FS Bancorp’s cultural revolution kicked off about a decade ago. It’s a journey that’s still ongoing for the holding company of 1st Security Bank of Washington, according to CEO Joseph Adams.
The predecessor of Mountlake Terrace, Washington-based FS Bancorp was a credit union from its founding in 1936 until 2004, when it converted to a mutual state savings bank. In 2012, upon converting from a mutual to stock ownership structure, Adams and his team began to reconsider the bank’s business lines and culture.
“We had to figure out what we wanted to be when we grew up,” says Adams. “We had difficulty attracting top talent in our market.” The bank posted a 0.5% return on assets as of December 2011, according to S&P’s Capital IQ database.
But that has changed. “If you look at the financials of this organization, for the last 10 years, you will see a hockey stick,” says Adams. “You will just see it growing and growing.” FS Bancorp reported a return on assets of 2.1% at the end of 2020. Overall performance drove FS Bancorp to place No. 1 among the Best Community Banks in the 2022 RankingBanking study, based on a variety of metrics including profitability, growth and total shareholder return, which totaled 125% over five years (2015 to 2020). Executive leadership, board oversight, innovation and growth were also examined, with FS Bancorp topping the Best Leadership Teams subcategory.
The $2.2 billion bank focuses on five areas: deposits, home lending, indirect consumer lending, commercial & industrial (C&I) and commercial real estate. But its business lines aren’t the sole driver of the bank’s success. Adams points to a cultural shift that started around a decade ago, when Adams promoted Vickie Jarman — previously part of the consumer lending group — to lead a team focused on transforming the bank. They proposed a new set of core values, along with a mission and vision for the company. It’s pretty simple: FS Bancorp wanted to create a “truly great place to work and bank,” says Adams. “We believe if you build a great place to work, it will be a great place to bank. We intentionally put those words in that order.”
What’s developed is a culture that values collaboration and humility, according to three FS Bancorp executives I spoke with in October: Adams, Chief Financial Officer Matt Mullet and Jarman, the bank’s chief human resources officer. Self promoters often don’t feel at home there, explains Mullet.
FS Bancorp wants “smart, driven, nice” people, says Adams. “Jerks” need not apply. “We all have to work someplace. Why not work someplace where we have each other’s back, where you wake up every morning excited to go see the people you get to work with?” he says. Getting all three qualities isn’t easy, so the bank makes prospective hires go through hoops to join the organization — the more senior, the more hoops. “Our head of retail, she joined us about four years ago, and she had 16 interviews,” says Adams. “But she kept coming. And she’s here, she does a great job.”
By all appearances, the lengthy hiring process isn’t keeping FS Bancorp from adding the talent it needs to drive growth. The company had 78 employees when its transformation began, says Jarman; now it employs more than 500.
Building a strong culture requires constant work and attention. FS Bancorp has worked with a corporate coach for more than a decade; Adams is also an avid reader of books on leadership and organizational development, including Jim Collins’ “Good to Great” and Simon Sinek’s “Leaders Eat Last.” Combined, the books shine a light on leaders that put their organizations ahead of their egos. Adams wants to adapt those concepts to FS Bancorp, and he’s working with their corporate coach to do it. That will include building a training process to help FS further develop its leaders so they get the culture, too. “It’ll probably take us a year or two, as we move into the future, to get it to a point where we believe we’ve really nailed it,” says Adams.
And they’re putting practices in place that take care of employees, including raising the starting wage to $20 an hour in July — in line with rates paid by big banks such as Bank of America Corp. and First Republic Bank. It was Mullet’s idea, says Adams. “He was concerned — with how expensive things are in the Seattle area — that we have a livable wage,” says Adams.
Adams was an attorney before becoming a banker but says he’s truly passionate about organizational development — getting the right people in the right positions to excel. “We work really hard to get people in roles that play to their strengths, not their weaknesses,” he says. “If you get somebody in a role that plays to their strengths, they do wake up every morning excited to do that role.”
That passion for people comes through in how Adams leads the organization, according to Jarman. “Joe isn’t someone who comes in and says, ‘OK, what do you have on your plate today?’ … He says, ‘Hey, how can I help you? What are you working on?’ It’s from a different angle. It’s not at you. It’s with you, and it’s supportive.”
“Playing to different strengths, and creating a collaborative environment where people are encouraged to think differently, builds a stronger bank,” Jarman continues. “We’ve created a space where people do feel safe saying, ‘I don’t agree with you’ or, ‘Can we try it this way?’” she says. Providing employees with the culture to foster those types of questions builds future leaders, and it comes from the top. “That’s what Joe does,” says Jarman. “He gives us the opportunity to grow.”
FS Bancorp CEO Joseph Adams will be part of a panel discussion at Bank Director’s Acquire or Be Acquired event in Phoenix, Jan. 30 – Feb. 1, 2022. Click here to access the agenda or learn more about the conference.