Jeffrey S. Lyon

About Jeffrey S. Lyon

Jeffrey S. Lyon (age 72 as of Dec 31, 2024) is an independent director of Heritage Financial Corporation and has served on the board since 2001; he currently chairs the Compensation Committee and sits on the Audit and Finance Committee, bringing five decades of commercial real estate expertise alongside executive leadership credentials (BA in real estate and finance, University of Oregon; CCIM) . He is Chairman Emeritus of Kidder Mathews (Chairman 2000–2023; CEO until July 1, 2020; retired as Chairman Jan 1, 2023), and is recognized by Nasdaq as financially sophisticated for audit committee service .

Past Roles

External Roles

Board Governance

• Independence and Structure: All nine HFWA director nominees are independent; HFWA separates Chair and CEO roles, with independent Board Chair and a Lead Independent Director structure .
• Committee Assignments (2024): Lyon chairs Compensation and serves on Audit and Finance; Audit met 9x, Compensation 5x, Corporate Governance & Nominating 8x, Risk & Technology 5x .
• Attendance/Engagement: Board held 10 regular meetings in 2024; independent directors met in executive session after each meeting; no director attended fewer than 75% of Board and committee meetings; all directors attended the 2024 annual meeting .
• Compensation Committee Interlocks: Compensation Committee members (Ellwanger, Giacobbe, Lyon, Rivera, Watson) were all independent; no officer roles or relationships requiring disclosure (no interlocks) .
• Shareholder Outreach: HFWA engaged 15 largest institutional investors (~54% of outstanding shares) with participation from Board Chair, Lead Independent Director, Compensation Chair, and Corporate Governance Chair; feedback supportive, with disclosure enhancements suggested .

Fixed Compensation

Performance Compensation

• HFWA’s director equity is time-based RSUs; performance-based metrics are applied to NEO incentives under the committee Lyon chairs, evidencing pay-for-performance oversight .
• 2024 Annual Incentive Metrics (NEOs):
  | Corporate Goal | Weighting | Threshold | Target | Maximum | Actual 2024 Performance | % of Target Achieved | |---|---|---:|---:|---:|---:|---:| | Diluted EPS | 40% (35% for CRO) | $1.50 | $2.00 | $2.50 | $1.24; adjusted to $1.80 for incentives | 80% | | Net Charge Offs (Recoveries)/Avg Loans | 20% (30% for CRO) | 0.11% | 0.06% | 0.01% | 0.06% | 100% | | Overhead Ratio | 40% (35% for CRO) | 2.39% | 2.24% | 2.04% | 2.22% | 105% |
• Deferred Compensation (NEOs): 2024 goals mirrored EPS and net charge offs; February 2025 committee-approved contributions based on 2024 performance were $131,819 (CEO), $96,300 (President), $74,923 (CFO), $61,977 (CRO) .

Other Directorships & Interlocks

Expertise & Qualifications

• Commercial Real Estate Leadership: 50 years of Puget Sound CRE experience; Kidder Mathews Chairman/CEO; CCIM designation .
• Financial Literacy: Recognized as financially sophisticated for audit committee service .
• Governance and Compensation Oversight: Compensation Chair with oversight of performance-based pay, clawbacks, stock ownership rules, and independent consultants .

Equity Ownership

• Stock Ownership Guidelines: Directors must hold stock equal to 3x annual cash retainer; directors must retain 50% of shares until compliant; all directors are in compliance as of Dec 31, 2024 .
• Hedging/Pledging: Insider Trading Policy prohibits hedging; none of the directors or NEOs have hedged or pledged HFWA stock to the company’s knowledge .

Governance Assessment

• Strengths:

  • Independent board, separate Chair/CEO, active executive sessions, robust committee cadence; Lyon’s dual role (Compensation Chair; Audit member) enhances oversight of pay-risk and financial controls .
  • Director ownership guidelines with full compliance, anti-hedging/pledging rules, and enhanced clawback policy adopted in 2023 reinforce alignment and accountability .
  • High say‑on‑pay support (>98% in 2024) and proactive shareholder outreach with leadership/committee chairs suggests investor confidence in compensation governance under Lyon’s chairmanship .
  • Use of independent consultant (Pearl Meyer) and defined benchmarking peer group demonstrate structured, market-based pay oversight .

• Watch items / potential conflicts:

  • Discretionary metric adjustments: The committee adjusted EPS to exclude securities losses, BOLI restructuring costs, and a premises gain, raising adjusted EPS used for incentives to $1.80 from GAAP $1.24; ongoing monitoring of discretion magnitude and rationale is prudent .
  • Related party loans: Aggregate $6.5 million in loans to directors/executive officers outstanding at year-end 2024, made at market terms and approved under Regulation O; continue to monitor for any concentration or unusual terms (no exceptions disclosed) .
  • Real estate network: Lyon’s extensive CRE affiliations may present perceived conflict risk in a bank with meaningful CRE exposure; HFWA discloses Regulation O processes and independence status, mitigating risk with formal approvals .

• Compensation structure signals:

  • Director pay mix stable YoY (cash retainer, chair fees unchanged; equity RSU grant ~$50k) indicating conservative board compensation and predictable alignment via equity vesting .
  • Company equity plans use double‑trigger change‑of‑control vesting, avoiding single‑trigger accelerations; options not currently granted, limiting repricing risks .

• Overall: Governance practices and disclosures support investor confidence; Lyon’s experience and committee leadership bolster board effectiveness, with targeted monitoring of compensation discretion and related-party exposures advisable for continued assurance .