<PAGE> 1
===============================================================================
PROXY
===============================================================================
ANNUAL MEETING OF SHAREHOLDERS OF
UNITED SECURITY BANCORPORATION
MAY 29, 1997
The undersigned hereby constitutes and appoints William C. Dashiell and
Jacqueline A. Barnard, each of them the undersigned's attorney-in-fact and
proxy to vote all of the shares of common stock of United Security
Bancorporation (the "Company") owned of record by the undersigned on April 14,
1997 at the annual meeting of shareholders of the Company to be held on May 29,
1997 on any adjournment(s) thereof.
UNLESS OTHERWISE INDICATED, THE SHARES OF COMMON STOCK OWNED
BY THE UNDERSIGNED WILL BE VOTES FOR ITEM 1.
ITEM 1. ELECTION OF DIRECTORS
David Blankenship William C. Dashiell Rand Elliot
Robert J. Gardner Robert L. Golob James L. Moe
Keith P. Sattler Dann Simpson Norman J. Traaen
[ ] FOR the nominees listed above.
[ ] FOR the nominees listed above EXCEPT: ____________________
[ ] WITHOUT AUTHORITY to vote from all nominees listed above.
- ------------------------------------- -------------------------------------
Please print name(s) Signature of Shareholder
DATED: , 1997
------------------------------ -------------------------------------
Please print name(s) Additional Signature if Jointly Owned
<PAGE> 2
================================================================================
UNITED SECURITY BANCORPORATION
================================================================================
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 29, 1997
TO: THE SHAREHOLDERS OF UNITED SECURITY BANCORPORATION
Notice is hereby given that the annual meeting of shareholders of
United Security Bancorporation, (the "Company") will be held at Quality Inn
Oakwood, North 7919 Division, Spokane, Washington, on Thursday, May 29, 1997,
at 7:00 p.m., local time, for the following purposes:
(1) To elect nine members to the Board of Directors;
(2) In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting.
Shareholders of record at the close of business April 14, 1997, are
entitled to vote at the annual meeting and any adjournment(s) thereof. Whether
or not you plan to attend the meeting, please sign, date and return the
enclosed proxy in the reply envelope provided. The prompt return of your proxy
will assist us in preparing for the meeting.
By Order of the Board of Directors
William C. Dashiell, President
<PAGE> 3
================================================================================
UNITED SECURITY BANCORPORATION
================================================================================
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 29, 1997
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of UNITED SECURITY BANCORPORATION, a
Washington corporation (the "Company"), for the annual meeting of shareholders
of the Company to be held at 7:00 p.m., local time, on Thursday, May 29, 1997,
and any adjournment(s) or postponement(s) thereof. These proxy materials were
first mailed to shareholders on or about May 5, 1997.
The annual meeting will be held at Quality Inn Oakwood, North 7919
Division, Spokane, Washington. The executive offices of the Company are
located at 9506 North Newport Highway, Spokane, Washington 99218-1200.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the annual
meeting are summarized in the enclosed Notice of Annual Meeting of
Shareholders. Each of the proposals is described in more detail in subsequent
sections of this Proxy Statement.
VOTING RIGHTS AND SOLICITATIONS
The Company's common stock is the only type of security entitled to
vote at the annual meeting. If you were a shareholder of record of common
stock of the Company at the close of business on April 14, 1997 (the "record
date"), you may vote at the annual meeting. On all matters requiring a
shareholder vote at the annual meeting, each shareholder is entitled to one
vote, in person or by proxy, for each share of common stock of the Company
recorded in his or her name. On the record date, there were 3,682,341 issued
and outstanding shares of common stock.
The affirmative vote of a plurality of the shares present at the
annual meeting, in person or by proxy, is required to elect directors (Item 1).
Abstentions and "broker non-votes" (shares held by a broker or nominee as to
which a broker or nominee indicates n the Proxy that it does not have the
authority, either express or discretionary, to vote on a particular matter) are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business at the Annual Meeting. For the election of Directors,
an abstention from voting and broker non-votes will have the legal effect of
neither a vote for nor against the nominee. For all other matters, an
abstention from voting and broker non-votes, since they are not affirmative
votes, will have the same practical effect as a vote against the respective
matters.
If you are unable to attend the annual meeting, you may vote by proxy.
The enclosed proxy is solicited by the Board of Directors of the Company, and
when returned, properly completed, will be voted as you direct on your proxy.
If the proxy is returned with no instructions on how the shares are to be
voted, shares represented by such proxies will be voted FOR election of the
director-nominees identified by the Board of Directors (Item 1).
Page 2
<PAGE> 4
You may revoke or change your proxy at any time before it is exercised
at the annual meeting. To do this, send a written notice of revocation or
another signed proxy bearing a later date to the Secretary of the Company at
its principal executive office. You may also revoke your proxy by giving
notice and voting in person at the annual meeting.
COSTS OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In
addition, the Company will reimburse brokerage firms, custodians, nominees and
fiduciaries for their expenses in forwarding solicitation material to
beneficial owners. Proxies may also be solicited personally or by telephone or
telegram by certain of the Company's directors, executive officers and regular
employees, who will not receive additional compensation therefor. The total
cost of proxy solicitation, including the cost of preparing this Proxy
Statement, is estimated not to exceed $10,000.
THE COMPANY AND SUBSIDIARIES
As used in this Proxy Statement, the term the "Company" refers to
United Security Bancorporation and its operating subsidiaries, United Security
Bank ("USB"), Home Security Bank ("HSB"), USB Insurance Agencies, Inc. ("USB
Insurance"), USB Leasing, Inc. ("USB Leasing") and USB Mortgage Company, Inc.
("USB Mortgage"). USB and HSB are sometimes collectively referred to in this
Proxy Statement as the "Banks."
[The balance of this page has been intentionally left blank.]
Page 3
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 14, 1997, the names of,
and number of shares of common stock held by (i) beneficial owners known to the
Company to own more than five percent (5%) of the Company's common stock, (ii)
each director and executive officer of the Company and key executive officers
of the Company's subsidiaries, and (iii) all directors and executive officers
of the Company and key executive officers of the Company's subsidiaries as a
group. At such date the number of issued and outstanding shares of common
stock of the Company was 3,682,341.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
NAME AND (ALL DIRECT UNLESS PERCENT
ADDRESS OF OWNER OTHERWISE NOTED) OF CLASS
---------------- -------------------- --------
<S> <C> <C>
David C. Blankenship (1) 130,381 (2) 3.54%
William C. Dashiell (1) 44,238 (3) 1.20%
J. Rand Elliott (1) 1,210 0.03%
Robert J. Gardner (1) 18,496 (4) 0.50%
Robert L. Golob (1) 12,856 0.35%
Stanley W. Horton (14) 134,232 (5) 3.65%
James L. Moe (1) 81,300 (6) 2.20%
Keith P. Sattler (1) 15,064.4(7) 0.41%
Dann Simpson (1) 4,879 0.13%
Norman J. Traaen (1) 16,920 0.46%
Jacqueline A. Barnard 4,079 (9) 0.11%
Duane L. Brandenburg 0 (8) 0.00%
William G. Edom 220 (10) 0.01%
Chad Galloway (11) 55 0.00%
Daniel P. Murray 9,166 (12) 0.24%
Jeff Verble (13) 1,634 0.04%
---------------------------
(All directors and executive
officers as a group (16 persons) 474,730.4 12.87%
</TABLE>
___________________________________________
(1) Director of the Company
(2) Includes 18,116 shares held of record by MIW Investments
(3) Includes 10,714 shares allocated to Mr. Dashiell under the Company's
employee stock ownership plan, 148 shares held of record for the
benefit of Mr. Dashiell's children and 117 shares held of record by Mr.
Dashiell's spouse. Mr. Dashiell is the President and Chief Executive
Officer of the Company.
(4) Includes 9,149 shares held of record by Gardner Logging and Trucking,
Inc. and 1,517 shares held of record by Mr. Gardner's spouse.
(5) Includes 21,102 shares held of record by Intermountain Electric, Inc.,
21,102 shares held of record by P.K. Contractors, Inc. and 18,116
shares held of record by MIW Investments.
(6) Includes 5,879 shares allocated to Mr. Moe under the Company's employee
stock ownership plan. Mr. Moe is the President of USB Insurance.
(7) Consists of 4,908 shares held of record by Mr. Sattler's children and
91.4 shares held of record by TIPS.
(8) Mr. Brandenburg is the President and Chief Executive Officer of USB.
(9) Includes 3,059 shares allocated to Ms. Barnard under the Company's
employee stock ownership plan. Ms. Barnard is the Assistant Vice
President of the Company.
(10) Mr. Edom is the President of HSB.
(11) Mr. Galloway is the Vice President and Chief Financial Officer of the
Company.
(12) Includes 4,577 shares allocated to Mr. Murray under the Company's
employee stock ownership plan. Mr. Murray is the Senior Vice
President-Loan Administrator of the Company and USB.
(13) Mr. Verble is the President of USB Mortgage Company, Inc. and USB
Leasing, Inc.
(14) Mr. Horton resigned effective April 21, 1997.
Page 4
<PAGE> 6
DIRECTORS AND EXECUTIVE OFFICERS
The names, ages, business experience for at least the last five years and
positions of the directors and executive officers of the Company and its
subsidiaries, as of April 14, 1997, are set out below. The Company's Board of
Directors consists of ten members. All directors serve until the next annual
meeting of the Company's shareholders or until their successors are elected and
qualified. Officers are appointed by the Board of Directors. There are no
family relationships among these officers, nor any arrangements or
understandings between any officer and any other person pursuant to which the
officer was elected.
Directors of the Company:
<TABLE>
<CAPTION>
Name and Position AGE BUSINESS EXPERIENCE
----------------- --- -------------------
<S> <C> <C>
David C. Blankenship 54 Mr. Blankenship has been a Director of the Company and USB
Director of the Company, USB, USB since 1991 and 1990 respectively, and has been a member of
Mortgage, USB Insurance and USB the Executive Committee of the Company since 1993. He is
Leasing and a member of the Executive the President and owner of Blankenship and Associates, Inc.
Committee of the Company which is engaged in the commercial lighting and fixture
business and is also a Director of Playfair Race Course, Inc.,
Holland Road Properties, Inc. and RiverPark Properties, Inc.,
and Triple Ten Investments.
William C. Dashiell 58 Mr. Dashiell has been a Director of the Company, and its
Chairman, Chief Executive Officer and President and Chief Executive Officer since 1985 and Chairman
President of the Company. Director of the Board of USB, HSB, USB Insurance, USB Leasing and USB
and Chairman of USB, Director of HSB, Mortgage since 1974, 1989, 1987, 1985 and 1985 respectively
USB Insurance, USB Leasing, USB and a member of the Executive Committee of USB and the Company
Mortgage and a member of the since 1974 and 1993, respectively. Mr. Dashiell has been
Executive Committees of the Company involved in all aspects of the industry for the past 35 years.
and USB.
Rand Elliott 46 Mr. Elliott has been a Director of Home Security Bank since
Director, Home Security Bank 1995, and a Director of the Company since 1996. Mr. Elliott
has been the General Manager and President of the Holiday Inn
of Yakima since 1977 and is a Board Member of the Yakima
chapter of the American Red Cross. Mr. Elliott currently
maintains membership in the Yakima Downtown Rotary Club and
Y.M.C.A.
Robert J. Gardner 57 Mr. Gardner has been a Director of the Company since 1985, and
Director of the Company, USB, USB a Director of USB, USB Insurance, USB Mortgage and USB Leasing
Insurance, USB Mortgage and USB since 1980, 1987, 1995 and 1995 respectively. Mr. Gardner is
Leasing. self-employed in the logging business and is currently
President and principal owner of Gardner Logging and Trucking,
Inc. of Chewelah, Washington.
Robert L. Golob 66 Mr. Golob has been a Director of the Company since 1988, and
Director of the Company and HSB a Director of HSB since 1989. Mr. Golob is employed by Golob
Dairy, Inc., a family-owned operation based in Granger,
Washington and has served as its President since 1980.
</TABLE>
Page 5
<PAGE> 7
<TABLE>
<CAPTION>
Name and Position AGE BUSINESS EXPERIENCE
----------------- --- -------------------
<S> <C> <C>
Stan W. Horton 54 Mr. Horton has been a Director of the Company since 1985,
Director of the Company, USB, USB a Director of USB since 1982 and a Director of USB Insurance,
Insurance, USB Leasing, and USB USB Leasing and USB Mortgage since 1987, 1985 and 1985,
Mortgage and a member of the respectively. In addition, he has been a member of the
Executive Committee of the Company Executive Committee of the Company since 1993. Since 1968,
Mr. Horton has been President of Intermountain Electric, Inc.
of Spokane. He is also a Director of P.K. Contractors, Inc.,
Playfair Race Course, Inc., Holland Road Properties, Inc.,
RiverPark Properties, Inc., and Triple Ten Investments. Mr.
Horton resigned as a Director of the Company and its
subsidiaries effective April 21, 1997.
James L. Moe 46 Mr. Moe has been a Director of the Company and USB Insurance
Director of the Company and USB since 1992 and 1990, respectively, and has been President of
Insurance and a member of the USB Insurance since 1990 and a member of the Executive
Executive Committee of the Company Committee of the Company since 1993. Prior to such time, Mr.
Moe owned and operated James L. Moe Insurance Company, Colville,
Washington, which was acquired by the Company (through its
USB Insurance subsidiary) in 1990.
Keith P. Sattler 53 Mr. Sattler has been a Director of the Company, USB Mortgage
Director of the Company, USB Mortgage and USB Leasing since 1993, 1995 and 1995 respectively and a
and USB Leasing, Chairman of HSB, and member of the Executive Committee of the Company since January
a member of the Executive Committee 1994. In addition, he has served as a Director of HSB since
of the Company. 1993, and since 1996 has served as its Chairman. He is a
certified public accountant and principal in the Prosser,
Washington, accounting firm of Sattler and Heslop. Mr.
Sattler is currently a Director of the Lower Valley Holding
Corp., and the Sunnyside Housing Authority.
Dann Simpson 63 Mr. Simpson has been a Director of the Company since 1985,
Director of the Company, USB and USB a Director of USB and USB insurance since 1974 and 1985
Insurance, and a member of the respectively, and a member of the Executive Committee of
Executive Committee of the Company the Company since 1993. From 1986 to 1990, Mr. Simpson
was controller of Nelson Landscape Services, Inc., and from
1990 to 1993 was business manager of Stevens County
Counseling Services. Prior to 1986, he was a practicing
accountant.
Norman J. Traaen 76 Mr. Traaen has been a Director of the Company since 1985 and
Director of the Company, USB, USB a Director of USB, USB Mortgage and USB Leasing since 1974,
Mortgage and USB Leasing. 1985, and 1995 respectively. From 1965 until his retirement i
n 1972, Mr. Traaen owned and operated an auto parts store.
He is also active in commercial and residential real estate
investing.
</TABLE>
[The balance of this page has been intentionally left blank.]
Page 6
<PAGE> 8
Directors or Executive Officers
of Subsidiaries:
<TABLE>
<CAPTION>
Name and Position AGE BUSINESS EXPERIENCE
----------------- --- -------------------
<S> <C> <C>
Daniel P. Murray 49 Mr. Murray has been a Director of USB since 1990, and from 1990 to
Senior Vice President- Loan March of 1995 served as its President. He has been a Director of HSB
Administrator of the Company since 1996. From 1985 to 1990 he was Vice President and Credit
and USB, and a Director of USB, Administrator of Valley Bank in Mount Vernon, Washington. Mr. Murray
HSB and USB Leasing is a member of the Hillyard Valley Lions Club and a past Director and
past president of the Chewelah Valley Lions Club, member of the Board
of Directors of the Inland N.W. Chapter of the National Multiple
Sclerosis Society.
Duane L. Brandenburg 51 Mr. Brandenburg was appointed as President, Chief Executive Officer
Vice President of the Company and Director of USB on November 26, 1996, and Vice President of the
and President, Chief Executive Company on December 10, 1996. From 1969 until joining USB, he served
Officer and a Director of USB in various capacities with Farmers and Merchants Bank, Opportunity,
Washington, most recently as Executive Vice President, Director and
Secretary to the Board of Directors. During 1967 and 1968, he was
employed by Farmers and Merchants Banks as a marketing researcher.
Mr. Brandenburg is a 1969 graduate of Eastern Washington State
College and holds a B.A. in Business Administration.
William G. Edom 58 Mr. Edom was appointed as President, Chief Executive Officer and
Vice President of the Company Director of HSB on June 6, 1996, and Vice President of the Company
and President, Chief Executive on July 23, 1996. From 1985 until joining HSB, he served in various
Officer and Director of HSB capacities with Valley Commercial Bank, which merged with WestOne
Bancorp, and ultimately U.S. Bancorp, most recently as Vice President
and manager of the Clarkston office. From 1980 to 1985 he was
President & CEO of High Lakes Community Bank in LaPine, Oregon; and
ultimately President & CEO of Greater Pacific Bank in Albany, Oregon.
From 1973 to 1980 he served in various capacities with Citizens Bank
of Oregon, most recently as Commercial Loan Administrator. From 1963
to 1973, he participated in First National Bank of Oregon's training
program in various capacities. Mr. Edom attended the University of
Oregon and is a graduate of the Pacific Coast Banking School.
Jeffrey S. Verble 39 Mr. Verble has been President of USB Mortgage Company since 1995 and
Vice President of the Company President of USB Leasing, since March, 1997. Mr. Verble was previously
and President of USB Mortgage self-employed as a builder/developer. Mr. Verble also has eight years
and USB Leasing. of prior experience as a mortgage lender. Mr. Verble holds a B.A. in
Industrial Technology from Eastern Washington University.
</TABLE>
Page 7
<PAGE> 9
<TABLE>
<CAPTION>
Name and Position AGE BUSINESS EXPERIENCE
----------------- --- -------------------
<S> <C> <C>
Phillip B. Anderson 57 Mr. Anderson has been Vice President of USB Insurance since 1990, and
Vice President of USB Insurance from 1985 to 1990 was employed in various capacities by James L. Moe
Insurance Agency, Inc. Mr. Anderson is currently a Director of both
the Mount Carmel Hospital Foundation and Dominican Health Services.
Jacqueline A. Barnard 39 Ms. Barnard has been Secretary and Treasurer of the Company, USB
Assistant Vice President, Insurance and USB Leasing since 1991, and USB Mortgage since 1995.
Secretary and Treasurer of the Since 1978, Ms. Barnard has served in various capacities with the
Company; Secretary and Company, most recently as Assistant Vice President.
Treasurer of USB Insurance, USB
Leasing, and USB Mortgage.
</TABLE>
[The balance of this page has been intentionally left blank.]
Page 8
<PAGE> 10
EXECUTIVE COMPENSATION
Report of Compensation Committee on Executive Compensation. The
Compensation Committee of the Board of Directors of United Security
Bancorporation is composed of David Blankenship, Dann Simpson, and Keith
Sattler. Directors Blankenship, Simpson and Sattler were appointed to the
Compensation Committee in 1995.
The intention of this Committee Report is to describe in general terms the
process the Committee undertakes and the matters it considers in determining
the appropriate compensation for United Security Bancorporation's executive
officers, including the executive officers who are named in the enclosed
Summary Compensation Table (the "Named Executives").
United Security Bancorporation, acting through the Committee, believes that the
Compensation of its Named Executives and other key personnel should reflect and
support the goals and strategies that United Security Bancorporation has
established.
Compensation Philosophy. The Compensation Committee has two principal
objectives in determining executive compensation (1) to attract, reward and
retain key executive officers and (2) to motivate executive officers to perform
to the best of their abilities and to achieve short-term and long-term
corporate objectives that will contribute to the overall goal of enhancing
stockholders value. In furtherance of these objectives, the Committee has
adopted the following policies:
o The Company will compensate competitively with the practices
of other leading companies in the related fields;
o Performance at the corporate, subsidiary and individual
executive officer level will determine a significant portion of
compensation;
o The attainment of realizable but challenging objectives will
determine performance-based compensation; and
o The Company will encourage executive officers to hold
substantial, long-term equity stakes in the Company so that the
interest of executive officers will coincide with the interest
of stockholders - accordingly stock options will constitute a
significant portion of compensation.
Elements of Executive Compensation. The elements of the Company's
compensation of executive officers are: (1) annual cash compensation in the
form of base salary and incentive bonuses, (2) long-term incentive compensation
in the form of Salary Continuation Agreements, (3) long-term incentive
compensation in the form of stock options granted under the Company's 1995
Incentive Stock Option Plan and (4) other compensation and employee benefits
generally available to all employees of the Company, such as health insurance
and employer contributions under the Company's Employee Stock Ownership Plan.
The Committee believes that the Company's goals are best supported by
attracting and retaining well-qualified executive officers and other personnel
through competitive compensation arrangements, with emphasis on rewards for
outstanding contributions to the Company's success, with a special emphasis on
aligning the interests of executive officers and other personnel with those of
the Company's shareholders.
[The balance of this page has been intentionally left blank.]
Page 9
<PAGE> 11
Summary Compensation Table. The following table discloses
compensation received by the Company's Chief Executive Officer, its Senior Vice
President-Loan Administrator, its Chief Financial Officer and the President of
USB Insurance Agencies, Inc., the President of USB, the former President of USB
and the former President of HSB, for the years ended December 31, 1996, 1995
and 1994. No other executive officer of the Company or any of its subsidiaries
received annual compensation in excess of $100,000 for such years.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
- ------------------------------------------------------------------------------------
OTHER
EXECUTIVE ANNUAL
OFFICER YEAR SALARY BONUS COMPENSATION(1)
------------------ ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
William C. Dashiell 1996 $137,400 $97,932 $11,050
President & CEO of 1995 109,920 54,329 9,350
the Company 1994 102,216 52,522 4,268
Daniel P. Murray 1996 $79,980 $48,965 $ 4,700
Senior Vice President- 1995 73,500 42,418 4,600
Loan Administrator 1994 70,008 40,259 4,268
of the Company and
USB; Director of USB
Chad Galloway 1996 $ 54,119 $ 50,086 -
Vice President and CFO 1995 - - -
of the Company 1994 - - -
James L. Moe 1996 $ 98,277 $ 10,699 $ 3,400
President & Director 1995 86,587 30,699 2,400
of USB Insurance; 1994 86,796 27,414 1,800
Duane L. Brandenburg 1996(4) $ 10,680 $ - $ 700
President & Director 1995 - - -
of USB 1994 - - -
Robert L. McKean(5) 1996 $ 74,220 $ 87,202 $ 4,000
President & Director 1995 64,086 29,762 3,800
of USB 1994 - - -
Douglas C. Lukens(6) 1996 $ 27,399 $ 24,110 $ 1,300
President of HSB 1995 75,000 21,237 3,775
1994 70,397 - 2,625
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
- ----------------------------------------------------------------------------------------------
DOLLAR VALUE SECURITIES ALL OTHER
EXECUTIVE OF RESTRICTED UNDERLYING LTIP COMPEN-
OFFICER STOCK AWARDS OPTIONS/SARS(2) PAYOUTS SATION(3)
------------------ ------------- --------------- ------- ----------
<S> <C> <C> <C> <C>
William C. Dashiell - - - $ 25,583
President & CEO of - $ 5,627 - 25,578
the Company - - - 25,579
Daniel P. Murray - $ - - $ 17,051
Senior Vice President- - 3,584 - -
Loan Administrator - - - -
of the Company and
USB; Director of USB
Chad Galloway - - - -
Vice President and CFO - - - -
of the Company - - - -
James L. Moe - $ - - $ -
President & Director - 4,545 - -
of USB Insurance; - - - -
Direcor o Company
Duane L. Brandenburg - $ - - -
President & Director - - - -
of USB - - - -
Robert L. McKean(5) - $ - - -
President & Director - 4,095 - -
of USB - - - -
Douglas C. Lukens(6) - $ - - -
President of HSB - 3,694 - -
- - - -
</TABLE>
Stock Options. No options were granted to directors or executive
officers during the year ended December 31, 1996. Options totaling 83,840
shares were granted during 1995.
Directors' Compensation. Directors of the Company receive $400 for
each meeting of the board of directors attended, and members of the executive
committee of the board receive $400 per meeting attended. During the year
ended December 31, 1996, the Company paid total directors' fees of $29,200
pursuant to such arrangements.
__________________________________
(1) Represents director fees paid during the year.
(2) Represents the value attributed to the named executive officers during
the year pursuant to the stock options granted. The value of the
options represent the difference between the option price and the fair
market value at year end 1995.
(3) Represents the value attributed to the named executive officer during
the year pursuant to agreements entered into between USB and such
officers as part of USB's salary continuation plan.
(4) Salary on an annualized basis would be $100,200.
(5) Mr. McKean's employment terminated effective November 8, 1996.
(6) Mr. Lukens' employment terminated effective April 17, 1996.
Page 10
<PAGE> 12
Certain directors of the Company are also directors or executive
officers of the Company's subsidiaries or members of various committees of the
Company's board of directors, and receive fees for meetings attended in such
capacities. During the year ended December 31, 1996, USB paid directors $300
for each board of directors meeting attended and $100 for each committee
meeting attended. During the same period, HSB paid directors $200 for each
board of directors meeting attended and $50 for each committee meeting
attended. USB Insurance, USB Leasing and USB Mortgage currently do not pay
directors' fees.
Description of Salary Continuation Agreements. Both USB and HSB
maintain salary continuation plans for the benefit of certain of their
directors, executive officers and other key employees. The plans became
effective in early 1994 and provide for monthly payments to such persons, or
their designated beneficiaries, for a period of ten years following retirement
at age 65, or death prior to retirement. Amounts payable to eligible
participants are determined by reference to such person's base salary as of the
date of each such person's agreement under the plans (and, in the case of
directors who are not also executive officers, the amount of directors' fees
paid to such person at such time), and range from 40% to 60% of such base
salary or fees, and may be adjusted in each year to compensate for increases in
the cost of living.
The plans are generally available to most directors, executive
officers and other key employees of USB and HSB, and vest according to years of
service. Persons employed by the Banks for at least six continuous years prior
to the effective date of the plans are deemed vested with respect to 20% of the
salary continuation benefits available to them, and become vested in an
additional 20% of such benefits for each succeeding year of employment
thereafter until the employee becomes fully vested. Eligible persons employed
by the Banks for at least ten continuous years prior to the effective date of
the plans are deemed fully vested.
USB's and HSB's obligations under the salary continuation plans are
funded by prepaid policies of universal life insurance covering the lives of
the plan participants. These policies were purchased by USB and HSB in 1994,
at an aggregate cost of approximately $1,913,030.
As of December 31, 1996, the salary continuation plan in effect at USB
covered eleven individuals, six of whom were fully vested, two of whom were
partially vested and three of whom were not vested. The plan in effect at HSB
at such date covered nine individuals, none of whom were fully vested, four of
whom were only partially vested, and five of whom were not vested.
Description of Employee Stock Ownership Plan. The Company maintains
an employee stock ownership plan and trust, known as the United Security
Bancorporation Employee Stock Ownership Plan, for the benefit of its and its
subsidiaries' employees. The plan became effective January 1, 1989, and is
intended to enable participating employees to share in the growth and
prosperity of the Company and thereby accumulate capital for retirement needs.
The plan is qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended, as a stock bonus plan. Employees of the Company or its
subsidiaries who are 21 years of age or older become eligible for participation
in the plan in any plan year after 1,000 hours or more of service.
The Company makes annual contributions to the trust created under the
plan (for which the Company receives a deduction) and the trust invests such
contributions and trust earnings in common stock of the Company. Contributions
to the plan in each of the years ended December 31, 1996, 1995 and 1994 were
$184,653, $146,000 and $122,300.
At December 31, 1996, the plan owned 176,176 shares of common stock of
the Company, representing approximately 4.78% of the then outstanding shares.
At such date, the plan had no outstanding debt.
[The balance of this page has been intentionally left blank.]
Page 11
<PAGE> 13
Description of Incentive Stock Option Plan. The Company presently
maintains one stock option plan, known as the 1995 Incentive Stock Option Plan.
The Plan was adopted by the board of directors on March 14, 1995 and by the
shareholders on May 24, 1995, and provides for the issuance of incentive stock
options intended to qualify under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and options that are not qualified under the
Code. Key individuals of the Company and its subsidiaries (including
directors, executive officers who are also employees, and advisors or
consultants to the Company) are eligible to receive grants of options. The
plan is administered by a Compensation Committee of the Board of Directors,
whose members are entitled to receive awards of options if and when granted by
an independent executive remuneration committee. Up to 300,000 shares of the
Common Stock of the Company or shares representing eight percent (8%) of the
Common Stock of the Company from time-to-time outstanding, whichever is less,
are available for issuance in the form of options under the plan.
The Compensation Committee has authority with respect to the grant of
options to all eligible participants in the plan. The plan provides that the
Compensation Committee may consider but shall not be bound by the
recommendations of management or the board of directors of the Company in
exercising its duties under the plan.
The exercise price of an incentive stock option granted under the plan
may not be less than one hundred percent of the fair market value of the
Company's Common Stock on the date the option is granted, as determined by
reference to the average of the bid and asked prices of the Common Stock of the
Company as of the date of grant. The aggregate fair market value, on the date
of grant, of the stock for which incentive stock options are exercisable for
the first time by an employee during any calendar year may not exceed $100,000.
The Compensation Committee may, in its discretion, place limits on the
number of shares of Common Stock subject to any option award that can be
exercised in any given calendar year. Payment of the exercise price of an
option must be made in cash, unless the Compensation Committee determines
otherwise. Options may be subject to such additional or different terms and
conditions not inconsistent with the plan as are prescribed by the compensation
committee.
In the event of a change in control of the Company (as defined in the
plan), or if the Company enters into, or the board of directors proposes that
the Company enter into, a reorganization event (as defined in the plan), the
Compensation Committee may take such action and make such adjustments with
respect to the options as it deems appropriate including: in the case of a
change of control, providing that all options shall become immediately
exercisable, or providing for cash payment to the optionee upon surrender of
his or her options; and in the case of a reorganization event or proposed
reorganization event, providing that options will be terminated or canceled if
not exercised within a certain period, advancing the date on which outstanding
options will be exercisable or providing for cash payment to an optionee upon
the surrender of his or her options.
The plan may be amended at any time and from time to time by the Board
of Directors, but no amendment which materially increases the benefits accruing
to an optionee, materially increases the maximum aggregate number of shares of
Common Stock of the Company which may be issued pursuant to the plan or
materially modifies the eligibility requirements of the plan will be effective
unless approved by the shareholders of the Company. No amendment may alter or
impair any of the rights or obligations of any person under any option granted
under the plan without the optionee's consent.
No options were granted to directors or executive officers during year
ended 12-31-96.
[The balance of this page has been intentionally left blank.]
Page 12
<PAGE> 14
STOCK PERFORMANCE GRAPH
The chart below depicts the total return to shareholders during the period
beginning May 5, 1995, when United Security Bancorporation first issued its
shares publicly, and ending December 31, 1996. The definition of total return
includes appreciation in market value of the stock as well as the actual cash
and stock dividends paid to shareholders. The comparable indices utilized are
the S&P 500 Index and the Major Regional Banks (MRB) Index. The chart assumes
that the value of the investment in United Security Bancorporation's common
stock and each of the two indices was $100 on May 5, 1995, and that all
dividends were reinvested.
The Major Regional Banks peer group comprises 21 of the largest regional
banks in the United States, and all but two of the banks do not compete
directly with United Security Bancorporation and the two banks that do are much
larger. Those banks that are members of the group are as follows: Banc One
Corp; Bank Boston, Bank New York; Boatman's Bcshs, Comerica, Inc.; Corestates
Finl; Fifth Third Banc; First Bank Sys; First Union Corp; Fleet Finl Group;
Keycorp; Mellon Bank Corp; Nationsbank Corp; Natl City Corp; Norwest Corp; PNC
Bank Corp; Republic NY Corp; Suntrust Banks; U.S. Bancorp; Wachovia Corp.
[GRAPH]
5/5/95 12/31/95 12/31/96
S&P Major Regional Banks $100.00 $157.53 $215.30
S&P 500 $100.00 $137.58 $169.20
United Security Bancorporation $100.00 $178.75 $210.00
Page 13
<PAGE> 15
RELATED PARTY TRANSACTIONS AND BUSINESS RELATIONSHIPS
Loans to Affiliates. Some of the Company's directors and executive
officers were customers of the Banks during the fiscal years ended December 31,
1996, 1995 and 1994 and had transactions with such Banks in the ordinary course
of business. In addition, some of the Company's directors and executive
officers are officers, directors or shareholders of corporations or members of
partnerships which were customers of the Banks during the fiscal years ended
December 31, 1996, 1995 and 1994, and had transactions with such Banks in the
ordinary course of business. All loans included in such transactions were on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than any normal risk of collectibility or present other
unfavorable terms. The aggregate dollar amounts of these loans were $9,525,000
at December 31, 1996, $7,976,000 at December 31, 1995 and $4,845,881 at
December 31, 1994. During the year ended December 31, 1996, $8,814,000 of new
related party loans were made. Repayments and adjustments of related party
loans during such year aggregated $7,265,000.
Insurance Agency Payments. During the years ended December 31, 1996,
1995 and 1994, USB Insurance received commissions aggregating $10,000, $36,000
and $111,000 in connection with the purchase by USB and HSB of universal life
insurance policies on the lives of certain of their directors and executive
officers. Such policies are designed to fund USB's and HSB's obligations under
the salary continuation agreements described elsewhere in this Proxy Statement
that were entered into with such persons in 1995.
SECTION 16(a) REPORTING OBLIGATIONS
Based solely on its review of copies of reports made pursuant to
Section 16(a) of the Securities Exchange Act of 1934, related regulations, and
written representations that no other reports were required, the Company
believes that during the year ended December 31, 1996 all filing requirements
applicable to its directors, executive officers and 10% shareholders were
satisfied.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The consolidated financial statements of the Company for the years
ended December 31, 1996, 1995 and 1994 appearing in the Company's annual report
on Form 10-KSB for the year ended December 31, 1996 are hereby incorporated by
reference in this Proxy Statement. A copy of the Company's annual report on
Form 10-KSB can be obtained free of charge from the Company by writing to
Jacqueline A. Barnard, Secretary, United Security Bancorporation, 9506 North
Newport Highway, Spokane, Washington 99218-1200.
[The balance of this page has been intentionally left blank.]
Page 14
<PAGE> 16
================================================================================
ITEM NO. 1 -- ELECTION OF DIRECTORS
================================================================================
At the annual meeting, nine directors are to be elected, each to serve until
the next annual meeting of shareholders and until their successors are elected
and qualified.
Unless authority to vote is withheld on a proxy, proxies in the form
enclosed will be voted FOR the director-nominees identified below. If any
nominee is not available for election (a contingency which the Company does not
now foresee), it is the intention of the Board of Directors to recommend the
election of a substitute nominee, and proxies in the form enclosed will be
voted FOR the election of such substitute nominee unless authority to vote such
proxies in the election of directors has been withheld.
NOMINEES TO THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
---- --- --------------
<S> <C> <C>
David C. Blankenship 54 1991
William C. Dashiell 58 1985
Rand Elliott 46 1996
Robert J. Gardner 57 1985
Robert L. Golob 66 1988
James L. Moe 46 1992
Keith P. Sattler 53 1993
Dann Simpson 63 1985
Norman J. Traaen 76 1985
</TABLE>
The business experience for the past five years of all nominees is set forth
in the discussion of directors and executive officers, at pages 5 and 6 of this
Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING NOMINEES TO THE
BOARD OF DIRECTORS.
[The balance of this page has been intentionally left blank.]
Page 15
<PAGE> 17
================================================================================
PROPOSALS FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
================================================================================
Shareholders who intend to present proposals for consideration at next
year's annual meeting are advised that any such proposal must be received by
the Secretary of the Corporation no later than the close of business on
November 14, 1997, if such proposal is to be considered for inclusion in the
proxy statement and form of proxy relating to that meeting.
================================================================================
CONCLUSION
================================================================================
It is important that proxies be returned promptly. Shareholders are
requested to vote, sign, date and promptly return the proxy in the enclosed
self-addressed envelope.
The Board of Directors knows of no other matters which may be presented for
shareholder action at the annual meeting. If other matters do properly come
before the meeting, it is intended that the persons named in the proxies will
vote on such proposals according to their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
April 14, 1997 Jacqueline A. Barnard, Secretary
Page 16
