| ☒ | No fee | ||||||||||||||||
| ☐ | Fee paid previously with preliminary materials | ||||||||||||||||
| Fee computed on table | |||||||||||||||||
| filing | |||||||||||||||||
2400 3rd Avenue, Suite 150
Seattle, Washington 98121
(206) 448-0884
April 13, 2021
18, 2023
Dear Fellow Shareholder:
On behalf of the Board of Directors and management of Sound Financial Bancorp, Inc., I cordially invite you to attend our 20212023 Annual Meeting of Shareholders. The meeting will be held at 12:10:00 p.m.a.m., Pacific Time, on May 27, 2021,31, 2023, at our executive offices, located at 2400 3rd Avenue, Suite 150, Seattle, Washington.
The matters expected to be acted upon at the meeting are described in detail in the attached Notice of Annual Meeting of Shareholders and proxy statement. An important part of the Annual Meeting is the shareholder vote on corporate business items. I urge you to exercise your rights as a shareholder to vote and participate in this process. At the Annual Meeting, I will present management’s report to you on Sound Financial Bancorp, Inc.’s 20202022 financial and operating performance.
We encourage you to carefully review this year’s notice and proxy statement which contain important information about the proxy voting and the business to be conducted at the annual meeting. We encourage you to vote your shares by proxy as promptly as possible by telephone, online or by mail in advance of the annual meeting. Every shareholder vote is important, and we want to ensure that your shares are represented at the meeting. Your prompt response will save us the additional expense of soliciting proxies and will ensure that your shares are represented at the meeting. Returning the proxy card by mail or voting telephonically or electronically prior to the meeting does NOT deprive you of your right to attend the meeting andor to vote your shares in person for matters being acted upon at the meeting.
Your Board of Directors and management are committed to the continued success of Sound Financial Bancorp, Inc. and the enhancement of the value of your investment. As President and Chief Executive Officer, I want to express my appreciation for your confidence and support.
_____________________________
Sincerely,
/s/ Laura Lee Stewart
Laura Lee Stewart
President and Chief Executive Officer
SOUND FINANCIAL BANCORP, INC.
2400 3rd Avenue, Suite 150
Seattle, Washington 98121
(206) 448-0884
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 27, 2021
31, 2023
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Sound Financial Bancorp, Inc. will be held as follows:
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TIME Wednesday, May 31, 2023, at 10:00 a.m., Pacific Time
PLACE Sound Community Bank
2400 3rd Avenue, Suite 150
Seattle, Washington
BUSINESS (1) Election of two directors of Sound Financial Bancorp, Inc.
(2) Advisory (non-binding) vote on executive compensation.
(3) Ratification of the appointment of Moss Adams, LLP as Sound Financial Bancorp, Inc.’s independent registered public accounting firm for the fiscal year ending December 31, 2023.
RECORD DATE Holders of record of Sound Financial Bancorp, Inc. common stock at the close of business on March 31, 2023, are entitled to receive this Notice and to vote at the annual meeting, or any adjournment or postponement thereof.
PROXY VOTING It is important that your shares be represented and voted at the annual meeting. To ensure that your shares are represented at the meeting, please take the time to vote by Internet or telephone or by mailing a completed proxy card as soon as possible. Regardless of the number of shares you own your vote is very important. Please act today.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Laura Lee Stewart
Laura Lee Stewart
President and Chief Executive Officer
Seattle, Washington
April 18, 2023
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting 31, 2023. Sound Financial Bancorp Inc.’s proxy statement, Annual Report on Form 10-K and electronic proxy card are available on the Internet at You are encouraged to review all of the information contained in the proxy statement before voting. |
2400 3rd Avenue, Suite 150
Seattle, Washington 98121
(206) 448-0884
PROXY STATEMENT
INTRODUCTION
The Board of Directors of Sound Financial Bancorp, Inc. is using this proxy statement to solicit proxies from the holders of common stock of Sound Financial Bancorp, Inc. for use at our upcoming annual meeting of shareholders. The annual meeting of shareholders will be held at 12:10:00 p.m.a.m., Pacific Time on Thursday,Wednesday, May 27, 2021,31, 2023, at our executive office,offices located at 2400 3rd Avenue, Suite 150, Seattle, Washington. Because of the coronavirus (COVID-19), we may impose restrictions on meeting attendees or decide to hold the meeting by means of remote communication such as live audio or webcast. We will announce any change to our annual meeting no later than May 13, 2021 via a press release, posting details on our website and filing materials with the SEC. We strongly recommend that you vote your shares in advance of the annual meeting.
At the meeting, shareholders will be asked to vote on three proposals, which are set forth in the accompanying Notice of Annual Meeting of Shareholders and are described in more detail below. Shareholders also will consider any other matters that may properly come before the meeting, although the Board of Directors knows of no other business to be presented. Sound Financial Bancorp, Inc. is referred to in this proxy statement from time to time as “Sound Financial Bancorp”Bancorp,” the “Company,” “we,” “us” or the “Company.“our.” Certain of the information in this proxy statement relates to Sound Community Bank, a wholly owned subsidiary of the Company, which is referred to in this proxy statement from time to time as the “Bank.”
By submitting your proxy, either by executing and returning the enclosed proxy card or by voting electronically via the Internet or by telephone, you authorize the Company’s Board of Directors to represent you and vote your shares at the annual meeting in accordance with your instructions. The Board of Directors also may vote your shares to adjourn the annual meeting from time to time and will be authorized to vote your shares at any adjournments or postponements of the annual meeting. This proxy statement and the accompanying materials are first being made available to shareholders on or about April 13, 2021.
18, 2023.
Your vote is important. You may vote your shares by Internet or telephone. You also may vote by sending a completed proxy card by regular mail or by submitting a ballot in person at the Annual Meeting. Whether or not you plan to attend the meeting, please read the proxy statement and vote your shares by Internet or telephone or by sending a completed proxy card by regular mail as promptly as possible. This will ensure that your shares are represented at the meeting.
1
INFORMATION ABOUT THE ANNUAL MEETING
What is the purpose of the annual meeting?
At the annual meeting, shareholders will be asked to vote on the following proposals:
The shareholders
Proposal 1. Election of two directors of Sound Financial Bancorp, each for a three-year term.
Proposal 2. Advisory (non-binding) vote on executive compensation.
Proposal 3. Ratification of the appointment of Moss Adams, LLP as Sound Financial Bancorp’s independent registered public accounting firm for the fiscal year ending December 31, 2023.
Shareholders also will transact any other business that may properly come before the annual meeting, although, as of the date of this proxy statement, the Board of Directors knows of no other business to be presented. If any other proposal properly comes before the shareholders for a vote at the meeting, the proxy holders will vote your shares in accordance with their best judgment. Members of our management team will be present at the annual meeting to respond to appropriate questions from shareholders.
How does the Board of Directors recommend I vote on the proposals?
The Board of Directors recommends that you vote:
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| • | FOR the election of the | |||||
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| • | FOR ratification of the appointment of Moss Adams, LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, | |||||
Who can vote at the annual meeting?
The record date for the annual meeting is March 31, 2021.2023. Only shareholders of record at the close of business on that date are entitled to receive notice of and to vote at the annual meeting. The only class of stock entitled to be voted at the annual meeting is the common stock of the Company. Each outstanding share of common stock is entitled to one vote for each matter before the annual meeting; provided, however, that pursuant to Section D of Article 5 of the Company’s charter, no shareholder who beneficially owns more than ten percent of the shares of our common stock outstanding as of that date may vote shares in excess of this limit. At the close of business on the record date, there were 2,600,9542,601,443 shares of common stock outstanding.
If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name and these proxy materials are being forwarded to you by your broker or nominee. As the beneficial owner, you have the right to direct your broker or nominee how to vote.
Can I attend the annual meeting?
If you are a shareholder as of the close of business on March 31, 2021,2023, you may attend the meeting. However, if you hold your shares in street name, you will need proof of ownership to be admitted to the meeting. A recent brokerage statement or a letter from your bank or broker, are examples of proof of ownership. If you want to vote your shares of Sound Financial Bancorp common stock held in street name in person at the meeting, you must get a written proxy in your name from the broker, bank or other nominee who holds your shares.
2
What are the quorum and vote requirements?
The annual meeting will be held only if there is a quorum. A quorum exists if a majoritythe holders of at least one-third of the outstanding shares of common stock entitled to vote, represented in person or by proxy, isare present at the meeting. If you return valid proxy instructions or attend the meeting in person, your shares will be counted for purposes of determining whether there is a quorum, even if you abstain from voting. Broker non-votes also will be counted for purposes of determining the existence of a quorum. A broker non-vote occurs when a broker, bank or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner.
Directors are elected by a plurality of the votes cast by Sound Financial Bancorp shareholders at the annual meeting.cast. Votes may be cast for or withheld from a nominee. Votes that are withheld and broker non-votes will have no effect on the election of the director nominees. The advisory vote on executive compensation and the ratification of the appointment of Moss Adams, LLP each requires the affirmative vote of a majority of the votes cast on the matter. Abstentions and broker non-votes will not be counted as votes cast on these matters. Accordingly, abstentions and broker non-votes will have no effect on the advisory vote on executive compensation or the ratification of the appointment of Moss Adams, LLP.
How can I obtain a paper copy of this proxy statement, the proxy card and the Annual Report to Shareholders?
You may
If you would like to request that a paper or email copy of thesethe proxy materials be mailedmaterial(s) for this and/or future shareholder meetings, you may (1) visit www.ProxyVote.com, (2) call 1-800-579-1639 or (3) send an email to you free of charge at any time by calling 800-690-6903 (please providesendmaterial@proxyvote.com. If sending an email, please include your Shareholder Control Number, which was printed at the bottom of the April 13, 202118, 2023 Notice of Meeting and Availability of Proxy Materials);Materials, in the subject line. Unless requested, you will not otherwise receive a paper or by making your request online at http://www.proxyvote.com and inserting your Shareholder Control Number when prompted.
email copy.
How do I vote?
If you are a registered shareholder, that is, if you hold your stock in your own name, you may vote by:
Internet. To vote by Internet, have your Shareholder Control Number from the Notice of Meeting and Availability of Proxy Materials dated April 13, 2021,18, 2023, in hand; go tohttp:https://www.proxyvote.com; and follow the instructions for voting on-line. The deadline for voting by Internet is 11:59 p.m. Eastern Time on May 26, 2021.
30, 2023.
Telephone. To vote byphone, have your Shareholder Control Number from the Notice of Meeting and Availability of Proxy Materials dated April 13, 2021,18, 2023, in hand; call the toll-free phone number 800-690-6903; and follow the instructions for voting. The deadline for voting by phone is 11:59 p.m. Eastern Time on May 26, 2021.
30, 2023.
Mail. To vote by mail, request a paper copy of the proxy card and related materials, as noted in the response to the previous question. Then properly complete and sign the proxy card and return it in the return envelope provided in a timely manner. The mailed card must be received by the Company before the start of the annual meeting to be voted.
In person at the annual meeting. If you plan to attend the annual meeting and wish to vote in person, we will give you a ballot at the meeting. However, if your shares are held in the name of your broker, bank or other nominee, you must obtain a proxy form from the named holder of your shares indicating that you were the beneficial owner of those shares on the record date for voting at the annual meeting.
Can I change my vote after I submit my proxy?
You may revoke your proxy at any time before the vote is taken at the annual meeting. If you are a registered shareholder, you may revoke your proxy and change your vote at any time before the polls close at the meeting by:
•signing another proxy with a later date;
•voting by telephone or on the Internet -- your latest telephone or Internet vote will be counted;
•giving written notice of the revocation of your proxy to the Secretary of Sound Financial Bancorp, Inc. prior to the annual meeting; or
•voting in person at the annual meeting. Attendance at the annual meeting will not in and of itself constitute revocation of your proxy.
3
If you have instructed a broker, bank or other nominee to vote your shares, you must follow directions received from your nominee to change those instructions.
What if I do not specify how my shares are to be voted?
If you submit an executed proxy by Internet, phone or mail but do not indicate any voting instructions, your shares will be voted:
•FOR the election of the director nominees to the Company’s Board of Directors.
named in this proxy statement.
•FOR the advisory vote on executive compensation.
•FOR the ratification of the appointment of Moss Adams, LLP as the Company’s independent registered public accounting firm.
firm for the fiscal year ending December 31, 2023.
What if my shares are held in “street name” by a broker?
If your shares are held in “street name” by a broker, your broker is required to vote those shares in accordance with your instructions. If you do not give instructions to your broker, your broker nevertheless will be entitled to vote the shares with respect to “discretionary” items but will not be permitted to vote your shares with respect to any “non-discretionary”“non‑discretionary” items. In the case of non-discretionary items, the shares will be treated as “broker non-votes.” Whether an item is discretionary is determined by the exchange rules governing your broker. You broker will forwardprovide information to you indicating how you can forward voting instructions and whether you can forward them by Internet, phone or mail.
What if my shares are held in Sound Financial Bancorp’s employee stock ownership plan?
If you participate in the Sound Financial Bancorp Employee Stock Ownership Plan (the “ESOP”), you will receive a voting instruction form that reflects all shares you may direct the trustees to vote on your behalf under the plan. Under the terms of the ESOP, each participant instructsis entitled to instruct the trustee of the plan how to vote the shares of common stock allocated to his or herthe participant's ESOP account. If a participant properly executes the voting instruction card distributed by the trustee, the trustee will vote the participant’s shares in accordance with the instructions. Where properly executed voting instruction cards are returned to the trustee with no specific instruction as to how to vote at the annual meeting, the trustee will vote the shares “FOR” eachthe election of the proposal’s set forthdirector nominees named in this proxy statement.statement, “FOR” the advisory vote on executive compensation and “FOR” the ratification of the appointment of Moss Adams, LLP. If a participant fails to give timely voting instructions to the trustee with respect to the voting of the common stock that is allocated to his or her ESOP account, the trustee will vote such shares “FOR” eachthe election of the proposal set forthdirector nominees named in this proxy statement.statement, “FOR” the advisory vote on executive compensation and “FOR” the ratification of the appointment of Moss Adams, LLP. The ESOP trustee, subject to the exercise of its fiduciary duties, will vote all unallocated shares of Sound Financial Bancorp common stock held by the ESOP in the same proportion as shares for which it has received timely voting instructions.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table shows, as of March 31, 2021,2023, the voting record date, the beneficial ownership of the Company’s common stock by:
(1) any persons or entities known by management to beneficially own more than 5% of the outstanding shares of Sound Financial Bancorp’s common stock;
(2) each director and director nominee of Sound Financial Bancorp;
(3) each executive officer of Sound Financial Bancorp named in the 2022 Summary Compensation Table; and
(4) all of the directors and executive officers of Sound Financial Bancorp as a group.
An asterisk (*) in the table indicates that an individual beneficially owns less than one percent of the outstanding common stock of Sound Financial Bancorp. The address of each of the beneficial owners, except where otherwise indicated, is Sound Financial Bancorp’s address. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (“SEC”).
As of March 31, 2021,2023, there were 2,600,9542,601,443 shares of Sound Financial Bancorp common stock issued and outstanding.
| Name of Beneficial Owner | Number of Beneficially Owned(1) | Percent of Common Stock Outstanding(1) | ||||||
Stilwell Activist Fund, L.P., Stilwell Activist Investment, L.P., Stilwell Partners, L.P., Stilwell Value LLC, Stilwell Value Partners VII, L.P. and Joseph Stilwell (collectively, the “Stilwell Group”) 111 Broadway, 12th Floor, New York, NY 10006 | 294,400 | (2) | 11.3 | % | ||||
| FJ Capital Management LLC, Financial Opportunity Fund LLC, Financial Hybrid Opportunity Fund LLC, Financial Hybrid Opportunity SPV I LLC and Martin Friedman (collectively, the “FJ Group”) 1313 Dolley Madison Blvd, Ste 306 McLean, VA 22101 | 218,402 | (3) | 8.4 | % | ||||
| Sound Financial Bancorp, Inc. Employee Stock Ownership Plan | 151,022 | 5.8 | % | |||||
| Tyler K. Myers, Chairman of the Board | 47,107 | (4) | 1.8 | % | ||||
| David S. Haddad, Jr., Vice Chairman of the Board | 19,546 | (5) | * | |||||
| Laura Lee Stewart, Director, President, CEO and Interim CFO/Director Nominee | 109,057 | (6) | 4.1 | % | ||||
| Robert F. Carney, Director | 15,087 | (7) | * | |||||
| Debra Jones, Director/Director Nominee | 27,288 | (8) | 1.0 | % | ||||
| Rogelio Riojas, Director/Director Nominee | 35,979 | (9) | 1.4 | % | ||||
| James E. Sweeney, Director | 24,573 | (10) | * | |||||
| Heidi Sexton, EVP/COO | 29,022 | (11) | * | |||||
| Daphne D. Kelley, EVP/CFO | 880 | (12) | * | |||||
| Directors and executive officers of Sound Financial Bancorp as a group (11 persons) | 321,783 | (13) | 12.1 | % | ||||
(Footnotes begin on following page.)
4
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| Name of Beneficial Owner | Number of Shares Beneficially Owned(1) | Percent of Common Stock Outstanding(1) | ||||||||||||||||||
| Stilwell Activist Fund, L.P., Stilwell Activist Investment, L.P., Stilwell Partners, L.P., Stilwell Value Partners VII, L.P., Stilwell Value LLC and Joseph Stilwell (collectively, the “Stilwell Group”) 111 Broadway, 12th Floor, New York, NY 10006 | 317,936 | (2) | 12.2 | % | ||||||||||||||||
| FJ Capital Management LLC, Financial Opportunity Fund LLC, Financial Hybrid Opportunity Fund LLC, Financial Hybrid Opportunity SPV I LLC and Martin Friedman (collectively, the “FJ Group”) 1313 Dolley Madison Blvd, Ste 306, McLean, VA 22101 | 203,574 | (3) | 7.8 | % | ||||||||||||||||
| M3 Funds, LLC, M3 Partners L.P., M3F, Inc., Jason A. Stock, and William C. Waller (collectively, the "M3 Funds") 2070 E 2100 S, Suite 250, Salt Lake City, UT 84109 | 173,407 | (4) | 6.7 | % | ||||||||||||||||
| Sound Financial Bancorp, Inc. Employee Stock Ownership Plan | 155,135 | 6.0 | % | |||||||||||||||||
| Tyler K. Myers, Chairman of the Board | 48,032 | (5) | 1.8 | % | ||||||||||||||||
| David S. Haddad, Jr., Vice Chairman of the Board/ Director Nominee | 21,223 | (6) | * | |||||||||||||||||
| Laura Lee Stewart, Director, President and Chief Executive Officer/ Director Nominee | 106,146 | (7) | 4.1 | % | ||||||||||||||||
| Robert F. Carney, Director | 15,037 | (8) | * | |||||||||||||||||
| Debra Jones, Director | 28,238 | (9) | 1.1 | % | ||||||||||||||||
| Rogelio Riojas, Director | 36,929 | (10) | 1.4 | % | ||||||||||||||||
| James E. Sweeney, Director | 22,523 | (11) | * | |||||||||||||||||
| Wes Ochs, Executive Vice President/Chief Strategy and Financial Officer | 18,231 | (12) | * | |||||||||||||||||
| Heidi Sexton, Executive Vice President/Chief Operating Officer | 34,631 | (13) | 1.3 | % | ||||||||||||||||
| Directors and executive officers of Sound Financial Bancorp as a group (9 persons) | 330,990 | (14) | 12.5 | % | ||||||||||||||||
| (Footnotes below) | ||||||||||||||||||||
| (1) | Except as otherwise noted in these footnotes, the nature of beneficial ownership for shares reported in this table is sole voting and investment power. | |||||||||||||||||||
| (2) | Based on Schedule 13D/A filed with the SEC on July 5, 2022, by the Stilwell Group, pursuant to which each member of the Stilwell Group reported shared voting and dispositive power over the Company’s shares. | |||||||||||||||||||
| (3) | Based on Schedule 13G/A filed with the SEC on February 8, 2023 by the FJ Group, pursuant to which each member of the FJ Group reported shared voting and dispositive power over the Company’s shares. | |||||||||||||||||||
| (4) | Based on Schedule 13G/A filed with the SEC on February 10, 2023 by M3 Funds, LLC, pursuant to which each member of M3 Funds reported shared voting and dispositive power over the Company’s shares. | |||||||||||||||||||
| (5) | Includes 21,430 shares held in Mr. Myers’ 401(k) account and 4,371 shares held in a partnership, in which he is a partner. Also includes 1,000 shares in UTMA accounts for Mr. Myers’ daughter, of which he is trustee. In addition, includes options to acquire 4,092 shares over which Mr. Myers has no voting or dispositive power and 287 restricted shares over which Mr. Myers has sole voting power and no dispositive power. | |||||||||||||||||||
| (6) | Includes 14,138 shares held in an IRA account. Also includes options to acquire 1,697 shares over which Mr. Haddad has no voting or dispositive power and 287 restricted shares over which Mr. Haddad has sole voting power and no dispositive power. | |||||||||||||||||||
| (7) | Includes 18,034 shares in Ms. Stewart’s 401(k) Plan account and 13,769 shares allocated to Ms. Stewart in the ESOP. In addition, includes options to acquire 16,071 shares over which Ms. Stewart has no voting or dispositive power and 800 restricted shares over which she has sole voting power and no dispositive power. | |||||||||||||||||||
| (8) | Includes options to acquire 3,622 shares over which Mr. Carney has no voting or dispositive power and 287 restricted shares over which Mr. Carney has sole voting power and no dispositive power. | |||||||||||||||||||
| (9) | Includes options to acquire 835 shares over which Ms. Jones has no voting or dispositive power and 287 restricted shares over which Ms. Jones has sole voting power and no dispositive power. | |||||||||||||||||||
| (10) | Includes options to acquire 835 shares over which Mr. Riojas has no voting or dispositive power and 287 restricted shares over which Mr. Riojas has sole voting power and no dispositive power. | |||||||||||||||||||
| (11) | Includes options to acquire 835 shares over which Mr. Sweeney has no voting or dispositive power and 287 restricted shares over which Mr. Sweeney has sole voting power and no dispositive power. | |||||||||||||||||||
| (12) | Includes 750 shares in Mr. Ochs’ 401(k) account and 7,071 shares allocated to Mr. Ochs in the ESOP. Includes options to acquire 5,010 shares over which Mr. Ochs has no voting or dispositive power and 1,950 restricted shares over which he has sole voting power and no dispositive power. | |||||||||||||||||||
| (13) | Includes 2,264 shares in Ms. Sexton’s 401(k) account and 9,007 shares allocated to Ms. Sexton in the ESOP. Includes options to acquire 9,460 shares over which Ms. Sexton has no voting or dispositive power and 2,015 restricted shares over which she has sole voting power and no dispositive power. | |||||||||||||||||||
| (14) | Includes shares held by current directors and executive officers directly, in retirement accounts, in a fiduciary capacity or by certain affiliated entities or members of the named individuals’ families, with respect to which shares the named individuals and group may be deemed to have sole or shared voting and/or dispositive powers. Also includes options to acquire 42,457 shares over which the individuals have no voting or dispositive power and 6,487 shares of restricted stock over which they have sole voting power and no dispositive power. | |||||||||||||||||||
5
PROPOSAL I -ELECTION1 - ELECTION OF DIRECTORS
Sound Financial Bancorp’s Board of Directors is currently composed of seven members, each of whom is also a director of Sound Community Bank. Pursuant to the Company’s charter, the directors shall beare divided into three classes, as nearly equal in number as reasonably possible, with approximately one-third of the directors are elected annually.
The following table sets forth certain information regarding the composition of Sound Financial Bancorp’s Board of Directors, including each director’s term of office. The Sound Financial Bancorp Board of Directors, acting on the recommendation of the Nominating Committee, has recommended and approved the nomination of David S. Haddad, Jr.and Laura Lee Stewart to serve as director for a term of two years to expire at the annual meeting of shareholders to be held in 2023 and Debra Jones and Rogelio Riojas to serve as directors for a term of three years to expire at the annual meeting of shareholders to be held in 2024.
2026.
It is intended that the proxies solicited on behalf of the Sound Financial Bancorp Board of Directors (other than proxies in which the authority to vote for a nominee is withheld) will be voted at the annual meeting “FOR” the election of each of the director nominees. If any nominee is unable to serve, the shares represented by all valid proxies will be voted for the election of such substitute nominee as the Board of Directors, acting on the recommendations of the Nominating Committee, may recommend. At this time, we know of no reason why any director nominee might be unable to serve if elected. Except as disclosed in this proxy statement, there are no arrangements or understandings between any director nominee and any other person pursuant to which such director nominee was selected. The Board of Directors unanimously recommends that you vote “FOR” the election of the director nominees whose names appear below.
| Name | Age(1) | Positions With Sound Financial Bancorp | Director Since(2) | Term Expires | ||||||||||||||||||||||
| Director Nominees | ||||||||||||||||||||||||||
| David S. Haddad, Jr. | 74 | Director | 1990 | 2026(3) | ||||||||||||||||||||||
| Laura Lee Stewart | 73 | President, Chief Executive Officer and Director | 1990 | 2026(3) | ||||||||||||||||||||||
| Continuing Directors | ||||||||||||||||||||||||||
| Tyler K. Myers | 60 | Chairman of the Board | 1993 | 2025 | ||||||||||||||||||||||
| Robert F. Carney | 75 | Director | 1984 | 2025 | ||||||||||||||||||||||
| Debra Jones | 65 | Director | 2005 | 2024 | ||||||||||||||||||||||
| Rogelio Riojas | 72 | Director | 2005 | 2024 | ||||||||||||||||||||||
| James E. Sweeney | 73 | Director | 1986 | 2025 | ||||||||||||||||||||||
| Name | Age(1) | Positions with Sound Financial Bancorp | Director Since(2) | Term Expires | ||||||||||
| Director Nominees | ||||||||||||||
| Laura Lee Stewart | 71 | President, Chief Executive Officer, Interim Chief Financial Officer and Director | 1990 | 2023 | (3) | |||||||||
| Debra Jones | 63 | Director | 2005 | 2024 | (3) | |||||||||
| Rogelio Riojas | 70 | Director | 2005 | 2024 | (3) | |||||||||
| Continuing Directors | ||||||||||||||
| David S. Haddad, Jr. | 73 | Vice Chairman of the Board | 1990 | 2023 | ||||||||||
| Tyler K. Myers | 58 | Chairman of the Board | 1993 | 2022 | ||||||||||
| Robert F. Carney | 73 | Director | 1984 | 2022 | ||||||||||
| James E. Sweeney | 71 | Director | 1986 | 2022 | ||||||||||
____________________
(1) At December 31, 2020.
2022.
(2) Includes years of service on the Board of Sound Community Bank (and its predecessor entity).
(3) If elected at the annual meeting.
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Business Experience and Qualifications of Directors and Director Nominees
The business experience of each director and director nominee of Sound Financial Bancorp for at least the past five years and the experience, qualifications, attributes, skills and areas of expertise of each director that supports his or her service as a director are set forth below.
David S. Haddad, Jr. Mr. Haddad is Vice Chairman of the Boards of Directors of Sound Financial Bancorp and Sound Community Bank. Prior to his retirement, Mr. Haddad was an Operations Manager at Cutter and Buck, a golf apparel company from 1999 until 2003; a Senior Manager of Operations at Progressive International, a housewares wholesaler from 1995 until 1999; and a warehouse manager for Associated Grocers from 1982 until 1995. During Mr. Haddad’s years of service at the senior management level of these companies, his responsibilities included budgeting, personnel management, contract negotiations and control of capital expenditures. During his retirement, Mr. Haddad worked part time from 2004 until 2009 as a Customer Service Supervisor with Alaska Airlines. Mr. Haddad’s 32 years of service as a director of Sound Community Bank (including its predecessor credit union organization) provide him with a strong knowledge and understanding of the institution’s business and history. Mr. Haddad’s positions at the senior management level of various companies and as a Customer Service Supervisor for Alaska Airlines have provided him with strong leadership, interpersonal, management and administrative skills.
Laura Lee Stewart. Ms. Stewart is currentlythe President and Chief Executive Officer and Interim Chief Financial Officer of Sound Community Bank and Sound Financial Bancorp. Prior to joining Sound Community Bank as its President in 1989, when it was a credit union, Ms. Stewart was Senior Vice President/Retail Banking at Great Western Bank. Ms. Stewart was selected as an inaugural member of the FDIC Community Bank Advisory Board and completed her term in 2011. In 2011, Ms. Stewart was appointed to the inaugural Consumer Financial Protection Bureau board and completed her term in 2013. She also served as Chair of the American Bankers Association’s (ABA)(“ABA”) Government Relations Council and is the past Chair of the Washington Bankers Association. The American Banker magazine honored her as one of the top 25 Women to Watch in banking in 2011, 2015, 2016, 2017, 2018 and 2018,2022, and as one of the most powerful women in Banking in 2019, 2020 and 2020.2021. In 2016, Ms. Stewart was recognized as a WomenWoman of Influence by the Puget Sound Business Journal. In 2018, she was named Community Banker of the yearYear by American Banker. Ms. Stewart also served as Chair of the National Arthritis Foundation’s board of directors as well as serving as the Past Chair of the board of directors of Woodland Park Zoo. Ms. Stewart is currently serving her second term as a member of the Seattle Branch Board of Directors of the Federal Reserve Bank of San Francisco. She is also the only non-native Board member of the Jamestown Sklallan Community Development Financial Institution. In October 2019, Ms. Stewart was elected Chair of the ABA. In 2021, she was named as one of The Power 100 by the Puget Sound Business Journal. Her many years of service in all areas of the financial institution operations and duties as President and Chief Executive Officer of Sound Financial Bancorp and Sound Community Bank bring a specialspecialized knowledge of the financial, economic and regulatory challenges we face, and she is well suitedwell-suited to educatingkeeping the Board informed on these matters.
Tyler K. Myers. Mr.Myers is the Chairman of the Boards of Directors of Sound Financial Bancorp and Sound Community Bank, and currently is the President and General Partner of The Myers Group, a conglomerate of retail businesses that are focused primarily on the grocery, hardware and fuel industries. Mr. Myers is responsible for overseeing the success and profitability of all Myers Group business and real estate operations. Mr. Myers has been with The Myers Group since 1978. Mr. Myers’ years of work with and running the Myers Group has provided him with strong leadership, management, financial and administrative skills, which together with his participation in our local business community for over 40 years brings knowledge of the local economy and potential business opportunities for Sound Community Bank.
Robert F. Carney. Mr. Carney is retired and previously served as the Director of Meat and Seafood Merchandising for Scolaris Food & Drug Company in Reno, Nevada, a position he held from February 2008 to July 2017. Prior to February 2008, he was Director of Meat and Seafood Merchandising for Brown & Cole Stores in Bellingham, Washington for six years. Mr. Carney has over 20 years of experience in management positions in the food industry, including 12 years of budgeting and profit-generating responsibilities. He has an MBA from the University of Southern California and an undergraduate degree in economics and business. Mr. Carney has attended seminars on the credit union and banking business and has 38 years of experience on our Board, beginning when Sound Community Bank was a $25 million-in-assets credit union. Mr. Carney’s years of management experience, together with his educational training, has provided him with expertise in the areas of business operations, budgeting and financial management, which expertise is valuable to our organization.
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Debra Jones. Ms. Jones served as the Vice President of Administrative Services at Bellingham Technical College from August 2005 until her retirement in September 2014, where she was responsible for cash management, financial affairs, physical plant administration and strategic planning. Prior to joining the college, she served from September 2004 to May 2005 as Manager of Budget and Cash Management of Brown & Cole Stores, a retail grocer, and from 1998 to 2004 as Vice President of Administrative and Financial Services at Brown & Cole Stores. She is a certified public accountant and has served in chief financial officer positions for over 25 years, with responsibility for financial management, risk management and business administration. Her experience and expertise in the areas of accounting, finance and human resources are all valuable skills which she brings to our Board of Directors and as our “audit committee financial expert.”
Rogelio Riojas. Mr. Riojas is the Chief Executive Officer of Sea Mar Community Health Centers, a health care and social services organization serving low-income and underserved populations in Seattle and several counties in Washington. He has served in this position for over 30 years. Mr. Riojas has extensive management and administrative skills and experience in the heavily regulated healthhealthcare industry, especially in our local community. He also has experience in compensation, personnel management and other human resource matters, which are valuable skills he brings to our Board of Directors.
Vice-Presidentvice president of Vitamin Shoppe, Inc., a national health and wellness retailer based in North Bergan, New Jersey. Mr. Sweeney previously served as President and Chief Executive Officer of Super Supplements, Inc., a Pacific Northwest retail chain specializing in vitamins, health supplements and nutrition with stores in Washington, Oregon and Idaho, from June 2006 until its acquisition by Vitamin Shoppe in February 2013. Prior to his employment with Super Supplements, Mr. Sweeney was Managing Partner of Corporate Strategies and Development, LLC, a management consulting firm serving businesses in the Puget Sound area. He brings general business, financial and risk management skills to Sound Community Bank and has experience guiding business entities during difficult business and economic cycles. His participation in our local business community for over 40 years brings knowledge of the local economy and potential business opportunities for Sound Community Bank.
David S. Haddad, Jr. Mr. Haddad is Vice Chairman of the Boards of Directors of Sound Financial Bancorp and Sound Community Bank. Prior to his retirement, Mr. Haddad was an Operations Manager at Cutter and Buck, a golf apparel company from 1999 until 2003; a Senior Manager of Operations at Progressive International, a housewares wholesaler from 1995 until 1999; and a warehouse manager for Associated Grocers from 1982 until 1995. During Mr. Haddad’s years of service at the senior management level of these companies, his responsibilities included budgeting, personnel management, contract negotiations and control of capital expenditures. During his retirement, Mr. Haddad worked part time from 2004 until 2009 as a Customer Service Supervisor with Alaska Airlines. Mr. Haddad’s 22 years of service as a director of Sound Community Bank (including its predecessor credit union organization) provide him with a strong knowledge and understanding of the institution’s business and history. Mr. Haddad’s years of service at the senior management level of various companies and as a Customer Service Supervisor for Alaska Airlines has provided him with strong leadership, interpersonal, management and administrative skills.
Tyler K. Myers. Mr. Myers is the Chairman of the Boards of Directors of Sound Financial Bancorp and Sound Community Bank, and currently is the President and General Partner of The Myers Group, a conglomerate of retail businesses that are focused primarily in the retail grocery, hardware and fuel industries. Mr. Myers is responsible for overseeing the success and profitability of all Myers group business and real estate operations. Mr. Myers has been with The Myers Group since 1978. Mr. Myers’ years of work with and running the Myers Group has provided him with strong leadership, management, financial and administrative skills, which together with his participation in the local community, brings valuable knowledge and skills to our organization. In addition, his participation in our local business community for over 40 years brings knowledge of the local economy and business opportunities for Sound Community Bank.
Robert F. Carney. Mr. Carney is retired and previously served as the Director of Meat and Seafood Merchandising for Scolaris Food & Drug Company in Reno, Nevada, a position he had held since February 2008. Prior to February 2008, he was Director of Meat and Seafood Merchandising for Brown & Cole Stores in Bellingham, Washington for six years. Mr. Carney has over 20 years of experience in management positions in the food industry, including 12 years of budgeting and profit generating responsibilities. He has an MBA from the University of Southern California and an undergraduate degree in economics and business. Mr. Carney has attended seminars on the credit union and banking business over the years and has 36 years of experience on our Board, beginning when Sound Community Bank was a $25 million credit union. Mr. Carney’s years of management experience, together with his educational training, has provided him with extensive experience in the areas of business operations, budgeting and financial management, which knowledge is valuable to our organization.
James E. Sweeney.
Mr. Sweeney is retired and previously served as a8
Director Compensation
Directors of Sound Community Bank (excluding Laura Lee Stewart, the President and Chief Executive Officer of Sound Community Bank, who receives no separate compensation for her service as a director) receive compensation for their service on the Board of Directors of Sound Community Bank. They receive no separate compensation for their service on the Board of Directors of Sound Financial Bancorp. During 2020,2022, our directors received an annual retainer fee of $27,150,$30,720, plus $1,500 for each monthly board meeting attended. The directors are not paid additional fees for service on various board committees or special board meetings.
The following table provides compensation paid to, or earned by, each non-employee member of the Board of Directors during the year ended December 31, 2020.
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option Awards ($)(2) | All other compensation ($)(3) |
Total ($) | |||||||||||||||
| Tyler K. Myers | 42,150 | 7,330 | 869 | 264 | 50,613 | |||||||||||||||
| David S. Haddad, Jr. | 42,150 | 7,330 | 869 | 264 | 50,613 | |||||||||||||||
| Robert F. Carney | 42,150 | 7,330 | 869 | 264 | 50,613 | |||||||||||||||
| Kathleen B. Cook | 17,313 | --- | --- | 288 | 17,601 | |||||||||||||||
| Debra Jones | 42,150 | 7,330 | 869 | 264 | 50,613 | |||||||||||||||
| Rogelio Riojas | 42,150 | 7,330 | 869 | 264 | 50,613 | |||||||||||||||
| James E. Sweeney | 42,150 | 7,330 | 869 | 264 | 50,613 | |||||||||||||||
| Name | Fees Earned or Paid in Cash | Stock Awards (1) | Option Awards (2) | All Other Compensation (3) | Total | |||||||||||||||
| Tyler K. Myers | $ | 45,720 | $ | 8,570 | $ | 3,185 | $ | 261 | $ | 57,735 | ||||||||||
| David S. Haddad, Jr. | 45,720 | 8,570 | 3,185 | 261 | 57,735 | |||||||||||||||
| Robert F. Carney | 45,720 | 8,570 | 3,185 | 261 | 57,735 | |||||||||||||||
| Debra Jones | 45,720 | 8,570 | 3,185 | 261 | 57,735 | |||||||||||||||
| Rogelio Riojas | 45,720 | 8,570 | 3,185 | 261 | 57,735 | |||||||||||||||
| James E. Sweeney | 45,720 | 8,570 | 3,185 | 261 | 57,735 | |||||||||||||||
| (1) | On January | ||||||
| (2) | On January | ||||||
| (3) | Dividends paid to the directors during | ||||||
With respect to the restricted stock and stock options discussed in the footnotes above, vesting accelerates in the event of the director’s death or disability or in connection with a change in control of Sound Financial Bancorp or Sound Communitythe Bank. In the event of a termination of service unless otherwise determined byfor any reason other than death or disability or in connection with a change in control of Sound Financial Bancorp or the compensation committee,Bank, all non-vested awards arewould be canceled and the exercise period on the remaining unexercised, vested option awards would be reduced to three months.
Directors are provided or reimbursed for travel and lodging and other customary out-of-pocket expenses incurred in attending out-of-town board and committee meetings, industry conferences and continuing education seminars. Any incremental spousal costs in connection with those meetings, conferences and seminars are paid for by the directors personally. Sound Community Bank also pays the premiums on directors’ and officers’ liability insurance.
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Board of Directors’ Meetings and Committees and Corporate Governance Matters
Director Independence. The Board applies the independence standard in the NASDAQ listing standards to its directors. The Board has determined that six of our seven directors, Directors Myers, Haddad, Carney, Jones, Riojas and Sweeney, are “independent directors” as that term is defined in the NASDAQ listing standards. Marketplace Rules (the “Nasdaq Rules”). The Board of Directors has made a subjective determination as to each independent director that no relationships exist that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment in carrying out the responsibilities of a director. In making these determinations, the directors reviewed and discussed information provided by the directors and the Company with regard to each director’s business and personal activities as they may relate to the Company and its management.
companyCompany in the eyes of our customers, employees and other stakeholders.
Board Leadership Structure.
The Board has placed the responsibilities of Chairman with an independent non-executive member of the Board which we believe provides better accountability between the Board and our management team. We believe it is beneficial to have an independent Chairman whose sole responsibility to us is leading our Board members as they provide leadership to our executive team. Our Chairman is responsible for providing leadership to the Board and facilitating communication among the directors; setting the Board meeting agendas in consultation with the President and Chief Executive Officer (“CEO”); and presiding at Board meetings and executive sessions. This delineation of duties allows the President and CEO to focus her attention on managing the day-to-day business of Sound Community Bank. We believe this structure provides strong leadership for our Board, while positioning our President and CEO as the leader of theBoard Role in Risk Oversight.The Board of Directors is responsible for consideration and oversight of risks facing Sound Financial Bancorp and is responsible for ensuring that material risks are identified and managed appropriately. The Audit Committee meets quarterly, or more frequently as needed, with management in order to review our major financial risk exposures and the steps management is taking to monitor and control such exposures. Directors also serve on various committees that focus on major areas of risk in Sound Financial Bancorp and Sound Community Bank that include but are not limited to loans and compensation. Directors discuss risk and risk mitigation strategies with management within these committees. All risk oversight discussions are included in committee reports to the full Board of Directors.
Stock Pledging and Hedging Policies. Sound Financial Bancorp’s “Insider Trading Policy,” among other things, generally prohibits the Company’s directors and executive officers from holding Company stock in a margin account or pledging Company stock as collateral for a loan. An exception to this policy may beoccur where a person wishes to pledge Company securities as collateral for a loan (not including margin debt) and clearly demonstrates the financial capacity to repay the loan without resort to the pledged securities. In addition, the policy prohibits directors, officers and employees of the Company from using any financial instruments (including without limitation prepaid variable forward contracts, equity swaps, collars, and exchange funds) or otherwise engaging in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s securities owned by the director, executive officer or employee.
Board Meetings and Committees. Meetings of Sound Financial Bancorp’s Board of Directors are generally held on a quarterly basis. The membership of Sound Community Bank’s Board of Directors is identical to Sound Financial Bancorp’s Board of Directors. Meetings of Sound Community Bank’s Board of Directors are generally held on a monthly basis. For the fiscal year ended December 31, 2020,2022, the Board of Directors of Sound Financial Bancorp held five regular meetings and no special meetings, and the Board of Directors of Sound Community Bank held 10 regular meetings and no special meetings. During fiscal year 2020,2022, no incumbent director attended fewer than 75% in the aggregate of the total number of meetings of each Board and the total number of meetings held by the committees of each Board on which committees he or she served.
The Board of Directors of Sound Financial Bancorp has standing Compensation, Audit and Nominating committees. Information regarding the functions of the Board’s committees, their present membership and the number of meetings held by each committee forduring the year ended December 31, 2020,2022, is set forth below:
Compensation Committee. The Compensation Committee operates under a formal written charter adopted by the Board of Directors. The Compensation Committee is responsible for: (i) determining and evaluating the compensation of the Chief Executive Officer and other executive officers; (ii) reviewing and monitoring existing compensation plans, policies and programs and recommending changes to the goals and objectives of these plans, policies and programs to the entire Board; and (iii) reviewing and recommending new compensation plans, policies and programs. The Compensation Committee also recommends to the Board of Directors any changes in the compensation structure for non-employee directors and conducts an annual performance review of the Chief Executive Officer. The Compensation Committee does not designatedelegate its authority to any one of its members or any
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other person,person; however, Ms. Stewart does make recommendations to the Compensation Committee for all executive compensation, except her own.
The Compensation Committee is comprised of Directors Sweeney (chair), Jones, Haddad and Myers, each of whom is “independent” as that term is defined for compensation committee members in the Nasdaq Marketplace Rules (the “Nasdaq Rules”). Rules.The Compensation Committee is scheduled to meet at least once a year and on an as-needed basis. The Compensation Committee met fourfive times during 2020.
2022.auditorsauditors’ qualifications and independence, the performance of our internal audit function and independent auditors and any other areas of potential financial risk to Sound Financial Bancorp specified by its Board of Directors. The Audit Committee also is responsible for the appointment, compensation, retention and oversight of our independent auditors, including pre-approval of all audit and non-audit services to be performed by the independent auditors.
Audit Committee.
The Audit Committee operates under a formal written charter adopted by the Board of Directors. The Audit Committee is appointed by the Board of Directors to provide assistance to the Board in fulfilling its oversight responsibility relating to the integrity of our consolidated financial statements and the financial reporting processes, the systems of internal accounting and financial controls, compliance with legal and regulatory requirements, the annual independent audit of our consolidated financial statements, the independentThe current members of the Audit Committee are Directors Jones (chair), Riojas, Haddad, Carney and Cook. Haddad.All members of the Audit Committee, in addition to being independent as defineddirectors under Rule 4200 (a)(15) of the Nasdaq Rules, (i) meet the criteria for independence set forth in Section 10A(m)(3) of the Securities Exchange Act of 1934 and (ii) are able to read and understand fundamental financial statements, including our balance sheet, income statement, and cash flow statement. Additionally, Debra Jones has had past employment experience in finance or accounting and/or requisite professional certification in accounting that results in her financial sophistication. The Board of Directors has determined that Ms. Jones meets the requirements adopted by the SEC for qualification as an “audit committee financial expert.” During 2020,2022, the Audit Committee held four meetings.
Nominating Committee. Our Nominating Committee is comprised of Directors Haddad (chair), MyersRiojas and Jones, each of whom is “independent” as that term is defined for compensation committee members inan independent director under the Nasdaq Rules. The Nominating Committee is scheduled to meet at least once a year and on an as-needed basis. The Nominating Committee met one time during 2020. 2022.The Nominating Committee operates under a formal written charter adopted by the Board of Directors. The Nominating Committee is responsible for identifying and recommending director candidates to serve on the Board of Directors. Final approval of director nominees is determined by the full Board, based on the recommendations of the Nominating Committee. The nominees for election at the meeting identified in this document were recommended to the Board by the Nominating Committee. The Nominating Committee has the following responsibilities under its charter:
| (i) | recommend to the Board the appropriate size of the Board and assist in identifying, interviewing and recruiting candidates for the Board; | |||||
| (ii) | recommend candidates (including incumbents) for election and appointment to the Board of Directors, subject to the provisions set forth in the Company's charter and bylaws relating to the nomination or appointment of directors, based on the following criteria: (i) business experience, education, integrity, reputation, independence, conflicts of interest, diversity, and age; (ii) number of other directorships and commitments (including charitable obligations); (iii) tenure on the Board; (iv) attendance at Board and committee meetings: (v) stock ownership; (vi) specialized knowledge (such as an understanding of banking, accounting, marketing, finance, regulation and public policy); (vii) residency and a commitment to the Company’s communities and shared values; and (viii) overall experience in the context of the needs of the Board as a whole. As a general rule, it is the desire of the Board of Directors that directors shall live and/or work in the communities served by the Company’s subsidiary bank; | |||||
| (iii) | consider and evaluate nominations from shareholders using the same criteria as all other nominations; | |||||
| (iv) | annually recommend to the Board committee assignments and committee chairs on all committees of the Board, and recommend committee members to fill vacancies on committees as necessary; and | |||||
| (v) | perform any other duties or responsibilities expressly delegated to the Nominating Committee by the Board. | |||||
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As set forth
The Company does not currently have a formal diversity policy; however, as noted above, diversity is one of the factors that the Nominating Committee considers in identifying nominees for director. The Nominating Committee has not adopted a formal diversity policy with regard toreviews the selectionrequisite skills and characteristics of director nominees. DuringBoard members as well as the year ended December 31, 2020,composition of the Board of Directors had three femaleas a whole when recommending nominees for the Board. The Nominating Committee has no predefined minimum criteria for selecting director nominees, although it believes that all directors oneshould share qualities such as business experience, excellent decision-making ability, good judgment, personal integrity and outstanding reputation. In any given search, the Nominating Committee may also define particular characteristics for candidates to balance the overall skills and characteristics of whom retired during the year, and one director that identifies as Latinx, representing 50% of the board membership.
Pursuant to the Company’s bylaws, no person 75 years of age or older is eligible for election, re-election, appointment or re-appointment to the Company’s Board and its perceived needs. However, during any search, the Nominating Committee reserves the right to modify its stated search criteria for exceptional candidates. The table below provides certain highlights of Directors. No director whothe composition of our board members and nominees. Each of the categories listed in the below table has attained the age of 75 shall continue to servemeaning as a director beyond the annual meeting of shareholders at which his or her term as a director expires.
it is used in Nasdaq Rule 5605(f).
| Board Diversity Matrix (As of April 18, 2023) | ||||||||||||||
| Total Number of Directors | 7 | |||||||||||||
| Female | Male | Non-Binary | Gender Undisclosed | |||||||||||
| Part I: Gender Identity | ||||||||||||||
| Directors | 2 | 5 | ||||||||||||
| Part II: Demographic Background | ||||||||||||||
| African American or Black | ||||||||||||||
| Alaskan Native or American Indian | ||||||||||||||
| Asian | ||||||||||||||
| Hispanic or Latinx | 1 | |||||||||||||
| Native Hawaiian or Pacific Islander | ||||||||||||||
| White | 2 | 4 | ||||||||||||
| Two or More Races or Ethnicities | ||||||||||||||
| LGBTQ+ | 0 | |||||||||||||
| Did Not Disclose Demographic Background | 0 | |||||||||||||
Nominations of persons for election to the Board of Directors may be made only by or at the direction of the Board of Directors or by any stockholder entitled to vote for the election of directors who complies with the notice procedures. Pursuant to the Company’s bylaws, nominations for directors by shareholders must be made in writing and received by the Secretary of the Company at the Company’s principal executive offices no earlier than 120 calendar days prior to the meeting date and no later than 90 calendar days prior to the meeting date. If, however, less than 100 calendar days’ notice or public announcement of the date of the meeting is given or made to shareholders, nominations must be received by the Company not later than the close of business on the tenth calendar day following the earlier of the day on which notice of the date of the meeting was mailed or otherwise transmitted or the day on which public announcement of the date of the meeting was first made. In addition to meeting the applicable deadline, nominations must be accompanied by certain information specified in the Company’s bylaws.
This description is a summary of our nominating process. Any shareholder wishing to propose a director candidate to the Company should review and must comply, in full, with the procedures set forth in the Company’s charter and bylaws.
bylaws, as well as the requirements of Rule 14a-19 under the Securities Exchange Act of 1934, as amended. For additional information, see “Shareholder Proposals and Other Information Regarding the 2024 Annual Meeting.”
Stock Ownership Guidelines.The Board of Directors believes the alignment of directors’ interests with those of shareholders is strengthened when Board members are also shareholders. Under the Company’s stock ownership guidelines, outside (non-employee) directors of the Company or its wholly-owned operating subsidiary, Sound Community Bank, are expected to own Sound Financial Bancorp common stock equal in value to at least $50,000 within two years of joining the Board (of which $10,000 should be owned within the first year of joining the Board). Share ownership for purposes of calculating compliance with these ownership guidelines do not include a director’s unexercised stock options or any shares of Company common stock that are pledged or otherwise encumbered. As of the date of this proxy statement, all of our current non-employee directors meet the stock ownership threshold.
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Communications with Directors. Any shareholder desiring to communicate with the Board of Directors, or one or more specific members thereof, should communicate in writing addressed to Tyler K. Myers, Chairman of the Board of the Company, 2400 3rd Avenue, Suite 150, Seattle, Washington, 98121.
Attendance Policy at Annual Meetings. Although we do not have a formal policy regarding director attendance at annual shareholder meetings, directors are expected to attend these meetings. All directors were in attendance atattended last year’s annual shareholder meeting.
Committee Charters. The charters of the Audit, Compensation and Nominating Committees are posted on our website at www.soundcb.com under “Investor Relations - Governance Documents.”
Code of Ethics. We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, and personpersons performing similar functions, and to all of our other employees and our directors. You may obtain a copy of the code of ethics free of charge by writing to the Corporate Secretary of Sound Financial Bancorp, 2400 3rd Avenue, Suite 150, Seattle, Washington, 98121 or by calling (206) 448-0884. In addition, the code of ethics is available on our website at www.soundcb.com under “Investor Relations - Governance Documents.”
TRANSACTIONS WITH CERTAIN RELATED PERSONS
In the ordinarynormal course of our business, we have engaged and expect to continue engaging through the Bank in ordinary banking transactions with our directors, executive officers, their immediate family members and companies in which they may have a 5% or more beneficial ownership interest,their affiliated entities, including loans to such persons. Except as set forth below, there were no transactions of this nature, the amount of which exceeded $120,000 during 20202022 or 2019.
2021.
Our directors, officers and employees are eligible for any type of credit offered by Sound Community Bank. Federal regulations permit executive officers and directors to participate in loan programs that are available to other employees, as long as the director or executive officer is not given preferential treatment compared to other participating employees. In accordance with banking regulations, such loans to directors and executive officers are made on substantially the same terms as those available to Sound Community Bank’s employees.employees generally. Such loans provide for a discount as to interest rate, consistent with the requirements of the Federal Reserve Board’s Regulation O – Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks. When the director or executive officer leaves Sound Community Bank, these preferential rates return to market rates and terms in effect at the time of origination. Except as set forth above, loans to directors and executive officers are made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as prevailing at the time for comparable loans with persons not related to Sound Community Bank, and do not involve more than the normal risk of collectability or present other unfavorable features.
Set forth below is information regarding loans made with preferential interest rates, as compared to interest rates prevailing at the time of origination for comparable loans with persons not related to Sound Community Bank, to directors and executive officers during each of the last two fiscal years who had aggregate indebtedness to Sound Community Bank that exceeded $120,000.
| Name | Nature of Transaction | Interest Rate | Largest 01/01/20 to | Principal Balance at 12/31/2020 | Principal Paid 01/01/20 to 12/31/20 | Interest Paid 01/01/20 to 12/31/20 | ||||||||||||||||
| Tyler Myers | Mortgage Loan | 2.25 | % | $ | 386,738 | $ | 368,025 | $ | 18,713 | $ | 8,233 | |||||||||||
| David Haddad | Mortgage Loan | 2.75 | % | 308,533 | --- | 308,533 | 5,190 | |||||||||||||||
| Debra Jones | Mortgage Loan | 2.25 | % | 450,561 | 432,135 | 18,426 | 9,498 | |||||||||||||||
| James E. Sweeney | Mortgage Loan | 2.25 | % | 326,460 | 309,618 | 16,842 | 6,736 | |||||||||||||||
| Laura Lee Stewart | Mortgage Loan | 2.63 | % | 720,000 | 703,755 | 16,245 | 19,479 | |||||||||||||||
| Heidi Sexton | Mortgage Loan | 2.75 | % | 560,472 | 546,210 | 14,262 | 14,155 | |||||||||||||||
| Wes Ochs | Mortgage Loan | 2.75 | % | 390,460 | 381,026 | 9,434 | 9,869 | |||||||||||||||
| Name | Nature of Transaction | Interest Rate | Largest 01/01/19 to | Principal | Principal Paid 01/01/19 to 12/31/19 | Interest Paid 01/01/19 to 12/31/19 | ||||||||||||||||
| Tyler Myers | Mortgage Loan | 1.88 | % | $ | 585,100 | $ | 386,738 | $ | 198,362 | $ | 7,191 | |||||||||||
| David Haddad | Mortgage Loan | 2.75 | % | 314,100 | 308,533 | 5,567 | 6,944 | |||||||||||||||
| Robert Carney | Mortgage Loan | 2.38 | % | 123,000 | 57,574 | 65,426 | 2,009 | |||||||||||||||
| Debra Jones | Mortgage Loan | 2.13 | % | 621,000 | 450,561 | 170,439 | 7,865 | |||||||||||||||
| James E. Sweeney | Mortgage Loan | 1.88 | % | 585,000 | 326,460 | 258,540 | 5,938 | |||||||||||||||
| Laura Lee Stewart | Mortgage Loan | 2.75 | % | 720,000 | 720,000 | 0 | 1,593 | |||||||||||||||
| Heidi Sexton | Mortgage Loan | 2.38 | % | 580,000 | 560,472 | 19,528 | 13,489 | |||||||||||||||
| Wes Ochs | Mortgage Loan | 2.375 | % | 399,125 | 390,460 | 8,665 | 9,395 | |||||||||||||||
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| Name | Nature of Transaction | Interest Rate | Largest Principal Balance 01/01/22 to 12/31/22 | Principal Balance at 12/31/2022 | Principal Paid 01/01/22 to 12/31/22 | Interest Paid 01/01/22 to 12/31/22 | ||||||||||||||
| Tyler Myers | Mortgage Loan | 1.50% | $ | 348,906 | $ | 328,622 | $ | 20,284 | $ | 5,639 | ||||||||||
| Debra Jones | Mortgage Loan | 1.38% | 413,345 | 393,308 | 20,037 | 6,827 | ||||||||||||||
| James E. Sweeney | Mortgage Loan | 1.50% | 292,433 | 274,386 | 18,047 | 4,867 | ||||||||||||||
| Laura Lee Stewart | Mortgage Loan | 1.75% | 687,342 | 567,425 | 119,916 | 12,706 | ||||||||||||||
| Heidi Sexton | Mortgage Loan | 1.75% | 531,723 | 515,602 | 16,122 | 11,104 | ||||||||||||||
| Wes Ochs | Mortgage Loan | 1.75% | 371,438 | 360,905 | 10,533 | 7,763 | ||||||||||||||
| Name | Nature of Transaction | Interest Rate | Largest Principal Balance 01/01/21 to 12/31/21 | Principal Balance at 12/31/2021 | Principal Paid 01/01/21 to 12/31/21 | Interest Paid 01/01/21 to 12/31/21 | ||||||||||||||
| Tyler Myers | Mortgage Loan | 2.13% | $ | 368,025 | $ | 348,906 | $ | 19,119 | $ | 7,750 | ||||||||||
| Debra Jones | Mortgage Loan | 1.75% | 432,135 | 413,345 | 18,790 | 9,185 | ||||||||||||||
| James E. Sweeney | Mortgage Loan | 2.00% | 309,618 | 292,433 | 17,185 | 6,356 | ||||||||||||||
| Laura Lee Stewart | Mortgage Loan | 2.13% | 703,755 | 687,342 | 16,413 | 18,277 | ||||||||||||||
| Heidi Sexton | Mortgage Loan | 2.38% | 546,210 | 531,723 | 14,487 | 14,010 | ||||||||||||||
| Wes Ochs | Mortgage Loan | 2.38% | 381,026 | 371,438 | 9,588 | 9,775 | ||||||||||||||
Shelli Robb-Kahler serves as a branch manager of Sound Community Bank. Ms. KahlerRobb-Kahler is the sister of LaurieMs. Stewart, who serves as President and Chief Executive Officer, of the Company and the Bank. As a result of her employment with Sound Community Bank, Mrs. KahlerMs. Robb-Kahler received annual compensation of $141,519$142,757 in 20202022 and $115,398$153,913 in 2019.
EXECUTIVE COMPENSATION
Summary2021.
14
Executive Compensation Table.
The following table summarizes the compensation paid to, or earned by, our President and Chief Executive Officer, and our two next highest compensated executive officers who were serving at the end of the fiscal year ended December 31, 20202022 for services rendered in all capacities during the years ended December 31, 20202022 and 2019.2021. We use the term “named executive officers” in this document to refer to the persons listed in this table.
Name and Principal Position | Fiscal Year | Salary $ |
Bonus $(1) | Stock | Option | Non-Equity | All Other $(5) | Total | ||||||||||||||||||||||||
| Laura Lee Stewart | 2020 | 456,341 | 66,650 | --- | 869 | 188,317 | 113,639 | 825,816 | ||||||||||||||||||||||||
| President, CEO, Interim CFO and Director | 2019 | 413,331 | 2,010 | 8,040 | 1,810 | 143,085 | 70,622 | 638,898 | ||||||||||||||||||||||||
| Heidi Sexton | 2020 | 247,406 | 43,101 | 54,242 | 9,774 | 89,516 | 75,542 | 519,581 | ||||||||||||||||||||||||
| EVP/COO | 2019 | 229,225 | 12,395 | 49,580 | 10,860 | 65,389 | 19,877 | 387,326 | ||||||||||||||||||||||||
| Daphne D. Kelley | 2020 | 243,000 | 12,095 | 48,378 | 7,240 | 87,368 | 65,294 | 463,375 | ||||||||||||||||||||||||
| EVP/CFO | ____ | |||||||||||||||||||||||||||||||
Summary Compensation Table
Name and Principal Position | Fiscal Year | Salary | Bonus(1) | Stock Awards(2) | Option Awards(3) | Non-Equity Incentive Plan Compensation(4) | All Other Compensation(5) | Total | ||||||||||||||||||
Laura Lee Stewart President and CEO | 2022 | $ | 509,868 | $ | 10,713 | $ | 10,712 | $ | — | $ | 234,975 | $ | 172,928 | $ | 939,196 | |||||||||||
| 2021 | 451,793 | 25,968 | — | 1,692 | 156,114 | 132,169 | 767,736 | |||||||||||||||||||
Heidi Sexton EVP/COO | 2022 | 277,500 | 8,570 | 34,280 | 19,904 | 95,473 | 78,141 | 513,868 | ||||||||||||||||||
| 2021 | 260,083 | 6,167 | 24,670 | 10,716 | 74,137 | 69,162 | 444,935 | |||||||||||||||||||
Wes Ochs EVP/CFO and CSO | 2022 | 275,333 | 8,570 | 34,280 | 19,904 | 95,473 | 93,870 | 527,430 | ||||||||||||||||||
| 2021 | 232,083 | 6,167 | 24,670 | 10,716 | 66,752 | 75,671 | 416,059 | |||||||||||||||||||
(1)Includes for 2022: (a) the grant date fair value, under FASB ASC Topic 718, of 250 shares, 200 shares and 200 shares of Company common stock granted to Ms. Stewart, Ms. Sexton and Mr. Ochs, respectively on January 28, 2022. Includes for 2021: (a) the grant date fair value, under FASB ASC Topic 718, of 800 shares, 190 shares and 190 shares of Company common stock granted to Ms. Stewart, Ms. Sexton, and Mr. Ochs, respectively, on January 27, 2021.
(Footnotes continued on following page.)
| Description | Stewart | Sexton | Kelley | |||||||||
| 401(k) matching contribution | $ | 10,833 | $ | 9,255 | $ | 7,578 | ||||||
| Non-qualified deferred compensation plan contribution(a) | 61,703 | 20,000 | 20,000 | |||||||||
| Payment for executive medical benefits | 2,401 | 7,824 | --- | |||||||||
| Payment for unused vacation not eligible for rollover | 7,946 | 9,615 | 9,384 | |||||||||
| Employee stock ownership plan allocation | 23,612 | 23,612 | 23,612 | |||||||||
| Parking allowance | --- | 3,120 | 3,120 | |||||||||
| Dividends on restricted stock | 144 | 2,116 | 1,600 | |||||||||
| Matching charitable contribution(b) | 7,000 | --- | --- | |||||||||
| Total | $ | 113,639 | $ | 75,542 | $ | 65,294 | ||||||
Outstanding Equity Awards at December 31, 2020. 2022” below.
(3)Reflects the value of stock options to purchase: (i) for 2022, 2,000 shares of Company common stock granted to each of Ms. Sexton and Mr. Ochs on January 28, 2022 and (ii) for 2021, 300 shares of Company common stock granted to Ms. Stewart and 1,900 shares of Company common stock granted to each of Ms. Sexton and Mr. Ochs, respectively, on January 27, 2021. The amounts in this column are calculated using the grant date fair values of the awards under FASB ASC Topic 718, based on the fair value of the stock option awards, as estimated using the Black-Scholes option-pricing model. The assumptions used in the calculation of these amounts are included in Note 14 of the Notes to Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC. For additional information, see “- Outstanding Equity Awards at December 31, 2022” below.
(4)For additional information, see “- Annual Bonus Plan” below.
(5)The amounts reported for the year ended December 31, 2022, consist of the following (no named executive officer received personal benefits or perquisites exceeding $10,000 in the aggregate):
| Description | Stewart | Sexton | Ochs | ||||||||||||||||||||
| 401(k) matching contribution | $ | 9,108 | $ | 8,340 | $ | 8,307 | |||||||||||||||||
Non-qualified deferred compensation plan contribution(a) | 113,584 | 25,000 | 35,000 | ||||||||||||||||||||
| Payment for executive medical benefits | 2,461 | 8,028 | 10,800 | ||||||||||||||||||||
| Payment for unused vacation not eligible for rollover | 9,904 | 7,512 | 10,731 | ||||||||||||||||||||
| Employee stock ownership plan allocation | 27,293 | 27,293 | 27,293 | ||||||||||||||||||||
| Parking allowance | 3,531 | — | — | ||||||||||||||||||||
| Dividends on restricted stock | 47 | 1,969 | 1,739 | ||||||||||||||||||||
Matching charitable contribution(c) | 7,000 | — | — | ||||||||||||||||||||
| Total | $ | 172,928 | $ | 78,141 | $ | 93,870 | |||||||||||||||||
(a)Non-qualified supplemental retirement contributions made by the Bank on behalf of the executive under the Bank’s non-qualified deferred compensation plan. The Bank's 2022 contribution for Ms. Stewart vested over one year, with 50% immediate vesting commencing on February 1, 2022 and the remainder vesting on February 1, 2023. The Bank's 2022 contributions for Ms. Sexton and Mr. Ochs vest over five years commencing on February 1, 2023. For additional information, see “- Non-qualified Deferred Compensation Plan” below.
(b)We annually match up to $7,000 in charitable contributions made by Ms. Stewart to charities of her choice that are tax-exempt organizations under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “IRC”).
15
Outstanding Equity Awards at December 31, 2022
The following table sets forth information for each named executive officer concerning stock options and restricted stock held at December 31, 2020.
| Options Awards | Stock Awards | |||||||||||||||||||||
| Name | Number of | Option Exercise Price | Option Expiration Date | Number | Market Value of Shares or Units of Stock That Have Not Vested(6) | |||||||||||||||||
| Exercisable | Unexercisable | |||||||||||||||||||||
| Laura Lee Stewart | 18,316 | --- | $ | 16.80 | 01/23/2024 | |||||||||||||||||
| 8,362 | --- | 18.36 | 01/28/2025 | |||||||||||||||||||
| 8,502 | --- | 18.36 | 01/28/2025 | |||||||||||||||||||
| 100 | 150 | (1) | 33.50 | 01/25/2029 | 180 | (1) | $ | 5,715 | ||||||||||||||
| 40 | 80 | (2) | 36.26 | 01/31/2030 | ||||||||||||||||||
| Heidi Sexton | 4,414 | --- | 8.49 | 02/28/2022 | ||||||||||||||||||
| 1,500 | --- | 22.31 | 01/29/2026 | |||||||||||||||||||
| 3,000 | --- | 28.34 | 01/27/2027 | |||||||||||||||||||
| 560 | 840 | (3) | 35.27 | 11/19/2028 | 74 | (3) | $ | 2,350 | ||||||||||||||
| 600 | 900 | (4) | 33.50 | 01/25/2029 | 1,110 | (1) | 35,243 | |||||||||||||||
| 270 | 1,080 | (5) | 36.26 | 01/31/2030 | 1,480 | (5) | 46,990 | |||||||||||||||
| Daphne D. Kelley | 320 | 480 | (4) | 33.50 | 01/25/2029 | 720 | (1) | $ | 22,860 | |||||||||||||
| 200 | 800 | (5) | 36.26 | 01/31/2030 | 1,320 | (5) | 41,910 | |||||||||||||||
| Options Awards | Stock Awards | ||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested(8) | ||||||||||||||||||||||||||||||
| Exercisable | Unexercisable | ||||||||||||||||||||||||||||||||||
| Laura Lee Stewart | 13,737 | — | $ | 16.80 | 1/23/2024 | ||||||||||||||||||||||||||||||
| 3,502 | — | 18.36 | 1/28/2025 | ||||||||||||||||||||||||||||||||
| 8,362 | — | 18.36 | 1/28/2025 | ||||||||||||||||||||||||||||||||
| 200 | 50 | (1) | 33.50 | 1/25/2029 | 60 | (1) | $2,356 | ||||||||||||||||||||||||||||
| 120 | — | 36.26 | 1/31/2030 | ||||||||||||||||||||||||||||||||
| 200 | 100 | (2) | 32.46 | 1/27/2031 | |||||||||||||||||||||||||||||||
| 250 | (3) | 9,818 | |||||||||||||||||||||||||||||||||
| Heidi Sexton | 500 | — | 22.31 | 1/29/2026 | |||||||||||||||||||||||||||||||
| 3,000 | — | 28.34 | 1/27/2027 | ||||||||||||||||||||||||||||||||
| 1,120 | 280 | (4) | 35.27 | 11/19/2028 | 25 | (4) | $982 | ||||||||||||||||||||||||||||
| 1,200 | 300 | (1) | 33.50 | 1/25/2029 | 370 | (1) | 14,530 | ||||||||||||||||||||||||||||
| 810 | 540 | (5) | 36.26 | 1/31/2030 | 740 | (5) | 29,060 | ||||||||||||||||||||||||||||
| 760 | 1,140 | (6) | 32.46 | 1/27/2031 | 570 | (6) | 22,384 | ||||||||||||||||||||||||||||
| 400 | 1,600 | (7) | 42.85 | 1/28/2032 | 800 | (7) | 31,416 | ||||||||||||||||||||||||||||
| Wes Ochs | 1,200 | — | 28.34 | 1/27/2027 | |||||||||||||||||||||||||||||||
| 600 | 150 | (4) | 33.50 | 1/25/2029 | 200 | (1) | $7,854 | ||||||||||||||||||||||||||||
| 600 | 400 | (5) | 36.26 | 1/31/2030 | 660 | (5) | 25,918 | ||||||||||||||||||||||||||||
| 760 | 1,140 | (6) | 32.46 | 1/27/2031 | 570 | (6) | 22,384 | ||||||||||||||||||||||||||||
| 400 | 1,600 | (7) | 42.85 | 1/28/2032 | 800 | (7) | 31,416 | ||||||||||||||||||||||||||||
(1)Vests in three equal annual installments on January 25, 2021, 2022 and 2023.
(2)Vests on January 27, 2023.
(3)Vests on January 28, 2023.
(4)Vests on November 19, 2023.
(5)Vests in two equal annual installments on January 31, 20212023 and 2022.
(3) Vests in three equal annual installments on November 19, 2021, 2022 and 2023.
(4) 2024.
(6)Vests in three equal annual installments on January 25, 2021, 202227, 2023, 2024 and 2023.
(5) 2025.
(7)Vests in four equal annual installments on January 31, 2021, 2022,28, 2023, 2024, 2025 and 2024.
(6) 2026.
(8)Value is based on the $31.75$39.27 closing price of a share of Sound Financial Bancorp common stock on December 31, 2020.2022.
IRC. Supplemental Executive Retirement Plans.The Company maintains two supplemental executive retirement plans for the benefit of Ms. Stewart, which are intended to be unfunded, non-contributory defined benefit plans maintained primarily to provide her with supplemental retirement income. The first supplemental executive retirement plan (“SERP 1”) Employment Agreement. On January 25, 2019, the Company and the Bank (collectively, the “Employers”), entered into an amended and restated employment agreement (the “Amended Employment Agreement”) with Ms. Stewart, President and Chief Executive Officer of the Employers. The Amended Employment Agreement amends and restates the amended and restated employment agreement entered into with Ms. Stewart on August 30, 2016.The Amended Employment Agreement currently expires on December 31, 2022.2024 as a result of the automatic renewal of its term for one additional year on January 1, 2023. On January 1 of each year, the term of the Amended16Employment Agreement will be extended for a period of one additional year, unless either the Employers give notice to Ms. Stewart or Ms. Stewart gives notice to the Employers in writing at least 60 days prior to such date that the term of the Amended Employment Agreement will not be extended further. If any party gives timely notice that the term will not be extended as of any such January 1st, then the Amended Employment Agreement will terminate at the conclusion of its remaining term. The Amended Employment Agreement also provides that if a change in control of the Company or the Bank occurs during the term of the Amended Employment Agreement, then the term will be extended to the extent necessary so that it expires no earlier than the one-year anniversary of the date of the change in control. This ensures that the cash severance under the Amended Employment Agreement is at least one times Ms. Stewart’s salary.Ms. Stewart's annual minimum base salary under the Amended Employment Agreement is Four Hundred Thirteen Thousand Two Hundred Thirty-One Dollars and Thirty-Seven Cents ($413,231.37), her base salary for 2019 as established by the Compensation Committee of the Board of Directors of the Company. The amount of her annual salary is reviewed by the Compensation Committee each year. The Amended Employment Agreement provides for: no salary reductions; participation in bonus plans, retirement plans, group insurance and other benefits provided to full time Bank employees generally and in which executive officers participate; and reimbursement of expenses incurred by Ms. Stewart in performing services for the Employers.Under the Amended Employment Agreement, if Ms. Stewart's employment is terminated for any reason other than cause, death, retirement, or disability, or if she resigns following certain events such as relocation or demotion, she will be entitled to receive for the remaining term of the Amended Employment Agreement: (i) her salary and (ii) at no premium cost to Ms. Stewart, the same group health benefits and other group insurance and group retirement benefits as Ms. Stewart would have received had she continued to be employed by the Employers, to the extent that the Employers can do so under the terms of applicable plans as are maintained by the Employers for the benefit of their executive officers from time to time. All of the foregoing payments are subject to cut-back to the extent the payments are deemed "parachute payments" under Section 280G of the Internal Revenue Code, as amended (the “IRC”).Annual Bonus Plan. Our named executive officers participate in an annual incentive bonus plan (“Annual Bonus Plan”), which provides for annual cash bonuses to designated senior managers, including all the named executive officers, upon the achievement of performance goals established by the Board of Directors based on the recommendation of the Compensation Committee. The participants’ bonuses are based 50% on meeting quantitative goals and 50% on meeting qualitative goals. The quantitative goals are based on overall corporate performance and include performance factors relating to asset size, capital level, delinquency ratio, return on assets, and equity, levels of non-interest income and non-interest expense, net interest margin, charge-offs and the size of the loan portfolio.charge-offs. The qualitative goals are non-financial corporate goals that require leadership of senior management and are ranked based on their relative importance to our operations. The performance goals are the same for all participants. Under the Annual Bonus Plan, for 2020, Ms. Stewart, Ms. Sexton and Ms. Kelley wereMr. Ochs are entitled to receive a bonus of up to 40%50.0%, 33%37.5% and 33%37.5%, respectively, of their base salary, depending on how actual performance compares with the pre-established quantitative and qualitative corporate performance goals. Based on the Company’s actual performance compared to the pre-established corporate performance goals for 2020,2022, prior to the earnings override adjustment discussed below, Ms. Stewart, Ms. Sexton and Ms. KelleyMr. Ochs earned a bonus of 36.75%47.63%, 30.32%35.72% and 30.32%35.72%, respectively, of their base salary.The bonus percentages earned by the participants are subject to upward or downward adjustment by up to 50%, based on the percentage that actual net income is above or below the targeted net income as set by the Board of Directors (“Earnings Override Adjustment”). The Earnings Override Adjustment for 20202022 resulted in an 18.1% upwarda 4.2% downward adjustment in the bonus percentages earned. Accordingly, for the year ended December 31, 2020,2022, Ms. Stewart, Ms. Sexton and Ms. KelleyMr. Ochs earned bonuses of 43.40%45.63%, 35.81%34.22% and 35.81%34.22% of base salary, respectively. The bonus amountsamount earned by each of the named executive officers for 20202022 is included in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table above.wasbecame effective as of August 14, 2007. The second supplemental executive retirement plan (“SERP 2”) wasbecame effective as of December 30, 2011, at which time the benefits under SERP 1 were frozen. At that time, the Company also entered into a Confidentiality, Non-Competition, and Non-Solicitation Agreement with Ms. Stewart, which is discussed below.
