<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1 )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
UNITED SECURITY BANCORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
UNITED SECURITY BANCORPORATION
9506 NORTH NEWPORT HIGHWAY
SPOKANE, WASHINGTON 99218-1200
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 2, 1998
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 The Quality Inn Oakwood,
North 7919 Division, Spokane, Washington, on Tuesday, June 2, 1998, at 7:00 p.m.
local time for the purpose of considering and voting upon the following matters:
1. ELECTION OF DIRECTORS. To elect ten (10) Directors to serve until
the next annual meeting or until their successors have been
elected and qualified.
2. WHATEVER OTHER BUSINESS may properly come before the Annual
Meeting or any adjournments thereof.
Only those shareholders of record at the close of business on May 8,
1998, shall be entitled to notice of, and to vote at, the Annual Meeting or any
adjournments thereof.
Further information regarding voting rights and the business to be
transacted at the Annual Meeting is given in the accompanying Proxy Statement.
The directors, officers and personnel who serve you genuinely appreciate your
continued interest as a shareholder in the affairs of the Company, its growth
and development.
May 14, 1998
BY ORDER OF THE BOARD OF DIRECTORS
William C. Dashiell Richard C. Emery
Chief Executive Officer President
================================================================================
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the Annual Meeting, please sign and date your
Proxy card and return it in the enclosed postage prepaid envelope. The prompt
return of your proxy will assist us in preparing for the meeting. Retention of
the Proxy is not necessary for admission to the Annual Meeting.
================================================================================
<PAGE> 3
UNITED SECURITY BANCORPORATION
9506 NORTH NEWPORT HIGHWAY
SPOKANE, WASHINGTON 99218-1200
(509) 467-6949
PROXY STATEMENT
This Proxy Statement and the accompanying Proxy are being sent to
shareholders on or about May 14, 1998, for use in connection with the Annual
Meeting of Shareholders of United Security Bancorporation (the "Company") to be
held on Tuesday, June 2, 1998. Only those shareholders of record at the close of
business on May 8, 1998 (the "Record Date"), shall be entitled to vote. The
number of shares of the Company's no par common stock (the "Common Stock"),
outstanding on the Record Date and entitled to vote at the Annual Shareholders'
Meeting is 4,054,278.
VOTING RIGHTS AND SOLICITATIONS
The enclosed Proxy is solicited by and on behalf of the Board of
Directors of the Company, with the cost of solicitation borne by the Company.
Solicitation may be made by directors and officers of the Company and its
operating subsidiaries, United Security Bank ("USB"), Home Security Bank
("HSB"), Bank of Pullman ("BOP"), USB Insurance Agencies, Inc. ("USB
Insurance"), USB Leasing, Inc. ("USB Leasing") and USB Mortgage Company, Inc.
("USB Mortgage") (collectively, the "Subsidiaries"). USB, HSB and BOP are
sometimes collectively referred to in this Proxy Statement as the "Banks".
Solicitation may be made by use of the mails, by telephone, facsimile and
personal interview.
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 the Record Date of May 8, 1998, 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 4,054,278 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 No. 1).
Abstentions and "broker non-votes" (shares held by a broker or nominee as to
which a broker or nominee indicates in 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.
Cumulative voting for directors is not permitted.
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
1
<PAGE> 4
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 No. 1).
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.
PURPOSE OF MEETING
There is one matter being presented for consideration by the
shareholders at the Annual Meeting.
NO. 1 - ELECTION OF DIRECTORS
GENERAL
The Company's Articles of Incorporation, as Amended ("Articles") allow
the Board or the shareholders to set the number of directors on the Board within
a range of 5 to 25. Currently, this number is 10. The Articles also allow the
Board to fill vacancies created on the Board. The Board by resolution has set
the number of directors for the next Board to serve at 10.
Directors are elected for terms of one year or until their successors
are elected and qualified.
At the annual meeting, ten (10) directors are to be elected, each to
serve until the next annual meeting of shareholders or until his successor is
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.
In accordance with the above, the Board of Directors has nominated David
C. Blankenship, William C. Dashiell, James Rand Elliott, Richard C. Emery,
Robert J. Gardner, Robert L. Golob, Keith P. Sattler, Dann Simpson, Norman J.
Traaen and Ronald Wachter as directors, to serve a one year term or until their
successors are elected and qualified.
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<PAGE> 5
INFORMATION WITH RESPECT TO NOMINEES
The following tables set forth certain information with respect to the
nominees for director. The table below includes: (i) their ages; (ii) their
principal occupations during the past five years; and (iii) the year first
elected or appointed a director of the Company. The table also indicates the
number of shares of common stock beneficially owned by each individual as of
December 31, 1997 and the percentage of common stock outstanding on that date
that the individual's holdings represented. Where beneficial ownership is less
than one percent of the outstanding shares, the percentage is not reflected in
the table.
<TABLE>
<CAPTION>
SHARES AND
PERCENTAGE OF
COMMON STOCK
PRINCIPAL OCCUPATION BENEFICIALLY
NAME, AGE AND OF DIRECTOR DURING OWNED AS OF
TENURE AS DIRECTOR LAST FIVE YEARS DECEMBER 31, 1997 *
------------------ --------------- -------------------
(1)(2)
<S> <C> <C>
David C. Blankenship, 55 President and owner of Blankenship 108,054 (3)
Since 1991 and Associates, Inc.; director of (2.66%)
Playfair Race Course, Inc.,
Holland Road Properties, Inc.,
RiverPark Properties, Inc., and
Triple Ten Investments; director
of USB, USB Mortgage, USB
Insurance and USB Leasing
William C. Dashiell, 59 Chief Executive Officer and former 54,801 (5)
Since 1985 (4) President of the Company; 1.35%
Chairman, USB, HSB, USB Insurance,
USB Leasing and USB Mortgage
James Rand Elliot, 47 Partner of Premium Finance 4,434 (6)
Since 1996 Company; director of Yakima
chapter of American Red Cross;
director of HSB
Richard C. Emery, 56 President and Chief Operating 7,817
Since 1997 (4) Officer since November, 1997;
former President and Chief
Executive Officer of Pacific One
Bank, NA and its predecessor,
American National Bank
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
SHARES AND
PERCENTAGE OF
COMMON STOCK
PRINCIPAL OCCUPATION BENEFICIALLY
NAME, AGE AND OF DIRECTOR DURING OWNED AS OF
TENURE AS DIRECTOR LAST FIVE YEARS DECEMBER 31, 1997 *
------------------ --------------- -------------------
(1)(2)
<S> <C> <C>
Robert J. Gardner, 58 Self-employed in the logging 23,003 (7)
Since 1985 business; President/owner of
Gardner Logging and Trucking,
Inc.; director of USB, USB
Insurance, USB Mortgage and USB
Leasing
Robert L. Golob, 67 President of Golob Diary, Inc.; 18,523 (8)
Since 1988 director of HSB
Keith P. Sattler, 54 CPA/Principal of Sattler and 13,843 (9)
Since 1993 Heslop; director and treasurer of
Lower Valley Holding Corp.;
director of Sunnyside Housing
Authority; Chairman/director of
HSB; director of USB Mortgage and
USB Leasing
Dann Simpson, 65 Retired accountant; director of 8,029
Since 1985 USB and USB Insurance
Norman J. Traaen, 77 Real estate investor; director of 21,272
Since 1985 USB, USB Mortgage and USB Leasing
Ronald Wachter, 60 General Manager of NuChem Ltd.; 6,050
Since 1997 director of BOP
</TABLE>
* Share amounts reflect stock dividends, including the 10% dividend declared
January 13, 1998.
(1) Shares held with sole voting and investment power directly unless
otherwise indicated.
(2) Share amounts include stock options which are exercisable within 60 days
as follows: David C. Blankenship, 2,662 shares; William C. Dashiell,
19,709 shares; Richard C. Emery, 2,867 shares; Robert J. Gardner, 2,662
shares; Robert L. Golob, 2,662 shares; Keith P. Sattler, 2,662 shares;
Dann Simpson, 2,662 shares; Norman J. Traaen, 2,662 shares.
(3) Includes 1,443 shares held of record by MIW Investments.
(4) Mr. Dashiell served as President of the Company through October, 1997;
Mr. Emery's tenure as President of the Company began in November, 1997.
4
<PAGE> 7
(5) Includes 11,785 shares allocated to Mr. Dashiell under the Company's
employee stock ownership plan, 162 shares held jointly with Mr.
Dashiell's children, 128 shares held of record by Mr. Dashiell's spouse
and 515 shares held jointly with Mr. Dashiell's mother.
(6) Includes 2,511 shares held of record by Mr. Elliott's spouse.
(7) Includes 10,063 shares held of record by Gardner Logging and Trucking,
Inc. and 1,667 shares held of record by Mr. Gardner's spouse.
(8) Includes 1,720 shares held of record by Pacific Crest Securities.
(9) Includes 110 shares held of record by TIPS.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE NOMINEES TO BE
ELECTED AS DIRECTORS.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The following sets forth information concerning the Board of Directors
and Committees of the Company during the year ended December 31, 1997.
BOARD OF DIRECTORS
The Company held six (6) Board meetings in 1997. Each director attended
at least 75 percent of the aggregate of: (i) the total number of meetings of the
Board of Directors; and (ii) the total number of meetings held by all committees
on which he served.
CERTAIN COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has established an Audit and
Compliance Committee ("Audit Committee"), a Compensation Committee and an
Executive Committee. When the need arose the full Board served as the Nominating
Committee.
Audit Committee. The main function of the Audit Committee includes
reviewing the plan, scope, and audit results of the independent auditors, as
well as reviewing and approving the services of the independent auditors. The
Audit Committee reviews or causes to be reviewed the reports of bank regulatory
authorities and reports its conclusions to the Board of Directors. The Audit
Committee also reviews procedures with respect to the Company's records and its
business practices, and reviews the adequacy and implementation of the internal
auditing, accounting and financial controls. The Committee held four (4)
meetings during the year. For 1997, members of the Audit Committee consisted of
Messrs. Keith P. Sattler (Chair), David C. Blankenship, Dann Simpson and Robert
J. Gardner.
Compensation Committee. There were no formal meetings of the
Compensation Committee in 1997. The Compensation Committee consists of Messrs.
Dann Simpson (Chair), David C. Blankenship, Keith P. Sattler and Robert J.
Gardner. In lieu of formal meetings of the Compensation Committee, the entire
Board of Directors approved executive compensation based on recommendations of
management.
5
<PAGE> 8
Executive Committee. The main function of the Executive Committee is to
establish the agenda for the Company's Board of Directors meetings, to receive
reports from the Executive Officers regarding their activities and the
implementation of the Company's business plan, and to ensure the Company's
strategic planning process is being followed. The Committee held eight (8)
meetings during the year. For 1997, members of the Executive Committee consisted
of Messrs. William C. Dashiell (Chair), David C. Blankenship, Stanley W. Horton
(resigned effective April 21, 1997), James L. Moe (resigned September 30, 1997),
Keith P. Sattler, Dann Simpson and Robert J. Gardner.
COMPENSATION OF DIRECTORS
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, 1997, the Company
paid total director fees of $48,200 pursuant to such arrangements.
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. Similar programs for directors of the Subsidiaries have been
established which are commensurate with the size of the institution and the
procedures of its peer and affiliate banks.
Directors of the Company are eligible to receive options under the 1995
Incentive Stock Option Plan. This plan is described in the Executive
Compensation section under the heading "Description of Incentive Stock Option
Plan".
EXECUTIVE COMPENSATION
The following table sets forth a summary of certain information
concerning compensation awarded to or paid by the Company for services rendered
in all capacities, during the last three fiscal years to the Chief Executive
Officer and the six most highly compensated executive officers of the Company
and, in certain instances, its Subsidiaries, whose total compensation in 1997
exceeded $100,000.
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<PAGE> 9
<TABLE>
<CAPTION>
=================================================================================================================================
NAME AND YEAR LONG TERM ALL OTHER
PRINCIPAL POSITION ANNUAL COMPENSATION COMPENSATION COMPENSATION
---------------------------------------- ------------------------ (4)
OTHER SECURITIES PAYOUTS
ANNUAL UNDERLYING
SALARY BONUS COMPENSATION OPTIONS/
(1) (2) SARS (3)
--------
LTIP
PAYOUTS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
William C. Dashiell, 1997 $176,896 $ 88,996 $ 0 0 0 $ 25,584
President and 1996 148,450 97,932 0 0 0 25,583
Chief Executive 1995 119,270 62,500 0 14,808 0 25,579
Officer (5)
- ---------------------------------------------------------------------------------------------------------------------------------
Daniel P. Murray, 1997 $102,950 $ 46,960 $ 0 0 0 $ 17,052
Senior Vice 1996 84,680 48,965 0 0 0 17,051
president - Loan 1995 77,768 42,418 0 9,432 0 0
Administrator of
Company and USB
- ---------------------------------------------------------------------------------------------------------------------------------
Chad Galloway, 1997 $ 58,464 $ 44,498 $ 0 0 0 $ 0
Vice President and 1996 54,199 50,086 0 0 0 0
CFO of Company 1995 0 0 0 7,144 0 0
- ---------------------------------------------------------------------------------------------------------------------------------
James L. Moe, 1997 $108,346 $ 0 $ 0 0 0 $ 0
President of USB 1996 101,677 30,699 0 0 0 0
Insurance 1995 89,196 27,414 0 11,960 0 0
- ---------------------------------------------------------------------------------------------------------------------------------
Duane L. Brandenburg, 1997 $107,400 $ 36,777 $ 0 0 0 $ 0
Vice President of 1996 10,680(6) 700 0 13,030 0 0
Company; President
and CEO of USB
- ---------------------------------------------------------------------------------------------------------------------------------
William G. Edom, 1997 $ 84,450 $ 19,490 $ 0 0 0 $ 0
Vice President of
Company; President
and CEO of HSB
- ---------------------------------------------------------------------------------------------------------------------------------
Richard C. Emery 1997 $23,916(7) $ 11,125 $ 0 14,333 0 $ 0
President and COO
of Company
=================================================================================================================================
</TABLE>
(1) Includes director fees paid during the year.
(2) Does not include amounts attributable to miscellaneous benefits received
by executive officers, including the use of company-owned automobiles
and the payment of certain club dues. In the opinion of management, the
costs to the Company of providing such benefits to any individual
executive officer during the year ended December 31, 1997 did not exceed
the lesser of $50,000 or 10% of the total of annual salary and bonus
reported for the individual.
(3) Options to acquire shares of Common Stock. Share amounts for options
granted in 1997 have been adjusted for the 10% stock dividend declared
on January 13, 1998.
(4) 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.
(5) Mr. Dashiell served as President of the Company through October, 1997.
Richard C. Emery began serving as President of the Company in November,
1997.
(6) Mr. Brandenburg's 1996 salary on an annualized basis would have been
$100,200.
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<PAGE> 10
(7) Includes director fees of $1,000; Mr. Emery's 1997 salary on an
annualized basis (exclusive of director fees) would have been $137,500.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
===============================================================================================
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
INDIVIDUAL GRANTS OF STOCK PRICE
APPRECIATION
FOR OPTION TERM (2)
- -----------------------------------------------------------------------------------------------
% OF TOTAL
OPTIONS OPTIONS
NAME GRANTED(1) GRANTED TO EXERCISE EXPIRATION
EMPLOYEES PRICE (1) DATE 5% 10%
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard C. Emery 14,333 58.09% $16.87 10/31/02 $66,736 $147,738
===============================================================================================
</TABLE>
(1) Share amount and exercise price have been adjusted to reflect the 10%
stock dividend declared on January 13, 1998.
(2) The potential realizable value portion of the foregoing table
illustrates values that might be realized upon exercise of the options
immediately prior to the expiration of their term based upon the assumed
compounded rates of appreciation in the value of Common Stock as
specified in the table over the term of the options. These amounts do
not take into account provisions of the options providing for
termination of the option following termination of employment or
nontransferability.
Option Exercises. The following table sets forth certain information
concerning exercises of stock options pursuant to the Company's stock option
plan by the named executive officers during the year ended December 31, 1997 and
stock options held at year end.
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<PAGE> 11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
===============================================================================================================================
SHARES
ACQUIRED
ON VALUE NUMBER OF VALUE OF
NAME EXERCISE REALIZED UNEXERCISED UNEXERCISED OPTIONS AT
OPTIONS AT YEAR END (1) YEAR END (2)
---------------------------------------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William C. Dashiell 0 $ 0 19,709 0 $ 179,549 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Daniel P. Murray 0 $ 0 12,668 0 $ 115,406 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Chad Galloway 0 $ 0 9,509 0 $ 86,627 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
James L. Moe 0 $ 0 15,919 0 $ 145,022 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Duane L. Brandenburg 0 $ 0 6,307 9,459 $ 72,594 $ 108,873
- -------------------------------------------------------------------------------------------------------------------------------
William G. Edom 0 $ 0 4,596 6,893 $ 48,396 $ 72,583
- -------------------------------------------------------------------------------------------------------------------------------
Richard C. Emery 0 $ 0 2,867 11,466 $ 48,366 $ 193,431
===============================================================================================================================
</TABLE>
(1) Share amounts and values have been adjusted for stock dividends, including
the 10% stock dividend declared on January 13, 1998.
(2) On December 31, 1997, the closing price of the Common Stock was $20.00. For
purposes of the foregoing table, stock options with an exercise price less
than that amount are considered to be "in-the-money" and are considered to
have a value equal to the difference between this amount and the exercise
price of the stock option multiplied by the number of shares covered by the
stock option.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company maintains an employee stock ownership plan and trust, known
as the United Security Bancorporation Employee Stock Ownership Plan ("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 achieving 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 fiscal year 1997 totaled $205,950.
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<PAGE> 12
At December 31, 1997 (as adjusted for the stock dividend declared
January 13, 1998), the Plan owned 87,633 shares of Common Stock of the Company,
representing approximately 4.63% of the then outstanding shares. At such date,
the Plan had no outstanding debt.
DESCRIPTION OF INCENTIVE STOCK OPTION PLAN
The Company presently maintains one stock option plan, known as the 1995
Incentive Stock Option Plan ("1995 Plan"). The 1995 Plan, adopted by the Board
of Directors on March 14, 1995, and by the shareholders on May 24, 1995,
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 1995 Plan is administered by a Compensation Committee ("Committee")
of the Board of Directors, comprised of at least 2 non-employee 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 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 1995 Plan.
SALARY CONTINUATION AGREEMENTS
USB and HSB have entered into Executive Salary Continuation Agreements
with certain of its directors and employees, including certain named executive
officers. Under the terms of the respective agreements, the director or officer
will receive an annual sum, payable on a monthly basis, for a period of ten
years upon retirement. The following named executive officers will receive
payments under their individual agreements: Mr. Dashiell will receive $39,600,
Mr. Murray will receive $40,800, Mr. Galloway will receive $30,000, and Mr.
Brandenburg will receive $51,745.
The plans are generally available to most directors, executive officers
and other key employees of the Banks, 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.
As of December 31, 1997, 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 seven individuals, none of whom were fully vested, three of
whom were only partially vested, and four of whom were not vested.
10
<PAGE> 13
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company is
composed of Messrs. Dann Simpson (Chair), David C. Blankenship, Keith P. Sattler
and Robert J. Gardner.
The intention of this Compensation Committee Report is to describe in
general terms the process the Compensation Committee and Board of Directors
undertakes and the matters it considers in determining the appropriate
compensation for the Company's executive officers.
The Company believes that the Compensation of its executive officers and
other key personnel should reflect and support the goals and strategies that the
Company has established.
Compensation Philosophy. There are 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 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 Plan.
The Compensation 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.
11
<PAGE> 14
EXECUTIVE COMPENSATION COMMITTEE
Dann Simpson (Chair) o David C. Blankenship o Keith P. Sattler
o Robert J. Gardner
STOCK PERFORMANCE GRAPH
The chart below depicts the total return to shareholders during the
period beginning May 5, 1995, when the Company first issued its shares publicly,
and ending December 31, 1997. 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 the Company's Common Stock and each of the two indices was
$100 on May 5, 1995, and that all dividends were reinvested.
<TABLE>
<CAPTION>
Period Ending
-------------------------------------------------
Index 5/5/95 12/31/95 12/31/96 12/31/97
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
USBN $100 $177 $220 $323
S&P 500 $100 $120 $151 $190
S&P Major Regional Banks $100 $128 $170 $249
</TABLE>
12
<PAGE> 15
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information concerning the non-director
executive officers named in the compensation table and all executive officers
and directors of the Company as a group. The Company is not aware of any person
who at December 31, 1997, beneficially owned more than five percent of its
outstanding Common Stock.
<TABLE>
<CAPTION>
CURRENT POSITION
WITH THE COMPANY AND SHARES AND PERCENTAGE
PRIOR FIVE YEAR OF COMMON STOCK
NAME AND AGE BUSINESS EXPERIENCE BENEFICIALLY OWNED *
------------ ------------------- --------------------
<S> <C> <C>
Daniel P. Murray, 50 Senior Vice President - Loan 19,167 (1)
Administrator of the Company and USB
Chad Galloway, 51 Vice President and CFO of the Company 9,690 (2)
and USB since 1995; formerly, Senior
Internal Auditor for Metropolitan
Mortgage, and Vice President and
Controller of AgAmerica, FCB
James L. Moe, 48 President of USB Insurance 42,548 (3)
(1.05%)
Duane L. Brandenburg, 52 President, CEO and director of USB since 6,307 (4)
November, 1996; Vice President of
Company since December, 1996; Executive
Vice President, Director and Secretary
of, and served in other capacities with,
Farmers and Merchants Bank
William G. Edom, 48 President ,CEO and director of HSB since 7,009 (5)
June, 1996; Vice President of the
Company since July, 1996; Vice President
and manager of, and served in other
capacities with, Valley Commercial Bank,
which merged with WestOne Bancorp, and
ultimately U.S. Bancorp
Executive officers and 374,019
directors as a group (17 (8.99%)
individuals)
</TABLE>
13
<PAGE> 16
* Unless otherwise noted, all shares owned represent less than one percent.
Share amounts have been adjusted for the 10% stock dividend declared on January
13, 1998.
(1) Includes 5,034 shares allocated to Mr. Murray under the Company's employee
stock ownership plan, and 12,668 shares for stock options which are
exercisable within 60 days.
(2) Includes 9,509 shares for stock options which are exercisable within 60
days.
(3) Includes 6,466 shares allocated to Mr. Moe under the Company's employee
stock ownership plan, and 15,919 shares for stock options which are
exercisable within 60 days.
(4) Stock options which are exercisable within 60 days.
(5) Includes 4,596 shares for stock options which are exercisable within 60
days.
EXECUTIVE OFFICERS
The following table sets forth information with respect to executive
officers who are not directors or nominees for director of the Company, and are
not otherwise named in the compensation table.
<TABLE>
<CAPTION>
CURRENT POSITION WITH THE COMPANY AND
NAME AND AGE PRIOR FIVE YEAR BUSINESS EXPERIENCE
------------ -----------------------------------
<S> <C>
Jeffrey S. Verble, 40 President of USB Mortgage since 1995 and President of
USB Leasing since March, 1997; formerly self-employed
as a builder/developer
Gary E. Schell, 49 President and CEO of BOP since 1974
</TABLE>
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,
1997, 1996 and 1995 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, 1997, 1996 and 1995, 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.
Insurance Agency Payments. During the years ended December 31, 1997.
1996 and 1995, USB Insurance received commissions aggregating approximately
$32,000, 10,000 and $36,000,
14
<PAGE> 17
respectively, in connection with the purchase by USB and HSB of universal life
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.
COMPLIANCE WITH SECTION 16(a) FILING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
("Section 16(a)") requires that all executive officers and directors of the
Company and all persons who beneficially own more than 10 percent of the
Company's Common Stock file reports with the Securities and Exchange Commission
with respect to beneficial ownership of the Company's Securities. The Company
has adopted procedures to assist its directors and executive officers in
complying with the Section 16(a) filings.
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, 1997 all filing requirements applicable to
its directors, executive officers and 10% shareholders were satisfied, except as
follows. James L. Moe inadvertently neglected to file a Form 4 for the sale of
36,800 shares. A Form 4 reflecting the sale of shares was subsequently filed on
November 7, 1998. Gary E. Schell inadvertently neglected to file a Form 4 for
two transactions for the purchase of 1,000 shares and 500 shares, respectively.
A Form 4 reflecting the purchases of shares was subsequently filed on April 9,
1998.
AUDITORS
In 1997, the Company selected Moss Adams, LLP, Certified Public
Accountants, as its new independent auditors for the current year and for the
year ended December 31, 1997. Representatives of Moss Adams, LLP will be present
at the Annual Meeting, and will have the opportunity to make a statement if they
so desire. They will also be available to respond to appropriate questions.
The Company's former auditors, McFarland & Alton, P.S., declined to
stand for re-election after completion of the 1996 fiscal year audit. During the
years ended December 31, 1997, 1996 and 1995, there were no disagreements with
Moss Adams, LLP or McFarland & Alton, P.S. on any material accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
which, if not resolved to the satisfaction of such firms, would have caused them
to make reference to the subject matter of such disagreement on their reports of
such financial statements.
OTHER BUSINESS
The Board of Directors knows of no other matters to be brought before
the shareholders at the Annual Meeting. In the event other matters are presented
for a vote at the Meeting, the proxy holders will vote shares represented by
properly executed proxies in their discretion in accordance with their judgment
on such matters.
15
<PAGE> 18
At the Annual Meeting, management will report on the Company's business
and shareholders will have the opportunity to ask questions.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
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 Company no later than the close of business on November 16,
1998, if such proposal is to be considered for inclusion in the proxy statement
and form of proxy relating to that meeting.
ANNUAL REPORT TO SHAREHOLDERS
ANY SHAREHOLDER MAY OBTAIN WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1997, INCLUDING
FINANCIAL STATEMENTS. Written requests for the Form 10-K should be addressed to
Jacqueline A. Barnard, Secretary to the Board of Directors of United Security
Bancorporation, 9506 North Newport Highway, Spokane, WA 99218-1200.
May 14, 1998 BY ORDER OF THE BOARD OF DIRECTORS
Jacqueline A. Barnard, Secretary
16
<PAGE> 19
UNITED SECURITY BANCORPORATION
PROXY
PLEASE SIGN AND RETURN IMMEDIATELY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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 May 8, 1998 at the annual
meeting of shareholders of the Company to be held on June 2, 1998 or any
adjournment(s) thereof.
UNLESS OTHERWISE INDICATED, THE SHARES OF COMMON STOCK OWNED
BY THE UNDERSIGNED WILL BE VOTES FOR ITEM NO. 1.
ITEM NO. 1 ELECTION OF DIRECTORS
A. I vote FOR all nominees listed below (except as marked to the
contrary below) [ ]
B. I WITHHOLD AUTHORITY to vote for any individual nominee whose
name I have struck a line through in the list below [ ]
David C. Blankenship o William C. Dashiell o James Rand Elliot
Richard C. Emery o Robert J. Gardner o Robert L. Golob
Keith P. Sattler o Dann Simpson o Norman J. Traaen
o Ronald Wachter
ITEM NO. 2. WHATEVER OTHER BUSINESS may properly be brought before the Annual
Meeting or any adjournment(s) thereof.
THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" AND WILL BE VOTED "FOR" THE
PROPOSAL LISTED UNLESS AUTHORITY IS WITHHELD, IN WHICH CASE THIS PROXY
WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATION SO MADE.
Management knows of no other matters that may properly be, or which are
likely to be, brought before the Annual Meeting. However, if any other matters
are properly presented at the Annual Meeting, this Proxy will be voted in
accordance with the recommendations of management.
The Board of Directors recommends a vote "FOR" the listed proposal.
DATED:_______________ , 1998
___________________________________
Print Name(s)
___________________________________
___________________________________
WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OF GUARDIAN,
PLEASE GIVE FULL TITLE. IF MORE
THAN ONE TRUSTEE, ALL SHOULD SIGN.
ALL JOINT OWNERS MUST SIGN.
