<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______________ to
_______________
Commission File Number 0-15508
HAWAII NATIONAL BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
HAWAII 99-0250218
(State of incorporation) (IRS Employer Identification No.)
45 NORTH KING STREET, HONOLULU, HAWAII 96817
(Address of principal executive offices) (Zip Code)
(808) 528-7711
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest date is:
Common Stock, $1 Par Value; outstanding at March 31, 1997 - 711,000 shares
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1997,
December 31, 1996 and March 31, 1996 (Unaudited) . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income - Three months
ended March 31, 1997 and 1996 (Unaudited) . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows - Three months
ended March 31, 1997 and 1996 (Unaudited) . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements (Unaudited) . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HAWAII NATIONAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, 1997, DECEMBER 31, 1996 AND MARCH 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31 MARCH 31
1997 1996 1996
-------- -------- --------
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $18,561 $17,277 $16,570
Federal funds sold 20,250 16,000 15,000
Investment securities
Held-to-maturity (fair value of $48,550, 48,931 47,930 46,991
$48,007 and $46,933, respectively)
Available-for-sale 1,760 1,487 1,497
Loans and leases 205,703 207,262 207,327
Less allowance for possible loan
and lease losses (note 2) 3,198 3,067 3,037
-------- -------- --------
202,505 204,195 204,290
Premises and equipment 3,774 3,900 4,115
Other assets 4,534 5,236 5,196
-------- -------- --------
Total assets $300,315 $296,025 $293,659
======== ======== ========
LIABILITIES:
Deposits -
Demand $90,347 $88,133 $85,918
Savings 112,268 110,032 115,959
Time 67,465 66,429 62,316
-------- -------- --------
Total deposits 270,080 264,594 264,193
Short-term borrowings 1,000 844 838
Other liabilities 1,386 2,790 1,356
-------- -------- --------
Total liabilities 272,466 268,228 266,387
SHAREHOLDERS' EQUITY (note 3):
Common stock, par value $1 per share;
Authorized - 10,000,000 shares
Issued and outstanding - 711,000 shares 711 711 711
Capital in excess of par value 12,148 12,148 12,148
Retained earnings 14,990 14,938 14,413
-------- -------- --------
Total shareholders' equity 27,849 27,797 27,272
-------- -------- --------
Total liabilities and shareholders' equity $300,315 $296,025 $293,659
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE> 4
HAWAII NATIONAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
----------------------------
1997 1996
------- -------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $4,597 $4,826
Interest on direct financing leases 23 29
Interest on Federal funds sold 234 168
Interest on investment securities-
Taxable 731 644
Exempt from Federal income tax -- 19
------ ------
Total interest income 5,585 5,686
------ ------
INTEREST EXPENSE:
Deposits 1,647 1,757
Short-term borrowings 10 10
------ ------
Total interest expense 1,657 1,767
------ ------
Net interest income 3,928 3,919
PROVISION FOR LOAN AND LEASE LOSSES (note 2) 180 225
------ ------
Net interest income after provision for
loan and lease losses 3,748 3,694
------ ------
OTHER INCOME:
Service charges on deposit accounts 272 271
Other service charges, collection and
exchange charges, commissions and fees 483 431
------ ------
755 702
------ ------
OTHER EXPENSES:
Salaries and employee benefits 2,151 2,050
Occupancy expense of bank premises 1,102 1,086
Other operating expenses 992 967
------ ------
4,245 4,103
------ ------
Income before income taxes 258 293
INCOME TAX PROVISION 100 107
------ ------
Net Income $158 $186
====== ======
PER SHARE DATA:
Net income $0.22 $0.26
Cash dividend $0.15 $0.15
Average shares outstanding 711,000 711,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE> 5
HAWAII NATIONAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and fees received $5,402 $5,532
Interest paid (1,665) (1,691)
Service charges, collection and exchange charges,
commission and fees received 755 702
Cash paid to suppliers and employees (3,269) (3,586)
Income taxes paid (18) (26)
------- -------
Net cash provided by operating activities 1,205 931
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of investment securities held-to-maturity 4,003 6,003
Purchase of investment securities held-to-maturity (5,004) (7,001)
Purchase of investment securities available-for-sale (273) --
Net decrease in loans and leases made to customers 1,566 2,802
Proceeds from sale of loans -- 2,819
Capital expenditures (19) (66)
Proceeds from sale of equipment -- 2
Purchase of other real estate owned -- (194)
------- -------
Net cash provided by investing activities 273 4,365
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits and savings accounts 2,970 (9,008)
Net increase in time deposits 1,036 2,795
Net increase (decrease) in short-term borrowings 156 (65)
Dividends paid (106) (106)
------- -------
Net cash provided by (used in) financing activities 4,056 (6,384)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,534 (1,088)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 33,277 32,658
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $38,811 $31,570
======= =======
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net Income $158 $186
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation on bank premises and equipment 144 138
Provision for loan and lease losses 180 225
Amortization of deferred loan fees (55) (138)
Changes in -
Interest receivable (128) (16)
Interest payable (8) 76
Taxes payable 82 81
Other assets 829 269
Other liabilities 3 110
------- -------
Net cash provided by operating activities $1,205 $931
======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfer from loans to real estate acquired through foreclosure -- $175
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE> 6
HAWAII NATIONAL BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three
months ended March 31, 1997, are not necessarily indicative of the results
anticipated for the year ending December 31, 1997. For additional
information, refer to the consolidated financial statements and footnotes
thereto included in Hawaii National Bancshares, Inc.'s annual report on Form
10-K for the year ended December 31, 1996.
2. ALLOWANCE FOR POSSIBLE LOAN AND LEASE LOSSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
(in thousands) 1997 1996
------ ------
<S> <C> <C>
Balance, beginning of period $3,067 $3,096
Provision charged to operations 180 225
Loans and leases charged-off (60) (340)
Recoveries credited to allowance 11 56
------ ------
Net charge-offs (49) (284)
------ ------
Balance, end of period $3,198 $3,037
====== ======
</TABLE>
The following table presents information on the recorded investment in
impaired loans for the dates indicated:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31 MARCH 31
(IN THOUSANDS) 1997 1996 1996
--------- ----------- --------
<S> <C> <C> <C>
Impaired loans for which there is a related allowance $1,858 $1,424 $729
Impaired loans for which there is no related allowance 1,465 1,650 2,427
------ ------ ------
Total recorded investment $3,323 $3,074 $3,156
====== ====== ======
</TABLE>
The average recorded investment in impaired loans was $3,042,000 for the
three months ended March 31, 1997, $3,970,000 for the year ended December
31, 1996 and $3,116,000 for the three months ended March 31, 1996. Interest
income on impaired loans is recognized in accordance with the Company's
nonaccrual loan policy. There was no interest income recognized on impaired
loans during these periods.
3. STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
(IN THOUSANDS) 1997 1996
------- -------
<S> <C> <C>
Balance, beginning of period $27,797 $27,192
Net income 158 186
Cash dividends (106) (106)
------- -------
Balance, end of period $27,849 $27,272
======= =======
</TABLE>
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<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Hawaii National Bancshares, Inc. ("Company") is a bank holding company
whose wholly-owned subsidiary is Hawaii National Bank ("HNB" or the "Bank"), a
national banking association. The Company derives substantially all of its
income from the operations of the Bank and the Bank's assets constitute the
majority of the Company's assets. Therefore, the discussion that follows
relates mainly to the activities of the Bank.
LOCAL ECONOMY
Hawaii's economy is expected to remain generally weak in 1997. While
tourism has been leading the recovery, in recent months, Hawaii's largest
industry has experienced a decline in visitor arrivals and shorter average
stays. Further, as the yen continues to weaken against the dollar, there is
concern that fewer Japanese tourists will visit Hawaii and those that do will
spend less, resulting in lower revenues for local retailers. The lack of job
creation continues to be a major drag on both the local economy and the local
real estate market. During the first quarter of 1997, bankruptcy filings
increased 68%, compared to the same period in 1996. The median price for a
single-family home on Oahu in March 1997 was $305,000, a decline of 6.2% from
$325,000 in March 1996. The median price for a condominium on Oahu was
$150,000, down 21.1% from $190,000 a year ago.
HIGHLIGHTS
The Company reported net income of $158,000 for the three months ended
March 31, 1997, a decrease of $28,000 or 15.1% from the comparable period in
1996. The lower results were primarily due to an increase in other expenses,
partly offset by an increase in other income and a decrease in the provision
for loan and lease losses. Earnings per share were $0.22 for the first quarter
of 1997, compared to $0.26 for the same quarter a year ago.
Total assets increased from $296,025,000 at December 31, 1996 to
$300,315,000 at March 31, 1997. Loans and leases ended the first quarter of
1997 at $205,703,000, a decline from $207,262,000 at year-end 1996. Deposits
grew $5,486,000 to $270,080,000 at March 31, 1997 from December 31, 1996.
Leverage and risk-based capital ratios continued to exceed regulatory
requirements by a substantial margin.
At March 31, 1997, noncurrent loans and leases totaled $4,053,000,
representing 2.0% of total loans and leases, compared to $3,392,000 or 1.6% at
December 31, 1996. Net charge-offs declined to $49,000 for the first quarter
of 1997, compared to $284,000 for the same period last year.
In May 1997, the Bank will open a new branch in the Times Square
Shopping Center in Pearl City on Oahu, which will provide the Bank with an
opportunity to expand its loan and deposit base. Based on past experience,
initially new branches have an adverse impact on earnings until the volume of
business grows to cover overhead expenses. This may be mitigated to some
extent since staffing for the new branch is expected to be accomplished
internally.
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<PAGE> 8
RESULTS OF OPERATIONS
Net Interest Income
Net interest income for the three months ended March 31, 1997 was
$3,928,000, compared to $3,919,000 for the respective period in 1996. During
the quarter, a reduction in interest expense offset a decline in interest
income. The average net interest margin for the first quarters of 1997 and
1996 was 5.84% and 5.83%, respectively.
Interest income for the three months ended March 31, 1997 decreased
$101,000 or 1.8% from the comparable period in 1996. The lower results were
due to a decline in interest and fees on loans, partly offset by an increase in
interest on federal funds sold and investment securities. The average yield on
interest-earning assets for the first quarter of 1997 was 8.30%, compared to
8.46% for the same period in 1996.
Interest expense for the three months ended March 31, 1997 declined
$110,000 or 6.2%, compared to the same period a year earlier. The improvement
was attributable to a decrease in interest expense on deposits. The average
rate paid on deposits and interest-bearing liabilities for the quarter was
3.26%, compared to 3.46% for the same period in 1996.
On March 25, 1997, the Federal Reserve raised its target for the
federal funds rate by 25 basis points, the first increase in more than two
years. The Bank has an asset-sensitive balance sheet, which means that
interest-earning assets tend to reprice faster than interest- bearing
liabilities. Thus, net interest income should benefit if interest rates
continue to rise.
Other Income and Expenses
Other income for the three months ended March 31, 1997 increased
$53,000, or 7.5%, compared to the same quarter in the prior year. The increase
was primarily due to the collection of rental income from other real estate
owned.
Other expenses consist primarily of salaries and employee benefits,
occupancy expense and other operating expenses. For the three months ended
March 31, 1997, other expenses increased $142,000 or 3.5%, compared to the same
period last year.
Salaries and employee benefits for the first quarter of 1997 increased
$101,000 or 4.9%, over the same period a year earlier. The growth in this
category reflected normal merit and inflationary adjustments which were adopted
to keep the Bank's salary and benefit packages competitive. The Bank continues
to closely monitor increases in staff. The number of full-time equivalent
employees totaled 217 at March 31, 1997 and 219 at March 31, 1996.
Occupancy expenses for the three months ended March 31, 1997 rose
$16,000 or 1.5% from the comparable period in 1996. The increase was
attributable to higher repair costs, taxes and depreciation charges.
Other operating expenses for the first quarter of 1997 increased
$25,000 or 2.6%, compared to same period a year ago. Included in other
expenses are data processing fees paid
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<PAGE> 9
to Computer Systems International, Ltd. ("CSI"), a company formed to provide
computer services to financial institutions including the Bank. An affiliate
of a director and the Bank each own a 50% interest in this bank service
corporation. Data processing fees paid to CSI amounted to $189,087 and
$178,064 for the first three months of 1997 and 1996, respectively.
Income Taxes
The Company's federal and state income tax provision for the first
quarter of 1997 was $100,000, compared to $107,000 for the same quarter a year
ago. The effective income tax rates for these periods was 38.8% and 36.5%,
respectively. The higher rate in the quarter reflected the absence of tax
exempt investment income, compared to the same period in 1996.
FINANCIAL CONDITION
Deposits
At March 31, 1997, total deposits were $270,080,000, compared to
$264,594,000 at December 31, 1996, and $264,193,000 at March 31, 1996.
Noninterest-bearing demand deposits ended the quarter $2,394,000 above the
balance reported at year-end 1996. Interest-bearing demand deposits at
quarter-end were virtually unchanged from December 31, 1996. Savings and time
deposits increased $2,236,000 and $1,036,000, respectively, over year-end 1996
levels.
The following table presents the distribution of the Bank's deposit
accounts for the dates indicated.
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996 March 31, 1996
--------------------- ---------------------- ----------------------
Balance % Balance % Balance %
------------ ----- ------------ ----- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand $ 62,383,000 23.1% $ 59,989,000 22.7% $ 56,466,000 21.4%
Interest-bearing demand 27,964,000 10.3 28,144,000 10.6 29,452,000 11.1
Savings 112,268,000 41.6 110,032,000 41.6 115,959,000 43.9
Time 67,465,000 25.0 66,429,000 25.1 62,316,000 23.6
------------ ----- ------------ ----- ------------ -----
Total deposits $270,080,000 100.0% $264,594,000 100.0% $264,193,000 100.0%
============ ====== ============ ====== ============ ======
</TABLE>
Since March 31, 1996, time deposits, as a percentage of total
deposits, have grown from 23.6% to 25.0% as of March 31, 1997. Meanwhile, over
the same period, savings deposits have declined from 43.9% to 41.6%. This
change in the deposit mix has increased deposit costs for the Bank. The
average rates paid on savings and time deposits for the first quarter of 1997
were 2.76% and 4.78%, respectively.
Included in time deposits are certificates of deposits ("CDs")
purchased by the State of Hawaii, its counties and other government agencies.
Historically, these CDs have been a stable source of funds for the Bank and are
considered to be core deposits. At March 31, 1997,
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<PAGE> 10
December 31, 1996, and March 31, 1996, public time deposits totaled
$32,453,000, $32,192,000, and $31,455,000, respectively, representing 12.0%,
12.2%, and 11.9% of the Bank's total deposits.
Investment Securities
Investment securities consist principally of short and intermediate
term debt instruments issued by the U.S. Treasury and other U.S. government
agencies. The Bank is also a stockholder in the Federal Reserve Bank and the
Federal Home Loan Bank of Seattle. The Bank has no zero coupon bonds,
collateralized mortgage obligations or stripped mortgage-backed securities.
At March 31, 1997, the book and fair value of the held-to-maturity
portfolio was $48,931,000 and $48,550,000, respectively. As of the same date,
the book and fair value of the available-for-sale portfolio was $1,760,000.
The Bank had no trading securities as of March 31, 1997. During the first
quarter of 1997, there were no sales or transfers of investment securities
between the held-to-maturity, available-for- sale or trading categories.
Loan Portfolio and Loan Concentrations
At March 31, 1997, loans and leases were $205,703,000, compared to
$207,262,000 at year-end 1996 and $207,327,000 at March 31, 1996. During the
quarter, growth in the portfolio continued to be constrained by a weak local
economy. The Bank had no significant concentrations of credit with any
individual party; however, its lending was concentrated on the island of Oahu.
The following table presents the composition of the Bank's loan and
lease portfolio at the dates indicated.
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996 March 31, 1996
---------------------- ---------------------- -----------------------
Balance % Balance % Balance %
------------ ----- ------------ ----- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Real estate
Family residential $104,618,000 50.9% $104,791,000 50.5% $104,324,000 50.4%
Construction 2,880,000 1.4 2,572,000 1.2 3,603,000 1.7
Commercial property 26,509,000 12.9 25,851,000 12.5 26,561,000 12.8
------------ ----- ------------ ----- ------------ -----
Total 134,007,000 65.2 133,214,000 64.2 134,488,000 64.9
Commercial, industrial
and agricultural 63,069,000 30.7 64,804,000 31.3 64,130,000 31.0
Consumer 7,280,000 3.5 7,674,000 3.7 7,276,000 3.5
All other loans 437,000 0.2 557,000 0.3 304,000 0.1
Direct financing leases 910,000 0.4 1,013,000 0.5 1,129,000 0.5
------------ ----- ------------ ----- ------------ -----
Total $205,703,000 100.0% $207,262,000 100.0% $207,327,000 100.0%
============ ====== ============ ====== ============ ======
</TABLE>
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<PAGE> 11
Loan Portfolio Risk Elements and Other Real Estate Owned
Noncurrent loans and leases consist of loans and leases that are past
due for 90 days or more and still accruing interest and loans and leases on
nonaccrual status. At March 31, 1997, noncurrent loans and leases amounted to
$4,053,000, representing 2.0% of loans and leases outstanding, compared to
$3,392,000, or 1.6%, at December 31, 1996, and $3,427,000, or 1.7%, at March
31, 1996. Most of the credits in this category are collateralized by real
estate. The Bank had no restructured loans or leases as of March 31, 1997,
December 31, 1996 or March 31, 1996.
Other real estate owned ("OREO"), which is included in other assets,
decreased from $1,356,000 at March 31, 1996 to $1,219,000 at March 31, 1997.
The OREO portfolio consisted of a commercial property and two residential
condominiums. At March 31, 1997, the market values of these properties, less
estimated selling costs, exceeded their respective carrying values. There was
no reserve required for the periods ended March 31, 1997, December 31, 1996 and
March 31, 1996.
The following table presents information on noncurrent loans and
leases and OREO for the dates indicated:
<TABLE>
<CAPTION>
March 31 December 31 March 31
1997 1996 1996
----------- ------------ ------------
<S> <C> <C> <C>
Noncurrent
Past due 90 days or more $ 595,000 $ 212,000 $ 6,000
Nonaccrual 3,458,000 3,180,000 3,421,000
----------- ----------- -----------
Total $ 4,053,000 $ 3,392,000 $ 3,427,000
=========== =========== ===========
OREO $ 1,219,000 $ 1,219,000 $ 1,356,000
=========== =========== ===========
</TABLE>
Note: Impaired loans are included in nonaccrual loans and leases.
Provision and Allowance for Loan and Lease Losses
During the three months ended March 31, 1997, the Bank provided
$180,000 for possible loan losses, compared to $225,000 for the three months
ended March 31, 1996.
Gross charge-offs declined to $60,000 for the three months ended March
31, 1997, compared to $340,000 for the same period in 1996. Most of the
charge-offs in the current period were loans under $3,000. Comparatively,
nearly 75% of the losses in last year's period were attributable to two
credits. Recoveries totaled $11,000 and $56,000 for the first quarter of 1997
and 1996, respectively. This brought net charge-offs for the first three
months of 1997 to $49,000, well below the $284,000 reported for the same period
in 1996. The annualized ratio of net charge-offs to average loans and leases
for the first quarter of 1997 was 0.10%, compared to 0.53% for the same period
a year earlier.
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<PAGE> 12
At March 31, 1997, the allowance for loan and lease losses stood at
$3,198,000, compared to $3,067,000 at December 31, 1996 and $3,037,000 at March
31, 1996. The ratio of the allowance to total loans and leases outstanding was
1.55%, 1.48% and 1.46% at March 31, 1997, December 31, 1996 and March 31, 1996,
respectively. While the reserve represented 78.9% of noncurrent loans and
leases at quarter-end, in the opinion of management, it remained at a
sufficient level to absorb potential losses. As was noted earlier, the
majority of the loans and leases in the noncurrent category are collateralized
by real estate.
Liquidity
The Bank has adequate liquidity to accommodate fluctuations in deposit
levels, fund operations, provide for customer credit needs and meet obligations
and commitments on a timely basis. The Bank has no brokered deposits. It has
generally been a net seller of federal funds. The Bank has a line of credit
with the Federal Home Loan Bank of Seattle equal to 10% of total assets,
including a cash management agreement line of 5%. There were no borrowings at
March 31, 1997. This facility enhances the Bank's asset and liability
management by providing an alternative source of liquidity.
For the first three months of 1997, net cash provided by operating
activities was $1,205,000. Net cash provided by investing activities was
$273,000, largely due to a net decrease in loans and leases. Net cash provided
by financing activities was $4,056,000, due primarily to a net increase in
deposits.
Shareholders' Equity and Capital Resources
Shareholders' equity totaled $27,849,000 at March 31, 1997, an
increase of $52,000 from December 31, 1996 and $577,000 from March 31, 1996.
The growth in equity was achieved through retention of earnings after payment
of cash dividends of $106,650. Book value per share increased to $39.17 at
March 31, 1997, compared to $39.10 and $38.36 at December 31, 1996 and March
31, 1996, respectively.
In order to be considered well-capitalized by the bank regulatory
agencies, an institution must have at minimum a 5.0% leverage ratio, a Tier 1
risk-based capital ratio of 6.0% and a total capital ratio of 10.0%. The
Company's leverage ratio was 9.51% at March 31, 1997; 9.45% at December 31,
1996; and 9.29% at March 31, 1996. At March 31, 1997, the Company's Tier 1 and
total capital ratios were 14.10% and 15.35%, respectively, compared to 13.96%
and 15.22% at December 31, 1996; and 13.55% and 14.80% at March 31, 1996.
Effect of New Accounting Standard
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
which is effective for financial statements issued for periods ending after
December 31, 1997, including interim periods. Earlier application is not
permitted. This Statement requires disclosing basic and diluted earnings per
share for all years presented in the income statement. The adoption of this
Statement is not anticipated to have a material impact on the consolidated
financial statements of the Company.
-12-
<PAGE> 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HAWAII NATIONAL BANCSHARES, INC.
(Registrant)
Date May 6, 1997 By /s/Warren K.K. Luke
--------------------- ------------------------------------
Warren K.K. Luke
President
Date May 6, 1997 By /s/Ernest T. Murata
--------------------- ------------------------------------
Ernest T. Murata
Vice President, Treasurer,
Assistant Secretary and
Chief Financial Officer
-13-
<PAGE> 14
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
27 Financial Data Schedule
-14-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 18,561
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 20,250
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,760
<INVESTMENTS-CARRYING> 48,931
<INVESTMENTS-MARKET> 48,550
<LOANS> 205,703
<ALLOWANCE> 3,198
<TOTAL-ASSETS> 300,315
<DEPOSITS> 270,080
<SHORT-TERM> 1,000
<LIABILITIES-OTHER> 1,386
<LONG-TERM> 0
0
0
<COMMON> 711
<OTHER-SE> 27,138
<TOTAL-LIABILITIES-AND-EQUITY> 300,315
<INTEREST-LOAN> 4,597
<INTEREST-INVEST> 731
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,585
<INTEREST-DEPOSIT> 1,647
<INTEREST-EXPENSE> 1,657
<INTEREST-INCOME-NET> 3,928
<LOAN-LOSSES> 180
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,245
<INCOME-PRETAX> 258
<INCOME-PRE-EXTRAORDINARY> 158
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 158
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
<YIELD-ACTUAL> 5.84
<LOANS-NON> 3,458
<LOANS-PAST> 595
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,067
<CHARGE-OFFS> 60
<RECOVERIES> 11
<ALLOWANCE-CLOSE> 3,198
<ALLOWANCE-DOMESTIC> 3,198
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 620
</TABLE>
