Exhibit 99.1
UNITED SECURITY BANCORPORATION
PROFIT SHARING 401(k) PLAN
INDEPENDENT AUDITOR’S REPORT
and
FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000 AND 1999
CONTENTS
PAGE | ||
INDEPENDENT AUDITOR’S REPORT | 1 | |
FINANCIAL STATEMENTS | ||
Statement of net assets available for benefits | 2 | |
Statement of changes in net assets available for benefits | 3 | |
Notes to financial statements | 4-6 | |
SUPPLEMENTAL SCHEDULE | ||
Schedule H, Line 4i - schedule of assets (held at end of year) | 7 |
INDEPENDENT AUDITOR’S REPORT
To the Board of Trustees
United Security Bancorporation
Profit Sharing 401(k) Plan
We have audited the accompanying statement of net assets available for benefits of the United Security Bancorporation Profit Sharing 401(k) Plan as of December 31, 2001 and 2000, and the related statement of changes in net assets available for benefits for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2001 and 2000, and the changes in net assets available for benefits for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) as of December 31, 2001, is presented for purposes of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ MOSS ADAMS LLP
Everett, Washington
July 12, 2002
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UNITED SECURITY BANCORPORATION
PROFIT SHARING 401(k) PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, | ||||||
2001 | 2000 | |||||
ASSETS | ||||||
Investments, at fair value | ||||||
Mutual funds | $ | 1,761,052 | $ | 1,768,849 | ||
Employer’s common stock | 68,595 | 47,801 | ||||
1,829,647 | 1,816,650 | |||||
RECEIVABLES | ||||||
Employer contributions | 12,189 | |||||
Participants’ contributions | 30,606 | 29,034 | ||||
42,795 | 29,034 | |||||
NET ASSETS AVAILABLE FOR BENEFITS | $ | 1,872,442 | $ | 1,845,684 | ||
See accompanying notes. | 2 |
UNITED SECURITY BANCORPORATION
PROFIT SHARING 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, | ||||||||||||
2001 | 2000 | 1999 | ||||||||||
ADDITIONS TO NET ASSETS ATTRIBUTED TO | ||||||||||||
Investment income | ||||||||||||
Net depreciation in fair value of investments | $ | (225,858 | ) | $ | (85,095 | ) | $ | (48,445 | ) | |||
Interest and dividends | 4,053 | 24,343 | 52,674 | |||||||||
(221,805 | ) | (60,752 | ) | 4,229 | ||||||||
Less investment expenses | (17,526 | ) | (25,200 | ) | ||||||||
(221,805 | ) | (78,278 | ) | (20,971 | ) | |||||||
Contributions | ||||||||||||
Employer | 165,119 | |||||||||||
Participants’ | 407,134 | 305,712 | 238,086 | |||||||||
Rollovers from qualified plan | 984 | 207,735 | ||||||||||
572,253 | 306,696 | 445,821 | ||||||||||
Total additions | 350,448 | 228,418 | 424,850 | |||||||||
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO | ||||||||||||
Benefits paid to participants | 323,690 | 346,500 | 421,026 | |||||||||
INCREASE (DECREASE) IN NET ASSETS | 26,758 | (118,082 | ) | 3,824 | ||||||||
NET ASSETS AVAILABLE FOR BENEFITS | ||||||||||||
Beginning of year | 1,845,684 | 1,963,766 | 1,959,942 | |||||||||
End of year | $ | 1,872,442 | $ | 1,845,684 | $ | 1,963,766 | ||||||
3 | See accompanying notes. |
UNITED SECURITY BANCORPORATION
PROFIT SHARING 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
Note 1 – Description of the Plan
The following description of the United Security Bancorporation Profit Sharing 401(k) Plan (Plan) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions. In March 2001, United Security Bancorporation changed its name to AmericanWest Bancorporation (Note 6).
General – The Plan is a defined contribution plan sponsored and administered by an outside third party. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Plan has two features: a profit sharing feature and a salary deferral feature, commonly known as a 401(k) plan.
Participation and vesting – The Plan generally covers all full-time employees of AmericanWest Bancorporation (Bancorporation) who have completed 1,000 hours of service and who have attained at least 18 years of age. Participants gain 20% vesting of the profit sharing each year after two completed years of service, and become 100% vested after six years of service. All 401(k) employee contributions are immediately 100% vested.
Contributions – Profit sharing contributions are made from Bancorporation profits at the discretion of the Bancorporation. The 401(k) feature of the Plan allows participants to make contributions, through salary reduction, of 1% to 15% of their gross pay. The Bancorporation made contributions of $165,119 during 2001 and none were made during 2000 or 1999.
Participant accounts – Each participant’s account is credited with the participant’s contribution and an allocation of (a) the Bancorporation’s contribution, (b) Plan earnings, and (c) forfeitures of terminated participants’ nonvested accounts. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
Payment of benefits – Participants entitled to distributions due to retirement, death, disability, or termination of employment have the option of receiving a lump-sum payment or periodic payments which meet the requirements of the Internal Revenue Code.
Plan termination – Although it has not expressed any intent to do so, the Bancorporation has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become fully vested in their accounts.
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UNITED SECURITY BANCORPORATION
PROFIT SHARING 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies
Basis of accounting – The financial statements of the Plan are prepared under the accrual method of accounting.
Investment valuation and income recognition – The Plan’s investments are stated at fair value based on quoted market prices. Mutual funds are valued at the net asset value of shares held by the plan at year end.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Payments of benefits – Benefits are recorded when paid.
Use of estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Risks and uncertainties – The Plan provides for various investment options in combinations of mutual funds and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits and the statement of changes in net assets available for benefits.
Reclassifications – Certain amounts in the 2000 financial statements have been reclassified to conform to the 2001 presentation.
Note 3 – Tax Status
The Internal Revenue Service has determined and informed the Company by letter dated January 10, 1997 that the Plan and related trust are designed in accordance with the applicable requirements of the Internal Revenue Code. The Plan has been amended since receiving the determination letter. However, the plan administrator and the Plan’s tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable provisions of the Internal Revenue Code.
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UNITED SECURITY BANCORPORATION
PROFIT SHARING 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
Note 4 – Investments
Individual investments that represent 5% or more of net assets available for benefits are as follows:
2001 | 2000 | |||||
AIM Balance Fund A | $ | 138,645 | $ | 112,282 | ||
AIM Basic Value Fund A | $ | 246,983 | $ | 185,988 | ||
American Funds New Economy Fund A | $ | 243,649 | $ | 240,479 | ||
American Funds Europacific Growth Fund A | $ | 262,731 | $ | 242,151 | ||
AIM Cash Reserve Shares | $ | 262,957 | $ | 378,426 | ||
AIM Blue Chip Fund A | $ | 266,766 | $ | 273,242 | ||
AIM Aggressive Growth Fund A | $ | 312,677 | $ | 315,512 |
During 2001, 2000 and 1999, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) (depreciated) appreciated in value by $(225,858), $(85,095) and $(48,445), respectively, as follows:
YEARS ENDED DECEMBER 31, | ||||||||||||
2001 | 2000 | 1999 | ||||||||||
Mutual funds | $ | (230,307 | ) | $ | (42,612 | ) | ||||||
Employer common stock | 4,449 | (42,483 | ) | $ | (24,554 | ) | ||||||
U.S. Treasury bonds | (23,891 | ) | ||||||||||
$ | (225,858 | ) | $ | (85,095 | ) | $ | (48,445 | ) | ||||
Note 5 – Related Party Transactions
During 2001, 2000 and 1999, the Bancorporation paid and provided certain administrative and accounting fees on behalf of the Plan.
Note 6 – Subsequent Events
The Plan name as adopted by the employer is United Security Bancorporation 401(k) Plan; the Bancorporation is in the process of changing the legal name of the plan to reflect the sponsor’s name change to AmericanWest Bancorporation.
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SUPPLEMENTAL SCHEDULE
UNITED SECURITY BANCORPORATION
PROFIT SHARING 401(k) PLAN
E.I.N. 91-1259511, PLAN NUMBER 002
SCHEDULE H, LINE 4i – SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2001
(a) | (b) IDENTITY OF ISSUER, BORROWER, LESSOR, OR SIMILAR PARTY | (c) DESCRIPTION OF INVESTMENT INCLUDING MATURITY DATE, RATE OF INTEREST, COLLATERAL, PAR OR MATURITY VALUE | (d) COST** | (e) CURRENT VALUE | |||||
AIM Cash Reserve Shares | Money Market Fund | $ | 262,957 | ||||||
AIM Aggressive Growth Fund A | Mutual fund | 312,677 | |||||||
AIM Balance Fund A | Mutual fund | 138,645 | |||||||
AIM Basic Value Fund A | Mutual fund | 246,983 | |||||||
AIM Blue Chip Fund A | Mutual fund | 266,766 | |||||||
American Funds New Economy Fund A | Mutual fund | 243,649 | |||||||
American Funds Europacific Growth Fund A | Mutual fund | 262,731 | |||||||
American Fund Bond Fund A | Mutual fund | 26,644 | |||||||
* | AmericanWest Bancorporation (formerly United Security Bancorporation) | Common stock | 68,595 | ||||||
$ | 1,829,647 | ||||||||
* | A party in interest as defined by ERISA |
** | Cost omitted with respect to participant directed transactions under an individual account plan |
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