions and experience as a director of banks suits him to director service.racial minority.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
AND CORPORATE GOVERNANCE MATTERS
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE MATTERS |
Board of Directors
The Boards of Directors of FS Bancorp and 1st Security Bank conduct their business through board and committee meetings. During the fiscal year ended December 31, 2019,2020, the Boards of Directors of FS Bancorp and 1st Security Bank each held nine10 meetings. No director of FS Bancorp or the Bank attended fewer than 75% of the total meetings of the boards and committees on which that person served during this period.
Committees and Committee Charters
The Board of Directors of FS Bancorp has standing Audit, Compensation, and Nominating/Nominating and Environmental, Social, Governance committees. The Board has adopted written charters for each of these committees, copies of which are available on our website at www.FSBWA.com under “Investor Relations.” The directors’ current memberships on the committee is reflected below. Joseph C. Adams, our Chief Executive Officer, is not a member of any of these committees as they are comprised solely of independent directors.
| | | | | Nominating and Environmental, Social, Governance Committee |
| | | | | |
Pamela M. Andrews | | | | | ✓ |
Marina Cofer-Wildsmith | ✓ | | | | ✓ Chair |
Ted A. Leech | ✓ Chair | | ✓ | | |
Michael J. Mansfield | ✓ | | ✓ Chair | | |
Margaret R. Piesik | | | ✓ | | ✓ |
Mark H. Tueffers | ✓ | | | | |
Joseph P. Zavaglia | | | ✓ | | ✓ |
Audit Committee. The Audit Committee consists of Directors Leech (Chairperson), Mansfield, Tueffers and Cofer-Wildsmith. The Audit Committee meets at least quarterly and its primary responsibilities are to (1) meet with both the internal and external auditors on behalf of the Board of Directors to review and discuss their findings, and to make recommendations to the Board regarding the selection of the external auditors and (2) work closely with our compliance officer to monitor compliance with all applicable laws and regulations. The Audit Committee met nine times during the year ended December 31, 2019.2020. Please refer to the section entitled, “Audit Committee Matters” for additional information.
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Each member of the Audit Committee is “independent” in accordance with the requirements for companies listed on The Nasdaq Stock Market LLC (“Nasdaq”). In addition, the Board of Directors has determined that Mr. Leech, Mr. Tueffers, and Mr. Mansfield meet the definition of “audit committee financial expert,” as defined by the SEC.
Compensation Committee. The Compensation Committee consists of Directors Mansfield (Chairperson), Leech, Zavaglia and Piesik. The Committee is responsible for the recommendation to the Board of Directors of the Chief Executive Officer’s annual compensation package, as well as Board compensation, Chief Executive Officer evaluation, the review and approval of executive incentive packages and perquisite programs, and overseeing and administering our qualified, tax exempt benefit plans. Each member of the Committee is “independent,” in accordance with the requirements for companies listed on Nasdaq. This Committee met nine times during the year ended December 31, 2019.2020.
Nominating/Nominating and Environmental, Social, Governance Committee. The Nominating/Nominating and Environmental, Social, Governance Committee which consists of Directors Cofer-Wildsmith (Chairperson), Piesik and Zavaglia, is responsible for developing(1) reviewing issues and recommendingdevelopments related to corporate governance policiesissues, (2) identifying individuals qualified to serve as directors, consistent with Board-approved criteria, (3) recommending to the Board nominees for election or appointment to the Board of Directors and guidelines(4) overseeing the environmental and social responsibility activities and practices for FS Bancorp, and identifying and recommending director and committee member candidates. The Committee meets at least four times a year.Bancorp. Each member of the Committee is “independent,” in accordance with the requirements for companies listed on Nasdaq. This Committee met seven13 times during the year ended December 31, 2019.2020.
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Only those nominations made by the Nominating/Nominating and Environmental, Social, Governance Committee or properly presented by shareholders will be voted upon at the annual meeting. In its deliberations for selecting candidates for nominees as director, the Committee considers the candidate’s knowledge of the banking business and involvement in community, business and civic affairs, diversity factors and also considers whether the candidate would provide for adequate representation of 1st Security Bank’s market area. Any nominee for director made by the Committee must be highly qualified with regard to some or all these attributes. In searching for qualified director candidates to fill vacancies on the Board, the Committee solicits its current Board of Directors for names of potentially qualified candidates. Additionally, the Committee may request that members of the Board of Directors pursue their own business contacts for the names of potentially qualified candidates. The Committee would then consider the potential pool of director candidates, select the candidate it believes best meets the then-current needs of the Board, and conduct a thorough investigation of the proposed candidate’s background to ensure there is no past history that would cause the candidate not to be qualified to serve as one of our directors. Although the Nominating/Governance Committee charter does not specifically provide for the consideration of shareholder nominees for directors, the Committee will consider director candidates recommended by a shareholder that are submitted in accordance with our Articles of Incorporation. Because our Articles of Incorporation provide a process for shareholder nominations, the Committee did not believe it was necessary to provide for shareholder nominations of directors in its charter. If a shareholder submits a proposed nominee, the Committee would consider the proposed nominee, along with any other proposed nominees recommended by members of our Board of Directors, in the same manner in which the Committee would evaluate its nominees for director. For a description of the proper procedure for shareholder nominations, see “Shareholder Proposals” in this proxy statement.
Corporate Governance
Governance Highlights. To further our commitment and oversight of environmental, social and governance matters, the Governance and Nominating Committee is now the Nominating and Environmental, Social, Governance Committee, and has expanded its purposes. Highlights of FS Bancorp’s corporate governance include the following:
• Independent Board Chair;
• Seven of eight directors are independent;
• Board committees are comprised entirely of independent directors;
• Independent directors meet in regular executive sessions throughout the year;
• Regular Board and committee self-evaluations;
• Policy restricts hedging;
• Alignment of director and shareholder interests; and
• Use of clawback provisions in executive pay.
We are committed to establishing and maintaining high standards of corporate governance. The Board of Directors adoptedhave a corporate governance policy that covers the following:
the duties and responsibilities of each director;
director, as well as the composition, responsibilities and operation of the Board of Directors;
the establishment and operation ofits committees. The policy also addresses succession planning, executive Board committees;
convening executive sessions, of independent directors;
the Board’s interaction with management and third parties;parties, and
regular Board and Chief Executive Officer performance evaluations.
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These initiatives are intended to comply with the provisions contained in the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC adopted thereunder, and Nasdaq rules. Our Board of DirectorsWe will continue to evaluate and improve our corporate governance principles and policies as necessary and as required.appropriate.
Director Independence.Leadership Structure. Our commonFS Bancorp has separated the roles of Board Chair and Chief Executive Officer. The Board Chair, who is an independent director, leads the Board and presides at all Board meetings. The Board believes it is important to have an independent director in a Board leadership position and has had an independent Board Chair since FS Bancorp’s incorporation in 2011. Having an independent Board Chair enables non-management directors to raise issues and concerns for Board consideration without immediately involving management. The Board Chair also serves as a liaison between the Board and senior management.
Executive Sessions. Board meetings are held regularly throughout the year. At the conclusion of Audit Committee meetings and Board meetings, the independent directors hold executive sessions.
Shareholder Communication. We are committed to open and ongoing dialog with our shareholders and we regularly seek feedback on a variety of issues, including business strategy, governance, executive compensation and any other topics shareholders wish to discuss. To this end, each year we engage with our shareholders in a
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variety of ways in order to obtain their feedback. In 2020, this engagement process included seven investor conferences, quarterly earnings calls and communication between our investor relations team and members of our senior management team and shareholders. The feedback was consistent with prior years with shareholders most commonly recommending stock repurchases when our stock is listedundervalued and consideration of increasing the dividend given the lower than average payout ratio.
In 2021, we will add a new component of our shareholder engagement effort focused on corporate governance, executive compensation, corporate social responsibility, and other environmental, social and governance matters of interest to our shareholders. A few shareholders recently expressed the Nasdaq Global Select Market. In accordanceview that they are looking for progress over time on FS Bancorp’s governance practices, continued evolution and disclosure on FS Bancorp’s philanthropic, environmental and social responsibilities.
The Board of Directors welcomes communication from our shareholders. Shareholders may mail communications to the Board of Directors, FS Bancorp, Inc., 6920 220th Street SW, Mountlake Terrace, Washington 98043 or may email the Chief Financial Officer, Matthew Mullet, at mattm@fsbwa.com. Shareholders should indicate clearly the director or director(s) to whom the communication is being sent so that each communication may be forwarded appropriately.
Board Involvement in Risk Management Process. As part of its overall responsibility to oversee the management, business, and strategy of FS Bancorp, one of the primary responsibilities of our Board of Directors is to oversee the amounts and types of risk taken by management in executing the corporate strategy, and to monitor our risk experience against the policies and procedures set to control those risks. The Board’s risk oversight function is carried out through its approval of various policies and procedures, such as our lending and investment policies; ratification or approval of investments and loans exceeding certain thresholds; and regular review of risk elements such as interest rate risk exposure, liquidity, and problem assets. Some oversight functions are delegated to committees of the Board, with Nasdaq requirements,such committees regularly reporting to the full Board the results of their oversight activities. For example, the Audit Committee is responsible for oversight of the independent registered public accounting firm and meets directly with the firm at various times during the course of the year.
Board Oversight of Information and Cybersecurity. As a financial institution, cybersecurity presents a significant operational and reputational risk. Accordingly, we take the protection of customer and business information very seriously. We have developed a robust information/cyber security program designed to protect the confidentiality, integrity, and availability of business and customer information. As part of this program, our Chief Information Officer reports to the Audit Committee of the Board of Directors at least quarterly. Reports include information and cyber security assessment results, business continuity, disaster recovery, and incident response planning and testing, patch management program status, vendor management program status, and independent audit results. All information security-related policies are reviewed and approved annually by the Audit Committee.
We promote a majorityculture of continued learning that has resulted in a highly experienced information security team that holds advanced certifications and master’s degrees in cybersecurity. In addition to our directors must beown experienced information security team, we also partner with industry experts for managed security services such as threat intelligence, firewall, intrusion detection, and intrusion prevention services to ensure protection around the clock. Highlights of the information and cybersecurity program include the following:
Advanced cybersecurity education for employees;
Deployment of defense-in-depth strategy with multiple layers of controls to provide information protection;
Engagement of third-party audit firms to conduct independent directors.security assessments that include vulnerability assessments and penetration tests; and
Conduct of new and ongoing security awareness training for all teammates across the organization.
Succession Planning. The Board has determinedbelieves that sixone of our seven directors are independent, as defined by Nasdaq. Directors Cofer-Wildsmith, Leech, Mansfield, Piesik, Tueffersits primary responsibilites is to oversee the development and Zavaglia are all independent. Only Joseph C. Adams, whoretention of senior talent and to ensure that an appropriate succession plan is in place for our Chief Executive Officer is not independent.and other members of senior management. The Board, Compensation Committee, Nominating
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and Environmental, Social, Governance Committee and the Chief Executive Officer regularly review senior management talent and succession planning.
Code of Business Conduct and Ethics. On December 15, 2016, the Board of Directors updated our Code of Business Conduct and Ethics, which is designed to deter wrongdoing and to promote honest and ethical conduct in every respect. The Code addresses conflicts of interest, the treatment of confidential information, general employee conduct and compliance with applicable laws, rules and regulations. The Code is applicable to each of our directors, officers, including the principal executive officer and senior financial officers, and employees and requires individuals to maintain the highest standards of professional conduct. A copy of the Code of Ethics is available on our website at www.FSBWA.com.
Shareholder Communication with the Board of Directors. The Board of Directors welcomes communication from shareholders. Shareholders may send communications to the Board of Directors, FS Bancorp, Inc., 6920 220th Street SW, Mountlake Terrace, Washington 98043. Shareholders should indicate clearly the director or director(s) to whom the communication is being sent so that each communication may be forwarded appropriately.www.FSBWA.com.
Annual Meeting Attendance by Directors. FS Bancorp encourages, but does not require, its directors to attend the annual meeting of shareholders. Four directorsAs a result of the COVID-19 pandemic, the only director who attended the 20192020 annual meeting of shareholders.shareholders was Joseph C. Adams, our Chief Executive Officer.
Corporate Responsibility
Workplace Culture. Our Vision Statement truly captures our culture: “To Build a Truly Great Place to Work and Bank.” The order of the words “work” and “bank” are intentional. We believe if you build a great place to work, it will by its nature become a great place to bank. There is also tremendous public company data available that shows companies with intentionally great work environments outperform companies with avearage corporate cultures. Our commitment to building a great workplace culture began in 2009. Not surprisingly, our financial performance has improved dramatically since we made that culture commitment. The awards we have received over the years validate our decision to have a “people centric” culture that strives to hire and promote “Smart, Driven, Nice” teammates. These awards include:
American Banker’s Top 200 Publicly Traded Bank, fifth consecutive year;
5-star bank rating by BauerFinancial;
Independent Community Bankers Association 2020 Top Mortgage and Consumer Lenders for financial institutions with assets of $1 billion or more;
American Banker’s Best Banks to Work For 2020, top 10 nationwide;
2020 Puget Sound Business Journal Best Workplaces – 5th consecutive year;
Puget Sound Business Journal’s 2020 Top Corporate Philanthropists, medium companies;
Listed by Depositaccounts.com as one of healthiest 200 banks in United States;
Listed by Hovde Group as one of the High Performing Small Cap Banks; and
Investment grade rated by Kroll at BBB for senior debt and BBB- for subordinated debt.
Response to COVID Pandemic. As the COVID-19 pandemic began having widespread impact in the spring of 2020, we once again relied upon our Vision Statement, Core Values and Business Philosophy to determine the best course of action. The Chief Executive Officer and Chief Financial Officer began having all-staff video calls every other Friday starting March 20, 2020 to keep employees informed as the pandemic worsened. By the April 3, 2020 all-staff call, the stock market had fallen precipitously, 1st Security Bank friends and family were losing their jobs and there was a tremendous amount of fear regarding health and financial concerns. As a result, on the April 3rd all-staff call, the Chief Executive Officer announced, “Operation Safe and Secure 2020.” The Chief Executive Officer and Chief Financial Officer explained the premise behind the Operation. They explained that our employees are our most important asset and due to the pandemic, it became imperative to protect that critical asset. Operation Safe and Secure 2020 had two primary objectives. The first objective, “Safe,” was to provide for the safety of our employees’ and customers’ health during this time of pandemic. The second objective, “Secure,” was to protect the financial security of our employees. Since the pandemic began, 1st Security Bank has had no layoffs or furloughs.
Diversity. Our Core Value, “Diversity—we celebrate diversity and support equality for all” was established over a decade ago. We are striving for diversity in all areas. Currently, half of our senior executive team and three of our eight directors are women. The Chief Executive Officer and one other senior executive offcer are racial minorities. In line with our Core Value of diversity, we were the only bank that publicly supported marriage equality in Washington State and the only community bank to sign the amicus brief to the U.S. Supreme Court supporting marriage equality nationally. In November 2013, our Chief Executive Officer hosted a press
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conference at our Capitol Hill bank branch where he introduced United States Senator Patty Murray and she thereafter called on the United States House of Representatives to pass the Employment Non-Discrimination Act.
Environmental, Social and Governance Criteria. As discussed previously, our Core Values reflect our commitment to diversity, equality, inclusiveness and social awareness. To further our commitment to and oversight of these values, our Governance and Nominating Committee was renamed and became the Nominating and Environmental, Social, Governance Committee in 2020. A copy of our Core Values, Business Philosophy, Vision and Mission Statements are available on our website at www.FSBWA.com.
We undertook numerous social efforts in 2020 and in the recent past. These include:
Financial and volunteer support of The IF Project, which assists soon to be released inmates prepare for life after incarceration;
1st Security Bank all-staff call dedicated to discussing the tragic death of George Floyd and the need to end discrimination in all its forms;
Financial and volunteer support of Community Reinvestment Act activities; and
Commitment to keep branches open and add jobs in economically hard-hit areas in connection with the 2018 acquisition of Anchor Bancorp.
Many of our efforts focus on employee satisfaction. These include:
Employee education grant program of up to $5,000 per year to pursue a degree program;
Employee education loan forgiveness program of up to $5,000 in 2020 in with the CAREs Act;
Commitment to identifying and assisting employees who face hardships;
Internal employee wellness and fitness challenge programs;
Employee Satisfaction Task Force, through which one person from each department has monthly meetings with the Chief Human Resources Officer to make 1st Security Bank the best possible workplace;
Our Chief Financial Officer’s commitment to not increasing the employee portion of healthcare expenses, despite rising costs.
We also have a commitment to environmental issues:
Vast majority of our Indirect dealers are in solar, multiple pane windows, siding or roofing (all supporting the environment);
Financing of marine lending during the pandemic to support families wanting to spend family time in a COVID-19 free environment;
1st Security Bank remote employees have reduced fuel consumption and emissions;
All potential loans with possible environmental challenges are reviewed by a former EPA biologist to ensure the loan will not trigger environmental liability for 1st Security Bank and to ensure our prospective customer is not buying something hazardous to their health (ground water, soil or vapor related health concerns);
We have worked with our various public utility districts on energy efficiency initiatives, including eight projects with energy savings ranging from 25% to 92% and two more projects planned for 2021;
Montesano branch is a Green-certified building;
Our critical technology infrastructure is housed at the Sabey Datacenter, which has many sustainability initiatives including:
o | Energy Star Certification |
Ongoing project replacing our HVAC units with units that contain environmentally safe refrigerant and 20% increased energy efficiency;
Ongoing project to replace fluorescent bulbs with LEDs, which use 75% less energy and last nine years longer than fluorescent bulbs, decreasing landfill waste;
Light and movement sensors installed in many locations turn off lights in unoccupied areas;
Recycling where permitted by the public utility;
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Ongoing efforts to go paperless; and
Purchases of recycled paper.
Our power provider purchases 80% of its power from the federal Bonneville Power Administration, the majority of which is generated by renewable hydroelectric projects. In 2020, our employees traveled less than half the amount they did in 2019, leading to a savings of 101 tons of carbon dioxide, or 61%.
Transactions with Related Persons.Persons
1st Security Bank has followed a policy of granting loans to officers and directors, which fully complies with all applicable federal regulations. Loans to directors and executive officers are made in the ordinary course of business and on the same terms and conditions as those of comparable transactions with all customers prevailing at the time, other than those made under the Bank’s employee loan program, which is described below. Loans to directors and officers are made in accordance with our underwriting guidelines, and do not involve more than the normal risk of collectibilitycollectability or present other unfavorable features. These loans are reviewed by the Chief Credit Officer and are acted on by 1st Security Bank’s Board of Directors.
The employee loan program applies to a mortgage loan to purchase or refinance a home. Standard loan terms and underwriting qualifications apply, as do the following benefits: (1) a credit of 1% of the base loan amount will be given to offset our standard loan origination fee; (2) an owner-occupied transaction will also be given an additional credit of $1,195 to offset the processing fee; and (3) the wire transfer fee will be waived. The table below provides information regarding our directors and executive officers who had indebtedness and principal payable thereon pursuant to the employee loan program that exceeded $120,000 during the years ended December 31, 20192020 and 2018.2019.
Name | | Year ended December 31, | | Type of loan | | Amount involved in the trans- action ($)(1) | | Amount out- standing at end of period ($) | | Principal paid during the period ($) | | Interest paid during the period ($) | | Interest rate (%) | | | | | | Amount involved in the trans- action ($)(1) | | Amount out- standing at end of period ($) | | Principal paid
during the period ($) | | Interest paid during the period ($) | | Interest |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Donn C. Costa | | 2019 | | First mortgage | | 248,752 | | 239,096 | | 9,656 | | 7,332 | | 3.00 (2) | | 2020 | | First mortgage | | 239,096 | | 225,142 | | 13,954 | | 7,027 | | 3.00 |
| | 2018 | | First mortgage | | 259,479 | | 248,752 | | 10,727 | | 7,626 | | 3.00 (2) | | 2019 | | First mortgage | | 248,752 | | 239,096 | | 9,656 | | 7,332 | | 3.00 |
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(1) | Consists of the largest amount of principal outstanding during the year. |
(2) | Prevailing rate at time loan was made was 3.25%, with a .25% reduction for automatic payment. |
We recognize that transactions between us and any of our directors or executive officers can present potential or actual conflicts of interest and create the appearance that these decisions are based on considerations other than our best interests. Therefore, as a general matter and in accordance with our Code of Business Conduct and Ethics, it is our preference to avoid such transactions. Nevertheless, we recognize that there are situations where
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such transactions may be in, or may not be inconsistent with, our best interests. Accordingly, the Code requires the Board of Directors or a committee of the Board to review and, if appropriate, to approve or ratify any such transaction. If a Board member is a participant in the transaction, then that member is required to abstain from the discussion, approval or ratification process. After its review, the Board or committee will only approve or ratify those transactions that are in, or are not inconsistent with, our best interests, as determined in good faith.
Leadership Structure
FS Bancorp has separated the roles of Chairman and Chief Executive Officer. The Chairman, who is an independent director, leads the Board and presides at all Board meetings. The Board supports having an independent director in a Board leadership position and has had an independent Chairman for many years. Having an independent Chairman enables non-management directors to raise issues and concerns for Board consideration without immediately involving management. The Chairman also serves as a liaison between the Board and senior management.
Board Involvement in Risk Management Process
As part of its overall responsibility to oversee the management, business and strategy of FS Bancorp, one of the primary responsibilities of our Board of Directors is to oversee the amounts and types of risk taken by management in executing the corporate strategy, and to monitor our risk experience against the policies and procedures set to control those risks. The Board’s risk oversight function is carried out through its approval of various policies and procedures, such as our lending and investment polices; ratification or approval of investments and loans exceeding certain thresholds; and regular review of risk elements such as interest rate risk exposure, liquidity and problem assets. Some oversight functions are delegated to committees of the Board, with such committees regularly reporting to the full Board the results of their oversight activities. For example, the Audit Committee is responsible for oversight of the independent registered public accounting firm and meets directly with the firm at various times during the course of the year.
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The following table shows the compensation paid to our directors for the year ended December 31, 2019,2020, with the exception of Joseph C. Adams, who is our Chief Executive Officer and whose compensation is included in the section entitled “Executive Compensation.”
Each director of 1st Security Bank is also a director of FS Bancorp. The directors received no additional compensation for attendance at any meeting of FS Bancorp’s Board of Directors during the year ended December 31, 2019.2020. The directors are compensated for their service on 1st Security Bank’s Board of Directors. In 2019,2020, non-employee directors of 1st Security Bank received a retainer of $3,500 per month, except for the Chairman of the Board Chair, who received $4,500 per month, for service on the Board. Directors also receive the following additional fees: for the committee chairs, an annual retainer of $3,600; Board meeting attendance fees of $750 for each meeting attended in person and $250 for each meeting attended by teleconference; and a committee meeting attendance fee of $500. As a result of the COVID-19 pandemic, Board meetings were held virtually via web conferencing and were treated as if they had been held in person for purposes of meeting attendance fees. 1st Security Bank’s Compensation Committee recommends to the Board of Directors the amount of fees paid for service on the Board. Directors are provided or reimbursed for travel and lodging and other customary out-of-pocket expenses incurred in attending board and committee meetings, industry conferences and continuing education seminars.