Joseph C. Adams
About Joseph C. Adams
Joseph C. Adams, 65, is Chief Executive Officer of 1st Security Bank of Washington (since July 2004) and a director of FS Bancorp, Inc. (first appointed/elected 2005; current term to 2027) . He holds a BBA in Finance (University of Hawaii, with Distinction), a JD (University of Puget Sound, cum laude), and graduated with honors from Pacific Coast Banking School (2007); he is a member of the Washington State Bar Association . Under his leadership, 2024 results included net income of $35.0 million, ROA of 1.18%, NIM of 4.30%, tangible book value growth of 13.8%, and cumulative TSR value of $145.99 on a $100 investment (2019–2024) . FS Bancorp also reported book value per share of $38.26 (vs. $34.36 in 2023) and increased cash dividends to $1.06 per share in 2024 .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| 1st Security Bank of Washington | Chief Executive Officer | 2004–present | Led growth, risk management, succession planning; delivered consistent profitability and tangible book value growth . |
| 1st Security Bank of Washington | Chief Financial Officer | 2003–2004 | Established financial leadership pre-CEO tenure . |
| Washington’s Credit Union (predecessor) | Supervisory Committee Chairperson | 1993–1999 | Governance oversight before conversion to bank structure . |
| Univar USA | Lawyer; Director of Regulatory Affairs | Pre‑2003 (years not disclosed) | Drove environmental compliance for largest U.S. chemical distributor . |
| K&L Gates | Lawyer | Not disclosed | Legal practice (tax/regulatory) . |
| Deloitte | Tax Consultant | Not disclosed | Tax advisory experience . |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| Washington State Bar Association | Member | Not disclosed | Active attorney credential . |
| Community Bankers of Washington | Board member (prior) | Not disclosed | Industry engagement . |
Fixed Compensation
| Year | Base Salary ($) | Change vs prior year | CEO Pay Ratio |
|---|---|---|---|
| 2024 | 590,000 | +12.38% vs. 2023 | 27:1 (vs. median employee $57,107) |
| 2023 | 525,000 | — | — |
- Compensation philosophy emphasizes competitiveness, performance linkage, ownership alignment, and risk balance .
- Say‑on‑pay support exceeded 95% in 2024, indicating strong shareholder alignment .
Performance Compensation
Annual Incentive (2024)
| Component | Target | Actual Payout | Dollar Outcome | Key performance references |
|---|---|---|---|---|
| Annual cash incentive | 50% of base salary | 87.5% of base salary | 516,000 | Net income $35.0m; ROA 1.18%; NIM 4.30%; TBV +13.8%; deposit growth ex‑brokered +$105.2m; nonperforming assets 0.45% |
- “Most important” measures used to link pay and performance: Net Income, Net Interest Margin, Efficiency Ratio, Return on Assets, Relative TSR .
- No disclosure of metric weightings/thresholds for the annual plan; Compensation Committee applies holistic assessment and discretion with risk guardrails (capital, liquidity, regulatory exam, 401(k) match, dividends) .
Long‑Term Equity Incentives (granted 8/15/2024)
| Instrument | Grant date | Shares/Options | Exercise/Price | Vesting | Grant Date Fair Value ($) |
|---|---|---|---|---|---|
| Restricted Stock | 8/15/2024 | 7,000 | — | 20% annually, starting 8/15/2025 | 293,860 |
| Stock Options | 8/15/2024 | 14,000 | 41.98 | 20% annually, starting 8/15/2025 | 160,860 |
| Total | — | — | — | — | 454,720 |
- Option value only realized if stock appreciates above strike; grants align with shareholders; fixed grant timing and FMV exercise prices mitigate “spring‑loading” risks .
- 2024 realized compensation events: option exercises (92,640 shares; $1,912,757 value) and stock vesting (7,920 shares; $332,482) .
Outstanding Equity (as of 12/31/2024)
| Category | Detail |
|---|---|
| Unvested stock | 21,820 shares; market value $895,929 (at $41.06) . |
| Option tranches (examples) | 14,400 exercisable / 9,600 unexercisable @ $35.46 (8/13/21); 9,000 / 13,500 @ $30.94 (8/15/22); 3,900 / 15,600 @ $30.73 (8/15/23); 0 / 14,000 @ $41.98 (8/15/24) . |
Equity Ownership & Alignment
| Measure | Value |
|---|---|
| Direct/RS/ESOP/other shares | 155,045 shares |
| Stock options exercisable within 60 days | 50,340 options |
| Total beneficial ownership | 205,385 (2.6% of outstanding) |
| Shares outstanding (record date) | 7,756,000 |
| Unvested shares (12/31/24) | 21,820 ($895,929 at $41.06) |
| Ownership guidelines | CEO minimum 3x base salary; all NEOs compliant as of 12/31/24 |
| Hedging/pledging | Prohibited; no exceptions noted as of proxy date |
- Insider policy imposes blackouts; only 10b5‑1 compliant trading permitted during windows .
- Director and executive stock ownership policies require retention of 50% of net-after-tax vested shares until guideline met .
Employment Terms
| Provision | Key terms |
|---|---|
| CEO Severance Agreement | Lump sum equal to 24 months of base compensation if terminated without cause, resignation for “good reason,” or upon change in control (single‑trigger payment) . |
| “Good reason” (CEO) | Salary reduction or elimination of significant compensation (unless broad‑based), material adverse duty changes, or material relocation . |
| Equity acceleration on death/disability | Acceleration under 2013 and 2018 equity plans . |
| Change‑in‑control (equity) | 2013 plan: single‑trigger full acceleration; 2018 plan: double‑trigger (CIC plus qualifying termination), or accelerate at CIC if awards not assumed/replaced with equivalent value . |
| Estimated payouts (12/31/24) | CEO: severance $1,180,000 (involuntary and CIC), equity acceleration value $1,348,107 (death/disability; CIC conditions per plan) . |
| Clawback | Clawback in place since 2012; updated in 2023 for Exchange Act Section 10D/Nasdaq Rule 5608 . |
| Perquisites/SERP | Typical benefits only; no significant perqs; no SERP; no tax gross‑ups; no option repricing . |
Board Governance and Director Service
- Board service: Director since 2005 (includes prior service at the Bank); term to expire 2027; age 65 .
- Independence: Not independent (CEO); 6 of 7 directors independent; independent Board Chair (Ted A. Leech) .
- Committees: All committees are independent; CEO is not a member of Audit, Compensation, or Governance, Nominating and Culture Committees .
- Meetings/attendance: 9 Board meetings in 2024; no director attended fewer than 75% of meetings .
- Anti‑pledging/anti‑hedging; executive sessions held regularly .
Director Compensation Context (for dual‑role considerations)
- As CEO, Adams’ compensation is reported in the Executive Compensation section; he does not receive separate director fees (director compensation table excludes him) .
- Say‑on‑pay approval in 2024 exceeded 95% , and the Compensation Committee consists entirely of independent directors .
Compensation Structure Analysis
- Mix and trend: 2024 base salary increased 12.38% to $590,000, while at‑risk pay remained significant via annual incentive (87.5% of base) and equity grants ($454,720) — demonstrating continued emphasis on performance and long‑term alignment .
- LTI design: Balanced RS + options with 5‑year pro‑rata vesting supports retention and alignment; fixed grant timing and FMV exercise prices reinforce governance .
- Risk controls: Robust clawback, anti‑hedging/pledging, ownership guidelines, and committee discretion with regulatory/capital guardrails .
- Peer benchmarking: Uses a defined peer group for competitiveness; no disclosed target percentile; independent consultant (Pearl Meyer) retained by the Committee .
Related Party Transactions and Red Flags
- Employee loan program table for 2024 lists only Donn C. Costa; Adams not listed in transactions exceeding $120,000 .
- Explicit prohibitions: no tax gross‑ups, no option repricing, no SERP .
- Pledging/hedging prohibited; no exceptions noted .
Performance & Track Record
| Metric | 2024 | 2023 | Notes |
|---|---|---|---|
| Net Income ($m) | 35.0 | 36.1 | Resilient through rate headwinds . |
| Net Interest Margin | 4.30% | 4.48% | — |
| Nonperforming Assets (% assets) | 0.45% | 0.37% | Asset quality remained strong . |
| TBV per share | $36.02 (TBV) vs. $31.64 prior; +13.8% | — | TBV growth cited . |
| BV per share | $38.26 | $34.36 | — |
| Cumulative TSR value (since 12/31/2019) | $145.99 (FSBW) | Peer index $132.44 | Based on $100 initial investment with dividends reinvested . |
| ROA | 1.18% | 1.27% | Pay‑versus‑performance table . |
Equity Overhang and Potential Selling Pressure
- 2024 realized exercises (92,640 options) and stock vesting (7,920 shares) indicate periodic liquidity events; future scheduled vesting from 2024 grants equals 1,400 RS shares and 2,800 options vesting on 8/15/2025, with similar annual tranches through 2029 if employed .
- Anti‑pledging and 10b5‑1 policy reduce risk of forced selling and improve trade transparency .
Compensation Peer Group (benchmarking context)
Alerus Financial; Bank of Marin; BayCom; Camden National; CapStar Financial; Coastal Financial; First Northwest; Five Star Bancorp; HarborOne; Home Bancorp; HomeTrust; Independent Bank; Mercantile Bank; Meridian; Northrim; Sierra Bancorp; Timberland Bancorp; Waterstone Financial .
Employment Contract Economics (Change‑in‑Control)
- CEO severance: single‑trigger cash severance (24 months base) upon change in control; equity awards under 2018 plan require double‑trigger unless not assumed; 2013 plan single‑trigger accelerates .
- Estimated CEO severance and equity values (as of 12/31/24): $1.18m cash; $1.35m equity acceleration under specified conditions .
Investment Implications
- Alignment and pay‑for‑performance: High say‑on‑pay (95%+) and substantial at‑risk pay tied to bank performance and TSR are positives; ownership at 2.6% and strict anti‑hedging/pledging strengthen alignment .
- Retention risk: Five‑year pro‑rata vesting across multiple grant vintages plus ownership guidelines support retention; CEO severance (24 months base) provides stability, though single‑trigger CIC cash is moderately shareholder‑unfriendly versus pure double‑trigger constructs .
- Trading signals: Regular annual vesting (Aug 15) and options nearing vesting could create predictable windows of potential selling, though 10b5‑1 and blackout policies temper timing risks .
- Execution track record: TBV compounding (+13.8% in 2024), strong asset quality, and above‑peer cumulative TSR over 2019–2024 indicate effective execution through rate cycles; watching margin pressure (NIM down YoY) and credit normalization remains prudent .
- Governance quality: Independent chair, majority‑independent board, robust clawback, and committee independence offset CEO/director dual‑role concerns .