<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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-5(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Hawaii National Bancshares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant As Specified in its Charter)
Not Applicable
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-5(i)(1), or 14a-5(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-5(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-5(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:
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(4) Date Filed:
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<PAGE> 2
HAWAII NATIONAL BANCSHARES, INC.
45 North King Street, Honolulu, Hawaii 96817
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that, pursuant to call of its Directors, the Annual
Meeting of Shareholders of Hawaii National Bancshares, Inc. will be held in the
Board Room of the Banking House, Fourth Floor, 45 North King Street, Honolulu,
Hawaii, on Tuesday, April 18, 1995, at 10:00 A.M., for the purpose of
considering and voting upon the following matters:
1. Election of Directors. Electing a Board of Directors to hold
office until the next Annual Meeting of Shareholders or until
their successors have been elected and qualified.
2. Whatever other business may properly be brought before the
meeting or any adjournment thereof.
Only those shareholders of record at the close of business on March 30, 1995,
shall be entitled to notice of meeting and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Gordon J. Mau
Secretary
Honolulu, Hawaii
March 30, 1995
WE URGE YOU TO COMPLETE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND THE
MEETING, YOU MAY THEN WITHDRAW YOUR PROXY AND VOTE IN PERSON.
<PAGE> 3
HAWAII NATIONAL BANCSHARES, INC.
45 North King Street
Honolulu, Hawaii 96817
PROXY STATEMENT
This Proxy Statement and the accompanying Proxy first are being sent
to shareholders on or about March 30, 1995, for use in connection with the
Annual Meeting of Shareholders of Hawaii National Bancshares, Inc.
("Bancshares") to be held on Tuesday, April 18, 1995. Only those shareholders
of record of Bancshares issued and outstanding common stock at the close of
business on March 30, 1995 shall be entitled to notice of the meeting and to
vote. The number of shares of common stock outstanding and entitled to vote at
the Annual Shareholders' Meeting is 711,000.
The enclosed Proxy is solicited by and on behalf of the Board of
Directors of Bancshares and the costs of solicitation will be borne by
Bancshares. In addition to the use of the mails, solicitation may be made,
without additional compensation, by directors and officers of Bancshares and
regular employees of Hawaii National Bank ("HNB" or the "Bank"), by telephone,
telecopier, telegraph and personal interview. Bancshares will reimburse
brokers, nominees and similar recordholders for reasonable expenses in mailing
proxy material to beneficial owners.
If the enclosed Proxy is duly executed and received in time for the
meeting, it is the intention of the persons named therein to vote the shares
represented by the Proxy for the five nominees listed, unless otherwise
directed. Any proxy given by a shareholder may be revoked before its exercise
by notice to Bancshares in writing, by a subsequently dated proxy, or in open
meeting prior to the taking of the shareholder vote. The shares represented by
properly executed proxies which are not revoked will be voted in accordance
with the specifications therein.
On each matter that comes before the meeting, each shareholder will
have one vote for each share of stock held, except that cumulative voting may
be required in the election of directors. Hawaii law requires use of cumulative
voting in the election of directors if, not less than 48 hours prior to the
time fixed for the meeting, any shareholder delivers a request therefor to an
officer of Bancshares. Under cumulative voting, each shareholder present in
person or by proxy may cast a number of votes equal to the number of his shares
multiplied by the number of directors to be elected. The shareholder may cast
all of such votes for a single director or may distribute them among the number
to be voted for, or any two or more of them, as he sees fit. The nominees
receiving the highest number of votes on the foregoing basis, up to the total
number of directors to be elected, will be the successful nominees. If
cumulative voting is requested, the holders of management proxies will vote the
proxies received by them cumulatively in such manner as is determined by them
at that time.
1
<PAGE> 4
ELECTION OF DIRECTORS
Bancshares' Bylaws provide that the number of directors to be elected
at the Shareholders' Meeting shall be not less than 3 nor more than 15, as
determined by the Board of Directors. The Board has set the number of Directors
to be elected at 5. The Bylaws also provide that the Board of Directors may
increase the number of directors by not more than 2 between annual
shareholders' meetings and fill the vacancies created thereby, provided that
the number of directors shall at no time exceed 15.
The persons named below will be nominated for election to serve until
the 1996 Annual Meeting of Shareholders and until their successors are elected
and have qualified. Other nominations may be made at the meeting.
The following table sets forth certain information with respect to the
nominees for director, including their ages, their principal occupations during
the past five years, the year first elected a Director of Bancshares and the
number of shares and percent (if more than one percent) of Bancshares common
stock beneficially owned by each on January 31, 1995. All of the nominees are
presently directors of Bancshares.
<TABLE>
<CAPTION>
SHARES OF
NAME AND AGE OF NOMINEE, YEAR FIRST BANCSHARES
PRINCIPAL OCCUPATION ELECTED COMMON STOCK PERCENT
DURING PAST FIVE YEARS DIRECTOR OF BENEFICIALLY OF
AND FAMILY RELATIONSHIP BANCSHARES OWNED CLASS
------------------------- ------------ ------------- --------
<S> <C> <C> <C>
K. J. Luke, 80, 1986 62,942(1) 8.9%
Chairman of the Board and Chief
Executive Officer of Bancshares;
Chairman of the Board of HNB; Advisory
Director of Aloha Airlines;
Father of Warren K. K. Luke.
Warren K. K. Luke, 50, 1986 193,805(2) 27.3%
President and Director of Bancshares;
Vice Chairman, President and Chief
Executive Officer of HNB;
Son of K. J. Luke.
Gordon J. Mau, 48, 1990 62,067(3) 8.7%
Secretary and Director of Bancshares;
Assistant Secretary and Director of
HNB; Attorney-at-Law;
Brother-in-law of Warren K. K. Luke.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
SHARES OF
NAME AND AGE OF NOMINEE, YEAR FIRST BANCSHARES
PRINCIPAL OCCUPATION ELECTED COMMON STOCK PERCENT
DURING PAST FIVE YEARS DIRECTOR OF BENEFICIALLY OF
AND FAMILY RELATIONSHIP BANCSHARES OWNED CLASS
------------------------- ------------ ------------- --------
<S> <C> <C> <C>
Tan Tek Lum, 59, 1993 93,720(4) 13.2%
Director, Executive Vice President and
Assistant Secretary, Lum Yip Kee, Ltd.
(Real Estate Investments);
Chairman, Community Reinvestment Act
Committee of HNB; Brother-in-law of
Carolyn Luke, wife of Warren K. K. Luke.
Arthur S. K. Fong, 70, 1993 318(5) *%
Partner, Fong & Fong, Attorneys
at Law; prior to 1992, attorney,
private practice; Chairman,
Executive Committee of HNB.
</TABLE>
- ------------
*Indicates less than 1% ownership
1. Includes 19,447 shares held by Mr. Luke's wife, Beatrice S. Y. Luke,
as trustee of the Beatrice Lum Luke Trust dated 5/26/83, over which
Mr. Luke exercises no voting or investment power. Also includes
ownership of: (a) 5 shares owned by K.J.L., Inc. by virtue of Mr.
Luke's ownership of 40.57% of that company's total voting stock; and
(b) 35,520 shares owned by K.J.L. Associates by virtue of Mr. Luke's
status as a general partner, over which Mr. Luke shares voting and
investment power.
2. Includes 11,404 shares owned by Mr. Luke's wife, Carolyn Luke, over
which Mr. Luke exercises no voting or investment power; 23,762 shares
held by Mr. and Mrs. Luke as trustee for their children, over which
Mrs. Luke shares voting and investment power; and 81,859 shares held
by Mr. Luke as trustee for his nephews and nieces, over which he
exercises sole voting and investment power. Also includes ownership
of: (a) 5 shares owned by K.J.L., Inc. by virtue of Mr. Luke's status
as a principal shareholder, director and executive officer; and (b)
35,520 shares owned by K.J.L. Associates by virtue of Mr. Luke's
status as a principal shareholder, director and executive officer of
K.J.L., Inc., the corporate general partner.
3. Includes 975 shares owned by Mr. Mau's wife, Sharlene Mau, over which
Mr. Mau exercises no voting or investment power; 28,058 shares held by
Mrs. Mau as trustee of the Sharlene Kam Sun Luke Mau Trust
3
<PAGE> 6
dated 12/13/93, over which Mr. Mau exercises no voting or investment
power; and 1,300 shares and 16,394 shares held by Mr. and Mrs. Mau,
as trustees for their children, over which Mr. Mau shares voting and
investment power.
4. Includes 47,820 shares held by Mr. Lum as trustee of separate trusts
established for the benefit of Warren K. K. Luke, Loretta H. W.
Yajima, Sharlene K. S. Mau and Janice M. T. Loo, over which Mr. Lum
shares voting and investment power; 45,400 shares held by Mr. Lum as
trustee for separate trusts established for the benefit of the
children of Warren K. K. Luke, over which Mr. Lum shares voting and
investment power; and 300 shares owned by the Y. T. Lum Family Trust,
over which Mr. Lum shares voting and investment power.
5. Includes 224 shares owned jointly by Mr. Fong and his wife, Victoria
C. Fong, over which Mr. Fong shares voting and investment power.
While not subject to election by the shareholders of Bancshares, the
following, in addition to Messrs. K. J. Luke, Warren Luke, Gordon J. Mau, Tan
Tek Lum and Arthur S. K. Fong, are expected to be elected by Bancshares to
serve as directors of the Bank for the ensuing year are:
William S. Chee
Lawrence Kunihisa
If any nominee should refuse or be unable to serve, the proxy will be
voted for such person as shall be designated by the Board of Directors to
replace any such nominee. The Board of Directors presently has no knowledge
that any of the nominees will refuse or be unable to serve.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of Bancshares may establish certain standing
committees, including an Executive Committee and Audit Committee. Presently,
Bancshares has no standing committees. However, the Examining Committee of HNB,
Bancshares' sole subsidiary, effectively serves as the Audit Committee for
Bancshares.
There were five (5) meetings of the Board of Directors of Bancshares
during 1994. All of the foregoing nominees attended at least 75% of the
meetings of the Board during 1994.
Among the standing committees of HNB are the Examining Committee,
Community Reinvestment Act Committee ("CRA") and the Executive Committee.
Neither Bancshares nor HNB have nominating committees.
The Examining Committee of HNB, which met four times during 1994,
determines on behalf of the Board whether the performance and examination of
the independent public accounting firm and the internal HNB Auditor are
satisfactory and adequate to meet the Board's supervisory responsibil-
4
<PAGE> 7
ity. The Committee reviews internal auditing procedures, the adequacy of
internal financial and accounting controls, the work of the external and
internal auditors and management's responses to their audit reports and
recommendations. The members of the Examining Committee are Messrs. Lawrence
Kunihisa (Chairman), Arthur S. K. Fong, Tan Tek Lum and Gordon Mau.
The Executive Committee of HNB met four times during 1994. The
Committee acts from time to time between Board meetings, but its actions are
subject to Board approval. The members of the Committee are Messrs. Arthur S.
K. Fong (Chairman), Lawrence Kunihisa, K. J. Luke, Warren K. K. Luke and Tan
Tek Lum. The Compensation Committee is a subcommittee of the Executive
Committee which is composed of independent, nonemployee directors. The
Committee reviews the performance, salaries, and benefit plans of executive
officers and directors. The members of the Committee are Messrs. Arthur S. K.
Fong (Chairman), Lawrence Kunihisa and Tan Tek Lum.
The CRA Committee of HNB met five times during 1994. The Committee
reviews the Bank's CRA policies and activities and monitors the Bank's
contacts, communications and involvement in projects and organizations
affecting low and moderate income areas in the community. The Bank actively
seeks interchange with organizations and members of the community regarding
ways in which the credit needs of these areas can be better served. The
long-term benefits of the Bank's lending policy on student loans, loans to new
entrepreneurs, small businesses, young professionals, and low-income housing
programs to help build a better and more profitable community are part of its
objectives. The members of the committee are Messrs. Tan Tek Lum (Chairman),
Lawrence Kunihisa, William Chee and Gordon J. Mau.
All of the members of the Board of Directors of HNB receive a fee of
$100 per month plus $250 for each meeting attended. Additionally, nonemployee
directors of the Discount (Loan), Examining and Executive committees of the
Board of Directors of HNB receive a fee of $100 per month for each of the
committees on which they serve, and members of the Discount and CRA committees
also receive $100 per meeting attended. No separate directors fees are paid by
Bancshares.
EXECUTIVE COMPENSATION
OVERVIEW
In October 1992, the Securities and Exchange Commission (SEC) approved
changes relating to disclosure requirements for executive compensation. The
rules are intended to provide shareholders with a clear and concise view of the
compensation paid to executive officers and directors, and an understanding of
the directors' reasoning in making compensation decisions.
5
<PAGE> 8
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid or accrued by HNB
during the years ended December 31, 1994, 1993 and 1992 for the chief executive
officer and each other executive officer whose aggregate cash compensation
exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation
- -----------------------------------------------------------------------------------------------------------------------
Name and Other Annual
Principal Position Year Salary Bonus Compensation(2)
------------------ ---- ------ ------- ---------------
<S> <C> <C> <C> <C>
K. J. Luke 1994 $152,573 $ -- $15,285
Chairman of the Board and 1993 $152,522 $17,860 $15,285
Chief Executive Officer of 1992 $152,210 $16,044 $13,635
Bancshares; Chairman of the
Board of HNB.
Warren K. K. Luke 1994 $193,780 $ -- $ 7,500
President and Director of 1993 $179,744 $18,370 $ 7,750
Bancshares; Vice Chairman, 1992 $177,301(1) $16,353 $ 5,900
President and Chief Executive
Officer of HNB.
Ernest T. Murata 1994 $139,801 $ -- $ 5,713
Vice President, Treasurer 1993 $140,162(1) $12,440 $ 5,713
and Assistant Secretary of 1992 $130,801(1) $11,493 $ 5,713
Bancshares; Executive Vice
President, Cashier and
Secretary of HNB.
</TABLE>
Notes:
1. Includes an adjustment in vacation benefits in 1993 of $10,012 for
Ernest T. Murata and $9,761 and $9,343 in 1992 for Warren K. K. Luke
and Ernest T. Murata, respectively.
2. Other annual compensation for the years ended December 31, 1994, 1993,
and 1992 consisted of the following:
<TABLE>
<CAPTION>
Director and Personal Use of Direct
Committee Fees Automobiles Reimbursements Total
-------------- --------------- --------------- -------
<S> <C> <C> <C> <C> <C>
K. J. Luke 1994 $3,950 $7,595 $3,740 $15,285
1993 $3,950 $7,595 $3,740 $15,285
1992 $2,300 $7,595 $3,740 $13,635
Warren K. K. Luke 1994 $4,200 $ -- $3,300 $ 7,500
1993 $4,450 $ -- $3,300 $ 7,750
1992 $2,600 $ -- $3,300 $ 5,900
Ernest T. Murata 1994 $ -- $3,828 $1,885 $ 5,713
1993 $ -- $3,828 $1,885 $ 5,713
1992 $ -- $3,828 $1,885 $ 5,713
</TABLE>
6
<PAGE> 9
Bancshares and HNB have not granted any options or other forms of
long-term incentive awards and, consequently, no such options or awards are
outstanding.
PENSION PLAN
HNB has a noncontributory pension plan. As of December 31, 1994, HNB's
Employees' Retirement Plan had 226 participating employees in the Plan. The
Plan is funded annually. HNB policy is to fund pension costs using an actuarial
basis, which includes past service and current cost. As such, it cannot
determine the actual contributions allocated to each of the above-listed
individuals. Under this Plan, employees are required to complete one full year
of service before being eligible to be a member of the Plan. In order to be
fully vested, a participant must complete five years of service with HNB.
Benefits become effective upon an employee's retirement at the normal
retirement age of 65 years. The Plan also offers employees various options with
respect to the manner of receiving retirement benefits. Under specific
circumstances, employees who have attained certain ages and lengths of service
may retire early at reduced benefits. In 1994 HNB's contribution to the
Retirement Plan represented 4.69% of the total remuneration paid to the Plan's
participants.
ESTIMATED ANNUAL PENSION
PAYABLE AT AGE 65
<TABLE>
<CAPTION>
Years of Service with HNB
--------------------------------------------------------------------------------
Average
Salary Per Year 10 15 20 25 30
- ----------------- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$240,000 $34,480 $54,869 $75,257 $95,646 $116,034
220,000 32,302 51,305 70,307 89,310 108,312
200,000 29,552 46,805 64,057 81,310 98,562
180,000 26,802 42,305 57,807 73,310 88,812
160,000 24,052 37,805 51,557 65,310 79,062
140,000 21,152 33,155 45,157 57,160 69,162
120,000 18,102 28,355 38,607 48,860 59,112
</TABLE>
The above table shows the estimated annual retirement benefit payable
on a straight-life annuity basis to participating employees, including the
named executive officers, for the average annual salary and years of service
classification indicated. The benefits indicated in the table are not subject
to Social Security deductions or other offset amounts. Under the Plan, covered
compensation consists solely of salary and excludes overtime and bonuses.
Please refer to the "Summary Compensation Table" for a 3 year history of the
salaries paid or accrued by HNB for Messrs. K. J. Luke, Warren K. K. Luke, and
Ernest T. Murata.
As of December 31, 1994, the credited years of service under the Plan
for Messrs. Warren K. K. Luke, and Ernest T. Murata were 22 and 32 years,
7
<PAGE> 10
respectively. K. J. Luke, who has 34 years of credited service, is presently
receiving annual payments of $24,204 under the Plan.
Effective January 1, 1994, HNB established a nonqualified and unfunded
supplemental executive retirement plan ("SERP"). The SERP is intended to
supplement payments due to participants upon retirement under HNB's
existing pension plan. The SERP provides for a payment of up to 70% of the
participant's average earnings over a specified three year period. This amount
is reduced by amounts payable to the participant under HNB's pension plan and
social security benefits. The amount may be further reduced in the event of
early retirement prior to age 68. Presently, Mr. Ernest T. Murata is the only
participant in the SERP.
COMPENSATION COMMITTEE REPORT
The Compensation Committee administers the compensation program for
executive officers of Bancshares and HNB. The objective of the program is to
attract and retain qualified executives and to reward them for their
achievements and contributions to Bancshares and HNB.
The Committee believes that the optimal compensation plan should
motivate executives to look ahead to the future, as opposed to focusing on
short-term performance. In keeping with this philosophy, HNB's compensation
packages encourage teamwork, qualitative contributions, and long range
planning. While bonuses are linked to achievements, base compensation is
structured to provide executive officers with salaries that are competitive
with those paid by other banks in Hawaii, taking into account differences in
asset size, financial condition, and other relevant factors. Since Bancshares'
stock is inactively traded and the company's strategy is to generate capital
through retention of earnings, return on shareholders' equity and the current
year's results are not significant factors in establishing salaries or bonuses;
however, they are considered.
K. J. Luke is the Chief Executive Officer and Chairman of the Board of
Bancshares and the founder and Chairman of the Board of HNB. He has guided HNB
for more than 32 years, from its beginnings as a one bank office on King and
Smith Streets to the present day, as a full service bank with 9 branch
locations. His wisdom and knowledge of banks and banking is invaluable. Warren
K. K. Luke is President and Director of Bancshares and Vice Chairman of the
Board, President and Chief Executive Officer of HNB. He manages the day to day
operations of Bancshares and HNB and leads both companies in strategic
planning. Warren K. K. Luke has significantly enhanced HNB's visibility in the
community through his participation in numerous civic, nonprofit, and
professional activities, on both a local and national level.
In determining Messrs. K. J. Luke's and Warren K. K. Luke's base
compensation for 1994, the Committee considered the above factors. It also
utilized a survey of salaries paid to CEOs of banks in Hawaii with assets
ranging between $798.8 million and $11.3 billion. The salaries paid to Messrs.
K.
8
<PAGE> 11
J. Luke and Warren K. K. Luke in 1994 were consistent with HNB's ranking in the
survey in terms of asset size. Except for HNB, none of the banks included in
this study were represented in the Unlisted Independent Bank Proxy used in the
performance graph to compare cumulative total return.
No bonuses or other incentive-driven compensation, such as stock
options, stock appreciation rights, restricted stock awards, or other types of
payments were awarded in 1994.
Compensation Committee
Arthur S. K. Fong, Chairman
Lawrence Kunihisa
Tan Tek Lum
PERFORMANCE GRAPH
Bancshares' common stock is not actively traded and is not listed on
any exchange. While a comparison with a broad market index composed of actively
traded stocks may not be meaningful, the SEC requires that such information be
provided to shareholders. Set forth below is a line graph comparing the yearly
percentage change in the cumulative total shareholder return on Bancshares'
common stock against the cumulative total return of the NASDAQ Index, and an
index of unlisted independent western banks for a period of five years
commencing on December 31, 1989 and ending on December 31, 1994.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
Among Hawaii National Bancshares, Inc., NASDAQ Index and an Index of
Unlisted Independent Banks
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Bancshares 100.00 80.95 89.79 89.82 98.85 124.77
NASDAQ Index 100.00 82.20 128.92 148.84 170.79 165.33
Unlisted 100.00 104.05 103.67 101.28 119.01 118.59
Independent
Bank Proxy
</TABLE>
*Assumes $100.00 invested on December 31, 1989 in Bancshares' stock, NASDAQ
Index and the Montgomery Securities' Western Bank Monitor Unlisted Independent
Bank Proxy. Total return assumes reinvestment of dividends.
9
<PAGE> 12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is a subcommittee of the Executive
Committee of the Board of Directors. The Committee consists of three
independent, outside directors: Messrs. Arthur S. K. Fong, Lawrence Kunihisa,
and Tan Tek Lum. None of these individuals is or has been employed as an
officer of Bancshares or HNB. Tan Tek Lum is the brother-in-law of Carolyn
Luke, the wife of Warren K. K. Luke. While K. J. Luke and Warren K. K. Luke
are members of the Executive Committee, they are not members of the
Compensation Committee. Neither of these individuals are involved in matters
relating to their own or each others compensation.
RELATED TRANSACTIONS
During 1994, directors, executive officers, principal shareholders and
many of their associates (i.e. certain relatives and corporations and other
entities in which such persons have a significant interest) of Bancshares and
HNB were customers of HNB. It is anticipated that such directors, officers,
principal shareholders and their associates will continue to be customers of
HNB in the future. All transactions between HNB and directors, executive
officers, principal shareholders and their associates were made in the ordinary
course of business on substantially the same terms, including interest rates,
collateral and repayment terms on extensions of credit, as those prevailing at
the same time for comparable transactions with other persons. In the opinion of
management, such transactions do not involve more than the normal risk of
collectibility or present other unfavorable features.
HNB leases its office space for its headquarters building at King and
Smith Streets from K. J. L. Associates, an affiliate of directors K. J. Luke
and Warren K. K. Luke. The lease has a term until December 31, 2039 and
requires fixed annual rents of $1,025,445 from January 1, 1995 until December
31, 1997; and rent thereafter is to be fixed for each of the fifteen succeeding
3-year periods by agreement or, failing agreement, by arbitration.
HNB leases office, supply and storage space for its Airport Branch and
general operations from Industrial Investors, Inc., an affiliate of director
Warren K. K. Luke. The lease requires the payment of fixed annual rents of
$187,733 from January 1, 1993 until December 31, 1997; $207,988 from January 1,
1998 until December 31, 2002; and rent thereafter is to be fixed for the
succeeding 10-year period by agreement, or failing agreement by arbitration.
All of the lease and sublease payments described above are in addition
to insurance, taxes, maintenance, and utility payments.
The Boards of Directors of Bancshares and HNB believe that the lease
terms discussed above are as favorable to HNB as those which could have been
obtainable in transactions with persons or companies not affiliated with
Bancshares or HNB.
10
<PAGE> 13
HNB utilizes the firm of Loyalty Insurance Agency, Ltd. in placing
HNB's insurance, which includes a variety of standard HNB insurance, such as,
fidelity, liability, fire, etc. Mr. Warren K. K. Luke, a director and officer
of Bancshares and HNB, is also a director of Loyalty Insurance Agency, Ltd. and
its parent company, Loyalty Enterprises, Ltd. Mr. K. J. Luke, a director and
officer of Bancshares and HNB, is also a principal shareholder of Loyalty
Enterprises, Ltd. The Board of Directors of HNB believes that the selection of
surety companies and the pricing of the premiums are as favorable as would be
obtainable with other insurance firms. During 1994, HNB paid an aggregate
premium of $213,407 to such firm. HNB plans to continue to utilize the agency
during 1995.
HNB uses the firm of Computer Systems International, Ltd. ("CSI") to
provide data processing services. CSI is a bank service company formed to
provide data processing services to financial institutions, including HNB. At
December 31, 1994, HNB and Loyalty Investments (an affiliate of Chairman of the
Board, K. J. Luke), each owned a 50% interest in CSI. HNB's interest in CSI
increased from a 33 1/3% interest effective January 4, 1994 when CSI purchased
into treasury stock the interest of another financial institution. Messrs. K.
J. Luke, Warren K. K. Luke and Ernest Murata are officers and directors of
CSI. Charges to HNB for data processing services provided by CSI during 1994
were $845,818.
PRINCIPAL SHAREHOLDERS AND OWNERSHIP OF STOCK
BY OFFICERS AND DIRECTORS OF BANCSHARES
PRINCIPAL SHAREHOLDERS
In accordance with applicable SEC rules the following table sets forth
those persons who owned beneficially, directly or indirectly, more than 5
percent of the issued and outstanding shares of Bancshares stock as of January
31, 1995. Such rules require not only the disclosure of shares over which an
individual holds sole voting and investment power, but also shares over which
such individual shares voting and investment power. As a consequence, and as
indicated in the footnotes below, in many instances this results in duplication
in the numbers and percentages reported in the table. In the aggregate, members
of the Luke family and their affiliates beneficially owned approximately 85% of
the issued and outstanding shares of Bancshares stock as of January 31, 1995.
11
<PAGE> 14
<TABLE>
<CAPTION>
% of
Relationship Class
with Banc- Record Beneficially Beneficially
Name shares or HNB Ownership Owned Owned
- ---- ------------- --------- ------------ ------------
<S> <C> <C> <C> <C>
K. J. Luke Chief Executive 7,970 62,942(1) 8.9%
Officer and
Chairman of the
Board of
Bancshares;
Chairman of the
Board of HNB
Warren K. K. Luke President and 41,255 193,805(2) 27.3%
Director of
Bancshares;
Vice Chairman,
President and
Chief Executive
Officer of HNB
Loretta H. W. Principal 29,713 58,179(3) 8.2%
Yajima Shareholder,
daughter of K. J.
Luke and sister
of Warren K. K.
Luke
Gordon J. Mau Secretary and 15,340 62,067(4) 8.7%
Director of
Bancshares;
Assistant
Secretary and
Director of HNB
Sharlene K. S. Principal 29,033 62,067(5) 8.7%
Mau Shareholder,
daughter of K. J.
Luke and sister
of Warren K. K.
Luke
Janice M. T. Loo Principal 35,948 45,962(6) 6.5%
Shareholder,
daughter of K. J.
Luke and sister
of Warren K. K.
Luke
</TABLE>
12
<PAGE> 15
<TABLE>
<S> <C> <C> <C> <C>
Sun Jing Lam Principal 253 131,513(7) 18.5%
Shareholder
Jeanette Lum Chun Principal 147(8) 179,227(8) 25.2%
Shareholder
Herbert Y. H. Principal 994(9) 48,814(9) 6.9%
Chinn Shareholder
Tan Tek Lum Principal 200 93,720(10) 13.2%
Shareholder and
Director of
Bancshares
and HNB
</TABLE>
(1) Includes 19,447 shares held by Mr. Luke's wife, Beatrice S. Y. Luke, as
trustee of the Beatrice Lum Luke Trust dated 5/26/83, over which Mr. Luke
exercises no voting or investment power. Also includes ownership of: (a)
5 shares owned by K. J. L., Inc. by virtue of Mr. Luke's ownership of
40.57% of that company's total voting stock, and (b) 35,520 shares owned
by K. J. L. Associates by virtue of Mr. Luke's status as a general
partner, over which Mr. Luke shares voting and investment power.
(2) Includes 11,404 shares owned by Mr. Luke's wife, Carolyn Luke, over which
Mr. Luke exercises no voting or investment power; 23,762 shares held by
Mr. and Mrs. Luke as trustee for their children, over which Mrs. Luke
shares voting and investment power; and 81,859 shares held by Mr. Luke as
trustee for his nephews and nieces, over which he exercises sole voting
and investment power. Also includes ownership of: (a) 5 shares owned by
K. J. L., Inc. by virtue of Mr. Luke's status as a principal shareholder,
director and executive officer; and (b) 35,520 shares owned by K. J. L.
Associates by virtue of Mr. Luke's status as a principal shareholder,
director and executive officer of K. J. L., Inc., the corporate general
partner.
(3) Includes 14,169 shares owned by Mrs. Yajima's husband, Tyler Yajima, over
which Mrs. Yajima exercises no voting or investment power; and 14,297
shares held by Mrs. Yajima as trustee for her children, over which Mr.
Yajima shares voting and investment power.
(4) Includes 975 shares owned by Mr. Mau's wife, Sharlene Mau, over which Mr.
Mau exercises no voting or investment power; 28,058 shares held by Mrs.
Mau as trustee of the Sharlene Kam Sun Luke Mau Trust dated
13
<PAGE> 16
12/31/93, over which Mr. Mau exercises no voting or investment power; and
1,300 shares and 16,394 shares held by Mr. and Mrs. Mau, as trustees for
their children, over which Mr. Mau shares voting and investment power.
(5) Includes 975 shares owned by Mrs. Mau's husband, Gordon J. Mau, over
which Mrs. Mau exercises no voting or investment power; and 1,300 shares
and 16,394 shares held by Mr. and Mrs. Mau, as trustees for their
children, over which Mrs. Mau shares voting and investment power.
(6) Includes 10,014 shares owned by Mrs. Loo's husband, Wilson Loo, over
which Mrs. Loo exercises no voting or investment power.
(7) Includes 253 shares held by Mr. Lam as trustee of the Sun Jing Lam Trust
dated 4/25/86; 126,700 shares held by Mr. Lam as trustee of separate
trusts established for the benefit of Warren K. K. Luke, Loretta H. W.
Yajima, Sharlene K. S. Mau, and Janice M. T. Loo, over which Mr. Lam
shares voting and investment power; and 4,560 shares held by Mr. Lam as
trustee of separate trusts established for the benefit of the children of
Warren K. K. Luke, over which Mr. Lam shares voting and investment power.
(8) Includes 118 shares over which Mrs. Chun exercises sole voting and
investment power; 47,820 shares and 126,700 shares held by Mrs. Chun as
trustee of separate trusts established for the benefit of Warren K. K.
Luke, Loretta H. W. Yajima, Sharlene K. S. Mau and Janice M. T. Loo,
over which Mrs. Chun shares voting and investment power; 4,560 shares
held by Mrs. Chun as trustee of separate trusts established for the
benefit of the children of Warren K. K. Luke, over which Mrs. Chun shares
voting and investment power; and 29 shares owned jointly by Mrs. Chun and
her husband.
(9) Includes 994 shares held jointly by Mr. Chinn with his wife; and 47,820
shares held by Mr. Chinn as trustee of separate trusts established for
the benefit of Warren K. K. Luke, Loretta H. W. Yajima, Sharlene K. S.
Mau and Janice M. T. Loo, over which Mr. Chinn shares voting and
investment power.
(10) Includes 47,820 shares held by Mr. Lum as trustee of separate trusts
established for the benefit of Warren K. K. Luke, Loretta H. W. Yajima,
Sharlene K. S. Mau and Janice M. T. Loo, over which Mr. Lum shares voting
and investment power; 45,400 shares held by Mr. Lum as trustee for
separate trusts established for the benefit of the children of Warren K.
K. Luke, over which Mr. Lum shares voting and investment power; and 300
shares owned by the Y. T. Lum Family Trust, over which Mr. Lum shares
voting and investment power.
14
<PAGE> 17
DIRECTORS AND EXECUTIVE OFFICERS
As of January 31, 1995, each of the named executives and directors of
Bancshares, and the directors and executive officers of Bancshares as a group,
owned beneficially, directly or indirectly, shares of Bancshares' common stock
as set forth below. Unless otherwise indicated, ownership represents sole
voting or investment power.
<TABLE>
<CAPTION>
Amount % of Class
Record Beneficially Beneficially
Name of Individual and Position Ownership Owned Owned
- ------------------------------- --------- ------------ ------------
<S> <C> <C> <C>
K. J. Luke,
Executive Officer and Director 7,970 62,942(1) 8.9%
Warren K. K. Luke,
Executive Officer and Director 41,255 193,805(1) 27.3%
Ernest T. Murata,
Executive Officer 400 400 *
Gordon J. Mau, Director 15,340 62,067(1) 8.7%
Tan Tek Lum, Director 200 93,720(1) 13.2%
Arthur S. K. Fong, Director 318 318 *
Directors and Executive Officers
as a Group 65,483 413,252 58.1%
</TABLE>
*Indicates less than 1% ownership.
(1)For a detailed description of the nature of the beneficial ownership of
Messrs. K. J. Luke, Warren K. K. Luke, Gordon J. Mau and Tan Tek Lum, see notes
1, 2, 4, and 10 to "Principal Shareholders" herein, respectively.
Bancshares knows of no other persons who, as of January 31, 1995,
owned beneficially, directly or indirectly, more than 5 percent of Bancshares'
outstanding voting securities and knows of no voting trust, pledge, or other
similar agreement affecting any of Bancshares outstanding voting securities.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Coopers and Lybrand performed the audit of the
consolidated financial statements for Bancshares and HNB for the year ended
December 31, 1994. The Board of Directors has appointed Coopers and Lybrand as
independent auditors of Bancshares and HNB for the current year. Shareholders
are not required to take action on this selection. Representatives of Coopers
and Lybrand will be present at the Annual Meeting. They will be given the
opportunity to present a statement, if they so desire, and will be available to
respond to appropriate questions.
15
<PAGE> 18
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
The 1996 Annual Meeting of Shareholders will be held on or about April
16, 1996. Therefore, proposals of the shareholders intended to be presented at
the 1996 Annual Meeting must be received by the Secretary of the Board of
Directors, Hawaii National Bancshares, Inc., P.O. Box 3740, 45 North King
Street, Honolulu, Hawaii 96817, no later than November 17, 1995.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before
this Annual Meeting. However, if other matters should properly come before the
meeting, it is the intention of the persons named in the Proxy to vote the
Proxy in accordance with the recommendations of management on such matters.
By Order of the Board of Directors
Gordon J. Mau
Secretary
Honolulu, Hawaii
March 30, 1995
A COPY OF THE ANNUAL REPORT OF BANCSHARES ON FORM 10-K AS REQUIRED TO
BE FILED WITH THE SECURITIES & EXCHANGE COMMISSION, WASHINGTON, D.C.,
WILL BE MADE AVAILABLE WITHOUT CHARGE TO EACH SHAREHOLDER UPON REQUEST
THEREFOR TO:
Mr. Ernest T. Murata
Vice President, Treasurer and
Assistant Secretary
Hawaii National Bancshares, Inc.
P. O. Box 3740
Honolulu, Hawaii 96812
Phone: (808) 528-7711
16
<PAGE> 19
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS OF
HAWAII NATIONAL BANCSHARES, INC.
THIS PROXY IS BEING SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
PROXY
PLEASE SIGN AND RETURN IMMEDIATELY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned Shareholder of
Hawaii National Bancshares, Inc., Honolulu, Hawaii ("Bancshares") do hereby
nominate, constitute and appoint Herbert Nagata and Gordon J. Mau and each of
them (with full power to act alone) my true and lawful attorney with full power
of substitution, for me and in my name, place and stead to vote all the Common
Stock of Bancshares standing in my name and on its books on March 30, 1995, at
the Annual Meeting of Shareholders to be held in the Board Room of the Banking
House, Fourth Floor, 45 North King Street, Honolulu, Hawaii, 96817 on Tuesday,
April 18, 1995 at 10:00 a.m., or at any adjournments thereof, with all the
powers the undersigned would possess if personally present, as follows:
1. ELECTION OF DIRECTORS. The election of the persons listed
below to serve as directors for the ensuing year.
FOR all nominees listed WITHHOLD AUTHORITY
below (except as marked) to vote for all
to the contrary below) nominees listed below
K. J. Luke, Warren K. K. Luke, Gordon J. Mau, Tan Tek Lum and
Arthur S. K. Fong
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.
2. In their discretion, upon such other matters as may properly
come before the meeting.
THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" AND WILL BE VOTED
"FOR" THE PROPOSITION 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 meeting. However, if any other matters are
properly presented at said meeting, this proxy shall be voted in accordance
with the recommendations of management.
The Board of Directors recommends a vote "FOR" the listed proposition.
DATED:____________________________ , 1995
-----------------------------------------
(Signature of Shareholder)
-----------------------------------------
(Signature of Shareholder)
WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE. IF MORE THAN
ONE TRUSTEE, ALL SHOULD SIGN. ALL
JOINT OWNNERS MUST SIGN.
