<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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 Section 240.14a-11(c) or Section 240.14a-12
UNITED SECURITIES 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)(4) 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:
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Notes:
<PAGE>
UNITED SECURITY BANCORPORATION
9506 North Newport Highway
Spokane, Washington 99218-1200
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 25, 1999
To the Shareholders of United Security Bancorporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of United
Security Bancorporation ("USBN") will be held at The Quality Inn Oakwood, North
7919 Division, Spokane, Washington, on Tuesday, May 25, 1999, at 7:00 p.m. local
time for the purpose of considering and voting upon the following matters:
1. ELECTION OF DIRECTORS. To elect fourteen (14) 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 April 7,
1999, 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 USBN, its growth and
development.
April 23, 1999
BY ORDER OF THE BOARD OF DIRECTORS
William C. Dashiell Richard C. Emery
Chairman of the Board President & C.E.O.
================================================================================
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>
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 April 23, 1999, for use in connection with the Annual
Meeting of Shareholders of United Security Bancorporation (USBN) to be held on
Tuesday, May 25, 1999. Only those shareholders of record at the close of
business on April 7, 1999 (the "Record Date"), shall be entitled to vote. The
number of shares of USBN's no par common stock (the "Common Stock"), outstanding
on the Record Date and entitled to vote at the Annual Shareholders' Meeting is
6,939,511.
Voting Rights and Solicitations
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of USBN, with the cost of solicitation borne by USBN. Solicitation may be made
by directors and officers of USBN and its operating subsidiaries, United
Security Bank ("USB"), Home Security Bank ("HSB"), Bank of Pullman ("BOP"),
Grant National Bank ("GNB"), Bank of the West ("BOW") and USB Insurance
Agencies, Inc. ("USB Insurance")(collectively, the "Subsidiaries"). USB, HSB,
BOP, GNB and BOW 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.
USBN'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 USBN at
the close of business on the Record Date of April 7, 1999, 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 USBN recorded in his or her name. On the Record
Date, there were 6,939,511 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 USBN, and when
returned, properly completed, will be voted as you direct on your proxy. If the
proxy is returned with no instructions on how
1
<PAGE>
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 USBN 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 USBN. In addition, USBN
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 USBN'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
USBN'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 14. 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 14.
Directors are elected for terms of one year or until their successors are
elected and qualified.
At the annual meeting, fourteen (14) 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 USBN 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, Wes Colley, William C. Dashiell, James Rand Elliott, Richard C.
Emery, David E. Frame, Robert J. Gardner, Robert L. Golob, Norman V. McKibben,
Buddy R. Sampson, Keith P. Sattler, Donald H. Swartz II, Dann Simpson, and
Ronald Wachter as directors, to serve a one year term or until their successors
are elected and qualified.
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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 USBN. The table also indicates the number of
shares of common stock beneficially owned by each individual as of December 31,
1998 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, 1998*
- ------------------------------ ------------------------------------- -------------------------
(1)(2)
<S> <C> <C>
David C. Blankenship, 56 President and owner of Blankenship 133,920
Since 1991 and Associates, Inc.; Holland Road (1.93%)
Properties, Inc., RiverPark
Properties, Inc., and Triple Ten
Investments; director of USB, BOP
and USB Insurance
William C. Dashiell, 60 Former Chief Executive Officer and 72,100 (3)
Since 1985 President of the Company; Chairman (1.04%)
of the Company, USB and USB
Insurance; director of HSB and BOW
Wesley E. Colley, 60 President/Chief Executive Officer & 229,728
Since 1999 Director BOW (3.31%)
James Rand Elliott, 48 Partner of Premium Finance Company; 5,845 (4)
Since 1996 director of Yakima Chapter of
American Red Cross; director of HSB
Richard C. Emery, 57 President and Chief Executive 16,972
Since 1997 Officer since July, 1998; President
& Chief Operating Officer from
November, 1997 to July 1998; former
President and Chief Executive
Officer of Pacific One Bank, NA and
its predecessor, American National
Bank
</TABLE>
3
<PAGE>
<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, 1998*
- ------------------------------ ------------------------------------- -------------------------
(1)(2)
<S> <C> <C>
David E. Frame, 59 Chairman and CEO of American Line 136,320 (5)
Since 1999 Builders, Inc.; director of BOW (1.96%)
Robert J. Gardner, 59 Self-employed in the logging 27,721 (6)
Since 1985 business; President/owner of Gardner
Logging and Trucking, Inc.; director
of USB and USB Insurance
Robert L. Golob, 68 President of Golob Diary, Inc.; 22,795 (7)
Since 1988 director of HSB
Norman V. McKibben, 62 Self-employed wine grape grower; 73,333
Since 1999 director of The Hogue Cellars (1.06%)
Winery; director of Canoe Ridge
Winery; Partner of Pepper Bridge
Winery; director of BOW
Buddy R. Sampson Farmer; director USB, USB Insurance 5,113
and GNB
Keith P. Sattler, 55 CPA/Principal of Sattler and Heslop; 17,647 (8)
Since 1993 director and treasurer of Lower
Valley Holding Corp.; director of
Sunnyside Housing Authority;
Chairman/director of HSB and BOW
Dann Simpson, 66 Retired accountant; director of USB 11,250
Since 1985 and USB Insurance
Donald H. Swartz, II, 53 Owner, J&M Electric 24,446 (9)
Since 1998 director of GNB
Ronald Wachter, 61 President of NuChem Industries; 9,625
Since 1997 General Manager NuChem Ltd.;
President Whitman County Bus
Development; Secretary Greater
Pullman Economic Development;
director of BOP
</TABLE>
4
<PAGE>
* Share amounts reflect stock dividends, including the 10% dividend declared
January 29, 1999.
(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, 3,148 shares; Wesley E. Colley, 18,685
shares; William C. Dashiell, 21,706 shares; James Rand Elliott, 968 shares;
Richard C. Emery, 6,306 shares; David E. Frame, 15,325 shares; Robert J.
Gardner, 2,420 shares; Robert L. Golob, 5,348 shares; Norman V. McKibben,
400 shares; Buddy R. Sampson, 2,420 shares; Keith P. Sattler, 2,420 shares;
Dann Simpson, 5,348 shares; Donald H. Swartz, II, 2,200 shares; Ronald
Wachter, 2,420 shares.
(3) Includes 89 shares held jointly with Mr. Dashiell's son, 140 shares held of
record by Mr. Dashiell's spouse and 566 shares held jointly with Mr.
Dashiell's mother.
(4) Includes 2,762 shares held of record by Mr. Elliott's spouse.
(5) Includes 20,901 shares held of record by ALB Profit Sharing and 15,632
shares held of record by ALB Pension Plan.
(6) Includes 11,069 shares held of record by Gardner Logging and Trucking, Inc.
and 1,832 shares held of record by Mr. Gardner's spouse.
(7) Includes 1,892 shares held of record by Pacific Crest Securities.
(8) Includes 121 shares held of record by TIPS.
(9) Includes 466 shares held of record by Mr. Swartz's children.
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 USBN during the year ended December 31, 1998.
Board of Directors
USBN held eight (8) Board meetings in 1998. 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 USBN 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
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<PAGE>
bank regulatory authorities and reports its conclusions to the Board of
Directors. The Audit Committee also reviews procedures with respect to USBN's
records and its business practices, and reviews the adequacy and implementation
of the internal auditing, accounting and financial controls. The Committee held
five (5) meetings during the year. For 1998, members of the Audit Committee
consisted of Messrs. Keith P. Sattler (Chair), David C. Blankenship, Dann
Simpson, Robert J. Gardner and William C. Dashiell.
Compensation Committee. There were five (5) meetings of the Compensation
Committee in 1998. The Compensation Committee consists of Messrs. Dann Simpson
(Chair), David C. Blankenship, Keith P. Sattler, Robert J. Gardner and William
C. Dashiell.
Executive Committee. The main function of the Executive Committee is to
establish the agenda for USBN's Board of Directors meetings, to receive reports
from the Executive Officers regarding their activities and the implementation of
USBN's business plan, and to ensure USBN's strategic planning process is being
followed. The Committee held five (5) meetings during the year. For 1998,
members of the Executive Committee consisted of Messrs. William C. Dashiell
(Chair), David C. Blankenship, Richard C. Emery, Keith P. Sattler, Dann Simpson
and Robert J. Gardner.
Compensation of Directors
Directors of USBN receive $500 for each meeting of the board of directors
attended and members of the executive committee of the board receive $500 per
meeting attended. During the year ended December 31, 1998, USBN paid total
director fees of $94,500 pursuant to such arrangements.
Certain directors of USBN are also directors or executive officers of
USBN's Subsidiaries or members of various committees of USBN'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 USBN 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".
Employment Agreement
USBN has entered into an employment agreement with Wes Colley, President
and Chairman of BOW. Mr. Colley's agreement is for a term of 36 months which
commenced on the merger effective date of February 1, 1999. Mr. Colley's
intitial base salary under the agreement will be $108,600. The agreement further
provides that Mr. Colley will receive all benefits that are generally provided
to similarly situated full-time employees of USBN. Mr. Colley will also receive
certain fringe benefits, including the right to participate in group life
insurance, disability, health and accident insurance plans, profit sharing and
pension plans and other employee fringe benefit plans that BOW and USBN may have
in effect from time to time for similarly situated employees. If Mr. Colley is
terminated without cause or Mr. Colley terminates his employment for a
legitimate reason as defined in his agreement before the end of
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<PAGE>
the term of the agreement, Mr. Colley is entitled to receive his base salary for
the remaining term of the agreement. The employment agreement also provides for
a restriction on Mr. Colley's ability to compete with USBN or Bank of the West
following his termination from employment (voluntary or otherwise).
EXECUTIVE COMPENSATION
----------------------
The following table sets forth a summary of certain information concerning
compensation awarded to or paid by USBN for services rendered in all capacities,
during the last three fiscal years to the Chief Executive Officer and the three
most highly compensated executive officers of USBN and, in certain instances,
its Subsidiaries, whose total compensation in 1998 exceeded $100,000.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
-------------------------------------------- -------------------------
Other Securities Payouts
Annual Underlying -------- All Other
Name and Salary Compensation Options/ LTIP Compensation
Principal Position Year (1) Bonus (2) SARs (3) Payouts (4)
------------------ ---- ----------- ------- ------------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard C. Emery 1998 $164,100 $77,704 $0 0 0 $0
President and CEO of USBN 1997 (5) $23,916 11,125 0 15,766 0 0
Daniel P. Murray, 1998 $114,200 $49,918 $0 0 0 $17,052
Senior Vice president - 1997 102,950 46,960 0 0 0 17,052
Loan Administrator of 1996 84,680 48,965 0 0 0 17,051
USBN and USB
Chad Galloway, 1998 $60,804 $35,302 $0 0 0 $0
Vice President and 1997 58,464 44,498 0 0 0 0
CFO of USBN 1996 54,199 50,086 0 0 0 0
Wesley E. Colley, 1998 $118,879 $71,427 $0 3,648 0 0
President and CEO of BOW 1997 102,800 45,967 0 4,502 0 0
1996 100,100 42,500 0 1,871 0 0
</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
USBN of providing such benefits to any individual executive officer during
the year ended December 31, 1998 did not exceed the lesser of $50,000 or
10% of the total of annual salary and bonus reported for the individual.
(3) Represents options to acquire shares of Common Stock that were granted
under USBN's stock option plan.
(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) Includes director fees of $1,000; Mr. Emery's 1997 salary on an annualized
basis (exclusive of director fees) would have been $137,500.
7
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Individual Grants 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>
Wesley E. Colley 3,648 3.89% 9.29 2003 $9,354 $20,707
==============================================================================================================================
</TABLE>
(1) Share amount and exercise price have been adjusted to reflect the 10% stock
dividend declared on January 29, 1999.
(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 USBN's stock option plan by
the named executive officers during the year ended December 31, 1998 and stock
options held at year end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Shares Acquired Value Number of Unexercised Value of Unexercised
Name on Exercise Realized Options at Year End (1) Options at Year End (2)
-------------------------------- ------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Daniel P. Murray 0 $ 0 13,809 0 $ 75,535 $0
- -------------------------------------------------------------------------------------------------------------------------------
Wesley E. Colley 3,231 $39,741 15,232 0 $115,048 $0
- -------------------------------------------------------------------------------------------------------------------------------
Chad Galloway 0 $ 0 10,460 0 $ 57,216 $0
- -------------------------------------------------------------------------------------------------------------------------------
Richard C. Emery 0 $ 0 6,306 9,460 $ 0 $0
=============================================================================================================================
</TABLE>
(1) Share amounts and values have been adjusted for stock dividends, including
the 10% stock dividend declared on January 29, 1999.
(2) On December 31, 1998, the closing price of the Common Stock was $13.75. 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. Options with an exercise price greater than the closing price
on December 31, 1998, are showing no value.
8
<PAGE>
Employee Stock Ownership Plan
USBN 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 USBN 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 USBN 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.
USBN makes annual contributions to the trust created under the Plan (for
which USBN receives a deduction) and the trust invests such contributions and
trust earnings in Common Stock of USBN. Contributions to the Plan in fiscal year
1998 totaled $278,500.
At December 31, 1998 (as adjusted for the stock dividend declared January
29, 1999), the Plan owned 191,817 shares of Common Stock of USBN, representing
approximately 2.77% of the then outstanding shares. At such date, the Plan had
no outstanding debt.
Description of Incentive Stock Option Plan
USBN 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 USBN and its
Subsidiaries (including directors, executive officers who are also employees,
and advisors or consultants to USBN) 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 399,300 shares of Common
Stock of USBN or shares representing eight percent (8%) of the Common Stock of
USBN from time-to-time outstanding, whichever is less, are available for
issuance in the form of options under the 1995 Plan.
In addition, 108,878 shares of USBN options are available to BOW directors
and officers as part of the merger with BOW effective February 1, 1999. These
options are separate from the plan described above and will be exercised,
terminated or forfeited by the year 2003 consistent with the termination
schedules in the merger agreement.
Salary Continuation Agreements
USB, HSB, BOP and GNB 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. Emery will receive
$67,000, Mr. Murray will receive $40,800, Mr. Galloway will receive $30,000, Mr.
9
<PAGE>
Brandenburg will receive $51,745, Mr. Edom will receive $35,200, Mr. Schell
will receive $44,478 and Mr. Mitson will receive $48,077.
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. Obligations under the salary continuation plans are funded by
prepaid policies of universal life insurance covering the lives of the plan
participants.
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, Robert J. Gardner and Willliam C. Dashiell.
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.
USBN believes that the Compensation of its executive officers and other key
personnel should reflect and support the goals and strategies that USBN 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:
. USBN will compensate competitively with the practices of other leading
companies in the related fields;
. Performance at the corporate, subsidiary and individual executive
officer level will determine a significant portion of compensation;
. The attainment of realizable but challenging objectives will determine
performance-based compensation; and
. USBN will encourage executive officers to hold substantial, long-term
equity stakes in USBN 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 USBN'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;
10
<PAGE>
(3) long-term incentive compensation in the form of stock options granted under
USBN's 1995 Plan; and (4) other compensation and employee benefits generally
available to all employees of USBN, such as health insurance and employer
contributions under USBN's Plan.
The Compensation Committee believes that USBN'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 USBN's success, with a special emphasis on aligning
the interests of executive officers and other personnel with those of USBN's
shareholders.
Executive Compensation Committee
Dann Simpson (Chair) . David C. Blankenship . Keith P. Sattler
Robert J. Gardner . William C. Dashiell
[The balance of this page intentionally left blank.]
11
<PAGE>
STOCK PERFORMANCE GRAPH
-----------------------
The chart below depicts the total return to shareholders during the period
beginning May 5, 1995, when USBN first issued its shares publicly, and ending
December 31, 1998. 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 USBN's Common Stock and each of the two indices was $100 on May 5,
1995, and that all dividends were reinvested.
UNITED SECURITY BANCORPORATION
[GRAPH APPEARS HERE]
- ------------------------------------------------------------------
Period Ending
- ------------------------------------------------------------------
Index 5/95 12/95 12/96 12/97 12/98
--------------------------------------
United Security Bancorp 100 173 207 312 253
Regional-Pacific Banks 100 141 177 319 299
S & P Composite 100 122 150 200 257
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 USBN as a group.
12
<PAGE>
USBN is not aware of any person who at December 31, 1998, 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, 51 Senior Vice President - Loan Administrator of the Company and 21,504 (1)
USB
Chad Galloway, 52 Vice President and CFO of the Company and USB since 1995; 10,659 (2)
formerly, Senior Internal Auditor for Metropolitan Mortgage,
and Vice President and Controller of AgAmerica, FCB
Executive officers and 818,978 (3)
directors as a group (11.80%)
(16 individuals)
</TABLE>
* Unless otherwise noted, all shares owned represent less than one percent.
Share amounts have been adjusted for the 10% stock dividend declared on January
29, 1999.
(1) Includes 6,084 shares allocated to Mr. Murray under USBN's employee stock
ownership plan, and 13,809 shares for stock options which are exercisable
within 60 days.
(2) Includes 10,460 shares for stock options which are exercisable within 60
days.
(3) Includes shares for stock options owned by directors and executive officers
as a group which are exercisable within 60 days.
RELATED PARTY TRANSACTIONS AND BUSINESS RELATIONSHIPS
-----------------------------------------------------
Loans to Affiliates. Some of USBN's directors and executive officers were
customers of the Banks during the fiscal years ended December 31, 1998, 1997 and
1996 and had transactions with such Banks in the ordinary course of business. In
addition, some of USBN'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, 1998, 1997 and
1996, 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.
13
<PAGE>
Insurance Agency Payments. During the years ended December 31, 1998, 1997
and 1996, USB Insurance received commissions aggregating approximately $24,000,
$32,000 and $10,000, respectively, in connection with the purchase of universal
life policies on the lives of certain of their directors and executive officers.
Such policies are designed to fund 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 USBN and all
persons who beneficially own more than 10 percent of USBN's Common Stock file
reports with the Securities and Exchange Commission with respect to beneficial
ownership of USBN's Securities. USBN 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, USBN believes that during
the year ended December 31, 1998 all filing requirements applicable to its
directors, executive officers and 10% shareholders were satisfied, except as
follows: David C. Blankenship inadvertently neglected to file a Form 4 for a
transaction for the purchase of 1,454 shares. A Form 4 filing reflecting the
purchase of these shares was subsequently filed. Robert J. Gardner inadvertently
neglected to file a Form 4 for a transaction for the purchase of 2,662 shares. A
Form 4 filing reflecting the purchase of these shares was subsequently filed.
Keith P. Sattler inadvertently neglected to file a Form 4 filing for the
purchase of 2,662 shares. A Form 4 filing reflecting the purchase of these
shares was subsequently filed. Donald H. Swartz, II inadvertently neglected to
file a Form 3 to report the amount of shares initially owned. A Form 3 filing
was subsequently filed. Ronald Wachter inadvertently neglected to file a Form 4
for a transaction for the purchase of 500 shares. A Form 4 filing reflecting the
purchase of these shares was subsequently filed.
AUDITORS
--------
USBN selected Moss Adams, LLP, Certified Public Accountants, as its
independent auditors for the current year and for the year ended December 31,
1998. 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.
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.
At the Annual Meeting, management will report on USBN's business and
shareholders will have the opportunity to ask questions.
14
<PAGE>
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 USBN no later than the close of business on December 24, 1999, if
such proposal is to be considered for inclusion in the proxy statement and form
of proxy relating to that meeting. In addition, if USBN receives notice of a
shareholder proposal after March 9, 2000, the persons named as proxies in the
form of Proxy will have discretionary authority to vote on such shareholder
proposal.
ANNUAL REPORT TO SHAREHOLDERS
-----------------------------
A copy of USBN's Annual Report, including Form 10-K filed with the
Securities and Exchange Commission under the Securities and Exchange Act of 1934
for the year ended December 31, 1998, including financial statements, is
included with this mailing. Additional copies may be obtained without charge.
Written requests for additional copies of 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.
April 23, 1999 BY ORDER OF THE BOARD OF DIRECTORS
Jacqueline A. Barnard, Secretary
15
<PAGE>
PROXY
UNITED SECURITY BANCORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE SIGN AND RETURN IMMEDIATELY
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 (USBN) owned of record by the undersigned on April 7, 1999 at
the annual meeting of shareholders of USBN to be held on May 25, 1999 or any
adjournment(s) thereof.
UNLESS OTHERWISE INDICATED, THE SHARES OF COMMON STOCK OWNED BY THE
UNDERSIGNED WILL BE VOTED 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 [_]
<TABLE>
<S> <C> <C> <C>
Donald C. Blankenship William C. Dashiell James Rand Elliot Richard C. Emery
Robert J. Gardner Robert L. Golob Keith P. Sattler Dann Simpson
David E. Frame Donald H. Schwartz, II Wesley E. Colley
Buddy R. Sampson Ronald Wachter Norman V. McKibben
</TABLE>
C. I WITHHOLD AUTHORITY to vote for all nominees listed above [_]
________________________________________________________________________________
________________________________________________________________________________
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: , 1999
_______________________________
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.
